Seni Jaya Sdn Bhd v Dato' Ahmad Tarmizi B. Hj. Puteh (01(f)-29-09/2016(B))

ORION MESRA SDN. BHD. (711677-A) PERAYU-PERAYU

MAJLIS BANDARAYA PETALING JAYA RESPONDEN BEFORE THE HONOURABLE AHMAD BIN HAJI MAAROP PCA DAVID WONG DAK WAH, CJSS ZAINUN BINTI ALI, FCJ BALIA YUSOF BIN HAJI WAHI, FCJ MOHD ZAWAWI BIN SALLEH, FCJ 2

Introduction This is an appeal from the judgment of the Court of Appeal which had confirmed the decision of the High Court. The Appellants were the Plaintiffs in the High Court and had sued the Respondents/Defendants for breach of an alleged agreement to privatize to them the exclusive right to manage and operate all the outdoor advertising sites in the city of Petaling Jaya through the agency of the MPPJ Sports Club.

The Appellants had applied for leave to appeal to the Federal Court pursuant to section 96(a) of the Courts of Judicature Act 1964 and on 30 August 2016, this Court granted leave to appeal on three questions of law.

We had heard the appeal and reserved judgment for deliberation. We have since given further due consideration to the submissions of respective counsel and now give our decision and grounds. 3

This judgment is prepared pursuant to section 78[1] of the Courts of Judicature Act 1964, as our learned sister, Justice Zainun Ali has since retired. Leave questions

This Court allowed the following questions of law:

(i) Whether the Agreement between the Second Respondent (an arm of the state Authority) and the First Applicant was entered into ‘ultra vires’ and/or in breach of the statutory provisions under Sections 65 to 67 of the NLC where TOL (Temporary Occupation Licences) under the licensing of the State Authority were not obtained for the purposes of the advertising billboards or where such non-compliance makes the agreement merely voidable?

Background facts The Appellants are private limited companies who engages in a business as media operators with outdoor billboard advertisements as one of their main operation. The 1st Appellant, prior to the termination by the 2nd Respondent, was one of 58 licensed media operators commissioned by the 2nd Respondent to operate and manage billboard advertising sites in the city of Petaling Jaya.

The 1st Respondent was the President of Majlis Perbandaran Petaling Jaya (MPPJ), which is the 2nd Respondent, being the local authority for the city of Petaling Jaya under the Local Government Act 1976 (the Act). As the local authority, the 2nd Respondent administer the running of the city of Petaling Jaya. The 2nd Respondent is now known as the Majlis Bandaraya Petaling Jaya (MBPJ).

In 2003, the Sports Club, which was a registered society under the Societies Act 1966 and operated under the auspices of the 2nd 5 Respondent, was given the sole right and license to manage the billboard sites. The purpose of the aforesaid right is to provide a mechanism for the Sports Club to raise funds so that it could carry its activities.

With the acquired sole right to manage the advertising sites, the Sports Club entered into written agreements with the respective media operators whereby the relevant Billboard Licensed Fees of the 2nd Respondent would be paid to the 2nd Respondent on behalf of the Sports Club with an additional amount to be paid to the Sports Club. The aforesaid payments are the consideration payable by the licensed media operators for their rights to use the advertisement sites. The additional amounts to be paid to the Sports Club was the product of the mechanism put into place by the 2nd Respondent to allow the Sports Club to generate fund so that it could carry out its activities. It is not disputed that these additional amounts can come in the form of monetary payment or in kind. 6

The sponsorship amounts for the licensed sites were paid to the Sports Club account and not paid to the designated Local Authority Fund of the 2nd Respondent under the Act.

However, sometime in 2005, the Sports Club and the 2nd Respondent had great difficulty in recovering the consideration due under the Sports Club agreements due to the fact that the Sports Club did not have the requisite man power to effectively manage and administer the advertisement sites.

