IN THE COURT OF APPEAL OF MALAYSIA (APPELLATE JURISDICTION)
CIVIL APPEAL NO: W-02(NCVC)(W)-805-04/2013
MEG CONSULT SDN BHD
(Company No: 786494-M) … APPELLANT
HSB DEVELOPMENT SDN BHD
(Company No: 710822-A) … RESPONDENT
[In the High Court of Kuala Lumpur (Civil Division)
Civil Suit No: 22NCVC-639-05/2012 Between
MEG Consult Sdn Bhd
(Company No: 786494-M) … Plaintiff
HSB Development Sdn Bhd
(Company No: 710822-A) … Defendant]
ZAHARAH BINTI IBRAHIM, JCA ALIZATUL KHAIR BINTI OSMAN KHAIRUDDIN, JCA ABDUL AZIZ BIN ABDUL RAHIM, JCA
GROUNDS OF JUDGMENT
1. The learned High Court judge dismissed the appellant/plaintiff’s claim but allowed only prayer (a) of the respondent/defendant’s counterclaim for RM151,941.50.
2. The appellant now appeals against the decision of the High Court.
3. The agreed facts are as follows (as in the Statement of Agreed Facts):
(i) The respondent was the developer for a project known as “Cadangan Pembangunan kediaman dan komersial di atas Lot PT 1427 Mukim Damansara, Daerah Petaling, Selangor, Malaysia. Fasa 1 – Aragreen Residencies dan Fasa 2 – Aragreens Village” (“the project”).
(ii) The respondent appointed the appellant as the engineer to provide mechanical and electrical engineering services for the project.
(iii) The respondent and the appellant executed an agreement in respect of the project dated 12.1.2012.
(iv) By letter dated 24.4.2012 the respondent sent a termination notice (“Termination Notice”) to the appellant.
4. As evident by the agreed facts there was an agreement for mechanical and electrical consultancy services entered into between the appellant and the respondent on 12.1.2012 (“the agreement”), with regard to the Project.
Issues before the High Court
5. The issues for determination by the High Court (as per Enclosure 30 – Statement of Issues for trial) as follows:
(i) whether the appellant is entitled to the sum claimed under the 4 invoices purportedly not paid by the respondent which are invoices no. HSB/1012/018, HSB/1012/INV-02, HSB/GBI/102/01 and SB/GM/1012/ 001;
(ii) whether the terms of the agreement dated 12.1.2012 bind the appellant;
(iii) whether the maximum fees payable to the appellant (if the services were 100% completed) is RM2,900,000.00;
(iv) whether the respondent had overpaid the appellant’s professional fees totaling RM151,941.00; and
(v) whether the appellant has a lien over the documents relating to the project and if not whether the appellant had delayed the project and caused the respondent to
risk the failure to hand over the vacant possession of the project on time.
Findings by the High Court
6. The learned High Court judge found that the respondent’s witnesses are more credible than the appellant’s witnesses.
7. Referring to the Termination Notice vide letter dated 24.4.2012 the respondent wrote:
“Moving forward, HSB Development Sdn Bhd is going to jointly develop further value engineering options with the main contractors for the benefit of the whole development. In view of such objective, HSB regret to inform MEG Consult Sdn Bhd that with immediate effect of this letter, HSB is now serve a notice of termination to MEG Consult Sdn Bhd for the M & E Consultancy Service for both Phase 1 and Phase 2.”
8. The above paragraph has to be read together with clause 9 (2) of the agreement, which states –
“(2) Notwithstanding anything in this Agreement HSB may at its discretion and for whatever reason elect to terminate this Agreement at any time by giving 30 days written notice. No compensation or damages shall be paid to MEG should HSB decide to so terminate the Agreement. ”
9. Therefore the discretion to terminate the agreement lies with the respondent and the respondent’s letter of 24.4.2012 amounts to a written notice to terminate which termination would take effect 30 days after the date of the termination notice.
