Npg Global Pte. Ltd. v Malaysian German Resources Sdn. Bhd. (WA-22NCC-245-06/2022)

This judgment concerns an application by the Defendant to set aside a Judgment in Default obtained by the Plaintiff pursuant to the Defendant's failure to enter an appearance in a suit filed by the Plaintiff for breach of contract. The Plaintiff's claim against the Defendant arises from a contract for the supply and delivery of medical examination gloves which the Defendant failed to fulfil, resulting in loss and damage to the Plaintiff. The Defendant contends that the Judgment in Default should be set aside as the delay in filing the application was unintentional and it has a defence on the merits, namely that the Plaintiff's proper cause of action lies against the Defendant's supplier and not the Defendant itself. The Plaintiff opposes the application on the grounds that it is filed out of time without any satisfactory reasons and the Defendant has not demonstrated a valid defence on the merits or raised any triable issues to warrant the Judgment in Default being set aside.

The Plaintiff, NPG Global Pte Ltd, and the Defendant, Malaysian German Resources Sdn Bhd entered into a contract for the sale and purchase of gloves during the Covid-19 pandemic. The Defendant was to sell and deliver gloves obtained from a supplier named Eco Movers Service to the Plaintiff.

The transactions between the Plaintiff and Defendant were detailed in 3 Purchase Orders dated 7.12.2020 issued by the Plaintiff and 3 Proforma Invoices dated 7.12.2020 issued by the Defendant. The Purchase Orders placed the responsibility for quality and specification of the gloves on the Defendant. The Defendant's Proforma Invoices estimated a delivery date range from end of December 2020 to 10.1.2021.

On 7.12.2020, at the same time the Purchase Orders and Proforma Invoices were issued between the Plaintiff and Defendant, the Defendant issued Order Notes to Eco Movers Service for the preparation of the gloves for the Plaintiff.

On 9.12.2020, the Plaintiff paid a deposit of USD653,940.00, equivalent to 70% of the total Purchase Order amount. The Defendant subsequently paid Eco Movers Service a 70% deposit of the value of the Defendant's Order Notes.

The Plaintiff visited the Eco Movers Service factory on 22.12.2020 to observe the packing of the ordered gloves into boxes. Due to delays by Eco Movers Service in preparing and delivering the gloves to the Plaintiff, the Plaintiff conducted inspections at the Eco Movers Service factory on 14.1.2021 and 15.1.2021.

On 29.3.2021, the Defendant lodged a police report regarding the breach of contract by Eco Movers Service and requested return of the deposit money in order to refund the Plaintiff. However, the Defendant made a partial refund of the deposit to the Plaintiff amounting to USD35,582.00.

On 14.7.2022, the Plaintiff entered Judgment in Default against the Defendant for the following amounts: a) Immediate refund by the Defendant to the Plaintiff of the outstanding deposit balance of RM2,652,755.82 equivalent to USD618,358.00 at the exchange rate of RM4.29 as of 20.4.2022; b) Immediate payment by the Defendant to the Plaintiff of compensation amounting to USD94,420.00 4 equivalent to RM400,771.80 at the exchange rate of RM4.29 as of 20.4.2022, being 10% compensation on the contract value of USD934,200.00; c) General damages for loss of profits and loss of business to be assessed; d) Aggravated and exemplary damages to be assessed; e) Damages for injury to reputation and goodwill to be assessed; f) Interest at 5% per annum on the above amounts payable by the Defendant to the Plaintiff from the date of Judgment until full settlement; and g) Costs of RM1,500.00.

In this application in Enclosure 35, the Defendant seeks the following orders: a) Leave for the Defendant to make this application. b) The setting aside a Judgment in Default dated 14.7.2022, that was entered against the Defendant 5 c) Leave for the Defendant to file a Statement of Defence and Counterclaim (if any) against the Plaintiff's Writ and Statement of Claim. d) Stay of all proceedings and/or enforcement of the Judgment in Default until the full disposal of this application. e) Costs of this application to be borne by the Plaintiff.

The grounds for the application include: a) A reasonable delay by the Defendant in filing this action. b) The Defendant has a meritorious defence against the Plaintiff's claim. c) The application does not prejudice the Plaintiff as the merits of the case have not yet been heard and decided by the court. d) The Defendant was not given the right to be heard.

The key issues for the court to consider in this application are: 6 a) Whether the Defendant's application to set aside the Judgment in Default was filed out of time under Order 42 Rule 13 of the Rules of Court 2012 (“ROC 2012”), and if so, whether the Defendant has provided satisfactory reasons to justify the court exercising its discretion to extend time and hear the application on its merits. b) Whether the Judgment in Default is a regular judgment, and if so, whether the Defendant has shown by affidavit that it has a defence on the merits or that there are issues that merit a full trial on the claim, specifically: i) Whether the Defendant breached its contract with the Plaintiff by failing to supply and deliver the gloves ordered to the Plaintiff's customers; ii) Whether the Defendant can avoid liability to the Plaintiff on the basis that the Plaintiff's cause of action for unjust enrichment lies against Eco Movers Service instead; and iii) Whether the Defendant's partial refund of the deposit to the Plaintiff and proposal of a settlement constitute an admission of the Plaintiff's entire claim.

An application to set aside a judgment in default is governed by Order 42 Rule 13 ROC 2012. It requires such an application to be filed in court and served on the party who has obtained the judgment within 30 days after the receipt of the said judgment. Pursuant to Order 13 Rule 8 of the ROC 2012 the court has the discretionary power to set aside or vary any judgment on such terms as it thinks just.

An irregular default judgment would be set aside as of right irrespective of the merits ex debito justitiae as held by the Federal Court in Tuan Haji Ahmed Abdul Rahman v Arab-Malaysian Finance Bhd [1996] 1 MLJ 30. A default judgment found to be regularly obtained may still be set aside by the court if the applicant can show that he has a defence on the merits. See the judgments of the Federal Court in Hasil Bumi Perumahan Sdn Bhd & Ors v United Malayan Banking Bhd [1994] 1 CLJ 328 and the Court of Appeal in Yap Ke Huat & Ors v Pembangunan Warisan Murni Sejahtera Sdn Bhd & Anor [2008] 4 CLJ 175. For the applicant to be successful there must be an affidavit of merits, that is, an affidavit stating facts showing a defence on the merits as held in Bank Bumiputra (M) Bhd v Majlis Amanah Rakyat [1979] 1 MLJ 23 (Federal Court).

Delay in making such application is a factor to be considered by the court in deciding whether to grant or 8 refuse the application (see Tuan Haji Ahmed Abdul Rahman v Arab-Malaysian Finance Bhd [supra].

Having these legal principles in mind, I now turn to the respective submissions by learned counsels who represented the parties in this case.

The Defendant contends that the delay in filing this application to set aside the Judgment in Default was unintentional. It submits that the court has absolute discretion to set aside a default judgment entered due to the Defendant's failure to comply with the rules in the ROC 2012 and allow the case to be heard on its merits, relying on the case of Lai Yoke Ngan & Anor v Chin Teck Kwee & Anor [1997] 2 MLJ 565 (FC).

The Plaintiff argues that the application was filed out of time. The Judgment in Default was served on the Defendant by registered post on 9.11.2022 and received by the Defendant on 15.11.2022. Under Order 42 Rule 13 ROC 2012, the Defendant had 30 days from receipt of the Judgment to file the application. However, the Defendant only filed this application on 28.12.2022, more than 30 days after receipt of the Judgment. The Plaintiff submits that the Defendant has not provided any satisfactory explanation to 9 support the grounds for the delay to justify invoking the court's discretion to extend time. The Plaintiff relies on the case of Dato' Ahmad Sudin lwn Dato' Ariffin [2014] MLRHU 51 (HC) which held that an applicant must state clear reasons for seeking an extension of time and not merely provide a vague or general reason, failing which the application should be rejected.

Having considered the submissions of both parties, I find that the Defendant's application to set aside the Judgment in Default was indeed filed out of time under Order 42 Rule 13 ROC 2012. The Judgment in Default was served on the Defendant on 9.11.2022 and deemed received by 15.11.2022, as evidenced by the Affidavit of Service filed on 22.11.2022. This application was only filed on 28.12.2022, clearly more than 30 days after the Defendant received the Judgment in Default.

While the court undoubtedly has the discretion to extend time and allow an application filed out of time to be heard if there are good reasons, I do not find the Defendant's reasons satisfactory in the present case. The only reason stated in the Defendant's application is that there was a “reasonable delay” in filing this action. No details were provided as to why the delay occurred and what steps, if any, were taken by the Defendant after receiving the Judgment in Default. I agree with the Plaintiff's reliance on the Dato' Ahmad Sudin case that the applicant must provide 10 clear justification, and not just make a bare or general assertion of reasonable delay.

The Defendant relied on the Court of Appeal's decision in Lai Yoke Ngan to argue that the court has the power to set aside a default judgment obtained by an irregularity in following procedural rules. However, the Federal Court in that same case stated that where a default judgment has been regularly obtained, the Defendant must show by affidavit that it has a defence on the merits in order to succeed. In the present case, there is no irregularity in the Judgment in Default. The procedural requirements for serving the Judgment in Default on the Defendant were complied with. Therefore, the Defendant must show a meritable defence and not simply ask for the Judgment to be set aside due to its own failure to comply with the rules.

Accordingly, I find that the Defendant has not provided any satisfactory reasons to justify this court exercising its discretion to extend the time for the Defendant to file this application. The Defendant was well aware of the Judgment in Default and had ample opportunity to file the application within time but failed to do so. Granting an extension of time without good reasons would be tantamount to rendering the rules on time limits nugatory. As such, I hold that the Defendant has not fulfilled this requirement for the court to grant leave to the Defendant to file this application filed out of time with no good reasons shown to warrant an extension 11 of time. On this ground alone the Defendant's application to set aside the Judgment in Default should be dismissed.

For completeness, I will also consider whether the Defendant has shown a defence on the merit.

The Defendant submits that the Judgment in Default should be set aside as the Defendant has a defence on the merits. The Defendant contends that the Plaintiff's cause of action is against Eco Movers Service, not the Defendant, as the Defendant was merely acting as an intermediary between the Plaintiff and Eco Movers Service. The Defendant argues that the Plaintiff was aware that Eco Movers Service was the actual supplier of the gloves and the Plaintiff had even visited Eco Movers Service's factory. Further, the Defendant asserts that it had no knowledge of the Plaintiff's contracts with other companies to supply the gloves. On the unjust enrichment point, the Defendant relies on the cases of Tanjung Teras Sdn Bhd v Kerajaan Malaysia [2015] 9 CLJ 1002 (CA) and Munisamy Rajagopal v Subashini Karuppiah [2022] 10 CLJ 951 (HC) to argue that the party who was unjustly enriched, i.e. Eco Movers Service, should be liable to the Plaintiff even if there was no privity of contract between them. The Defendant submits that the partial refund was not an admission of the Plaintiff's entire claim.

The Plaintiff argues that there is no issue to be tried shown by the Defendant. The Plaintiff points out that the Defendant has failed to show by affidavit that it has a defence on the merits, as required by Bank Bumiputra Malaysia Bhd v Majlis Amanah Ra'ayat [1979] 1 MLJ 23 (FC). On the breach of contract issue, the Plaintiff relies on the express terms of the Purchase Orders and Proforma Invoices between the parties which placed the responsibility for quality, specification and timely delivery of the gloves on the Defendant. The Plaintiff contends that Sections 71 and 74 of the Contracts Act 1950 entitles it to claim compensation from the Defendant for the breach and failure to deliver the gloves. Relying on the case of Arubaito Mukaya (M) Sdn Bhd v Wee Kian Hong & Anor [2017] MLRHU 1723 (HC), the Plaintiff submits that the Defendant has failed to show a prima facie defence or triable issue to warrant setting aside the Judgment in Default. On privity of contract, the Plaintiff cites the case of Sia Her Yam Realty Sdn Bhd v Strata Century Sdn Bhd [2021] MLRHU 511 (HC) and argues that the Defendant's attempt to shift liability to Eco Movers Service should be rejected as there was no contract between the Plaintiff and Eco Movers Service. Finally, the Plaintiff says the Defendant's letter dated 11.2.2021 seeking more time to refund the deposit and the subsequent partial refund are clear admissions of its breach and liability for the Plaintiff's claim.

Having perused the cause papers and considered the submissions of both parties, I find that the Judgment in Default is a regular judgment as the Defendant has not disputed the service of the Writ and Statement of Claim on it on 8.6.2022 and the Plaintiff has complied with the procedural requirements for entering default judgment. The Defendant also does not give any reason as to why the Judgment in Default may be irregular, Therefore, the key issue is whether the Defendant has shown by affidavit that it has a defence on the merits or triable issues.

I am of the considered view that the Defendant has failed to show that it has a bona fide defence or triable issues to warrant this court setting aside the Judgment in Default. It is clear from the contemporaneous documents, particularly the Purchase Orders dated 7.12.2020 issued by the Plaintiff to the Defendant and corresponding Proforma Invoices of the same date issued by the Defendant, that the Defendant had agreed to supply and deliver the gloves ordered by the Plaintiff. The terms expressly made the Defendant responsible for the product quality, specifications, quantities, packing and timely delivery of the gloves to the Plaintiff's customer Ammex Corporation in the USA. The Defendant's knowledge that the gloves were meant for the Plaintiff's end customers is further evidenced by the 3 Purchase Orders dated 7.12.2020 issued by the Defendant to Eco Movers Service containing specific delivery instructions for the Plaintiff's customer.

I do not accept the Defendant's argument that it can avoid liability by claiming that the Plaintiff's cause of action is 14 against Eco Movers Service. The Plaintiff had contracted with the Defendant, not Eco Movers Service. There was no privity of contract between the Plaintiff and Eco Movers Service. The Plaintiff's supposed knowledge that Eco Movers Service was the actual manufacturer of the gloves does not change the fact that the Plaintiff's contract was with the Defendant. The cases of Tanjung Teras and Munisamy Rajagopal cited by the Defendant are distinguishable as they relate to unjust enrichment claims under Section 71 of the Contracts Act and do not apply where there is an express contract between the parties, as in the present case.

That the Plaintiff's claim against the Defendant is firmly grounded in contract can be seen from Sections 71 and 74 of the Contracts Act 1950. Section 71 provides that where a person lawfully does anything for another person or delivers anything to him, not intending to do so gratuitously, the latter must make compensation to the former for the thing done or delivered. Here, the Plaintiff had paid 70% of the purchase price amounting to USD653,940.00 to the Defendant. Section 74 entitles a party to a breach of contract to receive compensation for any loss or damage caused by the breach. The failure of the Defendant to deliver the gloves to the Plaintiff in breach of the contract has clearly caused loss and damage to the Plaintiff.

I also find that the Defendant's conduct in seeking additional time to refund the Plaintiff's deposit via its letter dated

11.2.2021 and subsequently making a partial refund of USD35,582.00 amounts to an acknowledgment of its breach of contract and liability to the Plaintiff, at least to the extent of the amount claimed as refund of the deposit. The Defendant's argument that this is not an admission of the Plaintiff's entire claim is unmeritorious as the Plaintiff is entitled in law to claim compensation and damages over and above the refund of deposit amount for the Defendant's breach of contract. [30] For the reasons above, I find that the Defendant has failed to demonstrate a defence on the merits or raise any triable issues requiring the Judgment in Default to be set aside. The Defendant is essentially attempting to evade its contractual liability to the Plaintiff by pinning the blame on Eco Movers Service, a party which the Plaintiff had no contract with. Even if Eco Movers Service had failed to supply the gloves to the Defendant, it does not absolve the Defendant from its contractual obligations to the Plaintiff or preclude the Plaintiff from claiming compensation from the Defendant for the breach. Accordingly, I hold that the Defendant's application to set aside the Judgment in Default is dismissed with costs. Conclusion [31] Considering the totality of the facts and circumstances of the case as disclosed in the affidavit evidence, it was quite clear to me that the service of the Writ, Statement of Claim and Judgment in Default was in order and the Defendants have not provided a good reason in their delay in filing the application to set aside the Judgment in Default. The Defendants also had failed to a show defence on the merits in accordance with the principles established by Bank Bumiputra Malaysia Bhd v Majlis Amanah Rakyat [supra] and Hasil Bumi Perumahan Sdn Bhd & 5 Ors v United Malayan Banking Corp Bhd [supra]. [32] Accordingly, in view of the foregoing reasons, I had no doubt that the Amended Judgment in Default entered by the Plaintiff ought not to be set aside. I thus dismissed the application of the Defendant in Enclosure 35 with costs of RM3,000. 11 March 2024 ATAN MUSTAFFA YUSSOF AHMAD Judge Kuala Lumpur High Court (Commercial Division) Counsel: For the Plaintiff: Regina Daniel (Messrs Regina Daniel & Co) For the Defendant: Hanis Nabila (Messrs. C.P. Ang & Co)