DALAM MAHKAMAH RAYUAN MALAYSIA (BIDANGKUASA RAYUAN)

RAYUAN SIVIL NO. N 01 9 2005 ANTARA

NIRWANA CONSTRUCTION SDN BHD PERAYU DAN

1. PENGARAH JABATAN KERJA RAYA NEGERI SEMBILAN DARUL KHUSUS

2. KERAJAAN MALAYSIA RESPONDEN- RESPONDEN

(Dalam Perkara Mahkamah Tinggi Malaya di Seremban Guaman Sivil No: 22-97-1997

Antara

Nirwana Construction Sdn Bhd Plaintif Dan

1. Pengarah Jabatan Kerja Raya Negeri Sembilan Darul Khusus

2. Kerajaan Malaysia Defendan- Defendan)

Coram : Gopal Sri Ram, J.C.A. Zaleha Zahari, J.C.A. Zainun Ali, J.C.A.

JUDGMENT OF GOPAL SRI RAM J.C.A.

1. There is only one issue in this case. It is whether the plaintiff

(appellant before us) is entitled to recover damages for breach of a

building contract he had entered into with the defendant (respondent

before us). The relevant facts are as follows.

2. The plaintiff is a building contractor. On 2 March 1993, it

entered into a contract for the construction of a school for the

defendant. The contract was in the standard PWD (JKR) form with

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which we are all quite familiar. The contract price was RM

1,956,126. The contract period was 78 weeks, that is to say, the

plaintiff had to complete construction of the school and hand it to the

defendant within that period. It is not on dispute that the 78 weeks

expired on 29 August 1994. As it happened, the plaintiff did not

complete construction by the agreed date. However, there is

abundant evidence to show that the plaintiff was granted several

extensions by the defendant. It is also beyond dispute indeed it is

conceded by the defendant that as at 12 September 1995 (which is

the date of his letter) the plaintiff had completed 93% of the work.

What was left undone was certain remedial work in respect of some

of the partitions in the building and the planting of grass on the hill

slopes and the football field. The former was completed. As to the

latter, the defendant accepted the turfing that was done on the hill

slopes but he rejected the turfing of the football field which he wanted

turfed with cow grass which is not the kind of grass that the plaintiff

had used. Despite the aforesaid state of affairs, the defendant took

the position that the work contracted for had not been completed.

So, by his letter of 12 September 1995, to which I have referred, the

defendant warned the plaintiff to complete all works within 14 days.

The defendant warned that if the plaintiff should make default then

clause 51 of the contract would be invoked and the contract

terminated. Later, by his letter of 7 October 1995, the defendant

terminated the contract, purporting to act under clause 51(a) thereof.

In essence what that clause says is this: without prejudice to any

other remedies the Government (in the present instance the

defendant) may have, in the event of the plaintiff commits any of the

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breaches specified by sub-clause (i) (v) of clause 51, the

Superintending Officer (S.O.) administering the contract may issue a

notice to the contractor (the instant plaintiff) calling upon him to

remedy the breach and if the breach persists for 14 days then the

S.O. may terminate the contract.

3. There are three matters relating to the letter of 7 October 1995

that require mention. First, on 11 October 1995, some four days

after the letter was written, a meeting was held between the parties.

It was agreed that the defendant will be granted a further extension.

Nothing was said about the letter itself. Second, the State Engineer,

after a review of the facts, recommended that the plaintiff be excused

for 17 weeks of delay. Despite this the defendant only permitted the

plaintiff only 9 weeks. The defendant did not at any time reserve his

rights under the letter of 7 October. How could he? The 9 weeks

extension he gave the plaintiff far exceeded the 14 days the S.O. had

prescribed under the letter. The irresistible inference to be drawn

from all these actings is that the parties regarded the notice of 7

October 1995 as a dead letter intended to have no effect whatsoever.

It therefore ceased, for all purposes, to have any effect whatsoever.

Further, there is cogent evidence from the plaintiff to show that at the

meeting of 11 October 1995 the defendant had waived his right to

claim liquidated ascertained damages (LAD) from the plaintiff for the

delay in completing construction. Third, if you look at the 7 October

1995 letter, you will find that it does not accord with the terms of

clause 51. I will deal with this part of the case at the appropriate

place in this judgment.

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4. Let me now conclude the factual narrative. On 5 June 1996,

the school constructed by the plaintiff was officially handed over to

the Ministry of Education which accepted it. Then, on 5 July 1996,

the defendant wrote to the plaintiff alleging that the latter had not

completed the works under the contract and on that basis sought to

reinstate and rely upon the letter of 7 October 1995 which by this time

was, of course, dead as a doornail. The plaintiff refused to accept

the termination. It issued writ. The defendant delivered his defence

and counterclaim. The judge who tried the action found for the

defendant. He dismissed the claim and entered judgment on the

defendants counterclaim. The plaintiff has now appealed to us.

