Sabotage is not on by default, you have to spefically enable that.
Random malfunctions are on though. To disable them go into the SH3 Commander\Cfg folder and move out all the Randomized Events files. Either delete them or move them into a backup folder.
The worst malfunctions I've had were a blurry periscope or the dreaded "Flank speed = 0" engine malfunction. Ugh, hate that one! heh
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