Can a contractor’s payment be withheld when interim certificates have been issued by the consultant architect for the project?
JUANG SETIA SDN BHD V TINDAK MURNI SDN BHD  1 MLRA 46
- Pursuant to a contract, Juang Setia Sdn Bhd (“JSSB”) was engaged as a contractor to carry out building works for Tindak Murni Sdn Bhd (“TMSB”) (“Contract”).
- JSSB had carried out works of the Contract and TMSB’s consultant architect had issued interim certificates to TMSB for the value of works totalling RM2,684,924-55.
- TMSB had made payments totalling RM1,143,149-65 and refused to pay the outstanding sum of RM1,702,870-37 (“Outstanding Sum”) on the basis that JSSB had failed to rectify on going defects in the works during the defects liability period in accordance with the Certificate of Practical Completion which was issued by TMSB’s consultant architect.
- JSSB sued for payment of the Outstanding Sum and obtained a judgment in default which was later on set aside on application by TMSB.
- JSSB appealed to the Court of Appeal.
COURT OF APPEAL DECISION – APPEAL ALLOWED!
The Court of Appeal allowed the appeal and held as follows:
- It would defeat the purpose of issuing the certificates if the interim certificates issued by TMSB’s consultant architect (which were not challenged, corrected, revised or modified) were not conclusive.
- It would also be inconsistent with the Contract which stated that JSSB would be entitled to payment after the interim certificates were issued within the period of honouring certificates.
- It was also contrary to TMSB’s conduct when TMSB had made partial payment of the works completed as certified under the interim certificates.