Gopal Sri Ram JCA:

[1] This is the judgment of the court.

[2] This is a case in which the respondent was given a timber licence by the State Government.

[3] By two agreements dated 28 June 1993 and 13 August 1993 the respondent engaged the appellant to fell and extract timber from a certain portion of the land in the licence in question. Later the agreement was terminated and the appellant filed an action against the respondent for breach of contract. The learned judge who heard the suit dismissed it on the sole ground that the two agreements aforementioned were illegal and void because it amounted to an assignment of the respondent's licence to the appellant which was prohibited by law.

[4] The respondent's case is that the licence in question was issued under s. 24 of the Forest Enactment 1968. For this contention the respondent relied on the following endorsement at the foot of the Timber Licence (see at p. 337 of vol. 2 of the record of appeal) as follows:

In Witness Hereof, the Director for and on behalf of the Government of the State of Sabah and empowered by Section 4 and 24 of the Forest Enactment, 1968 has hereunder set his hand on this 26th day of Oct 1990.

[5] Under r. 3 of the Forest Rules 1969 a licence issued under s. 24 must be in Form I, Form IIA or Form IIB. The licence here is not in any of the said prescribed Forms. It is not correct to construe the timber licence as a s. 24 licence just because the Director says it is signed or issued under s. 24. We are therefore unable to agree with this contention of the respondent.

[6] We return now to the issue of assignment. The impugned agreements make it clear that only 4.3% of the whole area covered by the licence issued to the respondent was made the subject matter of the agreements. Further, cls. 2 and 6 of the agreement dated 28 June 1993 make it clear that the respondent retains control over the felling of the timber. As far as the power of attorney is concerned, this was executed simultaneously with the agreements and is merely an adjunct to enable the appellant to extract timber.

[7] Learned counsel for the respondent has submitted that the facts of the present case are indistinguishable from those of Lo Su Tsoon Timber Depot v. Southern Estate Sdn. Bhd.; [1971] 2 MLJ 161 and Sundang Timber Co. Sdn. Bhd. v. Kinabatangan Development Co. Sdn. Bhd.; [1977] 2 MLJ 200. With respect, we do not agree. In both those cases, the whole of the rights under the licence were assigned to the other party. Here the agreements do not do that. They merely confer on the appellant the right to enter, extract and account for the timber to the respondent. Of course, the appellant has a share in the profits but that does not mean that there was an assignment of the licence.

[8] In our judgment, the facts of this case are closer to those of Perkayuan OKS No. 2 Sdn Bhd v. Kelantan State Economic Development Corp [1995] 1 CLJ 761. In that case the Federal Court made the following observation about the fact pattern in that case:

Upon examination of all the relevant provisions of the second agreement of 24 May 1988, we are compelled to depart from the finding of the learned judge below. From the preamble in paras (b) and (c), there is there stated the first indication as to the real intention of the parties. Because OKS No 2 (the appellant/plaintiff) 'is desirous of felling, logging and removing timber from that portion of the concession area', OKS No 2 'had agreed to engage' the contractor (Kempadang) to do the work subject to the terms and conditions in the agreement. The appellant/plaintiff agreed only 'to engage' Kempadang. To engage is to employ or to secure for service. By cl 1 of the said agreement, the contractor 'agrees to fell ...' the timber 'subject to the reasonable satisfaction of OKS No 2 and in conformity with all the reasonable directions and requirements of OKS No 2 and ...'. Upon being engaged to do the work, the contractor did not have a free hand to work the