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2025 MarsdenLR 4862
HIGH COURT MALAYA PENANG
LATEX FORM SDN BHD – Appellant
Versus
ICONIC MEDICARE SDN BHD – Respondent
[Civil Suit No: PA-22NCvC-49-04/2024]
A party's failure to perform contractual obligations constitutes a breach, allowing the innocent party to terminate the contract and seek damages, as time is of the essence.
Headnote:(A) Contracts Act 1950 - Breach of contract - Liquidated damages - Plaintiff's claim for RM 11,038,004.00 dismissed as unproven and unsupported by evidence - Defendant's counterclaim for RM 9,780,000.00 for incomplete machines and RM 435,000.00 for liquidated damages allowed in part - Time is of the essence in contracts, and failure to complete machines constitutes a fundamental breach - Defendant entitled to terminate the contract and seek damages for losses incurred. (Paras 8, 10, 27, 64, 98)
Facts of the case:
The Plaintiff entered a contract to supply machines to the Defendant, which was not completed as per the agreed schedule, leading to delays and defects. The Defendant terminated the contract and sought damages.
Findings of Court:
The Plaintiff failed to prove its claim and was found to have fundamentally breached the contract by not completing the machines, leading to the Defendant’s entitlement to damages.
Issues: The main issues were whether the Plaintiff breached the contract, whether the Defendant was entitled to liquidated damages, and the validity of the Plaintiff's claims for payments.
Ratio Decidendi: The court ruled that the Plaintiff did not fulfill its contractual obligations, and the Defendant was justified in terminating the contract and seeking damages for the incomplete work. The Plaintiff's claims were dismissed due to lack of evidence.
Result: Plaintiff's claim dismissed; Defendant's counterclaim allowed in part, ordering Plaintiff to pay RM 10,115,000.00 to Defendant.
Introduction
[1] This suit arose over a contract between the Plaintiff ("P") and the Defendant ("D") for the supply of machines. After a full trial, I dismiss P's claim and allow D's counterclaim in part. Here are the grounds of my judgment.
Background Facts
[2] Pursuant to a purchase order dated 11 March 2021 issued by D to P read together with a quotation titled 'Proposal for Double Former Powder Free Glove Dipping Machine' dated 11 March 2021 issued by P to D ("contract"), D hired P to build and deliver 6 units of 'Double Former Powder Free Glove Dipping Machine' ("machines"). The price of the machines is RM 38,280,000.00, ie RM 6,380,000.00 per unit. The purchase of the machines is to fulfill Phase 2 of D's factory at Batu Kawan, Penang ("project"), which manufactures gloves.
[3] The salient terms of the contract are these:
(a) 6 units of 'Double Former Powder Free Glove Dipping Machine' shall be built and delivered at a price of RM 6,380,000.00 per unit;
(b) 'Double Former Powder Free Glove Dipping Machine' must achieve a machine speed of 38,000.00 pieces of gloves per hour;
(c) The schedule of supply, installation and commissioning of the machines is as follows:
(i) Machine 1 and Machine 2 (ie Line 7 and Line 8 in D's factory) - October 2021;
(ii) Machine 3 and Machine 4 (ie Line 9 and Line 10 in D's factory) - November 2021; and
(iii) Machine 5 and Machine 6 (ie Line 11 and Line 12 in D's factory) - December 2021.
(d) The schedule of payment for the machines is as follows:
Payment Term:
"10 % – Down payment upon confirmation order
30 % – Upon delivery, progressively
50 % – Progress payment upon machine fabrication
10 % – 60 days after commissioning / test - run"
Payment Arrangement in Detail:
"10 % – Down payment
5 % – Upon delivery of mild steel frame, platform
5% – Upon delivery of oven panel, sporkrt / shaft / bearing
5 % – Upon delivery of chain and holder
5% – Upon delivery of cable, electrical panel, themoil, gas, water, chiller piping and insulation and oven ducting
5 % – Upon delivery of all brushes
5 % – Upon delivery of other complete items
10% – Upon 20 % completion of fabrication work
10 % – Upon 40 % completion of fabrication work
10 % – Upon 60 % completion of fabrication work
10 % – Upon 80 % completion of fabrication work
10 % – Upon 100 % completion of fabrication work
10 % – 60 days after testing and commissioning"
(e) Liquidated damages ("LAD") is calculated at the sum of RM1,500.00 per day per machine for the first 45 days delay on each machine. And RM2,500.00 for the following number of days delay;
(f) A minimum warranty period of 1 year for any faulty machinery parts supplied from the commissioning and handover of the machines, except for wear and tear; and
(g) P warrants that the machines shall be new and free from defects in materials and workmanship for a period of 12 months from the date of completion and commissioning on site.
Defendant's Case
[4] D's case is this.
(a) As a result of P's delay in supplying the machines during the original contract period (first delay), the parties held a discussion on 4 July 2022. Pursuant to the discussion, D agreed to grant an extension of time for P to complete the project. This is on the condition that LAD in the sum of RM 2.4 million shall be paid by P to D.
(b) The additional terms that were agreed upon by both parties are as follows ("EOT terms"):
"Line #1 to #6 to deduct MCO stop work No of days, 30 daysIconic stop work order due to auditing, to be deduct 10 days
Line #1 to be deduct 35 days, Line #2 to be deduct 14 days due to washing brush modification period
Line #1 to #6 LAD to be closed off at date 30 June 2022
Line #3 to #6 LAD to be hold on for 3 months from 30 June 2022 onwards
Line #1 and #2 to be full completion by 30 July 2022"
(c) Although the EOT terms were agreed between the parties, P still failed to complete Machine 1 and Machine 2 on or before 30 July 2022 (second delay).
(d) Through a letter dated 1 September 2022, D gave notice to P that its failure to
