Hong Xin Construction Sdn Bhd v Syarikat Perumahan Negara Berhad (BA-22C-26-07/2022)

This is an action brought against the Defendant, being the Employer, based on a letter dated 16.8.2018 (the impugned letter) alleged to be an undertaking issued to the Plaintiff by the Defendant.

Relying on the impugned letter, the Plaintiff sought for the sum of RM14,064,534.36 to be paid by the Defendant. This sum is the judgment sum obtained through the Johor Bahru High Court vide Civil Suit No.: JA-22C-4-06/2019 (“JBHC Suit”) by the Plaintiff against Cosmic Master Development Sdn. Bhd. (“CMDSB”).

The Defendant and CMDSB entered into a Development Agreement dated 22.1.2007 (“Development Agreement”) and a Project Business Collaboration Agreement dated 25.7.2011 (“Collaboration Agreement”) (hereinafter referred to as the “Agreements”) in relation to a project known as “Cadangan Pembangunan Rumah Pangsa Mampu Milik Sebanyak 972 Unit Serta Kemudahan Yang Terdiri Daripada 1 Unit Pencawang Stesyen Utama (SSU), 4 Unit Pencawang TNB, 1 Unit Surau, 1 Unit Pondok Pengawal, 6 Unit Pusat Pengumpulan Sampah Di Atas Lot 189189, 189190 & 189191 Mukim Plentong, Johor Bahru Untuk Tetuan Syarikat Perumahan Negara Berhad” (“the Project”).

Based on the Collaboration Agreement, the Defendant had assigned all rights and responsibilities over the Project to CMDSB and 3 for which the Defendant had executed a limited Power of Attorney in favour of CMDSB.

By way of a Letter of Award dated 24.4.2018 (“LOA”), CMDSB subsequently appointed the Plaintiff as the (building) contractor for the execution and completion of the remaining works under the Project. The LOA incorporated the Articles of Agreement of PAM Contract 2006 (Without Quantities) and the Conditions of Contract of PAM Contract 2006 (Without Quantities). The Plaintiff’s appointment under the LOA was however not subject to the Development Agreement and/or Collaboration Agreement.

By way of a letter dated 30.4.2018 (“CMDSB’s letter dated 30.4.2018”), CMDSB wrote to the Defendant requesting for the issuance of its letter of undertaking in compliance to Clause 2.0 and Clause 3.4 of the LOA.

The Defendant had subsequently issued the impugned letter :

During the course of the works, Certificates of Payment Nos. 1, 2 and 3 (“Certificates of Payment”) were issued in favour of the Plaintiff, however, no payments were made to the Plaintiff for the same. Subsequent to the Certificates of Payment, the Plaintiff had also submitted its Progress Claims Nos. 4, 5, 6 and 7 (“Progress Claims”), which were not certified by CMDSB. Although there are no contemporaneous documents whatsoever from the Defendant and/or CMDSB, disputing that works had been carried out for any of the Certificates of Payment or the Progress Claims, no payments were made to the Plaintiff.

As a consequent to the non-payment of the Certificates of Payment and the Progress Claims, the Plaintiff had commenced a civil action against CMDSB and the Defendant through the JBHC Suit. Upon the conclusion of the JBHC Suit, the Learned High Court Judge on 25.10.2020 (“Judgment”) allowed the Plaintiff’s claim based on Payment Certificates Nos. 1, 2 ,3 and Payment Claim No.4 for a total sum of RM14,064,534.36. This judgment was affirmed by the Court of Appeal vide Civil Appeal No. J-02(c)(W)-1821-11/2020.

The claim against the Defendant at the JBHC Suit however was discontinued/withdrawn by the Plaintiff on 1.7.2019 prior to its conclusion with liberty to file afresh. It is the Plaintiff’s contention that the impugned letter is an undertaking to pay directly to the Plaintiff payments due to it under the Project. As such, the Defendant is bound by its promise to pay the judgment sum of RM14,064,534.36 to the Plaintiff as sum owed to the Plaintiff for the works done under the Project.

The Defendant on the other hand claims that it is not privy to the LOA between the Plaintiff and CMDSB and as such, the sum of RM14,064,534.36 is claimable from CMDSB as the cause of action arose from the LOA. It is also the Defendant’s contention that the impugned letter is not an undertaking to pay but a letter merely allowing the payment to the Plaintiff to be made using the HDA.

