CHONG NGE WEI & ORS v KEMAJUAN MASTERON SDN BHD [2022] 4 CLJ 833

FEDERAL COURT

CONTRACT – BREACH OF SALE AND PURCHASE AGREEMENT

Facts

1.      The Appellants were purchasers of the apartment units in a housing project developed by the Respondent.

2.      The Sale and Purchase Agreement (“SPA”) entered between the Appellants and Respondent were statutory contracts under the Housing Developing Act (Control and Licensing) Act 1966 (“Act 118”).

3.      The Appellants sued the Respondent for breach of contract specifically Clause 12 of the SPA where the Respondent had changed the building material for the outer brick walls from the agreed autoclaved aerated concrete building blocks to flexcore without the Appellants’ consent.

4.       Clause 12 of the SPA clearly stated that the buyer is entitled to damages or corresponding reduction in the purchase price if the Respondent made changes to the apartment construction without the buyer’s consent and the changes involved the use of cheaper materials.

5.      The High Court allowed the Appellants’ claims and ordered damages amounting to RM380,500.00 to be paid to the Appellants after assessment was made by the registrar based on the quotation tendered as evidence by the Appellants’ contractor.

6.      The Respondent appealed to the judge in chambers (“JC”) on the grounds that the amount awarded was unreasonable and excessive as it was only based on one quotation. The Respondent argued that more quotations should have been tendered by the Appellant.

7.      The JC dismissed the Respondent’s appeal. Aggrieved by the decision of the JC, the Respondent then appealed to the Court of Appeal (‘COA”) and succeeded when the COA decided to set aside the decision of the High Court, leaving the Appellants with no compensation based on the ground that actual works must be carried out first and actual expenses must be incurred first before the Appellant could claim for damages.

8.      The Appellant then filed an appeal to the Federal Court.

Issues

(i) Whether the demonstration of an actual loss was necessary in order for a claim for damages under Clause 12 to be granted?

(i) Whether the demonstration of an actual loss was necessary in order for a claim for damages under Clause 12 to be granted?

(a) Clause 12 of the SPA provides that –

“ No changes thereto or deviations therefrom shall be made without the consent in writing of the Purchaser except such as may be required by the Appropriate Authority. The Purchaser shall not be liable for the costs of such changes or deviations and in the event that the changes or deviations involved the substitution or use of cheaper materials or the omission of works originally agreed to be carried out by the Vendor the Purchaser shall be entitled to a corresponding reduction in the purchase price herein or to damages in respect thereof.”

(b) The contractual provision above clearly entitles the Appellant to two rights namely –

(i)  reduction of purchase price of the property; or

(ii) claim for damages,

in the event different materials for the construction were used by the Respondent without the Appellants’ prior consent. In this present case, the Appellant had opted to claim for damages against the Respondent’s wrongful act of using material that is different from what was contracted for without the Appellants’ consent.

(c) The basic principle regarding damages was explained in the case of Livingstone v Rawyards Coal Co [1880] 5 App Cas 25:

“…that sum of money which will put the party who has been injured, or who has suffered, in the same position as he would have been in if he had not sustained the wrong for which he is now getting his compensation or reparation.”

(d) In this case, proof of damages had been provided by the Appellant through quotation prepared by a building contractor for the cost of replacing the flexcore with autoclaved aerated concrete building block and the Respondent raised no objection nor producing any alternative figure to the contrary when the quotation was tendered as evidence.

(e) Reference was made to the case of WM Cory & Son Ltd where it was held that the Plaintiffs were entitled to an award of damages which will meet the costs of the remedial works.

(f) By applying the above principles, it was held that the quotation provided by the Appellant is a prima facie proof of loss in which the sum will meet the costs of the remedial works of replacing the flexcore with the material that was initially contracted for.

Decision

The Federal Court unanimously reversed the decision of the Court of Appeal and restored the decision of the High Court.

1.      A breach of contract occurs when one party fails to fulfil their obligations as specified in the contract or performs them inadequately.

2.      One of the common remedy in breach of contract is compensatory damages where the aim is to restore the Appellants in the same situation as if the contract had been performed.

3.      To establish the claim for damages, the proof of actual loss must be shown before the damages can be awarded.

4.      Hence, the main issue in this present case was regarding the type of proof that is necessary in determining quantum of damages awarded to the Appellants –

(a) whether the quotation provided by a building contractor constitutes sufficient evidence of the damages; or

(b)   whether the proof must be an evidence of the sum of money that they had already spent for the remedial works.

5.      The principle in the case of Strange & Ors v Westbury Homes Ltd & Anor [2009] EWCA Civ 1247 provides that damages could be awarded based on the quotations produced as long as the quotation provides a reasonable cost of remedial works and covers all the work needed to remedy the defects.

6.      Therefore, subject to any rebuttal evidence tendered to challenge the excessiveness and reasonableness of the prima facie proof, a building contractor’s quotation that offers a detailed breakdown of the remedial works to be carried out serves as prima facie proof of the losses and damages suffered by the purchaser which in this case known as the Appellant.