Century Software (Malaysia) Sdn Bhd v Northport (Malaysia) Bhd (W-02(NCVC)(W)-1110-05/2018)

(a) Clauses 23 and 22 of the Agreement [19] Para 2 of the notice of termination issued by the Plaintiff states "We are instructed by our client to hereby give you 7 days' notice that the entire Agreement is terminated pursuant to Clause 23.0 of the Agreement." [20] Learned Counsel for the Plaintiff submitted that the Plaintiff terminated the Agreement pursuant to clause 23.0 of the Agreement which confers upon the Plaintiff a contractual right to terminate the Agreement in whole or in part at any time without assigning any reason by giving notice 7 days in writing. Clause 23 reads as follows: "23.0 TERMINATION NORTHPORT reserves the right to terminate this Agreement in whole or in part at any time without assigning any reason by giving notice seven (7) days in writing. NORTHPORT shall not be liable for any loss or damage suffered by the Contractor arising from the termination of this Agreement under this Clause." [21] In this regard, the learned Judge held that-

(a) "the Plaintiff's right to terminate unilaterally is an arbitrary right which is repugnant to all the other clauses in particular clause 22 since there is an 8 months period for implementation of the System and thereafter 36 months warranty period from Go-live which was on 1.3.2015 and a further 2 years of support";

(b) "the Plaintiff had failed to observe and comply with clause 22 as agreed upon between the parties";

(c) "Clause 22 provides for a 2 stage notice procedure for termination. At the first stage, the Plaintiff has to send a notice specifying the breaches and provide the Defendant a 7 days period to rectify the same. Thereafter the Plaintiff may terminate by notice if these breaches continue past that 7 days period"; and

(d) "On the facts of this case this 2 stage agreed mode for termination was not complied with by the Plaintiff. The preliminary notice specifying the breach and providing a 7 days period for rectification was never issued. The Plaintiff's letter of 30.3.2016 which preceded the termination letter merely highlighted the alleged breaches and that Flexidata had been reactivated". (paras 64, 68, 66 and 67 respectively of the Grounds of Judgment) [22] Learned Counsel for the Plaintiff argued that the learned Judge erred in her findings in para 21 (a) to (d) above for the following reasons:

(a) full effect must be given to clause 23 of the Agreement as the terms of the clause are clear and unambiguous and it is valid and binding as it has been agreed by both parties with equal bargaining powers after a tender exercise and reference is made to the acceptance page. The Court of Appeal cases of Seven Seas Industries Sdn Bhd v Philips Electronic Supplies (M) Sdn Bhd & Anor [2008] 5 MLJ 157, Setapak Heights Development Sdn Bhd v Tekno Kota Sdn Bhd [2006] 3 MLJ 131, Dato' Sivananthan a/l Shanmugam v Artisan Fokus Sdn Bhd [2016] 3 MLJ 122, Syarikat Binaan Utara Jaya (a firm) v Koperasi Serbaguna Sungai Glugor Bhd [2009] 2 MLJ 546 were cited;

(b) there is no clause making it mandatory for the Plaintiff to resort to clause 22.0 prior to exercising its right under clause 23.0;

(c) clause 23.0 is not an arbitrary right as it can and was exercised with good cause given that in para 3 of the Notice of Termination-

(i) the Defendant failed to provide a fully functioning financial System to the Plaintiff in accordance with the terms and conditions of the Agreement;

