HECKLER & KOCH GMBH (Syarikat Jerman, didaftarkan di Mahkamah Stuggart dibawah No - HRB 481250) v ZAIKRY SANY BIN MOHD ISA berniaga sebagai MYDEFENSE TECHNOLOGY (No. Pendaftaran Perniagaan - 201403219775) (AA-22NCC-6-04/2022)

This case concerns a claim by the Plaintiff, a German company specializing in the design and manufacture of small arms and military equipment, against the Defendant, a Malaysian businessman engaged in the supply of military hardware. The dispute arises from a series of contracts for the sale of weapons and military materials, which the Plaintiff contends have not been fully honored by the Defendant, particularly in relation to outstanding payments under several invoices.

The Plaintiff alleges that the Defendant has failed to make payment for the outstanding sum of 753,473.00 EUR, despite repeated demands and partial payments made in acknowledgment of the debt. This action seeks to recover the balance due under the relevant contracts, along with interest on the unpaid amounts.

The central issue for determination in this case is whether the Defendant has discharged its contractual obligations to the Plaintiff by settling the invoices in full or whether the Plaintiff is entitled to the remaining unpaid amounts. The case also brings into focus questions regarding the governing law of the contracts, as well as the legal consequences of partial payments made by the Defendant.

The Plaintiff is a limited liability company incorporated in Germany, specializing in the design and manufacture of small arms and light 3 weaponry, primarily for use by law enforcement and military forces across the globe. The company operates extensively in the defense sector, supplying advanced weapons systems through carefully negotiated contracts.

The Defendant, a Malaysian citizen, conducts business under the name My Defense Technology, a sole proprietorship duly registered under the laws of Malaysia. The Defendant's business primarily involves the procurement and supply of military-grade equipment.

Between 2018 and 2019, the Plaintiff and Defendant entered into a series of contractual agreements whereby the Defendant agreed to purchase a range of weapons and military materials from the Plaintiff (“the Contracts”). These contracts, executed through a series of offers, order confirmations, purchase orders, delivery notes, and invoices, formed the basis of their commercial relationship.

A significant term of these contracts stipulated that payment for the products would be made in advance, and it was agreed that German law would govern the contracts. The Plaintiff duly performed its part of the agreement by supplying the ordered products to the Defendant.

On 4.5.2021, the Plaintiff's solicitors issued a formal letter of demand to the Defendant, requesting payment of outstanding amounts reflected in the unpaid invoices. These invoices documented a sum of 753,473.00 EUR that remained unpaid, in addition to interest on the delayed payments.

The Defendant admitted to being liable for the outstanding amounts and subsequently made partial payments totalling 83,000.00 EUR. However, despite these partial payments, a substantial portion of the debt remains unresolved.

The Plaintiff asserts that the Defendant has failed to fulfill its payment obligations under the terms of the contract, prompting this legal action to recover the outstanding amount.

The Defendant, in its defense, raises the issues of late delivery of the Products and asserts that certain liabilities had been transferred to a third-party company, Empayar Paradigma Sdn Bhd ("Empayar Paradigma").

The key issues to be addressed by this Court are as follows:

Whether the Defendant has breached the terms of the contracts by failing to make full payment for the products supplied by the Plaintiff;

(ii) Whether the Plaintiff is entitled to recover the outstanding amount of 753,473.00 EUR and any interest accrued due to late payment. BREACH OF CONTRACT [13] The Plaintiff has provided ample evidence demonstrating that the Defendant acknowledged his debt and obligation to pay the outstanding sums. This acknowledgment is evidenced through various correspondences, partial payments, and a formal Debt Acknowledgment Agreement as follows:-

Letter Dated 21.6.2018: The Defendant unequivocally stated that he "remains obliged to pay the complete purchase price" for the Products. This is a clear admission of liability.

(ii) Email Dated 1.7.2019: The Defendant acknowledged the receipt of the Products and assured the Plaintiff that he would follow up on the claim. This again shows acknowledgment of the delivery and a promise of payment.

(iii) Email Dated 4.7.2019: The Defendant attached photographs of the Products and confirmed his presence during the inspection. This further affirms the Defendant's acceptance of the Products and the confirmation of their receipt.

