MALAYSIA IN THE HIGH COURT IN SABAH & SARAWAK AT KOTA KINABALU CIVIL SUIT 22-271-2001 5 IAY & ASSOCIATES - PLAINTIFF V 10 LEMBAGA PELABUHAN-PELABUHAN SABAH DEFENDANT 15 NOTES OF PROCEEDINGS IN OPEN COURT 3 JANUARY 2006 AT 9:00 A.M. 20 Coram: For Plaintiff: Justice Datuk Ian H. C. Chin Sugumar Balakrishnan & Natasha Balakrishnan Datuk Mohamaed Bazain Idris, SAG & Mohd Saifurrazee Hussin Dgku Fazidah Hatun Pb Hj Bagul 25 For Defendant: 30 Sugumar: Two bundles of documents, one of Plaintiff and one of Defendant, both agreed and to be admitted in all respect. SAG: 35 40 Confirm that Court: The Documents in the Plaintiff’s bundle are admitted as evidence and mark P1-82 and the documents in the Defendant’s bundle are admitted as evidence and mark D1-81. Sugumar: Not been able to agree on issues and facts. The Plaintiff’s case is that there was a concluded contract between the Plaintiff and 1 5 10 15 20 25 30 the Defendant in respect of a project and the Plaintiff will show that the Minister of Communications and Works had pursuant to s 73(1) of the Sabah Ports Authority Enactment 1981 given directions to the Defendant wherein she agreed the approve the application of the Plaintiff in respect of the said project. [Court: When did the contract legally come into existence] When the board of the Defendant approved the said contract on 7 August 1997 and communicated to Defendant on 11 August 1997 which will be the date of the concluded contract. Alternatively the Plaintiff will also argue subsequent to the Defendant’s approval of the said contract, a total of 5 draft joint venture agreements that had gone through the parties until finally at the meeting on 17 March 1998 between the parties that it was agreed that the final 5th draft was to be submitted for the Defendant’s final approval which contains all the terms of the contract. The Plaintiff will show Defendant by letter dated 25 January 1999 had expressly stated they accepted the terms of the draft joint venture agreement and the draft power of attorney. BY letter dated 14/12/1999 Defendant purported to repudiate the approval and the concluded contract by informing the Plaintiff that the Ministry had decided not to approve the project and henece project considered as terminated. The Defence hinges on an amendment to the principal Act which requires joint venture agreement to be referred to the Cabinet for approval. Will show amendment came after approval and has no retrospective effect as Plaintiff had accrued right. Defence also that the said project would involve the giving of guarantee as security for loan and that would require the cabinet approval and again this requirement came into being after law came into existence after the parties had entered into contract and hence no retrospective effect. Main ground of the defence is that there is no concluded contract between the parties as formal agreement had not been executed. [SAG: Would put it in the draft I have submitted to my learned friend which he refused to agree.] [Copies of the same reproduced below.] 35 2 5 10 3 5 4 Court: Mr Sugumar, what is the reason for your refusal. Sugumar: We gave our draft which they altered. Objecting to 1, 3, 5, 7 and 8 which have not been pleaded. 5 SAG: Contained in Plaintiff’s pleadings and in defence – crystallization of the issues. Agreed bundles also support this issue. 10 Court: The issues have been raised by the pleadings either directly or indirectly, being a natural consequence of what are in issues. So, in so far as the Defence is concerned, they include the issues in the above draft. 15 9.35 a.m. 20 PW1: MOHD AYAZ KHAN BIN YUNUS KHAN Affirmed in English Examination-in-Chief : Age 51, residing at Kg Pasir Putih, Jalan Sin San, 91000 Tawau, a businessman. Managing partner of the Plaintiff’s 25 firm. Disclose names of partners to Plaintiff in D19. Forwarded trading licence D31 by letter D30 to the Defendant. P2-34 refers to the proposal to the Minster of Communications and Works, [Witness went through the documents.] Equity structure 15% and 85%, with 15% for the Defendant. Minister responded to proposal by D1. Proposal made to 30 Minister and not Defendant because the ministry is in charge of SPA. Q P35-36 – did the Defendant inform the Plaintiff they have approved the project A Yes 5 Q After the approval given to the Defendant what happened A We were waiting for the agreement to be signed, to be signed after the approval 5 Q Before signing, was there any draft A About the joint venture Q D7-8 first draft A Yes Q At that stage was the equity structure 15% to Defendant A Yes Q D13 the second draft A Yes Q D15-18 – Defendant’s response to 2nd draft A Yes Q Did Defendant proposed a change in equity structure A Yes 20% and 80% Q D20-22 – 3rd draft submitted to Defendanty A Yes Q Together with it a draft power of attorney A Yes 10 15 20 25 6 5 Q D24-25 was that the Defendant’s response to 3rd draft A Yes Q Was there a fourth draft A Yes. D27-29 Q Was there any meeting held between Plaintiff and Defendant on 17/3/1998 and what happened A Yes as stated in D37 Q Was the fifth amended draft submitted A Yes D37-39. Terms accepted as indicated in D66. Q D66 – did the Defendant request the Plaintiff to agree to varying 10 in value of land 15 A Yes. I agreed to revised valuation as indicated in D67 Q D81 – did the Defendant inform you project not being approved and hence being terminated 20 25 A Yes Q D53 – requests of Plaintiff for various things A Yes and I submitted the same to Defendant. Q Claim 11(a) – RM7,500 paid and RM10,000 for outline A Payments were made 7 5 Q Any professional fees RM5,250 paid for valuation report – P74 A Yes Q Any receipts A Lost them Q Subsequent to the Plaintiff being informed of termination was the said project or about the same awarded to anybody else A Yes. [After being referred to Defence]. Pembinaan Mutiara was awarded on 20/12/2000. 