10. The High Court judge ruled that the agreement was properly and lawfully terminated.
11. As a result of the termination, Clause 9(3) of the agreement becomes relevant. It read as follows –
“(3) In the event of the Agreement being terminated in accordance with Clause 9.1 and 9.2, HSB shall only be liable to pay MEG profesional fees due for the services up to and including the effective date of termination. The fees shall be determined in accordance with the appendix. ”
12. Clause 1 of Annex C of the agreement provides for the payment schedule to the appellant, wherein interim payments will be made to the appellant in the manner as set out in the table, upon completion and acceptance of the agreed items of service by the respondent, and the appellant’s remuneration would be for a maximum of RM2.9 million IF 100% of the work were completed.
13. The appellant claimed for RM1,531,664.45 i.e. profesional fees vide the following four (4) invoices:
(a) Invoice No: HSB/1012/018 dated 3.5.2012 for the sum of RM836,777.18;
(b) Invoice No: HSB/GBI/1012/01 dated 3.5.2012 for the sum of RM169,600.00;
(c) Invoice No: HSB/GM/1012 dated 3.5.2012 for the sum of RM381,600.00; and
(d) Invoice No: MEG/1012/Inv – 02 dated 16.4.2012 for the sum of RM143,687.27.
14. The burden is on the appellant and it is on a balance of probabilities. The respondent contends that it had over paid the appellant. The learned High Court judge found that the appellant has not satisfied this burden and therefore dismissed the appellant’s claim. The learned trial judge also found that the respondent had overpaid the appellant in the sum of RM155,899.50.
15. The reasons given by the learned trial judge are as follows: The appellant’s Invoice No. HSB/1012/081 dated 3.5.2012 for the sum of RM836,777.18 is based upon an erroneous calculation of fees by the appellant. In the column for “Grand Total” for “Fees”, the appellant projected for itself to receive the total profesional fees amounting to RM4,474,285.70 as if it had completed 100% of the work. It follows that each and every breakdown therein is based upon this wrong basis of calculation. The agreement specifically provides for the maximum profesional fees only of RM2.9 million payable to the appellant.
16. During cross-examination, PW2 who was the Director and
shareholder of the appellant agreed that the appellant was bound by the terms of the M & E agreement and that based on the terms of the M & E agreement the maximum fees payable to the appellant on the basis that the appellant completes 100% of the work under the agreement is RM2.9 million. Moreover, the appellant had previously issued invoices dated 3.7.2010, 1.10.2010, 20.4.2011, 3.6.2011, 25.8.2011, 10.10.2011,
25.11.2011, 14.12.2011, 3.1.2012 and 15.2.2012.
17. The apportionment of the fees payable to the appellant is based on the lump sum payment agreement of RM2.9 million between the appellant and the respondent as provided in the M & E agreement. This means that if the appellant had completed all the work required of them for Phases 1 and 2 of the Project as listed in the Consultant’s Certificate for Payment, the total fees to be certified and payable to the appellant would be a maximum of RM2.9 million only.
18. With regard to invoices in paragraph 13 (b), (c) and (d) above, these relate to payments to sub-contractors allegedly made by the appellant.
19. The learned High Court judge found that the appellant had not produced to the satisfaction of the Court on a balance of probabilities, evidence –
“(a) in regard to the appellant’s invoice no. HSB/GBI/1012/01 dated 3.5.2012 for the sum of RM169,600.00 for reimbursement for the professional fees with the appellant alleged was advanced to Messrs. Green Building Index Consultancy, for green building consultancy services on the respondent’s behalf;
(b) in regard to the appellant’s invoice no. HSB/GM/1012 dated 3.5.2012 for the sum of RM381,600.00 for reimbursement for the professional fees which the appellant alleged to have advanced to Messrs. Green Mark Consultancy, for environmental consultancy services on the respondent’s behalf;
(c) In regard to invoice no. MEG/1012/Inv-02 dated 16.4.2012 for the sum of RM143,687.27 for reimbursement for the professional fees which the appellant
alleged to have advanced to Messrs Bo steiber Lighting Design, for professional lighting design services on the respondent’s behalf.”
that these amounts were paid out by the appellant.
