Koperasi Permodalan Felda Malaysia Berhad v Icon City Development Sdn Bhd (W-02(NCvC)(W)-2606-12/2018)

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1 DALAM MAHKAMAH RAYUAN MALAYSIA (BIDANG KUASA RAYUAN) RAYUAN SIVIL NO. W-02(NCvC)(W)-2606-12/2018 ANTARA KOPERASI PERMODALAN FELDA MALAYSIA BERHAD (Koop Negara No. 39) … PERAYU

Subsection

(2) The court in Henderson separated the four non-exhaustive identifiable errors of a trial judge from the plainly wrong test: (i) a material error of law; (ii) a critical finding of fact which has no basis in the evidence; (iii) demonstrable misunderstanding of relevant evidence; and (iv) a demonstrable failure to consider relevant evidence. The phrase 'lack of judicial appreciation of evidence' used in Gan Yook Chin & Anor v. Lee Ing Chin & Ors could very well encompass three out of four errors of a trial judge identifiable in Henderson. Whilst there was a slight difference in the approach of the appellate intervention, both the UK Supreme Court and the Federal Court effectively shared a common thread where it had been held that appellate intervention was justified where there is lack of judicial appreciation of evidence. What is pertinent is that the 'plainly wrong' test is not intended to be used by an appellate court as a means to substitute its own decision for that of the trial court on the facts. (paras 54, 72, 74 & 76)

Subsection

(3) An appellate court should not interfere with the factual findings of a trial judge unless it was satisfied that the decision of the trial judge was 'plainly wrong' where in arriving at the decision it could not reasonably be explained or justified and so was one which no reasonable judge could have reached. …

Subsection

(4) … (9) …

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(10) Henderson was not setting any guidelines to the plainly wrong test. It merely provided a construction as to what amounts to the 'plainly wrong' test in an appellate intervention. Rather than adopting a rigid set of rules to demarcate the boundaries of appellate intervention insofar as findings of fact are concerned, the 'plainly wrong' test should be retained as a flexible guide for appellate courts. …” (Emphasis Added)

