Redmax SDN BHD V PSI Incontrol SDN BHD
Redmax SDN BHD V PSI Incontrol SDN BHD
A
Redmax Sdn Bhd v PSI Incontrol Sdn Bhd
application for the injunction; and (d) the appellant’s failure to pay the claim A
triggered the presumption that it was unable to pay its debts. The appellant
appealed against the winding up order.
Held, allowing the appeal and setting aside the winding up order:
B
(1) The decision of the High Court was plainly wrong because: (a) the main
contract was clearly incorporated in the subcontract; (b) as the sums
payable to the appellant by JPS under the main contract were the subject
matter of arbitration, it could not be said that the sum claimed by the
respondent was not disputed; (c) the correspondence between the parties C
showed that the respondent’s claim was disputed in that it required
proper assessment; and (d) there was no acceptance of the claim made in
substance (see para 33).
(2) Since the winding up petition was based on a debt which was disputed on
D
substantial grounds, the respondent was not a creditor within the
meaning of s 218(2) of the Companies Act 1965 and thus was not
entitled to present the petition (see para 34).
(3) Given the contemporaneous documents and the relevant provisions of
the subcontract, the respondent knew from the outset that its claims for E
additional costs was for approval and payment by JPS and that only when
the approval and payment was received from JPS would the appellant
remit the approved payment to the respondent. In other words, there was
basis for the appellant to contend that the respondent’s claim once
forwarded to the appellant did not mean that the respondent would F
automatically be paid by the appellant (see para 30).
(4) Since the appellant’s claim against JPS, which included the respondent’s
claim for additional costs, had not been resolved and was pending
arbitration, it could not be said that there was no bona fide dispute on the
G
respondent’s claim (see para 31).
(5) The court had a statutory duty to review the decision of the High Court.
Accordingly, the respondent’s arguments with regard to res judicata and
issue estoppel did not arise (see para 32).
H
[Bahasa Malaysia summary
Perayu adalah kontraktor utama dalam menjalankan projek kerajaan. Perayu
mensubkontrakkan sebahagian kerja-kerjanya kepada responden. Kelewatan
dalam menyelesaikan kontrak utama melewatkan penyelesaian subkontrak.
Responden memohon kepada perayu untuk pelanjutan masa bagi I
menyelesaikan dan meminta bayaran sebanyak RM1,461,050 (‘tuntutan’) bagi
kerja yang ia telah siapkan. Perayu menjawab bahawa tuntutan adalah
tertakluk kepada penilaian oleh pihak (‘JPS’) yang mensubkontrakkan
kepadanya untuk menjalankan kontrak utama dan bahawa walau
Redmax Sdn Bhd v PSI Incontrol Sdn Bhd
[2018] 6 MLJ (Tengku Maimun JCA) 283
kos tambahan adalah untuk kelulusan dan bayaran oleh JPS dan ini A
sahaja apabila kelulusan dan bayaran diterima daripada JPS, perayu akan
remit bayaran yang diiluluskan tersebut kepada responden. Dalam
perkataan lain, terdapat asas untuk perayu berhujah bahawa tuntutan
responden apabila sahaja diberikan kepada perayu tidak bermaksud
bahawa responden akan dibayar secara automatik oleh perayu (lihat B
perenggan 30).
(4) Memandangkan tuntutan perayu terhadap JPS, yang termasuk tuntutan
responden bagi kos tambahan, tidak selesai dan menunggu timbang tara,
ia tidak dapat dikatakan bahawa tidak terdapat pertikaian bona fide ke C
atas tuntutan responden (lihat perenggan 31).
(5) Mahkamah mempunyai duti statutori untuk menyemak keputusan
Mahkamah Tinggi. Oleh itu, hujahan responden berkaitan res judicata
dan isu estopel tidak berbangkit (lihat perenggan 32).] D
Notes
For cases on disputed debt, see 3(1) Mallal’s Digest (5th Ed, 2018 Reissue)
paras 1433–1451.
