Best Amity Sdn Bhd v Merah Jaya Sdn Bhd (22NCVC-40-04/2015)

This case concerns a landlord unilaterally terminated a tenancy agreement because the rental for the month of September 2014 was not paid by the due date by the tenant. The tenant was not satisfied with the unilateral termination of the tenancy agreement and brought this action against the landlord for wrongful termination of the tenancy agreement and claimed damages.

The questions before this Court was who was to be blamed for the delay in the payment of the September 2014 rental and whether the termination of the tenancy agreement was legal or not.

On the one hand, the plaintiff/tenant alleged that the defendant/landlord had breached the tenancy agreement in that the defendant did not abide by the terms of the tenancy agreement. On the other hand, the defendant alleged that the plaintiff failed to pay the agreed monthly rental on the due date, and therefore, the plaintiff had breached the tenancy agreement, and the defendant was entitled to terminate the tenancy agreement. The defendant also alleged that the plaintiff had occupied an area of the land beyond what the plaintiff had agreed to rent. The defendant contended that as a result of the alleged breaches by the plaintiff, the defendant was entitled to reclaim possession of the property. The defendant filed a counter-claim against the plaintiff for expenses and losses incurred in relation to reclaiming possession of the property.

The parties‟ counsels agreed that the issue for determination before this Court was only on liability; any issues with regard to the quantum of damages, if relevant, will be dealt with by a Senior Assistant Registrar.

On 21.2.2017, this Court allowed the plaintiff‟s claim and held that the defendant had wrongfully terminated the tenancy agreement, and consequently, the defendant had committed a trespass. This Court held that the defendant was to be liable for the plaintiff‟s losses, if any, and made an order for damages to be assessed before a Senior Assistant Registrar.

The defendant was not satisfied with the decision of this Court and filed an appeal to the Court of Appeal. This judgment serves as the reasons for the decision. The reasons are set down as below.

By way of a letter dated 14.7.2014, the defendant offered to let to the plaintiff a piece of land known as PTD 3163, Mukim Tanjung Kupang, Kg. Pekajang, Johor (herein before and after referred to as „the property‟). In the said letter, the defendant set down the terms and conditions of the tenancy (hereinafter referred to as „the tenancy agreement‟).

The salient terms and conditions of the tenancy agreement were, inter alia, a monthly rental of RM5,500.00 was to be paid over a period of 2 years, and that the tenancy was to commence on 1.8.2014. The rental shall be paid within 7 days of each month, and the plaintiff agreed to rent the property on a “as is where is” basis. The plaintiff through its Page 4 of 17 representative accepted the terms and conditions offered by the defendant by signing on the duplicate copy of the said letter dated 14.7.2014 and returning the same to the plaintiff as instructed.

The plaintiff is dealing in the recycling business. The plaintiff paid all the necessary deposits to the defendant, including one month advance payment. A sum of RM11,000.00 was paid to the defendant via a Public Bank cheque 004679 on 18.7.2014.

The tenancy commenced on 1.8.2014. Around the end of August 2014, the plaintiff‟s representative requested for the defendant‟s bank account details in order to make a direct payment into the defendant‟s account for the rental for the month of September 2014. The defendant‟s representative, one Mr. Hua Lai Hock (a.k.a Francis Hua) (DW1), did not provide the defendant‟s bank account number to the plaintiff. Instead, he provided his personal bank account number to the plaintiff. DW1 requested the plaintiff to pay the September 2014 rental into his personal account. At the same time, DW1 also requested the plaintiff to pay a further sum of RM2,473.80 as expenses incurred to purchase accessories in relation to the supply of electricity and water to the property. DW1 said that he had paid the said sum out of his own pocket.

The plaintiff suspected something was amiss, therefore, did not accede to DW1‟s request. As a result, the rental for the month of September 2014 was not paid on or before the 7th day of the month. On the 9.9.2014, the plaintiff‟s representative, one Ms. Kew Khuan Ying (PW1), went to the property and found the ingress and egress to the property was obstructed by a metal container. Further, the gate to the property was locked. PW1 tried to contact DW1 on his mobile phone, but there was no response.

