Asia Farms Network Sdn. Bhd. v UK Farming Sdn. Bhd (JB-22NCC-4-07/2019)

Distributorship: Asia Milk Traders (“AMT”), a sole proprietorship established by PW1, would exclusively distribute the Defendant’s products to commercial retailers and supermarkets markets in Malaysia;

(ii) Price Stability: Product prices would remain fixed for the first three years of the agreement;

(iii) Credit Terms: AMT’s product purchases would have a credit limit of RM200,000.00 with a 60-day credit term; and

(iv) Duration: The Distributorship Agreement will last 15 years, starting from 21.06.2016. [11] In reliance of this purported Distributorship Agreement, AMT established a substantial clientele, including supermarket chains. Since there was consistent growth in the distribution of the Defendant’s products, Plaintiff, Asia Farms Network Sdn. Bhd. was incorporated on 19.01.2017 to facilitate the business expansion. June 25, 2024 4 [12] According to Plaintiff, the Distributorship Agreement between AMT and Defendant was then assigned and continued with Plaintiff. This was acknowledged by the Defendant and the parties maintained a continuous business relationship and fulfilled the contractual obligations according to the terms of the Distributorship Agreement. [13] Whereas according to the Defendant from the middle of 2016 to December 2018, Plaintiff was one of the Defendant’s agents who purchased the Defendant’s products for distribution, re-sale and supply in Malaysia. [14] The relationship between Plaintiff and Defendant from time to time was governed by the terms in the Agent Details and Quotation issued by Plaintiff to Defendant. In addition, the terms were also as stated in the purchase orders, delivery orders and invoices issued between parties. [15] Defendant contends that the Plaintiff agreed to these terms. The Plaintiff had a credit term for sixty (60) days. [16] The Defendant duly supplied the products as ordered by the Plaintiff. However, Plaintiff was not prompt in making payment and as of 22.11.2018 an outstanding amount of RM 247,826.20 in unpaid invoices was due and owing to Defendant. [17] This prompted Defendant to issue a 5th revised Quotation dated 1.12.2018 giving Plaintiff a credit limit of RM 200,000.00 and payment term of 60 days. In the same quotation, Defendant also stated that Plaintiff has a credit deposit of RM150,000.00. June 25, 2024 5 [18] After taking into account the credit deposit for the sum RM 150,000.00 towards the outstanding sums due to Defendant, the credit limit in the 5th Revised Quotation was reduced to RM 50,000.00. This was reflected in the Defendant’s subsequent Agent Details and Quotation dated 1.1.2019. [19] After the deduction of RM 150,000.00, the balance due and owing from Plaintiff to Defendant was RM 97,826.20. Thereafter, Plaintiff made two payments on 13.12.2018 and 14.12.2018 and also issued several Purchase Orders to Defendant to further order products. The products in respect of these Purchase Orders were delivered to the Plaintiff. [20] As of 26.12.2018, there was an outstanding amount of RM 83,

351.45 due and owing from the Plaintiff to Defendant. [21] However, despite Defendant’s numerous requests and reminders, Plaintiff failed, neglected and/or refused to pay the balance outstanding to Defendant. [22] The outstanding sum RM 83, 351.45 subsequently exceeded the credit limit of RM 50,000.00 provided for in the Quotation dated 1.1.2019. [23] Via an email dated 3.1.2019, Defendant sent a notice to terminate Plaintiff as the Defendant’s agent to distribute its products. [24] Whereas Plaintiff contends that the credit limit and the terms of payment were unilaterally varied by Defendant without their consent. June 25, 2024 6 [25] As such, Plaintiff claims their termination as distributors by the Defendant is unlawful. [26] This led to Plaintiff filing this action against Defendant claiming that they were appointed as the sole and exclusive Distributor by the Defendant pursuant to a Distributorship Agreement. Plaintiff is seeking a declaration that the termination of their Distribution Agreement by the Defendant is unlawful and for loss of profits as damages. [27] Whereas Defendant counter-claims against Plaintiff for the sum of RM 83,351.45 being the balance due and outstanding for the supply of the products due from Plaintiff. ANALYSIS AND FINDING [28] In my considered view, upon perusing the pleadings, evidence and submissions by parties, the following issues need to be determined: -

Whether Plaintiff is the Defendant’s agent or distributor.

(ii) Whether Plaintiff was appointed as a sole and exclusive distributor by Defendant for a period of fifteen years pursuant to a Distributorship Agreement.

(iii) Whether the termination of Plaintiff as agent or distributor of the Defendant is lawful. June 25, 2024 7

(iv) In the event the termination is unlawful, what are the losses suffered by the Plaintiff?

Has the Defendant proven their counterclaim for the sum RM 83,351.45? [29] In respect of the burden of proof in civil cases the Federal Court in Letchumanan Chettiar Alagappan (As Executor to Sl Alameloo Achi (Deceased)) & Anor v. Secure Plantation Sdn Bhd [2017] 5 CLJ 418 considered Sections 101 and 102 Evidence Act 1950 and held as follows: - “Thus, a plaintiff has both the burden of proof as well as the initial onus of proof.” [30] It is trite law that the standard of proof in civil cases is on the balance of probabilities as explained by the Federal Court in Inas Faiqah Mohd Helmi (A child suing through her father and next friend; Mohd Helmi Abdul Aziz) v. Kerajaan Malaysia & Ors [2016] 2 CLJ 885 as follows: - “[13] The standard of proof in civil cases is the legal standard to which a party is required to prove its case, namely on a balance of probabilities. In civil litigation, the question of the probability or improbability of an action occurring is an important consideration to be taken into account in deciding whether that particular event had actually taken place or not. In the case of Miller v. Minister of Pensions [1947] 2 All ER 372, Lord Denning said the following about the standard of proof in civil cases: The... [standard of proof] ... is well settled. It must carry a reasonable degree of probability... if the evidence is such June 25, 2024 8 that the tribunal can say: ‘We think it more probable than not’ the burden is discharged, but, if the probabilities are equal, it is not.” [31] I shall deal with issues (i) and (ii) which are interrelated together.