5. In my respectful view, this appeal must succeed for the

following reasons. In the first place, it is not open to the defendant to

rely on the letter of 7 October 1995. If, as the defendant alleges, the

plaintiff had committed a fundamental breach of the contract, the

defendant had two mutually exclusive options open to him. He could

accept the plaintiffs repudiation and treat the contract as at an end.

Or he could waive the repudiatory conduct and treat the contract as

subsisting. These options are given him by section 40 of the

Contracts Act 1950 which reads:

When a party to a contract has refused to

perform, or disabled himself from performing, his

promise in its entirety, the promisee may put an

end to the contract, unless he has signified, by

words or conduct, his acquiescence in its

continuance.

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The defendants conduct in granting the plaintiff extensions of time

does in my judgment fairly support the plaintiffs case that there was

acquiescence on the part of the defendant in the continuance of the

contract. There is also the fact that the Ministry of Education

accepted without any reservation the handing over of the school to it

on 5 June 1996. The defendant having made his election to affirm

the contract, his right to put an end to it was forever lost. See, Lim Ah Moi v AMS Periasamy Suppiah Pillay [1997] 3 MLJ 323.

6. In the second place, the notice of termination which the

defendant sought to issue pursuant to the terms of clause 51 of the

contract does not accord with the terms of the clause. For it does

not specify the breach in question as required by the clause. It is

settled law that clauses such as the one under discussion will be

construed strictly, that is to say, their strict compliance will be sought

by the courts. As Wee Chong Jin CJ said in Central Provident Fund v Ho Bock Kee [1981] 2 MLJ 162, a forfeiture clause in a building contract will be strictly construed to see whether the

operative event has occurred or not. In my judgment the notice

dated 7 October 1995 was null and void and of no effect because it

does not comply with the terms of clause 51. It is also my judgment

that the defendants attempt to reinstate the said notice by way of its

letter dated 5 July 1996 was ineffective. You cannot reinstate

something that is utterly void.

7. In the third place, the defendants contention that the plaintiff

had committed a fundamental breach of the contract cannot succeed

on the facts of this case. There is the defendants own admission

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that as at 12 September 1995, 93% of the work was completed.

There was no demand made by the defendant of the plaintiff to

remedy any defect in the school building itself despite the fact that it

was, as conceded by DW2 in his evidence, that it was open for the

defendant to have done so. The only real complaint which the

defendant had was in relation to the laying of the cow grass on the

playing field. This in my judgment is a trivial breach for which the

defendant would not be entitled to put the contract to an end. This is

because the plaintiff did not refuse to perform or disable itself from

performing the contract in its entirety. In short, there is not here a

state of affairs where to borrow the language of Lord Diplock in

Photo Production Ltd v Securicor Transport Ltd [1980] 1 All ER 556 the failure by one party to perform a primary obligation has the effect of depriving the other party of substantially the whole benefit

which it was the intention of the parties that he should obtain from the

contract. Accordingly, it was not open to the defendant to put an

end to the contract. It follows that his act of terminating the contract

amounted to a breach of contract.

8. There is one further matter I must mention. In the court below

it was part of the plaintiffs case that the defendants witness (DW1)

had acted in bad faith in the dealings he had had with the plaintiff.

The learned judge who tried the case however refused to permit the

plaintiff to cross examine DW1 on the point. Yet when he came to

write his judgment he said that the plaintiff had failed to establish

mala fides against the defendant. This, with respect, is a serious

misdirection. Having denied counsel for the plaintiff the opportunity

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to cross examine DW1 on the issue of mala fides, it was not open to

him, as a matter of natural justice, to make a finding on the very point

against the plaintiff. There is, so far as I am advised, no decided

case directly in point. The closest analogy that comes to mind is

Hadmor Productions Ltd v Hamilton [1983] 1 AC 191. It was a case that was decided at a time when it was the rule that courts

should not seek assistance from Hansard to interpret a statute.

