Giga Engineering & Construction Sdn Bhd V Yip Chee Seng & Sons Sdn Bhd&2lagi

  

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W-02-561-2010

 

IN THE COURT OF APPEAL MALAYSIA (APPELATE JURISDICTION)

 

CIVIL APPEAL NO: W-02-561-2010

 

BETWEEN

 

GIGA ENGINEERING & CONSTRUCTION SDN BHD … APPELLANT

 

AND

 

1. YIP CHEE SENG & SONS SDN BHD

 

2. AAY CONSTRUCTION SDN BHD

 

3. MMN BINA SDN BHD … RESPONDENTS

 

(In the matter of Kuala Lumpur High Court Guaman Sivil No: S-22-562-2002)

 

CORAM

 

ABDUL WAHAB PATAIL, JCA BALIA YUSOF HJ WAHI, JCA TENGKU MAIMUN TUAN MAT, JCA

 

JUDGMENT

 

[1] This is an appeal against the decision of the High Court at Kuala Lumpur dismissing the appellant’s claim against the three respondents and allowing the 1st respondent’s counterclaim against the appellant.

 

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[2] The background facts setting the appellant’s/plaintiff’s claim against the respondents/defendants may briefly be summarized as follows and we will refer to the parties in this appeal as they were in the court below.

 

[3] The plaintiff’s claim arose out of a project known as “Rancangan Bekalan Air Greater Kuantan Fasa II-Pakej 3 Membina dan Menyiapkan Empangan Serta Kerja-Kerja Berkaitan di Sungai Chereh, Kuantan, Pahang Darul Makmur”(“the Project”). The plaintiff claims that it was invited by the 1st and 2nd defendants to jointly participate with them in a joint venture between the plaintiff, the 1st and 2nd defendants (“the Three-Party Joint Venture”) to submit a tender to the Jabatan Bekalan Air Negeri Pahang Darul Makmur in respect of the Project. On the basis and pursuant to the said joint venture, the plaintiff proceeded to prepare the tender.

 

[4] The essential features and the basic understanding of the Three-Party Joint Venture between the plaintiff and the 1st and 2nd Defendants were as follows:

 

(a) given the plaintiff’s experience in such and/or related field of engineering and construction works, the plaintiff was requested by the 1st and 2nd defendants to provide its expertise in the preparation of the tender for the said Project which included aspects of pricing for the tender and preparations of the work programs and technical schedules;

 

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(b) the tender for the said Project would, however, be submitted through another joint venture between the 2nd defendant and the 3rd defendant (the “AAY-MMN Joint Venture”);

 

(c) upon the AAY-MMN Joint Venture securing the said Project, the plaintiff would be awarded a portion of the works arising from the said Project (the Plaintiff’s Portion) with the balance to be shared by and/or between the 1st and 2nd defendants.

 

[5] The Three-Party Joint Venture was later followed by a “Pre-Tender Agreement” executed on 9.8.2001 by the plaintiff and the 1st defendant (exh.P13). This Pre-Tender Agreement envisaged the entire project being sub-contracted by the AAY-MMN Joint Venture to the 1st defendant. The 1st defendant would then sub-contract the Plaintiff’s Portion of the Project to the plaintiff. Clause F of the Pre-Tender Agreement provides that the agreement shall be void if the 1st defendant is not awarded the project. The 2nd and 3rd defendants did enter into a Joint Venture Agreement dated 10.1.2001 whereby the 3rd defendant holds a majority of 70% shareholding and the 2nd defendant holds 30%. The defendants submitted the tender for the Project through the AAY-MMN Joint Venture. The plaintiff says the tender was submitted using, amongst others as the starting basis, the prices which the plaintiff had prepared. By a letter dated 18.1.2002 the Jabatan Bekalan Air Negeri Pahang Darul Makmur awarded the said Project to the AAY-MMN Joint Venture for a total contract sum of RM 69,300,000.00.

 

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[6] The plaintiff contends that having regard to inter alia, the relationship between the parties arising from the Three-Party Joint Venture and further upon the defendants having obtained the benefits of the plaintiff’s input and efforts, the defendants, in particular the 1st and 2nd defendants were under the implied obligation not to act in any manner inconsistent with the Three-Party Joint Venture on the Plaintiff’s Portion and to cooperate and take all necessary steps to ensure that the plaintiff be awarded the Plaintiff’s Portion.

