Hartajaya-Benteng Timur-AMR Jeli JV Sdn Bhd v Kerajaan Malaysia (21C-2-06/2015)

Special Damages of RM68,378,874.73 under the Original

the sum of RM36,368,815.13 being balance sum payable by the Defendant under the Original Contract;

the sum of RM14,087,467.32 being the balance sum payable by the Defendant under the New Contract;

Special Damages of RM1,113,225.90 being costs incurred by Plaintiff during the “floating period” from 16.6.2010 to 22.11.2011;

the sum to be assessed and paid by the Defendant to the Plaintiff based on quantum meruit;

General Damages for breach of contract by the Defendant to be assessed by the Court;

costs on a solicitor-client basis;

interest at the rate of 5% per annum from the date of the Statement of Claim to realization; and

all other reliefs deemed just and expedient by this Honorable Court. [10] The other prayers having been withdrawn, were struck out including the prayer for special damages of RM11,080,070.92 for lost of profit 6 apparently under the New Contract but in reality is a claim as stated in paragraph 64(b) of the Statement of Claim as a Claim for “Losses arising from the unlawful termination of the Original Contract”. As the New Contract was also awarded to HBT and presumably negotiated at arm’s length for there is no evidence or suggestion otherwise, there is therefore no loss of profit arising out of the unlawful termination of the Original Contract as HBT had asserted. [11] The Government as the Plaintiff had claimed the sum of RM21,021,364.43 being the additional costs incurred in awarding the New Contract to the Plaintiff to complete the uncompleted works under the Original Contract. [12] Parties had agreed that the trial be bifurcated in that the Court would only need to decide on liabilities arising out of the termination of the Original Contract and the New Contract and following that, a separate exercise shall be undertaken for assessment of damages. [13] The parties shall be referred to as HBT and the Government and sometimes as the Plaintiff and the Defendant respectively as the pleadings material to this dispute are almost exclusively from the 2015 Suit. 7 Principles Whether the termination under the Original Contract by the Government was lawful [14] I shall deal with the termination of the Original Contract first. [15] The project is referred to as “Projek Membina Jalan Baru Dari Lebuhraya Seremban-PD-FR5 Di Pasir Panjang Dan Menaiktaraf FR5 Dari Pasir Panjang Ke Linggi, Negeri Sembilan”. It consisted more particularly of a Section 1 which comprised of: i. Construction of Arterial A and the mainline new road from CH. 7,700 to CH. 8,579 (“Package A”); and ii. Upgrading the existing Federal Route 5 from Pasir Panjang to Linggi (“Package B”). [16] There was also a Section 2 which included the construction of Arterial Road B but that, to the disappointment of the Plaintiff HBT was awarded to another party, though in the submission of the HBT to the Defendant, the whole Works were depicted as a single project. [17] The Government awarded Section 1 of the project (“Project”) to HBT vide a “Surat Setuju Terima” dated 5.1.2009. The Plaintiff was instructed to commence works on 14.2.2005 and they entered into part of the site on that day. 8 [18] On 30.4.2005 the Plaintiff executed the First Contract (“Original Contract”) in the form of the Articles of Agreement Contract JKR/IP/CKUB/3/2005 which was a PWD DB/T form of contract. The Plaintiff was to complete the works on 12.8.2007. [19] From the word “go”, this Project was saddled with problems that could have been avoided and averted through a more proactive action on the part of both parties. For the Original Contract, the blame could not be placed entirely on the shoulders of HBT as there were clearly circumstances that were outside of HBT’s control. There were pieces of lands that comprised the Project Site which process of compulsory acquisition by the Government had yet to be completed. [20] I agree with the Plaintiff that under Clause 39.2 read together with Clause 1.3(m) of the PWD Contract in the Original Contract, the delivery of “Site” possession would mean the complete Site (on which all works have to take place) and that was not given on the Commencement Date of 14.2.2005 for the Plaintiff was only given possession of part of the Site. [21] Both DW 1 and DW 2 admitted to the above. DW 1 was Nurhayati Binti Ab. Manan, the QS for the Project. DW 2 Ir Hj Baharanuddin Bin Che Zain was the Project Director of the Project. 9 [22] DW 1 further sheepishly said that the Government only commenced the land acquisition processes after the Plaintiff had started work on 14.2.2005. [23] There were 3 EOTs given for the Original Contract. The main reason was for the delay in giving complete possession of the whole Project Site to HBT. In particular was the delay in acquiring Lot 415 by the Government and hence the corresponding delay in making Lot 415 available to HBT for use. Lot 415 was a hillock which was predetermined to be the source of soil for HBT’s use in the Project. Earth from Lot 415 was to be transported to the Site by HBT for the upgrading of the existing road of 22.6 km and the construction of a new road 4.3km. [24] I have no doubt that the use of the earth from Lot 415 for the purposes of the construction and upgrading of the roads is part of the terms of the Contract. There are contemporaneous documents pointing inexorably to the fact that both parties appreciated the pivotal physical position of Lot 415 vis-a-vis the transport of the earth to the roads to be constructed and upgraded. [25] I agree with the Plaintiff that the following internal memo and letter of the Defendant would seal and settle this issue as both parties had agreed that the Contract was priced based on sourcing the earth from Lot 415: 10

Vide an internal Memo dated 11.9.2008 Memo from the Unit Kontrak dan Ukur Bahan of JKR to the Ketua Penolong Pengarah Kanan Bhgn Pengurusan Projek, it was confirmed that the contract price for Contract 1 was negotiated on the basis that all soil requirements would be from Lot 415 i.e. the Plaintiff did not cost for external supply soil: “pihak tuan telah mengesahkan bahawa semasa proses rundingan harga projek ini dibuat, kerja-kerja tanah yang terlibat (Lot 415 & Arterial A) adalah secara cut & fill sahaja kerana tanah-tanah yang hendak dipotong di Lot 415 boleh dan mencukupi untuk Arterial A yang memerlukan ‘filling’” (emphasis added)

