Judgment

Abdul Malek Ahmad, PCA

(delivering the judgment of the court)

1. The respondents, who were the plaintiffs in the Sessions Court, are partners in Pakatan Reka Arkitek while the second, third and fourth appellants are directors of the first appellant. The respondents had rendered architectural services to the first appellant for a project at Lots 80 and 81 at section 7, Petaling Jaya.

2. By letter dated May 7, 1991, it was agreed between the parties that the first appellant was to pay the sum of RM217,002,50 to the respondents for the architectural services rendered. The letter is reproduced below:

   PAKATAN REKA ARKITEK ARCHITECTURE PLANNING INTERIOR DESIGN North South Properties Sdn Bhd Bangunan North South Kuala Lumpur Reference: PRA/9001/A 7 May 1991   Dear Sirs, PROPOSED OFFICE BUILDING ON LOTS 80 & 81, SECTION 7, PETALING JAYA, DISTRICT OF PETALING - Agreement On Professional Fees - We refer to the meetings between your YB Tuan Haji Megat Najmuddin and our Mr. David Teh on the payment of professional fees for services rendered for the above project. We write to record chat the sum of $217,002.50 has been agreed as full settlement of fees for services rendered by Pakatan Reka Arkitek. North South Properties Sdn Bhd has requested that payment be made via a post-dated cheque No. MBB 259920 dated 29 October 1991. The two parties, Pakatan Reka Arkitek and North South Properties Sdn Bhd further agreed on the following: 1. That Pakatan Reka Arkitek has discharged their duties faithfully. 2. That there will be no further claims by one party against the other on any matters arising. 3. That in appreciation of the goodwill extended by Pakatan Reka Arkitek, North South Properties Sdn Bhd agreed to consider a further sum as compensation for termination of Pakatan Reka Arkitek's services. As requested, in interest of the project and for goodwill, we forward herewith our letter of release' to enable another Architect to be appointed. We would be grateful if you could sign the duplicate of this letter to confirm the above agreement. Yours faithfully PAKATAN REKA ARKITEK Sgd. David Teh NORTH SOUTH PROPERTIES SDN BHD. Sgd.

3. In addition, the second, third and fourth appellants also gave an undertaking dated May 9, 1991 that the agreed sum would be paid on or before October 29, 1991. That undertaking reads:

   NORTH SOUTH PROPERTIES SDN BHD BANGUNAN NORTH SOUTH KUALA LUMPUR Pakatan Reka Arkitek 39A Jln Dato Haji Eusoff Kuala Lumpur Your Ref: PRA/9001/A Date:9 May 1991 Dear Sirs, PROPOSED OFFICE BUILDING ON LOT 80&81 SECTION 7, PETALING JAYA DISTRICT OF PETALING AGREEMENT ON PROFESSIONAL FEES Perakuan di bawah Sek. 48 Akta Setem 1949 Disahkan di bawah Seksyen 47A, (1) Penalti sebanyak $25/- dijelaskan / diuruskan sepenuhnya. Sgd. Timb. Pemungut Duti Setem, K. Lumpur JHDN (illegible) We refer to your letter dated 7 May 1991 regarding the above. We, the undersigned being the Directors of the Company hereby give you our joint and several undertaking that the sum of M$217,002.50 referred to paragraph 2 (two) of the said letter dated 7 May 1991 shall be paid to you on or before the 19th day of October 1991. Yours faithfully NORTH SOUTH PROPERTIES SDN BHD sgd. HJ MEGAT NAJMUDDIN BIN DATO SERI (DR) HJ MEGAT KHAS Sgd. YAP CHENG HOCK Sgd. WITNESS: NAME: GO PECK HAR

4. However, when the abovementioned cheque was presented for payment, it was stopped. The respondents commenced the action to recover the amount and filed an application for summary judgment under Order 26A of the Subordinate Courts Rules 1980 (hereinafter "the SCR").

5. It was the contention of learned counsel for the appellants that:

   1. this action is time barred since the architectural services rendered was up to April 27, 1991, the date the cause of action arose for non-payment, whereas the action was commenced only on October 24, 1997 - limitation has set in as it is more than six years;

   2. the cheque cannot be relied upon as the basis for the cause of action because the issue of the cheque was not pleaded in the statement of claim and the respondents were confined to their pleadings only;

   3. the second, third and fourth appellants are not liable under the letter of undertaking dated May 9, 1991 because it is not a letter of undertaking but merely a "comfort letter" which is not binding;

   4. the second, third and fourth appellants are not liable because there was no consideration for the undertaking given by them; and

   5. the payment on the cheque was stopped because the architectural services rendered by the respondents were not satisfactory.

6. However, the learned Sessions Court judge allowed the application for summary judgment and on appeal to the High Court, the learned High Court judge held as follows:

   1. that the cause of action only arose on October 29, 1991 when the obligation to pay arose and there was no payment received by the respondents. Therefore, the claim is not time barred;

   2. that the respondents' cause of action was based on the non-payment of architectural services rendered and not on the cheque dated October 29, 1991. Under the agreement dated May 7, 1991 the appellants are bound to pay RM217,002.50 to the respondents;

   3. that the contents of the letter dated May 9, 1991 signed by the second, third and fourth appellants show that it is a letter of undertaking and not a comfort letter. The language is clear especially the usage of the word "undertaking" in the letter. Further the letter contains a witness's signature and it was stamped. Therefore, it shows the clear intention of the parties that it is intended to bind them; and

   4. that the architectural services rendered was the consideration for the undertaking given by the second, third and fourth appellants pursuant to s 2 of the Contracts Act 1950 wherein the respondents agreed to accept the payment due on October 29, 1991.

7. The date learned counsel for the appellants maintained was the date the cause of action occurred, namely, April 27, 1991. This was the date the independent adjudicator issued his findings on the dispute and, for effect, is reproduced below:

   HAJI HAJEEDAR HAJI ABDUL MAJID Dipl-Arch. (Port.) APAM, ARIBA, Cert. City Planning (Tokyo) 27th April 1991 Y.Bhg. Tuan Haji Megat 12th Floor Menara SMI Kuala Lumpur Pakatan Reka Arkitek 39A Jalan Dato Haji Kuala Lumpur (Attn: Mr. David Teh) Mr. C H Yap / Mr. Lawrence Lai North South Properties Sdn Bhd Bangunan North South Kuala Lumpur Dear Sirs, PROPOSED OFFICE BUILDING ON LOTS 80 & 81, SECTION 7 PETALING JAYA. Further to your reference to the undersigned to act as the ultimate adjudicator in respect of the dispute on professional fees payable to the architect, I am pleased to append below my findings which is final. The basis of my assessment and adjudication is as follows:- (1) that both parties have agreed to appoint the undersigned as the ultimate adjudicator to resolve the reasonable quantum due to Pakatan Reka Arkitek for works done up to their termination. (2) The undersigned held separate hearings with the client and architect respectively. The evaluation was also based on verbal representation of parties and two separate bundles of documents from the client and architect. A set of architectural drawings supplied by the client (and agreed by the architect) was also used as basis of the evaluation. (3) Upon termination, the cost plan for the project was established at $22,420,000.00 and professional fee was agreed at4.5% of the total project cost. (4) The services extended by the architect as per the basic scopes of work was partial and incomplete. As such the amount due shall be proportionate to the level of service achieved at both the Schematic and Design Development Stages. It was noted that the stages were overlapped and developed concurrently. Having considered the views of both parties and perused the written documents and architectural drawings, the undersigned is of the opinion that the fee due to the architect is as follows:- Design Fee Calculation Estimated project cost of office tower with podium based on the Cost Plan (excluding all external works, special works, contingencies and inflation allowances) $22,420,000.00 Professional fees, as agreed: 4.5% of total project costs = 4.5% x $22,420,000.00 = $1,008,900.00 Fees due to Architect: Schematic Design : 90% of 15% = 90% x (15% x $1,008,900) = $136,201.50 Design Development: 30% of 30% = 30% x (30% x $1,008,900) = $90,801.00 $227,002.50 Less: Amount paid earlier to the architect ... ...  $10,000.00 AMOUNT DUE  $217,002.50 The undersigned declares chat the amount established above has been derived at objectively without prejudice to either party. I return herewith your respective documents and drawings. Yours faithfully, Sgd. HAJI HAJEEDAR HAJI ABDUL MAJID

8. In Reeves v Butcher [1891] 2 QB 509, it was held that the statute of limitations was a good defence, for that the time began to run from the earliest time at which the plaintiff could have brought her action, that is, twenty one days after the first instalment of interest became due. It also held that this expression, "cause of action," has been repeatedly the subject of decision, and it has been held, particularly in Hemp v Garland QB 519, decided in 1843, that the cause of action arises at the time when the debt could first have been recovered by action. The right to bring an action may arise on various events; but it has always been held that the statute runs from the earliest time at which an action could be brought.

9. In Nadefinco Ltd v Kevin Corporation Sdn Bhd [1978] 2 MLJ 59, the Federal Court was of the view that the cause of action in that case accrued the instant the mining company failed to pay the first instalment due and therefore the action was barred by limitation, the action being commenced more than six years after the cause or action arose.

10. As regards the question of the cheque not being stated in the pleadings despite the details of the date of the payment pursuant to the agreement made between the parties, learned counsel for the respondents relied on paragraph 18/7/3 at p 280 of the Supreme Court Practice 1991, vol I, Part I which states:

    Material facts, not evidence — Every pleading must contain only a statement of the material facts on which the party pleading relies, and not the evidence by which they are to be proved (per Farwell LJ in NW Salt Co Ltd v Electrolytic Alkali Co Ltd [1913] 3 KB 422 at p 425). "The distinction is taken in the very rule itself between the facts on which the party relies, and the evidence to prove those facts" (per Brett LJ in Philipps v Philipps (1878) 4 QBD 133). All facts which tend to prove the fact in issue will be relevant at the trial, but they are not "material facts" for pleading purposes. "It is an elementary rule in pleading that when a statement of facts is relied on, it is enough to allege it simply without setting out the subordinate facts which are the means of proving it, or the evidence sustaining the allegation" (per Lord Denman CJ in Williams v Wilcox [1838] A&E 314 at p331; and see Stuart v Gladstone (1879) 10 Ch D 644).

11. Pertaining to the other payments made by the first appellant before the agreement namely RM10,000 on June 29, 1990 and RM20,000 on February 6, 1991, these were before the independent adjudicator's finding although there is mention made in his letter of one earlier payment of RM10,000.

12. In Poh Chu Chai's, Law of Banking, vol 2; Pledges, Guarantees and Letters of Credit (3rd edn) at pp 464 and 465, the author says a performance bond or guarantee has to be distinguished from a letter of comfort. Unlike a performance bond or a guarantee which embodies a legally binding undertaking, a letter of comfort is usually a statement of moral responsibility which is not intended to have any legally binding effect. Whether a letter of comfort is capable of giving rise to a legally binding undertaking will depend on the intention of the parties and the circumstances under which the letter of comfort is given. We are of the considered opinion here that the letter signed by the second, third and fourth appellants was in fact a letter of undertaking and not a letter of comfort.

13. There has also been no complaint made by the appellants as regards to the architectural services rendered by the respondents at any stage. The agreement made between them pursuant to the independent adjudicator's finding and letter of undertaking by the second, third and fourth appellants is further testimony of the fact that the payment was correctly due from the appellants to the respondents. The cause of action accrues on the date of the postdated cheque because before that date, the respondents were not entitled to make any claim in view of the agreement made.

14. Before us, the same issues were canvassed and we dismissed the appeal with costs on the grounds that there were no triable issues raised. Further, we find both the Sessions Court and the High Court were correct in coming to the same finding. The deposit is to go to the respondents to the account of taxed costs.

15. Subsequent to our order, learned counsel for the respondents asked for the release of the money deposited with court on July 27, 2000 with all the relevant interest. Learned counsel for the appellants had no objections and we accordingly ordered that the money deposited into court is to be paid out with all the relevant interest.

Cases

Hemp v Garland [1843] 4 QB 519; Nadefinco Ltd v Kevin Corporation Sdn Bhd [1978] 2 MLJ 59, FC; Reeves v Butcher [1891] 2 QB 509, CA

Legislations

Subordinate Courts Rules 1980: Ord.26A

Authors and other references

Pledges, Guarantees and Letters of Credit, 3rd edn

Poh Chu Chai's, Law of Banking, vol 2

Supreme Court Practice 1991, vol I, Part I

Representations

Suria Kumar DJ Paul (Suria Kumar & Co) for appellants

KB Ong & Julie CG Teh (Dorairaj, Low & Teh) for respondents

Notes:-

This decision is also reported at [2005] 3 AMR 123.