Arab Malaysian Finance Bhd v Kah Motor Co Sdn Bhd - NO: W-02-172-2004 [2010] MYCA 39 (2 April 2010)

DALAM MAHKAMAH RAYUAN MALAYSIA (BIDANGKUASA RAYUAN)

RAYUAN SIVIL NO: W-02-172-2004

ANTARA
ARAB MALAYSIAN FINANCE BHD ----- PERAYU DAN
KAH MOTOR CO SDN BHD ------ RESPONDEN

Dalam Perkara Guaman No: D3-22-907-2000

Dalam Mahkamah Tinggi Malaya di Kuala Lumpur

ANTARA
KAH MOTOR CO SDN BHD ------ PLAINTIF DAN
ARAB MALAYSIAN FINANCE BHD ----- DEFENDAN

CORAM:

(1) TENGKU BAHARUDIN SHAH, JCA

(2) ABDULL HAMID EMBONG, JCA (now FCJ) (3) ABDUL MALIK BIN ISHAK, JCA

ABDUL MALIK BIN ISHAK, JCA DELIVERING THE JUDGMENT OF THE COURT

Introduction

[1]  The parties will be referred to like what they were referred to by the learned trial judge of the High
Court.  Thus, Kah Motor Co Sdn Bhd will be referred to as the plaintiff and Arab Malaysian Finance Bhd will be
referred to as the defendant.
[2]  After the full trial, the learned trial judge of the High Court gave judgment in favour of the plaintiff with interest
and costs. Aggrieved by that decision, the defendant filed an appeal to this court.

Facts of the case

[3]  At all material times, the plaintiff was a distributor of and/or dealer of Honda cars.
[4]  At all material times, the defendant was and is a licensed finance company within the meaning of the Banking
and Financial Institutions Act

1989.  And at all material times, the defendant carried on its business at its branch at Lots 3 & 4, ground
floor, block “Y” , Bandar Ramai-Ramai, Jalan Leila, 90000 Sandakan.

[5]  At all material times, Cahaya Motor (Sabah) Sdn Bhd (“Cahaya Motor”) was the defendant’s customer. Cahaya
Motor was in the motor car trade of buying and selling cars.  Cahaya Motor wanted to purchase Honda cars from the
plaintiff for sale to the public.  And to expedite that purchase, Cahaya Motor obtained credit facilities from the
defendant.
[6]  The defendant granted and subsequently increased the floor stocking facilities to Cahaya Motor as evidenced by
the respective letters of offer and the facility agreements dated 12.6.1989,  12.5.1990 and

21.1.1991. And at all material times, Cahaya Motor carried on its business at block “A”, Lot 9, ground floor, Bandar Nam
Tung, Sandakan.
[7]  Under the said facilities, Cahaya Motor ordered the Honda cars it wanted from the plaintiff who then informed
the defendant.  The defendant then gave letters of undertaking to the plaintiff to pay the plaintiff for the price of the
Honda cars sold and delivered to Cahaya Motor by the plaintiff.
[8] The plaintiff duly sold and delivered the Honda cars to Cahaya Motor based on the undertakings given to the
plaintiff by the defendant to pay the price to the plaintiff.  The stand of the plaintiff was that it had complied with all
the terms and conditions of the said undertakings.
[9]  The plaintiff claimed against the defendant for the sum of

RM347,518.36 being the balance of monies due and payable by the

defendant under the said undertakings given to the plaintiff by the defendant.  The breakdown of the sums owed by the
defendant to the plaintiff can be seen in the plaintiff’s amended statement of claim and they are now reproduced herein:

“Particulars

Type of
Invoice Amount
Chasis
No Engine No Date
Vehicle No
Number RM
s
EMO272
1. Honda MA422-100379 CD4- 19/5/94 82,096.65
2
Accord 600399
Honda CD4-
EMO272
2. MA422-200532 19/5/94 85,771.09
4
Accord 700517
Honda CD4-
EMO285
3. MA422-201388 17/8/94 86,521.09
8
Accord 701422
EMO291
4. Honda MA422-201588 CD4- 08/9/94 87,433.09
5
Accord 701584
Honda CD4-
EMO300
5. MA422-202291 16/12/94 87,793.09
1
Accord 702324
429,615.01

Less payment made in respect of EM02722 82,096.65

Outstanding amount due to Plaintiff 347,518.36.”

[10]  Repeated demands made by the plaintiff to the defendant fell on deaf ears and the plaintiff claimed for:
(i)  the sum of RM347,518.36;
(ii)  interest on the said sum of RM347,518.36 at 8 per cent per annum from 1.1.1998 to the date of payment;
(iii) further or other order; and

(iv) costs.
[11]  The defendant by its defence averred that there were four conditions precedent to be fulfilled before the
disbursement of the facility by the defendant to Cahaya Motor and/or to the plaintiff would take place. The plaintiff
must comply with these four conditions precedent and shall deliver them to the defendant, namely:
(a)  the original invoice issued to the defendant in respect of the

Honda cars;
(b)  the original custom excise Form 7 in respect of the Honda cars; (c)  the original marine cargo all risks insurance
policy in respect of

the Honda cars with the defendant’s interest endorsed therein;

and

(d)  all other relevant original shipping and custom declaration documents in respect of the Honda cars.
[12]  All these four original documents served as security for repayment of the facility granted to Cahaya Motor.
[13]  It is trite law that whether a contract is operative, or even exists, may depend upon a contingency.  Put
differently, it can be said that the operation of a contract may be subject to a condition precedent.  And until the
condition precedent occurs, the contract is inoperative.

