Cheematrade Sdn. Bhd. v 1. ) Sabah Shell Petroleum Company Limited (BA-22NCvC-161-04/2023)

SABAH SHELL PETROLEUM COMPANY LIMITED (No. Syarikat: 993229–W)

SARAWAK SHELL BERHAD (No. Syarikat: 71978–W) …DEFENDAN-DEFENDAN JUDGMENT Introduction [1] The expression "second bite at the cherry" is often invoked in legal proceedings to argue against allowing a party to have another opportunity to present their case or arguments after they have already had their chance. One common context where such an argument is raised relates to the 03/09/2024 08:50:07 BA-22NCvC-161-04/2023 Kand. 65 principle of res judicata. In essence, this argument serves as a protective measure to ensure that litigation does not become a repetitive or abusive process, and it upholds the integrity of court decisions. [2] The present applications in Enclosures 18 and 19 by the First and Second Defendants respectively seek to strike out the Plaintiff’s Writ and Statement of Claim primarily on the following two grounds, namely: • that the Plaintiff’s Writ and Statement of Claim discloses no reasonable cause of action against the First and Second Defendants; and • that the Plaintiff is barred by the doctrine of res judicata. The Essential Issues [3] The first of two critical issues raised in these applications is whether the Plaintiff’s Writ and Statement of Claim discloses any reasonable cause of action against the First and Second Defendants. [4] In determining the above issue, this Court is required to consider the doctrine of privity of contract, in particular, the question of whether it bars the Plaintiff from commencing the current action against the First and Second Defendants. [5] The second vital issue is whether the Plaintiff is barred by the doctrine of res judicata, which encompasses both cause of action estoppel and/or issue estoppel, from bringing this suit. [6] Questions arising from this second issue include the following, that is:

whether the issue of the extension of liability on the part of the First Defendant under the PM-MCM Contract to any non-contracting parties including the sub-contractors had been decided in an earlier suit, rendering the Plaintiff as being barred from relitigating the same issue in this suit;

whether the Plaintiff is similarly barred from claiming "constructive trust" and/or "unjust enrichment" against the First Defendant;

whether the Plaintiff is estopped from raising any claim or cause of action or issue that the Plaintiff could have raised in the earlier suit but did not; and

notwithstanding that the Second Defendant was not a party to the earlier suit, whether the Second Defendant is a privy of the First Defendant by virtue of the fact that both are parties to the PM-MGM Contract and that both are the co-employers of Trans Fame thereunder. Correspondingly, the question is whether the Plaintiff is barred from relitigating the same issues in the earlier suit and/or issues that could have been raised in the earlier suit but did not, against the Second Defendant. The Genesis of the Main Suit [7] The Plaintiff filed this Suit against the First and Second Defendants on 30 April, 2023 for damages arising from the supply of scaffolding materials to one Trans Fame Offshore Sdn Bhd (“Trans Fame”), for the use of the First and Second Defendants. [8] Trans Fame had earlier entered into a contract with the First and Second Defendants, that is, the "Provision of Pan Malaysia Maintenance, Construction and Modification Contract for 2018 – 2023" (“PM-MCM Contract”). Under the PM-MCM Contract, Trans Fame was to provide certain maintenance services for the First and Second Defendants' projects in Sabah and Sarawak and these included scaffolding materials which were delivered to the First and Second Defendants' projects from time to time. [9] On 15 March, 2021, the First and Second Defendants issued a notice of termination of the PM-MCM Contract to Trans Fame ("Notice of Termination") effective 14 April, 2021. [10] On 21 April, 2021, the First and Second Defendants paid Trans Fame a total of RM2,239,189.84 as final payment under the PM-MCM Contract, which Trans Fame accepted ("Final Payment"). [11] In consideration of such payment, Trans Fame issued a contract closure certificate to the First and Second Defendants ("Contract Closure Certificate"). [12] The Plaintiff's claim against the First and Second Defendants is premised on breach of contract, breach of duty of care, breach of constructive trust, and unjust enrichment where the Plaintiff alleged, inter alia, that:

The Plaintiff supplied scaffolding materials ("Materials") to Trans Fame for the use of the First and Second Defendants in the said project;

The orders which the Plaintiff received from Trans Fame in relation to the Materials were dependent on the PM-MCM Contract between Trans Fame and the First and Second Defendants;

The Plaintiff was a sub-contractor under the PM-MGM Contract and its rights or interest as a sub-contractor ought to be safeguarded by the First and Second Defendants according to the

The Final Payment made by the First and Second Defendants to Trans Fame amounting to RM2,239,189.84 contravened the PM-MCM Contract considering that, at that point of time, Trans Fame was already placed under a judicial management order ("JMO"). The Defendants’ Contentions in Support of their Striking Out Applications [13] As noted in paragraph [2] above, the present applications by the Defendants are premised on the following two grounds, namely: that the Plaintiff’s Writ and Statement of Claim discloses no reasonable cause of action against the First and Second Defendants; and that the Plaintiff is barred by the doctrine of res judicata from bringing this suit. Privity of Contract [14] In support of their striking out applications, the First and Second Defendants averred that the doctrine of privity of contract bars the Plaintiff from commencing the current action against them. [15] The argument advanced is that the Plaintiff is relying on the terms in the PM-MCM Contract but the parties in that said Contract are the Defendants and Trans Fame. In other words, the Plaintiff is a total stranger to the PM-MCM Contract. [16] The Defendant relied on a line of authorities, including Tan Poh Yee v Tan Boon Thien and other appeals [2017] 3 CLJ 569; [2017] 3 MLJ 244; [2018] 2 MLRA 514; Mahkota Technologies Sdn Bhd v Bina Jati Sdn Bhd & Anor [2001] AMEJ 0204; [2001] 1 LNS 195; [2001] MLJU 749; [2001] 6 MLRA 307; Veeriyah a/I Gothandabani v Majestic Heights Sdn Bhd (In liquidation) & Ors [2017] 7 AMR 717; [2017] 1 LNS 1158; [2017] MLJU 1148; [2017] MLRHU 718 and Terranova Builders Sdn Bhd (previously known as Nisa Consolidated Sdn Bhd) v Repc Services Sdn Bhd (previously known as Ranhill Engineers and Constructors Sdn Bhd) & Anor [2018] 1 LNS 2149; [2018] MLJU 1995; [2018] MLRHU 1746 (refd) to illustrate that claims have been, and ought to be, struck out under Order 18 rule 19(1) of the Rules of Court 2012 against a defendant where there was no privily of contract between the defendant and the plaintiff. [17] As the Plaintiff is not a party to the PM-MCM Contract, the First and Second Defendants maintained that there is clearly no proximity of relationship between them and the Plaintiff for them to assume any such duty of care. Hence the First and Second Defendants asserted that there is no duty of care owed by them to the Plaintiff. [18] The First and Second Defendants further argued that there are no provisions under the PM-MCM Contract which provide any obligations and/or responsibility on their part towards the Plaintiff and the only circumstance where the Defendants could be responsible to sub-contractors is when there is a novation of the contract but such novation can only take place at the Defendants' option and there was no express and/or implied novation and/or assignment whatsoever. [19] For the above novation assertion, the First and Second Defendants referred this Court to Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915] AC 847; Scruttons Ltdv Midland Silicones Ltd [1962] AC 446; Suwiri Sdn Bhd v Government of the State of Sabah [2008] 1 AMR 1; [2007] 1 CLJ 123; [2008] 1 MLJ 743; [2007] 2 MLRA 667; and Bacom Enterprises Sdn Bhd v Jong Chuk & Ors [2011] 2 AMCR 12; [2011] CLJU 440; [2011] 5 MLJ 820; [2011] 1 MLRA 853. [20] In their reply to the Plaintiff’s claim under the head of unjust enrichment, the Defendants’ arguments were twofold, namely, first, that they did not benefit from the Final Payment that they made to Trans Fame and second, there was no fiduciary relationship between the Plaintiff and them for 'unjust enrichment' to be capable of