La Leisure Pty Ltd v Sabrecraft Marine Sdn. Bhd. (BA-22NCC-123-10/2021)

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DALAM MAHKAMAH TINGGI MALAYA DI SHAH ALAM DALAM NEGERI SELANGOR DARUL EHSAN GUAMAN NO.: BA-22NCC-123-10/2021 ANTARA LA LEISURE PTY LTD (No. Pendaftaran Syarikat: ACN 161 526 450) (mendakwa sebagai Pemegang Amanah kepada LAT Unit Trust)

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SCHEDULE 5-STORAGE FEES Penalty Fees: $ 750.00 per day [14] Applying clause 17.1 of the Agreement that the construction of the Agreement is not to be affected by any headings, this Court construes Clause 6 as being entirely applicable to any material delay events, including those not amounting [15] Further, having regard to the delay events complained of by the 1st Defendant, the above Clause 6 is also to be read together with: CLAUSE 2 MODIFICATIONS AND CHANGES TO THE 2. SPECIFICATIONS 1 No modifications or changes to the Specification, Delivery Date and/or price shall be binding on the Parties unless and until set out in writing and signed by both Parties 2.2 The Builders shall have the right to refuse to agree to any modification or change to the Specification or Plans. The Builders must act reasonably in considering any request for modification or change to the Specification or Plans [16] Thus, changes to the specification of the Vessel as set out in

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Schedule 1 to the Agreement (Sabre Craft Vessel Specifications and Inclusions) were also contemplated events provided for in the Agreement. The 1st Defendant was entitled to refuse to agree to any modification or change to the Specification or Plans. [17] Having acted reasonably in acceding to any requests made by the Plaintiff whether or not they amounted to a change of specification, the parties must be deemed to have either waived clause 2.1 or considered that clause 2.1 did not apply to the requests. [18] The Plaintiff is not expected to have the expertise to know the time-delay and cost impact for any change of specification to the Vessel. Since the 1st Defendant alleged that the delay events were caused by the Plaintiff, the onus was on the 1st Defendant to assess the time-delay impact of any delaying event (including changes in specifications), if any, and notify the Plaintiff so that an extended Delivery Date could be agreed upon. [19] As noted therefore, the 1st Defendant did not invoke the provisions in clauses 6.2 and 6.3 of the Agreement at any time nor for the purposes of this litigation, undertake any delay analysis to connect these alleged delay events to the ultimate period of delay in the construction of the Vessel. Strictly speaking then, the 1st Defendant impliedly undertook to carry on the build with the Delivery Date remaining unchanged. [20] However, despite the extended delays in the construction, the Plaintiff did not make any claim for liquidated delay damages and neither party terminated the Agreement. Time was at no point treated as being of the essence of the Agreement. [21] The Court interprets the conduct of the parties to mean that the Plaintiff had also waived clause 6.4 of the Agreement and implicitly agreed to extend the time for completion. No new fixed timeline or schedule being in effect, this Court finds that the Delivery Date was for the most part, at large. This simply means that the Vessel must be completed within a reasonable time. [22] The Plaintiff took the position that the Delivery Date remained 8-6- 2017, while the 1st Defendant took the position that it was justified in not delivering the Vessel at all. The true position is somewhere in between, but there is insufficient material for the Court to attempt a technical time-delay analysis of what a reasonable revised date of completion should be. [23] In any case, the 1st Defendant never completed the Vessel for the Plaintiff and as shown later, stopped work in September 2019. This Court has thus only considered the subjective evidence adduced about the relative culpability of the parties for the delay events to ascertain if they were contributing factors that justified the 1st Defendant stopping work in September 2019. [24] I deal with the 1st constant change requests in the specifications of the Vessel in the next section on stoppage of construction. This is because the 1st basis for stopping work was an alleged unpaid invoice for variation works. Before that, and for completeness, I have also considered the following other delay events for their effect in the scheme of things: a) Copyright issues with the design provided by the Plaintiff [25] The copyright in certain aspects of the original design of the Vessel belonged to one Damien Smith. It is not in dispute that the design of the design. This was resolved by the Plaintiff as early as 11-2-2017, before the Agreement was signed. [26] It was thus established early on in the cross examination of the 3rd Defendant, Stephen John Stirrup (DW-1), that the copyright issue did not cause any delay to the construction of the Vessel. Accordingly, this Court finds that the copyright issue has not been shown to be a valid delay event at all. b) Delay in confirming which drive to use on the Vessel [27] The specification for two (2) Q-SPD Surface Drives for the Vessel was in the original Agreement. It would appear from the evidence that the issue of delay in confirming which drive to use on the Vessel arose because the 1st Defendant had not ordered the identified drives from the supplier along with the orders placed for other materials at the start of the Agreement. This resulted in those identified drives becoming unavailable and the 1st Defendant proposing alternative options to the Plaintiff. [28] The Plaintiff argued that the 1st Defendant had not only failed to place the order for the drives when it should have, but also misled the Plaintiff into believing that the drives would arrive around 26-4-2017 along with the other parts ordered. The 1st Defendant only notified the Plaintiff on 14-6-2018 that the drives were no longer available, leading to the discussion about alternatives. [29] The 1st Defendant did not explain the failure to secure the original drives, but contended that it was the Plaintiff who subsequently delayed in deciding on which of the alternatives to pick, in that until 3-10-2018, the Plaintiff had not made a decision in respect of the type of drive units to be used. [30] Reviewing the evidence as a whole on this issue, I find that the 1st picking the type of drives to be used on the Vessel from the outset, but this is not the case. The Plaintiff did not cause this delay, the 1st Defedant did. [31] Ultimately, it