[14]  Where the condition is precedent, the agreement is not fully binding until the event occurs.  And where the
condition is subsequent, there is a binding agreement until the event occurs.
[15]  Conditions precedent are terms to the effect that unless a particular event occurs either no contract arises (a
condition precedent to the contract as a whole) or, although a contract may have arisen, its performance, in whole or
in part, cannot be enforced (a condition precedent to performance). A classic example of the former category can be
found in the case of Gilbert J McCaul (Australia) Pty Ltd v Pitt Club Ltd [1956]
57 SR(NSW) 332; while a good example of the latter category is Perri And
Another v. Coolangatta Investments Proprietary Limited [1981-1982]
149 C.L.R. 537.
[16] The facts in Gilbert J McCaul (Australia) Pty Ltd v Pitt Club Ltd (supra) may be stated as follows. There, in a
five year lease there was a clause giving the tenant an option of a further five years subject to two conditions – three
months’ notice of intention to exercise the option, and the punctual payment of rent and due performance of all
covenants during the term of the original lease.  During the first five years,  the tenant frequently failed to pay the
rent punctually.  The tenant did, however, give the three months’  notice required to exercise the option.  The lessor

refused the renewal.  The tenant sued.  It was held that punctual payment of rent was a condition precedent to the tenant’s
right to exercise the option.  The fact that the lessor had never complained about the tenant’s lack of punctuality was not a
waiver of that condition precedent. The tenant had not complied with it and hence could not demand renewal.

[17]  We now make reference to the case of Perri And Another v. Coolangatta Investments Proprietary Limited
(supra). The parties in that case contracted for the sale and purchase of a block of land.  The contract stipulated that
it was entered into “subject to purchasers completing a sale of their property at no: 9 Korokan Road, Lilli
Pilli.” Several months passed, the Lilli Pilli property remained unsold and, finally, the vendor company advised
the Perris that it was terminating the contract. The Perris disputed the company’s right to do so.  It was held that
whilst the contract was perfectly valid,  the sale of Lilli Pilli property was a condition precedent to the obligation to
settle.  Until the Lilli Pilli property was sold, settlement could not be demanded.  However, if that sale did not take
place within a reasonable time, either party could elect to bring the contract to an end provided they themselves were
not in default. Consequently, it was held that the company’s termination was valid.

[18]  Yet another case to refer to would be the case of John Pym v. Robert James Roy Campbell, James Thompson
Mackenzie and Richard Pastor Pritchard [1856] 119 English Reports 6 EL & BL 370. The plaintiff in that case
wished to sell to the defendant a share in an invention of the plaintiff.  A written document appeared to contain an
agreement for the purchase.  The plaintiff sought to rely upon it but the defendant established that the parties had
further agreed that the written agreement was to be the agreement only if the plaintiff’s invention was approved by a
third party, Abernethie. Unfortunately, Abernethie had not given his approval of the invention.  The court held that
there was no contract at all. Abernethie’s approval was a condition precedent to the existence of the contract.
[19]  Lord Denning L.J.  in  Trans Trust S.P.R.L. v. Danubian
Trading Co. Ld. [1952] 2 Q.B. 297, at page 304, aptly said:
“Sometimes it is a condition precedent to the formation of a contract, that is, it is a condition which must be fulfilled
before any contract is concluded at all. In those cases the stipulation ‘subject to the opening of a credit’ is rather like
a stipulation ‘subject to contract’. If no credit is provided, there is no contract between the parties. In other cases a
contract is concluded and the stipulation for a credit is a condition that is an essential term of the contract. In those
cases the provision of the credit is a condition precedent, not to the formation of a contract, but to the obligation of
the seller to deliver the goods. If the buyer fails to provide the credit, the seller can treat himself as discharged from
any further performance of the contract and can sue the buyer for damages for not providing the credit.”

[20]  We will demonstrate, in due course, that the conditions precedent were not fulfilled by the plaintiff and the
defendant was not obliged to pay the sum of RM347,518.36 as demanded by the plaintiff. Meanwhile, we will
continue to narrate the facts of the case.
[21]  The defendant further averred in its defence that the defendant had accordingly issued a conditional letter of
undertaking directly to the plaintiff in order to make payment to the plaintiff on behalf of Cahaya Motor for the
Honda cars supplied by the plaintiff to Cahaya Motor provided that the plaintiff shall first deliver the four original
documents to the defendant.
[22]  In regard to the averments at paragraph 7 of the amended statement of claim, the defendant in its defence at
paragraph 7 denied any knowledge that the plaintiff had duly sold and delivered the Honda cars to Cahaya Motor
and the defendant further averred and denied the allegation that the plaintiff had complied with all the terms and
conditions of the conditional letter of undertakings and the defendant categorically put the plaintiff to strict proof
thereof.
[23]  The defendant averred in its defence that it gave the plaintiff the benefit of doubt out of goodwill by requesting
the plaintiff for the documentary proof of delivery of the four original documents to the

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defendant but despite repeated reminders on several occasions by the defendant to the plaintiff requesting for the
documentary proof of delivery of the four original documents to the defendant, to date the defendant has not received the
documentary proof of delivery of those documents.

[24]  For these reasons, the defendant prayed that the plaintiff’s action be dismissed with costs and the defendant also
averred that the plaintiff had failed to disclose any reasonable cause of action or that the action was
scandalous, frivolous, mischievous or vexatious or an abuse of the process of the court.

Analysis

[25]  Having perused through the appeal record, it is appropriate to pose this salient question: “Has the plaintiff
discharged its burden of proof?”  Azmi L.P. in Nanyang Development (1966) Sdn. Bhd. v. How Swee Poh [1970] 1
MLJ 145, F.C., writing a separate majority judgment, aptly said:

“I am afraid I cannot understand this argument. Viscount Maugham in Joseph Constantine Steamship Line Ltd. v.
Imperial Smelting Corporation Ltd. The Kingswood [1941] 2 All E.R. 165, 179 dealing with the question of burden of
proof in that case says this:

‘Agreeing with the trial judge, I think the burden of proof in any particular case depends on the circumstances in
which the claim arises. In general the rule which applies is ei qui affirmat non ei qui negat incumbit probatio. It is an
ancient rule founded on considerations of good sense, and it should not be departed from without strong reasons.’

