Azbana Development Sdn Bhd v Majlis Perbandaran Kemaman (WA-21NCVC-63-06/2017)

The Plaintiff/ADSB had filed a suit against the Defendant for principally an unlawful termination of an Agreement entered into between them. The relief sought by the Plaintiff was Specific Performance, as per the Statement of Claims and some other Declaratory Reliefs.

After hearing all the oral testimonies of the witnesses and perusing through all the documentary evidence adduced and after hearing submissions by both parties, this Court had, on a balance of 2 probabilities found that the Plaintiff had succeeded in proving their action and hence their action was allowed with cost of RM20,000.00.

Dissatisfied, the Defendant had filed an appeal to the Court of Appeal.

Herewith are the grounds for that decision.

The Plaintiff, Azbana Development Sdn Bhd (In Liquidation) (“ADSB”) was wound up in 2002 and its affairs are currently managed by the Liquidator, Sundarasan a/l Arumugan.

Prior to that winding up, ADSB (Plaintiff) was involved in the construction and development business.

The Defendant Majlis Perbandaran Kemaman (“KMN”) is a local authority under the administration of the Terengganu State Government, and the registered owner of the Land in question (below):

Vide a Memorandum of Agreement (“Agreement”) dated 3rd February 1996 entered into by both parties, ADSB/Plaintiff was appointed as the developer to construct a 5 Storey Shopping Complex on the Land held under No. Hakmilik: 1604, No. Lot 3 12338 (formerly known as No. H.S.(M) 10115, No. P.T. 10111), Tempat Kampung Limbong, Mukim Cukai, Daerah Kemaman, Terengganu (“the Land”). Only upon request by MPK, ADSB shall construct an Office Tower or Hotel on top of the Shopping Complex.

Vide Section 5.4 (d) of the Agreement, once the Shopping Complex is completed and if MPK does not intend to construct the said Office Tower, the Land shall be transferred forthwith to ADSB.

In the event MPK elected not to construct the Office Tower, ADSB shall have the absolute rights to develop the Office Tower without interference from MPK.

It is the Plaintiff’s case that as the construction of the Shopping Complex has been completed, therefore, MPK must transfer the Land to ADSB. MPK has persistently avoided and refused to transfer the Land to ADSB.

On the contrary MPK/Defendant contended that ADSB/Plaintiff committed several breaches of the Agreement and that the Agreement should be interpreted by taking into account the insolvent status of ADSB and public policy as MPK/Defendant is a public body, which used public funds towards the financing of the project through a redemption scheme. Hence, they submitted that they owe a duty to the taxpayers to ensure that the Land is not transferred to the Plaintiff/ADSB. 4

Hence, the suit against MPK/Defendant for Specific Performance and some Declaratory Reliefs as envisaged in their Statement of Claims. C. ANALYSIS AND FINDING OF THIS COURT

Simply put, the subject matter of the Agreement is the construction of a 5 storey Shopping Complex and subject to Section 5.4 of the Agreement, a 13 storey Office Tower on the Land. (The construction of the Office Tower can be substituted with the construction of a hotel on condition that the Defendant (MPK) informs ADSB/Plaintiff of the same within 1 month from the date of the Agreement). (Section 5.5 (a) of the Agreement)

Regarding the Office Tower, the Agreement granted MPK an option to either proceed or not with the construction of the Office Tower (“the Option”). In the event MPK/Defendant intends to proceed with the construction of the Office Tower, it shall give written notice of such intention to ADSB and such notice may not be given after completion of the Shopping Complex or 12 months from the date of the Agreement, whichever is earlier (“the Option Period”).

In a nutshell, the Plaintiff’s claimed that there was a breach of contract as the Defendant refused to transfer the Land. The breach of contract are premised on the interpretation of the Agreement itself. Hence, it is germane for this Court to dwell on the Agreement and its unilateral termination by the Defendant in a more detailed 5 manner, emphasizing on its interpretation and taking into consideration the conduct and intention of the parties.

In general it can be gleaned that the Agreement covers 2 aspects i.e.:

One, the completion of the Shopping Complex. In consideration thereof, MPK shall be entitled to the Agreed Parcels and ADSB shall be entitled to the Land; and

