Redmax Sdn Bhd v Psi Incontrol Sdn Bhd (B-02(NCC)(A)-2585-12/2017)

(i) that there was no dispute that the respondent had completed the works during the period of EOT 1;

(v) that the clause ‘pay when paid’ in the sub-contract is not applicable; and

(a) a creditor by assignment or otherwise to whom the company is indebted in a sum exceeding five hundred ringgit then due has served on the company … a demand …requiring the company to pay the sum so due, and the company has for three weeks thereafter neglected to pay the sum or to secure or compound for it to the reasonable satisfaction of the creditor; Civil Appeal No. B-02(NCC)-(A)-2585-12/2017 7 … What is a “creditor”? According to Osborn’s Concise Law Dictionary, 7th edn, a “creditor” is “a person to whom a debt is owing”. In the instant case, is the petitioner a creditor? To entitle the petitioner to call itself a creditor, there must be a debt owing from the respondent to the creditor. The petitioner has not obtained a judgment against the respondent for the sum claimed which would have clearly shown it is a creditor. That being the situation it has to show that there is a debt owing from the respondent to them. The debt must also be undisputed.”. [18] In granting the winding up order, the learned judge accepted the respondent’s contention that there exists a genuine debt due and accruing from the appellant to which there is no bona fide dispute. [19] With respect we disagreed. Contrary to the findings of the learned judge, we found on the face of the records that the debt alleged to be due and owing by the appellant to the respondent is a disputed debt. And we were satisfied that the learned judge erred in his approach and conduct of the winding up proceedings. The winding up court should undertake a prima facie study to ascertain whether a debt is genuinely disputed. It does not warrant a minute examination of the factual basis as done by the learned judge, which is more properly dealt with by a civil court or arbitration as the case may be. [20] Vide a letter dated 21.10.2013, the appellant wrote to the respondent stating inter alia that: “2. Untuk makluman, keputusan kelulusan permohonan lanjutan masa pihak kami telah diluluskan. Civil Appeal No. B-02(NCC)-(A)-2585-12/2017 8

Oleh yang demikian, pihak tuan diberi kelulusan tambahan seperti yang pihak tuan hasratkan sehingga 2/3/2014.

