United Overseas Bank (Malaysia) Bhd v Viacor Asia Sdn Bhd (BA-22NCC-92-08/2021)

FLOWCRETE MALAYSIA SDN BHD (No. Pendaftaran: 200101028594 [564352-K] … PIHAK KETIGA PERTAMA

THEN LIAT NYAP (No. K/P: 541206-13-5333) … PIHAK KETIGA KEDUA

Ralf Walter Jooss (No. Pasport Federal Republic of Germany: Cg08r6fpm) … PIHAK KETIGA KETIGA

AROKIASAMY A/L THANGARAJU (No. K/P: 670308-10-6577) … PIHAK KETIGA KEEMPAT S/N jzGdF6I4b0iSZqakT8eavA JUDGMENT Introduction [1] Banks are widely recognized for engaging in various businesses to generate income. Common banking activities include generating interest income through lending and investments, along with foreign exchange trading. [2] The case at hand highlights another significant banking service, “factoring”, which may not be well-known to the general public. In a factoring arrangement, a business sells its accounts receivable, or invoices, to a third party – referred to as a factor – at a discount. This enables the business to receive immediate funds based on their customers' invoices, circumventing the usual delay in customer payments. The factor then takes on the risks associated with the receivables and handles the collection process. [3] In conjunction with the factoring agreement entered into by the parties, this Court is tasked with resolving several legal issues and considerations that have emerged from this agreement. The Questions for Determination [4] This decision relates to a Notice of Application filed by the Defendant in Enclosure 112 for a preliminary determination of four questions or issues set out therein and for the Plaintiff’s claim to be dismissed on the basis that these questions should be answered in favour of the Defendant. S/N jzGdF6I4b0iSZqakT8eavA [5] At the hearing of Enclosure 112 on November 1, 2023, this Court issued an order to address not only the four questions proposed by the Defendant but also three additional questions raised by the Plaintiff in its Affidavit in Reply in Enclosure 115. The parties requested that these questions be resolved under Order 14A of the Rules of Court 2012, and sought to have the trial of this action dispensed with. [6] The four questions framed by the Defendant in Enclosure 112 are as follows: Question 1: Based on paragraphs 3 and 4 of the Amended Statement of Claim dated 12.8.2021 (“the Amended SOC”) and further refer to paragraph 32 of the Amended Defence No. 2 dated 11.4.2023 (“the Amended Defence”), whether the Notice of Assignment dated 11.8.2016 (“the Notice of Assignment”) is subject to the terms and conditions in uFactor Agreement dated 25.3.2016 (“the uFactor Agreement”)? Question 2: Based on paragraphs 3 and 4 of the Amended SOC and further refer to paragraph 32 of the Amended Defence, whether the Plaintiff has filed this legal proceedings strictly in the manner provided under Clause 5.3 and to be read together with Clause 18.9 of the uFactor Agreement? If Clause 5.3 and to be read together with Clause 18.9 have not been complied with does the Plaintiff have any locus standi in this legal proceeding? S/N jzGdF6I4b0iSZqakT8eavA Question 3: Refer to paragraph 25 of the Amended Reply dated 12.10.2021 and paragraph 33 of the Amended Defence, whether the proof of debts filed by the Plaintiff on 8.12.2021 and 7.7.2022 respectively against the 1st Third Party and 2nd Third Party after obtaining Judgment in Default of Appearance shall constitute the repurchase of the alleged debt claimed in this legal proceeding amounting RM4,999,740.00 by the 1st Third Party and 2nd Third Party from the Plaintiff pursuant to Clause 2.9 of the uFactor Agreement? If the aforesaid is answer in affirmative, based on Clause 2.9 of the uFactor Agreement, whether there is any debt due and owing by the Defendant to the Plaintiff under the Notice of Assignment? Question 4: Refer to paragraphs 10, 11(b) and 11(d) of the Amended SOC and paragraph 26 of the Amended Defence, whether Clause 18.20 of the uFactor Agreement forbids the Plaintiff from seeking the alternative relief as pleaded thereof from the Defendant? [7] While the three questions couched by the Plaintiff are as follows: Question 5: Whether the Defendant is estopped from disputing the Plaintiff’s claim of RM4,999,740.00 under the Notice of Assignment by reason of the Defendant’s conduct albeit through its former top S/N jzGdF6I4b0iSZqakT8eavA management, in making substantial payment to the Plaintiff for the 9 allegedly fictitious invoices assigned by Flowcrete to the Plaintiff? Question 6: Whether the allegation of conspiracy to defraud and creation of fictitious invoices purportedly committed by the Third Parties taints the Plaintiff, an innocent party’s claim against the Defendant for the assigned debt under the Notice of Assignment? Question 7: Whether the fraudulent conduct of the 3rd and 4th Third Party in conspiring with the 1st and 2nd Third Party, is imputed on the Defendant and therefore the Defendant is liable to pay damages for tort of deceit to the Plaintiff in the form of financing sum of RM3,999,792.00 released by the Plaintiff to the 1st Third Party under the uFactor Facility? The Parties and the Background Facts [8] The Plaintiff, United Overseas Bank (Malaysia) Berhad, is a financial institution incorporated in Malaysia. [9] The Defendant, Viacor Asia Sdn Bhd is a private limited company incorporated under the Companies Act 2016. [10] In addition to these two main protagonists are four other “Third Parties”, namely: S/N jzGdF6I4b0iSZqakT8eavA

Flowcrete Malaysia Sdn Bhd (“1st Third Party”), the borrower of the loan and which is now in liquidation;

Then Liat Nyap (“2nd Third Party), the guarantor of the loan and who is now a bankrupt and the majority shareholder and director of the 1st Third Party and a shadow and/or de facto shareholder and director of the Defendant;

Ralf Walter Joss (“3rd Third Party”), the ex-managing director of the Defendant; and

Arokiasamy a/l Thangaraju (“4th Third Party”), the ex-general manager of the Defendant. [11] The Plaintiff had granted a uFactor facility (“the Factoring Facility”) to the 1st Third Party Borrower through Letters of Offer and a uFactor Agreement dated 25 March, 2016 whereby the 1st Third Party has agreed to assign all its rights and benefit in the amounts owed by its debtors under the sale of goods transactions to the Plaintiff. [12] By the 1st Third Party’s letter dated 11 August, 2016 issued to the Defendant (“the Notice of Assignment”), the 1st Third Party had given a written notice to the Defendant that all present and future amount due under the invoices issued by it to the Defendant have been assigned to the Plaintiff under the Factoring Agreement and that the Defendant was required to make payment of the sums due under the invoices directly to the Plaintiff. [13] The Notice of Assignment was acknowledged by the 4th Third Party, with the Defendant’s company stamp affixed on the Notice of Assignment. S/N jzGdF6I4b0iSZqakT8eavA [14] From time to time, the 1st Third Party would submit to the Plaintiff a form listing down the debts assigned to the Plaintiff including its invoices, the Defendant’s purchase orders and the delivery orders duly acknowledged receipt by the Defendant. Upon receiving the same, the Plaintiff would disburse the financing sum under the Factoring Facility for the use of the 1st Third Party. [15] In between the period of August 2016 to March 2019, the Defendant had made payments to the Plaintiff for the invoices assigned to the Plaintiff totalling RM3,810,890.10 either by cheque or RENTAS transfers from its own account. However, payment for 13 invoices totalling RM4,999,740.00 were still outstanding (“the Unpaid Invoices”). [16] The Plaintiff had released a total of RM3,999,792.00 to the 1st Third Party to finance the Unpaid Invoices. [17] Following the issuance by the Plaintiff of its letter of demand dated 2 October, 2019, the Plaintiff filed this Writ action against the Defendant, seeking for, inter alia, judgment for the sum of RM4,999,740.00 being the total principal sum due and owing under the invoices assigned to the Plaintiff and judgment interest on RM4,999,740.00 at the rate of 5% per annum calculated from the date of filing of this action until the date of full and final settlement or in the alternative, damages for tort of deceit committed by the Defendant in colluding with the 1st Third Party and deceiving the Plaintiff into releasing a total financing sum of RM3,999,792.00 to the 1st Third Party and interest on the judgment sum of RM3,999,732.00 at the rate of 5% per annum calculated from the date of the release of the financing sum under the respective invoices to the date of full settlement. S/N jzGdF6I4b0iSZqakT8eavA Determination of questions of law or construction under Order 14A of the Rules of Court 2012 [18] At the outset, it should be mentioned that Order 14A may be invoked if firstly, there has been an application by a party or the court decides to act of its own motion (at any stage of the proceedings); and secondly, the court is satisfied that (a) such question is suitable for determination without the full trial of the action; and (b) such determination will finally determine the entire cause or matter or any claim or issue therein. [19] Before embarking on an assessment of the appropriateness of invoking Order 14A, it is pertinent to recall the clarifications provided by the Court of Appeal in Petroleum Nasional Bhd v Kerajaan Negeri Terengganu [2004] 1 MLJ 8 regarding the nuanced differentiation between the procedural frameworks delineated in Order 14A and Order 33 rule 2 of the Rules of Court 2012. The Court of Appeal explicated as follows: [35] … Under the former, the entire cause or matter need not be finally determined. It also permits any claim or issue herein to be so determined, but the question must be purely question of law or construction of document. And the latter caters not only for the question or issue of law arising in a cause or matter to be tried but also of fact or partly of fact and partly of law, and also the entire cause or matter need not be finally determined. In spite of the similarities between the two orders, there are also differences between them otherwise the former would not have been introduced into our civil procedure. It is to be stressed that under both orders the court can direct the question or issue to be determined or tried without the need for any party having to apply for it and the court may on its own frame or reframe the question or issue for the purpose or recast S/N jzGdF6I4b0iSZqakT8eavA the question or issue proposed by the applicant or subtract therefrom or add thereto other question or issue. These can be gathered from the provisions of the orders itself. It is manifestly evident that the court has a wide discretion on the matter. … [20] For easy reference, Order 14A of the Rules of Court 2012 provides as follows: Disposal of Case on Point of Law Determination of questions of law or construction (O. 14A, r. 1)

