MAXISEGAR SDN BHD & ANOR V. INDERA MANAGEMENT SERVICES SDN BHD

HIGH COURT [KUALA LUMPUR]
ZULKEFLI AHMAD MAKINUDIN, J
CIVIL SUIT NO: D3 - 22 - 2129 - 1998
5 OCTOBER 2005
IN THE HIGH COURT OF MALAYA AT KUALA LUMPUR

CIVIL SUIT NO: D3-22-2129-1998

BETWEEN

(a) Maxisegar Sdn Bhd

(b) Abra Development Sdn Bhd - PLAINTIFFS

AND

Indera Management Services Sdn Bhd - DEFENDANT
 

JUDGMENT

The Plaintiffs' Claim

The relevant facts relating to the plaintiffs' claim against the defendant gathered from the amended Statement of Claim can be laid out as follows:-

(c) By a letter of appointment dated 15-11-1996, the first plaintiff appointed the defendant as the Property Manager to manage properties developed by the first plaintiff known as "Grandeur Tower" and "Low Cost 940" with effect from 20-11-1996 which appointment was accepted by the defendant or on about 12-12-1996 (hereinafter referred to as "the 1st appointment").

(d) By a letter of appointment dated 15-11-1996, the second plaintiff appointed the defendant as the Property Manager to manage property developed by the second plaintiff known as "Le Jardine Deluxe" with effect from 20-11-1996 which appointment was accepted by the defendant on or about 12-12-1996 (hereinafter referred to as "the 2nd appointment).

(e) That the term of both the 1st and 2nd appointments are identical and contain in the following express and/or implied terms inter alia:-

(i) the defendant shall prepare and dispatch monthly billings and collect maintenance charges from the owners/ residents of the properties and to initiate appropriate action against those in arrears.

(ii) the defendant shall engage in and carry out preventive maintenance for efficient upkeep of the properties;

(iii) that the defendant shall ensure that the appointed landscaping contractor, cleaning services contractor, security guard and other contract workers execute their duties effectively and promptly;

(iv) the defendant shall prepare and submit monthly maintenance charge collection report and statement of account on every 7th of the month to the plaintiffs;

(v) the defendant shall prepare and submit yearly budget to the plaintiffs;

(vi) the defendant shall be paid professional fee at RM13.00 per unit in respect of "Grandeur Tower", RM10.00 per unit for "Low Cost 940" and RM13.00 per unit for "Le Jardine Deluxe";

(vii) either party may terminate the said appointments by giving 3 months advance notice, without giving any reason whatsoever;

(viii) the defendant is authorized to make payment up to RM100.00 for the payment of the services within the scope of work and any expenditure above the said amount shall be approved by the plaintiffs;

(ix) the defendant to record water meter readings of each unit and bill for and collect monies from the owners/residents for water consumption for each unit, regularly;

(x) the defendant is obliged to ensure that the collections are sufficient to meet the maintenance expenses including payment for essential services e.g. electricity and water supply, insurance and for other services including cleaning, security etc. as well as the defendant own professional fee; and

(xi) all monies collected by the defendant must be deposited into the plaintiffs' account and any payments made must be from the above said accounts and made through cheques issued by authorized signatory of the plaintiffs.

(f) That despite repeated requests and/or demands and/or reminders by the plaintiffs, the defendant had breached the terms of the appointments and/or failed, refused and/or neglected to perform its reasonable responsibilities as a Property Manager.

(g) That in relation to all 3 properties, the defendant had, since its appointment, failed, refused and/or neglected to fulfil obligation referred to in paragraph 3(i) to (v) and (viii) to (xi) above.

(h) That pursuant to the breaches and/or failure of the defendant as stated above, the plaintiffs had on or about 6-1-98 instructed its internal auditors to conduct an examination of the defendant's books and accounts and such related documents for a period from November 1996 to December 1997 that revealed the following:-

(i) The defendant breached, failed, refused and/or neglected to maintain separate statements of account for each of the residents/owners.

(ii) The defendant fraudulently and wrongfully misappropriated monies collected from residents/owners for its own usage wrongly and failed, refused and/or neglected to deposit the said monies into the plaintiffs' bank accounts or to account for the said monies to the plaintiffs, particulars whereof are:-

(a) the defendant intentionally failed, refused and/or neglected to maintain receipts with sequential order or if the defendant did maintain such receipts, failed, refused and/or neglected to submit all the official receipt books to the plaintiffs' auditors;

(b) an amount of RM192,040.10 in relation to "Grandeur Tower" and "Low Cost 940" and an amount of RM17,443.57 in relation to "Le Jardine Deluxe" that was collected in cash but not deposited or banked into plaintiffs' accounts and are not accounted for in the bank statements;

( c) an amount of RM126,228.20 in relation to "Grandeur Tower" and "Low Cost 940" and an amount of RM 11,757.32 for "Le Jardine Deluxe" in cash and banked into the plaintiffs' account with no official receipts;

(d) resulting in a nett cash shortage of RM65,811.40 for "Grandeur Tower" and "Low Cost 940" and RM5,686.25 for "Le Jardine Deluxe";

(e) an amount of RM31,904.46 for "Grandeur Tower" and "Low Cost 940" and an amount of RM20,768.75 for "Le Jardine Deluxe" collected in the form of cheques but not deposited into plaintiffs' account;

(f) an amount of RM31,486.32 for "Grandeur Tower" and "Low Cost 940" and an amount of RM2,139.75 for "Le Jardine Deluxe" in the form of cheques banked into the plaintiffs' account with no official receipts;

(g) as a result of the breaches and fraudulent activities by the defendant, the plaintiffs suffered loss and damage;

(h) that at a meeting held between the representatives of the plaintiffs and the defendant on 30-4-98, the breaches and fraudulent activities were brought to the defendant's attention and that the defendant promised to provide clarification and/or explanation;

(i) that notwithstanding paragraph (h) above, until 1-5-98, the defendant still failed, refused and/or neglected to provide any clarifications and/or explanation;

(j) in view of the defendant's breaches of the term of the appointment and unexplained fraudulent activities, defendants appointment as the Property Manager was terminated with effect from 1-6-98 vide plaintiff's solicitors' letters dated 1-6-98; and

(k) that in compliance with clause 7 the 1st and 2nd letters of appointment, the first plaintiff terminated the appointment of the defendant as its Property Manager on or about 14-7-1999 by notice in writing dated 24-3-1999 and that similarly the second plaintiff terminated the defendant's appointment as Property Manager on or about 14-8-1999 by notice in writing dated 26-4-1999.

The plaintiffs claimed loss and damage against the defendant and sought the following reliefs:-

(a) for a declaration:-

(i) that the first plaintiff has lawfully terminated the 1st appointment dated 15-11-1996 on or about 14-7-1999;

(ii) that the second plaintiff has lawfully terminated the 2nd appointment dated 15-11-1996 on or about 14-8-1999; and

(iii) in the alternative that the defendant's appointment as the plaintiffs' Property Manager have been properly terminated and that the defendant is no longer the Property Manager for the properties.

(a) an injunction to restrain the defendant from acting as the Property Manager, collecting any monies as the Property Manager and entering onto any part of the properties;

(b) that defendant returns vacant possession of the property management office in the properties within 24 hours of granting of order;

(c) special damages and/or monies has and received by the defendant for plaintiffs' use and/or monies held on constructive trust:-

(i) in respect of the first plaintiff, an amount of RM192,040.10 and RM31,904.46 or such sum or sums as the Court may award at the trial; and

(ii) in respect of the second plaintiff, an amount of RM11,575.32 and RM2,134.75 or such sum or sums as the Court may award at the trial.

(e) general damages for breach of contract;

(f) damages for tort of conversion;

(g) general damages for tort of trespass to land; and

(h) costs.

The Defendant's Amended Defence and Counterclaim

In the defendant's amended defence and counterclaim, the defendant averred as follows:-

(1) that the defendant has discharged the obligations pursuant to the 1st and 2nd letters of appointment efficiently and effectively but faced resistance from the plaintiffs' representatives including but not limited to Mr. Gan Eee Chin, Mr. P. Muniandy, Mr. Yong Peing Feei, Ms. Vasantha Manickam and Mr. Lee;

(2) that the defendant's appointment was at the invitation and instructions of Tan Sri Chan Ah Chai, a close friend and former University Malaya 2nd residential college colleague of the defendant's director, Dr. Bernard Thong who is also Puan Sri's cousin against the wishes of the plaintiffs' representatives who wanted to appoint a Property Manager who would entertain them;

(3) the plaintiffs are put to strict proof pertaining to the implied conditions of appointment in paragraph 15 of the amended Statement of Claim;

(4) that when the defendant took up the appointment as the Property Manager in place of Munira & Co., the former Property Manager, the common facilities and preventive maintenance were in deplorable state due to inter alia the following reasons:-

(i) the plaintiffs' incessant refusal to pay contractors for services rendered;

(ii) the plaintiffs' refusal to use the maintenance and service fee collected by Munira & Co. to settle the current bills; and

(iii) the plaintiffs' refusal to pay Munira & Co. the agreed professional fee.

