Foong LI Trading Sdn Bhd v Ocr Properties (Kuantan) Sdn Bhd (BA-24C-27-05/2025)

Enclosure 1 is an application by the Plaintiff pursuant to S.30 Construction Industry Payment and Adjudication Act 2012 (“CIPAA”) for an order for payment of the adjudicated amount directly from the principal.

The relevant cause papers in this application are :-

the Plaintiff’s supporting affidavit affirmed by Tan Tee

(ii) the Defendant’s affidavit in reply affirmed by Ong Kah Wee on 4.6.2025 (“the Defendant’s Affidavit 1”);

(iii) the Plaintiff’s affidavit affirmed by Tan Tee Heong on 9.7.2025 (“the Plaintiff’s Affidavit 2”). Parties and Background

The material background facts in this case, which are not in dispute, are as follows :-

The Defendant has engaged Kencana Amanjaya Sdn Bhd (“Kencana”) as the main contractor in a project known as “Cadangan Pembangunan Institusi Pengajuan Tinggi Swasta Yang Merangkumi 3 Fasa di atas Lot PT 13825, Taman Teknologi Malaysia, Mukim Petaling, Bandaraya Kuala Lumpur, Wilayah Persekutuan”” (“the Project”);

(ii) Kencana has in turn appointed the Plaintiff as one of its sub-contractor for certain works and although the Plaintiff has carried out its works but was not fully paid by Kencana;

(iii) Kencana was wound up on 17.4.2023 and pursuant to S.471(2) Companies Act 2016, the Plaintiff obtained leave to initiate adjudication proceedings against Kencana under CIPAA vide Order dated 3.4.2024;

(iv) The Plaintiff commenced adjudication proceedings under CIPAA and on 5.11.2024 received the Adjudication Decision against Kencana whereupon Kencana was to pay the Plaintiff on/before 31.12.2024:-

RM518,898.81 being the outstanding amount;

RM242,335.07 being the interest on the unpaid sum;

RM53,115.68 being the costs of the adjudication proceedings; (“the Adjudication Sum”)

The Adjudication Decision remains outstanding;

(vi) The Plaintiff has issued their letter dated 2.1.2025 to the Defendant requesting the Defendant as the principal of Kencana to make payment of the adjudication amount pursuant to S.30 CIPAA (“S.30 Notice”);

(vii) The Defendant replied vide their letter dated 6.1.2025 informing the Plaintiff, inter alia, that there was no monies due or payable to Kencana as the Defendant and Kencana have entered into Settlement Agreement dated 27.11.2022 (“SA 1”) and Settlement Agreement dated 20.7.2023 (“SA 2”) where the parties therein have agreed to the settlement of all Defendant’s indebtedness to Kencana upon the due performance thereto.

No payment was received from the Defendant and hence this application.

S.30 CIPAA reads as follows :

If a party against whom an adjudication decision was made fails to make payment of the adjudicated amount, the party who obtained the adjudication decision in his favour may make a written request for payment of the adjudicated amount direct from the principal of the party against whom the adjudication decision is made.

Upon receipt of the written request under subsection (1), the principal shall serve a notice in writing on the party against whom the adjudication decision was made to show proof of payment and to state that direct payment would be made after the expiry of ten working days of the service of the notice.

In the absence of proof of payment requested under subsection (2), the principal shall pay the adjudicated amount to the party who obtained the adjudication decision in his favour.

The principal may recover the amount paid under subsection (3) as a debt or set off the same from any money due or payable by the principal to the party against whom the adjudication decision was made.

This section shall only be invoked if money is due or payable by the principal to the party against whom the adjudication decision was made at the time of the receipt of the request under subsection (1).