is not disputed that the Plaintiff purchased and paid AUD68,162.00 for the 2 Q-SPD Surface Drives separately on 6-11-2018 and 10-2-2019 to the vendor, Q-Marine International Ltd, and that the drives arrived in mid-April 2019. No evidence was led that the 1st Defendant was unable to complete the Vessel because the 2 Q-SPD Surface Drives had not arrived in time. c) Delay in lodging paperwork with AMSA [32] The 1st Defendant pleaded that the Plaintiff lodged the paperwork on 13-12-2018 after which AMSA informed that they had changed their system and/or regulations and that the 1st Defendant had to redesign the Vessel pursuant to the new regulations. [33] The delay question relates to the issuance by AMSA of a Unique Vessel Identification (UVI) number for the Vessel, whose responsibility it was to lodge the paperwork on the AMSA website to get the UVI issued and the consequences of the delay. [34] In this case, the Plaintiff had initiated the inquiry with the 1st Defendant in October 2018 whether the application had been lodged. There was a third party marine surveyor involved who had advised that due to changeover from a prior system used by AMSA, the original application was void. [35] The Plaintiff contended that it was the 1st to lodge all necessary paperwork with AMSA, while the 1st Defendant testified that in the end, they undertook this task to avoid further delays. [36] No expert evidence was called to testify to the question of whose responsibility it was. There was also no evidence on who lodged the original application which became void. This Court is not in a position to determine this issue otherwise than according to the available material. [37] On this, there are the following contractual provisions in the Agreement: The Builders warrant to the Purchaser that on delivery the Vessel will comply with: 8.2.1 Any other requirements or regulations which may be agreed in writing between the parties. 8.2.2. All Australian Standards applicable to the Vessel to be Since no evidence was led and no submissions were offered on this, its relevance to the delay in the lodgment of paperwork with AMSA is unclear but it appears to be part of the 1st the Vessel will be compliant with regulations (UVI registered) and standards (AMSA design requirements). [38] In any case, no evidence was led by the 1st Defendant to prove that the delay in lodging the AMSA paperwork contributed to the overall delay in completion of the Vessel. No mention of this factor was made at any material time in the course of the build. Stoppage of Construction Whether the 1st Defendant was entitled to stop construction and/or claim storage charges [39] The payment terms in the Agreement are set out here: 3.2 The Builders shall give the Purchaser of the anticipated date of completion of each stage of construction as provided in Schedule 2 by way of a valid tax invoice. On expiry of such notice the relevant Payment will become due within 7 days and payable in full without discount, deduction or set off.

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SCHEDULE 2-PAYMENT Payments 40% On confirmed order, based on contract value 20% On arrival of Aluminium plate to Sabrecraft factory 15% On arrival of Engines to Sabrecraft factory 10% On completion of main structural aluminium works 8% On successful completion of sea trials 7% Prior to vessel leaving factory for delivery at Darwin 4. CLAUSE 4 UNPAID INSTALLMENTS 1 If the Purchaser fails for any reason to pay the full amount of any Payment or other sum due to the Builders on the due date the Builders shall be entitled to stop construction of the Vessel until all outstanding Payments have been paid in full, and the Delivery Date shall be extended. The Builder will notify the Purchaser the time for the extended period within 7 days after re- [40] It is not in dispute in this case that the Plaintiff had made the following payments under the Agreement and from time to time, as additionally requested. The particulars of payments made by the Plaintiff are as follows: [41] The provision in Clause 4.1 of the Agreement allowed the 1st Defendant to stop construction if there was any payment or other sum due to it. At some point in or around September 2019, the 1st Defendant stopped construction of the Vessel on account of alleged unpaid invoices for variation works and storage charges. [42] The invoices for variation works and storage charges were issued by the 3rd Defendant to the Plaintiff by email on various dates, but tracing the documentary evidence adduced, it can be discerned that: (a) Vide an email dated 17-12-2018, the 1st Defendant requested for additional payment, including an additional AUD45,000.00 to change the drawings, get the drawings approved again and remove and rebuild sections of the vessels including the platform, toilet, ramp, bollards, console and rear roof (b) As at 17-12-2018, the pending payment was for invoice amount AUD69,640.00 and included the 5th Payment of 8% of AUD438,000.00. (c) The payment of AUD69,640.00 was made by the Plaintiff on 19-12-2018. The 1st Defendant indicated that completion date was now 26 weeks from the date of receipt of the funds. (d) On 14-4-2019, the 1st Defendant issued an e-mail to the representative at the 1st indignantly (e) On 25-9-2019, the 1st Defendant issued Invoice No. 250919 dated 25-9-2019 for what appears to be daily storage charges for 14 days at $750.00 per day or $11,550.00 with GST. (f) Vide the same email on 25-9-2019, the 1st Defendant also attached Invoice No. 110919 dated 11-9-2019 issued to the Plaintiff for what appears to be described only as including GST. The 1st Defendant stated here that: Advise me once these have both been paid and we will (g) On 26-9-2019, the Plaintiff replied to ask Please advise why you are storing the vessel while the (h) Thereafter, the 1st Defendant continued to send invoices for storage at the rate of $750.00 per day. On 7-12-2019, the 1st Defendant sent the following email to the Plaintiff: Charlie, Attached are invoices for storage and the variations todate. These need to be paid in full before any more work is done to complete the vessel and ship. As soon as the invoices are paid in full we will continue back onto this project as there is little left to do now. In terms of completion, time it will be around 6 weeks before it is ready for sea trials and then shipping As I said before we started the previous lot of changes, there were to be no more. This new lot of changes are what you wanted, not Sabrecraft and you cannot seriously expect the changes to be done for free Again Sabrecraft Marine cannot be expected to be a storage facility or a source of your