MALAYSIA

IN THE HIGH COURT IN SABAH & SARAWAK

AT KOTA KINABALU
CIVIL SUIT 22-271-2001
5

IAY & ASSOCIATES

PLAINTIFF

V
10

LEMBAGA PELABUHAN-PELABUHAN
SABAH
DEFENDANT
15

NOTES OF PROCEEDINGS
IN OPEN COURT
3 JANUARY 2006
AT 9:00 A.M.

20

Coram:
For Plaintiff:
25For Defendant:

Justice Datuk Ian H. C. Chin

Sugumar Balakrishnan & Natasha
Balakrishnan
Datuk Mohamaed Bazain Idris, SAG &
Mohd Saifurrazee Hussin
Dgku Fazidah Hatun Pb Hj Bagul

30Sugumar:

Two bundles of documents, one of Plaintiff and one of

Defendant, both agreed and to be admitted in all respect.
SAG:

Confirm that

35Court:

The Documents in the Plaintiffs bundle are admitted as

evidence and mark P1-82 and the documents in the Defendants bundle
are admitted as evidence and mark D1-81.

Sugumar: Not been able to agree on issues and facts. The Plaintiffs
40case is that there was a concluded contract between the Plaintiff and
1

the Defendant in respect of a project and the Plaintiff will show that the
Minister of Communications and Works had pursuant to s 73(1) of the
Sabah Ports Authority Enactment 1981 given directions to the
Defendant wherein she agreed the approve the application of the
5Plaintiff in respect of the said project. [Court: When did the contract
legally come into existence] When the board of the Defendant
approved the said contract on 7 August 1997 and communicated to
Defendant on 11 August 1997 which will be the date of the concluded
contract. Alternatively the Plaintiff will also argue subsequent to the
10Defendants approval of the said contract, a total of 5 draft joint
venture agreements that had gone through the parties until finally at
the meeting on 17 March 1998 between the parties that it was agreed
that the final 5th draft was to be submitted for the Defendants final
approval which contains all the terms of the contract. The Plaintiff will
15show Defendant by letter dated 25 January 1999 had expressly stated
they accepted the terms of the draft joint venture agreement and the
draft power of attorney. BY letter dated 14/12/1999 Defendant
purported to repudiate the approval and the concluded contract by
informing the Plaintiff that the Ministry had decided not to approve the
20project and henece project considered as terminated.
The Defence hinges on an amendment to the principal Act which
requires joint venture agreement to be referred to the Cabinet for
approval. Will show amendment came after approval and has no
25retrospective effect as Plaintiff had accrued right. Defence also that the
said project would involve the giving of guarantee as security for loan
and that would require the cabinet approval and again this requirement
came into being after law came into existence after the parties had
entered into contract and hence no retrospective effect. Main ground
30of the defence is that there is no concluded contract between the parties
as formal agreement had not been executed. [SAG: Would put it in the
draft I have submitted to my learned friend which he refused to agree.]
[Copies of the same reproduced below.]
35

10
3

Court:

Mr Sugumar, what is the reason for your refusal.

Sugumar: We gave our draft which they altered. Objecting to 1, 3, 5,

7 and 8 which have not been pleaded.
5

SAG:
Contained in Plaintiffs pleadings and in defence
crystallization of the issues. Agreed bundles also support this issue.
10Court:

The issues have been raised by the pleadings either

directly or indirectly, being a natural consequence of what are in
issues. So, in so far as the Defence is concerned, they include the
issues in the above draft.

15

9.35 a.m.

20PW1:

MOHD AYAZ KHAN BIN YUNUS KHAN

Affirmed in English

Examination-in-Chief : Age 51, residing at Kg Pasir Putih, Jalan Sin

San, 91000 Tawau, a businessman. Managing partner of the Plaintiffs
25firm.

Disclose names of partners to Plaintiff in D19.

Forwarded

trading licence D31 by letter D30 to the Defendant. P2-34 refers to the
proposal to the Minster of Communications and Works, [Witness went
through the documents.] Equity structure 15% and 85%, with 15% for
the Defendant. Minister responded to proposal by D1. Proposal made to
30Minister and not Defendant because the ministry is in charge of SPA.

P35-36 did the Defendant inform the Plaintiff they have

approved the project

Yes
5

After the approval given to the Defendant what happened

We were waiting for the agreement to be signed, to be signed

after the approval

5Q

Before signing, was there any draft

About the joint venture

D7-8 first draft

Yes

10

At that stage was the equity structure 15% to Defendant

Yes

D13 the second draft

15A

Yes

D15-18 Defendants response to 2nd draft

Yes

20Q

Did Defendant proposed a change in equity structure

Yes 20% and 80%

D20-22 3rd draft submitted to Defendanty

Yes

25

Together with it a draft power of attorney

Yes
6

D24-25 was that the Defendants response to 3rd draft

Yes

Was there a fourth draft

5A

Yes. D27-29
Was there any meeting held between Plaintiff and Defendant on
17/3/1998 and what happened

Yes as stated in D37

10

Was the fifth amended draft submitted

Yes D37-39. Terms accepted as indicated in D66.

D66 did the Defendant request the Plaintiff to agree to varying

in value of land

15

Yes. I agreed to revised valuation as indicated in D67

D81 did the Defendant inform you project not being approved
and hence being terminated

20A

Yes

D53 requests of Plaintiff for various things

Yes and I submitted the same to Defendant.

