Pembinaan Jaya Zira Sdn Bhd v Mp Bersatu Mega Sdn Bhd (B-02(NCC)(A)-1679-08/2017 & B-02(IM)-191-01/2018)

Saya ingin menyatakan disini bahawa pengeluaran pertama pembiayaan telah dibuat oleh BPMB pada 17.9.2019, dan ini sekali gus memberi efek kepada tanggungan Plaintif untuk membuat pembayaran berjumlah Ringgit Malaysia : Sebelas Juta Lapan Ratus Ribu (RM11,800,000.00) kepada Defendan Pertama menurut peruntukan CA tersebut. Namun begitu saya telah dinasihati oleh peguamcara saya, yang mana saya sesungguhnya percaya adalah benar, bahawa sekiranya Plaintif membuat pembayaran berjumlah Ringgit Malaysia : Sebelas Juta Lapan Ratus Ribu (RM 11,800,000.00) atau mana-mana bahagian daripada jumlah Ringgit 10 Malaysia: Sebelas Juta Lapan Ratus Ribu (RM11,8000,000.00) kepada Defendant Pertama, ianya berkemungkinan besar akan menimbulkan satu tanggungan Plaintif terhadap kegagalan untuk mematuhi perintah mahkamah sepertimana yang dinyatakan di dalam perintah Garnisi tersebut. (emphasis added).” [8] Keeping this admission in abeyance for a moment, we need to state at the outset that in our view, the resolution of these two appeals lies in the central issue pertaining to the validity of the assignment of the Development Agreement to the plaintiff which is Appeal no 191 for should it be decided in favour of the plaintiff, the decision in Appeal no 1679 would consequently follow suit. The core issue [9] This issue is centered on the consent by Putrajaya Holdings for the assignment of the Project by the defendant to the plaintiff which was never obtained at that relevant and material time. What Putrajaya Holdings did subsequent to the execution of the Deed of Assignment and CAA was to enter into a Novation Agreement with the plaintiff and defendant on 30/12/2014 in which it was agreed, to put it simply, that the plaintiff stepped into the shoes of the defendant in respect of the Project. On the very same date as this Novation Agreement both the plaintiff and the 11 defendant entered into a Supplementary Contract Agreement (“Supplementary Agreement”). In Recital 5 thereof it is stated that Putrajaya Holdings “… has requested that the above mentioned Deed of Assignment be replaced and substituted with a Novation Agreement to be executed …” by the parties therein. In clause 1.1 the consideration for the Supplementary Agreement is stated as payment of “… all the monies as stipulated in clause 1.1 to 1.6 of the Contract Agreement.” Then in clause 2.3 it states that references to the Deed of Assignment in the Contract Agreement “… prior to this Supplementary Contract Assignment Agreement shall mean to refer to the Novation Agreement”. [10] Coming back to the issue of Putrajaya Holding’s consent, we must first mention that relevant to it is clause 27 of the Development Agreement in which the parties have agreed on the appointment of a Substituted Entity and the consequences of such an appointment. The said clause reads as follows: CLAUSE 27

27.1 Appointment of Substituted Entity

27.1.1 Perbadanan acknowledges that the Developer may grant to the Lenders, as security for the financing or refinancing of the Gross Development Costs, the rights to appoint a Substituted Entity to 12 take over the development rights granted to the Developer pursuant to Clause 3.

27.1.2 If the Developer fails to remedy the relevant defaults in accordance with Clauses 23.1.1, or 23.2.1, then and in such event, without prejudice to any other rights it may possess, Perbadanan shall give notice in writing to the Developer, that it may terminate this Agreement unless within a period of sixty (60) days after the date of such notice, the Lenders nominate a company which satisfies the conditions set out in Clause 27.2 (such company shall hereinafter be referred to as the “Substituted Entity”). If the Lenders nominate a Substituted Entity within the period as aforesaid or within such longer period as Perbadanan may approve, the Parties shall enter into such agreements as may be necessary to effect the substitution.

