In construction projects, disputes arise when a party withholds or refuses to issue the certificates under the contract. The High Court case of Elite Alliance Engineering Sdn Bhd v Visi Nusajaya Sdn Bhd [2021] MLJU 2421 demonstrates that a contractor is still entitled to payment for work done if a contractual certificate is unjustifiably withheld by the other party.
Brief Facts
- The Respondent, Visi Nusajaya Sdn Bhd (“Visi Nusajaya”), as the sub-contractor, appointed the Appellant, Elite Alliance Engineering Sdn Bhd (“Elite Alliance”) to carry out pipe jacking works.
- Elite Alliance completed its works but Visi Nusajaya did not issue a certificate of practical completion for the works. Visi Nusajaya’s position was that the main contractor had yet to issue a certificate of practical completion as certain testing and commissioning had yet to be done by Indah Water Konsortium.
- Visi Nusajaya also refused to release the retention sum to Elite Alliance, stating that the release of the retention sum is subject to the employer releasing the retention sum in the main contract.
- Elite Alliance then commenced an action against Visi Nusajaya at the Sessions Court but its claims were dismissed. Elite Alliance appealed to the High Court.
High Court’s Findings
The Court found there was no express requirement under the contract between Visi Nusajaya and Elite Alliance that provides that the completion of the works will only be deemed achieved upon testing and commissioning by Indah Water Konsortium
Given that there is no agreed form for the certificate of practical completion (CPC), the Court found that the joint measurement sheet of completed work as approved by Visi Nusajaya was as good as a CPC.
The Court held that even if the joint measurement sheet of completed work is not to be construed as a CPC, Elite Alliance can still recover its payment. Taking guidance an earlier decision of Frontprise Interior Sdn Bhd v Acoustro Corporation Sdn Bhd [2021] 1 LNS 633, as Visi Nusajaya withheld the issuance of the CPC without valid reasons, Elite Alliance is entitled to the retention sum because the CPC can be deemed issued.
Key Takeaways
The issues highlighted in the case above is not uncommon between main contractors and their sub-contractors. It is important for parties, particularly the main contractors, to understand the terms of their contract before withholding the issuance of certificates. If there is no legal justification for the withholding of the certificates, then the sub-contractors could be entitled to payment regardless of whether certificates are eventually issued or not. This applies whether the certificate is an interim payment certificate (as in Frontprise Interior Sdn Bhd (ibid)) or a CPC (as in Elite Alliance Engineering Sdn Bhd (supra)).
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This article was written by Sean Ferdinand Ng (Associate) from Donovan & Ho’s dispute resolution practice.
Donovan & Ho is a law firm in Malaysia. Our dispute resolution provides advice and legal representation in the civil and industrial courts. We also represent clients in both domestic and international arbitration, as well as other forms of alternative dispute resolution. Our experienced lawyers are also able to assist in commercial and civil disputes (such as debt recovery, shareholders’ or directors’ disputes, breach of contract and claims for injunctive relief), constructive disputes (arbitration and/or adjudication proceedings, disputes relating to delays, liquidated damages, defects and rectification work) and employment disputes (unfair dismissal claims, judicial review proceedings, and employment-related civil claims). Have a question? Please contact us.
