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2024 MarsdenLR 2093
HIGH COURT MALAYA KUALA LUMPUR
DIGORA SDN BHD – Appellant
Versus
FGV FERTILISER SDN BHD – Respondent
[Appeal No: WA-12ANCC-69-10/2023]
A third party cannot enforce a contract to which it is not a party, and silence in response to a demand letter does not constitute an admission of liability.
Headnote:(A) Rules of 2012 - Order 18 Rule 19(1)(b), (c), and (d) - Appeal against striking out application - Claim for outstanding payments premised on Subject Letter - Appellant failed to establish reasonable cause of action against Respondent - No privity of contract between Appellant and Respondent - Allegations of fraud unpleaded and unsubstantiated - Appeal dismissed with costs. (Paras 1, 76)
(B) Privity of Contract - Only parties to a contract can enforce its terms - Appellant, as a third party, lacks standing to claim under the Subject Letter. (Paras 44, 54)
(C) Admission of Liability - Failure to respond to demand letter does not equate to admission of liability; it may only be considered as evidence in assessing overall case merit. (Paras 67, 70)
Facts of the case:
Appellant supplied Raw Materials to Assess Products, which in turn supplied Finished Products to Respondent. Respondent made payments to Assess Products instead of Appellant, leading to the claim for RM281,523.00. (Paras 2-14)
Findings of Court:
Appellant has no reasonable cause of action against Respondent; the claim is unsustainable due to lack of privity and unpleaded fraud. (Paras 41, 60)
Issues: Whether Appellant has a reasonable cause of action against Respondent, whether Respondent breached obligations owed to Appellant, whether fraud is established, and whether silence to demand letter amounts to admission of liability. (Paras 1, 67)
Ratio Decidendi: The court found that the Subject Letter created no enforceable obligations for the Appellant due to privity of contract, and allegations of fraud were inadequately pleaded. (Paras 41, 60)
Result: Appeal dismissed with costs of RM4,000.00. (Para 76)
JUDGMENT
Introduction
[1] This judgment concerns an appeal against the decision of the Sessions Court in allowing the striking out application filed by the Respondent to strike out the Appellant's claim pursuant to O 18 r 19(1)(b), (c) and (d) of the Rules of 2012. The Appellant's claim against the Respondent is for a sum of money outstanding for goods supplied, premised primarily on a letter issued by a third party to the Respondent. The key issues that arise for determination in this appeal are whether the Appellant has a reasonable cause of action against the Respondent, whether the Respondent had breached any obligations owed to the Appellant, whether the cause of action of fraud has been established against the Respondent and whether the Respondent's failure to respond to a letter of demand amounts to an admission of liability. In arriving at my decision, I have considered the Appeal Record, written submissions of both parties as well as the grounds of judgment of the learned Sessions Court Judge. Before setting out my findings on the issues, I will first briefly outline the salient facts of the case.
Background Facts
[2] The Appellant, Digora Sdn Bhd ("Digora") supplies polypropylene woven fabrics ("Raw Materials") to the 1st Defendant, Assess Products (M) Sdn Bhd ("Assess Products"). This establishes the "1st Contract" between Digora and Assess Products.
[3] Assess Products then manufactures the Raw Materials into polypropylene bags ("Finished Products") for use in packing fertilizers and supplies them to the Respondent (the 3rd Defendant in the Sessions Court ), FGV Fertiliser Sdn Bhd ("FGV Fertilise?'). This establishes the "2nd Contract" between Assess Products and FGV Fertiliser.
[4] The 2nd Defendant, Assess Packaging (M) Sdn Bhd ("Assess Packaging') is a related company of Assess Products.
[5] On 15 April 2022, through a letter ("Subject Lette?'), Assess Products requested FGV Fertiliser to make direct payments for Assess Products' invoices related to FGV Fertiliser's six purchase orders ("POs") to Digora. The POs are:
a) 8400015782 dated 2 March 2022
b) 8400015668 dated 7 February 2022
c) 8400015628 dated 17 January 2022
d) 8400015948 dated 11 March 2022
e) 8400015781 dated 2 March 2022
f) 8400015583 dated 3 January 2022
[6] FGV Fertiliser agreed to comply with Assess Products' request in the Subject Letter. Digora is not a party or signatory to the Subject Letter.
[7] After issuing the Subject Letter, Assess Products issued the following six invoices amounting to RM295,339.70 to FGV Fertiliser, which are directly linked to the POs for the supply of Finished Products by Assess Products to FGV Fertiliser:
a) Invoice 00002237 dated 26 April 2022 for PO 8400015781 amounting to RM59,465.93
b) Invoice 00002236 dated 22 April 2022 for PO 8400015628 amounting to RM54,136.50
c) Invoice 00002241 dated 9 May 2022 amounting to RM1,290.30
d) Invoice 00002242 dated 9 May 2022 amounting to RM91,218.60
e) Invoice 00002244 dated 12 May 2022 for PO 8400015668 amounting to RM64,831.80
f) Invoice 00002238 dated 26 April 2022 for PO 8400015782 amounting to RM24,396.57
[8] Subsequently, Assess Products issued new payment instructions to FGV Fertiliser via a letter dated 18 May 2022 to pay the invoice amounts to Assess Products and Assess Packaging's bank accounts instead of to Digora directly.
[9] FGV Fertiliser made payments totalling RM295,339.70 to Assess Products and Assess Packaging on 28 April 2022 and 26 May 2022 in compliance with the new payment instructions from Assess Products.
[10] Digora supplied Raw Materials to Assess Products vide purchase order No P022/030 and the following invoices and delivery orders, amounting to RM281,523.00:
a) Invoice/DO 2200037 dated 19 April 2022 for RM119,779.00
b) Invoice/DO 2200038 dated 21 April 2022 for RM29,975.00
c) Invoice/DO 2200039 dated 25 April 2022 for RM59,829.00
d) Invoice/DO 2200040 dated 9 May 2022 for RM71,940.00
[11] On 20 September 2022, Assess Products through Assess