(d) there was no acceptance of the System by the Plaintiff; and

(e) the provision under clause 23.0 of the Agreement which states that "NORTHPORT shall not be liable for any loss or damage suffered by the Contractor arising from the termination of this Agreement" fortifies the Plaintiff's right to terminate with notice given that it makes provision for the consequences of termination "under this Clause" which had to be contrasted with termination under clause 22.0 of the Agreement which provides for different consequences. [23] With respect we are unable to accept the aforesaid submission of the Plaintiff that the learned Judge has erred. In our considered opinion, Her Ladyship's findings in para 21(a) to (d) above are correct. The learned Judge's finding is justified because as correctly submitted by the Defendant clause 23 clashed with the agreed time lines of the 8 months period for implementation of the System, 36 months warranty period from Go-Live on 1/3/2015 and a further 2 years of support services. The significance of the agreed time lines will be discussed at the appropriate place in this judgment. [24] In SPM Membrane Switch Sdn Bhd v Kerajaan Negeri Selangor [2016] 1 MLJ 464, briefly, by an agreement, the respondent appointed the appellant to assist with the collection of outstanding quit rent. The agreement included a term that allowed the respondent to terminate the agreement unilaterally by giving thirty days' notice to the appellant in the event that one of eight grounds, as set out in cl 8.1(b) of the agreement, was to occur. The respondent sought to terminate the agreement it had entered into with the appellant on grounds that the latter had breached various terms of the agreement. In purported exercise of its right under clause 8.1(b) of the agreement, the respondent issued a letter of a notice of termination giving 30 days' notice and the termination was effected by a subsequent letter. Both letters did not specify any reason for termination. The appellant commenced an action against the respondent and submitted, among others, that clause 8.1(b) could only be invoked after the procedure in clause 9 pertaining to conducting a performance review of the appellant company's performance of its services under the agreement had been satisfied. The Court of Appeal upheld the decision of the trial judge in that an exercise of the of the right of termination under clause 8.1(b) was not connected with the review procedure under clause 9 and that the 2 clauses were to be read disjunctively. Dissatisfied the appellant sought leave to appeal and was granted leave by the Federal Court to proceed on the question of law as to whether a notice to terminate a privatisation agreement which was vague, unspecific and uncertain was defective and bad in law. The appellant's contention was that there was no review conducted of its performance and as a result no reasons were given for the purpose of determining it had fallen foul of clause 8.1(b). On this issue, the Federal Court at p.465-465, among others, held- "Upon the interpretation of cll 8 and 9 of the agreement as parts of a whole contract it was apparent that cl 8.1 did not provide a freestanding right to terminate the contract. If it was a freestanding right then it could be easily used to subvert the purpose of cl 9, which could not be the intention of the parties as objectively determined. ... Arguably the purpose of this clause leans in favour of protecting the position of the appellant against wilful termination for one, and to provide an added layer of protection in that it was given the opportunity to 'remedy the unsatisfactory situation' in 30 days. It could not be the case that the respondent was allowed to circumvent the purpose of cl 9 by invoking unilateral termination under cl 8.1(b) when cl 9.3 itself refers to cl 8.1(b) as a means of protecting the respondent's interests." [25] Applying the principle adopted in SPM Membrane's case (supra) to the appeal before us, we are of the view that reading clauses 22 and 23 in the context of the Agreement as a whole, it is clear that clause 23 does not provide a freestanding right to terminate the Agreement. Objectively determined if it was interpreted otherwise, clause 23 could be easily used to subvert the purpose of clause 22 which is to give the Defendant a 7 days grace period, by invoking unilateral termination under clause 23. This Court cannot allow the Plaintiff to invoke unilateral termination under clause 23 to circumvent the purpose of clause 22 which leans in favour of protecting the Defendant and deny the Defendant of the added layer of protection against such unilateral termination by the 7 days grace period. [26] In addition we are of the considered view that the contention of the Plaintiff that clause 23 on the right of termination without assigning any reason superseded clause 22 cannot be sustained because we agreed with Counsel for the Defendant's oral submission that there is an absence of any clause to preserve its intent to do so in the Agreement by using such words as "notwithstanding any other terms" or "without prejudice to the right to terminate under clause 22." (see 493 [82] G in SPM Membrane's case). [27] In SPM Membrane's case, the Federal Court at 491[78], among others, opined "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."; and at 492[79] after having referred to Arnold v Britton and others [2015] UKSC 36 expressed that the Supreme Court of UK "is not totally opposed to the application of business common sense approach in construing a contract, in the absence of clear words." In the context of the appeals before us, between the two interpretations, the first interpretation allows for a 2 stage notice procedure: at the first stage for the Defendant to be given a written notice by the Plaintiff specifying the breaches therein and a 7 days period to rectify the same; and at 2nd stage the Plaintiff may terminate if the breaches remained not rectified past the 7 days after issuance of a written notice. The other interpretation allows for termination of the Agreement in whole or in part at any time without assigning any reason by giving 7 days' notice in writing. In our view the first interpretation makes more commercial sense because clause 22 gives an opportunity to the Defendant to remedy which would otherwise be illusory if clause 23 is permitted to supersede clause 22. [28] Hence we conclude there is no merit in the Plaintiff's contention in para 22(a) and (b) above.

(b) No total failure of consideration [29] Another ground canvassed by Counsel for the Plaintiff as to why the learned Judge erred is when Her Ladyship held the termination of the Agreement was invalid as there was no total failure of consideration. Firstly, Counsel submitted that there was a misdirection in law on the applicability of s.40 of the Contracts Act 1950 and the Berjaya Times Squares Sdn Bhd (formerly known as Berjaya Ditan Sdn Bhd) v M Concept Sdn Bhd [2010] 1 MLJ 597 in that the correct approach was for the learned Judge to recognise that the termination of the Agreement was carried out pursuant to the express contractual agreement between the parties in the form of clause 23 and not by operation of law. To bolster its position, the Plaintiff relied on Dream Property Sdn Bhd v Atlas Housing Sdn Bhd [2015] 2 MLJ 441. [30] In Dream Property's case the subject matter revolved around the termination of a sale and purchase agreement entered between the appellant/defendant/ purchaser with the respondent /plaintiff / registered proprietor of land/ vendor for the purchase of land. Of importance was clause 12 of the said SPA which reads- "Upon the interpretation of cll 8 and 9 of the agreement as parts of a whole contract it was apparent that cl 8.1 did not provide a freestanding right to terminate the contract. If it was a freestanding right then it could be easily used to subvert the purpose of cl 9, which could not be the intention of the parties as objectively determined." As the respondent failed to receive the balance price even after 3 months of the extended completion date, it notified the appellant that the 10% deposit had been forfeited and pursuant to clause 12 of the SPA, the agreement automatically became null and void. At p. 471 of the report, Azahar Mohamad FCJ (now Chief Judge of Malaya) (delivering the judgment of the Federal Court) stated that- [82] ... in view of the clear wording of cl.12, the parties to the SPA had agreed to waive the requirement for the issuance of a notice of termination upon the breach of the SPA...[C]l 12 expressly provides that the SPA 'shall be treated as null and void and of no further effect upon the non-payment of the balance purchase price within the stipulated time period'. In the result, the enforceability of cl 12 is not open to challenge." [31] However it is to be noted that His Lordship at p. 472 of Dream Property's case stated- [84] It is for the court to infer from the surrounding circumstance whether, pursuant to s 40 of the Contracts Act 1950, the plaintiff had elected to affirm in the continuance of the SPA or to treat it as at an end (see the objective test propounded in Mintye Properties Sdn Bhd v Yayasan Melaka [2006] 6 MLJ 420; [2006] 4 CLJ 267). In our view, the letter dated 9 March 2006 and the plaintiff's conduct on 28 August 2006 in filing the writ of summons herein, which initiated the present suit against the defendant provide compelling evidence of the plaintiff having treated the SPA as terminated to the knowledge of the defendant after the extended completion date of 21 May 2006." (Emphasis added) [32] We are however of the considered view that Dream Property's case can be distinguished where the intention of parties for an automatic termination was clear for reasons pointed out by the Federal Court. However in this instant appeal, the Plaintiff terminated not only under clause 23 (see para 19 above) but "additionally" for the reasons spelled out in para 3 of the notice of termination which reads- "3. Additionally, we are instructed by our client to state that you have failed to provide our client with a fully functioning financial system ("System") in accordance with the terms and conditions of the Agreement. The System provided by you has not fulfilled our client's requirements and is not fit for its intended purpose, particulars of which you are aware of and have also been communicated to you." [33] The learned Judge noted para 3 of the notice of termination and observed that the Plaintiff's basis for termination "implies a total failure of consideration" because the reasons for termination was that the System was not fit for its purpose as it was not fully functional. (paras 52 and 53 of the Grounds of Judgment) [34] Her Ladyship then referred to s.40 of the Contracts Act which provides- "40. Effect of refusal of party to perform promise wholly. When a party to a contract has refused to perform, or disabled himself from performing, his promise in its entirety, the promise may put an end to the contract, unless he has signified, by words or conduct, his acquiescence in its continuance." [35] Her Ladyship noted that the phrase "his promise in its entirety" in s.40 has been explained by Gopal Sri Ram FCJ (as he then was) in Berjaya Times Squares (supra) at p. 611 as follows: "Special attention should be paid to the phrase 'his promise in its entirety'. Under the section the right in a non-defaulter to repudiate a contract only accrues when the defaulter has refused to perform or has disabled himself or herself from performing the whole of his promise. If there is part performance by the defaulting party, the innocent party may not put an end to the contract." In our judgment the learned Judge's deduction that the applicable test is "whether the party in default has failed to perform in its entirety" (paras 55 and 56 of the Ground of Judgment) is the correct approach by reason of the following:

(a) it is in accord with the judgment of the Federal Court at 609 [24] that s.40 of the Contracts Act is a restatement of the English common law position, a conclusion drawn after reference to several English cases (see paras 17 to 24 of the Report); and

(b) it is confirmed by the dicta of the Federal Court at p. 609 as follows: "...when deciding whether there is in a given case total failure of consideration, the court must first interpret the promise as a whole and next view the performance of the promise from the point of view of the party in default. The test is not whether the innocent party received anything under the contract. The test is whether the party in default has failed to perform his promise in its entirety." [36] Having regard to the test to be applied, the learned Judge made the following findings of fact on the works executed by the Defendant: "57. In this case, much evidence was led of the work done by the Defendant in implementing its System: the copious minutes of the "Working Committee" and "Steering Committee" meetings bear testimony to the work done by the Defendant. The defendant had expended time, cost and efforts in developing testing, training and implementing the System..." (para 57 of the Grounds of Judgment) [37] In our judgment these findings are correct as the evidence led at trial confirmed that works and services performed for the Plaintiff's benefit from the 1 $ ^{st} $ kick-off meeting (11/6/2014) included- "(i) Conducting Business Requirement Studies for both the financial modules and integration modules.

(v) Conducting Key User Trainings for the users.

(x) The Plaintiff thereafter using the System for their daily operations for 1 $ \frac{1}{3} $ years." (An illustrative Implementation Methodology and terminology used is in Appendix A of Defendant's Appendix Bundle). [38] The learned Judge concluded the following in the Grounds of Judgment: "57... Unfortunately, it did not meet with the Plaintiff's expectation and unhappiness in not receiving the entire promised bargain under the Agreement. 58. However, in light of the decision in Berjaya Time Square it cannot be said that there was total failure of consideration as the Defendant had not failed to perform its obligation in its entirety. The termination was invalid. My finding is fortified by the evidence of the Plaintiff's acquiescence of the continuance of the Agreement by the 6 extended deadlines." [39] The Plaintiff argued that the termination of the Agreement is valid given that the learned Judge made a finding in para 70 of the Grounds of Judgment that the Defendant "failed to deliver a fully functioning financial system in accordance with the Agreement". With respect we are unable to agree with the Plaintiff's approach on its right to termination from the angle that it did not receive the entire promised bargain under the Agreement. To reiterate, the test is not what the Plaintiff received but whether the Defendant failed to perform its obligation in its entirety. Hence we are of the view that the learned Judge's conclusion that the termination of the Agreement was invalid is correct following the Berjaya Times Squares' case that so long as there is part performance, the innocent party cannot terminate the contract. [40] Since there is some amount of overlap on the matters pertaining to the contentions of the Plaintiff that the Defendant failed to deliver a fully functioning System and that there was no acceptance of the System by the Plaintiff, these arguments will be dealt with under Appeal 1110. [41] Further, we agreed with the Defendant's submission that the finding of unlawful termination by the learned Judge rendered the Plaintiff in constructive breach of the Agreement since the Plaintiff is now in breach by making it impossible for the Defendant to continue to perform its services during the Warranty Period which expired in March 2018. We drew support for this approach premised on the dicta of the Federal Court in Akitek Tenggara Sdn Bhd v. Mid Valley City Sdn Bhd [2007] 2 MLRA 584 at p.610 as follows: [31] ... The reason for the termination of the services of the plaintiff by the defendant is thus not valid. There is therefore a constructive breach of contract by the defendant... [32] Where a party by his own act makes it impossible for him to perform his contract at the due date, there is a constructive breach of contract, and the other party is entitled forthwith to enforce his rights as on a breach." Reasons for the finding of constructive breach on the Plaintiff's part will be elaborated when we examine the performance of the Agreement during the Warranty Period under Appeal 1110. Appeal 1110 B. Whether the learned Judge erred in dismissing the Defendant's Counterclaim

(c) Failure to deliver a fully functioning System [42] Learned Counsel for the Plaintiff submitted that this Court ought not to disturb the following findings of the learned Judge as they are findings of fact:

(a) "With regard to the Plaintiff's complaint that the Defendant failed to resolve the 160 RFS Issues/ Issues relating to primary functionalities/modules/stop production issues, I find there is credible evidence that there were still unresolved issues which resulted in the Plaintiff reactivating its previous financial system i.e. Flexidata." (para 39 (vi) of the Grounds of Judgment);

