Bank Kerjasama Rakyat Malaysia Berhad v XXXX (W-03(IM)(MUA)-2-01/2024)

Kamuja Hartamas Sdn. Bhd. (No. Syarikat: 817821-V) (Formerly known as Aras Suasana Sdn. Bhd)

Ahmad Iskandar bin Md. Sulaiman (I/C No.: 691015-04-5275)

Mohamad Fazli bin Salleh (I/C No.: 770418-08-6333) ...Defendants CORAM: ISMAIL BIN BRAHIM, JCA LIM HOCK LENG, JCA EVROL MARIETTE PETERS, JCA

The Appellant, Bank Kerjasama Rakyat Malaysia Berhad ("the Bank”), wrongfully terminated Islamic financing facilities granted to the Respondent, Kamuja Hartamas Sdn Bhd ("Kamuja”), for a housing development project in Dengkil, Selangor.

This appeal concerns only the quantum of damages. Liability is no longer in issue, following earlier proceedings.

The High Court awarded Kamuja RM15,140,156.15 for loss of profits before deductions.

After deducting RM3,633,637.48 at the rate of 24% for income tax and RM4,000,000.00 million from the sale of the project land,the final award stood at RM7,506,518.67.

The High Court reversed the Deputy Registrar who had awarded only nominal damages of RM5,000.00 on the basis that Kamuja failed to prove causation.

Kamuja filed a cross-appeal, arguing that the deductions for income tax and the project land sale proceeds should not have been made.

A general summary of the legal principles applicable to the appeal would be in order, before we set out a narrative of the facilities granted and the project, as well as the circumstances in which the facilities were wrongfully terminated.

Thereafter, we will deal with the original High Court and Court of Appeal proceedings on liability, before considering the assessment of damages exercise before the Deputy Registrar and the appeal to the learned Judicial Commissioner ("JC").

(A) Burden of Proof for Damages

In an assessment of damages, the burden of proof is on the party asserting that it has sustained damages. An order that there be an inquiry or assessment of damages does not raise a presumption that loss or damages has in fact been sustained. See the decision of the Court of Appeal in Sime UEP Properties Bhd v Woon Nyoke Lin [2002] 3 CLJ 719; [2002] 1 MLRA 409.

In Tan Sri Khoo Teck Puat & Anor v Plenitude Holdings Sdn Bhd [1995] 1 CLJ 15, the Federal Court made it clear that a claimant seeking damages must satisfy "the fundamental requirement of having to prove its loss (if any) arising from those breaches". In so holding, the Federal Court cited with approval the words of Lord Goddard in Bonham-Carter v. Hyde Park Hotel Ltd. [1948] WN 69: "...plaintiffs must understand that if they bring actions for damages it is for them to prove their damage; it is not enough to write down the particulars, so to speak, throw them at the head of the court, saying: 'This is what I have lost, I ask you to give me these damages'. They have to prove it."

(B) Entitlement to Damages

Under Section 74 of the Contracts Act 1950, which puts the common law rule in Hadley v Baxendale on a statutory footing, a claimant is entitled to compensation for loss or damage arising from a breach of contract under two distinct limbs:

damages that arise naturally, in the usual course of events, from the breach; and

(ii) damages that the parties reasonably contemplated at the time they made the contract, as the probable result of the breach.

(C) Appeal Against Assessment of Damages

An appellate court will only interfere with an assessment of damages if the lower court acted on the wrong legal principle, misunderstood the facts, or made a plainly erroneous estimate of damages, as stated by Lord Wright in Davies v Powell Duffryn Associated Collieries Ltd [1942] AC 601, 616, 617, and adopted by the Federal Court in Mahmod Bin Kailan v. Goh Seng Choon & Anor [1976] CLJU 68; [1976] 2 MLJ 239.

In the same vein, Kamaludin Md Said JCA, in Pendaftar Hakmilk Pejabat Tanah dan Galian Selangor & Anor v Lau Yong Ying [2020] 5 CLJ 164 held: "... the appellate court may interfere with an award of damages if satisfied that the judge has acted on a wrong principle of law, or has misapprehended the facts, or has for these or other reasons made a wholly erroneous estimate of the damage suffered." Facilities Granted, Wrongful Termination

The Bank granted Kamuja Islamic financing facilities totalling RM9.846 million in three tranches: - RM3.346 million for land purchase; - RM500,000 for infrastructure works; and - RM6 million for construction costs.

The facilities were intended as bridging finance for the development project which was to comprise 110 terrace houses and 34 semi-detached houses.

Before approving these facilities, the Bank carried out a feasibility study and prepared a report dated 9 July 2008.

Only the first tranche was disbursed which Kamuja used to purchase the project land which was charged to the Bank as security.

The second and third tranches were never released, as Kamuja was said to have defaulted.

The Bank sued but the action was withdrawn, with liberty to file afresh, in order for negotiations to take place.

Kamuja later faced difficulties obtaining a Development Order ("DO") from Majlis Perbandaran Sepang, preventing the conversion of the land from agricultural to residential use.

In 2012, Kamuja requested restructuring of the facilities and offered further security of RM1 million. Kamuja also made a revised "4th Proposal" involving 66 semidetached houses, with Phase 1 consisting of 40 units.

The Bank did not respond, and restructuring negotiations eventually failed.

On 6 June 2013, the Bank terminated the facilities on the ground that Kamuja failed to comply with the proposed restructuring terms. The Bank's solicitors wrote: "Seterusnya kami dimaklumkan oleh anakguam bahawa berikutan surat tuntutan kami terdahulu yang bertarikh 06.03.2013, pihak tuan telah membuat cadangan penstrukturan segala pembayaran kemudahan pembaiyaan di atas. Namun demikian, pihak tuan telah gagal mematuhi cadangan penyelesaian yang tersebut. Kami hari ini dimaklumkan bahawa pihak tuan telah enggan dan/atau gagal membayar kepada anakguam kami jumlah yang tertunggak di bawah kemudahan tersebut di mana setakat 04.06.2013 jumlah yang terhutang adalah berjumlah RM3,600,768.90."

