Modular Quest Sdn Bhd v Maju Construction & Development Sdn Bhd (BA-12B-111-10/2024)

HARIKRISHNAN A/L KANAPATHY /K. HARIKRISHNAN (DIDAKWA SEBAGAI RAKAN KONGSI DI TETUAN K.

MAJU CONSTRUCTION & DEVELOPMENT SDN BHD (NO. SYARIKAT: 1147542-P) RESPONDEN-RESPONDEN [Dalam Mahkamah Sesyen di Shah Alam Dalam Negeri Selangor Darul Ehsan, Malaysia Guaman Sivil No.: BA-A52-48-06/2020 Modular Quest Sdn Bhd (No. Syarikat: 905552-T) Dan Harikrishnan A/L Kanapathy /K.Harikrishnan (Didakwa Sebagai Rakan Kongsi Di Tetuan K.Harikrishnan & Co) Maju Construction & Development Sdn Bhd (No. Syarikat: 1147542-P) Pihak Ke-3] (DIDENGAR BERSAMA) DALAM MAHKAMAH TINGGI MALAYA DI SHAH ALAM DALAM NEGERI SELANGOR DARUL EHSAN, MALAYSIA RAYUAN SIVIL NO.: BA-12B-111-10/2024 MODULAR QUEST SDN BHD (NO. SYARIKAT: 905552-T) MAJU CONSTRUCTION & DEVELOPMENT SDN BHD (NO. SYARIKAT: 1147542-P) [Dalam Mahkamah Sesyen di Shah Alam Dalam Negeri Selangor Darul Ehsan, Malaysia Guaman Sivil No.: BA-A52-2-01/2020 Antara Maju Construction & Development Sdn Bhd (No. Syarikat: 1147542-P) Plaintif Dan Modular Quest Sdn Bhd (No. Syarikat: 905552-T)

The Appellant/Plaintiff in Appeal 112 and Appellant/Defendant in Appeal 111 ( was seeking the refund of a RM150,000.00 deposit it paid to the 1st Respondent/Defendant ( krishnan in Appeal 112, a firm of solicitors that represented the 2nd Respondent/Third Party ( in Appeal 112 and Respondent/Plaintiff in Appeal 111.

Modular paid the said sum of RM150,000.00 to Harikrishnan to hold as stakeholders in exchange for the release of documents to conduct a due diligence in relation to a Joint Development Agreement dated 17-11-2016 for a project.

In Appeal 111, Modular was appealing against the Sessions Court ms for a declaration that the RM150,000.00 was validly and properly forfeited and

In Appeal 112, Modular was appealing on the dismissal of its suit against Harikrishnan for breach of a stakeholder agreement with respect to the RM150,000.00. Harikrishnan Third Party indemnity claim against Maju was presumably dismissed but Maju did not contest its obligation to indemnify Harikrishnan. Background facts 5. Maju had secured rights as a developer for the construction of a university campus as part of a mixed development project in Johor. Modular expressed its interest to participate as a main contractor on a joint venture basis with Maju vide a Letter of Intent dated 9-9-2019 ( ). The principal of the project was YPJ Plantations Sdn. Bhd.

former solicitors, Firdaus Arshad & Co. ) responded on 9-9-2019 setting out a long list of conditions for RM150,000.00 for the commitment to release the Project

By a letter dated 20-9-2019, FAC explained the purpose of the RM150,000.00 earnest deposit and expressed the condition that: In the event our client (sic) in default and the agreement with your (sic) unable to be finalized, our client undertake (sic) to refund the earnest deposit within forty-five (45) days. Should your company (sic) in default, the earnest deposit will be forfeited by our client

Modular responded vide its solicitors ( ) letter dated 14-10-2019 setting out the terms for the payment of the RM150,000.00 to Harikrishnan as the agreed stakeholder. It included the following terms:

Further, SB Chua stated that the 14-10-2019 letter superseded all prior agreements, arrangements and understandings between the parties relating to the subject matter thereof and the letter was counter-signed by Maju ( Letter ).

The Letter Agreement was followed by a letter from SB Chua dated 16-10-2019 to Harikrishnan accompanying the RM150,000.00 in which it was expressly stated that the RM150,000.00 was payable subject to the terms of the Letter Agreement and subject to your undertaking that you will hold the Deposit as stakeholder in accordance to the terms and conditions of Our Letter [i.e. the Letter Agreement] and you will fully refund the same to our client, MODULAR QUEST SDN BHD (Modular) in

Harikrishnan accepted the RM150,000.00 and the undertaking in the letter of 16-10-2019 without any objections to the terms of the undertaking or the Letter Agreement. The two (2) letters therefore constituted the terms of his stakeholding as a solicitor ( ). Pleaded Defence 12. According to Harikrishnan, Modular had issued a due diligence checklist on 29-10-2019 to delay the due diligence and that all available documents had been furnished, were available from

Harikrishnan pleaded case was that after various discussions, Maju and Modular agreed to change the terms of the Letter Agreement (which, for the purpose of this Judgment, will be referred to as the ).