25Q

Claim 11(a) RM7,500 paid and RM10,000 for outline

Payments were made

Any professional fees RM5,250 paid for valuation report P74

Yes

Any receipts

5A

Lost them
Subsequent to the Plaintiff being informed of termination was
the said project or about the same awarded to anybody else

Yes. [After being referred to Defence]. Pembinaan Mutiara was

awarded on 20/12/2000.

10

9.57 a.m.
Cross-Examination of PW1:
15

When was your partnership registered

26 August 1997.

D31 licence expired on 31/12/1997

20A

Yes

When you negotiated with SPA you have no trading licence

I was in Tawau at that time, person who negotiated thing is

Iskandak Malik, I did not check the licence at that time

25

Sugumar:

Not pleaded

SAG:

Para. 1 of Defence challenge capacity of the Plaintiff

8

Court:
Q

Evidence need not be pleaded.

9/3/1998 you submitted D31 which had expired

Court:

The answer is obvious, move on.

D1 refers to proposal

Yes, not refer to terms and conditions of contract

The minister can study your terms and conditions and give the
necessary direction

10

Yes

Minister can also disagree with your terms and conditions

Yes

15

Minister did not agree that the land vested in SPA is to be

divested, meaning to be sold

A
20Q

I do not know about that

If minister disagree who is at fault

SPA is under ministry, if approval given by SPA, SPA is at fault

Are you suggesting that the minister agreement to your proposal

is a binding contract

25A

No

D38(a) Preamble A is that true that government has alienated

land to SPA

A
5Q

Yes
Did you know the condition of the gazette

I do not know

Gazette contain prohibition of lease sale etc so to sale land in

breach

10A

I do not know
P38(b), clause 4(a) - condition precedent land has not been
alienated to SPA

I do not understand the question

15

Put

Land had not been alienated to SPA as required by the

agreement

A
20Q

I think yes, have not seen the title

How can you impose on the SPA when the land cannot be sold or
leased

[Witness took time and then asked for the question to be

repeated.]

25Put

Agreement cannot be enforced because SPA cannot sell or

lease the land

I cannot agree witih that

10

Your negotiation with SPA on terms and conditions went on till

1999

A
5Q

Yes
Valuation of the land is part and partial of the terms and
conditions of the agreement

I do not think so

D66 25/1/1999 why do you talk about valuation in that letter

10A

I think that is the procedure

D68 para 2 your company accepts that fact that it will take
sometime for the land to be processed

Yes

15

The land is a big issue in this draft agreement

I do not agree with that

SPA has no power to sell the vested land

20A

If the land belongs to SPA they have the power to sell it. I do not
understand the question, sorry
Why wrote the letter stated in para 2

We have to take time to get the land for the project. We have to

25

get the land. We applied for the project on the land, land belongs
to SPA

11

All land matters when vested by the TYT must go through the
cabinet

A
5Q

Not aware
Can minister reject alienation of land

If there is a reason. Will agreed if reason is acceptable.

At the discretion of the minister and government

Must be a reason for the rejection

10

D79 para 2 disagreed with joint venture agreement to alienate

the land and any property of SPA

A
15Q

That is not a reason. It is telling our company. Not a reason.

Must preserve the vested land

We are developing the land for the government also

Draft D38(e) para (f) right to charge and sell you can sell
the land

20Court:

It is in the negative no power instead

D38(h) para 14 you could have set up hotel and shops and
could sell

A
25

Yes, not alienating, developing for the government, a joint

venture. Profit also going to SPA. So it is a win win situation.
Apart from that we are building the terminal which goes to SPA

12

and they will make collection. We are selling to the commercial,

not to the government.
Q
5A

D63 as at 20/11/1998 the SPA was still studying the draft

Yes

D65 board must refer detail proposal to ministry

Yes, according to the letter. I was aware.

10Q

D70 2nd paragraph subject to ministry approval

Yes

If I were to take your line of claim, the moment the minister

approved port must sign the agreement

15A

I think so, if ministry approved must sign agreement. Approval

comes from SPA, proceeds to the ministry

For what purpose

For approval

20

Your proposal to minister did not contain any details, no terms

and conditions

A
25Q

There is a letter from minister D1

D2-34 is only a proposal and do not contain the terms and
conditions

Yes
13

D70 is a reference to the terms and conditions

Yes

You disagree with termination on advice of ministry

5A

Yes

D76 as late as Agusut 1999 matter was still awaiting approval

Yes, do not understand as I have approval from minister already

10Q

No agreement was signed between the plaintiff and the defendant

No agreement

When was the final negotiation completed

I forgot the date. I think in 1998.

15

Put

You did not state that you are a partner in pleading because
during the negotiation you have no trading licence

I have trading licence

10.46 a.m.

20

Re-Examination of PW1:
Q

5th draft, selling or leasing of the land D38(a) where does it

talk about selling or leasing of the land of SPA

25

No

14

D38(a) clause 1

Agreement to develop the land

At whose cost

5A

Developer

Court:

No point in asking the witness to read the terms stated

there.