To overcome this collection difficulty, the 2nd Respondent in 2005 decided to privatize the Billboard Advertisement Scheme and in doing so, the 2nd Respondent called for tenders. The Appellants were one of the three tenderers in the privatization exercise. It is from this privatization exercise that the legal suit of the Appellants stems from. The Appellants fashioned their claims in the Re-Amended Statement of Claim as follows: “11. In late 2005, the 1st Defendant on behalf of MPPJ as part of a privatization scheme invited 3 Licenced Media Operators, consisting of Seni Jaya, Big Tree Sdn. Bhd. and one Kurnia Outdoor Media Sdn. Bhd. (‘Kurnia Media’) to 7 submit tenders to provide integrated management services in respect of all the MPPJ Sites. The MPPJ Sites consisted of the following:

(i) 172 specified MPPJ Sites in Petaling Jaya identified by MPPJ itself (‘Package A Sites’); and

The company whose tender was accepted would :

(i) manage and/or administer the MPPJ Sites;

It is the contention of the Appellants that their tender for the Billboard Privatization Scheme had been successful resulting in an agreement with the 2nd Respondent on the following terms as set out in the Re-amended Statement of Claim: 8 “14 At the invitation and on the inducement of the 1st Defendant, Seni Jaya and Orion Mesra jointly submitted a proposal for the Billboard Privatisation Scheme to MPPJ on 14.12.2005 in accordance with the terms as stipulated by the 1st Defendant, for the exclusive management and operation of the Package A and Package B Sites on terms (‘Proposed Billboard Privatisation Scheme’) which inter alia included the following express conditions:

(i) the Plaintiffs would be given a concession for the exclusive right to manage and operate the Package A and Package B Sites (‘the Concession’);

(a) to MPPJ, the MPPJ Billboard Licence Fees on an annual basis for all the Package A sites amounting to RM179,040.00 (‘Package A MPPJ Rates’); and

(b) to the Sports Club:

(i) a ‘one off’ payment of RM320,000.00 for Package A, payable upon MPPJ’s acceptance of the Proposed Billboard 9 Privatisation Scheme (‘Package A Initial Payment’); and

The Appellants premised their case heavily on the letter dated 16.12.2005 signed by the 1st Respondent. They pleaded as follows: “In response to the Proposed Billboard Privatisation Scheme of the Plaintiffs, the 1st Defendant on behalf of MPPJ by letter dated 16.12.2005 agreed ‘in principle’ to give the Concession to the Plaintiffs, to manage and operate the outdoor advertising sites in areas under the control and jurisdiction of MPPJ, save for the sites adjacent to the Sprint Highway, Lebuhraya Damansara Puchong, New Klang Valley Expressway and Federal Highway (‘the Agreement’).” 10

In relying on the aforesaid letter, the Appellants made payment on the same day i.e. 16.12.2005 to the Sports Club of its entitlement to the one-off payment of RM320,000/- and the annual payment of RM1,780,000 amounting in total to RM2,100,000/-. The effect of these payments according to the Appellants is this:

“Acting on the faith and truth of the said representations of, and the Agreement with, the Defendant and being induced thereby, the Plaintiffs by letter of the same date (16.12.2005) to the 1st Defendants accepted the grant by the 2nd Defendants of the Concession. Pursuant to the Agreement reached between the parties, the Package A Initial Payment of RM380,000.00 and Package A Annual Payment of RM1,780,000.00 (collectively referred to as the ‘Package A Payment’) stipulated in the Proposed Billboard Privatisation Scheme, which amounted to the sum of RM2,100,000.00 was paid by the Plaintiffs to the Sports Club on 16.12.2005. The sum of RM2,100,000.00 was received by the Sports Club for and/or on behalf of MPPJ.”

Premised on the contention that there has been a concluded agreement between the Appellants and the 2nd Respondent, they launched this legal suit in 2017 claiming for specific performance of 11 the alleged concession agreement or in the alternative for damages against the 2nd Respondent.

High Court After a trial, the High Court dismissed the Appellants/plaintiffs’ suit holding, inter alia, that the Sports Club could not lawfully be an agent of the licensing functions of the 2nd Respondent and that no contract had come into being with the Appellants and that even if there was at all a contract it was void for illegality. The 1st Respondent did not enter appearance personally and hence was unrepresented throughout the trial and the appeal.

