JUDGMENT

I. PLAINTIFF'S CLAIM AND DEFENDANT'S COUNTERCLAIM

This is a claim by the Plaintiff against the Defendant for a sum of RM114,623-87, two retention sums of RM40,000-00 and RM40,522-69 respectively, general damages and interest, arising out of certain contractual works.

There is also a counterclaim by the Defendant for damages, interest and costs against the Plaintiff.

II. CONTRACT

There was no formal contract entered into between the Plaintiff and the Defendant. The Plaintiff was invited to give a quotation on the basis of drawings or plans prepared by the Defendant’s architect and engineering consultants.

A letter of acceptance of tender signed by both the Plaintiff and the Defendant and annexed to the minutes of the second site meeting held on 2nd January 1991, was sent to the Plaintiff. The relevant terms are as follows:

Pursuant to the said terms the Plaintiff was required to deposit, inter alia, a performance bond amounting to RM71,400-00 being 5% of the contract sum as a condition precedent to the commencement of the works.

The date of site possession and the completion date were, by subsequent agreement between the Plaintiff and the Defendant, changed to 8 January 1991 and 8 November 1991 respectively.

III. PLAINTIFF'S EXECUTION OF THE WORKS

1. Delay

The Plaintiff’s progress was such that as the completion date approached, the works were far from complete, due to:

(a)a lack of construction and resource planning;

(b)no competent site supervisory staff until at least 50% of the contract period has passed; and

(c)material shortages as the Plaintiff did not pay the suppliers on time.

The Plaintiff produced two revised “catch-up“ programmes but did not adhere to them.

2. Defects

(1)The Defendant alleged that there were serious defects in the works executed by the Plaintiff, which were primarily caused by poor supervision and quality control, poor workmanship, use of substandard materials and failure to adhere to the drawings. The defects were recorded in contemporaneous photographs and also in various letters between the Defendant and the engineer, Perunding Sezaman (who in this project was the contracts administrator) and the contractor. According to the Defendants, these defects affected the structural integrity of the houses.

3. Certificates and Payment

The engineer issued various interim certificates, most of which were paid although the contract documents did not provide for payments on an interim basis. The certificates were based on a valuation of the works carried out, and took no account of the defects or the cost of rectifying them..

By the time certificates 10 and 11 were issued on 21 December 1991 and 21 January 1992 respectively, the amended completion date of 8 November 1991 had already passed and the Plaintiff was liable for agreed liquidated damages, at RM328-00 per day.

On the basis of the estimated cost of rectifying the defects and the agreed liquidated damage of the Plaintiff already incurred and increasing daily, the Defendant exercised its rights of set-off and withheld payment for part of the sum certified in interim certificate No. 10 amounting to RM21,273-20 and all the sums certified in interim certificate No. 11 amounting to RM93,350-67.

4. Demands and Suspension

The Plaintiff then proceeded to demand for payment of the sums withheld, and despite being informed of the Defendant’s position as to the disputed sum, suspended works.

5. Termination

After giving notice to resume works through its solicitors, the Defendant terminated the contract with the Plaintiff.

IV. ISSUES FOR DETERMINATION BY THE COURT

Against the above background, it is common ground that the following issues arise for determination by the Court:

1.Whether the Defendant was entitled to exercise a right of set-off in respect of rectification of defective works and agreed liquidated damages for delay on the part of the Plaintiff in completing the w