2026 MarsdenLR 570

HIGH COURT MALAYA JOHOR BAHRU
NORADURA HAMZAH, JC
HONG XIN CONSTRUCTION SDN BHD – Appellant
Versus
ZANA BINA SDN BHD & ANOR – Respondent
[Civil Suit No: JA-22NCC-75-11/2020]

A party who makes payments on behalf of another pursuant to a failed underlying arrangement, where no consideration is received, may recover such sums, even if made via negotiable instruments. Payments made under commercial compulsion and marked 'without prejudice' do not extinguish one's cause of action.

Headnote:(A) Contracts Act 1950 - Section 74 - Bills of Exchange Act 1949 - Sections 27 and 47 - Companies Act 2016 - Section 466(1)(a) - Rules of Court 2012 - Order 34 Rule 2(2)(b) - Construction dispute - Recovery of monies paid - Total failure of consideration - Payment under protest - Admissibility of 'without prejudice' correspondence.

(B) Payment made under compulsion, where the payer is not the primary debtor and the underlying condition for payment (the receipt of consideration) has failed, is recoverable. A cheque issued in such circumstances does not create an independent statutory obligation when the underlying transaction lacks consideration. (Paras 19, 24, 35)

(C) Correspondence marked 'without prejudice' is admissible to establish the nature of payment, particularly where it evidences a protest against liability and the continuation of legal proceedings. The admission of such documents as 'Part B' evidence, where authenticity is not in dispute, rests on the weight of the contents rather than formal verification of the maker. (Paras 26, 33-34)

(D) Principles of res judicata do not apply to interlocutory applications like winding-up injunctions, which lack the requisite finality. A party who has maintained a separate, ongoing civil suit throughout has not acted in a manner that precludes them from seeking recovery. (Paras 29, 61)

Facts of the case:
The litigation concerned the recovery of payments made by a contractor to a sub-contractor's creditor. The plaintiff, acting as a payment conduit, issued cheques to satisfy the debt of another entity. Following the failure of the primary debtor to fulfill its contractual duties and the absence of any direct consideration provided by the creditor to the plaintiff, the plaintiff sought to recover the funds, arguing that payments were made under a conditional arrangement and later under commercial compulsion during winding-up proceedings.

Findings of Court:
The court found that the plaintiff received no consideration for the payments, and that the contractual liability for the debt rested solely on the primary debtor. The payments made were deemed recoverable due to total failure of consideration and the existence of a valid protest at the time of payment.

Issues: Whether there was a total failure of consideration for the payments made, whether the plaintiff was independently liable for the debt, whether the 'without prejudice' correspondence was admissible, and whether the claims were barred by res judicata.

Ratio Decidendi: The court determined that the underlying transaction governed the obligation, not the negotiable instruments used for payment. Because the primary condition for the payments (performance by the debtor) was not met, there was a total failure of consideration. Furthermore, the 'without prejudice' reservation preserved the plaintiff's right to recover, and no res judicata applied as the previous proceedings were interlocutory and did not address the substantive merits of this claim.

Result: Plaintiff's claim allowed; Defendant to pay RM2,582,019.00 with interest; Defendant's counterclaim dismissed.