Titimas Shipping & Trading Sdn Bhd v 1. ) Eustacia Solutions (BA-22NCvC-285-07/2022)

Eustacia Solutions 2. Fong Yee Ling 3. Wong Kai Kang …Defendants GROUNDS OF JUDGMENT Introduction [1] Plaintiff filed an application for summary judgment under Order 14 of the Rules of Court 2012 (the ROC) as in Enclosure 14, and the Defendants applied to strike out Plaintiff's claim under Order 18 Rule 19 of the ROC via Enclosure 20. [2] Both applications were heard together. The Order 14 application was allowed, and the Defendants' application under Order 18 was consequently dismissed, with a cost of RM3000 for each application to the Plaintiff. [3] The Defendants have now appealed to the Court of Appeal. My reasons are below. 15/07/2024 16:07:35 BA-22NCvC-285-07/2022 Kand. 47 Factual Background [4] Plaintiff and Defendants entered into a Contract of Agreement on 20.4.2021 (the contract) to perform 12 voyages of shipments for a period of 12 months to carry 50,000 mt more or less in owner's option or up to the vessel capacity of river sand in bulk. The first voyage was, to begin with the laycan date (which stands for "Laydays Commence and Cancelling date" - It refers to a specific or agreed period for a vessel's arrival) on 27.4.2021 to 15.5.2021. [5] The 1st Defendant issued an invoice on 22.4.2021, and Plaintiff paid 30% of the ocean freight amounting to USD153,750.00 (the equivalent of RM631,343.62) to the 1st Defendant on 4.5.2021 and 6.5.2021 (the initial payment) via two banking transactions (see exhibits YKY-3). [6]

The Contract of Agreement and the Fixture Note specifically spelt out that payments would be made upon signing, and Plaintiff had not complied. The invoice was issued on 22.4.2021, and payment was only made on 4.5.2021 and 6.5.2021. If time were of the essence, the Plaintiff themselves had not adhered to the terms of the contract.

Plaintiff was to provide a Cargo Declaration Certificate, TML Certificate, and MSDS sheet, which they did not provide upon laycan fixing. All the required documents were never given by the Plaintiff to the Defendants.

Plaintiff's request for a refund goes against Clause 14 of the contract, which states that freight deposits are not refundable if Plaintiff were to postpone or cancel the shipment.

The material to be shipped is for non-essential items, which were sand used in the construction industry and are in no way detrimental or essential. Considering that all construction projects in China and Hong Kong also came to a halt during the pandemic, this negates the Plaintiff's claim against the Defendants.

Any dispute arising should be referred to arbitration, and the English Law shall apply.

Parties are bound by the terms of the contract.

