Esdc Technology Sdn Bhd v Heitech Padu Berhad (BA-22NCvC-562-11/2018)

The Plaintiff was the Defendant’s subcontractor since 2010 for the its main contract works with Jabatan Pendaftaran Negara (“JPN”) to provide ICT maintenance services. From 2010 till 2017, the Defendant was re-appointed the main contractor by JPN several times, but failed to secure its re-appointment when its contract expired in 2017.

The Plaintiff’s suit stems from the services it provided outside the contract period pending the results of the tender exercise by JPN in 2017. The Plaintiff claims that having provided the services in the interim period, the Defendant is obliged to pay for it. 28/06/2023 13:20:59 BA-22NCvC-562-11/2018 Kand. 93

The salient facts, in so far as they are undisputed, are as follows.

By a letter dated 29.7.2010, the Defendant was appointed by the Government to provide “Perkhidmatan Penyelenggaraan Sistem Bisnes Utama ICT Di Jabatan Pendaftaran Negara.” The contract period was from 1.7.2010 to 30.6.2011.

To complement its delivery of the maintenance services, the Defendant appointed the Plaintiff as a subcontractor to maintain the MyKad component of the core system provided by the Defendant.

The main contract between the Defendant and JPN generally expired after a time frame of every one or two years. Over the course of the next 7 years, the Defendant was re-appointed several times when its contract expired on 30th June of the particular year.

It was JPN’s practice to conduct a tender exercise only upon the expiry of the contract. Pending the results of the tender, the Defendant would provide a Letter of Undertaking stating that it will continue to provide basic technical support at no extra charge during the interim period, which was usually for the months of July to September.

Upon its re-appointment, a new contract will be executed with JPN and backdated to the 1st of July to cater for the interim period 3 between the expiry of the contract and the re-appointment after the tender exercise.

With each re-appointment, the Plaintiff was also appointed as the Defendant’s sub-contractor for the years from 1.7.2010 to 30.6.2017. The Plaintiff’s contract sum was based on the amount stated in the Purchase Orders issued by the Defendant to the Plaintiff. There was no formal contract. A total of 5 Purchase Orders in total were issued to the Plaintiff during this period.

The instant dispute arose when the Defendant failed to be re-appointed following the expiry of its contract on 30.6.2017. Upon the expiry, a tender exercise was carried out by JPN for the appointment of a contractor. Pending the appointment, as was customary on the part of the Defendant, it gave a letter of undertaking dated 19.6.2017 stating “pihak kami akan terus berada di pejabat SI Consultant di Ibu Pejabat JPN bagi memberikan khidmat kepada JPN sementara menunggu Kementerian Dalam Negeri memuktamadkan keputusan tender bagi kontrak penyelenggaraan Sistem Bisnes Utama ICT di JPN untuk tempoh dua (2) tahun akan datang.”

It was not until 31.8.2017 that the Defendant came to know that it was unsuccessful in tendering for the new contract. JPN awarded the ICT maintenance contract to a third party. The Defendant then recalled its personnel from JPN who had been providing basic support service from July 2017. No maintenance service was provided from September 2017 by the Defendant.

The Plaintiff continued to provide its services to JPN for the months of July, August and September 2017, as it had for the previous 7 years pending the Defendant’s appointment after the tender exercise. It stopped sometime in September 2017 when its personnel were not allowed on the premises of JPN.

The Plaintiff seeks to be paid the value of the works provided for these 3 months. Regardless of the Defendant’s non-appointment as the main contractor from July 2017, it is nonetheless liable to pay the Plaintiff for its services rendered during the interim months from July to September 2017.

The Defendant had instructed the Plaintiff to provide the service to JPN. Its letter of undertaking to JPN dated 19.6.2017 for free basic support service included the Plaintiff’s scope of work. The Plaintiff never intended the works to be provided free of charge during the interim period.

The parties had intended for the Plaintiff to be paid for its services. This is evident from the past conduct of the Defendant as upon being re-appointed, the Plaintiff was paid for its work during the interim period. The 5 previous Purchase Orders issued for the past 7 years included payment for work done during the interim period. The Defendant made payment towards the invoices issued following the Purchase Orders.

The Plaintiff further alleges that the provision of its services from July to September 2017 was not conditional upon the Defendant’s re-appointment by JPN.

Its claim in this suit is for the amount of RM 2,730,000.00 being the value of its services for these 3 months. This amount is computed based on the 5th Purchase Order dated 29.10.2015 for the sum of RM 21,840,000.00. Based on the amount therein, a sum of RM 910,000.00 for each of the months of July, August and September 2017 was arrived at.

