Bond M & E (KL) Sdn Bhd v Isyoda (M) Sdn Bhd (WA-22C-2-01/2016)

This case explores the question of who a sub-contractor should sue for payment due to it under a Sub-Contract with its main contractor when 2 there is a separate agreement between the main contractor and its employer that the employer would pay the sub-contractor direct. The sub-contractor is not a party to that agreement between the main contractor and its employer. There has been some previous direct payments from the employer to the sub-contractor. [2] Here we have a curious case where when sued by the Plaintiff for an amount not disputed, the Defendant is saying they are not liable because the Third Party should be paying under the contract between the Defendant and the Third Party and the Third Party is pushing it back to the Defendant saying that they are not liable to pay as the Defendant has breached the Settlement Agreement between them and the Defendant! The Project and the Parties [3] On 7.2.2007, the Plaintiff, as sub-contractor, was awarded a contract by the Defendant, as main contractor, for Electrical Services in respect of a project known as “Cadangan Pembangunan Enterprise Komersial Dan Perdagangan (Parcel B) Yang Mengandungi: i) ‘Retail’, ‘Supermarket’, ‘Foodcourt’ & ‘Cafe’, ‘Techno Centre’ dan ‘Mega Tutorial’ di Tingkat Sub Basement hingga Tingkat 7, ii) Pangsapuri Servis, iii) Hostel, iv) Tempat Letak Kereta di Tingkat Basement dan Sub Basement di Atas Sebahagian 3 Lot 365, 262 dan 174, Seksyen 92, Jalan LokeYew Kuala Lumpur-Zon. e@ Fraser.Biz.Park” (“the said Project”) according to the terms contained therein for the total contract sum of RM11,742,471.00 (“the Sub-Contract”). [4] Earlier on 27.11.2006, the Third Party had awarded the main contract to the Defendant as the turnkey (design & build) contractor. The contract document between the Third Party and the Defendant was executed on 11.12.2006 (collectively referred as the “Main Contract”). [5] For ease of reference, consistency and where relevant, the Plaintiff shall also be referred to as “Bond”, the Defendant as “Isyoda” and the Third Party as “Brampton”. [6] Subsequent to the said Sub-Contract and from time to time, Isyoda also issued variation orders and instructed Bond to proceed with additional works in respect of the Sub-Contract for the amount stated in each variation order based on the instructions of the client in the said Project, Brampton. The total amount of the variation orders in the Sub-Contract is RM1,944,543.54 (“the said Variation Orders”). As a result, the total Sub-Contract sum was revised from RM11,742,471.00 to RM13,687,014.54 (“the Final Contract Sum”). 4

The electrical system was duly handed over by Bond to Brampton on 23.9.2010. Bond's letter dated 27.9.2010 referred to that and Isyoda had also confirmed the same with Brampton via its letter dated 30.9.2010. Based on the agreement between the parties, the maintenance period for Bond’s works commenced on 23.9.2010 and expired on 22.3.2012. [8] Brampton issued a statement of partial possession dated 6.10.2010 confirming that all works carried out by Isyoda in the said Project including the electrical system works carried out by Bond pursuant to the Sub-Contract has been completed and handed over (except for one lot of external car park at Grid 11 under the Defendant’s job scope) to Brampton. This was also communicated by Isyoda to the Bond via its letter dated 1.8.2011. [9] Simply put, Bond had fulfilled its obligations under the Maintenance Period (Defect Liability Period) pursuant to the Sub-Contract. On 18.10.2012, Isyoda prepared and forwarded the Final Account and the relevant Statutory Declaration to be executed by Bond. Bond duly executed both the Final Account and the Statutory Declaration and returned the same to Isyoda via its letter on 19.10.2012. 5

According to the Final Account and Statutory Declaration, it was confirmed that the sum of RM2,521,043.96 was still owing by Isyoda under the Sub-Contract. [11] By way of introduction, it should also be mentioned here that Isyoda awarded a Sub-Contract to GAE Technical Services Sdn Bhd (“GAE”) for the Project’s air-conditioning and ventilation system (“ACVS”) works via a letter of award dated 7.2.2007 (“GAE’s Sub-Contract”). The ACVS is also referred to as the ACMV i.e. air-conditioning and mechanical ventilation system in some documents exhibited. This will feature in the discussion with respect to the claim by Isyoda under the indemnity agreement with Brampton. Prayers [12] On 19.8.2011, 29.1.2012 and 26.11.2014, Bond received part payments in the sum of RM800,000.00, RM400,000.00 and RM50,000.00, direct from Brampton, leaving a total balance outstanding sum of RM1,271,043.96 which remains unpaid by Isyoda. Bond as Plaintiff, sued Isyoda as Defendant, for the said sum together with interest and costs. 6

The Defendant denied the claim, contending that there was a “Direct Dealing & Payment Agreement” between the all the three parties where Bond will be paid by Brampton directly. [14] The Defendant also commenced Third Party proceedings against the Third Party to seek an indemnity from the Third Party under the terms of the Settlement Agreement. [15] The Defendant brought in Brampton as Third Party, claiming an indemnity under the following agreements entered into between them subsequent to the completion of the Project:

Supplemental Agreement (Issues) dated 15.6.2011; See: pages 89-133 of CBOD1 2. Supplemental Agreement (M&E) dated 15.6.2011; See: pages 134-139 of CBOD1 3. Settlement Agreement dated 4.2.2013. See: pages 140-146 of CBOD1 7 [16] Isyoda as Defendant, prayed for the following against Brampton as Third Party: a) An order for indemnity of the sum of RM1,271,043.96 or any sum that the Court orders to be paid to the Plaintiff; b) Alternatively, an order that the sum of RM1,271,043.96 (or any part thereof) to be paid by the Third party to the Plaintiff; c) An order for indemnity for interest that the Courts orders to be paid to the Plaintiff; d) An order for indemnity of costs that the Court orders to paid to the Plaintiff; e) An order for indemnity on any other monetary relief that the Court orders to be paid to the Plaintiff; f) Interest at the rate of 5% per annum on any sum that the Third Party fails to pay to the Defendant pursuant to the order made herein; g) Costs of the Third Party proceeding; h) Any further relief and other relief that the Court deems fit to grant. 