10Q

D31 submitted expired trading licence - D19 two names

disclosed as partners yourself and another person were you
partners at that time when you made the proposal to the minister

A
15Q

Yes
When negotiation concluded, you mention 1998 D37

17 March 1998

D38(a) alienation of land preamble was this draft vetted by

SPA

20A

Yes
D66 last substantive para does SPA say they accept the terms

Court:
25

The letter says what it says there, no need for the witness
to tell me

15

Sugumar:

That is the case for the Plaintiff

SAG:

Elect to call witnesses

.
[Court went into a short recess.]
5

11.20 A.M.
DW1:

MOHAMMED SAHID BIN HJ NAWAB KHAN

Affirmed in English

10

Examination-in-Chief : Age 54, residing at Lot 10 Kg Peringatan,

Jalan Peringatan Kepayan, 88869 Kota Kinabablu, senior manager of
human recourse department of Sabah Ports Sdn Bhd. Secretary of SPA
from 1994-2004. I am aware of this case, about the proposed contract.
15P1-36 is not the proposal to minister. When we received P1 we also

received a copy of letter of a letter from developer to the minister. P234 proposal came in later, could be in 1997 or may be later. As a result
of a series of communication between SPA and developer they were
requested to submit their JV proposal including details. To tbe best of
20my recollection P2-34 was not given to the minister.

When you received the letter from minister what is SPA

supposed to do

We wrote to developer arising from board meeting.

25

D8 1st draft was submitted to us. Negotiation went on until April 1999,
a series of negotiation. D67 valuation is important because in the JV

16

agreement one of the consideration was to provide and alienate the land
to the developer.
Q
5A

D57 at 3/6/1998 SPA have not made decision on agreement

Yes
D58 why is it necessary for the draft agreement and power of
attorney be referred to minister in charge of ports

Involve vested land which belongs to the government and

according to vesting requirement we are not in position to

10

alienate sell or lease any land without approval of TYT ort rather
the state government
Q

D63 can you approve draft agreement without consent of

ministry

15

Cannot

D65 2nd paragraph same reason relating to vesting land you

have given earlier

20A

Yes
Can you enter into agreement with plaintiff without approval of
cabinet and government

Cannot

17

D70 27/3/1999 still waiting for reply from ministry

concerned

A
5Q

Yes
Why did you disapprove as pere paragraph 2
Land still vested to SPA and not been alienated for project and
any JV and alienation we need approval of government

Q
10A

D71 why
For purpose of getting approval for the JV power of attorney and
proposal as a whole. Wrote to Plaintiff of my action by D76. D77
reminded ministry

Q
15A

Every effort was made by SPA to get approval approved

Yes

D79 background of letter

Around May there was a cabinet decision conveyed to us through

ministry, SPA required to develop on their own. A contractor was
appointed to do the upgrading work, basic infrastructure and land

20

site, RM2.8 million.

Q

Plaintiff project proposed value

RM180 million

18

Upgrading work is what the port is now

Yes, no hotel, no commercial development, not close to proposal.

Land stayed as vested land.

5Q

Can you comply with draft agreement

Cannot do so until the land has been transferred to the developer

D81

Decision conveyed to company

10

D38(a) preamble A

No land been alienated to SPA, only vested to port

11.45 a.m.

15

Cross-Examination of DW1:
Q

P35-36, para 2 at this stage only proposal in existence is P2-34

To the best of my recollection, they have come later on.

Referring to letter from minister, proposal as shown in the head

20

of letter. Letter from us went on to say required things D35.

Q

Did the Plaintiff submit P2-34

Yes, a detailed proposal.

19

No letter from SPA to say do not agree with P2-34

A series of discussions that went on until 1999 where JV, power

of attorney

5Q

Only reference you made after receiving draft agreement made

suggestions for amendments D15-18

Correct, amendment to draft JV, cannot confirm that it is not an

amendment to P2-34

10Q

D24-25 amendments to draft JV

Yes, cannot confirm that it is not an amendment to P2-34

D37- letter from Plaintiff - there was meeting on 17/3/1998

Cannot recall

15

This was the final draft sent to SPA

I cannot recall

Clause 6, D38 - 6(a) it is SPAs responsibility to submit the

land application for the land to be alienated to SPA

20

Court:

Move on, witness not qualified to answer question of

interpretation of document
25Q

D65 did the board of SPA approve the final draft of JV and
power of attorney

Conditional approval, communicated in D66

20

P35-36 when the Defendant first inform the Plaintiff their

proposal being approved by board of SPA did letter say it is
subject to cabinet or any authority

Not specifically

Put

Did not inform the Plaintiff of further conditiona for

approval

A
10Put

Not at that time

As between the state government and board authority,
internal matter between two of you

Cannot comment on that

D66 valuation at RM5.8 million for the purpose of amount of

bankers guarantee to be provided by the Plaintiff

15

Yes

D68-69 this was a totally independent proposal from the one

earlier approved by the board vide P35-36

20A

No, this is the same

Put

It is a totally different proposal for beautification only

No. Cannot comment whether it is for beautification of

existing building

21

Contract awarded to do what

Directed by the state government to provide basic facilities for

local craft and ferry from Labuan

5Q

At your own cost

Yes

If proposal carried out, who would bear

I am not familiar with contents

10

12.02 PM
Re-Examination of DW1:
15

Are you subject to the

Statutory Body (Supplementary

Provisions) Enactment 1997

A

Yes

20SAG:

Court:

That is the case for the Defendant. Wish to submit

tomorrow morning
Adjourn to 10.00 a.m. 4 January 2006 to hear the closing
speeches.

25

Justice Datuk Ian H.C. Chin

22

4 January 2006
10.30 a.m.
Parties same
5Court:

I have received a soft copy of the closing address of the

speech of counsel for the Defendant which I reproduce below. Anything
else to add on it.

10Sugumar:

I tender my written submission.

Court:
I need a soft copy and you should know I always want a
soft copy where the submission has been reduced into writing as this
will help me in my arriving at a decision expeditiously taking
15advantage of technology. I adjourn for a short while to enable you to
procure a soft copy.