Following the termination, the Bank sued Kamuja to recover its losses. Kamuja in turn counterclaimed for wrongful termination of the facilities.

The trial proceeded but just before the decision was delivered, Kamuja paid the outstanding sum to the Bank which withdrew its claim.

Kamuja nonetheless pressed on with its counterclaim which the High Court Judge dismissed. As a result of the dismissal, Her Ladyship did not find it necessary to deal with Kamuja's claim for damages.

The Court of Appeal allowed Kamuja's appeal.

It held that the termination notice dated 6 June 2013 was bad mainly because:

the termination notice did not specify the terms which Kamuja had failed to observe except to say "gagal mematuhi penyelesaian tersebut;” and

(ii) the bank took an inconsistent stand that there was no agreement on restructuring concluded but nonetheless relied on Kamuja's purported failure to comply with the terms of settlement to justify termination.

It ordered damages to be assessed by the Registrar of the High Court.

The Bank's application for leave to appeal to the Federal Court was dismissed on 4 July 2017.

In the assessment of damages proceedings, each of the parties called 3 witnesses.

The Bank's witnesses were Shahidan Bin Busah, its assistant manager (PW1), Amir @ Yusof Bin Ismail, a valuer (PW2), Muhammad Faisal Bin Musa, a quantity surveyor (PW3).

Kamuja's witnesses were Muhamad Yazid Bin Mohamed, a property valuer (DW1), Siti Aishah Binti Md Shah, its project manager (DW2), and Datin Nabilah Binti Sanusi, its director (DW3).

The Deputy Registrar awarded nominal damages to Kamuja in the sum of RM5,000.00 on the basis that the developer had failed to prove causation, or a direct link between the bank's wrongful termination and the failed housing project.

In elaboration, the Deputy Registrar found that Kamuja did not produce contemporaneous documents or cash flow projections to show that they had the financial resources to complete a project which would require about RM45 million.

The Deputy Registrar also found the loss of profits in relation to the 4th Proposal (to convert the original development of 110 terrace and 34 semi-detached houses to 66 semi-detached houses) was not within the contemplation of the parties, because the bank was never given the opportunity to assess its feasibility or conduct a study on it.

He further found that even before the bank terminated the financing on 6 June 2023, Kamuja had been prepared to redeem the project land as early as October 2012 and was already seeking funds elsewhere, thus indicating that it was not relying on the bank's funds to complete the project.

In addition, the Deputy Registrar found that, after succeeding on liability in the Court of Appeal, Kamuja had voluntarily sold off the project land for unknown reasons, rather than as a result of the bank's wrongful termination.

The Deputy Registrar concluded that Kamuja's failure to proceed with the project was not caused by the termination, and Kamuja's claim - for damages and loss amounting to RM34,323,431.08 based on a quantity surveyor's report - was unsustainable.

Aggrieved by the Deputy Registrar's decision, Kamuja appealed to the High Court.

The High Court allowed the appeal, and assessed loss of profits in the sum of RM15,140,156.15 (before deductions) for loss of profit based on the Development Order for Phase 1 of the 4th Proposal comprising 40 units of semi-detached houses.

The award was premised on the DO for 40 semi-detached houses as the first phase of the 4th Proposal, which had revised the overall project to consist of 66 semi-detached houses in order to make the best use of the land and to enhance the GDV.

It will be recalled that the 1st Proposal, submitted in 2008, was for 110 terrace houses and 34 semi-detached houses.

The High Court held that the bank was estopped from denying the 4th Proposal because it remained silent and raised no objection when the plan and full report were submitted in 2012.

Notably, the developer applied for and obtained the DO based on these revised plans of which the bank was undoubtedly made aware vide Kamuja's letters of 18 June 2012 and 20 November 2012.

In assessing the damages, the High Court relied on the formula of Gross Development Value ("GDV")-Gross Development Costs ("GDC")=loss of profits.

In accepting the GDV at RM49,660,000.00 for Phase 1 of the 4th Proposal comprising 40 units of semi-detached houses, the learned JC relied on a valuation report prepared by DW1 using the "comparable method". DW1 compared the project to similar mature developments in the adjacent areas.

The learned JC noted that PW2, a licenced valuer who was the bank's own expert witness, acknowledged that the "comparable method" is the most accepted practice.

The learned JC accepted that at the material time circa 2014- 15, the expected time of completion, the positive property market would have supported the underlying figures for the GDV.

As for the GDC, the JC accepted that the total construction and development costs for Phase 1 of the project would have been RM34,519,843.85, considering the detailed costing calculations by JY Cost Plan Consultants, and Kamuja's in-house quantity surveyor and project manager (DW2).

Significantly, the assistant bank manager (PW1) and quantity surveyor (PW3) accepted during the trial that the developer's cost estimates were more detailed and conservative than the bank's internal figures.

That takes us full circle to the assessment premised on the GDV of RM49,660,000.00 minus the GDC of RM34,519,843.85, thus obtaining a figure representing the loss of profits at RM15,140,156.15.

The High Court went on to make deductions for income tax, and the sale proceeds of the project land which resulted in a reduced award of RM7,506,518.67 to Kamuja for its counterclaim.

It was in such circumstances that the bank appealed against the High Court's award of the gross damages of RM15,140,256.15, while the developer filed a cross-appeal against both the deductions.

Broadly, the appeal raises 4 principal issues:

whether the Court of Appeal's earlier judgment rendered the claim for loss of profits res judicata;

whether the Bank's wrongful termination was the effective cause of the failure of the development project;

whether damages based on the 4th Proposal were within the reasonable contemplation of the parties under section 74 of the Contracts Act 1950; and

whether the High Court correctly assessed the quantum of loss of profits and the subsequent deductions.

Res Judicata

Off the bat, the Bank argued that the Court of Appeal had previously made specific findings that Kamuja did not have the financial capacity to complete the project, even if the remaining tranches were to be released.

