Spm Energy Sdn Bhd v Multi Discovery Sdn Bhd (B-02(NCvC)(W)-1669-09/2022)

(ii) the $ 1^{\mathrm{st}} $ Defendant "shall not be liable for any cost, loss of profit, expenses, claims and damages whatsoever arising out from" the termination of the LA $ (1^{\mathrm{st}} $ Defendant-Plaintiff) (Clause 7); and Attached to the Plaintiff's Letter (13.2.2018) were two copies of the Plaintiff's Proposed Novation [LA （ $ 1^{\mathrm{st}} $ Defendant-Plaintiff)] (which had been executed by the Plaintiff and Tiemura) for the $ 1^{\mathrm{st}} $ Defendant's approval. C. Proceedings in the High Court

(ii) the "retention sum" (a portion of payment due from the $ 1^{\mathrm{st}} $ Defendant to the Plaintiff) which had been retained by the 1 $ ^{st} $ Defendant so as to ensure the completion of the Project by the Plaintiff (Retention Sum). "29.28 Plaintif menafikan kandungan perenggan 31 Tuntutan Balas dan menyatakan bahawa sebenarnya Defendandefendan terutamanya Defendan Pertama dan Defendan Kedua yang telah melakukan penipuan, konspirasi, fraud, dan kemungkiran butir-butir sebagaimana yang telah dinyatakan di dalam Pernyataan Tuntutan Plaintif sehingga menyebabkan Plaintif terpaksa mengambil langkah untuk keluar dari Projek tersebut untuk mengurangkan kerugian Plaintif disebabkan kos Projek tersebut. (emphasis added).

(ii) RM9,594,183.51; paragraph 18 GOJ. D. Proceedings in the Court of Appeal E. Question of law posed by the Court of Appeal F. New submission by the Plaintiff's learned counsel (Plaintiff's New Submission). "r 8. Notice of cross-appeal. (emphasis added). G. Whether Clause 5 is void under s 35(1) and (2)(a) CIPAA "s 2. Application This Act applies to every construction contract made in writing relating to construction work carried out wholly or partly within the territory of Malaysia including a construction contract entered into by the Government. s 3. Non-application This Act does not apply to a construction contract entered into by a natural person for any construction work in respect of any building which is less than four storeys high and which is wholly intended for his occupation. s 4. Interpretation In this Act, unless the context otherwise requires - "construction contract" means a construction work contract or construction consultancy contract; "construction work" means the construction, extension, installation, repair, maintenance, renewal, removal, renovation, alteration, dismantling, or demolition of- s 35. Prohibition of conditional payment s 40. Exemption The Minister may, upon considering the recommendation of the KLRCA, by order published in the Gazette, exempt- (emphasis added). [113] As between the principal and the main contractor, there was no adjudication under CIPAA between them, the issue of whether cl 25.4(d) above is a conditional payment term prohibited under s 35 [CIPAA] does not apply. The parties may want to reserve for argument at the arbitration or litigation between them if cl 25.4(d) applies or does not apply in a non-adjudication proceeding under the CIPAA. [114] We are aware that some High Court cases had decided that cl 25.4(d) is in the nature of a conditional payment provision prohibited under s 35(1) [CIPAA] which prohibition reads as follows: [115] Such a clause has the effect, upon the termination of the contract, of postponing payment due until the final accounts are concluded and the works completed and was held in the following cases as defeating the purpose of the CIPAA and is thus void and unenforceable: [116] There are other High Court cases that endorsed and adopted the same approach to other types of conditional payments. See the cases of Ireka Engineering & Construction Sdn Bhd v Tri Pacific Engineering Sdn Bhd and another summons [2020] MLJU 548 (per Wong Kian Kheong J (now JCA) at paras [19] to [21]) and also Lion Pacific Sdn Bhd v Pestech Technology Sdn Bhd and another case [2020] MLJU 2308 (per Wong Kian Kheong J (now JCA) at para [20]). [117] We agree with the above High Court decisions on why cl 24.5(d) of the PAM contract 2006 should be considered a conditional payment provision that is prohibited in an adjudication claim. The issue of whether such a conditional payment provision is applicable in an arbitration or litigation claim between the contracting parties and not in an adjudication is a separate issue altogether. Whilst such a cl like cl 25.4(d) of the PAM contract has been held to be a conditional payment provision which is prohibited under s 35(1) [CIPAA] in an adjudication between the parties to the construction contract, it may still be upheld by the courts in an arbitration or litigation between the parties in this case between the principal and the main contractor. The prohibition appears to be confined to adjudication proceedings as the long title suggested as follows:

In our view, whether s 35 CIPAA applies to Court/Arbitral Proceedings when there are no Adjudication Proceedings, is a pure question of law. We have to interpret the relevant provisions in CIPAA so as to ascertain whether Parliament had intended for s 35 CIPAA to apply in Court/Arbitral Proceedings when no Adjudication Proceedings have been instituted. We decide that subject to two exceptions [2 Exceptions (Non-Application of Section 35 CIPAA)], it was the intention of the legislature for s 35 CIPAA to apply to "construction contracts" (defined in s 4 CIPAA) in Court/Arbitral Proceedings when there are no Adjudication Proceedings. Our decision is premised on the following reasons in the interpretation of the following provisions in CIPAA:

as decided in Uzma Engineering Sdn Bhd v Khan Co Ltd [2020] MLJU 1272, at [22(1)], s 35 CIPAA applies in Court/Arbitral Proceedings when the following four conditions laid down in s 2 CIPAA have been fulfilled cumulatively-

there is a "construction contract" as understood in s 4 CIPAA;

the construction contract is made in writing;

the construction contract relates to "construction work" as defined in s 4 CIPAA; and

the construction work is carried out wholly or partly within the territory in Malaysia [4 Cumulative Conditions (Section 2 CIPAA)];

the following reasons in MN Global Venture, at [22], supports the statutory interpretation that Parliament had intended for s 35(1) CIPAA to apply in Court/Arbitral Proceedings (when no Adjudication Proceedings have been filed) if the 4 Cumulative Conditions (Section 2 CIPAA) have been satisfied - [22] I must admit that in Khairi Consult and Gandahan, my attention was not drawn to Bond's Case. Hence, in light of Bond's Case, I shall now reconsider the correctness of my earlier decisions in Khairi Consult and Gandahan. With respect, I am of the diffident view that if a contract is subject to the application of CIPAA, s 35(1) CIPAA shall apply to the contract despite the fact that no [Adjudication Proceedings] have been instituted under CIPAA. My reasons are as follows:

the long title to CIPAA [Long Title (CIPAA)] provides the following three purposes of CIPAA [3 Purposes (CIPAA)]-

to "facilitate regular and timely payment" in the construction industry $ [1^{\mathrm{st}} $ Purpose (CIPAA)];

to "provide a mechanism for speedy dispute resolution through adjudication" $ [2^{nd} $ Purpose (CIPAA)]; and

to "provide for remedies for the recovery of payment" in the construction industry $ [ 3^{rd} $ Purpose (CIPAA)]. It is permissible for the court to refer to a punctuation mark in a statutory provision so as to ascertain the intention of the legislature in enacting that provision please refer to the Supreme Court's judgment delivered by Eusoff Chin SCJ (as he then was) in Prithipal Singh v Datuk Bandar, Kuala Lumpur (Golden Arches Restaurant Sdn Bhd, Intervener) [1993] 3 MLJ 336, at 340-341. By the use of commas in the Long Title (CIPAA), it is clear that Parliament has intended for the 3 Purposes (CIPAA) to be independent of each other. Accordingly, the $ 1^{st} $ Purpose (CIPAA) and $ 3^{rd} $ Purpose (CIPAA) are not dependent on the commencement of [Adjudication Proceedings] under CIPAA $ [2^{nd} $ Purpose (CIPAA)]. Section 35 CIPAA, in my view, is a provision which is intended by the legislature to fulfil the $ 1^{st} $ Purpose (CIPAA) and $ 3^{rd} $ Purpose (CIPAA);

s 16 of the Interpretation Acts 1948 and 1967 (IA) provides as follows- "Notice to be taken of division into parts, chapters, etc.