changing desires in how you want the vessel. Sabrecraft has no desire to have his vessel taking up production space in the factory, it has to be finished and moved out Do not pay into the Australia account as previous, we can no longer accept payment for Sabrecraft Marine via the SMA account. Pay into the Malaysian account a shown on the invoices. (i) As at 8-6-2020, the Statement of Invoices from the 1st Defendant amounted to AUD286,060.00. (j) On 4-5-2021, the 1st Defendant sent a further email to the Plaintiff that ended in these terms: the storage fees or modifications without proceeding to litigation (this may take years for an outcome), Sabrecraft Marine Sdn Bhd is not willing to waste any further money storing the vessel. To mitigate the losses already incurred and future losses, Sabrecraft Marine Sdn Bhd has sold the vessel. As part of the impending litigation, this sale amount will be deducted from [43] The 1st on the Vessel depends on whether the alleged outstanding invoices were legitimately due and payable by the Plaintiff. The analysis is as follows: a) Variation Works [44] The issue of variation works was the main plank of the defence case i.e. that the Plaintiff made constant requests for changes to the specifications of the Vessel. The pleaded particulars of change in specification related to the windshield design, deck layout and various changes queried about and/or requested in an email from the Plaintiff on 17-7-2017. [45] The Plaintiff took the position that any changes taken up by the 1st Defendant were minor and directed at simplifying the build. Considering the timeframe when they were communicated, the Plaintiff further contended that the changes requested had no time impact on the construction of the Vessel and that the 1st Defendant had readily agreed to them with no notification of any time and cost impact on the build. [46] The 1st Defendant contended that even minor changes required re-submission of the design drawings for regulatory approval. However, the 1st Defendant did not go on to prove that the changes affected the schedule for the construction of the Vessel and if so, to what degree. [47] The best evidence of the re-programmed construction timetable for the Vessel is the 1st Defendant email dated 17-12-2018. As at that date, the 1st Defendant had: (a) invoiced an amount AUD69,640.00 for the agreed variation works together with the 5th Payment of 8% of AUD438,000.00; and (b) indicated that the revised completion date for the Vessel was then to be 26 weeks from the date of receipt of the funds. [48] The payment of AUD69,640.00 was made by the Plaintiff on 19-12- 2018. Thus, without any judgment on the reasonableness or otherwise for this new deadline according to the 1st Defendant, the revised Delivery Date was to have been around July 2019. [49] In other words, the pleaded changes to specifications raised by the 1st Defendant were in truth, non-issues in this action. This is because the 1st Defendant only identified changes in specifications that were attributed to the Plaintiff as at July 2017. [50] The changes complained of were paid for and also apparently factored by the 1st Defendant in the reckoning of time for the delivery of the Vessel. There is no evidence of any subsequent change requests by the Plaintiff affecting the construction of the Vessel. [51] The 1st Defendant relies on Invoice No. 110919 dated 11-9-2019 totalling $91,916.00 or, per a re-issued Invoice No: 071219B dated 7-12-2019 with the same description, $83,560.00 without GST. [52] There are no particulars of the variation works referred to in either invoice. There was also no attempt by the 1st and/or 3rd Defendants to lead any evidence during the trial, to e referred to, how they were valued and the outcome of the said variations. [53] As part of the 1st were no pleaded particulars of the alleged unpaid invoice for variation works. Taking into account the informal conduct of the parties in the performance of the Agreement, there was also no evidence led by the 1st Defendant on the specifics of alleged further change requests by the Plaintiff. [54] In other words, there is no cogent evidence to demonstrate that any further variation works were carried out to justify a claim by the 1st Defendant on Invoice No. 110919 and/or Invoice No. 071219B. b) Storage Charges [55] In the counterclaim, the 1st Defendant claims a total of AUD538,810.00 as storage charges. According to the first of the daily storage invoices issued by the 1st Defendant, namely Invoice No. 250919 dated 25-9-2019, the claim was for daily storage charges for 14 days at $750.00 per day or $11,550.00 with GST. [56] There is no explanation why the 1st Defendant had stopped work 2 weeks prior as at 11-9-2019, other than that Invoice No. 110919 dated 11- 9-2019 for variation works had not been paid. [57] Further, it is unclear if the 1st Defendant had a contractual basis to claim storage charges at all. It states in Clause 5.7 of the Agreement that storage charges are only applicable for storage necessitated at the end of the build. There is no contractual right to do so mid-way through the build: If the Purchaser fails to take delivery of the Vessel or fails to pay any outstanding sums due to the Builders then, in addition to any other rights which the Builders may have, the Builders shall be entitled to require the Purchaser to pay such reasonable berthing and/or storage charges as the Builders shall notify to the Purchaser together with any other expenses reasonably incurred by the Builders, including but not limited to insurance, storage, maintenance and lifting of the Vessel in or out of the water until [58] The commercial basis of the Agreement appears to be that the 1st Defendant was to continue the construction of the Vessel to completion. In any case, the Court has found that the 1st Defendant had no basis to move the partially built Vessel into storage as there were no unpaid invoices legitimately due to the 1st Defendant. [59] In relation to the 1st it is also noted that Clause 5.7 of the Agreement refers only to reasonable storage charges as the 1st Defendant shall notify to the Plaintiff i.e. there is no applicable contractual storage charge to be imposed. There was no attempt to justify the $750.00 per day charged as reasonable. [60] The reason for the omission may be that the 1st Defendant relied on Schedule 5 of the Agreement to impose storage charges of $750.00 per day. However, this Court construes the charge of $750.00 per day in

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Schedule 5 as the penalty fee for late delivery under Clause 6.4 since the body of the Agreement in Clause 6.4 makes specific reference to

