Parties must meet contractual obligations for substantial completion before performance bonds can be released, emphasizing the requirement of satisfactory completion as per contractual definitions.

Introduction

[1] There were two appeals before us arising from the same suit as follows:

(i) Civil Appeal No: W-01(C)(W)-5-01-2015 and

(ii) Civil Appeal No: W-01(C)(W)-6-01-2015.

In this judgment, for ease of reference, we will refer the parties in their original capacities in the court below.

[2] The plaintiff was appointed by the defendant to carry out works for the "Redevelopment of the Kota Kinabalu International Airport, Sabah, Package 2: Airside Infrastructure, Air Traffic Control Tower and New Low Costs Carrier Terminal ("the Project"). The contract sum for the project was RM720,000,000.00. Subsequently, the contract sum was increased to RM773,186,760.75. The agreement between the parties was executed on 1 August 2006 and the period of completion of the project was 36 months from the date of the Letter of Acceptance dated 21 April 2006 ("the Principal Agreement").

[3] Due to issues relating to the construction of the precision approach lights for Runway 2, a Supplementary Agreement ("SA") was executed extending the period of completion for each of the Sections as follows:

(i) Section 1: 30 April 2012;

(ii) Section 2: 30 August 2012; and

(iii) Section 3: 31 December 2012.

[4] It was the plaintiff's case in view of the fact that they had substantially completed the Section 1 works, the defendant must issue the Certificate of Practical Completion ("CPC") pursuant to cl 48.2 of the Principal Agreement and release 50% of the performance bond. According to the plaintiff, the failure of the defendant to issue the CPC and release 50% of the performance bond amounting to RM18,000,000.00 to the plaintiff was a clear breach of the Principal Agreement. It was the plaintiff's pleaded case that the call on the performance bond by the defendant was wrongful due to the termination of the said agreement on 7 June 2012 by the plaintiff.

[5] The plaintiff filed the claim against the defendant for breach of the terms of the Principal Agreement for failing to issue the CPC upon the completion of Section 1 works and the imposition of the Liquidated Ascertained Damages ("LAD") in respect of Section 2 works by the defendant was wrongful.

[6] The learned High court Judge partly allowed the plaintiff's claim against the defendant as follows:

(i) A declaration that the defendant had breached the contract in failing to issue the CPC upon the completion of Section 1 works on 30 April 2012 and failing to release 50% of the performance bond;

(ii) The defendant to pay RM18,000,000.00 to the plaintiff together with interest at 5% per annum from the date of judgment until the date of full settlement;

(iii) A declaration that the imposition of LAD against the plaintiff for Section 1 works was wrongful;

(iv) A declaration that the imposition of LAD against the plaintiff for Section 2 works was invalid; and

(v) Costs of RM70,000.00 to be paid to the plaintiff.

[7] The learned High court Judge dismissed part of the plaintiff's claims as follows:

(i) RM18,000,000.00 being the balance 50% of the performance bond called and retained by the defendant; and

(ii) RM303,000.00 being a reimbursable claim due to the plaintiff for various Environmental Impact Assessment ("EIA") reports.

[8] The plaintiff appealed against the part of the High court's judgment dismissing its claims whilst the defendant appealed against the whole of the judgment.

[9] We had unanimously allowed the first appeal by the defendant and dismissed the second appeal by the plaintiff with costs. We now set down our reasons for doing so.

Material Facts

[10] By the terms of the Letter of Acceptance, the plaintiff was required to furnish to the defendant a performance bond in the sum of RM36,000,000.00 being 5% of the contract s