Akitek vs Mid Valley City free essay sample

Most construction companies have a general place of business; however, the construction company often performs multiple projects at different sites. The production responsibilities of the construction sector are typically covered in contracts with the owners of construction projects (prime contracts) or contracts with other construction establishments (subcontracts). (The Mirkhan Law Firm, 2013) The construction contract serves as an agreement between the two parties involved in a construction project, and both parties to the contract are obligated to perform their end of the contract. It is almost a given that some form of a dispute will develop on every construction jobsite. It might be between the owner and the general contractor (GC), between the GC and a subcontractor, between a subcontractor and another subcontractor, between a subcontractor and a sub-sub contractor, between the GC, Sub, Sub-Sub and their material supplier, between the owner or GC and the Architect or Designer, and the list goes on and on (SERVICES) The construction dispute in this case was about breach of contract between client and consultant/architect ( Akitek Tenggara Sdn Bhd vs Mid Valley City Sdn Bhd). We will write a custom essay sample on Akitek vs Mid Valley City or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page There were a few definition of breach of contract: Breach of contract happens where there is an actual failure by a party to the contract to perform his obligations under the contract or an indication of his intention not to do so. (Oxford University Press, 2009) A breach of contract occurs where a party to a contract fails to perform, precisely and exactly, his obligations under the contract. This can take various forms for example, the failure to supply goods or perform a service as agreed. (IBS, 2013) Breach of contract is a legal cause of action in which a binding agreement or bargained-for exchange is not honored by one or more of the parties to the contract by non-performance or interference with the other partys performance. If the party does not fulfill his contractual promise, or has given information to the 2 other party that he will not perform his duty as mentioned in the contract or if by his action and conduct he seems to be unable to perform the contract, he is said to breach the contract. SHUTTIE, 2010) The aimed of this study was to expose engineers about one of disputes that occurred in construction project. If the dispute cannot be resolved through negotiation and compromise, it will become necessary for an impartial third party to resolve the disagreement. (Bruce M. Jervis, 1988). It is begun when Akitek Tenggara was appointed by the developer for a proposed comprehensive development of five lots of land at Jalan Penghulu Mat, Kampung Haji Abdullah Hukum, in Kuala Lumpur. . 0 NAME AND BACKGROUND OF DISPUTE PARTIES 2. 1 The Plaintiff (Akitek Tenggara Sdn Bhd) 2. 1. 1 History The firm started in 1976 when it was initially concerned with low-income mass housing. It has since completed commercial, recreational, tourism, urban planning and institutional projects. In 1989, Akitek Tenggara II was formed to take in new and younger partners from diverse backgrounds, enabling the set-up to renew itself through the input of fresh talents. 2. 1. Scope of Works The practice engages in city planning, project feasibility studies, research, interior design and architectural works; in particular, educational buildings, health-care facilities, recreational and residential developments 2. 2 The Defendant (Mid Valley City Sdn Bhd) Pioneer property developer, IGB Corporation Berha d has set the industry standard where many continue to follow. As the developer of the countrys many ‘first’ residential and hospitality developments, the Group has created a niche for itself as an asset builder focused on harnessing recurring income from its property investment and hospitality businesses. Defying convention the firm’s management evolved to adapt to the industry’s most fundamental and challenging axiom: that real estate is by nature a local business. 3 Even as the firm crossed continents and cultures, high standards of quality, taste and execution remained steadfastly at its core. Mid Valley City, the Group’s maiden and largest 50-acre project on the fringes of Kuala Lumpur is today the countrys largest shopping mall and a major landmark in the Klang Valley. Attention to detail, efficiency, economy and engineering innovations are among the hallmarks of all IGB projects. The group currently commands over 6023 keys with its acquired hotels and continues to serve its investors and 1070 tenants with a total disposal of 4. 