Mkp Builders Sdn Bhd v Panzana Enterprise Sdn Bhd (WA-22NCC-421-07/2019)

PANZANA ENTERPRISE SDN. BHD. (No. Syarikat: 83573-P)

AHMAD SUFIAN BIN ABDUL MAJID (No. K/P: 561202-08-5891)

ALISSA FITRI BINTI HISHAM … DEFENDAN - (No. K/P: 610318-04-5478) DEFENDAN GROUNDS OF JUDGMENT (Post-Trial)

This is the Plaintiff’s claim against the 2nd and 3rd Defendants pursuant to section 540 of the Companies Act 2016 (“CA 2016”), together with the 1st Defendant’s counterclaim against S/N /dOkrwfjtki6WCIBByRMg Page 2 of 47 the Plaintiff and the counterclaim by the 2nd and 3rd Defendants.

The Plaintiff’s claim against the 1st Defendant had earlier been struck out. The issues remaining for determination are: i) the Plaintiff’s claim under section 540 CA 2016 against the 2nd and 3rd Defendants; ii) the 1st Defendant’s counterclaim against the Plaintiff; and iii) the 2nd and 3rd Defendants’ counterclaim for abuse of process against the Plaintiff.

It is to be noted at the outset that notwithstanding that the Plaintiff’s claim against the 1st Defendant has been struck out, the Plaintiff continues to assert that sums are due to it under the Sub-Contract and relies on such assertions both in response to the 1st Defendant’s counterclaim and in support of its claim against the 2nd and 3rd Defendants under section 540 CA 2016. The manner in which these positions are advanced gives rise to a disconnect between the Plaintiff’s pleaded causes of action and the reliefs sought against each Defendant, which will be addressed in the analysis below.

After a full trial, I dismissed the Plaintiff’s claim, dismissed the counterclaim of the 2nd and 3rd Defendants, and allowed the 1st Defendant’s counterclaim. These are my grounds. S/N /dOkrwfjtki6WCIBByRMg Page 3 of 47 A]

This action arises out of construction works forming part of the Damansara–Shah Alam Elevated Expressway (“DASH Project”).

The employer of the Project was Turnpike Synergy Sdn Bhd (“Turnpike” or “Employer”), which had awarded the main contract to the 1st Defendant on 4.8.2016.

The 1st Defendant was thus the main contractor for the Project.

The Plaintiff was engaged by the 1st Defendant as a subcontractor pursuant to a Letter of Award dated 20.1.2017, with the Sub-Contract Period commencing on 1.2.2017 (the “Sub-Contract”).

Under the Sub-Contract, the Plaintiff was responsible for carrying out specified portions of the works. The relationship between the parties was therefore that of main contractor and subcontractor, governed by the terms and conditions of the Sub-Contract.

The 2nd and 3rd Defendants are directors of the 1st Defendant. The Plaintiff’s claim against them is premised on section 540 CA 2016, on the basis that they were allegedly knowingly S/N /dOkrwfjtki6WCIBByRMg Page 4 of 47 parties to the carrying on of the 1st Defendant’s business with intent to defraud creditors.

A key feature of the Sub-Contract was its deferred payment or self-financing structure, under which the Plaintiff undertook to finance the execution of its works in the first instance, with payment to be made in accordance with the contractual mechanisms set out in the Sub-Contract.

On 16.4.2018, the parties entered into an Agreed Omission, whereby certain portions of the Plaintiff’s scope of works were omitted. The document expressly provided that all other terms and conditions of the Sub-Contract remained unchanged.

Notwithstanding the reduction in scope, the contemporaneous records show that the Plaintiff’s progress remained unsatisfactory. The 1st Defendant issued a series of reminders throughout the course of the Sub-Contract, amounting to 19 reminder letters, drawing attention to the Plaintiff’s delay and lack of progress.

In addition, the 1st Defendant issued four (4) Notices of Delay and Slow Work Progress between 16.10.2018 and 4.3.2019, formally notifying the Plaintiff of its continued failure to meet the contractual programme. S/N /dOkrwfjtki6WCIBByRMg

Under the Sub-Contract, any entitlement to an extension of time was subject to compliance with the contractual mechanism, including the requirement to give timely written notice and supporting particulars. It is the 1st Defendant’s case that the Plaintiff failed to comply with these requirements.

A Certificate of Non-Completion (“CNC”) was subsequently issued by the 1st Defendant. Thereafter, the Sub-Contract was terminated on 15.4.2019.

The Plaintiff disputes the validity of the termination. In particular, it contends that delays were caused by matters beyond its control, including alleged late handover of the site and issues relating to utilities relocation.

The Plaintiff also relies on an adjudication decision obtained pursuant to the Construction Industry Payment and Adjudication Act 2012 (“CIPAA”), in which the adjudicator found in favour of the Plaintiff and, inter alia, held that the termination of the Sub-Contract by the 1st Defendant was unlawful and that sums were due to the Plaintiff. The Plaintiff relies on this adjudication decision in support of its claim in these proceedings.

However, it is not disputed that the Plaintiff’s claim against the 1st Defendant was subsequently struck out. S/N /dOkrwfjtki6WCIBByRMg

Following the termination, the 1st Defendant engaged third-party contractors to complete the works and incurred various costs, which now form the basis of its counterclaim. B]

The Plaintiff contends that the termination of the Sub-Contract by the 1st Defendant was unlawful. It asserts that the delays complained of were caused by matters beyond its control, including issues relating to site conditions and utilities relocation.

The Plaintiff further contends that it is entitled to an extension of time under the Sub-Contract, as well as payment for works carried out, including the retention sum.

