Chow Kwee Chai v PGL Vision Sdn Bhd (J-02(NCVC)(W)-770-04-2017)

This appeal is brought by the appellant, Chow Kwee Chai (trading in the name of East Pearl Timber) against the decision of the learned High Court Judge at Johore Bahru, who had allowed the claim of the respondent, PGL Vision Sdn Bhd against him. We heard the appeal and had unanimously dismissed it for the reasons we set out below.

The respondent’s claim against the appellant was for payment of the sale of timber logs which remained outstanding. According to the respondent the appellant was a customer of the respondent company and had transacted with the appellant since the year 2013. The transaction as pleaded at paragraph 4 of the Statement of Claim, was for the timber logs sold and delivered by the respondent. The claim was supported by the statement of accounts as found at page 183 Ikatan Teras Bersama Jilid 3 2, together with the delivery orders and invoices. A sum of RM1,902,945.17 (as at 14.05.2013) remained outstanding and unpaid.

The respondent’s case was that it bought the timber logs from the licensee of a concession area at Cherul Mukim Bandi Daerah Kemaman Terengganu (the Concession Area). The licensee, Ismail Bin Said (who was a director of a company known as Staricoplus Sdn Bhd), and who testified as SP1, confirmed that he was the licensee of the Concession Area and he had sold timber logs to the respondent. SP1 also testified that he had appointed Dato’ Chai Han Kwang (Dato’ Chai) to assist him to extract the timber logs from the Concession Area.

The appellant had acknowledged receipt of the timber logs supplied by the respondent, between 03.03.2013 to 14.05.2013 which amounted to a total cost as pleaded in the claim of the respondent. All reminders sent by the respondent to the appellant demanding for payment did not meet any response and the amount claimed remained unpaid. This forms the basis of the claim by the respondent in this suit.

In defending the claim, the appellant denied being a customer of the respondent, denied ordering the timber logs from the respondent and denied of any indebtedness. Alternative to all of these denials, the 4 appellant’s pleaded defence is that the purchase price claimed by the respondent had already been fully paid to the agent of the respondent, Dato’ Chai. Further to that and in the course of trial, the appellant raised issues on the illegality of the agreement between him and the respondent on the supply of timber.

After a full trial the learned trial Judge found in favour of the respondent. It was held that the respondent had proved its claim on a balance of probabilities. The learned trial Judge found the claim of the respondent was well substantiated with the delivery orders and invoices produced in Court (see Rekod Rayuan Bahagian C, Jilid 1), whereas the defences raised by the appellant were found to be contradictory and without proof. According to the learned trial Judge, the defence of denial of transactions contradicted the delivery orders and invoices as tendered by the respondent. The defence that the appellant had already paid the amount through Dato’ Chai was not proved because the appellant failed to establish in evidence that Dato’ Chai was an agent of the respondent. There was no document evidencing that the purported payment made to Dato’ Chai was for the claim of the respondent. Furthermore, Dato’ Chai was not called as a witness to corroborate the appellant’s case. 5

The learned trial Judge had also deliberated on the issue of illegality raised as a defence by the appellant. The learned Judge agreed that the agreement between the parties is one prohibited by section 24 of the Contracts Act 1950, and therefore null and void. However, the claim of the respondent was still allowed applying section 66 of the Contracts Act and the principle of unjust enrichment.

On appeal before us the appellant raised issues that the learned Judge had erred in his finding of facts and law in allowing the claim of the respondent. Fifteen grounds were listed in the Memorandum of Appeal. In both the oral and written submissions, however, it was urged upon this Court by the learned appellant’s counsel for an appellate intervention into the findings of the learned trial Judge as the learned Judge had erred in the following areas: i. in finding that there was no evidence led that Dato’ Chai was the agent of the respondent; ii. failing to accept that payment was already made to Chai; iii. failing to consider section 149 of the Contracts Act 1950; iv. having found the agreement void ab initio and yet allowed the claim; and v. in his findings on unjust enrichment. 6 It is to be reiterated here that the ground on illegality raised by the appellant was that the learned Judge, though was correct in finding that the agreement between parties was null and void under section 24 of the Contracts Act, but had erred in allowing the claim despite the illegality.