11

That rule means ‘the burden of proving a fact rests on the party who substantially asserts the affirmative of the issue
and not upon the party who denies it: for a negative is usually incapable of proof.’

The learned authors of Sarkar on Evidence express the view that section 101 of the Evidence Ordinance is based on
that rule.”

[26] We would answer the question posed in the negative.

[27]  We will also demonstrate that there was an inadequate judicial appreciation of the evidence as
adduced.  Appellate intervention is called for in this appeal.  The Privy Council speaking through Lord Fraser of
Tullybelton in Chow Yee Wah & Anor. v. Choo Ah Pat [1978] 2 M.L.J. 41, P.C., at page 42, made reference to the case
of Clarke v Edinburgh & District Tramways Co [1919] S.C. (H.L.) 35 where the following principles of law were laid
down:

“ ‘When a judge hears and sees witnesses and makes a conclusion or inference with regard to what on balance is the
weight of their evidence, that judgment is entitled to great respect, and that quite irrespective of whether the judge
makes any observations with regard to credibility or not. I can of course quite understand a Court of Appeal that
says that it will not interfere in a case in which the judge has announced as part of his judgment that he believes one
set of witnesses, having seen them and heard them, and does not believe another. But that is not the ordinary case of a
cause in a court of justice. In courts of justice in the ordinary case things are much more evenly divided; witnesses
without any conscious bias towards a conclusion may have in their demeanour, in their manner, in their hesitation, in
the nuance of their expressions, in even the turns of the eyelid, left an impression upon the man who saw and heard
them which can never be reproduced in the printed page. What in such circumstances, thus psychologically put, is the
duty of an appellate court? In my opinion, the duty of an appellate court in those circumstances is for each judge of it
to put to himself, as I now do in this case, the question, Am I – who sit here without those advantages, sometimes
broad and sometimes subtle, which are the privilege of the judge who heard and tried the case – in a position, not
having those privileges, to come to a clear conclusion that the judge who had them was plainly wrong? If I cannot be
satisfied in my own mind

12

that the judge with those privileges was plainly wrong, then it appears to me to be my duty to defer to his judgment.’

The first part of that quotation from the speech of Viscount Sankey shows that there is no room for an argument
which was at least adumbrated on behalf of the respondent in the instant appeal to the effect that the principle
of Thomas does not apply to the appeal to the Federal Court because it is the appeal by way of rehearing – Courts of
Judicature Act, 1964, section 69. Their Lordships would add that the instant case falls within the class referred to in
the quotation from Clarke v. Edinburgh Tramways Co. 1919 S.C. (H.L.)

35,36 in which the judge has announced as part of his judgment that he believes one set of witnesses and disbelieves
the other.”

[28]  And this very passage was cited with approval by the Brunei Court of Appeal in the case of Hanshim Corp Sdn
Bhd v New York Plastic Co Pte Ltd [1990] 1 MLJ 345, CA.
[29]  In Watt Or Thomas v. Thomas [1947] A.C. 484, H.L., all the Law Lords wrote separate
judgments.  However, the judgment of Lord Thankerton deserves mention. There at pages 487 to 488, his Lordship
set out the approach to be adopted by the appellate court in these erudite terms:

“I do not find it necessary to review the many decisions of this House, for it seems to me that the principle embodied
therein is a simple one, and may be stated thus: I. Where a question of fact has been tried by a judge without a jury,
and there is no question of misdirection of himself by the judge, an appellate court which is disposed to come to a
different conclusion on the printed evidence, should not do so unless it is satisfied that any advantage enjoyed by the
trial judge by reason of having seen and heard the witnesses, could not be sufficient to explain or justify the trial
judge’s conclusion: II. The appellate court may take the view that, without having seen or heard the witnesses, it is
not in a position to come to any satisfactory conclusion on the printed evidence: III. The appellate court, either
because the reasons given by the trial judge are not satisfactory, or because it unmistakably so appears from the

13

evidence, may be satisfied that he has not taken proper advantage of his having seen and heard the witnesses, and the
matter will then become at large for the appellate court. It is obvious that the value and importance of having seen
and heard the witnesses will vary according to the class of case, and, it may be, the individual case in question. It will
hardly be disputed that consistorial cases form a class in which it is generally most important to see and hear the
witnesses, and particularly the spouses themselves; and, further, within that class, cases of alleged cruelty will afford
an even stronger example of such an advantage. Normally the cruelty is alleged to have occurred within the family
establishment, and the physique, temperament, standard of culture, habits of verbal expression and of action, and the
interaction between the spouses in their daily life, cannot be adequately judged except by seeing and hearing them in
the witness box. The law has no footrule by which to measure the personalities of the spouses. In cases such as the
present, it will be almost invariably found that a divided household promotes partisanship, and it is difficult to get
unbiased evidence.”

[30]  These fundamental principles of law have been applied vigorously in numerous cases.  Suffice for us to make
mention of only two of them, namely:
(a) Tay Kheng Hong v. Heap Moh Steamship Co. Ltd. [1964] 30
M.L.J. 87, H.C. Singapore, C.A. Singapore, and Privy Council;

and

(b) Gan Yook Chin & Anor v. Lee Ing Chin & Ors [2004] 4 CLJ
309, F.C. Malaysia.
[31]  Now, where the credibility of witnessess is not in issue and the only concern of the Court of Appeal is to
determine whether the trial judge has drawn proper inferences from the facts, the Court of Appeal is in just as good a
position as the trial judge to evaluate and assess the evidence.  In

14

these circumstances, the appellate court will give the appropriate weight to the opinion of the trial judge but at the same time
it may form its own independent opinion on the inferences to be drawn.

[32]  Lee Hun Hoe (CJ Borneo) speaking for the Supreme Court in Yeap Leong Huat v Yeap Leong Soon & Anor and
another application [1989] 3 MLJ 157, aptly said, at page 161 of the report:

“An appellate court should not interfere with the finding of facts by the learned judge who has seen and heard the
witnesses and is in a better position to assess their credibilities. On the other hand, the defendants contended that the
learned judge erred primarily in drawing the wrong inferences from established facts. It is trite law that, on the
question of evaluation of facts, the appellate court is in as good a position as the trial judge to evaluate those
facts:  Watt v Thomas [1947] All ER 582,  Benmax v Austin [1955]1 All ER 326, Tithes Dental a Photo Supply Sdn Bhd
v Expresa Lineas Maritimes Argentinas & Ors [1977] 1 MLJ 13, Chow Yee Wah 7 Anor v Choo Ah Pat  [1978] 2 MLJ
41. An appellate court can also review a trial court’s decision if the reasons are unsatisfactory and contradictory: Lim
Kim Chet & Anor v Multar bin Masngud [1974] 2 MLJ 165 or if in reaching its conclusion the learned judge has not
properly analysed the entirety of the evidence which was given before him:  Choo Kok Beng v Choo Kok Hoe [1984] 2
MLJ 165.”

[33]  Edgar Joseph Jr SCJ delivering the majority judgment of the Supreme Court in Sundram v Arujunan & Anor
[1994] 3 MLJ 361, had this to say at page 373 of the report:

“By way of postlude, we must add a final point regarding this part of the case lest we be accused of an oversight. We
recognise, as we must, that a Court of Appeal will naturally be reluctant to interfere with a finding of fact by the trial
judge who has had the inestimable advantage of watching the demeanour of the witnesses, ‘their candour or their
partisanship, and all the incidental elements so difficult to describe which make up the atmosphere of an actual trial’
(per Lord Macmillan in Watt v Thomas [1947] AC 484 at pp 490-491;

15

[1947] 1 All ER 582 at p 590). But, having said that, we would draw attention to the familiar principle that there is a
distinction between the finding of a specific fact and the finding of a fact which is really an inference drawn from the
facts specifically found. In the latter case – and the present case is such a case – the appellate court will be far more
ready to reverse his decision founded as it is on inferences drawn from admitted or undisputed facts. (See Benmax v
Austin Motor Co Ltd [1955] AC 370; [1955] 1 All ER 326; [1955] 2 WLR

418.)”

[34]  In Sivalingam a/l Periasamy v Periasamy & Anor [1995] 3

MLJ 395, C.A., this court speaking jointly through Gopal Sri Ram and

Mahadev Shankar JJCA rightly said at pages 398 to 399 of the report:

“It is trite law that this court will not readily interfere with the findings of fact arrived at by the court of first instance
to which the law entrusts the primary task of evaluation of the evidence. But we are under a duty to intervene in a
case where, as here, the trial court has so fundamentally misdirected itself, that one may safely say that no reasonable
court which had properly directed itself and asked the correct questions would have arrived at the same conclusion.”

[35]  The Singapore Court of Appeal in MK (Project Management) Ltd v Baker Marine Energy Pte Ltd [1995] 1 SLR
36, echoed the same sentiments as seen at the headnotes at page 37. There it was stated that:
“(1) Appellate courts are exceedingly slow to overturn findings of fact based on evidence given by witnesses which the
trial judge had the advantage of hearing first-hand but this reluctance is not quite so pronounced when the findings
of fact are actually inferences made from primary facts which are not in dispute. The learned judicial commissioner’s
findings that there was no certainty as to when the commission was to become payable and that no commission was
payable until the financial package was finalised, fell into the latter category. It was far from clear that the letters
suggested that the commission would only become payable if the financial package was finalised. At the same time,
the respondents never pleaded that the parties had agreed to the commission being conditional upon the financial
package being arranged. It was not open to the learned judicial

16

commissioner to make this finding of fact in the absence of an amendment to the pleadings.”

[36]  Steve Shim CJ (Sabah & Sarawak) writing for the Federal Court in Gan Yook Chin & Anor v. Lee Ing Chin &
Ors (supra), at pages 320 to 321, aptly said:

“In our view, the Court of Appeal in citing these cases had clearly borne in mind the central feature of appellate
intervention ie, to determine whether or not the trial court had arrived at its decision or finding correctly on the basis
of the relevant law and/or the established evidence. In so doing, the Court of Appeal was perfectly entitled to examine
the process of evaluation of the evidence by the trial court. Clearly, the phrase ‘insufficient judicial appreciation of
evidence’ merely related to such a process. This is reflected in the Court of Appeal’s restatement that a judge who
was required to adjudicate upon a dispute must arrive at his decision on an issue of fact by assessing, weighing and,
for good reasons, either accepting or rejecting the whole or any part of the evidence placed before him. The Court of
Appeal further reiterated the principle central to appellate intervention ie, that a decision arrived at by a trial court
without judicial appreciation of the evidence might be set aside on appeal. This is consistent with the established
plainly wrong test.

In the circumstances and for the reasons stated, there is no merit in the appellants’ contention that the Court of
Appeal had adopted a new test for appellate intervention. In our view, what the Court of Appeal had done was
merely to accentuate the established plainly wrong test consistently applied by the appellate courts in this country.”

[37]  Here, the main issue that arose for determination before the learned trial judge of the High Court was whether
the plaintiff had proven by way of documentary evidence the delivery of the four original documents as specified in
the letters of undertaking by the plaintiff to the

17

defendant?  If the answer is in the affirmative, then the defendant shall be bound by its undertaking to pay the sum claimed
by the plaintiff.

[38]  The live issue pursued before the High Court and before this court was this (see paragraph 1 of the
memorandum of appeal):

“The learned judge erred in law and in fact in holding that the appellant is estopped through ‘convention’ from
denying that the appellant did not receive from the respondent the original documents pursuant to the letters of
undertaking. The learned judge ought to have held that the respondent did not satisfy the conditions to be met under
the doctrine of estoppel.”

[39] Put in another way:

“Whether the trial judge’s invocation of the equitable doctrine of estoppel by convention was justified in the
circumstances of the case?”