8 Principles Whether there is a Direct Dealing and Payment Agreement between Bond, Isyoda and Brampton whereby Isyoda no longer has the obligation to make payment to Bond under the said Sub-Contract (“Direct Dealing & Payment Agreement issue”) [17] It was argued on behalf of Isyoda that the said “Direct Dealing & Payment Agreement” among Bond, Isyoda and Brampton was such that: a) Brampton would deal directly with Bond thereby releasing and discharging Isyoda’s obligations in respect of the Sub-Contract; and b) Brampton would pay Bond directly thereby releasing and discharging Isyoda’s obligation to pay Bond. [18] Isyoda had relied on the following documents and events to support its alleged “Direct Dealing & Payment Agreement”: a) direct handover by Bond to Brampton in relation to the works completed under the Sub-Contract; b) Supplemental Agreement dated 15.6.2011; 9 c) Bond’s letters dated 16.8.2011 and 17.8.2011 requesting, inter alia, for direct payment from Brampton; d) Brampton’s direct payments of RM800,000, RM400,000 and RM50,000 to Bond; e) Assignment Agreement prepared by Bond; f) the Settlement Agreement between Isyoda and Brampton dated 4.2.2013. [19] Learned counsel for Bond, Mr Deepak Mahadevan, argued that Isyoda’s contention is misplaced. With respect to the direct handover by Bond to Brompton, I agree that it was done with the consent of Isyoda. There was a letter from Isyoda to Help University dated 22.9.2010, copied to Bond, wherein Isyoda states that it is agreeable to the request for temporary power supply to Help University, subject to Bond’s consent. [20] On the same day, Isyoda notified Bond that since the Project is now handed over to Brampton, the electrical services/systems are still contractually under the custody and maintenance of Bond. As a result, Isyoda gave Bond the liberty to impose conditions to safeguard its interest. 10 [21] Under the circumstances it was reasonable for Bond to take Isyoda’s letter dated 22.9.2010 to mean that consent was given by Isyoda for Bond to handover its works directly to Brampton. As a consequence, Bond proceeded to hand over the electrical system to Brampton on 23.9.2010 under the supervision of Mr. CP Lee, a representative of Isyoda. This was notified to Isyoda via Bond’s letter dated 27.9.2010. [22] There is no basis for Isyoda's allegation that Bond bypassed Isyoda and directly handed over its works to Brampton. Not only was Isyoda involved in the handover, it also provided its consent for Bond to handover its works directly to Brampton. [23] I agree with learned counsel for Bond that Isyoda's reliance on 2 separate agreements to support their contention of the so-called “Direct Dealing & Payment Agreement” i.e. the Supplemental Agreement and Settlement Agreement, is also missing the mark. [24] To begin with, the Supplemental Agreement and Settlement Agreement is between Isyoda and Brampton. Bond is not a party. Whilst such an agreement may confer a benefit to Bond, it does not allow Bond to sue for that benefit under the Agreements to which Bond is not a party. 11 Bond would still have to look to its contracting party Isyoda to demand for payments. [25] In fact a similar matter had come before our High Court involving the Defendant here. In the case of Sigma Elevator (M) Sdn Bhd v Isyoda (M) Sdn Bhd & Anor [2016] 10 MLJ 635, the High Court had decided on a similar project involving another sub-contractor against Isyoda. The factual substratum is the same, involving the same Supplemental Agreement and Settlement Agreement. In that case, Isyoda also attempted to escape liability by suggesting that the direct payment clause in the Settlement Agreement discharged Isyoda from its obligations to pay the sub-contractor and that it was Brampton who has to pay the sub-contractor. [26] Justice Mary Lim J (now JCA) had no difficulty untying the knot of legal relationships and placing the legal obligation to pay on the rightful contracting party. She observed as follows: “[61] It is equally obvious from the SA that it is an agreement that does not involve Sigma. By no means is it a tripartite agreement between the three parties before the court where it was agreed that Sigma is to be paid directly by Brampton. It is 12 simply an agreement reached between Isyoda and Brampton for the purpose of a ‘global’ settlement of the then pending disputes between the parties. The parties did not include Sigma directly as a contracting party. Nevertheless, it affects Sigma indirectly as a party who would stand to benefit, as the SA does provide for direct payments to Sigma for work it has done. [62] Be that as it may, the existence of the SA does not absolve Isyoda from its obligations to pay Sigma for work done under the subcontract. For that, Isyoda remains very much liable under the subcontract to pay Sigma for work that Sigma has completed." (emphasis added) [27] Our present position is no different. Back to basics, the rule of privity of contracts dictate that only parties to a contract may sue and be sued contractually. Even if a benefit is conferred on a non-party, that non-party cannot sue unless made a party in a tripartite agreement where the initial obligation of Isyoda to pay Bond is now taken over by Brampton with the corresponding rights of Brampton to sue Bond for any defective works during the Defect Liability Period. 13 [28] If authorities are needed one can refer to the Court of Appeal case of Tsang Yee Kwan v Majlis Perbandaran Batu Pahat [2011] 8 CLJ 913 at p 914 where it was reiterated as follows: "The doctrine of privity established that only parties to a contract incurred rights and obligations under the contract. Third parties could not sue or be sued under a contract." [29] Likewise the Court of Appeal in Boustead Naval Shipyard Sdn Bhd v Dynaforce Corporation Sdn Bhd [2014] 5 CLJ 533 at p 561 said: "Bluntly put only the parties to the contract have enforceable rights and obligations under the contract. As an established principle of contract law, the common law doctrine of privity of contract stands for the simple proposition that, 'no one but the parties to a contract can be bound by it or be entitled under it.'” [30] I agree with the Plaintiff that the Defendant had been selective in its reliance on Bond’s letters dated 16.8.2011 and 17.8.2011 to support its alleged Direct Dealing & Payment Agreement. On 16.8.2011, Bond merely made a request to Isyoda for direct payment from Brampton. This request was rejected by Isyoda via its letter dated 17.8.2011. 