- 2021年，原告和被告签订了一份合同，约定在12个月内进行12次航运，运送50,000吨左右的散装河砂。被告开了发票后，原告支付了30%的海运费用，约为USD153,750.00。根据合同，双方在被告指定船只进行第一次航行后签署了一份船舶租约备忘录。原告随后支付了USD138,750.00作为押金。
- 一个月后，原告收到LKE Sdn Bhd（被告雇佣的船主）的一封信，通知他们因为新冠疫情和全球封锁，他们不会派船来马来西亚。原告立即回应，表示航运属于基本服务，不受封锁影响，因此这一理由不可接受。原告随后认为合同无效并要求退款。原告还通知被告，不同意船主要求全额付款，并提出应延长装货期限。
- 尽管延长了装货期限，但被告没有履行合同的条款，所以原告提起诉讼，要求退还之前所有的付款。被告反对原告的申请，提出以下理由：
(i) 合同和船舶租约备忘录规定付款应在签署时进行，但原告没有按时付款。
(ii)原告要求退款违反了合同中的条款，该条款规定如果原告延期或取消货运，押金不予退还。
(iii)被运送的砂用于建筑，不是必需品。疫情期间，中国和香港的所有建筑项目都暂停，这削弱了原告的索赔理由。
- 法院认为，被告未能履行合同中的责任，即没有安排船只在限期内运输货物，这样原告有权终止合同并要求退款。
- 法院同意被告的观点，如果是原告延期或取消货运，合约允许被告不退还押金。但是在这个案件中，是被告没有安排船只，而不是原告的问题。
- 被告提到，虽然原告强调时间很重要，但原告也没有按时付款或提供所需文件。法院认为，这只是被告试图挑剔原告的一个借口，因为被告收到原告的付款时，并没有为此投诉；原告是在被告安排了船只，才需要原告提供文件，但是被告却收了USD292,500.00，却没有提供任何服务。
- 法院判定合同和船舶租约备忘录终止，原告有权要求退还已支付的款项，总共为USD292,500.00，外加从判决日期起按年利率5%计算的利息，直到款项还清。被告还需支付每项RM3000的诉讼费用给原告。
*如果遇到合同履行问题，应及时寻求法律咨询，保障自身权益。
Introduction
- Plaintiff filed an application for summary judgement under Order 14 of the Rules of Court 2012 (the ROC), and the Defendants applied to strike out Plaintiff’s claim under Order 18 rule 19 of the ROC. Both applications were heard together. The Order 14 application was allowed, and the Defendants’ application under Order 18 was consequently dismissed, with a cost of RM3000 for each application to the Plaintiff. The Defendants have now appealed to the Court of Appeal.
Factual Background
- Plaintiff and Defendants entered into a Contract of Agreement in 2021 (the contract) to perform 12 voyages of shipments for a period of 12 months to carry 50,000 mt more or less in owner’s option or up to the vessel capacity of river sand in bulk.
- The Defendant issued an invoice, and Plaintiff paid 30% of the ocean freight amounting to USD153,750.00 (the equivalent of RM631,343.62) to the Defendant (the initial payment). Pursuant to the said contract, a Fixture Note was signed upon Defendants naming a vessel to perform the first voyage. Plaintiff had then transferred a further sum of USD138,750.00 (the equivalent of RM582,750.00) to the 1st Defendant as the Fixture Note deposit payment.
- One month later, Plaintiff received a letter from LKE Sdn Bhd (the ship owner employed by the Defendants) informing that they are not sending any vessel to Malaysia, purportedly due to the Covid-19 and the global lockdown.
- Plaintiff immediately responded and informed both the Defendants and LKE Sdn Bhd that the reason given that is, due to the movement control order (MCO) and Covid-19 lockdown was unacceptable as shipping is part of an essential service and not affected by the MCO. The Plaintiff subsequently treated the Contract of Agreement as no longer valid and requested a refund of the initial payment.
- Plaintiff informed the Defendants that they are not agreeable to the owner’s request for full payment and reiterated that time is of the essence, and stated the revised laycan date (which stands for “Laydays Commence and Cancelling date” – It refers to a specific or agreed period for a vessel’s arrival) should be extended.
- Despite the extended laycan date, the 1st Defendant allegedly neglected and failed to honour the terms of the contract and Fixture Note, hence this action.
- The Defendants object to the Plaintiff’s application for summary judgement, arguing:
(1) The Contract of Agreement and the Fixture Note specifically spelt out that payments would be made upon signing, and Plaintiff had not complied.
…
(3) Plaintiff’s request for a refund goes against Clause 14 of the contract, which states that freight deposits are not refundable if Plaintiff were to postpone or cancel the shipment.
(4) The material to be shipped is for non-essential items, which were sand used in the construction industry and are in no way detrimental or essential. Considering that all construction projects in China and Hong Kong also came to a halt during the pandemic, this negates the Plaintiff’s claim against the Defendants.
…
Findings and Analysis
- The general rule under Section 40 of the Contract Act 1950 (the CA) is that the contract ends if the party refuses to perform its promises or has prevented itself from performing them unless it has indicated by word or conduct that it consents to the continuance of the contract.