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Schedule 5 for that purpose. [61] As this Court has found that the 1st Defendant has not made out its right to claim on Invoice No. 110919 and/or Invoice No: 071219B, it also finds as a corollary to that, that the stoppage of works and the removal of the Vessel into storage by the 1st Defendant are unjustified. Total Failure of Consideration Whether the Plaintiff had fully paid for the Vessel including variation works and whether there was total failure of consideration? [62] As mentioned, it is not in dispute that the Plaintiff had paid the 1st Defendant AUD441,940.00 for the Vessel including variation works and AUD68,162.20 to Q-Marine International Limited for 2 Q-SPD Surface Drives, propeller and shaft which were delivered to the 1st workshop for installation on the Vessel. It is also not in dispute that the 1st Defendant failed to deliver the Vessel in any shape or form to the Plaintiff. [63] The Plaintiff submitted that there was a total failure of consideration for the monies paid and claimed for the return of the monies spent on a restitutionary basis. This will be dealt with in more detail under the assessment of damages section of this judgment. As a prelude, the legal basis fo simply a breach of contract. There is no plea of a quasi-contractual claim in unjust enrichment or money had and received as it relates to the monies spent in the performance of the Agreement. [64] Total failure of consideration is not a cause of action and cannot be looked at in isolation. The Federal Court in Berjaya Times Square Sdn Bhd v. M-Concept Sdn Bhd [2010] 1 CLJ 269 has context of the limited common law right of rescission. [65] The following statement is part of the illuminating judgment of the late Gopal Sri Ram FCJ in Berjaya Times Square : That said, it is now settled that there is, at common law, a right to rescind a contract in very limited circumstances. In essence it is the quasi-contractual remedy of restitution in cases where there has been a total failure of consideration. In Fibrosa Spolka Akcyjna v. Fairbairn Lawson Combe Barbour Ltd [1943] AC 32, 48, Viscount Simon LC said: ... in the law relating to the formation of contract, the promise to do a thing may often be the consideration, but when one is considering the law of failure of consideration and of the quasi-contractual right to recover money on that ground, it is, generally speaking, not the promise which is referred to as the consideration, but the performance of the promise. The money was paid to secure performance and, if performance fails the inducement which brought about the payment is not fulfilled. If this were not so, there could never be any recovery of money, for failure of consideration, by the payer of the money in return for a promise of future performance, yet there are endless examples which show that money can be recovered, as for a complete failure of consideration, in cases where the promise was given but could not be fulfilled... [18] What has to be added to the learned Lord Chancellor's view is the qualification: ... that failure of consideration does not depend upon the question whether the promisee has or has not received anything under the contract... but rather whether the promisor has performed any part of the contractual duties in respect of which the payment is due." (Stocznia Gdanska SA v. Latvian Shipping Co [1998] 1 All ER 883, per Lord Goff of Chieveley) In other words, 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 [66] The issue was also addressed in a subsequent Federal Court case of Damansara Realty Bhd v Bungsar Hill Holdings Sdn Bhd & Anor [2011] 6 MLJ 464 : work has been done indicating that the development or construction had commenced, there would be no total failure of consideration because the promise had been performed although not in its entirety. On the facts of that case the decision may be supportable. But we do not agree with the stand that there can be no total failure of consideration so long as part of the promise has been fulfilled. [59] In our view, whether or not there has been total failure of consideration is a question of fact which can be resolved by looking at the circumstances of the case. Each case has its own peculiar facts. No two cases can be said to be identical although they may be similar. We are inclined to take the view that minimal works such as getting development permission orders or taking possession over the land for development purposes may not in most instances fall on the same side as Berjaya Times Square Sdn Bhd. This is simply because such an interpretation does not make commercial sense. What good is a mere foundation of an office building to a company? In such circumstances, it must be taken as if the promise had not been fulfilled in its entirety. [60] In fact in Berjaya Times Square Sdn Bhd, it did not rule as wrong the conclusions in the cases which allowed termination of the respective contracts on the ground that there was failure to complete the contractual works (see Tan Yang Loong & Anor v. Newacres Sdn Bhd [1992] 3 CLJ Rep 666; [1992] 1 MLJ 289; Chye Fook v. Teh Teng Seng Realty Sdn Bhd [1989] 1 MLJ 308; Law Ngei Ung v. Tamansuri Sdn Bhd [1989] 2 CLJ 44 (Rep); [1989] 2 CLJ 181). As such the principle should therefore be this. There is a total failure of consideration (and a failure to perform a promise in its entirety) where a reasonable and commercially sensible man would look upon the project of having little or no value at all. If the reasonable and commercially sensible man sees the performance of the contract of having some value, it should be taken that there has been no total failure of consideration and accordingly the promise has been performed in part. In the earlier instance, there is a right to terminate the contract, but not in the latter instance. [67] It is not clear if the above dicta in Damansara Realty has conflated the idea of termination for fundamental breach and common law rescission in the sense described in Fibrosa Spolka Akcyjna v. Fairbairn Lawson Combe Barbour Ltd [1943] AC 32 or whether it is expressing the de minimis rule to the commercial value of what has been performed to ascertain whether there is a total failure of consideration. [68] For the present purposes, it suffices to say that Damansara Realty did not change the perspective from where value is to be assessed in determining whether there is total failure of consideration i.e. it is from the perspective of the promisor what was performed by the promisor as opposed to what the promisee received. [69] In this case, there is evidence that the 1st Defendant