Ch'ng Ghee Weng v Lee Khoon Eng T/A Prestige (P-02(NCVC)(W)-1264-07/2017)

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BAH SIEW CHIN … PERAYU-PERAYU DAN LEE KHOON ENG T/A PRESTIGE CONSTRUCTION … RESPONDEN Dalam Mahkamah Tinggi Malaya di Pulau Pinang Dalam Guaman Sivil No. PA-22NCVC-120-06/2016 Antara Lee Khoon Eng T/A Prestige Constrction … Plaintif Dan

Ch’ng Ghee Weng

Bah Siew Chin … Defendan-Defendan CORAM: ABANG ISKANDAR BIN ABANG HASHIM, JCA BADARIAH BINTI SAHAMID, JCA, MARY LIM THIAM SUAN, JCA 2 GROUNDS OF JUDGMENT Introduction [1] This is an appeal against the decision of the learned High Court Judge who in the High Court at Penang on 16 May 2017, allowed the Plaintiff’s claim against the Defendants for the sum of RM1,800,000.00 with interests and costs of RM15,000.00. [2] For ease of reference, parties will be referred to as they were in proceedings before the High Court. Background Facts [3] The material facts are derived primarily from the learned trial Judge’s ‘Grounds of Judgment’. The Plaintiff is the sole proprietor of Prestige Construction carrying on the business of cabling, building and civil works. 3 [4] By a Letter of Award dated 13.03.2013, the Plaintiff agreed to carry out the project, ‘Cadangan Mendirikan 1 Unit Rumah Sebuah 3 Tingkat Di Atas Lot 871, Seksyen 2, Jalan Sempadan, Bandar Ayer Itam, Daerah Timur Laut, Pulau Pinang’ for the Defendants in consideration of the amount of RM6,800,000 (‘The Project’). [5] The Letter of Award was issued by the Defendants’ appointed Architect to the Project, CG Cheng Architect. Thereafter, a Contract Agreement dated 14.08.2013 was entered into by both parties. [6] Prior to the issuance of the Letter of Award, there were negotiations between the Plaintiff and the Defendants on the contract sum for the Project. The Plaintiff had issued four quotations as follows:

(a) 1st quotation dated 12.11.12 for the sum of RM4,781,333.40.

(b) 2nd quotation dated 24.12. 2012 for the sum of RM5,407,093.40.

(c) 3rd quotation dated 03.01.2013 for the sum of RM4,801,433.40.

(d) 4th quotation dated 24.01.2013 for the sum of RM4,753,419.07. 4 These quotations formed part of the Letter of Award dated 13 March 2013 and the Construction Agreement dated 14 August 2013. [7] In the Letter of Award and the Construction Agreement, the contract price for the Project was stated to be RM6,800,000. [8] After signing the Contract Agreement, the Defendants issued six (6) cheques to the Plaintiff for the total sum of RM1,800,000. The six cheques were as follows:

(i) HSBC cheque No. 170760 dated 04.09.2013 for RM380,000.00;

(v) HSBC cheque No. 404015 dated 21.10.2013 for RM200,000.00;

The contract price of RM6,800,000 that was stated in the Construction Agreement was not the true price agreed to by both parties but a lower sum of RM4,403.419.07. The price was inflated for the purpose of obtaining a bank loan.

The six cheques issued by the Defendants to the Plaintiff for a total value of RM1,800,000 was not meant to be cashed by the Plaintiff. They were issued for the purpose of showing the bank the value of the works to be carried out under the Project in 7 order that the bank would approve the Defendants’ loan application.

In an earlier suit against the Defendants in a related matter, the Plaintiff had admitted in his pleadings that he had received RM1,800,000 from the Defendants. The Findings and Decision of the High Court [14] According to the trial Judge’s Judgment, the trial of the matter took less than a day. The only witnesses were the Plaintiff and the two Defendants. At the end of the trial, the learned Judge allowed the Plaintiff’s claim of RM1,800,000. The findings of the learned trial Judge in respect of the defences raised by the Defendants are as follows:

The contract sum as stipulated in the Letter of Award and Contract Agreement between the parties is RM6.8 million and not the lower sum of RM4,403.419.07 as asserted by the Defendants. 8

Both defendants have admitted in this current suit that they have not paid the RM1.8 million to the Plaintiff. Thus the Plaintiff’s pleaded admission in suit No. PA-22 NCVC -52- 03/2016 is a non-issue.

