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DALAM MAHKAMAH TINGGI MALAYA DI JOHOR BAHRU
DALAM NEGERI JOHOR, MALAYSIA
GUAMAN SIVIL NO. : 22-834-2003
BETWEEN
CRESCENT CONCRETE SDN BHD
…
PLAINTIFF
AND
(1) SULONG ENGINEERING SDN BHD
…
1ST DEFENDANT
(2) DATO’ HAJI SULONG BIN HAJI MAMAT
…
2ND DEFENDANT
GROUNDS OF DECISION
Introduction
[1] The proceeding in this case arose from the claim of the plaintiff for
the balance of the price of goods sold and delivered to the 1st defendant
whereby the 2nd defendant was the guarantor. At the conclusion of the trial,
I allowed the claim in part against the 2nd defendant but dismissed the claim
against the 1st defendant. I now give my reasons.
The Facts
[2] The 1st defendant was the main contractor in a building project at
Bandar Uda Utama, Pulai, Johor. On 18.4.2001, it engaged Lotus Quest
Sdn Bhd as its total subcontractor to carry out the works of the project,
which also entailed purchasing concrete from 3rd parties. Sometime in April
of 2001, PW1, a director and sales manager of the plaintiff company, found
out that Lotus Quest wanted to buy concrete from the plaintiff. He therefore
went to an office in Larkin Perdana, Johor Bahru that had a signboard
carrying the name “Sulong Engineering”. At that office, he met one Encik
Zainuddin that held himself out to be a representative of Lotus Quest Sdn
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Bhd. Zainuddin had even given PW1 his business card, which indicated he
was from Lotus Quest. There was no one else present at that meeting.
[3] PW1 said he handed to Zainuddin a quotation dated 24.4.2001 (at
pages 1-2 of Agreed Bundle D (Part B)) setting out the terms of supply of
the concrete. He said it was Zainuddin that had furnished him with the
details of the address and contact persons stated on the quotation. The
following details on the quotation are material :
(i)
it was addressed to “Sulong Engineering Sdn Bhd/Lotus Quest
Sdn Bhd”;
(ii) the trading address of “Sulong Engineering Sdn Bhd/Lotus
Quest Sdn Bhd” was stated as “15, Susur Perdana 1, Larkin
Perdana, Johor Bahru”;
(iii) the telephone number stated below the trading address was 072340745 and the fax number as 07-2386021; and
(iv) the quotation was made to the attention of En. Zulkifli Ismail
and En. Abd Aziz Khan Alior Khan. PW1 admitted in court that
these 2 persons were representatives of Lotus Quest.
[4] According to PW1, Zainuddin took the quotation back. Subsequently,
the quotation was returned to him acknowledged and signed. The
acknowledgment chop at the last page of the quotation (p.2 of Bundle D)
was in the name of Sulong Engineering Sdn Bhd. However, as will be seen
later, it bore the trading address of Lotus Quest as well as their telephone
and fax numbers.
[5] The plaintiff commenced supply of concrete to the project site on
31.5.2001. Lotus Quest received the first delivery of 350m³ and the relevant
delivery orders were duly chopped and signed by them. According to PW1,
when he found out that Lotus Quest received the first 350m³ and that the
recipient chops were that of Lotus Quest, he stopped delivering the
concrete. He then requested Lotus Quest to change the recipient’s chop to
that of the 1st defendant before he would resume supply. Obviously, Lotus
Quest complied because deliveries had resumed on 14.6.2001 as could be
seen from the delivery order at page 36 of Bundle E, which appears to be
the first to bear the chop of Sulong Engineering as recipient. Thereafter
nearly all the delivery orders bore the chop of Sulong Engineering as
recipient. According to PW1, the plaintiff continued to deliver the concrete
until 31.7.2001 when he ceased because the plaintiff was not getting any
payment from the 1st defendant despite the accumulated debt at
RM 472, 804.00.
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[6] In July of 2001, DW2, in his capacity as the project coordinator of the
1st defendant, visited the project site. He discovered there was delay in
construction and a shortage of ready-mixed concrete. He informed DW1
who was the 2nd defendant and the managing director of the 1st defendant
company. On 1.8.2001 DW1, DW2 and DW3, the 1st defendant’s project
supervisor, met with Encik Zainuddin of Lotus Quest at the project site.
Zainuddin told them that the delay was due to shortage of supply of
concrete from the plaintiff. DW1 then requested Zainuddin to arrange a
meeting with the plaintiff.