[40]  Now, it must be borne in mind that in the amended statement of claim:

(a)  there was no allegation of estoppel;
(b)  no facts were alluded to about estoppel;
(c)  no mention was made about any variation of the terms of the letters of undertaking; and
(d)  neither was there any statement about any mistake of fact or mistake of law.

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[41]  The letter of undertaking dated 19.5.1994 from the defendant to the plaintiff can be seen at pages 278 to 279 of
the appeal record and it was worded in this way:

“RE : CAHAYA MOTOR SABAH SDN BHD, SANDAKAN FLOOR STOCKING FACILITY OF RM600,000.00

Your letter dated 19-5-94 faxed to us on 19-5-94 refers.

Please be informed that payment for the following vehicles will be remitted to your company within two (2) weeks
upon confirmation of receipt of Bill of Lading and  the receipt of other related documents stated herein.

TYPE OF COLOU CHASSIS AMOUNT

ENGINE NO:
VEHICLE R NO: (RM)
Honda Accord SB/IV MA422-100383 CD4-600396 RM 82,096.65
Honda Accord SB/IV MA422-100379 CD4-600399 RM 82,096.65
Honda Accord NB/IV MA422-200712 CD4-700708 RM 86,521.09
Honda Accord CR/IV MA422-200532 CD4-700517 RM 85,771.09
Total :- RM336,485.48

OTHER RELATED DOCUMENTS REQUIRED:

(a) Original Invoice(s) issued to Arab-Malaysian Finance Berhad for the account of Cahaya Motor (Sabah) Sdn Bhd,
Sandakan;

(b) Original Certificate(s) on Motor Vehicles released from assembly plants issued for each vehicle (Custom Excise
Form 7);

(c) Original Marine Cargo All Risks Insurance policy for the full insurable value of the vehicle(s) with Arab-
Malaysian Finance Berhad interest endorsed therein;

(d) All relevant Original Shipping and Customs Declaration documents;

(e) Original Letter of Undertaking from Kah Motor Company Sdn Bhd for the following:

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(i) To deliver the Customs Excise Form 7 and Original Invoice(s) for custody with Arab-Malaysian Finance Berhad;
and

(ii) To deliver the vehicle(s) to Cahaya Motor (S) Sdn Bhd, Sandakan upon written confirmation of payment from
Arab- Malaysian Finance Berhad.”

[42]  Another letter of undertaking dated 16.8.1994 from the defendant to the plaintiff can be seen at pages 310 to 311
of the appeal record.  The requirements in this letter of undertaking are the same as the letter of undertaking dated
19.5.1994 at page 279 of the appeal record which have been reproduced.
[43]  Yet another letter of undertaking dated 10.9.1994 from the defendant to the plaintiff can be seen at pages 325 to
326 of the appeal record. The requirements in this letter of undertaking are the same as the letter of undertaking
dated 19.5.1994 at page 279 of the appeal record which have been reproduced.
[44]  Again another letter of undertaking can be seen at pages 351 to

352 of the appeal record.  It was undated.  Likewise the requirements in this letter of undertaking are the same as the letter of
undertaking dated
19.5.1994 at page 279 of the appeal record as reproduced earlier.

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[45]  We reiterate the crucial words in the letter of undertaking as seen at page 279 of the appeal record and we now
reproduce those words, once again:

“(ii) To deliver the vehicle(s) to Cahaya Motor(s) Sdn Bhd, Sandakan upon written confirmation of payment from
Arab-Malaysian Finance Bhd.”
[46]  The plaintiff sought to justify its action to deliver the four original documents to the wrong address by stating
that the defendant did not object to the plaintiff sending those documents to Cahaya Motor.  But, unfortunately, the
plaintiff did not plead such an allegation nor adduced any evidence to support its allegation that the defendant did
not object to the plaintiff sending the four original documents to Cahaya Motor.
[47]  The plaintiff also sought to rely on the defendant’s exhibit marked as “D2” as seen at pages 227 to 228 of the
appeal record to lend support to its supposition that the defendant did not object to the plaintiff sending the four
original documents to Cahaya Motor.  Now, exhibit “D2” was a bill of lading designated as  “original” from the
shipper to the consignee. The shipper was:

“Kah Motor Co Sdn Bhd (Pg) No: 4 Leith Street

10200 Penang.”

21

[48] While the consignee was:

“Arab Malaysian Finance Bhd A/C Syk Cahaya Motors (S) S/B Bandar Nam Tung, Blk ‘A’ Lot ‘9’ Mile 2, Leila Rd,
90008 Sandakan.”

[49]  So, the plaintiff claimed that the defendant was estopped from denying non-receipt of all the four original
documents through the doctrine of estoppel by convention and conduct. The learned trial judge of the High Court
also found that the defendant was estopped through “convention” from denying that the defendant did not receive
from the plaintiff the four original documents pursuant to the letters of undertaking.
[50]  Mohamed Azmi J (later SCJ) in  V. Veeriah v. General Manager, Keretapi Tanah Melayu [1974] 1 M.L.J. 201,
202, in the course of his Lordship’s judgment had this to say in regard to the scope of estoppel in section 115 of the
Evidence Act 1950:

“Sarkar on Evidence, Twelfth Edition, at page 1033 states that there are seven prerequisites to bring a case within the
scope of estoppel as defined in section 115. It was contended by the defence that all these prerequisites had been
fulfilled, namely:–

(1) There must be a representation by a person or his authorised agent to another in any form – a declaration, act or
omission.

(2) The representation must have been of the existence of a fact and not of promises de futuro or intention which
might or might not be enforceable in contract.

(3) The representation must have meant to be relied upon, i.e. it must have been made under the circumstances which
amounted to an intention causing or permitting belief in another. The proof of the intent might be direct or
circumstantial, e.g. by conduct.

22

(4) There must have been belief on the part of the other party in its truth.

