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2024 MarsdenLR 1009
HIGH COURT MALAYA PULAU PINANG
MAJLIS BANDARAYA PULAU PINANG – Appellant
Versus
SAGAMUDA CIVIL SDN BHD – Respondent
[Civil Suit No: PA-22C-5-05-2021]
The court ruled that proper procedures for contract termination must be followed, and adjudication decisions are interim, subject to final determination by courts.
Headnote:(A) Construction Industry Payment and Adjudication Act 2012 – Sections 13(c), 28, and 37 – Contract termination – Plaintiff's claims against Defendant dismissed as Plaintiff failed to prove breach of contract and invalid termination notices issued – Defendant's counterclaim allowed for LAD and final payment claims – Court emphasized that adjudication decisions are interim and subject to final determination by courts. (Paras 121, 122)
(B) Contract Law – Termination of contract – Validity of termination notices must comply with contractual procedures – Failure to issue proper notices renders terminations invalid. (Paras 49, 50)
(C) Liquidated Damages – Conditions for imposing LAD must be met, including issuance of a Certificate of Non-Completion (CNC) and written notice of deductions. (Paras 93, 94)
Facts of the case: The dispute arose from a construction contract where the Plaintiff claimed breach by the Defendant, leading to termination notices. The Defendant counterclaimed for unpaid amounts and LAD. The Court found the Plaintiff's claims unsubstantiated and the terminations invalid.
Findings of Court: The Plaintiff failed to prove its claims, while the Defendant successfully established its counterclaims.
Issues: The main issues included the validity of termination notices, entitlement to LAD, and the enforceability of adjudication decisions.
Ratio Decidendi: The Court ruled that proper procedures for contract termination must be followed, and adjudication decisions are not final but subject to court review.
Result: Plaintiff's claims dismissed; Defendant's counterclaims allowed.
JUDGMENT
[After Full Trial]
Introduction
[1] This case concerns a construction dispute between the Plaintiff as the employer and the Defendant as the main contractor in respect of a project known as "Cadangan Membaik Pulih Infirmary Di Jalan Sungai, Pulau Pinang" (Project). The parties executed a construction contract dated 15 September 2014 which adopted the Agreement and Conditions of PAM Contract 2006 (With Quantities).
[2] After considering the evidence presented by both parties, on a balance of probabilities, the Court decided that the Plaintiff had failed to prove its case against the Defendant while the Defendant had succeeded in proving its counter-claim against the Plaintiff.
[3] Dissatisfied with this Court's decision, delivered on 26 March 2024, an appeal was filed by the Plaintiff to the Court of Appeal (COA). The parties are referred to as they were in the High Court.
Trial
[4] The trial was conducted for seven (7) days, ie on 9 October 2023, 10 October 2023, 11 October 2023, 12 October 2023, 18 October 2023, 19 October 2023, and 20 October 2023. The Plaintiff called three (3) witnesses and the Defendant called one (1) witness as follows:
(i) Tay Boon Leong (Architect of the Project) as PW-1
(ii) Goh Kean Guan (Quantity Surveyor of the Project as PW-2)
(iii) Rizuwan Bin Salleh (Pengarah Kawalan Bangunan of the Plaintiff) as PW-3
(iv) Mohd Radzuan bin Ahmad (Managing Director of the Defendant) as DW-1
Background Facts
[5] By a Letter of Acceptance dated 14 August 2014 (Refer: B/1-3) ("LOA"), the Plaintiff appointed the Defendant as the main contractor for a contract of RM8,240,000.00 (Proposals to Rehabilitate the Infirmary in Jalan Sungai, Penang). Subsequently, the parties executed a formal contract dated 15 September 2014 which adopted the Agreement and Conditions of PAM Contract 2006 (With Quantities). Date of Commencement of the Project is on 15 September 2014 and Date of Completion of the Project is on 14 September 2015.
[6] Follow-up from the irregular and also illegal (unlawful) termination of the contract by Plaintiff and the breach of contract committed by the Plaintiff, the Defendant has commenced an adjudication claim against the Plaintiff in July of 2020 according to the CIPAA 2012. In the adjudication, the Defendant has demanded payment from the Plaintiff which is limited to claims for payment of works that have been carried out by the Defendant in the Project as follows:
(i) RM695,640.00 (amount of damages -LAD) was wrongly deducted by the Plaintiff from the Interim Payment Certificate No 7, 8, 9, 10 and 11;and
(ii) Last Payment Claim No 12 dated 12 July 2016 totalling RM1,654,195.58 plus costs.
[7] The Plaintiff has failed to answer or challenge the Defendant's adjudication claim. After Adjudicator, Dr Teng Kam Wah heard the merits of the Defendant's claim, the Adjudicator issued the Adjudicator Decision (AD) dated 26 February 2021 (reference No AIAC/D/ADJ-3315-2020) which allow the claim of payment by the Defendant together with interest and costs. The Plaintiff then, filed this action.
Plaintiff's Claim
[8] In this Writ, the Plaintiff makes the following claim:
(i) The Defendant has breached the contract and failed to perform the work of the Project regularly and diligently (regularly and diligently).
(ii) The defendant has been handed over with a Certificate of Completion of Work (CNC) dated 15 September 2015 when the Defendant failed to complete the said Project before the contract completion date 14 September 2015.
(iii) All 6 extension of time ('EOT') applications made by the defendant is invalid.
(iv) The Defendant has failed to remedy its breach of contract even though there is a notice from the Architect dated 1 February 2016 directing the Defendant to do the remedy. Therefore, through a letter dated 15 April 2016, the Plaintiff terminate the Defendant's employment under the said Contract pursuant to cl 25 Conditions of Contract ('COC').
(v) Through a letter dated 17 April 2016, the Defendant a
