Qed Systems Sdn Bhd v Global Minerals (Sarawak) Sdn. Bhd. (W-02(NCVC)(W)-400-03/2016)

1 IN THE COURT OF APPEAL, MALAYSIA (APPELLATE JURISDICTION) CIVIL APPEAL NO. W – 02 (NCVC)(W) – 400 – 03 / 2016 BETWEEN QED SYSTEMS SDN BHD …APPELLANT AND GLOBAL MINERALS (SARAWAK) SDN. BHD. …RESPONDENT [In the matter of High Court in Malaya at Kuala Lumpur, Civil Suit No. 22NCVC-479-08/2013 Between Global Minerals (Sarawak) Sdn. Bhd. …Plaintiff And QED Systems Sdn. Bhd. …Defendant] HEARD TOGETHER WITH IN THE COURT OF APPEAL, MALAYSIA (APPELLATE JURISDICTION) CIVIL APPEAL NO. W – 02 (NCVC)(W) – 2105 – 11 / 2016 2 BETWEEN GLOBAL MINERALS (SARAWAK) SDN. BHD …APPELLANT AND QED SYSTEMS SDN BHD …RESPONDENT [In the matter of High Court in Malaya at Kuala Lumpur, Civil Suit No. 22NCVC-479-08/2013 Between Global Minerals (Sarawak) Sdn. Bhd. …Plaintiff And QED Systems Sdn. Bhd. …Defendant] CORAM: DAVID WONG DAK WAH, JCA HAMID SULTAN BIN ABU BACKER, JCA UMI KALTHUM BINTI ABDUL MAJID, JCA 3 GROUNDS OF JUDGMENT A. INTRODUCTION

1. Global Minerals (Sarawak) Sdn. Bhd. is a coal mining company and QED Systems Sdn Bhd is a company that provides the supply, fabrication and installation of machinery and equipment for the processing of earth surface extracted produce such as granite and other minerals.

2. Both companies are incorporated under the Companies Act 1965.

3. There were two appeals before this Court. These appeals arise from the decision of the learned High Court Judge vide Civil Suit No. 22NCVC- 479-08/2013 where the learned High Court Judge had allowed Global Minerals (Sarawak) Sdn. Bhd.’s claim for breach of contract. The learned High Court Judge had also allowed QED Systems Sdn. Bhd.’s counter-claim as a set-off to the Global Minerals (Sarawak) Sdn. Bhd.’s claim for the balance of the contract sum.

4. Aggrieved with the said decision, QED Systems Sdn. Bhd. filed an appeal vide Civil Appeal No. W-02(NCVC)(W)-400-03/2016 (“Appeal 400”) against the decision of the learned High Court Judge in allowing Global Minerals (Sarawak) Sdn. Bhd.’s claim. 4

5. At the same time, Global Minerals (Sarawak) Sdn. Bhd. filed an appeal vide Civil Appeal No. W-02(NCVC)(W)-2105-11/2016 (“Appeal 2105”) against the decision of the learned High Court Judge in allowing the QED Systems Sdn. Bhd.’s counter-claim.

6. Both appeals were heard together before this Court. For the purposes of this Grounds of Judgment, the parties will be referred to as they were before this Court in Appeal 400; QED Systems Sdn. Bhd. as the Appellant and Global Minerals (Sarawak) Sdn. Bhd. as the Respondent. B. BACKGROUND FACTS

7. The Respondent is a coal mining company in Kapit, Sarawak. The average output of the Respondent’s plant was 150 metric tonnes per hour. The Respondent intended to upgrade the plant and to increase the output from the existing 150 metric tonnes to 200 – 250 metric tonnes per hour (“MTPH”) to meet the increasing demands from its clients.