20

25

Justice Datuk Ian H.C. Chin

30

23

MALAYSIA
IN THE HIGH COURT IN SABAH AND SARAWAK AT KOTA KINABALU
SUIT NO. K 22 271 OF 2001
5

BETWEEN
IAY & ASSOCIATES
[suing as a firm]

PLAINTIFF

10

AND
LEMBAGA PELABUHAN-PELABUHAN SABAH
DEFENDANT

15
DEFENDANTS SUBMISSION
May it pleases your Lordship,
20For the Plaintiff to succeed in this case the Plaintiff must cross two legal hurdles.
First, the Plaintiff must show that for the Draft Joint Venture Agreement to be
binding and effective against the Defendant, the Defendant need not secure the
approval of the government first even though the land was vested to the Defendant
25by the Yang di-Pertua Negeri with conditions attached to it.
Secondly, the Plaintiff must show that the Statutory Bodies (Supplementary
Provision) Enactment 1997, sections 8(1)(e) and 10(c), which took effect on 31
December 1997, is not applicable in the circumstances of this case.
30
SEEKING APPROVAL OF THE STATE GOVERNMENT
The Plaintiff in their testimony stated that he was not aware that the land is a vested
land. (See Page 9 line 25; Page 10 line 5 and 10 of the Notes of Proceeding)
35
The conclusion to be drawn from this ignorance is that when the Plaintiff prepared
the Draft Joint Venture Agreement, the Plaintiff was on the wrong premise in
believing that the land was alienated to the Defendant. For that reason in the Recital
to the Draft Joint Venture Agreement prepared by the Plaintiff at page 38(a), it
40stated that the land was alienated to the Defendant.
Assuming the Draft Joint Venture Agreement is binding even though not signed, the
end result would be frustration because the status of the subject matter, i.e. the 6.2
acres of land requested by the Plaintiff has not been alienated to the Defendant but
45still vested to the Defendant. Since the land is still vested to the Defendant then the

24

parties cannot proceed with the Project without complying with the prohibitions in
the Gazette Notification No.20.
In the case of Yong Ung Kai v Enting (1965) 2 MLJ 98, paginated in the
5Defendants bundle of authority at page 17 and 18, the court decided, because of
the failure to obtain the necessary licence the agreement became impossible to
perform. It was also decided in the judgment, even if there is no specific term in the
agreement to obtain a licence it is implied. Hence any claim arising from that
failed.
10
The Defendant in their testimony had clearly stated that the land is a vested land
which contains prohibitions as stated in the gazette notification no.20 dated
13.1.1983 which reads, inter alia:
15

(2)

The Sabah Ports Authority shall not sell, lease or otherwise alienate
the said land without the prior approval of the Yang di-Pertua
Negeri.

For the Draft Joint Venture Agreement to be binding the Defendant must seek the
20approval of the State Government and the Yang di-Pertua Negeri to remove the
caveat attached to the vesting order because the Draft Joint Venture Agreement
contains the following provisions.
I refer to exhibit D38(c)
25
At Clause 5(d) of the Draft Joint Venture Agreement, it clearly stipulates that the
land will be subject to sale and purchase Agreement together with transfer
document in connection with the sale and purchase of the properties developed
herein.
30
At Clause 5(f) of the Draft Joint Venture Agreement, the Plaintiff was To apply
and obtain a developers License if necessary, to develop and sell the properties
according to the Housing (Control and Licensing of Developers) Enactment, 1978.
35At Clause 5(h) of the Draft Joint Venture Agreement, the Plaintiff was To deliver
vacant possession of those completed properties to the respective purchasers with
the Certificate of Fitness for Occupation.
Without the approval of the State Government and without degazetting the said
40gazette notification, the Draft Joint Venture Agreement cannot be effected whether
it is signed or unsigned. The end result would be frustration of the Draft Joint
Venture Agreement.
Even if the Defendant approves the Proposed Draft Joint Venture Agreement, which
45the Defendant submits is conditional approval; the State Government must consent

25

to the removal of the vested land first. DW1 in his testimony stated that the
Defendants approval was conditional upon the State Governments approval.
The Defendant had sought the approval of the State Government to give effect to
5the Draft Joint Venture Agreement. This is reflected in the various letters written by
the Defendant to the Ministry.
In exhibit D66, letter dated 25.01.1999, addressed to the Plaintiff, Defendent
informed the Plaintiff that detail of the proposed project and the Draft Joint Venture
10Agreement and the Draft Power of Attorney are in the process of being submitted
to the State Government for approval.
In exhibit D70, the Defendant qualified it approval by stating that though the
Defendant had approved the Draft Joint Venture Agreement, it has to refer to the
15Ministry of Infrastructure Development for approval. As stated by DW1, they have
to refer the Draft Joint Venture Agreement to the State Government because it
affected the status of the vested land.
In exhibit D71, (i) the Defendant submitted the Draft Joint Venture Agreement, (ii)
20the Draft Power of Attorney (iii) and the Defendant also brought to the attention of
the Ministry that the said land is a vested land and that the Defendant will submit
its application for the said land for the purpose of the project. (iv) The Defendant
also brought to the attention of the Ministry the provision of the Statutory Bodies
(Supplementary Provisions) Enactment 1997 which requires the Defendant to
25obtain the approval of the State Government before it enters into the joint venture
agreement with the Plaintiff.
In exhibit D77, the Defendant reminded the Ministry of Infrastructure Development
of its application for approval of the Draft Joint Venture Agreement.
30
DW1 in his testimony stated that around May, the Cabinet conveyed to the
Defendant through the Ministry that the Defendant was required to develop the
proposed site on their own.
35In the same letter, D77, the Defendant also enquire about the instruction of the
State Government for the Defendant to construct the passenger ferry terminal
facilities itself. From this letter it is clear that the Defendant had done everything
possible to give effect to the Draft Joint Venture Agreement and this letter also
reflect the State Governments intention that the Defendant not to enter into any
40joint venture agreement with any party.
In exhibit D79, in response to the Defendants enquiry in D77, the Ministry rejected
the Defendants proposal to develop the said land with the Plaintiff on a joint
venture basis. The Defendant to preserve the status of the vested land. This would
45mean that the status of the vested land remains intact and whatever agreement
entered between the Plaintiff and the Defendant rightly or wrongly cannot be