14 [31] There were 2 further letters by Bond to Isyoda dated 17.8.2011 and 23.8.2011. In these letters, Bond referred to the Supplemental Agreement which was extended to them and stated that it will deal directly with Brampton and claim for direct payment from Brampton. Both letters by Bond were replied by Isyoda via its letters dated 18.8.2011 and 24.8.2011, as follows: Isyoda’s letter dated 18.8.2011 reads: “…the subcontract above is still binding between Bond M&E (KL) Sdn Bhd and Isyoda (M) Sdn Bhd as far as above subcontract work is concerned.” Isyoda’s letter dated 24.8.2011 reads: “…We reiterate that the subcontract between you and us is still binding and enforceable.” [32] As a result of the above letters from Isyoda, Bond could hardly be faulted for accepting and respecting Isyoda’s position and for proceeding to claim all outstanding sums from Isyoda. Acting consistently throughout, after Isyoda’s last letter dated 24.8.2011 stating its position that the Sub-Contract remains binding, Bond continued to pursue its claim directly from 15 Isyoda vide its letters to Isyoda dated 18.4.2012 and 24.4.2102 for the outstanding sums under the Project. [33] Throughout this period, Isyoda never once informed Bond that it was not liable to pay under the Sub-Contract at the material time. The first time a contrary intention was communicated by Isyoda to Bond was on 21.11.2014 where Isyoda took the position that they are not liable to pay Bond under the Settlement Agreement. [34] In reply, Bond stated via its letter dated 19.12.2014 to Isyoda that it is not privy to the Settlement Agreement and Bond maintains that Isyoda remains their contracting party. There was no reply by Isyoda to this letter. [35] In its defence, Isyoda had sought to rely on the direct payments made by Brampton to Bond to establish the alleged “Direct Dealing & Payment Agreement”. [36] To be clear, there had been 2 direct payments made by Brampton to Bond i.e. RM800,000.00 on 19.8.2011 and RM400,000.00 on 29.1.2012. Even when these payments were made, it was made by cheques payable to Bond but handed over to the Isyoda for it to in turn transmit it to Bond. There was subsequently another payment of RM50,000.00 from Brampton to Bond on 26.11.2014. I agree that these direct payments do not 16 corroborate Isyoda’s alleged Direct Dealing & Payment Agreement for the following reasons: a) Brampton’s main contract conditions (incorporated in the Sub-Contract) allows Brampton to make direct payment to Bond under clause 30A of the Main Contract Conditions; b) Bond continued to demand and pursue its claim against Isyoda even after receiving direct payments from Brampton; c) Section 2(d) of the Contracts Act 1950 allows for consideration to come from a third party. [37] Clause 30A.1 of the Main Contract conditions provides as follows: “30A.1 If the Contractor fails to make payment due to any of his sub-contractor for works properly executed in respect of this Contract, the Employer, having reasonably satisfied himself that the Contractor is in default of such payment, is entitled (but not obliged) to make all payments direct to such sub-contractor of all or any amounts due or which may subsequently become due to the sub-contractor… 17 30A.2 The exercise of the entitlement under this clause 30A.1 shall not create any privity of contract between the Employer and the sub-contractor nor shall it in any respect relieve or absolve the Contractor from any obligations or liabilities under or in connection with this Contract” (emphasis added) [38] This clause 30A of the Main Contract conditions also forms part of the Sub-Contract. This was also confirmed by DW1 during cross examination. It was also established during cross examination of TPW2, that Brampton had exercised its rights to make direct payments of RM800,000.00 on 19.8.2011 and RM400,000.00 on 29.1.2012 pursuant to the Supplementary Agreement which is read together with clause 30A of the Main Contract Conditions. [39] As for section 2(d) Contracts Act 1950, it was explained by the Court of Appeal in Boustead Naval Shipyard Sdn Bhd v Dynaforce Corp Sdn Bhd [2015] 1 MLJ 284 that it merely provides that consideration for a promise may move from the promisee or any other party. Hence, the fact that Brampton has made payments to Bond does not make them a contracting party as Isyoda have alleged. 18 [40] As for the draft Assignment Agreement which Isyoda asked Bond to prepare on or around 11.10.2012, with respect to a release and waiver whereby Bond will release Isyoda from all and any liability under the Sub-Contract in return for payment from Brampton, that remained unsigned. [41] Bond was not agreeable to this draft release and waiver. As a result, Bond prepared another Assignment Agreement and forwarded the same to Isyoda on 19.10.2012 and requested for the same to be returned. To date, the said Assignment Agreement has not been signed or executed by both Isyoda and Brampton i.e. assignor and assignee. I agree with learned counsel for the Plaintiff that there was no concluded contract between all parties regarding the said Assignment Agreement (Kopeks Holdings Sdn Bhd v Bank Islam Malaysia Bhd [2012] 4 MLJ 337). The Court cannot cannot infer or ink an agreement for the parties when they could not agree on the terms no matter how close they were to achieving a consensus-ad-idem! Either there is a concluded agreement involving all three parties or there is none. Here there is none. [42] There was no further performance of the contract according to the terms that could not be agreed. Again, the dicta of Justice Mary Lim J (now JCA) in the Sigma Elevator (M) Sdn Bhd v Isyoda (M) Sdn Bhd & Anor [2016] 10 MLJ 635 case bears repetition: 19 “[46] It is obvious that the letter of release and waive bears only the signature of Sigma. Both Brampton and Isyoda did not sign the letter. Isyoda argues that its signature is immaterial or unnecessary whereas Sigma says otherwise. [47] In my judgment, the affixing of a signature by the contracting party is important and material as it signifies agreement and commitment to the terms as appearing in the relevant document upon which the signature appears… [48] When Sigma signed the letter of release and waiver, it was on Isyoda’s assurance that it would form a tripartite agreement. Isyoda was to procure Brampton’s signature on that letter of release and waiver… [49] Sigma’s particular requirement of a tripartite agreement is not a bare averment but, a real and substantial defence…At that meeting the minutes of which can be found at p. 575 of CBD 3, it is recorded that a tripartite agreement was initially proposed to formalize the direct payments to some of the M&E subcontractors, which would include Sigma. This proposal was subsequently dropped and replaced by the settlement agreement found at p. 539 CBD 3. I must 20 immediately reject any suggestion that the settlement agreement signed one a half years after Sigma had signed