8. After several meetings between the Appellant’s and the Respondent’s representatives, the Appellant vide a letter dated 12.12.2011 entitled Re: Proposed Up-Grading Works for Existing 150.0 MTPH Capacity Coal Crushing Plant in Kapit, Sarawak (“Letter of 5 Quotation”), submitted its proposal and quotation together with the layout drawing for the intended upgrading works to the Respondent. This Letter of Quotation was prepared by the Appellant.

9. Based on the Letter of Quotation, the Respondent engaged the Appellant to design, fabricate, and install a new upgraded coal crushing plant with an increased coal crushing capacity of the Respondent’s existing 150.0 MTPH capacity (“the Upgrading Works”).

10. Then, based on a letter dated 20.12.2011, the Appellant stated that the Respondent had verbally agreed to award the Upgrading Works to the Appellant. That the agreed total contract price was quoted to be RM 1,705,000.00. However, the Letter of Quotation formed the basis of the contract between the Appellant and the Respondent.

11. The parties had also agreed that the terms of payment for the contract price shall be paid as per Part H of the Letter of Quotation, as follows: “H. TERMS OF PAYMENT - 40% non-refundable down payment on signing of Contract Agreement. - 30% when goods ready for delivery to Port Kelang Wharf. - 15% on completion of each break of the mechanical installation. - 10% on successful testing and commissioning of each break. - 5% retention for 90 days from the date of handing over of the plant.” 6

12. The Letter of Quotation provides that the Appellant shall be responsible inter alia to design, manufacture, fabricate, supply and install all the items provided under Parts A, B, C, D, and E.

13. It was also agreed by both parties that the Appellant was to supply all the parts based on the original design provided by the Respondent and the Appellant was to purchase a Vibrating Screen from a third party. The Appellant was to assist in shipping of all the parts together with the Vibrating Screen ordered from a third party.

14. The Respondent had paid the sum of RM 682,000 on 21.12.2011, being 40% of the contract sum as the non-refundable down payment on signing of the Contract Agreement, and a sum of RM 511, 500.00 on 16.3.2012, being the 30% of the contract sum when the goods were ready to be delivered to Port Kelang Wharf. The Respondent had paid a total of RM 1,193,500.00 or 70% of the contract sum. The balance sum of RM 556,500.00 has yet to be paid.

15. The Respondent however was of the view that the Appellant is not entitled for the said balance sum because the Respondent alleged that the Appellant had failed to carry out the Upgrading Works satisfactorily. 7

16. The Respondent alleged that the Upgrading Works were defective, inadequate and not fit for the Respondent’s purpose and use. The Respondent further alleged that the Appellant had failed to exercise reasonable care, skill and diligence in executing the Upgrading Works.

17. In essence, the Respondent alleged that the Appellant had failed to supply and had failed to use proper materials and equipment of quality in carrying out the Upgrading Works and these failures had effectively caused frequent breakdowns, stoppages, spillage of coal and choking at the crushing tunnel of the Respondent’s plant capacity for crushing and producing coal, as a result of which, the Respondent suffered losses. As such, the Respondent claimed against the Appellant damages and compensation including the loss of profits and the costs for additional machineries and equipment.

18. The Appellant however alleged that the Upgrading Works agreed by the parties had resulted in subsequent upgrades by the Respondent. These further upgrades were more than what the Letter of Quotation had envisaged. All the remedial works and complaints made by the Respondent that were within the scope of the Letter of Quotation had been duly attended to and remedied. As such, the Appellant is entitled for the balance sum. 8 C. AT THE HIGH COURT

19. The learned High Court Judge was of the view that the crux of the Respondent’s case was whether the Appellant had failed to properly and satisfactorily carry out the Upgrading Works for the Respondent’s coal mining plant in accordance with its obligation under the Letter of Quotation.

20. The learned High Court Judge was of the considered view that there were indeed problems pertaining to the Upgrading Works that had been carried out by the Appellant. Her Ladyship further observed that the Appellant had attempted to place the blame on the Respondent by faulting the other equipment supplied by third party to have contributed to the defects in the Upgrading Works.

