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2019 MarsdenLR 2311
HIGH COURT SABAH & SARAWAK KOTA KINABALU
KURNIA NIAGA – Appellant
Versus
KEMENTERIAN PERUMAHAN & KERAJAAN TEMPATAN & ANOR – Respondent
[Suit No: BKI-21NCC-1/3-2018]
The imposition of liquidated damages is invalid if the plaintiff was entitled to an extension of time under contract variations, which the defendants failed to consider appropriately.
Headnote:The judgment addresses issues related to a construction contract breach where liquidated ascertained damages were imposed on the plaintiff. The court found that the third extension of time was necessary given the variations instructed. The court determined that the imposition of LAD by the defendants was not valid due to prior agreements made under a subsequent contract. Ultimately, the court dismissed the plaintiff's claims. The court framed issues regarding the validity of LAD under a varied contract and the necessity of a third extension of time. It reasoned that the defendants' failure to grant the third extension and consider delays led to wrongful charges against the plaintiff. The court concluded, "I dismissed the Plaintiff's claim with no order as to costs."
| Table of Content |
|---|
| 1. plaintiff's initial claim regarding contract terms and damages. (Para 1 , 2 , 4) |
| 2. defendants' responses and justifications for liquidated damages. (Para 3 , 11 , 12) |
| 3. details of the construction contract and the implications of the varied contract. (Para 5 , 10) |
| 4. determination of issues regarding extension of time and responsibilities. (Para 23) |
| 5. assessment of extension of time necessity under contract. (Para 24 , 25 , 28) |
| 6. court's reflection on previous case law and its applicability. (Para 32 , 33 , 34) |
| 7. final ruling regarding waiver of rights and judgment outcome. (Para 49 , 60) |
| 8. final determination on lad claims and the outcome based on contractual terms. (Para 52) |
[1] The Plaintiff, a building and construction contractor sued the Defendants arising from a contract dated 12 March 2008 it entered with the Defendants to carry out works known as "Merekabentuk, Membina dan Menyiapkan 1,000 Unit Rumah Pangsa 4-5 Tingkat dan Kerja-Kerja Yang Berkaitan Dengannya Bagi Program Perumahan Rakyat (PPR-Disewa) Di Batu 21/2, Jalan Bubul Lama, Semporna, Sabah" ("the Works") for the sum of RM68,686,000.00 ("the Contract Sum") subject to the terms and conditions therein ("the Contract").
[2] After a full trial, this Court dismissed the Plaintiff's claim. Per parties' agreement, no order as to costs was made.
[3] The Plaintiff has filed a Notice of Appeal against this Court's decision.
The Plaintiff's Case
[4] Although the Works were to be completed by 24 December 2009, the Plaintiff was granted 2 extensions of time on 24 June 2008 ("the 1st EOT") and on 7 September 2010 ("the 2nd EOT"). The 1st EOT was for until 6 June 2010 and the 2nd EOT was for until 6 March 2012.
[5] On 10 February 2011, the Defendants issued one "Arahan Perubahan Kerja NO 1" ("APK1") varying the Contract by omitting Block 10 and Block 11 from the Works ("the Varied Contract"). A sum of RM10,781,760.00 from the Contract Sum was also deducted thereby reducing the Contract sum to RM57,904,240.00.
[6] The Plaintiff forwarded 2 proposals as alternatives to the APK1 on 24 February 2011 and 1 February 2012. However, both were declined by the Defendants.
[7] Thereafter, the Plaintiff proposed a mutual termination of the Contract pursuant to cl 40 thereof but was also declined.
[8] The parties then entered into negotiations to assess the loss suffered and work done by the Plaintiff due to the APK1.
[9] In reliance of the APK1, the Plaintiff proceeded to perform the Varied Contract and on 31 July 2012, applied for a third extension of time ("the 3rd EOT"). The Plaintiff was required to submit a revised development plan/sub-division plan in accordance with the APK1 to the local authority first and thereafter to complete the Varied Contract.
[10] At the time of issuance of the APK 1 on 10 February 2011, there were still 13 months before the expiry of the Contract under the 2nd EOT which was to only lapse on 6 March 2012. However, the Defendants failed, refused or neglected to grant the 3rd EOT which resulted in the Plaintiff not being able to complete the Works.
[11] In addition, the Plaintiff claimed that the Defendants failed, refused or neglected to settle the Plaintiff's earlier claims in the sums of RM6,976,467.50 and RM270,103.40 thereby making the Plaintiff unable to proceed further.
[12] The Defendants had caused notices to terminate ("Notis Untuk Tujuan Penamatan Pengambilan Kerja Kontraktor") to the Plaintiff on 3 occassions ie on 5 December 2012, 29 March 2013 and 23 April 2013 stating the reason as "...tidak menjalankan kerja dengan bersungguh-sungguh.."
[13] Subsequent to the termination, the Defendants re-appointed the Plaintiff to complete the Works to which the Plaintiff had agreed upon the assurance by the Defendants that they could appeal against the Liquidated and Ascertained Damages ("LAD") to be imposed.
[14] The Plaintiff subsequently completed the Works. However, the Plaintiff was charged with the sum of RM5,247,578.00 as LAD from 7 March 2012 t
