MANGKUBUMI SDN BHD v Kosi Enginering Sdn Bhd (WA-22NCC-479-10/2020)

Adalah dengan ini dimaklumkan bahawa pihak pengurusan telah menilai serta memutuskan untuk mengenakan kadar faedah sebanyak 8.85% setahun berkuatkuasa serta-merta kepada pihak subkontraktor yang ingin memohon Bayaran Pendahuluan. Kadar faedah yang dikenakan ini adalah bersesuaian dengan caj yang dikenakan kepada kami diatas kemudahan pinjaman yang disediakan oleh pihak bank.

Oleh yang demikian, pihak tuan dikehendaki mempertingkatkan kelancaran kemajuan kerja fizikal di tapak bagi mengurangkan tempoh masa pinjaman serta memastikan projek dapat disiapkan dalam tempoh masa yang ditetapkan. Kerjasama dan perhatian dari pihak tuan mengenai perkara di atas amatlah dihargai dan diucapkan ribuan terima kasih.” [28] Mangkubumi, through the evidence of DWI, admitted to not suffering any losses and Kosi did not cause any delays in the project. His evidence during cross-examination was: “LKH: Selain daripada itu, anda juga-Plaintif juga memberi bayaran kepada pihak Ketiga iaitu RM137,000.00, RM140,00.00 dan RM251,000.00 setuju? Setuju. Apabila anda membuat bayaran ini bagi pihak ketiga ini, setuju dengan cadangan saya, pihak Plaintif menerima manfaat iaitu mendapat bahan-bahan yang dibekalkan, setuju? Setuju. Oleh itu, saya cadangkan apabila bayaran ini dibuat, Plaintif tidak mengalami kerugian kerana menerima manfaat, setuju? Plaintif? Menerima manfaat daripada pembayaran kepada pihak ketiga ini. Oleh itu, Plaintif tidak mengalami kerugian, setuju? Setuju.” [29] Therefore, Mangkubumi has no legal right to charge the 8.85% interest on these amounts. Therefore, any accumulation of interest on these payments is unjustified. [30] Kosi was only agreeable to the 8.85% interest rate only if Mangkubumi provides substantive documented proof that it corresponds to the interest charged by Ambank and that the advance payment is intended for Kosi’s suppliers to carry out the works under the project. Evidence is required to support the rate of 8.85% interest as the agreement between Mangkubumi and Kosi is based on the understanding that Mangkubumi supports the procurement of materials necessary for the project. Mangkubumi has failed to provide documentary evidence to support its claim that the rate of 8.85% interest is based on what was charged by Ambank. Thus, the burden of proof on Mangkubumi according to Section 101 of the Evidence Act 1950 is not discharged. In contrast, Kosi has presented documentary evidence to substantiate its claim, fulfilling the requirements of the Evidence Act. Mangkubumi’s failure to provide evidence renders the source of the accumulated amount of RM100,570.43 as interest charges to be unsubstantiated. [31] Kosi’s offer of an 8.85% interest rate was intended to be a bilateral contract, not a unilateral one, and Kosi’s silence does not constitute acceptance. Kosi’s silence in response to Mangkubumi’s letter dated 6.8.2018 and the obligation under clause 25(h) of the Letter of Award does not constitute acceptance of the 8.85% interest rate. [32] Silence does not amount to acceptance. In Seloga Sdn Bhd v UEM Gynisys Sdn Bhd [2007] 7 MLJ 385 (Court of Appeal) it was stated: “[62] Even if the respondent had not responded to the appellant’s letters dated 17 November 1999 and 11 December 2000, silence on their part would not constitute acceptance. In relation to this, we would refer to Halsbury’s Laws of England (4th Ed) Vol 9 at p 123 which reads:

Mode of acceptance: (2) by silence. Where the offeree is silent following the offer of a bilateral contract, a distinction must be drawn between the act of acceptance and communication of acceptance. It is not always necessary that acceptance be communicated before it becomes effective, but there must be an act of acceptance. The general rule is that if the only facts are that there has been an offer followed by silence on the part of the offeree, there is no acceptance of that offer, though there might be liability to pay a reasonable sum for any benefit received. Thus, the offeror cannot bind the offeree against the latter’s will by expressly stipulating that, if the offeree does nothing, he will be bound to a contract, or to a variation of an existing contract.” [33] The case of Agromate (M) Sdn Bhd v Felcra Niaga Sdn Bhd [2022] 1 LNS 1655 (Court of Appeal) demonstrates that it is only when there is a pre-existing business relationship and long-standing course of dealing between parties that silence or failure to object to contractual terms will amount to acceptance of terms offered. Here, the parties had been doing business together for years under invoices and delivery orders containing late payment interest term. The defendant never objected and continued accepting delivery of goods pursuant to those terms. This conduct was held to indicate assent and acceptance of the interest term. [34] Mangkubumi