Two, in the event MPK does not wish to construct the Office Tower, ADSB shall have the absolute discretion to deal with the construction of the Office Tower as it deems fit without interference from MPK and the Land is to be transferred to ADSB forthwith. In consideration thereof, MPK shall be entitled to piling costs payable within 2 years from completion of the Shopping Complex and the Agreed Payment which shall be due 1 month from the issuance of the Certificate of Fitness for the Office Tower. [18] Based on the Agreement, in so far as ADSB/Plaintiff is concerned, this Court opined that for ADSB to be entitled to the Land, there are 3 conditions to be met. Firstly, it must be shown that the Shopping Complex has been completed, secondly MPK did not intend to proceed with the construction of the Office Tower and thereafter a request was made for the transfer of the Land. 6 [19] Regarding the first condition, this Court opined that the Shopping Complex has been completed, from the many evidence adduced amongst others, from the Defendant’s witnesses’ (DW1, DW2 and DW3’s) admission that the Shopping Complex was completed in the year 1997 when the Temporary Certificate of Fitness was issued on 3rd December 1997 and extended until 26th May 1998 (“TCF”). Further, there was also an admission by DW3 that the Final Certificate of Fitness (“Final CF”) has not been issued due to ‘technical requirements’ only. [20] This Court noted that as at 5th February 2014, the only ‘technical requirement’ to be complied with to obtain the Final CF is obtaining the letter of support from Indah Water Konsortium, (“IWK”). [21] This Court opined and agreed with the Plaintiff that obtaining the Final CF is not a requirement under the Agreement or indicative of whether the Shopping Complex has been completed. This is implied because, MPK themselves, as the local authority possessed with power to issue the Final CF, are themselves occupants and/or have leased out their units to third parties, despite knowing that the Final CF for the Shopping Complex has yet to be issued. This shows that technically the Shopping Complex is fit for occupation. [22] What about the construction of the Office Tower? If we could recall, vide Section 5.4 (d), the Agreement provides that MPK is required to furnish ADSB with a written notice of its intention to proceed with the construction of the Office Tower within the Option Period. 7 (See page 178 of “B2”). Unfortunately, MPK did not give a written notice. The Agreement further provides that in the event MPK fails to exercise the option within the Option Period, it shall be deemed that MPK has no intention to proceed with the construction of the Office Tower. In May 2002, vide a letter dated 31st May 2002, MPK wrote to ADSB informing that MPK has decided to not proceed with the construction of the hotel as it was not profitable. [23] This Court observed that in the same letter, MPK acknowledged ADSB’s rights under Section 5.4 (d) of the Agreement, which inter alia provides that the Land is to be transferred to ADSB forthwith. [24] Following that on 16th February 2012, the Liquidator’s Solicitors had rightly requested for the Land to be transferred pursuant to Section 3.3 and 5.4 (d) of the Agreement. MPK did not respond to the letter above. Sections 3.3 and 5.4 (d) reads as follows: “Section 3.3 (Transfer of Project Land) Notwithstanding any provisions to the contrary in this Agreement MDK only shall transfer the Project Land to the Company upon request after completion of the Shopping Complex.” “Section 5.4 (d) (Office Tower) reads: 8 “(d) In the event MDK fail to notify the Company in writing of its intention to proceed with the construction of the Office Tower and to buy back the same upon completion thereof within twelve (12) months from the date of this Agreement or upon completion of the Shopping Complex as certified by the Company's Architect whichever is the earlier then it shall be deemed that MDK has no intention to proceed with the construction of the Office Tower and to buy back the same upon completion thereof whereon the Company may at its absolute discretion construct and develop the Office Tower or construct such other development or modification as the Company deems fit in substitution thereof in which event:

MDK shall forthwith at the request of the Company transfer the Project Land to the Company if the same has not already been transferred;

(ii) all monies actually paid by MDK to the Company less interest, if any, for the Piling Works shall be refunded by the Company to MDK within two (2) years in default of which the Company shall pay to MDK interest on the outstanding amount to be refunded at the rate of ten per centum (10%) per annum. Any sum not paid by MDK to the Company for Piling Works shall thereafter ceased to be payable; 9

(iii) the rights title interests and benefits in the Office Tower or such other development in substitution of the Office Tower Shall belong to the Company absolutely and the Company Shall be entitled to sell transfer charge mortgage assign or otherwise deal with the Office Tower or any part thereof or the development in substitution in such ‘manner and upon such terms as it deems fit free from any claims whatsoever from MDK and the provisions of Section 8.2 hereof and other related sections shall apply mutadis mutandis;

(iv) ….. [25] This was the start of the beginning of the fiasco. MPK has hence breached the terms of the Agreement when it failed to transfer the Land to ADSB forthwith. [26] This Court observed that, with respect, this is surprising considering the fact that the Plaintiff had done its part of the bargain. From the totality of the evidence, several attempts were made by the Defendant to terminate the Agreement. This is again surprising, as the following will show the various attempts made by the Defendant: [27] The first attempt was on 10th August 2011 where MPK/Defendant issued a letter purporting to terminate the Agreement on grounds that ADSB/Plaintiff was wound up, giving rise to the Liquidator being unable to carry out his obligations under the Agreement. As such, 10 the Project has been abandoned since the winding up of ADSB in 2002, and by MPK releasing the charge on the Land, the Land was returned to MPK. [28] Following that, for the purpose of clarifying its position, on 10th August 2012, the Liquidator made an application vide a Notice of Motion in the Winding Up Court seeking for determination on whether the Agreement is still valid and binding despite ADSB being in liquidation, and in the event if the Agreement is valid and binding, an order for MPK to transfer the Land to ADSB. [29] On 29th April 2013, in setting aside the 1st Termination, the Court made the following orders:

That the Agreement is valid and binding despite the liquidation status of ADSB; (this is extremely important)

That MPK/Defendant transfer the Land to ADSB/Plaintiff subject to the Land being solely utilized for the development of the Office Tower/Hotel and the said Land shall not be transferred to a third party; and

