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2024 MarsdenLR 123
COURT OF APPEAL PUTRAJAYA
LIM CHONG FONG, JCA
KERAJAAN MALAYSIA – Appellant
Versus
PDS TRAINING CAMP SDN BHD & ANOTHER APPEAL – Respondent
[Civil Appeal Nos: N-01(NCVC)(W)-324-06-2023 & N-01(NCVC)(W)-388-07-2023]
The termination clause allowing the Government to end contracts for national interest is valid and does not infringe the Contracts Act or public policy.
Headnote:(A) Contracts Act 1950 - Sections 24 and 29 - Federal Constitution - Article 8 - Termination of contract for national interest - Clause 36 of the Contract allows Government termination without cause, deemed void due to public policy and unequal bargaining power - High Court's decision to invalidate Clause 36 is reversed. (Paras 39, 41, 42)
(B) Appeal - Standard of review - Appellate court's role is to ensure trial court's findings are justified based on evidence, not to substitute its judgment. (Paras 16, 18)
Facts of the case:
The Plaintiff, a private company, entered into a contract with the Defendant, the Federal Government, for services related to a training program. The Defendant terminated the contract citing national interest, leading to the Plaintiff's suit claiming damages. (Paras 6-12)
Findings of Court:
The Court found Clause 36 lawful, and the Plaintiff's claims for consequential damages were excluded under the Contract. The High Court's ruling was reversed. (Paras 41-42)
Issues: Whether Clause 36 violated the Contracts Act and Federal Constitution, and whether the Plaintiff was denied rights under the Contract. (Paras 20, 24)
Ratio Decidendi: The Court held that the termination clause was valid and did not infringe public policy, emphasizing the importance of the Government's discretion in matters of national interest. (Paras 39-41)
Result: Appeals allowed; High Court's decision set aside.
Introduction
[1] These are after-trial appeals in respect of the termination of a contract based on national interest.
[2] The Appellant in Civil Appeal No: N-01(NCvC)(W)-324-06-2023 ("Appeal 324") and the Respondent in Civil Appeal No: N-01(NCvC)(W)388-07-2023 ("Appeal 388"), who is the defendant in the action, is the Federal Government of Malaysia.
[3] The Respondent in Appeal 324 and the Appellant in Appeal 388, who is the plaintiff in the action, is a private limited company involved in the accommodation and food services business.
[4] We heard the appeals which had been earlier ordered by this Court to be heard together on 6 May 2024 and thereafter adjourned them to deliberate on the arguments put forth by the parties respectively.
[5] Upon so doing, we give our decision hereinbelow together with the supporting grounds. For purposes herein and in avoidance of confusion, we will refer to the parties as the Plaintiff and the Defendant respectively.
Background
[6] By a Contract No. KP/JKLN(PRA)KRM31.00/2014 entered into between the parties after a tender exercise, the Plaintiff undertook to provide the Defendant with training facilities and food services for the "Program Latihan Khidmat Negara (PLKN)" at the PLKN Camp PDS, Port Dickson, Negeri Sembilan ("Contract").
[7] The duration of the Contract is initially for 3 years from 2003 and after several renewals, the Contract is scheduled to lapse on 31 December 2020.
[8] During the term of the Contract, the Plaintiff also undertook the expansion of the PLKN camp by relocating the PDS Resort to a new camp to be developed at Lot 5343, 5344, 5345, 5346, and 5347 Mukim Pasir Panjang, Port Dickson, to fulfil the 30-acre contractual requirement as requested by the Plaintiff and approved by the Defendant's Ministry of Defence.
[9] However, the Defendant prematurely, by notice on 3 September 2018 sent to the Respondent, terminated the Contract pursuant to cl 36 of the Contract.
The notice is reproduced below:
[10] It is provided as follows in cl 36 of the Contract:
"(36.1) Tidak tertakluk kepada mana-mana peruntukan dalam Kontrak ini, KERAJAAN berhak menamatkan Kontrak ini pada bila-bila masa dengan memberikan notis bertulis tidak kurang daripada tiga puluh (30) hari kepada KONTRAKTOR (tanpa memberi apa-apa sebab) sekiranya kerajaan berpendapat penamatan itu perlu dilaksanakan atas kepentingan negara keselamatan negara atau bagi tujuan polisi kerajaan atau polisi awam.
(36.2) Bagi maksud klausa ini, perkara yang berjumlah kepada "kepentingan negara", "kepentingan keselamatan negara", "polisi kerajaan" dan "polisi awam" hendaklah diputuskan oleh KERAJAAN sahaja dan keputusan itu adalan muktamad dan tidak boleh dicabar.
(36.3) Pihak-pihak bersetuju bahawa KONTRAKTOR tidak berhak untuk menuntut sebarang kerugian termasuk kehilangan perolehan pendapatan, pampasan, tuntutan, ganti rugi atau sebagainya atas penamatan Kontrak itu."
which is translated as follows:
"(36.1) Notwithstanding any provision of this Contract, the Government may terminate this Contract by giving not less than thirty (30) days written notice to that effect to the Contractor (without any obligation to give any reason thereof) if the Government considers that such termination s necessary for national interest, national policy or national security.
(36.2) For the purpose of this clause, what constitutes "national interest", "national policy" and "national security" shall be solely made and determined by the Government and such determination shall for all intent and purposes be final and conclusive and shall not be open to any challenge whatsoever.
(36.3) The parties agree that the CONTRACTOR shall not be entitled to claim for any losses including loss of income, compensation, claim, damages or the like by reason of the termination of the Contract."
[11] As a result, the Plaintiff, on 13 January 2020, commenced Seremban High Court Suit No. NA-21NCVC-2-01-2020 ("Suit") against the Defendant.
In The High Court
[1
