Perwira Affin Bank V Smijaya Sdn. Bhd.& 4 Lagi

  

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IN THE HIGH COURT OF MALAYA AT KUALA LUMPUR (COMMERCIAL DIVISION)

 

SUIT NO. D2-22-1587-2000

 

BETWEEN

 

PERWIRA AFFIN BANK … PLAINTIFF

 

AND

 

1) SMIJAYA SDN. BHD.

 

2) TENGKU ZULKORNIN BIN TENGKU ALAUDDIN

 

3) ABDUL SAMAD BIN ABDULLAH

 

4) KOH CHWEE TAY @ KOR CHWEE NEE

 

5) TEO BOON HNAI … DEFENDANTS

 

GROUNDS OF DECISION

 

BEFORE HIS LORDSHIP TUAN ANANTHAM KASINATHER JUDGE HIGH COURT MALAYA

 

KUALA LUMPUR IN OPEN COURT

 

Background facts

 

Sometime in early 1997, the 1st Defendant was approached by University Hospital, Malaysia (‘UH’) seeking to appoint the 1st Defendant as the contractor to supply, install and commission advanced cancer treatment equipment to UH. According to the 4th

 

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Defendant (‘DW1 ’), a director of the 1st Defendant and the Defendants’ only witness in this case, the offer was on the basis that the contract be performed by way of a Turnkey Contract. According to DW 1, as the 1st Defendant had never undertaken a Turnkey Contract in Malaysia, it approached several banks in Kuala Lumpur about obtaining financing facilities to finance this Turnkey Contract. One of the banks approached by DW1 was the Plaintiff. The first representative of the Plaintiff with whom DW 1 had any dealings was one Mr. Hoh Choon Seong (now deceased). At that juncture, Mr. Hoh was the Manager of the Plaintiff’s Jalan Sultan Sulaiman Branch. According to DW1, following two or three meetings with Mr. Hoh, the 2nd Defendant and DW1 representing the 1st Defendant met with Mr. Hoh and the Plaintiff’s top management personnel, presumably directors of the Plaintiff (see answer to question 8 of WSDW 1), to discuss further the provision of financing facilities by the Plaintiff to the 1st Defendant.

 

Subsequent to this meeting, the Defendant requested and the Plaintiff granted to the 1st Defendant vide a letter of offer dated 30th April 1997 (hereinafter referred to as ‘the said letter of offer’), a non-checking overdraft facility of RM 800,000.00 and a combined Letter

 

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of Credit (LOC) cum Trust Receipt facility of RM 11,100,00.00 and a forex facility of US 3 million, subject to the terms and conditions stipulated in the said letter of offer. The Plaintiff and the 1st Defendant thereafter executed a Facilities Agreement dated 15th May 1997. Sec. 4.01 of this agreement required the 1st Defendant to provide security in the form inter alia of the 2nd to the 5th Defendants providing a joint and several guarantee and the 1st Defendant executing a deed of assignment of the contract payments due and payable to the 1st Defendant under the Turnkey Contract by UH. Pursuant thereto, the 2nd to the 5th Defendants executed letters of guarantee on 9th May 1997 and the Plaintiff and the 1st Defendant, a deed assignment on 15th May 1997. The UH though an Undertaking to the Plaintiff dated 3rd June 1997 consented to the assignment and undertook to remit all payments due under the Turnkey Contract directly to the Plaintiff.

 

The 1st Defendant thereafter utilised the overdraft, the Letters of Credit cum Trust Receipts and forex facilities granted by the Plaintiff. In breach of the terms of the facilities agreement, the 1st Defendant failed to maintain the facilities in a satisfactory manner and/or in accordance with the terms and conditions therein and in particular, failed to repay the Trust Receipts and Bill

 

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Receivables on the respective due dates. As at 31st March 2000, the 1st Defendant’s accounts with the Plaintiff showed a total outstanding balance of RM 2,985,243.79 with continuing interest calculated at the respective interest rates on the respective principal sums from 1st April 2000 to date of full payment thereof (hereinafter referred to as ‘the Said Outstanding Sum’), comprising the following:-

