Malaysian Shipping Agencies Sdn Bhd v MTC Engineering Sdn Bhd (B-02(NCVC)(W)-139-01/2018)

1 DALAM MAHKAMAH RAYUAN MALAYSIA (BIDANG KUASA RAYUAN) RAYUAN SIVIL No: B-02(NCVC)(W)-139-01/2018 ANTARA MALAYSIAN SHIPPING AGENCIES SDN BHD (NO SYARIKAT: 11689-P) …..PERAYU DAN MTC ENGINEERING SDN BHD (NO. SYARIKAT: 843778-T) .…RESPONDEN [Dalam Perkara Mengenai Mahkamah Tinggi Malaya Di Shah Alam Dalam Negeri Selangor Darul Ehsan, Malaysia Guaman No: 22 NCVC-387-07/2015 Antara Malaysian Shipping Agencies Sdn Bhd (No. Syarikat: 11689-P) ……Plaintif Dan MTC Engineering Sdn Bhd (No Syarikat: 843778-T) ……Defendan] 2 CORAM: ZABARIAH MOHD YUSOF, JCA HARMINDAR SINGH DHALIWAL, JCA NOR BEE ARIFFIN, JCA JUDGMENT [1] The appeal before us is against the decision of the learned High Court Judge dated 19.9.2017. The appellant claimed that there were fundamental errors committed by the High Court Judge in dismissing the appellant’s claim and allowing the respondent’s counterclaim, hence the present appeal. [2] After hearing the oral submissions and perusing through the written submissions of both parties and the appeal records, we found appealable errors on the part of the learned High Court Judge in determining the case. Accordingly, unanimously we allowed the appeal with costs and set aside the order of the High Court. We now give our reasons for allowing the appeal. [3] Parties will be referred to, as they were, in the High Court. A. BACKGROUND: A.1. The Petronas Contract: [4] Pursuant to a Letter of Award (LOA) dated 21.9.2012, Petronas Carigali Sdn Bhd (Petronas) awarded a contract to the defendant for the 3 provision of supply, delivery, installation, commissioning, operation and maintenance of extended well test (EWT) vessel and EWT System at 2 oilfields (Petronas Contract) (pages 1-8 CB 1). This was to enable Petronas to test and produce oil at 2 projects i.e. in Kayu Manis South East (KMSE) and Anjung Kecil (AK) oilfields located offshore Bintulu. [5] The contract awarded by Petronas to the defendant is for the defendant to perform all works in relation to the supply, delivery, installation, commissioning, operation and maintenance of EWT System at KMSE and AK oilfields. The complete contract between Petronas and the defendant has not been produced. A.2. The EWT System: [6] The EWT System enables the user to ascertain the quantity of oil that can be produced from the seabed oil well so as to determine whether it is profitable to invest in drilling in that particular oil well. This requires the use of sea vessels as it takes place in open seas. The various vessels used are collectively known as “marine spread”. [7] The installation of the EWT System involves several stages. The cause of the dispute between the plaintiff and the defendant arose in one of these earlier stages which is referred to as “the tensioning stage”. [8] The learned High Court Judge had outlined the process of installation of the EWT System, in her judgment, which we adopted with some modifications in our judgment herein. 4 [9] Essentially, the location of the oil well is underwater in the seabed, which is known as the underwater well. Oil drilled from the underwater well will be brought up to above sea level by way of a pipeline. When the oil is brought to above sea level, the said oil will be transported to land by a sea vessel. [10] To facilitate the oil transfer, a CALM buoy (buoy) will be floated to enable the vessels to moor pending the loading of the drilled oil onto the sea vessel. This buoy is akin to a floating jetty. [11] The buoy was to be secured in its position by 6 chains. One end of each of the chain was to be hooked to the buoy while the other end would be fastened to the seabed. The end attached to the buoy is referred to as the “buoy end” and the other end of the same chain as the “seabed end.” The seabed end has to be fastened to the seabed. [12] 2 items are attached to the seabed end of the chains. They are an anchor and a clump. The clump is a heavy weight which serves 2 functions, namely to pull the anchor down to the seabed and to help to navigate the anchor to the desired position. [13] The anchor fastening process or the locking of the anchors to the seabed renders the anchors immobile. This process begins with dropping the seabed end of the chains into the sea. Once the anchors hit the seabed, the anchors will be dragged for a certain distance. Due to the combined weight of the anchor and the clump, the dragging will cause the anchor to sink and dig into the seabed. Ultimately, upon the sinking into a certain depth, 5 the anchor will lock into the seabed. The buoy end of the chains will then be attached to the buoy by way of a hook up. [14] The buoy must have some degree of mobility, which is necessary to enable the buoy to rotate and move when it is tossed around by strong winds and waves at open seas. In order to install a fixed and yet mobile buoy to accommodate the weather, these 6 chains must be fixed with a certain degree of tension. The appropriate tension is achieved by using a stevtensioner (this is the ‘tensioning process). A.3. The contract between the plaintiff and the defendant: [15] The defendant subsequently issued out a LOA dated 6.3.2013 whereby the defendant awarded a contract to the plaintiff to carry out part of the works required for the provision of transportation and installation of the EWT Facilities System for the defendant at KMSE ((MTCE Contract) (page 9-17 of CB 1). Essentially the defendant appointed the plaintiff as its subcontractor for the works. On 23.4.2013, the plaintiff acknowledged receipt of the LOA dated 6.3.2013 and confirm that it understood and shall fully abide by the conditions set therein (Pages 18 of CB 1). At this juncture it is pertinent to note that the terms of the subcontract between the plaintiff and the defendant is as per the terms in the LOA dated 6.3.2013. The pleadings referred to this subcontract between the plaintiff and the defendant as the MTCE Contract. For the purpose of this judgment we shall refer to this subcontract between the plaintiff and the defendant as the MTCE Contract. The terms of this MTCE Contact is as per the terms stated in the LOA dated 6.3.2013. 