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2023 MarsdenLR 2870
HIGH COURT MALAYA PENANG
ECO PRIORITY SDN BHD – Appellant
Versus
ZHONGHUA SOUTHERN PHARMA SDN BHD – Respondent
[Civil Suit No: PA-22NCvC-115-08/2022]
The court ruled that acceptance of goods by the buyer without objection precludes later claims of unmerchantable quality, and the burden of proof rests on the asserting party.
Headnote:(A) Sale of Goods Act 1957 - Section 42 - Claim for outstanding sum of RM5,576,789.40 for raw materials supplied - Defendant's counterclaim for unmerchantable quality dismissed - Plaintiff fulfilled contractual obligations and Defendant accepted goods without protest - Allegations of unmerchantable quality deemed unsubstantiated and afterthought. (Paras 1, 12, 43, 88)
(B) Acceptance of Goods - Buyer deemed to have accepted goods upon delivery unless rejection is communicated - Defendant's failure to raise quality issues at the time of delivery led to acceptance. (Paras 16, 19)
(C) Burden of Proof - The burden lies on the party making the assertion - Defendant failed to prove allegations of unmerchantable quality. (Paras 43, 44)
(D) Late Payment Interest - Contractually agreed rate of 8% per annum upheld despite discrepancies in demand letters. (Paras 90, 92)
Facts of the case:
The Plaintiff supplied raw materials to the Defendant, who accepted the materials and made partial payment. The Defendant later claimed the materials were unmerchantable, which the court found unsubstantiated.
Findings of Court:
The Plaintiff's claim was allowed, and the Defendant's counterclaim was dismissed.
Issues: Whether the Defendant is liable for the outstanding sum and the quality of the raw materials supplied.
Ratio Decidendi: The court found that the Defendant accepted the goods without objection and failed to substantiate claims of unmerchantable quality.
Result: Plaintiff's claim allowed; Defendant's counterclaim dismissed.
| Table of Content |
|---|
| 1. claim for outstanding payment and defense of quality. (Para 1 , 2 , 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10) |
| 2. determination of liability and quality issues. (Para 11 , 31 , 43 , 44) |
| 3. court's findings on acceptance and acknowledgment of debt. (Para 12 , 14 , 15 , 19 , 21 , 30 , 34) |
| 4. provisions of sale of goods act regarding quality. (Para 42 , 51) |
| 5. final judgment in favor of the plaintiff. (Para 94) |
Introduction
[1] This is a claim by the Plaintiff ("P") against the Defendant ("D") for a sum of RM5,576,789.40 ("outstanding sum") in respect of raw materials supplied by P to D. The defence of D is that the raw materials supplied by P were not of merchantable quality. D filed a counterclaim premised on loss suffered due to the alleged unmerchantable quality. After a full trial, I allowed P's claim. I dismissed D's counterclaim. Here are the grounds of my judgment.
Background Facts
The Parties
[2] P is a supplier of herbs including frankincense, myrrh and high resin jernang. D was a customer of P.
The Purchase Orders
[3] From 22 August 2019 until 4 June 2020, D issued several purchase orders ("purchase orders") to purchase raw materials from P. The particulars of the purchase orders are as follows:
The Delivery Orders
[4] Upon delivery of the raw materials by P, D accepted the raw materials by signing on the delivery orders dated from 22 August 2019 until 10 June 2020 ("delivery orders"). The particulars of the delivery orders are as follows:
The Invoices
[5] Subsequently, P issued the invoices dated from 22 August 2019 until 10 June 2020 ("invoices") to D based on the purchase orders and the delivery orders. D has made a part payment of RM576,624.60, leaving a balance outstanding sum of RM5,576,789.40. The particulars of the invoices are as follows:
[6] It is an express term in the invoices that the "goods sold are neither returnable nor refundable".
The Audit Confirmation
[7] On 10 January 2022, D issued a 'Confirmation of Balances for Audit Purposes' ("audit confirmation") to P to confirm on the sum payable to P. Wherein the same comprised the outstanding sum based on D's own records. According to P, even though the audit confirmation was received by D, at no time did D indicate that the outstanding sum is challenged due to unmerchantable quality of the raw materials.
The Letter Of Demand And The Notice Of Demand
[8] On 20 May 2022, P issued a letter of demand ("letter of demand") to D to demand for the outstanding sum. D never replied to P.
[9] Via its solicitors, P then issued a notice of demand dated 8 July 2022 ("notice of demand") to D. Again, D did not reply or raise any issue concerning the quality of the raw materials supplied by P.
Fresh Purchase Order After Official Demand By The Plaintiff
[10] Nevertheless, D continued to place a new purchase order with P. D again accepted the further delivery of the raw materials and paid to P without any protest. The raw materials were retained and used by D.
Issues For Determination
[11] The issues for determination in the present case may be crystallised as follows:
(a) Whether D is liable to pay the outstanding sum of RM5,576,789.40 to P for the raw materials sold and delivered by P to D, according to the invoices dated between 22 August 2019 to 10 June 2020 issued by P to D; and
(b) Whether the raw materials supplied by P to D are of merchantable quality and according to the purchase orders issued by D.
[12] It is my finding that D is liable to pay the outstanding sum of RM5,576,789.40 to P. I consider the allegation of unmerchantable quality raised by D to be unsubstantiated and an afterthought. My reasons are as follows:
(i) P has fulfilled its contractual obligation in delivering the raw materials ordered by D; and
(ii) D has on various occasions admitted its indebtedness to P.
[13] Here is my explanation.
(i) The Plaintiffs Contractual Obligation Has Been Fulfilled
[14] P's cause of action is premised on goods sold and delivered to D. A contractual relationship was formed