All the above are triable issues. Order 14 Rule 1 of the ROC [12] The law on summary judgment is trite. It is only in plain and obvious cases that recourse should be given to the summary process under Order 14 Rule 1. It should only be made if the court thinks it is a plain case and ought not to go to trial (refer to Esso Standard Malaysia v. Southern Cross Airways (M) Bhd [1972] CLJU 31 and National Company for Foreign Trade v. Kayu Raya Sdn Bhd [1984] 1 CLJ Rep 283). [13] However, the Defendants should not be shut out from defending a claim unless it is apparent they have no case in the action. A complete defence need not be shown (see Alloy Automotive Sdn Bhd v. Perusahaan Ironfield Sdn Bhd [1986] CLJ Rep 45). The defence setup need only show that there is a triable issue (Bank Negara Malaysia v. Mohd Ismail & Ors [1992] 1 CLJ 627). [14] Merely raising an issue does not mean that the issue is triable. The Federal Court in Voo Min En & Ors Leong Chung Fatt [1982] CLJU 47 held that ".. the pertinent principle being one where it is not enough for the defendant "to raise an issue or any issue". The Defendant must instead raise such issue as would require a trial in order to determine it." Order 18 Rule 19 of the ROC [15] There is also no necessity to reiterate or reprise the trite principle of law on striking out of an action under O18 R19 as it was well established by clear decisions of the Federal Court in Bandar Builders Sdn Bhd v United Malayan Banking Corporation Bhd (1993) 4 CLJ 7 on the test for striking out applications. [16] The Court of Appeal, in Sivarasa Rasiah & Ors v. Che Hamzah Che Ismail & Ors [2012] 1 CLJ 75, adopted the well-settled principle of striking out in the following passage: "A striking out order should not be made summarily by the court if there is issue of law that requires lengthy argument and mature consideration. It should also not be made if there is issue of fact that is capable of resolution only after taking viva voce evidence during trial (see: Lai Yoke Ngan & Anor v. Chin Teck Kwee & Anor [1997] 3 CLJ 305; [1997] 2 MLJ 565 (FC))." [17] The primary task of this court is to determine whether the issues arising from the facts canvased fall within the limbs of Rule 19(1). Findings and Analysis [18] An obligation binds parties to a contract, and they must either perform or offer to perform their respective promises unless the performance is dispensed with or excused under the law – see 'The Commercial Law of Malaysia' by Beaxrix Vohrah and Wu Min Aun. [19] The general rule under section 40 of the Contract Act 1950 (the CA) is that the contract ends if the party refuses to perform its promises or has prevented itself from performing them unless it has indicated by word or conduct that it consents to the continuance of the contract. "Section 40 of the Contract Act 1950: When a party to a contract has refused to perform, or disabled himself from performing his promises in its entirety, the promise may put an end to the contract, unless he has signified, by word or conduct, his acquiescence in its continuance." [20] Due to Defendant's failure to ensure the first voyage within the laycan date, Plaintiff claims that the contract was breached and the Defendants were unable to fulfil its promises; therefore, Plaintiff is entitled to terminate the contract or treat it as void. [21] It was argued that the Defendant's refusal to perform its part of the contract constituted a fundamental breach of the contract. [22] In the case of Damansara Realty Bhd v Bangsar Hill Holdings Sdn Bhd (2011) 6 MLJ, it was held that in commercial contracts, it is a prima facie acceptance that time would be of the essence. It was also stated in Damansara Realty that even where parties to a contract do not intend time of the essence, the promisor is still obliged to perform his obligation within a reasonable time (see paragraph 33 of the judgment). [23] I find that the laycan date was set, deposits were paid, and Plaintiff explained that the shipping industry would not be affected by the pandemic to the Defendants. It would be unreasonable for the Defendants to simply accept the excuse/reason given by their principal (owner of the vessel) at the expense of the Plaintiff's commercial detriment. [24] I agree with the Plaintiff's contention that there was a total failure of consideration by the Defendants. After the indication given by Lai Kuan Enterprise that they would not be sending any ship, the Defendants had not named a vessel to take delivery of the cargo to date, even though a considerable sum of money had been paid as a downpayment. [25] Undisputedly, deposits are paid in exchange for the service of delivery of goods by ship. However, the Defendants failed to show readiness to perform their part, and therefore, the Plaintiff is entitled to terminate the Contract of Agreement and the Fixture Note. [26] The Defendants denied any violation of the terms and contended that the owner of the ship merely put on hold the sending of the vessel temporarily due to the global lockdown. The Defendants relied on the terms stipulated in Clauses 14, 15, and 34 of the contract. The terms were reproduced below for ease of reference: "14. 30 pct freight or equivalent USD157,500 to be paid by the charters to the owners nominated bank account upon signing of agreement and balance 70 pct or equivalent at USD367,500 before vessel sailing from loading port and signing/releasing of bills of lading stamped "freight payable as per charter party" and freight deposit is non-refundable if chtrs postpone or cancel the shipment applicable to every single voyage.

CHTRS/SHIPPER to provide cargo declaration certificate to owner. TML certificate and MSDS sheet to be provided upon fixing of laycan for every single voyage and also handed over a copy to the master prior to commencement of loading.

