Pembinaan BLT Sdn Bhd v Sharikat Galian Razak Sdn Bhd (24NCC-515-12/2016)

Execution no. 37G-4-01/2015 (“Garnishee Proceeding”); and

an arbitration proceeding initiated by the Defendant against the Plaintiff is decided by the Kuala Lumpur Regional Center for Arbitration (KLRCA) (“Arbitration Proceeding”). [2] The Plaintiff’s alternative prayer is for an order that in the event a winding up petition has been filed, the Defendant is prevented from advertising, publishing or making a proclamation of the said winding up petition in any local daily newspaper or government gazettes against the Plaintiff until a judgement is obtained in the above two suits. 4 [3] I allowed the Plaintiff’s OS. Dissatisfied with my decision, the Defendant filed a Notice of Appeal against the said decision. Parties [4] The Plaintiff is a company jointly owned by the Ministry of Finance, Malaysia and the Federal Lands Commissioner. The Plaintiff’s nature of business is in the construction of government buildings and leasing of the said buildings, in particular constructing buildings and infrastructure facilities for Polis DiRaja Malaysia (PDRM). [5] The Defendant is also a company and was appointed by the Plaintiff as the main contractor main contractor via a construction contract dated 9 April 2009 (Contract) to implement a project known as “Cadangan Menaiktaraf Dengan Meroboh Dan Membina Semula Kem Batalion 3 Pasukan Gerakan Am, Polis Diraja Malaysia Di Atas Lot 7199, Mukim Bidor, Daerah Batang Padang, Perak Darul Ridzuan. Pakej 2 – Kerja-Kerja Infrastruktur, 429 Unit Kediaman Unit Kelas F, Bangunan Pentadbiran, Kemudahan-Kemudahan Laun Dan Kerja-Kerja Mekanikal Dan Elektrikal” (Project). 5 [6] The Defendant is also the judgement debtor in the Garnishee Proceeding which was filed against the Defendant by a judgment creditor known as RBA Engineering (M) Sdn Bhd (RBA). Factual Background [7] Dispute arose between the Plaintiff and Defendant in respect of works and/or additional earthworks done by the Defendant for the Project. [8] According to the Defendant, it had completed all earthworks for the Project on 14 May 2012 and the making good defect period expired on 16 February 2014. The Plaintiff was supposed to release the remaining Performance Bond or the retention sum in May 2014. However, the Plaintiff had failed to issue any Final Certificate before 6 May 2014. [9] On the other hand, the Plaintiff alleges that disputes as to the method, quantum, pricing, the date of commencement and the date of completion of the additional earthworks had arose. The said additional works are classified as variation order works. 6 [10] For the additional earthworks, the Defendant was required to excavate and remove ‘unsuitable materials’ from the construction site and to refill the areas that had been excavated with ‘suitable materials’. [11] The Plaintiff contends that the Defendant had failed to furnish the following supporting documents –

the approval documents with signatures of the Plaintiff’s authorised person;

minutes of meetings with the Plaintiff’s authorised person;

invoices pertaining to the variation order works for payment;

delivery orders of materials in and out of worksite; and

payment vouchers. [12] Since the Defendant had failed to provide the Plaintiff with the above supporting documents, the Plaintiff could not verify as to whether the additional earthworks were actually done in a proper manner or that approvals had been obtained from the Plaintiff’s authorised person or whether the additional earthworks were carried out in accordance to the Plaintiff’s specifications. 7 [13] For ease of reference the events that transpired between the parties pursuant to the dispute is set out chronologically in the table below (Chronological Table) below –

23 September 2014 Meeting between Plaintiff and Defendant to resolve on the issue of the additional earthworks and the payments thereof on the claims submitted by the Defendant from the month of March 2010 onwards (Meeting).

23 September 2014 (Exhibit PBLT-20, Enclosure 2) Plaintiff’s letter confirming the following matters was agreed and finalised between the Parties and resolved – 23 September 2014 (Exhibit PBLT-20, Enclosure 2) Defendant’s letter confirming the decisions made and agreed between the parties at the Meeting in respect of woks done. The Defendant sets out a table describing details of the works done and that the amount of additional works agreed between the parties was RM17,240,285.00. The Defendant requested for preparation of the Arahan Perubahan Kerja and the Pelarasan Harga Kontrak to be expedited for purpose of payment since the 8 Item Date Event earthworks has been completed in 2011 and that the Defendant had issued the Certificate of Making Good Defects on 2 May 2014.

24 September 2014 (Exhibit PBLT-20, Enclosure 2) Defendant’s letter replying to the Plaintiff’s letter dated 23 September 2014. Based on the contents of the Plaintiff’s letter dated 23 September 2014 and the Defendant’s letter of even date the Defendant summarised the disagreement of the parties in respect of earthworks done. The Defendant reiterated its claim of RM17,240,285.00 as stated in its letter dated 23 September 2014.

26 September 2014 (Exhibit PBLT-20, Enclosure 2) Plaintiff replied to the Defendant’s letter dated 24 September 2014 expressing its disappointment with the Defendant who the Plaintiff alleged has reneged on the agreement which was agreed between the parties at the Meeting. The Plaintiff sets out a table which shows details of the earthworks done by the Defendant and the total value of the said works done for the Project is

3 October 2014 (Exhibit PBLT-20, Enclosure 2) Defendant’s letter denying they reneged on the agreements reached between the parties. The Defendant rejected the amount RM10,888,005.40 stated by the Plaintiff and reiterated its claim for the sum RM RM17,240,285.00 as stated in its letter dated 23 September 2014. 9 Item Date Event Since there is disagreement between the parties in respect of the earthworks done which may be due to misunderstanding, the Defendant proposed a meeting be held to resolve the disagreement and request the Plaintiff as the Superintending Officer to make a final decision whether to confirm, revoke or vary the Plaintiff’s decision 7. 20 October 2014 (Exhibit PBLT-20, Enclosure 2) Plaintiff’s letter replying to the Defendant’s letter dated 3 October 2014 reiterating the contents of its letter dated 23 September 2014 and 26 September 2014. Be that as it may, the Plaintiff is prepared to meet with the Defendant to discuss the matter. However the Plaintiff pointed out that the Managing Director of the Plaintiff ought to attend the meeting proposed by the Defendant.