6 [16] The plaintiff’s scope of work is set out in Appendix 2 to the MTCE Contract (page 17 of CB 1). The defendant issued an Installation Procedure containing specifications and the methodology for the project (pages 27-254 of CB 1). Hence the plaintiff’s scope of work involved a portion of the project. There is a Baseline Schedule setting out a 26 day timeline for works under the MTCE Contract (the transportation and Installation “T & I works”) which was prepared by the defendant (pages 256- 257 of CB 1). [17] The defendant was to pay the plaintiff RM12,400,000.00 for the subcontract of the plaintiff, pursuant to Appendix 1 of the MTCE Contract (page 16 of CB 1). RM6,200,000.00 was paid by the defendant to the plaintiff. There is no dispute to this fact. [18] The MTCE Contract was then further subcontracted to Ardent Sea Tramp Sdn Bhd (Ardent), (Ardent Contract) (pages 19-26 of CB 1). The plaintiff paid RM15,498,499.91 to Ardent and its subcontractors for the works performed under the Ardent Contract. [19] The project envisages the installation of a CALM buoy offshore which is divided into few phases. The plaintiff loads all equipment offshore and mobilise all vessels to the KMSE site, sets up a crane barge (In this case TH 819) and deploys flowlines from the vessels to the TARPON (the pipe which transports oil). Thereafter 6 anchors with chains are dropped onto the seabed (chain laying) with the other ends picked up and hooked on to a stevtensioner, which is used to cross tension all 6 chains (stevtensioning). Subsequently an anchor handling tug (AHT) will hook up the CALM Buoy to 7 the chains, completing the process, and the vessels will demobilize from KMSE. A.4. The Installation Procedure: [20] The Installation Procedure is a document provided and prepared by MTC Subsea Sdn Bhd (MTCS), which is a related company of the defendant. It is a document which sets out, amongst others, the “transportation and Installation” (T & I) works, which are as follows: Manager (OCM) to be a MTCS representative. The OCM has the responsibility of managing the offshore construction works (page 287 of P13); The location of the 6 anchor drops and the procedure of laying the anchors on the sea bed (pages 341-344 of exhibit P13); and P13). [21] The defendant was represented offshore. The OCM and the subcontractors carried out the works offshore and sent daily progress reports to the defendant, which documented the works carried out. The plaintiff 8 received the daily progress reports, although not the full set (pages 103-230 of exhibit P13). The defendant also engaged an independent marine surveyor from Independent Marine and Engineering Consultants Sdn Bhd (IMEC). IMEC produced 2 reports, dated 10.6.2013 and 20.8.2013 (pages 87-101 of P12 and pages 231-258 of P16). A.5. The Disputes and Termination: [22] The T & I works could not be completed within the 26 days as provided by the Baseline Schedule. However the parties continued to work beyond the 26 days. But the contract came to a standstill during the pre-tensioning phase, because the hook up of the chain to the stevtensioner could not be done. That was required to enable the stevtensioner to do the tensioning of the chains to enable the hook up of the CALM Buoy. [23] The marine spread was demobilized when it left the site on 2 instances. At the 1st instance the marine spread returned to site. However in the 2nd demobilization, the marine spread did not return to site despite the defendant‘s threat of termination. [24] The defendant terminated the contract by letter dated 9.9.2013 giving 4 days notice of the termination (pages 274-276 of CB Vol 1). [25] There is no dispute that at the time when the contractual relationship came to an end that: 9 This means that the buoy was far from being commissioned. [26] The plaintiff disputes the termination and claimed that it was unlawful for the following reasons: and [27] Ardent commenced proceedings against the plaintiff on 2.1.2015 claiming a total of RM12,451,475.00 as an outstanding payment for the works done pursuant to the Letter of Appointment (pages 509-523 of exhibit P48). However, those proceedings had since been withdrawn with liberty to file afresh as Ardent was wound up prior to the commencement of the said suit without the sanction of the Official Receiver. 10 [28] The plaintiff claimed that it suffered losses and damages as a result of the unlawful termination of the contract and instituted the present action against the defendant seeking for the following reliefs: As such the plaintiff is entitled to recover the following: RM15,498,499.91, the disputed sum of RM12,451,475.00 and the balance contract price of RM6,200,000.00 ) in the total sum of RM34,149,974.91; 11 [29] The defendant in defending the claim by the plaintiff asserts that the plaintiff was contractually bound to commission the buoy. When the plaintiff failed to commission the buoy, the plaintiff had committed a breach which resulted in the lawful termination notice to the plaintiff. The defendant contends that it suffered loss due to the plaintiff’s breach as it had to employ a 3rd party to complete the works. As a result the defendant in turn instituted a counter claim seeking for special and general damages and loss of income as a result of the breach of contract by the plaintiff, namely: RM4.331 as at 9.9.2015) costs incurred by the defendant and to be paid to the third parties for the completion of the said works under the MTCE Contract in US dollars; RM3,0634 as at 9.9.2015) costs incurred by the defendant to complete the said works under the MTCE Contract paid in Singapore Dollar; 12 RM4.331 as at 9.9.2015) costs incurred by the defendant to complete the said works under the MTCE Contract paid in US Dollar; RM26,575,016.00 (USD6,136,000.00 exchange rate at RM4.331 as at 9.9.2015) that is the loss of income for USD52,000.00 per day starting from 1.6.2013 till 26.9.2013; Contract in its entirety;

(ii) Terms and Conditions Agreement-MTCE and MSA In the event of any conflict or discrepancy between the aforesaid documents, the Principal Contractor shall advise and use its sole/absolute discretion to determine which documents shall prevail.” “The details of the works to be performed and undertaken by sub contractor shall include but not limited as per Appendix II, MSA Ref No: MSA/2013/EWT/MTCE/02, Scope of Work schedule and subsequently, any other agreed scope of work and specifications discussed between both parties…” [34] The learned High Court Judge concluded, premised on Clause 1 of the MTCE Contract, that both the plaintiff and the defendant had intended for a formal contract to be executed after the MTCE Contract. However that has not been carried out. Thus, in the absence of a formal contract, the learned High Court Judge found that the MTCE Contract is the only binding contract between the parties. Hence Clause 1 of the MTCE Contract provides that the Petronas Contract shall be an integral part of the contract between the plaintiff and the defendant. It is an undisputed fact that the Petronas Contract required the buoy to be commissioned. [35] It was also agreed by the plaintiff that in the event of any conflict or discrepancies that should arise in respect of the contractual terms, the 15 defendant shall have the absolute right to determine which term (document) should prevail. It is thus within the defendant’s legal rights to make an election that the Petronas agreement should prevail, which is what the defendant is now doing in resisting the plaintiff’s claim. [36] Therefore premised on the aforesaid 2 clauses the learned High Court Judge made findings that the MTCE Contract required the plaintiff to commission the buoy (paragraph 31 of the grounds). [37] The learned High Court Judge also said that her findings were further fortified by: Surveyor issued the Suitability Report. The plaintiff admits receipt of this. The 2nd payment of 50% became due only when the Marine Warranty Surveyor certifies that the EWT facilities has been hooked up and commissioned. 