LA LEISURE PTY LTD v 1. ) SABRECRAFT MARINE SDN. BHD. 2. ) IPOH CASTING SDN. BHD. (DULUNYA DIKENALI SEBAGAI MEGASTRA JAYA SDN. BHD.) 3. ) Stephen John Stirrup

Case Significance

Distinguishes unproven loss of profits from recoverable wasted expenditure as the measure of damages for breach of a vessel-construction contract, and confirms the personal liability of a director who signs the agreement as guarantor.

This High Court decision at Shah Alam concerns a claim arising from the failed construction of a vessel, and the correct measure of damages where a buyer proves breach but not its claimed loss of profits. The plaintiff, an Australian company suing as trustee of a unit trust, had entered into an agreement in March 2017 with the first defendant for the construction of a new vessel; the third defendant, a director of the first defendant, had signed the agreement both on the company's behalf and in his personal capacity as guarantor. When the vessel was not delivered, the plaintiff sued for breach, and the defendants raised issues including whether the delays had been caused by the plaintiff's own changes to the vessel's specification, whether time had become at large, and whether the first defendant had been entitled to stop construction and to sell the partially built vessel to mitigate its losses; there was also a counterclaim for outstanding payments for variation works and storage. The Court found that the plaintiff was not entitled to the liquidated quantum of damages it sought, that it had failed to prove damages in terms of loss of profits, and that it could not claim restitution on the basis of a total failure of consideration. However, it held that the plaintiff had satisfactorily proved its damages for breach of the agreement in the form of wasted expenditure, in the amount of AUD523,558.56, and was entitled to recover that sum from the first and third defendants jointly and severally. The Court entered judgment accordingly on the relevant prayers, with costs of RM80,000 to the plaintiff. The decision illustrates the distinction between unproven loss of profits and recoverable wasted expenditure as measures of damages for breach of a construction contract, and the personal exposure of a guarantor who signs in that capacity.