C.V. Timber Industries Sdn Bhd v Ad Catering and Canopy Sdn Bhd (AA-22NCvC-12-02/2023)

After a careful review of the Statement of Claim, Defence and Counterclaim, Reply, and Defence to Counterclaim, and after considering the submissions from both parties, this court is firmly convinced that the Counterclaim should be struck out. Before 25 setting out the reasons for this decision, I will first set out the contentions of the respective parties. Plaintiff’s case

The Plaintiff's case focuses on a rental agreement and subsequent 30 disputes over non-payment of rent and unauthorized alterations to 03/02/2024 23:47:15 AA-22NCvC-12-02/2023 Kand. 29 2 the property. The agreement, signed on September 28, 2016, was for a period of 36 months, with a specified rental rate. Initially, the Defendant complied by paying a security deposit and the first month's rent. However, the Plaintiff alleges that the Defendant 35 defaulted on rent payments from the start of the rental period. Furthermore, unauthorized modifications were reportedly made to the premises by the Defendant.

When the Defendant continued to default on rent, the Plaintiff, 40 issued a notice of demand on October 4, 2022, terminating the rental agreement and demanding overdue rent and the return of the premises. Despite this notice, the Defendant refused to make payment as demanded and refused to vacate the premises. As a result, the Plaintiff is seeking recovery of the total outstanding rent 45 of RM1,667,354.84 as of 30 September 2022, plus double rent from 1 October 2022, until the premises are returned. This claim also includes demands for utility arrears and other related costs. Defendant’s case 50 [4] The Defendant's case focuses on issues related to the rental agreement, property condition, and financial expenditures. They contend that upon entering the rental agreement, the premises were soon affected by flooding, which led to significant property damage and business losses for the Defendant. The Defendant claims to 55 have informed the Plaintiff about these issues and states that the Plaintiff was already aware of the flooding problem but did not disclose this information at the time of the rental agreement. [5] According to the Defendant, there was an understanding with the Plaintiff that rent would not be collected until the flood issues were 60 resolved. Consequently, the Defendant did not pay the monthly rent, diverting these funds instead to address the flooding problems. The Defendant also contends that they invested approximately RM3.5 million for the restoration of the premises and flood mitigation efforts. 65 [6] The Defendant alleges that the Plaintiff was fully aware of and had implicitly agreed to these restoration efforts, which transformed the premises from an old wooden factory to a modern restaurant and event space. The Defendant also refers to the Plaintiff's failure to demand rent during this period as acknowledgment of these 70 circumstances.

The Defendant expresses surprise at receiving a termination notice, given the alleged cooperative relationship with the Plaintiff in resolving the flooding issues and the lack of prior rent demands. The 75 Defendant seeks to have the Plaintiff's claims dismissed and demands compensation for their investment in the premises if required to vacate. They also request a reasonable extension to exercise the option to purchase the premises at an agreed price, in addition to other relevant reliefs deemed fair by the court. 80

In response to the Defendant's defence and counterclaim, the Plaintiff denies the allegations and maintain their original stance. 85 The Plaintiff rejects the Defendant's claim of an understanding to withhold rent until the flood issues were resolved. The Defendant was expected to conduct due diligence before entering the rental agreement and had the option to terminate the agreement if the flooding adversely affected their business. 90

The Plaintiff’s leniency shown regarding rent collection was due to the Defendant's financial difficulties, not an agreement to waive or suspend rent collection until the flood issues were resolved. The flood problems are a government and local authority matter, not the 95 Plaintiff's responsibility. The Plaintiff also states that the Defendant had the right to terminate the lease agreement if they found the renovation costs too high, which the Defendant failed to exercise the right. Lack of Merit in Defendant's Counterclaim: 100

The Defendant's counterclaim, which seeks reimbursement for renovation and development expenses on the premises, by not paying a single month rent to the Plaintiff lacks merit. These expenses incurred by the Defendant was for their own business 105 purposes and were unrelated to any obligations or agreements with 5 the Plaintiff. This assertion establishes that there is no reasonable cause of action by the Defendant against the Plaintiff.