(iv) Email Dated 31.7.2019: The Defendant informed the Plaintiff that "payment will be transferred to HKO," reinforcing the obligation to settle the outstanding amounts.

Debt Acknowledgment Agreement Dated 21.12.2020: The Defendant formally confirmed and acknowledged his indebtedness to the Plaintiff, which included the amounts under the unpaid invoices. [14] The acknowledgment of debt and partial payments, in this context, serve as compelling indicators of liability. In Terranova Builders Sdn Bhd v Repc Services Sdn Bhd [2018] LNS 2149, the High Court held that the defendant’s admission of liability in various letters and part payments rendered their denial of debt to be a "bare denial" and devoid of merit as follows:- “[19] In MBF Factors Sdn Bhd v. Keh Hua T/A JAG Trading [2004] 1 CLJ 409 at page 415, the Court held as follows: "In any event, the conduct of the defendant in making two direct part payments to the Plaintiff vide OCBC cheque and cash clearly militates and negates the defendant's defence." [20] I agree with learned counsel for the Plaintiff that D1 by their admission of liability in the various letters and part payments made had rendered the assertion by D1 that they did not owe any money to the Plaintiff to be inherently improbable and indeed is contradicted by the contemporaneous documents.” [15] Similarly, the Defendant’s conduct in this case mirrors such an admission, with part payments providing further evidence of indebtedness. [16] In Tec D (Malaysia) Sdn Bhd v Refinenetworks Sdn Bhd [2022] LNS 2168, the court found that partial payments made after the issuance of invoices constituted an admission of indebtedness:- “[34] It is undisputed that the Defendant had issued two POs dated 09.12.2016 and 28.12.2016 and pursuant to the said POs, the Plaintiffs had sold and delivered computer products to the Defendant and/or the end user (the Labuan Financial Services Authority). The Defendant did not deny that all products delivered are in accordance with the POs. [35] It is also undisputed that the computer products were duly received and invoices no. 4128002065 dated 09.03.2017 and no. 4127017702 dated 10.03.2017 for the said products were issued to the Defendants by the Plaintiffs. [36] It is undisputed that the Defendant had acknowledged receiving the products and the Defendant did not raise any objections at the material time when it was received. [37] It is undisputed that the Defendant had continued to keep in possession the products despite having knowledge that the products are not in accordance to the specification inaccurate and incorrect. Hence, the Defendant cannot now claim goods are not according to specification, inaccurate and incorrect and refuse to pay the Plaintiffs the balance amount. The Defendant's conduct binds them. [38] The Defendant had also not disputed that they have made part payments and the Defendant had made further payments even after the Letter of Demand was issued on 27.02.2020. The said payments were made on 05.03.2020,

