MS PILING & TRADING SDN BHD v PEMBINAAN WINCON SDN BHD & ORS [2015] 1 MLJ 84

Court of Appeal (Putrajaya)

Repudiation of Contract

Facts

1.     The Respondent is a company dealing in construction business was awarded with a contract to construct and complete 25,000 unit of mixed residentials dwellings in the Republic of Sri Lanka (“Project”).

2.     The Appellant was appointed as a sub-contractor to fabricate and supply Precast Reinforced Concrete Piles to the Respondent in the view of the Project (“Operations”).  Both parties entered into an agreement dated 13 April 2004 (“First Agreement”).

3.     The Appellant commenced its operation in June 2004.  Nonetheless, due to the inconsistency in the quality of the ready-mixed concrete supplied by the Respondent, the Appellant was forced to stop its Operations.

4.     The Appellant and the Respondent then entered into another agreement dated 12 November 2004 (“Second Agreement”) in which the Respondent is obligated to supply the ready mixed-concrete of Grade 45 (“Materials”) for the Appellant to carry out the Operations.

5.     However, by mid-January 2006, the Respondent failed to deliver the Materials as per the Second Agreement.  The Operations stopped and the Appellant’s staff returned to Malaysia for the Chinese New Year Holidays.

6.     The Appellant then sued the Respondent for breach of contract due to the failure on part of the Respondent to supply the Materials wherein leading to the failure of constructing and completing the Project, incurring loss of profits to the Appellant.

7.     The Appellant contended that because of the lack of instructions from the Respondent, the Respondent has terminated the First and Second Agreement (“Two Agreements”) by way of repudiation.

8.     The High Court dismissed the claim by the Appellant, thus the instant appeal is brought by the Appellant.

1.     The Appellant’s case on the claim of repudiation by the Respondent is premised from the fact that there has been no instruction by the Respondent to the Appellant to return to Sri Lanka to resume the Operations, therefore, repudiating the Two Agreements.

2.     As for the Appellant, their acceptance to the repudiation of the Two Agreements is by way of filing the writ of summons and the statement of claim against the Respondent in the High Court.

3.     The Court after scrutinizing the findings of the learned High Court judge found the followings:

“the lack of instructions from the Respondent to the Appellant to resume the works in Sri Lanka could not amount to a repudiation of the Two Agreements. The learned trial judge was quite correct to hold that ‘mere silence’ was insufficient to amount to a repudiation and that the Two Agreements still subsisted.  For a contract to be repudiated there must have been an absolute refusal to perform, only then can the innocent party treat itself as being discharged.  Here, in the present case there was no overt act committed by the Respondent to suggest that there was an express refusal by the Respondent to carry on with the Two Agreements and for the court to reasonably conclude that the Respondent no longer intended to be bound by the terms of the Two Agreements”.

[Emphasis added]

4.     The Court found that there was no substantial conversation between the Appellant and the Respondent, in any other form, that the Respondent had terminated the Two Agreements.  Likewise, the Appellant never once wrote to the Respondent accepting the alleged termination of the Two Agreements.

5.     The Court was of the view that in the absence of any correspondence between the Appellant and the Respondent pertaining to the repudiation of the Two Agreements, it is difficult to accept that such repudiation was agreed upon between the parties.

6.     The Court took its stand in explaining the circumstances of repudiation and further held as follows:

“In any event if the Appellant was desirous of accepting the repudiation of the Two Agreements by the Respondent for whatever reason the Appellant deemed fit, the acceptance ought to have been in writing by way of a letter or similar media as it is the norm in the commercial world.  It would be most unusual and undesirable for a party to accept a purported repudiation of a contract by merely filing a writ of summons and statement of claim in immediate response instead of by way of an exchange of views through correspondence as this may lead to unnecessary litigation.”

Decision

The Court of Appeal dismissed the appeal with order as to costs against the Appellant.

1.     Repudiation of contract occurs when one party to the contract indicated its unwilling desire to pursue with the contract.  A clear indication from that particular party to repudiate the contract has always been the core problem in determining the alleged repudiation.

2.     Commonly, the act of repudiating from a contract can be seen in the following circumstances:

(a)  A party renounced a contract or demonstrated a clear intention to no longer be bound by its obligations under the contract; and

(b)  A party’s action had prevented the performance of its obligations under the contract to such an extent that it would be impossible for both parties to achieve the goal under their contract.