Permodalan Negeri Selangor Berhad v 1. Seribu Baiduri Sdn Bhd (24-394-03/2013)

(D) 5386 PT No. 8594, Mukim Tanjung Dua Belas, Daerah Kuala Langat, Negeri Selangor Dan Dalam Perkara Perjanjian Usahasama di antara Tetuan Permodalan Negeri Selangor Berhad (PNSB) dengan Tetuan Utuh Sejagat Sdn Bhd bertarikh 15.8.2000 bagi membangunkan kawasan perumahan dan kawasan komersial di atas tanah yang mempunyai Hakmilik PT No. 8594, Mukim Tanjung Dua Belas, Daerah Kuala Langat, Negeri Selangor Dan Dalam Perkara Perjanjian Usahasama di antara Tetuan Permodalan Negeri Selangor Berhad (PNSB) dengan Tetuan Jatidiri Gigih Sdn Bhd bertarikh 15.8.2000 bagi membangunkan kawasan perumahan dan kawasan komersial di atas atas yang mempunyai Hakmilik PT No. 8594, Mukim Tanjung Dua Belas, Daerah Kuala Langat, Negeri Selangor Dan Dalam Perkara Pampasan Yang Dibayar oleh Kerajaan Negeri Selangor untuk Pengambilan Tanah di Borang H No. 155/2007, Borang H No. 156/2007, Borang H No. 157/2007 dan Borang H No. 600/2008 di atas kesemua tanah yang dipegang dibawah Mukim Tanjung Dua Belas, 2 Daerah Kuala Langat, Negeri Selangor seluar 547 hektar (1352 ekar) Dan Dalam Perkara Aturan 5 Kaedah 4 Aturan 7, Aturan 15, Aturan 16, Aturan 28 Kaedah-Kaedah Mahkamah 2012 ANTARA PERMODALAN NEGERI SELANGOR BERHAD ... PLAINTIF DAN

1.

2.

JATIDITI GIGIH SDN BHD

LBS BINA GROUP BERHAD DEFENDAN GROUNDS OF JUDGMENT (Enclosure1 –Originating Summons) BACKGROUND FACTS [1] The Plaintiff vide its Originating Summons in Enclosure 1 seeks from this Court inter alia for the following orders: 3

Satu deklarasi diberikan bahawa Defendan-Defendan tidak berhak langsung terhadap wang pampasan yang berjumlah RM 86,307,360.00 yang diterima oleh beberapa bank sebagai Pemegang Gadaian untuk wang penebusan tanah-tanah kepunyaan Plaintif yang mana tanah-tanah tersebut telah dicagarkan kepada bank-bank oleh Defendan Pertama hingga Defendan Ketiga.

Satu perintah bahawa Defendan-Defendan membayar wang sebanyak RM 86,307,360.00 kepada Plaintif.

Satu deklarasi bahawa berdasarkan maksud sebenar terma-terma di dalam Perjanjian Usahasama antara Plaintif dan Defendan-defendan, hak untuk mendapat wang pampasan tersebut adalah tidak termaktub di dalam skop Perjanjian Usahasama antara Plaintif dan Defendan-Defendan.

Satu deklarasi bahawa Perjanjian Usahasama tidak memperuntukkan sebarang hak penerimaan pampasan langsung kepada Defendan-Defendan.

Satu deklarasi bahawa defendan-Defendan hanya berhak menuntut gantirugi berdasarkan jumlah yang telah dibelanjakan di dalam 4 mengusahakan tanah-tanah yang terlibat di bawah Perjanjian Usahasama di dalam pengambilan tanah untuk ditaksirkan oleh pihak Mahkamah.

