CAN THE ARCHITECT CLAIM SCALE OF ‘MAXIMUM’ FEE IN THE FACE OF TERMINATION?

CAN THE ARCHITECT CLAIM SCALE OF ‘MAXIMUM’ FEE IN THE FACE OF TERMINATION

UPDATE: In ATSA Architects Sdn Bhd v Teguh Majuria [2022] MLJU 3329, the central issue was whether ATSA’s claim—being below the Scale of Minimum Fees (SOMF)—rendered the contract illegal, and consequently whether the adjudication decision (AD) was wrongly granted and ought to be stayed.
At [57], the court noted that the Adjudicator failed to fully address whether the contract was illegal and therefore outside CIPAA, as well as the issue of an unqualified person allegedly performing architectural functions. However, the court held that the rules of natural justice did not apply in this context.
At [74], on the question of whether the LOA was illegal due to fees charged below the SOMF, the court aligned itself with Hardie Development—non-compliance with SOMF does not automatically render a contract illegal.
At [84], the standing (locus) of the unqualified person was raised, but the court declined to rule on it, stating that the issue involved mixed questions of fact and law requiring further determination. Accordingly, at [98], the court found it could not pronounce on the legality of the contract based on this unresolved locus issue.
As a result, at [108], enforcement of the AD was stayed pending the outcome of another suit. Both the setting-aside and enforcement applications were dismissed at [110].
In summary: The court did not answer whether ATSA’s sub-SOMF claim was illegal. The stay of the AD was granted solely because a related suit remained unresolved—not because the AD was found to be wrongly awarded.

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UPDATE: Hardie Development Sdn Bhd. v David Shen I-Tan[1] provided clarity as to the following questions[2]:
 

1. Whether an architect is allowed to charge professional fees less than the prescribed minimum fees set by the Architect’s Act 1967, the Architect’s Rules 1973 and the Architects (Scale of Minimum Fees) Rules 1986?

 

1. If the answer is in the negative, does the engagement of the architect become void and enforceable for illegality?

 
The court holds that ‘charging of professional fees by Defendant less or lower than the minimum fees as prescribed by and in breach of the Architects (Scale of Minimum Fees) Rules 1986 does not render the architect’s service contract or contract of engagement with his/her client void or unenforceable so as to deprive the architect of any right to recover his/her fees or remuneration.’
 
In arriving to such decision, the court hold that:
 

1. ‘[…] court ought to be very slow to hold that a statute intends to interfere with the rights and remedies given by the ordinary law of contract’[3];
2. ‘It would amount to wicked injustice and against public policy to allow the Plaintiff to exploit the generosity of the Defendant in charging his fees lower (if at all) than the minimum fees as prescribed by the Architect (Scale of Minimum Fees) Rules 1986 […]’[4]

 
Applying the principles of law as stated in Co-Operative Central Bank Ltd (In Receivership) v Feyen Development Sdn Bhd[5]; Lori (M) Bhd (Interim Receiver) v Arab-Malaysian Finance Bhd[6]; Asia Television Ltd. & anor v. Viwa Video Sdn. Bhd.[7]; Becca (M) Sdn. Bhd. v. Tang Choong Kuang & anor[8]; with the reasoning of Justice Lee Swee Seng in Matrix Concepts (Central) Sdn. Bhd. v. Ar. Lim Yoke Tiang[9].
 
In essence, the findings in Matrix Concepts is still the deciding factor and rest assured that such decisions has given the precedent that it is not illegal for architects to charge below the mandatory scale of minimum fee Rules … then the question, why mandatory?