20. Furthermore the appellant’s Invoice No. HSB/1012/017 dated 2.4.2012 (1 month earlier) is for fees for the same scope of work performed as in the appellant’s Invoice No. HSB/1012/018 although the amount invoiced is different. The appellant has not explained how or why it came to issue two invoices for fees in regard to the same scope of work.
21. In the absence of any explanation, the inference to be drawn is one of unjust enrichment on the part of the appellant. [see Pet Far Eastern (M) Sdn Bhd v Tan Uong Huat & Ors  2 CLJ 886, Perak Motor Company Sdn Bhd v Estate Pekebun Kechil Sdn Bhd  4 CLJ 603.]
22. As regards the respondent’s counter-claim for RM155,899.50, APEC vide the Consultant’s Certificate dated 18.4.2012 had certified that the total certified fees payable to the appellant under the agreement was RM935,559.00.
23. The respondent had already paid the appellant RM1,091,458.50. As such the respondent’s counter-claim is allowed for RM155,899.50, with interest at 5% from the date of the filing of its counter claim to full realization.
This appeal and our opinion
24. The appellant’s claim in the Court below is for breach of contract for services caused by purportedly wrongful termination of the contract by the defendant. The appellant therefore claimed for general damages for breach of the contract and for specific damages in the sum of RM1,531,664.45 being the profesional fees due and payable under the contract based on the four (4) invoices referred to above. The appellant also claimed interest and costs.
25. The appellant contends, in his pleading, that if the contract had not been terminated and he was allowed to complete the works under the contract he would be entitled to be paid the sum of RM4,474,285.70 as the total sum (of his fee) under the contract.
26. The first issue for determination in this appeal is whether the High Court was correct in holding that the contract had been lawfully terminated. Learned counsel for the appellant contended that it was not. He argued that the letter of termination or the notice given by the respondent to the appellant dated 24.4.2012 very clearly states that the termination was ‘with immediate effect of this letter’. This means the termination of the appellant’s contract was on 24.4.2012, the date of the letter, or at the latest on the date or day the appellant received the termination letter. However it was pointed out that this was contrary to clause 9(1) of the agreement which provides that either party may terminate the contract by giving 30 days’ written notice to the other party. On the facts in this case, we agree with this submission. There is no ambiguity in clause 9(1) of the agreement as to the period of notice for termination; and there is no evidence whatsoever that this termination period had been varied or waived by the appellant. The
terms of the contract between the parties must be held to be sacrosanct. The terms regulate their relationship in carrying out the contract. Therefore each party to the contract must be held to their end of the bargain. Unless the terms of the contract are unlawful or unconscionable, the Court must give effect to them to preserve the business efficacy of the contractual relationship. We therefore find that the learned trial judge had erred in holding the termination was lawful on the ground that the discretion to terminate the agreement was with the respondent. In our view clause (1) of the agreement is so blatantly clear that either party must give 30 days’ notice to terminate the contract. This had not been complied with by the respondent.
27. Therefore it is our opinion that the learned judge had erred in his finding and conclusion that the termination of the agreement by the respondent which was to take effect immediately was valid. Instead on the facts and circumstances of the case we found that the termination was unlawful.
28. We do not accept the learned judge’s finding and conclusion that the termination was lawful simply because the discretion to terminate was with the respondent and the respondent’s termination notice of 24.4.2012, on the face of it, would take effect 30 days after the notice was given. There is no other reason given by the learned judge but an exercise of discretion on the part of the respondent under clause 9(2) of the agreement. We also do not think that the finding of the learned judge on the termination can be supported by the oral testimony of DW2 (Ir Lim Sow Wu) the respondent’s chief executive officer as suggested by learned
counsel for the respondent in his written submission. DW2 testified in cross-examination that the letter of 24.4.2012 is a mere notice; not a termination. He said there was no mention of 30 days in the letter. On DW2’s evidence, learned counsel for the respondent submitted that it was notice that was served on the appellant with immediate effect and not the letter of termination. We do not agree with this submission. Clause 9(2) of the agreement is crystal clear that the parties had agreed to 30 days’ notice of termination. The letter of 24.4.2012 by the respondent to the appellant stated in no uncertain terms that ‘..with immediate effect of this letter, HSB is now serve a notice of termination to MEG Consult Sdn Bhd…’. Judging from the expressions used in the letter and the language of clause 9(2) of the agreement we are unable to see the difference between a ‘notice’ and ‘a letter of termination’ insofar as the respondent’s letter of 24.4.2012 is concerned merely because the letter makes no mention of the 30 days period.
29. Having found the termination of the agreement was unlawful is the appellant entitled to damages? The learned High Court judge did not deal with this issue because of his finding that the termination was valid. However it is obvious from the terms of the agreement that the parties had agreed that a total lump sum of RM2.9 million as payment of the fees to the appellant was for work done and services rendered. The agreement also provides, in Annexe D, the adjustment of these fees. It was submitted for the appellant that on the uncontradicted evidence of PW2, the appellant had completed a substantial part of the works and that PW2 had testified that the appellant would have made a profit of RM800,000.00 but for the termination.
30. Under the agreement, the maximum fees payable to the appellant, if the appellant had completed 100% of the work is RM2.9 million. Therefore if at all the appellant is entitled to damages the amount awarded should not exceed this limit. The reason being that the only loss which the appellant would have suffered by a wrongful termination is the maximum fees under the agreement that would have been payable to him. As to the provision of the adjustment of the fees, our view is that it can be read in two ways. One way is the adjustment to the fees claimed by the appellant on each invoice presented to the respondent for work and services done and completed. The other way is to read it to mean that any adjustment to the total amount of the final fees payable to the appellant cannot exceed the limit agreed between the parties. Our reason for saying so is because the capping of the total amount of the fees payable to the appellant under the agreement had been agreed and this capping is the term of the contract, not just a condition. We observe that there is no other item of payment payable to the appellant under the agreement except for the payment of professional fees.
31. The claim by the appellant in this case is essentially for the amount in the four (4) invoices mentioned in paragraph 13 above. Apparently, the 1st invoice is the claim by the appellant purportedly for the appellant’s unpaid professional fees. The claim for the 2nd, 3rd and 4th invoices were for reimbursement of the professional fees which the appellant had advanced to the subcontractors.
32. The learned High Court judge had, in his written judgment, considered these invoices and found that the appellant had not discharged the burden of proving these invoices on the balance of probabilities. In this respect we agree with the learned judge that the burden is on the appellant to prove that he is entitled to be paid the amount in each of the four invoices. In his analysis of the invoices, the learned judge noted that the appellant’s Invoice No. HSB/1012/018 dated 3.5.2012, the sum of RM836,777.18 (invoice in paragraph 13(a) above) is based on an erroneous calculation of fees by the appellant. The learned judge further noted that in the column for “GRAND TOTAL” for “FEES”, the appellant projected for itself to receive total professional fees amounting to RM4,474,285.70 as if it has completed 100% of the work. According to the learned judge this is a wrong basis of calculation. This is because the agreement specifically provides for the maximum professional fees of only RM2.9 million payable to the appellant. This fact, as found by the learned judge, was supported by the evidence of PW2 during cross-examination. PW2 was the director and shareholder of the appellant. He testified that the appellant is bound by the terms of the agreement.
33. Learned counsel for the respondent also submitted that there has been double billing. He gave as an example the appellant’s Invoice No. HSB/1012/017 dated 2.4.2012, where under item 1.1 (“Complete Site investigation”), the appellant billed the respondent RM72,500.00 for 100% of the work done. One month later, in the purported 1st invoice, for the exact same work, the appellant was now purporting to bill the respondent RM87,000.00. He further submitted that when PW2 was cross-examined on this double
billing for “Complete Site Investigation”, PW2 who was the director of the appellant, was evasive. The learned judge in paragraph 29 of his judgment accepted that there were two invoices (i.e. double billing) for the same scope of work in relation to complete site investigation and concluded that the appellant had not explained how and why two invoices for fees were issued for the same scope of work. The learned High Court judge also noted that the appellant had previously issued invoices for payments of the fees to the respondent and these had been paid by the respondent.
34. In considering the claim by the appellant under the four invoices, the learned High Court judge had also considered the Consultant’s Certificate for Payment dated 18.4.2012 issued by Asia Pacific Engineering Consortium Sdn Bhd (APEC) which certified that the total fees payable to the appellant under the agreement was RM935,559.00. It is pertinent to note that this Consultant’s Certificate for Payment was issued by APEC almost four months after the date of the termination letter given to the appellant by the respondent. Thus, it may be inferred that at the date of the certificate all the works done by the appellant under the agreement had been taken into account. Yet, the amount certified and payable to the appellant is only RM935,559.00 – that is RM880,027.00 for phase 1, and RM555,320.00 for phase 2. This total amount obviously fell short of the RM2.9 million which the appellant is entitled to be paid if the appellant had completed 100% of the work. Therefore, it appears that the appellant had not completed 100% of the work. We observe that the appellant never claimed either in the pleadings or in the submissions before us, or before the Court below that it had completed 100% of the work.
Therefore, the computation by APEC of the work done by the appellant, according to the certificate for payment, must be taken on the balance of probability to be true. In fact, the learned High Court judge had accepted the APEC certificate as accurate and properly issued. The learned judge also found that the respondent had paid the appellant the amount of RM1,091,458.50 for the percentage of work done; and found that, after taking into consideration the amount certified by APEC to be due and payable to the appellant, the latter was overpaid by the amount RM155,899.50.
35. The learned judge in his judgment, when addressing this issue of overpayment and the APEC certificate for payment had said as follows:
“(a) The Asia Pacific Engineering Consortium Sdn Bhd (APEC) were the Consultant Project Manager and APEC had by way of a Consultant Certificate for payment dated 18.4.2012 certified that the total certified fees payable to the appellant under the agreement was RM935,559.00.
(b) This figure was for fees arrived upon after assessing the total work completed by the appellant based on all the documents, drawings and other related documents which have been submitted and uploaded to a common computer system known as Aconex.
(c) The learned High Court judge accepted APEC’s certificate as accurate and properly issued and that the total amount payable to the appellant was RM935,559.00.
If one were to add RM880,027.00 to RM55,532,00 one would get a total of RM935,559.00.
(d) APEC had detailed out the breakdown of the fees payable to the appellant in items no. 1 to 13 for both Phases 1 and 2 of the Project in the Consultant
Certificate for Payment which is reproduced for ease of reference.
PHASE 1 PHASE 2
Item Stage Appointment of Fees % Complete Fee Payable Appointment of Fees % Complete Fee Payable
% RM % RM
1. Upon Confirmation 2.50 53,989 100% 53,989 2.50 18,511 100% 18,511
2. Concept Approval 2.50 53,989 100% 53,989 2.50 18,511 0% –
3. Design Stage 15.00 323,936 100% 323,936 15.00 111,064 0% –
4. Complete Documentation 7.50 161,968 100% 161,968 7.50 55,532 0% –
5. D.O. Approval 5.00 107,978 100% 107,978 5.00 37,021 100% 37,021
6. B.P. Approval 5.00 109,978 100% 107,978 5.00 37,031 0% –
7. Tender Award 5.00 107,978 65% 70187 5.00 37,021 0% –
8. Piling/Sub-structure 9.00 194,361 0% – 9.00 66,638 0% –
9. Super-Structure 36.00 777,446 0% – 36.00 266,553 0% –
10. Upon Practical Completion 2.50 53,989 0% – 2.50 18,511 0% –
11. Upon Cerficate of Fitness for Occupation (C.F.O)/Certificate of Completion and Compliance (C.C.C) 5.00 107,978 0% 5.00 37,021 18,511 0%
12. Upon expiry of Defect Liability Period (D.L.P.) 2.50 53,989 0% 2.50 185,11 0%
13 Upon Final Account 2.50 53,989 0% – 2.50 0% –
TOTAL 880,027 740,426 55,532
(e) However, the amount already paid by the respondent to the appellant for the percentage of work done amounted to RM1,091,458.50. The appellant would only be entitled to the RM2.9 million fees under the agreement provided that 100% of the work stipulated under the agreement had been done, according to APEC the appellant was only entitled to RM935,559.00 as certified fees payable under the agreement. Therefore the respondent had overpaid the appellant to the tune of RM155,899.50. ”
