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IN THE HIGH COURT OF MALAYA AT KUALA LUMPUR
(COMMERCIAL DIVISION)
SUIT NO: 22NCC-322-04/2013
SALCON ENGINEERING BERHAD
v.
CIRCLE RING NETWORK SDN. BHD.
GROUNDS OF JUDGMENT
Brief Background
The Plaintiff was awarded a contract by Air Kelantan Sendirian
Berhad (“AKSB”) to install Smartmeters in the premises of its
consumers under the NRW Kelantan Project (“the said Project”),
for and on behalf of AKSB. The Smartmeters were to replace the
old original mechanical water meters. The Plaintiff was appointed by
the Defendant to supply the Smartmeters for the said Project.
By a Purchase Order No. PO 029135 dated 25.9.2008, which was
subject to the Terms and Conditions attached thereto (hereinafter
referred to as “the said Agreement”), the Defendant had agreed
to supply to the Plaintiff with 80,000 units of NRW-E-Meter-003,
Fully Electronic Non-Mechanical Water Meter Smartmeter (Model:
SM150VR) (hereinafter referred to as “the Smartmeters”) for a
purchase price of RM10,800,000.00 for the said Project for and
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on behalf of AKSB. The Plaintiff had paid the Defendant a sum
of RM9,767,520.00 being payment of 95% purchase price for
the 76,160 units of Smartmeters. The Plaintiff retained 5% of
the purchase price, as stipulated in Clause 16 of the Terms and
Conditions of the said Agreement.
It is contended by the Plaintiff that the Defendant at all material
times acknowledge that the Smartmeters it had to supply were to
be installed by the Plaintiff in the premises of consumers under the
Project for and on behalf of AKSB, as stipulated in the said
Agreement. The Smartmeters were duly delivered and installed in
batches. The Defendant delivered a total of 76,160 units of the
Smartmeters for the said Project. Pursuant to the installation of
the Smartmeters supplied by the Defendant, it is alleged by the
Plaintiff that there were numerous and various problems encountered
by the consumers.
The Defendant had, midway through the Project suggested that the
Smartmeters be replaced with another Smartmeter Model 150E to
overcome the said various problems. The Defendant was also unable
to manufacture the SM150VR Smartmeters due to a shortage of
electronic components from their sole supplier, to meet the supply
of the high number of replacement SM150VR Smartmeters needed.
As a result of all the problems and complaints received pertaining
to the Smartmeters, Suruhanjaya Perkhidmatan Air Negara (‘SPAN’)
suspended the Defendant’s SPAN certificate vide its letter dated
9.8.2010 and instructed the Defendant to:-
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(i)
Immediately cease supplying or providing any more of
the Smartmeters to any of the meter providers/operators
in Peninsular Malaysia or Federal Territory of Labuan,
pending investigation by SPAN;
(ii)
Furnish SPAN a complete report on the reasons for the
defects of the Smartmeters, and the remedial measures
taken to resolve the problems, within 14 days of the
SPAN’s letter; and
(iii)
The failure of the Defendant to furnish the said report
or revert with reasonable response within the time
stipulated will result in the Defendant’s registration
certificate being revoked by SPAN and the Smartmeters
will not be permitted to be utilized in the water industry
in Peninsular Malaysia or the Federal Territory of Labuan.
The Plaintiff’s Claim
The Plaintiff had awarded the contract to the Defendant to supply
the Smartmeters for the said Project based on the following
representations made by the Defendant:(i)
the Defendant was the sole supplier of the Smartmeters
in Malaysia;
(ii)
that the Defendant had successfully supplied and
installed the Smartmeters for various other projects;
(iii)
the testing of the Smartmeters are of international testing
standard;
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(iv)
the Smartmeters are being used inter alia, in various
countries such as the United Kingdom, Europe, Korea,
Philippines and Indonesia; and
(v)
the Smartmeters are of an approved quality and a product
registered with Suruhanjaya Perkhidmatan Air Negara
(“SPAN”) and certified by SIRIM QAS.
It is the Plaintiff’s case that the Smartmeters supplied and installed
by the Defendant at the consumers’ premises encountered numerous
and various problems. Amongst the problems encountered and
complaints raised by the consumers were as follows:
(i)
the Smartmeters were not recording any clear readings;
(ii)
there were no meter readings appearing on the LCD or
displayed on the digital screen of the Smartmeters;
(iii)
the Smartmeters were recording unreasonably high bills,
exceeding the normal consumption of the premises;
(iv)
the Earth Conductivity Strip (ECS) was not installed on
each of the Smartmeters;
(v)
the Smartmeters were faulty and defective due to
problems with the Printed Circuit Board (PCB);
(vi)
the Smartmeters were faulty and defective due to battery
failure although according to the specifications, battery is
to last for 10 to 15 years; and
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(vii) the Smartmeters recordings were inaccurate, unreliable
and doubtful.
The problem was raised by AKSB with the Plaintiff and also with the
Defendant. The Plaintiff had repeatedly requested the Defendant to
find a solution and/or rectify the problems, as raised by AKSB and
the consumers as a result of the installation of the defective and/
or malfunctioning Smartmeters at the consumers’ premises.
It is the contention of the Plaintiff that the Defendant had, at all
material time full knowledge and was aware of all the problems or
issues raised by the Plaintiff and AKSB. In fact, the Defendant had
acknowledged the problems, and admitted to the defectiveness of
the Smartmeters, and had promised to rectify and/or resolve the
problems, vide its numerous letters to the Plaintiff and/or AKSB,
in particular letters dated 8.3.2011 and 9.3.2011, and at various
meetings held, in particular at the meeting held on 23.8.2010
attended by, among others, the Plaintiff, the Defendant, AKSB and
SPAN.
SPAN also very much doubted the recommendation of the Defendant
to install the 2nd “grounding wire” for the meters that recorded very
high readings, as this feature was not part of the specifications when
the meters were tested and awarded the SIRIM QAS certification.
SPAN also doubted the effectiveness of this and the method of
installation, which was not practical.
The Defendant had agreed to accept responsibility for the defective
Smartmeters and promised the Plaintiff and AKSB to take remedial
measures to resolve the problems, as follows:
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(i)
replace all the defective Smartmeters manufactured
between years 2007 and 2008 that had been installed
by the Plaintiff at the consumers premises, with the
Smartmeters manufactured in 2009; and
(ii)
install the Instrument Bond on every Smartmeters already
installed and delivered and to be delivered.
AKSB had further instructed the Plaintiff to ensure the above remedial
steps be carried out on an urgent basis.
However, due to the failure of the Defendant to take remedial
measures and/or resolve the problems with regards to the
Smartmeters, AKSB, vide letter dated 27.2.2011, decided to
discontinue with the usage of the Smartmeters with serial number
beginning with “08” as the said Smartmeters with the said serial
number encountered various and numerous problems after the
installation at the sites and/or consumers’ premises. AKSB instructed
the Plaintiff to discontinue installation of the Smartmeters with
the said serial numbers. In respect of the Smartmeters with the
said serial numbers already installed at the site or premises, AKSB
requested the Plaintiff to replace the said meters with new meters
to avoid continuous and prolonged problems to AKSB and its
consumers.