(5) There must have been action on the faith of that declaration, act or omission, that is to say, the declaration, act or
omission must have actually caused another to act on the faith of it, and to alter his former position to his prejudice
or detriment.

(6) The misrepresentation or conduct or negligence must have been the proximate cause of leading the other party to
act to his prejudice.

(7) The person claiming the benefit of an estoppel must show that he was not aware of the true state of things. If he
was aware of the real state of things or had means of knowledge, there can be no estoppel.

Thus, for the defendant to succeed on the defence of estoppel, there must be ignorance on his part as to the real date
of birth of the plaintiff. He must show that he was ignorant of the truth regarding the representation, but when both
parties have equal means of knowledge of the fact, which in the present case was the plaintiff’s date of birth, there
can be no estoppel. Further, in my judgment, there can be no estoppel where the truth of the matter appears, as it did
in the present case, on the face of the proceedings. (See judgment of Lord Davey in Tara Lal Singh v. Sarobur Singh
27 I.A. 33
@ 38). To my mind, this is a sound authority since estoppel is based on equity and good conscience with the object of
preventing fraud and to secure justice between parties by promotion of honesty and good faith. From the agreed
facts, it was common ground that the plaintiff was born on June 2, 1921 and not on June 26, 1916. His present
Identity Card, E.P.F. Membership Card and Citizenship Certificate all showed his date of birth as 1921 and not 1916.
In fact, at the outset of the hearing, learned counsel for the defendant conceded that the plaintiff was born on June 2,
1921. Under the circumstances, there could be no estoppel arising out of this action when the truth of the plaintiff’s
date of birth appeared on the face of the proceedings and, as such, the plaintiff should not be estopped from denying
his date of birth as June 26, 1916.”

[51]  Here, the plaintiff was not ignorant of the defendant’s address.

When the plaintiff received the letters of undertaking the defendant’s

23

address was stated boldly on the defendant’s letter head.  The plaintiff was certainly aware of the true state of things and had
the means to find out the true state of the defendant’s address.  It is our judgment that there can be no estoppel in this
appeal.  It is also our judgment that the duty was on the plaintiff to prevent fraud by sending the four original documents
directly to the defendant. If the four original documents were sent to the wrong address, that would provide an opportunity
for someone to facilitate a fraud. [52]  The plaintiff was required to deliver the four original documents
to the defendant at the defendant’s address but failed to do so.  The plaintiff should know what to do after all both  “the
plaintiff and the defendant have had business dealings since before 1991” (see page
31 of the appeal record of the written judgment of the learned trial judge of the High Court).

[53]  Next, the learned trial judge of the High Court placed undue reliance on the evidence of Sin Fook
Sing (“DW1”) in regard to forgery and authencity of the four original documents.  With respect, both these two
points were not facts in issue for the simple reason that they were not pleaded in the statement of defence.  In the
words of Ong Hock Thye F.J. writing separately for the Federal Court in the case of  How Park Too v Mohideen
[1968] 1 MLJ 51, at page 52:

24

“In the first place, the point was never pleaded in the defence; consequently it was not a fact in issue requiring the
magistrate to make any finding thereon.”

[54]  We categorically say that against the backdrop of the defendant’s pleaded defence, DW1’s testimony was
certainly relevant.  In our judgment, the probative value of DW1’s testimony cannot be doubted. It demonstrated the
extent of the “benefit of doubt” and  “goodwill” extended by the defendant to the plaintiff.  DW1’s evidence did not
deviate from the pleaded defence.  On the contrary, DW1’s evidence was sufficiently relevant to an issue before the
court and therefore they are admissible.  In Director of Public Prosecutions v Kilbourne [1973] A.C.
729, H.L., at page 756, Lord Simon of Glaisdale aptly said:

“Evidence is relevant if it is logically probative or disprobative of some matter which requires proof. I do not pause to
analyse what is involved in ‘logical probativeness,’ except to note that the term does not of itself express the element
of experience which is so significant of its operation in law, and possibly elsewhere. It is sufficient to say, even at the
risk of etymological tautology, that relevant (i.e., logically probative or disprobative) evidence is evidence which
makes the matter which requires proof more or less probable.”

[55]  And in R. v. Harz, R. v. Power [1966] 3 All E.R. 433 (Court of

Criminal Appeal), at page 449, Thesiger J had this to say:

“The conclusions to be drawn from the authorities seem to be as follows:

(i) The main general rule governing the entire subject is that evidence which is sufficiently relevant to an issue before
the court is admissible and all that is irrelevant or insufficiently relevant should be excluded. (CROSS ON
EVIDENCE (2nd Edn.) pp. 12-13). The word ‘relevant’ is used in the sense in which it is

25

defined in art. 1 of STEPHEN’S DIGEST OF THE LAW OF EVIDENCE (12th Edn.). It is there stated that the
word:
‘means that any two facts to which it is applied are so related to each other that according to the common course of
events one either taken by itself or in connexion with other facts proves or renders probable the past .... existence ....
of the other.’

Thus the word ‘relevant’ is to all intents and purposes synonymous with the phrase ‘of probative value’.”

[56]  Chong Siew Fai CJ (Sabah & Sarawak) in Thavanathan a/l Balasubramaniam v Public Prosecutor [1997] 2
MLJ 401, at page 409, said that:

“Of the law of evidence, the cardinal rule relating to relevancy is that, subject to the exclusionary rules, all evidence
which is sufficiently relevant to the facts in issue is admissible.”

[57]  Thus, when DW1 said that the letters of undertaking were doubtful documents that piece of evidence should be
admissible because such evidence was not prejudicial to the plaintiff’s claim.
[58]  The learned trial judge of the High Court placed excessive reliance upon the evidence of Moganadegan a/l
Erulappan (PW2) that proof of posting were destroyed in a flood and his Lordship also failed to consider that there
was no evidence adduced to show that the flood actually occurred and that the flood had destroyed the proof of
posting. Under cross-examination at page 113 of the appeal record,  PW2 categorically said:

“I have proof of posting of documents sent to the defendant.”