The Plaintiff relies on an adjudication decision obtained in its favour under CIPAA, in which the adjudicator found that the termination was unlawful and that sums were due to the Plaintiff.

In relation to the 2nd and 3rd Defendants, the Plaintiff alleges that they are liable under section 540 of the Companies Act 2016 on the basis that they were knowingly parties to the carrying on of the 1st Defendant’s business with intent to defraud creditors. The Plaintiff also alleges dishonesty and misuse of the corporate structure. S/N /dOkrwfjtki6WCIBByRMg Page 7 of 47 C]

The 1st Defendant contends that the Plaintiff was in continuous delay and failed to meet the contractual programme. It further contends that the Plaintiff failed to comply with Clause 4.1 of the Sub-Contract, in particular the requirement to provide timely notice in support of any claim for extension of time.

The 1st Defendant maintains that the termination of the Sub-Contract was lawful, having complied with the contractual mechanism, including the issuance of the Certificate of Non-Completion. It also contends that the Plaintiff is not entitled to rely on any extension of time granted by the employer, as such extensions arise from a separate contractual relationship.

The 1st Defendant further contends that the adjudication decision relied upon by the Plaintiff is not binding on this Court.

The 1st Defendant also contends that the Plaintiff is not a creditor, in light of the striking out of its claim against the 1st Defendant.

The 1st Defendant advances a counterclaim against the Plaintiff comprising several heads, namely: S/N /dOkrwfjtki6WCIBByRMg Page 8 of 47 i)

The 1st Defendant contends that the Plaintiff is liable for delay under the Sub-Contract and is therefore liable to pay liquidated damages pursuant to the relevant contractual provisions. ii)

The 1st Defendant claims for various costs and charges issued to the Plaintiff by way of debit notes, which it contends were properly raised in the course of the Sub-Contract and remain unpaid. iii)

The 1st Defendant contends that, due to the Plaintiff’s failure to perform its obligations, it was necessary to engage third-party contractors to carry out and complete portions of the Plaintiff’s works. The costs incurred in doing so are claimed as back charges recoverable from the Plaintiff under the Sub-Contract. iv)

The 1st Defendant further claims for additional costs incurred in completing the works following the termination of the Sub-Contract, which it contends arose as a consequence of the Plaintiff’s default. S/N /dOkrwfjtki6WCIBByRMg Page 9 of 47 v)

The 1st Defendant claims for sums paid pursuant to a consent judgment obtained by B-Cor against the 1st Defendant in relation to works connected to the Sub-Contract. The 1st Defendant contends that it is entitled to recover these sums from the Plaintiff under the indemnity provisions of the Sub-Contract. D]

The 2nd and 3rd Defendants deny that the requirements of section 540 CA 2016 are satisfied. They contend that any alleged fraudulent intent must be established at the time of the inception of the Sub-Contract in 2017, and that subsequent financial difficulties are irrelevant.

They further contend that the Plaintiff is not a creditor, as it has neither obtained judgment nor established any debt against the 1st Defendant.

The 2nd and 3rd Defendants also contend that many of the allegations relied upon by the Plaintiff were not pleaded or put to witnesses in cross-examination, and therefore cannot be relied upon. S/N /dOkrwfjtki6WCIBByRMg

Finally, the 2nd and 3rd Defendants contend that the Plaintiff’s claim constitutes an abuse of process, and they pursue a counterclaim on that basis. E]

The issues for determination are as follows: Issue 1: Termination of the Sub-Contract i) Whether the termination of the Sub-Contract dated 1.1.2017 by the 1st Defendant on 15.4.2019 was lawful; Issue 2: Extension of Time (“EOT”) ii) Whether the Plaintiff is entitled to any extension of time under the Sub-Contract, having regard to: a) the contractual requirements (including Clause 4.1); and b) the Plaintiff’s allegations of delay caused by site conditions and utilities relocation; Issue 3: Plaintiff’s Alleged Entitlement to Payment iii) Whether, notwithstanding the striking out of the Plaintiff’s claim against the 1st Defendant, the Plaintiff S/N /dOkrwfjtki6WCIBByRMg Page 11 of 47 has established that any sum is due to it under the Sub-Contract, including the retention sum, and if so, whether such sum affects the 1st Defendant’s counterclaim and the Plaintiff’s claim under section 540 CA 2016 against the 2nd and 3rd Defendants. Issue 4: 1st Defendant’s Counterclaim iv) Whether the 1st Defendant has established its counterclaim against the Plaintiff, comprising: a) liquidated damages; b) debit notes; c) back charges; d) additional completion costs; and e) the B-Cor Geotechnics Sdn Bhd claim; Issue 5: Set-Off and Net Position v) Whether, and if so to what extent, the Plaintiff is entitled to any set-off, and the resulting net sum payable between the parties; S/N /dOkrwfjtki6WCIBByRMg Page 12 of 47 Issue 6: The Plaintiff’s Section 540 CA 2016 Claim vi) Whether the Plaintiff has established that it is a creditor of the 1st Defendant for the purposes of section 540 CA 2016, that is, whether the Plaintiff has established that the 1st Defendant is indebted to it in a legally enforceable sum or liability. vii) If so, whether the business of the 1st Defendant was carried on with intent to defraud creditors, and whether the 2nd and 3rd Defendants were knowingly parties thereto; and Issue 7: 2nd and 3rd Defendants’ Counterclaim viii) Whether the counterclaim by the 2nd and 3rd Defendants for abuse of process is made out. F] ANALYSIS AND FINDINGS F1. Relationship Between Issues 1, 2 and 3

Issues 1, 2 and 3 are closely interrelated and are best considered together, in that: i) whether the Plaintiff is entitled to an extension of time under the Sub-Contract is central to determining whether S/N /dOkrwfjtki6WCIBByRMg Page 13 of 47 the termination of the Sub-Contract by the 1st Defendant was lawful; and ii) the lawfulness of the termination, in turn, affects the Plaintiff’s entitlement to any payment under the Sub-Contract, including the retention sum.

