Hyperwave Systems Engineering Sdn. Bhd. v Usahawan Bersama Teknik Sdn. Bhd. (Q-02(NCvC)(W)-2407-12/2021)

The matter went to full trial the learned Judicial Commissioner (JC) 1 allowed the Plaintiff claim and entered judgment prayed for with costs of 2 RM70,000.00. 3 4 [3] In this judgment, the parties will be referred to as they were in the court 5 below. 6 7 8 B. THE PLAINTIFF’S CASE 9 10 [4] The Plaintiff is a company in the business of trading in engineering, 11 machine, and equipment spare parts. 12 13 [5] The Defendant is a company in the business of trading, construction, 14 and servicing of petrol, chemical, and related instruments. 15 16 [6] At all material times, the Defendant is the appointed contractor for 17 Malaysia LNG Dua Sdn Bhd (MLNG) for the project known as “Provision 18 of Procurement, Construction, and Commissioning of MLNG Dua 19 Rejuvenation (MDR) project at Bintulu, Sarawak. Under this contract, the 20 Defendant was required to use Amri brand of butterfly valves. 21 22 [7] In 2015, the Defendant, through its officers approached the Plaintiff, 23 asking for the Plaintiff’s assistance to source for the Amri brand butterfly 24 valves. Due to the higher price of Amri brand valve, the Plaintiff proposed 25 Orton brand valve to substitute the Amri brand valve for the MDR project. 26 27

Subsequently, there were many discussions between the Plaintiff and 1 the Defendant’s representatives. It was agreed during these discussions 2 that the Defendant would seek MLNG’s approval for the change of brand 3 from Amri Valve to Orton Valve. Further, there was also a mutual 4 understanding between the parties that if MLNG’s approval for the brand 5 change was obtained, the Defendant would award a Purchase Order to 6 the Plaintiff, who would in turn award a separate purchase order to Orton 7 S.r.I (Orton), a company in Italy for the manufacturing and supplying of the 8 Orton Valve for the MDR project. Orton S.r.I’s local exclusive partner, AHT, 9 was registered in the Petronas Vendor list under several Standardised 10 Work& Equipment Categories Codes. In all meetings with the Defendant, 11 AHT was introduced as Orton’s agent and the Plaintiff also made it clear 12 that for the MDR project, Orton would work directly with the Plaintiff while 13 AHT would play a supporting role. 14 15 [9] Plaintiff and Orton had assisted the Defendant to obtain the approval of 16 MLNG to change the brand from Amri valve to Orton valve and the said 17 approval was ultimately obtained. The Plaintiff and defendant had also 18 engaged into numerous discussions pertaining to the technical 19 specifications, pricing quotation, and the delivery time of the said valve. 20 21 [10] Eventually, on 13.4.2016, the Defendant issued its Purchase Order 22 (Original PO) wherein the Defendant had placed an order for 40 units of 23 Orton’s brand valves for a total sum of RM17,6000,000.00. This Original 24 PO was received by the Defendant on 14.4.2016. Upon perusal of the 25 Original PO, the Plaintiff discovered a few discrepancies with regards to 26 the delivery date and the testing specifications of the said Orton Valve. The 27 5 matter was further discussed between the officers of the Plaintiff and the 1 Defendant and the Plaintiff was instructed by the Defendant to make the 2 necessary amendments to the Original PO. The Plaintiff then sent an 3 amended PO to the Defendant via email on 14.4.2016. 4 5 [11] As time was of the essence, on 14.4.2016, the Plaintiff had issued a 6 Purchase Order to Orton (Orton’s PO), for the supply of the said Orton 7 Valve. This is to ensure that the time specified in the Original PO with the 8 Defendant could be met. On the same premise, the Plaintiff had paid 20% 9 down payment of the Orton’s PO to ensure that the delivery of the said 10 valve could be expedited to meet the tight delivery schedule required by 11 the Defendant. The Plaintiff had paid the sum of €2,510, 561.00 12 (equivalent to RM11,849,847.92) to Orton. 13 14 [12] On 18.4.2016, the Plaintiff issued its invoice dated 14.4.2016 to the 15 Defendant for the 10% down payment of the first PO to be paid within 7 16 days from receipt of the first PO. The Defendant had failed to pay the said 17 deposit payment. 18 19 [13] Between 21.4.2016 and 28.4.2016, the parties had various meetings, 20 including the 1st and 2nd kick-off meetings, the pre-inspection meeting to 21 discuss matters pertaining to the payment, delivery, technical issues, and 22 the documentation for the supply of the said valve. During these meetings, 23 the parties were reminded that the delivery schedule of the valve had to 24 be met to ensure that there would be no delay in the MDR project. 25 26 27

On 5.5.2016, the Plaintiff forwarded a document, which was presented 1 to the project team of MLNGD team during the Pre-inspection meeting on 2 5.5.2016, to the Defendant for its approval. Despite its importance and 3 urgent reminders, the Defendant had not returned the said Inspection and 4 Test Plan which caused a crucial setback in the production of the said 5 valve. 6 7 [15] Vide its letter dated 10.5.2016, the Defendant summarily cancelled the 8 Original PO without any reason. Only in its response to the Plaintiff letter 9 dated 13.5.2016 that the Defendant, vide letter dated 16.5.2016 explained 10 that the first PO was cancelled due to the following reasons: 11 12 i. the Plaintiff did not have the authorization to sell the said 13 valves under the UBT’s PETRONAS Licence No. 443387-D, 14 under the list of Categories of Licence/Registration Supplier 15 Code PV1020200 (the PETRONAS Licence); and 16 17 ii. the business transaction involving the Plaintiff supplying the 18 said Valves to the Defendant was in breach of the PETRONAS 19 Licence General Condition Item 6 and 10 (f) 20 21 [16] The Plaintiff pleads the said PETRONAS licence is not applicable to 22 them because based on the Original PO, the contract in question was 23 between the Plaintiff and Defendant, whereby the Defendant was to buy 24 the valve directly from the Plaintiff and this contract does not concern the 25 PETRONAS License on the simple reason that PETRONAS is not a party 26 in the first PO. 27

