Malayan Banking Berhad v 1. ) Ho Hup Construction Company Berhad (WA-22NCC-112-03/2019)

HO HUP CONSTRUCTION COMPANY BERHAD (No. Syarikat: 14034-W)

SENI KENANGA SDN BHD (No. Syarikat: 377814-A)

HJ SAID BINAAN SDN BHD (IN LIQUIDATION) (No. Syarikat: 40750-K) … DEFENDAN-DEFENDAN GROUNDS OF JUDGMENT A. Introduction [1] The plaintiff filed this action to seek the payment of proceeds of a contract between the 1st defendant and the 2nd and 3rd defendants, which ! ! the plaintiff claimed are due to be paid to it, pursuant to banking facilities it granted to the 3rd defendant. The plaintiff claimed that the proceeds have been absolutely assigned to it by the 2nd and 3rd defendants, giving rise to the obligation on the part of the 1st defendant to pay the proceeds into an account designated by the parties. [2] The 1st defendant filed a counterclaim against the plaintiff and the 2nd and 3rd defendants, seeking a declaration that the plaintiff’s claim against it has been extinguished by liquidated and ascertained damages (“LAD”) and back charges due from the 2nd and 3rd defendants. The 1st defendant also claimed the LAD and back charges against the 2nd and 3rd defendants. [3] After a full trial, the court substantially allowed the plaintiff’s claim, and dismissed the 1st defendant’s counterclaim. These are the grounds of the court’s decision. B. Background Facts The Project [4] By an agreement dated 7 April 2014 (“JVA”), the 2nd and 3rd defendants formed a joint venture known as Hj Said Binaan Sdn Bhd - Seni Kenanga Sdn Bhd JV (“JV”). [5] The JV was awarded a contract by the 1st defendant (“Contract”) to build commercial and office blocks at Bandar Bukit Jalil (“Project”). Works under the Contract were carried out by the 2nd and 3rd defendants. ! ! The Banking Facilities [6] To facilitate the implementation of works under the Contract, the 3rd defendant obtained banking facilities of up to a total of RM33,000,000 (“Banking Facilities”) from the plaintiff. The Banking Facilities were granted by way of a letter of offer dated 30 July 2014. [7]

Absolute Assignment In consideration of the Lender having agreed at the request of the Assignor to make available to Hj Said the Facility upon the terms and conditions contained in the Facility Agreement, the Assignor as beneficial owner hereby assigns absolutely to the Lender all its rights, title and interest in and under the Contract including the Contract Proceeds (as defined in the Facility Agreement) free from all Security Interest (as defined in the Facility) to secure repayment of the Secured Amounts …” (emphasis added) ! ! b. The NACI, which is an express notice in writing given to the 1st defendant, the person from whom the assignors (the 2nd and 3rd defendants) would have been entitled to receive the Proceeds. The NACI, issued by the JV to the 1st defendant, reads: “We hereby give you notice that:-

by a deed of assignment dated 25 SEP 2014 (“the Assignment”) made between ourselves and MALAYAN BANKING BERHAD (“the Assignee”), we have assigned absolutely to the Assignee all our present and future rights, title and interests in and to all sums of moneys due and payable to us under or arising from the Contract referred to above ("the Proceeds");” (emphasis added) [31] From the above documents, it is clear that an absolute assignment under section 4(3) of the CLA had been created, as the Deed of Assignment is a valid legal assignment in writing under the hands of the 2nd and 3rd defendants as assignors. Further, by the NACI, express notice of the assignment has been given by the 2nd and 3rd defendants to the debtor, the 1st defendant. ! ! [32] The 1st defendant argued that only an equitable assignment was created by the parties, and as such, the plaintiff does not have the right to sue the 1st defendant in its own name. Instead, the plaintiff must step into the shoes of the 2nd and 3rd defendants, and sue in their names under the Deed of Assignment and the Power of Attorney. [33] However, it is clear from the instruments creating the assignment, that an absolute assignment was intended to be created by the parties. The use of the words “assigns absolutely” in the Deed of Assignment and the NACI reflects the parties’ intention to regard the assignment as an absolute assignment (and not purporting to be by way of charge only)