 

TYPE PRINCIPAL INTEREST RATE

 

CHARGED ON THE PRINCIPAL SUM

 

Trust Receipt RM 1,067,540.35 4.0% + BLR

 

(Chargeable on a monthly basis)

 

OUTSTANDING AS AT 31.3.2000

 

RM 1,256,077.34

 

Bills Receivable RM 943, 475.99 4.0 + BLR}

 

RM 1,010,522.40

 

RM 360,180.00 4.0 + BLR}

 

RM 430,403.90

 

Total

 

RM 248,276.25 4.0 + BLR} RM 288,240.15

 

(Chargeable on a monthly basis)

 

RM 2,619,472.59

 

RM 2,985, 243.79

 

By a letter of demand dated 25th April 2000, the Plaintiff through their solicitors, Messrs Shook Lin & Bok, demanded from the 1st Defendant the payment of the

 

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outstanding sum. The 1st Defendant failed to pay to the Plaintiff the outstanding sum or any part thereof. This default led to the filing of this claim. The first Defendant, in addition to resisting the claim, contends in the Counterclaim that the Plaintiff is indebted to it in the sum of RM 3,995,904.00. The gist of the Counter-claim will become apparent from the facts enumerated later in this judgment.

 

Operation of facility

 

The performance of the Turnkey Contract required the purchase of equipment, the payment of which involved the issuance of four usance Letters of Credit (LOC) in US Dollars by the Plaintiff. On 20th March1997, the 1st Defendant issued four purchase orders to the American vendor of the equipment (see pages 223-227 of Exh. B). The American vendor confirmed the purchase orders and the shipment date vide its fax transmission of 9th May 1997 (see page 238 of Exh. B). The vendor’s confirmation of the 1st Defendant’s purchase orders was conditional on the Plaintiff delivering to it an irrevocable LOC in favour of the vendor to be received 1 week before shipment, with the first two shipments expected on 22nd May and 17th June 1997. Under the terms of the contract between the 1st Defendant and the vendor, the 1st Defendant was

 

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granted a generous credit period for payment with 60% of the purchase price payable 120 days from date of shipment, the next 20%, 220 days from date of shipment and the final 20%, 300 days from date of shipment. The effect, in law, of this arrangement was that although the Plaintiff was required to deliver the LOC one week before the shipment dates in May and June 1997, the credit extended by the LOC was only negotiable through bills of exchange, by the vendor on the expiry of the credit period.

 

According to DW1, upon receipt of the confirmation from the vendor, he duly notified Mr. Hoh, about the vendor’s acceptance and Mr. Hoh then, required him to complete and lodge with the Plaintiff a documentary credit application. The 1st Defendant duly completed and submitted to the Plaintiff the documentary credit application on 5th June 1997 (see page 70 of Exh. B). This documentary application required the shipment of the equipment not later than 30th June 1997 and for the negotiation of the credit extended by the LOC, on the expiry of the credit period. The amount of the first LOC was US 1,976,000 but payable in three tranches with each tranch being negotiable on the expiry of the last day of the credit period of 120, 220 and 300 days respectively.

 

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Within 4 days of the application, the bank issued the LOC bearing number LOCTFC9700622 and debited the 1st Defendant’s bank account with the commission of RM 10,069.94 only. According to DW1, he received a call from Mr. Hoh around the time of the issuance of the LOC confirming the issuance and informing DW1 to expect the debit advice for the commission charges at the prevailing rate of 2.522. The 1st Defendant was duly provided with the debit advice statement dated 9th June 1997, advising it of the commission charges (see page 75 of Exh. B). The commission charges were calculated pursuant to sec. 3.16 of the Facility Agreement.