It is the Plaintiff’s pleaded case that the Defendant has acted in bad 1 faith and/or mala fide in unlawfully cancelling the binding contract between 2 the parties in the form of the Original PO. 3 4 5 C. THE DEFENDANT’S CASE 6 7 [18] In essence, the Defendant contended that there is no concluded 8 contract between the parties because after the issuance of the Original 9 PO, the Plaintiff had made variations, amendments or changes thereto 10 amounting to a counter offer which was not accepted by the Defendant. 11 Further, it was averred that the invoice dated 14.4.2016 was based on the 12 said counter offer, hence there is no valid acceptance of the PO. It follows 13 that the 10% down payment was not payable or otherwise a total failure of 14 consideration. It is also the Defendant’s case that the Plaintiff did not 15 frankly and faithfully disclose its relationship with Orton or AHT to the 16 Defendant when it lobbied for the business of the said valves from the 17 Defendant. By this, the Defendant do not consider the Plaintiff i in a 18 position to fulfill its obligation under the PO, hence justifying the 19 cancellation of the PO. The Defendant also pleads that since the Plaintiff 20 was not the authorized agent of Orton to enter into a contract on behalf of 21 Orton with the Defendant in accordance with the agency law for the 22 procurement of the said Orton valve, the contract falls under the restriction 23 set out in Paragraphs 6, 9 and 10(f) read with Paragraph 11 of the 24 PETRONAS Licence General Conditions prohibiting the Plaintiff as 25 unauthorized party to provide service or supply of any facility, fittings or 26 equipment without consent from PETRONAS. 27 D. SUMMARY OF THE DECISION OF THE HIGH COURT 1 2 [19] Based on the evidence before him, the learned JC ruled that there 3 was a legally binding contract between the parties. He found that there 4 was a mutual understanding between the Plaintiff and Defendant that the 5 Defendant was to award a PO to the Plaintiff and the Plaintiff would in turn 6 issued a separate PO to Orton for the manufacturing and supply of Orton 7 valves for the MDR Project. With regards to the amendment to the PO, the 8 learned JC found that it was made to the technical specifications of the 9 valves and to correct the typographical deviations made by the Defendant 10 to the original PO and the amendment was not objected to by the 11 Defendant. This does not amount to a counteroffer as claimed by the 12 Defendant. The learned JC also ruled that the contract between the parties 13 was not illegal. This is because, the Plaintiff had furnished its licence and 14 relevant documents pertaining to the supply of the said valves, hence the 15 Defendant has all necessary knowledge on the Plaintiff’s identity and 16 eligibility to supply the Orton Valves and had never raise any objection on 17 the issue with the Plaintiff’s PETRONAS licence before issuing the PO. 18 According to the learned JC, the issue of illegality is an afterthought. The 19 learned JC opined that, from the evidence adduced during the trial, the 20 termination of the contract was not bona fide. In the opinion of the learned 21 JC, the Defendant had wrongfully terminated the contract despite the 22 Plaintiff had paid the deposit amounting to RM1,760,000.00 to Orton. From 23 the evidence, the learned JC found that Plaintiff had suffered loss arising 24 out of the Defendant’s sudden cancellation of the contract. 25 26 27 E. ANALYIS AND OUR FINDING 1 2 [20] We have perused the Memorandum of Appeal and considered the 3 submission of learned counsels for both parties. In our considered view, 4 the crux of the Defendant’s appeal is premised on the following main 5 issues, namely: 6 7 i. whether there is a concluded contract between the parties in 8 the form of the PO dated 13.4.2016 which was then amended 9 on 14.6.2016; 10 11 ii. whether the said agreement is tainted with illegality for the 12 purported breach of Paragraphs 6, 9 and 10(f) read with 13 Paragraph 11 of the PETRONAS Licence General Conditions 14 15 16 E(i) Whether there is a concluded contract between the parties in the 17 form of the PO dated 13.4.2016 which was then amended on 14.6.2016 18 19 [21] In this respect, the Defendant contended that there is no valid and 20 binding contract between the parties because there is no absolute and 21 unequivocal acceptance of the Original PO and that the Amended PO 22 dated 14.6.2016 amounted to a counter offer which is not accepted by the 23 Defendant. It was submitted that there were handwritten alterations made 24 on the Original PO which formed the Amended PO. The plaintiff took an 25 opposite position. It was submitted that there was a concluded agreement 26 between the parties and that the amendments on the Amended PO were 27 10 minor amendments to the Original PO to reflect what was agreed upon by 1 the parties. 2 3 [22] This issue would inevitably require us to discuss one of the basic 4 principles of contract law i.e. whether there is an intention to create legal 5 relations between the Plaintiff and the Defendant. It is trite law that a vital 6 requirement for a valid contract is that the parties must have a mutual 7 intention to enter into a legally binding contract. In the case of a 8 commercial contract, Halsbury’s Law of England (5th Edition Reissue) 9 paragraphs 302 states: 10 11 ‘Whilst in the case of commercial agreements, there is a presumption that 12 the parties intend to create legal relations, that presumption may be 13 expressly negative; for instance, the agreement may be made ‘subject to 14 contract’ or include an ‘honor clause’, such as is frequently the case in 15 respect of football pools; or letters of comfort of intent’ 16 17 [23] Decided cases have listed the criteria where the court could infer that 18 the parties’ intention to create a contractual relationship between them. For 19 example, inference must be drawn from the language the parties have 20 used, their conduct from the surrounding circumstances and the object of 21 the contract (see Ayer Hitam Tin Dredging Malaysia Bhd v YC Chin 22 Enterprise Sdn Bhd [1994] 2 MLJ 754s); or from the whole of the 23 correspondences between the parties to see whether they have come to 24 a binding contract (see Lau Sieng Ngoung v Hup Shing Co Ltd [1969] 1 25 MLJ 190). 26 27

