DATAMICRON SYSTEMS SDN BHD v DATAKRAF SOLUTION SDN BHD

Case Significance

Illustrates the assessment of damages, including on a man-day basis and under section 71 of the Contracts Act 1950, where a contract is silent on the measure, and the limits privity places on a subcontractor's remedies against the principal.

This High Court decision at Kuala Lumpur concerns a subcontractor's claim for payment following the cancellation of a government contract, and it addresses how damages are assessed where the contract is silent on the method of calculation. The plaintiff and the defendant had entered into a Teaming Agreement under which the plaintiff would help the defendant bid for government projects, the defendant undertaking to appoint the plaintiff as its main subcontractor if the bid succeeded. With the plaintiff's technical input the defendant secured a government contract from the National Cyber Security Agency worth approximately RM13,500,000.00 and duly appointed the plaintiff as its subcontractor. The plaintiff played the major role in performing the work, attending every meeting with the government agencies and attending to every aspect of the project, while the defendant's role was largely to supply the hardware for the software the plaintiff created. When the government agency terminated the main contract for unforeseen reasons, the defendant in turn terminated the subcontract but failed to pay the plaintiff and failed to disclose what payment or consideration it had received from the agency, notwithstanding that the plaintiff was not in default. The questions for the court were whether the defendant had breached its contract with the plaintiff, how the plaintiff was to be compensated where the contract did not specify how damages for breach were to be assessed, whether section 71 of the Contracts Act 1950 and the principle of quantum meruit applied, and whether the plaintiff could claim on a man-day calculation basis; the court also noted that, by reason of privity, the plaintiff had no cause of action against the government agency, there being no Malaysian statute equivalent to the United Kingdom's Contracts (Rights of Third Parties) Act 1999. After a full trial the court found that the plaintiff had proved its claim on a balance of probabilities and allowed the claim against the defendant. The judgment is a useful illustration of the assessment of damages, including on a man-day basis and under section 71 of the Contracts Act 1950, where a contract is silent on the measure, and of the limits privity places on a subcontractor's remedies against the principal.