Revisiting the Highland Towers: Has the Judicial Tide Subsided?

Abdul Mu’iz Abdul Razak

Faculty of Law, Universiti Teknologi MARA, 40450 Shah Alam Selangor, Malaysia

Keywords: Construction, Court, Industry, Risks, Works.

Abstract: This paper aims to look into the treatment of the Malaysian courts in cases of defective works in the

construction industry with guidance from the Higland Towers tragedy, specifically the High Court case of

Steven Phoa Cheng Loon v Highland Properties Sdn Bhd. Through the decisions of the Malaysian courts

coupled with industry practice, the analysis might shed some light as to the direction of the Malaysian

construction industry. A doctrinal analysis is employed to ascertain the attitude of Malaysian courts towards

cases involving defective works. The purpose of this study is to analyse the current trend in Malaysian courts

and industry practice in dealing with defective works in the construction industry. Further, the analysis will

be utilised to provide guidelines to constrution industry players to ensure that possibility of defective works

is minimized and how best to deal with defective works appearing in the construction project. This paper

concludes with the recommendation for the construction industry players to adopt proper industry practice

with guidance as provided by the Malaysian courts in order to reduce the risk of defective works in

construction projects.

1 INTRODUCTION

Generally, a defect would mean that the contractor

failed to achieve a certain standard of workmanship

or failure to comply with requirements as to materials

to be used as set out in the construction contract.

Nevertheless, each construction contract might differ

in detail as to what amount to a defect or defective

works. These defining clauses, in whatever form,

would be scrutinised by the courts to comprehend

whether the situations as alleged by the parties to the

contract as being defective works or otherwise a mere

rectificable minor flaw. In both circumstances, it is

common in the industry that the contractors are left

with generally two choices: whether to offer

themselves for rectification works or come to an

agreement as to a settlement sum. The trend in other

commonwealth countries, especially in Australia is

that the contractors prefer to opt for rectification

works because then they would have more control

over the scope of work and that the situation would

be more familiar to them and would potentially

involve lesser rectification time and ultimately, lesser

cost (Campbell, 2018).

It should be noted on the outset that the

contractors have the implied obligation to ensure that

the works they carried out is in accordance with the

contract in a reasonable and safe manner while

ensuring that the end product is of good and

acceptable quality. One of the manner in which this

implied obligation would be breached is that if the

materials supplied and eventually used is defective

(Cremean & Ozer, 2018). By extension, this would

also mean that the defective works are not just

looking into the failure to comply with the standard

of workmanship, but goes beyond that by looking at

the possibility of using materials that are not suitable

for the purpose of the construction project, taking into

consideration various factors including the climate

condition, geographical location and project costs.

The Malaysian Construction Industry, despite

being a multi-billion ringgit industry, is still tainted

with the image and an overall fear of the end-user that

the completed project will be streamed with defects

and if the matter worsen, there will be years of dispute

resolution process because the parties to the

construction projects will refuse to take responsibility

of the defective works. This is not surprising as each

construction project has its own unique

circumstances, be it design, site conditions, cost and

parties involved (Ahmad Rashid, Jamaludin, &

Hussin Amin, 2014). This results in the subjective

consequence of each particular construction project,

be it in a positive or negative manner. Eventually,

208

Razak, A.

Revisiting the Highland Towers: Has the Judicial Tide Subsided?.

DOI: 10.5220/0010053702080211

In Proceedings of the International Law Conference (iN-LAC 2018) - Law, Technology and the Imperative of Change in the 21st Century, pages 208-211

ISBN: 978-989-758-482-4

when the relationship of the parties turned sour due to

the defective works, the dispute resolution

mechanism chosen by the parties would have the

chance to look into the matter and should the parties

were unsatisfied with the decision, ultimately the

courts would have to assess these particular

consequences in order to come to provide judgements

for each case.

The above discussion centred mainly on the fact

that the parties to the dispute of the alleged defective

works were in fact parties to the construction

contract, but what if this was not the case all the time?

