DALAM MAHKAMAH RAYUAN MALAYSIA (BIDANG KUASA RAYUAN) RAYUAN SIVIL NO. W-02-1003-2009 Antara 1. Ace Heights (M) Sdn. Bhd. (No. Syarikat 400572 D) 2. Dato Abdullah B. Mohd Yusof 3. Abbas Bin Yaacob 4. Harith Merican 5. Kamil Ahmad Merican. Perayu-Perayu Dan 1. BSNC Leasing (M) Sdn. Bhd. (No Syarikat 349734 U) 2. Affin Bank Berhad (No. Syarikat 25046-T). Responden-Responden Didengar bersama-sama dengan DALAM MAHKAMAH RAYUAN MALAYSIA (BIDANG KUASA RAYUAN) RAYUAN SIVIL) NO. W-02-1067-2009 Antara Ramlan Bin Haron 1. Perayu
Dan 1. BSNC Leasing (M) Sdn. Bhd. (No Syarikat 349734 U) 2. Affin Bank Berhad (No. Syarikat 25046 T). Responden-Responden [DALAM MAHKAMAH TINGGI MALAYA DI KUALA LUMPUR (BAHAGIAN SIVIL) GUAMAN NO. S4(S1)-22-1294-2001] 1. BSNC Leasing (M) Sdn. Bhd. (No Syarikat 349734 U) Antara 2. Affin Bank Berhad (No. Syarikat 25046-T). Plaintif-Plaintif Dan 1. Ace Heights (M) Sdn. Bhd. (No. Syarikat 400572 D) 2. Dato Abdullah B. Mohd Yusof 3. Abbas Bin Yaacob 4. Harith Merican 5. Kamil Ahmad Merican 6. Ramlan Bin Haron CORAM. Defenden-Defenden ZALEHA ZAHARI, JCA MOHD HISHAMUDDIN MOHD YUNUS, JCA 2
LINTON ALBERT, JCA GROUNDS OF DECISION [1] The respondents in both appeals were the first and second plaintiffs in the suit from which these appeals arose while all the appellants were the defendants. Both appeals were heard together by consent. In appeal No. W-02-1003-2009 (the first appeal) the first appellant was the first defendant in the suit and the second to the fifth appellants were the second to the fifth defendant respectively. In appeal No. W-02-1067-2009 (the second appeal) the appellant was the 6 th defendant in the suit. The suit was initially commenced by the first plaintiff but the second plaintiff was subsequently added as a party after the rights and obligations under the hire purchase agreement which was the subject matter of the suit were vested in the second plaintiff by virtue of a court order dated 18-12-2000. The respective parties will be referred to in the way they have been described above. [2] The suit was founded on an industrial hire purchase agreement entered into between the first plaintif as the owner and the first defendant as the hirer on 22.5.97 and a Guarantee and Indemnity of the Hire Purchase Agreement executed by the second to the sixth defendants 3
who were the guarantors, also dated 22.5.97. The backdrop to these two pivotal documents can be summarized as follows:- The first defendant had earlier on purchased a yacht, M.V. Romi for RM750,000.00 under a back to back arrangement with its original owner one Scot Bradley and the second owner Zeta Marine Sdn. Bhd. The yacht was subsequently chartered to Zeta Marine Sdn. Bhd. and it was envisaged that the proceeds of the charter of RM10,000.00 per month would be expended towards payment of the monthly rentals due to the first plaintiff under the industrial hire purchase agreement. Hence, contemporaneous with the execution of the industrial hire purchase agreement the first defendant executed a Deed of Assignment with the first plaintif assigning the proceeds of the charter agreement with Zeta Marine Sdn. Bhd. to the first plaintif. The facility provided by the first plaintiff and disbursed to the first defendant on 22.5.97 at the request of Zeta Marine Sdn. Bhd. was RM500,000.00. The first defendant was required under the industrial hire purchase agreement to pay the first plaintif 60 equal monthly installments of RM11,250.00 the sum total of which comprised the facility of RM500,000.00 and finance charges of RM175,000.00 making a total of RM675,000.00. 4
[3] The first defendant defaulted in its obligation to pay the monthly installments not least because the proceeds expected from the charter agreement with Zeta Marine Sdn. Bhd. in respect of the yacht inexplicably did not materialize. The default was dire since 1997. After protracted negotiations the first plaintif commenced the suit on 19.12.2001. Despite the difficulties encountered, the first defendant had in fact initiated settlement of the claim before the suit was instituted and negotiations continued in earnest thereafter. After rejecting two previous offers of RM400,000.00 and RM450,000.00 as settlement amounts the second plaintiff wrote a letter dated 22.1.2002 to the first defendant stating that it was prepared to accept a sum of RM500,000.00 as full settlement payable in two payments, the first payment of RM100,000.00 by 7.2.2002 and the second payment of RM400,000.00 by 15.3.2002. This offer was accompanied by a caveat that it was made entirely in a without prejudice basis and that it reserves its rights to its claim. For the sake of completeness it is perhaps useful to reproduce the crucial parts of the letter dated 21.1.2002 verbatim:.. prepared to consider RM500,000.00 being full settlement amount of the account and the sum is to be paid as follows: a. 1 st payment : Rm100,000.00 by 7/2/2002 5
