THE OFFICIAL REPOSITORY OF
MALAYSIAN JUDGMENTS & RULINGS

[2018] MYCA 84 ENGLISH

BS Eramaju Engineering Sdn Bhd v OPS Suria (EM) Sdn Bhd and Another, and Another Appeal
Suit Number: Civil Appeal Nos. S-02(W)-834-05/2015 & S-02(W)-1075-06/2015 

Litigation & court procedure – Whether a judgment for a greater sum than the amount actually owed renders the judgment null and void – Power of courts to amend their orders to make necessary adjustments in such cases – Whether the judgment sum awarded was in excess of what was due

Litigation & court procedure – Whether the trial court reformulated the agreed issues to be tried between the parties – Whether such reformulation fair/ prejudicial to the parties – Whether the disputes in question can be disposed of within the confines of the reformulated issues

Contracts & commercial – Settlement agreement – Alleged breach of the settlement agreement – Whether the first defendant has authorised the second defendant (solicitor firm) to conclude the alleged settlement agreement on its behalf with the plaintiff – Authorisation as between the plaintiff and the first defendant – Authorisation as between the second defendant and the first defendant

Professional relationship – Solicitor-Client relationship – Whether a solicitor has actual or ostensible authority to bind his client contractually – Whether authority must be expressed in written form – Whether a question of fact – Burden of proof

JUDGMENT

[1] Civil Appeal No. S-02(W)-834-05/2015 is the appellant/ 1st defendant’s appeal against the decision of the High Court allowing the 1st respondent/ plaintiff’s claim for the sum of RM5,035,292.27 arising out of an alleged breach of a settlement agreement between the 1st respondent/ plaintiff and the appellant/ 1st defendant and the 2nd respondent/ 2nd defendant.

[2] Meanwhile, Civil Appeal No. S-02(W)-1075-66/2015 is the 2nd respondent/ 2nd defendant’s appeal against the decision of the High Court that the 2nd respondent/ 2nd defendant did not have the authority to propose and negotiate a settlement agreement with the 1st respondent/ plaintiff on behalf of the appellant/ 1st defendant.

[3] The parties shall hereinafter be referred as they were in the Court below.

Background Facts

[4] In the year 2008, the Ministry of Education started a school electrification project to supply electricity to rural schools in Sabah using the solar hybrid system. The project is to be implemented in phrases or packages.

[5] The plaintiff (OPS Surai (EM) Sdn. Bhd.) is a private limited company based in Kuching, Sarawak and was involved as contractors in the implementation of the said solar hybrid project.

[6] The 1st defendant (BS Eramaju Engineering Sdn. Bhd. (formerly known as Ayuda Engineering Services Enterprise Sdn. Bhd.)) is a private limited company incorporated in Malaysia and was formed principally to tender for the said solar hybrid project. The 1st defendant claimed that at the material time they had only secured the award for Packages 11 and 12 of the said project.

[7] The 2nd defendant, Balbir Singh s/o Shingara Singh, is an advocate of the High Court at Malaya and practicing as a sole proprietor under the firm name of M/s Wan Balbir & Associate. He was purportedly engaged by the 1st defendant to act as their solicitor in the ensuing dispute between the plaintiff and the 1st defendant.

[8] The learned trial judge found that the 1st defendant had been awarded the contract to build a power plant under Package 4 of the project by the Ministry of Education/ Government. Thereafter, the plaintiff was appointed as its turnkey contractor by the 1st defendant to supply and build the said project pursuant to an agreement dated 28.5.2008.

[9] As the project progressed, a dispute arose between the plaintiff and the 1st defendant on issues of contract payments, wherein the said dispute was subsequently referred to arbitration.

[10] Sometimes in January 2010, the plaintiff commenced a civil action through its Kuching solicitors, M/s T.C. Chong & Co., against the 1st defendant and two (2) others in the High Court at Kuching vide Suit No. 22-9-2010-111 (‘the 1st Suit’) because the plaintiff was unable to collect the contract payments due to it from the 1st defendant.

[11] The relief sought in the 1st Suit was a mandatory order for the defendants to open a collection account in their joint names instructing the Government to pay all future progressive claims into the joint account and to give standing instruction to the bank to deduct 60% of the money credited into the joint account. There was also a monetary claim of RM5,176,200.00 against the defendants.

[12] The 1st defendant, however, claimed that it was not a party to the 1st Suit. The suit was against 3 defendants, namely Ayuda Engineering Services Enterprise (‘AESE’), Haji Nordin b. Karto and Mohammad Nazri bin Norlan. The 1st defendant contended that AESE is a separate entity altogether and that the learned trial judge had erroneously treated AESE and the 1st defendant as if they were one and the same legal entity. The 1st defendant reaffirmed that the 1st Suit has nothing to do with the 1st defendant at all.

[13] 1st defendant further stated that the said suit was in respect of a sub-contract agreement dated 28.5.2008 entered between the plaintiff and AESE over Package 4 of the solar hybrid project. The plaintiff filed the suit because it was unable to collect the contract sum which was due to it from AESE. Judgment in default of appearance was entered against AESE and Mohammad Nazri bin Norlan on 25.3.2010.

