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Malayan Law Journal Unreported/2016/Volume/Om Cahaya Mineral Asia Berhad v Damansara Realty
(Pahang) Sdn Bhd - [2016] MLJU 893 - 1 July 2016

[2016] MLJU 893

Om Cahaya Mineral Asia Berhad v Damansara Realty (Pahang) Sdn Bhd


HIGH COURT (KUALA LUMPUR)
DATUK YEOH WEE SIAM
CIVIL SUIT NO. WA-22NCVC-140-03/2016
1 July 2016

Ms Masturina Mohamad Rodzi Mr. Alfred Vun Yun Fui (Pupil in Chambers), together with her Messrs
Edwin & Suren for the plaintiff.

Datuk Jagjit Singh Datuk Akberdin Abdul Kader Mr. Harjinder Singh Sandhu Messrs Akberdin & Co. for the
defendant.

DATUK YEOH WEE SIAM

JUDGMENT

(In respect of striking out Application)

ENCLOSURE 10

[1] Enclosure 10 is the Defendant's Application to strike out the Plaintiff's Writ of Summons and Statement of
Claim under o.18 r.19(b), (c) and/or (d) of the Rules of Court 2012 ("ROC"), and for costs ("the Application").

BACKGROUND FACTS

[2] The Plaintiff is a company carrying on a business which includes preparing the site for construction, cut
and fill works, site clearance, mineral extraction and the mineral export business.

[3] The Defendant is the registered owner of a parcel of land known as Lots 1, 2, 3, 4, 9, 12 and 18 located
at Mukim Sungai Karang, Daerah Kuantan, Pahang Darul Makmur measuring approximately 500 acres ("the
Land").

[4] Vide a Letter of Intent dated 3.12.2014 ("LOI 1") issued by the Defendant to the Plaintiff, the Defendant
invited the Plaintiff to venture into a contract for the Plaintiff to do site clearance, extract mineral, and
undertake a proper cut and fill works for the purpose of future development ("the works") over an
approximate 100 acres of the Land area (at Lot 1 and portion of Lot 9 of the Land). The Plaintiff accepted the
offer.

[5] On 5.2.2015, the Defendant issued a Letter of Award dated 5.2.2015 ("LOA 2") to the Plaintiff
awarding the Plaintiff with the same works as in LOI 1, but for a larger area i.e. on Lot 18, Lot 12 and a
portion of Lot 9 of the Land measuring approximately 200 acres. Under LOA 2, the award given to the
Plaintiff is two-fold, as follows:

(1) First part, the Plaintiff's obligations under the agreement are:
(a) to perform site clearance and preparation on Lot 18, Lot 12 and a portion of Lot 9 of the
Land for future development purposes;
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(b) to ensure that the Land is duly leveled and suitable for future development; and
(c) to undertake and perform cut and fill works.
For these works, the proposed payment to be paid by the Defendant to the Plaintiff is in the
total sum of RM10.8 million.
(2) Second part, the Defendant granted the Plaintiff rights to extract and dispose of the minerals,
i.e. bauxite, found on site. For these works, the Plaintiff would pay the Defendant a lump sum
fee of RM20 million as tribute payment according to the timelines agreed to by both parties.

(Note: Under LOA 2, the total tribute payment payable by the Plaintiff to the Defendant is
RM30.8 million. However, a portion of the tribute in the sum of RM10.8 million (payable to the
Defendant) shall be utilized by the Plaintiff to offset the cost incurred for the works referred to in
the First part above, leaving a balance of RM20 million to be paid by the Plaintiff to the
Defendant).

[6] Upon agreement by both parties, the Plaintiff entered a formal written agreement backdated to
1.12.2014 with the Defendant ("Agreement"). By a Variation Letter dated 2.3.2015 from the Defendant to the
Plaintiff ("Variation Letter"), the Defendant and the Plaintiff agreed to vary the terms of the Agreement dated
1.12.2014 which, inter alia, include the following:

(1) The commencement date of the Agreement shall be 18.2.2015, instead of 1.12.2014;
(2) The Appointment and Duration of the Agreement under Clause 2 of the Agreement shall be a
term of 2 years from the commencement date, with an option to extend for a further 1 year from
the expiry of the initial term.
(3) The termination notice period under Clause 5 of the Agreement shall be 60 days.
(4) The Payment Schedule for the tribute payment of RM20 million to the Defendant was
amended.

[7] On 5.6.2015 the Defendant issued another Letter of Intent ("LOI 3") to the Plaintiff for the same works,
and to prepare the access road, make ready and/or prepare trench borders, and to do the necessary landfills
over the contiguous area to the portion of the Land awarded to the Plaintiff under LOI 1, LOA 2 and the
backdated Agreement earlier i.e. at Lot 1, 2, 3, 4 and a portion of Lot 9 of the Land.

[8] The Plaintiff accepted LOI 3. By an email dated 24.7.2015 from the Defendant to the Plaintiff, the Plaintiff
was informed that the Defendant was in the midst of preparing a formal agreement to be signed by both
parties, which agreement will reflect the intention of the parties regarding LOI 3.

[9] The Agreement between the Plaintiff and the Defendant (exh. TMF-1 of Defendant's Affidavit in
Support, enclosure 11) therefore constitutes the following documents:

(1) LOI 1 dated 3.12.2014;


(2) LOA 2 dated 5.2.2015;
(3) the backdated Agreement dated 1.12.2014;
(4) the Variation Letter dated 2.3.2015; and
(5) LOI 3 dated 5.6.2015.

[10] The Plaintiff alleged that in reliance of the Agreement, the Plaintiff has commenced, conducted and
expended substantially for the works that it had carried out over the Land.

[11] By a letter dated 11.9.2015 from the Defendant to the Plaintiff ("termination letter"), the Defendant
terminated the Agreement dated 1.12.2014 and the Variation Letter dated 2.3.2015, and refused to be bound
by it any longer. No reason was given in the termination letter by the Defendant for the termination of the
Agreement.

[12] The Plaintiff alleged that notwithstanding the Plaintiff's appeal and requests to remain on the site, the
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Defendant has wrongfully and in breach of the Agreement failed, refused and prevented the Plaintiff from
entering the site.

[13] The Plaintiff contends that by reason of the Defendant's prevention of the Plaintiff from completing the
works under the Agreement, the Plaintiff has suffered loss and damage.

[14] In paragraph 35 of the Statement of Claim, the Plaintiff claims;

(1) "A declaration that the termination of the Agreement vide the Defendant's letter dated 11.9.2015 was
invalid and unlawful;
(2) Special damages (Wasted expenditure) in the sum of RM15,833,484.16;
(3) Loss of profit in the sum of USD85 million (RM366,656,000.00 as at the date of this summons);
(4) Alternatively or in lieu;-
(i) a declaration that specific performance be granted to the Plaintiff to proceed with the said
Agreement;
(ii) an order that the Plaintiff be granted an extension of time of 526 days with an option to
extend for a further one (1) year from the expiry, from the date of this Order to complete the
works under the Agreement;
(iii) loss and expense arising from the delay caused by the wrongful termination by the
Defendant to be assessed by the Court from the date of wrongful termination on 11.9.2015
until the date of this Order;

(5) Interest and finance charges to be assessed by the Court from the date of wrongful termination on
11.9.2015 until the date of this Order;
(6) Costs;
(7) Further or other relief as is deemed necessary by this Honourable Court.".

COURT'S DECISION REGARDING ENCLOSURE 10

[15] After hearing the Application on 27.5.2016, I allowed the Defendant's Application to strike out the
Plaintiff's Writ and Statement of Claim. I further ordered that costs of RM5,000.00 are to be paid by the
Plaintiff to the Defendant, subject to payment of the allocatur fee of 4% of the costs.

GROUNDS FOR DECISION

The Law

[16] The law on striking out an application is settled. It is only in plain and obvious cases that recourse can
be made to the summary process. This summary process is only appropriate in plain and obvious cases
where it can be clearly seen that a claim on the face of it is obviously unsustainable (see Federal Court
decisions in Bandar Builder Sdn Bhd & Ors V. United Malayan Banking Corporation Bhd [1993] 3 MLJ 36,
and Seruan Gemilang Makmur Sdn Bhd V. Kerajaan Negeri Pahang Darul Makmur & Anor [2016] MLJU
12).