On 3.9.2018, the Plaintiff issued 3 invoices to the Defendant to demand for payment for services for the months of July, August and September 2017. When no payment was forthcoming, a letter of demand dated 26.9.2018 was sent. The demand was refuted by the Defendant, hence, the instant suit.

The Defendant denies instructing the Plaintiff to carry out services for these 3 months. The Plaintiff decided on their own accord to continue offering their services to JPN after the expiry of the main contract on 30.6.2017.

No contractual relationship existed between the parties beyond the expiry of the main contract. The past practice in relation to the 5 prior sub-contracts would show that the Defendant’s obligation to pay the Plaintiff arose when the following had taken place. After the appointment of the Defendant by JPN, it will first request the Plaintiff for a quotation for the new sub-contract. Upon the Plaintiff providing its quotation, the parties will enter into negotiations on the contract sum, after which the Defendant will issue a Purchase Order to the Plaintiff, followed with an invoice issued by the Plaintiff. Payment to the Plaintiff will be made only after the Defendant has received payment from JPN. It was a back to back arrangement.

In this instance, the Defendant was not appointed by JPN for the new contract. Therefore, none of the aforementioned events took place. The Defendant’s obligation to pay for services during the interim period does not arise.

Finally, the provision of the services by the Plaintiff from July to September 2017 was a business risk taken by the Plaintiff.

It is fundamental that the liability of the Defendant to pay can only arise from a contractual obligation. Arising from the rival contentions of the parties, the critical issue is whether a contractual relationship existed between the parties during the interim months of July to September 2017. The determination of this issue will require the court to make findings of fact whether the Defendant had instructed the Plaintiff to provide its services and whether the services were provided by the Plaintiff gratuitously, taking into account the past practices of the parties.

The law on the burden of proof in civil cases is settled. The burden of proof lies with the Plaintiff, on a balance of probabilities, if it is to succeed in its claim. Coupled with this basic principle is another equally important principle that the party who asserts a fact bears the burden to prove it. (See: sections 101 and 102 of the Evidence Act, 1950 and Letchumanan Chettiar Alagapan (as executor to SL Alamelooo Achi (Deceased) & Anor v Secure Plantation Sdn. Bhd.) [2017] 5 CLJ 418).

The pleaded case of the Plaintiff, evident from paragraph 8 of the Statement of Claim, is that it was instructed to provide the maintenance services. Paragraph 8 states,

Bagi memastikan perkhidmatan dan penyelenggaraan system yang kompleks ini tidak tergendala, Defendan dan JPN mengarahkan Plaintiff untuk meneruskan perkhidmatan di luar tempoh kontrak sejak bulan Julai 2017 sehingga September 2017. [26] The Plaintiff’s evidence at the trial does not support its pleaded case. In the cross-examination PW1, the director of the Plaintiff, she conceded that there was no specific instruction written or otherwise given by the Defendant to provide the services in the interim period. This to me, is a critical piece of evidence which I find necessary to reproduce below:- : Dato’, for completeness, Dato’ tak ada apa-apa arahan bertulis secara direct kepada pihak Plaintiff, betul? Dzuria : Betul : Adakah tak ada? Itu sahaja soalan saya bukan setuju tak setuju. Adakah apa-apa arahan untuk melanjutkan di luar tempoh masa yang sudah ditetapkan? Dzuria : Ada : Mana arahannya? Dzuria : Arahan saya katakan tadi, indirect arahan : So tak ada spesifik kan? Dzuria : Ya, spesifik memang tidak ada [27] To explain her statement that there was an indirect instruction by the Defendant to the Plaintiff to provide its services, the Plaintiff relied on the letter of undertaking issued by the Defendant on 19.6.2017. The Defendant therein offered to provide basic support services as listed, which included items (iii) Khidmat sokongan sistem aplikasi I-JPN dan e-JPN and (iv) Perkhidmatan Pemulihan Bencana bagi Sistem I-JPN, which were services provided by the Plaintiff. On this basis, PW1 said that there was indirect instruction given by the Defendant. [28] However, upon being questioned further in cross, PW1 admitted that she only came to know of this letter of undertaking in October