In the case of Cipta Cermat Sdn Bhd v Perbadanan Kemajuan 1 Negeri Kedah [2007] 2 MLJ 746, this court refer to G Percy Trentham 2 Ltd v Archital Luxfer Ltd [1993] 1 Llyod’s Rep 25 and state: 3 4 ‘That was a case in which the like question as in present instance arose, 5 namely, whether the parties had made a binding contract. Steyn LJ (as he 6 then was) said that in such a case as present, ‘the governing criterion is 7 the reasonable expectation of honest man,’ and that ‘the yardstick is the 8 reasonable expectations of sensible businessmen….’ 9 10 [25] Learned counsel for the Plaintiff cited the case of Daiman 11 Development Sdn Bhd v Mathew Lui Chin Teck [1981] 1 MLJ 56 where 12 the Privy Council opines: 13 14 ‘The question whether parties have entered into contractual relationships 15 with each other essentially depends upon the proper understanding of the 16 expressions they have employed in communicating with each other 17 considered against the background of the circumstances the provisions of 18 any applicable law. Where they have expressed themselves in writing the 19 proper construction of the writing against that background will answer the 20 question, the purpose of construction is to determine whether the parties 21 intend presently to be bound to each other or whether, no matter how 22 complete their arrangements might appear to be, they do not so intend 23 until the occurrence of some further event, including the signature of some 24 further document or the making of some further arrangement. The 25 question is one to be expressed intention and is not to be answered by the 26 presence or absence of any particular forms of words.’ 27 28

Based from the cases referred to above, it is the principle of law that 1 to determine whether there is a binding contract between the parties, the 2 court must consider the peculiar facts and circumstances between the 3 parties especially the conduct of the parties prior and subsequent to the 4 execution of the contract. The court must consider the correspondences 5 between the parties and must give effect to the intention of the parties that 6 could be inferred from those correspondences. There is no exhaustive list 7 of factors to be used as a guideline in determining whether the parties had 8 intended to be legally bound by the agreement between them. However, 9 in commercial contracts, the court must give effect to a reasonable 10 expectation of honest man, using the yardstick of a reasonable expectation 11 of sensible businessmen. If this court reaches a conclusion that the parties 12 intended to form a legally binding contract, then there is an enforceable 13 contract (see Charles Grenier Sdn Bhd v Lau Wing Hong [1996] 3 MLJ 14 327) 15 16 [27] In this appeal, the learned JC ruled that 17 18 ‘… there was mutual understanding between the parties that the 19 Defendant was to award a purchase order to the Plaintiff and the Plaintiff 20 would in turn award a separate purchase order to Orton for the 21 manufacturing and supply of the Orton valves for the MDR Project.’ 22 23 [28] We are of the considered view that the learned JC was not plainly 24 wrong in his findings. Evidence was led to the effect that one Mr. Sim the 25 Defendant’s employer had approached PW2 in January 2015 to seek 26 PW2’s assistance to assist one Mr. Ang from the Defendant to source for 27 13 some Butterfly Valve for the MDR Project. Subsequently, further 1 discussions took place and in May 2015, where one Mr. Perry Tan Chee 2 Fui of the Defendant, during a meeting with PW2 and Mr. Sim, had 3 complained about the high price of the Amri Brand of valve. It was then 4 proposed by PW2 that the Orton brand valve could answer the Defendant’s 5 concern about the high price. It was at the request of Mr. Perry Tan Chee 6 Fui that PW2 started working with the Defendant for the procurement of 7 the Orton brand valve. This includes the assistance rendered by the 8 Plaintiff to help the Defendant obtained the approval from PETRONAS to 9 change the Amri Brand valve to Orton brand valve, discussing with Orton’s 10 representative regarding the technical specification of Orton’s valve for 11 them to meet the MLNG’s requirement of the Orton valve. In this respect, 12 the Defendant had allowed Orton’s representative to directly contact the 13 Defendant in relation to the technical issues to expediate the prices. The 14 Plaintiff was also introduced to DW6, the director of the Defendant who 15 had chaired most of the meeting held for the Defendant’s proposal for the 16 MDR project. The Plaintiff was also invited to a meeting on 7.4.2016 at the 17 Defendant’s office in Bintulu for the commercial negotiations for the 18 Plaintiff’s proposal to the Defendant. At this meeting, the switch of brand 19 from Amri brand valve to Orton brand valve was approved by MLNG. 20 Subsequently, the Plaintiff also had coordinated with Orton to finalise the 21 terms and conditions of the Orton’s Commercial Proposal (rev 5) to 22 prepare for the purchase order. It must be noted that the all these events 23 had culminated in the original PO issued by the Defendant on 13.6.2016. 24 25 26

Based on the above evidence that had been accepted by the learned 1 JC, His Lordship’s finding of facts of the existence of a valid binding 2 contract was not unfounded. These facts supported the learned JC’s 3 finding that there was a mutual understanding between the parties that the 4 Defendant was to award the Original PO to the Plaintiff. The learned JC 5 who has the audio and visual advantage when hearing the witnesses 6 giving evidence is entitled to make his finding of facts which the appellate 7 would normally hesitate to interfere. 8 9 [30] We agree with the learned JC on this issue. 10 11 [31] The next issue now is whether the amended PO amounts to a counter- 12 offer by the Plaintiff, which the Defendant claimed that they did not accept. 13 It is trite that the acceptance by the Plaintiff may be qualified if there are 14 new terms introduced by the Plaintiff as a counter-offer destroying the 15 original offer. In his book Law of Contract (4th edition) at page 51 paragraph 16 [2.19], learned author Tan Sri Visu Sinadurai states: 17 18 [2.19] Acceptance subject to new terms: counter offer. In certain cases, 19 the court may consider the purported acceptance that is qualified by the 20 introduction of a new term as a counter offer destroying the original offer. 21 In such cases, where the purported acceptance has been couched in 22 terms suggesting the introduction of a new term, it has been held to be a 23 counter-offer. The effect of this is that the original offer is destroyed: Hyde 24 v Wrench….’ 25 26 [32] It is not disputed by the Plaintiff that they had made amendments to 27 the original PO. According to the Plaintiff, the amendments were in respect 28 15 of two areas namely the amendment to the technical specification of the 1 valve and to the delivery date. In respect of the former, the Plaintiff 2 submitted that the amendment was merely to reflect the specification 3 under Rev. 7 Quotation as agreed by the parties. There are six 4 amendments under this heading. In this judgement we only need to refer 5 to one of the amendments as follows: 6 7 i. item 1.6 from “NDE AS PER MESC SPE 77/302: IC-I” to “NDE AS 8 PER MESC SPE 77/302: IC-II 9 10 [33] For the avoidance of doubt, we must state here that all amendments 11 made by the Plaintiff were to amend the Roman numerals referred to in 12 Items 1.6, 1.12. 1.14. 1.22. 1.28 and 1.30. In this regard, the Plaintiff had 13 led evidence that the NDE specification amendments were made to correct 14 the typographical errors made by the Defendant in the original PO. 15 16 [34] In respect of the amendment to the delivery date, the Defendant 17 argued that this is also a counter-offer which they disagree and hence 18 there is no conclusive and binding contract between the parties. 19 20 [35] The delivery date of the valves was amended by the Plaintiff as 21 follows: 22 23 DELIVERY DATE IS AFTER 15 JANUARY 2017 BUT BEFORE 15 24 FEBUARY 2017 to DELIVERY DATE IS AFTER 15 JANUARY 2017 BUT 25 BY 1ST MARCH 2017 26 27

In this respect, the Plaintiff explained that pursuant to the agreement 1 between the parties, the delivery date for the valve was fixed 46 weeks 2 from the date of the approved drawings of the said valves and under clause 3 3 (a) of the General Terms and Condition, the Plaintiff undertakes to try its 4 very best to deliver earlier to ease the Defendant’s job. The approval of the 5 drawing of the valves would be within 4 weeks from the issuance of the 6 original PO (i.e. from 13.6.2016). Hence, by way of computation, the 7 delivery of the said valve would be by March 2017. This amendment does 8 not change the obligation of the Plaintiff to deliver the said valve within 46 9 weeks from the date of the approved drawings. 10 11 [37] In this issue, the learned JC made the following finding of fact i.e.: 12 13

Having considered the evidence before me, I am inclined to agree with 14 the Plaintiff that the Corrected PO does not amount to a counteroffer as 15 the terms of the contract were already agreed upon before the issuance of 16 the Original PO. The Corrected PO, therefore, was issued as a mere 17 formality between the parties. At all material times, it was understood 18 between the parties that the delivery date for the Orton valves was fixed 19 for 46 weeks from the date of the approved drawings. By way of DW2’s 20 email to the Plaintiff on 13.6.2016, the Defendant would send the Original 21 PO to the Plaintiff before 15.4.2016, and the approval to the drawing s 22 would be within 4 weeks from 15.4.2026. It would therefore make sense 23 for the delivery date for the Orton valves to be fixed for some time around 24 the end of March 2017. 25 26 [38] Again, the learned JC finding above is not unreasonable. On the 27 issue of amendment, he had referred to the evidence of DW2 who had 28 instructed for the amendment to be made so as to reflect what had been 29 agreed between the parties. In our view, the amendment did not introduce 1 any new terms to the Original PO. It merely clarifies the understanding and 2 the agreements reached between the parties during the negotiation stage. 3 Hence, the learned JC ruled that the amendments do not amount to a 4 counter offer and we agree with this finding. 5 6 [39] We now come to the issue of whether by its conduct, the Defendant 7 had accepted the purported counter-offer from the Plaintiff. This is the 8 alternative finding made by the learned JC, in the event that this court is 9 not with him in his finding on the existence of a concluded contract 10 between the parties. 11 12 [40] Section 7 of the Contract Act 1950 provides that the acceptance of 13 an offer must be (a) absolute and unqualified and (b) be expressed in some 14 usual and reasonable manner in which it is to be accepted. On the other 15 hand, section 8 provides: 16 17

Performance of the conditions of a proposal, or the acceptance of any 18 consideration for reciprocal promise which may be offered with a proposal, 19 is an acceptance of the proposal. 20 21 [41] In our opinion, section 8 covers a situation where the performance of 22 the conditions of the contract will be deemed as an acceptance of one 23 party to be bound by the contract. It follows that if a party conducts or 24 performs any condition stipulated in the contract, the law will deem this is 25 an agreement to be bound by the contract. In the case of Heller Factoring 26 (M) Sdn Bhd v Metalco Industries (M) Sdn Bhd [1995] 3 CLJ 5, this 27 court held that a contract can be enforced despite it being signed only by 1 one party if there is evidence that the other party had elected to be bound 2 by the contract. 3 4 [42] Obviously, the determination of whether the Defendant had, by its 5 conduct, signifies its acceptance of the purported counter-offer is a 6 question of fact, which is best decided by the learned JC. In this respect, 7 the learned JC ruled: 8 9