It is not in dispute that the metal container was placed at the entrance to the property by DW1, and it was DW1 who locked the gate to prevent the plaintiff‟s representatives, agents and/or workers from entering the property.

In the months of September and October 2014, the defendant had through its solicitors sent numerous letters (dated 12.9.2014, 30.9.2014 and 9.10.2014) to the plaintiff alleging, inter alia, that the plaintiff had breached the tenancy agreement. Those solicitors‟ letters were addressed to the plaintiff‟s company secretary firm, instead of the plaintiff‟s place of business address. All these letters were received by the plaintiff‟s company secretary firm in the month of October 2014, even though two out of the three letters were dated in September 2014. All these letters were brought to the attention of PW1 only on 21.10.2014.

On 26.10.2014, the plaintiff through its solicitors replied the defendant‟s solicitors‟ letters. The plaintiff refuted the allegations in the said letters. A banker‟s cheque for a sum of RM5,500.00 payable in favour of the defendant company was enclosed in the said plaintiff‟s solicitor‟s letter. The payment was meant for the rental for the month September 2014. The payment was made on condition that the defendant shall return possession of the said property to the plaintiff. The banker‟s cheque was released to the defendant by the defendant‟s solicitors. The defendant took the money, but did not return possession of the said property to the plaintiff. Instead, the defendant used the money to off-set the expenses it had incurred, such as clearing of the plaintiff‟s belongings from the said property. The defendant listed its claims against the plaintiff in its counter-claim for expenses incurred totalling a sum of RM88,303.80 (after deducting the sum RM5,500.00 paid by the plaintiff).

The defendant‟s main contention was that it would not matter whether the rental payment was to be paid into the defendant‟s account or into the personal account of DW1. As long as the rental payment was not received by the defendant by the due date, that was a breach of the tenancy agreement, and the defendant was entitled to terminate the same and claim any losses thereby so incurred.

The defendant contended that the plaintiff was liable to pay the expenses incurred for the purchase of the accessories because the defendant had provided a generator at the property and affixed the necessary water piping and such costs were incurred by DW1 personally. The defendant also contended that no matter what excuses the plaintiff had raised in evidence, the fact remained that the rental for the month of September 2014 was not paid on the due date which was on the 7th day of the month of September 2014.

The defendant further contended that it took 2 months for it to remove all the rubbish left by the plaintiff at the property. The defendant claimed it was entitled to be reimbursed for the costs incurred to remove all the rubbish.

During the trial, the defendant raised a fact which was not pleaded in the defence or counter-claim. The defendant referred the Court to a second tenancy agreement signed by DW1 and one Mr. New Ken Seng (PW2) who purportedly represented the plaintiff company. PW2 placed his signature on this second tenancy agreement on 15.7.2014 as acceptance of the terms and conditions stipulated therein.

This second tenancy agreement was also dated 14.7.2014 and its salient terms and conditions were similar to the earlier tenancy agreement. The defendant wanted to adduce and rely on this second tenancy agreement in its defence case. The learned counsel for the plaintiff vigorously objected to the admission of the said document because the said document and the evidence adduced in relation to this second tenancy agreement were not pleaded in the defence case from the onset.

It is trite law that parties are bound by their own pleadings, and evidence to be adduced in the trial must necessarily relate to the pleaded facts. In Pembinaan SPK Sdn Bhd v Jalinan Waja Sdn Bhd [2014] 2 MLJ 322, the Court of Appeal held at p.332 as follows: “[26] A decision based on an unpleaded case will as a rule occasion a failure of natural justice and will be liable to be set aside on appeal. It denies the litigant the right to present his case fully before the judge on the unpleaded issue before the decision is made by the court. A corollary to this principle is the following: it is not the duty of the court to make a case for the party when that party does not raise, or wish to raise, a point in the litigation. Janagi v Ong Boon Kiat [1971] 2 MLJ 196, states the portion very clearly thus: A judgment should be based upon the issues which arise in this suit. If such a judgment does not dispose of the questions as presented by the parties it renders itself liable not only to grave criticism but also to a miscarriage of justice. It becomes worse and is unsustainable if it goes Page 8 of 17 outside the issues. Such a judgment cannot be said to be in accordance with the law and the rules of procedure.”