partially performed the Agreement to such a degree that the Plai claim was for possession of the Vessel. Both parties treated the Agreement as afoot throughout. Therefore, this Court finds that there was in the sense explained above. [70] The upshot is that as far as liablility is concerned, there is clearly a breach of contract by the 1st Defendant in ultimately failing to deliver the Vessel to the Plaintiff, but no total failure of consideration The only defence that the 1st Defendant has in effect pleaded is the defence of set-off which I have rejected in dismissing the 1st it relates to the variation works and storage charges above. Sale of the Vessel Whether the 1st Defendant is entitled to sell the Vessel and/or whether the 1st Defendant committed conversion [71] According to the 1st Defendant, the Vessel was sold to the 2nd Defendant to m outstanding invoices issued to it. The Plaintiff has not pleaded any material facts against the 2nd Defendant other than that it is the party to whom the Vessel appeared to have been sold. [72] During the trial, one Glenn Wallace (DW-2) gave evidence in his capacity as a director of the 2nd Defendant. As submitted by the Plaintiff, evidence had emerged that according to the Plaintiff, cast doubt whether the Vessel was really sold to the 2nd Defendant or if the whole transaction was a ruse. [73] DW-2 claimed to have negotiated a private sale of a partially built vessel from the 1st Defendant for RM414,000.00, to be used in his retirement as a fishing boat. The Plaintiff highlighted that the Vessel is a 50-seater ferry and tendered evidence from the 1st advertising the sale of another vessel fitting the description of the Vessel for USD1.7 million. [74] As noted however, the Plaintiff has abandoned its prayers for the recovery of possession of the Vessel. There is accordingly also no relief claimed against the 2nd Defendant. [75] That said, the Court must still determine whether the 1st Defendant was entitled to sell the partially built Vessel as justification for ultimate non-delivery of the same to the Plaintiff. On this point, I find that even if there were invoices legitimately due to the 1st Defendant that the Plaintiff had refused to pay, there were also contractual provisions in the Agreement that contemplated such event and provided for it. [76] Clause 4 of the Agreement makes it clear that the remedy for the 1st Defendant in the event of any unpaid invoice, is to require payment and complete the construction of the Vessel or to terminate the Agreement and sell the Vessel. 4. CLAUSE 4 UNPAID INSTALLMENTS 3 prejudice to any other rights, be entitled: 4.3.1 to require payment from the Purchaser forthwith of the balance of the Contract Price then outstanding and to complete the construction of the Vessel; or 4.3.2 to terminate this Agreement and to sell the Vessel pursuant to Clause 10.2. 4.4 The Purchaser shall in addition be liable for any loss or damage, special and or direct losses incurred by the Builders as a result of the delay in the payment of the Payments or any this clause is limited to the Contract Price and will under no circumstances exceed the Contract Price. 10. CLAUSE 10 TERMINATION 2 If the Builders exercise their right to terminate this Agreement under Clause 10.1 they shall be entitled to sell the Vessel, the materials and the equipment and/or any other property of the Purchaser in the possession of the Builders for the purpose of the construction of the Vessel. The Builders shall give the Vessel and/or other property and such notice shall give details of the reasons for the sale including details of any sums due and payable to the Builders together with the details of the proposed method of sale. Following the sale of the Vessel and/or other property the Builders shall repay to the Purchaser the balance of the proceeds of sale after deduction of all sums owing to the Builders and all reasonable legal or other expenses including, but not limited to, the costs of sale and maintenance and storage charges. 11. CLAUSE 11 OWNERSHIP OF THE VESSEL 4 If the Purchaser is in breach of any of the terms of this Agreement after the property in the Vessel and/or materials and equipment has passed to him and the Builders wish to exercise their right to sell the Vessel and/or materials and equipment as set out herein then the property in the Vessel and/or materials shall revert from the Purchaser to the Builders [77] According to the Federal Court case of Catajaya Sdn Bhd v. Shoppoint Sdn Bhd & Ors [2021] 3 CLJ 159, a contractual provision which provides for a pa construed strictly against it. [78] In this case, the 1st Defendant did not give any notice to terminate the Agreement or, in accordance with clauses 10.2 and 11.4 of the eir intention to sell the Vessel. [79] Therefore, the 1st Defendant did not comply with Clause 10.2 and/or 11.4 of the Agreement, rendering the 1st of the Agreement and sale of the Vessel wrongful and invalid. [80] It is clear from clause 11.1 of the Agreement that ownership of the Vessel had vested in the Plaintiff from the date of the 1st Payment or later, in respect of payments for materials and equipment purchased or appropriated from time to time specifically for the construction of the Vessel: 11.1 The Vessel and/or all materials and equipment purchased or appropriated from time to time by the Builders specifically for its construction (whether in their premises, upon the water or elsewhere) shall become the property of the Purchaser upon the payment of the first Payment or, if later, upon the date of the said purchase or appropriation. The Builders shall, however, have a lien on the Vessel and any materials or equipment purchased for or appropriated to the construction for recovery of all sums due (whether invoiced or not) under the terms of this Agreement or any [81] As the Court has found no basis for the claim of unpaid invoices by the 1st Defendant, the 1st Defendant had not established a valid lien on the Vessel. There being to valid reversion of title to the 1st Defendant pursuant to clause 11.4 of the Agreement, the alleged sale of the partially built Vessel by the 1st Defendant to the 2nd Defendant without notice to the Plaintiff was a clear breach of the Agreement. [82] This Court notes that the sale of the Vessel by the 1st Defendant would also constitute conversion of the Vessel as a tort on the facts and evidence. It is noted however, the Plaintiff has not pleaded that the 3rd Defendant is a joint tortfeasor or offered any submissions on the issue of conversion. Liability of Guarantor Whether the 3rd Defendant is personally liable as a guarantor under the Agreement [83] As determined