16 [38] Therefore premised on the aforesaid, the learned High Court Judge was of the view that the plaintiff was contractually bound to commission the buoy. C.2. Whether the plaintiff committed breach of contract: [39] It was the findings of the learned High Court Judge that the plaintiff had committed breach of contract by the following acts:

(ii) Failure of the plaintiff to hook the chain to the stevtensioner. [40] In determining whether the plaintiff committed a breach of the contract the trial court proceeded to determine the following sub issues:  Whether the hook up of the chains to the stevtensioner failed because there were insufficient chains; and  Whether Captain Hamzah is the defendant’s agent. It is crucial to determine this issue because Captain Hamzah committed the error of dropping the anchors off the designated position, which had caused the failure to hook up the chain to the buoy, which was the reason why the buoy was not commissioned. [41] The learned High Court Judge found that, although the plaintiff argued that the failure to hook the chain to the stevtensioner was due to: 17 prepared a report which supported the plaintiff’s allegation that said the hook up failed because the quantity of the chains was insufficient. However, during cross examination, PW 2 admitted that: [42] The defendant contended that another failure to hook up was due to the vessel supplied and used by the plaintiff was underpowered and not powerful enough to pull the chains to hook up the chains to the stevtensioner. However, the learned High Court Judge found that the Independent Marine & Engineering Consultants Sdn Bhd (IMEC), a Marine Warranty Surveyor appointed by Ardent, plaintiff’s subcontractor stated that: 18 “Setia Jaguh itself cannot do the tensioning since the BP is only 100 MT with 150MT is indeed for tensioning test, Meeting on plan to demob all marine spreads held on board Setia Jaguh as per discussed. Setia Jaguh and Tat Hong to be replaced by another vessel.” [43] Based on the aforesaid, the learned High Court Judge found that the plaintiff has no evidence to substantiate its allegation that the hook up failed because there was insufficient chain and the defendant’s contention that the vessel was underpowered was proved by the report by IMEC. C.3. Whether the Offshore Construction Manager (OCM), Captain Hamzah was the defendant’s agent: [44] It was the plaintiff’s argument that Captain Hamzah was the defendant’s agent based on documentary and oral evidence. In the documentary evidence of Daily Progress Report (P15), appeared Captain Hamzah’s signature on it with a stamp of MTC Subsea Sdn Bhd (MTCS), which described him as MTCS’s representative in these reports. MTCS is the defendant’s subsidiary company. It is the plaintiff’s submission that Captain Hamzah is the defendant’s agent as MTCS is the defendant’s subsidiary company. [45] However the learned High Court Judge was not persuaded by the argument of the plaintiff as that would run foul of the doctrine of separate legal entities as enunciated in Salomon v Salomon [1897] AC 22. Therefore, the learned High Court Judge held that the plaintiff failed to show 19 by way of its documentary evidence that Captain Hamzah was the defendant’s agent. [46] The plaintiff also adduced oral evidence on this point by calling Encik Ahmad Daniya bin Yusof (PW 3) as a witness. He is one of the directors of Ardent. PW 3 denies that Captain Hamzah was an Ardent’s representative. He alleges that Captain Hamzah was a representative of MTCS and nobody from Ardent was in charge offshore. [47] PW 2 stated that even though Captain Hamzah is Ardent’s director, Captain Hamzah does not have the power to appoint himself as the OCM. [48] The learned High Court Judge referred to a Search of the Companies Commission of Malaysia (D 35), where the defendant established that Captain Hamzah is one of Ardent’s Director. It was also found that PW 3 was a bankrupt and therefore Captain Hamzah must be taken to be the sole director as PW 3 failed to show that he had obtain leave from the Court to act as Ardent’s director. [49] At this point, the plaintiff failed to call any MTCS’s representative to confirm or deny Captain Hamzah’s position. [50] This allegation by the plaintiff that Captain Hamzah is a representative of the defendant’s is premised on the Daily Progress Report which was prepared by a third party, IMEC. It was open to the plaintiff to call a MTCS’s representative. That would be the best evidence available. However, the plaintiff failed to do so and offered no explanation for this omission. 20 [51] The learned High Court Judge also found that the credibility of PW 3 who testified that Captain Hamzah was MTCS’s representative is in doubt. Although he has been a bankrupt since 2012, he held himself as Ardent’s director when he signed the letter of 18.4.2014. The learned High Court Judge also found it difficult to believe PW 3 as being unable to locate Captain Hamzah to give evidence in court. Why should Ardent appoint the 2nd OCM to replace Captain Hamzah if Captain Hamzah was MTCS’s representative? Why did MTCS not appoint a replacement from its own representative? The learned High Court Judge also took into account that the plaintiff had always maintained that it was responsible for the provision of manpower in this project. Nowhere is there any statement that in the plaintiff’s provision of manpower, the appointment of the OCM is to be excluded. [52] Therefore, on a balance of probabilities, the learned High Court Judge found that Captain Hamzah was the plaintiff’s agent as he can also be regarded as sole director of Ardent as PW 3 is a bankrupt. C.4. Whether the defendant’s agent had dropped the anchor at the wrong positions: [53] The anchor had been dropped on 21.6 m out of position and further was 64.3m out of position by Encik Khairul Anuar’s (2nd OCM) instruction who has taken over the job from Captain Hamzah (1st OCM). [54] As the OCM now proved to be the plaintiff’s agent, the error