27.2 Substituted Entity For the purpose of Clause 27.1, a Substituted Entity shall satisfy the following conditions:

(a) The company has been approved by Perbadanan;

(b) The company is a credible and financially viable company;

(c) Perbadanan is satisfied that the shareholding of the company conforms to the requirements laid down in applicable Government’s policies from time to time; and

(d) The company possesses the expertise and competency to remedy any existing defaults of the Developer including the expertise to carry out the Project. 13

27.3 Effect of Appointment If a Substituted Entity is appointed in accordance with Clause 27.1, then, with effect from the date of such appointment, the Substituted Entity shall for all purposes of this Agreement have the benefit of all rights, and shall assume all liabilities and obligations of the Developer under this Agreement and thereafter all references in this Agreement to the Developer shall be construed as references to the Substituted Entity. [11] Then in the all important clause 41 on assignment this was what the parties agreed: CLAUSE 41

41.1 Permitted Assignment The Developer may assign to and create security in favour of its Lenders in respect of the followings:-

(a) all its rights, interest and title under this Agreement in respect of the Proceed of Sales;

(b) all its rights, interest and title under this Agreement in respect of the amount payable to the Developer by Perbadanan as a result of early termination of this Agreement pursuant to Clause 24.1.2 and Clause 26A.

41.2 Other Assignment not Allowed Save as provided in Clause 41.1, the Developer shall not assign, transfer or novate this Agreement or any part of it or any interest conferred by this Agreement to any third party without prior written 14 consent from Perbadanan and upon such terms and conditions as Perbadanan deems fit. [12] Of course the crucial clause relied upon by the plaintiff here is clause 41.2. The learned High Court Judge at paragraph 46 of Her Ladyship’s judgment acknowledged that Putrajaya Holding’s consent was material under the said clause 41.2 but qualified that provision by saying in the same paragraph: “Nonetheless, this Court must also be minded that as consequence flowing from the DA, the Plaintiff, the Defendant and also PJC had executed other agreements in relation to the novation and assignment of the rights and obligations under the DA.” [13] Her Ladyship in the next paragraph then said “clause 41.2 must not be read solely on its own in isolation the other terms incorporated in other agreement embracing the DA.”(sic). She then proceeded to examine the Novation Agreement before concluding that since Putrajaya Holdings was a party to the Novation Agreement, the issue of its consent under clause 41.2 does not arise because by virtue of it being a party it had expressly consented to the defendant assigning or novating all the rights, titles and interests under the Development Agreement to the plaintiff. Her Ladyship also considered the fact that the plaintiff and defendant had entered into the Supplementary Agreement in which the intention of the parties as spelt out in clause 1.1, 2.1 to 2.4 was that the Novation Agreement would 15 override the Deed of Assignment. The plaintiff was therefore estopped, said Her Ladyship, relying on Boustead Trading (1985) Sdn Bhd v Arab Malaysian Merchant Bank Bhd (1995) 3 MLJ 331 from disputing the CAA and all the underlying agreements especially since Dato’ Adi Munawar had in the affidavit in the interpleader summons admitted its liability to pay the sum under the CAA. [14] From the tenor of the aforesaid judgment and despite her Ladyship’s citation of the judgment of Haidar J (as he then was) in H&R Johnson Tiles Ltd & Anor v H&R Johnson (M) Sdn Bhd (1998) 4 MLJ 13 where His Lordship clearly upheld the contention of the plaintiff in the cited case that assignment of rights is wholly distinct from the circumstance of novation and could not therefore be equated, yet it appears with respect, that such an equation was made by Her Ladyship. [15] Aside from the fact that assignment of rights are provided under two different written laws, that is, section 4(3) of the Civil Law Act 1956 for the former and under section 63 of the Contracts Act 1950 for the latter, the Supreme Court in Housing and Development Board v Lee Sem Yoong Sdn Bhd (1987) 2 MLJ 204 had also clearly said that there was a distinction between the two which it described as follows: Novation is a transaction by which a new contract is substituted for one that has already been made. Unlike assignment, novation does not involve 16 the transfer of any property at all. It comprises (a) an annulment of one debt and (b) the creation of a substituted debt in its place. (Re United Railways of the Havana and Regla Warehouses Ltd [1960] Ch 52 8486)” [16] Given the clear distinction between the two, we are of the view that the learned High Court Judge fell into error when she found, as stated earlier that Putrajaya Holdings’ consent was not an issue because it had executed the Novation Agreement with the plaintiff and the defendant. Also with respect she was equally wrong in deciding that the Federal Court’s decision in Merita Merchant Bank Singapore Ltd v Dewan Bahasa & Pustaka (2014) 9 CLJ 1064 does not apply in this case because there was no distinguishing feature in the said case with the one before her. Merita’s case (supra) [17] Like in the case before us, there was a non-assignment clause in the two contracts executed by the respective parties for the supply of printing papers to the respondent by Benatulin Timur Sdn Bhd (“Benatulin”) and these clauses provide that the contractor must obtain the written consent of Dewan Bahasa & Pustaka (“Dewan”) before it can assign its rights under the agreement with the said Dewan. Benatulin had assigned certain debts due and payable by Dewan to it to the appellant, Merita Merchant Bank Singapore Ltd, who sued the said respondent for 17 the assigned debts. It obtained judgment in the High Court which decision was reversed by the Court of Appeal. Leave to appeal to the Federal Court was granted on this question of law: “In the assignment under Section 4(3) of the Civil Law Act 1956, whether consent of the Debtor is a legal requirement in order for the assignment to be valid in law”. The question was answered in the negative. However in respect of the non-assignment clause this was what the Federal Court held at paragraphs 31 and 32 of the judgment which we deemed fit to reproduce below: “[31] We share the same view. On the facts of this case, we find that the non-assignment clauses appearing in both the 1996 contracts and the 1997 contract were valid and binding on both parties. The two clauses appearing in both contracts prohibiting assignment were not absolute in nature but qualified in the sense once written consent is obtained one party can still assign their rights and benefits under the contract. The non-assignment clauses here expressly laid down that consent was a condition precedent before an assignment can be made. In our judgment, we find that the insertion of the non-assignment clauses as a term of the contract is not in contravention of s. 4(3) of the CLA. The non-assignment clause which made consent a precondition before the debts could be assigned did not operate 18 to invalidate the assignment contract as it was a term agreed upon by both parties when they entered into the contract. It is trite that parties are free to enter into a contract with terms and conditions as they deem fit and these terms and condition are binding on the parties who have in the first place agreed to be bound by it. Thus, we hold that there could be no valid assignment if the element of consent under the non-assignment clause is not fulfilled. It was a well-established principle sanctioned by the doctrine of sanctity of contract that parties who make agreement must adhere to their terms. [32] In our judgment, on the facts of this case, we are unable to accede to the arguments urged upon us by learned counsel for Merita that since a proper notice of assignment in writing had been given by Merita to DBP, it fulfilled the requirement for a valid and binding assignment to take effect under s. 4(3) of the CLA. As we have said earlier the element of consent is a prerequisite before a valid assignment can be made. Thus, the requirement under s. 4(3) of the CLA 1956 with regard to a legal assignment only comes into play if the contract is assignable or the restriction to assign is fulfilled. In the instant case the non-assignment clauses and the element of consent thereunder formed an important term of the contract that parties have agreed. That formed the main prerequisite before the other 19 prerequisites under s. 4(3) of the CLA could be considered.”(emphasis added). [18] It is therefore patently obvious from the ratio in Meritas’s case (supra) that the assignment of the Development Agreement by the defendant to the plaintiff as per the Deed of Assignment, the CAA and consequently, the Supplementary Agreement which was predicated upon the said Deed was void due to the non-fulfilment of the condition precedent on consent from Putrajaya Holdings in the said clause. Given the clear legal distinction between an assignment and a novation, the fact that Putrajaya Holdings have agreed to the novation of the Development Agreement does not have the legal effect of a retrospective consent to the said assignment especially in the absence of any affidavit evidence from Putrajaya Holdings to explain why no such consent was given by it. The fact of the novation simply means, as rightly submitted by learned counsel for the appellant, that because of the defendant’s failure to perform its obligation under the Development Agreement due to its financial position, under clause 23.1.2 of the Development Agreement, Putrajaya Holdings was fully entitled to “… appoint another party to take one and complete the Project according to the terms and conditions as it deems fit” and pursuant to clause 27.1 as reproduced earlier, Putrajaya Holdings can appoint another developer to take over the defendant’s place. This they had done 20 through the said Novation Agreement. In saying all of the above, we are mindful of the fact that after the execution of the Deed of Assignment and CAA by the plaintiff and the defendant, both documents were forwarded to Putrajaya Holdings and by reason thereof it was aware of the same. We are equally aware that as per paragraph 9 of Dato’ Adi’s affidavit in support in the interpleader summons, he did depose that the Novation Agreement was actually drawn up at the suggestion of Putrajaya Holdings. The fact that Putrajaya Holdings had that knowledge or made that suggestion could not in any way be held against the plaintiff or is evidence in favour of the defendant because on the last page of the Deed of Assignment, right after the signing page for the authorised signatories of the plaintiff and defendant, there is a specific clause on Putrajaya’s consent which was never signed. For certainty that clause is reproduced below: CONSENT TO ASSIGNMENT OF THE DEVELOPMENT AGREEMENT PURSUANT TO CLAUSE 41.2 Perbadanan Putrajaya hereby consents and agrees to the assignment of the Development Agreement between Assignor and Assignee. The Consent shall become effective upon full execution hereof by all parties, and no assignment shall be deemed to have occurred between Assignor and Assignee