Claiming for Remedial / Defective Works – Is a quotation sufficient?

Is a quotation sufficient to claim for remedial / defective works? Or do you need to ACTUALLY incur the cost of repair?

Imagine this scenario: You are an employer. You engaged a contractor to carry out building works. There is defect on his work. He fails or refuses to rectify it. Left with no alternative, you intend to engage another to carry it out. This new contractor gives you a quote for the remedial work. It will cost you some money. Can you file an action in court to claim for the cost prior to carrying out the remedial work? Or must you expand that cost first?

The case of Ang Ban Giap

In Ang Ban Giap v Worldwide Holdings Bhd & Anor [2019] 8 MLJ 669, the plaintiff entered into a sale and purchase agreement with the 1st defendant for the purchase of a new bungalow. The 2nd defendant was the vendor’s solicitors. They were holding some of the purchase money as stakeholders’ sum under the sale and purchase agreement ("SPA").

Clause 25 of the SPA is in relation to defect liability period. It says that any defects shall be made repaired and made good by the 1st defendant within 30 days from them receiving a written notice from the Purchaser within the defect liability period. Clause 25 further provides that if the 1st defendant fails to remedy the defects:

“… the Purchaser shall be entitled to carry out the works to repair and make good the said defect, shrinkage or other faults himself and ‘to recover’ from the Vendor the costs of repairing and making good the same and the Purchaser may deduct such cost from any sum which has been held by the Vendor’s solicitors as stakeholders for the Vendor under item 5 of the Third Schedule provided that the Purchaser shall, at any time after the expiry of the said period of thirty (30) days, notify the Vendor of the costs of repairing and making good the said defect, shrinkage or other faults before the commencement of the works and shall give the Vendor an opportunity to carry out the works himself within fourteen (14) days from the date the Purchaser has notified the Vendor of his intention to carry out the said works and provided further that the Purchaser shall carry out and commence the said works as soon as practicable after the Vendor’s failure to carry out the said works within the said fourteen (14) days. …”

The plaintiff discovered defects in his bungalow. He wrote to the 1st defendant giving him notice to remedy the defects. When the 1st defendant failed to do so, the plaintiff engaged a 3rd party contractor to estimate the cost of the remedial works. The plaintiff only proceeded with some of the works. He did not proceed with the rest because of the high costs involved. The plaintiff commenced a suit for among others, the balance of the rectification costs. He also claims against the 2nd defendant to release to him the stakeholder’s sum under clause 25.

The High Court dismissed the plaintiff’s claim. The reason by the Court is that the plaintiff can only make a claim if he fulfills his contractual obligation to carry out and complete the rectification works. The court emphasised that merely submitting a quotation for the cost of rectification does not qualify under clause 25.

The Court drew the meaning of the word ‘recover’ which is ‘to get back something lost or spent’. His Lordship took a strict and literal interpretation of clause 25 in that “that the key words ‘recover’ and ‘deduct’ in the cl 25(2) are sufficiently clear in their meaning that the plaintiff needs to complete the rectification works first, before he is entitled to recover and deduct the cost of repairing and making good the defects, shrinkages or other faults from the sum held by D2 as stakeholder for D1”.

Other Cases

Yet the decision in Ang Ban Giap is not consistent with past precedents which allowed a claimant to claim for remedial works which have yet to be carried out:

In Komala Devi a/p M Perumal v Bandar Eco-Setia Sdn Bhd & Anor [2016] MLJU 719, Lim Chong Fong JC (as his Lordship was formerly known) allowed the plaintiff’s claim for rectification of defective works based on a quotation. Like in Ang Ban Giap, these remedial works have yet to be carried out. This case also concerns a contract with a defect liability clause that uses the word “recover”:

26. Defect Liability Period

(1) Any defect, shrinkage or other faults in the said Building which shall become apparent within a period of (18) calendar months after the date the Purchaser takes vacant possession of the Building to which water and electricity supply are ready for connection to the said Building, and which are due to defective workmanship or the material or the said Building not having been constructed in accordance with the plans and descriptions as specified in the Second and Fourth Schedule as approved or amended by the Appropriate Authority, shall be repaired and made good by the Vendor at its own cost and expense within (30) days of it having received written notice thereof from the Purchaser and if the said defect, shrinkage or other faults in the said Building have not been made good by the Vendor, the Purchaser shall be entitled to recover from the Vendor the costs of repairing and making good the same and the Purchaser may deduct such costs from any sum which has been held by the Vendor’s solicitors as stakeholder for the Vendor...”

See also Quah Ban Poh v Dragon Garden Pte Ltd [1985] 2 MLJ 159, Portland Arena Sdn Bhd v Sime Darby Property Bhd [2015] 10 MLJ 1 which allowed claims for rectification works based on quotation although the exact clauses are not mentioned in these two cases.

Perhaps the rationale by Lee Swee Seng JC (as his Lordship was formerly known) in Guan Heng Construction Works (suing as a firm) v IMM White Button Mushroom (M) Sdn Bhd and another suit [2013] 10 MLJ 465 can shed some light. In this case, Guan Heng was appointed as the contractor to build a farming and fertilizer factory. The contract was terminated at 92% completion and the factory floor sank. Guan Heng carried out rectification works. Yet, the floor sank again. IMM counterclaimed against IMM for an estimated rectification cost. Allowing for the cost of rectification (but for a reduced sum) the learned judicial commissioner held:

“[71] It can thus be confidently stated that the fact that the defendant has not effected the rectification works to the sinking floor does not prevent it from making a claim on what is a bona fide reasonable assessment of costs to be incurred in rectifying the defects. … one will have to make an assessment as to what is a reasonable assessment of damages that the plaintiff should pay for the floor that had sunk unevenly. Otherwise an impecunious injured party would not be able to make a claim if he has to wait until he has the funds and then do the rectification works for by then limitation would have set in. It would be a double blow for the injured party. Here it can be appreciated that the factory floor being uneven after sinking, it was difficult for the machinery to be firmly affixed not to mention dangers posed to staff and with production having being delayed, one can imagine the cash flow problems that would be snow-balling”

PAM 2006 Conditions of Contract

Clause 15.4 of the PAM 2006 Conditions of Contract uses a different, albeit similar, phrase than that in clause 25 of Ang Ban Giap:

“… If the Contractor fails to attend to the Defects, the Employer may, without prejudice to any other rights and remedies which he may possess under the Contract, employ and pay other Person to rectify the Defects and all costs incurred shall be set-off by the Employer under Clause 30.4 …”

The expression in the PWD 203 form also uses the phrase “the costs incurred … shall be deducted from any money due or to become due”.

It can be suggested that the operation is PAM and PWD is only limited to instances where the employer intends to use the cost for purposes of set off alone under the respective clause.

CONCLUSION

It is suggested that one has to look at the exact and precise terms of their respective contract to decide if they can claim for remedial works based on a quotation.