[14] Sometimes in June 2010, the plaintiff through the same firm of solicitors filed a Writ of Summons against the 1st defendant in the High Court at Kuching, Sarawak, vide Suit No. 22-11-2010-111 (‘the 2nd Suit’), alleging that prior to the award of the said project by the Ministry of Education, the 1st defendant had entered into an agreement with the plaintiff to appoint the plaintiff as their sub-contractor for the execution of the said project as awarded by the Ministry of Education. Correspondingly, the plaintiff applied to injunct the 1st defendant from executing the project with a third party, to wit Kombinasi Solar Bhd., and damages to be assessed.

[15] However, the 1st defendant stated that at the material time the 2nd Suit was filed in Court, the 1st defendant had already sub-contracted the works to Kombinasi Solar Bhd. The injunction application was subsequently dismissed by the High Court at Kuching on 12.1.2011. The suit against the 1st defendant was, however, discontinued only in May 2012 after the case was transferred to the High Court at Sandakan.

[16] Be that as it may, nevertheless pursuant to the 2nd Suit, negotiations to settle the dispute amicably were carried out between the plaintiff and the 1st defendant with the involvement of the 2nd defendant, who had represented himself to the plaintiff/ its solicitors that he was authorized by the 1st defendant to negotiate for the amicable settlement of both Suits that were still pending.

[17] The plaintiff subsequently filed the present suit against the 1st defendant on 8.9.2011, premised upon the allegation that the 2nd defendant was authorised by the 1st defendant to negotiate for the settlement of the 1st and 2nd Suits still pending in the High Court on its behalf and that a ‘settlement’ was concluded by the exchange of letters dated 8.7.2010 from the 2nd defendant as solicitor for the 1st defendant to M/s T.C. Chong & Co., the solicitor for the plaintiff and another letter dated 12.7.2010 from M/s T.C. Chong & Co. to the 2nd defendant.

[18] It was also the plaintiff’s case that as part of the settlement agreement, it was agreed that the plaintiff shall be paid a settlement sum amounting to RM5,176,200.00 and the said settlement sum shall be paid by AESE, one of the defendants in the 1st Suit, executing a Deed of Assignment assigning to the plaintiff the remaining contract payments due from the Government to the 1st defendant, if any. On its part, the 1st defendant had agreed to issue a Deed of Undertaking to pay the difference between the sum of RM5,176,200.00 and the monies received, if any, under the Deed of Assignment.

[19] The plaintiff had further claimed that the 1st defendant had breached the alleged settlement agreement in failing to issue the said Deed of Undertaking and to pay the differential sum of RM5,035,292.27 within 12 months of the date of the purported settlement.

[20] The 1st defendant countered that the 2nd defendant had no authority to enter into the purported settlement agreement on its behalf with the plaintiff and hence the said settlement agreement does not bind the 1st defendant.

[21] It was also the 1st defendant’s contention that it did not appoint the 2nd defendant to represent the 1st defendant in the 2nd Suit as the 2nd defendant has no right of audience before the High Court at Kuching. Accordingly, the plaintiff’s solicitor ought to have known that any negotiation for settlement of the 2nd Suit should be with M/s Lai & Co, who was the solicitors on record acting for the 1st defendant in the 2nd Suit.

[22] In so far as the 2nd defendant is concerned, it was his contention that one Michael Kwan, a representative from the 1st defendant’s office had held out to him and the plaintiff that he had the authority to commit the 1st defendant to a settlement. It was also averred that he was duly authorized by AESE and the 1st defendant to negotiate a settlement of the 2 pending Suits. The Warrants of Appointment, were issued by AESE and the 1st defendant on 16.3.2009 and 6.4.2009 respectively.

[23] The 2nd defendant also claimed that in the course of his retention, he was directed by the said Michael Kwan to assist them in the negotiations for the settlement. The drafting of the settlement agreement was done with the full knowledge of the 1st defendant’s directors who were asked to comment and update on the progress of the settlement. He averred that he was given the mandate to negotiate and settle the civil Suits, on behalf of the 1st defendant by Michael Kwan.

[24] The 2nd defendant further filed a counter claim against the plaintiff, the 1st defendant, Kwan Hiuang @ Kwan Huang Cheng (Michael Kwan) and Mohd. Nazri bin Norlan, claiming that they had represented to him that they had the authority from the 1st defendant when in fact they do not. As against the plaintiff, the 2nd defendant claimed that the plaintiff’s claim against him is not bona-fide and is an abuse of the process of the court and pleaded for damages to be assessed. In the event, this counter-claim was dismissed by the learned trial judge.

Decision of the Trial Judge

[25] In his decision, the learned trial judge reformulated the issues to be tried between the parties into 3 principal issues, as enumerated below:

(i) whether there was a concluded settlement reached between the plaintiff and the 2nd defendant and whether the settlement between them was in the form of settlement agreement dated 26.8.2010 or was the settlement concluded via two letters, one dated 8.7.2010 from the 2nd defendant’s firm (letter of offer) and the other dated, 12.7.2010 from the plaintiff’s solicitor (letter of acceptance);

(ii) whether the 2nd defendant had the authority to settle the dispute between the plaintiff and the 1st defendant; and

(iii) whether the 1st defendant was bound by the terms of the settlement and whether the 2nd defendant was liable in making the offer as per letter dated 8.7.2010.