27 October 2014 Meeting between the parties and the Minister of Finance II.

31 October 2014 (Exhibit PBLT-20, Enclosure 2) Defendant’s letter to the Minister of Finance II of the Ministry of Finance as a follow-up of the meeting on 27 October 2014 to explain further the issue. In the strong word letter, the Defendant highlighted, among others, the following – (which the Defendant said ought to have been issued before 6 May 2014) is the Unsuitable Material for the platform Such position is not true and a big lie and 10 Item Date Event defamatory (tidak benar dan pembohongan besar dan fitnah). The Plaintiff’s position is inconsistent with the reports of consultants (of the Project) appointed by the Plaintiff Contract when it failed to issue the Final Certificate before 6 May 2014

2 January 2015 RBA obtained judgment in default against the Defendant in Civil Action 22NCVC-530-11/2014 on 2 January 2015 (Judgment In Default). The judgment sum was RM17,441,241.69.

28 January 2015 (GOTSC) dated 28 January 2015 against the Plaintiff to garnish a sum of RM10,000,000.00 which is alleged to be owing and payable by the Plaintiff to the Defendant pursuant to a letter dated 26 September 2014 written by the Plaintiff to the Defendant.

5 February 2016 (Exhibit PBLT-16, Enclosure 2) The Senior Assistant Registrar (SAR) ordered that the GOTSC be made absolute.

16 February 2016 (Exhibit PBLT-17, Enclosure 2) The Plaintiff appealed to Judge in Chambers against the SAR’s decision. 11 Item Date Event 14. 1 April 2016 (Exhibit PBLT-18, Enclosure 2) High Court allowed the Plaintiff’s appeal and ordered that –

12 May 2016 (Exhibit PBLT-19, Enclosure 2) Defendant filed an application to intervene in the Garnishee Proceedings.

7 June 2016 (Exhibit PBLT-21, Enclosure 2) Defendant’s letter to the Plaintiff stating the Plaintiff has failed to decide on the sum RM20,552,093.87 which is payable to the Defendant. By the said letter the Defendant notified the Plaintiff that it is invoking clause 54(c) of the Contract and required the dispute be referred to arbitration.

7 June 2016 to 2 November 2016 Parties were proposing and counter-proposing the arbitrator to be appointed.

17 June 2016 Defendant’s application to intervene in the Garnishee Proceedings was dismissed by the court.

4 July 2016 (Exhibit PBLT-21, Enclosure 2) Letter from the Defendant’s solicitor to the Plaintiff’s solicitor – and 20 October 2014 has already acknowledged the said sum. 12 Item Date Event 20. 18 July 2016 (Exhibit PBLT-21, Enclosure 2) Letter from the Plaintiff’s solicitor to the Defendant’s solicitor stating the sum RM10,888,005.40 is heavily disputed and that the said amount is the subject matter of the Garnishee Proceedings.

10 November 2016 (Exhibit PBLT-21, Enclosure 2) Letter from the Defendant’s solicitor to the Plaintiff’s solicitor proposing parties refer the appointment of arbitrator to the Kuala Lumpur Regional Centre for Arbitration (KLRCA).

11 November 2016 (Exhibit PBLT-21, Enclosure 2) Letter from the Plaintiff’s solicitor to the Defendant’s solicitor informing the Plaintiff’s agreement with the Defendant that a request be made to KLRCA to appoint an arbitrator.

25 November 2016 (Exhibit PBLT-22, Enclosure 2) Letter from the Defendant’s solicitor to the Plaintiff forwarding a notice dated 22 November 2016 issued pursuant to section 218(1)(e) of the Companies Act 1965 (Statutory Notice) demanding payment of RM6,313, 526.40 from the Plaintiff. Attached to the Statutory Notice is the Final Certificate and a copy of the Plaintiff’s Letter dated 26 September.

28 November 2016 (Exhibit PBLT-23, Enclosure 2) Letter from the Plaintiff’s solicitor to the Defendant’s solicitor disputing the amount RM6,313,526.40 demanded as parties are still in disagreement over the amount demanded and that the said disputed amount is the subject matter of the Garnishee Proceedings and that it is also the subject matter of an arbitration which the Defendant intends to commence pursuant to clause 54 of the Contract. 13 Item Date Event 25. 29 November 2016 (Exhibit PBLT-23, Enclosure 2) Letter from the Defendant’s solicitor to the Plaintiff’s solicitor informing the amount RM6,313,526.40 demanded is not disputed and that the Defendant will proceed with the Statutory Notice.

7 December 2016 The Plaintiff filed the OS and affidavit in support. The law [14] In Pacific & Orient Insurance Co Bhd V. Muniammah Muniandy [2011] 1 CLJ 947 the Court of Appeal held as follows – [25] An application for an injunction to restrain an intended winding-up petition against a company is known as a "Fortuna Injunction", taking its name from the case of Fortuna Holdings Pty Ltd v. The Deputy Commissioner of Taxation [1978] VR 83. In that case the court laid down the basis on which a court acts to restrain the presentation of a winding-up petition and the two principles that guide courts in the grant of an injunction to that effect. (see also: Mobikom Sdn Bhd v. Inmiss Communications Sdn Bhd [2007] 3 CLJ 295 (Court of Appeal). [26] The first principle laid down in that case in that an injunction of that nature may be granted by court where the presentation of the petition might produce irreparable damage to the company and where the proposed petition has no chance of success. In order to succeed in getting injunction under this principle, the applicant must satisfy both limbs of the principle ie,:

the intended petition has no chance of success, as a matter of law as well as a matter of fact; and 14

