Pan Malaysian Pools Sdn Bhd v Xcess Networks (M) Sdn. Bhd. (WA-12BNCvC-7-01/2024)

After hearing the appeal, I hold the view that the minor errors in the Grounds of Judgment of the learned Sessions Court judge have not caused any miscarriage of justice, and are not appealable errors. Therefore, I decided that this Court ought to dismiss the Appellant/Defendant’s appeal. Background Facts [3] The parties hereto are not strangers. Prior to the latest agreement between them which forms the subject matter of the civil suit at the Sessions Court, the Respondent/Plaintiff had been providing services in the field of Information Technology (commonly known as “IT”) to the Appellant/Defendant. Their business relationship began with an agreement signed on 2nd November 2009 which they described as a System Supply Agreement. Over the years, several other contracts were made between them. The Appellant/Defendant’s Position [4] The Appellant/Defendant’s position is that an Agreement dated 22nd February 2018 which they described as a “Support and Maintenance Services (NFO Gaming Network Equipment)” made between the two parties could be terminated at any time by giving three months’ notice pursuant to Clause 9.4 thereof, and since written notice had been given 3 on 5th September 2019, the Appellant/Defendant was liable to pay the Respondent/Plaintiff only up till 31st December 2019.

The Appellant/Defendant contended that since a notice of termination had been given earlier, it is not liable to pay the Respondent/Plaintiff’s Invoice No. XN-0915, which was issued on 10th December 2019 for the period of 1st January 2020 to 31st March 2020. The Respondent/Plaintiff’s Position [6] The Respondent/Plaintiff’s position is that based on the said Agreement dated 22nd February 2018, the Appellant/Defendant is liable to pay for the final quarter of the third contractual year because the Appellant/Defendant had agreed to pay based on contractual year basis.

Further, the Respondent/Plaintiff contended as it had already paid third-party vendors for the entire contractual year, it should be entitled to bill the Appellant/Defendant until 31 March 2020, the end of the agreement period. The learned Sessions Court judge’s Grounds [8] The learned trial judge made a finding that the Appellant/Defendant is liable to pay the invoice which was for the fourth quarter from 1st January 2020 till 31st March 2020. For the record, I need to state that I find the learned Sessions Court judge had erred in finding that Clause 9.4 would be applicable subject to Clause 2.3. As I shall explain below, I arrived at the same conclusion but due to different reasons. As the order issued by the learned trial judge was to allow the Respondent/Plaintiff’s claim, I find that there was no miscarriage of justice. Analysis of the Facts and Law [9] After reading the submissions of both sides – which are equally compelling and persuasive – I had read the said Agreement dated 22nd February 2018, the notes of evidence and also the documentary evidence adduced at the Sessions Court trial, including the emails exchanged between the parties, to decide whether there is any appealable error in the grounds of the learned Sessions Court judge who had decided to allow the Respondent/Plaintiff’s claim.

First, I note that though the said Agreement was dated 22nd February 2018, it was intended to cover the contractual obligations of both parties for the period of 1st April 2017 to 31st March 2020. In other words, the Respondent/Plaintiff was already providing the services required by the Appellant/Defendant for nearly eleven months before both parties finalised the terms of the said Agreement which was dated 22nd February 2018.

As mentioned above, it is undisputed that there were earlier contracts made between the parties, and to avoid confusion, they referred to the said Agreement as “the 2018 Agreement”, which I shall hereinafter also refer as “the 2018 Agreement”. The latest contract between the parties expired on 31st March 2017 but the Respondent/Plaintiff was asked to continue providing its services pending the signing of an Agreement for the period commencing from 1st April 2017, the terms of which were negotiated for several months.

In the 2018 Agreement, the Appellant/Defendant agreed to use the services of the Respondent/Plaintiff for its business for a period of three 5 contractual years, which were from 1st April 2017 till 31st March 2018, 1st April 2018 till 31st March 2019 and finally 1st April 2019 till 31st March 2020.

Even though payments were to be made in advance every quarter and not once a year, the Third Schedule clearly shows that the total Service Fee of RM3,242,613.69 payable by the Appellant/Defendant was separated into 3 contractual years, of 4 quarterly payments for each quarter in a contractual year. The description used in the said the Third Schedule was “Payment Breakdown”.

In the said “Payment Breakdown”, the first payment was identified as “Q1/1”, which I perceive to mean the first quarterly payment for the first contractual year, i.e. for the period of 1st April 2017 till 30th June 2017. The last payment due was identified as Q4/3, which I read as a reference to the fourth quarterly payment for the third contractual year, i.e. for the period of 1st January 2020 till 31st March 2020. i.e. final quarterly payment for the third contractual year. For convenient reference, a screenshot of the said Third Schedule of the 2018 Agreement is shown below:

In his submissions, learned counsel for the Respondent/Plaintiff referred this court, inter alia, to the contents of earlier contracts, the emails exchanged between the parties and the difference between Clauses 9.5.3 and 9.5.4, to submit that the words in brackets “per contractual year” were added into Paragraph 2 of the Third Schedule of the 2018 Agreement after the Appellant/Defendant agreed that payments shall be for payable based on “per contractual year” basis. A screenshot of the said Paragraph 2 is shown below:

On a balance of probabilities, I find that the subsequent addition of those words in brackets “per contractual year” was due to the Appellant understanding that the Respondent had to make annual contractual commitments to its suppliers back-to-back with its contract with the Appellant, so as to be able to provide services to the latter. Two emails exchanged between the parties on 18th and 24th January 2018 and the 7 subsequent addition of those words “per contractual year” into the 2018 Agreement, fortifies my finding. The said email is shown below:

In her eloquent reply, learned counsel for the Appellant submitted, inter alia, that Clause 20 of the 2018 Agreement states that it constitutes the entire agreement between the parties, and that pursuant to a notice under Clause 9.4 thereof, the Appellant was entitled to terminate without having to show any cause for termination. The said Clause 9.4 reads:

With respect, I disagree with the Appellant’s submission because the words “per contractual year” were added into the 2018 Agreement after further negotiation between the parties, and surely it was not intended to be a superfluous addition. Secondly the 2018 Agreement was not for a period commencing from the date of the Agreement, and thirdly, the Third Schedule shows that the total Service Fee of RM3,242,613.69 payable by the Appellant was to be separated into 3 contractual years; of 4 quarterly payments for each quarter in a contractual year.

