Kawan Engineering Sdn Bhd v Nyew Kam Cheng (BA-22NCC-159-11/2023)

NYEW KAM CHENG

TAN MEE YUAN (NRIC NO.: 710702-08-5472) … DEFENDANTS

The Plaintiff’s claim is founded on an alleged breach of a Letter of Guarantee dated 12 February 2020, executed by the Defendants in favour of the Plaintiff. The Plaintiff seeks to recover a sum of RM2,326,676.05, being monies paid on behalf of Periforce Sdn Bhd, which were guaranteed by the Defendants.

Having heard the evidence of all witnesses, considered the written submissions filed, and heard oral submissions from both counsel, I allowed the Plaintiff’s claim. These are my grounds of judgment.

The Plaintiff, Kawan Engineering Sdn Bhd, is a company incorporated in Malaysia. At all material times, the Plaintiff was involved in the supply of engineering works, materials, and related services in connection with projects undertaken by Periforce Sdn Bhd.

The First Defendant, Nyew Kam Cheng, and the Second Defendant, Tan Mee Yuan, were directors of Periforce Sdn Bhd.

The Defendants are sued in their personal capacities pursuant to a Letter of Guarantee dated 12 February 2020, in which they are alleged to have guaranteed the liabilities of Periforce Sdn Bhd to the Plaintiff.

Unless otherwise stated, references to “the Defendants” refer to both Defendants jointly.

The Plaintiff was engaged by Periforce Sdn Bhd (Periforce) to supply engineering works, equipment, fabrication, installation, and related services for several industrial projects undertaken by S/N UtKnFwbmSk6OVsKXovQvgg Periforce. The Defendants were, at all material times, directors of Periforce Sdn Bhd.

It is not disputed that, in the course of these dealings, the Plaintiff supplied works and materials for various projects, including projects commonly referred to by the parties as KTM, MSM Prai, CSR, Harcos, Dana, and RPG. The Plaintiff’s involvement in these projects spanned the supply of machinery, fabrication works, installation, and associated costs.

According to the Plaintiff, on 12 February 2020, both Defendants executed a document titled “Guarantee by Individual(s)” (the Guarantee), whereby the Defendants agreed to personally guarantee the payment of all sums due and owing by Periforce Sdn Bhd to the Plaintiff. Under the terms of the said Guarantee, the Defendants undertook to be jointly and severally liable as guarantors and principal debtors in the event Periforce defaulted in payment.

The Plaintiff’s case is that the Guarantee was requested as a condition for continuing works and supplies to Periforce, given that Periforce was a limited liability company. The Plaintiff relies on this Guarantee as the contractual basis for the present claim.

The Defendants, however, dispute the enforceability of the Guarantee. The First Defendant testified that he does not recall S/N UtKnFwbmSk6OVsKXovQvgg signing the Guarantee and, in any event, contends that subsequent arrangements between the parties superseded or rendered the Guarantee unenforceable.

The Defendants’ case centres on an alleged Loan & Caretaking Agreement & Promissory Note dated 18 February 2020 (LCAPN), which was signed by the First Defendant and forwarded to Lim Thou Lai (LTL), the Managing Director of the Plaintiff, for signature. It is the Defendants’ position that LTL never signed the LCAPN, but that both parties nevertheless acted upon its terms.

According to the Defendants, under the LCAPN:

The Plaintiff and/or LTL were to take over the management of Periforce’s projects.

The Plaintiff was to be paid on a cost-plus basis.

Control over Periforce’s bank accounts and financial transactions was transferred to LTL and the Plaintiff’s Chief Financial Officer; and

Project proceeds were to be set off against monies advanced by the Plaintiff. S/N UtKnFwbmSk6OVsKXovQvgg

The First Defendant gave evidence that, pursuant to these arrangements, company resolutions were passed appointing LTL and the Plaintiff’s officer as signatories, makers, and checkers of Periforce’s banking facilities with Maybank and Affin Islamic Bank, and that the First Defendant’s own role was limited to viewing account information without authority to initiate or approve transactions.

