Emum Capital Sdn Bhd v 1. ) Great Concrete Sdn Bhd (WA-22NCC-573-08/2024)

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1 IN THE HIGH COURT OF MALAYA IN KUALA LUMPUR (COMMERCIAL DIVISION) SUIT NO.: WA-22NCC-573-08/2024 BETWEEN EMUM CAPITAL SDN BHD [No. Syarikat: 197401001984 (19143-D)] ... PLAINTIFF

Preamble

Pursuant to the Credit Facility, the 1st Defendant placed orders for bulk cement with the Plaintiff, which the Plaintiff duly supplied and delivered to the 1st Defendant. For each delivery, the 1st Defendant acknowledged receipt via the relevant delivery orders, and the Plaintiff subsequently issued invoices for payment. The invoices clearly stated that the payment term was 60 days and that interest of 1.5% per month would be charged on all overdue accounts. [8] Despite several demands and reminders, the Defendants failed to fully settle the outstanding amounts owed to the Plaintiff. The last partial payment of RM20,894.40 was made on 5.4.2024, leaving a significant balance unpaid. [9] By letter dated 30.5.2024, the 1st Defendant acknowledged that the Plaintiff had ceased supplying products but stated that the 1st Defendant had continued to make payments to reduce the outstanding indebtedness. The 1st Defendant also requested that the Plaintiff waive the late interest in a proposed settlement plan. [10] The Plaintiff's solicitors issued a letter of demand dated 4.6.2024, demanding payment of the outstanding amount as of 30.4.2024, totalling RM1,273,538.00. The Defendants' solicitors replied by letter dated 6.6.2024, making a bare denial of the debt. [11] The Plaintiff subsequently filed this suit, claiming RM1,307,291.00 (as of 31.7.2024), comprising the Principal Amount of RM750,003.00 and Late Interest of RM557,288.00, as well as continuing Late Interest accruing from 1.8.2024 until full settlement. [12] The Defendants filed their Defence and Counterclaim on 16.10.2024, claiming that the Plaintiff breached the Credit Facility terms by suspending the facility around October 2021, causing them to incur damages of RM6,085,969.52 from having to procure materials at higher prices. They also counterclaimed for general damages, alleging that the Plaintiff's reporting of their default to credit agencies negatively impacted their credit facilities. THE PLAINTIFF'S CLAIM [13] The Plaintiff is claiming RM1,307,291.00 from the 1st Defendant and its directors/guarantors, 2nd Defendant and the 3rd Defendant). This amount consists of RM750,003.00 in principal for unpaid building materials (bulk cement) supplied to the 1st Defendant, plus RM557,288.00 in late interest charges at 1.5% per month as stipulated in their credit facility agreement dated 20.2.2019. [14] The claim arises from a credit facility of RM2,000,000 with 60-day credit terms that the Plaintiff granted to the 1st Defendant. Under this arrangement, the Plaintiff supplied bulk cement to the 1st Defendant, which was delivered and acknowledged by the 1st Defendant through delivery orders. The Plaintiff subsequently issued invoices for payment, which remained unpaid despite the credit term having expired. [15] The Plaintiff contends that despite numerous reminders and demands, including a formal letter of demand dated 4.6.2024, demanding payment of RM1,273,538.00 (the outstanding amount as of 30.4.2024), the Defendants have failed to settle the outstanding amount. The Plaintiff argues that the 2nd and 3rd Defendants are jointly and severally liable as guarantors based on a Letter of Guarantee dated 1.11.2018. The Plaintiff is applying for summary judgment, asserting that the Defendants have no valid defense to the claim. THE DEFENDANT'S COUNTERCLAIM [16] The Defendants' counterclaim consists of two distinct parts. First, they claim RM6,081,552.32 in damages allegedly suffered when the Plaintiff abruptly suspended their credit facility in October 2021. The Defendants argue that this suspension was a breach of the credit agreement and was done without proper notice. As a result, they claim they were forced to purchase raw materials from alternative suppliers at higher prices for their ongoing projects, leading to substantial financial losses. [17] The Defendants contend that the Plaintiff had waived the original 60-day credit term through its conduct by consistently allowing payments beyond 60 days (up to 225 days in some instances) and having an average payment period of 141.46 days. They argue that a WhatsApp message from the Plaintiff's director requesting payments to be “pulled back to below 120 days” confirms this waiver of the original terms. [18] Second, the Defendants claim general damages resulting