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2020 MarsdenLR 1914
HIGH COURT MALAYA KUALA LUMPUR
BAUER (MALAYSIA) SDN BHD – Appellant
Versus
HUNDRED VISION CONSTRUCTION SDN BHD & ANOR – Respondent
[Civil Suit No: WA-22C-59-05/2017]
An NSC cannot claim directly from an employer without privity of contract, and entitlements for quantum meruit are limited by existing contractual obligations.
Headnote:(A) Contracts Act 1950 – Sections 71 and 551(1) – Nominated Subcontractor claims against employer – No privity of contract between employer and NSC established – Dismissal of NSC's claims – NSC lacked entitlement for direct payment from employer and could not claim under quantum meruit; contractual obligations clearly outlined. (Paras 37-45)
Facts of the case: Dispute arose between NSC and employer regarding contract performance, payment for services rendered, and allegations of negligence causing damage to nearby buildings. (Paras 4-12)
Findings of Court: NSC could not establish a direct contractual claim against D2 (employer), as it actively participated in negotiations which expressly stated no privity exists. (Paras 45, 72)
Issues: Whether D2 owed a duty of care to NSC, and if NSC was entitled to sue D2 for unpaid amounts despite lack of direct contract. (Paras 83-84)
Ratio Decidendi: The clear intention of the parties established an absence of privity, negating direct liability and the possibility of a collateral agreement; previous rulings supported that NSC claims must be directed at the main contractor (D1). (Paras 181-184)
Result: Both claims dismissed with each party bearing their own costs.
[1] The exact nature of the contractual relationship between an employer and a nominated subcontractor ("NSC") is often more than meets the eyes. Various mechanisms have been explored by an NSC to ensure, if not, secure payments for work contractually done for its main contractor including some direct payment arrangements where the employer would pay directly to the NSC.
[2] When that is not done and the NSC discovered that the main contractor had nevertheless been paid or had gone into liquidation, it is natural for the NSC to explore making a claim against the employer as it happened here. The NSC staged its claim under breach of representations and warranties given by the employer to it and even under a collateral contract to pay. Alternatively, it tried to claim under quantum meruit under s 71 Contracts Act 1950 .
[3] The employer in turn counterclaimed against the NSC for damages arising out of the damage done to an adjacent building and to delay occasioned by the NSC arising out of what it said is the NSC's negligence. That raises an interesting question as to whether an NSC owes a duty of care in tort to the employer when all three parties had worked out their risks in providing for their respective rights and obligations under their separate contracts with each other down the chain of construction, and in this case under a standard form PAM Contract with some modifications.
Parties and Project
[4] The plaintiff had earlier on 6 June 2017 taken a judgment in default against the 1st defendant ("D1") for the same claim which is the subject-matter of the trial between the plaintiff and the 2nd defendant ("D2"), Bakti Dinamik Sdn Bhd.
[5] The plaintiff is an NSC of D1. D1 in turn had been appointed by D2 as its main contractor for the substructure and superstructure works under a Main Contract with respect to a high-end service suites called Tribeca along Jalan Imbi in Kuala Lumpur. D1 is the owner-cum-developer of the Project.
[6] The plaintiff is a substructure works specialist and it was appointed by D1 to do the substructure works as an NSC for a contract sum of about RM30 million. D1 had earlier been appointed by D2 for the same substructure works about RM50 million.
Problems
[7] Along the way in the execution of the works, an adjacent building to the works, owned by Wagner Piano Sdn Bhd ("Wagner Piano Building"), suffered damage, flooding and settlement such that Wagner Piano had to move out. It then commenced on 28 November 2014 an action in negligence against D2 as the first defendant and D1 as the 2nd defendant and the plaintiff as the 3rd defendant there ("the Wagner Piano Suit").
[8] The Wagner Piano Suit was settled around March/April 2015 by the 2nd defendant there who is also D2 here. D2 made a commercial decision on settlement as it could not suffer the risk of a possible injunction to stop work which Wagner Piano intended to apply for and the effect that would have on existing as well as prospective purchasers.
[9] The plaintiff did not want to participate in the settlement as it took the view that it was not negligent and indeed the defence filed by D2 there was that the plaintiff here had complied with all the standard and approved practice and had taken the necessary diligence in executing the substructure works.
[10] The plaintiff was not paid for Interim Certificates 16 and 17 amounting to RM1,809,747.85 and RM907,654.19 making a total of RM2,717,402.04.
[11] The plaintiff had obtained an adjudication decision in its favour on 15 September 2016 for these 2 certificates as well as its claim for variation works and loss and expense for a total of about RM4.2 million.
[12] The plaintiff however was shocked to later learn that D1 had been struck out by the Companies Commission of Malaysia ("CCM") on 28 May 2017. Prior to that the plaintiff had made a CCM search and discovered then that D1 was in the process of being struck out.
[13] Of course the plaintiff would have cause for concern and it shoul