(b) the 4 unresolved issues; and

(c) "The Defendant's counter claim for Amount (1) and Amount(2) and damages is similarly dismissed as there is cogent evidence before this court that it had failed to deliver a fully functioning financial system in accordance with the Agreement." (para 70 of the Grounds of Judgment). [43] Counsel relied on a dicta from the case of UEM Group Bhd v. Genisys Integrated Engineers Pte Ltd & Anor [2010] 9 CLJ 785. Here the Federal Court when addressing the primary issue of whether the Court of Appeal had erred in interfering with the findings of facts of the trial judge at p.800 opined- "It is well settled law that an appellate court will not generally speaking, intervene with the decision of a trial court unless the trial court is shown to be plainly wrong in arriving at its decision. A plainly wrong decision happens when the trial court is guilty of no or insufficient judicial appreciation of evidence. (See Chow Yee Wah & Anor v. Choo Ah Pat [1978] 1 LNS 32; Watt or Thomas v. Thomas [1947] AC 484; and Gan Yook Chin & Anor v. Lee Ing Chin & Ors [2004] 4 CLJ 309)." [44] The "plainly wrong" principle propounded in UEM Group Bhd (supra) is trite and cuts both ways. Contrary to the position taken by the Plaintiff, it is the Defendant's contention that the learned Judge's findings on the 4 issues are plainly wrong due to insufficient judicial appreciation of the evidence adduced at trial. We find there is merit in the Defendant's submission for the reasons discussed below. As alluded in para 14 above, the learned Judge at para 49 of the Grounds of Judgment found 4 issues had not been resolved by the Defendant. We note that these 4 issues were in fact a reproduction of items (iii) to (vi) of the evidence in chief of PW1, Tamilmaran a/l Rajagopal (Plaintiff's Project Manager) (Q&A 24 of PWS-1).

(i) Closing of the accounts in February 2015

(i) the learned Judge's conclusion after 8 witnesses and 10 days trial should not be brushed aside as it is a considered decision and a finding of fact made by the Judge having the benefit of viewing all the witnesses, (ii) there is no misdirection of law as the learned Judge's finding is fully justifiable in light of the following evidence alluded by Plaintiff-

(a) particulars in the Minutes of the Steering Committee Meeting on 19/11/2015;

(b) non-compliance of the 25/11/2015 deadline; and

(c) Plaintiff's letters dated 13/1/2016, 10/3/2016 and 30/3/2016. [53] Learned Counsel for the Plaintiff argued that the Minutes of the Steering Committee ('SC') of 19/11/2015('the 19/11/2015 Meeting') is the pivotal document which showed the following:

(a) all parties were present i.e. the Defendant had 5 representatives including, the Chief Operating Officer (Paremeswaran a/lRajagopal-DW1),General Manager and 3 Consultants whilst the Plaintiff had 7 representatives was represented, including, the Chairman and PW1, PW2 and PW3.

(b) The agenda of the 19/11/2015 Meeting were "... system critical issues that effected the productivity and quality of Finance Division services...” and the Minutes recorded that the System's outstanding issues concerned "Core module deliverables" and "...CENSOF to tackle the (sic) all the critical issues (Stop and Impede Production)...”， performance issues still persisted, recurring issues and the conclusion of the 19/11/2015 Meeting was for CENSOF to resolve all critical issues by the deadline of 25/11/2015 ( Appellant's CB 2/3 in Appeal 1132 pp. 511,513,515 & 517). The Defendant's position was that the 19/11/2015 Meeting was the culmination of other SC meetings which clearly showed as late as 19/11/2015 there were still issues which not been fulfilled by the fixed deadline. [54] The Plaintiff submitted that (i) it was not incumbent upon it to respond to the Defendant's 16/12/2015 email given that the Defendant had failed to comply with the deadline; and (ii) it was untenable for the Defendant to contend that issues were pending confirmation. [55] In addition the Plaintiff argued that the fact that there was no acceptance of the System and there were unresolved issues relating to the core modules/primary functionalities/stop production was reinforced with the Plaintiff's letters dated 13/1/2016, 10/3/2016 and 30/3/2016 where it has been communicated to the Defendant that-

(a) it has not delivered a fully functioning financial System in accordance with the Agreement; and

(b) the System has not fulfilled the Plaintiff's requirements and was not fit for its intended purpose. [56] On a preliminary note, we wish to state that we are not able to agree with the Counsel for the Defendant's oral submission that para 70 of the Grounds of Judgment (para 42(c) above) when taken in its totality meant that the learned Judge's finding "there is cogent evidence before the court that it failed to deliver a fully functioning financial system in accordance with the Agreement" is confined to the 4 unresolved issues. The reason is due to the learned Judge's findings of the 4 unresolved issues in para 39(vi) of her Grounds of Judgment as one of the findings (i) to (viii) in the said para which is as follows:

(a) "39. At the close of the full trial and upon hearing the submissions of the parties"; and

(b) the use of the word "include" in her finding at para 49 which reads as follows: "49. From the evidence led, I was satisfied that the issues which had not been resolved by the Defendant include- " wherein the learned Judge then spelled out the 4 unresolved issues. [57] Turning now to the merits of the Plaintiff's submission in paras 52 to 55 above, other than our observation made at para 56 above, with respect we are unable to agree with the Plaintiff's aforesaid submission in paras 52 to 55. We reiterate that the 4 unresolved issues are stale issues. Since the resolution of the 160 RFS issues in para 52 to 55 are intertwined with the issue of acceptance of the System, we shall address the former issues whilst addressing the latter.