 

The US Dollar appreciated considerably against the Malaysian Ringgit between the application, in June 1997 and the date when the vendor negotiated the first tranch of the credit extended under the LOC in October 1997. In real terms, the appreciation amounted to this. In June 1997, the exchange rate was RM 2.522 to USD 1 whereas in October 1997 it was RM 3.34 for every USD 1. Naturally, this meant that when the vendor negotiated the first tranch of 60 % of US 1, 976,000 in October 1997, the 1st Defendant’s account was debited with an amount substantially more, then, would have been the case if the conversion and ensuing debit had taken place in June

 

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1997. According to DW1, just before the first tranch became due on 22nd October 1997, an employee of the Plaintiff contacted him enquiring whether the 1st Defendant had purchased the US Dollars for the first tranch payable under first LOC (see answer to question 15 of WSDW 1).Whereupon, DW 1 demanded clarification since, according to him, he had been led to believe that the Plaintiff had already purchased the US Dollars. DW1 was then advised to purchase the necessary US Dollars for the purposes of the LOC. DW1 was then required to purchase US Dollars through the Plaintiff’s forex department at the then prevailing rate of RM 3.34 for every USD 1 (see answer to question 15 in WSDW 1).

 

Basis of Counter-claim

 

The difference in the exchange rate between June and October 1997 forms the primary basis of 1st Defendant’s Counter-claim. The Counter-claim can be summarised to be that by oral representations amounting to a collateral contract, the Plaintiff undertook the responsibility to manage the exchange rate. The exchange rate to be managed in such of manner that the applicable exchange rate for all the four usance LOC’s would be RM 2.54 to USD 1. In other words, the Plaintiff through Mr. Hoh agreed to hedge/buy the US

 

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Dollar in advance so as to enable the 1st Defendant to enjoy the benefit of a fixed exchange rate for all the four usance LOCs. The Plaintiff, according to the 1st Defendant, in breach of this collateral contract failed to purchase US Dollars at the agreed rate of RM 2.54 to USD 1 or hedge the exchange rate in such a manner to ensure that the 1st Defendant had to pay for the four usance LOCs’ at the rate of RM 2.54 to USD 1.

 

The Defendant’s Pleaded Case

 

That oral representations amounting to a collateral contract were made by Mr. Hoh to the following effect: –

 

a) The Plaintiff was experienced in project financial management, and was convinced that the Supply contract was feasible and that the 1st Defendant’s profit forecast was attainable;

 

b) The Plaintiff was experienced in the financing of international sale and purchase of goods;

 

c) The Plaintiff was interested in joining hands with the 1st Defendant in the Supply Contract by inter alia financing the same;

 

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d) The Plaintiff will use its expertise and experience to manage and implement the financing facilities on behalf of the 1st Defendant, including rendering proper and necessary advice to the 1st Defendant;

 

e) The financing facilities provided by the Plaintiff will be able to accommodate the 1st Defendant’s needs and maintain the gross profit forecast of approximately RM 1,000,000.00;

 

f) The applicable exchange rate for the letters of credit that the 1st Defendant will purchase for the Supply contract will be fixed at RM 2.54 to USD 1 or lower;

 

g) The Plaintiff will ‘purchase’ or ‘book’ US Dollars on behalf of the 1st Defendant for the letters of credit that the 1st Defendant will purchase for the Supply contract, and minimise the effect of currency fluctuations; and

 

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h) The Plaintiff will ensure that the letters of credit purchased by the 1st Defendant are issued and delivered strictly in accordance with the 1st Defendant’s instructions and without delay.

 

(see paragraphs 5.5 and 5.6 of the Statement of Defence and Counter-claim)

 

Findings of Court

 

a) A Court of Law determines the merits of the claim and defence based on the evidence produced before the Court and not the parties pleadings. I have taken pains to set out the oral representations attributed to Mr. Hoh in the pleadings so as to enable me to compare the 1st Defendants pleaded case with its evidence in Court. DW 1, the 1st Defendant’s only witness, deals with the alleged oral representations in his answers to questions 7, 9 and 10 of WSDW 1.