The Bank interpreted that as a final ruling by which Kamuja was barred from claiming any loss of profit, and was instead required to prove actual expenses incurred. It cited a number of cases, including Hartecon JV Sdn Bhd & Anor v Hartela Contractors Ltd [1996] 2 MLJ 57; [1997] 2 CLJ 104, and Serac Asia Sdn Bhd v Sepakat Insurance Brokers Sdn Bhd [2013] 6 CLJ 673, to support its stand that once a matter has been decided, it cannot be re-litigated.

It was submitted the Court of Appeal had also specifically made a finding that the remaining facilities amounting to RM6.5 million would not suffice to complete a RM45 million project since it held: "Even if the Plaintiff had disbursed the two tranches it would be for only RM9,846,000.00 which would not suffice to complete a RM45 million Project."

The Bank's argument that Kamuja's claim for loss of profits become res judicata does not bite, because the Court of Appeal did not make a final decision on the loss of profits. Only when an issue has been determined with finality, and encapsulated in a sealed order does the court become functus office. The authorities cited by the Bank may thus be distinguished.

The Court of Appeal was pointing out problems with Kamuja's claim, not shutting it down. There was insufficient evidence to decide on damages at that stage. Hence, it remitted the assessment of damages to the High Court.

The references made by the Bank to the judgment cannot be read in isolation. The specific references have to be read contextually.

The following paragraphs in the Court of Appeal's judgment make it clear that it wanted a fresh look at causation and financial capacity during the assessment hearing: "[27] In our view whether or not there was a challenge posed on the report by DW1, the first defendant would have to first establish what are the damages resulting from the wrongful termination. For example, it cannot be assumed that the wrongful termination per se had caused the project to scuttle. There is evidence as submitted by learned counsel for the plaintiff that the first defendant was in no financial position to complete the project which required RM45m to complete in the first place. Even if the plaintiff had disbursed the two tranches it would be for only RM9,846,000 which would not suffice to complete a RM45m project. We do not agree therefore that the damages claimed by the first defendant should simply be based on the project amount after deducting the profit to the plaintiff per se, as loss suffered by the first defendant. [28] For the above reasons, we make an order for the damages to be assessed before the registrar. The damages suffered if any is to be assessed on the basis that they are damages suffered as a consequence of the unlawful termination. We therefore allowed the appeal by the first defendant with costs and remitted the case to the High Court before the registrar for damages to be assessed."

Causation

The Bank's primary position is that although the termination of the facilities was ultimately held to be wrongful, the termination was not the effective cause or causa causans of the failure of the development project.

The arguments relate to the first limb of section 74 of the Contracts Act 1950.

According to the Bank, the project would have failed in any event because Kamuja lacked the financial ability to complete it and had already begun taking steps to redeem the project land and seek alternative funding even before the facilities were terminated.

The Bank also contended that the damages awarded by the learned JC were based on the 4th Proposal which was neither approved by the Bank nor within its contemplation when the facilities were granted.

We propose to first address the issue of causation.

The Bank relied heavily on the findings of the Deputy Registrar that Kamuja was prepared to redeem the project land as early as October 2012, approximately eight months before the termination of the facilities on 6 June 2013. It was argued that this demonstrated that Kamuja was no longer relying on the Bank's facilities and was actively pursuing alternative arrangements.

The Bank further emphasised that Kamuja eventually sold the project land in 2018 after succeeding before the Court of Appeal on liability. According to the Bank, that conduct was inconsistent with an intention to proceed with the project and demonstrated that the project was abandoned for reasons independent of the termination.

We are unable to agree, as the evidence must be viewed in its proper context.

The proposal to redeem the project land did not arise in a vacuum, or materialised because of an intention to abandon the project. Rather, the proposal came about due to mounting pressure exerted by the Bank.

On 25 September 2012, the Bank issued a demand requiring full payment and threatening legal proceedings and foreclosure.

In response, Kamuja wrote on 5 October 2012 proposing a restructuring of the facilities. The letter made it clear that Kamuja remained prepared to proceed with the development. It was only in the event that the Bank insisted on full repayment that Kamuja sought a three-month grace period to settle the indebtedness and avoid foreclosure proceedings.

Subsequently, on 28 February 2013, after restructuring negotiations had stalled and the Bank continued to exert pressure, Kamuja requested a redemption statement.

In our judgment, those events do not establish that Kamuja had abandoned the project or that it had secured alternative financing sufficient to replace the facilities.

At most, they demonstrate attempts by Kamuja to preserve the project land and avoid foreclosure in the face of the Bank's actions.

We are also not persuaded by the Bank's argument premised on the subsequent sale of the project land in 2018.

Much water had flowed under the bridge by then. The facilities had already been terminated in June 2013. The project had stalled for years. Construction costs would inevitably have increased during the intervening period.

More importantly, the evidence demonstrates that the project could not realistically progress because the Bank, as chargee, withheld its consent to the subdivision of the land.

The significance of this cannot be overstated.

Without subdivision, the necessary approvals for development could not be obtained.

The Court of Appeal had previously observed: "There was not an explanation on the reason for withholding the consent except that in the trial PW3 who testified on behalf of the Plaintiff said the reason for withholding was because the Plaintiff intended to foreclose the Land. Despite appeals by the First Defendant the Plaintiff did not give its consent. Instead, the Plaintiff terminated the Facilities."

The Bank's conduct was thus a substantial obstacle to the continuation of the project.

The learned JC cannot be faulted for applying the observation of the Supreme Court in Bank Bumiputra Malaysia Bhd v Mae Perkayuan Sdn Bhd [1993] 2 MLJ 76 that it is public and common knowledge that once a bank withdraws facilities, it becomes "virtually impossible" for a developer to find alternative financing.

We now turn to what was, in reality, the Bank's principal submission on causation, namely that Kamuja lacked the financial ability to complete the development even if the remaining facilities had been disbursed.

The Bank repeatedly emphasised that only RM6.5 million remained available for disbursement whereas the project itself required funding well in excess of that sum.

The argument, however, overlooks the nature of the facilities and the financing structure contemplated from the outset.

Kamuja's answer was straightforward. It pointed to the fact that on 15 May 2014 it paid RM3,684,694.25 in cash to redeem the project land from the Bank.

