IN THE COURT OF APPEAL UiTM
RIVIA SDN BHD ...APPELLANT
LASKAR BINA SDN BHD ...RESPONDENT
in the matter in the High Court of UiTM
Civil Suit No. 10NCB-111-11/2014
LASKAR BINA SDN BHD ...Plaintiff
RIVIA SDN BHD ...Defendant
(Decided by the learned Justice Mohd Knopfler)
INTERPART 2015 MOOT PROBLEM
1. The fluctuation of the economy of recent times has pushed the price of property to incredulous heights. Though the national living standard has arisen, it is verily difficult to say the same regarding the quality and affordability of living considering the fact that the national cost of living is at an all-time high.
2. In light of the above conundrum, two property development companies, both of which were incorporated in Malaysia under the Companies Act 1950, namely Rivia Sdn Bhd ("Rivia") and Laskar Sdn Bhd ("Laskar") saw an opportunity to aid nation's citizens while still generating a reasonable margin of profit.
3. Rivia and Laskar have entered into a Joint Venture Agreement ("JVA") executed on 1.1.2013 to develop an affordable housing project on a piece of land approximately 15 hectares in size situated in Shah Alam ("Property"). This Property is an unencumbered lot wholly owned by Laskar.
4. Datuk Raz ("Raz") is the CEO and shareholder of Rivia while Datuk Indra ("Indra") is the CEO of Laskar. Leading up to the execution of the JVA, Indira has sent the following e-mail to Raz:
"Dear Datuk Raz of Rivia,
Do accept my utmost appreciation to the fact that you yourself share the same aspirations to help our nation's citizens during these perilous times. Our future generations should at least be able to afford a roof over their heads.
We reconcile with the fact that our combined funds alone is insufficient to make up a fairly strong capital injection to realise our venture.
As we all already know the Property as it stands now is wholly owned by Laskar. In the spirit of national salvation, Laskar is prepared to place the property as security to enable Rivia to obtain facilities from a financier, preferably from a reputable financial institution.
"Building Life for a Living"
[Sent on 10.10.2012]
5. In response, Raz replied vide the following e-mail:
"Dear Datuk Indra of Laskar,
I refer to our JVA and also your e-mail sent on 10.10.2012. Indeed, my children and their children do not deserve to be engulfed in such a predicament. The country prospers and standard of living rises, but the cost of living seems insurmountable and the scale of earning remains stagnant which is not doing any favours at all. The low profit margin from this JVA might tilt the scale although just for little, but a little goes a long way in this day and age. At least we are not in arms with the sickness that sky-rocketed the property price to the heavens and beyond.
Regarding to the prospect of fresh capital input, Rivia expresses its immense appreciation and will ensure that the Property will be utilised as security with minimal risks of enforcement and/or seizure by the Bank. We are already in talks with Bank Sans Frontieres ("BSF") and they have agreed to grant facilities contingent to the size of the Property.
Please see attached here, the final draft of the JVA dated 15.10.2013 for your perusal. If all is a go, then Rivia will proceed to execute and stamp the JVA.
*see Appendix A of the Moot Problem for salient clauses of the JVA
"Sustainability as Life's Priority"
[Sent on 15.10.2012]
6. Upon perusal of the draft JVA attached in the e-mail above, both Rivia and Laskar proceeded to execute the JVA containing the exact similar terms in Appendix A on 1.1.2013. Laskar has also executed a third-party charge in favour of Rivia placing the Property as security with BSF.
7. In the midst of the Development, the State Authorities issued a notice of acquisition to Laskar stipulating that approximately 20% of the Property shall be put under acquisition for the construction of the Anggerek Highway, an alternative tolled Highway to ease the congestion in and out of Shah Alam to and from Kuala Lumpur. The Land Acquisition Notice in Form G (Appendix B) was issued in accordance with the Land Acquisition Act 1960.
*See Appendix B of the Moot Problem for the Notice of Acquisition
8. In response to the Notice of Acquisition, Laskar issued Form N under Section 38(1) of the Land Acquisition Act 1960 to object the amount of compensation stated in Form G. Laskar's, out of the numerous grounds of objection enlisted under the same Section of the Act, Laskar only enlisted its ground of objection as;
"(a) Membantah amaun dan/atau jumlah pampasan dan/atau gantirugi yang dinyatakan dalam Borang G"
9. Upon the conclusion of Laskar's Objection, the State Authorities have agreed to set the compensation at RM 12,500,000.00 which is a notable increase of RM 2,500,000.00.
10. In view of the acquisition, the parties saw that it is appropriate to enter into a Settlement Agreement ("Settlement") to revise and determine the parties' Revenue Entitlement as per Clause 2.0 of the JVA. The following term was agreed vide the Settlement:
1.1 It is mutually agreed that Laskar's Revenue Entitlement shall be the determined sum of RM 40,500,000.00; and
1.2 It is mutually agreed that the developer's Revenue Entitlement shall be the total revenue from the sales of the development less Laskar's determined Revenue Entitlement above and other expenses in furtherance of the JVA.
11. Consequently, the compensation was fully paid to Bank Sans Frontieres to relinquish the debt and redeem Property from being security. At the same moment in time, the determined Revenue Entitlement was also paid in full to Laskar.
12. Upon realizing that the compensation was not paid to Laskar, Datuk Indra immediately called Datuk Raz telephonically and tumultuously vented the following:
"You ungrateful capitalist fodder, what makes you think you can use our compensation money to relinquish your own debt?
We were generous enough to source our own land to be held as security knowing that Rivia does not have adequate funds to develop the Property to generate profit. Rivia literally obtained monies from the facilities at the expense of Laskar's generosity. If not for the security, it goes without saying that BSF won't even take a 2nd look at your loan application.
Clearly the compensation monies are Laskar's own as Laskar is the appropriate as well as the actual party suffering a loss and detriment from the acquisition.
As a borrower to BSF, you were supposed to pay your own debts yourself, from your own coffer, and not at the expense of other's loss. It is your duty to discharge the security, you insolent fool. You can't even read the contracts properly can you? Abide by the Contracts, Raz. You cannot feign ignorance to what we have agreed to.
It goes without saying that the compensation monies are disparate and distinct from the Revenue Entitlement and/or all of the contracts we have entered into.
You know what? The JVA's clause on Acquisition doesn't make sense either.
Both of us were only supposed to obtain profits from the sale of the housing units and not anything else. That's the exact reason we set up an account as such. It is vivid that the compensation monies are not any part of it.
I am all for easing the citizens' predicament in affording a home for their families, but I do not and will not stand idle while vultures like Rivia preys on corporations and stealing people blind!
Let the hammer of justice obliterate your greed. Rest assured, I will see you in Court."
13. Subsequent to the altercation above, Raz sent the following e-mail to Indra:
As much as I respect you as a business partner with similar ideals, I take utmost offence over your loose-lipped remark about myself being a capitalist fodder. I have no doubt at all that I have the people's interests at heart, and not solely my own. Perhaps you are the greedy dragon who jumps the exact moment money is involved.
It is only logical that the compensation monies from part and parcel of the parties' Revenue Entitlements which were consequently concluded vide the Settlement.
We were in this together, and the debt Rivia incurred is for the furtherance of our common JVA. Laskar is not the only party adversely affected by the acquisition.
And don't you forget the mass of conducts of Laskar itself which acquiesces that the compensation monies are indeed a part of the Revenue Entitlement notwithstanding whatever that has been agreed.
In fact, why don't you take a closer look and properly read all our contracts? What makes you think that the Acquisition Clause doesn't make sense? Au Contraire, Indra, the Acquisition Clause fits the the parties' relationships and covenants like a smooth silk glove.
I don't understand all your ramblings about the Account. It's hardly an issue and in fact a non-issue to be precise.
Save your sermon for justice for your untruly delusions, Indra. The Court is a chamber of facts, not paranoia."
Datuk Raz of Rivia"
14. True to his words, Indra did file an action against Rivia in the High Court of UiTM, with Justice Mohd Knopfler presiding. Knopfler J. upon disposing the case has decided in favour of the Plaintiff-Respondent, Laskar Bina Sdn Bhd on the following grounds:
i. Parties to the JVA must strictly adhere to the provisions of the Contract and shall not be allowed to deviate from each party's covenants;
ii. The only party actually adversely affected by the Acquisition is the Plaintiff;
iii. The compensation monies do not form part and parcel of revenues under the JVA or even the Settlement;
iv. The Acquisition Clause in the JVA should be severed from the rest of the JVA as it is indeed ambiguous.
15. The Defendant-Appellant, Rivia Sdn Bhd, in turn has filed a Notice of Appeal against the totality of Knopfler J's decision which shall be heard in the Moot Court of Appeal UiTM. The grounds of appeal anlisted in the Notice of Appeal are as follows:
i. The Respondent, through its conducts, acquiesces and/or accedes that the parties (particularly the Appellant) to the JVA may derogate from the covenants agreed in the JVA;
ii. The Respondent as the Developer under the JVA was also adversely affected by the Acquisition;
iii. The compensation monies should be taken into account in the calculation of entitlements under the JVA which was already resolved through the Settlement Agreement; and
iv. The Acquisition Clause in the JVA should remain enforceable as the clause is not at all ambiguous.
RIVIA SDN. BHD.
LASKAR BINA SDN. BHD.
Dated: 1st January 2013
This Joint-Venture Agreement ("JVA") is entered into by the two parties above for the common as well as mutual benefit and purpose of developing the Shah Alam land wholly owned by Laskar Bina Sdn Bhd ("Property") into an affordable housing area.
a. Laskar Bina Sdn Bhd shall be referred to as ("Laskar")
b. Rivia Sdn Bhd shall be referred to as the ("Developer")
c. Shah Alam Land shall be referred to as the ("Property")
d. ("Housing Development Account") shall refer to the definition of a Housing Development Account defined under Section 7A (3) of the Housing Developers (Control and Licensing) Act 1966.
2.0 Revenue Entitlements
a. Laskar is entitled to either 40 per centum (40%) of the gross profit from the Development or any alternative future determinable sum to be mutually agreed by all parties and incorporated into such appropriate agreement(s) as its Revenue Entitlement.
b. The Developer is entitled to the total revenue from the Development upon deducting Laskar's Revenue Entitlement under Clause 2.0 (a) above and any other costs incurred in furtherance of the Development under the JVA.
3.0 Land Acquisitions
a. In the circumstances that the Property or any part thereof shall be subjected to any order and/or notice for acquisition, each party's entitlement to the compensation sum shall take into account the stage of development's progress and other ancillary expenses in furtherance of the development under the JVA.
4.0 Placing the Property as Security
a. In the circumstance that the Developer opted to charge or otherwise encumber the whole or any part of the property, the Developer herein covenants and undertakes with Laskar that:
i. The Developer shall discharge or cause to discharge the charge or any encumbrance(s) on the Property or any part thereof immediately upon the full settlement of the loan and/or facility sum at the Developer's own expense.
Authored by: AHMAD ZULFIKRI BIN IBRAHIM
Advocate and Solicitor
Messrs Fuad, Abi & Aidil
LLB (Hons) UiTM