b. 2 nd payment RM400,000.00 by 15/3/2002 Meanwhile, please be informed that the above offer is made entirely on a without prejudice basis and we reserve all our rights under the account (emphasis added). The bank will be proceeding with the pending legal action under the account and will only withhold the action upon receipt of the 1 st payment of Rm100k in the event you are agreeable to the above. [4] Subsequently, there were several offers of settlement by the first defendant but they were all rejected, including an offer of RM500,000.00, payable in six payments. On 5.3.2002 the second plaintiff wrote another letter to the first defendant reiterating its earlier offer as stated in its letter of 22.1.2002 with the same caveat that it was reserving its rights to the claim and to continue with the legal action. On 15.3.2002 the first defendant wrote to the second plaintiff offering a settlement in the sum of RM500,000.00 payable in five payments and enclosing five cheques of RM100,000.00 each. The first cheque was due for immediate payment, the second cheque was dated 15.4.2002; and the other cheques were dated 15.5.2002, 15.6.2002 and 15.7.2002 respectively. The contents of the letter are reproduced verbatim: 6
We refer to the above matter and to your letter dated 5 th March 2002. We appeal for your indulgence to allow us sometime toraise the funds. We have put up the vessed ROMI for sale and would be pursuing that vigorously. In the meantime we propose to pay as follow:- (i) RM100,000.00 immediately for which Cheque No. BIMB 590389 is enclosed herewith (ii) RM100,000.00 on 15 th April 2002 for which Cheque No. BIMB 590390 enclosed (iii) RM100,000.00 on 15 th May 2002 for which Cheque No. BIMB 590391 enclosed (iv) RM100,000.00 on 15 th June 2002 for which Cheque No. BIMB 590392 is enclosed herewith (v) RM100,000.00 on 15 th July 2002 for which Cheque No. BIMB 590393 enclosed You have our assurance that as soon as the vessel ROMI is disposed off all the proceeds will be utilized to pay for the 7
remaining outstanding, so that full payment can be affected earlier then the above dates. We appeal for your understanding and cooperation. [5] The second plaintiff was silent to the first defendant s latest offer. The second plaintiff did not reject this latest offer unlike the other previous offers. Instead, the second plaintiff accepted all the cheques and encashed the first two cheques. The first defendant negotiated for the return of the three other cheques but paid further sums totaling RM175,000.00. Thus only RM375,000.00 was paid out of the agreed settlement sum of RM500,000.00 under the compromise and leaving RM125,000.00 unpaid. [6] In response to the first defendant s breach of the terms of the compromise to pay RM500,000.00 to settle the claim, the second plaintiff proceeded to repossess the yacht, but as misfortune would have it, the yacht while in the possession, custody and control of the second plaintiff, inexplicably caught fire on 24.12.2003 and sank resulting in total loss. The second plaintiff s claim was for the sum of RM304,655.48 being arrears due under the hire purchase agreement together with interest, thereon calculated at 1.25% per month from 1.1.2007 until full payment. 8
