570 Weeluk (S) Pte Ltd v.

Jid Fu Plywood Sdn Bhd [1998] 6 MLRH

WEELUK (S) PTE LTD

v.
JID FU PLYWOOD SDN BHD
High Court, Sandakan
Richard Malanjum J
[Suit No. S. 22 - 40 Of 1993]
17 July 1998

JUDGMENT
MALAYSIA

IN THE HIGH COURT IN SABAH AND SARAWAK AT SANDAKAN

SUIT NO. S. 22 - 40 OF 1993

BETWEEN

WEELUK (S) PTE LTD PLAINTIFFS

AND

JID FU PLYWOOD SDN BHD DEFENDANTS

BEFORE THE HONOURABLE MR. JUSTICE RICHARD MALANJUM

IN OPEN COURT

JUDGMENT

In this action the Plaintiffs are claiming from the Defendants the following (as per
Statement of Claim):-

(2) The total sum of US$190,500.00 or the equivalent in Ringgit Malaysia or

alternatively damages for breach of contract to be assessed pursuant to
paragraph 13 thereof;

(3) Interests on the amounts adjudged at the rate of 8% per annum from the date
hereof until the date of judgment pursuant to Section 11 of the Civil Law Act,
1956;

(4) Statutory interests on the amounts adjudged at the rate of 8% per annum from
the date of judgment until the date of full payment;

(5) costs; and

[1998] 6 MLRH Weeluk (S) Pte Ltd v. Jid Fu Plywood Sdn Bhd 571

(6) Any other just or better relief that this Honorable Court deems fit to make. "

Basically the Plaintiffs are alleging breach of contract on the part of the Defendants in
connection with the sale and purchase of seraya plywood intended for the Saudi Arabia and
China markets.

B. The brief facts:

As the learned counsel for the Plaintiffs has accepted the brief facts as outlined by the
learned counsel for the Defendants, for convenience it should be quite appropriate if I
reproduce the same herein:-

There were two agreements as follows:-

1) Dated 2nd October 1992 (...):
Hereinafter called the First Contract;

2) Dated 22nd December 1992 (...):

Hereinafter called the Second Contract.

For the First Contract, there were two lots, namely:-

Lot 1A and B: delivery in mid-November 1992;

Lot 2A and B: delivery in mid-December 1992.

Lot 1A and B were delivered on 13th December 1992 (...).

Lot 2A was delivered in January 1993 (...).

The disputed agreements were Lot 2B of the First Contract and the Second
Contract.

Although the Defendants raised a number of defenses in the Statement of Defense,

at the trial evidence was concentrated on the non-issuance of the Letter of Credit
by the Plaintiffs as the reason for non-delivery by the Defendants.

It is to this that this submission will be concentrated on."

C. The Issues:

Having considered the pleadings, the evidence adduced and the submissions in this case I
find the following issues for determination, namely:-
(1) The preliminary issue, i.e. whether the Plaintiffs solely based their case on
hearsay evidence and as such they have therefore failed to prove their case;

(2) Whether the defense ultimately relied upon by the Defendants has been
pleaded;
572 Weeluk (S) Pte Ltd v. Jid Fu Plywood Sdn Bhd [1998] 6 MLRH

(3) If the answer to (2) above is in the affirmative, whether there were contractual
relationships established and whether there were breaches thereof; and

(4) If the answers to (3) above are in the affirmative, whether damages have been
proved.

(a) Issue (1):

On this issue learned counsel for the Defendants contended that the evidence of PW.1, Mr.
David Wong, was nothing but hearsay as he was not involved in the transactions under
dispute. Learned counsel relied on the facts that PW.1 did not sign the relevant agreements
and that it was either Ms. Phyllis Tan or Mr. Peter Wong who attended to the
correspondences.

But learned counsel for the Plaintiffs argued that PW.1 gave an oral evidence that he had
personal knowledge of the transactions and that could not be hearsay evidence. Learned
counsel also said that it was not a case of where PW.1 related to the Court what he had been
told by another person.

Having considered the opposing contentions of learned counsel for the parties and having
perused the evidence adduced from PW.1, I am inclined to agree with the learned counsel
for the Plaintiffs. In fact I find that PW.1 gave evidence on matters which he said he had
personal knowledge. I do not find that assertion to have been successfully rebutted by the
Defendants. And to now say that he (PW.1) did not execute the relevant agreements would
tantamount to renege what was agreed at the commencement of the trial, namely, that the
existence of the documents were not in dispute and that it was not necessary to call the
makers.

Further, PW.1 made it very clear that he was the person who made the final decisions on the
transactions, being the Managing Director of the Plaintiffs. The Defendants did not show
otherwise on such an assertion.

Neither was it shown in any manner that those correspondences tendered in Court nor could
what were said by PW.1 in evidence not have been known by PW.1. If that were the case
then it would have been quite ridiculous for PW.1 to call himself the Managing Director of
the Plaintiffs.

Accordingly, it is my conclusion that for this Issue (1) I find in favour of the Plaintiffs.

(b) Issue (2):

This issue arises from the statement of the learned counsel for the Defendants who
commented that the non-delivery of the seraya plywood was due to the non-issuance of
Letter of Credit by the Plaintiffs. Learned counsel for the Plaintiffs argued that such a

stand was not covered by the defense of the Defendants in particular, paragraph 4 (v) of
the Amended Defense.
[1998] 6 MLRH Weeluk (S) Pte Ltd v. Jid Fu Plywood Sdn Bhd 573

Having considered the submissions of the respective learned counsel it is my view that the
learned counsel for the Plaintiffs gave too much emphasis on the introductory statement of
the learned counsel for the Defendants. In fact on the question of liability the issues raised
by the learned counsel for the Defendants were basically two, namely, whether there was a
valid contract between the parties and whether there was a breach by the Defendants. But of
course I am well aware that such issues are based on the premise that there was no Letter of
Credit issued by the Plaintiffs.

In the course of the trial learned counsel for the Plaintiffs objected to evidence being led on
such a premise, contending that it was a new line of defence and that it was a surprise to the
Plaintiffs. I did not then make a ruling summarily but allowed admission of such evidence.
And now having the benefit of the whole proceeding, I am of the view that my decision to
allow it should be sustained. The impugned paragraph 4 (v) of the Amended Defense is not
as restricted as learned counsel for the Plaintiffs interpreted it to be. That paragraph reads:-

I am therefore inclined to agree with the learned counsel for the Defendants that it does
cover the question pertaining to the issuance of Letter of Credit although it is confined to
the First Contract.

As regards the element of surprise, I do not think there can be. Even PW.1 in his evidence
in chief made reference to the practice of issuance of a Letter of Credit as a mode of
payment to the Defendants. And in fact he dealt with such matter quite extensively,
explaining that there would have been no problem in opening a Letter of Credit for the
Second Contract if the Defendants had given their instruction. Again, when PW.1 was
cross-examined such matter was asked.

But having stated the foregoing I should also remind myself that only matters that have
been pleaded should be considered. (See: Yew Wan Leong v Lai Kok Chye[1990] 1 MLRA
327; [1990] 2 MLJ 152; [1990] 1 CLJ 330 ). And as to what constitutes an element of
surprise and when is a matter or fact considered as pleaded, I need only to refer to what was
said by his Lordship Peh Swee Chin SCJ in Superintendent of Lands and Surveys (4th
Division) v Hamit bin Matusin [1994] 1 MLRA 300; [1994] 3 MLJ 185; [1994] 3 CLJ
567; [1994] 3 AMR 1882 at page 189-190:-

If a party is taken by surprise, he must object then and there at the point of time
when such evidence emerges, for such evidence to be disregarded by the court,

and the court will then uphold such timely objection. The court will generally,
however, grant an adjournment if requested, on suitable terms as to costs, etc,

for the pleading to be amended by the party seeking to adduce such evidence.
One must bear in mind the need for an orderly adversary system of a court
trial, not a chaotic harangue in a market place.

A party is not taken by surprise when the circumstances actually indicate so,
eg when such evidence is the very evidence sought to be relied on by him from
574 Weeluk (S) Pte Ltd v. Jid Fu Plywood Sdn Bhd [1998] 6 MLRH

the outset, or when he fails to object to such evidence then and there as this court
now seeks to emphasize.

Thus, when a plaintiff had stated in her pleadings that she was 'lawfully walking
along the proper side of the road', when in evidence, she said she was crossing the
road when no vehicles were in sight, it was held by the Federal Court that that
was not fatal to her claim when the defendant was not taken by surprise because
the fact of her walking across the road was pleased by the defendant in the
defence and relied on at the very outset. Please see Siti Aisha bte Ibrahim v Goh
Cheng Hwai [1982] 1 MLRA 160; [1982] 2 MLJ 124; [1982] CLJ 326."

In the instant case, on careful perusal of the Amended Defense I find that the issue
pertaining to issuance of a Letter of Credit as a requirement has been pleaded not only in
paragraph 4 (v) but also in paragraph 4 (x) and (xi) in respect of the First Contract. And as
for the Second Contract the issue has been raised in paragraph 6 (iii) and (iv) thereof. The
wordings may not be in the form as expected by the Plaintiffs. However, it should be borne
in mind that what the Defendants are asserting is that due to the non-issuance of a Letter of
Credit, there is therefore no contract for them to oblige.

Hence, the answer to this Issue (2) is in the affirmative.

(c) Issue (3):

(i) The evidence and contentions:
There are two parts to this Issue (3). The first part deals with whether there existed
contractual relationships between the parties in connection with the First and Second
Contracts respectively.

Learned counsel for the Defendants answered that question in the negative substantially on
the basis that no Letters of Credit were issued by the Plaintiffs in relation to Lot 2(b) of the
First Contract as well as the Second Contract and hence there

Was no consideration passing or that there was a failure of consideration. And his reasons
for coming to such a conclusion are as follows:-

(i) Generally:-
(a) That save for the oral testimony of PW.1, there was no evidence adduced to
show that Letters of Credit were issued. If such were issued they should have been
tendered as evidence in Court;
(b) That the oral evidence of PW.1 was merely secondary evidence and thus
inadmissible in the absence of any explanation for the failure to produce the best
evidence available. Section 65 of the Evidence Act 1950 was cited;

(c) That the previous conduct of business between the parties involved the
issuance of Letter of Credit; and
[1998] 6 MLRH Weeluk (S) Pte Ltd v. Jid Fu Plywood Sdn Bhd 575

(d) That the Plaintiffs were informed that shipments for Lots 2 (a), 2 (b) and the
Second Contract would be ready by February 1993. Yet only the Letter of Credit
for Lot 2 (a) was issued.

(ii) That in respect of Lot 2(b) specifically:-

(a) The purported amended Letter of Credit was nothing but a mere application to
amend. The falsity could be confirmed by the letter from the Plaintiffs dated
17/02/93 purporting to enclose a Letter of Credit whilst the application for
amendment was only made on 18/02/93;
(b) there was no reason for the Plaintiffs to secure the issuance of a Letter of
Credit when by letters dated 17/02/93 and 18/02/93 the Defendants in no uncertain
term informed the Plaintiffs that they could not deliver the plywood as requested;

(c) The assertion that there existed a Master Letter of Credit cannot be true. In the
evidence of PW.1 he said that the Letter of Credit for the First Contract had been
fully utilized. And so for the Second Contract the Plaintiffs were awaiting
instruction. As such, there should be no question of a Master Letter of Credit;

(d) Although the same Letter of Credit was used for Lot 1 and Lot 2 (a) of the
First Contract, there was none issued for Lot 2 (b). The application to amend the
Letter of Credit made on 02/02/93 covered only Lot 2 (a). Thus the plywood for
Lot 2 (a) was dispatched to the Plaintiffs in February, 1993 while the plywood
intended for Lot 2 (b) was subsequently sold off by the Defendants;

(e) the Defendants could not be expected to part with the plywood without sight of
a Letter of Credit in view of the previous experience of delayed payments for Lots
1 and 2 (a); and

(f) The allegation of the Plaintiffs that the Defendants wanted a price increase due
to the increase in cess and tax ignored the fact that it was the Plaintiffs which
delayed the issuance of the Letter of Credit for Lot 1. And they wanted Lot 2 to be
delivered in January 1993 knowing the increase in the cess. The Defendants could
only do it in February 1993. But no blame should be attributed

To the Defendants when it was the Plaintiffs which were in breach of the
agreements.

(iii) That for the Second Contract:-

(i) There was no explanation why the Plaintiffs could not have opened a Letter of
Credit in February 1993 when they obtained for Lot 2 (a). After all the Defendants
did inform the Plaintiffs that the shipment for the Second Contract would be made
in February, 1993; and
(ii) The explanation of PW.1 that the Plaintiffs were awaiting instruction of the
Defendants on the shipment date and where to open the Letter of Credit did not
make any sense. The Plaintiffs were already told that the shipment would be
576 Weeluk (S) Pte Ltd v. Jid Fu Plywood Sdn Bhd [1998] 6 MLRH

available in February 1993. Further, as for the instruction on where to issue the
Letter of Credit, that would have been covered by the alleged Master Letter of
Credit if there was one and thus there was therefore no question of further
instruction.

For the Plaintiffs it was contended as follows:-

(a) that it was not due to the non-issuance of a Letter of Credit that the Defendants
failed to deliver the plywood under the First Contract, specifically, Lot 2 (b). The
real reason was due to the increase in cess and tax thereby escalating the costs of
plywood. As such the Defendants wanted to renegotiate the First and Second
Contracts. In the interim the Defendants indicated that they could supply thereby
obliging the Plaintiffs to make the necessary preparations including shipping
arrangement;
(b) That DW.1, Hou Wen Tung, admitted the Defendants did not demand any
Letter of Credit from the Plaintiffs. And his explanation that the contracts were no
longer valid could not stand as there was no evidence that the contracts were
terminated by the Defendants or had informed the Plaintiffs of any breach;

(c) That the request for payment by Telegraphic Transfer was not made a term for
delivery of the plywood. Even after the Plaintiffs failed to meet the request the
Defendants indicated they would supply the plywood;

(d) That there was a Letter of Credit for the entire First Contract as explained by
PW.1 and admitted by DW.1. The amount in the Letter of Credit No. 92007112
could be increased as and when required. The cost of the "entire Lot 2 of the First
Contract" was US$202,779.58 and the Letter of Credit No. 92007112 was
increased to that figure (pages 31-32 of Agreed Bundle 1);

(e) That in respect of the Second Contract, the non-issuance of Letter of Credit
was not covered by paragraph 4 (v) of the Amended Defence;

(f) That in any event for the Second Contract the Plaintiffs had indicated to the
Defendants that a Letter of Credit was ready awaiting for their confirmation to
proceed. Such Letter of Credit would have been opened if the plywood was ready.
But the Defendants had already decided not to supply and hence the plywood was
never ready; and

(g) That the Plaintiffs informed the Defendants that they were awaiting instruction
from the latter as to where to open the Letter of Credit. There was no response.
Hence, the Defendants could not now complain of non-issuance of a Letter of
Credit as the reason for the non-supply of plywood for the Second Contract.

(ii) Findings:

For convenience, I will address to two contracts separately.

[1998] 6 MLRH Weeluk (S) Pte Ltd v. Jid Fu Plywood Sdn Bhd 577

In respect of Lot 2 (b) of the First Contract the Defendants insisted that it was due to the
non-issuance of a Letter of Credit that caused the non-delivery of the plywood as
contracted. The Plaintiffs stated otherwise. Basically the Plaintiffs alleged that it was due to
the increase in cess and tax. The Defendants wanted to renegotiate the price, failing which
they failed to make the delivery.

It is not in dispute that under the First Contract - JPP/P021-10/92 dated 02/10/92 (page 3 of
Agreed Bundle 1) the agreed mode of payment was by "irrevocable sight L/C". And Lot 1
shipment was expected to be around mid-November whilst the Lot 2 shipment was around
mid-December. However, even for Lot 1 and Lot 2 (a) the shipments were only done in
January 1993 after the initial hesitancy of the Defendants (see pages 9 and 12 of Agreed
Bundle 1). From these two letters the reasons seemed to be due to the inability of the
Defendants' mill, the increase in export cess and the problem with raw material. For Lot 1
the payment was made on 07/01/93 by way of the Letter of Credit No. 92007112 in the
sums of US$273,926.61 and US$303,161.21 (page 14 of Agreed Bundle 1).
In respect of Lot 2 (a) the shipment appeared to have taken place at the end of January 1993
(page 20 of Agreed Bundle 1). And the instruction of the Plaintiffs given on 21/01/93 as
regards payment was for the Defendants to draw on the Letter of Credit
Under discrepancy (page 21 of Agreed Bundle 1). This was promptly replied by the
Defendants on 21/01/93 stating that their banker in Sandakan did not accept the Letter
of Credit drawn under discrepancy. They requested payment by telegraphic transfer
before the 30th January, 1993 (page 23 of Agreed Bundle 1). That request was not met.
Instead, on 01/02/93 the Plaintiffs sent to the Defendants the "L/C Amendment
Application" dated 02/02/93 (pages 24 and 25 of Agreed Bundle 1). And the payment
was finally effected on 23/02/93 as could be inferred from the letter of the Plaintiffs'
banker (page 43 of Agreed Bundle 1).

From these two shipments the following may be observed:-

(b) That discrepancies in the documents of the beneficiaries of the Letter of

Credit were noted on presentation. In both instances the Plaintiffs accepted the
documents with discrepancies;

(c) That invariably there were delays in the payments. For instance, in the
second shipment the payment came in only on 23/02/93. Obviously the delay
was due to the application for increase which was only done on 02/02/93; and

(d) That in spite of the delays, I found no written protest from the Defendants.
Nor was there any suggestion made to the Plaintiffs to stop using the same
Letter of Credit to effect payment for future shipments. And although the
Defendants requested for payment by telegraphic transfer for the second
shipment, there was no insistence when the request was not obliged.

The foregoing observations do have bearing in respect of the undelivered Lot 2 (b) of
the First Contract which was also for the Saudi Arabia market.
578 Weeluk (S) Pte Ltd v. Jid Fu Plywood Sdn Bhd [1998] 6 MLRH

From the documentary evidence this was the approach taken by the Defendants in
relation to Lot 2 (b). In response to the Plaintiffs' request for the shipment (page 24 of
Agreed Bundle 1) the Defendants indicated that it could be arranged in mid-February
1993 (page 27 of Agreed Bundle 1). This was subsequently confirmed by the
Defendants in their letter to the Plaintiffs dated 02/02/93 (page 28 of Agreed Bundle 1).

On their part the Plaintiffs, inter alia, proceeded to inform the Defendants as per their
faxed Note No. 0861/93 dated 17/02/93 (page 30 of Agreed Bundle 1) thus:-

Another faxed Note No. 0891/93 from the Plaintiffs given on the same date (page 31 of
Agreed Bundle 1) also made reference to the "L/C Amendment" when it stated:-
However, what the Plaintiffs referred to as the "L/C Amendment" appears to be the
Application for Amendment dated 18/02/93 (page 32 of Agreed Bundle 1). It involved
an application to increase the value of the Letter of Credit No. 92007112 by
US$202,779.58. This mode of course was not foreign to the parties in view of what

Transpired for Lot 2 (a) of the First Contract. And that would probably
explain why the Defendants did not protest on receipt of the first Note (page 30 of
Agreed Bundle 1). Instead they replied on 17/02/93 vide faxed Note 0217-1 in these
terms (page 33 of Agreed Bundle 1):-

1. Mr. Wen-Tung Hou is still traveling in (sic)aboard and very difficult to

contact him.

2. However, we did check with Sabah plant and they advised it is impossible
to deliver any plywood to you in recently (sic).

3. We will keep in (sic) pushing them and will advise you later."

With such a message the Plaintiffs sent the second Note (page 31 of Agreed Bundle 1).
Again the Defendants in reply on 18/02/93 did not mention anything about the Letter
of Credit. Instead they said these (page 34 of Agreed Bundle 1):-

1. We have studied and passed your fax to our mill today.

2. However, our mill in Sabah still has difficulties to produce your orders in
Feb or March. We believe those orders may have to delay (sic) until April.

3. Please kindly switch those volume to s/timber in order to cut loss.

4. We are sorry and will advise you our position later."

As expected the Plaintiffs answered on 18/02/93 that they could not accept such a
position (page 35 of Agreed Bundle 1). But the Defendants responded on 18/02/93
(page 36 of the Agreed Bundle 1) as follows:-
[1998] 6 MLRH Weeluk (S) Pte Ltd v. Jid Fu Plywood Sdn Bhd 579

1. Again we already passed your fax to Sabah mill.

2. Fro (sic) your information, Wen-Tung, Hou is still traveling (sic) and
difficult to contract (sic).We will also pass your fax to him a.s.a.p.

3. At this moment, due to short of suitable logs we think it is impossible to

deliver any plywood to you. Will inform you our position later."

And as tendered in Court the above seems to be the last written message of the
Defendants in relation to their dealing with the Plaintiffs.
Hence, as can be seen from the replies of the Defendants it was not raised in any
manner pertaining to the issuance of a Letter of Credit as a condition to deliver the
plywood for Lot 2 (b). Neither was it questioned the practice of extending the existing
Letter of Credit. It is therefore my finding on the balance of probabilities that it was
not because of non-issuance of a Letter of Credit by the Plaintiffs that caused the
Defendants not to deliver the plywood under Lot 2 (b) of the First Contract. It was
basically related to problems in production and raw materials.

In view of the contents of the replies of the Defendants referred to hereinabove, I find it
very difficult to believe or accept the testimony of DW.1 regarding the failure of the
Defendants to deliver the plywood for Lot 2 (b). I noted that DW.1 was happily
prepared to say anything although it was obviously inconsistent with the Defendants'
own documents. I was not impressed at all of him as a witness of truth.

As to whether there was in existence a Letter of Credit for Lot 2 (b), I find that the
parties seemed to have relied on one Letter of Credit No. 92007112. Although at the
material time the Plaintiffs were only applying to amend the Letter of Credit by way of
increasing its value to accommodate Lot 2 (b), it could not be said that there existed at
that time no Letter of Credit for that Lot. Going by what happened to the shipment for
Lot 2 (a) it

Should be quite safe to assume that the same mode would have taken place for Lot 2
(b) if the plywood were supplied. Further, the replies of the Defendants did not object
expressly or impliedly to such a mode.

Accordingly, I find and I am satisfied on the balance of probabilities that the Letter of
Credit No. 92007112 was available for use in respect of Lot 2 (b) at the relevant time
subject to amendment as was done for Lot 2 (a). And in any event and as stated
hereinabove, the status of the Letter of Credit or the absence of one was not the basis
for the non-delivery of plywood for Lot 2 (b).

From the above, it is my inevitable conclusion that there existed a binding contract and
the Defendants had breached it. In short, it is my finding that the Plaintiffs have
established liability on the balance of probabilities against the Defendants in respect of
Lot 2 (b) of the First Contract. I will deal with the issue of damages later.
580 Weeluk (S) Pte Ltd v. Jid Fu Plywood Sdn Bhd [1998] 6 MLRH

As regards the Second Contract it is contained in contract document JFP/PO23-11/92

dated 22/12/1992 (page 5 of Agreed Bundle 1). The term of payment is also stated as
by "irrevocable L/C at sight" with the shipment expected to be around February, 1993.
From the letters and notes of the Plaintiffs to the Defendants the shipment under the
Second Contract was intended for China market.

For this Second Contract the Defendants relied on the same reasons as for Lot 2 (b) of
the First Contract to justify their failure to deliver the plywood as agreed.
But on perusal of the replies sent by the Defendants to the Plaintiffs it is quite obvious
that on the very next day after its execution the Second Contract was doomed to fail.
By their letters of 23/12/92 (page 9 of Agreed Bundle 1) and 06/01/93 (page 12 of
Agreed Bundle 1) the Defendants indicated that they could not meet the target dates for
both the First and Second Contracts. They offered mid-February 1993 as the new date

Citing increase in export cess and raw material problem as the reasons. But as seen
earlier and after much protest by the Plaintiffs the Defendants did manage to oblige Lot
1 and Lot 2 (a) of the First Contract though after a delay.

And I am not convinced that it was due to the non-issuance of a Letter of Credit that
made the Defendants to renege their obligation under the Second Contract. Nowhere in
their letters to the Plaintiffs was such a reason given. In fact in their letter to the
Plaintiffs dated 01/06/93 (although '1992' is written therein) (page 15 of the Agreed
Bundle 1) in respect of the shipment to China (Second Contract) the Defendants
wrote:-
"... ... ...
... ... ...

I think we are living in hand of Sabah Government. MD40/M3 increase of

export tax and MD20/M3 increase of logs cess which make our cost up about
USD35/M3. We were originally thinking that Sabah Government will carry
new

policy on 1st of March. But, unfortunately after their announcement of new

logs cess and export tax plus logs supplires refused to follow their
commitment. We have no choice but ask for your help/unserstand in which
adjust price in old order. We will advise our final decision of new price later."

Again on 01/02/93 in their reply to the Plaintiffs (page 27 of Agreed Bundle 1) the
Defendants reiterated their position as regards the China shipment thus:-
"... ... ...
Regarding China order - situation in Sabah is very bad (you may know better
than we are). As we told you before, logs suppliers are asking prices
adjustments even after delivery of logs or refused to deliver any logs to us. As
[1998] 6 MLRH Weeluk (S) Pte Ltd v. Jid Fu Plywood Sdn Bhd 581

result of that and export tax, our products cost will raise over USD50/M3. It
makes us losing a lot of money and almost impossible to stay in Sabah.

Anyway, to complete this order, we would suggest that you place a new order
at USD400/M3 (one of buyer asked us to sell him at USD395/M3 for Feb
shipment.) and quantity 1500M3.

We will ship this order together with previous order in end Feb/ear Mar.
Please study and advise your idea by return fax."

And the Defendants seemed to be quite happy judging from their reply (page 28 of
Agreed Bundle 1) when the Plaintiffs responded by stating that they would check with
the China delegation which they were about to meet.

By their letter dated 05/02/93 to the Defendants (page 29 of Agreed Bundle 1) the
Plaintiffs made their position very clear when they wrote:-

Total 300 CBM to ship end February."

That letter received no reply from the Defendants. Thus, another letter was sent on
17/02/93 (page 30 of Agreed Bundle 1) which also made reference to the China
shipment in this way:-
"... ... ...
... ... ...

Re 1500 CBM + 1500 CBM of plywood for China.

The above L/C is ready awaiting your confirmation to proceed. Please rush
your confirmation by return to enable us to confirm vessel."

The Defendants responded as per page 33 of the Agreed Bundle 1 and quoted
hereinabove.

In turn the Plaintiffs wrote back to say (page 31 of Agreed Bundle 1), inter alia, that as
regards the Second Contract they were waiting for instruction from the Defendants
"where to open L/C to. Please kindly advice by return. ”Subsequently, the Defendants
replied as per pages 34 and 36 of the Agreed Bundle 1 and reproduced hereinabove.
Then they went silent.

The Plaintiffs made another attempt to communicate with the Defendants when they
wrote on 22/02/93 (page 38 of Agreed Bundle 1) in respect of China shipment stating:-
"... ... ...
... ... ...

Re 1500 CBM + 1500 CBM China Contract

582 Weeluk (S) Pte Ltd v. Jid Fu Plywood Sdn Bhd [1998] 6 MLRH

Please advise status, we can't break our commitment, please advise for us to
fix vessel and open L/C. We need your urgent reply as we can't wait any
longer. We also need to know whether you will now go for 1500 M3 + 1500
M3 or keep to 1500 M3 at old price. Please reply by reutrn failing which we
will take it that you are not dealing in good faith with us to settle this matter."

There was no reply. Hence, in my view, there is a basis for the learned counsel for the
Plaintiffs to say that the "Defendants never responded to pp. 30, 31 and 38 in respect of
the LC for the Second Contract and the reason is because the Defendants had at that
stage already decided that they would not deliver the plywood under the Second
Contract. The Defendants cannot now complain about the non-issuance of the Letter of
Credit in respect of the Second Contract."

Accordingly, as regards the Second Contract the non-issuance of a Letter of Credit as

the reason for the failure to deliver is quite irrelevant. Based on the documentary
evidence before me I am satisfied on the balance of probabilities that the Defendants
did not intend to go on with the contract. There is therefore no basis in defence to say
that there was no contractual relationship owing to the non-issuance of a Letter of
Credit.

As regards the oral evidence of DW.1 in connection with the Second Contract I hold
the same view of him as expressed when dealing with Lot 2 (b) of the First Contract.

For the foregoing reasons I am therefore satisfied that the Plaintiffs have established
liability on the balance of probabilities against the Defendants in respect of the Second
Contract. In short, there existed a valid contract between the parties and the Defendants
had breached it when they failed to deliver the plywood as agreed.

My answers to Issue (3) are therefore in the affirmative.

For completeness, I note that the Defendants have also raised some other issues in their
Amended Defense. However, in the light of the evidence adduced and the final

Submissions of their learned counsel, it is obvious that those other issues are no longer
pursued. Hence, there is no necessity for me to consider them.

(d) Issue (4):

Learned counsel for the Defendants submitted that even if liability was found against
the Defendants, the Plaintiffs failed to prove damages suffered. He cited the case of
Popular Industries Ltd v The Eastern Garment Manufacturing Co. Sdn Bhd [1989]
2 MLRH 705; [1989] 3 MLJ 360; [1990] 1 CLJ 133 . He argued that though the
Defendants agreed not to have the makers of the documents in the Agreed Bundle 1
called, that should not exempt the Plaintiffs from the burden of proving their contents.
[1998] 6 MLRH Weeluk (S) Pte Ltd v. Jid Fu Plywood Sdn Bhd 583

The case of Jaafar bin Shaari & Anor v Tan Lip Eng & Anor [1997] 4 AMR
3744 was referred to.

Learned counsel also contended that the burden is on the Plaintiffs to prove their loss
which involved calling the receiver of any payment. He cited Chong Khee Sang v
Pang Ah Chee [1983] 2 MLRH 299; [1984] 1 MLJ 377.

In respect of the documents tendered to prove losses learned counsel argued that their
contents were not proved. Hence, he submitted that no reliance should be placed on
them.
For the Plaintiffs, learned counsel contended that evidence were adduced on the
payments that had to be made by the Plaintiffs arising from the failure of the
Defendants to deliver the plywood. Learned counsel also said that the Defendants'
learned counsel "did not at any time during cross-examination of PW.1 raise any issue
Pertaining to damages." Thus, he said that the Defendants should be deemed to have
abandoned such issue. He cited the case of Teo Hock Guan & Anor (t/a Teo Meng
Huah Construction) v Johore Builders & Investments Sdn Bhd [1996] 1 MLRA 501;
[1996] 2 MLJ 596; [1996] 4 CLJ 184; [1996] 2 AMR 2330 .

Now, in respect of the claim of the Plaintiffs, the sums are made up of the following
items:-
(a) For Lot 2 (b) First Contract
(i) US$ 4,102.42 - Loss of profit;

(ii) US$70,295.24 - Compensation payment to Alkhamael Trading;

and

(iii) US$21,000.00 - Payment to Balisa Shipping & Trading Pte. Ltd.

(b) For Second Contract

(i) US$ 10,500.00 - Loss of profit; and

(ii) US$180,000.00 - Compensation paid to Tinme (SEA) Pte. Ltd.

Before embarking to consider specifically each of the items, I should first dispose of
the argument regarding the documents contained in the Agreed Bundle 1. I do such an
exercise at this stage due to the submissions of the learned counsel for the Defendants.
There is no doubt that at the commencement of the hearing it was made very clear by
learned counsel for the Plaintiffs and confirmed by learned counsel for the Defendants
that the documents in Bundle 1 were agreed only to the extent that the makers need not
be called. In short the existence of those documents seems to have been agreed upon
but not the contents.
However, in the course of the hearing learned counsel for the Defendants stated that if
the documents in Bundle 1 had been referred to during the hearing they should be
deemed as part of the evidence. Such statement led to the documents in Bundle 1 being
584 Weeluk (S) Pte Ltd v. Jid Fu Plywood Sdn Bhd [1998] 6 MLRH

only referred to the witnesses during the trial shorn of the usual identification and other
affirmations.
Notwithstanding such a position having been taken, learned counsel for the Defendants
proceeded to state in his submission that "although the documents referred to in the
bundle shall be taken as evidence that does not detract from the requirements of the
law, namely, that if the documents are (sic) inadmissible, the omission to object will
not render such document admissible." He referred to the case of Syarikat Jenka Sdn
Bhd Bhd v Abdul Rashid bin Harun [1981] 1 MLJ 201. To my mind this part of the
submission did not help to clear the confusion. Be that as it may, I think it was quite
clear to all parties that the initial position as taken was not altered.
Reverting therefore to the issue at hand I will deal first with the damages claimed under
Lot 2 (b) of the First Contract.
In respect of the loss of profit, PW.1 explained how it was arrived at. He said that it
was simply the difference between the buying and selling prices. PW.1 also said that
for Lot 2, only 3,060 pieces out of the agreed total of 45,900 pieces for the 3.3 mm
specification were supplied. And for the 4.8 mm specification only 18,700 pieces were
supplied out of the agreed total of 30,470 pieces. With the figures as given and relating
those to the contract document (page 3 of Agreed Bundle 1), it would appear that for
Lot 2 (b) the whole of the 3.3 mm specification was not supplied while there was a
partial supply for the 4.8 mm specification.
Meanwhile, the Plaintiffs have specifically shown in the Statement of Claim the
computation for the loss of profit. Surprisingly the Defendants did not query PW.1 on
the computation, probably due to the figures obviously stated in the contract
documents. And I do not think such a claim is unreasonable or unjustified. The
Plaintiffs were in the business to make some profits. And they could have secured that
sum if the Defendants met their contractual obligation. I am therefore satisfied that the
Plaintiffs have proved on the balance of probabilities this portion of the claim, being
the loss of profit for Lot 2 (b) of the First Contract. Hence I allow the claim against the
Defendants in the sum of
US$4,102.42 or its equivalent in Ringgit based on the rate of exchange as at the date of
this Judgment...
Next, the Plaintiffs claim for what they have allegedly paid as compensation to their
buyer in Saudi Arabia. And in the first place I do not think there is any dispute that the
Defendants knew that the plywood were for resale. But the Plaintiffs are now saying
that they are entitled to payment as damages for the sum which they have paid to the
buyer.
Having considered the evidence adduced to substantiate this claim, I am not satisfied
on the balance of probabilities that that the Plaintiffs have established it. PW.1
evidence is not much of a help as he only pointed out the relevant documents in the
Agreed Bundle 1 without further elaboration of any sort. And those documents in my
view are not convincing even on the balance of probabilities. The Plaintiffs appear to
be only too willing to pay compensation to their buyer (page 40 of Agreed Bundle 1)
[1998] 6 MLRH Weeluk (S) Pte Ltd v. Jid Fu Plywood Sdn Bhd 585

when that was not even a strict term in their contract with the latter (page 4 of Agreed
Bundle 1). And I note that the shipment was agreed to be in December 1992. Yet I
found not a single document from the buyer fore-warning the Plaintiffs of the possible
consequence due to the delay or non-supply after the agreed shipment date expired. It
was only when the supply failed to come after months of delay that suddenly the
purported losses were brought up by the buyer. And my doubt is aggravated by the
letter of the Plaintiffs to the buyer on 07/04/93 (page 57 of Agreed Bundle 1). Therein
it was stated that a "TT form showing remittance of US$70,295.24" was supposedly
enclosed. Yet such a document was not tendered in Court. The only document relied
upon is at page 53 of the Agreed Bundle 1 which is only an application form devoid of
approval of any kind. I do not think it would have been difficult for the Plaintiffs to
produce the actual copy with the relevant approval endorsed if indeed the application
went through. No doubt there is purportedly to be a copy of the receipt issued by the
buyer. But in the first place I am not satisfied that the payment was actually made. The
Plaintiffs have not proved such an assertion on the balance of probabilities.
Consequently, the receipt itself becomes doubtful. As such, I should disallow this part
of the claim.
The final portion of the claim relates to the purported payment to Balisa Shipping and
Trading Pte Ltd. Again the Plaintiffs only relied on some documents with PW.1 only
referring to them. Although there was a purported claim made by the shipping
company (page 54 of Agreed Bundle 1) and a copy of the cheque purportedly being the
payment exhibited (page 55 of Agreed Bundle 1), no document was tendered to show
that the payment was in fact effected. There is also no acknowledgement receipt
tendered in Court. And I did not hear any explanation from PW.1 on those missing
links. Thus, I am unable to allow this portion of the claim as I am not satisfied that the
Plaintiffs have proved it on the balance of probabilities.
Thus, for Lot 2 (b) of the First Contract I should only allow the claim for loss of profit
in the sum as stated hereinabove.
In respect of the Second Contract the Plaintiffs also relied on the difference in the
buying and selling prices less freight costs to determine their loss of profit. And as
stated earlier the Defendants knew that the intended purchase of the plywood was for
resale. Hence,
they should have anticipated that failure on their part to meet their obligation could affect the
sale of the Plaintiffs.
Having therefore considered this part of the claim and in the light of the contract documents
(pages 5 and 10 of the Agreed Bundle 1) I do not think the claim of US$10,500.00 as the loss of
profit is

Unreasonable. I am also satisfied that the Plaintiffs have proved such claim on the
balance of probabilities. And I do not think there is any
good reason to doubt the authenticity of those contract documents. Accordingly, I
allow this portion of the claim under the Second Contract.
The other portion of the claim of the Plaintiffs under the Second Contract is for reimbursement
of US$180,000.00 which was allegedly paid to their buyer as compensation. The Plaintiffs relied
on two documents to substantiate the claim, namely, a purported settlement agreement dated
586 Weeluk (S) Pte Ltd v. Jid Fu Plywood Sdn Bhd [1998] 6 MLRH

23/04/93 and a photocopy of a cash cheque with the amount of S$293,400.00. PW.1 was
contented to refer only to these documents without any confirmation or assurance that the cheque
was actually banked in. There was also no explanation why cash mode was chosen when issuing
the cheque. No doubt there is the purported settlement agreement containing the
acknowledgement receipt of the cheque. But was the payment actually effected? Receipt of the
cash cheque is one thing whilst receipt of the actual payment is another. The latter indicates the
actual loss suffered by the Plaintiffs. Perhaps the recipient would have been of help if he was
called to testify. To accept these documents as sufficient to order the Defendants to make good
the alleged loss would set an unwarranted precedent for future cases. The Plaintiffs took upon
themselves the risk of settling with their buyer. And for them to recover such payment, if indeed
made, they should prove to this Court on the balance of probabilities that it was actually done
and thus incurred a loss. I would add that the Plaintiffs should also show that it was reasonable
and justified in the circumstances. Otherwise there is nothing to prevent two parties from making
an arrangement between them so as to secure exorbitant damages from another party. Thus, for
this part of the claim, I am not satisfied that the Plaintiffs have proved it on the balance of
probabilities. Hence, I disallow it. And accordingly for the Second Contract I only allow the
claim for loss of profit in the sum of US$10,500.00 or its equivalent in Ringgit based on the
prevailing exchange rate as at the date of this Judgment.
D. Conclusions:
To sum up I find that the First Contract Lot 2 (b) and the Second Contract as valid and binding
upon the parties. Further, it is my judgment that the Defendants have breached
Both the Contracts when they without any lawful excuse failed to supply the plywood as stated
in the respective contract documents. But arising from those breaches I grant only the claims for
loss of profits in the sums as stated hereinabove.
As for the award of interests I find no justification to exercise my discretion to allow interest to
begin from the date of commencement of this action in view of the claims that I have allowed.
And I heard no compelling argument from the Plaintiffs to warrant such an exercise.
Accordingly I should only allow the usual statutory interest of 8% per annum on the sums
awarded from the date of this Judgment to the date of full payment.
Finally, I award costs to the Plaintiffs to be taxed unless agreed.
Signed.
(RICHARD MALANJUM)
Judge
Date: 17th July, 1998