Bergamo Development (M) Sdn Bhd v 1. ) Eck Development (M) Sdn Bhd (PA-22C-7-12/2016)

This is a suit by the rescue contractor suing the developer and its affiliated original contractor for final payment in respect of a housing development project. 2

The Plaintiff is a private limited company incorporated under the Companies Act 1965.

The First Defendant is a private limited company incorporated under the Companies Act 1965 involved in the property development business and the developer of the Taman Desa Ku Phase 1 project (“Project”) in Kulim, Kedah Darul Aman.

The Second Defendant is a private limited company incorporated under the Companies Act 1965 involved in the construction business. It is affiliated to the First Defendant and they share the same business address.

This Suit was filed on 22 December 2016 and the Plaintiff claimed against both the First Defendant and Second Defendant (collectively “Defendants”) for the following: (ai) A declaration that the Plaintiff has completed its Job Scope under the Construction Agreement dated 7 November 2013; 3 (aii) A declaration that Plaintiff is entitled to the consideration provided under clause 2.1 of the Construction Agreement dated 7 November 2013; (aiii) An order that the Defendants pay to the Plaintiff the sum of RM3.1 million; (aiv) In the alternative to sub-paragraph (iii) above, for an order for specific performance of the Construction Agreement dated 7 November 2013 and the following consequential orders:

That the Defendants specifically perform clause 2.3 of the Construction Agreement dated 7 November 2013 by issuing and receiving the progressive claims in accordance with the Fifth Schedule of the Building Contract from the Purchasers or their Financiers, as the case may be;

That the Defendants specifically perform clause 2.1(b) of the Construction Agreement dated 7 November 2013 by paying to the Plaintiff within 14 days from the date of service of this order the sum of RM3.1 million. 4 (av) In the alternative to sub paragraph (iii) and/or (iv), for an order that the Defendants pay to the Plaintiff the sum of RM3.1 million less the amount assessed or found by this Honourable Court to be the actual costs incurred by the Defendants to complete the uncompleted Job Scope and to rectify the defects, if any which the Plaintiff was obliged to rectify under the terms of the Construction Agreement; (bi) A declaration that the 22 May 2015 Agreement and/or the Supplementary Agreement dated 6 July 2015 have been validly avoided by the Plaintiff and are not enforceable or binding on the Plaintiff; (bii) That the Defendants pay the Plaintiff the sum of RM6.08 million (or the actual market value of the Plaintiff’s Units as found by this Honourable Court) less the sum of RM3.3 million paid by the Defendants to the Plaintiff;

In the alternative, that the Defendants pay to the Plaintiff the sum of RM6.08 million (or the amount found by this Honourable Court to be the costs incurred by the Plaintiff to 5 carry out the works pursuant to the Construction Agreement) less the sum of RM3.3 million paid by the Defendants to the

In the alternative, damages to be assessed;

Costs.

The Defendants in defence counterclaimed for the following:

A declaration that the Supplementary Agreement dated 6 July 2015 is valid and the terms therein enforceable and binding upon the Plaintiff;

A declaration that the Plaintiff:

refused, failed and/or neglected to complete the Job Scope under the Construction Agreement and/or;

(ii) breached and contravened the express and implied terms of the Construction Agreement and Supplementary Agreement 6 and is not entitled to received any consideration under the Construction Agreement and Supplementary Agreement;

An order that the Plaintiff gives effect and transfer or cause the transfer of the whole equity share capital (free from liabilities) and ownership of Bergamo Development (M) Sdn Bhd free from any encumbrances and whatsoever accrued or outstanding liabilities owing to the First Defendant or its nominee within fourteen (14) days from the service of this order;

In the alternative to the above paragraph (c), for an order of specific performance of the Supplementary Agreement and the consequential order that the Plaintiff specifically execute clause 2.1.3 of the Supplementary Agreement to give effect and transfer or cause to be transferred;

the whole of equity share capital; and

(ii) ownership rights of Bergamo Development (M) Sdn Bhd; 7

In the alternative to the above paragraphs (c) and (d), for an order that the Plaintiff pay to the Defendants damages in the sum equivalent to the whole worth of the equity share capital of Bergamo Development (M) Sdn Bhd (assessed as at 6 July 2015) to the First Defendant or its nominee within fourteen (14) days from the service of this order;

The sum of RM4,225,466.50 as damages to the Defendants;

In the alternative to the above paragraph (f), for an order that the Plaintiff pays to the Defendants the sum stipulated in the above paragraph (f) less the balance of the progressive claim amounting to RM3.1 million;

In the alternative to the above paragraphs (f) and (g), for an order that the Plaintiff pays to the Defendants the sum in the above paragraph (f) or (g) less the amount of the bank guarantee or deposit that has been returned to the Defendants till the date of filing of the Counterclaim (if any); 8

in the alternative, for an order that the damages as claimed in paragraph (f) or (g) or (h) to be assessed by the Court;

Damages for breach of the Construction Agreement and Supplementary Agreement to be assessed by the Court;

Interests at the rate of 5% on the sums in (e) and/or (f) and/or (g) and/or (h) and/or (i) and/or (j) from the date of filing of the counter claim till full realization;

General damages, aggravated and exemplary damages; and

The trial of this Suit took 8 days on 12 to 14 September 2017, 11 to 13 December 2017 and 5 and 7 February 2018. The trial documents were marked as bundles A to O with the documentary evidence collated in bundles B to K (save for those in bundle D pages 33 to 55) that carried status B by consent. In the course of the trial, exhibits P1 to D4 were also admitted in evidence. 9

Nonetheless, the Plaintiff also sought to admit in evidence various WhatsApp mobile phone conversation messages that are compiled in bundle D pages 33 to 55 but objected upon by the Defendants. These messages comprised those between the director of the Plaintiff and director of the First Defendant and amongst the Desaku Kulim Authorities chat group and Desaku Road to CF chat group. On my review of these messages, I find that the contents are relevant as they relate to the facts in issue as pleaded in this Suit including the Defendants’ conduct in encouraging the Plaintiff to continue working on the Project after 6 November 2014 as well as the conduct of the project consultants on the quality of work done by the Plaintiff in the Project. In this respect, ss. 3 and 5 of the Evidence Act 1950 provide as follows: “3. Interpretation “fact in issue” means any fact from which, either by itself or in connection with other fact, the existence, non-existence, 10 nature or extent of any right, liability or disability asserted or denied in any suit or proceeding necessarily follows.

Evidence may be given of facts in issue and relevant facts Evidence may be given in any suit or proceeding of the existence or non-existence of every fact in issue and of such other facts as are hereinafter declared to be relevant, and of no others.” As to the admissibility of these WhatsApp messages, the law has been succinctly set out by Wong Kian Keong JC in Mok Yii Chek v Sovo Sdn Bhd [2015] 1 LNS 448 as follows: “24. Even if a party disputes the genuineness of a print-out of an email and "WhatsApp " message (Disputed Print-out), namely that party insists on the Disputed Print-out to be marked as a "Part C" document (Part C Document) under Order 34 rule 2(2)(e)(ii) RC, the Disputed 11 Print-out may be admitted as evidence if the following criteria are met: requirements in s. 5 EA, namely – Thye FJ (as his Lordship then was) in the Federal Court case of How Paik Too v. Mohideen [1967] 1 LNS 57; [1968] 1 MLJ 51, at 52; or

(ii) the Disputed Print-out is relevant under ss 6 to 55 (contained in Chapter 2 EA which is entitled "Relevancy of facts "). Section 3 EA explains that a fact is 12 relevant when "one fact is said to be relevant to another when the one is connected with the other in any of the ways referred to in the provisions of [EA] relating to the relevancy of facts"; and "computer " (defined widely in s 3 EA). Explanation 3 to s 62 EA provides that a document produced by a computer is primary evidence and such primary evidence may be adduced pursuant to s 64 EA. As the Disputed Print-out is a document produced by a computer, the party adducing such a document must fulfil one of these 3 alternative conditions – JCA in the Court of Appeal case of Gnanasegaran a/l Perarajasingam v. Public Prosecutor [1997] 4 CLJ 6; [1997] 3 AMR 2841, at 2852-2853, which has been affirmed by the Federal Court's judgment given by Zulkefli Makinudin FCJ 13 (as his Lordship then was) in Ahmad Najib v. Public Prosecutor [2009] 2 CLJ 800, at 823-826 and 830;

(ii) there is a certificate given under s 90A(2) EA(Section 90A Certificate ) by a person responsible for – - that the Disputed Print-out is produced by the computer in the course of the ordinary use of the computer According to s 90A(3)(a) EA, the Section 90A Certificate may state a matter to the best of the knowledge and belief of the person stating it. Where a Section 90A Certificate is given, s 90A(4) EA presumes that the computer in question "was in good working order and was operating properly in all respects throughout the material part of the period during which the document was produced"; or 14

(ii) the computer was operating properly in all respects throughout the material part of the period during which the document was produced - please see the Federal Court case of Ahmad Najib, at 826- 830, which has approved Augustine Paul JCA's (as his Lordship then was) judgment in the Court of Appeal case of Hanafi Mat Hassan, at p. 306. It is to be noted that according to s 90C EA, s 90A EA "shall prevail and have full force and effect notwithstanding anything inconsistent therewith, or contrary thereto, contained in any other provision of [EA], or in the Bankers' Books (Evidence) Act 1949, or in any provision of any written law relating to 15 certification, production or extraction of documents or in any rule of law or practice relating to production, admission, or proof, of evidence in any criminal or civil proceeding ".” Consequently and in my opinion, the Plaintiff herein has satisfied the pre-requisites by the tendering of a certificate made pursuant to s. 90A(2) Evidence Act 1950 by the director of the Plaintiff who is responsible for the care and management of the usage of the Samsung Galaxy S6 mobile phone (serial no. R58G3246MHV) and Hewlett-Packard laptop computer (serial no. CNF1042YS7). The messages were extracted and printed therefrom. He has certified that the WhatsApp messages were generated from his personal WhatsApp account that was registered using his mobile phone Maxis number 013-3360600 as well as extracted and printed from his mobile phone and laptop computer in the course of their ordinary use. I am mindful that the Defendants referred to the case of Nazaruddin Mohd Shariff @ Masari & Ors v. Samsyem Saam & Ors [2016] 1 LNS 1434 to challenge the admissibility of the WhatsApp messages because such messages were found not to 16 be conclusive evidence. The case is however distinguishable because it was determined pursuant to an interlocutory striking out application. In the premises, I therefore admit Document ID 5 and bundle D pages 33 to 55 in evidence as exhibits P5 and P6 respectively.

In addition, the following witnesses testified at the trial:

Balasubramaniam a/l Alagusundaram (“PW1”), a shareholder and director of the Plaintiff;

(ii) Yap King Keong (“PW2”), a registered quantity surveyor and director of Perunding Kos Bersatu Sdn Bhd;

(iii) Tan Ah Keat (‘PW3”), a registered valuer and director of JS Valuers Property Consultants (Penang) Sdn Bhd;

(iv) Razif Ahmad bin Zubeir Ahmad Khan (“DW1”), the project coordinator of the First Defendant; 17

Chan Chuan Ka (“DW2”), the quantity surveyor of the First

(vi) Rohana binti Shariff (“DW3”), a shareholder and director of the First Defendant;

(vii) Lau Hean Hooi (“DW4”), a registered architect and sole proprietor of H.H. Lau Architect;

(viii) Ng Chong Sit (“DW5”), a professional electrical engineer and partner in Perkhidmatan Perunding Utara; and

(ix) Tan Eng Hock (“DW6”), a professional civil engineer and partner in Lumbini Consultancy.

After the close of trial, the parties simultaneously submitted their respective written submissions in chief and followed by submissions in reply. I thereafter heard oral arguments and clarification from counsel on 3 April 2018. 18

The following background facts are derived from the statement of agreed facts as well as those found by me based on all the evidence adduced before me.

The First Defendant was the registered and beneficial owner of the land known as PT no. 1523, Mukim Padang Meha, Daerah Kulim, Kedah held under HS(D) 3058/95 (“Land”).

On or around 2005, the First Defendant commenced development of the Project by getting the Land sub-divided into 230 individual plots and sold them to purchasers (“Purchasers”). These Purchasers appointed the Second Defendant as contractor to construct and complete bungalow houses on the sub-divided plots.

The Second Defendant however did not complete the construction of the bungalow houses and the Project was abandoned sometime in 2008. 19

Between 2008 and 2013, there were several failed attempts made by the National Housing Department of the Ministry of Housing and Local Government (“Ministry”) to get the First Defendant to revive the Project. In consequence, the First Defendant was blacklisted by the Ministry.

In 2013, the Plaintiff was approached by officials of the Ministry to submit a proposal to revive the Project as rescue contractor.

Following discussions between the Plaintiff represented by PW1 and the Defendants represented by Dato’ Dr Khor Eng Chuen (“KEC”), DW3 and a Mr. Khoo, the parties then executed a Construction Agreement dated 7 November 2013 (“Construction Agreement”). The Construction Agreement was drafted by the Plaintiff’s solicitor but there were one to two meetings and telephone conversations between the parties to settle on the terms.

The material terms of the Construction Agreement wherein the Plaintiff, First Defendant and Second Defendant were designated 20 as the Contractor, Land Owner and Building Contractor respectively are reproduced as follows: “1. CONSTRUCTION AGREEMENT

1.1 In consideration of an subject to the respective agreements undertakings covenants and obligations of the parties hereto as hereinafter set out, the Land Owner and the Building Contractor hereby agrees to appoint the Contractor to complete the Project and the Contractor hereby agrees to complete the Project within the job scope, the details of which are more specifically provided in the First Schedule hereto (hereinafter referred to as “the Job Scope”) in accordance with the existing approval by Appropriate Authority of the building plans and specifications (hereinafter referred to as “the said Building Plans and Specifications”) including plans for roads, drainage, sewerage, sanitary, electrical and water supplies and subject to terms and conditions hereinafter contained. 21

1.2 The contractor hereby agrees to undertake, carry out and successfully complete the Project together with the infrastructure and amenities thereof in accordance with the Job Scope and the approved building plans by the Appropriate Authority.

1.3 It is hereby expressly agreed and declared that the type, specifications and all matters and things relating to the Project may be varied or amended by the Contractor pursuant to the Upgrade and Improvement Agreement or the Variation Agreement to be entered between the Land Owner, Building Contractor, the contractor and the respective purchasers of the Project, as the case may be without any extra costs on the Building Contractor.

2.

