Contractual Dispute Process 1O1

Overview

Curious about the contractual dispute process in Malaysia? Let’s explore this hypothetical scenario;

Pied Piper Sdn Bhd ("Pied Piper") has a contract with Hamelin Industries Sdn Bhd ("Hamelin") to supply and deliver 10 tons of PVC pipes worth RM1,500,000.00 under a six-month supply contract. According to Pied Piper's invoice terms, Hamelin must pay for the supplied pipes within 30 days of invoice issuance. Signed delivery orders confirm the description and quantity of pipes supplied and delivered to Hamelin.

During the course of the business, Pied Piper issued 6 invoices, with the final invoice totalling RM300,000.00 remaining unpaid despite repeated reminders to Hamelin.

Which Court to commence an action?

Which court should Pied Piper sue Hamelin in? Understanding the Malaysian legal system helps us determine this:

a) Claims between RM5,000.00 and RM100,000 shall be filed in the Magistrate Court.

b) Claims between RM100,000.00 and RM1,000,000.00 shall be filed in the Sessions Court.

c) Claims exceeding RM1,000,000.00 shall be filed in the High Court.

In this case, since Pied Piper's claim is RM300,000.00, the suit should be filed at the Sessions Court, with Pied Piper as the Plaintiff and Hamelin as the Defendant.

How will the dispute be determined?

A contractual dispute can be resolved either through summary judgment proceedings or by going through a trial process. What is the difference?

a) Summary Judgment:

Summary judgment refers to a procedural process that allows for a swift resolution of a case without a trial. It is usually invoked when the Defendant lacks a viable defence to the claim. This process relies on written testimonies and documentary evidence, eliminating the need for parties to attend court to testify. It thus offers a cost-effective and efficient way to resolve disputes.

b) Full Trial:

A full trial involves filing various court documents (usually handled by a lawyer), presenting evidence, and filing witness statements. Both parties will be called as a witness to support their respective cases subject to vigorous cross examination by the respective opponent’s lawyer. This process is lengthier than summary judgment, incurs higher legal fees, and can be stressful due to its lengthy process.

Which option should be chosen? The more cost-effective one, correct?

There's no straightforward answer, as it depends on the case's facts and evidence. Let's consider two scenarios:

a) Scenario A:

Pied Piper provided correspondence and signed delivery orders indicating the successful receipt of PVC pipes by Hamelin. Despite repeated requests, Hamelin didn't respond or make the payment. At the summary judgment stage, Hamelin raised defective issues but failed to provide evidence to support its claim. Pied Piper is likely to succeed at the summary judgment stage.

b) Scenario B:

Hamelin stated in its various written correspondence that the last delivery order wasn't signed because the PVC pipes delivered didn't conform to the issued purchase order. They claim that 45mm pipes were delivered instead of the agreed 30mm pipes. Hamelin informed Pied Piper that payments will be withheld until the correct pipes are delivered and reserved the right to claim damages if the issue isn't rectified immediately. Pied Piper ignored Hamelin's correspondence and pursued summary judgment at the Sessions Court. Pied Piper is unlikely to succeed at the summary judgment stage as Hamelin now has a viable defence against Pied Piper’s claim supported by documentary evidence. The matter will now revert to a full trial with each party being called as a witness.

Conclusion

As contractual disputes become increasingly common, it is important to note that having a well-drafted contract alone does not guarantee success in a dispute. In many cases, the documentary evidence and correspondence between the parties play a vital role as they capture the parties' stance and understanding within the contractual relationship.

In conclusion, it is always advisable to seek the guidance of a lawyer when faced with an impending dispute, as the outcome of any legal battle depends on the specific facts and evidence presented. While the summary judgment process offers a faster route for debt recovery, the presence of proper contractual documentation and correspondence is pivotal in determining its success.