In a letter dated 18.9.2008, the Ketua Penolong Pengarah Kanan Bhgn Pengurusan Projek wrote to the Pengarah Kerja Raya Negeri Sembilan (who was acting as the PD’s Representative) and confirmed; “Adalah difahamkan bahawa pihak tuan sedang berusaha untuk mendapat kebenaran khas daripada pihak tuan punya tanah (Guthrie) Lot 415 (Seksyen 2) supaya memberi laluan kepada lori-lori kontraktor HBA. 11 Sekiranya kebenaran khas itu tidak dapat diperolehi, maka pejabat ini juga berpendapat bahawa kontraktor adalah wajar dibenarkan untuk mengimpot tanah (supaya projek tidak terus gendala)” (emphasis added) [26] After Lot 415 was compulsorily acquired and handed over to the Plaintiff on 22.10.2007, apparently the owner of Lot 415 was not happy with the compensation and was not in receipt of the compensation from the Government and the problem was only resolved in February 2009 as confirmed by DW

[27] There was also the further problem faced in that the Plaintiff was unable to transport the soil from Lot 415 to Arterial Road A by use of “unlicensed lorries” through the Mainline under Section 2 of the Works. The Mainline had not been cleared as Section 2 had been delayed in the Award to another party. The earth from Lot 415 had now to be transported through licensed lorries through Federal Road 5; which is a further and more circuitous route. [28] The Plaintiff’s 3rd EOT application was made on 8.9.2008 and the Completion Date was extended to 1.12.2009 (“Extended Completion Date”). It is not disputed that the first 3 EOTs were granted on the basis of 12 Clause 45.1(g) on ground of the Government’s failure to give Site possession. [29] Various reasons were given to justify the need for the 3 EOT applications besides the delay in giving possession of Lot 415 where the source of the earth was to be taken from for the upgrading and construction of the roads and these included the delay caused by land acquisition of other pieces of lands and correspondingly the delay in site possession arising from the unhappiness of the landowners over the proposed compulsory acquisition and representation made by the landowners that the roads may be realigned, the inclement weather in the rain and the need to relocate obstructing utilities pipelines, to name but a few. [30] As can be seen and appreciated, the delay so far were because of factors beyond the control of the Plaintiff. At first blush the delay of 5 years would come across as alarming. There is no need to revisit the first 3 applications for EOT as these had been granted by the Government for reasons that must have been weighed and considered to be valid. [31] The problem came with the 4th EOT dated 22.7.2009 wherein the Plaintiff had applied for an EOT of a further 300 days to 1.5.2010. [32] The main reason given was for the failure of the Defendant’s contractor to remove existing utility pipes at Junction 3 to complete the 13 realigning of these utility pipes. The Contractor’s entitlement to an EOT would be under Clause 45.1(i) where the delay is occasioned by others engaged by the Government not forming part of the Contract. [33] There was also the related problem of delay in approving the Plaintiff’s entitlement to claim for ‘transport’ costs to move the earth from Lot 415 to Arterial A given that the Plaintiff was unable to use the mainline. There was also the corresponding delay in transporting the earth from Lot 415 through a now further and more circuitous route. There was no response to this 4th EOT application from the Government. [34] Evidence was led that the Government had given its subcontractor until 27.12.2009 to complete the works of realignment of the utilities pipes. See DBOD 2 p24-27. However on 18.11.2009 the Defendant issued a Notice of Intention to Terminate on ground of failure of HBT to proceed regularly and diligently with the works in that 65.6% had been completed when the expected completion was 97.7%. The Notice of Intention to Terminate gave the Plaintiff 14 days to “menjalankan kerja tuan dengan lebih cergas lagi” which being translated means to “carry out the works with greater diligence.” [35] Learned counsel for the Plaintiff, Mr Harvinderjit Singh, highlighted that in its effort to increase the progress of works the Plaintiff had 14 proceeded to appoint Projek Penyelenggaraan Lebuhraya Berhad (PROPEL) to undertake the works jointly with the Plaintiff at the Plaintiff’s own costs. Several Meetings took place between the parties and on 17.11.2009 a Recovery Plan (endorsed by the Plaintiff and PROPEL) was sent to the Defendant by the Plaintiff following a meeting with the Minister of Works. The Recovery Plan outlined an updated program of works to complete the Project by 30.9.2010. [36] Then came 1.12.2009 which was the Extended Completion Date after the 3rd EOT. The Government on 2.12.2009 issued a Certificate of Non-Completion (“CNC”). That would entitle the Government to charge LAD of RM19,498.00 per day if there is no valid EOT that should have been given. [37] On 23.11.2009, the Defendant issued a Termination Letter to terminate the Plaintiff in accordance with Clause 54.3 of the Original Contract. [38] It cannot be disputed that unless the Defendant’s contractor for the realignment of pipes had finished their work, there was no way for HBT to complete the works by the Extended Completion Date of 1.12.2009. [39] DW1, the QS for the Government, admitted under cross-examination that the EOT 4 applied by HBT should have been given taking into the 15 circumstances of the case especially when all issues relating to land acquisition was only resolved in February 2009. [40] DW 2 admitted that the delay in giving site possession meant that the Project Director (“PD”) was obliged to give extension of time according to clause 39.4 and Clause 45.1(g) of the PWD Contract. See p 1527 of Notes of Proceedings (“NOP”) Vol 6 what was applied was 180 days for Lot 415 and 120 days for the pipes making a total of 300 days or slightly over 9 months. [41] Whatever was the Schedule of Work after the 3rd EOT, it could no longer be relied upon by the Government as effective possession of Lot 415 was only given in February 2009 with the Extended Completion Date on 1.12.2009. [42] The 3rd EOT was granted with Extended Completion Date to 1.12.2009 against the backdrop of circumstances during September 2008 when the 3rd EOT was applied for. Parties had not anticipated that complete possession of Lot 415 could only be effected in February 2009 as confirmed by DW 1. [43] That would significantly alter the percentage of completion of works. When the Plaintiff’s 4th EOT was not responded to or in the words of the learned SFC Ahmad Hanir, “not granted” when it should have been 16 granted, the consequence is that the Government could no longer hold the Plaintiff to the Extended Completion Date of 1.12.2009. [44] It is incumbent on the Government as the employer of the Contract to grant an EOT when it is obvious that the delay was not caused by the Contractor’s slow progress but rather by the Government. Learned counsel for the Plaintiff referred the Court to the following passages which underscored such a duty of the part of an Employer for otherwise the Employer will be profiting from its own delay to the prejudice of the

Hudson’s Building and Engineering Contracts, 12th Ed at page 8-052 & 8-055: “Thus the Employer and any Certifier who is required by the termination clause to consider whether any Contractor is progressing regularly and diligently, will have to consider whether the completion date should be extended, and to judge progress by reference to that extended date if they think than an extension is merited”

