Nulink Solutions Sdn Bhd(Company No: 513450-W) … AppellantAndAfdilia Holdings Sdn Bhd(Company No: 154349-P) … Respondent

  

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IN THE HIGH COURT OF MALAYA AT KUALA LUMPUR

 

CIVIL APPEAL NO: 12BNCC-23-04/2015

 

BETWEEN

 

NULINK SOLUTIONS SDN BHD

 

(Company No: 513450-W) … APPELLANT

 

AND

 

AFDILIA HOLDINGS SDN BHD

 

(Company No: 154349-P) … RESPONDENT

 

JUDGMENT

 

(Appeal from Sessions Court)

 

A. Issues

 

1. This appeal against a Sessions Court’s decision, concerns, among others, the following issues:

 

(1) whether “without prejudice” communication between a party to a suit and a person who is not a party to the suit, is admissible as evidence in the suit;

 

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(2) whether there is a concluded agreement based on the correspondence by solicitors;

 

(3) what is the effect of a cheque drawn by a party (Drawer) under s 73(1) of the Bills of Exchange Act 1949 (BEA)?;

 

(4) whether a party to whom a cheque is payable (Payee) is barred from presenting the cheque for payment by a settlement agreement between the Payee and a party who is not the Drawer; and

 

(5) what is the remedy available to the Payee against the Drawer for a dishonoured cheque under s 47(2) read with ss 55(1)(a), 57(a)(i) and (ii) BEA?

 

B. Facts

 

2. As of 4.4.2013, Gunung Fiber Optik Sdn. Bhd. (GFO) owed trade debts in the amount of RM2,499,913.28 (GFO’s Debt) to the appellant company (Appellant).

 

3. Dato’ Mohd. Nadzri bin A. Halim (SD1) is a director of the respondent company (Respondent) and GFO. SD1 and SDI’s wife are the only shareholders of the Respondent. SD1 however is not a shareholder of GFO.

 

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4. By way of a letter dated 8.4.2013, the Appellant’s solicitors, Messrs Shook Lin & Bok (Messrs SLB), had demanded GFO to pay GFO’s Debt. Upon GFO’s failure to pay GFO’s Debt, Messrs SLB served a demand dated

 

3.7.2013 under s 218(2)(a) of the Companies Act 1965 (CA) on GFO [Section 218(2)(a) Demand].

 

5. GFO had applied to the Shah Alam High Court for a “Fortuna” injunction to restrain the Appellant from filing a winding up petition against GFO (Fortuna Injunction Proceedings).

 

6. Pending the Fortuna Injunction Proceedings, a meeting was held on

 

2.8.2013 (Meeting dated 2.8.2013) between –

 

(1) SD1 acting on GFO’s behalf; and

 

(2) Mr. Victor Lim Fung Tuang, the Appellant’s “Principal Officer’ (SP1), and Mr. Goh Ban Tiong (both acted for the Appellant).

 

7. Messrs SLB sent a “strictly without prejudice” letter dated 13.8.2013 (Messrs SLB’s Letter dated 13.8.2013) to GFO’s solicitors, Messrs AJ Arifin, Yeo & Harpal (Messrs AYH). According to Messrs SLB’s Letter dated 13.8.2013, among others, SD1 had proposed at the Meeting dated

 

2.8.2013 that GFO would settle GFO’s Debt amounting to RM2,499,913.28 (Paragraph 2 of Messrs SLB’s Letter dated 13.8.2013) on the following terms:

 

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(1) a sum of RM2,142,351.28 would be paid by GFO in 12 monthly instalments by way of 12 cheques. These 12 Cheques would include –

 

(a) a 11 Banker’s Cheque” to be dated 13.8.2013;

 

(b) the Respondent’s Cheque which would be post-dated to 30.9.2013; and

 

(c) 10 post-dated cheques by GFO (GFO’s 10 Post-dated Cheques);

 

(2) the remaining sum of RM357,562.00 would be settled by GFO by, among others, entering into a hire purchase agreement with a bank within 3 months from 15.8.2013 (HP Arrangement);

 

(3) GFO would procure a bank guarantee to guarantee the payments of GFO’s 10 Post-dated Cheques (Provision of BG); and

 

(4) if GFO failed to accept the proposal stated in Messrs SLB’s Letter dated 13.8.2013, the Appellant would commence legal proceedings against GFO without further notice (Paragraph 5 of Messrs SLB’s Letter dated 13.8.2013).

 

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8. Messrs AYH sent a “without prejudice” letter dated 13.8.2013 to Messrs SLB (Messrs AYH’s Letter dated 13.8.2013). Messrs AYH’s Letter dated

 

13.8.2013 stated, among others, as follows:

 

(1) Messrs AYH referred to the Meeting dated 2.8.2013 and Messrs SLB’s Letter dated 13.8.2013;

 

(2) Messrs AYH confirmed, among others, Paragraph 2 of Messrs SLB’s Letter dated 13.8.2013 except that the settlement sum was RM2,100,000.00 and not RM2,499,913.28. Consequently, Messrs AYH enclosed the following 12 cheques in Messrs AYH’s Letter dated

 

13.8.2013 to Messrs SLB –

 

(a) a Public Bank Bhd’s (PBB) Banker’s Cheque no. 167793 in the amount of RM150,000.00 payable to the Appellant (Banker’s Cheque);

 

(b) a PBB’s cheque no. 272230 dated 30.9.2013 drawn by the Respondent for a sum of RM150,000.00 (Sum) and payable to the Appellant by way of “account payee” (Respondent’s Cheque); and

 

(c) GFO’s 10 Post-dated Cheques (12 Cheques);

 

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(3) Messrs AYH had not been instructed on the HP Arrangement. In fact, Messrs AYH stated that the HP Arrangement constituted “new terms” which had not been discussed before the issuance of Messrs SLB’s Letter dated 13.8.2013; and

 

(4) Paragraph 5 of Messrs SLB’s Letter dated 13.8.2013 was “uncalled for’ as all the terms as agreed, had been complied with by GFO and the Appellant had no more cause of action against GFO.

