Ketua Setiausaha Kementerian Pertahanan Malaysia v Bumita Sdn Bhd (R-01(NCVC)(W)-281.08/2015)

KETUA SETIAUSAHA KEMENTERIAN PERTAHANAN

KERAJAAN MALAYSIA …PERAYU-PERAYU DAN BUMITA SDN BHD …RESPONDEN (Dalam Perkara Mahkamah Tinggi Malaysia di Kangar, Di Negeri Perlis, Malaysia

Ketua Setiausaha Kementerian Pertahanan Malaysia

Kerajaan Malaysia …Defendan-Defendan KORAM LIM YEE LAN, HMR BADARIAH BINTI SAHAMID, HMR HARMINDAR SINGH DHALIWAL, HMR 2 Introduction For ease of reference parties will be referred to as they were in proceedings before the High Court. [1] This is an appeal against the decision of the learned Judicial Commissioner (JC) delivered on 26.06.2015 which allowed the Plaintiff’s claim against the Defendants in the following terms:

A declaration that the a revocation of a Letter of Acceptance (LOA) by the 1st Defendant was unlawful;

(ii) An award of RM10, 000 in nominal damages as compensation for preliminary works;

(iii) An award of RM1.2 million for future loss of profits, calculated as 20% of the contract price of RM60.5 million. Background Facts [2] The Plaintiff was invited by the Defendants to participate in a direct negotiation tender in a project known as, “PROJEK PEMBANGUNAN SEMULA KEM REJIMEN SEMPADAN DAN SKUADRON MEDAN JURUTERA (KEM ORAN) CHUPING, ORAN PERLIS”. (“the said Project”). [3] In response, the Plaintiff submitted its tender which included design and price for RM62 million. After negotiations between the parties, the contract price was agreed to be reduced to RM 60.5 million. [4] Subsequently, the Ministry of Defence (“MINDEF”), acting for the Defendants issued a Letter of Acceptance (LOA) dated 22.05.2008 to the Plaintiff. 3 The letter reads as follows: “Dengan ini adalah diberitahu bahawa Tender tuan bagi kerja-kerja tersebut diatas berharga RM60, 500,000 (Ringgit Malaysia: ENAM PULUH JUTA LIMA RATUS RIBU SAHAJA) telah dipersetujui, tertakluk kepada had, syarat dan perjanjian dalam Dokumen Tender yang menjadi asas Tender ini dan juga kepada surat ini.

Tuan akan dikehendaki melaksanakan Perjanjian Kontrak yang formal dalam sedikit masa lagi. Bagaimanapun, sehinggalah Perjanjian Kontrak yang formal itu dilaksanakan, Tender Tuan berserta Surat Setuju Terima ini akan menjadi kontrak yang sah mengikat di antara tuan dan Kerajaan.

Tuan dikehendaki menyatakan pilihan kaedah Bon Perlaksanaan samaada:

Jaminan Bank/Bank Islam/Bank Pembangunan Malaysia Berhad (BPMB); atau

(ii) Jaminan Syarikat Kewangan; atau

(iii) Jaminan Insurans/Takaful atau

(iv) Wang Jaminan Pelaksanaan yang dikenakan potongan sebanyak sepuloh patus (10%) daripada setiap bayaran interim sehingga mencapai jumlah lima peratus (5%) Jumlah Harga Kontrak.

Tarikh milik tapak bina, seperti yang disebutkan dalam Syarat-syarat Kontrak, ialah pada 3 Jun 2008. Walau bagaimanapun, tuan hanya boleh memulakan kerja setelah tuan menyerahkan kepada Pegawai Penguasa perkara-perkara berikut: 4

Polisi Insurans Tanggungan Awam (iaitu insurans terhadap bencana kepada orang-orang dan kerosakan kepada harta nilai insurans tidak kurang daripada RM2,000,000.00.

Polisi Insurans Kerja RM60, 500.000.