189 mil sqft in building space, with exceptional personnel and state of the art technology. The firms unique talent in value engineering allows its partners to achieve their development goals on or below budget. IGB Corporation Berhad invests in and manages a diverse portfolio of long term commercial, retail, residential and hospitality assets in Asia, Australia, the United States and Europe. In addition to its core property investment portfolio, the Group actively manages a portfolio of non property related investments mainly consist of civil, building construction, investment holding and project management services. Core to the Group’s successful investment is a hands on approach and strong attention to detail in managing assets and ensuring optimal returns. It also prides itself on its continued local community support and involvement. 3. 0 NATURE OF DISPUTE AND NARRATIVE OF THECASE 3. 1 Nature of Disputes Termination of plaintiff’s appointment a) By a letter dated 1 November 1988, the defendant purported to discharge the plaintiff as the architect for the said project for the reasons that IGB Corp Bhd (‘IGB’) was as at the date thereof the majority shareholders of the defendant and intended to utilize the services of architects presently retained by IGB Corp Bhd for the said project. ) By a letter dated 26 January 1989, the first defendant wrote to the plaintiff stating that the plaintiff’s services as the architect for the said project had been ‘unequivocally and irrevocably terminated’ as the said project had been aborted. 4 3. 2 Narrative of the Case 3. 2. 1 Facts The first defendant was at all material times, the registered proprietor and beneficial owner of all the pieces of land held under GM 755 Lot 19, GM 776 Lots 23 and 25, GM 872 Lot 34, GM 753 Lot 21, all in Section 95A Town of Kuala Lumpur (‘the said lands’). In 1982, the plaintiff was appointed by one Lim Pak Tow Sons Realty Sdn Bhd (‘Lim’) to make a submission on its behalf regarding Lots 19 and 21, by submitting plans for the commercial development of the said lots. By a letter dated 8 November 1982 to Lim, the plaintiff set out the terms of his appointment as an architect for the submission of plans for the change of land use and for the increase in density of Lot 19. The terms were as follows: a) On submission to Planning Department for change of use and increase in density, the plaintiff would be paid a lump sum fee of RM20,000; and b) Should the project proceed further requiring the full professional services of the plaintiff, the lump sum fee of RM20,000 would be deemed to be part payment towards the plaintiff’s fees of 5% of the total construction costs. The said Lim then engaged the plaintiff to prepare a comprehensive development plan of a township encompassing the said lands and the surrounding lands which belonged to the state. By its letter dated 28 September 1983, the plaintiff submitted the layout plans to the City Hall. 3. 2. 2 The Project On 1 March 1984, a joint venture agreement (‘the JVA’) was entered into between the Mayor Kuala Lumpur and the defendant to develop the said lands into a township which then became known as Bandar Syed Putra project (‘the project’). After the JVA was signed, the Gazette Notification and the compulsory acquisition of Lots 19 and 21 were revoked. By a letter dated 6 October 1983, the plaintiff then informed Lim that the 5 architect’s fee for the said project was, inter alia, 5% of the total building costs. . 2. 3 Terms of the Plaintiff’s Appointment By a letter dated 6 April 1984 from the plaintiff to the defendant, the plaintiff set out the terms of its appointment as the architect for the said project. The plaintiff’s fees agreed upon were as follows: a) 4% of the total building cost for the first blocks; b) 2% of the tot al building cost for the subsequent repetitive blocks; c) 1% of the total infrastructure costs; d) RM300 per unit for the medium low and low cost residential units for the City Hall; and e) RM600 per unit for the medium cost flats for the City Hall. By a letter dated 14 June 1984, the defendant confirmed its acceptance of the appointment and professional fees of the plaintiff as the architect for the said project with the proviso that in the event changes or improvements were required in the subsequent repetitive lots, the fees for the repetitive lots would remain at 2% of the building costs. The defendant further confirmed the terms of appointment of the plaintiff by signing the letter dated 6 April 1984 from the plaintiff. 3. 2. The Plaintiff’s Case The plaintiff’s claim against the defendant is for professional fees and for damages for wrongful termination of the plaintiff’s services as an architect, in breach of a contract or agreement between them. The plaintiff’s claim in summary is either: a) For damages for wrongful termination in the sum of RM7,705,382 or alternatively; b) A sum of RM2,006,373 on the basis of quantum meruit as at the date of termination The plaintiff contended that it was eng aged as an architect by the defendant pursuant to two letters of appointment, namely: a) Letter dated 8 November 1982; and 6 ) Letter dated 6 April 1984 and affirmed by the defendant’s letter dated 14 June 1984. The plaintiff argued that its services cannot be terminated unless there is a breach of the express or implied terms of the agreement and for just cause. The agreement cannot be terminated for any other reason and if terminated, the party exercising its right to terminate the agreement will do so in breach thereof and will be liable to pay damages. 