[26] In regard to the first issue, the learned trial judge found, based upon a series of letters and e-mails between the parties concerned, that there was indeed a concluded settlement between the parties herein. The learned trial judge considered the final letter of offer dated 8.7.2010 from the 2nd defendant (M/s Wan Balbir & Associates) at p. 1576, Vol. 5 (Part C) Record of Appeal (‘RA’) and the acceptance of the said offer by the plaintiff’s solicitor (M/s T.C. Chong & Co.) vide letter dated 12.7.2010, at p. 1579, Vol. 5 (Part C) RA, as the final instrument that cemented the settlement agreement.

[27] For purposes of clarity, we reproduced below the relevant segments of the 2nd defendant’s letter (dated 8.7.2010) wherein the title of the said letter clearly refers to the 1st and 2nd suits at Kuching High Court and also the arbitration proceedings preceding the 2 Suits:

"...

2. We inform that after further discussion, our clients have reverted with the following proposal taking into account your client’s concerns. All references to Ayuda Enterprise shall mean Ayuda Engineering Services Enterprise. All references to Ayuda S/B shall refer to Ayuda Engineering Services Enterprise Sdn. Bhd.

3. ...

4. Our revised proposal is as follows:-

4.1 Under the First Suit, Ayuda Enterprise shall pay or cause to be paid to OPS Suria Sdn. Bhd. the sum of RM5,176,200.00 only (‘the settlement sum’) Ayuda Enterprise shall execute a deed of assignment for the contract undertake by your client for all remaining payments. Your client shall discharge all other outstanding matters due under that contract. The release of the payment in your clients favor shall be irrevocable and binding on our client Ayuda Enterprise.

4.2 As regard to differential between the sum of RM5,176,200.00 and the monies received under the Deed, Ayuda S/B shall issue an undertaking to pay the differential within 12 months from the date of the settlement.

4.3 The Principal Officer of Ayuda S/B, Encik Nazri bin Norlan shall give his personel guarantee for the indebtedness of Ayuda S/B in addition to its corporate undertaking to the settlement of the differential.

4.4 Both parties shall by consent stay the Arbitration proceedings pending the settlement of the First Contract.

5. As regard the Second Suit, Ayuda S/B shall without admission of liability and on an ex gratia basis pay to OPS Suria Sdn. Bhd. the sum of RM40,000.00 and cost of RM25,000.00 upon the acceptance of the settlement hereof. The Second Suit shall be discontinued upon full payment of RM5,176,200.00 under the First Suit, If necessary your client shall apply to stay all proceedings under the Second Suit.

6. ...”

[28] Ayuda Engineering Services Enterprise Sdn. Bhd. referred to in the said letter as Ayuda S/B is the 1st Defendant herein before us.

[29] It would appear that the settlement is a global settlement involving both the 1st and 2nd Suits as well as the matter pending before the arbitrator over the same dispute.

[30] Meanwhile, the plaintiff’s solicitor replied as follows vide their 12.7.2010 letter:

"Thank you for your letter of 8th July, 2010.

Our client accepts the settlement in your above letter. Please, on an urgent basis, prepare the drafts for our vetting. We believe the settlement involves the following documents:

1) Deed of Assignment.

2) Letter of Undertaking (with duly passed resolution of Ayuda Engineering Services Enterprise Sdn. Bhd. annexed).

3) Letter of Guarantee.

On our part, we shall apply to stay the proceedings. Any consent required from any third party including the consent from the government for the Deed of Assignment and the stamping of the documents shall be your client’s responsibility.”

[31] The learned trial judge found that the said 2nd defendant’s letter did not state that the terms of the settlement must be incorporated in a formal agreement but instead stated that his client (the 1st defendant) had reverted with certain proposals for the plaintiff’s consideration and in response thereto, the plaintiff had unequivocally accepted the said offer and instructed the 2nd defendant to prepare the execution of the Deed of Assignment, Letter of Undertaking and Letter of Guarantee. The two letters showed the intention of the parties to amicably settle their disputes. There was therefore no ambiguity in these letters and they clearly spelt out the intention of the parties to be bound.

[32] The learned trial judge further opined that the intention of the parties to be bound by the terms of the said letters were reflected by the fact that the 1st defendant had subsequently executed the Deed of Assignment (Vol. 5 (Part C) pp. 1592 to 1595) and the Letter of Guarantee (Vol. 5 (Part C) pp. 1587 to 1606). Nevertheless, a Settlement Agreement (Vol. 5 (Part C) pp. 1586 to 1591) was executed between the plaintiff and the 1st defendant on 26.8.2010 and it was only after seeing this formal agreement that DW-3 (Michael Kwan, one of the directors of the 1st defendant) decided to review the terms of the settlement and later retracted their earlier agreement that the 1st defendant would give their Letter of Guarantee.

[33] Finally, it was the learned trial judge’s findings that from the construction of the said letters, it was the intention of the parties that there was a concluded contract between the parties and the 1st defendant was in breach of the said contract when it failed to execute the Letter of Undertaking in favour of the plaintiff.

[34] On the second issue of whether the 2nd defendant had the authority to settle the dispute between the plaintiff and the 1st defendant, the learned trial judge found that in the eyes of the plaintiff, the 2nd defendant was perfectly authorized to represent the 1st defendant in the negotiation for the settlement of their disputes on account that:

(i) The 2nd defendant had a long professional relationship with DW-3 (Michael Kwan), an officer and a member of the 1st defendant’s Board of Directors and had acted for the 1st defendant on numerous occasions involving major disputes;

(ii) It was the evidence of counsel for the plaintiff, Jonathan Chong (PW-2) that he was informed by the 2nd defendant of Collin Lai’s appointment as counsel for the 1st defendant in the 1st and 2nd Suits. The 2nd defendant had been actively involved in the negotiations and was communicating with the plaintiff’s solicitor and was the instructing solicitor for the 1st and 2nd Suits. Even Collin Lai, counsel for the 1st defendant, took instruction from the 2nd defendant;

(iii) When the plaintiff initially rejected the 2nd defendant’s proposal for payment, it was the 2nd defendant who forwarded the said letter to Mohd. Nazri, a member of the 1st defendant’s Board of Directors and informed that he (the 2nd defendant) would give his views (Bundle C(1) pp. 302-304 and Bundle F(2) pp. 191-194);

(iv) After the plaintiff accepted the 1st defendant’s proposal vide letter dated 12.7.2010, the 2nd defendant sent an e-mail to Michael Kwan and Mohd. Nazri informing them that he had received the format of the Deed of Assignment form from MOE (Ministry of Education) for the drafting of the said Deed of Assignment pursuant to the Settlement Agreement (Vol. 5 (Part C) pp. 1586 to 1591)

(v) After the plaintiff had accepted the proposed terms of settlement the 2nd defendant sent an e-mail to Jonathan Chong and copied to Collin Lai, attaching the finalized draft settlement agreement, Deed of Assignment and the Letter of Guarantee asking whether there are amendments to be made before the documents could be executed by the parties.

(vi) The 2nd defendant also said that he had discussed the proposed settlement with Michael Kwan and proceeded to draft the proposed settlement and gave a copy to Michael Kwan.

(vii) On 25.10.2010, Collin Lai sent a text message to the 2nd defendant informing him that Jonathan Chong had requested for the adjournment of the hearing of an interlocutory application in respect of the 1st and 2nd Suits, pending the settlement agreement. The 2nd defendant told Collin Lai that he is agreeable to the adjournment.

(viii) The aforesaid series of communication between the 2nd defendant, Jonathan Chong, Michael Kwan and Collin Lai showed that the 2nd defendant had been in communication with the plaintiff and Michael Kwan, also a director of the 1st defendant, is aware of the progress of the settlement agreement.

(ix) The 2nd defendant’s testimony that his relationship with Michael Kwan (DW-3) since 2007 had established a degree of trust and he would act on DW-3’s instruction even when there are no written instruction from DW-3. The 2nd defendant also testified that he was initially engaged by the 1st defendant to defend them in the 1st and 2nd Suits. However, since he was not admitted to practice in Sarawak, the 1st defendant then engaged the services of Collin Lai of M/S Lai & Co to act for them.

[35] Based upon the above, the learned trial judge opined that it was not unreasonable for the plaintiff to infer that they could rely on the ostensible authority of the 2nd defendant to negotiate and enter into a settlement with the 1st defendant. Consequently, the learned trial judge ruled that the 2nd defendant had the authority to negotiate and propose a settlement with the plaintiff on behalf of the 1st defendant. Hence, the 1st defendant was bound by the terms of the settlement as per letter dated 8.7.2010. The learned trial also applied the rulings in McEwan [2005] Ltd v Sharp Tudhope [2009] NZHC 706 and Gaymark Investment Pty v Nicholas & Sevanti Tsangaris & Emmanuel & Garfalix Gerakios (No. Ap. 1 of 1986) to fortify the position he had taken. In the latter case, it was ruled that:

"What I think in question in this case is counsel authority, as between himself and his opponent, to bind his client to an agreement of compromise, as distinct from his actual or implied authority, as between himself and his client, to do so.”

[36] As regards to whether the 2nd defendant had acted without the authority of the 1st defendant when the settlement agreement was agreed upon, and to commit the 1st defendant to substantial liability of about RM5 million, the learned trial judge opined that no such written instruction was given by the 1st defendant to the 2nd defendant and hence, the 2nd defendant should not be permitted to rely on any verbal instruction as it would not be consistent with s.29 of the Evidence Act, 1950. On the balance of probabilities, the learned judge found that the 2nd defendant has no authority to settle the dispute between the plaintiff and the first defendant. The learned judge relied on the decision In the matter of HIH Limited (in liquidation); Smith & Ors v McGrath & Ors; McGrath & Ors [2014] NSWSC 922, that such authority must be given in writing.

[37] In respect of the third issue, to wit, whether the 1st defendant is bound by the terms of the settlement and whether the 2nd defendant is liable in making the offer as per letter dated 8.7.2010, the learned trial judge opined that based on the series of letters between the 2nd defendant, Michael Kwan, the plaintiff’s solicitor and the defendant’s solicitor, it would not be in the interest of justice to set aside the settlement that had been reached between the parties on account that Michael Kwan, a director of the 1st defendant, had been actively involved in the negotiations. He was constantly notified by the 2nd defendant on the progress of the negotiations and the 2nd defendant had also consulted and sought the input of Michael Kwan before the 8.7.2010 letter was sent to the plaintiff’s solicitor. In addition, throughout the series of negotiations, there was no protest lodge by the 1st defendant through Michael Kwan.

[38] Only when the settlement agreement was executed between the plaintiff and 1st defendant on 26.8.2010 and after seeing the formal agreement that DW-3 decided to review the terms of the agreement and later retracted the agreement that the 1st defendant would give their Letter of Guarantee.

[39] The learned judge further found that the 2nd defendant was not liable to the plaintiff even though he has acted without the express authority of the 1st defendant because all along the 1st defendant was aware of the negotiations for settlement with the plaintiff, only to retract it after it was concluded.

The Appeals

[40] All the parties to the suit lodged separate appeals against the said decision of the learned trial judge.

[41] The 1st defendant’s appeal (Civil Appeal No. S-02(W)-834-05/2015) is against the plaintiff and the 2nd defendant and it canvassed the following grounds:

(i) The sum awarded by the learned judge was in excess of what was due to the plaintiff;

(ii) The learned judge erred in law and in fact when the agreed issues to be tried between the plaintiff and 1st defendant was reformulated to only 3 issues from the original 21 issues; and

(iii) The 2nd defendant is not authorized to compromise the 2nd Suit or conclude the alleged settlement agreement on behalf of the 1st defendant.

[42] The cross-appeal by the plaintiff is fixated on the following grounds:

(i) If the appeal by the 1st defendant is allowed and the High Court order is set aside, the 2nd defendant do pay the plaintiff the sum of RM3,922,192.27 together with interest thereon at 4% p.a. from the date of judgment to date of full payment and costs of RM80,000.00

(ii) If the appeal by the 1st defendant is dismissed, the order of the High Court dated 24.4.2015 which reads “plaintiff’s claim against the 1st defendant in terms of the statement of claim is allowed” be varied to read “plaintiff’s claim against the 1st defendant is allowed in the sum of RM3,922,192.27 together with interest thereon at 4% p.a from the date of judgment to date of full settlement and costs of RM80,000.00 paid by the 1st defendant to the plaintiff”.

Our Decision

The 1st Defendant’s Appeal and the cross-appeal by the plaintiff

Ground (i) - the judgment sum awarded was in excess of what was due to the plaintiff

[43] Learned counsel for the 1st defendant submitted that the learned trial judge had awarded a sum in excess of what was due to the plaintiff. The plaintiff had actually been paid the amount of RM1,311,000.00 out of the sum claimed, leaving a balance of RM3,922,192.27 as reflected in the plaintiff’s cross-appeal to vary the judgment sum in terms of the Statement of Claim. The learned trial judge was in error when he held that the plaintiff is now claiming for the sum of RM5,035,292.27, being the balance of the amount due to the plaintiff. It was submitted that on this ground alone, the decision of the learned trial judge is flawed and ought to be wholly set aside.

[44] In the course of the trial, the plaintiff had acknowledged and admitted that it had received partial payments after the writ was filed pursuant to the Deed of Assignment and had asked for a lesser amount to be entered in its favour. However, the original amount without the deductions was instead awarded.

[45] In our view, a judgment for a greater sum than the amount actually owed does not render the judgment null and void. It is our further view that such larger sum that was entered into was purely due to an oversight on the part of the learned trial judge to deduct the sums already paid from the total judgment sum. There can be no other explanation to account for this anomaly.

[46] It is trite that in such event, the law courts has always been empowered to amend the order accordingly where adjustments can be made to reflect the actual amount owed and due and none would have been prejudiced as it now involved a lesser sum. It is also in the best interest of justice to make such necessary adjustments.

[47] As such, we opined that this ground of appeal is devoid of any merit and we unhesitatingly dismissed the same. Correspondingly, we adjusted the judgment sum awarded to the plaintiff to an amount reflective of the plaintiff’s claim less the partial payments already paid after the writ was filled, to wit RM3,922,192.27 only.

Ground (ii) - reformulation of the agreed issues to be tried between the plaintiff and the defendants

[48] Learned counsel for the 1st defendant submitted that prior to the trial, the 1st defendant and the plaintiff had formulated 21 agreed issues to be tried amongst them. However, the learned trial judge found no issues to be tried and reformulated the agreed issues to only 3 issues. It was thus submitted that by doing so, the learned trial judge had shifted the issues. Hence, instead of the first issue of whether the 2nd defendant was authorized to negotiate, the learned trial judge went on to find whether there was a concluded agreement. In addition, since the parties have agreed amongst themselves as to the issues to be tried based on the pleaded case, it would not be fair to the parties if the trial judge is to deduce his own agreed issues. Also, this is not a case where parties are unable to agree on the issues to be tried or had separately submitted issues to be tried.

[49] It was finally submitted that the learned trial judge had committed a fundamental error and on account of the same, the judgment cannot stand.

[50] We have examined the issues. The agreed issues to be tried for the main trial came to about 21 issues, whereas as between the plaintiff and the 1st defendant there were 8 issues and between the plaintiff and the 2nd defendant, 13 issues were involved. As for the counterclaims, there were a total of 24 issues. Apparently, the issues overlapped substantially.

[51] In such event, it is not difficult to understand why the learned trial judge had reformulated the agreed issues to be tried in the manner he did. Otherwise, he would have been overwhelmed by the issues. In his grounds of judgment, at pp. 1956, 1957, Supplementary Record of Appeal, the learned trial judge reasoned:

“There are no common issues to be tried that have been agreed upon by the parties herein. Each party has their own list of issues to be tried. This is evident from the written submissions filed by the respective counsels. I have examined the pleadings, the evidence adduced by the parties as well as the documentary evidence produced during the trial and of the opinion that the dispute herein can be determined based on the following main issues, namely:

(1)

...

as reproduced at para. 25, 
p. 12 of this judgment.”

(2)

...

(3)

...


[52]
We were in agreement with the learned trial judge that the disputes herein can be disposed off within the confines of the 3 aforesaid issues as reformulated by the learned trial judge himself without causing any prejudice to any of the parties herein. We agreed that the 21 issues to be tried in the main trial and 24 issues for the counter-claims substantially overlapped. The agreed issues as reformulated by the learned trial judge are materially the same and were within the four walls of the overall issues as proposed by the parties, except that the issues as now reformulated by the learned trial judge are a lot more leaner, concise, plain and direct to the point. None of the relevant and important issues though were left out.

[53] In the final analysis, it is apparent that the learned trial judge had gone through the pleadings and evidence adduced and had extracted the issues correctly and sufficiently to dispose off the case. In all the circumstances of the case, he is entitled to do so, principally, for the expeditious and fair disposal of the case-see Layang-layang Helicopters Sdn. Bhd. v NCT Helicopters Sdn. Bhd. [2014] 1 LNS.

[54] In the event, we found the current issue equally devoid of any merit.

Ground (iii) - the 2nd defendant is not authorized to compromise the 2nd Suit or conclude the alleged settlement agreement on behalf of the 1st defendant

[55] Learned counsel for the 1st defendant submitted that the primary issue raised in the pleading was whether the 1st defendant had appointed or authorized the 2nd defendant to negotiate and enter into any settlement on its behalf with the plaintiff in respect of the 2nd Suit.

[56] It was further submitted that on the evidence as adduced before the Court, the learned trial judge was correct to find that the 2nd defendant was not authorized to compromise a settlement on behalf of the 1st defendant and that the 2nd defendant did not have the express authorization from the 1st defendant to commit it to a substantial settlement. Hence, on this finding alone, it was sufficient to dispose off this case in favour of the 1st defendant.

[57] Thus, it is submitted further that correspondingly, the learned trial judge’s findings that there was a concluded settlement between the plaintiff and 1st defendant is contrary to his own finding that the 2nd defendant is not authorized to compromise the settlement on behalf of the 1st defendant and that the 2nd defendant did not have the express authorization from the 1st defendant to commit the 1st defendant to the settlement.

[58] In addition, on the 2nd defendant’s retainer, the learned trial judge found as follows, at pp. 1972, 1973 Supp. Record of Appeal:

“Hence the authority of a solicitor will be depended on the retainer and this aspect I am persuaded by the authority cited by learned counsel for the plaintiff (In the matter of HIH Insurance Ltd (in liquidation); Smith & Ors v Mc Grath & Ors [2014] NSWSC 922) that this authority must be given in writing.

In this instant case the crux of the matter is whether or not the 2nd defendant has the authority to commit the 1st defendant to substantial liability of about RM5 million. It is the 2nd defendant’s case that he has been given a written authority by the 1st defendant (Bundle F2 page 181); however this warrant obviously in respect of claim against OPS Suria (EM) Sdn. Bhd. Hence when the 2nd defendant proceeded to accept the proposed settlement term from TC Chong & Advocates, it is not related to matters in their claim against OPS Suria. It is about committing the 2nd defendant to pay. I am of the opinion that this is the only written instruction given by the 1st defendant to the 2nd defendant and the 2nd defendant should not be permitted to rely on any verbal instruction as it would not be consistent with section 92 of the Evidence Act. In the circumstances I rule that, on the balance of probability, the 2nd defendant has no authority to settle the dispute between the plaintiff and the first defendant.”

[59] Be that as it may, in our view, the learned trial judge did not take the simplistic approach a suggested by learned counsel for the 1st defendant but had however, taken the approach of dissecting the issue of authorization into 2 parts, to wit:

(i) authorization as between the plaintiff and the 1st defendant;

(ii) authorization as between the 2nd defendant and the 1st defendant.

[60] As between the plaintiff and the 1st defendant, the learned trial judge, based upon the grounds enumerated earlier in para. 34(i) to (ix), pp. 16 to 19 of this judgment, found that the 2nd defendant is authorized to represent the 1st defendant in the negotiations for the settlement of their disputes and therefore the 1st defendant is bound by the settlement reached between the 2nd defendant and the solicitor for the plaintiff, M/s T.C. Chong & Co.

[61] We were with the learned trial judge on the aforesaid findings by him. In all the circumstances of the case and the events leading to the conclusion of the settlement agreement and upon the strength of the letter dated 8.7.2010, we opined that it was not unreasonable for the plaintiff to infer that they could rely on the ostensible authority of the 2nd defendant to negotiate and enter into a settlement on behalf of the 1st defendant.

[62] In addition, the evidence showed that Collin Lai, counsel on record for the 1st defendant, was informed of the negotiations and of the settlement itself that was attempted and conducted by the 2nd defendant and he did not at any time object to the 2nd defendant’s role in the negotiations whether before or after the settlement agreement was reached. The learned trial judge even found that Collin Lai had even advised the parties to comply with the settlement that was agreed upon.

[63] The events that ensued after the settlement agreement was reached further fortified the notion that the 2nd defendant was authorized to negotiate a settlement agreement between the plaintiff and the 1st defendant and there was indeed a concluded settlement agreement between the 2 parties as found as a matter of fact by the learned trial judge. The execution of the Deed of Assignment and the Letter of Undertaking were in terms of the 8.7.2010 and 12.7.2010 letters as negotiated by the 2nd defendant and the solicitor for the plaintiff.

[64] The titles of both these letters refers to the 1st Suit (Suit No. 22-9­-2010-111, between OPS Suria (EM) Sdn. Bhd. v Ayuda Engineering Services Enterprise and 2 Ors); the 2nd Suit (Suit No. 22-111-2010-­111, between OPS Suria (EM) Sdn. Bhd v Ayuda Engineering Services Enterprise Sdn. Bhd., now known as the 1st defendant) and the matter that was still pending arbitration between OPS Suria (EM) Sdn. Bhd. v Ayuda Engineering Services Enterprise. Clearly, the settlement sought by the parties was global in nature to encompass all the Suits that were still pending before the courts and arbitration. There can be no dispute that the 1st defendant was a party in the negotiations then in progress and the settlement that was finally achieved pursuant to the said agreement. There can also be no denying and was certainly within the knowledge of the 1st defendant that the 2nd defendant was very instrumental in the said process of negotiations which resulted in the said settlement.

[65] In addition, a settlement agreement at pp. 1586 to 1591, Vol. 5 (Part C) RA, was executed between the plaintiff and the defendants in the 1st Suit on 26.8.2010. It was only after seeing this formal agreement that the 1st defendant, through DW-3, decided to review the terms of the settlement and finally retracted their earlier agreement that the 1st defendant would give their Letter of Guarantee pursuant to the terms of the 2 letters dated 8.7.2010 and 12.7.2010. The terms of the proposed settlement vide the 2nd defendant’s letter dated 8.7.2010 which was carbon copied to his clients (the defendants in both Suits) and accepted by the plaintiffs vide their 12.7.2010 reply, clearly implicate the 1st defendant in the settlement process, evinced at paras. 4.1 to 4.4 of the 8.7.2010 letter. Although the said letter dated 8.7.2010 was carbon copied to the defendants, there was apparently no hostile response from them, expressing their objections or disagreements, in particular from the 1st defendant.

[66] As between the 2nd defendant and the 1st defendant, the 2nd defendant’s authority to act for the 1st defendant in the negotiation process could either be expressed or implied. The law is trite that there is no such rigidity that the authority must be expressed in written form. It could be implicit in terms of the retainer and no formalities are required to constitute a valid retainer. It may be in writing or made orally or be inferred from the conduct of the parties therein. In Gurbachan Singh Bagawan Singh & Ors v Vellasamy Pennusamy & Other Appeals [2015] 1 CLJ 719, the Federal Court ruled, at pp. 739, 740:

"[36] A solicitor-client relationship may arise either:

(a) by an express agreement between a solicit and a client; or

(b) where there is express assertion by a solicitor to act for the client; or

(c) it may be implied.

[37] Where it is to be implied it is for the purported client in an action against a solicitor to prove the existence of a solicitor-client relationship between them. Proof of such relationship requires an objective consideration of all the facts and circumstances in order to come to a reasonable conclusion:

(a) that the purported client has sought for advice or assistance from the solicitor;

(b) that the assistance sought for was within the profesional competence of the solicitor;

(c) that the solicitor expressly or impliedly agree to provide such assistance or reasonably should know that the purported client would reasonably rely on him to provide the assistance; and

(d) that it was reasonable for the purported client to believe that the solicitor was representing him.

[38] It is therefore a matter of evidence to determine whether a solicitor-client relationship exists. Hence, it is essential to consider such evidence adduced including the words and conduct of the parties towards each other. It is also to be noted that fee arrangement or payment is not determinative of the existence of a solicitor-client relationship. Take for instance the case of the Minnesota woman who met a lawyer for less than an hour to consult on a possible claim for medical negligence. At that point in time only ten months was left before limitation would set in. No fee arrangement or authorization to act was discussed. But the woman was left with the impression that her case was weak and that the lawyer would consult with others to discuss the case, only getting back to her if she had a viable claim. The woman did not hear from the lawyer even after a year past. So she consulted another lawyer but only to find that the statute of limitation had set in. The first lawyer was ultimately found liable and was ordered to pay a sum that the woman would have received if she had timely proceeded with her case. But unilateral belief by a purported client that the solicitor would represent him or her would not suffice.”