2.1 In consideration of the Contractor completing the Project in accordance with the Job Scope, it is hereby expressly agreed that the Contractor shall be entitled to all of the followings:- 22 THSB free from any encumbrances whatsoever upon execution of this Agreement, the PT numbers of which are as follows:- 1) 634 2) 657 3) 661 4) 681 5) 692 6) 694 7) 700 8) 704 9) 743 10) 753 11) 757 12) 775 13) 776 14) 779 15) 781 23 16) 783 17) 787 18) 802 19) 809 (hereinafter referred to as “the Progressive Claims”) but in any event not less than Ringgit Malaysia Three Million One Hundred Thousand (RM 3,100,000.00) only. Subject to all the Progressive Claims have been made and that the Progressive Claims received shall be less than RM 3,100,100.00, the Land Owner and/or the Building Contractor shall immediately pay the difference to the Contractor within Occupation for the Project. Any excessive amount from the Progressive Claims (if any) shall be refunded to the Building Contractor; 24 150,000.00) only to be paid by the Land Owner/Building Contractor to the Contractor’s Solicitors as stakeholders within three (3) months from the date of this Agreement who are hereby authorised to release the same to the Contractor upon issuance of the Certificate of Fitness for Occupation for the Project.

2.2 To facilitate the provision of Clause 2.1(a) above, The Land Owner shall upon its execution of this Agreement deposit the Contractor’s Units’ Original Issue Document of Title together with valid and registrable Memorandum of Transfer and Discharge of Charge (if any) and the latest quit rent and assessment receipts of the Contractor’s Units with the Contractor for the Contractor or its solicitors to present the same at the relevant land office to effect the transfer of the Contractor’s Units to THSB.

2.3 To facilitate the provision of Clause 2.1(b) above, the Building Contractor shall upon issuance of Certificate of Fitness for Occupation for the Project assist the Contractor to 25 issue and receive the Progressive Claims in accordance with Variation Agreement or the Fifth (5th) Schedule of the Building Contract, as the case may be, from the Purchasers or their financiers, as the case may be. The Building Contractor shall upon its execution of this Agreement, serve a written notice to Public Bank Berhad to irrevocably appoint the three (3) representatives of the Contractor, namely BALASUBRAMANIAM A/L ALAGUSUNDRAM (NRIC No. 790508-02-5081) and VIJAYENDREN A/L KUPPUSAMY (NRIC No. 790815-14-5227) and R RAGU A/L RAJOO M RETHINAM (NRIC No. 800428-08-5697) to be its signatories (with all three to sign) for its Public Bank Berhad’s Account No.3134086116 (hereinafter referred to as “the said Account”) only to enable the Contractor to receive the Progressive Claims from the Purchasers or their financiers and to operate the said Account in the Contractor’s sole and absolute discretion. For the avoidance of doubt, all the Progressive Claims shall be credited into the said Account only but not any other bank account and all Progressive Claims received in the said Account shall only be credited to the Contractor’s Public Bank Berhad’s Account No. 26 Contractor for the purpose of the said Account hereof shall withdraw themselves from being the signatories from the said Account instantly from the date of this Agreement. Upon full receipt of the Progressive Claims by the Contractor, the said three (3) representatives of the Contractor shall withdraw themselves from being the signatories of the Building Contractor and shall cease to have any rights on the said Account.

CONDITIONS PRECEDENT It is hereby agreed that this Agreement is expressly conditional upon the following conditions precedent to be fulfilled by the Land Owner and/or Building Contractor within the time period stipulated hereinafter subject to any further extensions to be deemed fit and necessary by the Contractor. 27

3.1 Delivery of Vacant Possession of the Project Land

The Land Owner and/or the Building Contractor shall within fourteen (14) days from the date of this Agreement deliver vacant possession of the Project Land limited to the area of 230 units of bungalow lots, water tank and STP area to the Contractor for completion of the Job Scope in accordance with the provisions of this Agreement.

3.2 Deposit of Documents

The Land Owner and the Building Contractor hall upon their execution of this Agreement furnish and deposit with the Contractor the originals of the following documents:- i) The Director’s Resolution authorising the appointment and withdrawal signatories for the said Account pursuant to Clause 2.3 hereof; ii) the approval by Appropriate Authority of the building plans and specifications (hereinafter referred to as “the said 28 Building Plans and Specifications”) including plans for roads, drainage, sewerage , sanitary, electrical and water supplies; iii) the statement of accounts by consultants of the Project for the sums payable for balance job until Certificate of Fitness for Occupation for 230 units of bungalow lots; iv) the details of the 202 Purchasers and their end-financiers; v) the PT numbers of the eighty (80) Upgrading Purchasers; vi) the original Discharge of Charge Form (Form 16N) (if any) in relation to the Contractor’s Units; vii) one (1) certified true copies each of the land Owner’s memorandum and Articles of Association, Form 24,44,49 and its Director’s and Member’s resolution authorising the transfer of each of the Contractor’s Units to THSB in accordance with this Agreement; 29 viii) any other documents in the possession of the Land Owner and the Building Contractor necessarily required for the Contractor to complete the Job Scope and to transfer the Contractor’s Units to the THSB, free from any encumbrances whatsoever; (hereinafter collectively referred to as “the said Documents”)

4.

4.1 The Contractor shall complete the Job Scope in a good and workmanlike manner and in compliance with generally recognised building standards and practices and in accordance with the said existing Buildings Plans and Specifications within six (6) months from the date of this Agreement and subject to an automatic extension for six (6) months.

4.7 For the avoidance of doubt and subject to Clause 6.2 herein, any works not stated expressly in the Job Scope shall remain the duty and obligation of the Land Owner and/or the 30 Building Contractor, as the case may be. In the event that the Contractor shall assist (but not obligated) to complete any works not stated in the Job Scope, the Land Owner and the Building Contractor hereby expressly agree that the Contractor shall be entitled to additional payments provided that the Contractor shall, before commencement of the additional works, serve a seven (7) days’ prior written notice to the Land Owner and/or the Building Contractor specifying the details of the additional works required together with a quotation. The Land Owner and/or the Building Contractor shall be entitled to reject the Contractors’ quotation in writing before expiry of the seven (7) days’ notice and to complete the said additional works at its own costs and expense within thirty (30) days from the date of its rejection, failing which the time stipulated in Clause 4.1 hereof shall be extended accordingly. If the Land Owner and/or the Building Contractor shall accept the Contractor’s quotation, the Land Owner and/or the Building Contractor shall deposit the full payment of the quotation with the Contractor’s Solicitors within seven (7) days from the date of its receipt of the said notice from the Contractor before the Contractor commences 31 the said additional works. The full payment of the quotation shall only be released by the Contractor’s Solicitors to the Contractor upon issuance of Certificate of Fitness for Occupation.

4.8 Notwithstanding anything contained herein, the Land Owner and the Building Contractor hereby declare represent and warrant that all the existing building works are in accordance with the said Building Plans and Specifications and there shall be no changes or deviations required by the Appropriate Authority and it shall be the sole responsibility of the Land Owner and/or the Building Contractor for such deviations and to deal with the Appropriate Authority and to waive or comply with the said requirement within thirty (30) days from the notice of the Appropriate Authority in the event that there is such requirement by the Appropriate Authority. In the event that the Land Owner or Building Contractor take more than thirty (30) days to waive or comply with the said requirement, the time period stated in Clause 41. hereof shall be extended accordingly. 32

5.

5.1 The Land Owner shall upon its execution of this Agreement, execute a valid and registrable Memorandum of Transfer (hereinafter referred as “MOT”) under the National Land Code in favour THSB and deposit the same with the Contractor for the purpose of the transferring the said Contractor’s Units in the name of THSB, free from any encumbrance whatsoever.

5.5 The Land Owner shall not further sell or deal with the Contractor’s Units of the Project in any manner whatsoever save and in accordance with the Agreement.

6.

6.1 The Building Contractor shall at its own costs and expense construct and complete any other works not stated expressly in the Job Scope in a good and workmanlike manner and in compliance with generally recognised building standards and practices and in accordance with the said 33 Buildings Plans and Specifications (as approved together with all amendments thereto if any) within Six (6) months from the date hereof to facilitate the issuance of Certificate of Fitness for Occupation for the Project.

6.2 In addition to Clause 6.1 hereof, the Building Contractor shall at its own costs and expense attend to the defects on the Sewerage Piping and Water Reticulation Piping and the structural defects of the Project with diligence and in a good and workmanlike manner.

6.3 Upon delivery of vacant possession of the units to the Purchasers, the Building Contractor shall at its own costs and expense provide Six (6) months defect liability period to the Purchasers in accordance with the Building Contract. For the avoidance of doubt, the Contractor shall provide six

months defect liability period to the Building Contractor for the painting works, all electrical works done by the contractor and water piping from the water tank to the main tapping point for the 230 bungalow lots only. 34

9.

9.1 Upon issuance of Certificate of Fitness for Occupation for the Project, the Contractor shall be entitled to and be at full and complete liberty to enter into sale agreements with any intended purchasers in respect of the Contractor’s Units or any one thereof upon such terms and conditions and at such prices as the Contractor shall in its absolute discretion think fit and proper.

10.1 In the event that the Land Owner or the Building Contractor or the Contractor shall default in the performance of its duties or breach any of the terms and condition in this Agreement, obligations and covenants herein, the other party/ies shall be entitled to the remedy of specific performance against the default party and it is hereby expressly agreed that an alternative remedy of monetary compensation shall not be regarded as compensation or sufficient compensation for the party’s default in the 35 performance of the terms and conditions herein. The default party, as the case may be, shall pay all costs disbursements and whatever expenses legal or otherwise and whether judicial, legal or extra-judicial and as between solicitor and client paid or payable by the other party to specifically enforce this Agreement.

10.2 Notwithstanding anything contained herein, in the event the Contractor shall fail to complete the Job Scope in accordance with this Agreement (not due to any fault on the Land Owner or the Building Contractor), the Contractor shall not be entitled to any considerations provided in Clause 2 hereof and the Contractor shall not be entitled to make any claims against the Land Owner and/or the Building Contractor. However, in the event that the Land Owner and/or the Building Contractor shall default in the performance of its duties or breach any of the terms and conditions in this Agreement, obligations and covenants herein, without prejudice to the Contractor’s rights pursuant to Clause 10.1 herein, the Contractor shall be entitled to 36 claim from the Land Owner and/or the Building Contractor for the total works carried out on the said Project.

11.

11.1 It is hereby agreed by the parties that in the absence of any defaults on the part of the Contractor, the Land Owner and/or the Building Contractor shall not be entitled to terminate this Agreement in any manner whatsoever, failing which clause 10 hereof shall apply.

13.1 The Land Owner acknowledges that the Contractor has agreed to enter into this Agreement on the basis of and in full reliance upon the aforesaid representations, covenants, warranties and declarations which is true and correct in all respects. It is hereby agreed that in the event that there is a breach of the representations, covenants or warranties contained herein, the Land Owner shall rectify the said breach within fourteen (14) days from the date of the 37 Contractor’s Solicitors’ request requiring such rectification, failing which the Land Owner is deemed to have defaulted and Clause 10 shall apply. The Land Owner further agrees to indemnify the Contractor and keep the Contractor fully indemnified against all damages losses proceedings actions expenses and/or claims whatsoever which the Contractor may suffer by reason of or arising out of any breach of the declarations and representations herein. FIRST SCHEDULE

Design and build of water tank (with minimum capacity for 230 units) and the piping from water tank to main tapping point for 230 units of bungalow houses

Contribution fees to authorities (excluding TNB)

Balance payments to consultants of the Project 38

Subject to clause 4.7

To check and rectify defects and carry out and complete all necessary and required works according to existing approved plans which certified by all consultants (if applicable) in order to obtain Certificate of Occupation for the said 230 units.”

Thus based on clause 4.1 of the Construction Agreement, the Plaintiff is obliged to complete the Job Scope specified therein (“Works”) within 12 months from 7 November 2013, to wit: 6 November 2014.

The Plaintiff could not commence the Works upon the execution of the Construction Agreement by reason that the Defendants failed to furnish and deposit to the Plaintiff the original approved building plans. These plans were delivered to the Plaintiff late and piecemeal, to wit: the building plan in December 2013, TNB sub-station and Telekom plans in April 2014, landscape plan in May 2014 and the street lighting plans in June 2014. In addition, the water reticulation details plans and traffic light plans were then not 39 yet submitted. They were finally submitted, approved and furnished to the Plaintiff in September 2014 and June 2014 respectively. The road and drainage plans were then also not yet approved. They were finally approved and furnished to the Plaintiff only in June 2014. The approved sewerage treatment plant (“STP”) plans had expired. The re-submitted STP plans had to be re-submitted, approved and finally furnished to the Plaintiff in February 2015.

The Plaintiff nonetheless utilized its best endeavours to proceed with the carrying out of the Works wherever possible as seen from the Project site meeting minutes and the Plaintiff completed the Works in December 2014 save for the STP and the water reservoir and pump house. Consequently, the appropriate authorities such as TNB, Telekoms, JKR, etc. were notified on the completion of the relevant works for inspections to be carried out to obtain clearance for the issuance of the certificate of fitness for occupation (“CFO”) of the Project.

By that time, the First Defendant secured a new foreign investor MBI International and was therefore desirous to commence the 40 Taman Desa Ku Phase 2 project urgently. However the First Defendant had to get itself removed from the Ministry’s blacklisting. Thus for the STP, the First Defendant made an arrangement with Indah Water Konsortium (“IWK”) for the First Defendant to give an undertaking to complete the STP and provide a bank guarantee of RM500,000.00 to IWK in consideration of IWK issuing its letter of clearance for the CFO. As for the water reservoir and pump house, the Plaintiff discussed with the First Defendant and filed an appeal to the Syarikat Air Darul Aman Sdn Bhd (“SADA”) for waiver of the construction of the water reservoir and pump house in consideration of payment of contribution to SADA. The Plaintiff’s appeal was allowed and the Plaintiff paid the contribution of RM459,733.60 to SADA.

On 29 April 2015, the Majlis Perbandaran Kulim (“MPK”) issued the CFO to the First Defendant. Subsequently, the Plaintiff also wrote to the Ministry on 4 May 2015 in support of the First Defendant’s removal from the blacklist and to re-obtain its housing developer license. 41

Notwithstanding the issuance of the CFO, the Defendants failed to issue or cause the issuance of the progressive payment claim to the Purchasers to enable the Plaintiff to be paid as required under clause 2.3 of the Construction Agreement despite the Plaintiff having requested the Defendants to do so. As the result, there was a meeting held on 6 May 2015 wherein the Plaintiff was represented by PW1 and the Defendants by KEC, DW3 and a Mr. Khoo. At that meeting, the Defendants claimed that the Plaintiff defaulted on the Construction Agreement by not obtaining the CFO before 7 November 2014 and thus the Plaintiff is disentitled to the proceeds of the progressive claim receivable from the Purchasers as well as the 19 Contractor’s Units of bungalow houses under clause 2.1 (a) of the Construction Agreement. The Defendants also informed the Plaintiff that the First Defendant had in February 2015 lodged private caveats on the aforesaid 19 units of bungalow houses which had been transferred to Tijuana Homes Sdn Bhd in August 2014. As the result and notwithstanding the Plaintiff’s protest, the Defendants insisted that they would not proceed to issue the progressive claims to the Purchasers unless the Plaintiff agreed to sell back the 19 units of bungalow to the First Defendant for the sum of RM3.3 million. 42 Hence on 14 May 2015, the parties met again and it was agreed that the RM3.3 million payment would be paid in a lump sum on or before 23 May 2015 and the Plaintiff would accordingly cause Tijuana Homes Sdn Bhd to transfer the aforesaid 19 units of bungalow houses to the First Defendant or its nominees. The Defendants would waive the Plaintiff’s non compliance of its time obligation under clause 4.1 of the Construction Agreement. As the result there was a meeting held on 19 May 2015 to confirm the agreement held amongst the Plaintiff, Defendant and officials from the Ministry. As evidenced by the Ministry’s letter dated 19 June 2015 and minutes appended thereto, it was noted that the Defendants would hand over the keys to the Purchasers on 26 May 2015. The RM3.3 million would be paid by the Defendants to the Plaintiff at the end of the week after the transfer forms 14A in respect of the 19 units bungalow houses are submitted to the First Defendant and that the Defendants would issue the progressive claim to the Purchasers on 25 May 2015. Subsequently the Plaintiff also obtained the First Defendant’s acknowledgment of the same in the Plaintiff’s letter dated 22 May 2015 (collectively “May Agreement”). 43

The Plaintiff handed over the transfer forms of the 19 units of bungalow houses to the First Defendant on 23 May 2015 but the Defendants did not pay the Plaintiff the RM3.3 million on that day in exchange as agreed.

On 25 May 2015, the First Defendant wrote to the Plaintiff alleging that the Plaintiff was in default of the Construction Agreement for not completing the Works within the stipulated time as well as that the workmanship of the Works is of bad quality. In addition, the First Defendant had given a bank guarantee of RM500,000.00 to IWK for the STP that was pending completion. Consequently, the Defendants exercised clause 10.2 of the Construction Agreement to deny the Plaintiff of any of its consideration thereunder.

Thereafter on 1 June 2015 the First Defendant wrote again to the Plaintiff complaining that tens of scores of the Purchasers had filed their complaints on uncompleted work for the building and finishing upon receiving their keys during hand over of vacant possession of their houses. Thus due to impending pressure from them, the First Defendant was forced to attend to the complaints and immediately carry out work to complete the uncompleted work. As the result, 44 the Defendants would not be making the progressive claims to the Purchasers until they are all satisfied with their houses. The Plaintiff would be held accountable and liable for all costs and expenses incurred. The total costs for completing all the uncompleted work and defective work would be deducted from the monies payable to the Plaintiff from the progressive claims to the Purchasers.

In consequence, the Defendants only paid the Plaintiff RM500,000.00 on 15 June 2015 and another RM500,000.00 on 22 June 2015 out of the RM3.3 million that was agreed to have been paid in full in a single lump sum on 25 May 2015. The Plaintiff continued to pursue the Defendants for the balance of the payment but the Defendants refused to do so unless and until a further supplementary agreement drawn up by the Defendants is executed by the Plaintiff.

The Plaintiff thus agreed to execute the supplementary agreement although the Plaintiff knew what the Defendants were doing was wrong and in breach of the Construction Agreement. Hence the supplementary agreement was executed on 6 July 2015 45 (“Supplementary Agreement”). The material terms of the Supplementary Agreement where the Plaintiff, First Defendant and Second Defendant were again designated as the Contractor, Land Owner and Building Contractor respectively are reproduced as follows: “1. COMPLETION OF UNCOMPLETED WORKS AND

1.1 The Contractor hereby request and the Land Owner hereby agreed to complete all the uncompleted Job Scope failed to carry out by the Contractor and to rectify the all defects works for the said Projects, as provided in the Construction Agreement to the satisfaction of the Consultants for the Project.

1.2 The contractor agreed to be solely responsible for all the cost and expenses to complete all the uncompleted Job Scope and all the cost and expenses for the rectification of defects works for the Project to the satisfaction of the Consultants for the Project. 46

1.3 The parties hereby agree that the Land Owner shall be entitle to offset and contra the cost and expenses incurred by the Land Owner for the completion all the uncompleted Job Scope and for the rectification of defects works for the Project as provided in the Construction Agreement with the remaining progressive claims to the Purchasers of the Project.

1.4 Both parties hereby further agreed that any surplus remaining progressive claims after offset and contra with the cost and expenses incurred by the Land Owner for the completion all the uncompleted Job Scope and for the rectification of defects works for the Project to be refunded to the Contractor. Likewise any shortfall of the remaining progressive claims must be settled by the Contractor to the Land Owner.

2.0 TRANSFER OF 19 UNSOLD UNITS OF THE PROJECT AND TAKE OVER OF THE ENTIRE EQUITY SHARE AND OWNERSHIP OF BERGAMO DEVELOPMENT (M) SDN. BHD. 47

2.1 In consideration of the Land Owner agree to assist and complete the Job Scope and rectify all the defect works for the project as provided in Clause 1 above, the Contractor hereby agree to the Land Owner as follows:

2.1.1 The contractor shall execute and effect the registration of transfer in favour of the Land Owner or it nominee/s Nineteen (19) unsold units of the Project (hereinafter called the “Nineteen (19) unsold units”) free from any encumbrances whatsoever upon execution of this Agreement. The PT numbers are as follows :- Item Plot No. HS. (D) PT.No 1 657 62493 3410 2 634 62470 3387 3 661 62497 3414 4 681 62517 3434 5 688 62524 3441 6 692 62528 3445 7 694 62530 3447 8 700 62536 3453 48 9 704 62540 3457 10 743 62579 3496 11 753 62589 3506 12 757 62593 3510 13 775 62611 3528 14 779 62615 3532 15 781 62617 3534 16 783 62619 3536 17 787 62623 3540 18 802 62638 3555 19 803 62645 3562

2.1.2 The Land Owner shall be at liberty at its own cost and expenses to lodge a Private Caveat as from the date hereof provided that Land Owner shall at its own cost and expenses withdraw the said Private Caveat if the Land Owner shall fail to settle the balance purchase consideration within the time stipulated in clause 2.2 hereof. 49

2.1.3 The Contractor shall all effect and execute transfer of the entire equity share capital and ownership of Bergamo Development (M) Sdn Bhd free of encumbrances of whatsoever to the Land Owner or its nominee/s. The Contractor has to settle all the liabilities owing and outstanding as at the date of executing transfer.

2.2 In consideration of the Contractor agree to execute and effect registration of transfer of Nineteen (19) unsold units to the Land Owner or its nominee/s free from any encumbrances whatsoever and effect and execute a transfer of the entire equity share capital (net of liabilities) and ownership of Bergamo Development (M) Sdn Bhd free of encumbrances of whatsoever to the Land Owner or its nominee/s, the Land Owner hereby agrees to pay to the Contractor a sum of RM 3,300,000.00 (hereinafter call the “Consideration”) in the following manner :- On or before 22 June 2015 RM 1,050,000.00 On or before 22 July 2015 RM 1,000,000.00 On or before 22 August 2015 RM 1,000,000.00 50 On or before 22 September 2015 RM 250,000.00 The Contractor hereby acknowledge that he has received a total sum of RM 1,050,000.00 upon execution of this agreement.

2.4 Should the registration of transfer in favour of the Land Owner or its nominee/s for the Nineteen (19) unsold units cannot be perfected or effected, the Contractor shall refund in full all the said Consideration to the Land Owner upon notification. Should the transfer of the entire equity share capital (net of liabilities) and ownership of Bergamo Development (M) Sdn Bhd free of encumbrances of whatsoever to the Land Owner or its nominee/s can not be affected, the Contractor shall refund in full all the said Consideration to the Land Owner upon notification.” 51

That notwithstanding, the Defendants still failed to pay the Plaintiff in accordance with clause 2.2 of the Supplementary Agreement. The Plaintiff was paid RM500,000.00 on 7 August 2015, RM500,000.00 on 8 September 2015, RM250,000.00 on 5 October 2015, RM200,000.00 on 3 November 2015, RM200,000.00 on 25 November 2015, RM200,000.00 on 31 January 2016 and finally RM400,000.00 on 25 April 2016. Furthermore, the Defendant did not pay the Plaintiff the sum of RM3.1 million payable from the progressive claims to the Purchasers even though the defects liability period of the Project was over. The Plaintiff was informed by the Defendants that the progressive claims were not made to the Purchasers because the Purchasers were claiming late delivery compensation of their bungalow houses from the Defendants. Furthermore, the defect rectification works in the Project were being undertaken and are in fact still ongoing presently.

As the result the Plaintiff on 15 August 2016 wrote a letter of demand for payment to the Defendants. They replied on 17 August 2016 justifying their refusal to do so. The Plaintiff responded with 52 its rebuttal on 9 September 2016. The Defendants again replied on 20 September 2016 with their counter rebuttal.

The Plaintiff thereafter through its solicitors Messrs. Ghazi & Lim by letter dated 16 December 2016 made a formal demand against the Defendants and the Defendants replied on 28 December 2016 through their solicitors Messrs. Allen Chee Ram by letter dated 28 December 2016.

In view of the disputes and differences that have arisen, the Plaintiff hence filed this Suit.

From the pleadings, statement of issues to be tried and the closing submissions of the parties, I distil the following broad six issues that require determination together with the rest of the associated sub issues parked thereunder:

Time for completion of the Works; 53

(ii) Completion of the Works and Defects therein;

(iii) Validity of the May Agreement and Supplementary Agreement;

(iv) Plaintiff’s Claims;

Defendants’ Counter-Claims; and

(vi) Illegality of Construction Agreement Findings of the Court

Before dealing with the afore-listed issues seriatim, it is worthwhile that I start off discussing the surrounding circumstances that led to the execution of the initial Construction Agreement. The genesis to every contract is always relevant to help to understand the nature of the relationship between the contracting parties. It is common ground that the Project which comprised of the sale of land and construction of bungalow houses were undertaken by the Defendants for numerous Purchasers since 2005. The Project was 54 however abandoned in 2008 and I find that it was due to the Defendants’ impecuniosities as the developer and contractor respectively to finance the carrying out of the Project till completion. As the result, the Project remained abandoned from 2008-2013 despite several attempts to revive it because no contractor was willing to be associated with the Defendants in the Project because of the high financial risks involved. By reason of the abandonment of the Project, the First Defendant was also blacklisted by the Ministry as a licensed housing developer.

PW1 had been involved in several housing development projects successfully and sometime in 2013, he was invited by officials of the Ministry particularly Mr. Gunasegaran Naidu to consider resuscitating the Project. After discussion with his business partner Mr. Vijayendran Kuppusamy, they decided to use the Plaintiff being their new corporate vehicle to undertake the challenge to revive and complete the Project. Accordingly they went to the Project site and carried out a visual inspection on every bungalow house. They found that many of the houses were already built and there was however finishing work pending such as ceiling and painting. They also visited the STP and the other 55 infrastructural portions of the Project. At that time, there was no approved building plans provided to them except for working drawings. Based on their experience, the estimated costs to complete the Works was roughly RM6 million. Thus based on the consideration of balance progressive payment from the Purchasers and acquisition of 19 units of bungalow houses that were valued at RM8 million in total, they thought it was viable to take up the challenge. According to PW1, even in case there was an under calculation and budgeted cost overrun, they still had sufficient buffer of RM2 million to make some profit in the Project.

Consequently the official from the Ministry, Mr. Gunasekaran Naidu introduced the Defendants representatives to them. After several discussions, the Construction Agreement was finally executed on 7 November 2013 that formed the contractual document which governed their relationship. The Plaintiff’s payment terms in clause 2.1 of the Construction Agreement is unique in that the Plaintiff would only be able to convert as well as receive its consideration in cash after the completion of the Project. In other words, the interim financing from commencement until completion of the Project was entirely on the Plaintiff. 56

Time for Completion of the Works

Based on clause 4.1 of the Construction Agreement, the Plaintiff was obliged to complete the Works by 6 November 2014 including after taking into consideration the automatic extension of 6 months.

However and as set out in paragraph 20 above, I find and hold that the Defendants had breached clause 3.2(a)(ii) of the Construction Agreement by having failed to furnish to the Plaintiff the approved said Building Plans and Specifications timeously upon the execution of the Construction Agreement as stipulated. I am aware that DW1 felt otherwise but he did not produce any cogent documentary record evidencing the issuance of drawings to the Plaintiff which is common in the construction industry. For constructional purposes, there is the maxim that the contractor must not only complete the works within the time but he must also be afforded the time to have the works completed. It is axiomatic that the Plaintiff must undertake the Works based on approved drawings and specifications. Based on clause 3.2 (a)(ii) of the Construction Agreement, it is implicit the responsibility of getting all 57 design of the Works done and approved laid upon the Defendants. Consequently by the Defendants’ lackadaisical failure to furnish the approved said Building Plans and Specifications within the agreed time, the Plaintiff could not progress with the execution of the Works as planned or envisaged to achieve completion by 6 November 2014 and I so find and hold accordingly. That notwithstanding, there were also additional works to be undertaken by the Plaintiff in deviation of the original Works based on the existing approved said Building Plans and Specification as stipulated in clauses 1.1 and 4.1 of the Construction Agreement. These additional works comprised of changes in the design and construction of the traffic lights, M&E system and pump house as well as the STP.

In the Supreme Court case of Thamesa Designs Sdn Bhd v. Kuching Hotels Sdn Bhd [1993] 3 MLJ 25, Mohamed Dzaiddin SCJ (later CJ) held as follows with emphasis added by me: “On the question of delay in delivery of site, the court observed at p 155 that it was also the appellant's case that the delay was caused by the respondent having delivered 58 the site rather late, thus leaving little time for the appellant to complete the work. The court considered and applied the principle in Dodd v Churton 3, and stated at p 156: At the risk of repetition we restate the principle in that where one party to a contract is prevented from performing it by the act of the other, he is not liable in law for the default. On the same page, the court reiterated that: Only in circumstances in which the employer or his agent is in no way to blame for the delay would the court be willing to allow damages. If the employer contributes to the delay by ordering extra work or is guilty of the delay in delivering possession of the site, or of any other cause no damages could be claimed. (See Hudson at pp 624-628.) To recapitulate, in the present case, it is not disputed that under the said contract, the date for completion of the works was 18 April 1985. Yet, by such date, most floors of the hotel were still not handed over to the judgment debtor. It is also 59 common ground that there is no provision in the said contract, particularly cll 21 and 23 for any extension of time to complete the works on account of delay in handing-over of the site. In fact, the evidence of Patrick William Bone (GW1), the design consultant (at p 53 of the appeal record), confirmed that there was no extension of time given for the late handing-over. He agreed that all the areas were handed over late. Thus, if the employer handed over the site late which led to the delay on the part of the contractor to complete the works, it is patently clear, based on the principles cited above, that the employer should not be entitled to claim for liquidated damages under the said contract because, by his omission to give possession of the site on time, the time for completion becomes 'at large' and there was no date from which the damages could be assessed.”