(5) as a result of the plaintiff's constant refusal to pay for service rendered, existing contractors refused to provide services and the defendant had to source for new contractors and at all material time plaintiffs were notorious for not paying for services rendered; hence the decline in the quality of services rendered, consequence of which, collection of maintenance fee was effected;

(6) by the defendant's efforts, quality of services rendered was improved resulting in the increase in the monthly collection of maintenance fee inspite of which defendant was only paid professional fee of RM 151,540.82 instead of the agreed fee of RM301,837.84 as at June 1997;

(7) the plaintiffs' consistent refusal to pay the contractors for service rendered resulted in various meeting between the defendant and the plaintiffs' Senior Maintenance Manager, Mr. Muniandy who revealed the following:-

(i) the monthly maintenance fee collected was used to pay the plaintiffs' old and more pressing debts to avoid legal action; and

(ii) that the fee collected was also used to settle the liabilities of other companies within the Talam Group of Companies.

(8) Plaintiffs' refusal to pay the contractors for services rendered caused a decline in the quality of services provided which directly affected the collection of the maintenance fee;

(9) Approximately RM 100,000.00 was advanced by the defendant up to December 1997 to pay off the contractors on the plaintiffs' behalf and this fact was known to the plaintiffs;

(10) besides the plaintiffs' refusal to pay the contractor their dues, the following were complaints that were ignored by the plaintiffs in breach of the spirit and terms of the 1st and 2nd letters of appointment that contributed to the decline in the collection of the monthly maintenance fee:-

(i) frequent lift break down;

(ii) water leakage at "Grandeur Tower" and "Le Jardine Deluxe"; and

(iii) flooding in the basement of "Low Cost 940".

(11) as the plaintiffs breached the terms of both the letters of appointment by their refusal to pay the defendant's the agreed professional fee, a letter dated 1-12-1997 was issued by the defendant demanding for its entitlement, failing which the letter was to be treated as notice to terminate the appointment resulting in a meeting with the plaintiffs' representatives on 13- 12-1997 who communicated their intention to take over the defendant's functions with immediate effect in breach of clause 16 7. A letter dated 15-12-1997 was issued to Tan Sri Chan Ah Chai who promised to pay the defendant and the contractors and requested the defendant to continue acting as the Property Manager;

(12) that the internal auditors of Talam Group of Companies have no authority to examine the defendant's records and books and that the services of independent auditors should have been used;

(13) that the plaintiff's are fully aware that the alleged shortage in the funds collected were used to pay off the contractors to maintain the quality of services rendered at the properties;

(14) that the shortage was clarified during the meeting on 30-4-1998 and the defendant agreed to furnish the supporting documents on conditions that the monies due to the defendant is placed with the plaintiffs' solicitors' to be held as "stakeholders";

(15) the letter of termination dated 1-6-1998 is invalid by reasons of non compliance of the terms of the 1st and 2nd letters of appointment;

(16) the letters of termination dated 24-3-1999 and 26-4-1999 respectively are invalid as they were issued subsequent to the filing of the action; and

(17) that this action was commenced prior to a proper termination of the defendant's appointment and/or any breaches by the defendant. The defendant has counterclaimed against the plaintiffs as follows:-

(i) An amount of RM483,559.86 as at June 1998 made out as follows:-

(a) In respect of "Grandeur Tower", until June 1998, professional fee of RM157,248.00 and monies paid on behalf of the first plaintiff to contractors amounting to RM104,461.56 as well as an amount of RM8,736.00 per month on account of the professional fee from July 1998 until the decision of this case.

(b) In respect of "Le Jardine Deluxe" until June 1998, professional fee of RM21,621.60 and monies paid on behalf of the second plaintiff to contractors amounting to RM17,316.00 as well as an amount of RM1,965.00 per month on account of the professional fee from July 1998 until the decision of this case.

(c) In respect of "Low Cost 940" until June 1998, professional fee of RM 157,920.00 and monies paid on behalf of the first plaintiff to contractors amounting to RM24,992.70 as well as an amount of RM9,870.00 per month on account of the professional fee from July 1998 until the decision of this case.

(ii) a declaration that the notices of termination dated 24-3-1999 and 26-4-1999 are invalid;

(iii) a declaration that the defendant remains as the Property Manager of the properties;

(iv) a declaration that the plaintiffs are estopped from preventing the defendant from acting as the Property Manager and that the plaintiffs are estopped from carrying out the functions of a Property Manager including the collection of maintenance fee until this action is heard on merits and decided;

(v) interest at the rate of 8.0% per annum on RM483,559.86 from the date of judgment to the date of settlement;

(vi) general damages for loss of reputation;

(vii) interest at the rate of 8.0% per annum on the amount awarded as general damages from the date of Judgment to the date of settlement; and

(viii) costs.

Issues To Be Tried

The plaintiffs' claim and the defendants counter claim in my view involve the following issues:-

(a) Whether the 1st, 2nd and 3rd termination are valid and whether this action is pre-mature by reason of the plaintiffs' failure to comply with the terms of the letters of appointment?

(b) Have the plaintiffs proven that the defendant breached the terms of the letters of appointment?

(c) Whether the defendant is entitled to the professional fee and whether the plaintiffs are estopped from challenging the validity of the payments in excess of RM 100.00 paid to the contractor by virtue of having reimbursed the defendant in the past?

(d) Whether by the letters of appointment, PW2, the internal auditor of Talam Corporation Berhad was entitled to carry out the raid on the defendant's premises, seize and remove some of the defendant's documents? and

(e) What is the legal effect of the accounts prepared by the internal auditor of Talam Corporation Berhad for and on behalf of the plaintiffs which formed the basis of the plaintiffs' claim?

1st Issue - Whether the 1st, 2nd and 3rd termination are valid and whether this action is premature?

The Writ of Summons and the Statement of Claim was filed by the plaintiffs' former solicitors M/s Christina Chia Ng & Partners on 25-6-1998 premised on the 1st termination. The first plaintiff's letter of termination as aforesaid is found at pages 12 to 14 of AB1 whereas the second plaintiff's letter of termination is at pages 15 to 17 of the same bundle. Subsequent to the 1st termination, M/s Christina Chia Ng & Partners issued fresh termination letters dated 12-8-1998 purportedly terminating the defendant's appointment as the Property Manager on behalf of both plaintiffs. These letters of termination are found at page 10 (the 1st plaintiff) and page 11 (2nd plaintiff) of AB1.

It is noted that the plaintiffs' new solicitors, M/s Yeap & Yong issued the 3rd termination on behalf of the first plaintiff by letter dated 24-3-1999 giving the defendant a 3 month notice purportedly in accordance with clause 7 of the letter of appointment dated 15-11-1996, the defendant's last day of service according to the said letter was 14-7-1999 (at page 7 of AB1). Whereas, the second plaintiff issued a similar letter but dated 26-4-1999, the 22 defendant's last day of service according to the said letter was 14-8-1999 (at page 8 of AB1).

Having issued the 3rd termination, the plaintiffs amended their statement of claim on 7.12-2000 pursuant to an order dated 29-11-2000 and their Writ of Summons on 27-3-2001 pursuant to another order dated 21-3-2001, among other things to introduce the 3rd termination and for a declaration that the defendant's appointment was lawfully terminated by virtue of the 3rd termination. [See pages 6 to 21 for the amended statement of claim and pages 1 to 5 for the amended Writ of Summons in IP]. An injunction has also been sought by the plaintiffs to prevent the defendant from providing services as the Property Manager, appointment of which the plaintiffs' claim came to an end with the 3rd termination.

What then is the effect of the introduction of the 3rd termination in the plaintiffs' pleading? I find this is an unequivocal admission by the plaintiffs that the 1st and 2nd terminations are invalid and that the plaintiffs' cause of action is now premised on the 3rd termination. The question is can a new cause of action accruing since the original pleading be introduced to replace the "existing cause of action"? The answer must be in the negative. On this 23 point reference is made to the decision of Lim Beng Choon J in the case of Simetech (M) Sdn, Bhd. v. Yeoh Cheng Liam Construction Sdn. Bhd. [1992] 3 CLJ 585 (Rep) [1992] 1 CLJ 509; [1992] 1 MLJ 11 wherein at page 18 it was held as follows:-

"It is to be noted that the amendments made by the plaintiff to its statement of claim were made by consent of the parties. However that may be, it does not inhibit the defendant from raising the issue that notwithstanding the amendments the plaintiff had no right to claim for the additional sum of 173,659.25 for the abovementioned reasons given by counsel for the defendant. It is an accepted rule of law that where the amendment will still leave the plaintiff without any title to sue at the date of the writ, the amendment would be worthless. Pursuant to this rule, counsel for the defendant has every right to raise the first issue, namely, whether, notwithstanding the amendment, the plaintiff was entitled to claim for the additional sum when at the date of the issue of the writ the plaintiff was not entitled to such claim. Putting it another way had the plaintiff a cause of action in respect of the additional sum at the time when the writ was issued?

