The court emphasized that contractual payment terms must be adhered to as stated, confirming that a subcontractor cannot be forced to accept payment in a form other than as agreed upon, namely cash.

Headnote:(A) Companies Act - Section 176(1) - Contract Law - Construction of Contract - Payment terms - The main contractor and nominated subcontractor engagement in the renovation of a hotel; issues of insolvency and payment forms raised pertaining to liability for payment. (Paras 6, 10, 17, 27)

(B) Contract Formation - Consideration - The court ruled that even if a subcontractor is nominated, a valid contract exists provided that the parties consented freely and there is sufficient consideration. (Paras 25, 10)

Facts of the case:
The appellant was the main contractor for the renovation of a hotel, subcontracting parts of the project to the respondent. After the owner became insolvent, the appellant sought to pay the respondent with stocks instead of cash for outstanding debts. (Paras 1-6)

Findings of Court:
The consents and terms as agreed were upheld, and the subcontract included a pay-when-paid clause. Payment must be in monetary form, not stocks; therefore, the appellant is obligated to pay the respondent in cash. (Paras 17, 27)

Issues: Whether the respondent is obligated to accept stocks as payment instead of cash and whether a valid contract existed between the parties. (Paras 17, 29)

Ratio Decidendi: The court held that the construction of the payment terms in the contract explicitly specified monetary payment; therefore, stocks cannot be unilaterally imposed as a form of payment. Appellant must adhere to the payment terms outlined in the subcontract. (Paras 18, 27)

Result: Appeal dismissed with costs of RM80,000 to the respondent.

Table of Content
1. establishment of subcontractor agreement details. (Para 1 , 2 , 3 , 4 , 5 , 6)
2. responses to insolvency and proposal negotiations. (Para 8 , 9 , 10 , 11 , 12 , 13)
3. court actions and proceedings initiated. (Para 14 , 15 , 16)
4. high court and court of appeal judgment rationale. (Para 17 , 18)
5. construction of the contract terms on payment. (Para 19 , 24 , 25 , 26 , 27 , 28 , 29)

James Foong FCJ:

Introduction

[1] The facts of this case are undisputed and are relatively straightforward. The appellant was the main contractor for the renovation and extension of the Merlin Hotel, Subang (the said project). The owner was a private limited company known as Subang Jaya Development Hotel Sdn Bhd (owner). The owner was part of the Faber Group Berhad, a public listed company. The respondent was the nominated subcontractor of the appellant for the installation of air-conditioning and ventilation in the said project. The respondent was nominated by the owner and in the usual course of practice in the building industry accepted by the appellant. The pertinent part of the owner's consultant letter informing the appellant of this is as follows:

We have been instructed by our client, Messrs Subang Jaya Hotel Development Sdn Bhd to inform you that they have selected Messrs UEM Genisys Sdn Bhd (the respondent) to be the Nominated Sub-Contractor to execute the Air Conditioning & Mechanical Ventilation Services Subcontract work for a tender sum of Ringgit Malaysia: Two Million Five Hundred and Ninety Three Thousand Eight Hundred and Sixty Two Only (RM2,593,862.00) with a completion period of 28 weeks or to follow the main contract programme.

In accordance with the condition of contract entered between yourselves and Messrs Subang Jaya Hotel Development Sdn Bhd, you are hereby instructed to accept the tender submitted by Messrs UEM Genisys Sdn Bhd and the said tenderer is hereby declared to be the Subcontractor employed by you and shall be referred to as the "Nominated Sub-Contractor".

[2] The appellant accepted the respondent as the nominated subcontractor and in paras 10 and 11 of their letter to the respondent dated 30 November 1994 listed:

10. You have agreed that payment will be made to you within forty five (45) days from the date of receipt by the contactor of any certificate of duplicate copy thereof from the Architect or until receipt of main contract payment from the employer, whichever is later.

11. In the event of any inconsistency between the terms of this Letter of Acceptance and the terms of the formal subcontract to be entered into between you and us, the terms of this Letter of Acceptance shall prevail.

[3] The respondent accepted this condition by endorsing on this letter:

We, the undersigned, hereby acknowledge receipt of the above Letter of Acceptance, a copy of which has been retained by us, and confirm that all the terms and conditions and stipulations are fully agreed to by us.

[4] Subsequently, the respondent was also nominated as the subcontractor by the owner for the supply and installation of kitchen equipment in the said project and the price for this sub-contract was RM1,060,000. The appellant accepted the respondent as their sub-contractor in much the same manner and on the same terms and conditions as the first appointment.

[5] A formal sub-contract agreement between the appellant and the respondent was executed on 27 July 1996 for these jobs.

[6] When all the respective works of the appellant and respondent were completed but before the appellant was fully paid by the owner, the owner became insolvent. On 13 October 1999, the owner and its parent company, the Faber Group Berhad together with another associated company, Faber Hotels Holdings Sdn Bhd, (all collectively known as the Scheme of Companies) obtained an order restraining creditors, including the appellant (which are referred to as Scheme Creditors) from taking any action against the owner to recover their debts. This was soon followed by a proposed

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2010 MarsdenLR 346

FEDERAL COURT, PUTRAJAYASELOGA JAYA SDN BHD – AppellantVersusUEM GENISYS SDN BHD – Respondent[Civil Appeal No: 02(F)-20-2008(W)]

The court emphasized that contractual payment terms must be adhered to as stated, confirming that a subcontractor cannot be forced to accept payment in a form other than as agreed upon, namely cash.

FEDERAL COURT, PUTRAJAYA
SELOGA JAYA SDN BHD – Appellant
Versus
UEM GENISYS SDN BHD – Respondent
[Civil Appeal No: 02(F)-20-2008(W)]