 

I have read the answers to these three questions carefully and I am unable to discern any oral representations attributed to Mr. Hoh in any of these answers to the effect that the Plaintiff agreed :

 

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i. To use its expertise and experience to manage and implement the financing matters on behalf of the 1st Defendant, including rendering proper and necessary advice to the 1st Defendant, particularly, any circumstances which may adversely affect the exchange rate, and actions necessary to prevent or minimize losses resulting thereform;

 

ii. To accommodate the 1st Defendant’s needs and maintain the gross profit forecast of approximately RM 1,000,000.00;

 

iii. To ensure that the applicable exchange rate for the letters of credit that the 1st Defendant will purchase for the Turnkey Contract will be at the rate of RM 2.54 to USD1.00 or lower;

 

iv. To ‘purchase’ or ‘book’ US Dollars in advance on behalf of the 1st

 

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Defendant for the LOC that the 1st Defendant had to purchase for the Turnkey Contract, and minimize the effect of currency fluctuations and

 

v. To properly exercise its rights over the Escrow Account to assist the 1st Defendant to obtain the forecasted profit and to ensure smooth running of the Turnkey contract

 

(see answers to questions 7, 9 and 10 of WSDW1 -hereinafter collectively referred to as ‘the critical representations’)

 

The only evidence in the answers to these three questions consistent with the Defendant’s pleaded case, is that, the Plaintiff had plenty of experience in project financial management, was interested in the project, that the project was feasible and that the Plaintiff was interested in joining hands with the 1st Defendant on the Turnkey Contract. The representations attributed to Mr. Hoh in these answers, other than that concerning the joining of hands, is consistent with the Plaintiff as a bank merely informing any customer with a viable project, why the bank is prepared to finance the project. It is not clear

 

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as to what DW1 meant by joining hands, but if it meant a joint venture, its literal meaning, this is inconsistent with the normal functions of a bank and consequently highly improbable. Be that as it may, it came as no surprise to me when Counsel for the Plaintiff put it to DW1 that his answers to these three questions were all about his representations and nothing concerning the Plaintiff’s representations. DW 1 agreed to this question. Furthermore, answering the next question, that the only representations made by the Plaintiff are those set out in his answer to question 10, DW 1 agreed and added ‘they said they want to see the project completed on time. Nothing else’. Whilst he denied the suggestion that the Plaintiff never promised to hedge the exchange rate, in answer to the very next question, he agreed with counsel that the Plaintiff’s officers never promised to hedge the exchange rate.

 

Counsel for the Defendant strenuously submitted in his written submission that I must accept the existence of the oral representations and by reason thereof, the collateral agreement, simply because Counsel for the Plaintiff never suggested in cross examination to DW1 that there were no such meetings or that Mr. Hoh did not make the oral representations during these meetings. With

 

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respect, I disagree. In my judgment, Counsel for the Plaintiff quite correctly put it to DW 1 that his own evidence is that the sum total of all oral representations during all of these meetings by the Plaintiff was confined to his answers to question 7, 8 and 10 of WSDW 1. With reference to DW1 ’s answer to question 10, Counsel put it to him ‘that’s all that was said? Nothing else?’. DW 1 answer to this question was and I quote ‘they said they want to see the project completed on time. Nothing else’. I do not see the need for Counsel for the Plaintiff to allude further to the alleged meetings and the representations purportedly made by the Plaintiff’s representatives at such meetings when DW1 has, in no uncertain terms, answered that the contents of his answer to question 10 represents all of the Plaintiff’s representations save for the visit to the site. Nothing else. Furthermore, it must be borne in mind that it is DW1 ’s own evidence that his negotiations with Mr. Hoh, were followed by a meeting with the Plaintiff’s directors (see answer to question 8). In the absence of any evidence of the critical representations being repeated by Mr. Hoh in the presence of the Directors or the Directors themselves making the same representations, in my opinion, the representations attributed to Mr. Hoh are not binding on the Plaintiff. This must necessarily be so, as why else would Mr. Hoh require

 

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DW1 and the 2nd Defendant to meet the Plaintiff’s directors.