3. 2. 5 Case for Defendant The defendant pleaded that its right to terminate the services/contract of the plaintiff was implied by law. It also argued that from the letter of appointment dated 6 April 1984, it was implied that the plaintiff’s services may be terminated if the project was aborted, abandoned or delayed. The defendant denied that the plaintiff’s termination was wrongful or unlawful and the defendant further denied that it was in breach of the said contract. It also pointed out that from a decision of the then Supreme Court in Civil Appeal No 02-124-1990, it was implied that the plaintiff’s services were terminable and that the termination thereof was correctly made and that the issue of the said termination was res judicata. It was also the case of the defendant that it was not in breach of contract for the reason that the said project was delayed indefinitely, abandoned or aborted and accordingly the defendant was not liable in damages. Finally, the defendant pleaded that the plaintiff’s claim was statute barred by limitation pursuant to s 6 of the Limitation Act 1953. The defendant thus counterclaimed for a sum of RM131,636. 31 which the defendant claimed it had overpaid 3. 2. 6 The Claim The plaintiff therefore claimed: 7 ) The sum of RM7,705,382 for wrongful termination of the plaintiff’s architectural services in breach of the contract of employment between the plaintiff and the defendant; b) The sum of RM7,705,382 for wrongful termination of the plaintiff’s architectural services in breach of the contract of employment between the plaintiff and the defendant; c) Interest on the judgment sum at the rate of 8% per annum from the date of unlawful termination, 1 November 1988 to th e date of realization; d) Costs; and e) Such further and other relief as this court may deem fit and proper. 3. 2. Finding of the Courts It is clear to me that the employment of the plaintiff as architect for the said project and its professional fees is based on the agreement reached between the parties as contained in the plaintiff’s letter dated 6 April 1984 and confirmed by the defendant by its letter dated 14 June 1984. It is also clear that there is no express stipulation as to the defendant’s right to terminate the plaintiff’s services. Can the defendant therefore terminate the plaintiff’s services for the reasons advanced, namely: a) that IGB wanted to retain its own architects and/or; b) that the project had been aborted? What is important to note however is that the letter of termination of the plaintiff’s services is premised solely on the ground that IGB was at the date thereof the majority shareholder of the defendant and hence intended to utilize the architects on the panel of IGB for the said project. I have been shown no evidence that the project has been abandoned. I also note that there has been no complaint by the defendant in respect of the services rendered by the plaintiff. I reject the defendant’s reason that IGB being the majority shareholder, intended to use its own architects, on the basis that this was never envisaged or agreed to by the parties when the terms were agreed upon. 8 In any case under cross-examination, DW2 clearly admitted that the JVA was not terminated but was varied. He also conceded that it was incorrect to say that the plaintiff’s services were terminated because the project was abandoned. He also confirmed that the JVA between the defendant and Kuala Lumpur City Hall was still ongoing. It is interesting to observe that after the plaintiff was discharged as the architect of the said project, the defendant contended that new amended layout plans and amended building plans were submitted. However, DW2 did not produce any of the alleged new amended layout plans and amended building plans or even a fresh JVA between the defendant, IGB and City Hall. There was not even produced to the court, a new development order. I therefore find that as admitted by DW2, the defendant is still continuing with development of the said project under the existing JVA. Even if the concept of the project had been varied (which I find is not the case), the project nevertheless remains the same and is still ongoing. It is clear to me that the defendant has been laboring under an erroneous misconception that an alteration or variation of the concept of the development is synonymous with the project being abandoned. In any case, DW2 had admitted that the plaintiff’s services were terminated not because the project was aborted, but because IGB wanted to use their own architects. He, who asserts, proves. The defendant has in my judgment failed to discharge the burden of proving that the project had been abandoned or aborted. The term relating to this aspect merely states that if this happens, the fees computed to the nearest stage of work is payable. In the circumstances, it is my finding that the termination of the plaintiff by the defendant was indeed unlawful as the plaintiff was not in breach of any of the terms of the contract. Accordingly, I find that the defendant is in breach of the contract and the plaintiff is entitled to compensation for loss or damage against the defendant pursuant to s 74 of the Contracts Act 1950. 