Likewise there were acts of prevention on the part of the Defendants because of their critical failure to furnish the said Building Plans and Specifications to the Plaintiff timeously as well as the ordering of the additional work. The time or date for 60 completion under the Construction Agreement was hence set at large. In consequence, the Plaintiff was only obliged to complete the Works within reasonable time subject to the resolution of the ongoing constraints encountered by virtue of the breach by the Defendants.

I further find and hold that the Defendants were fully aware of it and had in fact encouraged the Plaintiff to carry on to complete the Works post 6 November 2014 as seen from the WhatsApp messages exchanged between PW1 and DW3 who are both directors of their respective companies. If the Defendants had considered that the late completion was indeed due to the fault of the Plaintiff, I have no doubt that the Defendants would have sent a stern warning notice to the Plaintiff followed by termination as allowed for pursuant to clause 11 of the Construction Agreement. There isn’t a shred of evidence that the Plaintiff had been so warned by the Defendants but rather the Plaintiff was instead encouraged by the Defendants to carry on to complete the Works soonest possible. Put simply, the Defendants had acquiesced to the actions of the Plaintiff. 61

The legal consequence is that as seen in the Federal Court case of Sim Chio Huat v. Wong Ted Fui [1993] 1 MLJ 151 where Salleh Abas FJ (later LP) held as follows with emphasis added by me: “In modern law of contract prima faciea stipulation as to time is not of the essence of a contract, unless the parties agree that it be so. (See Lord Simon of Glaisdale in United Scientific v Burnley Council [1978] AC 904 940 and 944. In this case as time was provided to be of the essence of the agreement, the stipulated periods within which these four houses had to be delivered to the respondent became an essential condition of the agreement. Failure by the appellant to fulfill this condition would entitle the respondent to have an option of treating the agreement either (a) as having been repudiated and dismissing the appellant; or (b) as still continuing. (See 9 Halsbury'sLaws of England, 4th ed. para 538, page 370). In this case obviously he did not choose to treat the agreement as having been repudiated. By allowing the 62 delivery dates to pass and by acquiescing in the work continuing under the agreement and indeed by ordering extra work to be done for each of these houses, for which the agreement made no provision, the appellant must be held to have waived his right to rescind the agreement on account of repudiation and also the right to treat himself as discharged therefrom. He must be deemed to have elected the agreement as still continuing.”

(ii) Completion of the Works and Defects therein

Notwithstanding the aforesaid prevention or impediment caused by the Defendants on the Plaintiff and as set out in paragraph 39 above, I find and hold that the Plaintiff had nonetheless carried out the Works with reasonable diligence and substantially completed the building and external infrastructure works in December 2014 as testified by PW1. The remaining major outstanding works then were the water reservoir and pump house as well as the STP. 63

In respect of the water reservoir and pump house, it is not in doubt or dispute that it was part of the Plaintiff’s Works in the Construction Agreement. However by virtue of the oral consensual arrangement between the parties to allow the Plaintiff to appeal to SADA to waive the requirement to construct the water reservoir and pump house, the Defendants could not later revert and insist that they were not constructed by the Plaintiff. In other words, the parties cannot approbate and reprobate, see Usima Sdn Bhd v. Lee Hor Fong (trading under the name and style of Pembinaan LH Fong) [2017] 5 MLJ 273. Since the appeal to SADA was allowed and the Plaintiff in lieu paid contribution compensation amounting to RM459,733.60 to SADA, I find and hold that the work is deem omitted from the Works required in the Construction Agreement.

As for the STP, I find that it was within the Plaintiff’s responsibility pursuant to clauses 1.2 and 3.1(a) of the Construction Agreement read together. The Plaintiff was however only able to commence constructing the STP when the requisite plans were approved on 1 February 2015. However and again by virtue of another oral consensual agreement between the parties to have the 64 construction and completion of the STP deferred provided the First Defendant was able to secure IWK’s approval of the CFO to be issued in consideration of a secured undertaking given to IWK to defer the carrying out of the STP, the Defendants could similarly not later revert and insist that the STP work was not done by the Plaintiff at all material times. As a matter of fact, the First Defendant managed to obtain the approval from IWK by furnishing a bank guarantee of RM500,000.00 to IWK to have the STP constructed later in time. As the result, IWK notified the MDK that it had no objection to the issuance of the CFO for the Project. In the premises, I find and hold that the STP work has been postponed to be constructed by the Plaintiff on a future date.

In the premises, I find and hold that the Plaintiff completed its Works required under the Construction Agreement (save for the STP that is to be completed by a future agreed date) within reasonable time on 29 April 2015 when the CFO was issued by the MDK. 65

I have carefully reviewed the CFO and hold that it is an unconditional and unqualified CFO issued pursuant to by-law 25 of the Uniform Building By-laws 1984 that reads: “25. Certificate of fitness for occupation

Certificate of fitness for occupation of a building shall be given when-

the qualified persons during the course of the work have certified in form E as set out in the Second Schedule to these By-laws that they have supervised the erection of the building, that to the best of their knowledge and belief the building has been constructed in accordance with these By-laws and any conditions imposed by the local authority and that they accept full responsibility for those portions which they are respectively concerned with and the local authority or an officer authorised by it in writing for the purpose has inspected the building. 66

all essential services, including access roads, landscape, car parks, drains, sanitary, water and electricity installation, fire lifts, fire hydrant and other where required, sewerage and refuse disposal requirements have been provided.

upon satisfaction of the requirements under subparagraphs (a) and (b) the local authority shall issue the certificate of fitness for occupation to the qualified person within 14 days from the date of the submission of Form E.

if the qualified person does not receive the certificate of fitness from the local authority within the prescribed period, the application for the certificate of fitness for occupation shall be deemed to have been approved.

the local authority then shall issue the certificate of fitness for occupation to the owner of the building.

Nothing contained in this by-law shall prevent the local authority or any officer authorised by it in writing for the purpose from inspecting any building works at any stage 67 thereof and calling attention to any deviation from the approved plan or non-compliance with any of these By-laws which he may observe and from giving notice in writing ordering such deviation to be rectified.” There is also no evidence of any subsequent inspection and directive by the MDK after the issuance of the CFO to rectify any deviation or non compliance in the Project.

As far as the status of the CFO is concerned in this Suit, I refer to s. 94 of the Evidence Act 1950 which reads: “94. Exclusion of evidence against application of document ton existing facts When language used in a document is plain in itself and when it applies accurately to existing facts, evidence may not be given to show that it was not meant to apply to such facts. 68 Illustration A conveys to B by memorandum of transfer "my estate at Kranji containing 100 acres." A has an estate at Kranji containing 100 acres. Evidence may not be given of the fact that the estate meant was one situated at a different place and of a different size.” This is in my view sufficient to repel the Defendants’ subsequent contentions that the Works could not be considered completed because the Works were manifestly fraught with defects. In Perbandanan Kemajuan Negeri Selangor v. Selangor Country Club Sdn Bhd [2016] 8 MLJ 211, Vernon Ong Lam Kiat JCA held as follows: “[33] As a general rule, the words of an instrument must be construed according to their natural meaning. Where the language of a document is plain and unambiguous and applies accurately to existing facts then the intention of the parties to the document should be gathered from the language of the document itself. No amount of acting by the 69 parties can alter or qualify words which are plain and unambiguous: see s. 94 of the Evidence Act 1950; North Eastern Railway Company v. Hastings [1900] AC 260 (PC).”

However according to the Defendants, the quality of the Works achieved was so deplorable that the Project should not be considered completed at that point in time. They relied particularly on the letters of the architect, H.H. Lau Architect dated 30 March 2015 and the civil & structural engineer Lumbini Consultancy dated 3 April 2015 written to the First Defendant. In those letters, the architect and the civil & structural engineer apparently instructed the First Defendant to issue to them an undertaking letter and personal guarantee by the First Defendant’s directors to undertake all rectification of defects to their satisfaction in view of the unsatisfactory and bad workmanship quality in the building and finishing work. It seemed that they needed the comfort for them to apply to the MDK to issue the CFO even though the other related authorities have issued their clearance letters in support of the same. The First Defendant gave the required undertaking and guarantee to them on 4 April 2015. 70

I have carefully read these letters and reviewed the testimony of DW3, DW4 and DW6 on this respect and I find that they were all written in collusion amongst the Defendants, architect and civil & structural engineer. In this respect, I find the contents of the letters unbelievable. A constructional professional would normally never certify something that is patently false and misrepresent to others particularly to the local authority. Yet here, the architect made the application to the MDK for issuance of CFO which was supported by the civil & structural engineer that the Works were completed as per by-law 25 but in the same breath notified the First Defendant that the Works were fraught with defects. The letters were also never written to the Plaintiff at the material time although it was meant as a complaint against the Plaintiff’s work. I sensed from the style and language of the letters including the First Defendant’s reply that these letters were all crafted by a sole legally qualified person. In the circumstances, I have my doubts on the veracity of the contents of the letters. The answers given by both the architect and civil & structural engineers at trial were neither satisfactory nor convincing too as seen from the excerpts of the notes of proceedings. The architect testified as follows: 71 Did you apart from the Defendant, did you send a copy of this letter to anyone else? Can’t recall. Can’t recall. Did you send it for example to the other consultants in the project? I can’t recall. You can’t recall. Did you discuss with any other consultants about issuing the letter? I can’t recall. ... Now, looking at this letter at page 270, do you agree this letter does not set out any particulars or details of the bad quality of workmanship of the building and finishing works? 72 You mean, not detail? Yes. It doesn’t say what is actually wrong. Doesn’t set out what is wrong. Too many things. Too many things. But, it doesn’t set out, do you agree? Yes. ... I ‘m putting it to you that the Plaintiff, the rescue contractor should be notified of the defects that you say was found in the work carried out by them. The defects, shortcomings, bad finishing, et cetera. The Plaintiff should be notified. Difficult to answer. Not. Not. Too many things. It’s considered uncompleted works. How to -.” 73 Subsequently, the civil & structural engineer testified as follows: Yes, now could you refer then to page 270, this is the letter 30.03.2015 issued by HH Lau Architect. Now could you focus on the body of the letter, the content of the letter on page 270 it is there are paragraph numberings there 1.0, 2.0,

3.0, 4.0 and compare that to your letter at page 271 beginning the word, there are four paragraphs not numbered but the first paragraph begins with the word, we have referred to the above matter. No.2 there refer to related authorities, paragraph 3 and paragraph 4. Do you see those four paragraphs? Yes. ... Ok, Mr Tan, do you agree that these two letters are materially similar, the content is materially similar? Actually they cc to me this Architect HH Lau. 74 ... So now your evidence is, is it still the same? Did you draft the letter page 271 yourself? Normally I write a lot of Facebook, in the Facebook. I read of history, I quote this, quote that, doesn’t mean that I go and ask HH Lau, can you teach me how to write. Just now you questioned me I refer to this type referring to anyone. So now your answer if I ask you the same thing did you draft this letter yourself, the letter at page 271, what is your answer? I draft myself. ... So did you put HH Lau’s letter in front of you and copy it in this case? 75 You mean I copy? Yes. Totally copied? YA: Did you substantially copy? No I quote the good wording, take. I quote the good sentence.”

Moreover I also noted from the contemporaneous documents such as the minutes of the project site meeting and the WhatsApp group chats between the Plaintiff and the professional consultants that none of them including H.H. Lau Architect and Lumbini Consultancy ever queried or complained to the Plaintiff about the workmanship or quality of the Works other than certain minor defects. In addition, it is seen that both the architect and civil & structural engineer were unable to particularise the defective works as alleged by them when challenged at the trial. The veracity of their allegations thus becomes questionable when they cannot be 76 identified and substantiated in detail. They are at best fanciful conjectures that are useless evidentially.

Be that as it may, the acceptability of quality of the Works is a question of fact. The Plaintiff has relied on the CFO to support its contention that the Works as built were fine and accepted. It is to me prima facie justified. Thus the evidential burden is displaced onto the Defendants who contended otherwise. I have held as follows in Oakwell Engineering International Pte Ltd v. PCM Feam (M) Sdn Bhd [2014] 11 MLJ 175: "[12] The quality of the evidence required to prove allegations is still subject to the antiquated "best evidence" rule. In the textbook Phipson on Evidence 17th edition, it is stated in paragraph 7-40 to 7-43 that: "The maxim that "the best evidence must be given of which the nature of the case permits" was once treated as expressing the great fundamental principle upon which the law of evidence depends. Thus, Lord Hardwicke went so far to say that "the judges and sages of the law have laid it down that there is but one general rule of evidence, the best that the nature of 77 the case will permit"...In the present day, then, it is not true that the best evidence must, or may always be given, though its non-production may be a matter for comment, or affect the weight of that which is produced...". Further it is stated at paragraph 42-10 to 42-11 that: "Extrinsic evidence is sometimes admissible to prove the existence as distinguished from the terms of some transaction or relationship which has been reduced to writing...On the other hand, strict proof of a transaction of the document is sometimes required, though the terms thereof may not be in dispute. Thus, on a charge of perjury committed in proceedings before justices for refusing to leave licensed premises, the license must be produced, and oral testimony by the proprietor that he is licensed is inadmissible. So, the fact, that a person is rated to the relief of the poor can only be proved by the rate-book, or secondary evidence thereof and not by parol." [13] Consequently in civil litigation particularly construction type litigation, I am of the view that relevant documents that substantiate or support the oral allegations must be adduced 78 at the trial where such documentary evidence is expected to be available in the ordinary course of business and commerce. Otherwise a reasonable explanation must be tendered to justify their non production. In the absence of these documents or explanation of their absence, mere oral testimony is not weighty enough to overcome the burden of proving the allegations on a balance of probabilities... "

In this regard, I find that the Defendants have failed to produce before me cogent documentary evidence such as contemporaneous correspondences, non compliance reports (commonly known as NCRs), architect/engineers’ rectification instructions, etc. to corroborate their allegations that the Works were incomplete and fraught with defects. Most importantly, the Defendants failed to produce to me photographic evidence of the Works as it then stood as at 29 April 2015 when the CFO was issued. In this modern technology age, the photographic evidence may be produced by way of digital photographs or even video recording of all the alleged defects seen in the bungalow houses and infra structure works. They must be captured systematically in detail for the Court to objectively assess whether the Works were 79 in fact incomplete and/or defective as alleged. In the absence of such cogent evidence, I find and hold that the Defendants have failed to discharge their evidential onus of proof and their bare and bald allegations must accordingly be rejected.

