CAS Systems (M) Sdn Bhd v Yeo Seng & 1 Lagi (12BNCC-25-08/2017)

Content

1 IN THE HIGH COURT OF MALAYA AT KUALA LUMPUR IN THE STATE OF WILAYAH PERSEKUTUAN, MALAYSIA CIVIL APPEAL NO. WA-12BNCC-25-08/2017

Preamble

Pursuant to s. 15 and s. 16(1)(b) of the Sale of Goods Act, the Cutting Machine which was purchased by description shall corresponds with the description and it is an implied condition that the Machine shall be of merchantable quality. [16] The Defendants complained the performance of the Cutting Machine was not satisfactory and the said machine was not in accordance with the specifications stated in the Quotation. In particular, DW 1 complained that the Cutting Machine was not able to cut stainless steel which is 2 mm thick. This is contrary to what was stated in the said Quotation – Cutting Material & Maximum Thickness Stainless Steel Maximum 1.5mm by Air (if Adding Oxygen can cut 2mm) Carbon Steel 0.5-3mm Iron 0-5-3mm 11 [17] During cross-examination DW 1 testified that the technician from China who was brought in by the Plaintiff to inspect the Cutting Machine informed him that the said machine cannot cut stainless steel of 2 mm thick. As such the said technician did not attempt to do so (see page 207 Rekod Rayuan line 2 – 10). [18] PW 3 (director of the Plaintiff company) confirmed in his testimony that in a business like the one carried out by Yeo Seng Design, a cutting machine will be used first followed by a welding machine – (see page 191 Rekod Rayuan line 4 – 7) Sebab anda pembekal kepada ramai peniaga seperti Yeo Seng Design, cutting machine digunakan sebelum welding machine digunakan, betul? Betul. (and see pg 190 line 14 – 19) Dan Setuju bahawa cutting machine ini dibeli oleh Defendant demi kegunaan dalam peniagaan mereka? Setuju bahawa sekiranya Defendant tidak ada cutting machine atau cutting machine yang ada tidak boleh digunapakai, maka kerja-kerja yang patut dibuat dengan kegunaan cutting machine harus disalurkan kepada pihak ke 3? Yes. 12 [19] PW 3 confirmed that DW 1 had informed him that Yeo Seng Design’s requirement that the Cutting Machine should be able to cut stainless steel of 2 mm thick – Saya cadangkan kepada Mr Lim, bahawa Mr Yeo Seng telah beritahu kamu bahawa beliau memerlukan sekurang-kurangnya 2 mm untuk stainless steel? Yes. According to PW 3 the Cutting Machine supplied to the Defendants is a standard machine with laser power of 300W which can cut stainless steel of 1.5 mm thick. PW 3 said he had informed DW 1 at the exhibition site that the Cutting Machine is capable of cutting stainless steel of 2 mm thickness but oxygen must be added and that the speed must be reduced (see page 193 Rekod Rayuan line 2 – 11). [20] In this respect it must be noted that the Plaintiff’s technician PW 1 who attended the Defendants’ premises for purpose of installing, providing training and service of the Cutting Machine, testified that he had never tested the said machine to cut stainless steel which is of 2 mm thick as the Plaintiff’s factory do not have stainless steel of such 13 thickness (see page 132 (line 18 – 23) and page 133 (line 1 – 9) Rekod Rayuan). [21] Taking into account the witnesses’ testimonies, it is my finding that the Cutting Machine was not able to cut stainless steel of 2 mm thick. Even though the said machine was described that it can be done by adding oxygen, no evidence was led to show that oxygen was added and the Cutting Machine was able to cut stainless steel of such thickness. The fact that the Plaintiff has suggested, via letter dated 12 October 2016 (discussed below), for the Cutting Machine to be upgraded from 300W to 500W (which can cut stainless steel of 5 mm thickness which will cause the Defendants additional RM 100,000.00) goes to show that the Plaintiff admitted that the Cutting Machine would not be able to function effectively when it involves stainless steel of 2 mm thick. [22] In their defence the Defendants pleaded that the computer and machine software driver which was supplied together with the Cutting Machine (see item 2 Delivery Order at page 70 Rekod Rayuan) could not connect to the Cutting Machine even though the software programme supplied was subsequently changed by the Plaintiff. PW 3 in his testimony explained the function of the software driver – 14 Tolong terangkan Mr Limit, apa ini software CD Driver? Setiap mesin yang kami bekal kepada pelanggan kalau mesin itu perlu dijalan melalui computer, dia mesti memakai driver untuk download ke dalam computer mereka, so, jadi, software driver ini baru dia boleh berhubung dengan software; design software yang dijual dipasaran sebagai contoh AutoCAD atau illustrator, atau CorelDraw atau selain software yang boleh design melalui illustrator image atau converter lain. ... ... Apa yang dibekalkan oleh Plaintif? Boleh beritahu kepada Mahkamah? Bersama dengan cutting machine, software apa dibekalkan oleh Plaintif? Driver untuk fiber laser. Apa driver yang dibekalkan? Untuk menjalankan design software. Boleh mesin digunakan tanpa software CD Driver? Tidak boleh. [23] It is not disputed that to address the problem, the Plaintiff had changed the software from i3 (the original software at the time the Cutting Machine was delivered to the Defendant) to i5 and subsequently to i7 (see Service Order Report dated 15 September 2016 page 82 Rekod Rayuan Bundle B). Then on 15 November 2016, the i7 was 15 replaced with a software computer from China (see Service Order Report dated 5 November 2016 page 86 Rekod Rayuan). [24] There was also problem with regard to the laser power supply of the Cutting Machine. This particular problem was recorded in the Service Order Report dated 7 and 8 November 2016 (see page 87 – 88 Rekod Rayuan). In his testimony PW 1 admitted such problem occurred – Dalam report yang kita lihat di muka surat 16 – 26, setuju bahawa ada catit laser power supply abnormal? Ya. Dan setuju bahawa tanpa laser power, mesin itu tak boleh digunakan? Tidak boleh berfungsi langsung. Ya? Tidak boleh berfungsi. [25] It was PW 1 who had stated in the Service Order Report that the laser power supply was abnormal and caused problem to the Defendants (see Rekod Rayuan page 133 line 6 – 23, page 134 line 1 – 6). PW 1 explained “abnormal” as “power laser sudah hilang” (see 16 Rekod Rayuan page 133 16 – 20) and / or “power supply sudah tak ada laser” (see Rekod Rayuan page 135 line 5). He testified he had gone to Yeo Seng Design premises on 7 and 8 November 2016 with the engineer from the manufacturing company to check the laser power supply of the Cutting Machine. [26] As admitted by PW 3, until 9 November 2016 the problems relating to the Cutting Machine were not solved (see Rekod Rayuan page 181 line 16 – 17). Such was the situation despite the fact that the Plaintiff had written to the Defendants in October 2016 acknowledging the many problems faced by Yeo Seng Design caused by the Cutting Machine, the steps taken to solve the problems posed by the said machine and suggesting some possible ways to solve the problem including arranging for the engineer of the manufacturer company from China to assist in solving the problem. The Plaintiff had even offered to do the cutting of materials for Yeo Seng Design for free. Yeo Seng Design is just required to send the oxygen and nitrogen to the Plaintiff and then collect the materials from the Plaintiff after completion of the job. The letter dated 12 October 2016 which was signed by PW 1 on behalf of the Plaintiff is reproduced verbatim below – 17 Yeo Seng Design 136, Jalan Sungai Besi 57100 Kuala Lumpur Dear Mr Yeo, Re: Pro-Laser Suda High Precision Fiber FC1325-300W Laser Cutting Machine We would like to apologize for the above machine causing lot of problem to your company, we understand your situation sorry about the machine problems. I would like to state that we are not an unreasonable or an irresponsible company. Under normal circumstances if the new users have operate the machine improperly, or it happen that during transportation process the computer software and board may also cause instability. In fact, the computer and the machine driver software problems we have been in constant tracking with manufacturers and discuss how to solve the problem. As for the computer we had changed from i3 to i5, and now we even replaced with i7. The manufacturers will send new software to us for replacement, within these two days we will be able to receive it. In the meantime while we have not yet solved your problem, both parties have to look at the whole problem in a calm way. I can only say that temper is ultimately not solving the problem. I hope we can keep calm to solve the problem. For the time being I have a few suggestions:- 1) Yesterday we had change a new board for the machine, we wait and see whether the problems can be resolved. 2) If the problem still cannot solve, I will arrange engineer from the manufacturer company to come over to help us solve the problem. 