In Malaysian Civil Procedure 2013 at p. 218 it states as follows: “Each party must plead all the material facts on which he means to rely at trial as he will otherwise not be entitled to adduce evidence on the same at the trial. Accordingly, no averment must be omitted which is essential to success. A court is bound to decide a case on the issues on record and may not decide issues which are not on record: see Haji Mohamaed Dom v Sakiman [1956] MLJ 45, applying Blay v Pollard and Morris [1930] 1 KB 628, CA (Eng);….”

Having regard to the above authorities, the purported second tenancy agreement which the defendant‟s counsel wanted to adduce as evidence and the oral evidence revolving around the existence and contents of the said document were rejected and not considered by this Court.

Coming back to the two questions raised earlier, namely, first, who was to be blamed for the delay of the rental payment for the month of September 2014, and secondly, whether the termination of the tenancy agreement was lawful or not?

This Court shall deal with the first issue by referring to the witness statement of DW1 (encl. 73), particularly Q&A numbers 6, 7, 9 and 10. DW1 stated as follows: Page 9 of 17

Q: Selain pencerobohan, ada kamu cuba hubungi Plaintif untuk perkara lain? A: Ya, sekitar akhir bulan Julai 2014, saya ada cuba hubungi New untuk pembayaran yang telah saya keluarkan untuk pemasangan wayar dan paip air tetapi tidak berjaya. Seterusnya saya ada berjumpa dengan Encik Ramesh yang saya percaya adalah kontraktor bebas bagi Plaintif untuk mengankut sampah sarap bagi pihak Plaintif.

Q: Apa yang berlaku antara kamu dan Ramesh? A: Saya diberitahu oleh Ramesh dari Perniagaan Ruban atau Ruban Recycling Sdn Bhd atau R&R Recycling Enterprise yang beliau hanya menyewa dari New untuk menggunakan tanah serta air dan elektrik tersebut dan Ramesh tidak patut bayar kos pemasangan atau bil air dan elektrik yang telah dibayar oleh saya. Ramesh mencadangkan agar saya menuntut wang air dan elektrik serta kos pemasangan dari New atau isterinya. Dan Ramesh juga menyatakan sekiranya tidak Berjaya saya patut menuntut dari seorang pengarah syarikat Plaintif yang lain yang dikenali sebagai Sakura. ….

Q: Nombor akaun siapa yang anda berikan kepada isteri New? A: Memandangkan saya telah membeli barangan dengan wang saya sendiri maka saya telah Page 10 of 17 memberikan akaun perseorangan saya sendiri. Saya ingin menyatakan saya ada memberitahu akan jumlah barangan yang telah dibeli….

Q: Ada Plaintif membayar ini? A: Setakat 7.9.2014 Plaintif gagal membayar bil ini dan juga pada setakat masa ini Plaintif juga gagal membayar sewa bulan September, 2014. [25] DW1 had requested the plaintiff to bank in a sum to repay the money that he had incurred and September 2014 monthly rental into his personal account. The tenancy agreement does not state how payments are to be made to the defendant. The question is whether was the plaintiff had rightfully refused to pay the September 2014 rental and repay the sum incurred by DW1 into DW1‟s personal bank account? [26] It is not in dispute that the tenancy agreement was entered into between two companies. The plaintiff owes the obligation under the tenancy agreement to the defendant, and not to the individual representing the defendant. Although DW1 had personally incurred certain expenses in relation to the property, if there is any money owing to DW1, the party who owes the money to DW 1 ought to be the defendant company, not the plaintiff. Further, it is the defendant who has the right under the tenancy agreement to claim from the plaintiff a sum to cover such expenses, and not DW1 personally. [27] The plaintiff is only responsible to and answerable for claims made by the defendant company, not by DW1 personally. DW1‟s request to the plaintiff to pay money into his personal account would be outside the Page 11 of 17 ordinary course of business. The plaintiff‟s refusal to accede to DW1‟s request was, in the opinion of this Court, justifiable in law. [28] Based on the evidence, plaintiff‟s representative had requested from DW1 the defendant‟s account number before the due date, i.e. the 7th day of September 2014. An inference could be made out from the evidence that the plaintiff was ready to pay the rental for the month of September 2014 even before the due date. If DW1 had provided the defendant‟s bank account number to the plaintiff before the due date, the plaintiff would have paid the rental for the month of September 2014 on time. In the event the defendant had given its bank account number to the plaintiff, and yet, the plaintiff did not pay the rental on time, the plaintiff would have breached the tenancy agreement. But, that was not the case. The plaintiff had explained the reason for its delay in paying the rental for the month of September 2014 and such delay was justifiable. The plaintiff was entitled to refuse to pay the rental to DW1. The defendant had no obligation to pay the rental into DW1‟s personal account or to pay DW1 any sum of money claimed by DW1. [29] The plaintiff had through its solicitors delivered a banker‟s cheque payable to the defendant company at the first available opportunity after having found out that the defendant had purportedly terminated the tenancy agreement. DW1 did not contact with the plaintiff‟s representative and did not provide the defendant‟s bank account number to the plaintiff‟s representative for the whole of September 2014, and this left the plaintiff with no choice but to withhold payment until it could find a proper way to make payment to the defendant. [30] The plaintiff only became aware of a proper way to pay the defendant in October 2014 when it received the defendant‟s solicitors‟ Page 12 of 17 letters. It was prudent for the plaintiff to deliver a banker‟s cheque to the defendant‟s solicitors. The defendant accepted the banker‟s cheque given by the plaintiff notwithstanding there was a condition attached thereto. The condition was that the defendant was supposed to deliver possession back to the plaintiff in the event the defendant accepted the banker‟s cheque. But, the defendant did not adhere to the condition. The defendant went on to use the money to off-set what the defendant thought it was entitled to. The defendant‟s action was clearly in breach of the condition. The defendant was wrong not returning possession of the said property to the plaintiff after having received the banker‟s cheque and after having cashed the money. [31] The unilateral termination of the tenancy agreement by the defendant, in the opinion of this Court, was not in accordance with s.40 of the Contracts Act 1950 which states as follows: “40. Effect of refusal of party to perform promise wholly. When a party to a contract has refused to perform, or disabled himself from performing, his promise in its entirety, the promisee may put an end to the contract, unless he has signified, by words or conduct, his acquiescence in its continuance.” [32] I find that the plaintiff did not refuse to perform its promise, i.e. to pay monthly rental, or had disabled itself from performing its promise. The plaintiff could not perform its promise because DW1 did not provide the defendant‟s bank account number to the plaintiff, but had required the plaintiff to make payment into DW1‟s personal account, which the Page 13 of 17 plaintiff was entitled to refuse to do so. Hence, the defendant was not entitled in law to put an end to the tenancy agreement. [33] Further, s. 39(1) of the Contracts Act 1950 states as follows: “39. Effect of refusal to accept offer of performance