The first question is whether the Plaintiff was in delay in the performance of its obligations under the Sub-Contract.

Under the Sub-Contract, the Plaintiff was required to complete the Sub-Contract Works by 31.12.2018.

The evidence establishes, and it is not seriously disputed, that the Plaintiff did not complete the Sub-Contract Works by the contractual completion date of 31.12.2018.

The evidence shows that the Plaintiff failed to progress its works in accordance with the contractual programme. In this regard, I note that the Plaintiff failed to submit its own Work Programme as required under Clause 3.2. As a result, its progress was assessed by reference to the Baseline Programme submitted by the 1st Defendant to the employer, Turnpike. S/N /dOkrwfjtki6WCIBByRMg

The expert evidence of Nicholas Ian Powell (DW-3), which was not contradicted by any rebuttal expert evidence, establishes that: i) the early works did not commence in accordance with the Baseline Programme; ii) where works did commence, they took longer than the allocated durations; and iii) there were significant gaps between work activities.

These findings are consistent with the contemporaneous documents. Throughout the Sub-Contract, the 1st Defendant issued at least 19 letters reminding the Plaintiff that it was behind schedule, as well as complaints regarding the quality of its works.

In an effort to facilitate completion, the parties entered into an Agreed Omission on 16.4.2018, substantially reducing the Plaintiff’s scope of works while preserving the remaining contractual obligations. Notwithstanding this concession, the Plaintiff remained in delay.

Prior to termination, the 1st Defendant issued four (4) Notices of Delay and Slow Work Progress between 16.10.2018 and 4.3.2019, warning the Plaintiff to remedy its defaults. S/N /dOkrwfjtki6WCIBByRMg

A Certificate of Non-Completion (“CNC”) was issued on 15.3.2019, certifying that the Plaintiff had failed to complete the works by the contractual completion date. The CNC was subsequently transmitted to the Plaintiff’s representative, and its receipt was confirmed in evidence.

The Plaintiff’s challenge to the validity of the CNC, including the allegation that the acknowledgement of receipt was forged, is not supported by the evidence. In particular, the individual said to have made the police report was not called to testify.

Following the CNC, a Notice of Default dated 29.3.2019 was issued.

When no satisfactory improvement was made, the 1st Defendant issued a Letter of Termination on 18.4.2019 after the expiry of the contractual cure period.

Having considered the contemporaneous documents and the expert evidence, I find that the Plaintiff was in persistent and continuing delay in the performance of its obligations under the Sub-Contract.

The next question is whether the delay on the part of the Plaintiff was excusable, in the sense that the Plaintiff was entitled to an extension of time under the Sub-Contract. S/N /dOkrwfjtki6WCIBByRMg

The entitlement to an extension of time is governed by the contractual mechanism set out in the Sub-Contract, in particular Clause 4.1, which requires the subcontractor to give timely written notice, together with the necessary particulars, of any event relied upon for an extension of time.

The 1st Defendant relies on Yuk Tung Construction Sdn Bhd v. Daya CMT Sdn Bhd [2020] MLJU 1084 (CA) and KL Eco City Sdn Bhd v. Tuck Sin Engineering & Construction Sdn Bhd & Anor [2020] MLJU 2457 for the proposition that such notification requirements operate as mandatory condition precedents to an EOT claim.

The Plaintiff’s case is that the delays were caused by matters beyond its control, in particular alleged late handover of the site, issues relating to utilities relocation, and matters concerning the piling platform. The Plaintiff also relies on MKP Builders Sdn Bhd v. Glocal Tech Engineering Sdn Bhd [2022] 1 LNS 2481 to submit that time was set at large and that the 1st Defendant could not rely on Clause 4.1 or Clause 4.5.

I am unable to accept the Plaintiff’s submission. Even assuming that the Plaintiff’s complaints on site handover, utilities relocation or piling platform had factual basis, the Plaintiff was still required to comply with the contractual mechanism under Clause 4.1. The decision in Glocal Tech (supra) does not assist the Plaintiff where the Sub-Contract in S/N /dOkrwfjtki6WCIBByRMg Page 17 of 47 the present case contains an express EOT mechanism requiring timely notice and particulars.

The evidence shows that the Plaintiff did not comply with Clause 4.1. In particular, no prior written notice of intention to claim an EOT was given within the contractual time, and no sufficient supporting particulars were furnished to justify the EOT now claimed.

The Plaintiff’s first and only formal EOT application (“Plaintiff’s Sole EOT Application”) was issued on 13.4.2019. In that application, the Plaintiff sought an extension until 31.10.2019 and relied on relocation of services pipe, namely water pipes, as the alleged cause of delay. This was made only shortly before the termination and was the first time the Plaintiff raised a formal EOT claim.

I accept the 1st Defendant’s position that the Plaintiff’s Sole EOT Application was groundless: i) First, the Plaintiff failed to comply with the mandatory condition precedent under Clause 4.1. ii) Secondly, the relocation of services pipe or water pipes did not affect the Plaintiff’s reduced scope of works after the Agreed Omission. This was confirmed by Ahmad Arifin bin Kasah, DW-1. S/N /dOkrwfjtki6WCIBByRMg

The Plaintiff’s reliance on the EOTs granted by Turnpike to the 1st Defendant under the main contract also does not assist the Plaintiff. Those EOTs arose under a separate contractual relationship between Turnpike and the 1st Defendant. They did not automatically confer any corresponding EOT entitlement upon the Plaintiff under the Sub-Contract.

