Freight Mark (M) Sdn Bhd (no. sykt:159467-A) v Bumi Asia Auto Sdn Bhd (no. sykt: 804297-H) (12ANCVC-138-09/2017)

This is an appeal against the decision of the learned sessions judge at Shah Alam who on 15 September 2017, after a full trial, dismissed the appellant’s (the plaintiff in the court below) claim against the respondent (the defendant in the court below). For convenience I shall hereinafter refer to the parties as they were in the court below. 2 Background facts 2. The plaintiff pursuant to two contracts dated 8 July 2014 agreed to sell the defendant, 21 second hand lorries. Five lorries were sold under the first contract (exhibit P12), and 16 lorries under the second contract (exhibit P2). All the 21 lorries were under hire purchase at the material time. The lorries under the first contract were hire-purchased to Orix, and the lorries under the second agreement to

The subject matter of the present appeal is the second contract. The 16 lorries under the second contract were sold for RM1,248,000.00. Clause 2.1 of the second contract required the defendant to pay a 10% deposit on signing of the contract. No deposit was paid by the defendant though the plaintiff sent 2 reminders via emails dated 13 November 2014 and 12 January 2015. By email dated 19 May 2015, the defendant informed the plaintiff that it did not wish to proceed with the second contract it as it had purchased new lorries and terminated the same. 3

In September 2017, the plaintiff brought this action in the session court claiming damages for losses it had allegedly suffered as a result of the unlawful termination of the second contract. In its Defence, the defendant pleaded that at the time of the contract, the plaintiff was aware that the defendant had purchased the lorries to fulfill its obligations under a contract it had entered into with Coca Cola. It was further alleged as a result of the plaintiff delaying the delivering of the five lorries under the first contract and transferring ownership of the same to the defendant, the defendant was compelled to buy new lorries to perform its contract with Coca Cola. The defendant terminated the second contract because of the delay in the delivery of the 5 lorries under the contract.

At the trial, the plaintiff’s main witnesses were PW3 and PW4, the latter being the who had signed the two contracts on behalf of the plaintiff. PW3 and PW4 acknowledged the following facts during cross examination. First, that the parties had agreed that the second contract was to take effect only upon completion of the first contract. Secondly, that the plaintiff fulfilled its contractual obligations under the first contract after a delay of about 10 months, in April 2015. 4 Thirdly, that the said delay was occasioned by the plaintiff’s failure to settle the outstanding hire purchase installments in order to obtain the release of the five lorries and the original registration cards from Orix. Fourthly, the parties had waived the payment of the 10% deposit required by clause 2.1 on the signing of the second agreement. PW4 also acknowledged that the plaintiff would not have been able to release the lorries in batches of 5 to the defendant as required under the second contract as HSBC would not have consented to rescind the hire purchase agreements on the lorries on a staggered basis. He explained that under the hire purchase facility with HSBC, the plaintiff was required to settle to all monies due on the 16 lorries at the same time.

At the conclusion of evidence and submissions, the learned sessions judge dismissed the plaintiff‘s claim. She found that although the second contract did not state that it was to take effect only upon completion of the first contract, there existed an oral agreement between the parties to that effect. In making this finding, she relied on, among others, an email dated 24 June 2014 from the plaintiff to the defendant and the admissions of PW3 and PW4. By the email 5 dated 24 June 2014, the plaintiff proposed to release the lorries in batches of 5 under the second contract after the receipt of the deposit, and further that the first and second contracts be signed simultaneously though the second contract would take effect only upon the completion of the first contract. The learned sessions judge also concluded that the defendant was entitled to terminate the second contract by reason of the delay on the plaintiff’s part in the completion of the first contract. She therefore held the termination of the second contract by the defendant was lawful. Issues 7. There are three issues which arise for consideration before me. First, whether the sessions judge erred in allowing the defendant to introduce evidence to vary the effective date of the second contract. Secondly, whether the learned sessions judge was right in holding that the defendant’s termination of the second contract was lawful. If the answer to both the issues was in the affirmative, what were the damages payable by the defendant. I will consider each of these issues seriatim. 6 Issue 1 8. It was the plaintiff’s case both here and in the court below that the second contract was to take effect upon execution. It was contended by the plaintiff that the defendant having signed the second contract, was precluded from introducing evidence of negotiations that took place prior to the execution of the contract to prove the existence of an oral agreement between the parties that the second contract was to take effect only upon the completion of the first contract. The plaintiff argued that the documents and emails relied on by the defendant to prove this oral agreement were inadmissible being pre contract documents. The plaintiff also argued that the sessions judge erred in her finding that PW3 and PW4 had in their evidence acknowledged the existence of the oral agreement.

