Nallini Pathmanathan JC

SALIENT FACTS

Bina Puri Sdn Bhd (‘the plaintiff’) undertook in 1995, the construction of a five and a half storey office building which included two levels of basement (‘the contract work’). The plaintiff was the main contractor for these works. The physical construction works began in November 1995, with the substructure works, ie works beneath the ground. In January 1996, cracks appeared in buildings and drains near the work site. In March 1996, deflections occurred in the retaining wall comprising a part of the contract work. In April 1996, a crackline surrounding the site appeared. Remedial measures were undertaken after this. However in July 1996, ground heaving occurred at the nearby Malaysian Nature Society building which was reported in the newspapers. Other surrounding shophouses also experienced cracks. The local council issued a stop work order. Further remedial measures were undertaken on the advice of an independent engineering consultant. During this period, in January, March and April 1996, there was heavy rainfall.

Prior to this on 22 November 1995, the plaintiff had taken a contractor’s all risks policy from the defendant (‘the policy’). The policy covered two types of damage, namely damage to the contract work in section 1 and damage to third party property, in section 2. With respect to damage to the contract work in section 1, in summary, the policy provided that the insurers agreed to indemnify the insured in the event the plaintiff should suffer ‘any unforeseen and sudden physical loss or damage from any cause, other than those specifically excluded…’. For the purposes of this case, the relevant exclusion clause to section 1 states that the insurers are not liable for ‘loss or damage due to faulty design’ under exception (c).

As for damage to third party property, covered by section 2, the insurers agreed to indemnify the insured in respect of, inter alia, ‘accidental loss of or damage to property belonging to third parties occurring in direct connection with the construction or erection of the items insured under Section 1 and happening on or in the immediate vicinity of the site during the Period of Cover’. The special exclusions to section 2 damage precluded cover for damage caused by vibration or by the removal or weakening of support or injury or damage to any person or property. However by a special endorsement 120 relating to vibration, removal or weakening of support, the section 2 coverage was extended to cover precisely such loss, ie loss or damage caused by vibration or by removal or weakening of support. But endorsement 120 contains a proviso that ‘the insurers will not indemnify the insured in respect of loss or damage which is foreseeable having regard to the nature of the construction work or the manner of its execution’.

The plaintiff made a claim under the policy which was eventually rejected. In the course of arriving at its decision, expert opinions were sought and procured from the consultant engineer having conduct of the contract work, Khoo Liau, PW3 operating as CK Engineers & Associates for the plaintiff, and Christopher Treleaven, DW1, the expert consultant engineer for the defendant who then worked for Dunning Thornton Consultants Malaysia Sdn Bhd.

In summary, PW3, the expert for the plaintiff maintained that the cause of the loss and damage to the contract work, which was ‘sudden’ and ‘unforeseeable’, was the unpredictable and surprisingly heavy rainfall during the months of January, March and April 1996. As a consequence, it was contended for the plaintiff that such loss and damage fell squarely within the ambit of the policy. The defendant on the other hand, maintained that the loss and damage to the contract work was foreseeable and not sudden thereby precluding coverage under the policy. DW1 testified that the cause of such loss and damage was the wrong choice of a retaining wall which led to consolidation settlement of the ground in and around the site, as