Construction Delay and LAD Dispute in Malaysia: Lessons from the Court of Appeal in Savelite Engineering v Askey Media Technology [2025] CLJU 1808
Introduction
In Malaysia, construction projects are often high-value, time-sensitive, and heavily governed by contracts. When disputes arise — especially over delays, penalties, and liquidated damages (LAD) — the financial stakes can be enormous.
A recent Court of Appeal decision in Savelite Engineering Sdn Bhd v Askey Media Technology Sdn Bhd [2025] CLJU 1808 provides important lessons for business owners, developers, landlords, and contractors. The case revolved around whether the contractor was liable for RM768,900.00 in LAD for delays in completing a factory, and whether the employer (the client) could also claim for loss of profit and indemnity payments.
This article provides a public-friendly breakdown of the case — the facts, legal issues, and the judge’s reasoning. It also explains how we here at JY Ko Advocates & Solicitors can help if you’re facing a similar contractual or construction dispute in Malaysia.
Background of the Case
The Contract
- Parties involved:
- Askey Media Technology Sdn Bhd (Plaintiff/Employer) – the client who commissioned a factory project.
- Savelite Engineering Sdn Bhd (Defendant/Contractor) – the contractor hired to build the factory.
- Scope of project: Construction of a two-storey office and single-storey factory in Bayan Lepas, Penang.
- Contract price: RM8.6 million.
- Time frame: The contractor had 24 weeks to complete the project, with a completion deadline of 4 September 2016.
- Liquidated damages (LAD): The contract stated a penalty of RM3,300 per day if the project was delayed.
This meant that time was critical — both sides knew the project had to be completed quickly because the employer had already signed a tenancy agreement with Ceva Logistics (M) Sdn Bhd, who was expecting to move into the factory by March 2017.
The Delays
- The contractor failed to complete the project by the agreed date (4 September 2016).
- A Certificate of Non-Completion (CNC) was issued by the Superintending Officer (SO), confirming the delay.
- The contractor applied for several extensions of time (EOT), but only a partial extension (143 days) was granted by the SO.
- The factory was only practically completed on 15 September 2017 — nearly 376 days late.
The Employer’s Losses
Because of the delay:
- The employer could not deliver the factory to Ceva Logistics on time.
- The employer claimed:
- RM768,900 in LAD (233 days × RM3,300, after factoring in the SO’s partial EOT).
- RM1.13 million in loss of profit, since they could not collect rent from Ceva Logistics on time.
- RM523,096.50 indemnity payment that they had to pay to the tenant for late delivery.
High Court’s Decision
The High Court ruled:
- The contractor was liable for RM768,900 in LAD.
- The claims for loss of profit and indemnity payments were rejected.
- Interest at 5% per annum was imposed on the LAD.
- Costs of RM10,000 were awarded to the employer.
Both sides were unhappy:
- The contractor appealed, arguing they should not pay any LAD at all.
- The employer appealed, seeking to also recover the loss of profit and indemnity.
The Legal Issues Before the Court of Appeal
The Court of Appeal had to decide on four main issues:
- Was time the essence of the contract?
- If time was not the essence, then LAD might not apply strictly.
- Did equitable estoppel apply?
- Could the employer be stopped from claiming LAD because they had accepted late work or issued the Completion Certificate?
- Who caused the delay?
- Was the delay caused by the contractor’s slow progress, or by the employer’s conduct?
- Could the employer claim both LAD and other damages (loss of profit & indemnity)?
- Or was LAD the only remedy under the contract?
The Court of Appeal’s Reasoning
1. Was Time the Essence of the Contract?
The court held that time was clearly of the essence.
- The contract specifically mentioned deadlines, LAD clauses, and strict completion terms.
- Clauses 14, 30, and 31 of the General Conditions of Contract showed that delays would attract LAD.
- Even though there was some flexibility for the SO to grant extensions, this did not make time “at large”.
👉 Lesson: In Malaysian construction contracts, if a contract has clear LAD clauses and deadlines, the courts will usually treat time as essential.
2. Equitable Estoppel
The contractor argued:
- Since the employer accepted progress claims and allowed the project to be completed, they should be estopped (legally prevented) from claiming LAD.