4. 0 JUDICIAL PRECEDENT AND LEGAL ISSUES DISCUSSED BY THE COURT 4. 1 Cases a) Edwin Hill Partners v Leakcliff Properties Ltd (1984) 272 EG 63 the court held that the absence of a contractual right to terminate the engagement prior to completion of the services or the project means that the contract is in the nature of an entire contract. The court also reject ed the defendant’s argument that the right to terminate was to be implied. Such an argument failed because the parties had expressly dealt with what was to happen if the defendant was unable to proceed and had not made any arrangements for any other termination. In the light of these cases, is the plaintiff entitled to compensation and damages for work done to date of termination and the loss of net profits on the abandoned work or uncompleted services lost by reason of the aforesaid breach after deducting therefrom the cost to the plaintiff for providing the uncompleted services for the abandoned works or as pleaded in the alternative is the plaintiff entitled to treat the contract as at an end and sue upon a quantum meruit basis only? They find that on the basis of Edwin Hill, when a contract of employment between the owner and the architect has been partly performed and there is a refusal or failure of the building owner to complete the project amounting to repudiation on his part, the architect can, on general principle, sue for all sums due at the time. Alternatively, the plaintiff may treat the contract as at an end and is entitled to the damages based on the principle of quantum meruit (see Hudson’s Building Engineering Contract (11th Ed) Vol 1 para 2. 260 page 390). However, the question remains whether the plaintiff is entitled to sue on the ‘entire contract’ or on ‘quantum meruit’. They had earlier held that neither has the project been aborted, abandoned nor delayed indefinitely. This is based on the admission of DW2 himself. The provision relating to payment of compensation where 10 there is abortion, or abandonment of work or indefinite delay stipulates that upon such occurrence, then the fees computed to the nearest stage of work is payable. It is for the defendant to bring its case within this provision if it wishes to submit that the plaintiff is entitled only to a quantum meruit basis. But as I have held, since I have found that the project as envisaged in the earlier JVA is still subsisting, the defendant has failed to prove entitlement only under a quantum meruit basis. This is a clear case of wanton cancellation of the contract by the defendant purely on the basis that it wished to utilize its own architects. I therefore hold that the plaintiff is entitled to sue for all sums due at the time of the breach and for the loss of profits on the work lost by reason of the breach. They also find that the plaintiff’s evidence in respect of particulars of loss and damage suffered by it as a result of its unlawful termination by the defendant in breach of the contract has not been seriously challenged in cross-examination by the defendant. The defendant solely relied on the evidence of DW2, one Sze To, and their architect. This was an appeal by Edwin Hill Partners from the dismissal by Rose J of their claim as plaintiff for damages against First National Finance Corporation ple, defendants and present respondents, for procuring a breach of contract between the appellants and Leakcliff PropertiesLtd in relation to architectural services for the development of Wellington House in Waterloo Road, London SEI. Watt, 1998, Volume 2) b) Thomas v Hammersmith Borough Council [1938] 3 All ER 203 The Court of Appeal held that unless there is an agreement to the contrary, an appointment in explicit and unqualified terms for a particular project cannot be determined until the purpose for the appointment has been achieved. However, in the event of lear agreement as to the purpose of the appointment, any termination of the employment before the purpose of the appointment has been achieved, would amount to a breach of contract. 11 c) Sivalingam Periasamy v Periasamy [1995] 3 MLJ 395 The Court of Appeal commented on the need to put one’s case to the other side in cross-examination. The detail of loss and damage suffered by the plaintiff is set out in agreed Bundle E. 4. 2 Legislations a) Contracts Act 1950: s. 74 74. Compensation for loss or damage caused by breach of contract (1) When a contract has been broken, the party who suffers by the breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from the breach, or which the parties knew, when they made the contract to be likely to result from the breach of it. (2) Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach. Compensation for failure to discharge obligation resembling those created by contract (3) When an obligation resembling those created by contract has been incurred and has not been discharged, any person injured by the failure to discharge it is entitled to receive the same compensation from the party in default as if the person had contracted to discharge it and had broken his contract. b) Limitation Act 1953: s. 6 Actions of contract and tort and certain other actions, shall not be brought after the expiration of six years from the date on which the cause of action accrued. This includes actions founded on contract or on tort, actions to enforce a recognizance, actions to enforce an award and actions to recover any sum by virtue of any written law other than a penalty or forfeiture or of a sum by way of penalty or forfeiture. 