from the Plaintiff reporting them to credit reporting agencies (CTOS and Experian) as defaulters. They allege this reporting was done without proper basis since the debt was in dispute, particularly the interest component. They further claim that these adverse credit reports negatively impacted their applications for credit facilities with other financial institutions such as Agape Business Specialist and Orix Leasing Malaysia Berhad, causing financial losses that need to be assessed by the court. The Defendants have produced letters from these institutions rejecting their credit applications allegedly due to the adverse credit reports. THE APPLICATIONS [19] The Plaintiff filed two applications: a) Enclosure 12: An application for summary judgment under Order 14 Rules of Court 2012 for the full amount claimed. b) Enclosure 13: An application to strike out the Defendants' counterclaim under Order 18 Rule 19(1)(b), (c) and/or (d) Rules of Court 2012. RESPECTIVE PARTIES' SUBMISSIONS Plaintiff's Submissions [20] The Plaintiff contended that it had established a prima facie case for summary judgment by satisfying all preliminary requirements under Order 14. The Plaintiff argued that the Defendants had failed to raise any triable issues, as the sale and delivery of bulk cement to the 1st Defendant was undisputed, with the 1st Defendant acknowledging receipt of the goods through signed delivery orders. The Plaintiff maintained that its suspension of the credit facility was justified and in accordance with the terms of their agreement, as evidenced by the Credit Facility Application Form and Approval Letter. The Plaintiff rejected the Defendants' claim that the credit terms were waived or extended beyond 60 days, asserting that it had consistently issued debit notes for the late payment interest and maintained its right to payment according to the agreed terms. The Plaintiff also argued that the alleged discrepancies in delivery orders were immaterial, as the 1st Defendant had accepted the goods without objection and made partial payments towards the outstanding debt. Regarding the Defendants' counterclaim, the Plaintiff submitted that it was unsustainable as the suspension of credit was in accordance with the agreement, and the reporting to credit agencies was done with the Defendants' consent as per the Credit Facility Application. Defendants' Submissions [21] The Defendants argued that there were several triable issues precluding summary judgment. They claimed that the Plaintiff had waived the 60-day credit term through conduct, pointing to records showing that payments were accepted beyond 60 days (with an average of 141.46 days) and a WhatsApp message from the Plaintiff's director requesting payment “below 120 days.” The Defendants also contended that the Plaintiff was not entitled to claim late interest, as this was never a condition of sale in their dealings. They highlighted various discrepancies in 25 out of 70 delivery orders, including missing purchase orders, inconsistent security stamp dates, and one delivery order bearing stamps of two different companies. The Defendants further alleged that the Letter of Guarantee was defective and that they never received a completed, stamped copy. In relation to their counterclaim, the Defendants maintained that the Plaintiff's abrupt suspension of the credit facility without prior notice constituted a breach of contract, causing them to incur losses of RM6,081,552.32 from having to procure materials at higher prices. They also alleged that the Plaintiff's reporting to credit agencies was unjustified, particularly when the amount claimed was in dispute. ENCLOSURE 12: APPLICATION FOR SUMMARY JUDGMENT The Legal Test for Summary Judgment [22] The legal principles governing an application under Order 14 Rules of Court 2012 are well-established. The burden is initially on the plaintiff to establish that the defendant has entered appearance, the statement of claim has been served, and the affidavit in support complies with Order 14 Rule 2 by verifying the facts of the claim and stating the deponent's belief that there is no defence to the claim. Once these conditions are fulfilled, the burden shifts to the defendant to raise triable issues. [23] As held in the Federal Court case of Cempaka Finance Bhd v Ho Lai Ying & Anor [2006] 2 MLJ 685, once the plaintiff has satisfied these conditions, “the burden then shifts to the defendant to raise triable issues.” [24] In Bank Negara Malaysia v Mohd Ismail [1992] 1 MLJ 400, the Supreme Court explained that the duty of a judge does not end when a fact is asserted by one party and denied