[2011] 7 MLRH Bank Simpanan Nasional v.

Cyber Business Solutions Sdn Bhd 253

BANK SIMPANAN NASIONAL

v.
CYBER BUSINESS SOLUTIONS SDN BHD

High Court Malaya, Kuala Lumpur

Anantham Kasinather J
[Suit No. D-22-Ncc-279-2009]
14 June 2011

JUDGMENT
GROUNDS OF DECISION
BEFORE HIS LORDSHIP TUAN ANANTHAM KASINATHER
JUDGE HIGH COURT MALAYA
KUALA LUMPUR
IN CHAMBERS
Background Facts
1. In March 2007, the Plaintiff desirous of replacing its existing computerised loan
management system ("SKS System"), issued a tender in the form of a 'Request for
Proposal' dated 16th March 2007. There is no dispute that the loan management
system ("IMS") proposed by the Defendant was based upon an Application
Software developed by Elsag. Together with Elsag's collaboration and
involvement, the Defendant submitted a bid described as 'Response' on 6th April
2007. It is not in dispute that following this 'Response', the Defendant conducted a
detailed walk-through of the proposed IMS for the Plaintiff. This was confirmed by
the Plaintiff's only witness Mr. Abdullah Aziz bin Buyong ('PW1').
2. The Plaintiff was successful in its bid. It is not in dispute that the Defendant's
engagement was formalised and governed by the following documents:-
a) Letter of Offer/ Award dated 28th December 2007;
b) Letter of Offer/ Award dated 24th January 2008;
c) Letter of Offer/ Award dated 13th June 2008;
d) Letter of Offer/ Award dated 17th July 2008;
e) Software Purchase Agreement dated 16th September 2009;
f) Hardware Purchase Agreement dated 16th September 2009;
g) Software Development Agreement dated 16th September 2009;
254 Bank Simpanan Nasional v. Cyber Business Solutions Sdn Bhd [2011] 7 MLRH

(Hereinafter collectively referred as 'the said contract')

3. The said contract did not spell out or describe the LMS required by the Plaintiff
in any detail or degree of specificity. As with the 'Request for proposal' and
'response', PW 1 agreed in cross-examination that it was in general terms. The
details and specifics were supposed to be derived from an exercise known as the
'Gap Analysis' which PW 1 described as designed to identify the functional gaps
between the 'as is' and the 'to be' ...", This exercise on completion was to culminate
in the production of a document called the 'Functional Specification
Documentation ("FSD"). This exercise started after the LMS project was awarded
to the Defendant and kicked-off on 8th January 2009 (Exh. C 1 p 202 to C 2 p 850)
.
4. The 'Gap Analysis' exercise leading up to the FSD was for the purpose of
ascertaining the Plaintiff's exact requirements for the intended LMS. The
significance of the FSD was that its contents represented what the Plaintiff
expected of the Defendant and from the Defendant's perspective, what was
required of it. For this reason, the Gap Analysis exercise was important as it
afforded the opportunity for both parties to the contract to understand their
respective contractual obligations. The FSD was completed after some 5 months
and signed-off by the parties on 26th May 2008. It is not in dispute that the
Defendant was not obliged to develop or customise any functions outside the FSD
save pursuant to a change request procedure (CR). Clause 3.4.3 stipulates as
follows:-
"the parties hereby agree that notwithstanding their signing-off of the Functional
Specification Documentation, if the circumstances so require, the client shall have the
right to revise and require the Vendor to execute the revision(s) of any part of the
Functional Specification Documentation, and such revisions shall be made, assessed
and carried out in accordance with the Change request Procedures as set out in
Annexure 7 ".

Annexure 7 in turn states as follows:

"Client may submit a Change Request to vendor request a change to the scope of
services, including but not limited to addition, omission or substitution of any works
pursuant to this Agreement or the alteration of the terms and conditions under which
such works are to be performed by the Vendor. Such request must be made using the
Change Request Form attached to this Annexure.
A Change Request shall be given to the Vendor's Project Manager or his/her nominated
delegate.
After receipt of a Change Request from the client, the Vendor shall provide Client with
the following information in writing:
[2011] 7 MLRH Bank Simpanan Nasional v. Cyber Business Solutions Sdn Bhd 255

a) Vendor's proposal for implementing the request change;

b) The amount of addition to or reduction in fees, if any, payable to vendor as a
result of the proposed change request; and
c) The impact, if any, on the delivery schedule arising from the change request.

Within seven (7) Business Days after receiving Vendor's proposal on the Change
Request, Client shall notify the Vendor of its acceptance or rejection of the same by
written notice to vendor and failure to notify shall be deemed rejected.
No Change Request shall be binding upon either Party unless signed by both parties.
Upon signing by both Parties, the signed Change Request shall form part of this
Agreement ".

5. Accordingly whilst the FSD spells-out the agreed scope of works, if there is to be
any addition to it, the Change Request ('CR') procedure pursuant to Clause 3.4.3
and Annexure 7 is to be followed before any additional work can form part of the
agreed scope of works. In other words, the parties had to agree on what impact the
CR was to have on the agreed price and delivery schedule before the CR could
become a term of the contract. PW 1 conceded this to be the case during cross
examination. However, he contended that the Letter of Offer / Award dated 17th
July 2008 was the only CR issued by the Plaintiff. This was naturally rejected by
the Defendants who take the position that no CRs' were issued at all although they
were required to undertake Additional Work / Requirements in respect of 17
items. The nature of these 17 items will be dealt latter in this judgment.
6. The Plaintiff set up two main committees at the development level to deal with
the LMS. The first known as the Project Steering Committee ('PSC') was
responsible for making decisions and providing guidance on the overall strategic
direction of the LMS project. Its responsibility included approving, revising,
amending strategies, implementing the plan, determining the project scope and
milestones and allocating functions and resources for the LMS project. Below the
PSC was the Project Working Committee (PWC). The members of this committee
were responsible for overseeing the progress of the LMS project and dealing with
problems or issues and to report from time to time to the PSC concerning the status
of the LMS project. PW 1 conceded that notwithstanding the presence of the
Defendant's representative in the PWC, the power to make the final decision
always rested with the representatives of the Plaintiff. Apart from the PSC and the
PWC, the Plaintiff had its own IT project team which was very much involved in
the project.
7. In the letter of Offer / Award dated 28th December 2007, Clause (4) stipulated
for the LMS to be completed within 9 months of the Start Date. Given the LMS
Project kick-off on 8th January 2008, this would be October 2008. However, this
256 Bank Simpanan Nasional v. Cyber Business Solutions Sdn Bhd [2011] 7 MLRH

was later changed by the PSC. In its meeting on 6th August 2008, the PSC
extended the timeline for completion to (1) 5th November 2008 for Phase 1 (Micro
Finance and Micro Credit) and (2) February 2009 for Phase 2 (Housing, Personal,
Hire Purchase and Credit Card). It is not in dispute that the completion of the
LMS project was delayed beyond the aforesaid dates. It is also not in dispute that
the Plaintiff did not impose new completion dates. However, it is the Plaintiff's
case that following the Defendant's persistent failure to complete the LMS project,
the Plaintiff issued a notice dated 21st May 2009 (Exh. 4189 of C10) inter alia
requiring the Defendant to provide a revised timeline for phase one rollout and of
the holding of a meeting by the PSC to deliberate and determine the party
responsible for the delay. By the same letter, the Plaintiff made known its intention
to impose Liquidated Ascertained Damages (LAD) against the Defendant if the
delay was attributable to the Defendant.
8. I now propose to set out some facts about data migration since it is the
Defendant's case that it is the Plaintiff's delay in dealing with this issue that delayed
the completion of the LMS project.
9. Data Migration is the process by which the data of the Plaintiff's existing loans
stored in the Plaintiff's existing SKS System was to be transferred to the new LMS
being developed by the Defendant. As accepted by PW 1 in cross examination, this
essentially involved three steps, namely:-
(a) The extraction of the data from the Plaintiff's existing SKS system;
(b) The cleansing or scrubbing of that data, which is to perform corrections to
incomplete, unavailable or wrong data; and
(c) The uploading of the clean data into the LMS.