Schedule

Schedule A hereto or the extended date, as the case may be, to the actual date of delivery of vacant possession of the said Parcel to the Purchaser. 13.1.3 For the avoidance of doubt, any cause of action to claim liquidated damages by the Purchaser under this clause shall accrue on the date the Purchaser takes vacant possession of the said Parcel. 13.2 Manner of vacant possession 13.2.1 Upon issuance of a certificate by the Developer's architect certifying that the construction of the Said Parcel has been duly competed and the Purchaser having paid all monies payable under this Agreement and having performed and observed all terms and conditions on the Purchaser's part under this Agreement, the Developer shall let the Purchaser into possession of the said Parcel PROVIDED ALWAYS THAT such possession shall not give the Purchaser the right to occupy and the Purchaser shall not occupy the said Parcel or to make any alterations additions or otherwise to the said Parcel until such time as the Certificate of Completion and Compliance for the said Parcel is issued. 13.2.2 Upon the expiry of fourteen (14) days from the date of notice from the Developer requesting the Purchaser to take possession of the said Parcel whether or not the Purchaser has actually entered into possession or occupation of the said Parcel, the Purchaser shall be deemed to have taken delivery of vacant possession of the said Parcel and the Developer shall thereafter not be liable for any loss and/or damage to the said Parcel or to the fixtures and fittings therein." (Emphasis Added) WHETHER THE 2ND RESPONDENT’S ARCHITECT’S LETTERS ARE VALID EXTENSIONS OF TIME UNDER THE SPAs? 24. Clause 13.1.1 of the SPAs states that the 1st Respondent must deliver vacant possession of the said Properties within 36 months from the date of the Period Approval or the Extended Period Approval ("Specified Period"). The exception to this general rule in the SPAs is that, if in the opinion of the Architect, delivery of vacant possession of the said Properties is delayed by reason of exceptional causes as stated in clause 13.1.1, then, the Architect shall grant a fair and reasonable extension of time in favour of the 1st Respondent. 25. Clause 13.1.2 of the SPAs further states that in the event that the 1st Respondent fails to deliver vacant possession of the said Properties within the Specified Period (or the extended time allowed by the Architect), the 1st Respondent shall pay to the Appellant, liquidated damages at the rate of 10% of the Purchase Price per annum on daily rests pursuant to the SPAs. These liquidated damages would start from the Specified Period to the actual date of delivery of vacant possession of the said Properties to the Appellant. 26. Further, according to Clause 25.1 of the SPAs, the 1st Respondent shall be responsible for connecting and applying for connection of utilities and services which serves the said Properties (water, electricity, sewerage, telephone, as piping, sanitary, cooling ducts and so on)', at its own cost and expense. 27. It is undisputed that the Specified Period in the SPAs ends on 4.6.2015. The 1st Respondent's contention is that there were extensions of time granted by the Architect pursuant to Clause 13.1.1 of the SPAs by way of the Architect’s Letters which extended the time for the 1st Respondent to deliver vacant possession until 15.1.2016. 28. We are of the considered opinion that the learned High Court Judge had erred in construing the Architect's Letters as extensions of time under the SPAs when it is clear from an interpretation of the Architect's Letters when they are not, on the following grounds:- (a) The Architect's Letters make no mention of the SPAs and specifically Clause 13.1.1 of the SPAs which the 1st Respondent relies heavily upon; (b) The Architect's Letters do not state that in the opinion of the Architect, the events in the said letters were events beyond the Developer's control or events which fall within any of the grounds in Clause 13.1.1 or were force majeure events; and (c) The Architect's Letters do not state any opinion at all and merely state that there would be delays in the completion of the construction works. 29. As such, we are of the opinion that the Architect's Letters do not qualify as valid Certificates of Extension of Time which would justify the 1st Respondent’s delay in delivering the vacant possession of the said Properties to the Appellant. 30. We also find that the 1st Respondent’s claims that the breaches by their Main Contractor, Sara-Timur Sdn. Bhd. and its application for restructuring pursuant to section 176 of the Companies Act 1965 were events beyond its control to which it was entitled to extensions of time, has no merits. The breaches caused by the Main Contractor's restructuring exercise were not force majeure events and were not beyond the 1st Respondent's control in the said Project under Clause 13.1.1 of the SPAs. 31. In Araprop Development Sdn Bhd v Leong Chee Kong & Anor [2008] 1 CLJ 135 , the Court of Appeal inter alia held that delay caused by the sub-contractor was not a circumstance beyond the vendor's control. "[29] Going through the evidence and as pleaded by the appellant itself, the delay was caused by laying the electrical and telephone cable late. I agree with the conclusion of the learned trial judge that the delay as pleaded is not a delay as stipulated by cl. 22 of the S&P. The delay in the present appeal was by the appellant's sub-contractors who were under the control of the appellant. The S&P clearly provides for a completion date and I believe this is also true in the sub contracts with TNB and Maxis. The appellant could terminate the sub-contracts when it became obvious that the sub-contractors could not complete the works within the stipulated time. As it was the appellant did nothing and now uses cl. 22 of the S&P as an excuse for the delay. [30] For the reasons stated above, I agree with the learned trial judge that the delay was not a delay within the exclusion cl. 22 of the S&P." (Emphasis Added) 32. The Court of Appeal in the above case clearly showed that contractors are under the control of their employers, and the employer such as the 1st Respondent cannot utilise their contractor's breaches or defaults, to gain extension of time. WHEN WAS VACANT POSSESSION OF THE SAID PROPERTIES DELIVERED TO THE APPELLANT? 33. On 30.12.2015, the 1st Respondent issued a letter bearing the same date, informing the Appellant that the said Properties are ready for delivery of vacant possession, enclosing a Certificate of Completion from the Architect and that the requirements for vacant possession under Clause 13.2.1 of the SPAs have been met. 34. Pursuant to clause 13.2.2 of the SPAs, the Appellant would be deemed to have taken the possession of the said Properties within 14 days from the date of the letter, which would be 13.1.2016. 