Subparagraph
(vii) Whether the plaintiff is entitled to claim RM97,108.14 for direct and indirect costs and RM455,648.10 for loss and profit. Whether the defendant validly terminated the Agreement [18] The contract period of the Main Contract is 11 months commencing from 16.10.2015 to 15.9.2016. The Master Work Program Schedule, agreed to by the parties, essentially detailed the various scope of works including the duration to carry out each specific works, the start date and completion of the said works. The first issue would be determinative of the issues in respect of the claim of compensation, loss of profit, indirect costs as well as rectification costs. The trial Judge found that the defendant had successfully proved that the plaintiff failed to proceed with the subcontract Works diligently, as at the point of termination on 25.5.2016 the subcontract Works completed were only 33.3% with 3½ months to go before the scheduled project completion date. The plaintiff failed to demonstrate that due to the insufficient materials by the defendant it had affected the scheduled Master Work Program Schedule. Learned counsel for the defendant argued that there was no proper application for EOT pursuant to clause 7.3. Furthermore, the plaintiff ‘s welders were not skilful enough as they had failed the test conducted before they could start welding the P92 pipes. 12 [19] Clause 2 of the Agreement stipulates that the plaintiff shall commence the subcontract Works upon receipt of the defendant’s instruction and shall duly complete the works according to the Master Work Program Schedule: “The Subcontractor shall commence the work upon receipt of the Contractor’s written instruction and shall duly complete all Subcontract works within the Master Work Program Schedule.” [20] Prior to mobilising its workers, the plaintiff was informed that 60% of the materials will be made available at the site. However, upon mobilising its workers to the site the plaintiff discovered that the piping materials for only 5 systems were available. The thickness of the pipes also exceeded the thickness as mentioned in the bill of materials. The plaintiff could only have commenced the subcontract Works effectively if the piping materials were available according to the required specification. Nevertheless, despite the lack of materials, the plaintiff proceeded to carry out the works with the available material in the Site. [21] The materials were only received by the plaintiff on site from January 2016 to March 2016, a delay of 3 months. Some of the piping system works only commenced upon receipt of the materials. The plaintiff informed the defendant through numerous e-mails of the problems due to the delay in the supply of the materials. [22] The plaintiff argued that all reasonable steps were taken to expedite the works on site. They applied for EOT on 5.1.2016 pursuant to clause 7.3 of Part B of the terms and conditions of the Agreement. Unfortunately, according to the plaintiff the request for EOT was not 13 considered at all by the defendant. Clause 7.3 of the Agreement stipulates as follows: “Subject to Sub-Clause 10.3, the Subcontractor shall be entitled to an extension to the Time for Completion if he is or will be delayed by any of the Contractor’s Liabilities. On receipt of an application from the Subcontractor, the Contractor shall consider all supporting details provided by the Subcontractor and shall extend the Time for Completion as appropriate.” [23] As soon as the plaintiff knew of the problem due to the delay in supplying permanent materials the plaintiff notified the defendant through various e-mails as required under clause 10.3 on “Early Warning”: “A Party shall notify the other as soon as he is aware of any circumstance which may delay or disrupt the Works, or which may give rise to a claim for additional payment. The Subcontractor shall take all reasonable steps to minimise these effects. The Subcontractor’s entitlement to extension to the Time for Competion or additional payment shall be limited to the time and payment which would have been due if he had given prompt notice and had taken all reasonable steps.” [24] The plaintiff notified the defendant via e-mail dated 5.1.2016 of the delay and subsequently requested for an extension of the completion date. The defendant, however, did not respond to the said e-mail in respect of the request for EOT to complete the subcontract Works as required under clause 10 and clause 7.3 of the Agreement. Despite not receiving any response from the defendant, the plaintiff continued carrying out the subcontract Works until they were terminated. 14 [25] On 25.4.2016 the plaintiff proposed to the defendant that due to the delay in supply of the materials, the Master Work Program Schedule should be revised from 11.9.2016 to 11.12.2016. It is the plaintiff’s contention that the defendant did not respond to the proposal to revise the Master Work Program Schedule. On 25.6.2016 the plaintiff yet again suggested to the defendant to revise the Master Work Program Schedule. The defendant, however did not respond to the suggestion. The defendant’s witness, Muhkles bin Hamzah (DW2) explained during re-examination that he did not respond as the email was not addressed to him personally but specifically addressed to the defendant. DW2 further testified that the reason given by the plaintiff that the delay was due to the supply of materials by the defendant was without basis as the materials for the 5 systems were available at the site to enable the plaintiff to proceed with the welding works as scheduled. The defendant had also reminded the plaintiff to increase its workforce in order to catch up with the delay. However, this was not done. According to the defendant as at 27.6.2016 only 33.3% of the subcontract Works was completed by the plaintiff. [26] As a result of the failure of the plaintiff to carry out the subcontract Works expeditiously according to the schedule, the defendant claimed it had no other alternative but to terminate the Agreement on 26.5.2016. The defendant contended that the plaintiff failed to complete the piping systems as specified in the Master Work Program Schedule and according to the agreed timeline despite numerous complaints and reminders. Learned counsel for the plaintiff argued in response that in addition to the pipes materials, the defendant failed to provide trailers and cranes as required, making it impossible for the plaintiff to carry out the works expeditiously as expected. Learned counsel for the plaintiff 15 disagreed with the decision of the learned High Court Judge that the plaintiff’s workers were unskilled as they failed the test conducted before welding the P92 pipes. The document adduced as evidence by the defendant, “Overall WQT Back Charge” to plaintiff, did not only contain