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2025 MarsdenLR 3307
HIGH COURT MALAYA JOHOR BAHRU
NZ BINA SDN BHD – Appellant
Versus
REAPLITE INDUSTRY SDN BHD & ANOR (ENCLS 240 241 242 243 244 258 261 296 3.... – Respondent
[Suit No: JA-22NCVC-275-12/2017]
The unlawful termination of a subcontract due to delays not solely attributed to the subcontractor entitles the contractor to liquidated damages, thus validating the counterclaims for unpaid progress claims and the return of performance bonds.
Headnote:(A) Contract Law - Liquidated Damages - The Plaintiff claimed liquidated ascertained damages from the Defendant due to delays in the completion of a highway project subcontract. The court addressed the legality of the Plaintiff's termination of the subcontract and the legitimacy of claims made by the Defendant. (Paras 1-8)
(B) Termination of Contract - The court found that the Plaintiff's termination of the contract was unlawful, as evidence showed that the Defendant had completed 98% of the work and faced unjust delays due to factors beyond their control. (Paras 34-36)
Facts of the case:
The Plaintiff, having contracted with JKR, entered into a subcontract with the Defendant for construction work. Delays were caused by JKR's own payment issues and other utility works affecting the site. The Plaintiff terminated the contract citing delays but sought to recover liquidated damages based on JKR's claims. The Defendant counterclaimed for unpaid progressive claims and the return of a performance bond.
Findings of Court:
The Defendant's claims were corroborated by evidence; the termination was deemed unlawful. The court ruled that the Plaintiff was liable for the unpaid claims and must return the performance bond. (Paras 34-38)
Issues: The court addressed whether the Plaintiff had the right to claim liquidated damages, whether termination was lawful, and whether the Defendant was entitled to claims against the Plaintiff.
Ratio Decidendi: The court concluded that the Plaintiff's termination was unjustified, as delays were not solely the Defendant's fault, and established the need for the Plaintiff to compensate the Defendant appropriately for their claims. (Paras 34-36)
Result: The Plaintiff's claim is dismissed; the Defendant is entitled to the performance bond and unpaid claims.
| Table of Content |
|---|
| 1. claim for liquidated damages arising from contract. (Para 1 , 2 , 3 , 4 , 5 , 6) |
| 2. dispute over entitlement and claims of unpaid compensation. (Para 7 , 8 , 9 , 10) |
| 3. evidentiary issues regarding project delay and responsibility. (Para 11 , 14 , 19) |
| 4. terms of the sub-contract and responsibility for delays. (Para 17 , 18 , 20 , 21) |
| 5. submission of claims and acceptance of supporting evidence. (Para 22 , 26 , 30 , 32) |
| 6. determination of unlawful contract termination. (Para 34 , 35 , 36) |
| 7. court dismisses plaintiff's claim; affirms defendant's position. (Para 38) |
[1] This is a suit in which the reliefs agreed by the Plaintiff before commencement of the trial, claiming only for liquidated ascertained damages (LAD) to be paid by the 1st Defendant arising from the termination of contract for delay in completion of construction work by the 1 st Defendant in the main-contract of a highway project. The main contract was between JKR and the Plaintiff. The sub-contract between the Plaintiff and the 1st Defendant to execute the JKR project was entered into pursuant to a Letter of Award ("LOA") from the Plaintiff to the 1st Defendant, dated 31 December 2013.
[2] The LAD sum, in turn was attributed to the sum imposed by JKR against the Plaintiff for the delay in the work, agreed by both parties (JKR-Plaintiff) in the main contract. The 1st Defendant, by way of the said LOA and Extension of Times ("EOT") Nos 1 and 2 granted by JKR1 (the EOT was on the application made by the Plaintiff, as sought by the 1st Defendant), was required to complete its work by 31 March 2017 but failed. A Notice of Termination to the 1st Defendant was issued on 30 October 2017 by the Plaintiff for the 1st Defendant's failure, refusal and/or neglect to complete the JKR project2.
[3] The 1st Defendant in its counter-claim sought for declaratory relief of the termination as being unlawful as 98% of the works already completed, payment of unpaid progressive claims being progress payment No 35, 36 and 37 and the performance bond for the sum of RM11,498,944.49 called by JKR. The performance bond together with a credit facility of RM66,499,000.00 was obtained from the 2nd Defendant by the 1st Defendant at the request of the Plaintiff, it being a condition for the purpose towards financing the execution of the JKR project.
[4] Under the OCBC Facility, the Plaintiff was to assign all payments from JKR ("JKR Proceeds") to a "Designated Current Account" ("DCA") in OCBC3. When JKR makes payment to the DCA account, the JKR Proceeds will be distributed in the following manner:
i. 3% will be transferred to the Plaintiff;
ii. From the 97% then, OCBC will deduct whatever sums owing to it; and
iii. The balance will then be released to the 1st Defendant's account which was a joint signatory account with the Plaintiff.
[5] This is in line with the Letter of Award para (E) that states:
"E. Progress Payment and Retention
Progress Payment shall be made to you on 'back to back' basis upon we received the same from our Employer.
The Employer shall deposit the progress payments directly into a designated Escrow Account maintained with any Banks (which will be determined later) whereby the said Banks shall the apportion the funds accordingly based on the agreed proportion."
[6] With the termination of the sub-contract with the 1st Defendant, the Plaintiff argued that the assignment of the JKR Proceeds should equally be terminated, which moved an O14A application filed by the Plaintiff and was allowed by the High Court. OCBC's appeal to the Court of Appeal and OCBC's appeal was allowed. However, with the settlement eventually entered between the Plaintiff and the 2nd Defendant OCBC Bank, the 2nd Defendant no longer made a party to this current suit. The Plaintiff emphasized in its submission before this Court, that the assignment of the proceeds was never reinstated after the appeal.
[7] As to the progressive claims no 35, 36 and 37 the Plaintiff conten