Since there was already a suit which had been filed by the Plaintiff against CMDSB, it is the Defendant’s contention that this action against it is a duplicity of action and therefore, an abuse of the court. C. ISSUES

Issues which have to be considered by this court arising from both parties’ case are as follows: i. Whether the Plaintiff’s claim through this suit is a duplicity claim with the JBHC Suit and as such is judicially estopped to bring this action against the Defendant. ii. Whether the impugned letter issued by the Defendant to the Plaintiff is a letter of undertaking. iii. If so, whether the Defendant is bound by the Letter of Undertaking dated 16.8.2018. D. FINDINGS OF THE COURT I. Whether the Plaintiff’s claim through this suit is a duplicity claim with the JBHC Suit and as such is judicially estopped to bring this action against the Defendant.

The action brought by the Plaintiff against CMDSB and the Defendant (initially) was for the recovery of the Certificates of Payment and the Progressive Claims which was not paid to the Plaintiff. The JBHC Suit had determined both liability and quantum against CMDSB (by which time the Plaintiff had withdrawn its claim against the Defendant through the JBHC Suit).

In this case, the claim made by the Plaintiff against the Defendant is pursuant to the impugned letter, which the Plaintiff claims is a letter of undertaking by the Defendant to pay the sum certified for the works done at the Project to it directly.

As such, this action is clearly not a duplicity with the action filed and concluded at the JBHC Suit.

This court accepts and reiterates the reference made by the Plaintiff to the case of Tan Sri Rozali bin Ismail v Abdul Hadi bin Hamad & Anor [2023] 9 MLJ 346, where the High Court explained what amounts to a duplicity of proceedings: “[76] Therefore, there is a clear duplicity of proceedings. It is undesirable that two different courts are asked to decide on the same or similar issues (see Oversea-Chinese Banking Corporation Ltd v National Union of Bank Employees & Ors [1985] 1 MLJ 439 Wan Hamzah J and Lesco Development Corp Sdn Bhd v Malaysia Building Society Bhd [1988] 2 MLJ 184 (SC)).

Therefore, on this ground of duplicity of proceedings, this appeal should also be dismissed.” (Emphasis added)

It is an undeniable fact that the judgment sum obtained through the JBHC Suit was not paid to the Plaintiff by CMDSB any time before or during the course of this suit. Furthermore, since the Plaintiff had withdrawn the claim against the Defendant at the JBHC Suit prior to any findings made by the Learned High Court Judge at the JBHC Suit, this action against the Defendant cannot be said to be a duplicity. Through this suit, the Plaintiff is merely enforcing the promise to pay via the impugned letter issued by the Defendant to the Plaintiff.

As to whether the Plaintiff is judicially estopped to bring this action, as submitted by the Plaintiff, the principle of judicial estoppel is premised on an “assertion of an inconsistent position in a subsequent proceeding” and seeks to “address the incongruity of allowing a party to assert a position in one court and the opposite in another tribunal” as established in the case of Peguam Negara Malaysia v Nurul Izzah bt Anwar & Ors [2017] MLJU 273. Correspondingly, the Plaintiff has not taken a 10 position in the JBHC Suit which is inconsistent with its position in this suit and neither had it benefited from the JBHC Suit but had yet proceeded in this suit to claim against the Defendant. As such, the Plaintiff is not judicially estopped to bring this action against the Defendant. II. Whether the impugned letter issued by the Defendant to the Plaintiff is a letter of undertaking.

Undisputedly, the impugned letter is issued by the Defendant in the Plaintiff’s name directly. The letter from the Defendant was a requirement to be obtained in the Plaintiff’s name pursuant to Clause 2.0 of the LOA:

It is the Defendant’s argument that the impugned letter is not an undertaking as the word synonym to “undertaking” or “undertake” translated in Bahasa Malaysia as “akujanji” does not appear anywhere in the said letter.

The legal meaning of the word “undertaking” means “a promise or a pledge to do something or to refrain from doing something” in accordance to the dictionary meaning. According to the Black’s Law Dictionary 8th Edition the words “undertaking” & “undertake” are as follows:

Based on the dictionary meaning, a promise or a pledge to do something or to refrain from doing something amounts to an undertaking, as such, in the absence of the usage of the word “akujanji” (translated in Bahasa Malaysia), the question here is, whether there was a promise made in this letter to the Plaintiff by the Defendant.

This court does not accept to the Defendant’s argument that the impugned letter is merely to agree that the payment to the Plaintiff will be paid through the HDA and as such is not an undertaking. This is because, if the Defendant’s version is correct then it makes no sense that the letter is issued to the Plaintiff (being the payee) and not to CMDSB (being the payor) as alleged. In interpreting the impugned letter, this court is of the view that not only the contents of the letter have to be taken into consideration but also the fact that the letter was issued by the Defendant on its own letterhead to the Plaintiff.