1.

The Court may, upon the application of a party or of its own motion, determine any question of law or construction of any document arising in any cause or matter at any stage of the proceedings where it appears to the Court that —

such question is suitable for determination without the full trial of the action; and

such determination will finally determine the entire cause or matter or any claim or issue therein.

On such determination the Court may dismiss the cause or matter or make such order or judgment as it thinks just.

The Court shall not determine any question under this Order unless the parties have had an opportunity of being heard on the question. S/N jzGdF6I4b0iSZqakT8eavA

The jurisdiction of the Court under this Order may be exercised by a Registrar.

Nothing in this Order shall limit the powers of the Court under Order 18, rule 19 or any other provisions of these Rules. Manner in which applications under rule 1 may be made (O. 14A, r. 2)

An application under rule 1 may be made by a notice of application or, notwithstanding Order 32, rule 1, may be made orally in the course of any interlocutory application to the Court. and Order 33 rule 2 of the Rules of Court 2012 states as follows: Time of trial of questions or issues (O. 33, r. 2)

The Court may order any question or issue arising in a cause or matter, whether of fact or law or partly of fact and partly of law, and whether raised by the pleadings or otherwise, to be tried before, at or after the trial of the cause or matter, and may give directions as to the manner in which the question or issue shall be stated. [21] Having considered the matter at hand, this Court was of the considered view that the Questions couched were indeed suitable for determination pursuant to Order 14A and proceeded to stage two to determine the issues posed on their merits. S/N jzGdF6I4b0iSZqakT8eavA Question 1 [22] The gist of Question 1 is whether the Notice of Assignment dated 11 August, 2016 is subject to the terms and conditions in the uFactor Agreement dated 25 March, 2016? [23] It was the Defendant’s assertion that the answer should be in the affirmative. The underlying reason advanced by the Defendant was that the Plaintiff’s rights in the Notice of Assignment arose from the uFactor Agreement and should therefore be made subject to the terms therein. [24] The Plaintiff contested the aforementioned assertion and argued instead that since the Defendant is a non-party or stranger to the uFactor Agreement (entered into between the Plaintiff and the 1st Third Party), the Defendant is not entitled to invoke and rely on the terms therein as defence. This is premised on the doctrine of privity of contract and the Plaintiff cited the decision of the Federal Court in Suwiri Sdn Bhd v Government State of Sabah [2008] 1 AMR 1; [2007] 1 CLJ 123; [2008] 1 MLJ 743; [2007] 2 MLRA 667. [25] The Plaintiff further averred that this principle is equally applicable to factoring agreements and relied on cases such as Arab Malaysian Merchant Bank Bhd v Sin Hiap Enterprise [1989] 1 CLJ (Rep) 307; [1989] 1 MLRH 651 and Mayban Finance Bhd v Kee Fatt Motors Engineering Sdn Bhd [2010] AMEJ 0279; [2010] CLJU 1113; [2010] MLJU 1169; [2010] 15 MLRH 684. S/N jzGdF6I4b0iSZqakT8eavA [26] Based on the doctrine of privity of contract and the above authorities, the Plaintiff submitted that the answer to Question 1 should be in the negative. [27] The Defendant did not dispute the principle as laid down in Suwiri Sdn Bhd v Government