Court of Appeal The Court of Appeal affirmed the decision of the High Court on the ground that no binding agreement had been concluded between the Appellants and the 2nd Respondent. 12 Our grounds of decision Was there a Concluded Contract?

It is undisputed between the parties that the first issue which we have to deal with or deliberate on is simply “whether there was a concluded contract between the Appellants and the 2nd Respondent”. The leave questions in our view would only become relevant and contentious issues in the whole scheme of things if we find that there was indeed a concluded contract. As correctly pointed by the learned counsel for the 2nd Respondent, the Appellants had sought an order of specific performance ‘of the Agreement’ to award the Billboard Privatization Scheme as a concession to the Appellants.

What amounts to a concluded contract is a matter of fact and law. The law is as prescribed in section 7(a) of the Contract Act 1950 which reads as follows: “7. Acceptance must be absolute In order to convert a proposal into a promise the acceptance must –

(a) be absolute and unqualified;” 13

What section 7 (a) says is simply this. For any concluded agreement to come into existence there must be a clear and definite offer by the proposer and an “absolute and unqualified” acceptance of the same by the offeree. The phrase “absolute and unqualified” is critical in that any acceptance coupled with any condition can never be a “absolute and unqualified” acceptance. It must be absolute in that all terms set out in the offer must be accepted. It must be unqualified in that acceptance attached with condition is a qualified acceptance. Once such conditional acceptance is on the negotiating table so to speak, the parties are simply back to the negotiating mode as there is now a counter offer by the offeree which in effect rejects the proposal. Withdrawal of the conditional acceptance per se would not revive the original offer. Only an absolute and unqualified acceptance of the counter offer by the proposer will there be a concluded contract between the proposer and offeree.

As to what should be the approach to employ in unraveling the factual matrix to determine whether parties had reached consensus ad idem 14 on the terms, the Federal Court in Deutsche Bank (M) Bhd v MBf Holdings Bhd & Anor [2015] 8 CLJ 1068, reasoned that that question "could only be gleaned from the mandate letter, the emails/letters and conduct of the parties" and "not on the subjective mind, but upon a consideration of what was communicated between them by words or conduct... from the perspective of the notional reasonable man." In other words, the test is an objective one.

A similar approach was in fact applied in an earlier Supreme Court decision in Ayer Hitam Tin Dredging Malaysia Bhd v. YC Chin Enterprise Sdn Bhd [1994] 3 CLJ 133 where Edgar Joseph Jr SCJ opined as follows: "The authorities show that such inference must be drawn from the language the parties have used, their conduct, regard being had to the surrounding circumstances, and the object of the contract. In other words, in its task of ascertaining the intention of the parties, the Court will, generally speaking, apply an objective test, more particularly, it will ask itself, what would the intention of reasonable man be, if they were in the shoes of the parties to the alleged contract." 15

With the above guidelines at the foremost of our minds, we now apply the same to the factual matrix herein. Learned counsel for the Appellants in advancing his contention that there is a concluded contract between the Appellants and the 2nd Respondent relied in our view on the following events:

(a) The Appellants’ proposal dated 14.12.2005 in which the following terms, in the words of the learned counsel, were offered:

(i) A concession was to be granted by MBPJ to Seni Jaya and Orion Mesra for exclusive rights to manage all outdoor advertising sites in Petaling Jaya, excluding sites within ROW (Right of Way) of the Sprint, LDP, NKVE and Federal Highways;

(v) On or before 1.1.2006 MBPJ was to deliver the 172 Packages A Sites to Seni Jaya and Onion Mesra;

(a) To MBPJ, payment of the licence fees for all the Package A and Package B sites, on annual basis;

(b) To the Sports Club, a one-time payment of RM320,000.00 in consideration for Package (Package A Initial Payment);

(c) Also to the Sports Club, an annual payment of RM1,780,000.00 for the 172 Package A Sites computed as follows (Package Annual Payment).