The Defendant had promised to resolve this problem immediately
and suggested that the Smartmeters be replaced with another
Smartmeter Model 150E. AKSB agreed to replace the Smartmeters
with Smartmeter Model 150E with the following conditions:-
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(i)
the said replacement does not involve additional cost;
(ii)
the Smartmeter Model 150E is of better quality;
(iii)
in the event there is any defectiveness/damage to the
quality of any one of the Smartmeter Model 150E, then
the usage of the Smartmeter Model 150E shall be
cancelled and all the said Smartmeters will be returned en
masse to the Defendant; and
(iv)
the product warranty of the Smartmeter Model 150E was
to be the same as the Smartmeter SM150VR.
In spite of admitting and acknowledging the issues and/or problems,
and giving an undertaking to the Plaintiff and AKSB to resolve the
problems, as well as the Plaintiff’s repeated request to the Defendant
to take the defective Smartmeters and to send replacements, to fix
the Instrument Bond, to deliver the different model of Smartmeters,
as promised, the Defendant neglected, failed and/or refused to do so
and to resolve the Problems.
As a result of the Defendant’s neglect, failure and/or refusal, AKSB
had rejected all the Smartmeters under the Project and requested
the Plaintiff to replace all the Smartmeters, whether installed or
otherwise, with mechanical meters.
The Plaintiff subsequently returned all the Smartmeters purchased
under the Agreement and the Smartmeter Model 150E for being
defective, faulty and/or malfunctioned to the Defendant, and replaced
the Smartmeter with mechanical meters as instructed by AKSB. As
a result, the Plaintiff had incurred additional cost.
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However, the Defendant vide its letter dated 12.6.2012 refused to
accept all the Smartmeters returned by the Plaintiff. The Plaintiff
stated that the Defendant had failed to conform with and had
breached the terms and conditions of the Agreement in respect
of the supply of the Smartmeters for the said Project. The brief
particulars of the Defendant’s said breach of the Agreement are
as follows:
(i)
supplying the Smartmeters which are not of merchantable
quality and not fit for the purpose of the Project;
(ii)
failing, neglecting and/or refusing to strictly conform to
the Technical Specifications of the Smartmeters, attached
to the Agreement;
(iii)
continuously failing, neglecting and/or refusing to replace
the defective Smartmeters despite numerous reminders;
and
(iv)
continuously failing, neglecting and/or refusing to take
remedial action to overcome and prevent recurring
problems to the said defective Smartmeters despite
numerous reminders.
The Defendant according to the Plaintiff refused to perform its
obligations in entirety under the Agreement, thus repudiating the
Agreement. It is the contention of the Plaintiff that due to the
Defendant’s repudiation and breach, the Smartmeters were rejected
in total by AKSB under the Project, and as a result the Plaintiff
had
to source for and procure mechanical meters as replacement
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of the rejected Smartmeters for the entire Project from another
supplier, thus incurring further loss and damage.
The Agreement was repudiated by the Defendant and the said
repudiation was accepted by the Plaintiff. The Plaintiff claimed a
sum RM10,079,126.20 being the amount paid to the Defendant
together with damages and loss suffered as a result of the said
repudiation.
The Plaintiff’s solicitors issued a letter of demand dated 28.8.2012 to
the Defendant as a result of the said repudiation. Despite repeated
demands and reminders, the Defendant had failed, neglected and/
or refused to pay the amount of RM10,079,126.20 being the amount
paid to the Defendant together with damages and loss suffered by
the Plaintiff as a result of the said repudiation.
Defendant’s Defence and Counter Claim
The Defendant contended that the Plaintiff refused and/or neglected
to pay the sum of RM514,080.00 which should have been paid to
the Defendant after the warranty period of the Smartmeters had
lapsed. It is contended by the Defendant that at all material times,
the Smartmeters had been certified as a measuring instrument by
European Community, SIRIM QAS and SPAN.
In their defence the Defendant raised the following:
(a)
the Smartmeters were not stored properly thus badly
damaging the Smartmeters causing the display to be
faded or with blank display;
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(b)
the Plaintiff acted against the advice of the Defendant
and/or did not comply with the Instructions for Storage,
Handling and Installation Manual of the Smartmeters;
(c)
the total rejected Smartmeters sent to the Defendant
were 7,027 units only and not 60,425 as alleged by the
Plaintiff;
(d)
the Smartmeters supplied to the Plaintiff were based
on the requirement of the Plaintiff for the said Project,
whereby the requirement was based on a tender
advertisement in the New Straits Times;
(e)
the Plaintiff failed and/or neglected to carry out checks
for the underground electricity surge and/or to fit the
necessary Instrument Bond as illustrated in Figure 8
Instructions for Storage, Handling and Installation Manual;
(f)
the Plaintiff failed to install the Smartmeters with the
Instrument Bond in accordance with the Instructions for
the Storage, Handling and Installation Manual that have
caused the battery to drain abnormally and the readings
of the Smartmeters to fluctuate thereby affecting the
readings of the Smartmeters;
(g)
the Plaintiff did not order from the Defendant the
Instrument Bond to be installed;
(h)
the Plaintiff did not inspect and clean up the upstream
water pipeworks where iron filings were found in the
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Smartmeters and the said iron filings have shortened
the internal measurement electrode of the Smartmeters
resulting in intermittent or erratic readings;
(i)
the warranty period of one year for the delivered
Smartmeters had expired and therefore the Plaintiff had
no right to return the Smartmeters and/or make any claim
against the Defendant;
(j)
the Plaintiff had failed to properly inspect all the
Smartmeters
received
from
the
Defendant
and/or
informed the Defendant within 14 days from the date
of receipt that the Smartmeters were faulty as provided
for under the Terms and Conditions of the Purchase
Order; and
(k)
in the early part of 2012, 100 Smartmeters were tested in
a pilot scheme test in Kota Bharu and they were found
by AKSB to be problem free.
The Defendant further submitted that SPAN was satisfied with its
report which it had furnished in December 2012, that the
Smartmeters were working satisfactorily. The Defendant contends
that it had, at all material times satisfactorily performed its
obligations.
The Defendant counter-claims against the Plaintiff for the sum of
RM514,080.00 being the retention sum held by the Plaintiff.
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The Trial
The trial commenced on 7.10.2013 and continued on 8.10.2013,
9.10.2013, 29.10.2013, 24.2.2014, 25.2.2014 ending on 26.2.2014.
A total of eight witnesses were called to give evidence, that is, five
(5) Plaintiff’s witnesses and three (3) witnesses for the Defendant.
The documents referred during the trial proceedings are as follow:(i)
Bundle of Pleadings;
(ii)
Ikatan Dokumen-dokumen (Plaintif) marked as A1 –
which during the course of the trial, both parties agreed
for its placement to be under Part B, that is agreed as
to existence but subject to cross-examination;
(iii)
Ikatan Dokumen-dokumen (Plaintif) marked as A2 –
which during the course of the trial, both parties agreed
for its placement to be under Part B, that is agreed as to
existence but subject to cross-examination; and
(iv)
Ikatan Dokumen Defendan marked as B.