PW 1 sought to convey the impression in his witness statement - WSPW 1 that:

(a) Data Migration was wholly within the Defendant's agreed scope of works;
(b) The Defendant had failed in its responsibilities in this regard, and
(c) It is this failure on the part of the Defendant that caused the delay in the
implementation of the LMS Project.

10. However, in cross examination, PW 1 conceded that most aspects of extraction

and cleansing / scrubbing were not part of the Defendant's agreed scope of works,
but rather that of the plaintiff. Additionally, in the face of clause 3.8.1 of the
Software Development Agreement, PW 1 conceded that the Defendant's
responsibility was only to upload the clean data to the LMS.
11. Be that as it may, the numerous delays in the completion of the LMS project,
according to PW 1, caused much anguish to the Plaintiff. On 5th August 2009, the
Plaintiff issued a 'Notice of Remedial' to the Defendant alleging various delays and
[2011] 7 MLRH Bank Simpanan Nasional v. Cyber Business Solutions Sdn Bhd 257

failures in performance and purporting to give the Defendant 14 days to remedy

the same. On account of the Defendant's alleged failure to remedy, the Plaintiff
through its solicitors, Albar & Partners, terminated the Defendant's engagement by
their letter of 26th August 2009.
Plaintiff's case
12. The thrust of the Plaintiff's case was that the delay in the completion of the
LMS project was of such a magnitude as to warrant the termination of the
contract. The Plaintiff contended that the prolonged delay entitled it to rescind the
contract based on a total failure of consideration (see Q & A 53 of WSPW 1) .
This prompted the Plaintiff to cause the issuance of a letter dated 5th August 2009
(Exh. 4193 of C 10) specifying the following defects:
i. Failure to notify BSN on the timelines for Phase I and II Rollout;
ii. Failure to deliver the LMS rollout;
iii. Failure to finalise /provide /complete the technical manual, user manual, the
cutover plan, the fallback plan and other documentation / manuals under the cut over
checklist;
iv. Failure to deliver LMS for a complete end-to-end System Integration Test (SIT);
v. Failure to complete LMS Roll Out Checklist;
vi. Failure to properly execute the stress test;
vii. Failure to execute the mock run; and
viii. Other failures as set out in the LMS Show Stopper Functional List under
Annexure 'A'

13. By the same letter, the Defendant was required to remedy the abovementioned
breaches within 14 days of the letter, with the threat of termination in default
thereof. Arising from the Defendant's failure to remedy the breaches, the Plaintiff
caused its solicitors Mr. Albar & Partner to terminate the contract vide their letter
of 26th August 2009 (Exh. 4203 of C 10) . In other words, this termination was
premised on the Defendant being solely responsible for the prolonged delay and
the Plaintiff receiving no part of the goods and services promised under the
contract. Apart from seeking the usual remedies following the rescission of a
contract such as the refund of the purchase consideration, the Plaintiff also sought
to recover special damages including the sum of RM698,211 purportedly incurred
by the Plaintiff in maintaining the SKS system pending delivery of the LMS
System.
Defendant's case
14. The thrust of the Defendant's defence and Counter-Claim can be said to be that
it was not a responsible for the delays in the completion of the LMS system.
258 Bank Simpanan Nasional v. Cyber Business Solutions Sdn Bhd [2011] 7 MLRH

According to the Defendant the alleged 'delays' and 'failures' complained of, were
caused by problems arising from:-
(a) data migration, a process by which data from the Plaintiff's existing SKS
System had to be extracted, cleansed/scrubbed and uploaded to the new LMS
developed by the Defendant, and which was the responsibility of the Plaintiff;
and
(b) the Plaintiff's requests for additional work / requirements which were
outside the Defendant's agreed scope of works and which the Plaintiff required
the Defendant to undertake.

15. Additionally, the Defendant contended that the time for completion of the
LMS Project was rendered at large and that in all circumstances of the case, the
Defendant had substantially completed and performed its obligations and that the
Plaintiff had wrongfully terminated the Defendant. Arising from the Defendant's
claim that it had substantially completed the said contract, the Defendant sought to
recover the balance of the purchase price and other monies by way of quantum
meruit for the additional work/ requirements performed by it, and the repayment of
the Performance Bond by way of its counter-claim.
Issues
16. In my opinion, there are four issues arising from the claim and Counter-Claim.
The issues being:
I. Whether the Plaintiff was entitled to terminate the Defendant's engagement?
II. Whether the Defendant had substantially completed and performed its
obligations under the contract?
III. Whether the Defendant is entitled to recover the sum of USD168,000 by
way of quantum meruit; and
IV. Whether the Defendant is entitled to recover the proceeds of the
performance bond forfeited by the Plaintiff?

First issue
Whether the Plaintiff was entitled to terminate the Defendant's engagement?
17. The answer to this question requires an in-depth examination of the time for
completion of the LMS project; the delays in completion; the reasons for the delay;
which of the two parties to this action is responsible for the delay; and finally the
status of the additional works in the form of CR undertaken by the Defendant.
18. It must be noted at the outset that this issue only concerns the matter of the
software development and customisation. This is because there is no dispute that
pursuant to the Software Purchase Agreement and the Hardware Purchase
[2011] 7 MLRH Bank Simpanan Nasional v. Cyber Business Solutions Sdn Bhd 259

