Alupanorama Metals Sdn Bhd v Okaya International (H.K.) Ltd (BA-22NCC-109-09/2019)

ALUPANORAMA METALS SDN BHD

AM METALS SERVICES CENTRE SDN BHD (NO. SYARIKAT: 551888-W) …PLAINTIF-PLAINTIF

1.

2.

3.

YIP KWONG NIN

ZHENG, LIQUN (PEOPLE’S REPUBLIC OF CHINA PASSPORT NO. E38086584) …DEFENDAN-DEFENDAN

For the purpose of this judgment, all parties will be referred to in abbreviation. There are only 4 remaining defendants as D5 has been struck out as a party.

The Plaintiffs suit against the Defendants arose from a contractual relationship for the purchase of aluminium products manufactured by the mill of the D2.

As D2 did not offer credit terms for its manufactured Products, the Plaintiff obtained the services of the D1 to provide credit terms. D4 represented D1 in negotiating the terms of the credit facility arrangement with the Plaintiffs at the material time.

The Plaintiffs subsequently discovered that the aluminium products were not manufactured by the D2’s mill, but by third party mills.

It then brought the present action against the Defendants, founded on several causes of action, namely breach of contract, fraud and conspiracy to defraud as well as unjust enrichment.

D1, having paid for the goods supplied to the Plaintiffs by D2, counterclaimed for the amounts that had been paid. The Plaintiffs’ case

The Plaintiffs are in the business of trading in aluminium products. They are sister companies. The Plaintiffs supply aluminium products to its customers in various sectors including construction, electrical and electronics engineering and also the oil and gas sector.

In relation to the aluminium products forming the subject matter of the present dispute, P2 was merely a purchasing agent for P1 for tax purposes. The Products purchased were eventually delivered to P1.

Prior to the sale of aluminium Products to its customers, its customers would first engage with P1’s representatives if P1 is able to supply the Products. P1’s customers will provide the specific profiles of its requirement in specification sheets which it forwards to potential mills in China. Discussion with and enquiries from the mills by P1 will focus on the technical requirements and the cost factor.

Based on the profiles given, the mills will then develop the mould and would forward a sample finished product according to the specification sheets to P1’s customers for approval. If it meets with the customer’s approval, orders would be placed by them with P1.

To ensure the quality of the mill and its Products, P1’s representatives will visit the mills to conduct a physical audit and inspection.

I shall now come to the facts leading to the dispute between the parties.

Sometime in 2012, P1 received enquiries from its customers to supply aluminium extrusion products (“the Products”). PW1 approached D5, a Chinese national by the name of Jesse. He was requested to source for mills for these Products. Jesse reverted with information that D2 was capable of manufacturing the extrusion Products.

At this juncture, I pause the narrative of the Plaintiffs’ case to state the developments post filing of suit in respect of D2 and D3. After this suit was filed, the Plaintiffs found that D2 had been deregistered and merged with D3. Upon legal advice obtained from a legal firm in China, the Plaintiffs were advised that D3 had assumed all the liabilities of D2. Although D3 was served with the cause papers, it did not enter any appearance. The Plaintiffs elected to proceed with the trial in accordance with O. 13 r 6 of the Rules of Court 2012, as if appearance had been entered. For the purpose of this judgment, as the events happened before the deregistration of D2, only D2 will be referred to. In any event, D3’s liability will become relevant only in the event judgment is found for the Plaintiffs.

I shall now continue with the narrative. Having confirmed that D2 was able to meet the Plaintiffs’ requirement, Jesse issued an invitation to audit D2’s mill, located at Qiangjiang Industry Park in Guangxi, China (“Yinhai Factory”). PW1 the director of P1, was personally present at the audit of the Yinhai Factory.

PW1 found the Yinhai Factory to be a credible source of supply of the Products. She found its capacity was satisfactory and it was backed by a government linked company. Upon obtaining the approval of P1’s customer, the Plaintiffs agreed for the Products to be manufactured by the Yinhai Factory.

From 2012 onwards, the Plaintiffs conducted business with D2 as its supplier of the Products. All negotiations on the price, quantity and delivery time of the Products were had with D2.