26

[59]  But in the same breath, PW2 testified under cross-examination at page 113 of the appeal record that:

“In 1997 there was a flood under which all our documents at the office have been damaged and therefore I cannot
produce this proof of posting of the documents to the defendant.”

[60]  This provoked the learned counsel for the defendant to advance this salient question to PW2 (see pages 113 to
114 of the appeal record):

“Q: I put it to you it is strange that the flood only destroyed the proof of posting documents and not the documents
exhibited in this case.

A: I do not agree.”

[61] But, alas the plaintiff failed to adduce any evidence to show that the flood had indeed damaged the proof of
posting. Under re-examination at pages 115 to 116 of the appeal record, PW2 testified that:

“In 1997 we kept the record of documets of proof of posting in a store at the ground floor of our office. We do not
write on the board in our offices any proof of posting of documents. We write in our proof of posting of such
documents in a full scap book. We write on this full scap book under the heading of Pos Laju and DHL. It is this full
scap book that has been destroyed by the flood in that year

1997.”

[62]  We note that there was no evidence adduced as to the depth of the flood. Several pertinent questions
immediately come to the forefront:
(a)  was the flood that deep that only the documents on the third floor was saved?;

27

(b)  was there a security guard who was on duty at the material time and who could come forward and give
evidence?; and
(c)  where exactly was the full scap book at the time of the flood?
[63]  DW1 – the finance officer of the defendant, gave evidence and he testified at page 121 of the appeal record in
this way:

“The plaintiff sent documents to the defendant company by way of courier service. Normally letters sent to the
defendant are acknowledged by the defendant. The defendant will acknowledge on the courier company consignment
note. If the defendant acknowledged receipt of the documents then there is proof that the documents were sent rightly
to the defendant.”

[64]  This piece of damning evidence would certainly be in favour of the defendant in that if the full scap book was
damaged or destroyed by the flood, then the plaintiff could still produce the consignment note as proof of
delivery.  Yet this was not done and we can only conclude that the plaintiff had sent the four original documents to the
wrong address.
[65]  Next, the learned trial judge of the High Court erred in law and in fact in holding that the plaintiff had proved
that the bills of lading and all the four original documents as stated in the letters of undertaking had been forwarded
to the defendant even though the covering letter enclosing the said documents were addressed to Cahaya Motor.  On
the evidence, we say that the learned trial judge of the High Court ought to have held that the bills of lading and all
the four original documents as stated in the letters

28

of undertaking had been forwarded to the wrong address and, consequently, the learned trial judge of the High Court ought
to have held that in the circumstances and by virtue of the nature of the transaction, it was improbable that the defendant had
allowed the plaintiff to send the four original documents as stipulated in the letters of undertaking to Cahaya Motor and not
to the defendant direct.

[66]  Now, under the letters of undertaking the defendant required the plaintiff to issue the original invoice to:

“Arab-Malaysian Finance Berhad for the account of Cahaya Motor

(Sabah) Sdn Bhd, Sandakan.”

[67]  At the top left hand corner just below the plaintiff’s name and address of the invoice, the following words
appeared:

“LOAN BY: M/S ARAB-MALAYSIAN FINANCE BHD

SOLD TO: A/C SYK CAHAYA MOTORS (S) S/B BANDAR NAM TUNG BLK ‘A’ LOT ‘9’ MILE 2 LEILA RD
90008 SANDAKAN.”

[68]  The invoice showed the defendant to be the lender while SYK CAHAYA MOTORS (S) S/B to be the buyer of all
the Honda cars of the plaintiff.  This was also set out in the agreed facts between the parties. The letters of
undertaking stipulated that the original invoices must be issued to the defendant and for the account of “(A/C) of
SYK CAHAYA MOTORS (S) S/B.”  That being the case, documents like the bill of lading and the

29

permit to transport goods which relate to the delivery of the Honda cars to Cahaya Motor will have to have a similar name
and address as shown in the invoices in order for the Honda cars to be delivered to Cahaya Motor. In short, from the
documentary evidence it can readily be ascertained that the defendant was the lender and the actual buyer of the Honda cars
from the plaintiff was Cahaya Motor.  The Honda cars will have to be delivered to Cahaya Motor and it was for this reason
that the bill of lading and the permit to transport goods reflected Cahaya Motor’s address.

[69]  It must be emphasised that Cahaya Motor’s address was not the address of the defendant.  And at all material
times, the plaintiff knew the actual address of the defendant through the letters of undertaking.
[70] It must be borne in mind that Cahaya Motor’s address was at:

“Bandar Nam Tung

Blk ‘A’ Lot ‘9’

Mile 2, Leila Road

90008 Sandakan.”

[71] While the defendant’s address was at:

“Lots 3 & 4, Ground Floor

Blok ‘Y’, Bandar Ramai-Ramai Jalan Leila, 90000 Sandakan Sabah.”

[72]  Be it noted that the defendant’s address was categorised as an agreed and undisputed facts.

30

[73] PW2 confirmed that he was, at all material times, the administrator / export manager of the plaintiff. And under
cross- examination,  PW2 testified that he was in charge of sending all the four original documents to the
defendant. PW2 also testified, under cross- examination, at page 113 of the appeal record that:

“The address given in this letter is Arab-Malaysian Finance Berhad, Syarikat Cahaya Motor Sdn Bhd, Bandar Nam
Tung, Block ‘A’, Lot ‘9’, Mile 2, Leila Road, 90008 Sandakan. This is the address of the defendant financier. All this
while all the relevant documents addressed to Arab-Malaysian Finance are sent to this address.”

