Sediabena Sdn. Bhd. v China Comservice (Hong Kong) Limited ……..Responden (B-02(NCVC)(W)-154-01/2016)

The claim by the Plaintiff against the Defendant, in the High Court, is for, inter alia, the following reliefs: a) a declaration that the Defendant had breached its express obligations under the Strategic Alliance Agreement dated 23.12.2010 (SAA); 3 b) a declaration that the Defendant acted in breach of its implied obligations under the SAA; c) a declaration that the Defendant acted in breach of its fiduciary duties and obligations as a trustee; d) Damages, as consequential relief; e) Costs.

The Defendant counterclaimed against the Plaintiff, inter alia, for a declaration that the Plaintiff had breached the SAA, and sought an order or compensation for the breach committed.

At the end of the trial, the learned trial Judge allowed the Plaintiff’s claim in part, as follows: “(1) it is declared that the Defendant acted in breach of its expressed obligations under the Strategic Alliance Agreement dated 23rd December 2010;

The claim of the Plaintiff that sought a declaration that the Defendant acted in breach of its implied obligations under the SAA and a declaration that the Defendant acted in breach of its fiduciary duties and obligations in respect of its duties as a trustee were dismissed by the learned trial Judge.

The counterclaim by the Defendant was also dismissed.

The Plaintiff appealed to the Court of Appeal against that part of the decision of the learned trial Judge that disallowed the Plaintiff’s claim.

After hearing both parties and after perusing the Appeal Records, we unanimously dismissed both Appeals with costs and affirmed the decision of the learned trial Judge of the High Court.

Herein below are our grounds. Parties shall be referred to, as they were in the High Court.

On 15.2.2010, the Defendant and Dewarisan Holdings Sdn. Bhd. (DHSB) entered into a “Smart Partner Project Agreement” (SPPA) with Maxis Broadband Sdn. Bhd. (Maxis). Pursuant to this SPPA, Maxis appointed the Defendant and DHSB for the supply, delivery, 5 construction, installation, testing, commissioning and decommissioning and maintenance of network infrastructure and facilities for Maxis for a period of 3 years (Works). Maxis has the option to renew the SPPA for another 2 years.

The scope of work undertaken by the Defendant under the SPPA is for the supply, delivery, construction, installation, testing, commissioning and decommissioning of network infrastructure (Defendant’s Works), whilst DHSB undertook the maintenance portion of the works.

With regards to the Works including the Defendant’s Works, the provisions of the SPPA (which are relevant to our present appeal), are as follows:

(i) Clause 14 provides that such works as required by Maxis are requisitioned by way of “Work Orders” in the form of Purchase Orders or Departmental Release Orders (DROs);

The Plaintiff came into the picture when it entered into a SAA on 23.12.2010 with the Defendant for the Defendant’s Works under the SPPA. These being the Work Orders issued by Maxis as of the date of the SAA and defined thereto in the SAA as “On-Going Projects” (2010 DROs).

Clause 2.1 of the SAA provides that the Defendant is to be the sole and exclusive project manager for the Defendant’s Works under the

The SAA also provides that: A. The Defendant shall, inter alia:

(i) allocate all work orders received from Maxis for execution; (Clause 3.1 (a));

(f)). B. The Plaintiff shall inter alia: 7 i) execute the works with due skill and care and in a professional manner (Clause 3.2 (b)); ii) be responsible for all financing including operational and capital expenses (Clause 3.2 (c)); iii) offer employment to all the Defendant’s employees as may be determined by the Plaintiff (Clause 3.2 (d)); C. The Defendant warrants and represents that: i) the aggregate contract value of the 2010 DROs is no less than RM16,643,694.00 all of which is fully recoverable from Maxis (Clause 4.1 (c)); ii) as at 23.12.2010 the works for the 2010 DROs duly performed and carried out is no less than RM8,321,847.00 all of which is fully recoverable from Maxis (Clause 4.1 (d)); iii) all payments from Maxis can only be paid into the NJA operated jointly by DHSB and the Defendant with the Defendant’s portion thereafter credited into the Defendant’s account by way of a standing instruction issued jointly by DHSB and the Defendant (Clause 4.1 (e) and (f)). D. Pursuant to the SAA, the Plaintiff was to implement the DROs issued after the SAA was entered into, i.e. the post 2010 DROs, 8 including financing all operational and capital expenses incurred in that regard.

As for the 2010 DROs, it is not disputed that the implementation and all operational and capital expenses incurred thereof, were the responsibility of the Defendant. For these 2010 DROs, the Plaintiff was to provide assistance to the Defendant with funding and that the Defendant was required to complete the 2010 DROs. In this regard the Plaintiff agreed to contribute no more than RM15,811,509.00 to assist the Defendant in its commitment under the 2010 DROs, or On-Going projects. The contribution was to be made in 3 Tranches which as follows: a) First Tranche - no more than RM8,321,847.00 to be paid on 24.12.2010; b) 2nd Tranche - no more than RM5,825,293.00 to be paid when the total amount of the invoices issued by the Defendant to Maxis amounts to no less than RM12,482,771.00; c) 3rd Tranche - no more than RM1,664,369.00 to be paid after the Plaintiff has received RM16,643,694.00 from the On-Going Projects (2010 DROs) paid by Maxis. 9

Upon payment of the 1st and the 2nd Tranches by the Plaintiff, the Defendant was to complete the 2010 DROs within the time stipulated and to invoice Maxis for the same.

Further, Clause 5.7 of the SAA provides that the Plaintiff is entitled to RM16,643,694.00 from the 2010 DROs payable from 90% of all payments received by the Defendant from Maxis for 2010 DROs, with any excess amount going to the Defendant and any shortfall to be paid by the Defendant to the Plaintiff.