Sometime in 2014, the Plaintiffs requested D2 to grant credit terms for payment. This was to alleviate the financial obligations faced by the Plaintiffs they had granted credit terms to their customers. The request was made to Jesse.

Jesse responded to inform that D2 does not transact on credit terms. Instead he proposed to introduce the Plaintiffs to D1 (“Okaya”), to facilitate the credit arrangement the Plaintiffs needed. Okaya is a company based in the Hong Kong Special Administrative Region of the People’s Republic of China.

Sometime in late 2014, Jesse introduced PW1 to the D4 (“Danny”), who acted as Okaya’s representative. Shortly thereafter, PW1, Danny and Jesse had a meeting in Malaysia to agree on the credit arrangement.

At the meeting, Danny informed PW1 that Okaya was able to offer credit terms for the purchase of Products from D2 at the rate of 1% from the quoted price for a credit period of 3 months.

At the said meeting, it was agreed that P1 would place its orders with Okaya and Okaya would in turn place the same order with D2. Okaya would earn a fee of 1% from the price quoted by D2. The documentation process involved was also agreed upon. In addition parties agreed that all previous terms applicable and agreed upon between the Plaintiffs and D2 would equally apply to Okaya. The crucial term the Plaintiffs rely on in this action is that the Products must be manufactured by the Yinhai Factory. .

The tripartite arrangement commenced in February 2015 until February 2018. Throughout that period, there were a total of 66 Purchase Orders issued by P1 to Okaya.

Unfortunately, the business relationship broke down in February

Several factors contributed to the breakdown. In January 2018, at a meeting in Kuala Lumpur, Jesse informed PW1 that since 2017, the Products supplied were not manufactured from Yinhai Factory. Instead, it was manufactured by Sihui Shi Guoyao Aluminium Co. Ltd and Foshan Jinlan Aluminium Co. Ltd. The switch of factories was not informed to the Plaintiffs.

The Plaintiffs considered this switch to constitute a fundamental breach of contract between the P1 and the Defendants. The discovery resulted in a serious disagreement with one of its customers, MFE Formwork. (“MFE”). MFE had placed orders with P1 for products to be manufactured by the Yinhai Factory. As it turned out otherwise, P1 had to eventually give a discount from the original price to MFE so as to preserve the continuity of the business relationship from 2018 to 2022. The Plaintiff had to enter into a settlement agreement with MFE wherein it was forced to give a discount totaling US 1,604,241.20. This amount is claimed premised on a breach of contract cause of action.

PW1 also discovered that fake mill certificates had accompanied the Products. The fake certificates were issued to represent that the Products were manufactured by Yinhai Factory. It was issued to mislead and conceal the fact that the Products were manufactured by third party mills. Apart from the factories owned by Sihui Shi Guoyao Aluminium Co. Ltd and Foshan Jinlan Aluminium Co. Ltd, one of the mills was Pingguo Asia Aluminium Co. Ltd (“Pingguo”).

To confirm PW1’s suspicions that the Products were sourced from Pingguo, she gave Pingguo the drawings of MFE. It was then that she was informed that Pingguo already had the drawings. She then suspected fraud as only Yinhai Factory would have the drawings for the Products since the drawings were tailored for the specific requirements of its customer.

Upon examination of the other documents given by Pingguo, PW1 concluded that the Products were from Pingguo and not Yinhai Factory.

The Plaintiffs also discovered that the price for the Products sourced from the third party mills was much cheaper than from the Yinhai Factory. Okaya had in fact profited beyond the 1% mark up price as agreed. The Plaintiffs allege that the Defendants had acted in concert to perpetrate fraud and conspiracy on the Plaintiffs. The Defendants had unjustly enriched themselves by their fraudulent action.

The Plaintiffs claim that the unjust enrichment was at their expense. They are therefore entitled to the amount of USD 1,532,720 by which the Defendants have been unjustly enriched. This figure was arrived at by the following computation. PW1 observed that there was a price difference of USD 161/Metric Ton between the manufacturing price of Pingguo and the Yinhai Factory. Based on the 66 Purchase Orders issued by P1 to Okaya, a total of 9,520 Metric Tons were purchased. The amount of USD 1,532,720 is arrived at by direct multiplication.