Whether Plaintiff is the Defendant’s agent or distributor.

(ii) Whether Plaintiff was appointed as a sole and exclusive distributor of Defendant’s products for a period of fifteen years pursuant to a Distributorship Agreement. [32] In support of their appointment as the sole and exclusive distributors of Defendant’s products and the existence of a Distributorship Agreement, Plaintiff relied on the following evidence: -

The meeting held between the parties on 14.06.2016 before the commencement of the Distributorship Agreement.

(ii) The handwritten note made by DW1 and Amy Goh in respect of the pricing and credit terms. This handwritten note is produced below: - June 25, 2024 9

(iii) The appointment letter dated 25.07.2016 which was sent to Defendant not long after the commencement of the Distributorship Agreement on 21.06.2016. According to Plaintiff, this letter of appointment was prepared upon the request of Defendant to fulfil a requirement for Defendant’s loan application to Bank Pertanian Malaysia Berhad. For easy reference, the letter of appointment is produced below: - June 25, 2024 10

(iv) The unsigned letter of appointment spelling out the terms of the Distributorship Agreement. For easy reference, the letter of appointment is produced below: - June 25, 2024 11

According to Plaintiff, this Letter of Appointment was prepared at the request of Defendant. This was when Plaintiff discovered Defendant supplying the products to one of its customers, a supermarket chain called Hero Market and confronted the Defendant. Defendant then agreed to return the distributorship for Hero Market to Plaintiff and requested for this letter of appointment to be prepared. Furthermore, Plaintiff also says it was the Defendant who provided their letterhead to prepare this letter of Appointment.

(vi) The oral testimony of the Plaintiff’s directors, PW1 and PW2 on their appointment as sole and exclusive distributors by the Defendant and existence of the Distributorship Agreement.

(vii) Lastly the labelling of Defendant’s product as required by law. According to the Plaintiff, the labelling of the products carries the word, “Distributed by Asia Milk Traders”. The Plaintiff also produced a photograph of the Defendant’s milk bottle in evidence to show this label. However, the photograph was very blurry. A clearer copy of the photograph produced by Plaintiff during Defendant’s case was objected to by Defendant on the grounds it was produced very late in the day and long after case management directions were given to the parties. The Defendant’s objection was upheld by the Court. [33] On the other hand, Defendant contends that Plaintiff is one of the Defendant’s agents for purposes of distribution, re-sale and supply in Malaysia. [34] In support of their contention, Defendant submits as follows: - June 25, 2024 12

It is not true that the Plaintiff was incorporated solely to distribute the Defendant’s products. According to Defendant, the SSM search on Plaintiff shows Plaintiff also deal with other kinds of products apart from dairy products.

(ii) There is no sole and exclusive Distributorship Agreement for 15 years existing between the parties.

(iii) There is no agreement between the parties for pricing to remain unchanged.

(iv) The handwritten notes cannot be relied on in respect of Plaintiff’s allegation that the credit limit was for RM 200,000.00 and payment terms 60 days.