26

carried out unless the status of the vested land can be changed to suit the
requirement of the Draft Joint Venture Agreement. The proposed draft JointVenture Agreement is an exercise in futility and it is frustrated by the State
Governments decision.
5
THE APPROVAL
CONDITIONAL.

OF

THE

JOINT-VENTURE

AGREEMENT

IS

Exhibit D1, the approval of the Minister is conditional in that it stated that sila
10ambil tindakan sewajarnya meaning that the Defendant should take reasonable
action which impliedly suggest that all procedures must be adhered to.
In Exhibit P1 at page 35, the Defendant requested for a detailed proposed
development from the Plaintiff for the Defendants consideration and further action.
15
As stated by DW1, the proposal in Exhibit P1 at page 2 to page 34 came later. In
this Exhibit, the size of the proposed area also was not clearly identified. The
proposal was uncertain.
20At Exhibit D1, page 24, the Defendant was to pay the premium and stamp duty.
This is only a proposal not a binding agreement.
In the proposed Draft Joint-Venture Agreement submitted on 17.3.1998, the
proposal has been amended in that the premium and the stamp duty were to be
25borne by the plaintiff. This fact suggests that the proposal is not a binding contract
as at the year 1997 because the terms and conditions were only finalized on
12.3.1999 at page 67 of D1 where the Plaintiff agrees to the valuation of the land.
Even if the Defendant agrees on the valuation of the land this does not make it a
30binding agreement because until and unless the State Government agrees to lift the
prohibitions of the vested land the Defendant cannot agree on the valuation of the
land on behalf of the State Government. The State Government has got its own
valuer to determine the value of the land. The agreement is still uncertain.
35In Exhibit D1, page 68, the Plaintiff in their own letter dated 13.2.1999, recognised
that their proposal is conditional upon the land matter being resolved with the State
Government.
The Defendant will rely on the earlier submission and Exhibits to indicate that the
40approval is conditional subject to the State Governments approval.
Defendant humbly submits, the fact that the Draft Joint Venture Agreement is
submitted to the Ministry for the approval it clearly shows that the Draft Joint
Venture Agreement is still conditional.
45

27

On the face of the Draft Joint Venture Agreement is also reflect a conditional term
of approval.
Clause 4.1 contains conditions precedent. What is the point of contending the Draft
5Joint Venture Agreement as valid and binding on the parties when even before they
could enter into a binding agreement, the Defendant must seek the approval of the
Cabinet.
Since the Plaintiff was the party who made the offer, it is up to the Defendant to
10decide on the condition of acceptance. In the circumstances of this case the
Defendant had clearly indicated to the Plaintiff that the approval is subject to the
Ministrys approval on the Draft Joint Venture Agreement.
Since the Plaintiff had enquired about the status of the Draft Joint Venture
15Agreement in D 74, this only confirms the Defendants stand that the Plaintiff was
aware that the approval of the Draft Joint Venture Agreement was conditional. D76
was the Defendants reply.
STATUTORY BODIES (SUPPLEMENTARY PROVISION) ENACTMENT
201997, - SECTION 8(1)(e) and SECTION 10 (c)
These provisions took effect on 31.12.1997.
25From exhibits tendered in this proceeding, the Draft Joint Venture Agreement was
not finalized until the year 1999.
PW1 stated that the Draft Joint Venture Agreement was finalized in 1998.
30If this facts stand, then the Defendant must seeks the approval of the Cabinet before
the Defendant could enter into any joint venture agreement.
The Cabinet decision as stated by DW1 came in the month of May and this was
35conveyed to the Defendant as reflected in Exhibit D1 at page 77. The decision of
the Cabinet was further conveyed to the Defendant in Exhibit D1 at page 79.
The decision of the Cabinet and the State Government is final and it is in
accordance with section 8(1)(e) of the Enactment.
40
Section 10 (c) of the same Enactment provides that No Statutory body shall,
without the prior written approval of the Cabinet, guarantee or provide any form of
security for any loan, liability or obligation, contractual or otherwise, of any of its
holding or subsidiary or related companies.
45