Quite apart from the above claims one of the deliveries was delayed which caused P1 to incur a cost of USD 206,211.81. P1 contends in view of the arrangement that terms previously applicable to D2 including time for delivery, would apply to Okaya, Okaya was responsible for the late payment charges.

The Plaintiffs therefore claim damages against the Defendants which is summarized and quantified as follows:

Breach of contract USD 1,604,241.20;

(ii) Unjust enrichment USD 1,532,720;

(iii) Late delivery penalty USD 206,211.81 Defence of Okaya and Danny

On 7.9.2021, the High Court had struck out P2’s claim against Okaya following P2’s withdrawal of its claim. What remains is P1’s claim against Okaya, and the Plaintiffs’ claim against D2 and Danny.

Only Okaya and Danny were represented at the trial. On the issue of liability, Okaya’s defence to the claim is essentially as follows:

Okaya’s role was only to facilitate P1’s continued purchase of the Products from D2, by settling the prices of the Products with D2 and providing credit terms to P1. The documents involved, namely the Purchase Orders issued by P1 to Okaya and Okaya’s Sale Contract Notes were not issued for the purpose of a usual sale and purchase of products. Okaya was not the seller of the Products;

(ii) Premised on its limited role, all disputes concerning the Products including specifications, quality or delivery were matters solely between P1 and D2. Notwithstanding any dispute P1 may have with D2 on the Products, P1 had to settle the prices of the Products stated in Okaya’s invoices. The cause of action for breach of contract does not arise;

(iii) In any event, the damages for breach of contract amounting to USD 1,604,241.20 was never pleaded It is not now open to P1 to claim for it;

(iv) There was no express term stipulated in P1’s Purchase Orders nor Okaya’s Sales Contract Notes that the Products must be manufactured by the Yinhai Factory;

Okaya was not involved in the alleged purchase of the Products from third party mills;

(vi) The mill certificates accompanying the Products made no mention of the factory manufacturing them;

(vii) The Plaintiff’s claim premised on fraud and conspiracy does not satisfy the ingredients for this cause of action;

(viii) The claim for unjust enrichment is misconceived as it was not shown to have been at P1’s expense. The claim was not particularized in the pleadings; and

(ix) The claim for late delivery against Okaya is without basis as the Products were delivered directly by D2 to P1 without Okaya’s involvement. The damages for late delivery was not particularized in the pleadings.

In respect of Danny, his defence on liability in summary, is as follows:

In respect of the 66 transactions between P1, Okaya and D2, Danny only acted as Okaya’s representative. The Plaintiffs’ claim against him was also in that capacity. He was not sought to be made personally liable. The claim against him was an afterthought as he was brought in only 3 years after the commencement of the action; and

(ii) Danny was not responsible for the alleged fake mill certificates, nor was unjustly enriched by retaining any sum paid by P1 for the transactions. Okaya’s counterclaim

Okaya counterclaims against P1 an amount of USD 1,723,127.65. This outstanding amount arises from payments already made by Okaya to D2 with a commission of 1%. Okaya had issued 13 invoices to P1 for this amount which remains outstanding to date. P1 has refused to pay the amount.

The details pertaining to the 13 invoices have been set out in Appendix A of Okaya’s Re-Amended Defence and Counterclaim dated 18.9.2023. P1’s defence to Okaya’s counterclaim

P1 takes the position that it is not obliged to settle the amount in the 13 invoices as Okaya has failed to supply the Products according to the terms agreed upon, in particular the Products were to be manufactured by the Yinhai Factory. Issues for determination

To establish its case, the Plaintiffs called PW1 the director of P1 to testify. She was the only witness for the Plaintiffs. Okaya’s testimony was given through one Akiya Toshiyuki, the former Managing Director of Okaya and Danny testified on his behalf.

Although there were only 3 witnesses, the trial spanned some 15 days in view of the extensive cross examination of the witnesses who were referred to the voluminous documents tendered.

However, having heard the testimony of the witnesses and the issues raised in the pleadings, I am of the view that there are but only several issues to be determined which would have a bearing on the outcome of the respective parties’ case.

