A Langkawi-based company took the government to court for alleged wrongful termination of a contract to upgrade military aircraft worth almost half a billion ringgit.

Langkawi R&D Academy Sdn Bhd filed the breach of contract suit at the Kuala Lumpur High Court today and named the secretary-general of the Defence Ministry (Mindef), the minister and the government as defendants.

The plaintiff claimed that a backdoor deal between the defendants and a sub-contractor had led to the early termination in violation of the 10-year concession inked in 2001.

It is seeking RM48 million as general damages, another RM432 million for future loss of contract, exemplary damages, costs and other reliefs deemed fit by the court.

Lawyer M Manogar said he will serve the copy of the writ to the defendants after receiving a sealed copy from the court sometime next week, after which the defendants have eight days to enter their defence.

The plaintiff contracted to undertake avionics upgrading and refurbishment works involving the first of 10 Royal Malaysia Air Force Northrop F5-E&F fighter jets that were "not in a flyable condition".

The signing was witnessed by then premier Dr Mahathir Mohamad.

Although the contract was signed on Oct 11, 2001, it took effect on June 15, 2001, and was supposed to remain in force until June 14, 2011.

The plaintiff now claimed that the defendants had terminated the contract on Sept 6, 2002, without reasonable grounds.

The defendants said the plaintiff had failed to provide the performance bond within 14 days of sealing the deal and failed to deliver "one unit of flyable technology demonstrator" before Nov 15 as contracted.

Neither valid nor unilateral

In a reply a month later, the plaintiff countered that the defendants had not given 30 days termination notice, never raised the issue of performance bond and had asked for a fresh start pertaining to the single flyable unit due to extenuating circumstances.

The plaintiff claimed that to date, the defendants have yet to respond to their letter and on July 1, 2005, sent notice that it is exercising the option to rescind the contract on the basis that the termination was neither valid not unilateral.

In the statement, the plaintiff claimed the defendants had openly supported third parties to lobby for the sub-contract job pertaining to the upgrading and refurbishment works.

In the meantime, the plaintiff claimed it was shocked to learn about the defendants' "secret dealings directly with CAS Ltd" to continue the upgrading works without its knowledge.

The plaintiff had by then already terminated the sub-contract with UK-based Caledonian Airborne Systems Ltd (CAS Ltd) due to its unsatisfactory performance.

Taiwan-based Aerospace Industrial Development Corporation (AIDC), which had been placed on stand-by earlier for technical expertise in avionics, was being considered as a replacement, and the plaintiff claimed the defendants had been duly notified in writing.

The plaintiff claimed it was also shocked by the defendants' full support to CAS Ltd and Caledonian Airborne Group of Companies for them to continue upgrading works and to search for an alternative local partner.

The plaintiff claimed another aircraft maintenance company Airod Sdn Bhd had also begun to lobby the AIDC for the F5 fighter jet programme via a top-level visit to Taiwan.

"Airod also through their letter dated May 21, 2002, informed AIDC Taiwan that they were actually instructed by the defendants to continue with the said F5 fighter jet upgrading works," claimed the plaintiff.

No satisfactory reasons

It claimed to have learnt from local newspapers that Airod had signed an MoU with CAS Ltd and two other foreign partners - Northrop Gruman Corporation and Recon Optical Incorporated - to proceed with the upgrading works.

The MoU, claimed the plaintiff, was inked during the Farnborough Air Show in London witnessed by the deputy defence minister.

The plaintiff claimed that when met, the defence minister "did not give any satisfactory reasons but made the stand that he supports CAS Ltd to continue the said F5 fighter jet upgrading works".

The plaintiff claimed that CAS Ltd was granted access into the RMAF base in Butterworth whereas its security passes had been cancelled.

Citing Malay Mail reports in May 2002, the plaintiff quoted the minister as saying that upgrading works was nearing completion.

The plaintiff claimed that CAS Ltd had reportedly announced obtaining approval to continue the upgrading works.

Then Air Force chief General Sulaiman Mahmud, however, had reportedly said that F5-F fighter jets were not ready to fly anytime soon and that he did not know when they would be ready.

Now a fisherman

The plaintiff claimed that the general had nonetheless confirmed that upgrading works were being conducted by CAS Ltd.

The plaintiff also noted that CAS Ltd's associate Caledonian Airborne Engineering Ltd was put under receivership with an administrative order issued by a UK court.

When met outside the court, the plaintiff's spokesperson Mohammad Abdullah said since the dispute had remain unresolved for so long, he had to eke out a living doing other things.

"I'm a fisherman now. As a co-founder of the company (the plaintiff), I can't do anything until this matter is resolved... and I still have to earn a living," he said.

"The whole thing smacks of arrogance, at best."

Mohammad, 49, said he will now let the matter take its own course through the justice system.