arising. On this argument, the Defendants relied on Dream Property Sdn Bhd v Atlas Housing Sdn Bhd [2015] 2 AMR 601; [2015] 2 CLJ 453; [2015] 2 MLJ 441; [2015] 2 MLRA 247. [21] As for the Plaintiff’s claim pursuant to constructive trust, the Defendants underscored the fact that the Final Payment arose from the PM-MCM Contract between the Defendants and Trans Fame. Again, the Plaintiff was never a party to this Contract. Hence, the Defendants emphasized that they cannot be seen as holding the monies arising from the PM-MCM Contract on the basis of constructive trust. Res judicata [22] On the res judicata ground, a broader doctrine that prevents the re-litigation of a matter that has already been decided by a competent court and one that encompasses both cause of action estoppel and issue estoppel, the Defendants’ applications are premised on the following contentions. [23] First, the issue of the extension of liability on the part of the First Defendant under the PM-MCM Contract to any non-contracting parties including the sub-contractors, had been decided in an earlier suit (“DSCAFF Suit”). Since the Plaintiff was a party to the DSCAFF Suit and had taken part in opposing the striking out in that suit, it was the First Defendant’s contention that the Plaintiff is barred from relitigating the same issues again in this suit. [24] Second, it was also argued that the Plaintiff is similarly barred from claiming "constructive trust" and/or "unjust enrichment" against the First Defendant. This is considering that the subject matter of the Plaintiff's claim and causes of action in this suit is identical to the subject matter, claims, issues and/or arguments raised in the DSCAFF Suit. Therefore, it was the First Defendant’s assertation that the Plaintiff is estopped from raising any claim or cause of action or issue that the Plaintiff could have raised in the DSCAFF Suit (which it failed to do so), against the First Defendant in the present suit. [25] Third, the argument advanced is that notwithstanding that the Second Defendant was not a party to the DSCAFF Suit, the Second Defendant is a privy of the First Defendant by virtue of the fact that both are parties to the PM-MGM Contract and that both are the co-employers of Trans Fame thereunder. Therefore, it was the Second Defendant’s submission that the Plaintiff is barred from relitigating the same issues in the DSCAFF Suit and/or issues that could have been raised in the DSCAFF Suit (which it failed to do so), against the Second Defendant in the present suit. The Earlier or DSCAFF Suit [26] Before we proceed to consider the contentions by the Plaintiff in opposing these striking out application, it is necessary that the nature of the earlier of DSCAFF Suit is understood. [27] In 2021, Dscaff Engineering Sdn Bhd ("Dscaff'), the supplier of the scaffolding materials for the Project had commenced a suit against the present Plaintiff and the present First Defendant vide the Kuala Lumpur Suit No. WA-22NCVC-535-08/2021 ("DSCAFF Suit"). [28] In that DSCAFF Suit, Dscaff had claimed against the present Plaintiff for, inter alia, the outstanding payment of rental rate for the scaffolding materials under a Scaffolding Rental Agreement dated 15 May, 2019 between the parties ("Scaffolding Rental Agreement"). [29] In that same action, Dscaff also sued the present First Defendant for, inter alia, the following: • The return and/or redeliver of the scaffolding materials on the basis that the First Defendant being the bailee and/or party presently having custody of the materials; and • Restitution and/or compensation: o At a rate not less than the rental rate of RM149,768.00 per month or at such rate and/or sum as may be determined by the Court and until such time of full return and/or redelivery of the materials to Dscaff; and o At a rate of not less than the rental rate of RM149,768.00 per month or at such rate and/or sum as may be determined by the Court for any such period of its usage of the material without any payment made specifically for the same. [30] The First Defendant subsequently filed an application to strike out Dscaff's