until such execution by Perbadanan Putrajaya. Date : 21 By : PERBADANAN PUTRAJAYA Name: Title : (emphasis added) In subscribing to the view expressed above, we do acknowledge that the end and practical result of the assignment and the novation may be the same, which was the plaintiff taking over the project from the defendant but the legal consequence of not obtaining the requisite consent cannot be ignored and the doctrine of stare decisis dictates that the ratio in Merita’s case (supra) be applied here. [19] Coming back now to the afore-mentioned admission of owning the disputed amount under the Deed of Assignment in the said affidavit of Dato’ Adi, given our view that the said Deed was null and void, the admission would not carry any weight at all to the prejudice of the plaintiff or act as an estoppel for section 31 of the Evidence Act 1950 acknowledges that : “Admissions are not conclusive proof of the matters admitted, but they may operate as estoppels under the provisions hereinafter contained.” (emphasis added). In other words, the law does not mandate the raising of the estoppel once an admission was made. Furthermore, Dato’ Adi has also explained that 22 the said admission was made then under the mistaken belief that the agreement was valid. In the clear face of the invalidity of that assignment by the application based on the ratio in Merita’s case (supra), that explanation by Dato’ Adi cannot be summarily rejected. Technical objection [20] Before concluding, we will, for completeness mention the technical objection made by the defendant before the learned High Court Judge as well as in the submission before us, though not highlighted in the oral submission at the hearing of these appeals. The objection was that the plaintiff’s OS was defective because of non-compliance under Order 7 Rule 3(1) and (2) of the Rules of Court 2012 (“the ROC”) as it did not state in its intitulement the specific sub section of section 34 of the Specific Reliefs Act 1950 upon which the prayers are made and nor did it include a concise statement of the reliefs and particulars upon which the cause of action was predicated upon. The learned High Court Judge held in paragraphs 36 and 37 of her judgment that these omissions were not prejudicial against the defendant for it was able to file an affidavit to oppose the application and were curable under Order 2 r l in view of Order 1A of the ROC. We said ‘mention’ and not address because the defendant did not file any cross-appeal against the said findings and we also happen to agree with the learned High Court Judge’s reasonings as aforesaid. 23 [21] Premised on the above considerations, Appeal 191 is allowed as per prayer 1 of the OS which was to declare the Contract Assignment Agreement and its related agreement null and void as well as prayer 3 which was for the refund of the amount of RM9,399,682.34 which was paid by the plaintiff to the defendant but which we did not allow as prayed. Instead, we ordered that in respect of this prayer 3 the matter be remitted to the High Court to determine the amount of restitution to be paid to the plaintiff because although we agree that the total amount paid was not to be refunded to the plaintiff, it does not mean that there were no legitimate expenses incurred by the defendant at all following the said assignment. Thus, it is only fair that the amount due be assessed by the High Court. [22] Consequent upon the above, we also ordered that Appeal no 1679 be allowed as it is trite law that where there is a bona fide dispute as to the debt on substantial grounds, a Fortuna Injunction should be granted. Our considerations in Appeal no 191 not only showed such a dispute exist but that the debt as demanded in the section 218 notice was not even owed by the plaintiff to the defendant. It being allowed was therefore a foregone conclusion and we need not belabour ourselves with the demerits of the appeal except to say this. It goes without saying that should our reasonings for allowing Appeal no 191 be impugned, this Appeal no 1679 must also be dismissed because the section 218 notice 24 was issued based on the said admission of Dato’ Adi that RM11,800,000.00 under the CAA was due and owing to the defendant by the plaintiff. In the face of such admission (which of course we had said earlier should not be held against the plaintiff and presuming that we were wrong in saying so), the contention about the solvency of the plaintiff cannot be used to grant the injunction sought because non-compliance with the timeline in the said notice to pay the debt raises a presumption that it was insolvent. It would be up to the plaintiff, at the hearing of the petition, to convince the court otherwise. As held by this court in Pacific Orient Insurance Co. Bhd v Muniammah a/p Muniandy (2011) 1 AMR 685, “[38] When the debt is clearly established it follows that the court would not in general at any rate interfere even though the company would appear to be solvent. (see Mann v Goldstein (supra). Vaisey J once said in the case of In Re A Company (1950) 94 SJ 369: Rich Men and rich companies who did not pay their debts had only themselves to blame if it were thought that they could not pay them.” Learned counsel for the plaintiff submitted the issuance of the said notice was an abuse of the court’s process and that the real reason for issuing the section 218 notice was to coerce the plaintiff to pay the disputed amount. The answer to that lies in paragraph 40 of the just cited case above where it was held: 25 “[40] Prima facie, a creditor who is not paid has a right to file a petition for a winding-up whatever may be his other motives. (see Morgan Guaranty Trust Co of New York v Lian Seng Properties Sdn Bhd [1991] 1 MLJ