Consequently, I find and hold that the Plaintiff satisfactorily completed the Works on 29 April 2015 except for the STP that has been deferred by the consent of the parties. If there were any defects in the Works, I find them to be only minimal and minor as would invariably be the case in all constructional works. This is admitted by the Defendants themselves as confirmed at the meeting with the Ministry on 19 May 2015. In that meeting, the First Defendant’s comments were minuted as follows: “Wakil Pemaju memaklumkan pada masa sekarang, mereka sedang membuat kerja-kerja pembaikan kecil pada projek tersebut bagi menyiapkan kerja-kerja yang tidak disiapkan sepenuhnya oleh pihak kontraktor penyelamat.” DW1 also testified as follows as seen from the excerpts of the notes of proceedings: 80 Ok. En. Razif, saya katakan tidak mungkin kontrak untuk RM2.97 juta ini adalah kontrak untuk rektifikasi kerja Fasa 1 yang sepatutnya dibuat oleh Plaintif. Tak mungkin, mustahil sebab Defendan hanya menyedari terdapat kerja-kerja pembaikan major pada bulan Julai 2015? Ok. Tak mungkin Defendan boleh tiga bulan sebelum itu, memasuki kontrak sebanyak RM2.97 juta untuk membaiki, membuat kerja rektifikasi major. Setuju? Basically ... YA: Jawapan? A: Ya, setuju.” Nonetheless the defect rectification of these minor defects which were within the realm of responsibility of the Plaintiff ought to 81 undertaken during the defects liability period as provided in clause 6.3 of the Construction Agreement.

(iii) Validity of the May Agreement and Supplemental Agreement

Upon the completion of the Works, the Plaintiff must be paid its consideration as provided in the Construction Agreement. As set out in paragraph 24 above, the Defendants in breach of clause 2.3 of the Construction Agreement did not issue or cause the issuance of the progressive claims to the Purchasers. In addition, the Plaintiff also realized that the First Defendants had neither with just cause nor consent of the Plaintiff already in February 2015 lodged private caveats on the 19 units of bungalow houses received by the Plaintiff as consideration under the Construction Agreement and transferred to Tijuana Homes Sdn Bhd. I further find as testified by PW1 that the Plaintiff repeatedly requested the Defendants to issue the progressive claims to the Purchasers. Without receiving the payment from the progressive claims, the Plaintiff faced serious cash flow problem because the Plaintiff had to make payments to various sub contractors and suppliers who were involved in completing the Works. The Plaintiff was 82 dependent on these sub contractors’ and suppliers’ credit and the Plaintiff knew that they expected to be paid by the Plaintiff after the CFO has been obtained. It was for this purpose that the Ministry had as early as on 22 July 2014 wrote to the Purchasers’ bank financiers to seek their co-operation in releasing the final progressive claims immediately upon the issuance of the CFO to ease the case flow in completing the Project. Furthermore, the Ministry on 16 October 2014 again convened a joint meeting with the Purchasers’ bank financiers, Plaintiff and the First Defendant to ascertain the requirements in order to release the payment of the progressive claims and how soon the payments would be made. In the premises, I find and hold that the Plaintiff being a small and newly set up corporate vehicle was desperate for money to fund its cash flow at that point in time.

The Defendants responded to the Plaintiff by convening a meeting on 6 May 2015 principally involving PW1 and KEC. The Defendants took the stance that the Plaintiff was in breach of the Construction Agreement for not completing the Project before 7 November 2014. As the result, the Defendants made it clear that the Plaintiff was not entitled to the payment from the progressive 83 claims of the Purchasers. The Defendants further insisted that they would not proceed to issue the progressive claims to the Purchasers unless the Plaintiff agreed to sell back the 19 units of bungalow houses to the Defendants for the sum of RM3.3 million. I pause to note at this juncture that the Defendants did not make any assertion on incomplete or unacceptable defective work done by the Plaintiff at this meeting.

As testified by PW1, I find that the Plaintiff was very reluctant to agree to the Defendants’ demand on the transfer back of the 19 units of bungalow houses to the First Defendant at RM3.3 million because that valuation of RM3.3 million was based on the value estimated by the government’s valuer for stamp duty purposes when the units were transferred to the Plaintiff’s nominee, Tijuana Homes Sdn Bhd based predominantly on land value only by reason that the buildings were then uncompleted without CFO. The Plaintiff was convinced that the then current market value of the 19 units of bungalow houses were much higher. The Plaintiff protested but the Plaintiff nonetheless had no practical choice except to agree to sell the 19 units of bungalow houses to the First Defendant at RM3.3 million because the Plaintiff was already cash 84 trapped due to the Defendants’ refusal to issue the progressive claims to the Purchasers. The Plaintiff was facing immense cash flow problem to pay its subcontractors and suppliers. In addition, the Defendants had wrongfully caveated the 19 units bungalow houses and the Plaintiff was thus unable to generate cash flow by selling these units in the open market which the Plaintiff is entitled to do so pursuant to clause 9.1 of the Construction Agreement. There was another meeting held on 14 May 2015 again principally between PW1 and KEC and it was affirmed that the Defendants would pay the sum of RM3.3 million on or before 23 May 2015 for the sale of the 19 units bungalow houses in consideration of the Defendants waiving its claim for late completion of the Project. This agreement was re-confirmed in the subsequent meeting together with the Ministry on 19 May 2015.

59.

As the result, I find that there was only two part payments of RM500,000.00 paid to the Plaintiff on 15 June 2015 and 22 June 2015 for the sale of the 19 units of bungalow houses. These payments were obviously inadequate to pay the Plaintiff’s sub contractors and suppliers as testified by PW1. By that time, the Plaintiff had already borrowed money from third parties to make some payment to the sub contractors and suppliers and the RM1,000,000.00 received from the First Defendant was just enough to pay of the third party lenders. 86

Despite the Plaintiff through PW1 continued to chase for the balance of RM2.3 million that was overdue, I find that the Defendants refused to pay the same. Eventually, the Defendants presented a non negotiable pre-prepared Supplementary Agreement for execution by the Plaintiff. According to PW1, the contents of the Supplementary Agreement were unfair but the Plaintiff had no choice at the time but to execute it. The recitals of the Supplementary Agreement were also untrue in that it was recited that the Plaintiff failed to complete the Job Scope in the Construction Agreement whereas in actual fact there was no such failure on the part of the Plaintiff. It further recited that the Plaintiff had requested the First Defendant for assistance to complete the uncompleted Job Scope and to rectify defects in the Works to the satisfaction of the Project consultants and that the First Defendant shall be entitled to off set and contra the costs thereof against the progressive claims whereas in actual fact the Plaintiff had satisfactorily completed the Works with CFO obtained and also did not request the First Defendant for assistance to complete any of the allegedly uncompleted Works. It also recited that the First Defendant shall be at liberty to lodge private caveats on the Plaintiff’s 19 units of bungalow houses as from the date of the 87 Supplementary Agreement whereas the First Defendant had in fact already lodged the private caveats in February 2015. The Defendants expressly told the Plaintiff that if the Supplementary Agreement wasn’t executed, the Plaintiff would not receive any money at all.

For completeness and despite that the Plaintiff was constrained to execute the Supplementary Agreement, I find that the Defendants reneged on the Supplementary Agreement as well by again having failed later to pay the Plaintiff in accordance with clause 2.2 of the Supplementary Agreement. As a matter of fact, the balance of the RM2.3 million was dragged for another 9 months with each part payment being made after PW1 had to plead and beseech KEC for payment. Furthermore on each payment received, the Plaintiff was constrained to sign on the First Defendant’s payment voucher that had the following pre-printed phrase: “Being payment for full and final settlement of all costs for work done incurred by Bergamo Development (M) Sdn Bhd, in lieu of all considerations payable by ECK Sdn Bhd and Foo Yee Construction Sdn Bhd to Bergamo Sdn Bhd 88

The Plaintiff therefore in the circumstances contended that the Plaintiff’s consent to the May Agreement as well as the Supplementary Agreement was induced or procured through economic duress.

In the Privy Council case of Pao On v. Lau Yiu Long [1980] A.C. 614, Lord Scarman held as follows: 89 “Duress, whatever form it takes, is a coercion of the will so as to vitiate consent. Their Lordships agree with the observations of Kerr J. in Occidental Worldwide Investment Corporation v. Skibs A/S Avanti [1976] 1 Lloyd’s Rep. 293, 336 that in a contractual situation commercial pressure is not enough. There must be present some factor “which could in law be regarded as a coercion of his will so as to vitiate his consent.” This conception is in line with what was said in this Board’s decision in Barton v. Armstrong [1976] A.C. 104, 121 by Lord Wilberforce and Lord Simon of Glaisdale – observations with which the majority judgment appears to be in agreement. In determining whether there was a coercion of will such that there was no true consent, it is material to inquire whether, at the time he was allegedly coerced did or did not protest; whether, at the time he was allegedly coerced into making the contract, he did or he did not have an alternative course open to him such as adequate legal remedy; whether he was independently advised; and whether after entering the contract he took steps to avoid it. All these matters are, as was recognised in Maskell v. 90 Horner [195] 3 K.B. 106, relevant in determining whether he acted voluntarily or not.” Subsequently in the English House of Lords case of Universe Tankships Inc. of Monrovia v. International Transport Workers Federation and Others [1983] 1 A.C. 366, Lord Scarman further held as follows: “It is, I think, already established law that economic pressure can in law amount to duress; and that duress, if proved, not only renders voidable a transaction into which a person has entered under its compulsion but is actionable as a tort, if it causes damage or loss: Barton v. Armstrong [1976] A.C. and Pao On v. Lau Yiu Long [1980] A.C. 614. The authorities upon which these two cases were based reveal two elements in the wrong of duress: (1) pressure amounting to compulsion of the will of the victim; and (2) the illegitimacy of the pressure exerted. There must be pressure, the practical effect of which is compulsion or the absence of choice. Compulsion is variously described in the authorities as coercion or vitiation of consent. The classic case of duress 91 is, however, not the lack of will to submit but the victim’s intentional submission arising from the realisation that there is no other practical choice open to him. This is the thread of principle which links the early law of duress (threat to life or limb) with later developments when the law came also to recognise as duress first the threat to property and now the threat to a man’s business or trade. The development is well traced in Goff and Jones, The Law of Restitution, 2nd ed.

(1978), chapter 9. The absence of choice can be proved in various ways, e.g. by protest, by the absence of independent legal advice, or by a declaration to go to law to recover the money paid or the property transferred: see Maskell v. Horner [1915] 3 K.B.

But none of these evidential goes to the essence of duress. The victim’s silence will not assist the bully, if the lack of any practicable choice but to submit is proved.”

Generally the Malaysian position is set out in ss. 14 and 15 of the Contracts Act 1950 that read: 92 “14. Free Consent Consent is said to be free when it is not caused by-

coercion, as defined in section 15;

undue influence, as defined in section 16;

fraud, as defined in section 17;

misrepresentation, as defined in section 18; or

mistake, subject to sections 21, 22 and 23. Consent is said to be so caused when it would not have been given but for the existence of such coercion, undue influence, fraud, misrepresentation, or mistake. 93

Coercion "Coercion" is the committing, or threatening to commit any act forbidden by the Penal Code, or the unlawful detaining or threatening to detain, any property, to the prejudice of any person whatever, with the intention of causing any person to enter into an agreement. Explanation - It is immaterial whether the Penal Code is or is not in force in the place where the coercion is employed. ILLUSTRATION A, on board an English ship on the high seas, causes B to enter into an agreement by an act amounting to criminal intimidation under the Penal Code. A afterwards sues B for breach of contract at Taiping. A has employed coercion, although his act is not an offence by the law of England, and although section 506 of the Penal 94 Code was not in force at the time when or place where the act was done.” Thus in OCBC Securities (Melaka) Sdn Bhd (Formerly known as Sykt Tan, Chiow & Loh Securities Sdn Bhd) v. Koh Kee Huat [2004] 2 MLJ 110, Low Hop Bing J (later JCA) held as follows with emphasis added by me: “23. Sections 15 and 73 were specifically considered by Eusoff Chin J (later Chief Justice Malaysia) in Chin Nam Bee Development Sdn Bhd v Tai Kim Choo & 4 Ors [1988] 2 MLJ 117 (HC). The dispute related to the payment of an additional sum of RM4,000 by each of the respondents (the plaintiffs in the magistrate's court) to the appellant (the defendant) pursuant to a sale and purchase agreement to purchase a house each at RM29,500. The magistrate found that the payment was not voluntary but made under a threat by the appellant to cancel the respondents' booking for their houses. There was a protest by the respondents over the payment. The magistrate ordered the refund of the RM4,000 to the respondents and on appeal the order was affirmed by 95 Eusoff Chin J (later Chief Justice Malaysia) who applied ss 15 and 73 of the Contracts Act 1950. The eminent and learned judge rejected the appellant's contention that the threat to cancel the bookings of the houses did not amount to coercion as defined under s 15. His Lordship further considered s 73 which, where relevant, reads as follows: 73 A person to whom money has been paid under coercion, must repay or return it. 24 . His Lordship followed the Privy Council decision in Kanhaya Lai v National Bank of India Ltd [1913] ILR Vol XL (Calcutta series) 598 and held that the word 'coercion' in the context of s 73 should be given its ordinary and general meaning, while the definition of coercion in s 15 should only apply for the purpose contained in s 14 which regulates free consent.

From all the aforesaid authorities in which the concept of duress, including economic duress, has been enunciated, the following principles may be culled: 96

Our courts are slow in invoking the concept of duress as defined in s 15 or to import the concept of economic duress unless there is positive evidence to that effect, which must satisfy the guidelines given by the Privy Council in Pao On.

The defence of duress or economic duress must be such as to vitiate free consent in order to render a contract voidable.

The concept of coercion as defined in s 15 cannot be equated with that in s 73 in which the word 'coercion' should be given an ordinary and general meaning.

Section 73 requires a person to whom money has been paid under coercion to repay or return it.” It can be discerned His Lordship was of the opinion that actionable duress isn’t confined to coercion alone as prescribed in s.15 of the Contracts Act 1950. 97 Earlier in Mohd Fariq Subramaniam v Naza Molar Trading Sdn Bhd [1998] 6 MLJ 193, James Foong J (later FCJ) equated actionable duress to vitiate a contract generally with coercion of will which vitiated consent adopted from the Singapore case of Third World Development & Anor v Atang Latief & Anor [1990] 1 SCR 533. This definition is wider than coercion defined in s.15 of the Contracts Act 1950. I am mindful here that the Contracts Act 1950 as stated in the preamble thereto is not a codifying statute but a statute relating to contracts. The Courts are therefore free to accept common law development as seen in the Federal Court case of Asia Television Ltd v Viwa Video Sdn Bhd [1984] 2 MLJ 304 and the Supreme Court case of Co-operative Central Bank Ltd (in receivership) v Feyan Development Sdn Bhd [1995] 3 ML 313. I thus share and adopt the views of both Low Hop Bing J and James Foong in both aforesaid cases.

