Fraud negates a contract; hence, the Seller's reliance on CIF terms fails when the transaction is proven fraudulent, including submission of falsified shipping documents.

Background

[1] This case involves Venkal Apparels Pvt Ltd (the Plaintiff), which has sued multiple defendants for alleged fraud concerning shipments of nitrile gloves. The Plaintiff claims it paid RM28,902,540.00 for 1,026,000 boxes of nitrile gloves (Goods) but received empty boxes and scraps.

[2] I took over this case from Justice Arief Emran, who was transferred to the commercial court in December 2023. For the record, the Plaintiff obtained an Interlocutory Injunction Order against all the Defendants on 14 December 2021 to freeze all bank accounts belonging to the defendant companies: Cry Respond Sdn Bhd (D1), Gigayear Diversified (D3), Mutiara Ideal Capital (D4), LBY Exim Trade (D5), HCK Global Trading (D6), and HCK Global Construction (D7). This freezing order prevents these companies, along with their agents or employees, from withdrawing money, transferring funds, making transactions, disposing of assets, or engaging in activities that would alter the account balances. The restriction will remain in effect until the lawsuit is complete or until the court issues further orders. The same freezing order applies to Krishna A/L Seloa Raju (D2). On 7 April 2022, the Plaintiff obtained an ex-parte garnishment order to show cause against Malayan Banking Berhad, Mid Valley City branch, to freeze all money and assets belonging to the judgment debtor D5. However, the garnishment order was not pursued any further. An application for security for costs made by D1 and D2 against the Plaintiff was dismissed by this court on 27 September 2021, a decision that the court of Appeal affirmed on 30 November 2022.

[3] The trial proceeded with one Plaintiff's witness on 9 January 2023 after the parties were required to shortlist their witnesses. The Plaintiff did not call any witnesses from the company itself but called its customer, CMJ Medical Supplies LLC (CMJ) in the USA, and the representative of their forwarding company, Dextrans Sdn Bhd (Dextrans). D1 and D2 called one witness (D2) while D4, D6 and D7 also called one.

[4] The agreed-upon facts include D1 being a Malaysian company incorporated with D2 as its director at the relevant time. The other defendants' companies, LBY Exim Trade Sdn Bhd (D4), Mutiara Ideal Capital Berhad (D5), HCK Global Trading Sdn Bhd (D6), and HCK Global Construction Sdn Bhd (D7), are all incorporated in Malaysia. D4, D6 and D7 all share the same registered addresses and secretaries.

[5] The Plaintiff entered into an agreement dated 6 November 2020 with D1 (the Agreement). As part of the Agreement, D1 provided key shipping documentation to the Plaintiff, including the Bill of Lading, K2 Forms, SGS Certification, and insurance documents for six shipments with specific Master Bill of Lading reference numbers (MADUPM708400, HDMUMYWB0880618, EGLV099103063833, WHLC045AA39311, EGLV09130688110, EGLV09130688101). The Plaintiff paid USD7,079,400.00, which D2 acknowledged. Subsequently, D1 transferred funds to D3, D4, D5, D6, and D7 through telegraphic transfer. D4 received RM11.5 million from D1 via Hon