[7] A meeting was arranged the same day at the site and attended by
DW1, DW2, DW3, PW1 and Zainuddin. At the meeting, PW1 said that the
stoppage of supply of concrete was due to the failure of Lotus Quest paying
for the earlier deliveries because it had not received payment from the 1st
defendant. DW1 stated in response that the 1st defendant had never
defaulted in any payment to Lotus Quest. DW1 then offered to take over
the purchase of concrete from Lotus Quest and deal directly with the
plaintiff from then on, that is to say from 1 August 2001. He as well agreed
to execute a personal guarantee for the supply of concrete from the plaintiff
from August 2001. PW1 then handed a personal guarantee form and an
application for credit facilities to DW1 for him to sign. DW1 did not sign the
guarantee and application form immediately as he wanted to consult his
lawyers. Further, DW1 wanted a letter of undertaking from Lotus Quest that
they would settle the debts for concrete supplied to Lotus Quest prior to
August 2001. He made this known at the meeting.
[8] The personal guarantee (at pp 39-42 Agreed Bundle B(Part B)) and
the application for credit facilities (at Bundle B pp 34-37) were signed by
DW1 on 13.8.2001 and returned to the plaintiff vide letter dated 13.8.2001
(at Bundle B p 38). In the letter, DW1 stated that the guarantee was to take
effect from July 13, 2001 and for deliveries made on and/or after that date.
PW1 accepted the terms of the letter by signing at the portion below. In the
meantime, Lotus Quest had issued a letter of 4.8.2001 (at Bundle D p.9) to
the 1st defendant undertaking it would settle all amounts outstanding for the
amount of concrete already ordered for the project.
[9] By a letter of 22.1.2002 (at Bundle B p. 44) the 1st defendant wrote to
the plaintiff to inform that there had been a mistake to the letter of
13.8.2001 in that the date the guarantee was to commence was mistakenly
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stated as 13.7.2001 when instead it should have been 13.8.2001. PW1
testified he responded with his letter of 24.1.2002 (at p.5 Bundle D) wherein
he stated his disagreement to the 1st defendant changing the
commencement date and insisting instead that the date 13.7.2001 should
be maintained.
[10] The plaintiff resumed delivery of concrete to the project site from
August 2001. Although the 1st defendant had taken over the purchase of
the concrete from August 2001, Lotus Quest was still the subcontractor
responsible to place orders, receive the concrete at site and collate the
delivery orders for the 1st defendant to make payment. In November 2001,
the 1st defendant terminated Lotus Quest as the subcontractor and
thereafter, the 1st defendant was directly involved in ordering and receiving
the concrete from the plaintiff.
[11] It was not in dispute that the 1st defendant had paid in full to the
plaintiff for all deliveries made from August 2001 onwards.
The Plaintiff’s Claim
[12] The plaintiff’s claim against the 1st and the 2nd defendants was for the
sum of RM343, 306.32 as at 21.3.2002. It was the case for the plaintiff that
this was the balance of the sum due and owing for the concrete sold and
delivered by them to the 1st defendant. At the trial, it was not in dispute
between the parties that the plaintiff’s claim in reality was for invoices
issued for deliveries of concrete made prior to August 2001. The 2nd
defendant was sued on the personal guarantee of 13.8.2001 wherein he
had guaranteed payment for concrete supplied on and after 13.7.2001.
The Defence and Counterclaim
[13] The defendants pleaded that the 1st defendant did not have any
contractual relationship with the plaintiff prior to August 2001 and was
therefore not liable to pay for any concrete delivered before that date. The
defendants admitted that the 2nd defendant issued the personal guarantee
of 13.8.2001. They however averred that it was only to guarantee payment
of all future supply of concrete by the plaintiff, that is to say, for deliveries
made after August 2001. Further, the value of the concrete supplied by the
plaintiff from 1.8.2001 amounted to RM 814, 287.00 and the 1st defendant
had paid the plaintiff RM 841, 123.00 resulting in an overpayment of
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RM 26, 835.50. Thus, rather then there being any sum due to the plaintiff,
there instead was overpayment of RM 26, 835.50 that the 1st defendant
wished to counterclaim. However, at the trial, learned counsel for the
defendants withdrew the counterclaim and the court accordingly had it
dismissed.
Issues for Trial
[14] The parties by their Statement of Issues to be Tried dated 26.11.2009
(Bundle H) confined the issues for trial to the following :
(i)
whether the 1st defendant was indebted to the plaintiff in the
sum of RM343,306.32 as at 21.3.2002;
(ii) whether the 2nd defendant was liable under the guarantee given
on 13.8.2001 to pay the plaintiff the said sum of RM342,306.32;
and
(iii) whether the 1st defendant had overpaid the plaintiff by
RM26,835.50.