21. The learned High Court Judge was satisfied that the Respondent had proved that the Appellant had breached its contractual obligation in carrying out the Upgrading Works with reasonable skill and care. Reasonable skill and care were deemed to be the implied terms of the said contract by the learned High Court Judge.

22. The learned High Court Judge further opined that in a contract involving fabrication and installation of equipment, there exists an implied 9 term that the party executing the fabrication and installation possesses the necessary skill and knowledge of the work involved. The Appellant could not, after submitting the Letter of Quotation to the Respondent, argue that it was not appointed as the consultant engineer and does not possess any prior experience in respect of the work involved. The Appellant could not shift the blame to the Respondent’s consultant and alleged that it was in total reliance on them (the Respondent’s consultant) throughout the Upgrading Works.

23. The learned High Court Judge was of the view that the Respondent had proved its claims and the Appellant is liable for breach of contract. In respect of the counter-claim, the learned High Court Judge found that despite the unsatisfactory Upgrading Works, the Respondent had in fact accepted the Appellant’s work and as such, the Appellant was entitled to the payment of the balance sum.

24. The learned High Court Judge further found the absence of any evidence to suggest that the Respondent had rejected the Appellant’s work in total. In fact, the evidence showed that despite the shortcomings, the Respondent’s plant was still able to operate at 200 to 250 MTPH. Thus, the learned High Court Judge found that the Appellant was entitled 10 to deduct or set-off the balance due under the contract to the Respondent from the loss and damage it suffered.

25. The learned High Court Judge awarded RM 150,000.00 for expenses incurred to hire and rent additional machineries and equipment such as excavators, trucks, and bulldozers for the Respondent to manually operate the plant.

26. In regard to loss of profits, the learned High Court Judge awarded RM 300,000.00 instead of RM 800, 072.00 claimed by the Respondent as the learned High Court Judge was of the view that there was an exaggeration on the Respondent’s claim under this item.

27. In respect of the costs of repairs and rectifications for the Upgrading Works, the learned High Court Judge was of the view that there was no evidence of any actual repair and rectification work had been done although the Respondent attempted to prove the same through the quotation dated 12.6.2012 from Maine-Lyn Enterprise Sdn. Bhd. for the amount of RM 241, 500.00.

28. The learned High Court Judge, however, acknowledged that there would be some repair and rectification work to be carried out and awarded a sum of RM 100,000.00 as being an appropriate and reasonable sum. 11 The learned Judge had also awarded the sum of RM 26,980.00 for further and additional costs of repair and rectification due to parts which were defective / unsuitable for the plant.

29. To summarise, the learned High Court Judge allowed the

980. Respondent’s claim for loss and damages for a total sum of RM 576,

00. The learned High Court Judge had also allowed the Appellant’s counter-claim for the balance of the contract sum in the amount of RM 556,500.00. The balance of the contract sum is to be set off from the amount awarded to the Respondent. The costs of RM 10,000.00 was awarded to the Respondent, to be paid by the Appellant. D. THE APPEAL

30. Before us, the Appellant directed its submissions on the following grounds and they are as follows:

30.1 the Appellant contended that it had performed its part of the obligation in the Upgrading Works as per the design and specification in the Letter of Quotation and in accordance with the Respondent’s instructions. If there were any shortcomings and/or defects, or unsuitability of equipment supplied, they were not the fault of the Appellant; 12

30.2 the Appellant contended that the learned High Court Judge had failed to appreciate the inconsistency between the Respondent’s pleadings and the oral testimony of the Respondent’s witness in respect of the coal crushing capacity of the Respondent’s plant;

30.3 the Appellant contended that, save for the ones where receipt was submitted, the Respondent had failed to particularised its claim and neither did the claims were supported with any documentary evidence; and 30.4 the Appellant contended that the learned High Court Judge had failed to assess proper damages to be awarded to the Respondent in this case.

