Classic Kancil Sdn Bhd v Degussa Enterprisea (W-02(NCC)(W)-74-01/2021)

DEGUSSA ENTERPRISE

MOHAMED FAIZAL FEROZ BIN ABOO HASSAN (Berniaga di bawah gaya dan nama Degussa Enterprise) [In the Matter of High Court of Malaya at Kuala Lumpur Civil Suit No.WA-22 NCC-291-05/2019 Between Classic Kancil Sdn Bhd - Plaintiff

Degussa Enterprise

Mohamed Faizal Feroz bin Aboo Hassan - Defendants] CORAM: LEE SWEE SENG, JCA HADHARIAH BINTI SYED ISMAIL, JCA SUPANG LIAN, JCA GROUNDS OF JUDGMENT Introduction [1] The appeal by the appellant is against the decision of the High Court, given on 17.12.2020, dismissing the appellant's claim for a sum of RM3,360,000.00 being the outstanding sum due and owing to the appellant for services rendered by the appellant at the request of the respondents. [2] We heard and unanimously allow the appeal on 10.11.2021. [3] The appellant is the plaintiff and the respondents are the defendants at the High Court. In this judgment, we will refer the parties as they were in their original position. Background facts [4] The plaintiff carries on the business of supplying and installing of manhole slabs beneath the roads. Each manhole slab was said to weigh in the region of 2.5 tonnes. Heavy machineries were used for excavation and laying of the manhole. The plaintiff has the manpower, the machineries and expertise to carry out the works. [5] The defendant was the main contractor to the replacement and civil works for 1300 units manhole slabs (the said works) owned by Telekom Malaysia (TM) at various locations in Kuala Lumpur and Selangor. [6] The plaintiff was the sub-contractor of the defendant. [7] After the said works had been completed, the plaintiff issued a quotation for 1300 units of manhole slabs at the price of RM4400.00 for each slab amounting to RM5,720,000.00 to the defendant. [8] The defendant being the main contractor to TM quoted a price of RM7500.00 for each unit of manhole slab ie an additional of RM3100.00 per manhole with a total cost of RM9,750,000.00 to TM. [9] The plaintiff claimed it has supplied and installed 1300 units of manhole slabs to the satisfaction of TM and the sum of RM5,720,000.00 remains outstanding. However, TM only accepted 1278 units manhole slabs. [10] It is an undisputed fact that there was no privity of contract between the plaintiff and TM. Therefore, the plaintiff's claims for RM5,720,000.00 is against the defendant. [11] The pricing quoted by the defendant prompted TM to hold a negotiation meeting with the defendant at TM's office on 25.7.2018 to settle the payments for the said works. The plaintiff was not invited to attend the meeting. Nevertheless, the defendant roped in the plaintiff for the meeting on 25.7.2018 simply because it was the plaintiff who had carried out and completed the said works. [12] There was no written minutes of the meeting. However, what transpired at the meeting was recorded by PW1 via her handphone. The transcript of the recording was produced in court as exhibit C1. [13] A day after the meeting, TM sent an email dated 26.7.2018 to the defendant confirming that the total sum approved for the said works was RM3,960,550.00. [14] It is not disputed that the 26.7.2018 email was never addressed to nor copied to the plaintiff. Thus, the plaintiff contends it was not aware of any such settlement of RM3,960,550.00 since the plaintiff's claim against the defendant is for RM5,720,000.00. It is the plaintiff's contention that although they attended the meeting on 25.7.2018, they did did not agree to any price revision and the plaintiff was never informed by the defendant of TM's agreement to pay the sum of RM3,960,550.00. [15] On 15.1.2019, the plaintiff issued an invoice No. CKSB 0005/19 for 530 units of manhole slabs @ RM4400.00 per unit amounting to RM2,332,000.00 which was duly acknowledged receipt by the defendant. [16] Even though the defendant received the sum of RM3,960,550.00 from TM, the defendant deducted 40% from RM3,960,550.00 and paid the plaintiff the sum of RM2,400,000.00 via their payment voucher No.0160 dated 23.1.2019 and after deducting a credit note of RM40,000.00, issued a CIMB Islamic Cheque No. 000836 for RM2,360,000.00 to the plaintiff on 23.1.2019. [17] On 29.5.2019, the plaintiff commenced this action against the defendant seeking for payments of the balance 770 units manhole slabs @ RM4400.00 per unit amounting to RM3,360,000.00. [18] In its defence to the plaintiff's claim, the defendants contended that the plaintiff have agreed at the meeting to accept RM3,960,550.00 as full and final settlement for the works done. The defendants also contended that the plaintiff have also agreed to the 40% deduction. In the circumstances, the defendants maintained their position that they did not owe any money to the plaintiff. [19] Initially, the defendants brought in TM as a third party in this proceeding. However, TM had applied to set aside the third party notice. Eventually, on 13.7.2020, the defendants withdrew the third party proceedings against TM. At the High Court [20] Before the High Court, the parties had agreed that the sole issue to be determined by the court was whether in the meeting held on 25.7.2018, the plaintiff had agreed to accept the sum of RM3,960,550.00 as full and final settlement for the works done. [21] Needless to say, the plaintiff's director, one Mr Sabapathy (PW2) who attended the meeting on 25.7.2018 testified that the plaintiff had never agreed to accept a sum of RM3,960,550.00 as full and final settlement of its claim for RM5,720,000.00. On the other hand, both the second defendant (DW1) and TM's Manager (DW2) gave oral testimony that PW2 had agreed to accept a lesser sum. [22] To support its case, the plaintiff rely on the transcription of the audio recording, exhibit C1. [23] In his analysis of the evidence, the learned Judicial Commissioner (JC) made the following finding of facts:

That the plaintiff had completed their sub-contract works with the defendant;

That a sum of RM5,720,000.00 was due and owing to the plaintiff prior to the meeting with TM on 25.7.2018;

That the plaintiff's stance all along is they never agreed to accept a lesser sum as full and final settlement of its claim against the defendant. [24] Having had the benefit of perusing the transcription (exhibit C1), the learned JC found it hard to follow as he was unable to identify with any certainty whose voices they are and certain portions are referred to as "inaudible". However, the learned JC noted that at page 8 of exhibit C1, His Lordship can clearly identify that PW2 has said as follows: "Saya punya last final, saya cakap macam inilah boss. Lebih lebih 7%. Okay saya bagi kurang kalau boleh. Tak boleh kalu, bagi satu late payment. Ini payment kasi 4 payment kasi saya. Macam ini selesai semua masaalah. Kita semua dah buat." [25] Even though the learned JC appreciates that the above quoted statement support PW2's evidence that he did not agree with TM's proposal of RM3,960,550.00, His Lordship took the view that the same is consistent with DW2's evidence that PW2 did object at the beginning of the meeting but at the end PW2 agreed to a lower sum. DW2 is En Aizat bin Amir Hamzah, the Manager of TM. In the end, the learned JC preferred to rely on the oral testimony of witnesses and not exhibit C1. [26] Faced with two contradicting oral versions, the learned JC found the defendants' version to be the more probable one and dismissed the plaintiff's claim. In arriving at the decision, His Lordship:

Accepted the oral testimony of DW1 and DW2;

(ii) That DW1 and DW2's evidence were supported by the email dated 26.7.2018 from TM to the defendant; an invoice dated 15.1.2019 from the plaintiff to the defendant and the payment voucher dated 23.1.2019 for RM2,360,000.00 from the defendant to the plaintiff. [27] The learned JC rejected the plaintiff's version for the following reasons:

If there was no agreement reached at the meeting, it was reasonable to expect the plaintiff would have issued an invoice for the whole amount outstanding of 1300 manhole slabs. However, the plaintiff only issued an invoice for 530 slabs.

(ii) On the plaintiff's response that it was issuing invoices in instalment, there was no evidence of any agreement reached that payments would be in instalment. In fact, there was no further invoices issued by the plaintiff for the balance.

(iii) Upon accepting payment of RM2,360,000.00, there was no correspondence from the plaintiff to the defendant seeking any balance sum due or owing or highlighting that it was only partial payment.