…

you are hereby authorised and instructed to remit the Proceeds dírect to the Assignee at its branch office at 66, Jalan USJ 10/1B, UEP Subang Jaya, 47620 Subang Jaya, Selangor for the credit of the account of ‘Maybank-Hj Said Binaan Sdn. Bhd. - SENI KENANGA SDN. BHD. JV', Account No. 512482456019 as and when such Proceeds shalt become due and payable under the provisions of the Contract; …” (emphasis added) [39] The operational implementation of the financing process involves the issuance of payment certificates by the 1st defendant, certifying the works done by and the amount of the Proceeds due to the 2nd and 3rd defendants. The 2nd and 3rd defendants will then provide the payment certificates to the plaintiff, and upon confirmation from the 1st defendant, the plaintiff releases financing to the 3rd defendant. The 1st defendant is then required to make payments towards the payment certificates, into the Designated Account. [40] PC 41 and PC 42 were submitted to the plaintiff sometime in May and June 2017. Upon receipt of PC 41 and PC 42, the plaintiff had duly confirmed with the 1st defendant’s representative, Victoria Loui Hoong Mei (“DW2”) that: ! ! a. PC 41 and PC 42 were genuine, and issued by the 1st defendant; b. The works done as stated in PC 41 and PC 42 had been certified by the 1st defendant; c. No payment had been made in respect of PC 41 and PC 42 to the 2nd defendant or 3rd defendant, or any third party; and d. The amounts stated in PC 41 and PC 42 were correct, and were due and payable by the 1st defendant. [41] The 1st defendant argued that it is not obliged to pay towards PC 41 and PC 42 because: a. The NACI is not binding on the 1st defendant; and b. The 3rd defendant was terminated from the Contract, and LAD and back charges were due under PC 41 and PC 42. [42] For the reasons explained below, I am unable to agree with the 1st defendant’s argument. Is the NACI binding on the 1st defendant? [43] The NACI was acknowledged by the 1st defendant, and the 1st defendant agreed to comply with the terms and instructions contained in ! ! the NACI. On this basis, the court found that the 1st defendant is bound by the NACI. [44] The 1st defendant raised two points in contending that the NACI does not bind it. The first point is that the Banking Facilities were granted to the 3rd defendant, and the 1st and 2nd defendants are not privy to the facilities. I found this argument to be baseless as third parties are allowed to provide security for financing facilities, and in this case, the third parties, the 1st and 2nd defendants, received benefits from the facilities. [45] The second point raised is that the plaintiff is not a signatory to the NACI. I found this argument to be unsustainable, as the conditions of a valid assignment under section 4(3) of the CLA does not require an assignee to execute any document. [46] Further and in any event, the 1st defendant had remitted the Proceeds under earlier payment certificates into the Designated Account, in accordance with the NACI. [47] I am in this regard guided by Federal Court case of Boustead Trading (1985) Sdn Bhd v Arab-Malaysian Merchant Bank Bhd [1995] 3 MLJ 331 and the Court of Appeal cases of Yoong Sze Fatt v Pengkalen Securities Sdn Bhd [2010] 1 MLJ 85 and Ekuiti Setegap Sdn Bhd v Plaza 393 Management Corp (established under The Strata Titles Act 1985) [2018] 4 MLJ 284, involving defendants who had made payments pursuant to financing arrangements, without raising any complaints on the validity of the arrangements, or statements issued. The courts held that as the defendants had failed to raise complaints, protests ! ! or queries on the arrangements at the initial stage, the defendants were estopped from challenging the validity of the arrangements. [48] In the present case, the 1st defendant had remitted the Proceeds into the Designated Account, pursuant to earlier payment certificates issued. These payments were made by the 1st defendant in accordance with the NACI, and without any objection raised on the validity of the NACI. Having acted in accordance with the NACI without any objection, I am of the view that the 1st defendant is now estopped from denying the validity of the NACI. Was the 3rd defendant terminated from the Contract, and are LAD and back charges due under PC 41 and PC 42? [49] It cannot be disputed that payments in respect of PC 41 and PC 42 have not been made into the Designated Account. [50] The 1st defendant argued that it was not obliged to pay towards PC 41 and PC 42, in view of the following: a. The 3rd defendant was terminated from the Contract; and b. There are LAD and back charges due under PC 41 and PC 42. [51] I first considered the issue of termination of the JV by way of the Letter of Termination, which is dated 27 December 2017 and was sent by ! ! the 2nd defendant to the 3rd defendant. The Letter of Termination states as follows: “We put on record that you did not respond to our letter dated 3/11/2017 requesting you to put forward your Mitigation Plan to remedy the breach as alleged by Ho Hup Construction Company Berhad dated 1/11/2017. We hereby give you notice that we are terminating the Joint Venture Agreement dated 7/4/2014 and the Supplemental Agreement dated 2/10/2014 in that: -

