KENWINGSTON SDN. BHD. v INGCA SDN. BHD.

Case Significance

Instructive on the limits of a section 71 Contracts Act 1950 restitutionary claim against a paying party in a multi-tier construction chain, holding that a party that has already given full consideration for the benefit is not unjustly enriched despite the absence of privity.

This High Court decision at Kuala Lumpur, in the Construction Court, is an appeal from the Sessions Court concerning a claim by a supplier down a construction contracting chain against a party with whom it had no contract. The appellant, Kenwingston Sdn Bhd, was the principal subcontractor for a housing development, engaged by the main contractor which was in turn appointed by the developer. The principal subcontractor engaged a subcontractor for plumbing works, and that subcontractor engaged the respondent, Ingca Sdn Bhd, as a sub-subcontractor to supply and install fibreglass-reinforced plastic water tanks. When the subcontractor failed to pay the sub-subcontractor, the sub-subcontractor sued the principal subcontractor, and the Sessions Court allowed its claim of RM847,484.12 with interest and costs, relying on section 71 of the Contracts Act 1950, which imposes an obligation to pay for a non-gratuitous benefit lawfully enjoyed. The principal subcontractor appealed. The court, per Rajes Raghavji JC, held that there was no privity of contract between the principal subcontractor and the sub-subcontractor, and that the Sessions Court had erred in invoking section 71 against the principal subcontractor. The decisive point was that the principal subcontractor had already provided full consideration for the works, including the water tanks, having paid down the contractual chain for the benefit it received; it was therefore not unjustly enriched at the sub-subcontractor's expense, and to compel it to pay again would sanction an inequitable double payment. Although the court accepted that a claim under section 71 is independent and that the sub-subcontractor had not acted gratuitously, that became academic once the principal subcontractor had shown it was not unjustly enriched. The appeal was allowed, the Sessions Court order set aside and the claim dismissed, with costs to the principal subcontractor. The judgment is instructive on the limits of a section 71 restitutionary claim against a paying party in a multi-tier construction chain where privity is absent.