18 3) Or you can request to replace the current 300W machine to 500W machine, you just pay the price difference. In order to give our support to you and for the convenience, we are willing to help in processing and cutting the material for free, you only need to send the oxygen and nitrogen gas to us, after completion the job you arrange to take back all the materials and unused gases. We are very grateful for your cooperation and support. Thank you. Yours faithfully sgd .................................... Lim Chi Ching Managing Director [27] PW 3 admitted that the software (to replace the software i7) which the Plaintiff said will arrive from China within 2 days (from the date the letter was issued) was not received by the Plaintiff within the said period. However the Plaintiff had managed to secured the attendance of the engineer form the manufacturing company and on 5 November 2016 the said engineer had gone to the Defendants’ premises (together with PW 1 – see page 131 Rekod Rayuan line 9 – 17) for purpose of conducting inspection and trouble viewing. Based on the Service Order Report dated 5 November 2016 the software the i7 was changed to a 19 software computer from China (see Service Order Report dated 5 November 2016 page 86 Rekod Rayuan). [28] PW 3 said he had gone to the premises of Teo Seng Design a number of times including 5 and 15 November 2016. The purpose of the visit on 15 November 2016 is stated in the Plaintiff’s letter to Yeo Seng Design of even date – Date: 15-11-2016 Yeo Seng Design 136, Jalan Sungai Besi 57100 Kuala Lumpur Dear Mr Yeo, Re: Repair and replace new unit of laser source for Pro-laser Suda high precision fiber FC1325-300W laser cutting machine Today, we have arrange China manufacturer’s engineer to your company to replace repair and checking the above mentioned machine. The following new parts will be replace and change 1) Fiber laser source 300W 2) Remote control handle 3) Computer system 4) Software The above services are free of charge. 20 If you are unable to accept this arrangement, and in the future you need the above service, the customer will be responsible and pay for all the costs incur. Yours faithfully sgd ................................... Lim Chi Ching Managing Director [29] However the intended inspection could not be carried out because according to PW 1, the said engineer was denied entry to the Defendants’ premises (see Rekod Rayuan page 135 line 1 – 14) while PW 3 said the Defendants refused to allow the inspection and double checking to be carried out (see Rekod Rayuan page 187 line 1 – 13). DW 1 admitted he refused inspection to be carried out because he had given the Plaintiff one month to solve the problem but it has escalated to 3 months. DW 1 further testified the Plaintiff’s technician came almost every day to inspect the Cutting Machine but the problem still continue. [P intended to ganti power supply foc]. This, according to DW 1, wasted his time and disrupted his business and the profit projected thereto. As such there is no purpose for him to take the machine. In December 2016, in response to the demand for payment made by the Plaintiff’s 21 solicitor, DW 1 demanded for the refund of RM 76,012.00 and that the Plaintiff take back the Cutting Machine. [30] It is evidently clear that the problems posed by the Cutting Machine (inability to cut stainless steel of 2 mm thickness using oxygen, laser power supply and the software driver machine) has led to the numerous steps taken by the Plaintiff to rectify the fault but the problems persisted. After the Cutting Machine was delivered to DW 1 on 16 August 2016, the Plaintiff’s technicians (PW 1 and PW 2) had gone to the premises of Yeo Seng Design on numerous time to carry out inspection, checking and changing parts of the Cutting Machine. This is evident from the Service Delivery Order issued by the Plaintiff technicians for 15 September 2016, 10 October 2016, 14 October 2016, 17 October 2016, 24 October 2016 and 5 to 9 November 2016 (see Rekod Rayuan page 82 – 90) where various attempts made by the Plaintiff to rectify the various defects. In fact PW 1 admitted without the laser power supply and the software driver machine the Cutting Machine cannot be used and the Plaintiff at all material time was aware that Yeo Seng Design need to use the Cutting Machine as part of the process in producing material in order to provide services to the Defendants’ customers. The constant and persistent technical problems posed by the Cutting Machine has deprived the Defendants of the full and 22 effective use of the Cutting Machine for its intended purpose. As such it is reasonable that the Defendants eventually opted to rescind the contract and demanded for the refund of money paid. [31] It was contended by the Plaintiff that the Defendants is not entitled to rescind the contract because the Cutting Machine was still under warranty. According to the Plaintiff the warranty is stipulated in the Quotation and Delivery Order. Perusal of the Quotation and Delivery Order shows the warranty given was in respect of manufacturer’s defect. The complaints made in respect of the Cutting Machine relates to the description of the Cutting Machine itself, namely, the cutting capability, the laser power supply on which the Cutting Machine run and the software driver machine which, in my view does not relate to manufacturer’s defect. Assuming for a moment it is manufacturer’s defect the