 

In my judgment, the discrepancy between the 1st Defendant’s pleaded case and its oral evidence calls for a credible explanation from the 1st Defendant, since the pleadings were prepared on a date much closer to the alleged breach of contract on the part of the Plaintiff. Since no credible explanation was forthcoming, I am inclined to attribute the discrepancy between DWl’s oral evidence and the Defendant’s pleaded case to DW1 ’s fear of cross-examination. Hence, the decision to depart from the 1st Defendant’s pleaded case and concede under oath that some of the oral representations attributed to Mr. Hoh were, in fact, DW1 ’s own inferences. This discrepancy is significant as evidenced by the use of precise words in quotes such as ‘purchase’ or ‘book’ in the pleadings but not in the answers of DW 1. Instead, they now appear as part of DW1 ’s answer to question 11, which represents the 1st Defendant’s belief only. Hence, the opening words to his answer to question! 1;

 

‘The Plaintiff clearly understood what Smijaya needed and what was required of the Plaintiff. By the Plaintiff’s response and requirements, Smijaya was led to believe that’

 

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Counsel for the Defendants then cites the case of Kluang Wood Products Sdn. Bhd & Anor v. Hong Leong Finance Bhd. & Anor (1999) 1 CLJ 1 as authority for the proposition that impressions formed by a party to a contract during negotiations, can give rise to a cause of action based on a collateral contract or collateral warranty, as was the case in Kluang Wood Products. Learned Counsel, in particular, relies on the passage in the judgment of the Chief Justice of Borneo, Chong Siew Fai (as he then was), which reads as follows ‘As regards the criticism that the representation rested on the impression derived by Chew from the negotiation with Pang rather than on Pang’s actual utterances, I fail to see why an impression, if properly formed from negotiation with someone, cannot form the basis of a representation. (see example Box v. Midland Bank (1979) 2 Llyod Rep 391) (discuss later). If there any doubt, it is for the opposing party to test the propriety or correctness of the alleged impression. In the instant case, Chew was not at all cross examined in this regard’.

 

With respect, in my opinion, the pronouncements of Chong Siew Fai CJ, in that case, do not assist the Defendant. First, the critical words in the passage quoted

 

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above are ‘if properly formed’. On the facts of that case, the issue revolved around whether representations had been made by the bank’s representative concerning the provision of end finance during negotiations. It was not in dispute that negotiations for end finance between the principal witness for the Plaintiff and the bank’s representative had taken place. Subsequently, the bank’s offer letter did incorporate an offer of end finance and which offer was accepted by the Plaintiff. The evidence of the Plaintiff’s principal witness concerning the representations made by the bank’s representative during negotiations concerning end finance was not challenged by the bank’ Counsel nor was there any cross examination. The bank’s representative did not give evidence and no credible explanation was proffered by the bank for the absence of this witness. Based on the aforesaid facts, the trial judge concluded that the bank’s representative, had, indeed, made the oral representations concerning end finance attributed to him by the Plaintiff’s principal witness. It is against this background, that His Lordship pronounced the words in the passage quoted above. Accordingly, in my opinion, on the facts of that case, there was a justification for the Court holding that the impression was ‘properly formed’.

 

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Clearly, this passage is of no help to the Defendant, in this case, as there was no mention of the Plaintiff buying or hedging US Dollars in either the letter of offer or the contracts executed by the parties. Furthermore, it is the 1st Defendant who has failed to call a material witness since, according to DW1, he was accompanied at these meetings by the 2nd Defendant. By DWl’s own admission, the 2nd Defendant is able to attend Court but did not do so (see page 15 of NE). The only contemporaneous documents relied upon by the 1st Defendant in support of the alleged collateral contract are Exh. 75 and 347 of Bundle B (see page 16 of Notes of Evidence – NE). The 1st Defendant relies on Exh. 75 of Bundle B as establishing the Plaintiff’s agreement to fix the rate at RM 2.522 for LOC TFC9700622 for the whole amount of USD 1,976,000. PW 1 denied this to be the case. This document was also relied upon by Counsel for the Defendants, as confirming that it was the Plaintiff’s responsibility to purchase or book US Dollars. This was also denied by PW1. With respect, in my judgment, the Defendant’s reliance on Exh. B page 75 is totally misplaced. First, this debit advice makes reference to the exchange rate of RM 2.52 to USD 1 because that was the prevailing exchange rate on that day and that day’s rate was used to calculate the contract rate/commission payable to the Plaintiff under the facility

