Askey Media Technology Sdn Bhd v Savelite Engineering Sdn Bhd (P-02(NCvC)(W)-192-02/2024)

We shall refer to the parties as they were in the High Court.

By way of a contract consisting of several documents (Contract), the plaintiff company (Plaintiff) appointed the defendant company (Defendant) to construct a two-storey office and single-storey factory (Factory) on Plots 73B and 73C (Lots 12146 and 12145), Lintang Bayan Lepas 3, Bayan Lepas Industrial Area, Barat Daya District, Mukim 12, Bayan Lepas, Penang at a price of RM8,600,000.00 (Price).

"Form of Agreement" dated 29.4.2016 (FA) had been signed by both the Plaintiff and Defendant. Clause 2 FA stated that the following documents "shall be deemed to form and be read as part" of the Contract-

The Contract consisted of the following documents:

FA - clause 2(a) FA;

"Letter of Award" dated 7.3.2016 (LA)- clause 2(b) FA;

"Appendix A" - clause 2(d) FA;

"Scope of Works" (SW)- clause 2(e) FA; and

"General Conditions of Contract" (GCC) - clause 2(i) FA;

according to clause 4 LA, among others-

the Factory "shall be completed" within 24 weeks and the completion date of the Factory "shall' be 4.9.2016 (Completion Date);

"Liquidated and Ascertained Damages" (LAD) for the delay in the completion of the Factory "shall be fixed" at RM3,300.00 per day [Rate (LAD)]; and

"Due to the urgency of this project", the Defendant was "advised to complete [the Factory] as soon as possible";

Appendix A stated as follows, among others-

according to clause 1.0, "Time For Completion" was 24 weeks;

clause 1.2 stated the Completion Date;

clause 6 provided for the Rate (LAD); and

"Superintending Officer" (SO) was Messrs Perunding AG, Civil and Structural Consulting Engineers;

according to clause 14 SW- "The time for the completion of the works as stated in the Appendix will be strictly enforced and if extra plants, transport, personnel, overtime etc. are required to complete the works within the time stated, all expenses will be borne by the contractor [Defendant]. ... no extension of time [EOT] will be allowed unless the Engineer [SO] gives special consideration under unforeseen circumstances." (emphasis added); and

clauses 30 and 31 GCC provide as follows- "30. If the [Defendant] fails to complete the work by the date in the Form of Tender or within any extended time under Clause 31 hereof and the SD [should be SO] certifies in writing that in his opinion the same ought reasonably so to have been completed, the [Defendant] shall pay or allow to the [Plaintiff] a sum calculated at the rate stated in the Form of Tender as [LAD] for the period prorate during which the said works shall so remain or have remained incomplete and the [SO] may deduct such damages from any moneys [sic] due to the [Defendant].

If, in the opinion of the [SO], the works be delayed by force majeure or by reason of any exceptionally inclement weather or by reason of directions given by the [SO] consequential upon dispute with neighbouring owners or by reason of [SO's] instructions given in pursuance of Clause 1 hereof or in consequence of the [Defendant] not having received in due time necessary instructions from the [SO] for which he shall specifically applied in writing, or by reason of civil commotion, local combination of workmen, strike or lock-out affecting any of the trades employed upon the works or by the work of nominated sub-contractors or by the works of other Contractors or tradesmen engaged by the [Plaintiff] which are not referred to in the Specification, then in such case the [SO] shall make a fair and reasonable [EOT] for completion of the works. Upon the happening of a strike or lock-out the [Defendant] shall immediately give notice thereof in writing to the [SO], but [the Defendant] shall nevertheless use constantly [the Defendant's] best endeavors to prevent delay and shall do all that may reasonably be required to the satisfaction of the [SO] to proceed with the Works." (emphasis added).

The Plaintiff had entered into the following agreements with Ceva Logistics (M) Sdn. Bhd. (Tenant):

an agreement dated 14.12.2015 and an Addendum dated 8.6.2016; and

a tenancy agreement dated 7.10.2017 - for the Plaintiff to rent the Factory to the Tenant [Tenancy (Factory)]. According to the Tenancy (Factory), the Plaintiff was contractually obliged to deliver vacant possession of the Factory to the Tenant on 13.3.2017 [Date (Plaintiff's Scheduled Delivery of Factory to Tenant)].