The court disagreed:
- The contractor itself had applied for multiple extensions — showing it acknowledged time was essential.
- The employer’s acceptance of late completion did not waive their right to claim LAD.
👉 Lesson: Accepting late delivery does not automatically prevent you from claiming LAD, especially if the contract expressly provides for it.
3. Who Was Responsible for the Delay?
The contractor blamed the employer.
But the court found:
- Documentary evidence (letters, CNC, rejection of EOT applications) showed the contractor’s slow progress was the real cause.
- The SO had already granted a fair 143-day extension, but beyond that, the contractor was at fault.
👉 Lesson: Courts rely heavily on documentary evidence (letters, notices, certificates). Contractors must keep strong records if they want to prove delays were caused by the employer.
4. Can the Employer Claim LAD and Other Damages?
This was a crucial issue.
- Contracts Act 1950, Section 75 states that when a contract specifies a sum (like LAD) for breach, that sum is the maximum compensation, unless proven unreasonable.
- Since the contract already provided for LAD, the employer could not also claim loss of profit or indemnity payments.
- The Court of Appeal said LAD of RM768,900 was reasonable compensation, not extravagant, and in line with the employer’s legitimate interest.
👉 Lesson: If your contract includes an LAD clause, you generally cannot claim additional damages for delay. LAD is the agreed remedy.
Interest Adjustment
The Court of Appeal adjusted the High Court’s ruling slightly:
- Interest should only run from 26 January 2017 (after the 143-day extension), not from 4 September 2016.
- Both appeals (contractor’s and employer’s) were dismissed.
Key Takeaways for Businesses and Contractors
This case is highly relevant for anyone entering into construction contracts, tenancy agreements, or major supply deals in Malaysia.
- Always check if time is “of the essence”. If a contract specifies deadlines and LAD, you must treat them seriously.
- Document everything. Letters, notices, and certificates can make or break your case.
- Employers: LAD is your main protection — but you cannot double-claim for loss of profit unless the contract allows.
- Contractors: Don’t assume extensions will be granted. Apply in writing, and if rejected, you remain liable.
- Disputes can be costly. This case involved years of litigation and appeals, with hundreds of thousands at stake.
How JY Ko Advocates & Solicitors Can Help You
At JY Ko Advocates & Solicitors, we provide legal services mainly in:
- Contractual disputes – including breach of contract, LAD claims, and indemnities.
- Construction law – representing both contractors and employers in disputes over delays, payments, and project completion.
- Debt recovery – recovering unpaid sums from contracts, tenancy agreements, and business deals.
- Litigation & dispute resolution – whether in the High Court, Court of Appeal, or alternative forums like arbitration and adjudication.
Why Choose Us?
✅ Proven courtroom experience – Our team has successfully acted in cases involving injunctions, construction disputes, tenancy matters, and corporate litigation.
✅ Tailored legal strategy – We explain options clearly and act in your best business interests.
✅ Accessible & responsive – We work closely with SMEs, contractors, and business owners who need practical solutions.
If you are facing a dispute over construction delays, LAD, unpaid works, tenancy indemnities, or contract breaches, we can help protect your rights and recover your losses.
Frequently Asked Questions (FAQs)
1. What are Liquidated and Ascertained Damages (LAD)?
LAD is a pre-agreed penalty amount stated in the contract for delays or breaches. For example, RM3,300 per day of delay.
2. Can I still claim for other losses if my contract has LAD?
Usually no. If the contract has an LAD clause, that is the main remedy, unless the clause is proven unreasonable.
3. What if the delay was not my fault?
If you are a contractor, you must apply for extension of time (EOT) and prove that the delay was caused by the employer or external factors (e.g., force majeure, strikes).
4. Can landlords or employers sue for loss of rental income due to contractor delay?
Only if the contract does not have an LAD clause, or if the LAD clause is ruled unreasonable. Otherwise, LAD is the limit.
5. How long does it take to resolve such disputes?
Cases can take several years, especially if they go to appeal. Alternative dispute resolution (arbitration, adjudication, or mediation) may be faster.
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Disclaimer: The above proposition is subject to actual facts and circumstances and shall never be referred as the actual law without seeking legal advice. Consult us for more information!