PT Kiara Temasek Internasional v Inai Kiara Sdn Bhd &

[2016] 10 MLJ Ors (Chan Jit Li JC) 537

A PT Kiara Temasek Internasional v Inai Kiara Sdn Bhd & Ors

HIGH COURT (SHAH ALAM) — CIVIL SUIT NO 22NCVC-647–12 OF

2015
B CHAN JIT LI JC
20 JUNE 2016

Civil Procedure — Striking out — Application for — Whether court should

C conduct minute examination of documents or facts — Whether matter ought to be
determined at trial — Whether claim clearly unsustainable — Rules of Court
2012 O 18 r 19(1)

The dispute related to the construction of a breakwater for the new deep water
D terminal at Kuantan Port (‘the project’). The third defendant appointed the
first and second defendants as contractor to construct the project. The third
defendant, however, was unhappy with the lack of progress of the project. To
address this issue of delay, it was agreed that the plaintiff be appointed as an
additional subcontractor. This plan, however, failed to placate the third
E defendant. It was then agreed that the contractor would surrender to the third
defendant that part of the project which had earlier been awarded to the
plaintiff. The third defendant’s was also given the prerogative of appointing a
new contractor to construct the surrendered area. The contractor then
terminated the plaintiff ’s appointment. The plaintiff thus commenced this
F action against the first and second defendants alleging breach of contract and
against the third defendant for inducing a breach or procuring a breach of
contract. The third defendant applied to strike out the plaintiff ’s claim under
O 18 r 19(1) of the Rules of Court 2012 contending that it was plainly and
obviously unsustainable. It was the plaintiff ’s case that the breach of contract
G constituted of the acts of taking back the works awarded to the plaintiff and the
subsequent award of the same to the new contractor resulting in the
termination of the plaintiff ’s appointment.

Held, dismissing the application with costs of RM5,000:

H
(1) The tort of inducing a breach or procuring a breach of contract is
committed when a third party deliberately interferes in the execution of
a valid contract that has been concluded between two or more other
parties (see para 19).
I (2) It constitutes a tort of inducement to breach of contract if five conditions
are fulfilled: (a) first, there must be either ‘direct’ interference or ‘indirect’
interference coupled with the use of unlawful means; (b) secondly, the
defendant must be shown to have knowledge of the relevant contract;
(c) thirdly, he must be shown to have had the intent to interfere with it;
538 Malayan Law Journal [2016] 10 MLJ

(d) fourthly, in bringing an action, other than a quia timet action, the A
plaintiff must show that he has suffered special damage, that is, more than
nominal damage; and (e) fifthly, so far as is necessary, the plaintiff must
successfully rebut any defence based on justification which the defendant
may put forward (see para 20).
B
(3) In an application under O 18 r 19(1) the court should not conduct a
minute examination of the documents or facts to ascertain whether the
defendant has a defence. If the third defendant was of the view that the
manner in which it acted was justified in view of the delay in the project,
then it was a matter which ought to be determined at a trial. The third C
defendant thus failed to show that the plaintiff ’s claim was clearly
unsustainable (see para 37).

[Bahasa Malaysia summary

Pertikaian berkaitan kepada pembinaan tembok penahan ombak bagi terminal D
dalam baru di Pelabuhan Kuantan (‘projek’). Defendan ketiga melantik
defendan pertama dan kedua sebgaai kontraktor untuk membina projek
tersebut. Defendan ketiga, walau bagaimanapun tidak berpuas hati dengan
ketiadaan kemajuan projek tersebut. Bagi menangani isu kelewatan ini, ia
dipersetujui bahawa plaintif dilantik sebagai subkontraktor tambahan. Pelan E
ini, walau bagaimanapun, gagal untuk menenangkan defendan ketiga. Ia
dipersetujui bahawa kontraktor akan memberikan kepada defendan ketiga
bahagian projek yang pada mulanya diawardkan kepada plaintif. Defendan
ketiga juga diberikan prerogatif untuk melantik kontraktor baru untuk
membina kawasan yang diberikan. Kontraktor kemudiannya menamatkan F
pelantikan plaintif. Plaintif oleh itu memulakan tindakan ini terhadap
defendan-defendan pertama dan kedua dengan mendakwa kemungkiran
kontrak dan terhadap defendan ketiga kerana mendorong kemungkiran atau
memperolehi kemungkiran kontrak. Defendan ketiga memohon untuk
membatalkan tuntutan plaintif di bawah A 18 k 19(1) Kaedah-Kaedah G
Mahkamah 2012 dengan berhujah bahawa ia adalah jelas dan nyata tidak
boleh dipertahankan. Adalah kes plaintif bahawa kemungkiran kontrak
membentuk tindakan mengambil balik kerja-kerja yang diawardkan kepada
plaintif dan award seterusnya daripadanya kepada kontraktor baru
mengakibatkan penamatan pelantikan plaintif. H