10 9.57 a.m. Cross-Examination of PW1: 15 20 Q When was your partnership registered A 26 August 1997. Q D31 – licence expired on 31/12/1997 A Yes Q When you negotiated with SPA you have no trading licence A I was in Tawau at that time, person who negotiated thing is Iskandak Malik, I did not check the licence at that time 25 Sugumar: Not pleaded SAG: Para. 1 of Defence – challenge capacity of the Plaintiff 8 Court: Q Evidence need not be pleaded. 9/3/1998 you submitted D31 which had expired Court: The answer is obvious, move on. 5 Q D1 – refers to proposal A Yes, not refer to terms and conditions of contract Q The minister can study your terms and conditions and give the necessary direction 10 A Yes Q Minister can also disagree with your terms and conditions A Yes Q Minister did not agree that the land vested in SPA is to be 15 divested, meaning to be sold 20 A I do not know about that Q If minister disagree who is at fault A SPA is under ministry, if approval given by SPA, SPA is at fault Q Are you suggesting that the minister agreement to your proposal is a binding contract 25 A No 9 Q D38(a) – Preamble A – is that true that government has alienated land to SPA 5 A Yes Q Did you know the condition of the gazette A I do not know Q Gazette contain prohibition of lease sale etc – so to sale land in breach 10 A I do not know Q P38(b), clause 4(a) - condition precedent – land has not been alienated to SPA A I do not understand the question Put Land had not been alienated to SPA as required by the 15 agreement 20 A I think yes, have not seen the title Q How can you impose on the SPA when the land cannot be sold or leased A [Witness took time and then asked for the question to be repeated.] 25 Put Agreement cannot be enforced because SPA cannot sell or lease the land A I cannot agree witih that 10 Q Your negotiation with SPA on terms and conditions went on till 1999 5 A Yes Q Valuation of the land is part and partial of the terms and conditions of the agreement 10 A I do not think so Q D66 – 25/1/1999 – why do you talk about valuation in that letter A I think that is the procedure Q D68 – para 2 – your company accepts that fact that it will take sometime for the land to be processed A Yes Q The land is a big issue in this draft agreement A I do not agree with that Q SPA has no power to sell the vested land A If the land belongs to SPA they have the power to sell it. I do not 15 20 understand the question, sorry 25 Q Why wrote the letter stated in para 2 A We have to take time to get the land for the project. We have to get the land. We applied for the project on the land, land belongs to SPA 11 Q All land matters when vested by the TYT must go through the cabinet 5 A Not aware Q Can minister reject alienation of land A If there is a reason. Will agreed if reason is acceptable. Q At the discretion of the minister and government A Must be a reason for the rejection Q D79 – para 2 – disagreed with joint venture agreement to alienate 10 the land and any property of SPA – 15 A That is not a reason. It is telling our company. Not a reason. Q Must preserve the vested land A We are developing the land for the government also Q Draft D38(e) – para (f) – right to charge and sell – you can sell the land 20 Court: Q It is in the negative – no power instead D38(h) – para 14 – you could have set up hotel and shops and could sell A 25 Yes, not alienating, developing for the government, a joint venture. Profit also going to SPA. So it is a win win situation. Apart from that we are building the terminal which goes to SPA 12 and they will make collection. We are selling to the commercial, not to the government. 5 10 Q D63 – as at 20/11/1998 the SPA was still studying the draft A Yes Q D65 – board must refer detail proposal to ministry A Yes, according to the letter. I was aware. Q D70 – 2nd paragraph – subject to ministry approval A Yes Q If I were to take your line of claim, the moment the minister approved port must sign the agreement 15 A I think so, if ministry approved must sign agreement. Approval comes from SPA, proceeds to the ministry Q For what purpose A For approval Q Your proposal to minister did not contain any details, no terms 20 and conditions 25 A There is a letter from minister D1 Q D2-34 is only a proposal and do not contain the terms and conditions A Yes 13 5 10 Q D70 is a reference to the terms and conditions A Yes Q You disagree with termination on advice of ministry A Yes Q D76 as late as Agusut 1999 – matter was still awaiting approval A Yes, do not understand as I have approval from minister already Q No agreement was signed between the plaintiff and the defendant A No agreement Q When was the final negotiation completed A I forgot the date. I think in 1998. Put You did not state that you are a partner in pleading because 15 during the negotiation you have no trading licence A I have trading licence 10.46 a.m. 20 Re-Examination of PW1: Q 5th draft, selling or leasing of the land – D38(a) – where does it talk about selling or leasing of the land of SPA 25 A No 14 5 Q D38(a) – clause 1 A Agreement to develop the land Q At whose cost A Developer Court: No point in asking the witness to read the terms stated there. 10 Q D31 – submitted expired trading licence - D19 – two names disclosed as partners – yourself and another person – were you partners at that time when you made the proposal to the minister 15 A Yes Q When negotiation concluded, you mention 1998 – D37 A 17 March 1998 Q D38(a) – alienation of land – preamble – was this draft vetted by SPA 20 A Yes Q D66 – last substantive para – does SPA say they accept the terms Court: 25 The letter says what it says there, no need for the witness to tell me 15 Sugumar: That is the case for the Plaintiff SAG: Elect to call witnesses . [Court went into a short recess.] 5 11.20 A.M. DW1: MOHAMMED SAHID BIN HJ NAWAB KHAN Affirmed in English 10 Examination-in-Chief : Age 54, residing at Lot 10 Kg Peringatan, Jalan Peringatan Kepayan, 88869 Kota Kinabablu, senior manager of human recourse department of Sabah Ports Sdn Bhd. Secretary of SPA from 1994-2004. I am aware of this case, about the proposed contract. 