Learned appellant’s counsel invited the Court to intervene with the trial Judge’s finding of facts which held that there was no evidence that Dato’ Chai was the agent of the respondent. Learned counsel submitted that all the Delivery Orders issued by the respondent belonged to Jet Foo Trading Sdn Bhd, with the rubber stamp of the respondent affixed; that Dato’ Chai was a shareholder of Jet Foo Trading together with Mahachai Holding (M) Sdn Bhd. SP2 testified that Mahachai Holding (M) Sdn Bhd also belonged to Dato’ Chai. The Delivery Orders were issued by SP2 who was the former employee of Dato’ Chai.

In his testimony the appellant insisted that he did not at any time deal with the respondent company for the purchase of the timber logs. All dealings was between him and Dato’ Chai. SD2 had also said that all the timber logs from the Concession Area were purchased by Dato’ Chai and instructions such as timber species, price and the purchase regarding the sale of timber logs to the appellant was given to him by Dato’ Chai. SD2 7 would prepare the delivery orders on behalf of the respondent but on the instruction of Dato’ Chai.

The appellant’s version was that sometime in 2011 Dato’ Chai approached the appellant and offered to sell him timber logs from the Concession Area, upon the issuance of the relevant Forest Licenses. The appellant accepted the said offer after inspecting the Concession Area and checking with his sources at the Forestry Department. Consequently, at the instruction of Dato’ Chai, the appellant had on various occasions paid a total of RM2,534,249.98 to him or to persons instructed by him as advance payment for purchase of timber logs. According to the appellant that was a very common practice in the timber industry.

Documents evidencing payment of a total sum of RM2,534,249.98 were referred to the Court. Exhibit D187 (pp. 273-290 Ikatan Teras Bersama Jilid 2) and exhibit D188 (pp. 291-301 Ikatan Teras Bersama Jilid 2) showed bank-in-slips of Public Bank Islamic Berhad denoting payment made by the appellant to Dato’ Chai into his account in that Bank. Bank-in-slips of Maybank show payment made by the appellant to SP2 into SP2’s account. And bank-in-slip of CIMB Bank/CIMB Islamic Bank evidencing payment made by the appellant into Dato’ Chai’s account in that Bank. There were cash vouchers duly signed by Dato’ Chai accepting 8 cash payment from the appellant. There were also payment made to person or persons purportedly instructed by Dato’ Chai by way of the appellant’s cash voucher, where the bank-in-slips of Maybank show payment made into Tan See Yam’s account.

Learned counsel submitted, the documents evidencing payment coupled with the fact that delivery orders of Dato’ Chai’s company known as Jet Foo Trading Sdn Bhd were used, clearly linked Dato’ Chai and his active involvement in the sale of timber logs in the Concession Area to the appellant. Consequently, it was submitted, notwithstanding the sale under the name of the respondent, Dato’ Chai in all circumstances of the case must be considered the principal or at the very least an agent of the respondent. Learned counsel contended, the trial Judge should have accepted the evidence which demonstrates that all dealings between parties were made by the appellant through Dato’ Chai. The learned Judge had erred in failing to infer that Dato’ Chai was the agent of the appellant. Being an agent, the payment made to him would absolve any liability on the part of the appellant to the respondent.

We agree with learned counsel that some of the evidence as highlighted above was not given consideration in the grounds of judgment of the learned trial Judge. However, that notwithstanding, the above 9 evidence in our view is of very little assistance to establish that Dato’ Chai was an agent of the respondent.

Having scrutinised the appeal records before us we agree with the finding of the learned trial Judge. SD2 who was a subpoenaed witness of the appellant had admitted and confirmed that he was the one who prepared the invoices on behalf of the respondent and issued them to the appellant. SD2 explained how the delivery orders belonging to Jet Foo Trading had been used. He said he was in the forest extracting timber at that material time. According to him when the delivery orders of the respondent were out of stock he had borrowed the empty delivery orders forms from his former employer, Jet Foo Trading Sdn Bhd because Jet Foo had changed its name to Rimbunan Makmur Sdn Bhd and could no longer use them. Thus the name of Jet Foo on each of the delivery orders was cancelled and stamped with the rubber stamp of the respondent’s company, together with the seal of the company. All the delivery orders were then addressed to the appellant.