non-compliance with the specifications tantamount to a breach of implied condition under s. 16 (1) (b) Sales of Goods Act which entitled the Defendants to rescind the contract in respect of the Cutting Machine. [32] The Plaintiff seems to suggest the root of the problem was due to the Defendants’ failure to comply with the operating instruction given 23 during training, which caused the Cutting Machine not to be fully functioning. In his witness statement PW 1 testified – S27: Semasa melakukan servis, adakah terdapat sebarang kerosakan pada mesin tersebut? J27: Tiada, tetapi kami dapat mengenai pasti bahawa mesin tersebut telah ditetapkan (setting) pada tahap yang tidak betul semasa kami melakukan pemeriksaan. Maksud saya setting pada “nitrogen pressure”, “focus detector” dan “metal plastic layer not removed during production” tidak di ikuti semasa pengendalian produksi oleh Defendan-Defendan. S28: Secara ringkas sila beritahu Mahkamah apa maksud anda diatas? J28: Pengguna tidak mengikut arahan seperti mana telah di ajar dan akibatnya mesin tersebut tidak dapat berfungsi dengan cara yang betul dan optimal. Keputusan terakhir produksi tidak berjalan lancar dan mesin tersebut akan berhenti tergendala dan memerlukan pembaikian teknikal setiap kali. [33] According to PW 1 he had informed the Defendants’ worker Xiao Chiang about this but the said worker refused to heed his advice to reset the Cutting Machine. One would consider the Defendants’ failure to comply with operating instruction is a serious matter as it is not the Cutting Machine which is faulty but the fault of the Defendant who failed to operate the said machine accordingly. As such it is only reasonable 24 to expect this point / issue to be recorded by PW 1 in his report after his inspection and checking on the Cutting Machine at the premises of to Yeo Seng Design. By their practice (as evident form the various Service Order Report issued) such significant fact would have been reported in the Service Order Report. Ironically, such fact was not reported in any of the Service Order Report issued by PW 1 and PW 2 after attending to the Cutting Machine at Yeo Seng Design premises (see pages 79 – 90 Rekod Rayuan). [34] Besides that, it is pertinent to note there is no evidence led to show that the Plaintiff had notified Yeo Seng Design that the reason why the Cutting Machine was not able to fully function was due to the Defendants’ own fault and not technical defect of the Cutting Machine. This particularly significant fact would, to a certain extent, absolve the Plaintiff’s from their responsibility in relation to the merchantable quality of the Cutting Machine. None of the Plaintiff’s letters dated 12 October 2016 and 15 November 2016 (which was after the numerous visits to check and inspect the Cutting Machine) had mentioned that the Defendants’ failure to operate the Cutting Machine in accordance with the operating instruction was actually the cause of the problem. In fact, PW 3 admitted this was not reported in the service order report and no letter to that effect was issued to the Defendants – 25 Ini adalah tuntutan balas, saya sentuh sedikit mengenai jawapan yang diberi oleh anda dalam penyata saksi, iaitu mengenai penyata kamu bahawa, ini jawapan 10, ‘Saya difahamkan oleh pasukan teknikal saya selepas lawatan service bahawa pengguna mungkin silap atau secara kasar salahguna mesin tersebut dengan melakukan setting yang tidak wajar pada peralatan nitrogen pressure, focus detector & metal plastic layer not remove during production apabila mesin tersebut sedang berjalan, isu-isu seperti ini telah pun dibangkitkan kepada perhatian Defendant pertama.’ Soalan saya, setuju bahawa perkara ini iaitu jawapan 10, tidak dinyata dalam service order report bahawa mesin ini salah digunakan atau tidak ikut arahan. Ya. Setuju bahawa Plaintiff tidak tulis sebarang surat kepada Defendant mengatakan inilah puncanya mesin tidak boleh digunakan. Saya sendiri yang berhadapan dengan— Soalan saya, tidak ada surat, setuju? Yes. As such, to suggest the fault lies with the Defendants is not tenable. 26 [35] Having considered the evidence as a whole I am of the view the Defendants has proven the Cutting Machine was not of merchantable quality. It was argued by the Plaintiff there was no expert evidence led to show the Cutting Machine was of unmerchantable quality. I am of the view there is sufficient contemporaneous evidence (as discussed above) for the court to infer that the Cutting Machine was not of merchantable quality. As such the absence of expert evidence and failure to call Xiao Chiang the worker of Yeo Seng Design to whom training was given is not fatal for purpose of proving the merchantable quality of the Cutting Machine. [36] Thus the Plaintiff had breached the implied conditions under s.