Desa Samudra Sdn Bhd v.

[2012] 1 CLJ Bandar Teknik Sdn Bhd & Ors 429

A DESA SAMUDRA SDN BHD

v.

BANDAR TEKNIK SDN BHD & ORS

B FEDERAL COURT, PUTRAJAYA
RICHARD MALANJUM CJ (SABAH & SARAWAK)
HASHIM YUSOFF FCJ
ABDULL HAMID EMBONG FCJ
[CIVIL APPEAL NO: 02( )-9-2011 (W)]
C 14 DECEMBER 2011

CONTRACT: Building contract - Termination - Contractor petitioned

court under s. 176(1) Companies Act 1965 for approval of scheme of
composition with creditors - Whether cl. 25(2) PAM Standard Form
D Building Contract of Malaysia triggered causing automatic termination of
main contract - Issuance of moratorium order under s. 176(10)
Companies Act 1965 - Whether activated cl. 25(2) PAM Standard
Form Building Contract

TORT: Trespass - Liability of - Claim for trespass and conversion -

E
Removal of materials from site - Whether main contractor had authority
to give consent to respondents to do so - Whether PAM Building Contract
automatically terminated - Whether legal possession remained with main
contractor as PAM Building Contract not validly terminated
F CONTRACT: Oral agreement - Admissibility of evidence - Disputed
document - Admissibility of Minutes of Meeting showing appellant
agreeing to make direct payments to subcontractors - Whether Minutes
part of agreed bundle of documents - Whether Court of Appeal erred in
referring to the Minutes - Whether there was legally binding relationship
G between appellant and respondents - Whether plaintiff estopped from
asserting there was no such contract

The appellant was the owner of Wisma E&C, an office building in

Damansara Heights. One Autoways Constructions Sdn Bhd
H (“Autoways”) was engaged as main contractor under a PAM
Building Contract to construct the office building. The
respondents herein were subcontractors appointed by Autoways to
perform various functions under the project. The crux of the case
surrounded cl. 25(2) of the PAM Building Contract which
I provides for automatic termination of the contract upon the main
contractor ‘making a composition or arrangement with his
430 Current Law Journal [2012] 1 CLJ

creditors.’ In this respect, a termination letter was issued by the A

appellant upon learning that Autoways had made an application to
the court under s. 176 of the Companies Act 1965. Autoways
thus vacated the site and reverted possession back to the
appellant. On the authorisation of Autoways, the respondents had
re-entered the site without giving notice to the appellant and had B
removed equipment and goods, and in the process damaged the
building. The appellant sued the subcontractors in trespass and
conversion. The subcontractors in response filed a counterclaim for
individual sums owing to them directly by the appellant based on
an alleged oral contract. The High Court found the subcontractors C
to be liable and dismissed the counterclaim by the subcontractors.
The Court of Appeal reversed the High Court’s decision and held
that the contract between the appellant and Autoways was not
validly terminated, and that Autoways remained the main
contractor and could give consent to the respondents to enter the D
site, thus there was no trespass or conversion by the respondents.
The Court of Appeal proceeded to dismiss the appellant’s claim
and allowed the respondents’ counterclaim with costs. The
appellant thus appealed. With leave of this court, the following
questions were posed, inter alia (i) whether cl. 25(2) of the PAM E
Standard Form Building Contract of Malaysia was triggered
causing an automatic termination of the main contract if the
contractor petitioned the court under s. 176(1) of the Companies
Act 1965 for approval of a scheme of composition with its
creditors; (ii) whether the issuance of an order under s. 176(10) F
of the Companies Act would activate cl. 25(2) of the PAM
Contract; (iii) whether under the PAM Standard Form Building
Contract possession of a project site reverted back to the
employer regardless of whether the termination of the contract was
disputed by the main contractor and (iv) whether the Court of G
Appeal could judicially base its decision on a disputed document
that was not admitted into evidence by the trial judge.

Held (dismissing the appeal)

Per Richard Malanjum CJ (Sabah & Sarawak): H

(1) The appellant’s contention strongly hinged upon the words

“making a composition or arrangement with his creditors” as
stipulated in cl. 25(2). Although the word “making” was used,
it must for all necessary purposes be read as the composition
I
or arrangement had been made. It was not the intention of
the PAM Building Contract to automatically terminate
 Desa Samudra Sdn Bhd v.
[2012] 1 CLJ Bandar Teknik Sdn Bhd & Ors 431

A contracts whereby the main contractor possibly had financial

difficulties. If indeed the PAM Building Contract Agreement
intended to cover such situations, it must state so expressly.
The presentation of a proposal of a scheme of composition or
arrangement to the court was not by itself sufficient to
B activate cl. 25(2). Clause 25(2) would only be activated when
the court is called upon to approve the composition or
arrangement as provided for under s. 176(3). Unless and until
that event happens, cl. 25(2) has no application. (paras 23,
24, 26 & 28)
C
(2) The obtaining of a moratorium order under s. 176(10) did not
fall within the ambit of the “making a composition or
arrangement with his creditors.” The events mentioned in
cl. 25(2) are essentially instances of insolvency. An application
D (and also the granting of the same) under s. 176(10) is not
an instance of insolvency. It may for all necessary purposes be
that insolvency is probable or imminent, but at the stage of
such an application, the main contractor could not be said to
be insolvent. Thus, the granting of a moratorium order under
E s. 176(1) did not activate cl. 25(2). (para 19)

