Jn Teguh Energy Sdn Bhd v Umd Energy Sdn Bhd (WA-27NCC-26-06/2022)

UMD ENERGY SDN BHD (Company No.: 201801024005/1286025-T)

EFOGEN SDN BHD (IN LIQUIDATION) (Company No.: 200201031665 (599330-K) …DEFENDANTS JUDGMENT Introduction [1] A and B entered into a contract with C where A and B jointly agreed to supply C with an offshore support vessel to enable C to discharge its obligations to D. After the contract had been performed, C discovered that A had in fact been wound up prior to the execution of the contract and the liquidator of A had not authorised the contract with C at all. Based on the aforesaid, C contended that it had no legal obligation to pay B the outstanding sum as the contract was null and void and or inoperative. C contended that A was a necessary party to the contract as it was in possession of the “SWEC Code’ or ‘licence’ which was a pre-requisite to D awarding the works to C. [2] The aforesaid, save for an ancillary issue of set-off, essentially encapsulates the gist of the disputes before this Court. [3] After hearing testimonies from the parties, perusal of the written submissions filed after trial and after hearing oral submissions from counsel, this Court allowed the Plaintiff’s claims with costs. Background Facts [4] On 30.7.2021, the 1st Defendant entered into 2 separate charterparty agreements, namely: a) a BIMCO Supplytime 2017 Charter Party for Offshore Support Vessel with the 2nd Defendant for the vessel, “EFOGEN ALTAMIS” (“the Efogen”) (“the Efogen Charter Party”); b) a BIMCO Supplytime 2017 Charter Party for Offshore Support Vessel with the Plaintiff and the 2nd Defendant for the vessel, “VT HANDLER” (“the VT Handler”) (“the VT Handler Charter Party”) [5] The 1st Defendant had required the aforesaid two vessels to discharge its contractual obligations with Petronas Carigali Sdn Bhd (“Petronas Carigali”) for a project known as “Provision of Engineering, Procurement, Construction, Installation and Commissioning (EPIC) of PM 309 Gas Ledang Redev Segment 2 Development Project” (“the Project”). [6] The reason the 1st Defendant had chosen to enter into the Efogen Charter Party and the VT Handler Charter Party was because, at the material times, the 2nd Defendant was in possession of the SWEC Code from Petronas Carigali, which, according to the 1st Defendant, was a pre-condition required by Petronas Carigali for the Project. [7] However, unbeknown to the 1st Defendant, the 2nd Defendant was already wound up at the time when the two charterparty agreements were signed. In fact, the 2nd Defendant was wound up on 19.8.2019. [8] It is not in dispute that the Liquidator of the 2nd Defendant had not sanctioned the execution of the Efogen Charter Party and the VT Handler Charter Party by the directors of the 2nd Defendant. [9] Notwithstanding the aforesaid, it is also not in dispute that the vessel, VT Handler was duly delivered to the 1st Defendant and had proceeded to perform all her obligations under the VT Handler Charter Party. [10] Invoices were issued by the Plaintiff to the 1st Defendant for the charter hire under the VT Handler Charter Party. Save for the first invoice which was paid, the 1st Defendant failed to pay the subsequent invoices with the consequence being that a sum of RM2,125,266.41 remained outstanding (“the Outstanding Sum”). [11] Despite repeated demands, the 1st Defendant failed to pay the Plaintiff the Outstanding Sum without proffering any reasons for the non-payment. [12] However, when the Plaintiff commenced this action against the 1st Defendant for the Outstanding Sum, the 1st Defendant raised, for the first time, the following defences to the claim: a) the 1st Defendant is entitled to set off a sum of RM 913,500.00 that had been paid to the 2nd Defendant in respect of the Efogen Charter Party from the Outstanding Sum; b) both the Efogen Charter Party and the VT Handler Charter Party are void ab initio as the 2nd Defendant did not obtain the sanction of the Liquidator to enter into the same at the material times; c) the Plaintiff had misrepresented themselves as the owner of the vessel, VT Handler when in truth the owner was one Vitawani Holdings Sdn Bhd (“Vitawani”). [13] Each of these defences shall be considered in turn. Court’s Considerations The Set-Off [14] According to the 1st Defendant, the 2nd Defendant was unable to deliver the vessel, Efogen as required under the Efogen Charter Party as the said vessel had broken down and was held at the Berjaya Dockyard in Sibu due to non-payment of its repair works. [15] As the 2nd Defendant was facing financial issues, the 1st Defendant had agreed to alter the payment milestones under the Efogen Charter Party in order to secure the release of the vessel. In this regard, the 1st Defendant had advanced a sum of RM 773,500.00 to the 2nd Defendant on top of the sum of RM 140,000.00 that it had earlier paid under the Efogen Charter Party. [16] However, notwithstanding the aforesaid payments, the 2nd Defendant had failed to deliver the vessel to the 1st Defendant pursuant to the Efogen Charter Party. [17] DW1 testified on behalf of the 1st Defendant that there was “a gentleman agreement” between the Plaintiff and the 1st Defendant that the said sum of RM 913,000.00 that was paid by the 1st Defendant to the 2nd Defendant under the Efogen Charter Party would be set-off against the Outstanding Sum under the VT Handler Charter Party. [18] However, DW1 acknowledged that he was not