Whilst I agree with the submission of learned counsel for the Appellant that emails exchanged between the parties in year 2016 are irrelevant, I am of the view that emails exchanged between the parties between 1st April 2017 and 22nd February 2018 are relevant because that period is within the first contractual year set out in the 2018 Agreement. Those two emails, on 18th January 2018 written by the Respondent/Plaintiff and on 24th January 2018 by the Appellant/Defendant respectively are relevant and admissible to assist the learned Sessions Court judge in deciding the case. The Appellant/Defendant’s stand that their agreeing to pay for a minimum period of 12 months referred to the first contractual year, is, with respect, untenable because on 24th January 2018 when it sent that email to the Respondent/Plaintiff, there were only 2 months and 7 days left before the end of the first contractual year – and would have been superfluous.

It is my judgment that a fair and logical construction of the 2018 Agreement, as a whole, would be that if the Appellant/Defendant had continued to accept the services of the Respondent/Plaintiff on or after 1st April 2018, i.e. entering the second contractual year, it must pay the Respondent/Plaintiff for the whole of the second contractual year. The “remaining unutilised period” stated in Clause 9.5.3 is intended to refer to the third contractual year if notice of termination is given three months before the end of the second contractual year.

Now, if the Appellant/Defendant had intended to terminate the third contractual year which begun on 1st April 2019, notice should have been given to the Respondent/Plaintiff, at the latest by 31st December 2018, so that the Respondent/Plaintiff could act to terminate its back-to-back 10 contracts with its suppliers. This is consistent with the fact that the services that were provided were specialised services that required the Respondent/Plaintiff to have the hardware as well as manpower on standby to serve the Appellant/Defendant at numerous sites. The Respondent/Plaintiff had to provide software support service on 24/7 basis, which I understand to mean 24 hours 7 days a week. This is evident from Section B of the Second Schedule to the 2018 Agreement, as shown below:

The twenty sites to be serviced by the Respondent/Plaintiff are located all over Malaysia, as set out in Section C of the Second Schedule, from Alor Setar up north, to Kuantan on the east coast and Johor Bahru down south. A screenshot of the said Section C is pasted below.

The 2018 Agreement also rendered the Respondent/Plaintiff liable to pay liquidated damages as set out in Clause 9.3 in the event of any failure to perform its services at the twenty sites scattered all over Malaysia punctually. Hence, I find that the Respondent/Plaintiff’s insistence on being paid on the basis of “per contractual year” to be reasonable, and had in fact been accepted by the Appellant/Defendant.

Further, from my reading of the 2018 Agreement, the parties’ intention to be bound on the basis of contractual years is also visible from the contents of Clause 2.3 which mentions the deadline of “2nd Anniversary of the Term” for the Appellant/Defendant to give notice of intention to reduce the scope of Services and/or sites to be serviced by 12 the Respondent/Plaintiff. Had the Appellant/Defendant given such a notice at least three months before the “2nd Anniversary of the Term”, it would have been entitled to reduce the Service Fee payable to the Respondent/Plaintiff by reducing the scope of Services and/or sites.

In my judgment, the deadline of three months before the “2nd Anniversary of the Term” was so fixed because payments were to be made on “per contractual year” basis. Variation, if any, of the scope of Services and/or sites pursuant to Clause 2.3 must be finalised at least three months early. This is because as soon as performance of the contract entered the third contractual year, i.e. on 1st April 2019, the Appellant became liable to pay the full agreed fee for the third contractual year which ended on 31st March 2020, albeit by way of four quarterly payments.

The provisions in the 2018 Agreement for early termination, i.e. less than a contractual year, would be applicable if and only if one of the “termination events” spelled out in Clause 9.1 was to occur, granting the Appellant/Defendant the right to terminate immediately under Clause 9.2 or if it was the Respondent/Plaintiff who has given notice of termination, in which case the Respondent would be liable to refund the Appellant’s money and pay damages. It is undisputed that no “termination event” occurred and the Respondent did not give any notice of termination.

If the Appellant/Defendant had intended the contract to be freely terminable, it should have declined to agree that payment of Service Fee be on a “per contractual year” basis and insisted on “per quarterly” instead. Counsel for the Appellant: Shamala Balasundaram (Siow Poh Ching with him) SOLICITORS FOR THE APPELLANT: MESSRS CHOOI & COMPANY Advocates & Solicitors Level 5, Menara BRDB, 285, Jalan Maarof, Bukit Bandaraya, 59000 KUALA LUMPUR. Counsel for the Respondent: Mahendra Mahaason (Joshua Laurence (PDK) with him) SOLICITORS FOR THE RESPONDENT: MESSRS SREE HARRY & CO. Advocates & Solicitors No. 39, Jalan SS1/36, 47300 PETALING JAYA, SELANGOR LEGISLATIONS REFERRED TO:

S.29 of the Courts of Judicature Act 1964