Neither the identity of the representatives nor the date of the alleged Oral Agreement were pleaded, but the pleaded terms of the alleged Oral Agreement were as follows:

Maju then allegedly instructed Harikrishnan to release the first RM30,000.00 by letter dated 22-10-2019 pursuant to an agreement between Maju and Modular as evidenced by a letter dated 21-10-2019, and the remaining RM120,000.00 by a letter dated 6-12-2019 as forfeiture due to an alleged breach by Modular of the pleaded Oral Agreement.

Central to the dispute between the parties was a determination of what the terms relating to the RM150,000.00 stakeholder sum were. Modular claimed that it is evidenced by the Stakeholder Agreement whereas Harikrishnan claimed that there are other conditions attached, referring to the pleaded terms of the so-called Oral Agreement.

In submissions however, Harikrishnan disclaimed that its case was premised on an Oral Agreement, but on an implied term that if Modular did not issue a notice of dissatisfaction (Clause 6 of the Letter Agreement) within the due diligence period ending 45 days after 14-10-2019, the RM150,000.00 was forfeited. Maju submitted that the RM150,000.00 was not for purposes of the due diligence at all and relied on the terms of the 9-9-2019 letter from FAC. Analysis and findings 18. The crux of the pleaded Defence by Harikrishnan was whether there was an Oral Agreement setting a deadline to complete the due diligence at 45 days from 14-10-2019. By letters and emails dated 24-10-2019, 30-10-2019, 1-11-2019 and 4-11-2019, Harikrishnan and SB Chua exchanged correspondences about the due diligence. In these letters: a) Harikrishnan requested Modular to deposit a RM2 million bank draft in favour of YPJ Plantations Sdn. Bhd. before Modular meets directly with the principal (see letter dated 24-10-2019); b) Harikrishnan requested Modular to deposit RM2 million due diligence checklist (see letter dated 30-10-2019); c) As it related to the RM150,000.00, Harikrishnan said (on 30-10-2019): d) Harikrishnan then wrote another letter alluding to an agreement reached between the principals (see letter dated 1-11-2019). The letter was in the following terms:

The only documented evidence of the alleged Oral Agreement was the aforesaid letter dated 1-11-2019 from Harikrishnan. In response, SB Chua had in its e-mail on 4-11-2019 objected to any deviation from the Letter A There was a similar sentiment expressed in SB -10-2019.

However, this Court noted that there were no provisions in the Stakeholder Agreement requiring amendments to be in writing and Alex Choong (on behalf of Modular) and Zin (on behalf of Maju) were in direct communication with each other in meetings, telephone calls and via WhatsApp without the presence of their lawyers.

In the circumstances, direct evidence pertaining to the alleged variation to the Stakeholders Agreement could only be admissible if it came from Alex Choong (on behalf of Modular) and allegedly entered into this Oral Agreement.

In a conflict of witness testimony, this Court should defer to the findings of the Sessions Court Judge but without written grounds of judgment, there is no insight into the reasoning behind the decision and whether the credibility of the witnesses was a factor. On a review of the oral testimony, neither witness swayed the case.

However, there were other deciding factors in these appeals that were not apparently taken into consideration by the Sessions Court. The most obvious of which was that position contradicted the express terms of the Stakeholders Agreement which had been formally reduced to writing and signed.

It is trite that a variation thereof requires proof of offer, acceptance and valid consideration. As explained by the Federal Court in Kuala Dimensi Sdn Bhd v Port Kelang Authority [2025] 2 MLJ 238: s 63 of the Contracts Act 1950 which states that if parties agree to alter the said contract, the original contract need not be performed. When the plaintiff and the defendant here altered the rate of interest in the original contract ADW1, essentially, they are altering the original contract. As a result, a new contract is formed, ie ADW2. If the parties cannot establish all the elements of a valid contract in ADW2, the agreeme confined to the original contract (refer to the FC case of Yong Mok Hin v United Malay States Sugar Industries Ltd [1967] 2 MLJ 9 The issue of variation of contract and the requirement of consideration is extensively explained by the Court of Appeal in 555 Film Sdn Bhd & Ors v Adamancy Construction Sdn Bhd [2023] MLJU 986. For a variation to be contractually binding, all of the legal requirements to form a valid contract, including the provision of valuable consideration by each party.