involved personally in the “gentleman agreement”. He testified that the agreement was told to him by his Chief Executive Officer, who did not come to Court to give evidence on the same. [19] As a start, it must be noted that the Efogen Charter Party involved a completely different vessel. More significantly, under the terms of the VT Handler Charter Party, Clause 12(e) thereof expressly stipulates that the “payments of hire, fuel invoices and disbursements … shall be received in the currency stated in Box 20(i) in full without discount or set-off to the account stated in Box 23…”. [20] Thus, it is clear that unless the 1st Defendant can show an agreement between the parties to depart from the aforesaid Clause 12(e), there can be no set-off allowed under the VT Handler Charter Party. [21] In this case, since the 1st Defendant is asserting the existence of “a gentleman agreement” on the set-off, the burden is on the 1st Defendant to establish the existence of the said agreement. [22] The 1st Defendant had failed to call any witness who had personal knowledge of the “gentleman agreement” to testify on the same at the trial. DW1 who was called to testify on the same had no personal knowledge and his testimony on the “gentleman agreement” is mere hearsay evidence and is thus, inadmissible. [23] For the reasons above, it is my judgment that the 1st Defendant’s contention of a set-off is not established and must be rejected. Contract void ab initio [24] The 1st Defendant claimed that because Efogen was already wound up at the time the VT Handler Charter Party was executed and no sanction had been obtained from the Liquidator of the 2nd Defendant to any of the directors and or officers of the company to enter into the contract, the VT Handler Charter Party must be treated as void ab initio. [25] In American International Assurance Bhd v. Coordinated Services L Design Sdn Bhd [2012] 1 MLJ 369, Ramli Ali JCA (as he then was) held thus: “[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 companies is vested with the liquidator. No one but the liquidator can act for the company.” [26] Whilst it may be true that it was the Plaintiff who had sub-chartered the vessel, VT Handler from Oceanford Sdn Bhd (“Oceanford”), who had in turn chartered from the vessel from the legal owner, Vitawani Sdn Bhd (“Vitawani”), and whilst it was also true that the Plaintiff was the one who had performed the obligations under the VT Handler, nevertheless, it was contended that the 1st Defendant had agreed to enter into the VT Handler with the Plaintiff only because the 2nd Defendant was made a joint charterer. This was because it was the 2nd Defendant who had the SWEC Code issued by Petronas Carigali at the material times. [27] With respect, even though the 2nd Defendant had no capacity to enter into the VT Handler Charter Party at the material times because no sanction was obtained from its Liquidator, this to my mind, does not mean that the VT Handler Charter Party is rendered void ab initio. This is because the Plaintiff had remained fully competent and capable of performing the obligations under the VT Handler Charter Party. [28] Indeed, it is not even disputed that the Plaintiff had successfully performed all its obligations under the VT Handler Charter Party to the 1st Defendant. There is no evidence adduced to suggest that the obligations under the VT Handler Charter Party were not satisfactorily discharged at all. [29] Indeed, the 1st Defendant had expressly acknowledged that the Plaintiff had fulfilled its contractual obligations by delivering the vessel VT Handler to the 1st Defendant and that the Outstanding Sum is indeed owed by the 1st Defendant to the Plaintiff. More specifically, the admissions were made by DW1 in the course of cross examination: At page 60 in the Notes of Proceedings: So do you agree with me, that what you're saying here is that, in essence, you have no dispute or UMD has no dispute that the Plaintiff has carried out his contractual obligation? DW1: This one is related to VT Handler is it? Yes, yes. VT Handler only. DW1: Okay. VT Handler, yes they tunai tanggungjawab, they deliver. At page 61 in the Notes of Proceedings: JN Teguh issued this Statement of Account to UMD Energy, would you agree? DW1: Yes. So, on the numbers here, at the total here, 125,266.41, is there any dispute that actually UMD is supposed to pay this amount money to JN Teguh? DW1: No. There is no dispute, right? DW1: No dispute. [30] The effect of the 2nd Defendant being wound up and in entering into the VT Handler Charter Party without the sanction of the Liquidator is that vis-à-vis the 2nd Defendant, the VT Handler Charter Party is simply unenforceable by the 2nd Defendant unless adopted and or ratified by the Liquidator. [31] On the issue of the SWEC Code, as rightly pointed out by learned counsel for the Plaintiff, the SWEC Code requirement was not a term of the VT Handler Charter Party at all. The SWEC Code requirement, if at all, only existed between the 1st Defendant and Petronas Carigali. Any non-compliance, if at all, means that the 1st Defendant may be in breach of its contract with Petronas Carigali but there is no evidence before this Court that the 1st Defendant had not been paid under its Contract with Petronas Carigali by reason of the Plaintiff not having the SWEC Code. [32] Thus, the 1st Defendant, having received the entire benefits from the Plaintiff’s performance of its obligations