Boustead Petroleum Marketing Sdn Bhd v Strategic Transforms Sdn Bhd (BA-22NCC-16-02/2021)

ISMAIL HOLDINGS SDN BHD

STRATEGIC TRANSFORMS SDN BHD (NO. SYARIKAT : 200201026803 (594466-K) …DEFENDAN-DEFENDAN

The 2nd Defendant in its Notice of Application in enclosure 56 applies to have this court determine of several questions as set out in its application prior to the disposal of the matter at a full hearing. The application is made pursuant to Order 33, rules 2, 3 and 5, and Order 92 rule 4 of the Rules of Court 2012. 2 Background facts

The material facts which provide the context in which the application is made, are as follows.

The Plaintiff is a retailer and marketer of downstream oil and gas products where it is inter alia involved in selling their petroleum products under the brand name “BHPetrol” to their network of petrol station operators located around the country.

The 1st Defendant is in the business of, inter alia, operating petrol stations, whilst the 2nd Defendant is the registered proprietor of the land held under title HSM 2581 PT 34050 Mukim Labu, Daerah Seremban, Negeri Sembilan (“Land”). The Seremban Petrol Station is located on the Land.

On 8.8.2017, the parties executed a tripartite Supply and Licence Agreement (“SLA”) between the Plaintiff on the one part and the 1st and 2nd Defendants on the other part. The Plaintiff was to appoint the 1st Defendant as the dealer of the Seremban Petrol Station to exclusively sell the Plaintiff’s petroleum products at the Seremban Petrol Station, and the 2nd Defendant was to grant the Plaintiff exclusive possession over the Land by way of a lease for a period of 25 years (“Lease Agreement”).

Following the execution of the SLA and the Lease Agreement, the Defendants were required to complete the execution of the lease and the presentation thereof to the relevant authorities of the said Land in favour of the Plaintiff as security, upon the Plaintiff 3 obtaining the consent to lease from the relevant authorities. It is undisputed that the lease over the Land has yet to be registered in favour of the Plaintiff.

Sometime towards the end of 2020, the Plaintiff perceived that the Defendants evinced an intention to terminate the SLA and Lease Agreement. Parties then engaged in a series of negotiations between November 2020 and January 2021, to amicably resolve the various issues which had arisen.

On 19.1.2021, the Plaintiff discovered that one of its vendors, namely Maxis, attempted to remove the equipment for the VSAT service at the Seremban Petrol Station. As this was done without prior notification to and consent of the Plaintiff, Maxis was ordered to stop the decommissioning of the VSAT Service.

This incident prompted the 1st Defendant to allege by letter dated 22.1.2021 that the Plaintiff had committed an act of repudiation, which it accepted, and considered the SLA to be terminated. The Plaintiff was also instructed to remove its dispensing pumps, signage and underground tanks within 7 days of the letter failing which the 1st Defendant will proceed to remove the same. The 1st Defendant then proceeded to surrender possession of the Land to the 2nd Defendant as the landowner.

By letter dated 22.1.2021, the Plaintiff responded to deny any intention to terminate the SLA and instructed the 1st Defendant to withdraw its intention to terminate. Such withdrawal was not forthcoming. The Plaintiff then issued a Notice of Termination on 4

26.1.2021 terminating the 1st Defendant’s appointment as a dealer under the SLA, citing Events of Termination stipulated under clause 17.2 of the SLA.

On the same day, the 2nd Defendant wrote to the Plaintiff to inform inter alia that the Plaintiff’s failure to register the lease to date was tantamount to a breach by the Plaintiff and requested the Plaintiff to take certain remedial action within 14 days, failing which the 2nd Defendant will terminate the Lease Agreement.

By a letter dated 8.2.2021, the 2nd Defendant informed the Plaintiff that it would terminate the Lease Agreement with effect from 11.2.2011. The Plaintiff was also requested to remove all its belongings on the Land.

Following the Plaintiff’s refusal to remove its belongings from the Land as notified, the 2nd Defendant engaged contractors to do so. This prompted the Plaintiff to file the instant suit seeking various reliefs in the form of declarations and damages. The Plaintiff also filed for an interlocutory injunction to prevent the Defendants from removing any equipment belonging to the Plaintiff. In addition, an order was also sought for the Plaintiff to be allowed to appoint a new dealer to operate the said station. On 5.5.2021, this court dismissed the injunction application of the Plaintiff.

