Case:

Brief Facts:

• PDS Training Camp Sdn Bhd [PDS] is a private limited company involved in the accommodation and food services business.
  
  
• PDS and the Government of Malaysia [the Govt] entered into a contract where PDS would provide the Govt with training facilities and food services for the Program Latihan Khidmat Negara (“PLKN”) at the PLKN Camp PDS, Port Dickson, Negeri Sembilan (“the Contract”).
  
  
• After several renewals of the Contract, it was scheduled to lapse on 31.12.2020. However, on 3.09.2018, the Govt terminated the Contract pursuant to clause 36 of the Contract.
  
  
• Clause 36 of the Contract empowers the Govt to terminate the Contract at any time, with 30 days’ notice, without providing any reasons, if it is for the national interest, national policy or national security. What amounts to such category can only be solely decided by the Govt.
  
  
• As a result, PDS sued the Govt in the High Court.

THE DECISION OF HIGH COURT (HC)

• The HC decided that Clause 36 of the Contract is an exemption clause which means the Govt is excluded from any liability either in Contract or in tort.
  
  
• Therefore, the HC held that such a clause prevents PDS from claiming any damages against the Govt.
  
  
• The HC further held that such a clause removes the jurisdiction of the Courts to hear the suit and as such is against public policy, thus illegal.
  
  
• Both Parties dissatisfied with different aspects of the judgement appealed to the Court of Appeal.

THE DECISION OF COURT OF APPEAL (COA)

• Firstly, the COA decided that Clause 36 of the Contract does not specifically discriminate PDS and such does not violate their right to safeguard and protection under Article 8 of the Federal Constitution.
  
  
• Secondly, the COA ruled that Clause 36 did not remove or restrict the power of the Court to hear the matter and as such is not against public policy and therefore not illegal.
  
  
• Here, upon reading Clause 36 of the Contract, it does not restrict all of PDS’s right and remedies. PDS was still able to enjoy the benefits of the Contract prior to its termination.
  
  
• The Contract was also procured by PDS in an open tender basis. PDS and other tenderers knew the entire Contract’s terms before submitting their tender.
  
  
• PDS had the choice to not bid for the Contract. The COA also found that PDS never tried to remove Clause 36 of the Contract.
  
  
• Without any evidence of any attempt to bargain between the Parties, the COA disagreed with the HC that there is an unequal bargaining power.
  
  
• Thirdly, the COA found that all of the objects in the Contract are lawful. Termination for national interest also does not violate public policy.
  
  
• The Contract was terminated due to financial constraint by the Govt, and not due to any bad intent.
  
  
• Therefore, the COA set aside the HC’s decision and concluded that Clause 36 of the Contract is not illegal upon its true construction and PDS is not entitled to claim any loss.