The Defendants’ contention that the purpose for the issuance of the six cheques is for the bank to release the loan to the Defendants is ‘weird’. The loan application is a matter between the defendants and the bank only. It does not concern the Plaintiff. [15] Premised on the above findings, the learned trial Judge had concluded in her Judgment, (p. 23) as follows: “The defendant’s conduct show the original cheques were in their possession and they are not honest in demanding the same from the plaintiff. The defendants are not truthful witnesses. On the other hand, I accepted the plaintiff’s version that RM 1.8 million is initial payments and he was instructed by the defendants not to cash the cheques until the defendants’ loan application is approved. Now, not only the defendants’ 9 loan has been approved, the project also was completed. Since the plaintiff has fulfilled his obligations under the contract, he is entitled to receive payment of RM1.8 million. This sum is due and owing from the Defendants to the plaintiff. In the circumstances, I allowed the plaintiff’s claim.” [16] The reasons given by the trial Judge to allow the Plaintiff’s claim may be summarised as follows:

(i) The trial judge believed the Plaintiff’s contention that the RM1,800,000 (the value of the cheques) is initial payment for the Project;

(v) The Defendants are not honest in issuing the six cheques and subsequently demanding their return even though the Defendants’ loan application for the Project had been approved. OUR JUDGMENT [17] After careful consideration of learned counsels’ written and oral submissions, the Appeal records and relevant authorities, we were unanimous in our view that there were appealable errors in the learned Trial Judge’s decision that warranted our appellate intervention. We accordingly allowed this appeal. The grounds of our decision are set out below. [18] The Plaintiff’s claim of RM1,800,000 is premised on the total value of six cheques which were issued by the Defendants to the Plaintiff, which cheques were not deposited or encashed by the Plaintiff, allegedly on the Defendants’ instructions. The question that arises is whether the Plaintiff is entitled to claim the value of the six cheques, RM1,800,000 from the Defendants? 11 “Advance Payment” [19] It is trite law that the legal burden is on the Plaintiff to prove his claim both in terms of liability as well as quantum. At the outset, it is unclear to us as to what the Plaintiff’s claim of RM1,800,000 refers to. In the Plaintiff’s Statement of Claim, the abovementioned sum was referred to as “pembayaran awal” (advance payment). The Plaintiff’s claim was premised on the advance payment in respect of a Letter of Award and a written Construction Contract. However, no documentary evidence was produced by the Plaintiff to support the quantum of RM1,800,000. The learned trial Judge appeared to have been satisfied with the Plaintiff’s assertion that the Plaintiff and the Defendants had agreed to the sum of RM1,800,000 as initial payment for the Project, without any documentary evidence of such agreement or supporting documentary evidence of any initial/preliminary construction expenses as is usual in construction practice, such as materials purchased, mobilisation of labour, or work done. [20] Further, we note that the Schedule of Payment in the Second Schedule of the Construction Agreement had expressly stated as follows: 12 “The Contract Sum of RM6,800,000 shall be paid by the Employer to the Contractor by instalments according to the stage of the Work constructed completed by the Contractor within fourteen (14) working days from the date of the Contractor’s written notice of the completion of progress stage of the Work which shall be supported by a certificate signed by the Architect in charge together with the payment notice.” However, we note that no such certification by an Architect of progress stage of Work was proffered as evidence of the Plaintiff’s claim for RM1,800,000. [21] In addition, in spite of the learned trial Judge’s acknowledgement of the completion of the Project by the Plaintiff, we could not find a single supporting documentation to verify the same. [22] It has also not escaped our notice that in an earlier related suit against the Defendants, the Plaintiff had pleaded that he had received the amount of RM1,800,000 from the Defendants in respect of the same 13 Project. When the Plaintiff was questioned in court in respect of the same, he did not deny having received the amount but contended that the amount was in respect of “other variation works”. An extract of the Plaintiff’s (Lee) testimony is stated below: (at p. 61-62 of Rekod Rayuan J. 2(1) Bhg. B& C) “SAW: … Malah di perenggan 7 dalam Pernyataan Tuntutan kamu, kamu kata seperti berikut “Selain daripada bayaran-bayaran yang diterima daripada bank, Defendan-Defendan telah membuat bayaran berjumlah Satu Perpuluhan Lapan Juta kepada Plaintiff. Dan maka demi menjelaskan kerja-kerja kontrak asal, kerja variasi dibawah… tersebut sebanyak Tujuh Perpuluhan Sembilan Juta, Plaintiff telah menerima secara totalnya jumlah 6.6 million iaitu 4.8 +1.8 million tersebut. Encik Lee, bukankah kamu katakan dalam tuntutan kamu, kamu telah terima wang tersebut dan juga kamu juga ada menyemak mengambil kira Satu Perpuluhan Lapan juta tersebut sebagai telah dibayar? 