Secara alternatif, sekiranya Mahkamah memutuskan untuk menolak permohonan Plaintif di perenggan (b), satu perintah bahawa Defendan-Defendan membayar wang sebanyak RM 25,892,208.00 bersamaan 30% wang pampasan tersebut yang ditawarkan oleh Defendan Keempat melalui surat Defendan Keempat bertarikh 20.1.2009 dan surat peguamcara Defendan Keempat, iaitu Tetuan Manjit Singh Sachdev, Mohamad Radzi & Partners bertarikh 16.1.2009 [2] Basically in the present case, this Court is to determine the appropriate interpretation of numerous documents inclusive of contracts, supplementary contracts as well as terms of charges. In the simplest term, the present dispute is regarding the propriety of utilising compensation monies from a land acquisition under the Land Acquisition Act, to redeem securities from charges, which were charged for loan facilities in furtherance of Joint Venture Agreements for a development project. 5 [3] The Plaintiff {Permodalan Negeri Selangor Berhad (“PNSB”)} in the present case is the investment arm of the State of Selangor. [4] The 1st Defendant (Seribu Baiduri Sdn Bhd), 2nd Defendant (Utuh Sejagat Sdn Bhd) and 3rd Defendant (Jatidiri Gigih Sdn Bhd) are private limited companies incorporated in Malaysian under the Companies Act 1950, while the 4th Defendant (LBS Bina Group Berhad) is a listed company which is the holding company of the other Defendants. All of which are companies in the business of property sales and development. [5] Circa the year 2000, the Defendants have entered numerous Joint Venture Agreements (“JVAs”) with the Plaintiff to jointly develop the land held under title number HS (D) 5386 PT No. 8594 Mukim Tanjung Dua Belas Daerah Kuala Langat Selangor Darul Ehsan (“project land”). (See Exhibits PN-2, PN-5, and PN-7 of the Affidavit in Support for the JVAs). [6] In furtherance to the JVAs, in setting down the terms of payment of the proceeds from the development, the Defendants and the Plaintiff 6 have entered into numerous Supplementary Agreements setting out the terms of payment. Ultimately with regard to the payment of proceeds from the development, the Defendants and the Plaintiff have entered into a Settlement Agreement dated 27.12.2010 (“Settlement Agreement”) (see Exhibit LBS-6 of the Defendant’s First Affidavit in Reply). [7] Consequently, in financing the development project, the Plaintiff has agreed to allow the Defendants to use the project land as security to secure financing for the development project by way of a charge. In pursuance of this mutual consent, the Plaintiff itself has executed numerous Third Party Charges in favour of the Defendants using the project land as security. (See Exhibits LBS-1 to LBS-5 of the Defendant’s Affidavit in Reply for the Charge Documents) [8] In the midst of the above agreements, the State Government vide its acquisition notices proceeded to acquire a part of the project land (“acquired lands”) for the SKVE Highway Project in the year 2008. (See Exhibits PN-9 to PN-13 of the Affidavit in Support for the acquisition notices). 7 [9] The Plaintiff vide its Affidavits has admitted that they accepted the acquisitions but with objections only to the amount of compensation offered by the State Government vide its numerous Forms N. [10] In view of the acquisition, the State Government offered compensation monies (totalling to the amount of RM 86,307,360.00) (“compensation monies”) for the acquired land and has in fact paid the compensation monies directly to the chargees of the project land. [11] This direct payment of the compensation monies to the chargees is the core subject matter of the present dispute. It is simply the Plaintiff’s case that the whole of the compensation monies should be paid to the Plaintiff as the owner of the acquired lands and that the compensation monies are not subject to the JVAs for dissemination as proceeds from the development project. On the other hand, the Defendants contend that the JVAs and the charge documents allow the Defendants to take the compensation monies into account for the calculation of profits under the JVA. Thus, there is actually only one 8 pertinent issue for this Court to determine this present dispute which is: “ Should the compensation monies be taken into account for the final calculation of profits under the JVAs and the Settlement Agreement ? ” SHOULD THE COMPENSATION MONIES BE TAKEN INTO ACCOUNT FOR THE FINAL CALCULATION OF PROFITS UNDER THE JVAs AND THE SETTLEMENT AGREEMENT? [12] The Plaintiff’s case largely hinges on the argument that the compensation monies is not part and parcel of the revenue or proceeds of the sale from the development which shall be disseminated under clause 5.01 of the JVAs which was ultimately superseded by the Settlement Agreement. It is the Plaintiff’s case that although the entitlements under clause 5.01 of the JVAs have been resolved, the compensation monies is beyond and outside the ambit of clause 5.01 of the JVAs and thus, cannot be considered to be resolved and finalized vide the Settlement Agreement. The Plaintiff 9 draws the difference between proceeds as in revenue from sales and also compensation which is allegedly separate from the proceeds in revenue from sales. It is the Plaintiff’s case that the loss of land is personal only to the Plaintiff and the Defendants’ indebtedness to the charge is personal only to the Defendants. Therefore, the Defendants should pay their debts using their own monies and their profits from the sale and not the compensation monies. However, it is this Court’s considered view that it is improper to follow the Plaintiff’s isolated interpretation of the JVAs. The grounds for which are as follows:

The conjunctive reading of Clause 2.02.9(b), Clause 5.01, and Clause 28.01.01, of the JVAs [13] The Defendants however, contended that the compensation monies should be accounted for in the final calculation of profits under clause 5.01 of the JVAs. This Clause reads:

PNSB shall be entitled to either thirty per centum (30%) of the gross profit from the whole Development in respect of the said Land or a sum to be determined and agreed upon 10 by the parties hereto within three (3) months from the date of this Agreement or such extended period and incorporated into such appropriate agreement…