the letter of release and waiver is the tripartite agreement that the parties, especially Sigma, required from Isyoda.” (emphasis added) Whether the conduct of the Plaintiff, Defendant and Third Party was such that the Plaintiff is estopped from denying the existence of a Direct Dealing & Payment Agreement [43] Isyoda took the position that it was just a conduit to facilitate the payment of monies for work done directly from Brampton to Bond and that Bond was effectively dealing with Brampton direct. In effect Isyoda is saying that it was an unnecessary appendix in the implementation of the contract until completion. [44] It even pointed out to the fact that the Sub-Contract price and details were pre-agreed between Bond and Brampton before Isyoda came into the picture. This, Isyoda explained, was why Bond was willing to accept the payment term stated in the Sub-Contract. [45] I must say that this is not borne out by the evidence adduced. There was clear evidence of the quotation from Bond to Isyoda on 22.12.2006 where reference was made to Bond’s letter dated 22.11.2006 21 and the discussion between DW1 and Bond’s representative on 21.12.2006. [46] Further to that, Bond wrote another letter on 28.12.2006 to revise its Schedule of prices in line with Isyoda’s requirement. Subsequent thereto, the Sub-Contract was issued by Isyoda on 7.2.2007. [47] From the evidence adduced, the negotiations and pricing of the Sub-Contract was discussed between Bond and Isyoda. Brampton was not involved in this negotiations. In fact, there is not a single evidence led by Isyoda to show any correspondence between Bond and Brampton prior to the Sub-Contract. [48] During trial, DW1 was not able to show any evidence that Brampton negotiated directly with Bond on the Sub-Contract price or other terms. Thus, Isyoda's contention regarding any alleged pre-existing relationship between Bond and Brampton before the Sub-Contract remained unproven. Even if it be true, it does not and cannot alter the contractual relationship contained in the Sub-Contract between Isyoda and Bond. Surely Isyoda cannot have consented to assuming liabilities without corresponding gain as it was not doing charity work but rather entering into a construction contract with corresponding risks and rewards. 22 [49] Isyoda further submitted that Bond took instructions from one Mr. CP Lee during the construction project which is evidence of the direct dealing between Bond and Brampton. I agree with the Plaintiff that this argument is misplaced for following reasons: a) All correspondence and dealings were only between Bond and Isyoda throughout the construction project. This is evidenced via the exchange of letters between the parties. b) There is evidence that Mr. CP Lee was appointed by Isyoda in 2 Letters of Appointment from Isyoda. Hence, for all intents and purposes, Mr CP Lee who held himself out as the Project Manager of Isyoda, was acting for Isyoda during the implementation stage. c) There were numerous correspondence and dealings between Bond and Isyoda only both prior to, during and even after the construction as seen in the following letters: i) Bond’s letter dated 22.12.2006 to Isyoda regarding pricing (Pre-contract) ii) Bond’s letter dated 28.12.2006 to Isyoda regarding pricing (Pre-contract) 23 iii) Bond’s site memo to Isyoda dated 26.10.2008 regarding CPC outstanding issue (Implementation Stage) iv) Bond’s letter to Isyoda dated 31.12.2009 regarding non-completion of works (Implementation Stage) v) Bond’s letter to Isyoda dated 18.1.2010 regarding variation order (Implementation Stage) vi) Bond’s letter to Isyoda dated 7.7.2010 regarding work progress certification and payment (Implementation Stage) vii) Bond’s letter to Isyoda dated 21.7.2010 regarding demand for progress payment (Implementation stage) viii) Bond’s letter to Isyoda dated 27.9.2010 regarding handover of works (Implementation Stage) ix) Bond’s letter to Isyoda dated 19.1.2011 regarding final account (Post Completion Stage) x) Bond’s letter to Isyoda dated 24.7.2013 regarding statement of final account (Post Completion Stage) [50] The above letters show that Bond has dealt only with Isyoda in relation to its scope of works under the Sub-Contract. In fact, during cross 24 examination of DW1, these letters were referred to him and he confirmed the following: “DPM : Ok. Mr Tan, I’ve shown you a total of nine letters. There are many more letters. I’m not going to go on to all the letters. Alright. These letters were issued from Bond to Isyoda prior to the letter of award, after the letter of award, during the execution of the project, handover of the electrical works and also regarding the final account. All these letters were issued during this period from Bond to Isyoda. Correct? TAN: Yes, correct. DPM : And during this period, there is no letter in the bundle directly between Bond to Brampton. TAN: Correct.” [51] To a question from the Court, the following was also agreed by DW1: "YA: So, from 2006 up 2013, there were direct dealings between Plaintiff and Defendant by exchange of letters. No letters issued by Plaintiff to Third Party for this period. So, you agree? 25 TAN: No letters, I agree, My Lord.” [52] Based on the above, it can confidently and comfortably be said that there is no basis for Isyoda to say that Bond received instructions from Brampton directly during the implementation stage. In fact, the written correspondence shows otherwise and as admitted by DW1 above, there is no written correspondence between Bond and Brampton during this period. [53] The fact of direct handing over of the Plaintiff's completed works to Brampton does not derogate from the fact of the binding contract between the Plaintiff and the Defendant and as the Defendant had consented to the direct handing over, it cannot now be a cause of complaint. [54] Even with respect to post-completion conduct, the relevant letters from Bond dated 16.8.2011, 17.8.2011 and 23.8.2011 referred by Isyoda in their submission were replied by Isyoda. In all its reply letters, Isyoda had rejected Bond’s request for direct payment and maintained that the Sub-Contract remains binding and enforceable. Isyoda’s last letter stating the same was dated 24.8.2011 and there was no further correspondence by Isyoda to state otherwise. As for the Assignment Agreement, there was no conclusion to this Agreement and both Isyoda and Brampton 26 never executed this agreement. [55] Even Bond’s last letter dated 19.12.2014 to Isyoda states that the Sub-Contract between Isyoda and Bond remain binding. DW1 admitted that there was no reply and thereafter, agreed that the Sub-Contract