The Plaintiff did not have a mining licence from the authorities which is a pre-condition of the
Agreement

[17] Clause 3(a) of the Agreement states as follows:

"3. OCMAB'S WARRANTS AND COVENANTS

OCMAB hereby warrants and covenants with DRP as follows:-


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a. That OCMAB have all the necessary licences for purposes of undertaking the above scope of work and OCMAB
shall procure any other licences and approval as required by the relevant authority at OCMAB's cost and expenses.".

[18] From Clause 3(a), it is imperative that at the commencement of the Agreement, the Plaintiff should
"have all the necessary licences" for undertaking the scope of works under the Agreement. It is only after the
commencement of the Agreement, and if other licences or approval from the relevant authority are required,
then the Plaintiff shall procure those other licences. However, it is clear that from the outset of the
Agreement, the Plaintiff must already have or possess the necessary licences.

[19] The Defendant subsequently discovered that the Plaintiff did not have the necessary licences to carry
out the scope of works. In fact, in paragraph 3 of the Plaintiff's Reply, and in paragraphs 6 and 7 of the
Plaintiff's Affidavit in Reply ("AIR") to this Application, the Plaintiff did not deny the fact that it did not have the
necessary licences to do so.

[20] Paragraph 3 of the Plaintiff's Reply states as follows:

"3. The Plaintiff vehemently denies paragraph 6 of the Statement of Defence which is an afterthought.

3.1 The Defendant is at all material times aware and have full knowledge that that the relevant authorities
requires the Plaintiff to obtain an authorization letter from the Defendant as the Land Owner to enable
the Plaintiff to apply for the relevant mining license. The issue has been communicated and discussed
between the Plaintiff and the Defendant and/or its agent on several occasions, and the Plaintiff has
repeatedly requested the Defendant to issue the said authorization letter.
3.2 However, the Defendant through its agent has given an undertaking to the Plaintiff that the Defendant
as the land owner will apply for the relevant mining license pursuant to the Agreement. The Plaintiff
would not have done substantial works over the Lands (without getting any payment) if not for the
Defendant's undertaking that the Defendant shall apply for the relevant mining license pursuant to the
Agreement.
3.3 In any event, the issue of the Plaintiff's purported failure to obtain the relevant mining license is only
raised for the first time in the Defendant's Statement of Defence herein.".

[21] From the above pleading, it is clear that the Plaintiff did not have the necessary licences, as it had held
out to the Defendant, under Clause 3(a) of the Agreement.

The Plaintiff did not possess the required "mineral tenement".

[22] The Plaintiff contends that it had carried out preparation works for extraction and disposition of minerals
found on the site. The Plaintiff admits that it had carried out exploration works and extracted minerals for
sampling. The Plaintiff however defended itself by stating that, as mining works have not yet started, there
was no need for a mining licence. Here, I am of the view that the Plaintiff is under a misconception about the
requirements of the law.

[23] As the Defendant had submitted, the Plaintiff has no right to carry out any work on the land without
first obtaining what is known as a mineral tenement. A mineral tenement is defined under s.3 of the Mineral
Development Act 1994 ("MDA") to mean:

' "mineral tenement" means a fossicking licence, dulang licence, individual mining licence, prospecting licence,
exploration licence, proprietary mining licence, mining lease, or any of them for the purpose of exploration or mining of
minerals or mineral ores, as the case may be, issued under any Federal or State law regulating mineral tenements;'
(emphasis added).

[24] Since the Plaintiff is not a natural person, it is not required to have a fossicking licence, or an individual
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mining licence. A dulang licence for panning is irrelevant in view of the value of the Plaintiff's claim. In the
premises, of all the mineral tenements, the Plaintiff at least ought to have obtained either a mining lease (for
the prepatory work) or a prospective or exploration licence (for the exploration / sampling).

[25] In brief, the Plaintiff submits that it has commenced, conducted, completed and expended
substantially for, inter alia, the following works over the Land:

a. "site clearance works;


b. cut and fill works;
c. engaging contractors and machineries for the purpose of the works;
d. getting necessary approvals for the works;
e. engaging specialist and geologist to conduct site survey and studies;
f. laboratory research to determine the quality of minerals found on site;
g. arranging for a proper washing machinery to wash the bauxite extracted from the Land;
h. arranging for a proper weighing bridge at site to weigh the extracted and washed bauxite;
i. arranging for transportation to transport the bauxite from initial site, to the weighing bridge, and
subsequently to transport the bauxite to the respective port;
j. securing potential buyers;
k. engaging financial consultant regarding the works; and
l. other related works pursuant to the Agreement between the parties.".