Even if I have erred in this aspect, and the said Corrected PO amounts 10 to a counteroffer, I find that the Defendant had indeed accepted the same. 11 12 [43] Be that as it may, we find that there is evidence to support the finding 13 of the learned JC. Among others, there is evidence to show: 14 15 i. DW2 who had instructed the amendments to be made to the 16 first PO to reflect the agreement of the parties before the 17 Defendant issued the first PO. 18 19 ii. Thereafter, the Defendant had requested the Plaintiff to initial 20 and chop every page of the Amended PO and returned the 21 same to the Plaintiff without any objection to the amendment. 22 23 24 iii. The Defendant merely asked the GST portion of the Amended 25 PO to be removed when the same was emailed to them on 26 14.6.2016 without raising any objection to the Amended PO. 27 1 iv. Between 15.4.2016 and 6.5.2016, there were WhatsApp 2 messages between the Plaintiff and the Defendant to follow up 3 on the invoice and the principal warranty letter but the 4 Defendant’s representative had never raised anything about 5 the Amended PO. 6 7 v. The Defendant had organized the kick-off meetings, normally 8 held after the contract is being agreed upon and signed, on 9 21.4.2016 and 27.4.2016 where the Plaintiff was also invited. 10 There was no issue pertaining to the Amended PO raised by 11 the Defendant. 12 13 14 vi. The Defendant had organized a Pre-Inspection meeting also 15 attended by the Plaintiff to identify and calculate the progress 16 achievement for the MDR Project. 17 18 [44] All these evidences were duly considered by the learned JC before 19 arriving at his finding that by its conduct, the Defendant had accepted the 20 Corrective PO as a binding contract. We find that there is no plain error in 21 the finding of the learned JC on this issue. We would add that, based on 22 the facts of this case, it is within the expectation of a sensible businessman 23 that a valid contract has been entered between the parties. 24 25 E (ii) Whether the said agreement is tainted with illegality for the 26 purported breach of PETRONAS Licence General Conditions 27 Paragraphs 6, 9, and 10(f) read with Paragraph 11 of the PETRONAS 1 Licence 2 3 [45] It is the Defendant’s case that the contract falls under the restriction 4 set out in Paragraphs 6, 9 and 10(f) read with Paragraph 11 of the 5 PETRONAS Licence General Conditions prohibiting the Plaintiff as 6 unauthorized party to provide service or supply of any facility, fittings or 7 equipment without consent from PETRONAS. The Defendant further 8 contended the Plaintiff then (presumably to circumvent the purported 9 licence requirement) had been involved in the scheme of arrangement by 10 way of a “Memorandum of Understanding” dated 12.4.2016 with AHT 11 Norlan to secure the supply of Orton Valve from IMI ORTON of Italy and 12 under such arrangement, the Plaintiff paid commission to AHT Norlan. 13 The Defendant further submitted that AHT Norlan had the requisite licence 14 to deal with Orton Valve in Malaysia. 15 16 [46] In essence, the Defendant pleaded case is that since the Plaintiff 17 was not the authorized agent of ORTON Italy to enter into a contract on 18 behalf of ORTON Italy with the Defendant in accordance with the agency 19 law for the procurement of the said Orton valve, the contract falls under 20 the restriction set out in Paragraphs 6, 9 and 10(f) read with Paragraph 11 21 of the PETRONAS Licence General Conditions prohibiting the Plaintiff as 22 unauthorized party to provide service or supply of any facility, fittings or 23 equipment without licence from PETRONAS. Failure by the Plaintiff to 24 comply with PETRONAS Licence General Conditions is an offence under 25 Regulation 3 of the Petroleum Regulations 1974 (PU (A) 432/1974) and 26 would attract a penalty in the form of a fine and imprisonment or both under 1 Regulation 9. 2 3 [47] To the contrary, the Plaintiff contended that the PETRONAS Licence 4 is only required for upstream projects whereas for downstream projects, 5 only a PETRONAS Registration is needed. This is revealed by PW1 in his 6 evidence. According to PW1, the work Package 07 of the MDR Project in 7 this case is a downstream project. 8 9 [48] Section 10(1) of the Contract Act 1950 provides that all agreements 10 are contract if they are made by the free consent of the parties competent 11 to contract for a legal consideration and with lawful object and are not 12 expressly declared to be void under the Act. Section 24 of the Contract Act 13 1950 defines lawful considerations in the negative where the consideration 14 or object of an agreement is unlawful unless: 15 16 a. it is forbidden by law; 17 b. it is such a nature that, if permitted, it would defeat any law; 18 c. it is fraudulent; 19 d. it involves or implies injury to the person or property of another; or 20 e. the court regards it as immoral, or opposed to public policy. 21 22 [49] Given the Defendant’s pleaded defence, it is pertinent for us to 23 reproduce the relevant provisions of the regulation and the PETRONAS 24 Licence General Conditions referred to by the parties. 25 26 27 [50] Regulation 3 of the Petroleum Regulations 1974 provides: 1 2

Applications made to PETRONAS 3 4 The following applications for licence shall be made to the President of 5 PETRONAS: 6 7

a licence to commence or continue any business or service, onshore 8 or offshore relating to the exploration, exploitation, winning and 9 obtaining of petroleum and, in particular involving the supply and use 10 of rigs, derricks, ocean tankers and barges; 11 12

a licence to commence or continue any business or service involving 13 the supply of equipment and facilities and services required in 14 connection with the exploration, exploitation, winning and obtaining of 15 petroleum including the following: 16 17 18

survey and exploration services; 19 20

(ii) all engineering, technical and consultancy services involved 21 in exploration, drilling and production of crude oil and natural 22 gas; 23 24

(iii) all engineering, construction and maintenance works 25 connected with upstream activities; 26 27

(iv) rigs and drilling services; 28 29

supply of all exploration, drilling and production materials, 1 equipment, platforms, derricks, tools and installation, pipe 2 and pipe-laying services, barges and tankers; 3 4

(vi) supply of general services connected with upstream 5 activities. (emphasis added) 6 7 [51] Regulation 9 of the Petroleum Regulations provides: 8 9 Any person who commences or continues any business or service 10 mentioned in Regulation 3 without a license or fails to comply with any 11 condition of any such licence shall be guilty of an offence and shall on 12 conviction be liable to a fine of not exceeding fifty thousand ringgit or to 13 imprisonment for a term not exceeding two years or to both and in the case 14 of a continuing offence he shall be liable to a further fine of one thousand 15 ringgit for each day or part of a day during which the offence continues 16 after the first day in respect of which the conviction is recorded. 17 18 [52] Meanwhile, the PETRONAS Licence General Conditions issued to the 19 Plaintiff that the Defendant is now challenging are Paragraphs 6, 9, and 20 10(f) which provide: 21 … 22