(iv) Based on the oral testimony and conduct of the parties, it was more probable than not that the plaintiff did agree to accept the lower sum as proposed by TM. The plaintiff then accepted the said payment less the defendants' 40% commission without any protest. The Appeal [28] The points raised by the appellant /plaintiff in this appeal are as follows:

The learned JC has erred in law and in fact in accepting the evidence of DW1 and DW2 that the plaintiff's representative (PW2) has agreed to accept the settlement proposal when in fact DW2 in his evidence confirmed that there is no privity of contract between TM and the plaintiff. Therefore, it is not likely for the plaintiff to accept the sum of RM3,960,550.00 as full and final settlement in the absence of any minutes of the negotiation meeting confirming the same by all parties present at the meeting.

(ii) The learned JC has erred in law and fact in accepting the evidence of DW1 that the payment voucher dated 23.1.2019 confirms that the payment amount of RM2,360,000.00 was full and final settlement when the plaintiff has issued an invoice dated 15.1.2019 for 530 unit manhole slabs amounting to RM2,332,000.00.

(iii) The learned JC has erred in law and fact in failing to appreciate the fact that the plaintiff was not aware of the outcome of the negotiation meeting on 25.7.2018 because not only the email from DW2 was not communicated to the plaintiff, the defendant also did not inform the plaintiff about the settlement.

(iv) The learned JC has erred in law and fact in accepting DW1's testimony of a unilateral 40% deduction from the settlement sum of RM3,960,550.00 when DW1 confirms there is nothing before the court which confers any right to the defendant to deduct the sum of RM1,600,550.00 from the proposed settlement.

The learned JC has erred in law and fact in failing to take into consideration that the plaintiff did not receive the full sum of RM3,960,550.00 purportedly alleged as full and final settlement of the plaintiff's claim. The plaintiff's submissions [29] In gist, the plaintiff's argument can be summarised as follows. The second defendant (DW1) in his evidence agrees that in a similar transaction involving the plaintiff, the defendant and TM, prior to this dispute, the plaintiff had quoted the same price of RM4400.00 for each manhole slab and the defendant has made payments based on the plaintiff's quotation without any problem. [30] DW1 also agrees that it is the responsibility of the defendants to make a claim for payments with the project owner i.e. TM. [31] DW1 further agrees that there is nothing in the payment voucher to confirm that the sum of RM2,360,000.00 was a full and final payment for 1300 units of manhole slabs. Despite the obvious, DW1 maintained his position that the payment voucher conclusively proved that the plaintiff had accepted RM2,360,000.00 as full and final settlement for 1300 manhole slabs. [32] Finally, DW1 agrees that there was no document to prove not only the existence of the distribution formula 60:40, but also the plaintiff's agreement to such formula. [33] In the circumstances mentioned above, the plaintiff submitted that the learned JC had erred in his decision to dismiss the plaintiff's claim. The defendants' submissions [34] The respondents/ defendants submit that the payment of RM3,960,550.00 by TM to the defendant was paid after the parties including PW2 had reached a consensus on the negotiation of payment during the meeting on 25.7.2018. That this settlement sum was supported by TM's email dated 26.7.2018 and the defendants' payment voucher. And there was no complaint by PW2 after he collected the lesser payment of RM2,360,000.00. [35] The defendant of course submitted that the learned JC had not erred in his decision. Our Decision [36] We disagree with the defendant's submission. The undisputed fact is the defendant has accepted the plaintiff's pricing of RM4400.00 per unit for each manhole slab. This is the contractual price the plaintiff has agreed to supply and install 1300 units manhole slabs. The defendant ordered the plaintiff to supply and install 1300 manhole slabs on urgent basis as it was close to S.E.A Games in Kuala Lumpur. [37] We also find the meeting on 25.7.2018 was called by TM after the defendants had quoted the price of RM7,500.00 per unit for each manhole slab with the total sum claimed for 1300 units manhole slabs amounting to RM9,750,000.00. DW1 in his evidence agrees that TM was shocked with the amount of RM9.750 million quoted by the defendants and not the RM5 million quoted by the plaintiff. [38] According to TM's email dated 26.7.2018 at page 745 Appeal Record (Bahagian C) Jilid 2, TM confirms as follows:

Total PO claimed by the defendants - RM9,660,000.00

(ii) Moderation for Claim (revision of rental, permit and mobilisation cost) - RM5,839,900.00 Total SUM works that TM propose for approval RM3,960,550.00 [39] If we divide RM3,960,550.00 against 1300 units of manhole slabs, the price of one unit amounts to RM1815.38 which is 41.25% of the original agreed unit price of RM4400.00. There is a deduction of 58.75% from the original price. [40] Taking into account the amount of RM5,720,000.00 claimed by the plaintiff is not disputed by the defendants and there is a cut of 58.75 % of the original price, it is our considered view that the defendants had to adduce cogent evidence to prove that the plaintiff has agreed to accept:

first, the lesser sum of RM3,960,550.00 as full and final settlement for 1300 manhole slabs;

(ii) second, a further lesser sum of RM2,360,000.00 as full and final settlement for 1300 manhole slabs;

(iii) third, the deduction of RM3,360,000.00 from the original amount of RM5,720,000.00;

(iv) fourth, a further deduction of RM1,560,550.00 from RM3,960,550.00 based on the formula of payments sharing of 60% to the plaintiff and 40% to the defendant; and

fifth, a further deduction of RM40,000.00 from RM3,960,550.00 being credit note to expedite payments of RM3,960,550.00 making the total sum deducted from RM3,960,550.00 is RM1,600,550.00. [41] As agreed by DW1, the defendants' payment voucher do not mentioned the words "full and final settlement for 1300 manhole slabs". In this regard, we find the learned JC had erred in accepting the payment voucher as the document which support the defendants' version. In the circumstances, we agree with the plaintiff that the payment voucher do not constitute a conclusive proof that the plaintiff has agreed to accept RM3,960,550.00 as settlement of its claim against the defendant. We find support in our conclusion in the fact that the plaintiff had no knowledge about the sum approved by TM is RM3,960,550.00 because neither the plaintiff was informed of the same by the defendants nor did they receive TM's email. The plaintiff cannot be expected to protest on something which they do not know. Further support is found in the plaintiff's invoice for payments of 530 units manhole slabs dated 15.1.2019. Although the learned JC had remarked that the plaintiff should have issued an invoice for the total 1300 units manhole, such remark only goes to the manner as to how the plaintiff conduct its business with the defendant. What is important to note from the plaintiff's invoice is the plaintiff is claiming the pricing of RM4400.00 per unit. Thus, the plaintiff's invoice is a clear indication that the plaintiff did not agree to accept TM's revised price of RM1815.38 per unit as alleged by DW1. It is unreasonable for DW1 to make such allegation when DW1 himself has attempted to claim for RM7500.00 per unit price. [42] With regard to the defendants' claim for distribution of 60 % payments from TM to the plaintiff and 40% to the defendants, DW1 agrees that such distribution was not supported by any document. This distribution was not mentioned in the plaintiff's quotation. Our view is, strong evidence is required to displace the written quotation accepted by the defendant. Since we find there is no evidence of this 60:40 sharing of the sum received from TM, we do not think that the learned JC was right in finding that the plaintiff had agreed to a lesser sum from TM out of which the plaintiff would only get 60%. [43] For the aforesaid reasons, we find there is merit in the appeal. We therefore allow the appeal and set aside the Order of the High Court. We grant judgment to the plaintiff for the sum of RM4400.00 per unit x 1278 units of manhole slabs = RM5,623,200.00. As RM2,360,000.00 has been paid, the balance outstanding is RM3,263,200.00 for which judgment is entered together with interest at 5% per annum from the date of filing of the writ till realisation. [44] We order costs of RM40,000.00 here and below to the plaintiff subject to allocator. Dated $ 1 3^{\mathrm{th}} $ Mei 2022. Hadhariah binti Syed Ismail Judge Court of Appeal. For the Appellant/ Plaintiff Mr S. Letchiemanan (Miss Priya Darshini with him); Messrs Pathi & Associates. For the Respondents /Defendants : En Khairul Azlee bin Amran (Cik Faridatul Aqmar with him); Messrs Aqmar Ahmad & Co.