Her assertion that the Plaintiff was indirectly instructed therefore flies in the face of this admission. This letter cannot be proof of the Defendant’s instruction as alleged. I would therefore regard her evidence as to the Defendant’s instruction, as implausible. [29] As for its pleading that it was on the instruction of JPN, that is irrelevant as the claim of the Plaintiff is against the Defendant, and not JPN. [30] To conclude the point on whether the Plaintiff was instructed by the Defendant, I find the case for the Plaintiff defeated by its own evidence. There was no such instruction by the Defendant. Past practices [31] It was not disputed that for the previous years, there would usually be an interim period of some 3 months before the results of the tender exercise. It is only upon the re-appointment of the Defendant by JPN, will the Defendant issue a Purchase Order to the Plaintiff. [32] The documentary evidence before me speaks for itself. The 5 previous Purchase Orders were dated 8.9.2010, 30.9.2011,

26.11.2012, 14.11.2014 and 29.10.2015 respectively. As the contract period with JPN was with effect from 1st July, this evidence confirms the Defendant’s case that they were issued only after being re-appointed as main contractor by JPN. [33] It is not disputed that the Purchase Orders in the past would include the value of the services during the interim period. What is disputed is whether that fact is sufficient to establish a contractual relationship during July to September 2017 and consequently Defendant’s obligation to pay for the services? [34] Having considered the evidence before me, I do not think so. I accept the evidence of the defence on the renewal practice as credible and consistent with the documents tendered at the trial. The Plaintiff had to first furnish a quotation. Parties would then enter into negotiations to finalize the contract sum after which the Defendant will issue a Purchase Order to include the services during the interim period. It is obvious that a contractual relationship is formed only after the Defendant’s re-appointment as the main contractor. [35] Based on this evidence, I accept the Defence contention that until the Purchase Orders were issued, there was no privity of contract between the Plaintiff and the Defendant. [36] I do not agree that the subsequent inclusion of the value of the services provided during the interim period in the Purchase Orders is evidence of an intention to pay the Plaintiff, as alleged by the Plaintiff. [37] Consequently, I find that until the re-appointment of the Defendant as the main contractor by JPN, the services provided by the Plaintiff in the interim period was gratuitous. It was rendered in the expectation that it would be appointed the sub-contractor, following the Defendant’s re-appointed as the main contractor. [38] The Plaintiff’s own evidence through PW1 confirms this, : Ok, saya juga cadangkan kepada Dato’ Dzuria bahawa mana-mana pembayaran untuk perkhidmatan-perkhidmatan yang dikatakan telah dilaksanakan oleh Plaintif untuk JPN semasa menunggu pembaharuan Kontrak Utama hanya akan berbangkit selepas terdapat pembaharuan Kontrak Utama di antara Defendan dan JPN/Kerajaan dan selepas negosiasi perundingan di antara Defendan dan Plaintiff dan perlantikan baru Plaintif sebagai kontraktor kecil. Dzuria : Saya setuju. [39] I find that it is precisely on the basis suggested by the defence and agreed to by PW1 herself, that the Plaintiff will receive payment for its services during the interim period. In my view, the same considerations applied when the Defendant’s contract expired on 30th June 2017. [40] I will now touch on other aspects of the evidence affecting the merits of the Plaintiff’s case. Conduct of the Plaintiff post interim period [41] I note that the Plaintiff had initially sought payment from JPN. The minutes of the meeting held at JPN on 23.11.2017, and chaired by the Deputy Secretary-General of the Ministry was adduced in evidence. The meeting was informed of the following matters:-

the Plaintiff vide its letter of 30.10.2017 requested JPN to pay for maintaining the Mykad system provided outside the contract tenure, amounting to RM 3,500,000;

(ii) JPN stated that it did not give any instructions to maintain the system during the interim period from July to September 2017. It was the Defendant who offered to maintain the system at no cost in its letter of undertaking dated 19.6.2017;

(iii) the Plaintiff had verbally offered to maintain the MyKad sistem for free until the results of the tender. It was on that basis that the offer was accepted by JPN; and

(iv) upon checking the maintenance work allegedly performed by the Plaintiff, JPN found that the claim did not match the actual work done. [42] More importantly, the minutes record the following, which is produced in verbatim here,

