Qq Miracles Sdn. Bhd. v Hong Cheng Seafood Supplies Sdn. Bhd. (AB-22NCC-3-11/2021)

The trial was held on 21.11.2022 – 23.11.2022, 11.3.2023,

9.2023 and 25.10.2023. The Court reserved judgment after hearing submissions of the parties on 23.1.2024. On 7.3.2024, the Court allowed both plaintiff’s claims and dismissed the Defendant’s counterclaim. The Defendant has appealed against this Court’s decision and here are the reasons for the Court’s decision on the same. The parties will be referred to as they were at the High Court where both plaintiffs will be collectively referred to as “the Plaintiffs”. S/N msqNp7msukqbMpLE3PNSSg INTERLOCUTORY APPLICATIONS [4] There were 4 and 3 interlocutory applications filed in Suits No. 2 and No. 1, respectively. They were all filed by the Plaintiffs for summary judgment, striking out of the Defendant’s counterclaim and stay of execution pending appeal to the Court of Appeal after the previous Judicial Commissioner of the Taiping High Court dismissed all the Plaintiffs’ applications. The appeals were subsequently dismissed by the Court of Appeal. The fourth application was for consolidation of both suits which as I stated earlier was allowed by the High Court. [5] During the full trial, the documents referred to by the Court were as follows:

Ikatan Pliding (BOP);

Ikatan Dokumen Defendan (DBOD1); and [6] The witnesses for the Plaintiffs were as follows:

Ng Pei Woon – SP2;

Lim Fu Kwee – SP3. [7] The witnesses for the Defendant were as follows:

Tan Cheong Hoor – SD1;

Khor Chiew Yong – SD2;

Khor Chiew Peng – SD3; dan

Khor Hui Ni – SD4. S/N msqNp7msukqbMpLE3PNSSg FACTS OF THE CASE [8] The Plaintiffs were private companies established in Malaysia having their business address in Masai, Johor. The Defendant was a private company having its registered and business address in Parit Buntar, Perak. The Plaintiffs were suppliers of tiger prawns and the Defendant was one of their customers. The Defendant alleged that the tiger prawns supplied by the Plaintiffs since 2016 were meant for the international market, inter alia, China and Taiwan; that the Plaintiff knew of the destination of the tiger prawns and that the monthly purchase value was about RM1,000,000.00. [9] The Plaintiffs sold the tiger prawns to the Defendant on a 30-days credit terms as agreed to by all parties and they would deliver the tiger prawns to the Defendant’s business address or wherever designated by the Defendant. The Plaintiffs’ Delivery Note stipulated that interest at the rate of 1.5% per month on the outstanding amount would be charged if the Defendant failed to make payment. The Plaintiffs had delivered the tiger prawns to the Defendant and payment received without any disputes until late 2017. The Plaintiffs then started charging interest on all outstanding amount, which the Defendant disputed that it had ever agreed to such term. The Defendant started to question the quality of the tiger prawns supplied by the Plaintiffs and alleged that their overseas customers had imposed stricter conditions and one of it was that they would only accept good quality tiger prawns. [10] The Defendant alleged that the tiger prawns they received from the Plaintiffs from November 2017 until 2018 were of unmerchantable quality. Some of the consigment received were partly spoilt such as “rosak, S/N msqNp7msukqbMpLE3PNSSg lembik, kepala udang longgar, berwarna biru, tidak mengikut saiz dan tidak mengikut spesifikasi yang diminta”. The percentage of spoilt tiger prawns were very high and the Defendants received complaints from their Taiwan customers and they demanded a copy of the “prawn analysis certificate” (sijil analisa udang) from the Defendant. The Defendant pursued the matter with the Plaintiffs and other local suppliers. The Defendant alleged that its other suppliers had complied with its request but did not manage to obtain the certificate from the Plaintiffs until 2019. By then the parties had stopped transacting with each other. [11] In this “curious” case of the blue tiger prawns (which will be elaborated later), the Defendant pleaded that they were of unmerchantable quality because the Plaintiffs were supposed to supply black tiger prawns for the Defendant’s overseas customers. The black tiger prawns would turn a reddish tinge when cooked. The shell of blue tiger prawns would turn orangey when cooked, which the Defendant’s Taiwanese customers would reject as not meeting their specification. Therefore, when the Taiwanese customers cancelled all their orders, the Defendant allegedly suffered major losses due to the cancellation. At the peak of the orders, the Defendant had nearly 40 tonnes of tiger prawns which it could not sell to the overseas market and therefore they had to store the tiger prawns in cold-rooms. When the Defendant were unable to store all the tiger prawns in its own facilities, it had to rent other companies’ cold-rooms at a cost of RM500,000.00 for the period of 2 years from 2018 to 2019 because the Plaintiffs refused to take back all their tiger prawns from the Defendant. [12] To mitigate its losses, the Defendant after about 2 years finally sold the remaining prawns to the domestic market at a 50% loss (compared S/N msqNp7msukqbMpLE3PNSSg with the price that it would be able to command from overseas market). The Defendant claimed that it had to expend extra costs to employ workers to de-shell the prawns in order to sell them to the domestic market. It claimed that it had suffered future losses too due to loss of reputation since the overseas buyers would not buy from them anymore; it was as if the Defendant had cheated its customers by supplying tiger prawns which did not meet the specifications agreed with the customers earlier. Hence, the Defendant counterclaimed for the abovementioned damages. [13] In regard to the Plaintiffs’ monetary claims against the Defendant, the Plaintiffs contended that they were not paid from November 2017. Then on 8.8.2018, to settle the outstanding debts, the Defendant gave 3 Public Bank Berhad post-dated cheques to the Plaintiff (QQ Miracles) totalling RM410,923.26 and 4 Public Bank Berhad post-dated cheques to the Plaintiff (QQ Trading) totalling RM734,374.80 as follows: No. Date of cheque Cheque No.

24/3/2019 016627 200,000 2. 28/3/2019 016628 200,000 3. 28/7/2019 016632 10,923-26 Total amount: 410,923-26 No. Date of cheque Cheque No.

24/2/2019 016626 200,000-00 2. 26/5/2019 016629 200,000-00 S/N msqNp7msukqbMpLE3PNSSg

23/6/2019 016630 200,000-00 4. 28/7/2019 016631 134,374-80 Total amount: 734,374-80 [14] Nevertheless, when the Plaintiffs tried to cash the Cheque Nos. 016626 and 016627, both cheques bounced because of “Payment stopped / Payment cancelled”. Therefore, the Plaintiffs instructed their solicitor to send a Notice of Demand to the Defendant in March 2019. Suddenly the Defendant responded that there were quality issues with the tiger prawns supplied by the Plaintiffs whereas this was never brought up to the Plaintiffs in the past. Pursuant thereto, the Plaintiffs filed the claims against the same Defendant and demanded the agreed interest of 1.5% per month on the outstanding balance. ISSUES TO BE TRIED [15] Both parties filed the Issues to be Tried separately (Encls. 60 and 64) wherein each contained 8 and 4 issues. They obviously overlap in some parts. Nevertheless, the Court may summarise the issues into the following: i. Whether the Defendant was liable to pay the total amount of RM1,584,221.06 to the Plaintiffs (QQ Trading Sdn. Bhd. and QQ Miracles Sdn. Bhd.) and interest at the rate of 1.5% per month; and ii. Whether the Plaintiffs were liable to pay the Defendant for general damages, aggravated and exmplary damages. S/N msqNp7msukqbMpLE3PNSSg EVALUATION AND FINDINGS OF THE COURT i. Whether the Defendant was liable to pay the total amount of RM1,584,221.06 to the Plaintiffs (QQ Trading Sdn. Bhd. and QQ Miracles Sdn. Bhd.) and interest at the rate of 1.5% per month [16] To start off, the standard of proof rests on the Plaintiffs to prove on a balance of probabilities the debt owed by the Defendant: Tey Moon Kim v Hon Siew Mei [2013] 7 MLJ 528; Sms Realty Sdn Bhd v Azure Property Holdings Sdn Bhd [2019] 3 MLRH 389. It was the Defendant’s contention that the Plaintiffs’ tiger prawns did not meet the specifications for sale in overseas market and did not comply with international standards, international safety and food safety standards, were imperfect because the prawns were “rosak, lembik, kepala udang longgar, berwarna biru, tidak mengikut saiz dan tidak mengikut spesifikasi yang diminta”. The issue of the bluish-tinged prawns became a main point of the Defendant’s defence during the trial and that it was not liable to pay the Plaintiffs for the alleged outstanding amount claimed. [17] SD1 was called to testify about the quality of the Plaintiffs’ tiger prawns. This witness claimed he was a business partner of the Defendant where he would buy prawns from the company for overseas market. He also brought representatives of the Defendant to the US to for marketing purposes. He had 30 years’ of experience dealing with supplying of seafood (including prawns) to overseas customers. He gave evidence that from his experience, if the tiger prawns’ shell were blue or had a bluish-tinge, that was because of farming problems and not due to the processing factory problems. The reasons for the tiger prawns having such bluish-tinge, which the shell of good quality tiger prawns should be black in colour, could be due to 3 factors (refer to Notes of Evidence pages 158-159): S/N msqNp7msukqbMpLE3PNSSg i. unhealthy broodstock (benih udang tidak sihat); ii. quality of food or plankton; and iii. water and environment. [18] According to SD1, all these factors could be verified by looking at the certificate issued by the Fisheries Department. The certificate is called MyGap, which is issued under Skim Penternakan Ladang Aquaculture Malaysia more than 10 years ago. The tiger prawns supplied by the Plaintiffs were alleged to be aquaculture produce rather than actual produce from the sea. This became a point of contention by the Defendant who was a middleman dealing with seafood, which in my view was not an important point in this case. This was because the Defendant knew the nature of the tiger prawns (i.e. aquaculture products) supplied by the Plaintiffs when they had been transacting with the Plaintiffs since 2016. [19] Coming back to the bluish tiger prawns, the Defendant exhibited photographs of the crustaceans alleging them to be from the Plaintiffs’ farms (refer to page 318 of CBOD). The photograph was compared with the one in page 319 of CBOD which showed black tiger prawns from another supplier. However the Plaintiffs disputed this photograph because it was submitted in the Plaintiffs’ written submissions: S/N msqNp7msukqbMpLE3PNSSg [20] The photographs were supported by Exhibit D66 which was a s.90A certificate by SD3 as the photographs were taken using his phone camera. As a preliminary point, I have to agree with the Plaintiffs in paragraphs 77- 78 of their submissions. Nevertheless, I will go on to explain why the Court, on a balance of probabilities, decided that the bluish-tinged tiger prawns issue did not sway the Court in the Defendant’s favour. SD4 also gave her opinion why the tiger prawns