After the commencement of the trial, i.e. on 28.10.2013, the Plaintiff
decided to file a further bundle of documents containing the complete
Tender documents for the NRW Kelantan Project with the full
Technical Specifications However, the admission of the said
document was disallowed as directions for filing of all documents
pertinent to the trial were given during case management on
18.7.2013. The Parties were present during the case management
and had notice of the directions of this Court to file the Common
Bundle of Documents by 17.8.2013. The Defendant also attempted
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to file an additional bundle of documents which was also disallowed
by this Court based on the same reason.
The witnesses who testified in Court were as follows:The Plaintiff
(i)
Dato’ Teo Yen Hue (PW1) – the CEO of Suruhanjaya
Perkhidmatan Air Negara (SPAN);
(ii)
Ms. Chai Ai Nai (PW2) – the former General Manager,
Water Resources of the Plaintiff for the Kelantan NRW
Project;
(iii)
Mr. Lee Choon Weng (PW3) – the current General
Manager, Water Resources of the Plaintiff;
(iv)
Tuan Haji Wan Mohd. Zamri Bin Wan Ismail (PW4) –
Ketua Jabatan Teknikal dan Pengeluaran Air Kelantan
Sdn. Bhd. (AKSB); and
(v)
Encik Ahmadunissah Bin Abdullah (PW5) – Assistant
Project Manager of the Plaintiff, Kelantan NRW Project;
The Defendant
(i)
Encik Azmi Bin Musa (DW1) – Auditor Utama, SIRIM
QAS;
(ii)
Encik Hafizal Bin Abu Bakar (DW2) – Project Assistant
Manager of the Defendant; and
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(iii)
Mr. Leong Sze Choong (DW3) – former General Manager
of Operations for EPMB, the holding company of the
Defendant.
Decision and Reasons
The Plaintiff pleaded that the Defendant had failed to conform
with and had breached the terms and conditions of the Purchase
Order (PO) in respect of the supply of the Smartmeters for the said
Project. The particulars of the breach as pleaded in paragraph 23
of the Statement of Claim by the Plaintiff are as follows,
“ a. Supplying the Smartmeters which are not of merchantable quality and
not fit for the purpose of the Project;
b. Failing, neglecting and/or refusing to strictly conform to the Technical
Specifications of the Smartmeters, attached to the Agreement;
c. Continuously failing neglecting and /or refusing to replace the
defective Smartmeters despite numerous reminders; and
d. Continuously failing, neglecting and/or refusing to remedial action to
overcome and prevent recurring problems to the said defective
Smartmeters despite numerous reminders.”.
Issues
i.
Whether the Smartmeters supplied by the Defendant was not in
conformity with the Technical Specifications.
ii.
Whether the Smartmeters supplied by the Defendant were of
merchantable quality.
Compliance of the Technical Specifications
I propose to deal with regards to the compliance with the Technical
Specifications attached as Appendix I to terms and conditions of
the Purchase Order (PO). Pursuant to the terms and conditions of
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the PO dated 25.9.2008 between the Parties, the Defendant agreed
to supply to the Plaintiff 80,000 units of NRW-E-metg-003, a fully
electronic non mechanical water meter known as Smartmeter
(SM150VR) for a purchase price of RM10,800,000.00 for the said
Project. The Smartmeters were to replace all the original manual
water meters in the whole state of Kelantan,
“ 1) Salcon
Engineering
Berhad
(hereinafter
referred
to
as
the
“Employer”) is desirous of procuring Water Meters (hereinafter
referred to as “Equipment’) for the use at the Kelantan NRW
(hereinafter referred to as “Project”)…”.
The installation of the Smartmeters however, would be by contractors
appointed by the Plaintiff. The Defendant supplied and delivered
a total of 76,160 units of Smartmeters to the Plaintiff for the said
Project. During the course of installation (between 2009-2011) the
Plaintiff returned a total of 60,425 units out of the 76,160 units as
the meters supplied were found to be defective.
The Plaintiff in its pleadings stated that the Defendant had failed to
conform with and breached the terms and conditions of the PO,
“The Plaintiff states that the Defendant had failed to conform with and had
breached the terms and conditions of the Agreement in respect of the
supply of the Smartmeters for the said Project. The brief particulars of
the Defendant’s breach of the Agreement are as follows,
a…..
b. Failing, neglecting and/or refusing to strictly conform to the
Technical Specifications of the Smartmeters, attached to the
Agreement…
c….
d…..
……”.
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According to the terms and conditions of the PO (re: pg1-4A1) the
units supplied must conform with the Technical Specifications as
required by AKSB in its tender,
“ 7) Guarantee and Warranty
The Supplier warrants for 12 months from the date of delivery that
the Equipment supplied shall be guaranteed against any defect
in manufacturing, packing or handling and shall strictly conform
to the Technical Specifications (as per Appendix I attached) and
the accuracy of the Equipment shall be within the allowable
limit as well as fit for its intended purpose, i.e. for use in the
Project.”.
The terms of the PO expressly stipulates the meter to be supplied
“…shall strictly conform to the Technical Specifications”. The basis of
the Plaintiff’s claim against the Defendant as pleaded is the nonconformity of the Technical Specifications. Despite pleading the nonconformity of the Technical Specifications, the Learned Counsel for
the Plaintiff did not include the said Technical Specifications in the
Common Bundle of Document (CBD).
It was only when prompted by this Court during the trial that the
learned Plaintiff’s Counsel realized that they had not included in the
CBD the most important crucial piece of documentary evidence
which the Plaintiff’s case is dependent upon. An oral application was
then made during the trial by the Learned Counsel for the Plaintiff
to admit the Technical Specification as evidence. The Defence
Counsel objected to the admission of the documents as the trial
had commenced and that further instruction regarding the documents
would be needed from his client. After submissions by both Counsels
the application was dismissed as the Parties were given ample
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opportunities to file and exchange documents prior to the
commencement of the trial.
Furthermore, the Technical Specifications is not a newly discovered
document and the Plaintiff had knowledge and possession of the
said document from the very beginning. The first case management
before this Court was on 18.6.2013 and with consent of the Parties
trial dates were fixed from 7.10.2013 to 10.10.2013. Directions
were then given to the Parties to file the Bundle of Pleadings,
Common Bundles of Documents, Agreed Facts and Issues. Witness
Statements were to be filed and exchanged by 30.9.2013. Prior
to the case management before me the Parties had attended a
number case managements before the Learned SAR on 15.4.2013,
29.4.2013 and 3.6.2013.
The Plaintiff’s application to amend the Statement of Claim was
allowed on 4.9.2013. The final case management was then
conducted on 30.9.2013 with no indication or intimation by the
Plaintiff‘s Counsel that they had any intention to file further
documents. The Technical Specifications was not a newly discovered
evidence by the Plaintiff and in fact, formed the basis of the Plaintiff’s
claims against the Defendant. As such, the absence of such a
document would mean that this Court is unable to make any findings
whether the Smartmeters supplied by the Defendant did not conform
with the Technical Specifications. However, it is observed by this
Court that in its pleadings, the Plaintiff did not even particularize
or describe the specific technical non-compliance but merely made
a general assertion in the Statement of Claim that the Plaintiff did
not conform with the Technical Specifications.
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As the document containing the Technical Specifications was not
adduced as evidence and the Plaintiff did not specify or plead the
Technical Specifications that was not complied with this Court is
unable to determine whether the Smartmeters supplied by the
Defendant was not in conformity with the Technical Specifications as
provided by AKSB through the Plaintiff.
The Complaints
The Smartmeters supplied by the Defendant are fully electronic
non-mechanical water meters. The installation of the said meters
was the responsibility of the Plaintiff. Clause 13 of the terms and
conditions of the PO stipulated that the Defendant was to deliver
the meters to the project site at Kelantan latest by 30.6.2009 with
the 1st delivery for 20,000 units of the meters to be done by
30.10.2008 and subsequent delivery of 20,000 units per month.
The supply of the Smartmeters were delivered by the Defendant to
the Plaintiff in batches between 2009 and 2011. The Defendant
delivered a total of 76,160 units of the Smartmeters. A total of 60,425
units were rejected and returned to the Defendant. The Smartmeters
have a warranty period of 12 months from the date of delivery against
battery failure. The terms and conditions of the PO stipulates that
the Plaintiff may reject the Smartmeters supplied within 14 days
of delivery if it is found to be damaged or not conforming to the
Technical Specifications.
The Defendant delivered the first batch of Smartmeters to the Plaintiff
between September 2008 and June 2009. According to the terms and
conditions of the PO, the Plaintiff must inspect the meters for any
defects and notify the Defendant in writing of the rejection within
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fourteen days from the date of the delivery (Re: Clause 8). Under
the terms of the PO, the Plaintiff is required to check the meters for
any physical damage that are verifiable visually from the date of
receiving of each delivery and within fourteen days give notification
and evidence of damage (Re: Clause 9).
After the Smartmeters were installed at the consumers’ premises
there were complaints as follows:
i.
the Smartmeters were not recording any clear readings;
ii.
no meter readings appearing on the LCD or displayed
on the digital screen of the Smartmeters;
iii.
the Smartmeters were recording unreasonably high
bills, exceeding normal consumption of the premises;
iv.
the Instrument Bond (ECS) was not installed on each
Smartmeters;
v.
the Smartmeters were faulty and defective due to
problems with the Printed Circuit Board (PCB); and
vi.
the Smartmeters were faulty and defective due to battery
failure.
By a letter dated 11.11.2009, AKSB notified the Plaintiff that they
had received complaints regarding the meters supplied by the
Defendant. The Plaintiff then notified the Defendant of the complaints
with received with regards to the Smartmeters. However, no evidence
was adduced by the Plaintiff through any of its witnesses that they
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had physically checked the Smartmeters supplied for any damages
or for any non-compliance of the Technical Specifications.
Clause 8 of the terms and conditions of the PO provides,
“ Rejection
In the event that the Equipment supplied by the Supplier have been
discovered or determined to be damaged in any way, inferior to or not
confirming to the Technical Specification, the Employer shall notify the
Supplier in writing of the rejection within fourteen (14) days from the date
of delivery of the same.
The Supplier shall bear all its own costs, expenses or charges incurred
in order to remove and replace such rejected Equipment within the time
stipulated in the written notice.
If the Supplier shall fail to comply with the above, the Employer shall
have the right to procure replacement for the rejected Equipment and all
costs, expenses and losses thereby incurred by the Employer shall be
recovered from the Supplier.”.
Based on the documentary evidence and testimony, no evidence was
adduced by the Plaintiff that they had notified the Defendant in writing
rejecting the Smartmeters within fourteen days from the date of
delivery as required under the terms and conditions of the PO. No
explaination were given by the Plaintiff why they had not adhere to
the terms and conditions of the PO. Based on the foregoing, this
Court is satisfied that the Plaintiff did not give any notice in writing
rejecting the Smartmeter within the agreed stipulated time pursuant to
clause 8 of the terms and conditions of the PO.
Serial Numbers ‘08’ and ‘09’
It is contended by the Plaintiff that 60,000 units of the Smartmeters
with the serial number ‘08’ were not of merchantable quality and not
21
fit for its purpose. By a letter dated 5.8.2010, AKSB notified in writing
to the Defendant that the meters with serial number ‘08’ had serious
problems,
“....penggunaan smartmeters yang no. siri bermula 08.....mengalami
masalah yang serius selepas pemasangan.”.
However, AKSB did not mention that the meters were not fit for its
purpose but instead instructed the Defendant to replace the meters.
This was confirmed by the Plaintiff vide letter dated 9.8.2010.
Subsequently, AKSB then issued a letter to the Plaintiff dated
7.10.2010 and informed as follows,
“ SALCON ENGINEERING BERHAD JV
FALLAH TECHNOLOGY SDN BHD
15th Floor Menara Summit
Persiaran Kewajipan, USJ 1
47600 UEP Subang Jaya
SELANGOR DARUL EHSAN.
Tel: 03-8024 8822
Fak: 03-8024 8811
No. Kontrak :AKSB/P&P/UK/NRW/08/09
PROJEK: MENJALANKAN KAJIAN DAN KERJA PERLAKSANAAN
PROGRAM NRW SELURUH NEGARA KELANTAN
PER: ISU PENGGUNAAN SMARTMETER DI BAWAH PROJEK NRW
.
Dengan segala hormatnya perkara di atas dan keputusan mesyuarat
bersama SPAN, pihak AKSB, PZK Sdn Bhd dan pihak kontraktor dengan
pembekal smartmeter bahawa masalah bacaan tidak keluar pada skrin
sebagaimana yang berlaku di Negeri Kelantan adalah disebabkan
masalah yang terjadi kepada PCB (Print Circuit Board) yang dikesani
semasa pembuatan di kilang smartmeter iaitu bagi batch dan pembuatan
tahun 2007-2008. Manakala bagi masalah berkaitan bil tinggi yang
tidak munasabah yang direkodkan adalah disebabkan terdapatnya
kebocoran arus elektrik di lokasi pemasangan smartmeter tersebut
yang menyebabkan system elektronik meter terganggu yang
menyebabkan bacaan meter tidak betul.
Bagi menyelesaikan masalah yang dihadapi oleh pihak AKSB, pada
mesyuarat tersebut pihak AKSB telah memutuskan supaya metermeter yang bermasalah dengan PCB keluaran tahun 2007-2008
ditarik balik di tapak yang telah dipasang di premis dan yang masih
ada dalam stok pihak kontraktor. Pihak kontraktor diminta
menukarkannya dengan smartmeter keluaran PCB tahun 2009 yang
didakwa oleh pihak pembekal bahawa masalah PCB telah diatasi.