Agreement, the Defendant delivered software and hardware purchased by the

Plaintiff. PW 1 admitted to the delivery of these items and confirmed that these
items remained in the possession of the Plaintiff (see NOE - 2 page 149, items 516
- 520) .
19. As regards the time for completion, in the Letter of Offer / Award dated 28th
December 2007, Clause (4) stipulates that the LMS was to be completed within 9
months of the Start Date. Given the LMS Project kick-off on 8th January 2008, this
would be October 2008. Again, it is not in dispute that this was later changed by
the PSC. In its meeting on 6th August 2008, the PSC extended the timeline for
completion to 5th November 2008 for Phase 1 (Micro Finance and Micro Credit
and February 2009 for Phase 2 (Housing, Personal, Hire Purchase and Credit
Card).
20. It is not in dispute that time was of the essence of the said contract (see clause
13.9) . Pursuant to clause 10.1 (i), the Plaintiff was entitled to terminate the
contract for any delay in completion beyond the stipulated date. Pursuant to clause
3.13, the Plaintiff was entitled to impose LAD against the Defendant arising from
any delay in completion. In cases where the Plaintiff had contributed to the delay,
the quantum of the LAD was to be adjusted according to the degree of culpability
of each party for the delay (see clause 3.12.6) . There is no evidence in any of the
deliberations of the PSC of the Plaintiff having entertained any intention to impose
LAD for delay notwithstanding that there were serious delays in the completion of
the LMS.
21. The first submission of Counsel for the Defendant on the 1st issue was that
once the time for completion is extended, time is at large. In other words, for the
Plaintiff to insist that the LMS be completed by the new completion date, LMS
must furnish notice of the new date of completion and make completion by the
new date, the essence of the contract. The rational for this requirement is that once
the date for completion is allowed to pass without the victim of the delay, in this
case the Plaintiff, invoking its right to repudiate the contract for delay, then, the
Plaintiff must be held to have waived its rights to rescind and the Defendant
discharged from the obligation to comply with the original timeline stipulated in
the contract. The Plaintiff is deemed to have elected to treat the contract as
continuing and time said to be at large (see Sim Chio Huat v. Wong Ted Fui [1982] 1
MLRA 379; [1983] CLJ (Rep) 363; [1983] 1 CLJ 178 ; [1983] 1 MLJ 151).
22. Counsel for the Plaintiff did not seriously dispute that time was at large
following the extensions granted by the Plaintiff. However, Counsel for the
Plaintiff countered that by stipulating the time for the Defendant to rectify its
breaches by its letters of 21st May 2009 and 5th August 2009, the Plaintiff had
effectively made time the essence of the contract. Counsel relied on the case of
National Skin Centre (Singapore) Ptd Ltd v. Eutech Cybernetics Pte Ltd[2002] 1 SLR 241
as authority for this proposition.
23. With respect, I disagree. In my judgment, there is a material difference between
260 Bank Simpanan Nasional v. Cyber Business Solutions Sdn Bhd [2011] 7 MLRH

making time of the essence of the contract and requiring the other party to the
contract to rectify breaches of the contract within a stipulated time. In my opinion,
the difference is evident from the objective sought to be achieved by the two
notices. In one case, the objective is to secure the completion of the contract. In the
other, the objective is to ensure that defects are rectified by a particular date.
Furthermore, the contents of the aforesaid two letters do not include the imposition
of any time for completion by the Plaintiff. On the contrary, the contents of the
two letters only require the Defendant to stipulate a revised timeline for the rollout
of the different phases. Furthermore, paragraph 3 of the Plaintiff's letter of 25th
May 2009 suggests that even the Plaintiff was uncertain as to whether the
Defendant was solely responsible for the delay. Paragraph 3 reads as follows:
"the provision of clause 3.13.2 of the SDA is now applicable. If upon their deliberation,
the Project Steering Committee the delay is caused by you, we shall exercise our right to
charge the Liquidated Ascertained Damages until, and inclusive of, the day the LMS
System for Phase 1 Part 1 Rollout and the System Integration Test and the User
Acceptance Test thereof are completed to our satisfaction and in compliance with the
relevant provisions of the SDA "

24. Since there is no evidence of the Plaintiff having imposed any LAD on the
Defendant following its letter of 25th May 2009, the only reasonable inference is
that the Plaintiff was not satisfied that the Defendant was to blame for the delay.
25. With respect, I also disagree with Counsel for the Plaintiff that the Singapore
case of National Skin Centre is an authority for the proposition of law contended
for by him. In my judgment, from the following passage in the judgment of the
Singapore case, it is evident that the facts in the Singapore case are far removed
from those in this case. This passage reads as follows:
"Eutech failed to commission the system by that date due to its own default. Several
extensions of time were given by NSC. However, Eutech failed to commission the system
even within the extended times. Finally on 11 February 2000 NSC issued a letter to
Eutech stating that the project was already in delay for more than five months and that
NSC expected the full system to be delivered within three month (ie, by 11 May) ".

26. In my opinion, from this passage, it is evident that the pronouncements in the
Singapore case is premised on the following findings of facts by the trial judge.
These are:
a) That the delay in the commissioning of the system was due to the default of
the Defendant; and
b) On 11th February 2000, the Plaintiff did issue a letter to the Defendant
stating that the project had to be delivered within 3 months of 11th February
2000 ie, 11th May 2000.
[2011] 7 MLRH Bank Simpanan Nasional v. Cyber Business Solutions Sdn Bhd 261

The Plaintiff having made 11th May 2000 the final date for completion of the
contract, the Defendant responded with its own proposals wherein it indicated that
it could only promise completion by 28th July 2000. This was not acceptable to the
Plaintiff. The Plaintiff, then, treating the Defendant's offer to complete by 28th July
2000 as amounting to "a clear expression by Eutech that it could not deliver the system by
the dateline of 11th May 2000 " (see page 244 paragraph d - e of the reported
judgment of the Court) terminated the contract. The Plaintiff treated the
Defendant's refusal to comply with the new dateline as amounting to a repudiation
of the contract thereby entitling it to accept the repudiation and terminate the
contract. In this case, it is the finding of the Court that the Defendant is not to
blame for the delay (dealt with later in this judgment) and that the Plaintiff, in any
event, failed to stipulate a specific date for the completion of the contract thereby
rendering time for completion to be at large.

27. The second submission of Counsel for the Defendant is that there is good
reason for the Plaintiff not to have imposed LAD and terminate the contract
earlier. That is simply this. The Plaintiff was to blame for the delay. Counsel for
the Defendant highlighted in his submission the need for the data of the Plaintiff's
existing loan stored in the Plaintiff's existing SKS System to be transferred to the
new LMS developed by the Defendant. This process known as Data Migration,
according to Counsel, involved three steps;
a) The extraction of the data from the Plaintiff's existing SKS System;
b) The cleansing or scrubbing of that data, which is to perform corrections to
incomplete, unavailable or wrong data; and
c) The uploading of the clean data into the LMS.

28. According to the submission of Counsel for the Defendant and which
submission I accept as correct, without the existing data in the SKS System being
first extracted and cleansed / scrubbed, it cannot be uploaded into the new LMS.
Those first 2 steps were thus the most important steps. This was admitted by PW 1
since the LMS was to replace the Plaintiff's SKS System and not a case of the
Plaintiff intending to run 2 parallel systems. PW 1 was constrained to admit this
fact after initially denying this to be the case. Initially in his witness statement, PW
1 sought to convey the picture that: Data Migration was wholly within the
Defendant's agreed scope of works; the Defendant had failed in its responsibilities
in this regard, and that this caused the delay in the implementation of the LMS
project. However, under intense cross examination, PW 1 conceded that cleansing
/ scrubbing were not part of the Defendant's agreed scope of works but rather that
of the Plaintiff contrary to his answers in Q & A 31 - 34. This is also evident from
clause 3.8.1 of the Software Development Agreement. In my judgment, the
attempt by PW 1 to dispute this obvious obligation of the Plaintiff under the terms
of the Software Development Agreement did not do any good to his credibility as a
262 Bank Simpanan Nasional v. Cyber Business Solutions Sdn Bhd [2011] 7 MLRH