E
Cases referred to
Metal Reclamation Industries Sdn Bhd v JRC Tenaga Sdn Bhd [2000] MLJU
836; [2000] 6 CLJ 290, HC (refd)
Legislation referred to F
Companies Act 1965 s 218(1)(e), (2), (2)(a)
INTRODUCTION
[1] This is an appeal filed by Redmax Sdn Bhd (‘the appellant’) against the
winding up order made by the High Court upon the petition presented by PSI I
Incontrol Sdn Bhd (‘the respondent’) under s 218(1)(e) of the Companies Act
1965 (‘the Companies Act’).
[2] We had unanimously allowed the appeal and we now give our reasons.
Redmax Sdn Bhd v PSI Incontrol Sdn Bhd
[2018] 6 MLJ (Tengku Maimun JCA) 285
A BACKGROUND FACTS
[3] The appellant was the main contractor for a project known as
‘Merekabentuk, Membina dan Menyiapkan Kerja-Kerja Tebatan Banjir Sungai
Muda (Bahagian Hilir) Kedah Darul Aman — Pakej 2’ (‘the main contract’) by
B the Government of Malaysia, under Jabatan Pengairan dan Saliran (‘JPS’).
[4] The appellant entered into a subcontract with the respondent for the
‘Design, Supply, Install, Testing and Commissioning of Automation System
C and SCADA System’.
[5] The completion of the main contract was delayed and several extensions
of time (‘EOT’) were given by JPS to the appellant. Due to the delay of the
main contract, the respondent’s works were also delayed including the
D installation of the SCADA/automation system, as the installation room for the
system has yet to be completed.
[6] By a letter dated 6 August 2013, the respondent applied for EOT to the
appellant (‘EOT 1’). In the said letter, the respondent stated that any additional
E costs incurred by the respondent will be forwarded to the appellant. The
application for EOT 1 was approved by the appellant until 2 March 2014.
[8] Vide a letter dated 4 December 2015, the appellant denied owing the
G respondent the said sum. The appellant stated, inter alia, that it is not in a
position to pay for the EOT 1 claim to the respondent as it has not received any
payment from JPS and was contemplating to arbitrate the matter with JPS.
The appellant invited the respondent to join and share legal costs for the
arbitration.
H
[9] The respondent contended that it was not privy to the agreement under
the main contract and was not therefore obliged to participate or await the
outcome of the arbitration. The respondent asserted that there is a genuine
debt due and accrued which is not bona fide disputed by the appellant.
I
[10] By a letter dated 21 June 2016, the respondent served a statutory
demand on the appellant pursuant to s 218(2)(a) of the Companies Act,
demanding payment within 21 days from the date of service of the notice.
286 Malayan Law Journal [2018] 6 MLJ
[13] The only issue before the High Court was whether there was a bona fide D
dispute on the sum of RM1,461,050 claimed by the respondent against the
appellant.
[14] The learned judge resolved the issue in favour of the respondent for the
reasons, inter alia: E
(a) that there was no dispute that the respondent had completed the works
during the period of EOT 1;
(b) since works had been done, the respondent is entitled to be paid;
F
(c) the respondent’s claim is a matter between the respondent and the
appellant and had nothing to do with JPS;
(d) that during the hearing of the fortuna injunction, the issues raised by the
appellant on the bona fides of the respondent’s claim were rejected by the
court; G
(e) that the clause ‘pay when paid’ in the subcontract is not applicable; and
(f) the appellant’s failure to pay the respondent within 21 days triggers the
presumption that the appellant is unable to pay its debt.
H
THE APPEAL
[15] Before us, learned counsel for the appellant highlighted that the sub
contract is back to back with the main contract and that the respondent’s claim
is disputed on liability and quantum. Learned counsel referred us to several I
letters exchanged between the parties to show that the respondent’s claim was
accepted for submission to, and subject to assessment by JPS. The respondent’s
claim is thus not ascertained and this is not a fit and proper case for the
appellant to be wound up.
Redmax Sdn Bhd v PSI Incontrol Sdn Bhd
[2018] 6 MLJ (Tengku Maimun JCA) 287
A [16] For the respondent, learned counsel submitted that the learned judge
was correct in his finding. Learned counsel emphasised that the appellant had
accepted the respondent’s claim. The claim is a clear bona fide claim which is
not disputed by the appellant. It was also submitted for the respondent that the
bona fides of the respondent’s claim had been ventilated in the Fortuna
B injunction hearing and in the appellant’s application to strike out the petition
which was dismissed. Hence it was argued for the respondent that the appellant
is estopped from raising the same issues and that the appellant is caught by the
doctrine of res judicata twice over. Learned counsel reiterated that the clause
‘pay when paid’ is not applicable to the respondent.
C
OUR DECISION
G …
What is a ‘creditor’? According to Osborn’s Concise Law Dictionary (7th Ed) a
‘creditor’ is ‘a person to whom a debt is owing’. In the instant case, is the petitioner
a creditor? To entitle the petitioner to call itself a creditor, there must be a debt
owing from the respondent to the creditor. The petitioner has not obtained a
H judgment against the respondent for the sum claimed which would have clearly
shown it is a creditor. That being the situation it has to show that there is a debt
owing from the respondent to them. The debt must also be undisputed.
[18] In granting the winding up order, the learned judge accepted the
I respondent’s contention that there exists a genuine debt due and accruing from
the appellant to which there is no bona fide dispute.
[20] Vide a letter dated 21 October 2013, the appellant wrote to the
respondent stating, inter alia, that:
2. Untuk makluman, keputusan kelulusan permohonan lanjutan masa pihak kami C
telah diluluskan.
3. Oleh yang demikian, pihak tuan diberi kelulusan tambahan seperti yang pihak
tuan hasratkan sehingga 2/3/2014.
4. Sebarang hasrat menuntut kerugian dan/atau perbelanjaan tambahan adalah D
tertakluk dibawah kelulusan JPS dan pihak tuan boleh membuat tuntutan
tambahan terbaru ini melalui pihak kami dengan kadar segera.
A At this juncture, your client’s attention is drawn to the fact that at all times they have
been receiving instructions directly from JPS’s engineers on all works pertaining to
the Extension of Time. Following that your client has been dealing directly with the
QS department of JPS with their claims and now all of a sudden making the claim
with our client.
B Our client would like to make it clear that they have exercised reasonable endeavor
to claim for this contractual benefits from JPS but due to delay our client has not
received any payment from JPS. Since this contractual benefits from JPS have not
been awarded to our client, hence they are also not in a position to award your client
the same.
C
[24] From the above exchanges, it is apparent that the appellant had not
accepted the respondent’s claim. What was accepted was the submission of the
respondent’s claim which remains to be assessed and ascertained by JPS. This
D
fact was also averred to by the appellant in its affidavit in opposition to the
winding up petition, where the appellant had stated inter alia that the summary
of cost variation claim submitted by the respondent was incorrect and
unsubstantiated (see pp 38–50 of record of appeal, Part B).
E [25] In its affidavit in opposition, the appellant had also alluded to cl 4 of the
letter of award which states:
The Sub-Contractor shall submit his interim progress claim on a monthly basis and
carry out a joint site valuation with the Contractor and/or the Government’s
Representative(s).
F
All interim payments shall be made to the Sub-Contractor no later than the expiry
of thirty (30) days from the date of receipt by the Contractor payment from the
Government in respect of the claim for the work.
