Gsib Sdn Bhd v Nz Wheels Sdn Bhd (BA-22NCvC-218-05/2019)

The Plaintiff voiced their dissatisfaction over the re-tendering exercise as GSIB is not the cause for the delay and yet the Consultants were reinstated”

(ii) the Management had decided to retain and continue with GSIB as the contractor to the Kuantan Autohaus Project. The scope of works and value of the Project will be discussed during a separate meeting between GSIB and NZW in due course”

(iii) the Plaintiff’s Head of Operations and the Managing Director of GSIB accepted the appointment contractor and agreed to continue with the profit margin (in percentage) as agreed in the earlier tender exercise / award”.

(iv) GSIB disagreed to the Mutual Termination unless conditions in GSIB’s letter dated 3rd March 2017 is met. [12] Due to non-crystallization of the Mutual Termination two (2) proposals were suggested:

payment for loss of profit in the sum of RM 2,740,754.11,

(ii) or in the alternative to renegotiate if the works were to proceed on a revised design “which did not occur”. [13] As the parties could not agree to the terms of the mutual termination, the Plaintiff commenced the present suit against the Defendant. Summary of the Plaintiff’s submission [14 I have summarized the Plaintiff’s submission as follows:

At the time of engagement, the Defendant did not relate or mention any risk associated, contingencies and/or any circumstances that can influence and affect the Works;

(ii) The Plaintiff as the Contractor was contractually bound to carry out and complete the Works in accordance with the contract and the contract drawings.

(iii)

(iv) The Plaintiff was subsequently informed by the S.O. that the Defendant was unable to satisfy the Conditional Approval granted by the Majlis Perbandaran Kuantan (“MPK ”).

After 5 and ½ months of suspension of the Works, the Defendant through the SO proposed for a mutual termination of the contract.

(vi) The Plaintiff took the position that the Defendant had committed a breach of contract. Nonetheless, the Plaintiff agreed to a mutual termination and wrote to the Defendant proposing their terms. The Defendant however, delayed to respond to the Plaintiff’s proposal by 26 months before terminating the Plaintiff’s appointment. By delaying to respond, the Plaintiff contend that the Defendant violated Section 74 of the Contracts Act (reliance placed on the case of Hong Kong Fir Shipping Co Ltd v Kawasaki Ksen Kaisha Ltd (1962) 2 QB 26).

(vii) The Plaintiff was still ready and willing to resume the Works upon obtaining the approval from MPK. Be that as it may, the obligation to obtain the approval was within the responsibility of the Defendant.

(viii) There was a default by the Defendant to obtain such approval which justifies damages against them.

(ix) In so far as the Plaintiff’s claim for the steel bars purchased, the Plaintiff had taken steps to protect and secure them against loss, damage, deterioration and/or degradation. Despite the Plaintiff seeking instructions from the engineer for protection of the same, there was no response.

With reference to late payment of the retention sum, the Plaintiff seeks for interest for late payment at the rate of 1% above Maybank’s BLR.

(xi) The Plaintiff also contends that it is entitled to claim LAD against the Defendant as that would have been the case in the event the Plaintiff had failed to complete the Project within the stipulated period.

(xii) Pursuant to Section 75 of the Contracts Act, the Plaintiff contend that they were entitled to the sum of RM2,740,754.11 claimed whether or not actual loss is proved to have been caused by the Defendant’s breach. This sum sought is not extravagant, unconscionable nor unreasonable (reference made to the Federal Court decision in Selvakumar a/l Murugiah v Thiagarajah a/l Retnasamay [1995] 2 AMR 1097 and Johor Coastal Development Sdn Bhd v Constrajaya Sdn Bhd [2009] 4 CLJ 569). Summary of the Defendant’s submission [15] The Defendant’s reply to position taken by the Plaintiff are as follows:

that the contract between the Plaintiff and Defendant was frustrated as the Defendant could not obtain the necessary approvals from MPK for purposes of continuing with the Project. This relates to MPK’s condition for the Defendant to surrender part of its land to enable MPK to approve the application for the requisite development order. If the Defendant had to surrender part of its land i.e. the internal road, the driveway for the showroom will be lost. This would defeat the purpose of the Project.