witness.
29. There is overwhelming evidence that the Plaintiff encountered major problems
with the transfer of data from the SKS System. As early as 5th December 2007, PW
1 in his email to Ms. Raihan Ghazi (the then Project Director of the Defendant)
admitted to there being pertinent information missing from the data in the SKS
System. The kick-off meeting on 8th January 2008 also recognised this to be a
problem, noting that 'Massive Data Scrubbing' was needed. That this problem
persisted is evident from the minutes of the meeting of 8th July 2008 PWC meeting.
At this meeting, it was minuted that there were 7,000 customers with missing data
which the Plaintiff needed to resolve. On 25th November 2008, the project meeting
recorded that numerous problems were still encountered in data migration. This
continued way into 2009. On 12th February 2009 and 19th February 2009, project
meetings recorded yet more problems with data migration. On 27th March 2009,
DW 4 and the Pn. Zaleha Che Mustapha, one of the Plaintiff's LMS Project
Managers, explained to the PSC the various issues with the assistance of a
slide-show presentation. Counsel for the Defendant contended that the significance
of this is that the Plaintiff's own Project Manager, Pn. Zaleha Che Mustapha,
accepted that these were problems. Notwithstanding this substantial body of
evidence of the difficulties being encountered by the Plaintiff with data migration,
PW 1 in cross examination sought to deny that data migration caused delay to the
LMS Project.
30. The Plaintiff's difficulties with data migration was partly the result of poor
decisions made by it with regards its manpower requirements with this exercise.
Initially, the Plaintiff refused to engage the services of the vendor of its existing
SKS System, a company called Infopro to undertake this exercise although Infopro
was the obvious choice due to its familiarity with the SKS System. Instead the
Plaintiff's resolved to undertake this exercise itself. On 22nd February 2008, it
proclaimed that its branches would complete data scrubbing in 3 months from 1st
March 2008 to 1st June 20008. However, PW 1 conceded that due to its own faults
and internal limitations, the Plaintiff only started data scrubbing on 10th April
2008. Then on 15th April 2008, a mere 5 days after it started its data scrubbing
activities, the Plaintiff suddenly expressed a need to seek third party assistance
realising that it was too slow and expensive doing it in-house. As late as 13th May
2008, the Plaintiff had still not made a decision one way or another as to whether
to even appoint a third party to complete the exercise. Counsel for the Defendant
highlighted in his submission that 13th May 2008 was a mere 2 weeks from the
original planned completion date for completion of data cleansing / scrubbing (1st
June 2008). Finally, in June 2008, after rejecting Infopro's quotation as being too
expensive, the Plaintiff engaged MIIT Business Sdn Bhd (MIIT) to undertake the
data cleansing / scrubbing. Whilst MIIT was the Plaintiff's choice and appointee,
the 'formal' position was that MIIT were deemed to be appointed by the Plaintiff
pursuant to a private agreement between the Plaintiff and the Defendant. The
Defendant receiving the sum of RM7,100.00 for its troubles in facilitating this
[2011] 7 MLRH Bank Simpanan Nasional v. Cyber Business Solutions Sdn Bhd 263

arrangement. In truth, the Plaintiff had difficulty appointing MIIT directly without
Bank Negara's approval, and as such asked the Defendant to appoint MIIT on the
understanding that MIIT remained directly responsible to the Plaintiff and the
Defendant was to bear no responsibility.
31. Based on the above facts, Counsel for the Plaintiff submitted and I accept as
correct, the Plaintiff remained responsible for data cleansing / scrubbing. In my
judgment, the Plaintiff's late realisation of its own inability to complete data
migration and the ensuing late appointment of MIIT substantially contributed to
the delay in the completion of the LMS project. This had to be the case since MIIT
had to restart the process when they were appointed in August 2008. It is also my
finding that this late commencement by MIIT seriously affected the momentum /
progress of the LMS project. For instance, even as late as March 2009, the Plaintiff
was unable to produce clean data for uploading into the LMS System by the
Defendant. This is evident from the minutes of the LMS meeting of 27th March
2009 when during the course of this meeting, the Defendant's representative
highlighted the difficulty they were encountering with data migration issues and a
representative of the Plaintiff acknowledged this difficulty and required the
Defendant to look into solutions and raise the issues at the next PSC meeting (see
item 26 at page 3405 of C 8) . According to Q & A 50 of WSDW 4, the difficultly
revolved around data validation and data uploading. The errors, according to DW
4 were due to inconsistent data, matters within the province of the Plaintiff. The
Defendant had to wait for the inconsistent data to be corrected by the Plaintiff and
MIIT or find alternatives to avoid erroneous results being produced by LMS due to
the inconsistent data, before uploading the data into the LMS. The evidence of
DW 4 is borne out by contemporaneous records of the minutes of the meeting of
the loan management system of 30th May 2009 (see item 16 at page 3720 of C 9) .
32. In my judgment, this also explains why the Plaintiff extended the completion
dates on more than one occasion and never once in any one of the PSC meetings
deliberated upon imposing LAD upon the Defendant for delay. On the contrary at
the meeting of 27th March 2009, the following is recorded:
"The LMS Project Timelines V16.6 for March 2009 Roll out for Phase 1 remained
unchanged. Thus, CBS and BSN mutually accepted and acknowledged the delays.
March 09 2009 benchmarking of the delay ".

33. In my judgment, the aforesaid words can only amount to an acknowledgment

on the part of Pn. Zaleha Che Mustapha that, at the least, the Plaintiff and the
Defendant were equally responsible for the delays up to 9th March 2009 in the
completion of the LMS project. Additionally, there is the observation earlier in this
judgment of the Plaintiff not imposing any LAD following its threat to do so if the
PSC should find the Defendant to be the cause of the delay in the rollout of phase 1
of the LMS system (see paragraphs 23 and 24) . Accordingly, it is my finding that
the delays preceding 9th March 2009, on the part of the Defendant, cannot form the
264 Bank Simpanan Nasional v. Cyber Business Solutions Sdn Bhd [2011] 7 MLRH

basis for termination of the contract by the Plaintiffs. I am fortified in making this
finding by the conduct of the Plaintiff following Pn. Zaleha Che Mustapha's
observations at this meeting. The Plaintiff now stipulated new Roll out dates after
the Defendant notified the Plaintiff of 90% completion rate of LMS customization
and development and data migration completion rate of 84%. The new Roll out
dates for phase 1 being:
I. Roll out for new MF for HQ, KL, Kota Bharu and Kota Kinabalu on 30/04/2009
II. Roll out for new MF at other branches nationwide by 31/05/2009
III. Roll out for 'clean' MF DM data by 03/07/2009

34. The Defendant was also required to come back with the timelines for last stage
for consideration by PSC at its next meeting in May 2009. The Plaintiff's letter of
21st May 2009 suggests that the Defendant did not respond in a timely manner
with the new rollout dates. However, this only resulted in yet another letter being
issued on 5th August 2009 containing allegations of the same defaults ie, "failure to
notify BSN on the timelines for phase 1 and (ii) rollout but with no specific dates
being imposed by the Plaintiff for completion. Accordingly, it is my finding that
there is no evidence that Plaintiff made completion by the new rollout dates, the
essence of the contract. Yet, there is compelling evidence in the form of the oral
evidence of PW 1 that delay is the primary reason for the Petitioner terminating
the contract. This is my finding following the answer given by PW 1 to a question
posed by me during cross examination of PW 1 by Counsel for the Defendant.
35. During the course of PW 1 being cross examined concerning the outcome of
testing conducted by the Plaintiff, the following exchange took place between the
Court and PW 1.
YA : Yes, that's why. What counsel is trying to say is that at this point in time
in August, you can't say that it is defective because you are testing. You see, as
far as the case is concerned, you are alleging that something is wrong, they are
in breach. Breach means you did something wrong. But if you haven't tested
and come to a conclusion, you cannot say that they are in the wrong. That's
what counsel is trying to say. So, (1), (2), (3), because it is not available,
functions not available, you can say that they are in breach. But the other
items all there but not checked yet to see whether they are functioning and all
that. And the testing is being done by the Bank, and so what Counsel is trying
to say, that in August 2008 when you prepared this report the only 3 items
which you are really saying something you are not happy with is the first (1),
(2) and (3). The others you are still testing which you do not know the results
yet.
A : Ya, but the notice of termination, because we have given 3 extension of
the roll out date.
[2011] 7 MLRH Bank Simpanan Nasional v. Cyber Business Solutions Sdn Bhd 265

CY : That is a separate matter. We are coming to that later. We are talking about
this notice.
A : Ok.
YA : If you haven't completed your testing, you cannot say.
A : Ok.
Q : So you agree it's those 3 items here that you can complain about?
A : Ok, agreed. But the whole thing the product is not delivered to us on time,
date that we agreed. We can test, no problem, but it is not delivered. That's
the issue why we terminate. This is part of the information for issues that
raised.