Furthermore, if the objective to issue the impugned letter is merely to confirm which account will be used to pay the Plaintiff as contended by the Defendant, then, the words preceding “Akaun Pemaju Perumahan (HDA)” that is “…akan dibayar terus kepada pihak tuan melalui…” is not even necessary to be stated in this letter. Taking the letter in its entirety, with the presence of these words, it only confirms the Plaintiff’s averment that the Defendant has promised or undertaken to 13 pay to the Plaintiff directly via the HDA through this letter dated 16.8.2018, thus making it an undertaking to pay.

Furthermore, the impugned letter had made reference to a letter issued by the Defendant to CMDSB dated 4.6.2018 (“letter dated 4.6.2018”), however, this letter which was referred to had not been produced during trial in order for this court to know the contents of the same. Neither did the Defendant call the person or persons who had personal knowledge of the contents of the letter dated 4.6.2018 or the impugned letter to give evidence in court on behalf of the Defendant.

It cannot be denied that the letter dated 4.6.2018 referred to in the impugned letter would surely shine some light as to the reason for the issuance of the impugned letter by the Defendant. Due to the non-production of the same and the failure to call any witness who had personal knowledge of the matters dealt with at that material time in relation to the LOA and the required letter of undertaking including the issuance of the impugned letter, a presumption that revelation of the same would be unfavourable to the Defendant can be arrived at, hence, this court invokes Section 114(g) of the Evidence Act 1950 against the Defendant. “Section 114 (g) of the Evidence Act 1950

