The validity of a letter of award is contingent on the authority of its signatory; reliance on the Turquand rule protects a party acting in good faith under mistaken assumptions.

[1] This is the plaintiff, S Quarry Sdn Bhd's appeal against the decision of the learned judicial commissioner (JC) of the High Court in (i) dismissing the plaintiff's claim for damages for breach of contract against the defendants Desaru Development Holdings One Sdn Bhd (the 1st defendant) and Desaru Development Corporation Sdn Bhd (the 2nd defendant) and (ii) allowing the counter claim of the 2nd defendant and nine related companies against the plaintiff.

The Salient Facts

[2] Following the plaintiff's proposal contained in a letter dated 16 January 2012, the 1st defendant issued a letter of award dated 19 January 2012 (the LOA) to the plaintiff whereby the 1st defendant agreed to allow the plaintiff to carry out site clearing and excavations works on two plots of land identified jointly as 'Phase 3 lands'. It was also agreed that the plaintiff would pay to the 1st defendant RM8.00 per tonne for rock materials extracted therefrom. The Phase 3 lands are registered in the name of the 2nd defendant company; the 2nd defendant company is a wholly-owned subsidiary of the 1st defendant company.

[3] The LOA was signed by Muhd Firdaus Azharuddin (PW2) who was at the material time, the Chief Executive Officer of the 1st defendant and General Manager of the 2nd defendant.

[4] Pursuant to the LOA, the plaintiff have carried out site clearing works and extracted rock materials from the Phase 3 lands and have paid a total sum of RM419,008.80 to the 1st defendant for the rock materials.

[5] On 11 December 2012, Mohd Nadziruddin Bin Mohd Basri (DW1) then Chief Executive Officer of the 2nd defendant lodged a police report alleging wrongful encroachment and illegal mining on the Phase 3 lands. As a result, PW2, Lai Chee Long (PW1) the 1st defendant's head of project development, Hassan bin Zainal (PW3) the 2nd defendant's assistant vice president and the site representative and some of the plaintiff's employees and workers of the plaintiff's sub-contractors were arrested and detained for investigations.

[6] However, as no criminal proceedings were initiated against any of the individuals arrested, the plaintiff requested to carry on with the excavation works. By a letter dated 18 January 2013, solicitors acting for the 1st and 2nd defendants and its subsidiaries informed the plaintiff that (i) the LOA is null and void because the LOA was signed by PW2 as the CEO of the 1st defendant company and that neither the 1st defendant nor PW2 have any authority to grant the rights over the Phase 3 lands, and (ii) in the event that the LOA is valid and enforceable, the plaintiff breached the terms of the LOA on the grounds as set out in the said letter.

[7] As a consequence of the aforesaid, the plaintiff instituted the action against the 1st and 2nd defendants for breach of contract claiming for special damages in respect of idling costs, wasted costs, value of stockpiled rock material left at the site and total costs incurred, and other heads of damages.

[8] The defence of the defendants centred on the validity of the LOA. The invalidity was premised on (i) 1st defendant is not the Phase 3 lands owner, (ii) the signatory to the LOA was not authorised, and (iii) the plaintiff was at all times aware and had constructive knowledge that the Phase 3 lands did not belong to the 1st defendant.

Findings Of The High Court

[9] The learned JC dismissed the plaintiff's claim and allowed the defendants' counterclaim on the following grounds: