CASE OF THE WEEK

The first defendant had instructed the plaintiff, a Coach builder, to build a 40 seater Coach ('the said Coach'). The second defendant, a financial institution, by a letter of offer ('the letter of offer') approved the first defendant's request for loan to finance the purchase of the said Coach in the sum of RM380,511.20 ('the said loan") from the plaintiff. The first defendant paid a deposit of RM20,000 to the plaintiff as initial payment or deposit for the purchase of the said Coach and the said Coach was delivered to the first defendant on 1 June 2007. The said coach, however, was completely burnt down on 3 June 2007 and was beyond repair. The balance of the purchase price of the said Coach remained unpaid. Thus, the plaintiff claimed against the first and second defendants for the said balance purchase price of the said Coach, amounting to RM360,511.20. It was the first defendant's contention, inter alia, that it was the second defendant that had agreed to grant the first defendant a lease facility to finance the purchase of the said Coach and that it was the second defendant's responsibility to pay the balance claimed by the plaintiff. The first defendant also contended that the plaintiff had entered into an agreement with the second defendant without the consent and knowledge of the first defendant. The first defendant also filed a counterclaim against the plaintiff for damages for breach of contract. The second defendant contended, inter alia, that the disbursement of the said loan was subject to the pre-disbursement conditions as stated in the letter of offer and that the first defendant had failed to fulfil the pre-disbursement conditions which resulted in the said letter of offer being repudiated.

Held (entering judgment against first defendant; dismissing first defendant's counterclaim; dismissing plaintiff's case against second defendant):

(1) Notwithstanding the approval of the said loan by the second defendant, the first defendant was the buyer of the said Coach, which was evidenced by the letter of offer from the second defendant to the first defendant wherein the second defendant indicated its intention to hire the said Coach from the first defendant. The plaintiff pursuant to the agreement with the first defendant, had built the said Coach according to the agreed specifications, delivered the same to the first defendant and registered the ownership of the said Coach in the name of the first defendant and thus had fully performed the said agreement. (paras 10 & 12)

(2) The first defendant's contention that the plaintiff had entered into an agreement with the second defendant, without the consent and knowledge of the first defendant, to release the Coach to the first defendant prior to the disbursement of the said loan, was without basis and merits. In fact, the delivery of the said Coach to the first defendant was to enable and facilitate the disbursement of the said loan by the second defendant. (para 13)

(3) The second defendant's refusal to disburse the said loan to the plaintiff was due solely to the first defendant's failure to comply with the pre-disbursement conditions of the second defendant. Since the said Coach was delivered and ownership of the same was transferred to the first defendant, the risk of the said Coach had passed to the first defendant. Since the said Coach was burnt after the ownership and risk of the same was transferred to the first defendant, and whilst in the first defendant's possession, control and care, the first defendant was wholly responsible for the loss of the said Coach. Thus, the first defendant had failed to adduce any credible evidence to prove its counterclaim. (paras 15, 19 & 24)

(4) The second defendant was not liable to pay out the said loan to the plaintiff. The second defendant's letter of offer and subsequent supplementary letters of offer contained the pre-disbursement conditions that must be fulfilled by the first defendant before payment could be released by the second defendant to the plaintiff. Since the first defendant failed to fulfil the requirement when it failed to pay the initial payment of RM45,166.02 to the second defendant, ie, the advance rental payment of RM37,638.35 and the first month rental payment of RM7,527.67, the second defendant had no contractual obligation to release the payment to the plaintiff. Further, the second defendant was not privy to the agreement entered between the plaintiff and the first defendant for the purchase of the said Coach and the plaintiff was not privy to the letter of offer and the lease agreement entered into between the first defendant and the second defendant.
(para 28)

(5) The plaintiff knew at all material times that the pre-disbursement conditions had not yet been fulfilled by the first defendant and the plaintiff knew that the second defendant had no contractual obligation to release the payment for the said Coach to the plaintiff. Further, the delivery of the said Coach was made by the plaintiff to the first defendant without the instruction, knowledge and consent of the second defendant as contended by the plaintiff. (para 31)

(6) In the premises, the plaintiff had proved its case on a balance of probability against first defendant and therefore, judgment was ordered to be entered against the first defendant. The first defendant's counterclaim was also dismissed. As regards the second defendant, the plaintiff had failed to prove its case against the second defendant. (paras 33 & 34)

Case(s) referred to:

Arab-Malaysian Credit Bhd v. Saujana Kinabalu Sdn Bhd & Ors and Another Case [2011] 10 CLJ 10 HC (refd)

Ling Chick Ngai v. Scott & English (M) Sdn Bhd [2006] 7 CLJ 602 HC (refd)

Low Hock Jee v. Mayban Finance Berhad [1996] 2 CLJ 479 HC (refd)

Legislation referred to:

Civil Law Act 1956, s. 5

Sale of Goods Act 1979 [UK], s. 20

For the plaintiff - Chin Tek Min; M/s Chin Jingulam & Assocs

For the 1st defendant - Siti Azizah M Yusop; M/s Azizah & Co

For the 2nd defendant - Faizal Sarbi; M/s Cheu Adnan & Razi

Reported by Suhainah Wahiduddin