by the other. Where such assertion or denial is “equivocal, or lacking in precision or is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable in itself, then the judge has a duty to reject such assertion or denial, thereby rendering the issue not triable.” [25] In this case, there is no dispute that the Defendants have filed a Memorandum of Appearance, the Statement of Claim has been served, and the Plaintiff's Affidavit in Support of the Summary Judgment Application has verified the facts on which the claim is based and stated the deponent's belief that the Defendants have no defence. Thus, the Plaintiff has established a prima facie case, and the burden now shifts to the Defendants to raise triable issues. Triable Issues Raised by the Defendants [26] The Defendants have raised the following purported triable issues: a) Whether the Plaintiff breached the terms of the Approval Letter when it suspended or terminated the Credit Term around October 2021; b) Whether the Plaintiff had, by conduct, waived the 60- day Credit Term and/or the right to impose Late Interest; c) Whether there are discrepancies in the Delivery Orders and Purchase Orders that affect the Plaintiff's claim; d) Whether the Letter of Guarantee signed by the 2nd and 3rd Defendants is defective, invalid, or unenforceable. [27] I shall address each of these purported triable issues in turn. Analysis and Findings of the Court Whether the Plaintiff Breached the Terms of the Approval Letter [28] The Defendants allege that the Plaintiff breached the terms of the Approval Letter when it suspended or terminated the Credit Term around October 2021. This allegation is without merit. [29] The Credit Facility Application Form included a declaration signed by the 1st Defendant's directors which explicitly states that “In the event that our company still fails to settle any amount due within (30) days after the amount has become due as stipulated under clause (a) and inclusive on the interest as stipulated under clause (b), the supplier shall cease to supply the goods on credit terms until such period that all amount due has been paid.” Furthermore, the Approval Letter dated 20.2.2019 provides that “We reserve the right and have full discretion to amend, suspend or revoke part or whole of the credit limit and terms without prior notice or assigning any reason.” [30] It is undisputed that the 1st Defendant failed to pay the Principal Amount within the Credit Term. In such circumstances, the Plaintiff was entitled, pursuant to the terms of the Declaration and the Approval Letter, to suspend or terminate the Credit Term facility. [31] Moreover, the 1st Defendant's own letters acknowledge the Plaintiff's right to suspend the Credit Term. In the letter dated 30.5.2024, the 1st Defendant stated, “For context, even though our account has been abruptly suspended and supply of bulk cement stopped on 8 October 2021, we have continued to pare down our debt...” Similarly, in the letter dated 11.11.2021, the 1st Defendant acknowledged, “Although our Account has been suspended in early October 2021...we nevertheless continued to pay down our debt.” [32] The 1st Defendant's claim that they objected to the suspension is contradicted by their continued partial payments and correspondence, which acknowledge the Plaintiff's right to suspend without disputing its legitimacy. The objections raised in the letters dated 30.3.2023 and 30.5.2023 (as referenced by the Defendants) were made long after the suspension and appear to be afterthoughts. [33] Based on the established legal principle in Polygram Records Sdn Bhd v The Search & Anor [1994] 3 MLJ 127 (HC) and Capital Stitch Industry Sdn Bhd & Anor v Jubileei Sdn Bhd [2018] MLJU 1703 (HC), a party signing a contract is bound by its terms unless fraud, undue influence, or misrepresentation can be proven. No such allegations have been made by the Defendants. [34] In view of the above, I find that the Plaintiff's suspension of the Credit Term was in accordance with the agreed terms and does not give rise to a triable issue. Whether the Plaintiff Had Waived the Credit Term and Late Interest [35] The Defendants allege that the Plaintiff waived the 60-day Credit Term through conduct, pointing to payment records showing that payments were accepted beyond 60 days and a WhatsApp message from the Plaintiff's director requesting payment “below 120 days.” They also contend that the Plaintiff is not entitled to claim the Late Interest or had waived the right to do so. [36] The principle of waiver, as established in Deepak Jaikishan a/l Jaikishhan Rewachand & Anor v Intrared Sdn Bhd [2013] 7 