The court clarified that under s 15(2) of the Civil Law Act, a party asserting entitlement to retain fees has the burden to prove related expenses incurred, reinforcing obligations predetermined by contractual agreements.

[1] There were two appeals before us, namely, appeal No. N-02-2894-12/2012 and appeal No. N-02-2967-12/2012 which were heard simultaneously. The appeals are against the decision of the High COURT at Seremban delivered on 31 October 2009 wherein the appellants in appeal No.N-02-2894-12/2012 were the plaintiffs and the respondent was the defendant. For the purpose of this judgment the parties will be referred to as they were in appeal No. N-02-2894-12/2012.

[2] In the COURT below the plaintiffs sought for inter alia a declaration that the Tapping Agreements entered into between the plaintiffs and the defendant dated 15 July 1997 ("the TAs") were void by reason of frustration and claim for refund of fees paid to the defendant under the TAs in the sum of RM868,297.52 together with interests and costs. The defendant counterclaims for the balance of the fees due under the said TAs in the sum of RM1,515,152.48. Alternatively the defendant claims for costs of construction of the Waste Treatment Plant ("WTP") under the said TAs, less the fees paid.

[3] The High COURT found that the TAs had become void and were discharged due to frustration. Consequently the High COURT made inter alia the following orders:

(a) the TA and the Service Agreements are declared as void on the ground of frustration of contract;

(b) the sum of RM868,297.52 received by the defendant from the plaintiffs shall be retained by the defendant to set off the costs of construction incurred by the defendant under the TAs, and

(c) the defendant's counterclaim is dismissed.

[4] The plaintiffs filed their appeal vide appeal No.N-02-2894-12/2012 and the defendant appeals against the dismissal of its counterclaim vide appeal No.N-02-2967-12/2012. It must be noted that the parties are not appealing against the learned judge's finding that the TAs are void on the ground of frustration.

[5] The basis for the learned judge's order that the amount of RM868,297.52 received by the defendant from the plaintiffs shall be retained by the defendant is made pursuant to the exercise of Her Ladyship's discretion under the proviso to s 15(2) of the Civil Law Act 1956 ("the Act") that it is just and fair to allow the defendant to off-set the costs of construction of the WTP.

[6] At the conclusion of submissions we reserved our decision. We now give our decision. Having considered the appeal records and the submissions made by both parties it is our unanimous decision that appeal No.N-02-2894-12/2012 be allowed and appeal No.N-02-2967-12/2012 be dismissed. Our reasons are as follows.

Salient Background Facts

[7] The plaintiffs were owners and/or operators of pig farms on the land in and around the area of Bukit Pelandok and Tanah Merah in the District of Port Dickson. Sometime in the early 1990s the State Government of Negeri Sembilan decided to designate and develop a new pig farming area to be called the "Integrated Pig Farming Area" ("the IPFA") for Bukit Pelandok and its surrounding area.

[8] The defendant was chosen as the developer of the IPFA where, inter alia, it is to provide and construct a central waste treatment plant to treat the waste water from the pig farms. The plaintiffs' pig farms are outside the IPFA. It is not disputed that it is the State Government's policy that all pig farming activities are to be allowed only in the IPFA. However the State Authority seemed to relax the policy and allowed those existing pig farms to continue operation provided they are connected to the defendant's Central Waste Treatment System ("the CWTS").

[9] Pursuant to this policy, the plaintiffs and the defendant entered into the two agreements, which are, the TAs and the Service Agreements ("the SAs") in respect of their respective lots. Under the TAs, the defendant agreed