Claims for damages in construction contracts require strict proof; failure to substantiate claims may lead to nominal damages only.

Introduction

[1] This is an appeal on the assessment of damages pursuant to a terminated construction contract.

[2] The Appellant, who is the defendant in the High Court, is a private limited company.

[3] The Respondent, also a private limited company, is the plaintiff in the High Court.

[4] We heard the appeal on 14 March 2025 and subsequently adjourned the decision to allow time for deliberation on the arguments presented by the parties.

[5] Now having done so, we hereby give our decision below together with our supporting grounds.

Background

[6] The Appellant was awarded the main contract by the Ministry of Education of the Federal Government of Malaysia ("Employer") to construct a school named Sekolah Menengah Kebangsaan Tandek 2, located in Kuala Marudu, Sabah, with a contract value of RM42,750,000.00 ("Main Contract Sum").

[7] The Appellant thereafter sub-contracted the carrying out of the whole of the building works to the Respondent via a written sub-contract agreement dated 28 July 2009 ("Sub-Contract Agreement"). The sub-contract sum of the Respondent is determined at RM35,228,250.00 ("Sub-Contract Sum"), to wit, 85% of RM41,445,000.00 being the Main Contract Sum less contribution and levy charges of RM1,305,000.00. Thus, the balance of RM6,216,750.00, being 15% of the Main Contract Sum less contribution and levy charges is the Appellant's entitlement.

[8] During the course of construction of the school, there were disputes that arose that resulted in the Appellant, on 11 November 2014, terminating the Sub- Contract Agreement for the Respondent's failure to complete the construction of the school.

[9] Consequently, the Respondent commenced the action in the High Court ("Suit") and claimed damages against the Appellant for wrongful termination of the Sub-Contract Agreement. The Appellant counter-claimed damages against the Respondent, especially the extra costs incurred to complete the building works by Bangkit Energy & Pro Logistic (EM) Sdn Bhd ("Completion Contractor").

In The High Court

[10] After the trial of the Suit, the High Court on 15 November 2021, found in favour of the Appellant.

[11] On appeal by the Respondent, this Court in Civil Appeal No S-02(NCVC) (W)-2545-12/2017, reversed the High Court's decision on 21 March 2019 (see Richallenge Corporation Sdn Bhd v. Poteck Enterprise Sdn Bhd 2020 MarsdenLR 817 ; [2020] 3 MLJ 704 ; ; [2020] 4 AMR 865 ). The High Court was then ordered to assess the damages suffered by the Respondent due to the Appellant's unlawful termination of the Sub-Contract Agreement.

[12] Consequently, upon assessment, the High Court on 14 December 2021 allowed damages under the following headings:

Thus, the High Court ordered the Appellant to pay the total amount of RM8,999,897.27, with interest at the rate of 8% per annum from 29 September 2014 to the date of judgment and thereafter statutory interest on the said sum at the rate of 5% per annum from the date of judgment to the date of full payment and costs of RM10,000.00 subject to allocator.

[13] The Appellant is dissatisfied with the assessment made by the High Court and, therefore, filed an appeal with the Court of Appeal on 11 January 2022.

Findings Of This Court

[14] Although this is an appeal arising from the assessment of damages, our function here is no different from that of an appeal on liability after