That MPK be entitled to file its Proof of Debt (“POD”) for all claims and debts owed by ADSB (“the 1st Order”). [30] In not honouring the Court’s Order (“1st Order”), MPK/Defendant did not transfer the Land as directed in the 1st Order. MPK alleged 11 that full particulars of the development ought to be disclosed to MPK before the transfer of the Land can be affected. That prompted ADSB to file another motion dated 26th August 2014 in Court and the Court ordered that pursuant to the 1st Order, MPK is to execute the transfer form and all necessary documentation to facilitate the transfer of the Land and that the original title of the Land be delivered to the Liquidator within 30 days. (“the 2nd Order”) [31] Recognising that there was a 2nd Order imposed on them, on 8th January 2015, MPK’s Solicitors requested for an extension of time to return the duly executed transfer document. However, nothing materialize thereafter. This Court opined that the Defendant’s conduct of refusing to comply with the Court Order was surprising. DW1 testified that the Court Orders were not complied with based on grounds of “public policy” and explained that MPK’s Solicitors were instructed to file an application to challenge the Court Orders on grounds of “public policy”. (See Q & A no. 27 of DW1) [32] While the said application was pending, MPK issued the 2nd Termination dated 8th September 2016 to frustrate the enforcement of the Court Orders. [33] The Plaintiff thereafter filed a motion for further determination. The said Motion was dismissed as the Judge was of the view that there has been a change in circumstances and in any event, the issues 12 raised are substantive issues that ought to be resolved in a Civil Court. [34] Hence, this action by the Plaintiff as the Plaintiff believed that the second termination was invalid. Finding [35] After hearing the direct oral and documentary evidence, this Court was of the considered opinion that MPK deliberately did not comply with the Court Orders. DW1 admitted that the issue of public policy was raised to oppose the committal proceedings (@ p177 of Vol. Notes of Proceedings on 18th June 2019). [36] Guided by all the evidence adduced before this Court both oral and documentary evidence, and also after considering submissions by parties, this Court opined that the 2nd Termination was invalid and was afterthought. This was because the Agreement provides for only 2 instances when the Agreement can be terminated i.e. when construction of the Shopping Complex has been abandoned and when work on the site has been suspended for more than 120 days. (“Termination Instances”) [37] MPK/Defendant alleged that the Project has been abandoned and that work has been suspended for more than 120 days, the Project has not been completed within the time limit, terms and conditions 13 of the Agreement and the 3rd Party SPAs, and for the reasons above, the purpose, intent and consideration of the Agreement has been destroyed. [38] Perusing through the evidence, this Court found that those allegations were not true. This was because the Defendant’s witnesses admit that the Shopping Complex was completed in 1997. [39] Section 5.6 (d) of the Agreement provides that in the event the Project is abandoned, ADSB shall immediately upon demand by MPK discharge the charge on the Land. This right was not exercised by MPK which only means that the state of the Shopping Complex being abandoned never arose. Section 5.6 (d) reads as follows: “Section 5.6 (d) reads as follows: In the event the Project is abandoned for any reason due to the default of the Company, the Company shall immediately upon demand by MDK discharge the charge created by MDK for the benefit of the Company.” [40] Further, this Court agreed with the Plaintiff that the allegation that the project has been abandoned is a repeated issue that was previously raised in the 1st Termination. Despite raising this issue in 14 the 1st Termination, the 1st Order held that the Land must be transferred to ADSB. [41] Section 5.1 stipulates that the Project comprise of the construction of the Shopping Complex and the Office Tower. Section 5.1 reads as follows: “Section 5.1 (The Project) The Project shall comprise of the following:

construction of the shopping complexs in accordance with the provisions of Section 5.3 (a) hereof;

