Pearl Amrin Sdn. Bhd. v 1. ) XXXX (JA-22NCvC-18-02/2018)

RIZSILLA GLOBAL SDN BHD [COMPANY NO.: 1112361-X]

RIZAM BIN SAHAR [NRIC NO.: 800610-01-6073] … DEFENDANTS  GROUNDS OF JUDGMENT  26/06/2022 11:11:55 JA-22NCvC-18-02/2018 Kand. 113 Before The Honourable Judicial Commissioner Ahmad Murad Bin Abdul Aziz 2 JUDGMENT BACKGROUND FACTS [1] On 25.04.2015, the First Defendant (“D1”) was appointed by Syarikat Gabungan Wilayah JB PLT as the main contractor for the purpose of extracting sand from the district of Wilayah Johor Bahru, including the area known as Felda Sungai Sibol. The parties entered into a Concession Agreement ( “Concession Agreement”), which contained the terms of the appointment. [2] Following the signing of the Concession Agreement, D1 entered into agreements with a number of Felda settlers within the Felda Sungai Sibol area. The agreements with the Felda settlers (“Agreement with Settlers”) specified that D1 shall undertake the following: a) Pengeluaran pasir; b) Penyewaan tapak untuk palong, kolam cuci air dan tapak stok poll; c) Penyewaan laluan jalan di lot-lot peneroka-peneroka tersebut di dalam kawasan Felda Sibol (selepas in dirujuk sebagai “lot-lot tersebut”). [3] After the execution of the Agreement with Settlers, the Plaintiff and D1 entered into an agreement, dated 10.06.2015, for the extraction and sale of sand. Principally, under the terms of this agreement (“Sand Extraction Agreement”), the Plaintiff’s scope of work is, inter-alia, as follows: Clause 5.1 The Plaintiff shall, at its own cost and expense, arrange for its own machinery, equipment and labour to extract the sand from the concession. Clause 5.2 The Plaintiff shall build roads, ponds and all necessary infrastructure that are required to enable the Plaintiff to extract sand at its own cost and expenses. Before The Honourable Judicial Commissioner Ahmad Murad Bin Abdul Aziz 3 Clause 5.4 The Plaintiff hereby agrees to extract a minimum of 40,000 metric tonne of sand every month from the concession, failing which the Plaintiff will pay to D1 the shortfall. [4] Just a few months after the Plaintiff commenced the sand extraction, the parties started quarrelling over many issues which culminated in the Plaintiff unilaterally making a decision to stop performing its obligations under the Concession Agreement. [5] After repudiating the Concession Agreement, the Plaintiff filed this suit against D1 and the Second Defendant (“D2”), seeking an order that the Defendants refund the deposit of RM513,000.00 paid under the terms of the Sand Extraction Agreement, interests and costs. D1, thereafter, filed its defence and counter-claim, seeking damages against the Plaintiff for wrongfull termination of the Sand Extraction Agreement. THE PROCEEDINGS [6] This suit has a somewhat chequered trajectory. On 22.10.2019, the Plaintiff’s writ and statement of claim were struck out with costs by the previous Judge for failure by the Plaintiff’s main witness to attend court on the trial date. However, on appeal, the Plaintiff’s claim was reinstated by the Court of Appeal. After reinstatement, the Plaintiff’s witness again failed to attend court on another trial date without giving proper notice to the court and without giving any acceptable excuse. This Court then proceeded to dismiss the Plaintiff’s claim, leaving only D1’s counter-claim. [7] The Plaintiff did not appeal against the dismissal of its claim, therefore, the trial proceeded with D1’s counter-claim for damages for wrongful termination of the Sand Extraction Agreement by the Plaintiff. [8] At the end of the trial, I allowed D1’s counter-claim and awarded damages for three (3) of the ten (10) items pleaded by D1 as head of damages, namely: Before The Honourable Judicial Commissioner Ahmad Murad Bin Abdul Aziz 4 i. Outstanding payment for the extraction of sand from 02.05.2016 to 18.05.2016 under Item 1 of Schedule A amounting to RM64,508.80; ii. The sum of RM871,774.80 being compensation for the Plaintiff’s failure to extract approximately 150,306 metric tonnes (being the minimum guaranteed by the Plaintiff pursuant to Clause 5.4 of the Sand Extraction Agreement) for the period of November 2015 to May 2016; iii. Compensation for the extraction of excess sand not declared by the Plaintiff of up to 10,672 metric tonnes amounting to RM61,897.60. [9] The aggregate of the three (3) items of damages awarded to D1 came up to the sum of RM998,181.20 and I allowed interests, and