of dropping the anchor off the designated position, was the act of the plaintiff, which was in breach of its contractual duty. 21 [55] It was also proved during cross examination of PW 2 that the OCM being the plaintiff’s agent could have easily rectified the situation by just moving the anchor but the plaintiff did not. [56] As the plaintiff is the party that committed the breach, it cannot be allowed to succeed in its alternative plea of quantum merit (Lau Kee Ko & Anor v Paw Ngi Siu [1974] 1 MLJ 21) . [57] Based on the aforesaid, the learned High Court Judge dismissed the plaintiff’s claim with costs of RM60,000.00. [58] The defendant’s counterclaim is allowed with damages to be assessed as follows: and 27.9.2013 respectively to the date of full settlement; 22 D. OUR DECISION: [59] Our judgment will address the issues in relation to the points raised in the memorandum of appeal of the plaintiff. D.1. Whether the defendant could elect to have the plaintiff bound by the Petronas Contract (paras 3, 4, 5 and 6 of the Memorandum Rayuan Tambahan): D1.1. The Construction of the LOA: [60] Paragraphs 3,4,5 and 6 of the Memorandum Rayuan Tambahan relates to the construction of the MTCE Contract . The plaintiff submitted that the learned High Court Judge erred when making her findings that the defendant could after entering into a contract with the plaintiff for a far lesser price and scope of work, elect to have the plaintiff bound by the defendant’s contractual obligations under the Petronas Contract for a larger sum. [61] It was the findings of the learned High Court Judge that the plaintiff was obliged to commission the buoy on the basis of Clause 1 and Clause 5 of the MTCE Contract. [62] The MTCE Contract envisaged the plaintiff and the defendant entering into a “Terms and Conditions Agreement” which they never did (Clauses 1 (ii) and 2 of the MTCE Contract at page 10 of the CB 1). Neither 23 was the plaintiff provided with the Petronas Contract between defendant and Petronas. [63] Clause 1 of the MTCE Contract which was relied upon by the learned High Court Judge applies in the event of conflict between the Principle Agreement, which is the Petronas Contract and the “Terms and Conditions Agreement”. There never was any “Terms and Conditions Agreement” entered into between the plaintiff and the defendant. Clearly, Clause 1 is therefore inapplicable. [64] Further, the provision of Clause 1 of the MTCE Contract does not give an election to the defendant to elect which scope of work it wanted the plaintiff to perform, after entering into the contract with the plaintiff at an agreed price, which is much less than the Petronas Contract. A reading of Clause 1 of the MTCE Contract suggests that it was intended to determine which document would prevail in the event of conflict of inconsistency between the two. Since there was no “Terms and Conditions Agreement” entered into between the plaintiff and the defendant, there is no conflict/inconsistency between the MTCE Contract and the Petronas Contract. The MTCE Contract is a product of the sub contract of part of the works of the Petronas Contract to the plaintiff. [65] Appendix 2 of the MTCE Contract (page 17 of CB 1) sets out the specific scope of works which is the provision of Transportation and Installation (T & I) of EWT Facilities System for Kayu Manis and Anjung Kecil Development Field. This specific scope of works involved the provision of the following: 24 [66] The evidence of SP 1 and SP 2, explained the meaning of what constitutes “the provision of T & I PMT”. The evidence of SP 3, who is an Ardent’s director who confirmed the evidence of SP 1 and SP 2, that “T & I PMT” involved only the provision of manpower and vessels for marine spread chartering (provision of vessels), seafastening and grillage (loading of cargo), inspection and testing (ensuring cargo was on board), lifting and rigging aids (part of the assembly and lifting equipment during loading), and fuel, bunkering, bedding (provision of fuel and accommodation) (refer to Notes of Evidence pages 544-545 RR (b) Jilid 3/4). [67] The defendant’s witness, SD 1 also confirmed that a portion of the Petronas Contract and not the entire Petronas Contract was subcontracted to the plaintiff (Notes of Evidence at page 670 RR (B) Jilid 3/4). [68] The learned High Court Judge did not give any consideration to these witnesses’ testimony in interpreting the MTCE Contract. [69] There is no other documentary evidence to suggest parties agreed to any other scope of work other than what was set out in the MTCE Contract. 25 Apart from the plaintiff not given a copy of the Petronas Contract, neither was the plaintiff informed that the scope of works of the Petronas Contract was to be performed by the plaintiff. [70] From the Petronas Contract, it appears that it had a far larger scope of work than what the plaintiff had to perform, namely “to do all works towards supply, delivery, installation, commissioning, operation and maintenance of EWT Vessel and EWT System for KSME and AK project for Petronas”.

Whereas the MTCE Contract only required the plaintiff to supply “T & I PMT”, namely the supply of transportation and installation, project management team and vessels, consisting only a portion of the works under Petronas Contract. This the learned High Court Judge failed to appreciate. [71] Counsel for the defendant submitted that Clause 5 of the MTCE Contract is unambiguous and there is no other alternative construction can be attached to its meaning. Counsel for the defendant referred to the case of Malayan Newsprint Industries Sdn Bhd v Perdana Cigna Berhad & Ors [2008] 2 MLJ 256 in that when interpreting a contract they should be construed in their plain and ordinary meaning, except to the extent that some modification is necessary to avoid absurdity, inconsistency or repugnancy. It was also argued by the defendant that even assuming for a moment that Clause 5 is capable of being given an alternative construction/interpretation, the background factual matrix has to be taken into account. This was the position taken in Berjaya Times Square Sdn Bhd v M-Concept Sdn Bhd [2010] 1 MLJ 597 and SPM Membrane Switch Sdn Bhd v Kerajaan Negeri Selangor [2016] 1 MLJ 464. 26 [72] However, we are of the view that, the cases cited by the defendant are of no help to the defendant. In fact, after taking into account the background facts of the present case, it is illogical to hold that the contract between the plaintiff and the defendant encompass the whole works as envisaged in the contract between Petronas and the defendant. The learned High Court Judge overlooked the fact that the Petronas Contract has a consideration in excess of RM50 million and a term in excess of 4 years.