remains binding and enforceable. I agree with the Plaintiff that even by looking at the conduct of the parties and especially that between Bond and Isyoda, one cannot say that there was a Direct Dealing & Payment Agreement. [56] One must hearken to the guidance provided by the Federal Court in the case of Tractors Malaysia Bhd v Kumpulan Pembinaan Malaysia Sdn Bhd 1 MLJ 129 at page 130 para C where it was held that: “In dealing with the issue before us, we bear in mind the following: Where a contract has been reduced to writing, “it is in the writing that we must look for the whole of the terms made between the parties.” Per Viscount Haldane LC in Dunlop v Selfridges at page 854. And in such a circumstance, section 92 of the Evidence Act 1950 does not enable any party to that agreement to lead evidence 27 contradicting varying adding to or subtracting from its terms” [57] I agree with the Plaintiff that although the proviso to section 92 of the Evidence Act 1950 provides that evidence to show the existence of any distinct subsequent oral agreement to rescind or modify any such contract is permissible, this is not applicable here considering that Isyoda attempts to lead evidence which is a combination of either isolated letters by Bond taken out of context or Agreements not concluded between the parties to support its frivolous Direct Dealing & Payment Agreement. [58] I would hold that even by conduct of the parties, it could not be inferred that the Plaintiff had agreed to a Direct Dealing & Payment Agreement with the Third Party and if at all estoppel does apply, it is that the Defendant is estopped from contending that there was such an Agreement, absolving them from liability to pay under the Sub-Contract with the Plaintiff. [59] This Court agreed with Bond’s contention that Isyoda ought to be estopped from claiming it is not liable to pay Bond under the Sub-Contract. At all material times, Isyoda had in writing and by conduct, represented that the Sub-Contract is binding and enforceable (Boustead Trading (1985) 28 Sdn Bhd v Arab-Malaysian Merchant Bank Berhad [1995] 4 CLJ 283). There is no place for Isyoda to blow hot and cold. Whether clause 2.0 of the Sub-Contract regarding payment to Bond being made within 14 days upon receipt of the same by Isyoda from Brampton is void pursuant to section 35 of the Construction Industry Payment and Adjudication Act 2012 ("CIPAA")? (“Enforceability of Back to back clause”) [60] Isyoda appears to rely on the back to back payment clause contained in the said Sub-Contract to avoid liability to pay, namely: “2.0 Payment Terms Progress payments will be made to the sub-contractor within fourteen

days upon receipt of the same from the client ...” [61] The Plaintiff tried to rely on section 35 CIPAA to support the argument that the above clause is in the nature of a conditional payment clause and is thus void. Section 35(2) reads as follows: "For the purposes of the said section, it is a conditional payment when the obligation of one party to make payment is conditional upon that party having received payment from a third party.” 29 [62] Although CIPAA 2012 came in force on 15.4.2014, it was submitted by learned counsel for the Plaintiff that the said Act has retrospective effect considering the express wordings of the sections 2, 3 and 41 of CIPAA. [63] Further, it was argued for the Plaintiff that the High Court in Uda Holdings Bhd v Bisraya Construction Sdn Bhd & Anor and Another case [2015] 5 CLJ 527 has held that CIPAA 2012 has retrospective effect. Upon appeal, this decision has been affirmed by the Court of Appeal on 13.7.2015. [64] Learned counsel for the Plaintiff then concluded it would mean section 35 of CIPAA 2012 would render clause 2.0 of the said Sub-Contract as void. Therefore, it was argued, Isyoda cannot rely on the back to back clause contained in the said Sub-Contract to avoid liability to make payment of the outstanding sum owing to Bond. [65] However it is clear from section 35(2) CIPAA that such a clause is void only for the purposes of the said section; in other words it is only void for the purpose of Adjudication. If Parliament had wanted the prohibition to be of general application in the construction industry, it would have amended the Contracts Act 1950 and not confine and restrict its operation to statutory Adjudication under CIPAA. 30 [66] Isyoda appears to be taking an inconsistent position. On the one hand, it argued that it is not liable to pay until it receives payment from Brampton. On the other hand, Isyoda relies on the Settlement Agreement to say it is no longer liable to pay Bond. [67] By virtue of the Settlement Agreement which was entered into between Isyoda and Brampton on 4.2.2013 (6 years after the Sub-Contract with Bond), Isyoda and Brampton agreed in clause 11 of the Settlement Agreement that Brampton would make direct payments to Bond. This would mean that Isyoda would never receive any further payments from Brampton as of 4.2.2013 onwards. Surely both main contractor and employer cannot enter into an arrangement where the sub-contractor would not be paid at all in that the main contractor would be permitted to say "I don't have to pay you because I've not been paid," and the employer saying to the sub-contractor that "You won't be paid because I'm not going to pay the main contractor and you cannot sue me either because though I agreed with the main contractor to pay you direct, there is no contract between you and me!" It is a case of head I win and tail you lose. It can be graphically encapsulated in the Malay proverb of two elephants disputing with each other and fighting it out and in the meanwhile the mouse deer dies in the middle! 