Defendant has no oral or written Distributorship Agreement with Plaintiff and Plaintiff is not the sole and exclusive distributor of the Defendant’s products. [35] In support of the above submission, Defendant adduced evidence through the oral testimony of DW1 and also relied on the Agent Details and Quotation issued to Plaintiff from time to time. [36] In my judgement, upon considering the entire evidence, it cannot be denied that Plaintiff was distributing Defendant’s products. The evidence shows that Plaintiff was appointed by Defendant to distribute their products. June 25, 2024 13 [37] Hence, it is my finding that Plaintiff was an agent appointed by Defendant to distribute their products. Or to put it another way, Plaintiff was a distributor of Defendant’s products. [38] Next, I shall deal with whether they were appointed as sole and exclusive distributors for a fixed period of fifteen (15) years. [39] In support of their appointment as a sole and exclusive distributor, Plaintiff relies on the unsigned letter of appointment. [40] Plaintiff submits that although this letter was not signed by Defendant, there is ample evidence to show it is a concluded contract, valid and binding. [41] In support of this submission, Plaintiff relies on several facts that are discussed below. [42] Firstly, the need for this letter of appointment culminated from Defendant’s conduct in supplying the product to Hero Market, a supermarket chain to which only Plaintiff had the exclusive rights to distribute. Upon confronting DW1 in respect of Defendant’s said conduct, it was agreed that the distribution for Hero Market is to be returned to Plaintiff. According to Plaintiff, DW1 gave his verbal assurance to adhere to the terms of the Distributorship Agreement and requested Plaintiff to draft this letter of appointment. [43] Subsequently, without wasting any time, PW1 drafted the letter of appointment and it was done on the Defendant’s letterhead. According to Plaintiff, the fact that Defendant allowed them to use June 25, 2024 14 their letterhead is compelling evidence that Defendant agreed to enter into the Distributorship Agreement. [44] This letter of appointment was then e-mailed to one Amy Goh, DW1’s secretary in softcopy form. Therefore, Defendant was in receipt and had acknowledged the letter of appointment. [45] Next, there were numerous telephone conversations between PW1 and DW1 whereby DW1 had constantly assured Plaintiff that Defendant would sign the letter of appointment in due time. [46] The Defendant also did not raise any objections to this letter of appointment through either DW1 or Amy Goh. [47] Lastly, Defendant continued its business operations with Plaintiff whilst being fully cognizant of the existence of the unsigned letter of appointment. [48] In summary, Plaintiff submits all the above facts point to the fact there existed a concluded contract for the appointment of the Plaintiff as sole and exclusive distributor of Defendant’s products. [49] Whereas Defendant submits that there is no agreement appointing Plaintiff as the sole and exclusive distributor for its products for a period of 15 years. [50] Defendants submit that Plaintiff themselves admitted that no agreement for sole and exclusive distributorship exists as alleged in PW1 and PW2’s cross-examination: - June 25, 2024 15 All right. Okay I also refer you to page 9 of bundle D. P/Df: Yang Arif. It is an exhibit P2 Yang Arif. … This letter was written after your alleged Distribution Agreement. Correct? You said there’s the Distribution Agreement between the parties. Correct? This letter was written after that? Yes, that is correct. … My question to you now, you look at the letter would you agree there’s nothing stated here of the Plaintiff or the Asia Milk Traders being appointed as the sole and exclusive distributor as you have pleaded in statement. There’s nothing written, yeah this is written distributor but nothing is written as sole and exclusive distributor. Would you agree? Yes. … … I put it to you that the Plaintiff has been distributing its product agent to retailers before appointing you as also their agent being upon 21st June 2016. They have been doing, you know they have been distributing the product? Yes. [Please refer to Pages 26-28 Notes of Proceedings 24.7.2023-

25.7.2023]

The same was also admitted by PW-2 during cross-examination as follows: - …Now my question here is just now Ms Tan gave evidence that the plaintiff meaning Asia Farm Network Sdn. Bhd. not only supplies or distributes defendant’s product but also others supplier product. You agree with me? Yes. [Please refer to Page 107 Notes of Proceedings 24.7.2023 25.7.2023]” June 25, 2024 16 [51] Related to the issue concerning the Distributorship Agreement for a period of 15 years, Plaintiff also raised the issue that parties agreed for the price to remain unchanged for 3 years. However, they were unable to produce any evidence in support of this agreement apart from an email sent to Defendant on 2.5.2018 objecting to a price increase and stating that there was an agreement with DW1 that there would be no price increase for 3 years. [52] The Defendant denied that there was any agreement not to increase the price. DW1 testified that there are no terms agreed between the parties not to increase the price of the products for a specified period. [53] Whereas the Plaintiff’s director, PW1 agreed during her cross examination that there was no agreement in writing between the parties that there would be no price increment for a period of 3 years as follows: - I’m referring you to page 4 of your witness statement, item (i). You refer to page 1 of the Plaintiff’s bundle of documents. It was handwritten note by Mr Goh and me during the aforesaid meeting in Kuantan, Kluang, sorry confirming the price of the Defendant’s products. Are you there? Yes. … Okay, my question is all right you had answer. My question is here you said look at item (i) yeah. Here you said confirming the price of Defendant’s product bracket to remain unchanged for three years and the 60 days credit term. Now I’m referring you to page 1 P1, please let me know where that is state that to remain unchanged for three years? … June 25, 2024 17 Is there anything mention here on this letter remain unchanged for three years? That’s why in the bracket it was verbally given during the time. My question was very easy. Now listen to my question. Is there anything, anything in this statement which mention that the price remains unchanged for three years? Is that anything here? No, it was not written down. So, this is something between you have included here in your statement? Yes, that is correct. But no reference to the page

Correct? It’s reference but not written on the note. Yeah, all right. There’s nothing here right? Remain unchanged is there any? Yes.” [54] In support of their submissions that a concluded Distributorship Agreement exists for a period of 15 years, the Plaintiff relied on the decision of the Court of Appeal in Heller Factoring Sdn Bhd (Previously Known As Matang Factoring Sdn Bhd) v Metaico Industries (M) Sdn Bhd [1995] 2 MLJ 153, wherein it was held: - “The fact that the appellant had not dated or signed the sale and purchase agreement did not mean that there could be no concluded contract. Where a contract had been signed by one party only, it could be enforced where there was evidence, such as part performance by one party and acceptance by the other that the other party had elected to be bound by it. … It was strenuously submitted that because Matang had not dated or signed this document, there could be no concluded contract We are June 25, 2024 18 unable to subscribe to this view. The true position is that where a contract has been signed by one party only, it can be enforced where there is evidence that the other party has elected to be bound by it. … Part performance by one party, accepted by the other, is such other evidence. Delivery on 19 February was part performance.” [55] The Plaintiff also relied on the case of Universiti Tun Abdul Razak Sdn Bhd v Intra Harta Consultants Sdn Bhd [2022] MLRHU 827 wherein it was held as follows: - “[34] After all, Section 8 the Contracts Act 1950 clearly provides that the performance of the conditions of a contract will be deemed as an acceptance of one party to be bound to the contract. As such, despite the absence of a formal written agreement, the law will find the existence of a contract if like presently, by its conduct a party performs the terms stated in a contract.” [56] In my judgement, the facts in the present case do not disclose that there is a concluded distributorship agreement appointing the Plaintiff for a period of 15 years. [57] Foremost, Defendant through their witness (DW1) denied vehemently that no such Agreement was entered into or existed. [58] Next, the facts do not disclose any evidence of negotiations between the parties on the terms and conditions of the distributorship for a period of 15 years. [59] It is not in dispute that the letter appointing Plaintiff as a sole and exclusive distributor for a period of 15 years prepared under the Defendant’s letterhead was never signed by both parties although it is dated 4.1.2017. June 25, 2024 19 [60] It’s my finding that this letter of appointment was sent by Plaintiff to Defendant with terms unilaterally drafted by Plaintiff without Defendant’s agreement. My finding is fortified by PW1’s email dated 17th April 2017 to Amy Goh enclosing this letter of appointment stating it was for DW1’s approval. However, no evidence was adduced by Plaintiff that DW1 gave his approval. [61] Furthermore, PW1’s emails dated 17th and 26th April 2017 to Amy Goh enclosing this letter of appointment refer to it as an Agent Appointment Letter and not as a Distributorship Agreement. [62] Plaintiff also submits that the termination notice issued by Defendant confirms that they were appointed as sole distributors because Defendant themselves have stated in this notice that Plaintiff was terminated as Distributorship of Defendant by relying on the doctrine of res ipsa loquitor. [63] With due respect to learned counsel for the Plaintiff, this doctrine only applies to the law of tort. [64] In my view, it could be inferred from reading the letter of termination in its entirety that the word “distributorship” stated therein can mean Plaintiff was no longer allowed to supply or sell Defendant’s products to other companies. [65] Finally, I also find there is nothing in writing between the parties agreeing that there will be no price increase for 3 years. Pricing is always an important factor in any business. The Plaintiff ought to have ensured that if at all an agreement existed on the pricing, to have reduced it in writing. June 25, 2024 20 [66] The authorities relied on by the Plaintiff can be distinguished. In Heller Factoring (supra), the facts therein concerned the sale and delivery of a hydraulic press machine where after the buyer took delivery by transporting it to their premise, the seller repossessed the machine and sold it to a third party at a higher price. The Court of Appeal was of the view that the sale agreement was enforceable because the seller elected to be bound by it and delivery of the machine was part performance. [67] Whereas in Universiti Tun Abdul Razak (supra) the appellant in that case never denied the appointment of Respondent, a property agent firm. The Appellant merely said the Respondent was not entitled to the fees since the sale and purchase transaction did not materialise at the material time. Furthermore, the Appellant also admitted the Respondent’s appointment in their defence. [68] As for KGN Jaya Sdn Bhd v Pan Reliance Sdn Bhd [1996] 1 MLJ 233, it can be distinguished because that case concerned an agency relationship between an agent and principal. Likewise, the decision in Dato’ Mohamad bin Shahul Hameed v Datin Mazita bt Osman [2023] 6 MLJ 544 can also be distinguished because it concerns a partnership agreement which can exist orally without the formality of an executed agreement. [69] Whereas the facts in the present case, Plaintiff claims they were appointed as the sole and exclusive distributor of Defendant’s products for a period of fifteen (15) years under a Distributorship Agreement. June 25, 2024 21 [70] To prove that the Distributorship Agreement exists, Plaintiff produced the Letter of Appointment and the unsigned Letter of Appointment. [71] These letters only show there was an appointment but on what terms? In International Trading Co vs Chan Chow Kian [1970] 1 MLJ 192, Ong J sitting in the Federal Court commented on these sorts of appointment letters prepared by laymen. His Lordship observed as follows: - “I must say that, as an agreement, it was far from satisfactory. True, there was an appointment, but on what terms? The difficulties that have arisen in such cases were thus described by Viscount Maugham in Scammell v. Ouston [1941] AC 251, 255: It is a regrettable fact that there are few, if any, topics on which there seems to be a greater difference of judicial opinion than those which relate to the question whether as the