Nombor-nombor pendaftaran dibawah Skim Keselamatan Sosial Pekerja (PERKESO). [5] Amongst the conditions stated in the LOA are these: the contract price was RM 60.5 million; the contract period was 24 months; the date of possession of the site was 03.06.2008 and the date of completion of the said Project was on 02.06.2010. [6] The 1st Defendant had delivered possession of the site to the Plaintiff on 03.06.2008, in order that preliminary works could be commenced according to schedule. [7] By a letter dated 23.07.2008, MINDEF had issued a letter to the Plaintiff which revoked the LOA in the following terms: “2. Adalah dimaklumkan bahawa Kementerian ini memutuskan untuk membatalkan Surat Setuju Terima Tender (LOA) yang telah dikemukakan kepada Y. Bhg Dato’ mengenai projek pembangunan di atas berdasarkan kepada fakta-fakta berikut:

2.1 Syarikat Y.Bhg. Dato’ gagal mematuhi syarat untuk mendatangani dan mengembalikan Surat Setuju Terima (LOA) dalam tempoh tujuh (7) hari seperti yang dinyatakan pada para 8 kepada surat LOA berkenaan.

2.2 Syarikat Y.Bhg. Dato’ gagal mematuhi syarat yang ditetapkan pada para 6 dalam surat LOA iaitu 5 memulakan kerja dalam tempoh 2 minggu dari tarikh milik tapak yang telah dibuat pada 2 Jun 2008”. [8] In summary, the Defendants had revoked the LOA for the following reasons:

that the Plaintiff had failed to sign and return the LOA within 7 days from the date of the LOA , as required under para. 8 of the LOA, and

(ii) that the Plaintiff had failed to start work within two weeks from the date of possession of the site on 02.06.2008, as stipulated by para. 6 of the LOA. [9] The Plaintiff brought an action against the Defendants for a declaration that the revocation of the LOA was unlawful and damages for losses incurred in commencement of preliminary works on the said Project as well as future loss of profits. Issues before the High Court [10] The issues before the High Court may be summarised as follows:

Whether the revocation of the LOA by the1st Defendant was valid?

If the answer to the above is in the affirmative, whether the Plaintiff is entitled to the compensation sought? Decision of the High Court [11] The learned JC had allowed the Plaintiff’s claim for a declaration that the Defendant’s revocation of the LOA was invalid and awarded the 6 Plaintiff nominal damages of RM10, 000 for losses in respect of preliminary works as well as loss of future profit of RM1.2 million, which was calculated on the basis of 20% of the contract price of RM 60.5 million. [12] The grounds relied on by the learned JC are as follows:

The failure of the Plaintiff to comply with para. 8 of the LOA which requires the Plaintiff to sign and return the signed copy of the LOA to the Defendant is not a ground for revocation of the LOA by the Defendant. There is no express stipulation that a failure to comply with the terms of the LOA would entitle the Defendant to revoke the LOA.

The Plaintiff had already commenced preliminary works on the project site, in that earthworks and surveys had been conducted by the Plaintiff. Since para. 6 of the LOA does not define what amounts to “preliminary works”, the abovementioned works by the Plaintiffs can be construed as “preliminary works” in accordance with para. 6 of the LOA.

In the alternative, even if the Plaintiff had failed to commence preliminary works according to the stipulated time, the Defendants had by their subsequent conduct during the course of Coordination Meetings between the parties on 3.06.2008 and 13.06.2008, waived the requirement that the works on the site be commenced two weeks from the date possession of site was delivered to the Plaintiff.

In the absence of a written contract between the parties, the terms of the contract including clause 51 (b) (i) cannot be used 7 by the Defendants to revoke the LOA. Thus the Defendants’ termination of the LOA was unlawful.

Since the LOA was unlawfully terminated, the Plaintiff was entitled to nominal damages of RM30, 000 for losses incurred in undertaking “preliminary works” on the said Project as well as RM1.2 million for future loss of profits, calculated as 20% of the contract price of RM60.5 million. Plaintiffs/Respondents’ Submissions [13] The LOA was an acceptance by the Defendants to the offer made by the Plaintiffs through a direct negotiation tender. Thus there was already a subsisting binding contract between the parties that is legally enforceable. This is clearly stated in the said LOA as follows: “Dengan ini adalah diberitahu bahawa Tender tuan bagi kerja-kerja tersebut diatas berharga RM60, 500.00 (Ringgit Malaysia: ENAM PULUH JUTA LIMA RATUS RIBU SAHAJA) telah dipersetujui, tertakluk kepada had, syarat dan perjanjian dalam Dokumen Tender yang menjadi asas Tender ini dan juga kepada surat ini. Tuan akan dikehendaki melaksanakan Perjanjian Kontrak yang formal dalam sedikit masa lagi. Bagaimanapun, sehinggalah Perjanjian Kontrak yang formal dilaksanakan, Tender Tuan berserta Surat Setuju Terima Tender ini akan menjadi kontrak yang sah mengikat diantara tuan dan Kerajaan”. [14] Since the Defendants had accepted the offer of the Plaintiff and the acceptance had already been communicated to the Plaintiff, the Defendants cannot unilaterally revoke the acceptance. 8 In support of the above reference is made to Section 5 of the Contracts Act, 1950 which provides as follows: 5(1) A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards.

