BY Prisca Teh
You may rant and rave over an unpalatable plate of chicken rice, but you won’t refuse to settle the bill, even if you left it unfinished. By simple code of ethics, no respectable person would dodge payment for any services rendered or products purchased.
However, the very same people who find it dishonourable to run off without paying for a haircut that did not turn out as expected, somehow consider it justified to evade payment for renovations that cost thousands.
C.K. Lau from D Skill Design & Contract, having been in the renovation industry for 37 years, have lost count of the number of defrauders he has encountered. Recounting a bad experience where a customer intentionally schemed to dupe him of renovation cost amounting to RM35,000 (about ten years ago), he said, “Upon completion, he kept giving excuses to defer payment. Then one day, he suddenly became uncontactable. Eventually, I searched him up at the renovated house, only to discover that it was already occupied by a new owner. Apparently, he had done the renovation to increase the selling price of the terrace house, and once the transaction was completed, pocketed all the profits and disappeared. I could not dismantle the installation as the new owner was guiltless of the sham.”
In another case, during the 1998 recession, a customer simply told him he had lost his investments and could not pay him a sen. He fled overseas and left the dance studio business to his mistress, renovated at a cost of RM15,000. After several failed attempts to contact him, Lau finally looked up the proprietress in the renovated premises, where business was conducted interminably. She claimed her “husband” could not be traced and denied liability.
Lamenting the loss to a friend, who worked under a debt collection agency, Lau agreed to let them attempt recovery. The debt collectors managed to collect the payment, albeit in six postdated cheques, taking a cut of 50 per cent for each successful remittance. Though Lau considered it better than nothing, he did not use their services again when he found out their method of retrieving the debt was close to harassment.
Being unfamiliar with legalities, Lau is unaware of other recovery routes and amidst his busyness running the business with limited manpower, have not sought out other counteractions.
Mohd Daud Leong, an advocate who heads a firm under his name, said he has come across many cases of unpaid renovation works. As a safeguard, some contractors pay him a retainer fee, ranging from RM300 to RM8,000 per month, to advise them, help them draft agreements or represent them for small claims or in magistrate courts.
“They come with a one-page agreement and I add three of four pages more. Whenever you make people sign something, they become more serious,” Leong said.
C.W. Yeoh, from Lalang Landscape & Construction Sdn Bhd, said in his first years, he had losses from non-payments ranging from RM10,000 to RM60,000. He did not take any action to recover them due to “insufficient evidence because the balances are mostly additional works carried out based on verbal instructions and agreements”.
Similarly, Lau has encountered a client who made a myriad of excuses, blaming the slightest of flaws, to justify not paying the balance of RM80,000.
Both Yeoh and Lau said they had relied on word of honour and had not expected not to be paid. However, learning from the experience, Yeoh has since hardly faced such problems by ensuring everything is documented in black and white.
Leong concurred, “Everything must be put in writing. Sometimes humans are very fussy. Due to feng shui they may want to change the position of a door. Such a big job may delay the work. So contractors must spell out all these. If the piping and wiring is already installed, and they want to extend the kitchen two more feet, you must issue a variation order. The timeline must be extended. All must be in black and white.”
“Some clients may want to make changes, claiming the paint colour is wrong and use that as an excuse to evade payment. But [like shopping], you can’t expect to get a refund if you don’t look as good as the mannequin,” he pointed out.
Deliberating such mentality, Leong said, “Normally, [such] consumers feel it’s a small thing. It’s just a change of painting. They have already paid RM20,000, so [they think they are entitled to] the RM2,000 as a discount.”
To minimise disputes, Leong said some contractors show the proposed design in 3D in a CD, “You have to be very professional. If this is what you want, confirm and sign on the CD. It’s not fool-proof, but at least it’s not as bad.”
Amidst the nonfulfillments, Lau has, however, managed to recover RM130,000 from a client, but only after two years. The client brought him all the way to Seremban to show him a plot of land. Lau had to help find buyers, before the outstanding sum was allocated to him under the sale and purchase agreement, signed in front of the solicitor.
Leong conceded he had heard of many cases where contractors are paid in products, “perhaps a low- cost flat, where you either take it or leave it”.
Asked if there are laws to provide protective measures, Leong said, “[It is] all subject to the contract – how it’s drafted.”
Another advocate, Chanravathane S. Ponnudurai from SP Chanra, said, “It depends on evidence available for proving the claim.”
Chanravathane said she has handled many cases where contractors sue clients for non-payment, with claims “ranging from RM20,000 to hundreds of thousands”.
Asked if the losses were recovered, Leong said, “So far, so good. There has easily been 15 to 20 cases within the past six to seven years. Usually it’s the final 15 per cent to 20 per cent balance payment. After all the hassle, they still pay. Once they get the summons, they pay, some through three to five instalments.”
Probed further, Leong said, cases are settled “very fast now – within one year” because there is a tracking system under the KPI,making it very efficient since three years ago compared to five to six years’ time before that.
“Those without this kind of [legal] services can go to the Tribunal for Consumer Claims Malaysia. The manager or supervisor can go, not necessarily the boss,” he recommended.
(The Tribunal handles claims up to RM25,000.)
On bigger sums, another contractor, preferring anonymity, said he was put out of business by a well-known local developer. Upon completion of a major project, the developer called for a meeting with all the contractors involved. In a meeting room surrounded by bodyguards, he pulled out his gun, placed it on the table, and asked menacingly, “So, how much do I owe you?”
Taking the clear hint, the contractor wrote off the debt, a loss enough to make him close his business and walk away from such ventures ever again.
In response, Leong said, “Obviously he should lodge a police report. A right is still a right. If one is so scared, there will be no end to this kind of intimidation. Go to Bukit Aman. Hire a lawyer, sue them. For sure there was a contract [to abide by].”
Lim, an advocate from a KL legal firm said, in the case of contractors suing developers for non-payment, “they are mostly handled at the KL Regional Centre for Arbitration (KLRCA) as proceedings there are private and confidential as compared to court proceedings which are open, which is why so many developers and contractors prefer this route.”
“Most construction disputes will have an arbitration clause where parties will arbitrate their disputes first before going to court,” he said.
Although there is no minimum set for amounts of claims, Lim said, “But it won’t make sense to arbitrate something for RM10 when KLRCA fees will swallow your claim. I’ve not seen any construction claims lower than RM1 million. There may be smaller claims and parties may feel it’s cheaper to proceed in court.”
Asked how much the fees cost, Lim said, “Expensive.” Expenses include “lawyer fees, arbitrator’s fees, and KLRCA fees”.
“You can represent yourself but [it is] not practical,” he explained, so lawyers should be engaged.
Lim said there are known cases where contractors recover their losses through the KLRCA channel.
Asked on speed, Lim said, “arbitration tends to be faster than court, but now there is also “a special court known as the construction court” which is “a normal court that deals specifically on construction disputes” and “they are quite fast recently”.
Lim thinks construction courts are “more effective because the judges are well-versed with construction matters”. The cost is “the same as normal courts but cheaper than arbitration.”