Court may presume existence of certain fact The court may presume the existence of any fact which it thinks likely to have happened, regard being had to the common course of natural events, human conduct, and public and private business, in their relation to the facts of the particular case… g) that evidence which could be and is not produced would if produced be unfavourable to the person who withholds it;…” [28] Additionally, the fact that one of the pre-conditions to commence its works pursuant to the LOA is to obtain a letter of undertaking from the Defendant only confirms that the impugned letter being the only letter issued to the Plaintiff by the Defendant as required under the LOA in order for the Plaintiff to commence its works. There is no evidence from the Defendant of any other letter issued in compliance of the pre-conditions of the LOA or a denial that the impugned letter is not the letter issued for the purpose as required by the LOA. [29] Therefore, this court is of the view that the impugned letter is indeed a letter of undertaking issued to the Plaintiff promising to make direct payment via the HDA as required under the LOA (henceforth referred to as the Letter of Undertaking). III. Whether the Defendant is bound by the Letter of Undertaking. [30] To begin with, this court is of the view that the Letter of Undertaking is a contract (see cases: Concrete Engineering Products Bhd v Greengroup Engineering Sdn Bhd & Anor [2018] MLJU 1898; NV Bina Sdn Bhd v Magna Park Sdn Bhd [2016] 09 MLJ 313) [31] It is the Defendant’s contention that there is no obligation to pay the Plaintiff as there is no privity of contract between the Plaintiff and the Defendant. The liability established at the JBHC Suit is against CMDSB and as such, the Plaintiff’s recourse is against CMDSB and not the Defendant. [32] Though the Defendant’s contention may be correct in so far as that the liability under the LOA is on CMDSB to pay the Plaintiff, however, by the issuance of the Letter of Undertaking and the same being a contract, there is privity of contract created between the Defendant and the Plaintiff. Furthermore, by the Letter of Undertaking being a pre-condition in the LOA, issuance of the same had made the Defendant privy to the LOA i.e. by promising to make direct payment to the Plaintiff. [33] The fact that the Letter of Undertaking is issued after and pursuant to the LOA, this court finds that the Letter of Undertaking forms as a collateral contract entered by the parties as per the case of Malayan Banking Bhd v Government of Malaysia [2023] MLJU 2015, where Khadijah Idris J had referred to the Singapore case of Hiap Huat Pottery (S) Pte Ltd v TV Media Pte Ltd [1969] 1 SLR in relation to collateral contract: “[68] In the case cited by the Plaintiff Hiap Huat Pottery (S) Pte Ltd v TV Media Pte Ltd [1969] 1 SLR the Court held a collateral contract existed as a supplementary contract to a main contract which had already been in existence. It was also held that the main contract may be between the same parties as the collateral contract or it may be between a third party and one of the parties to the collateral contract. [69] In this instant case, the evidence adduced shows the Shipbuilding Contract which was between Defendant and NGV Tech was the main contract while the collateral contract was between Plaintiff and the Defendant that the Shipbuilding Contract was to be continued subject to the continued funding from the Plaintiff which in turn is subject to, critically, the waiver of the liquidated damages. [70] Thus the Defendant’s contention that the Plaintiff is not a party to the Shipbuilding Contract is immaterial and irrelevant.” [34] The court also refers to the case of Lew On @Lew Tee Yee v Mohammad bin Muhamed Avvuu & Ors (Setiamas Sdn Bhd & Anor, third parties) [2021] MLJU 2787, where Awg Armadajaya Awg Mahmud JC held that: “[28] The exceptions to the Common Law doctrine of privity of contract allow rights to third parties and some impositions of obligations. These are: i. Collateral Contracts (between the third party and one of the contracting parties).” [35] Furthermore, the Plaintiff’s action against the Defendant is for the breach of the Letter of Undertaking and not the LOA. The only condition set in the Letter of Undertaking is for direct payments to be made to the Plaintiff for the certified progressive claims. In this case, although there were Progressive Claims that were uncertified but by virtue of the judgment of the JBHC Suit, there was a judicially certified sum i.e. RM14,064,534.36 payable to the Plaintiff. [36] The Defendant had also additionally contended that the payment which is to be made via the HDA to the Plaintiff is subject to there being balance in the said HDA. It was established during cross examination of the Defendant’s sole witness that the Letter of Undertaking does not contain any language or words that subjects the Letter of Undertaking to the Agreements and that the payments were to be made to the Plaintiff via the HDA provided there was balance in the said account. “40.5 Further still, the Defendant’s sole witness confirmed that notwithstanding the expiration of the Collaboration Agreement on 31.3.2019, the Defendant did not at any material time withdraw the Letter of Undertaking issued to the Plaintiff.” [37] This court finds that this is an unfounded argument by the Defendant as clearly there is no such conditions stated in the Letter of Undertaking. Whether there is any balance in the HDA or not is irrelevant as far as the obligation to make direct payment pursuant to the Letter of Undertaking is concerned. [38] Again, this court finds that the words “akan dibayar terus” are not necessary to be included if the intention is only to state from which account the payment is to be made. In fact, the word “terus” which translates to “direct” can only mean “direct payment will be made”, in this case, by the Defendant. [39] This court is minded of the case of Kumpulan Darul Ehsan Bhd v Mastika Lagenda Sdn Bhd [2017] 4 MLJ 561, as highlighted by the Plaintiff where the Federal Court held that: “[23] In considering Question 1 it must be taken into account what the parties agreed to in the SSA. In this case there were two crucial matters agreed upon, namely, the option right and the waiver provision. As such those terms must be considered in the light of the legal principles, to wit, that the sanctity of a contract must be preserved and that it is not the function of the court to rewrite the agreed terms in a contract (see The Pacific Bank Bhd (sued as guarantor) v Kerajaan Negeri Sarawak [2014] 6 MLJ 153).” ( Also see: Dato' Shazryl Eskay bin Abdullah v Merong Mahawangsa Sdn Bhd & Anor [2014] 3 MLJ 892 – submitted by the Plaintiff) [40] It is this court’s view that the very fact that the Defendant had produced the Letter of Undertaking in its own letterhead to the Plaintiff directly, it can be very well be taken that it would have thought about the seriousness and the effect of the words stated in the contents of the said letter. [41] Although the Defendant had contended that since the Collaboration Agreement between the Defendant and CMDSB had ended and as such this Letter of Undertaking is no longer valid, there is no evidence produced to this court to show that the Letter of Undertaking has been revoked and/or cancelled by the Defendant. As such, this court is of the considered view that the Defendant is bound its obligation as per the Letter of Undertaking. E. CONCLUSION [42] Based on all the evidences produced before this court, in the upshot, this court allows the Plaintiff’s claims and the Defendant is ordered to pay to the Plaintiff as follows: i. the sum of RM14,064,534.68; ii. interest at 5% per annum on the sum of RM14,064,534.68 from 22.6.2022 until the date of this judgment; iii. interest at 5% per annum on the sum of RM14,064,534.68 from the date of this judgment until full realisation; and iv. cost of RM40,000.00 subject to allocatur fee. SUMATHI A/P MURUGIAH Judicial Commissioner High Court of Malaya Shah Alam, Selangor Darul Ehsan DATE : 2nd OCTOBER 2024 Counsel for Plaintiff : Mr. James P. Monteiro (Messrs. TJ Goh & Co) Counsel for Defendant : Mr. Syed Fadzil Alhabshi & Miss Aawaisha Pillai (Messrs. Sidek Teoh Wong & Dennis)