In any event, the Employer’s EOT No. 1, granted on 17.5.2018 for 133 days, concerned relocation of Telekom and TNB 11kv services, and not water pipes. This was distinct from the water pipe relocation relied upon in the Plaintiff’s Sole EOT Application dated 13.4.2019.

The Employer’s EOT No. 2, granted on 4.7.2019 for 173 days, also does not assist the Plaintiff. It was granted after the termination of the Sub-Contract, and in any event DW-2, Encik Arifin, confirmed that the relocation of services pipe did not affect the Plaintiff’s reduced scope of works after the Agreed Omission.

The Plaintiff also relies on an adjudication decision obtained under the CIPAA, in which the adjudicator found that the termination of the Sub-Contract by the 1st Defendant was unlawful.

I do not accept that this finding is determinative of the present proceedings. It is well established that adjudication under CIPAA is temporary and provisional in nature, and subject S/N /dOkrwfjtki6WCIBByRMg Page 19 of 47 to final determination by the court or arbitration. The adjudicator’s decision is therefore not conclusive and is not binding on this Court (Martego Sdn Bhd v. Arkitek Meor & Chew Sdn Bhd and another appeal [2020] 6 MLJ 224 (FC)).

In the present case, the adjudicator’s findings were made on a limited evidential basis. No witnesses were called and no cross-examination took place in the adjudication proceedings.

Further, it is not disputed that the Plaintiff’s claim against the 1st Defendant in these proceedings has been struck out. In these circumstances, the adjudication decision does not avail the Plaintiff.

Accordingly, I am not persuaded by the Plaintiff’s reliance on the adjudication decision.

The Plaintiff’s reliance on the piling platform issue is also without merit. The evidence shows that this issue was not pleaded as an extension of time claim but was instead advanced as part of the Plaintiff’s variation order claim. Further, no notice was given by the Plaintiff under Clause 4.1 in respect of the piling platform, and the issue was not raised prior to termination. In any event, the piling platform fell within the Plaintiff’s own scope of works.

I also do not accept the Plaintiff’s broad assertion that it was entitled to a six-month extension of time. No properly S/N /dOkrwfjtki6WCIBByRMg Page 20 of 47 supported application for such an extension was submitted to the 1st Defendant for consideration, and no sufficient contemporaneous documents were furnished to justify such a claim.

The consequences of the Plaintiff’s failure to comply with Clause 4.1 are clear: i) First, the Plaintiff is not entitled to rely on the alleged delay events to support a claim for an extension of time. ii) Secondly, time under the Sub-Contract is not set at large and remains of the essence. iii) Thirdly, the Plaintiff remains liable for delay in the performance of its obligations under the Sub-Contract.

For these reasons, I find that the Plaintiff is not entitled to any extension of time under the Sub-Contract.

The next issue is whether the termination of the Sub-Contract by the 1st Defendant was lawful.

The Plaintiff challenges the validity of the termination, including the issuance of the Certificate of Non-Completion (“CNC”) and the subsequent termination process. S/N /dOkrwfjtki6WCIBByRMg

It is clear on the evidence, and not seriously challenged, that the Plaintiff did not complete the Sub-Contract Works by the contractual completion date of 31.12.2018.

Having regard to the findings above, I am satisfied that the 1st Defendant was entitled to terminate the Sub-Contract.

In particular, I have found that: i) the Plaintiff was in persistent and continuing delay in the performance of its obligations; and ii) the Plaintiff is not entitled to any extension of time under the Sub-Contract by reason of its failure to comply with Clause 4.1.

In these circumstances, the contractual completion date remained operative, and the Plaintiff was in breach of its obligation to complete the works within the stipulated time.

The evidence further shows that the 1st Defendant complied with the contractual mechanism prior to termination. This included: i) the issuance of multiple notices highlighting delay and slow progress; S/N /dOkrwfjtki6WCIBByRMg Page 22 of 47 ii) the issuance of the CNC certifying the Plaintiff’s failure to complete the works by the contractual completion date; and iii) the issuance of a Notice of Default, followed by a termination after the expiry of the contractual cure period.

The Plaintiff’s challenge to the CNC, including the allegation that the acknowledgement of receipt was forged, is not supported by the evidence. As noted earlier, the individual said to have made the police report was not called as a witness.

In light of the above, I find that the 1st Defendant had valid contractual grounds to terminate the Sub-Contract.

Accordingly, the termination of the Sub-Contract by the 1st Defendant by way of the letter dated 18.4.2019 was lawful.

Although the Plaintiff’s claim against the 1st Defendant has been struck out, the Plaintiff maintains that sums remain due to it under the Sub-Contract, including the retention sum. This is relevant in the context of the 1st Defendant’s counterclaim.

In substance, the Plaintiff’s position is that it is entitled to payment for work done, and that such entitlement either defeats or reduces the 1st Defendant’s counterclaim. S/N /dOkrwfjtki6WCIBByRMg

However, in light of the findings above, I have found that: i) the Plaintiff was in persistent and continuing delay; ii) the Plaintiff is not entitled to any extension of time under the Sub-Contract; and iii) the termination of the Sub-Contract by the 1st Defendant was lawful.

In these circumstances, the Plaintiff has not established any contractual or other legal basis upon which it can assert that further sums are due to it under the Sub-Contract.

