Abdul Malik Ishak JCA (delivering judgment of the court):

INTRODUCTION

[1]This was an appeal against the decision of the High Court in dismissing the appellant’s claim and entering judgment on the first respondent’s counterclaim after a full trial.

[2]The appellant’s claim before the High Court was for the rescission of a settlement agreement on the grounds of conspiracy, fraud and for breach of contract.

[3]The first respondent’s counterclaim centred on the settlement agreement where the appellant agreed to pay the first respondent the sum of RM11,498,788.12. After the appellant had made the first payment of RM2,500,000, the appellant defaulted in making the subsequent instalment and pursuant to the settlement agreement, the appellant was liable to pay the first respondent the remaining balance sum of RM8,998,788.12.

THE RELEVANT FACTS

[4]This is a factually based appeal and we will now narrate the events that follow. The appellant is the developer of a housing project in Bukit Cerakah, Shah Alam. The first respondent, on the other hand, is an earthworks contractor.

[5]Now, the first respondent was appointed as the main earthworks contractor for the development in Phase 3A and Phase 3B.

[6]In regard to Phase 3B, the first respondent was the second respondent’s nominated subcontractor. The appellant agreed to make all payments that were due under the Phase 3B contract directly to the first respondent. Evidence wise, there is no direct contractual relationship between the appellant and the first respondent in respect of the works that were carried out in Phase 3B. The letter dated 1 April 1999 from the appellant to the second respondent appointing the first respondent as the nominated subcontractor can be seen at the first respondent’s core bundle at Tab 1. That letter was worded as follows:

Nomination of subcontractor for PROPOSED CONSTRUCTION AND COMPLETION OF EARTHWORKS AND MAIN DRAINAGE WORKS FOR CADANGAN PEMBANGUNAN BERSEPADU PUNCAK ALAM Dl ATAS LOT PT. 1929 AND PT. 1935, LADANG FELDA BUKIT CHERAKAH, MUKIM JERAM DAN IJOK, DAERAH KUALA SELANGOR, SELANGOR DARUL EHSAN (PHASE 3B)

- Instruction to Appoint Nominated subcontractors

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In accordance with Clause 28 of the Conditions of Contract, you are hereby instructed to accept the Tender for the above-mentioned subcontract Works from Menta Construction Sdn Bhd, who has been nominated to execute and complete the said subcontract Road and Drainage Works for the total sum of Ringgit Malaysia: Eleven Million Six Hundred Seventy Seven Thousand Eight Hundred and Ten (RM11,677,810.00).

The above-mentioned firm shall become Nominated subcontractor and you shall be required to enter into a formal subcontract with the said firm.

The subcontract documents will be prepared and you shall be notified when they are ready to be signed by you and the Nominated subcontractor.

The Nominated subcontractor has undertaken to commence the subcontract Works within two (2) weeks from the date of receipt of your Official Order and to complete the whole of the subcontract Works within Twelve (12) Months from the date of Site Possession.

All correspondence i.e. letters, instructions and the like issued by the Superintending Officer whether directly or indirectly to you relating to subcontract Works shall be deemed to have been served to you and taken effect thereof by the Nominated subcontractor in so far as it related to the proper execution and completion of the NSC works.

You are hereby required to provide all necessary Supervision and Administration of the Nominated subcontractor’s Works including co-ordination with the Employer and the S.O. to ensure the timely completion of the Works and compliance with the provisions of the Contract.

Please prepare the necessary Letter of Acceptance and Documents for the execution of both the contracts.

[7]Another significant letter from the appellant to the first respondent dated 1 April