The SO issued to the Defendant a "Certificate of Non-Completion" of the Factory dated 5.9.2016 (CNC). According to the CNC, among others-

the Factory was not completed on the Completion Date (4.9.2016); and

the Defendant would incur LAD at the Rate (LAD) until the date of "Practical Completion" of the Factory.

On 15.9.2016, the Defendant made an application to the SO for an EOT of the Completion Date (Defendant's $ 1^{st} $ EOT Application).

By way of a letter dated 4.10.2016 from the SO to the Defendant, the SO rejected the Defendant's $ 1^{\mathrm{st}} $ EOT Application [SO's Rejection (Defendant's $ 1^{\mathrm{st}} $ EOT Application)].

The SO sent a letter dated 12.2.2017 to the Defendant [SO's Letter (12.2.2017)]. Paragraph 2 of the SO's Letter (12.2.2017) stated as follows, among others:

the Defendant's work progress was "too slow";

the CNC had been issued; and

the Rate (LAD) had been fixed.

By way of a letter dated 8.6.2017, the SO reminded the Defendant of the Completion Date and the Rate (LAD) [SO's Letter (8.6.2017)].

The Defendant made a second application dated 17.7.2017 to the SO for an extension of the Completion Date (Defendant's $ 2^{n d} $ EOT Application).

On 15.9.2017, the SO issued a "Certificate of Practical Completion" of the Factory (CPC).

The SO sent two letters dated 13.1.2020 to the Plaintiff [SO's 2 Letters (13.1.2020)] which stated as follows, among others:

the Defendant had failed to complete the construction of the Factory on the Completion Date (4.9.2016);

the CPC was only issued on 15.9.2017;

there was a total delay of 376 days (from 5.9.2016 to 15.9.2017) in the Defendant's completion of the construction of the Factory (Defendant's Delay);

with regard to the Defendant's Delay, the SO only granted an EOT for 143 days [SO's EOT (Defendant's Delay)]. Hence, LAD was only imposed on the Defendant with regard to 233 days (376 days - 143 days); and

the Defendant was liable to pay a total sum of RM768,900.00 to the Plaintiff as LAD (233 days x RM3,300.00). The SO's 2 Letters (13.1.2020) had been copied to the Defendant.

Due to the Defendant's Delay, the Plaintiff could not deliver vacant possession of the Factory to the Tenant on 13.3.2017 [Date (Plaintiff's Scheduled Delivery of Factory to Tenant)]. Hence, the Plaintiff alleged that in addition to the LAD, the Plaintiff had also suffered the following loss:

a loss of profit in a sum of RM1,136,180.00 [Plaintiff's Loss of Profit (Tenancy)] suffered by the Plaintiff due to the Plaintiff's delay in handing over vacant possession of the Factory to the Tenant [Plaintiff's Delay (Delivery of Factory to Tenant)]; and

an amount of RM523,096.50 which the Plaintiff had to pay to the Tenant due to the Plaintiff's Delay (Delivery of Factory to Tenant) [Plaintiff's Indemnity (Tenant)]. B. Proceedings in the High Court

On 25.2.2019, the Plaintiff filed a suit against the Defendant in the High Court (This Suit) and claimed for the following relief, among others:

a sum of RM1,240,800.00 as LAD for the Defendant's Delay of 376 days (from 5.9.2016 to 15.9.2017) [without taking into account the SO's EOT (Defendant's Delay)]. As an alternative to this claim, if the SO's EOT (Defendant's Delay) was considered, the Plaintiff prayed for LAD in an amount of RM768,900.00 (233 days x RM3,300.00);

the Plaintiff's Loss of Profit (Tenancy); and

the Plaintiff's Indemnity (Tenant) (Original Action).

Interestingly, after the filing of This Suit by the Plaintiff, the Defendant made a third and fourth EOT application to the SO on 1.11.2019 (Defendant's $ 3^{rd} $ EOT Application) and 15.11.2019 (Defendant's $ 4^{th} $ EOT Application).