Given that the defendants had withdrawn the counterclaim, issue (iii) above
was no longer in contention.
Was the 1st defendant indebted to the plaintiff in the sum of RM343,
306.32 as at 21.3.2002?
[15] As stated earlier, it was not in dispute that the claim of the plaintiff in
reality was for the balance of payment on invoices issued for deliveries of
concrete made before August 2001. It was the case for the plaintiff that the
1st defendant was liable to pay because the supply agreement i.e. the
quotation dated 24.4.2001 (at Bundle D pp 1-2) and some of the delivery
orders issued prior to August 2001 (in Bundle E) bore the company chop of
the 1st defendant which proved that the agreement was between the
plaintiff and the 1st defendant and the concrete delivered to the 1st
defendant. I found that the plaintiff had not on balance of probabilities
proved its case against the 1st defendant for the following reasons.
[16] In Artic Building and Civil Engineering Sdn Bhd v Ahmad Zaki
Sdn Bhd & Ors [2009] 9 MLJ 328 it was held that a subcontractor is
independent from a main contractor. Further, the subcontractor’s acts or
representations vis-à-vis a 3rd party supplier would not bind the main
contractor so as to give an obligation by the main contractor to the 3 rd party
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supplier. In the present case, the acts and representations of Encik
Zainuddin of Lotus Quest could not bind the 1st defendant to pay for
concrete delivered prior to August 2001. Zainuddin was neither a
representative nor agent of the 1st defendant and was never authorized by
the 1st defendant to enter into any agreement on its behalf with the plaintiff
let alone the supply agreement.
[17] There was evidence from DW1 supported by DW2 that Lotus Quest
had before August 2001, misused the 1st defendant’s corporate name by
using the 1st defendant’s company chop and affixing it to the plaintiff’s
quotation and delivery orders without the defendant’s permission and
knowledge. Another misuse was falsely opening an office at No. 15, Susur
Larkin Perdana 1, Larkin Perdana, Johor Bahru under the 1st defendant’s
name. I believed and accepted the evidence for the 1st defendant on this
because it was supported by the act of DW1 in lodging the police report of
28.11.2001 (at Bundle D pp 6-8) against Lotus Quest. This report was
lodged after the 1st defendant took over the works from Lotus Quest in
November and the full extent of the misuse came to light. Moreover, there
was corroboration of the evidence of DW1 from PW1 himself who under
cross-examination admitted that before August 2001 the 1st and 2nd
defendants had no dealings at all with the plaintiff. In my judgment, if the
plaintiff and the defendants had no such dealings, there was no reason for
the company chop of the 1st defendant to have appeared on the quotation
and delivery orders that were issued before August 2001. There must have
been a misuse of it as was the assertion of the defendants.
[18] In any event, the evidence in my view clearly showed that PW1 was
actually aware that the supply agreement was with Lotus Quest and not
with the 1st defendant. During cross-examination, PW1 let on that when he
learned in early April of 2001 that someone was interested in purchasing
concrete from the plaintiff, the information he received was that the party
interested was Lotus Quest. Nothing was mentioned of Sulong
Engineering, the 1st defendant. Thus, when he went over to the office at
Larkin Perdana it was to seek out Lotus Quest and not Sulong Engineering.
PW1 admitted further under cross-examination that when he met Zainuddin
at the office, he knew that the latter was a representative of Lotus Quest
and not acting on behalf of the 1st defendant. As he said, Zainuddin had
even given him a business card that indicated he was from Lotus Quest.
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[19] Moreover, PW1 admitted it was Zainuddin that had furnished him with
the details of the address and contact persons stated on the quotation. The
trading address given was “No. 15, Susur Perdana 1, Larkin Perdana,
Johor Bahru”. It is noteworthy that address was actually the trading
address of Lotus Quest as confirmed by the SSM search (at p.2 of Agreed
Bundle B (Part A)). The telephone number stated below the trading
address was 07-2340745 and the fax number 07-2386021. Both these
numbers belong to Lotus Quest as can be seen on the letterhead of Lotus
Quest found at p.9 of Agreed Bundle D (Part B). What was more, the
quotation was made to the attention of En. Zulkifli Ismail and En. Abd Aziz
Khan Alior Khan. PW1 admitted in court that these 2 persons were
representatives of Lotus Quest. In my judgment, the reasonable inference
was that PW1 very well knew that the supply agreement was with Lotus
Quest and not with Sulong Engineering.