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[1] [2020] MLJU 1103
[2] Hardie [n1] at [25]
[3] Hardie [n1] at [96]: cited St. John Shipping Corporation v. Joseph Rank Ltd. [1956] 3 All ER 683
[4] Hardie [n1] at [99]: cited Narraway v. Bolster (1924) Estate Gazette 83
[5] [1995] 3 MLJ 313 (FC)
[6] [1999] 3 MLJ 81 (FC)
[7] [1984] 2 MLJ 304
[8] [1986] CLJ (Rep) 64
[9] [2018] MLJU 1548

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The question of law, whether can the Architect charge below its Scale of Minimum Fee (SOMF) Rules? If so, whether can the Architect claim its fee under SOMF Rules when the letter of appointment (LOA) that has been entered upon does not comply with the SOMF? If so, whether ‘letter of release’ (LOR) was obliged to be released without delay even though the Architect holds a lien over the document pending payment of its fee, when the LOA specified in contrast with the provision of the Architects Rules 1996?
 
The old case of Seniwisma S & O Akitek Planner v Perusahaan Hiaz Sdn Bhd [1980][1] held that the Architect’s fee was pursued under SOMF but the court was extremely careful in awarding based on SOMF and subsequently set-aside appeal, instead, due to the nexus of facts points toward the approved layout deviates from their proposal, implying that the appellant's layout has not been used as the approved layout.  Whereupon the court continues to guide us that Scale of Fee (SOF) without the word minimum is for the purpose of to check recalcitrant consultants who impose exorbitant fees to the public.[2] In the same vein, court is ready to accept the legitimacy of consultant charging below the SOF.[3] As to the question, can the Architect charge below its SOMF Rules, the legal position has always been, ‘yes’ but specifically it remains untested.[4]
 
A recent appeal case of Ar.Lim Yoke Tiang v Matrix Concepts (Central) Sdn Bhd [2020][5], posted the following ratio-decidendi,  a term in the contract cannot be changed merely by reason of a termination of services[6]; whereupon an agreement that does not conform to SOMF, i.e. on lump-sum, shall not be based upon SOMF as its basis of claim[7]; as SOMF is only binding to the architect but not the contracting party[8]; whereupon LOA is clear that Letter of Release (LOR) was obliged to be released without delay, maintaining the Architects Rules 1996 on a lien[9] over the documents pending to be paid, has no application[10], when the LOA was prioritised over the Architects Rules 1996.
 
As for this Ar.Lim Yoke Tiang v Matrix Concepts (Central) Sdn Bhd [2020], we have yet to see if LAM actually takes the trouble to sanction the architect for procuring works below the SOMF and as usual, nobody can have access to Board of Architects (LAM)’s proceeding on issues of professional-misconduct, which may have been conducted in an opaque-manner.
 
Concluding, just like the saying “unexpected in a case where in a competitive market one has to try to anchor in the work and secure the project”[11], it is no secret that most Architect has not played by the Architects Rules 1996 in imposing the mandatory SOMF-Rule.[12] The court is ready to accept the reality that SOMF is only binding to the architect but not the contracting party. In response, LAM has since mooted the idea of ‘stakeholder’ to collect fee on behalves of the architects[13], but that has yet to see the light at the end of the tunnel. In a nutshell, court will not make a contract for the parties when there is none, more so, court will not apply ‘extra-contractual’ concepts when there is a contract binding the parties, that include superseding any rules contradicting the true-intention of the parties in contract.

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[1] 2 MLJ 37
[2] Mott Macdonald (Malaysia) Sdn Bhd v. Hock Der Realty Sdn Bhd [1996] MLJU 342
[3] Sri Palmar Development & Construction Sdn Bhd V Jurukur Perunding Services Sdn Bhd [2010] 6 MLJ 166
[4] The late Ar. Kington Loo, did mention that there was a test-case on this but it did not survive due to the demise of the architect.
[5] 1 LNS 35 (CA)
[6] p.14.L.[25]
[7] p.15.L.[27]
[8] p.16.L.[28]
[9] Hughes v Lenny (1839) 5 M. & W. 183: lien to recover its due
[10] p.20.L.[40]
[11] p.15.L.[27]
[12] As per studies carried by PAM
[13] <https://lam.gov.my/index.php/latest-news/410-lam-stakeholder-fee-management-system1.html>