W-02(W)-691-04/2015

At the High Court UEM Construction Sdn Bhd-party, saying if any liability is incurred, it should be borne by UEM by way of indemnity.

SSB as its name suggests, is a company manufacturing steel. It relies on TNB to supply the electricity in order to produce the steel. SSB claimed for seven days, 26.8.2008 to 1.9.2008, TNB failed to do that. As a result, SSB said it could not produce the steel and had incurred losses. In this respect, SSB said there is breach of contract between the two and negligence by TNB. Among others, SSB claimed RM 8,183,305.00 damages against TNB.

caused the failure of electricity to be supplied to SSB. TNB said the 5 electricity-supply to SSB had been affected by the construction works undertaken by UEM. UEM had caused electricity cables in carrying out the former works. TNB said that UEM agreed to build a temporary trench to protect the underground cables. This trench failed to be built by UEM.

TNB among others RM 2,402, 803.49 as special damages against UEM.

In turn, UEM said in performing its construction works, it had numerous discussions with TNB on how to protect the latter electricity - -in electricity cables and TNB was given the reports of these tests. TNB - the electricity cables and UEM took further precautions including works in protecting the underground electricity cables. UEM said it had done the works approved by TNB in protecting the electricity cables with due care. It had not been negligent in this regard and should not be liable for any claim arising from the loss of SSB.

The HC decided that TNB is liable in tort to SSB only for 50% damages, while the other 50% is to be borne by UEM. against UEM for damages was dismissed and the HC awarded damages 6 against TNB of only RM 4,000,000.00 to SSB instead of RM 8,183,305.00 as pleaded by SSB.

The HC decided to dismiss the claim based on contract by SSB against TNB but allowed the claim based on tort for negligence. The amount of RM 4,000,000.00 as damages awarded to SSB against TNB is for liability in tort under s. 74 Contracts Act 1950.

Dissatisfied with the decision of the HC, all three parties came before us for their respective appeals. The three appeals before us are as follows:

Appeal No: W-02(W)-628-04/2015 is decision:

that TNB is liable in tort to SSB and to pay RM 4,000,000.00

50% indemnity by UEM, as opposed to full indemnity: and

dismissal of its claim against UEM for cable damage claim;

Appeal No: W-02 (W)-691-04/2015 is SSB awarded by HC to SSB of only RM 4,000,000.00;

Appeal No: W-02(W)-761-05/2015 is finding of contributory negligence (50%) and the order to pay RM 2,000,000.00 to TNB. 7 Our Decision [9] First, there is no reason to disturb the decision of the HC in . SSB is satisfied with this decision as it did not appeal against the same. The issue therefore is res judicata. In fact, SSB in its written submission acknowledged that its appeal is only on quantum of damages awarded by the HC. The effect of a case which was not appealed is seen in Suruhanjaya Sekuriti Malaysia v Chan Soon Huat [2018] 9 MLJ 782 where it is said as follows: [139] The defendant also raised the issue that the plaintiff failed to plead the particulars who had communicated the inside information, how the defendant obtained this and what was the precise communication. This court as already ruled circumstantial evidence can be accepted with regard to the questions raised here. Besides these were the objections for an application filed by the by this court much earlier. There was no appeal against this decision. Hence, the matter is res judicata. [Emphasis Added] [10] On this note too, since the HC had dismissed TNB based on contract, the HC erred in allowing damages based on s.74 Contracts Act 1950.The HC had decided the contractual claim by SSB could not be sustained against TNB. Therefore it should not refer to that provision in allowing damages. This provision is only for compensation for loss or damage caused by breach of contract. It states as follows: S 74 Compensation for loss or damage caused by breach of contract

When a contract has been broken, the party who suffers by the breach is entitled to receive, from the party who has broken the contract, compensation 8 for any loss or damage caused to him thereby, which naturally arose in the usual course of things from the breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it.

Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach. [Emphasis Added] [11] This statutory provision must also not be used to award damages in tort. The above provision as shown, could only be used when there is contractual relationship. Thus, when the HC awarded damages based on this provision for tort against TNB for SSB, with respect, we are of the view that the HC had erred in doing so. [12] In addition, as indicated earlier, the amount of RM 4,000,000.00 as damages awarded by the HC to SSB against TNB is for liability in tort under s. 74 Contracts Act 1950. However, there is no explanation by the HC, even on how this amount is arrived at or how this was calculated. There is no oral or documentary evidence supporting this exact amount to be awarded as damages for SSB. [13] Further, for the claim by SSB in tort, it must prove damages it suffered by reason of the alleged negligence of TNB. However, the HC found that SSB had failed to prove damages in tort. The HC finding that SSB had failed to prove damages in tort for negligence is also seen through evidence in the HC. For instance, SSB said its damages is proven by the tonnage production records. However, it was never proven that these tonnage production records are the actual records of SSB. Neither was the maker of the documents supporting these records called to testify. 9 [14] In addition, SSB as the plaintiff claiming, has the burden to prove damages. On this point, Lord Goddard in Bonham-Carter v. Hyde Park Hotel [1948] 64 TLR 177 said: Plaintiffs must understand that if they bring actions for damages it is for them to prove their damage; it is not enough to write down the particulars and, so to speak, throw them a [15] In this regard, it is already explained that the HC found, based on evidence, that SSB did not prove damages on the claim in tort. There is no reason for us to disturb this finding of fact by the HC. In this respect, we note the Federal Court case of Ng Hoo Kui & Anor v Wendy Tan Lee Peng [2020] 10 CLJ 1 where it is held as follows: As long as the trial judge's conclusion can be supported on a rational basis in view of the material evidence, the fact that the appellate court feels like it might have decided differently is irrelevant. In other words, a finding of fact that would not be repugnant to common sense ought not to be disturbed. The trial judge should be accorded a margin of appreciation when his treatment of the evidence is examined by the appellate courts. [16] We also agree with the contention of TNB, as it was found not liable in contract by the HC, it cannot be liable in tort on the same facts. In the House of Lords case of National Bank of Greece v Pinios Shipping Co No1 and Another [1990] 1 AC 637, Lloyd L.J. said: But so far as I know it has never been the law that a plaintiff who has the choice of suing in contract or tort can fail in contract yet nevertheless succeed in tort; and, if it ever was the law, it has ceased to be the law since Tai Hing Cotton Mill Ltd. v. Liu Chong Hing Bank Ltd. [1986] A.C. 80. In that case 10 the bank advanced very much the same argument as has been advanced by Mr. Hamilton. But the argument was rejected. Lord Scarman said, at p.107: "Their Lordships do not believe that there is anything to the advantage of the law's development in searching for a liability in tort where the parties are in a contractual relationship. This is particularly so in a commercial relationship. Though it is possible as a matter of legal semantics to conduct an analysis of the rights and duties inherent in some contractual relationships including that of banker and customer either as a matter of contract law when the question will be what, if any, terms are to be implied or as a matter of tort law when the task will be to identify a duty arising from the proximity and character of the relationship between the parties, their Lordships believe it to be correct in principle and necessary for the avoidance of confusion in the law to adhere to the contractual analysis: on principle because it is a relationship in which the parties have, subject to a few exceptions, the right to determine their obligations to each other, and for the avoidance of confusion because different consequences do follow according to whether liability arises from contract or tort, e.g. in the limitation of action." A little later, Lord Scarman said: "Their Lordships do not, therefore, embark on an investigation as to whether in the relationship of banker and customer it is possible to identify tort as well as contract as a source of the obligations owed by one to the other. Their Lordships do not, however, accept that the parties' mutual obligations in tort can be any greater than those to be found expressly or by necessary implication in their contract." Nothing in the subsequent cases at first instance on which Mr. Hamilton relied throws any doubt on the appropriateness of Lord Scarman's observations to the present case. I would hold without hesitation that if, in a case such as the present, the plaintiff fails in contract, he must necessarily fail in tort. [Emphasis Added] 11 [17] Further, tort of negligence could not be allowed as it is based on pure economic loss. This is reflected in claim as follows: a) Plaintif menuntut daripada Defendan tersebut Gantirugi Am dan/atau Gantirugi Khas berjumlah RM8,183,305.00 berhubung kesemua dan segala kerugian yang telah dialami oleh Plaintif akibat daripada gangguan bekalan elektrik yang telah menimpa Plaintif dan/atau anak-anak Syarikat Plaintif bermula dari 26.08.2008 sehingga ke 01.09.2008 sehingga menjejaskan operasi dan/atau produksi dua [2] kilang membuat besi 6) Bermula pada 26.08.2008 sehingga ke 01.09.2008 Syarikat Plaintif telah mengalami gangguan dan/atau hentian bekalan elektrik sehingga telah Lorong Perusahaan 12, Prai Industrial Estate, 13600 Prai, Pulau Pinang dan Plaintiff telah mengalami kerugian akibat langsung daripadanya. a) Gantirugi Am dan/atau Gantirugi Khas sebanyak RM8,183,305.00 dan/atau apa-apa jumlah yang lebih tinggi setimpal dengan kerugian yang telah dialami oleh Plaintif; b) Faedah pada kadar 1.5% sebulan atau pada kadar 8% setahun keatas jumlah penghakiman dikira dari tarikh 26.08.2008 sehingga ke tarikh penghakiman termasuk faedah penghakiman pada kadar 8% keatas jumlah penghakiman dikira dari tarikh penghakiman ke tarikh penyelesaian penuh. [18] Looking at the above pleading it also could not be denied that the relief sought by SSB is not for financial loss due directly to physical damage to SSB Had there been physical damage or loss arising directly as a result of disruption of electricity supply, this court 12 would be minded to allow damages for SSB. For instance, had it been pleaded that the disruption of electricity had caused total damage to the machinery of SSB requiring the machinery to be completely replaced. Another instance is where though there is no total damage to the machinery but professionals outside SSB had to be paid to repair the same. Unfortunately, these instances were not pleaded. [19] We are guided in the proposition above by the Federal Court case of Tenaga Nasional Malaysia v Batu Kemas Industri Sdn Bhd and another appeal [2018] 5 MLJ 561 which disallowed the claim for pure economic loss, independent of physical damage. The facts of this case are similar to the present case before us. In this case too, the electricity supply had been disrupted to the claimant company and the claim was made for damages because of the said disruption. This case held as follows:

In the case of damage caused by power failure or disruption, only economic loss consequent to physical damage was recoverable. In the instant case, such loss, which was allowed, comprised: the replacement cost of two machines (RM1,434,720), the brake motor (RM17,988), cost of transformer (RM4,136), technical advice (RM6,200), labour cost to manually pack the bricks (RM18,000), cost of two German engineers engaged to repair the machines for 21 days (RM103,757.11) and cost of mechanics, electricians, technicians and local supervisors (RM22,000) (see para 102).