 

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agreement for the issuance of the LOC. Secondly, there is a difference, in law, between issuance of the LOC and the negotiation of the credit extended by the LOC through bills of exchange drawn on the Plaintiff by the vendor. As explained earlier in this judgment, the negotiation of the LOC was in October 1997 although issued in June 1997. This was due to the lengthy credit period afforded by the vendor to the 1st Defendant. If the Plaintiff had, indeed, booked or purchased the US Dollars on 9th June 1997, the Malaysian equivalent would have been debited to the 1st Defendant’s account on that day and the 1st Defendant liable to pay interest on the same thereafter. The fact of the matter, is that, no such debit took place, simply because no booking or purchase of US Dollars took place on that day. It would have been apparent to the 1st Defendant from its monthly statements that on 9th June 1997, the Plaintiff had not purchased any US Dollars pursuant to the issuance of LOC TFC 9700622 on 9th June 1997. It is inconceivable that DW1 as a seasoned businessman would not have detected the absence of such a debit in the 1st Defendant’s account.

 

It is my finding that since the 1st Defendant was in receipt of monthly statements from the Plaintiff, it would have become aware from its June 1997 monthly

 

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statement that the Plaintiff had only debited its account with the commission charges but not the Malaysian Equivalent of any US Dollars. It is therefore disingenuous on the part of the 1st Defendant to rely on Exh. 75 of the Bundle B as affording the necessary contemporaneous documentary evidence of its claim to the existence of a collateral contract. Furthermore, reliance on this document is inconsistent with the 1st Defendant’s own pleaded case that the collateral contract was that the Plaintiff agreed to hedge the US Dollar at the rate of RM 2.54 to USD 1.

 

This leads me to the other exh. 347, the letter of 9th June 1997 written by DW1 to Mr. Hoh on behalf of the Plaintiff. The authenticity of this document was challenged by the Plaintiff on the grounds that they had no record of this document in their file. It is my finding that this document was probably written by DW1 because the contents of this document including the date of the same is consistent with DW1’s oral evidence under cross examination that the late Mr. Hoh had called him simultaneously with the issuing of the debit advice (see page 16 of NE) informing him of the exchange rate on that day being 2.522 and that he should expect a debit advise for the bank’s commission charges. In my

 

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judgment, DW1 probably did write this letter but this letter does not assist the Defendant’s case, either. It is my finding that exh. 347 of B was written probably as a result of a misunderstanding by DW1 of what was told to him by Mr. Hoh simultaneously with the issuance of the LOC and the debit advice of 9th June 1997. I make this finding because the exchange rate of 2.522 in Exh. 347 of B is identical to the rate quoted in the debit advice Exh. 75 of Bundle B. Secondly, DW1 in Exh. 347 of Bundle B, expressly refers to the number of the first LOC although, the debit advice (Exh. 75 B), was yet to reach the 1st Defendant. Thirdly, in the same letter, DW1 states and I quote ‘we will await your debit for the bank’s commission charges at the same rate’. This debit advise statement did reach the 1st Defendant shortly thereafter. DW1 must have realised when he received the June statement of the 1st Defendant, probably some time in July 1997 that the Plaintiff had only debited the account with the commission charges and no purchase of US Dollars had taken place. In my judgment, DW1 after initially being mistaken about Mr. Hoh’s representations on 9th June 1997, thereafter probably decided to take advantage of Mr. Hoh’s death by amending the Defence and Counterclaim of the 1st Defendant and for the first time attribute to Mr. Hoh the critical representations and that these

 

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representations were made not on 9th June 1997 but in the course of negotiations leading to the offer letter. For this reason, I dismiss DWl’s claim that Exh. 347 affords contemporaneous documentary evidence of Mr. Hoh’s oral representations. Admittedly, DW1 in the second half of the same letter raised the subject of the Plaintiff providing hedging services to protect the 1st Defendant’s profit margin. However, again, it is, in my judgment, more a case of DW 1 expressing his expectations to the Plaintiff rather than a confirmation of any earlier oral representations by the Plaintiff. Besides, for this letter to amount to a confirmation as per the 1st Defendant’s pleaded case, the exchange rate should be 2.54 and not 2.522.