Company (i.e. the Plaintiff) is not allowed to take another company as 23 principal, agent, sub-contractor or otherwise to provide any service or 24 supply of any facility, fitting and equipment on its behalf without prior 25 written consent from PETRONAS. 26 … 27

This License is only valid for services and supply of products as stated 28 in the appendix of the PETRONAS license certificate; 29 … 30 10 This company (i.e. the Plaintiff) can be penalized if in PETRONAS’s 1 opinion, 2 3 it has conducted one or more of the following; 4 … 5

Sub-contract work to another contractor without any written permission 6 from PETRONAS. 7 8 [53] It would appear that, in alleging the contract was illegal, the 9 Defendant is relying on paragraphs (a) and (b) of section 24 of the Contract 10 Act. In the case of Sababumi (Sandakan) Sdn Bhd v Datuk Yap Pak 11 Leong [1998] 3 MLJ 151, Peh Siew Chin, FCJ for the Federal Court states 12 that: 13 14 ‘Section 24 appears to me to have been drafted after some fine tuning of 15 the common law on which it is based. At common law, contracts fitting in 16 with the said section 24(a) and (b) for contravening any law would be illegal 17 for being against public policy, but in our Contracts Act 1950, the same 18 contracts are covered by section 24 (a) and (b), i.e. under two separate 19 subsection so that section 24, which also refers to public policy else where 20 in the section, deals with other contracts against public policy such as, as 21 we know, contracts which interfere with administration of justice, contracts 22 in restraint of trade and contract other than in these two groups…. 23 24 At common law, a contract may be illegal by common law or by statute; in 25 either case the contract is unenforceable. It is to be borne in mind that 26 section 24 (a) of Contract Act 1950 involves the consideration and/or 27 object of a contract being forbidden by law, and ‘law’ means common law 28 or any statute. Thus, under section 24 (a) aforesaid, an agreement is illegal 29 and unenforceable when either the consideration or the object of the 30 agreement is to do an act forbidden by law, and this in my view, is the 1 culled essence of some part of the common law on illegality of contract, 2 which says in the nutshell that a contract to do an act illegal by statute or 3 prohibited or forbidden by statute is unenforceable and illegal. It is very 4 important to remember that it is distinguishable from another aspect or 5 question as to whether a statute prohibits any contract. It is illegal and 6 unenforceable under section 24(a) aforesaid because it is a contract 7 involving consent of both contracting parties to do the very act prohibited 8 or forbidden by statute. This position obtains as well when the terms of the 9 contract amount inevitably to the same situation. Thus, an agreement to 10 commit an offence as set out in the Penal Code is the simplest of examples 11 of an agreement to do an act prohibited by statute. 12 13 To decide if section 24(a) makes a contract illegal and unenforceable in 14 connection with a statute, and this bears repeating, one must find out first 15 if the statute prohibits or forbids the act which the parties have contracted 16 to do by the contract in question, and not whether the statute prohibits the 17 contract or the making of the contract in question by the parties. This 18 difference is real, though very subtle. In my view, the failure to bear in mind 19 this fine distinction has given rise to some difficulties.’ 20 21 [54] Applying Sababumi (supra) case above, and since it is the 22 Defendant’s defence that the contact is illegal, the Defendant bears the 23 burden to show that Regulation 3 of the Petroleum Regulations 1974 24 prohibits the acts (i.e. the supply of the Orton’s valve by Plaintiff) which the 25 parties have contracted to do. 26 27 [55] However, we must remind ourselves that not all breaches of a 28 statutory provision would render an agreement illegal or void though such 29 breach may attract criminal penalty (see Beca (Malaysia) Sdn Bhd v Tan 30 Choong Kuang & Anor [1986] 1 MLJ 390). In the case of Tan Keen 1 Keong @ Tan Kean Keong v Tan Eng Hong Paper & Stationery Sdn 2 Bhd & Ors and other appeals [2021] 3 MLJ 914, the Federal Court held 3 that: 4 5 [53] …before striking down agreements, voiding agreements or winding 6 up corporations, the court must be satisfied that the illegality or 7 contravention of law was related, or bore significant nexus, to the activities 8 or business of the company and/or for which the company was 9 incorporated. Not all breaches of statutory requirements would result in a 10 company being wound up even if the breaches attracted criminal sanction, 11 otherwise there would be chaos in commerce and business… 12 13 [54] The relevant statute complained of must be carefully examined, its 14 purpose, its object or purpose determined, before the court can conclude 15 one way or the another if the contract, act or deed in question is invalidated 16 by such contravention… 17 18 [56] We are of the opinion that in dealing with commercial contracts, the 19 court should, as far as possible, give effect to the bargain that has been 20 agreed to by the parties so as to ensure certainty in the commercial and 21 business transaction, especially when it involves multinational 22 corporations. The Federal Court in Tan Keen Keong @ Tan Kean 23 Keong(supra) referred to the case of Liputan Simfoni Sdn Bhd v 24 Pembangunan Orkid Desa Sdn Bhd [2019] 4 MLJ 141 and endorsed 25 the trio consideration principle in Patel v Mirza [2016] UKSC 42. Hence in 26 dealing with the issue of illegality, the court should always consider the 27 purpose of the statute, whether any other policy may be undermined or 28 disaffected and the need to exercised more restrain before declaring a 1 contract illegal. 2 3 [57] Applying Tan Keen Keong @ Tan Kean Keong(supra) to our case, 4 it is pertinent for us to examine the purpose of the Petroleum Regulation 5

This regulation was made pursuant to section 7 of the Petroleum 6 Development Act 1974 (the Act) which empowers the Prime Minister to 7 make regulations for the purpose of carrying into effect the provisions of 8 the Act. Section 7 reads: 9 10

