MBPJ sports club cannot act on council’s behalf, rules High Court

SHAH ALAM: The sports club of the Petaling Jaya City Council (MBPJ), which had collected millions in "donations in exchange for billboard licences", has no legal standing and hence cannot purport to collect monies on behalf of the council.
In a decision that will have far-reaching consequences and affect other local authorities with similar arrangements, the High Court here on New Year's Eve held that:
- the sports club cannot in law be an agent of the council;
- the sports club is not vested with the right and power to carry out the council's statutory powers; and
- any payment made to the sports club cannot be construed as payment to the council.
Justice See Mee Chun made these rulings when dismissing a breach of contract suit by Seni Jaya Sdn Bhd and its associate company Orion Mesra Sdn Bhd against the council and its former mayor Datuk Ahmad Termizi Puteh.
The two companies had sought damages and restitution claiming that MBPJ and Termizi did not honour an agreement to allow them to operate 172 billboards in the city vide an agreement the parties had entered into in 2005.
The companies claimed that a contract was approved for 172 sites said to be worth RM62 million in December 2005 for a 15-year term with an option to renew it for a further five years.
The plaintiffs also claimed that RM2.1 million was paid to MBPJ on Dec 16, 2005, while a "donation" of RM300,000 was made to Kelab Kebudayaan dan Sukan MBPJ, – the MBPJ Sports Club – which they said was consideration for the contract. But the council never saw a cent of the money.
MBPJ treasury director Sadiyah Khasiman testified that the sports club did not extend its share of payment to MBPJ for the deal.
During cross-examination she said that had payment be made to MBPJ, a receipt would be issued, which was not the case with this deal.
"If sports club (did) pay, we would have given a receipt, and there is no receipt," she said.
The council's deputy director of the Planning Development Department, Zain Azly Abdul Rahman, said Ahmad Termizi had awarded billboard contracts to Seni Jaya and Orion Mesra even before the council's full board had approved it. Approval was sought only after the letter was issued by the former mayor.
See noted that Ahmad Termizi was not present for the proceedings and neither was he represented by solicitors.
In their statement of claim, Seni Jaya and Orion Mesra said that it was the normal practice of the council to allow the sports club to manage the licensing and operations of billboards.
The sports club, they contended, thereafter entered into agreements with media operators who would pay the applicable licence fees to MBPJ on behalf of the sports club with an additional payment to the sports club as consideration to manage the billboards.
It also contended that it was an express term of the agreement that media operators would deal with MBPJ via the sports club on matters related to relocation of sites and procurement of the necessary approvals.
In its submissions, MBPJ counsel Datuk Kamaruzaman Arif rebutted that the sports club and the council were two different entities.
The sports club, he averred, was never appointed an agent of the council. Further, he argued that the Local Government Act does not allow any delegation of powers to any third party.
See agreed. "The sports club may be established under Section 101(t) of the Act but this does not amount to it being vested with the rights and powers to carry out MBPJ's statutory powers.
"Even if there was at all a contract, it is void for illegality as it is forbidden by law," she concluded.