University of Malaya v FBSM Ctech Sdn Bhd (W-02(IM)(NCVC)-1693-09/2016)

1 DALAM MAHKAMAH RAYUAN MALAYSIA (BIDANG KUASA RAYUAN) RAYUAN SIVIL NO: W-02(IM)(NCVC)-1693-09/2016 ANTARA UNIVERSITY OF MALAYA (UNIVERSITY MALAYA MEDICAL CENTRE) … PERAYU DAN FBSM CTECH SDN BHD (CO. NO.: 115609-U) …RESPONDEN [Dalam Mahkamah Tinggi Malaya di Kuala Lumpur Saman No: 22NCVC-574-10/2015 Antara FBSM Ctech Sdn Bhd (Co. No.: 115609-U) …Plaintif

1. Dan University of Malaya (University Malaya Medical Centre)

2. Technitium Sdn Bhd (in liquidation) (Co. No.: 547516 – X) … Defendan-Defendan] 2 (An appeal against the decision of YA Dato’ Nik Hasmat binti Nik Mohamad J, High Court at Kuala Lumpur made on 17.08.2016) CORAM ROHANA YUSUF, JCA VERNON ONG LAM KIAT, JCA ZALEHA BINTI YUSOF, JCA JUDGMENT OF THE COURT [1] This appeal is lodged by the First Defendant UMMC against the decision of the learned High Court Judge at Kuala Lumpur, who had dismissed its application for striking out under Order 18 rule 19 of the Rules of Court 2012. We have heard the appeal and have allowed the appeal of the First Defendant for the claim of the Plaintiff against the First Defendant be struck out. [2] We note that the contractual relationship between the parties in this suit are these. The First Defendant UMMC, appointed the Second Defendant Technitium Sdn Bhd as the main contractor to supply, deliver, install, test and commission Total Hospital Information System (THIS) at University Malaya Medical Centre (UMMC). This was made pursuant to a written contract dated 08.04.2006 (the Principal Agreement). 3 [3] The Second Defendant subsequently appointed the Plaintiff FBSM Ctech Sdn Bhd, as its subcontractor pursuant to a Letter of Award dated 28.04.2006. Under this Letter of Award, a back to back payment arrangement was made between the Second Defendant and the Plaintiff where any payment due to the Plaintiff under the Letter of Award would only be paid to the Plaintiff, upon the Second Defendant’s receipt of payment from the First Defendant UMMC. [4] The Plaintiff subcontractor, thereafter entered into agreements with various other sub-contractors namely; IBA Health (Malaysia) Sdn Bhd, Agfa Healthcare Corporation, Century Software and, TOMMS, to undertake the performance under the Letter of Award. [5] The First Defendant UMMC, terminated the Principal Agreement with the Second Defendant as its main contractor by a letter dated 01.01.2010 which led to the termination of the Letter of Award by the Second Defendant with the Plaintiff subcontractor on 05.04.2010. [6] The Plaintiff subcontractor meanwhile filed a Civil Suit No. D- 22NCC-1017-2010 against the Second Defendant main contractor, for payment under the Letter of Award. The Plaintiff obtained judgment 4 against the Second Defendant which resulted in the latter’s subsequent winding up vide a winding up Order dated 18.6.2012. [7] The Plaintiff commenced this action against both the First Defendant UMMC as well as the Second Defendant, main contractor Technitium (in Liquidation). From the pleadings it appears that the claim made by the Plaintiff against the First Defendant is purely on the basis that the Plaintiff has obtained sanction to represent the Second Defendant to sue and recover monies payable by the First Defendant to the Second Defendant, then in liquidation. [8] The First Defendant UMMC filed an application in the High Court Enclosure 6, under Order 18 rule 19(b) and (d) of the Rules of Court 2012, to strike out the Plaintiff’s claim against it. The learned High Court Judge dismissed the application on the following grounds. According to Her Ladyship there was sufficient privity of interest between the Plaintiff and the First Defendant UMMC, following the First Defendant’s execution of the Principal Agreement with the Second Defendant; that the nexus and the parties’ privity of interest’ disclose some causes of action which raise questions fit to be decided in a full hearing. 5 [9] On appeal against that decision the First Defendant UMMC, raised two main grounds. First there is no privity of contract between the First Defendant UMMC with the Plaintiff and secondly the Liquidator of the Second Defendant cannot sanction the Plaintiff as a creditor, to initiate a legal action in its own name for or on behalf of the Company in liquidation. [10] We have examined closely the reason propounded by the learned trial Judge, at paragraph 6.4 where it was decided as follows: ‘6.4 Despite Plaintiff not being a party to the Principal Agreement, I find sufficient privity of interest between the Plaintiff and the 1st Defendant in the 2nd Defendant’s award of contract to the Plaintiff following the 1st Defendant’s execution of Principal Agreement with the 1st Defendant. The nexus and, parties’ privy disclose some cause of action and, raise question fit to be decided in a full hearing. The mere fact that the Plaintiff’s case is weak and, not likely to succeed at the trial is no ground for the Writ to be struck out summarily.’ [11] It is noted from the grounds of judgment that the learned trial Judge did acknowledge that there was no privity of contract between the First Defendant and the Plaintiff. However, despite that finding the learned Judge proceeded to hold that there was ‘sufficient privity of interest’ between them. Her Ladyship found the Second Defendant’s 6 subcontracting the contract to the Plaintiff, following the First Defendant’s execution of Principal Agreement with the Second Defendant had created a relationship between the First Defendant UMMC with the Plaintiff. In short the learned Judge said because the Plaintiff and Technitium (Second Defendant) signed their subcontract after Technitium signed the Principal Agreement with the First Defendant, there somehow arose ‘privity of interest’ between them. [12] The reasoning by the learned trial Judge is contradictory to the settled legal position