Unlawful termination of a contract allows the aggrieved party to claim full contractual sum and damages under the principles of restitution.

JUDGMENT

FACTS

The defendant engaged the plaintiff as its consultant civil and structural engineers for its Damansara Fairway Project (the project) consisting of 3 tower blocks to be built on a piece of land held under Lot 23785 Mukim of Sungai Buloh, Selangor, by way of a letter of offer dated 14.11.95 (the contract).

According to clauses 2.1 and 2.2 of the contract, the fee agreed upon was a lump sum payment of RM410,000.00 consisting of RM242,000.00 for an alternative structural design and a sum of RM168,000.00 for the scope of services as civil and structural consultancy works under Part A of the Condition of Engagement set out by the Board of Engineers Malaysia (BEM).

On 7.5.96, the defendant unilaterally terminated the contract without the plaintiff's agreement and stated that it wished to change consultants and required the plaintiff to submit an invoice for all their work done thus far. The plaintiff had carried out its duties and there were never any complaints about the plaintiff's performance of its duties right up to the date of termination of the contract by the defendant on 7.5.96. Up to the date of termination, the defendant had only paid the plaintiff a sum of RM36,750.00 which comprised a fee of RM35,000.00 plus the 5% service tax. On 17.4.96, the plaintiff's engineer, one Lim Joo Kiat (Lim), who was assigned to work for the project tendered his resignation giving a three-month notice to the plaintiff. This meant that his employment with the plaintiff would expire on 16.7.96. The defendant proceeded to engage a new firm of consultant civil and structural engineers called Azman, Lim & Associates (formerly known as Jurutera Perunding ANZ Sdn Bhd) (the new firm) on or about 17.6.96 and the said Lim and one Azman bin Ahmad (Azman) are the only directors and substantial shareholders of the said new firm. Both Lim and Azman were prior to their resignation from the plaintiff, directors of the plaintiff as well.

The plaintiff sent the final invoice dated 15.8.96 to the defendant for the balance of the contracted sum of RM393,750.00 after deducting the previous payment of RM36,750.00. Upon receipt of the final invoice, the defendant replied by a letter dated 9.9.96 refusing to pay the entire balance contract sum and required the plaintiff to justify its claim.

THE CLAIM

It is the plaintiff's contention that the termination by the defendant of the contract on 7.5.96 is unlawful and that therefore, the plaintiff is entitled to claim the full contract sum. Although not specifically pleaded in the statement of claim the plaintiff prays in the alternative for the sum of RM242,000.00 for the alternative structural design works and RM127,000.00 for the consultancy works on a quantum meruit basis. There is also the usual prayer for interest and costs.

FINDINGS OF THE COURT

Was the termination unlawful?

The defendant argues that it terminated the agreement because of the fact that once Lim (DW2) had tendered his resignation as of 17.4.96, and since the other engineer, Azman, had already earlier left the plaintiff, the plaintiff had committed a breach of the agreement by no longer having the expertise of registered engineers to carry out the works on the said project and in failing to appoint any other registered engineers after the resignation of DW2 and Azman. This is a very surprising stand taken by the defendant. After all, the said Lim was still contractually in service when the defendant unilaterally terminated the contract. Lim would have to work up till 16.7.96. The defendant jumped the gun and no doubt with a reason. The said Lim had now teamed up with the new firm and the defendant had engaged this new firm in which Lim and Azman are the only two directors. In any case in its letter of termination of the contract dated 7.5.96 the defendant never mentioned the true reason pleaded in evidence. The reason given in the letter was that the defendant intended to change the consulting engineers. It never contended that the plaintiff la