and Kosi did not have the type of relationship where there were invoices with interest charges indicated not objected to over a long period as present in Agromate. Further, Kosi has expressly accepted the interest rate for certain amounts (the sums of RM140,000.00 and RM251,200.00.13) but has not accepted it for other amounts (RM180,000.00, RM137,012.41 and RM150,000.00). Kosi’s silence on those specific amounts cannot be interpreted as acceptance or agreement to the 8.85% interest rate. [35] Clause 25(h) of the Letter of Award states that the sub-contractor (Kosi) is responsible for bearing and paying the interest charge if it is related to financial assistance from a bank. Clause 25(h) of the Letter of Award reads: “(h) The Sub-Contractor shall aware if there any lawyer / legal fees and financial assistance from the bank and there is interest charged, it shall be borne and paid in full by the Sub-Contractor.” [36] As Mangkubumi is not a bank, as admitted by DW1, Mangkubumi’s witness during cross-examination, Mangkubumi cannot impose the responsibility of interest payment on Kosi based on Clause 25(h) Letter of Award. [37] It is noted that Mangkubumi denies being a lender or financial institution but relies on Clause 25(h) Letter of Award which obliges Kosi to pay the 8.85% interest for financial assistance from a bank to place the burden of paying the 8.85% interest onto Kosi. Mangkubumi is thus approbating and reprobating which is not allowed as held in Cheah Theam Kheng v City Centre Sdn Bhd (In Liquidation) and Other Appeals [2012] 1 MLJ 761. Mangkubumi’s charging of interest is in violation of Section 5(1) Moneylenders Act 1951, as it does not have the right to engage in money lending without a licence. Section 5(1) Moneylenders Act 1951 provides: “5(1) No person shall conduct business as a moneylender unless he is licensed under this Act.” [38] Mangkubumi argues that its lack of a licence to charge interest for advance payment was not pleaded by Kosi. However, the court views this argument as only a tactical move by Mangkubumi. Mangkubumi is aware that it does not have a licence to charge interest since it is not a financial institution or bank. The ability of Mangkubumi to charge interest is integral to the issue of whether the remaining balance that still needs to be paid by the Mangkubumi to Kosi is RM137,213.16. The court therefore rejects Mangkubumi’s submissions on the unpleaded issue of Mangkubumi’s lack of licence to charge interest for advance payment. [39] In relation to the amounts of RM180,000.00 and RM150,000.00, which Mangkubumi claims to be part of the RM858,212.41 it contends to be the total advance payments to Kosi’s suppliers, the court finds that these were payments made by Mangkubumi for “Insurance Advance Payment” related to repairworks that were not part of the Project which Kosi completed as per Mangkubumi’s request. During DW1’s cross-examination, his evidence was equivocal as after initially agreeing the payments were part of interim payments under the contract, he then conceded upon further questioning that the vouchers described the payments as “Advanced Payment”, confirming Mangkubumi’s contention that these amounts were meant for insurance advance payments, not project interim payments. The relevant part of DW1’s cross-examination from the Notes of Proceedings is as follows: “LKH: Kini saya merujuk anda kepada muka surat 105, bundle B1. Ok. Daripada penyata ini yang dikeluarkan oleh pihak Defendan, terdapat 2 bayaran dibuat dan RM180,000.00, setuju? Setuju. Jumlah ini, adakah termasuk dalam jumlah yang dinyatakan oleh pihak anda tadi, iaitu interim bayaran di bawah kontrak-dibawah LA tersebut? Ya, setuju. Maksud bayaran kepada pre-financing. Merujuk kepada muka 98 di bahagian B perenggan B, kurungan A kurungan, satu bayaran interim ini. RM10,703,319.60. Ini jumlah yang telah dibayar oleh pihak Plaintif kepada Defendan. Betul? Ya. Jumlah ini boleh meliputi jumlah yang tadi dirujuk iaitu dan RM180,000.00 ini, betul? Faham soalan saya? Tak Faham. Ok, saya merujuk anda tadi di m/s 105 untuk jumlah RM180,000.00 dan RM150,000.00. Ok, nampak 2 jumlah itu? RM150,000.00 RM180,000.00, betul? Betul. RM150,000.00 dan RM180,000.00 ini, jumlah ini adalah termasuk dalam jumlah interim bayaran di 98. Betul? Betul. Ya, betul. Betul. Dan jumlah detail untuk bayaran RM180,000.00 ini dapat dilihat di m/s 55 - 56, betul? Betul. Dan detail untuk bayaran RM150,000.00 di m/s 65 - 66? Betul. Betul. Kalau kita rujuk kepada m/s 55, wujud perkataan Advanced Payment. Ya, jika dibandingkan dengan seperti yang anda nyatakan tadi di m/s 105. Ok. Nampak tak di situ insurans payment 15 - Untuk RM180,000.00 itu, bayaran dibuat pada 23 Januari 2019. Betul. Dan bayaran untuk RM180,000.00 ini dibuat pada 15 April 2019. Betul? Betul. Ini bererti pada masa bayaran ini dibayar, Kalau anda tengok voucher di m/s 55, adalah lebih awal daripada tarikh insurans membuat bayaran. Betul? Awal daripada? Tarikh insurans membuat bayaran, betul? Betul. So, itu adalah ertinya Advanced Payment, betul? Betul.” [40] As shown in the foregoing section on Kosi’s claims for repairworks, after deducting these amounts from the total requested payment of RM521,482.34, Mangkubumi still owes Kosi RM191,482.34. Mangkubumi has no legal right to charge the 8.85% interest on these amounts, and any accumulation of interest on the sums RM180,000.00 and RM150,000.00 is unjustified. [41] Considering all the above, the court finds that there is only an amount outstanding from Mangkubumi to Kosi of RM528,212.41 (“the Advance Payment Amount”) in relation to the amount paid by Mangkubumi to Kosi’s suppliers as advance payments. This leaves a balance of RM137,213.16 after the Advance Payment Amount is deducted from the balance total claim amount of RM665,426.02. Outstanding payment for repairworks [42] Kosi adduced a summary dated 3.5.2021 in table form (“the Repairworks Table”) showing repairworks it performed on Mangkubumi’s request. This is produced below: [43] Mangkubumi’s position is that out of the five repairworks contained in Kosi’s Repairworks Table, only Items 1, 2, and 4 Repairworks are in dispute as Mangkubumi’s witness acknowledged that Items 3 and 5 Repairworks would be charged back to the subcontractor. Mangkubumi contends that the total amount that should be paid to Kosi for these repairworks is RM265,224.98, but Mangkubumi received payments from the insurance company for Items 1 and 2 Repairworks, which were not paid to Kosi. Instead, these payments were used to offset the outstanding advance payments owed by Mangkubumi to Kosi. Therefore, the remaining unpaid amount for the repairworks is RM49,924.00 (RM5,540 for Item 3 Repairworks and RM44,384 for Item 5 Repairworks). [44] Mangkubumi maintains that it does not owe any outstanding amount to Kosi for Item 1 Repairworks and contends and submits as follows: a) Mangkubumi has already paid Kosi for Item 1 Repairworks. Kosi alleges that it is owed for Item 1 Repairworks, but Mangkubumi explains that this amount was actually an advance payment to Kosi’s suppliers which had already been paid, as evidenced by Mangkubumi’s letter to Kosi dated 15.4.2019 and Mangkubumi’s Payment Voucher dated 15.4.2019. b) The payment for Item 1 Repairworks was made through the evaluation and payment by the insurer, MSIG, as agreed upon in discussions with Kosi. Mangkubumi received payment for Item 1 Repairworks from MSIG for a sum of RM111,829.58 as evidenced by the Maphilindo International Sdn Bhd letter dated 15.6.2020. c) Despite Kosi’s denial, Kosi had been informed, knew, and agreed that payment for Item 1 Repairworks would be made by the insurer, supported by evidence such as submissions for Item 1 Repairworks dated 1.11.2018 carbon copied to the Maphilindo International Sdn Bhd and Kosi’s participation in the repairworks. There is no evidence to support of Kosi’s disagreement to this payment method. [45] Mangkubumi maintains that it does not owe any outstanding amount to Kosi for Item 2 and contends and submits as follows: a) The payment of RM180,000.00 alleged by Kosi for Item 2 Repairworks was actually an advance payment and not specifically for Item 2 Repairworks, supported by evidence such as Mangkubumi’s letter to Kosi dated 15.4.2019 and payment voucher 23.1.2019 and acceptance by Kosi’s personnel. b) Item 2 Repairworks was paid through the insurer, with evidence of Kosi’s submission for Item 2 Repairworks dated 28.12.2018 which was carbon copied to Maphilindo International Sdn Bhd and payment into Kosi’s account. [46] Mangkubumi refused to pay for Item 4 Repairworks as the repair work for Item 4 Repairworks conducted by Kosi not only failed to solve the problem but also caused delays in the project. Mangkubumi contends and submits as follows: a) Damage to Telekom Malaysia's cable was not repaired and Kosi failed to comply with instructions. b) Kosi’s incident report, although disputed as to its authorship, acknowledges the concrete blockage and deviation of the cable routing. This proves that Kosi’s work was not safe and did not meet Mangkubumi’s instructions. c) Mangkubumi is entitled to compensation under Section 74 of the Contracts Act 1950 for the non-performance and delays caused by Kosi. In this case, Mangkubumi seeks compensation by not paying for Item 4, as Kosi failed to rectify the cable damage. [47] Kosi’s position is that Mangkubumi owes it RM191,482.34 for the repairworks performed at Mangkubumi's request. The repairworks were not part of the original contract but were requested by Mangkubumi as variation orders. Kosi completed the works and submitted bills totaling RM521,482.34. This consists of Kosi’s claims for Item 1 Repairworks amounting to RM202,150.34, Item 2 Repairworks amounting to RM213,404.00, Item 3 Repairworks amounting to RM5,540.00, Item 4 Repairworks amounting to RM56,004.00, and Item 5 Repairworks amounting to RM44,384.00, all of which were requested and completed by Kosi at Mangkubumi's request. [48] Mangkubumi has made partial payments of RM330,000.00 as an advance payment. After deducting the advance payment, the remaining amount owed by Mangkubumi is RM191,482.34. [49] Kosi relies on the precedent set in Era Kemuncak Jaya (M) Sdn Bhd v Tenaga Switchgear Sdn Bhd [2021] MLJU 1855, for the proposition that when repairworks are requested by Mangkubumi and completed by Kosi, Mangkubumi is obligated to reimburse Kosi for the cost of those works. [50] Mangkubumi has admitted to repairworks for Item 3 Repairworks i.e. RM5,540.00 and Item 5 Repairworks i.e. RM44,384.00. Thus, the following are Kosi’s submissions relating to Item 1 Repairworks, Item 2 Repairwoks and Item 4 Repairwoks: a) Kosi submitted the insurance claim for Item 1 Repairworks, which was handled by Mangkubumi's insurance company. The insurance claim amount was adjusted to RM186,829.58, but Mangkubumi only received RM111,829.58 after deducting the excess amount of RM75,000. Mangkubumi should pay the full repairworks claim amount of RM202,150.34 or at least the adjusted value of RM186,829.58, as Kosi is not responsible for the excess amount under the insurance policy. Kosi, not being a party to the insurance claim, cannot be held liable for the excess amount. b) Kosi submitted an insurance claim for Item 2 Repairworks, which was to be paid by Mangkubumi's insurer. The insurance claim amount was adjusted to RM153,471.40, but Mangkubumi only received RM103,471.40 after deducting the less excess amount of RM50,000. Mangkubumi should pay the full repairworks claim amount of RM213,404.00 or at least the adjusted value of RM153,471.40, as Mangkubumi, being the insured party, is responsible for the less excess amount under the insurance policy. Mangkubumi cannot impose the less excess amount on Kosi, as it is the insured's responsibility to pay for it. c) Mangkubumi admitted that the cables damaged in Item 4 Repairworks were not caused by Kosi, but by a third party, YCH Sdn. Bhd. Mangkubumi requested Kosi to repair the cables. Since the damage was caused by YCH and not by Kosi, Kosi is not liable to indemnify Mangkubumi under Clause 17 of the Letter of Award. Mangkubumi admitted to Clause 17, which states that the subcontractor (Kosi) shall only indemnify the contractor (Mangkubumi) for breaches caused by the subcontractor. As the damage was not caused by the subcontractor, Kosi argues that it is not obligated to indemnify Mangkubumi. Therefore, Mangkubumi should honour the claim of RM56,004.00 in full for Item 4 Repairworks. [51] The court rejects Mangkubumi’s contentions that the amounts of RM150,000.00 and RM180,000.00 were not meant as an advance payment for the Item 1 Repairworks and Item 2 Repairworks respectively. [52] From an examination of the Repairworks Table, it is clear that the amounts of RM150,000.00 and RM180,000.00 were not intended to be deducted from Item 1 Repairworks and Item 2 Repairworks individually, but rather the total amount of RM330,000.00 (RM150,000.00 + RM180,000.00) should be deducted from the overall sum of RM521,482.34, which includes the costs of all 5 repairworks in totality. [53] Mangkubumi’s payment vouchers dated 15.4.2019 and 23.1.2019 show that both the and RM180,000.00 were labeled as “ADVANCE PAYMENT - TG KARANG PROJECT.” This indicates that the payments were intended as insurance advance payments for all five repairworks in Tanjong Karang. [54] During the re-examination, PW1 confirmed that the payment vouchers specified “ADVANCE PAYMENT” and that there was no mention of repairworks. The documents therefore clearly indicate the nature of the payments and that Mangkubumi’s arguments cannot be sustained. [55] With regards the payment for Item 1 Repairworks and Item 2 Repairworks, the court finds that Kosi's arguments are more compelling. Although there was payment for Item 1 Repairworks and Item 2 Repairworks that was made through the insurer which Kosi agreed to, there is no justification for deducting the excess amounts of RM75,000.00 and RM50,000.00 respectively from the claimed amounts. The inclusion of the excess clause in an insurance policy is a risk allocation measure typically aimed at limiting the insurer's liability, which is agreed to by the insured party contractually. However, it should not unfairly shift the burden onto Kosi, who reasonably expected to be reimbursed for the full amount of the works performed. Kosi should not bear the consequences of an insurance arrangement, which it is not a party to, that does not adequately cover its expenses. From an equitable standpoint, it is fair and just that Kosi receives the full amount for the works performed. Kosi fulfilled its obligations under the contract and should not be penalised for limitations or deficiencies in Mangkubumi’s insurance coverage. However, given that an adjustment by the insurer is made for the repairworks bills, this should be taken into account as it could reasonably be expected by Kosi that it will be subjected to the adjustment when it agreed to be paid by the insurer. Therefore, Kosi should be paid the adjusted value of RM186,829.58 for Item 1 Repairworks and RM153,471.40 for Item 2 Repairworks. [56] I now turn to Item 4 Repairworks. The court does not accept Kosi’s argument that based on Clause 17 of the Letter of Award, Kosi is not responsible for damages caused by a third party during the Item 4 Repairworks, Mangkubumi should pay the full amount claimed for Item 4 Repairworks, which is RM56,004.00. Kosi’s reference to Clause 17 of the Letter of Award is irrelevant, as the real issue for Item 4 Repairworks is not who damaged the cable but rather whether Kosi performed the repair work to Mangkubumi’s satisfaction, a matter not addressed in Kosi’s submission. [57] The evidence before the court establishes that Kosi failed to conduct the repairworks properly and in accordance with Mangkubumi’s instructions. Damage to Telekom Malaysia's Fibre Optic Cable was reported at multiple locations, attributed to Kosi’s cable routing, as stated in Mangkubumi’s letter dated 18.6.2020. In the letter addressed to Kosi, Mangkubumi stated: “Perkara di atas adalah dirujuk serta laporan kerosakan yang diterima daripada pihak Telekom Malaysia (TM) melalui aplikasi whatsapp group 'Utiliti Tg Karang Sabak':- 1) 02hb Jun 2020 - Laporan Kerosakan Kabel TM Berhampiran Kawasan Pembinaan Jejantas Sungai Besar Berhadapan Klinik Kesihatan Sungai Besar (LHS) 2) 05hb Jun 2020 - Laporan Kerosakan Kabel TM Berhampiran Persimpangan Simpang 3 Loji (LHS) 3) 09hb Jun 2020 Laporan Kerosakan Kabel TM

Adalah dengan ini, pihak tuan perlu membuktikan bahawa laluan kabel yang dijalankan sebelum ini berada dalam keadaan yang selamat (bermaksud terhindar daripada gangguan kawasan pembinaar, yang sedang dijalankan seperti kerja-kerja piling, pengorekan, dan tidak berdekatan dengan laluan paip air dan lain-lain.

Pihak kami tidak teragak-agak akan mengenakan 'backcharged' kepada pihak tuan sekiranya laluan kabel yang dijalankan oleh pihak tuan tidak mengikut laluan yang sebenar (seperti lukisan pembinaan dan pengesahan kerja oleh pihak Mangkubumi dan Perunding ZAQ atau pihak JKR sebelum ini.

Maklumbalas segera terhadap perkara ini amatlah kami hargai terutamanya tanggungan sepenuhnya terhadap kos pembaikan sementara oleh pihak Telekom (jika ada) dan kos pembaikan sepenuhnya untuk kos pembaikan kekal (permanent cable).” [58] Despite Mangkubumi’s request for proof of safe routing, Kosi neglected to respond, demonstrating its failure in addressing the issue. Mangkubumi explicitly stated its right to “backcharge” Kosi if the cable routing failed to meet the required standards. Moreover, Mangkubumi informed Kosi in its letter dated 29.7.2020 to Kosi that piling works had to be halted due to damage to Telekom Malaysia's cable on 2.6.2020 causing delay in the piling works which resulted in a setback to the completion of the entire project. [59] Based on an incident report in Kosi’s letter to Mangkubumi dated 4.8.2020, it is evident from the report that Kosi’s cable routing was not safe as requested or instructed by Mangkubumi. The report confirms that the cable routing had deviated to the main road due to concrete blockage, rather than following the intended route. [60] The court recogniwes Mangkubumi's right to withhold payment to Kosi for Item 4 Repairworks, justifying it under Section 74 of the Contracts Act 1950. Section 74 provides that when a contract is breached, the party harmed by the breach can seek compensation from the party responsible for the breach. This compensation includes any loss or damage that naturally resulted from the breach or was anticipated by both parties at the time of contract formation. However, it excludes any loss or damage that is indirect or not a foreseeable result of the breach. Therefore, Mangkubumi is entitled to compensation for the losses incurred due to Kosi's non-performance, which led to delays in the project. [61] In conclusion, the total amount chargeable by Kosi to Mangkubumi for Items 1, 2, 3 and 5 Repairworks is RM390,224.98. This is broken down as follows: a) Item 1 Repairworks: RM186,829.58; b) Item 2 Repairworks: RM153,471.40; c) Item 3 Repairworks: RM5,540.00; and d) Item 5 Repairworks: RM44,384.00. [62] After deducting the advance payment of RM330,000.00 from the total amount of RM390,224.98, the remaining balance that Mangkubumi is liable to Kosi for the Repairworks is RM60,224.98. Mangkubumi’s defence of set-off [63] Mangkubumi’s position is that Kosi is entitled to be indemnified and recover its legal cost of RM510,730.00 incurred in Suit 187 pursuant to the Letter of Award and the Akujanji dated 27.2.2020. This is the basis of Mangkubumi’s defence of set-off, claiming that when this legal cost of RM510,730.00 is deducted from Kosi’s counterclaim amount, Kosi’s claim is extinguished. [64] In respect of the Letter of Award, Mangkubumi contends and submits as follows: a) Mangkubumi is entitled to be indemnified by Kosi for the payment of RM1,163,211.93 made to Ambank as part of an amicable settlement in Suit 187 between Ambank and Mangkubumi. b) The Facility provided by Ambank was intended to finance approved progress claims, issue letters of credit, and provide general working capital related to the Letter of Award. c) Kosi and Ambank reached a settlement during the appeal proceeding, resulting in Mangkubumi making the payment to Ambank, fully discharging both parties' liabilities towards Ambank. d) While Kosi agrees to deduct the payment from its total claim, it disputes the obligation to indemnify Mangkubumi for the legal costs incurred in defending the legal action initiated by Ambank. e) The indemnity charges demanded for the payment made to Ambank and the legal costs incurred are justified by the provisions of the Letter of Award and Akujanji. f) Under Clause 17 of the Letter of Award, Kosi is required to indemnify Mangkubumi for all liability, charges, and expenses incurred as a result of any breach, undertakings, obligations, or omissions by Kosi in carrying out the Works. g) Additionally, Clause 21 of the Letter of Award grants Mangkubumi the right to set-off any expenses suffered or incurred against any monies due to Kosi. h) Mangkubumi emphasises that Kosi obtained the Facility from Ambank to support its financial needs for the Works, further supporting its argument for indemnification. [65] In respect of the Akujanji, Mangkubumi contends and submits as follows: a) The Akujanji was issued during negotiations or discussions between the parties to prevent Ambank from taking legal action. Kosi, through its directors and shareholders, confirmed its responsibility for all payments related to the Facility and agreed to indemnify Kosi against any claims, costs, and expenses arising from it. The Facility, as outlined in Ambank’s Letter to Kosi dated 28.9.2016 (“the Letter of Offer”), was intended to assist Kosi financially in carrying out the Works, including general working capital related to the Letter of Award. If the Facility was not related to the Works, Ambank would not have granted it. b) The Letter of Offer is covered under the Letter of Award and Kosi is liable for Kosi's legal costs. Kosi has paid all the legal costs incurred to the respective solicitors, as evidenced in the documents. There is no requirement under the Letter of Award or Akujanji for Kosi to consult or discuss legal fees with Kosi. The appointment of a solicitor is discretionary and that each party is free to appoint its preferred legal representation. c) The Akujanji was issued by Kosi, not by its directors and shareholders in its personal capacity. The wording, context, and sentences of the Akujanji clearly indicate that it is from Kosi and not from the individual directors/shareholders. The Akujanji was executed by the signatories as shareholders and directors of Kosi, and it pertains to the Facility involving Kosi, Mangkubumi, and Ambank. d) Despite the absence of a round rubber stamp on the Akujanji, it was officially issued by Kosi. Another rubber stamp of Kosi, containing its full name, registration number, address, and telephone number, is present on the Akujanji, similar to other official documents such as the Letter of Award. e) Even if the Akujanji was considered to be from the directors/shareholders in its personal capacity, it would not negate Kosi's primary liability, and the directors/shareholders could not be named as defendants personally. [66] To understand Mangkubumi’s position regarding the Akujanji, the full text of the document is produced below: “Kami, Roseli bin Hussein no. kad pengenalan 571026-04-5063, Zarinah Binti Dolah no. kad pengenalan 661206-10-5106 dan Mohammad Hairi Bin Rahim no. kad pengenalan 840118-14-5291 sebagai pengarah-pengarah dan pemegang saham KOSI ENGINEERING SDN BHD (No. Syarikat: 203090-K) dengan ini mengesahkan bahawa kemudahan kewangan “Domestic Recourse Factoring Facility” berjumlah RM 8,500,000.00 yang diluluskan oleh AmBank (M) Berhad hanya melibatkan pihak KOSI Engineering Sdn Bhd (No. Syarikat: 203090-K) dengan Ambank (M) Berhad sahaja. Kami juga (KOSI Engineering Sdn Bhd (No. Syarikat: 203090-K)) mengesahkan bahawa Mangkubumi Sdn Bhd (No. Syarikat: 546556-H) tiada kaitan langsung berhubung perkara di atas dan Mangkubumi Sdn Bhd (No. Syarikat: 546556- H) tidak bertanggungjawab untuk membuat pembayaran apa-apa jumlah tertunggak kepada AmBank (M) Berhad. Kami juga (KOSI Engineering Sdn Bhd (No. Syarikat: 203090-K)) akan bertanggungjawab sepenuhnya terhadap pembayaran kepada AmBank (M) Berhad serta akan mematuhi terma-terma perjanjian di antara pihak KOSI Engineering Sdn Bhd (No. Syarikat: 203090-K) dengan Ambank

(M) Berhad tersebut. Sekiranya kami ingkar di dalam pembayaran kemudahan pembiayaan di atas kepada

(M) Berhad, kami mengesahkan dan berakujanji bahawa KOSI Engineering Sdn Bhd (No. Syarikat: 203090-K) akan bertanggungjawab sepenuhnya terhadap jumlah tertunggak tersebut. Selanjutnya, kami mengesahkan dan berakujanji akan menggantirugi Mangkubumi Sdn Bhd (No. Syarikat: 546556-H) terhadap apa-apa tuntutan, kos, perbelanjaan dan tindakan yang akan di ambil atau telah di ambil oleh AmBank (M) Berhad berhubung dengan kemudahan kewangan “Domestic Recourse Factoring Facility” yang disebutkan di atas. Kami juga akan menanggung segala kerugian dari segala tuntutan kos dan perbelanjaan yang ditimpa atau ditanggung atau membebankan Mangkubumi Sdn Bhd (No. Syarikat: 546556-H) hasil dari kegagalan KOSI Engineering Sdn Bhd (No. Syarikat: 203090-K) menyelesaikan kemudahan kewangan “Domestic Recourse Factoring Facility” kepada AmBank (M) Berhad. [67] The relevant signing portion of the Akujanji is produced below: [68] Kosi’s position is that it should not be held responsible for indemnifying Mangkubumi in relation to the legal costs incurred in Suit 187 as the indemnification provision of Clause 17 does not apply to Suit 187. In this regard, Kosi contends and submits as follows: a) Suit 187 involved a failure to make payments to AmBank and was not connected to Mangkubumi's contractual obligations under the Letter of Award. During cross-examination, Mangkubumi's witness confirmed that Suit 187 was unrelated to Mangkubumi's failure to perform the sub-package works mentioned in the Letter of Award. b) According to Clause 17 of the Letter of Award, the Sub-Contractor (Kosi) is required to indemnify the Contractor (Mangkubumi) for any breaches caused by the Sub-Contractor or its representatives in carrying out the Works. However, as Suit 187 falls outside the scope of the Project works specified in the Letter of Award, Kosi is not obligated to indemnify Mangkubumi for Suit 187. [69] Clause 17 is produced below for reference: “(a) The Sub-Contractor shall save harmless and indemnify the Contractor from and against all claims, proceedings, liabilities, damages, costs, losses, charges and expenses of any nature whatsoever suffered or incurred by the Contractor arising out of or in connection with any breach caused by the Sub-Contractor or any of its agents, servants or other authorised person of the Sub-Contractor's undertakings and obligations herein and in respect of any act or omission by the Sub-Contractor in carrying out the Works.” [70] The court finds that Mangkubumi is entitled to be indemnified for legal fees amounting to RM503,020.00 and RM7,710.00 (a total of RM510,730.00) paid by Mangkubumi to its lawyers in the defence of Suit 187, including proceedings up to the Court of Appeal. This is established through the bills from Messrs Azlan Shah Sukdev & Co and Messrs Mahadi Redzuan & Co adduced as evidence, along with payment proof that corroborates with the figures testified to by Mohamed Najib in his witness statement detailing the legal costs incurred in Suit 187 across both law firms that acted for Mangkubumi. [71] Mangkubumi’s evidence in this regard as provided by DW1 (Mohamad Najib Mohamed Daud, Mangkubumi’s director) was that Kosi obtained financing via the Facility from AmBank but failed to repay it, resulting in legal action against Kosi and Mangkubumi. Mangkubumi did not acknowledge AmBank's claim and insists that Kosi bears full responsibility for the loan. A series of meetings occurred, leading to Kosi executing the Akujanji to cover AmBank's claim and all associated costs. Mangkubumi paid the legal fees and under the terms of the Akujanji, Kosi is obligated to reimburse Mangkubumi for these expenses. [72] Mangkubumi's reliance on Clause 17 of the Letter of Award to assert its right to claim and hold Kosi responsible for indemnification and the payment of expenses and costs incurred as a result of AmBank's claim is problematic because there is insufficient evidence to establish a direct link between Kosi's alleged negligence or failure to perform its Project obligations and Suit 187. There is no evidence that clearly demonstrates that Suit 187 is a consequence of Kosi's actions or omissions related to the Project. Furthermore, during cross-examination, it was acknowledged by DW1 that Suit 187 does not involve any failure by Mangkubumi to carry out the sub-package works specified in the Letter of Award. [73] However, there is no such problem in relation to the reliance of Mangkubumi on the Akujanji to claim indemnity for the legal fees for Suit 187. The last paragraph of the Akujanji clearly