15 P1-36 is not the proposal to minister. When we received P1 we also received a copy of letter of a letter from developer to the minister. P234 proposal came in later, could be in 1997 or may be later. As a result of a series of communication between SPA and developer they were requested to submit their JV proposal including details. To tbe best of 20 my recollection P2-34 was not given to the minister. Q When you received the letter from minister what is SPA supposed to do A We wrote to developer arising from board meeting. 25 D8 1st draft was submitted to us. Negotiation went on until April 1999, a series of negotiation. D67 valuation is important because in the JV 16 agreement one of the consideration was to provide and alienate the land to the developer. 5 Q D57 – at 3/6/1998 SPA have not made decision on agreement A Yes Q D58 – why is it necessary for the draft agreement and power of attorney be referred to minister in charge of ports A Involve vested land which belongs to the government and according to vesting requirement we are not in position to 10 alienate sell or lease any land without approval of TYT ort rather the state government Q D63 – can you approve draft agreement without consent of ministry 15 A Cannot Q D65 – 2nd paragraph – same reason relating to vesting land you have given earlier 20 A Yes Q Can you enter into agreement with plaintiff without approval of cabinet and government A Cannot 25 17 Q D70 – 27/3/1999 – still waiting for reply from ministry concerned 5 A Yes Q Why did you disapprove as pere paragraph 2 A Land still vested to SPA and not been alienated for project and any JV and alienation we need approval of government 10 Q D71 – why A For purpose of getting approval for the JV power of attorney and proposal as a whole. Wrote to Plaintiff of my action by D76. D77 reminded ministry 15 Q Every effort was made by SPA to get approval approved A Yes Q D79 – background of letter A Around May there was a cabinet decision conveyed to us through ministry, SPA required to develop on their own. A contractor was appointed to do the upgrading work, basic infrastructure and 20 land site, RM2.8 million. Q Plaintiff project proposed value A RM180 million 25 18 Q Upgrading work is what the port is now A Yes, no hotel, no commercial development, not close to proposal. Land stayed as vested land. 5 Q Can you comply with draft agreement A Cannot do so until the land has been transferred to the developer Q D81 A Decision conveyed to company Q D38(a) – preamble A A No land been alienated to SPA, only vested to port 10 11.45 a.m. 15 Cross-Examination of DW1: Q P35-36, para 2 – at this stage only proposal in existence is P2-34 A To the best of my recollection, they have come later on. Referring to letter from minister, proposal as shown in the head 20 of letter. Letter from us went on to say required things D35. Q Did the Plaintiff submit P2-34 A Yes, a detailed proposal. 25 19 Q No letter from SPA to say do not agree with P2-34 A A series of discussions that went on until 1999 where JV, power of attorney…… 5 Q Only reference you made after receiving draft agreement – made suggestions for amendments – D15-18 A Correct, amendment to draft JV, cannot confirm that it is not an amendment to P2-34 10 Q D24-25 – amendments to draft JV A Yes, cannot confirm that it is not an amendment to P2-34 Q D37- letter from Plaintiff - there was meeting on 17/3/1998 A Cannot recall Q This was the final draft sent to SPA A I cannot recall Q Clause 6, D38 - 6(a) – it is SPA’s responsibility to submit the 15 land application for the land to be alienated to SPA 20 Court: Move on, witness not qualified to answer question of interpretation of document 25 Q D65 – did the board of SPA approve the final draft of JV and power of attorney A Conditional approval, communicated in D66 20 Q P35-36 – when the Defendant first inform the Plaintiff their proposal being approved by board of SPA – did letter say it is subject to cabinet or any authority A Not specifically Put Did not inform the Plaintiff of further conditiona for 5 approval 10 A Not at that time Put As between the state government and board authority, internal matter between two of you A Cannot comment on that Q D66 – valuation at RM5.8 million – for the purpose of amount of banker’s guarantee to be provided by the Plaintiff 15 A Yes Q D68-69 – this was a totally independent proposal from the one earlier approved by the board vide P35-36 20 A No, this is the same Put It is a totally different proposal for beautification only A No. Cannot comment whether it is for beautification of existing building 25 21 Q Contract awarded to do what A Directed by the state government to provide basic facilities for local craft and ferry from Labuan 5 Q At your own cost A Yes Q If proposal carried out, who would bear A I am not familiar with contents 10 12.02 PM Re-Examination of DW1: 15 Q Are you subject to the Statutory Body (Supplementary Provisions) Enactment 1997 A 20 Yes SAG: That is the case for the Defendant. Wish to submit tomorrow morning Court: Adjourn to 10.00 a.m. 4 January 2006 to hear the closing speeches. 25 Justice Datuk Ian H.C. Chin 22 4 January 2006 10.30 a.m. Parties same 5 10 15 Court: I have received a soft copy of the closing address of the speech of counsel for the Defendant which I reproduce below. Anything else to add on it. Sugumar: I tender my written submission. Court: I need a soft copy and you should know I always want a soft copy where the submission has been reduced into writing as this will help me in my arriving at a decision expeditiously taking advantage of technology. I adjourn for a short while to enable you to procure a soft copy. 20 25 Justice Datuk Ian H.C. Chin 30 23 MALAYSIA IN THE HIGH COURT IN SABAH AND SARAWAK AT KOTA KINABALU SUIT NO. K 22 – 271 OF 2001 5 BETWEEN …PLAINTIFF IAY & ASSOCIATES [suing as a firm] 10 AND LEMBAGA PELABUHAN-PELABUHAN SABAH …DEFENDANT 15 DEFENDANT’S SUBMISSION May it pleases your Lordship, 20 For the Plaintiff to succeed in this case the Plaintiff must cross two legal hurdles. 25 30 First, the Plaintiff must show that for the Draft Joint Venture Agreement to be binding and effective against the Defendant, the Defendant need not secure the approval of the government first even though the land was vested to the Defendant by the Yang di-Pertua Negeri with conditions attached to it. Secondly, the Plaintiff must show that the Statutory Bodies (Supplementary Provision) Enactment 1997, sections 8(1)(e) and 10(c), which took effect on 31 December 1997, is not applicable in the circumstances of this case. SEEKING APPROVAL OF THE STATE GOVERNMENT 35 40 45 The Plaintiff in their testimony stated that he was not aware that the land is a vested land. (See Page 9 line 25; Page 10 line 5 and 10 of the Notes of Proceeding) The conclusion to be drawn from this ignorance is that when the Plaintiff prepared the Draft Joint Venture Agreement, the Plaintiff was on the wrong premise in believing that the land was alienated to the Defendant. For that reason in the Recital to the Draft Joint Venture Agreement prepared by the Plaintiff at page 38(a), it stated that the land was alienated to the Defendant. Assuming the Draft Joint Venture Agreement is binding even though not signed, the end result would be frustration because the status of the subject matter, i.e. the 6.2 acres of land requested by the Plaintiff has not been alienated to the Defendant but still vested to the Defendant. Since the land is still vested to the Defendant then 24 the parties cannot proceed with the Project without complying with the prohibitions in the Gazette Notification No.20. 5 In the case of Yong Ung Kai v Enting (1965) 2 MLJ 98, paginated in the Defendant’s bundle of authority at page 17 and 18, the court decided, because of the failure to obtain the necessary licence the agreement became impossible to perform. It was also decided in the judgment, even if there is no specific term in the agreement to obtain a licence it is implied. Hence any claim arising from that failed. 10 The Defendant in their testimony had clearly stated that the land is a vested land which contains prohibitions as stated in the gazette notification no.20 dated 13.1.1983 which reads, inter alia: 15 20 “(2) The Sabah Ports Authority shall not sell, lease or otherwise alienate the said land without the prior approval of the Yang di-Pertua Negeri.” For the Draft Joint Venture Agreement to be binding the Defendant must seek the approval of the State Government and the Yang di-Pertua Negeri to remove the caveat attached to the vesting order because the Draft Joint Venture Agreement contains the following provisions. I refer to exhibit D38(c) 25 At Clause 5(d) of the Draft Joint Venture Agreement, it clearly stipulates that the land will be subject to “…sale and purchase Agreement together with transfer document in connection with the sale and purchase of the properties developed herein…”. 30 At Clause 5(f) of the Draft Joint Venture Agreement, the Plaintiff was “To apply and obtain a developer’s License if necessary, to develop and sell the properties according to the Housing (Control and Licensing of Developers) Enactment, 1978.” 35 40 45 At Clause 5(h) of the Draft Joint Venture Agreement, the Plaintiff was “To deliver vacant possession of those completed properties to the respective purchasers with the Certificate of Fitness for Occupation.” Without the approval of the State Government and without degazetting the said gazette notification, the Draft Joint Venture Agreement cannot be effected whether it is signed or unsigned. The end result would be frustration of the Draft Joint Venture Agreement. Even if the Defendant approves the Proposed Draft Joint Venture Agreement, which the Defendant submits is conditional approval; the State Government must 25 consent to the removal of the vested land first. DW1 in his testimony stated that the Defendant’s approval was conditional upon the State Government’s approval. 5 10 15 20 25 The Defendant had sought the approval of the State Government to give effect to the Draft Joint Venture Agreement. This is reflected in the various letters written by the Defendant to the Ministry. In exhibit D66, letter dated 25.01.1999, addressed to the Plaintiff, Defendent informed the Plaintiff that detail of the proposed project and the Draft Joint Venture Agreement and the Draft Power of Attorney are in the process of being submitted to the State Government for approval. In exhibit D70, the Defendant qualified it approval by stating that though the Defendant had approved the Draft Joint Venture Agreement, it has to refer to the Ministry of Infrastructure Development for approval. As stated by DW1, they have to refer the Draft Joint Venture Agreement to the State Government because it affected the status of the vested land. In exhibit D71, (i) the Defendant submitted the Draft Joint Venture Agreement, (ii) the Draft Power of Attorney (iii) and the Defendant also brought to the attention of the Ministry that the said land is a vested land and that the Defendant will submit its application for the said land for the purpose of the project. (iv) The Defendant also brought to the attention of the Ministry the provision of the Statutory Bodies (Supplementary Provisions) Enactment 1997 which requires the Defendant to obtain the approval of the State Government before it enters into the joint venture agreement with the Plaintiff. In exhibit D77, the Defendant reminded the Ministry of Infrastructure Development of its application for approval of the Draft Joint Venture Agreement. 