It is trite law that by virtue of sections 91 and 92 of the Evidence Act once a contract had been reduced to writing, neither party can adduce any evidence to contradict or vary the terms of the written contract. Section 92 specifically excludes evidence to contradict, vary, add to or subtract from any of the terms of contract in writing, except in any of the situations spelled out in the provisos thereto. 7 This is illustrated by the judgment of the Federal Court in Tindok Besar Estate Sdn Bhd v Tinjar Co [1979] 2 MLJ 229, where Chang Min Tat FJ explained: However s 92 allows, so far as it concerns this particular case, evidence in ….. and proviso (c) of ‘any separate oral agreement constituting a condition precedent to the attaching of any obligation under any such contract …’. The provisos qualify but do not eliminate the main provisions of the section, so that unless the additional evidence sought to be adduced falls within the scope of any of the provisos, it should not be allowed to be introduced as it would be to contradict, vary, add to or subtract from the terms of the agreement.

The defendant here, though it made no reference to proviso (c) to section 92, clearly was clearly relying on this proviso to prove that the completion of the first contract was a condition precedent for the second contract to come into effect. Proviso (c) to section 92 reads: When the terms of any such contract, grant or other disposition of property, or any matter required by law to be reduced to the form of a document, have been proved according to section 91, no evidence of any oral agreement or statement shall be admitted as between the parties to any such instrument or their representatives in interest for the purpose of contradicting, varying, adding to, or subtracting from its terms 8 Provided that—

the existence of any separate oral agreement constituting a condition precedent to the attaching of any obligation under any such contract, grant or disposition of property, may be proved

By virtue of proviso (c) when there is a separate oral agreement that the terms of the written contract will not take effect or will be of no force until a condition precedent has been fulfilled or a certain event has happened, evidence is admissible to show the existence of the said oral agreement. The proviso allows proof to be given of a separate oral agreement constituting the condition precedent.

The question that needs to be addressed therefore is whether, as contended by the plaintiff , the sessions judge in relying on the emails and evidence of PW3 and PW4 acted contrary to sections 91 and 92 of the Evidence Act 1950. In my opinion she did not. The emails were contemporaneous documents to establish the truth of the existence of the oral agreement. The plaintiff’s contention that PW3 and PW4 did not acknowledge that the parties had agreed that the completion of the first contract was a condition precedent for the 9 second contract to come into effect was not correct. It was specifically put to them by counsel for the defendant in cross examination that there was this oral agreement and they agreed. No clarification was sought of their answers in re examination. Issue 2 13. That brings me to the second issue. It was the plaintiff’s case here and below that the defendant was not entitled to terminate the second contract on the basis of the delay in the completion of the first contract as there was no oral agreement that the second contract was to take effect upon the completion of the first contract. In view of my conclusion that the sessions judge was correct in holding that there was such an oral agreement, the plaintiffs argument must fail. There was ample evidence to show delay in the completion of the first contract. The plaintiff was aware that the defendant required the lorries to honour its agreement with Coca-Cola. The sessions judge was correct in her finding that the defendant was entitled to terminate the second contract on account of the delay. 10

In view of my conclusion that the sessions judge was correct in holding that the termination of the second contract was not wrongful, I need not consider the damages point. In passing it bears mention that there was no evidence to show that the plaintiff had taken all reasonable efforts to mitigate its losses.

For all the reasons given, I would dismiss the appeal and award costs of RM7,000.00 to the defendant. Dated: 13 February 2019 (S.M KOMATHY SUPPIAH) Judge High Court of Malaya Shah Alam Date of Decision : 14 November 2018 Solicitors :- For the Appellant: Ng Siew Moi, [Messr. Wong Advocates & Solicitors] For the Respondent: M. Pani, [ Messr. Pani Normala & Co.]