Construction of a thirteen (13) strory Office Tower (excluding the five (5) level of shopping complex and two (2) levels of the Parking Lots) with an approximate gross build-up area of 150,345 square feet of office space and common area or the Hotel or such other form of development as the Company may from time to time propose SUBJECT ALWAYS to the provisions of Section 5.2, 5.4 and 5.5 hereof.” [42] The Agreement provides that the Shopping Complex shall be completed within 24 months from receipt of relevant approvals or date of delivery of vacant possession of the Land to ADSB. While there is no evidence of when the approval were obtained or when vacant possession of the Land was delivered to ADSB, it is 15 undisputed that the Shopping Complex was completed in 1997 and the TCF was issued on 3rd December 1997, i.e. within 24 months from the date of the Agreement. [43] With regards to the completion of the Office Tower, no completion time frame was stipulated. Further, in the event MPK elects to not exercise the Option, ADSB shall have the absolute right to develop the Office Tower without interference from MPK. [44] This Court agreed with the Plaintiff that the construction of the Office Tower is solely at the discretion of ADSB and the Agreement expressly provides that MPK shall waive all rights and claims made by MPK. MPK has no right under the Agreement to terminate the Agreement for failure to construct the Office Tower. Further, as mentioned earlier, since there was no stipulation of the time frame for completion of the same. Hence, the said of termination was pre-mature. [45] MPK/the Defendant also alleged that Section 5.6 of the Agreement was breached due to ADSB’s failure to repay the loan and the Redemption Agreement supersedes the Agreement. However, it can be gleaned from Section 11.1 that the Agreement can only be terminated upon occurrence of the termination instances. Therefore, a breach of Section 5.6 of the Agreement cannot be the basis to terminate the Agreement, as it is not a breach that goes to the root of the contract as the Shopping Complex has been 16 completed and a breach of Section 5.6 only entitles MPK to damages. [46] Secondly, the root of the contract can be distilled form Sections 3.2 and 11 of the Agreement i.e. that the Shopping Complex ought to be completed at ADSB’s own costs and expense and abandonment of the Shopping Complex is a ground for termination. [47] This Court would like to refer to the case of Ching Yik Development Sdn Bhd v. Setapak Heights Development Sdn Bhd [1996] 3 MLJ 675 (COA) where at page @ p682 it was held: “If the breach is of such a nature that it goes to the root of the contract, then the term broken is fundamental in nature. On the other hand, if the consequences of the breach complained of are not serious in the sense that they do not go to the root of the contract, then the term in question is a subsidiary one entitling the innocent party to recover damages [1996] 3 MJ 675 at 683 but not to treat the contract as being at an end.” [48] Thirdly, MPK and ADSB entered into a Redemption Agreement to deal with the foreclosure exercise undertaken by Gale due to the non-payment of the loan. This Court observed that MPK and ADSB had agreed that in consideration of MPK paying Gale the Redemption Sum to redeem 88 units, MPK will be assigned 74 units (“Redemption Units”). 17 [49] This Court opined and agreed with the Plaintiff that MPK after realizing the non-payment of the loan, opted to allow the said breach to be remedied by entering into the Redemption Agreement, thereby affirming the Agreement. [50] Towards that end, Section 40 of the Contracts Act 1950 (“CA”) is of pertinence which provides: “when a party to a contract has refused to perform, or disabled himself from performing his promise in its entirety, the promise may put an end to the contract, unless he has signified, by words or conduct, is acquiescence in its continuance.” [51] In the Court of Appeal case of First Count Sdn Bhd v. Wang Yew Logging & Plantation Sdn Bhd [2013] 4 MLJ 693 (COA) at p712, the Court held: “[38] Applying the foregoing principles of s. 40 of the Contracts Act 1950 to our present case and the test propounded in Mintye we find that the Plaintiff in our present case after realizing the purported non-performance and ending the contract, had continued to work in the logging operations for the Defendant for the period of nearly 54 months. Having done so, we are of the considered view that the Plaintiff is said to have ‘affirmed’ the contract and acquiesced in its continuance. The Plaintiff had accepted the breach and elected to continue with the contract by performing his part of the bargain. 18 [52] This Court opined that MPK’s reliance on Section 63 CA to allege that the Redemption Agreement supersedes the Agreement is misconceived as the Redemption Agreement clearly states that “This Agreement contains the entire agreement between the parties with respect to the subject matter of this Agreement”. [53] In the case of Alcatel-Lucent (M) Sdn Bhd (formerly known as Alcatel Network Systems (M) Sdn Bhd) v. Solid Investments Ltd and another appeal [2012] 4 MLJ 72 at pages 86 – 87 where the Court of Appeal discussed the effect of an entire agreement clause: “…Such ‘entire agreement clause’, in our judgment does not permit any term to be implied or to import any other consideration not in the contract, including any other collateral agreements with another party (not a party in the consultancy agreement). All matters relating to the payment of consultancy fees to be paid by Alcatel Standard SA and the Respondent (both are parties to the consultancy agreements) as well as the manner of computation of the fees must be read within the four walls of the consultancy agreements themselves (see Court of Appeal’s decisions in Master Strike Sdn Bhd v. Sterling Height Sdn Bhd [2005] 3 MLJ 585; [2005] 2 CLJ 596; and Petroleum Nasional Bhd v. Kerajaan Negeri Terengganu & Another Appeal [2004] 1 MLJ 8; [2003] 4 CLJ 337).” 