Clause 6.1 (a) of the same, states that if the total payments received from Maxis in relation to the Projects Works is less than RM200 million, the Plaintiff gets 90% of those total payments received. Clause 6.1 (b) states that if the total payments received from Maxis in relation to the Project Works is more than RM200 million, the Plaintiff gets 95% of those total payments received. The above is termed as the “Agreed Benefit Ratio”.

The Defendant agreed and undertook that all monies received by it from Maxis would be paid into a “Dedicated Account”, which is the Defendant’s dedicated current account. There was to be, after the payment of the 1st and the 2nd Tranches, a Standing Instruction for all monies in the Dedicated Account to be paid out to the Plaintiff and 10 Defendant according to the Agreed Benefit Ratio (Clause 6.1 (a) and

(b) of the SAA)).

It is not disputed that the Plaintiff had only paid the 1st Tranche to the Defendant. The dispute is as to the 2nd Tranche which the Plaintiff did not release to the Defendant. The Defendant contends that by early August 2011, the total amount of invoices issued to Maxis amounted to no less than RM12,482,771.00 and hence this triggered the release of the 2nd Tranche payment, which the Defendant alleged the Plaintiff failed to make.

However, the Plaintiff asserts that: i) the total amount invoiced by the Defendant to Maxis and also the payments received by the Defendant from Maxis could not be verified by the Plaintiff; ii) the Plaintiff was neither kept updated nor given copies of the invoices issued out to Maxis; iii) the Plaintiff was not kept informed of the payments received from Maxis. Premised on the above reasons, the Plaintiff could not release the 2nd Tranche. 11

Parties attempted to resolve the dispute and find an amicable solution. However, all attempts at resolution failed. The Plaintiff alleged that despite its numerous requests for the invoices issued to Maxis or evidence of payment to Maxis, it fell to deaf ears.

Subsequently, at a meeting on 25.7.2012, the Plaintiff gave notice to the Defendant that it is withdrawing from the SAA (refer to page 563- 564 of ACB Volume 2). It is not disputed that the Plaintiff had completely withdrawn itself from the SAA between June/July 2012. The Plaintiff pleaded that on or around 28.7.2012 the SAA was terminated.

The Plaintiff initiated a suit in the High Court seeking a declaration that the Defendant had acted in breach of its obligations under the SAA and also in breach of its fiduciary duties and obligations as trustee. This is the subject of the Appeal before us.

The main complaint of the Plaintiff is reflected in paragraph 11 of the Statement of Claim. The Plaintiff claims that notwithstanding that it had performed its obligations, including advancing the First Tranche of RM8,321,847.00 and incurring a further sum of RM13 million plus towards operational and capital expenditure for the Project Works, the Defendant committed various breaches of its obligations under the SAA and/or its fiduciary/trustee duties and obligations. The particulars of the breaches are: 12

(i) the Defendant attempted to put all of its employees on the Plaintiff’s payroll regardless of whether they were deployed for the Project Works;

(v) the Defendant failed to account to the Plaintiff and keep the Plaintiff informed and updated of all and any monies transferred to the Dedicated Account;

The Plaintiff alleged that, by reason of the said breaches by the Defendant, the Plaintiff was put to suffer loss and damage. The particulars of loss and damage claimed by the plaintiff are as follows: a) RM16,643,694.00 being the sum the Plaintiff is entitled to (Clause 5.7 of the SAA)); b) RM8,321,847.00 being the 1st Tranche of funding advanced by the Plaintiff; c) RM13,657,844.00 being the further sums incurred by the Plaintiff towards the operational and capital expenditure for the Project Works; d) 90% of all sums received by the Defendant from Maxis by which the Plaintiff is entitled to by Clause 6.1 (a) of the SAA; and e) RM1,388,217.52 being finance and other costs incurred by the Plaintiff for the funding and expenditure as aforesaid.

27.

The main issues to be determined were as follows: i) Whether the Plaintiff/Defendant had breached the SAA; ii) Whether the Defendant is a trustee on the monies paid by Maxis in the Dedicated Account. If so, whether the Defendant had acted in breach of its implied/fiduciary duties and obligations under its trustee’s duties under the SAA. The Decision of the High Court:

The primary issue before the Court was who was in breach of the SAA. The contention of the Plaintiff was that it was the Defendant who did not keep the Plaintiff informed of the invoicing to, and payments received from, Maxis.

On the other hand, the Defendant maintained that it was the Plaintiff who failed to advance the 2nd Tranche payment of RM5,825,283.00. The Defendant contended that the undisputed evidence showed that the Plaintiff abandoned works and failed to comply with its obligations 16 under the SAA and accordingly, it was the Plaintiff who had committed a repudiatory breach of the SAA.

The trial proceeded on liability. The learned trial Judge found that the Defendant was the one who had breached its obligations under Clause 3.1 of the SAA. It was her finding that the Defendant had failed to provide the Plaintiff with copies of Maxis’s invoices to allow the Plaintiff to verify that the total amount of invoices issued by the Defendant to Maxis had reached the threshold sum of RM12,482,771.00 under Clause 5.2 of the SAA. Consistent with her findings, she also found that: a) the Defendant could only issue invoices with the prior consent of the Plaintiff; and b) the Defendant did not obtain the prior consent of the Plaintiff before issuing invoices.