(d) Annual Payments to the Sports club for all the Package B Sites at the 17 same rates as in Paragraph © as applied for 172 Package A sites.

(b) MBPJ’s letter of Seni Jaya’s proposal agreed in principle dated 16.12.2005.

(c) Seni Jaya’s payment to the Sports Club totaling RM2.1 million and Orion Mesra also undertook to carry out all maintenance works in respect of the Package A and Package B sites, throughout the 15 to 20 years concession period.

(d) The Board meeting of the 2nd Respondent dated 22.12.2005.

(e) Confirmation letter dated 21.3.2006 by the 2nd Respondent.

(f) Meeting of Councilors of the 2nd Respondent dated 31.5.2006.

Letter dated 16.12 2005 As much reliance is made on the letter of 16.12.2005 by the Appellants, a detailed analysis of the same must be made by us and we do so by setting out the same in full here: 18 “Pengurusan dan Operasi Papan Iklan Luar (Outdoor Advertising) di kawasan MPPJ Dengan hormatnya saya merujuk kepada surat tuan bertarikh 14 Disember 2005 berkenaan perkara tersebut diatas. Pihak MPPJ Jaya secara prinsipnya bersetuju memberi konsesi kepada syarikat tuan di dalam pengurusan dan operasi papan iklan luar di kawasan MPPJ kecuali kawasan-kawasan ROW lebuhraya Sprint, LDP, NKVE dan lebuhraya persekutuan dan lain-lain tempat yang dipersetujui oleh kedua-dua pihak.

Perkara-perkara penting dan utama yang dikemukakan oleh pihak tuan di dalam surat tersebut akan diteliti oleh pihak kami dan akan dibincangkan dengan pihak tuan secepat mungkin. Sgd. Yang Dipertua Majlis Perbandara Petaling Jaya [emphasis ows]

Though the words “agreed in principle” were used in the letter dated 16.12.2005, they must be considered in the context of the entire letter. The proposal made by the Appellants was not short in details and it is glaring in the response made by the 2nd Respondent, there 19 was no reference to any of the proposed terms. In fact, in the second paragraph of the letter, it states in no uncertain terms that important terms and conditions (‘perkara-perkara penting dan utama’) will be discussed between the respective parties. With respect, how one can treat that as an absolute and unqualified acceptance is beyond us. It is at best a qualified or conditional acceptance which in law is in effect a rejection.

Learned counsel for the Appellants, however, submits that the factual matrix, despite the lack of a formal executed agreement, had given rise to a binding contract. With respect, we find no merit in such contention and our reasons are these. Firstly, the proposal submitted by the Appellants envisaged a 15 to 20 years monopoly in the use of the numerous advertising sites in the city of Petaling Jaya which would involve matters such as concession payments, approvals from numerous regulatory bodies, location of advertisement sites, delivery dates and plus the fact that many of the sites of which the Appellants are claiming exclusive or monopoly rights by the concession are sites claimed by licensed third parties. Surely the rights of these third parties must be settled or taken care of between the relevant third 20 party and the 2nd Respondent before the 2nd Respondent can agree to anything. It is not insignificant that the proposed clause 5.1.6 of the draft agreement put forth by the Appellant provides that the 2nd Respondent “upon expiry of the Third Party Permits, not to extend or renew such Third Party Permits under any circumstances”. Such onerous term has great ramifications to the 2nd Respondent and we are sure that it had been fully advised on those ramifications which could include legal suits from the relevant third party or at best compensations to be paid to the relevant third party. No reasonable enterprise would agree to such onerous term unless and until the full ramifications are known to it. With respect, the Appellants’ solicitor’s contention that all the terms had been agreed to by the 2nd Respondent is bereft of any evidence, written or otherwise. It is also bereft of any commercial sense.

