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2024 MarsdenLR 3135
HIGH COURT MALAYA SHAH ALAM
KAYANGAN KEMAS SDN BHD – Appellant
Versus
KAY CORPORATION SDN BHD & OTHER CASES (ENCLS 8 107 113 & 122) – Respondent
[Writ Summon Nos: BA-22C-50-11/2020 BA-22C-32-09/2021 & BA-22C-33-09/2021]
In construction contracts, variation claims must adhere to contract provisions and timelines; backcharges are permissible when justified under the contract terms.
Headnote:(A) Contracts - Construction Contracts - Lump Sum Contracts - Variations - Backcharges - The court found that KC was bound by the terms of the LOA and the Main Contract, which included provisions regarding variations and backcharges. The court ruled that KC's claims for variations were time-barred and dismissed the claims for pre-judgment interest. (Paras 57-111)
(B) Judgment - The court ordered KC to pay KK RM146,420.46 with interest, while KK was ordered to pay KC RM14,746.48 and RM345,892.38 in separate suits, both with interest. (Paras 111-112)
Facts of the case:
Three suits were filed regarding payment disputes between KK and KC over various construction projects, including claims for backcharges and variations.
Findings of Court:
The court held that KC's claims were not substantiated under the contract terms, and ruled on the respective payment obligations of both parties.
Issues: The court addressed issues of whether the Main Contract formed part of the LOA, KC's entitlement to variation works, the justification of backcharges imposed by KK, and the release of retention sums.
Ratio Decidendi: The court emphasized that variation claims must be approved by the relevant parties and highlighted the binding nature of the contract terms.
Result: KC to pay KK RM146,420.46; KK to pay KC RM14,746.48 and RM345,892.38.
JUDGMENT
A. Introduction
[1] BA-22C-50-11/2020 ("Suit 50") is heard together with BA-22C-32-09/2021 ("Suit 32") and BA-22C-33-09/2021 ("Suit 33") pursuant to the Order (Enclosure 8 in Suit 50) dated 16 August 2021. Since these suits are heard together, the parties are referred to as follows:
i. Kayangan Kemas Sdn Bhd is referred to as "KK"; and
ii. Kay Corporation Sdn Bhd is referred to as "KC".
[2] These suits were filed by parties for the following reasons:
I. Suit 50 - KC was appointed by KK as a subcontractor for the purpose of "Supply Labour, Material, Installation and Completion for Low Voltage System ("ELV") for the Kuala Krai Project for Government of Malaysia for a "lump sum" contract of RM15,000,000.00 ("Kuala Krai Project"). KK filed this suit against KC for the recovery of backcharges incurred by KK during the course of the construction of the project. KC has made a counter claim in this suit against KK for non-payment of additional sums due to variation orders carried out by KC in the Kuala Krai Project.
II. Suit 32 - KC was appointed by KK as a subcontractor for supply and fixing temporary electrical works vide a Letter of Award dated 29 April 2016 for the Tin City Project. KC filed this suit against KK to recover the non-payment sum of RM14,635.11 (being retention sum of RM12,778.85 and variation work of RM1,856.25) and the GST payment on variation work of RM111.37.
III. Suit 33 - KC was appointed by KK as subcontractor for electrical services and installation works vide a Letter of Award dated 4 June 2015 for the Kg Paloh Project. KC filed this suit against KK to recover an outstanding amount of RM345,892.38 and 5% retention sum of RM186,500.00. KK made a counter claim against KC in this suit for a sum of RM174,442.28.
B. Background Facts
[3] Suit 50 was filed by KK by way of a Writ at the Shah Alam High Court on November 2020, subsequently KC filed Suit Nos BA-A52C-1-01/2021 and BA-B52C-4-01/2021 at the Shah Alam Sessions Court in January 2021. By the Order dated 16 August 2021 of the Shah Alam High Court , both Suit No BA-A52C-1-01/2021 and BA-B52C-4-01/2021 were transferred to the Shah Alam High Court from the Shah Alam Sessions Court to be heard together with Suit 50 (being the primary suit) as Suit Nos 32 and 33 respectively at the High Court .
I. Suit 50
[4] KK was appointed as a subcontractor by Semarak Korporat Sdn Bhd ("SK") vide a letter dated 18 April 2014 to carry out works "designing, constructing, testing and commissioning" through a contract "Standard Form of Design and Build Contract (PWD Form DB (Rev 1/2010)" with Government of Malaysia ("Owner") ("Main Contract") for a project called "Cadangan Membina Hospital (268 Katil) Kuala Krai, Kelantan (Reka & Bina) Fasa 2: Kerja-Kerja Bangunan dan Lain-lain Kerja Berkaitan" ("the Kuala Krai Project").
[5] KC was appointed by KK vide a written contract on 4 January 2016 ("the Contract") as a subcontractor to "Supply Labour, Material, Installation and Completion for Low Voltage System ("ELV") for the Kuala Krai Project for a "lump sum" contract of RM15,000,000.00.
[6] The full and complete picture of the flow of awards involving the Kuala Krai Project is as follows:
i. The Government of Malaysia (through Jabatan Kerja Raya (Owner) to Pembinaan SPK Sdn Bhd("SPK") (Main Contractor);
ii. SPK to SK (Main Subcontractor 1);
iii. SK to KK (Main Subcontractor 2); and
iv. KK to KC (Subcontractor)
[7] Undisputedly, KK advanced out money in the sum of RM316,364.01 to KC for purposes of paying the site workers which became payable to KK. The amount of sub-contract works carried out by KC certified by KK was RM13,895,912.65 through Progressive Payment Certificate Nos 1 to 21 issued by KK.
[8] KK issued tax invoices amounting to RM788,286.00 allegedly for the works that were paid for by KK being backcharges against Progress Payment Nos 1 to 21.
[9] Subsequently, KK received KC's Progressive Claim No 22 amounting to RM5,393,516.04 of which KK only recognised R