The burden was therefore on Harikrishnan to prove the existence of the Oral Agreement as an exception to Sections 91 and 92 of the Evidence Act 1950. However, this Court was unable to identify all the elements of the variation much less find sufficient evidence of it.

The requisite consideration for the variation to the Stakeholders Agreement was neither pleaded nor proved. Beyond the bare assertion that the parties agreed to changed terms suspiciously like the terms of superseded LOI of 9-9-2019, the elements of a contract of variation were absent.

The evidence led through as to the existence of the Oral Agreement was also incomplete. Further, the several inconsistent changes to the terms of the formal Stakeholders Agreement alleged i.e. 45 days from 14-10-2019, 45 days from 17-10-2019, forfeiture with penalty, forfeiture alone were at consensus ad idem on each occasion, with all the attendant elements of a binding contract of variation.

The case for the defence became further confused when in case was not based on the existence of an Oral Agreement at all but based on a construction of the Stakeholders Agreement.

That Harikrishnan was seeking to justify forfeiture by reference to the terms of the written Stakeholder Agreement rather than the Oral Agreement suggested that the Oral Agreement as pleaded was an afterthought. Considering the apparent abandonment of that defence, I will say no more about it.

The terms of the Stakeholders Agreement were clear that the 45-day due diligence period commences upon receipt of all documents. The evidence in the case was not consistent with the contention that all documents had been furnished for the Company, the Project, the Proprietor and the University Justifiably or not, the due diligence check list was still open.

In any case, the Stakeholders Agreement was certainly unambiguous as to when the RM150,000.00 may be lawfully forfeited. It was always open for Modular to walk away from the transaction with a refund of the RM150,000.00 unless Clause 10 applied after the parties have finalized the terms of the Joint Venture Agreement following the completion of due diligence and the 60-days negotiation period. There was accordingly no binding commitment by Modular to participate in the project at all and parties were nowhere close to that stage.

In closing, it must not be overlooked that this case also concerned stakeholder monies subject to a solicitor s undertaking to hold it under express written conditions as evidenced by the Stakeholders Agreement. The Stakeholders Agreement is a tripartite agreement involving Maju, Modular and Harikrishnan as the stakeholder.

As the stakeholder, Harikrishnan was supposed to be a neutral party. The RM150,000.00 were trust monies in his hands and it would have been prudent to follow strictly the express terms of the Stakeholders Agreement, rather than to release it based on disputed terms.

As it related to the quantum of the claim, there was admittedly a partial release of the RM150,000.00 which was authorized on dated 21-10-2019:

There was no objection to the above from Harikrishnan as the stakeholder. The RM30,000.00 was authorized for release subject to terms that the sum remained a stakeholder sum and Harikrishnan ought not to have released the sum if any party to the Stakeholder Agreement disagreed with the stated terms for its release. Conclusion 36. In conclusion, this Court found that the Sessions Court was plainly wrong in condoning the release of the RM150,000.00 based on an unproven right of forfeiture. Hariskrishnan ought to have been found liable for breach of the Stakeholder Agreement and Maju is liable to indemnify Harikrishnan for the same.

Accordingly, both Appeals 111 and 112 were allowed and consequently: a) Judgment of the Sessions Court in Appeal 111 was set aside and the claim by Maju was dismissed and counterclaim against Maju was allowed in terms of para (a) to(c) of the counterclaim. b) Judgment of the Sessions Court in Appeal 112 was set aside and the claim by Modular was allowed in terms of prayers in paragraph 17 (a) to(d) of the Statement of Claim. The claim by Maju for an indemnity in third party proceedings was allowed in terms of prayers in paragraph 19 (a) to (c) of the third Statement of Claim with typographical amendments to Defendant where is referred. c) No order as to costs in respect of Appeal 111 or third party proceedings in Appeal 112. Costs were dealt with globally in Appeal 112 as follows: i) Harikrishnan (R1) to pay costs of RM20,000.00 here and below to Modular (Appellant); and ii) Maju (R2) to pay costs of RM5,000.00 here and below to Modular (Appellant). Bertarikh : 28 Ogos 2025 SGD ELAINE YAP CHIN GAIK PESURUHJAYA KEHAKIMAN MAHKAMAH TINGGI MALAYA SHAH ALAM Peguam bagi pihak Perayu/Plaintif: Yap Yoon Jan (Messrs Yap Siew Yee & Co.) Peguam bagi pihak Responden Pertama/Defendan: Mak Jun Yeen Peguam bagi pihak Responden Kedua/Pihak Ketiga: Muhammad Firdaus bin Arshad (Messrs Firdaus Arshad & Co.)