the names of the plaintiff’s welders who attended the Welders Qualification (WQT) but also included the names of the defendant‘s welders. Learned counsel for the plaintiff argued that the persons listed in the document are not all employed by the plaintiff and therefore cannot be relied on. [27] The learned High Court Judge found that a new detailed Master Work Program Schedule of Works and its manpower plan must be submitted together with the application for EOT by the plaintiff even though clause 7.3 does not specify such requirement. Since the plaintiff refused and failed to comply with the instructions of the defendant and due to the breach of the sub-contract Works despite repeated reminders to rectify the breach, the learned Judge found that there was a basis for termination of the Agreement by the defendant and that the termination was in accordance to the terms of the agreement. A Notice of Default dated 12.5.2016 was issued by the defendant pursuant to clause 12.1. The plaintiff however, failed to comply with the Notice of Default which resulted in the termination of the Agreement pursuant to clause 12.1. Accordingly, the plaintiff is not entitled to any damages arising from what they contended as the termination being unlawful and premature. The learned Judge having weighed the evidence before him was satisfied that the various reminders issued to the plaintiff had ultimately culminated in a Notice of Default followed by a Notice of Termination. The learned Judge found that the termination was in the circumstances proper, valid and 16 lawful. In particular, the Judge found at paragraphs [90] - [93] of his Grounds of Judgment: “[90] As the Plaintiff as the Subcontractor refused and failed to comply with the instruction of the Defendant and due to the breach of the Sub-Contract despite repeated reminders to rectify the breach, the Defendant had served a notice of default dated 12.5.2016 pursuant to clause 12.1. of the Contract to demand the Plaintiff to remedy the default. See the Notice of Default dated 12.5.2016 at page 976-978, CBOD-3(2). Clause 12.1 of the Contract provide as follows: "If the Subcontractor abandons the Works, refuses or fails to comply with a valid instruction of the Contractor or fails to proceed expeditiously and without delay, or is, despite a written complaint, in breach of the Contract, the Contractor may give notice referring to this Sub-Clause and stating the default. If the Subcontractor has not taken all practicable steps to remedy the default within 14 days after the Subcontractor's receipt of the Contractor's notice, the Contractor may by a second notice given within a further 21 days, terminate the Contract. The Subcontractor shall however wait for further written instruction from the Contractor before proceeding with any demobilization activity. After receipt of such written instruction, the Subcontractor shall then demobilize from the Site leaving behind Materials and Plant and any Subcontractor's Equipment which the Contractor instructs in the second notice is to be used until the completion of the Works." [91] The Plaintiff failed to comply with the Notice of Default dated 12.5.2016 and so the Defendant had by notice dated 26.5.2016 terminated the Contract pursuant to Clause 12.1. of the Contract. [92] The present case is not unlike the situation found in Teknik Segala Sdn Bhd v. Salcon Engineering Bhd [2012] 9 MLJ 529 where the High Court held that the termination was lawful due to the serious delays by the Plaintiff despite many notices sent. At page 545 the High Court observed as follows: 17 “[49] It cannot be disputed that there were serious delays in the plaintiffs works under the contract and the defendant had sent many notices relating to the delay for example at p 621 before the termination and at p 660, after the termination. This was acknowledged by PW-1 during his evidence in court." [93] I am satisfied that various reminders had been issued to the Plaintiff culminating in a Notice of Default followed by a Notice of Termination of the Sub-Contract and that the Termination was in the circumstances proper, valid and lawful.” [28] The Judge considered a number of authorities, in particular, Teknik Segala Sdn Bhd v Salcon Engineering Bhd [2012] 9 MLJ 529 where it was held by the High Court that the termination was lawful due to serious delays by the plaintiff despite many notices sent. His Lordship also referred to the case of Kerajaan Malaysia v Ven - Coal Resources Sdn Bhd [2014] 11 MLJ 218 where His Lordship himself held that each case must be decided on its own merits or the lack of it, taking into consideration all the circumstances some justifying termination and others in favour of affirming the contract: “[33] The plaintiff contended that the defendant was not likely to complete the project in three and half months based on the history of its delay without taking into consideration the reasonable request of the defendant for EOT of 189 days. The defendant castigated this as a pure conjecture and speculation. [34] The learned authors Sundra Rajoo, Dato' WSW Davidson and Ir Harbans Singh KS in The PAM 2006 Standard Form of Building Contract, LexisNexis, 2010 at p. 553 cautioned Employers who are too keen to invoke this ground in cl. 25.1(c) of the PAM 2006 Contract which is in pari materia with cl. 51(a)(ii) of the PWD 203 (Revised 10/83) Contract as follows: 18 “Although being in practice the most common ground of determination by the employer due to the contractor's progress being 'slow', it is nevertheless a difficult ground to establish and many a determination premised on it has been ultimately invalidated by the courts and arbitral forum with dire consequences. Therefore, practitioners must not be too hasty to invoke this performance default until they are confident that it can withstand the relevant legal challenges.” [35] In West Faulkner Associates v. London Borough of Newham [1994] 422 Con LR 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 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 Chappell, Marshall, Powell-Smith and Cavender in Building Contract Dictionary (3rd edn.) 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: 19 - The number of men retained on site compared to the number one would expect to be needed by a 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 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 20 requirements as to time, sequence and quality of work': West Faulkner Associates v. The London Borough of Newham (1995) 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 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...” [29] The terms and conditions of an agreement entered between the parties cannot be simply brushed aside and ignored. The Federal Court in the case of Lucy Wong Nyuk King (F) & Anor v Hwang Mee Hionq