14 LEE: Yang ini tuntutan kami untuk kes variasi yang lain.” [23] We note that there was no documentary evidence to support the Plaintiff’s contention that the RM1,800,000 that he had received from the Plaintiff was in respect of “other variation works”. [24] Thus the Plaintiff’s admission of having received payment of RM1,800,000 from the Defendants in his pleadings in the earlier suit as well as the Plaintiff’s testimony that he had received RM1,800,000 from the Defendants, albeit for “other variation works” runs counter to the express findings of the learned trial Judge that both parties had admitted that the Defendants had not paid the Plaintiff the sum of RM1,800,000. In the trial Judge’s Judgment (p. 9), the following was stated: “The second point raised by the defendants is the plaintiff had pleaded in para 7 of the statement of claim in Suit No. PA-22 NCVC-52-03/2016 that he has received RM1.8 million from the defendants. The contention is without merit because both defendants have admitted in this current suit that they have not paid RM1.8 million to the plaintiff. Therefore, there 15 is no need for the defendants to refer to para 7 of the statement of claim in Suit NCVC-52-03/2016. This second point is a non-issue”. (Emphasis added) Thus, the learned trial Judge had clearly misdirected herself and made perverse findings of fact. [25] Given the above circumstances, other than the Plaintiff’s oral testimony, there is a complete absence of documentary evidence to support the Plaintiff’s contention that the sum of RM1, 800,000 is due and owing to the Plaintiff in respect of works done on the Project. Value of the Six Cheques [26] Thus, the Plaintiff’s claim must necessarily be premised on the total value of the six cheques that were issued to him by the Defendants, which cheques were subsequently retracted by the Defendants. 16 [27] In this respect the learned trial Judge had fallen into error by accepting the quantum on the six cheques as an entitlement to the value of the said cheques by the Defendants. It is not disputed that the six cheques in question were never deposited or encashed by the Plaintiff. Thus the Plaintiff’s claim for the value of the six cheques cannot be treated as equivalent to an action for the dishonour of the six cheques which makes the Issuer liable. There was undisputed evidence that the Defendants had issued and later destroyed the cheques, leaving the Plaintiff with the photostated copies of the same. Those copies cannot, without more entitle the Defendants to the sum stated therein. [28] The learned Trial Judge also appeared to have taken irrelevant considerations into account i.e the conduct of the Defendants in issuing and later destroying the six cheques as the basis for liability to pay the Plaintiff the sum stipulated on the six cheques. The learned Trial judge was thus plainly wrong. [29] The Plaintiff’s only documentary evidence before the court was the photostated copies of the six cheques with the total sum of RM1.800,000. The cheques were never deposited or encashed by the Plaintiff. In his testimony in court, the Plaintiff had admitted that he had been instructed 17 not to cash the said cheques before the approval of the Defendants’ application for a bank loan to finance the Project. This position was also taken by the Defendants in their defence. It is thus clear to us that the issuance of the six cheques cannot be construed as an admission of liability on the part of the Defendants as both parties were aware that the sole purpose of the issuance of the six cheques was for the purpose of obtaining a bank loan. In the case of Sri Kelangkota-Rakan Engineering JV Sdn Bhd & Ors v Arab-Malaysian Prima Realty Sdn Bhd [2001] 1 CLJ 779, 790, the Court of Appeal in construing the agreements between the parties had emphasised the importance of seeing the real transaction behind the façade of the agreements. Gopal Sri Ram JCA (as he then was) had stated as follows: “Parties to a transaction may disguise its true nature and purport by whatever means available to them. Yet, the court will tear away the disguise and reveal to the world at large the true arrangement arrived at between the parties. It is important for reasons of public policy that the court is seised of this power. Were it not so, the law would be lending its aid to enforce pretended and not real obligations.” 18 (Refer also to Autoclenz Ltd v Belcher and others [2011] UKSC 41; Menta Construction Sdn Bhd v Lestari Puchong Sdn Bhd. [2015] 8 CLJ 1117) [30] Whatever the reasons for the issuance of the said cheques, the failure to encash them and their subsequent destruction appears to support the Defendants’ position that the value of the said cheques was never meant to be transferred to the Plaintiff but was utilised as a strategy to obtain a bank loan. The Plaintiff was fully aware of this but is now seeking to capitalise on this “pretended obligation” as giving rise to a “real obligation” to honour the value of the said cheques. [31] In addition, the Plaintiff had admitted in his oral testimony that he had never sent out a letter of demand to the Defendant in respect of the RM1,800,000 that was alleged to be owing to the Plaintiff. In fact, the Plaintiff also admitted in his oral testimony that he had commenced a suit on the six cheques against the Defendants only three years after the first payment. The Plaintiff’s conduct in not pursuing a claim of a substantial amount until three years later is not the usual response of a reasonable man of commerce and raises doubts of its genuineness. 19 [32] For all the reasons abovementioned, we were of the unanimous view that there was insufficient evidence to prove the Plaintiff’s claim. The learned trial Judge was therefore plainly wrong to have allowed the Plaintiff’s claim. In the premises we allowed this appeal with costs. The decision of the High Court is set aside. We also ordered the return of the deposit to the Appellant. Dated: 9 January 2019. (DATUK DR. BADARIAH SAHAMID) COURT OF APPEAL PUTRAJAYA For the Appellants: Saw Lip Khai Wong Xian Xheng Tetuan Chooi, Saw & Lim Peguambela & Peguamcara Unit 9-C Level 9 Wisma Boon Siew 1 Penang Road 10000 Penang For the Respondent: Ang Khoon Cheong Tetuan CP Ang & Co. Peguambela & Peguamcara No. 18 Lebuh Kampung Benggali 12000 Butterworth Penang