Diputuskan, menolak permohonan dengan kos sebanyak RM5,000:

(1) Tort yang mendorong kemungkiran atau memperolehi kemungkiran
kontrak adalah dilakukan apabila pihak ketiga dengan sengaja campur I
tangan dalam pelaksanaan kontrak yang sah yang telah disimpulkan di
antara dua atau lebih pihak lain (lihat perenggan 19).
(2) Ia membentuk tort mendorong untuk memungkiri kontrak jika lima
syarat dipenuhi: (a) pertama, mesti terdapat sama ada campur tangan
 PT Kiara Temasek Internasional v Inai Kiara Sdn Bhd &
[2016] 10 MLJ Ors (Chan Jit Li JC) 539

A ‘direct’ atau campur tangan ‘indirect’ bersama dengan penggunaan

maksud yang salah di sisi undang-undang; (b) kedua, defendan mesti
menunjukkan mempunyai pengetahuan mengenai kontrak relevan;
(c) ketiga, ia mesti menunjukkan mempunyai niat untuk campur tangan
dengannya; (d) keempat, dalam membawa tindakan, selain daripada
B tindakan quia timet, plaintif mesti menunjukkan bahawa dia
menanggung ganti rugi khas, iaitu, lebih daripada ganti rugi nominal;
dan (e) kelima, setakat yang perlu, plaintif mesti dengan berjaya
mematahkan apa-apa pembelaan berdasarkan atas justifikasi yang mana
defendan mungkin bangkitkan (lihat perenggan 20).
C
(3) Dalam permohonan di bawah A 18 k 19(1) mahkamah tidak patut
menjalankan pemeriksaan ke atas dokumen-dokumen atau fakta untuk
memastikan sama ada defendan mempunyai pembelaan. Jika pihak
ketiga berpendapat bahawa cara di mana ia bertindak adalah
D berjustifikasi mengambil kira kelewatan dalam projek, oleh itu ia adalah
perkara yang perlu ditentukan di perbicaraan. Defendan ketiga oleh itu
gagal untuk menunjukkan bahawa tuntutan plaintif jelas tidak boleh
dipertahankan (lihat perenggan 37).]

E Notes
For cases on application for striking out, see 2(5) Mallal’s Digest (5th Ed, 2015)
paras 8782–8808.

Cases referred to
F Bandar Builder Sdn Bhd & Ors v United Malayan Banking Corporation
Bhd [1993] 3 MLJ 36, SC (refd)
Greig and others v Insole and others [1978] 3 All ER 449, Ch D (refd)
Loh Holdings Sdn Bhd v Peglin Development Sdn Bhd & Anor [1984] 2 MLJ
105, FC (folld)
G Q2 Engineering Sdn Bhd v PJI-LFGC (Vietnam) Ltd & Ors [2013] 8 MLJ 157,
HC (refd)

Legislation referred to
Rules of Court 2012 O 18 r 19(1)
H
Mohd Zainudin Omar (Nurul Izza bt Shamsul Kamal with him) (Zainuddin &
Assoc) for the plaintiff.
T Kuhendran (Esther Tan with him) (Zul Rafique & Partners) for the third
defendant.
I
Chan Jit Li JC:

[1] Enclosure (9) is the third defendant’s application to strike out the
plaintiff ’s claim under O 18 r 19(1) of the Rules of Court 2012.
540 Malayan Law Journal [2016] 10 MLJ

[2] The Supreme Court in Bandar Builder Sdn Bhd & Ors v United Malayan A
Banking Corporation Bhd [1993] 3 MLJ 36 sets out the law on such an
application as follows:
The principles upon which the court acts in exercising its power under any of the
four limbs of O 18 r 19 (1) of the RHC are well settled. It is only in plain and B
obvious cases that recourse should be had to the summary process under this rule
(per Lindley MR in Hubbuck & Sons Ltd v Wilkinson, Heywood & Clark Ltd ), and
this summary procedure can only be adopted when it can be clearly seen that a claim
or answer is on the face of it ‘obviously unsustainable’ (see AG of Duchy of Lancaster
v L & NW Rly Co ). It cannot be exercised by a minute examination of the
documents and facts of the case, in order to see whether the party has a cause of C
action or a defence (see Wenlock v Moloney & Ors ). The authorities further show
that if there is a point of law which requires serious discussion, an objection should
be taken on the pleadings and the point set down for argument under O 33 r 3
(which is in pari materia with our O 33 r 2 of the RHC) (see Hubbuck & Sons Ltd
v Wilkinson, Heywood & Clark Ltd ). The court must be satisfied that there is no D
reasonable cause of action or that the claims are frivolous or vexatious or that the
defences raised are not arguable.

[3] The plaintiff ’s cause of action against the first and second defendants is
E
for a breach of contract while its cause of action against the third defendant is
for inducing a breach or procuring a breach of contract.

[4] The facts of the case are as follows. The parties’ dispute relates to the
construction of a breakwater for the new deep water terminal at Kuantan Port, F
Pahang for the East Coast Economic Region Development Council (‘the
project’).

[5] The third defendant appointed the first and second defendants as
contractor to construct this project vide a contract dated the 23 July 2013. G

[6] By this contract the first and second defendants, jointly known as Inai
Kiara Hwa Chi Joint Venture or IKHCJV (‘the contractor’), will take
possession of the site on 2 April 2013 and were required to complete the project
by 20 October 2015. H

[7] The third defendant, however, was unhappy with the lack of progress of
the project. To address this issue of delay, the contractor in a meeting dated
8 July 2015 proposed to the third defendant the following plan. The first step
will be to divide the remaining uncompleted work into three areas. Then two I
subcontractors would be appointed to increase the contractor’s capacity. The
contractor will continue to construct one of the remaining unconstructed area
whilst the two subcontractors will each construct one of the remaining two
areas.
 PT Kiara Temasek Internasional v Inai Kiara Sdn Bhd &
[2016] 10 MLJ Ors (Chan Jit Li JC) 541

A [8] This plan will expedite the construction of the project as the contractor
and the two subcontractors will not only be carrying out the construction
simultaneously but each of them will be responsible for a smaller area.

[9] The third defendant accepted the proposed plan. The contractor then
B proceeded to appoint the plaintiff and one Global Marine Contractors Sdn
Bhd as the subcontractors with the plaintiff being awarded the area CH 3600
to CH 4627.

C [10] This plan, however, failed to placate the third defendant. A series of
meetings were held among the three defendants to resolve this issue of delay.
These meetings culminated in the execution of a supplementary agreement on
23 October 2015. By this agreement, the contractor agreed to surrender to the
third defendant that part of the project which had earlier been awarded to the
D plaintiff. The third defendant’s was also given the prerogative of appointing a
new contractor to construct the surrendered area.

[11] The contractor then terminated the plaintiff ’s appointment. The

plaintiff received notification of the termination through an email dated
E 10 October 2015, of which I shall refer in detail at the later part of my
judgment, leading it to file the present action.

[12] It is the third defendant’s contention that the plaintiff ’s claim against it
should be struck out as it is plainly and obviously unsustainable for the
F
following reasons:
(a) the contractor did not commit a breach of contract;
(b) even if there was breach of contract by the contractor, it was never the
G intention of the third defendant to induce the breach; and
(c) the damages suffered by the plaintiff were not caused by the third
defendant but the contractor.

[13] I propose to deal with this application by addressing the following

H
issues:
(a) did the first and second defendants as the contractor commit a breach of
contract? and

I (b) has the plaintiff by its affidavits, if believed, shown that the third
defendant had committed the alleged tort?
542 Malayan Law Journal [2016] 10 MLJ

DID THE FIRST AND SECOND DEFENDANTS AS THE A

CONTRACTOR COMMIT A BREACH OF CONTRACT?

[14] It is the plaintiff ’s case that the breach of contract constitutes of the acts
of taking back the works awarded to the plaintiff and the subsequent award of
the same to the new contractor resulting in the termination of the plaintiff ’s B
appointment.

[15] Encik Kuheran, learned counsel for the third defendant, submits that
the contractor could not have committed a breach of contract because of a C
person known as Daniel Ting. He refers to that Daniel Ting as the ‘common
denominator’ in both the second defendant-company and the
plaintiff-company and wears the hat of both companies interchangeably.
Daniel Ting, the deponent of all of the plaintiff ’s affidavits is the director of the
plaintiff company. The minutes of the meeting of 8 July also shows that Daniel D
Ting as the technical director had represented the second defendant in the said
meeting.

[16] Encik Kuheran then continues by submitting that the second defendant
had attended all of the meetings held subsequent to 8 July. Therefore, the E
second defendant knew and, more importantly, consented to the very acts
which the plaintiff state constitutes the breach. Having consented to those acts,
Daniel Ting cannot now, by the mere change of hats, resile and rely on those
consented acts as evidence of breach.
F
[17] I note from the minutes of the meetings on which by Encik Kuheran
rest his submissions that Daniel Ting was present only at one meeting — the
meeting of 8 July. That was the meeting when the plan to appoint
subcontractors was unfurled and agreed to by the third defendant. Thereafter, G
he was notably absent in all of the meetings. Under such circumstances I find
it unsafe, as urged by Encik Kuheran, to conclude that Daniel Ting had
knowledge and/or consented to the acts in question.

[18] It is therefore my finding that it remains possible for the contractor to H

commit a breach of the contract.

HAS THE PLAINTIFF BY ITS AFFIDAVITS, IF BELIEVED, SHOWN

THAT THE THIRD DEFENDANT HAD INDUCED THE BREACH OF
CONTRACT BY THE FIRST AND SECOND DEFENDANTS? I

[19] The tort of inducing a breach or procuring a breach of contract is

committed when a third party deliberately interferes in the execution of a valid
contract that has been concluded between two or more other parties.
 PT Kiara Temasek Internasional v Inai Kiara Sdn Bhd &
[2016] 10 MLJ Ors (Chan Jit Li JC) 543

A [20] The summary of the law is in Greig and others v Insole and others [1978]
3 All ER 449. Greig’s case was cited with approval by the Federal Court in Loh
Holdings Sdn Bhd v Peglin Development Sdn Bhd & Anor [1984] 2 MLJ 105.
Slade J had held at p 484:
... (It constitutes a tort of inducement to breach of contract tort) if five conditions
B
are fulfilled:
First, there must be either (a) ‘direct’ interference; or (b) ‘indirect’ interference
coupled with the use of unlawful means: see per Lord Denning MR in Torquay Hotel
Co Ltd v Cousins [1069] 2 Ch 106 at p 138.
C As to meaning of ‘interference’ this is not confined to the actual procurement or
inducement of a breach of contract; it can cover the case where the third person
prevents or hinders one party from performing his contract even though this be not
a breach: see per Lord Denning MR.
Secondly, the defendant must be shown to have knowledge of the relevant contract.
D Thirdly, he must be shown to have had the intent to interfere with it.
Fourthly, in bringing an action, other than a quia timet action, the plaintiff must
show that he has suffered special damage, that is, more than nominal damage: see
Rookes v Barnard [1964] AC 1129, at p 1212, per Lord Devlin. In any quia timet
action, the plaintiff must show the likelihood of damage to him resulting if the act
E of interference is successful: see Emerald Construction Co Ltd v Lowthian [1966] 1
WLR 691 at p 703, per Diplock LJ.
Fifthly, so far as is necessary, the plaintiff must successfully rebut any defence based
on justification which the defendant may put forward.

F
[21] Thus, in order to determine whether or not the plaintiff has shown that
the third defendant had committed the alleged tort, I would have to consider
whether the plaintiff has shown that those five conditions were present in that:
(a) there was interference by the third defendant;
G
(b) the third defendant had knowledge of the contract between the plaintiff
and the first and second defendants;
(c) the third defendant had the intention to interfere with the contract;
(d) the plaintiff had suffered more than nominal loss; and
H
(e) the plaintiff must rebut any defence based on justification.

That there was interference by the third defendant

I [22] It is the plaintiff ’s contention that it was the third defendant’s

interference which caused the breach. This is denied by the third defendant.

[23] According to the plaintiff, in response to enquiries made in respect of its

status as the subcontractor prior to the termination the plaintiff received the
544 Malayan Law Journal [2016] 10 MLJ

following email (exh TTH1 to encl 9A): A

On Saturday, 10 October 2015, 19:22, Kuantan Breakwater Project
[email protected] wrote:
Dear Daniel,
We take note of your email below and wish to revert as follows: B
1. We have agreed as per our LOA jointly signed on 8th July 2015 to give PT
Kiara Temasek a parcel of the Works, namely form Ch. 4000 to the HEAD
(The Agreement).
2. On the 2nd of September till to date 5 nos. of High Level Management C
meetings have been taking place, chaired by KLCC and attended by
Client and IKHCJV representatives. We can inform you that it is Client’s
intention to omit part of the works from Ch. 3600 to the HEAD and award
to a third party. Focus of these discussions has been the legal structure
wherein such Client intent can be realised without disrupting existing
D
liabilities under the Main Contract. A final draft was presented to us last
week for comments and signing.
3. In view of the above developments, and your brief individual discussions
in Kuantan on 21st September 2015 with resp. Hj. Kamal, En. Arizan and
KLCC’s Chairman we can conclude that chances are slim that these works E
will be awarded to PT Kiara Temasek.
4. We therefore have decided to formally terminate The Agreement as per today
10 October 2015. A letter of the same will be forwarded to you by
registered mail.
F
Kind regards,
Marco Groot
Project Director
IKHCJV
G
(Emphasis added.)

[24] The contractor’s Project Director, one Mr Marco Groot, had by way of
this email terminated the plaintiff ’s appointment. The said Mr Marco Groot
had also explained that the termination was on account of the client’s ie the H
third defendant desire to award the plaintiff ’s work to a third party.

[25] I find Mr Marco Groot’s explanation to be evidence of the third

defendant’s interference.
I
That the third defendant had knowledge of the contract between the plaintiff and
the first and second defendants
 PT Kiara Temasek Internasional v Inai Kiara Sdn Bhd &
[2016] 10 MLJ Ors (Chan Jit Li JC) 545

A [26] I find that there is more than sufficient evidence to show that the third
defendant had knowledge of the contract between the plaintiff and the first and
second defendants for the following reasons.

[27] Firstly, the appointment of the subcontractors was first mooted at the
B meeting of 8 July and agreed to by the third defendant. Secondly, pursuant to
this agreement, a letter of award was issued to the plaintiff. This letter of award
was produced at a meeting on 9 July 2015 wherein the third defendant was
present. Subsequent to this, the plaintiff and the first and second defendants
executed a contract on 23 July. Both the letter of award and contract were
C
forwarded to the third defendant by the first defendant vide a letter dated
14 August. Last but not the least the plaintiff produced documentary evidence
which showed that the third defendant’s representative had corresponded with
the plaintiff in respect of this project (exh TTH3 to encl 9A is referred.)
D
That the third defendant had intention to interfere with the contract

[28] Encik Mohd Zainuddin Omar, learned counsel for the plaintiff,
contends that the third defendant’s intention to interfere with the contract
E became obvious when it voiced its desire to appoint the third party in place of
the plaintiff.

[29] In reply Encik Kuheran submits that this is not so and there was never
any intention or desire on the part of the third defendant to interfere. The
F breach of contract, if any, was the contractor’s own doing. In any event, the
breach was a natural or foreseeable consequence leading to the supplementary
agreement.

[30] In dealing with the issue of intention, Slade J in Greig’s case held (at
G p 485):
... If these five conditions are fulfilled and the defendant is shown to have had that
intention to interfere with the relevant contract which is necessary to constitute the
tort, it is quite irrelevant that he may have acted in good faith and without malice or
under a mistaken understanding as to his legal rights; good faith, as such, provides
H no defence whatever to a claim based on this tort: see, for example South Wales
Miners’ Federation v Glamorgan Coal Co Ltd [1905] AC 239 per Lord Macnagthen.

[31] The contents of the first defendant’s email at para 22 above places the
third defendant in a most damaging light. The third defendant’s true intent can
I only be determined after hearing an explanation from the first defendant
secured through a trial. It may well be that at the end of the day the evidence
exculpates the third defendant but be that as it may, I am of the view that it is
inappropriate at this stage to strike out the plaintiff ’s case (Loh Holdings Sdn
Bhd v Peglin Development Sdn Bhd & Anor [1984] 2 MLJ 105 followed).
546 Malayan Law Journal [2016] 10 MLJ

That the plaintiff had suffered more than nominal loss A

[32] Encik Kuheran’s contends that the third defendant should not be held
liable for the plaintiff ’s loss as it was the contractor’s breach which caused the
loss. Further, as the contractor had given notice of termination on the
10 October the third defendant entry into the arena was only after the breach B
had taken place as the supplementary agreement was executed on 23 October.

[33] This argument is obviously untenable. The tort which the third
defendant stands accused of does not require the element of privity of contract
C
(see Q2 Engineering Sdn Bhd v PJI-LFGC (Vietnam) Ltd & Ors [2013] 8 MLJ
157). And, as the act is one of inducement or procurement, that act has to come
before the breach.

[34] On the issue of nominal loss, the plaintiff explained that the project was D
a major project and required preparatory works. As time was of the essence he
undertook those steps immediately which included the purchase and rental of
barges and tugs from a company called QSA Marine & Logistics Pte Ltd. Apart
from the execution of an agreement with QSA, the plaintiff paid a down
payment of USD200,000 (the agreement and receipt are exhibited as E
exh TTH5 to encl 9A).

[35] This down payment is but a tip of the iceberg and the sum of
USD200,000 is not nominal by any ordinary standards and that being so, I am
satisfied that the plaintiff has shown that his loss is more than nominal. F

The plaintiff must rebut any defence based on justification

[36] The third defendant’s stand is that it had acted justifiably as the
completion date of the project had been delayed. The act of selecting the new G
contractor was purportedly to expedite the project.

[37] Bandar Builder’s case is very clear that in an application under O 18

r 19(1) the court should not conduct a minute examination of the documents
or facts to ascertain whether the defendant has a defence. But if the third H
defendant is of the view that the manner in which it acted was justified in view
of the delay in the project, then it is a matter which ought to be determined at
a trial. More so in this case when the plaintiff ’s October termination came so
very soon after first September 2015 ie the date the plaintiff was contractually
bound to commence work. I

[38] In conclusion I find that the third defendant has failed to show that the
plaintiff ’s claim is clearly unsustainable. This application is therefore dismissed
with costs of RM5,000.
 PT Kiara Temasek Internasional v Inai Kiara Sdn Bhd &
[2016] 10 MLJ Ors (Chan Jit Li JC) 547

A Application dismissed with costs of RM5,000.

Reported by Kanesh Sundrum