 

My final ground for rejecting the Defendant’s defence and Counter-claim is that, it is not in dispute that subsequent to the negotiation of the first two usance LOC’s, the Defendant without raising any objection with the Plaintiff concerning its alleged failure to hedge or buy forward US Dollars in respect of the first two usance LOCs, proceeded to;

 

a) Apply for further Letters of Credit from the Plaintiff (answer 18 WSDW 1);

 

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b) Forward buy the US Dollars between September 1997 and April 1998 (Answer 18 WSPW 1) and

 

c) Allow the Plaintiff to utilise monies in the escrow account to fully settle two out the four Letters of Credit as is evident from the evidence of DW1 in cross-examination set out below;-

 

Notes of Evidence at page 17

 

Tharmy : You gave evidence that out of the four LCs, 2 were paid in full?

 

DW1 : Yes.

 

Tharmy : The payment was made from the escrow account?

 

DW1 : Yes.

 

Tharmy : Did the Plaintiff inform you when they deducted the payments from the escrow account:

 

DW1 : Yes.

 

Tharmy : You were aware that bank was not fixing the exchange rate. After that, you received regular notices from the bank. Did you raise any objection at that time?

 

DW1 : No.

 

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Notes of Evidence at page 18

 

Tharmy Refer to the page 251 of Bundle B. Despite knowing in September/ October that exchange rate was not fixed and that there is an amended letter of offer, did you take steps to persuade and insist a term be inserted to fix the exchange rate?

 

DW 1 I did not.

 

Tharmy : So in September/October, you were aware that the bank did not fix the rate. Despite that, you still applied for the second – fourth LCs?

 

DW 1 : Yes.

 

Counsel for the Plaintiff submitted that the conduct set out above demonstrated that the allegations of a collateral contract are an afterthought. Whilst a Court of Law is not permitted to look at subsequent conduct to interpret the terms of an agreement, our Courts generally do take into account subsequent conduct to ascertain the meaning attached to an agreement or its terms by the party to the agreement, whether mistakenly or otherwise. This is to prevent either party from claiming that the document meant something else on its true construction (see Sri Kelangkota-Rakan Engineering JV SB v. Arab Malaysian Prima Realy SB (2001) 1 MLJ 324 at 338. I

 

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agree with the submission of counsel for the Plaintiff that the conduct of the 1st Defendant subsequent to the execution of the contract is consistent with it having accepted the responsibility of buying the US Dollars itself.

 

Accordingly, I allow the Plaintiff’s claim against the Defendants in terms of prayers (a), (b) (i) (ii) (iii) and (c) of paragraph 17 of Enc. 1. Since Counsel for the Plaintiff agreed to abandon prayer (d) in lieu of costs on a party and party basis to be fixed by this Court, I order the Defendants to pay costs of RM 45,000 to the Plaintiff. I dismiss the Counter-claim of the 1st Defendant with costs. Since I have already awarded substantial costs in allowing the Plaintiff’s claim and since the claim and Counterclaim are closely related, I order the 1st Defendant to pay costs of RM 5,000 to the Plaintiff in respect of the Counterclaim.

 

Sgd.

 

(Y.A Tuan K. Anantham)

 

Pesuruhjaya Kehakiman Mahkamah Tinggi Kuala Lumpur

 

Date of Decision: 30th April 2010

 

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Counsels:

 

Ms. R. Tharmy

 

(Tetuan Shook Lin & Bok)

 

Mr. Douglas Yee

 

(Tetuan Douglas Yee)

 

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for the Plaintiff

 

for the Defendants

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