This is a Court of Appeal case on the requirement of an acknowledgement of debt under s.27 of the Limitation Act 1953
Facts of the Case
The defendant (Lay Hong Food Corporation Sdn Bhd) entered into contracts for transportation and cold room storage facilities with the plaintiff (Tiong Nam Logistics Solutions Sdn Bhd) and its subsidiary (Tiong Nam Coldrooms and Distribution Centre Sdn Bhd). Between December 2004 and November 2007, the defendant entered into 7 contracts in total with the plaintiff and/or the plaintiff’s subsidiary. All the invoices were issued in the name of the plaintiff. The issue of whether the plaintiff was the right entity to sue was raised but the defendant decided not to pursue this issue in this appeal. The plaintiff claim against the defendant in the High Court for the following:
the invoice claims in the sum of RM1,683,850.38;
the loss of profits claim in the sum of RM1,555,675.14; and
the trucks claim for the loss of rental in the sum of RM470,500.
After a full trial, the High Court judge allowed all the three claims. The defendant appealed to the Court of Appeal.
Judgment of the Court
First Claim
The appellant had disputed part of the invoices dated before October 2007 amounted to RM274,540 because it was already time barred under the Limitation Act 1953 as the suit was filed in October 2013. The balance RM1,409,310.38 has been paid by the appellant together with the judgment sum which was ordered by the High Court.
The respondent had relied on a cheque dated 6 April 2009 issued by the appellant to the respondent. The respondent alleged it was a part payment of certain transaction and thus it is an acknowledgement of debt under s.26(2) of the Limitation Act 1953. Therefore, the claim starts to run afresh.
S.26 (2) Where any right of action has accrued to recover any debt or other liquidated pecuniary claim, or any claim to the personal estate of a deceased person or to any share or interest therein, and the person liable or accountable therefore acknowledges the claim or makes any payment in respect thereof, the right shall be deemed to have accrued on and not before the date of the acknowledgment or the last payment.
The court found that the rebuttal raised by the respondent was flawed. Firstly, the facts of acknowledgement of debt under the exception of s.26(2) was not plead by the respondent to revive the cause of action. Secondly, under s.27 of the Limitation Act 1953, the acknowledgement of the debt must be unequivocal. There must be evidence of an acknowledgement by the defendant that they were indebted to the plaintiff and quantified in figures.
S.27
(1) Every such acknowledgment as is referred to in section 26 or in the proviso to section 16 of this Act shall be in writing and signed by the person making the acknowledgment.
(2) Any such acknowledgment or payment as is referred to in section 26 or the proviso to section 16 of this Act may be made by the agent of the person by whom it is required to be made under that section, and shall be made to the person, or to an agent of the person, whose title or claim is being acknowledged or, as the case may be, in respect of whose claim the payment is being made.
The appellant had issued a cheque dated 6 April 2009. However, the respondent failed to show any evidence regarding the purpose of the cheque payment. The respondent also did not refer the cheque to any of the appellant’s witness to ascertain the purpose of the payment. Hence, the claim of RM274,540 was held to be time-barred and should be deducted from the total claim.
Second Claim
The respondent alleged that the appellant failed to issue an advance 6 months’ notice required by the contract cause them a loss of profit of 6 months. Respondent had relied only on a sheet of paper known as ‘Lay Hong Billing summary’ in the sum of RM1,555,675.14 which was unsigned. The basis of the claim for damages for loss of profits is based on an average of sales multiplied by 6 months.
The court held that it is legally impossible for the appellant to give the required 6 months’ notice because the contract would expire about a month after the appellant issued their notice of termination.
Regarding the manner of calculation of the loss, the court held that it is plainly wrong because it does not factor in the overhead costs, it is merely based on an average of sales multiplied by 6 months. It is not an appropriate way in proving damages. In Popular Industries Ltd v. The Eastern Garment Manufacturing Co Sdn Bhd [1990] 1 CLJ 133, it was held that a plaintiff seeking substantial damages has the burden of proving both the fact and the amount of damages before he can recover. If he proves neither, the action will fail or he may be awarded only nominal damages if he can prove a breach of his right. The method of calculation by using just summaries of billings without other supporting documents had been repeatedly rejected by the courts. (See Sony Electronics (M) Sdn Bhd v. Direct Interest Sdn Bhd [2007] 1 CLJ 611; [2007] 2 MLJ 229: Wasal Construction Sdn Bhd v. Boh Huat Chan Timber Products Sdn Bhd [2013] 1 LNS 1269; [2014] 4 MLJ 294).