30 DW1 in his testimony stated that around May, the Cabinet conveyed to the Defendant through the Ministry that the Defendant was required to develop the proposed site on their own. 35 40 45 In the same letter, D77, the Defendant also enquire about the instruction of the State Government for the Defendant to construct the passenger ferry terminal facilities itself. From this letter it is clear that the Defendant had done everything possible to give effect to the Draft Joint Venture Agreement and this letter also reflect the State Government’s intention that the Defendant not to enter into any joint venture agreement with any party. In exhibit D79, in response to the Defendant’s enquiry in D77, the Ministry rejected the Defendant’s proposal to develop the said land with the Plaintiff on a joint venture basis. The Defendant to preserve the status of the vested land. This would mean that the status of the vested land remains intact and whatever agreement entered between the Plaintiff and the Defendant rightly or wrongly 26 cannot be carried out unless the status of the vested land can be changed to suit the requirement of the Draft Joint Venture Agreement. The proposed draft JointVenture Agreement is an exercise in futility and it is frustrated by the State Governments decision. 5 THE APPROVAL CONDITIONAL. 10 15 OF THE JOINT-VENTURE AGREEMENT IS Exhibit D1, the approval of the Minister is conditional in that it stated that “sila ambil tindakan sewajarnya” meaning that the Defendant should take reasonable action which impliedly suggest that all procedures must be adhered to. In Exhibit P1 at page 35, the Defendant requested for a detailed proposed development from the Plaintiff for the Defendant’s consideration and further action. As stated by DW1, the proposal in Exhibit P1 at page 2 to page 34 came later. In this Exhibit, the size of the proposed area also was not clearly identified. The proposal was uncertain. 20 At Exhibit D1, page 24, the Defendant was to pay the premium and stamp duty. This is only a proposal not a binding agreement. 25 30 In the proposed Draft Joint-Venture Agreement submitted on 17.3.1998, the proposal has been amended in that the premium and the stamp duty were to be borne by the plaintiff. This fact suggests that the proposal is not a binding contract as at the year 1997 because the terms and conditions were only finalized on 12.3.1999 at page 67 of D1 where the Plaintiff agrees to the valuation of the land. Even if the Defendant agrees on the valuation of the land this does not make it a binding agreement because until and unless the State Government agrees to lift the prohibitions of the vested land the Defendant cannot agree on the valuation of the land on behalf of the State Government. The State Government has got its own valuer to determine the value of the land. The agreement is still uncertain. 35 In Exhibit D1, page 68, the Plaintiff in their own letter dated 13.2.1999, recognised that their proposal is conditional upon the land matter being resolved with the State Government. 40 45 The Defendant will rely on the earlier submission and Exhibits to indicate that the approval is conditional subject to the State Government’s approval. Defendant humbly submits, the fact that the Draft Joint Venture Agreement is submitted to the Ministry for the approval it clearly shows that the Draft Joint Venture Agreement is still conditional. 27 On the face of the Draft Joint Venture Agreement is also reflect a conditional term of approval. 5 10 15 20 Clause 4.1 contains conditions precedent. What is the point of contending the Draft Joint Venture Agreement as valid and binding on the parties when even before they could enter into a binding agreement, the Defendant must seek the approval of the Cabinet. Since the Plaintiff was the party who made the offer, it is up to the Defendant to decide on the condition of acceptance. In the circumstances of this case the Defendant had clearly indicated to the Plaintiff that the approval is subject to the Ministry’s approval on the Draft Joint Venture Agreement. Since the Plaintiff had enquired about the status of the Draft Joint Venture Agreement in D 74, this only confirms the Defendants stand that the Plaintiff was aware that the approval of the Draft Joint Venture Agreement was conditional. D76 was the Defendant’s reply. STATUTORY BODIES (SUPPLEMENTARY PROVISION) ENACTMENT 1997, - SECTION 8(1)(e) and SECTION 10 (c) These provisions took effect on 31.12.1997. 25 From exhibits tendered in this proceeding, the Draft Joint Venture Agreement was not finalized until the year 1999. PW1 stated that the Draft Joint Venture Agreement was finalized in 1998. 30 35 If this facts stand, then the Defendant must seeks the approval of the Cabinet before the Defendant could enter into any joint venture agreement. The Cabinet decision as stated by DW1 came in the month of May and this was conveyed to the Defendant as reflected in Exhibit D1 at page 77. The decision of the Cabinet was further conveyed to the Defendant in Exhibit D1 at page 79. The decision of the Cabinet and the State Government is final and it is in accordance with section 8(1)(e) of the Enactment. 40 Section 10 (c) of the same Enactment provides that “ No Statutory body shall, without the prior written approval of the Cabinet, guarantee or provide any form of security for any loan, liability or obligation, contractual or otherwise, of any of its holding or subsidiary or related companies”. 45 28 The Draft Joint Venture Agreement in Exhibit D1 at page 38(c) Clause 5 (g), provides for charging of the land as security for the purpose of bridging finance. 5 Since the Draft Joint Venture Agreement requires the approval of the Cabinet, it cannot be said that the Draft Joint Venture Agreement amounts to a binding contract. The Plaintiff cannot pre-empt the Cabinet’s approval. In the circumstances of this case, the Cabinet has already rejected the Draft Joint Venture Agreement and the Power of Attorney. 10 The Minister’s approval was also rejected by the Government. 