Meridian Diversified (M) Sdn Bhd v Export-Import Bank of Malaysia Berhad

Case Significance

Illustrates that a contract permitting only mutual termination by notice cannot be unilaterally terminated, and that damages for wrongful termination of a part-performed project are measured by the value of work actually completed (here 90%) rather than the full remaining contract value.

This High Court decision at Kuala Lumpur concerns the wrongful termination of a supply and service-level agreement for an IT implementation project and the measure of damages payable for work completed before termination. The plaintiff, Meridian Diversified (M) Sdn Bhd, an IT and systems-solutions provider, had contracted with the defendant, Export-Import Bank of Malaysia Berhad (EXIM Bank), to supply and implement a customised core banking IT solution. During the project the bank issued letters revising the implementation timeline and holding certain activities, before purporting to terminate the agreement. The two issues for trial were whether the termination was valid under the agreement's termination clause, and whether the plaintiff could recover the remaining contract value of RM8,629,770 as compensation. Applying a holistic approach to construction — reading the provisions together, giving effect to the requirement of mutual termination by notice, and declining to rewrite or improve the parties' bargain — the court held that the clause did not permit the unilateral termination the bank had effected, so the termination was wrongful and invalid. It found, on the contemporaneous weekly progress reports, that the plaintiff had performed its obligations satisfactorily and that the termination and any disabling of performance were attributable to the bank's own acts, amounting to a constructive breach. On damages, the court declined to award the full remaining contract value, but allowed compensation calculated on the 90% of the project work shown to have been completed: taking the contract sum of RM10,793,000, 90% of it (RM9,713,700) less the amount already paid (RM2,163,230), it allowed an outstanding sum of RM7,550,470. The court accordingly held the termination wrongful, awarded the plaintiff RM7,550,470 in compensation with interest at 5% per annum from judgment until settlement, and ordered costs of RM30,000, subject to allocatur. The court accepted, on the weekly progress reports, that the plaintiff had performed its obligations satisfactorily, and that the bank could not rely on a state of affairs brought about by its own acts, so the plaintiff was entitled to be paid for the value of the work it had actually completed.