(d) No acceptance of the System [58] Counsel for the Plaintiff contended that there was no acceptance of the System because the Finance Division's requirements were not met given the following:

(i) there was no sign off of the Final Acceptance Certificate and the Live Acceptance Certificate （'Go-Live Certificates'); and

(i) the Plaintiff accepted the System when it decided to Go Live on 1/3/2015;

(i) the Plaintiff only agreed to Go-Live subject to an undertaking by the Defendant; and

(a) the opening words of the $ 1^{\mathrm{st}} $ para of Warranty Period clause that "The warranty period must be 36 calendar months from date of full implementation which is after "Go-Live"...";

(b) "Go-Live" is the term to denote "Go Live is the day /time when the old Flexidata data system is laid and CFMAS runs solo.";

(c) "CFMAS/ System" is the term to denote "A term or a project code name given by Northport for this project.";

(d) "RFS" is a term to denote "a system where Northport lodges it (sic) issues post go live."; (the terms referred in (b) to (d) are in Appendix A, Appeal 1110)

(e) Para 2 of the Letter of Undertaking states that "The [SC] agree to CFMA to Go-Live on $ 1^{\mathrm{st}} $ March 2015 albeit with the conditions specified therein. [68] Flowing from the background leading to the setting up of the RFS mentioned in para 61 above, a total of 160 issues were registered by the Plaintiff into the System. It is not disputed that a lot of meetings were held which led to the 19/11/2015 meeting and the fixed deadline of 25/11/2015 to rectify the issues registered in the System. The System was robustly tested in February 2015 before it went live on 1/3/2015. Plaintiff started using the System to run its financial operations and did so extensively for the next 1 1/3 years. There is evidence from PW1 given under cross-examination that the defects during the Warranty Period is reported in the RFS System and PW3 agreed in cross-examination that the System went live on 1/3/2015 and the Warranty Period starts from there and that the Defendant was providing support and maintenance as requested by the Plaintiff (pp.507-508 RR Jld 2C (Bhg B) & (pp. 716 RR Jld 2B (Bhg B)). In our considered view, consistent with the documentary and oral evidence it is after the System went Go-Live on 1/3/2015 that the Warranty Period sets in. [69] Further, on the non-signing of the Go-Live Certificates, evidence was led that the Plaintiff requested the Defendant to forward the Go Live Certificate for its execution vide PW1's e-mail dated 26/2/2015 (p.520 CB 4/4 Appeal 1110) which states as follows: "We require the certificate by tomorrow morning for CS and NMB Finance to sign off." Despite the fact that PW1 during cross-examination confirmed that the Plaintiff agreed to sign off the said certificate on 27/2/2015 (p.353 RR Jld 2B (Bhg B)) , yet the Plaintiff reneged on its part to sign off the GoLive Certificate although the Defendant had issued the requested Letter of Undertaking (pp.356-357 RR Jld 2B (Bhg B)). Further, since the System did Go-Live and Flexidata was laid down on 1/3/2015 as agreed by PW1 in cross-examination (p.355 RR Jld 2B (Bhg B)), we find the Plaintiff had no excuse for refusing to sign the Go-Live Certificate. In any event, as PW1 agreed during cross-examination that it is best practice to have a final acceptance certificate to Go-Live and sign off, we are persuaded by the Defendant's submission that it is only a formality for the Plaintiff and not a condition under the Agreement as the Plaintiff contended. Therefore we agreed with the Defendant's submission that the Plaintiff cannot rely on its own wrong to benefit itself as it had refused to execute and return the Go-Live Certificate despite requesting for it. [70] Returning to the point on the resolution of the 160 RFS issues relating to the core modules/primary functionalities/stop production contended by the Plaintiff, we are of the view that the turning point started with the December emails. Vide e-mail dated 15/12/2105 (p.337 CB2/4 Appeal 1110), DW1 wrote to PW1 requesting for confirmation of an SC meeting ("preferably by [14th] Dec") since there was no response forthcoming from PW1 which he had requested vide his earlier email dated 9/12/2015 which reads- "Dear Mr Maran, We request your management consideration for this meeting. Thank you On 9 December 2015 at 16:15, Parameswaran Rajagopal wrote: Dear Mr Maran, Pn Roslina Dear Mr Maran, Pn Roslina We would like to request for an SC meeting with Northport Management preferably by Monday 14th Dec Agenda - Update on the RFSs status of Stop Production and Impede production issues - Payment(s) due for project - Other Matters" We noted that the Agenda topic of "Update of RFS's status of Stop Production and Impede Production issues" was the very agenda that the Plaintiff was concerned about. [71] Vide an e-mail dated 15/12/2015 (p.337 CB2/4 Appeal 1110), PW1 replied requesting for an update on status of the issues. The said email, among others, reads- "While waiting for SC members confirmation for the meeting, can you please provide status update on pending deliverable/RFS, Sub-Ledger vs General Ledger figures discrepancy issue and system instability root cause and solutions with technical document. This document has been requested last SC meeting and yet to receive." [72] DW1 responded immediately vide an e-mail on 16/12/2015 (p.336 CB2/4 Appeal 1110), with the update on the status of the 160 issues as tabulated below-No. of IssuesComment140Closed19User confirmation to close1Change request. Under testing and to close by 18/12/15 In cross-examination, whilst PW1 agreed that it is stated in the said e-mail that DW1 had informed him, "... RFS we have closed 99% and currently we have about 19 RFS pending user's confirmation ...I have attached the analysis in the email, 140 close, 19 pending user, close by 18th December, 1. Total close 159, total issue reports 160 and about 99.38% have been closed." PW1 disagreed to the follow up question: "SSL Yes. So you agree from this email, it has been confirmed that almost 99%, more than 99% of the RFS issue has been closed by CENSOF and 19 of the RFS is pending user's confirmation?" (pp.424-425 RR Jld 2B (Bhg B) Appeal 1110) [73] Notwithstanding PW1's disagreement, in our judgment, what is critical is that PW1 admitted that there was no challenge to the contents of the e-mail dated 16/12/2015 as is evident from his reply to the pointed question posed to him by the learned Judge as follows: "YA Did you deny? Can you just answer the question? Did you deny the contents of this email dated the 16th December?" TAMIL No, I did not." (pp.425-426 RR Jld 2B (Bhg B) Appeal 1110) [74] Moving on, as there was no SC meeting called pursuant to its request and to discuss payments due to it, the Defendant issued its letter dated 6/1/2016 requesting the Plaintiff to take cognisance that Northport had gone live and that the Plaintiff was "utilising the said system to receive dues from your clients, bill for services to your clients, submit regulatory reports and produce financial reports amongst the other financial requirements"; the performance of "the value-added reconciliation assistance tasks for the General Ledger entries against the associated subsidiary ledgers therein, the Accounts Payable entries therein again with the General Ledger and finally the Accounts Receivable entries therein against the General Ledger have been completed at our end."; and "have passed findings to the Northport Finance and have not received any news pertaining to the way forward." Critically the Defendant ended on the note "...that we would find it extremely difficult to continue rendering our 24 x 7 support services to Northport should we not receive any payment for our invoices." 2 invoices no. 003839A amounting to RM2,157,100.00 and no. NMB001 amounting to RM109,604.00 were attached (pp.360-364 CB2/4 Appeal 1110). [75] The Plaintiff responded vide its letter dated 13/1/2016 which, among others, stated that it would be remitting the sum of RM109,604.00 via telegraphic transfer on 13/1/2016; refusal to make payment of invoice no. 003839A on the basis of regurgitating the same issues but did not address the Defendant's e-mail of 16/12/2015; that the Plaintiff "shall commence evaluation of [Defendant's] deliverables in the next 15 working days whereby [Defendant] will be updated with the results accordingly." (pp.365-366 CB2/4 Appeal 1110). [76] We noted there the Plaintiff did not update the Defendant of the proposed evaluation of the deliverables "in the next 15 working days" which prompted the Defendant to issue another letter dated 7/3/2016 reminding the Plaintiff of its failure to do so and giving notice of institution of legal proceedings if the matter was left unresolved. (pp.367-368 CB2/4 Appeal 1110). [77] Vide letter of 10/3/2016, the Plaintiff responded with the same reply "Please be advised that we are in the midst of finalizing our evaluation of your deliverables and we will update you accordingly." (p. 369 CB2/4 Appeal 1110). [78] Vide letter of 30/3/2016, we observed that the Plaintiff stated that it had completed evaluation of the Defendant's deliverables and raised the same complaints at paras A and B of the said letter. Under the heading "Non resolution of Issues", where the Plaintiff referred to communication on the issues, it stopped short of its letter of 9/9/2015. It is noteworthy that the Plaintiff made no mention at all to the Defendant's 16/12/2015 e-mail which to reiterate was an update by the Defendant on the 160 RFS issues requested by the Plaintiff vide its e-mail of 15/12/2015. [79] In the letter of 30/3/2016, the Plaintiff complained "the reports generated by the System in respect of all the modules/functions in the System such as, the Accounts Receivable, Cash Book and GST, did not tally with our records" and "our Finance Division was unable to identify the differences and verify the accuracy of the said reports." Despite saying that the said complaint was crucial, we noticed no "reports generated" were produced by the Plaintiff. Hence we are of the view that the Plaintiff failed to discharge the burden of proof in respect of its allegation of inability to identify the differences to verify the accuracy of the said reports (p.370-372 CB2/4 Appeal 1110). [80] In the light of what we have addressed above, we have shown that the Plaintiff's contention that the letters dated 13/1/2016, 10/3/2016 and 30/3/2016 reinforced there were unresolved issues relating to the core modules/primary functionalities/stop production is untenable and devoid of merit. We find that the RFS issues were resolved on 16/12/2015 as PW1 in cross-examination admitted that he had no documents from the System for the period-December to March 2016 to prove those issues were subsisting and causing errors in the System post 16/12/2015 (pp.484-485 RR Jld 2B (Bhg B)). We find the learned Judge had failed to undertake a critical evaluation of the 160 RFS issues by testing the Plaintiff's oral evidence which clashed with the 2 contemporaneous e-mails of 15/12/2015 and 16/12/2015 of the Defendant which proved otherwise. The learned Judge also omitted to recognise that the Plaintiff's failure to support its allegation with documentary evidence produced from the System after the 16/12/2015 e-mail to prove otherwise was fatal to the Plaintiff's allegations. [81] The Plaintiff argued that the Defendant's contention that the 160 RFS issues were "progressively resolved" cannot be true for 2 reasons-

(a) that the Project Plan and Summary is not reliable evidence and cannot be accepted as conclusive evidence; and

(b) that there are 18 RFS in the Action List remained "Open" and particularised as items no.1 to 19 at pp. 20-21 of the Appellant's (Northport) Written Submission in Appeal 1132. [82] In respect of item (a) above, the Plaintiff submitted that the Project Plan and Summary (p. 341-345 CB2/4 Appeal 1110) is not reliable evidence and cannot be accepted as conclusive evidence as (i) the RFS date /Start date in the Project Plan and Summary are different and (ii) the open/close items in the Summary and the Action List are different. In this regard the Plaintiff referred to the evidence of Muhammad Firdaus bin Abdullah Leong (DW3 - Assistant Manager, Special (Lead Consultant Time Zone 2)) who prepared the Project Plan. DW3 testified in crossexamination that the Project Plan do not have actual "Start date" and "Finish date" and he referred to the same as "Default from the system" or "Random date" as he did not key in the actual relevant dates. In respect of item (b) above, the Plaintiff submitted the RFS issues remained "Open" given (i) that the "Status" reference in the Action List (pp. 544- 610 CB3/3 Appeal 1132) read as "Open" and (ii) the "Action List (Details)" showed that the action to be performed in respect of the RFS was still within the Defendant's purview and relied on DW3's evidence. [83] The Defendant highlighted to the Panel on the workings of the Action List using p. 544 CB3/3 Appeal 1132 as an example- "RFS Number: 15050360P" as every RFS given number "Status: Open/Close"; here it is Open "Assignment: Firdaus Leong" indication of who is the one doing the job from Defendant's side "Date Lodged: 14/5/2015, 14.56" "Problem Description: The total amount of the NDSB debtors Ageing for the month of Apr 15 did not tally with GL amount ". We find there is no merit in the Plaintiff's aforesaid contentions given that the Plaintiff was aware of the format as the Defendant had put the entire bundle in and the complaint was specified in the format, yet the Plaintiff did not raise and identify such complaints in its pleading, termination letter and witness statement; but it was only during crossexamination that the Plaintiff raised the RFS List issue. Having crosschecked the following examples in the Action List vis-a-vis the Project Plan and Summary, we found item 15050360P appeared as ID 149, item 15080013P as ID 164, item 15080012P appeared as ID 155 and item 15080567P appeared as ID 166. In our view this is a case where having not reverted to the Defendant regarding the Defendant's 16/12/2015 e-mail update on the 160 RFS issues requested by the Plaintiff vide its e-mail of 15/12/2015, the Plaintiff used that evidence to say that the Defendant did not do work. The Plaintiff's conduct of using its own failure to revert on issues as a basis to blame the Defendant is unreasonable and smacks of lack of bona fide. [84] The Plaintiff submitted that acceptance of the System is a primary criterion of the Agreement and referred to the following: "(a) Paragraph 4.1, Annexure F, envisage, inter alia, that the product and services offered by the Defendant "must meet the requirement of the Finance Division in Northport";