What if the end user of the premise has no contractual

relationship with contractors who were involved in

the construction of the building in the first place and

are somehow directly affected by the defective works

prevalent in the completed project? In this situation,

tort claims has been held to be allowed in certain

jurisdictions (Xavier, 2001). It is understandable that

a contractor owes a duty of care to lawful occupiers

of the completed building, albeit the latter were not

the initial contractual parties. Further, this duty stems

from the idea that the contractor must ensure that the

completed building has been carefully constructed.

The scope of this study is to look into the basis of

claims for defective works by first looking into Steven

Phoa Cheng Loon v Highland Properties (2000). The

study will then proceed to look at the trend of the

Courts in dealing with defective works appearing

during the Defects Liability Period (DLP) and after

Certificate of Practical Completion (CPC) has been

issued. There is a vacuum of literary works focusing

on the attitude of the Courts towards defective works

in Malaysia and the objective of this paper is to

address this particular vacuum and analyse the trend

to provide guidelines to construction industry players.

2 MATERIALS AND METHODS

This is a legal research paper and the materials are

collected through extensive case law and library

research. A doctrinal approach is undertaken to identity

the key theme in the judgments on Malaysian Courts

with regards to cases involving defective works in

construction projects. “Defective works” in itself is a

wide subject in the construction industry scene, steps

are taken to ensure that the emphasis of this paper

would be on how the Courts reacted to cases involving

defective works and how they analyse each particular

case by employing different principles of law. Further,

the judgements will be scrutinised to ensure the Courts

employ the appropriate principle of law, which might

help in shedding some light as to which directions

Malaysian Courts should steer its decision-making

process. Data will be collected from court decisions,

journal articles, standard form contracts as well as

government regulations and policies involving

construction and building bodies in Malaysia.

3 RESULTS AND DISCUSSIONS

There is an overall repulse of the Courts to actions of

the construction industry players, involving but not

limited to, contractors, architects, engineers, and

quantity surveyors, which resulted in the defective

works in construction projects. Despite this being so,

very little has been done to ensure that the cases are

not repeated in future situations. It is interesting to

note that there are provisions both in current

legislations and in the contracts between the parties to

the construction project addressing the issue on

defective works, provided there are written agreement

in the first place. Nevertheless, in reality, there is very

little emphasis by the parties to the construction

project to the content of the contract with regard to

defective works until after there are disputes between

them. Recourse to the content of the contract and the

construction of the various clauses is necessary in

most situations in order to ascertain whether there is

in fact defect in the construction works. This is

particularly so because to ascertaining whether there

is actual defect is a technical and difficult question.

(Bailey & Bell, 2011)

In Steven Phoa Cheng Loon v Highland

Properties (2000) or otherwise known as the

“Highland Tower” case, the High Court had the

opportunity to address the defective construction

works, which is considered one of the worse in

Malaysian history, while commenting on the

conducts of the professionals involved in the project.

It involved a development project consisting of three

blocks of apartments with a steep hill adjacent to the

towers and a stream flowing around the vicinity. On

one tragic day of 11 September 1993, Tower 1

collapsed and claimed the lives of 48 occupants.

Tower 2 and 3 were then immediately vacated, which

caused major monetary losses to the occupants.

Several legal issues were raised before the court,

among others is with regard to the negligence of the

first defendant to completely implement the approved

drainage plan that should have been the solution to

the flow of stream. This is because the Court found

that the root cause of the collapse was the presence of

water in the foundational structure, which failed to

accommodate the lateral load and leads directly to the

destabilization of the slope. Should the first defendant

Revisiting the Highland Towers: Has the Judicial Tide Subsided?

209

acted and conducted the project in accordance to the

approved drainage plan, the disaster would be able to

be avoided. The approved drainage plan was found to

be implemented up to only 10% out of the whole plan,

despite the defendants reported to the authorities that

the approved drainage plan was complied with and

implemented entirely.

It is obvious from the case and the judgment of the

Court that the defendants, inclusive of the contractor,

architect and engineer, failed to achieve the relevant

standard of workmanship of the construction project.

The sole motivation for the defendant to disregard the

approved plan and the subsequent false notice of

compliance was for prospective financial gains. In

this regard, it prompted the then Justice James Foong

to hold as follows:

I have reiterated my strong sentiments against this

type of attitude of professionals whose only

considerations is to guard and secure their own

interest rather than their duties and obligations to

those closely affected and the public on which much

faith and reliance are placed on them to carry out

their professional duties. I need not elaborate further

except to remind this defendant that he has to live out

the rest of his life knowing truly well that he

contributed to the tragedy of Highland Towers (Steven

Phoa Cheng Loon v Highland Properties, 2000).

In the Highland Towers, it is important to note that

the High Court was very displeased as to the direct

involvement of the defendants to the defects in the

project. For example, there was evidence that the

second defendant, as the engineer, did not exercised

care in relation to the design and construct of the

foundational structure as to accommodate lateral load

while taking steps to guarantee the stability of the

slope adjacent to the towers. Failure of the second

defendant to do as required as the engineer and to

exercise care not only was an obvious breach of duty,

but proof of the fact that the defendant failed to

achieve a proper standard of workmanship as required

by the contract.

Furthermore, in the Highland Towers case, the

actions raised mainly from the basis of tort of

negligence whereby the plaintiffs sued various

parties, which contributed, either directly or

indirectly, to the defective works. Contrastingly, in

the High Court case of KC Leong Holdings Sdn Bhd

v Datin Moh Lee Bing (2015), it features a contractual

relationship between the parties, and consequently

claims under torts, despite were briefly discussed,

were dismissed. Damage suffered by the defendant in

this case is in the nature of pure economic loss where

the building is allegedly built defectively but caused

no damage other than to the building itself. The

defendant alleged that the buildings were constructed

negligently and were not fit for the purposes of

occupation. However, it is to be noted that the High

Court has taken the view that the proper cause of

action in this case should be premised under breach

of contract instead of breach of tortious duty of care

as alleged by the defendant. This is also supported by

the fact that the defendant’s concluding submission

featured a claim under s.74 of the Contracts Act and

not one under tort of pure economic loss. The trend in

this case is that there is an indication in the judgement

of the court that it is recommended for claims on

defective works to be based on breach of contract

despite the convincing nature of tortious duty of care.

It is refreshing to have a simple case like this which

serves as a reminder that the first avenue of which the

Court will scrutinize in the event of construction

dispute involving defective work is the duty arisen in

the contract between the parties and not the duty

which may arise under tort.

KC Leong Holdings Sdn Bhd v Datin Moh Lee

Bing (2015) also touched on an important issue with

regard to defective works. What happened if the

defects are discovered after the defect liability period

has lapsed? Firstly, is there a defects liability period

clause? If not, then the Court will not ordinarily imply

such a clause in the contract between the parties.

Secondly, referring to a Court of Appeal case of Toh

Ang Poo (t/a Poo Wah Enterprise) v Jasin

Construction Development (M) Sdn Bhd (2014), the

Court ruled that the right to claim under defects

liability period clause do not supplant the right to

claim for damages. They are, in fact, an addition to

the right to claim for damages. Hence, Toh Ang Poo

(t/a Poo Wah Enterprise) v Jasin Construction

Development (M) Sdn Bhd (2014) did not generally

establish that once defects liability period has lapsed,

contractor’s liability for defective works would cease,

and should there be defective works attributable to the

contractor, the principal would still reserve the right

to claim for damages within the limitation period

prescribed by the Limitation Act 1953.