 

[7] With regard to the 3rd defendant, it is the plaintiff’s contention that the 3rd defendant was aware of the understanding and agreement between the plaintiff and the 1st and 2nd defendants, and that even if the 3rd defendant denies this, as the 3rd defendant was the 2nd defendant’s joint venture partner in the AAY-MMN Joint Venture, therefore the 3rd defendant is bound by the acts of the 2nd defendant, its joint venture partner. The plaintiff contends that the 3rd defendant is bound by the PreTender Agreement on the Plaintiff’s Portion on the basis that the AAY-MMN Joint Venture between the 2nd and 3rd defendants is in substance a partnership or alternatively the 2nd defendant was at all material times the lead partner within the AAY-MMN Joint Venture. However according to the plaintiff, notwithstanding the award of the Project to the AAY-MMN Joint Venture, and despite various reminders and demands by the plaintiff, the defendants have, in breach of the Three-Party Joint Venture and the JVA, failed and/or refused to award or cause to be awarded to the plaintiff the Plaintiff’s Portion of the Project.

 

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[8] In the suit filed against the defendants, the plaintiff is claiming for the following reliefs:

 

(1) a declaration that the Joint Venture was constituted and continues to subsist between the plaintiff and the 1st and 2nd defendants;

 

(2) a declaration that the defendants through the AAY-MMN Joint Venture hold the Plaintiff’s Portion as constructive trustees for the plaintiff;

 

(3) an account of the profits made by the defendants, from the Plaintiff’s Portion;

 

(4) an order for specific performance of the said Agreement for the Plaintiff’s Portion as evidenced by, inter alia, the PreTender Agreement;

 

(5) an order that the defendants pay to the plaintiff the profits found to have been made by them on the taking of Account;

 

(6) damages in lieu of and/or in addition to the order for specific performance to be assessed against the defendants;

 

(7) a declaration that the information and documents, including in particular, the work program and technical schedules, produced in the course of and/or forming part of the said tender submitted by the AAY-MMN Joint Venture are property of the plaintiff;

 

(8) such other orders or directions as this Honourable Court deems just and fit; and

 

(9) interest.

 

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[9] The learned trial judge at the conclusion of the trial dismissed the plaintiff’s claim against all three defendants. She found that between the plaintiff and the 1st defendant, there was only the Pre-Tender Agreement and there was no agreement between the plaintiff and the 2nd and 3rd defendants. The learned trial judge also concluded that if at all there was such a Three Party Joint Venture as alleged by the plaintiff it appears that such alleged joint venture did not materialize by the time the Pre-Tender Agreement was signed.

 

[10] The court ruled that the plaintiff had no cause of action against the 1st defendant. Similarly as against the 2nd and 3rd defendants, the court found they are not parties to the Pre-Tender Agreement and the plaintiff had no cause of action against them both and neither was the 2nd defendant a party to the Three Party Joint Venture.

 

[11] The 1st defendant had filed a counterclaim against the plaintiff alleging that the plaintiff had breached Clause B and E of the Pre-Tender Agreement and had caused losses to the 1st defendant for not being appointed as the sub-contractor to the project.

 

[12] The learned trial judge had allowed the 1st defendant’s counterclaim with cost and damages to be assessed by the Registrar.

 

[13] The plaintiff’s appeal against the High Court decision is only against the 1st and 2nd defendants, having withdrawn the appeal against the 3rd defendant.

 

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The appeal

 

[14] In a nutshell, the plaintiff’s claim against the defendants is for a portion of works referred to as the “Plaintiffs Portion” which essentially comprise the bulk of the works for the construction of the dam. The plaintiff contended that this was envisaged in the Three Party Joint Venture which was followed by the Pre-Tender Agreement between the plaintiff and the 1st defendant. The said agreement is the quid pro quo for the plaintiff agreeing to prepare the tender submissions which was used by the AAY-MMN Joint Venture to get the project from the Jabatan Bekalan Air Pahang.

 

[15] We agree with the findings of the learned trial judge that from the evidence proffered, there exists only the Pre-Tender Agreement and the said Pre-Tender Agreement is the culmination of the negotiation between the plaintiff and the 1st defendant. It also embodies all the terms and conditions that the plaintiff and the 1st defendant intended to rely on and to regulate their relationship. The said Pre-Tender Agreement manifests their intentions. The fact that no reference whatsoever is made to the Three Party Joint Venture in the said Pre-Tender Agreement merely indicates that there was no such agreement. Parties are not allowed to adduce oral evidence to contradict or vary the terms of the Pre-Tender Agreement. (Sections 91 and 92 Evidence Act 1950). The plaintiff submitted that their claim against the 1st and 2nd is essentially a claim in contract with reference to the Pre-Tender Agreement. The Pre-Tender Agreement clearly spelt out the award to be made to the plaintiff for the Plaintiff’s Portion at the agreed price. Reference is made to paragraph D of the same which reads:

 

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YCS has agreed and covenanted that he shall engage GEC as the subcontractor for the works in the event and only in the event that YCS is awarded the Project by the Main Contractor. Unless there is amendment in any part of the Tender Document, the Contract Sum for the Works amounting to RM 37,994,385.80 (Thirty Seven Million Nine Hundred Ninety Four Thousand Three Hundred Eighty Five Ringgit and Eighty Cents) with method related charges amounting to RM 3,939,200.00 (Three Million Nine Hundred Thirty Nine Thousand Two Hundred Ringgit) shall be awarded to GEC.

 

[16] The plaintiff’s learned counsel submitted that the learned trial Judge had failed to undertake an analysis of the said provisions in the agreement and this merits our intervention. It was further submitted that the 1st and 2nd defendants are one and the same person. On most of the occasions the 1st and 2nd defendants were represented by Ng Kai Wai and DW1, Yip Kok Weng.

 

[17] The 1st and 2nd defendants are basically family companies sharing

 

the same office both in Kuala Lumpur and Ipoh. DW1 is the Managing Director of the 1st defendant and also the Project Director of the 2nd defendant. His wife and sister are the major shareholders of the 2nd defendant. Learned counsel submitted that the court should lift the

 

corporate veil as it is clearly evident that the two defendants are using the cloak of separate legal entities to allow the 1st defendant to circumvent its contractual obligations under the Pre-Tender Agreement.

 

[18] It is trite that a litigant who seeks the court’s intervention to pierce the corporate veil must establish special circumstances showing that the

 

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company in question is a mere facade concealing the true facts (Takako Sakao v Ng Pek Yuen & Anor [2010] 1 CLJ 381). We find the plaintiff had failed to establish this.

 

[19] In our view, the essence of the plaintiff’s argument is simply that the 1st defendant was in breach of the Pre-Tender Agreement and this is further made clear from the written submissions submitted to this court for purposes of this appeal.

 

[20] We note that the learned judge had found, and rightly so, we must say, that it was never the plaintiff’s case that the 1st defendant was in breach of the Pre-Tender Agreement. The plaintiff cannot argue so now in this appeal. Be that as it may, on the evidence, we find that the learned trial judge had rightly concluded that the 1st defendant was not awarded the project but the AAY-MMN Joint Venture was. And as provided in Clause F of the Pre-Tender Agreement, the relationship between the plaintiff and 1st defendant comes to an end if and when the 1st defendant is not awarded the project and for that reason the Pre-Tender Agreement no longer subsist. The plaintiff then has no cause of action against the 1st defendant.

 

[21] It is also evident that the 2nd and 3rd defendants were never parties to the Pre-Tender Agreement and the plaintiff is seeking to impute liability on the 2nd defendant simply on the ground that the evidence shows DW1 represents both the 1st and 2nd defendants in the negotiations with the plaintiff.

 

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[22] DW1 on the other hand maintains that the 1st and 2nd defendant are separate and independent entities. They have a working arrangement that if the 2nd defendant manage to get substantial projects it may sub-contract the works to the 1st defendant. The 1st defendant is not a subsidiary or a holding company of the 2nd defendant. There are no common directors or shareholders between the two entities.

 

[23] The learned trial judge had made a specific finding that she accepted the evidence of DW1 and considered that “DW1 could not deal with the plaintiff as representative of the 2nd defendant in view of the fact that the 2nd defendant is a partner of the AAY-MMN Joint Venture and any decision if made on behalf of the 2nd defendant would have to take into account the 3rd defendant who is the majority shareholder and the controlling partner in the AAY-MMN Joint Venture”.

 

[24] We do not find anything perverse with the said finding and we find no justifiable ground to disturb the same.

 

[25] The plaintiff further contended that there was a joint venture agreement between the plaintiff with the 1st and 2nd defendants. This joint venture agreement is what the learned trial judge referred to as the Three Party Joint Venture.

