Ali Health Sdn Bhd v Sancy Berhad (WA-22NCvC-277-04/2021)

This action arises from a commercial dispute concerning the implementation of a Laboratory Information System ("LIS") for Hospital Kuala Lumpur ("HKL"). The Plaintiff, Ali Health Sdn. Bhd. ("the Plaintiff"), commenced this action against the Defendant, Sancy Berhad ("the Defendant"), alleging, amongst others, that the Defendant had wrongfully terminated the parties' 29/07/2026 17:00:00 WA-22NCvC-277-04/2021 Kand. 168 Sub-Contract dated 23 March 2021 ("the Sub-Contract") and had thereby committed a repudiatory breach of the agreement.

The Defendant denied the Plaintiff's claim and maintained that its Notice of Termination dated 23 March 2021 was lawfully issued pursuant to the Plaintiff's alleged breaches of the Sub-Contract. In addition, the Defendant advanced a Counterclaim founded substantially upon the same allegations.

The action proceeded to a full trial over eighteen hearing days. The Court heard the testimony of the Plaintiff's witnesses and the Defendant's witnesses, considered an extensive documentary record comprising the contractual documents, correspondence, technical documents, project records, meeting minutes and other contemporaneous materials, together with the written submissions and reply submissions filed by both parties.

Having considered the entirety of the evidence and the submissions of counsel, the Court entered judgment substantially in favour of the Plaintiff. These are the reasons for that decision.

The Defendant was the successful contractor engaged in relation to the implementation of the LIS for HKL.

6.

The project was technically complex. It involved the implementation of specialised software within a major public hospital, requiring coordination between the contracting parties, the end user, technical personnel and other stakeholders. Unsurprisingly, the implementation process generated numerous technical discussions, requests for modification, operational issues and ongoing engagement between the parties.

For a considerable period following the execution of the Sub-Contract, the parties continued to work together in implementing the project. Numerous meetings were held, correspondence exchanged and technical issues discussed in an effort to bring the implementation to a successful conclusion.

As the project progressed, disagreements arose between the parties concerning various aspects of the implementation. Those disagreements included matters relating to system functionality, implementation milestones, testing, outstanding work items, operational issues raised by HKL, the issue concerning 360 concurrent licences and other matters connected with the implementation of the HKL.

The parties were, however, fundamentally divided on the significance of those matters.

The Plaintiff maintained that the implementation remained ongoing, that the issues raised formed part of the ordinary implementation process and that both parties continued to work towards completion of the project.

The Defendant, on the other hand, took the position that the Plaintiff had failed to perform its contractual obligations in accordance with the Sub-Contract and that those failures entitled the Defendant to terminate the agreement.

On 23 March 2021, the Defendant issued its Notice of Termination. The Plaintiff disputed the validity of that termination and contended that it constituted a wrongful repudiation of the Sub-Contract.

Following the termination, disputes also arose concerning the parties' respective rights in relation to the source code, the escrow arrangement, ownership of intellectual property, outstanding contractual obligations and the financial consequences arising from the termination.

Those disputes ultimately culminated in the present proceedings.

The Plaintiff's case, as pleaded, is that the Defendant wrongfully terminated the Sub-Contract without lawful contractual justification. The Plaintiff contends that it had at all material times continued to perform its obligations under the Sub-Contract and that any outstanding implementation issues formed part of the continuing performance of a technically complex software implementation project.

The Plaintiff further contends that the Defendant's Notice of Termination amounted to a repudiatory breach of the Sub-Contract, thereby entitling the Plaintiff to accept that repudiation and claim the reliefs sought in the Statement of Claim.

In addition, the Plaintiff seeks declarations and consequential relief relating to the parties' contractual rights concerning the source code, the escrow arrangement and the intellectual property arising from the implementation of the project, together with damages and the other reliefs pleaded.

The Defendant denies liability. It contends that the Plaintiff committed numerous breaches of the Sub-Contract which entitled the Defendant to terminate the contractual relationship. In particular, the Defendant relies upon matters relating to the implementation of the system, alleged outstanding contractual obligations, the 360 concurrent licence issue, operational concerns, testing, deployment and other matters said to demonstrate the Plaintiff's failure to perform the Sub-Contract.