In This Suit, the Defendant filed a "Defence and Counterclaim" on 26.3.2019 which -

resisted the Original Action; and

counterclaimed for an outstanding sum of RM721,807.00 for works which had been performed by the Defendant to construct the Factory [Payment (Defendant's Works)] but had not been paid by the Plaintiff (Counterclaim).

The Counterclaim had been discontinued by the Defendant before the commencement of the trial in the High Court because the Defendant had recovered the Payment (Defendant's Works) pursuant to the Defendant's adjudication claim under the Construction Industry Payment and Adjudication Act 2012.

After a trial, the learned High Court Judge allowed partly the Original Action as follows:

after taking into account the SO's EOT (Defendant's Delay)] the Plaintiff's alternative claim for RM768,900.00 as LAD [High Court's Award (LAD)] , was allowed;

the High Court dismissed the claims for the Plaintiff's Loss of Profit (Tenancy) and Plaintiff's Indemnity (Tenant);

the Defendant shall pay to the Plaintiff interest at the rate of 5% per annum (pa) on the High Court's Award (LAD) from 4.9.2016 until full payment of the High Court's Award (LAD) [High Court's Award (Interest)]; and

the Defendant shall pay an amount of RM10,000.00 as costs to the Plaintiff (subject to allocatur fee) (High Court's Decision). C. Two appeals to the Court of Appeal (2 Appeals)

The following 2 Appeals had been filed against the High Court's Decision:

Civil Appeal no. P-02(NCVC)(W)-68-01/2024 had been lodged by the Defendant against the High Court's Decision (Defendant's Appeal). In the Defendant's Appeal, the Defendant's learned counsel contended that the Defendant was not liable to pay any LAD to the Plaintiff; and

the Plaintiff had filed Civil Appeal no. P-02(NCVC)(W)-192- 02/2024 against the High Court's Decision (Plaintiff's Appeal). By way of the Plaintiff's Appeal, the Plaintiff's learned counsel sought for an order for the Defendant to pay the Plaintiff's Loss of Profit (Tenancy) and Plaintiff's Indemnity (Tenant).

We heard together these 2 Appeals which emanated from This Suit in the High Court. D. Submission of parties

In support of the Defendant's Appeal and to resist the Plaintiff's appeal, the Defendant's learned counsel had advanced the following contentions, among others:

time was not the essence of the Contract because the Contract did not contain a provision for an EOT. In this regard, reliance was placed on the following two judgment of Lim Chong Fong J (as he then was) in the High Court-

RC Asia Engineering Sdn Bhd v Lion Pacific Sdn Bhd [2021] MLJU 1796; and

Infraprima Construction Sdn Bhd v Budaya Restu Sdn Bhd [2021] MLJU 1255;

the Plaintiff's acts had prevented the Defendant from completing the construction of the Factory on the Completion Date. Hence, the Plaintiff's conduct was the cause of the Defendant's Delay in this case and the Defendant was therefore not liable for any LAD to the Plaintiff;

the Plaintiff was estopped from claiming LAD against the Defendant due to, among others-

the issuance of the CPC;

the Plaintiff's acceptance of certain progress claims (PCs) by the Defendant by way of payment of those PCs; and

the SO did not decide the Defendant's $ 2^{n d} $ EOT Application; and

the Plaintiff did not issue a notice to claim LAD from the Defendant as required by s 56(3) of the Contracts Act 1950 (CA). Consequently, the Plaintiff could not claim any LAD from the Defendant in this case.

The following submission, among others, had been made by learned counsel for the Plaintiff:

by virtue of clause 14 SW, clauses 30 and 31 GCC, time was the essence of the Contract;

the Plaintiff did not prevent the Defendant from completing the building of the Factory on the Completion Date;

s 56(3) CA does not apply when the Contract had provided for LAD; and

the Plaintiff had a right to be indemnified by the Defendant with regard to the Plaintiff's Loss of Profit (Tenancy) and Plaintiff's Indemnity (Tenant). E. Issues

The following questions are determined in these 2 Appeals:

was time the essence of the Contract? In this regard, is there a rule of law that if an agreement is silent on EOT, time shall not be the essence of the agreement?;

whether the doctrine of equitable estoppel applied in this case;

what was/were the cause(s) for the Defendant's Delay?; and

could the Plaintiff claim LAD from the Defendant? This issue discusses the effect of ss 56, 74(1) and 75 CA in this case. F. Was time the essence of the Contract?