and the concept of privity of contract. The trial Judge had misapprehended what ‘privity of interest’ is and had assumed that it is somehow related to ‘privity of contract’. The phrase ‘privity of interest’ is a term of art used in relation to res judicata in order to consider whether the issues raised or the matters dealt in one case previously, binds a litigant in another case. That kind of litigant in a case, normally has a privity of interest with the previous issue of case which may invite the application of res judicata (see Nadarajah Konthandapany & Anor v N. oothaya Suriyan Nadarajah; Vasu Karupiah (Interveners) [2016] 1 LNS 174; Tanalachimy a/p Thoraisamy & Ors v Jayapalasingam a/l Kandiah & Ors (sued as liquidators of the Great Alonioners Trading Corp Bhd) and another 7 appeal [2014] 4 MLJ 85, CA, Dato’ Sivananthan Shanmugam v Artisan Fokus Sdn Bhd [2015] 2 CLJ 1062, CA.) [13] To find that the phrase ‘privity of interest’ may create ‘some cause of action’ is not known in law. This term ‘privity of interest’ cannot alter the fact that there is no privity of contract between the two parties. It is also not clear what exactly the ‘some causes of action’ that Her Ladyship had in mind as it was not articulated in the grounds of judgment. In any case ‘privity of interest’ was not pleaded in the Statement of Claim and neither was it raised as a point of submission. It is trite that parties cannot raise issues which are not pleaded. [14] What we found clear is that there is no contractual nexus between the Plaintiff and the First Defendant. The relationship between the parties in this case in fact, is a classic example of a contractual arrangement, where the employer appointed the main contractor, and the main contractor appointed a subcontractor to undertake a particular project of the employer. The contractual relationship are normally defined separately as between the employer and the main contractor, and the main contractor with its subcontractor. 8 [15] Since privity of contract clearly applies only as between the First Defendant with the Second Defendant as the main contractor, unless the main contractor had assigned, novated, or sold its chose in action to the Plaintiff, it cannot sue in its own name for and on behalf of the Second Defendant. [16] There is nothing in the Statement of Claim which pleaded any assignment, novation or the transfer of a chose of action by the Second Defendant against the First Defendant to the Plaintiff. Neither is there a pleaded case which is premised on a transfer of beneficial or legal interest in its chose of action by the Second Defendant to the Plaintiff (see Housing and Development Board v Lee Sem Yoong Sdn Bhd [1987] 1 LNS 30, SC). As such, there is nothing that can confer any authority on the Plaintiff to pursue any claim on behalf of the Second Defendant against the First Defendant. [17] The learned High Court Judge had further decided that – ‘As to the issue of whether the Plaintiff can be validly given the sanction by the 2nd Defendant’s liquidators to commence legal proceedings on its behalf, the asset and liability of a limited company vest in the liquidators upon its liquidation. Accordingly, the sanction is well within the 2nd Defendant’s 9 liquidators’ jurisdiction. In this respect, however, the Court is also empowered to provide sanction to authorize other person to institute action.’ Her Ladyship found that the Liquidator of the Second Defendant, is authorized to ‘sanction’ the Plaintiff which was a creditor that wound up the Second Defendant, to sue the First Defendant on its behalf in its own name. There is no law that says a Liquidator’s powers as contained in section 236 of the Companies Act 1965 can allow a liquidator to ‘sanction’ a creditor to take out and action for and on behalf of a wound up company (see Section 236(3) of the Companies Act 1965). In this regard we found the learned trial Judge had failed to appreciate what sanction is, and the ambit of a liquidator’s powers under the Companies Act. [18] The Plaintiff sought to rely on the Federal Court decision in Zaitun Marketing Sdn Bhd v Boustead Eldred Sdn Bhd [2010] 3 CLJ 785 to justify that it can sue the First Defendant. Zaitun Marketing (supra) however, is a case decided on a completely different point. It was held in that case that a liquidator did not have to first obtain authority from the Court or the committee of inspection, to exercise the powers to appoint a lawyer to initiate, continue or defend a claim under section 236(2)(a) of the Companies Act. It was not a decision on whether a private liquidator 10 can give sanction to a creditor to initiate a legal suit in its own name for and on behalf of the wound up company. [19] From the appeal records before us we find it plain and clear that the Plaintiff has no cause of action against the First Defendant as there is no privity of contract between them. The law relating to companies liquidation does not empower a liquidator to sanction any creditor to sue on behalf of a company in liquidation. For these reasons, we have no hesitation to allow the appeal by the First Defendant and make an order that the claim of the Plaintiff against the First Defendant should stand struck out. [20] We therefore allow the appeal of the First Defendant, and set aside the order by the learned trial Judge. Consequently, we allow the application of the First Defendant under Order 18 rule 19 of the Rules of Court. Hence, the claim by the Plaintiff against the First Defendant is struck out. -signed-ROHANA YUSUF Judge Court of Appeal Malaysia Dated: 17 April 2018 11 Counsel for the Appellant: Fahri Azzat and Nurul Rafeeza Hamdan Messrs. Fahri & Co. 15-2, Jalan PJU 7/16A Mutiara Damansara 47800 Petaling Jaya SELANGOR Counsel for the Respondent: Vincent Lim and Emily Wong Messrs. Dennis Nik & Wong No. 68-1, Jalan Telawi Bangsar Baru 59100 KUALA LUMPUR