According to Kamuja, that sum exceeded the amount of internally generated funding which the Bank itself considered necessary to complete the project.

There is considerable force in that submission.

The Bank's own feasibility study dated 9 July 2008 identified the following sources of funding: Payment for Land CostRM1,434,000.004%Construction/DevelopmentRM2,636,000.008%End Financiers/BuyersRM21,668,000.0061%Bank's FacilitiesRM9,846,000.0027%

The study therefore envisaged from the outset that the project would not be financed solely through the Bank's facilities.

Indeed, the largest component of funding, namely 61%, was expected to come from purchasers and their financiers.

This demonstrates that the facilities were intended as bridging finance pending sales and progressive drawdowns.

The learned JC was therefore correct in observing that the Bank's focus on the remaining RM6.5 million mischaracterised the nature of the financing arrangement.

The project was never intended to be completed solely with monies advanced by the Bank.

The redemption payment of RM3,684,694.25 is particularly significant.

The learned JC noted that this amount exceeded by approximately RM1 million the RM2,636,000.00 internal funding requirement identified in the Bank's own feasibility study.

Even if one adopts the Bank's alternative contention that approximately 10% of the Gross Development Cost would be required as internally generated funds, the result remains substantially the same.

The GDC for Phase 1 under the $ 4^{\mathrm{th}} $ Proposal was RM34,519,843.85.

Ten per cent of that amount is approximately RM3.45 million.

That figure remains below the redemption sum paid by Kamuja.

We are mindful that the Bank sought to rely on the evidence of DW3 that approximately RM4 million of internally generated funds would be required.

However, it is clear that DW3 was referring to the entire revised development and not merely Phase 1 comprising the 40 semidetached units approved under the Development Order.

The distinction is important.

The damages awarded by the learned JC were confined to Phase 1. The issue is therefore whether Kamuja had the financial capacity to undertake that particular phase of the development.

On the evidence, the answer is plainly in the affirmative.

We respectfully agree with the learned JC when His Lordship observed: "[48] From the evidence, it is clear that D1 had the required funds. Such financial capability was exhibited in D1's ability to pay the sum of RM3,684,694.25 in order to redeem the project land to avoid foreclosure action by the plaintiff. [49] In short, by cancelling the facilities and compelling D1 to use its internal funds to redeem the project land, the plaintiff's wrongful termination is the sole cause of the project's failure and the resultant loss to D1."

On the evidence, those findings could not be said to be plainly wrong.

In our view, if Kamuja was able to produce RM3.68 million in cash during ongoing litigation and under the threat of foreclosure, it cannot realistically be said that it lacked the financial ability to meet the smaller periodic internal funding requirements contemplated under the project.

Kamuja did have sufficient funds for construction and development costs, even though it paid the redemption sum several months after the termination of the facilities, bearing in mind that but for the wrongful termination, Kamuja could have availed itself of the remaining RM6.5 million which was never disbursed because of the wrongful termination.

In the face of Kamuja's financial capacity, no adverse inference ought to have been drawn by the Deputy Registrar under section 114(g) of the Evidence Act 1950.

Having considered the evidence as a whole, we are satisfied that the learned JC was correct in finding that the wrongful termination of the facilities was the effective cause of the failure of the project and the consequent loss of profits suffered by Kamuja.

Foreseeability

We now turn to the second limb of section 74 of the Contracts Act 1950.

The Bank contends that damages based on the 4th Proposal were not reasonably foreseeable and were outside the contemplation of the parties at the time of the breach.

According to the Bank, the facilities were originally granted on the basis of a feasibility study involving a development comprising 110 terrace houses and 34 semi-detached houses. The Bank argues that the learned JC's award was instead based on the 4th Proposal, which contemplated a revised development of 66 semi-detached houses, and that the revised proposal was never formally approved by the Bank.

It was therefore submitted that any loss of profits arising from the revised development falls outside the scope of recoverable damages under section 74 of the Contracts Act 1950.

We are unable to agree.

Section 74 of the Contracts Act 1950 entitles a claimant to recover not only losses which arise naturally from the breach, but also losses which the parties knew or ought reasonably to have contemplated as the probable result of the breach at the material time.

The question is therefore whether the loss of profits arising from the 4th Proposal was within the reasonable contemplation of the parties when the facilities were wrongfully terminated.

In answering that question, it is necessary to examine the evidence concerning the Bank's knowledge of the revised development proposal.

The evidence reveals that the 4th Proposal was not a new proposal which suddenly cropped up during the assessment proceedings. Rather, it had been communicated to the Bank long before the termination of the facilities.

On 18 June 2012, Kamuja submitted the 4th Proposal to the Bank as part of its restructuring request. The proposal revised the original development concept from 110 terrace houses and 34 semi-detached houses to 66 semi-detached houses.

The purpose of the revision was explained. According to Kamuja, the revised proposal would optimise the use of the land and enhance the GDV of the project.

Thereafter, on 20 November 2012, Kamuja furnished further supporting documents to the Bank. These included the cash flow projections and supporting financial information relating to the revised development.

The evidence further shows that after the termination of the facilities, Kamuja continued to provide information regarding the revised project.

By letter dated 23 August 2013, Kamuja forwarded to the Bank a "Kertas Cadangan Projek dan carta aliran tunai serta dokumen-dokumen yang berkenaan."

The payment schedules and sales projections supplied to the Bank set out in detail the anticipated sales revenue on a periodic basis and the projected repayment structure for the facilities.

Significantly, despite being furnished with the revised proposal, the supporting documents, the cash flow projections and the projected repayment schedules, the Bank did not raise any objection to the viability of the revised development.

Further, the Bank did not adduce evidence during the assessment proceedings demonstrating that the revised proposal was commercially unsound or materially different in terms of risk from the original development.

The Bank adduced no evidence to show that the change from the original proposal to the 4th Proposal adversely affected the feasibility of the project.

There was no expert evidence that the revised proposal was commercially unrealistic.

There was no evidence to show that the projected profits were unattainable.

Indeed, the Bank's position throughout was not that the 4th Proposal was unviable, but rather that it had never formally approved it.

