BG Oleochemicals SL v Evyap Sabun Malaysia Sdn Bhd
DMC/SandT/25/09
Malaysia
BG Oleochemicals SL v Evyap Sabun Malaysia Sdn Bhd
Kuala Lumpur High Court (Admiralty): Ong Chee Kwan J: [2024] MLJU 19: 2 January 2024
Judgment Available on Lexis Nexis
Philip Teoh (with Lim Wei Yee, Laura Yew and Lee Jie Zing) (Messrs. Azmi & Associates) for the Buyer, the Plaintiff.
Jeremy Joseph (with Matthew Jerome Van Huizen) (Messrs. Joseph & Partners) for the Seller, the Defendant.
CONTRACT FOR THE SALE OF GOODS: CARRIAGE OF GOODS BY SEA: CLAIM FOR INFESTATION AND OTHER DAMAGE TO CARGO: WHETHER DAMAGE DUE TO IMPROPER PREPARATION AND PACKAGING FOR CARRIAGE OR TO DAMAGE IN TRANSIT OR POST-DISCHARGE STORAGE
Summary
This case concerns a dispute arising from multiple shipments of Lauric Acid (“Cargoes”) sold by Evyap Sabun Malaysia Sdn Bhd (“Seller”), the Defendant, to BG Oleochemicals SL (“Buyer”), the Plaintiff, under a Sales Contract that required the goods to be “GMP+ FSA Assured” (Good Manufacturing Practices and Feed Safety Assurance). The Cargoes, shipped in Full Container Load (“FCL”) containers via different vessels over multiple shipments, was found upon arrival at the Buyer’ premises to be wet, melted, and infested with insects. The Buyer claimed total losses amounting to €278,545.80. After deducting the salvage value of €108,000.00, the net amount claimed by the Buyer was €170,545.80.
The High Court held in favour of the Buyer, finding that the Seller had breached the Sales Contract by failing to deliver the Cargoes in good order and condition as contractually required. The Court further clarified the scope of a seller’s duty under Malaysian law, holding that the Seller was responsible for ensuring the Cargoes were suitably prepared, packed, and protected against foreseeable risks during transit.
Note: the Seller has filed an appeal to the Court of Appeal. The appeal will be heard on 25 September 2025.
Case note contributed by Lee Jie Zing, LLB (Hons), LLM, Barrister (England & Wales), Advocate & Solicitor (Malaysia), ADR ODR International Mediator, and International Contributor to DMC’s Case Notes
Background
The Sales Contract between the parties required the Seller to supply Lauric Acid that met the “GMP+ FSA Assured” standard, to be used by the Buyer for the manufacture of animal feed. The Cargoes were shipped in FCL containers on different dates and vessels. Upon arrival at the Buyer’s warehouse, the Cargoes were found to be damaged, specifically wet, melted, and infested with insects, and were therefore rejected.
The Buyer promptly notified the Seller and claimed compensation for the defective shipments, alleging breach of contract for failure to meet the agreed quality standards. The Seller denied liability, arguing that fumigation was not expressly required by the Sales Contract and that external factors beyond their control may have contributed to the damage.
Judgment
In this case, the Court examined the contractual obligations of the Seller under both the Sales Contract and Sections 15 and 16 of the Sales of Goods Act 1957. The central issue was whether the Seller had fulfilled their implied duty to ensure that the Cargoes were in a condition corresponding to the description and fit for the intended purpose, i.e., animal feed, at the time of delivery.
The Court found that although the Sales Contract did not specifically mandate fumigation, the Seller was nonetheless under a duty to ensure that the Cargoes were appropriately prepared and safeguarded against predictable risks such as pest infestation. The presence of insects upon arrival, particularly due to untreated wooden floorboards in the containers, demonstrated a failure to meet this duty. The Court emphasised that fumigation was one of several preventive steps the Seller could have taken and that its failure to do so constituted a breach of its obligation to deliver goods conforming to the Sales Contract’s description.
In rejecting the Seller’s contention that the damage could have resulted from unknown or external causes, the Court noted that the pattern of damage across multiple shipments suggested a systemic failure in the Seller’s preparation and packing of the Cargoes.
Accordingly, the Court held that the Cargoes were not in good order and condition at the point of delivery, and the Seller had breached the Sales Contract. Judgment was entered in favour of the Buyer.
Comment
This decision of the Malaysian High Court has reinforced the obligations of sellers in international sales contracts to ensure that cargoes are properly prepared and delivered in a condition fit for their intended use. The Court’s analysis of implied terms under Section 15 and 16 of the Sale of Goods Act 1957, in the context of international commercial practices, underscores that sellers cannot absolve themselves of responsibility simply because certain preventive measures (like fumigation) were not expressly stated in the contract. This case serves as a reminder that the duty of care in preparing goods for shipment extends beyond mere compliance with contractual formalities and it encompasses all reasonable steps to avoid foreseeable harm to the cargo during transit.