You have willfully failed and/or neglected to observe your obligations under the provisions of the Joint

That you have failed to remedy such default within fourteen (14) working days after service of our letter dated 3/11/2017 to you; …” (emphasis added) [52] From the Letter of Termination, the JVA appears to have been terminated following the 3rd defendant’s failure to put forward its mitigation plan to remedy a breach which the 1st defendant alleged had occurred. The 2nd defendant claimed the 3rd defendant had wilfully failed and/or neglected to observe its obligations under the JVA. ! ! [53] There are two details I found peculiar in the termination of the JVA. First, there does not appear to have been any breach committed by the 3rd defendant which justified termination of the JVA. This is clear when I closely examined the details in the correspondences exchanged between the parties. [54] The Letter of Termination refers to two letters, a letter dated 3 November 2017 issued by the 2nd defendant to the 3rd defendant (“2nd Defendant’s Letter”), and a letter dated 1 November 2017 issued by the 1st defendant to the JV (“1st Defendant’s Letter”). In the Letter of Termination, the 2nd defendant claimed that in the 2nd Defendant’s Letter, it had requested the 3rd defendant to provide its mitigation plans for the breach alleged by the 1st defendant. It must be highlighted that the 2nd Defendant’s Letter has not been adduced as evidence and as such, the content and the very existence of the letter remains in question. [55] What is even more telling is the 1st Defendant’s Letter. This letter is referred to in the Letter of Termination as the letter in which the 1st defendant had alleged that a breach had been committed. It is this allegation of breach that led to the issuance of the 2nd Defendant’s Letter and the Letter of Termination. [56] However, a closer look at the 1st Defendant’s Letter reveals that the 1st Defendant’s Letter does not contain any allegation of breach by the 3rd defendant. The letter merely attached a certificate of non-completion dated 23 June 2017, and informed the JV of LAD imposed as a result of the non-completion. There is no mention of any plans required to be put in place by the JV. It is important to highlight that the certificate of non- ! ! completion dated 23 June 2017 was subsequently superseded by a letter of extension dated 28 June 2017, issued by the 1st defendant to the JV. Further and in any event, even if there had been a delay which required mitigation, the responsibility for the delay and any plans to mitigate the delay would be on the JV, and not on the 3rd defendant alone. The 2nd and 3rd defendants are related companies and it would not have made commercial sense for the 3rd defendant to be made solely liable for any breaches alleged by the 1st defendant. [57] Second, notwithstanding the termination, it is in evidence that the same project team members were involved in the Project, including project team members from the 3rd defendant. [58] The details highlighted above have led the court to the irresistible conclusion that the termination was not genuine, and was instigated by the 1st and 2nd defendants to remove the 3rd defendant from the Contract. Ultimately, the removal of the 3rd defendant from the Contract was used as a way to deny the 1st defendant’s obligations to the plaintiff under the Banking Facilities. [59] Next, I considered available evidence that would assist the court to determine whether LAD and back charges were in fact due to the 1st defendant. The 1st defendant claimed that it is entitled to impose LAD amounting to RM54,200,000 and back charges amounting to RM14,798,828.99 from the JV, and is entitled to set off these amounts against the Proceeds payable to the Designated Accounts. ! ! [60] However, evidence before the court indicates otherwise. In particular: a. In a document entitled “Ho Hup Bank in to SK JV Detail”, which was produced by the 2nd defendant during trial, the 1st defendant was shown to have made part payments totalling RM2,494,422.90 for PC 41 and RM4,654,305.83 for PC 42. The document also shows that the 2nd defendant received RM1,494,422.90 for PC 41 and RM4,254,305.83 for PC 42. However, neither the 1st nor the 2nd defendant has been able to conclusively confirm the exact amounts that had been paid; b. There is no record of any legitimate demands made by the 1st defendant to the 2nd and 3rd defendants for LAD and back charges that the 1st defendant claim were due, at the point PC 41 and PC 42 were issued or soon thereafter. There is also no record to show that the 1st defendant had complied with the contractual pre-conditions to impose LAD, including the issuance of a certificate of non-completion to the JV. Neither is there any record of specific back charges due and the nature of the back charges, for example overtime costs or advance payment claims; c. Payment certificates after PC 41 and PC 42 were later issued by the 1st defendant in respect of works completed, ! ! with the last payment certificate being payment certificate no. 50 dated 2 April 2018 for RM1,031,056.42; and d. An extension of time for the completion of the Project was granted, which raises serious doubts on the basis of the imposition of LAD on the 2nd and 3rd defendants. [61] The documents provided and the conduct of the 1st defendant as shown above are inconsistent with the 1st defendant’s position during trial that LAD and back charges were due to the 1st defendant. Thus, taking into account the totality of the evidence before this court, I find that on the balance of probabilities, the allegations by the 1st defendant that the JV had been terminated and that LAD and back charges were due under PC 41 and PC 42, are afterthoughts designed by the 1st defendant to avoid liability for payment towards PC 41 and PC 42. [62] With this conclusion, the court finds that the 1st defendant is obliged to make payments towards PC 41 and PC 42 into the Designated Account. Further, as there is evidence to show that part payments towards PC 41 and PC 42 had been made to the 2nd defendant, the 2nd defendant is also liable to make payments that it had received towards PC 41 and PC 42 into the Designated Account. [63] With the court’s rejection of the 1st defendant’s claim on the existence of LAD and back charges, the 1st defendant’s counterclaim against the plaintiff and the 2nd and 3rd defendants on LAD and back charges due must necessarily fail. ! ! H. Issue 3: Is The Letter Of Undertaking Binding On The 1st Defendant? [64] The Letter of Undertaking, dated 25 September 2017, and issued by the 1st defendant to the JV, first refers to two units of the 1st defendant’s properties, which are stated in the letter to be valued at RM10,812,000. The letter then provides as follows: “2. There is an outstanding sum of RM10,039,000.00 (the said “Sum”) for the completion of the above said Works due in August and September 2017.