Accordingly, the Plaintiff’s contention that it is entitled to payment, including the retention sum, is not made out and does not avail it in resisting the 1st Defendant’s counterclaim. G]

The 1st Defendant claims liquidated damages for delay pursuant to Clause 4.5 of the Sub-Contract, which provides for LAD in the sum of RM157,863.01 per day for delay beyond the contractual completion date. S/N /dOkrwfjtki6WCIBByRMg

It is not disputed that the contractual completion date was 31.12.2018, and I have found that the Plaintiff failed to complete the Sub-Contract Works by that date, was in persistent delay, and is not entitled to any extension of time.

In these circumstances, the 1st Defendant is entitled, in principle, to levy LAD in accordance with Clause 4.5 of the Sub-Contract. The enforceability of such a clause is well established (Cubic Electronics Sdn Bhd v. Mars Telecommunications Sdn Bhd [2018] MLJU 1935 (FC)). i)

The Plaintiff contends that following the Agreed Omission dated 16.4.2018, the 1st Defendant is not entitled to impose LAD at the original contractual rate.

I do not accept this submission. The Agreed Omission expressly provides that all other terms and conditions remain unchanged, which necessarily includes Clause 4.5.

There is no evidence of any agreement to vary the LAD rate or mechanism. In the absence of such agreement, the original contractual provisions on LAD continue to apply. ii)

The Plaintiff’s delay ran from 1.1.2019 to 15.4.2019, being a period of 105 days. S/N /dOkrwfjtki6WCIBByRMg

Applying the contractual rate of RM157,863.01 per day, the total LAD amounts to RM16,575,616.05.

The quantum of liquidated damages is supported by the evidence, including the analysis of the 1st Defendant’s expert, DW-3, whose findings on delay and duration were not effectively challenged. The Plaintiff did not call any expert to rebut the expert report of DW-3.

Accordingly, the total liquidated damages claimed amounts to RM16,575,616.05. iii)

In the circumstances, I am satisfied that the 1st Defendant has established its entitlement to liquidated damages in the sum of

The 1st Defendant claims a sum in respect of Debit Notes issued to the Plaintiff during the course of the Sub-Contract. i)

The Debit Notes comprise: S/N /dOkrwfjtki6WCIBByRMg Page 26 of 47 i) fines and/or penalties imposed on the Plaintiff for non-compliance with safety procedures pursuant to the Sub-Contract; and ii) claims for expenses incurred by the 1st Defendant on the Plaintiff’s behalf, including consultant inspector fees, supply of machinery and materials, utilities, minor works and related costs.

Such claims are, in principle, recoverable where they fall within the contractual provisions and are supported by proper documentation. ii)

The 1st Defendant relies on the expert evidence of DW-3 (Nicholas Ian Powell), who undertook a detailed review of the Debit Notes and their supporting documents.

In his assessment, DW-3 applied a structured methodology, accepting only those Debit Notes which satisfied one or more of the following criteria: i) Debit Notes that were signed and accepted by the Plaintiff; ii) Debit Notes which, although not signed, were supported by sufficient contemporaneous documentation; and S/N /dOkrwfjtki6WCIBByRMg Page 27 of 47 iii) Debit Notes which had been delivered to the Plaintiff and not disputed within a reasonable time.

This methodology is, in my view, reasonable and appropriate, as it ensures that only substantiated and properly supported claims are allowed. iii)

The total value of the Debit Notes issued by the 1st Defendant amounts to RM4,134,551.69, comprising 75 Debit Notes.

Applying the methodology set out above, DW-3 assessed that only RM2,965,383.49 is properly supported and recoverable.

The 1st Defendant has elected to adopt this reduced figure, and does not pursue the balance.

There is no cogent evidence before the Court to displace DW- 3’s assessment, and no alternative computation has been provided by the Plaintiff. iv)

In the circumstances, I accept DW-3’s assessment and find that the 1st Defendant has established its claim in respect of Debit Notes in the sum of RM2,965,383.49. S/N /dOkrwfjtki6WCIBByRMg

The 1st Defendant claims a sum in respect of Back Charges, arising from costs incurred in engaging third-party contractors and consultants to carry out works which the Plaintiff had failed to perform. i)

The legal basis for this claim is Clause 19.0 of the Sub-Contract, which confers on the 1st Defendant the right to engage third parties to carry out the Plaintiff’s works in the event of default, and to recover the resulting costs from the Plaintiff.

I have already found that the Plaintiff was in persistent delay and failed to perform its obligations under the Sub-Contract. In these circumstances, the 1st Defendant was entitled to exercise its contractual step-in rights under Clause 19.0. ii)

The evidence shows that the 1st Defendant engaged various third-party contractors and consultants to carry out portions of the piling and related works which the Plaintiff had failed to complete. These include: i) B Cor Geotechnic Sdn Bhd; S/N /dOkrwfjtki6WCIBByRMg Page 29 of 47 ii) Cosmos Infratech Sdn Bhd; iii) China Railway Siyuan Survey and Design Group Co. Ltd; iv) CTSM Geotechnology Sdn Bhd; and v) K.H. Perunding.

The engagement of these parties was supported by documentary evidence, including records of appointment and scope of works. iii)

The 1st Defendant relies on the expert evidence of DW-3, who assessed the Back Charges claim, including the costs incurred and the application of the 1st Defendant’s 15% service fee.

In his assessment, DW-3 did not initially account for a subsequent reduction made by the 1st Defendant in respect of the claim relating to Cosmos Infratech Sdn Bhd.

The 1st Defendant has, however, voluntarily reduced its claim by RM10,000.00 to reflect the revised figure for Cosmos Infratech’s works.

Taking into account this adjustment, the total Back Charges claimed amounts to RM19,451,667.47. S/N /dOkrwfjtki6WCIBByRMg Page 30 of 47 iv)

In light of the Plaintiff’s failure to perform its obligations, and the contractual entitlement of the 1st Defendant to engage third parties under Clause 19.0, I am satisfied that the Back Charges incurred are recoverable.

