Soon Hoe Chuan v Glomac Berhad (W-02(NCvC)(W)-2115-12/2023)

This appeal is concerned with the legal effect of a letter of appointment (“LOA”) issued by the Appellant, pursuant to which he claims contractual remuneration arising from his engagement in relation to a proposed joint venture development. The Respondent resists the claim on multiple grounds, contending, inter alia, that the LOA is invalid by reason of its reference to a non-existent meeting, that it is incapable of binding the Respondent insofar as it purports to appoint the Appellant as chief executive officer of a separate corporate entity, and that the director who accepted the LOA on behalf of the Respondent lacked the requisite authority.

Having considered the evidence and submissions, we are satisfied that the LOA constituted a valid and binding agreement. The reference to a meeting which, on the evidence, did not in fact take place does not, in the circumstances, vitiate the agreement, being no more than a non-essential recital. Further, notwithstanding that the LOA envisaged the Appellant’s appointment in relation to a subsidiary of the Respondent, the acceptance of its terms by the Respondent’s director gave rise to binding obligations on the part of the Respondent. In the absence of any evidence to the contrary, and in particular the failure to call the said director to testify, we are entitled to infer that he possessed the requisite authority to bind the Respondent.

That said, we are equally satisfied that the LOA was subsequently discharged by frustration. The supervening receivership of the landowner brought an end to the contemplated joint venture, and the Respondent’s subsidiary thereafter undertook a fundamentally different and substantially enlarged development on its own account. This constituted a radical change in the nature of the contractual adventure, such that the obligations undertaken under the LOA can no longer be said to subsist.

Accordingly, while we affirm the validity of the LOA at its inception, we hold that it was discharged by frustration upon the occurrence of the supervening events.

We therefore dismissed the Appellant’s appeal with costs fixed at RM50,000.00 subject to allocator.

In 2003, Glomac Alliance Sdn Bhd (“GASB”), a wholly owned subsidiary of the Respondent, entered into a joint venture agreement dated 17.1.2003 (“JVA”) with one Score Option Sdn Bhd (“SOSB”) to undertake a residential development on a 90- acre piece of land (“the JV Project”). The 90-acre land was part of a larger piece of land measuring about 200 acres held and owned by SOSB.

In August 2006, SOSB defaulted its loan repayment to Maybank Banking Berhad (“MBB”) which constituted a breach of the terms of the JVA. When SOSB failed to remedy the breach, GASB commenced a suit against SOSB seeking specific performance requiring SOSB to sell the JV Project land, or damages in lieu.

While the suit was pending, MBB exercised its right against SOSB to appoint Receivers and Managers (“R&M”) who upon their appointment took possession and control over SOSB’s entire 200-acre land. The R & M then put up the 200-acre land for sale by public tender.

GASB subsequently succeeded in its bid to purchase the 200- acre land from the R& M vide a sale and purchase agreement dated 21.1.2011 (“the SPA”).

At the time of the SPA, only Phase 1 of the originally planned JV Project, comprising approximately 9 – 10 phases altogether, had been commenced and completed. In fact, there was no construction activity during the period from 2008 to 2012.

As the new landowner, GASB had proceeded on a solo venture to develop a comprehensive township on the 200-acre land.

In May 2020, the Appellant filed the present suit in the High Court against the Respondent, claiming his alleged fees and profit share for the comprehensive township developed on the 200-acre land by GASB. In the action, the Plaintiff disclosed for the first time a letter dated 19.10.2004 that purportedly appointed him as the Chief Executive Officer (“CEO”) of GASB effective 13.10.2004 (“the LOA”).

The LOA, containing the terms of the Appellant’s appointment, was written by the Appellant and confirmed by one Datuk Richard Fong, a director of the Respondent and GASB at the material time. The Respondent disputed the validity of the LOA.

According to the Respondent, sometime in October 2004, GASB appointed the Appellant as an executive director. The Appellant subsequently resigned from his position as director about 6½ years later, in April 2011. Thereafter, GASB appointed the Appellant as its advisor until 2019. During the Appellant’s tenure as an executive director of GASB and thereafter as its advisor, the Appellant was paid RM10,000.00 per month.

On the other hand, the Appellant claims that he was and still is the CEO of GASB. More specifically, that, inter alia: a) His appointment was effective from 13.10.2004 until completion of the development of the 90-acre land under the joint venture with SOSB; b) His fees shall be 1.5% of the Gross Development Value (gross sale value) of the development; c) His payment term of a monthly advance sum of RM10,000.00 until the commencement of the project sales launch and payment received from purchasers. These advance payments shall be deducted from the total fees for the project.

