STEADFAST ADVISORY (M) SDN BHD v HOCK LOONG ELECTRICAL CORPORATION SDN BHD

Case Significance

Illustrates the principle that a customer-facing entity holding itself out as the warranty provider cannot escape liability through backend insurance arrangements, and the drawing of an adverse inference where a party fails to call a witness who could speak to where liability lay.

This High Court decision at Kuala Lumpur concerns an appeal in a dispute over liability under an extended warranty arrangement operated through an online platform. The appellant, a financial adviser that managed an online warranty platform, disputed liability for a modest sum claimed by the respondent for repairs, four customer claims having been rejected by the appellant. The appellant's central argument was that it had merely facilitated the platform and that all liability under the warranties was borne by a separate insurer, so that it should not be answerable for the rejected claims. The court's task was to determine whether the appellant, as the customer-facing entity, could disclaim responsibility to customers by pointing to a backend insurance arrangement with the insurer. On the evidence, the court found that the appellant had presented itself to customers as the warranty provider: the warranty certificates were branded and stated that the warranty was 'managed by' the appellant, and the appellant maintained exclusive customer contact channels through which claims were handled. The court also drew an adverse inference under section 114(g) of the Evidence Act 1950 against the appellant for its failure to call witnesses from the insurer, whose evidence would have been material to the contention that liability rested elsewhere. On that basis the court held that an entity which presents itself to customers as the warranty provider and controls the customer relationship cannot disclaim responsibility by relying on internal insurance arrangements of which the customers were unaware, a conclusion informed by the regulatory context governing financial and insurance intermediaries. The court accordingly dismissed the appeal, upholding the appellant's liability for the sum claimed. The judgment is a useful illustration of the principle that a customer-facing entity holding itself out as the provider of a warranty cannot escape liability through backend arrangements with an insurer, and of the drawing of an adverse inference where a party fails to call a witness who could speak to where liability truly lay.