METRAMAC CORPORATION SDN． BHD． v FAWZIAH HOLDINGS SDN． BHD．

DALAM MAHKAMAH PERSEKUTUAN MALAYSIA
(BIDANGKUASA RAYUAN)
RAYUAN SIVIL NO. 02 - 19 - 2006 (W)
ANTARA
METRAMAC CORPORATION SDN. BHD.
(dahulunya dikenali sebagai
Syarikat Teratai K G Sdn. Bhd.) ... PERAYU
DAN
FAWZIAH HOLDINGS SDN. BHD. ... RESPONDEN
[Dalam Perkara Rayuan Sivil No. W – 02 – 1009 – 2003
Dalam Mahkamah Rayuan Malaysia
Antara
Metramac Corporation Sdn. Bhd.
(dahulunya dikenali sebagai
Syarikat Teratai KG Sdn. Bhd. ... Perayu
Dan
Fawziah Holdings Sdn. Bhd. ... Responden]
2
DAN
DALAM MAHKAMAH PERSEKUTUAN MALAYSIA
(BIDANGKUASA RAYUAN)
RAYUAN SIVIL NO. 02 - 20 - 2006 (W)
ANTARA
METRAMAC CORPORATION SDN. BHD.
(dahulunya dikenali sebagai
Syarikat Teratai K G Sdn. Bhd.) ... PERAYU
DAN
FAWZIAH HOLDINGS SDN. BHD. ... RESPONDEN
[Dalam Perkara Rayuan Sivil No. W – 02 – 1013 – 2003
Dalam Mahkamah Rayuan Malaysia
Antara
Metramac Corporation Sdn. Bhd.
(dahulunya dikenali sebagai
Syarikat Teratai KG Sdn. Bhd. ... Perayu
Dan
Fawziah Holdings Sdn. Bhd. ... Responden]
3
Coram: Y.A.A. Tun Dato’ Sri Ahmad Fairuz Bin Dato’ Sheikh Abdul
Halim, KHN
Y.A. Dato’ Richard Malanjum, HBSS
Y.A. Dato’ Abdul Hamid Bin Hj Mohamad, HMP
Y.A. Dato’ Alauddin Bin Dato’ Mohd Sheriff, HMP
Y.A. Dato’ Bentara Istana Dato’ Nik Hashim Bin Nik Ab.
Rahman, HMP
JUDGMENT OF THE COURT
Introduction
1. There are two matters before this Court for our consideration.
The first is an appeal by the Appellant against the decision of
the Court of Appeal delivered on 25th October 2005. The
second is the respective applications by two Interveners to
have certain findings and comments found in the two judgments
of the Court of Appeal expunged on the grounds as contained
in their respective affidavits.
4
2. In respect of the appeal we have given leave to appeal on 27th
March 2006 involving three questions posed for our
determination, namely,:
a. Whether the creation of a trust by a company amounts to
an illegal reduction of its capital?
b. Whether the test adopted by the Court of Appeal, in
determining whether Clause 8 of the Signage Agreement
is a stipulation by way of a penalty and/or a sum named in
the contract for purposes of section 75 of the Contracts
Act 1950, is the correct test and/or is exhaustive?
c. Whether the Court of Appeal’s adverse remarks/findings
in the circumstances of this case, when viewed
objectively, shows a real danger of bias on the part of the
Court of Appeal in the judgment arrived at against the
Appellant?
5
Leave to intervene was also granted to the Interveners on 7th
March 2006.
3. This Judgment will deal only with the first matter, that is, the
appeal proper. A separate judgment will be delivered in respect
of the second matter.
4. At the outset of the hearing of the appeal proper learned
counsel for the Appellant intimated to us that he would proceed
to deal first with the third question posed and to be followed by
the first and second questions. Accordingly in this Judgment we
will adopt the same sequence. But to better understand the real
issues involved in the questions posed it is imperative that we
should first state the background facts and basis of the
decisions of the courts below.
Background Facts
5. The Appellant was formerly known as Syarikat Teratai K.G. Sdn
Bhd [‘STKG’]. It only changed its name to Metramac Corp Sdn
6
Bhd (‘Metramac’) on 4 March 1991 after it was bought over by
Metro Juara Sdn. Bhd. (‘Metro Juara’).
6. STKG and Fawziah Holdings Sdn Bhd (the Respondent in this
appeal) at the material time shared common shareholders and
directors, namely, Dato’ Fawziah and her mother Maimoon
Bee.
7. In July 1986 Dato’ Fawziah, through her company STKG, bid in
an open tender called by Dewan Bandaraya Kuala Lumpur
(‘DBKL’) to design, construct, finance and operate in the
privatization of certain roads in the Kuala Lumpur area (‘the
concession area’) and to collect the tolls for a period of 12
years. There were five other bidders including United Engineers
Malaysia Berhad (UEM). STKG was at that time engaged in
several other projects especially in the building of low cost flats
in Kuala Lumpur and Seremban and other civil engineering
works.
7
8. STKG won the tender and signed the First Concession
Agreement dated 20 November 1987 with DBKL (the First
Concession Agreement). A material clause in the First
Concession Agreement was the ‘land rights’ clause, out of
which arose the licensing agreement for signage rights in
favour of STKG. The signage rights refer to the advertising
rights through signboards and billboards etc along the
concession roads to be built by STKG in the concession area.
9. The First Concession Agreement was in the nature of a build,
operate and transfer agreement wherein upon the expiry of the
concession period, the roads would revert back to DBKL.
10. It was also anticipated by DBKL that any company operating
the First Concession Agreement area would be required to
raise funds from potential investors for the project.
11. In order to assure investors that all funds invested would go into
the project a separate company focused to do the project would
be desirable. After being advised by its professional financial
8
consultants, Schroder, STKG was restructured to hive off all its
non-concession businesses so that it became a one project
company.
12. Hence, on 31.03.1988, STKG and the Respondent entered into
a Sale Agreement dated 31.03.1988 (the Restructure Sale
Agreement) wherein STKG disposed of all its current business
activities, assets and liabilities to the Respondent save for the
new business activity pursuant to the First Concession
Agreement. As stipulated in the Restructure Sale Agreement,
this was done in view of the intended changes in the business
to be carried out by STKG including its new business venture to
be undertaken.
13. Some of the pertinent terms in the Restructure Sale Agreement
were thus:
i. that several of STKG’s assets, rights and liabilities were
sold to the Respondent;
9
ii. that STKG agreed to grant some benefits to the
Respondent which includes advertising rights under the
First Concession Agreement throughout the concession
period;
iii. that it was also agreed that all contracts and future
contracts obtained by STKG were to be subcontracted to
the Respondent and if they were not so subcontracted,
any monies, profits and benefits from such contracts or
future contracts were to be held by the STKG on trust for
the benefit of the Respondent. By clauses 9.4 and 9.5
STKG agreed to hold on trust for the Respondent any
‘future contracts’ entered into by it.
14. It is important to note that at the time of entering into the
Restructure Sale Agreement, Dato' Fawziah and her mother
were the only shareholders/directors of STKG. Nevertheless
due disclosures were made and approvals were obtained from
the shareholders in relation to the Restructure Sale Agreement.
10
15. The Restructure Sale Agreement was amended by a
Supplemental Sale Agreement dated 12.09.1988 (the
Supplemental Sale Agreement).
16. After the execution of the Restructure Sale Agreement and the
Supplemental Sale Agreement thereto, in December 1988 four
institutions and an individual invested in STKG with funds
injected in the total sum of RM65 million. The new shareholders
were the American International Assurance Ltd, Bank
Pembangunan Malaysia, Tabung Haji Malaysia, Mitsui
Construction and one Madam Itjih Nursalim from Indonesia.
STKG thus ceased to be a family company.
17. A formal Shareholders Agreement (the Shareholders
Agreement) was signed on 29th December 1988 between Dato’
Fawziah, Puan Maimoon and the new shareholders. Its
contents inter alia, were the acknowledgment by the new
shareholders of the hiving off, that is, the sale of the nonconcession
business’ assets and liabilities of STKG to the
Respondent. Dato Fawziah was appointed as the Managing
11
Director of STKG because of her experience in securing the
First Concession Agreement which remained the only business
activity of STKG.
18. Under the Shareholders Agreement Dato’ Fawziah and her
mother collectively held the largest interests in STKG (20.34%).
Further, Dato’ Fawziah had control over the manner in which
voting rights were exercised by Mitsui Construction Company
Ltd, which held an 18.45% interest in STKG.
19. Meanwhile, facilities were obtained by STKG from a consortium
of bankers and a Facilities Agreement was entered into on
26.01.1989. The sum obtained was RM204,000,000.00.
20. In furtherance to the First Concession Agreement, a License
Agreement was entered into between DBKL and STKG on 31st
January 1989 (the License Agreement) in which STKG was
given exclusive license to erect any advertisement or signage
on licensed premises within the concession area (the
advertisement rights).
12
21. On or around 01.09.1990, upon completing the road works on
the Cheras section of the concession area, STKG began
collecting tolls at its tolling station. The rate was RM1.00 for
light vehicles and RM2.00 for heavy vehicles.
22. An unexpected event happened after STKG commenced to
collect tolls. Public demonstrations took place leading the
Federal Government to step in to deal with the situation. As a
result thereof, DBKL by its letter dated 12.09.1990 instructed
STKG to suspend the collection of tolls at the Cheras tollbooth.
STKG complied with the instruction although it took the stand
that it was not legally obliged to do so.
23. Dato’ Fawziah was thus asked by the Board of Directors of
STKG to discuss with DBKL and the Federal Government on
the various options available due to the critical financial
predicament faced by STKG, namely, at risk were that the
RM40 millions loan repayment yearly to its lenders would not
be serviced without the toll collections and the RM65 millions
13
investment paid in by the new shareholders of STKG. Various
options, including compensation for termination, were proposed
to DBKL.
24. After the suspension of the toll collection and by 02.10.1990 it
became obvious to the new shareholders of STKG that the First
Concession Agreement in its original form could no longer be
performed and had to be terminated. STKG authorized Dato’
Fawziah being the Managing Director to negotiate for
compensation in the event of termination.
25. DBKL agreed in principle to the option that the First Concession
Agreement should be terminated and that compensation would
be paid. However no definite sum was mentioned.
26. Meanwhile, Dato’ Fawziah and the other shareholders received
from UEM an offer to purchase all their shares in STKG.
27. By 24.11.1990, UEM through its solicitors proceeded to make
an offer to the shareholders of STKG for the acquisition of all
14
their shares in STKG on payment of the sum of
RM97,543,459.50.
28. A draft Sale and Purchase Agreement was thus forwarded by
UEM’s solicitors to the shareholders of STKG for their
consideration together with a covering letter dated 11.12.1990.
29. During the Directors’ Meeting of STKG held on 13.12.1990, the
directors noted that the majority of the shareholders had signed
the Sale and Purchase Agreement to sell their shares in STKG
to UEM. In fact there was also a shareholders’ meeting held on
the same day. Common to the two meetings was a briefing note
which recommended for a quick sale of the shares in STKG.
The shareholders approved and accepted the recommendation.
30. Meanwhile on 02.11.1990 Dato’ Fawziah secured the execution
of a Signage Sub-Licence Agreement (the Signage Sub-
Licence Agreement) between STKG and the Respondent which
Agreement contained, inter alia, the granting to the Respondent
by STKG an exclusive sub-licence to erect signage on the
15
licensed premises (that is the exercise of the advertisement
rights) during the concession period and in consideration
thereof the Respondent would pay RM1,000 per year to STKG.
31. Dato Fawziah further managed to have the Signage Sub-
Licence Amending Agreement executed on 15.12.1990
between STKG and the Respondent which Agreement
addressed on the happenings of two events, namely,
i. for the mutual termination of the First Concession
Agreement dated 20.11.1987; and
ii. the termination of the Signage Sub-Licence Agreement by
STKG.
32. On 23.01.1991 an agreement was executed on the sales of all
STKG shares to Metro Juara Bhd (Metro Juara) a nominee of
UEM but with Anuar Othman and Dato Halim Saad registered
as the owners. Metro Juara paid a premium of approximately
16
RM32.5 million for the shares (RM0.50 per share) bringing the
total consideration to approximately RM97.5 million.
33. On 08.02.1991 a resolution was passed by the outgoing Board
of Directors of STKG wherein they resigned and new directors
were appointed. They also authorized the transfer of shares to
Metro Juara. In addition the outgoing Board of Directors of
STKG proceeded to ratify the Signage Sub-Licence Agreement
and the Signage Sub-Licence Amending Agreement. The new
incoming Board of Directors was not informed of the ratification.
34. STKG’s name was then changed to Metramac Corporation Sdn
Bhd (Metramac) now the Appellant, subsequent to Metro Juara
acquiring it.
35. The whole transaction was undertaken on an “as is where is”
basis, with a preliminary audit undertaken by the accounting
firm of Messrs Shamsir Jasani & Co.
17
36. By a letter dated 29.06.1992 through its solicitors Messrs
Rashid & Lee the Appellant proceeded to rescind the Signage
Sub-Licence Agreement and the Signage Sub-Licence
Amending Agreement on the grounds that the then Board of
Directors of the Appellant (then called STKG) failed to
discharge their fiduciary duties to the Appellant. It was alleged
that those agreements were not entered in the best interest of
and not beneficial to the Appellant. It was also alleged that even
if those agreements were ratified they would remain null and
void for want of valid disclosure as to the nature, effect and
basis of the Signage Sub-Licence Agreement by the then Board
of Directors.
37. Initially the Respondent disputed and refused to accept the
rescission of the two Agreements by the Appellant vide its
solicitors’ letter dated 06.07.1992. However, by its solicitors’
letter dated 26.05.1993 the Respondent considered the act of
rescission by the Appellant as an act of repudiation of the two
Agreements and accepted the same.
18
38. Meanwhile, the First Concession Agreement was formally
terminated and replaced with a new concession agreement
known as the Replacement Concession Agreement dated
13.02.1992 signed between DBKL and the Appellant
(Replacement Concession Agreement) in which it was a term
that the rights to compensation under the First Concession
Agreement would cease. However DBKL subsequently paid the
Appellant the sum of RM405 millions.
39. In its suit against the Appellant the Respondent claimed
damages and compensation from the Appellant alleging breach
of the terms of the Signage Sub-Licence Agreement and the
Signage Sub-Licence Amending Agreement for terminating
them and by giving the signage and advertising rights to third
parties.
40. In its claim for compensation the Respondent relied on the
formula under clause 8 of the Signage Sub-Licence Agreement
to calculate the amount of compensation payable. In that clause
it was stipulated that in the event of termination of the First
19
Concession Agreement by either the Appellant or DBKL the
Appellant would have to pay the Respondent a compensation in
the sum of RM7,797,000.00 per annum from 1991 to 2000 less
8% discount per annum and the same would be payable from
any compensation received from DBKL. The Signage Sub-
Licence Amending Agreement which covered the Signage Sub-
Licence Agreement also stipulated that the compensation sum
would be payable by STKG to the Respondent notwithstanding
that no compensation could be recovered from DBKL.
41. It was also the case of the Respondent that pursuant to Clause
4.6 of the First Concession Agreement the licence for land
rights granted by DBKL to STKG included the advertising rights
as provided for in Clause 4.4 thereof.
42. The Respondent further pleaded that the sum of RM405
millions received by the Appellant from DBKL was in fact
compensation sum. Hence the Appellant was holding it on trust
and for the benefit of the Respondent.
20
43. The Appellant denied that the sum received was held under
trust and countered that the said sum was a subsidy paid by the
Government through DBKL for the completion of the project.
44. Specifically the Respondent sought for the following orders to
be made against the Appellant, namely:
a. Damages for the breach of the Restructure Sale
Agreement in respect of Advertising Rights;
b. Further or alternatively, damages in the sum of
RM65,182,920.00 for breach of the Signage Sub-Licence
Agreement;
c. An Account with inquiries and consequential direction of
all profits, monies and benefits received and to be
received by the Appellant under the Replacement
Concession Agreement and the ‘said contracts’;
21
d. A declaration that the Appellant holds the said profits,
monies and benefits received and to be received on trust
for the benefit of the Respondent;
e. A declaration that the Appellant has misappropriated the
sum of RM190.00 and an order for the restitution thereof
to the Respondent;
f. An Order that the Appellant do pay and/or transfer to the
Respondent all of the said profits, monies and benefits
received and to be received under the Future Contracts;
g. General damages;
h. Interests; and
i. Costs.
45. In response to the claim made the Appellant denied liability and
counterclaimed against the Respondent contending, inter alia,:
22
a. That the Signage Sub-Licence Agreement and the
Signage Sub-Licence Amending Agreement were entered
into between the Appellant and the Respondent through
the previous directors, namely, Dato’ Fawziah and
Maimoon Bee in breach of their fiduciary duties to the
Appellant;
b. That Dato’ Fawziah and Maimoon Bee while as directors
of the Appellant caused the Appellant to enter into the
Signage Sub-Licence Amending Agreement when they
knew that no compensation would be payable by DBKL to
the Appellant and thus in breach of fiduciary duties as
directors thereby resulting in the said Signage Sub-
Licence Amending Agreement being void;
c. That Dato’ Fawziah and Maimoon Bee while as directors
of the Appellant made secret profit arising from the
execution of the Signage Sub-Licence Agreement as they
were also the only directors and shareholders of the
Appellant at that time and they knew that in the event of
23
the First Concession Agreement being terminated
compensation would be paid by the Appellant to the
Respondent. Further, Dato’ Fawziah and Maimoon Bee
took advantage of the situation by executing the Signage
Sub-Licence Amending Agreement when it was already
agreed by the then shareholders of the Appellant to
terminate the First Concession Agreement; and
d. That the Signage Sub-Licence Agreement and the
Signage Sub-Licence Amending Agreement were null,
void and of no effect.
Before The High Court
46. The trial commenced in early March 1998 before Steve Shim J.
(as he then was) who heard the evidence up to the end of the
first witness for the defence. Subsequently the conduct of the
trial until delivery of judgment was taken over by Kang Kwee
Gee J. who:
24
a. held the Appellant liable for breach of contract for the loss
of advertising rights under the Signage Sub-License
Agreement;
b. dismissed the claim of the Respondent for the sum of
RM65,182,920.00 holding that it was subject to section 75
of the Contracts Act 1950 and thus a penalty. Damages
was therefore ordered to be assessed;
c. dismissed the claim of the Respondent for loss of profits,
monies or other benefits arising from the future contracts
holding that such future contracts were void for
uncertainty under section 30 of the Contracts Act 1950
The learned Judge also held that there was no
consideration provided by the Respondent for such future
contracts;
d. dismissed the claim by the Respondent for liquidated
damages; and
25
e. dismissed the counterclaim of the Appellant.
47. Dissatisfied with the decision of the High Court the Respondent
appealed to the Court of Appeal on several grounds. The
Appellant also appealed against certain orders made by the
learned High Court Judge.
Before The Court of Appeal
48. There were two appeals before the Court of Appeal one by the
Respondent (Civil Appeal No. W - 02 – 1009 – 2003) and the
other by the Appellant (Civil Appeal No. W – 02 – 1013 – 2003).
49. After hearing the two appeals the Court of Appeal made the
following orders:
a. dismissed the appeal by the Appellant with costs against
the finding on liability in respect of the claim by the
Respondent for the loss of advertising rights;
26
b. dismissed the appeal by the Appellant with costs on the
dismissal of its counterclaim by the High Court; and
c. allowed with costs the appeal by the Respondent thereby
giving judgment for the Respondent on the claim for the
sum of RM65 million and for the loss of profits derived
from future contracts to be determined by the Registrar.
50. Although the decision of the Court of Appeal was unanimous
the main judgment was rendered by YA Gopal Sri Ram JCA
with YA Hashim Yusof JCA concurring (the main judgment)
whilst YA Zulkifli Makinuddin JCA gave a supplementary
judgment (supplementary judgment). Both the judgments of the
Court of Appeal for the purpose of this Judgment are
collectively referred to as ‘the judgments’.
Before This Court
51. The 3rd question reads:
27
‘Whether the Court of Appeal’s adverse
remarks/findings in the circumstances of this case,
when viewed objectively, shows a real danger of bias
on the part of the Court of Appeal in the judgment
arrived at against the Appellant?’
52. It was submitted that in both the judgments of the Court of
Appeal there are remarks and findings made by the learned
judges that could be construed as adverse, disparaging and
unwarranted. Emphasis was made that those remarks are
integral parts particularly to that of the main judgment. Hence
they exhibited a real danger of bias on the part of the Court of
Appeal against the Appellant. The real danger of bias
manifested itself from the Court of Appeal’s own written
judgments.
53. Learned counsel for the Appellant listed down the remarks and
findings in the form of Appendix B to his written submissions.
For convenience we reproduce them herein.
28
54. From the main judgment the remarks and findings identified are
thus:
Paragraph 10:
a. “… There then took place a chain of events as evidenced
by contemporaneous documents and uncontroverted
facts that reveals a scandalous state of affairs.”
Paragraph 11:
b. “… An appeal to the then Minister of Finance, Tun Daim
Zainuddin, fell on deaf ears. He simply told the
Defendant’s then existing shareholders that the Federal
Government was not is a position to pay the defendant
any compensation.”
Paragraph 12:
c. “The next thing that happened was this. By letters dated
12.11.1990 and 24.11.1990 a company called UEM Bhd,
a public limited company made an offer to purchase all
the shares in the Defendant company for a sum of
29
RM97.5 million. Curiously enough, neither letter made
any mention of the proposed termination of the
concession agreement by DBKL. In reality the shares
were to be purchased by a company nominated by UEM.
That company was Metro Juara Sdn. Bhd. which had
merely two shareholders who were also its sole directors.
These gentlemen were one Anuar Othman and one Dato
Halim Saad. The defendant’s shareholders could not
resist the sale. Their predicament is reflected in a
document called the Directors Briefing Note dated 13
December 1990. And it is not difficult to appreciate their
dilemma. The whole idea of obtaining the tender was
Dato’ Fawziah’s brainchild. The other shareholders had
invested large sums of money. The defendant had done
all that was required of it under the first concession
agreement. It had spent large sums of money to carry out
its obligations. It now found itself with the ground cut from
under its feet because of DBKL’s termination of the first
concession agreement. No compensation had been paid
to the defendant as matters then stood although
30
compensation was clearly payable. No one in his or her
right mind will consider the choice of selling of their
shares to Metro Juara at RM97.5 million as a choice at
all. All the independent evidence on record points to this
being in reality a crude case of economic duress
presenting itself in a more subtle form.”
Paragraph 13:
d. “Now, the offer by UEM to buy out the defendant’s shares
for RM 97.5 million simply does not make any commercial
sense. Here you have a company that has just had its
loan and shareholders capital wiped out in one stroke. It
had no money in its coffers. It had huge debts. It had no
prospects of receiving any compensation from DBKL. So
why pay RM 97.5 million for the shares of such a
company? The answer is simple enough. Anuar Othman
and Dato’ Halim Saad had something which the plaintiff
did not. And that was the patronage of the then Minister of
Finance, Tun Daim Zainuddin. …”
31
Paragraph 14:
e. “The next event that happened was the mechanics of the
takeover of the defendant by Metro Juara. It was a rushed
transaction. There was no examination of the defendant’s
books. No warranties were asked for or given. No due
diligence exercise was ever carried out. An agreement
called the Share Sale Agreement dated 23.01.1991 was
executed. Thereafter, the defendant’s name was changed
to Metramac Corporation Sdn Bhd, the name by which
the defendant is now cited in the instant proceedings.”
Paragraph 15:
f. “Not long after the take over, a strange thing happened.
Where doors were once closed to the defendant before its
take over, as if by the utterance of a magic spell all
bureaucratic doors were opened to the defendant after its
takeover by Metro Juara. And, as if by the rub of a magic
lamp, the Federal Government and DBKL who hitherto
claimed to be impoverished suddenly found themselves
flush with funds. They were now in a financial position to
32
compensate the defendant. The figures are staggering. In
one way or another, the defendant was to receive a total
sum of RM756.7 million. Let me give some details.”
Paragraph 16:
g. “In its letter of 30 August 1991, DBKL said that it would
pay the defendant RM312 million for the costs of works
done. On 13 February 1992, the Federal Government in
conjunction with DBKL agreed to subsidize the defendant
with a sum of RM405 million to enable the defendant to
meet the cost of financing the works to be undertaken
under a concession agreement that was to be entered
into between DBKL and the defendant. Mark you, at this
point in time, not a stick of work had been done under the
new concession agreement. On that very day, that is to
say, 13 February 1992, two other events occurred. First,
DBKL entered into another concession agreement with
the defendant. I will refer to this as the second concession
agreement. Second, the Ministry for Public Works gave
the defendant an undertaking to pay it RM32.5 million as
33
“payment for share premium” not “previously taken into
account”: So far as this case is concerned, the words
within quotation marks are meaningless. Because they
have no nexus whatsoever to any of the agreements
entered into between the several parties. You may well
ask how all this could have happened without the direct
involvement of Tun Daim. It is also incomprehensible why
the defendant as it was constituted immediately before
the takeover by Metro Juara was not given this same
financial support by the Federal Government. After all, at
least two of the pre-takeover shareholders were either
Government concerns or Government assisted concerns.
And in the case of Tabung Haji, the ultimate beneficiaries
would have been the poorer section of our society. I think
that it is a fair question to ask why taxpayers’ money was
channelled into the hands of two private individuals – to
profit them – instead of a wider Section of the general
public. It is not at all clear why the Minister for Finance
used his power to favour Anuar Othman and Dato Halim
Saad.”
34
Paragraph 17:
h. “For the sake of completeness, it must be mentioned that
the RM32.5 million mentioned earlier was siphoned out of
the defendant’s account by Anuar Othman and Dato’
Halim Saad. I asked learned counsel for the defendant
during argument how this ever could have happened. His
reply was stupefying. He said that these two gentlemen
had, as shareholders paid this sum into the defendant’s
account and were now reimbursing themselves.”
Paragraph 34:
i. “The second thing that is wrong with the defendant’s
argument is this. Assume for a moment that the
defendant’s present shareholders are mounting this
challenge in the name of the defendant. Assume that they
are entitled to do so – which is not the law. Even so, they
must come to court with clean hands. But they do not.
They are the ones who misappropriated the defendant’s
property – the RM32.5 million. They are the ones who,
with the support of Tun Daim, oppressed the previous
35
shareholders into parting with their shares. They are the
ones who took advantage of all the ideas of Dato’
Fawziah and used it for their benefit and obtained huge
payments from DBKL and the Federal Government. It is
now scarcely open to them to point fingers at the plaintiff.”
55. And from the supplementary judgment the remarks and findings
identified are thus:
Paragraph 34:
a. “It would appear it did not make business sense for Metro
Juara to offer to pay RM97.5m for a company that had
lost its only business. But it was explained by the fact that
there was the commitment in principle by DBKL to
compensate STKG for a sum which was estimated at
RM764m. As events went an amount equivalent to this
sum was indeed paid by DBKL to STKG (now called
Metramac, after its takeover by the UEM-nominated
Metro Juara) between August 1991 and February 1992;
36
Paragraph 35:
b. It became apparent, albeit later, that the Government had
decided by then that UEM should take over the project by
buying over STKG. The existing shareholders were all
then under pressure to sell off their respective shares to
UEM. The existing shareholders of STKG were also told
by the then Finance Minister Tun Daim that the
Government was not in the position to pay compensation
to them. This is evidenced from the exchange of letters
between Dato’ Fawziah and Tun Daim. …;
Paragraph 42:
c. In total, the payment to Metramac, by one description or
the other, now totalled RM756,700,000. It is not payment
under the second concession agreement. It must include
the ‘termination charges’ of RM63m to the plaintiff put
forward by Metramac itself;
37
Paragraph 43:
d. It is not mere coincidence that the sum of RM756,700,000
paid, or to be paid, to Metramac approximates the sum of
RM764,000,000 claimed as compensation by STKG for
termination of the first concession agreement;
Paragraph 44:
e. It is also not mere coincidence that Metramac had to
mutually agree to the termination of the first concession
agreement and receive in return a payment or pledge of
payment totalling RM756,000,000;
Paragraph 45:
f. In short, STKG which was bought by Metro Juara for a
mere RM97.5m was within a year paid or pledged to be
paid to Metramac a sum of RM756.7m even before
undertaking the works under the second concession
agreement;
38
Paragraph 46:
g. In the wake of these changes, the new owners of STKG,
as Metramac, have purported to rescind the signage
agreement and the amendment agreement. Later they
have also repudiated the restructure sale agreement of 31
March 1988.”
56. Briefly put it was the contention of learned counsel for the
Appellant that when viewed objectively, the Court of Appeal’s
written judgment portrayed Dato’ Fawziah as the innocent
victim of economic duress and the Appellant’s purported
“present shareholders” along with Tun Daim Zainuddin as the
oppressors. When viewed objectively and having regard to the
circumstances of the case, the Appellant and its case have
been unfairly regarded with disfavour.
57. In response to the submissions made by learned counsel for
the Appellant on the third question posed the submissions by
learned counsel for the Respondent may be summarized thus:
39
a. firstly, there is a presumption of impartiality;
b. secondly, the adverse findings made against the
Appellant were on issues of law and supported by the
evidence; and
c. thirdly, the adverse and disparaging remarks and findings
against third parties did not affect the determination of the
legal issues.
The Allegation Of Bias - Any Merit?
58. We will approach this issue by considering globally the
opposing contentions of the parties.
59. Learned counsel for the Respondent emphasized on the
presumption of impartiality. He submitted that a litigant alleging
bias against a judge has first to overcome the presumption of
impartiality. The burden rests with the party making the
allegation. Basically learned counsel argued that bias on the
part of judges should not be easily assumed since judges have
40
been sworn to administer impartial justice. Indeed he submitted
that ‘the effect of the presumption boils down to this: that
persuasive evidence that is cogent and convincing will be
required if the presumption of impartiality of a judicial officer is
to be rebutted’.
60. To support his submission learned counsel made references to
the views expressed in the Canadian Supreme Court case of
R.D.S v The Queen 151 DLR (4th) 193 where Cory J. said
(paras 113 and 117):
“Regardless of the precise words used to describe the
test, the object of the different formulations is to
emphasise the threshold for a finding of real or perceived
bias is high. It is a finding that must be carefully
considered since it calls into question an element of
judicial integrity”.
……………………….
41
“Courts have rightly recognized that there is a
presumption that judges will carry out their oath of office.
… This is one of the reasons why the threshold for a
successful allegation of perceived judicial bias is high.
However, despite this high threshold, the presumption
can be displaced with “cogent evidence” that
demonstrates that something the judge has done gives
rise to a reasonable apprehension of bias. ... The
presumption of judicial integrity can never relieve a judge
from the sworn duty to be impartial.”
61. From the submission of learned counsel for the Respondent it
is obviously admitted that the presumption of impartiality ‘does
not provide blanket immunity to judges in the sense that judicial
acts can never be challenged on grounds of bias.’ But to rebut it
requires ‘cogent evidence’ and to be firmly established that
there is a reasonable apprehension of bias.
42
62. Incidentally, it is interesting to note some of the illuminating and
advisory comments made in the Canadian case. Paragraphs
118, 120 and 129 for instance state this:
“It is right and proper that judges be held to the highest
standards of impartiality since they will have to determine
the most fundamentally important rights of the parties
appearing before them. This is true whether the legal
dispute arises between citizen and citizen or between the
citizen and the state. Every comment that a judge makes
from the bench is weighed and evaluated by the
community as well as the parties. Judges must be
conscious of this constant weighing and make every effort
to achieve neutrality and fairness in carrying out their
duties. This must be a cardinal rule of judicial conduct. …
“Regardless of their background, gender, ethnic origin or
race, all judges owe a fundamental duty to the community
to render impartial decisions and to appear impartial. It
follows that judges must strive to ensure that no word or
43
action during the course of the trial or in delivering
judgment might leave the reasonable, informed person
with the impression that an issue was pre-determined or
that a question was decided on the basis of stereotypical
assumptions or generalizations.” (Emphasis added).
“However, it is also the individualistic nature of a
determination of credibility that requires the judge, as trier
of fact, to be particularly careful to be and to appear to be
neutral. This obligation requires the judge to walk a
delicate line. On one hand, the judge is obviously
permitted to use common sense and wisdom gained from
personal experience in observing and judging the
trustworthiness of a particular witness on the basis of
factors such as testimony and demeanour. On the other
hand, the judge must avoid judging the credibility of the
witness on the basis of generalizations or upon matters
that were not in evidence.”
44
63. Learned counsel for the Appellant submitted that ‘the branding
of the Appellant as the “subjective litigant” in the course of his
oral submission is wholly irrelevant… it merely appears to avoid
answering the issues here: are the remarks and findings not
made in such an outspoken and extreme and unbalanced
terms? are not the remarks and findings unnecessary and
irrelevant to the circumstances of the case? are not the remarks
and findings unsupported by evidence? These questions can
be answered objectively by this Honourable Court personifying
the reasonable man.’
64. The Respondent on the other hand further narrowed down the
issue by contending that ‘the adverse findings made by the
concurring judges of the Court of Appeal relate to what is
described as “a chain of events as evidenced by
contemporaneous documents and uncontroverted facts that
reveals a scandalous state of affairs”… the adverse remarks
against the third parties which are said to constitute bias on the
part of the Court of Appeal are set out as Ground 1 of the
Memorandum of Appeal.. It is important to note the place of
45
these remarks in the 1st Judgment (main Judgment) and that
these remarks were in the nature of observations of the
background facts relating to the various issues arising in the
appeal.’
65. Having considered the lengthy submissions from both sides in
respect of the third question posed we are of the view that the
real issue is whether, premised on the remarks and findings
made by the Court of Appeal in the judgments as identified by
the Appellant in this appeal, the element of real danger of bias
has been established hence rebutting the presumption of
impartiality. In other words, the test as approved by this Court in
cases such as Majlis Perbandaran Pulau Pinang v Syarikat
Bekerjasama-sama Serbaguna Sungai Gelugor [1999] 3
MLJ 1 and Dato’ Tan Heng Chew v Tan Kim Hor [2006] 1
CLJ 577 applies. Briefly the test involved a question to be
asked, namely: ‘whether, when viewed objectively, having
regard to the circumstances of the case, there was a real
danger of bias on the part of the relevant member of the
tribunal in question, even though unintentionally, in the sense
46
that he might unfairly regard (or have unfairly regarded) with
favour, or disfavour, the case of a party to the issue under
consideration?’
66. It should also be noted that the grievance of the Appellant
arises from the contents of the judgments of the Court of
Appeal. Some of those remarks and findings are related to
third parties who are not parties to the litigation between the
Appellant and the Respondent.
67. From the respective submissions of learned counsel for the
parties it is acknowledged, albeit indirectly, that the approach
taken by the Appellant, namely, to premise the allegation of
bias on the judgments of the Court of Appeal is quite
unprecedented. The task is made more difficult as there
appears to be hardly any judicial decision on this specific point
made by our courts or by the courts in other common law
jurisdictions.
47
68. We also bear in mind the submission of learned counsel for the
Respondent that those remarks and findings complained of did
not affect the correctness of the decision of the Court of Appeal.
69. Now, in our view it does not mean that real danger of bias can
never be found arising from a judgment delivered by a court of
law. The Canadian case of R.D.S v The Queen (supra)
acknowledges that it can arise when delivering judgment.
Moreover it has been said that ‘in any case where the
impartiality of a judge is in question the appearance of the
matter is just as important as the reality.’ (per Lord Nolan in
Reg. v. Bow Street Magistrate, Ex p. Pinochet (No. 2) (H.L.
(E.)) (2000) 1 AC 119 at page 139).
70. We are therefore of the opinion that the stage at which bias is
said to have arisen is quite immaterial. The real danger of bias
can arise at any stage in a judicial or quasi-judicial proceeding
or even in administrative tribunal. The crucial point in
determining the presence of bias is to objectively enquire
whether the facts and circumstances asserted to be evidence of
48
bias affirmatively answer the test for real danger of bias as
formulated by this Court. In other words the enquiry is to
determine whether there is “a departure from the standard of
even-handed justice which the law requires from those who
occupy judicial office or those who are commonly regarded as
holding a quasi-judicial office, such as an arbitrator. The reason
for this clearly is that having to adjudicate between two or more
parties; he must come to his adjudication with an independent
mind, without any inclination or bias towards one side or other
in the dispute." (per Lord Thankerton in the English case of
Franklin v. Minister of Town & Country Planning [1948] A.C.
87).
71. Further, we do not think there is any good reason to limit any
finding of real danger of bias in a judicial proceeding only up to
the stage of pre-delivery of judgment. The element of real
danger of bias can be said to have played a role in a tribunal or
in any of its members at the time of coming to its decision if the
judgment delivered or the contents therein render an affirmative
answer after taking it through the test of bias as enunciated by
49
this Court, objectively and carefully, by the reviewing or
appellate court personifying as a reasonable man or a fairminded
and informed observer. (See: R v Gough [1993] AC
646).
72. In other words the question is ‘whether the allegation and the
factual circumstance could have ‘caused a fair-minded and
informed bystander to entertain a fear of real danger of bias’-
(see: Alor Janggus Soon Seng Trading Sdn Bhd & Ors v
Sey Hoe Sdn Bhd & Ors [2002] 4 MLJ 327; Locabail (UK)
Ltd. v Bayfield Properties Ltd & Anor. (2000) 1 All E R 65).
In fact in the case of Locabail (UK) Limited v Bayfield
Properties Limited (supra) this is what the English Court of
Appeal said at pages 77 and 78:
“... a real danger of bias might well be thought to arise if
... in a case where the credibility of any individual were an
issue to be decided by the judge, he had in a previous
case rejected the evidence of that person in such
outspoken terms as to throw doubt on his ability to
50
approach such person’s evidence with an open mind on
any later occasion; or if on any question at issue in the
proceedings before him the judge had expressed views,
particularly in the course of the hearing, in such extreme
and unbalanced terms as to throw doubt on his ability to
try the issue with an objective judicial mind (see Vakauta
v Kelly …); or if, for any other reason, there were real
ground for doubting the ability of the judge to ignore
extraneous considerations, prejudices and predilections
and bring an objective judgment to bear on the issue
before him. …”
73. But we hasten to add that any allegation of real danger of bias
based on a judgment delivered should not be readily
entertained by an appellate court. The reason is simple. A
losing party would only be too willing to allege bias. This might
be what was referred to during the submission before us as
‘opening the floodgates’ if the present appeal were to be
entertained readily. Thus, we would therefore think that unless
there exists in reality remarks and statements in the judgment
51
delivered indicating on the face of the record a real danger of
bias such allegation should be rejected summarily. In this way it
will ‘avoid setting aside of judgments upon quite insubstantial
grounds and the flimsiest pretexts of bias’. (See: Majlis
Perbandaran Pulau Pinang v Sykt. Berkerjasama
Serbaguna Sungai Gelugor (supra). Indeed this is how Lord
Hope of Craighead explained the rationale in Reg. v. Bow
Street Magistrate, Ex p. Pinochet (No. 2) (H.L.(E.)) (supra) at
page 142:
“The test which must be applied by the appellate courts of
criminal jurisdiction in England and Wales to cases in
which it is alleged that there has been a breach of this
principle by a member of an inferior tribunal is different
from that which is used in Scotland. The test which was
approved by your Lordships' House in Reg. v. Gough
[1993] A.C. 646 is whether there was a real danger of
bias on the part of the relevant member of the tribunal. I
think that the explanation for this choice of language lies
in the fact that it was necessary in that case to formulate
52
a test for the guidance of the lower appellate courts. The
aim, as Lord Woolf explained, at p. 673, was to avoid the
quashing of convictions upon quite insubstantial grounds
and the flimsiest pretexts of bias.”
74. Having said the foregoing we now turn to the judgments of the
Court of Appeal with particular reference to the submission that
the remarks and findings complained of are evidence of
apparent bias thereby rebutting the presumption of impartiality.
75. Impartiality of course refers ‘to a state of mind or attitude of the
tribunal in relation to the issues and the parties in a particular
case. The word "impartial" … connotes absence of bias, actual
or perceived.’ (per LeDain J. in Valente v Her Majesty the
Queen (1985) 2 S.C.R. 673 at 685). It has also been said that
‘the wisdom required of a judge is to recognize, consciously
allow for, and perhaps to question, all the baggage of past
attitudes and sympathies that fellow citizens are free to carry,
untested, to the grave. True impartiality does not require that
the judge have no sympathies or opinions; it requires that the
53
judge nevertheless be free to entertain and act upon different
points of view with an open mind.’ (See: Commentaries on
Judicial Conduct (1991) published by the Canadian Judicial
Council).
76. But before embarking to apply the bias test on the impugned
remarks and findings we think it is pertinent to first consider
whether those remarks and findings were essential and
relevant in determining the matter before the Court of Appeal.
77. We note that the claims by the Respondent are for damages
and compensation against the Appellant for breach of contract,
to wit, breach of the terms of the Signage Sub-Licence
Agreement and the Signage Sub-Licence Amending Agreement
for terminating them and by giving the signage and advertising
rights to third parties.
78. Another claim is for declaration of trust in respect of the sum of
an account to all monies, profits and benefits gained and to be
54
gained by the Appellant under the Replacement Concession
Agreement and future contracts.
79. Having carefully examined the relevance and the context in
which the remarks and findings were made particularly in the
main judgment of the Court of Appeal we are of the view that
they were unnecessary and irrelevant in determining the issues
and claims before the Court. It is indeed regrettable that those
remarks made were not only unnecessary but that the language
used was unwarranted to say the least. However, those
remarks alone cannot ipso facto be the basis to set aside the
decision of the Court of Appeal. (See: State of West Bengal v
Babu Chakraborty AIR [2004] SC 2324). More will be said on
this point when determining the second matter before us.
80. Meanwhile, judges, magistrates and those entrusted to perform
judicial or quasi-judicial functions are well advised to bear in
mind at all times what was said by this Court in Insas Bhd v
Ayer Molek Rubber Co Bhd [1995] 2 MLJ 833 at page 841:
55
“The objectionable and wholly offensive remarks made
against a court of law, the plaintiffs and their solicitors,
and the learned High Court judge, all of whom had had no
opportunity to defend themselves in the face of such
unwarranted and unjustified criticisms, ought to be
expunged from the judgment of the Court of Appeal, as it
has a tendency to bring the whole administration of law
and order in the courts into disrepute. It is judicially
recognized that judicial pronouncements should be
judicial in nature and not depart from sobriety,
moderation, and reserve. It has been said elsewhere that
the pen of a judge should be like the knife of a surgeon
which probes into the flesh only as much as is absolutely
necessary for the purpose of the case before it. A judge
should neither reward virtue nor chastise vice, and his
judgment should not display emotion and intemperance
as displayed in the judgment of the Court of Appeal here.”
81. We are aware that judges are entitled to express their opinion
and observations including criticism in a given case. (See: K: a
56
Judicial Officer AIR 2001 SC 972). There are a host of cases
on the point. In Bahai v Rashidian & Anor [1985] 3 All ER
385 the English Court of Appeal observed thus:
“The fact that a judge has determined the issues in the
action and in so doing has expressed views on the
conduct of the parties and of the witnesses, neither
constitutes bias nor the appearance of bias in relation to
subsequent applications in the action” (per Sir John
Donaldson MR at page 388).
In the same case Balcombe LJ at page 391 said:
“A judge properly exercising his judicial function, eg by
criticising the conduct of a party’s solicitor in the course of
his judgment on a matter which he considers relevant to
his decision, cannot by that process be said to be biased.
Bias is the antithesis of the proper exercise of a judicial
function”.
57
Similar opinion was expressed by Bingham MR in Inner West
London Coroner, ex parte Dallaglio [1994] 4 All ER 139
when he said this:
“..it not infrequently happens that judges find themselves
called upon to criticise, sometimes in strong terms, parties
or witnesses appearing before them. The subjects of
such criticisms are apt to complain that the judge was
prejudiced or biased against them. But such complaints
will carry no weight with an appellate court provided the
criticisms were based on material properly before the
judge in that case and were not, in the light of that
material, inappropriate. In such a case there is no
element of extraneous prejudice or predilection and
hence, in the eyes of the law, no question of bias.”
82. But as those cases show such criticisms or remarks are not
without limit. They ‘will carry no weight for the appellate court
provided the criticisms were based on material properly before
the judge in that case and were not, in the light of that material,
58
inappropriate.’ Hence, in our view what is expected from an
adjudicating tribunal is to consider only the evidence adduced
to determine if the claims have any merits. In the present
appeal the claims are not in the nature of public interest
litigation or having an element of public law so as to warrant
remarks and findings as found in main judgment of the Court of
Appeal. We do not think the Court of Appeal was called upon to
adjudicate a dispute which required it to champion the cause of
taxpayers or to deride the reputations or even to rebuke those
not parties to the action for their alleged abuse of powers.
83. There is of course the issue of judicial independence. However,
a judge must accept that the freedom attached to his
adjudicative independence imposes concurrent responsibility to
address only those issues properly before him, along with a
duty to make every effort to maintain impartiality and objectivity
in dealing with the issues and parties before him. Independence
means that in the discharge of his function a judge is subject to
nothing but the law and the command of his conscience. This
aspect of the concept of judicial independence refers to the
59
neutrality of mind of the judge, to his impartiality and his total
freedom from irrelevant pressures. The goal of judicial
independence is to ensure justice is done in individual cases
and to ensure public confidence in the justice system. Le Dain
J. in R v. Valente (1985), 19 C.R.R. 354 at page 364 said:
“Without that confidence the system cannot command the
respect and acceptance that are essential to its effective
operation. It is therefore important that a tribunal should
be perceived as independent as well as impartial, and
that the test of independence should include that
perception.”
84. We now turn to the allegation and assertion of real danger of
bias arising from those impugned remarks and findings. It is
trite law that any decision tainted with real danger of bias as
found would invariably be set aside. (See: R.D.S v The Queen
(supra); Reg. v. Bow Street Magistrate, Ex p. Pinochet (No.
2) (H.L.(E.)) (supra)).
60
85. The main judgment declares that ‘a chain of events as
evidenced by contemporaneous documents and uncontroverted
facts that reveals a scandalous state of affairs.’ There are also
the concluding statements made in the main judgment noting
that greater care was taken in examining the findings of the
lower court and ‘have very carefully scrutinised the disclosure
documents. I have read them again and again’. In our view
these declarations are not magical mantras that would preclude
further scrutiny. Thus, it falls upon us to determine if there is
such evidence which justifies those remarks and findings.
86. It is not in dispute that those remarks and findings were
directed not only against the Appellant but also against certain
personalities who were not parties to the suit. In short the nett
effect of the remarks and findings by the Court of Appeal is that
the actions or behaviour of those persons mentioned amounted
to economic duress against the former shareholders of the
Appellant, patronage and abuse of governmental powers and
positions for personal gains of some persons in complete
disregard to taxpayers’ money, misappropriation of funds
61
bordering on criminal breach of trust and the making of wild
allegations against the Respondent.
87. In the main judgment the learned judges painted this scenario.
That Dato’ Fawziah and her mother had an excellent idea which
was then translated into the core business of the Appellant.
After substantial investment obtained from the other previous
shareholders success of the business was in sight when
suddenly the suspension of the toll collection came about which
spelled economic disaster to those previous shareholders. No
one came to assist, not even the Federal Government or DBKL,
despite requests for assistance. It was when the previous
shareholders were in dire strait that the present shareholders
appeared offering them a sum of money that they had no
choice but to accept in order to avoid total financial disaster.
That the present shareholders could make such move due to
what they could subsequently manage to obtain not only from
the Government but also from DBKL. The reason they could do
it was because they had the patronage of the then Minister of
Finance Tun Daim Zainnuddin who earlier on did not assist the
62
previous shareholders but instead told them bluntly that the
Federal Government could not pay when asked to do so. The
present shareholders with the assistance of the then Minister
therefore earned huge gains out of the idea of Dato’ Fawziah.
Such gains came about as a consequence of abuse of powers
by the then Minister in preferring to help the present
shareholders when earlier on the previous shareholders were
not helped despite requests.
88. We have perused the evidence adduced. No one made any
allegation that he or she was compelled by the situation to sell
his or her shares in STKG, the then name of the Appellant, to
the present shareholders. In fact Dato’ Fawziah’s own words in
her letter of 7/2/1995 to the then Minister of Finance wrote that
as a businesswoman ‘I regarded the take-over purely as a
business proposition between the parties concerned’. No
witness came to testify that the suspension of the toll
collections was engineered by the present shareholders of the
Appellant or by the then Minister in order to take over the
business of the Appellant. The relevant persons including the
63
then Finance Minister were never called to testify. They were
not given any opportunity to state their versions of the event.
No doubt a ‘denial of the opportunity of being heard is a wrong
which is personal to the party aggrieved. If therefore such a
party does not complain, it is not the affairs of others to
complain.’ (See: Dewan Undangan Negeri Kelantan & Anor v
Nordin bin Salleh & Anor [1992] 1 MLJ 697). But in this case
those persons referred to in the remarks by the Court of Appeal
are strenuously complaining as indicated by their applications
to intervene. In any event it was not necessary at the trial stage
since the case of the Respondent was premised on an entirely
different footing. It was only at the appeal stage and particularly
due to the main judgment of the Court of Appeal that the need
for them to state their versions became quite apparent. But the
Court of Appeal did not seem to have realized that need
oblivious of what was said by the Supreme Court in Sundram v
Arujunan & Anor [1994] 3 MLJ 361 at page 370:
“The third point we should like to consider, may be
conveniently described as the natural justice point. In our
64
view, it was neither right nor fair to find that the plaintiff’s
head injury had been caused as a result of the prior
collision involving the plaintiff’s motor cycle and the other
motor cycle, without hearing the rider of the other motor
cycle. Indeed, as we have mentioned, at the outset, he
was never cited as a party in the suit or even called as a
witness, and no explanation had been vouchsafed to the
trial court for this glaring omission. There was, therefore,
a clear breach of the rule of natural justice embodied in
the maxim ‘audi alteram partem’,..”
89. Correspondences exchanged do not also portray an abuservictim
situation. The other previous shareholders of the
Appellant were not mere country yokels. They were
experienced corporate personalities and established statutory
bodies such as Tabung Haji. In fact the other previous
shareholders of the Appellant were not even parties to the suit.
Surely there would have been avalanche of protests written if
they had been oppressed. Subsequent payments made by the
Federal Government and DBKL were given with explanations.
65
But the way the Court of Appeal in the main judgment put it was
as though those payments were dished out without any sense
of accountability and according to the whims and fancies of the
then Minister of Finance. These remarks reflected such a
mood:
“It is also incomprehensible why the defendant as it was
constituted immediately before the takeover by Metro
Juara was not given this same financial support by the
Federal Government. After all, at least two of the pretakeover
shareholders were either Government concerns
or Government assisted concerns. And in the case of
Tabung Haji, the ultimate beneficiaries would have been
the poorer Section of our society. I think that it is a fair
question to ask why taxpayers’ money was channelled
into the hands of two private individuals – to profit them –
instead of a wider Section of the general public. It is not at
all clear why the Minister for Finance used his power to
favour Anuar Othman and Dato Halim Saad.”
66
………………………..
“In short, STKG which was bought by Metro Juara for a
mere RM97.5m was within a year paid or pledged to be
paid to Metramac a sum of RM756.7m even before
undertaking the works under the second concession
agreement.”
90. The total sum RM97.5 millions paid to the previous
shareholders far exceeded the initial sum of RM65 millions
invested. In other words they recovered the sums invested plus
some profit which might not have been realized due to the
suspension of the toll collection arising from the public
demonstration against it. In any event at that point in time Dato’
Fawziah, her mother and the previous shareholders had an
alternative cause of action open to them to seek legal remedy
and was not obliged to accept the offer by the present
shareholders of the Appellant. They also had the benefit of
having the services of legal advisors. Yet finally the offer by the
present shareholders of the Appellant was accepted. It could
67
not therefore be said that they were under economic duress at
the time of sale as erroneously found by the Court of Appeal.
91. Thus the scenario painted by the learned judges in the main
judgment came about from their own inferences and
imagination. Sadly, reading objectively the main and the
supplementary judgments one cannot avoid the sense that at
the outset the learned judges had the preconceived minds that
the primary issue was about the powerful (Goliath) taking
advantage of the weak (David). They seemed to believe without
due regard to the evidence adduced that there was an
arrangement concluded between the present shareholders of
the Appellant, the then Minister of Finance on behalf of the
Federal Government and DBKL to ensure that the Appellant
would profit from the acquisition of the shares from the previous
shareholders of the Appellant. Hence, the Court of Appeal was
all set to uncover a perceived ‘scandalous state of affairs’. In
our view it was their inferences and imagination that took the
centre stage leaving the evidence adduced on the back seat.
68
With respect we find that the Court of Appeal went on a frolic of
its own.
92. Obviously it was a case of striking at those persons who had no
opportunity to defend themselves under a cover of judicial
performance. A reminder is thus apposite that it ‘can cause
great unfairness to third parties if judges make findings of fact
or comments which pay no regard to this matter. As a general
rule, it is inappropriate, and often unfair, for a judge, in reasons
for judgment, to make an unqualified adverse finding
concerning someone who is not a party to litigation and who
has had no opportunity to answer the allegation in question.…
Non-parties can often be seriously damaged by a judge’s
manner of expressing reasons for judgment. Sometimes this
may be the result of mere thoughtlessness. A judge should
never cause unnecessary hurt.’ (See: Aspects of Judicial
Performance by Murray Gleeson AC, Chief Justice of
Australia).
69
93. A plain private claim for breaches of contract and express trust
was turned into a kind of public interest litigation by the learned
judges of the Court of Appeal without much push from the
Respondent. Indeed the allegations in the main judgment of
patronage, abuse of power and economic duress could only
have come in our view from the allegations inter alia of
“pressure to sell” the shares, receipt of “instruction” from Tun
Daim and Metro Juara ‘not foolish in offering” made in the
submissions of counsel for the Respondent in the Court of
Appeal and not as pleaded by the Respondent. Unfortunately
the Court of Appeal in its main judgment seems to have
swallowed those allegations of counsel hook, line and sinker.
The basic principle of law that a party is bound by its pleadings
was ignored. The proper approach should have been to
‘scrutinize the pleadings and identify the issues, take evidence,
hear the parties’ arguments and finally pronounce its judgment
having strict regard to the issues’. (See: R Rama Chandran v
The Industrial Court Of Malaysia & Anor [1997] 1 MLJ 145).
It is also useful to remind judges and judicial arbiters that
judgment should be ‘“pronounced upon the law and the facts of
70
the case, and in discharging this very responsible duty, the
judge publicly, in open court, assigns the reasons for his
decisions, stating the principles and authorities on which he
decides the matters of law, and reciting or advertising to the
various parts of the evidence from which he deduces his
conclusions of fact; and thus the matter in controversy between
the parties becomes adjudged” per Lord Shaw in Scott v Scott
[1913] AC 417 at pages 472.
94. Hence, considered objectively, we find that there was no basis
for the Court of Appeal to make the remarks and findings that
there were economic duress, patronage, abuse of
governmental positions and powers in complete disregard to
taxpayers’ money and misappropriation of funds. It is
unfortunate that the Court of Appeal made the remarks and
findings purportedly based on ‘contemporaneous documents
and from the circumstances, oral and documentary evidence,
all the independent evidence on record and record of appeal’
without properly adverting to any of them. Further, gleaned from
the exceptional strong and emotive language used particularly
71
in the main judgment it is our view that a reasonable person
would be persuaded to conclude that ‘there was a real danger
of bias on the part of the relevant members’ of the Court of
Appeal ‘even though unintentionally, in the sense that they
might unfairly regard (or have unfairly regarded) with favour, or
disfavour, the case of’ Appellant.
95. The remarks and findings were primarily directed against third
parties who were not parties to the suit. Learned counsel for the
Respondent contended that such remarks and findings did not
affect the fairness of the proceeding and its result. For the
Appellant it was argued that the Appellant was found ‘guilty by
association’ with the third parties.
96. With respect we are inclined to agree with the learned counsel
for the Appellant. The remarks and findings may appear to have
been directed to third parties. But the consequence of those
remarks and findings fell upon the Appellant. The reason is that
the Court of Appeal rolled up the third parties with the Appellant
and that the Appellant was assumed as the ultimate beneficiary
72
of the actions and conduct by the third parties. In fact upon
reading those remarks and findings one would be inclined to
come to a conclusion that the Appellant was ‘punished’ for the
purported misdeeds by the third parties. This summation is
borne out of the remark in the main judgment which reads:
“Assume for a moment that the defendant’s present
shareholders are mounting this challenge in the name of
the defendant. Assume that they are entitled to do so –
which is not the law. Even so, they must come to court
with clean hands. But they do not. They are the ones who
misappropriated the defendant’s property – the RM32.5
million. They are the ones who, with the support of Tun
Daim, oppressed the previous shareholders into parting
with their shares. They are the ones who took advantage
of all the ideas of Dato’ Fawziah and used it for their
benefit and obtained huge payments from DBKL and the
Federal Government. It is now scarcely open to them to
point fingers at the plaintiff.”
73
97. The nexus of the remarks and findings to the outcome of the
appeal before the Court of Appeal is therefore quite glaring.
98. We are therefore inclined to agree with the submission of
learned counsel for the Appellant that the remarks and findings
found particularly in the main judgment of the Court of Appeal
are not supported by evidence ‘yet they “make use of
injudicious, unfair and extravagant language” in such extreme,
outspoken and unbalance terms in that they were “out of all
proportion to or not commensurate with the circumstances
before the court” and they excite an apprehension that the
Court of Appeal might not bring an unprejudiced mind to the
resolution of the matter before it. There is indeed a real danger
that the Appellant’s case had been unfairly regarded with
disfavour, and its arguments were not addressed by the Court
of Appeal although they were either submitted or apparent from
the Record of Appeal.’ In short the element of real danger of
bias is present especially in the main judgment of the Court of
Appeal.
74
99. Having said the foregoing there is still the contention that
despite the remarks and findings in the main judgment, the
decision of the Court of Appeal should be maintained since
there is the supplementary judgment to support it.
100. With respect we find that all the learned judges of the Court of
Appeal spoke with one mind. The issue of severing the
impugned remarks and findings in the main judgment does not
arise. Their own statements on record indicate that position. In
particular his Lordship Zulkefli Makinudin JCA said that he “had
read the judgment in draft of my learned brother Gopal Sri Ram
JCA and fully agree with the views expressed and all the orders
made by his lordship on the said two appeals before us” and
that “the legal issues arising from the above mentioned factual
circumstances have been comprehensively dealt with by my
learned brother Gopal Sri Ram JCA in his judgment.” His
Lordship Hashim Yussof JCA expressed his agreement on
what were said in the main judgment. In any event we find that
even the remarks as identified in the supplementary judgment
are equally unnecessary and unsupported by the evidence
75
adduced. For instance, the finding in the supplementary
judgment that it was due to the commitment by DBKL to
compensate ‘STKG in principle, estimated at RM764m,
explains why UEM / Metro Juara bought over STKG on short
notice and without due diligence’ implies that there was an
unhealthy and hidden arrangement between the present
shareholders of the Appellant and DBKL to the prejudice of the
Respondent. However, the evidence adduced could not be said
to irresistibly support such a conclusion.
101. Hence for the reasons we have stated we are of the view that
the decision and judgments of the Court of Appeal cannot stand
the test of real danger of bias. We would therefore answer
Question 3 as posed in the affirmative. The consequence is that
the decision and judgments of the Court of Appeal are therefore
set aside.
102. Having come to the foregoing conclusion we need to address
whether to remit the matter back to the Court of Appeal or we
76
should consider and review the findings of the learned High
Court judge bearing in mind the materials before us.
103. After considering the arguments advanced before us we are of
the view that remitting this matter to the Court of Appeal will be
unnecessary and inappropriate in the circumstances. The High
Court had made findings of fact which this Court would thus be
as able as the Court of Appeal to decide on the issues of law
involved. (See: T v Secretary of State for the Home
Department [1995] 1 WLR 545; Newacres Sdn Bhd v Sri
Alam Sdn Bhd [2000] 2 MLJ 353.) Further, remittal means
additional costs and delay involved to the prejudice of both
parties. Meanwhile, it is not unheard of for this Court, after
having ruled that the decision of the lower court was a nullity, to
proceed to make the necessary orders as to prevent injustice
without having to remit a matter to the lower court. (See: R
Rama Chandran v The Industrial Court Of Malaysia & Anor
(supra)). We would therefore proceed to evaluate the materials
before us to determine whether the decision of the High Court
77
judge could be sustained. In other words, this Court has to
consider whether the High Court was correct in finding:
a. that the Appellant is liable for breach of contract which
would include the question on the enforceability of the
various agreements relevant to the parties and dealt with
by the Court of Appeal;
b. that clause 8 of the Signage Sub-Licence Agreement is a
penalty and thus the Appellant is not liable to pay the sum
of RM65,182,920 but only for damages to be assessed;
c. that the agreement in respect of future contracts is void
and thus the question of Trust account as contained in
clause 10 of the Restructure Sale Agreement does not
arise; and
d. that the counterclaim of the Appellant should be
dismissed.
78
104. No doubt the issue of liability under the agreements was not
posed before us. But since we have set aside the decision of
the Court of Appeal and that we are proceeding to review the
matter afresh it is only appropriate that we should consider
albeit briefly the issue which in fact was also submitted to us.
We make it clear that we are not adding any issue or question
posed before us. We take this approach in view of the decision
we have made on the status of the decision of the Court of
Appeal.
105. Further, in carrying out the foregoing exercise we would ipso
facto be dealing with questions 2 and 3 as posed before us. We
also bear in mind the contention of learned counsel for the
Respondent that notwithstanding our decision on Question 3
the remaining Questions 1 and 2 should be considered on their
own since they involved issues of law premised only on limited
relevant facts.
79
Enforceability And Liability Under The Various Agreements
106. We have carefully scrutinized the reasons given by the learned
High Court Judge in finding liability for breach of contract
against the Appellant. We have also taken time to deliberate on
the contentions advanced before us by learned counsel for the
Appellant on this point. With respect we have not been
persuaded.
107. We are entirely in agreement with the summation by the
learned High Court Judge when he said this:
‘A contract is essentially a bargain and in the absence of
any vitiating elements such as misrepresentation or fraud,
the court will enforce it. The defendant (the Appellant
before us) cannot now claim that the directors of the
plaintiff (the Respondent before us) had acted in bad faith
in not declaring their interest in the plaintiff’s company or
the existence of the agreements before Metro Juara
signed the Share Sales Agreement with the shareholders
(including the directors of the plaintiff) of the defendant
80
(then known as Syarikat Teratai on 23/1/1991. In
proceeding to enter into the Signage Agreement with the
defendant in 1990, the plaintiff was in fact exercising its
right to the advertising right under Clause 2.2 of the Sale
Agreement it had entered into earlier in March 1988 which
it had every right to do so.
In failing to honour its obligation under the Signage Sub-
Licence Agreement, the defendant had committed a
breach to which the plaintiff would have a right to claim
damages.’
108. Hence, we affirm the finding of liability of the Appellant as found
by the learned High Court Judge.
Question 2:
‘Whether the test adopted by the Court of Appeal, in
determining whether Clause 8 of the Signage
Agreement is a stipulation by way of a penalty and/or
a sum named in the contract for purposes of Section
81
75 of the Contracts Act 1950, is the correct test and/or
is exhaustive?’
109. This question arises in relation to clause 8 of the Signage Sub-
Licence Agreement as amended by the Signage Sub-Licence
Amendment Agreement vis-à-vis section 75 of the Contracts
Act 1950. To put it in term of a given sum it is whether section
75 applies to the sum of RM65,182,920.00 as claimed by the
Respondent calculated pursuant to clause 8 thereof.
110. The learned High Court Judge held that in failing to honour its
obligation under the Signage Sub-Licence Agreement the
Appellant had committed a breach to which the Respondent
would have a right to claim damages. He then proceeded to
consider whether the Respondent was entitled to the
compensation under clause 8 of the Agreement. He also found
that it was common ground that DBKL had committed a breach
of the First Concession Agreement by suspending the right of
the Appellant to collect toll on 12.9.1990.
82
111. Clause 8 of the Signage Sub-Licence Agreement in its
unamended form reads:
‘8 CHARGES PAYABLE ON CANCELLATION OF
CONTRACT
8.1 If the Concession agreement is terminated in any of
the following circumstances:
(a) by the company pursuant to Clause 15.3 of
the Concession agreement; or
(b) by the Datuk Bandar pursuant to Clause 15.4
of the Concession agreement,
then notwithstanding anything in Clause 1.4, this
Agreement shall be cancelled automatically upon
such termination becoming effective.
8.2 STKG acknowledges that the Licensee expects to
receive revenue during each of the years
83
commencing in 1 January, 1991 and ending on
December, 2000 of RM7,797,000. It is agreed that
upon cancellation under Clause 8.1 the Licensee
shall be entitled to receive following:
(a) If cancellation occurs prior to 1 January, 1991,
the following sums:
(i) RM7,797,000 in respect of 1991, and
(ii) The discounted value of RM7,797,000 in
respect of each the years 1992 to 2000
applying discount rate of 8% annum
(b) If cancellation occurs on or after 1 January
1991, the following sums:
(i) RM$7,797,000 in respect the year in
which cancellation occurs (the ‘Relevant
Year’) less any amounts already
84
received by the Licensee and payable to
it in respect of that year; and
(ii) the discounted value of RM$7,797,000
in respect of each of the years from the
Relevant Year to 2000 applying a
discount rate of 8% per annum; and
(c) if cancellation occurs in 2000 RM$7,797,000
less any amounts already received by the
Licensee or due to the Licensee and payable
to it in respect of that year, together, in each
case with interest at the rate of 9% per annum
on the sum payable calculated from the date
of cancellation to the date of payment by
Datuk Bandar under the Concession
agreement.
8.3 (a) It is agreed that upon cancellation of this
Agreement, a debt shall arise as calculated in
85
accordance with Clause 8.2 and the debt shall
be payable by STKG as a result of the
cancellation of this Agreement PROVIDED
THAT STKG shall only be obliged to make
payment of the said debt due to out of moneys
recovered from Datuk Bandar pursuant to the
Concession agreement and the Licensee shall
not take action to recover such debt from
STKG except if and to the extent that such
moneys have been so recovered by STKG.
(b) To the extent that money recovered from
Datuk Bandar pursuant to the Concession
agreement or the Licence Agreement are
clearly identifiable as payments in respect of
cancellation of this Agreement STKG shall
pay those sums to Licensee forthwith upon
receipt.
86
(c) To the extent that moneys recovered from
Datuk Bandar pursuant to the Concession
agreement are clearly identifiable as
payments in respect of cancellation of this
Agreement then STKG shall pay to the
Licensee a sum calculated in accordance with
the following formula:
Payment:
R + C – (L + CI + T) x CC TC
where
R means the total compensation claim received
from the Government;
C means the amounts of cash held by STKG
(plus deposits);
87
L means the sum of all financial indebtedness to
financial institutions;
CI means the sum of all current indebtedness of
STKG, being moneys paid on a monthly or
immediate basis, but not including claims for
cancellation of contracts;
T means all tax payments, due or to become
due;
TC means the value if all claims lodged by STKG
against Datuk Bandar; and
CC means the value of claims under this
Agreement.’
112. Clause 8 was slightly amended with the execution of the
Signage Sub-Licence Amendment Agreement on 15.12.1990.
The relevant portion of clause 8.1 as amended reads:
88
‘8.1 If:
a. the Concession Agreement or the Licence
Agreement or STKG’s rights under either of them
are, with the consent of STKG, terminated, …; or
b. STKG terminated this Agreement …:’
113. Indeed the learned High Court Judge had failed to appreciate
that the relevant clause to consider should be the amended
version. The effect of the amendment was basically to amend
the triggering point for a claim to arise under clause 8, to
include the mutual termination of the First Concession
Agreement or upon the termination of the Signage Sub-Licence
Agreement by STKG.
114. The learned High Court Judge held that the compensation
provision under clauses 8.2 and 8.3 was unenforceable for it
contravened section 75 illustrations (d), (e),(f) and (g) of the
Contracts Act 1950. Consequently he ruled that the
89
Respondent was not entitled to be compensated in accordance
with those clauses.
115. Unfortunately the learned High Court Judge did not elaborate
his reason other than quoting the illustrations as given in the
statutory provision.
116. In the impugned main judgment of the Court of Appeal it was
held inter alia that there was a breach of contract in that the
Signage Sub-Licence Agreement as amended was breached
hence prima facie section 75 would be applicable. However, the
“formula set out in the amended cl 8 is not ‘a sum named in the
contract’. It follows that s 75 does not bite on that count”. His
Lordship Gopal Sri Ram JCA did ‘not think that the cl 8 formula
is a penalty’. He went on to say this:
“To be a penalty it must hold the other contracting party in
terrorem. In other words it must be extortionate. So, a
clause in a contract for the sale and purchase of property
that enables the vendor to forfeit a non-extortionate
90
deposit is not a penalty and does not come within s 75.’…
In my judgment, there is nothing extortionate about the cl
8 formula. It is not, objectively speaking, directed at
ensuring that the defendant performs its obligation under
any contract it had with DBKL. It merely comes into
operation upon the happening of a contingency, namely,
the mutual termination of the first concession agreement.
That event did happen and as a result the formula has to
be used to calculate the losses suffered by the plaintiff.
There is another reason why s 75 does not apply to the
facts of this case. Section 75 is concerned with the
question whether a sum named in a contract or a
stipulation in a contract is a genuine pre-estimate of the
damages that the innocent party may suffer in the event
of a breach. It has no application to an action for a simple
debt, although it does apply to extortionate claims of
interest on a debt. In my judgment, cl 8 creates a debt in
the plaintiff’s favour.… We have before us a commercial
contract. And, as I have already said, the defendant’s
liability to the plaintiff was contingent upon the first
91
concession agreement being mutually terminated. That
event having happened, what the plaintiff was entitled to
recover from the defendant were not damages but was a
debt.… As I have already said, the cl 8 claim is in truth an
action to recover a debt owed by the defendant to the
plaintiff. That debt is the sum of RM65,182,920 arrived at
in accordance with the cl 8 formula.”
117. Learned counsel for the Respondent before us submitted a
similar argument that there was a mutual termination of the
First Concession Agreement hence there was no application of
section 75 which only addresses when there is a unilateral
breach of contract.
118. With respect we are inclined to agree with the approach
adopted by the learned Judge in the impugned main judgment
of the Court of Appeal in that the contract in issue should be the
Signage Sub-Licence Agreement as amended. Indeed there
was a breach of that contract by the Appellant. We note that the
High Court Judge premised his finding of liability against the
92
Appellant on the unamended Signage Sub-Licence Agreement.
However, since the effect of the amendment was only related to
the triggering point his finding on liability should not be affected.
The remaining issue therefore is whether the damages
computed in accordance with the formula in clause 8 is caught
by section 75 of the Contracts Act 1950.
119. Section 75 reads:
‘When a contract has been broken, if a sum is named in
the contract as the amount to be paid in case of such
breach, or if the contract contains any other stipulation by
way of penalty, the party complaining of the breach is
entitled, whether or not actual damage or loss is proved to
have been caused thereby, to receive from the party who
has broken the contract reasonable compensation not
exceeding the amount so named or, as the case may be,
the penalty stipulated for.’
Illustrations - (d), (e) (f) and (g):
93
‘(d) A gives B a bond for the repayment of $1,000 with
interest at 12 per cent at the end of six months, with a
stipulation that, in case of default, interest shall be
payable at the rate of 75 per cent from the date of default.
This is a stipulation by way of penalty, and B is only
entitled to recover from A such compensation as the court
considers reasonable.
(e) A who owes money to B, a moneylender,
undertakes to repay him by delivering to him 10 gantangs
of grain on a certain date, and stipulates that, in the event
of his not delivering the stipulated amount by the
stipulated date, he shall be liable to deliver 20 gantangs.
This is a stipulation by way of penalty, and B is only
entitled to reasonable compensation in case of breach.
(f) A undertakes to repay B a loan of $1,000 by five
equal monthly instalments, with a stipulation that, in
default of payment of any instalment, the whole shall
94
become due. This stipulation is not by way of penalty, and
the contract may be enforced according to its terms.
(g) A borrows $100 from B and gives him a bond for
$200 payable by five yearly instalments of $40, with a
stipulation that, in default of payment of any instalment,
the whole shall become due. This is a stipulation by way
of penalty.’
120. In this country the distinction between liquidated damages and
penalties is no longer significant in view of section 75 of the
Contracts Act 1950. (See: SS Maniam v The State Of Perak
[1957] MLJ 75; Linggi Plantations Ltd v Jagatheesan [1972]
1 MLJ 89). But we had allowed Question 2 to be posed at the
leave application stage since we were then considering the
point in relation to the impugned judgments of the Court of
Appeal in this matter. Since they have been set aside the
complaint by the Appellant that the Court of Appeal applied the
wrong test for section 75 is no longer relevant. We are now left
with the task of reviewing whether the learned High Court
95
Judge was correct in his conclusion on clause 8 of the Signage
Sub-Licence Agreement as amended by the Signage Sub-
Licence Amending Agreement.
121. Whether a provision in an agreement comes within the ambit of
section 75 is one of construction. And although section 75 has
done away with the significant distinction between penalty and
liquidated damages under common law some of the
pronouncements of the principles in Dunlop Pneumatic Tyre
Co, Ltd v New Garage and Motor Co Ltd [1914-15] All ER
Rep 739 are still relevant in considering whether a provision
comes within the ambit of section 75. The House of Lords in
that case speaking through Lord Dunedin at pages 741-742
said this:
‘In both of these cases many of the previous authorities
were considered. In view of that fact, and of the number
of the authorities available, I do not think it advisable to
attempt any detailed review of the various cases, but I
shall content myself with stating succinctly the various
96
propositions which I think are deducible from the
decisions which rank as authoritative:
(i) Though the parties to a contract who use the words
“penalty” or “liquidated damages” may prima facie be
supposed to mean what they say, yet the expression
used is not conclusive. The court must find out whether
the payment stipulated is in truth a penalty or liquidated
damages. This doctrine may be said to be found passim
in nearly every case.
(ii) The essence of a penalty is a payment of money
stipulated as in terrorem of the offending party; the
essence of liquidated damages is a genuine covenanted
pre-estimate of damage: Clydebank Engineering
Company v Yzquierdo y Castaneda (Don Jose Ramos),
[1905] AC 6; 74 LJPC 1; 91 LT 666; 21 TLR 58 (HL); 17
Digest (Repl) 149, 489.
97
(iii) The question whether a sum stipulated is penalty or
liquidated damages is a question of construction to be
decided upon the terms and inherent circumstances of
each particular contract, judged of as at the time of the
making of the contract, not as at the time of the breach:
Public Works Comr v Hills [1906] AC 368; 75 LJPC 69; 94
LT 833 (PC); 17 Digest (Repl) 149, 490 and Webster v
Bosanquet [1912] AC 394; 81 LJPC. 205; 106 LT 357; 28
TLR 271 (PC); 17 Digest (Repl) 156, 532.
(iv) To assist this task of construction various tests have
been suggested, which, if applicable to the case under
consideration, may prove helpful or even conclusive.
Such are:
(a) It will be held to be a penalty if the sum
stipulated for is extravagant and unconscionable in
amount in comparison with the greatest loss which
could conceivably be proved to have followed from
the breach — illustration given by Lord Halsbury,
98
LC, in the Clydebank Engineering Company v
Yzquierdo y Castaneda (Don Jose Ramos), [1905]
AC 6; 74 LJPC 1; 91 LT 666; 21 TLR 58 (H)L; 17
Digest (Repl) 149, 489.
(b) It will be held to be a penalty if the breach
consists only in not paying a sum of money, and the
sum stipulated is a sum greater than the sum which
ought to have been paid: Kemble v Farren (1829), 6
Bing 141; 3 Moo & P 425; 7 LJO SCP 258; 130 ER
1234; 17 Digest (Repl) 157, 546. This, though one
of the most ancient instances, is truly a corollary to
the last test. Whether it had its historical origin in the
doctrine of the common law that, when A promised
to pay B a sum of money on a certain day and did
not do so, B could only recover the sum with, in
certain cases, interest, but could never recover
further damages for non-timeous payment, or
whether it was a survival of the time when equity
reformed unconscionable bargains merely because
99
they were unconscionable — a subject which much
exercised Jessel, MR, in Wallis v Smith (1882), 21
Ch D 243; 52 LJ Ch 145; 47 LT 389; 31 WR 214
(CA); 17 Digest (Repl) 77, 14 — is probably more
interesting than material.
(c) There is a presumption (but no more) that it is
a penalty when:
‘a single lump sum is made payable by way of
compensation, on the occurrence of one or
more or all of several events, some of which
may occasion serious and others but trifling
damages’: per Lord Watson in Lord
Elphinstone v Monkland Iron and Coal Co
(1886) 11 App Cas 332; 35 WR 17 (HL); 17
Digest (Repl) 158, 555 (11 App Cas at p 342).
On the other hand:
100
(d) It is no obstacle to the sum stipulated being a
genuine pre-estimate of damage that the
consequences of the breach are such as to make
precise pre-estimation almost an impossibility. On
the contrary, that is just the situation when it is
probable that pre-estimated damage was the true
bargain between the parties: Clydebank
Engineering Company v Yzquierdo y Castaneda
(Don Jose Ramos), [1905] AC 6; 74 LJPC 1; 91 LT
666; 21 TLR 58 (HL); 17 Digest (Repl) 149, 489 per
Lord Halsbury; Webster v Bosanquet [1912] AC
394.’
122. Further, it is trite law that the burden to prove that a specified
sum or stipulation is a penalty is upon the party sued for its
recovery. (See: Robophone Facilities Ltd v Blank [1966] 1
WLR 1428). And in our view the mere use of formula in
calculating the sum payable does not necessarily mean that it
can never be a ‘sum named in a contract’ for the purposes of
section 75. It is a matter of construction premised in its ‘terms
101
and inherent circumstances, judged of as at the time of the
making’ of the agreement, not as at the time of the breach. In
other words it ‘depends on the intention of the parties to be
gathered from the whole of the contract. If the intention is to
secure performance of the contract by the imposition of a fine
or penalty, then the sum specified is a penalty; but if, on the
other hand, the intention is to assess the damages for breach of
the contract, it is liquidated damages.’ (See: Law v Redditch
Local Board [1982] 1 QB 127).
123. The Indian cases took a similar approach. In the case of PK
Achuthan v State Bank of Travancore, Calicut AIR 1975
Ker 47, a case cited in the main judgment of the Court of
Appeal, it was said thus:
‘The question whether a particular stipulation in a
contractual agreement is in the nature of a penalty has to
be determined by the court against the background of
various relevant factors, such as the character of the
transaction and its special nature, if any, the relative
102
situation of the parties, the rights and obligations accruing
from such a transaction under the general law and the
intention of the parties in incorporating in the contract the
particular stipulation which is contended to be penal in
nature. If on such a comprehensive consideration, the
court finds that the real purpose for which the stipulation
was incorporated in the contract was that by reason of its
burdensome or oppressive character it may operate in
terrorem over the promisor so as to drive him to fulfil the
contract, then the provision will be held to be one by way
of penalty.’
124. Having therefore considered objectively clause 8 as a whole
bearing in mind, inter alia, its ‘terms and inherent
circumstances, judged of as at the time of the making’ of the
agreement, not as at the time of the breach, we are in
agreement with the learned High Court Judge that applying
section 75 it is a penalty in nature in that the said clause
constitutes a threat held against the Appellant ‘in terrorem’
more in the nature of a security extended to the promisee to the
103
effect that the Agreement would be performed and not a
genuine pre-estimate of the damage which is likely to be
suffered by the Respondent in the event of such breach.
125. We are also inclined to agree with the learned counsel for the
Appellant that the formula, based on the Respondent’s annual
expected revenue of RM7,797,000.00 in order to come up with
the total claim of RM65,182,920.00, is not a genuine preestimate
damages that would be suffered by the Respondent in
the event of a breach of its contractual obligations by the
Appellant. Computing the annual expected revenue itself
involves many variables and other factors, including the
method, necessary to be taken into account. In other words the
sum payable is extortionate in that it is unreasonably high thus
requiring the Court to intervene by way of assessment to come
to a reasonable compensation payable. Indeed the fact that
there is only the payment of an annual licence of RM1,000.00
by the Respondent in return for an annual estimate revenue of
RM7,797,000.00 does make the argument attractive in that the
sum claimed is unreasonably disproportionate to the nature or
104
extent of the injury. However, we are also mindful to uphold the
principle of sanctity of contract and the absence of any
evidence indicating that at the time of entering into the contract
the parties were not on equal footing. Hence, we do not
propose to give any weight to the foregoing argument.
126. The usage of the phrase ‘a debt shall arise as calculated in
accordance with Clause 8.2 and the debt shall be payable by
STKG as a result of the cancellation of this Agreement’ does
not ipso facto rule out the probability that the sum payable can
be a ‘sum named in a contract’ for the purposes of section 75.
It is a matter of construction of the relevant terms with due
regard to the inherent circumstances at the making of the
agreement.
127. Accordingly, for the above reasons we are in agreement with
the conclusion by the learned High Court Judge that ‘there shall
be an order that damages be assessed in respect of the loss
suffered’ by the Respondent ‘to take account of and for the
duration of the Replacement Agreement any advertising rights
105
that may have been granted under the Replacement
Concession Agreement’ which the Appellant ‘signed within the
ambit of Clause 1.4 of the Signage Sub-Licence Agreement’.
128. As alluded to earlier in view of our answer to Question 3 we do
not have to answer Question 2 in its original context. But even if
we have to it is obvious from our above reasons that the
answer would have to be in the negative.
Question 1:
‘Whether the creation of a trust by a company
amounts to an illegal reduction of its capital?’
129. Before the High Court the issue was on the claim for account
and payment of income earned on ‘future contracts’. It was
premised on Clauses 9 and 10 of the Restructure Sale
Agreement.
106
130. The learned High Court Judge held that the agreement “with
respect to the ‘sale’ of ‘future contracts’ to the Respondent “was
void for uncertainty.” He gave his reasons, inter alia:
i. that it was incapable of being identified what constituted
‘such projects or works other than such projects relating
to the Concession Agreement’ that would oblige the
Appellant to sub-contract to the Respondent;
ii. that there was no mechanism provided for in the
Restructure Sale Agreement for making such
determination;
iii. that there was no indication of how long the obligation
would subsist;
iv. that there was no term or price provided for each subcontract;
and
107
v. that it was not clear if there would be any consideration
given for the sale of the future contracts.
131. Hence, the imposition of an obligation to set up a Trust Account
for the benefit of the Respondent as provided for under Clause
10 was ruled to be no longer arising since the provision relating
to ‘future contracts’ was ruled to be void for uncertainty as it did
not meet the requirement of section 30 of the Contracts Act
1950.
132. On appeal to the Court of Appeal the finding of the High Court
Judge was reversed. The Court of Appeal was of the view that
clause 9.5 of the Restructure Sale Agreement created an
express trust and that section 30 of the Contracts Act 1950 did
not apply. On the requirement of the three certainties in the
creation of an express trust his Lordship Gopal Sri Ram JCA
said this:
“There are two points that arise out of this head of the
plaintiff’s claim. The first concerns the grounds on which
108
the learned judge rejected it, namely that it is flawed by
uncertainty and by the want of consideration. Second,
there is the reason advanced by the defendant, in
addition to those given by the judge, namely, that the
basis for the claim simply does not exist. I will deal with
the latter first. But, some background is necessary.
This part of the plaintiff’s claim is directed at the second
concession agreement. It is the plaintiff’s case that the
second concession agreement is a ‘future contract’ within
cl 9.4. The restructure sale agreement in cl 1.1 defines
‘future contract’ as any contract relating to any project or
the construction of any works entered into or to be
entered into with the Datuk Bandar Kuala Lumpur or any
other person, other than such projects or works relating to
the first concession agreement.
Much time and effort has been spent in oral and written
argument on the learned judge’s finding that cl 9.4 was
void for uncertainty as a matter of contract by virtue of s
109
30 of the Contracts Act 1950. With respect, I think that the
target has once again been missed. Look at cl 9.5 again
and see what it actually does. It creates an express trust.
The actual words it uses are ‘the future contracts shall be
held by the vendor on trust for the purchaser (Emphasis
added). Once an express trust is created, there is no role
for the law of contract. The real question or target that
ought to have been addressed in the submissions of
counsel before the High Court should have been whether
the trust created under c 9.5 is certain. And upon that
question s 30 which only applies to contracts has no
relevance whatsoever.
The law governing the certainty of a trust is that laid down
by Lord Langdale MR in the seminal case of Knight v
Knight (1840) 49 ER 68. There it was held that for a trust
to be certain three requirements must be fulfilled. First,
there must be certainty of intention. Second there must be
certainty of subject matter: both in terms of the corpus
and the beneficial interest. Third, there must be certainty
110
of the objects of the trust. A trust is void if there is
uncertainty in any of these three elements.
In my judgment, on the facts of the present case the first
and third requirements are amply satisfied. Let me take
the first requirement. The words ‘shall be held by the
vendor on trust for the purchaser’ are imperative, not
precatory. They establish beyond a reasonable doubt an
intention on the part of the defendant (described as ‘the
vendor’ in cl 9.5) that it shall be constituted a trustee for
the plaintiff (see Hameeda Bee v Mrs P Seenivasagam
[1950] MLJ 267).
……………………….
After very careful consideration of the terms of the
restructure sale agreement, I have come to the
conclusion that the trust created under cl 9.5 is not void
for uncertainty. My reasons are these. In the first place,
the subject matter of the trust is clearly identified by the
111
restructure sale agreement itself. As I have already said,
cl 1.1 clearly defines what a future contract is. At the risk
of repetition, it says that ‘future contract’ means ‘any
contract relating to any project or the construction of any
works entered into or to be entered into with the Datuk
Bandar Kuala Lumpur or any other person, other than
such projects or works relating to the first concession
agreement’. So, if and when the defendant secures a
contract with DBKL or any other person for a project, that
contract is immediately charged with a trust. I cannot
therefore see how much more clearly trust property may
be identified. In the second place, the defendant had a
contingent, and I would venture to even say a vested,
right to secure a contract with DBKL in the form of the
second concession.”
133. Hence, Question 1 in its present form was allowed at the leave
stage premised on the impugned main judgment of the Court of
Appeal. Anyway as indicated earlier on learned counsel for the
Respondent took the position that this Question 1 should be
112
considered on its own even if we have answered Question 3 in
the affirmative.
134. However, in view of our answer to Question 3 and our decision
to set aside the main and supplementary judgments of the
Court of Appeal it is thus essential that we should review the
decision of the learned High Court Judge on the issue of trust
vis-à-vis the claim of the Respondent.
135. Relying on clauses 9 and 10 of the Restructure Sale Agreement
it is the case for the Respondent as prayed for that the
Appellant ‘holds the said profits, monies and benefits received
and to be received on trust for the benefit of the Respondent
under the new Concession Agreement and the said contracts’.
136. Although the learned High Court Judge might have erred in
applying section 30 of the Contracts Act 1950 when considering
clauses 9.5 and 10 of the Restructure Sale Agreement in term
of certainty, we are of the view in the same way as the Court of
Appeal that determining the elements of certainty in the
113
purported trust created by those clauses is still necessary.
Essentially therefore it is an exercise to determine whether all
the three elements of certainties in the creation of an express
trust, namely, intention, subject matter and object, are present.
137. Certainty of intention is clear from the words of the clause 9.5
and so too the object being the Respondent. It is the subject
matter of the purported express trust that poses some
difficulties.
138. ‘Future contracts’ has been defined in clause 1.1 of the
Restructure Sale Agreement as ‘any contract relating to any
project or the construction of any works entered into or to be
entered into with the Dato Bandar Kuala Lumpur or any other
person, other than such projects or works relating to the first
Concession Agreement’. (Emphasis added).
139. It is the pleaded case of the Respondent that the Replacement
Concession Agreement is a replacement of the First
Concession Agreement. In fact the recital as well as clause 1.4
114
of the Replacement Concession Agreement is clear in that it is
a replacement or substitution for the First Concession
Agreement.
140. If therefore the Replacement Concession Agreement is a
replacement of the First Concession Agreement there is merit
in the submission that projects or works relating to it could be
excluded due to the definition of ‘future contracts’ as given. As
the subject matter of the intended trust are the ‘future contracts’
but that the projects or works relating to the Replacement
Concession Agreement are not within the definition of ‘future
contracts’, it follows that there is no question of the
Replacement Concession Agreement being the subject matter
of the trust upon which the Respondent premised its claim
against the Appellant.
141. Accordingly we would say that the learned High Court Judge
was right in concluding that there was no basis for the claim
under clause 9 of the Restructure Sale Agreement.
115
142. Further, due to the uncertainty of what projects and works
should come under the purported trust there is therefore
uncertainty in the subject matter of the trust. This doubt is not
helped by the assertion of learned counsel for the Respondent
in answer to a question from the Bench that the Replacement
Concession Agreement is not a replacement for the First
Concession Agreement. Such contention gives the impression
that the Replacement Concession Agreement is within the
definition of ‘future contracts’. That seems to be also the view of
the Court of Appeal in its main judgment. Yet at the same time
it was also submitted that the trust was created in
‘consideration of the Respondent taking over all the liabilities
and indemnities of STKG (now the Appellant) in relation, to its
non-concession business,’ and other liabilities and warranty. It
was also submitted that clauses 9.4 and 9.5 were ‘created
merely to ensure that STKG’s status as a one project company
would not be jeopardized by the influx of future non-toll
business, which will instead be transferred to the Respondent.’
This last preceding statement may be correct if not for the
116
definition of ‘future contracts’ which only excluded projects and
works relating to the First Concession Agreement.
143. There is therefore confusion as to what actually the
Respondent is claiming under the purported express trust. If
indeed the Replacement Concession Agreement is within the
definition of ‘future contracts’ then there is merit to say that the
Appellant not only would be obliged to subcontract to the
Respondent all the projects and works under the Replacement
Concession Agreement but it would also be holding on trust all
profits and monies received by it in relation to the Replacement
Concession Agreement. That in our view makes no business
sense at all. It would tantamount to the Appellant spending its
own capital to generate incomes only to be subject to an
express trust in favour of the Respondent. There is therefore
merit to the assertion that it amounts to an enslavement of the
Appellant.
117
144. There is therefore ambiguity in the subject matter of the
purported express trust intended under clause 9.5 of the
Restructure Sale Agreement and is thus void for uncertainty.
145. For the above reasons it is thus unnecessary to answer
Question 1.
146. At any rate accepting the argument that the Replacement
Concession Agreement comes within the definition of ‘future
contracts’ the actual result of the purported express trust would
tantamount to nothing less than depletion of the share capital of
the Appellant since it is expected at its own costs to get the
projects and works under the Replacement Concession
Agreement and subcontract them to the Respondent and that
all profits and monies received in relation to the Replacement
Concession Agreement would be held on trust for the
Respondent. Nothing would be earned by the Appellant. In our
cursory view such purported express trust would obviously be a
scheme that could amount to an illegal reduction of capital
without any court’s sanction and the payment of profits without
118
declaring any dividend. Sections 64 and 365 (1) of the
Companies Act 1965, as amended, make clear the prohibitions
and the prerequisites and are thus relevant. If on the facts and
circumstances of this matter as canvassed our answer to
Question 1 would therefore be in the affirmative.
Conclusion:
147. For completeness we would therefore make the following
orders, namely:
a. that the main and supplementary judgments of the Court
of Appeal cannot stand the test of real danger of bias. We
would therefore answer Question 3 as posed in the
affirmative. The consequence is that the main and
supplementary judgments of the Court of Appeal are set
aside. It follows that the decision of the Court of Appeal is
therefore set aside;
b. that our answer to Question 2 is in the negative. The
Respondent would not be able to claim the sum
119
computed in accordance with the formulae given in clause
8 of the Signage Sub-Licence Agreement as amended by
the Signage Sub-Licence Amendment Agreement.
However, ‘there shall be an order that damages be
assessed in respect of the loss suffered’ by the
Respondent ‘to take account of and for the duration of the
Replacement Concession Agreement any advertising
rights that may have been granted’ under such
Agreement which the Appellant ‘signed within the ambit of
Clause 1.4 of the Signage Sub-Licence Agreement’;
c. that the claim pursuant to clauses 9 and 10 of the
Restructure Sale Agreement is dismissed. Further and if
necessary our answer to Question 1 is in the affirmative;
and
d. half costs to the Appellant here and below since the
appeal is only partially allowed. Deposit to be refunded to
the Appellant.
120
148. My learned brothers, the Chief Justice and Abdul Hamid
Mohamad, Alauddin Mohd. Sheriff and Nik Hashim Nik Abd
Rahman FCJJ have read this judgment in draft and have
expressed their agreement with it.
Signed.
(TAN SRI RICHARD MALANJUM)
Chief Judge Of Sabah And Sarawak
Date: 19th July, 2007
Peguamcara pihak Perayu: Tetuan Cheah Teh & Su
Peguamcara & Peguambela
Tingkat 17, Wisma Denmark
86, Jalan Ampang
50450 Kuala Lumpur
Peguamcara pihak Responden: Tetuan Noraisyah & Co.
Peguamcara & Peguambela
Lot 2276, Level 1, Wisma Sinar
Jalan AU 3/1
Taman Sepakat
54200 Kuala Lumpur
121
Peguamcara pihak Pencelah: Tetuan Shearn Delamore & Co.
Peguamcara & Peguambela
7th Floor, Wisma Hamzah Kwong-Hing
No. 1, Leboh Ampang
50450 Kuala Lumpur
Peguamcara pihak Pencelah: Tetuan Tommy Thomas
Peguamcara & Peguambela
101 Jalan Ara
Bangsar
59100 Kuala Lumpur

==========================================================================================

为尽量避免给当事人造成不良影响，经当事人本人申请110.com将对文章内容进行技术处理，点击查看详情。
==========================================================================================

相关判例：