I have therefore determined the broad issues for consideration as follows:

What was the nature of the arrangement between P1, Okaya and D2, and whether the terms relating to the Products apply to Okaya. The determination of this issue will in turn determine the claim for breach of contract and late delivery;

(ii) Was there fraud and conspiracy to defraud on the part of Okaya, D2 and Danny;

(iii) Was there unjust enrichment by Okaya, D2 and Danny; and

(iv) Is Okaya entitled to its counterclaim being outstanding sums under 13 invoices. Analysis and findings

In weighing the evidence before me, two fundamental principles are to borne in mind. The first is with respect to the burden of proof. It is trite law that a plaintiff bears the burden of proof on a balance of probabilities. This principle was well enunciated in the Federal Court case of Letchumanan Chettiar Alagappan @ L Allagappan (as executor to SL Alameloo Achi alias Sona Lena Alamelo Acho, deceased) & Anor v Secure Plantation Sdn Bhd [2017] 4 MLJ 697). If on the evidence, the Plaintiff succeeds in establishing a prima facie case, the burden then shifts to the Defendants to rebut the case against them by credible evidence in an attempt to tilt the balance in their favour.

The second principle to note is that the standard of proof for fraud and forgery in a civil case has now been conclusively settled by the Federal Court in Sinnaiyah & Sons Sdn Bhd v Damai Setia Sdn Bhd [2015] 5 MLJ 1. It is on a balance of probabilities. The tripartite arrangement between P1, Okaya and D2

The evidence from both parties established that a meeting took place in Malaysia in December 2014. Both parties are also on common ground that D2 will continue to supply the Products to P1 and P1 will negotiate directly with D2 on the specifications, quantities and price of the Products. As D2 could not provide credit, P1 then agreed to engage the services of Okaya where Okaya will pay D2 first, and then bill P1 an amount for the price of the Products with a mark up of 1%.

The crucial point in contention between parties is on the nature of the tripartite arrangement. P1 contends that premised on the documentation involved a buyer and seller relationship was established between P1 and Okaya. Okaya being the seller of the Products was obliged to ensure that all prior terms agreed upon with D2 was met. One of which is that the Products must be manufactured by Yinhai Factory and no other.

On this issue, I have considered the evidence of PW1 and weighed it against the evidence adduced by Danny and Akiya Toshiyuki (DW1), and found that on a balance of probabilities, the defence story is more plausible.

Danny gave a detailed explanation on the documents parties agreed upon. In summary, upon an agreement reached between P1 and D2 on the Products to be manufactured and supplied, the following documents will be issued by the respective parties as follows:

P1 to issue a Purchase Order to Okaya;

(ii) D2 to issue a Sales Confirmation to Okaya;

(iii) Okaya will then check the Purchase Order and Sales Confirmation to ensure they correspond in terms of specification, quantities, price and time of delivery;

(iv) Okaya will sign on P1’s Purchase Order and return to P1;

Okaya will issue a Sales Contract Note to P1 which corresponds with the Purchase Order;

(vi) Okaya will accept D2’s Sales Confirmation by signing and returning it; and

(vii) Okaya will issue a Purchase Order to D2 which corresponds to D2’s Sales Confirmation.

Upon the completion of the above, D2 then supplies the Products directly to P1 and issues an invoice to Okaya. Okaya will then pay D2 the invoiced amount. Finally, Okaya invoices P1 for the Products with a credit term of 90 days from the arrival of the Products.

Based on the documentation, I am of the view that the relationship between P1 and Okaya can hardly be that of buyer and seller of the Products. Okaya was merely to facilitate P1’s continued purchase of the Products from D2. PW1 admitted that the Plaintiffs wanted to purchase the Products on credit terms as it would ease their cash flow burden, and for that purpose, the service of Okaya was engaged.

There were other material evidence both oral and documentary adduced at the trial, and which I accepted, pointing towards the limited role of Okaya in this tripartite arrangement. They are as hereinafter mentioned.

The drawings of the Products were sent by P1 directly to D2. Okaya had no knowledge of nor was involved in the drawings. P1 negotiated with D2 on the schedule of delivery of the Products. The Products were delivered directly to P1. Claims for defective Products were made to D2 by way of deductions of the prices of the Products affected without Okaya’s involvement. D2 would then make the compensation by deducting the prices in D2’s invoices to Okaya. It is a pertinent fact to note that Okaya did not make any compensation to P1.