earlier, the 1st Defendant had no lawful justification to claim for alleged storage charges and/or unparticularised variation works. The 1st Defendant is thus liable for breach of the Agreement in failing to deliver the Vessel to the Plaintiff and in selling the Vessel without cause and with no notice to the Plaintiff. [84] Clause 16 of the Agreement is an express provision that the Guarantor (namely the 3rd Defendant, as identified in Schedule 6 of the Agreement), in consideration of the Plaintiff entering into the Agreement at his request, st [85] The 3rd Defendant has not pleaded or proved any defence independent of that of the 1st Defendant, to avoid liability under Clause 16 of the Agreement. In the circumstances, this Court finds that the 3rd Defendant is liable jointly and severally with the 1st Defendant for its breach of the Agreement. Assessment of Damages Whether the Plaintiff is entitled to the liquidated quantum of damages sought [86] The Plaintiff did not offer any submissions for damages based on conversion of the Vessel. Since there is a valid Agreement governing the parties and no other cause of action has been pleaded or argued for the recovery of damages, there is no need to nor is the Court at liberty to resort to any other legal theory to decide the question of liability and relief. Further, the Plaintiff abandoned its claim for specific relief. [87] The Section 74(1) of the Contracts Act 1950: (1) When a contract has been broken, the party who suffers by the breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from the breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it. (2) Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach. [88] Section 74 substantially affirms the common law rule laid down in Hadley v. Baxendale [1854] 9 Ex. 341. The Federal Court in Toeh Kee Keong v Tambun Mining Company Ltd [1968] 1 MLJ 39 explained the main principles of the rule and cited Asquith L.J. in Victoria Laundry (Windsor) Ltd Newman Industries Ltd [1949] 2 KB 528 for the restatement of the rule which I do not need to repeat. [89] It is also trite that the Plaintiff bears the burden of proving both special and general damages claimed. In Popular Industries Limited v. Eastern Garment Manufacturing Sdn Bhd [1990] 1 CLJ 133, Edgar Joseph Jr. J said: proved their claim for damages as alleged or at all? With regard to this part of the case, I would preface what I have to say by referring to certain well-established principles. It is axiomatic that a plaintiff seeking substantial damages has the burden of proving both the fact and the amount of damages before he can recover. If he proves neither, the action will fail or he may be awarded only nominal damages upon proof of the contravention of a right. Thus nominal damages may be awarded in all cases of breach of contract (see Marzetti v. William). And, where damage is shown but its amount is not proved sufficiently or at all, the court will usually decree nominal damages. See, for example Dixon v. Deveridge and Twyman v. Knowles [90] Earlier in Tan Geok Khoon & Gerard Francis Robless v Paya Terubong Estate Sdn Bhd [1988] 2 MLJ 672, Edgar Joseph Jr J (as he was then) cited the famous words of Lord Goddard in Bonham-Carter v. Hyde Park Hotel (1948) 64 TLR 177: plaintiffs must understand that if they bring actions for damages it is for them to prove their damage; it is not enough to write down the particulars and, so to speak, throw them at the head of the court, saying: This is what I have lost, I ask you to give me these Proof must come in the form of cogent and credible documentary evidence in support where such evidence is reasonably expected to be available. Rudimentary accounts and self-serving statements do not pass muster. [91] damages based only on the principles set out in the preceding paragraphs for breach of contract. a) Loss of Profits [92] The Plaintiff is an Australian company whose shareholders are Charles Thomas Sharpe (25%), Chantal Sharpe (25%) and Ben & Harry Limited (50%), the corporate trustee of the Sharpe Family Trust. The Agreement was entered into by the Plaintiff as a trustee for LAT Unit Trust and thus the Plaintiff in this action is the Plaintiff, suing as a trustee for LAT Unit Trust. [93] The Plaintiff carries on business of ferrying tourists on trips around Lake Argyle. According to the Plaintiff, Lake Argyle Pty Limited leases land at Lake Argyle from the Crown and operated Lake Argyle Resort and Caravan Park ( ). Paradise Resorts Australia Pty Limited now operates the Resort. Another company, Serenity Isles Trading Co Pty Limited ( ) sells tickets to tourists and pays the Plaintiff for use of the [94] The commissioning of the Vessel in 2017 was intended to fulfill increasing passenger demands and the Plaintiff contended that the 1st and 3rd Defendants were well aware of this fact. The Plaintiff therefore sought to recover damages from the 1st and/or 3rd Defendants for their failure to deliver the Vessel to the Plaintiff by 8-6-2017 or at all. [95] The Plaintiff gave evidence through Charles Thomas Sharpe (PW- 1) that the annual rate charged by the Plaintiff to SITCO is 12.5% of the initial total cost of obtaining the vessel. According to PW-1, if the Vessel had been delivered on time, the Plaintiff would have: (a) made a profit during the period 8-6-2017 to 5-4-2022 (4.82 years) when the Plaintiff sold its business to Discovery Holiday Parks Pty Limited; (b) secured a better price for the sale of its business to Discovery Holiday Parks Pty Limited. [96] The Plaintiff quantified its loss of profits as a result of the 1st 82 (or its equivalent in Ringgit Malaysia). [97] The 1st Defendant argued that the Plaintiff is not entitled to the heads of loss pleaded for the following reasons: (a) Apart from the bare averments of PW-1, there is no supporting evidence for the method of calculation or figures used by the Plaintiff in arriving at either loss of profit amounts; (b) The Plaintiff may not claim both loss of profits from being deprived of the use of the Vessel, as well as the wasted expenditure to procure the Vessel. Proof of Loss [98] The Plaintiff produced invoices issued to SITCO and a business sale agreement for the sale of the collective business assets of Charles Thomas Sharpe, Paradise Resorts Australia Pty Ltd, SITCO, Ord River Developments Pty Ltd and LA Leisure Pty Ltd to Discovery Holiday Parks Pty Limited ( ). [99] However, PW-1 provided no explanation or corroboration for the fundamental parameters of the calculations to arrive at AUD1,140,692.82 in PW-1 such as: (a) the 4.82-year period when the Vessel could have been deployed, considering that this Court has found that the