I further accept the assessment of DW-3 as to the quantum, and the adjustment made by the 1st Defendant.

Accordingly, I find that the 1st Defendant is entitled to recover Back Charges in the sum of RM19,451,667.47.

The 1st Defendant claims a sum in respect of Additional Completion Costs, arising from the costs incurred in completing the Sub-Contract Works following the termination of the Plaintiff’s Sub-Contract. i)

This claim arises as a direct consequence of the lawful termination of the Sub-Contract on 15.4.2019. Upon termination, the 1st Defendant was required to take over and complete the outstanding works which the Plaintiff had failed to perform. S/N /dOkrwfjtki6WCIBByRMg

In principle, such costs are recoverable as damages flowing from the Plaintiff’s breach of contract. ii)

The evidence shows that the 1st Defendant engaged third parties to complete the outstanding works, including piling works and structural works, as well as associated works such as the fabrication of T-beams which had been left incomplete by the Plaintiff. iii)

The 1st Defendant relies on the expert evidence of DW-3 (Nicholas Ian Powell), who undertook an assessment of the Additional Completion Costs.

In his analysis, DW-3 considered multiple scenarios in evaluating the appropriate quantum. In particular, he took into account: i) the reduction in the Plaintiff’s scope of works following the Agreed Omission; and ii) the subsequent termination of the 1st Defendant’s main contract with the employer. S/N /dOkrwfjtki6WCIBByRMg

Based on these considerations, DW-3 concluded that a pro-rated approach was appropriate in determining the recoverable costs. iv)

Applying this methodology, DW-3 assessed the Additional Completion Costs at RM22,259,847.31.

I am satisfied that the approach adopted by DW-3 is fair and reasonable, as it avoids overcompensation and reflects the actual extent of the works attributable to the Plaintiff’s default.

There is no cogent evidence before the Court to displace this assessment. v)

In the circumstances, I find that the 1st Defendant is entitled to recover Additional Completion Costs in the sum of

The 1st Defendant claims a sum in respect of payments made to B Cor Geotechnics Sdn Bhd pursuant to an adjudication decision under the CIPAA. S/N /dOkrwfjtki6WCIBByRMg Page 33 of 47 i)

The evidence shows that B Cor Geotechnics Sdn Bhd obtained an adjudication decision against the Plaintiff under CIPAA. The Plaintiff failed to make payment pursuant to that adjudication decision.

As a result, pursuant to a Section 30 CIPAA Order, the 1st Defendant was required to pay, and did pay, the sum due to B Cor Geotechnics Sdn Bhd on behalf of the Plaintiff.

Subsequently, on 14.7.2020, the 1st Defendant and B Cor Geotechnics Sdn Bhd recorded a Consent Judgment before the Court of Appeal, under which B Cor Geotechnics Sdn Bhd was to return the sum of RM2,859,122.17 to the 1st Defendant.

However, B Cor Geotechnics Sdn Bhd did not return the said sum, as it was wound up on 11.8.2020. ii)

The 1st Defendant’s claim is, in substance, one for indemnity.

The payment made by the 1st Defendant to B Cor Geotechnics Sdn Bhd was made on behalf of the Plaintiff in respect of works carried out for the benefit of the Plaintiff. S/N /dOkrwfjtki6WCIBByRMg

Under Clause 14.3 of the Sub-Contract, the Plaintiff is obliged to indemnify the 1st Defendant for such payments made on its behalf. iii)

The sum claimed by the 1st Defendant under this head is

This represents the amount paid by the 1st Defendant on behalf of the Plaintiff, which remains unrecovered following the winding up of B Cor Geotechnics Sdn Bhd. iv)

In the circumstances, I am satisfied that the 1st Defendant is entitled to recover the sum of RM2,854,194.17 from the Plaintiff pursuant to Clause 14.3 of the Sub-Contract. G6. Set-Off and Net Computation i)

The 1st Defendant accepts, based on the evidence including the assessment of DW-3, that the certified value of the Plaintiff’s works as at the date of termination is RM117,379,828.40, and that the total amount paid to the Plaintiff is RM82,407,675.94. S/N /dOkrwfjtki6WCIBByRMg

This leaves a balance of RM34,909,152.46, which would, in principle, be payable by the 1st Defendant to the Plaintiff under the Sub-Contract. ii)

The 1st Defendant submits that the Plaintiff is not entitled to rely on any set-off against the counterclaim, as the Plaintiff did not plead any defence of set-off.

In this regard, reliance is placed on Universal Cable (M) Bhd v. Bakti Arena Sdn Bhd & Ors [2000] MLJU 106; [2000] 3 CLJ 375 for the proposition that a party who has not pleaded set-off is not entitled to rely on it. iii)

I accept that, as a matter of pleading, the Plaintiff did not raise a formal defence of set-off.

However, this does not conclude the matter.

The balance sum of RM34,909,152.46 is not a speculative or unproven claim. It arises from the 1st Defendant’s own evidence, including the findings of DW-3, upon which the 1st Defendant itself relies in support of its counterclaim. S/N /dOkrwfjtki6WCIBByRMg

In these circumstances, it would be artificial to ignore this sum in determining the true financial position between the parties.

While the 1st Defendant is entitled to rely on Universal Cable (supra) to contend that the Plaintiff cannot assert a formal set-off, I am of the view that the present case falls outside the strict application of that principle. iv)

If the Court were to disregard the sum of RM34,909,152.46, the 1st Defendant would effectively recover its counterclaim in full while retaining the benefit of the Plaintiff’s certified works without accounting for the corresponding value.

This would result in the unjust enrichment of the 1st Defendant.

