A developer is not liable to pay unpaid suppliers directly under Section 71 of the Contracts Act 1950 without a privity of contract, as it would result in unjust enrichment.

JUDGMENT

Ong Chee Kwan J:

Introduction

[1] This judgment deals yet again with the question whether a developer who is the ultimate beneficiary of all goods supplied by various suppliers for its property development, is obliged to pay the unpaid suppliers down the chain in the event that the developer's main contractor and or sub-contractors with whom the suppliers had contracted failed to make payments for the goods so supplied. Can the suppliers rely on s 71 of the Contract Act 1950 and or the cause of action for unjust enrichment to recover the outstanding sums due directly from the developer?

[2] In this case, the 1st Respondent had successfully claimed after a full trial against the Appellant the sum of RM 814,014.31 being the remaining outstanding sums with interest for special equipment and the related works done under a contract between the 1st Respondent and the 2nd Respondent (who was unrepresented at the trial) which had remained unpaid.

[3] The Appellant contended that it was not obliged to pay the 1st Respondent as there was no privity of contract between them. It was also contended that s 71 of the Contracts Act 1950 and or the principles of unjust enrichment simply did not apply to the facts of this case.

Background Facts

[4] The 1st Respondent was a company specialising in the supply and installation of professional audio-visual equipment and technical services.

[5] The Appellant was the concessionaire under a Concession Agreement dated 21 February 2013 with the Government of Malaysia and Universiti Teknologi MARA ("UiTM") to design, construct, and maintain the new UiTM campus in Rembau, Negeri Sembilan ("the Project").

[6] The Appellant had appointed Tech Art Sdn Bhd ("Tech Art") as the main contractor for the supply of special equipment for the Project. Tech Art subcontracted part of the works to the 2nd Respondent who then engaged the 1st Respondent via a Letter of Award dated 4 November 2015 and a Contract for Supply, Installation and Commissioning Special Equipment at Faculty of Communication and Media Studies New Campus UITM Rembau, Negeri Sembilan Darul Khusus. ("Agreement").

[7] For the purpose of this appeal, this Court had proceeded on the assumption that the 1st Respondent had duly performed its contractual obligations by supplying and installing the equipment and providing the requisite services, including Testing & Commissioning ("T&C"), training for UiTM staff, and submission of necessary documentation such as manuals, warranty cards, and as- built drawings under its Agreement with the 2nd Respondent.

[8] Partial payments amounting to RM7,937,297.91 had been made leaving an outstanding sum of RM814,014.31 remaining unpaid ("the Outstanding Sum") as detailed in the Invoices ("the Invoices") issued to the 2nd Respondent. Despite made numerous requests for payment from the 1st Respondent which were acknowledged, the 2nd Respondent failed to make the payment of the Outstanding Sum.

[9] At the Session Court , the 2nd Respondent claimed against the Appellant and the 2nd Respondent for the Outstanding Sum. Judgment was granted against the Appellant based on the cause of action for unjust enrichment and under s 71 of the Contracts Act 1950 . Unsurprisingly, the Appellant appealed against the decision. The 2nd Respondent did not appeal.

[10] The learned Session Court Judge had relied on the judgment of the Court of Appeal in Kraas Solutions Sdn Bhd v. Konsesi Kota Permatamas Sdn Bhd; [2018] 6 MLJ 202; [2018] 9 CLJ 26; [2018] 3 AMR 790 ("Kraas Solutions') in coming to her decision. The facts in Kraas Solutions are materially identical to the present appeal. The Appellant's counsel admitted the same during the hearing. Both cases involved the Project and same parties (ie, the Government of Malaysia/University Technology Mara (UiTM) being the developer, the concessionaire being the Appellant and the main contractor, Tech Art).

[11] The Court of Appeal in Kraas Solutions (supra) held that all conditions under s 7