In considering the first issue, I would refer to the English Supreme Court Practice 1985 (Vol. 1) para 20/5 -8/2 pp 338-339. There it is set out that:-

An amendment duly made ... takes effect not from the date when the amendment is made but from the date of the original document which it amends ... Thus when an amendment is made to the writ, the amendment dates back to the date of the original issue of the writ and the action continues as though the amendment had been inserted from the beginning. The writ as amended becomes the original of the action and the claim thereon indorsed is substituted for the claim originally indorsed. "

Reference is also made to the case of Mohamed Said v. Fatimah [1962] 1 LNS 101; [1962] 28 MLJ 328 w here it was held by the Court at page 330G as follows:-

"When the appellant sued out his summons in the Sessions Court on 6th May, 1961, the licence had expired on 31st December, 1960. He did not subsequently make the required payment until the 5th July, 1961. The renewed licence took effect from that date. Therefore at the time he issued the summons the appellant was not the person entitled to possession of the land. His action was premature. The action speaks from the date of the writ or summons in this case and nothing occurring since the issue of the writ can be used to found a cause of action that did not exist at the time the writ was issued. The Court cannot even permit an amendment of the pleadings except by the consent of the parties which would so amend the writ as completely to change the cause of action so as to bring in a cause of action which was non-existent at the time the writ was originally issued. "

The Federal Court in the case of Sio Koon Lin & Anor. v. S. B. Mehra [1980] 1 LNS 135; [1981] 1 MLJ 225 on this same point held as follows:-

"If as at October 7, the respondent had no right of action to claim for the 35,000, it is clear that any amendment would be to introduce a new cause of action which did not exist at the date of the writ and if the leave of the Court is necessary, it would be refused: Eshelbv v. Federated European Bank (discussed below).

But as noted, the amendment was made without any requirement for leave and before delivery of the statement of defence. A subsequent application by the appellants to strike out the amendment on the ground that no leave was given for it was, after argument in open Court, dismissed. With this order of Court, the pleading must be read as amended. If the effect of the amendment was to determine the cause of action as at the date of amendment, that is, on October 14, 1972, the respondent would be clearly entitled to 35,000, an instalment 27 due and owing. And if not, but the cause of action was to be determined at the date of writ, then he should not be. On the authority of Sneade v. Wotherton. etc. Co. 1190411 KB. 295 in which Collins M.R. held at page 297:-

"the writ as amended becomes the origin of the action and the claim thereon indorsed is substituted for the claim originally indorsed', the amendment dated back to the date of the original issue of the writ and the action continued as though the amendment had been inserted from the beginning."

Finally, on the same issue, reference is made to the case of Eshelby v, Federated European Bank, Limited [1932] 1 K.B. 254 wherein it was held at page 262 as follows:-

"It is not correct to say, 'By leave of the Court you can do anything.' It is certain that by leave of the Court you cannot do everything. The Court is limited in giving its leave to the powers which are conferred upon it by the Rules and by Statute under which those Rules are made, and I cannot see how, without the consent of the parties, the Court can so amend a writ as completely to change the course of action so as to bring in a cause of action which was non-existent at the time the writ was originally issued. The learned Master of the rolls said: 'The court can ... easily amend the writ.' If it can, the Court has not done it in this particular case. The Court has amended the statement of claim which is endorsed upon the writ, but it has not amended the Writ itself, and, indeed, it could not have done so, because in order to make this action on the second installment one which would come within the writ, the date of the writ would have had to be altered from November 27, 1930, upon which it was issued and soon after which it was served, up to some date after January 15, 1931. I do not think the Court could possibly alter the writ in that way. It could not make 29 amendment to say that the writ had not been issued until some date after January 15, 1931. It seems to me, therefore this amendment never ought to have been made and that this judgment, so far as it is for more than the 4,716.65, which was originally claimed, is bad and must be set aside."

It is noted that the minutes in the Court file would show that the amendment by the plaintiffs to the Writ of Summons and the Statement of Claim was not with the defendant's consent. In fact, the plaintiffs' applications were both resisted and the amendment to the statement of claim was appealed upon to the Judge in Chambers. It is my finding that the plaintiffs' case as it presently stands is severely flawed as at the date of the issue of the Writ of Summons and the statement of claim, i.e. 25-6-1998, the 3rd termination was non-existent, which leaves both plaintiffs without any title to sue on the termination at the date of the Writ. Therefore it could only mean that the reliefs sought by the plaintiffs under paragraph 26.1.1, 26.1.2, 26.2, 26.3, 26.3.1, 26.3.3 and 26.4.3 (at pages 19 and 20 of IP) of the Amended Statement of Claim that flow from the 3rd termination must surely fail.

Another crucial point to be considered is that by issuing the 3rd termination, the plaintiffs have acknowledged that the 1st and 2n terminations are invalid. It would follow that when the original Writ and Statement of Claim was filed on 25-6-1998, the plaintiffs not only breached clause 7 of the letters of 1st and 2nd appointments but had no cause of action in so far as the defendant's position as the Property Manager was concerned. It is my finding that at the time this action was commenced, the defendant's appointment as the Property Manager was not terminated and therefore the reliefs sought are premature. On this ground alone the plaintiffs' action ought to be dismissed with costs.

2nd Issue - have the plaintiffs proven that the defendant breached the terms of the letters of appointment?

The plaintiffs alleged in the amended Statement of Claim that the defendant is guilty of breaching various terms contained in the letters of appointment. Section 103 of the Evidence Act 1950 on the burden of proof reads as follows:-

"The burden of proof as to any particular fact lies on that person who wishes the Court to believe in its existence, unless it is provided by any law that the proof of that fact shall lie on any particular person. The plaintiffs in this case attempted to discharge the evidential burden through the following witnesses:-

(i) Mr. Gan Ee Chin (PW 1) (ii) Mr. Loo Yoong Fong (PW 2) (iii) Mr. Aldragan a/1 Packini (PW 3).

PW1 in cross-examination said:-

"/ agree that I am not involved with the plaintiff company on a daily basis with the defendant in this case but the representatives of my company Mr. P. Muniandy and Miss Vasantha a/p Manickam are the persons who dealt with the defendant company."

PW2 is a Senior Internal Audit Manager attached to Talam Corporation Berhad and his "involvement" with the defendant was from January 1998 when he seized some of the defendant's document on the instruction of his employer, Talam Corporation Berhad. Whereas PW3, a Property Manager was seconded by his employers Europlus Berhad (formerly known as Larut Consolidated Berhad) on 1-7-1999 to LT Sdn. Bhd. which is the Property Agent managing the properties of Talam Corporation Berhad, Europlus and their subsidiaries.

None of these witnesses called by the plaintiffs was involved in the day to day dealings with the defendant but as pointed at by PW1, it was Mr. P. Muniandy and Ms. P. Vasantha who dealt with the defendant but the plaintiffs chose not to put them on stand. In the circumstances it would be proper to draw adverse inference against the plaintiffs pursuant to section 114(g) of the Evidence Act 1950 for failure to call them as witnesses. At best the testimonies of PW1, PW2 and PW3 should be regarded as hearsay as they have no personal knowledge as to what transpired on a day to day basis in the dealings between the plaintiffs and the defendant.

It is now proposed to review the terms of the letters of appointment that the plaintiffs alleged to have been breached by the defendant in respect of the following:-

(i) Preparation and despatch of monthly billing and collection of maintenance charges and initiate appropriate action on arrears.

It is noted that none of the plaintiffs' witnesses led any evidence on the alleged failure of the defendant to comply with the above as they were not involved in the day to day dealings with the defendant. On the contrary, the defendant's former Accounts Executive, Ms. Shee Guek Kim, Sarah (DW2) in Q/A 19 of Witness Statement DWS2 confirmed as follows:-

"at the end of every month, an account reflecting the billing as well as collection of the maintenance charge is prepared for all 3 complexes together with a monthly statement of account reflecting the expenses incurred and the amounts paid to the contractors. These statements of accounts are always handed over to Ms. Lee at the plaintiffs site office monthly."

As the burden of proof to substantiate the plaintiffs' claim that the defendant has breached the aforesaid term is on the plaintiffs pursuant to section 102 of the Evidence Act, 1950, their failure to call Ms. Lee to testify on the alleged breach must surely mean that the plaintiffs have failed to discharge the said burden.

DW2 was found to have further confirmed during re-examination that the statements of account that were forwarded to Ms. Lee could be found at pages 74, 85, 86 (exhibit D24), 91, 98, 100, 118-121 (exhibit D48) and 135-138 of NAB3.