The documents of payment tendered by the appellant in exhibits D187 and D188 were given due consideration by the learned trial Judge. The learned Judge however, held that it was no proof of anything since these documents do not indicate the purpose for which the payments were 10 made. The documents evidencing payment into the bank account of Dato’ Chai was not an indication that it was a payment made in relation to the claim of the respondent in this case. The bank-in-slips and cash vouchers exhibited in fact do not specify that the purpose of payment was for the timber supplied by the respondent. We therefore, agree with the learned trial Judge that these documents are not proof that the appellant had made payment through Dato’ Chai for the purchase price claimed by the respondent.

Further to that, the total sum of RM2,534,249.98 paid does not tally with the amount claimed by the respondent of only RM1,902,945.17. Apart from these documents no other evidence was produced to corroborate the appellant’s assertion that he had in fact paid the purchase price claimed by the respondent through Dato’ Chai. We further agree with the learned trial Judge therefore, that the appellant ought to have called Dato’ Chai to testify on both the issues of agency and payment. In our view, that would be the best evidence before the Court. Only Dato’ Chai would be able to testify and confirm if he in fact received the payment, and if he did, it was received on behalf of the respondent.

The learned trial Judge was therefore correct to find the alternative defence of the appellant that payment had already been paid to the 11 respondent not proved when there was no evidence adduced by the appellant that Dato’ Chai was the agent of the respondent. There was no evidence adduced to show that the purported payment was made by the appellant to the respondent through Dato’ Chai as Dato’ Chai was never produced in Court to confirm the same. We agree with the finding of the learned Judge and we find the reasons proffered are sound and properly substantiated.

Having considered the evidence before him and defences raised, the learned trial Judge, at paragraph 5 of the grounds of judgment at page 5 held that the respondent had established its case that the appellant ordered and purchased the timber logs and owed the respondent the sum claimed. We agree with this finding. It was also in evidence that the lorry driver of the appellant was the one who collected the logs from the respondent in the logging forest. The respondent through SD2 prepared all the delivery orders with list of detailed specification. The Delivery Orders were usually given to the lorry driver, who sent them together with the timber logs to the appellant.

The appellant on the other hand was found to have contradicted himself in his defence when he denied the transaction between them. The denial, according to the learned Judge became a bare denial in the face 12 of the invoices and delivery orders tendered in Court. It was the appellant’s own witness SD2, who admitted preparing the delivery orders on behalf of the respondent, which were passed through the lorry driver. Counsel for the respondent pointed out that during the trial the appellant initially objected to the invoices for lack of signatures by the respondent. However, his own witness SD2 admitted and acknowledged that the invoices were issued by him on behalf of the respondent. This eventually led to the acknowledgment and admission of the delivery orders and invoices by the appellant himself testifying as SD3.

Thus we agree with the learned Judge and His Lordship was correct to hold the respondent had proved its case on a balance of probabilities. The finding of the learned Judge was well reasoned. The claim of the respondent was substantiated with the necessary documents in the form of invoices and delivery orders addressed to the appellant, to prove delivery of the timber logs. We have no reason to disturb these factual findings. We are mindful that the appellate court should not unnecessarily disturb the decision of a trial court, unless the findings are plainly wrong as enunciated by the Federal Court in China Airlines Ltd v Maltran Air Corp. Sdn Bhd & Another Appeal [1996] 3 CLJ 163. This is not one of such case. 13

In any event, if what the appellant had asserted is in fact true the appellant can always claim back the purported payment against Dato’ Chai. It would also be sensible for the appellant to institute a claim against him by way of a third party proceedings.

We next dealt with the defence of illegality which was raised by the appellant at the High Court though it was not a pleaded defence. The learned trial Judge allowed the defence of illegality notwithstanding that it was not pleaded, as His Lordship was of the view that the Court can take notice of illegality ex facie, citing an authority of the Federal Court decision in Merong Mahawangsa Sdn Bhd & Anor v Dato’ Shazryl Eskay bin Abdullah [2015] 5 MLJ 619.