The Plaintiff does not dispute that such banking arrangements were implemented but maintains that these arrangements were made to facilitate project execution and payments, and not to transfer full responsibility or liability for Periforce’s obligations to the Plaintiff.

The Defendants allege that the Plaintiff and/or LTL breached the terms of the LCAPN by failing to complete certain projects within the stipulated time, failing to renew bank guarantees for specific projects, and failing to account for project expenses properly. The Defendants contend that these failures prevented Periforce from making claims for completed works, ultimately leading to its winding up on 24 May 2022.

In support of this position, the First Defendant referred to specific invoices, email correspondence seeking clarification on charges, and bank statements showing transactions carried out after LTL became a sole or controlling signatory.

The Plaintiff disputes these allegations and maintains that:

All works and supplies were carried out in accordance with instructions.

Statements of account, invoices, and delivery notes were regularly issued to the Defendants and Periforce.

The Defendants did not raise any contemporaneous objection to the accuracy of the accounts; and

The sums claimed represent actual costs incurred and remain unpaid. Amount Claimed

The Plaintiff claims a sum of RM2,326,676.05, being the outstanding amount due from Periforce for works and supplies rendered. The Plaintiff relies on statements of account, invoices, delivery notes, and a Certificate of Indebtedness dated 11 December 2023, issued after the commencement of proceedings, as reflecting the amount allegedly due and owing.

The Defendants dispute the quantum claimed and deny liability under the Guarantee, contending that the amount is inaccurate, disputed, and attributable to the Plaintiff’s own conduct in managing Periforce’s affairs. S/N UtKnFwbmSk6OVsKXovQvgg Agreed Issues to be Tried

Based on the pleadings, agreed facts, and submissions of both parties, the following issues arise for determination:

Whether the Letter of Guarantee dated 12 February 2020 was duly executed by the Defendants and is valid and binding on them.

Whether the Defendants are liable under the said Letter of Guarantee for the sum claimed by the Plaintiff.

Whether the alleged Loan and Caretaking Agreement and Promissory Note dated 18 February 2020 constituted a concluded and binding contract, and if so, what is its legal effect on the Plaintiff’s claim under the Letter of Guarantee.

Whether the Plaintiff was a party to, or bound by, the terms of the alleged Loan and Caretaking Agreement.

Whether the Defendants have been discharged from liability under the Letter of Guarantee by reason of: - the Plaintiff’s conduct, - alleged breaches of the Loan and Caretaking Agreement, or - alleged undue influence or unconscionable conduct. S/N UtKnFwbmSk6OVsKXovQvgg

Whether the Certificate of Indebtedness dated 11 December 2023 constitutes conclusive proof of the amount due.

Whether the Plaintiff has proven, on a balance of probabilities, the sum of RM2,326,676.05 as special damages.

Whether the Plaintiff is estopped from enforcing the Letter of Guarantee.

Whether the Plaintiff is entitled to the reliefs sought. Summary of Parties’ Submissions Plaintiff’s Submissions

The Plaintiff submits, in summary, as follows:

The Plaintiff’s claim is founded on the Guarantee dated 12 February 2020, executed by both Defendants.

The Defendants expressly agreed to be guarantors and principal debtors, jointly and severally liable for all sums due from Periforce Sdn Bhd to the Plaintiff.

The only issue for determination is whether the Defendants are liable to pay the outstanding sum of RM2,326,676.05 under the Letter of Guarantee. S/N UtKnFwbmSk6OVsKXovQvgg

The alleged Loan and Caretaking Agreement and Promissory Note was never a concluded contract, signed only by the First Defendant, was never executed by the Plaintiff or Lim Thou Lai (LTL) and lacks consensus ad idem.

The Plaintiff was not a party to the alleged LCAPN, and the Defendants cannot rely on it to defeat the Plaintiff’s claim due to privity of contract.

Allegations of undue influence, unconscionable conduct, conflict of interest, or breach by the Plaintiff were not properly pleaded and are unsupported by evidence.

The Certificate of Indebtedness dated 11 December 2023 was issued pursuant to the Guarantee and reflects amounts already communicated to the Defendants through statements of account and invoices.

