Arki-Tech International Pte Ltd v Rentak Tebrau Sdn Bhd

Rentak Tebrau Sdn Bhd, a Malaysian developer, planned a phased development in Iskandar, Johor, including two hotels, a convention centre, an office tower and a multi-storey carpark. Under a Consultancy Agreement for Development Management dated 16 January 2017, it engaged Arki-Tech International Pte Ltd, whose managing director is Mr Loo King Keong, as development manager for Phase 1 to provide value engineering (VE) services. The fee schedule set an hourly rate of $350, capped at 160 hours a month for services needed outside the agreed VE works, and separately provided for 20% of all cost savings from VE measured against a formal quantity surveyor's cost estimates, or based on a construction rate of RM250 per square foot. Proposals were to be implemented once the Rentak board approved them in writing. An annexed Term Sheet referred to the 20% fee and gave an option to negotiate later phases after practical completion of Phase 1.

Arki-Tech said it worked on corridor widths, air-conditioning, lift cores and room layouts for the first hotel, and on the carpark, the second hotel, the plot ratio and sketch design amendments. It issued payment claims totalling $26,021,083.65, which Rentak did not pay. The agreement ended in November 2018 and the project fell through. In Suit No 277 of 2019, Arki-Tech sued for those sums with 12% interest. Rentak said the agreement was void for uncertainty, and that Arki-Tech had not performed its obligations. The trial in the General Division of the High Court was bifurcated, with this judgment deciding liability only.

1. Whether the agreement was void for uncertainty or an unenforceable agreement to agree.
2. Whether Arki-Tech was entitled to be paid at the hourly rate, and whether it was entitled to 20% of cost savings for Phase 1.
3. Whether the parties agreed to extend the agreement to the other phases of the project.
4. Whether the 12% late payment interest clause was a penalty, and which VE proposals produced cost savings and were implementable.

The court found that Mr Loo drafted the agreement, so ambiguities were construed against Arki-Tech, but held the fee terms were not void. Read with the Term Sheet, the quantity surveyor was to be employed by Rentak, and Rentak's own QS was already engaged. Cost savings were to be measured at the tender award stage, when the successful tenderer's prices would be known. The missing Annex B was, on Rentak's directors' own evidence, the drawings given to Mr Loo on 16 November 2016, admissible under s 97 of the Evidence Act 1893. The RM250 option was intelligible as a fixed rate applied to the floor area saved. The fee clauses left nothing to further agreement.

Reading the agreement as a whole, the definitions of Fees and the monthly billing, intellectual property and termination clauses all tied payment to the hourly rate. The court rejected a reading under which Arki-Tech would be paid only a share of savings, which could leave it little for much work. The 20% was a bonus on top. It required written board approval of the proposals and full management and implementation up to the tender award stage. No written board approval was shown; directions from two directors at meetings and WhatsApp messages were not approval by the board, and the agreement ended long before tender. The court added that quantifying savings would require artificial assumptions about what the board would have approved.

The option for later phases was never triggered, as Phase 1 never reached practical completion, and Mr Loo himself accepted he had no mandate beyond Phase 1. But work on other phases was sanctioned by Rentak's directors and so was needed work payable hourly. Whether the interest clause operated as a penalty on the hourly fees was left for assessment.

Though not necessary to the decision, the court made findings on the disputed technical evidence. It held that enhancements without savings were valid VE work paid hourly but earned no 20% bonus. It found the corridor, air-conditioning, lift core and carpark proposals produced cost savings and were implementable, while the plot ratio and rooftop restaurant proposals produced none.

The High Court allowed Arki-Tech's claim in part. Rentak was held liable to pay $350 an hour for all work done under the agreement, VE-related or not, and for needed work outside its scope subject to the 160-hour monthly cap. Arki-Tech was not entitled to 20% of cost savings. Quantum, late payment interest and costs of the liability stage were left to the assessment stage.