31 [68] Therefore, its reliance on the back to back clause in the Sub-Contract is self-contradictory and should be struck down. [69] A similar dilemma was presented in Sigma Elevator (M) Sdn Bhd v Isyoda (M) Sdn Bhd & Anor [2016] 10 MLJ 635 where the High Court held that Isyoda cannot hold on to both arguments which were inconsistent to one another. Even assuming that the said clause is binding, it certainly does not absolve the Defendant Isyoda from paying especially when the Plaintiff has completed its work and the Project too is completed. [70] This argument appears to be a rehashed argument from Sigma Elevator (M) Sdn Bhd v Isyoda (M) Sdn Bhd & Anor [2016] 10 MLJ 635 where the High Court held as follows: “(2) The issue or defence of pay when paid under the subcontract was not available to Isyoda. Under the terms of the settlement agreement, Isyoda will never be paid by Brampton for work done by Sigma since Brampton was to pay Sigma directly whereas the argument of a back to back agreement was that Isyoda will only pay Sigma when it was paid by Brampton.” (emphasis added) 32 [71] I agree with the Plaintiff that by virtue of its Settlement Agreement between Isoda and Brampron, Isyoda cannot now rely on the enforceability of its back to back clause. Whether Bond’s claim for the sum of RM1,271,043.96 or any part thereof is time barred under section 6 of the Limitation Act 1953? (“Limitation Issue”) [72] Isyoda had stated in its defence that Bond’s claim is partially time barred. However, no evidence was led at trial to establish its contention. [73] I agree with the Plaintiff that there is merit in invoking Section 26(2) of the Limitation Act 1953 provides that: “Where any right of action has accrued to recover any debt or other liquidated pecuniary claim, or any claim to the personal estate of a deceased person or to any share or interest therein, and the person liable or accountable therefor acknowledges the claim or makes any payment in respect thereof, the right shall be deemed to have accrued on and not before the date of the acknowledgment or the last payment” [74] It is not disputed that Isyoda prepared and forwarded the Statement of Final Account to the Plaintiff on or around October 2012. Subsequently, 33 Isyoda executed the said Statement of Final Acount on 19.10.2012 which confirms the total outstanding balance of RM2,521,043.96 under the Sub-Contract. Hence, the signed Final Account by Isyoda amounts to an acknowledgment of Bond’s claim pursuant to section 26(2) of the Limitation Act 1953. [75] Further, PW1 also confirmed that the last payment received from Isyoda was via cheque no. 354669 dated 1.6.2010 which was cleared into Bond’s accounts on 7.6.2010. This was payment made by Isyoda towards Isyoda’s interim payment certificate no.24 which was the last certificate Bond received from Isyoda. Therefore time would also deem to have run from the date of the last payment by Isyoda on 7.6.2010 and considering that Bond’s action herein was filed in January 2016, it was filed well within time. [76] I agree that Isyoda’s contention that Bond’s claim is partially time barred is without any basis. Perhaps realizing this, there was no submission forthcoming on this issue from Isyoda. [77] I would for the reasons given above grant judgment for the sum claimed by the Plaintiff against the Defendant together with interests and costs. 34 Whether the Third Party can disclaim liability under their indemnity given to the Defendant [78] The Defendant submitted that in the event that it is liable to pay the Plaintiff, then the Third Party ought to indemnify the Defendant for whatever amount that the Court orders the Defendant to pay the Plaintiff, including all interests and costs. [79] I agree that the Defendant’s claim for an indemnity from the Third Party against the Plaintiff's claim is straightforward. It is based on Clause 12 of the Settlement Agreement, which reads: “12. Brampton shall indemnify and save harmless Isyoda from all and any claims made by the M&E Subcontractors, CP Consultants Pte. Ltd. or any of them whatsoever and howsoever. However, the liability under this clause in respect of claims made by the M&E Subcontractors and CP Consultants Pte. Ltd. shall be limited to those amounts respectively remaining due to them as stated in clause 11 above.” See: page 145 of CBOD1 [80] In this connection, Clause 11 of the Settlement Agreement is also relevant for it provides that: 35 “11. Brampton shall directly liaise with the M&E Subcontractors and CP Consultants Pte. Ltd. with a view to rectifying those defects in respect of the M&E Works of the Project and shall make direct payment to them of those sums remaining due under the M&E Subcontracts and the Consultancy Contracts as follows: …

all damages which he may be compelled to pay in any suit in respect of any matter to which the promise to indemnify applies;

all costs which he may be compelled to pay in any such suit if, in bringing or defending it, he did not contravene the orders of the promisor, and acted as it would have been prudent for him to act in the absence of any contract of indemnity, or if the promisor authorised him to bring or defend the suit; and …” [112] I would agree with the Defendant that since this Court has allowed the Plaintiff’s claim against the Defendant with costs and interest, then the Third Party has to indemnify the Defendant against such costs and 47 interests. Such an order is not repugnant to Clause 11(c) and 12 of the Settlement Agreement that limits the Defendant to the amount outstanding to the Plaintiff. Surely the Defendant cannot be expected to be out of pocket with respect to what the Defendant has been ordered to pay the Plaintiff which should have been paid by the Third Party in the first place without the need of the Plaintiff to commence any legal action. [113] Such costs should only be confined to party-to-party costs and not solicitor-client costs as the latter is not provided for in the indemnity agreement and neither has the Court awarded a solicitor-client costs against the Defendant with respect to the Plaintiff nor in favour of the Defendant with respect to the Third Party. Pronouncement [114] For all the reasons given above, I had allowed the Plaintiff to enter judgment against the Defendant for the balance sum of RM1,271,043.96 together with interest of 5% per annum from the date of writ till realization. [115] After hearing parties on costs, I ordered the Defendant to pay the Plaintiff the sum of RM50,000.00 for costs and allocator to be paid before extracting the order on costs. Judgment is therefore entered by the 48 Defendant against the Third Party for the sum above plus interest and costs of RM 50,000.00. [116] The interest between the Defendant and the Third Party shall be at the same rate of 5% per annum until realization as in any delay in the Third Party paying the Defendant the sum that the Defendant has to pay the Plaintiff. [117] As between the Defendant and the Third Party, as the Defendant has succeeded, costs should follow the event and the Court ordered the Third Party to pay the Defendant costs of RM20,000.00 and allocator to be paid before extraction of order of costs. - signed - Y.A. LEE SWEE SENG Judge Construction Court Kuala Lumpur Dated: 27 February 2017. 49 For Plaintiff : Deepak Mahadevan together with Abdullah Abbas (Azmi Fadzly Maha & Sim) For Defendant : Choon Hon Leng together with Magdalene Soon (Raja, Darryl & Loh) For Third Party: Chong Poh Ken together with Lim Tsu Ming (Ong, Chong & Tan) Date of Decision: 3 November 2016.