35. We further find that the learned High Court Judge should not have interpreted the SPAs in such a manner that combined the 2 separate and distinct events into a single event when they are not. There is no statutory prohibition against the segregation of these 2 events. The Appellant and the Respondent have voluntarily entered into the SPAs and parties have conducted their affairs in accordance with the terms and conditions of the SPAs. The sanctity of the contract entered between parties should be preserved. 36. We are of the considered view that the granting of "vacant possession” of the said Properties without the right to occupation is nothing novel as even in the sale of "housing accommodation", the previous Schedule H of the Housing Development (Control and Licensing) Regulations 1989 (before the amendments vide PU(A) 106/15 which came into force on 1/2/2011 included a clause for vacant possession without according a right to occupation in Clause 27(3) of the statutory Sale and Purchase Agreement as follows:- "(3) Such possession shall not give the Purchaser the right to occupy and the Purchaser shall not occupy the said Parcel until such time as the Certificate of Fitness for Occupation for the said Building is issued." 37. Our considered view is that there is merit in that the Appellant’s contention that Clause 13 of the SPAs merely requires the Appellant to physically complete works and provide a certificate of practical completion by the Architect as sufficient to provide vacant possession and that it would matter not, if the said Properties was not connected with the Essential Utilities. WHETHER THE RESPONDENT NEEDED TO PROVE DAMAGES? 38. The Appellant contended that the learned High Court Judge erred in holding that the Appellant failed to prove damages. 39. Whether the damage is quantifiable or otherwise, the court has to adopt a common sense approach by taking into account the genuine interest which an innocent party may have and the proportionality of a damages clause in determining reasonable compensation. 23 40. Section 75 of the Contracts Act, 1950 provides that reasonable compensation must not exceed the amount so named in the contract. Consequently, the impugned clause that the innocent party seeks to uphold would function as a cap on the maximum recoverable amount. 41. Guidance can be found in the Federal Court’s decision in Cubic Electronics Sdn Bhd (in liquidation) v Mars Telecommunications Sdn Bhd [2019] 2 CLJ 723, where Richard Malanjum (CJ (Sabah & Sarawak) (as he then was”) held inter alia as follows: “[70] We turn now to the issue on burden of proof. The initial onus lies on the party seeking to enforce a clause under s. 75 of the Act to adduce evidence that firstly, there was a breach of contract and that secondly, the contract contains a clause specifying a sum to be paid upon breach. Once these two elements have been established, the innocent party is entitled to receive a sum not exceeding the amount stipulated in the contract irrespective of whether actual damage or loss is proven, subject always to the defaulting party proving the unreasonableness of the damages clause including the sum stated therein, if any. [71] If there is a dispute as to what constitutes reasonable compensation, the burden of proof falls on the defaulting party to show that the damages clause is unreasonable or to demonstrate from available evidence and under such circumstances what comprises reasonable compensation caused by the breach of contract. Failing to discharge that burden, or in the absence of cogent evidence suggesting exorbitance or unconscionability of the agreed damages clause, the parties who have equality of opportunity for understanding and insisting upon their rights must be taken to have freely, deliberately and mutually consented to the contractual clause seeking to pre-allocate damages and hence the compensation stipulated in the contract ought to be upheld. [72] It bears repeating that the court should be slow to refuse to give effect to a damages clause for contracts which are the result of thorough negotiations made at arm's length between parties who have been properly advised. … [73] At any rate, to insist that the innocent party bears the burden of proof to show that an impugned clause is not excessive would undermine the purpose of having a damages clause in a contract, which is to promote business efficacy and minimise litigation between the parties (see: Scottish Law Commission, Discussion Paper on Penalty Clauses (Discussion Paper No 103), December 1997, paras. [5.30]-[5.40]). [74] In summary and for convenience, the principles that may be distilled from hereinabove are these: (i) If there is a breach of contract, any money paid in advance of performance and as part-payment of the contract price is generally recoverable by the payer. But a deposit paid which is not merely part-payment but also as a guarantee of performance is generally not recoverable. (ii) Whether a payment is part-payment of the price or a deposit is a question of interpretation that turns on the facts of a case, and the usual principles of interpretation apply. Once it has been ascertained that a payment possesses the dual characteristics of earnest money and part-payment, it is a deposit. (iii) A deposit is subject to s. 75 of the Act. (iv) In determining what amounts to "reasonable compensation" under s. 75 of the Act, the concepts of "legitimate interest" and "proportionality" as enunciated in Cavendish (supra) are relevant. (v) A sum payable on breach of contract will be held to be unreasonable compensation if it is extravagant and unconscionable in amount in comparison with the highest conceivable loss which could possibly flow from the breach. In the absence of proper justification, there should not be a significant difference between the level of damages spelt out in the contract and the level of loss or damage which is likely to be suffered by the innocent party. (vi) Section 75 of the Act allows reasonable compensation to be awarded by the court irrespective of whether actual loss or damage is proven. Thus, proof of actual loss is not the sole conclusive determinant of reasonable compensation although evidence of that may be a useful starting point. (vii) The initial onus lies on the party seeking to enforce a damages clause under s. 75 of the Act to adduce evidence that firstly, there was a breach of contract and that secondly, the contract contains a clause specifying a sum to be paid upon breach. Once these two elements have been established, the innocent party is entitled to receive a sum not exceeding the amount stipulated in the contract irrespective of whether actual damage or loss is proven subject always to the defaulting party proving the unreasonableness of the damages clause including the sum stated therein, if any. (viii) If there is a dispute as to what constitutes reasonable compensation, the burden of proof falls on the defaulting party to show that the damages clause including the sum stated therein is unreasonable.” (Emphasis Added) 42. From the evidence adduced, we are of the view that the Appellant has successfully discharged its burden of proof, firstly, that was a breach of contract and that secondly, the SPAs contained a clause specifying a sum to be paid upon breach which is clause 13.1.2 of the SPAs read with Section 7 of