costs of RM20,000.00. Since D1 had retained the sum of RM513,000.00 earlier paid by the Plaintiff as a deposit, I ordered a set-off for the deposit from the total damages of RM998,181.20. Thus, the amount of damages payable to D1 by the Plaintiff is RM998,181.20 less RM513,000.00 amounting to RM485,181.20. [10] The Plaintiff has filed an appeal against my decision only on the award of quantum but not on liability. Therefore, I will only address the issue of quantum. AWARD OF DAMAGES [11] The law applicable to the award for damages resulting from a breach of contract is well settled. The High Court in Hamdan bin Johan & Ors v FELCRA Bhd & Ors [2010] 8 MLJ 628 held as follows: “The measure of damages recoverable therefore involves the consideration of s 74 which substantially affirms the common law rule laid down in Hadley v Baxendale (1854) 156 ER 145. The common law rule affecting the measure of damages came up for consideration by the Federal Court in Teoh Kee Keong v Tambun Mining Co Ltd [1968] 1 MLJ 39. At p 40 Ong Hock Thye FJ said: Before The Honourable Judicial Commissioner Ahmad Murad Bin Abdul Aziz 5 ‘The rule lays down the main principles as follows: Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered as either arising naturally, i.e. according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it.’ [20] In short, the common law rule in the assessment of damages consists of two limbs. The first limb concerns damages flowing naturally, i.e. in the normal course of things from the breach. The second limb concerns the damages that the parties at the time of the making of the contract may reasonably be supposed to have contemplated, as the probable result of the breach. This court is also mindful that in the assessment of damages for breach of contract, the general rule is that the aggrieved party be put in the same position as if the contract had been performed; so that normally he is entitled to recover from the contract breaker his loss of profits, or the benefit of the bargain, as it is often called (see Central Malaysia Development Co Ltd v Chin Pak Chin [1967] 2 MLJ 174).” [12] D1 submits that the evidence led by the Defendants at trial would show that not only were the losses reasonably foreseeable by the parties herein, they are actually spelt out in the Sand Extraction Agreement itself, in that D1 would suffer loss should the Plaintiff elect to breach the Sand Extraction Agreement. [13] With respect to Item 1 Schedule A to D1’s counter-claim, I allowed the sum of RM64,588.00 being the outstanding sum due and owing for the sand extracted from 02.05.2016 to the date the Plaintiff stopped work on 18.05.2016. This can be seen from the record for May 2016 (see page 25 – Bundle C) The Plaintiff’s first witness (“PW1”) had also admitted that the amount remains unpaid (line 25 page 163, Notes of Evidence 1). This is purely an issue of a debt due and owing since the sand had been taken and no monies paid. There is no issue of law or of evidence that requires further determination. [14] With respect to Item 2 of Schedule A to D1’s counter-claim, the claim is for a shortfall in the quantity of sand the Plaintiff is required to extract under the Sand Extraction Agreement from November 2015 to May 2016, amounting to RM871,774.00, which I had allowed. Before The Honourable Judicial Commissioner Ahmad Murad Bin Abdul Aziz 6 D1 submits that this claim is in respect of the Plaintiff’s guarantee to extract a minimum of 40,000 metric tonnes of sand per month (as specified under Clause 5.4 of the Sand Extraction Agreement) from November 2015 until May 2016; i. In essence, the Plaintiff is supposed to extract a total of 280,000 metric tonnes until May 2016; ii. However, the records show that the Plaintiff only extracted a total of 129,694 metric tonnes, within the same period, leaving a balance 150,306 metric tonnes as the shortfall amount. [15] Applying the principle that the innocent party ought to be put in a position as if the contract had been performed, the Plaintiff would be liable to pay the amount of the shortfall from the minimum guaranteed amount of sand to be extracted for the period in question. Therefore, the sum of RM871,774.80 claimed by D1, being the value of the shortfall, is justified in law, and I allow the claim in full. [16] The Plaintiff in its written submission argues that D1 is estopped from claiming the shortfall of the guaranteed amount under Item 2 of