36. Learned counsel for the appellant had criticized the learned judge’s reliance on and acceptance of the consultant’s certificate. He argued that there is no provision in the agreement for any consultant to issue any certificate of payment. Clause 6(5) of the agreement only provides for the appellant if required by the respondent to furnish additional supporting documents and record to substantiate the payment to be paid to the appellant. He also pointed out that the certificate of payment by APEC was prepared by DW1, and in the preparation of the certificate DW1 had relied
on a database uploaded onto a computer system called Aconex. He pointed out that DW1 had testified that not all documents were uploaded onto the Aconex programme. DW1 also admitted in evidence that his assessment of the work done was based on what was uploaded onto the computer programme. He further submitted that the respondent did not ask the appellant for any supporting documents to substantiate the claim in the invoices. Learned counsel for the appellant referred to the remarks printed at the bottom of the certificate of payment which read as follows:
“Remarks: Please note that the certification is assessed on the basis that all documents, drawings etc have been submitted and uploaded to Aconex. All consultants are required to substantiate their claim with relevant proof of work completed to Aconex for assessment.”
37. However, on perusing the records of appeal, we could not find any documentary evidence to disagree with the learned High Court judge that the appellant had not produced to the satisfaction of the Court on the balance of probabilities evidence of the amount claimed in the invoices at paragraph 13(b), (c) and (d) above which the appellant had said he had paid out to the subcontractor. Therefore we agree with the learned judge that to allow the claim on these invoices would amount to unjust enrichment on the part of the appellant. The learned judge had cited the cases of Pet Far Eastern (M) Sdn Bhd v Tan Uong Huat & Ors  2 CLJ 886, Perak Motor Company Sdn Bhd v Estate Pekebun Kechil Sdn Bhd 4 CLJ 603 as authorities to support this proposition.
38. On the respondent’s counterclaim we agree with the learned High Court judge that on the evidence the appellant had been overpaid by RM155,899.50 and therefore the learned judge was correct to allow the counterclaim for this amount. The respondent’s claim in prayers (b) and (c) in the counterclaim were rejected by the learned High Court judge for the reasons stated in his judgment. After giving this rejection our due consideration, we do not find it merits our intervention.
39. Finally, in this case besides the documentary evidence, the learned High Court judge had also relied on oral testimony in relation to the documentary evidence produced before him. Learned counsel for the appellant had criticized the learned judge’s judgment on this point by submitting that the evidence of PW1 should not be rejected or disregarded merely because, as the former CEO and Executive Director of the respondent he was involved in the on-going legal proceedings with the respondent and was therefore an interested witness. This submission touches on credibility of witnesses. It is trite law that the Appellate Court is not in the same position as the trial Court to assess witnesses giving evidence. This is because the Appellate Court does not have the advantage of the trial Court in hearing and seeing the witnesses. Therefore, it is trite that the Appellate Court should be slow to disturb the trial Court’s impression and feel of the witnesses that testified before it.
40. For the foregoing reasons, we allow this appeal in part. We find that there is no valid termination of the agreement and therefore the appellant is entitled to damages for breach of the contract.
However, we also find that the appellant had not proved its damages. As such we award only nominal damages of RM50,000.00 to the appellant; and we affirm the rest of the High Court orders. We also award costs of RM25,0000 to the appellant for this appeal and order that the deposit be refunded to the appellant.
Dated : 13th September 2013
(DATO’ ABDUL AZIZ BIN ABDUL RAHIM)
Court of Appeal, Putrajaya
Counsel for the appellant
Bastian Vendargon (with him), Devan N Raman and Gene Vendargon Tetuan Devan & Associates
Counsel for the respondent:
Lim Koon Huan (with him), Teoh Choon Hui and Susanah Ng Tetuan Skrine