06.04.2020 and 01.06.2020, though the Defendant had complained, alleging that the products delivered was not according to specification, inaccurate and incorrect. It is apparent that the Defendant did not dispute the invoices and had made part payments. This to my mind is a clear admission of indebtedness. In the case of Boustead Trading (1985) Sdn Bhd v. Arab-Malaysian Merchant Bank Bhd [1995] 4 CLJ 283; [1995] 3 MLJ 331 where the Federal Court held that: - "(1) A reasonable man in the respondent's position would be entitled to assume that the appellant had agreed to the imposition of the 14-day period as it did not merely remain silent by not objecting to it but had in fact made payment on some invoices. The appellant should not be allowed to question the validity of the indorsement after seven months as it would be unconscionable and inequitable for it to do””. [17] The Defendant in the present case, by making partial payments, has similarly acknowledged his liability. Accordingly, it is my considered view that the Defendant’s repeated admissions and partial payments substantiate the Plaintiff’s claim that he remains liable for the outstanding sums. [18] The Defendant, in his defence, raised several arguments to contest his liability, the most prominent being late delivery by the Plaintiff. The Defendant claimed that the Products were not delivered within the six-month period stipulated in the purchase orders. [19] The Plaintiff contends, and I accept, that the contracts did not specify a fixed delivery period and that delivery was contingent upon obtaining the necessary government permits. This condition was explicitly acknowledged by the Defendant. [20] Even if the six-month delivery period had been validly incorporated into the contracts, the Defendant expressly waived this stipulation in his letter dated 21.6.2018, where he confirmed that he could not take delivery at the designated time and requested that the Plaintiff store the Products for a later delivery date. The Defendant further accepted the transfer of risks for accidental loss or damage and reaffirmed his obligation to pay the full purchase price. [21] Reference was made to the case of Sharikat Eastern Plastics Industry v Sharikat Lam Seng Trading [1972] 1 MLJ 21, where the High Court held that a party who indulges in further negotiations after a stipulated time for performance has passed effectively waives the time stipulation. Once the stipulated time is waived, the obligation becomes to perform within a reasonable time. [22] Based on the factual matrix of the case, this court is of the considered view that the Defendant’s contention regarding late delivery is without merit. The delivery period was contingent on the receipt of government permits, and any potential delay was explicitly waived by the Defendant in writing. As such, the Defendant cannot now rely on this as a defence to his failure to make payment. [23] During the trial, the Defendant attempted to argue that his liabilities under the contract had been transferred to a third party, Empayar Paradigma, in 2019. This contention was raised during cross-examination but was not pleaded in the Defendant’s Statement of Defence. [24] It is well-established that a party is bound by its pleadings, and any attempt to introduce unpleaded issues constitutes unfairness to the opposing party. In Giga Engineering & Construction Sdn Bhd v Yip Chee Seng & Sons Sdn Bhd [2015] 6 MLJ 449, the Federal Court reiterated that a party cannot introduce issues not raised in pleadings as follows:- “[42] Now, it is trite law that the plaintiff is bound by its own pleadings (see R Rama Chandran v The Industrial Court of Malaysia & Anor [1997] 1 MLJ 145; Anjalal Anmal & Anor v Abdul Kareem [1969] 1 MLJ 22; Gimstern Corporation (M) Sdn Bhd & Anor v Global Insurance Co Sdn Bhd [1987] MLJ 302 (SC); Joo Chin Kia v Loh Seng Tek [1987]1 CLJ 194; KEP Mohamed Ali v KEP Mohamad Ismail [1981] 2 MLJ 10 (FC)), The plaintiff is not permitted to improve its pleading in any other manner other than by way of an application to amend. Otherwise it would be unfair and prejudicial to the defendants if the plaintiff could now be allowed to raise an issue that was not within the contemplation of the parties in the first place (see Esso Petroleum Co Ltd v South Port Corp [1956] AC 218, Playing Cards (M) Sdn Bhd V China Mutual Navigation Co Ltd [1980] 2 MLJ 182 (FC)).” [25] The Defendant is bound by his pleadings, and the introduction of new facts or defenses during trial is not permissible unless appropriately pleaded and substantiated. The involvement of Empayar Paradigma was never raised in the Defendant’s pleadings and thus cannot be considered in this case. [26] Further, the burden of proof lies on the party asserting the existence of a particular fact. Under Section 103 of the Evidence Act 1950, the burden of proof as to any particular fact lies on the party who wishes the court to believe in its existence. [27] Even if the argument of transfer of liability was properly pleaded, the Defendant failed to produce any contemporaneous documents or oral evidence to support this contention. [28] The Defendant had in fact admitted during cross-examination that there were no documents in the Bundle of Documents pertaining to Empayar Paradigma, nor were any physically produced in court. [29] The Defendant’s assertion that liability was transferred to Empayar Paradigma is entirely unsubstantiated and constitutes an afterthought. There is no evidence to support this claim, and the Defendant failed to meet the burden of proof required under the law. As such, this argument is dismissed. [30] The Defendant also alleged that he had not made payment to the Plaintiff because he had not yet received money from a third-party company at the shipyard. This claim was raised without any supporting evidence and contradicted by the Plaintiff’s correspondence with one Dato Asraf Destini, who confirmed that payment had already been made to the Defendant in 2019. [31] The Defendant’s oral testimony is directly contradicted by documentary evidence, specifically the email correspondence between the Plaintiff and Dato Asraf. The Defendant did not produce any evidence to substantiate his claim that payment was not received. [32] In Tindok Besar Estate Sdn Bhd v Tinjar Co [1979] 2 MLJ 229, the Federal Court emphasized the importance of contemporaneous documentary evidence in determining the veracity of a witness's testimony. When oral evidence contradicts contemporaneous documents, the court is more likely to rely on the latter. [33] The Defendant’s claim that he had not received payment from a third party is unsubstantiated and contradicted by contemporaneous documentary evidence. The court rejects this defense. [34] Based on the facts presented and the legal principles applicable to this case, the court finds that the Defendant had acted in breach of the Contracts by failing to pay the outstanding sums under the unpaid invoices. The Defendant’s consistent acknowledgments of debt and partial payments unequivocally demonstrate his liability. [35] Accordingly, the court orders that the Defendant pay the outstanding amount under the unpaid invoices to the Plaintiff, along with interest and costs. The Plaintiff is entitled to judgment in its favour for the sum claimed, and any applicable interest from the date of the breach until full payment is made. DAMAGES [36] The Plaintiff has claimed that, in addition to the outstanding sums under the unpaid invoices, the Defendant is also liable to pay interest on these amounts as per German law. Sections 286(3) and 288(2) of the German Civil Code (Bürgerliches Gesetzbuch, BGB) provide that a debtor is considered in default if they fail to perform within 30 days after the due date and receipt of an invoice or equivalent statement of payment. In such cases, the debtor is liable to pay an interest of nine (9) percentage points above the basic rate of interest from the date the payment became due until the payment is made. [37] As per the testimony of the expert witness, Dr. Dieter Hettenbach, the applicable rates of interest under German law during the relevant period are as follows:

1st July 2018 – 31st December 2022: The basic rate of interest was -0.88 percentage points, making the applicable interest rate 8.12 percentage points.

(ii) 1st January 2023 – 30th June 2023: The basic rate of interest increased to 1.62 percentage points, making the applicable interest rate 10.62 percentage points.

(iii) 1st July 2023 onwards: The basic rate of interest further increased to 3.12 percentage points, making the applicable interest rate 12.12 percentage points. These interest rates apply to the outstanding sums from the respective due dates of each invoice until full payment is made. [38] The Plaintiff has claimed the following amounts in respect of the unpaid invoices and accrued interest:

The outstanding amount for the total sum of 753,473.00 EUR for the unpaid invoices to be paid by the Defendant;

(ii) Accrued Interest for Invoice No. 90135635:

Accrued interest of 167,300.00 EUR (250,300.00 EUR minus partial payments of 83,000.00 EUR) from 29th July 2018 to the date of judgment.

Accrued interest of 2,253.58 EUR on the sum of 10,000.00 EUR (late partial payment) from 29th July 2018 to 7th May 2021.

Accrued interest of 2,558.37 EUR on the sum of 10,000.00 EUR (late partial payment) from 29th July 2018 to 21st June 2021.

(iii) Accrued Interest for Invoice 90137536: Accrued interest on the sum of 103,866.00 EUR from 28th October 2018 to the date of judgment.

(iv) Accrued Interest for Invoice 90137538: Accrued interest on the sum of 298,464.00 EUR from 28th October 2018 to the date of judgment.

Accrued Interest for Invoice 90157282: Accrued interest on the sum of 69,000.00 EUR from 26th May 2021 to the date of judgment.

(vi) Accrued Interest for Invoice 90157283: Accrued interest on the sum of 114,843.00 EUR from 26th May 2021 to the date of judgment. [39] Upon reviewing the claims and submissions, I find that while the Plaintiff is entitled to a judgment sum for the Outstanding Amount of EUR 753,473.00, I do not find it appropriate to award accrued interest as claimed. Instead, I award interest at the rate of 5% per annum on the judgment sum from the date of filing this action until the full settlement of the amount owed. CONCLUSION [40] For the reasons set out above, I find that the Defendant has failed to discharge his obligations under the Contracts. The Plaintiff is entitled to the outstanding sum of EUR 753,473.00. I further order that interest be awarded at the rate of 5% from the date of filing until full settlement of the judgment sum. The Defendant is also to bear the costs of RM10,000.00 for these proceedings. Dated: 07.10.2024 Pihak-pihak: Tetuan Hazrul Fisoll bagi pihak Perayu Peguamcara & Peguambela No. B205, Jalan PJU 10/2A, PJU 10 Damansara Damai 47000 Sungai Buloh Selangor Tel:

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