The Appellant claims that he has been deprived of his agreed remuneration for his 13 years of commitment in which he has overcome physical challenges over the project, overcome the collapse of the joint venture of which the Respondent’s subsidiary was a joint venture party and achieved a profit of approximately RM108 million for the years from 2010 to 2019 for the Respondent via its subsidiary.

The Appellant in his Statement of Claim sought the following from the Respondent: a) the sum of RM5,301,901.00 being the balance management fee; b) the sum of RM11,470,070.00 being his purported 70% share of the profits; c) professional fees at the rate of 1.5% of the Gross Development Value received by the Respondent or GASB from 14.6.2019 to the date of the writ; d) an order for 30% of the 20% profit sharing on the profit in excess of Phase 1-7 of RM43,000,000.00 (or alternatively, RM56,700,000.00) made by GASB (alternatively the Respondent and GASB) in respect of the project to be held on trust in favour of the Appellant pending withdrawal of profit from the housing development account (HDA); e) a declaration that the Appellant is entitled to professional fees at 1.5% GDV and profit share at 20% for all profit in excess of Phase 1-7 of RM43,000,000.00 (or alternatively, RM56,700,000.00) made by GASB (alternatively the Respondent and GASB) in respect of the project; f) an account of sales values and profits in respect of the entire project; g) an order for payment of the profit share and professional fees pursuant to the said account; h) interest; i) costs.

The learned High Court Judge found that the LOA did not confer on the Appellant a valid position as CEO of GASB. There was no evidence that GASB had requested the Respondent to appoint a CEO on its behalf.

The learned High Court Judge also held that since it was the Appellant’s contention that the LOA was approved and accepted by Datuk Richard Fong, the onus was on the Appellant to call him as a witness and accordingly, no adverse inference was invoked for the Respondent’s failure to call Datuk Richard Fong to testify.

Further, the learned High Court Judge held that even if the LOA was valid and enforceable, the joint venture had come to an end when SOSB was placed under receivership.

Accordingly, the Appellant’s claim was dismissed with costs fixed at RM80,000.00.

In this appeal, the parties raised the following issues for this Court’s consideration: a) whether the LOA is invalid as it refers to an agreement being reached at a non-existent meeting; b) whether the Appellant’s appointment breached the doctrine of separate legal entity in that the Respondent, a third party, had purported to appoint the CEO of GASB, its subsidiary; c) whether Datuk Richard Foong had the authority to agree to the LOA on behalf of the Respondent; d) whether the LOA was discharged by frustration when SOSB went into receivership, and GASB embarked on the comprehensive township development of the 200-acre land on its own.

Each of these issues will be considered in turn. Whether LOA is invalid for a non-existent meeting

The LOA, which is written by the Appellant to the Respondent, attention to Datuk Richard Fong, bears the caption “Appointment as Chief Executive Officer of Glomac Alliance Sdn Bhd”. Its introductory paragraph states as follows: ‘With reference to the meeting on 12th October 2004 with Dato’ FD Mansor, your goodself, FD Iskandar and myself, I wish to thank you for the agreement to appoint me as the CEO to head Glomac Alliance Sdn Bhd”. [emphasis added]

There is no dispute that there was no meeting on 12.10.2004 among the parties referred to in the aforesaid LOA. Based on the premise that the Appellant’s purported appointment as the CEO of GASB was stated to have been made at the said meeting, it was contended that such an appointment under the LOA could not be valid as the said meeting never took place. In other words, there was never an agreement reached to appoint the Appellant as CEO of GASB in the first place.

On this issue, we find that even though there was no meeting on 12.10.2004 as stated in the LOA, nevertheless, the terms of the Appellant’s appointment as the CEO of GASB were sufficiently and clearly stated in the LOA, and these terms had been duly agreed by the Respondent, through Datuk Richard Fong. More specifically, right at the bottom of the LOA, Datuk Richard Fong had confirmed his acceptance of the terms on behalf of the Respondent when he placed his signature below the following sentence: “We, Glomac Berhad, hereby agree to the appointment of Mr Soon How Chuan on the above mentioned terms and conditions.”

The aforesaid, acknowledged and confirmed the Appellant’s appointment by the Respondent to act as GASB’s CEO based on the scope of work, remuneration package and payment terms set out in the letter. The fact that the LOA refers to a non-existent meeting does not at all invalidate the LOA. We hold that an erroneous reference to a meeting that never existed has no bearing when the stipulated operative terms of the LOA have been expressly accepted by the parties.

In this regard, the Respondent had failed to call Datuk Richard Fong, who had accepted the LOA on its behalf, to testify to dispute the validity of the LOA. Datuk Richard Fong is a key and material witness on the appointment of the Plaintiff, on the formation of the contract, his authority, and the intention of the parties. As a director of the Respondent, it was wholly within the Respondent’s powers and control to procure him to testify. His absence as a witness gives rise to an adverse inference that his evidence would not have assisted the Respondent’s case.