Sindall Ltd v Solland and Others [2001] 80 ConLR 152 at page 156: 17 “A person in the position of a contract administrator ought always to consider whether there were any factors known to him which might justify an extension of time even though the contractor may not have given written notice of them. This is all the more important if it is necessary to decide whether the contractor is proceeding regularly and diligently”

Engineering and Construction Contract Management, Ir Harbans Singh KS, page 458 & 466 “Contrary to popular belief and the various procedural provisions included in most conditions of contract, the contract administrator remains under a positive duty, upon the occurrence of a delaying event, to consider the Contractor’s entitlement to an extension of time whether or not the latter has made an application in consequence thereof” [45] I am in agreement with the above proposition and in the present case a proper application with the supporting documents had been sent with respect to the 4th EOT. [46] Learned counsel for the Plaintiff further submitted that a Contractor is entitled to any loss that arises from the Employer’s breach in giving 18 possession of the complete Site to the Contractor thereby hampering and hindering the Contractor from completing on time. [47] I am in agreement with the above proposition of law as substantiated by reference to the following:

Engineering and Construction Contract Management, Ir Harbans Singh KS In summary, the effects of the employer’s failure to give the contractor effective site possession on the stipulated date will be as follows: - Such default will constitute a breach of contract which will in principle give the contractor the right to rescind the contract; and - The contractor will be entitled to damages for any loss which he has suffered as a result of the breach; and - Unless the contract contains an express term permitting the employer to grant a commensurate extension of time to contract in compensation for the delay caused by the employer’s breach, the effect will be that the date of completion will be ‘at large’ and the employer will 19 lose his right to impose liquidated and ascertained damages under the contract.