[7] The pleaded defence of all the defendants were premised on the following broad grounds, namely: (a) (b) that the industrial hire purchase agreement was invalid; that the repossession of the yacht was unlawful because the second plaintiff had elected not to exercise its right to repossession by virtue of clause 9.2 of the industrial hire purchase agreement; and (c) that there was a compromise reached between the first defendant and the second plaintiff to settle the claim. The first defendant also counterclaimed for the loss of the yacht. The sixth defendant also contended that the total loss of the yacht would exonerate the claim. [8] The defendants contended that the industrial hire purchase agreement was devised to clothe an illegal money lending transaction because the yacht had been fully paid for by the first defendant to Zeta Marine Sdn. Bhd. before the hire purchase agreement was entered into and that the RM500,000.00 disbursed by the first plaintiff to the first 9
defendant on 22.5.97 was only a normal loan. The plaintiffs, on the other hand, argued that it was a sale and hire back transaction which was a valid and recognized form of hire purchase transaction as laid down in Kan Yeow Wing v. Keng Soon Motor Finance Co. [1962] 28 MLJ 391 at p397 and Yorkshire Railway Wagon Co. v. Maclure [1882] 21 Ch. D 309 at p314. The trial judge having analysed the evidence found the transaction to be a hire purchase of the yacht and ruled the hire purchase agreement to be valid and enforceable. He also ruled that clause 9.1 of the industrial hire purchase agreement gave the first plaintiff the right to repossession, and that clause 9.1 and 9.2 were not mutually exclusive. The learned trial judge also ruled that the second plaintiff was entitled to repossess the yacht. It was further held that the agreement to settle the claim for RM500,000.00 in five payments was not a compromise but only a without prejudice transaction with the first plaintiff or the second plaintiff having the liberty to revert to its rights under the hire purchase agreement at will, more so, where as here, the first defendant paid only RM375,000.00 out of the RM500,000.00 promised, to settle the plaintiffs claim under the hire purchase agreement. The High Court accordingly allowed the plaintiffs claim and dismissed the first defendant s counterclaim. No order was made concerning the yacht suggesting that the loss would lie where it fell. Hence the two appeals now before us. 10
[9] The present appeals revolved principally around the issues relating to the compromise of March 2002 and the total loss of the yacht whilst in the possession custody and control of the second plaintiff. [10] In determining whether there was, in law, a compromise between the second plaintiff and the first defendant it would be useful to set out the statement of the law which ought to be applied. On the authorities set out below, a compromise, simply put, is the settlement of a disputed claim by agreement between the parties. Any court proceedings already started are terminated. The terms of the settlement can be incorporated in a consent order by the court or the terms can form a contract between the parties. Where a party does not wish to be precluded from reviving its original claim in the event of the other party s inability to comply with his obligations under the compromise, a term to that affect should be incorporated: The Law and Practice of Compromise (David Foskett Fourth Edition) pada 8 03; Kuala Lumpur Landmark Sdn. Bhd. v. Standard Chartered Bank [1994] 2 MLJ 559. [11] In Lai Kok Kit v. MBF Finance Berhad [2000] 3 MLJ 136 at pp142 143 the Court of Appeal explained as follows: 11
In such circumstances, in my judgment, the original claims ceased to exist and the liability thereunder was discharged when the compromise agreement was entered into and these original claims cannot be revived whatever may have happened to that agreement and whether or not it has been repudiated, either because a breach of the agreement as such or if in fact there was a repudiation arising out of the repudiation of the main contracts had Supamarl s case on the first issue been correct. I do not think that the claims made in March 1976 can be revived in any form whatsoever, either on the basis of quantum meruit or on any other basis. I think that once the original claims were compromised effectively in a binding agreement, the only remedy that Supamarl would have would be to claim for damages for breach thereof. It is indisputable that the second plaintiff had clearly stated in its earlier offers and counter offers of settlement that they were made without prejudice to its rights to the claim under the hire purchase agreement. However, in our view, once a compromise is reached the caveats became ineffectual and unenforceable thus precluding the second plaintiff from reverting to its original claim in the proceedings pending between them. 12