(ii) the Company shall be entitled to the total sales revenue from the Development as a whole less PNSB’s entitlement under clause 5.01 (a)(i) and the overall cost of financing or development cost for the Development” [14] Now, what is clear here is that PNSB is entitled to either 30% of the gross profits or alternatively an determined sum (which later was determined to be RM80,500,000.00 in the Settlement Agreement). [15] The Defendants’ entitlement however would only be determined after deducting from the total revenues: i. PNSB’s portion of the gross profits or determined sum; and ii. Overall cost of financing or development cost for the Development. 11 [16] Another fact which is clear is that, indeed that the financing and costs of the Development is only deductible against the Defendants’ proceeds from the JVAs. [17] However, what remains in dispute is the question whether or not the compensation monies can be taken into account as proceeds especially for the Defendants to calculate their entitlement after deducting its indebtedness to the chargees? [18] Now, in ordinary circumstances, hypothetically if the acquisitions have never occurred, undoubtedly, the Defendants are liable to pay their indebtedness from their own proceeds of sales from the development and their own monies. Thus, the calculation for entitlement is strictly on the proceeds from the sales made and nothing else. Thus, the Defendant can only deduct their indebtedness from their end of the entitlement from the proceeds of sales. This is further supported by clause 2.02.9 (b) (iii) of the JVAs which stipulate: 12 “(b) In the event that the Company shall charge or otherwise encumber the whole or any part of the said Land…the Company hereby covenant and undertake with PNSB that:…

(iii) the Company shall discharge or cause to be discharged the charge or any encumbrances on the said Land or any part thereof immediately upon the full settlement of the loan sum at the Company’s own cost and expense.” [19] This is exactly the Plaintiff’s case. The calculation of proceeds does not concern the monies from the compensation at all. The compensation monies are not proceeds from sale from the JVAs. In simpler terms, the compensation monies are not proceeds. [20] However, the procession of the development is far from ordinary. The above covenants are not absolute and without exceptions. The operation and application of the JVAs changes in the occurrence of an acquisition by the State Government which 13 ultimately widens the scope of proceeds in clause 5.01 to include the compensation monies. [21] It is the Defendants’ case that the indebtedness from the charge has mutually benefited even the Plaintiff as it enables the parties to perform the JVAs and turning in profits. The Defendants argues that clause 5.01 must be read together with clause 28.01 of the JVAs which allegedly entitles all parties to the JVAs to the compensation monies. It reads: “28.01 LAND ACQUISITION In the event that the said Land or any part thereof shall be subject to any order or notice for acquisition…each parties entitlement to the compensation monies shall take into account inter alia the stage of the construction work for the Development, the fulfilment of the condition precedent and approvals obtained” 14 [22] With regard to the above clause, the only retort that the Plaintiff contended is not so much on the fact that even the Defendants are entitled to the compensation monies, but instead on the alleged fact that clause 28.01 does not stipulate the manner or percentage in which the parties are entitled to the compensation monies. Furthermore, the Plaintiff contends that the wording of clause 28.01 shows no nexus to clause 5.01’s stipulations as to the parties’ entitlements. [23] However, this retort falls short from negating the fact that indeed parties (inclusive of the Defendants) are entitled to the compensation monies. Thus, at least at this juncture it is safe to conclude that the Defendants are to an indeterminate extent are indeed entitled to the compensation monies.