result of informal letters or like documents a binding contract has been arrived at. Many well known instances are to be found in the books, the last being that of Hillas & Co. v. Acros Ltd. [1932] 147 LT 503. The reason for these different conclusions is that laymen unassisted by persons with a legal training are not always accustomed to use words or phrases with a precise or definite meaning. In order to constitute a valid contract the parties must so express themselves that their meaning can be determined with a reasonable degree of certainty. It is plain that unless this can be done it would be impossible to hold that the contracting parties had the same intention; in other words the consensus ad idem would be a matter of mere conjecture. This general rule, however, applies somewhat differently in different cases. In commercial documents connected with dealings in a trade with which the parties are perfectly familiar the Court is very willing, if satisfied that the parties thought that they made a binding June 25, 2024 22 contract, to imply terms and in particular terms as to the method of carrying out the contract which it would be impossible to supply in other kinds of contract: see Hillas & Co. v. Acros Ltd. [1932] 147 LT 503.” [72] Upon hearing the witnesses and considering the documents, I am not convinced and satisfied that the parties thought they had a binding Distributorship Agreement appointing the Plaintiff as the sole and exclusive distributor for a period of 15 years. [73] Henceforth it’s my finding that there is no evidence of a consensus ad idem between the parties on the terms of the purported Distributorship Agreement. In Dae Hanguru Infra Sdn Bhd v. Baldah Toyyibah (Prasarana) Kelantan Sdn Bhd & Another Appeal [2022] 5 CLJ 194, it was held by the Federal Court: - “(1) One of the essential requirements to form a valid contractual relationship is the meeting of the minds or consensus ad idem. No contract had been concluded between the plaintiff and the first defendant because there was no consensus ad idem.” [74] Whereas in Deutsche Bank (M) Bhd v MBF. Holdings Bhd & Anor [2015] 6 MLJ 310 relied on by the Plaintiff, the Federal Court held there was no consensus ad idem between the parties on the term. [75] In the circumstance, the authorities submitted by the Plaintiff concerning the existence of contemporaneous documents in support of the Distributorship Agreement for 15 years is irrelevant and does not apply to the present case based on my above finding. June 25, 2024 23 [76] The crux of the Plaintiff’s submission on the unsigned Letter of Appointment is that there was tacit acceptance by Defendant since they did not object and continued their business with the Plaintiff. [77] In support of their submission on this point, Plaintiff’s relied on the Court of Appeal’s decision in Genneva Malaysia Sdn Bhd v Tio Jit Hong & Ors [2020] 6 MLJ 703 where it was held that the conduct of contracting parties may amount to acceptance. In my judgement, the facts in Genneva Malaysia (supra) are distinguishable. It was held in that case where a Plaintiff has made an offer in contract to a Defendant and to that end has paid monies or delivered goods forming the subject matter of the contract to the defendant, the defendant cannot, after having accepted and utilized the monies or goods for its benefit, thereafter deny the existence of a binding and enforceable contract between them merely because it has not accepted the offer expressly or in writing as stipulated in the contract. [78] It’s my finding that the relationship between the parties was that Plaintiff was appointed as an agent to distribute Defendant’s products. [79] On the labelling of Defendant’s product carrying the word, “Distributed by Asia Milk Traders” as required under the Food Act 1983, in my view, this cannot confer sole and exclusive distributorship of Defendant’s products for a period of fifteen years on Plaintiff without the agreement from Defendant. It is merely evidence of Defendant's products being distributed by Plaintiff. June 25, 2024 24 [80] Further, from observing the demeanour of the Plaintiff’s directors, PW1 and PW2 during their testimony, I am not convinced and satisfied that there was consensus ad idem between the parties on the terms of the purported Distributorship Agreement and the unsigned letter of appointment was sent by the Plaintiff to Defendant with the terms agreed by the Defendant. [81] In Philips Malaysia Sdn Bhd v Seng Sin Hong Electric (M) Sdn Bhd [2011] 1 LNS 1031, it was held by Hasnah Mohammed Hashim JC (as Her Ladyship then was): - “According to the evidence of PW1 the reasons for termination was a commercial decision. The Modern retail needed only one distributer as the market in Malaysia is a small market and the potential for the market is not big enough for more than one distributer. The relationship between the Parties had turned bad when there were issues of non-payment for goods delivered. … Based on the documentary and oral evidence I find that there was no Distributorship Agreement in existence between the Parties. Therefore there was no breach of any agreement by the Plaintiff. The Letter of Intent (LOI) agreed upon by the parties is very clear that each party shall bear its own cost and neither party shall be liable to the other for any investments and/or expenses incurred by the Defendant pursuant to and/or in connection with the BPP. It also expressly provided that the appointment shall be subject always to the execution of a Distributer Agreement between the parties. There was no evidence of a Distributorship Agreement mutually agreed upon by the Parties.” [82] Finally, on this point, Plaintiff submits in their reply submissions that short of sounding like a broken record, they reiterate the June 25, 2024 25 Distributorship Agreement exists based on the Letter of Appointment and the unsigned Letter of Appointment that are contemporaneous documents duly received by Defendant without objections during the continuous business relationship. [83] In my considered view, Plaintiff ought to have sounded like a broken record with Defendant from the onset to ensure their rights as an agent to distribute were protected by entering into a proper Distributorship Agreement encompassing all the terms and conditions agreed by both parties. [84] In the foregoing, I conclude that there is no Distributorship Agreement mutually agreed between both parties.

