VISTANET (M) SDN BHD v PILECON CIVIL WORKS SDN BHD [2005] 6 MLJ 664 

 CASE NAME AND CITATION : 

VISTANET (M) SDN BHD v PILECON CIVIL WORKS SDN BHD [2005] 6 MLJ 664 

FACTS OF THE CASE : 

The case concerns a construction project involving a 33-storey service apartment in Kuala Lumpur. Vistanet (M) Sdn Bhd, the main contractor appointed by Mayland Boulevard Sdn Bhd, subcontracted Pilecon Civil Works Sdn Bhd to carry out part of the works under a RM34.13 million contract. Although the contract was never formally executed, the parties conducted themselves in accordance with the standard terms of the Pertubuhan Akitek Malaysia (PAM) contract. Work was scheduled to begin on 13 August 2003 and be completed by 12 May 2005, later extended to 10 July 2005. 

Delays plagued the project due to Pilecon’s repeated failure to adhere to the agreed schedule. The defendant suspended work without justification and eventually ceased all activity on site. Despite several notices from the plaintiff urging the defendant to rectify the breaches and resume work, Pilecon removed its machinery and vacated the site, effectively abandoning the project. Police reports and letters from subcontractors supported the plaintiff’s claim of abandonment. 

On 25 February 2005, Vistanet terminated Pilecon’s employment. The defendant’s breach, specifically of Clause 25.1(i) of the PAM contract, caused significant delays, putting Vistanet at risk of failing its obligations to the developer and individual purchasers. This exposed Vistanet to potential financial losses, including claims for liquidated damages.

To mitigate these losses, Vistanet initiated legal action. The company sought mandatory and prohibitory injunctions to regain possession of the construction site, bar further interference from the defendant, and secure the completion of the project through an alternative contractor. The case highlights the critical consequences of a subcontractor’s failure to perform and the legal remedies available to main contractors when faced with abandonment and project disruption. 

LEGAL ISSUES : 

• Whether the plaintiff was entitled to a mandatory injunction requiring the defendant to vacate the construction site and return possession of the site to the plaintiff ? 
• Whether the plaintiff was entitled to a prohibitory injunction restraining the defendant, its agents, and representatives from entering the construction site after the termination of employment. 

LEGAL REASONING : 

In granting Vistanet (M) Sdn Bhd’s (plaintiff) application for mandatory and prohibitory injunctions, the court relied on established principles under the Pertubuhan Akitek Malaysia (PAM) contract and case law. 

• First Issue 

In granting the mandatory injunction requiring the defendant, Pilecon Civil Works Sdn Bhd, to vacate and return possession of the site, the court emphasized that Clause 25.4(i) of the PAM contract expressly required the contractor (defendant) to vacate the site upon termination of employment. The court found that the defendant had breached Clause 25.1(i) by unjustifiably suspending work, causing significant delays, and abandoning the project. By removing its equipment and materials from the site, the defendant had impliedly accepted the termination. The court held that the plaintiff was entitled to regain possession immediately to mitigate damages, noting that the balance of convenience strongly favored the plaintiff.

This can be seen in the case as purported by the judge, “So it is appropriate to say and I so say that cl 25.4(i) of the PAM contract confirms the proposition of the law that the defendant as the contractor must return possession of the site immediately in order to enable the plaintiff as the employer to mitigate any loss which may result as a result of the defendant’s breach irrespective of whether the determination of the PAM contract is lawful or not.” (para 24) and “The defendant had impliedly accepted the determination by removing those properties belonging to them at the site.” (para 27) 

• Second Issue 

In granting the prohibitory injunction, the court held that the defendant’s continued presence on the construction site after the termination of their contract was unlawful and constituted trespass. The defendant had clearly abandoned the project and, therefore, had no legal right to remain on-site. The court found that permitting the defendant, its agents, or representatives to stay would have caused irreparable harm to the plaintiff by obstructing efforts to appoint a new contractor and resume work. Such interference would have further delayed the project’s completion and exposed the plaintiff to greater financial losses and liability to third parties. 

This can be seen in the case as purported by the judge, “ The defendant’s continued occupation of the site has harmed and would cause irreparable harm if the defendant is allowed to occupy the site without carrying out any work; it would be reasonable to return possession of the site to the plaintiff who could immediately employ another contractor to carry out and complete the unfinished works.” (para 57) 

The court concluded that granting both injunctions was necessary to prevent further damage to the plaintiff and to uphold the principles of justice, ensuring compliance with contractual obligations.

