Restitution under Section 71 of the Contracts Act ensures just compensation for work done, even absent direct contractual relationships, to prevent unjust enrichment.

Introduction

[1] This is an appeal by the appellant/defendant against the decision of the Kuala Lumpur High Court dated 28 February 2013 which dismissed the appellant/defendant's counterclaim for the sum of RM3,009,254.23 against the respondent/plaintiff.

[2] We heard the appeal on 13 August 2014, after which we adjourned the matter for consideration and decision. We now give our decision.

[3] In this judgment, the parties will be referred to as they were in the High Court.

Background Facts

[4] The chronology of events leading to the counterclaim of the defendant can be summarised as follows:

(i) the plaintiff entered into a sale and purchase agreement dated 24 May 2003 ("the agreement") with a company known as Jeram Permata (Cheras Sdn Bhd) ("JP"), in which, in consideration of JP agreeing to sell a piece of land and constructing on the said land 226 medium cost apartments as staff quarters for the Jabatan Bomba Dan Penyelamat Malaysia (JBPM), under the Ministry of Housing and Local Government, the plaintiff will pay a purchase price of RM50,548,000 (out of which RM4.44 million represents the price of the said land) to JP ("the project");

(ii) a sum of RM16 million had been paid to JP by the plaintiff under the agreement, which included the price of the said land. The said land had since been transferred to the plaintiff and registered in the name of the Federal Lands Commissioner under a document of title known as HS(D):99285 Lot No 5194 Mukim of Kuala Lumpur;

(iii) under cl 27.1 of the agreement, the project must be completed by JP within 24 months from the date of the building plans approvals given by DBKL on 12 November 2004, which brings the completion date of the project to 11 November 2006;

(iv) there was delay on the part of JP in completing the project, despite seven warning letters issued by the plaintiff on various dates between 24 April 2006 and 14 November 2006;

(v) by a letter dated 21 May 2007, the plaintiff gave a notice of breach of the agreement to JP. The said notice further stated that if the breach is not remedied by JP within 30 days, the agreement would be terminated;

(vi) by a letter dated 13 July 2007, the plaintiff issued a letter of termination to JP;

(vii) the defendant was appointed by JP as its sub-contractor vide a letter of acceptance dated 15 February 2007 ("LOA") to construct the "super structure works" under the project (see AR jilid 2(2) (Bahagian C LOA on p 276);

(vii) after the termination of the agreement, the defendant refused to leave the project site;

(ix) vide a letter dated 13 September 2007, the plaintiff gave a notice to the defendant to vacate the project site within 14 days of the letter and further informed the defendant that the plaintiff will not be making any payment to the defendant after the agreement was terminated on 13 July 2007. The defendant refused to vacate the site despite the notice;

(x) the plaintiff then filed an action against the defendant vide an originating summons ("OS") dated 12 October 2009 seeking the following reliefs:

(i) a declaration that it is the owner of the said land and is entitled to vacant possession of the said land;

(ii) a declaration that the defendant as the sub-contractor of the main contractor, JP, are trespassers on the said land after the agreement was terminated; and

(iii) an order that the defendant to vacate the said land within 14 days from the date of the Court's order;

(xi) the defendant in its affidavit in reply opposed the plaintiff's OS on the ground that there were many disputes of facts which could be resolved only through hearing the oral evidence of witnesses under a writ. Amongst the disputed facts were whether the termination of the agreement between plaintiff and JP wa