The court determined that the termination of the Subcontract Agreement was unlawful due to failure to comply with the required contractual procedures, not constituting a fundamental breach per section 40 of the Contracts Act 1950.

JUDGMENT

Hasnah Mohammed Hashim JCA:

[1] This appeal by the appellant is against of the decision of the learned Judicial Commissioner who had dismissed the appellant's claim for unlawful termination and for the damages to be assessed. The High Court allowed the respondent's counterclaim of RM1,537,226.00 for losses and damages. After having heard and considered the submission of the respective counsel for the parties, we had allowed the appeal and set aside the decision of the High Court. We remitted the case before the same High Court Judge for assessment of damages. We now give our reasons.

[2] For the purpose of this judgment, the parties will be referred to as they were in the High Court.

Material Facts

[3] The defendant is the main contractor of a project described as "Cadangan Pembangunan Projek Pendidikan Bagi SMK Tandek 2, Kota Marudu, Sabah" ('the Project') awarded by the Ministry of Education (MOE) ('the Employer'). The contract sum for the Project is RM41,445,000.00 ('the Contract Sum'). The defendant appointed the plaintiff as its subcontractor on 28 July 2009. The expected completion date of the Project was on 25 May 2011. However, the completion date was extended to 27 April 2012 ('the First EOT'). By the terms of the Subcontract Agreement ('SCA') it was agreed by the parties that the defendant's entitlement was 15% of the total Contract Sum, which is RM 6,216,750.00.

[4] The plaintiff's claim against the defendant is for unlawful termination of the SCA. The defendant, on the other hand, denied that it had unlawfully terminated the SCA. It had terminated the SCA due to the persistent failure of the plaintiff to commence works as scheduled resulting in the delay of completion of the Project. Due to the plaintiff's breach, the plaintiff is estopped from relying strictly on the terms of the SCA. The plaintiff, however, contended that it had duly commenced the works as scheduled but there were many factors beyond its control which consequently led to the delay in the completion of the Project as scheduled (such as inclement weather and other factors).

[5] At the trial in the High Court, the plaintiff called two witnesses, the consulting architect (PW1) and the plaintiff's director, PW2. The defendant called four witnesses, the director (DW1), the consultant quantity surveyor (DW2), a former officer of the MOE (DW3) and its General Manager (DW4).

[6] It was highlighted by learned counsel for the plaintiff that it was recorded in the minutes of meeting that as at 29 October 2013 the physical progress of the Project was 81% and that the defendant has been paid approximately 50% of the Contract Sum. The defendant in its defence pleaded that under the terms of the SCA the defendant as the main contractor of the Project has the right to terminate the SCA. On 29 September 2014 the defendant terminated the SCA. On 20 October 2014 the defendant through its solicitors notified the plaintiff of its intention to invoke cl 11.3 and on 8 January 2015, the defendant took over the Project. The plaintiff argued that there was no express termination in writing given by the defendant as cl 10 of the SCA does not allow the defendant to terminate the SCA. Furthermore, the second extension of time was subsequently granted by the Employer on 13 November 2014 extending the completion date to 6 September 2015 ('the Second EOT').

The Plaintiff's Arguments

[7] The plaintiff's submission is that the learned Judicial Commissioner had erred in law by solely relying on the case of Tan Kok Siang v. Kemuning Setia Sdn Bhd , 2017 MarsdenLR 96 and concluding that there was a fundamental breach of contract by the plaintiff. The learned Judicial Commissioner misapplied s 40 of the Contracts Act 1950 in determining that there was a total failure of consideration on the part of the plaintiff. Learned counsel for the plaintiff advanced several arguments in support of those submissions, contending that the finding by the High Court is fundamentally flawed. He argued