In my view, the Court is entitled to take into account the balance sum in arriving at a just result, particularly where the figure is derived from the 1st Defendant’s own evidence. v)

The total sum established by the 1st Defendant under its counterclaim is as follows: i) Liquidated and Ascertained Damages (LAD): RM16,575,616.05; S/N /dOkrwfjtki6WCIBByRMg Page 37 of 47 ii) Debit Notes Claim: RM2,965,383.49; iii) Back Charges Claim: RM19,451,667.47; iv) Additional Completion Costs: RM22,259,847.31; v) B Cor Geotechnics (Section 30 CIPAA Payment): RM2,854,194.17; vi) Total Counterclaim: RM64,106,708.49; and vii) Deducting the balance sum of RM34,909,152.46 referred to above, the net sum payable by the Plaintiff to the 1st Defendant is: RM29,197,556.03. vi)

Accordingly, I find that the Plaintiff is liable to pay the 1st Defendant the net sum of RM29,197,556.03.

I further order that interest on the said sum be paid at the rate of 5% per annum from the date of judgment.

In the circumstances of this case, I make no order as to costs. S/N /dOkrwfjtki6WCIBByRMg Page 38 of 47 H] PLAINTIFF’S SECTION 540 CA 2016 CLAIM AGAINST THE 2ND AND 3RD DEFENDANTS H1. Whether the Plaintiff is a “Creditor”

The Plaintiff’s claim against the 2nd and 3rd Defendants, directors of the 1st Defendant, is brought pursuant to section 540 CA 2016, on the basis that they were knowingly parties to the carrying on of the 1st Defendant’s business with intent to defraud creditors.

A threshold requirement under section 540 is that the Plaintiff must first establish that it is a creditor of the 1st Defendant, that is, that there exists a legally enforceable debt or liability owed by the 1st Defendant to the Plaintiff.

In the present case, it is not disputed that the Plaintiff’s claim against the 1st Defendant has been struck out.

Further, for the reasons set out earlier, I have found that the Plaintiff has not established that any sum is due to it under the Sub-Contract.

In these circumstances, the Plaintiff has failed to establish that it is a creditor of the 1st Defendant within the meaning of section 540 CA 2016. S/N /dOkrwfjtki6WCIBByRMg

On this ground alone, the Plaintiff’s claim under section 540 must fail. H2. Whether Fraudulent Trading is Established

Even if I am mistaken in finding that the Plaintiff is not a creditor of the 1st Defendant, I am not satisfied that the Plaintiff has established that the business of the 1st Defendant was carried on with intent to defraud creditors.

The applicable principles are well established. The burden lies on the Plaintiff to prove actual dishonesty, and not merely breach of contract or poor financial management. The Court must be satisfied that there was an intention to defraud creditors at some material time during the carrying on of the business.

In this regard, the Court is guided by the principles set out by the Federal Court in Lai Fee & Anor v. Wong Yu Vee & Ors [2023] 3 MLJ 503, which emphasise that fraudulent trading requires clear and cogent evidence of dishonesty.

The 2nd and 3rd Defendants submit that the alleged intention to defraud must be assessed at or around the time the Sub-Contract was entered into, and that subsequent events are insufficient to establish fraudulent trading. While it is correct that subsequent breach, delay or financial difficulty do not, without more, establish fraudulent intent, the relevant inquiry is S/N /dOkrwfjtki6WCIBByRMg Page 40 of 47 whether, at any material time, there was an intention to defraud creditors.

In the present case, there is no evidence of such intention at the inception of the Sub-Contract, namely at or around the time of the Letter of Award dated 20.1.2017, nor at any time thereafter.

The Plaintiff’s case is further undermined by the undisputed evidence as to the payments made by the 1st Defendant. The Plaintiff itself admits that it received a sum of approximately RM80,771,970.00, while the 1st Defendant’s evidence places the total payments at RM82,407,675.94, made over the period from 2017 to January 2019.

Having received such substantial payments over time, the Plaintiff cannot reasonably contend that there was an intention to defraud it simply because the alleged balance was not paid.

Further, the alleged balance said to be due is, in any event, the subject of a legitimate dispute between the parties.

It is well established that a refusal to pay a disputed sum, or even an inability to pay, does not in itself constitute an intention to defraud creditors under section 540 CA 2016. More is S/N /dOkrwfjtki6WCIBByRMg Page 41 of 47 required, namely clear evidence of actual dishonesty, which is absent in the present case. H4. Financial Position of the 1st Defendant

The financial evidence before the Court, including the audited accounts, shows that both before and after the termination of the Sub-Contract, the 1st Defendant was able to meet its debts.

Importantly, there was no challenge to the accuracy of these financial statements.

This is wholly inconsistent with any allegation that the 1st Defendant was carrying on its business with intent to defraud creditors.

In any event, the financial position of a company, whether strong or weak, is not in itself sufficient to establish dishonesty or an intention to defraud creditors for the purposes of section 540, which requires clear and cogent evidence of actual fraudulent intent.

I also note that, save for the allegation relating to the 1st Defendant’s alleged financial inability, the other allegations pleaded in support of the Plaintiff’s section 540 claim were not S/N /dOkrwfjtki6WCIBByRMg Page 42 of 47 put to the 2nd and 3rd Defendants during cross-examination.

In accordance with the principle in Aik Ming (M) Sdn Bhd v. Chan Ching Chuen & Ors and another appeal [1995] 2 MLJ 770, such allegations cannot now be relied upon. H6. Conclusion on Plaintiff’s Section 540 claim

For the reasons set out above: i) the Plaintiff has failed to establish that it is a creditor of the 1st Defendant; and ii) in any event, the Plaintiff has failed to establish that the 2nd and 3rd Defendants were knowingly parties to any fraudulent trading.

