The plaintiff bears the burden of proof and must provide credible evidence to substantiate claims in contract disputes, especially regarding outstanding payments.

[1] This is an appeal by the appellant/defendant against the decision of the High Court Judicial Commissioner ('learned JC') sitting at Kota Kinabalu in allowing the respondent/plaintiff's claim with costs. After a full trial, the learned JC entered judgment in favour of the plaintiff in the following terms:

(a) that the defendant shall pay the sum of RM5,357.88 to the plaintiff being the outstanding balance for work executed;

(b) that the defendant shall pay the sum of RM2,000,000.00 to the plaintiff as agreed liquidated damages under the agreement dated 22 June 2010;

(c) that the defendant shall pay statutory interest at the rate of 5% per annum from the date of judgment to the date of full payment to the plaintiff; and

(d) that the defendant shall pay costs of RM7,000.00 subject to 4% allocatur to the plaintiff.

[2] We heard the defendant's appeal on the 17 July 2018. After considering the written submissions and the oral arguments from both parties on the issues raised, we unanimously allowed the appeal. We now give our reasons for allowing the appeal.

[3] For ease of reference, parties will be referred to as they were in the proceedings before the High Court.

Background Facts

[4] The factual matrix of this case was not much in dispute. The subject matter of the present appeal relates to an agreement dated 22 June 2010 between the plaintiff, Teraju Hijau Sdn Bhd and the defendant, Sabah Land Development Board ('the said Agreement').

[5] The plaintiff is a company dealing with the operation of nursery for oil palm seedlings. The defendant is a statutory body constituted under the Sabah Land Development Board Enactment 1981.

[6] The parties entered into the said Agreement with the sole objective to develop, supply and operate an oil palm nursery in an effort to eradicate poverty in Tongod, Sandakan by promoting agropolitan, that is, by setting up agricultural and agro-based developments projects in Tongod.

[7] By the said Agreement, the defendant had agreed to engage the plaintiff to develop, supply and operate an oil palm nursery for a period of five (5) years with a minimum of 1,300,000 oil palm seedlings back to the defendant at an agreed contractual rates of RM8.50 per seedlings.

[8] After the execution of the said Agreement, the plaintiff began managing and operating the nursery. After the said Agreement had been in effect for approximately four years, the defendant had managed to source and supply some 284,860 seedlings, leaving a shortfall of 1,015,140 seedlings to be supplied. The plaintiff claimed that the defendant had owed it an outstanding sum of RM5,357.88 for the works done.

[9] Subsequently, by a letter dated 12 March 2014 (P12), the plaintiff wrote to the defendant to enquire about the supply and delivery of the remaining balance of the seedlings that the defendant was supposed to supply under the said Agreement. There was no response from the defendant to the letter P12 and as well to a series of reminder letters which were exhibited as P9, P10, P11 and P13.

[10] The plaintiff then wrote another letter dated 9 January 2014 through its solicitors, Messrs Chin Mirdin & Co (P3). There was no response from the defendant to the solicitor's letter as well as to the subsequent two reminder letters. It was after the third reminder letter dated 13 January 2015 (P4), the defendant responded to the plaintiff's letters.

[11] In the said P4 letter, the plaintiff had reminded the defendant to reply to the letter P3 an