Power to make regulations 11 12 The Prime Minister may make regulations for the purpose of carrying 13 into effect the provisions of the Act and, without prejudice to the 14 generality of the foregoing, such regulations may, in particular, provide 15 for- 16 17

the conduct of or carrying on of- 18

any business or service relating to the exploration, 19 exploitation, winning and obtaining of petroleum;

(ii) any business involving the manufacture and supply of 21 equipment used in the petroleum industry;

(iii) downstream activities and development relating to 23 petroleum; (emphasis added) 24 25

the marketing and distribution of petroleum and its products; 26 27

penalties in the form of a fine not exceeding one hundred thousand 28 ringgit or imprisonment not exceeding five years or both such fine and 29 imprisonment for breach of any of the regulations and for non- 1 compliance with any terms or condition of any license, permission or 2 approval issued or granted under the regulations; 3 4

for the forfeiture of anything used or intended to be used in the 5 commission of any such breach or non-compliance (emphasis added) 6 7 [58] It is also pertinent to state that the preamble of the Act states that 8 the Act was enacted 9 10 “to provide for the exploration and exploitation of petroleum whether 11 onshore or offshore by a Corporation in which will be vested the entire 12 ownership in and exclusive rights, powers, liberties and privileges in 13 respect of the said petroleum, and to control the carrying on of 14 downstream activities and development regulating to petroleum and its 15 products; to provide for the establishment of a Corporation under the 16 Companies Act, 1965 or under the law relating to the incorporation of 17 companies and for the powers of that Corporation, and to provide for 18 matters connected therewith or incidental thereto. (emphasis added) 19 20 [59] We are of the considered opinion that the relevant purpose of the Act 21 which is applicable to the present appeal is “to control the carrying on of 22 downstream activities and development regulating to petroleum and its 23 products”. In this regard, as we have stated earlier, the Regulation is said 24 to have been breached by the Plaintiff governs the upstream activities of 25 MLNG. However, it is important to note that the requirement for a licence 26 under Regulation 3 of the Petroleum Regulations 1974 applies only in 27 respect of the supply of general services connected with upstream 28 activities. While the Act was enacted to control the carrying on of 29 downstream activities, Regulation 3 is obviously silent with regard to the 1 need for a license for downstream activities. There is no requirement for 2 a licence for any contractor dealing with the supply of general services 3 connected with upstream activities. There is no prohibition under the 4 Regulation for the Plaintiff to be licenced with Petronas before entering into 5 the contract with the Defendant. Consequently, there is no breach of the 6 Regulation when the Plaintiff and Defendant entered into the agreement 7 to supply the Orton valve. We find that there is no nexus between the 8 statutory requirement and the contract between the parties. (Emphasis 9 added) 10 11 [60] Most importantly, it is obvious to us that the Plaintiff is not a party to 12 the contract between Defendant and Malaysia LNG Dua Sdn Bhd (MLNG) 13 for the supply of the Orton valve. The Plaintiff came into the picture after 14 the Defendant had approached them for the possibility of finding a cheaper 15 alternative valve to be supplied to MLNG. The Plaintiff had assisted the 16 Defendant in convincing MLNG to consent to the change of the brand. This 17 led to an agreement that the Plaintiff would then supply the Orton valve to 18 the Defendant for the same to be supplied to MLNG by the Defendant. The 19 obligation to supply the Orton valve to MLNG lies with the Defendant. The 20 Plaintiff is not the supplier of the Orton valve to MLNG; it is the Defendant 21 that should comply with the said licence requirement. Hence, we fail to see 22 how could the license requirement would make the agreement between 23 the Plaintiff and Defendant illegal. 24 25 [61] At the risk of being repetitive, it must be emphasized that the 26 requirement for a licence under Regulation 3 of the Petroleum Regulations 27 1974 applies only in respect of the supply of general services connected 1 with upstream activities. This, in our opinion, is crucial to the Plaintiff’s case 2 because they have taken the stand that the supply of the Orton valve 3 herein relates to a downstream activity and there is no need for a Petronas 4 licence. In this respect, PW1 had testified that the contract involves 5 downstream activities of MLNG, hence only a license is required. As long 6 as the Plaintiff is licensed with PETRONAS, which is the case here, the 7 contract between the parties is not illegal. 8 9 [62] The Defendant did not rebut this stance by calling any witness to 10 explain whether the supply of the Orton’s valve is for the upstream or 11 downstream activities. To the contrary, evidence was led that during the 12 meetings with the Defendant on 18.9.2016, the Plaintiff had introduced 13 AHT as Orton’s local exclusive partner and AHT was registered in 14 PETRONAS vendor’s list under several Standardised Work & Equipment 15 Categories codes and that AHT’s PETRONAS Licence/Registration (but 16 does not contain the Standardised Work & Equipment Categories code for 17 Orton’s valve) was enclosed by Orton. It was also disclosed during the 18 meetings that AHT is Orton’s agent and the Plaintiff had made it clear that 19 for the MDR project, Orton would work directly with the Plaintiff while AHT 20 would play a supporting role if needed. Further, as submitted by learned 21 counsel for the plaintiff under Article 34.2 of the General Conditions of 22 Contract governing the MDR Project, the Defendant is permitted to engage 23 PETRONAS registered companies (including the Plaintiff) in the 24 procurement of equipment, facilities, goods, materials, supplies and 25 services for the said project. As the matter stands, it is not unreasonable 26 for the learned JC, and this court to infer that the contract is not forbidden 27 or prohibited by statute. To the contrary, it is proven at the trial that Plaintiff 1 is a licenced entity under PETRONAS and was authorized to enter into the 2 agreement with the Defendant. 