36. The significance of the above exchange is that it amounts to an admission on

the part of PW 1 that the Plaintiff terminated the contract for delay contrary to his
assertion in his answer to question 54 in WSPW 1 that the termination was due to
the Defendant's failure to rectify the defects stated in the letter of 21st May 2009 or,
for that matter, its letter of 5th August 2009. In my view, the Plaintiff's reliance on
delay as their principal ground for termination is not helped by their failure to call
Pn. Zaleha Che Mustapha as a witness and not providing any good reason for not
doing so. I opine to this effect because clearly she and not PW 1 was the person
primarily involved in the decision making process insofar as the LMS Project was
concerned on behalf of the Plaintiff. Accordingly, on the issue of data migration
and how the Plaintiff's failure to competently deal with this item materially caused
the LMS project to be delayed, the Plaintiff's failure to call Pn. Zaleha Che
Mustapha as a witness gives rise to the irresistible inference that her evidence
would have been adverse to the Plaintiff.
37. It is my finding that there is one other reason why the Plaintiff has now chosen
to rely on delay rather than the Defendant's failure to rectify the defaults alleged in
the letters of 21st May 2009 and / or 5th August 2009. That reason is this. PW 1
confirmed in cross examination that after the commencement of system integration
test in May 2009, the Defendants were precluded from having access to the LMS
System. In other words, the Defendants were not afforded the opportunity to act
on the Plaintiff's letter of 21st May 2009. The position was even worse in August
2009 as the Defendants were even barred from entering their own project
management office at the Plaintiff's premises. DW 4's evidence to the same effect
was not subjected to any cross examination suggesting to the truth of the same. For
this reason, the Plaintiff's cannot rely on the Defendant's failure to rectify defects
whilst precluding them any forms of access to undertake such rectification works.
It seems to me that the Plaintiff was orchestrating the removal of the Defendant as
the vendor as why else prevent rectification. In my judgment, this also explains
why the Plaintiff has not called Pn. Zaleha Che Mustapha or any technical person
to give evidence of the defaults alleged against the Defendant or provide the results
266 Bank Simpanan Nasional v. Cyber Business Solutions Sdn Bhd [2011] 7 MLRH

of the test.
38. Counsel for the Plaintiff made much of the Defendant's letter of 19th August
2009 (Exh. 217 of B1) . Counsel contended that the contents of this letter which
amounted to a plea that the Plaintiff refrain from terminating the contract
amounted to an admission on the part of the Defendant that it was solely to blame
for the delay in the completion of the LMS project. Counsel also referred to the
representations made by DW 4 during the meeting of the LMS of 13th May 2009
that Elsag may not be prepared to provide its full commitment to undertake any
rectification as affording evidence of Elsag's abandonment of the contract. (Exh.
3721 item 19 of C9) .
39. With respect, I disagree. In my opinion, it is not unusual for the 'weaker party'
to a contract to appeal for the contract to be salvaged since it is invariably the case
that the 'stronger party' can better withstand the termination of a contract.
Additionally, there are such factors as goodwill and the existence of the
performance bond to be borne in mind. On the facts of this case, the Plaintiff being
a bank was clearly the 'stronger party' and the Defendant the 'weaker party'. It was
clearly not in the interest of the Defendant to upset the Plaintiff, its client, by
inviting termination particularly since the contract was so near completion. There
was also the ensuing risk of the Plaintiff calling on the performance bond
irrespective of the validity of its proposed termination. It is my finding that this
explains the basis for the Defendant's proposals for an amicable settlement of the
outstanding issues and that it be afforded the opportunity to salvage the project. In
my opinion, if the Plaintiff had reacted to this letter in the same manner as the
Plaintiff in the case of National Skin Centre by imposing a new rollout date and
made completion by this new date, the essence of the contract, they will not be in
the dilemma they presently find themselves in.
40. The representation concerning Elsag's attitude towards rectification must be
understood in the context of the failure of the Plaintiff to furnish CR and the
ensuing depletion of financial resources for Elsag to complete the project. This is
evident from the observation of Mr. Enrico in paragraph 5 of the PSC meeting
notes in June 2009 (Exh. 3409 C8 - item 5) . To the extent that it is my finding that
the 17 items should have been made the subject of CRs' and the Plaintiff was
wrong not to have issued the CRs and paid for them, it follows that Elsag was
justified in refusing to undertake rectification works until in receipt of further
payments from the Plaintiff. It is significant that as of May 2009, although the
Defendant and Elsag had completed 90% of the software customisation and
development, the Plaintiff had only paid 30% of the Defendant's entitlement for
these services (see N.E 155 of volume 2) . Accordingly, it is my finding that delay
was not a ground upon which the Plaintiff was entitled to terminate the contract
unlike the case of National Skin Centre (Singapore) Private Limited where the Court
found as a fact that the delay was the result of the Defendant being in default.
41. The third ground advanced by the Plaintiff to terminate was the Plaintiff's
[2011] 7 MLRH Bank Simpanan Nasional v. Cyber Business Solutions Sdn Bhd 267

failure to rectify the defects highlighted in the Plaintiff's letter of 21st May 2009.
This was the position adopted by PW 1 in WSPW 1. However, in cross
examination, he clarified that the Plaintiff was relying on the notice of remedial of
5th August 2009 and not the earlier letter of 21st May 2009. Although eight
breaches of the contract were alleged in the notice of remedial, PW 1 admitted in
cross examination that the breaches really amounted to three items only. The three
being:
i. Ceased interest function;
ii. BNM reporting; and
iii. Bounce cheque transactions

42. PW 1 admitted in cross examination that all other functions had been
completed although, at the material time, some of the completed functions were
undergoing testing to determine functionality. As regards the results of the tests,
the answers provided by PW 1 were equally unsatisfactory. The exchanges
between Counsel for the Defendant and PW 1 proceeded along the following lines:
Q : Now, User Acceptance Test evidence would no doubt show what
functions have passed and files have used the UAT test, and what failed, what
perhaps didn't pass, right?
A : Yes.
Q : Have you produced them in Court today?
A : Yes, I think it is in the Bundles.
Q : Where? I am talking about the UAT test evidence, not report.
A : I think it is in Bundle C7 at p2759.
Q : Encik Aziz, to help you, I am asking you for the UAT test evidence. What
I am talking about is where they run the function, whatever function they
choose to run, and they print the results as test evidence. I am not asking for
any of the reports, it's the actual test evidence.
A : We have, but its not here.