The principal prayers sought against the Defendants in this suit are specific performance of the SLA and Lease Agreement. Apart from this relief, the Plaintiff also seeks declarations to the effect that the termination of the SLA and Lease Agreement by the 1st Defendant 5 and 2nd Defendant respectively is wrongful and invalid. In addition, the Plaintiff seeks an order that it be allowed to nominate a new dealer to operate the Seremban Petrol Station, vacant possession of the Seremban Petrol Station and damages.

Both the Defendants have in turn, filed suits vide BA-22NCVC-65- 02/2021 and BA-22NCVC-33-01/2021 respectively for inter alia, declarations that the SLA and Lease Agreement entered into have been validly terminated.

Certain events post dismissal of the injunction then transpired that prompted the instant application. On 3.3.2021, the director of the 1st Defendant, Dato’ Sri Ismail bin Abdur Rahman, was informed by the Ministry of Domestic Trade and Consumer Affairs (“the Ministry”) that it had come to the Ministry’s notice that the Seremban Petrol Station had ceased operations without due approval. This was contrary to the terms of the licence granted to the 1st Defendant. He was then directed to commence operation within 14 days, failing which an offence would be committed, and due action taken under Control of Supplies Act 1961 read together with the Control of Supply Regulations 1974.

On 17.5.2021, the 2nd Defendant wrote to the Plaintiff to request for the original title which was in the possession of the Plaintiff for the purpose of applying to convert the use of its land from commercial to petrol station.

The Plaintiff responded on 31.5.2021 stating its refusal to accede to the request of the 2nd Defendant. The Plaintiff was of the view 6 that the express term of the SLA provided for the title to be deposited with the Plaintiff and/or its solicitors and shall be returned only upon registration of the lease. Further, the Plaintiff’s refusal is also in view of the relief of specific performance of the SLA and/or Lease Agreement it seeks in the instant suit.

On 10.6.2021, the 2nd Defendant wrote to request that the Plaintiff issue a release letter allowing the 2nd Defendant to deal with its land as it intends to use the land to operate a petrol station, as directed by the Ministry. Its request was met with refusal yet again by the Plaintiff. The 2nd Defendant’s application

The 2nd Defendant seeks the following issues (reproduced in its original version) to be determined as preliminary issues,:-

sama ada seksyen 89 Kanun Tanah Negara terpakai?

(ii) sama ada arahan oleh Kementerian Perdagangan Dalam Negeri dan Hal Ehwal Pengguna ke atas Defendan Pertama untuk Defendan Pertama membuka kembali perniagaan stesyen minyak di atas hartanah yang dikenali sebagai HSM 2581 PT 34050 Mukim Labu, Daerah Seremban, Negeri Sembilan juga perlu dipatuhi oleh Plaintiff dan Defendan Kedua?

(iii) sama ada Plaintiff mempunyai tanggungjawab dan keperluan terhadap Defendan Pertama dan/atau Defendan 7 Kedua untuk mengeluarkan surat pelepasan tanpa syarat, menyerahkan Hakmilik Asal dan mengeluarkan segala bebanan di atas Hartanah tersebut kepada Defendan Pertama dan/atau Defendan Kedua? Analysis and decision of this court The applicable principles

Order 33 rule 2 upon which the 2nd Defendant’s application is premised, provides as follows, Time of trial of questions or issues (O. 33, r. 2)

The Court may order any question or issue arising in a cause or matter, whether of fact or law or partly of fact and partly of law, and whether raised by the pleadings or otherwise, to be tried before, at or after the trial of the cause or matter, and may give directions as to the manner in which the question or issue shall be stated.

