INTERPART MOOT PROBLEM 2014

IN THE MOOT COURT OF APPEAL UNIVERSITI TEKNOLOGI SHAH ALAM

IN THE STATE OF SELANGOR DARUL EHSAN

APPEAL NO: W-004-TF OF 2014

BETWEEN

METAUDIO                                                                                                       ... APPELLANT

AND

SENDERS' WALTZ SDN BHD                                                                        ... DEFENDANT

1.         Winn Hargrove is a world-renowned jazz artiste who to date had earned the prestige of 16 Jazzy Awards. He had in his 50 years career released over 20 albums which at least 12 of them went platinum with record-breaking sales. Mr. Winn had earned his voluminous accolades because of his attention to sound precision and quality. There had been no releases of Mr. Winn that were short of an audio innovation and sheer marvel. Mr. Winn is the quintessential audiophile with the added insights of audio engineering genius.

2.         After half a century being involved in the music industry, Mr. Winn had an epiphany. He had envisioned sharing his work at a more intimate zenith. Instead of releasing a fully-composed audio recording to the masses, Mr. Winn intended to share to his listeners how he perceives sound in its fullest attention and detail. In his work, there is not a parsec of room for even a decibel of noise.

3.         Mr. Winn set forth to pursue his vision and had invented the “Incognito”, an active sound-cancelling dynamic over-ear headphones. The blueprint of the headphone shows that the headphone was engineered to generate the purest unperturbed sound. The make of the headphone is a complex hybrid of a carbon-fibre body, high-definition ultra-magnetic coils, solid gold input and output jacks, and mahogany tone-wood cups for maximum noise-cancellation, anti-coloration and high fidelity. The headphone boasts a ground-breaking frequency range of 5Hz to 75 000Hz. The headphone’s ear caps are made out of memory-foam and sown over with a weave of high-abrasion suede and leather for the perfect fit and durability.

4.         Mr. Winn had since under his own label, Metaudio, manufactured 5 million units of the “Incognito” for worldwide sales distribution. The Incognito’s sales motif is set as “High and Low, Incognito”. A full-blown marketing campaign was scheduled to launch in March 2014. The label is a company incorporated in London.

5.         For distribution in ASEAN countries, Metaudio had contracted with various distributors in different countries to be sold to many other certified retailers. For the distribution in Malaysia, Mr. Winn on behalf of Metaudio had initially emailed the Managing Director of Senders’ Waltz Sdn. Bhd. (a wholesale and distribution company incorporated in Malaysia), Miss Rania Olstead the following excerpt:

“Dear Miss Olstead,

The Incognito is not just a mere consignment. What I intend to distribute is an experience, not mere goods. What you are dealing with are cutting-edge equipment and materials which beg for proper handling and care. If Metaudio was to take you under our stride to distribute these experiences, I would take it that you share my understanding and concerns.

“High and Low, Incognito”

Yours exuberantly,

Winn Hargrove” – sent [8.12.2013]

To which Rania had replied the following:

“Dear Mr Hargrove,

We are honoured that you would consider our services to distribute your headphones. We are willing to extend our utmost cooperation in ensuring that the headphones are distributed in working condition alike all other contracts that we had in our years of business.

We had not even once failed your previous consignments of all your releases in the past. It is, was, and always will be our pleasure to have done business with Metaudio and yourself, maestro, for the past 5 decades.

“Let Senders Waltz”

Yours faithfully,

Rania Olstead” – sent [9.12.2013]

To which Mr. Winn followed with the following reply:

“Dear Miss Olstead,

I am glad that we both are on the same page.

“High and Low, Incognito”

Yours exuberantly,

Winn Hargrove.

7.         Following this exchange of emails, Metaudio had entered into a distribution agreement, the Malaysia Incognito Distribution Agreement (the “MIDA”) with Senders’ Waltz for the distribution of 250 000 units of Incognito. The MIDA was entered into between the two parties on 1.1.2014. The salient terms of the MIDA are as follows:

Clause

1a.       Metaudio Inc, (“the supplier”), agrees to supply, for the purpose of distribution in Malaysia, 250 000 units of the Incognito Headphones (“the headphones”), to Senders’ Waltz (Malaysia) Sdn Bhd, (“the distributor”). The supplier agrees to employ the distributor’s services for the purpose of distributing the headphones to retailers in Malaysia.

1b.      The distributor agrees to take delivery of the headphones in Malaysia, as the port of destination for the purpose of distribution in Malaysia.