On that basis, the Defendant maintains that its Notice of Termination was lawfully issued and that the Plaintiff's claim should therefore be dismissed.

The Defendant also advances a Counterclaim in which it seeks various declarations, consequential relief and damages arising from the Plaintiff's alleged breaches of the Sub-Contract.

Although numerous issues arose during the trial, the Court considers that the present dispute may be resolved by determining the following principal questions:

(a) Whether the Defendant was contractually entitled to terminate the Sub-Contract by its Notice of Termination dated 23 March 2021;

(b) Whether the Plaintiff committed any breach of the Sub-Contract capable of justifying the Defendant's termination;

(c) Whether the Defendant's termination constituted a wrongful repudiation of the Sub-Contract;

(d) The parties' respective contractual rights concerning the source code, the escrow arrangement and the intellectual property developed pursuant to the Sub-Contract;

(e) Whether the Defendant has established its Counterclaim; and

(f) The reliefs to which the respective parties are entitled.

Although the evidence traversed numerous technical issues, the Court does not consider that each technical disagreement requires separate determination. Many of those issues are interrelated and derive their significance from the same central question, namely whether the Defendant has established a contractual entitlement to terminate the Sub-Contract.

Accordingly, the Court has approached the evidence by reference to the contractual rights and obligations of the parties rather than by treating each technical dispute as an isolated issue. The Contractual Framework

The present dispute is fundamentally a contractual dispute. Whilst the trial traversed numerous technical issues concerning the implementation of the LIS, the parties' respective rights and liabilities ultimately fall to be determined by the terms of the Sub-Contract dated 1 August 2019. The Court must therefore ascertain whether the conduct complained of constituted breaches of the contractual obligations undertaken by the parties and, if so, whether those breaches entitled the Defendant to terminate the Sub-Contract.

Throughout the trial, considerable attention was devoted to matters such as software development, implementation progress, user requirements, system functionality, testing procedures, outstanding work items and operational issues raised during the implementation of the project.

Those matters undoubtedly formed an important part of the factual background. However, they cannot be considered in isolation from the contractual framework agreed between the parties. Technical difficulties do not, of themselves, determine contractual liability.

The Sub-Contract defines the parties' respective obligations, the scope of work to be performed, the implementation process, the contractual acceptance mechanism and the circumstances under which either party may invoke its contractual remedies. It is therefore the contract, and not the parties' subjective assessment of the project's progress, that determines whether either party had acquired the right to terminate the contractual relationship.

In construing the Sub-Contract, the Court has read its provisions as a coherent commercial instrument, giving the contractual language its ordinary and commercial meaning. Individual clauses cannot be interpreted in isolation. Still, they must be understood in the context of the agreement as a whole and the commercial purpose which the parties intended to achieve, namely the successful implementation of the LIS for HKL.

The contractual framework also envisaged a structured implementation process involving development, testing, deployment and contractual acceptance before the project could properly be regarded as completed. Whether described during the trial as PAT, UAT or FAT, those contractual processes formed part of the agreed mechanism by which implementation was to be verified and accepted.

The question before this Court is therefore not whether substantial work had been undertaken, but whether the Defendant has established, viewed objectively against the contractual framework, that it had performed its contractual obligations to the extent necessary to justify the exercise of its contractual right of termination.

The Court therefore approaches the present dispute on the footing that the parties' respective rights and obligations must be determined principally from the written Sub-Contract itself, consistent with the principle reflected in section 92 of the Evidence Act 1950.

This approach is consistent with the objective principles governing the construction of commercial contracts, whereby the Court must ascertain the parties' rights and obligations from the language of the agreement read as a whole and in its proper commercial context (see Reardon Smith Line Ltd v Yngvar Hansen-Tangen & Sanko Steamships Co 1.W.R.L (1976) pg. 995-996)

The Court further notes that the statutory consequences of a refusal or inability to perform contractual obligations are reflected in section 40 of the Contracts Act 1950.

The principal issue before the Court is whether the Defendant was contractually entitled to terminate the Sub-Contract by its Notice of Termination dated 23 March 2021.

