COVA DESIGN & CONTRACT SDN. BHD. v INTBUILD CONCEPT SDN. BHD.

Case Significance

Illustrates the assessment of liquidated ascertained damages and rectification costs under sections 74(1) and 75 of the Contracts Act 1950 in a construction subcontract, and recognises a remedy where a debt is wrongly maintained in a credit-reporting record after payment.

This High Court decision concerns a main contractor's appeal against the dismissal of its counterclaim in a subcontract dispute over the installation of built-in furniture in a large service-apartment development. The subcontractor had sued in the Sessions Court to recover a balance of RM84,255.52 for work done, the debt arising after two of six post-dated cheques issued by the main contractor were dishonoured with the notation that payment had been stopped. The main contractor counterclaimed, alleging that the subcontractor had delayed completion of the units against the deadlines fixed in a second letter of appointment, that its work was defective, and that it had suffered loss from an adverse credit record. The Sessions Court dismissed the counterclaim after a full trial and awarded costs against the main contractor, which appealed. The court examined whether the subcontractor had delayed in completing the units and whether the main contractor was entitled to liquidated ascertained damages, whether it could recover the cost of rectifying defective work, and whether it was entitled to damages for the continued reporting of the debt in a credit-reporting record, applying sections 74(1) and 75 of the Contracts Act 1950. Allowing the appeal in part, the court set aside the Sessions Court's decision, including costs, and awarded the main contractor liquidated damages of RM360,000.00 and RM86,890.66 for the cost of rectifying defects up to May 2021. It ordered the subcontractor to withdraw and cancel the credit report within seven days, and awarded nominal damages of RM2,000.00 for the continued reporting of the debt after the judgment sum had been settled, together with interest at 5% and costs of RM15,000.00. The judgment is a useful illustration of how the courts assess entitlement to liquidated ascertained damages and rectification costs under the Contracts Act 1950 in a construction subcontract, and of the availability of a remedy where a debt is wrongly maintained in a credit-reporting record after payment.