INGENIEUR
Damages for Late Completion
In the High Court case of Sakinas Sdn Bhd v Siew
Yik Hau & Anor [2002] 5 MLJ 498, the learned
judge in coming to the conclusion that “no known
measure of damages was employable” for delay
claims said that “a complex cocktail of losses
was involved, including financing charges, rental
expenses, loss of profit and loss of use and
enjoyment.”
It is submitted that such losses, though
difficult to prove and even more dif ficult to prove
precisely, do not belong entirely to the category
of losses for which there is no known measure of
damages. At the most, such losses are a hybrid of
the two types of losses postulated in Selva Kumar.
In such a situation, it is difficult to see how a pre-
determined sum can be accepted as the measure
of the entire loss without any proof.
Johor Coastal Development Sdn Bhd v
Constrajaya Sdn Bhd
The Federal Court re-looked Selva Kumar in Johor
Coastal Sdn Bhd v Constrajaya Sdn Bhd [2009]
4 MLJ 445. Those in the construction industry,
particularly employers, who still had a glimmer of
hope that liquidated damages would be validated,
were disappointed.
In that case, a vendor and a purchaser
entered into two sale and purchase agreements
with identical terms in respect of two lots of
land for RM4,590,000 and RM10,830,000
respectively. The purchase price was to be paid
via six instalments. The purchaser paid the first
three instalments for the two agreements totalling
RM8,998,400 which included the initial payment
of 12% amounting to RM 1,850,400 but defaulted
in paying the balance purchase price.
The vendor then terminated the sale and
purchase agreements and forfeited the sums
already paid. The purchaser applied for declaratory
relief to the effect that the termination was
unlawful and that the vendor was not entitled to
forfeit all the sums already paid for being penalties
which were unenforceable under s 75 of the Act.
The vendor was granted leave to appeal to the
Federal Court on the two questions posed:
(a) whether the part of the decision in Selva
Kumar which obliges a party having the benefit of
a liquidated damages clause to prove its losses,
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notwithstanding the words in s 75 of the Act
“whether or not actual damage or loss is proved to
have been caused thereby”, is correct; and
(b) whether or not parties entering into a
contract were entitled to contract out of the
provisions of s 75 of the Act.
The majority decision was to dismiss the
vendor’s appeal. For the first issue, the court
followed closely the dicta in Selva Kumar. The
court held that the vendor could not “recover or
retain without proof by evidence of the loss or
damage suffered as a result of the breach of the
agreements” because s 75 of the Act provided
“that in every case, the court must determine
what is reasonable compensation, ‘whether
or not actual damage or loss is proved to have
been caused thereby.’” The court agreed with
Selva Kumar that actual damages or reasonable
compensation must be proved.
As for the second question, the Federal
Court held, without giving any further reasons or
elaboration, that the agreements did not clearly
exclude the application of s 75 and that therefore
it was unnecessary for the court to answer the
question. Hence, that very crucial issue was skirted.
Interestingly, the court referred to the case of
Oil & Natural Gas Corp Ltd v Saw Pipes Ltd AIR
2003 SC 2629 and noted that nowhere there did
the Indian Supreme Court state that the provisions
of the Indian Contract Act could be contracted out
of. This statement seems to imply that the Federal
Court would not be inclined to hold that parties
could contract out of s 75 if this question had to
be answered.
Contracting out of Section 75 of the Act
A possible recourse for parties to have their
genuine pre-estimate of loss being recognised by
the court when awarding damages is to contract
out of s 75 clearly and precisely.
An authority on this exists in the form of Ooi
Boon Leong & Ors v Citibank NA [1984] 1 MLJ
222. In that case, the Privy Council said that the
legal consequences of a contract at common
law are applicable unless some different legal
consequences are spelt out by the Act.
The Privy Council added, “The contracting
parties are, however, not unable by agreement