JUDGMENT

Sulong Matjeraie J:

Ruling

[1] The defendant was a holder of a Special Timber Licence No. SK7/90 ('the said licence') issued by the Sabah Forestry Department for and on behalf of the State Government to fell, convert and extract timber from within a timber concession area of approximately 258,584 hectares of timber land situated in the districts of Sipitang, Beaufort and Tenom in the State of Sabah ('the said area'). The said licence was for a period of five years expiring on 15 October 1995.

[2] The plaintiff was the contractor to fell and to purchase the extracted timber from the said area.

[3] Two agreements for the extraction and purchasing of timber were signed between the plaintiff and defendant. One was dated 28 June 1993 ('the first agreement') and the second agreement was dated 13 August 1993 ('the second agreement'). Where appropriate the first agreement and the second agreement shall jointly be referred to as 'the first and second agreements'.

[4] The first agreement allows the plaintiff to extract commercial timber logs from 2,825 hectares of the said area and to purchase commercial timber logs therefrom while the second agreement permits the plaintiff to extract commercial timber logs from 8,477 hectares of the said area and to purchase timber logs therefrom in accordance with the terms and conditions stated therein. The total area of 11,302 hectares shall be referred to as 'the said portion of the said area'.

[5] By two irrevocable power of attorney dated 4 August 1993 and 22 September 1993 ('the said power of attorney') the defendant appointed the plaintiff as their attorney to, inter alia, "manage and superintendent the extraction and sale of timber therefrom and to enter into contracts and arrangements of all kinds in relations thereto and to generally exercise the powers granted therein and which shall be irrevocable for the period of the validity of the first and second agreements respectively. I shall come back to other terms of the power of attorney in the later part of this ruling.

[6] At the time of the execution of the first and second agreements, the plaintiff claims that the portion of the said land had a total volume of approximately 1,243,220 cubic meters of merchantable timber logs.

[7] Under cl. 27 of the first agreement and cl. 25 of the second agreement, the defendant may terminate the first and second agreements.

(i) upon the continuous occurrence of the events referred to in cl. 26 of the first agreement and cl. 24 of the second agreement for a period of 14 days, the defendant may terminate the first and or second agreements by giving six months written notice to the plaintiff.

(ii) in the event that the plaintiff commits any breach of the terms and conditions of the first and second agreements, the defendant may terminate the first and second agreements forthwith; and

(iii) upon the extraction and exhaustion of all merchantable timber logs from the said portion of the said area.

[8] Although the defendant admitted to having entered into the two agreements and the granting of two deeds of the power of attorney to the plaintiff but argued that these were entered into by their previous management. As such the defendant through their solicitors' letter dated 22 August 1994 repudiated the first and second agreements and revoked the said power of attorney on the grounds that the State Authorities had informed the defendant both agreements and the said power of attorney had contravened s. 24(6) of the Forests Enactment 1968 and were thereby rendered illegal and of no legal effect.

[9] To this the plaintiff contended that even if the first and second agreements are illegal (which obviously was denied) as alleged by the defendant, the plaintiff is not in pari delicto in that the plaintiff is the innocent party and not influenced by a guilty intention and would rely, if necessary, on s. 66 of the Contracts Act. It was the defendant, the plaintiff alleged, who had expressly and clearly agreed t