(ii) the presentation of such petition (which has no chance of success) might produce irreparable damage to the company. (see: Re A Company [1894] 1 Ch 349; Charles Forte Investment Ltd v. Amanda [1964] 1 Ch 240, [1963] 2 All ER 940; and Bryanston Finance Ltd v. De Vries (No 2) [1976] 2 WLR 41, [1976] 1 All ER 25). [15] In Mobikom Sdn Bhd V. Inmiss Communications Sdn Bhd [2007] 3 CLJ 295 the Court of Appeal said – [4] There is no doubt that a court has jurisdiction and power to grant an anti-suit injunction whenever the interests of justice call for or demand it. … a party may be restrained from presenting a winding up petition if it is found, for example, that there is a bona fide dispute about the debt on which the notice of demand issued under s. 218 of the Companies Act is based. See, Bina Satu Sdn Bhd v. Tan Construction [1988] 1 CLJ 384 (Rep); [1988] 2 CLJ 652; [1988] 1 MLJ 533; Stonegate Securities Ltd v. Gregory [1980] 1 Ch 576. Once the debt on which the proposed petition is based is bona fide disputed it matters not that the debtor company is in fact insolvent. See, Mann v. Goldstein [1968] 2 All ER 769. [5] The kind of injunction by which an intended winding up petition is sought to be restrained is known as a "Fortuna injunction" taking its name from the case in which the juridical basis for the relief was first explained. See, Fortuna Holdings Pty Ltd v. The Deputy Commissioner of Taxation [1978] VR 83. In that case, McGarvie J discussed the basis on which a court acts to restrain the presentation of a winding up petition and the two branches of the principle that guide courts in the grant of an injunction. In respect of the basis, his Honour said this: 15 When a court restrains the presentation of a winding up petition to that court it exercises part of its inherent jurisdiction to prevent abuse of its process. Mann v. Goldstein [1968] 1 WLR 1091, at pp. 1093-4; [1968] 2 All ER 769. Usually a court acts against abuse of its process after proceedings have been commenced. Thus, existing proceedings may be stayed or dismissed, or documents delivered as a step in the proceedings may be struck out. This is done to relieve a party to the proceedings from an oppressive and damaging situation in which he has been placed through abuse of court process. The law has long recognized that with proceedings to wind up a company, intervention after the commencement of proceedings would often be too late to relieve the company of oppression and damage. The courts have recognized that irreparable damage may be done to a company merely through public knowledge of the presentation of a petition. Usually the damage flows from the loss of commercial reputation which results. The courts have also been conscious of the pressure which may be put on a company, by a person with a disputed claim against it, threatening to present a winding up petition unless the company meets his claim. While that threat exists, the company, in order to avoid the damage involved in the presentation of a petition, is pressed to meet the claim although it may have substantial and genuine grounds for regarding itself as not required to do so. The decisions of the courts have established the principle that the presentation of a winding up petition may be restrained by injunction where its presentation would amount to an abuse of the process of the court. The courts apply this principle similarly to restrain the advertisement of a petition already presented. The principle enables companies to be protected from threatened or apprehended oppression and damage from abuse of court process. 16 The basis on which the courts have intervened in the cases cited by counsel, has been that presentation of a winding up petition might of itself cause irreparable damage to the company. Given that basis, the application of the principle which entitles the courts to intervene to prevent abuse of process, depends on the existence of different elements in two distinct situations considered in the authorities. Preliminary Objection by the Plaintiff [16] At the outset, the Plaintiff raised a preliminary objection in respect of the admissibility of the Plaintiff’s letter dated 26 September 2014 (Impugned Letter). It is the Plaintiff’s position that the said letter was issued on a without prejudice basis, thus inadmissible. [17] The Statutory Notice dated 22 November 2016 provides as follows –

Kami amat kecewa kerana berdasarkan kepada surat-surat di atas, wakil-wakil syarikat tuan yang hadir ke Mesyuarat pada 23 September 2014 berkenaan telah cuba menidakkan persetujuan yang dicapai. Ingin kami tegaskan di sini bahawa persetujuan/keputusan Mesyuarat tersebut adalah muktamad melainkan jika tuan menyatakan 21 bahawa wakil-wakil tuan yang hadir dan bersetuju dengan keputusan berkenaan bukannya wakil-wakil tuan yang sah. ...

Tanpa prasangka kami ringkaskan dalam jadual di bawah ini persetujuan yang telah dicapai berkenaan tuntutan tuan seperti mana yang telah kami nyatakan di dalam surat kami yang terdahulu ruj. PBLT/PLMD1/813/SGRSB/391 (shah) bertarikh 23 September 2014 berserta nilai-nilai (mengikut kiraan kami berdasarkan kepada kuantiti serta unit harga yang telah dipersetujui) ke atas tuntutan tersebut untuk rujukan tuan: ...

negotiations between the parties did not result in a settlement. As such the Impugned Letter automatically becomes inadmissible although its inclusion was not objected to by the Plaintiff at an earlier stage of the case. The Plaintiff refers, among others, to the landmark case Malayan Banking Bhd v Foo See Moi [1981] 2 MLJ 17 and s. 23 of the Evidence Act 1950 to support its argument in respect of the without prejudice issue. 22 [20] On the merits of its OS, the Plaintiff contends –

the demand for the sum RM 6,313,526.40 (Demanded Debt) is without conclusive proof that the works were carried out in a proper manner. Even though it is not pre-requisite for the Defendant to obtain judgment in respect of the Debt Demanded it is definitely a better way for the courts to make an informed decision in a winding up petition.

the reason why the Arbitration Proceedings is being initiated by the parties is to prove or disprove all that was due between the parties, including the Debt Demanded.

