KUALA LUMPUR: A shipyard failed to seek more than RM10 million in damages from the government after the latter terminated its contract to build a 30-meter fisheries research vessel for the Fisheries Department in 2019.
The High Court in Kelantan also granted the government the right to claim ship parts worth RM2.79 million from Semarak Shipyard & Maritime Engineering Sdn Bhd (SSME) due to the company's failure to complete the project.
An agreement was established between the government and SSME for the project implementation on May 25, 2017.
Pursuant to the initial agreement, SSME was granted 18 months to complete the project, starting on Dec 28, 2016, with expected completion on June 27, 2018.
After regular site visits and meetings, the defendant (government) observed project delays beyond the expected timeframe, prompting the plaintiff (SSME) to request an extension until Aug 27, 2019.
Both parties subsequently signed an additional agreement on May 15, 2018, for the time extension.
However, the company experienced delays in executing the service, leading the government to terminate the project on May 21, 2019.
At this point, the shipyard had received over RM8.7 million from the government for its works on the unfinished project including RM2.79 million for the main engine and gearbox.
The company is seeking RM10,940,956.92 from the government, claiming a breach of contract, as it was terminated before the extension deadline.
The company also refused to hand over the main engine, gearbox, and related equipment to the government, prompting the latter to file a countersuit to retrieve the contested items.
Judge Datuk Mohamad Abazafree Mohd Abbas when dismissing SSME's suit, said the contract termination was valid due to the plaintiff's breach caused by the project delay.
"The government has the right to terminate the agreement if the plaintiff fails to rectify the breach.
"The plaintiff has failed to complete the project and has continuously neglected their responsibilities under both agreements, despite receiving warning letters from the defendant.
"The plaintiff only managed to achieve 31.98 per cent of progress in Jan 24, 2019, compared to the scheduled 82.3 per cent resulting in a delay of up to 50.32 per cent.
"In this regard, the court decides that the defendant's action to terminate the agreement with the plaintiff is lawful and valid," he said.
He said the agreement was terminated after the defendant was satisfied that the delay had reached an unreasonable condition for the government to continue expecting SSME to complete the project within the deadline.
Abazafree said the plaintiff has also failed to substantiate their claims regarding damages.
"Until the termination date, the hull and superstructure were not completed, and electrical equipment and auxiliary engine did not arrive at the construction site.
"The installation, testing, and commissioning of all equipment, including machinery, systems, and related components, were not fully completed.
"No payment was made for 'delivery and after acceptance' at the mooring location as the project was not completed," he said.
When allowing the government's countersuit to retrieve the contested items, the judge said the defendant has the right to claim damages as the aggrieved party due to breach committed by the plaintiff.
"This is due to the payments made by the defendant to the plaintiff," he added.
The court also awarded costs of RM30,000 to be paid by the plaintiff.