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Manakala masalah smartmeter yang merekodkan bil tinggi pula, pihak
kontraktor dikehendaki mengadakan pemasangan ‘instrument bond’ bagi
setiap meter yang dipasang di tapak.
Pihak kontrakor pada mesyuarat tersebut telah bersetuju dengan
keputuan yang diambil oleh pihak AKSB dan akan membuat tindakan
selanjutnya termasuk berbincang dengan pihak smartmeter berhubung
dengan masalah tuntutan caj tambahan.
Sehubungan dengan itu, pihak tuan adalah dikehendaki menyegerakan
kerja-kerja pemasangan smartmeter yang menggunakan PCB keluaran
tahun 2009 termasuk menggantikan smartmeter sediada yang dipasang di
tapak yang keluaran tahun 2007-2008.
Pihak kontraktor juga dikehendaki mengadakan pemasangan instrument
bond terhadap meter-meter yang telah dan akan dipasang bagi mengelak
dari berlakunya bil yang tinggi yang akan menyebabkan masalah kepada
penggunaan AKSB.”.
The aforesaid letter from AKSB further confirmed that the cause
of the high readings was due to the electricity leakages and not due
to any manufacturing defect.
After identifying the cause of the problems, the Defendant replaced
and installed Smartmeters with ECS approved by SPAN. By a letter
dated 8.5.2011 AKSB informed the Plaintiff,
“ Perkara diatas adalah dirujuk dan lawatan pemeriksaan ke kilang
smartmeter (EP Manufacturing Bhd) di kawasan Perindustrian Shah
Alam pada 4/5/2011 oleh wakil AKSB (Ir. Mohd Zain Ismail) dan
wakil dari PZK (Ir. Kamal & En. Zahlan) serta pihak kontraktor Salcon
Engineering Berhad (Ir. Lee Chon Wang) adalah berkaitan.
2. Susulan daripada lawatan tersebut beberapa isu telah dibincang
dan dipersetujui bersama Pengurus Pengeluaran EP Manufacturing
(En. Rizal) sebagaimana berikut:
i. Pihak pembekal telah bersetuju untuk membuat penghantaran
ke tapak smartmeter model 150-E pada 13/5/2011 (Jumaat)
sebanyak 2000 unit.
ii. Bagi penghantaran baki terhadap smartmeter yang rosak
akan diganti dengan model 150VR. Penghantaran ke tapak
akan dilakukan pada 20/5/2011 iaitu sebanyak 3000 nos. Baki
penghantaran akan dilakukan setiap minggu sehingga kepada
kuantiti yang dikemukakan oleh pihak kontraktor.
23
iii. Kontraktor dikehendaki memulakan pemasangan meter
ditapak sejurus selepas bekalan meter sampai iaitu pada
14/5/2011.
Untuk makluman, perbincangan mengenai isu penghantaran dan
pemasangan smartmeter model SM150E telah dibuat semasa Mesyuarat
Teknikal dan Kemajuan Projek No. 28 (4/2011) pada 21 April 2011 yang
telah dipengerusikan oleh penandatangan. Hasil daripada perbincangan,
pihak kami telah merumuskan sebagaimana berikut:
a. Sejumlah 13,000 unit smartmeter model SM150VR yang masih
berada di dalam simpanan stor Salcon yang telah sahkan
berfungsi sepenuhnya oleh pihak Circle Ring, telah ditolak untuk
pemasangan disebabkan ianya terdiri dari meter yang
mempunyai no. siri 08XXXXXXXXX – batch smartmeter yang
mempunyai kadar kerosakan yang tertinggi.
b. Pihak Circle Ring telah berjanji untuk menghantar sebanyak
5,000 unit smartmeter model SM150E pada bulan May 2011
bagi menggantikan model SM150VR yang telah rosak.
Sehingga 23 April 2011 pihak kontraktor telah menerima
sebanyak 500 unit smartmeter model SM150E untuk dipasang.
c. Seperti yang telah dipersetujui sebulat suara di dalam
mesyuarat tersebut, pihak AKSB berhak untuk menolak
keseluruhan batch smartmeter model SM 150E yang dibekalkan
sekiranya berlaku sebarang kerosakan atau kegagaln
berfunsi.
d. Pihak AKSB masih menunggu pihak Circle Ring untuk
menghantar wakil teknikal bagi memeriksa pemasangan
smartmeter di tapak.
e. Pihak Circle Ring perlulah memastikan bahawa meter model
SM150E adalah model yang lebih baik dari segi kualiti dan juga
spesifikasi berbanding dengan model SM150VR. Justeru itu
pihak pembekal diminta untuk memberikan ‘warranty certificate’
untuk setiapunit meter yang dibekalkan.
f. Adalah menjadi tanggungjawab pihak Circle Ring untuk
memastikan setiap meter yang dibekalkan untuk kegunaan
AKSB mengikuti segala piawaian dan standard yang telah
ditetapkan oleh pihak SIRIM dan SPAN serta mendapat sijil
kelulusan.”.
The aforementioned letter confirmed that the Defendant was to
replace the Model 150-E with Model 150VR and that the Plaintiff
had agreed as well as accepted the offer of replacement of the
24
defective meters by the Defendant. The replaced meters were to
be delivered by 14.5.2011. The letter did not specify the defects but
merely states that the meters with the serial number “08” had a high
rate of defects. By this letter, the original delivery date stipulated in
terms and conditions of the PO was extended to 14.5.2011.
Having heard the testimonies of the witnesses of both the Plaintiff’s
and the Defendant’s and based on the evaluation of the evidence
adduced, this Court is satisfied that the meters supplied were of
merchantable quality. The cause of the high readings recorded was
not due to any manufacturing defects or non-compliance of technical
specification. The Defendant upon being alerted of the complaints
and with consent of the Plaintiff and AKSB rectify and replace the
meters.
Sticker Labels
The first complaint by AKSB was with regards to the quality of
the sticker labels with the serial numbers of the Smartmeters. By a
letter dated 5.4.2009 (Re: pg 15 A) AKSB requested that the sticker
labels be replaced with engraved serial numbers. It was agreed and
proposed by the Defendant. This was confirmed by the Plaintiff’s
own witness, PW2 through her Witness Statement (WS) that the
Defendant would undertake the delivery of engraved Smartmeters
in 3 stage as requested by AKSB as follows,
i.
to engrave and deliver the completed 16,200 units of
Smartmeters from Shah Alam;
ii.
to engrave and deliver the completed 15,720 units of
Smartmeters from Shah Alam; and
25
iii.
to send the engraving equipment, machinery and workers
to Kota Bharu to engrave the 48,080 that has been
delivered
by the Defendant.
No evidence was adduced by the Plaintiff through any of its
witnesses that the requirement to engrave the serial numbers on
the Smartmeters was in fact a condition under the Technical
Specifications and failure to do so would mean that the Defendant
was in breached of the PO.