MLJ 437 (HC), requires that “one party by his conduct leads another to believe that the strict rights arising under the contract will not be insisted upon, intending that the other should act on that belief, and he does act on it.” [37] In the present case, the evidence does not support a finding of waiver. The fact that the Plaintiff allowed the 1st Defendant to make payments beyond the 60-day Credit Term does not constitute a waiver of the Credit Term itself or the right to claim Late Interest. This is particularly so when the Approval Letter explicitly provides for the charging of Late Interest on overdue accounts, and the invoices issued by the Plaintiff consistently stated that interest at 1.5% per month would be charged on all overdue accounts. [38] The WhatsApp message from Patrick Ong requesting payment “below 120 days” does not establish a waiver either. When viewed in context, it appears to be part of the Plaintiff's efforts to encourage the 1st Defendant to reduce its outstanding debt. It does not evince an intention to abandon the 60-day Credit Term or the right to claim Late Interest. [39] Moreover, the Plaintiff consistently issued Debit Notes for the Late Interest, demonstrating its intention to enforce this contractual right. The Court of Appeal in Agromate (M) Sdn Bhd v Felcra Niaga Sdn Bhd [2022] CLJU 1655 held that where the late payment interest term is consistently and repeatedly incorporated in both quotations and invoices, it cannot be said to be unilateral or non-binding. [40] The Defendants' own letters acknowledge the Plaintiff's right to charge Late Interest. In their letters dated 26.9.2022 and 13.10.2022, they state, “Whilst it is your management's prerogative to continue billing the overdue interest charges, we sincerely hope the overdue interest charges are waived.” The request for a waiver implies an acknowledgment of the Plaintiff's right to charge the interest. [41] Additionally, the Plaintiff's letter dated 6.4.2023 clearly stated that the Late Interest “is an automated calculation that will be continuously accrued until the principal outstanding sum turns to zero. As such, we shall leave the interest discount request for further discussion after all principal sums are cleared.” The Plaintiff never agreed to waive the Late Interest, only to discuss a possible discount after full settlement of the principal sum, which never occurred. [42] It is well-established in Tansa Enterprise Sdn Bhd v Temenang Engineering Sdn Bhd [1994] CLJU 160 (HC) that the question of imposing interest based on a note on invoices does not constitute a triable issue, particularly when the defendant had full knowledge of this claim as indicated in the invoices and did not protest when the invoices were presented. [43] Based on the above, I find that there is no triable issue regarding the Plaintiff's entitlement to the Late Interest at the agreed rate of 1.5% per month. Whether Discrepancies in Delivery Orders Affect the Plaintiff's Claim [44] The Defendants highlighted various alleged discrepancies in 25 out of 70 delivery orders, including missing purchase orders, inconsistent security stamp dates, and one delivery order bearing stamps of two different companies. [45] These alleged discrepancies do not raise triable issues for several reasons. Firstly, the 1st Defendant acknowledged receipt of the goods by signing and stamping the delivery orders, which constitute prima facie evidence of delivery and acceptance. As held in Toyo Photo Products Sdn Bhd v Terence Ee Soon Lee [2012] MLJU 35 (HC), having taken delivery of the goods and having used or consumed the goods delivered by the plaintiff totally, the defendant must be held accountable for the payment of those goods. [46] Secondly, the alleged discrepancies are minor and do not negate the fact of delivery. The missing purchase orders do not invalidate the delivery orders that were acknowledged by the 1st Defendant. The inconsistent security stamp dates can be explained by the fact that the security inspection at the Plaintiff's supplier's premises would naturally occur before the actual delivery to the 1st Defendant's batching plant. The presence of two company stamps on one delivery order (Top Spectra Sdn Bhd and the 1st Defendant) was adequately explained by the Plaintiff as occurring because the batching plant was shared between the two companies. [47] Thirdly, at no time did the 1st Defendant raise any objection regarding the quality or quantity of the goods delivered. Instead, they continued to make partial payments, which further confirms their acceptance of the goods. [48] In Luxchem Trading Sdn