(iii) Whether the termination of Plaintiff as an agent or distributor by Defendant is lawful [85] Plaintiff contends that Defendant unlawfully terminated the Distributorship Agreement. [86] Whereas according to the Defendant’s pleaded case, they were justified in terminating Plaintiff as a distributor of their product due to Plaintiff’s failure to pay the balance outstanding and Plaintiff had exceeded the credit limit. [87] Since I have made a finding that there is no Distributorship Agreement appointing Plaintiff as a sole and exclusive distributor for fifteen (15) years, therefore the question of termination of the Distributorship Agreement does not arise. June 25, 2024 26 [88] Hence, what needs to be decided is whether the termination notice dated 3.1.2019 from Defendant to Plaintiff is a valid termination of Plaintiff’s appointment as an agent to distribute Defendant’s products. The termination notice is produced below: - [89] From the evidence led in this case, it can be concluded that the termination seems to be closely related to the credit limit and came about when the relationship between the parties had soured. [90] No documentary evidence of any credit limit given to Plaintiff was produced until the revised quotation dated 1.12.2018 issued by Defendant. [91] In total, Defendant produced six (6) quotations dated 21.6.2016,

1.3.2017, 10.4.2017, 16.5.2018, 1.12.2018 and 1.1.2019. I found June 25, 2024 27 only the quotations dated 1.12.2018 and 1.1.2019 provide for the credit limit as stated therein. [92] Next, the facts reveal that sometime around 7.7.2017 the directors of Plaintiff PW1 and PW2 had advanced a loan in the sum of RM200,000.00 to Defendant’s director DW1. DW1 agreed to repay this sum with interest in 24 months. [93] According to Plaintiff’s director PW1, sometime in November 2018, after repaying only RM30,000.00 towards the outstanding loan, DW1 indicated his inability to repay the remaining borrowed sum and suggested that the balance of RM 150,000.00 be set off with the sums owed by Plaintiff to the Defendant at the material time. [94] As such, the irresistible inference that can be drawn is that the credit limit of RM200,000.00 which is stated in the quotation dated 1.12.2018 actually refers to the loan sum of RM200,000.00 borrowed by DW1 from PW1 and PW2. My findings are also supported by the fact that none of the earlier quotations provided any credit limit under its terms and conditions. [95] The facts in this case show there was never a monetary credit limit when the parties were trading with each other before the revised quotation dated 1.12.2018 was issued by Defendant to Plaintiff. There was only a credit term concerning the payment period. [96] Thereafter, what must have transpired between the parties is that the relationship between the parties must have turned bad or sour. The Plaintiff’s directors PW1 and PW2 must have confronted DW1 on the repayment of the loan sum. According to DW1’s agreement June 25, 2024 28 to repay the loan sum RM 200,000.00, he should have repaid RM 180,000.00 by 2.12.2018. [97] With the repayments from DW1 not forthcoming, this must have probably led Plaintiff’s directors to withhold payment for Defendant’s invoices for the goods supplied. [98] The Defendant’s Debtor Statement dated 22.12.2018 shows that as of 22.11.2018 the sum due from Plaintiff for the Defendant’s invoices was RM247,826.20. [99] With the sum RM 247,826.20 due and outstanding from the Plaintiff and DW1's inability to repay the balance loan sum of RM 150,000.00, DW1 must have then proceeded to set off the sum RM 150,000.00 with the sum RM 247,826.20 leaving a balance RM97,826.20. [100] The set-off for RM150,000.00 was termed as a credit deposit. It is not a case where the Plaintiff paid RM150,000.00 to reduce the outstanding sum. [101] Upon the credit deposit of RM150,000.00 being used to set off the outstanding sums due from Plaintiff, Defendant considered the credit limit of RM200,000.00 automatically reduced to RM50,000.00 and this is reflected in the subsequent revised quotation dated 1.12.2018. [102] At the same time, Defendant also decided to reduce the credit term from the 60 days term previously to 45 days. June 25, 2024 29 [103] Plaintiff argues that Defendant had acted unilaterally and arbitrarily in reducing the credit limit from RM200,000.00 to RM 50,000.00 and also the credit terms to 45 days. [104] According to Plaintiff, their credit limit at all material times was RM200,000.00 and therefore, the outstanding sum due to Defendant was still within the credit limit. [105] Therefore, Plaintiff submits that the reason advanced by Defendant to terminate their distributorship that they had exceeded the credit limit of RM50,000.00 is untenable and an afterthought to justify the termination. [106] In short, the Plaintiff says the termination was unlawful. [107] In my judgment, the Plaintiff’s contention is not supported by any evidence. There is no evidence of the Plaintiff being given a credit limit of RM200,000.00 before the quotation dated 1.12.2018 was issued. Furthermore, as I have found above, this credit limit only came about when DW1 notified the Plaintiff’s director PW1 of his inability to repay the balance loan sum for RM150,000.00 and at the same time, the Plaintiff was owing RM247,826,20 to the Defendant towards the outstanding invoices. [108] It’s my finding that the directors of both parties seemed to have allowed matters relating to their personal dealings in respect of the loan sum of RM200,000.00 advanced to DW1 to be interrelated with the business relationship between both companies. June 25, 2024 30 [109] This must have led to the loan sum of RM 200,000.00 and its repayment to have a bearing on outstanding sums due from the Plaintiff to Defendant. [110] I also found both party's witnesses, PW1, PW2 and DW1 were not forthcoming in their evidence on the issue of the credit limit that was connected to the loan sum of RM200,000.00 advanced to DW1. [111] After the credit deposit for RM150,000.00 was set off, Plaintiff made two (2) payments towards the outstanding balance and ordered further goods. Thus, as at 26.12.2018, Plaintiff owed RM83,351.45 to Defendant [112] Thereafter on 3.1.2019, Defendant served a notice of termination on Plaintiff without giving any reasons. However, the Defendant advanced the reason for termination in Court. The Defendant is allowed to do so. In Joo Seng Trading Co vs Commercial Importers and Distributors Sdn Bhd [2007] 2 CLJ 25 it was held by the Court of Appeal speaking through His Lordship Sri Ram JCA (as he then was): - “It is settled law that where a contract-breaker gives no reason or gives a bad reason for terminating a contract, he or she is entitled at the trial to justify the termination on good grounds. Hence, although the respondent did not give any reasons in its letter of termination, it was entitled to justify its termination of the agreement at the trial on a sustainable ground. The respondent was able to demonstrate to a conviction that I several parts of the notes of evidence, there were admissions of breaches made by the appellant’s witnesses under cross examination. Accordingly, there was no merit in this ground of complaint.” June 25, 2024 31 [113] According to Defendant, Plaintiff did not pay on time and as of 26.12.2018 owed a sum of RM 83,315.45 which was more than the RM50,000.00 credit limit given to them. [114] In International Trading Co vs Chan Chow Kian [1970] 1 MLJ 192, the Federal Court held as follows: - “(2) where there is no firm agreement which binds the vendor in definite terms to supply goods to a purchaser at a price certain over a stipulated period the vendor is entitled to refuse to deal with the purchaser who has been in breach of his obligation to pay for goods already sold and delivered;

in this case as the customer having been given notice that he would not be supplied any more goods on credit unless overdue bills were first settled, and he refusing to pay, it was he, and not the vendor who was in breach of contract.” [115] As I have already found that there is no Distributorship Agreement for fifteen (15) years exists between the parties, Defendant was only supplying the products based on the issuance of the Purchase Orders by Plaintiff and issuance of the Defendant’s invoices and Delivery Orders. [116] It’s my finding that there was no firm agreement which binds Defendant in definite terms to supply goods to Plaintiff above a certain credit limit. In this case, the Defendant contends the credit limit to be RM50,000.00. [117] Therefore, surely Defendant is at liberty not to deal further with Plaintiff who has been in breach of his obligation to pay for the goods sold and delivered. June 25, 2024 32 [118] In addition, the term of payment for the eight (8) invoices issued by Defendant for the purchases made by Plaintiff after the credit deposit of RM150,000.00 was used to set off the outstanding sum, on 1.12.2018 carries the term cash on delivery. [119] In the circumstance, it's my finding that Defendant’s action in terminating Plaintiff as a distributor which in effect is to stop supplying their products to Plaintiff for distribution is not a breach of contract. [120] Plaintiff also submits that Defendant had pre-maturely terminated the Agreement before the expiry of ten (10) days provided in the Debtor's Statement to report to Defendant any discrepancy. In my judgement, despite the termination, Plaintiff is still not precluded from reporting any objections to the Defendant in respect of any discrepancy in the Debtor’s Statement.

(iv) If the termination is unlawful, what are the losses suffered by the Plaintiff? [121] Since I have found that there is no Distributorship Agreement and the termination of Plaintiff as a distributor of Defendant’s products is not unlawful, therefore, Plaintiff is not entitled to any damages. [122] However, for completeness, since parties have submitted on this issue, I shall deal with the same. [123] According to Plaintiff, they suffered loss of profits because they were deprived of the performance of the Distributorship Agreement for the June 25, 2024 33 remaining balance period from the total fifteen (15) years after it was prematurely terminated by Defendant. [124] Plaintiff contends that they suffered loss of revenue and loss of profits caused by: -

Due to early termination of the Distributorship Agreement, they suffered loss of revenue from the sale of the Defendant’s products;

(ii) Since Plaintiff could no longer sell Defendant’s products, it resulted in a reduction in their sales which led to loss of profits in the form of loss of revenue.

(iii) The damages are foreseeable because Defendant knows that Plaintiff supplies the products to big retail supermarket chains. [125] Wherefore Plaintiff submits the loss suffered was a natural and probable result of Defendant’s breach and not too remote and claims for the sum RM 4,056,000.00 as damages in the form of loss of profit had the terms of the Distributorship Agreement been adhered to by Defendant. [126] According to Plaintiff, using the fourth quarter of 2018 as a yardstick, the yearly anticipated net profit would be within the estimated region of RM 312,000.00 for a year and in turn RM 4,056,000.00 for the period of balance 13 years of the contract. In support of their claim, Plaintiff relies on the authority in the Court of Appeal’s case in Redha Resources Sdn Bhd v Majlis Agama Islam Selangor & Ors [2020] 6 MLJ 541 wherein it was held by Court of Appeal: - June 25, 2024 34 “[159] What D1 further suffers as a result of the unlawful termination by the plaintiffs is that it was being unlawfully deprived of the profits that it could have made if the concession were to run its full course. That is claimable under s 74 of the Contracts Act 1950 with respect to losses which naturally arose in the usual course of things from the breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it where the bank penalty and financial charges are concerned. [160] As for the above assessment of damages for the remaining unexpired period of the concession from 2016 to 2039, that shall be D2’s loss of profits compared to a case where the CA is allowed to run its course. The overall assessment of damages shall take into consideration all relevant and necessary costs that naturally arise in the building and operation of the project including the initial costs of constructing the building and furnishing it, the costs of maintaining the hostel and the financing costs.” [127] Whereas Defendant submits that Plaintiff’s claim for the sum RM 4,064,095.50 being the loss of profits from January 2019 to June 2031 is merely a conjecture and speculative. [128] According to the Defendant, the forecasted loss of profits was prepared by PW1 and not by an accountant. Furthermore, it cannot be certain that the retailers cited by Plaintiff will be operating for the next 13 years and there is no guarantee that Plaintiff will always be making a profit. In addition, the Sales by Customer report produced by Plaintiff does not specifically state that the sales were from Defendant’s product. [129] To sum up, Defendant says the claim for loss of profits by Plaintiff is merely guesswork and speculative. June 25, 2024 35 [130] In my judgment, Plaintiff has failed to prove their loss of profits in the sum of RM 4,064,095.50 by producing an accountant’s report compiling an estimate of future loss of profits due to the purported early termination of the Distributorship Agreement. The evidence before the Court in support of this sum is merely based on Plaintiff’s own calculation and not based on any proper accounting practice. This certainly is insufficient. [131] In Popular Industries Limited v. The Eastern Garment Manufacturing Co Sdn.Bhd. [1990] 1 CLJ 133, it was held by Edgar Joseph Jr J (as he then was): - “… A word now about general principles. When a plaintiff claims from a defendant, he has to show that the loss in respect of which he claims damages was caused by the defendant’s wrong, and also that the damages are not too remote to be recoverable. The principle of remoteness of damage is a limiting principle of policy and the principles applicable in contract and tort are not the same (see Koufos v Czarnikaw Ltd (The Heron II)[1969] 1 AC 350). … In this context, I am remained of Lord Goddard’s dictum in Bonham-Carter v. Hyde Park Hotel [1948] WN 89 quoted with approval by Thomson CJ in Lee Sau Kong v. Leow Cheng Chiang [1961] MLJ 17 (CA), namely that: Plaintiffs must understand that if they bring actions for damages it is for them to prove their damage; it is not enough to write down the particulars, and so to speak, throw them at the head of the Court, saying ‘This is what I have lost, I ask you to give me these damages’. They have to prove it. June 25, 2024 36 Accordingly, all I can do is to make an award of nominal damages of five hundred dollars in US currency that being the currency of the contract. (See Miliangos v. George Frank [1953] 1 QB 487 which I hereby do.” [132] Hence the Plaintiff has failed to prove the details of their damages. It is insufficient for the Plaintiff to just write down the details of their loss of profits without proving it. [133] In the foregoing, I find the Plaintiff has failed to prove their claim for the loss of profits. [134] As for the alleged loss of RM26,834.80 for unfulfilled Purchase Orders, the Plaintiff did not pursue this claim in their submission. In this circumstance, I will not address this claim.