Whereas, the MTCE Contract between the plaintiff and the defendant has a consideration of RM12,400,000.00 and the time line was only for 26 days (page 16 CB 1 and pages 256-257 of CB 1). D.1.2. The obligation to commission the buoy: [73] The learned High Court Judge found that the plaintiff was contractually bound to commission the buoy. [74] The defendant took the stand that the plaintiff was required to commission the EWT facilities, which in essence, according to the defendant, to do everything that the defendant is bound to do under the Petronas Contract (See notes of evidence dated 12.8.2016 page 709 Appendix E) . [75] However, this stand is contrary to the documentary evidence, as nowhere in the MTCE Contract was commissioning provided for, save for Appendix 1 where the terms of the payment are upon completion of “T & I/HUC” (page 16 of CB 1). Apart from this, the word “commissioning” appears in the description of the project in the MTCE Contract (page 9 of the 27 CB 1). However, it is to be noted that “the project” refers to the project as envisaged in the Petronas Contract (pages 1-8 of CB 1) not the MTCE Contract. [76] There was also the testimony of SP 3 who said that parties do not intend for the plaintiff to commission the EWT Facilities System. (refer to Notes of Evidence pages 567-570 RR (B) Jilid 3/4, Appendix F). SP 1 disagreed that the plaintiff has the obligation to perform the transportation and installation of the EWT Vessel and System and commission that the system is in working order before handing over to the defendant’s company. [77] In addition, the evidence shows that the defendant was in control of the project. This is apparent from the following:

(ii) the OCM was the defendant’s representative (described as MTC’s representative) until 12.7.2013 when he resigned (this issue will be addressed in the later part of this judgment);

(iii) the project manager is SD 1 who is the defendant’s representative; and

(iv) the IMEC reports dated 10.6.2013 (pages 958-973) and dated 20.8.2013 (pages 1100-1127 CB 3) show the personnel on KMSE site were that of the defendant’s representatives, namely: 28  Mr. Asral Fikri, representative-MTC Engineering Sdn Bhd;  Captain Hamzah Mohammad, Construction Supt-MTC Subsea Sdn Bhd;  Mr. Harris Shariff, Field Engineer-MTC Subsea Sdn Bhd;  Mr. Tawfik Ahmad Fadzil-MTC Subsea Sdn Bhd. [78] The OCM was in charge of the following:  Coordinates offshore construction works;  Coordination of personnel and equipment to ensure continuous program of works during offshore installations;  Ensure safety of all personnel on board vessel throughout the offshore installation campaign; and  Monitor Drilling Performance Review (DPR) and ensure prompt action to any matters highlighted by DPR or site personnel. [79] The project manager was in charge of the following (at page 39 CB 1): “Responsible for the overall execution of CONTRACTOR’S operation under the CONTRACT including matters on the safety, Project management, Operation, Engineering, Contract, QA/OC and others. PM shall liaise with COMPANY on all matters pertaining to WORK. PM shall ensure quality and timely delivery of the project within the budget in compliance to CONTRACT in the most effective and safest manner.” 29 [80] Counsel for the defendant referred us to the case of Heritage Grand Vacation Club Berhad v Pacific Fantasy Sdn Bhd [2016] 4 MLJ 389 and Shalini a/p Kanagaratnam v Pusat Perubatan Universiti Malaya & Anor [2016] MLJU 100. We failed to see how these 2 cases support the defendant’s case, namely, it is the plaintiff’s obligation to commission the buoy. D.1.3. The Installation Procedure: [81] The Installation Procedure was provided to the plaintiff by the defendant to identify the vessels which the plaintiff was to provide (pages 53- 56 of CB 1). [82] It is undisputed that, in fulfilling the Petronas Contract, the defendant had engaged other subcontractors to carry out the other scope of works under the Petronas Contract. The plaintiff’s scope of work constitutes only one of the scope of works under the Petronas Contract. Hence the Installation Procedure was also provided to the other sub-contractors to identify what was required of them in respect of the Installation Procedure and other areas of works. The Installation Procedure was designed and issued by MTCS, which was then issued to the defendant for circulation. (page 27 CB 1). SD 1, the defendant’s Project Manager during cross examination confirmed this after he was referred to the appendices of the Installation Procedure on what these works comprised (refer to Notes of Evidence pages 683-687 RR (B) Jilid 3/4 Appendix I). [83] Therefore, contrary to the findings of the learned High Court Judge that the defendant could after entering into a contract with the plaintiff for a 30 far lesser price and scope of work, elected to have the plaintiff bound by the defendant’s contractual obligations under a contract for a larger sum, namely the Petronas Contract, is clearly erroneous. The plaintiff had a defined scope of work and it was never to carry out the scope of work of the Petronas Contract. From the construction of the MTCE Contract, it has to be taken in its literal meaning given the factual matrix of the present case that the plaintiff is only limited to the provision of the vessels and manpower for the EWT System. D.2. Whether the plaintiff was in breach: D.2.1. Whether plaintiff failed to hook up and commission the EWT Facilities System (Paragraphs 8, 9, 10, 11, 12, 13, 14, 15, 16 of the Memorandum Rayuan Tambahan): [84] It is not in dispute that the hook up could not be done. [85] The defendant contended that this was because of the incapacity of the vessels provided by the plaintiff, while the plaintiff alleged that it was due to an insufficient supply of the chain length provided by the defendant. [86] The learned High Court Judge found that the plaintiff was in breach of its obligations to hook up and commission the EWT Facilities System. It is also the finding of the learned High Court Judge that there was sufficient chain length provided by the defendant for the hook up. [87] According to the Installation Procedure, which was provided by the defendant to the plaintiff, the required chain length for the anchor chains was 31 650 m (page 50 of the CB 1). Apart from the recommended 650m of chain, Vryhof Anchors, the stevtensioner providers in the Installation Procedure also says that an additional 124m of chain is required (page 151 of CB 1), given that 20m clump weight has already been included in the configuration. As such, the minimum requirement chain length as prescribed by the Installation Procedure, after taking into consideration of the 20m clump weight, would be: 650m (Chain) + 124m (additional chain length) [88] The IMEC Report dated 10.6.2013 (page 961 of CB 3) showed that only 600m of chain was loaded out. Clearly the chain length loaded out was insufficient. [89] The learned High Court Judge accepted the evidence of SP 2 when he was cross examined by counsel of the defendant, when SP 2 said that with 20m of clump weight chain, the chain would be sufficient to perform the hook up (paragraph 49 of the grounds at page 862 CB 3). The learned High Court Judge said that SP 2 conceded that the tensioning works is “mathematically possible” if the 20m clump weight has been taken into account (paragraph 50 of the grounds). [90] However, we found that these findings of the learned High Court Judge was erroneous. The 20m clump weight was already taken into account in the Installation Procedure which is the required chain length of 650m +