An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards. Thus the revocation of the LOA by the Defendants by a letter to the Plaintiff dated 23.07.2008 was invalid. [15] The Defendant’s reason for revoking the acceptance viz. the failure of the Plaintiff to comply with para. 8 of the LOA to sign and return the signed document within 7 days of the date of the letter, is unsustainable. The stipulation in para. 8 abovementioned was for the purpose of acknowledgment of receipt of the LOA. It was not a pre-condition to the establishment of a contract between the parties. [16] The said Project was executed through a direct negotiation tender where matters were discussed and finalised prior to the issuance of the said LOA. Acceptance was made by MINDEF with the issuance of the said LOA to the Plaintiff dated 22.06.2008. The said acceptance established a binding contract between the Plaintiffs and the Defendants. [17] The second reason given by the Defendant for revoking the acceptance is because the Plaintiff had failed to commence works on the site within two weeks from the date of the possession of the site on 02.06.2008, as required by para 6 of the said LOA which provides as follows: 9 “Kegagalan tuan memulakan kerja dalam tempoh dua (2) minggu dari tarikh milik tapak akan mengakibatkan pengambilan kerja tuan di bawah kontrak ditamatkan sejajar dengan Fasal 51(b) (i) Syarat-Syarat Kontrak.” According to the abovementioned clause the requirement to commence work was in relation to the determination of the Plaintiff’s employment under Clause 51 (b) (i) of the Syarat-Syarat Kontrak but not as a reason to revoke acceptance of the said LOA. [18] In any event, there is evidence that the Plaintiff had commenced works on the site within two weeks of possession of the site.

PW1 confirmed that the Plaintiff had started site survey works on 22.05.2008 which was completed on 08.06.2008. Site clearing and ground levelling works started on 10.06.2008 and was completed on 10.07.2008.

(ii) PW1 and PW2 had attended the Coordination Meeting on 13.06.2008 and the Chairman had been informed of the commencement of works. The Chairman had instructed that works be continued and documents to be submitted earlier so that the said Project would not be delayed.

(iii) The Plaintiffs had submitted survey plans and Monthly Progress Report No.1 as exhibits to support the Plaintiff’s contention that the Plaintiff had commenced works on the site. [19] The evidences of PW1, PW2 and PW3 were not challenged or refuted by the Defendants, thus must be accepted as true. (Refer to Wong Swee Chin v P.P. [1981] 1 MLJ 212; Aik Ming (M) Sdn Bhd v Chang Ching Chuan & Ors [1995] 2 MLJ 770; Soon Peng Yam & Anor v Bank of Tokyo-Mitsubishi (Malaysia) Bhd [2004] 2 MLJ 31.) 10 [20] The subsequent conduct of the Defendants in delivering possession of the site to the Plaintiffs on 03.06.2008, the attendance of the Defendant’s representative at the Coordination meeting on 13.06.2008 and instruction to the Plaintiff to continue with the works on the site in spite of the Plaintiff’s failure to sign and return the said LOA within 7 days was a clear waiver of the pre-condition, if any for the Plaintiff to sign and return the said LOA within the stipulated time. The Defendants are therefore estopped from an insistence on strict compliance of the preconditions of the said LOA, in particular para.8. Grounds of Appeal [21] The Defendant’s grounds of appeal may be summarised as follows. The learned JC had erred in granting a declaration to the Plaintiff that the revocation of the LOA was unlawful when the evidence was that the Plaintiff had failed to comply with the express terms of the LOA that mandated the Plaintiff to sign and return the said LOA within 7 days of the date of the LOA as required under para. 8 of the said LOA. [22] The learned JC had erred in his finding that in the absence of a written contract, the Defendants cannot use clause 51 (b) (i) of the Syarat-Syarat Kontrak to revoke the LOA. [23] The learned JC had erred in his finding that the Plaintiff had commenced preliminary works on the said Project and awarding nominal damages of RM10, 000 for losses incurred on the said preliminary works when there was no evidence of invoices or payment for preliminary works adduced by the Plaintiffs. 11 [24] The learned JC had erred in awarding compensation of RM 1.2 million for future loss of profits when the Plaintiff had failed to prove such losses. Decision of this Court [25] After careful consideration of learned counsels’ oral and written submissions as well as a perusal of the Appeal Records, we are of the unanimous view that there are merits in this appeal. Thus we allow this appeal with costs and set aside the decision of the learned JC. The reasons for our decision are set out below. [26] It is not disputed that the LOA upon which the Plaintiff places reliance is governed by the express terms and conditions of the LOA. This is stated in para. 2 which states (in Bahasa Melayu ) as follows:

Tuan akan dikehendaki melaksanakan Perjanjian Kontrak yang formal dalam sedikit masa lagi. Bagaimanapun, sehinggalah Perjanjian Kontrak yang formal dilaksanakan, Tender tuan beserta SST Tender ini akan menjadi kontrak yang sah yang mengikat diantara tuan dan Kerajaan." It is clear from the above that pending the execution of a formal Agreement, parties intend to nevertheless be bound by the terms of the LOA. [27] In addition, para. 8 of the LOA provides as follows: “Surat ini dihantar kepada tuan dalam dua (2) Salinan. Sila kembalikan Salinan asal, yang telah ditandatangani oleh tuan dan disaksikan dengan sempurna, di ruang yang berkenaan, ke pejabat ini dalam tempoh tujuh (7) hari dari tarikh surat ini.” 12 [28] The Defendant had issued the Plaintiff two notices of reminder – on 26.06.2008 and 8.07.2008 to comply with para. 8 abovementioned but to no avail. Thus, the failure of the Plaintiff to sign and return the signed LOA to the Defendant within 7 days as required by para.8 of the LOA is a breach of the LOA which entitles the Defendant to revoke the LOA. [29] In addition, the Plaintiff had also failed to commence works on the said project within two weeks of delivery of the site on 03.06.2008. Para. 4 of the LOA states as follows: “4. Tarikh milik tapak bina, seperti yang disebut dalam Syarat-Syarat Kontrak, ialah pada 3 Jun 2008. Walaubagaimanapun, tuan hanya boleh memulakan kerja setelah tuan menyerahkan kepada Pegawai Penguasa perkara-perkara berikut:

Polisi Insurans Tanggunan Awam (iaitu insurans terhadap bencana kepada orang-orang dan kerosakan kepada harta) nilai insurans tidak kurang daripada RM 2,000,000.00.