RATIO DECIDENDI : 

• First Issue 

The principle established was that under Clause 25.4(i) of the PAM Contract, once the defendant’s employment is lawfully terminated due to breach (e.g., suspension and delay of work), the contractor must vacate the site and return possession to the employer (plaintiff). The court affirmed that despite the contract being unsigned, both parties had impliedly accepted the PAM terms through conduct, making the determination and subsequent mandatory injunction lawful1. 

• Second Issue 

The court held that upon lawful termination of the defendant’s employment, Clause 25.4(i) required the return of possession to the plaintiff. As the defendant no longer had any right to remain on the site, it became a trespasser. Accordingly, a prohibitory injunction was deemed appropriate to restrain the defendant from re-entering the site. This legal remedy was necessary to protect the plaintiff’s possessory rights and to prevent any further disruption or harm to the ongoing efforts to complete the project. 

OBITER DICTA : 

• Mandatory Injunction Threshold: 

The judge discussed that mandatory injunctions at the interlocutory stage require a stronger and clearer case than prohibitory injunctions. He referenced Shepherd Homes Ltd v Sandham and Tinta Press v Bank Islam, stating this higher threshold should ideally be revisited by the Federal Court for clarity and development of the law. 

• Financial Standing and Injustice Considerations: 

The judge remarked that the defendant’s poor financial status and strike actions due to unpaid wages contributed to the delay. While not the basis of the legal entitlement to an injunction, it influenced the court’s view on the balance of convenience — favoring the plaintiff to avoid further project delays and losses. This could guide future courts in weighing equitable considerations. 

OUTCOME OF THE CASE : 

In Vistanet (M) Sdn Bhd v Pilecon Civil Works Sdn Bhd, the High Court ruled in favour of the plaintiff, Vistanet (M) Sdn Bhd. The court granted both the mandatory injunction and the prohibitory injunction sought by the plaintiff against the defendant, Pilecon Civil Works Sdn Bhd. Specifically, the court ordered the defendant to vacate the construction site immediately and return possession of the site to the plaintiff. Additionally, the defendant, including its agents and representatives, was restrained from re-entering the site following the lawful termination of its employment. 

The decision significantly impacted both parties. For the plaintiff, the ruling provided much-needed relief, allowing them to regain control of the construction site and proceed with appointing a new contractor to complete the project. This was crucial in avoiding further financial liability, including potential claims for liquidated ascertained damages (LAD) from the proprietor and possible legal actions from purchasers. On the other hand, the defendant, having been found in breach of its contractual obligations under the PAM contract, lost any right to remain on or access the site. The judgment reaffirmed that their rights were limited to monetary claims, which could be pursued through civil litigation or arbitration—not through continued occupation of the site. 

This outcome underscored the importance of adhering to contractual terms, particularly in construction projects where delays and non-performance can have serious cascading effects. The court recognized that the defendant had breached clause 25.1(i) of the PAM contract by failing to proceed with the works diligently, suspending work without justification, and significantly delaying project completion. The plaintiff’s reliance on clause 25.4(i), which mandated the return of site possession upon termination, was validated by the court, especially since the defendant’s conduct—including withdrawal from the site and cessation of work—demonstrated an implied acceptance of the termination. 

Furthermore, the court found that the balance of convenience and justice clearly favored the plaintiff. The consequences of not granting the injunctions would have been severe, including irreparable harm to the plaintiff’s financial and operational standing. In contrast, the defendant’s interest was purely financial, and their continued presence on-site lacked any legal or constructive purpose. The court emphasized that mandatory injunctions, though granted sparingly, were appropriate in this case due to the strong factual foundation and urgency involved. 

Overall, the decision not only resolved the immediate dispute but also served as a cautionary precedent on the legal ramifications of failing to meet contractual obligations in construction contracts. It reaffirmed the court’s willingness to grant both mandatory and prohibitory injunctions where there is clear evidence of breach and where the claimant stands to suffer significant harm. The judgment ultimately restored the plaintiff’s rights and enabled them to take prompt action to protect their interests and those of the project’s stakeholders.

Reference(S)

1 Rangithan B, “Can a Standard Form of Contract Be Implied by the Conduct of the Parties?” Construction & Planning – Malaysia (June 30, 2022) <https://www.mondaq.com/construction-planning/1207234/can-a-standard-form-of-contract-be-implied-by-the-cond uct-of-the-parties>