(b) Paragraph 5.2, Annexure F states: "The primary functionality of the solution is to cater to needs of", inter alia, "General Ledger, Accounts Receivable, Accounts payable, Cash Book, Budget And Budgetary Control, Project Costing, Fixed Asset and Management information...;

(c) Clause 7.2.3 (a) provides that the Defendant "expressly warrants to Northport that at the date of delivery of the System", that it has "complied with all requirements...";

(d) Clause 7.2.3 (b) provides that the "warranty in Sub-clause (a)”, "shall survive Northport's inspection" and "Failure of Northport to inspect of acceptance or use of the System by Northport ... shall not signify acceptance of the quality of the System...";

(e) Clause 6.1 which provides "NORTHPORT hereby covenants to pay the Contractor in consideration of the completion of performance of the Works and the Contractor making good of any defects whatsoever to the Works as shall become payable at the times and in the manner specified under Clause 8.0 and Annexure D of this Agreement";

(f) Clause 8.0 which provides "Payment to the Contractor for the Works shall be made in accordance with detailed invoice(s) verified by the Project manager in accordance with Annexure D herein based on actual work done.";

(g) Items 5 and 6 of Annexure D to the Agreement which provides the words "sign off" as follows: 5Upon sign-off on completion of Data Migration and System Integration Test15%(RM555,000.00)-NIL6Upon sign-off User Acceptance Test and completion of training20%(RM740,000.00)-NIL [85] Items (a), (b) and (e) in para 84 touch on the functionality of the System and (g) in para 84, on the issue of "sign-off" are matters which we have addressed earlier and we do not propose to repeat our position save to state that for the given reasons, there is no basis for the Plaintiff to argue that the Defendant has not delivered a fully functional System in accordance with the terms and conditions of the Agreement and that the System was not fit for its intended purpose and had not fulfilled the Plaintiff's requirements. [86] Clause 7.2.3 Warranty of the Agreement comprised paras (a) to (f). The Plaintiff focused on paras (a) and (b) of clause 7.2.3 but did not look at it in totality. It would be misleading to read one clause without reading the whole clause in context as cautioned by SPM Membrane not to read clauses in isolation. It is essential that paras (d) and (e) of clause 7.2.3 be considered. For context, paras (a), (b), (d) and (e) are reproduced in verbatim as follows: "(a) The Contractor expressly warrants to NORTHPORT that at the date of delivery of the System:

(i) The Contractor has complied with all requirements, specifications, conditions, designs, instructions or data furnished by NORTHPORT; and

(b) The warranty in Sub-clause 9(a) above shall survive NORTHPORT's inspection. Failure of NORTHPORT to inspect or acceptance or use of the System by NORTHPORT or signature by and on behalf of NORTHPORT on any Purchase Order/Invoice shall not signify acceptance of the quality of the System or that there has not a breach of warranty.

(d) The Contractor agrees that immediately upon service of NORTHPORT's written notice on the defect of the System that, the Contractor shall at its own expense:

(i) Correct completely the defects; or

(e) If the Contractor does not within fourteen (14) days of the notice undertake such correction or replacement, then without having notified the Contractor, NORTHPORT may itself or on its behalf by a third party make such correction or replacement at the Contractor's cost and expense and the Contractor shall immediately indemnity NORTHPORT on demand for any such cost or expenses suffered by NORTHPORT." (p. 211 CB2/4 Appeal 1110) [87] We find on the evidence the Defendant had attended to the defects as evidenced by the minutes of the SC Meetings. In any event, para (e) provides that if after being given 14 days written notice the defects have not been corrected or replaced, the Plaintiff may on its own or request a $ ^{3rd} $ party to undertake the rectification, provided the Defendant shall immediately indemnify the Plaintiff on demand for such cost or expenses incurred. Hence the remedy envisaged under the Warranty clause in clause 7.2.3 is to indemnify and not termination. This provision in our considered view lends credence to and is in harmony with the interpretation accorded to clauses 22 and 23 of the Agreement alluded in paras 25 to 27 above. [88] Regarding item (f) of the Agreement referred in para 84 above, we are of the view that the Plaintiff cannot rely on its own failure to verify the works under clause 8 of the Agreement. This is because the said issue is an afterthought given it was never pleaded and was raised for the first time when PW1 took the stand and in cross-examination PW1 admitted that he had not produced any document on verification (pp. 471-472 RR Jld 2B (Bhg B)). [89] The Plaintiff referred to clause 24.0 of the Agreement which states that "Whenever mentioned, time shall be the essence of the Agreement". In support of its proposition that time has always been of essence, the Plaintiff cited-

(a) s. 56(1) of the Contracts Act which states- "(1) 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."; and

