Back
2024 MarsdenLR 1546
HIGH COURT MALAYA SHAH ALAM
PEMBINAAN JAYA ZIRA SDN BHD – Appellant
Versus
BS SHEET PILES SDN BHD – Respondent
[Civil Appeal No: BA-12BNCvC-31-08/2023]
A party cannot evade liability in a construction contract by arranging for payment from a third party; such arrangements do not absolve the original debtor from their obligations.
Headnote:(A) Rules of 2012 - Order 14 - Summary judgment - Appeal against decision of Sessions Court allowing Respondent's application for summary judgment in a construction claim - The Appellant contended it owed no liability as per settlement agreement with third party - Court found no absolution of liability and that arrangement for payment did not relieve Appellant of obligation - Appeal dismissed with costs. (Paras 28-36)
(B) Liability - The principles governing liability in construction contracts - The Appellant cannot evade liability by arranging payments from third parties; absence of tripartite agreement does not absolve liability. (Paras 30-34)
Facts of the case:
The Appellant/Defendant appointed the Respondent/Plaintiff as subcontractor for a project. The Respondent claimed a balance sum owed following a settlement agreement, which the Appellant disputed, asserting payment was to be made by MRCB, a third party. The Respondent initiated adjudication proceedings when payment was not made. (Paras 4-13)
Findings of Court:
The Appellant/Defendant remains liable for the outstanding sum owed to the Respondent/Plaintiff despite proposed payment arrangements. (Paras 30-34)
Issues: Whether the Appellant has raised a triable issue regarding the liability for the outstanding payment owed to the Respondent/Plaintiff. (Paras 2-3)
Ratio Decidendi: A settlement agreement does not absolve a party from liability unless explicitly stated; arrangements for payment from third parties do not negate the original obligation. (Paras 30-32)
Result: Appeal dismissed with costs of RM20,000.
JUDGMENT
Introduction
[1] This is an appeal by the Appellant/Defendant against the decision of the Sessions Court in allowing the Respondent/Plaintiffs application for summary judgment. The action filed by the Respondent/Plaintiff against the Appellant/Defendant in the Sessions Court was in relation to a construction claim and a subsequent settlement agreement entered into between the parties.
The Core Issues
[2] Foremost in this appeal is the question of whether this is a case in which the Appellant/Defendant has succeeded in raising an issue or question in dispute which ought to be tried or there ought for some other reason to be a trial within the meaning of O 14 r 3 of the Rules of 2012 .
[3] The ensuing issue is whether it is the Appellant/Defendant that is liable to pay the balance sum owed to and claimed by the Respondent/Plaintiff or some other third party. Put differently, the issue for determination is whether the Appellant/Defendant has been absolved from liability as per the balance sum owed to and claimed by the Respondent/Plaintiff.
The Parties And The Background Facts
[4] Pursuant to a work order alluded to in paragraph [1], the Appellant/Defendant had appointed the Respondent/Plaintiff as a subcontractor for a contract known as Pembinaan dan Penyiapan Transit Aliran Ringan Laluan 3 (LRT3) dari Bandar Utama ke Johan Setia "Package GS09- Guideway, Stations, Park and Ride, Ancially Buildings and Other Associated Works".
[5] It was not disputed that the commencement date of the sub-contract was on 15 July 2020 and completion was on 14 November 2020.
[6] The Respondent/Plaintiffs claim against the Appellant/Defendant is premised on a Letter of Undertaking dated 30 June 2020 which the latter had issued to the former, whereby the Appellant/Defendant undertook to settle an amount owed by one Ikhmas Jaya Sdn Bhd to the Respondent/Plaintiff arising from a Letter of Award dated 11 July 2019 in relation to the above stated project. Ikhmas Jaya Sdn Bhd, who is also a sub-contractor to the Appellant/Defendant, had previously appointed the Respondent/Plaintiff to perform some works under the said Letter of Award for which Ikhmas Jaya Sdn Bhd had failed to make any payment.
[7] At a meeting held on 15 November 2021 between the Appellant/Defendant and the Respondent/Plaintiff, the former had proposed and agreed to settle all outstanding amount owing to the latter in the sum of RM1,300,000.
[8] When the Appellant/Defendant failed to make the above payment to the Respondent/Plaintiff, the Respondent/Plaintiff initiated Adjudication Proceedings under the Construction Industry Payment & Adjudication Act 2012 against the Appellant/Defendant.
[9] On 4 July 2022, the Appellant/Defendant through its solicitors again made a proposal for settlement of the outstanding sum of RM1,300,000 in two payments. The first payment was proposed to be paid immediately while the second payment was to be done on or before 30 November 2022.
[10] A point of considerable significance, which has crystallised into a contentious issue, is the fact that pursuant to the terms in the agreement, the payment is to be made directly to the Respondent/Plaintiff from the Employer/Owner of the said project, that it, the Malaysian Resources Corporation Berhad ("MRCB").
[11] The above proposal was accepted by Respondent/Plaintiff on 4 July 2022 on condition that in the event the second payment was not received on or before 30 November 2022, it will take action against the Appellant/Defendant to recover the sum due and owing.
[12] Upon receiving the first payment of RM573,691.93, which the Respondent/Plaintiff received directly from MRCB, it withdrew its adjudication proceedings on 8 July 2022. However, the Respondent/Plaintiff did not receive the second payment of RM726,308.10 as agreed.
[13] When a few reminder letters that were sent went unanswered, the Respondent/Plaintiff commenced an action in the Sessions Court claiming for the balance amount of RM726,3