were bluish in colour (refer to paragraphs 21-22 of her witness statement PSSD4) but the Court did not accept her evidence as an expert’s evidence because at 27-years’ old, I believed she was not an expert on prawns so to speak; she was an Accountant and doubled-up as clerk and quality control for the Defendant. There was no expert report tendered by the Defendant to support their contention that the bluish tiger prawns were unfit for consumption. I will go further on this point of fitness for consumption later in this Grounds of Judgment. [21] The evidence from SP1 in re-examination was: So, bolehkah saya bercakap tak ada masalah pun, tak ada isu kerosakan udang, tak ada masalah kerosakan udang berlaku. Ada sikit bila waktu hantar, bila waktu hantar dia terus beritahu ada berapa percent yang tak boleh pakai. (Refer to the Notes of Evidence at page 66) [22] Despite the Defendant’s requests for the relevant certificates from the Plaintiffs, it did not receive any. Instead the Defendant exhibited S/N msqNp7msukqbMpLE3PNSSg samples of certificates from another supplier as per pages 315-317 of CBOD, which in my view too was not really relevant here. Morever, SP2 denied that they were asked for the certificate(s) by the Defendant. In the cross-examination of SP2, the witness was asked: Adakah udang-udang yang dibekalkan oleh kamu kepada defendan mempunyai sijil analisa seumpamanya? Defendan pun tak ada minta kita nak buat ini test. Tak, kita tanya ada ke tak ada? Tidak. (Refer to page 94 of the Notes of Evidence). [23] The Defendant referred to the case of Syarikat Abdul Ghaffar Trading Sdn Bhd v. Societe Agro-Export Sahel-Sages [2022] 1 LNS 331 where the High Court decided: “Test of merchantable quality for dates. [18] In our present case the nature of the Plaintiff’s cause of action is that parts of the quantities of dried dates supplied by the Defendant were not of merchantable quality, thereby causing losses and damages to the Plaintiff. ... [20] This Court accepts the Plaintiff’s submission that the dried dates supplied by the Defendant to the Plaintiff are subject to the implied term as to the merchantable quality. [21] The test of unmerchantability of goods is that the goods are unmerchantable if they are of no use for any purpose for which such goods would normally be used and hence are not saleable under that description.”. [24] It was submitted that the Plaintiffs knew that the black tiger prawns were required for the Defendant’s overseas market. Therefore, it questioned why was it that since November 2017 until 2018, a large part of the tiger prawns supplied were of unmerchantable quality? The evidence of SP1 was relevant here: S/N msqNp7msukqbMpLE3PNSSg “Peg.Def : Setuju Saya katakan selepas udang harimau yang dieksport ke luar negara oleh defendan tidak mencapai spec antarabangsa pihak defendan telah memaklumkan perkara ini kepada kamu setuju. : Ulang Peg.Def : Setuju atau tidak defendan Hong Cheng ada bagitahu dekat kamu udang kamu tidak elok. : Bila? Peg.Def : Untuk udang 2017 September, November 2017 November punya udang sudah tidak elok. SP 1 : Tak ada, tak ada Yang Arif. Peg.Def : Defendan juga ada hubungi kamu untuk ambil balik ini 19 udang udang yang rosak. : Bila. Peg.Def : Untuk udang 2017 bulan 11 punya, itu semua yang last punya. SP 1 : Bila dia suruh Saya ambil balik. Bila Saya sue suruh lawyer kejar itu duit dia baru suruh Saya ambil sebelum dia suruh Saya ambil dia beritahu udang itu tak elok. Semua udang tak elok ke, semua ke, selepas Saya bawa isu ini suruh lawyer kejar duit. Sebelum itu ada dia beritahu Saya udang tak ada international market ada 2 masalah.” (Refer to page 45 of the Notes of Evidence) “Peg.Ptf : Siapakah pelanggan Hong Cheng Seafood iaitu defendan setahu anda? : Hong Cheng punya pelanggan? Peg.Ptf : Yes customer. : Saya tak tahu. Peg.Ptf : You tak tahu? : Mereka tak pernah beritahu.” (Refer to page 46 of the Notes of evidence) [25] From the evidence above which were cross-examination of SP1, it was clear that this witness denied that the Plaintiffs were ever told about who were the customers of the Defendant. Further, he told the Court that S/N msqNp7msukqbMpLE3PNSSg it was only after the legal proceedings were commenced by the Plaintiffs in 2019 that the Defendant requested them to collect the prawns and that was about 18 months after the dispute arose (refer to Exhibit D69 at page 230-231 of CBOD). It was not disputed that the Defendant had other local suppliers to supply them with tiger prawns. Therefore, the Plaintiffs disputed that the supposedly unmerchantable quality prawns came from their farms. This Court agreed with the Plaintiffs on this issue as it was a very belated attempt by the Defendant to get the prawns “...must be completely delivered out from our premises.”. There was no evidence at all to show that the Defendant had requested the Plaintiffs to collect their tiger prawns from the Defendant’s premises during the period of November 2017 until April 2019. [26] Section 16(1)(a) and (b) of the Sale of Goods Act 1957 (SOGA) provides as follows:

Subject to this Act and of any other law for the time being in force, there is no implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale, except as follows:

Where the buyer, expressly or by implication makes known to the seller the particular purpose for which the goods are required, so as to show that the buyer relies on the seller’s skill or judgment, and the goods are of a description which it is in the course of the seller’s business to supply (whether he is the manufacturer or producer or not) there is an implied condition that the goods shall be reasonably fit for such purpose: Provided that, in the case of a contract for the sale of a specified article under its patent or other trade name there is no implied condition as to its fitness for any particular purpose.

Where goods are bought by description from a seller who deals in goods of that description (whether he is the manufacturer or producer or not) there is an implied condition that the goods shall be of merchantable quality: S/N msqNp7msukqbMpLE3PNSSg Provided that if the buyer has examined the goods, there shall be no implied condition as regards defects which such examination ought to have revealed. [27] The Defendant submitted that the case of Syarikat Abdul Ghaffar was applicable in the present case as the facts were similar. Nevertheless, there was documentary evidence that showed the last delivery of the tiger prawns were made on 8.12.2017 as per Exhibit P20 at page 73 of CBOD. SD4 was cross-examined that quality control checking would be done before the Defendant accepted the consignment sent by the Plaintiffs. The evidence from SP3 (which was not disputed) was that when a consignment was delivered to the Defendant’s premises (or as directed by the Defendant), the Defendant’s employees would carry out the quality checks and record the percebtage of prawns rejected, the grades of the tiger prawns and the nett weight of the acceptable tiger prawns. The Plaintiffs would be informed earliest on the following day of the results and purchase price stated by the Defendant. SD4 was cross-examined as follows: “Peg Ptf : Yes ok, Saya cadangkan dekat sini proses menyediakan purchase order ini mesti dimulakan dengan penyediaan borang di muka surat 294 betul? SD 4 : Ya betul. Peg Ptf : Sekiranya you tak buat pemeriksaan, Hong Cheng tak akan buat purchase order. SD 4 : Ya betul.” [28] SD4’s evidence confirmed that a purchase order would only be prepared if the Defendant had conducted a quality check for each consignment received from the Plaintiffs. Based on the evidence before the Court, the issue that revolved was about quality of the goods and not the safety of the goods and fitness for comsumption. S/N msqNp7msukqbMpLE3PNSSg Nevertheless, the Court noted that the bluish prawns could be sold to the domestic market as can be seen from the evidence of the Defendant, meaning they were fit for consumption (refer to SD4’s witness statement PSSD4 Q26). The Defendant’s main issue during the trial was the unmerchantable quality of the Plaintiffs’ tiger prawns. The Defendant also alleged that the Plaintiffs were aware of the problems with their tiger prawns but pleaded with the Defendant to help them sell off the tiger prawns. The Court found that this allegation remained a bare assertion and was not proved by the Defendant. [29] This Court had perused the documents exhibited by the Plaintiffs and Defendant in the CBOD pertaining to the tiger prawns consignments (for example please refer to Exhibits D89 which were marked collectively, at pages 281 – 314 of CBOD). This is the Court’s tabulation of the reasons and percentage of rejected tiger prawns for ease of reference: Page Date Supplier Remarks/Quality 281 15.11.2017 QQ Trading (Lori pembekal) Total Kg Received – 149 Kgs Quality Inspection - Soft 35.5% - B. Calar 8.5% - K. Tanggal 4.0% - Biru – 10.5% 283 15.11.2017 QQ Trading (Lori pembekal) Total Kg Received – 293 Kgs Quality Inspection - Soft 6.4% - B. Calar 5.0% - Biru 18.8% 286 15.11.2017 QQ Trading (Lori pembekal) Total Kg Received – 2120 Kgs Quality Inspection - Soft 23.5% - B. Calar 5.6% - Biru 10.2% 297 25.11.2017 QQ Miracles Total Kg Received – 1359 Kgs Quality Inspection - Soft 4.8% S/N msqNp7msukqbMpLE3PNSSg (Lori Hong Cheng) - B. Calar 2.6% - K. Tanggal 3.0% - Biru 1.5% 298 25.11.2017 QQ Miracles (Lori Hong Cheng) Total Kg Received – 194 Kgs Quality Inspection - Soft 12.2% - B. Calar 2.7% - Biru 8.1% 299 25.11.2017 QQ Miracles (Lori Hong Cheng) Total Kg Received – 640 Kgs Quality Inspection - Soft 1.0% - B. Calar 4.4% - Biru 50.0% 300 25.11.2017 QQ Miracles (Lori Hong Cheng) Total Kg Received – 2087 Kgs Quality Inspection - Soft 4.9% - B. Calar 2.6% - K. Tanggal 0.6% - Pipi hitam 5.9% - Biru 56.3% 307 5.12.2018 QQ Trading (Lori Pembekal) Total Kg Received – 1300 Kgs Quality Inspection - Soft 15.7% - K. Tanggal 1.3% - Kaki karat 7.2% - Biru 6.3% 308 5.12.2018 QQ Trading (Lori Pembekal) Total Kg Received – 1744 Kgs Quality Inspection - Soft 7.6% - K. Tanggal 0.9% - Kaki karat 6.7% - Biru 7.2% 309 9.12.2018 (catching)

10.12.2018 (arrive) QQ Trading (Lori Pembekal) Total Kg Received – 1047 Kgs Quality Inspection - Soft 3.4% - B. Calar 4.5% - K. Tanggal 11.0% - Biru 7.2% 310 9.12.2018 (catching)

10.12.2018 (arrive) QQ Trading (Lori Pembekal) Total Kg Received – 1594 Kgs Quality Inspection - Soft 4.1% - B. Calar 1.2% - Pipi hitam 4.9% S/N msqNp7msukqbMpLE3PNSSg - Biru 4.2% 311 9.12.2018 (catching)