15 Section 3 of the Enactment provides that “In the event of any inconsistency between the provisions of this Enactment and of the State Law pursuant to which a statutory body is incorporated, the provisions of this Enactment shall prevail and the State Law shall, to the extent of inconsistency, be void.”. 20 In the circumstances of this case, since the Draft Joint Venture Agreement was finalized either in 1998 according to the Plaintiff or in 1999 according to the Defendant, the Minister’s approval made in 1997 is overtaken by Section 3 of the Enactment. Hence, any inconsistency between the Minister’s approval and the Cabinet’s decision, the latter’s decision prevails. 25 Section 24(b) of the Contracts Act 1950 provides that “The consideration or object of an agreement is lawful unless it is of a nature that, if permitted, it would defeat any law. 30 35 On this premise, it cannot be said that the proposal or the Draft Joint Venture Agreement is binding on either party because the consideration offends sections 8(1)(e) and section 10 (c) of the Statutory Body Enactment and section 24(b) of the Contracts Act 1950 if it is not referred for the Cabinet approval. NO TRADING LICENSE As disclosed in Exhibit D1 at page 30-31, letter dated 9.3.1998, the Plaintiff had submitted to the Defendant an expired trading license which expires on 31.12.1997. 40 45 The consequential effect is that whatever negotiation entered subsequent to 1997 is voidable. No entity should negotiate with a government’s statutory body unless they have a valid trading license. If they have no trading license, Defendant submits the agreement if at all there is an agreement which is denied here is voidable and can be terminated at the instance of the Defendant. 29 The Plaintiff may have made an innocent misrepresentation to the Defendant. When the Defendant issued the notice of termination at Exhibit D1 at page 81, the Defendant is only exercising its right when the contract is voidable. 5 In Black’s Law Dictionary, voidable means valid until annulled; esp.,(of a contract) capable being affirmed or rejected at the option of one parties. Section 19 of the Contract Act states the same principle. The termination is only an exercise under section 19 of the Contract Act 1950. 10 Defendant respectfully submits, the Plaintiff deliberately omitted to include in their pleadings the status of the plaintiff because the Plaintiff did not have a valid trading license during the negotiation. Despite the challenge in the Statement of Defence, the Plaintiff elects not to amend their pleadings. 15 The Plaintiff is not a registered company but a partnership. Without a valid trading license, the partnership does not exist thus the plaintiff is a non-entity in this proceeding. If the Plaintiff is a non-entity, it would prejudice the Defendant in the event the Defendant needs to enforce the judgment. 20 This is not an ordinary kind of contract between two individuals. It is subject to the provisions of specific Enactments and approval of the State Government. UPGRADING WORKS ON THE PORTS TERMINAL 25 The Defendant contends that the works awarded to Pembinaan Megah Mutiara Sdn. Bhd. was not the same kind of project as proposed by the Plaintiff. It is only upgrading of the ferry terminal facilities which costs only RM 2.8 million as opposed to the proposed Plaintiff’s project amounting to about RM180 million. 30 Moreover, Pembinaan Megah Mutiara Sdn. Bhd. is merely a contractor to the Defendant and not a joint venture partner or a developer. The nature of two Works are completely different. This is incompliance with the Cabinet’s decision. 35 For the reasons aforesaid, the Plaintiff’s claim should be dismissed with costs. Dated the 4th day of January 2006. 40 ________________________ 45 M0HAMED BAZAIN BIN IDRIS State Attorney General Advocate for the Defendant 30 11.00 a.m. 4 January 2006 Parties same 5 Court: I Have a soft copy of the submission of counsel for the Plaintiff which I reproduce below. Anything else to add. 10 31 MALAYSIA IN THE HIGH COURT OF SABAH AND SARAWAK AT KOTA KINABALU 5 SUIT NO. K22-271 OF 2001 BETWEEN 10 IAY & ASSOCIATES PLAINTIFF AND 15 LEMBAGA PELABUHAN-PELABUHAN SABAH DEFENDANT PLAINTIFF’S CLOSING SPEECH 20 ISSUES 2, 4 AND 6 OF THE DRAFT STATEMENT OF AGREED ISSUES At page 5 lines 26 to 28 PW1 testified that P2-34 was the proposal 25 forwarded to the Minister of Communication and Works. This evidence was never challenged under cross examination. In the exercise of her statutory powers under Section 73 (1) of the Sabah Ports Authority Enactment 1981 the Minister gave a statutory direction to the Defendant approving the Plaintiff’s proposal for the purpose of 30 carrying out the said Project – see D1. Submit that the Project referred to in D1 has to be P2-34. DW1 at page 16 lines 15 contended that P2-34 was not the proposal submitted to the minister and according to him the Defendant received 32 D1 together with a letter from the Plaintiff to the Minister but could not produce the purported letter. Submit if there was such a purported letter, it must surely be in the possession, custody or power of the Defendant and since the Defendant has not produced the purported 5 letter nor was PW1 cross examined on the purported letter, this court ought to draw the adverse inference under Section 114 (g) of the Evidence Act 1950. In any event DW1 at page 19 lines 23-24 did admit that the Plaintiff did submit P2-34. 10 The Plaintiff readily admits that D1 by itself does not create any contract and my opening speech makes that clear since D1 is addressed to the Defendant. All that D1 does is to require the Defendant to give effect to it as provided under Section 73 (1) of the Sabah Ports Authority Enactment 1981. 