The Contract was a commercial agreement and should be interpreted by the court in a manner which makes business common sense [Business Common Sense Construction (Commercial Contract)]. The application of the Business Common Sense Construction (Commercial Contract) has been applied by Zainun Ali FCJ in the Federal Court case of SPM Membrane Switch Sdn Bhd v Kerajaan Negeri Selangor [2016] 1 MLJ 464, at [78], as follows: [78] Thus the nub of this appeal is, when one has to choose between two competing interpretations, the one which makes more commercial sense should be preferred if the natural meaning of the words is unclear. It is noteworthy that the same approach was taken by Lord Hodge (in the majority decision of Arnold v Britton), where His Lordship accepted the unitary process of construction in Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900 para 21 that: '... if there are two possible constructions, the Court is entitled to prefer the construction which is consistent with business common sense and to reject the other." (emphasis added).

Applying the Business Common Sense Construction (Commercial Contract), we have no hesitation to affirm the High Court's Decision that time was indeed the essence of the Contract. Our reasons are as follows:

the following provisions of the Contract clearly support the interpretation that time for the Defendant's performance of the Contract was not at large-

clause 4 LA;

clauses 1.0, 1.2 and 6 Appendix A;

clause 14 SW; and

clauses 30 and 31 GCC [Contractual Provisions (Time of the Essence of the Contract)]; and

if we have accepted the submission by the Defendant's learned counsel that time was not the essence of the Contract, this would have rendered nugatory all the Contractual Provisions (Time of the Essence of the Contract).

All the cases cited by the Defendant's learned counsel can be easily distinguished from this case due to the presence of the Contractual Provisions (Time of the Essence of the Contract).

With regard to the contention by the Defendant's learned counsel that the absence of a provision in the Contract to grant an EOT for the Defendant to complete the construction of the Factory beyond the Completion Date (Express EOT Contractual Provision), in itself, meant that time was not of the essence of the Contract, we are not able to accede to such submission. Our reasons are as follows:

clause 14 SW and clause 31 GCC had expressly provided for the SO's discretion to grant an EOT for the Defendant to complete the construction of the Factory beyond the Completion Date. In other words, contrary to the contention of the Defendant's learned counsel, there are Express EOT Contractual Provisions in this case;

whether time is of the essence of an agreement is a question of interpretation of the agreement so as to ascertain the true intention of the parties. There is no rule of law that the absence of an Express EOT Contractual Provision, in itself, means that time is not of the essence of the agreement; and

even if there is no Express EOT Contractual Provision, the court may imply an EOT contractual provision if two concurrent tests for the implication of an implied EOT contractual provision are fulfilled. We refer to the following judgment of the High Court in Era Kemuncak Jaya (M) Sdn Bhd v Tenaga Switchgear Sdn Bhd [2022] 1 MLRH 208, at [56] - [56] I am of the view that the Defendant has an implied contractual right to grant an EOT to the Plaintiff under the Agreement (Defendant's Implied Right). This decision is premised on the following reasons:

according to the judgment of Peh Swee Chin FCJ in the Federal Court case of Sababumi (Sandakan) Sdn Bhd v Datuk Yap Pak Leong [1998] 3 MLJ 151, at 169-170, the court can imply a contractual term if the following two tests (2 Tests) are fulfilled cumulatively-

if an "officious bystander" is asked regarding the Defendant's Implied Right, what would be the answer of the officious bystander (Officious Bystander Test)?; and

is it necessary to give business efficacy to the Agreement for the court to imply the Defendant's Implied Right in the Agreement (Business Efficacy Test)? The 2 Tests have been affirmed by the Federal Court in a judgment delivered by Zulkefli Ahmad Makinudin PCA in See Leong Chye @ Sze Leong Chye & Anor v United Overseas Bank Bhd & another appeal [2019] 1 MLJ 25, at [74]-[76]; and

the cumulative application of the 2 Tests is as follows.

the Officious Bystander Test is fulfilled because if an officious bystander is asked whether the Defendant has an implied contractual right grant an EOT for the Plaintiff to complete the works in the Project, the officious bystander would have unhesitatingly answered "of course"; and

the Business Efficacy Test is satisfied as it is necessary to give business efficacy to the Agreement for the Defendant's Implied Right to be implied by the court in the Agreement." (emphasis added).

We have not overlooked the two High Court judgments in RC Asia Engineering and Infraprima Construction. In these two cases-

in RC Asia Engineering, at [45]; and

in Infraprima Construction, at [72] to [74] - there were express findings of fact by the trial High Court that the main contractors had prevented the sub-contractors from completing their construction work within the stipulated time periods. Accordingly-

the time for the performance of the construction contract was at large in RC Asia Engineering and Infraprima Construction; and

the dicta by the court in in RC Asia Engineering and Infraprima Construction regarding the absence of an Express EOT Contractual Provision, were merely obiter. G. Application of the equitable estoppel principle

The doctrine of equitable estoppel has a wide application - please refer to the Federal Court's judgment delivered by Gopal Sri Ram JCA (as he then was) in the Federal Court in Boustead Trading (1985) Sdn Bhd v Arab-Malaysian Merchant Bank Bhd [1995] 4 CLJ 283, at 294. In the Federal Court case of Usima Sdn Bhd v Lee Hor Fong (trading under the name and style of Pembinaan LH Fong) [2017] 5 MLJ 273, at [50], Balia Yusof FCJ had applied the equitable estoppel doctrine in a dispute regarding a construction contract.

A party's conduct is relevant under s 8(2) of the Evidence Act 1950 (EA). Reproduced below is s 8(2) EA: "The conduct of any party, or of any agent to any party, to any suit or proceeding in reference to that suit or proceeding, or in reference to any fact in issue therein or relevant thereto, and the conduct of any person an offence against whom is the subject of any proceeding, is relevant if the conduct influences or is influenced by any fact in issue or relevant fact, and whether it was previous or subsequent thereto." (emphasis added).

The Defendant was estopped from denying that time was not of the essence of the Contract due to the Defendant's own conduct [relevant under s 8(2) EA] as follows:

the Defendant did not dispute at all the accuracy of the CNC. Nor did the Defendant make any objection regarding the issuance of the CNC by the SO;

the Defendant made four EOT applications to the SO to extend time for the Defendant to complete the construction of the Factory. In fact, the Defendant's $ 3^{rd} $ EOT Application and Defendant's $ 4^{th} $ EOT Application were made after the filing of This Suit against the Defendant; and

the Counterclaim only prayed for Payment (Defendant's Works) and did not apply for declarations to invalidate-

the CNC;

the SO's Rejection (Defendant's $ 1^{\mathrm{st}} $ EOT Application); and/or

the SO's 2 Letters (13.1.2020) which granted the SO's EOT (Defendant's Delay) and the imposition of the LAD. In any event, the Counterclaim was subsequently withdrawn by the Defendant.

We are of the view that it is neither just nor equitable to invoke the equitable estoppel doctrine against the Plaintiff in this case because the main reason for the Defendant's Delay was due to the Defendant itself - please refer to paragraph 33 below. H. What was/were the cause(s) for the Defendant's Delay?

Contrary to the submission of the Defendant's learned counsel, the following contemporaneous documentary evidence proved on a balance of probabilities that the Defendant's Delay was due mainly to the Defendant's slow progress in completing the building of the Factory:

the CNC;

the SO's Rejection (Defendant's $ 1^{\mathrm{st}} $ EOT Application);

the SO's Letter (12.2.2017);

the SO's Letter (8.6.2017); and/or

the SO's 2 Letters (13.1.2020).