12 An action upon a judgment shall not be brought after the expiration of twelve years from the date on which the judgment became enforceable and no arrears of interest in respect of any judgment debt shall be recovered after the expiration of six years from the date on which the interest is due. 5. 0 COMMENTARY AND CONCLUSION 5. Commentary There are four types of contract breaches recognized by the law today: a) Minor breach b) Material breach c) Fundamental breach d) Anticipatory breach. This case can be classified under an anticipatory breach of a contract which is when the non-breaching party (Akitek Tenggara) realizes that the other party (Mid Valley City) of the contract will fail to perform his or her part of the contract in the future and can terminate the contract and sue for damages before the breach happens. In the majority of cases involving the breach of a contract, the damages awarded to the non-breaching party is typically in the form of money. In some instances, a judge can award an injunction or specific performance when monetary compensation for a breach of contract does not settle the breach effectively. (NOLO, 2013) Hochster v De La Tour is an example(is a landmark English contract law case on anticipatory breach of contract. It held that if a contract is repudiated before the date of performance, damages may be claimed immediately; In April, De La Tour agreed to employ Hochster as his courier for three months from 1 June 1852, to go on a trip around the European continent. On 11 May, De La Tour wrote to say that Hochster was no longer needed. On 22 May, Hochster sued. De La Tour argued that Hochster was still under an obligation to stay ready and willing to perform till the day when performance was due, and therefore could commence no action before. 13 â€Å" If a man contracts to execute a lease on and from a future day for a certain term, and, before that day, executes a lease to another for the same term, he may be immediately sued for breaking the contract† (Ford v Tiley) (Wikipedia, 2012) There are different types of damages that may apply under a breach of a construction contract. When one of the parties has breached the contract, then the party that has held up to their end of the contract may be entitled to various legal remedies. These may include consequential damages, liquidated damages, nominal damages and damages for specific performance. 5. 2 Conclusion After waiting 19 years, an architect firm will finally receive RM7. 7mil in damages for wrongful termination of its services as the architect for the developer of one of the country’s biggest shopping malls. Federal Court Justices Abdul Hamid Mohamad, Abdul Aziz Mohamad and S. Augustine Paul unanimously allowed Akitek Tenggara Sdn Bhd’s appeal against developer Mid Valley City Sdn Bhd. Akitek Tenggara was appointed by the developer for a proposed comprehensive development of five lots of land at Jalan Penghulu Mat, Kampung Haji Abdullah Hukum, in Kuala Lumpur. It claimed that the termination of its services via a letter dated Nov 11, 1988, was unlawful as it was not in breach of an express or implied term of an agreement with the developer. Akitek Tengarra claimed professional fees and damages for wrongful termination of its services as an architect, in breach of a contract or agreement between them. On May 11, 1999, the Kuala Lumpur High Court awarded the firm RM7. 7mil in damages saying Akitek Tenggara was entitled to compensation and damages for work done to date of termination and the loss of net profits on the abandoned work or uncompleted services lost by reason of the breach. Unhappy, Mid Valley City appealed and in 2005, the Court of Appeal overturned the RM7. 7mil award of damages for breach of contract but allowed the RM2mil claim for work done up to the date of termination. In his judgment, Justice Abdul Aziz Mohamad said there was no provision that gave LAM the competency to 14 ecide the lawfulness or otherwise of the termination of the services or engagement of an architect by his client, which was a question that would arise only in a contractual dispute. Justice Paul, in his judgment also agreed that LAM’s decision was of no effect as it was not competent to decide on the lawfulness or otherwise of the termination of an architect by his client. He said the M id Valley City’s intention to terminate the services of the architect as the new majority shareholders wanted to use the services of their own architect with a new development plan was brought by the act of developer itself.