28

The Draft Joint Venture Agreement in Exhibit D1 at page 38(c) Clause 5 (g),
provides for charging of the land as security for the purpose of bridging finance.
Since the Draft Joint Venture Agreement requires the approval of the Cabinet, it
5cannot be said that the Draft Joint Venture Agreement amounts to a binding
contract. The Plaintiff cannot pre-empt the Cabinets approval.
In the circumstances of this case, the Cabinet has already rejected the Draft Joint
Venture Agreement and the Power of Attorney.
10
The Ministers approval was also rejected by the Government.
Section 3 of the Enactment provides that In the event of any inconsistency
between the provisions of this Enactment and of the State Law pursuant to which
15a statutory body is incorporated, the provisions of this Enactment shall prevail
and the State Law shall, to the extent of inconsistency, be void..
In the circumstances of this case, since the Draft Joint Venture Agreement was
finalized either in 1998 according to the Plaintiff or in 1999 according to the
20Defendant, the Ministers approval made in 1997 is overtaken by Section 3 of the
Enactment. Hence, any inconsistency between the Ministers approval and the
Cabinets decision, the latters decision prevails.
Section 24(b) of the Contracts Act 1950 provides that The consideration or object
25of an agreement is lawful unless it is of a nature that, if permitted, it would defeat
any law.
On this premise, it cannot be said that the proposal or the Draft Joint Venture
Agreement is binding on either party because the consideration offends sections
308(1)(e) and section 10 (c) of the Statutory Body Enactment and section 24(b) of the
Contracts Act 1950 if it is not referred for the Cabinet approval.

35NO TRADING LICENSE

As disclosed in Exhibit D1 at page 30-31, letter dated 9.3.1998, the Plaintiff had
submitted to the Defendant an expired trading license which expires on 31.12.1997.
40
The consequential effect is that whatever negotiation entered subsequent to 1997 is
voidable. No entity should negotiate with a governments statutory body unless
they have a valid trading license. If they have no trading license, Defendant submits
the agreement if at all there is an agreement which is denied here is voidable and
45can be terminated at the instance of the Defendant.

29

The Plaintiff may have made an innocent misrepresentation to the Defendant.

When the Defendant issued the notice of termination at Exhibit D1 at page 81, the
Defendant is only exercising its right when the contract is voidable.
5
In Blacks Law Dictionary, voidable means valid until annulled; esp.,(of a contract)
capable being affirmed or rejected at the option of one parties. Section 19 of the
Contract Act states the same principle. The termination is only an exercise under
section 19 of the Contract Act 1950.
10
Defendant respectfully submits, the Plaintiff deliberately omitted to include in their
pleadings the status of the plaintiff because the Plaintiff did not have a valid trading
license during the negotiation. Despite the challenge in the Statement of Defence,
the Plaintiff elects not to amend their pleadings.
15
The Plaintiff is not a registered company but a partnership. Without a valid trading
license, the partnership does not exist thus the plaintiff is a non-entity in this
proceeding. If the Plaintiff is a non-entity, it would prejudice the Defendant in the
event the Defendant needs to enforce the judgment.
20
This is not an ordinary kind of contract between two individuals. It is subject to the
provisions of specific Enactments and approval of the State Government.
UPGRADING WORKS ON THE PORTS TERMINAL
25
The Defendant contends that the works awarded to Pembinaan Megah Mutiara Sdn.
Bhd. was not the same kind of project as proposed by the Plaintiff. It is only
upgrading of the ferry terminal facilities which costs only RM 2.8 million as
opposed to the proposed Plaintiffs project amounting to about RM180 million.
30
Moreover, Pembinaan Megah Mutiara Sdn. Bhd. is merely a contractor to the
Defendant and not a joint venture partner or a developer. The nature of two Works
are completely different. This is incompliance with the Cabinets decision.
35
For the reasons aforesaid, the Plaintiffs claim should be dismissed with costs.
Dated the 4th day of January 2006.
40
________________________

45

M0HAMED BAZAIN BIN IDRIS

State Attorney General
Advocate for the Defendant

30

11.00 a.m.
4 January 2006
Parties same
5

Court:
I Have a soft copy of the submission of counsel for the
Plaintiff which I reproduce below. Anything else to add.
10

31

MALAYSIA
IN THE HIGH COURT OF SABAH AND SARAWAK AT KOTA
KINABALU

SUIT NO. K22-271 OF 2001

BETWEEN
IAY & ASSOCIATES
10PLAINTIFF
AND
15LEMBAGA PELABUHAN-PELABUHAN SABAH

DEFENDANT

PLAINTIFFS CLOSING SPEECH

20

ISSUES 2, 4 AND 6 OF THE DRAFT STATEMENT OF AGREED

ISSUES
At page 5 lines 26 to 28 PW1 testified that P2-34 was the proposal
25forwarded to the Minister of Communication and Works. This evidence

was never challenged under cross examination. In the exercise of her

statutory powers under Section 73 (1) of the Sabah Ports Authority
Enactment 1981 the Minister gave a statutory direction to the
Defendant approving the Plaintiffs proposal for the purpose of
30carrying out the said Project see D1. Submit that the Project referred

to in D1 has to be P2-34.
DW1 at page 16 lines 15 contended that P2-34 was not the proposal
submitted to the minister and according to him the Defendant received

32

D1 together with a letter from the Plaintiff to the Minister but could not
produce the purported letter. Submit if there was such a purported
letter, it must surely be in the possession, custody or power of the
Defendant and since the Defendant has not produced the purported
5letter nor was PW1 cross examined on the purported letter, this court

ought to draw the adverse inference under Section 114 (g) of the
Evidence Act 1950. In any event DW1 at page 19 lines 23-24 did admit
that the Plaintiff did submit P2-34.
10The Plaintiff readily admits that D1 by itself does not create any

contract and my opening speech makes that clear since D1 is addressed

to the Defendant. All that D1 does is to require the Defendant to give
effect to it as provided under Section 73 (1) of the Sabah Ports
Authority Enactment 1981.
15

What creates a legal contract is P35-36 where the Defendant informs

the Plaintiff that the Defendant has approved the said Project on a joint
venture basis. It is pertinent to note that PW1 was never cross
examined on this fact. In the absence of any evidence to the contrary,
20P35-36 must be taken to the Defendant having approved P2-34. Refer

to cases 1 and 3 of Plaintiffs Bundle of Authorities.

