Reading The Fine Print:
Court Of Appeal Rules On Entitlement To Late Payment Interest On Overdue Invoices
In Agromate (M) Sdn Bhd v Felcra Niaga Sdn Bhd [2022] 1 LNS 1655, the Court of Appeal examined the plaintiff’s entitlement to late payment interest on overdue invoices issued for goods sold and delivered. The issues in this appeal were:
(1) Whether the defendant was contractually bound to pay the late payment interest?
(2) Whether the plaintiff had waived the late payment interest due to its delay in issuance of the late payment interest invoice?
Background Facts
The plaintiff (Agromate (M) Sdn Bhd) was a member of the Fertiliser Industry Association of Malaysia (FIAM) which sold fertiliser whereas the defendant (Felcra Niaga Sdn Bhd) was a fertiliser reseller. The defendant maintained a running account with the plaintiff since the commencement of their business dealings in 2016. The term which states "Interest of 12% per annum will be charged on overdue accounts until full settlement" was printed on all the plaintiff's invoices and delivery orders to the defendant.
The defendant failed to pay within the stipulated 60 day payment period but the plaintiff did not make any claim for late payment interest from 2016 to May 2018. The claim was first made in May 2018 by way of a tax invoice for the overdue interest on all the invoiced sums that the defendant failed to pay within the stipulated payment period. In the subsequent months, the plaintiff issued further invoices to charge the late payment interest. The plaintiff instituted legal action in May 2019 to claim, among others, a sum of RM1,662,197.54 for the late payment interest that was due.
High Court’s Decision
The High Court dismissed the claim on the ground that the defendant was not contractually bound to pay the late payment interest as the quotations issued by the plaintiff in December 2017 which incorporated the FIAM terms and conditions (including the late payment interest) (Quotations) were deemed superseded by a subsequent letter of offer from the plaintiff in February 2018 (Letter of Offer). Moreover, there was no stipulation of the FIAM terms and conditions in the Letter of Offer. The High Court also held that the plaintiff had waived the late payment interest by way of their conduct as no invoice was issued demanding the same prior to May 2018.
Court Of Appeal’s Decision
The Court of Appeal held that the High Court erred in arriving at the above conclusion for the reasons set out below:
(1) Was the defendant contractually bound to pay the late payment interest?
The fact that all invoices and delivery orders were printed with the late payment interest term was undisputed. However, the Court of Appeal noted that the Letter of Offer does not state any other terms except for the revised prices of the fertiliser. On the other hand, the Quotations stipulated, among others, payment terms and the applicability of FIAM terms and conditions. As such, the Court of Appeal held that the Letter of Offer does not constitute a complete contract between the parties and thus, should not be read in isolation. Instead, the Letter of Offer should have been read as part of a course of dealing between the parties since 2016 in which all the quotations, invoices, delivery orders and statement of accounts expressly stipulated the late payment interest term.
The Court of Appeal added that the Letter of Offer cannot be solely relied upon by the defendant to argue that the late payment interest term was not applicable. If the defendant’s intention from the start was to only rely on the terms of the Letter of Offer, the defendant should have promptly objected the invoices and delivery orders that incorporated the late payment interest term instead of accepting the goods and paying the principal sum.
The importance of transaction documents in cases involving goods sold and delivered was emphasised in Caltex Oil Malaysia Ltd v Classic Best Sdn Bhd and Ors [2007] 4 MLJ 772:
“[10] …I would place due emphasis on the written documents, namely the statement of accounts, invoices, delivery orders, delivery notes and the debit notes. These documents would collectively constitute a contract reduced into writing.”
As such, the Court of Appeal found that the High Court did not adequately consider authorities which held that the failure to object to the interest payment term printed on invoices amounts to acceptance of it.
(2) Did the plaintiff waive the late payment interest?
The High Court found waiver by estoppel on the part of the plaintiff as they did not enforce the late payment interest claim between 2016 and May 2018 which led the defendant to believe that no late payment interest would be imposed for all the overdue invoices. It was the defendant’s claim that they had relied upon such representation and was prejudiced by the plaintiff's subsequent decision to claim the late payment interest retrospectively.
Other than the fact that waiver was an unpleaded defence (as required by Order 18 rule 8(1) of the Rules of Court 2012) and there being no evidence to show that the defendant had altered its position due to the delay by the plaintiff in issuing the late payment interest invoices, the Court of Appeal further examined whether there was in fact waiver by the plaintiff based on the facts of the case.
As there was no express act by the plaintiff to indicate that the late payment interest would not be charged, the Court of Appeal held that a mere delay in issuing the invoices for the same would not constitute a waiver. As such, the Court of Appeal held that the defendant was not released from paying late payment interest by way of the plaintiff’s conduct.
Conclusion
In transactions involving goods sold and delivered, all the ancillary transaction documents such as the previous quotations, invoices, delivery orders and statements of accounts are crucial yet so easily overlooked. This case serves as a stark reminder that the court gives due consideration to all the transaction documents collectively in constituting a contract between parties.
As such, parties should always address their minds to all terms and conditions incorporated into all or any of these transaction documents (including the fine prints) in the course of their dealings and must be quick to object should they disagree with any terms not agreed upon.
5 May 2023