Whether the Defendant has proven their counterclaim for RM83,351.45 [135] Defendant’s counterclaim against Plaintiff is for the sum RM 83,351.45 being the balance from the outstanding invoices due. [136] Defendant relies on the Debtor Statements dated 22.12.2018 and 31.7.2019 in support of this sum as due and owing from the Plaintiff. [137] The Debtor Statement dated 22.12.2018 shows before the credit deposit of RM 150,000.00 was used to set off the outstanding invoices from the Plaintiff, the Plaintiff was owing RM 247,826.20. The sum of RM 247,826,20 was not disputed by the Plaintiff. [138] Thereafter the sum was reduced to RM 97,826.20. This was followed by Plaintiff making two payments of RM 49,880.00 and RM June 25, 2024 37 12,106.20 to reduce the outstanding sum to RM 35,840.00. Up until this stage, there was also no dispute on the balance sum outstanding. [139] Next from the period 16.12.2018 until 26.12.2018, Plaintiff issued Purchase Orders PO 0000234, PO 0000235, PO 0000236, PO 0000238, PO 0000239, PO 0000240, PO 0000242, PO 0000243 and PO 0000244 to Defendant ordering further goods for the total sum RM 47,511.45. [140] These Purchase Orders were produced in evidence together with the Defendant’s invoices which refers to these Purchase Orders. [141] Furthermore, the sum of RM 83,351.45 being outstanding was not denied by the Plaintiff director. During cross-examination, PW1 admitted as follows: - Did you make any payment after this? As at today, did you make any payments? Towards your debt? So, the debt is outstanding now is 83,351.45. Agree? Yes, according to the statement” [142] PW1 also admitted that Plaintiff never raised any objection to this amount claimed by the Defendant: - June 25, 2024 38 So as at 27 December 2018 the outstanding from you were 83,351.45. Correct? Yes, according to this statement After this statement was issued to you did you write to them to say that this is not the amount you owe them? Because you say as of this statement. Did you write? Any objection? No.” [143] There is no evidence produced by Plaintiff that they had challenged or disputed these debtor statements to challenge Defendant’s counterclaim. [144] Apart from submitting that Defendant failed to produce any delivery orders in support of their counterclaim for RM83,351.45, there was no real challenge by Plaintiff concerning this sum. [145] Therefore, I find the Defendant has proven their counterclaim on the balance of probabilities. CONCLUSION [146] In the foregoing, the Plaintiff’s claim is dismissed with costs. [147] The Defendant’s counterclaim for the sum RM83,351.45 is allowed with interest at the rate of 5% per annum from 13.9.2019 until the date of full settlement with costs. June 25, 2024 39 Dated this 25th June 2024 at Muar in the State of Johore. t.t. SURIA KUMAR DJ PAUL Judicial Commissioner High Court of Malaya Muar Johore Darul Ta’zim Counsels: For the Plaintiff : Randy Chew Beng Han with Muhammad Badran Adha Bin Sabaruddin For the Defendant : Jane M. Pragasam with Marianne Sonia Paul Philip Solicitors: For the Plaintiff Messrs Randy Chew & Co. Advocates & Solicitors Suite D4-U3-13, Level U3 Blok D4, Solaris Dutamas No. 1 Jalan Dutamas 1 50480 Kuala Lumpur [Ref. No. : A137/19/RC/BA] June 25, 2024 40

No. 97, Jalan TKS 1 Taman Kajang Sentral Sentral Business Park 43000 Kajang Selangor Darul Ehsan [Ref. No. : FH.191622.Lit] Hearing Date : 17th October 2022, 30th November 2022, 1st December 2022, 24th July 2023, 25th July 2023, 20th August 2023, 2nd October 2023, 27th November 2023, 18th February 2024 Decision Date : 25th June 2024