In the case of damage caused by power disruption or failure, pure economic loss independent of physical damage was not recoverable. The alleged losses claimed by the plaintiff in this category which were dismissed were: loss consequent to failure to supply (RM4,368,363.20), loss consequent to termination of orders (RM40,710.40 and[2018] 5 MLJ 561 at 564RM86,521.60), penalty for failure to supply (RM45,000 and RM60,000), loss of profits on account of loss of machinery (RM5,120,541.36), loss of 13 production and the profits thereof (RM32,651,550.43 and continuing), actions by banking institutions to recover loans (RM13,977,715.64), actions by suppliers to recover payments or debts (RM418,159.21) and loss of goodwill and market confidence in the plaintiff (RM3m) (see paras 102-103). [Emphasis Added] [20] disruption to supply of electricity, which is a pure economic loss. The losses for direct financial loss due to the disruption of electricity supply is normally a much lesser sum. Instead what is pleaded is substantial damages of RM 8,183,305.00, which denotes that, this is more likely a claim for pure economic loss. [21] In any event, at the very least, if one looks at the pleading as stated above, it is unclear whether SSB is claiming for loss of profits or wasted expenditure. In this regard, the Federal Court in Ismail v Haji Taib [1972] 1 MLJ 259 and also the Court of Appeal in Ban Chuan Trading Co Sdn Bhd & Ors v. Ng Bak Guan [2003] 4 CLJ 785 approved of the English case of Anglia Television v. Reed [1971] 3 All ER 690 where Lord Denning MR said: ... It seems to me that a plaintiff in such a case as this had an election; he can either claim for his loss of profits; or for his wasted expenditure. But he must elect between them. He cannot claim both. If he has not suffered any loss of profits or if he cannot prove what his profits would have been he can claim in the alternative the expenditure which has been thrown away, that Manufacturing Co Ltd [1953] 2 All ER 1261, 1264, 1265; [1954] 1 QB 292, at 303, 308. [Emphasis Added] 14 [22] Since it is unclear whether SSB is claiming for loss of profit (pure economic loss) or wasted expenditure, as a fortiori, there could not be an issue that it had elected either one of the two. In any case, the pleading does not seem to show either one had been claimed. Thus, the claim by SSB could not be allowed based on the case law authorities shown above. Conclusion [23] Based on all the reasons explained above, TNB could not be liable Therefore, there is no obligation on TNB to pay SSB the damages of RM 4,000,000.00 or RM 2,000,000.00 as ordered by the HC to be indemnified by UEM. Further as TNB is not liable to SSB, the order by the HC against UEM to indemnify TNB must also be set aside. However, we are unable to decide on the claim made by TNB against UEM for the loss arising from the damage to the underground cables because TNB and UEM told us they intended to settle this amicably. The notes of proceedings before us showed this. Hence in respect of Appeal No: W-02(W)-628-04/2015 it is partly allowed in favour of TNB, leaving the issue regarding the claim of TNB against UEM. [24] Based on the reasons explained too, as a consequence, Appeal No: W-02 (W)-691-04/2015 by SSB on damages awarded by HC to SSB amounting to only RM 4,000,000.00, should be dismissed. As we are of the considered view that TNB should not be liable whatsoever in this case, it has no duty to make payment even for the amount of RM 4,000,000.00 to SSB. [25] Likewise, based on the reasons we have given, Appeal No: W- 02(W)-761-05/2015 which is 15 contributory negligence (50%) and the order to pay RM 2,000,000.00 to TNB must also be allowed. As the claim by SSB against TNB for the tort of negligence had failed, it must follow there could not be contributory negligence by UEM. As a consequence, UEM could not be liable for the RM 2,000,000.00 to TNB as indemnity. Dated: 3 May 2023 Sgd ABU BAKAR JAIS Judge Court of Appeal Malaysia For Southern Steel Berhad: Sulaiman Abdullah, Narendran a/l Letchiemanan, Ramesh Sivakumar, Calvin Lim Sin Guan. [Messrs Goik, Ramesh & Loo] For Tenaga Nasional Berhad: Steven Thiru, David Mathew, Mohd Irwan Ismail, Pricilla Lim. [Steven Thiru & Sudhar Partnership] For UEM Construction Sdn Bhd: Loh Siew Cheang, P. Gananathan, Shasha Chin Sim Cheng. [Messrs Gananathan Loh]