In our view, that argument overlooks the significance of the Bank's conduct.

The learned JC found that the Bank remained silent despite being fully aware of the revised proposal and despite receiving the supporting documents and projections.

Significantly, the Bank stood by while Kamuja expended considerable effort and resources pursuing the Development Order based on the revised development concept.

The evidence establishes that Kamuja eventually obtained the DO for Phase 1 of the revised development and subsequently secured an extension thereof.

These were matters of which the Bank was undoubtedly aware.

The learned JC therefore concluded that the Bank was estopped from denying the 4th Proposal. We find no reason to disturb that conclusion.

The principle is well established.

As may be garnered from Tenaga Nasional Bhd v Calsonic Compressor (M) Sdn Bhd [2009] 8 MLJ 793, if a party has a right and sees another person about to commit an act infringing that right, but "stands by" in a way that induces the other person to believe they assent to that act, they cannot afterwards be heard to complain. 289, the Respondents stood by and allowed the completion date of the sale and purchase agreements ("SPAs") to lapse without objection, despite knowing that the developer had obtained approval for the new building plans. The Respondents' conduct led the developer to believe that the SPAs were abandoned and that the parties had agreed to proceed with the tower project instead. The Court of Appeal held that the Respondents' conduct estopped them from subsequently asserting the validity of the SPAs.

The present case falls squarely within that principle.

The Bank was informed of the revised proposal.

The Bank was supplied with supporting financial documents and cash flow projections.

The Bank knew that Kamuja was proceeding to obtain the necessary regulatory approvals based upon the revised proposal.

Yet the Bank remained silent.

Having stood by while Kamuja acted on the basis that the revised proposal was accepted as the operative development model, the Bank cannot now contend that the losses arising from that very development were unforeseeable or outside the parties' contemplation.

In our judgment, the learned JC correctly invoked the doctrine of estoppel against the Bank.

Following Mae Perkayuan (supra), the learned JC also correctly held that once the kind of damage (loss of profit) is foreseeable, the Bank is liable for the full extent of it under the $ ^{4} $ th Proposal even if it had not conducted a final study on the revised development, the nature of which was still housing.

The Bank's contention that damages based on the 4th Proposal were outside the reasonable contemplation of the parties is unpersuasive.

In other words, the evidence demonstrates that the Bank had actual knowledge of the revised proposal well before the facilities were terminated. The Bank was provided with the revised development plans, the projected cash flows and the anticipated repayment structure. It nevertheless raised no objection and allowed Kamuja to proceed with obtaining the necessary approvals.

In those circumstances, loss of profits arising from the revised development was plainly within the reasonable contemplation of the parties and constituted a foreseeable consequence of the wrongful termination of the facilities.

Accordingly, we agree with the learned JC that damages based on the 4th Proposal fall within the second limb of section 74 of the Contracts Act 1950 and are therefore recoverable.

Ascertaining the Quantum

Having concluded that the Bank's wrongful termination caused the failure of the project and that the loss of profits claimed was within the reasonable contemplation of the parties under section 74 of the Contracts Act 1950, we now turn to consider whether the learned JC erred in his assessment of damages.

The starting point is the well-established principle that an appellate court does not reassess damages merely because it might have reached a different figure. For appellate intervention to be justified, the court below must have omitted some relevant consideration, or the amount assessed must have been so excessive or insufficient, as to be plainly unreasonable. See the decisions of the Federal Court in Tan Kuan Yau v Suhindrimani Angasamy [1985] 1 CLJ 429; [1985] 2 MLJ 22; and Topaiwah v Salleh [1986] CLJU 161; [1968] 1 MLJ 284.

As stated by Lord Wright in Davies v Powell Duffryn Associated Collieries Ltd [1942] AC 601 and adopted by the Federal Court in Mahmod Bin Kailan v Goh Seng Choon & Anor [1976] 2 MLJ 239, appellate intervention is justified only where the trial court acted upon a wrong principle of law, misapprehended the evidence, or arrived at a wholly erroneous estimate of the damages suffered.

As noted earlier, the same principle was reaffirmed by the Court of Appeal in Pendaftar Hakmilik Pejabat Tanah dan Galian Selangor & Anor v Lau Yong Ying [2020] 5 CLJ 164.

The question before us is whether the learned JC committed any appealable error in arriving at the award of RM15,140,156.15 for loss of profits.

The Bank was at pains to stress that the learned JC's award far exceeded Kumaja's original estimate of profit at RM10.25 million, as set out in Kamuja's letter dated 23 August 2013 to the Bank.

The Bank contends that the learned JC ought not to have departed from Kamuja's own estimate.

We are unable to accept that submission.

The learned JC did not assess damages solely by reference to the figures appearing in the correspondence passing between the parties, but correctly relied on the expert and factual evidence adduced during the assessment proceedings, which represented the most current and comprehensive evidence available to the court.

The learned JC adopted the conventional method of assessing a developer's loss of profits, namely: Gross Development Value (GDV) less Gross Development Cost (GDC) = loss of profits

In principle, no complaint can be made regarding the formula adopted. We would think that the focus ought to be on the GDV and GDC figures, and the concern would be on their reliability or credibility.

The learned JC noted that DW1's valuation was based on comparable developments in neighbouring mature areas and reflected the market conditions prevailing around the anticipated completion period.

Significantly, PW2, who was the Bank's own licensed valuer, accepted during cross-examination that the comparable method was the most accepted valuation methodology in the industry.

Equally significant is the fact that the Bank did not produce any competing valuation demonstrating that the GDV adopted by DW1 was excessive.

Further, both parties' experts accepted that the property market during the relevant period, namely around 2014 to 2015, was generally positive and supportive of the valuation assumptions adopted. In elaboration, Amir @ Yusof Bin Ismail (PW2), a licensed valuer and the bank's own expert witness, conceded that the "comparable method" is the most accepted practice in the valuation business, and accepted that around the relevant period of 2014-15 (the expected completion time), the positive property market would have supported the underlying figures for the GDV.

In those circumstances, the learned JC cannot be faulted for accepting the GDV of RM49,660,000.00.

Turning now to the GDC for Phase 1, the learned JC accepted the evidence that it was RM34,519,843.85, and it was supported by detailed costing exercises undertaken by JY Cost Plan Consultants and by DW2, who was directly involved in the management and costing of the project.

It was not a speculative figure or plucked out of the air. On the contrary, the Bank's assistant manager (PW1), and the Bank's quantity surveyor (PW3), both acknowledged during the assessment proceedings that Kamuja's costing exercise was more detailed and more conservative than the Bank's own internal estimates.

These admissions undermine the Bank's attempt to challenge the reliability of the GDC relied upon by Kamuja.

Having accepted the GDV at RM49,660,000.00 and the GDC at RM34,519,843.85, the learned JC ascertained the loss of profits at RM15,140,156.15.

The loss of profits figure could hardly be said to be arbitrary, since it was supported by admissions made by the Bank's own witnesses.

In arriving at the award of RM15,140,156.15 for loss of profits, the learned JC acted on the most up to date evidence available. The 2013 estimate of RM10.25 million profit may be viewed as an outdated projection. It is to be noted that the 2013 estimate was prepared before the expert evidence was adduced during the assessment proceedings, by which time property values had appreciated, and the assumptions underlying the later valuation evidence were consistent with prevailing market conditions.

Deduction of Sale Proceeds of the Project Land

We first consider the cross-appeal against the deduction made by the learned JC in respect of the sale of the project land.

The learned JC deducted RM4 million from the damages awarded for loss of profits on the basis that Kamuja had sold the project land after the wrongful termination of the financing facilities. He reasoned that the sale formed part of Kamuja's mitigation efforts and that the proceeds received ought to be brought into account in reducing the damages recoverable.

In doing so, the learned JC rejected Kamuja's contention that no deduction should be made because the land cost of RM4.78 million had already been included as a development cost in the calculation of net profit. He also rejected Kamuja's separate claim for an alleged loss of RM780,000 said to have arisen from the disposal of the land.

The learned JC held that Kamuja could not, on the one hand, claim loss of profits on the basis that the development would have been completed and the subdivided units sold, and, on the other hand, retain the benefit of the proceeds received from the disposal of the same land.

We agree with the learned JC's underlying premise that the proceeds derived from the subsequent sale of the project land must be taken into account.

Damages for breach of contract are compensatory in nature. The purpose of an award is to place the innocent party, so far as money can do so, in the position it would have been in had the contract been performed, but not in a better position.

If Kamuja retained ownership of the project land after the financing facilities were wrongfully terminated and subsequently realised value from that asset through a sale, that benefit must be brought into account in assessing the loss actually suffered.

The difficulty, however, lies not in the principle of deduction but in the evidential basis upon which the learned JC fixed the amount of the deduction.

The learned JC was not satisfied that the evidence established the actual sale price of the land. He observed that the project land, situated on the eastern side of Putrajaya, would reasonably have appreciated in value over time. Indeed, he expressly stated that he was suspicious of the evidence relating to the sale price.

More significantly, Kamuja's own valuation evidence showed that the land, in its agricultural status, had been valued at RM9 million as at 11 June 2015.

Against that objective evidence, the only evidence that the land had been sold for approximately RM4 million came from DW3 during cross-examination.

DW3 was unable to recall material details of the transaction, including the precise date of sale, the identity of the purchaser and the exact sale consideration. Her testimony was qualified by expressions such as "I think so", "I believe" and "I'm not sure."

The learned JC himself noted that the alleged sale surfaced only towards the end of DW3's cross-examination, thereby depriving Kamuja of any meaningful opportunity at that stage to verify the information or adduce rebuttal evidence.

Notwithstanding those reservations and suspicion, the learned JC accepted the RM4 million figure as the basis for reducing the Bank's liability.

In our respectful view, that finding cannot be sustained.

The learned JC effectively accepted the RM4 million figure for the purpose of mitigation, yet rejected Kamuja's separate claim founded on the same sale transaction because the evidence relating to the sale price was unclear and unsupported by documentary proof.

Such an approach produces an evidential inconsistency. If the evidence was insufficiently reliable to support a claim for damages based on the alleged sale price, it is difficult to see how the same evidence could simultaneously provide a reliable basis for quantifying the deduction to be made against the damages awarded.

The High Court's reasoning is that DW3's testimony was unchallenged. While it is true that learned counsel for the Bank could have been more comprehensive in his cross-examination on the purported sale at RM4 million in 2018, it is to be noted that DW3 gave the impression of being evasive and the cross-examination did not end the moment DW3 revealed that the project land had been sold.

DW3's testimony ought to have been reviewed with more circumspection and tested against the other relevant evidence, especially since Kamuja was a single purpose company and Nabila was a director of the company.

We recognise that a failure to cross-examine may in an appropriate case amount to acceptance of the evidence given. See the decision of the Court of Appeal in Aik Ming (M) Sdn Bhd & Ors v Chang Ching Chuen & Ors & Another Case [1995] 3 CLJ 639,

The rule, derived from Browne v Dunne [1893] 6 R67, is not absolute, although it has been applied in our courts on many occasions. A court is not bound to accept evidence merely because it was not challenged where the evidence is inherently doubtful, unsupported by contemporaneous documents, or contradicted by more reliable objective evidence.

As recognised by the Federal Court through Raja Azlan Shah CJM (as His Lordship then was) in Wong Swee Chin v Public Prosecutor [1980] CLJU 138, it is only a general rule and as is common with all general rules, there are also exceptions, such as when the testimony itself is of "an incredible or romancing character," and where several witnesses are called upon to testify on the same point, it is not always necessary to cross-examine them all. See also the exceptions as set out in Griffiths v TUI (UK) Ltd [2025] AC 374 by the Supreme Court in the United Kingdom.

Here, DW3's bare, unsupported assertion that the land was sold for approximately RM4 million stood in stark contrast to Kamuja's own valuation evidence placing the value of the land at RM9 million as at June 2015.