2a.       The supplier agrees to ship the headphones to the port of destination on 15.2.2014 on-board the vessel, SS Coltrain as nominated and agreed by both parties.

2b.      The distributor agrees to take delivery of the headphones shipped on-board the SS Coltrain on 15.2.2014. The distributor shall ensure that the headphones are distributed in proper working condition. The supplier shall have their representative at the distributor’s warehouse for the final inspection of the headphones before the headphones are distributed to retailers.

3a.       The risk over the headphones shall remain with the supplier until the headphones are delivered to the respective retailers in Malaysia.

8.         On 15.2.2014, Rania had already mobilised Senders’ Waltz’s trucks from their base in Johor Bahru to Klang Port to accept delivery from Metaudio. However, as the day grew weary and dark, SS Coltrain was nowhere to be seen. The Port’s manifest had not registered any docked vessels by the alias of SS Coltrain. At about 6.00pm on the same day, the flustered Rania received a phone call from Mr. Winn. Mr. Winn’s baritone voice chimed in a jagged rhythm as he explained the absence of SS Coltrain. Mr. Winn explained that SS Coltrain could not set sail today. Mr. Winn exclaimed:

“The voyage had to be delayed as the port of shipment had booked all their vacuum-sealed containers for other consignments prior to the headphones. The headphones itself were not vacuum-sealed for environmental reasons. As an avid environmentalist, the vacuum sealed plastic bags would only be unsealed and thrown away by his listeners. Only a handful of people in the world are conscious enough to break their backs to recycle. Most of them would simply bludgeon the environment further having the plastic packages burnt in incinerators and illegal open burning. Moreover, as the target audience of the headphones are audiophiles, this segment of listeners would most probably own their own vacuum storage unit to store their intricate electronics and musical gadgets to keep them from oxidation and dampness. I reiterate that the headphones were made of mahogany tone-wood, a luscious songstress wood material. If the headphones were not sealed in vacuum, the headphones risk exposure to moisture and the wood components would indubitably be compromised of its integrity and the reverberating trait they hold. Especially along the port-side, the density of sodium chloride (known to mere mortals as common salt) is more prevalent in the air which increases the risk of oxidation of the metal components of the headphones.

Metaudio had no choice but to delay delivery to the port of shipment for three (3) days pending the availability of vacuum-sealed containers. The consignment would arrive 3 days later than the agreed date as per the MIDA.”

9.         Rania in turn in the same telephone conversation stated that the delay is unacceptable. The delivery will fall outside of the agreed date in the contract. Rania exclaimed:

“Late delivery on your side would mean late delivery on our side. This will go beyond the contracted date. I have already mobilised my carrier trucks in Klang Port from Johor. That travel is nearly half of the country itself. As much as we had been in business together for years, you still can’t expect Senders’ Waltz to return the trucks back to Johor Bahru. It will be a waste of resources of time and petrol. You will have to bear our expenses to remain in Klang for the next 3 days until the consignment arrives.”

10.      Mr. Winn agreed to cover Senders’ Waltz expenses in accommodating their stay pending the arrival of the consignment in Klang Port.

11.      On 19.2.2014, SS Coltrain safely berthed at Klang Port and unloaded the headphones onto the port. At about 3.00pm in the evening, all the headphones were successfully loaded unto the trucks. However, when one of the trucks was revved up to move, the ball-joint between the truck chassis and the cargo jerked violently and split into two. It was later found that for the last three days, the trucks were left to park at the port in the open air. The ball-joint seems to have rusted to the point of breakage. Rania then immediately telephoned Skodania, the after-market service providers for Senders’ Waltz carrier trucks. To Rania’s disdain, Skodania can only bring the spare-parts and their mechanics for repair works the following day on 20.2.2014. Rania had no choice but to postpone the transportation till the next day. Rania then telephoned Mr. Winn to inform of the unfortunate mishap. The trucks had to travel in a convoy for the purposes of security.

12.      Mr. Winn was thoroughly disgruntled. He could not bear the thought of having the headphones sitting senselessly for another day. Rania answered that they would bear the cost for the one day stowage of the consignment in Klang Port. Mr. Winn reminded Rania that the headphones require proper storage to prevent deterioration and damage.