(ii) Reconciling the JVAs’ terms and the terms of the Charge Documents [24] Now, going back to the Defendants’ contention that the Defendants’ entitlement under clause 28.01 can be read under clause 5.01, the 15 Defendants further their contention on this conjunctive reading with the clauses of the charges which the Plaintiff itself has executed. It is without a doubt that the terms of the Plaintiff’s charges all similarly stipulate that in the event of an acquisition by the State Government, the compensation monies shall be paid to the chargees so as to discharge the indebtedness. i. Clause 7.3 of the Third Party Charge in favour of the 2nd Defendant reads: (See Exhibit LBS-1 of the Defendants’ 1st Affidavit in Reply) “All monies received as or by way of compensation of the acquisition of the Said Land or any part thereof shall be applied in or towards the discharge or repayment of the Indebtedness and the Chargor shall, and hereby declares that it will, hold monies so received in trust for the Lender and the Chargor agrees and confirms that the Lender may receive and give a good discharge for all such monies…” 16 ii. Clause 16 of the Third Party Charge in favour of the 2nd Defendant reads: (see Exhibit LBS-2 of the Defendants’ 1st Affidavit in Reply) “Application of Compensation Moneys All moneys received as or by way of compensation in respect of any of the matters referred to in Clause 16 hereof shall be applied in or towards the discharge of repayment of the Monies Hereby Secured and the Borrower and the Chargor shall, and hereby declare that it will, hold all such moneys if paid to and received by the Borrower and/or the Chargor hereunder in trust for the Chargee and the Borrower and/or the Chargor agrees and confirms that the Chargee may receive and give a good discharge for all such moneys” iii. Similarly, all the clauses regarding compensation monies from acquisition in Clause 5(j) of the 2nd Third Party Charge in favour of the 1st Defendant, Clause 7.3 of the Third Party Charge in favour of the 3rd Defendant, and Clause 7.3 of the 17 2nd Third Party Charge in favour of the 3rd Defendant stipulate that: (see Exhibits LBS-3 to LBS-5) a. the compensation monies shall be applied to relinquish and discharge the indebtedness; and b. if the Plaintiff as chargor receives the compensation monies, the Plaintiff declares that it holds the compensation monies in trust for the Chargees. [25] In light of the unanimous clauses above, it is clear without a single doubt that the compensation monies not only can, but MUST be utilised to discharge the debts and the securities and pay the chargees. [26] Thus, what nexus this Court can infer from the above contractual obligation is that the compensation monies indeed should be taken into account to be deducted with the “overall cost of financing or development cost for the Development” (which indubitably 18 includes the financial indebtedness incurred in furtherance of the JVAs, which are the charges). [27] Therefore, by the operation of the clauses above, it advertently includes the compensation monies within the equation and/or formula of calculating the parties’ entitlements within the ambit of clause 5.01. Thus, it further supports the reasonableness of the interpretation that clause 5.01 of the JVAs must be read together with clause 28.01 of the JVAs in the instance of land acquisitions of the any part or the whole of the project land. [28] Thereto, it is this Court’s considered view that Clause 5.01 and Clause 28.01 of the JVAs must be read together. Thus, it is also this Court’s considered view that the compensation monies can be taken into account to conclude the parties’ entitlement under clause 5.01 and subsequently being finalized by the Settlement Agreement. It is immaterial that the Housing Development Account only holds the proceeds from the sales from the JVAs 19 [29] The Plaintiff sought to further their contention to demarcate proceeds and compensation in reference to clause 1.01.12 of the JVAs in which this clause defines the Housing Development Account (“HDA”) to be an account operated by the Defendants in accordance with Section 7A of the Housing Developers (Control and Licensing) Act 1966 for the purposes of the Development. Section 7A (3) of the Housing Developers (Control and Licensing) Act 1966 stipulates that: “The licensed housing developer shall pay into the Housing Development Account of a housing development the purchase monies received by the licensed housing developer from the sale of housing accommodation in the housing development and any other sum or sums of money which are required by regulations made under this Act to be paid into the Housing Development Account.” [30] However, there is nothing within this provision above, which stipulates that the calculation of profits entitlement cannot include compensation monies from land acquisitions. In fact, the payment of 20 the compensation monies directly to the chargees is in line with the provision above as the compensation monies were never deposited into this account. Plaintiff’s failure to object on the payment of the compensation monies to the chargees [31] The Defendants have raised a pertinent observation that the Plaintiff has NOT objected to the direct payment of the compensation monies to the chargees. This failure to object immensely detriments the Plaintiff’s case as it further supports the interpretation of the JVAs and the charge documents that compensation monies from land acquisition may be taken into account in concluding each parties’ entitlement from the JVAs. Notably, a registered owner of an acquired land may object the acquisition vide the issuance of Form N under Section 38(1) of the Land Acquisition Act 1960. One of the many grounds of objection in Form N is “(c) the person to whom it is payable”. 21 [32] However, it is even admitted by the Plaintiff that the only ground of objection in the Plaintiff’s Form N, so on the amount of compensation offered by the State Government. Paragraph 18 of the Plaintiff’s Affidavit in Reply (enclosure 6) avers the following: “Plaintif seterusnya menyatakan bahawa pihak Plaintif mahupun Defendan-Defendan telahpun menyedari bahawa terdapat pengambilan tanah oleh Kerajaan Negeri sejak dari mula lagi warta tersebut digazetkan dan Borang N di bawah Akta Pengambilan Tanah 1960 telah dimasukkan oleh pihak Plaintif. Tujuan kemasukan Borang N tersebut adalah untuk membantah nilai pampasan sebanyak RM86,307,360.00.” [33] It is pertinent that this Court reproduces one of the acquisition notices issued by the State Government which stipulates that the payment shall be made to the chargees and not the Plaintiff: