Meridian Contracts Sdn Bhd v Bauer (M) Sdn Bhd (W-02(NCVC)(W)-1567-07/2018)

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1 IN THE COURT OF APPEAL, MALAYSIA AT PUTRAJAYA (APPELLATE JURISDICTION) SIVIL APPEAL NO: W-02(NCVC)(W)-1567-07/2018 BETWEEN MERIDIAN CONTRACTS SDN BHD … APPELLANT (No. Syarikat: 530788-P) AND BAUER (M) SDN BHD … RESPONDENT (No. Syarikat: 121194-X) In the Matter of High Court of Malaya at Kuala Lumpur Civil Suit No: WA-22NCVC-458-07/2018 Between Meridian Contracts Sdn Bhd … Appellant (No. Syarikat: 530788-P) And Bauer (M) Sdn Bhd … Respondent (No. Syarikat: 121194-X) 2 CORAM: MOHAMAD ZABIDIN MOHD DIAH, JCA HADHARIAH SYED ISMAIL, JCA AHMAD NASFY YASIN, JCA GROUNDS OF JUDGMENT INTRODUCTION [1] This is an appeal by the Appellant, the Plaintiff in the court below against the decision of the learned High Court Judge in dismissing the Appellant’s claim after trial. [2] We have read the written submission and heard counsels for both parties. [3] Having considered the materials placed before us in the records of appeal, we are satisfied that there are merits in the appeal. We accordingly and unanimously allowed the appeal. The following are our grounds in arriving at that decision. BACKGROUND FACTS [4] The dispute between the parties arose from facts that occurred commonly in construction contracts. It occurred in the following way. The Respondent was appointed by Embassy Court Sdn. Bhd. on 12.07.2005 to carry out and complete the piling and substructure works for a condominium project located on part of Lot 305, Section 63, Lorong 3 Kuda, Off Jalan Tun Razak, Kuala Lumpur. The value of this project was stated to be RM31,226,056.14. The Respondent, subsequently on 30.08.2015, appointed the Appellant to carry out the piling works. The value of the sub-contract between the Appellant and the Respondent is stated as RM10,041,468.61. [5] Embassy Court Sdn. Bhd. then failed to make payment of monies due and owing to the Respondent and this resulted in the Respondent terminating the contract with Embassy Court Sdn. Bhd. on 20.01.2007. The Respondent, subsequently proceeded to issue notice to the Appellant informing the latter of the determination of the sub-contract work. That notice dated 20.01.2007, contained, among others, the following: - “We refer to the above sub-contract and the meeting held in our office today when we informed you that we have today exercised our right under the main contract to terminate our employment under the contract following a breach by the employer in failing to pay amounts due under interim payment certificates. Pursuant to Clause 29 of the sub-contract your employment under the sub-contract is automatically determined as a consequence of our employment being terminated under the main contract.” [6] The Appellant, aggrieved with the non-payment of what it alleged as the amount due under the sub-contract work, filed a claim against the Respondent, vide Kuala Lumpur High Court No. S-22-530-2009 claiming their entitlement for the works done up to termination. That proceeding, was however stayed pending arbitration proceeding between Embassy Court Sdn. Bhd. and the Respondent. 4 [7] Subsequently, the Respondent succeeded in the arbitration proceeding and was awarded a sum RM18,718,966.28 on 03.12.2012. [8] Premised on the arbitration award, the Appellant and the Respondent negotiated and agreed that the Appellant will be paid a sum of RM6,121,660.34 and a Compromise Agreement dated 15.02.2012 was signed. The parties then signed a Settlement Agreement on 03.07.2012 on similar terms as the Compromise Agreement. [9] Subsequently, Embassy Court Sdn. Bhd. and its holding company, Magna Prima Berhad and Respondent entered into a consent judgment, and it was agreed that a sum of RM16,000,000.00 was payable to the Respondent by Embassy Court Sdn. Bhd. This, in effect, reduced the sum payable to the Respondent under the arbitration award. It must be mentioned too that in the consent judgment the agreed sum was to be paid by instalment. [10] The Appellant therefore claimed a sum of RM5,232,000.00

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pursuant to the terms of the Settlement Agreement to be settled when the Respondent received the instalment payment from Magna Prima. The first instalment of RM430,000.00 was made on 18.09.2015. [11] According to the Appellant, on 12.10.2015, the Respondent unilaterally reduced the amount payable to it to RM3,809,662.80 based on the calculation of 23.81% of RM16,000,000.00 and thereafter made payments by instalments on the reduced sums (first purported reduction). 5 [12] The Appellant said it objected to the unilateral reduction, but that did not stop the Respondent, who further varied the Appellant's entitlement vide its letter dated 18.12.2015 reducing the entitlement to RM2,660,538.84 (second purported reduction). [13] Despite the Appellant objecting to this second purported reduction vide their letter dated 18.12.2015 the Respondent further varied the sum to RM3,681,654.88 (third purported reduction). [14] Around 21.06.2016, the Respondent once again wrote to the Appellant to further vary amount to RM3,006,665.80 (forth purported reduction). [15] It is not in dispute however that the Respondent had made various payments as follows: No. Date Amount (RM) 1 18.09.2015 430,000.00 2 16.10.2015 317,466.67 3 13.11.2015 317,466.67 4 15.12.2015 317,466.67 5 14.01.2016 317,466.67 6 16.02.2016 317,466.67 7 17.03.2016 317,466.67 8 19.04.2016 317,466.67 TOTAL 2,652,266.69 [16] The Appellant therefore claimed judgment in the sum of RM2,579,733.31 being the difference between the total amount due 6 under the Settlement Agreement (RM5,232,000.00) and amounts already paid (RM2,652,266.69). AT THE HIGH COURT [17] At the High Court, the learned Judge after hearing the evidence and submissions of both parties ruled in favour of the Respondent .Learned Counsel for the Appellant had referred us to the learned Judge’s brief decision read in open court as follows: -

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(ii) There is no breach of the Settlement Agreement by the Defendant as the amount of the Plaintiff’s entitlement was not specified in the Settlement Agreement.

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(iii) The parties have not agreed on the amount of the appropriate and proportional adjustment reflecting the final amount paid to the Defendant for the corresponding costs under the main contract between Embassy Court and the Defendant as stipulated in the Compromise Agreement.

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(iv) The parties had entered into the Settlement Agreement with the understanding that the monies payable (if any) to the Plaintiff by the Defendant, are subject to the amount of 7 monies that will be recovered by the Defendant under the main contract with Embassy Court and the costs incurred by the Defendant in the recovery of the monies.

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(vi) The parties were fully aware at the time they entered into the Settlement Agreement that the cost had not yet been awarded by the arbitrator and hence the issue of the amount of the costs of the arbitration proceeding was clearly within the contemplation of the parties when they entered into the Compromise Agreement as well as the Settlement Agreement.

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(vii) The Plaintiff had agreed to share 50% of the total legal cost incurred by the Defendant in recovering the outstanding amount from Embassy Court, after it was explained to the Plaintiff, at a meeting held on 07.12.2015 between the parties’ respective representative. Thus, to ascertain the amount payable to the Plaintiff, the total cost incurred by the Defendant in recovering the outstanding amount from Embassy Court must be included. [18] That, in short is how the matter came before us. 8 PRELIMINARY ISSUE [19] Learned counsel for the Appellant begun the appeal by highlighting that the Judge had retired on 31.07.2019 without furnishing any written grounds of the decision prior to retirement. This, according to learned counsel has deprived the Appellant from ventilating all the issues raised in the Memorandum of Appeal. [20] In short, the central focus of the attack mounted by the Appellant is on the absence of or sufficiency of the judicial appreciation of the facts and evidence leading to the decision as there is nothing on record to show that that exercise had been undertaken. [21] We consider it apposite at this juncture to address this issue of the absence of grounds of judgment, something that occurs more commonly now as compared to previously. In the first place, we should like to state that it is incumbent on any judge, having made a decision to provide grounds for the decision at the earliest, more so upon learning that an appeal had been filed. That is a given. For the strength of the decision lies in the reasoning and not the decision itself. It must be a speaking one (Balasingham v Public Prosecutor [1959] 1 MLJ 193, Tan Kim Leng & Anor v Chong Boon Eng & Anor [1974] 2 MLJ 151, Ganapathy a/l Rengasamy v Public Prosecutor [1998] 2 MLJ 577). No thunder is needed. It is a place where the language, instead of a voice, is raised, to borrow wise words from Rumi who said that it is the rain that grows flower and not the thunder. The grounds must stand scrutiny and reflects the basis upon which the decision was reached and reflect the thought processes that went in making that decision. Nothing must be left unsaid or said in coded signals as if litigants are signal 9 readers equipped with code breakers and ready to decipher codes at will! Let no litigant wring their hands in the air and venting in frustrations said: My Lords, we are neither mind readers nor jailbreakers! [22] In the second place we must also state that the absence of a written ground cannot in all cases or ipso facto result in a new trial. That will be decided on case to cases basis. A similar situation occurred before this court in Tan Ah Tong v Gee Boon Kee & Ors [2006] 2 MLJ

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(ii) The learned Judge has failed to appreciate or misunderstood the Appellant's pleaded case as there is no indication at all whether the learned trial Judge had considered the evidence and the pleadings.