On the issue of appropriate action taken to recover arrears in maintenance charges, I find that DW2 in Q/A 20 of DWS2 had outlined the steps taken as follows:-

(i) Defendant attempts to contact the residents personally;

(ii) If attempt to contact fail, reminders are issued by slipping the same under the door followed by a final reminder (exhibit D33); (i ii) When final reminder fails, with the plaintiffs' knowledge and approval, water supply was disconnected, which practice was discontinued on the advise of solicitors (exhibit D32); and (iv) Legal notices of demand are issued but defendant was not able to proceed further against the defaulters as the plaintiffs were not prepared to bear the legal costs for the proposed action (exhibit D36).

(ii) Preventive measures and maintenance routines:-

(a) Engaging and carrying out preventive maintenance for efficient up keep of building fabric, common property, facilities, equipment and services.

It is to be noted that none of the plaintiffs' witnesses gave any specifics with regards to their allegation that the defendant has breached the above. The defendant on the other hand had 36 through DW1 (Dr. Bernard Thong) and DW2 established that steps were taken to ensure efficient upkeep of the building, common facilities, equipment and service by engaging various contractors, evidence for which can be found in NAB-4. The defendant's efforts were however hampered by the plaintiffs' constant refusal to pay contractors for their services on time resulting in the abandonment of duties as was done by Watanjaya Security Services (M) Sdn. Bhd. or reduced workforce or even the institution of legal action as was done by Berani Guard Sdn. Bhd. (Please see Q/A 28 of DWS2 and exhibit D42). It is to be noted that DW2 was not cross-examined on this issue.

It is my view that to ensure efficient upkeep of the building, the basic infrastructure should be in good working order but that was not the case with the plaintiffs' complexes where lift breakdown was the norm rather than the exception. In addition there were as contended by defendant water leakage problem, structural cracks appearing at "Le Jardine Deluxe" and flooding at car park of block A and B of "Grandeur 37 Tower". The frequency of lift breakdown and letters to plaintiffs, marked as exhibits are D16, D17, D22, D33, D27, D29 and D47 whereas in respect of the leakage and other problem, the complaint forms duly completed by the residents as well as the letters forwarded to the plaintiffs are marked as exhibits D20, D21, D22, D23, D26, D27, D28, D29, D32 and D48. Despite the above complaints and reminders, no reply was ever received from the plaintiffs but the lift service provider, BSC Engineering (M) Sdn. Bhd., a subsidiary of Talam Corporation had replied on 30-7-1997 (ID18) as follows:-

"Due to our financial problem since the very first day, in order that we can solve the problem of the lift we must be paid before we proceed for work"

Reference is also made to exhibit D43 at pages 130 and 131 of NAB-2 being minutes of meeting dated 21-3-1997 between the first plaintiff, defendant and BSC Engineering (M) Sdn. Bhd. wherein the following is recorded as item 7.0.

"ARO commented that BSC was not paid for services carried out since last June 1996 amounting to RM87,840.00. The outstanding payment with ABRA for Grandeur Tower Project Block A RM76,571.OO, Block B RM307,400.00. Total RM383,971.00..."

It can be seen from the above that inspite of the defendant's efforts to ensure efficient upkeep of the building, common property, facilities, equipment and services, the plaintiffs' constant refusal or delay in paying the contractors hampered the said efforts. The plaintiffs instead of admitting their fault found it fit to blame the defendant. It is worthy of note that DW2 was not cross-examined on the above issue.

(b) Engaging and organizing in house maintenance staffs Evidence was led by the defendant through DW1 (Q/A 14 and 62 DWS1) that the defendant employed 7 staffs to 39 ensure smooth discharge of its obligation as the plaintiffs' Property Manager. It is my finding that the above proves that the defendant has complied with the aforesaid term and this evidence remains unchallenged as DW1 was not cross-examined on his aforesaid testimony.

(c) Calling of tenders and preparation of tender report for rectification work DW2 in Q/A 21 of DWS2 testified that the phrase "rectification work" refers to the painting of the complexes, changing of broken pipes, attending to the leakage and water seepage problem and repairing the generator set to name a few. In Q/A 22, DW2 when asked if the defendant called for tenders when it involved rectification works, answered as follows:- "Yes, we did. Upon receipt of all quotations, the same are forwarded to the plaintiffs' site office for a decision to be made. More often than not we do not receive any reply from the plaintiffs. Evidence of this can be found at pages 104 to 111 (exhibit 40 D37), 122 to 128 (exhibit D38), 131 (exhibit D39), 140, 142, 144 (exhibit D40), 157 to 160, 161 and 162 (exhibit D27), 176 (exhibit D28), 186 and 187, 192 and 193, 207, 210 (exhibit D29), 270, 292 to 295 (exhibit D40) of NAB-3. I wish to add that eventually we faced difficulties in obtaining quotations from contractors as word got around that they will not be paid by the plaintiffs even after completing their work."

It is my finding that the defendant has complied with its obligation to call for tenders for rectification work and not as claimed by the plaintiffs. It must be noted that pursuant to the appointment letters, appointment of security service providers, cleaners and landscapers do not fall within the definition of "rectification works" as admitted by PW2 during cross-examination.

(d) Ensuring that the appointed landscaping contractor, cleaning services contractor, security guard and other contract workers execute their duties effectively and promptly

I find that it is in evidence that at the time of the defendant's appointment as the Property Manager, the common facilities as well as the maintenance works were not in good state and in poor neglect [see Q/A 9 DWS1]. DW2 also testified in Q/A 13 DWS2 as follows:-

"The first thing we did was to visit all the 3 complexes to determine what exactly was required to be done. Dr. Bernard Thong, Mr. Cheah, the defendant's General Manager and I conducted spot checks and we were shocked to see the poor state of common facilities and to discover that the complexes were poorly maintained with the cleaning services and security services extremely unsatisfactory. The residents we interviewed were extremely displeased with the plaintiffs and we gathered that residents refused to pay the maintenance and service charges as no proper services 'were provided."

The reasons for the poor upkeep of the common facilities as well as the services provided as narrated by the plaintiffs' Senior Maintenance Manager, Mr. P. Muniandy are found in Q/A 17 DWS2 and Q/A9 DWS1 and are as follows:-

(a) that the collection of the maintenance and service fee in the past was used to settle the plaintiffs' earlier liabilities;

(b) that instructions from the plaintiffs' management was to ensure that old liabilities were settled first to avoid any legal action;

(c) that monies collected from the resident was also used to settle the liabilities of other companies within the Talam Group of Companies;

(d) that the previous Property Manager, Munira & Co. was not paid their professional fee and that they walked out;

(e) that the then service providers (contractors) were not paid their dues and therefore refused to continue their services; and

(f) it was difficult to get contractors to service the complexes as word got around that payment from the plaintiffs for services rendered was difficult and extremely slow.

It is to be noted that immediately before the defendant took over as Property Manager, the following was due and owing to creditors:-

(a) By the first plaintiff in respect of Grandeur Tower RM395,434.08

(b) By the first plaintiff in respect of Low Cost 940 RM 159,086.42

(c) By the second plaintiff in respect of Le Jardine Deluxe RM 76.423.83 Total RM630,944.33

According to DW2, the above information was obtained from accounting documents related to the 3 complexes that were handed over by the plaintiffs' Account Executive, Ms. Lee when the defendant took over as the Property Manager. The indebtedness as aforesaid are also reflected in the plaintiffs' own documents at pages 157, 190 and 208 of NAB-2 (exhibits P4, P5 and P6 respectively).

Collection of monthly maintenance and service charges were poor as the residents were extremely unhappy with the poor upkeep of the facilities. The defendant was initially faced with an enormous task and had to take immediate steps to win over the residents' trust and confidence by turning the situation around [see Q/A 16 DWS2]. Various steps were taken by the defendant to achieve the above goal but their efforts were constantly affected by the plaintiffs' "old habits" of delaying payments to the service providers as a result of which many contractors failed and/or refused to continue providing their services unless they were paid in full, the residents refused to pay as they were not satisfied with the services and the defendant became the punching bag of the residents [see Q/A 62 DWS1].

The situation was further aggravated by the plaintiffs when even before the issuance of the 1st termination, the plaintiffs issued notice to the residents that the plaintiffs would be collecting service charges and water charges with effect 46 from 1-6-1998 (pages 247 and 248 of NAB2). PW1 admitted during cross-examination that "at the material time, there were two site offices where one belongs to the plaintiffs and the other belongs to the defendant for the purpose of collecting the monthly charges." In my view this was a deliberate breach by the plaintiffs of the terms of the 1st and 2nd appointment.

It is noted that the plaintiffs at the same time with the issuance of the 1st termination, issued notices marked as exhibits D13 and D14 informing the residents/owners that the defendant was no longer the Property Manager for the plaintiffs with effect from 1-6-1998. PW1 agreed during cross-examination that there were utter chaos thereafter as the residents were confused as to whom payment of monthly charges should be made. PW1 further agreed that new residents thereafter were also in utter chaos as to whom payment of the monthly charges should be made to.

In order to overcome the problem of contractors abandoning their job by reasons of non payment, the defendant advanced approximately RM 100,000 as at December 1997 [see Q/A 65 DWS1] which fact was known to the plaintiffs who used it to their advantage by issuing notices of termination to remove the defendant. It is my finding that the defendant did all that can be expected and more from an experienced Property Manager in line with its obligations under the letters of appointment. The defendant has furnished sufficient evidence to support its claim that its obligation pursuant to the letters of appointment were religiously followed and complied with.

(e) Prepare and submit monthly maintenance charge collection report and statement of account on every 7th of the month In Q/A 23, DWS2 when asked if the reports were given to the plaintiffs every month, DW2 answered as follows:-

"Yes, I confirm that the reports are prepared by me and that they are forwarded to the plaintiffs by the 7th of the subsequent month most of the time. I acknowledge that there were times when the report was delayed but nevertheless the reports are given to the plaintiffs."

It is my view that it is only logical to expect the plaintiffs to have demanded for the said reports if they were not furnished by the defendant in accordance with the terms of the letters of appointment. I find there is not an iota of evidence to establish the plaintiffs' claim that the defendant failed to furnish the aforesaid reports and that the same was demanded for by the plaintiffs.

(f) Planning and advising on cost saving When asked if the defendant had complied with the above requirement, DW2 replied as follows in Q/A 24 DWS2:-

"Yes, the defendant did, from time to time, we compare the existing rates charged by the contractors and advise the plaintiffs of contractors that offer better rates. At times we offered the plaintiffs to attend to certain minor works by our own staffs instead of appointing contractors for the same. This can be seen from documents at pages 62 (D22), 163 (D27) and 210 (D29) of NAB-3"

The following appears at page 62, exhibit D22:-

"The quotation that we have obtained for the cleaning service as compared to our present cleaners, is as follows:-

MYMY KANAMBAL

ENTERPRISE ENTERPRISE

Low Cost 940 MR2,600.00 MR2,200.00

Le Jar dine Deluxe MR3,500.00 MR3,000.00

The above comparison clearly shows that there is a RM900 saving a month and moreover, Kanambal Enterprise has proved themselves to be efficient in their cleaning service at Grandeur Tower blocks currently.

In light of the above reasons, we would like to, with your permission, engaged Kanambal Enterprise for the supply of cleaning services to both Le Jardine Deluxe and Low Cost 940."

Based on the above it can be said that the defendant had complied with all the terms of the letters of appointment and had in fact improved the standard of services rendered to the residents of the 3 complexes tremendously. One only needs to look at exhibit DI5 to appreciate the defendant's efforts. It reads as follows:-

"RESIDENTS OF LE JARDINE DELUXE CONDOMINIUM c/o: Ground Floor, Block FT Le Jardine Deluxe Condominium Jalan Pandan Indah 4/12 Pandan Indah 55100 Kuala Lumpur.

13-12-1997.

To:-

Datuk Chan Ah Chye

Chief Executive Officer Talam Corporation Berhad

Level 23, Menara Maxisegar

Jalan Pandan Utama

Pandan Indah

55100 Kuala Lumpur.

Dear Datuk,

Re: Unauthorised and unjust dismissal of Indera Management services from providing management services to Le Jardine Deluxe Condominium, Pandan Indah, Kuala Lumpur

We refer to the above matter:-

(a) It has come to our notice that Abra Development Sdn. Bhd., without any valid reason and proper notice, dismissed Indera Management Services from providing management services to us with effect from 13-12-1997 by just giving them 24 hours' notice, despite Indera Management Services providing us with good services ever since they took over the condominium management from Munira & Co. in early February, 1997. Since they took over, they have improved the quality of services, improved the collection of maintenance fees from the residents and other incidentals. The residents have since been paying promptly but unfortunately not to the account of Indera Management Services but to Abra Development Sdn. Bhd. as the agreement between Abra Development Sdn. Bhd. and Indera Management Services states that payment should be made to Abra Development Sdn. Bhd.

(b) The accounts kept by Indera Management Services shows that the collection from the residents have been made up to date but Abra Development Sdn Bhd. has to date refuse to pay Indera Management Services for their share of the management fees and various expenses that had been incurred by them. For your information, Datuk Chan: 'No company can function without payment!" The reason given by Abra Development Sdn. Bhd. is that they have to use the current collection collected by Indera Management Services to pay for outstanding expenses that have been incurred before Indera Management Services took over! This reason is absolutely ridiculous as the current company would not be able to pay for the current expenses that is incurred. We, the residents and the management team from Indera Management Services, led by Mr. Bernard Thong, have tried to reason out various problems and solutions with your senior management team, led by Mr. Gan, Mr. Yang and Mr. Muniandy, but they just seem to sweep the problems under the carpet, out of your attention. "

3rd Issue - Whether the defendant is entitled to the professional fee and whether the plaintiffs are estopped from challenging the validity of the payments in excess of RM100,00 paid to the contractor by virtue of having reimbursed the defendant in the past?

The quantum of professional fee payable to the defendant is found in clause 5 of the letters of appointment and are as follows:-

Property Fee per unit/ No, of units Total fee

Per month payable

(i) Grandeur Tower RM13.00 640 RM 8,320.00

(j) Low Cost 940 RM10.00 940 RM 9,400.00

(k) Le Jardine Deluxe RM13.00 144 RM 1.872.00

Total RM19,592.00

(The total fee payable per month as aforesaid is not inclusive of service tax).

When questioned if the plaintiffs fulfilled their obligations to the defendant pursuant to the letters of appointment, DW2 in Q/A 27 DWS2 replied as follows:-

"No. The defendant's professional fee was never paid in full by the plaintiffs. Payment when made was irregular and never in full. In fact as at the end of June 1998, professional fee due and payable by the first plaintiff in respect of Grandeur Tower was however only RM11,939.20 was paid. Whereas in respect of Low Cost 940, the professional fee due and payable for the same period was RM191,149.00 but only RMS3,229.00 was paid. The professional fee due and payable by the second plaintiff as at June 1998 was RM38,067.12 but onlyRM18,411.12 was paid...."

The aforesaid figures were never challenged during cross- examination.

It is my finding that the defendant's claim in respect of the unpaid professional fee has been admitted by the plaintiff in documents contained in Bundle NAB-2 [plaintiffs' bundle of documents]. Reference is made to the documents at pages 120 and 121 NAB-2 which is a summary compiled by the first plaintiff from the invoices issued in respect of the management fee (professional fee) for Low Cost 940 and other expenses incurred by the defendant including but not limited to payment to contractors on the first plaintiff's behalf. This summary has been marked as exhibit D44.

The upper part of exhibit D44 at pages 120 and 121 of NAB-2 shows the amount invoiced, paid and invoice outstanding in respect of the management fee from the time defendant assumed the position as the Property Manger until June 1998. It shows that the total invoiced amount was RM191,149.00, the amount paid by the first plaintiff was RM33,229.00, leaving a balance of RM157,920.00. The same is repeated at the lower half of page 121.

Similarly at pages 145 to 149 of NAB-2 (exhibit D45) is a summary compiled by the first plaintiff from the invoices issued from the time defendant assumed the position as the Property Manager until June 1998 in respect of management fee (professional fee) for Grandeur Tower as well as other expenses incurred by the defendant including but not limited to payment to contractors on the first plaintiff's behalf. The said summary shows that the total invoiced amount was RM 169,187.20, the amount paid by the first plaintiff was RM11,939.20, leaving a balance of RM157,248.00. The same is repeated at the lower half of page 149.

The documents at pages 150 to 152 of NAB-2 (marked as exhibit D46) is a summary compiled by the second plaintiff from the invoices issued in respect of management fee (professional fee) for Le Jardine Deluxe as well as other expenses incurred by the defendant including but not limited to payment to contractors on the second plaintiff's behalf from the time defendant assumed the position as the Property Manager until June 1998. The said summary shows that the total invoiced amount was RM38,067.12, the amount paid by the second plaintiff was RM22,342.32, leaving a balance of RM15,724.80. The same is repeated at the lower half of page 152.

It is noted that DW2 was not cross-examined on her response to Q/A 37 to 45 of DWS2. It is my finding that the amounts counterclaimed in respect of management fee up to June 1998 have been admitted by the plaintiffs and proven by the documents prepared by the plaintiffs. The plaintiffs are therefore estopped from challenging these figures.

The defendant further claims an amount of RM8,376.00 per month in respect of management fee payable for Grandeur Tower, an amount of RM 1,965.00 for Le Jardine Deluxe and an amount of RM9,870.00 per month for Low Cost 940 from July 1998 until the decision of this Court on the basis that the defendant's appointment as the Property Manager has not been terminated. I find that such claims are tenable. This is premised on the fact that by issuing the 3rd termination, it is admitted by the plaintiffs that the 1st and 2nd terminations are invalid and to reflect the same the Writ of Summons and the Statement of Claim were both amended. The plaintiffs' claim as it stands is on the strength of the 3rd termination that was issued approximately one year after the claim was filed, therefore the plaintiffs' claim now makes reference to the 3rd termination that was non-existent at the time the claim was filed. On the strength of the cases referred to earlier, this Court must disregard the 3rd termination and hold that in so far as this action is concerned, the defendant's appointment has not been terminated. The defendant's claim for the management fee from July 1998 until the decision of this Court is based on clauses 5 and 7 of the letters of appointment.

On the monies advanced by the defendant on the plaintiffs' behalf

Pursuant to clause 8 of the letters of appointment, the defendant is authorized to make payment up to RM 100.00 for payment of services within the scope of work and that any expenditure in excess of the said sum shall be approved by the plaintiffs.

The amount claimed by the defendant in respect of the monies advanced are as follows:-

(i) against the first plaintiff in respect of Grandeur Tower RM104,461.56

(ii) against the first plaintiff in respect of Low Cost 940 RM 30,992.70

(iii) against the second plaintiff in respect of Le Jardine Deluxe RM 17316.00 Total RM 152,770.26

The summary of the aforesaid claim is found in paragraph 47 of the amended statement of defence and counterclaim at pages 55 to 58 of the IP and its breakdown are at pages 1 to 4 of NAB-4, marked as exhibit D34. The vouchers issued by the defendant for payment to the contractors contained in NAB-4 are marked collectively as exhibit D35 as explained by DW2inQ/A27of DWS2.

It is my finding that the defendant's decision to advance substantial amount of monies on behalf of the plaintiffs for payment to the contractors namely the cleaners, security service providers and maintenance contractors for the 3 complexes and for the purchase of stationeries [see Q/A 30 DWS2] was:-

(i) influenced by the close relationship between Dr. Bernard Thong with Tan Sri Chan Ah Chai and Puan Sri [see Q/A 3 DWS1];

(ii) to ensure that the contractors provide continued and uninterrupted services;

(iii) influenced by Tan Sri and Puan Sri's assurance that since they (Talam) are a public listed company, payment was not a problem [see Q/A 13 and 15 DWS1];

(iv) because the plaintiffs as usual were not paying the contractors [see Q/A 14 and 17 DWS1]; and

(v) also because contractors generally were not prepared to work for the plaintiffs, therefore on PW1 and Muniandy's suggestion, defendant entered into contracts with various contractors and service providers but when plaintiffs did not pay, the contractors went after the defendant [see Q/A 18 DWS1].

Perusing DW2's testimony in Q/A 28 DWS2 which remains unchallenged would show the existence of preferential treatment accorded to certain contractors and the evidence is as follows:-

"Instead of paying the current contractor in full, the cheques are never signed nor returned but cheque for payment to the past contractors and contractors who appear to be in their goods books such as My My Enterprise and Indah Seri are usually approved. The defendant's letter to the plaintiffs can be seen at page 152 of NAB-3 (exhibit D27). The situation became worse as the current contractors were getting upset, fearing that they would cease providing service, we had no choice but to pay them on behalf of the plaintiffs and both plaintiffs were fully aware of this fact. "

On the issue of the requirement of the plaintiffs' approval before payment in excess of RM 100.00 can be effected, reference is made to Q/A 25 of DWS2 where DW2 testified as follows:-

"Before any expenditure in excess of RMlOO.OO is incurred, we would normally forward the costing to the plaintiffs and in certain cases more than one quotations are given. Not once did we receive any written confirmation from the plaintiffs to proceed with the work but verbal approval is given by the plaintiffs' Senior Maintenance Manager, Mr. P. Muniandy. As most of our day to day dealings are with Mr. P. Muniandy and the plaintiffs' decisions are communicated through him, his verbal approval has always been treated as the plaintiffs' approval. In the past, the defendant was reimbursed the monies spent in carrying out such works and this can be seen from the plaintiffs' own documents at pages 120, 121, 145 to 152 of NAB-2 (exhibits D44 and D45). Further, every month we issued Creditor's listing including all payments in excess of RM 100.00, not once did anyone of the plaintiffs objected or rejected the invoices"

It is unfortunate that the plaintiff chose not to call upon their own staff Mr. P. Muniandy who could shed some light on the aforesaid issue with his testimony. This is despite the fact that the said staff's name is mentioned in the amended statement of defence and counterclaim and was confirmed by PW1 to be the person who dealt with the defendant on a day to day basis. The only conclusion to be drawn from the plaintiffs' failure is that Mr. P. Muniandy's testimony would not be in their favour, therefore, adverse inference should be invoked against the plaintiffs pursuant to section 114(g) of the Evidence Act, 1950 especially since Mr. P. Muniandy has affirmed various affidavits in this proceedings relating to the plaintiffs' claim.

Reference is now made to the lower half of exhibit D44 at pages 121 and 122 of NAB-2 [plaintiffs' bundle of documents] which is a summary compiled by the first plaintiff from the invoices issued from the time the defendant assumed the position as the Property Manager until June 1998 in respect of "repair and maintenance-electrical, rectification, plumbing, printing and stationery for Low Cost 940 i.e. payments made to the contractors by the defendant on the first plaintiff's behalf. It is to be noted that all of the invoices are in excess of RM 100.00. The said summary shows that the total invoiced amount was RM24,530.00, the total amount paid by the first plaintiff was RM5,210.00, leaving a balance of RM 19,320.00. The total amount outstanding and payable to the defendant inclusive of the management fee as at June 1998 by the first plaintiff in respect of Low Cost 940 according to exhibit D44 was RM 177,240.00.

DW2 when asked to compare the amount acknowledged to be owed by the first plaintiff as aforesaid with the defendant's counterclaim, testified as follows in Q/A 39 of DWS2:-

"No, there is a difference of RM5,672.70. I wish to state that the defendant's claim in paragraph 47(iii) of the amended counterclaim for Low Cost 940 in respect of monies paid to the contractors on behalf of the first plaintiff should read RM24,992.70 instead of RM30,967.00. However the total amount outstanding therein is correct. The amount due in respect of stationery should be RM17,860.00 as the amount for the month of June 1998 was inadvertently omitted when I prepared the claim. The first plaintiff appears to have overlooked a sum of RM4,200.00 that was paid for cleaning services to Kanambal Enterprise for the month of May 1998, payment voucher for the same is at page 67 of NAB-4 (exhibit D35). Therefore the defendant's counterclaim against the first plaintiff as at June 1998 shall be RM183,852.8.70."

Based on the above, out of the amount advanced by the defendant on behalf of the first plaintiff to contractors in respect of Low Cost 940, the amount due and owing as at June 1998 was RM25,932.70.

Reference to the lower half of page 145 and the rest of pages 146 to 149 of NAB-2 (exhibit D45) is a summary compiled by the first plaintiff from the invoices issued from the time the defendant assumed the position as the Property Manager until June 1998 in respect of "cleaning fee, security service, water pump service, repair and maintenance-electrical, rectification, plumbing" for Grandeur Tower i.e. payment made to the contractors by the defendant on the first plaintiff behalf. It is to be noted that almost all the invoices are in excess of RM 100.00. The said summary shows that the total invoiced amount was RM 150,032.72, the total amount paid by the first plaintiff was RM42,275.70, leaving a balance of RM107,757.42. The total amount outstanding and payable to the defendant inclusive of the management fee as at June 1998 by the first plaintiff in respect of Grandeur Tower according to exhibit D45 was RM265,005.42.

DW2 when asked to compare the amount acknowledged to be owed by the first plaintiff as aforesaid with the defendant's counterclaim, testified as follows in Q/A 40 of DWS2:-

"The first plaintiffs summary in respect of the monies due to the defendant for services rendered at Grandeur Tower appear at pages 145 to 149 NAB-2. At page 149, the management fee outstanding is the same as the defendant's claim, the amount due for cleaning services is the same, the total invoice for security services admitted by the plaintiff is short of RM2,298.24 which represents the charges incurred in May 1998 for services rendered by SASA Security Services Sdn. Bhd. whose invoice that was paid by the defendant is at page 40 of NAB-4. The amount admitted by the first plaintiff to be payable was RM22,165.92 instead of RM18,995.76 as claimed by the defendant. The defendant has combined the claim for water pump service and repair and maintenance and the amount claimed is RM29,645.80 whereas the amount admitted to be due by the first plaintiff is RM29,771.50. Therefore it is clear that the first plaintiff has acknowledged the defendant's counterclaim for services rendered for Grandeur Tower totaling RM261,709.56 as at June 1998"

It is my finding based on the above, out of the amount advanced by the defendant on behalf of the first plaintiff to contractors in respect of Grandeur Tower, the amount due and owing as at June 1998 was RM 104,641.50. Notwithstanding the fact that the amount acknowledged to be due by the first plaintiff in exhibit D45 inclusive of management fee as at June 1998 was RM265,005.42, the defendant maintains its claim of RM261,709.56.

Reference is made to the lower half of page 150 and the rest of pages 151 and 152 to NAB-2 [exhibit D46] which is a summary compiled by the second plaintiff from the invoices issued from the time the defendant assumed the position as the Property Manager until June 1998 in respect of "security service, water pump service, repair maintenance-electrical, rectification, plumbing, printing and stationery" for Le Jardine Deluxe i.e. payments made to the contractors by the defendant on the second plaintiff's behalf. It is to be noted that almost all the invoices are in excess of RM 100.00. The said summary shows that the total invoiced amount was RM62,477.20, the total amount paid by the second plaintiff was RM46,043.60, leaving a balance of RM16,433.60 The total amount outstanding and payable to the defendant inclusive of the management fee as at June 1998 by the second plaintiff in respect of the Le Jardine Deluxe according to exhibit D46 was RM32,158.40 DW2 when asked to compare the amount acknowledged to be owed by the second plaintiff as aforesaid with the defendant's counterclaim, testified as follows in Q/A 45 of DWS2:-

"The summary at page "752 of NAB-2 shows an outstanding amount of RM15,724.80 in respect of management fee payable to the defendant as at June 1998. I admit that this is the correct figure and not RM21,621.60 as claimed. In respect of security services the amount acknowledged to be due is RM6,249.60. However, the second plaintiff have not taken into consideration the amount of RM2,822.40 that was paid to SASA Security Services Sdn. Bhd. for services rendered in the month of May 1998 invoice for which is at page 41 ofNAB-4. Therefore the correct amount shall be as claimed by the defendant that is RM9,072.00. The amount due to the defendant for water pump service and repair and maintenance shall be RM4,224.00 and not RM6,308.00 as acknowledged. Whereas in respect of printing and stationery, the second plaintiff has omitted a sum of RM 144.00 for the month of May 98, therefore the correct figure should be RM4,020.00. Therefore, I state that the defendant's counterclaim for services rendered for Le Jardine Deluxe against the second plaintiff is RM33,040.80 as at June 1998 which is close to the amount summarized to be due by the second plaintiff."

Based on the above, out of the amount advanced by the defendant on behalf of the second plaintiff to contractors in respect of Le Jardine Deluxe, the amount due and owing as at June 1998, was RM 17,316.00. The defendant contended that notwithstanding the fact that the amount acknowledged to be due and owing by the second plaintiff in exhibit D46 inclusive of Management fee as at June 1998 was RM32,158.40, the defendant maintains its claim of RM33,040.80.

Based on the above, I accepted the following should be the counter claim amount as at June 1998 as confirmed by DW2 in Q/A 47 DWS2:-

(i) against the first plaintiff in respect of Grandeur Tower RM261.709.56

(ii) against the first plaintiff in respect of Low Cost 940 RM183.852.70

(iii) against the second plaintiff in respect of Le Jardine Deluxe RM 33340.80 Total RM478,603.06

and not as claimed in paragraph 50(c) of the amended statement of defence and counterclaim at page 58 of IP.

It is my finding in respect of the amount counterclaimed inclusive of the management fee and monies paid to the contractor up to June 1998, the plaintiffs have admitted owing to the defendant RM474,403.82, based on the documents prepared by and found in the plaintiffs' bundle of documents (NAB2). I also find that exhibits D44 to D46 have clearly shown that in the past, the plaintiffs have reimbursed the defendant for payments made in excess of RM 100.00. Therefore the plaintiffs are now estopped by conduct from questioning the defendant's entitlement to claim the amount remaining. It is clear that this term has been waived by the plaintiffs. The fact the exhibits D44 to D46 are in the plaintiffs' custody lends support to DW2's testimony that creditors listing are given to the plaintiffs' representative, Ms. Lee on a monthly basis.

4th Issue and 5th Issue shall be addressed together - Whether by the letter of appointment PW2 the internal auditor of Talam Corporation Berhad was entitled to carry out the raid on the defendant's premises, seize and remove some of the defendant documents and the legal effect of the account prepared by the internal auditor of Talam Corporation Berhad for and on behalf of the plaintiffs which formed basis of the plaintiffs' claim?

DW1 testified that on 6-1-1998, he received a call from his staff stating that one Mr. Loo (PW2) and his team had barged into the defendant's office and began ransacking the office and took away documents without the defendant's consent [see Q/A 22 and 29 of DWS1]. According to DW1 the documents taken away consisted of the defendant's account books, cash books, receipt books, bank documents and others including correspondences with the plaintiffs as well as the contractors. As DW1 was out of the office at that time, there was no resistance on the part of the defendant's staffs to prevent PW2 from removing the documents. DW1 further testified that sometime in February 1998, PW2 appeared at the defendant's office for some more documents but left empty handed after being told off by DWl.

It is my finding that the seizure and removal of documents from the defendant's office is illegal. The documents removed are the properties of the defendant. Further it must be noted that the defendant is a separate legal entity and is not in any way connected to the plaintiffs either by virtue of common shareholders or common directors. Neither is the defendant part of the Talam Group of Companies. The relationship was contractual in nature. The act of PW2 in raiding and seizing the documents without the express consent of the defendant is also criminal in nature.

DW3 who has been actively practicing as a Chartered Accountant for the past 24 years was invited by the defendant to render his professional opinion on the legality of the raid by PW2 to this Court. His expertise was not questioned by the plaintiffs. This question was posed to DW3 [see Q/A 11DWS3].

"In your years of experience as a chartered accountant, could you please explain if it is proper and/or regular for the said Mr. Loo Yong Foong, who is not the defendant's auditor or auditor appointed by the defendant to carry out investigation or any other work including the preparation of the accounts of the defendant's without their authorization."

DW3 replied as follows:-

"Of course not. The defendant's books and records are their properties unless Mr. Loo is invited by the defendant, he has no authority whatsoever to carry out the investigation or any other work including the preparation of the accounts, let alone the seizure of the defendant's books and records. An internal auditor is responsible and report to the management that appointed him."

It is my view the fact that Mr. Loo (PW2) was not invited by the defendant therefore he had no authority nor the locus whatsoever to carry out the investigation or any other work including the preparation of the accounts and that the removal of the documents constituted theft, trespass and breach of privacy. It must be noted that the letters of appointment do not authorize the seizure and removal of documents or investigation to be carried out on the financial documents of the defendant by PW2, the internal auditor of Talam Corporation Berhad. When asked of the raid and seizure of documents on 6-1-1998 by PW2 justified, DW3 answered as follows in Q/A 15 DWS3:-

"My Lord, it cannot be justified as Mr. Loo does not have any locus in so far as the defendant's accounts/books are concerned. Further the defendant is not a subsidiary or related company of Talam Corporation Berhad."

It is my view that if the plaintiffs had wanted the accounting figures from the defendant, they should have written in officially but in this case no such written request was ever made. Even if the plaintiffs had requested, all that they would have been entitled to would have been the defendant's audited accounts. The correct procedure requires the plaintiffs to review the audited accounts either with the defendant's accounting staff or the defendant's auditor. Alternatively, the plaintiff could have appointed independent auditors acceptable to the defendant to carry out the review with full cooperation from the defendant and have their cause of action on that independent report if there was basis for it.

DW3 testified [see Q/A 16 DWS3] that in his opinion, the raid and removal of documents on 6-1-1998 was unlawful, very high handed and that he believed the auditor to be guilty of trespass and breach of privacy. On the reports [exhibits P2 to P6] prepared by Mr. Loo (PW2), he said the following [see Q/A 17 DWS3]:-

"In my opinion, unless the defendant's management was involved in the preparation of the reports, the reports would definitely be incomplete and inaccurate for want of information that may be recorded in other documents not taken by Mr. Loo. Furthermore a lot of questionable basis and assumptions were used in the preparation of the accounts and in view of Mr. Loo's position in Talam Corporation Berhad there is very strong likelihood that the reports are biased in favour of the plaintiffs" He further said in Q/A 18 DWS3:-

"No, looking at documents alone would not be sufficient. Consequently, any accounts drawn up in such circumstances would be grossly inaccurate."

It is noted that PW2 in cross-examination confirmed that he did not direct the defendant on how to maintain the accounts and agreed that the defendant is entitled to keep their accounts in accordance with the requirement of the defendant's auditors on condition that they comply with acceptable accounting standards. The plaintiff's however have failed to establish what the acceptable accounting standard is and/or that the defendant has failed to comply with that standard. PW2 agreed that the method employed by the defendant to keep their books and accounts differed materially with the system in place with the plaintiffs. PW2 not only admitted during cross-examination that no prior notice was given to the defendant before the raid but also confirmed that legal advice was not sought before the plaintiffs' illegal raid on 6-1-1998.