[20] Even if for argument’s sake, Zainuddin were a representative or
agent of the 1st defendant, his acts and representation, would still not bind
the 1st defendant. This is because neither the 1st defendant nor Zainuddin
himself had represented to the plaintiff that he had the authority to enter
into any agreement on behalf of the 1st defendant. In Freeman & Lockyer
(A Firm) v Buckhurst Park Properties (Mangal) Ltd and Another [1964]
2 QB 480 it was held that for an agent to have apparent authority to bind
the principal, one of the conditions is that there must be a representation by
the principal that the agent has the authority to enter into a contract on
behalf of the principal. In Chew Hock San & Ors v Connaught Housing
Development Sdn Bhd [1985] 1 MLJ 350 our Federal Court held on the
facts of that case that a clerk of the respondent did not have the authority to
bind the respondent as the clerk had acted without the knowledge and
consent of the respondent.
[21] The plaintiff in addition had a duty to take reasonable steps to
ascertain and confirm with the 1st defendant that they would be the
purchaser of the concrete considering the fact that: (i) Lotus Quest and the
1st defendant are separate entities; (ii) the 1st defendant was a company
based in Terengganu; (iii) PW1 was aware that he was only dealing with
Zainuddin as a representative of Lotus Quest; and (iv) PW1 was aware he
was not dealing with any of the 1st defendant’s representatives. Under
cross-examination, PW1 admitted that he should have taken steps to verify
and confirm with the 1st defendant that they would be the purchaser of the
concrete but he failed to do so. In Armagas Ltd v Mundogas SA; The
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Ocean Frost [1985] 3 All ER 795 it was held that the representee cannot
assume, based simply on the agent’s representation, that the agent had
authority to enter into a contract on behalf of the principal. Stephenson LJ
remarked at p. 830 :
“Knowing that it should have referred to Mundogas’s top
management for confirmation of Magelssen’s representation that he
had their authority and should not have relied on his representation
(or on its agent Johannesen, who transmitted it to it), Armagas took
the risk of Magelssen’s representation of authority being untrue and
cannot
hold
Mundogas
responsible
for
his
fraudulent
misrepresentation either in contract or in tort.”
[22] Furthermore, PW1 admitted during cross-examination that he was the
one who before August 2001 requested Lotus Quest to change the
acknowledgement chop on the delivery orders from that of Lotus Quest to
Sulong Engineering otherwise he would not resume supplying the concrete
to the project site. That being the case, when the chop was suddenly
changed from that of Lotus Quest to Sulong Engineering, PW1 in my view,
should have verified and confirm with the 1st defendant that they were the
purchasers of the concrete. This was the more so because PW1 knew right
from the start that he was dealing with Zainuddin who was not a
representative of Sulong Engineering but of Lotus Quest. Neither Zainuddin
nor Sulong Engineering had ever represented to him that Zainuddin could
enter into any agreement on behalf of Sulong Engineering. And presently,
we had PW1 asking Lotus Quest to change the chop to that of Sulong
Engineering. When the chop was suddenly changed to that of Sulong
Engineering, surely PW1 should have been put on guard and should have
verified with Sulong Engineering. Without verifying or confirming with
Sulong Engineering, PW1 took the risk of the chop having been misused or
forged as indeed it was.
[23] Fourthly, I was of the view that the events that transpired at the
meeting of 1.8.2001 and subsequent to that were further proof that the
supply agreement prior to August 2001 could not have been with the 1 st
defendant. All 3 witnesses for the defendants testified that at the meeting
PW1 informed them that the stoppage of supply of concrete was due to the
failure of Lotus Quest paying for the earlier deliveries because it had not
received payment from the 1st defendant. DW1 asserted that he corrected
PW1 by stating that Sulong Engineering had never defaulted on payments
to Lotus Quest. He said he had even gone on to require from Lotus Quest a
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letter of undertaking that they would settle the debts for concrete supplied
to Lotus Quest prior to August 2001.
[24] I found the evidence of the 3 witnesses for the defendants on this to
be credible despite PW1’s denial of it in court. Rather, I thought it was PW1
that had not been forthright on the events that transpired at that meeting.