“Section 40 of the Contract Act 1950: When a party to a contract has refused to perform, or disabled himself from performing his promises in its entirety, the promise may put an end to the contract, unless he has signified, by word or conduct, his acquiescence in its continuance.”
- Due to Defendant’s failure to ensure the first voyage within the laycan date, Plaintiff claims that the contract was breached and the Defendants were unable to fulfil its promises; therefore, Plaintiff is entitled to terminate the contract or treat it as void. It was argued that the Defendant’s refusal to perform its part of the contract constituted a fundamental breach of the contract.
- In the case of Damansara Realty Bhd v Bangsar Hill Holdings Sdn Bhd [2011] 6 MLJ, it was held that in commercial contracts, it is a prima facie acceptance that time would be of the essence. It was also stated in Damansara Realty that even where parties to a contract do not intend time of the essence, the promisor is still obliged to perform his obligation within a reasonable time.
- The Court finds that the laycan date was set, deposits were paid, and Plaintiff explained that the shipping industry would not be affected by the pandemic to the Defendants. It would be unreasonable for the Defendants to simply accept the excuse/reason given by their principal (owner of the vessel) at the expense of the Plaintiff’s commercial detriment.
- The Court agrees with the Plaintiff’s contention that there was a total failure of consideration by the Defendants. After the indication given by LKE that they would not be sending any ship, the Defendants had not named a vessel to take delivery of the cargo to date, even though a considerable sum of money had been paid as a downpayment.
- Undisputedly, deposits are paid in exchange for the service of delivery of goods by ship. However, the Defendants failed to show readiness to perform their part, and therefore, the Plaintiff is entitled to terminate the Contract of Agreement and the Fixture Note.
- The Defendants referred Section 7 of the CA and the case of Catajaya Sdn Bhd v Shoppoint Snd Bhd [2021] 2 MLRA 46 and argued that since Plaintiff had agreed to both terms in the contract (including Clause 14: non-refundable of deposit) and the Fixture Note, therefore had absolutely and unqualified accepted the terms set up and therefore bound by it.
- The Court agrees with the Defendants that deposit would be non-refundable if the charters, that is the Plaintiff, postpone or cancel the shipment. In this case, it was the Defendants who failed to provide a vessel, regardless of whom the Defendants were to liaise with, which was LKE. The contract was between Plaintiff and Defendants; thus, any issues arising or any decision made by LKE should be dealt with between them, LKE and the Defendants. Defendants’ obligations are not discharged for the failure of the owner of the ship to provide the service. Therefore, it does not hinder Plaintiff from acting on their right to treat the agreement as terminated and request for a refund. The Court construed the terms of the agreement as a whole to grasp the true meaning of its clauses and make no attempt to improve any words used (the case of Catajaya Sdn Bhd is referred to).
- The Defendants had highlighted the issue that although the Plaintiff had emphasised and insisted on time as the essence of the contract, the Plaintiffs themselves had not complied with the requirement of paying the deposit upon signing the agreement (as stated in Clause 14) and not providing the required documents upon fixing of laycan (as stated in Clause 15).
- The Court finds that this allegation of delay in payment was made with the intention of finding fault with the Plaintiff. There is nothing before this court to show dissatisfaction or grievance on the part of the Defendants to receive the payments about two weeks later. The Defendants had received not a pittance but an enormous amount of RM1,214,098.62 with no service rendered to the Plaintiff.
- Similarly, with the allegation of non-production of documents, the Court agrees with the Plaintiff that it was only an afterthought. It was contended that even if the said documents were required to be submitted, they would be produced only when the laycan was fixed and before the loading commenced. However, since there is no vessel named for the voyage, no document can or need to be produced. Again, the Defendants never raised the issue of non-production of documents at all material times.
- The Plaintiff had brought to this court’s attention the law on the order of performance as provided in Section 53 of the CA. The section provides as follows: “Where the order in which reciprocal promises are to be performed is expressly fixed by the contract, they shall be performed in that order; and, where the order is not expressly fixed by the contract, they shall be performed in that order which the nature of the transaction requires.”
- Reference was then made to the case of Silver Concept Sdn Bhd v Brisdale Rasa Development Sdn Bhd (formerly known as Ekspidisi Ria Sdn Bhd) [2005] 4 MLJ 101, and it was asserted that the Defendants are not allowed to unilaterally alter the order of performance of reciprocal promises made between both parties, which the Court agrees.
- In conclusion, the Court finds no merits in the Defendant’s application to strike out the Plaintiff’s claim. This is a clear and plain case of the Defendant’s failure to honour its obligation by naming a vessel to perform the shipment as in the contract and thus constitute a total failure of consideration which entitles the Plaintiff to treat the contract as null and void; hence the return of the deposit paid.
Final Order
- The said contract and the Fixture Note are declared as terminated and Plaintiff are entitled to the refund of the initial payment and the Fixture Note deposit payment in the sum of USD292,500.00 or the equivalent as the date of judgement with interest of 5% per annum until the date of realisation. Cost of RM3000 for each application to the Plaintiff.
Source: Titimas Shipping & Trading Sdn Bhd v. Eustacia Solutions & Ors [2024] MLJU 1670. High Court Shah Alam. Noor Hayati Haji Mat JC.
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