The first Tranche of RM8,321,847.00 was already paid. It is only the 2nd Tranche which was withheld by the Plaintiff. It was only payable when the total invoice for the 2010 DROs was “no less than RM12,482.00”. The Plaintiff was unable to verify the financial progress of the Project nor the trigger point for the release of the 2nd Tranche. Hence, the learned trial Judge found that the Plaintiff was therefore entitled to withhold the 2nd Tranche. 17

The learned trial Judge also found that the breach by the Defendant of such obligations constituted a breach of a fundamental term of the agreement. However, she disallowed the Plaintiff’s “fiduciary/trustee duties claim” premised, essentially on the fact that the 2nd Tranche payment had yet to take place. FINDINGS: Whether the Plaintiff/Defendant had breached the SAA:

The learned trial Judge found that the Defendant failed to comply with Clauses 3.1 (e) and (f) and was therefore in breach of a fundamental term and hence was entitled to withhold the 2nd Tranche payment to the Defendant and ultimately to terminate the SAA on 28.7.2012. The learned trial Judge preferred the evidence of the Plaintiff whom she viewed as “more credible” in support of their contention, as compared to the witnesses of the Defendant who were “evasive and blowing hot and cold in responding to questions in relation to the failure in providing the invoices in question as in so much it had portrayed untruthfulness on their part and also lack transparency as the parties to the agreement”.

It is trite law that findings of the credibility of witnesses by the trier of the court of first instance, who has audio visual advantage, is rarely disturbed by an appellate court, unless it can be shown that the trier of fact is plainly wrong in arriving at its conclusions and decision. 18 (refer to Steven Phoa Cheng Loon & Ors and other appeals [2003] 1 MLJ 567; MMC Oil & Gas Engineering Sdn Bhd v Tan Bock Kwee & Sons Sdn Bhd [2016] 2 MLJ 428). Was the learned trial Judge wrong in her findings?

A perusal of the provisions of the SAA discloses the following. Clause 3.1 (e ) and (f) of the SAA provides for the general obligations of the Defendant: “3.1 The general Obligations of SSB Subject to the terms and conditions herein contained, SSB shall:

(e) not issue any invoices with respect to the Project Works without the prior consent of CCSHK and where such consent has been obtained, to do so in the form and manner to be determined by CCSHK;

(f) subject to Clause 3.1 (e), to provide CCSHK with all invoices issued to MBSB and an update on all payments received therefrom;”

According to the SAA, the 2nd Tranche was only payable when the total amount of invoices issued by the Defendant to Maxis for the 2010 DROs are not less than RM12,482,771.00.

The logical question to ask would be, how would the Plaintiff be able to verify that the amount of the invoices issued by the Defendant to Maxis for the 2010 DROs are not less than RM12,482,771.00. 19

Clauses 3.1 (e) and (f) appear to be the mechanism for the Plaintiff to keep track of the payments made by Maxis to the Defendant. This, consequently would have an effect on the funding obligations (the Tranche payments) on the part of the Plaintiff for the Defendant’s 2010 DROs entitlement pursuant to the SAA. By this, the Plaintiff would be able to monitor the contractual payments made by Maxis by reference to the payments updates provided by the Defendant.

From the evidence, it is not in dispute that the Plaintiff’s consent to the Defendant’s invoicing for the Project Works was by a representative of the Plaintiff who would sign the invoices for onward transmission to Maxis. From the testimony of the Plaintiff’s representative, SP 3 (Li Wen) the Plaintiff was only given few invoices to sign and it was never anywhere close to what ought to have been invoiced to Maxis given the number of DROs received from Maxis (refer to Tab 22 of the RCB Q & A No 10).

As a result, the Plaintiff queried repeatedly, as evidenced by the e-mails dated 15.3.2011 and 21.4.2011, requesting that the Defendant send to the Plaintiff the invoices before the issuance to Maxis for the Plaintiff’s signing and records.

The Plaintiff had insisted that they be given an account of the actual amount invoiced to and payment received from Maxis before the 2nd Tranche could be released. Instead the Plaintiff was only given listings of what the Defendant alleged to be invoices and payments. 20

The Defendant’s witness, Encik Zahar (SD 1) sought to justify the failure to obtain the signature of the Plaintiff’s representative before delivering it to Maxis, by alleging that this was due to the unavailability of the Plaintiff’s representative. However, in the same breath, he admitted that it was easy to call the Plaintiff for the signature. It is the Plaintiff’s case that its representatives were available at all material times and there is no evidence to suggest otherwise. The Defendant continued to issue invoices to Maxis without the Plaintiff’s consent, in total disregard of the provision of Clause 3.1 (e) of the SAA. Hence, the learned trial Judge correctly made the finding that the Defendant had breached Clause 3.1 of the SAA. (Refer to para 34 of her grounds).

Evidence further showed that the Plaintiff continued to make further requests from the Defendant for the invoices that were issued to Maxis, as can be seen from the following documents: a) e-mail on 21.4.2011 (Tab 4 page 31 of the RCB); b) e-mail on 6.10.2011 (Tab 10 page 95 of RCB); c) e-mail dated 28.6.2012 (Tab 14 at page 111 of RCB); d) letter dated 13.7.2012 (Tab 15 at page 112-113 of RCB); e) letter dated 6.8.2012 ( Tab 16 at page 114-115 of RCB); f) letter dated 10.10.2012 (Tab 17 at page 116-118 of RCB); g) letter dated 17.10.2012 (Tab 18 at pages 120-121 of RCB). 21 Therefore, the submissions by the Defendant that there was no evidence to support the finding of the learned trial Judge that there were repeated requests for the verification of the invoices was misplaced.

The Defendant could, at the very least, have provided true copies of the invoices issued to Maxis, to the Plaintiff. That would have been sufficient to enable the Plaintiff to keep track of the amounts invoiced. This is provided in Clause 3.1 (f) of the SAA.

Even SD 1 admitted that as at October 2011, the Plaintiff was still asking for the justification of the total bill that the Defendant had billed Maxis and total receivables based on the invoice or value. However, the Plaintiff’s request was not acceded to, by the Defendant, save and except for 9 or so invoices which were signed by the Plaintiff’s representative.