State of Sabah but argued that the facts in the cases cited by the Plaintiff differ from those in the present case. Question 2 [28] Regarding the matter in Question 2, the focal point lies in the determination of whether the Plaintiff has filed this action strictly in the manner provided under Clause 5.3 read together with Clause 18.9 of the uFactor Agreement? If these clauses have not been complied with, the question that follows is whether the Plaintiff has the necessary locus standi in the present legal proceedings? [29] Clause 5.3 of the uFactor Agreement states that:

Collection from Debtors …

5.3 Legal Proceedings: The Client agrees that the Bank may institute and conduct legal proceedings in the Client’s name and that the Bank shall have full control of any such proceedings. The Client shall make available to the Bank on request and free of charge all evidence required by the Bank in any proceeding and will procure the attendance at any hearing of such witnesses as the Bank may S/N jzGdF6I4b0iSZqakT8eavA require. The Bank may settle any claim by or against the Bank or the Client upon such terms as the Bank shall think fit. while Clause 18.9 of the same provides that:

General …

18.9 Power of Attorney: The Client hereby irrevocably appoints the Bank to be its attorney and on its behalf and in its name or otherwise, and with full power of substitution, to execute and do all such assurances, acts and things which the Client ought t do under the covenants and provisions contained in this Agreement including the endorsement on the Client’s behalf of any negotiable instrument, the amendment of invoices and credit notes submitted to the Bank and generally in its name or otherwise and on its behalf to exercise all or any of the powers, authorities and discretion conferred by or pursuant to this agreement (without prejudice to the generality of the foregoing) to sign seal and deliver and otherwise perfect any deed, assurance, agreement instrument or act which the Bank may in its absolute discretion deem proper in or for the purpose of exercising any of such powers, authorities or discretion (but the Bank shall be under no obligation to exercise its power of attorney hereunder). The Client hereby ratifies and confirms and agrees to ratify and confirm whatever the Bank shall do or purport to do in the exercise of all or any or the powers, authorities and discretion referred to above. The Client hereby declares that the powers and authority hereby conferred are given for valuable consideration and shall be and shall remain irrevocable for so long as any sum due to the Bank in respect of this agreement or any Debt remains unpaid. S/N jzGdF6I4b0iSZqakT8eavA [30] The Defendant’s contention was that since there have been non-compliance with the above clauses in the uFactor Agreement, the answer to Question 2 should be in the negative. [31] The Defendant has of course proceeded to Question 2 on the basis/assumption that the answer to Question 1 is in the affirmative. [32] In response, the Plaintiff argued that it has locus standi to sue the Defendant based on the Notice of Assignment. [33] The Plaintiff further submitted that in the context of the factoring arrangements, it has become the Defendant’s creditor for the invoices and the Defendant’s liability to pay the Plaintiff on the invoices crystallised upon the delivery of the Notice of Assignment to the Defendant. [34] The Plaintiff also relied on section 4(3) of the Civil Law Act, 1956 which provides as follows:

Any absolute assignment, by writing, under the hand of the assignor, not purporting to be by way of charge only, of any debt or other legal chose in action, of which express notice in writing has been given to the debtor, trustee or other person from whom the assignor would have been entitled to receive or claim the debt or chose in action, shall be, and be deemed to have been, effectual in law, subject to all equities which would have been entitled to priority over the right of the assignee under the law as it existed in the State before the date of the coming into force of this Act, to pass and transfer the legal right to the debt or chose in action, from the date of the notice, and all legal and other remedies for the same, and the power to give a good discharge for the same, without the concurrence of the assignor. S/N jzGdF6I4b0iSZqakT8eavA [35] The crux of the Plaintiff’s case is that it has stepped into the shoes of the 1st Third Party and was entitled to claim from the Defendant the sums due under the Unpaid Invoices assigned to the Plaintiff by the 1st Third Party. According to the Plaintiff, it had thus attained its locus standi to sue in its own name arisen from the law of assignment and not from the uFactor Agreement. It cited the Federal Court case of Boustead Trading

Sdn Bhd v Arab Malaysian Merchant Bank Bhd [1995] 3 AMAR 2871; [1995] 4 CLJ 283; [1995] 3 MLJ 331; [1995] 1 MLRA 738 and Arab Malaysian Merchant Bank Bhd v Sin Hiap Enterprise [1989] 1 CLJ (Rep) 307; [1989] 1 MLRH 651 [36] Once again, the Defendant sought to distinguish the authorities relied on by the Plaintiff. Question 3 [37] The core of Question 3 is whether the proof of debts filed by the Plaintiff on 8 December, 2021 and 7 July, 2022 respectively against the 1st Third Party and the 2nd Third Party after having obtained Judgment in Default of Appearance constituted the repurchase of the alleged debt claimed in this legal proceedings amounting RM4,999,740.00 by the 1st Third Party and 2nd Third Party from the Plaintiff pursuant to Clause 2.9 of the uFactor Agreement and if the aforesaid is answered in affirmative, based on Clause 2.9 of the uFactor Agreement, whether there is any debt due and owing by the Defendant to the Plaintiff under the Notice of Assignment? [38] Clause 2.9 of the uFactor Agreement reads as follows: S/N jzGdF6I4b0iSZqakT8eavA

2.9 Repurchase by Client: The Bank purchases Debts from the Client on the condition that and the Client shall forthwith upon the request of the

repurchase all Debts at the Repurchase Price upon termination of the uFactor Facility; and

repurchase a particular Debt at the Repurchase Price in the following events:

(if such Debt is an Approve Debt) upon its conversion from an Approved Debt into and Unapproved Debt;

(ii) if the Bank exercises its right of recourse as set out in Clause 3.2 below in relation to such Debt; and

(iii) in any other case as requested by the Bank. Upon the repurchase by the Client of a Debt:

there shall vest in the Client all the Bank’s present and future rights, title and interest in such Debt and all rights and remedies arising in connection with and/or for enforcing such Debt and the benefit of all guarantees indemnities insurances and securities in respect of such Debt and all goods and services or similar tax to which such Debt relates; and

there shall be deemed to be assigned or transferred to the Client absolutely all the present and future rights, tittle and interest of the Bank in and to such Debt and the Contracts of the Sale and goods and services relating to such Debt (including, without limitation, all undelivered, rejected or returned goods or services and all rights of lien, stoppage in transit and rights of an unpaid vendor and all the rights and remedies under or in connection with such Contracts of Sale wot Which that Debt relates). S/N jzGdF6I4b0iSZqakT8eavA [39] The Defendant’s contention was that since the Plaintiff has exercised its right of recourse against the 1st Third Party and 2nd Third Party as borrower and guarantor respectively (and having entered default judgments) the answer to the first part of this Question 3 should be in the affirmative. [40] In support of this argument, the Defendant relied on the decision in K Balasubramaniam, Liquidator for Kosmopolitan Credit Leasing Sdn Bhd v MBf Finance Bhd & Anor [2005] 1 AMR 585; [2005] 1 CLJ 793; [2005] 2 MLJ 201; [2004] 2 MLRA 528. [41] The Plaintiff disagreed and argued that the answer to the first part of Question 3should be in the negative. Its primary contention was that its right to sue the Defendant was not affected by its right of recourse against the 1st Third Party. The authorities cited by the Plaintiff include AMDB Factoring Sdn Bhd (formerly known as Arab-Malaysian Enterprises Sdn Bhd) v Iszajaya Sdn Bhd & Ors [1998] 1 CLJ Supp 159; [1997] 5 MLJ 402, Showa Factoring (Malaysia) Sdn Bhd v Focus ID (M) Sdn Bhd & Yang Lain [2001] 3 CLJ 56; [2001] MLJU 157; [2001] 1 MLRH 642 and Modalku Ventures Sdn Bhd v E-Tech IT Sdn Bhd (Able Enterprise (M) Sdn Bhd, third party [2023] AMEJ 1888; [2023] 10 CLJ 592; [2023] MLJU 2074; [2023] MLRHU 1561. [42] Further, Brightvite Sdn Bhd v Pantai Towers Management Corp and another appeal [2018] 5 AMR 559; [2019] 2 CLJ 439; [2018] 5 MLJ 634; [2018] 4 MLRA 457 was cited for the proposition that “the filing of proof of debt form does not preclude a creditor from seeking other recovery as the debt remains unpaid”. S/N jzGdF6I4b0iSZqakT8eavA Question 4 [43] The question for consideration in Question 4 is whether Clause 18.20 of the uFactor Agreement forbids the Plaintiff from seeking the alternative relief as pleaded thereof from the Defendant? [44] Clause 18.20 of the uFactor Agreement provides as follows:

18.20 Fraud: in the event of any fraudulent misrepresentation or any fraudulent act, conduct or claim by the Client, the Client shall refund to the Bank all payments made pursuant to the uFactor Facility. [45] The Defendant’s contention was that the answer is in the affirmative. [46] The Plaintiff adopted the stand that it was not precluded from seeking any relief against the Defendant in the event of fraud or any fraudulent act by the 1st Third Party. It also maintained that it is an innocent party to the conspiracy to defraud allegedly committed by the Third Parties and the Defendant through the latter’s agents. More importantly, the Plaintiff pointed out that in a factoring arrangement, the issue of fraud (between the assignor of the debt and the debtor) is of no concern to the assignee of the debt (which in this case is the Plaintiff). The Plaintiff was never a party to any of these acts such acts did not taint the assignee’s claim against the debtor. [47] The authorities cited are the Court of Appeal case of Mayban Factoring Bhd v Koperasi Pekerja-Pekerja Jabatan Perdana Menteri Malaysia Bhd [2001] 4 AMR 4193; [2001] 4 CLJ 409; [2001] 4 MLJ 337; S/N jzGdF6I4b0iSZqakT8eavA [2001] 1 MLRA 565 and Arab Malaysian Merchant Bank Bhd v Sin Hiap Enterprise. Question 5 [48] The poser in Question 5 is whether the Defendant is estopped from disputing the Plaintiff’s claim of RM4,999,740.00 under the Notice of Assignment by reason of the Defendant’s conduct, albeit through its former top management, in having made substantial payments to the Plaintiff for the 9 allegedly fictitious invoices assigned by the 1st Third Party to the Plaintiff. [49] Here, the Plaintiff submitted that the answer should be in the affirmative and the Defendant argued otherwise. [50] For the Plaintiff, it was contended that the Defendant through its agents who were vested with apparent and/or ostensible authority had held out to the Plaintiff that the Defendant was indebted to the Borrower/1st Third Party and that aforesaid conduct of the Defendant’s agents is imputed on and bind the Defendant. Once again, the Plaintiff relied on Arab Malaysian Merchant Bank Bhd v Sin Hiap Enterprise and Mayban Factoring Bhd v Koperasi Pekerja-Pekerja Jabatan Perdana Menteri Malaysia Bhd. [51] The Defendant refuted the above and unexpectedly argued that Question 5 cannot be summarily disposed of by Order 14A as there were serious disputes on material aspects of facts and therefore ought to be answered in the negative. S/N jzGdF6I4b0iSZqakT8eavA Questions 6 and 7 [52] The manner in which Question 6 is couched is whether the allegation of conspiracy to defraud and creation of fictitious invoices purportedly committed by the Third Parties taints the Plaintiff, an innocent party’s claim against the Defendant for the assigned debt under the Notice of Assignment? [53] As for Question 7, it was framed as follows, that is, whether the fraudulent conduct of the 3rd Third Party and the 4th Third Party in conspiring with the 1st and 2nd Third Party is imputed on the Defendant resulting in the Defendant being liable to pay damages for tort of deceit to the Plaintiff in the form of financing sum of RM3,999,792.00 released by the Plaintiff to the 1st Third Party under the uFactor Facility? [54] On these above two Questions, the Plaintiff maintained that:

The Plaintiff was not a party of the alleged conspiracy to defraud and the Defendant is bound by the action of its own agent(s);

The Defendant is not permitted to depart from their pleaded defence that the Plaintiff has no knowledge whatsoever of the alleged conspiracy to defraud at the material time; and

The Defendant is liable to pay damages to the Plaintiff based on the Tort of Deceit and their admission of wrongdoings committed by their agents. S/N jzGdF6I4b0iSZqakT8eavA [55] According to the Defendant, these two Questions are also based on serious disputed facts and should also be answered in the negative. The Decision of this Court [56] The following are this Court’s findings based on the Questions posed. [57] In relation to Question 1, the Defendant’s main motivation in advancing the argument that the Notice of Assignment dated 11 August, 2016 is subject to the terms and conditions in the uFactor Agreement dated 25 March, 2016 is simply because there are two particular clauses or terms in the uFactor Agreement which from the Defendant’s point of view, favours their case/defence. (These clauses/terms, if applicable, form the essence of Question 2.) [58] As noted in paragraphs [24] and [25] above, the Plaintiff’s contention that the Defendant is not permitted to rely on any of the clauses or terms in the uFactor Agreement is premised on the doctrine of privity of contract. [59] The doctrine of privity of contract, as explicated by the Federal Court in Suwiri Sdn Bhd v Government State of Sabah, is well-established. In that case, the Federal Court elucidated the doctrine in the following terms: [10] The doctrine of privity of contract is that as a general rule, a contract cannot confer rights or impose obligations on strangers to it, i.e persons who are not parties to it.” … S/N jzGdF6I4b0iSZqakT8eavA [12] Firstly, the alleged approval letter was in fact an internal communication between the Setiausaha Hasil Bumi and the Director of Forestry. It was not even copied to the appellant. Such being the position the appellant is regarded as a stranger to such communication. In other words, the appellant was not a party to the alleged letter of approval. Based on the doctrine of privity of contract, the appellant would have no locus or right to enforce the content of the alleged letter of approval in favour of the appellant. [13] The principle in Dunlop Pneumatic Tyre Co Ltd v Selfridae & Co Ltd [1915] AC 847 is a clear example on the rule of privity of contract. The House of Lords in this case stated: … In the law of England certain principles are fundamental. One is that only a person who is a party to a contract can sue on it. Our law knows nothing of a jus quaesitum tertio arising by way of contract. Such a right may be conferred by way of property, as for example, under a trust, but it cannot be conferred on a stranger to a contract as a right to enforce the contract in personam. [14] In Schmidt v Kepong Prospecting Ltd & Ors [1964] MLJ 416 the Federal Court recognized the application of the doctrine of privity of contract in Malaysia that a person who is not a party to a contract cannot take advantage of provisions of the contract…” [60] It remains for consideration whether the doctrine as it is understood applies to factoring agreements. The same argument as the one currently raised by the Defendant was made in Arab Malaysian Merchant Bank Bhd v Sin Hiap Enterprise and Mayban Finance Bhd v Kee Fatt Motors Engineering Sdn Bhd, cases involving factoring agreements. In both of S/N jzGdF6I4b0iSZqakT8eavA these cases, the defendants were not permitted to invoke the factoring agreements to escape liability on the basis that the defendants were strangers to those agreements. [61] Having considered the submissions by the parties and the authorities on this point, this Court is of the view that the answer to Question 1 is in the negative. [62] As for Question 2, this is the locus standi point. [63] The Defendant has of course proceeded to Question 2 on the basis/assumption that Question 1 is answered in the affirmative. Consequentially, when Clause 5.3 is read together with Clause 18.9 of the uFactor Agreement, the conclusion, according to the Defendant, is that the Plaintiff does not have locus standi in these proceedings. [64] The case for the Plaintiff for Question 2 has been outlined in paragraphs [33] – [35] above. [65] Since this Court has