News and developments
MANDATORY MEDIATION CLAUSE IN A CONCESSION AGREEMENT: NOT SO MANDATORY AFTER ALL?…
This article dissects and analyses the rationale behind the decision.
ISSUE
The issue before the Court of Appeal is whether the Concession Agreement dated 5 August 1999 (“CA”) can be terminated without prior recourse to a mandatory mediation process under Clause 11 of the CA?BACKGROUND FACTS
Godell Parking Sdn Bhd (“Godell”) and Majlis Bandaraya Petaling Jaya (“MBPJ”) entered into the CA where Godell is to manage the street parking collection system in Petaling Jaya for a period of 20 years. Godell is to pay monthly rental of a certain amount to MBPJ. Godell subsequently failed to pay monthly rentals. MBPJ then issued three notices of default to Godell. Godell was given fifteen (15) days from the date of receipt of the notices to rectify the default. Godell however responded to the notices of default on 5th June 2017 citing several alleged breaches of the CA by MBPJ as reasons for the non-payment. MBPJ thereafter terminated the CA by serving a notice of termination to Godell pursuant to Clause 10 of the CA. Godell instituted a claim against MBPJ on the basis that the termination was unlawful and claimed for damages. MBPJ in response raised a counter-claim for the outstanding monthly rentals. The High Court dismissed Godell’s claims. In so far as Godell’s argument that the termination was unlawful as MBPJ failed to exercise Clause 11 of the CA which is to refer the dispute to the State Government for mediation, the High Court held that Clause 11 is not a pre-condition to the issuance of a notice of termination. Godell then appealed to the Court of Appeal.DECISION OF THE COURT OF APPEAL
The Court of Appeal dismissed the appeal and upheld the decision of the High Court. In doing so, the Court of Appeal analysed Clause 10 and Clause 11 of the CA. The Court of Appeal held that there is nothing in Clause 10 and Clause 11 that suggest that the two clauses should be read together or are dependant on each other. The Court of Appeal found that the operationality of Clause 10 is not dependant on the fulfilment of Clause 11. The Court of Appeal was satisfied that termination under Clause 10 only requires two pre-conditions to be met, which are:- occurrence of an event of default; and
- issuance of a notice of
- there was no link between Clause 10 and Clause 11 of the CA; and
- clause 10 of the CA being the termination clause, has its own built-in mechanism for termination without reference to Clause