However, based on the correspondence between the Plaintiff and
the Defendant it was a request from AKSB after the Smartmeters
were delivered. At a discussion that was held on 15.4.2009 between
the parties with AKSB it was mutually agreed that the engraving of
the serial number will be done on the side of the meter body.
Samples of the engraved Smartmeters were couriered to AKSB for
approval on 22.4.2009. AKSB acknowledged that engraving is
preferred. The Defendant through its letter to the Plaintiff dated
5.5.2009 (Re: pg 16-17 A1) had informed that the Smartmeters are
produced with the Serial Number stickers and have been installed in
Korea, the Philippines and Europe without any problems with the
sticker labels.
Based on the evidence the issue with regards to the sticker labels
cannot be regarded as a manufacturing defect and that the said
meters supplied were not of merchantable quality. It was not even
a requirement by AKSB when the Defendant tendered for the supply
of the Smartmeters. It was only after delivery that the request was
made by AKSB to engrave the meters supplied pursuant to the PO.
Neither can it be a non compliance of the Technical Specification as it
26
was never a requirement from the very beginning that with or without
the engraved the serial number the Smartmeter is still fit for its
purpose of the project.
Therefore, based on the circumstances of the case and the evidence
before this Court, there was no evidence adduced that the sticker
label is in fact a manufacturing defect or even a technical requirement
stipulated in the technical specification. The Defendant therefore did
not breach the terms and conditions PO as alleged by the Plaintiff.
Printer Circuit Board (PCB)
After the Defendant was notified of the complaints with regards to the
PCB it took steps to check and test individually the faulty units. The
Defendant’s principal, Severn Trent UK’s representative, Mr. Alex
Elder, came to Kota Bharu to investigate the complaints. It was
discovered that the faults were due to the manual soldering of a PCB
component. 176 units were found to be faulty due to manufacturing
defects. The evidence shows that the Defendant took steps to
replace the 176 units with new SM150VR Smartmeters complete
with engraving as requested. The Plaintiff did not reject the units after
it was replaced.
Instrument Bond
An instrument bond is a strip of wire to conduct static electricity
throughout the metal pipeworks in the event there is a static
discharge from external sources affecting the pipeworks. It was
discovered that the high readings was due to electricity leakages.
After the discovery of the electricity leakages, the Defendant advised
the Plaintiff to install ECS. The Instrument Bond Kit was not part of
the PO as it is considered as an accessory and sold separately.
27
Each Smartmeters delivered comes with the instruction for storage,
handling and installation as well as,
i)
1 set meter coupling/meter tail; and
ii)
1 set 2 washer 45mm.
The Defendant admitted in evidence that the Plaintiff had enquired
about the Instrument Bond. According to the Defendant (DW3),
Instrument Bond is normally used in temperate countries where
static electricity is common as the static electricity will affect the
readings.
When it was discovered that in certain locations in Kelantan there
were cases of leakages of electricity underground, it was then
suggested by the Defendant to install an instrument bond to the
Smartmeters. After the Instrument Bond was installed the readings of
the usage of water came back to normal. This was confirmed by
AKSB through its letter dated 20.4.2010 (Re:pg 58 A1),
“ Susulan daripada pemasangan ‘Instrument Bond’ yang telah dilakukan
kepada Smartmeter yang mengalami masaalah bacaan tinggi oleh wakil
syarikat Circle Ring Network Sdn. Bhd….pada 23.2.2010 dan 24.2.2010
didapati rekod pengunaan air selepas pemasangan ‘Instrument Bond’
menurun hampir menyamai rekod pengunaan air semasa mengunakan
meter mekanikal…”.
PW1, the Chief Executive of Suruhanjaya Perkhidmatan Air Negara
(SPAN) told the Court that he had issued a letter requesting the
Defendant to prepare a report explaining the complaints. A number
of meetings were held which was attended by the Plaintiff, Defendant
and AKSB. At the meeting held on 23.8.2010, it was confirmed that
the high meter readings was caused by electrically leakage,
28
“ 3.6 Untuk meter-meter yang menunjukkan bacaan yang tinggi pula
ia disebabkan oleh kebocoran arus elektrik yang secara tidak
langsung mempengaruhi medan magnet yang ada pada meter
tersebut.”.
The Defendant also informed the meeting that TNB had confirmed
that the occurrences of electrical leakages but could not confirmed
the exact number of locations,
“ ….telah membuat semakan dengan pihak TNB dan TNB mengesahkan
memang terdapat kes-kes kebocoran arus elektrik tetapi tidak dapat
dipastikan jumlah lokasi yang terlibat.”.
The high readings complained of was due to electrical leakages – an
unexplained phenomenon. PW2, during cross-examination also
testified that the quotation for the specification did not mention that
the Smartmeters would be installed in a static electricity environment.
PW2 admitted that the Plaintiff did not carry out any test in Kelantan
before the meters were installed. The reason was because the
Plaintiff followed the specifications as required by AKSB. It was
further admitted in evidence by PW2 that the issue of the electrical
leakages was not brought to the attention of the Defendant.
PW2 during cross-examination confirmed that the meters offered
to the client, AKSB was based on the tender. Based on the both oral
and documentary evidence, this Court finds that the Defendant had
taken steps to rectify the problems of the high readings by installing
the instrument bond. The Plaintiff failed to prove that the high reading
was due to any technical non-compliance by the Defendant or a
manufacturing defects. The electrical leakages was an unexpected
and unexplained occurrence which not even mentioned in the tender.
29
The Defendant supplied the meters as per the tender which did
not take into consideration the occurrence electrical leakages.
Nevertheless after the discovery of the electrical leakages the Plaintiff
redesign the ECS and supplied the ESC at its own cost. The
discovery of the electrical leakages was after the installation of the
meters. The on the evaluation of the evidence, this Court is satisfied
that the supplied were Smartmeters was of merchantable quality.
The problem with regards to the high readings was not due to the
meters supplied being defective but due to the underground
electricity leakages.
Rejection of the Smartmeters
PW2 gave evidence that the specification required was given by the
Plaintiff’s
consultant.
PW2
also
confirmed
that
the
tender
specifications which must be complied with stated in the tender
documents would be the full specifications from AKSB. None of
the Plaintiff’s witnesses had testified that the Smartmeters delivered
were inspected and rejected within 14 days after the delivery on
the ground that it did not conform with the Technical Specification.
DW1, from SIRIM QAS International gave evidence that the
Smartmeters was approved by SIRIM and the SIRIM Certificate was
issued up to July 2014. This evidence remained unrebutted and
unchallenged by
the Plaintiff
The evidence adduced by the Defendant establish that the
Defendant had supplied and delivered the Smartmeters to the
Plaintiff according to the terms and conditions of the PO. The
Plaintiff is therefore deemed to have accepted the meters which
were duly delivered according to the terms and conditions of the
said PO.
30
The Installation
PW2 also confirmed that the Plaintiff did not have any trained installer
for the Smartmeter and had in fact procured the services of subcontractors for the installation of the said water meters. However, no
evidence was adduced by the Plaintiff that the sub-contractors had
complied with the installation instructions. The Plaintiff did not call
any of the installers to testify confirming that they had installed
according to the instructions provided by the Defendant. No evidence
was adduced by the Plaintiff to show the Smartmeters were defective
or faulty due to the non-compliance of the Technical Specifications
and that despite the meters being properly installed according to
instructions, the meters could not be used.
From March to September 2012, the Defendant had installed 100
units of the Smartmeters as a Pilot Scheme. AKSB in its report
(page 16-82 D) had stated that the said 100 meters were operating
satisfactorily.
Storage of the Smartmeters
It was argued by the Defendant that the Plaintiff did not store the
Smartmeters properly. DW3 who was the General Manager of
Operations of the Defendant gave evidence that on 11.11.2010, it
was discovered that the Plaintiff had kept the Smartmeters in an open
space. The original boxes were badly damaged due to rain and
sunlight. The Smartmeters should have been stored in controlled
conditions away from direct sunlight and must remain boxed until
installation. The evidence adduced shows that the Smartmeters were
not stored properly by the Plaintiff thus causing meters to be
damaged.
31
The Warranty
It was argued by the Plaintiff that if the delivery of the Smartmeters
did not complied with the Technical Specification, the Plaintiff would
have not have made the final payment of RM672,000.00. The
expiration of the warranty period of 12 months would have been on
24.8.2010. The Defendant however, gave evidence that it never
received any notice in writing from the Plaintiff. The terms and
conditions of the PO provides as follows:(i)
a warranty period of 12 months from the date of delivery
against battery failure;
(ii)
the Plaintiff may in writing reject the Smartmeters
within 14 days of delivery if it is found damaged or not
conforming to the Technical Specification; and
(iii)
the Defendant is to supply and deliver the Smartmeters
to the Plaintiff as per the PO.
Based on the evidence of DW3 and supported by the evidence of
PW2, the last delivery was delivered on 25.8.2009. The expiration
of warranty period of 12 months would be on 24.8.2010. Despite
the expiration of the warranty period, parties were trying to resolve
the problem.
The law on the breach of warranty was explained by Abdul Malik J
(as he then was) in the case of Universal Cable (M) Bhd. v. Bakti
Arena Sdn. Bhd. & Ors [2000] 3 CLJ 375 as follows:
“ Now, when there is a breach of warranty, the contract remains in
force and the first defendant as the buyer is restricted to a claim in
damages. Section 12(3) of the SGA defines a warranty as a stipulation
32
collateral to the main purpose of the contract, the breach of which gives
rise to a claim for damages but not to a right to reject the goods and
treat the contract as repudiated. Section 12(4) of the SGA enacts that
whether a stipulation in a contract of sale is a condition or a warranty
depends in each case on the construction of the contract.
The stipulation may be a condition, though called a warranty in the
contract. Section 12(1) of the SGA enacts that a stipulation in a contract
of sale with reference to goods which are the subject thereof may be a
condition or a warranty. Thus, in order to satisfy the definition of a
warranty, there must, first, be an agreement between the parties, a
promise that the representation is or will be true (Behn v. Burness [1863]
3 B & S 751 at 755; Bentsen v. Taylor, Sons & Co. (2) [1893] 2 QB 274
CA; Heilbut, Symons & Co Ltd v. Buckleton [1913] AC 30, HL; Oscar
Chess Ltd v. Williams [1957] 1 All ER 325, [1957] 1 WLR 370, CA;
and Dick Bentley Productions Ltd v. Harold Smith (Motors) Ltd [1965] 1
WLR 623, CA). Secondly, the agreement must be collateral to the main
purpose of the contract and it is for the purpose of transferring the
property in and the possession of the goods of the description contracted
for the buyer. The warranty is said to be collateral because the breach
of it, unlike the breach of a condition, is not the breach of the whole
consideration (Wallis, Son and Wells v. Pratt and Haynes [1910] 2 KB
1003 at 1012). Everything hinges on the contract. Whether a stipulation
in a contract of sale is a condition the breach of which gives rise to
a right to treat the contract as repudiated, or a warranty, the breach
of which may give rise to a claim for damages, depends in each
case on the construction of the contract itself (Cehave NV v. Bremer
Handelsgesellschaft mbH, The Hansa Nord [1976] QB 44, [1975] 3 All
ER 739,CA; Tradax International SA v. Goldschmidt SA [1977] 2 Lloyd’s
Rep 04; Bremer Handelsgesellschaft mbH v. Vanden Avenne - I zegem
PVBA [1978] 2 Lloyd’s Rep 109, HL; and Bnge Corpn v. Tradax
SA [1981] 2 All ER 513, [1981] 1 WLR 711 HL). As demonstrated,
s. 12 of the SGA expressly provides that a term essential to the main
purpose of the contract where a breach of which will entitle the injured
party to terminate the contract, or that a term is collateral to the main
33
purpose of the contract where its breach gives rise only to a claim for
damages.”.
What is meant by goods not of merchantable quality? Mah Weng
Kwai, JC (as he then was) in Asia Pacific Information Services
Sdn. Bhd. v. Cycle & Carriage Bintang Berhad & Anor Mercedes
Benz Malaysia Sdn. Bhd. [2010] MLJU 233 referred to the Federal
Court case of Seng Hin v. Arathoon Sons Ltd. [1968] 1 LNS 134;
[1968] 2 MLJ 123 where it was held that:
“...in order to show that the goods were not of a merchantable quality it
had to be shown that the goods were of no use for any purpose for which
such goods would normally be used and were therefore not saleable
under that description.”.
The Federal Court in Seng Hin v. Arathoon Sons [1968] 1 LNS 134
referred to the case of Barlett Sidney Marcus Ltd [1965] 1 WLR
1013 at page 1016,
“ I take the tests as to merchantability stated by Lord Wright in Cammell
Laird & Co v. Manganese Bronze and Brass Co Ltd and Grant v.
Australian Knitting Mills Ltd. In the Cammell Laird case, Lord Wright said
the goods were unmerchantable if they were of no use for any purpose
for which such goods would normally be used.”.
In the case of Lau Hee Teah v. Hargill Engineering Sdn. Bhd. &
Anor [1979] 1 LNS 40 the Federal Court held:
“ From the evidence in this case I find that all of the defects were defects
which could be put right either by replacement of the defective parts
or by simple repairs, and they were not defects sufficiently serious
to render the loader useless for any purpose for which it would usually
be used, and therefore it cannot be said that the loader was of
unmerchantable quality or unfit for the Plaintiff's purpose.