Where an Act or subsidiary legislation is divided into parts or chapters or otherwise, the fact and particulars of the division shall, without express mention thereof in the Act or subsidiary legislation, be taken notice of in all courts and for all purposes whatsoever." (emphasis added). Section 16 IA is in Part 1 of IA and applies to CIPAA by virtue of s 2(1)(a) IA (CIPAA has been enacted after 18.5.1967). CIPAA is divided into the following Parts, among others-

Part II (Adjudication of Payment Disputes) [Part II (CIPAA)];

Part III (Adjudicator) [Part III (CIPAA)];

Part IV (Enforcement of Adjudication Decision) [Part IV (CIPAA)];

Part V (Adjudication Authority) [Part V (CIPAA)]; and

Part VI (General) [Part VI (CIPAA)]. Parts II (CIPAA) to Parts V (CIPAA) concern provisions regarding [Adjudication Proceedings] which have been filed under CIPAA. It is thus clear that Parts II (CIPAA) to Parts V (CIPAA) contain provisions to attain the $ 2^{n d} $ Purpose (CIPAA). In contrast to Parts II (CIPAA) to Parts V (CIPAA), s 35 is expressly placed by Parliament in Part VI (CIPAA) and is therefore intended by the legislature to be of general application irrespective of whether [Adjudication Proceedings] have been instituted pursuant to CIPAA or not;

Parliament has expressly or impliedly referred to AP in ss 8(1), (3), 12(1) to (9), 14, 17(1) to (4), 18(1), (2), 25(a) to (p), 26(1), (2), 27(1) to (3), 32(c), (d) and 37(1) to (3) CIPAA. If the legislature had intended to confine the application of s 35 CIPAA to AP, Parliament would have easily stated as such in s 35 CIPAA;

there is nothing in s 35(1) CIPAA which has expressly or by necessary implication, confined the scope of s 35(1) CIPAA to [Adjudication Proceedings]. On the contrary, the legislature has employed a wide term "any" in s 35(1) CIPAA. The broad meaning of the word "any" has been explained by Augustine Paul FCJ in the Federal Court case of Metramac Corp Sdn Bhd (formerly known as Syarikat Teratati KG Sdn Bhd) v Fawziah Holdings Sdn Bhd [2006] 4 MLJ 113, at [41] and [42], as follows- [41] ... Bindra's Interpretation of Statutes (9th Ed) in commenting on the word 'any' says at p 1469: 'Any' is a word which excludes limitation or qualification. It connotes wide generality. [42] In Aerlinte Eireann Teoranta v Canada (Minister of Transport) (1990) 68 DLR (4th) 220, Heald JA said at p 225: In summary, then, the appellants' initial submission is to the effect that airlines can only be charged for airport facilities and services which they actually use. I am unable to agree with this submission. The trial judge carefully examined the language used in s 5 and concluded that the word 'any' as used in s 5 should be interpreted to mean 'all', 'each and every' or 'whichever'. He added (AB vol 19, p 3409): 'Thus 'at any airport' in s 5 includes among others the meaning 'at each and every, or whichever, airport' at which the Minister provides every and all, or whichever, facilities and services.' I agree with the conclusion of the trial judge." (emphasis added); and

CIPAA is a specific statute which applies to certain construction contracts - please refer to Uzma Engineering Sdn Bhd v Khan Co Ltd [2020] MLJU 1272, at [22]. The Contracts Act 1950 (CA) however is of general application to all contracts. By virtue of the maxim of statutory construction "generalia specialibus non derogant", the specific provisions in CIPAA shall prevail over the general provisions in CA. The scope of CIPAA, including s 35 CIPAA, is not therefore confined by any provision in CA. Nor is there a reason to amend the CA so as to provide for s 35 CIPAA to apply when no AP have been commenced under CIPAA." (emphasis added); and

there are 2 Exceptions (Non-Application of Section 35 CIPAA), namely, even if the 4 Cumulative Conditions (Section 2 CIPAA) have been fulfilled, s 35 CIPAA does not apply in Court/Arbitral Proceedings. As explained in Uzma Engineering, at [22(2)] the 2 Exceptions (Non-Application of Section 35 CIPAA) are as follows-

the existence of circumstances as stipulated in s 3 CIPAA, ie., a construction contract entered into by a natural person for any construction work in respect of any building which is less than four storeys high and which is wholly intended for his occupation; and

where a person, class of persons, contract, matter or transaction or class of contracts, matters or transactions has been exempted from the application of CIPAA under s 40 CIPAA by the "Minister" (defined in s 4 CIPAA as the Minister charged with the responsibility for works).

In this case, s 35(1) and (2)(a) CIPAA apply to invalidate Clause 5 because -

the 4 Cumulative Conditions (Section 2 CIPAA) had been satisfied with regard to the LA $ (1^{\mathrm{st}} $ Defendant-Plaintiff) and the Works in this case;

the 2 Exceptions (Non-Application of Section 35 CIPAA) cannot be invoked in respect of the LA $ (1^{\mathrm{st}} $ Defendant-Plaintiff); and

Clause 5 provided for the $ 1^{\mathrm{st}} $ Defendant to pay the Plaintiff after the $ 1^{\mathrm{st}} $ Defendant had received payment from the Employer.

Premised on the reasons as explained in the above paragraphs 36 and 37, Clause 5 is void and is therefore irrelevant for the purpose of This Appeal.

The following questions arise in This Appeal:

was the $ 1^{\mathrm{st}} $ Defendant's LA Termination (8.6.2018) lawful? In this regard-

whether the Plaintiff had breached the LA $ (1^{\mathrm{st}} $ Defendant-Plaintiff) by way of the Plaintiff's Demobilization without giving prior written notice to the $ 1^{\mathrm{st}} $ Defendant; and

had the $ 1^{\mathrm{st}} $ Defendant breached LA $ (1^{\mathrm{st}} $ Defendant-Plaintiff) by not paying the Plaintiff's Invoices?;

if the $ 1^{\mathrm{st}} $ Defendant had breached the LA $ (1^{\mathrm{st}} $ Defendant-Plaintiff) $ (1^{\mathrm{st}} $ Defendant's Breach), whether the High Court had correctly exercised its discretion to pierce the $ 1^{\mathrm{st}} $ Defendant's corporate veil and imposed liability for the $ 1^{\mathrm{st}} $ Defendant's Breach on the $ 2^{\mathrm{nd}} $ Defendant premised on any one or both of the following grounds-

the $ 1^{\mathrm{st}} $ Defendant is "merely a shelf company" for the $ 2^{\mathrm{nd}} $ Defendant; and/or

the Employer had awarded the Project to the $ 2^{nd} $ Defendant and the $ 2^{nd} $ Defendant then appointed the Plaintiff by using the $ 1^{st} $ Defendant as a "front" to issue the LA $ (1^{st} $ Defendant-Plaintiff). With regard to the above issue -

is/are the ground(s) for the court to pierce the corporate veil of a company to impose liability on an individual different from the ground(s) for the court to pierce the corporate veil of one company so as to impose liability on another company?; and

(ii) had the $ 1^{\mathrm{st}} $ and $ 2^{\mathrm{nd}} $ Defendants committed equitable or constructive fraud (Equitable/Constructive Fraud) so as to enable the learned High Court Judge to apply the evasion principle and impose liability on the $ 2^{\mathrm{nd}} $ Defendant for the $ 1^{\mathrm{st}} $ Defendant's Breach?; and

if-

the $ 1^{\mathrm{st}} $ Defendant's LA Termination (8.6.2018) was valid based on the Plaintiff's Demobilization, namely, the Plaintiff had breached the LA $ (1^{\mathrm{st}} $ Defendant-Plaintiff) （Plaintiff's Breach); and

the $ 1^{\mathrm{st}} $ Defendant had not breached the LA $ (1^{\mathrm{st}} $ Defendant-Plaintiff) by not paying the Plaintiff's Invoices the following questions arise -

should the Court of Appeal order an assessment of damages under s 74(1) of the Contracts Act 1950 [CA (1950)] regarding all the loss suffered by the $ 1^{\mathrm{st}} $ Defendant arising from the Plaintiff's Breach?; and

(ii) whether Clause 7 can bar the Plaintiff from recovering the following sums from the $ 1^{\mathrm{st}} $ Defendant-

(ii)(a) the value of the Completed Works which had not been paid by the $ 1^{st} $ Defendant to the Plaintiff?;

(ii)(b) the Plaintiff's Advance Payment; and

(ii)(c) the Retention Sum. I. Was the 1 $ ^{st} $ Defendant's LA Termination (8.6.2018) lawful?