Whilst the court has a discretion to order a question or issue posed to be tried at any stage of the proceedings, cases have enunciated on the exercise of the court’s discretion. In Krishnan Rajan A/L N Krishnan v Bank Negara Malaysia & Ors [2003] 1 MLJ 149, Justice Abdul Malik Ishak expounded on the application of Order 33 as follows, …the relevant principles governing an application under this rule can be distilled, inter alia, from these three cases: 8

Newacres Sdn Bhd v Sri Alam Sdn Bhd [1991] 3 MLJ 474 — a decision of the Supreme Court;

Arab Malaysian Finance Bhd v Meridien International Credit Corporation Ltd London [1993] 3 MLJ 193 — another decision of the Supreme Court; and

Dominic J Puthucheary v Jet Age Construction Sdn Bhd & Anor, Module Construction Sdn Bhd & Ors v Jet Age Construction Sdn Bhd & Anor [1997] 2 MLJ 252 — a decision of the Court of Appeal. Of course, there are other germane authorities on the subject that can be found in the local law journals but, for the present moment, the above three authorities would suffice. However, in the course of this judgment, I will refer to other elucidating authorities, both local and foreign. The principles of law that can be distilled from the long line of established authorities may conveniently be marshalled in these terms:

that the rule confers upon the court a wide discretionary power to order any question or issue in a cause or matter, whether of fact or law or partly of fact and partly of law, to be tried before, at or after the trial of the cause or matter;

(ii) that the application under O 33 r 2 of the RHC may not be appropriate where the facts are in dispute or where extrinsic evidence is required to be adduced;

(iii) that the overriding consideration, when taken in its correct perspective, is whether the application would result in a substantial saving of time and expenditure; and

(iv) that the court should be wary and warn itself against the abuse of this process.

In S.I Rajah & Anor v Dato’ Mak Hon Kam & Ors (No.1) [1994] 1 CLJ 207, Justice Lim Beng Choon held as follows, 9 However that may be, in deciding whether to allow the preliminary questions to be raised at the trial, the Court must bear in mind the following observations enunciated in the aforementioned cases:

As a general rule, the Court will exercise its power under O 33 r 2 to order a preliminary question to be tried if and only if the trial of the question will result in substantial saving of time and expenditure which otherwise would have to be expended should the action go on trial as a whole.

Nothwithstanding the general rule, an order under the said rule should not be made in respect of matters which by reason of the obscurity either of the facts or the law ought to be decided at the trial of the suit.

Preliminary points of law have been described as too often treacherous short cuts but where it is a trial of so-called preliminary issues of fact, the justification to allow the trial of such issues is even harder to discern.

In any event a preliminary question should be carefully and precisely framed so as to avoid difficulties of interpretation as to what is the real question which is being ordered to be tried as a preliminary issue – see Allen v Gulf Oil Refining Ltd. [1980] QB 156 (See also: Petroleum Nasional Bhd v Kerajaan Negeri Trengganu [2003] 4 CLJ 337 and Lim Thiam Huat & Anor v MBF Holdings Bhd & Anor and other appeals [ 2018] LNS 678)

In essence, recourse is to be had to Order 33 rule 2 where the determination of the preliminary issue would either substantially dispose of the cause or matter or where it would render the trial unnecessary, with the ultimate objective of saving time and costs. 10

The 2nd Defendant has also cited Order 33 rule 3 in support of its application. In the context of the 2nd Defendant’s application, I consider this provision to be relevant only if rule 2 has been satisfied as it pertains to the court’s direction in determining the mode of trial most suitable to decide the various issues requiring the court’s determination.

Finally, rule 5 was also relied on and correctly so, as this rule is to be read with rule 2. The provision is set out below, Dismissal of action after decision of preliminary issue (O. 33, r. 5)

If it appears to the Court that the decision of any question or issue arising in a cause or matter and tried separately from the cause or matter substantially disposes of the cause or matter or renders the trial of the cause or matter unnecessary, it may dismiss the cause or matter or make such other order or give such judgment therein as may be just.

I shall now consider the questions framed as set out above in the light of the governing principles. First question-whether s. 89 of the National Land Code (“NLC”) applies

Section 89 of the NLC provides, 89 Conclusiveness of register documents of title Every register document of title duly registered under this Chapter shall, subject to the provisions of this Act, be conclusive evidence− 11

that title to the land described therein is vested in the person or body for the time being named therein as proprietor; and

of the conditions, restrictions in interest and other provisions subject to which the land is for the time being held by that person or body, so far as the same are required by any provision of this Act to be specified or referred to in that document.

I fail to see how the determination of the application of section 89 would have any bearing on the issues in this suit. The 2nd Defendant’s position as the registered proprietor of the Land is not in dispute. The Plaintiff has expressly pleaded the 2nd Defendant to be the registered proprietor in its Statement of Claim. Neither is its title to the Land being challenged. In the circumstances, the application of section 89 is not in issue at all.