A perusal of P35-36 will show that the contract is not conditional to the
Defendant getting any approval from the Government or Ministry or
25Cabinet and DW1 at page 21 lines 1-8 admits to that. Section 4 (1) of

the Sabah Ports Authority Enactment 1981 clearly states that the
Defendant is competent to enter into contracts.
33

Furthermore, P35-36 is not worded as being subject to contact or a

formal execution of a contract and therefore the presumption referred to
in case 2 of the Plaintiffs Bundle of Authorities does not arise.
5

P35-36 indicates that the Defendant approved the said Project on

07.08.1997 and the approval was communicated on 11.08.1997.
In order to defeat the Plaintiff contention herein, the Defendant is
10relying on Section 8 (1) (e) and Section 10 (c) of the Statutory Bodies

(Supplementary Provisions) Enactment 1997 which was enacted on

24.12.1997 and came into force on 31.12.1997 i.e. after P35-36 came
into existence.
15The Statutory Bodies (Supplementary Provisions) Enactment 1997 has

no express provision to the effect that it has retrospective effect. On the

authority of case 5 of Plaintiffs Bundle of Authorities, it is submitted
that even if the 1997 Enactment expressly provides for retrospective
effect, it cannot take away the rights accrued to the Plaintiff pursuant to
20P35-36. On the authority of case 6 of Plaintiffs Bundle of Authorities

it is submitted that since Sections 8 (1) (e) and 10 (c) have the effect of
affecting substantive rights under P35-36, the 1997 Enactment must be
construed as having prospective effect only.
25The five Draft JV Agreements arose as a direct result of P35-36. The

first Draft JV Agreement was submitted to the Defendant vide D7 on

22.10.1997 before the 1997 Enactment came into force. The subsequent
34

four Draft JV Agreements were merely amendments made to the first

Draft JV Agreement and they are therefore merely consequential in
nature. The Draft JV Agreements was approved by the Defendants
Board of Directors on 31.12.1998 as evidence by D65 and vide D66 the
5Defendant communicated to the Plaintiff that the Draft JV Agreement

had been accepted. The acceptance here is consequential to the

approval contained in P35-36 since without P35-36 the question of
Draft JV Agreements do not arise.
10It is pertinent to note that the first time the Defendant informed the

Plaintiff that the Draft JV Agreement was being submitted to the State
Government for approval was on 25.01.1999 vide D66. However, the
point to be noted here is that State Government had way back on
25.04.1997 approved the said Project vide D1 and it is therefore
15superfluous to seek the State Governments approval in 1999.

Cases 1, 3 and 4 make it amply clear that a binding contract could

come into existence without a formal contract document being
executed by both parties as the agreed documents referred to at the trial
20clearly show that there was an enforceable contract between the

Plaintiff and the Defendant.

In any event if the Defendant takes the stand that there was no contract
in the first place, why does the Defendant deem it necessary to
25terminate it as indicated in D81.

35

It is pertinent to note that the same Ministry, which gave a statutory

direction under Section 73 (1) of the Sabah Ports Authority Enactment
1981 to the Defendant to approve the said Project vide D1 subsequently
decides not to approve it vide D79-80. However there is a difference
5here. In D1 you have a statutory direction exercised by the Minister and

that statutory directions has never been revoked or rescinded by the

Minister until current date. D79-80 is a letter issued not by the Minister
in the exercise of his statutory powers under Section 73 (1) but by the
permanent secretary to the Ministry. Can the permanent secretary to the
10Ministry overrule the Ministers statutory direction in D1.

To allow D79-80 to stand would constitute an illegality in that the

Defendant is required by law to give effect to the Ministers statutory
direction under Section 73 (1) and D79-80 constitutes a flagrant breach
15of the Ministers statutory direction in D1. It is submitted that D79-80

is a nullity.
ISSUE 3 OF THE DRAFT STATEMENT OF AGREED ISSUES
20It is submitted that given the fact that the Defendant is taking the stand

that there was no binding contract as per the Draft JV Agreement, the
fulfillment or otherwise of the conditions precedent therein will not
arise. In order for the Defendant to take the stand that the conditions
precedent have not been fulfilled they would have to first accept that
25there was a binding contract. Assuming the Defendant accepts that

there was a binding contract, the condition precedent in Clause 4.1 (a)

36

and (b) is the responsibility of the Defendant as can be seen from

Clause 6 (a) and (c) and not the Plaintiff.
The condition precedent in Clause 4.1 (c) is the responsibility of the
5Plaintiff pursuant to Clause 5 (a) which states that the Plaintiff has 6

months from the date of the Agreement to prepare and submit the
development plan for approval. The Plaintiff vide D62 had asked the
Defendant when the Defendant was ready to execute the Agreement
and instead of executing the Agreement the Defendant informs the
10Plaintiff in D81 that the said Project is considered as terminated.

It is submitted that the conditions precedent will only arise upon

execution of the formal agreement.
15ISSUE 5 OF THE DRAFT STATEMENT OF AGREED ISSUES

It is submitted that the Draft Agreement is for the Plaintiff to develop,

construct and complete the said Project on the Defendants land at the
Plaintiffs own cost and does not involve selling leasing or otherwise
20alienating the said land.

