In the recent Court of Appeal decision of Koperasi Permodalan Felda Malaysia Bhd v Icon City Development Sdn Bhd (dahulunya dikenali sebagai ‘Sierra Peninsular Development Sdn Bhd’) & Anor  MLJU 14, the Court of Appeal of Malaysia examined, amongst others, whether an architect can be found liable for conspiracy with the developer for granting extension of time in favour of the developer.
BRIEF BACKGROUND FACTS
The Koperasi Permodalan Felda Malaysia Sdn Bhd (“Appellant”) was one of the purchasers of 8 units of eight storey shop offices (“the Properties”) under a project known as the Icon City Project.
Icon City Development Sdn Bhd (“1st Respondent”) was the developer of the Icon City Project, and SN Low & Associates Sdn Bhd (“2nd Respondent”) was the Project Architect of the said Project.
As a result of the 1st Respondent failing to deliver the valid vacant possession of the Properties, the Appellant filed an action in the High Court against the Respondents for amongst others, the following reliefs:
a. A declaration that the opinion/recommendation by the 2nd Respondent to delay or extend the completion date and date of delivery of vacant possession is wrongful, invalid, improper and/or not bona fide and not applicable;
b. A declaration that the Appellant is entitled to claim for damages for the delay of the 1st Respondent in the completion of works and delivery of vacant possession for the units purchased by the Appellant as the opinion/recommendation of the 2nd Respondent to delay or extend the completion date and the date of delivery of vacant possession is wrongful, invalid, improper and/or not bona fide and not applicable;
c. Liquidated Ascertained Damages (“LAD”) for delays in delivery of vacant possession in the sum of RM3,710,465.75 calculated from 5.6.2015 to 30.12.2015; and
d. Damages for delays in delivery of vacant possession in the sum of RM2,550,425.36 calculated from 31.12.2015 to 26.8.2016.
The Appellant’s cause of action against the 1st Respondent is founded upon the 1st Respondent’s breach of the terms of the Sale and Purchase Agreements (“SPAs”) and the tort of conspiracy. The Appellant’s cause of action against the 2nd Respondent, is founded upon the torts of conspiracy and negligence for the breach of duty of care as the Architect for the said Project.
Under the terms of the SPAs, the date by which the 1st Respondent had to deliver vacant possession of the said Properties was on or before 4.6.2015. The 1st Respondent issued a letter dated 30.12.2015 to the Appellant informing that vacant possession of the Properties was ready to be delivered. However, the Certificate of Completion and Compliance (“CCC”) was not ready as the water connection, electricity connection and full access road (“Essential Amenities”) were not ready at the material time.
Thereafter, the 2nd Respondent issued 2 letters to the 1st Respondent, (“the Architect’s Letters”) stating that the original contractual completion date of 4.6.2015 was extended to 15.1.2016. The 1st Respondent relied on the Architect’s Letters to extend the original completion date of the said properties and was of the position that it would not be liable to pay LAD to the Appellant.
FINDINGS OF THE HIGH COURT
After full trial, the learned High Court Judge found that the Respondents are not liable for the Appellant’s claims for LAD and that the 1st Respondent was entitled to rely on the Architect’s Letters for extensions of time. It was found that the extension of time granted by the 2nd Respondent was valid and that the delay in handing over the vacant possession by the 1st Respondent was based on the extension of time granted by the 2nd Respondent. Thus, it was found that the 1st Respondent did not breach the terms of the SPAs when the CCC was issued after the granting of the vacant possession.
On the Appellant’s claim under tort of conspiracy, it was found that the Architect’s Letters were properly issued and the 2nd Respondent did not violate his fiduciary duty as the project architect for issuing those letters. It was also found that the Appellant failed to prove the existence of conspiracy between the 2 Respondents. On the issue of negligence, it was held that the 2nd Respondent granted the extension of time based on the circumstances that required it and that the extension was given reasonably. Thus, the 2nd Respondent did not breach the duty of care he owed to the Appellant when granting the extension that time.
Dissatisfied with the High Court’s decision, the Appellant appealed to the Court of Appeal.
FINDINGS OF THE COURT OF APPEAL
On the issue of extension of time and conspiracy, the Court of Appeal had to decide, amongst others, on the following issues:
i. Whether the Architect’s Letters were valid extensions of time under the SPAs; and
ii. Whether there are merits in the Appellant’s conspiracy claim against the Respondents.
In coming to its decision, the Court of Appeal made the following findings:
First Issue: whether the 2nd Respondent’s Architect Letters were valid extensions of time under the SPA
a. The Architect’s Letters were not valid extension of time as they make no mention of the SPA and specifically Clause 13.1.1. of the SPAs. Further, the Architect’s Letters do not state that in the opinion of the Architect, the events stated in said letters were events beyond the 1st Respondent’s control, or events which fall under any of the grounds in Clause 13.1.1, or were force majeure events.
b. The Architect’s Letters also do not state any opinion at all, and merely state that there would be delays in the completion of the construction works.
c. As such, the Architect’s Letters do not qualify as valid certificates of extension of time which would justify the 1st Respondent’s delay in delivering the vacant possession of the Properties to the Appellant.
Second Issue: Whether there are merits in the Appellant’s conspiracy claim against the Respondents
a. The standard of proof for conspiracy is very high and the party alleging conspiracy must prove that is it beyond reasonable doubt that the other parties had acted in conspiracy with one another.
b. The ‘overt act’ pleaded by the Appellant against the 2nd Respondent is that the 2nd Respondent had issued the extension of time of the Project in favour of the 1st Respondent. The Court of Appeal held that by merely granting an extension of time to the 1st Respondent, the 2nd Respondent was only carrying out his contractual duty.
c. The performance of an Architect under the Project cannot amount to an overt act in furtherance of a conspiracy.
d. Further, there is no credible evidence adduced by the Appellant to prove that there was a conspiracy between the Respondents to injure the Appellant. The Architect’s Letters were insufficient to prove the tort of conspiracy at all.
The Court of Appeal’s decision in this case had certainly provided a clear illustration on the high threshold in succeeding a conspiracy claim against a party. Whilst the Court of Appeal found that the letters issued by the Architect were not valid extensions of time under the SPA, thus finding that the 1st Respondent was liable to pay LAD to the Appellant, the Court of Appeal also found that the mere act of issuing letters to grant an extension of time to the developer was not an overt act to justify a claim under the tort of conspiracy.
This article is intended to be informative and not intended to be nor should be relied upon as a substitute for legal or any other professional advice.
About the author
Ooi Hui Ying
Civil Litigation, Construction & Engineering, Dispute Resolution (Arbitration & Adjudication)
Harold & Lam Partnership