3 4 [63] Be that as it may, from the evidence above, the Defendant was at all 5 material times (especially in the meeting on 20.1.2016 between the 6 Plaintiff, the Defendant, Orton, AHT and MLNG), aware of the Plaintiff’s 7 eligibility to supply the Orton’s valve and the change of Amri brand valve 8 to Orton brand valve had been approved by MNLG. Also, at this point in 9 time, the Defendant (and MLNG) was aware that the Plaintiff’s licence 10 does not contain the Standardised Work & Equipment Categories code for 11 Orton’s valve. Hence, the Defendant is aware that the Plaintiff is 12 handicapped in so far as the licence for the supply of Orton’s valve is 13 concerned. In this respect, neither MLNG nor the Defendant had raised 14 any issue about the requirement of the PETRONAS Licence in the 15 contract. In our view, there is no basis for the Defendant to raise the issue 16 of illegality now. We agree with the finding of the learned JC that the 17 contract is not tainted with illegality. 18 19 20 E (iii) Allegation of a non-speaking judgment 21 22 [64] Before we conclude, we wish to deal with the Defendant’s 10th and 23 11th Ground of Appeal. It is the Defendant contention that the learned JC 24 was plainly wrong when, in arriving at his decision in allowing the Plaintiff’s 25 claim, he failed to decide on the issues to be tried as framed by learned 26 counsel, without giving reason or adequate reasons for his finding or 1 conclusion relating to such issues to satisfy the demand of justice. 2 [65] However, in his submission, learned counsel merely reproducing 3 grounds 10 and 11 and did not elaborate further. Be that as it may, in the 4 preceding grounds of appeal, it was submitted that the learned JC had 5 wrongly ruled on the issue of pleading/unpleaded facts raised during the 6 trial, especially on the need of the parties to plead material facts as 7 opposed to evidence and the appreciation of evidence before him. Learned 8 counsel also commented on the manner the learned JC handled the many 9 objections raised during the trial. 10 11 [66] In this respect, suffice for us to refer to the case of Dr Hari Krishnan 12 & Anor v Megat Noor Ishak bin Megat Ibrahim & Anor and other 13 appeals [2018] 3 CLJ 427. In that case, one of the issues raised in the 14 Federal Court was the failure of the trial judge to give a speaking judgment. 15 The appellant had raised a preliminary objection before the Federal Court 16 and sought an order for a retrial on the ground that the trial judge had given 17 a non-speaking judgment in that the judge had failed to give reasoned 18 judgment for his conclusion and merely made a finding without explaining 19 why he was persuaded to that end. In disallowing the application for a 20 retrial, the Federal Court held that while it disapproves of the non-speaking 21 judgment it does not necessarily follow that the court should always order 22 a retrial. In such scenario, the appellate court have a duty to make their 23 own findings of facts based on the evidence available in the records of 24 appeal. 25 26 [67] The facts are different here. The learned JC had in fact considered 1 the evidence before him in the light of the pleadings and issues to be tried. 2 He had reminded himself of the burden of proof in civil matters and gave 3 reasons for his findings which are supported by the oral testimonies and 4 the documentary evidence before him. Examples of this approach appear 5 in paragraphs 33, 34, 36, 37, 40, and 41 of the grounds of judgement. The 6 learned JC may have summarized his analysis of the evidence before him 7 and compressed them in a summary manner in the grounds of judgement, 8 but he cannot be faulted in his approach since the matter had gone into a 9 lengthy trial over a period of two years and to expect the learned JC to go 10 into detail of all issues before him may result in him missing the important 11 determinative issues between the parties. In the context of the crucial 12 issues in this case, we are of the view that the learned JC had taken into 13 consideration all issues and evidence before him before arriving at his 14 decision. Our duty is to consider whether the learned JC had committed a 15 plain error of law or fact which warrants appellate intervention and we find 16 none. 17 18 [68] Further, under section 167 of Evidence Act 1950, any improper 19 admission or rejection of evidence shall not be a ground on itself for a 20 retrial or reversal of any decision if it appears to this court that, 21 independently of the evidence rejected or to and admitted, there is 22 sufficient evidence to justify the decision, or that, if the rejected evidence 23 had been received, it ought not to have varied the decision. 24 25 [69] It is imperative that under section 167, whether or not the judgment 26 should be reversed or altered on the ground of wrongful admission of 27 evidence the court must be satisfied that there was sufficient evidence to 1 justify the decision. In the case of Juraimi bin Husin v Public Prosecutor 2 [1998] 1 MLJ 537, this court opines: 3 4 The second is the well-known and authoritative work by Woodrooffe 5 & Ameer Ali entitled The Law of Evidence (16th Ed) where in Vol 6 4, at page 3805 the following passage appears: 7 8 ‘Section 167 applies to both criminal as well as civil proceedings, 9 and it is but one of the many applications of that principle which is 10 at the root of modern legislation respecting judicial procedure, 11 namely, that if legal technicalities cannot be wholly excluded, they 12 shall at least be prevented from materially impeding the course of 13 judicial proceedings and the attainment of that substantial justice 14 which should be their only aim’. 15 16 [70] Having perused all materials before us we find that the learned JC 17 had acted correctly. We find that, even if there had been a wrongful 18 rejection of evidence or wrongful admission of evidence, there is sufficient 19 evidence to justify the decision of the learned JC. Hence, we are of the 20 view that the learned JC’s finding/decision was justified and he did not 21 commit any appealable error that warrants our intervention. 22 23 [71] Based on the above reasons, we are of the considered opinion that 24 there is no plain error committed by the learned JC in arriving at his 25 decision. There is no merit in this appeal. The appeal is dismissed. We 26 affirm the decision of the learned JC. Costs of RM30,000 to the 27 Respondent subject to allocator. 28 1 Dated : 16th JULY 2024 2 3 4 5 AZHAHARI KAMAL BIN RAMLI 6 JUDGE 7 COURT OF APPEAL, MALAYSIA 8 9 10 For the Appellant : HENRY LING KUONG MENG 11 [Ling & Wong Advocates] 12 13 For the Respondent : 1) LIDWINA KIEW CHIN CHIN 14 2) CHARMAINE WONG XIA YI 15 [David Allan Sagah & Teng Advocates] 16 17 18 19