claim against it on the basis, inter alia, that Dscaff does not have a cause of action against the First Defendant since: • The First Defendant was not privy to the Scaffold Rental Agreement; and • Dscaff was also not privy to the PM-MCM Contract. [31] A noteworthy point is that the striking out application in the DSCAFF Suit was not only opposed by Dscaff (the Plaintiff in that Suit) but also by Cheematrade (the co-Defendant in that Suit and the present Plaintiff in this Suit). [32] Cheematrade (the present Plaintiff in this Suit) had claimed, inter alia, the following in the DSCAFF Suit: • That based on the terms of the PM-MCM Contract, the First Defendant has an obligation and/or owed duty of care towards Dscaff and the Plaintiff; • That when the First Defendant made full payment to Trans Fame, the First Defendant had breached the material terms of the PM-MCM Contract. Therefore, the Plaintiff claimed that the First Defendant had been negligent and/or grossly negligent in relation to the Plaintiff; and • In the DSCAFF Suit, the Plaintiff qua the First Defendant claimed that there is a legal basis for a third party like Dscaff and the Plaintiff to recover their substantive losses from the First Defendant notwithstanding that they did not have a privily of contract with the First Defendant. [33] In that DSCAFF Suit, reliance and references were made to (1) Article 33.2, (2) Article 33.2.2, (3) Article 33.5 and (4) Article 2.1.27 of the PM-MCM Contract. [34] On 23 May, 2022, the High Court in the that DSCAFF Suit dismissed the Striking Out Application. [35] The First Defendant then appealed to the Court of Appeal against the High Court Decision. The issues before the Appeal were inter alia, the following: • Whether a third party who is not a privy to the PM-MCM Contract can take advantage of the provisions in the PM-MCM Contract to its benefit?; and • Whether those provisions in the PM-MCM Contract give rise to a separate cause of action in tort based on a duty of care that the First Defendant owes to third parties, including Dscaff? [36] On 14 March, 2023, the Court of Appeal unanimously allowed the appeal. In allowing the same, the Court of Appeal answered the above questions in the negative. [37] No application for leave to appeal to the Federal Court was filed by Dscaff or the Plaintiff as the respondents in the appeal. The Plaintiff’s Contentions in Opposing the Present Striking Out Applications [38] The Plaintiff’s submissions in opposing the Defendants’ Striking Out Application can be summarised as follows. [39] First, it was the Plaintiff’s contention that the doctrine of privity cannot be viewed narrowly and should take into consideration the conduct of the parties, and the overall facts and circumstances of a particular case. The Plaintiff also argued that there is a nexus between the Plaintiff and Defendants pursuant to Section 71 of the Contracts Act 1950 and through the reference to the Defendants’ logo and the title of the PM-MCM Contract in the Alleged Service Orders and/or Alleged Backload Consignment Notes. [40] Second, the Plaintiff averred that there is a legal basis for a third party like the Plaintiff in this case to recover its substantial losses from the Defendants although the Plaintiff did not have privity of contract with the Defendants in stricto sensu. [41] Third, the Plaintiff argued that there are “material issues” to be ventilated at a full trial. [42] Fourth, the Plaintiff disputed that the principle of res judicata is applicable in this present case. The Plaintiff put forward three reason to substantiate this ground, that is: (1) the Plaintiff was not a plaintiff in the DSCAFF Suit; (2) the issues of unjust enrichment and breach of constructive trust were never raised; and (3) the merits of the case were never argued or decided upon. The Applicable Law and Principles [43] The grounds upon which a Court may “order to be struck out or amended any pleading or the endorsement, of any writ in the action, or anything in any pleading or in the endorsement” are provided in Order 18 rule 19(1) of the Rules of Court 2012 and they are —

