Nagartanam A/L Balaraju V Ireka Construction Bhd.


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(dahulunya dikenali sebagai Lai Siew Wah Sdn. Bhd.)


(Dalam perkara Mahkamah Tinggi Malaya di Kuala Lumpur Guaman Sivil No. C3316 Tahun 1983)




Nagartanam A/L Balaraju






Ireka Construction Bhd ……




(Dahulunya dikenali sebagai Lai Siew Wan Sdn. Bhd.)












The plaintiff (appellant herein), Nagartanam a/l Balaraju and the defendant (respondent herein), Ireka Construction Bhd (formerly known as Lai Siew Wah Sdn Bhd), had entered into an agreement dated 4/7/80 wherein Lai Siew Wah Sdn Bhd was described as the Contractor and Nagartanam a/l Balaraju was described as the Sub-Contractor. The defendant agreed to employ the plaintiff to carry out transportation of earth subject to the terms and conditions set out in the said agreement. The plaintiff brought an action in the High Court against the defendant at the expiration of the said agreement, primarily for the return of the security deposit paid pursuant to the provisions of the agreement. The plaintiff’s action was dismissed in the High Court and, hence this Appeal by the plaintiff.




In order to understand the plaintiff’s case against the defendant, it is crucial to focus on the terms and conditions of the written agreement between the plaintiff and the defendant dated 4/7/80 for transportation of earth (at page 257 Record of Appeal ) [hereinafter referred to as the Contract]. Although dated and signed on 4/7/80, the Contract stipulated that it was to commence on 7/6/80 and expire on 6/6/83 ( a period of 3 years), unless extended by the defendant in writing, as provided under clause 1. The Contract was not extended and, therefore, expired by effluxion of time on 6/6/83. The plaintiff filed his writ on 12/12/83.


Clause 2) of the Contract reads:


The Sub-Contractor:


a) shall use an Isuzu TD50 Dump Truck


bearing Registration No. WW 885 Chassis No. 1814536 Engine No. 475064 supplied by the Contractor for the purpose of carrying out the




transportation of earth for the Contractor.


b) at his own expense, supply labour, diesel, lubricant oils for the said Isuzu TD50 Dump Truck and all other working tools and materials necessary for the execution of the sub-contract work.


c) reimburse the Contractor or pay for the


premium in respect of adequate insurance coverage of the said Isuzu TD50 Dump Truck and shall insure his employees under workmen’s


Compensation or SOCSO Scheme.


d) ………………………………..


e) ………………………………..”


The Contract did not mention that the defendant had taken delivery of the Dump Truck, identified in paragraph a) of clause 2), from Mortgage and Finance Berhad (hereinafter




referred to as MAF) on 3/6/80 pursuant to a Lease Agreement dated 3/6/80 between MAF and M/S Lai Siew Wah Sdn Bhd. i.e. the defendant. The plaintiff was never informed by the defendant, orally or in writing that the Dump Truck was on lease to the defendant from MAF. Under the said Lease Agreement, the defendant was required to pay MAF a rental of RM905.00 per month for the lease period of 24 months, commencing on 3/6/80. Under Clause 8(a) of the Lease Agreement the defendant shall insure the said Dump Truck for its full insurable value. The insurable value for the purposes of Clause 8(a) was stipulated in the Lease Agreement as RM23,000.00 for the First Year and RM 16,000.00 for the Second year (see Lease Agreement at pages 24 to 27 in Rekod Rayuan Tambahan).


Clause 2 of the Contract did not stipulate that the plaintiff was required to reimburse or pay the rental (of RM905.00) for the Dump Truck to be incurred by the defendant, although the defendant was obliged to pay monthly to MAF the said rental, commencing from 17/6/80, for the whole period of the lease.




It was never a term of the Contract that during the currency of the said Contract the plaintiff was to pay to the defendant any sum for hiring the Dump Truck. Nevertheless, the sum of RM6,000.00 paid by the plaintiff, as security deposit pursuant to Clause 8) a) of the Contract, has been unilaterally treated by the defendant as plaintiff’s payment of deposit for hiring of the said Dump Truck. This is irrefutable from the documentary evidence, namely, the official receipt No 1895, dated 7/6/80 (that is, the date of the commencement of the Contract), at page 200 of Rekod Rayuan. It reads:


“Received from Nagartanam A/L Balaraju Dollars Six Thousand Only in payment of Deposit for Hiring one unit of Isuzu TD50 Dump Truck S/No. 1814536 & Eng No. 475064.




Indeed, all the official receipts issued by the defendant to the plaintiff are “in payment of Deposit for Hiring of Isuzu Dump Truck”.




There is not a single official receipt to acknowledge that the defendant has received any security deposit from the plaintiff under Clause 8) a) and b) of the Contract (see official receipts issued by the defendant from page 200 to page 215 of the Rekod Rayuan). The learned trial Judge completely failed to evaluate this evidence. In failing to do so, he has misdirected himself in law and in fact with reference to the plaintiff’s claim for a refund of his security deposit and, thereby erred in concluding that the plaintiff had not proved his pleaded case. If the defendant has not accepted any payments made by the plaintiff as security deposit, it follows, as a logical conclusion, there would be no money in the hands of the defendant to forfeit from the plaintiff under Clause 8) c). Under such circumstances, any forfeiture of plaintiff’s money by the defendant, for any breach of the terms of the Contract, would be untenable and unlawful.




Clause 8) of the Agreement reads:




a) To secure the performance by the SubContractor of his obligations and covenants hereunder, the Sub-Contractor shall deposit the sum of dollars $6,000.00 with the Contractor.


b) To further ensure that the Sub-Contractor will not abandon the contract before its due date (the abandonment or failure to perform by the Sub-Contractor is acknowledged by the parties hereto as highly damaging to the Contractor’s business) the Sub-Contractor shall on or before the day of every month during the currency of this agreement deposit the further sum of $938.89 with the Contractor but so that the aggregate of such additional monthly deposit shall not exceed $33,800.00.




c) In the event of breach by the SubContractor of the terms of the contract, or the failure by the Sub-Contractor to complete the said term of three years, the Contractor shall be entitled to forfeit all the deposits so made under subparagraph a) plus b) hereof as agreed liquidated damages.”


An undated type-written letter, addressed to the defendant, agreeing to purchase the Dump Truck for the sum of RM39,800.00 upon expiry of the Contract, was


obviously ‘pre-prepared’ by the defendant before the Contract was executed. Thereafter, the plaintiff was undoubtedly prevailed upon by the defendant to sign the said letter on the same day the plaintiff signed the Contract (4/7/80). A


careful reading of the said letter, particularly the last paragraph thereof, clearly demonstrates the defendant’s intent and attempt to ingeniously and unconscionably create a situation of “heads, I win; tails, you lose;” in relation to the security deposits under clause 8) a) and b) of the Contract.




The Dump Truck, in all probability, will only have scrap value, at the expiry of the contract. The Dump Truck will most certainly suffer severe wear and tear in the off-road use of it by the plaintiff, in the execution of the Contract under clause 2) a) and 6). No person in his right mind would agree to purchase the said Dump Truck, upon the expiry of the Contract, at the same value as at the commencement of the Contract. The said undated letter (page 278 Record of Appeal) reads:




Lai Siew Wah Sdn. Bhd.


Taman Midah, Jalan Cheras Kuala Lumpur


I/We Nagartanam A/L Balaraju I/C No. 5987090 the Sub-Contractor, hereby agree to purchase theTD50 Dump Truck with Registration No. WW 885 Chasis No. 1814536 Engine No.475064 from your company for the sum of dollars $39800.00 upon expiry of my/our contract with your company dated 4th July, 1980.




I hereby authorize your company to contra all the deposits retained by your company towards payment of the purchase price.


Dated this day of


(Nagartanam A/L Balaraju)”


A careful scrutiny of the documentary evidence [that is, the Lease Agreement, dated 3/6/80 (page 24 Rekod Rayuan Tambahan) and the Hire-Purchase Agreement, dated 1/7/82 (page 39 Rekod Rayuan Tambahan)] relating to the said Dump Truck would reveal that the purported agreement to purchase by the plaintiff stated in the undated letter is null and void, because the defendant was in no position to agree to sell the Dump Truck on the date the plaintiff was made to sign the said un-dated letter. In any event, the plaintiff denied he ever agreed to buy the Dump Truck from the defendant. The




purchase price of RM39,800.00 for the Dump Truck, at the expiry of the Contract, is too ludicrously high, for anyone to agree.


DW2, a director of the defendant, testified that the financing for the purchase of the Dump Truck was obtained from MAF. Under the Lease Agreement, dated 3/6/80, the defendant has to pay 24 rentals of RM905.00 monthly, with effect from 17/6/80 and, at the end of the lease contract the defendant may offer to purchase the Dump Truck from MAF (see pages 23-27 of Rekod Rayuan Tambahan). Clause 3 of the Lease Agreement clearly provides that the defendant (Lessee) shall have no right of property over the Dump Truck and is merely a bailee to use the same subject to the terms and conditions in the Lease Agreement:


“3. The Lessee acknowledges that the Goods are and throughout the period of this Lease shall remain the sole property of the Lessor and the Lessee shall have no right of property therein




but is merely a bailee to use the same subject to the terms and conditions herein contained.”


At the end of the 24 months of the Lease Agreement, the defendant entered into a one year Hire-Purchase Agreement, dated 1/7/82 ,with MAF for the purchase of the Dump Truck at the Hire Purchase Price of RM6495.00 and Cash Price of RM6,000.00 (see The Schedule in the Hire Purchase Agreement at page 40 Rekod Rayuan Tambahan). Under the repayment schedule, the balance of hire is payable by 11 monthly installments of RM417.80 and one final rental of RM408.00, commencing on 25/7/82 and, thereafter, on or before the 25th day of each succeeding month until the said 12 rentals have been paid in full. Under clause 4 of the Hire Purchase Agreement the Hirer (Defendant) shall not have any right or interest in the Dump Truck other than that of Hirer under the agreement until all the 12 payments have been made and, the Dump Truck shall remain the absolute property of the Owner (that is, MAF). The hirer shall not




represent or hold himself out to be the owner of the Dump




“4. If the Hirer pays all sums due or payable under this agreement including the initial payment made upon signing of this agreement for the option to purchase and the monthly payments by way of rent for the hiring and has strictly performed and observed all the conditions of this agreement the hiring shall come to an end and the said goods shall become the property of the Hirer and the Owner will assign and make over all its right and interest in the same to the Hirer but until all such payment as aforesaid have been made and the said conditions have been performed the said goods shall remain the absolute property of the Owner, and the Hirer shall not have any right or interest in the same other than that of Hirer under this agreement. In particular and without prejudice to the foregoing, the Hirer shall not represent or hold himself out as or do or suffer anything whereby the Hirer may




be reputed to be Owner of the goods and any implied consent of the Owner is also hereby expressly excluded.”


In the above circumstances, even upon the expiry of the Contract on 6/6/83, the defendant had no right, pursuant to clause 4 of the said Hire-Purchase Agreement, to hold himself out as the owner of the Dump Truck and attempt to sell same to the plaintiff because, it was only on 5/7/83 that MAF withdrew its ownership claim on the Dump Truck, when it wrote a letter to the RIMV (see letter at page 43 Rekod Rayuan Tambahan).


The defendant did not plead any set-off and counter-claim against the plaintiff for damages arising from any breach of the terms and conditions in the Contract.


The plaintiff’s evidence is simple and consistent with the Contract. His understanding was that the deposit was for the due performance of the contract for the transportation of earth




and refundable at the end of the contract. At no time did he


agree that the defendant could use the deposit towards the purchase of the Dump Truck. He maintained that the contract was not for the purchase of the Dump Truck (lorry):


“Pada masa itu, saya tidak mampu membeli lori itu, tetapi mampu mendapatkan kontrak sahaja.


Kontrak ini tidak untuk membeli lori”


The plaintiff (PW1) testified, inter alia :




“…Pada 1980, saya telah menandatangani satu perjanjian dengan Defendan BD2 Pg 1-3 referred to witness… Di bawah perjanjian ini saya diminta mengangkat tanah dari satu tempat ke satu tempat lain. Saya telah membayar sebanyak RM6000/- kepada Defendan, sebagai deposit.




……Jumlah deposit adalah RM38,000.


Selain dari RM6000/- bakinya RM32,800.00 adalah akan dibayar sebanyak RM938.89, yang akan dipotong daripada pendapatan bulanan saya. Selepas itu saya meneruskan kerja ini.


BD1 Pg dirujuk kepada saksi. Ini adalah penyata akhir yang saya terima daripada Defendan.”


Now, the “penyata akhir” alluded to by the plaintiff, is the Statement of Account, dated 5th Mei 1983 found at page 232 of the Record of Appeal, issued by the Defendant. It shows a credit balance of RM28,533.36.


In his evidence the plaintiff also said:


“Defendan membekalkan saya lori untuk mengangkut tanah. Saya tidak membayar untuk menggunakan lori yang dibekalkan kepada saya. Di bawah perjanjian tersebut, saya hanya perlu membayar sebanyak $938.89 untuk meneruskan kerja tersebut. Untuk kegunaan




lori tersebut, saya tidak perlu membayar apa-




Apabila saya tandatangan surat di muka surat 5, saya diberitahu saya boleh membeli lori itu selepas 3 tahun ataupun deposit tersebut akan dipulangkan kepada saya. Saya teruskan kontrak ini dan kemudian selepas 2 tahun saya telah berhenti kerja tersebut. Saya pulangkan lori itu kepada defendan pada Disember 1983. Saya berhenti kerja ini kerana saya tidak dapat keuntungan dan lori itu sentiasa rosak. Pada masa saya menggunakan lori itu, perbelanjaan untuk spare part dan maintenance akan dipotong daripada pendapatan saya. Saya membayar untuk memperbaiki lori itu.


Selepas saya berhenti perjanjian tersebut, saya diminta untuk membeli lori tersebut, tetapi saya tidak ingin membeli lori tersebut, kerana saya tidak mendapat keuntungan. Malah pula, lori itu sentiasa rosak.




Saya telah meminta RM6000/- dan deposit bulanan untuk dikembalikan kepada saya. Defendan enggan membayar. Defendan telah memaksa saya membeli lori tersebut, tetapi tidak menunjukkan surat di muka surat 5 BD2.


…………………………. Saya tidak


membenarkan Defendan menggunakan deposit yang saya telah bayar, sebagai harga pembelian lori itu.


Saya meminta pengembalian deposit itu dan deklarasi bahawa surat tersebut adalah tak sah dan batal.






S: Awak bayar tiap-tiap bulan untuk kerja.


Anda bayar untuk kerja anda, Betul?


J: Ya, untuk kontrak.


S: Orang lain dibayar untuk kerja. Anda


bayar untuk kerja anda, Betul?


J: Pembayaran saya adalah untuk deposit


kontrak untuk mengangkut.


S: Tiap-tiap bulan Lai Siew Wah ada beri




J: Ya, Betul.


S: BD1 muka surat 49 dirujuk kepada saksi.


Ini adalah satu resit?


J: Ya, Betul.


S: Resit ini adalah untuk penyewaan lori?






Saya tidak tahu apa yang tertulis dalam resit tetapi saya tahu ini adalah untuk bayaran bulanan.




Q. When you signed this contract BD2 pgl, and letter pg. 5, were you told that the Agreement and the letter were one contract?


A. Ya.


Q. Were you positive that pg.5 was not dated?


A. Ya.”




The Statement of Defence is at pages 61 to 64 of the Appeal Record. It is significant to note that the defendant has not pleaded any set-off and counterclaim, in answer to plaintiff’s claim for a return of the monies deposited by him under the Contract. While admitting the execution of the Contract, the defendant contends that the payments by the plaintiff were a deposit to ensure the plaintiff will complete the Contract and in the event there was a breach by the plaintiff, the defendant was entitled to forfeit all deposits as liquidated damages. In the event the Contract was carried out to its completion, the plaintiff was entitled to purchase the Dump Truck from the defendant for the sum of RM39,800.00. As regards the undated letter, prepared alongside the Contract, signed by the plaintiff and addressed to the defendant, the defendant contends that the plaintiff agreed to purchase the Dump Truck for the sum of RM39, 800.00 upon the expiry of the Agreement and authorized the defendant to set off all payments of deposits towards payment of the purchase price.




The defendant admits that a sum of RM28,540.05 was paid as deposit pursuant to the Contract and claimed that it exercised a contractual right in forfeiting the said deposit as agreed liquidated damages.


It is trite law, practice and procedure, that in order to exercise or assert defendant’s contractual right to forfeit any money, in answer to plaintiff’s claim for the return of the security deposit, the defendant must plead, by way of a set-off and counterclaim, the alleged breach or breaches of the Contract that entitles the defendant to forfeit the said sum by way of liquidated damages under the Contract and prove the same. The defendant has glaringly failed to do this or to sue the plaintiff on the alleged agreement contained in the undated letter vide the Dump Truck.


DW1, a director of the company, testifying on behalf of the defendant, said that he never told or promised the plaintiff




that whatever sums of monies he had paid will be refunded to




DW1 testified, inter-alia:


[Examination-in chief]


“I have never told or promised the plaintiff that whatever sums of money he has paid would be refunded to him.


The Agreement upon successful performance will entitle the plaintiff to the truck and all payments made by him is subject to a contra. He must fulfill his obligations under the Agreement.


Plaintiff is not the only sub-contractor who signed this Agreement. We have a total of 54 agreements of this nature. The plaintiff is one of them.






Pg 11-13 of D1- The purpose of collecting RM6000/- and then deducting RM938.89 is to assist the company perform the contract


obligations. The collections are by way of security deposit to perform the sub-contract works.


On a reading of this Agreement pg 11-13, it (the deposit) cannot be applied for any other purpose than stated in the Agreement.


We are actually assisting the sub-contractor not only earn a living but also to own a truck eventually. If the sub-contractor completes the contract, he has the commitment to purchase the truck.


Pg 14 is never dated and will be dated if the sub-contract is fully performed. Completion of the contract means the sub-contractor will




purchase the lorry. However, the project has been abandoned. This letter was not included in the Agreement. It is part of the sub-contractor’s commitment to own this truck. He has no option to seek a refund of the deposit.


The true intention of the Defendant is to apply the money towards the purchase price of the truck. The objective of the Agreement is to assist the sub-contractor to own a truck upon completion.


The sub-contractor’s option is to own the truck. The objectives are not mentioned but there are clauses related to the objective.


I propose a sum of RM33,800.00 as security deposit. This is the cost of the truck. When the contract commenced on 4/7/1980, the truck was valued at RM33, 800.00. I can’t recall how much loan was taken on the truck. At the end of the contract period, the book value, I can check from the book.




D2 is my calculation. The residual value as at 10/7/1982 was RM6000/.


As at 25/6/1983, the residual value was nil.


When I requested the deposit of RM33,800/-, it reflected the value of the vehicle at the time of the Agreement i.e. 4/7/1980. I agreed to sell the vehicle to the Plaintiff on the day of the sub-contract was signed. That was the date of the commitment on the date of the Agreement. I sold the vehicle to the Plaintiff on the date of the sub-contract. The transfer was to be effected upon the completion of the subcontract.


The monthly deductions become a fund to the Defendant’s company. The company paid for the truck at the time of the purchase. We financed the scheme.”




It is irrefutable from the documentary evidence namely, the Lease Agreement and the Hire-Purchase Agreement, that the property in the Dump Truck, during the currency of the plaintiff’s 3 year Contract with the defendant or, even upon its expiry on 5/6/83, was not in the hands of the defendant. Instead the Dump Truck remained the absolute property of MAF until 5/7/83. Under such circumstances, the defendant could not have sold or agreed to sell the Dump Truck to the plaintiff nor could the plaintiff have agreed to buy the Dump Truck on the date the Contract was signed on 4/7/80.


All the official receipts issued by the defendant in respect of the plaintiff’s payments for security deposit under the Contract reflect that the defendant has deemed the said payments to be in fact made for the hiring of the Dump Truck. Appropriation of the security deposit for the hiring of the Dump Truck is not a term of the Contract and, therefore, any appropriation by the defendant is unlawful and void. There is no lawful and valid agreement between the plaintiff and the defendant permitting such appropriation. The defendant is not




entitled, upon the expiration of the Contract to retain the payments which were made by way of security deposit for due performance of the Contract.


The appeal is unanimously allowed. The decision of the High Court Judge is set aside. The undated document referred to in paragraph 4 of the statement of claim is hereby declared null and void. Judgment entered for the plaintiff in the sum of RM28,540.05 (admitted to have been received by the defendant from the plaintiff, in the statement of defence), with interest at 4% per annum from the date of filing of the action till date of judgment and, thereafter, at 8% per annum till date of full payment.


Costs to the plaintiff, here and below. Deposit of this appeal to be refunded to plaintiff (appellant).




YA Datin Paduka Zaleha binti Zahari, JCA and YA Dato’


Ahmad bin Haji Maarop, JCA have seen this judgment in draft and are in agreement with the contents thereof.


Order accordingly.






Court of Appeal PUTRAJAYA




1. Encik Harpal Singh Grewal


2. Encik Jasvinjit Singh PEGUAM RESPONDEN


1. Encik Ivan Loo


2. Encik Ganesh K.S. Sinnadurai


25 JANUARY 2008



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