 

9. In reply to Messrs AYH’s Letter dated 13.8.2013, Messrs SLB sent a “strictly without prejudice” letter dated 14.8.2013 (Messrs SLB’s Letter dated 14.8.2013). Messrs SLB’s Letter dated 14.8.2013 stated that SD1 had proposed to settle GFO’s Debt in the amount of RM2,499,913.28, instead of RM2,100,000.00. As such, Messrs SLB requested for another cheque for the sum of RM42,351.28 from GFO.

 

10. Messrs SLB sent a “strictly without prejudice” letter dated 22.8.2013 to Messrs AYH (Messrs SLB’s Letter dated 22.8.2013). Messrs SLB’s Letter dated 22.8.2013 stated, among others, if Messrs SLB did not receive GFO’s cheque for the sum of RM42,351.28 by 12.00 pm, 26.8.2013, the Appellant would deem that GFO had no interest in an amicable resolution of the matter and the settlement negotiation “shall’ be aborted and the Appellant would commence legal proceedings against GFO to recover GFO’s Debts without further notice.

 

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11. Messrs AYH sent a letter dated 26.8.2013 to Messrs SLB (Messrs AYH’s Letter dated 26.8.2013) which stated, among others:

 

(1) Mr. Jasvinjit Singh, the Respondent’s learned counsel, was in the midst of setting up his own legal practice and was having difficulty in obtaining instructions;

 

(2) SD1 had been hospitalized due to a “nagging ailment;

 

(3) GFO agreed to deposit the additional sum of RM42,351.28 with Messrs SLB. GFO was also agreeable to the HP Arrangement; and

 

(4) due to the situation stated in Messrs AYH’s Letter dated 26.8.2013, Messrs AYH requested for time until –

 

(a) 29.8.2013 to deposit the cheque for the sum of RM42,351.28; and

 

(b) 27.8.2013 to confirm the “exact terms” of the issues raised in Messrs SLB’s Letter dated 13.8.2013 regarding, among others, the HP Arrangement, because the file and Messrs SLB’s Letter dated 13.8.2013 were in Mr. Jasvinjit Singh’s new office.

 

12. Messrs AYH sent a letter dated 28.8.2013 to Messrs SLB (Messrs AYH’s Letter dated 28.8.2013). Messrs AYH’s Letter dated 28.8.2013 stated, among others –

 

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(1) Messrs AYH confirmed that GFO would deposit an additional cheque for the sum of RM42,351.28 by 29.8.2013 but this cheque would be dated 30.8.2014;

 

(2) GFO accepted the additional terms regarding the HP Arrangement “save that GFO requested for a three-month period to commence from the date of Messrs AYH’s Letter dated 28.8.2013;

 

(3) GFO further accepted paragraph 3.2 of Messrs SLB’s Letter dated

 

13.8.2013 (regarding, among others, the effect of GFO’s default of any instalment payment) “save that the default clause would not be triggered until the expiry of 21 days from the due date of the relevant instalment. This was because GFO’s payments from Telekom Malaysia Bhd. and/or GFO’s financier might be delayed; and

 

(4) Messrs AYH requested Messrs SLB to forward a draft settlement agreement for Messrs AYH’s perusal. For this purpose, the draft settlement agreement could be emailed to iasviniit@gmail.com.

 

13. By way of an email dated 17.9.2013, Messrs SLB forwarded a draft settlement agreement to Mr. Jasvinjit Singh. Subsequently, there was an exchange of emails between Messrs SLB and Mr. Jasvinjit Singh on the terms and conditions of the draft settlement agreement. I will highlight one email dated 27.9.2013 sent by Mr. Jasvinjit Singh to Messrs SLB (Mr. Jasvinjit Singh’s Email dated 27.9.2013) which stated, among others,

 

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the period for the Provision of BG should be extended by 1 more week as there would not be any prejudice “so long as the cheques continue to be cleared’.

 

14. The settlement agreement was not executed by GFO and the Appellant.

 

15. GFO’s Malayan Banking Bhd’s (MBB) cheque dated 30.10.2013 for the sum of RM150,000.00 (GFO’s Cheque dated 30.10.2013) was presented by the Appellant to MBB for payment but GFO’s Cheque dated 30.10.2013 had been dishonoured by GFO.

 

16. The Appellant presented the Respondent’s Cheque to PBB for payment and was informed by PBB on 7.11.2013 that the Respondent’s Cheque had been dishonoured by the Respondent. According to PBB, the Respondent’s Cheque was not honoured because “payment stopped/payment countermanded’ by the Respondent.

 

17. On 5.12.2013, Messrs SLB sent a letter to the Respondent’s solicitors, Messrs Jasvinjit Singh & Co (Messrs JS), regarding, among others (Messrs SLB’s Letter dated 5.12.2013), the following matters:

 

(1) the dishonoured Respondent’s Cheque and GFO’s Cheque dated 30.10.2013;

 

(2) whether GFO was interested to settle the matter;

 

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(3) Mr. Jasvinjit Singh informed Messrs SLB that he would speak to his client and respond on 8.11.2013. However, until the date of Messrs SLB’s Letter dated 5.12.2013, Mr. Jasvinjit Singh had yet to respond to Messrs SLB; and

 

(4) GFO had breached the settlement agreement and the Appellant was entitled to exercise all rights under the settlement agreement against GFO.

 

18. Messrs JS replied to Messrs SLB’s Letter dated 5.12.2013 by way of a letter dated 5.12.2013 (Messrs JS’s Letter dated 5.12.2013). Messrs JS’s Letter dated 5.12.2013 stated, among others:

 

(1) Mr. Jasvinjit Singh apologized for not reverting to Messrs SLB on the question of dishonor of the Respondent’s Cheque and GFO’s Cheque dated 30.10.2013;

 

(2) GFO was unable to proceed with any amicable settlement with the Appellant; and

 

(3) as there was no “binding agreement’ between GFO and the Appellant

 

(a) Messrs SLB should not have released the 12 Cheques to the Appellant;

 

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(b) the Appellant should not have presented the Respondent’s Cheque and GFO’s Cheque dated 30.10.2013 for payment; and

 

(c) Messrs SLB should return the balance of the 12 Cheques, including the Banker’s Cheque to Messrs JS.

 

19. On 10.12.2013, the Appellant presented a winding up petition against GFO in the Kuala Lumpur High Court (KLHC). The KLHC wound up GFO and appointed the Official Receiver (OR) as GFO’s liquidator on 6.5.2014.