31. It was the Appellant’s contention that it had fulfilled its obligations as stipulated under the Letter of Quotation as agreed to by both parties. The Appellant was to supply all the parts based on the original design provided by the Respondent and the Appellant was to purchase a Vibrating Screen from a third party. This had been done by the Appellant.

32. The parts to be changed was done in accordance with the layout plan prepared by the Appellant. The Appellant had also assisted in the shipping of all the parts together with the Vibrating Screen ordered from the third party. The Appellant had modified all the parts of the mining plant 13 that were replaced by the Appellant and the modifications were “as instructed and directed by the Respondent”.

33. In addition to that, the Appellant had also provided the parts of the coal mining plant which were to be replaced back into the original design “as specified by the Respondent”. Thus, the Appellant submitted that the whole Upgrading Works was done thoroughly under the supervision of the Respondent.

34. The Appellant argued that there was inconsistency in respect of the coal crushing capacity of the mining plant. The Statement of Claim at paragraph 16 (e) stated that the Appellant had failed to ensure the coal crushing capacity was maintained at an average between 200 – 250 MTPH and in paragraph 16 (f) of the same, the Respondent stated that the Appellant had failed to ensure the Upgrading Works would not cause damage and loss to the Respondent’s existing 150 MTPH. On the contrary, the testimony of PW2, who is the Operation Manager of the Respondent, suggested that the Upgrading Works had failed to deliver the intended result of having a coal crushing capacity above 300 to 400 MTPH. The Appellant submitted that the Respondent is bound by its pleadings. The documentary evidence showed that the output was at 230 MTPH and remains at 230 MTPH after the upgrade. There was never any 14 mention in the Letter of Quotation that the machines were expected to produce more than 250 MTPH after the upgrade.

35. The Appellant further argued that the contract was purely an agreement for the supply and delivery of the mechanical installations as specified by the Respondent including those machineries that were ordered from third party.

36. The Appellant contended that the learned High Court Judge had erred in law and in fact in allowing the Respondent’s claim at the High Court even when the Respondent had failed to prove its losses. As such, the Respondent’s claim should not have been allowed.

37. Conversely, the Respondent argued that at all material times, the Appellant knew the purpose of the Upgrading Works was to increase the coal crushing capacity from 150 MTPH to above 300 - 400 MTPH. The Respondent had relied on the Appellant as a company that deals with such specifications to be able to complete the Upgrading Works successfully. The Letter of Quotation relied by the parties which formed the basis of the contract and laying the terms of the Upgrading Work was prepared by the Appellant. 15

38. The Respondent also submitted that the design, fabrication and the choice and quality of the materials as well as the measurements were all supplied and done by the Appellant.

39. Thus, given the many issues that arose after the Upgrading Works conducted by the Appellant, the Respondent submitted that the Appellant had failed to complete the Upgrading Works as agreed by both parties. The testimonies of PW1 in particular suggested that the Appellant had failed to supply and use proper materials and equipment of quality in the Upgrading Works and the Appellant had failed to ensure the design, construction, installation and commissioning of the Upgrading Works would not cause spillage, blockages, wastage and loss of the coal during the coal crushing process.

40. The Respondent further argued that one of the main reasons for the Upgrading Works was to increase the plant’s coal crushing capacity. The Appellant had failed to deliver this aspect of the contract. The Upgrading Works did not result in the plant’s output reaching 250 MTPH. Worse still, the Respondent argued that Upgrading Works had caused damage and loss of use of the coal mining plant. 16

41. The Appellant’s own witness, DW1, had admitted to such failure and attributed it to the Appellant’s lack of experience in fabricating coal crushing plant as it was the Appellant’s first foray involving coal.