Lodder and Another v Slowey [1904] A.C. That where a contractor after part performance of his contract is wrongfully excluded from the land on which the works were to be executed, and is thereby prevented from completing his contract, he is entitled to treat the contract as rescinded and to sue on a quantum meruit for work and labour done and materials supplied previous to the recession” See also: Syarikat Chang Cheng (M) Sdn Bhd v Pembangunan Orkid Desa Sdn Bhd [1996] 1 MLJ 799. [48] There was no reply to the Plaintiff’s 4th EOT application which was made on 22.7.2009 and there was some 6 months delay in not replying as the CNC was issued on 2.12.2009. Under the circumstance where the CNC had been issued the Government must be taken to have rejected the Plaintiff’s 4th EOT application and a wrongful rejection at that. [49] Alternatively the failure to respond after 6 months from the date of the application for the 4th EOT is unreasonable in the circumstances as admitted by DW 2 during his cross-examination. DW 2 also accepted that time for Completion would be at large if the application for extension of time 20 is not processed. I would add that if the 4th EOT application was wrongly rejected, the same consequence would ensue such that time for completion becomes at large the Contractor would be allowed a reasonable time to complete. [50] If authorities are needed one can refer to Kerajaan Malaysia v Ven-coal Resources Sdn Bhd [2014] 5 CLJ 186 and Sindall v Solland (supra) where it was held that in the event there were grounds justifying an extension of time, then time would have been enlarged and the Employer cannot rely on the grounds that the contractor had not acted ‘regularly and diligently’. [51] In Kerajaan Malaysia v Ven-Coal Resources Sdn Bhd (supra) where the contractor’s application for the EOT should have been allowed, it was observed as follows: “[35] Having found that the request for EOT of 189 days was reasonable and that the SO should have allowed it, the CPM would have been amended accordingly to reflect the 189 days extension. The corrected and revised CPM should have added another 189 days for the soft soil condition and restriction in space at the project site besides the construction for the store and the piling to a new depth of 48 meters involving 44 piles. Therefore strictly speaking there was no 21 delay, as at the point of termination, the defendant had some none and a half months to go before completion” [52] Learned counsel for the Plaintiff also drew the Court’s attention to the meeting of 23.11.2009, 6 days before 1.12.2009 (the Extended Completion Date) where the minutes of the meeting read as follows at page 32 paragraph 4.1 PBOD 1: “Pengerusi mengucapkan terima kasih kepada semua dan meminta semua memberi kerjasama untuk menyiapkan projek ini mengikut jadual perlaksanaan yang baru yang realistik.” [53] Therefore the conduct of the parties was that a new Work Schedule would be prepared taking realistically into consideration the delays in the giving of complete Site possession. In the circumstances the Government would be estopped from terminating the Original Contract in the absence of further delay caused by the Contractor. [54] The inevitable conclusion in the light of the above discussion would be that the termination of the Original Contract was unlawful in the circumstances of the case as time for completion had become at large. Whether the termination had been cancelled and or revoked or rendered inoperative and that the Original Contract had been 22 continued when the Plaintiff was allowed to resume the uncompleted works [55] Though the Contract had been terminated then, there were nevertheless, appeals from HBT for the Contract to be reinstated and the end result was that the Government invited HBT back into the Site to finish the uncompleted works. See HBT’s Additional Submission pp 7-11. This turn of events can only be interpreted to mean that the Original Contract was revived and continued under the same terms and that HBT had been given a reasonable time to complete. That reasonable time was indicated in some letters between the parties as December 2010. In the light of this turn of events the termination notice of 23.12.2009 had effectively been rendered inoperative by this subsequent conduct of the parties. [56] The evidence on this cannot be ignored and indeed, taken together would point irresistibly to this conclusion that the Original Contract had been reinstated and that for all intents and purposes the Notice of Termination had been revoked or cancelled. [57] The meeting on 29.1.2010 recorded and resolved as follows: “Kerajaan akan memberikan peluang kedua kepada kontraktor untuk menyambung kontrak iaitu menyambung kerja-kerja yang 23 tertangguh dengan jaminan komitmen yang dijanjikan oleh kontraktor.” (emphasis added) [58] It would be an exercise in hair splitting to say, as argued by the SFC for the Government that what was continued was the uncompleted works and that the Original Contract remained terminated. It would be rather artificial a distinction to say that the uncompleted works can be divorced from the Original Contract that spelt out the scope of the works and the BQ rates as well as the design in the drawings. It would be a contradiction in terms to say the Contract Works can be separated from the Contract. [59] The Defendant had directed the Plaintiff to withdraw its legal letter sent through their solicitors Vas & Co dated 25.1.2010 post termination as a precondition for the Plaintiff to resume works in the Original Contract. [60] There was a further letter from JKR to MOF dated 11.2.2010 where a Supplementary Agreement was to be executed stating and spelling out the extended period of the Contract. The letter reads: “Sekiranya dibenarkan oleh Kementerian Kewangan satu perjanjian tambahan (Supplementary Agreement) akan disediakan untuk memastikan Kontak antara Kerajaan dan HBA dapat diteruskan melalui lanjutan tempoh kontrak” (emphasis added) 24 [61] DW 2 testified and confirmed that the intention was to allow the Plaintiff to continue with the Works under the Original Contract with an extension to the contract period. [62] Consistent with that understanding there was a followed up letter from JKR to the Plaintiff dated 23.2.2010 wherein Plaintiff was to re-enter the Site “untuk menyambungkan baki kerja di bawah Kontrak.” which means “to continue the balance Works under the Contract.” [63] The further restoration to status quo can be seen in the fact that at a meeting on 31.3.2010 it was noted that the Performance Bond which had been earlier enforced would be returned upon a new Performance Bond being issued. [64] What was more than palpable was the purposeful action taken to unwind the termination of the Original Contract with a view to restoring it, as if it had not been terminated. This is also borne out from the internal correspondence from the Minister of Works to the Ministry of Finance dated 5.4.2010 as seen below: “- Baru-baru ini pihak kontraktor telah melantik PROPEL Berhad (sebuah anak syarikat GLC) sebagai sub-kontraktor untuk menyiapkan baki kerja di bawah kontrak ini. 25 - Pihak PROPEL Berhad yang berkemampuan utuk menjalankan kerja ini telah memberi komitmen kepada JKR untuk menyempurnakan semua baki kerja sebelum hujung tahun 2010;” (emphasis added) [65] The Minutes of Site Meeting No. 49 on 29.4.2010 met the test of consistency in the consensus between the parties that there would be the continuation of the Original Contract with an EOT until December 2010. [66] According to DW 3 this was the “tarikh penyiapan projek yang dijangkakan” or “the anticipated date of completion of the project.” [67] There was a further letter from JKR to MOF dated 26.5.2010 where JKR appeared to be updating MOF on what was happening at Site with a view to not disrupting the restored status quo that was working well: “Untuk makluman Y. Bhg Dato’, pihak Propel telah melaksanakan skop kerja dari 23 Februari sehingga kini bernilai kira-kira RM20 Juta dari nilai baki keseluruhan kerja sebanyak kira-kira RM 40.5 Juta” [68] To cap it all that in reality the Original Contract had been continued and that there was no cessation of the same can be seen in the fact that the Defendant in fact paid Interim Certificates No. 59 dated 28.12.2009 and 26 Interim Certificates No. 60 dated 28.1.2010 which were assessed for works done pre-termination. [69] DW1 confirmed Interim Certificate No. 59 and Interim Certificate No. 60 were for value of works done pre-termination. DW1 further confirmed that payment was inconsistent with Clause 54.3 of the Original Contract which deals with post termination finalization of accounts and not continued payments of interim certificates. This is most telling as the reason for these payments was because the Plaintiff was asked to finish the works under the Original Contract. DW2 was candid in agreeing that if there was termination the assessment of interim certificates will automatically stop and final accounts would be done. [70] That cements it all and removes all confusion and clarifies that the Original Contract was being continued by consent of both the Plaintiff and the Defendant. [71] In the light of the above conduct and confirmation in the correspondence between the parties inter-se and the between JKR and MOF being the different arms of the Government, the letter from MOF dated 11.6.2010 that the Plaintiff must stop work by 16.6.2010 came like a thunderbolt