(3) As to whether Autoways had the authority to give consent to

the respondents to remove their materials from the site after
the PAM contract had been terminated, it was this court's
view that whether or not Autoways had the authority to do
F
so would depend on whether the PAM Contract had been
validly terminated or otherwise. It followed that the PAM
Contract had not been automatically terminated and thus
Autoways had the authority to give the said consent to the
respondents. Hence, there was no question of trespass or
G
conversion by the respondents. The appellant did physically
have possession of the site (possession in fact). However, legal
possession remained with Autoways because the PAM
Contract was not validly terminated (possession in law).
(paras 30 & 31)
H
(4) The appellant disputed the Minutes of Meeting dated 14 April
1998 whereby it was allegedly agreed that the appellant would
make direct payments to the subcontractors to continue with
the outstanding works on the site. It was the appellant’s stand
I that the said Minutes was not tendered in evidence. However,
432 Current Law Journal [2012] 1 CLJ

it was found that the said Minutes were part of the Agreed A
Bundle of Documents and were indeed referred to extensively
by the parties. At no point did the learned trial judge rule
that the said Minutes were inadmissible. The Court of Appeal
did not commit any error in referring to the said Minutes in
arriving at its decision. Indeed, the overwhelming B
contemporaneous evidence as pointed out by the Court of
Appeal such as the fact that there had been payment on two
previous occasions after the meeting showed that there was
an oral contract for direct payment to be made by the
appellant to the subcontractors. Indeed, there being a legally C
binding relationship between the appellant and the
respondents, the appellant must be estopped from asserting
that there was no such oral contract. The respondents were
entitled to succeed in their counterclaim. (paras 43 & 46)
D
Bahasa Malaysia Translation Of Headnotes

Perayu adalah pemilik Wisma E&C, sebuah bangunan pejabat di

Damansara Heights. Autoways Construction Sdn Bhd
(“Autoways”) telah menjadi kontraktor utama di bawah Kontrak
E
Bangunan PAM untuk membina bangunan pejabat. Responden-
responden di sini adalah subkontraktor-subkontraktor yang dilantik
oleh Autoways untuk melaksanakan pelbagai fungsi di bawah
projek. Teras kes ini adalah mengenai kl. 25(2) Kontrak Bangunan
PAM yang menyediakan peruntukan bagi penamatan automatik
F
kontrak apabila kontraktor utama ‘membuat suatu komposisi atau
susunan dengan pemiutangnya’. Dalam hal ini, surat penamatan
telah dikeluarkan oleh perayu apabila didapati bahawa Autoways
telah membuat permohonan kepada mahkamah di bawah s. 176
Akta Syarikat 1965. Autoways telah berundur dari tapak tersebut
G
dan mengembalikan semula milikan kepada perayu. Atas pemberian
kuasa Autoways, responden-responden telah memasuki balik tapak
itu tanpa memberi notis kepada perayu dan telah mengeluarkan
peralatan dan barang-barangan, dan dalam proses telah
merosakkan bangunan. Perayu telah saman subkontraktor-
H
subkontraktor dalam pencerobohan dan penukaran. Subkontraktor-
subkontraktor, sebagai tindak balas, memfailkan rayuan balas untuk
jumlah-jumlah yang terhutang secara individu kepada mereka oleh
perayu berdasarkan kontrak lisan yang didakwa telah dibuat.
Mahkamah Tinggi mendapati subkontraktor-subkontraktor adalah
I
bertanggungjawab dan menolak rayuan balas subkontraktor-
 Desa Samudra Sdn Bhd v.
[2012] 1 CLJ Bandar Teknik Sdn Bhd & Ors 433

A subkontraktor. Mahkamah Rayuan telah mengakas keputusan

Mahkamah Tinggi dan memutuskan bahawa penamatan kontrak di
antara perayu dan Autoways tidak sah, dan Autoways kekal
sebagai kontraktor utama dan mempunyai kuasa untuk
membenarkan responden-responden untuk memasuki tapak, oleh
B itu tiada pencerobohan dan penukaran dilakukan oleh responden-
responden. Mahkamah Rayuan terus menolak tuntutan perayu dan
membenarkan rayuan balas responden dengan kos. Dengan itu,
perayu merayu. Dengan kebenaran mahkamah ini, soalan-soalan
berikut telah ditimbulkan, antara lain (i) sama ada kl. 25(2)
C Standard Borang Kontrak Bangunan PAM Malaysia tercetus
menyebabkan penamatan automatik kontrak utama jika kontraktor
telah membuat petisyen ke mahkamah di bawah s. 176(1) Akta
Syarikat 1965 bagi kelulusan skema komposisi dengan pemiutang-
pemiutangnya; (ii) sama ada pengeluaran suatu perintah di bawah
D s. 176(10) Akta Syarikat akan mengaktifkan kl. 25(2) kontrak
PAM; (iii) sama ada di bawah Standard Borang Kontrak Bangunan
PAM pemilikan tapak projek dikembalikan semula kepada majikan
tanpa mengira sama ada penamatan kontrak dipertikaikan oleh
kontraktor utama dan (iv) sama ada Mahkamah Rayuan boleh
E secara kehakiman membuat keputusan berdasarkan dokumen yang
dipertikaikan tidak diterima-masuk sebagai keterangan oleh hakim
bicara.