Secondly, there was in fact a proposed agreement between the Appellants and 2nd Respondent and that, in itself, as pointed out by learned counsel for the 2nd Respondent, ran into 37 pages and contained numerous terms of detailed and far-reaching effect. A cursory look at that document would show that the terms proposed 21 are complex to say the least and would require well trained commercial legal adviser to give proper advice as it involved the capacity of the 2nd Respondent, being a statutory body, to enter into business relationship with commercial enterprises. This was correctly picked up by the Legal Department of MBPJ where its Legal Advisor at a council meeting dated 22.12.2005 expressed his reservation: “iv. …Penasihat Undang-undang Majlis memberi komen bahawa keputusan kepada Perkara 20.5 adalah bertentangan dengan undang-undang. MPPJ tidak boleh menswastakan tapak 172 kepada 2 syarikat dengan menandatangani perjanjian kerana MPPJ adalah bukan tuan punya tanah atas tapak iklan berkenaan, MPPJ tiada ‘Locus Standi’.”

Thirdly, the 2nd Respondent is a statutory body and it is plain as day light that for the 2nd Respondent to enter any commercial transaction of such a nature, like any private commercial entity, it would require an appropriate approval in a form of minutes of council meetings. We see no such written approval by the 2nd Respondent. The lack of such written consent basically shows that it had not or could not agree to the proposal put forth by the Appellants. 22

Fourthly, simple common-sense dictates that no reasonable person or commercial enterprise would be bound by such a loose arrangement as that advanced by the Appellants’ counsel when the business relationship encompasses a monopoly of some 15 years of unlimited use of advertising sites and involves quite a substantial amount of monetary consideration.

Fifthly, as rightly pointed out by learned counsel for the 2nd Respondent, if there was indeed a concluded contract there was no necessity for the 1st Appellant by a letter dated 26.5.2006 to protest the failure of the 2nd Respondent to reply on the proposed changes. Such protestation simply infers that there was no concluded contract until a formal agreement was executed by respective parties.

In regard to the payment of RM2,100,000.00 to the Sports Club by the Appellants, it is a matter between the Appellants and the Sports Club as we find no evidence to link that payment to the alleged concluded contract between the respective parties. At best, the payment was made on the hope that there will be a concluded contract between the Appellant and the 2nd Respondent. Hope plus 23 payments to a third party in the circumstances could not be equated to a concluded contract. Again, if that payment is part of the consideration to the proposed agreement, surely mention must be made of that consideration in the proposed agreement sent to the 2nd Respondent to consider. It simply does not make sense not to mention that RM2.1 million consideration in the proposed agreement. We agree with learned counsel for the 2nd Respondent that the Appellants made the fatal risk in not naming the Sports Club as a party to the suit to advance their contention that the Sports Club is an agent to the 2nd Respondent.

As we have found that there is no concluded contract, we do not find it necessary to deliberate on the leave questions. We are fully aware that the questions posed are questions where leave had been granted by this Court. Be that as it may, this Court continues to have the discretion whether to answer those leave questions especially when answering them becomes an academic exercise. (see Sri Kelangkota-Rakan Engineering JV Sdn Bhd & Anor v Arab-Malaysian Prima Realty Sdn Bhd & Ors [2003] 3 CLJ 349) 24

Conclusion What the High Court and the Court of Appeal had done was merely to apply the right law to the factual matrix to the same. From our analysis, no one can say that their conclusions were conclusions which no reasonable tribunal would arrive at. Their reasonings were premised on established evidence adduced in Court and consistent with both common and commercial sense. What that simply means, no appellate intervention is warranted by this Court.

Accordingly, we dismiss the appeal with costs in the sum of RM50,000.00 subject to payment of allocator fees. We also order that deposit be returned to the Appellants. Dated: 21 November 2018. -sgd- (DAVID WONG DAK WAH) Chief Judge of Sabah and Sarawak 1st and 2nd Appellant : Muhammad Shafee Abdullah With him Sarah Abishegam & Wee Yeong Kang 25 2nd Respondent : Cyrus V. Das With him Kamaruzaman M. Arif & Sofiah Omar Messrs. Kamaruzaman Arif, Amran & Chong Notice: This copy of the Court's Reasons for Judgment is subject to formal revision.