out of the blue. JKR must have been embarrassed to have to write to the Plaintiff on 30.6.2010 to stop work immediately and to leave the 27 Site. JKR being just a Department as in the Public Works Department acted out of deference to the MOF who controls the purse. [72] What cannot escape anyone’s notice was that JKR and MOF did not seem to be acting in tandem with each other, with the result that the Plaintiff became the casualty in the process akin to the proverbial saying that when 2 elephants are in conflict it is the ant that gotten squeezed and stampeded in the middle. When the right hand does not agree with what the left hand is doing, there could often arise, as in this case, a comedy of errors. [73] The Plaintiff immediately replied vide their letter of 2.7.2010 impressing upon the Defendant that the abrupt stoppage of work would materially affect the Plaintiff. There was no reply to this letter or perhaps no reasonable reply could be forthcoming. [74] DW 2 was frank to admit that though the Plaintiff was appealing to continue the uncompleted works, JKR was “stuck in the middle”. Whilst completion was anticipated in December 2010, suddenly MOF had sent this letter of 11.6.2010 and JKR had to coyly comply. [75] No doubt the Defendant sought to interpret this contract post-termination as a stand-alone contract outside the Original Contract by stating so in their payment letters. This is more a matter of semantics and 28 nomenclature. The terms under which HBT is proceeding during this period of 23.2.2010 to 16.6.2010 cannot but be on the same terms and conditions as the Original Contract. In fact the Government also agreed that no LAD would be charged during this period, and this confirms that there was extension given to HBT to complete within a reasonable time. See p 331 of PBOD 1. [76] The problem that arose here had arisen before the case of Kuala Lumpur High Court Civil Suit No.: 21NCVC-14-2011 in Pintasia Jaya Sdn Bhd v. Kerajaan Malaysia (Jabatan Kerja Raya) where Amelia Tee J. observed as follows: “[54] The Court finds that notwithstanding the absence of any formal written withdrawal of the Notice of Termination dated 24.8.2009, there is clear evidence from PW 7 [the then Director General of JKR] that he had granted the contractor an extension of the contract until 15.12.2009 and the contractor had acted on such extension by continuing work on the project site beyond 24.8.2009. The court is unable to accept PW 7’s attempt to distinguish between ‘an extension of the contract’ and ‘giving the contractor an opportunity to complete the contract’. The Court is of the considered view that if the contractor was given an opportunity 29 beyond the date of termination in the Notice of Termination to complete the contract, then it follows ipso facto that there was a decision made to give the contractor an extension of time to complete the contract. In that event, the Court is satisfied that the Notice of Termination dated 21.8.2009, as it stood, would no longer be of any effect once the defendant had given the plaintiff an extension until 15.12.2009. In the face of an extension being given until 15.12.2009, there is regrettably an absence of instructions being escalated downwards that there should also be corresponding joint-inspections in respect of the works that that were carried out until that date. As such, the Court finds that the Plaintiff and its subcontractors had continued works at the project site up to 15.12.2009.” [77] To be precise the expression of “payment outside the contract” was only used after MOF had written on 11.6.2010 to terminate the contract abruptly. [78] In its letter of 11.6.2010 it was stated as follows: “Diluluskan bayaran khas di luar kontrak ke atas kerja-kerja yang telah dilaksanakan setelah kontrak ditamatkan sehingga 16 Jun 2010” 30 [79] Likewise the “Perakuan Separa Bayar” 1 and 2 which were dated 26.7.2010 and 23.11.2010 were issued after the MOF letter of 11.6.2010. Whether the abrupt termination without Notice of the Original Contract as revived by the Defendant in allowing the Plaintiff to resume completing the uncompleted Works was unlawful [80] MOF might well be unhappy that such a contract could be continued after its termination. However, to the Plaintiff, the Government acts as one and so this action instructing the Plaintiff to stop work immediately can only mean and be interpreted to mean that the Government had terminated this Original Contract that had been extended upon it being revived. This termination is unlawful anyway as no Notice of Intention to Terminate was given and no reason was given for termination. [81] The initial termination of the Original Contract had been held to be unlawful and this subsequent termination after the Original Contract had been revived and allowed to continue, without Notice and without any reason being given there for, is also unlawful in the circumstances of the case. [82] Learned counsel for the Plaintiff pointed out that despite the Timbalan Ketua Pengarah JKR taking position that PROPEL had done works valued 31 at RM20M, DW 2 confirmed that the Plaintiff was only paid about RM4.8M for works from February to June 2010. [83] The Plaintiff took the stand that throughout this period the Plaintiff was not paid for the works in accordance with the value of the same. These amounts included claims made by PROPEL. The Plaintiff on 8.11.2010 made a claim for RM36,368,814.13 which was never responded to by the Defendant despite several reminders. [84] With regards to the loss and damage incurred by the Plaintiff as a result of the delays and the termination of the Original Contract, the Plaintiff was asked to put in a Special Payment Claim on these loss and expenses. [85] On 28.2.2011 the Plaintiff submitted the same at RM68,378,874.73. [86] The Defendant did not respond to this despite a follow up letter being sent by the Plaintiff on 11.5.2011. [87] The Defendant would be liable for all losses flowing natural from the unlawful termination of the Original Contract and the Original Contract as revived not exceeding the amount claimed as may be proved. As this trial was agreed to be bifurcated, assessment of damages will be set for another day. [88] The Plaintiff, HBT had withdrawn its claim for loss of profit arising out of this unlawful termination. The reason is not difficult to find. There was a 32 prolonged negotiation where finally HBT was given the contract to finish the uncompleted works by a new Letter of Award dated 10.11.2011 for about RM47.5 m and later converted into a Lump Sum Contract dated 7.9.2011. [89] There is no suggestion that this New Contract was negotiated other than at arm’s length and there could be no loss of profit arising from what was claimed as the loss arising from being prevented to complete the Contract for the simple reason that the Plaintiff was reappointed to complete the Contract. Any profit element would of course have been costed into the New Contract. Whether the termination of the New Contract by the Government was unlawful [90] After a prolonged negotiation the New Contract was entered into vide a Supplemental Agreement signed in September 2012. The finally agreed price was for a Lump Sum Contract of RM45.9 million. [91] There was a 1st EOT under this New Contract. However the Completion Date of 21.3.2013 was fast approaching. On 14.3.2013 the Plaintiff HBT applied for the 2nd EOT on ground of inclement weather for the period of 22.11.2012 to 24.12.2012 and of the unavailability of transport 33 service for the supply of the materials by Negeri Roadstone (“NRSB”) and the EOT applied was for 60 days. [92] The reasons given are not sufficiently cogent to justify a second EOT. [93] The application must be complete and the relevant reports were not attached as supporting documents. Under Clause 43.1 of the New Contract (page 104 PBOD 5) the duty is on the Contractor to furnish the complete documents to substantiate the reason for the EOT. The Defendant in rejecting the 2nd EOT application had stated that the Plaintiff had failed to produce the weather report from the Meteorological Department. Whilst a previous weather report had been submitted for the 1st EOT application for the New Contract that was for the period of 2008 to 2012 (pages 881-887 PBOD 3). It does not cover the period applied for when the 2nd EOT application was made on 14.3.2013. Moreover it was a weather report from the site diary and not from the Meteorological Department. As pointed out by the SFC until the termination of the 2nd Contract on 23.5.2013 the Plaintiff had not forwarded the Meteorological Report or sought a fresh application from the Defendant based on a complete Meteorological Report. [94] Learned counsel for the Plaintiff had pitched his submission on the national shortage of the construction materials in the stones, crusher run 34 and bitumen to be supplied by NRSB as the main reason for applying for the 2nd EOT for 60 days. However there was no evidence adduced that there was such a national shortage. Upon a closer scrutiny of the reason given it is really a problem of lack of transportation in delivering the materials ordered. The exact words in the original language of the 2nd EOT application at pages 6-7 DBOD 3 are reproduced below: “43.1 (i) Ketiadaan khidmat pengangkutan Sepertimana pihak tuan maklum, kami telah mengikat Deed of Assignment dengan Negeri Roadstone bagi bekalan bahan pavement dan telah membuat pesanan seawal 29.10.2012

“DAMAGES FOR NON-COMPLETION 1 If the Contractor fails to complete the Works by the Date for Completion or within any extended time granted pursuant to clause 43, the SO shall issue a Certificate of Non-Completion to the Contractor. Prior to the issuance of the Certificate of Non-completion, the SO shall issue a notice to the Contractor informing the Contractor the intention of the 37 Government to impose Liquidated and Ascertained Damages to the Contractor if the Contractor fails to complete the Works by the Date for Completion or within any extended time granted.

40.2 Upon the issuance of the Certificate of Non-Completion, the Government shall be entitled to recover from the Contractor Liquidated and Ascertained Damages calculated at the rate stated in Appendix from the period of the issuance of the Certificate of Non-Completion to the date of issuance of Certificate of Practical Completion or the date of termination of this Contract. The SO may deduct such damages from any money due or to become due to the Contractor failing which such damages shall be recovered from the Performance Bond or as a debt due from the Contractor. The SO shall inform the Contractor in writing of such deduction.” (emphasis added) [101] The issuance of a CNC is also a precondition to recovering LAD from the Contractor from the date of the CNC to the date of issuance of the Certificate of Practical Completion (“CPC”) or the date of termination of the Contract. 38 [102] Whilst I agree with learned counsel for the Plaintiff that the remedy for the singular event of the Contractor not completing the works by the Completion or Extended Completion Date is the imposition of LAD, that does not mean that the Employer is precluded altogether from terminating the Contract for valid grounds. Clause 40.2 itself provides the two scenarios that may happen upon the issuance of a CNC:

The LAD would be imposed from the date of CNC to date of

The LAD would be imposed from date of CNC to date or termination of the Contract. [103] There is nothing preventing an Employer from terminating a Contractor after having issued the CNC for the grounds for a valid termination under the Contract could always be deployed by the Employer in the event that the Contractor has fallen behind the schedule of completion to such a level that the Employer could not realistically expect the Contractor to complete the Works beyond a reasonable time after the Completion Date or Extended Completion Date as the case may be. [104] An Employer is not required to bear with an agonizingly slow progress of a Contractor that is consistently falling behind the Schedule of Works whether by use of the CPM or the Sistem Kawal & Lapor (“SKALA”) 39 method of measuring progress in the works. Neither can a Contractor buy unlimited time for completion by stating that the Employer has elected to impose LAD. A frustrating delay with no remedial steps taken to accelerate the progress of the Works may go to the root of the Contract that would justify a termination on ground of failure to proceed with the Works regularly and diligently. [105] Learned counsel for the Plaintiff cited the Singapore case of Chua Chay Lee & Ors v Premier Properties Pte Ltd [2000] 4 SLR 177. [106] The contractor there had delayed completing the works for more than 12 months after the contractual completion date. The Singapore Court of Appeal held that the termination on ground of the 12 month delay was unlawful in the circumstances of the case. It observed as follows: [6] If one were to ask whether or not the respondents' delay of around 12 months for the handing over of the appellants' new apartments was an anticipatory breach which went to the root of the contract or was a frustrating delay or would lead to performance by the respondents of their contractual obligations in a manner which was substantially inconsistent with the bargain between them and the appellants, there would 40 be no reason whatsoever to disturb the finding of the judicial commissioner. … [8] The inclusion of a liquidated damages clause in the agreement showed that the parties had contemplated a possible delay in the completion of the appellants' apartments. … [9] A party to a contract may not purchase indefinite delay by paying damages. A time will come when the delay is so great that the defaulting party is guilty of repudiatory conduct. However, that point of time had not arrived when the appellants terminated the contract on 11 May 1999... … [12] Whether one applied English cases or Laurinda's case to the facts in this case, the only reasonable conclusion was that the appellants were not entitled to terminate the contract when they purported to do so on 11 May 1999. They could not show how a delay of 12 months, in the context of a 33-month period of construction, coupled with the payment of $280,500 in liquidated damages to each of them, could be a 41 frustrating delay going to the root of the agreement.” (emphasis added) [107] I must say that each case must be decided on its own particular and peculiar facts. In the Singapore case it was the construction of apartments where the owners of the existing apartments have exchanged their old apartments for new ones to be built by the developer and the owners received no monies from the developer. The appellants/owners had each received a banker’s guarantee for SGD2,805,000.00 as security for the performance of the developer’s obligations. The developer’s progress in the construction was delayed by hitches in their acquiring of adjacent land and the decommissioning of a substation on the land to be acquired. [108] In the instant case we are dealing with a Government project for the construction of a road and the upgrading of another. The public should not be put to the inconvenience of having to use roads long due for upgrading and the facility of a new road to travel and transport. It is tax payer’s money over which proper stewardship must be exercised by the Government in providing the roads as planned and promised to the rakyat under the Government’s Development Plan. [109] It is not for the Plaintiff as a Contractor to say that the Government has to be content to just imposing LAD. It is for the Government to form a 42 considered opinion as to whether the Contractor has failed to proceed with the Works regularly and diligently. Such an opinion is of course subject to review by the Court when it is being challenged by the Contractor as is the case here. It would be too simplistic an argument to say that having issued a CNC on 22.3.2013 for a case where the Extended Completion Date was 21.3.2013, the Defendant is precluded from terminating the New Contract on 9.5.2013 and would be missing the mark altogether. Whether or not the Government could terminate some 1 1/2 months after the issuance of the CNC would have to be examined to see if there was a failure on the part of the Plaintiff to proceed regularly and diligently. [110] I would prefer the case of Sanlaiman Sdn Bhd v Kerajaan Malaysia [2013] 3 MLJ 755 as authority for the proposition that an issuance of a CNC and the consequent termination on grounds of failure to act regularly and diligently are not inconsistent. Granted it was said in the context of the High Court not exercising its appellate jurisdiction but its supervisory jurisdiction in the context of setting aside an arbitral award but nevertheless the endorsement by the High Court, that the issuance of a CNC is not necessarily inconsistent with a subsequent termination on ground of a failure to proceed regularly and diligently, is instructive. The Court held as follows: 43 “[47] Seen in its entirety, I do not find the findings in the final award illogical or inconsistent. The learned arbitrator has come to definite findings on the evidence and has found the issues of CNC and EOT to be separate from the issue of failure to proceed regularly and diligently with the works which afforded a cause for termination under cl 51 of the contract. There cannot be said to be any illegality or irrationality in the Edwards v Bairstow sense, even on the assumption it applies. It cannot be plausibly concluded that on the present facts no reasonable arbitrator would have reached the same conclusions. While one can accept the principle that 'there cannot be one law for arbitrators and another for the court', and 'there is one law for all', such that if a contract is illegal 'then arbitrators must decline to award upon it just as the court would do' (per Lord Denning LJ, as he then was, in David Taylor & Son Ltd v Barnett Trading Co [1953] 1 WLR 562), it is equally important to realize the limits of the court's jurisdiction in these matters, which is limited to the correction of 'arbitral' not 'appellate' errors.” (emphasis added) [111] I see no contradiction in this case in the Government having issued CNC on 22.3.2013 and then issuing a Notice of Intention to Terminate on 28.3.2013 for failure to proceed regularly and diligently with the works. It is 44 an option open to the Government as Employer to decide whether this is a suitable case for merely charging LAD of a mere RM8,589.99 or to terminate the contract on the ground of failure to proceed regularly and diligently. [112] The comment of the learned author Chow Kok Fong in the Law and Practice of Construction Contracts, Fourth Edition, Thomas Reuters at paragraph 13.70 is instructive: “13.70 As noted earlier, most modern construction contracts contain provisions which enable an employer to terminate the contract where there are sufficient indications to suggest that the original contractor is unlikely to complete the works within an acceptable time frame. This recourse is premised on the existence of an obligation on the part of the contractor to sustain a reasonable rate of progress with the works, an obligation which is distinguishable from the more obvious obligation of completing the works on time. The learned editor of the Hudson 12th Ed considering that such an obligation must, if necessary, be implied. He suggested that it would be absurd if the owner was to be without remedy until perhaps after a distant completion date, and then only for the perhaps inadequate damages 45 resulting from late completion simpliciter. It was further pointed out that, by that time, a failing contractor might well be in liquidation. The learned editor considered that, at any rate, in situations where the works are to be completed within a reasonable time, the period to be allowed for the completion of the works can only be established on the assumption that the contractor does proceed with due diligence.” (emphasis added) [113] The ground for issuing the Notice of Intention to Terminate is that of failure to regularly and diligently proceed with the works. As at the date of termination, according to the Government who had used the SKALA Method, the completion was 69.2% and according to HBT that used the Critical Path Method (“CPM”) it was 78%. [114] In Kerajaan Malaysia v Ven-Coal Resources Sdn Bhd (supra) it was observed that: “[40] ...The CPM is nothing more than a guide with respect to the sequence and schedule of works and may be used as a guide in the SO exercising his discretion in whether or not to grant an EOT and if so for how many days...” (emphasis added) [115] As it has been held that the S.O. had correctly exercised his discretion to refuse the 2nd EOT application after considering the reasons 46 put forward by the Plaintiff, then Court would have to look at the delay vis-a-vis the Extended Completion Date of 21.3.2013 and the progress of the works as at the date of Termination. [116] The learned SFC explained that the CPM is nothing more than a plan of work, prepared by the Plaintiff and to be approved by the Defendant. This plan of work is subject to revisions and amendments if the need arises, particularly when the Plaintiff is unable to carry out the works as planned. It is a plan of work to be followed by the Plaintiff in carrying out the works. The Defendant also referred to the case of Kerajaan Malaysia v Ven-Coal Resources Sdn Bhd (supra) as follows: “[41] The importance and implication of non-compliance with the CPM must be kept in its proper perspective. As explained in Roberts & Schaefer Co v Hardaway Co, a decision of the United States Court of Appeals for the Eleventh Circuit No 97–2664 at p 5: A CPM is a standard construction device used to plan the activities of a construction project in a logical, orderly sequencing manner citing durations for the different activities from the beginning of the job to the end. A CPM is created by dividing the entire project into discrete and quantifiable steps; in turn, each step is allotted an estimated 47 time of completion. Ultimately, each step is arranged into a chronological sequence, thus revealing the anticipated length and structure of the entire construction schedule. In addition to serving as a road map for the contractors to determine when and where their work fits into the overall construction sequence, the CPM also assists contractors in assessing their hiring and material purchasing needs.” [117] Sistem Kawal & Lapor or SKALA which is a nice acronym [DBOD-3 p. 421-425] on the other hand is the end result of the assessment of value of work done at site. The value of work done which was assessed periodically will be inserted into SKALA and it will be reflected in terms of percentage of work done. This is explained by DW4 [A12 & A15 DW4-WS]. [118] As explained by DW 4, assessment on Site will be made with CPM as a guideline. The physical progress of the work can be assessed based on CPM. However the financial value of work done will be assessed not based on CPM, but based on the value of work stated in the Bill of Quantities (BQ). This financial value represents the accurate value of work done vis-à- vis the contract sum. This financial value is the value reflected in SKALA [A14, A15 & A16 DW4-WS]. 48 [119] As can be seen, both the CPM and SKALA methods are different tools for measuring the progress of the scope and schedule of works. The CPM was used with respect to measuring the physical progress of the works whereas the SKALA was used to measure the financial progress. Both are valid methods and one is not superior to the other. Little wonder that some contracts refer to financial completion rather than physical completion and parties may even specify the difference in percentage between the contractual completion and actual completion, be it physical or financial, before there could be a termination. [120] When properly viewed, there is no disparity between the 2 different sets of figures in the CPM that the Plaintiff had relied on and the SKALA that the Defendant had relied on. [121] Before issuing the Notice of Intention to Terminate there were Warning Letters given where the percentage of completion was based on CPM. [122] The Notice of Intention to Terminate dated 28.3.2013 [DBOD-1 p. 230-233] where the percentage is 69.2% was based on financial progress. [123] The Notice of Termination dated 9.5.2013 [DBOD-1 p. 237-239] where the percentage remained at 69.2% where financial progress is concerned. 49 [124] There is no disparity on the percentage of the work’s progress stated above. This is because the percentages in the warning letters were calculated based on CPM and the percentages in the notices were calculated based on SKALA. As between the percentages calculated based on CPM themselves, the percentage stated in a later letter dated 28.2.2013 was lower at 75.39% than the earlier letter dated 6.2.2013 of 81.0% because the CPM was revised. As between the percentages calculated based on CPM and SKALA, the percentage stated in a later notice was lower than the earlier letter because the percentages based on CPM are physical percentage while the percentages based on SKALA are financial percentage. [125] I agree with the learned SFC that even if such differences of percentages were to be treated as disparity, the disparity does not affect the validity of the termination. This is because the reason for the termination of the New Contract is the failure of the Plaintiff to proceed with the works regularly and diligently. By referring to the percentages, without explaining the differences, it can be seen that in every letter and notice that the Plaintiff had failed to achieve the targeted percentage that the Plaintiff should have achieved. Where there is no expressly stated objective difference in the percentage of completion between the contractual 50 completion and actual completion, be it physical or financial progress, the Court would have to consider in each case where the difference was big enough to justify termination bearing in mind also the progress if any between the Notice of Intention to Terminate and the progress at the date of Termination. [126] During the 14 days period given via the Notice of Intention to Terminate dated 28.3.2013 and even up to the date of Termination on 9.5.2013, the Plaintiff still failed to proceed with the works regularly and diligently. This is based on the assessment made by the Defendant on site where it was found that only minimal works were done by the Plaintiff with few machineries and workers [DBOD-3 p.287-381]. [127] The Defendant relies on the case of Kerajaan Malaysia v Ven-Coal Resources Sdn Bhd (supra) where the Court had made several references as follows: “[35] In West Faulkner Associates v London Borough of Newham

42 ConLR 144 it was held as follows: In the JCT contracts the phrase requiring the contractor ‘to proceed regularly and diligently with the works’ means that the contractor must proceed continuously, industriously and efficiently with appropriate physical 51 resources so as to progress the works steadily towards completion substantially in accordance with the contractual requirements as to time, sequence and quality of work. The clause requires the contractor to proceed both regularly and diligently. Failure in either respect entitles the employer to terminate the contract.” [36] The learned authors Chappeil, Marshall, Powell-Smith and Cavender in Building Contract Dictionary (3rd Ed), at pp 348–349 explained the meaning of the phrase ‘regularly and diligently’ as follows: “…This phrase probably means more than an express restatement of the contractor’s common law obligation as to progress ie it must bear some relationship to the specified date of completion and his progress must be constant, systematic and industrious. Whether or not the contractual standard is achieved is probably best judged objectively having regard to such matters as: - The number of men retained on site compared to the number one would expect to be needed by a 52 competent and experienced contractor faced with the same relevant commitments. - The plant and other equipment employed on the work in relation to the type and volume of work to be undertaken in the time available for completion. - The progress actually being made on the site relative to the volume and complexity of the work still to do to achieve contractual completion. A slow rate of progress judged against the performance of other contractors is an indicator that the contractor is not proceeding ‘regularly and diligently’ although low productivity on site may well be explained by other factors which are outside the contractor’s control. Hence, account must also be taken of any extenuating circumstances that are outside the contractor’s control which are hindering, or which may in due course hinder or prevent, the desired rate of progress. There is also at least one line of authority making it clear that merely going slowly is not, in itself a breach of contract and it will always be a difficult question to decide whether a contractor’s progress amounts, in fact, to a failure to proceed 53 regularly and diligently. However, the Court of Appeal has now given some useful guidance on the matter. ‘What particularly is supplied by the word ‘regularly’: is not least a requirement to attend for work on a regular daily basis with sufficient in the way of men, materials and plant to have the physical capacity to progress the works substantially in accordance with the contractual obligations. What in particular the word ‘diligently’ contributes to the concept is the need to apply that physical capacity industriously and efficiently towards the same end. Taken together, the obligation upon the contractor is essentially to proceed continuously, industriously and efficiently with appropriate physical resources so as to progress the works steadily towards completion substantially in accordance with the contractual requirements as to time, sequence and quality of work’: West Faulkner Associates v The London Borough of Newham

11 Const LJ 157 per Simon Brown LJ at 161. That view usefully expands on previous judicial opinion which acknowledges that whereas the words generally convey a sense of activity, of orderly progress, of industry and 54 perseverance, ‘such words provide little help on the question of how much activity, progress and so on is to be expected…’: London Borough of Hounslow v Twickenham Garden Developments Ltd (1970) 7 BLR 81 …” [128] Based on the percentage of completion, whether one follows the SKALA method or CPM method, I am of the view that there were valid reasons for terminating for the ground stated. The 2nd EOT application was only for 60 days and even after the notice period to rectify the breach there was a lapse of about 42 days and realistically HBT could not have completed on time the works. Being a public works project it is for the Government to determine whether and for how long they should wait before terminating when the Plaintiff as Contractor has not engendered confidence in taking remedial actions to catch up from where they had fallen behind be it in coming up with an accelerated program or increasing the number of staff or machineries at the Site. The Court does not have to defer to the opinion of the Government in a matter of terminating the Contract where delay consequential upon a failure to proceed regularly and diligently is concerned but the Court must be satisfied that there are reasonable grounds in the circumstances to terminate the Contract. 55 [129] I have found that the Government had reasonable ground to terminate based on a failure of the proceed regularly and diligently after the Extended Completion Date and after the Notice of Intention to Terminate had been issued. [130] Therefore I find the termination of the New Contract to have been lawfully made. Pronouncement [131] I shall now address the issue of the heads of damages for assessment of damages as parties have agreed that the trial was on the basis of determining liability. Subject to the Plaintiff satisfying the Court as to their entitlement to claim under the respective clauses of the Original Contract, the assessment of damages shall be for the following:

para 67(e) Bundle of Pleading (“BOP”) Amended Statement of Claim-This is a claim for Loss and Expense and subject to HBT’s entitlement to this claim and KM raising the necessary objection, this head of claim shall not exceed the sum named as RM68, 378,874.73 after HBT has proved on the balance of probabilities the quantum;

para 67(g) is a claim damages suffered and amounts unpaid by the Government during the period of the extended contract from 23.2.2010 to 16.6.2010 not exceeding the amount claimed of RM36,368,814.13;

para 67 (i) is the claim for damages suffered during the “floating period” before the New Contract was awarded to HBT and this claim shall not exceed RM1,113,225.90;

Interest as claimed at 5% per annum from date of filing of HBT’s writ. [132] For avoidance of doubt I state that HBT is not entitled to any claim for loss of profit under the Original Contract or under the Original Contract extended which was abruptly terminated on 16.6.2010 for the reasons given. At any rate the Plaintiff had withdrawn this head of Claim and so this head of Claim had been struck out. [133] As I have also held that the termination of the New Contract is validly done, it is for the Government to decide whether or not to bring any claim. [134] As for the Suit 2016 brought by the Government for loss of profit, since I have held that the termination of the Original Contract was unlawful, I would dismiss that claim altogether. 57 [135] After hearing the parties on costs, parties agreed that the Government shall pay HBT the sum of RM35,000.00 as agreed costs and allocatur to be paid before extraction the judgment of the Court. Dated: 23 March 2018 - signed - Y.A. LEE SWEE SENG Judge Construction Court High Court Kuala Lumpur For the Plaintiff in : Harvinderjit Singh together with suit No: 21C-2-06/2015 Sarah Felix For the Defendant in suit (Messrs Vin Law Co.) No: 21C-2-03/2016 For the Defendant in : Ahmad Hanir (SFC) for 2015 suit Suit No: 21C-2-06/2015 Saravanan (FC) together with For the Plaintiff in Suit Salehuddin Md Ali (SFC) for 2016 Suit.