It is elementary that once there is a compromise to settle neither party can willy nilly refuse to recognize its existence simply because the negotiations leading to the contract were made without prejudice. Here, it was patently clear that there was unqualified acceptance of the first defendant s offer of payment of RM500,000.00 represented by the five cheques two of which were duly encashed by the second plaintiff. There was a definite breach by the first defendant of its obligations under the compromise but the second plaintiff s remedy was to sue under the compromise. In the circumstances, it followed that the repossession of the yacht by the second plaintiff was unlawful and it must accordingly be held to account for its loss because having resorted to the remedy under clause 9.2 of the hire purchase agreement the second plaintiff was precluded from repossession of the yacht under clause 9.1. Clause 9.1 and 9.2 are as follows: 9.1 If during the hiring:-.... Hirer shall default in payment of the deposit or any sums payable under this Agreement for seven (7) days 13
after same shall have become due (whether formally demanded or not); or.... Then in any of the said events, Owner shall forthwith and without notice or demand become entitled to immediate possession of the Goods an Owner may, without prejudice to any other rights and remedies it may have under this Agreement : - (I) Immediately terminate this Agreement without notice and resume possession of the Goods and for this purpose enter upon any land or building on or in which the Goods are or are believed to be and if the Goods or any part thereof affixed to any land or building Owner shall be entitled to sever the same therefrom and Hirer shall be responsible to all damage caused to the land or building by such removal. 14
(II) Alternatively by written notice to Hirer determine and end this Agreement and thereupon Hirer shall no longer be in possession of the Goods with Owner s consent and Hirer shall not thereafter have any rights under this Agreements. 9.2 If Owner shall for any reason whatsoever be unable or unwilling to resume possession of the Goods, Owner shall be entitled at its option in lieu of resuming possession of the Goods to recover on demand from Hirer the balance of the hire installment which would have been payable by Hirer to complete the purchase of the Goods if this Agreement had not been terminated plus interest for any sum outstanding less a rebate (if any) plus all costs and expenses incurred by Owner including legal lees on a full indemnity basis in tracing and/or endeavouring to resume repossession of the Goods or in applying for or attempting to enforce payment of any sums payable under this Agreement and generally to enforce compliance of the terms of this Agreements by the Hirer. 15
[12] The appeals are, for the reasons aforesaid allowed with costs. The plaintiff s claim is dismissed and the first defendant s counter claim is allowed. It is further ordered that the respondents account for the loss of the yacht with damages to the first defendant to be assessed by the Senior Assistant Registrar less the sum of RM125,000.00. Costs of RM34,000.00 here and below awarded to the appellants in the first appeal and costs of RM10,000.00 here and below awarded to the appellant in the second appeal. Deposits refunded. t.t Dated : 12 th Mac 2015 LINTON ALBERT Judge Court of Appeal Malaysia Putrajaya COUNSEL For the Appellants in Appeal. L. Sabapathy and P.Y.Liew No: W-02-1003-2009 Messrs Logan Sabapathy & Co. Floor, Wisma Hamzah-Kwong Hing No. 1, Leboh Ampang20 th 50100 Kuala Lumpur 16
For the Appellant in Appeal. Roseline Thomas No: W-02-1067-2009 Messrs Abdullah & Zainudin Advocates & Solicitors Tingkat 31, Menara Tun Razak Jalan Raja Laut 50350 Kuala Lumpur [AZ/AY/JD/MISC/2002] For the Respondent s. Andrew Chiew together with C.B.Loh Messrs Lee Hishamuddin Allen & Gledhill Advocates & Solicitors Tingkat 16, Menara TM Asia Life 189 Jalan Tun Razak 50400 Kuala Lumpur (Ruj: LCB/AC/33501] 17