In this case, the SO's EOT (Defendant's Delay) gave an EOT of 143 days for which the Plaintiff could not impose LAD on the Defendant. No evidence had been adduced by the Plaintiff to invalidate the SO's EOT (Defendant's Delay). Hence, the learned High Court Judge's correct reliance on the SO's EOT (Defendant's Delay). In any event, we are not satisfied that the High Court's acceptance of the SO's EOT (Defendant's Delay) constituted a plain error of fact as decided by Zabariah Yusof FCJ in the Federal Court's case of Ng Hoo Kui & Anor v Wendy Tan Lee Peng (administratrix for the estate of Tan Ewe Kwang, deceased) & Ors [2020] 12 MLJ 67, at [33] and [34]. I. Effect of ss 56, 74(1) and 75 CA

Sections 56, 74 and 75 CA provide as follows: "s 56. Effect of failure to perform at fixed time, in contract in which time is essential.

When a party to a contract promises to do a certain thing at or before a specified time, or certain things at or before specified times, and fails to do any such thing at or before the specified time, the contract, or so much of it as has not been performed, becomes voidable at the option of the promisee, if the intention of the parties was that time should be of the essence of the contract. Effect of failure when time is not essential

If it was not the intention of the parties that time should be of the essence of the contract, the contract does not become voidable by the failure to do the thing at or before the specified time; but the promisee is entitled to compensation from the promisor for any loss occasioned to him by the failure. Effect of acceptance of performance at time other than that agreed upon

If, in case of a contract voidable on account of the promisor's failure to perform his promise at the time agreed, the promisee accepts performance of the promise at any time other than that agreed, the promisee cannot claim compensation for any loss occasioned by the non-performance of the promise at the time agreed, unless, at the time of the acceptance, he gives notice to the promisor of his intention to do so. s 74. Compensation for loss or damage caused by breach of contract

When a contract has been broken, the party who suffers by the breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from the breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it.

Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach. s 75. Compensation for breach of contract where penalty stipulated for When a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, or if the contract contains any other stipulation by way of penalty, the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or, as the case may be, the penalty stipulated for." (emphasis added).

Firstly, s 56(2) CA does not apply in this case because as explained in the above paragraph 25, premised on the Contractual Provisions (Time of the Essence of the Contract), time was of the essence of the Contract. Hence, there was no room for the Defendant to rely on s 56(2) CA in this case.

Secondly, s 56(1) CA initially applied in this case, namely, once the Defendant failed to complete the construction of the Factory on the Completion Date (4.9.2016) [Defendant's Breach (Contract)], the Contract was voidable at the option of the Plaintiff. However, the Plaintiff had affirmed the voidable Contract by allowing the Defendant to complete the building of the Factory. In other words, the Plaintiff could not rescind the Contract pursuant to s 56(1) CA based on the Defendant's Breach (Contract).

Sections 56(3) and 74(1) CA do not apply in this case due to the following reasons:

clause 4 LA, clause 6 Appendix A and clause 30 GCC have provided for LAD to be paid by the Defendant to the Plaintiff (Express LAD Contractual Provisions). The Express LAD Contractual Provisions attract the application of s 75 CA (When a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach);

in accordance with the maxim of statutory interpretation, generalia specialibus non derogant, s 75 CA is a specific provision and should be applied in preference to the general provisions of ss 56(3) and 74(1) CA. It is to be noted that in the Court of Appeal case of Luggage Distributors (M) Sdn Bhd v Tan Hor Teng & Anor [1995] 1 MLJ 719, at 758 to 759, Gopal Sri Ram JCA (as he then was) applied the maxim generalia specialibus non derogant to give effect to a specific provision of the National Land Code (NLC) in preference to a general provision in the NLC; and

in the High Court case of Tunjang Wawasan Sdn Bhd v TNB Generation Sdn Bhd [2007] 1 LNS 337, at p. 8, Kang Hwee Ghee J (as he then was) decided as follows- "Section 56(3) [CA] requiring the defendant to give notice of its intention to claim damages after it exercises its option to treat the contract as still subsisting, applies only such cases where the parties have not made provisions in the contract for liquidated ascertained damages." (emphasis added).