Arbitration in Malaysia and English Law to apply." [27] It is pertinent to note at this juncture that the Defendants had not raised these references to Clauses 14, 15 and 34 in their reply to Plaintiff's letter dated 18.5.2021. It was also not before this court of any response or reply to Plainitff's Letter of Demand dated 10.5.2022 by Defendants raising those issues. [28] It was submitted by the Defendants, referring to section 7 of the CA and the case of Catajaya Sdn Bhd v Shoppoint Snd Bhd (2021) 2 MLRA 46, that since Plaintiff had agreed to both terms in the contract and the Fixture Note, therefore had absolutely and unqualified accepted the terms set up and therefore bound by it. [29] I agree with the Defendants on the above references and believe that Clause 14 clearly states that the deposit would be non-refundable if the charters, that is the Plaintiff, postpone or cancel the shipment. In this case, it was the Defendants who failed to provide a vessel, regardless of whom the Defendants were to liaise with, which was Lai Kuan Enterprise. The contract was between Plaintiff and Defendants; thus, any issues arising or any decision made by Lai Kuan Enterprise should be dealt with between them, Lai Kuan Enterprise and the Defendants. Defendants' obligations are not discharged for the failure of the owner of the ship to provide the service. Therefore, Clause 14 does not hinder Plaintiff from acting on their right to treat the agreement as terminated and request for a refund. I am construing the terms of the agreement as a whole to grasp the true meaning of its clauses and make no attempt to improve any words used (the case of Catajaya Sdn Bhd is referred to). [30] Regarding the issue of whether this matter should be referred to arbitration and for English Law to be applied, I am of the opinion that the Defendants had taken steps in these proceedings which had precluded them from relying on the arbitration clause and deemed to have submitted to the jurisdiction of the High Court (see Sanwell Corp v Trans Resources Corp Sdn Bhd (2002) 2 MLJ 625). No stay application was made pursuant to section 10 of the Arbitration Act 2005, and merely raising the existence of an arbitration clause does not entitle the Defendants to strike out the Plaintiff's claim (see the case of CLLS Power System Sdn Bhd v Sara Timur Sdn Bhd (2015) 11 MLJ 485). [31] The Defendants had highlighted the issue that although the Plaintif had emphasized and insisted on time as the essence of the contract, the Plaintifs themselves had not complied with the requirement of paying the deposit upon signing the agreement as stated in Clause 14 and not providing the required documents upon fixing of laycan (clause 15). [32] I find that this allegation of delay in payment was made with the intention of finding fault with the Plaintiff. I say this because there is nothing before this court to show dissatisfaction or grievance on the part of the Defendants to receive the payments about two weeks later (the invoice was dated 22.4.2021, and payment was made on 4th and 6th of May). They had received not a pittance but an enormous amount of RM1,214,098.62 with no service rendered to the Plaintiff. [33] Similarly, with the allegation of non-production of documents, I agree with the Plaintiff that it was only an afterthought. It was contended that even if the said documents were required to be submitted, they would be produced only when the laycan was fixed and before the loading commenced. However, since there is no vessel named for the voyage, no document can or need to be produced. Again, the Defendants never raised the issue of non-production of documents at all material times, then. [34] Defendants' reliance on Clause 15 does not change the situation faced by both parties. It was not before this court that the Defendants could not arrange a vessel due to Plaintiff's alleged failure to provide those documents. I am not convinced those were valid reasons to justify the Defendants defence against this claim. [35] The Plaintiff had brought to this court's attention the law on the order of performance as provided in section 53 of the CA. The section provides as follows: "Where the order in which reciprocal promises are to be performed is expressly fixed by the contract, they shall be performed in that order; and, where the order is not expressly fixed by the contract, they shall be performed in that order which the nature of the transaction requires." [36] Reference was then made to the case of Silver Concept Sdn Bhd v Brisdale Rasa Development Sdn Bhd (formerly known as Ekspidisi Ria Sdn Bhd) (2005) 4 MLJ 101, and it was asserted that the Defendants are not allowed to unilaterally alter the order of performance of reciprocal promises made between both parties, which I agree. [37] In conclusion, I find no merits in the Defendant's application to strike out the Plaintiff's claim, and I am satisfied, based on the discussion above, that this is a clear and plain case of the Defendant's failure to honour its obligation by naming a vessel to perform the shipment as in the contract and thus constitute a total failure of consideration which entitles the Plaintiff to treat the contract as null and void; hence the return of the deposit paid. I see no necessity for this matter to proceed to trial in order to determine the issues raised. Final order [38] Plaintiff's application in enclosure 14 is hereby allowed with cost, and the Defendants' application in enclosure 20 is dismissed with cost. [39] In accordance with the prayers stated in the Amended Statement of Claim, the said contract and the Fixture Note are declared as terminated and Plaintiff are entitled to the refund of the initial payment and the Fixture Note deposit payment in the sum of USD292,500.00 or the equivalent as the date of judgment with interest of 5% per annum until the date of realisation. Cost of RM3000 for each application to the Plaintiff. Dated this: 12th July 2021 sgd (NOOR HAYATI BINTI HAJI MAT) Judicial Commissioner Shah Alam High Court NVCV 9 Counsels: For the Plaintiff: Leonard Ng Messrs Yew Huoi, How & Associates