states that Kosi confirms and pledges to indemnify Mangkubumi against any claims, costs, expenses, and actions that AmBank may take or has taken in relation to the mentioned 'Domestic Recourse Factoring Facility'. In other words, Kosi agreed to cover all losses resulting from its failure to fulfill the obligations of the Ambank Facility and protect Mangkubumi from any financial consequences arising from it. It is not disputed that the Akujanji was executed in relation to Suit 187. [74] The only issue raised by Kosi in respect of the Akujanji was that the Akujanji was entered into by the individuals Roseli Bin Hussein, Zarinah Binti Dolah, and Mohammad Hairi Bin Rahim in their personal capacity, not on behalf of Kosi. I cannot find this to be true. From a careful examination of the Akujanji, it is clear that the Akujanji was given by Kosi, and not the individuals who signed it. The only potential argument in favour of Kosi is that the Akujanji begins with the words “Kami, Roseli bin Hussein no. kad pengenalan 571026-04-5063, Zarinah Binti Dolah no. kad pengenalan 661206-10-5106 dan Mohammad Hairi Bin Rahim no. kad pengenalan 840118-14-5291 sebagai pengarah-pengarah dan pemegang saham KOSI ENGINEERING SDN BHD (No. Syarikat: 203090-K)” which Kosi argues to mean that it is an indemnity given by the individuals stated. However, from the overall reading of the Akujanji it is clear that the words mean that Roseli bin Hussein, Zarinah Binti Dolah, and Mohammad Hairi Bin Rahim as directors and/or shareholders of Kosi are making the statements that follow. There was no indemnity given by the individuals in the paragraph. [75] The rest of the text in the Akujanji which follows from “Kami juga (KOSI Engineering Sdn Bhd (No. Syarikat: 203090-K)) akan bertanggungjawab sepenuhnya …” indicates that the indemnity is given by Kosi and not the individuals. Critically, for the purpose of the indemnity for the legal fees, it is the last paragraph that firmly establishes Kosi’s obligation to reimburse Mangkubumi for the legal fees. [76] The Akujanji document was issued by Kosi, despite the lack of Kosi’s round rubber stamp. This is supported by the presence of Kosi's other rubber stamp on the Akujanji, which includes crucial details such as the company's full name, registration number, address, and telephone number. The presence of this rubber stamp on the Akujanji aligns with the practice of using rubber stamps on official documents, as seen in other authoritative documents like the Letter of Award. [77] Given the above, the court finds that Mangkubumi is successful in proving its defence of set-off against Kosi’s counterclaim. [78] The court found above that Kosi’s counterclaim against Mangkubumi was successful for a sum of RM197,438.14. This is set-off by the legal fees incurred by Mangkubumi by way of indemnity. Deducting the Plaintiff's legal cost of RM510,730.00 from Kosi’s successful claim amount of RM197,438.14 will extinguish the whole of Kosi’s claim against Mangkubumi. There is no outstanding amount for Mangkubumi to pay to Kosi. [79] I pause here to note that the set-off as claimed by Mangkubumi satisfies the requirements of set-off as decided in Permodalan Plantations Sdn. Bhd v Rachuta Sdn Bhd [1985] 1 CLJ 62 where Salleh Abas LP observed: “The characteristics of set-off as contained in O. r. 17 are that (1) it is a cross-claim for a sum of money, ascertained or otherwise; (2) it is relied as a defence to meet the whole or part of plaintiff's claim, and (3) that it is immaterial whether it is added or not as a counterclaim as long as it is included in the defence.” [80] This defence was specifically raised by Mangkubumi in paragraph 7A (g) of the Amended Defence to Counterclaim, indicating its intention to offset any amounts owed to it against Kosi’s claim. “(g) sekiranya ditolak jumlah tuntutan balas Defendan tersebut, maka ia akan meninggalkan jumlah-RM182.034.05. Demikain itu, Plaintif tiada liabiliti dan Defendan langsung tidak berhak kepada apa jua bayarandaripada Plaintif.” [81] The defence of set-off has proven successful, as the Mangkubumi’s claim surpasses Kosi’s, resulting in a net amount owed by Kosi to Mangkubumi. Mangkubumi is therefore not liable for any part of Kosi’s claim in this action. Conclusion [82] In the premise, based on the findings of the court above, the claim of the Plaintiff in the Counterclaim is dismissed as the Defendant in the Counterclaim is successful in its defence of set-off which extinguishes the whole of the counterclaim. [83] The court orders that costs of RM15,000 is to be paid by Kosi to Mangkubumi. 4 January 2024 ATAN MUSTAFFA YUSSOF AHMAD Judge Kuala Lumpur High Court (Commercial Division) Counsel: For the Plaintiff in Counterclaim: Lim Kien Huat with Felicia Paula Mojikon (PDK) (Messrs Lee & Lim) For the Defendant in the Counterclaim: Syafiq Amani (Messrs. Mahadi Redzuan & Co)