Delivery Date could not have remained at 8-6-2017 based on the conduct of the parties in allowing time to be at large; (b) vessel applied to arrive at the notional rental charges the Plaintiff could have charged SITCO for the use of the Vessel; (c) the AUD48,000.00 cost of transporting the Vessel applied to the total cost of the Vessel; and (d) the nominated figure of 9.5 of the b multiplied with the expected revenue from SITCO to arrive at AUD756,744.54 as the stated diminution in the sale price of [100] This Court also cannot agree with the underlying basis for calculating loss of profits in that the notional rental charges the Plaintiff could have charged SITCO was a projected revenue income and does not f the Agreement had been performed, the Plaintiff would have incurred the expenses and cost of operations in operating the Vessel to generate the revenue. [101] This Court therefore agrees with the 1st Defendant that the Plaintiff has failed to prove damages for breach of the Agreement in terms of loss of profits. b) Monies paid in performance of the Agreement [102] The Plaintiff also claims the sums it has expended in performance of the Agreement, comprising: (a) AUD441,940.00 paid to the 1st Defendant; and (b) AUD81,618.56 paid to third parties which in turn comprised of AUD68,162.00 paid by the Plaintiff to Q-Marine International Ltd for the Q-SPD Surface Drives and the balance AUD13,456.56 are expenses incurred to procure the attendance of representatives of Kedge Pty Ltd to attend at the 1st Vessel in April 2019. Item Amount (AUD) Q-SPD Surface Drive, propeller and shaft 68,162.00 Airline flight charges for the surveyors to survey the Vessel 2,177.00 Payment to Kedge Surveys to survey the Vessel in progress 8,581.10 Kedge Surveys out of pocket expenses 389.20 Cost of accommodation representative, boat captain and surveyor from Kedge Surveys 2,309.26 TOTAL 81,618.56 [103] The Plaintiff submitted that the claimed sums are due as restitution for the 1st tion because the Plaintiff never got delivery of the Vessel. The 1st Defendant contended that there was no default on its part and therefore no damages ought to be payable and in respect of the quantum, the AUD13,456.56 was not proved. [104] It was not seriously challenged that the sums AUD441,940.00 (payments to the 1st Defendant) and AUD68,162.00 (payment to Q-Marine International Ltd) were expended by the Plaintiff. [105] This Court finds that the AUD13,456.56 expense to survey the Vessel in April 2019 was satisfactorily proven on a balance of probabilities. The fact that this survey took place is well documented. The documents in support of these expenses were in the trial bundles and it appeared that neither party took the trouble to set them out and deal with them individually. They were in that sense, unchallenged by the 1st Defendant. [106] As this Court has found that the 1st Defendant had breached the Agreement in failing to deliver the Vessel, the Plaintiff is entitled to recover the sum AUD523,558.56 as damages in terms of wasted expenditure. [107] The 1st Defendant had also argued that: (a) the Plaintiff cannot recover both loss of profits and wasted expenditure; and (b) the Plaintiff cannot recover both restitution and damages. [108] These arguments have been rendered academic by the finding that the Plaintiff failed to prove its claim for loss of profits, and that there is no total failure of consideration to warrant a restitutionary basis for recovery. For completeness however, I will also address the question of election of damages here. Election of Measure of Damages [109] It is well-established that the assessment of damages may take place on two different bases, as summarised in China Comservice (Hong Kong) Limited v Sediabena Sdn Bhd & Anor Appeal [2024] CLJU 1980: - where the party is restored to a position as if the contract had been performed and mainly to recover the profits that the party had lost or deprived; The reliance loss approach - where the party is to be restored to its position before the contract is entered, to recover the expenditure [110] On the issue of election of damages, the Court of Appeal in Ban Chuan Trading Co Sdn Bhd & Ors v Ng Bak Guan [2003] 4 CLJ 785 ( held : like to quote the words of Lord Denning MR in Anglia Television v. Reed which was cited by Suffian FJ (as he was then) in Ismail v. Haji Taib [1972] 1 MLJ 259 at p. 260. Lord Denning M.R. said: ... It seems to me that a plaintiff in such a case as this had an election; he can either claim for his loss of profits; or for his wasted expenditure. But he must elect between them. He cannot claim both. If he has not suffered any loss of profits - or if he cannot prove what his profits would have been he can claim in the alternative the expenditure which has been thrown away, that is, wasted by reason of the breach. That is shown by Cullinane v. Britist 'Rema' Manufacturing Co Ltd [1953] 2 All ER 1261, 1264, 1265; [1954] 1 Restitutionary Basis for Recovery [111] Based on Berjaya Times Square, it may be said that there is a third approach to assess damages, that is the restitutionary approach, which departs from the usual compensatory approach for damages. It is the consequence of a common law right to rescind a contract which in effect, entitles the innocent party to restitution of the monies paid in reliance of the promise of performance by the defaulting party. [112] However, as alluded to earlier: [20] Absent a total failure of consideration, the common law right to rescind does not exist. Goff & Jones "The Law of Restitution" (6th edn) which is the leading text on the subject has this to say at p. 502, para. 20-007: A breach of contract may be so fundamental that it deprives the 'party who has further undertakings still to perform of substantially the whole benefit which it was the intention of the parties as expressed in the contract that he should obtain as the consideration for performing those undertakings.' (Hong Kong Fir Shipping Co Ltd v. Kawasaki Kaisen Kaisha Ltd [1962] 2 QB 26]. The innocent party has then an election. He may affirm the contract or he may bring it to an end. In the latter event, if he has paid money to the defendant under the contract, he can, as an alternative to claiming damages, sue for recovery of the money provided that the consideration for the payment has wholly failed; if the consideration has partially failed, his only action is for damages. (Emphasis added) In other words, where there has been a total failure of consideration, the innocent party has the alternative remedy of suing to recover monies paid under the contract to the guilty party. But he can under no circumstances have his