Significantly, Kamuja relied on that very valuation report to support its claim for loss of profits. Yet no explanation was forthcoming as to how land valued at RM9 million in 2015 could have been sold for less than half that amount only a few years later.

The burden of establishing the actual sale price rested on Kamuja. The facts relating to the sale transaction were especially within its knowledge, and the relevant documents were within its possession or control. Section 106 of the Evidence Act 1950 therefore applied.

Despite that burden, no sale and purchase agreement, transfer documents or other contemporaneous evidence was produced. Nor was any satisfactory explanation provided for the substantial disparity between the valuation evidence and the alleged sale price.

In these circumstances, we are unable to uphold the learned JC's acceptance of the RM4 million figure.

Had the ownership of the land not been raised by learned counsel for the Bank, Kamuja would have pursued its claim for the full loss of profits without accounting for the proceeds received from the disposal of the land. If not for the unexpected revelation in cross-examination, Kamuja would have misled the court into unjustly enriching it.

We agree with the learned JC's observation that: "...the project land which is located on the eastern side of Putrajaya would have significantly appreciated in value over the ten-year period. Even with a conservative annual growth rate of 6%, such land would be worth at least RM8.5 million in 2018. In fact, according to D1's own valuation evidence, the project land, in its agricultural status, was valued at RM9 million as of 11 June 2015."

On the evidence before the court, the only objective and reliable evidence of value is therefore the valuation placing the land at RM9 million.

We turn next to the manner in which that figure should be brought into account.

The learned JC assessed the loss of profits by applying the following formula: GDV RM49,660,000.00 minus GDC RM34,519,843.85 = loss of profits of RM15,140,156.15.

Importantly, the GDC already included the acquisition cost of the land in the sum of RM4,780,000.00.

The proper approach is to identify the net benefit obtained by Kamuja from retaining and subsequently disposing of the land.

That net benefit is thus: RM9,000,000.00 minus RM4,780,000.00 = RM4,220,000.00.

It is this amount, and not RM4 million, that should be deducted from the assessed loss of profits.

Accordingly, the learned JC's deduction of RM4 million is set aside and substituted with a deduction of RM4,220,000.00.

The damages for loss of profits, before taking into account any taxation issue, are therefore: RM15,140,156.15 minus RM4,220,000.00 = RM10,920,156.15.

That figure ensures that Kamuja receives compensation for the profits lost as a consequence of the wrongful termination while avoiding any double recovery in respect of the project land.

Whether Income Tax Ought to be Deducted

We next consider the cross-appeal against the learned JC's deduction of 24% income tax from the award for loss of profits.

The learned JC held that damages awarded for loss of profits represent taxable income and that the assessment ought therefore to reflect the claimant's liability to pay tax.

The principle originates from the decision of the House of Lords in British Transport Commission v Gourley [1956] AC 185. There, damages were awarded for loss of earnings arising from personal injuries suffered by the Plaintiff who was a civil engineer. The House of Lords held, by a majority, that the award should be assessed net of income tax. Lord Jowitt observed that to ignore the incidence of taxation would be inconsistent with reality. The underlying rationale is that damages should place the claimant in the same position he would have occupied had the wrong not occurred, and no better.

The Gourley principle was applied in Malaysia by Syed Agil Barakbah in Yeap Cheng Hock v Kajima-Taisei Joint Venture [1973] 1 MLJ 230 and has since been recognised beyond personal injury claims, including contractual claims involving loss of profits.

Kamuja argues that the deduction was wrongly made because taxation was neither pleaded nor properly litigated during the assessment proceedings, having been raised only at the submission stage.

We are unable to accept that contention. In Daishowa (M) Wood Products Sdn Bhd v Kepong Wood Products Sdn Bhd [1980] 2 MLJ 68, the Federal Court considered the question of taxation notwithstanding that it had not been pleaded, and it was only raised by way of a letter to the trial judge who did not then make any deduction from the award of damages.

In that case, the respondent was awarded damages for loss of profits following the appellant's wrongful termination of a supply agreement. The trial judge assessed damages based on gross profits without deducting tax. Allowing the appeal on this issue, the Federal Court expressly adopted the Gourley principle, holding: "The dominant rule is that the appellant should have his damages assessed upon the basis of what he had actually lost and in determining what he had really lost, the learned judge ought to have considered the tax liability of the appellant."

The Federal Court further held that the failure to deduct tax resulted in the respondent receiving more than its actual loss and that the award ought therefore to be reduced accordingly.

The position in Associated Pan Malaysia Cement Sdn Bhd v Syarikat Teknikal & Kejuruteraan Sdn Bhd [1990] 3 MLJ 287 was materially different. There, the damages comprised multiple heads of claim arising from different breaches and covering different periods. The Supreme Court accepted the correctness of Gourley and Daishowa, and acknowledged that the damages would have been lower had tax been deducted. However, it declined to make any deduction because the issue had not been raised before the trial judge and there was insufficient evidence from which the actual tax liability could be assessed. Any deduction in those circumstances would necessarily have been speculative.

The present case is closer to Daishowa (supra) than to Associated Pan Malaysia Cement (supra). The damages awarded were for a single head of loss, namely loss of profits. The GDV and GDC were firmly established by the evidence, thereby providing a sufficient basis upon which the tax consequence of the lost profits could be assessed.

In the circumstances, we are of the view that the learned JC cannot be faulted for applying the Gourley principle and making a deduction for income tax in arriving at the award for loss of profits.

The final award may be ascertained in the following manner: RM15,140,156.15 (loss of profits) minus RM4,220,000.00 (net land sale proceeds) = RM10,920,156.15 minus 24% income tax = RM8,299,318.67.

Interest

Before concluding, we have to address the issue of prejudgment and post-judgment interest on the loss of profits.

In order to appreciate the parties' arguments, it is necessary to set out section 11(1) of the Civil Law Act 1956 which governs pre-judgment interest, and Order 42, rule 12 of the Rules of Court 2012 which regulates post-judgment interest.