It is well established that not every breach of contract entitles the innocent party to terminate the agreement. Whether such a right arises depends upon the proper construction of the contract, the nature of the obligation alleged to have been breached, and whether the breach relied upon is sufficiently serious to justify bringing the contractual relationship to an end.

A distinction must therefore be drawn between breaches which sound only in damages and those which go to the root of the contract. The burden lies upon the party asserting the right of termination to establish both the factual and contractual basis upon which that right is exercised.

The Defendant submits that it had substantially completed its contractual obligations and that any remaining matters concerned subsequent change requests, additional requirements or delays outside its contractual responsibility.

The Plaintiff, on the other hand, contends that the contractual implementation process had not reached the stage contemplated by the Sub-Contract and that the Defendant therefore remained obliged to complete outstanding contractual obligations before asserting any entitlement to terminate.

Those competing contentions must be resolved objectively by reference to the contractual provisions and the evidence adduced at trial.

The applicable legal principles are not in dispute. The real issue lies in their application to the facts established by the evidence. It is to that evidence that the Court now turns. F.

This action proceeded to a full trial over eighteen hearing days during which the Court heard oral testimony from the witnesses called by both parties and considered an extensive body of contemporaneous documentary evidence comprising the contractual documents, project records, correspondence, meeting minutes, technical documentation and other materials generated throughout the implementation of the LIS. The Court also had the benefit of detailed written submissions and reply submissions from both parties.

In evaluating the evidence, the Court has not approached the case by considering the testimony of each witness in isolation. Rather, the Court has evaluated the evidence issue by issue, having regard to the contractual framework, the contemporaneous documentary record, the oral testimony of the witnesses and the commercial context in which the parties operated. Ultimately, the Court's task is to determine whether the material facts necessary to establish the parties' respective contractual rights and liabilities have been proved on a balance of probabilities.

The Court has attached particular weight to the contemporaneous documentary evidence. In a commercial dispute of this nature, documents created during the ordinary course of the parties' contractual relationship, before litigation became inevitable, frequently provide the most reliable indication of how the project progressed, how the parties understood their contractual obligations, and whether either party regarded the implementation process as having reached contractual completion.

Where later recollections differed from the contemporaneous record, the Court has carefully examined whether there existed any objective basis for preferring those later explanations over the documentary evidence.

At the same time, the Court has borne in mind that this was a technically complex software implementation project involving a major public hospital. It would be unrealistic to expect every technical issue, operational difficulty or implementation challenge to proceed without disagreement.

The mere existence of technical problems, user complaints, requests for modification or differing views as to progress does not, without more, establish either contractual breach or contractual completion. Those matters must be evaluated against the contractual obligations assumed by the parties under the Sub-Contract.

The Court has therefore considered the evidence cumulatively rather than by reference to isolated incidents or individual documents. No single email, meeting, technical issue or answer given in cross-examination has been treated as determinative. Instead, each forms part of the overall evidential matrix from which the Court has determined whether, viewed objectively and in light of the Sub-Contract, the Defendant had established a contractual entitlement to terminate the parties' relationship.

Where reference is made in this Judgment to the evidence of a particular witness, it is not because the Court has determined the issues by reference to that witness alone. Rather, such evidence is referred to insofar as it is supported by, or assists in explaining, the contemporaneous documentary record and the contractual framework governing the parties' relationship. The Court's findings are therefore based upon the cumulative effect of the evidence viewed as a whole. G. THE CENTRAL ISSUE Whether the Defendant had established a contractual entitlement to terminate the Sub-Contract