124m. There were actually no concessions made by SP2. SP 2 was merely responding to the suggestions that if a chain length of 116m referred to 32 Ahmad Daniya’s email of 27.8.2013 (pages 374-377 CB 3) was produced on site (and it was short of the 8m as required for the 124m length) would the 20m clump weight make the hook up possible. SP 2 answered and explained that the hook up was “mathematically possible” under perfect conditions (page 530 RR Jilid 3/4). However the seabed cannot be termed as “perfect conditions” for the hook up to be done. The learned High Court Judge failed to appreciate and considered SP 2’s evidence when he said that: “I mean if you were just looking at a drawing on paper, you could do it mathematically. You could probably do it. But it wasn’t like that. It was at sea with the ship moving up and down, with your lengths not exactly in a straight line, your chains not exactly in a straight line. Nothing is perfect. So it is not practically possible. It might be mathematically possible. But it’s not practically possible. “ [91] The defendant took the position that an additional 100 m chain length was provided when it relied on its email dated 24.8.2013 (page 371 of CB 1) which states as follows: “The actual chain length and we have additional approx. 100m work chain which was connected to the anchor chain for tensioning making it more than 700 m length.” 100m is still short than what is required in the Installation Procedure which is 124m. In any event, the additional 100m chain length allegedly available was never established in evidence that it had been provided and loaded onto the vessels. The contemporaneous documentary evidence, namely the IMEC Report dated 10.6.2013 documented the Load Out list identifying the equipment loaded out, which showed only 600m of chain length was loaded 33 out. This contradicted the contention of the defendant that they had provided another 100m of chain length as suggested in the email. But, no matter how one looks at it, 100m is still short than the required length of 124m. D.2.2. 20m clump weight: [92] At paragraph 49 of the grounds, the learned High Court Judge referred to the testimony by SP 2 when he failed to take into account that there was another 20m clump weight on each anchor to perform the hook up. The learned High Court Judge relied on the so called “concessions” by SP 2 that the tensioning works is “mathematically possible” if the 20m clump weight has been taken into account. By accepting the evidence of SP 2 which is “mathematically possible”, the learned High Court Judge is ignoring the requirements of the chain length as stated in the Installation Procedure. Essentially, the learned High Court Judge found that although the chain length was shorter than the required length as stipulated by the Installation Procedure, it was sufficient to perform the hook up. These findings are clearly flawed because:

(ii) SP 2 never conceded to the sufficiency of the chain provided by the defendant. He was asked that if the additional length of 124m was short of 8m, and the 20m clump weight was added on, would that make the chain length longer and made it possible to perform 34 the hook up to which he said it’s mathematically possible in perfect conditions but it’s not practically possible (refer to paragraph 90 of this judgment). Essentially what SP 2 meant is that with the length of the chain provided by the defendant, the hook up cannot be done, as there was not enough chain and that the procedure was not followed. As the additional chain as required was not provided, the plaintiff could not perform the work as required and no tensioning could be done. [93] The learned High Court Judge’s finding that there was sufficient chain length to perform the hook up was not supported by any technical nor expert evidence. SP 2 was the only expert witness produced. The evidence of SP 2 and the IMEC Report showed that due to the insufficient chain length provided by the defendant the hook up was impossible to perform. Therefore, the findings by the learned High Court Judge that the plaintiff had breached the contract when it failed to hook up was not supported by evidence and clearly erroneous. D.2.3. The Anchor Drop Position (paragraph 17 Memorandum Rayuan Tambahan): [94] It is undisputed that the 6 drag anchors were dropped out of its designated positions. [95] Appendix F of the Installation Procedure provides the designated location for the anchors to be dropped off (page 150 CB 1). The IMEC Report 35 dated 20.8.2013 recorded the 6 anchors were indeed dropped not at the target position. [96] The learned High Court Judge accepted this fact. However, she found that the error could be remedied by moving the anchors into the correct position, which the plaintiff failed to do (paragraph 61 of the grounds). Her basis was based on the evidence of SP 2 where she had reproduced at paragraph 50 in her grounds, that it was possible to move the anchors. [97] However, a perusal of the evidence of SP 2 which was reproduced by the learned High Court Judge at paragraph 50 of her grounds does not seem to suggest that SP 2 said conclusively that the anchors could be moved given the insufficiency of the length of the chain provided by the defendant. In fact when it was suggested to SP 2 that it was possible to move the anchors to the designated position, SP 2 did ask the counsel for the defendant “using what”. Essentially the evidence points to the fact that due to the shortage of the chains it was not possible to move the anchors to the desired position. Hence the findings of the learned High Court Judge that it was possible to move the anchor to the designated position, is without any expert evidence nor consideration. This is a situation of where 6 anchors dropped onto the seabed in the middle of the ocean and the existence of a marine spread with specific functions none of which were to pull up the anchors (as opposed to dropping them down) and re-drop them in a different location. This was precisely what SP 2 meant when he was asked whether it was possible to move the anchors and he replied “using what”, as the marine spread was not to function as such. SP 2 questioned back counsel when he was asked as to the possibility of lifting the anchors and re-drop back to the ocean bed, as 36 what vessel or equipment to be used to lift the anchors and re-drop them back into position. Given the Installation Procedure did not stipulate the option to re-lift from the seabed and re-drop the anchors back to the sea bed; for the court to accept that the anchors could have been moved in deep sea conditions (without addressing as to what vessels and equipment were to be introduced to the site to perform this task and who was to bear the costs of the same) was misconceived. [98] SP 2 also said in his testimony that even if it was possible to move the anchors, it would not have changed anything (page 621 RR (B) Jilid 3/4) because that is where they were supposed to be dropped off in the first place and to do