[26] In order to carry out all the works as pleaded by the Plaintiff in paragraphs 15-18 and 20-22 of the
Statement of Claim, a mining lease, which is a type of mineral tenement granted under s.63 of the Mineral
Enactment 2001 of Pahang (En.7/2001) ("Enactment") is required.

[27] It is only after the Plaintiff has been granted a mining lease, then pursuant to s.70 of the Enactment,
the Plaintiff has the rights to carry out the following works provided in the same section:

"70.(1) A mining lease shall, subject to this Enactment and to the terms and conditions specified in the lease, confer
upon the lessee thereof the rights-

....

(b) subject to section 7 -

(i) and any other law relating to minerals, to store, transport, process and sell any mineral extracted and dispose of any
waste;

(ii) to use any timber, sand or gravel as required for mining within the mining land;

....

(vi) to use, occupy and enjoy the land in respect of which a mining lease has been granted for mining purposes."

[28] From a perusal of paragraphs 15, 16, 17, 19, 20, 21 and 22 of the Statement of Claim, it is clear that the
Plaintiff's claim for prepatory works is premised on works consistent with that of holder of a mining lease
which the Plaintiff never had. In fact, the Plaintiff itself did not deny in paragraph 3 of its Reply that it did not
possess any mineral tenement.

The Plaintiff did not possess a prospecting licence or exploration licence to carry out the acts
mentioned in paragraphs 18 and 23 of the Statement of Claim

[29] From paragraphs 18 and 23 of the Statement of Claim, it can be seen clearly that the Plaintiff has
carried out prospecting and exploratory works. The Plaintiff may not carry out such works without first
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applying for and obtaining the prospecting licence or exploratory licence as required under s.41 of the
Enactment.

[30] It is only after being approved the prospecting licence or exploratory licence under s.41 of the
Enactment that the Plaintiff has the following rights under s.49 of the Enactment:

"49. Rights under prospecting licence or exploration licence

A prospecting licence or exploration licence, as the case may be, shall, subject to this Enactment and to the terms
or conditions specified in the licence, confer upon the holder thereof the rights-

(a) to obtain access and to enter the prospecting or exploration area;


(b) to explore on an exclusive basis for any mineral within the limits of the prospecting or exploration area;
(c) to obtain samples within the limits of the prospecting or exploration area and to remove such samples;
and
(d) to use water, sand and gravel, road, canal and river as required for exploration within the limits of the
prospecting or exploration area." (emphasis added).

[31] There is no proof that the Plaintiff had at any given time been the holder of a prospecting licence or
exploratory licence.

Operating without a mineral tenement is a statutory offence

[32] S.157, s.158 and s.173 of the Enactment provide for the statutory offence of conducting any
exploration without the requisite licence and the penalty thereof as follows:

'157 Penalty for conducting exploration without licence

(1) Any person who conducts any exploration-


(a) Without a valid prospecting licence or exploration licence issued under this Enactment; and
(b) In the case of alienated land, occupied land, reserved land or reserved forest area, without
the written permission of the owner of the alienated land or occupied land, or the officer for
the time being having the control over the reserved land or reserved forest area, or
authorisation under an access order as provided under section 88 or 91, shall be guilty of an
offence.
(c) For the purpose of subsection (1), "exploration" shall not include fossicking.';

"158 Penalty for mining without a valid licence or lease

Any person who conducts mining without a valid licence or lease issued under this Enactment whether or not any
mineral is won shall be guilty of an offence and shall, on conviction, be liable to a fine not exceeding five hundred
thousand ringgit or to imprisonment for a term not exceeding ten years or to both."; and

"173 General penalty

Any person who is guilty of an offence under this Enactment for which no penalty is expressly provided shall, on
conviction, be liable to a fine not exceeding fifty thousand ringgit or to imprisonment for a term not exceeding three
years or to both.".