Obviously the question as to whether there was coercion or duress operating during the formation of the contract is fact sensitive depending on the unique circumstances of each case. From the 98 trend of Malaysian cases that were decided on coercion or duress, mostly many of them failed including the cases of Mayland Lending Sdn Bhd v. Rossmaizati Mohamad & Anor [2015] 7 MLJ 216, Zainol @ Zainol Abidin bin Mohamed v. Lee Lim Huat [2015] 11 MLJ 395 and Wie Hock Beng v. Choy Teong Fui & Anor [2014] 1 LNS 1525 that all came before me. Nonetheless it is my opinion that the defence of economic duress is available to vitiate the agreement in an appropriate circumstance notwithstanding that the usual incidents of coercion such as committing or threatening to commit any act forbidden by the Penal Code or unlawful detaining or threatening to detain any property with the intention of causing any person to enter into an agreement are absent.

Cash flow is particularly critical in the construction industry because of its inherent multi tiered operational nature that is significantly dependent upon the payment financing of work operation by the immediate upper tier. This is one of the unique features of the construction industry that is distinctive from the other manufacturing industries. The criticality of cash flow has 99 already been recognised by the Malaysian Courts way back in the 1970s where Ong Hock Sim FJ held as follows in the Federal Court case of Bandar Raya Developments Bhd v. Wong Hoe Kan & Sons Sdn Bhd [1972] 1 MLJ 75: “We would also refer to the recent Court of Appeal decision in England reported in the Times of the 21st October, 1971 in the case of Frederick Mark Ltd v Schild (London) Times October 21 1971. The Court of Appeal in that case referred to Dawnay's case and categorically stated that the court agreed with every word Lord Denning said. This was to the effect that the purpose of interim certificates was to see that payments made under them were without any correlative right to set off or counterclaim as that would run counter to the very purpose of interim certificates – to provide cash for the contractor or sub-contractor to get on with the work. A debt due under an interim certificate was a debt of a class which ought not to be allowed to be made the subject of a set off or counterclaim.” 100

The issue before me in gist here is basically that the Plaintiff had been induced to agree and accept the May Agreement and the Supplementary Agreement under commercial pressure of suffocation of its cash flow by the Defendants. Hence, did that constitute economic duress sufficient to vitiate both the aforesaid agreements?

As alluded to by Low Hop Bing J (later JCA) in OCBC Securities (Melaka) Sdn Bhd (Formerly known as Sykt Tan, Chiow & Loh Securities Sdn Bhd) v. Koh Kee Huat (supra), the Pao On guidelines are instructive in determining the operationality of economic duress or otherwise. In Visu Sinnadurai’s leading Malaysian treatise Law of Contract (2011) 4 ed. 363, the relevant principles involved as distilled from the recent English decision of Kolmar Group AG v. Traxpo Enterprises PVT Ltd [2010] EWHC 113 (Comm) can be summarized as follows:

Imposition of illegitimate economic pressure inducing the entry of the relevant contract;

(ii) Presence of absence of protest by the victim; 101

(iii) Availability of practical alternatives to the victim; and

(iv) Steps taken by the victim to avoid the contract after the pressure ceased.

Firstly as to the imposition or exertion of illegitimate pressure, I find from the Malaysian Companies Commission’s corporate information record that the Plaintiff company is a small outfit having a paid capital of RM100.00 only. There are 2 shareholders and directors including PW1 who is a professional engineer experienced in housing development. It is obvious and the Defendant knew that the Plaintiff would hence have carried out the Works financed by sub contractors and suppliers’ credit pending ultimate payment by the Defendants. In spite of its limited financial capacity, the Plaintiff nonetheless completed the Works and very importantly obtained the CFO for the Project which had already been abandoned for 5 years. As the result, the First Defendant was by the efforts of the Plaintiff relieved from the dilemma it faced from Purchasers and the Ministry over the Project. The blacklisting of the First Defendant was also removed by the Ministry with the support of the Plaintiff which enabled the First Defendant to launch 102 its Taman Desa Ku Phase 2 project. It is therefore natural that the Plaintiff expected to be paid its corresponding consideration by the Defendants in accordance with the Construction Agreement. I am however appalled to find that the Defendants were not only ungrateful but also unscrupulous in not honouring their bargain under the Construction Agreement. Traditionally the illegitimacy of the pressure has often been understood and applied in the manner as prescribed in s. 15 of the Contracts Act 1950. There must hence have been the commitment of an act or threat to commit an act forbidden by the Penal Code. However I noted that The Concise Oxford English Dictionary 11 ed. 709 defined illegitimate as not in accordance with the law or accepted standards (emphasis is mine). It is broader than unlawfulness. I am therefore of the opinion that illegitimate pressure also encompasses the commitment of an act or threat to commit an act that is objectively malicious. In other words, it must have been calculated by one to secure an unjustified advantage by harming another including infliction of financial harm. However, there isn’t the need for physical threat to have occasioned. 103

As for the May Agreement, the Defendants in essence threatened the Plaintiff that it would receive nothing unless the Plaintiff agreed to sell its 19 units of bungalow houses back to the First Defendant at its dictated valuation price of only RM3.3 million. As found by me in paragraph 58 above, the Plaintiff was under tremendous financial predicament and stress at that point in time. The only excuse advanced by the Defendants in not wanting to issue the progressive payment claims to the Purchasers to pay the Plaintiff is due to the purported Plaintiff’s late completion of the Works. This excuse is however absolutely unfounded as held by me in paragraphs 44 to 48 above. I find that the Defendants were in fact aware of their untenable stance but it was in any event pursued tactically in bad faith to pressurize the Plaintiff in view of its desperate and precarious financial standing to secure a better deal for themselves. Consequently I find and hold that the Defendants in such circumstances illegitimately exerted pressure upon the Plaintiff against its will to induce the making of the May Agreement.

In respect of the Supplementary Agreement, I find that the Defendants again threatened not to pay the Plaintiff the balance of the RM2.3 million from the RM3.3 million agreed payment 104

It is plain that the Plaintiff was induced into the making of both the May Agreement and Supplementary Agreement because if not for the Defendants’ ultimatum, the Plaintiff would not have agreed to sell its 19 units of bungalow houses which the Plaintiff knew was at gross undervalue as well as agree to all the terms of the Supplementary Agreement which the Plaintiff knew were unfairly tilted in favour of the Defendants. I noticed that the settlement agreement was set aside in Utiriam a/l Sebestian Pillai v. 106 Stevenson Erutyanathan a/l Leo [2009] 5 AMR 846 when it was blatantly unfair and forced upon the plaintiff to execute it.

Secondly and as testified by PW1, I find that that Plaintiff indeed protested to the Defendants’ ultimatum at all material times before the making of the May Agreement and Supplementary Agreement. However the Defendants’ conduct showed that any further protest would be futile and of no avail. On the other side, the Defendants’ alter ego KEC who issued the ultimatum neither even bothered nor saw it fit to appear in Court to defend it in rebuttal and be subjected to scrutiny.

Thirdly and again as testified by PW1, I find that the Plaintiff had no practical alternative remedy but to give in to the Defendants’ ultimatum and agree to the making of both the May Agreement and Supplementary Agreement. It is plain that the Plaintiff needed immediate cash flow to pay its sub contractors and suppliers after having already exhausted its capacity to borrow from third parties. Otherwise, the Plaintiff could never stay afloat. In addition, the Plaintiff’s 19 units of bungalow houses were wrongfully caveated by the First Defendant and could not be sold to generate cash 107 flow. Bank financing was unavailable in view of the corporate size of the Plaintiff as well as the predicament it faced. It was impractical to commence civil litigation or even statutory adjudication to obtain the necessary reliefs by reason that the former would take at least a year and the latter at least several months if not also arguably lacking in power to declare a contract vitiated. Based on the unique circumstances encountered by the Plaintiff, I am satisfied that the Plaintiff had no other option but to succumb and give in to the Defendants’ ultimatum.

Fourthly I find and hold that the pressure or duress that arose and resulted in the May Agreement followed by the Supplementary Agreement continued since the Plaintiff remains unpaid todate for the payment from the proceeds of the Purchasers. In other words, the pressure or duress has not yet ceased. The continuing bad faith of the Defendants is further evidenced by the purported ongoing defect rectification of the Works that remained unfinished by the Defendants till this day. All the Defendants witnesses DW1, DW2, DW3 and DW4 who were involved could not satisfactorily explain to me why the defect rectification could be not completed earlier within reasonable time. It seems to me that the non 108 completion is the excuse to continue to withhold the Plaintiff’s payment. In any event, I find and hold that the Plaintiff finally took steps to avoid the contract, to wit: both the May Agreement and Supplementary Agreement as notified to the Defendants vide the Plaintiff’s solicitor’s letter dated 16 December 2016 followed by the filing of this Suit.

In the premises, I therefore find and hold that the Plaintiff has successfully invoked the defence of economic duress to vitiate or avoid the May Agreement as well as the Supplementary Agreement.

(iv) Plaintiff’s Claims

In consequence of my finding that the May Agreement and Supplementary Agreement have been vitiated or avoided, the resultant legal position is that as set out in ss. 65 and 66 of the Contracts Act 1950 that reads: 109 “65. Consequences of rescission of voidable contract When a person at whose option a contract is voidable rescinds it, the other party thereto need not perform any promise therein contained in which he is promisor. The party rescinding a voidable contract shall, if he has received any benefit thereunder from another party to such contract, restore the benefit, so far as may be, to the person from whom it was received.

Obligation of person who has received advantage under void agreement, or contract that becomes void When an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under the agreement or contract is bound to restore it, or to make compensation for it, to the person from whom he received it. 110

A pays B RM1,000 in consideration of B's promising to marry C, A's daughter. C is dead at the time of the promise. The agreement is void, but B must repay Athe RM1,000.

A contracts with B to deliver to him 250 gantangs of rice before the 1st of May. A delivers 130 gantangs only before that day, and none later. B retains the 130 gantangs after the 1st of May. He is bound to pay A for them.

A, a singer, contracts with B, the manager of a theatre, to sing at his theatre for two nights in every week during the next two months, and B engages to pay her RM100 for each night's performance. On the sixth night A wilfully absents herself from the theatre, and B, in consequence, rescinds the contract. B must pay A for the five nights on which she had sung.

A contracts to sing for B at a concert for RM1,000, which are paid in advance. A is too ill to sing. A is not bound to 111 make compensation to B for the loss of the profits which B would have made if A had been able to sing, but must refund to B the RM1,000 paid in advance.” In the Federal Court case of Berjaya Time Square Sdn Bhd v. M-Concept Sdn Bhd [2010] 1 CLJ 219, Gopal Sri Ram FCJ held as follows: “[29] In Linggi Plantations Ltd v. Jagatheesan [1971] 1 LNS 66, Lord Hailsham said that Muralidhar Chatterjee : is simply authority for the proposition that in section 65, where the words 'voidable' or 'rescind' are used, they can be applicable not merely to cases when a contract is brought to an end ab initio for fraud or undue influence or some similar cause, but also to cases where one party elects to terminate a contract repudiated by the other party through anticipatory breach or rejection of its fundamental terms. [30] In VK Kumaraswami Chettiar v. PASV Karuppuswami Mooppanar AIR [1953] Mad 380 an unusually strong Bench 112 of the Madras High Court comprising Rajamannar, CJ and Venkatarama Aiyar J explained the decision in Muralidhar Chatterjee as follows: There the appellant had entered into a contract with the respondents for distributing films in various areas and had paid a sum of Rs. 4000 as advance. On 1-12-1933 the appellant wrote a letter complaining that the defendants had committed several breaches of the contract and that he would have no more business dealings with them. After some correspondence the respondents accepted the repudiation by letter dated 31-1-1937. Then the plaintiff filed an action for damages for breach of contract and also for the return of the advance. It was found that the defendants had not broken the contract and on that finding the claim for damages was dismissed. With reference to the claim for return of advance it was contended by the defendants that the plaintiff who was in default could not recover the same; while the plaintiff contended that as the contract had been rescinded by the respondents on 21-1-1937 he was entitled to its return under Section 64, Contract Act. The Privy 113 Council accepted this contention and held that the plaintiff was entitled to recover the advance amount and that the right of the defendants was to make a cross claim for damages against the appellants for breach of contract. The decision as such has no bearing on the point now under discussion but it is argued that the case was dealt with as one falling under section 39, Contract Act; that the repudiation by the appellant contained in his letter dated 1- 12-1936 was held to give a right to the respondents to avoid the contract and the letter dated 31-1-1937 was treated as an acceptance of the repudiation by them. In the same manner, contends Mr. N. Rajagopala Aiyangar, the failure of the respondent to take delivery of the goods on 2-8-1943 gave the appellants only a right to avoid the contract and they not having done that, the contract stood. But the agreement which the Privy Council had to consider in Muralidhar Chatterjee v. International Film Ltd., was a continuing contract involving mutual obligations and is similar to the one which came before the House of Lords in Heyman v. Darwins [1942] AC 356. For the reasons already given, this decision cannot be taken as an authority for the 114 contention that section 39 applies even when there is a refusal to perform the contract after the time for performance has arrived. [31] In Rama Rao v. Bashu Khan Saheb [1998] 2 CTC 363, K Sampath J, after discussing the case of Shree Hanuman Cotton Mills v. Tata Air Craft Ltd AIR [1970] SC 1986 said this: While dealing with that case, the Supreme Court referred to the decision in Muralidhar Chatterjee v. International Film Co., Ltd., AIR [1943] PC 34 and held that restoration of benefit under section 64 of the Contract Act (section 65 of the Act) would arise only when there was no breach on the part of the person seeking such restoration. The situation here is also similar. In my view, the decision of the Supreme Court relied upon by the learned counsel for the appellants does not help the appellants at all. [32] In my view, the decision in Muralidhar Chatterjee v. International Film Co Ltd is readily explainable on the basis 115 of the doctrine of restitution. There the plaintiff had paid moneys to the defendants but had received nothing in return. It would be an unjust enrichment to have permitted the defendants to keep the money when they had put an end to the contract. However, the defendants had a valid counterclaim for damages for breach of contract against the plaintiff. And they would, in recovering those damages, be obliged to give the plaintiff credit for the monies he had already paid. The true principle is this. A contract breaker must pay damages to the innocent party. However, if he has made any payment under the contract (not being a true deposit for the purchase of movable or immovable property) the contract breaker is entitled to have that payment set off against the damages he has to pay. However, he cannot seek to recover any benefit he may have conferred upon the innocent party where he is himself guilty of a breach of contract. Were it otherwise, a contract breaker will be in a position to take advantage of his own wrong…” 116

As the result, I find and hold the Plaintiff must be put in the position as provided by the Construction Agreement in the absence of the May Agreement and Supplementary Agreement. Since the Plaintiff has completed the Works as found, the Plaintiff must be paid subject to any contractual or otherwise equitable set off of the Defendants as well as any previous payment made by them to the Plaintiff.