As we have alluded to earlier, in relation to illegality issue learned counsel contended that the learned Judge had erred because though the agreement was found to be illegal for having consideration that is prohibited by statute and hence against public policy, but yet allowed the claim of the respondent. The application of section 66 of the Contracts Act by the learned Judge was said to be inappropriate and the doctrine of unjust enrichment should not have been applied. 14

On the pleading point, we agreed with the learned Judge and the legal position was correctly stated. Though not pleaded, the Courts are bound at all stages of proceedings to take note of illegality. Illegality need not be pleaded as it is a question of substance of which if necessary the Court even on its own motion may take cognisance of. Thus when a suggestion is made to the Court that a contract is illegal, notwithstanding that it is not pleaded the Court is bound to give consideration to the fact that the contract may be illegal and that the Court may not be able to enforce it. This issue had been exhaustively discussed by the Federal Court in Merong Mahawangsa (supra).

The finding of illegality by the learned Judge as appeared in the grounds of judgment (pages 6-7) was premised on the following established facts:

The goods supplied by the Plaintiff to the Defendant were timber logs.

(ii) SP1, a director of Staricoplus Sdn Bhd, was the licensee of the two “Lesen Mengambil Hasil Tanah” for Charul Mukim Bandi, Kemaman (the Forest Licenses) Exhibit D14 and D15. He told the Court that he engaged one Dato’ Chai Han Kwang of Mahachai Holdings (M) Sdn Bhd as a contractor to assist him to extract timber logs from the concession area. He also told the Court that he sold all the timber logs to the Plaintiff. 15

(iii) The timber logs supplied to the Defendant was from the forest concession area in Charul, Mukim Bandi, Kemaman under the Forest Licenses dated 2.7.2012 issued by the Forestry Department (Exhibit D14 and D15).

(iv) Clause 26 of the two licenses (D14 and D15) provides: “26.0 Kayu Balak diproses di Kilang Pelesen Sendiri Dalam skim Kilang Papan, semua kayu-kayu yang dipotong dan diambil dari kawasan lesen dalam satu-satu tahun dipotong dan dijadikan papan atau lain-lain kayu sedia di kilang papan ‘pelesen’ sendiri dan/atau mana-mana kilang papan dalam negeri yang pelesen mempunyai perkongsian mengikut cara bekerja yang ditetapkan kecuali jika ada kebenaran bertulis daripada Pengarah Perhutanan Negeri Terengganu.” Exhibit D14 Bundle 1 page 22 Exhibit 15 Bundle 1 page 59). It is clear from Clause 26 that all the timber logs from the concession areas are to be sent to the licensee’s sawmill and processed into sawn timbers unless with the permission of the Pengarah Perhutanan Negeri Terengganu.

SD1 Timbalan Pengarah Perhutanan Negeri Terengganu told the Court that the Pengarah did not at any time waive the above mentioned condition. [27] The learned Judge first found the agreement between the parties, for the sale of timber in breach of an express additional condition in clause 16

26.0 of the licence issued under the National Forestry Act 1984 (NFA). A fortiori the agreement was found to be illegal and against public policy. The illegality as found by the learned Judge began with the supply of timber from the licensee (as testified by SP1) to the respondent and the illegality continued with the agreement of supplying the timber logs by the respondent to the appellant, which formed the basis of claim in this appeal. [28] There was no cross appeal by the respondent on the finding of illegality made by the learned Judge. In his written submissions however, learned respondent’s counsel disputed and raised issues with that finding. There was no objection raised by learned appellant’s counsel on that submission. Hence we have proceeded to deliberate on the finding of illegality by the learned trial Judge. [29] We would begin by a careful examination of condition 26.0 of the licence, where it states: “26.0 Kayu Balak diproses di Kilang Pelesen Sendiri Dalam Skim Kilang Papan, semua kayu-kayu yang dipotong dan diambil dari kawasan lesen dalam satu-satu tahun dipotong dan dijadikan papan atau lain-lain kayu sedia di kilang papan “pelesen’ sendiri dan/atau mana-mana kilang papan dalam negeri yang pelesen mempunyai perkongsian 17