(emphasis added).” Conclusion [23] Thus we are of the unanimous view that both appeals be allowed and with a global cost of RM20,000 here and below. The matter was remitted to the High Court to determine the issue of restitution to the appellant under prayer 3 of the Amended OS dated 12/9/2017. Date : 25 February 2019 signed RHODZARIAH BINTI BUJANG Judge, Court of Appeal Putrajaya Note : This copy of the Court’s Grounds of Judgment is subject to Editorial revision. 26 Parties appearing: For the Appellant: Case No. B-02(NCC)(A)-1679-08/2017 Messrs Amelda Fuad Abi & Aidil 37G, Medan Bukit Indah 2, Taman Bukit Indah, 68000 AMPANG, SELANGOR DARUL EHSAN Tel : 03-4295 4799 Fax : 03-4295 9799 Case No. B-02(IM)-191-01/2018 Malik Imtiaz Sarwar, Khoo Suk Chyi, Amelda Md Din, K. Selva Kumaran & Abu Haziq Abu Talib Messrs Malik Imtiaz Sarwar E3, Taman Tunku Apartments, Taman Tunku, Bukit Tunku, 50480 KUALA LUMPUR Tel : 03 6203 5633 Fax : 03 6203 3644 For the Respondent: Case No. B-02(NCC)(A)-1679-08/2017 & Case No. B-02(IM)-191-01/2018 Shobah Veera, Samarudin bin Rejab, Vinod Sharma & N. Rajentharan Messrs Hakem Arabi & Associates Suite No. 8-15-2, 15th Floor Menara Mutiara Bangsar Jalan Liku, Off Jalan Riong, 59100 KUALA LUMPUR Tel : 03 2282 2339 Fax : 03 2282 2078 27 Cases referred to: