IN THE HIGH COURT OF MALAYA AT SHAH ALAM IN THE STATE OF SELANGOR DARUL EHSAN [CIVIL SUIT NO: 22-510-2003] BETWEEN A & AT ADVANCED POWER SYSTEMS SDN BHD... PLAINTIFF AND PERNEC CORPORATION BHD (NO SYARIKAT: 014075-M)... DEFENDANT CONTRACT: Claim for services rendered - Consultancy fees - Plaintiff claiming under consultancy agreement for helping defendant secure contracts - Fees by percentage on purchase orders made by purchaser with defendant - Whether purchase orders in question came within ambit of plaintiff s services under consultancy agreement or were secured by defendant independently - Question of fact [Plaintiff s claim allowed.] JUDGMENT [1] Plaintiff alleged that he had been helping the Defendant procure contracts from Celcom all the way from Phase 1 to Phase 6. On 1-2- 2001, Plaintiff and Defendant entered into a Consultancy Agreement (CA) (Exhibit D23) for the Expansion of the Mobile Prepaid Card System of Celcom (Phase 6). The CA provide amongst others that in 1
consideration for the successful procurement of the contract by the Plaintiff, the Defendant agrees to pay the Defendant a consultancy fees for a sum equivalent of 12% of the purchase orders (PO) made by Celcom to the Defendant for Phase 6. The rates for the consultancy fees shall be reduced to 10% or lower for future projects. [2] The Plaintiff now claim that for purchase order (PO) number 6 dated 15-7-2002 the Defendant failed to pay his consultancy fees for the amount of RM496,656/- together with interest and cost. The Defendant denied that PO No. 6 is within Phase 6 and that Celcom had order PO No. 6 directly from the Defendant without going through Plaintiff. [3] At the trial, Plaintiff had 1 witness and the Defendant had 2 witnesses. [4] The issue before the Court is whether PO No. 6 is within Phase 6 and whether the Defendant is liable to pay the Plaintiff RM496,656/-. [5] The Consultancy Agreement (CA) dated 1-2-2001 (Exh. D23) provides the following:- For the Expansion of the Mobile Prepaid Card System of Celcom (Phase 6) for 2, 5 Million customer Base and also the related items listed below: 2
(i) (ii) (Hi) (iv) Integrated Voice Response (IVR) system Comprehensive Maintenance Contract MPC Database upgrade from 1M to 1.5M subscribers NMS (OSI Solution). THIS AGREEMENT is made on the 1 st February 2001 between:- WHEREAS:- 1. the Consultant is a company having n its employed personnel with considerable skill knowledge and experience in the field of telecommunications and are in the position to procure contracts for PERNEC to construct and implement Intelligent Network Platform for and on behalf of CELCOM (Malaysia) Sdn. Bhd (hereinafter known as the Customer ) 2. PERNEC is desirous of engaging the services of the Consultant and the Consultants hereby agreed to provide their assistance in respect of procuring the contract for PENEC from CELCOM to construct and implement Intelligent Network Platform for and on their behalf. 3. The parties have agreed to regulate their relationship in the manner herein set out in this Agreement. NOW THEREFORE, in consideration of them mutual convents contained herein the parties hereby agree as follows: (i) The consideration for the successful procurement of the contract by the Consultant in favor of PERNEC, PERNEC agrees to pay the 3
Consultant the sum equivalent of total Twelve percent (12%) of the purchase order amount from CELCOM to PERNEC. This rates for the consultant fee shall be reduced to Ten percent (10%) or lower for future projects. 6. During the continuance of this Agreement, the Consultant shall not provide the same services or assistance to any other party which has submitted a similar bid for the above said RFP to the Customer. [6] PW1 in his Witness Statement stated that Plaintiff helped secure contracts from Celcom to the Defendant from Phase 1 to Phase 6 of the IN Project. Phase 4 was to build up Celcom s customer base to 500,000. The IN equipment purchased by Celcom for Phase 5 was to cater for Celcom s increased to 1.5 million customer base. Due to the rapid growth of Celcom s customer base, Celcom had to start purchasing equipment for Phase 6, which would allow them to cater for a customer base of up to 2.5 million. PW1 then described the process of securing contracts from Celcom. He said, first Celcom puts out a tender. Bidders then furnish a quotation to Celcom. The plaintiff was actively involved during the evaluation of the bids by Celcom. Upon completion of the tender evaluation, Celcom issues a Letter of Award (LOA) to the successful bidder which in this case is the Defendant. Upon agreeing to Terms and Conditions of the LOA, Celcom issues Purchase Orders (PO) to defendant according to Celcom s needs and if necessary beyond the stated value in the LOA. This process is repeated for each subsequent Phases. 4
[7] PW1 went on to say that for Phase 6, the initial quotation by Defendant was RM74,924,553.15 (Exhibit P1). However, the Letter of Award dated 19-3-2002 (Exhibit P8) by Celcom to Defendant was only for a sum of RM24,005,938.22. PW1 explained as regards the difference in the quoted and the sum awarded by the LOA. He said that although Defendant furnished a quotation for RM 74 million plus, but due to financial and budgets constraints, Celcom s LOA and the various purchase orders (POs) was for RM24 million plus. This would tally with the amount of the LOA and the PO No. 1-5. However according to PW1 because of increasing demands Celcom decided to increase its subscriber base and Celcom then placed an order via PO6 (Exhibit P20) for the value of RM4,138,800/- and for which his fees would be 12% of the value of RM4,138,800/-. That would be RM496,656/-. Because he believed that the PO6 was within the scope of Phase 6, Plaintiff then sent invoices for the fees due to Plaintiff and many reminders but the Defendant failed to pay Plaintiff his fees. Plaintiff s counsel in his submission submits that the Plaintiff was instrumental in winning for the Defendant Phase 6 of the contract which the Defendant originally quoted a price of RM74,924,553.15 but later due to budget constraints by Celcom, the contract was reduced to RM24,005,938,22, He argued that this figure is not an absolute figure and that figure can change depending on the requirements of Celcom. This is clear from the LOA from Celcom which says:- 5
Clause 4 PERNEC will enter into a contract with Celcom for the period of one (1) year with orders placed through issuance of Purchase Orders as and when required. The contract shall also give provision for an extension of up to one (1) year by the mutual agreement if deemed necessary. Plaintiff s counsel submitted that issuance of Purchase Orders as and when required when read together with extension of up to one (1) year means that the contract sum of RM24,005,938.22 is not an exhaustive one because obviously Celcom reserves the right to continue to issue POs as and when required and also to extend the contract for up to a year depending on its requirements. 8. Clause 1.1 and 4 of the LOA and clause 3 of the CA are as follows:- Letter of Award Clause 1.1 TERMS AND CONDITIONS 1. SCOPE OF AWARDS 1.1. Your scope of work shall includes the following services:- Supply, delivery, install, testing and commissioning and the provision of engineer... services and training for Celcom Prepaid Mobile Service Enhancement, Database expansion and IN Platform Upgrading. 6
4. CONTRACT AGREEMENT PERNEC will enter into a contract with CELCOM for the period of one (1) year with orders placed through issuance of Purchase Order as and when required. The contract shall also give provision for an extension of up to one (1) year by mutual agreement if deemed necessary. Clause 3, Consultancy Agreement NOW THEREFORE, in consideration of them mutual covenants contained herein the Parties hereby agree as follows: (i) The consideration for the successful procurement of the contract by the Consultant in favor of PERNEC, PERNEC agrees to pay the Consultant the sum equivalent of total Twelve percent (12%) of the purchase order amount from CELCOM to PERNEC. This rate is only applicable for Phase 6 project. The rates for the consultant fee shall be reduced to Ten percent (10%) or lower for future projects. [9] Plaintiff s counsel submitted that reading the above extracts of the LOA and the CA one would arrive at the inescapable conclusion Celcom could and did issue POs over and above the contract value of RM24,005,938.22 as stated in the LOA as and when required. POs at Exhibit P18, P16, P10, P12 and P14 clearly refer to the database expansion from 1-2.5 million subscribers as in the CA and that the fees payable - to the Plaintiff is 12% of the value of the POs as in Clause 2 of the CA. 7
[10] In order to illustrate the database increase of subscribers by Celcom, Plaintiff s counsel put in tabular form the various POs and the database increase as follows:- Pgs in Bundle B PO Value RM Date Database increase Comm 12, 13 & 14 1,810,500.00 29.11.00 1M to 1.3M RM217,260 17 & 18 1,210,500.00 28.04.01 1.3M to 1.5M RM145,260 19 & 20 2,500,000.00 21.03.02 1.5M to 2M RM300,000 6, 7 & 8 13,390,130.00 21.03.02 2M to 2.5M RM1,606,816 9 & 10 10,615,808,22 21.03.02 SSP Exp RM1,273,897 Total 29,526,938.22 and % of Commission 12%. From the table it is clear that the PO (Exhibit 18) is for expansion of subscribers from 2 million to 2.5 million. It is therefore clear that the POs come within the term of the CA. [11] Based on the above I agree with Plaintiff s counsel that Celcom could and did issue POs over and above the contract value and this would include the 6 th PO which is in dispute. I agree that the Plaintiff is entitled to the claim of 12% of the value of the 6 th PO as stated in his Statement of Claim. [12] However, this judgment would not be complete if I do not evaluate the Defendant s case. Defendant s witness DW1 stated that only 2 PO s were issued by Celcom for Phase 6 ie, PO No: NP 846 8
(Exhibit P18) and PO NP 845 (Exhibit P16). No other POs were issued. DW1 wrote to DW2 who is an officer from Celcom to confirm that Celcom issued only PO NP 846 and NP 845. Why did DW2 write this letter? DW1 in cross examination stated that he requested for Celcom to write that letter dated 13-11-2003 to the Defendant. The cross examination is as follows:- 85. Q : Did Defendant request Celcom to issue this letter at A : Yes. page 41? 86. Q : How was request made and by whom? A : Requested by me to Celcom s project manager, Khatijah Ahmad to confirm the deliverable under page 6. 87. Q : What prompted you to make this request? A : We seek confirmation from Celcom to confirm deliverable under Phase 6 of Project. 88. Q : You did this in 2003? A : Yes. 89 Q : Wasn t all work completed sometime in 2002? A : I m not sure when work completed. My intention was to confirm deliverable under Phase 6. 90. Q : Why do you need confirmation of deliverable? A : (1) We have payment term we proposed to Celcom as per my Exhibit at page 42, 43, 44. 9
(2) Since we receive request from A & AT claiming that the PO under dispute valued as at RM4,138,800 million was not part of Phase 6 of Project. To confirm that. 91. Q : I put it to you as at November 2003, Celcom had made all payments due to Defendant under Phase 6 and there was no requirement for confirmation deliverables to Celcom. A : I couldn t confirm that because on page 42 is on proposal to Celcom on payment term. Letterdated 12-3- 2002 and I don t have record how and when. Celcom made payment to Pernec. Deliverables confirmation also involve warranty issues for Project. 92. Q : I put it to you your requested document at page 41 is to defect Plaintiff s claim? A : I disagree. 93. Q : Refer to page 3, Bundle B. Looking at CA as a whole. I put it to you when Defendant signed the Agreement it was on the understanding that only Plaintiff could procure Celcom contract for Defendant for Phase 6. A : Yes. 94. Q : I put it to you when Defendant signed Agreement it was on the Defendant would not go behind Plaintiff s back and deal directly with Celcom for Phase 6 or any other future Celcom project? A : I disagree. 10
[13] As it turn out, DW2, under cross examination admitted that she was a former system engineer with the Defendant. The relevant part of her testimony is as follows:- 2. Q : What is your relation with Pernec? A : They are our supplies for IN System in Celcom. 3. Q : Isn t it true you used to work with Pernec? A : Yes, for 1 year. 4. Q : What was your position in Pernec? A : System Engineer. [14] Therefore, it is to be questioned why DW1 had requested DW2 to confirm the 2 PO s ie, NP 846 and NP 845 only in 2003 when the Project was already completed. Also, the Court is wary as to DW2 s biasness, because she was a former systems engineer with the Defendant. [15] Lastly, the Plaintiff by the terms of the CA was not allowed to provide the same services it provide to Defendant to any other party. Clause 5 of the CA provides the following:- During the continuance of this Agreement, the Consultant shall not prove the same services or assistance to any other party, which has submitted a similar bid for the above said RFP to the Customer. 11
The Plaintiff now find itself not getting paid for consultancy fee and at the same time was prevented from doing consultancy work with any other party. [16] Based on the above, I find that the Plaintiff had proven its case on a balance of probability and I allow the Plaintiff s claim with cost. (NORAINI BT. ABDUL RAHMAN) Pesuruhjaya Kehakiman Mahkamah Tinggi (T-Track 2) Shah Alam Tarikh Keputusan : 12 MARCH 2010. PEGUAM-PEGUAM: Bagi pihak plaintiff - Sreether; M/s Murali b Pillai & Associates Peguambela dan Peguamcara Bilik 1504/5, Tingkat 15, Wisma Lim Foo Yong No. 86, Jalan Raja Chulan, 50200 KUALA LUMPUR. 12
Bagi pihak defendant - Faizal Hassan; M/s Edlin Ghazaly & Associates Peguambela dan Peguamcara Level 22, Menara Tun Razak Jalan Raja Laut 50350 KUALA LUMPUR. 13