Even in one particular instance of late delivery of the Products, P1 made a direct claim against D2 by issuing a tax invoice and a complaint note to D2. P1 did not claim against Okaya. The relevant tax invoice and complaint note attached to P1’s email to D2 were referred to at the trial. Again, this fortifies Okaya’s case that it was not responsible for matters pertaining to the Products.

I therefore find that the oral and documentary evidence before this court strongly supports an arrangement where Okaya’s role was in essence to settle payments of the Products on behalf of P1 by paying D2 and granting credit terms to P1 with a commission of 1%. There was certainly no seller buyer relationship as alleged by the Plaintiff. It would make no commercial sense for a party providing credit to be bound by the obligations undertaken by a seller.

Such an arrangement where one party is brought to provide financial assistance is not unknown in commercial world. Counsel for Okaya submitted that similar transactions were upheld by courts in other jurisdictions in the cases of Medcellence Manufacturing v Getha (1969) Sdn Bhd & Anor, HC, De Chang Fulfilment Ltd v Manley Toys Ltd & Anor, HK121 and Etacol (Hong Kong) Ltd & Ors v Sinomast Ltd & Ors (No 2), HK122. I find merit in the submissions made.

Critically, this arrangement substantiates the defence case that Okaya will not be responsible or liable for the Products, as Okaya was a mere financier to P1.

PW1 alleged that at the December 2014 meeting, Danny gave the assurance that the Products will be manufactured by the Yinhai Factory. This was denied by Danny.

I do not find this allegation borne out by any credible evidence. Again, it made no sense for Okaya to give such assurance on the manufacture of the Products when it had only a limited role in the transactions which were essentially between P1 and D2. To reiterate, it is my finding that Okaya did not deal with the Products as if it was a seller.

To conclude on the issue pertaining to the tripartite arrangement, I find as follows:

The relationship between P1, Okaya and D2 is governed by the tripartite arrangement in which Okaya’s role was merely assist facilitate P1’s continued purchase of products from D2 by providing credit terms; and

(ii) The terms pertaining to the Products are matters solely between the Plaintiffs and D2.

Having concluded on the true nature of the tripartite arrangement, this brings me to the next issue whether there was a breach of contract by Okaya, D2 and Danny. Breach of contract

This claim is premised on the allegation the Products were not manufactured by Yinhai Factory. Having found that Okaya’s role is merely to facilitate payment, there is no basis for this claim.

In other words, there is no evidence that the contractual relationship between P1 and Okaya is subject to a term that the Products must be manufactured by Yinhai Factory. Consequently, there can be no question of breach of contract.

In attempting to prove that the Products were manufactured and sourced from Pingguo, P1 relied on 4 sets of contract documents involving Pingguo and Okaya. This evidence was effectively refuted by Okaya when it was demonstrated that the Pingguo contracts were unrelated to the 66 transactions between P1 and Okaya. They were shown to have been either entered before the 66 transactions, were cancelled, or delivered to D2 in China.

Crucially, P1’s claim for USD 1,604,241.20 arising from the Products being from third party mills was neither pleaded nor particularized. This goes against trite principles of pleadings. In Damansara Realty (Pahang) Sdn Bhd v Om Cahaya Mineral Asia Bhd [2021] 5 MLJ 1, the Court of Appeal held as follows: [156] The principle in relation to special damages is trite, ie it must be specifically pleaded (and particularised) and strictly proven. In Ong Ah Long, Justice Syed Agil Barakbah FCJ (pp 327–328 (MLJ)) speaking for the Federal Court explained the principle in the following words: It is a well-established principle that special damages in contrast to general damages, have to be specifically pleaded and strictly proved. They are recoverable only where they can be included in the proper measure of damages and are not too remote (see Halsbury’s Laws of England (4th Ed) Vol 11 p 218 para 386). That in our view is the cardinal principle adopted by all courts both in England and this country. The same principle was adopted by Ong Hock Thye, FJ (as he then was) in Yee Hup Transport & Co and Anor v Wong Kong [1967] 2 MLJ 93 which was an appeal on quantum of damages. Quoting an excerpt from the judgment of Wilmer LJ in Ilkiw v Samuels [1963] 1 WLR 991; [1963] 2 All ER 879 he held that the general damages should not be awarded as though they were special damages properly pleaded and proved. Similarly Chang Min Tat, FJ (as he then was) in Murtadza bin Mohamed Hassan v Chong Swee Pian [1980]1 MLJ 216 applied the principle in Ilkiw v Samuels ( supra) that special damages if pleaded as in that case could be recovered. The principle was also adopted by Mohamed Azmi J (as he then was) in Sam Wun Hoang v Kader Ibramshah [1981]1 MLJ 295 in the Federal Court.