Where a promisor has made an offer of performance to the promise, and the offer has not been accepted, the promisor is not responsible for non-performance, nor does he thereby lose his rights under the contract.” [34] The plaintiff made an offer to pay the monthly rental into the defendant‟s bank account, which the plaintiff had a contractual obligation to do, but that offer was not accepted by DW1 on behalf of the defendant. DW1 insisted for the monthly rental to be paid into his personal account. The offer made by the plaintiff was not accepted, thereby, in law the plaintiff could not be responsible for its non-performance upon the due date where it supposed to perform its promise. The plaintiff did not breach the tenancy agreement; the plaintiff just could not perform its obligation because DW1 did not accept the offer of performance. The plaintiff was not responsible for the non-performance on the due date, nor did it thereby lose its rights under the tenancy agreement. [35] Flowing from the above finding, this Court will now address the second question. The defendant contended that DW1 had left a hand written note at the entrance of the property informing the plaintiff to Page 14 of 17 contact him immediately. The hand written note was placed by DW1 at the property on 9.9.2014, the date DW1 had blocked the entrance and locked the gate. DW1 did not regard the hand written note as a termination notice. This means that the defendant had entered the property and reclaimed possession of the property even before any proper termination notice was issued. [36] DW1 stated that he instructed the defendant‟s solicitors to inform the plaintiff of the defendant‟s instruction to terminate the tenancy agreement after he had placed the metal container at the entrance and locked the gate to the property:

Q: Apa yang kamu telah buat selepas itu? A: Saya telah mengarahkan peguam saya untuk memaklumkan kepada Plaintif akan hasrat saya untuk menamatkan perjanjian sewa yang sedia ada dan peguam saya ada menghantar surat kepada alamat daftar Plaintif tetapi surat ini tidak dituntut. [37] DW1‟s evidence clearly shows the defendant had not terminated the tenancy agreement before DW1 entered into the property and reclaimed possession. The action taken by the defendant‟s representative was clearly wrong in law. [38] The first letter from the defendant‟s solicitors was dated 12.9.2014. Even if that letter was to be construed as a termination notice, the fact remains that the defendant had entered into the property and reclaimed possession of the property before the letter was issued. This means the defendant had entered into the property without the plaintiff‟s permission, Page 15 of 17 in other words, the defendant‟s representative had entered into the property unlawfully. [39] The defendant had in evidence alluded to other reasons as to why the plaintiff did not pay the rental, such as, suggesting that the plaintiff was not financially sound at that material time. This Court was not prepared to accept such evidence because, firstly, it was never pleaded that the plaintiff was in financial problem, and secondly, the evidence adduced by the defendant was mere conjecture and without proof. [40] The defendant had in its evidence raised other issues to support its counter-claim, especially its allegation that the plaintiff had occupied an area of the property beyond what the plaintiff had rented. I find the defendant‟s allegation of fact was not proved on a balance of probabilities. [41] In any event, the plaintiff‟s alleged encroachment into a small part of the land outside the rented property could not, in my view, give rise to any right for the defendant to put an end to the tenancy agreement under s. 40 of the Contracts Act 1950. Conclusion [42] Based on the above analysis, this Court held that the delay in the payment of the rental for the month of September 2014 was caused by the action of the defendant‟s representative. The plaintiff could not be faulted for the delay and did not breach the tenancy agreement as alleged by the defendant. Page 16 of 17 [43] The entry into the property by defendant‟s representative was unlawful because the tenancy agreement was still subsisting and valid at the material time. DW1‟s actions of placing the metal container and locking the gate without proper termination of the tenancy agreement was unlawful. [44] The Court held that the defendant‟s termination of the tenancy agreement was unlawful. The Court further held that the defendant is liable for the losses incurred by the plaintiff as pleaded in its statement of claim. The Court, therefore, has allowed the plaintiff‟s claim and ordered the quantum of damages to be assessed by a Senior Assistant Registrar, and dismissed the defendant‟s counter-claim. The defendant is hereby ordered to pay costs of RM10,000.00 for the main suit and RM5,000.00 for the counter-claim to the plaintiff. -Signed- ……………………………………… (CHOO KAH SING) Judicial Commissioner High Court, Johor Bahru Page 17 of 17 Plaintiff‟s counsel : Ram Karpal Singh Tetuan Karpal Singh & Company Defendant‟s counsel : KT Leow Tetuan SL Teh & Co.