It is my finding that since the raid on the defendant's premises on 6-1- 1998 and the seizure and removal of documents was unlawful, the reports prepared by PW2 [exhibits P2 to P6] are also invalid for the following reasons:-

(i) that no legal basis for PW2 to conduct the unlawful raid and seizure of documents;

(ii) that the reports are one sided and self serving;

(iii) that the letters of appointment do not authorize the raid and seizure of the defendant's documents (express or otherwise);

(iv) that the reports were prepared based on incomplete document (DW1 in re-examination testified that the defendant maintained 3 sites offices (one in each project). Documents were kept at all the 3 site offices and that PW2 only seized and removed documents kept at the Le Jardine Deluxe site office);

(v) that the reports are PW2's own interpretations and deductions;

(vi) that the reports are incomplete and inaccurate for want of information as the defendant was not involved in their preparation;

(vii) without the defendant's cooperation input and review, the reports are grossly inaccurate, for example, in the plaintiffs' claim, PW1 admitted that it was inconsistent for the first plaintiff to claim RM 192,040.10 when the police report claimed the sum of RM65,811.40 whereas the second plaintiff had claimed RM 11,575.32 when the police report claimed the sum of RM5,686.25;and

(viii) highly irregular and improper for the plaintiffs to adopt the reports as a finality for purposes of instituting this action.

Based on the above, it is my finding that the reports [exhibits P2 to P6] cannot be made the basis of a claim for breach of trust and fraud against the defendant. The defendant had suggested that an independent auditor be appointed to review the defendant's account which suggestion was struck down by the plaintiffs. It is noted that PW1 admitted during cross-examination that the alleged shortfall as claimed in this action and the figures reported in the police reports (exhibits Dll and D12) are inconsistent. Therefore, the figure ought to disregarded completely.

It is also my finding that the unlawful raid carried out by the plaintiffs was in furtherance of a conspiracy to remove the defendant from office and this is evident from what transpired during a meeting on 30-4-1998 (the minutes of which is marked as exhibit P7). DW1 who was at the meeting testified as follows [see Q/A 75 DWS1].

"This meeting, I categorically informed them that if they want me out, pay me my fees and reimburse me what I have spent on their behalf. Unfortunately, I was told to shut up and explain all kinds of shortages in cash. I was told that I would be put behind bars for the so called cash shortages. This was stated by Mr. Gan. When I asked to explain more they told me that the time would come for me. Also at this meeting I categorically stated that a third person audit would prove once and for all that they owe me a lot of money. The audit would be fair and independent. I was prepared to pay half its costs so that I could prove to Tan Sri and his wife the true financial situation. 'Throughout my explanation, Mr. Gan was looking at the table, simply shook his head from left to right and smiled sheepishly"

The above is corroborated by DW2's testimony in Q/A 59 to 60 of DWS2. It is confirmed by DW2 that the alleged discrepancies and/or shortage was explained by DW1 to PW1 during the said meeting [see Q/A 60 DWS2] as follows:-

"Yes, Dr. Thong explained that the shortage if any would be the monies paid to the contractors and to meet other expenses. He further added that if the plaintiffs had paid the defendant the management fee promptly and to the contractors on time there would not arise a need to pay the contractors from monies collected. In any event, Dr. Thong requested that an independent audit be carried out as he does not recognize the plaintiffs' accounts."

The minutes of the meeting on 30-4-1998 (exhibit P7) was never given to the defendant either in draft or approved form and this was confirmed by PW2. DW1 testified that the exhibit P7 does not reflect the true happening at that meeting. The defendant was not invited for a meeting on 13-5-1998 as alleged by the plaintiff and this is evident in paragraph 12 at page 63, exhibit P7 which reads:-

"GEC would like to have another meeting with Mr. Young, Mr. Muniandy, Ms. Lee and the Internal Audit on 13th May, 1998 at 3.00 p.m. at the Meeting Room, level 22, Menara Maxisegar"

None of the persons named above represents the defendant. This is one of the many unsubstantiated allegations which questions the plaintiffs' bona fides. On the same issue, DW1 in Q/A 77 DWS1 said as follows:-

"I have no knowledge of this meeting. I received no letters informing me of this meeting or any calls or notices why I did not attend this meeting. This so called meeting is a lie just to show and impress Tan Sri that I was not interested or not co-operating which they now try to impress this Court by the same strategy."

It is noted that the conspiracy against the defendant deepened when the accounts [exhibits P2-P6] pursuant to the illegal raid were made the basis for police reports (exhibits Dll and D12) against the defendant for the alleged shortages resulting the arrest and humiliation of DW1 [see Q/A 41 DWS1]. It is the defendant's contention that these reports were lodged to intimidate and remove the defendant despite the plaintiffs being armed with the fact that the accounts prepared were inaccurate, one sided and bias. This is in addition to the failed injunction in this action premised on the 1st termination and another civil suit instituted by the plaintiffs against the defendant premised on the 3rd termination in the Kuala Lumpur High Court bearing No. S3-22-679-99 which was struck off with costs. Besides the above, other attempts to evict the defendant were explain in Q/A 85 of DWS1 in answer to the following question:-

"Q. Were any attempts made to evict you from your site office?

A. Yes, about 5 times. First there were threatening calls, second many break ins where we lost many precious documents, third, our main door was pad locked and fourth, an attempted arson and fifth by deliberate disconnection of electricity supply."

The defendant has categorically denied the plaintiffs' claim of misappropriation and/or fraudulent activities and contended that the basis for the allegation i.e. the accounts are unlawful, biased, inaccurate and self serving. This is DWl's response in Q/A 88 DWS1 in answer to the following question:-

"Q. You deny the entire claim of the plaintiffs?

A. Yes, I deny the entire claim of the plaintiffs as baseless as the facts and the figures stated therein flows from an illegal and unlawful audit conducted by Mr. Loo. How can it be called an audit when they do not know our system and based on so scanty documents. It is easy to pick and allege based on whatever little they have. Mr. Loo an experience auditor can put up facts and figures to make me look bad. In their entire reports they failed to state how much they owe me and how much I have advanced on their behalf. Which of the contractors and service providers have been paid and who have not been paid. This is not a good audit. It is an unsafe report produced with the intention of throwing me out without proper notice of 3 months. This audit is contrary to all known principles of auditing in this country and internationally. Of course if they had agreed to my propose to have an independent audit at the meeting on 30-4-1998 I would be bound by the audit and the facts and figures appearing in that audit could be used as a basis for any claim or police report and vice versa for either party. It would also be an authentic document for this Court without any question as to its veracity or accuracy of biasness''

In Q/A 89 DWS1, when asked if the defendant appropriated any monies belonging to the plaintiffs as alleged by Mr. Loo's so called audit, DW1 responded as follows:-

"A. No. I did not do that. I view my contract with Tan Sri and his wife. I cannot let them down. My name will go down. KL is a very small place. It will affect my profession as a property manager. If they had not accused me of stealing, I would be happy to sit down with them and resolve the results of their so called audit. Every cent could have been accounted for. But they chose not to sit down with me. Pursuant to the conspiracy which I have stated, they wanted me out and to fix me up with the police and run me down as a property manager. Until today, I don't understand what is so difficult to sit down and sort out the matter. After all it was in our common interest to know who has paid and who has not paid and which contractor is owed. It was in the plaintiffs' interest to know as they had the contract with the purchasers. If they were sincere about resolving this matter they could have sat down with us."

On the grounds stated above it is my finding with regard to the fourth issue it should be decided in the defendant's favour. The raid on the defendant's premises, the seizure and removal of some of the documents is illegal and therefore, the accounts prepared by PW2 are just as illegal and should not be allowed to be made the basis of the plaintiffs' claim.

Conclusion

Having studied the oral evidence of the witnesses called by the plaintiffs and the defendant including the documentary evidence tendered by both the parties, it is my finding that the plaintiffs have failed on the balance of probabilities to prove their claims against the defendant. I therefore dismissed the plaintiffs' claim with costs. As regard the defendant's counterclaim, it is my finding that the defendant has succeeded on the balance of probabilities in proving its counterclaim against the plaintiffs. I therefore allowed the defendant's counterclaim with costs and made the orders as prayed for in the counterclaim.

(DATO' ZULKEFLI BIN AHMAD MAKINUDIN) - Judge High Court, Kuala Lumpur

5 October 2005.

Counsel for the Plaintifs - Mr. Jeffrey Law from Messrs. Yeap & Yong, Mr. Joginder Singh from Messrs. Joginder Singh & Co.

Counsel for the Defendant - Y. Bhg. Dato' Gulam and Mr. Satish Nair from Messrs. Gulam & Wong.