[67] Edgar Joseph Jr. FCJ speaking for the Federal Court in Teh Eok Kee & Anor v Tan Chiah Hock & Anor [1996] 2 CLJ 227 postulated that it is a question of fact in each case, whether a solicitor has actual or ostensible authority to bind his client contractually. His authority is limited by his instructions, which is also a question of fact. The burden of proof of establishing such authority must rest on the party who alleges it.

[68] There are ample evidence though to suggest the existence of such implied authority for the 2nd defendant to negotiate with the plaintiff on behalf of the 1st defendant. It is most discernible during the cross-examination of DW-3, a member of the 1st defendant’s Board of Directors when he admitted that he was aware of the negotiations and settlement process and the issues involved, but did not intervene to stop it nor register any objections. Also, there was almost total adherence of the terms of the settlement as proposed in the said 2 letters dated 8.7.2010 and 12.7.2010 but for DW-3’s last minute intervention, resulting in the retraction of the 1st defendant’s initial agreement to issue the said Letter of Guarantee pursuant to the settlement agreement vide the aforesaid 2 letters.

[69] The factors taken into account by the learned trial judge enumerated in para. 34 (i) to (ix), pp. 16 to 19, of this judgment are equally strong indicators of the 2nd defendant’s implicit authority to bind the 1st defendant.

[70] For all the reasons given, we were unanimous in our view that in so far as the plaintiff is concerned, they have entered into a valid binding contract with the 1st defendant. The dispute was only between the 1st and 2nd defendants and not with the plaintiff.

[71] Henceforth, the 1st defendant’s appeal was dismissed with costs quantified at RM10,000.00, subject to the payment of the allocator fee. Deposit was refunded to the 1st defendant.

The 2nd Defendant’s Appeal (Civil Appeal No. S-02(W)-1075-06/2015)

[72] The 2nd defendant’s appeal is against the 1st defendant and the plaintiff and grounded upon the following issues:

(i) The learned trial judge erred in law and in fact when he found that the 2nd defendant had the authority to negotiate and propose settlement with the plaintiff on behalf of the 1st defendant but did not have the written authority to settle the dispute between the plaintiff and the 1st defendant i.e to commit the 1st defendant to a substantial liability of RM5 million.

(ii) That the settlement agreement formed by the exchange of the proposal letter dated 8.7.2010 issued by the 2nd defendant’s firm to the plaintiff’s solicitor (M/s T.C. Chong & Co) constituted an instrument relating to proceedings in Sarawak Court. Y.A. Datuk Douglas Primus Sikayun had, on 22.1.2014, in an unrelated case ruled that since the 2nd defendant was not admitted to practice in the State of Sarawak, he had breached s.16(1)(a) of the Sarawak Advocates Ordinance, Cap. 110. The 2nd defendant contended that there is no such breach and urged this Court to purged the said ruling.

[73] We had no hesitation in dismissing Ground (i) of the 2nd defendant’s appeal on account that there was no order nor any judgment issued against the 2nd defendant. Hence, his appeal was not maintainable.

[74] We also had no hesitation in dismissing Ground (ii) of the 2nd defendant’s appeal on account that the said ruling by Y.A. Datuk Douglas Primus Sikayun was made in another proceeding not related with the present case before us. Hence, we decline jurisdiction to preside and hear the issue.

[75] The 2nd defendant’s appeal was therefore dismissed with cost at RM5000.00 to each of the respondents (the plaintiff and 1st defendant) subject to payment of the allocator fee. Deposit was refunded to the 2nd defendant.

[76] In view of the decision in Appeal No. S-02(W)-834-05/2015, the plaintiff did not proceed with its cross-appeal as it had now become academic. The said cross-appeal was withdrawn without more.

DATED: 8th May 2018

AHMADI HAJI ASNAWI
Judge
Court of Appeal, Malaysia

COUNSEL

For the Appellant/ Respondents: Norbert Yapp & Eow Ee Pei, T/n Norbert Yapp & Associates

For the 1st Respondent: Francis Wong Kum Heng & Roweina Bt Rasid, T/n William Liaw Chan & Co

For the 2nd Respondent: Zaleha Binti Mohd Yusuf Pan, T/n Peter Lo & Co

Legislation referred to:

Evidence Act 1950, Section 29

Sarawak Advocates Ordinance, Section 16(1)(a)

Judgments referred to:

Gaymark Investment Pty v Nicholas & Sevanti Tsangaris & Emmanuel & Garfalix Gerakios (No. Ap. 1 of 1986)

Gurbachan Singh Bagawan Singh & Ors v Vellasamy Pennusamy & Other Appeals [2015] 1 CLJ 719

In the matter of HIH Limited (in liquidation); Smith & Ors v McGrath & Ors; McGrath & Ors [2014] NSWSC 922

Layang-layang Helicopters Sdn. Bhd. v NCT Helicopters Sdn. Bhd. [2014] 1 LNS

McEwan [2005] Ltd v Sharp Tudhope [2009] NZHC 706

OPS Suria (EM) Sdn. Bhd v Ayuda Engineering Services Enterprise Sdn. Bhd., Suit No. 22-111-2010­-111

OPS Suria (EM) Sdn. Bhd. v Ayuda Engineering Services Enterprise and 2 Ors, Suit No. 22-9­-2010-111

Teh Eok Kee & Anor v Tan Chiah Hock & Anor [1996] 2 CLJ 227

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