that a chain length of 124m is still required, which in this case there was no required length provided by the defendant. D.2.4. Capability and Capacity of Vessels (paragraphs 15, 16, 18 of the Memorandum Rayuan Tambahan): [99] Apart from finding that the plaintiff has failed to establish that the hook up of the chains to the stevtensioner failed due to insufficient chains, the learned High Court Judge also found that the probable cause of the hook up failure was, as contended by the defendant, due to the fact that the vessel was underpowered (paragraph 54 of the grounds.) [100] It is undisputed that the plaintiff’s obligation is to provide vessels (termed as marine spreads) used for the project. These vessels or marine spread is stipulated in the Installation Procedure. When the hook up could not be performed, the defendant requested the plaintiff to change the marine 37 spread in its email dated 13.8.2013 (pages 405-406 of CB 1). The email states: “it is found that the existing marine spread is not capable to performed (sic) the job due to safety and vessel limitation itself…. Our proposal is to use AHT with bigger capacity of bollard pull for the tensioning works and installation of chain to buoy using air tugger”. The defendant raised issue with the vessels provided by the plaintiff, namely the crane barge Tat Hong 819 and the anchor handling tug (AHT) Setia Jaguh (page 379 of CB 1). It is not in dispute that the crane barge Tat Hong 819 was specified in the Installation Procedure (page 53 CB 1). But at trial the instability of Tat Hong 819 was abandoned by the defendant. What remains to be an issue is the AHT Setia Jaguh. [101] What appears to be not an issue is the fact that AHT Setia Jaguh was identified in the Installation Procedure as MMS Pahlawan 2 with a bollard pull of 60 tonnes. The plaintiff chartered Setia Jaguh, an alternative vessel after the demobilization of MMS Pahlawan 2 as it has been chartered to another project by then. It is also not in dispute that Setia Jaguh’s bollard pull was 105 tonnes which in fact was more than the bollard pull of MMS Pahlawan 2. SP 2 in his evidence said that: “The AHT, “SETIA JAGUH’ was chartered in as replacement for “MMS PAHLAWAN 2”. “SETIA JAGUH” is bigger, more powerful and has a higher bollard pull… 38 ……The replacement of AHT was more powerful. It should be remembered that MTCE/MTCS considered the less powerful MMSP2 adequate for the task in hand and the MTCS Installation procedure had been verified and approved on that basis. Even “LANPAN 21” had been considered acceptable.” [102] The learned High Court Judge erroneously concluded that Setia Jaguh was underpowered premised upon the contents of the IMEC Report which is the Marine Warranty Surveyor appointed by Ardent, the plaintiff’s sub-contractor which states in its Surveyor Log (P6) as follows: “Setia Jaguh itself cannot do the tensioning since the BP is only 100MT while 150MT is needed for the tensioning test.” [103] The learned High Court Judge misconstrued the above said contents of the IMEC Reports. Nowhere does the report says that Setia Jaguh was underpowered. It is a fact that Setia Jaguh cannot do tensioning as it was never intended to do so, as Setia Jaguh was an anchor handling tug which was never meant for tensioning or pulling the chain to the crane. The Installation Procedure sets out the task of the AHT and its function is to pick up the anchor wire and have it connected to the crane barge (Refer to Anchor Deployment Procedure at page 60 CB 1). This was supported by the report of SP 2 which the learned High Court Judge failed to consider which sets out the intended use of the vessels, namely sections 4.2, 13.2 and 13 of the Expert Report, with particular reference to section 13.2.3 on the function of Setia Jaguh (page 508 of CB 1) which states: “13.2.3 …..The reason that a lower bollard pull tug could be utilized is because the plan required cross-tensioning to be completed using a Stevtensioner prepared on the deck of TH819 and not by the AHT itself. 39 In this section, I will show that Setia Jaguh was in fact used in a manner that had not been planned for although ultimately, that also failed.” The report of SP 2 further said that: “13.4.8…..They also note that, “Setia Jaguh itself cannot do the tensioning since the BP(Bollard Pull) is only 100MT while 150MT is needed for the tensioning test.” However, the installation procedure in 14.4 of the IPCB directs that the tug is only used for bringing the anchor chain pennant or buoy wires to TH 819 and that the crane on the latter is used for yo-yo-ing the tensioner. It was never intended that the tug be used for tensioning.” [104] From the evidence, the pre tensioning works are supposed to be done by the crane barge by way of cross tensioning. This is evident by the testimony of SP 2 who said that: “…according to procedure, the (sic), it was never intended for either of the anchor handling tugs to actually tension the cables, tension the anchor chains, that was clearly stated as being the Stevtensioning technique which would be done by the crane involving a tug trying to tension a chain was outside the procedure.” (page 406 RR (B) Jilid 2/ 4)) Further at page 431 RR (B) Jilid 2/4), SP 2 said: “Q:…I would like to ask you, the defendant asked the plaintiff to provide other options for a marine spread. And they suggested the Plaintiff should use a anchor handling tug with a bigger capacity of Bollard pull and installation of a chain using an air tugger. Can you tell the Court what your comment is about that in relation to the installation Procedure? 40 A: ….as soon as you start talking about using a tug to tension a chain, you are already departing from Installation Procedure. And there is no contingency in the Installation Procedure to do that. So we would have to sit down and decide what was in new Installation Procedure and draw out such a procedure or an amendment to the procedure. The air tugger idea, I believe it’s we put a new winch on top of the convoy and that heaves the chain so that we can connect it to the convoy. But you have already, as soon you use a tug to tension the chain, you are already departing from that procedure.” [105] Therefore, from the aforesaid, the learned High Court Judge erred when she held that the hook up could not be done due to the vessels provided by the plaintiff being underpowered. The plaintiff had chartered the requested vessels as stipulated under the Installation Procedure. Therefore any incapacity or under power of the vessels was due to the defendant’s in stipulating the requirements of the vessels in the Installation Procedure. [106] The learned High Court Judge also erred when she relied on the single entry in the IMEC Report dated 20.3.2013 (page 1126 CB 3) to hold that the anchor handling tug (AHT) Setia Jaguh was under capacity. The entry “Setia Jaguh itself cannot do the tensioning since the BP is only 100MT while 150MT is needed for tensioning test.”, does not establish that Setia Jaguh was under capacity, because:

20.5.2013 - 1.6.2013/2.6.2013 - 15.7.2013 (page 9760, 1102 CB3):  Mr. Asral Fikri, representative-MTC Engineering Sdn Bhd;  Captain Hamzah Mohammad, Construction Supt-MTC Subsea Sdn Bhd;  Mr. Harris Shariff, Field Engineer-MTC Subsea Sdn Bhd;  Mr. Tawfik Ahmad Fadzil-MTC Subsea Sdn Bhd.