It discloses no reasonable cause of action; and/or

It is scandalous, frivolous or vexatious; and/or

It may prejudice, embarrass or delay the fair trial of the action; and/or

It is otherwise an abuse of the process of the Court. [44] Section 71 of the Contracts Act 1950, a provision relied by the Plaintiff provides as follows: Obligation of person enjoying benefit of non-gratuitous act

Where a person lawfully does anything for another person, or delivers anything to him, not intending to do so gratuitously, and such other person enjoys the benefit thereof, the latter is bound to make compensation to the former in respect of, or to restore, the thing so done or delivered.

A, a tradesman, leaves goods at B’s house by mistake. B treats the goods as his own. He is bound to pay A for them.

A saves B’s property from fire. A is not entitled to compensation from B, if the circumstances show that he intended to act gratuitously. [45] The leading authorities on the legal concepts invoked by the parties in these applications include the following. [46] In Serac Asia Sdn Bhd v Sepakat Insurance Brokers Sdn Bhd [2013] 4 AMR 385; [2013] 6 CLJ 673; [2013] 5 MLJ 1; [2013] 5 MLRA 175, the Federal Court reiterated that the re-litigation of a regularly and properly concluded matter as determined by the court is prohibited by the wide doctrine of res judicata and that the judicial process rests on the twin pillars of certainty and finality. [47] On the constituent elements that must be present for a cause of action based on unjust enrichment, the decision of the Federal Court in Dream Property Sdn Bhd v Atlas Housing Sdn Bhd [2015] 2 AMR 601; [2015] 2 CLJ 453; [2015] 2 MLJ 441; [2015] 2 MLRA 247 is instructive. The Federal Court summed up the law as follows: [117] The above passages from the judgments of the House of Lords are instructive and are significant contribution to the development of law of unjust enrichment. The principle underlying the cases of Banque Financiere de la Cite v Parc (Battersea) Ltd and Sempra Metals Ltd (formerly Metallgesellschaft Ltd) v IRC is that, in the context of the present case, a cause of action in unjust enrichment can give rise to a right to restitution where it can be established that:

the plaintiff must have been enriched;

the enrichment must be gained at the defendant’s expense;