under the VT Handler Charter Party, surely must make payments to the Plaintiff as agreed under the terms thereto. In other words, the 1st Defendant had suffered no loss or has not shown that it has suffered any loss from the fact that the Plaintiff as the charterer in the VT Handler Charter Party, had breached the condition requiring that it had the requisite SWEC Code at the time of the contract, if at all this was an implied term. [33] Put it in another way, because the 2nd Defendant had no capacity to enter into the VT Handler Charter Party jointly with the Plaintiff at the time of the formation of the agreement with the 1st Defendant, the effect in law is that the VT Handler Charter Party was an agreement made between the Plaintiff and the 1st Defendant only where the Plaintiff was to perform the entirety of the obligations thereunder to the 1st Defendant. It is not in dispute that, these obligations had been duly performed. [34] Even if the 2nd Defendant is to be treated as a joint obligor to the VT Handler Charter Party, the fact that the 1st Defendant had performed the entirety of the obligations means that the performance by the 1st Defendant discharges the obligations of the 2nd Defendant. If an authority is needed, one need only refer to the Federal Court in Lembaga Kumpulan Wang Simpanan Pekerja v. Edwin Cassion a/l Nagappan @ Marie [2021] 7 CLJ 823 which held as follows regarding joint obligation: “[16] Joint liability arises when two or more persons jointly promise to do the same thing. There is only one obligation or promise, and consequently, performance by one person discharges the others”. [35] In the premises, it is my judgment that the 1st Defendant’s reliance on the 2nd Defendant being wound up at the material times as justification to avoid any obligations to make payment to the Plaintiff is also without any merits. Misrepresentation on ownership [36] The 1st Defendant contended that the Plaintiff had misrepresented itself as the Owner of the vessel, VT Handler. This is premised on the fact that the Plaintiff’s name had appeared in the box label “owner” in the VT Handler Charter Party. [37] With respect, this is a non-starter for the 1st Defendant. It is very common for a charterer to sub-charter the vessel to another party and beyond, without necessarily being the owner of the vessel but describing itself as the “owner” in the charterparty agreement. [38] In this case, VT Handler was chartered by the Plaintiff from Oceanford who had in turn chartered it from Vitawani. There could be no misrepresentation because the Plaintiff had in fact disclosed the details of the true owner by submitting the Certificate of Registry of the vessel to 1st Defendant during the tender stage. That document contained all the pertinent information in respect of vessel, VT Handler. The certificate stated Vitawani as the legal owner of VT Handler. [39] In any case, the alleged misrepresentation posited by the 1st Defendant does not hold water as DW2 who was the person in charge of the tender and award for this project had unequivocally stated that the true ownership of VT Handler in this case was not important. The alleged issue of misrepresentation is a clear afterthought as the 1st Defendant was not only made aware and was in possession of documents showing who the owner of VT Handler was, but more crucially, who was the owner of VT Handler had never been important to the 1st Defendant. Judgment against the 1st Defendant [40] Accordingly, it is my judgment that the Plaintiff has satisfactorily discharged its burden on the balance of probabilities that the 1st Defendant is liable to pay the sum of RM2,125,266.41 to the Plaintiff being the Outstanding Sum owed under the VT Handler Charter Party. [41] The 1st Defendant is to pay the Plaintiff the sum of RM 2,125,266.41 with interests at the rate of 0.5% per month from 8.1.2022 until the date of this judgment as contracted and thereafter at the rate of 5% per annum until full realisation. [42] The 1st Defendant is to pay the Plaintiff costs fixed at RM 50,000.00 subject to allocator. Judgment against the 2nd Defendant [43] As regards the 2nd Defendant, the Plaintiff has filed an application for a judgment in default of Defence to be entered against them. The 2nd Defendant has failed to file its Defence after entering its memorandum of appearance. The Liquidator for the 2nd Defendant had indicated during the pre-trial case management that the 2nd Defendant will not be contesting the Plaintiff’s claims in this action against it. [44] As such, the Plaintiff had filed an application against the 2nd Defendant under Order 19 Rule 7 Rules of Court 2012 ROC 2012 vide a Notice of Application (Encl. 56) and the Affidavit in Support affirmed by PW1 (Encl. 57). [45] In the application, the Plaintiff is seeking for an order that the VT Handler Charter Party is only valid and applicable between the Plaintiff and the 1st Defendant only. [46] Based on my determination above, I also grant an order in terms of the Plaintiff’s Enclosure 56. Dated the 2nd day of July 2024 ONG CHEE KWAN Judge of the High Court of Malaya High Court of Kuala Lumpur, NCC2 & Admiralty Counsel:

Mr. Ian Shang Kuan for Plaintiff

Mr. Azinuddin Karim for Defendant

American International Assurance Bhd v. Coordinated Services L Design Sdn Bhd [2012] 1 MLJ 369 2. Lembaga Kumpulan Wang Simpanan Pekerja v. Edwin Cassion a/l

Order 19 Rule 7 Rules of Court 2012 ROC 2012