He never mentioned the meeting in evidence-in-chief, which I found rather
odd considering, as PW1 himself admitted in court, that would have been
the first time representatives of the plaintiff and the 1st defendant had met. I
observed too that PW1, under cross-examination, suddenly switched to the
“I can’t recall” mode of answering questions when grilled on what DW1 had
said in response. I was convinced he was just being evasive and not
wanting to tell the truth. The evidence of DW1, DW2 and DW3 was the
more cogent because in the end we had in evidence that Lotus Quest
issued the letter of undertaking of 4.8.2001 (at p.9 Bundle D). This was
consistent and tied in with the evidence of DW1 that he made the request
of Lotus Quest at the meeting. I therefore believed and accepted the
evidence of the 3 witnesses for the defendants that PW1 had at the
meeting of 1.8.2001 informed all that the supply of concrete was stopped
because Lotus Quest failed to pay for earlier deliveries. By saying this,
PW1 had acknowledged that it was Lotus Quest and not Sulong
Engineering that was liable to pay for the deliveries before August 2001.
[25] Yet another matter of significance that transpired at the meeting of
1.8.2001 was that the plaintiff during the meeting requested DW1 to sign
the personal guarantee (at Bundle B pp 39-42) and to make an application
for credit facilities (Bundle B pp 34-37). If indeed, there had been a supply
agreement in place between the plaintiff and the 1st defendant since April
2001, it did not make sense for the plaintiff to be asking the 1st defendant to
make the application subsequently in August. Looking at the payment
terms of 30 days and interest of 1.5% per month stated in the application
for credit facilities, it is similar to the payment terms of 30 days and interest
of 1% per month applicable to the earlier deliveries of concrete as shown in
term 3 of the quotation of 24.4.2001 (at Bundle D p.2). The reasonable
inference was that the payment term in the quotation of 24.4.2001 was
applicable to Lotus Quest, which was why the plaintiff in August 2001
wanted the 1st defendant to sign the application for credit facilities to also
accept similar terms of payment.
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[26] It was the plaintiff that wished the court to believe that the supply and
delivery of the concrete to the project site made prior to August 2001 was
at the request of the 1st defendant. It was also the plaintiff that wished the
court to believe that the supply agreement of 24.4.2001 i.e. the quotation,
was entered into between the plaintiff and the 1st defendant. The burden
therefore was on the plaintiff, by virtue of section 103 of the Evidence Act
1950, to prove the existence of these facts. For the reasons given, I found
that the plaintiff had not so proved on balance of probabilities. It was for
that reason that I did not find the 1st defendant liable to pay for the
deliveries of concrete made before August 2001 and the claim against it
accordingly dismissed.
Was the 2nd defendant liable under the guarantee of 13.8.2001 to pay
the plaintiff RM 342, 306.32?
[27] I have earlier described the circumstances of the making of the
guarantee of 13.8.2001 (at Bundle B pp 39-42). In my opinion and this was
not a matter of any dispute at the trial, it was a personal guarantee signed
by DW1. In his letter of 13.8.2001 (at p.38 Bundle B), DW1 had as well
described the guarantee as such when he stated in paragraph 2 of the
letter thus, “serta jaminan Dato’ Haji Sulong Engineering bin Haji Mamat”.
By this letter, DW1 stated that the guarantee was to take effect from July
13, 2001 and for deliveries made on or after that date. His precise words
were “Jaminan ini berkuat kuasa daripada 13hb Julai 2001 dan untuk
bekalan yang dihantar pada dan/atau selepas daripada tarikh ini.” Ergo, we
had DW1 by his letter of 13.8.2001 agreeing to be liable to pay for all
deliveries that were made on or after 13.8.2001.
[28] DW1 had also by the last paragraph of the letter required the plaintiff
to sign at the bottom portion of the letter if the latter agreed to the terms of
the letter. The exact words used by DW1 were, “Sekiranya pihak tuan
bersetuju, sila tandatangani salinan surat ini dan kembalikan kepada kami
untuk simpanan.” As testified by PW1, and this was not disputed by the
defendants, PW1 accepted the terms of the letter and signed and affixed
the plaintiff’s chop at the bottom right on 5.9.2001. In my opinion, once
PW1 had accepted the terms proposed by DW1, a contract was concluded
the terms of which DW1 was to abide.
[29] The terms of the personal guarantee meant that the 2nd defendant
was liable to pay for concrete supplied on and/or after 13.7.2001. PW1
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himself during cross-examination, admitted that by the wordings of this
letter, the 1st and the 2nd defendants were liable to pay for concrete
supplied on or after 13.7.2001 and not for those supplied before that date.
[30] In trying to get out of the terms of the guarantee, the 2nd defendant
raised one sole defence. It was that there was a typographical error in the
date stated in the letter of 13.8.2001. The 2nd defendant said that the letter
wrongly stated the commencement date of the guarantee to be 13.7.2001
when it should have been 13.8.2001. He said that the error was a typing
error made by his clerk. Moreover, the 2nd defendant, after realizing the
typographical error, had issued the letter of 22.1.2002 (at p.44 of Bundle B)
to the plaintiff to point out the error and make corrections.