10.12.2018 (arrive) QQ Trading (Lori Pembekal) Total Kg Received – 530 Kgs Quality Inspection - Soft 3.6% - B. Calar 0.9% - Kaki karat 3.6% - Biru 5.2% [30] From the table above, I found that out of 33 documents on the Incoming Raw Material Inspection Record, only 12 of them recorded that there were blue tiger prawns in the consignment. Out of the 12 documents (pages 281, 283, 286, 297, 298, 299, 300, 307, 308, 309, 310 and 311) the percentage of the blue tiger prawns ranged from 1.5% to 56.3%. Only 2 consigments at pages 299 and 300 recorded 50.0% and 56.3% of blue tiger prawns and 1 consignment at page 283 recorded 18.8%. The other 9 consignments out of the 12 recorded 10% and below blue tiger prawns. Therefore, although the crux of the Defendant’s complaint was the issue of blue tiger prawns, from the exhibits shown and summarised above, I would say only 3 out of the 33 documents showed that there was a large quantity of blue tiger prawns in those consignments. Therefore, the Defendant’s claims that the overseas customers were unhappy with the blue tiger prawns in my view was exaggerated and unsustainable. There were only general assertions about the rejection of blue tiger prawns by the overseas customer(s) but there was no clear evidence on which date consignment sent to Taiwan that was rejected by the customer(s). [31] Moreover, SD4 stated in her witness stataement:

9.S: Sila jelaskan bagaimanakah pesanan pembelian dibuat oleh Defendan kepada syarikat Pembekal Udang Harimau? Kebiasaannya pemilik kolam ternakan udang akan hubungi pihak kami untuk tangkapan udang pada masa dan hari yang ditetapkan. Pihak S/N msqNp7msukqbMpLE3PNSSg kami akan mengarahkan pemandu lori kami untuk mengangkut hasil tangkapan udang tersebut. Walau bagaimanapun disebabkan Pengarah Defendan dan Pengarah Plaintif saling mengenali, Plaintif kebiasaannya akan menghubungi Pengarah Defendan memaklumkan bahawa Plaintif akan datang hantar bekalan Udang Harimau ke syarikat Defendan pada sekian hari tanpa memaklumkan secara khusus berapa tan jumlah berat Udang Harimau. Secara amnya Plaintif akan memaklumkan kepada Defendan secara kasar bekalan akan dihantar lebih kurang 1 lori bersamaan dengan 1 kolam ternakan. Udang Harimau yang akan dihantar oleh Plaintif juga mempunyai saiz udang yang bercampur-campur disebabkan ia daripada kolam ternakan yang berlainan. Kemudian, selepas Pengarah Defendan membuat kira-kira jumlah udang yang diterima, Pesanan Pembelian ini akan diambil gambar oleh saya untuk tindakan saya selanjutnya. Sila jelaskan apakah prosedur operasi standard (SOP) dari awal penerimaan, cara penyimpanan bekalan di kilang Defendan sehingga penghantaran Udang Harimau kepada pihak pembeli? Bekalan Udang Harimau akan dihantar oleh pihak pembekal ke bahagian penerimaan di kilang Defendan. Selepas bekalan Udang Harimau dibawa turun dari lori, Udang Harimau akan dibersihkan, diasingkan mengikut saiz, disusun dan dibungkus untuk disimpan di dalam bilik sejuk beku lebih kurang selama 1 bulan bergantung kepada pesanan pembelian yang diterima daripada pihak pembeli di luar negara. [32] In her answer to Q.9, the witness stated that she would take photographs of the sampling done as proof of what was stated in regard to the quality inspection. But no photographs taken then was exhibited as proof in Court. And in her answer to Q.19, she stated that the tiger prawns would be kept in the coldroom for one month depending on the orders received from its customers. Therefore, it did not make sense to me that the Defendant would keep on receiving the “lower quality” prawns from the Plaintiffs unless they were actualy prepared to take on that risk. The Defendant claimed that it was a big supplier of seafood to the international market and it had a healthy bank balance, denying the claim that it had insufficient funds to pay the Plaintiffs, as shown in its financial statements S/N msqNp7msukqbMpLE3PNSSg (Exhibit D84) and bank account statement (Exhibit D85) exhibited at pages 152-191 and pages 122-127 of CBOD, respectively. To my mind, I can safely conclude that the Defendant was willing to take the risk of continuing its dealings with the Plaintiffs because it was capable to take on such risk due to its strong financial standing, despite the RM22 million loss in the costs of sales for the financial year ending March 2019. Therefore, the Defendant cannot claim that there had been a breach of warranty by the Plaintiffs. The evidential burden is on the Defendant to prove the low quality of the Plaintiffs’ tiger prawns (s.101 and 103 of the Evidence Act 1950), which I found it had not discharged. [33] The fact that the Defendant continued dealing with the Plaintiffs after the first consignment dated 15.11.2017 which was recorded to have defects or low quality prawns, this Court found that the maxim Caveat Emptor or “Buyer beware” is applicable in this case. As of the mid-November 2017, in order to mitigate its losses when the Plaintiffs allegedly did not want to take back the tiger prawns from the Defendant, the company should immediately sell off the prawns to the domestic market and not to accept anymore consignment from the Plaintiffs. However, the Defendant continued to receive supplies from the Plaintiffs until the last recorded consignment on 11.12.2018. Alternatively, the Defendant could have easily sent back the packed prawns to the Plaintiffs using its own transportation (as stated by SD4 about the procedures upon receipt of supplies in Q19 of PSSD4). [34] Coming back to s.16(1)(b) of SOGA on implied condition as to quality or fitness, there is an implied condition that the goods shall be of merchantable quality provided that if the buyer has examined the goods, there shall be no implied condition as regards defects which such S/N msqNp7msukqbMpLE3PNSSg examination ought to have revealed. This Court found that the Defendant could not rely on this exception because it has failed to prove its assertion that the tiger prawns supplied by the Plaintiffs were of unmerchantable quality since SD4 had stated positively that the consignments received would be screened by her and other employees for their quality. In the case of Wee Lian Construction Sdn Bhd v Ingersoll-Jati Malaysia Sdn Bhd [2010] 3 MLJ 425 the Court of Appeal dismissed the appeal of the buyer who received delivery of goods but failed to make payment. Abdul Malik Ishak JCA (as his Lordship then was) held: “The purchase order was signed and accepted by the plaintiff and the caption at the bottom sealed the plaintiff's fate. A person who signs a contractual document is bound by its terms even though he has not read it... ... The plaintiff had been given the opportunity to inspect the machine prior to delivery. Even after the delivery of the machine to the IJM site, the plaintiff had ample time to examine it during the first few days to see whether the machine was fitted with a VL140 drifter and, at the same time, to seek an expert's opinion. Instead of adopting all these measures, the plaintiff accepted the machine...” [Emphasis added] [35] I have also done a bit of research for the meaning of ‘merchantable quality’ since it is not defined in the SOGA. In an Article by Nur Rabiatuladawiah Abdul Rahman entitled “The Rise and Fall of Caveat Emptor in Malaysian Sale of Goods Contract” reported in Journal of Law & Governance Volume (No. 1) 2018: 1-14, the author discussed the salient provisions of SOGA as well as the Consumer Protection Act 1999. It was stated at page 9 therein that in the English case of Cehave NV v Bremer Handelsgesellschaft MBH [1976] QB 44, Lord Denning MR pointed out that among factors to be taken into account in assessing S/N msqNp7msukqbMpLE3PNSSg ‘merchantable quality’ includes the purpose for which goods of that nature are commonly bought, the description applied, the price and any other relevant circumstances. The author had also started her article by commenting on the doctrine of Caveat Emptor. At page 3, the author stated: “The doctrine in other words, gives the buyer a right to investigate whether the goods to be purchased are free from any defect before the actual agreement is completed, so as to protect him from any future risk arising from a defective product. Jowitt's Dictionary of English Law (1977), explains that a purchaser or buyer must be on the alert since he has no right to remain in ignorance of the fact that what he is buying belongs to someone other than the vendor, and that any purchaser who fails to investigate the vendor's title does so at his own risk. The doctrine of caveat emptor however, does not imply any obligation on the seller to point out defects in the goods to be sold. He is, therefore, only under the duty to allow the buyer or purchaser to investigate the goods himself and nothing more (Mohd. Ma'sum Billah, 1998)…”. [Emphasis added] Continuing at page 13, the author stated: “The doctrine of caveat emptor (Let the buyer beware) have been applied in Sale of Goods Act 1957 which was enacted based on the UK Sale of Goods Act 1893. After the amendments have been made to the Sale of Goods Act 1893, the law on the sale of goods in Malaysia still adopt the 1893 Act to which the doctrine of caveat emptor still applied in the contract of sale of goods. However, the doctrine of caveat emptor gradually began to fall when the government [became] aware of the importance in protecting the consumers as the community who is always being manipulated by the supplier and manufacturer in the market world by enacting new legislation known as Consumer Protection Act 1999 in which the provisions provided more protection to the buyer, especially the consumers. However, the consumer’s protection provided by this Act is not absolute protection as there are several provisions that excludes the liability of the supplier and manufacturer in this market world. Therefore, the buyer still has to be aware in purchasing the goods…”. [36] The Court noted that s.33 of the Consumer Protection Act 1999 provides: S/N msqNp7msukqbMpLE3PNSSg Implied guarantee as to fitness for particular purpose 33.

that the goods are reasonably fit for any particular purpose that the consumer makes known, expressly or by implication, to the supplier as the purpose for which the goods are being acquired by the consumer; and

that the goods are reasonably fit for any particular purpose for which the supplier represents that they are or will be fit.

the consumer does not rely on the supplier’s skill or judgment; or

it is unreasonable for the consumer to rely on the supplier’s skill or judgment.