Bhd v WRP Asia Pacific Sdn Bhd [2021] MLJU 2442, the High Court found that where delivery orders were signed and stamped by the defendant, bare denials and claims of discrepancies were “a futile attempt by the Defendant to raise a triable issue.” [49] Moreover, in Caltex Oil Malaysia Ltd v Classic Best Sdn Bhd & Ors [2007] 4 MLJ 772, the High Court held that in cases involving goods sold and delivered, “due emphasis on the written documents, namely the statement of accounts, invoices, delivery orders, delivery notes and the debit notes” should be placed, as these “would collectively constitute a contract reduced into writing.” [50] Based on the above, I find that the alleged discrepancies in the delivery orders do not raise triable issues. Whether the Letter of Guarantee is Valid and Enforceable [51] The Defendants allege that the Letter of Guarantee is defective, invalid, or unenforceable, pointing out that it contains incomplete information and that they never received a completed, stamped copy. [52] This allegation is without merit. The incomplete information pertains only to basic details about the 1st Defendant and document dates, which were filled in by the Plaintiff during the execution of the Guarantee Letter based on corporate documents provided by the Defendants. [53] More importantly, through their letters dated 31.5.2024 (Exhibit TKC-6), the 2nd and 3rd Defendants acknowledged and admitted having signed the Guarantee Letter. There is no allegation of fraud, undue influence, or misrepresentation in the execution of the Guarantee Letter. [54] The High Court in Capital Stitch Industry Sdn Bhd & Anor v Jubileei Sdn Bhd [supra], quoting Hap Seng Credit Sdn Bhd v Mohamed bin A Ralim & Ors [2016] 10 MLJ 761 (HC), held that “the argument that the respondents had not been in the know of the transactions and that the first respondent having merely signed blank forms and did not understand English, and thus ought not to be responsible for the same is not only unsupported with evidence, but also not justified under the law.” [55] The Defendants' argument that the Plaintiff's variation of payment terms and interest rates discharges them from liability under the Guarantee Letter is unsupported by evidence. There is no proof of any variation of the payment terms or interest rates. The Plaintiff has consistently maintained the 60-day Credit Term and the 1.5% per month Late Interest rate as per the Approval Letter. The Plaintiff's forbearance in accepting late payments does not constitute a variation of the terms. [56] Based on the above, I find that there is no triable issue regarding the validity and enforceability of the Guarantee Letter against the 2nd and 3rd Defendants. Non-Query of Account Stated [57] The Defendants failed to raise any objection to the delivery orders, invoices, and Statement of Account issued by the Plaintiff, particularly regarding the Principal Amount outstanding. This lack of objection gives rise to a situation of 'non-query of account stated', as established in Easy Region Engineering Sdn Bhd v Bureau Veritas (M) Sdn Bhd [2017] MLJU 2284, where the High Court ruled that: “The legal implications arising from such conduct on the defendant's part is that an account stated comes into being and/or the defendant is estopped from denying any liability to pay on the outstanding invoices.” [58] Similarly, in Caltex Oil Malaysia Ltd v Classic Best Sdn Bhd & Ors [2007] 4 MLJ 772, the High Court held that: “It was an undisputed fact that the plaintiff had sent statements of accounts to the first defendant and the first defendant had not questioned the plaintiff on the accounts. This meant that a situation of 'account-stated' had arisen and the defendants were estopped from questioning the statement of accounts.” [59] In the present case, the Defendants did not raise any objection to the Statement of Account detailing the outstanding amount. Instead, the 1st Defendant requested a waiver of the Late Interest in their letter dated 30.5.2024, implicitly acknowledging the Principal Amount due. The Defendants' response to the Plaintiff's Demand Letter was merely a bare denial without raising any of the specific issues now being claimed. [60] Based on the above, I find that the Defendants are estopped from disputing their liability for the Principal Amount and Late Interest as claimed by the Plaintiff. Conclusion on Summary Judgment Application [61] In Alloy Automotive Sdn Bhd v Perusahaan Ironfield Sdn Bhd [1986] 1 MLJ 382, the Federal Court stated that “when all issues are clear, summary judgment should be given.” [62] In the present case, the Plaintiff has