With regard to the application of s 75 CA, Richard Malanjum CJ (Sabah & Sarawak) (as he then was) in the Federal Court case of Cubic Electronics Sdn Bhd (in liquidation) v Mars Telecommunications Sdn Bhd [2019] 2 CLJ 723, at [74], had delivered the following judgment: [74] In summary and for convenience, the principles that may be distilled from hereinabove are these:

(iv) In determining what amounts to "reasonable compensation" under s 75 [CA], the concepts of "legitimate interest" and "proportionality" as enunciated in Cavendish (supra) are relevant.

A sum payable on breach of contract will be held to be unreasonable compensation if it is extravagant and unconscionable in amount in comparison with the highest conceivable loss which could possibly flow from the breach. In the absence of proper justification, there should not be a significant difference between the level of damages spelt out in the contract and the level of loss or damage which is likely to be suffered by the innocent party.

(vi) s 75 [CA] allows reasonable compensation to be awarded by the court irrespective of whether actual loss or damage is proven. Thus, proof of actual loss is not the sole conclusive determinant of reasonable compensation although evidence of that may be a useful starting point.

(vii) The initial onus lies on the party seeking to enforce a damages clause under s 75 [CA] to adduce evidence that firstly, there was a breach of contract and that secondly, the contract contains a clause specifying a sum to be paid upon breach. Once these two elements have been established, the innocent party is entitled to receive a sum not exceeding the amount stipulated in the contract irrespective of whether actual damage or loss is proven subject always to the defaulting party proving the unreasonableness of the damages clause including the sum stated therein, if any.

(viii) If there is a dispute as to what constitutes reasonable compensation, the burden of proof falls on the defaulting party to show that the damages clause including the sum stated therein is unreasonable." (emphasis added).

Based on s 75 CA (as interpreted in Cubic Electronics), we are of the following view:

the Plaintiff had proven the following two matters-

the Defendant's Breach (Contract) - please refer to the above paragraph 37; and

there were Express LAD Contractual Provisions;

upon proof of the two matters as stated in the above subparagraph (1), the Plaintiff was entitled to receive LAD not exceeding the amount stipulated in the Express LAD Contractual Provisions, irrespective of whether actual damage or loss is proven by the Plaintiff, subject always to the Defendant proving -

the unreasonableness of the Express LAD Contractual Provisions; or

the amount of LAD did not constitute "reasonable compensation" in this case;

the Defendant had the evidential burden to prove that the sum of RM768,900.00 [after taking into account the SO's EOT (Defendant's Delay)] awarded by the High Court [High Court's Award (LAD)], was unreasonable;

in deciding what amounts to "reasonable compensation" for the Plaintiff arising from the Defendant's Breach (Contract), the court has to consider the two concepts of "legitimate interest" and "proportionality";

the Defendant had failed to discharge the evidential burden to satisfy the court that the High Court's Award (LAD) did not constitute reasonable compensation. This decision is supported by the following evidence and reasons-

the Plaintiff had a "legitimate interest" to claim LAD from the Defendant (Plaintiff's Legitimate Interest) because the Plaintiff had an obligation to rent the Factory to the Tenant with effect from 13.3.2017 [Date (Plaintiff's Scheduled Delivery of Factory to Tenant)]. As a direct result of the Defendant's Breach (Contract), the Plaintiff had incurred the following two losses-

the Plaintiff's Loss of Profit (Tenancy); and

(ii) the Plaintiff's Indemnity (Tenant);

the Price was RM8,600,000.00. The High Court's Award (LAD) only constituted about 8.95% of the Price. It is therefore clear that the High Court's Award (LAD) was not grossly disproportionate to the Price;

in view of the Plaintiff's Legitimate Interest and the proportionality of the High Court's Award (LAD) o the Price, the High Court's Award (LAD) constituted reasonable compensation for the Plaintiff in this case. This is because the High Court's Award (LAD) was neither extravagant nor unconscionable in comparison with the actual total loss suffered by the Plaintiff in this case as a result of the Defendant's Breach (Contract), ie., the Plaintiff's Loss of Profit (Tenancy) and Plaintiff's Indemnity (Tenant); and

the High Court's Award (LAD) took into account the SO's EOT (Defendant's Delay) (which gave an EOT of 143 days for which the Plaintiff could not claim LAD from the Defendant); and