The Defendant contended that it had provided to the Plaintiff, via e-mail on 26.4.2011, scanned copies of letters which were sent to Maxis by the Defendant purportedly enclosing the invoices issued. However, a perusal of such e-mailed letters show that the invoices were never enclosed. Clearly, the letters alone would not reflect the actual amount or value of the invoices which were sent to Maxis. Without the actual invoices, the Plaintiff would not be able to verify the amount billed to Maxis by the Defendant. In any event, from the e-mailed letters, the invoices were only for the period before 26.4.2011. 22 What happened to the invoices after that date? These invoices were never provided to the Plaintiff.

The Defendant also asserted that it had provided a compilation of invoices to the Plaintiff’s representative, Webb Wei (SP 4) on 30.7.2011. This was evidenced from the letter of the Defendant dated 22.8.2011 (Refer to tab 7 page 86 of the RCB). However, the Plaintiff denied ever receiving such a letter and averred that it did not have record of it. In any event, we agree with the submission of the Plaintiff that it is unsafe to accept as conclusive that the delivery of such letter had been made to the Plaintiff, because: a) The letter did not state anywhere that a “compilation of invoices” was enclosed. At best it states a “compile (d) invoice summary” was given to Webb Wei (SP 4) on 30.7.2011; b) The Defendant was not certain when exactly this alleged “compile (d) invoice summary” was handed to the Plaintiff. The Defendant’s witness, SD 2 who is the Managing Director was evasive when cross examined on this, contradicting the contents of his own letter. (refer to Tab 25 at page 166-168 of RCB); c) What is more damaging is that on the day, 30.7.2011, which was the day the letter says the alleged “compile (d) invoice summary” was purportedly handed to the Plaintiff, Webb Wei (SP 4), it was not disputed that Webb Wei was not in Malaysia. 23 Hence the letter dated 22.8.2011 relied upon by the Defendant does not help its case at all. In addition, a compiled summary of invoices which is a summary obviously prepared by the Defendant, is insufficient for purposes of verification of the actual amount invoiced to Maxis.

Clause 3.1 (f) of the SAA places further obligations on the Defendant to provide the Plaintiff with updates on all payments received from Maxis, with the Plaintiff and the Defendant receiving the Agreed Ratio Benefit of either 90:10 or 95:5.

It is agreed that all monies paid by Maxis which parties are entitled to, are to be ultimately transferred into the Dedicated Account. Hence it follows that such evidence of monies received from Maxis would be reflected in the bank statements of the Dedicated Accounts itself.

However, until the conclusion of the trial, the bank statements of the Dedicated Account had not been given to the Plaintiff, despite numerous requests being made to the Defendant, be it oral or written. This was the evidence that was produced at trial: a) SP 3 e-mailed the Defendant on 24.8.2011 requesting that all “project account receipts” are to be e-mailed to him to enable the Plaintiff to verify the payments received from Maxis, with 24 such information to be on a fortnightly basis. SP 3 was referring to the bank statements in the Dedicated Account. b) However, what the Defendant did was to e-mail a summary of what the Defendant said were payments received from Maxis in an excel spreadsheet which was prepared by the Defendant, as was conceded by SD 1 (Zahar). Surely this spreadsheet was prepared based on the primary documents i.e. bank statements.

After the e-mail dated 24.8.2011, SP 3 approached the Defendant through its representative, Mr. Deva who was in charge of the Defendant’s finances. Mr. Deva was informed that the spreadsheet was insufficient and that the actual bank statements were required for the Plaintiff to verify the payments received from Maxis. Again there was no response from the Defendant. Instead the Defendant continued to send more summaries of the payment received from Maxis in excel spreadsheets. The Defendant denied that such a request was ever made to Mr. Deva. However, Mr. Deva of the Defendant was never called to testify and no reason given for such failure. The burden was on the Defendant to call Mr. Deva, as it was the Defendant who asserted that no such request was ever made to Mr. Deva of the Defendant. As Mr. Deva was not called, the denial was a bare one. 25

As such, the failure of the Defendant to provide the necessary documents to enable the Plaintiff to verify the payments received from Maxis amounts to a breach of Clause 3.1 (f) of the SAA as was the finding of the learned trial Judge in her grounds at page 204 para 57 at tab 27 RCB. It cannot therefore be said that the learned trial Judge erred in arriving at her conclusion. The 2nd Tranche Payment:

According to the SAA, the Plaintiff is to release this 2nd Tranche to the Defendant when the total amount of invoices issued by the Defendant to Maxis for the 2010 DROs is no less than

The learned trial Judge found that the “the evidence shows that the refusal by the plaintiff to release the 2nd Tranche is because the total amount invoiced by the defendant to Maxis and also the payment received by the defendant from Maxis could not be verified by the plaintiff. The plaintiff was never kept informed of the payment nor given copies of invoices issued to Maxis”. The Defendant submitted that this finding of the learned trial Judge was wrong.

However, we are not with the Defendant in this respect. As had been shown in the preceding paragraphs, the Defendant was the one which had failed to provide the Plaintiff with the invoices to Maxis and the updated payments received from Maxis. Without the Plaintiff being 26 able to verify the actual amount from the invoices to Maxis and the updated payments received from Maxis, how could the Plaintiff determine the trigger point for the release of the 2nd Tranche, as it would only trigger at no less than RM12,482,771.00? The learned trial Judge correctly observed that the built-in mechanism housed in Clause 3.1 of the SAA provides the agreed method for the Plaintiff to independently verify and monitor the amount invoiced to/and paid by Maxis.