It was only at the trial that PW1 led evidence on the alleged loss of USD 1,604,241.20. P1 referred to a letter dated 10.4.2018 from MFE to P1 and a letter dated 15.2.2023 from P1 to MFE to support their claim for the amount. The amount was based on the discount given by P1 to MFE arising from the Products being manufactured by a different mill.

Okaya contend that this piece of evidence is but an afterthought. I am inclined to agree. Such a substantial claim ought to have been included right from the commencement of the suit. It was omitted even when the original Statement of Claim was amended. This puts into question the genuineness and the validity of the claim.

In my view, the allegation of being supplied Products other than that agreed upon is one that should be sought against D2 instead. However, having found the evidence that the Products were manufactured by third party mills wanting, the claim for breach of contract is also not proved against D2. Claim for late delivery of the Products

P1 claims that Okaya and D2 had delayed in delivering the Products in July 2016 and therefore are liable to pay a sum of

This claim is denied by Okaya.

Arising from my findings on the tripartite arrangement, Okaya cannot be made liable for the alleged late delivery of the Products. To recapitulate, the evidence established that firstly, matters concerning delivery of the Products are solely between P1 and D2. Secondly, the Products were delivered by D2 directly to P1. Thirdly, on the evidence, P1 eventually accepted that the claim for late delivery was to be made directly to D2.

This is evidenced by P1’s conduct in issuing a Tax Invoice and Complaint Note No. CF-1711006 dated 21.11.2017 to D2 directly for the late delivery. Sometime later, PW1 emailed to Danny in an attempt to claim from Okaya the sum of USD 206,211.81 for the same complaint of late delivery. The subsequent email exchanges from 18.3.2018 to 6.4.2018 between them showed that P1 eventually accepted that Okaya was not to be responsible for the late shipment of the Products. Thereafter, P1 continued to claim from D2 for the late delivery. In the circumstances, the claim for late delivery against Okaya is not established.

Having found that it is claim for delivery is to be made against D2, the question to consider is whether the claim is proven. D2 did not defend the claim. Nonetheless, the burden is on P1 to prove its case.

The amount of USD 206,211.81 sought to be claimed by P1 is to be treated as special damages as it has been quantified. It is trite law that special damages must be pleaded and proved. Whilst it was pleaded in its Re-Amended Statement of Claim dated 24.5.2023, I find no evidence led to support the amount claimed. In fact, the PW1 the only witness for the Plaintiffs made no mention of it in her evidence in chief.

The Plaintiff cannot hope to prove its case by merely pleading it without any supporting evidence. In this regard, I find the judgment of Edgar Joseph Jr in Popular Industries Limited v Eastern Garment Manufacturing Sdn Bhd [1989] 3 MLJ 360 instructive. The relevant portion reads as follows: I now turn to consider the crucial question: have the plaintiffs proved their claim for damages as alleged or at all? With regard to this part of the case, I would preface what I have to say by referring to certain well-established principles. It is axiomatic that a plaintiff seeking substantial damages has the burden of proving both the fact and the amount of damages before he can recover. If he proves neither, the action will fail or he may be awarded only nominal damages upon proof of the contravention of a right. Thus nominal damages may be awarded in all cases of breach of contract (see Marzetti v William 109 ER 842). And, where damage is shown but its amount is not proved sufficiently or at all, the court will usually decree nominal damages. See, for example Dixon v Deveridge (1825) 2 C&P 109; 172 ER 50 and Twyman v Knowles 138

In short, the omission to provide any supportive evidence must necessarily lead to a dismissal of the claim against D2. Fraud and conspiracy to defraud on the part of Okaya, D2 and Danny

P1’s case is that Okaya, D2 and Danny acted in concert by obtaining the Products from third party mills but forwarded the Mill Certificates of Yinhai Factory.