43. In my judgment, since PW 1 did not produce the outcome of these tests
although available by his own admission, the Court infers that the outcome of the
tests are favourable to the Defendant. In other words, that apart from the aforesaid
three items, the LMS system was fully functional.
44. Since the Plaintiff also sought to rely on the Defendant's failure to rectify the 3
items as a basis for termination, it is necessary now to examine the terms of the
SDA to ascertain whether completion of these 3 items formed part of the
268 Bank Simpanan Nasional v. Cyber Business Solutions Sdn Bhd [2011] 7 MLRH

Defendant's agreed scope of works.

Additional works requirement
45. The Defendant pleaded in paragraph 11 (a) to (q) of its Defence and
Counter-Claim 17 items which it claimed to be outside its original agreed scope of
works. From the findings of the Court in paragraphs 42 and 46, it is evident that
the Defendant, at the request of the Plaintiff, undertook work on all of the 17 items
but had only completed 14 items at the time of termination. However, it is equally
evident that none of the 17 items were the subject matter of a Change Request
('CR'). The significance of the 17 items is four fold. First, should these 17 items
have been the subject matter of CRs' pursuant to annexure 7 of the Software
Development Agreement (SDA)? Secondly, if not, what is the legal implication of
the 17 items not forming the subject matter of a CR? Thirdly, was the Plaintiff
entitled to terminate the contract for any delay in the completion of any one CR, in
the absence of any stipulation of the delivery schedule for the CR pursuant to
annexure 7? Finally, is the Plaintiff liable to pay the Defendant for the costs of the
14 new items completed by the Defendant, in the absence of any fees agreed to by
the parties pursuant to annexure 7?
46. The answer to the first issue turns upon the FSD. PW 1 admitted in cross
examination that the Defendant's original agreed scope of works was limited to
develop what was spelled-out in the FSD. Accordingly, if any of the 17 items are
not specified in the FSD, then, it is deemed to be outside the Defendant's original
agreed scope of works. PW 1 also conceded that out of the 17 items pleaded in
paragraph 11, only 2 items (i) (cease interest) and (j) (bounced cheque) have not
been developed. In other words, items (a) to (h) and items (k) to (q) have been
developed. According to Counsel for the Defendant in WSPW 1, PW 1 only made
a bare statement that all these 17 items were to be integrated into the FSD. PW 1
then made reference to the FSD with regards to 3 out of the 17 items, namely:-
a) 'cease interest' (item (i));
b) 'bounced cheque' (item (j)); and
c) 'outstanding balance' (item (k)). only.

47. For this reason, not surprisingly PW 1 was unable to demonstrate the inclusion
of items (a) to (h) and items (k) to (q) in the FSD. Indeed, PW 1 took an unduly
long time when required to produce proof of the inclusion of the very first item (a)
in the FSD. At this juncture, the Court to expedite the trial suggested that PW 1
put forward a further witness statement. This was done the following day by way
of WSPW 1A. In WSPW 1A, PW 1 sought to justify his claim that the 17 items
were integrated into the FSD by making reference variously to the RFP, Response,
Gap Analysis Report and FSD. Based on PW 1's evidence that the Defendant's
agreed scope of works is limited to FSD, I agree with Counsel for the Defendant
that PW 1's reference to 'RFP', 'Response' and 'GAR' is irrelevant. I do not propose
[2011] 7 MLRH Bank Simpanan Nasional v. Cyber Business Solutions Sdn Bhd 269

to examine the evidence of PW 1 in detail on this issue save to state that it is my

finding that PW 1 failed miserably in establishing that these 17 items were included
in the FSD. Indeed, PW 1 under cross examination conceded that the need for
these 17 items was realised after the completion of the FSD and the Defendant
asked to customise the functions thereafter. PW 1 made a feeble attempt to
circumvent the dilemma that the Plaintiff's found themselves in following this
concession by then trying to suggest that there was no need to include these items
in the FSD because there were references made to the same in the "requirement
document" and the Defendant's 'response' to the "request for the proposal". With
respect, this evidence not only cast doubt on the credibility of PW 1 but also
manifested a lack of understanding of the LMS project by him. I opine to this effect
because there is documentary evidence that his superior Pn. Zaleha Che Mustapha
in the meeting of 4th March 2009 conceded that some of these items should form
the subject matter of CR (see C 8 page 3325 - paragraph 8, 3326) . Another piece
of evidence detrimental to the Plaintiff's contention is the evidence of DW 4, the
Defendant's Project Director for the LMS project from April 2008 till the Plaintiff's
termination. According to her, all 17 items were new requirements outside the
FSD. DW 4 being eminently suited to give this evidence as she is a technical
person, unlike PW 1, and was involved in overseeing the implementation of the
LMS project. Notwithstanding her comprehensive evidence on this issue in favour
of the Defendant's case, there was no searching cross examination by Counsel for
the Plaintiff to dent her evidence. It follows that this Court must accept DW 4's
evidence on its entirety by reason thereof. Accordingly, it is my finding that the 17
items were not included in the FSD and consequently ought to have been the
subject matter of CR's.
48. A careful examination of clause 3.4.3 and annexure 7 of the SDA reveals that
the agreement between the Plaintiff and the Defendant contemplated variations to
the scope of works to be undertaken by the Defendant. However, such variations
were to be initiated in the form of a Change Request issued by the Plaintiff to the
Defendant. In other words, a Change Request is similar to an offer in the context
of a contract. The Defendant upon receipt of this offer was required to revert with
its own proposals as regards implementation; the impact of the offer on the fees
and delivery schedule. The Plaintiff, in turn, was required to respond within 7 days
"after receiving vendor's proposal on the Change Request " by way of acceptance or
rejection. In my opinion, the legal implications of a CR is that it would result in a
variation to the SDA only upon acceptance by the Plaintiff of the Defendant's
proposal. In default of such acceptance, the Defendant's obligations under the SDA
remain those prescribed in the FSD. I am fortified in this conclusion by the express
provision in annexure 7 that a Change Request is not to form part of the SDA save
"upon signing by both parties, the signed Change Request shall form part of this agreement".
Accordingly, the answer to the second question is that the legal implication of the
17 items not forming part of the SDA is that the Plaintiff cannot terminate the
SDA for the Defendant's failure to produce the functional cease interest item (i)
and bounce cheque item (j). The rational for this conclusion is clause 10.1 (i) which
270 Bank Simpanan Nasional v. Cyber Business Solutions Sdn Bhd [2011] 7 MLRH

reads as follows:
"a party shall have the right to terminate this agreement with immediate effect by
serving a notice if the other party (hereinafter refer ot as the Defaulting Party) (i)
commits any breach of any of the provisions of this Agreement ... "

49. In my opinion, the requirement in the Plaintiff's letter of 5th August 2009 that
the Defendant rectify the absence of the 'cease interest' and 'bounce cheque'
functions in the LMS System within the time stipulated in the SDA was unjustified
so long as these two items were not included in a CR and additional fees and a
revised schedule for completion concluded with the Defendants in respect of these
two items. This is because until a CR is formalised in accordance with the terms of
the SDA, the SDA is not varied to include work undertaken by the Defendant
which ought to have been the subject matter of a CR. The same is true of the third
item ie, BNM Reporting, as this was also not a function specified in the FSD,
having been specified in the 'Requests for proposal' and 'Response' only. I agree
with Counsel for the Defendant that to the extent that the requirement for BNM
Reporting was limited to "ability to generate such a report only", the Defendants
have, in any event, complied with this requirement. Accordingly, in my judgment,
the Plaintiff's termination of the contract whether based on the Defendant's failure
to produce a functional 'cease interest' and 'bounced cheque' in time or rectify its
failure to do so, pursuant to the Plaintiff's letter of 5th August 2009, is bad in law.
As opined earlier, the invalidity arises because the termination is premised on the
aforesaid items forming part of the SDA when this is not the case. The Plaintiff's
entitlement to the costs of the 14 completed items will be dealt with later in this
judgment.
50. I now propose to deal with the other grounds advanced by Counsel for the
Defendant to defeat the Plaintiff's claim. Incidentally, the Plaintiff's claim based on
total failure of consideration is for the return of the purchase consideration.
Counsel for the Defendant referred the Court to the PWC Weekly Report No.
16/20009 for the period 4 - 8 May 2009 wherein it was acknowledged by the
Plaintiff that phase 1 development and customisation was 92% complete (Exh.
3856 of C 9) . This percentage of completion included the completion of the 14
new items in respect of which no CR had been issued. PW 1 under cross
examination did not refute this percentage of completion. Indeed, PW 1 even
admitted that the LMS system could operate notwithstanding the non completion
of the 2 items and BNM Reporting being limited to what was available under the
previous SKS System. Furthermore, DW 4, a technical person, gave evidence that
the LMS was already a working system at the time of issuance of the Plaintiff's
letter of 21st May 2009. In the light of the Plaintiff's failure to call a technical
person to substantiate its claim that the LMS System was inoperable and its failure
to produce the results of the tests conducted by it to determine functionality, it is
my finding that the LMS system was substantially completed. Accordingly, in my
judgment, since the LMS System was substantially completed and operational,
[2011] 7 MLRH Bank Simpanan Nasional v. Cyber Business Solutions Sdn Bhd 271

there is no basis for the Plaintiff's claim for the return of the purchase
consideration.
51. The Plaintiff, in my view, conscious of the weakness of its claim sought to rely
on an acknowledgement stamped on its letter of 21st May 2009 to the following
effect:
'Certificate of Acceptance: We Cyber Business Solutions Sdn. Bhd. (Company No:
395882-T), hereby agree and accept the above confirmation and the terms and
conditions '.

as amounting to an admission of the contents of its letter of 21st May 2009. To the
extent that the contents included allegations of default on the part of the
Defendants, Counsel for the Plaintiff contended that the stamped remarks
amounted to an admission of default on the part of Defendant. With respect, I
reject this submission. In my opinion, the aforesaid remarks stamped on the
Plaintiff's letter by a subordinate staff of the Defendant amounts to nothing more
than an acknowledgement of the receipt of the letter by the Defendants. Having
seen the employee responsible for the insertion of this stamp, DW 3, and having
heard her evidence, I am satisfied she was telling the truth when she stated in
evidence that she inserted the stamp containing the aforesaid words by way of
acknowledgement only.
52. In my judgment, there is one other reason why the Plaintiff's claim fails even if
the termination was lawful. That is this. By clause 11.1, upon default by the
Defendant prior the cut: off date for the rollout of phase 1 of the LMS project, the
Plaintiff's rights are limited to appointing a new vendor ' to continue and complete the
LMS Project ' and thereafter finalise the accounts between the parties pursuant to
clause 11.2 of the SDA. In this respect, the opening words of 11.2 required the
Plaintiff to pay fees for all work completed by the Defendant. In other words, the
Plaintiff's cause of action even if the termination was lawful was to appoint a third
party to continue and complete the LMS System and thereafter pay the Defendant
the fees due to it less the costs and expenses paid by the Plaintiff to the third party
vendor to complete the system. This remedy is consistent with the rights of a
victim of a breach of contract in cases of termination as opposed to recession (See
Berjaya Times Square Sdn Bhd v. M-Concept Sdn Bhd[2009] 3 MLRA 1; [2010] 1 MLJ
597; [2010] 1 CLJ 269 and Edgar Joseph Jr. FCJ (as he then was) in Tan Sri Khoo
Teck Puat & Anor v. Plenitude Holdings Sdn Bhd [1994] 1 MLRA 420; [1994] 3 MLJ
777; [1995] 1 CLJ 15; [1995] 1 AMR 041 ). In Berjaya Times Square, Gopal Sri
Ram FCJ (as he then was) put it this way:
"that said, it is now settled that there is, at common law, a right to rescind a contract in
very limited circumstances. In essence it is the quasi-contractual remedy of restitution in
cases where there has been a total failure of consideration ... "
272 Bank Simpanan Nasional v. Cyber Business Solutions Sdn Bhd [2011] 7 MLRH

53. With respect, the Plaintiff displayed a singular lack of appreciation of this to be
its entitlement by not only not engaging a third party vendor but by pursuing this
claim based on rescission. The Plaintiff erroneously has proceeded on the basis that
it is entitled in law to retain the benefit of all of the goods and services furnished by
the Defendant pursuant to the SDA and simultaneously recover all of the monies
paid by it to-date under the SDA without regard to the provisions of the SDA.
Second issue
Whether the Defendant had substantially completed and performed its
obligations under contract?
54. PW 1 conceded that when the Plaintiff purported to terminate the contract vide
its solicitors letter of 26th August 2009, all that was outstanding were the 'cease
interest', 'bounce cheque function' and the BNM Reporting functions. In the light
of this Court's earlier findings that the aforesaid three functions were outside the
agreed scope of works stipulated in the FSD, it follows as a matter of course that
the Defendant has substantially completed and performed its obligations under the
contract. This conclusion of the Court is reinforced by the fact that the Plaintiff has
retained in its possession all hardware and software delivered and / or produced by
the Defendant under the LMS project and failed to produce to the Court the results
of the User Acceptance Test. In my judgment, for the Plaintiff to persuade this
Court that the Defendant had not achieved substantial completion on the balance
of probabilities, the least that the Plaintiff ought to have done was to have called a
witness technically competent on the LMS project to provide independent evidence
refuting the Defendant's claim that it had substantially completed what it was
required to do under the FSD. In my judgment, the Plaintiff's failure to call such a
witness coupled with the unsatisfactory evidence of PW 1 and the retention of the
'fruits' of the Defendant's labour pursuant to the contract compels me to conclude
that the Plaintiff has substantially performed the contract. In this respect, I adopt
the pronouncements of Zainon Ali JCA in Nirwawa Construction Sdn Bhd v.
Pengarah Jabatan Kerja Raya Negeri Sembilan Darul Khusus & Anor[2008] 4 MLJ that
under the doctrine of substantial performance a promisor who had substantially
performed its side of the contract may sue on the contract for the agreed sum,
though it remains liable in damages for its partial failure to fulfil its contractual
obligations. Her Ladyship opined and, in my view, correctly that this doctrine
applies in cases where the contract is an entire or lump sum contract. For the
reasons stated in paragraph 52 of this judgment, the contract between the parties in
this case is clearly a lump sum contract. Accordingly, it follows that the Defendant
is entitled to the undisputed balance of the contract sum amounting to
RM3,902,220.00.
Third issue
Whether the Defendant is entitled to recover the sum of USD168,000 by way of
quantum meruit ?
[2011] 7 MLRH Bank Simpanan Nasional v. Cyber Business Solutions Sdn Bhd 273

55. The basis of the Defendant's claim for the sum of USD168,000 is that
notwithstanding that the 17 new items did not form the subject matter of a CR, the
Defendant is entitled to judgment for this amount under the doctrine of quantum
meruit . The rational being that under this doctrine, any party who has undertaken
work and completed the same is entitled to compensation so long as the work was
undertaken at the request of the party called upon to compensate. Applying this
doctrine to the facts of this case, it is the submission of Counsel for the Defendant
that since the Defendant had undertaken and completed 14 out of the 17 items, it is
entitled to be compensated in respect of these 14 items since it is not in dispute that
the goods and services in respect of these 14 items were undertaken at the request
of the Plaintiff. That the new items were undertaken at the request of the Plaintiff is
borne out by the evidence of PW 1 and statements attributed to Pn. Zaleha Che
Mustapha in the minutes of the PSC. Counsel for the Defendant invited the Court
to have regard to the pronouncement of Edger Joseph Jr. FCJ (as he then was) in
Ayer Hitam Tin Dredging Malaysia Bhd v. YC Chin Enterprices Sdn Bhd [1994] 1
MLRA 201; [1994] 3 CLJ 133 ; [1994] 2 MLJ 754 wherein His Lordship
acknowledged that a claimant undertaking work either with the knowledge or the
request of a third party ie, the Plaintiff in this case, is entitled to recover the costs
and expenses incurred in undertaking such work under the doctrine of quantum
meriut . This doctrine is also enshrined in sec. 71 of the Contract Acts .
56. In my judgment, the Defendant is entitled to recover under this doctrine and
Sec. 71 of the Contract Act in respect of the 14 items notwithstanding the absence
of a CR. It appeared to me that the objection of Counsel for the Plaintiff to this
claim was primarily directed at the evidence relied upon by the Defendants to
substantiate their claim. The Defendants relied on the invoices issued by Elsag to
justify their claim as amounting to the 'reasonable sum' incurred by them in
undertaking and completing the 14 items. The aggregate of these invoices
amounting to USD168,000 in all.
57. The objection to these invoices by the Plaintiff was that Elsag's invoices are not
admissible since no representative was called as a witness to introduce the invoices.
With respect, in my judgment, the invoices are admissible in evidence as the
Defendant's are the recipients of these invoices. As regards the weight to be
attached to these invoices, in my view, there is no reason for this Court not to
accept the contents of these invoices as genuine since Elsag was the supplier and
consultant to the LMS project, to the knowledge of the Plaintiff. The Plaintiff
which had at several meetings demanded the support and commitment of Elsag to
the LMS project cannot now turn around and deny that the source for the goods
and services supplied by the Defendant to the Plaintiff was Elsag. Accordingly, I
am satisfied that the Defendant did incur the amount of USD168,000 stipulated in
the invoices of Elsag as representing the costs and expenses incurred by the
Defendant in undertaking and completing the 14 new items.
Fourth Issue
274 Bank Simpanan Nasional v. Cyber Business Solutions Sdn Bhd [2011] 7 MLRH

Whether the Defendant is entitled to recover the proceeds of the performance

bond forfeited by the Plaintiff?
58. Following the termination of the contract, the Plaintiff recovered the sum of
RM466,706.60 from the RHB Bank Berhad representing the value of the
performance bond furnished by the defendant upon executing the contract. It is not
in dispute that the performance bond was furnished by the Defendant by way of
security for any damages suffered by the Plaintiff arising from the Defendant's
breach of the contract. This is evident from a literal reading of clause 2.5.7 read
with clause 11.2 of the SDA. That the Plaintiff's entitlement to the value of the
performance bond is subject to the Plaintiff proving its losses is also evident from
the particulars of its pleaded claim. In paragraph 13 of its amended statement of
claim, the Plaintiff claims to have incurred special damages of RM6,886,448.00 but
which claim was reduced to RM6,419,741.90 after the setting off of the value of
the performance bond.
59. In my judgment, the Defendant is entitled to the refund of the performance
bond for two reasons. First, the forfeiture of the performance bond was premised
on the Defendant being in breach and the 3 items forming part of the contract.
Since it is the finding of this court that the Defendant was not in breach of the
contract and the termination unlawful, the forfeiture must equally be unlawful.
Secondly, in my judgment, the Plaintiff has not proved the losses alleged to have
been suffered by it. An examination of paragraph 13 of the amended claim reveals
the bulk of the claim under paragraph 13 (i) to be premised on the Plaintiff being
entitled to a refund of the full contract sum. Since there is no basis for this claim by
reason of the contract being a lump sum contract, this claim must necessarily fail.
The second head of claim was for equipment worth RM75,050. This claim also
fails since PW 1 conceded under Cross Examination that the equipment forming
the subject matter of this claim is still in the possession of the Plaintiff. The plaintiff
led no satisfactory evidence for the claim of RM13,800 purportedly incurred for the
stamping of the various agreements. In the absence of such evidence, the Court is
compelled to reject this claim. The next claim for late delivery was not pursued
actively by the Plaintiff and consequently fails. Finally, there is the claim for
RM698,211. The basis of this claim is that arising from the failure of the Defendant
to complete the LMS project on time, the Plaintiff had to continue to maintain the
SKS system. This sum supposedly represents the cost of such maintenance. In my
judgment, this claim is justified only if the Plaintiff was successful in establishing
that the Defendant was late in the delivery of the LMS project in accordance with
the terms of the contract. Since the Plaintiff was unsuccessful in doing this through
its own failure in not making time of the essence of the contract and by ensuring
agreement on CRs', there is no basis for this claim. Secondly, in my opinion, the
terms of the contract provides the remedy for any delay on the part of the
Defendant. This remedy is for the Plaintiff to invoke the liquidated damages clause
to be found in clause 11.2 and to terminate and prove its loses following
termination. The Plaintiff having failed to invoke the LAD clause and not having
 [2011] 7 MLRH Bank Simpanan Nasional v. Cyber Business Solutions Sdn Bhd 275

employed third parties to complete the project, cannot seek to recover losses
presumably incurred before the termination of the contract. This is particularly so
when the Plaintiff consented to the extensions beyond the original completion
date. Thirdly, I agree with counsel for the defendant that if the Plaintiff is to
succeed in obtaining damages for the costs of maintaining the SKS system for an
extended period than the Plaintiff is obliged in law to set off against this losses, the
costs it would have incurred in maintaining the LMS system.
60. For the reasons contained in this Judgment, I make the following orders in
respect of the Plaintiff's claim and the Defendant's counter-claim:
61. I hereby dismiss Plaintiff's claim with costs.
62. I allow the Defendant's counter claim with costs and order the Plaintiff to pay
the Defendant:
i) The sum of RM3,902,220.00;
ii) The sum of USD168,000;
iii) The sum of RM466,706.60.

63. I order the Plaintiff to pay interest on the above sums at the rate of 4% p.a.
from 26/8/2009 till judgment. I order the Plaintiff to pay interest on the above
sums at the rate of 8% p.a. from judgment till realisation.
64. I order the Plaintiff to pay costs of RM150,000 to the Defendant arising from
dismissal of the claim and the counter claim being allowed. In ordering such
substantial costs, I have taken into account the following factors:
i) this is not an ordinary case and the facts are fairly complicated;
ii) the trial was over several days and not on consecutive days resulting in
counsel having to undertake additional getting up;
iii) the claim and counter claim involved subject matter exceeding RM 5
million;
iv) the points of law involved were intricate and the submission
comprehensive; and
v) the case involved technical concepts consequently requiring counsel to
familiarise themselves with the technical aspects of the case.

Mahkamah Tinggi Kuala Lumpur

Date of Decision: 14 JUNE 2011

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