Consequently the Plaintiff’s claim may conveniently be divided into two portions, to wit the loss arising from the sale of the 19 units of bungalow houses to the First Defendant as well as the payment from the final progressive claim to the Purchasers. These are the Plaintiff’s consideration under clauses 2.1(a) and (b) of the Construction Agreement respectively.

In respect of the former, I find and hold that the appropriate measure of compensation would be the difference between the market value of the units at the material time and the sum of RM3.3 million paid by the First Defendant since the transfer of the 19 units of bungalow houses has already been perfected in 2015 and possibly further changed hands. 117

The Plaintiff appointed PW3, a registered valuer to opine on the fair market value of the 19 units of bungalow houses at the material time in mid 2015. I have carefully reviewed the expert report and opinion of PW3 and find that his valuation of RM5,590,000.00 is fair and reasonable for these houses. On the other hand, I observed that the value of RM3.3 million forced upon the Plaintiff by the Defendants through KEC is arbitrary. The Defendants neither appointed a registered valuer to corroborate their valuation nor procured the attendance of KEC in Court to justify the valuation. In addition, the case of Sukiran bin Sarman v. Petronas Dagangan Bhd [2014] 7 MLJ 222 relied upon by the Defendants is thus distinguishable on the facts.

In the premises, I find and hold that the fair compensation payable to the Plaintiff is the difference between RM5,590,000.00 and RM3,300,000.00 which amounted to RM2,290,000.00.

As to the payment derivable from the progressive claims to the Purchasers, it is plainly provided in clause 2.1(b) of the Construction Agreement that the Plaintiff is entitled to the Defendants’ remaining payment claims receivable from the 118 Purchasers subject to the minimum of RM3,100,000.00. The Defendants did not tender any cogent evidence at the trial as to the remaining amount truly payable by the Purchasers. In any event, it is evident that the Defendants in breach of the Construction Agreement failed, refused or neglected to issue their remaining progressive claims to the Purchasers notwithstanding that the CFO had been issued. As the result, the Plaintiff was deprived of its payment accordingly.

In the circumstances, I find and hold that in breach of contract by the Defendants, the Plaintiff should forthwith be compensated the minimum sum of RM3.1 million as claimed as damages.

Consequently, I hereby assess the amount of the Plaintiff’s claim payable by the Defendants totals to RM 5,390,000.00 being RM2,290,000.00 + RM3,100,000.00. This sum of RM5,390,000.00 is of course subject to such counterclaim of the Defendants as proved and found below. For completeness, I am mindful that the Defendants have relied on clause 10.2 of the Construction Agreement in attempt to deny the 119 Plaintiff of its whole consideration thereunder, thus defeating the Plaintiff’s claims. The provision in clause 10.2 is however clearly unavailable to both the Defendants because they were jointly at fault in breach of contract for not complying with clause 3.2 (a) (ii) to furnish the Plaintiff with all the said Building Plans and Specifications as prescribed and I so find and hold accordingly. In any event, I further hold that clause 10.2 is a penalty and hence unenforceable following Selva Kumar a/l Murugiah v. Thiagarajah a/l Retnasamy [1995] 1 MLJ 817 that had a similarly harsh contractual provision.

Defendants’ Counterclaim

Although the Defendants pleaded for RM4,225,466.50, they eventually submitted a counterclaim of RM4,042,477.87 after trial comprising of four heads of claim, to wit:

cost of rectification of defects amounting to RM2,980,661.97 as at 5 July 2016; 120

(ii) bank guarantees, deposits and bank charges amounting to RM945,092.38;

(iii) consultants fees and utilities payment amounting to RM114,875.15; and

(iv) costs of completing STP amounting to RM184,837.00.

Firstly as to the costs of rectification of defects, I have held as follows in KC Leong Holdings Sdn Bhd v. Datin Moh Bee Ling [2015] 7 MLJ 10 which has been shared and followed by Lee Swee Seng J in Poratha Corporation Sdn Bhd v. Technofit Sdn Bhd [2018] AMEJ 0214 with emphasis added: "[63] The defendant‘s cross-claim is massive comprising of essentially three heads of claim. Firstly there is special damages amounting to RM1,065,370.92 for remedying and rectifying multiple, gross and latent defects as submitted. In this respect, the defendant has in substantiation produced the invoices of her rectification contractors such as Walk & Turn Builders, Shin Tat Construction Trading Sdn Bhd, DJ 121 Deconway Furniture, Itex Power Enterprises, Kim Soon Electrical Engineering, etc that accumulated to that amount. There is no serious dispute that the defendant has paid against these invoices. [64] On scrutiny of the invoices, I find that the items therein comprise of purported remedial work beyond those dealt under the third issue herein. In other words, there is a lot of other unexplained work. The defendant has merely collated all her payments made to the rectification contractors and held them entirely to the account of the plaintiff. This is plainly unsatisfactory and does not meet the requirement of proof of damages as held by the court of appeal in Sony Electronics (M) Sdn Bhd v Direct Interest Sdn Bhd [2007] 2 MLJ 229; [2007] 2 AMR 229. In building contract litigation, I have expected the complainant to carefully sieve through and tabulate each and every relevant defect and the costs of remedying them systematically preferably also in a Scott schedule. The tabulation must cross-refer to the defect as substantiated preferably by photographic records or 122 other cogent mode of proof together with the corresponding item of expenses or costs incurred to remedy the defect as substantiated by the work invoices. The complainant must in honesty disregard those works that constituted improvement or addition/modification rather than rectification. In short, the complainant cannot ‘throw the whole kitchen sink’ of alleged unprocessed defects and expenses to the court to have them sorted out as presented by the defendant here.”

The Defendants called DW2 who is not a registered quantity surveyor to testify on the defect rectification costs. He is an employee of the First Defendant who joined the company only in April 2016. Hence he has vested interest and not truly an independent witness. In addition, he had no personal knowledge of the defects that subsisted and rectified prior thereto. I have scrutinised his testimony and noticed that he has ventured to give expert opinion instead of merely collating the factual evidence of the defects and the corresponding rectification costs. I find his explanation on the assessment of the defect rectification costing of RM30,000.00/unit for 99 units and RM6,000/unit for 63 units overly 123 general and theoretical divorced from the realities of the actual Project conditions. It was merely a guesstimate. In any event, I find and hold that the Defendants failed to prove the defect rectification costs systematically as per the guidelines outlined by me above. The failure is fatal to the Defendants’ claim for several reasons. Firstly the Plaintiff’s obligation in respect of defect rectification is set out in clause 6.3 of the Construction Agreement seems limited to painting works and electrical works only. The rest of the defect rectification is under the purview of the Second Defendant and not claimable against the Plaintiff. Secondly and more pertinently, the Defendants have failed to satisfy me that there were indeed defects that required rectification to the extent as claimed by them. I reiterate my findings in paragraphs 58 to 60 above. I noticed that certain photographs tendered by them were those produced by Purchasers but not by the architect or civil & structural engineer at the material time on completion of the Works. The cogency of these photographs is questionable by reason that it is unknown as to when these photographs were taken especially to ascertain if they were indeed due to wear and tear subsequent to vacant possession afforded to the Purchasers. Thirdly, I have nonetheless reviewed the Defendants’ documentary evidence produced in 124 bundles E and I and find that they were no different from that produced in KC Leong Holdings Sdn Bhd v. Datin Moh Bee Ling (supra) where the ‘whole kitchen sink’ of unprocessed vouchers were thrown to the Court. I noticed that certain vouchers were produced in bad faith for defect rectification supposedly done in 2014. I further noticed that they included payment vouchers for erection of workers’ quarters in end 2015 as well as show house for the Desa Ku Phase 2 that has nothing to do with the Plaintiff whatsoever. Fourthly, the Defendants have purportedly entered into a contract for major repairs amounting to RM2.97 million as early as in April 2015 in further attempt to support their claim, that is about 2 months before the Defendants for the first time made hue and cry over their alleged defective work with the Plaintiff that led to the execution of the Supplementary Agreement. As acknowledged by DW1, this contract is fishy and likely concocted for purposes of trial purposes. This is to me yet another indicia of bad faith if not fraud that destroyed the credibility of their claim. Fifthly and finally, the Defendants were unable to satisfactorily explain to me as to why the defect rectification is still uncompleted todate after almost 3 years. This again smacks of bad faith and goes to show that either the defects do not exist as alleged and/or 125 that it is merely a ploy to justify the continuing withholding of the Plaintiff’s money.

The Plaintiff has in rebuttal appointed PW2, an independent registered quantity surveyor to opine on the Defendants’ alleged defect rectification costs. It is seen from his analysis that the estimated costs that would be incurred (if any) is significantly lower than that claimed by the Defendants. However PW2 was only able to methodically estimate the fair costs of defect rectification on per unit of bungalow basis that ranged between RM4,369.78 and RM5,627.19 for the whole building depending on the type of unit involved. If it is only for painting works, then the equivalent fair costs on per unit of bungalow basis only ranged from RM350.34 and RM556.95 respectively. The total amount of estimated fair costs involved could not however be established because there is no cogent evidence adduced by the Defendants as to specifically which units were affected.

Nonetheless since there is some evidence of minor defects subsisting in the completed Works as acknowledged by the Plaintiff and the Defendants’ at the meeting with the Ministry on 19 126 May 2015, I find that the Plaintiff should compensate a fair global sum of RM150,000.00 to the Defendants just as in Ke Seng Enterprise Sdn Bhd v. Lembaga Pembangunan Perumahan Dan Bandar [2011] 2 CLJ 228 where a fair global sum was awarded on the circumstances of the case.

Secondly as to the claim for bank guarantee, deposit and bank charges, I find that the bank guarantee of RM500,000.00 given by the Defendants to IWK was only for security for completion of the STP. There is no evidence that the guarantee was called and forfeited by IWK. Consequently, this sum of RM500,000.00 cannot be recovered from the Plaintiff. I am of the view and so find and hold that the Plaintiff ought to only to pay for the expenses to procure the bank guarantee that amounted to only RM5,451.60.

In respect of the other guarantees and deposits, it is provided in clauses 6.1 and 6.2 read together of the Construction Agreement that the bank guarantee for the sewerage piping is under the purview of the Second Defendant’s responsibility. Similarly the deposits payable to SADA, JKR and MPK are under the purview of the Defendants because the Plaintiff was only required to pay 127 contributions but not deposits as per clause 4.1 of the Construction Agreement. Moreover DW2 has conceded at the trial that the deposits would be refunded to the Defendants.

Thirdly as for consultant’s fees payment, the Plaintiff admitted to RM63,000.00 that has been by paid the Defendants to H.H. Lau Architect for RM31,800.00, Lumbini Consultancy for RM21,200.00 and Perkhidmatan Perunding Utara for RM10,000.00 respectively. This claim is thus deem conceded.

However I find and hold that the Plaintiff is not liable to the further consultant fee payment of RM13,409.00 that was paid to H.H. Lau Architect because it was for the other phases of the Desa Taman Ku development beyond the 203 units of bungalow houses.

Fourthly the Defendants claimed the sum of RM184,837.00 for the construction and completion of the STP comprising of payment to Kejuruteraan Aditeknik (M) Sdn Bhd amounting to RM44,037.00, Aspes Builders Sdn Bhd amounting to RM137,800.00 and for painting and repair of the door amounting to RM3,000.00. 128

As found by me in paragraph 51 above, the construction of the STP was deferred. It was budgeted for by the Plaintiff within its Job Scope and ought to be carried out by the Plaintiff. However the Defendants within their purported rights provided in the Supplementary Agreement deprived the right of the Plaintiff to carry out the STP works by appointing others to do so instead. In this connection, I find that the Defendants initially appointed Kejuruteraan Aditeknik (M) Sdn Bhd to carry out and complete the STP works at the contract sum of RM63,400.00. However the work was subsequently suspended for more than a year in October 2016 and later resumed to completion by Aspes Builders Sdn Bhd.

In the premises, I find and hold that the Plaintiff should fairly compensate the sum of RM63,400.00 only and the balance of the claim of the Defendants to be recovered by them from Kejuruteraan Aditeknik (M) Sdn Bhd.

Consequently, I hereby assess the amount of the Defendants’ counter claim payable by the Plaintiff totals to RM281,851.60 being RM150,000.00 + RM5,451.60 + RM63,000.00 + RM63,400.00

(vi) Illegality of Construction Agreement

Although unpleaded in the Defendants’ statement of defence and counterclaim and statement of issues to be tried, the Defendants raised for the first time in its closing submission that the Construction Agreement was tainted with illegality. According to the Defendants, illegality can be raised at any time following Keng Soon Finance Bhd v. MK Retnam Holdings Sdn Bhd & Anor [1989] 1 MLJ 457.

In this regard, the Defendants referred to clause 2.1(a) and (b) of the Construction Agreement that the 19 units of the Plaintiff’s bungalow houses were to be immediately transferred to Tijuana Homes Sdn Bhd which was neither involved in any capacity nor contributed to the Project in any way. According to the Defendants, the owner of Tijuana Homes Sdn Bhd is a friend of Gunasegaran Naidu who was the official from the Ministry that introduced the rescue contract to both the Plaintiff and the Defendants. Further according to the Defendants, the transfer of the 19 units of bungalow houses was presumably for gratification for bringing in 130 the Plaintiff as rescue contractor and the Ministry apply pressure upon the Defendants and their consultants to ensure that the CFO was issued as well as threat not to remove the First Defendant from the Ministry’s black listing. In addition, the Defendants alleged that PW1 had instructed that all documents relating to the transfer of the units were to be sent directly to Gunasegaran Naidu for signatures by the signatories of Tijuana Homes Sdn Bhd.

In the premises, the Defendants contended that Tijuana Homes Sdn Bhd was in reality under the control of Gunasegaran Naidu and was simply used as a conduit to facilitate the transfer of the 19 units of bungalow houses as consideration. In support of their contention of illegality, the Defendants relied upon ss. 24 and 25 of the Contracts Act 1950 that provide: 131 “24. What considerations and objects are lawful, and what are not The consideration or object of an agreement is lawful, unless-

it is forbidden by a law;

it is of such a nature that, if permitted, it would defeat any law;

it is fraudulent;

it involves or implies injury to the person or property of another; or

the court regards it as immoral, or opposed to public policy. 132 In each of the above cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void.