19 [54] The Redemption Agreement does not stipulate that the Agreement is terminated and does not address any of ADSB’s rights under the Agreement, such as, construction of the Office Tower or the Agreed Payment. [55] In this regard, MPK takes an inconsistent position by on one hand alleging that it is entitled to the Agreed Payment an on the other hand alleging that the Agreement has been superseded. [56] This Court agreed with the Plaintiff that by MPK filing its POD containing the claim for the Agreed Payment, MPK in fact acknowledges ADSB’s rights under the Agreement to the Land and absolute discretion to construct the Office Tower. DW1 admits this during cross-examination: “DTM Dan saya juga katakan bahawa dalam membuat tuntutan untuk dibayar jumlah RM800,000 ini, ianya merupakan satu pengiktirafan hak pihak Plaintif untuk membina hotel. Setuju atau tak setuju? SINA Setuju, Yang Arif.” [57] The Plaintiff submitted that by MPK entering into the Redemption Agreement, any breach of Section 5.6 was affirmed. In this regard, MPK ought to be estopped from raising any allegation of defaults of the loan. This Court agreed with that submission. This Court found support in Lord Denning’s passage in WJ Alan & Co. Ltd v. El 20 Nasr Export and Import Co. which was quoted with approval by the Federal Court in Boustead Trading (1985) Sdn Bhd v. Arab-Malaysian Merchant Snd Bhd [1995] 3 MLJ 331 at 347: “If one party by his conduct, leads another to believe that the strict rights arising under the contract will not be insisted upon, intending that the other should act on that belief, and he does act on it, then the first party will not afterwards be allowed to insist on strict legal rights when it would be inequitable for him to do so.” [58] MPK alleged that Section 5.7 of the Agreement was breached due to ADSB’s failure to submit the layout plans for the Project according to the time limit, terms and conditions of the Agreement. This Court was of the considered opinion that, there is no time period for the construction of the Office Tower. It follows that there is no time limit for submission of the layout plans for the Office Tower and this was admitted by DWL. Therefore, MPK’s ground of termination is premature. “DTM Pn Sina, Pn Sina, tadi Pn Sina kata Pn Sina tidak pasti sama ada ada had masa untuk pembinaan menara pejabat. Saya katakan kalau tidak ada had masa untuk pembinaan menara pejabat, semestinya tidak ada apa-apa had masa untuk Plaintif mengemukakan pelan pembangunan. Setuju atau tidak? SINA Ok, setuju.” 21 Further, this Court observed that MPK was fully aware that before ADSB and TSI Holding Sdn Bhd (“the White Knight”) could decide on the suitability of construction of the Office Tower or Hotel, MPK was required to disclose the original structural plans for the Shopping Complex. Hence, the inability of ADSB to submit the layout plans for the construction of the Office Tower is actually attributable to MPK. [59] MPK/Defendant alleged that Section 6.1 (b) of the Agreement was breached as ADSB failed to pay the piling costs according to the time limit, terms and conditions of the Agreement. This Court was of the considered opinion that MPK reference to Section 6.1 (b) of the Agreement is applicable when MPK intends to proceed with the construction of the Office Tower and the obligation to pay the piling costs falls on MPK. [60] However this Court observed that the repayment of the piling costs is not a matter that goes to the root of the Agreement as failure to repay would entitle MPK to interest only and does not fall within any one of the Termination Instances. Further, MPK filed its POD for the said piling costs on or about 27th November 2013 thereby electing for its claims to be adjudicated by the Liquidator. Subsequently, MPK did not respond to the Liquidator’s request to provide documentary evidence in support of the piling costs or file an application in Court challenging the Liquidator’s request for documentary evidence. 22 [61] MPK alleged that ADSB breached the covenants set out in Section 9.2 of the Agreement. Section 9.2 contains 9 covenants and MPK does not identify which covenant has been breached. After perusing all the covenants, this Court was satisfied that there was no breach of each of the covenants and/or no such allegation has been pleaded and/or such allegation is lacking in particulars. [62] MPK alleged that the assignment of the development rights under the Agreement between ADSB and the White Knight dated 11th February 2015 (“TSI Agreement”) is in breach of Section 13.1 of the Agreement as no consent from MPK was obtained. [63] This Court observed that Section 13.1 provides that ADSB may assign, transfer or vest the whole or any part of ADSB’s rights, title, interest and obligations under the Agreement to any person or body with the prior consent of MPK who has the absolute right to refuse consent. [64] This Court agreed with the Plaintiff that Section 13.1 ought to be read together with Section 5.4 (d) (iii) which states that the rights, title, interests and benefits in the Office Tower or such other development in substitution of the Office Tower shall belong to ADSB absolutely and ADSB shall be entitled to sell, transfer, charge, mortgage, assign or otherwise deal with the Office Tower as it deems fit free from any claim from MPK. 23 [65] That being the case in light of absolute discretion and rights over the Office Tower vesting in ADSB, it is clear that Section 13.1 is only applicable to the period of the construction of the Shopping Complex. [66] Section 13.1 does not state that MPK’s consent ought to be in writing. DW1 confirmed this in cross-examination: “DTM Dan di sini tidak dinyatakan bahawa kebenaran, consent, hendaklah dalam bentuk bertulis. Betul? 13.1 yang mengatakan ‘prior consent’ bukan ‘piror written consent’. Betul? SINA Betul, Yang Arif. DTIM Jadi apa yang terkandung di dalam penyata saksi di dalam Jawapan 43 (viii) adalah tidak benar. Betul? SINA Betul, Yang Arif. DTM Dan perkataan ‘bertulis’ adalah satu tambahan oleh pihak Puan yang tidak terkandung di dalam perjanjian. Betul? SINA Betul, Yang Arif.” [67] From the evidence adduced, this Court was satisfied that MPK had full knowledge that the White Knight was appointed by ADSB to 24 undertake the construction of the hotel and did not object to this appointment. The positive conduct displayed by the Defendant was telling. Instead, MPK agreed to have a further discussion with the White Knight to determine if the original piling work could withstand the White Knight’s proposed development. In fact, ADSB/Plaintiff’s appointment of a white knight to complete the construction of the Office Tower was made known to MPK as early as 16th February 2015, and yet, MPK did not raise any objections to such appointment. As the Defendant failed to object to the appointment of the White Knight and by their conduct, acquiesced to the White Knight’s appointment and is now estopped from terminating the Agreement on that ground. (See the case of Ng Yee Fong & Anor v. EW Talalla [1986] 1 MLJ 25 (SC) at p 27 see also the conduct in Bonstead Trading v. Arab Malaysia (supra)): [68] In the case of Malaysian International Merchant Bankers Bhd v. Datuk Mohd. Salleh & Anor [1988] 2 CLJ 90 it was held that consent may be inferred from conduct without express words. [69] MPK/Defendant also alleged that it suffered financial losses due to ADSB’s failure to complete the Project. [70] During the trial, MPK contended that these the losses suffered:

The Redemption Sum;

(ii) The piling costs; 25

(iii) The sum of RM272,906.64 as payment towards obtaining the strata titles payable to Juruukur Putra (Timur);

(iv) The approximate sum of RM1mil as cost of obtaining the certificate of fitness and strata titles;

The sum of RM70,000.00 a month as maintenance costs for the Shopping Complex. [71] However, this Court observed that no demand or counter-claim has been claimed by MPK for the alleged losses. Hence, this cannot be factured in as one of the reasons for termination. [72] MPK also alleged that due to the failure to complete the Project MPK’s image and reputation has been affected as the Project has been purportedly abandoned since 2002. [73] However this court opined that the purported loss of image and reputation did not form the basis of the 1st Termination. Therefore, this ground of termination is an afterthought. Further, this is not an issue that was pleaded in the Defence. [74] In fact, this Court observed that during the settlement negotiations, the effect on MPK’s reputation and image was not discussed or seriously discussed but on monetary gains and/or benefits MPK could obtain from the construction of the Office Tower. [75] Further, as submitted by the Plaintiff, a claim for loss of reputation is a subject matter of a defamation suit and ordinarily cannot be 26 sustained by any other form of action. Further, in the case of Foaminol Laboratories Ltd v. British Artid Plastics Ltd [1941] 2 AII ER 393 @ p 399: “… mere loss of reputation is the proper subject of an action for defamation, and cannot ordinarily be sustained by means of any other form of action …” [76] MPK alleged that ADSB is financially unsound to complete the Project and therefore the purpose and intent of the Agreement was destroyed. [77] Again, this Court opined that it is a repeated issue that was previously raised in the 1st Termination. Despite that, the first Court’s Order held that the Agreement is valid and the Land must be transferred to ADSB. [78] Looking at the circumstances surrounding this action holistically, what is important is that the Shopping Complex has been completed. Once the Shopping Complex has been completed and upon request by ADSB, the Land must be transferred to ADSB. At the risk of repetition, in the event that MPK does not wish to construct the Office Tower, absolute discretion is vested in ADSB to deal with the development of the Office Tower without interference from MPK. 27 [79] That being the case, this Court opined that the purpose and intent of the Agreement has not been destroyed as the Shopping Complex has been completed and MPK shall not interfere with the construction of the Office Tower. [80] The Plaintiff submitted that MPK has taken a conflicting position as, during the meetings held between MPK and the Liquidator to reach an amicable settlement, MPK was fully aware of ADSB’s insolvent status but nonetheless continued to deal and negotiate the settlement. This Court agreed with the Plaintiff. [81] This was based on the many admissions admitted by the Defence’s witness especially DW1 which the following paragraphs would show. DW1 admitted that MPK continued to deal with ADSB despite the ADSB’s insolvency: “DTM Dan di dalam perbincangan-perbincangan tidak ada apa-apa cadangan bahawa pihak Plaintif bersama dengan TSI Holdings, White Knight, tidak boleh melaksanakan kerja-kerja pemulihan. Betul? I’ll rephrase. I’ll break it down, My Lord. Tidak ada cadangan di sini… apa-apa yang dikatakan dalam minit ini bahawa ‘Oh, saya tidak mahu berurus dengan Plaintif kerana Plaintif sememangnya insovent’. SINA Betul.” [82] DW1 admitted that MPK’s focus was more on monetary gains: 28 “DTM Jadi nampaknya terma-terma tambahan kebanyakannya yang dicadangkan di dalam draf ini…71, My Lord… bertugu (12:02:26 PM) lebih kepada keuntungan yang akan diperolehi, keuntungan lebihan yang boleh diperolehi dari projek ini. Betul? Betul tak, terma-terma baru ini adalah untuk meningkatkan keuntungan kepada, keuntungan kewangan kepada Defendan. Betul? SINA Betul. Kalau tak setuju, jangan setuju, itu cadangan kita.” [83] DW1 admitted that despite the insolvency of ADSB, there were no doubts that the Project can be completed: “DTM Ya, memang boleh. Jadi meski pun pihak Plaintif telah insolvent, telah digulungkan, tetapi semestinya pihak Defendan mengambil pendirian bahawa keadaan insolvency Plaintif tidak akan menghalang projek tersebut diteruskan. Betul? SINA Betul. DTM Sekiranya terma-terma tambahan dipersetujui, betul? SINA Betul, Yang Arif. [84] MPK also alleged that based on Section 57 of the Contract Act the Agreement is frustrated and hence void due to ADSB’s insolvency, 29 inability to pay the piling costs and the Agreed Payment. This Court was of the considered opinion that MPK’s reliance on Section 57 CA was misconceived. As mentioned earlier, MPK failed to acceed to the Liquidator’s request for documents to enable the adjudication of the POD. In respect of the Agreed Payment, the said sum is premature at this juncture as the Certificate of Fitness for the Office Tower has not been issued. [85] In Pacific Forest Industries Sdn Bhd & Anor v. Lin Wen Chih & Anor [2009] 6 MLJ 293 the Federal Court explains 2 points on the doctrine of frustration:

the contract is not frustrated merely because one canot pay its debts; and

(ii) the doctrine of frustration can only be invoked by the party who is unable to perform its obligation under the contract due to the intervening act, as follows: “A contract does not become frustrated merely because it becomes difficult to perform. If a party has money to pay his debt, it cannot be considered impossible to perform as it is not frustration. Neither can be plead frustration because the terms of the contract make it difficult to interpret. If it cannot be performed or becomes unlawful to perform, then the party who is to perform his part of the bargain can plead frustration. The doctrine of frustration is only a special case to discharge 30 a contract by an impossibility of performance after the contract was entered into. A contract is frustrated when subsequent to its formation, a change of circumstances renders the contract legally or physically impossible to be performed. It occurs in a situation where due to a change of circumstances a contract is rendered legally and physically impossible of performance. The doctrine is an exception to the general rule as to an absolute contract in that a person who specifically undertakes an absolute obligation cannot afterwards claim to be absolved from liability by the fact his failure to perform the obligation is due to the occurrence of an event over which he has no control. The doctrine does not apply just because the promisor’s obligation has become, because of change of circumstances, more onerous than what he has contracted for.” [86] Further PW1’s evidence that the Liquidator is ready, willing and able to fulfill the terms which include the Agreed Payment and the piling costs was not seriously challenged during cross-examination. Therefore, MPK is not entitled to terminate the Agreement based on Section 57 CA. [87] MPK also alleged that ADSB’s breach of the Agreement is against public policy. 31 [88] However, MPK fails to identify what is the ‘public policy’ under consideration. The only indication given was MPK’s responsibility, duty and role to the public or taxpayers. [89] DW1 admitted that no notice or circular was tendered to show the ‘public policy’ relied on by MPK: “DTM Adakah terdapat apa-apa dokumen di dalam ikatan-ikatan di hadapan Mahkamah berkenaan dengan dasar polisi awam yang dikatakan? Tidak ada, kan? SINA Tak ada, Yang Arif. DTM Tak ada circular kah, apa-apa policy statement kah, apa-apa kah, tak ada, kan? SINA Tak ada, Yang Arif.” [90] DW1 also admitted that prior to the commencement of the committal proceedings against officer of MPK, the issue of “public policy” was not raised. “DTM Ok, rujuk balik kepada surat peguamcara. Muka surat 142, Bundle B. 152. Ada apa-apa dinyatakan di sini berkenaan dasar polisi awam? Tidak? Tidak ada, kan? SINA Dalam surat ni, tak ada, Yang Arif. 32 DTM Semua dibangkitkan selepas kebenaran untuk mengkommitkan Defendan diberi, betul? 20 alasan penamatan baru. Semua pemikiran semula, terdapat nasihat baru lah. Betul? SINA Betul, Yang Arif. DTM Dan atas alasan… dan atas nasihat dan pemikiran semula, pihak Defendan membuat keputusan supaya tidak memindah milik hartanah tersebut, betul? SINA Yang Arif, kita – DTM Betul atau tidak? YA Jawab betul atau tidak. SINA Betul, Yang Arif. ……………………………. DTM Surat bertarikh 7 Oktober di muka surat 146 dan juga surat di muka surat 152 tadi, 08.01.2015. Ok? Di dalam surat-surat ini, dasar polisi awam tidak dibangkitkan, betul? SINA Betul, Yang Arif.” 33 [91] This Court agreed with the Plaintiff that it cannot be positively stated that the Agreement can be terminated on grounds of public policy. [92] Suffice for this Court to refer to the Court of Appeal case of Pang Mun Chung & Anor v. Cheong Huey Charn [2018] 4 MLJ 594 tendered by the Plaintiff where the defence of public policy was raised. The Court of Appeal held as follows: “[37] On the scope of public policy, the Federal Court cited with approval a passage in Cheshire and Fitfoot’s Law of Contract (8th Ed) which appeared as follows (at p 256): First, although the rules already established by precedent must be moulded to fit the new conditions of a changing world, it is no longer legitimate for the Courts to invent a new head of public policy. A judge is not free to speculate upon what, in his opinion, is for the good of the community. He must be content to apply, either directly or by way of analogy, the principles laid down in previous decisions. He must expound, not expand, this particular branch of the law. Secondly, even though the contract is one which prima facie falls under one of the recognized heads of public policy, it will not be held illegal unless its harmful qualities are indisputable. The doctrine, as Lord Atkin remarked in a leading case [1938] AC 1, ‘should only be invoked in clear cases in which the harm to the public is substantially 34 uncontestable, and does not depend upon the idiosyncratic inferences of a few judicial minds … In popular language … the contract should be given the benefit of the doubt’. [93] Regarding the issue of redemption sum, this Court observed that MPK pleads that the payment of the Redemption Sum are derived from taxpayers’ money. To the contrary, MPK received fair value for payment of the Redemption Sum when 74 units of the Shopping Complex was assigned to MPK. [94] However, the minutes of the meeting on 11th September 2015 showed that the Redemption Sum in fact was derived from a loan taken from the State Government of Terengganu and not tax collection. No document was tendered to show that the Redemption Sum in fact originated from taxpayer’s money. [95] When Counsel for ADSB highlighted that MPK has the ability to generate income from commercial activities and suggested that DW1 in fact could not be certain that any purported repayment to the State Government derived from taxpayers money, DW1 agreed. DW1 also confirmed that the purported use of public funds was an afterthought in response to the committal proceedings. “DTM Pn Sina, khususnya dikatakan ia datang dari kutipan cukai. Tetapi saya katakana bahawa Majlis juga menerima wang dari aktiviti-aktiviti komersial. Betul tak? 35 DTM Jadi, sememangnya isu ini dibangkitkan sebagai satu pemikiran semula, (afterthought). Betul? SINA Betul, Yang Arif. DTM Untuk mengelakkan penguatkuasaan perintah kebenaran committal, setuju? SINA Setuju, Yang Arif.” [96] As demonstrated earlier, MPK focused on obtaining monetary gains during the settlement negotiations. The ‘public policy’ was never mentioned or considered in proposing the settlements terms. DW1 herself admitted that she was unable to connect the ‘public policy’ with the monetary gains sought by MPK: “SINA Betul. Kalau tak setuju, jangan setuju, itu cadangan kita. DTM Tapi ini tidak selaras dengan pembelaan berkenaan polisi awam. Betul? Setuju tak? SINA Saya tak faham macam mana nak kaitkan yang ini dengan polisi awam.” [97] The Defendant argued that the whole Agreement is void without consideration. However, this Court observed that since the 36 Shopping Complex is completed, there is no total failure of consideration. [98] In Berjaya Times Squares Sdn Bhd at page 604 it was held that: “[4] … A reference to ss 40 and 56 (1) of the Act clearly