The Defendant submitted that BG Lim (the alleged agent of the Plaintiff - which was never proven) would be able to give confirmation and verification that the collections from Maxis had reached the threshold of about RM14 million as at November 2011. This can be seen from his e-mail of 23.11.2011. Later, this amount was revised upwards to RM15 million in his e-mail of 20.12.2011. However, a perusal of the e-mail dated 23.11.2011 does not show that BG Lim had confirmed nor verified the collections from Maxis. The e-mail shows that it was a mere summary of the discussion in the meeting between the parties on 23.11.2011 (refer to ACB-2 at page 446-447). Similarly, the e-mail of 20.12.2011 was also a summary of the discussion between BG Lim, SP 1 and SD 2 on 20.12.2011 (refer to ACB-2 at page 447). Moreover, the issue whether such collections were verified by the Plaintiff or BG Lim at the meeting on 23.11.2011 and/or 20.12.2011 was never the case of the Defendant and never put to any of the witnesses. Therefore the Defendant’s argument that 27 the collections from Maxis have reached the threshold of RM14 million is baseless.

The Defendant also submitted that the court should invoke an adverse inference against the Plaintiff for failure to call this BG Lim to court as a witness. We are of the view that if at all an adverse inference is to be made, it should be invoked against the Defendant, as it was the Defendant who asserted that the invoices have reached the threshold. In any event, BG Lim is not a material witness, given that the evidence in relation to the invoice and evidence in relation to BG Lim has all been reduced to writing (which are in part B and hence not disputed).

Finally, as no determination could be made as to the amount of the invoices, the Plaintiff is entitled to withhold the release of the 2nd Tranche of RM5,825,847.00. The Defendant is the author of this predicament. The Plaintiff has no basis to release the 2nd Tranche payment. This was the finding of the learned trial Judge, which we agreed to be correct. Whether the breach by the Defendant constitutes a breach of a fundamental term of the SAA:

The learned trial Judge after considering the evidence arrived at a finding that the conduct of the Defendant constituted a breach of Clause 3.1 (e) of the SAA. The learned trial Judge found that the act of providing the invoices is fundamental to the SAA, which justified 28 the Plaintiff taking the steps of not releasing the 2nd Tranche and terminating the SAA on 28.7.2012. Hence her finding that the termination of the SAA was valid. The Defendant submitted that the learned trial Judge did not explain in her grounds as to how she came to the conclusion that the various obligations under Clause 3.1 of the SAA (which is an omnibus clause entitled “the General Obligations of SSB”) constituted a “fundamental condition”. The Defendant asserted that the SAA does not expressly classify any of the obligations under Clause 3.1 as conditions. It was also not the pleaded case of Plaintiff that Clause 3.1 was in the nature of conditions. The Defendant submitted that any breach of Clause 3.1 (f) could not, in law, constitute a ground for termination. This, according to the Defendant, was the error committed by the learned trial Judge. We, however, are in total agreement with the finding of the learned trial Judge in this regard. In construing a clause of the SAA, regard must be given to the words used in their factual and commercial context. The clauses of the SAA must be viewed and assessed in the light of the overall purpose of the SAA. Clauses 3.1 (e) and (f) are essential and go to the root of the entire SAA, without which the ultimate purposes of the SAA are impossible to achieve. It is clear that without the invoices, the Plaintiff could not verify the amount billed to Maxis, which in turn affected the 2nd Tranche payment. The Plaintiff had raised its concerns on the problem of collection for the Defendant’s repayment for the 1st Tranche (RM8,321,847.00) at the meeting on 25.7.2012 (refer to page 563 of ACB Volume 2), which 29 caused difficulty to the Plaintiff to continue the Project after these losses. Therefore, one cannot deny the importance of these clauses, which are fundamental to the SAA, a breach of which, by the Defendant, entitles the Plaintiff to terminate the SAA.

It was argued by the Defendant in its submission that there was no clear notice of the Plaintiff’s termination of the SAA. However, a perusal of the minutes of meeting dated 25.7.2012 clearly show that the Plaintiff did give a notice to the Defendant that the Plaintiff would withdraw from the SAA and reasons were given for the withdrawal (refer to page 563 and 564 of ACB Volume 2). Ultimately the Plaintiff completely withdrew from the SAA between June/July 2012. This was never disputed at trial in the High Court. Consequential relief to the Plaintiff as a result of the breach by the Defendant:

The learned trial Judge further found that the Plaintiff had not breached the SAA by withholding the 2nd Tranche as claimed by the Defendant. The Plaintiff had already committed and contributed a sum of RM8,321,847.00 in the 1st Tranche but had yet to receive any returns whilst the Defendant had gained financial benefit derived from Maxis Smart Partner Project. It therefore follows that the Defendant’s counterclaim must fail as it is premised upon the Plaintiff terminating the SAA. The Plaintiff is entitled to compensation for any loss or damage which arose from the breach by the Defendant. By virtue of 30 section 74 of the Contracts Act 1950, the Plaintiff who was the party who had suffered from the breach is entitled to claim for whatever loss that it suffered as a result thereof.

We are of the view that the learned trial Judge had made the correct findings in this respect and we find no reason to disturb the same. Whether the Defendant is a trustee of the monies paid by Maxis in the Dedicated Account. If so, whether the Defendant had acted in breach of its fiduciary duties and obligations under its trustee’s duties under the SAA

The learned trial Judge refused this claim on the basis that, inter alia, the 2nd Tranche had yet to take place and that the claim for an account and inquiry requested would only be relevant when the payment of the 2nd Tranche was made. The Plaintiff submitted that the learned trial Judge fell into error in law and fact, in that having determined that the Plaintiff’s inability to release the 2nd Tranche was due to the conduct of the Defendant when it failed to provide the Plaintiff with the invoices issued to Maxis and the payments made by Maxis, she disallowed the Plaintiff’s breach of fiduciary/trustee duties claim.

The Plaintiff submitted that nowhere in the SAA does it state that the Plaintiff’s entitlement to the monies in the Dedicated Account is dependent upon payment of the 2nd Tranche and/or securing the 31 replacement Bank Guarantee Facility. To say that it is, is reading into the SAA terms which are plainly not there, which the law disallows. Thus, the Plaintiff submitted that its entitlement is in no way qualified or made conditional upon the payment of the 2nd Tranche and/or any other condition.