42. Thus, the Respondent submitted that the Appellant had breached its contractual obligation in the Upgrading Works as the executed works were defective, inadequate and not fit for the very purpose and use it was intended for and the Respondent also submitted that the Appellant had failed to exercise all reasonable care, skill and diligence in discharging its part of the contract. To rectify the defects caused by the Appellant, the Respondent suffered losses and damage. Counter-Claim

43. In respect of the Respondent’s cross-appeal on the counter-claim that was allowed by the learned High Court Judge, the Respondent submitted that the Appellant was not entitled to the balance of the contract sum of RM 556, 500.00.

44. The Respondent submitted that the Appellant had not performed its entire obligations under the contract nor had the Appellant substantially performed the contract. The Appellant had also refused to repair and rectify all the problems which were created by the Appellant’s defective / 17 inadequate / unfit for the for the Respondent’s purpose and use machinery and equipment supplied by the Appellant. Thus, based on the aforesaid reasons, the Respondent submitted that the cross-appeal must be allowed and the Appellant is not entitled to the balance of the contract sum. E. OUR DECISION

45. Before we heard the parties, we had instructed the Respondent to prepare a spread sheet to be divided into columns stipulating the items of claim by the Respondent, the learned Judge’s judgment / award in respect of those items of claim, the Respondent’s evidence to support its claim, and the Appellant’s response to the same items. This spread sheet is as contained in pages 158 – 165 of the Common Bundle (2). Therefore, reference will be made to the items of claim as per the spread sheet.

46. This suit in the High Court below had been fully heard by the learned High Court Judge. We were therefore very mindful of the general rule of non-interference by the appellate court of the trial judge’s finding of facts, “unless the trial court is shown to be plainly wrong in arriving at its decision. But appellate interference will take place in cases where there has been no or insufficient judicial appreciation of the evidence” – see Lee Ing Chin @ Lee Teck Seng v Gan Yook Chin [2003] 2 CLJ 19; [2003] 2 18 MLJ 97 C.A. at page 116, 120. We therefore declined to disturb the learned High Court Judge’s finding of facts pertaining to the liabilities of the parties against each other.

47. However, we found the damages awarded by the learned High Court Judge to the Respondent were excessive, especially in view of the fact that there was lack of proof in regard to some of the heads of claim made by the Respondent. It is trite law on damages that he who makes a claim must prove that he has actually suffered the loss claimed and the loss is due to the actions of the opposing party, failing which he is not entitled to the claim. In Morello Sdn Bhd v Jacques (International) Sdn Bhd [1995] 2 CLJ 23; [1995] 1 MLJ 577, the Federal Court had applied the principle in the English case of Bonham-Carter v Hyde Park Hotel Ltd [1948] WN 89, wherein Lord Goddard was quoted as holding that- “Plaintiffs must understand that if they bring actions for damages it is for them to prove their damage; it is not enough to write down the particulars, and so to speak, throw them at the head of the court, saying: “That is what I have lost; I ask you to give me these damages.” They have to prove it.” We then focused our attention on the claims made by the Respondent by referring to the spread sheet prepared by the parties. 19

48. We therefore referred to the five items the Respondent had claimed for, and to a certain extent, was allowed by the learned High Court Judge found in the spread sheet. Item A

49. Under Item A, the claim was for additional machineries used for 13 days when the coal crushing plant had to be closed down for repairs and for rectification works. The Respondent initially claimed for RM 272,

860.00 but the learned High Court Judge only allowed RM 150,000.00. The learned High Court Judge found that the Appellant’s Upgrading Work had caused frequent breakdown of the plant and problems such as spillage and loss of coal forcing the Respondent to carry out rectification works to remedy the defects.

50. We had carefully perused the documentary evidence before us and we found that the rental rates of tractors and excavators the Respondent premised its claim upon was just a mere quotation by Woodman Sdn Bhd dated 21.5.2004. We also took note that no witness was called to testify on the veracity of this document and as such, we were of the view that this document was just a mere quotation at best and did not confirm any losses suffered by the Respondent. 20

51. We also found that there was no amount attributed to the costs of rental of property, plant or equipment for the year ending 31.12.2012 in the Financial Statement of the Respondent (“the Financial Report”). The Financial Report showed no amount was recorded for such item.