15 What creates a legal contract is P35-36 where the Defendant informs the Plaintiff that the Defendant has approved the said Project on a joint venture basis. It is pertinent to note that PW1 was never cross examined on this fact. In the absence of any evidence to the contrary, P35-36 20 must be taken to the Defendant having approved P2-34. Refer to cases 1 and 3 of Plaintiff’s Bundle of Authorities. A perusal of P35-36 will show that the contract is not conditional to the Defendant getting any approval from the Government or Ministry or 25 Cabinet and DW1 at page 21 lines 1-8 admits to that. Section 4 (1) of the Sabah Ports Authority Enactment 1981 clearly states that the Defendant is competent to enter into contracts. 33 Furthermore, P35-36 is not worded as being subject to contact or a formal execution of a contract and therefore the presumption referred to in case 2 of the Plaintiff’s Bundle of Authorities does not arise. 5 P35-36 indicates that the Defendant approved the said Project on 07.08.1997 and the approval was communicated on 11.08.1997. In order to defeat the Plaintiff contention herein, the Defendant is 10 relying on Section 8 (1) (e) and Section 10 (c) of the Statutory Bodies (Supplementary Provisions) Enactment 1997 which was enacted on 24.12.1997 and came into force on 31.12.1997 i.e. after P35-36 came into existence. 15 The Statutory Bodies (Supplementary Provisions) Enactment 1997 has no express provision to the effect that it has retrospective effect. On the authority of case 5 of Plaintiff’s Bundle of Authorities, it is submitted that even if the 1997 Enactment expressly provides for retrospective effect, it cannot take away the rights accrued to the Plaintiff pursuant to 20 P35-36. On the authority of case 6 of Plaintiff’s Bundle of Authorities it is submitted that since Sections 8 (1) (e) and 10 (c) have the effect of affecting substantive rights under P35-36, the 1997 Enactment must be construed as having prospective effect only. 25 The five Draft JV Agreements arose as a direct result of P35-36. The first Draft JV Agreement was submitted to the Defendant vide D7 on 22.10.1997 before the 1997 Enactment came into force. The subsequent 34 four Draft JV Agreements were merely amendments made to the first Draft JV Agreement and they are therefore merely consequential in nature. The Draft JV Agreements was approved by the Defendant’s Board of Directors on 31.12.1998 as evidence by D65 and vide D66 the 5 Defendant communicated to the Plaintiff that the Draft JV Agreement had been accepted. The acceptance here is consequential to the approval contained in P35-36 since without P35-36 the question of Draft JV Agreements do not arise. 10 It is pertinent to note that the first time the Defendant informed the Plaintiff that the Draft JV Agreement was being submitted to the State Government for approval was on 25.01.1999 vide D66. However, the point to be noted here is that State Government had way back on 25.04.1997 approved the said Project vide D1 and it is therefore 15 superfluous to seek the State Government’s approval in 1999. Cases 1, 3 and 4 make it amply clear that a binding contract could come into existence without a formal contract document being executed by both parties as the agreed documents referred to at the trial clearly 20 show that there was an enforceable contract between the Plaintiff and the Defendant. In any event if the Defendant takes the stand that there was no contract in the first place, why does the Defendant deem it necessary to 25 terminate it as indicated in D81. 35 It is pertinent to note that the same Ministry, which gave a statutory direction under Section 73 (1) of the Sabah Ports Authority Enactment 1981 to the Defendant to approve the said Project vide D1 subsequently decides not to approve it vide D79-80. However there is a difference 5 here. In D1 you have a statutory direction exercised by the Minister and that statutory directions has never been revoked or rescinded by the Minister until current date. D79-80 is a letter issued not by the Minister in the exercise of his statutory powers under Section 73 (1) but by the permanent secretary to the Ministry. Can the permanent secretary to the 10 Ministry overrule the Minister’s statutory direction in D1. To allow D79-80 to stand would constitute an illegality in that the Defendant is required by law to give effect to the Minister’s statutory direction under Section 73 (1) and D79-80 constitutes a flagrant breach 15 of the Minister’s statutory direction in D1. It is submitted that D79-80 is a nullity. ISSUE 3 OF THE DRAFT STATEMENT OF AGREED ISSUES 20 It is submitted that given the fact that the Defendant is taking the stand that there was no binding contract as per the Draft JV Agreement, the fulfillment or otherwise of the conditions precedent therein will not arise. In order for the Defendant to take the stand that the conditions precedent have not been fulfilled they would have to first accept that 25 there was a binding contract. Assuming the Defendant accepts that there was a binding contract, the condition precedent in Clause 4.1 (a) 36 and (b) is the responsibility of the Defendant as can be seen from Clause 6 (a) and (c) and not the Plaintiff. The condition precedent in Clause 4.1 (c) is the responsibility of the 5 Plaintiff pursuant to Clause 5 (a) which states that the Plaintiff has 6 months from the date of the Agreement to prepare and submit the development plan for approval. The Plaintiff vide D62 had asked the Defendant when the Defendant was ready to execute the Agreement and instead of executing the Agreement the Defendant informs the 10 Plaintiff in D81 that the said Project is considered as terminated. It is submitted that the conditions precedent will only arise upon execution of the formal agreement. 