Firstly, in paragraphs 29 and 30 ARDDCC, the Plaintiff's Demobilization had been admitted because of, among others, the following reasons:

the failure of the $ 1^{\mathrm{st}} $ Defendant to pay the Plaintiff's Invoices;

the Plaintiff had to mitigate its own loss; and

the Plaintiff had its own internal management problems which was within the knowledge of the Defendants. With respect, the learned High Court Judge had failed to take into account the fact that paragraphs 29 and 30 ARDDCC constituted a "judicial admission" regarding the Plaintiff's Demobilization [Judicial Admission (Plaintiff's Demobilization)]. The effect of the Judicial Admission (Plaintiff's Demobilization) has been explained by the following judgment of the Federal Court delivered by Suriyadi Halim Omar FCJ in Yam Kong Seng & Anor v Yee Weng Kai [2014] 4 MLJ 478, at [15] to [18] - [15] To enable us to ascertain whether there was a judicial admission we need to refer to para 8 of the defence. It reads as follows:

... Further Defendants 1 and 2 aver that the Defendants were ready and willing at all material time to settle the said amount within six months hut as there was no mutual agreement as to a fixed rate of interest or whether there was any interest at all, the date of breach was not fixed, and lack of a unequivocal written demand all of which put the whole outstanding sum for repayment in dispute ... [16] The above averment was in response to para 12 of the statement of claim wherein the appellants averred that the company and the respondent had confirmed in writing of the amount owing and payable to them. It is trite law that a judicial admission made in a pleading stands on a higher footing than evidentiary admission (Sarkar's Law of Evidence) with the respondent's admission therein be made the foundation of the rights of the parties (Satish Mohan Bilal v State of UP AIR 1986 All 126, at p 128; 1985 All CJ 507). Any failure on the part of the respondent to rebut the admission to avoid the legal consequences of his admission would entitle the appellants to enter judgment against him. [17] Having perused the defence in particular para 8, we find that there is clear judicial admission of the debt owed. The question that must follow would be whether the respondent was avoiding responsibility to pay up. In Jacob and Goldrein's Pleadings: Principles and Practice [1990] pp 133-134 in dealing with confession and avoidance, the following is stated: Confession and Avoidance Meaning The term 'confession and avoidance' is the description of a plea in the defence which, while expressly or impliedly admitting or confessing or assuming the truth of the material facts alleged in the statement of claim, seeks at the same time to avoid or destroy the legal consequences of those facts. The plea is invoked by alleging fresh or additional facts to establish some legal justification or excuse, or some other ground for avoiding or escaping legal liability. The defendant, as it were, confesses the truth of what is alleged against him but proceed immediately to 'avoid' the effect of such allegations. [18] Having scrutinised the defence we find that the respondent has failed to avoid legal liability. With there being judicial admission by the respondent sufficient to hold him liable to the amount claimed the answer to the first question of law in this appeal must be answered in the positive." (emphasis added).

The omission of the High Court to consider the Judicial Admission (Plaintiff's Demobilization), in our view -

constituted a legal error which had caused an injustice to the $ 1^{st} $ Defendant (High Court's $ 1^{st} $ Legal Error); and

warrants appellate intervention.

Secondly, the Judicial Admission (Plaintiff's Demobilization) proved on a balance of probabilities that irrespective of the reason or reasons for the Plaintiff's Demobilization, the Plaintiff had breached the LA (1 $ ^{1st} $ Defendant-Plaintiff) [Plaintiff's Breach (Demobilization)]. This was because the Plaintiff could not simply demobilize and abandon the Site without giving prior written notice to the $ ^{1st} $ Defendant that if the $ ^{1st} $ Defendant did not pay the Plaintiff's Invoices directly to the Plaintiff within a period of reasonable time (Stipulated Time Period), the Plaintiff would demobilise and leave the Site after the expiry of the Stipulated Time Period. The learned High Court Judge had consequently committed an error of law in failing to find that the Plaintiff's Breach (Demobilization) had occurred in this case (High Court's $ 2^{nd} $ Legal Error).

It is not disputed that as a general rule, an appellate court should not set aside a trial judge's findings of fact because the trial judge has the audio-visual advantage of listening to the witnesses and assessing their demeanour - please refer to the Federal Court's judgment delivered by Zabariah Yusof FCJ in Ng Hoo Kui & Anor v Wendy Tan Lee Peng (administratrix for the estate of Tan Ewe Kwang, deceased) & Ors [2020] 12 MLJ 67, at [33] and [34]. However, as explained in Ng Hoo Kui, at [78], exceptionally, an appellate panel can set aside a trial court's factual finding which is a "plain" error of fact as understood in the following two cumulative circumstances:

the trial court's finding of fact cannot be reasonably explained or justified; and

no reasonable trial judge could have arrived at the factual finding.

Thirdly, we are of the view that the learned High Court Judge had committed a plain error of fact (as understood in Ng Hoo Kui) in deciding that the 1 $ ^{st} $ Defendant's LA Termination (8.6.2018) was invalid (High Court's 1 $ ^{st} $ Plain Factual Error). The High Court's 1 $ ^{st} $ Plain Factual Error is premised on the following evidence and reasons:

the High Court did not consider the contents of the Plaintiff's Letter (13.2.2018) [which was sent way before the $ ^{1 \mathrm{st}} $ Defendant's LA Termination (8.6.2018)]. In the Plaintiff's Letter (13.2.2018), the Plaintiff had admitted that the Plaintiff no longer had the capacity to finance the Project because the Plaintiff was bogged down with the Contracts (Plaintiff-TNB) [Plaintiff's Admission (Financial Incapability)]. The Plaintiff's Admission (Financial Incapability) was relevant under ss 17(1) and 21 of the Evidence Act 1950 (EA). Sections 17(1) and 21 EA state as follows- "s 17. Admission and confession defined

An admission is a statement, oral or documentary, which suggests any inference as to any fact in issue or relevant fact, and which is made by any of the persons and under the circumstances hereinafter mentioned. s 21. Proof of admissions against persons making them and by or on their behalf Admissions are relevant and may be proved as against the person who makes them or his representative in interest; but they cannot be proved by or on behalf of the person who makes them or by his representative in interest except in the following cases:

an admission may be proved by or on behalf of the person making it when it is of a nature that, if the person making it were dead, it would be relevant as between third persons under section 32;

an admission may be proved by or on behalf of the person making it when it consists of a statement of the existence of any state of mind or body relevant or in issue, made at or about the time when that state of mind or body existed and is accompanied by conduct rendering its falsehood improbable;

an admission may be proved by or on behalf of the person making it if it is relevant otherwise than as an admission." (emphasis added);

if there is a conflict between contemporaneous documentary evidence and self-serving oral testimony, a reasonable trial judge should have accepted the former and not the latter. In this regard, we rely on the following judgment of the Court of Appeal delivered by Siti Norma Yaakob JCA (as she then was) in Guan Teik Sdn Bhd v Hj Mohd Noor Hj Yakob & Ors [2000] 4 CLJ 324, at 330- "In cases where conflicting evidence are presented before a court, it is the duty of the court not only to weigh such evidence on a balance of probabilities but it is also encumbent [sic] upon the court to look at all the surrounding factors and to weigh and evaluate contemporaneous documents that may tend to establish the truth or otherwise of a given fact. In this instance the learned trial judge discredited the evidence of the appellant, accepted the evidence of the respondents wholeheartedly and disregarded the contemporaneous documents totally. We say that he had erred as he had failed to direct his mind as to the probative effect of the contemporaneous documents. He should, after accepting the respondents' evidence, weighed it against the contemporaneous documents and evaluate whether such documents support the respondents' oral testimony. We say that this evaluation exercise is most crucial for it must be remembered that the respondents were testifying to events that happened eighteen years ago whilst the contemporaneous documents speak of matters then existing at the time such documents, were issued." (emphasis added). In the GOJ, the learned High Court Judge did not refer to any document, let alone the Plaintiff's Admission (Financial Incapability). With respect, the High Court should have given effect to the Plaintiff's Admission (Financial Incapability);

as explained in paragraph 46 below, the learned High Court Judge committed a plain factual error in deciding that the $ 1^{\mathrm{st}} $ Defendant had failed to pay the Plaintiff's Invoices as alleged by the Plaintiff $ [1^{\mathrm{st}} $ Defendant's Alleged Non-Payment (Plaintiff's Invoices)];

even if it was assumed that the $ 1^{\mathrm{st}} $ Defendant's Alleged NonPayment (Plaintiff's Invoices) had been proven, the Plaintiff had elected -

not to terminate the LA (1 $ ^{1 s t} $ Defendant-Plaintiff) based on the Defendant's Alleged Non-Payment (Plaintiff's Invoices); and

to affirm the LA $ (1^{\mathrm{st}} $ Defendant-Plaintiff) notwithstanding the Defendant's Alleged Non-Payment (Plaintiff's Invoices) [Plaintiff's Affirmation (LA)]. The Plaintiff's Affirmation (LA) was clear from the Plaintiff's two letters, namely-

in the Plaintiff's Letter (26.4.2018), among others, the Plaintiff requested for the assistance of the $ 1^{\mathrm{st}} $ Defendant to provide records and documents regarding the Project; and

(ii) the Plaintiff's Letter (31.5.2018) urged the $ 1^{\mathrm{st}} $ Defendant to retract the $ 1^{\mathrm{st}} $ Defendant's Notice to Terminate LA (25.5.2018) "with immediate effect within 48 hours" from the date of the Plaintiff's Letter (31.5.2018); and

before the Plaintiff's Demobilization, the Plaintiff did not send any written notice, letter or demand to the $ 1^{\mathrm{st}} $ Defendant regarding the Plaintiff's intention to demobilize from the Site if the Plaintiff's Invoices were not paid by the $ 1^{\mathrm{st}} $ Defendant. Accordingly, the Plaintiff's Demobilization was concealed from the $ 1^{\mathrm{st}} $ Defendant. Such a conduct by the Plaintiff was relevant under s 8(2) EA and proved the Plaintiff's lack of bona fides in this case. We reproduce below s 8(2) EA- "The conduct of any party, or of any agent to any party, to any suit or proceeding in reference to that suit or proceeding, or in reference to any fact in issue therein or relevant thereto, and the conduct of any person an offence against whom is the subject of any proceeding, is relevant if the conduct influences or is influenced by any fact in issue or relevant fact, and whether it was previous or subsequent thereto." (emphasis added).