In Kinu Sdn Bhd v Kerajaan Malaysia (Jabatan Kerja Raya Malaysia) (2025) 5 MLJ 162, the Court of Appeal has re-iterated the 4 conditions to be satisfied by the subcontractor for direct payment by the principal as propounded in the case of Cabnet Systems (M) Sdn Bhd v Dekad Kaliber Sdn Bhd & Anor, which are:-

The main contractor must have failed to pay the adjudicated amount to the subcontractor (ss 3-(1) and (3) CIPAA) [“1st Condition”];

The subcontractor made a written request that the principal pay the adjudicated amount directly to the subcontractor (s 30(1), CIPAA) [“2nd Condition”];

There was money due or payable from the principal to the main contractor (s 30(5), CIPAA) [“3rd Condition”];

The principal did not comply with the subcontractor’s notice and did not pay the adjudicated amount directly to the subcontractor [“4th Condition”]. [collectively referred to as “the 4 Conditions” unless individually referred]

In JDI Builtech (M) Sdn Bhd v Danga Jed Development Malaysia Sdn Bhd (2024) 3 MLRA 713, the Court of Appeal held the following :- “[54] The respective legal and evidential burden with respect to the fulfilment of the 4 Conditions referred to by Wong Kian Kheong J (now JCA) in Cabnet Systems (M) Sdn Bhd v Dekad Kaliber Sdn Bhd & Anor (2020) 3 MLRH 83 was further expounded by His Lordship in LTK Façade Specialist Sdn Bhd v Sri Mutiara Development Sdn Bhd

MLRHU 831 as follows: “[26] With regard to the 4 Conditions, I have decided as follows in Chong Lek Engineering Works Sdn Bhd v PFCE Integrated Plant and Project Sdn Bhd And Anor Case (2020) MLRHU 1879 at [17], [18] and [20] : [20] Regarding the application of the 4 Conditions, I am of the following view :

X (who has obtained an adjudication decision against Y) has the following burdens of proof against Z under s 30 CIPAA –

X has the legal burden to prove against Z (Y’s principal) on a balance of probabilities the 4 Conditions under s 101(1) and (2) of the Evidence Act 1950 (EA); and

X also has the initial evidential burden pursuant to s 102 EA to prove the 4 Conditions against Z

If X proves the first, second and fourth Conditions (“1st Condition”, “2nd Condition” and “4th Condition”) as explained in Cabnet Systems, the evidential burden (not the legal burden) concerning the 3rd Condition shifts from X to Z. This is due to the application of s 106 EA which provides as follows – “When any fact is especially within the knowledge of any person, the burden of proving the fact is upon him” Section 106 EA applies in respect of the 3rd Condition because firstly, X does not have access to the contract between Y and Z. Nor does X have any access to the documentary evidence regarding the dealings between Y and Z. Whether any sum of money is “due” or “payable” from Z to Y at the time of Z’s receipt of X’s request, is “especially within the knowledge” of Z. Accordingly, if Z denies that no amount of money is “due” or “payable” from Z to Y at the time of Z’s receipt of X’s Request, by virtue of S 106 EA, Z has the evidential burden to “prove” such a denial… [55] As the assumption and the initial evidential burden is discharged by the subcontractor as above stated, the evidential burden then shifts to the principal to show proof that there is no amount owing by it to the main contractor. That it may show by adducing credible evidence of bona fide dispute with its main contractor and documents to substantiate that there is no money owing at that moment.” Issue in this application

The Court is satisfied that the Plaintiff has in this case proven on a balance of probabilities the following :-

Kencana has failed to pay the adjudicated amount to the subcontractor (ss 3-(1) and (3) CIPAA) [“1st Condition”];

The Plaintiff has made a written request that the Defendant pays the adjudicated amount directly to the subcontractor (s 30(1), CIPAA) [“2nd Condition”];

The Defendant did not comply with the Plaintiff’s notice and did not pay the adjudicated amount directly to the Plaintiff [“4th Condition”].

As held in JDI Tech’s case (supra.), having established the 1st Condition, the 2nd Condition and the 4th Condition, the evidential burden (not the legal burden) that there was no money due or payable from the Defendant to Kencana (the 3rd Condition) shifts to the Defendant.