In the circumstances, the Plaintiff’s claim against the 2nd and 3rd Defendants is misconceived and fundamentally flawed, and is accordingly dismissed. I] 2ND AND 3RD DEFENDANTS’ COUNTERCLAIM (ABUSE OF

The 2nd and 3rd Defendants have filed a counterclaim against the Plaintiff premised on abuse of process. S/N /dOkrwfjtki6WCIBByRMg

It is well established that abuse of process is more properly characterised as a defence to a claim rather than an independent cause of action, unlike, for example, a claim for malicious prosecution.

In the present case, while I have found that the Plaintiff’s claim against the 2nd and 3rd Defendants is misconceived and fundamentally flawed (see Malaysia Building Society Bhd v. Tan Sri General Ungku Nazaruddin Bin Ungku Mohamed [1998] 2 AMR 1666; [1998] 2 MLJ 425), that finding does not, without more, give rise to a separate and independent cause of action in abuse of process.

The 2nd and 3rd Defendants have not established the necessary elements to sustain such a counterclaim as a standalone claim.

In the circumstances, the 2nd and 3rd Defendants’ counterclaim for abuse of process is dismissed.

In any event, having regard to the nature of the Plaintiff’s claim against the 2nd and 3rd Defendants, which I have found to be misconceived and fundamentally flawed, I consider it appropriate to award costs to the 2nd and 3rd Defendants on a solicitor-and-client basis, which is sufficient to compensate them for the costs reasonably incurred in defending the claim. S/N /dOkrwfjtki6WCIBByRMg Page 44 of 47 J]

For the reasons stated above: i) The Plaintiff’s claim against the 1st Defendant having been struck out, and the Plaintiff having failed to establish that there is any sum is due to it under the Sub-Contract, the Plaintiff is not entitled to any payment under the Sub-Contract, including the retention sum. ii) The 1st Defendant has established its counterclaim against the Plaintiff on a balance of probabilities, and I accordingly enter judgment for the 1st Defendant in the net sum of RM29,197,556.03, together with interest at the rate of 5% per annum from the date of judgment until full realisation. iii) No order as to costs in respect of the 1st Defendant counterclaim against the Plaintiff. iv) The Plaintiff has failed to make out its claim against the 2nd and 3rd Defendants, and has further failed to prove, on a balance of probabilities, that the 2nd and 3rd Defendants were knowingly parties to any fraudulent trading within the meaning of section 540 of the Companies Act 2016. Accordingly, the Plaintiff’s claim against the 2nd and 3rd Defendants is dismissed with costs on a solicitor-and-client basis. S/N /dOkrwfjtki6WCIBByRMg Page 45 of 47 v) The 2nd and 3rd Defendants’ counterclaim for abuse of process against the Plaintiff is dismissed. Dated this 27th day of April, 2026 -SGD- (WAN MUHAMMAD AMIN BIN WAN YAHYA) JUDGE HIGH COURT OF MALAYA, (COMMERCIAL DIVISION (NCC 3)) HIGH COURT OF KUALA LUMPUR IN THE FEDERAL TERRITORY, MALAYSIA PLAINTIFF : Tang Kim Choong (Mohammad Shafiee Bin Afendi together with him) Messrs K. C. Tang & Co. No. 16-1, Jalan Jernai 6/21D, Medan Idaman Batu 5 Jalan Gombak, 53100 Kuala Lumpur Tel: 03-4025 5524 Email: counseltang@hotmail.com 1ST DEFENDANT : Harold Tan Kok Leng (Jessica Wong Yi Sing together with him) Messrs Harold & Lam Partnership Suite 32-5, Oval Tower Damansara, No. 685, Jalan Damansara, 60000 Kuala Lumpur Tel: 03-7732 8863 Email: hlp@hlplawyers.com S/N /dOkrwfjtki6WCIBByRMg Page 46 of 47 2ND AND 3RD DEFENDANTS : Jeyakumar Palakrishnar (Normadiah Binti Mohammad together with him) Messrs Zahir Jeya & Zainal Level 26-3A, PJX-HM Shah Tower, No.16A, Persiaran Barat, 46050 Petaling Jaya, Selangor Tel: 03-228 8500 Email: legal@zahirjeyazainal.com LEGISLATION / RULES CITED Companies Act 2016 ▪ Section 540 Construction Industry Payment and Adjudication Act 2012 ▪ Section 30

Aik Ming (M) Sdn Bhd v. Chan Ching Chuen & Ors and another appeal [1995] 2 MLJ 770

Cubic Electronics Sdn Bhd v. Mars Telecommunications Sdn

KL Eco City Sdn Bhd v. Tuck Sin Engineering & Construction

Lai Fee & Anor v. Wong Yu Vee & Ors [2023] 3 MLJ 503

MKP Builders Sdn Bhd v. Glocal Tech Engineering Sdn Bhd [2022] 1 LNS 2481 S/N /dOkrwfjtki6WCIBByRMg

Martego Sdn Bhd v. Arkitek Meor & Chew Sdn Bhd and another appeal [2020] 6 MLJ 224

Malaysia Building Society Bhd v. Tan Sri General Ungku Nazaruddin Bin Ungku Mohamed [1998] 2 AMR 1666; [1998] 2

Universal Cable (M) Bhd v. Bakti Arena Sdn Bhd & Ors [2000] MLJU 106; [2000] 3 CLJ 375

Yuk Tung Construction Sdn Bhd v. Daya CMT Sdn Bhd [2020] MLJU 1084 S/N /dOkrwfjtki6WCIBByRMg