In Toh Ang Poo (t/a Poo Wah Enterprise) v Jasin

Construction Development (M) Sdn Bhd (2014), the

Plaintiff in this case claimed for rectification costs for

defective works which were discovered within the

defects liability period. Defendant, on the other hand,

claimed that there were no defects and even if there

were any, it had been made good during the defects

liability period. This is because the Plaintiff had

certified all the Defendant’s works and made full

payment. There were grave discrepancies in the

allegation of defective works. For example the

Plaintiff alleged in November 2007 that the manholes

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were constructed without the cast in-situ concrete

surrounds, which if were to be true, it would not be

considered as defective works but rather a serious

ommission, hence an incomplete work. This is

bearing in mind that the consultant engineer had

issued the Certificate of Practical Completion (CPC)

in November 2006, one year prior to the allegation

made in November 2007. Since there was no

allegation of negligence of consultant engineer in

issuing the CPC, such defective works remained as

allegation and not proven. This indicates that CPC by

the consultant engineer serves as more than just

indicating that the there is completion of the

construction works but also as a proof that should

there are defective works, such certification would

not be issued.

The Federal Court in Juara Serata Sdn Bhd v

Alpharich Sdn Bhd (2015) took the chance to remind

construction industry players that with regard to the

defective works, the parties to the construction

contract must firstly refer to the terms of the

agreement and should it provided for the procedures

to address for the defective works, it must be

followed. In this case, the Appellant alleged defective

works against the Respondent, and according to the

written agreement, the former must provide written

instructions to the latter to make good the defects.

However, the Appelant engaged a third party

contractor to “remedy” the alleged defects and claim

the cost of such remedy works from the Respondent.

The Federal Court affirm the position held by both the

High Court and the Court of Appeal that the first

avenue to determine the rights and obligations of the

parties is the contract and the construction contract in

this case had provided for the procedures in the event

of defective works. Principal, or employer in this

case, cannot simply straightaway hire a third party

contractor to rectify the defects and claim such costs

to the original contractor.

4 CONCLUSION

It can be deduced from the words of the then Justice

James Foong in Steven Phoa Cheng Loon v Highland

Properties (2000) about the repulse and the overall

inclination of the courts in addressing the unethical

conduct of construction professionals of such

magnitude, which directly caused the defects in the

construcion project and eventually lead to the death

of the occupants and in most cases, caused the end-

product user some serious safety issues.

The judicial tide after the tragedy of the Highland

Towers is that there is a growing concern as to the

standards of workmanship and overall safety to the

end-product user. Attitude of the courts in shaping the

law with regards to defective works in construction

projects has been positive in the sense that the courts

are ready to read into the contract the obligation of the

contractual parties to ensure the project achieve a

minimum standard of workmanship, which would

ultimately ensure risk of defective works would be

minimised.

ACKNOWLEDGEMENTS

The writer would like to express his gratitude to I-

NLAC2018 for organising this conference. The writer

would like to express his deepest appreciation to the

Faculty of Law, UiTM Shah Alam for the assistance

in preparing this paper. The writer would like to thank

this family and close friends, colleagues at the Faculty

of Law, librarians at Perpustakaan Undang Undang,

Perpustakaan Tun Abdul Razak, UiTM and all who

are directly and indirectly assisted in preparing this

paper.

REFERENCES

Ahmad Rashid, Z. Z., Jamaludin, N. E., & Hussin Amin, A.

A. (2014). Managing construction latent defect

contractually. Malayan Law Journal Articles, 5, lxxxi.

Campbell, G. (2018). Big choice in rotten apples : to pay or

to rectify latent residential. Australian Construction

Law Bulletin, p. 70.

Cremean, D. j, & Ozer, N. (2018). ( 4 ) Content And

Construction Of Building Contracts. Halsbury’s Laws

of Australia (p. 550).

Bailey, I. (2011) Construction Law in Australia. Australia:

Lawbook Co.

Juara Serata Sdn Bhd v Alpharich Sdn Bhd, Malayan Law

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2015 )

KC Leong Holdings Sdn Bhd v Datin Moh Lee Bing,

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30, 2014)

Stephen Phoa Chen Loon & Ors v Highland Properties Sdn

Bhd & Ors,

Malayan Law Journal 200 (High Court Kuala Lumpur

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Sdn Bhd, Malayan Law Journal 192 (Court of Appeal

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