Schedule

Schedule A of the SPAs. See: Cubic Electronics Sdn Bhd (in liquidation) v Mars Telecommunications Sdn Bhd [2019] 2 CLJ 723. 43. In the present case, under the SPAs, the agreed rate of LAD is 10% per annum of the purchase price of the said Properties Office, which is similar to the rate of liquidated damages awarded in statutorily prescribed sale and purchase agreements such as

Schedule

Schedule G or H of the Housing Development Amendment Act 2012. Thus, we are of the view that such a rate of LAD is fair and reasonable. THE CONSPIRACY CLAIM 44. The Appellant then brought an action for declaration that the extension of time is invalid, Liquidated Damages ("LAD") for late delivery, and damages for purported late issuance of CCC to be paid by the 1st Respondent and/ or 2nd Respondent jointly and/ or severally. 45. In SCK Group Bhd & Anor v Sunny Liew Siew Pang & Anor [20111 4 MLJ 393, the Court of Appeal held that the standard of proof for conspiracy is very high and it means beyond reasonable doubt. The Plaintiff must establish the following to succeed in their claim for conspiracy:- “The tort of conspiracy is not constituted by the conspiratorial agreement alone. For conspiracy to take place, there must also be an unlawful object, or, if not in itself unlawful, it must be brought about by unlawful means: see Davies v Thomas [1920] 2 Ch 189 per Warrington LJ, and Seah Siang Mong v Ong Ban Chai & Another Case [1998] 1 CLJ Supp 295 (HC) per Ghazali J (now FCJ). There must be a co-existence of an agreement with an overt act causing damage to the plaintiffs. Hence, this tort is complete only if the agreement is carried into effect, thereby causing damage to the plaintiffs. In order to succeed in a claim based on the tort of conspiracy, the plaintiffs must establish: (a) an agreement between two or more persons; (b) for the purpose of injuring the plaintiff,' and (c) acts done in the execution of that agreement resulted in damage to the plaintiff: Marrinan v Vibart [1962] 1 All ER 869 at p 871 per Salmon J; and Halsbury's Laws of England (4th Ed) Vol 45 at p 271, as applied by Ghazali J (now FCJ) in Seah Siang Mong." 46. We noted that the "overt act" in furtherance of conspiracy pleaded at Paragraph 36 of the Statement of Claim is that the 2nd Respondent had issued the extension of time of the said Project in favour of the 1st Respondent. We are of the considered view that by merely granting the extension of time to the 1st Respondent, the 2nd Respondent was merely carrying out his contractual duty. The performance of the contractual duty of 2nd Respondent as the project Architect cannot amount to an overt act in furtherance of a conspiracy. Thus, we find that this contention has no merit. 28 47. Further, there is no credible evidence adduced by the Appellant to prove there was a conspiracy between the 1st and 2nd Respondents to injure the Appellant. The only evidence adduced by the Appellant to support their case for conspiracy are the letters between the Appellant, 1st Respondent and 2nd Respondent. However, such letters are insufficient to prove the tort of conspiracy at all. 48. In this regard, we are in agreement with the learned High Court Judge that the Appellant has failed to prove the essential elements of the tort of conspiracy against the Respondents. OUR DECISION 49. We are of the considered opinion that the learned High Court Judge made errors which warranted appellate intervention in the Appellant’s appeal. More often than not, an appellate court will not reverse a trial court's findings of facts unless that finding was 'plainly wrong'. 50. In the light of our above findings, we unanimously allow the Appellant’s appeal in part. 51. In the premises, we grant the following orders:- (a) The Appellant’s appeal against the 1st Respondent is allowed in part:- (i) The 1st Respondent is to pay the Appellant, the sum of RM3,710,465.75 as LAD for delay in delivery of vacant possession calculated from 5.6.2015 until 30.12.2015; (ii) The 1st Respondent shall pay interest on the sum of RM3,710,465.75 at the rate of 5% per annum from 22.11.2018 (date of the Judgment of the High Court) until full and final payment. (b) Cost here and below in the sum of RM30,000.00 to be paid by the 1st Respondent to the Appellant subject to allocator; (c) The appeal against the 2nd Respondent is dismissed; and (d) The Appellant shall pay cost of RM10,000.00 to the 2nd Respondent subject to allocator. 52. The decision of the learned High Court Judge of 18.7. 2018 is varied accordingly. Dated this 3rd day of January, 2023 -SGD-LEE HENG CHEONG JUDGE COURT OF APPEAL Appellant’s Counsels : Mr. Joshua Chong Wan Ken (together with Ms. Khor Yongshi and Mr. Chan Jia Her) Messrs. Raja Darryl & Loh 1st Respondent’s Counsels: Mr. Justin Voon Tiam Yu, (together with Ms. Lee Chooi Peng and Ms. Lim Xin Yi Messrs. Justin Voon Chooi & Wing 2nd Respondent’s Counsels: Mr. Edwin Lim Hock Lee and Ms. Ng Sim Hong Messrs. Edwin Lim & Suren