52. The same Financial Report also indicated that the stock piles for the year 2012 had increased up to 100% as compared to the year 2011. This would have indicated that there was no major stoppages or plant breakdown that stunted the plant’s production.

53. Thus, we were of the view that the learned High Court Judge’s decision in awarding RM 150,000.00 under this item was without any basis. We disagreed with the learned High Court Judge’s decision on this Item and we allowed the Appellant’s appeal under Item A. We, however, found that the Appellant was only entitled for a nominal sum of RM 20,000.00. Item B

54. Under Item B, the claim was for the loss of profit due to the closure of the Respondent’s plant for 13 days. At the High Court, the Respondent claimed for RM 800, 072.00. The learned High Court Judge awarded the Respondent a sum of RM 300,000.00 under this Item. 21

55. The alleged 13-day delay was not supported by any documentary evidence other than the oral testimony of PW2, PW3 and PW 4. On top of that, we found that the daily coal production report showed that there was no stoppage of works – see page 146, Core Bundle (2).

56. Once again, we disagreed with the learned High Court Judge’s finding on this issue and we echoed our reasons as stipulated in Item A for Item B as well. As such, we only allowed a nominal sum of RM20,000.00 for this Item. Item C

57. Under Item C, the claim was for the repairs and rectification costs allegedly suffered by the Respondent. At the High Court, the Respondent’s claim was for RM 241, 500.00. The learned High Court Judge awarded RM 100,000.00. We have carefully perused the document used by the Respondent to base the claim under Item C and we once again found the document to be a mere quotation. The said quotation by Maine-Lyn Enterprise Sdn Bhd dated 12.6.2012 was a quotation for rectification and upgrading works. No evidence of any payment was made to that effect. Thus, we allowed the Appellant’s appeal under Item C and we were of the view that a nominal sum of RM 20,000.00 was an adequate and appropriate amount to be awarded to the Respondent. 22 Items D and E

58. Item D and E were the claims for material purchased and the labour charges respectively. The parties had agreed that the award for Item D be in the sum of RM 26,980.00 and there shall be no award for labour charges. We thereby affirmed the decision of the learned High Court Judge on these 2 Items. Counter-Claim

59. In respect of the counter-claim, we were of the considered view that the Appellant had completed the Upgrading Works as per the Letter of Quotation and we agreed with the learned High Court Judge that there was no evidence to suggest that the Respondent had rejected the Appellant’s work in totality. Given our findings that the Respondent had failed to prove its losses in respect of Items A, B and C, we were of the unanimous view that the Appellant was entitled to the balance of the contract sum. We therefore dismissed the Respondent’s counter-claim. F. CONCLUSION

60. Based on the facts adumbrated above and the spread sheet prepared by the parties on pages 158 to 165 of the Common Core Bundle 23

(2) of the Parties, in respect of Civil Appeal No. W-02(NCVC)(W)-400- 03/2016, we unanimously allowed Appeal 400 in part as follows:

60.1 in respect of Items A, B and C, we allowed a nominal sum of RM 20,000 for each Item;

60.2 in respect of Items D and E, we affirmed the decision of the learned

980. High Court Judge wherein she had awarded the sum of RM 26, 00 for Item D and Nil for Item E.

61. As regards Civil Appeal W-02(NCVC)(W)-2105-11/2016, we unanimously dismissed this appeal.

62. We awarded no costs for both appeals and the deposits are to be refunded, if any. sgd (UMI KALTHUM BINTI ABDUL MAJID) Judge Court of Appeal Putrajaya Dated: 9.07.2020 24 Counsels For the Appellant - Ravi G (together with Aida Hasan) from Messrs. G. Ravi For the Respondent - Alex Keong from Messrs. Alex Keong & Co.