[33] As submitted by the Defendant, the Plaintiff's actions have exposed the Defendant to criminal liability.
Therefore, the Defendant was justified in terminating the Plaintiff's operations. Otherwise, the Defendant
would be at risk of being being hauled up by the authorities for criminal consequences.

[34] In view of the above considerations, I am of the opinion that the Plaintiff's claim, which is founded on
illegal activity and resulting in the Agreement being void and unenforceable, is obviously unsustainable and
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ought to be struck out.

[35] The Plaintiff contends that the Land is an alienated land. Hence only a proprietary mining licence
may be granted over the Land. The Plaintiff cited s.81(1) of the Enactment which provides as follows:

"81.(1) An application for proprietary mining license shall be made by the owner of any alienated land to the State
Authority in the prescribed form." (emphasis added).

[36] Relying on the above provision, the Plaintiff submits that it is extremely ridiculous for the Defendant to
suggest that the Agreement between the Plaintiff and the Defendant is tainted with illegality by virtue of the
Plaintiff failing to obtain the necessary mining licence, when the relevant licence can only be applied for by
the Defendant itself as the owner of the Land.

[37] However, I am of the view that the above submission of the Plaintiff cannot hold water. It is clear that at
the outset, the Plaintiff had contracted with the Defendant on the basis that the Plaintiff already had the
necessary licences to carry out the works (see Clause 3(a) of the Agreement). The Plaintiff cannot now
contend that it does not have the necessary licences because the Defendant, being the registered proprietor
of the Land, is the one who has the obligation under s.81(1) of the Enactment to apply for the proprietary
mining licence.

Whether Plaintiff is entitled to compensation for works done

[38] In the alternative, should this Court find the Agreement between the Plaintiff and the Defendant to
be void, the Plaintiff submits that the Plaintiff is still entitled to be compensated for its losses incurred for the
works already done on the Land. The Plaintiff relies on s.66 of the Contracts Act 1950 which provides as
follows:

"66. Obligation of person who has received advantage under void agreement, or contract that becomes void

When an agreement is discovered to be void, or when a contract becomes void, any person who has received any
advantage under the agreement or contract is bound to restore it, or to make compensation for it, to the person from
whom he received it.".

[39] I considered s.24 and s.25 of the Contracts Act 1950 which provide as follows:

"What considerations and objects are lawful, and what not

24. The consideration or object of an agreement is lawful, unless -

(a) it is forbidden by a law;


(b) it is of such a nature that, if permitted, it would defeat any law;
(c) it is fraudulent;
(d) it involves or implies injury to the person or property of another; or
(e) the court regards it as immoral, or opposed to public policy.

In each of the above cases, the consideration or object of an agreement is said to be unlawful. Every agreement of
which the object or consideration is unlawful is void."; and

"Void Agreements

Agreements void if considerations and objects unlawful in part

25. If any part of a single consideration for one or more objects, or any one or any part of any one of several
considerations for a single object, is unlawful, the agreement is void.".
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[40] There are several decided cases that have ruled that illegality under s.24 of the Contracts Act 1950
extends to contracts carried out without the possession of the necessary licences.

[41] In YEEP MOOI V. CHU CHIN CHUA & ORS [1960] 1 LNS 169 the Federal Court led by Salleh
Abas FJ held as follows:

"In our view the deceased by accepting these deposits was carrying on a borrowing business and since he was not a
public company, nor a company licensed to carry on such business, (referred to in the Act as licensed borrowing
company), the Act prohibits him from accepting these deposits and treats such acceptance as an offence punishable
with fine or imprisonment or with both. Such transactions, including the one which he accepted from the appellant,
being contrary to the Act, are illegal void and unenforceable ( section 2(g) and section 24 of the Contracts Act)."
(emphasis added).

[42] In LEE NYAN HON & BROTHERS SDN BHD V. METRO CHARM SDN BHD [2009] 6 CLJ 626 Low
Hop Bing JCA in the Court Of Appeal stated as follows:

"[18] In our view, the evidence has established that the plaintiff was in breach of the express covenants contained in cl.
5.5 cl. 5.9 supra. Being the party in breach of the law, due to its failure to obtain the building approval for the
construction of the building structures and the procurement of the licences to carry out entertainment business in the
building, the plaintiff is precluded from enlisting the assistance of the court. In other words, the plaintiff's illegal acts had
precluded the plaintiff from pursuing its action: ex turpi causa non oriter actio. An action does not arise from a base
cause: see "Latin for Lawyers".

[19] This clear and well recognized legal maxim is founded in good sense. No court will enforce an illegal contract or
allow itself to be made the instrument of enforcing obligations arising out of a contract or transaction which is illegal,
......" (emphasis added).

[43] In MERONG MAHAWANGSA SDN BHD & ANOR V. DATO' SHAZRYLL ESKAY ABDULLAH
[2015] 8 CLJ 212 the Federal Court through the Judgment delivered by Jeffrey Tan FCJ held as follows:

"[19] It is perfectly settled, that where the contract which the plaintiff seeks to enforce, be it express or implied, is
expressly or by implication forbidden by the common law or statute, no court will lend its assistance to give effect"
(Cope v. Rowlands [1836] 2 M&W 149, 157 per Parke B." (emphasis added).

[44] In TAN CHEE HOE & SONS V. CODE FOCUS SDN BHD [2014] 3 CLJ 141, the Federal Court held
as follows:

'[33] To knowingly and consciously waive the mandatory statutory requirement of s.132C of the Companies Act 1965
is unlawful. The court of law will not entertain such unlawful act by allowing claim based on the void agreement. The
same principle was adopted by Coulson J in K/S Lincoln v. CB Richard Ellis Hotels Ltd [2009] EWHC 2344 where it
was held that "it seems clear that the underlying principle or policy is one of deterrence; that the courts will not
encourage illegal acts by allowing claim based upon them.' (emphasis added).

(See also Court of Appeal decision in Ong Then Chye & Ors V. Tiew Choy Chai & Anor [2011] 1 CLJ 674, Nusa Sinar
Makmur Sdn Bhd V. Maha Persada Capital Sdn Bhd [2014] 1 LNS 1846, SPA Essentia (M) Sdn Bhd & Anor V. MTJ
Development Sdn Bhd & Anor [2013] 1 LNS 403, and Layang-Layang Helicopters Sdn Bhd V. NCT Helicopter Sdn
Bhd [2014] 1 LNS 1426).

[45] In Lim Kar Bee V. Duoforties Properties (M) Sdn Bhd [1992] 2 MLJ 281, the Supreme Court, in
allowing the appeal held:
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"(1) When the contract is not ex facie illegal, the court can still take judicial notice of illegality and refuse to enforce the
contract even though illegality has not been pleaded but only in the situation when facts which have not been pleaded
emerge in evidence in the course of the trial showing clearly the illegality. Such a situation exists in this appeal.".

[46] On the issue whether the Plaintiff is entitled to relief under s.66 of the Contracts Act 1950, the
learned author, Dato' Seri Visu Sinnadurai (as he then was), in Law of Contract Fourth Edition Vol One had
this to say at paragraph [8.208] pg 92 of his book regarding the scope of s.66 of the same Act:

"The crucial test for the application of section 66 is whether the parties were aware of the illegality at the time the
contract was made. The parties may only seek restitution under section 66 if they were unaware of the illegality.".

[47] The learned author in paragraph [8.214] of the same book went on to say:

"[8.214] Where parties are in pari delicto. No relief under section 66 may be granted to either party to an illegal
agreement if both the parties had full knowledge of the illegality at the time when the agreement was entered into.
Indeed, it would be against public policy to allow any party to obtain relief who knowingly entered into an illegal
contract.".

[48] Applying the above authorities to the present case, in view of Clause 3(a) of the Agreement, it is clear
that the Plaintiff had knowledge that it did not have the necessary licences for the works. Nonetheless, the
Plaintiff proceeded to carry out the works as pleaded in the Statement of Claim. Since the Plaintiff was fully
aware of the illegality of its action in carrying out the works without the necessary licences in breach of the
MDA and the Enactment, it follows that upon the Agreement being void on ground of illegality, the Plaintiff is
not entitled to compensation from the Defendant for its losses for the works already done. Therefore, no
relief ought to be granted to the Plaintiff under s.66 of the Contracts Act 1950.

[49] Based on the foregoing grounds, I allowed the Defendant's Application.

Order accordingly.