2.1.3 Pihak ESDC mengakui dan mengesahkan bahawa: ….. iii) ESDC meneruskan perkhidmatan untuk tempoh tiga (3) bulan tersebut berdasarkan anggapan bahawa ESDC akan kekal sebagai sub-kontraktor bagi kontrak baharu akan datang. iv) Senarai kerja-kerja yang dikemukakan dalam surat tuntutan tersebut adalah skop kerja keseluruhan kontrak tetapi bukan semua skop kerja tersebut dilaksanakan oleh pihak ESDC [43] It is therefore evident that the Plaintiff’s services were offered at its own volition, and in the hope of being re-appointed as the sub-contractor. As the Defendant was not successful in the tender exercise, the issue of payment for the interim period must also end there. In any event, JPN found the Plaintiff’s claim to be unsupported based on the documentation furnished. [44] There was another follow up meeting in JPN on 30.11.2017 to discuss the Plaintiff’s claim. The explanation provided by the Bahagian Teknologi Maklumat is also relevant, wherein it stated that several of the Plaintiff’s claim included tasks that had to be completed by the Plaintiff within the contract period. As they were completed beyond the expiry date of 30.6.2017, the question of paying for these tasks does not arise. [45] It is fairly obvious that having exhausted its efforts to get JPN to pay, the Plaintiff then sought payment from the Defendant. The amount claimed by the Plaintiff [46] The Plaintiff relies on 3 invoices it issued to support its claim of RM 2,730,000.00. The invoices were dated 1.7.2017, 1.8.2017 and 1.9.2017 respectively, each for the amount of RM 910,000. [47] Having scrutinized these invoices, I do not find any acknowledgment of receipt by the Defendant. Further, I find the invoices to be self-serving as they were back-dated, to be sent with the Plaintiff’s letter of demand for payment dated 3.9.2018. PW1 admitted that they were back-dated. [48] The amount of RM 910,000 stated in each of the invoices is questionable. It was based on the figures in the 5th Purchase Order issued for the contract which expired on 30th June 2017. The invoices quote the reference number of the 5th Purchase Order. They were unilaterally issued. It was not a negotiated amount, unlike the previous sub-contracts. I therefore find that the Plaintiff has failed to prove the basis of the amounts claimed. [49] In conclusion, the Plaintiff failed to prove, on a balance of probabilities, that there was a contractual obligation on the part of the Defendant to pay for the services rendered during the interim period. In this regard, I agree with the Defendant’s contention that the Plaintiff’s provision of its services was a business risk it took, in the expectation that its sub-contract would be renewed. The fact of the previous renewals would have heightened its expectation. Unfortunately, as events turned out, its hopes were dashed. The Plaintiff is totally misconceived to rely on past practices that payments were made for the interim periods, and the fact that Plaintiff never intended to provide the services gratuitously. The essential requirement that a contract exists must first be established. Quantum meruit point [50] The Plaintiff in its written submission has raised an additional basis for its claim, one premised on quantum meruit. This point was not pleaded in its Statement of Claim. [51] On the failure to plead quantum meruit which is a substantive point, I am guided by the authority of Pembinaan SPK Sdn Bhd v Jalinan Waja Sdn Bhd [2014] 2 MLJ 322. The Court of Appeal held, [27] In our view, a claim for quantum meruit here related to more than a claim based on the legal effects of pleaded material facts; it was a cause of action in itself, which was substantive in nature and therefore required express pleading and the adduction at trial of a sufficient foundation of facts derived from evidence tendered through witnesses' testimony or relevant, cogent documentary evidence. It was too substantive to be subsumed under the blanket notion of it being based on material facts 'writ large in the whole claim.' By the same token, it was difficult to blandly accept that the 'omnibus' prayer of 'further or other relief' could supply the omission of an express pleading. Resort to the omnibus prayer would only make sense where the main claim was not dismissed, since after all this was for 'further or other relief'. In our opinion, the decision of the Federal Court in Lim Eng Kay v Jaafar bin Mohamed Said, cannot be so liberally read as to countenance a major breach or misapplication of fundamental rules of pleadings and the proper role of the court in our adversarial system of civil justice. [52] As the quantum meruit point was not pleaded, it is not open to the Plaintiff to now raise it in its written submissions. The Defendant was deprived of the opportunity to rebut it in evidence. Conclusion [53] Premised on the foregoing reasons, the Plaintiff’s claim against the Defendant is dismissed. I also order for costs of RM 35,000 to be paid by the Plaintiff to the Defendant, subject to allocatur. Dated : 26th June 2023 -SGD- ...………………..….... Alice Loke Yee Ching Judge High Court of Malaya at Shah Alam Counsel for the Plaintiff : Mr. Collin Andrew Pereira Tetuan Goh Wong Pereira Counsel for the Defendant : Mr. Ramesh Gopal (Ms. Kresha Paskaran with him)