since the Debt Demanded is in dispute, the Defendant’s intended winding up petition is an abuse of process of the court and ought to be restrained by an injunction. [21] The Defendant denies that the Impugned Letter was issued on a without prejudice basis. The Defendant submits – Plaintiff’s letter where the Defendant claims the Plaintiff has confirmed the settlement – 23 Lanjutan kepada mesyuarat yang diadakan di pejabat kami pada pagi ini (23 September 2014) yang dihadiri oleh Tuan Haji Rahman Ayob, En. Razali Jalil dan En. Norbasha Abdul Aziz daripada syarikat tuan dan saya sendiri selaku Pegawai Penguasa (PP) Projek dan pegawai-pegawai kami iaitu En. Noor Azman Embi, En. Mohd. Yusoff Awang, Pn. Wan Sharwani Wan Yaacob, En. Zaidi Haron, En. Abdul Aziz Abu Bakar dan En. Mohd. Shahill Ishak, perkara-perkara seperti butiran berikut telah dibincangkan dan dipersetujui bersama:- ...

Selain daripada perkara di atas, sukacita juga ingin dimaklumkan bahawa kuantiti untuk kerja-kerja (bulk earthwork – cut & fill) di dalam kawasan tapak projek akan berdasarkan kepada Lukisan Terbina (As-built drawing) yang tuan kemukakan dan disahkan sebelum ini.

Pembayaran untuk kerja-kerja yang tuan telah laksanakan akan dibuat dalam masa terdekat berdasarkan persetujuan semasa mesyuarat di atas. The Defendant submits based on paragraph 4 of the said letter the Plaintiff had acknowledged the Debt Demanded based on the calculations at paragraph 2 of the said letter. 24

(ii) Plaintiff’s Impugned Letter where the Plaintiff said –

... Ingin kami tegaskan bahawa persetujuan/keputusan Mesyuarat tersebut adalah muktamad melainkan jika tuan-tuan menyatakan bahawa wakil tuan-tuan yang hadir dan bersetuju dengan keputusan berkenaan bukannya wakil-wakil tuan yang sah. …

Tanpa prasangka kami ringkaskan dalam jadual di bawah ini persetujuan yang telah dicapai berkenaan tuntutan tuan seperti mana yang telah kami nyatakan di dalam surat kami yang terdahulu ruj. PBLT/PLMD1/813/SGRSB/391 (shah) bertarikh 23 September 2014 berserta nilai-nilai (mengikut kiraan kami berdasarkan kepada kuantiti serta unit harga yang telah dipersetujui) ke atas tuntutan tersebut untuk rujukan tuan: ...

Sila juga tuan ambil maklum bahawa dengan demikian nilai keseluruhan untuk kerja tanah bagi projek ini adalah RM10,888,005.40 (iaitu RM6,313,526.40 + RM4,574,479.00) sebagaimana butiran di dalam jadual-jadual di atas.

Sekali lagi ingin kami tegaskan bahawa keputusan/persetujuan bersama yang dicapai semasa Mesyuarat tersebut adalah muktamad dan pembayaran ke atas tuntutan-tuntutan berkenaan akan diproses dan dibuat mengikut keputusan ini. 25 [22] The Defendant submits the fact that the Plaintiff insisted to make payment of the Debt Demanded regardless of the Defendant’s position and that the corresponding work amounting to RM4,574,479.00 has been paid effectively in November 2014 is consistent with clause 54(b) of the Contract. Therefore the balance in the sum of the Debt Demanded become due and payable to the Defendant. Findings of the court [23] As decided by the Federal Court in the case of Foo See Moi, letters written without prejudice are inadmissible in evidence of the negotiations attempted and where the negotiations conducted lead to a settlement the letters become admissible in evidence of the terms of the agreement. [24] As to the factors which need to be taken into consideration when determining whether a letter is issued with prejudice or otherwise the court in Indran a/l N Jeganathan v Nithiyani a/p K Kulaveerasingam [2011] 7 MLJ 237 referred to a Hong Kong case of Re Jinro (HK) Ltd [2002] 4 HKC 90 and said – 26 [30] In Re Jinro (HK) Ltd [2002] 4 HKC 90 the judge held that it was not necessary for a 'without prejudice' stamp to be expressly applied to the negotiations if it was clear from the surrounding circumstances that the parties were genuinely seeking to compromise the dispute. It was stated in that case that a party claiming without prejudice privilege on communication would have to show that the communication was made legal proceedings in relation to the dispute had commenced or were contemplated: (iii) the communication was made in a genuine attempt to settle the dispute; the communication was made with the intent that if negotiations failed, it could not be disclosed without the parties consent. [25] Applying the law as stated in the above cases to the facts that transpired between the parties I am of the view, based on the reason stated below, the Plaintiff’s Impugned Letter was issued on a without prejudice basis. [26] It is noted that the Impugned Letter was not boldly stamped headed with the phrase “Without Prejudice”. However the application of the rule is not dependent on the use of the said phrase and regards must be given to the circumstances surrounding the issuance of the Impugned Letter, namely, the circumstances which led to the issuance of the said letter and the circumstances that transpired thereafter. [27] The evidence (in particular as set out in the Chronological Table) clearly shows at the time the Impugned Letter was issued the parties 27 were in the midst of a series of discussion as part of their effort to resolve the issue relating to the value of earthworks done by the Defendant. The Impugned Letter was issued almost immediately after the Meeting on 23 September 2014 where both the Plaintiff and Defendant met to discuss the unresolved issue regarding value of additional works done by the Defendant. Importantly discussions were also carried out by both parties by putting forward their case in writing via the numerous letters to justify their position, particularly the quantity, rate and value of works done by the Defendant. The affidavit evidence shows that each of the party refused to accept the other party explanation or justification in relation to the works done by the Defendant. [28] Based on the affidavits of both parties and contents of the letters exchanged between the parties it is my finding that discussions were carried out with the intention of resolving the value of additional earthworks done by the Defendant under the Project to enable the Final Certificate be issued so as to enable payment to be made to the Defendant. Having considered the affidavit evidence adduced I am of the view that the parties had failed to reach a settlement in respect of the value of additional earthworks done which made the issuance of the Final Certificate impossible. I shall state my reasons below. 28 [29] Considering the evidence in its totality I do not agree with the Defendant’s contentions that the Plaintiff’s letter stated at paragraph 21 above shows the Plaintiff’s confirmation and acknowledgement of the Debt Demanded. [30] If one were to only refer to the said selected passages of the Plaintiff’s letter as highlighted by the Defendant (see paragraph 21 above) it would appear that an agreement was reached because the above passages seems to indicate the Plaintiff’s position as such. However it must be borne in mind the statements made by the Plaintiff in the letters highlighted by the Defendant was part and parcel of an ongoing exercise between the Plaintiff and the Defendant to resolve the dispute in respect of the value of earthwork done by the Defendant. As such it is not right to only focus on the Plaintiff’s position as the negotiation/discussion exercise was a two way interaction between the parties. Obviously the Defendant’s position and response to the unresolved issue and the statement made by the Plaintiff in the above passages must be equally considered in order to determine whether there was indeed an agreement reached between the parties. In other words, it must be determined whether there was a meeting of mind between the Plaintiff and the Defendant in relation to the unresolved issue and the Demanded Debt (RM6,313,596.40) as the sum due and 29 payable by the Plaintiff to the Defendant under the Contract. If there is such an agreement then the preliminary objection raised by the Plaintiff in respect of the admissibility of the Without Prejudice Letter must fail. [31] In the Plaintiff’s letter dated 23 September 2014, no doubt the Plaintiff had outlined in a table the details of works done, claim made by the Defendant for the additional works done and what appears to be the agreement reached between the parties in respect of the additional works done. It was also stated in the letter that that payment will be made by the Plaintiff based on the agreement at the Meeting. However the amount of payment to be made or agreed by both parties was not stated in the said letter. [32] Notwithstanding that, the Defendant replied via letter dated 24 September 2014 disputing the Plaintiff’s letter dated 23 September Defendant set out the said differences. The Defendant then set out in detail their computation of the earthworks done in a table and state the value of additional earthworks done as RM17,240,285.00 which is payable to the Defendant. 30 [33] The Impugned Letter was issued in response to the Defendant’s letter dated 24 September 2014 in which the Defendant claimed the sum RM17,240,285.00 is payable. The Impugned Letter is the Plaintiff’s denial in respect of the Defendant’s claim of RM17,240,285.00. Instead the Plaintiff’s calculation of the total value for earthworks done as itemised at paragraph 3 is RM6,313,526.40 and at paragraph 5 is RM4,574,479.00. This made up a total of RM10,888,005.40. It is to be noted the details (includes units, rate and quantity) of the additional earthworks done at the said paragraph 3 where the total value is RM6,313,526.40 is made on a without prejudice basis. The sum RM6,313.526.40 is the sum demanded from the Plaintiff in the Statutory Notice (Demanded Debt). [34] The Defendant subsequently via letter dated 3 October 2014 insisted the sum RM10,888,005.40 is a mistake and that the sum ought to be RM17,240,285.00. By the last paragraph of the 3 October 2014 letter, again the Defendant acknowledged that both parties has different position/views in construing the earthworks done. Pursuant to that the Defendant proposed a meeting be held so that the Plaintiff in its capacity as the Superintending Officer of the Project to decide whether to confirm, revoke or vary the Plaintiff’s own decision. It is pertinent to note the words in the last paragraph where the Defendant said as follows - 31 Oleh kerana terdapat perbezaan dalam menterjemahkan kerja-kerja berkaitan di antara kita, mungkin kerana salah faham dan/atau salah andai, saya ingin mencadangkan supaya satu mesyuarat semula dapat diadakan untuk menyelesaikan perkara-perkara yang berbangkit dan memohon keputusan muktamad tuan sebagai Pegawai Penguasa samada mengesahkan, membatalkan atau mengubah (confirm, reverse or vary) keputusan-keputusan tuan dan/atau pegawai-pegawai tuan untuk tindakan lanjut pihak kami. [35] This is followed by the Plaintiff’s letter dated 20 October 2014 where the Plaintiff replied it has no objection for a meeting as proposed by the Defendant so as to enable parties to discuss further. The Plaintiff however reiterated that the Plaintiff’s position in its letter dated 23 September 2014 and the Impugned Letter remains. [36] At this juncture it is to be noted that in so far as the Plaintiff is concerned the value of additional earthworks is RM10,888,005.40

Arbitration

If any dispute or difference shall arise between the Government and the Contractor, either during the progress or after completion of the Works, or after the determination of the Contractor’s employment, or breach of this Contract, as to :

the construction of this Contract, or

(ii) any matter of thing of whatsoever nature arising under this Contract, or

(iii) the withholding by the S.O. of any certificate to which the Contractor may claim to be entitled, then such dispute or difference shall be referred to the officer named in the Appendix for a decision.

The officer’s named in the Appendix decision which is to be in writing shall subject to sub-clause (e) hereof be binding on the parties until the completion of the Works and shall forthwith be given effect to by the Contractor who shall proceed with the Works with all due diligence whether or not notice of dissatisfaction is given by him.

If the officer named in the Appendix fails to give a decision for a period of forty-five (45) days after being requested to do so by the Contractor or if the Contractor be dissatisfied with any decision of the officer named in the Appendix, then in any such case the Contractor may within forth-five (45) days after the expiration of forth-five (45) days after he had made his request to the officer named in the Appendix, or within forth-five (45) days after receiving the decision of the officer named in the Appendix, as the case be, require that such dispute or difference be referred to Arbitration and final decision of a person to be agreed between parties to act as the Arbitrator. The arbitration shall be held at the Regional Centre for arbitration at Kuala Lumpur, using the facilities and assistance available at the Centre. 34

Such reference, except on any difference or dispute under Clause 52 hereof shall not be commenced until after the completion or alleged completion of the Works or determination or alleged determination of the Contractor’s employment under this Contract, or abandonment of the Works, unless with the written consent of the Government and the Contractor. [39] Subsequently in what appears to be a change of heart, via letter dated 4 July 2016, the Defendant informed the Plaintiff that the Plaintiff had already acknowledged and established the sum RM10,888,005.40 in the Plaintiff’s letters dated 23 September 2014, the Impugned Letter and 20 October 2014. By the letter dated 4 July 2016 the Defendant’s position is that the sum RM10,888,005.40 (which was previously disputed by the Defendant) is not disputed and will not be referred for purpose of arbitration. [40] Be that as it may, the Plaintiff responded via its letter dated 18 July 2016 disputing the Defendant’s claim and maintained that both parties were still in disagreement over the amount due and payable to the Defendant. The Plaintiff reminded the Defendant that the sum RM10,888,005.40 is being heavily contested by the Plaintiff and is the subject matter in the Garnishee Proceedings. 35 [41] While the parties were in the midst of proposing names of arbitrator to be mutually appointed (eventually parties agreed for the KLRCA to appoint an arbitrator), the Defendant served the Statutory Notice on the Plaintiff, this time demanding RM6,313,526.40 (Debt Demanded) which the Defendant now alleges as an undisputed amount due and owing in respect of the value of the additional earthworks done. [42] Premised on the above background, it is my considered opinion that the parties did not reach an agreement in respect of the value of additional earthworks carried out by the Defendant. As such the Impugned Letter is inadmissible. [43] The Defendant in its written submission cited two English cases and urged this court to exempt the Impugned Letter from the without prejudice rule and to admit the said letter. However learned counsel for the Defendant did not explain on what basis the Impugned Letter ought to be exempted from the without prejudice rule. [44] In the first case cited, Unilever plc v The Procter & Gamble Co [2001] 1 All ER 783, discussed the scope of the without prejudice rule. The issue there was whether an oral statement made by the defendant at a without prejudice meeting with the plaintiff (U plc), which the 36 defendant (P & G) claimed to be a threat can be relied upon by the plaintiff as a basis for his action for a declaratory relief against the defendant. The defendant contended that the statement was protected from use in the proceedings by the without prejudice rule and applied to strike out the proceedings as an abuse of the process of the court. In response, the plaintiff contended that that rule was confined to admissions, and did not therefore extend to an assertion of the type allegedly made by the defendant. The trial judge rejected the plaintiff’s contentions and struck out the proceedings. The plaintiff appealed. [45] The Court of Appeal dismissed the plaintiff’s appeal. In his judgment, Robert Walker LJ referred to a well-known passage in Rush & Tompkins Ltd v Greater London Council [1988] 3 All ER 737 [1989] AC 1280 which recognises the without prejudice rule as being based on public policy to promote settlement out of court and the express or implied agreement of the parties themselves that communications in the course of their negotiations should not be admissible in evidence if, despite the negotiations, a contested hearing ensues. [46] Despite the existence of without prejudice negotiations Robert Walker LJ said there were numerous occasions on which the without prejudice rule does not prevent the admission into evidence of what one 37 or both of the parties said or wrote. Among the most important instances highlighted -

when the issue is whether without prejudice communications have resulted in a concluded compromise agreement, those communications are admissible. It is admissible because the relevance of the communications lies not in the truth of any fact which it asserts or admits, but simply in the fact that it was made.

evidence of the negotiations is also admissible to show that an agreement apparently concluded between the parties during the negotiations should be set aside on the ground of misrepresentation, fraud or undue influence.

where there is no concluded compromise, a clear statement which is made by one party to negotiations, and on which the other party is intended to act and does in fact act, may be admissible as giving rise to an estoppel.

one party may be allowed to give evidence of what the other said or wrote in without prejudice negotiations if the 38 exclusion of the evidence would act as a cloak for perjury, blackmail or other 'unambiguous impropriety'.

evidence of negotiations may be given (for instance, on an application to strike out proceedings for want of prosecution) in order to explain delay or apparent acquiescence.

issue unconnected with the truth or falsity of anything stated in the negotiations, and as therefore falling outside the principle of public policy protecting without prejudice communications (Muller v Linsley & Mortimer (a firm) [1996] PNLR 74).

the exception (or apparent exception) for an offer expressly made 'without prejudice except as to costs' which was recognised by the Court of Appeal in Cutts v Head [1984] Ch 290, and by the House of Lords in the Rush & Tompkins Ltd v Greater London Council [1989] AC 1280 case, as based on an express or implied agreement between the parties and which stands apart from the principle of public policy. The court recognised that no reason in principle why parties to without prejudice negotiations should not expressly 39 or impliedly agree to vary the application of the public policy rule in other respects, either by extending or by limiting its reach.