We hereby undertake to pay the said Sum on or before 31.3.2018 (the said "Settlement Date").

As collateral to the above undertaking we hereby allocate the said Properties to be charged by Malayan Banking Bhd (“MBB”) as security towards your loan with MBB.” (emphasis added) [65] From the Letter of Undertaking, the 1st defendant admitted that a sum of RM10,039,000 is due and owing pursuant to works completed by the JV. The 1st defendant undertook to pay the sum on or before 31 March 2018, and agreed to charge the two properties identified in the letter, as security for the Banking Facilities. The sum of RM10,039,000 was not ! ! paid, and the two properties mentioned in the Letter of Undertaking were not charged in favour of the plaintiff. [66] The chronology of events leading to the issuance of the Letter of Undertaking shows that the 1st defendant had issued the Letter of Undertaking as a commitment to the plaintiff, after delays in making payments towards PC 41 and PC 42. Noor Hashida Mohd Hashim (“PW1”), an officer of the plaintiff who was at the material time the Head of the Subang Business Centre, testified that meetings were held in August 2017, at the request of the plaintiff, after the 1st defendant failed to make payments towards PC 41 and PC 42. [67] In answer to question 45 of PW1’s witness statement, WS-PW1, PW1 testified that the following was discussed during the meeting: “At the meeting, we raised the issue that PC No. 41 and PC No. 42 remained outstanding and informed that this could affect the future financing of the Project. The Bank highlighted to the 1st Defendant (Ho Hup) that the slow payments by the 1st Defendant (Ho Hup) had jeopardized the 3rd Defendant (Hj Said)'s track record with the Bank. This was because all the previous projects by the 3rd Defendant (Hj Said) that the Bank financed had been completed with no issues. The 1st Defendant (Ho Hup) admitted that they had cashflow problems. However, the 1st Defendant (Ho Hup) assured that payment would be forthcoming and undertook to make ! ! payment to the Bank. The 1st Defendant (Ho Hup) also proposed to offer two properties to the Bank as a third party security. At the meeting, the Bank informed that it would need the particulars of the properties offered by the 1st Defendant (Ho Hup). Further, the Bank wanted assurance of the amount that would be paid by the 1st Defendant (Ho Hup) and the timeline for payment. The meeting ended with the 1st Defendant (Ho Hup) and the 3rd Defendant (Hj Said) promising to provide the Bank with timeline for payment and the details of the properties to be pledged by the 1st Defendant (Ho Hup).” (emphasis added) [68] PW1’s testimony is consistent with documents subsequently exchanged and issued by the parties. In correspondences exchanged between the 1st defendant and the plaintiff, the 1st defendant requested for samples of letters of undertaking for it to use. The earlier drafts of letters of undertaking were circulated by the 1st defendant to the JV and to the plaintiff, including to the plaintiff’s internal legal team. [69] Thus, from evidence before the court, including the wording of the Letter of Undertaking, it is clear that the Letter of Undertaking: ! ! a. Is an acknowledgment by the 1st defendant of its obligation to pay the Proceeds to the plaintiff, pursuant to the NACI; b. Is an admission of debt owing pursuant to PC 41 and PC 42; and c. Is issued for the benefit of the 1st defendant. [70] Thus, the court finds that the Letter of Undertaking is binding on the 1st defendant. [71] The 1st defendant issued a letter dated 29 December 2017, to revoke the Letter of Undertaking. However, I find the revocation of the Letter of Undertaking to be invalid, taking into account the nature of the assignment, which I had found to be an absolute assignment under section 4(3) of the CLA. Essentially, the revocation of the Letter of Undertaking would effectively discharge the payment of the Proceeds, which the 1st defendant is obliged to pay under the Deed of Assignment and the NACI. [72] Section 4(3) provides for the effect of an absolute assignment, which is: “… to pass and transfer the legal right to the debt or chose in action, from the date of the notice, and all legal and other remedies for the same, and the power to give a good discharge for the same, without the concurrence of the assignor.” ! ! (emphasis added) [73] Section 4(3) of the CLA is clear. The power to give a good discharge for the debt arising in relation to PC 41 and PC 42 is with the plaintiff. Thus, it is not open to the 1st defendant to unilaterally revoke the Letter of Undertaking, and the 2nd and 3rd defendants cannot provide any consent in respect of the revocation.

[74] The court found that the plaintiff has proven its claim, and allowed the following prayers in paragraph 23 of the re-amended statement of claim, for sums to be paid into the Designated Account, jointly and severally by the 1st and/or 2nd defendants: a. The sum of RM4,000,486.82 under PC 41 (paragraph 23(b) of the re-amended statement of claim); b. The sum of RM9,500,348.16 under PC 42 (paragraph 23(c) of the re-amended statement of claim); c. All other sums including retention sums payable by the 1st defendant to the 2nd defendant and/or 3rd defendant under or arising from the Contract (paragraph 23(d) of the re-amended statement of claim); and d. All other sums under or arising from the Contract, which were paid by the 1st defendant to the 2nd defendant but ! ! not paid into the Designated Account (paragraph 23(dd) of the re-amended statement of claim). [75] The amounts paid into the Designated Account shall be dealt with in accordance with the terms of the Banking Facilities, including the Deed of Assignment and the NACI. [76] The court granted interests sought in paragraph 23(e) of the re-amended statement of claim. [77] The court further ordered that the amounts in paragraphs 23(d) and 23(e) of the re-amended statement of claim shall be assessed and determined by the parties. The parties shall be at liberty to apply to the court for further orders. [78] However, the court dismissed the prayer in paragraph 23(a) of the re-amended statement of claim, for the sum of RM10,039,000 to be paid into the Designated Account. This prayer was dismissed notwithstanding the finding that the Letter of Undertaking is binding on the 1st defendant. As the prayers in paragraphs 23(b) and 23(c) for sums under PC 41 and PC 42 to be paid to the Designated Account have been allowed, the grant of the prayer in paragraph 23(a) is no longer justifiable, and would lead to the plaintiff being unjustly enriched. [79] The court further found that the 1st defendant had not proven its claim that the amount under PC 41 and PC 42 had been extinguished by LAD and back charges, As such, the 1st defendant’s counterclaim against the plaintiff and the 2nd and 3rd defendants are dismissed. [80] The court ordered the payment of the following costs: a. RM100,000 to be paid by the 1st defendant to the plaintiff; b. RM30,000 to be paid by the 2nd defendant to the plaintiff; c. RM30,000 to be paid by the 1st defendant to the 2nd defendant; and d. RM30,000 to be paid by the 1st defendant to the 3rd defendant. Dated 13 June 2025 ADLIN ABDUL MAJID Judge High Court of Malaya Kuala Lumpur Counsel: Plaintiff : Claudia Cheah (together with Aufa Radzi, Kalaiarasan Rasadurai and Bernice Ho) of Messrs. Skrine ! ! 1st defendant : James Monteiro (together with Queeny Ban) of Messrs. James Monteiro 2nd defendant : Shopna Rani Malakar of Messrs. Shopna Rani Malakar & Co 3rd defendant : Kelly Khoo (together with Nur Dalila Zulkarnain) of Messrs. Malis & Khoo