G [26] The appellant also relied upon cl 11.2 of the subcontract to oppose the
petition. Clause 11.2 reads:
11.2 Subject to the Sub-contractor’s compliance with this Sub-Clause, the
Contractor shall take all reasonable steps to secure from the Employer (including
the Consultant) such contractual benefits (including additional payments,
H extensions of time or both), if any, as may be claimable in accordance with the Main
Contract. The Sub-contractor shall in sufficient time, afford the Contractor all
information and assistance that may be required to enable the Contractor to claim
such contractual benefits. On receiving any such contractual benefits from the
Employer, the Contractor shall pass on the Sub-contractor such proportion thereof
as may in all circumstances be fair and reasonable, it being understood that, in the
I
case of any claim of the Contractor for an additional payment, the Contractor’s
receipt of payment therefrom from the Employer shall be a condition precedent to
the Contractor’s liability to the Sub-contractor in respect of such claim. Sub-
contractor will only be paid for any variation claims if Contractor’s obtain the same
from the Employer less any cost mutually agreed upon …
290 Malayan Law Journal [2018] 6 MLJ
[27] That the subcontract is back to back with the main contract is also A
stipulated under the following cll 3.1 and 4.2:
3.1 The following documents shall be deemed to form and be read and construed as
the Sub-contract, viz:
a. The Main Contract Document (except for details of commercial related B
information);
b. The Sub-contract Document;
c. The Letter of Award or Acceptance between the parties hereto and all
attachments and all annexure thereto. C
4.2 The Sub-contractor shall deemed (sic) to have sighted the Main Contract and
Sub-Contract documents … and is fully aware and have full knowledge of the
Contractor’s obligations to the Employer and the Employer’s requirements to the
extent as it relates to the Sub-contract works. Where and to the extent of such
obligations in the Main Contract relates to the Sub-contract, the same shall bind the D
Sub-contractor in a ‘back to back’ basis with the Contractor …
[28] It is further provided under cl 7.2 of the subcontract as set out below
that the respondent’s claim under the EOTs would be investigated:
E
Provided that the Sub-contractor shall not be entitled to such extension of time
unless he has submitted to the Contractor notice of the circumstances which are
delaying him within 7 days of such delay first occurring together with detailed
particulars in justification of the extension of time claimed in order that the claim
may be investigated at the time …
F
[29] The respondent, vide para 12 of the petition states that ‘… the
Petitioner was informed by JPS that if the Respondent wishes to make a claim
for the Petitioner’s EOT1 claim from JPS, the Respondent must first pay the
Petitioner …’. The respondent’s statement is with respect, devoid of any basis G
and contrary to the terms of the subcontract. There was nothing in the
subcontract that the respondent should be paid first by the appellant. Rather
cl 13(b) states:
The Contractor shall not be held responsible for any delay caused by the Employer
or any third party involved with the project that is beyond the control of the H
Contractor. The Contractor shall use all reasonable endeavours to claim for
contractual benefits from the Employer should any delay occur. The
Sub-Contractor shall only be accorded the same if the Contractor obtains the
contractual benefits from the Employer.
I
[30] Given the contemporaneous documents and the relevant provisions of
the subcontract, we found much force in the submission of learned counsel for
the appellant that the respondent knew from the outset that the claims for
additional costs forwarded to the appellant was for approval and payment from
Redmax Sdn Bhd v PSI Incontrol Sdn Bhd
[2018] 6 MLJ (Tengku Maimun JCA) 291
A JPS and that only when the approval and payment was received from JPS
would the appellant remit the approved payment to the respondent. In other
words, there was some basis for the appellant to contend that the respondent’s
claim once forwarded to the appellant did not mean that the respondent would
automatically be paid by the appellant.
B
[31] The appellant’s claim against JPS, which includes the respondent’s
claim for additional costs incurred during the EOT 1, has not been resolved. It
is pending in the arbitration proceedings. Thus, it cannot be said that there is
no bona fide dispute on the respondent’s claim against the appellant. The issues
C
pertaining to the dispute, in particular ‘pay when paid’ ought to be dealt with
in arbitration or in civil proceeding, should such proceedings be filed by the
parties here.
D [32] On estoppel and res judicata, we disagreed with the respondent that as
a result of the dismissal of the applications for fortuna injunction and the
striking out, the appellant is prevented from litigating the issue whether there
was a bona fide dispute to the debt. Those two applications were interlocutory
applications which were decided on certain established principles. The issue to
E be considered by us in this appeal was whether there was a genuine dispute
about the debt. On this issue, we had a statutory duty to review the decision of
the High Court. Res judicata and issue estoppel simply did not arise.
CONCLUSION
F
[33] On the facts before us, we were convinced that the learned judge was
plainly wrong because:
(a) the main contract is clearly incorporated in the subcontract;
G (b) as the sums payable to the appellant by JPS under the main contract are
currently the subject matter of arbitration, it is clear that it cannot be said
that the sums claimed by the respondent is not disputed;
(c) the correspondence between the parties bears out the fact that the claim
is disputed in that it requires proper assessment; and
H
(d) there was no acceptance of the claim made in substance.
[34] Since the petition was based on a debt which was disputed on
substantial grounds, we found that the respondent was not a creditor within
I the meaning of s 218(2) of the Companies Act and the respondent was thus not
entitled to present the winding up petition.
[35] The appeal was consequently allowed with costs. The order of the High
Court was set aside.
292 Malayan Law Journal [2018] 6 MLJ