A cause of action founded on conspiracy has been given judicial recognition in our courts, evident in the Court of Appeal case of Global Ventures Network Sdn Bhd v Lokman bin Dato’ Mohd Kamal and another appeal [2018] 6 MLJ 103 where it was held, …in order to make out a case of conspiracy, the plaintiff would need to establish that there was an agreement between two or more persons to injure the plaintiff; and that the acts done in execution of that agreement resulted in damage to the plaintiff… (See also: Universal Health Care (R & D) Sdn Bhd (previously known as Heath Care Sdn Bhd v Ramli bin Md Saleh & Ors) [2025] 5 MLJ 106

Evaluating the available evidence against the legal principles enunciated, I find the evidence barely makes out a case of conspiracy. The Plaintiffs cannot rely on mere suspicion or evidence that falls short of the requisite standard of proof. I find much of the conclusion drawn by the Plaintiffs were based on speculation, mere suspicion and far-fetched inferences, unsupported by evidence.

As P1 has made a specific assertion of fake mill certificates, then it is incumbent on it to prove that the mill certificates were fake. I do not find this assertion borne out by evidence.

P1 then goes one step further to allege conspiracy to defraud on the part of Okaya, D2 and Danny. Again, P1 has to show by credible evidence that Okaya and Danny had agreed with D2 acting through Jesse, to perpetrate fraud on P1. I do not find the allegation substantiated on the available evidence before me.

Although the following findings have been made earlier, it bears repeating here. I have found on the evidence, that Okaya and Danny did not deal with the Products. Any discussion on the Products were made with D2 only. It was not a term of the contractual relationship between Okaya and P1 that the Products have to be from Yinhai Factory. These evidence would adequately rebut any allegation that Okaya and Danny had acted in concert with D2 pursuant to any alleged agreement on part of all parties.

In the circumstances, I find the cause of action founded on fraud and conspiracy to defraud is not established. Unjust enrichment on the part of Okaya, D2 and Danny

I now come to the claim premised on unjust enrichment.

The starting point for discussion is the requisite elements to prove in order to succeed. In this regard, the judgment of the Federal Court in Dream Property Sdn Bhd v Atlas Housing Sdn Bhd [2015] 2 CLJ 453 provides valuable guidance as follows: [117] The above passages from the judgments of the House of Lords are instructive and are significant contribution to the development of law of unjust enrichment. The principle underlying the cases of Banque Financiere de la Cite Appellants v Parc (Battersea) Ltd. And Others Respondents (supra) and Sempra Metals Ltd (formerly Metallgesellschaft Ltd) v. Inland Revenue Commissioners and Another (supra) is that, in the context of the present case, a cause of action in unjust enrichment can give rise to a right to restitution where it can be established that:

The Plaintiff must have been enriched;

The enrichment must be gained at the Defendant's expense;

That the retention of the benefit by the Plaintiff was unjust; and

There must be no defence available to extinguish or reduce the Plaintiff's liability to make restitution.

The Plaintiffs claim that as a result of the difference in the price of the goods manufactured by D2 and third party mills, Okaya and Danny have been unjustly enriched. Okaya had wrongfully obtained unjust enrichment of profit that was more than 1%. The basis of this allegation was the difference in the unit price of the Plaintiffs’ Purchase Order less the unit price of the Pingguo Contracts. Premised on this, the Plaintiffs contend that USD 161 MT was profited by Okaya which works out to USD 1,532,720 for a total 9,520 MT delivered pursuant to the 66 transactions.

In arriving at the above computation, the Plaintiffs have selected one particular Purchase Order, namely PO No. 09002302. This Purchase Order was between P2 and D2. In cross examination, PW1 conceded that this Purchase Order did not involve Okaya nor Danny. Further, as established earlier and accepted by this court, the Pingguo Contracts were not related to the 66 transactions which Okaya facilitated in financing. As the evidential value of these documents have been demolished, the Plaintiffs’ case for unjust enrichment has no leg to stand on.