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(iii) The learned Judge cannot be said to have undertaken an evaluation or analysis of the Plaintiff’s pleaded cause of 12 action to ascertain whether the pleaded cause of action had indeed been made out and proved.

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(iv) The learned Judge, in the absence of any evaluation of the evidence, could not be said to have made a proper finding of facts and this was plainly wrong as there is no indication whether there was sufficient judicial appreciation of the evidence; and [26] To buttress its case the Appellant had made a plethora of submissions. We trust we would not be doing an injustice to learned counsel by summarising the submissions as follows:-

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(ii) a critical finding of fact which has no basis in the evidence;

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(iii) demonstrable misunderstanding of relevant evidence; and

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(iv) a demonstrable failure to consider relevant evidence; (all of which justifies appellate intervention of a trial judge's decision), this court in Gan Yook Chin (supra) effectively included them under what amount to the trial judge as being "plainly wrong". [72] The phrase "lack of judicial appreciation of evidence" used in Gan Yook Chin (supra ) could very well encompass three out of four errors of a trial judge (other than the "material error of law") said to be identifiable by Lord Reed in Henderson (supra ), namely:

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(ii) demonstrable misunderstanding of relevant evidence; and

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(iii) demonstrable failure to consider relevant evidence. 18 [73] Given that the issue at present is about identifying situations where the findings of fact by a trial court justify appellate intervention, the other identifiable error of "material error of law" listed by Lord Reed in Henderson (supra) can occur when a trial judge erroneously apply legal principles (e.g. rules of evidence) in the course of making a finding of fact, thus resulting in a lack of judicial appreciation of evidence. For example, when a trial judge erroneously placed a burden of proof on a party that will lead the judge to misdirect himself when he attempts to interpret the factual matrix before him. The commission of material error of law by the trial judge in arriving at his conclusions (e.g., the requirement of proof of intention in constructive trust as opposed to express trust), also justifies an appellate court reversing such conclusions.” [37] Having examined the facts and records we find that the conclusions reached by the learned judge are plainly wrong. [38] We find that the Respondent submissions on the existence of an implied terms on the sharing of costs and expenses are not only misconceived but unsupported by evidence. In point of fact, Clause 2 of the Settlement Agreement clearly provides that the amount payable by the Respondent is equivalent to 32.70% of the amount under the arbitration award. Thus, applying the said formula when Embassy Court and the Respondent agreed to settle at RM16,000,000.00 and the Appellant's portion at 32.70% would amount to RM5,232,000.00. As such, we are of the view that the Respondent's contention that Respondent was entitled to deduct the sum of RM2,660,538.84 as it was subject to the appropriate and proportionate adjustment clause militates against the weight of evidence. Clause 2 in both Agreements, in our view, cannot be unilaterally varied by the Respondent based on its own interpretation which is clearly skewed to it. 19 [39] Similarly we find that there is no appreciation by the learned Judge of the evidence that the exchange of correspondence relied on by the Respondent to show that the Appellant has somehow agreed to a reduction and costs sharing are nothing but an attempt to reach a compromise and cannot displace the written Agreements executed by the parties. Further it is as plain as a pikestaff that the negotiations were done on a “without prejudice” basis. The authorities on the scope and effect of without prejudice communications are aplenty and plain and we do not think we could add any further on the subject. In the present case the without prejudice communication was also agreed by the parties in the agreed facts. Similarly, the fact that the Appellant had at all times objected to the conduct of the Respondent in unilaterally varying the amount payable had not been given sufficient attention more so when that fact stood unchallenged by the Respondent . [40] In our view a proper appreciation of the evidence would, on the balance of probabilities, point to the conclusion that the Appellant had proved its case and is entitled to a judgment. CONCLUSION [41] Based on the aforesaid reasons, curial intervention is required, and we accordingly do so. The appeal is therefore allowed to the extent stated below. [42] The order of the High Court of 28.06.2018 is hereby set aside. We enter judgment for the Appellant. We further order that the interest as claimed in paragraph 35.3 of the Statement of Claim is to run from the date of the Writ. 20 [43] Taking into account the facts and submissions filed we award costs here and below to the Appellant in the sum of RM50,000.00 subject to allocator fees. We so order. Dated: 25 June 2021 -Sgd-AHMAD NASFY YASIN Judge Court of Appeal Malaysia Putrajaya Counsel/Solicitors For the Appellant: Dato’ Harpal Singh Grewal Reny Rao with him [Messrs. AJ Ariffin Yeo & Harpal (Kuala Lumpur)] For the Respondent: Sanjay Mohanasundaram Gobinanth a/l Karuppan with him [Messrs. Sanjay Mohad (Kuala Lumpur)]