The Plaintiff submitted that the learned trial Judge did not reject the existence of a trust in the present Appeal. The Defendant submitted that there was certainty of the subject matter of the trust as far as the present appeal is concerned. The Defendant submitted that the cumulative effect of Clauses 5.7, 6.1 and 6.2 disclose : a) An intention to create a trust; the agreement sets out that the Defendant agrees to receive and hold all payments and monies from Maxis on trust for inter alia the Plaintiff in the Dedicated Account; b) there was certainty of object; it being clear that it is the payments of Maxis to which the Plaintiff was entitled to in accordance with the ratio in the SAA, and thus the Plaintiff is a beneficiary of it; and c) there was certainty of subject matter; it being clear that the trust attaches itself to all the monies received by the Defendant from Maxis pursuant to the SPPA dated 15.2.2010 which will then be transferred and credited into the Dedicated Account. 32 For clarity and convenience, Clauses 5.7, 6.1 and 6.2 are set out below: Clause 5.7 of the SAA provides as follows:- “For the avoidance of doubt, [the Plaintiff] is entitled to receive RM16,643,694.00 from the On-Going Projects and shall be paid from 90% of all payments and proceeds accruing and received by [the Defendant] under the On-Going Projects to be distributed in accordance with the Agreed Benefit Ratio under the dedicated account…” Clause 6.1 of the SAA provides as follows:- “6.1. Agreed Benefit Ratio Subject to the terms and conditions herein, the parties agree and acknowledge that contractual payments for the Project Works shall be apportioned in the following manner:

(a) so long as the cumulative aggregate contractual payments for the Project Works (which does not include the contractual values of the On-Going Projects) received is less than RM200,000,000.00 and such sums are or will be credited into the Dedicated Account, the parties shall apportion the same as follows:

(i) 90% to [the Plaintiff]; and

(b) in the event, the cumulative aggregate contractual payments for the Project Works (which does not include the contractual value of the On-Going Projects) received is more than RM200,000,00.00 and such sums are or will be credited into the Dedicated Account, the 33 apportionment for the next gross contractual payment received for the Project Works shall be apportioned in the following manner:

(i) 95% to [the Plaintiff] and;

(a) [The Defendant] has already established and is operating a dedicated current account in Malayan Banking Berhad (Company No: 3813-K) at the branch in Tapah, Perak.

(b) [The Defendant] agrees and undertakes to transfer the SSB Portion from the Nominated Joint Account into the Dedicated Account. [The Defendant] agrees and acknowledges that [the Defendant] shall ensure that all monies to be received from [Maxis] under the [SPPA] will be credited only into the Dedicated Account.

(c) With respect to the Dedicated Account, the parties shall upon the First Tranche and Second Tranche being paid in accordance with Clause 5.2, issue to Malayan Banking Berhad a SI to be effectively immediately authorising all payments credited to this Dedicated Account to be immediately remitted to [the Plaintiff] and [the Defendant] in the Agreed Benefit Ratio. The parties agree and acknowledge that no changes to the Dedicated Account or any instruction to the bank shall be made without the prior written consent of [the Plaintiff]. 34

(d) Upon the First Tranche and Second Tranche being paid in accordance with Clause 5.2 and the replacement bank guarantee facility being made available in accordance with Clause 5.6, the parties agree that all the cheque and/or operating signatories to the Dedicated Account shall be nominated and appointed by [the Plaintiff].

(e) [The Defendant] and [the Plaintiff] agree and undertake that no payments, transfers, remittance or withdrawals shall be made from the Dedicated Account unless it is done under the SI with payments only to [the Plaintiff] and [the Defendant] in accordance with their respective Agreed Benefit Ratio.”

The Plaintiff submitted that, given that the Defendant is a trustee of the monies in the Dedicated Account and the Plaintiff is a beneficiary thereof, the Defendant thus owes fiduciary duties to the Plaintiff. It was also submitted that, even if there is no trust, the Plaintiff owes fiduciary duties as the relationship between the Plaintiff and the Defendant is one that possesses the 3 general characteristics of a fiduciary obligation as set out in Frame v Smith [1987] 42 DLR 81 i.e.: “Relationships in which a fiduciary obligation have been imposed seem to possess three general characteristics:

The argument advanced by the Plaintiff was premised on express trust where the 3 certainties were referred to. In the course of the Plaintiff’s argument to support the proposition of the existence of a 36 trust, the cases of ESPL (M) Sdn Bhd v Radio & General Engineering Sdn Bhd [2005] 2 MLJ 422 and Re Kayford Ltd [1975] 1 AER 604 were referred to us. We noted that, in those cases, there was evidence of an express intention to create a trust. For example, in ESPL (M) Sdn Bhd v Radio & General Engineering Sdn Bhd [2005] 2 MLJ 422 the word “trust” was used. None of those cases imposed conditions that had to be fulfilled before the beneficiary’s interest crystallized.

It is noted that an express trust may be created without using the words “trust”. In the absence of express words creating such an express trust, the Court will look at the surrounding circumstances to determine whether the party intended to constitute itself a trustee, as illustrated by this Court in ESPL (M) Sdn Bhd v Radio & General Engineering Sdn Bhd (supra) where there was a clear and an express Clause 27.1 in the sub contract which stated “….Sub-Contractor will receive the payment made by the Contractor and will hold the right to receive such payments as a trust fund to be applied first to the payment of labourers, suppliers, Sub-sub-Contractors and others responsible for the Works justifying such payments….”. In that case the said clause together with the contemporaneous correspondence and the surrounding circumstances showed that the plaintiff clearly “intended to constitute itself a trustee for the defendant”. 37