Whether the Defendant was entitled to terminate the Sub-Contract is therefore not determined merely by the existence of complaints concerning performance, but by whether, properly construed, the contractual prerequisites for termination had in fact arisen, as recognised in SPM Membrane Switch Sdn Bhd v Kerajaan Negeri Selangor [2016] 1 MLRA . In her judgment, the Learned Federal Court Judge said as follows: “[34] Where the natural meaning of the contract is not clear and in the particular absence of words to the effect mentioned above, the principles in ICS in their qualified form (see [28] which qualifies its application vis-a-vis rectification), remain applicable and relevant to the construction of the construct such as to enable the court to objectively determine “the meaning which the contract would convey to a reasonable person having all the background knowledge …available to the parties.” [35] The principles of Lord Hoffmann were summarised in Berjaya Times Square Sdn Bhd v. M-Concept Sdn Bhd [2009] 3 MLRA 1 at para 42 p 17. Gopal Sri Ram FCJ, who delivered the leading judgment of the court stated: “Here it is important to bear in mind that a contract is to be interpreted in accordance with the following guidelines. First, a court interpreting a private contract is not confined to the four corners of the document. It is entitled to look at the factual matrix which forms the background to the transaction. Second, the factual matrix which forms the background to the transaction includes all material that was reasonably available to the parties. Third, the interpreting court must disregard any part of the background that is declaratory of subjective intent only. Lastly, the court should adopt an objective approach when interpreting a private contract.”

Although the parties advanced numerous allegations concerning delays, outstanding work, change requests, additional user licences, source code, project management, payment disputes and the performance of their respective contractual obligations, the Court considers that these matters ultimately converge upon a single central question.

The essential issue is whether, viewed objectively against the terms of the Sub-Contract, the Defendant had established a contractual entitlement to terminate the Sub-Contract by its Notice of Termination dated 23 March 2021.

That question cannot be answered merely by determining whether difficulties arose during the implementation of the LIS. Nor can it be answered by identifying isolated instances of delay, disagreement or dissatisfaction on either side. Large-scale software implementation projects are seldom free from technical issues, operational challenges or evolving user requirements. The existence of such matters, without more, does not itself confer a contractual right of termination.

Rather, the Court must determine whether the matters relied upon by the Defendant, whether considered individually or cumulatively, constituted breaches of such gravity, viewed in the context of the contractual framework agreed by the parties, as to entitle the Defendant to bring the contractual relationship to an immediate end. In undertaking that exercise, the Court must also consider whether the Defendant had itself discharged the contractual obligations which it now contends had substantially been performed.

Equally important is the distinction between substantial progress in implementation and contractual completion. Throughout the trial, the Defendant maintained that the core LIS had substantially been completed and that any outstanding matters concerned enhancements, additional requests or delays attributable to HKL or the Plaintiff.

The Plaintiff disputed that characterisation, contending that the contractual implementation process, including the agreed testing and acceptance mechanism, had not reached the stage contemplated by the Sub-Contract.

The Court considers this distinction to be of central importance because contractual rights of termination cannot be determined solely by reference to the percentage of work said to have been completed or by one party's own assessment of its performance.

It is therefore against this framework that the Court now examines the evidence relating to the implementation of the project, the parties' respective contractual obligations and the events leading to the Defendant's termination of the Sub-Contract.

The Defendant's case is that it was lawfully entitled to terminate the Sub-Contract because it had substantially performed its contractual obligations, whilst the Plaintiff had committed fundamental breaches which entitled the Defendant to bring the contractual relationship to an immediate end. Those alleged breaches include, amongst others, failures relating to payment, project management, acceptance procedures, additional user licences, change requests and matters which the Defendant contends fell outside its original contractual scope.

The Defendant further contends that, by the time the Notice of Termination dated 23 March 2021 was issued, the core LIS had substantially been completed and any remaining matters concerned either enhancements, additional requests by HKL or administrative matters relating to deployment and sign-off. It is therefore argued that the Plaintiff's continued refusal to recognise completion and to satisfy the Defendant's contractual entitlements amounted to repudiatory conduct justifying immediate termination.

The Court has carefully considered those submissions. There is no doubt that considerable work had been undertaken by the Defendant in developing and implementing the LIS. Equally, the evidence demonstrates that the implementation process encountered numerous technical, operational and administrative difficulties. However, those matters do not themselves determine whether the Defendant had acquired the contractual right to terminate the Sub-Contract.

In the Court's judgment, the Defendant's submissions proceed from a premise which requires careful examination. Throughout the trial, substantial emphasis was placed upon the percentage of work said to have been completed, the extent of software development undertaken and the effort expended in implementing the project. While those matters are relevant to understanding the factual background, they do not answer the contractual question before the Court.