In this regard, we would respectfully disagree with the learned High Court Judge that, because it was the Appellant’s case that the LOA was accepted by Datuk Richard Fong, the burden rests with the Appellant to procure his attendance to testify. Whilst it is correct that the Appellant bears the legal burden to prove the existence and the validity of the LOA and that Datuk Richard Fong had accepted the terms therein, the Appellant had discharged his evidential burden once the authenticity of the LOA and Datuk Richard Fong’s signature were proven or accepted. There was no dispute that Datuk Richard Fong was a director and Vice Chairman of the Respondent and that by the terms of the acknowledgment, he was acting on behalf of the Respondent.

The evidential burden then shifted to the Respondent to dispute the authenticity of the LOA and the acceptance of its terms therein. As a director and Vice Chairman of the Respondent, the Respondent was in a position to produce Datuk Richard Fong to dispute and or rebut the Appellant’s contention. Even though the Appellant bears the legal burden of proof, the Respondent cannot avoid an adverse inference by withholding its own key witness after the Appellant had discharged his initial evidential burden.

Accordingly, we see no merit in the Respondent’s contention that the LOA is invalid on the ground that the meeting of 12.10.2004 is non-existent. The fact that the LOA was only disclosed belatedly and was countersigned by Datuk Richard Fong who is alleged to be the Appellant’s business partner does not make the LOA a sham once the authenticity of the document is established and the acceptance of the contents not rebutted. Whether the LOA is invalid because it purports to appoint a CEO for GASB

The contention is that the Appellant was appointed as the CEO of GASB, not by GASB itself but by the Respondent unilaterally. The Respondent submitted that the power to appoint a CEO by a company rests entirely in the hands of the company itself and no external party, including the company’s parent company, can appoint a CEO on its behalf without its consent and in accordance with its internal constitution.

In this case, the LOA was a contract where the Respondent appointed the Appellant as the CEO of GASB. In our view, even though GASB and the Respondent are strictly speaking two different and separate entities, there is in principle nothing wrong for the Respondent to appoint the Appellant as the CEO of GASB for its benefit. The contract was between the Appellant and the Respondent and not between the Appellant and GASB at all.

This is clear as the Plaintiff was paid by the Defendant the sum of RM1,331,619.10 during the period from November 2004 to August 2019.

There is no quarrel that a consideration in a contract need not benefit the promisor. The promisee may provide consideration by conferring a benefit on a third party at the promisor’s request.

Accordingly, the fact that GASB and the Respondent are two separate and independent entities is irrelevant to the validity or otherwise of the LOA.

The Respondent pointed to the fact that in GASB’s Board of Directors’ circular resolution dated 20.10.2004, the Appellant was appointed as an additional director of GASB until he resigned as a director on 29.4.2011. We find that this fact, instead of contradicting the LOA, suggests that GASB itself had accepted the Appellant’s appointment under the LOA. The timing of the circular resolution which was issued almost immediately after the LOA was accepted lends support to the LOA. Further, the fact that the Appellant himself had resigned as a director of GASB not long after the SPA was signed shows that the Appellant had accepted that the joint venture with SOSB which was the subject matter of his scope of works had come to an end.

We note that in the aforesaid GASB’s Board of Directors’ circular resolution, the Appellant was described as “executive director” and not “chief executive director’. To our mind, the description of the Appellant as “executive director” is not inconsistent with the LOA appointing him as the Chief Executive Director. The law recognizes “directors” and not “CEO” as a separate legal category. A director who assumes the role of CEO is one who not only sits on the Board of Directors but is empowered with enhanced managerial authority derived either from the delegation of powers by the Board of Directors and or pursuant to a letter of appointment.

Accordingly, we also find separately that GASB had also accepted the Appellant’s appointment under the LOA. Datuk Richard Fong’s authority to accept the LOA on Respondent’s behalf

The next question is whether Datuk Richard Fong had the authority to bind the Respondent when he accepted the terms of the LOA on behalf of the Respondent.

In this regard, there is no dispute that Datuk Richard Fong was at the material time a director and the Vice Chairman of the Respondent. As a director and Vice Chairman of the Respondent, Datuk Richard Fong would have actual or, at the very least, ostensible authority to accept and agree to the terms of the Appellant’s appointment as GASB’s CEO under the LOA.

More importantly, there is no evidence at all before the Court that the Respondent had questioned Datuk Richard Fong’s authority to accept the terms of the LOA on its behalf. Again, Datuk Richard Fong himself did not testify to refute his own authority to accept the terms of the LOA on behalf of the Respondent. No valid explanation was proffered for his absence, and by reason thereof, section 114(g) of the Evidence Act 1950 can be invoked to raise an adverse inference against the Respondent.