A agrees to sell his house to B for RM10,000. Here, B's promise to pay the sum of RM10,000 is the consideration for A's promise to sell the house, and A's promise to sell the house is the consideration for B's promise to pay the RM10,000. These are lawful considerations.

A promises to pay B RM1,000 at the end of six months, if C, who owes that sum to B, fails to pay it. B promises to grant time to C accordingly. Here the promise of each party is the consideration for the promise of the other party, and they are lawful considerations.

A promises, for a certain sum paid to him by B, to make good to B the value of his ship if it is wrecked on a certain voyage. Here A's promise is the consideration for B's 133 payment, and B's payment is the consideration for A's promise, and these are lawful considerations.

A promises to maintain B's child, and B promises to pay A RM1,000 yearly for the purpose. Here the promise of each party is the consideration for the promise of the other party. They are lawful considerations.

A, B and C enter into an agreement for the division among them of gains acquired, or to be acquired, by them by fraud. The agreement is void, as its object is unlawful.

A promises to obtain for B an employment in the public service, and B promises to pay RM1,000 to A. The agreement is void, as the consideration for it is unlawful.

A, being agent for a landed proprietor, agrees for money, without the knowledge of his principal, to obtain for B a lease of land belonging to his principal. The agreement between A and B is void, as it implies a fraud by concealment, by A, on his principal. 134

A promises B to drop a prosecution which he has instituted against B for robbery, and B promises to restore the value of the things taken. The agreement is void, as its object is unlawful.

A's estate is sold for arrears of revenue under a written law, by which the defaulter is prohibited from purchasing the estate. B, upon an understanding withA, becomes the purchaser, and agrees to convey the estate to A upon receiving from him the price which B has paid. The agreement is void, as it renders the transaction, in effect, a purchase by the defaulter, and would so defeat the object of the law.

A, who is B's advocate, promises to exercise his influence, as such, with B in favour of C, and C promises to pay RM1,000 to A. The agreement is void, because it is immoral.

A agrees to let her daughter to hire to B for concubinage. The agreement is void, because it is immoral, though the letting may not be punishable under the Penal Code. 135

Agreement void if consideration and objects are unlawful in part If any part of a single consideration for one or more objects, or any one or any part of any one of several considerations for a single object, is unlawful, the agreement is void. Illustration A promises to superintend, on behalf of B, a legal manufacture of indigo, and an illegal traffic in other articles. B promises to pay to A a salary of RM10,000 a year. The agreement in void, the object of A's promise and the consideration for B's promise, being in part unlawful.” The Defendants also refer to the recent Court of Appeal case of John Amborse v. Peter Anthony & Anor [2017] 4 MLJ 374 where Tengku Maimun JCA held as follows: “[40] The principles that can be gleaned from Merong Mahawangsa are as follows: 136

no court ought to enforce an illegal contract where the contract is ex facie illegal, even if illegality was not pleaded;

where the contract is not ex facie illegal and illegality was not pleaded, the court can still take judicial notice of illegality when facts which have not been pleaded emerge in evidence in the course of the trial showing clearly the illegality;

the court is bound to intervene if illegality is brought to its notice; and

such judicial notice can be taken at any stage, either at the court of first instance or at the appellate stage. [41] In our view, the most pertinent principle encapsulated in Merong Mahawangsa is that the courts are bound at all stages to take notice of illegality, whether ex facie or which later appears, even though not pleaded, and that it was contrary to public policy that a person should be hired for money or valuable consideration, to use his position and interest to procure a benefit from the government.” 137 Earlier in the Federal court case of Merong Mahawangsa Sdn Bhd & Anor v. Dato Sharzryl Eskay bin Abdullah [2015] 5 MLJ 619, Jeffrey Tan FCJ held as follows: “[77] There could be no mistake about it, the RM20m was intended as payment for service rendered by the Respondent to secure the bridge project for the Consortium. But what sort of service was rendered by the respondent? In the instant case, the answer was provided by the respondent. The respondent pleaded that he ‘used his influence and good relationship with the Government of Malaysia to procure the original bridge project (‘SIG project’) for the benefit and interest of the (first appellant)’. In his amended statement of claim at 164–166 AR, the respondent particularised his close relationship with named Federal Ministers and his dealings with Federal Ministers with respect to the bridge project. But it was not in pleadings alone that influence peddling was admitted by the respondent. In his witness statement (see 564–580AR), the respondent affirmed his pleaded facts and even provided further details of his influence and the manner in which he 138 exerted his influence and convinced those Federal Ministers (in particular, see 569–571AR. ‘An agreement, the object of which is to use the influence with the ministers of government to obtain a favourable decision, is destructive of sound and good administration. It showed a tendency to corrupt or influence public servants to give favourable decisions otherwise than on their own merits. Such an agreement is contrary to public policy. It is immaterial, if the persons intended to be influenced are not amenable to such recommendations’ (Mulla Indian Contract and Specific Relief Acts (13th Ed Vol 1) at 702–703). On the facts and on the face of it, it was so plain and obvious that the consideration was unlawful, and that the letter of undertaking was void. On that ground, the claim should have been dismissed.”

The Defendants concluded by submitting that although the inserting of Tijuana Homes Sdn Bhd on the face of it seemed lawful and innocuous, yet the exercise was actually carried out in order to achieve an unlawful end following Hasmah Bee Abdul Rahman v. Kenny Chua Kien Lam [2006] 5 MLJ 236. The Plaintiff has come to Court to seek relief pursuant to the 139 Construction Agreement with unclean hands and must consequently be denied any relief whatsoever following Nyan Hon & Bros Sdn Bhd v. Metro Charm Sdn Bhd [2009] 6 MLJ 450.

The Plaintiff in response strenuously contended it is trite law that the parties are bound by the pleadings. In the case of illegality, Ismail Khan CJ (Borneo) held as follows in the Federal Court case of Lo Su Tsoon Timber Depot v. Southern Estate Sdn Bhd [1971] 2 MLJ 161: “The point whether the court can take cognizance of a point of illegality, whether pleaded or not, has been the subject of numerous decisions. I need only refer to the case of Snell v Unity Finance Limited [1963] 3 All ER 50 at p 55 where most of the authorities were dealt with. In that case Willmer L.J. referred with approval to the propositions set out by Devlin J. in Edler v Auerbach [1949] 2 All ER 692 who, following the reference to North-Western Salt Company Limited v Electrolytic Alkali Company Limited [1914-15] All ER Rep 752, said: 140 "That case authorises, I think, four propositions: first, that where a contract is ex facie illegal, the court will not enforce it, whether the illegality is pleaded or not; secondly, that where, as here, the contract is not ex facie illegal, evidence of extraneous circumstances tending to show that it has an illegal object should not be admitted unless the circumstances relied on are pleaded; thirdly, that where unpleaded facts, which, taken by themselves show an illegal object, have got in evidence (because, perhaps, no objection was raised or because they were adduced for some other purpose), the court should not act on them unless it is satisfied that the whole of the relevant circumstances are before it; but, fourthly, that where the court is satisfied that all the relevant facts are before it and it can see clearly from them that the contract had an illegal object, it may not enforce the contract, whether the facts were pleaded or not."”

The Plaintiff contended that the Construction Agreement plainly isn’t of the first category of being ex facie illegal. The nature of the Defendants’ contention fell under the second category that required the circumstances relied upon to be pleaded. In this 141 connection, the Defendants didn’t plead the owner of Tijuani Homes Sdn Bhd as well as that Tijuani Homes Sdn Bhd wasn’t the Plaintiff’s nominee. The Defendants ran foul of Order 18 rule 8(1)(b) of the Rules of Court 2012 that provides: “8. Matters which shall be specifically pleaded (O. 18 r. 8)

A party shall in any pleading subsequent to a statement of claim plead specifically any matter, for example, performance, release, any relevant statute of limitation, fraud or any fact showing illegality-

which he alleges makes any claim or defence of the opposite party not maintainable;

which, if not specifically pleaded, might take the opposite party by surprise; or

which raises issues of fact not arising out of the preceding pleading.” 142

The Plaintiff further contended that even if the nature of the Defendants’ contention fell under the third category where the unpleaded facts by themselves show an illegal object, the Court should not act on them unless it is satisfied that the whole of the relevant circumstances are before it. In this respect, the whole of the relevant circumstances were not put before the Court, viz:

Who is the owner of Tijuana Homes Sdn Bhd?;

(ii) What exactly is the connection between Gunasegaran Naidu and Tijuana Homes Sdn Bhd?;

(iii) What is the nominee arrangement between the Plaintiff and Tijuana Homes Sdn Bhd?;

(iv) Is Tijuana Homes Sdn Bhd the Plaintiff’s nominee?; and

Was it the Plaintiff or the Defendants who requested Tijuana Homes Sdn Bhd to be the Plaintiff’s nominee? 143 In the Supreme Court case of Lim Kar Bee v. Duofortis Properties (M) Sdn Bhd [1992] 2 MLJ 281 Peh Swee Chin FCJ held as follows: “Courts have always set their face against illegality in any contract. It is very well settled that the courts take judicial notice of such illegality and refuse to enforce the contract, and such judicial notice may be taken at any stage, either at the court of first instance or at the appellate stage irrespective of whether illegality is pleaded or not where the contract is ex facie illegal. When the contract is not ex facie illegal, then on the question of pleadings, there is only one situation where illegality need not be pleaded when the court can still take judicial notice of illegality and refuse to enforce it. The situation is when facts which have not been pleaded emerge in evidence in the course of the trial showing clearly the illegality, eg the illegal purpose of the contract, or its illegal consideration, with the presence of all relevant circumstances, see eg Palaniappa Chettiar v Arunasalam Chettiar 1, Leong Poh Chin v Chin 144 Thin Sin 2, and North Western Salt Co Ltd v Electrolytic Alkali Ltd 3 just to mention a few.”

Finally the Plaintiff submitted that the Defendants failed to discharge their burden of proof by adducing sufficient cogent evidence that the transfer of the 19 units of bungalow houses was not as a stakeholding. Consequently, this illegality argument by the Defendants ought to be rejected outright.

I am perplexed to observe that the Defendants whom I found have not conducted themselves honourably and come to Court with clean hands as far as the performance of the Construction Agreement as well as the entry of the May Agreement and Supplementary Agreement are concerned are now cross contending that the Plaintiff too has not come to Court with clean hands by having indulged in illegality in the making of the Construction Agreement. It seems to me to be a desperate last minute counter attack made in afterthought to save themselves. 145

First and foremost, I am with the Plaintiff that the Construction Agreement is not ex-facie illegal. As to the illegal object as alleged by the Defendants, it must be specifically pleaded but that wasn’t done by them. Furthermore, it wasn’t also specifically put to the Plaintiff’s key witness PW1 at the trial in breach of the Browne v Dunn principle as required in by the Court of Appeal in Aik Ming (M) Sdn Bhd & Anor v. Chang Ching Chuen & Ors and Another Appeal [1995] 2 MLJ 770. The Plaintiff was therefore caught by surprise and would severely be prejudiced if the Defendants’ allegations are entertained at this juncture.

In any event I hold that both the legal and evidential burden of proof lie upon the Defendants to prove the illegal object as so alleged by them and put forth the whole circumstances before me. I am satisfied from PW1’s testimony that the 19 units of bungalow houses were transferred to Tijuana Homes Sdn Bhd as stakeholding at the request of KEC during the negotiations that led to the making of the Construction Agreement. This is because KEC was worried that the Plaintiff may not finish the Works. Hence both parties agreed to transfer the 19 units to a nominee company and Gunasekaran Naidu being the middle person who brought the 146 parties together suggested to utilize his friend’s company and both parties agreed thereto. Consequently Tijuana Homes Sdn Bhd was meant to hold the 19 units as both nominee and stakeholder and later transfer the 19 units back to the Plaintiff upon the completion of the Project with CFO. If it was otherwise as alleged by the Defendants, it is for them to adduce cogent evidence to rebut PW1 by calling KEC if not also Gunasekaran Naidu and the owner of Tijuana Homes Sdn Bhd as witnesses. This was not done. In addition, I would have expected the Defendants to ‘put the money where the mouth is’ by making a report to the Malaysian Anti Corruption Commission and risk the hazards of having made a false report or face a malicious prosecution suit. This was not done too. It is convenient but ridiculous to suggest that adverse inference ought to be drawn against the Plaintiff for not calling them instead. Hence, the Defendants have failed to meet their requisite burden of proof accordingly. 147 More pertinently as it turned out, I noted that the 19 units of bungalow houses were in fact re-transferred back by Tijuana Holdings Sdn Bhd to the Defendants because of the May Agreement and Supplementary Agreement. This transfer back would not have happened if the 19 units was the illegal object or consideration that had already accrued to and owned by someone else.

Finally the Defendants also unfairly in my view painted that there was something sinister on the part of the Ministry putting pressure for the Project to be completed fast as testified by DW6. There is nothing sinister about the Ministry putting pressure here in my opinion because the Project had been abandoned for a long time leaving a few hundred unhappy and disgruntled Purchasers.

I therefore find that there is neither illegality nor illegal object disclosed in this case. 148

This is a classic construction contract case which highlighted the plight of the contractor that was bullied by the developer. But it is also a rare case where the plea of economic duress succeeded on its own peculiar special facts. Ordinarily, the common recourse is now to resort to statutory adjudication under the Construction Industry Payment and Adjudication Act 2012 to address cash flow problems. Nonetheless common law remedies including that premised on economic duress always remain an option particularly in appropriate acute cash flow hardship scenarios inflicted upon by the non paying party.

For the foregoing reasons, I find and hold that the Plaintiff succeeded in its claim amounting to RM5,390,000.00 subject to the Defendants’ equitable set off of their counterclaim amounting to RM281,851.60 only. The nett amount due and payable by the Defendants to the Plaintiff is therefore RM5,108,148.40. Accordingly I enter judgment for the Plaintiff in the following overall terms against the Defendants: 149 (i.) a declaration that the 22 May 2015 agreement and the Supplementary Agreement dated 6 July 2015 are set aside; (ii.) payment of RM5,108,148.40 with interest thereon at 5% per annum from the date of the writ till full realization; and (iii.) costs of RM125,000.00. Dated this 27 April 2018 t.t LIM CHONG FONG JUDGE HIGH COURT GEORGETOWN PENANG 150 COUNSEL FOR THE PLAINTIFF: ARUMUGAM GANAPATHY (MOSES MATHEW GEORGE WITH HIM) SOLICITORS FOR THE PLAINTIFF: GHAZI & LIM COUNSEL FOR THE DEFENDANTS: SARAVANESH SUPRAMANIAM