 

[26] The nature of the joint venture referred to by the plaintiff is set out in paragraph 4 of the plaintiff’s amended statement of claim which reads as follows:

 

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“Sometime in early July 2001, the Plaintiff was invited by the 1st and 2nd defendants to jointly participate with them in a joint venture (“the Joint Venture”) to submit a tender to the Jabatan Bekalan Air Negeri Pahang Darul Makmur in respect of the Project known as “Rancangan Bekalan Air Greater Kuantan Fasa II-Pakej 3 Membina Dan Menyiapkan Empangan Serta Kerja-Kerja Berkaitan di Sungai Chereh, Kuantan, Pahang Darul Makmur”(“the Project”) as more particularly described in the Tender Documents (“the Tender Documents”).

 

[27] In our view, the invitation to participate in the joint venture to submit a tender to the Jabatan Bekalan Air Negeri Pahang in respect of the project on its own does not create a contractual relationship between the plaintiff and the 1st and 2nd defendants. At most it is an invitation for a discussion and negotiation which culminates in the preparation and signing of the Pre-Tender Agreement between the plaintiff and the 1st defendant.

 

[28] DW1 in his evidence had stated that except for the Pre Tender Agreement, there was no other understanding, representation or agreement between the plaintiff and the 1st defendant. There was no joint venture, partnership or any understanding between the plaintiff and the 1st and 2nd defendants. The learned trial judge had accepted DW1’s evidence and we see no reason why Her Ladyship should not. We are in no better position to say otherwise. As a trier of fact, the findings of the learned trial judge deserve great respect. Nothing is demonstrated before us to justify our intervention either in the learned trial judge’s findings of facts or her assessment or appreciation of the evidence.

 

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[29] We find no merits in the plaintiff’s appeal against the dismissal of its claim and to that extent this appeal is dismissed.

 

[30] In respect of the appeal against the granting of the 1st defendant’s counterclaim against the plaintiff, in our considered view, the learned trial judge had erred in allowing the 1st defendant’s counterclaim against the plaintiff on the ground that “the 1st defendant was disabled from accepting the offer to be the AAY-MMN Joint Venture sub-contractor due to the refusal of the plaintiff to review its price”. (see page 62 Rekod Rayuan Jilid 1)

 

[31] We have earlier referred to paragraph D of the Pre-Tender Agreement which stipulates that the 1st defendant shall engage the plaintiff as the sub-contractor for the project only in the event that the 1st defendant is awarded the project by the main contractor which is the AAY-MMN Joint Venture. It is an undisputed fact that the 1st defendant was not awarded the project by the AAY-MMN Joint Venture.

 

[32] The learned trial judge had concluded that the plaintiff was in breach of the Pre-Tender Agreement in its refusal to revise or reduce and rationalize their rates thus depriving the 1st defendant from being appointed as the subcontractor of the Project.

 

[33] We found merits in the plaintiff’s learned counsel’s submissions that the plaintiff cannot be in breach of an agreement which is void. The PreTender agreement becomes void if the 1st defendant is not awarded the

 

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project (paragraph F of the Pre-Tender Agreement). Consequently, the 1st defendant could not have any rights under the agreement and to allow the 1st defendant to claim a right under the aforesaid void agreement is a serious error committed by the learned trial judge.

 

[34] For the aforesaid reason, the plaintiff could not be held liable for breach of the said Pre-Tender Agreement and the 1st defendant’s counterclaim against the plaintiff ought to have been dismissed. Consequently, the order of the learned trial judge allowing the 1st defendant’s counterclaim against the plaintiff with costs and damages to be assessed by the Registrar is set aside.

 

[35] In the upshot, our final order will be, the plaintiff’s appeal is allowed in part in respect of the counterclaim by the 1st defendant and the rest of the appeal is hereby dismissed. We award cost in the sum of RM20,000/-to the 1st defendant and RM10,000/- to the 2nd defendant. Deposit to be refunded.

 

sgd

 

DATO’ BALIA YUSOF BIN HJ WAHI Judge, Court of Appeal Malaysia

 

Dated : 2nd June 2014

 

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PARTIES

 

For the Appellant: Michael Chow and Keong Hui Jiun Messrs Michael Chow

 

For the 1st Respondent: Zaidah bte Ibrahim Messrs Ho & Company

 

For the 2nd Respondent: Justin Voon & Alvin Lai Messrs Justin Voon Chooi & Wing

 

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