(ii) As a result of thereof, the Defendant’s dealership with Mercedes Benz Malaysia (“MBM”) was terminated on 11- 08-2017. The Plaintiff was informed of this in early September 2017. Due to the termination of the dealership, the Defendant had to discontinue the Project as it carries no purpose to proceed. Thus, the Defendant had no alternative but to terminate the contract with the Plaintiff.

(iii) Due to the frustration of the contract, the Defendant has no obligation to pay the Plaintiff.

(iv) In the alternative, the Defendant takes the position that the Plaintiff has failed to prove its losses and damages.

In respect of the claim for loss of profit, the Defendant took the position that the Plaintiff’s claim on this heading is based on anticipation. This involves headings for which letter of award has not been issued to sub-contractors. In cases, where letter of award were issued to contractors, work had no even started. Hence, such a claim for loss of profit cannot be considered by this Court.

(vi) In so far as the claims for materials on site amounting to RM160,700-34, the Defendant states as follows: a. They had paid a sum of RM14,493-89 for materials on site to the Plaintiff leaving a balance of RM146,206-45; b. The above balance of RM146,206-45 includes a claim for rebar in the sum of RM105,346-45. Due to the Plaintiff’s failure to protect the rebar from rusting, the rebar is no longer fit for construction. In such circumstances, the Plaintiff’s claim for rebar should be dismissed and/or reduced as its value had diminished. c. As to rest of the amount claim which includes timber in the sum of RM2,700-00, fabricated rebar worth RM2,000-00 and M&E materials worth RM14,493-89, the Defendant contends that the Plaintiff has failed to show any proof an how such amounts was derived. d. Had the Plaintiff accepted the proposed mutual termination, the Defendant would have honoured the disputed materials on site. e. In so far as the Plaintiff’s claim for work done is concerned, the Defendant had paid everything including the Retention Sum of RM150,343-83. f. Lastly, as the Plaintiff did pray for interest on late payment of the retention sum and GST in its Writ and Statement of Claim, it cannot now at the end of the trial seek for such from this Court. Summary of the Plaintiff’s further submission [16] In response to the Defendant’s defence of frustration, the Plaintiff contended that: i. the frustration relied upon by the Defendant was self induced as the Defendant had deliberately not complied with the terms set by MPK. ii. The conditions set by MPK was never made known to the Plaintiffs. Knowing the setback and in anticipation of a waiver setback, the Defendant took a calculated commercial risk to proceed with the Project at the risk of the Plaintiff. iii. There is no supervening event that is a capable of frustrating the contract thus not open to the instant Defendant to rely on the doctrine of frustration. iv. The scenario as presented by the Defendant does not fall within the ambit of Section 66 of the Contracts Act 1950 and section 15(2) of the Civil Law Act 1956 as the this is not a case where the contract was substantially impossible of performance without fault on either side. v. The Plaintiff’s claim against the Defendant was based on unlawful termination and the issue of loss and damages have been sufficiently presented. Court’s Analysis and Findings [17] Having analysed the pleadings, evidence adduced at the trial and the submission by counsel, this Court is of the considered view that the Plaintiff’s claim for damages due to unlawful and premature termination is unwarranted. Despite concluding so, this Court finds that damages ought to be allowed due to frustration of the contract between the Plaintiff and the Defendant. [18] My rationale for deciding so can be seen in the following paragraphs of this judgment. Firstly, the Plaintiff’s contention that they are entitled to seek damages for unlawful and premature termination of contract is clearly misguided as the termination by the Defendant was premised on the failure of the Defendant to obtain the requisite development order to enable it to proceed with the implementation of the Project. The Plaintiff’s insistence that they are able, willing and ready to undertake the completion of the Project is clearly ignorant of the fact that to do so without the development order from MPK would render the Project illegal. In this regard, the Street and Drainage Act 1974 clearly stipulates in Section 70 of the act: “(1) No person shall erect any building without the prior written permission of the local authority.

Any person who intends to erect any building shall submit:

to the local authority such plans and specifications as may be required by any by-law made under this Act; and

to the relevant authority such plans and specifications in respect of the sewerage system as may be required by any other written law.” Being an experience contractor, the Plaintiff ought not to have proceeded with the Project Works without having sight of any written approval from the authorities which allows the Defendant’s Project physical works to commence on site. [19] Secondly, this Court takes the view that the Plaintiff’s submission that by reason of the Defendant’s failure to inform that of the conditions set by MPK meant that the Defendant had taken a calculated commercial risk to proceed with the Project at the risk of the Plaintiff (see Enclosure 62 paragraph 20), is akin to a claim for negligent and/or fraudulent misrepresentation. This is untenable as such a case was never pleaded by the Plaintiffs in the first place. It is elementary and trite law that parties are bound by its own pleadings and is prohibited from departing on its own case at their own whims and fancy (see Samuel Naik Siang Ting v Public Bank Bhd [2015] 6 MLJ 1; State Government of Perak v Muniandy [1986] 1 MLJ 490; Anuar bin Mat Amin v Abdullah bin Mohd Zain [1989] 3 MLJ 313; Lee Ah Chor v Southern Bank Bhd [1991] 1 MLJ 428; and The Chartered Bank v Yong Chan [1974] 1 MLJ 157). [20] Thirdly, this Court finds that the contract between the Plaintiff and the Defendants was indeed frustrated by a supervening event i.e. the Defendant’s failure to obtain the requisite approval from MPK. In this regard, this Court cannot agree with the Plaintiff’s submission that the frustration relied upon by the Defendant was self induced as the Defendant had refused to comply with the condition set by MPK i.e. for the Defendant to surrender the internal road to the proposed Project to MPK. This contention is ignorant of the fact that the Defendant is not the owner of the land concerned despite being the Project owner and undertook the Project to enable them to operate a dealership and service center for Mercedes Benz Malaysia. My review of the tender documents adduced by the Plaintiff finds that the land belongs to a company which is not a party to this suit: Merchant Hectares Sdn Bhd (“MHSB”) of No. 2A, Jalan Wan Kadir 3, TTDI Plaza, Taman Tun Dr. Ismail, 6000 Kuala Lumpur (see page 227 of Bundle B1). No evidence was adduced by the Plaintiff to show that Merchant Hectares Sdn Bhd and the Defendant are the same entity. In this regard, the Defendant cannot be faulted for not surrendering land which does not belong to them. [21] Lastly, there is ample evidence to show that the Plaintiff was aware that the proposed structure under the Project was to enable the Defendant to operate a dealership and service center for Mercedes Benz Malaysia. The Plaintiff was also aware that the Defendant’s dealership was terminated due to the Defendant’s failure to obtain the approval from MPK (see testimony of SP-1 during cross examination). In light thereof, the continuation of the proposed Project would be superfluous and redundant. Damages due to frustration of contract [22] In allowing the Plaintiff’s damages under this heading, this Court takes cognizance of the following:

the suspension period of approximately 5 and 1/2 months that the Plaintiff had to endure prior to the termination. This would definitely have incurred actual and incidental costs;

(ii) mobilization and demobilization cost; and

(iii) the dispute on the materials on site especially the claim for rebar in the sum of RM105,346-45. [23] In this regard, this Court orders for damages due to frustration of contract (excluding the Plaintiff’s claim for loss of profit) be assessed vide a separate assessment proceeding. For purposes of clarity, the Plaintiff’s claim for loss of profit is not allowed as there was no unlawful or premature termination of contract by the Defendant. Costs of Proceedings [24] Having heard brief submissions by parties on the issue of costs, I am of the view that a sum of RM15,000.00 is reasonable towards the costs of the trial (RM5,000.00 per day x 3 days). In addition, a further sum of RM18,000.00 is reasonable towards the costs of getting up in preparing for the submissions (both sums are subject to allocator). I order so accordingly. Dated 21st June 2023, ……………………………….. (MOHD FIRUZ BIN JAFFRIL) JUDGE HIGH COURT OF MALAYA AT KUALA LUMPUR Solicitors for the Plaintiff: En.Kengadharan A/L Ramasamy, Messrs R. Kengadharan & Co, Advocates & Solicitors, No.15, Tingkat 2, Jalan SS 2/55, 47300 Petaling Jaya, Selangor. (No.Ruj : KR/LIT/2453/GSIB/NZWSB/18) No.Tel : 03-78745999 Solicitors for Defendants: En.Hairul Azam, Messrs Azam Lim & Pang, Suite 2B-10-1, Tingkat 10, Blok 2B, Plaza Sentral, Jalan Stesen Sentral 5, Kuala Lumpur Sentral, 50470 Kuala Lumpur. (No.Ruj : N164/9/HA/man(lit)GSI). No.Tel : 03-22605388.