[74]  It was wrong for PW2 to say that Cahaya Motor’s address was “.... the address of the defendant financier.” Such
an assertion certainly contradicted with the agreed facts.
[75] Again, under cross-examination at pages 111 to 112 of the appeal record, PW2 had this to say:

“The buyer of the vehicles is the defendant company. I am sure of this fact. The defendant company is financing for
Cahaya Motor Sabah (M) Sdn Bhd. I agree that the defendant company is the financier. I still maintain that the
buyer in this case is the defendant company. The ordering of the vehicles were made by the defendant company.”

[76]  It is rather unfortunate that this piece of evidence from PW2 contradicted PW2’s earlier witness statement as
seen at page 72 of the appeal record where he said in answer to Question 4:

“First of all Cahaya Motor will place order for motor cars it wished to purchase with the plaintiff.”

31

[77]  It is perplexing that PW2 was unable to distinguish between a buyer of the Honda cars and a financier.  It must
be recalled to mind that PW2 joined the plaintiff in 1991.  And the disputed claim arose in 1994 (see PW2’s witness
statement at page 72 of the appeal record).  Based on the available evidence, we must conclude that PW2 who was in
charge of sending all the four original documents to the defendant chose not to send all those documents to the
defendant’s address but instead to Cahaya Motor’s address.  The covering letters of the plaintiff enclosing all the four
original documents would clearly show that the wrong address was chosen. [78]  We categorically say that the names
and addresses in the invoices, bills of lading and the permits to transport goods were correctly named and
addressed. But,  unfortunately, the addresses in the plaintiff’s covering letters enclosing all the four original
documents were wrongly addressed to Cahaya Motor’s address.  We say that the covering letter should be a straight
forward letter addressed directly to the defendant

without the need to mention that it was for the account of Cahaya Motor. [79]  In our judgment, PW2 being an export
manager should know
the importance that all the four original documents should be sent directly to the defendant.  We too hold that PW2 should
have known that all the four original documents were security documents meant for the defendant.

32

To say the least, the oversight by PW2 was quite fatal.  The four conditions precedent were not fulfilled by the plaintiff and
the defendant was right in refusing to pay the sum of RM347,518.36 to the plaintiff as demanded.

[80] Going on an uphill task, the plaintiff resorted to certain payments made to the plaintiff by the defendant
pursuant to the bills of lading in order to draw an inference that the defendant received all the four original
documents.  The defendant admitted paying for those Honda cars listed at items (1) and (2) in exhibit “P1” as seen at
page 353 of the appeal record for the simple reason that there was a letter from Cahaya Motor to the defendant
requesting payment for the same.  That letter was dated

8.6.1994 and it was worded in this way (see page 294 of the appeal record):

“Re : Floor Stocking Facility

Shall be pleased if you could kindly arrange to pay Kah Motor Co. Sdn. Bhd., for an amount of RM164,193.30 being
payment for 2 units of Honda Accord 2.2 EFI (M). Details are as follows:-
Model  Engine No. Chassis No. CIF Price
CD4-
MA422-100383 600396 RM 82,096.65
Honda Accord 2.2 EFI (M) Honda Accord 2.2 EFI
(M)
MA422-100379 CD4- RM 82,096.65
600399
RM164,193.30
Total:
==========
=

We have secured firm buyers, M/S Indah Jadi Sdn. Bhd. and Juita Maju Sdn. Bhd. and both of them have confirmed
H/P loans from your company for loan amounts of RM96,000.00 and RM70,000.00

33

respectively i.e. total H/P loan RM166,000.00, you are requested to contra the account for the floor stocking of these
two units.

Thank you. Yours faithfully,

CAHAYA MOTOR (SABAH) SDN. BHD.”

[81]  And by way of two letters dated 15.6.1994 (as seen at page 298 of the appeal record) and 20.7.1994 (as seen at
page 302 of the appeal record), the defendant made the necessary payments through the issuance of cheques.
[82]  It must be emphasised that those two payments were made as a result of the letter from Cahaya Motor and not
because the defendant had received the four original documents from the plaintiff.
[83]  Be that as it may, the defendant did not make the payment for item (3) in exhibit “P1”.  Payment was, in
fact, made by Cahaya Motor by way of a bank draft vide SCB Bank draft no: 103902 for the amount of
RM86,521.09. Moreover, the defendant had never made payment via bank drafts; rather payment by the defendant
had always been by way of cheques.  In his witness statement at page 97 of the appeal record, DW1 explained the
usage of cheques in this way:

“26 Question : Did the defendant ever make any payments to the plaintiff by way of a bank draft?

Answer : Absolutely not. Question : Why not?

34

Answer : Our cheques are good enough.”

[84]  With respect, the conclusion of learned trial judge of the High Court that just because payments had been made
on those two occasions then it could be inferred that the defendant had received and seen all the four original
documents was a wrong conclusion.  Such an inference was certainly unsafe.  Lord Atkin in  Maharaja Sris Chandra
Nandy and another v Rakhalananda Thakur and others AIR 1941 P.C. 16, held that:

“If it is not safe from the evidence for the appellate Court to draw a particular inference it is also not safe for the trial
Judge to draw the inference. Not safe must mean that there is no evidence from which the inference can reasonably
be drawn. There are cases in which evidence is so well balanced that an inference either way can reasonably be
drawn. In such cases the appellate tribunal may select the inference they choose: but they can have no equal choice
between an inference that is safe, and one that is unsafe.”

[85]  Now, from the moment the plaintiff delivered the Honda cars to the ship until those cars were collected by
Cahaya Motor, the plaintiff had full control of the delivery and release of those cars to Cahaya Motor.  The defendant
would only make payment to the plaintiff upon receipt of the four original documents.  These were the security
documents which would facilitate the disbursements of the loan.  Without those security documents, the defendant
was under no obligation to pay.

35
[86]  For the reasons adumbrated above, we unanimously allowed the appeal and set aside the decision of the learned
judge of the High Court.  We made an order that costs should be given to the defendant here and below.  We too
ordered that the deposit to be refunded to the defendant.

2.4.2010 Dato’ Abdul Malik bin Ishak

Judge, Court of Appeal,
Malaysia