Sebarang hasrat menuntut kerugian dan/atau perbelanjaan tambahan adalah tertakluk dibawah kelulusan JPS dan pihak tuan boleh membuat tuntutan tambahan terbaru ini melalui pihak kami dengan kadar segera. “ [21] The respondent, by a letter dated 25.2.2014 submitted a claim for RM1,461,050.00. The letter reads: “… Regarding to the extension of time agreement, we would like to request addition cost variation due to additional cost that incurred during the remaining of above named project. … Your cooperation to get this claim approved is highly appreciated.”. [22] On 22.12.2014, the respondent wrote another letter to the appellant wherein the respondent states inter alia: “2. … we have discussed with JPS Projek Khas and they have agreed for PSI to proceed with these claims. However, Redmax has to pay PSI first before JPS can consider it as cost incurred in this project. Redmax may claim back from JPS as a variation order for the SCADA works.”. [23] In its reply to the respondent solicitor’s statutory demand, the appellant’s solicitors wrote as follows: Civil Appeal No. B-02(NCC)-(A)-2585-12/2017 9 “… Our client denies that the amount claimed by your client has become accrued and demandable by your client. Your client’s demand is therefore pre-mature. Our client states further that on a goodwill basis they have included your client’s claim with theirs for payment of Extension of Time in relation to a project known as “Design, Supply, Deliver, Installation, testing and Commissioning of Automation System and SCADA System – Sungai Muda – Pakej 2”. At this juncture, your client’s attention is drawn to the fact that at all times they have been receiving instructions directly from JPS’s engineers on all works pertaining to the Extension of Time. Following that your client has been dealing directly with the QS department of JPS with their claims and now all of a sudden making the claim with our client. Our client would like to make it clear that they have exercised reasonable endeavor to claim for this contractual benefits from JPS but due to delay our client has not received any payment from JPS. Since this contractual benefits from JPS have not been awarded to our client, hence they are also not in a position to award your client the same.”. [24] From the above exchanges, it is apparent that the appellant had not accepted the respondent’s claim. What was accepted was the submission of the respondent’s claim which remains to be assessed and ascertained by JPS. This fact was also averred to by the appellant in its affidavit in opposition to the winding up petition, where the appellant had stated inter alia that the Summary of Cost Variation Claim submitted by the respondent was incorrect and unsubstantiated (see pages 38-50 of Record of Appeal Part B). Civil Appeal No. B-02(NCC)-(A)-2585-12/2017 10 [25] In its affidavit in opposition, the appellant had also alluded to clause 4 of the letter of award which states: “The Sub-Contractor shall submit his interim progress claim on a monthly basis and carry out a joint site valuation with the Contractor and/or the Government’s Representative(s). All interim payments shall be made to the Sub-Contractor no later than the expiry of thirty (30) days from the date of receipt by the Contractor payment from the Government in respect of the claim for the work.”. [26] The appellant also relied upon clause 11.2 of the sub-contract to oppose the petition. Clause 11.2 reads: “11.2 Subject to the Sub-contractor’s compliance with this Sub-Clause, the Contractor shall take all reasonable steps to secure from the Employer (including the Consultant) such contractual benefits (including additional payments, extensions of time or both), if any, as may be claimable in accordance with the Main Contract. The Sub-contractor shall in sufficient time, afford the Contractor all information and assistance that may be required to enable the Contractor to claim such contractual benefits. On receiving any such contractual benefits from the Employer, the Contractor shall pass on the Sub-contractor such proportion thereof as may in all circumstances be fair and reasonable, it being understood that, in the case of any claim of the Contractor for an additional payment, the Contractor’s receipt of payment therefrom from the Employer shall be a condition precedent to the Contractor’s liability to the Sub-contractor in respect of such claim. Sub-contractor will only be paid for any variation claims if Contractor’s obtain the same from the Employer less any cost mutually agreed upon. …”. [27] That the sub-contract is back to back with the main contract is also stipulated under the following clauses 3.1 and 4.2: Civil Appeal No. B-02(NCC)-(A)-2585-12/2017 11 “3.1 The following documents shall be deemed to form and be read and construed as the Sub-contract, viz.: a. The Main Contract Document (except for details of commercial related information); b. The Sub-contract Document; c. The Letter of Award or Acceptance between the parties hereto and all attachments and all annexure thereto.”. “4.2 The Sub-contractor shall deemed (sic) to have sighted the Main Contract and Sub-Contract documents … and is fully aware and have full knowledge of the Contractor’s obligations to the Employer and the Employer’s requirements to the extent as it relates to the Sub-contract works. Where and to the extent of such obligations in the Main Contract relates to the Sub-contract, the same shall bind the Sub-contractor in a “back to back” basis with the Contractor. …”. [28] It is further provided under clause 7.2 of the sub-contract as set out below that the respondent’s claim under the EOTs would be investigated: “Provided that the Sub-contractor shall not be entitled to such extension of time unless he has submitted to the Contractor notice of the circumstances which are delaying him within 7 days of such delay first occurring together with detailed particulars in justification of the extension of time claimed in order that the claim may be investigated at the time …”. [29] The respondent, vide paragraph 12 of the petition states that “… the Petitioner was informed by JPS that if the Respondent wishes to make a claim for the Petitioner’s EOT1 claim from JPS, the Respondent must first pay the Petitioner…”. The respondent’s statement is with respect, devoid of any basis and contrary to Civil Appeal No. B-02(NCC)-(A)-2585-12/2017 12 the terms of the sub-contract. There was nothing in the sub-contract that the respondent should be paid first by the appellant. Rather clause 13(b) states: “The Contractor shall not be held responsible for any delay caused by the Employer or any third party involved with the project that is beyond the control of the Contractor. The Contractor shall use all reasonable endeavours to claim for contractual benefits from the Employer should any delay occur. The Sub-Contractor shall only be accorded the same if the Contractor obtains the contractual benefits from the Employer.”. [30] Given the contemporaneous documents and the relevant provisions of the sub-contract, we found much force in the submission of learned counsel for the appellant that the respondent knew from the outset that the claims for additional costs forwarded to the appellant was for approval and payment from JPS and that only when the approval and payment was received from JPS would the appellant remit the approved payment to the respondent. In other words, there was some basis for the appellant to contend that the respondent’s claim once forwarded to the appellant did not mean that the respondent would automatically be paid by the appellant. [31] The appellant’s claim against JPS, which includes the respondent’s claim for additional costs incurred during the EOT 1, has not been resolved. It is pending in the arbitration proceedings. Thus, it cannot be said that there is no bona fide dispute on the respondent’s claim against the appellant. The issues pertaining to the dispute, in particular ‘pay when paid’ ought to be dealt with in arbitration or in civil proceeding, should such proceedings be filed by the parties here. Civil Appeal No. B-02(NCC)-(A)-2585-12/2017 13 [32] On estoppel and res judicata, we disagreed with the respondent that as a result of the dismissal of the applications for fortuna injunction and the striking out, the appellant is prevented from litigating the issue whether there was a bona fide dispute to the debt. Those two applications were interlocutory applications which were decided on certain established principles. The issue to be considered by us in this appeal was whether there was a genuine dispute about the debt. On this issue, we had a statutory duty to review the decision of the High Court. Res judicata and issue estoppel simply did not arise. Conclusion [33] On the facts before us, we were convinced that the learned judge was plainly wrong because:

(i) The main contract is clearly incorporated in the sub-contract;