13.      Rania promptly called on the port officials to ascertain if there were cargo holds still available to stow the consignment for the rest of the day till tomorrow when the damaged truck was fit to operate after necessary repairs. The port officials explained that there is one cargo hold which was available which had the necessary equipment to store the consignment in a vacuum. However, the officer who had the expertise to operate this specialised equipment was on leave for the whole week. Rania skimmed through her contacts to see if there was anyone that within her network that might have the expertise to operate the hold around the Klang Valley area.

14.      Fortunately, Rania recalled that Mr. Har Bee Han Kuok, a storage specialist from Han Kuok Specialty Storage and Delivery Sdn. Bhd. had his registered address in Petaling Jaya. She immediately dialled Han Kuok to identify if he would be able to assist Senders’ Waltz with storage management. Han Kuok immediately drove to Klang Port to assess the situation.

15.      Upon assessing the consignment and storage hold, Han Kuok identified that he would be able to operate the hold’s equipment. Both Rania and Han Kuok quickly drew an agreement:

A.   Han Kuok (“the handler”) shall be employed from 19.2.2014 till 20.2.2014. The handler shall follow all the instructions and guidelines provided by Senders’ Waltz (“the company”) in the management of the consignment.

B.   The handler shall stow the consignment in a vacuum state utilising the equipment available in the cargo hold.

C.   The Company shall pay the handler remuneration for his work.

16.      On the following day, at the time the hold was opened, it was found that there were vapours on the seams of the headphones’ packaging. It can be seen that the foam paddings securing the headphones in their packages were slightly damp. It was later found that Han Kuok had not secured one of the vacuum seals of the cargo hold.

17.      Notwithstanding the state of the headphones at that time, Senders’ Waltz proceeded with their journey and finally reached their headquarters in Johor Bahru. Mr. Harry Mason, Metaudio’s inspections officer and representative conducted final inspection of the goods with his team in Senders’ Waltz warehouse. The inspection concluded that at least 35% of the headphones had a more profound sound absorption rate than the other 65%. Sound waves were lost and were not channelled properly into the audio engine.

18.      The inspection found that the cause of the weaker sound integrity was damp mahogany tone-wood structures in the headphones. The affected headphones now could only boast a 20Hz - 35 000Hz frequency range. Nevertheless, the headphones are in working condition. These results were then communicated to Mr. Winn Hargrove.

19.      Mr. Winn was thoroughly infuriated. Without a moment’s hesitation, Mr. Winn had called for a total-recall of all the units shipped to Senders’ Waltz. Mr. Winn then communicated to Rania that Senders’ Waltz had conducted itself negligently and in total disregard of the contract as the headphones were not up to spec.

20.      Rania however replied that Senders’ Waltz had not been in breach of the contract. The headphones are indeed in proper working condition. The headphones are able to properly function as they were intended to be used. There was no reason for the total-recall of the headphones. In fact, not all of the headphones were affected. Furthermore, Senders’ Waltz should be absolved from any liability even in the instance of negligence. Senders’ Waltz understood that the MIDA shall be similar to all of our contracts in the past which provides the following exclusion clause:

“cl. 89:

The distributor shall not be liable for any damages whatsoever on the goods caused by neglect and/or wilful neglect on the part of the distributor.”

21.      Notwithstanding Rania’s revolt, Mr. Winn gritted his teeth, slammed his fists on his marble table and stood firm with his decision. All the headphones were recalled by Metaudio. Metaudio then had filed a suit in the High Court of Universiti Teknologi MARA, which stood trial before Judge Zairi Zainudin. The High Court had held the following:

      I.   --  It was clear from the construction of the MIDA itself that time is of the essence. As the Plaintiff had first, delayed delivery to the port of shipment, they had breached the contract.

    II.       - The Defendant was not in breach of the MIDA as the headphones were indeed in working condition, fit to perform and operate as it was intended to perform and operate as headphones at the time the goods were in the Defendant’s possession.

   III.        - The Defendant was not at all negligent in the care and management of the headphones and even if the Defendant was negligent, they are absolved from any liability as the exclusion clause relied upon by the Defendant applies as intended by both parties in the making of the MIDA.

  IV.      - The Court finds that Han Kuok is the employee of the Defendant, and that the Defendant should have been vicariously liable for Han Kuok’s negligence. However, as the Defendant is protected by the exclusion clause, the Defendant remains absolved from any liability.

Claim dismissed. Judgment for the Defendant, Senders’ Waltz Sdn. Bhd.

Metaudio now appeals to the Court of Appeal of Universiti Teknologi Mara against Zairi Zainudin J’s decision.

Moot Author
ZULFIKRI IBRAHIM