(b) the case of Damansara Realty Bhd v. Bungsar Hill Holdings Sdn Bhd & Anor [2011] 6 MLJ 464 at p. 466 in which the Federal Court held "It is trite that there is a prima facie acceptance that in commercial contracts, time would be of the essence." [90] In response to the Plaintiff's contention the RFS issues were not resolved by the 25/11/2015, it cannot be gainsaid that even after the deadline, the Plaintiff continued to use the System for 11/3 years. In Berjaya Times Squares' case, the Federal Court held time was no longer the essence for purposes of s. 56(1) of the Contracts Act as "This was evidenced by the conduct of the respondent [the purchaser] itself in having several negotiations with the appellant [the property developer] with a view to expediting the completion of the construction of the property before intimating to the appellant of its decision to rescind the SPA. The respondent also took such a long period of time after the stipulated period and the extended period of completion to rescind the SPA..." (per Zulkefli FCJ (as he then was) at 604 [5]). In fact the same principle was echoed by the Federal Court in Damansara Realty Bhd (supra) at p.479 [31], which after stating "It is trite that there is a prima facie acceptance that in commercial contracts, time would be of the essence" (as the Plaintiff has submitted), the Court further stated "It can of course be rebutted if the parties indicate otherwise by words or conduct, but for a starting point, it must be assumed that the parties intended for time to be of essence. It would not make commercial sense if otherwise." The critical phrase "It can of course be rebutted if the parties indicate otherwise by words or conduct" was unfortunately missed or omitted by the Plaintiff. [91] In this appeal before us, the learned Judge opined her finding that the termination was invalid " [I]s fortified by the evidence of the Plaintiff's acquiescence of the continuance of the Agreement by the 6 extended deadlines." (para 58 of the Grounds of Judgment). We find there is no error in the finding because applying the principle in Berjaya Times Squares' case, notwithstanding that 25/11/2015 was the deadline (6 extensions were prior to that), no other deadline was fixed thereafter and the Plaintiff continued to use the System and took time prior to its termination of the Agreement in April 2016. In light of this, it is our considered view that time is at large and is no longer the essence of the Agreement. [92] There is an added reason as to why we are of the view that time is not of the essence in the Agreement. In Berjaya Times Squares' case, after the Federal Court had at 619 [40] referred to the unanimous decision of the Supreme Court in Hind Construction Contractors v State of Maharashtra AIR 1979 SC 720, at 619 the Federal Court opined as follows: [41] I respectfully accept that the foregoing passages are an accurate statement of the law governing s 56(1) of the Act. In my judgment, while individual contracts will fall to be interpreted in accordance with their own terms, it is a useful guide to construction that a stipulation as to time must be read along with other provisions of the contract to determine if time is truly of the essence of the contract. Further, a clause providing for the payment of a sum whether as a fine, a penalty or as liquidated damages calculated on a daily basis for the period that the work undertaken remains unfinished on the expiry of the time provided in the contract would, in the absence of a contrary intention to be gathered from the contract, point to time not being of the essence." (per Gopal Sri Ram FCJ (as he then was). (Emphasis added) [93] The Warranty Period clause in Annexure F of the Agreement provides that in the event of non-compliance, the agreed remedy for unresolved issues is that the Defendant shall pay a penalty fee. Applying the principle as emphasised in Berjaya Times Squares' case at 620[41], we are of the considered view that since there is an absence of a contrary intention in the Agreement in that no further timeline was fixed by the Plaintiff after 25/11/2015 prior to the termination of the Agreement in April 2016, the said clause point to time not being of the essence.

(e) Whether the learned Judge erred on the application of the doctrine of substantial performance [94] The Plaintiff contended that there is no substantial performance of the Agreement in the absence of acceptance of the System because-

(a) the terms of the Agreement which demonstrate that acceptance of the System goes to the root of the System; and

(b) thus the principle envisaged in (i) Chain Cycle Sdn Bhd v. Government of Malaysia [2015] 9 MLJ 214 becomes applicable and the Plaintiff is released from paying the balance of the invoices. The Plaintiff, among others, referred to p. 226 where the High Court held- "[30] From the passage extracted above, I am of the view that the arbitrator was entirely correct in coming to the conclusion that, where a contractor commits a breach that goes to the root of the contract, it will not be open for the contractor to argue that there had been substantial performance of the contract. The ratio in Hoenig is this: where a breach by the contractor is not one that goes to the root of the contract, the doctrine of substantial performance will apply to require the employer to pay for the price of the contract. The converse must necessarily also be correct; where the breach is one that does go to the root of the contract, the doctrine of substantial performance will not apply and the employer will not be obliged to pay the contracted price." Learned Counsel for the Plaintiff submitted that in Chain Cycle (supra), the arbitrator's award was affirmed when the High Court held that the failure to meet the required performance specifications meant that there was no substantial performance (p.215 Held (1)). Relying on the dicta of the High Court (p.226[30]), Counsel submitted in the appeal before us, "the Defendant's failure to meet the requirement of the Finance Division in the Plaintiff (which is a mandatory requirement) necessarily means that there could not have been substantial performance of the Agreement."

(a) in Appeal 1132, as we found there were no merits, the said appeal was dismissed;

(b) in Appeal 1110, as we found there were merits, in the exercise of our appellate intervention, we allowed part of Appeal 1110 i.e. for Amount 1 only in the sum of RM 2,220,000.00 with interest and at the rate of 5% from the date of judgment till full and final settlement; and

(c) global costs of RM40,000.00 was awarded to the Defendant subject to payment of allocatur. Dated: 11/12/2020 -sgd-LAU BEE LAN Judge Court of Appeal Malaysia Putrajaya COUNSEL: Appeal 1110 K. Chandrasekar together with S. Seenivasagam [Messrs. Azariah & Assoc.] for the Appellant Christopher Arun together with Patricia Jayne Noeb [Messrs. Ariff Rozhan & Co.] for the Respondent Appeal 1132 Christopher Arun together with Patricia Jayne Noeb [Messrs. Ariff Rozhan & Co.] for the Appellant K. Chandrasekar together with S. Seenivasagam [Messrs. Azariah & Assoc.] for the Respondent