The dispute, from the correspondence of the parties, is with regard to the possession of the document of title, which is currently with the Plaintiff’s solicitors. The Plaintiff’s solicitors have refused to return the original title to the 2nd Defendant. Also, the refusal by the Plaintiff to issue a letter of release to allow it to operate a petrol station has added to its quandary. These disputes however, do not call for a determination of the application of section 89 of the NLC.

From the pleadings filed, the issues would principally center on the validity of the termination of the SLA and/or Lease Agreement by the parties. The dispute is essentially a contractual dispute. The 12 determination of the validity of the termination would have a consequence on the remedies sought by the respective parties.

I therefore fail to see how a determination of the application of section 89 would substantially dispose of the main suit. Second question-whether the directives from the Ministry of Domestic Trade and Consumer Affairs ought to be complied with by the Plaintiff and the 2nd Defendant

Again, the directives by the Ministry has no bearing on the main suit. In fact, it is totally unrelated. The directive arose after the suit was filed, as a consequence of events which transpired after the filing of the instant suit.

There is no issue of non-compliance by the Plaintiff, although the 1st Defendant finds itself in a predicament at present as the directive was directed at Dato’ Sri Ismail, who is also alleged to be a common director and/or majority shareholder of both the Defendants. However, the compliance of the directive by the Plaintiff and the 2nd Defendant is not in issue as it was not even addressed to the Plaintiff nor the 2nd Defendant. In any event, the Ministry is not even a party to the current proceedings. The question of compliance to its directive by any party cannot be heard in its absence. Question 3-whether the Plaintiff is obliged to issue the release letter and return the original title of the Land to the Defendants, and remove any encumbrance on the Land 13

Whilst this question is related to the contractual obligations of parties under the SLA Agreement and the Lease Agreement, this question alone will not substantially dispose of the entire suit.

The Plaintiff and the Defendants have taken actions which are tantamount to termination of the SLA and/or Lease Agreement. The validity of their actions under the SLA and Lease Agreement would have to be determined first. This issue would have a consequential effect on the obligation of the Plaintiff to issue the release letter and return the original title of the Land to the 2nd Defendant. To seek the court’s determination of Question 3 would be putting the cart before the horse. In short it is premature.

Further the Plaintiff’s obligation to issue the release letter in order to allow the 2nd Defendant to use the said Land would depend on whether the SLA and/or Lease Agreement is still binding which in turn depends on facts to be established at the trial. These facts are highly contentious as evidenced by the pleadings filed.

The Plaintiff has also questioned the bona fides of the application by the 2nd Defendant and allege that the application was actuated by mala fides on its part. The allegation is premised on recent events which transpired evidencing the 2nd Defendant’s intention to operate a petrol station under Shell’s brand name at the Seremban Petrol Station. This prompted the 2nd Defendant to request for a release letter from the Plaintiff and the return of the original title which the Plaintiff not surprisingly, refused as the Plaintiff as it is seeking for specific performance of the SLA and/or Lease Agreement. 14

Whilst I would not go so far as to attribute the 2nd Defendant with mala fides in filing the present application, the contention of the Plaintiff cannot be entirely dismissed bearing in mind the preceding circumstances. In any event, even in the absence of this ground, there is sufficient reason to find that the questions do not justify the exercise of the court’s discretion under O 33 as the determination of the proposed questions would not substantially put an end to the main suit.

Premised on the foregoing reasons, the application in enclosure 56 is dismissed. I also order that costs of RM 3,000 be paid to the Plaintiff by the 2nd Defendant. Dated : 17th December 2021 …….…-sgd-..………. Alice Loke Yee Ching Judicial Commissioner High Court of Malaya at Shah Alam 15 Counsel for the Plaintiff : Mr. Wong Yun Wei Tetuan Zul Rafique & Partners Counsel for the 1st Defendant Mr. Wan Shahrizal bin Wan Ladin (Puan Haniza binti Dato’ Dr. Ibrahim and Puan Normah binti Mohamad Desa with him) Tetuan Haniza Ibrahim & Co Counsel for the 2nd Defendant : Dato’ Edward Ng Boon Seong