[31] The 2nd defendant wanted the court to believe that there was a
typographical error, as such, the burden of proof was on him. I found that
he had not so proved on balance of probabilities.
[32] In the first place, the evidence was clear that DW1 had carefully
considered the terms of the guarantee before he signed it and that negates
any suggestion of a mistake. It was the evidence of DW1 that he did not
sign the personal guarantee there and then on 1.8.2001 because he
wanted to get advice from his lawyers. It meant that DW1 had taken time to
consider the terms of the guarantee and had received legal advice on it. It
is to be noted that the parties at the meeting of 1.8.2001 did not discuss or
agree on the date of commencement of the guarantee. It was therefore up
to the defendants to propose the date of commencement and the plaintiff to
decide whether to accept the date or not. The 2nd defendant proposed the
date 13.7.2001 in the letter of 13.8.2001. Considerable thought must
therefore have been given to the date proposed.
[33] Secondly, there was nothing illogical about the 2nd defendant
agreeing to be liable from 13.7.2001 since by end of June 2001, and this is
in the evidence and not disputed, the outstanding sum was only RM179.00.
[34] Thirdly, under cross-examination, DW1 admitted that before the letter
of 13.8.2001 was sent, his employee Mohd Azmi had shown it to him and
asked for permission to send it. He admitted that he had specifically
authorized Mohd Azmi to sign the letter on his behalf. DW1 went on to
admit that he saw the letter again after the plaintiff had accepted it and sent
it back. He said that was how he knew that the plaintiff had agreed to and
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accepted the terms of the letter on 5.9.2001. It did not make sense, in my
judgment that DW1 had not spotted or realized there was a typing error.
Since DW1 had carefully considered the terms of the guarantee, proposed
the date of commencement, seen the letter of 13.8.2001 before it was sent
and again saw it after it was accepted and returned by the plaintiff, it was
highly improbable in my opinion, that there had been a typographical error.
The letter of correction of 22.1.2002 (at p.44 Bundle B) in my view was an
afterthought.
[35] Fourthly, DW1 in his evidence asserted that the clerk in the office
made the typing error in the letter of 13.8.2001. He as well spoke of Mohd
Azmi having shown him the letter and asking permission to send it. In my
view, truly the clerk and Mohd Azmi were material witnesses who could
have provided the best evidence on whether there was a typing error and
therefore could clear all doubts. Although that was the case, the defendants
did not call either one of them to testify. Not only that, the defendants did
not explain why they could not be available. In the circumstances, I did not
hesitate to make an adverse inference, as was done in Chan Yoke Lain
(administrator of the estate of Chong Yoke Fah, deceased) v Pacific
Orient Insurance Co Sdn Bhd [1999] 1 MLJ 303, against the defendants
pursuant to section 114(g) of the Evidence Act 1950. The inference here
being that if the clerk and Mohd Azmi were called they would deny there
was a typographical error. For that reason, the case for the defendants that
there was a typographical error was completely debunked.
[36] In any case, even if there had been a typographical error in the letter
of 13.8.2001 leading to an error in the date of commencement of the
guarantee stated therein, it was, in my view, a unilateral mistake on the part
of the defendants. The law is clear that unilateral mistake on the part of a
contracting party will not invalidate the contract made.
[37] Section 23 Contracts Act 1950 is applicable and it reads thus :
“A contract is not voidable merely because it was caused by one of
the parties to it being under a mistake as to a matter of fact.”
[38] In his book, The Law of Contract in Malaysia and Singapore:
Cases and Commentary, Prof. Madya Visu Sinnadurai writes at p.269 :
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“…section 23 provides that a contract is not voidable merely because it
was caused by one of the parties to it being under a mistake as to a matter
of fact. The use of words ‘not voidable’ is not a happy one. It is not clear
whether such an agreement is valid or void. However, the better view
seems to be that such an agreement is valid. …
It should be pointed out that if a mistake made by one of the parties to an
agreement does not invalidate the agreement, then an anomaly is created:
s.10 of the Contracts Act provides that all agreements are contracts if they
are made by the free consent of the parties. Section 14 then spells out the
circumstances under which a contract is said to be free: without coercion,
undue influence, fraud, misrepresentation or mistake. Except in the case of
mistake, the effect of any such agreement which is entered into without the
free consent of the parties is that such an agreement is voidable. If the
mistake is made by both the parties, then the agreement is void. If,
however, the mistake is made by only one of the parties, then such an
agreement is valid even though there is no free consent. In such a case
the party is left without any remedy.” (underlined mine)
[39] In Tham Kong v Oh Hiam & Ors [1968] 1 MLJ 44 Ong Hock Thye
FJ elaborates (at p. 48) :
“Before passing to the question of mutual mistake, I would first say a few
words on the plea of unilateral mistake. The law covering the
circumstances of this case is thus set out in 26 Halsbury (3rd Ed.) p. 898,
citing Tamplin v James :
“When the contract is clear the mistake of one party only will not, as
a general rule, prevent the formation of a contract and consequent
liability in damages being incurred for non-performance, for, if a man
will not take reasonable care to ascertain what he is contracting
about, he must take the consequences. Even if the mistake is such
as a reasonably diligent man might fall into, a party cannot
successfully resist an action for damages, nor, as a rule, specific
performance, by a simple statement that he has made a mistake
where there has been no misrepresentation and where there is no
ambiguity in the terms of the contract.”