34
[26]
The tests of merchantability and of being reasonably fit for
the purpose have been propounded by Lord Denning MR in the case
of Bartlett v. Sidney Marcus Ltd [1965] 1 WLR 1013 in these words:
I take the tests as to merchantability stated by Lord Wright in
Cammell Laird & Co v. Manganese Bronze and Brass Co. Ltd. And
Grant v. Australian Knitting Mills Ltd. In the Cammell Laird case,
Lord Wright said the goods were unmerchantable if they were “of
no use” for any purpose for which such goods would normally be
used. In the Grant case he said that merchantable meant that the
article, if only meant for one particular use in the ordinary course, is
‘fit for that use.’ It seems to me that those two tests do not cover the
whole ground. There is a considerable territory where on the one
hand you cannot say that the article is ‘of no use’ at all, and on the
other hand cannot say that it is entirely ‘fit for use’. The article may
be of some use though not entirely efficient use for the purpose. It
may not be in perfect condition but yet it is in a useable condition. It
is then, I think, merchantable.
Cooper J in Mac Ewan & Co Ltd v. Ashwin [1916] NZCR 1028
when considering the provisions of s. 16(b) of the New Zealand
Sale of Goods Act 1908 which is in parimateriato s. 16(1)(b) of our
SGA, in a case involving the supply of a cream-separator machine,
held that a machine that is of “merchantable quality” is one that
is ‘reasonably capable of performing the work for which it was
designed.”.
The Plaintiff failed to show that the Smartmeters supplied by the
Defendant could not function, unfit for the purpose and was not
of merchantable quality. No evidence was adduced by the Plaintiff
that the meters could not be used for the purpose for which it would
normally be used. In light of the cited cases, it cannot be said that the
Defendant had breached the condition of merchantable quality and
fitness. Based on the documents and the evidence adduced, that
35
there was no breach of the warranty by the Defendant. In fact, when
the complaints were raised by AKSB as well as the Plaintiff, the
Defendant had at all times taken steps to rectify the problems.
The Plaintiff have taken delivery of the Smartmeters supplied by
the Defendant and therefore must be held accountable for the
payment of those meters supplied. In Universal Cable (M) Bhd.
v. Bakti Arena Sdn. Bhd. & Ors [2000] 3 CLJ 375 the High Court
held,
“ The goods that were delivered by the plaintiff were accepted by the
first defendant. There was no intimation emanating from the first
defendant that the goods sold and delivered were not in conformity
with the specifications as stipulated by the first defendant. The first
defendant’s conduct in accepting those goods that were delivered by
the plaintiff without notifying the latter of the alleged unmerchantibility
of the goods constituted an acceptance of the goods so delivered.
Section 42 of the Sale of Goods Act 1957 (Act 382) would certainly
be construed in favour of the plaintiff and that section enacts that:
The buyer is deemed to have accepted the goods when he
intimates to the seller that he has accepted them, or when the
goods have been delivered to him and he does any act in relation
to them which is inconsistent with the ownership of the seller,
or when, after a lapse of a reasonable time, he retains the
goods without intimating to the seller that he has rejected
them.”.
In my judgment there was acceptance of those Smartmeters and the
Plaintiff lost its right to reject those goods by the terms and conditions
of the PO. It must be borne in mind that any rejection of the
Smartmeters delivered must be according to the expressed terms
and conditions of the PO and failing which, the Plaintiff will be
deemed to have accepted the goods. In law, once the Plaintiff is
36
deemed to have accepted the goods, the Plaintiff would have lost its
right to reject the goods for breach of condition and can only claim
for damages. The Plaintiff did not reject the goods according to the
terms and conditions of PO.
It is important to note Section 41(1) of the Sales of Goods Act which
reads as follows:
“ Where goods are delivered to the buyer which he has not previously
examined, he is deemed to have accepted them unless and until he
has a reasonable opportunity of examining them for the purpose of
ascertaining whether they are in conformity with the contract.”.
The above said section provides the purchaser a right to examine
the goods delivered to him. Essentially, this means that if a purchaser
has examined the goods and has accepted them, he cannot
then reject them after a reasonable time. Section 42 of the Act
provides,
“ The buyer is deemed to have accepted the goods when he intimates to
the seller that he has accepted them, or when the goods have been
delivered to him and he does any act in relation to them which is
inconsistent with the ownership of the seller, or when after the lapse of
a reasonable time, he retains the goods without intimating to the seller
that he has rejected them.”.
Applying Section 42 of the Act and based on the evidence, this
Court is satisfied that the Plaintiff had accepted the Smartmeters
delivered to AKSB. By accepting the Smartmeters after delivery and
rectification of the defects by the Defendant, the Plaintiff is deemed
to have accepted the Smartmeters.
37
Counter Claim
I come now to the Counter Claim. The Defendant’s counter claim
against the Plaintiff is for the sum of RM514,080.00 held as retention
sum by the Plaintiff. The Smartmeters supplied to the Plaintiff
were based on the requirements of the Plaintiff. The Plaintiff never
informed the Defendant of the conditions of the site where the
Smartmeters were to be to installed. There was no indication at all of
electricity leakages and the need to install the ECS. In fact AKSB and
the Plaintiff themselves were unaware of such occurrences until the
installation of the Smartmeters.
The last delivery of the Smartmeters was delivered to the Plaintiff
as required pursuant to the PO. The Defendant delivered the
Smartmeters according to the terms of the PO and has also replaced
the Smartmeters. Furthermore, sometime in 2012 in a pilot scheme
test of 100 Smartmeters conducted in Kota Bharu, the said meters
were found to be operating satisfactorily. On 21.11.2012, AKSB
issued a report and confirmed that the 100 meters were operating
satisfactorily. Based on the circumstances of the case and the
evidence adduced, the Defendant had duly performed its obligation
under the PO.
The Plaintiff has not paid the 5% retention sum. The retention sum
should have been paid after the expiry of the warranty period. DW3
gave evidence which was not challenged or rebutted by the Plaintiff
that the expiry date for the last warranty is on 24.8.2010 as
the last shipment was delivered on 24.8.2009. The Defendant
is therefore entitled to the sum of RM514,808.00 retained by the
Plaintiff.
38
Conclusion
In coming to a decision, this Court has carefully weighed both the
oral and documentary evidence adduced by all parties, scrutinised all
the documents tendered and relied upon by the parties and
considered the written submissions as well as the authorities filed by
them. On considering the evidence as a whole especially the
evidence of all the Plaintiff’s witnesses vis-à-vis the pleadings, and
that of the Defendant, the Plaintiff has not proved its pleaded case
on a balance of probabilities against the Defendant. Hence, the
Plaintiff’s claims against the Defendant is dismissed with costs. The
counter claim of the Defendant is allowed with cost. The Plaintiff is to
pay to the Defendant the sum of RM514,080.00. After submissions
by Counsels, cost of RM30,000.00 was awarded to be paid by the
Plaintiff to the Defendant.
sgd.
(HASNAH BINTI DATO’ MOHAMMED HASHIM)
Judge
High Court of Malaya
Kuala Lumpur.
14th November 2014
39
Counsels:
For the Plaintiff/Appellant:
Salcon Engineering Berhad
[Messrs. The Chambers of Frida}
- Mow Eu Thuan
- Frida Krishnan
-
Veronica Dominic
For the Defendant/Respondent:
Circle Ring Network Sdn. Bhd.
[Messrs. Wee Choon Keong + Faaiz]
- Duna Mohd. Isa