PETALING JAYA: A sand-mining subcontractor lost RM3.5 million in deposits after the Johor Bahru High Court ruled that its failure to pay for sand extracted from a Felda plantation amounted to a fundamental breach of contract.
Judicial Commissioner Noradura Hamzah dismissed Power KK Resources Sdn Bhd’s claim against main contractor Pearl Amrin Sdn Bhd, its director Hamdan Dali and his sole proprietorship, Pearl Amrin Enterprise.
Noradura also ordered Power KK to pay Pearl Amrin RM190,204.80 in outstanding extraction payments, with 5% interest, and RM150,000 in costs.
The dispute arose from a 10-year agreement signed in January 2017 for sand extraction across about 350 acres at Ladang Felda Kledang 2 in Kota Tinggi.
Power KK sought the return of RM2.1 million in security deposits and RM1.4 million in tree-compensation payments, alleging that Pearl Amrin wrongfully terminated the agreement in December 2020.
However, Noradura found that Power KK had continued extracting and selling sand from May 2020 without making payments.
She described the company manager’s admission during cross-examination that no payments had been made since May 2020 as "devastating" to Power KK’s case.
In her judgment, Noradura also rejected the company’s reliance on Covid-19 restrictions, noting that it had obtained police permits and continued operating.
Noradura held that the failure to pay constituted a fundamental breach under Section 40 of the Contracts Act 1950, making Pearl Amrin’s termination of the agreement lawful despite an issue concerning the 60-day notice period.
She allowed Pearl Amrin to retain the RM3.5 million deposits towards losses and rehabilitation costs, with any additional restoration cost to be assessed separately.
Noradura also refused to hold Hamdan personally liable merely because he owned 99% of Pearl Amrin.
GK Sritharan and Chai Yi Ng appeared for Power KK, while Lim Chon Sin and Kenny Lo represented the defendants.