There is no such bar now. See, Pepper v Hart [1993] AC 593. In Hadmor Productions, at the hearing before the Court of Appeal, counsel on both sides, in obedience to the rule, refrained from

making any reference to Hansard. During argument, Lord Denning

MR who presided gave no indication to counsel that he intended to

rely on Hansard. However, when he came to write his judgment the

Master of the Rolls when interpreting the relevant provision in the

statute before the court referred to the speech of Lord Wedderburn in

the House of Lords reported in Hansard when moving an

unsuccessful opposition amendment to the relevant Bill. When the

matter went on further appeal to the House of Lords, Lord Diplock

criticised this approach. He said:

Under our adversary system of procedure, for a

judge to disregard the rule by which counsel are

bound has the effect of depriving the parties to the

action of the benefit of one of the most

fundamental rules of natural justice: the right of

each to be informed of any point adverse to him

that is going to be relied upon by the judge and to

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be given an opportunity of stating what his answer

to it is. In the instant case counsel for Hamilton

and Bould complained that Lord Denning M.R. had

selected one speech alone to rely upon out of

many that had been made in the course of the

passage of what was a highly controversial Bill

through the two Houses of Parliament; and that if

he, as counsel, had known that the Master of the

Rolls was going to do that, not only would he have

wished to criticise what Lord Wedderburn had said

in his speech in the House of Lords, but he would

also have wished to rely on other speeches

disagreeing with Lord Wedderburn if he, as

counsel, had been entitled to refer to Hansard.

9. In the present case, when the learned trial judge disallowed

counsel for the plaintiff from pursuing the line of cross examination on

the issue of DW1s mala fides counsel was entitled to assume that no

adverse comment would be made against his client on that point.

Unfortunately, the learned judge after having made his decision

nevertheless went on to comment adversely on the plaintiffs case.

This is a clear breach of the rules of natural justice. If this be the

only point before us, I would have been minded to direct a re-trial of

the action. However, there are, as I have shown, other areas in

which the learned judge had misdirected himself both on the facts

and the law.

10. I now come to the issue of damages. In its statement of claim,

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the plaintiff claimed the balance due to it on the contract. This is a

sum of RM501,817.66. It is entitled to have this. It is also the

plaintiffs case that following the termination of the contract it was

blacklisted in so far as Government contracts are concerned. It said

that it suffered general damages. It put these at RM2.8 million.

11. There is no doubt that the blacklisting of a contractor by the

PWD can have serious financial ramifications for him. He will not

ever be considered in the execution of Government projects. Even

work in the private sector may be difficult to come by. These are

matters of public notoriety. It follows that the plaintiff must have

suffered some damage from the blacklisting. Perhaps not to the

extent it has claimed. It may be difficult to assess the damage. But

that is no reason for refusing to make an award in its favour. In

Tham Cheow Toh v Associated Metal Smelters Ltd [1972] 1 MLJ 171, Ali J (as he then was) cited with approval the following passage in the judgment of Cockburn C.J. in Simpson v The London and North Western Railway Company [1876] 1 QB 274 at page 277:

as to the supposed impossibility of ascertaining

the damages, I think there is no such impossibility;

to some extent, no doubt, they must be matter of

speculation, but that is no reason for not awarding

any damages at all.

12. There is a further point which is in the plaintiffs favour. It is an

established principle that breach of contract is actionable per se. In

other words, damage, that is to say, injuria, need not be separately

established as an ingredient of the wrong. Neither is a plaintiff in an

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action for breach of contract required in law to prove that the

defendant acted intentionally or negligently in committing the breach.

Once a breach of contract is established a plaintiff is entitled to

recover damages. What follows is an exercise in the assessment of

those damages. If at that stage he or she is unable to evidentially

establish the measure of damage suffered, nominal damages will be

awarded. As my learned sister Zainun Ali said when delivering the

judgment of this Court in Sony Electronics (M) Sdn Bhd v Direct Interest Sdn Bhd [2007] MLJ 229:

Nominal damages may be awarded where the fact

of a loss is shown but the necessary evidence as

to its amount is not given.

13. Acting on these well settled principles, I would award the

plaintiff general damages for breach of contract and direct the

assessment of such damages by the senior assistant registrar of the

High Court. I would also direct an early hearing of the assessment.

14. For the reasons already given I would allow this appeal and set

aside the order of the learned judge. I have had the advantage of

reading my learned sister Zainun Alis judgment in draft and agree

with the orders she proposes to make in this appeal.

Arguments heard and judgment reserved on 22 November 2006.

Dated this 21st day of April 2008.

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Gopal Sri Ram Judge, Court of Appeal Malaysia Putrajaya Counsel for the appellant: Aris Rizal Christopher Fernando

(Raftfizi b. Zainal Abidin with him) Solicitors for the appellant: Tetuan Aris Rizal Christopher

Fernando & Co. Counsel for the respondents: Noramilia Mohd Saad

Solicitors for the respondents: Peguam Negara Malaysia