established a prima facie case for summary judgment, and the Defendants have failed to raise any triable issues. The alleged triable issues put forward by the Defendants are either contradicted by the documentary evidence or immaterial to their liability to pay the Principal Amount and Late Interest as claimed by the Plaintiff. [63] I am therefore satisfied that this is a proper case for summary judgment to be entered against the Defendants. ENCLOSURE 13: APPLICATION TO STRIKE OUT COUNTERCLAIM Legal Test for Striking Out [64] The principles governing an application under Order 18 Rule 19 Rules of Court 2012 are well-established. As stated by the Supreme Court in Bandar Builders Sdn Bhd & Ors v United Malayan Banking Corporation Sdn Bhd [1993] 3 MLJ 36, “it is only in plain and obvious cases that recourse should be had to the summary process under this rule and the summary procedure can only be adopted when it can clearly be seen that a claim or answer is on the face of it 'obviously unsustainable'.” [65] In Harapan Permai Sdn Bhd v Sabah Forest Industries Sdn Bhd [2011] 2 MLJ 192, the Court of Appeal held that a pleading is “frivolous or vexatious” when it is obviously unsustainable, and an abuse of process arises where the process of the court has not been used in a bona fide manner. [66] The Court of Appeal in Tan Wei Hong (a child suing through his guardian ad litem and next friend, Chuang Yin E) & Ors v Malaysia Airlines System Bhd & Ors [2017] 4 MLJ 540 emphasised that the power to strike out pleadings is discretionary and should be exercised with the greatest care and caution, in recognition of the principle that courts must not drive away litigants from the seat of justice, however weak their case may be. [67] With these principles in mind, I will now examine whether the Defendants' counterclaim is obviously unsustainable and should be struck out. Analysis and Findings of the Court First Part of Counterclaim: Damages for Higher Prices Paid for Materials [68] The Defendants counterclaim for RM6,085,969.52, allegedly damages and losses suffered when they had to procure raw materials from alternative suppliers at higher prices following the Plaintiff's suspension of credit facilities. [69] This part of the counterclaim is obviously unsustainable. As I have already found in paragraphs 22 to 28 above regarding Enclosure 12, the Plaintiff's suspension of credit facilities was in accordance with the agreed terms of the Credit Facility Application and Approval Letter. There was no breach of contract by the Plaintiff. [70] Additionally, the Defendants failed to provide any letters or notices to the Plaintiff regarding the alleged damages or losses prior to filing their counterclaim. In Lianmark Sdn Bhd v Al-Ambia Sdn Bhd [2021] MLJU 272, the High Court refused to award damages to the defendant where there was no evidence that the defendant had notified the plaintiff of any alleged delay or breach, or that the defendant had provided any list of defects or notice to remedy, or that the defendant had made any efforts to mitigate the alleged losses. [71] The Defendants failed to plead any particulars in their Defence and Counterclaim in relation to this head of counterclaim. In High Century Sdn Bhd v Liew Foot And Sons Construction Sdn Bhd [2014] MLJU 253, the High Court rejected claims that were not properly particularised in the Defence and Counterclaim. Furthermore, the evidence provided by the Defendants to support their claim, a self-generated document at Exhibit TKC-14, is obviously self-serving and contains no supporting documentation as justification. In KC Leong Holdings Sdn Bhd v Datin Moh Bee Ling [2015] 7 MLJ 10, the High Court held that “the complainant cannot 'throw the whole kitchen sink' of alleged unprocessed defects and expenses to the court to have them sorted out as presented by the defendant here.” [72] Based on the above, I find that this part of the counterclaim is obviously unsustainable and should be struck out. Second Part of Counterclaim: General Damages for Reporting to Credit Agencies [73] The Defendants counterclaim for general damages, alleging that due to the reporting of the Defendants to Credit Reporting Agencies, such as CTOS, as defaulters, their applications for credit facilities were negatively impacted. [74] This part of the counterclaim is also obviously unsustainable. The Credit Facility Application Form signed by the 1st Defendant's directors expressly agreed that the Plaintiff was entitled, at any time, to disclose any information regarding the account conduct to credit reporting agencies under the Credit Reporting Agencies Act