in matrimonial cases where there is now a distinct privilege extending to communications received in confidence with a view to matrimonial conciliation [47] In his concluding remark, his lordship said - In those circumstances I consider that this court should, in determining this appeal, give effect to the principles stated in the modern cases, especially Cutts v Head, the Rush & Tompkins case and Muller's case. Whatever difficulties there are in a complete reconciliation of those cases, they make clear that the without prejudice rule is founded partly in public policy and partly in the agreement of the parties. They show that the protection of admissions against interest is the most important practical effect of the rule. But to dissect out identifiable admissions and withhold protection from the rest of without prejudice communications (except for a special reason) would not only create huge practical difficulties but would be contrary to the underlying objective of giving protection to the parties, in the words of Lord Griffiths in Rush & Tompkins Ltd v Greater London Council [1988] 3 All ER 737 at 740, [1989] AC 1280 at 1300: 'to speak freely about all issues in the litigation both factual and legal when seeking compromise and, for the purpose of establishing a basis of compromise, admitting certain facts.' Parties cannot speak freely at a without prejudice meeting if they must constantly monitor every sentence, with lawyers or patent agents sitting at their shoulders as minders. 40 Lord Griffiths in the Rush & Tompkins case noted, and more recent decisions illustrate, that even in situations to which the without prejudice rule undoubtedly applies, the veil imposed by public policy may have to be pulled aside, even so as to disclose admissions, in cases where the protection afforded by the rule has been unequivocally abused. [48] It was held that the pleading of the threat or claim of right did not come within any recognised exception to that rule, and the expansion of such exceptions should not be encouraged when an important ingredient of the civil justice reforms was to encourage those who were in dispute to engage in frank discussions before they resorted to litigation. [49] In the second case, Rush & Tompkins Ltd, the plaintiff sued the main contractor and sub-contractor appointed by him under a contract for construction of 639 houses after the parties failed to reach agreement to settle the dispute arose under the said contract. Subsequently the plaintiff withdrew the action against the main contractor after both of them settled the matter where the main contractor paid the plaintiff, the payment made includes a sum representing an assessment of the value of the sub-contractor claim. The sub-contractor applied for discovery of the 'without prejudice' correspondence which had passed between the plaintiffs and the first defendants leading up to the settlement in order to ascertain the value which had been placed on their claim by the plaintiffs and the first 41 defendants. The plaintiffs conceded that the correspondence might be relevant to the issues between themselves and the second defendants but claimed that it was privileged from disclosure because it had been written without prejudice. [50] In allowing the plaintiff’s appeal, the House of Lords held that the sub-contractor were not entitled to discovery of the without prejudice correspondence which had passed between the plaintiffs and the main contractor leading up to the settlement of their action. It was also held without prejudice correspondence entered into with the object of effecting the compromise of an action remained privileged after the compromise had been reached and accordingly the correspondence was inadmissible in any subsequent litigation connected with the same subject matter whether between the same or different parties and, furthermore, was also protected from subsequent discovery by other parties to the same litigation. [51] Thus, based on the approach taken by the courts in the cases above, though there are recognised exception to the without prejudice rule, the applicability of such exception must be treated with caution as not to undermine the underlying objective of the said rule to promote settlement out of court and the agreement between the parties that 42 communications in the course of negotiations should not be admissible if negotiations fail. [52] In the instant case I am of the view the Impugned Letter do no fall within any of the recognised exception to the without prejudice rule as established in the cases cited. Even assuming that the Impugned Letter falls within the exception in the category listed at paragraph 46(a) above, it is for the purpose of showing that the Plaintiff had indeed stated their calculation of the total value for additional earthworks done as itemised at paragraphs 3 and 5 of the Impugned letter as RM6,313,526.40 and RM4,574,479.00 respectively but not to show the truth of such statement. [53] Under the circumstances, the Impugned Letter is inadmissible and the Defendant cannot rely on the Impugned Letter as the basis of the Statutory Notice. Even though the Plaintiff admits the issue on admissibility of the Impugned Letter were not raised earlier, that does not make the said letter admissible (CGU Insurance Bhd v ASEAN Security Paper Mills Sdn Bhd [2006] 3 MLJ 1). Notwithstanding the inadmissibility of the Impugned Letter, the issue in respect of the Demanded Debt being a bona fide debt or otherwise need to be considered. 43 [54] It is my finding that parties has failed to reach a settlement to resolve the issue relating to the additional earthworks done by the Defendant. Thus the Final Certificate which the Defendant attached to the Statutory Notice is not finalised by the parties and the Defendant cannot therefore rely on the Final Certificate to support its position that the Debt Demanded is not disputed, due and payable to them. The Defendant’s own conduct has shown inconsistencies in respect of the exact amount due and payable to them. The Defendant took the position the Debt Demanded is a debt due to them after they had disputed the Debt Demanded strenuously during the discussion as evident from the various letters sent to the Plaintiff. In fact based on the affidavit of the Defendant (Exhibit PBLT-9, Enclosure 2) filed in the Garnishee Proceedings to resist the GOTSC, the Defendant averred that RBA/Judgment Creditor is not entitled to garnish the Defendant as the sum payable to the Defendant is still being disputed. [55] The Defendant contends based on clause 54(b) of the Contract, the sum RM6,313,526.40 becomes due and payable to them. Clause 54(b) provides as follows – 44

Arbitration …

The officer’s named in the Appendix decision which is to be in writing shall subject to sub-clause (e) hereof be binding on the parties until the completion of the Works and shall forthwith be given effect to by the Contractor who shall proceed with the Works with all due diligence whether or not notice of dissatisfaction is given by him. [56] It must be noted that sub-clause 54(d) is not a stand alone provision as it is part of clause 54 of the Contract which deals with alternate dispute resolution, namely arbitration. Sub-clause 54(d) is specifically to be read with sub-clause 54(e) which reads as follows –