the sum of RM2,521,043.96 due to Bond M&E (KL) Sdn Bhd;” See: page 145 of CBOD1. [81] It is not in dispute that the Settlement Agreement is a valid and binding contract between the Defendant and the Third Party. The provisions of Clauses 11 and 12 are clear and the present claim by the Plaintiff against the Defendant clearly falls within that. Clause 11 is clear in that the Third Party has a contractual duty under the Settlement Agreement to make direct payment to the Plaintiff for the sum of RM2,521,043.96. It is also clear that the amount of RM1,271,043.96 claimed by the Plaintiff against the Defendant in this action was part of the RM2,521,043.96 that the Third Party was liable to pay the Plaintiff under the Settlement Agreement. Once the direct payment of RM1,250,000.00 had been taken into account, then it would arrive at the exact amount of RM1,271,043.06 that the Plaintiff is claiming now. 36 [82] I would agree with learned counsel for the Defendant, Mr Choon Hon Leng, that had the Third Party honoured its obligation under Clause 11 and paid the Plaintiff, then this action would not have been initiated at all as it would have been totally unnecessary. [83] The Defendant had succinctly stated that the Third Party’s defence actually only has one point i.e. the Third Party claimed that the Defendant was in breach of the Settlement Agreement due to the Defendant’s alleged failure to take action against another M&E sub-contractor GAE Technical Services Sdn Bhd (“GAE”) in respect of defects in air-conditioning and mechanical ventilation work (“ACMV Works”). That the Third Party claimed was a breach by the Defendant that releases the Third Party from any obligation to pay the Plaintiff under its indemnity obligation under Clause 12 of the Settlement Agreement. [84] However there is already an action in the Sessions Court between GAE as Plaintiff and Isyoda as Defendant with Brampton as Third Party. Almost concurrently with the present action, GAE has filed a similar action against the Defendant at the Kuala Lumpur Sessions Court Suit No. WA-B52C-9-01/2016 (“Existing GAE Action”). The Defendant has similarly taken third party proceedings against the Third Party. 37 See: pleadings filed by the parties at pages 650-665, 668-703, 704-720, 721-741 of CBOD4 and pages 742-795, 796-828, 829-846 of CBOD5 [85] In that action, based on the same allegation of defects in GAE’s Works, particularly on the temperature issue, the Third Party claimed that the Defendant was in breach of the Settlement Agreement and hence sought an order from the Sessions Court compelling the Defendant to take action against GAE in accordance with the terms of the Settlement Agreement. See: Third Party’s Counterclaim against the Defendant at pages 742-795 of CBOD5, particularly pages 789-795 [86] I can appreciate the contention of learned counsel for the Defendant that, if the Sessions Court in the Existing GAE Action allows the Third Party’s counterclaim against the Defendant, then the Third Party’s complaint here i.e. failure by the Defendant to take action against GAE would have been fully remedied. [87] If the Third Party was able to prove that the Defendant was in fact in breach of the Settlement Agreement due to failure to take action against GAE, then the Third Party would be entitled to the remedy that it prayed for in the Existing GAE Action. 38 [88] When such relief is given, then the Defendant could no longer be said to be in breach of the Settlement Agreement, in which case the Third Party’s defence in this action must fall. [89] If the Third Party is not able to prove that there was a breach by the Defendant and the Sessions Court in the Existing GAE Action does not grant the Third Party the reliefs that it prayed for, then it just shows that the Third Party’s allegations are unsustainable. [90] The Third Party cannot use the same “breach” twice. The Third Party had elected to raise a counterclaim in the Existing GAE Action to seek its full remedy. [91] I agree with the Defendant that in the circumstances, the defence raised by the Third Party in this action can be safely disregarded and struck out by this Court since the substantive merits of such defence and the consequential relief is now properly within the purview and jurisdiction of another Court of competent jurisdiction. [92] In this connection, GAE is also a party in the Existing GAE Action and nobody is in a better position than GAE to answer to the allegations of defects in GAE’s Works. This Court does not have the benefit of GAE’s evidence but the Sessions Court in the Existing GAE Action has. Premised 39 on the above, this Court should decline deciding on the issue of defects in GAE works and any allegation of breach arising from such matter. Such matter should be properly left with the Sessions Court in the Existing GAE Action to decide. [93] Learned counsel for the Third Party, Miss Chong Poh Ken, argued that this Court, being a High Court, should decide on whether the Defendant has breached the Settlement Agreement by not taking action against GAE and that such a decision would be binding on the Sessions Court in the Existing GAE Action. I do not think that this is an issue that can be decided properly without GAE being a party. In fact in the Existing GAE Action in the Sessions Court, all the relevant parties are before the Court; GAE as Plaintiff claiming for amount owing to it by Isyoda; Isyoda having a claim under the indemnity in the Settlement Agreement against the Third Party Brampton and the Third Party having a counterclaim against Isyoda for breach of the Settlement Agreement. When all the parties are properly before the Sessions Court, this High Court should not venture to decide on a matter that can be more properly decided at the Sessions Court. [94] Further, it is a finding of fact that there are no defects which respect to the Plaintiff/Bond's works in the Sub-Contract and indeed this Court had granted judgment on the sum claimed against the Defendant/Isyoda. It is 40 also not the Third Party's contention that Isyoda had not taken action against Bond but rather that Isyoda has not taken action against GAE. That can be more properly decided in the Existing GAE Action in the Sessions Court where GAE is the Plaintiff, Isyoda the Defendant and Brampton the Third Party. [95] This Court should not allow a multiplicity of proceedings on the same issue in two different courts and more so when the issue can be more properly decided in the Sessions Court in the Existing GAE Action. To allow that would be an abuse of the court's process. [96] Then there is the argument that the indemnity clause in Clause 12 is contingent on or conditional upon the Defendant complying with Clause 5 of the Settlement Agreement. Clause 5 reads as follows: Clause 5 "...Isyoda shall, upon Brampton's request and direction, take all necessary steps and action as permitted by law and/or under the M&E Subcontracts to enforce its rights and remedies under the M&E Subcontracts for the benefit of Brampton. All such steps taken by Isyoda at Brampton's request shall be at Brampton's costs..." 