This section shall apply whether or not the purpose is a purpose as to which the goods are commonly supplied. [37] Section 33 of the Consumer Protection Act 1999 does not really take away the “protection for sellers” because this Court opines the way subsection (1) is drafted it places the burden on the consumer to inform the supplier first, expressly or by implication, what is the purpose of the goods being sought by the former. Then the supplier gives a guarantee that the goods supplied are reasonably fit for any particular purpose that the consumer makes known, and that the goods are reasonably fit for any particular purpose for which the supplier represents that they are or will be fit. In any event, it is always prudent for buyers to be aware of the nature and condition of the goods they are purchasing, lest they be blamed in the event the goods do not meet expectations later. [38] In the present case, the fact that the Defendant still kept the frozen prawns in the cold rooms about 18 months after the first alleged complaint S/N msqNp7msukqbMpLE3PNSSg of the low quality of the tiger prawns showed the irrational action of the Defendant in mitigating its losses. Once a consignment has been sent, the risk is transferred to the purchaser as is provided for under s. 23(2) of SOGA as follows:

Sale of unascertained goods and appropriation

Where there is a contract for the sale of unascertained or future goods by description and goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer. Such assent may be express or implied, and may be given either before or after the appropriation is made. Delivery to carrier

Where, in pursuance of the contract, the seller delivers the goods to the buyer or to a carrier or other bailee (whether named by the buyer or not) for the purpose of transmission to the buyer, and does not reserve the right of disposal, he is deemed to have unconditionally appropriated the goods to the contract. [39] From the evidence adduced, the tiger prawns supplied by the Plaintiffs were sent to the Defendant’s premises for the latter to check on the quality, segregate them according to grades (sizes), clean, pack them and frozen and kept in the cold rooms within 1 month or depending when their customers require them. I am of the view that s.23(2) applied in the present case, and it was up to the Defendant to dispose the tiger prawns once they had been received from the Plaintiffs. The next course of action was for the Defendant to make payment upon the terms that they had agreed to. The provision of s.31 SOGA also applied. [40] As stated earlier, this is not an unfit for consumption issue or food safety as raised by the Defendant in its pleadings, about not meeting international standards. SD1 was a Malaysian who was based overseas and his company obtained its supplies of tiger prawns from the Defendant. S/N msqNp7msukqbMpLE3PNSSg He claimed that he felt he too was a victim in this case, apart from the Defendant. This was because their proposed joint-venture to explore the US market had been curtailed because of the CTOS blacklisting. [41] But before I go on to consider the second issue to be decided by this Court, it is necessary to address the CTOS issue as well as the evidence of SD1 above. The complaint was that the Plaintiffs had complained to CTOS about the stopped payment of 2 post-dated cheques by the Defendant. It was the Defendant’s contention that the Plaintiffs lodged a false report to CTOS stating that the latter had “insufficent funds” without verifying the facts with it first. This had allegedly caused reputational losses to the Defendant. SP1 did not deny that he did not check with the Defendant on the status of its bank account balance. He also stated that “Kita lapor supaya dia ada rasa sikit, rasa takut.”. [42] SD1 during cross-examination replied to a question by the Plaintiffs’ counsel: Peg Ptf : Then kenapa sebagai seorang yang munasabah, kenapa you tak ada bagi satu chance lagi kepada Hong Cheng supaya menggantikan udang udang yang lain, kenapa terus cancel sahaja? SD 1 : Saya cancel kerana dia tak ada duit seperti CTOS cakap. Peg Ptf : Again. Yang Arif : Tak faham tak faham apa dia? SD 1 : Saya cancel dia punya order tak mahu kerja sama dengan dia kerana Saya dapat CTOS cakap dia tak ada duit. (Refer to page 177 of the Nota Keterangan) [43] Now, the lodgment of the report with CTOS was some time in 2019