showed that the right to rescind a contract by way of termination only arises when there has been a total failure of consideration. What is of significance on the facts of this case is that there is no question of the appellant not having done anything on the construction of the property as undertaken by them vide the SPA. Indeed, the facts before the court showed that the construction of the property was completed and was in the state of delivery to the respondent. It is my view that the entitlement of the respondent in this case is confined and limited to compensation in the form of LAD as agreed upon in the SPA and that the respondent has no right to rescind the SPA.” [99] MPK alleged that the Agreement is void for total failure of consideration as MPK settled the Redemption Sum and due to ADSB’s insolvency, ADSB no longer has the ability to furnish consideration under the Agreement. MPK purports that by payment of the Redemption Sum the costs and expense of the construction of the Shopping Complex was financed by MPK. [100] The Plaintiff submitted DW1, in examination in chief, dishonestly and intentionally failed to state that MPK received 74 units in the 37 Shopping Complex as consideration of payment of the Redemption Sum with the intent to mislead this Court. MPK’s allegation that the costs and expense of the construction of the Shopping Complex was borne by MPK is untrue. [101] According to the Defendant, when tested during cross-examination, DW1 did not know what was the total costs and expense of the Project and agreed that in the event that she did not know therefore she was not in a position to allege that the costs and expense was borne by MPK. “DTM Sina, berapakah kos untuk membina kompleks tersebut? SINA Saya tak tahu, Yang Arif. DTM Tidak tahu. Jadi adalah tidak betul kalau Pn Sina katakan bahawa pihak Defendan telah menanggung kos pembinaan kompleks tersebut. Betul? SINA Tak betul, Yang Arif. DTM Kalau Pn Sina tidak tahu berapa banyak kos pembinaan kompleks semestinya Pn Sina tidak boleh katakana bahawa pihak Defendan telah menanggung kos tersebut. Setuju atau tak setuju? SINA Setuju, Yang Arif.” 38 [102] This Court agreed with the Plaintiff. This was because with regard to the Redemption Sum, MPK received sufficient consideration for the same and ADSB does not owe MPK for the settlement of the Redemption Sum and with regard to the payment of the Agreed Payment any claim to the same at this juncture is premature. [103] This Court opined that MPK’s reference to Section 29 CA at the paragraph (xvii) of the 2nd Termination is misconceived and not applicable to the present case. Section 29 CA deals with situations where an agreement is entered into to restrict enforcement of rights under or in respect of any contract in legal proceedings. [104] That being the case, this Court opined that the 2nd Termination is unlawful as the alleged grounds are baseless and a mere afterthoughts. [105] Finally, this Court agreed that the acts and conducts of MPK had given rise to a legitimate expectation by the Plaintiff that the land will be transferred to ADSB and hence, the termination should not have happened in the first place. [106] The first conduct of the Defendant that invites such expectation was the Defendant’s attitude in not appealing or applying to set aside (prior to the Committal) the 2 Court Orders that directs MPK to transfer the Land to ADSB. 39 [107] The second conduct that invites such expectation was MPK’s affirmation that the validity of the 1st Order when it filed its POD pursuant to the said Order. The Liquidator expected MPK to comply with the remaining terms of the said order i.e. transfer the land to ADSB. [108] The 3rd conduct was MPK’s Solicitor’s letters dated 13th September 2013 and 7th October 2013, MPK consistently agreed to transfer the Land to ADSB. [109] The fourth conduct exhibited by Defendant that invites such expectation was DW1’s admission that vide MPK’s letter dated 3rd December 2014 requesting for an extension of time due to flooding in the district of Kemaman and that MPK was in the process of change of administration had given the Plaintiff the impression that MPK would not challenge ADSB’s right to the Land. [110] Subsequently MPK’s Solicitors unequivocally informed the Plaintiff that MPK will sign the transfer document once the new management is in place. [111] In the spirit of cooperation, the committal action which was filed to penalize MPK for failing to sign the transfer forms, was withdrawn by the Plaintiff on the basis that parties would endeavour to reach a settlement. This further gave expectation to the Plaintiff of the Land transfer. 40 [112] The affidavits affirmed by the Yang Dipertua Majlis Perbandaran Kemaman on 4th March 2014, 18th April 2014 and 1st July 2015 confirms that MPK intended to transfer the land subject to ADSB disclosing details of the development, further reinforced the Plaintiff legitimate expectation. [113] Despite MPK/Defendant knowing that ADSB was wound up, they deliberately continued to correspond and communicate with the Liquidator on the future development of the Land. This conduct had further induced the Plaintiff into believing that the Land will finally be transferred to the Plaintiff. [114] It is an affront to justice on the part of the Defendant for failing to transfer the Land after all its conduct and action exhibited were moving towards the direction of honouring the agreed transfer of the land to the Plaintiff. Equity will come and help the Plaintiff by compelling the Defendant to do so. [115] In Inwards and Others v. Baker [1965] 1 AII ER 446 as held by Lord Denning at page 449 to 450 that: “… It seems to me that this is one of the cases of an equity created by estoppel, or equitable estoppel, as it is sometimes called, by which the person who has made the expenditure is induced by the expectation of obtaining protection, and equity protects him so that an injustice may not be perpetrated. I am clearly of opinion that the 41 appeal should be allowed and that judgment should be entered for the defendant.” [116] (See also Cheng Hang Guan & Ors v. Perumahan Farlim (Penang) Sdn Bhd & Ors [1993] 3 MLJ 352): D. CONCLUSION [117] Looking at the evidence in totality for the foregoing reasons, this Court opined that the Defendant has no right to terminate the agreement. Hence, the termination was illegal. On the premises and on a balance of probabilities, this Court held that the Plaintiff had successfully proved their claims and hence the reliefs prayed are hence granted except prayers (viii) and (ix) with cost of RM20,000.00. Dated: 25th June 2020 (DATO’ AHMAD BIN BACHE) Judge Civil High Court NCvC 3 Kuala Lumpur 42 Parties: Plaintiff’s Solicitors: Ms. Tina Francis, Ms. Deva Premila Devadason and Mr. Ng Ken Yong Messrs E. D. Louis & Associates No. 54, Jalan Terasek 4 Bangsar Baru 59100 KUALA LUMPUR (Ref. No.: EDL/ADSB/MPK/1766/17) (Tel. No.: 03-22843545 / Fax No.: 03-22843546) Defendant’s Solicitors: Mr. Mohd Hisham bin Md Nen and Mr. Ahmad Husam bin Mansuri Messrs Wong-Chooi & Mohd Nor 25-1 & 25-2, Tingkat 1 & 2 Dataran Dwitasik, Jalan Dwitasik 1 Bandar Sri Permaisuri Cheras 56000 KUALA LUMPUR (Ref. No.: WPC/5620/L886/MPK/17/AK) (Tel. No.: 03-91725900 / Fax No.: 03-91711873)