The Letter of Undertaking remains enforceable and binding, and the subsequent communications did not void the defendant's obligation to make direct payments to the plaintiff.

[1] The plaintiff, NV Bina Sdn Bhd, was a sub-subcontractor for a mixed development project involving the construction of apartments and shops located on Jalan Kepong. The defendant, Magna Park Sdn Bhd, was the developer and owner of the project. The plaintiff sued the defendant for certain progress payments due to the plaintiff in respect of the project. The plaintiff's case was founded on a letter of undertaking dated 1 September 2005 (the Letter of Undertaking) from the defendant and addressed to the plaintiff, by which the defendant had irrevocably undertaken to make direct payments to the plaintiff in respect of the subcontract works performed by the plaintiff.

Facts

[2] The defendant, as employer, awarded the project to an unincorporated joint venture known as MPC-Perembun JV, comprising an associated company of the defendant, Magna Prima Construction Sdn Bhd, and Perembun (M) Sdn Bhd MPC-Perembun JV, as the main contractor, in turn awarded the project to Bina BMK Sdn Bhd (Bina BMK) as the main sub-contractor.

[3] By a letter of acceptance of award dated 18 April 2005, Bina BMK Sdn Bhd appointed the plaintiff as the sub-subcontractor to undertake the main building works for the project.

[4] As mentioned above, on 1 September 2005, the defendant issued the Letter of Undertaking to the plaintiff, which letter was countersigned by MPC-Perembun JV, Bina BMK and the plaintiff. The principal purpose of the Letter of Undertaking was to provide that payments due under the sub-subcontract to the plaintiff were to be made directly by the defendant, as employer of the project.

[5] There were two subsequent letters issued by the defendant and counter-signed by the plaintiff, dated 13 October 2006 and 12 December 2006. The effect of these letters, in particular on the arrangement for direct payment established pursuant to the Letter of Undertaking, forms the crux of the dispute between the parties. The defendant's position is that these subsequent letters displaced its obligation to make direct payments under the Letter of Undertaking. Neither of these subsequent letters were signed by MPC-Perembun JV, an important point discussed further below.

[6] The certificate of practical completion for the project was issued on 11 December 2007. The defect liability period for the project expired on 10 June 2009.

[7] Some payments had been made to the plaintiff under the sub-subcontract and pursuant to the Letter of Undertaking. However, a sum of RM6,041,934.56 remains outstanding, which includes RM1,158,015.22, being 2.5% of the contract sum being retained until expiry of the defect liability period.

[8] Arbitral proceedings had been commenced between the main contractor, MPC-Perembun JV, and Bina BMK, the main subcontractor. Bina BMK claimed for amounts due to it under the terms of the subcontract entered between them. The arbitrator issued a final award on 21 April 2014. Neither the plaintiff nor the defendant was a party to the arbitration.

[9] In his final award, the arbitrator came to a finding that the Letter of Undertaking was invalid and ineffective and did not bind Bina BMK on the following grounds:

(a) there was economic duress on the claimant, Bina BMK, and therefore there was no consent to form the basis of an agreement;

(b) there was no consideration flowing from NV Bina Sdn Bhd (the subcontractor and plaintiff in this action) to Magna Park Sdn Bhd (the employer and defendant in the instant case); and

(c) there was no privity between the plaintiff and the defenda