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2020 MarsdenLR 1066
HIGH COURT (KUALA LUMPUR)
AHMAD KAMAL BIN MD. SHAHID, J
Masai Tat Construction Sdn Bhd – Plaintiff
Versus
Redison Builders Sdn Bhd & Anor – Defendant
GUAMAN SIVIL NO: JA-22NCVC-259-12/2017
The court ruled that the term 'ensure' in a Tri-Party Agreement does not impose a payment obligation on the Second Defendant to cover the First Defendant's outstanding debts.
Headnote:(A) Companies Act 1965 - Winding Up - Contractual Obligations - Plaintiff's claim against Second Defendant for sum due under Sub-Contract - Court found no obligation ensued from Tri-Party Agreement for Second Defendant to pay Plaintiff for outstanding debt of First Defendant, which was wound up - The intention of parties was established that obligations of payment resided solely with First Defendant without creating a preference over other creditors. (Paras 17, 33, 35, 49, 84)
(B) Legal Interpretation - The phrase ‘ensure’ does not impose a binding payment obligation, warranting dismissal of claims for double payment or preference among creditors. (Paras 59-60, 83)
Facts of the case:
The Plaintiff engaged as Subcontractor under a Sub-Contract for a project with a value of RM3,869,000.00, alleged outstanding amount claimed against Second Defendant, notwithstanding First Defendant's liquidation as of 1.11.2017.
Findings of Court:
The Plaintiff’s claim was dismissed due to lack of enforceable obligation on the Second Defendant to pay the Plaintiff, as determined through contract interpretation and absence of trust provisions concerning payment arrangements.
Issues: a) Obligation of Second Defendant to pay under the Tri-Party Agreement; b) Existence of double payment risk; c) Court’s ability to assist Plaintiff against First Defendant's creditors.
Ratio Decidendi: The court ruled the language of the Tri-Party Agreement did not impose payment obligation on Second Defendant; obligations remained with First Defendant, and claims made to secure payment could not circumvent statutory insolvency principles.
Result: Claim dismissed with costs awarded.
| Table of Content |
|---|
| 1. facts of breach of contract. (Para 1 , 2 , 3 , 4 , 5 , 6 , 7 , 8 , 9) |
| 2. parties argue obligations under agreements. (Para 10 , 11 , 12 , 13 , 14 , 15 , 16) |
| 3. court's observations on procedural matters. (Para 20 , 21 , 22 , 24 , 25 , 26 , 27 , 28 , 29 , 30 , 31) |
| 4. interpretation of 'ensure' in agreements. (Para 33 , 34 , 35) |
| 5. court's rationale against reinterpreting contracts. (Para 49 , 57 , 58) |
| 6. issues about debt distribution during insolvency. (Para 61 , 62 , 65 , 69 , 70 , 72 , 74) |
| 7. final judgment denies plaintiff's claim. (Para 82 , 84) |
[1]This is a case on breach of contract in respect of the contracts entered between parties.
[2]Pursuant to a Winding Up Order dated 1.11.2017, the First Defendant had wound up on 1.11.2017 and the Plaintiff has subsequently withdrawn its action against the First Defendant.
[3]The Plaintiff’s claim against the Second Defendant is for the sum of RM2,850,360.12 allegedly outstanding under the Sub-Contract which was entered between Plaintiff and the First Defendant.
Brief Facts
[4]The Plaintiff is a company incorporated in Malaysia under the Companies Act 1965 with a registered business address at No. 6, Jalan Cenderai 23, Kawasan Perindustrian Kota Puteri, 81750 Masai, Johor.
[5]The First Defendant is a company incorporated in Malaysia under the Companies Act 1965 with a registered address at No 308, Blok A (3rd Floor), Kelana Business Centre, 97 Jalan SS7/2, Kelana Jaya, 47301 Petaling Jaya, Selangor and its business address at Block D-3-13A, Block D, Oasis Square 2A, Ara Damansara, 47301 Petaling Jaya, Selangor.
[6]The Second Defendant is a company incorporated in Malaysia under the Companies Act 1965 with a registered address at M5C-15, 2nd Floor, Jalan Pandan Indah 4/1, Pandan Indah, 55100 Kuala Lumpur and its business address at No 294, Jalan Sri Jati 2, Taman Sri Jati, Off Jalan Puchong, 58200 Kuala Lumpur.
[7]By way of a letter of Award dated 28.6.2014 (the Main Contract), the Second Defendant had appointed the First Defendant as the Main Contractor for the Project called ‘Cadangan Projek Ladang Buah Berskala Besar di atas sebahagian PTD 2730 di Kg Tuah She, Mukim Sedili Besar, Daerah Kota Tinggi, Johor’ (The Project) amounting to RM7,718,000.00 (the Main Contract Works).
[8]By way of a letter of Award dated 2.11.2015 (the Sub-Contract), the First Defendant had appointed the Plaintiff as Subcontractor for the part of the work of the said Project amounting to RM3,869,000.00 (the sub contract works).
[9]The said Sub-Contract was executed on 2.11.2015 and on the same day also, the First Defendant, the Second Defendant and the Plaintiff had executed a Tri-Party Construction Agreement dated 2.11.2015 (Tri Party-Agreement) to ensure the payment of the Contract Sum under the Sub-Contract to the Plaintiff.
The Plaintiff’s Case
[10]It is the Plaintiff’s contentions that the Tri-Party Agreement does impose an obligation and liability on the Second Defendant to pay on behalf of the First Defendant for monies due and owing under the Sub-Contract entered between Plaintiff and the First Defendant.
[11]The Palintiff submitted that the word ‘ensure’ stated in clause 3 of the said Tri-Party Agreement does impose an obligation on the Second Defendant to make payment on behalf of the First Defendant for the alleged outstanding sum owed under the Sub-Contract.
The Second Defendant’s Case
[12]It is the contention of the Second Defendant that the Second Defendant is not a party or privy to the Sub-Contract entered between the Plaintiff and the First Defendant.
[13]The Second Defendant submitted that under the term of the Sub-Contract, the First Defendant is liable to pay the Plaintiff for the works completed thereunder. The Second Defendant also submitted that the Sub-Contract does not contain any terms imposing an obligation, contractual or otherwise on the Second Defendant to pay for and/ or on behalf of the First Defendant for works carried out under the said contract.
[14]Hence, it is the Second De