On the other hand, Okaya has produced documentary evidence to show that the difference in the price paid by P1 to Okaya and what Okaya paid to D2 was about 1.16%. Okaya merely earned what it was entitled to. There is also no evidence to show that Danny took any of the sum paid by P1. There is no question of unjust enrichment by either Okaya or Danny.

The Plaintiffs’ case of unjust enrichment also rests on documentary evidence of refunds made by Okaya to a third party company named R & J International Metals Sdn. Bhd. PW1 in her evidence in chief then alleged that she believed the refunds were profits shared between Okaya, D2, Danny and Jesse. However, she candidly admitted that she did not know the details of how the profits were split.

To refute the allegation of secret profits made, Danny’s evidence was as follows. There were two occasions when he noted that Okaya could have earned more than 2% from the prices in P1’s Purchase Orders and D2’s Sales Confirmation. Upon noticing the increase, he contacted Jesse for an explanation. Jesse explained that after the price of the Products was agreed upon with D2, there were occasions when the D2 managed to obtain the aluminium metal at a lower price on the London Metal Exchange. However, D2’s staff used the lower price to calculate the unit price when it ought to have been the earlier price agreed upon between D2 and P1. Jesse then asked Danny to refund the price difference on behalf of Okaya. The refund was to be either made to D2 or R & J Metals Industry Co Ltd.as instructed by D2. Okaya merely followed D2’s instructions on the refund as the money belonged to it.

In respect of the other occasion of refund, the same explanation was proffered. The refunds were made in 4 payments totaling USD 39,864.09.

I find the explanation of Danny to be reasonable and a plausible one. It sufficiently rebuts P1’s case of unjust enrichment, supported by the fact that Okaya has no relationship with R & J Metals Industry Co Ltd.

In the upshot, the Plaintiffs have failed to show that the Okaya, D2 and Danny have been enriched at its expense. Consequently, the cause of action premised on unjust enrichment is not proved.

Okaya’s counterclaim is for the outstanding sum of USD 1,723,128.65. This sum comprised of the price of the Products paid by Okaya on P1’s behalf to D2 including the commission of approximately 1%. The sum arises from 13 of Okaya’s invoices.

Danny as Okaya’s representative, confirmed that all the Products in these 13 invoices have been delivered by D2 to P1. The fact of delivery is supported by undisputed documentary evidence. PW1 admitted to having received the Products in these invoices. She even agreed that P1 has not settled the amounts in the invoices.

P1’s only defence to the counterclaim is that the Plaintiffs are not liable to pay the outstanding amount as the Products delivered were manufactured by third party mills. In view of the Plaintiffs’ claim in this action, the amount due from Okaya would be offset by the Plaintiffs’ claim.

Having found the Plaintiffs to have failed to prove their case in respect of all the causes of action, their defence to the counterclaim is untenable.

In the circumstances, the counterclaim is allowed.

Premised on the foregoing, I find the Plaintiffs’ case against Okaya, D2 and Danny not proven on the available evidence before this court. However, I find the counterclaim of Okaya to have been established.

I therefore make the following orders:

Plaintiffs’ claim against the 1st, 2nd, 3rd and 4th Defendants is dismissed;

(ii) The 1st Defendant’s counterclaim against the 1st Plaintiff is allowed for the sum of USD 1,723,128.65. The exchange rate is determined at RM 4.053 being Bank Negara’s rate;

(iii) Interest on the judgment sum at the rate of 5% on the sum in (ii) from the date of judgment until realization;

(iv) Costs of RM 100,000.00 subject to allocatur to be paid by the 1st Plaintiff to the 1st Defendant;

Costs of RM 50,000.00 subject to allocatur to be paid by the Plaintiffs to the 4th Defendant; and

(vi) No costs to be awarded against the 2nd and 3rd Defendants. Dated: 10th June 2026 -sgd-Alice Loke Yee Ching Judge High Court Kuala Lumpur Counsel for Plaintiffs: Encik Premshangar s/o Venugopal (En. Tuw Min Ric, Cik Elora Ng & En.Tang Suvine together with him) Tetuan Ong, Ric & Partners Counsel for 1st and En. Mong Chung Seng 4th Defendants (Cik Chew Sue Peng & Cik Kho Yan Yee together with him) Tetuan Lee Hishammuddin Allen & Gledhill