once s 75 CA applied in this case, the Plaintiff could only claim for a maximum sum in the form of the High Court's Award (LAD), namely, an amount "not exceeding the amount so named" in the Express LAD Contractual Provisions. In other words, the Plaintiff could only claim for the High Court's Award (LAD) and not-

the Plaintiff's Loss of Profit (Tenancy); and

the Plaintiff's Indemnity (Tenant). We are not persuaded that in the light of the Express LAD Contractual Provisions and s 75 CA, the Plaintiff had a right to be indemnified by the Defendant with regard to the Plaintiff's Loss of Profit (Tenancy) and Plaintiff's Indemnity (Tenant). Hence, we are constrained to dismiss the Plaintiff's Appeal.

Section 11 of Civil Law Act 1956 (CLA) and O 42 r 12 of the Rules of Court 2012 (RC) provide as follows: "s 11 CLA Power of Courts to award interest on debts and damages In any proceedings tried in any Court for the recovery of any debt or damages, the Court may, if it thinks fit, order that there shall be included in the sum for which judgment is given interest as such rate as it thinks fit on the whole or any part of the debt or damages for the whole or any part of the period between the date when the cause of action arose and the date of the judgment: Provided that nothing in this section -

shall authorize the giving of interest upon interest;

shall apply in relation to any debt upon which interest is payable as of right whether by virtue of any agreement or otherwise; or

shall affect the damages recoverable for the dishonour of a bill of exchange. O 42 r 12 RC Interest on judgment debts Subject to rule 12A, except when it has been otherwise agreed between the parties, every judgment debt shall carry interest at such rate as the Chief Justice may from time to time determine or at such other rate not exceeding the rate aforesaid as the Court determines, such interest to be calculated from the date of judgment until the judgment is satisfied." (emphasis added).

The court has a discretion pursuant to s 11 CLA to award prejudgment interest on any judgment amount "at such rate as it thinks fit on the whole or any part of the ... damages for the whole or any part of the period ... between the date when the cause of action arose and the date of judgment" - please refer to the judgment by Raja Azlan Shah FJ (as His Majesty then was) in the Federal Court case of Lim Kar Bee v Abdul Latif bin Ismail [1978] 1 MLJ 109, at 120.

O 42 r 12 RC empowers the court to grant post-judgment interest.

As correctly submitted by the Defendant's learned counsel, the High Court could only impose 5% interest pa on the High Court's Award (LAD) with effect from 26.1.2017 [after the expiry of 143 days from

9.2016 (Completion Date)] because the learned High Court Judge had rightly taken into account the SO's EOT (Defendant's Delay)]. Consequently, by virtue of s 11 CLA and O 42 r 12 RC, we vary the High Court's Decision as follows - the Defendant shall pay to the Plaintiff interest at the rate of 5% pa on High Court's Award (LAD) with effect from 26.1.2017 until full payment of the High Court's Award (LAD).

We exercise our discretion under s 70 of the Courts of Judicature Act 1964 read with rr 54 and 96 of the Rules of the Court of Appeal 1994 to order no costs for these 2 Appeals. This is because both the 2 Appeals are bereft of merit. L. Outcome of the 2 Appeals

In view of the above evidence and reasons-

both the Defendant's Appeal and Plaintiff's Appeal are dismissed;

the High Court's Decision is varied as stated in the above paragraph 44; and

there shall be no order as to costs for these 2 Appeals - please refer to the above paragraph 45. DATE: 22 JULY 2025 WONG KIAN KHEONG Judge Court of Appeal For Appeal No: P-02(NCvC)(W)-68-01/2024 Counsel for the Appellant:Ms. K. Sheela T. Vinayaka Das (Messrs Sheela Vinayaka & Co) Counsel for the Respondent:Mr. Cheong Yew Sheng & Mr. Nicholas Lim Biing Tsong (Messrs Wong & Loh) For Appeal No: P-02(NCvC)(W)-192-02/2024 Counsel for the Respondent:Ms. K. Sheela T. Vinayaka Das (Messrs Sheela Vinayaka & Co)