JUDGMENTBY: EDGAR JOSEPH JR SCJ(DELIVERING THE JUDGMENT OF THE COURT)

The primary issue which arises for decision in this appeal is whether there was a concluded contract between the appellant as employer and the respondent as contractor, to construct and develop low-cost houses and shophouses for the appellants workers, in the Mukim of Dengkil, the District of Sepang, State of Selangor.

The appellant, who was the defendant in the court below, is a public limited company incorporated in Malaysia with its registered office at 16, Jalan Tangsi, Kuala Lumpur.

The respondent, who was the plaintiff in the court below, is a private limited company incorporated in Malaysia with its principal place of business at 448, Jalan Pudu, Kuala Lumpur, carrying on the business of building and general contractors.

It would be more convenient to refer to the appellant and the respondent as the defendant and the plaintiff, respectively.

The record provided shows that in March 1981,the plaintiff had entered into negotiations with a third party, Malaysia Mining Corp Bhd (MMCB), a majority shareholder of the defendant, to develop and construct low-cost houses and shophouses for the defendants workers hereinbefore mentioned (the project). So far as the defendant was concerned, the project was non-profitable. By September 1984, the defendants board of directors being agreeable to the plaintiffs proposals, the secretary of the defendant wrote a letter dated 19 September 1984 addressed to the plaintiff (the letter of 19 September 1984) in the following terms:

Dear Sirs

Ayer Hitam Tin Dredging Malaysia Bhd (AHTB) Workers Housing Scheme

We refer to the above subject and are pleased to advise that your

proposals for the implementation of the housing scheme are agreeable to

the board of directors of the company, subject to the following terms

and conditions:

(i) that the project shall be on a turnkey basis;

(ii) that the design and selling prices of the individual units shall

be as approved by the Jawatankuasa Tetap Kebajikan

Pekerja-Pekerja Ladang dan Lombong Selangor;

(iii) that YC Chin Enterprises shall arrange for end financing of the

project;

(iv) payments to YC Chin Enterprises shall be made at stages of

completion in accordance with the payment schedule as agreed

between the end financier and YC ChinEnterprises and that AHTD

[the plaintiff] shall not be liable for any progress payment;

(v) the filling and levelling of the site shall be carried out by YC

Chin Enterprises for which AHTD undertakes to pay a sum not

exceeding RM300,000 towards the cost of this work;

(vi) that the above terms and conditions be constituted in the form of

an agreement between YC Chin Enterprises and AHTD and that

appropriate indemnity clauses in favour of AHTD in respect of

material defects in site work, foundation and buildings in the

project be incorporated into the said agreement.

A copy of the draft agreement will be forwarded to you in due course

for your perusal.

We trust that the above are in order and should you agree to the above terms and conditions, kindly sign the duplicate copy of this letter and return to us as soon as possible.

Yours faithfully

Ayer Hitam Tin Dredging Malaysia Bhd

--Sgd--

Secretary

In reliance upon the letter of 19 September 1984, the plaintiff had proceeded to make arrangements for end financing for the project and had also commenced preliminary works on the site, for which purpose, architects, engineers and surveyors were appointed. This, they did, although no formal agreement in writing had been executed but in the confident belief that the letter of 19 September 1984 constituted a binding contract.

However, although a copy of the draft agreement referred to in the letter of 19 Se

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