The proper inquiry is whether, at the time the Defendant elected to terminate the Sub-Contract, it had established, by reference to the contractual framework agreed by the parties, that it had become entitled to exercise that contractual remedy. That inquiry necessarily requires the Court to consider not only the Defendant's allegations concerning the Plaintiff's conduct, but also whether the Defendant itself had fulfilled the contractual obligations upon which its asserted right of termination depended.

Upon considering the totality of the evidence, the Court is unable to accept the Defendant's submission that the project had reached contractual completion by the time the Notice of Termination was issued. Whilst the Court accepts that substantial work had been undertaken in developing the LIS, the evidence, viewed objectively, demonstrates that the contractual implementation process had not yet reached the stage contemplated by the Sub-Contract.

The contemporaneous documentary evidence consistently reflects that implementation remained ongoing. The documentary record shows continuing discussions concerning outstanding functionality, deployment, testing, user requirements, system performance and operational issues. These matters were not merely historical disputes which had already been resolved but formed part of the continuing implementation process at the material time.

This conclusion is reinforced by the oral evidence. The Defendant's own evidence acknowledges that portions of the remaining work had yet to progress beyond the staging environment and remained subject to deployment and the agreed contractual acceptance process.

That evidence is inconsistent with the proposition that contractual completion had already been achieved. It may demonstrate that further development work had been undertaken, but it does not establish that the implementation process had reached contractual completion in accordance with the Sub-Contract.

The Court is likewise unable to accept the Defendant's submission that substantial development work, without more, constituted contractual completion. The Sub-Contract contemplated a structured implementation process involving development, deployment, testing and contractual acceptance. Those contractual stages formed part of the agreed mechanism by which the parties would determine whether the system had been completed in accordance with the contractual specifications.

During the trial, considerable attention was devoted to the processes described as PAT, UAT and FAT. Whatever terminology the parties employed during the implementation of the project, the essential point remains that the Sub-Contract envisaged an agreed process by which implementation would be verified before completion could properly be recognised.

The contractual terminology adopted by the parties must therefore be interpreted according to its ordinary meaning within the overall structure of the Sub-Contract, rather than by reference to either party's subsequent subjective understanding. In the case of Malaysia British Assurance Bhd v Syarikat Pembenaan Karun Sdn Bhd [2008] 6 MLJ 533 the learned Judge quoted the House of Lords’ decision in Reardon Smith Line Ltd v Yngvar Hansen-Tangen and Sanko Steamships Co [1976] 1 WLR 989. In that case Lord Wilberforce made the following observation on the correct approach to the construction of commercial contracts: “The contract is in the English language and (cl 40) is to be construed in accordance with English law. But it has been sought to introduce, as an aid to construction, a considerable amount of evidence as to Japanese usages and practice, some of which was in fact taken into account by the Court of Appeal. To decide how far this is legitimate one must make a distinction. When it comes to ascertaining whether particular words apply to a factual situation or, if one prefers, whether a factual situation comes within particular words, it is undoubtedly proper, and necessary, to take evidence as to the factual situation.”

The Defendant's own evidence acknowledged that certain procedures relied upon by it, including a purported mechanism of deemed acceptance, were not provided for under the Sub-Contract.

The Court is therefore unable to conclude that contractual acceptance could arise through a unilateral procedure which the parties themselves had not agreed. Whether the Defendant was contractually entitled to terminate cannot be determined by reading any individual contractual provision in isolation. The agreement must instead be construed as a coherent whole, with each contractual provision operating consistently with the agreed implementation framework. This approach is consistent with the reasoning of the Court of Appeal in Century Software (M) Sdn Bhd v Northport (M) Bhd & Another Appeal [2021] 3 MLJ. Outstanding Works

Considerable attention was devoted during the trial to the issue of the alleged outstanding works, including the Defendant's contention that only a relatively small portion of the contractual work remained incomplete.

In the Court's view, the dispute is not to be resolved by reference to percentages alone. Whether the outstanding work was quantified at 16.44% or otherwise does not, by itself, determine whether the Defendant had acquired a contractual right to terminate.

The more important consideration is the nature of the outstanding matters and whether they demonstrated that the Plaintiff had fundamentally failed to perform the Sub-Contract.

Having considered the evidence, the Court is unable to reach that conclusion. The evidence shows that implementation remained ongoing and that the outstanding matters continued to be addressed by the parties. While differences undoubtedly existed regarding responsibility for particular items, those differences did not, in the circumstances of this case, amount to a repudiatory breach by the Plaintiff. The 360 Concurrent Access Licence Issue

The Court now turns to one of the principal disputes between the parties concerning the contractual requirement relating to the provision of 360 concurrent access licences. Although the parties devoted considerable attention to the technical operation of the licensing arrangement, the issue is ultimately one of contractual construction rather than technical design.

The Defendant contends that its contractual obligation extended only to providing 360 named User IDs and that any requirement exceeding that number constituted an additional contractual obligation for which further payment was required. The Plaintiff, on the other hand, maintains that the Sub-Contract contemplated a system capable of supporting 360 concurrent users, meaning that while more than 360 users could be registered within the system, no more than 360 users would access the system simultaneously.

Having considered the contractual language as a whole, the Court is unable to accept the Defendant's interpretation. The contractual documents expressly employ the expression "360 concurrent access licences." The commercial significance of the word "concurrent" cannot be ignored or treated as surplusage. It reflects the parties' intention that the contractual limitation concerns the number of users who may access the system simultaneously, rather than the total number of registered users maintained within the database.

This interpretation is consistent not only with the ordinary meaning of the contractual language but also with the commercial purpose of the LIS. A hospital environment necessarily involves a substantial number of authorised personnel who may require access to the system at different times. It would therefore be commercially unrealistic to construe the Sub-Contract as limiting the total number of registered users to precisely 360 if the parties had expressly chosen to qualify that figure by the word "concurrent."

The Defendant's own evidence further supports this construction. During the trial, it was accepted that the contractual documents referred to 360 concurrent access licences. In the Court's judgment, that acknowledgement reinforces the conclusion that the contractual limitation concerns simultaneous access rather than the total number of registered users. The Court is therefore unable to accept an interpretation which effectively deprives the word "concurrent" of any meaningful contractual operation.

This conclusion also has an important bearing upon the Defendant's counterclaim relating to additional user licences. If, upon the proper construction of the Sub-Contract, the Plaintiff's interpretation of the licensing arrangement is correct, the Court is unable to conclude that the additional licence charges claimed by the Defendant arose as contractual entitlements in the manner contended.

The Court will return to this aspect when considering the Defendant's counterclaim.

The Court has considered the Defendant's reasons for termination both individually and collectively. The Court is satisfied that they do not establish that the Plaintiff committed a breach going to the root of the Sub-Contract or otherwise entitling the Defendant to terminate the agreement.

What the evidence reveals is a project that experienced technical and operational challenges but in which both parties continued to engage in implementation and problem-solving. The Court is unable to infer from that evidence that the Plaintiff had repudiated the Sub-Contract or that the Defendant had acquired a contractual right to terminate it.

Accordingly, the Court finds that the Defendant's Notice of Termination dated 23 March 2021 was not contractually justified and constituted a wrongful termination of the Sub-Contract. Source Code and Escrow Obligations

The parties also advanced competing claims concerning the ownership of the source code, the escrow arrangement and the Defendant's obligations following the termination of the Sub-Contract. Although these issues were argued at considerable length during the trial, the Court considers that they must likewise be determined primarily by reference to the contractual provisions agreed between the parties.

The Defendant contends that, as the developer of the LIS, it remained the owner of the source code and was entitled to withhold access to the source code following the termination of the Sub-Contract. It further relies upon intellectual property considerations in support of its refusal to make the source code available to the Plaintiff.

The Court is unable to accept that submission in the manner advanced by the Defendant. Whatever proprietary rights the Defendant may possess in relation to the development of the software, those rights must be exercised consistently with the contractual obligations which the Defendant voluntarily assumed under the Sub-Contract.

The issue before this Court is therefore not the abstract ownership of the source code, but the contractual consequences arising upon the termination of the parties' contractual relationship.