In the case of Bandar Builder Sdn Bhd & Ors v United Malayan 110 Banking Corporation Bhd (1993) 3 MLJ 36, it was held that the court should only entertain claims or counterclaims that are not "obviously unsustainable" and should not be used to divert attention from the core issues. In this case, the Defendant's counterclaim lacks merit as it does not have a reasonable cause of action against 115 the Plaintiff. Scandalous and Vexatious Counterclaim:

The Defendant's counterclaim is scandalous and vexatious because it attempts to divert attention from the core issues of rent arrears and 120 vacant possession. The Defendant's counterclaim, which is essentially a claim for business expenses unrelated to the lease agreement, is presented in a way that is intended to confuse the court and delay the proceedings. This misuse of the counterclaim process undermines the integrity of the court proceedings. 125

In the case of Gabriel Peter & Partners (suing as a firm) v Wee Chong Jin (1998) 1 SLR 374, the Singapore Court of Appeal stated that an "abuse of the process of the Court" includes considerations of public policy and the interests of justice. It signifies that the court's 130 process should not be abused and that counterclaims should not be 6 used in a manner that is scandalous, vexatious, or intended to delay proceedings. This case supports the Plaintiff's argument regarding the scandalous and vexatious nature of the Defendant's counterclaim. Held (4) of the case states as follows: 135 “(4) The term, ‘abuse of the process of the Court’, in O 18 r 19(1)(d) had been given a wide interpretation by the courts. It included considerations of public policy and interests of justice. This term signified that the process of the court had to be used bona fide and properly and was not to be abused. The categories 140 of conduct rendering a claim frivolous, vexatious or an abuse of process were not closed and would depend on all the relevant circumstances of the case” Abuse of Court Process: 145 [14] The Defendant's counterclaim constitutes an abuse of the court process. By making a counterclaim that seeks to shift the focus of the case away from the Plaintiff's legitimate claims for unpaid rent and vacant possession, the Defendant is misusing the legal process for its own advantage. This abuse of the court process undermines 150 the efficiency and effectiveness of the legal system.

In the case of Gabriel Peter & Partners v Wee Chong Jin (supra), the court stated that the categories of conduct rendering a claim frivolous, vexatious, or an abuse of process were not closed and 155 would depend on all the relevant circumstances of the case.

Based on the grounds mentioned above, this court finds that the Defendant's counterclaim lacks a reasonable cause of action, is 160 presented in a manner that is scandalous and vexatious, and constitutes an abuse of the court process. Therefore, the court allows the Plaintiff’s application in Enclosure 13 that the Defendant's counterclaim dated 13 June 2023, be struck out with costs of RM2000.00. 165 Date : 29th January 2024 170 Moses Susayan MOSES SUSAYAN Judicial Commissioner High Court in Malaya 175 at Ipoh, Perak 180 Parties: For Plaintiff : Lim Wai Hung Advocates and Solicitors 185 [Messrs Rusnah Loh Ng & Co.] Ipoh, Perak For Defendant : Saranjit Singh Advocates and Solicitors 190 [Messrs Saranjit] Ipoh, Perak (Notice: This Grounds of Decision is subject to official editorial revision) 195 Headnotes: Civil Procedure— Pleadings— Striking out counterclaim,— Rules of Court 1996 O 18 r 19(1)— Abuse of process — What constituted abuse of process of court —Whether the counterclaim that seeks to shift the focus of the case away from the Plaintiff's legitimate claims for unpaid rent and 200 vacant possession was abuse of process of court — Rules of Court 1996 O 18 r 19(1)(d) — the categories of conduct rendering a claim frivolous, vexatious or an abuse of process are not closed and depend on relevant circumstances of the case