Section 114(g) of the Evidence Act 1950 permits the Court to presume that evidence that could and should be produced would, if produced, be unfavourable to the party withholding it. In this case, the Respondent had proffered as an excuse for not calling Datuk Richard Fong that he was the Appellant’s business partner and would not be an impartial witness. With respect, the contention that a witness may be bias is not a valid justification for not calling him. Biasness goes to the issue of weight and not admissibility. The Court cannot accept the excuse that “we didn’t call him because he might not support us” to avoid an adverse inference being invoke. On the contrary, that is precisely when the inference is strongest.

Datuk Richard Fong had countersigned the LOA and accepted the terms thereunder on the Respondent’s behalf. The dispute is directly about the validity and authority to accept the LOA. His evidence is material, there is no evidence he is truly unavailable or that his evidence would be merely cumulative. As a director of the Respondent, he is also within the Respondent’s control to testify. Therefore, an adverse inference should be invoked in the circumstances.

In the premises, we find that Datuk Richard Fong had the requisite authority to accept the terms of the LOA on behalf of the Respondent. Whether the LOA was discharged by frustration

Under Davis Contractors Ltd v Fareham UDC [1956] AC 696, frustration arises where the supervening event renders the obligation “radically different from that which was undertaken”. The obligation must not be merely more onerous, but it has become a different contractual adventure altogether. Lord Radcliffe puts it in the following manner at p. 728-729 of the judgment: “So perhaps it would be simpler to say it at the outset that frustration occurs when the law recognizes that without default of either party a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract. Non haec in foedera veni. It was not this that I promised to do”

In the present case, the LOA expressly tied the Appellant’s role and scope of services to a joint venture with SOSB, confining to the residential development within the 90-acre land. The Appellant’s remuneration package was structured around that specific joint venture project. However, when SOSB came under receivership, the subject matter or joint venture of the Appellant’s scope of services under the LOA ceased to exist. This was because the counterparty to the joint venture, SOSB was no longer capable of proceeding with the project and instead of GASB developing the residential property on the 90- acre together with SOSB, GASB had to develop the entire 200- acre land as a comprehensive mixed township development on its own.

SOSB’s receivership was unforeseen and had occurred through no fault of the Respondent. When SOSB’s entire 200-acre land was sold via tender, the original joint venture structure between SOSB and GASB ceased to exist. In other words, the foundation of the Appellant’s scope of services under the LOA had disappeared.

Significantly, when GASB successfully tendered for the 200- acre land and decided to go solo to develop the same as a comprehensive mixed township development, this was an entirely new project, involving different scale, risks, cost structure and commercial venture. In fact, the new development was not just ‘bigger’, it was qualitatively different. It was infrastructure-heavy in respect of roads, utilities and amenities, it was phased over a longer period, it involved mixed-use and not purely residential and undoubtedly needed greater capital exposure and financing complexity. The new project called for different costs structures, margin dynamics and risks horizons.

As the landowner, GASB had to assume the responsibilities and obligations to low-costs construction and common facilities and infrastructure. It also needed to shoulder third party claims in respect of abandoned development on the larger 200-acre land. The commercial foundation of the bargain that was agreed upon in the LOA was very different and was calibrated based on a very different set of obligations arising from the limited residential development of the 90-acre land through a joint venture with SOSB.

The new time-line in completing the township carrying with it the phenomenal inflation in prices had resulted in the terrace houses in the subsequent phases being sold for approximately RM680,000.00 – RM937,000.00 as compared to the previously projected prices of RM300,000.00. Such increase in prices were never due to the Appellant’s contribution at all as the CEO appointed under the LOA. Further, the development of the LRT line near the GASB project also contributed to the increase of the Gross Development Profit to the township project. When the LOA was issued in 2004, there was no LRT line or LRT station near the 90-acre land planned for the joint venture.

In short, the new comprehensive township development for the 200-acre land was never within the purview of the LOA and the obligations were so radically different from what was originally undertaken that the LOA must be treated as frustrated and the parties discharged from their respective obligations arising from the supervening events of the receivership that had destroyed the foundation of the contract under the LOA. It would be unconscionable for the Appellant to be permitted to rely on the payment package and terms under the LOA to claim against the Respondent pegged on the much-expanded development which was never envisaged at the time of the LOA.

In the premises, we are unanimous in our decision that the Appeal is to be dismissed with costs fixed at RM50,000.00 subject to allocator. DATE: 10 APRIL 2026 -sgd-ONG CHEE KWAN JUDGE COURT OF APPEAL For the Appellant :

Kamraj Nayagam; and

Maya Gayathri. (Messrs Mah-Kamariyah & Philip Koh) For the Respondent :

Vijay Raj;

Ratha Govindasamy; and 3. Priyadiam Annadurai. (Messrs Skrine)