MCGIRVANMEDIA (ASIA) SDN BHD v HSS INTEGRATED SDN BHD

Case Significance

Addresses the consequences of the wrongful termination of a consultancy engagement, holding that the breach rendered the whole contract sum payable and that costs flowing naturally from performance are recoverable as they are not too remote.

This High Court decision concerns the wrongful termination of a sub-consultant on a public infrastructure project and the recovery of contractual sums and consequential losses. The dispute arose out of a bus rapid transit project undertaken by a regional development authority, on which the defendant had won an open tender to be the lead consultant, supported by a collaboration of approved sub-consultants that included the plaintiff. The collaboration was evidenced by a term of reference and a non-exclusive teaming agreement. A few months into the project, disagreements arose between the plaintiff and the defendant over the plaintiff's scope of work, variations to that scope and the timeline, and the payment schedule, and the defendant terminated the plaintiff. The plaintiff sued for the work done and the balance of the sums promised under its agreement with the defendant. After a full trial on oral and documentary evidence, the Court addressed the actual scope of the plaintiff's work before and after the award, the variation of that scope, and the payment terms. It held that the defendant had breached its agreement in relation to the plaintiff, with the consequence that the entire contract sum became due and payable, and that the plaintiff could also recover the additional and operational costs incurred in complying with the defendant's instructions, since these arose naturally in the performance of the contract and were not remote or indirect losses. The Court allowed the plaintiff's claim with costs and dismissed the defendant's counterclaim. The judgment is significant for its treatment of the consequences of wrongful termination of a consultancy engagement and the recoverability of consequential costs that flow naturally from performance. The decision is a practical statement of the consequences that follow when a lead consultant wrongfully cuts a sub-consultant out of a project, and of the recoverability of the losses that flow naturally from being required to perform, and then being deprived of the benefit of, the engagement.