According to the evidence and the relevant findings, there can be no doubt
that, howsoever the mistake arose on the part of the vendor, it did so for
reasons entirely unconnected with the appellant and for which he was in
no way responsible. In a recent East African case, Hasham v Zenab
[1960] 2 W.L.R. 374, 381 which shows several points of resemblance to
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the present appeal, Lord Tucker, delivering the judgment of the Privy
Council, said :
“… This is a plea of mistake common to both parties which was not
the case made by the defendant. Treating it, however, as a plea of
unilateral mistake it could, in the absence of fraud, only afford
ground for rescission if the mistake was induced by some innocent
misrepresentation made by or on behalf of the plaintiff or by some
misleading conduct on his part.”
In the absence of any proof of fraud or misrepresentation, neither of which
was pleaded or disclosed in the evidence, the respondents, therefore must
fail, had they relied on unilateral mistake.”
[40] In the present case, there was no evidence that the plaintiff on its part
had made a mistake as to the date the guarantee was to take effect. There
also was no evidence of fraud or misrepresentation on the part of the
plaintiff. In any case, the defendants had not pleaded mutual mistake, fraud
or misrepresentation in their defence. PW1 testified he accepted the term
proposed by the 2nd defendant that the guarantee was to commence from
13.7.2001 and as such, signed the letter on 5.9.2001. DW1 testified to the
same effect. Quite clearly, if there was a typographical error, it was a
unilateral mistake on the part of the defendants which was entirely
unconnected with the plaintiff and for which the latter was in no way
responsible. The agreement therefore was valid leaving the defendants
without any remedy.
[41] The defendants suggested that the plaintiff had agreed to the date of
commencement of the guarantee being varied. For this, they relied on the
statement by Mohd Azmi in the so-called letter of correction of 22.1.2002
that he had had spoken by phone to PW1 on 15.11.2001 and the latter had
agreed that the guarantee was to commence from 13.8.2001. The
defendants contended that PW1 in his reply letter of 24.1.2002 (at p. 5 of
Bundle D) did not specifically dispute this telephone conversation with
Mohd Azmi.
[42] In my opinion, although PW1 in his reply letter might not have made
specific reference to the alleged telephone conversation with Mohd Azmy,
there was no denying that he stated his disagreement to the defendants’
proposal to change the date from 13.7.2001 to 13.8.2001. In any case,
whatever Mohd Azmy said in his letter of correction concerning the
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telephone conversation was all hearsay and he was not in court to testify
on it whereas PW1 was in court to deny and rebut the allegation that it was
ever made. Mohd Azmi was the maker of the correction letter and was the
best person to explain the letter. As such, he was a material witness but not
called by the defendants. The irresistible inference pursuant to section 114
(g) Evidence Act 1950 was that, if called, he would testify that no such
telephone conversation with PW1 ever took place. That being the case,
there was no evidence at all that the plaintiff had agreed to the variation of
the date of commencement of the guarantee. It is well settled that there can
be no unilateral variation of an agreed term of a contract (see Paul
Murugesu s/o Ponnusamy (as representative of Nalamah d/o
Sangapillay (deceased) v Cheok Toh Gong & Ors [1996] 1 MLJ 843 and
Sumeria Enterprise Sdn Bhd v Seberai Majuharta Sdn Bhd [1995] 4
MLJ 542).
[43] In my view, the terms of the agreement between the parties as stated
in the letter of 13.8.2001 (at p.38 Bundle B) were all too clear. By
paragraph a, the parties had contracted that the personal guarantee signed
by Dato’ Haji Sulong, the 2nd defendant, was to commence from 13.7.2001.