Polisi insurans Kerja RM 60,5000.00

Nombor-nombor pendaftaran dibawah Skim Keselamatan Sosial Pekerja ( PERKESO)”. [30] The failure to commence work at the appointed date is a breach of para. 6 of the LOA which states as follows: “Kegagalan tuan memulakan kerja dalam tempoh dua (2) minggu dari tarikh milik tapak akan mengaakibatkan pengambilan kerja tuan dibawah kontrak ditamatkan sejajar dengan Fasal 51 (b)(i) Syarat-Syarat Kontrak”. 13 [31] The terms stipulated in the LOA, in particular in paras.4, 6 and 8 of the LOA are in the nature of conditions precedent, the non-fulfilment of which will negative the existence of a binding contract between the parties. Thus, the Defendants were entitled to revoke the LOA. (Refer to Malayan Flour Mills Bhd v Saw Eng Chee (the administrator of the estate of Saw Cheng Chor, the deceased) & Anor [2001] 3 MLJ 69; Chase Perdana Bhd v Md Afendi bin Hamdan [2000] 9 MLJ 783). [32] We note that it was expressly stated in para.2 of the LOA that pending the execution of a formal agreement between the parties, the terms of the LOA would nevertheless be binding. [33] We are therefore of the view that the learned JC had erred in his finding that the acceptance of the LOA by the Plaintiff did not allow the Defendants to terminate the LOA. In addition, we are of the opinion that the signing and return of the LOA as stipulated by para. 8 of the LOA was essential to conclude a binding contract. [34] In respect of the contention of the Plaintiff that the subsequent conduct of the Defendants during the course of the Coordination meetings between the parties can be construed as a waiver for compliance of the conditions precedent in the LOA, we are of the view that since the issue of waiver was not pleaded in the Plaintiff’s claim, it cannot now be raised for our consideration. [35] In respect of the Plaintiff’s claim for damages, we find no credible evidence adduced by the Plaintiff to support the contention that the Plaintiff had incurred expenses in undertaking earthworks and survey works which the Plaintiff submits are “preliminary works” on the said Project. 14 [36] SP1 in his evidence had admitted that there were no preliminary works undertaken on the site. There were no site diaries on the works and no information as to the number of workers on the Project sites. The documents tendered by the Plaintiff entitled, “LAPORAN KEMAJUAN BULANAN NO 1 (BAGI TEMPOH HINGGA 13/07/2008) at pgs. 100-104 of Rekod Rayuan Jil. 2 (1) were unsigned in the columns designated for preparation and verification of abovementioned report. Neither was a witness who had prepared the abovementioned report called to give evidence on the report .It is trite that the burden of proof lies on the Plaintiff to prove its claim. (Refer to sections 101 and 103 of the Evidence Act, 1950) [37] In addition, the survey plans were dated after the date of the revocation of the LOA and are clearly an “afterthought”. There were no invoices or receipt of payments in respect of the alleged “preliminary works”. What was adduced was merely a quotation for earthworks at the Project site by Enrich Frontier Sdn Bhd dated 2.6.2008. (Refer to Rekod Rayuan Jil 2 (1) at p. 90) [38] In any event, para. 4 of the LOA had stipulated that the Plaintiff could only commence works on the site after obtaining and presenting specified insurance policies and registration numbers under the PERKESO workers social security scheme. It is not disputed that the Plaintiff had not adduced any evidence that the abovementioned conditions had been complied with. [39] It is trite and settled law that a plaintiff who brings an action to recover damages must discharge the burden of proving both the fact of damage and the amount of damage. (See Delpuri-Harl Corp JV Sdn Bhd v Perbadanan Kemajuan Negeri Selangor [2014] 1 LNS 1075). Thus the 15 learned JC’s award of RM 10,000 to the Plaintiff as nominal damages for preliminary works on the project is clearly unsustainable. [40] The award of RM1.2 million for future loss of profits to the Plaintiff is also unsustainable in law. The amount was derived by calculating 20% of the contract price of RM60.5 million as the loss of future profits. Since the Plaintiff had failed to adduce evidence that preliminary works had even commenced, there is no basis for the assertion of a future loss of profits. It is not sufficient to merely submit a projected loss of profits. (Refer to Bekalan Sains P & C Sdn Bhd v Bank Bumiputra Malaysia [2011] 5 MLJ 1; Prai Power Sdn Bhd v Malayawata Steel Bhd [2013] 1 LNS 1530). [41] In conclusion, we find merits in this appeal. We therefore allow this appeal with costs of RM20, 000 to the Appellants. We set aside the decision of the learned JC both on liability as well as damages. 20 DECEMBER 2017 Signed DATUK DR BADARIAH SAHAMID, JUDGE, COURT OF APPEAL, PUTRAJAYA. 16 COUNSEL/SOLICITORS: FOR THE APPELLANT: Ahmad Terrirudin bin Mohd Salleh Peguam Kanan Persekutuan Jabatan Peguam Negara Malaysia No. 45, Persiaran Perdana Presint 4 62100 PUTRAJAYA Cynthia Noor Haizean binti Sulaiman Peguam Persekutuan Jabatan Peguam Negara Malaysia No. 45, Persiaran Perdana Presint 4 62100 PUTRAJAYA FOR THE RESPONDENT: Zamri bin Ibrahim Tetuan Zamri Ibrahim & Co Peguam Bela dan Peguam Cara No. 33, Jalan Sena Indah Persiaran Jubli Emas 01000 Kangar PERLIS