We have no hesitation to decide that the $ 1^{\mathrm{st}} $ Defendant's LA Termination (8.6.2018) was lawful on the following grounds:

the $ 1^{\mathrm{st}} $ Defendant's LA Termination (8.6.2018) relied on the Plaintiff's Demobilization as one of the two grounds to terminate the LA $ (1^{\mathrm{st}} $ Defendant-Plaintiff);

the Plaintiff's Demobilization was clearly proven by the Judicial Admission (Plaintiff's Demobilization); and

with the Plaintiff's Demobilization, the Plaintiff had therefore refused, failed and/or neglected to carry out the LA $ (1^{\mathrm{st}} $ Defendant-Plaintiff) within the meaning of Clause 7. Consequently, the $ 1^{\mathrm{st}} $ Defendant's LA Termination (8.6.2018) was lawfully carried out in accordance with Clause 7. J. Did the 1 $ ^{st} $ Defendant breach the LA (1 $ ^{st} $ Defendant-Plaintiff) by not paying the Plaintiff's Invoices?

The following evidence and reasons, in our view, show that the learned High Court Judge had committed a plain error of fact in deciding that the 1 $ ^{st} $ Defendant's Alleged Non-Payment (Plaintiff's Invoices) had been proven by the Plaintiff (High Court's 2 $ ^{nd} $ Plain Factual Error):

it was clear from-

the LA (Plaintiff-Tiemura);

the Plaintiff's Assignment (Tiemura);

the Plaintiff's Letter (13.2.2018);

the Plaintiff's Proposed Novation [LA $ (1^{\mathrm{st}} $ Defendant-Plaintiff] in favour of Tiemura;

the $ 1^{\mathrm{st}} $ Defendant's Letter (25.4.2018);

the Plaintiff's Letter (26.4.2018); and

the $ 1^{\mathrm{st}} $ Defendant's Letter (25.5.2018) - that the Plaintiff did not perform the Works. Instead, the Works had been performed by Tiemura and the Plaintiff's Sub-Contractors. It was not disputed that the 1 $ ^{st} $ Defendant had paid directly to the Plaintiff's Sub-Contractors for certain aspects of the Completed Works [1 $ ^{st} $ Defendant's Part Payments (Plaintiff's Sub-Contractors)]. The Plaintiff had to deduct the $ ^{1st} $ Defendant's Part Payments (Plaintiff's Sub-Contractors) from the Plaintiff's Invoices to arrive at an outstanding sum due from the $ ^{1st} $ Defendant to the Plaintiff for the Completed Works [Outstanding Sum (Completed Works)] . The very first time, the Plaintiff claimed for the Outstanding Sum (Completed Works) was in the Plaintiff's Letter (31.5.2018) when the Plaintiff claimed for the $ ^{1st} $ Defendant to pay an amount of RM5,309,783.03 within 48 hours from the date of the Plaintiff's Letter (31.5.2018)! We are not able to accept this demand in the Plaintiff's Letter (31.5.2018) as proof on a balance of probabilities of the $ 1^{\mathrm{st}} $ Defendant's Alleged Non-Payment (Plaintiff's Invoices). This decision is premised on the following reasons-

the Plaintiff's Letter (31.5.2018) was sent in response to the $ 1^{\mathrm{st}} $ Defendant's Notice to Terminate LA (25.5.2018). Hence, the Plaintiff's bona fides in sending the Plaintiff's Letter (31.5.2018) could be questioned, if not doubted;

(ii) before the Plaintiff's Letter (31.5.2018), there was no written notice, letter or demand by the Plaintiff for the $ 1^{\mathrm{st}} $ Defendant to pay any one of the Plaintiff's Invoices, let alone the Outstanding Sum (Completed Works). Such an omission on the part of the Plaintiff was relevant under s 8(2) EA and proved on a balance of probabilities that the $ 1^{\mathrm{st}} $ Defendant's Alleged Non-Payment (Plaintiff's Invoices) was a mere afterthought [after the Plaintiff had received the 1 $ ^{st} $ Defendant's Notice to Terminate LA (25.5.2018)];

(iii) if the Outstanding Sum (Completed Works) existed, namely, Tiemura and the Plaintiff's Sub-Contractors had not been paid for the Completed Works, there would have been progress claim(s), invoice(s), written notice(s), letter(s), demand(s) and/or claim(s) from Tiemura and the Plaintiff's Sub-Contractors to the Plaintiff for payment of the Outstanding Sum (Completed Works) [Progress Claim/Invoice/Demand/Claim (Tiemura/Plaintiff's Sub-Contractors)]. Inexplicably, the Plaintiff did not adduce as evidence in this case any Progress Claim/Invoice/Demand/Claim (Tiemura/Plaintiff's Sub-Contractors) to support the existence of the Outstanding Sum (Completed Works). More confounding is the fact that no suit or adjudication proceedings had been filed by Tiemura and/or the Plaintiff's Sub-Contractors against the Plaintiff for the Outstanding Sum (Completed Works); and

(iv) the Plaintiff's Letter (31.5.2018) claimed for RM5,309,783.03 as the Outstanding Sum (Completed Works). However, an amount of RM27,768,405.47 had been prayed for in the SOC as the Outstanding Sum (Completed Works)! Worse still, the High Court decided that the $ ^{1st} $ and $ ^{2nd} $ Defendants shall pay the Judgment Sum (RM11,236,585.00) to the Plaintiff without any cogent reason and computation. In a commercial case, especially a construction claim, it behoves the trial judge to give reason(s) and calculation to explain, if not justify, a monetary award; and

as explained in the above paragraphs 40 to 44, the Plaintiff's Breach (Demobilization) had been committed. When the High Court found as a fact that the 1 $ ^{st} $ Defendant had breached the LA (1 $ ^{st} $ Defendant-Plaintiff) by not paying the Plaintiff's Invoices, this is tantamount to allowing a party who has breached an agreement (Defaulting Party) to exploit the Defaulting Party's own wrong by enforcing the very agreement breached by the Defaulting Party! We rely on the following judgment of Gopal Sri Ram JCA (as he then was) in the Court of Appeal case of Pentadbir Tanah Daerah Petaling v Swee Lin Sdn Bhd [1999] 3 MLJ 489, at 492- "Quite apart from the construction of para 1(3)(b) of the First Schedule, there is a principle of great antiquity that a litigant ought not to benefit from its own wrong. Although of universal application, it has been restated when applied to a particular context. For example, the principle when applied in the context of the law of contract may be formulated as follows: a party ought not to be permitted to take advantage of his own breach. See Alghussein Establishment v Eton College [1988] 1 WLR 587, New Zealand Shipping Co Ltd v Societe Des Ateliers Et Chantiers De France [1919] AC 1. But as I have said, the principle is of universal application." (emphasis added). K. Was the 2 $ ^{n d} $ Defendant liable for the 1 $ ^{s t} $ Defendant's Breach?

As explained in the above Parts I and J, the Plaintiff (not the $ 1^{\mathrm{st}} $ Defendant) had breached the LA ( $ 1^{\mathrm{st}} $ Defendant-Plaintiff). As the $ 1^{\mathrm{st}} $ Defendant was not liable to the Plaintiff in this case, the $ 2^{\mathrm{nd}} $ Defendant could not therefore be jointly and severally liable with the $ 1^{\mathrm{st}} $ Defendant to the Plaintiff.

On the assumption that the Plaintiff's Breach (Demobilization) had not occurred and the Alleged Non-Payment (Plaintiff's Invoices) had been proven in this case (ie., we now assume that the $ ^{1st} $ Defendant's Breach had been committed), this court will now consider whether the learned High Court Judge had correctly exercised his discretion to pierce the corporate veil of the $ ^{1st} $ Defendant so as to impose liability for the $ ^{1st} $ Defendant's Breach on the $ ^{2nd} $ Defendant.

As a general rule, the court cannot simply pierce the $ 1^{\mathrm{st}} $ Defendant's corporate veil so as to impose liability on the $ 2^{\mathrm{nd}} $ Defendant for the $ 1^{\mathrm{st}} $ Defendant's Breach [General Rule (Separate Corporate Persons)]. The existence of the General Rule (Separate Corporate Persons) is due to the following two reasons-

according to s 20(a) of the Companies Act 2016 [CA (2016)] the $ 1^{\mathrm{st}} $ and $ 2^{\mathrm{nd}} $ Defendants are separate legal entities (Company's Own Legal Personality). Section 20 CA (2016) states as follows- "s 20. Separate legal entity A company incorporated under this Act is a body corporate and shall-

have legal personality separate from that of its members; and

continue in existence until it is removed from the register." (emphasis added); and

the $ 1^{\mathrm{st}} $ Defendant has limited liability which cannot be imposed on third parties, including the $ 2^{\mathrm{nd}} $ Defendant (Company's Limited Liability).

With regard to the court's discretionary power to pierce a company's (X Company) corporate veil so as to impose liability on individuals (not to impose liability on another company) for X Company's liability [Court's Piercing Corporate Veil (Liability on Individual)] in the Federal Court case of Ong Leong Chiou & Anor v Keller (M) Sdn Bhd & Ors [2021] 3 MLJ 622, at [98] and [99], Nallini Pathmanathan FCJ had adopted the judgment of Lord Sumption JSC in the United Kingdom's (UK) Supreme Court in Prest v Petrodel Resources Ltd & Ors [2013] AC 415, as follows: [98] The concept of lifting and piercing were and continue to be utilised interchangeably in this jurisdiction. However, in this appeal, I have considered in greater detail the differences in the principles underlying the principle of 'piercing' the corporate veil as enunciated by Lord Sumption. I am of the considered view that it would be appropriate to adopt the analysis put forward by Lord Sumption in Prest, but as agreed by the majority of the Bench in Prest, the analysis ought not to be applied too rigidly. It would be premature to bar or foreclose the categories of cases in which the corporate personality may be either disregarded or the veil 'pierced'. [99] The following conclusions may be drawn in relation to the disregarding of the corporate veil:

There subsists a long line of authority over the years in Malaysia which recognises that fraud, whether common law fraud or fraud in equity permits the court disregarding of the corporate personality. This body of law as adopted from the United Kingdom takes its line of reasoning from the 'fraud unravels all' principle as expounded by Denning LJ in Lazarus v. Beasley (above). That body of law remains correct and relevant and ought not to be lightly tampered with. It is reflective of the position in law recognised in Salomon v. Salomon (above). It is moreover, with respect, entirely legally coherent because the theoretical concept of the separate corporate personality was founded to enable business to be conducted. It is the essence of incorporation that the shareholder/controller of the company limits his liability in respect of the future conduct of the company's affairs. There is nothing wrong with that. Advantage is taken of limited liability to avoid personal liability if things go wrong. (see Persad v. Singh per Lord Neuberger [2017] UKPC 32). However, the limitation of liability envisages that such future conduct of the company's business is to be conducted honestly and with integrity - the law is predicated on that assumption. Once honesty is abandoned and the company is utilised as a vehicle for dishonest conduct, or fraud, or unconscionable conduct, then the basis for the separate corporate personality is jeopardised and undermined. It no longer serves the purpose it was intended for. As such it is only correct that a court investigating the injury or loss suffered by reason of the wrongful utilisation of the corporate personality, or the abuse of the corporate personality, is allowed to both look behind the façade to ascertain the true facts and also impose liability against the persons perpetrating such wrongdoing as is required on the facts of a particular case. This body of law relating to fraud subsists outside of the doctrine of 'piercing' the corporate veil as explained in Prest;

(ii) I would respectfully concur with the legal rationale prescribed by Lord Sumption in Prest, which explains that in order to ascertain whether the veil of incorporation ought to be 'pierced', the nature of the wrongdoing in issue ought to be analysed to ascertain whether it falls within the purview of the 'concealment' principle or the 'evasion' principle. To this end, the distinction between the two principles of concealment and evasion are of importance and benefit to enable a court to analyse with greater accuracy the basis on which the corporate personality is being disregarded. It also results in different consequences as explained earlier; Concealment Principle

(iii) The analysis in Prest, namely that the concealment principle does not in reality pierce the veil of incorporation, but allows the court to disregard or look behind the corporate personality to ascertain the true facts, ought to be considered for use and application in this jurisdiction. The reason is because after ascertaining the true facts concealed behind the corporate personality, it will enable a court to determine which legal principle of substantive law it will then utilise to determine whether liability subsists, or does not subsist, against a party to the dispute, on a given set of facts. This may involve the utilisation of the principles of agency or trusts or some other area of the law. Such application allows for a greater analysis of the basis on which liability is imposed, rather than simply stating that the corporate veil has been lifted and imposing liability on a party without explaining the legal basis for doing so. It is also important to note that it does not engage the evasion principle such that the corporate veil is not pierced; Evasion Principle

(iv) If the wrongdoing warrants the application of the evasion principle, the consequence is that the corporate veil is pierced, so as to enable liability to be imposed on a person, seemingly unconnected to the transaction in dispute. First, it is necessary to ascertain if there is a legal right against the person in control of a company which exists independently of the company's involvement, and a company is interposed such that the legal personality of the company defeats the legal right or frustrates its enforcement. This is a considerable obstacle to overcome, and it is only rarely that an appropriate set of facts will allow for such 'piercing'. Ultimately, the narrow and rigid test ensures that the corporate personality is not lightly disregarded. Even when the facts of a particular case warrant invoking the evasion principle enabling the corporate veil to be pierced, the court may only apply the doctrine to deprive the company or its controller of the advantage that they would otherwise have obtained by the company's separate legal personality. If there subsists a legal relationship between the company and its controller, it might not be necessary to pierce the corporate veil, in which event it ought not to be pierced; Conclusions

In many instances, the facts will not allow for a clean and clear application of either one of these principles. Both principles might come into play. It has also been demonstrated that the application of these different principles might well give rise to the same result. This is a practical reality that should be borne in mind when analysing the particular factual matrix. It has also been reported that there has been a degree of misunderstanding in the application of these two principles. It is in this context that the comments of the rest of the Bench in Prest are most relevant. Baroness Hale, quite correctly, questioned whether all cases would fall neatly into cases of either concealment or evasion. (see para 92). Her comment that where the doctrine is sought to be utilised to convert the liability of the controller of the company to the company itself, the utilisation of the agency concept and the 'directing mind' would be more appropriate than the doctrine of piercing of the veil. I would respectfully concur with these statements;

(vi) Having reviewed some of the relevant case-law in this jurisdiction, I conclude, with respect, that there has been no confusion in the application of the principles. Firstly all relevant principles in keeping with the law throughout the Commonwealth have been adhered to. This is marked by the move from the general and somewhat amorphous test of 'in the interests of justice' in earlier case law to the clear boundaries drawn in Law Kam Loy v. Boltex (above) where disregarding the corporate veil was stated to be applicable when there was evidence of actual fraud at common law or unconscionable or inequitable conduct amounting to fraud in equity. This position in law was then expanded in Gurbachan Singh ('above') where the test and rationale expressed in Prest were considered. In the present appeal, I have sought to clarify the position in law further as above." (emphasis added).

Based on our understanding of Malaysian case law -

in view of the General Rule (Separate Corporate Persons) premised on the Company's Own Legal Personality and Company's Limited Liability, the Court's Piercing Corporate Veil (Liability on Individual) should not be invoked as a matter of general application but instead, should only be exercised in the following exceptional circumstances-

there is proof of -

actual fraud; or

(ii) Equitable/Constructive Fraud - please refer to Ong Leong Chiou; and

in accordance with the "Evasion Principle", the court imposes liability on an individual (Y) for the liability incurred by X Company when -

Y is X Company's "alter ego";

(ii) Y is the "directing mind and will" of X Company; and/or

(iii) Y controls X Company - please refer to the Federal Court's judgment delivered by Chong Siew Fai CJ (Sabah & Sarawak) in Sunrise Sdn Bhd v First Profile (M) Sdn Bhd & Anor [1996] 3 MLJ 533, at 545. In Sunrise, at p. 541 to 542, there was undisputed evidence that the holding company controlled the subsidiary company and consequently, the Federal Court ordered an interlocutory injunction to restrain the holding company from disposing lands held in the name of the subsidiary company;

by way of the Court's Piercing Corporate Veil (Liability on Individual), in accordance with the Evasion Principle, justice is attained by ensuring that Y's personal liability for X Company's liability, is not evaded; and

the Court's Piercing Corporate Veil (Liability on Individual) cannot be exercised merely in the interest of justice (in the absence of actual fraud or Equitable/Constructive Fraud) because such a wide application of the Court's Piercing Corporate Veil (Liability on Individual) will undermine the General Rule (Separate Corporate Persons).

In addition to the Court's Piercing Corporate Veil (Liability on Individual), the court has a discretionary power to pierce the corporate veil of X Company and impose liability on another company (Z Company). We shall refer to the exercise of such an exceptional discretion as the "Court's Piercing Corporate Veil (Liability on Another Company)". With regard to the Court's Piercing Corporate Veil (Liability on Another Company), we express the following view:

premised on the General Rule (Separate Corporate Persons), the Court's Piercing Corporate Veil (Liability on Another Company) should only be applied exceptionally. If otherwise, the General Rule (Separate Corporate Persons) will be undermined, if not rendered redundant;

in the UK, Slade LJ delivered the following judgment of the Court of Appeal in Adams & Ors v Cape Industries plc & Anor [1990] Ch 433, at 542 and 544- "The question of law which we now have to consider is whether the arrangements regarding N.A.A.C., A.M.C. and C.P.C. made by Cape with the intentions which we have inferred constituted a façade such as to justify the lifting of the corporate veil so as that C.P.C.'s and A.M.C.'s presence in the United States of America should be treated as the presence of Cape/Capasco for this reason if no other. ... Mr. Morison submitted that the court will lift the corporate veil where a defendant by the device of a corporate structure attempts to evade (i) limitations imposed on his conduct by law; (ii) such rights of relief against him as third parties already possess; and (iii) such rights of relief as third parties may in the future acquire. Assuming that the first and second of these three conditions will suffice in law to justify such a course, neither of them apply in the present case. It is not suggested that the arrangements involved any actual or potential illegality or were intended to deprive anyone of their existing rights. Whether or not such a course deserves moral approval, there was nothing illegal as such in Cape arranging its affairs (whether by the use of subsidiaries or otherwise) so as to attract the minimum publicity to its involvement in the sale of Cape asbestos in the United States of America. As to condition (iii), we do not accept as a matter of law that the court is entitled to lift the corporate veil as against a defendant company which is the member of a corporate group merely because the corporate structure has been used so as to ensure that the legal liability (if any) in respect of particular future activities of the group (and correspondingly the risk of enforcement of that liability) will fall on another member of the group rather than the defendant company. Whether or not this is desirable, the right to use a corporate structure in this manner is inherent in our corporate law. Mr. Morison urged on us that the purpose of the operation was in substance that Cape would have the practical benefit of the group's asbestos trade in the United States of America without the risks of tortious liability. This may be so. However, in our judgment, Cape was in law entitled to organise the group's affairs in that manner and (save in the case of A.M.C. to which special considerations apply) to expect that the court would apply the principle of Salomon v. A. Salomon & Co. Ltd. [1987] AC 22 in the ordinary way. We reject the "corporate veil" argument." (emphasis added). According to Adams, a group of companies is entitled to arrange its corporate affairs in any manner so as to avoid future legal liability provided that such a corporate arrangement-

does not involve any actual or potential illegality; or

is not intended to deprive any party of the party's existing right(s) [not future right(s)] [Right of Group of Companies (Corporate Arrangement)];

the Right of Group of Companies (Corporate Arrangement) as laid down in Adams had been adopted by Ramly Ali JCA (as he then was) in the Court of Appeal case of ARL Associates Sdn Bhd & Ors v Bank Kerjasama Rakyat Malaysia Bhd [2012] MLJU 1450, at [22] to [24], as follows- [22] It is also trite law that a parent company and a subsidiary company (even a one hundred percent wholly owned by the parent company), are distinct legal entities. The parent company is neither the agent of the subsidiary company nor is it responsible for the acts or defaults of the subsidiary company (see: Ebbw Vale Urban Dist. Council v South Wales Traffic Licensing Authority [1951] 1 All ER 806). [23] In applying the above principles of law, we can safely conclude that the 1st Defendant, even though 20% of its shares were held indirectly by the Respondent (through it's wholly subsidiaries) at the relevant time, was clearly a separate and distinct entity from the Respondent. [24] Members, shareholders or even a parent company (being majority shareholders) as a general rule are not liable and cannot be held responsible for any liability of the company in question either in contract or in tort. They are being shielded by the corporate veil, which can only be lifted in exceptional circumstances where there is fraud involved. There must be exceptional circumstances such as fraud at common law or some inequitable or unconscionable conduct amounting to fraud in equity to lift the corporate veil (see: Adams & Ors v Cape Industries Pic & Anor [1990] Ch 433; and Law Kam Loy & Anor v Boltex Sdn Bhd & Ors [2005] 3 CLJ 355, Court of Appeal).” (emphasis added); and

from the viewpoint of the stare decisis doctrine, the Court of Appeal is bound by its own previous decisions - please refer to the Federal Court's judgment delivered by Peh Swee Chin FCJ in Dalip Bhagwan Singh v Public Prosecutor [1998] 1 MLJ 1, at 12 to 13. Accordingly, until our Federal Court overrules ARL Associates, we are constrained by the doctrine of stare decisis to follow ARL Associates and apply the Right of Group of Companies (Corporate Arrangement).

Both the Court's Piercing Corporate Veil (Liability on Individual) and Court's Piercing Corporate Veil (Liability on Another Company) involve the court's decision on a question of mixed law and fact because-

whether there is a sufficient ground in law for the court to pierce the corporate veil of X Company and impose liability on Y or Z Company is a question of law; and

whether the court should exercise its discretion to pierce X Company's corporate veil and impose liability on Y or Z Company depends on the particular facts of the case in question.

In this case, the learned High Court Judge had made two findings of mixed law and fact as follows:

there was no ground for the $ 3^{rd} $ to $ 5^{th} $ Defendants to be personally liable for the $ 1^{st} $ Defendant's Breach [High Court's Finding of Mixed Law and Fact ( $ 3^{rd} $ to $ 5^{th} $ Defendants)]; and

the $ 2^{\mathrm{nd}} $ Defendant was liable for the $ 1^{\mathrm{st}} $ Defendant's Breach [High Court's Finding of Mixed Law and Fact ( $ 2^{\mathrm{nd}} $ Defendant)].

The Plaintiff did not appeal to the Court of Appeal against the High Court's Finding of Mixed Law and Fact $ ( 3^{rd} $ to $ 5^{th} $ Defendants). Nor did the Plaintiff file a notice of cross-appeal for the Court of Appeal to vary the High Court's Decision in respect of the High Court's Finding of Mixed Law and Fact $ ( 3^{rd} $ to $ 5^{th} $ Defendants).

In the Court of Appeal case of P'ng Hun Sun v Dato' Yip Yee Foo [2013] 6 MLJ 523, at [14], Zawawi Salleh JCA (as he then was) explained when an appellate court may set aside a trial court's finding of mixed law and fact: [14] What, then, is the appropriate standard of review for the appellate court to apply in mixed question of fact and law? In our view, the appropriate standard of review in this situation would be to give appropriate deference to the trial judge's factual finding but to reserve for the appellate court the ability to independently evaluate the legal effect of those factual finding." (emphasis added).

We can only set aside the High Court's Finding of Mixed Law and Fact ( $ 2^{\mathrm{nd}} $ Defendant) [with regard to the Court's Piercing Corporate Veil (Liability on Another Company)] if-

the legal basis for the High Court to impose liability on the $ 2^{n d} $ Defendant for the $ 1^{s t} $ Defendant's Liability was an error of law; and/or

the factual basis for the learned High Court Judge to exercise his discretion to pierce the $ 1^{\mathrm{st}} $ Defendant's corporate veil, was plainly erroneous (within the meaning laid down in Ng Hoo Kui).