The defendants did not prove on balance that there was either a
typographical error or agreement to a variation. In any case, even if there
was a mistake, it was unilateral on the part of the defendants and could not
render the agreement invalid. The 2nd defendant was bound by the terms of
the agreement and therefore liable to pay the plaintiff for deliveries of
concrete made on and/or after 13.7.2001.
What was the quantum of the liability of the 2nd Defendant ?
[44] It was not in dispute that the defendants have paid for deliveries
made after 1.8.2001. Therefore, we were concerned only with deliveries
made from the 13th to the end of July 2001 for which the 2nd defendant was
liable to pay pursuant to the terms of the guarantee and letter of 13.8.2001.
By paragraph 1 of the Statement of Claim, the plaintiff has set out the
particulars of the claim for invoices issued in the month of July 2001. The
delivery orders from 28.5.2001 until 31.7.2001 are produced at pp 2-351 of
Bundle E (Agreed Bundle (Part B)). As well, every one of the invoices for
the month of July 2001 as set out in paragraph 1 of the Statement of Claim
are produced in Bundle E (Agreed Bundle (Part B)). The invoices, the date,
the corresponding page number in Bundle E and the amount of the
invoices are as follows :
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Date
Invoice Number
Amount
(RM)
15.7.2001
15.7.2001
31.7.2001
31.7.2001
00000984
GP 00243
00001008
GP00257
Total
96022.00
36198.00
125575.00
58830.00
316625.00
Corresponding
page number
In Bundle E
Page 228
Page 233
Page 352
Page 355
It can be seen from the above that for the whole month of July 2001, there
were deliveries to the value of RM 316, 625.00.
[45] At the trial, the defendants did not dispute that the plaintiff had made
deliveries of concrete to the project site prior to August 2001 or that the
corresponding invoices were issued. In fact, it was never the case for the
defendants that the plaintiff had not delivered concrete before August 2001
or that the plaintiff had not issued the corresponding invoices. That is why
we had learned counsel for the defendants, after the conclusion of trial,
stating in his submission that “Encik Mutalif for the Plaintiff agrees that the
Plaintiff’s claim is in reality for invoices issued prior to August 2001.” A little
further down learned counsel submits thus: “It is not disputed that the
concrete delivered by the Plaintiff were to be used in a project in Bandar
Uda Utama, Mukim Pulai, Johor … where the 1st Defendant was the main
contractor and a company known as Lotus Quest Sdn Bhd … was the total
sub-contractor engaged by the 1st Defendant.” These statements from
learned counsel for the defendants are admissions that the plaintiff made
deliveries of concrete and invoices were issued for those made prior to
August 2001.
[46] As well, the defendants at the trial had never disputed the contents of
the invoices issued for the delivery of concrete in the month of July 2001. I
say so because PW1 was never cross-examined on the truth of the content
of these invoices (tabled above). In addition, the defendants had never put
it to PW1 that the contents of these invoices were inaccurate or false. This
was not surprising because the case for the defendants had never been
that the concrete was not delivered or that the amount and pricing was
wrong. What was in dispute was the liability of the defendants to pay for the
deliveries made.
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[47] There being no dispute, I found it proved on balance that for the
month of July 2001, the plaintiff had made deliveries of concrete to the
amount of RM 316, 625.00.
Conclusion
[48] As stated earlier and for the reasons given, the 2nd defendant was
liable only for the deliveries made from the 13th to the end of July 2001.
However, as pointed out by learned counsel for the plaintiff, the invoices
issued on 15 July 2001 included deliveries made before 13.7.2001 i.e. from
2.7.2001 to 12.7.2001. The relevant delivery orders are at pages 138, 151,
165, 181 and 196 of Bundle E and amounted to RM 65, 734.00. This sum
being the price of concrete delivered before 13.7.2001 had to be deducted
from the total amount of RM 316, 625.00. This leaves us with the balance
of RM 250, 891.00. That is the reason I entered judgment for the plaintiff
against the 2nd defendant for the price of the goods sold and delivered
between 13.7.2001 and 31.7.2001 in the sum of RM 250, 891 with interest
at 12% per annum from the date of the last delivery to date of payment.
The parties had agreed for costs of the action and counterclaim for the
plaintiff at RM 8,000.00.
SUPANG LIAN
Judicial Commissioner
High Court Malaya
Johor Bahru
Dated : 16 October 2010
Counsels
Mr. Ng Chew Hor of Messrs Ng Fan & Associates for the plaintiff
Mr. Yasin Aminuddin Anwar and Mr. K S Lee of Messrs Y. A. Anwar & Co.
for the 1st and 2nd defendants
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