41 [97] No where is it provided that Clauses 11 and 12 of the Settlement Agreement are subject to Clause 5. I agree with the Defendant that Clauses 11 and 12 can and should be enforced independently. If the Third Party opined that the Defendant was in breach of Clause 5, then the Third Party is at liberty to seek appropriate remedy against the Defendant, which the Third Party is already doing by raising a counterclaim against the Defendant in the Existing GAE Action. [98] In other words, the contractual obligations are independent if performance of that obligation by a party is not conditioned upon the performance of another reciprocal obligation by the other party; otherwise the obligations are dependent in that performance of the obligation by a party is a condition precedent to the performance or readiness and willingness to perform the reciprocal obligation by the other party. [99] The Privy Council in Keng Soon Finance Bhd v MK Retnam Holdings Sdn Bhd & Anor [1989] 1 MLJ 457 at 459 observed as follows: '‘… the question whether covenants are to be held dependant or independent of each other is to be determined by the intention and the meaning of the parties as it appears on the instrument, and by the application of common sense to each particular case; to which 42 intention once discovered, all technical forms of expression must give way'’. [100] The Third Party could only be discharged from its obligations under the Settlement Agreement if the Settlement Agreement had been terminated. That did not happen. At all material times the Settlement Agreement remains valid and binding between the Defendant and the Third Party. In fact, the reliefs prayed for by the Third Party in the counterclaim in the Existing GAE Action show that the Third Party had no intention of repudiating or terminating the Settlement Agreement but wanted the Settlement Agreement to be enforced. [101] An indemnity clause in the context of a global settlement that requires the Third Party to pay the sub-contractors like the Plaintiff here, must be given its ordinary and natural meaning. Both the Defendant and the Third Party could not have intended that for a sum of more than RM2.5 million owing then to the Plaintiff, the Defendant would not be paid merely because it has not taken action against some sub-contractors as required of them and as instructed by the Third Party/Brampton. [102] Here there was no instruction from Brampton to Isyoda for action to be taken against Bond/Plaintiff but rather for action against GAE which is 43 already the subject of the Existing GAE Action in the Sessions Court. The Third Party/Brampton should not be allowed to use a pending proceeding in the Existing GAE Action in the Sessions Court which is unrelated to the works done by the Plaintiff/Bond here to justify their refusal to make payments to the Defendant for the payments that the Defendant has now to make to the Plaintiff. [103] The overall justice of the case is such that if really there is a breach on the part of the Defendant to take action against GAE, then it is for Brampton to bring the necessary action against the Defendant/Isyoda and to prove its loss. This it has done in the Existing GAE Action when it put up a counterclaim as Third Party against Isyoda as Defendant. [104] In terms of sequence, it was clear that the first breach that occurred was the Third Party’s failure to pay the M&E sub-contractors including the Plaintiff as provided for under Clause 11 of the Settlement Agreement. The instruction to pursue action against GAE was only given to Isyoda on 24.6.2015 whereas the Settlement Agreement with the agreed sum which Brampton was required to pay the Plaintiff was entered into on 4.2.2013. [105] Clearly the Third Party cannot use its own breach as an excuse for not complying with the indemnity clause just because a subsequent event 44 had happened which is a breach by the Defendant/Isyoda in taking action against GAE. [106] The Third Party alleged that they have issued instructions to the Defendant via letter dated 24.6.2015, demanding the Defendant to take action against the Plaintiff to rectify the alleged defects and non-compliance of GAE’s works. See:pages 850-883 of CBOD6 [107] In reply, the Defendant issued a letter dated 26.8.2015. At the material time, there was a Previous Court Action where GAE had sued Brampton in the Sessions Court for the amount due for work done and Brampton had counterclaimed for defective works that had to be rectified. The Sessions Court had allowed GAE's claim and dismissed Brampton's counterclaim. At that time there was pending the appeal and thus it is only appropriate for the Defendant to wait for the outcome of the appeal before taking any action against GAE. The Defendant requested the Third Party’s update on the outcome of the appeal and that the Defendant would act in accordance with the Settlement Agreement. See:pages 646 of CBOD4. [108] There was no reply nor update after the Defendant’s letter. In the circumstances the so-called instruction of 24.6.2015 was spent. In this connection, the instruction from Third Party is important because only the 45 Third Party knew what they wanted to do. The Defendant could not be expected to take action on its own volition as the Defendant has no interest in it and the Defendant may risk non-indemnity if it took action without the Third Party’s instruction. In short, without such instruction, which was in fact not given, the Defendant had no obligation to act and as such there was no breach or failure by the Defendant. [109] This Court is of the view that even if the Defendant/Isyoda here has breached its promise to take action against GAE as instructed by the Third Party/Brampton, that by itself, in the absence of any evidence as to the loss suffered by Brampton, cannot be a valid excuse to say that the indemnity clause in the Settlement Agreement is rendered inoperative and unenforceable until Isyoda takes legal action against Isyoda. At any rate Brampton has counterclaimed against Isyoda in the Existing GAE Action in the Sessions Court and the full reliefs will be granted to Brampton in terms of damage suffered by Brampton as a result of the alleged breach by Isyoda to take legal action against GAE. [110] The Third Party also claimed that the Third Party’s liability to indemnify the Defendant was limited to the principal sum claimed by the Plaintiff only, and does not include interest or costs that the Plaintiff is entitled to. 46 [111] Clause 12 of the Settlement Agreement is a contract of indemnity within the meaning of section 77 of the Contracts Act 1950. As such, section 78 of the Contracts Act 1950 is also applicable. Section 78 of the Contracts Act 1950 provides that: “The promisee in the contract of indemnity, acting within the scope of his authority, is entitled to recover from the promisor: