The court affirmed the right to terminate a contract based on substantial breaches by the employer, validating claims for retention sums in construction agreements.

Proceeding:

The plaintiff's claim against the defendant is in substance three folds which are:

1. A declaration that the Agreement dated 23.06.1998 between the plaintiff and the defendant (agreement) to construct for the defendant a palm oil mill for a total sum of RM11,330,000.00 had been lawfully terminated by the plaintiff,

2. For a sum of RM1,073,017.80 made up of:-

(a) RM961,509.30 [retention sum held by the defendant for the construction supply, fabrication, erection, installation of installation of a 45 tonnes palm oil mill]

(b) RM53,200.00 [retention sum held by the defendant for the supply of proprietary equipment]

(c) RM58,308.50 [amount for variation order for the piling works and load test for the boiler foundation.

3. The loss of profit on the value of the balance of the unfinished works.

The defendant denies the claim on the ground that the plaintiff had wrongly terminated the agreement and as a result had filed a counterclaim against the plaintiff.

In respect of the counterclaim, it had been agreed by counsel that the proof in respect of the quantum of damages suffered by the defendant will only be necessary if the court finds that the plaintiff's termination of the agreement to be wrongful.

Background facts:

The agreement which the plaintiff and the defendant entered into was to construct for the defendant and further to supply, fabricate, erect, install and commission a 45 tonnes FFB/HR palm oil mill (mill) including all ancillary works at Sg. Memanjang, Beluran (collectively referred to as the Works) for a total sum of RM11,330,000.00. This Mill is to be sited in the defendant's plantation known as Ladang Hassan.

Konsultant Proses Sdn Bhd (Konsultant Proses) on 2.9.1995 under a memorandum of agreement was appointed the engineer for the construction of the palm oil mill.

The plaintiff took possession of the site within fourteen (14) days from 19.05.1997 - 1 year before signing of the agreement dated 23.6.1998, and carried out the Works and submitted claims for payment progressively according to the stages of construction of the Works. Work on the site was put on hold as the defendant then had no technical person on site and work on the Mill restarted only in June 1998 when Liau Kim Tin (PW3), a professionally qualified engineer, was employed as the defendant's general manager who was tasked to be in charge of the mill project. On 13.12.1999 the plaintiff was informed by the defendant that the operation of the Mill should only start at the end of 2000 as there was a shortage of crop from its own estate.

For works executed by the plaintiff for the Mill and for proprietary equipments supplied, the plaintiff had submitted claims which were certified resulting payments made to the plaintiff leaving the following retention amounts of RM961,509.30 and RM53,200.00 respectively for the works executed for the mill and proprietary equipments supplied. These retention amounts are not disputed by the defendant except for the issue whether the plaintiff is entitled to them which will be dealt with later in my judgment.

The Issues:

Counsel at the end of the trial had agreed on the issues to be deliberated by me and they are these:

Issue No. 1:

Even if proven (which is denied), whether the purported grounds for the plaintiff's self-termination of the Contract vide their solicitors' letter dated 5.11.2002 are recognized under the Contract and if not, whether the said termination was wrongful.

The solicitor's letter sets out 5 grounds and they are these:

1. that the defendant had allegedly repeatedly and consistently failed to honour their contractual obligations by failing to extend to the plaintiff the design plan for the effluent treatment system;

2. that the defendant had allegedly failed to construct the water reservoir resulting in the plaintiff's inability to carry out piping works to and from the mill to the water reservoir;

3. that the d