The Defendants received statements, invoices, and delivery notes and did not raise any contemporaneous objection.

The Plaintiff submits that the quantum claimed is proven on a balance of probabilities. Defendants’ Submissions

The Defendants submit, as follows:

The Plaintiff has not discharged its burden of proof to establish liability under the Guarantee.

The LCAPN constituted a binding arrangement that it altered the relationship between the parties and superseded or affected the enforceability of the Letter of Guarantee.

The Plaintiff, through LTL and its officers, exercised control over Periforce’s finances and project execution, including control over bank accounts, authority as signatories and management of payments.

The Plaintiff failed to complete certain projects and/or renew bank guarantees, causing Periforce to suffer losses and eventually be wound up.

The Defendants contend that the Plaintiff’s conduct amounts to undue influence, unconscionable conduct, and/or a basis to discharge the Defendants from liability under the Guarantee.

The Certificate of Indebtedness relied upon by the Plaintiff: was issued after proceedings commenced, contains manifest errors and cannot be relied upon as proof of the amount claimed.

The Plaintiff is estopped from relying on the Certificate of Indebtedness. S/N UtKnFwbmSk6OVsKXovQvgg

The quantum claimed as special damages is disputed and strictly denied. Analysis and Findings Existence, validity and enforceability of the Letter of Guarantee

The Plaintiff’s claim is founded on the Guarantee dated 12 February 2020, which the Plaintiff says was executed by both Defendants. The Defendants deny liability and challenge the enforceability of the said Guarantee.

Having considered the evidence and submissions, I find that the Letter of Guarantee was duly executed and therefore existed, was valid, and binding on the Defendants according to its express terms. The Defendants did not adduce cogent evidence to rebut the Plaintiff’s case on execution. A bare denial is insufficient.

In this regard, I accept the Plaintiff’s submission that sections 79, 80 and 81 of the Contracts Act 1950 apply. Once execution is established, the Defendants are bound by the contract they signed. I also accept the Plaintiff’s reliance on the principle stated in Samuel Naik Siang Ting v Public Bank Bhd [2015] 6 MLJ 1, that parties are bound by their contractual undertakings and pleadings.

I therefore find that the Letter of Guarantee is enforceable against the Defendants.

The Defendants rely heavily on the alleged LCAPN and submit that it alters the parties’ legal relationship and affects the enforceability of the Guarantee. I am unable to agree.

On the evidence, the LCAPN was signed only by the First Defendant and was never executed by the Plaintiff or LTL. Mere knowledge of the document or subsequent conduct is not sufficient to establish consensus ad idem. The Defendants failed to show that LTL agreed to be bound by the terms of the LCA.

While the Defendants relied on JNA Ikhtisas Sdn Bhd v Kerajaan Malaysia [2014] 3 MLJ 174 to argue that the absence of formal execution is not decisive, that case is distinguishable on its facts. In the present case, there is no clear evidence of mutual agreement or acceptance by the Plaintiff.

I also agree with the Plaintiff that privity of contract is a valid concern. The LCAPN, even if taken at its highest, was an arrangement between the Defendants and LTL personally. The Plaintiff was not a party to it. Accordingly, the Defendants cannot rely on the LCAPN to defeat or qualify the Plaintiff’s rights under the Guarantee. S/N UtKnFwbmSk6OVsKXovQvgg Certificate of Indebtedness and its evidential value

The Plaintiff relied on a Certificate of Indebtedness dated 11 December 2023, issued after the action was filed, pursuant to Clause 12 of the Guarantee.

On this issue, I agree in part with the Defendants. I am of the opinion that a certificate of indebtedness issued after the commencement of proceedings cannot, by itself, be treated as conclusive evidence of the amount due in this case.

The authorities relied upon by the Plaintiff relating to banks issuing certificates of indebtedness are distinguishable. Those cases concern banking facilities involving fixed loan sums. The present case involves a claim for special damages, and the amount claimed must therefore be strictly proved. The Plaintiff cannot rely solely on a Certificate of Indebtedness to establish the sum due.