The High Court's sole legal and factual basis to impose liability for the $ ^{1st} $ Defendant's Breach on the $ ^{2nd} $ Defendant was that the $ ^{1st} $ Defendant was "merely a shelf company" which was used by the $ ^{2nd} $ Defendant as a "front" to issue the LA ( $ ^{1st} $ Defendant-Plaintiff) to the Plaintiff [Allegation (Shelf Company)] . We have no hesitation to decide that the learned High Court Judge committed an error of law by relying solely on the Allegation (Shelf Company) to impose liability on the $ ^{2nd} $ Defendant for the $ ^{1st} $ Defendant's Breach. Our reasons are as follows:

the Allegation (Shelf Company) is not an exception to the General Rule (Separate Corporate Persons) which is premised on the Company's Own Legal Personality and Company's Limited Liability. The learned High Court Judge did not cite any case in Malaysia or Commonwealth where Court's Piercing Corporate Veil (Liability on Another Company) could be justified solely on the Allegation (Shelf Company);

the learned High Court Judge omitted to consider the Right of Group of Companies (Corporate Arrangement) as laid down in Adams and ARL Associates. It is to be emphasized that the Court of Appeal's judgment in ARL Associates is binding on the Court of Appeal, High Court and all subordinate courts;

when the $ 2^{nd} $ Defendant was awarded the Project by the Employer, the $ 2^{nd} $ Defendant awarded the Project to the $ 1^{st} $ Defendant as an exercise of the Right of Group of Companies (Corporate Arrangement) by the $ 1^{st} $ and $ 2^{nd} $ Defendants. This exercise of the Right of Group of Companies (Corporate Arrangement) by the $ 1^{st} $ and $ 2^{nd} $ Defendants was lawful because the $ 1^{st} $ and $ 2^{nd} $ Defendants were entitled to arrange their corporate affairs in a manner as to avoid future legal liability provided that such a corporate arrangement-

did not involve any actual or potential illegality; and

was not intended to deprive the Plaintiff of the Plaintiff's existing right. The failure of the High Court to take into account the Right of Group of Companies (Corporate Arrangement) in this case, had not only undermined the General Rule (Separate Corporate Persons) but had also rendered nugatory the Right of Group of Companies (Corporate Arrangement);

there was no proof of actual fraud by the Defendants or any one of the Defendants which could justify the Court's Piercing Corporate Veil (Liability on Another Company)]. Nor did the Plaintiff file a notice of cross-appeal under r 8(1) RCA for the Court of Appeal to vary the High Court's Decision on the ground that the $ 2^{nd} $ Defendant was liable for the $ 1^{st} $ Defendant's Breach on the ground of actual fraud on the part of the Defendants or any one of the Defendants; and

as explained in paragraph 59 below, there is no Equitable/Constructive Fraud on the part of the Defendants or any one of the Defendants in this case. In any event, the Plaintiff had not filed a notice of cross-appeal under r 8(1) RCA for the Court of Appeal to vary the High Court's Decision so as to justify the Court's Piercing Corporate Veil (Liability on Another Company)] on the ground of Equitable/Constructive Fraud on the part of the Defendants. Hence, the Plaintiff cannot now contend in This Appeal that the $ ^{1^{st}} $ and $ ^{2^{nd}} $ Defendants had committed Equitable/Constructive Fraud against the Plaintiff.

Equitable/Constructive Fraud had been explained by Mohd. Azmi SCJ in the Supreme Court case of Rasiah Munusamy v Lim Tan & Sons Sdn Bhd [1985] 2 MLJ 291, at 296, as follows: "It is not a fraud in the common law sense, but an unmeritorious and unconscionable conduct which is known as constructive or equitable fraud (see Spry on Equitable Remedies, 2nd Edition, at page 236)." (emphasis added). We are of the view that the Defendants had not committed Equitable/Constructive Fraud against the Plaintiff in this case. The following evidence and reasons support this factual decision:

there was no unconscionability in this case due to the following reasons-

the Project was a purely commercial matter (which involved construction) between the Plaintiff on the one part and the $ 1^{\mathrm{st}} $ and $ 2^{\mathrm{nd}} $ Defendants on the other part (referred collectively as the " $ 1^{\mathrm{st}} / 2^{\mathrm{nd}} $ Defendants"). In this case, there was no "vulnerable" party, such as a consumer or home buyer, for the law to protect;

there was no unequal bargaining power between the Plaintiff and the $ 1^{\mathrm{st}}/2^{\mathrm{nd}} $ Defendants. In fact, even before the commencement of the Works the Plaintiff had the financial capability to provide RM2,500,000.00 as the Plaintiff's Advance Payment - please refer to Clause 4.1;

the Plaintiff had the complete freedom to accept or decline to agree to the LA $ (1^{\mathrm{st}} $ Defendant-Plaintiff);

before entering into the LA $ (1^{\mathrm{st}} $ Defendant-Plaintiff), the Plaintiff had actual knowledge that-

the Employer had appointed the $ 2^{\mathrm{nd}} $ Defendant (not the $ 1^{\mathrm{st}} $ Defendant) to perform the Works; and

(ii) the $ 2^{n d} $ Defendant had appointed the $ 1^{s t} $ Defendant to perform the Works [Plaintiff's Prior Actual Knowledge （ $ 1^{\mathrm{st}}/2^{\mathrm{nd}} $ Defendants' Arrangement)] With the Plaintiff's Prior Actual Knowledge $ (1^{\mathrm{st}} / 2^{\mathrm{nd}} $ Defendants' Arrangement), the Plaintiff made an informed business decision before agreeing to enter into the LA $ (1^{\mathrm{st}} $ Defendant-Plaintiff); and

the Plaintiff did not perform the Works at all. This was clear from the following evidence-

by virtue of Clause 4.2, the $ 1^{\mathrm{st}} $ Defendant's Appointment (Plaintiff's Key PMT) had been made. In other words, there was no key PMT on the Plaintiff's side for the purpose of the Project; and

(ii) on the same day the Plaintiff accepted the LA $ (1^{\mathrm{st}} $ Defendant-Plaintiff), ie., 12.10.2016, the Plaintiff subcontracted the entire Works to Tiemura. Indeed, the Plaintiff's Assignment (Tiemura) had been executed. It is clear that the Plaintiff was not a bona fide sub-contractor for the 1 $ ^{st} $ Defendant in this case. In fact, the Plaintiff's Admission (Financial Incapability) in the Plaintiff's Letter (13.2.2018), showed that the Plaintiff was in effect a financier of the Project; and

in the Plaintiff's Letter (26.4.2018), the Plaintiff sought the $ 1^{\mathrm{st}} $ Defendant's "kind co-operation" to share with the Plaintiff the complete records and documentation regarding the Project from the tender stage until the date of Plaintiff's Letter (26.4.2018). Such a request was acceded to in the $ 1^{\mathrm{st}} $ Defendant's $ 1^{\mathrm{st}} $ Letter (27.4.2018). It is clear that the $ 1^{\mathrm{st}} $ Defendant did not act unconscionably in this case towards the Plaintiff.

Premised on the evidence and reasons stated in the above paragraphs 58 and 59, we have no hesitation to decide that-

the legal basis for the High Court to impose liability on the $ 2^{n d} $ Defendant for the $ 1^{s t} $ Defendant's Liability [Allegation (Shelf Company)] , was an error of law; and

the factual basis for the learned High Court Judge to exercise his discretion to pierce the $ 1^{\mathrm{st}} $ Defendant's corporate veil [Allegation (Shelf Company)] , was plainly erroneous. [High Court's Error (Mixed Law and Fact)]. L. How to overcome problems arising from the sub-contracting phenomenon?

This case illustrates the "undesirable", if not problematic, consequences when construction works have been given by an employer (R) to a main contractor (S) who then subcontracts the entire or part of the works to a first sub-contractor (T). T subsequently sub-contracts the entire or part of the works to a second sub-contractor (U). U may further sub-contract the entire or part of the works to a third sub-contractor. In such a scenario, the following problems, among others, may arise:

the appointment of T and U may have circumvented R's stringent requirements for the appointment of S as the main contractor for the works. Worse still, the appointment of T and U may defeat the socio-economic objective of appointing S in the first place;

the sub-contract for works is solely between T and U which cannot be enforced by R and S against U. Consequently, R and S cannot-

directly ensure -

the quality of the works performed by U (U's Works); and

(ii) that U's Works are completed within stipulated time; and

directly compel U to rectify any defect in U's Works;

U may be guilty of delay in U's Works and this will have a detrimental knock-on effect on R, S and T. U may even fail to complete U's Works;

T may be paid for U's Works by S but for various reasons, T does not pay U for U's Works; and

when disputes arise, there may be multiple-

adjudication proceedings; and/or

legal or arbitral proceedings between -

R and S;

(ii) S and T; and/or

(iii) T and U.

In our considered view, there are two options (2 Options) to overcome the above problems associated with the sub-contracting phenomenon. In these 2 Options, with regard to the project in question, all the relevant parties will enter into a-

"Project Alliance Agreement" (PAA). PAAs have been applied in the construction industry in Singapore and Australia; and/or

"Partnering Contract" (PC). PCs have been adopted in the UK. Notwithstanding the name-

there is no partnership or joint venture among the parties in a PC - please refer to the judgment of Akenhead J in UK's High Court in TSG Building Services plc v South Anglia Housing Ltd [2013] EWHC 1151 (TCC), at [25]; and

a PC does not give rise to a fiduciary relationship between the parties in the PC - please see the decision of Carr J (as she then was) in UK's High Court case of Fujitsu Services Ltd v IBM United Kingdom Ltd [2014] EWHC 752 (TCC), at [117] to [146]. In a well-drafted PAA or PC, the rights and obligations of all the parties are clearly spelt out (so as to secure an optimum outcome of the project). If there is any dispute, the parties can resort to the enforcement of the PAA or PC only. There is therefore a saving of time, effort and costs of all parties. According to Julian Bailey, "Construction Law", 3rd Edition (2020), Vol. 1, at [1.71], one of the key differences between a PAA and PC is that there is a sharing of cost risk in a PAA but not in a PC. M. What are the appropriate remedies?