answered Question 1 in the negative, the Defendant is not entitled to invoke the terms of the uFactor Agreement against the Plaintiff. [66] Even if this Court were wrong in arriving at its conclusion on Question 1, Clause 5.3 of the uFactor Agreement merely stipulates that the Plaintiff may sue the debtors in the 1st Third Party’s name and there is nothing therein which restricts or refrains the Plaintiff from suing the debtor under its own name particularly when the present action is premised on the Notice of Assignment by which the Plaintiff has become the creditor in S/N jzGdF6I4b0iSZqakT8eavA place of the 1st Third Party for the debt due under the invoices issued to the Defendant. Accordingly, the Plaintiff has filed these legal proceedings in accordance with the provisions of the uFactor Agreement. [67] Central to the matters raised in Question 3 have been summarized in paragraphs [37] – [42] above. [68] This Court is of the considered view that the mere filing of the proof of debt by the Plaintiff against the 1st Third Party and the 2nd Third Party did not extinguish the repurchase debt pursuant to Clause 2.9 read with 2.10 of the uFactor Agreement unless the repurchase debt has been fully settled by the 1st or 2nd Third Parties. [69] Even assuming that the answer to Question 3 were in the affirmative, as argued by the Defendant, notwithstanding the filing of the proof of debt by the Plaintiff against the 1st Third Party and the 2nd Third Party for the repurchase debt, there is still debt due and owing by the Defendant to the Plaintiff under the Notice of Assignment as there was no recovery under the proof of debt. [70] With regard to Question 4, that is, whether Clause 18.20 of the uFactor Agreement forbids the Plaintiff from seeking the alternative relief as pleaded thereof from the Defendant, the opposing arguments advanced and the authorities relied by the parties have been delineated in paragraphs [44] – [47] above. [71] This Court is of the considered view that Clause 18.20 of the uFactor Agreement does not forbid the Plaintiff from suing the Defendant based S/N jzGdF6I4b0iSZqakT8eavA on the alternative relief or tort of deceit pleaded. Hence, the answer to Question 5 is in the negative. [72] In relation to the poser raised in Question 5, we should once again recap the arguments raised by the parties in paragraphs [48] – [ 51] above. [73] First, this Court is unable to agree with the Defendant that Question 5 cannot be summarily disposed of by Order 14A as there are serious disputes on material aspects of facts. [74] Based on the evidence, submissions and authorities before this Court, this Court answers Question 5 in the affirmative. [75] The Defendant is estopped from disputing the Plaintiff’s claim of RM4,999,740.00 under the Notice of Assignment through their conduct, inter alia, in acknowledging and accepting the Notice of Assignment and making substantial part payment to the Plaintiff for the 9 alleged fictitious invoices without any protest. [76] This has also considered the points and arguments put forward by the parties re Question 6 and is of the considered view that the answer to Question 6 is in the negative. [77] The allegation of conspiracy to defraud and creation of fictitious invoices purportedly committed by the Third Parties do not impugn the Plaintiff nor affect its claim against the Defendant for the assigned debt under the Notice of Assignment. S/N jzGdF6I4b0iSZqakT8eavA [78] Since this Court has decided in favour of the Plaintiff on both Questions 5 and 6 with the consequence that the Plaintiff succeeding on its main claim, there is no necessity to proceed to Question 7 of the alternative claim. [79] In view of the above findings, judgment is entered against the Defendant as follows:

Judgment sum of RM4,999,740 being the principal amount due and owing under the Unpaid Invoices; and

Interest on the judgment sum of RM4,999,740.00 at the rate of 5.0% per annum calculated from the filing date of this action to the date of full settlement; and [80] Costs of RM20,000 to be paid by the Defendant to the Plaintiff, subject to allocatur. Dated: 5 May, 2024 sgd [CHOONG YEOW CHOY] Judicial Commissioner High Court of Malaya Shah Alam S/N jzGdF6I4b0iSZqakT8eavA Counsel: Koh San Tee with Tan Hui Ru for the Plaintiff (Messrs. Benjamin Dawson) Teoh Bi Shan for the Defendant (Messrs. Bishan & Partners) S/N jzGdF6I4b0iSZqakT8eavA