According to the rule of evidence, when documentary evidence is tendered, primary evidence of the said document must be adduced except cases under s.65 of the Evidence Act 1950. (KPM Khidmat Sdn Bhd v. Tey Kim Suie [1994] 3 CLJ 1; [1994] 2 MLJ 627)
The court held that there were no primary documents or audited accounts produced by the respondent to prove the facts and the amount of the stated sum as loss of profits. The facts as stated in the summary of billings were mere statements and it could not be taken as proving that the statements were correct. It has to be proved by calling the maker to explain the facts and the basis of the calculation of the amount which is being claimed. Hence, the second claim was not allowed because of inadequate proof.
Third Claim
Pursuant to a letter by the respondent, the respondent agreed to purchase and the appellant agreed to sell five delivery trucks. One of the agreed terms is that appellant was to transfer the ownership of the trucks to the respondent upon full settlement of the loan to the bank. Respondent was to pay the appellant the fees for inspection, renewal of road tax and insurance.
It was alleged by the respondent that due to the failure of the appellant to make payments for road tax, insurance and fees for inspection, the respondent was unable to use the trucks until the date when the ownership of the trucks was transferred to the plaintiff. Hence, the total amount of loss which the plaintiff claimed as total loss of profits was in the amount of RM470,500. The appellant had then delivered the documents relating to the trucks and its loan to the respondent upon settlement of the balance purchase price.
From the facts, the appellant had handled over the possession of the trucks to the respondent in May 2005. It was also agreed by the respondent’s witness that the insurance and road tax for the trucks could be renewed even without the respondent being registered as the owner of the trucks. Thus, the respondent’s allegation that the trucks is not useable because of road tax not renewed is not true. Therefore, the third claim was not allowed because the respondent failed to show any prove that the five trucks were unusable or that he suffered a loss of rental.
Furthermore, the court distinguish the current facts from SPM Membrane Switch Sdn Bhd v. Kerajaan Negeri Selangor [2016] 1 CLJ 177 and disagreed with the respondent’s submission to revert the case back to High Court for recalculation of the damages. This is because the basic evidence was insufficient for any calculation or formula to be devised in order to arrive at a figure where the loss can be quantified. To remit the case back to the trial court for reassessment would result in giving the respondent a second bite of the cherry, which would cause grave prejudice to the appellant.
Principles of the Case
Under s.27 of the Limitation Act 1953, the acknowledgement of the debt must be unequivocal. There must be evidence of an acknowledgement by the defendant that they were indebted to the plaintiff and quantified in figures.
it is legally impossible for the appellant to give an agreed advance notice if the contract would expire in a period lesser than the agreed advance notice. Claim for damages will be unsustainable.
A plaintiff seeking substantial damages has the burden of proving both the fact and the amount of damages before he can recover. If he proves neither, the action will fail or he may be awarded only nominal damages if he can prove a breach of his right. (Popular Industries Ltd v. The Eastern Garment Manufacturing Co Sdn Bhd [1990] 1 CLJ 133)
The method of calculation by using just summaries of billings without other supporting documents had been repeatedly rejected by the courts. (Sony Electronics (M) Sdn Bhd v. Direct Interest Sdn Bhd [2007] 1 CLJ 611; [2007] 2 MLJ 229: Wasal Construction Sdn Bhd v. Boh Huat Chan Timber Products Sdn Bhd [2013] 1 LNS 1269; [2014] 4 MLJ 294)
when documentary evidence is tendered, primary evidence of the said document must be adduced except cases under s.65 of the Evidence Act 1950. (KPM Khidmat Sdn Bhd v. Tey Kim Suie [1994] 3 CLJ 1; [1994] 2 MLJ 627)
If the Plaintiff failed to adduce sufficient evidence of the losses claimed at a trial and had failed to lead the necessary evidence, the court could not remit the case for reassessment as it is prejudicial to the defendant. (SPM Membrane Switch Sdn Bhd v. Kerajaan Negeri Selangor [2016] 1 CLJ 177)