Arbitration

disruption in any ongoing construction projects being implemented by the Plaintiff for the Government of Malaysia;

losses to the shareholders of the Plaintiff, namely the Minister of Finance and the Federal Lands Commissioner (see Exhibit PBLT-2, Enclosure 2);

huge loss of reputation and confidence to the Plaintiff and its shareholders; and

the Plaintiff’s account can be frozen by the bank which will result in obstructing the Plaintiff from carrying out its business including making payments to interested parties including contractors, consultants, suppliers and also salary payments to its staff. 48 [62] It is true there is no documentary proof shown to support the Plaintiff’s averment in relation to the possible irreparable damage that it may suffered. In this respect it must be borne in mind the question of irreparable damage is a question of fact of each particular case and it may come in various form. Mere public knowledge of a winding up petition being presented against a company is recognised as a possible cause of irreparable damage to the company concerned. This is the observation made by the Court of Appeal in the case of Mobikom Sdn Bhd, where it said – … The courts have recognized that irreparable damage may be done to a company merely through public knowledge of the presentation of a petition. Usually the damage flows from the loss of commercial reputation which results... [63] In the instant case I am of the view the instances stated in the said paragraph 23 is sufficient for this court to accept that those are the irreparable damage that may be suffered by the Plaintiff which is served with the Statutory Notice and a winding up proceeding hanging over its head. In so far as the property of the Plaintiff is concerned, the Plaintiff, just like any other company against which winding up petition is presented, is prohibited from disposing its property unless with leave of the court (s. 223 of CA 1965). Thus it is a known fact that the business 49 of a company like the Plaintiff will be affected which may result in irreparable damage. In this respect it is noted the Plaintiff had recorded a profit after tax in the sum RM417,621,781.00 for the financial year end 2014 (based on the Plaintiff’s financial information lodged with the Companies Commission of Malaysia Exhibit PBLT-1 Enclosure 2). Based on such performance, inference may be drawn that the Plaintiff is actively and heavily involve in constructing buildings for the Government’s public purposes. The commencement of a winding up proceedings will substantially disrupt the business of the Plaintiff and consequentially, the performance of the Government in delivering efficient service for the good of the public. This alone to my mind may result in irreparable damage to the Plaintiff for its failure to fulfil its contractual obligation to the Government. [64] In light of my finding that there is bona fide dispute in relation to the sum RM6,313,526.40 (Demanded Debt) as being a debt payable by the Plaintiff to the Defendant, to allow a winding up petition premised on such disputed debt is an abuse of the process of the court. Besides that, as the intended petition has no chance of success in fact and in law, it would not be just and equitable if the intended winding up petition is not restrained. To intervene after the commencement of the winding 50 up proceedings may be too late to relieve the Plaintiff of the irreparable damage that may be suffered by the Plaintiff. Conclusion [65] Premised on the above reasons I allowed the Plaintiff’s OS in terms of the prayers sought thereto. ( KHADIJAH BINTI IDRIS ) JUDICIAL COMMISSIONER HIGH COURT (COMMERCIAL DIVISION) DATED 20 JULY 2018 Counsel: Defendant/Applicant : Datuk Wira Mohd Hafarizam Harun, Norhazira Abu Haiyan and Iqhmar Syafiq Mohd Azmi (Pupil in Chambers) of Messrs Hafarizam Wan & Aisha Mubarak Plaintiff/Respondent : Sarah Maalini Abishegam, Noor Farhah

The Arbitrator shall have power to review and revise and certificate, opinion, decision, requisition or notice and to determine all matters in dispute which shall be submitted to him, and of which notice shall have been given in accordance with sub-clause (c) aforesaid, in the same manner as if no such certificate, opinion, decision, requisition or notice had been given. [57] From my reading of the entire clause 54 and in particular sub-clauses (b) and (e), it is clear that the decision made by the named officer in the Appendix, namely the Managing Director of the Plaintiff is still subject to the review and revision by the arbitrator appointed by the 45 parties to arbitrate the dispute between them. As the evidence shows it was the intention of the parties to have the dispute in respect of the value of additional earthworks referred to arbitration. However before the intended arbitration could proceed, the Defendant issued the Statutory Notice claiming the Demanded Debt is payable to them as it is not disputed. [58] The Statutory Notice was issued pursuant to s. 218(e) and 218(2)(a) of the CA 1965. S. 218(1)(e) provides that the winding up court may order the winding up of a company if the company is unable to pay its debt. S. 218(2)(a) states a company is deemed to be unable to pay its debt if it fails to pay to its creditor a sum exceeding five hundred ringgit within three weeks after the demand to pay the debt was served on the company by its creditor. In the instant case in order for the Plaintiff is deemed to be unable to pay its debt to the Defendant in the sum of RM6,313,526.40 there must first exist a bona fide debt for such amount due and payable from the Defendant to the Plaintiff. In other words there must be a creditor-debtor relationship between the Defendant and Plaintiff (Public Bank Bhd lwn Search Realty (M) Sdn Bhd [2001] 3 MLJ 119). 46 [59] Taking into account the evidence in relation to what transpired between the Plaintiff and Defendant in respect of the Demanded Debt, I am of the view there is a bona fide dispute surrounding the determination of the value of additional earthworks carried out by the Defendant. There is no credible evidence to show that the Plaintiff is indebted to the Defendant for the Demanded Debt. Thus in this context the Defendant is not a creditor and the Plaintiff is not a debtor. Under the circumstances the issue of the Plaintiff being unable to pay its debt to the Defendant does not arise. Accordingly it is my considered opinion that the petition which the Defendant intends to file to wind up the Plaintiff on the ground that it is unable to pay the Demanded Debt has no chance of success in law and in fact. As such the Statutory Notice with the ultimate intention of filing a winding up petition is an abuse of the process of the court and this court ought to intervene to restrain the filing of the winding up petition. [60] It is also my considered view that the dispute between the parties in respect of the value of additional earthworks done by the Defendant ought to be ventilated and adjudged in a proper suit as the winding up court is not a forum where disputed debt is determined and not a debt collecting agency (Sri Jeluda Sdn Bhd v Pentalink Sdn Bhd [2008] 3 MLJ 47 692; Mann v Goldstein [1968] 2 ALL ER 769; Re Lympne Investments Ltd [1972] 2 ALL ER 385). [61] In respect of irreparable damage to the Plaintiff, the Defendant submits the Plaintiff failed to plead cogent and/or reasonable damage to the effect. The Plaintiff submits paragraph 23 of its affidavit in support of the OS (Enclosure 2) provides the irreparable damage that may be caused to the Plaintiff –