Global Upline Sdn. Bhd. v Kerajaan Malaysia, 30-10-2015

• Judge: DATO’ MARY LIM THIAM SUAN
• Judgment Date: 30 October 2015
• Court: High Court (Malaysia)
• Record Number: 21C-2-05/2013

IN THE HIGH COURT OF MALAYA AT KUALA LUMPUR

IN THE STATE OF WILAYAH PERSEKUTUAN, MALAYSIA

(CIVIL DIVISION)

CIVIL SUIT NO: 21C-2-05/2013

BETWEEN

GLOBAL UPLINE SDN BHD ... PLAINTIFF

(COMPANY NO: 482678-H)

AND

KERAJAAN MALAYSIA ... DEFENDANT

GROUNDS OF DECISION

1. The Plaintiff asked the Defendant to issue a Certificate of Practical Completion [CPC] and the release of half of its monies held under a performance bond when it claimed substantial completion of the first of three sections of works that it was contracted to carry out for the Defendant.

2. The Defendant refused. The Defendant contended that the Plaintiff “should have completed the whole works of Section 1 before it can be said to fulfil the Substantial Completion Date as provided in Clause 43 of the said Contract”. Consequently, a Certificate of Non-Completion [CNC] was issued before the Defendant finally terminated the contract.

3. It is the Plaintiff’s case that there is no requirement under the contract itself for “full completion” before CPC is issued. As a result of the Defendant’s wrongful termination which amounted to a repudiation of the contract, the Plaintiff argued that it was discharged from its further obligations under the contract, including Sections 2 and 3 Works. In its Statement of Claim, the Plaintiff seeks inter alia declaratory orders and damages including a sum of RM36 million being the amount of the performance bond that ought to have been released.

Factual background

4. The factual background is substantially put together in the Statement of Agreed facts. This is how it all started.

5. The Defendant, the Government of Malaysia, wanted to upgrade Kota Kinabalu International Airport so that it could cater for unrestricted operations of bigger aircrafts such as the Boeing 747-400. Up until then, the airport was handling mainly scheduled operations, chartered flights and some general aviation flights The airport had a single runway [Runway 20] of 2,988 meters (9,800 feet) in length, a parking apron that can accommodate one B-747, two AB-330, Three B-737 and four Fokker-50, a Passenger Terminal Building, an Air Traffic Control Tower complex and other associated facilities that can handle aircraft up to Boeing 747-400. With the upgrading that included extending the runway [Runway 02] to a length of 3,780 meters with pavement strengths designed to cater for Boeing 747-400 having a frequency of at least 1,200 annual departures, and an extension of 1,474 m of the existing main parallel taxiway to provide a full parallel taxiway system, and two high-speed exit taxiways, there would be unrestricted operations for these larger aircrafts.

6. There were three packages to this whole project. The Plaintiff was contracted to carry out only Package 2 which involved the Airside Infrastructure, Air Traffic Control Tower and New Low Cost Carrier Terminal [the Works]. The total contract price for Package 2 was RM720 million. This contract price was revised to RM773,401,624.39 when several variation orders were issued in the course of the execution of the Works.

7. The terms and conditions of the Plaintiff’s contract with the Defendant dated 1.8.2008 for the Works inter alia required the contract to be read together with the following; namely the Letter of Acceptance dated 21.4.2006; the Government Needs Statement for the Development of Kota Kinabalu International Airport, Sabah Malaysia; the Conditions of Contract and Appendices thereto; the General and Performance Specifications and the Appendices thereto Preambles, Method of Measurement, General Requirements and Preliminaries, Schedule of Rates, Price Breakdown and the Appendices; and Drawings [Principal Agreement].

8. Because the airport was an ‘operational airport’, the Government Needs Statement specifically stated that extra care was required to coordinate the Works so as to warrant a safe and smooth implementation of the Project. The sequence of works had to be planned in such “as not to disrupt the airport’s operations and to exercise every care and precaution to prevent any incidents or accidents from occurring.” The Defendant engaged KLIA Consultancy Services Sdn Bhd [KLIACS] as its representative for the purposes of administering the Principal Agreement/Works.

9. Under the terms of the Principal Agreement, the Plaintiff was required to furnish a Performance Bond worth RM36 million representing 5% of the contract price. The bond was procured from Bank Pembangunan Malaysia Berhad.

10. In the course of the Works, there were 5 Extensions of Time [EOT] granted by the Defendant pursuant to the Plaintiff’s applications. With these EOTs, the original date of completion was extended as follow:

1. EOT Certificate No. 1 which was approved on 3.2.2009 granted an extension until 15.12.2009;

2. EOT Certificate No. 2 which was approved on 24.12.2009 granted an extension until 19.5.2010;

3. EOT Certificate No. 3 which was approved on 3.6.2010 granted an extension until 1.7.2010;

4. EOT Certificate No. 4 which was approved on 28.6.2010 granted an extension until 18.3.2011; and

5. EOT Certificate No. 5 which was approved on 1.4.2011 granted an extension until 30.4.2012.

11. In the course of the Works, the Defendant had also issued 5 Taking-Over Certificates [TOC] when the following works valued by the Defendant at RM137,505,858.24 were completed:

1. TOC No. 1 dated 17.1.2007 certifying that the airside infrastructure new air traffic control tower and new low cost carrier terminal building and the associated items were completed on 10.1.2007;

2. TOC No. 2 dated 2.9.2008 certifying that the Department of Civil Aviation [DCA] Administration Building was completed;

3. TOC dated 1.9.2009 certifying that the Doppler VHF Omnidirectional Range [DVOR] and Distance Measuring Equipment [DME] were completed;

4. TOC No. 3 dated 2.2.2009 certifying that the Air Traffic Control Tower Building, its facilities building and part of apron were completed; and

5. TOC No. 5 dated 20.10.2011 certifying that Taxiway Lima, Golf, Charlie and part of Northern Apron of Terminal 1 were completed.

12. A portion of the new extended runway 02 including the foundation for the Approach Lights was to be constructed offshore. This involved reclamation works which meant that the approval of the Environmental Protection Department of Sabah [EPD] was required. The Plaintiff had submitted an Assessment of the Hydraulic Impacts from Approach Light Foundations Report [the Report] to EPD for this purpose. On 13.2.2007, EPD gave its approval subject to certain conditions.

13. Towards the end of the 5^th EOT, issues arose in relation to the construction of the precision approach lights [PAL] for Runway 02. The Plaintiff’s initial method of construction of the foundation for the PAL involved the use of a piling barge to construct offshore platforms to uphold the PAL. However, the seabed of the area where the platform was to be constructed had to be dredged because it was shallow. In its letter dated 9.6.2010, EPD imposed additional conditions to deal with this matter of substantial dredging works of the seabed.

14. On 2.8.2010, EPD told the Plaintiff that based on complaints from the public on the offshore works, the results of the joint inspection conducted on 30.7.2010 and EPD’s review of the Report, EPD found that the information in the Report was inaccurate and did not reflect the true condition at the site. EPD then replaced the additional conditions with new conditions after requiring a Supplementary Environment Impact Assessment Study to be conducted. Those additional conditions being:

1. construction of the PAL must use an environmentally friendly method which does not involve any dredging of the seabed sand or sand in the Kuala Sungai Petagas area; and

2. the Plaintiff must inform EPD of the construction method to be adopted before construction of the PAL.

15. On 27.8.2010, the Plaintiff proposed an alternative method of construction. Instead of using a piling barge to construct offshore platforms to uphold the PAL, temporary staging where temporary steel staging as a working platform was proposed. EPD approved this alternative method on 31.1.2011. The additional costs of this alternative method was estimated to be around RM15,291,838.00.

16. The parties exchanged a series of letters [dated 7.2.2011, 14.4.2011, 27.4.2011, 21.6.2011 and 3.1.2012] over the completion of the Works before finally deciding on 17.1.2012 to enter into a Supplementary Agreement [SA] for the construction of the PAL. The parties met to discuss the draft SA on 7.3.2012. On 13.3.2012, the SA was drawn up and signed. Under the terms of the SA, the Works were now divided into three sections; namely Section 1, Section 2 and Section 3 with different completion dates; and different rates of LAD imposed in the event of any delay in completion of any of the Sections.

17. Section 1 Works was where the problem started. The Plaintiff was required to complete these Works by 30.4.2012. The Plaintiff claimed that it had substantially completed whereas the Defendant viewed otherwise.

18. By letter dated 27.4.2012, the Defendant informed the Plaintiff that Liquidated and Ascertained Damages [LAD] will be imposed if Section 1 Works were not completed by 30.4.2012. The Plaintiff treated this letter...