Section 11(1) provides: "In any proceedings tried in any Court for the recovery of any debt or damages, the Court may, if it thinks fit, order that there shall be included in the sum for which judgment is given interest at such rate as it thinks fit on the whole or any part of the debt or damages for the whole or any part of the period between the date when the cause of action arose and the date of the judgment...(emphasis added)"

Order 42, rule 12 provides: "Subject to rule 12A, except when it has been otherwise agreed between the parties, every judgment debt shall carry interest at such rate as the Chief Justice may from time to time determine or at such other rate not exceeding the rate aforesaid as the Court determines, such interest to be calculated from the date of judgment until the judgment is satisfied."

The Bank took what appears to be an inconsistent position. In its submissions vide Enclosure 23, paragraph 1.13, it stated: "On 05.01.2024, the High Court allowed Kamuja's appeal and awarded damages amounting to RM7,506,518.67 with interest from 06.06.2016."

However, in paragraph 9.1 of the same submissions, the Bank also submitted that "the learned Judicial Commissioner was wrong in awarding interest to run from 06.06.2013 for the simple reason that such was not awarded by the Court of Appeal (Liability)."

The Bank argued that interest should only run on the loss of profits from 5 January 2024, the date on which the learned JC overturned the Deputy Registrar's award of nominal damages, and determined the quantum of damages it suffered.

In elaboration, the Bank characterised (i) interest prior to 5 January 2024 as pre-judgment interest, and submitted that (ii) the High Court was wrong to award pre-judgment interest because the Court of Appeal had only ordered an assessment of damages.

In support, it cited the recent Court of Appeal decision in Kerajaan Malaysia v Batu Kemas Industri Sdn Bhd [2024] CLJU 3215. In that case, it was held that when an appellate court orders an assessment of damages without mentioning interest, the lower court must follow that instruction strictly. The lower court cannot independently award pre-judgment interest.

Applying that principle here, it was submitted for the Bank that the learned JC fell into error when he awarded pre-judgment interest on his own accord.

While we have no difficulty with the principle, we are not persuaded by the Bank's argument that the interest should only begin to run from 5 January 2024, and that any interest prior thereto constitutes pre-judgment interest.

In our view, for the purposes of determining whether interest is pre-judgment or post-judgment, the relevant date is generally the date that there is a finding of liability which is subject to Order 42, rule 7(2) of the Rules of Court 2012.

In Liau Kim Lian v Bajuria [1971] 1 MLJ 276, the Federal Court made it clear that where judgment is entered for damages to be assessed, interest runs from the date judgment is entered establishing liability, and not from the later date when damages are assessed. The rationale, based on the inciptur principle, is simple: a successful party should be compensated for being deprived of the use of its money from the time its right to that money is confirmed.

In the words of the Federal Court: " (a) judgment for damages to be assessed, or for costs to be taxed, carries interest from the date of entry of judgment and not from the date of assessment or taxation."

The principle has since been affirmed by the apex court in Gooi Hock Seng v Chuah Guat Khim [2000] MLJU 840 and Kerajaan Negeri Johor & Anor v Adong Bin Kuwau & Ors [2002] 3 MLJ 705.

We are mindful that the commencement date is not fixed or immutable. While Order 42, rule 7(2) of the Rules of Court 2012 provides that a judgment or order takes effect from the day it is pronounced, it qualifies the general rule by providing: "...unless the Court orders it to be dated as of some other earlier or later day, in which case it shall be dated as of that other day."

Accordingly, when the learned JC ordered interest to run from 6 June 2016 at 5% per annum - instead of 20 April 2015 (when the Court of Appeal made a finding of liability) - until the date of payment, he had good reason for doing so. He was entitled to exercise that discretion under the said Order 42, rule 7(2).

It will be recalled that the Bank wrongfully terminated Kamuja's bridging facilities on 6 June 2013.

There was ample evidence to justify the learned JC's order that interest should begin to accrue 3 years from 6 June 2016, as the project would have been completed within the three-year construction period commencing in June 2013 had the bridging facilities not been wrongfully terminated.

On 20 November 2012, Kamuja had forwarded a set of supporting documents to the Bank, which explicitly included a "cashflow projection for the next 3 years".

In its earlier letters dated 8 July 2012 and 27 August 2012, Kamuja had proposed a restructuring of the financing facility to be extended for a "further three-year period" (which the Bank did not dispute) to allow for the successful completion of the project following delays in obtaining the DO.

In the light of the Federal Court decisions read together with Order 42, rule 7(2) and rule 12, the learned JC cannot be faulted for ordering interest to run from 6 June 2016. Bearing in mind that the earlier Court of Appeal panel had established liability on 20 April 2015, that judgment date would be the date from which interest would start to run. There is thus no prejudgment interest.

The Bank's appeal premised on causation, remoteness, and interest - comprising the major part of its case - was dismissed. The Bank did however succeed in reducing the award on account of the land sale proceeds, albeit not in the manner it sought. The learned JC's deduction of RM4,000,000.00 in respect of the sale of the project land is set aside and substituted with a deduction of RM4,220,000.00, being the net benefit realised from the land after accounting for the acquisition cost already included in the GDC.

As regards Kamuja's cross-appeal, the learned JC's deduction of 24% income tax is upheld.

Following clarification, since the commencement date for interest is to run from 6 June 2016, instead of 20 April 2015, Kamuja will receive a reduced amount of interest. The interest is to run at the rate of 5% per annum on the final, net award of RM RM8,299,318.67, from 6 June 2016 till the date of payment.

To the limited extent as set out above, the appeal is allowed in part and is therefore not wholly dismissed, whereas Kamuja's cross-appeal stands dismissed in its entirety, contrary to what was stated in the oral decision.

The Appellant Bank is to pay the Respondent costs of RM70,000.00 subject to payment of the allocatur fee. Dated the $ 1 7^{th} $ day of July 2026 Counsel for the Appellant:

Dato' Dr Cyrus V Das

Mohd Munzeer Bin Zainul Abidin

Mohammad Zaid Bin Daud [Yusfarizal, Aziz & Zaid] Counsel for the Respondent:

Krishna Dallumah

Yung Yoong Hui

Marcus Chung Yu Hang [S Mathews & Associates]