that the retention of the benefit by the plaintiff was unjust; and

there must be no defence available to extinguish or reduce the plaintiff’s liability to make restitution. [118] Nearer home, there is now no longer any question that unjust enrichment law is a new developing area of law which is recognised by our courts. That the principle of unjust enrichment is the basis to justify an award of restitutionary relief can be seen in Sediperak Sdn Bhd v Baboo Chowdhury [1999] 5 MLJ 229 and in Air Express International (M) Sdn Bhd v MISC Agencies Sdn Bhd [2012] 4 MLJ 59. Nevertheless, it has to be said that despite the increase in judicial reference to the expression of unjust enrichment to justify an award of restitutionary reliefs, the law of unjust enrichment is still in its formative stage in our jurisdiction (see article entitled ‘An Introduction to the Law of Unjust Enrichment’ [2013] 5 MLJ i by Alvin W-L See). In our view, the time has come for this court to recognise the law of unjust enrichment by which justice is done in a range factual circumstances, and that the restitutionary remedy is at all times so applied to attain justice. [119] Applying those principles, we now turn to consider whether the defendant has made out a cause of action in unjust enrichment: the plaintiff has been enriched, that this enrichment was gained at the defendant’s expense, that the plaintiff’s enrichment at the defendant’s expense was unjust, and whether there are any special defences to the claim. [48] In Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915] AC 847, the House of Lords remarked as follows: My Lords, in the law of England certain principles are fundamental. One is that only a person who is a party to a contract can can sue on it. Our law knows nothing of a jus quaesi-tum tertio arising by way of contract. Such a right may be conferred by way of property, as, for example, under a trust, but if cannot be conferred on a stranger to a contract as a right to enforce the contract in personam. A second principle is that if a person with whom a contract not under seal has been made is to be able to enforce it consideration must have been given by him to the promisor or to some other person at the promisor’s request. These two principles are not recognized in the same fashion by the jurisprudence of certain Continental countries or of Scotland, but here they are well established. A third pro-position is that a principal not named in the contract may sue upon it if the promisee really contracted as his agent. But again, in order to entitle him so to sue, he must have given consideration either personally or through the promisee, acting as his agent in giving it. and again, in Scruttons Ltdv Midland Silicones Ltd [1962] AC 446, Lord Reid had this to say: … I find it impossible to deny the existence of the general rule that a stranger to contract cannot in a question with either of the contracting parties take advantage of provisions of the contract, even where it is clear from the contract that some provision in it was intended to benefit him. That rule appears to have been crystallised a century ago in Tweddle v. Atkinson and finally established in this House in Dunlop Pneumatic Tyre Co, Ltd. v. Selfridge & Co. Ltd. There are, it is true, certain well-established exceptions to that rule– though I am not sure that they are really exceptions and do not arise from other principles. But none of these in any way touch the present case. [49] The legal proposition that “the doctrine of privity of contract is that as a general rule, a contract cannot confer rights or impose obligations on strangers to it, i.e. persons who are not parties to it” is a firmly established principle by virtue of the Federal Court pronouncement in Suwiri Sdn Bhd v Government of the State of Sabah [2008] 1 AMR 1; [2007] 1 CLJ 123; [2008] 1 MLJ 743; [2007] 2 MLRA 667. Decision of this Court [50] As the effect of an order to strike out a writ and statement of claim is akin to the granting of a summary judgment in favour of a Defendant(s) – as it is so regarded in the United States – this Court will approach the present application with great caution and decide on these applications based on the established principles and (with the exception of the ground under Order 18 rule 19(1)(a) of the Rules of Court 2012), the evidence before the court. [51] On the doctrine of res judicata and its subset concepts of cause of action estoppel and/or issue estoppel, this Court is required to carefully examine the earlier DSCAFF Suit, as outlined in paragraphs [26] – [37] above. [52] Having carefully considered the DSCAFF Suit, this Court is of the considered view that under the doctrine of res judicata, the Plaintiff is barred from relitigating the same issues. [53] As for the “new/additional” issues and/or causes of actions raised in the present Suit and the existence of the Second Defendant in the present suit, this Court finds that the res judicata doctrine is still applicable by virtue of the extended doctrine of res judicata propounded by the case of Henderson v Henderson (1843) 3 Hare JOO. 67 ER 313. [54] The extended doctrine of res judicata is well-established and accepted by the Malaysian courts: see, for example, Asia Commercial Finance (M) Bhd v Kawai Teliti Sdn Bhd [1995] 3 AMR 2559 (refd); [1995] 3 CLJ 783; [1995] 3 MLJ 189; [1995] 1 MLRA 611. [55] Notwithstanding that the Second Defendant was not a party in the DSCAFF Suit, the estoppel by way of res judicata similarly applies. Here there was a privity of interest between the Defendants. [56] On these findings alone, this Court will exercise its powers pursuant to Order 18 rule 19(1)(d) and allows the Defendants’ applications in Enclosures 18 and 19 to strike out the Plaintiff’s Writ and Statement of Claim. [57] In the event that this Court has erred in allowing the Defendants’ application based on the doctrine of res judicata/cause of action estoppel and/or issue estoppel, this Court also finds merit in the arguments that the doctrine of privity bars the Plaintiff from relying on the PM-MCM Contract. [58] The absence of evidence to show or conclude the existence of a novation of the contract supports the decision of this Court in deciding in favour of the Defendants. [59] On the issue of duty of care owed to the Plaintiff, this Court has taken note of and examined Article 33.2.2 of the PM-MGM Contract which requires Trans Fame to furnish the relevant information to the First Defendant and/or the Second Defendant upon their request, prior to Trans Fame entering into contracts with the proposed sub-contractor. This raised the question as to whether it gives rise to any obligation or duty that the First Defendant and/or Second Defendant owe to the Plaintiff. This Court is of the view that the answer is in the negative. [60] Likewise, the question as to whether there is any obligation under the PM-MGM Contract that mandated the First Defendant and/or the Second Defendant to pay any sub-contractors directly, this Court is also of the view that the answer is in the negative. [61] Based on the authorities submitted by the parties, together with the evidence available, this Court also finds that the elements of Unjust Enrichment and Constructive Trust have not been established. [62] In view of the above findings, the applications in Enclosures 18 and 19 are allowed with costs. [63] The Plaintiff to pay costs of RM10,000 to each of the Defendants, subject to allocatur. Dated: 1 September, 2024 sgd [CHOONG YEOW CHOY] Judicial Commissioner High Court of Malaya Shah Alam Counsel: Parimaladevi a/p Sangaran for the Plaintiff (Messrs. A. Rajadurai P. Kuppusamy & Co.) Priyanka Menon for the Defendants (Messrs. Shearn Delamore & Co.)