Engineers Beware! Comply or Else….

Case Commentary on Luxor Holdings Sdn Bhd v. Hainal-Konyi (M) Sdn Bhd [2006]

2 CLJ 856

 


Introduction

An engineer must be registered with the Board of Engineers Malaysia (the “Board”) in order to practise or take up employment which requires him to perform professional engineering services in Malaysia. The Registration of Engineers Act 1967 (“the Act”) sets out the requirements of the registration of engineers in Malaysia.

 

The recent Court of Appeal (“CA”) decision in the above case serves as a timely reminder of the pitfalls of carrying on business as an engineering practice without fully complying with the registration requirements under the Act.

 

 

Brief Facts

In November 1995, the appellant (Luxor) appointed the respondent (Hainal-Konyi) as the consultant civil and structural engineer for their development project. The respondent’s managing director, En. Hendra Wahjudi, being also one of their shareholders, negotiated and executed the appointment agreement (“the Agreement”) for and on behalf of the respondent. En. Wahjudi was a foreign engineer.

 

Two engineers, En. Azman bin Ahmad and Mr. Lim Joo Kiat who were both duly registered with the Board, were assigned by the respondent to the project. However, prior to the completion of the project, they resigned from the respondent company. In May 1996, the appellant terminated the Agreement and requested the respondent to submit their invoices for all works performed as of the date of the termination. The respondent submitted their final invoice for the sum of RM393,750.00, being the total amount stated under the Agreement less RM36,750.00 already paid by the appellant. The appellant refused to pay the amount claimed and the respondent instituted a court action claiming the sum of RM393,750.00.  The High Court (“HC”) allowed the respondent’s claim; the appellant then appealed to the CA and was eventually successful.

 

 

Issues

The CA in this case dealt essentially with two issues of interest:-

 

  1. (a) whether the Agreement was in contravention of sec. 7A of the Act and was therefore illegal and unenforceable; and
  1. (b) whether the appellant was entitled to terminate the Agreement because of the failure of the respondent to assign a registered engineer for the project.

 

 

The Decision

The CA held that the Agreement was illegal on grounds that En. Wahjudi, being an unregistered foreign engineer, had no authority to negotiate and execute the Agreement as he was prohibited under the Act to be a director, shareholder or an officer of the respondent. In arriving at its decision, the CA considered the importance of the registration requirements as set out in sec. 7A of the Act (inserted as a new section by the Registration of Engineers (Amendment) Act 1974). The said sec. 7A of the Act required the board of directors of a body corporate providing engineering services to consist of:-

 

  1. (a) entirely of individuals who are registered professional engineers; or alternatively;
  1. (b) of a majority of individuals who are registered professional engineers and the others are either architects, quantity surveyors or land surveyors duly registered with the relevant professional bodies or other individual persons belonging to a profession allied to the practice of engineering and who have been approved in writing by the Board.

 

Sec. 7A of the Act further required all the shares of the body corporate to be held by persons mentioned in paragraphs (a) and (b) above, provided always that the registered professional engineers must have a controlling stake.

 

In respect of the issue of termination of the Agreement, the CA held that the termination was justified as the respondent had breached the Agreement in failing to assign a registered professional engineer to replace En. Azman and Mr. Lim who had both resigned from the respondent and rejected the contention that En. Wahjudi would be a suitable replacement on the ground that he was an unregistered engineer. The CA was of the opinion that it was clear from sec. 7 of the Act that no person could practise or take up employment as an engineer unless he is a registered professional engineer with the Board and that the term “engineer” was defined to in the Agreement to mean an engineer registered under sec. 7 of the Act.

 

 

Conclusion

This decision merely reaffirms the legal position that any provision of professional engineering services in contravention of the registration requirements of the Act would render the agreement to be illegal and unenforceable. An unregistered person or body corporate providing professional engineering services would accordingly be deprived of the right to recover in Court any fees for such services rendered.

 

However, this decision is significant because it sets out that the failure to assign a registered engineer at all times for a particular project was sufficient to result in a repudiatory breach entitling the employer or the client to terminate the contract. It must be noted that whether a breach is repudiatory in nature differs from case to case and legal advice should always be sought before commencing any action on this basis.

 

 

SHEMANE CHAN ( This e-mail address is being protected from spambots. You need JavaScript enabled to view it )

*Editorial note: Section 7A of the Registration of Engineers (Amendment) Act 1974 has since been amended.

 
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