Similarly, Re Kayford Ltd [1975] 1 AER 604 is another authority that illustrates the proposition that the intention of the parties is to be gathered from the totality of the circumstances of the case, including the words written or spoken and the conduct of parties, in the determination of the existence of a trust. Megarry J held that although no imperative words were used in any of the documents, it was clear that the intention was that “there should be a trust”. He said as follows: “Now there are clearly some loose ends in the case. Mr. Kay, advised to establish a “customers’ trust Deposit Account”, seems to have thought that it did not matter what the account was called so long as there was a separate account; and so the dormant deposit account suggested by the bank manager was used. The bank statement for this account is before me, and on the first page, for which the title is simply “Deposit Account Kayford Limited”, nearly 26 Pound is credited. The second and third pages have the words “Customer Trust Deposit Account” added after the previous title of the account; and Mr. Joel’s payment was made after these words had been added. Mr. Kay also left matters resting on a telephone conversation with the bank manager until he wrote his letter of 12 December to the bank. That letter reads: “We confirm our instructions regarding the opening of the deposit account for customers deposits for new orders”; and he then makes some mention of other accounts with the bank. The letter goes on; Please ensure the re-opened deposit account is titled “Customer Trust Deposit Account”. Then he gives the reference number and asks for confirmation that this has been done. Nevertheless, despite the loose ends, when I take as a whole the affidavits of Mr. Wainwright, Mr. Kay and Mr Hall (the bank manager) I feel no doubt that the intention was that there should be a trust. There are no difficulties. The property concerned is pure personality, and so-called “three certainties” of a trust. The subject matter to be held on trust is clear, and so are the beneficial interests therein, as well as the beneficiaries. As for the requisite certainty of words, it is well settled that a trust 38 can be created without using the words “trust” or “confidence” or the like; the question is whether in substance a sufficient intention to create a trust has been manifested.”

Gunn Chit Tuan SCJ in Geh Cheng Hooi v Equipment Dynamics [1991] 1 MLJ 293 applied Re Kayford Ltd (supra) where he said: “Although we would agree with the view that a trust should not normally be imported into a commercial relationship, yet we would hold that in cases such as those involved in these appeals the court could and should consider the facts to determine whether a fiduciary relationship existed. We therefore agreed with Mr. Wong that in the present cases we must consider the circumstances concerning the relationship between the parties. We were satisfied and agreed with the learned judge that in the circumstances of these cases a trust can be implied even where the agreements themselves do not contain an express clause that the proceeds of sale should be held on trust as it is clearly manifested in the agreements and the correspondence concerned that it was the intention of the parties that the Emporium or its outlets as licensors should, after deduction of the fees and commissions agreed to be paid to them, make over to the concessionaires or consignors all payments by third party customers (emphasis added).”

As far as the present appeal is concerned, there is nothing in the testimonies of the witnesses to show that the true intention of the parties was to create a trust, as this issue was never addressed by the witnesses of the Plaintiff nor suggested via cross-examination of the Defendant’s witnesses.

73.

The Plaintiff sought to rely on the cumulative effect of Clauses 5.7, 1 and 6.2 of the SAA to show that there was a trust. However, we 39 failed to see how such provisions of the SAA can be interpreted to create a trust. The entire structure of the SAA was such that, the Plaintiff would only earn the right to repay themselves from the Dedicated Account once the Plaintiff has paid the 1st Tranche and the 2nd Tranche. It is not in dispute that the 1st Tranche was paid, but not the 2nd Tranche. If one is to read Clause 5.6 of the same, which provides that if the Plaintiff failed to replace the bank guarantee facility of the Defendant by 15.1.2011, then the Defendant shall be entitled to utilize the funds in the Dedicated Account for that purpose. Such a provision cannot be compatible with the existence of a trust as contended by the Plaintiff.

This Court in Perman Sdn Bhd v European Commodities Sdn Bhd [2005] 4 CLJ 750) has held that the standard of proof of the existence of an express trust in given circumstances is very high. The rationale in law is that, no person’s property should be burdened with the interest of another in the absence of the clearest of proof. The law requires an intention to create a trust to be expressed in clear language.

The relationship between the Plaintiff and the Defendant is strictly governed by the SAA. There are no clear stipulations in the SAA as to creation of a trust. What is clear, is the dispute in relation to the alleged breaches by the parties of the provisions of the SAA. The 40 cause of action is breach of a commercial contract i.e. the SAA which was entered between 2 business entities. A further examination of the relevant provisions of the SAA discloses the following: a) Clause 6.2 (c) provides that after paying the 1st Tranche and the 2nd Tranche, a Standing Instruction will be issued to Maybank to authorize the remittance of the monies in the Dedicated Account upon the Agreed Benefit Ratio; b) It is from this Dedicated Account that the Plaintiff was to seek repayment of the advances it was to make to the Defendant in the form of the 1st Tranche and the 2nd Tranche, together with the notional top up, to the extent of RM16,643,694.00. Hence the right to seek repayment will only accrue upon payment of the 2nd Tranche; and c) Clause 5.7 provides that, if for whatever reason, the proceeds of the On-Going Projects should be insufficient to repay the Plaintiff, the Defendant was not to make any payment to cover the shortfall from its own coffers. Instead, the shortfall was to be covered from the profits derived from any future collaboration between the Plaintiff and the Defendant. The abovementioned provisions of the SAA militate against the existence of a trust. 41

In addition, it is trite law that we do not import elements of fiduciary duties and trust into contractual commercial contexts. In the case of Hospital Products Limited v United States Surgical Cooperation [1984] CLR 41, Maison J summarized the contractual and fiduciary relationship between contracting parties, where he held at page 97: “That contractual and fiduciary relationships may co-exist between the same parties has never been doubted. Indeed, the existence of a basic contractual relationship has in many situations provided a foundation for the erection of a fiduciary relationship. In these situations it is the contractual foundation which is all important because it is the contract that regulates the basic rights and liabilities of the parties. The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to them. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction.”