money returned and claim damages. And if the consideration has only [113] This Court refers to the Court of Appeal decision in Pan Malaysian Pools Sdn Bhd v Kwan Tat Thai & Anor and other appeals [2018] 4 CLJ 323 ) which is often also cited for setting out the broad principles for assessment of damages for breach of contract as follows: It is now trite that the court in assessing damages take into consideration three fundamental principles. They are as follows: (1) restitution in integrum, (ii) remoteness of damages; (iii) mitigation of [114] The point of clarification is that in Pan Malaysian Pools, the term that explained the concept in the following sense that the first principle in awarding damages restitution in integrum where an injury is to be compensated by damages, in settling the sum of money to be given in reparation of the damage, you should as nearly as possible get at that sum of money which will put the party who has been injured or who has suffered, in the same position as he would have been in, if he had not sustained the wrong for which he is now getting his compensation or reparation The rule appears to be the same in actions upon contract also, for a party who has sustained loss by reason of a breach of contract is, with respect to damages, entitled to be placed in the same situation as he would be in if the contract had been performed. But as Lord Dunedin has forcibly put it, "restitution in integrum " is a phrase which is properly applied when you wish to express a condition which is imposed upon a person seeking to rescind a contract. [Emphasis added] [115] Generally speaking therefore, with the exception of common law rescission of a contract for total failure of consideration, the theoretical foundation for the right to restitution remedy as it is understood today is founded on the law of unjust enrichment which fall outside the domains of contract of tort (See Dream Property Sdn Bhd v. Atlas Housing Sdn Bhd [2015] 2 CLJ 453). [116] Further, this Court adopts the perspective that a party relying on total failure of consideration cannot have both his money returned and claim damages, following Berjaya Times Square. This is because in principle, restitution is a quasi-contractual remedy. [117] On the facts of this case, there is no real difference between wasted expenditure as damages and money paid for which consideration has totally failed. In both situations, the Plaintiff is not entitled to recover both (A) [restitution of the price paid (gain-based interest) or wasted expenditure (reliance interest)] and (B) [loss of profits (expectation interest)]. [118] It was highlighted in submissions that if the Agreement had been performed, the Plaintiff would have both the Vessel and the profit that would have been made from it in its business. It may therefore seem to be counter-intuitive that the Plaintiff in this case cannot recover both loss of profits and wasted expenditure since it has ended up with no Vessel. [119] Based on the compensatory principles for assessment of damages in contract, the theory is that the Plaintiff would be put in a better position than if the Agreement had been performed if it can recover both (A)+(B). This theory applies in principle because the law assumes that the Plaintiff can make a calculated decision based on what can be proven. [120] (A) is aimed at restoring the Plaintiff to its pre-contract position (no Vessel) while for (B), the law does not distinguish between the intended profit-making venture for the Vessel. Thus, the calculation for (B) must assume that the money value of the Vessel has been absorbed and accounted for over the time taken to generate the revenue. For example, if the Vessel was commissioned for sub-sale, the lost profit will be from that sub-sale and it is easily understood why the election of damages in those circumstances is not conceptually problematic or unfair. [121] In other words, there is no inconsistency in the law that the measure of loss must accord with the principle that an election must be made between (A) and (B). Conclusions [122] To summarise the conclusions from this Judgment: (1) What is the legal consequence of the pleaded delay events in the construction of the Vessel? Time was set at large, and the Vessel ought to have been completed for delivery to the Plaintiff cannot be determined on the available evidence. (2) Whether the 1st Defendant was entitled to stop construction and/or claim storage charges No. The 1st for either variation works or storage charges was not proven. (3) Whether the Plaintiff had fully paid for the Vessel including variation works and whether there was total failure of consideration. The Plaintiff has fully paid for the Vessel but there is no total failure of consideration because the Agreement was treated as afoot and there was partial performance of it by the 1st Defendant. That said, there is clearly a breach of contract by the 1st Defendant in ultimately failing to deliver the Vessel to the Plaintiff. The only defence that the 1st Defendant has in effect pleaded is the defence of set-off which I have rejected in dismissing the 1st counterclaim. (4) Whether the 1st Defendant was entitled to sell the Vessel and/or whether the 1st Defendant committed conversion No. The 1st Defendant breached the terms of the Agreement in selling the Vessel and in so doing, also committed the tort of conversion. (5) Whether the 3rd Defendant is personally liable as a guarantor under the Agreement Yes. The 3rd Defendant has not pleaded or proved any defence independent of that of the 1st Defendant, to avoid liability under Clause 16 of the Agreement. The 3rd Defendant is liable jointly and severally with the 1st Defendant for the breach of the Agreement. (6) Whether the Plaintiff is entitled to the liquidated quantum of damages sought from the 1st and 3rd Defendants. The Plaintiff failed to prove damages in terms of loss of profits and is not entitled to claim for restitution on the basis of total failure of consideration. However, the Plaintiff has satisfactorily proven its damages for breach of the Agreement in terms of its wasted expenditure in the amount AUD523,558.56 and is entitled to recover this sum from the 1st and 3rd Defendants, jointly and severally. [123] the 1st and 3rd Defendants jointly and/or severally in terms of prayers 7A, 8 and 10. Costs for the Plaintiff in the sum of RM80,000.00 subject to allocator. Bertarikh : 10 Januari 2025 SGD ELAINE YAP CHIN GAIK PESURUHJAYA KEHAKIMAN MAHKAMAH TINGGI MALAYA SHAH ALAM Peguam Untuk Plaintif : Louise Azmi (with Royce Bong), Messrs Skrine Untuk Defendan-Defendan : Mathan Raj, Messrs Dinesh Hazira & Partners (Klang)