15 ISSUE 5 OF THE DRAFT STATEMENT OF AGREED ISSUES It is submitted that the Draft Agreement is for the Plaintiff to develop, construct and complete the said Project on the Defendant’s land at the Plaintiff’s own cost and does not involve selling leasing or otherwise 20 alienating the said land. ISSUE 7 THE DRAFT STATEMENT OF AGREED ISSUES It is submitted that the Draft JV Agreement is not conditional upon the 25 Plaintiff providing a valid trading license – and therefore it cannot be said to be a condition precedent and it would have been stated in Clause 4.1 37 ISSUE 8 OF THE DRAFT STATEMENT OF AGREED ISSUES It is submitted that D26 requested the Plaintiff to provide the relevant development permits and licenses required by the authorities e.g. CIDB 5 etc. Thus, there was no failure on the part of the Plaintiff to submit a valid trading license upon being requested by the Defendant. ISSUE 1 OF THE DRAFT STATEMENT OF AGREED ISSUES 10 It is submitted that in the Defendant’s Defence at Paragraph 1 the Defendant relied on Order 77 Rule 2 of the Rules of the High Court 1980 to contend that the Plaintiff is not the proper party to bring and/or to continue the present action against the Defendant. Order 77 Rule 2 empowers the Defendant in an action brought by partners in a name of 15 a firm to serve on the Plaintiff or their solicitors a notice requiring them to furnish the Defendant with the names and places of residence of the partners in the firm. Since commencement of this action no such notice has been served by the Defendant on the Plaintiff or their solicitors. The answer is obvious since vide D19 prior to commencement of this 20 action the necessary particulars have been disclosed to the Defendant. Thus, way back on 09.02.1998 when D19 was received the Defendant knew who the partners were and they also knew that the Plaintiff was a partnership firm. The law on partnership is govern by the Partnership 25 Act 1961 and not founded on a trading license. Section 3 (1) of the Partnership Act 1961 defines a partnership as the relation which subsist between persons carrying on business in common with a view of profit. 38 Section 7 provides that the acts of a partner shall bind the partnership firm and Section 8 provides that partners are bound by acts on behalf of the partnership firm. 5 In the light of the aforesaid, it is submitted that this fact not been pleaded in the Statement of Claim has not occasioned a substantial miscarriage of justice. Reference is made to Order 1 A and Order 2 Rule 3 of the Rules of the High Court 1980. Submit, that your Lordship ought to have regard to the justice of the case and not some technical 10 non-compliance of a fact that is already known to the Defendant prior to the commencement of this action. DAMAGES 15 On the issue of the measure of damages for breach of contract is governed by Section 74 of the Contracts Act 1950 which requires that the damage or loss suffered must be within the contemplation of both parties. See Case No. 8 of the Bundle of Authorities. 20 On the special damages pleaded, the evidence of PW1 at page 7, lines 25 – 26 and page 8, lines 1 – 2 was never challenged by the Defendant under cross examination. There is clear evidence that the Defendant vide D53 requested the Plaintiff to prepare and submit (a) artist impression of the overall development project and (b) detailed outline 25 of the existing project site within the port area, which the Plaintiff duly prepared and submitted as shown in D55. Hence, the expenses incurred in this connection was within the contemplation of the parties and 39 therefore, the sums of RM7,500.00 and RM10,000.00 ought to be allowed. In respect of the professional fees of RM5,250.00 incurred for 5 preparation of report and valuation of the existing Old Wharf, the Defendant vide D60 requested the Plaintiff to engage a private valuer to carry out the valuation and the relevant valuation report was duly forwarded to the Defendant vide D61. The relevant receipt appears at P74. This expense was also within the contemplation of the parties and 10 therefore ought to be allowed. In any event, the Defendant did not challenge the sum incurred. On the question of loss of profits from the said Project, the evidence would show that P2 – 34 which included detailed projected profit to be 15 earned from the Project which appears at P25 – 31. P2 – 34 is an agreed and admitted document. Counsel for the Defendant did not at all challenge the projections set out in P25 – 31. It is also an uncontroverted fact that the Defendant did have a copy of P2 – 34 as admitted by DW1 at page 19, lines 23 – 24. Both the Minister vide D1 20 and the Defendant vide D35 – 36 approved the proposal which was P2 – 34 including the projected profits set out therein. Hence, it was within the contemplation of the parties that the Defendant. Based on P2 – 34, the projected net income from the development was 25 RM82,495,000.00 while the projected income from the terminal was RM500,000.00 per year. Therefore, the estimated net income the Plaintiff would have lost from the said Project would be 80% of 40 RM82,495,000.00, which is equivalent to RM65,996,000.00 but in the Plaintiff’s pleadings the Plaintiff has put its loss of net profits at the reduced sum of RM31,316,550.00 which it is bound by. 5 On the loss of profit from the operation of passenger ferry terminal appearing at P31, there appears to be an error in the calculation at 80% of RM492,000.00 per year. The assumption for item 2 (boats from Labuan and Brunei) should be RM15,000.00 instead of RM9,000.00 per month. Therefore, the correct calculation would be RM47,000.00 10 per month instead of RM41,000.00. Thus, 80% of the annual revenue of RM564,000.00 would be RM451,200.00 per year to be calculated for a period of 10 years would amount to RM4,512,000.00 which would be reasonable in the circumstances. 15 Dated the 4th day of January 2006. Sugumar Balakrishnan Counsel for the Plaintiff 20 41 Sugumar: Awarding of works to Mutiara, project was substantially the same as the one awarded to Plaintiff. In defence, pleaded contract signed. Contract was no adduced in evidence. Submit that court can invoke adverse inference. 5 Court: Adjourn to 10.00 a.m. 6 January 2006 for judgment 10 15 20 Justice Datuk Ian H.C. Chin 42