Hence, upon a true construction of the SAA, it is clear that the repayment of the advances made by the Plaintiff (in the form of the 1st and the 2nd Tranches together with RM16,634,694.00) from the Dedicated Account was after the 1st and the 2nd Tranches were paid. An express/implied trust cannot be inferred to have been created in these situations. The entitlement of the Plaintiff to the repayment from the Dedicated Account did not crystallize, unlike the facts in ESPL (M) Sdn Bhd v Radio & General Engineering Sdn Bhd (supra), Re Kayford (supra), Geh Cheng Hooi v Equipment 42 Dynamics (supra). Ultimately, our present Appeal is a case of breach of contract.

Therefore, we found that the learned trial Judge had not erred when she dismissed the claim of the Plaintiff that the Defendant acted in breach of its implied obligations under the SAA or that the Defendant acted in breach of its fiduciary duties and obligations under its trustees’ duties. The purported departure by the Plaintiff from its pleadings:

The Defendant argued that the Plaintiff had departed from its pleaded case when it argued that it was not able to verify the invoices issued by Maxis. The Defendant submitted that the learned trial Judge‘s finding that the Defendant had not provided the actual invoices and payments, is at variance with the Plaintiff’s pleaded case. However, this argument by the Defendant is without merit as the Plaintiff has pleaded these material facts at : i) para 7 (d) (iv) in the Statement of Claim which reads: “(d) The Defendant shall…. (iv) provide the Plaintiff with all invoices issued to maxis and updates on all payments received from maxis (Clause 3.1 (f))” ii) para 11 (c ) and (d) of the Statement of Claim which read: 43 “(c) The Defendant failed, in particular from in and around October 2011, to keep the Plaintiff informed and updated on the invoices issued to Maxis.”

(d) The Defendant failed, in particular from in and around October 2011, to keep the Plaintiff informed and updated on the payments received from Maxis.”

Subsequently, the Plaintiff adduced evidence at trial to support these material facts, i.e. that such information or update on the invoices must surely be that which is reasonably and objectively verifiable, given that these two parties here are commercial business entities entering into an agreement for the first time. It has been established through evidence that there have been no invoices to Maxis, provided to the Plaintiff for verification, which is an obligation stipulated under the SAA. The invoices are the best evidence for the said purpose, not the summaries or listings as provided by the Defendant. Evidence from the Defendant’s witnesses who said that they have provided the invoices to the Plaintiff are inadequate to verify the actual amount of the invoices billed to Maxis. Similarly, as to payments which the Defendant received from Maxis, the best evidence would be the bank statements of the Dedicated Account.

Hence, we found that the Plaintiff’s case was in accordance to its pleaded case and the argument that the Plaintiff had departed from the same holds no water. 44 The Counterclaim by the Defendant:

The Defendant argued that as the Plaintiff had purportedly breached the SAA, the Plaintiff cannot take advantage of its own wrong. The Defendant referred us to the case of Poh Geok Sing v HB Enterprise Sdn Bhd [2006] 1 CLJ 765 in support of its proposition that a contract breaker, being responsible for the breach of an agreement, “cannot seek to recover any benefit he may have conferred upon the innocent party where he is himself guilty of a breach of the contract. Were it otherwise, a contract breaker will be in a position to take advantage of his own wrong”.

However, the facts in Poh Geok Sing (supra) are distinguishable from the facts in the Appeal before us for the following reasons:

(a) Firstly, the Plaintiff in the present Appeal is not the contract breaker. We have found that it was the Defendant which breached the SAA when it failed to comply with Clause 3.1 (e) and (f) of the SAA, as there cannot be a determination on the amount which had been invoiced to Maxis, thus making it impossible for parties to determine that the payment for the 2nd Tranche has been triggered. Hence, the Plaintiff could not be faulted for withholding the 2nd Tranche payment to the Defendant. The Plaintiff is not in breach of the SAA for withholding of the 2nd Tranche. 45

(b) Secondly, in Poh Geok Sing (supra), there was a clear termination of the contract by the defendant therein, which the court held to be justified and lawful, and hence the defendant therein was entitled to claim for damages. In our present Appeal, the Defendant never terminated the SAA. If at all, in fact it affirmed the SAA.

(c) In addition, in Poh Gek Sing (supra), the case involved a “lump sum contract” where the contract requires the completion of an entire project before payment becomes due, which is not the situation in our present Appeal. Nowhere in the SAA was it stated that the Plaintiff is to complete the Project Works before it is entitled to receive payments. The SAA provides that the Plaintiff is entitled to receive: i) RM16,643,694.00 from 90% of the 2010 DROs; ii) 90%/95% of the proceeds from the post 2010 DROs; as and when these monies are paid into the Dedicated Account by Maxis. This happened whenever Maxis issued a DROs, the Plaintiff/Defendant will complete the DROs and the Defendant will then invoice Maxis who will then make payment.

(d) In Poh Gek Sing (supra), it was also found that the defendant therein had not conferred any benefit upon the plaintiff therein 46

Consequently, the declaration sought by the Defendant in the counterclaim was rightly dismissed by the learned trial Judge. Conclusion:

We therefore dismissed both the appeals with no order as to costs. The decision of the learned High Court Judge is affirmed. Signed by: Zabariah Mohd Yusof Judge Court of Appeal Putrajaya Date: 31.10.2017 47 COUNSEL: Conrad Young, K. Thavanesan, Tan Shang Neng for the Appellant in Appeal B-02(NCVC)(W)-152-01/2016 and for the Respondent in Appeal B-02 (NCVC)(W)-154-01/2016 [Messrs. Sreeneevasan Young] Michael Chow & T.P. Teh for the Respondent in Appeal B-02(NCVC)(W)-152- 01/2016 and for the Appellant in Appeal B-02(NCVC)(W)-154-01/2016 [Messrs. Michael Chow]