A contractor's lawful termination of a sub-contract due to delays and poor performance does not negate the sub-contractor's right to claim for unpaid work performed under the contract.

Sumathi Murugiah JC:

A. Introduction

[1] This is a typical dispute between the Defendant (main contractor) and the Plaintiff (sub-contractor) in relation to non-payment for work done. The dispute between them escalated to the Plaintiff's contract being terminated and had led to the Plaintiff having to file this suit against the Defendant.

[2] The Plaintiff's action against the Defendant is to claim for the balance payment due for the works done together with the retention sum and loss of profit arising from the termination which the Plaintiff disputes as unlawful termination.

B. Brief Background

[3] Pursuant to a Letter of Acceptance of Tender dated 18 February 2016, Jabatan Kerja Raya (JKR) appointed the Defendant as the main contractor for upgrading works for Federal Road 5 (FR5) from Tanjong Karang to Sabak Bernam, Selangor Darul Ehsan ("the Project") for the contract price of RM708,928,000.00 (including the total GST of RM40,128,000.00).

[4] Via a Letter of Award dated 28 April 2016 (LOA), together with the Sub-contract Agreement, the Defendant appointed the Plaintiff as the sub-contractor to perform Pavement Works and Road Furniture works under the Project for the contract sum amounting to RM104,117,800.40 (including total GST amounting to RM5,893,460.40). Subsequently, the parties revised the contract sum to RM91,844,175.22.

[5] The Defendant had made some payments for the Plaintiff's works in the project and had subsequently terminated the Plaintiff's contract on the basis that the Plaintiff had failed to complete the work within the time frame given, as per the required specifications and performance required.

[6] The Defendant had backcharged / deducted from the Plaintiff's payment sums due to the Defendant's advance payments, stamping of contract documents, consultant's overtime claim, patching of potholes, roadline marking, road stud, compensation for accident and fine for breaching Site's Safety Requirements.

[7] The Plaintiff has filed this suit against the Defendant in order to claim for the alleged balance sums which were not paid for the works done and against the backcharges / deductions which it disagrees. The Plaintiff also challenged the termination of its contract by the Defendant as unlawful.

[8] Due to the unlawful termination, the Plaintiff is entitled for the balance payments for works done under the contract and for loss of profit due amounting to a total of RM24,937,230.22 [(RM23.354,170.67 + RM 1,583,059.55) inclusive of GST and Retention Sum of RM4,592,208.75].

[9] Based on the Defendant's Statement of Defence, the Defendant has paid to the Plaintiff together with the Retention Sum a total of RM62,521,926.86 inclusive of all the backcharges / deductions for the Defendant's advance payments, stamping of contract documents, consultant's overtime claim, patching of potholes, roadline marking, road stud, compensation for accident and fine for breaching Site's Safety Requirements.

C. Plaintiff's Case

[10] The Plaintiff was paid not in accordance to its claim based on works done. The Defendant had paid the Plaintiff according to the payment released by the Employer (JKR) and had instructed the Plaintiff to prepare a tax invoice to reflect the amount paid to the Plaintiff. The amount paid was always lesser than the amount the Plaintiff claimed for work done for each and every Progress Claim issued by the Plaintiff.

[11] Since the Plaintiff's works under the sub-contract is provisional, the Plaintiffs works are subject to measurement and re-measurement. The Plaintiff was never informed or invited for any re-measurement by the Defendant. The Plaintiff relies on cl 46 of the Sub-contract Agreement where it provides:

"Clause 46.0 - Measurement of Sub-Contract Works

46.1 The P.D, shall, when he requires any parts of the sub¬contract Works to be measured or remeasured for the purposes of Clauses of Variation under cl 22 and provisional quantities under cl 24.5, clause 24.6, clause 24.7 give reasonable notice to the Con