Gopal Sri Ram JCA (delivering judgment of the court):

[1]This appeal turns upon the construction of a clause in a standard form PWD (JKR) contract in its application to the facts that are relevant to this dispute. I will refer to the clause in question at some length later. Let me first set out the facts and background against which this appeal rests.

[2]There is a project called the Puncak Alam Development. The appellant is the developer of that project. The project comes in two phases. It employed the respondent to carry out construction of both phases. Phase 2 was to consist of 331 units of double storied terrace houses. A letter of award was issued by the appellant to the respondent in respect of Phase 2 on 15November 1998. Later a contract in the PWD form was executed by the parties.

[3]In point of time Phase 1 came after Phase 2. It was to comprise of 16 blocks of single storied terrace houses. The letter of award in respect of Phase 1 was issued on 5 July 1999. A second standard contract in PWD form was entered into between the parties.

[4]Later, disputes arose between the parties. Two actions were filed. Both by the respondent. I will call them the S3 and S5 suits. Because they were filed in the third and fifth courts respectively of the Civil Division of the Kuala Lumpur High Court. The S3 suit was in respect of Phase 2. In it the respondent claimed a sum of RM5,862,612.33 as being due under interim certificates issued for work done on Phase 2 of the project. The appellant delivered a defence and counterclaim in which it alleged fraud, breach of contract and negligence on the respondent's part. In its counterclaim it claimed a sum of RM46,210,924.68 on the ground that 243 out of the 331 units lacked structural integrity and had therefore to be demolished. It relied on interim certificate 14 issued by the superintending officer, that is to say, the architect in the present case.

[5]The S5 suit was commenced by the respondent to recover a sum of RM3,665,582.94 that was claimed to be due on interim certificates issued in respect of Phase 1. The appellant delivered its defence and counterclaim to the S5 suit. Among other pleas taken, the appellant sought to set off monies owing from the respondent to the appellant on the Phase 2 contract against any sum that may be due from the appellant to the respondent under the Phase 1 contract. In support of its defence of set off, it relied on cl 50 of the Phase 2 contract. The question is whether it could do so. The judge on a summons taken out by the respondent under O 14A of Rules of the High Court 1980 ('the RHC') held against the appellant. His judgment is reported in L'Grande Development Sdn Bhd v Bukit Cerakah Development Sdn Bhd [2007] 4 MLJ 518

[6]The starting point is the general law regarding the defence of set off in the context of a building contract. It is a principle of general application that both an employer and a builder have a right of set off against each other in the absence of a contrary intention expressed by the parties. Such a contrary intention may appear from express words used by the parties or by clear implication from what they said or did. See, Pembenaan Leow Tuck Chui & Sons Sdn Bhd v Dr Leela's Medical Centre Sdn Bhd [1995] 2 MLJ 57

The Government or the SO on its behalf shall be entitled to deduct any money owing from the Contractor to the Government under this Contract from any sum which may become due or is payable to the Contractor under this Contract or any other contracts to which the Government and the Contractor are parties thereto. The SO in issuing any certificate under Clause 47, shall have regard to any such sum so chargeable against the Contractor, provided always that this provision shall not affect any other remedy to which the Government may be entitled for the recovery of such sums.

References in the clause to 'the Government' are, of course, to the appellant employer, while references to the SO or superintending officer are to the archite