A perusal of the cause papers filed by parties in this application shows that the core issue between parties falls squarely on whether there was any monies due or payable by the Defendant to Kencana at the time of receipt of the S.30 Notice. Monies due or payable to Kencana

Vide the Defendant’s Affidavit 1 the Defendant has sought to show that there is no money due or payable by them to Kencana as the Defendant has fully performed their obligations under SA 1 and SA 2 in full settlement of all its indebtedness to Kencana.

The only issue the Court will need to decide is whether SA 2 was a valid agreement. If in the affirmative, then the Defendant would have discharged their entire indebtedness to Kencana and therefore, there is no monies due or payable by the Defendant to Kencana at the date of receipt of the S. 30 Notice. If in the negative, the Defendant shall be obliged to pay the Adjudication Sum.

Kencana was wound up on 17.4.2023.

The Defendant claims that the Defendant has entered into the SA 2 on 20.7.2023 with Kencana. The SA 2 is essentially a 2- page letter addressed to Kencana confirming that the remaining balance of RM2,124,665.41 under the SA1 payable to Kencana (“the Balance Sum”) and that the Balance Sum was to be made to Kencana by monthly payments on/before 25.7.2023,

25.8.2023, 25.9.2023 and 25.10.2023.

It must be emphasised that the SA 2 made no mention at all that Kencana was wound up prior to the date of the SA 2. [the SA 2 : the Defendant’s Affidavit 1, exhibit “OKW-16”]

S. 455(2) Companies Act provides that : On the appointment of a liquidator, all powers of the directors cease, except so far as the company in general meeting with consent from liquidator, or the liquidator sanctions the continuance of all the powers of the directors.

Powers of the liquidator is as provided under S. 486 Companies

Where a company is wound up by the Court, the liquidator may:

without the authority under paragraph (b), exercise any of the general powers specified in Part 1 of the

with the authority of the Court or the committee of inspection, exercise any of the powers specified in Part II of the Twelfth Schedule.

The liquidator may, without the authority of either the Court or of the committee of inspection, do all acts and execute in the name and on behalf of the company all deeds, receipts and other documents and for that purpose use when necessary, the company’s seal (Part I(d) of the Twelfth Schedule)

In American International Assurance Bhd v Coordinated Services L Design Sdn Bhd (2012)1 CLJ 506, the Court of Appeal has held: “[25] It is trite law that once a company is wound up, the board of directors of the company becomes functus officio. The liquidator displaces the directors and the control of the activities of the company is vested with the liquidator. No one but the liquidator can act for the company. The directors however have the residual powers to bring an appeal against the winding up order… [26] When a winding up order is made, the directors of the company remain in office but their powers are removed…”

In Berjaya Sompo Insurans Bhd v Shamisa Holiday & Travel Sdn Bhd (2022) MLJU 2001, the Court concluded that the contract entered by company already wound up, and not by the liquidator, to be null and void ab initio.

Based on the above legal analysis, this Court holds that:-

with effect from 17.4.2023, Kencana’s directors’ powers were removed and vested with the liquidator;

(ii) the liquidator’s sanction was not obtained by Kencana’s directors for the execution of SA2;

(iii) the liquidator had no knowledge of the existence of the SA2 [ the Plaintiff’s Affidavit 2, exhibit “TTH-2”]

In the upshot, the SA2 entered between the Defendant and Kencana is void ab initio as the directors of Kencana can no longer act on behalf of the company and for the company at the material time. Money due or payable to Kencana

In the event there was payment of RM2,124,655.41 as averred by the Defendant [the Defendant’s Affidavit 1, exhibit “OKW-6”], the fact remains that the indebtedness of the Defendant to Kencana is not discharged as the payment was made under a contract that is void ab initio.

24.