Diputuskan (menolak rayuan)

F Oleh Richard Malanjum HB (Sabah & Sarawak):

(1) Hujahan perayu bergantung kuat pada perkataan-perkataan

‘membuat suatu komposisi atau susunan dengan pemiutang-
pemiutangnya’ seperti yang ditetapkan oleh kl. 25(2).Walaupun
perkataan ‘membuat’ digunakan, ia mesti untuk semua tujuan
G
perlu dibaca sebagai komposisi atau susunan telahpun dibuat.
Ia bukan niat Kontrak Bangunan PAM untuk menamatkan
secara automatik kontrak-kontrak di mana kontraktor utama
mungkin mempunyai masalah kewangan. Jika benar Kontrak
Bangunan PAM bertujuan untuk meliputi keadaan-keadaan
H
seperti itu, ia harus dinyatakan dengan terang dan nyata.
Pembentangan cadangan skema komposisi atau susunan ke
mahkamah tidak dengan sendirinya mencukupi untuk
mengaktifkan kl. 25(2). Klausa 25(2) hanya boleh diaktifkan
apabila mahkamah dipanggil untuk meluluskan komposisi dan
I
susunan seperti yang diperuntukkan di bawah s. 176(3).
Melainkan dan sehingga perkara itu berlaku, kl. 25(2) tidak
digunapakai.
434 Current Law Journal [2012] 1 CLJ

(2) Mendapatkan perintah moratorium di bawah s. 176(10) tidak A

termasuk di dalam skop ‘membuat komposisi dan susunan
dengan pemiutang-pemiutang’. Peristiwa-peristiwa yang disebut
di dalam k. 25(2) pada dasarnya keadaan-keadaan insolvensi.
Permohonan (dan membenarkannya) di bawah s. 176(10)
bukan keadaan insolvensi. Ia mungkin bagi semua tujuan dan B
maksud yang perlu bahawa ketaksolvenan adalah
berkemungkinan dan akan berlaku, tetapi pada peringkat
permohonan seperti itu, kontraktor utama tidak boleh
dikatakan tak solven. Oleh itu, pemberian suatu perintah
moratorium di bawah s. 176(1) tidak mengaktifkan kl. 25(2). C

(3) Mengenai sama ada Autoways mempunyai kuasa untuk

mengizinkan responden-responden mengambil barang-barang
mereka dari tapak tersebut selepas kontrak PAM telah
ditamatkan, ia adalah pandangan mahkamah ini bahawa sama D
ada Autoways mempunyai kuasa berbuat demikian bergantung
kepada sama ada kontrak PAM telah ditamatkan dengan sah
atau tidak. Boleh disimpulkan bahawa kontrak PAM tidak
ditamatkan secara automatik dan oleh itu Autoways
mempunyai kuasa untuk memberi keizinan kepada responden- E
responden. Oleh itu, tidak ada soalan pencerobohan atau
penukaran oleh responden-responden. Perayu mempunyai
milikan fizikal ke atas tapak tersebut (milikan sebenar). Walau
bagaimanapun, milikan undang-undang kekal dengan Autoways
kerana kontrak PAM tidak sah ditamatkan (milikan di sisi F
undang-undang).

(4) Perayu mempertikaikan minit mesyuarat bertarikh 14 April

1998 di mana ia didakwa satu persetujuan telah dibuat untuk
perayu membuat bayaran terus kepada subkontraktor-
G
subkontraktor untuk meneruskan kerja-kerja tertunggak di
tapak tersebut. Ia adalah pendirian perayu bahawa minit
tersebut tidak dikemukakan sebagai keterangan. Walau
bagaimanapun, didapati bahawa minit tersebut adalah
sebahagian dari Ikatan Dokumen Yang Telah Dipersetujui dan
H
telah dirujuk dengan meluas oleh pihak-pihak terlibat. Tidak
pada satu titik pun yang arif hakim bicara telah memutuskan
bahawa minit tersebut tidak boleh diterima. Mahkamah Rayuan
tidak khilaf apabila merujuk kepada minit tersebut dalam
membuat keputusan. Sesungguhnya, keterangan kontemporari
I
yang cukup banyak seperti yang ditegaskan oleh Mahkamah
Rayuan seperti terdapat dua bayaran yang dibuat sebelum ini
 Desa Samudra Sdn Bhd v.
[2012] 1 CLJ Bandar Teknik Sdn Bhd & Ors 435

A selepas mesyuarat menunjukkan bahawa terdapat kontrak lisan

untuk bayaran terus dibuat oleh perayu kepada subkontraktor-
subkontraktor. Sesungguhnya, dengan wujudnya satu
perhubungan mengikat secara sah di antara perayu dan
responden-responden, perayu harus diestop dari menegaskan
B bahawa tidak terdapat kontrak lisan. Responden-responden
harus berjaya di dalam rayuan balas mereka.
Case(s) referred to:
Abdul Rahim Abdul Hamid & Ors v. Perdana Merchant Bankers Bhd & Ors
[2006] 3 CLJ 1 FC (refd)
C
Asean Security Paper Mills Sdn Bhd v. CGU Insurance Bhd [2007] 2 CLJ 1
FC (refd)
Autoways Constructions Sdn Bhd lwn. Desa Samudra Sdn Bhd & Anor
[1999] 4 CLJ 601 HC (refd)
Boustead Trading (1985) Sdn Bhd v. Arab-Malaysian Merchant Bank
D Berhad [1995] 4 CLJ 283 FC (refd)
China Airlines Ltd v. Maltran Air Corp Sdn Bhd & Another Appeal [1996] 3
CLJ 163 FC (refd)
Desa Samudra Sdn Bhd v. Autoways Construction Sdn Bhd & Ors; Another
Case [2009] 1 LNS 298 HC (refd)
JKP Sdn Bhd v. PPH Development (M) Sdn Bhd [2007] 3 CLJ 621 CA
E
(refd)
Lyle-Meller v. A Lewis & Co (Westminster) Ltd [1956] 1 All ER 247 (refd)
Majlis Perbandaran Ampang Jaya v. Steven Phoa Cheng Loon & Ors [2006]
2 CLJ 1 FC (refd)
New Zealand Insurance Co Ltd v. Sinnadorai [1969] 1 LNS 119 FC (refd)
F Shaikh Sahied bin Talip bin Jaafar bin Talip v. Khoo Kang Chek [1931] 1
LNS 29 HC (refd)
Sinnadorai v. New Zealand Insurance Company Ltd [1968] 1 LNS 144 HC
(refd)
Television Broadcasts Ltd & Ors v. Golden Line Video & Anor [1989] 1 CLJ
589; [1989] 2 CLJ (Rep) 1099 HC (refd)
G
Legislation referred to:
Companies Act 1965, s. 176(1), (10)

For the appellant - Dato’ Cyrus Das (RM Krishnan & Harvinderjit Singh
with him); M/s Kumar Partnership
H
For the respondents - Datuk N Chandran (Mahendran Chelliah & Ranjan
Chandran with him); M/s RR Chelliah Brothers

[Appeal from Court of Appeal, Civil Appeal No: W-02-1094-2009]

Reported by Suhainah Wahiduddin

I
436 Current Law Journal [2012] 1 CLJ

JUDGMENT A

Richard Malanjum CJ (Sabah & Sarawak):

[1] With leave of this court granted on 21 February 2011, the

following questions are posed before us for our consideration,
B
namely:

(1) Whether cl. 25(2) of the PAM Standard Form Building

Contract of Malaysia is triggered, causing an automatic
termination of the main contract if the Contractor petitions
the court under s. 176(1) of the Companies Act 1965 for C
approval of a scheme of composition with its creditors?
(2) Whether a restraining or moratorium order issued by the court
under s. 176(10) of the Companies Act 1965 in favour of the
Contractor is proof of ‘making of a composition or D
arrangement with creditors for the purpose of cl. 25(2) of the
PAM Building Contract?

(3) Whether under the PAM Standard Form Building Contract,

possession of a project site reverts back to the employer
E
regardless of whether the termination of the contract is
disputed by the main contractor?

(4) Upon the project site reverting to the employer, could the
main contractor under the PAM Contract consider itself
released from the terms of the contract and/or authorize the F
Sub-Contractors to enter upon the site and remove goods and
materials without the consent of the employer or the project
Architect?

(5) Whether the torts of conversion and trespass to goods G

committed by several tortfeasors attract liability on a joint and
several basis for the total value of the goods or materials that
are the subject matter of trespass and conversion?

(6) Whether the Court of Appeal could judicially base its decision
H
on a disputed document that was not admitted into evidence
by the trial court?

[2] We heard learned counsel for the parties and reserved our
decision. Having given the arguments submitted our anxious
consideration we now deliver our decision. I
 Desa Samudra Sdn Bhd v.
[2012] 1 CLJ Bandar Teknik Sdn Bhd & Ors 437

A Background

[3] Briefly, the facts surrounding the case have been thoroughly
elucidated by the High Court and the said judgment can be found
at [2009] 1 LNS 298. The Court of Appeal in its broad grounds
B of reasons did not repeat the facts of the case with great detail.
We propose to do the same and highlight only the relevant and
pertinent facts for the purposes of this appeal.

[4] The appellant herein is the owner of Wisma E & C which is

an office building located in Damansara Heights. One Autoways
C
Constructions Sdn. Bhd. (“Autoways”) was engaged as the main
contractor under a PAM Building Contract to construct the said
office building. The appellant was the employer. Autoways was
originally named as the first defendant in the court of first instance,
but as it had already been wound up, it did not participate at the
D
trial.

[5] The respondents on the other hand are subcontractors

appointed by Autoways to perform various functions under the
project. The individuals named as respondents, namely the 2nd
E and 4th respondents, are principals of the respective sub-
contractors. The 5th and 6th respondents are related to the
counterclaim only.

[6] The crux of the case surrounds cl. 25(2) of the RAM
F Building Contract which provides for automatic termination of the
contract upon the happening of certain events. The pertinent
event is the main contractor “making a composition or
arrangement with his creditors”. In this respect, a termination
letter dated 26 June 1998 was issued by the appellant upon
G learning that Autoways made an application to the court under s.
176 of the Companies Act 1965.

[7] Autoways maintained that it disputed the right of the

appellant to invoke cl. 25(2) but nevertheless vacated the site and
reverted possession back to the appellant.
H
[8] The present dispute arose from events which occurred on 2
August 1998. On the authorization of Autoways, the first to
fourth respondents (as subcontractors and their principal officials)
re-entered the site without giving notice to the appellant or the
I Architect and removed plants, tools, equipment and goods, and
in the process damaged or destroyed temporary buildings by
stripping off mechanical and electrical installations.
438 Current Law Journal [2012] 1 CLJ

[9] Premised on that, the appellant sued the sub-contractors in A

trespass and conversion for RM695,000. The subcontractors in
response filed a counter-claim for individual sums owing to them
directly by the appellant based on an alleged oral contract said to
be made at a meeting on 14 April 1998. In essence, the alleged
oral contract effectively stipulates that the appellant had B
undertaken to pay the sub-contractors whatever sums owed to
them by Autoways as a result of the latter’s financial difficulties.

[10] The High Court on 6 May 2009 found that as the PAM
Building Contract was validly terminated under cl. 25(2) of the C
same read together with s. 176(10) of the Companies Act,
Autoways had ceased to be the main contractor and could not
have validly given consent to the sub-contractors to enter the site.
Hence, the High Court found the sub-contractors to be liable for
trespass and conversion, but could not award damages because D
the appellant had failed to prove which sub-contractor did and
took what. The counter-claim brought by the sub-contractors was
also dismissed on the ground that the alleged oral contract for
direct payment made on 14 April 1998 was not proven on the
balance of probabilities. In short, both the claim and counter-claim E
were dismissed with costs. As such, both parties appealed.

[11] The Court of Appeal on 2 September 2010 reversed the

High Court’s decision on several grounds. First, the Court of
Appeal was of the view that obtaining a moratorium order under
F
s. 176(10) of the Companies Act did not activate the automatic
termination of the PAM Building Contract, and as such the
contract between the appellant and Autoways was not validly
terminated. It followed that by reason thereof, Autoways remained
the main contractor and could validly give consent to the
G
respondents to enter the site, and accordingly there was no
trespass and conversion by the respondents. The Court of Appeal
also found that the respondents had successfully established the
existence of an oral contract made on 14 April 1998 whereby a
binding obligation was created for direct payment to be made to
H
the respondents to continue and complete the pending works. The
Court of Appeal proceeded to dismiss the appellant’s claim for
trespass and conversion, and allowed the respondent’s
counterclaim with costs.
I
 Desa Samudra Sdn Bhd v.
[2012] 1 CLJ Bandar Teknik Sdn Bhd & Ors 439

A Our Decision

[12] For the reasons below, we would dismiss this appeal with
costs and affirm the decision of the Court of Appeal.

Reasons
B
[13] Due to the fact that they are closely related, we shall
answer Questions 1 and 2 together and so too Questions 3 and
4 since they are essentially related to the PAM Building Contract.
Questions 5 and 6 are standalone questions respectively.
C
Questions 1 And 2 – Effect Of s. 176 Of The Companies Act

[14] This is perhaps the most crucial question raised by the

appellant which begs an answer. It is essentially the effect which
ss. 176(1) and 176(10) of the Companies Act 1965 has in relation
D
to cl. 25(2) of the PAM Building Contract.

[15] Now, s. 176(1) states the following:

Where a compromise or arrangement is proposed between a
E company and its creditors or any class of them or between the
company and its members or any class of them the Court may,
on the application in a summary way of the company or of any
creditor or member of the company, or in the case of a company
being wound up of the liquidator, order a meeting of the creditors
or class of creditors or of the members of the company or class
F of members to be summoned in such manner as the Court
directs.

[16] And s. 176(10) stipulates as below:

Where no order has been made or resolution passed for the
G winding up of a company and any such compromise or
arrangement has been proposed between the company and its
creditors or any class of those creditors, the Court may, in
addition to any of its powers, on the application in a summary
way of the company or of any member or creditor of the
H company restrain further proceedings in any action or proceeding
against the company except by leave of the Court and subject to
such terms as the Court imposes.

[17] The material part of cl. 25(2) of the PAM Building Contract
is termed as follows:
I
440 Current Law Journal [2012] 1 CLJ

In the event of the Contractor becoming a bankrupt or making a A

composition or arrangement with his creditors or having a winding
up order made ... the employment of the Contractor under this
Contract shall be forthwith automatically determined but the said
employment may be reinstated and continued if the Employer and
Contractor his trustee in bankruptcy liquidator receiver or manager
B
as the case may be shall so agree.

[18] We will deal with the second question first, ie, the effect of
s. 176(10) because it would help narrow down the broad scope
of discussion under the first question. The sole point for
consideration on this question is whether the issuance an order C
under the s. 176(10) of the Companies Act 1965 would activate
cl. 25(2) of the PAM Contract. Although compelling at first
glance, we respectfully do not agree with the appellant’s stand.
We accordingly find that the granting of a moratorium order under
s. 176(10) does not activate cl. 25(2). D

[19] Our simple rationale for this is that the events mentioned in
cl. 25(2) are essentially instances of insolvency. An application
(and also the granting of the same) under s. 176(10) is not an
instance of insolvency. It may for all necessary purposes be that E
insolvency is probable or imminent, but at the stage of such an
application, the main contractor cannot be said to be insolvent. It
should be borne in mind that there have been instances where
companies have bounced back after being granted s. 176(10)
orders – some make it whereas others do not. F

[20] In short, s. 176(10) does not have any bearing on cl. 25(2).
This brings us to the first question which deals with s. 176(1).
Now, it is pertinent to note that a moratorium order under
s. 176(10) was in actual fact obtained. However, no compromise
G
or arrangement had been agreed upon and approved by the court
as per the other provisions of s. 176.

[21] Now, the appellant’s contention strongly hinges upon the

words “making a composition or arrangement with his creditors”
as stipulated in cl. 25(2). The appellant argues by reason of the H
usage of the word “making”, it was intended that a composition
or arrangement need not necessarily be made. In other words, a
proposal to enter into the same would suffice. The High Court
was in agreement with that interpretation. The Court of Appeal
disagreed. I
 Desa Samudra Sdn Bhd v.
[2012] 1 CLJ Bandar Teknik Sdn Bhd & Ors 441

A [22] Having considered all the arguments we are in agreement

with the approach by the Court of Appeal. It is a matter of
interpretation of the phrase: “making a composition or arrangement
with his creditors”. For instance, the words ‘the making of the
article ...’ was given the grammatical construction of ‘the actual
B making of the article’ and not otherwise. (See: Television Broadcasts
Ltd & Ors v. Golden Line Video & Anor [1989] 1 CLJ 589; [1989]
2 CLJ (Rep) 1099 (also [1988] SLR 930).

[23] Hence, we are of the view that although the word “making”
C is used, it must for all necessary purposes be read as the
composition or arrangement has been made. In other words it
must necessarily be a step further than a mere proposal to enter
into composition or arrangement. It is akin to provisions where
words such as “upon the entering of a judgment” or “upon the
D happening of an event” – whereby the judgment has to be entered
or the event has to happen before it could be said that the
provision has been activated.

[24] We do not think that the PAM Building Contract intends

to automatically terminate contracts whereby the main contractor
E
possibly has financial difficulties. If indeed the PAM Building
Contract Agreement intends to cover such situations, it must state
so expressly. After all proposals of schemes of composition or
arrangements do not necessarily materialize at all times.
F [25] We find further support in our view by the words adopted
in cl. 25(2) itself, ie, “but the said employment may be reinstated
and continued if the employer and contractor his trustee in
bankruptcy liquidator receiver or manager as the case may be
shall so agree” (emphasis added) also leads us to conclude that
G cl. 25(2) seemingly comes into play only upon the happening of
the event and not in the process of it. Those persons or bodies
mentioned in the emphasis highlighted above would be where the
event has actually happened.

H [26] Indeed cl. 25(2) also uses the words “becoming a bankrupt”
and also “having a winding up order made”. It is beyond doubt
that the said clause intends for the bankruptcy orders to have
been entered or the winding order to have been made. That to
our mind is akin to “making a composition or arrangement with
I his creditors”. The words “becoming”, “making” and “having” are
of the similar grammatical tense, namely present tense (or perhaps
442 Current Law Journal [2012] 1 CLJ

even present continuous tense). We find no merit in the A

appellant’s argument that the usage of the present tense would
result in the interpretation of cl. 25(2) read together with s. 176.

[27] Thus, with respect, we are inclined to disagree with the

conclusion arrived at by the High Court in an earlier case B
involving the similar parties, ie, Autoways Constructions Sdn Bhd lwn.
Desa Samudra Sdn Bhd & Anor [1999] 4 CLJ 601. Instead, we
prefer to follow the approach adopted by the High Court in
Sinnadorai v. New Zealand Insurance Company Ltd [1968] 1 LNS
144. When dealing with a similar provision the learned judge there C
concluded that such a provision is only activated once the event
has happened. No doubt the decision in that case was reversed
by the then Federal Court but it was on a different ground
altogether. (See: New Zealand Insurance Co Ltd v. Sinnadorai [1969]
1 LNS 119). In other words, the then Federal Court did not D
disapprove the interpretation of the said provision by the learned
judge. We would therefore for practical reasons adopt such an
interpretation.

[28] Accordingly, we are of the view that the obtaining of a

E
moratorium order under s. 176(10) does not fall within the ambit
of the “making a composition or arrangement with his creditors”.
Similarly, the presentation of a proposal of a scheme of
composition or arrangement to the court is not by itself sufficient
to activate cl. 25(2). Clause 25(2) is only activated when the
F
court is called upon to approve the composition or arrangement
as provided for under s. 176(3). Unless and until that event
happens, cl. 25(2) has no application.

Questions 3 And 4 – Project Site Reverting Back Upon

Termination G

[29] Our simple answer to Question 3 is that it would necessarily

depend on the validity of the termination. No doubt the general
rule is that termination of the PAM Building Contract would result
in the project site reverting back to the employer. However, if H
indeed the termination was unlawful and/or unjustified, an
exception to the general rule would arise.

[30] In the present case the question is whether Autoways had

the authority to give consent to the respondents to remove their
I
materials from the site after the PAM Contract has been
 Desa Samudra Sdn Bhd v.
[2012] 1 CLJ Bandar Teknik Sdn Bhd & Ors 443

A terminated. It is our considered view that whether or not

Autoways had the authority to do so would depend on whether
the PAM Contract had been validly terminated or otherwise. As a
consequence of the answers to the first two questions posed, it
follows that the PAM Contract had not been automatically
B terminated and thus Autoways had the authority to give the said
consent to the respondents. Hence, there is no question of
trespass or conversion by the respondents. As such, question 4
does not arise and there is no need for us to address the same.

C [31] We find it necessary to add a few words to this scenario.

We are of the opinion that a distinction ought to be drawn
between ‘possession in fact’ and ‘possession in law’. We accept
that “possession” can be broadly divided into possession in fact
(physical control) and possession in law (legal control) (see:
D generally Shaikh Sahied bin Talip bin Jaafar bin Talip v. Khoo Kang
Chek [1931] 1 LNS 29 where the court (Simpson J) observed that
– “Possession is primarily divisible into possession in fact (physical
control) and possession in law”). What we mean to say is that
although the Main Contractor may not have possession in fact, it
E may still retain possession in law. Applying it to the present
situation, it is not in dispute that Autoways did in actual fact
vacate the site. Hence, the appellant did indeed take over the site
upon the said termination. Accordingly, the appellant did physically
have possession of the site – this is what we mean by possession
F in fact. However, legal possession remained with Autoways
because the PAM Contract was not validly terminated – this is
what we mean by possession in law.

[32] Hence, we find ourselves in agreement with the views of

Professor Vincent Powell-Smith in The Malaysian Standard Form
G
of Building Contract – PAM 1969 where he opined that
“Although there is no express provision that on determination the
contractor must give up possession of the site, it is suggested that
he is bound to do so, even if he is disputing the grounds or
validity of the determination”. That, to our mind, is with reference
H
to the physical possession of the site – ie, possession in fact. We
add that even though the contractor has surrendered possession
of the site back to the employer, that by itself does not affect the
position that the contractor may still have possession in law – the
latter situation being dependant on whether the contract was
I
validly terminated in the first place.
444 Current Law Journal [2012] 1 CLJ

Question 5 A

[33] This question deals with the liability of joint tortfeasors

towards the total value of the subject matter where trespass or
conversion has been established. Now, in this case we have
already found that neither trespass nor conversion has been B
established. Thus, this issue need not be addressed. However, this
question raises general importance and thus we feel obliged to say
a few words on this subject matter.

[34] We accept that joint tortfeasors may be jointly and severally

C
liable for the total amount of the subject matter where a tort
action has successfully been established. But that itself would
necessarily depend on the facts and circumstances of the case. It
is very much a factual issue. We would therefore decline to lay
down a hard and fast rule for this. But it is for the court to
D
consider whether or not the acts of tort are said to be indivisible.
(See: Majlis Perbandaran Ampang Jaya v. Steven Phoa Cheng Loon &
Ors [2006] 2 CLJ 1).

[35] Even assuming that this issue is still relevant in this case we
find that in the present circumstances each of the sub contractors E
(including the respondents) would have only taken their respective
materials out of the site. It would be a grave injustice to hold
them for materials taken out by other sub contractors or damage
and injuries caused by them. In short, we are of the view that the
facts of the present case do not justify imputing full liability on the F
respondents for the damage and injury which had been caused
jointly by the acts of the sub contractors on that day.
Question 6 – Status Of Document Not Admitted In Evidence
G
[36] This question relates to an important evidential and
procedural issue. It also has crucial bearing in the determination
of this appeal. In the event that we are wrong in our findings with
regard to s. 176 of the Companies Act and cl. 25(2) of the PAM
Building Contract, we are of the view that the appeal should be
H
dismissed on this ground. This ground is the cross appeal raised
by the respondents in the Court of Appeal which was allowed.

[37] The general rule is that document not admitted in evidence

by the trial court should not be relied upon by an appellate court.
The appropriate approach when dealing with a situation where the I
ground for appeal is that a document was wrongfully rejected by
 Desa Samudra Sdn Bhd v.
[2012] 1 CLJ Bandar Teknik Sdn Bhd & Ors 445

A the trial court would be for the appellate court to rule on its
admissibility and if found to be favourable, to order the matter to
be remitted back for trial and that the document be admitted
before the trial court and subjected to cross-examination. Of
course, there are instances where an appellate court may consider
B new evidence not raised at trial – but that is a different matter
altogether and of no concern here.

[38] However, in the present case the question posed by the

appellant does not reflect the actual position of the document in
C dispute. The document in question is the minutes of meeting
dated 14 April 1998, whereby it was allegedly agreed that the
appellant would make direct payment to the sub contractors to
continue with the outstanding works on the site.

[39] The appellant seems to take the stand that the said minutes
D
was not tendered in evidence (and hence the manner in which the
question was posed). The respondents on the other hand argued
that the said minutes in actual fact formed part of the agreed
bundle at trial and was in fact extensively referred to by the
parties at trial as D 9-12. The respondents acknowledge that at
E
trial, the appellant did object to the said minutes, but that the
court merely noted down the objection and proceeded. At no
point was it ruled that the said minutes were inadmissible. Parties
continued to refer to the minutes thereafter.
F [40] We therefore agree with the respondents’ argument. In the
law governing documentary evidence, as in oral evidence, three
matters come to mind – relevancy, admissibility, and weight. They
must be considered in that order. Only evidence which is relevant
ought to be admissible. Irrelevant evidence should be rendered as
G inadmissible and the matter ends there. Now, relevant evidence
which is rendered admissible is still subject to the element of
weight. The court can either attach due weight to the evidence,
or some weight, little weight, or no weight at all. Due regard must
be given to the authenticity of the evidence, its source, its
H contents, and more importantly, the surrounding circumstances
of the case. This is where contemporaneous evidence would come
in handy.
[41] Having considered the circumstances of the case, we are of
I the view that the said minutes were part of the agreed bundle of
documents and were indeed referred to extensively by the parties.
An objection was raised and noted at the outset, but at no point
446 Current Law Journal [2012] 1 CLJ

did the learned trial judge rule that the said minutes were A
inadmissible. The mere fact that a document is disputed or
objected to does not by itself render the document inadmissible.
Parties continued to refer to the minutes at trial as D9-12. Hence,
the appellant’s approach to the question posed is a non-starter in
actual fact. B

[42] To our mind, the only issue in question is the weight that
ought to be attached to the said minutes. And in arriving at this
juncture, we state for the record that we are of the view that the
Court of Appeal did not commit any error in referring to the said C
minutes in arriving at its decision. The Court of Appeal did not
(as the appellant seems to portray) refer to evidence which had
been ruled as inadmissible and render it admissible, and base its
decision on the same. All it did was to attach due weight to the
said minutes. We are of the view that appellate courts are D
perfectly entitled to do the same. (See: Asean Security Paper Mills
Sdn Bhd v. CGU Insurance Bhd [2007] 2 CLJ 1; Abdul Rahim Abdul
Hamid & Ors v. Perdana Merchant Bankers Bhd & Ors [2006] 3
CLJ 1; and China Airlines Ltd v. Maltran Air Corp Sdn Bhd &
Another Appeal [1996] 3 CLJ 163). E

[43] Indeed, the overwhelming contemporaneous evidence as

pointed out by the Court of Appeal such as the fact that there
had been payment on two previous occasions after the meeting
goes to show that indeed there was an oral contract for direct
F
payment to be made by the appellant to the sub contractors.
Indeed, there being a legally binding relationship between the
appellant and the respondents (see: Lyle-Meller v. A Lewis & Co
(Westminster) Ltd [1956] 1 All ER 247), the appellant must be
estopped from asserting that there was no such oral contract.
G
(See: Boustead Trading (1985) Sdn Bhd v. Arab-Malaysian Merchant
Bank Berhad [1995] 4 CLJ 283).

[44] In any event, even if the minutes were not considered in

evidence, we are of the view that there was sufficient oral
evidence raised at trial to show that there was indeed an oral H
agreement to the effect as alluded to above.

[45] Accordingly, we find that there was an oral contract

between the parties to the present appeal whereby the
respondents were induced to perform and complete the works. I
This is not only established by the said minutes but by other
 Desa Samudra Sdn Bhd v.
[2012] 1 CLJ Bandar Teknik Sdn Bhd & Ors 447

A contemporaneous evidence and also circumstantial evidence. We

also note and endorse the approach taken by the Court of Appeal
in JKP Sdn Bhd v. PPH Development (M) Sdn Bhd [2007] 3 CLJ
621 whereby a slightly similar situation occurred.

B Conclusion

[46] Accordingly, we are of the view that the PAM Building

Contract was not automatically terminated by reason of the
existence of a proposed scheme of composition or arrangement or
by the granting of a moratorium order under s. 176 of the
C
Companies Act. As such, the main contractor was legally
authorized to give consent to the sub contractors to remove the
latter’s materials from the site and as such the appellant’s action
in trespass and conversion cannot sustain. As for the respondents’
claim, we are of the view that there was an agreement between
D
the appellant and the respondents that the former would make
direct payment to the latter to complete the works. The
appellant’s breach of this agreement towards the tail end of the
project entitled the respondents to succeed in their counter-claim.
E [47] We accordingly find no reason to disagree with the findings
and decision of the Court of Appeal. Therefore, this appeal is
dismissed with costs.