 

C. Sessions Court

 

20. On 13.1.2014, based on the dishonoured Respondent’s Cheque, the Appellant filed a suit against the Respondent in the Sessions Court to claim for, among others –

 

(1) the Sum;

 

(2) interest at the rate of 5% per annum on the Sum from the date of judgment until the satisfaction of the judgment; and

 

(3) costs (Appellant’s Suit).

 

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21. In the Appellant’s Suit, the Respondent counterclaimed against the Appellant in respect of the Banker’s Cheque (Respondent’s Counterclaim).

 

22. The learned Sessions Court Judge had –

 

(1) dismissed the Appellant’s Suit with costs (Sessions Court’s Dismissal of Appellant’s Suit); and

 

(2) dismissed the Respondent’s Counterclaim with costs (Sessions Court’s Dismissal of Respondent’s Counterclaim).

 

23. The Appellant filed this appeal against the Sessions Court’s Dismissal of Appellant’s Suit. There was no appeal by the Respondent against the Sessions Court’s Dismissal of Respondent’s Counterclaim.

 

24. The learned Sessions Court Judge’s written judgment gave the following reasons to substantiate the Sessions Court’s Dismissal of Appellant’s Suit:

 

(1) the Appellant and GFO were in a state of negotiations and a settlement agreement had not been reached between the Appellant and GFO. The learned Sessions Court Judge had relied on the following cases –

 

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(a) the Supreme Court’s judgment delivered by Edgar Joseph Jr SCJ in Ayer Hitam Tin Dredging Malaysia Bhd v YC Chin Enterprises Sdn Bhd [1994] 1 MLRA 201; and

 

(b) Abdul Malek Ahmad FCJ’s (as he then was) decision in the Supreme Court case of Lee Kok Chin v Jasmin Arunthuthu Allegakogen & Ors [2000] 1 MLRA 603; and

 

(2) the Appellant had no right to present the Respondent’s Cheque until there was a concluded and formalized settlement agreement between the Appellant and GFO.

 

D. Parties’ submission

 

25. The Appellant contended, among others, as follows, in support of this

 

appeal:

 

(1) a settlement agreement had been reached between the Appellant and GFO. In the KLHC, GFO resisted the Appellant’s winding up proceedings by contending that there was no binding settlement agreement between the Appellant and GFO. Such a contention had been rejected by KLHC when the KLHC wound up GFO;

 

(2) the 12 Cheques had been tendered to the Appellant to stave off winding up proceedings against GFO. As such, there was

 

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consideration for the 12 Cheques, including the Respondent’s

 

Cheque;

 

(3) the execution of a formal settlement agreement was proposed by the

 

Appellant for the Appellant’s benefit and could be waived by the

 

Appellant according to the following cases –

 

(a) the judgment of the Singapore’s Court of Appeal delivered by Chan Sek Keong J (as he then was) in Rumah Nanas Rubber Estates Sdn Bhd v NM Rothschild & Sons (Singapore) Ltd & Ors [1990] 1 MLJ 257; and

 

(b) Abdul Wahab Patail JCA’s judgment in the Court of Appeal case of Bank Bumiputra Malaysia Bhd v Emas Bestari Sdn Bhd & another appeal [2014] 2 MLJ 49;

 

(4) as –

 

(a) there was a settlement agreement between the Appellant and GFO; and

 

(b) the 12 Cheques had been given to the Appellant freely and without any condition attached

 

– the Appellant could present the Respondent’s Cheque to PBB for payment;

 

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(5) a cheque is to be treated as cash according to the following cases –

 

(a) the English Divisional Court case of Jackson v Murphy (18871888) 4 TLR 92;

 

(b) Syed Ahmad Helmy JC’s (as he then was) decision in the High Court case of Dato’ Francis Ng Tian Sang v Alexander Wong Shoon Choy & Ors [2002] 7 CLJ 301; and

 

(c) the judgment of Mary Lim J (as she then was) in the High Court in Affin Bank Bhd v MMJ Exchange Sdn Bhd & Anor [2011] 9 MLJ 787 (MMJ Exchange Sdn Bhd);

 

(6) when the Respondent’s Cheque was dishonoured, s 47 BEA grants the Appellant with an immediate right of recourse against the Respondent as the Drawer. The Appellant relied on the following cases –

 

(a) the Singapore Court of Appeal’s judgment delivered by VK Rajah JA in Tjong Very Sumito & Ors v Antig Investments Pte Ltd

 

[2009] 4 SLR 732;

 

(b) Mary Lim J’s decision in the High Court case of ZAQ Construction Sdn Bhd & Anor v Putrajaya Holdings Sdn Bhd

 

[2014] 10 MLJ 633;

 

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(c) Belinda Ang Saw Ean J’s judgment in the Singapore High Court case of NEC Asia Pte Ltd (now known as NEC Asia Pacific Pte Ltd) v Picket & Rail Asia Pacific Pte Ltd & Ors [2011] 2 SLR 565;

 

(d) the decision of Lau Bee Lan J in the High Court case of Raymond Mah Mun Kitt v Bengjaya Sdn Bhd [2014] 1 LNS 82; and

 

(e) Lee Swee Seng J’s judgment in the High Court in Uni Wall Architectural Product & Services Sdn Bhd v Global Upline

 

Sdn Bhd [2011] MLJU 517;

 

(7) the Respondent as the Drawer has the legal burden to prove that there was no consideration for the Respondent’s Cheque. The Appellant’s learned counsel cited Thomson CJ’s (as he then was) judgment in the Federation of Malaya’s Court of Appeal in Ong Guan Hua v Chong (1963) 29 MLJ 6; and

 

(8) the Respondent could not establish any of the 3 defences available to a Drawer, namely –

 

(a) there was fraud;

 

(b) the Respondent’s Cheque was invalid; or

 

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(c) there was failure of consideration for the Respondent’s Cheque.

 

The Appellant cited Viscount Dilhorne’s judgment in the House of Lords case of Nova (Jersey) Knit Ltd v Kammgarn Spinnerei GmbH [1977] 2 All ER 463.

 

26. In resisting this appeal, the Respondent advanced the following contentions, among others:

 

(1) no settlement agreement had been concluded between the Appellant and GFO. Hence, Messrs SLB should not have given the 12 Cheques to the Appellant and the Appellant could not lawfully present –

 

(a) the Banker’s Cheque; and

 

(b) the Respondent’s Cheque – for payment;

 

(2) the Respondent was not bound to honour the Respondent’s Cheque because there was a total failure of consideration in respect of the Respondent’s Cheque within the meaning of s 2(d) of the Contracts Act 1950 [CA (1950)]. The Respondent relied on Suffian J’s (as he then was) judgment in the High Court case of JM Wotherspoon & Co Ltd v Henry Agency House [1962] MLJ 86;

 

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(3) the communication between –

 

(a) SD1 and SP1; and

 

(b) solicitors for the Appellant and GFO

 

– had been conducted on a “without prejudice” basis and should not be admitted as evidence in this case; and

 

(4) in presenting the Respondent’s Cheque, the Appellant had acted fraudulently, unlawfully and mala fide. The Appellant had not given any notice to the Respondent and GFO that the Appellant would present the Respondent’s Cheque. Reliance had been placed by the Respondent on the following cases –

 

(a) Abdul Aziz J’s judgment in the Federal Court case of Kerpa Singh v Bariam Singh [1966] 1 MLJ 38;

 

(b) Rigby J’s decision in the High Court in Gooi Seang Tuck v Tan Peng Loon & Anor [1959] 1 MLRH 680;

 

(c) Choor Singh J’s judgment in the High Court case of Jagat Singh v Arthur Heng [1963] 1 MLRH 313; and

 

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(d) Rodzhariah Bujang JC’s (as she then was) decision in the High Court in Re Joseph Tang Chock Chung, ex-p Wong Bing Seng [2009] 10 MLRH 148.

 

E. GFO, Respondent and SD1 are separate legal persons

 

27. It is trite law that under s 16(5) CA, GFO and the Respondent are separate legal entities. GFO and the Respondent are also legal persons who are distinct from SD1.

 

28. To pierce or lift the corporate veil of a company, 3 Federal Court judgments require a party to fulfil a two-fold requirement (2 Conditions), namely the party has to satisfy the court that –

 

(1) the piercing or lifting of a corporate veil is in the interest of justice; and

 

(2) there exists special circumstances to pierce or lift the corporate veil in question, such as –

 

(a) there is perpetration of actual fraud or Common Law fraud;

 

(b) equitable fraud or constructive fraud has been committed;

 

(c) there is evasion of obligation or liability; or

 

(d) there has been an abuse of corporate personality.

 

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The 3 Federal Court judgments which have laid down the 2 Conditions, are as follows:

 

(i) Hasan Lah FCJ’s judgment in Solid Investment Ltd v Alcatel Lucent (M) Sdn Bhd [2014] 3 CLJ 73, at 92;

 

(ii) the decision of Richard Malanjum CJ (Sabah & Sarawak) in Gurbachan Singh s/o Bagawan Singh & Ors v Vellasamy s/o Pennusamy & Ors [2015] 1 MLJ 773, at paragraphs 96-99; and

 

(iii) Richard Malanjum CJ (Sabah & Sarawak)’s judgment in Giga Engineering & Construction Sdn Bhd v Yip Chee Seng & Sons Sdn Bhd & Anor [2015] 9 CLJ 537, at paragraphs 39, 44 and 45.

 

29. Both the Appellant and Respondent had not pleaded and contended that the corporate veil of GFO and the Respondent should be pierced or lifted. Nor was there any evidence that the 2 Conditions had been fulfilled in this case to pierce or lift the corporate personalities of GFO and the Respondent. As such, this appeal will be decided on the separate legal personalities of GFO, Respondent and SD1.

 

F. Whether privileged communication is admissible

 

30. As stated above, the following letters had been sent on a “without prejudice” basis:

 

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(1) Messrs SLB’s Letters dated 13.8.2013, 14.8.2013 and 22.8.2013; and

 

(2) Messrs AYH’s Letter dated 13.8.2013.

 

31. I am of the view that the “without prejudice” letters are admissible in this

 

case on any one or more of the following grounds:

 

(1) the “without prejudice” communication was between the Appellant and GFO. As explained above, GFO is a legal entity which is different from the Respondent and SD1. GFO is not a party in this case. The privilege of “without prejudice” communication belonged solely to GFO and the Appellant. Neither the Respondent nor SD1 could claim any privilege in respect of the “without prejudice” communication between the Appellant and GFO;

 

(2) for reasons which will be elaborated later in this judgment, this court finds that there is a concluded settlement agreement between GFO and the Appellant. In Malayan Banking Bhd v Foo See Moi [1981] 2 MLJ 17, at 18, Chang Min Tat FJ decided in the Federal Court that when “without prejudice” negotiations leads to a settlement, such “without prejudice” communication becomes admissible as evidence of the terms and conditions of the settlement agreement; and

 

(3) the Respondent had not objected to the “without prejudice” letters at the trial. In fact, the Respondent had relied on certain “without

 

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prejudice” letters in this case. As such, the Respondent cannot now object to the admissibility of the “without prejudice” letters in this case – please see the Singapore Court of Appeal’s judgment in Lim Tjoen Kong v A-B Chew Investments Pte Ltd [1991] 3 MLJ 4, at 8-9, delivered by Chan Sek Keong J (as he then was).

 

G. Whether there was a concluded settlement agreement between GFO and Appellant

 

32. Firstly, cases which have decided on whether binding agreements have been formed or otherwise, depend on the evidence adduced in those cases. As such, reported judgments on this issue may not constitute binding legal precedents from the view point of stare decisis.

 

33. I am of the view that the following evidence proves on a balance of probabilities that GFO has entered into a binding agreement with the Appellant (Settlement Agreement) within the meaning of s 2(e) CA (1950) (every promise and every set of promises, forming the consideration for each other, is an agreement):

 

(1) Messrs SLB’s Letter dated 13.8.2013 constituted a “proposaf’ within the meaning of s 2(a) CA (1950) (when one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to the act or abstinence, he is said to make a proposal);

 

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(2) Messrs AYH’s Letter dated 28.8.2013 accepted the Appellant’s offer as understood in s 2(b) CA (1950) (when the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted: a proposal, when accepted, becomes a promise). I am mindful that Messrs AYH’s Letter dated 28.8.2013 expressly requested for 2 extensions of time regarding the HP Arrangement and the default clause (GFO’s Request For Extensions of Time). I am of the opinion that GFO’s Request For Extensions of Time –

 

(a) did not amount to a counter offer which would destroy the Appellant’s offer (in Messrs SLB’s Letter dated 13.8.2013). I rely on the Court of Appeal’s judgment delivered by Zulkefli Makinuddin JCA (as he then was) in Transwater Tenaga Sdn Bhd v APS Technologies Sdn Bhd & Anor [2007] 1 MLJ 301, at 309, as follows –

 

“[13] Assuming that there was a request by the first plaintiff to quote an escalated cost, by law it remained a request and not a counter-offer as proffered by the defendant. I find there is nothing specific by way of a counter-offer made but a mere request which cannot be treated as a rejection of the defendant’s offer of 14 January 1998 ”

 

(emphasis added); and

 

(b) did not constitute a conditional acceptance as provided in s 7(a) CA (1950). This is because an objective and literal construction

 

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of Messrs AYH’s Letter dated 28.8.2013 as a whole, showed GFO’s manifest intention to accept the Appellant’s offer as stated in Messrs SLB’s Letter dated 13.8.2013. GFO’s Request For Extensions of Time was merely a request by GFO to the Appellant for the Appellant to consider 2 extensions of time; and

 

(3) GFO had handed 13 cheques, including the Banker’s Cheque, through Messrs AYH to Messrs SLB, the Appellant’s solicitors. Such a conduct, clearly evidenced the conclusion of the Settlement Agreement.

 

34. The fact that a formal Settlement Agreement (Formal Contract) had not been executed by the Appellant and GFO, in my view, did not affect the formation of the Settlement Agreement. Such a decision is premised on the following evidence and reasons:

 

(1) the Banker’s Cheque could be encashed on 13.8.2013 or at any time thereafter. Such a fact clearly showed GFO’s manifest intention for the Settlement Agreement to be enforceable even before the execution of the Formal Contract;

 

(2) there was no contemporaneous documentary evidence that the Appellant and GFO had manifestly intended for a Formal Contract to be executed before the Settlement Agreement could be enforced; and

 

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(3) Messrs AYH’s Letter dated 28.8.2013 did not, expressly or by necessary implication, require a Formal Contract to be executed by the Appellant and GFO before the Settlement Agreement could take effect. In fact, none of the letters from Messrs AYH had expressly stated that all communication between the Appellant and GFO were “subject to formal contract’. Even if Messrs AYH had used the phrase “subject to formal contract’, an interpretation of the contemporaneous documents in this case, evinced the expressed intention of GFO and the Appellant to enter into a legally binding contract which was effective before the execution of a Formal Contract – please see the Privy Council’s opinion delivered by Sir Garfield Barwick in an appeal from Malaysia, Daiman Development Sdn Bhd v Mathew Lui Chin Teck & Anor Appeal [1981] 1 MLJ 56, at 58 and 61.

 

H. Effect of cheques

 

35. Sections 73 and 101(2) BEA provide as follows:

 

“ 73. Cheque defined

 

(1) A cheque is a bill of exchange drawn on a banker payable on demand.

 

(2) Except as otherwise provided in this Part, the provisions of this Act applicable to a bill of exchange payable on demand apply to a cheque.

 

101. Savings

 

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(2) Subject to the provisions of any written law for the time being in force, the rules of the common law of England, including the law merchant, shall, save in so far as they are inconsistent with the express provisions of this Act, apply to bills of exchange,

 

promissory notes and cheques ”

 

(emphasis added).

 

36. I will like to point out that there was no written judgment in Jackson. Caution should be exercised in respect of case notes or case digest. I refer to the Federal Court’s judgment given by Suffian LP in Datuk Haji Harun bin Haji Idris v Public Prosecutor [1977] 2 MLJ 155, at 170, as follows –

 

“ The full judgment in Heah Chin Kim [1954] MLJ xxxiii is not available and it is impossible for us to determine its ratio decidendi.”

 

(emphasis added).

 

37. Our BEA is based on the United Kingdom’s Bills of Exchange Act 1882 [BEA (UK)]. The title to BEA (UK) states, among others, that the BEA (UK) codifies the law relating to bills of exchange and cheques. Section 101(2) BEA allows the application of English Common Law in respect of, among others, cheques, when there is no applicable Malaysian written law.

 

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38. According to s 73(1) BEA, a cheque is a bill of exchange. The following cases have held that cheques are to be treated as cash:

 

(1) Lord Denning MR had held in the English Court of Appeal case of Fielding & Platt Ltd v Najjar [1969] 2 All ER 150, at 152, as follows –

 

“ We have repeatedly said in this court that a bill of exchange or a promissory note is to be treated as cash. It is to be honoured unless there is some good reason to the contrary

 

(emphasis added).

 

English cases on cheques, may be resorted to by virtue of s 101(2) BEA;

 

(2) Dato’ Francis Ng Tian Sang, at p. 305; and

 

(3) Goh Phai Cheng JC’s decision in the Singapore High Court case of Yeo Hiap Seng v Australian Food Corp Pte Ltd & Anor [1991] 3 MLJ 144, at 149. The Bills of Exchange of Singapore [BEA (Singapore)] is similar to our BEA. As such, Singapore cases on BEA (Singapore) may apply to the construction of our BEA.

 

39. I note that MMJ Exchange Sdn Bhd, at p. 803, concerns banker’s cheques and does not apply to the Respondent’s Cheque.

 

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I. Whether Appellant was barred from presenting Respondent’s Cheque by Settlement Agreement

 

40. I am of the view that a Payee may be barred from presenting a cheque for payment by a contract between the Payee and a party who is not the Drawer (Third Party). This is because if the Payee presents a cheque contrary to the contract with the Third Party (Payee’s Contract With Third Party) –

 

(1) the Payee would have breached the Payee’s Contract With Third Party (Payee’s Breach); and

 

(2) the Third Party may claim from the Payee for loss or damage suffered by the Third Party which arises from the Payee’s Breach.

 

41. As explained in the above Part G, there was a binding Settlement Agreement between GFO and the Appellant. The Settlement Agreement certainly did not bar the Appellant from presenting the Respondent’s Cheque to PBB for payment.

 

42. Even if it is assumed that the Settlement Agreement bars the Appellant from presenting the Respondent’s Cheque to PBB for payment, the Appellant’s breach of the Settlement Agreement can only be enforced by GFO (by the OR acting as GFO’s liquidator) and not by the Respondent (who is not a party to the Settlement Agreement). This is because of the

 

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application of the doctrine of privity of contract which has been affirmed by our apex courts in the 3 following cases:

 

(1) the Privy Council’s decision delivered by Lord Wilberforce in an appeal from Malaysia, Kepong Prospecting Ltd & Ors v Schmidt [1968] 1 MLJ 170, at 174;

 

(2) the judgment of Gopal Sri Ram JCA (as he then was) in the Federal Court case of Badiaddin bin Mohd Mahidin & Anor v Arab Malaysian Finance Bhd [1998] 1 MLJ 393, at 431; and

 

(3) the Federal Court’s judgment delivered by Ahmad Fairuz CJ in Suwiri Sdn Bhd v Government of the State of Sabah [2008] 1 MLJ 743, at 751-752.

 

In Pancaran Gayabina Sdn Bhd v Chew Yong See [2015] 3 AMR 480, at paragraph 20, I held as follows –

 

“20. … Kepong Prospecting Ltd affirms the doctrine of privity of contract in [CA (1950]. According to Kepong Prospecting Ltd, a person who has provided a valid consideration under s 2(d) CA (1950) cannot enforce a contract if the person is not a party to the contract. It is to be noted that the following countries have passed legislation which confers a right on a person who is not a party to a contract (Third Party) to enforce the contract if the contract expressly provides that the Third Party may do so or if the contract confers a benefit on the Third Party –

 

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(1) the New Zealand Parliament has passed the Contracts (Privity) Act 1982 (CPA); and

 

(2) the United Kingdom (UK) Parliament has legislated the Contracts (Rights of Third Parties) Act 1999 (CRTPA). It is to be noted that the CRTPA applies to England, Wales and Northern Ireland only.

 

Malaysia has no legislation equivalent to CPA and CRTPA which constitute statutory exceptions to the doctrine of privity of contract in New Zealand and UK respectively .”

 

(emphasis added).

 

Based on the doctrine of privity of contract, even if the Respondent had provided the Respondent’s Cheque, the Respondent could not enforce the Settlement Agreement against the Appellant to bar the Appellant from presenting the Respondent’s Cheque to PBB for payment.

 

J. Rebuttable presumption of consideration

 

43. Section 30(1) BEA states as follows:

 

“30. Presumption of value and good faith

 

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(1) Every party whose signature appears on a bill is prima facie

 

deemed to have become a party thereto for value.’

 

(emphasis added).

 

44. According to s 2 BEA, “value” means “valuable consideration”.

 

45. Section 30(1) BEA raised a rebuttable presumption that the Respondent’s Cheque had been given by the Respondent for a valuable consideration. The Respondent bears the legal burden to rebut this presumption under s 30(1) BEA on a balance of probabilities. I rely on the following cases:

 

(1) Thomson CJ’s (as he then was) judgment in the Federation of Malaya’s Court of Appeal in Ong Guan Hua, at p. 7, as follows:

 

“In the first place what we are dealing with is not an action on an agreement which is set up as a contract, it is an action on negotiable instruments. The difference which is important here is that in an action based on a contract it is for the plaintiff to prove the consideration. In an action on a negotiable instrument, however, consideration is presumed and it is for the maker or the endorser of the instrument if he wishes to defend the action to prove that there was no consideration. This is because of section 30 of the Bills of Exchange Ordinance (section 30 of the English Act of 1882) which reads as follows:-

 

“Every party whose signature appears on a bill is prima facie deemed to have become a party thereto for value. “

 

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The reason for this provision is clear. As has been said by the draftsman of the 1882 Act (Chalmers’ Bills of Exchange, 10th ed., p. xlix):-

 

“ln England bills have developed into a perfectly flexible paper currency. In France a bill represents a trade transaction; in England it is merely an instrument of credit.” “

 

(emphasis added); and

 

(2) Viscount Dilhorne’s judgment in the 4-1 majority decision of the House of Lords in Nova (Jersey) Knit Ltd, at p. 470 –

 

… Bearing in mind the intrinsic nature of a bill of exchange, ‘an unconditional order’, which the appellants were entitled to regard as a deferred instalment of cash, and the fact that cross-claims, unless based on fraud, invalidity or failure of consideration are not allowed, it appears to me that seldom, if ever, can it be right while denying the right to bring a cross-claim, to allow a cross-claim to operate as a bar to execution and to prevent the holder of a bill of exchange receiving the deferred instalment of cash which the parties agreed he should get .”

 

(emphasis added).

 

K. Whether Respondent’s Cheque was valid

 

46. Section 27(1) BEA provides as follows:

 

“27. Value and holder for value

 

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(1) Valuable consideration for a bill may be constituted by –

 

(a) any consideration sufficient to support a simple contract;

 

(b) an antecedent debt or liability. Such a debt or liability is deemed valuable consideration whether the bill is payable on demand or at a future time ”

 

(emphasis added).

 

47. According to s 2 BEA, ”holder” means “the payee or indorsee of a bill or note who is in possession of it, or the bearer thereof’. It is clear that the Appellant as the Payee of the Respondent’s Cheque who had possession of the Respondent’s Cheque, was a “holder’ of the Respondent’s Cheque as understood in s 2 BEA.

 

48. I am of the view that the Respondent is unable to rebut the statutory presumption under s 30(1) BEA on a balance of probabilities that the Respondent’s Cheque had been given by the Respondent for valuable consideration. This was because there was a valid consideration for the Respondent’s Cheque for the following reasons:

 

(1) there was “consideration” as understood in s 27(1)(a) BEA read with s 2(d) CA (1950) (when, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a

 

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consideration for the promise) when the Appellant had abstained from filing –

 

(a) a winding up petition against GFO based on GFO’s Debt; or

 

(b) an action against GFO to recover GFO’s Debt

 

– by receiving, among others, the Respondent’s Cheque. I rely on Belinda Ang Saw Ean J’s judgment in the Singapore High Court case of NEC Asia Pte Ltd, at paragraphs 76 and 77, as follows –

 

“[76] NEC’s claim against D2 is based on the D2’s cheque for S$ 1,917,054.00. NEC presented the Cheque on 11 August 2008 but was informed that the cheque payment had been stopped.

 

[77] In this case, I find that D2 had issued the cheque to NEC in order to discharge D1’s obligation to make payment to NEC under the supply contract. Accordingly, NEC had given good consideration to D2 (ie, releasing D1 from its payment obligations) in exchange for its issuance of the cheque. NEC is a holder for value in respect of the cheque under s 27 of the Bills of Exchange Act (Cap 23, 2004 Rev Ed).”

 

(emphasis added).

 

Section 27 of BEA (Singapore) is in pari materia with our s 27 BEA. Hence, the relevance of NEC Asia Pte Ltd to this appeal; and/or

 

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(2) there was an antecedent debt or liability in the form of GFO’s Debt as understood in s 27(1)(b) BEA.

 

49. The following evidence showed that the Appellant was free to deal with the Respondent’s Cheque as the Appellant saw fit:

 

(1) there was no evidence that the Respondent required the Appellant to

 

(a) obtain the Respondent’s consent for; or

 

(b) give prior notice to the Respondent of

 

– the Appellant’s presentation of the Respondent’s Cheque to PBB for payment;

 

(2) the Respondent’s Cheque was dated 30.9.2013. This meant that the Appellant was entitled to present the Respondent’s Cheque to PBB for payment on or after 30.9.2013. When a Drawer inserts a particular date in a cheque without any qualification or condition (as in this case), the Drawer manifestly intends for the cheque to be banked in on that date or any date subsequent thereto;

 

(3) Messrs AYH did not require –

 

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(a) that the Respondent’s Cheque could only be released by Messrs SLB to the Appellant with the consent of the Respondent, GFO or Messrs AYH;

 

(b) that the Respondent’s Cheque could only be presented by the Appellant to PBB for payment with the consent of the Respondent, GFO or Messrs AYH; and

 

(c) the Appellant to give prior notice to the Respondent, GFO or Messrs AYH of the Appellant’s presentation of the Respondent’s Cheque to PBB for payment; and

 

(4) Mr. Jasvinjit Singh’s Email dated 27.9.2013 clearly stated that the cheques sent by Messrs AYH (including the Respondent’s Cheque) could be cleared by the Appellant. It is to be noted that Mr. Jasvinjit Singh had acted for both GFO and the Respondent. There was no evidence that Mr. Jasvinjit Singh’s Email dated 27.9.2013 had been sent –

 

(a) by mistake; or

 

(b) without the authority of the Respondent.

 

50. In Sinnaiyah & Sons Sdn Bhd v Damai Setia Sdn Bhd [2015] 5 AMR 497, at paragraphs 48-53, Richard Malanjum CJ (Sabah & Sarawak) has decided in the Federal Court that an allegation of fraud, even if such an

 

36

 

allegation concerns “criminal fraud’, need only be proven on a balance of probabilities and not beyond all reasonable doubt.

 

51. There is absolutely no evidence of any fraud committed by the Appellant in this case. On the contrary, the following evidence showed that the Respondent’s Cheque had been given by the Respondent voluntarily to stave off the Appellant’s intended winding up of GFO:

 

(1) GFO’s Debt had indeed been incurred. The Respondent had not adduced any evidence that GFO’s Debt was not genuine or was disputed by GFO;

 

(2) Section 218(2)(a) Demand had been served by the Appellant on GFO. There was no response at all by GFO to the Section 218(2)(a) Demand; and

 

(3) as elaborated in the above Part G, there was a binding Settlement Agreement between GFO and the Appellant.

 

L. Consequences of dishonoured Respondent’s Cheque

 

52. Sections 47, 55(1) and 57(a) BEA read as follows:

 

“47. Dishonour by non-payment

 

(1) A bill is dishonoured by non-payment –

 

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(a) when it is duly presented for payment and payment is refused or cannot be obtained; or

 

(b) when presentment is excused and the bill is overdue and unpaid.

 

(2) Subject to this Act, when a bill is dishonoured by non-payment, an immediate right of recourse against the drawer and indorsers accrues to the holder.

 

55. Liability of drawer or indorser (1) The drawer of a bill by drawing it –

 

(a) engages that on due presentment it shall be accepted and paid according to its tenor, and that if it be dishonoured, he will compensate the holder or any indorser who is compelled to pay it, provided that the requisite proceedings on dishonour be duly taken;

 

(b) is precluded from denying to a holder in due course the existence of the payee and his then capacity to indorse.

 

57. Measure of damages against parties to dishonoured bill

 

Where a bill is dishonoured, the measure of damages, which shall be deemed to be a liquidated amount, shall be as follows:

 

(a) the holder may recover from any party liable on the bill, and the drawer who has been compelled to pay the bill may recover from the acceptor, and an indorser who has been compelled to pay the bill may recover from the acceptor or from the drawer, or from a prior indorser –

 

(i) the amount of the bill;

 

(ii) interest thereon from the time of presentment for payment if the bill is payable on demand, and from the

 

maturity of the bill in any other case;

 

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(iii) the expenses of noting, or, when protest is necessary, and the protest has been extended, the expenses of the protest;

 

jj

 

(emphasis added).

 

53. The Respondent’s Cheque had been dishonoured by the Respondent within the meaning of s 47(1)(a) BEA. Upon the dishonour of the Respondent’s Cheque, a statutory cause of action arises as follows:

 

(1) by reason of s 47(2) BEA, the Appellant as the “holder’ of the Respondent’s Cheque, has an “immediate right of recourse” against the Respondent as the Drawer; and

 

(2) according to s 55(1)(a) BEA, the Respondent as the Drawer, “will compensate” the Appellant as the “holder’ of the Respondent’s Cheque.

 

54. The measure of damages for the dishonour of the Respondent’s Cheque is as follows:

 

(1) by virtue of s 57(a)(i) BEA, the Appellant as the “holder’ of the Respondent’s Cheque “may’ claim from the Respondent “the amount of the bill’, namely the Sum (the amount stated in the Respondent’s Cheque); and

 

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(2) under s 57(a)(ii) BEA, the Appellant “may” claim from the Respondent interest on the Sum from the date of presentment of the Respondent’s Cheque on 7.11.2013.

