There is usually no doubt as to who the employer is under the construction contract. But once in a while, a case like G-Pile System Sdn Bhd v CMMC Sdn Bhd [2021] 1 LNS 1727 comes along to show how things can go wrong when roles are fluid and proper documentation is lacking.
CMMC Sdn Bhd (“CMMC”) wanted to develop an apartment project on a piece of land that it owned. CMMC appointed the usual bevy of consultants for such a task, i.e. an architect, a quantity surveyor, a mechanical and electrical engineer and a civil and structural engineer.
CMMC and Jinling Management Sdn Bhd (“Jinling”) entered into a co-operation agreement (the “Co-operation Agreement”) which stipulated that (i) Jinling shall be appointed as turnkey contractor for the project, and (ii) Jinling shall appoint all subcontractors and suppliers under its name.
G-Pile System Sdn Bhd (“G-Pile”) was invited to tender for the project works by the quantity surveyor (acting for CMMC), but the Plaintiff later submitted its tender to Jinling.
Although the tender was submitted to Jinling, it was CMMC and its consultants who were involved in the tender clarification with G-Pile.
Thereafter, the letter of award to G-Pile was issued by Jinling (instead of CMMC).
This was later followed by the execution of the formal contract document which contained the PAM Contract 2006 standard form (the “PAM Form”). The opening part of the PAM Form stated that CMMC is the employer. But it was Jinling instead who signed at the space allocated for the “employer” to do so, at the last page of the PAM Form. The signing by Jinling consisted of – (i) a signature by an individual named Mr Fu; and (ii) Jinling’s rubber stamp below Mr Fu’s signature. There was no express statement that Jinling was signing on behalf of CMMC.
To further compound the situation, it was Jinling who paid G-Pile the interim payments for work done, but such payments were made based on interim certificates issued by CMMC’s consultants.
G-Pile completed its works. A statement of final accounts was executed. The statement named CMMC as the employer. But in the space for the employer to execute, there was a signature by Mr Fu and Jinling’s rubber stamp below that.
So, who is the employer who contracted with G-Pile in this morass of confusion? CMMC or Jinling?
G-Pile took the position that its contract was with CMMC. On that footing, G-Pile initiated statutory adjudication against CMMC for its outstanding claims under the contract. CMMC predictably raised a defence that it was not a party to the contract, and pointed its finger at Jinling. G-Pile’s claim was dismissed by the adjudicator.
Subsequently, G-Pile filed the present court action against both CMMC and Jinling, seeking a declaration that either CMMC or Jinling is – or both of them are – party to the contract.
What the High Court Decided
The High Court found that it was CMMC who contracted with G-Pile. This conclusion was arrived at as follows.
Firstly, the letter of award was issued by Jinling as agent of CMMC because it was CMMC (and its consultants) who actively participated during the tender process, whereas Jinling was merely the addressee of the tender submission. Jinling had ostensible authority to issue the letter of award on behalf of CMMC.
Secondly, although the letter of award expressly stipulated that it shall be a binding contract between Jinling and G-Pile pending execution of a formal contract, this was a misnomer. Anyway, the formal contract (i.e. the contract document) was later executed between G-Pile and CMMC.
Thirdly, and moving on to the contract document, the individual who apparently signed for Jinling – i.e. Mr Fu – was a director and shareholder of both CMMC and Jinling. Hence, Mr Fu is regarded as signing for CMMC, or alternatively for Jinling as agent of CMMC. Further, Jinling was designated as a specialist consultant (and not as the employer) in the PAM Form.
Fourthly, it was made clear in the early site meetings that Jinling was the project management consultant whereas the employer’s representative who attended those meetings was an individual from CMMC.
Fifthly, although Jinling paid G-Pile, those payments were based on certificates issued by consultants who were agents of CMMC. Therefore, the payments are regarded as being made by Jinling as agent of CMMC.
Sixthly, concerning the statement of final accounts, Mr Fu is regarded as signing for CMMC, or alternatively for Jinling as agent of CMMC.
Lastly, although the Co-operation Agreement made it the responsibility of Jinling to pay G-Pile, G-Pile was not a party to that Agreement. The construction contract was still regarded as being made between G-Pile and CMMC
As a result, CMMC was found liable to G-Pile for the latter’s outstanding claims.
Conclusion
This case demonstrates the importance of making sure that the contract is executed by the proper parties. This is especially so in light of the 1MDB scandal where identity confusion due to similar names can give rise to many complications.
Had there been no confusion about CMMC being the employer, it is likely that G-Pile would have succeeded in its adjudication based on the agreed final accounts, and hence avoid the more costly and time consuming route of pursuing its claim in court.
The contents of this article are published for the purpose of general information only; they are not to be regarded, used or relied on as legal advice for any matter. Please contact us if you require legal advice specific to your case.