As explained in the above paragraph 42, the Plaintiff's Breach (Demobilization) had been committed. Hence, an assessment (Assessment) of all the loss suffered by the $ 1^{\mathrm{st}} $ Defendant due to the Plaintiff's Breach (Demobilization) （ $ 1^{\mathrm{st}} $ Defendant's Loss) shall be conducted by the Construction High Court in Shah Alam (Construction High Court).

With regard to the $ 1^{\mathrm{st}} $ Defendant's Loss -

the $ 1^{\mathrm{st}} $ Defendant has the evidential burden to prove on a balance of probabilities the $ 1^{\mathrm{st}} $ Defendant's Loss within the meaning of the two limbs of s 74(1) CA (1950). Section 74(1) CA (1950) provides as follows - "s 74. Compensation for loss or damage caused by breach of contract

When a contract has been broken, the party who suffers by the breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from the breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it." (emphasis added). The two limbs of s 74(1) CA (1950) { " $ 1^{\mathrm{st}} $ Limb [Section 74(1) CA (1950)] " and " $ 2^{\mathrm{nd}} $ Limb [Section 74(2) CA (1950)] " } have been explained in Jambatan Merah Sdn Bhd (in liquidation) v Public Bank Bhd [2016] 1 CLJ 811, at [46], as follows: [46] Even if the Plaintiff has suffered any loss or damage due to the Defendant's Breach (Alleged Loss), the Plaintiff must prove that the Alleged Loss is claimable and is not too remote under either one or both the limbs of s 74(1) CA (1950) as follows:

the Alleged Loss "naturally arose in the usual course of things" from the Defendant's Breach within the meaning of the first limb of s 74(1) CA (1950); and/or

both the Plaintiff and Defendant "knew, when they made the contract" that the Alleged Loss was "likely to result from the breach" of the Defendant's Breach as understood in the second limb of s 74(1) CA (1950)."

if the $ 1^{\mathrm{st}} $ Defendant's Loss cannot be proven on a balance of probabilities pursuant to the $ 1^{\mathrm{st}} $ Limb [Section 74(1) CA (1950)] and/or $ 2^{\mathrm{nd}} $ Limb [Section 74(2) CA (1950)], the $ 1^{\mathrm{st}} $ Defendant is only entitled to nominal damages - please refer to the judgment of Edgar Joseph Jr FCJ in the Federal Court case of Tan Sri Khoo Teck Puat & Anor v Plenitude Holdings Sdn Bhd [1994] 3 MLJ 777, at 799. M(2). Can Plaintiff claim for the Outstanding Sum (Completed Works), Plaintiff's Advance Payment and Retention Sum at the Assessment from the $ 1^{\mathrm{st}} $ Defendant?

The first question is whether Clause 7 bars the Plaintiff from claiming for the following three sums from the $ 1^{\mathrm{st}} $ Defendant-

the Outstanding Sum (Completed Works);

the Plaintiff's Advance Payment; and

the Retention Sum (3 Sums).

Clause 7 stated that the $ 1^{\mathrm{st}} $ Defendant "shall not be liable for any cost, loss of profit, expenses, claims and damages whatsoever arising out from" the termination of the LA ( $ 1^{\mathrm{st}} $ Defendant-Plaintiff). We are of the following view regarding Clause 7:

Clause 7 is capable of the following two interpretations-

the $ 1^{\mathrm{st}} $ Defendant was not liable to the Plaintiff for the 3 Sums in the event of the $ 1^{\mathrm{st}} $ Defendant's LA Termination (8.6.2018) [ $ 1^{\mathrm{st}} $ Construction (Clause 7)]; or

the $ 1^{\mathrm{st}} $ Defendant was not liable for "any cost, loss of profit, expenses, claims and damages whatsoever arising out from" the $ 1^{\mathrm{st}} $ Defendant's LA Termination (8.6.2018) but the $ 1^{\mathrm{st}} $ Defendant was still liable for the 3 Sums which did not arise from the $ 1^{\mathrm{st}} $ Defendant's LA Termination (8.6.2018) [ $ 2^{\mathrm{nd}} $ Construction (Clause 7)];

as the LA $ (1^{\mathrm{st}} $ Defendant-Plaintiff) was a commercial contract, the $ 2^{\mathrm{nd}} $ Construction (Clause 7) is accepted by us as the only commercially sensible interpretation of Clause 7. Notwithstanding the $ 1^{\mathrm{st}} $ Defendant's LA Termination (8.6.2018), the $ 1^{\mathrm{st}} $ Defendant shall pay the 3 Sums to the Plaintiff. If otherwise, the $ 1^{\mathrm{st}} $ Defendant will be unjustly enriched in the form of the 3 Sums at the expense of the Plaintiff; and

the LA （ $ 1^{\mathrm{st}} $ Defendant-Plaintiff) was drafted by the $ 1^{\mathrm{st}} $ Defendant. If there are two interpretations of Clause 7, by virtue of the contra proferentem rule of construction, the court shall adopt the interpretation which is favourable to the Plaintiff [who did not draft the LA （ $ 1^{\mathrm{st}} $ Defendant-Plaintiff)] - please refer to the Court of Appeal's judgment in Abdul Rahman bin Soltan & Ors v Federal Land Development Authority & Anor and other appeals [2023] 4 MLJ 318, at [52].

We should add that the Retention Sum consisted of payment for the Completed Works which had been retained by the $ 1^{\mathrm{st}} $ Defendant pending the completion of the Works. In this regard, we rely on the following judgment of Zainun Ali JCA (as she then was) in the Court of Appeal case of Qimonda Malaysia Sdn Bhd (in liquidation) v Sediabena Sdn Bhd & Anor [2012] 3 MLJ 422, at [17]: [17] The retention monies are monies already earned by the respondents (as contractor) for the works already done under the contract. These monies are part of the progress payments claimed and certified for payment to the respondents (as contractor) under cl 22 of the contract concerned. ...” (emphasis added). M(3). Duties and discretionary powers of the Construction High Court at the Assessment

The Construction High Court shall conduct the Assessment as follows:

whether the $ 1^{\mathrm{st}} $ Defendant's Loss had been proven on a balance of probabilities pursuant to the $ 1^{\mathrm{st}} $ Limb [Section 74(1) CA (1950)] and/or $ 2^{\mathrm{nd}} $ Limb [Section 74(2) CA (1950)];

can the Plaintiff prove on a balance of probabilities the Outstanding Sum (Completed Works)?; and

after the Construction High Court had assessed the $ 1^{\mathrm{st}} $ Defendant's Loss and Outstanding Sum (Completed Works), the Construction High Court shall -

order the $ 1^{\mathrm{st}} $ Defendant's return of the Plaintiff's Advance Payment and Retention Sum to the Plaintiff; and

have the discretion to -

award pre-Assessment interest and post-Assessment interest under s 11 of the Civil Law Act 1956 and O 42 r 12 of the Rules of Court 2012 respectively on the $ 1^{\mathrm{st}} $ Defendant's Loss and 3 Sums; and

(ii) determine who shall be liable for the costs of the Assessment and its quantum. N. Outcome of This Appeal

Premised on the above evidence and reasons, including -

the High Court's $ 1^{\mathrm{st}} $ and $ 2^{\mathrm{nd}} $ Legal Errors;

the High Court's $ 1^{\mathrm{st}} $ and $ 2^{\mathrm{nd}} $ Plain Factual Errors; and

the High Court's Error (Mixed Law and Fact) This Appeal is allowed with the following order:

the HC's Decision is set aside;

judgment is entered as follows-

the Original Action is dismissed;

(ii) the Counterclaim is allowed; and

(iii) the Construction High Court shall conduct the Assessment as stated in the above paragraph 68; and

the Plaintiff shall pay one set of costs of RM60,000.00 to the $ 1^{st} $ and $ 2^{nd} $ Defendants for the proceedings in the High Court and Court of Appeal (subject to allocatur fee).

In closing, it is hoped that the problems arising from sub-contracting phenomenon in the construction industry may be alleviated, if not overcome, by the introduction of PAAs or PCs. DATE: 20 FEBRUARY 2025 WONG KIAN KHEONG Judge Court of Appeal For the Appellants: Encik Bahari Yeow, Mr. Lim Zhi Jian & Ms. Ling Siew Hui (Messrs Rosli Dahlan Saravana Partnership) For the Respondent: Encik Mohd Saiful Hadi bin Dowlad Rahuman & Puan Azreen binti Abdul Latif (Messrs Ainul Azam & Co)