In this regard, I am guided by the burden of proof principles under sections 101 to 103 of the Evidence Act 1950, as applied in Pembinaan BLT Sdn Bhd v Nazarin (NBM) Sdn Bhd [2021] MLJU 1254. The Plaintiff must prove the quantum claimed by credible documentary and oral evidence. Therefore, I am of the considered view that parties should not be allowed to create a shortcut by relying solely on a certificate of indebtedness to establish special damages. S/N UtKnFwbmSk6OVsKXovQvgg Whether the sum of RM2,326,676.05 has been proven

Although I do not accept the Certificate of Indebtedness as conclusive proof, this does not dispose of the Plaintiff’s claim on quantum.

I have examined the statements of account, invoices, delivery notes, and supporting documents tendered by the Plaintiff, together with the oral evidence. On the balance of probabilities, I find that the Defendants were informed of the amount claimed through these documents.

The First Defendant admitted receiving the statements of account and invoices. He was unable to show that he raised any contemporaneous objection to their accuracy. Applying the burden of proof principles under sections 101 to 103 of the Evidence Act 1950, as explained and oftenly quoated in Letchumanan Chettiar Alagappan @ L Allagappan (as executor to SL Alameloo Achi alias Sona Lena Alamelo Acho, deceased) & Anor v. Secure Plantation Sdn Bhd [2017] 5 CLJ 418, FC (which was refered to in the submitted case of Pembinaan BLT Sdn Bhd v Nazarin (NBM) Sdn Bhd [2021] MLJU 1254) I find that the Plaintiff has discharged its burden of proving the sum claimed.

Accordingly, I am satisfied that the Plaintiff has proven the sum of RM2,326,676.05 as special damages. S/N UtKnFwbmSk6OVsKXovQvgg Allegations of undue influence and control over Periforce

The Defendants alleged that the Plaintiff exercised undue influence and improper control over Periforce by reason of the authority given to the Plaintiff to manage Periforce’s financial affairs.

I find no merit in this submission. Allegations of undue influence or unconscionable conduct must be clearly pleaded and strictly proved, as held in Tan Ah Tong v Parveen Kaur [2011] 5 MLJ

In the present case, these allegations were not properly pleaded and are not supported by the evidence.

The evidence shows that the Plaintiff’s involvement in Periforce’s financial management was done with the sanction and authority of Periforce itself. The Defendants, as directors, retained overall control and management of the company. I therefore find that the Plaintiff’s conduct was lawful and does not operate to discharge the Defendants from liability under the Guarantee.

Having considered the evidence, the submissions of both parties, and the authorities cited, I find that:

The Letter of Guarantee dated 12 February 2020 is valid and binding; S/N UtKnFwbmSk6OVsKXovQvgg

The alleged Loan and Caretaking Agreement does not affect the Plaintiff’s rights;

The Certificate of Indebtedness is not conclusive, but the quantum has been independently proven; and

The Defendants remain liable under the Letter of Guarantee for the sum claimed. Final order

For the reasons set out above, I find that the Plaintiff has successfully proven its claim on a balance of probabilities. The Defendants are liable under the Letter of Guarantee for the sum claimed.

Accordingly, the Plaintiff’s claim against both Defendants is allowed.

I hereby order as follows:

Judgment is entered in favour of the Plaintiff against both Defendants jointly and severally in the sum of RM2,326,676.05.

Costs of this action are awarded to the Plaintiff in the sum of RM20,000.00, subject to allocator’s fees. S/N UtKnFwbmSk6OVsKXovQvgg

Any other relief prayed for but not expressly granted is dismissed. Dated this: 30th December 2025 ~signed~ (NOOR HAYATI BINTI HAJI MAT) JUDGE HIGH COURT OF MALAYA SHAH ALAM, SELANGOR For the Plaintiff : Leong Cheok Keng together with Muhammad Farhan bin Sapian Sauri Messrs Leong & Tan For the Defendants : Freddy Lim Messrs Wong Tan & Co. S/N UtKnFwbmSk6OVsKXovQvgg