The Sub-Contract expressly provides for the handling of the source code upon termination and further envisages the establishment of an escrow arrangement. Those provisions serve an obvious commercial purpose. The LIS was developed for use in a major public hospital where continuity of operations was of critical importance.

The contractual arrangements concerning the source code and escrow mechanism were therefore intended to ensure that the Plaintiff would not be left without the practical means of maintaining or supporting the system in the event that the contractual relationship came to an end.

The Court further notes that the Defendant's own evidence acknowledges that the Sub-Contract expressly contemplated the delivery of the source code upon termination and that possession of the source code would enable the Plaintiff to continue maintaining the LIS. The Defendant likewise accepted that the escrow arrangement envisaged under the Sub-Contract had not in fact been implemented, although it attributed this to the project not having reached contractual completion.

These matters are significant because they demonstrate that the contractual framework itself anticipated the continued operability and maintenance of the system in the event that the contractual relationship came to an end.

In the Court's judgment, those matters materially undermine the Defendant's contention that it was contractually entitled to withhold the source code following its termination of the Sub-Contract. Once the contractual provisions governing the source code and escrow arrangements are properly construed, the Defendant cannot rely solely upon general assertions of intellectual property ownership whilst disregarding the contractual obligations which it had expressly undertaken.

This conclusion assumes added significance in light of the Court's earlier finding that the Defendant has failed to establish a lawful contractual basis for its termination of the Sub-Contract. A party who has not established that its termination was contractually justified cannot rely upon that termination to avoid performing contractual obligations which the contract itself imposes upon termination. To hold otherwise would permit a party to obtain an advantage from its own wrongful termination.

Accordingly, the Court is unable to accept the Defendant's submission that the source code and escrow provisions support either the validity of its termination or the relief sought in its counterclaim.

Properly construed, those contractual provisions are consistent with the Plaintiff's case that the parties had contemplated the continued availability of the source code to ensure the uninterrupted operation and maintenance of the LIS.

The resolution of this issue must again be found in the contractual arrangements agreed by the parties. The rights relating to the source code and the escrow arrangement are contractual in nature. They do not arise independently of the Sub-Contract but are governed by the rights and obligations expressly undertaken by the parties.

Having found that the Defendant was not contractually entitled to terminate the Sub-Contract, it necessarily follows that the Defendant cannot derive additional contractual rights by reason of that wrongful termination.

A party who has wrongfully repudiated a contract cannot rely upon that repudiation to obtain contractual benefits which would otherwise only become available upon a lawful exercise of the contractual provisions.

The Court is therefore unable to accept the Defendant's contention that the Notice of Termination, being wrongful, operated to entitle the Defendant to immediate access to or ownership of the source code beyond the rights conferred by the Sub-Contract.

This conclusion is consistent not only with the contractual language but also with the fundamental principle that contractual rights must be exercised in accordance with the contract itself. A party cannot enlarge its contractual entitlement through its own breach.

The Court has also considered the evidence relating to the escrow arrangement. The purpose of an escrow mechanism is to protect legitimate contractual interests in circumstances contemplated by the agreement. Whether the escrow is to be released depends upon the occurrence of the contractual events specified by the parties.

In the present case, those contractual conditions have not been established in the manner contended by the Defendant. The Defendant's reliance upon its own Notice of Termination cannot satisfy the contractual requirements where the termination itself has been found to be unjustified.

The Court therefore finds that the Defendant has failed to establish any contractual entitlement to invoke the escrow arrangement in the manner claimed.

For substantially the same reasons, the Court is not persuaded that the Defendant has established any entitlement to the declaratory relief sought concerning ownership of the intellectual property beyond what is expressly provided under the Sub-Contract.

The Court accordingly rejects the Defendant's contentions relating to the source code, the escrow arrangement and the ownership of the intellectual property insofar as those claims depend upon the validity of the Defendant's termination of the Sub-Contract.

The Court emphasises that this conclusion does not determine the parties' rights in the abstract. Rather, it determines those rights within the factual and contractual circumstances of the present case.

The Defendant's claim to the source code, the escrow arrangement and the related intellectual property rights was advanced on the footing that its Notice of Termination was lawfully issued. Having failed to establish that premise, the consequential relief sought cannot be sustained.