In the case of Tan Chee Hoe & Sdn Bhd v Code Focus Sdn Bhd [2014] 3 MLJ 301, Ramly Ali FCJ at page 317 states as follows: “SECTION 66 OF THE CONTRACTS ACT 1950 [37] The effect of a void contract or agreement is provided for under s 66 of the Contracts Act 1950, which reads: 66 When an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under the agreement or contract is bound to restore it, or to make compensation for it, to the person from whom he received it. [38] The facts of the present case do fit the meaning of the words ‘discovered to be void’ or ‘becomes void’ as found in section 66 above. The Privy Council in Harnath Kaur v Inder Singh [1922] LR 50, 1 A 69 in considering a claim based on s 65 of the Indian Contracts Act 1872 (which was identical to our s 66 of the Contracts Act 1950) ruled: an agreement, therefore, discovered to be void is one discovered to be not enforceable by law, and on the language of the section, would include an agreement that was void in that sense from its inception as distinct from a contract that becomes void. The above principle was followed by Wan Suleiman J in Ahmad bin Udoh & Anor v Ng Aik Chong [1969] 2 MLJ 116. [39] A right to restitution may arise out of a failure of a contract though the right itself be not a matter of contractual obligation. It appears to be based on the principle exemplified in the Roman Law condictio causa data causa no secuta (contract becoming impossible to perform owing to the outbreak of war in 1914). The Privy Council in Menaka v Lum Kum Chum [1977] 1 MLJ 91, in dealing with s 65 of the Indian Contracts Act 1872 (which is identical to ours 66 of the Contracts Act 1950) ruled: In that way effect will be given to section 65 under which each party is bound to restore any advantage which he has received to the person from whom he received it — see Govindram Seksaria v Radbone where Lord Morton of Henry ton said: The result of section 65 of the Indian Contract Act was that, as from (the date on which the contract became void) each of the parties became bound to restore to the other any advantage which the restoring party had received under the contract of sale.”

The Federal Court went on to hold in Tan Chee Hoe (supra.) that “a void contract or agreement cannot be enforced by law. When a contract or agreement is void, the whole terms in the contract are void and cannot be enforced. No term of the said contract can be spared…”

As it is the finding of this Court that the SA2 is void ab initio, the Court accepts that there was RM2,124,665.41 payable to Kencana as at 20.7.2023 and that amount continues to be payable to Kencana up to the date of receipt of the S.30 Notice by the Defendant.

The Plaintiff has further submitted that the Defendant has failed to comply with S. 30(2) CIPAA, in that the Defendant did not serve a written notice to Jetson to show proof of payment, and has submitted that this is fatal to the defence that there is no monies due or payable from the Defendant to Jetson.

The Court of Appeal in Kinu Sdn Bhd (supra.) was not prepared to “hold that the failure of the principal to give a written notice under s 30(2) is invariably fatal in all cases. However the use of “shall” in s 30(2) in that upon receipt of the written request under subsection (1), “the principal shall serve a notice in writing” on its main contractor against whom the subcontractor had obtained an adjudication decision, does convey a certain mandatory need to comply. A non-compliance would be a factor to be taken into consideration in considering if there is money “due or payable” from the principal to the main contractor and where circumstances justify, to even draw an adverse inference against the principal under s 114(g) Evidence Act 1950.

Having failed to serve a notice in writing to Kencana to request Kencana to show proof of payment made by Kencana to the Plaintiff, the Defendant must then independently and upon credible and cogent evidence satisfy the Court that there is no amount due or payable by the Defendant to Kencana.

This the Defendant has failed to do for reasons set out above.

Based on the preceding paragraphs, I am satisfied that the Defendant has not been able to discharge the evidential burden that there is in fact no monies due or payable by the Defendant to Kencana.

The Court therefore allows Enclosure 1 with costs of RM7,500.00 to be paid by the Defendant to the Plaintiff subject to allocator Dated : 24 September 2025 t.t ………………………………………. SHAHRIZA ZALINA BINTI ABDUL SHUKOR PESURUHJAYA KEHAKIMAN MAHKAMAH TINGGI MALAYA SHAH ALAM SELANGOR DARUL EHSAN For the Plaintiff : Phang Ting Hong (Tan Wei Sheng with him) (Messrs. Liaw & Partners) For the Defendant : Abd Azim Bin Abd Razak (Yap Yeow Han with him) (Messrs. Rahmat Lim & Partners)