(ii) 23.7.2013 - 16.8.2013 (page 1102 CB 3):  Ir. Amin Syakir Latib, Representative-MTC Engineering Sdn Bhd;  Mr. Khairul Anwar Ibrahim, Operation Manager-Ardent Sea-Tramp Sdn Bhd;  Mr. Mohd Anuwar Hamzah, SAAEM HUC Engineer-AAEM/Ardent Sea-Tramp Sdn Bhd;  Mr. JP Heeren, Stevetensioner Engineer-Mooreast/MTC Engineering Sdn Bhd. [111] Further the MTCE Daily Progress report were signed off by an “Offshore Construction Manager NAME: Capt Hamzah Mohamad”, followed by the stamp of MTCS next to his name. [112] The learned High Court Judge at paragraphs 56 and 57 of her grounds said that although Captain Hamzah signed off the Daily Progress Reports 43 with the stamp of MTCS and described as MTCS’s representative in the reports, they do not show that he is therefore MTCE’s representative because of the doctrine of separate legal entities. [113] The learned High Court Judge’s basis for holding that Captain Hamzah was the plaintiff’s representative was because of an email dated 1.2.2013 (page 313 of CB 1) using an email address of “capt.hamzah@seatramp.my” and the fact that Captain Hamzah was a director of Ardent. However, to rely on these to form a basis to support the learned High Court Judge’s findings that Captain Hamzah was the plaintiff’s representative in his capacity as OCM for the project, is indeed erroneous. There are more substantive, relevant and authoritative documents like the IMEC reports and the Daily Progress Reports which were prepared on site which sets out the capacities of parties involved in the project recorded in a contemporaneous manner. The IMEC Reports at page 960, 1102 CB 3 that IMEC acts for MTCS. [114] In fact the email address of Captain Hamzah which was relied upon by the learned High Court Judge as a basis to conclude that he was a representative of the plaintiff, was before the commencement of the MTCE Contract, which hardly can be termed as contemporaneous. It is also in evidence that Captain Hamzah had used various email address, e.g. in an email dated 22.1.2013 at page 312 of CB 1) he uses hamzah@ corromasters.com. SP 3 explained that he has assigned that email address to Captain Hamzah to use as they had worked together on other matters e.g. loading masses on cargo. 44 [115] The fact that Captain Hamzah was appointed as director of Ardent does not make him an Ardent representative as OCM. A person may be a director of various companies without being employed in any of them. This does not conclusively proved that he was a representative of the plaintiff. [116] As to the credibility of PW 3 which the learned High Court Judge found to be in doubt due to the fact that he was a bankrupt and that he had not obtained leave from the court to act as Ardent’s director; we found that the learned Judge erred in using this as a basis in deciding the reliability and credibility of the evidence of PW 3. When considering the credibility of witnesses (regardless of whether they are a bankrupt), it is trite to test their veracity by reference to the objective facts proved independently of their testimony, in particular by reference to the documents in the case, namely the IMEC reports and the Daily Progress Reports. Even without the evidence of PW 3, the IMEC reports and the Daily Progress Reports are sufficient to support the plaintiff’s case that Captain Hamzah is indeed the defendant’s representative. E. TERMINATION: [117] Given the aforesaid, the Judge was plainly wrong in coming to the conclusion that the plaintiff was in breach of the LOA. [118] The defendant terminated the contract due to the plaintiff’s alleged failure to change the marine spread and delay on the part of the plaintiff to complete the works. 45 [119] On the alleged failure on the part of the plaintiff to change the marine spread, we have addressed this issue in paragraphs 99-107 in this judgment. The termination letter of the defendant also mentioned delay on the part of the plaintiff. The said letter mentioned that the contract duration of the subcontract of the plaintiff began on 6.3.2013. However, the evidence showed that the loading out instruction was only issued on 25.5.2013. Therefore, to say that the subcontract of the plaintiff has yet to be completed by 9.6.2013 was incorrect and misconceived. Further, the allegation that the plaintiff as subcontractor had demobilized the marine spread, is also incorrect. It was Captain Hamzah, the defendant’s representative, who had demobilized the same on 13.7.2013, when he resigned. [120] Hence the termination by the defendant was without just cause and therefore wrongful. It must therefore necessarily follow that the plaintiff is entitled to damages for the wrongful termination of the same. F. CONCLUSION: [121] Given the aforesaid the learned High Court Judge was plainly wrong in coming to the conclusion that the plaintiff was in breach of the MTCE contract. [122] As the MTCE contract was unlawfully terminated, the plaintiff is entitled to damages for wrongful termination. [123] We allowed the appeal with costs here and below. The order of the learned High Court Judge is set aside and judgment to be entered in favor 46 of the appellant/plaintiff with the result that the counter claim is dismissed. Damages to be assessed for wrongful termination of the contract. Signed by: Zabariah Mohd Yusof Judge Court of Appeal Putrajaya Date: 18.6.2019 COUNSEL: Shanti Morgan & Hee Hui Ting for the Appellant [Messrs. Shearn Delamore & Co] Norazali bin Nordin, Danial Rahman bin Yang Razali, Mohamad Nizam bin Mohd Salleh for the Respondent [Messrs Maxwell Kenion Cowdy & Jones]