 

55. I am of the view that the use of the permissive term “may’ in s 57(a) BEA confers a discretionary power on the Court to order any sum to be paid by the Drawer to the Payee in respect of a dishonoured cheque.

 

56. The following cases have granted summary judgment in favour of Payees of dishonoured cheques against the Drawers in question:

 

(1) Dato’ Francis Ng Tian Sang, at p. 305-306;

 

(2) Raymond Mah Mun Kitt;

 

(3) Uni Wall Architectural Product & Services Sdn Bhd; and

 

(4) NEC Asia Pte Ltd, at paragraphs 78 and 79.

 

M. Cases cited by parties

 

57. The following cases referred to by the Appellant’s learned counsel, concerned admission of liability in the form of dishonoured cheques:

 

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(1) the judgment of Geoffrey Ma J (as he then was) in the Hong Kong High Court in Getwick Engineers Limited v Pilecon Engineering Limited [2002] 1020 HKCU 1;

 

(2) the Singapore Court of Appeal’s decision in Tjong Very Sumito & Ors v Antig Investments Pte Ltd, at paragraph 57; and

 

(3) Mary Lim J’s judgment in the High Court case of ZAQ Construction Sdn Bhd, at 657-658.

 

As explained above, the Appellant has a statutory cause of action under ss 47(2) and 55(1)(a) BEA against the Respondent based on the dishonoured Respondent’s Cheque. There is therefore no need for the Appellant to rely on any admission of liability by the Respondent.

 

58. All the cases cited by the Respondent’s learned counsel could be easily distinguished from this case on one or more of the following grounds:

 

(1) GFO’s Debt had been incurred;

 

(2) Section 218(2)(a) Demand had been served by the Appellant on GFO without any denial by GFO;

 

(3) as explained in the above Part G, there was a binding Settlement Agreement between GFO and the Appellant;

 

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(4) the Respondent had failed to rebut the statutory presumption that the Respondent’s Cheque had been given by the Respondent for value under s 30(1) BEA because there was valid consideration furnished by the Appellant for the Respondent’s Cheque – please see the above paragraph 48;

 

(5) the Respondent’s Cheque had been given by the Respondent and Messrs AYH without any condition or restriction imposed on the Appellant – please see the above sub-paragraphs 49(1) and (3); and/or

 

(6) the Appellant had a valid statutory cause of action under ss 47(2), 55(1)(a), 57(a)(i) and (ii) BEA against the Respondent.

 

N. Whether there should be appellate intervention in this case

 

59. I am mindful that I am sitting as an appellate judge over the Sessions Court’s Dismissal of Appellant’s Suit after a trial pursuant to s 27 of the Courts of Judicature Act 1964 and Order 55 rule 3(1) of the Rules of Court 2012 (RC). Having said that, this case warrants appellate intervention for the following reasons:

 

(1) the learned Sessions Court Judge had erred in law by not considering the effect of ss 27(1)(a), (b), 30(1), 47(1)(a), (2), 55(1)(a), 57(a)(i), (ii) and 73(1) BEA (Errors of Law);

 

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(2) this appeal concerned undisputed documentary evidence and their construction. In such a case, the appellate court is in the same position as the trial judge;

 

(3) the Sessions Court’s Dismissal of Appellant’s Suit did not concern any finding of fact or finding regarding credibility of witnesses. Accordingly, the appellate court does not suffer any audio-visual disadvantage in deciding this appeal; and

 

(4) the Errors of Law had caused an injustice to the Appellant as the Appellant would not have entered into the Settlement Agreement with GFO, if not for, among others, the Respondent’s Cheque.

 

60. In Eastern & Oriental Hotel (1951) Sdn Bhd v Ellarious George Fernandez & Anor [1989] 1 MLJ 35, at 36-38, Wan Hamzah SCJ in the Supreme Court, intervened in respect of certain findings of fact made by the learned High Court Judge after a trial, on the ground, among others, that the trial judge had not considered the contemporaneous documentary evidence in that case.

 

61. In view of the dishonour of the Respondent’s Cheque, it is only just that this Court exercises its discretion under s 57(a)(i) BEA to order the Respondent to pay the Sum to the Appellant.

 

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62. I am however not inclined to exercise my discretion under s 57(a)(ii) BEA to order interest on the Sum from the date of the presentation of the Respondent’s Cheque on 7.11.2013. This is due to the following reasons:

 

(1) the Appellant’s Statement of Claim prayed for interest on the Sum from the date of judgment in this case;

 

(2) the Appellant’s 2 written submissions in support of this appeal, did not apply for interest on the Sum from 7.11.2013;

 

(3) prior to the issue of the Respondent’s Cheque, the Respondent did not incur any liability due to the Appellant. The Respondent’s Cheque was given to the Appellant solely to assist GFO to stave off winding up proceedings to be commenced by the Appellant against GFO; and

 

(4) the Appellant is entitled to file a proof of debt with the OR (as GFO’s liquidator) in respect of GFO’s Debt and consequently, the Appellant may claim tax benefit thereto.

 

63. This Court will order interest at the rate of 5% per annum on the Sum from the date this appeal is allowed until the date of full satisfaction of the Sum pursuant to Order 42 rule 12 and Order 55 rule 14 RC.

 

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O. Court’s decision

 

64. Premised on the above reasons, this appeal is allowed with the following

 

order:

 

(1) the Sessions Court’s Dismissal of Appellant’s Suit is reversed;

 

(2) judgment is entered against the Respondent for the Sum;

 

(3) interest at the rate of 5% per annum on the Sum from the date of this judgment until full satisfaction of the Sum;

 

(4) costs for this appeal and the trial of the Appellant’s Suit, shall be paid by the Respondent to the Appellant; and

 

(5) allocator fee shall be paid on the amount of costs ordered in this appeal.

 

WONG KIAN KHEONG

 

Judicial Commissioner High Court (Commercial Division) Kuala Lumpur

 

DATE: 11 JULY 2016

 

Counsel for Appellant: Mr. Sudharsanan Thillainathan & Cik Nur Asilah bt. Mohd Nor

 

(Messrs Shook Lin & Bok)

 

Counsel for Respondent: Mr. Jasvinjit Singh (Messrs Jasvinjit Singh & Co.)

 

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