The Court therefore concludes that the Plaintiff is entitled to the declaratory and consequential relief relating to these issues in accordance with the contractual rights preserved under the Sub-Contract.

The Defendant's Counterclaim is founded substantially upon the same factual allegations relied upon to justify its Notice of Termination. It alleges that the Plaintiff failed to perform its contractual obligations and seeks declarations, damages and consequential relief arising from those alleged breaches.

The Court has carefully considered each head of the Counterclaim together with the evidence relied upon in support thereof.

However, the Counterclaim encounters the same fundamental difficulty that affects the Defendant's defence.

The Court has already found that the Defendant has failed to establish that the Plaintiff committed breaches of such a nature as to entitle the Defendant to terminate the Sub-Contract. The evidence does not support the conclusion that the Plaintiff fundamentally failed to perform its contractual obligations.

While the implementation of the project undoubtedly encountered technical issues and operational challenges, those matters do not, in themselves, establish contractual liability on the part of the Plaintiff.

The Court is not satisfied that the Defendant has discharged the burden of proving the breaches alleged in the Counterclaim on the balance of probabilities. Nor is the Court satisfied that the Defendant has established the loss and damage said to have resulted from those alleged breaches in the manner pleaded.

Many of the alleged losses claimed by the Defendant are premised upon the assumption that the Plaintiff was responsible for the failure of the project and that the Defendant lawfully terminated the Sub-Contract. In light of the Court's findings, those assumptions cannot be maintained.

It follows that the declaratory relief, damages and consequential relief sought in the Counterclaim cannot be granted.

Accordingly, the Defendant's Counterclaim is dismissed in its entirety. I.

Since the Defendant asserted that it was contractually entitled to terminate the Sub-Contract, the burden rested upon the Defendant to establish the factual and contractual basis for that entitlement. (See Sections 101–103 Evidence Act 1950)

Having carefully considered all the oral and documentary evidence, the submissions of learned counsel and the applicable contractual principles, the Court concludes that the Defendant has failed to establish that it was contractually entitled to terminate the Sub-Contract on 23 March 2021.

The Court is satisfied that the matters relied upon by the Defendant, whether considered individually or collectively, did not amount to breaches which entitled the Defendant to bring the contractual relationship to an end. The evidence demonstrates that the parties remained engaged in an ongoing implementation process and continued to address the technical and operational issues arising from the project. Those matters did not, in the circumstances of this case, constitute a repudiatory breach by the Plaintiff.

The Defendant's Notice of Termination therefore amounted to a wrongful termination of the Sub-Contract. The Plaintiff is entitled to the relief granted by the Court.

The Defendant's claims relating to the source code, the escrow arrangement and the intellectual property cannot succeed, as those claims were advanced on the premise that the Defendant had lawfully terminated the Sub-Contract. That premise has not been established.

For the same reasons, the Defendant has failed to prove its Counterclaim on the balance of probabilities.

Accordingly, the Court makes the following orders:

(a) A declaration is granted that the Defendant's purported termination of the Sub-Contract dated 23 March 2021 was unlawful, invalid and of no legal effect.

(b) A declaration is granted that the Defendant committed breaches of its contractual obligations under the Sub-Contract.

(c) The Defendant's Counterclaim is dismissed.

(d) The Plaintiff is entitled to recover such damages as are proved to have been caused by the Defendant's unlawful termination of and breaches of the Sub-Contract, with the assessment of such damages, together with all consequential issues arising therefrom, to be determined by the Court unless otherwise agreed between the parties.

(e) Costs of RM30,000 to the Plaintiff, subject to allocatur. Dated: 28th July 2026 …………………………………………….. (YA PUAN MAHAZAN BINTI MAT TAIB) JUDGE HIGH COURT OF MALAYA KUALA LUMPUR Counsel for The Plaintiff : Nigel William Kraal & Cindy Goh Joo Seong Messrs. Cheang & Ariff (Kuala Lumpur) Advocates & Solicitors Counsel for The Defendant : Mahendra Mahason & Haritarrishini Kejendran Messrs. Sree Harry & Co. (Petaling Jaya) Advocates & Solicitors