ISSUE 7 THE DRAFT STATEMENT OF AGREED ISSUES

It is submitted that the Draft JV Agreement is not conditional upon the
25Plaintiff providing a valid trading license and therefore it cannot be

said to be a condition precedent and it would have been stated in

Clause 4.1

37

ISSUE 8 OF THE DRAFT STATEMENT OF AGREED ISSUES

It is submitted that D26 requested the Plaintiff to provide the relevant
development permits and licenses required by the authorities e.g. CIDB
5etc. Thus, there was no failure on the part of the Plaintiff to submit a

valid trading license upon being requested by the Defendant.

ISSUE 1 OF THE DRAFT STATEMENT OF AGREED ISSUES
10It is submitted that in the Defendants Defence at Paragraph 1 the

Defendant relied on Order 77 Rule 2 of the Rules of the High Court

1980 to contend that the Plaintiff is not the proper party to bring and/or
to continue the present action against the Defendant. Order 77 Rule 2
empowers the Defendant in an action brought by partners in a name of
15a firm to serve on the Plaintiff or their solicitors a notice requiring them

to furnish the Defendant with the names and places of residence of the
partners in the firm. Since commencement of this action no such notice
has been served by the Defendant on the Plaintiff or their solicitors.
The answer is obvious since vide D19 prior to commencement of this
20action the necessary particulars have been disclosed to the Defendant.

Thus, way back on 09.02.1998 when D19 was received the Defendant
knew who the partners were and they also knew that the Plaintiff was a
partnership firm. The law on partnership is govern by the Partnership
25Act 1961 and not founded on a trading license. Section 3 (1) of the

Partnership Act 1961 defines a partnership as the relation which subsist

between persons carrying on business in common with a view of profit.

38

Section 7 provides that the acts of a partner shall bind the partnership
firm and Section 8 provides that partners are bound by acts on behalf of
the partnership firm.
5In the light of the aforesaid, it is submitted that this fact not been

pleaded in the Statement of Claim has not occasioned a substantial

miscarriage of justice. Reference is made to Order 1 A and Order 2
Rule 3 of the Rules of the High Court 1980. Submit, that your Lordship
ought to have regard to the justice of the case and not some technical
10non-compliance of a fact that is already known to the Defendant prior

to the commencement of this action.

DAMAGES
15On the issue of the measure of damages for breach of contract is

governed by Section 74 of the Contracts Act 1950 which requires that

the damage or loss suffered must be within the contemplation of both
parties. See Case No. 8 of the Bundle of Authorities.
20On the special damages pleaded, the evidence of PW1 at page 7, lines

25 26 and page 8, lines 1 2 was never challenged by the Defendant

under cross examination. There is clear evidence that the Defendant
vide D53 requested the Plaintiff to prepare and submit (a) artist
impression of the overall development project and (b) detailed outline
25of the existing project site within the port area, which the Plaintiff duly

prepared and submitted as shown in D55. Hence, the expenses incurred

in this connection was within the contemplation of the parties and

39

therefore, the sums of RM7,500.00 and RM10,000.00 ought to be

allowed.
In respect of the professional fees of RM5,250.00 incurred for
5preparation of report and valuation of the existing Old Wharf, the

Defendant vide D60 requested the Plaintiff to engage a private valuer to

carry out the valuation and the relevant valuation report was duly
forwarded to the Defendant vide D61. The relevant receipt appears at
P74. This expense was also within the contemplation of the parties and
10therefore ought to be allowed. In any event, the Defendant did not

challenge the sum incurred.

On the question of loss of profits from the said Project, the evidence
would show that P2 34 which included detailed projected profit to be
15earned from the Project which appears at P25 31. P2 34 is an agreed

and admitted document. Counsel for the Defendant did not at all
challenge the projections set out in P25 31. It is also an
uncontroverted fact that the Defendant did have a copy of P2 34 as
admitted by DW1 at page 19, lines 23 24. Both the Minister vide D1
20and the Defendant vide D35 36 approved the proposal which was P2

34 including the projected profits set out therein. Hence, it was within
the contemplation of the parties that the Defendant.
Based on P2 34, the projected net income from the development was
25RM82,495,000.00 while the projected income from the terminal was

RM500,000.00 per year. Therefore, the estimated net income the

Plaintiff would have lost from the said Project would be 80% of
40

RM82,495,000.00, which is equivalent to RM65,996,000.00 but in the

Plaintiffs pleadings the Plaintiff has put its loss of net profits at the
reduced sum of RM31,316,550.00 which it is bound by.
5On the loss of profit from the operation of passenger ferry terminal

appearing at P31, there appears to be an error in the calculation at 80%

of RM492,000.00 per year. The assumption for item 2 (boats from
Labuan and Brunei) should be RM15,000.00 instead of RM9,000.00
per month. Therefore, the correct calculation would be RM47,000.00
10per month instead of RM41,000.00. Thus, 80% of the annual revenue

of RM564,000.00 would be RM451,200.00 per year to be calculated

for a period of 10 years would amount to RM4,512,000.00 which
would be reasonable in the circumstances.
15

Dated the 4th day of January 2006.

Sugumar Balakrishnan
Counsel for the Plaintiff

41

Sugumar: Awarding of works to Mutiara, project was substantially

the same as the one awarded to Plaintiff. In defence, pleaded contract
signed. Contract was no adduced in evidence. Submit that court can
invoke adverse inference.
5

Court:

Adjourn to 10.00 a.m. 6 January 2006 for judgment

10

15

20

Justice Datuk Ian H.C. Chin

42