Djen Enterprise Sdn. Bhd v Proton Edar Sdn. Bhd. (KA-22NCvC-50-10/2022)

This case presents a fundamental conflict between the bedrock principle of contractual sanctity and the invocation of extraordinary external circumstances as a shield against commercial default. At its heart, the dispute concerns whether a commercial party, having formally committed to performance targets, may subsequently rely 06/04/2026 23:45:18 KA-22NCvC-50-10/2022 Kand. 110 on the COVID-19 pandemic and allegations of a 'corporate scheme' to escape the consequences of its failure to perform.

While the Plaintiff portrays its termination as an act of bad faith by a national automotive giant aimed at eliminating smaller dealerships, the Defendant stands on the express terms of a signed bargain. Ultimately, this Court must determine whether the protective reach of the COVID-19 Act 2020 and the doctrine of mala fide can supersede the clear, documented obligations of a dealer whose own signature has defined the parameters of the relationship.

The relationship between the parties officially began when the Defendant appointed the Plaintiff as a 2S dealer under a Service Dealership Agreement dated 01.04.2010 (“the Dealership Agreement”). A few years later, around 2012, the Defendant shifted its business model and stopped accepting applications from new 2S dealers, moving towards a policy prioritising 3S and 4S outlets.

In anticipation of launching their first SUV models, the Defendant issued multiple memorandums between October 2017 and August 2018, requiring dealers to upgrade their facilities to the new 3S/4S Corporate Identity to be eligible to service the new models. The Plaintiff refused to commit to this upgrading exercise. The new Proton X-Series models were officially launched shortly after, on 12.12.2018. Even though the Plaintiff was prohibited from servicing the new X-Series models, the Plaintiff met its performance targets for 2019.

Performance issues began surfacing early the next year, leading the Defendant to send warning letters to the Plaintiff between February and July 2020 for failing to meet their targets. This period coincided with the implementation of the Movement Control Order (“MCO”) from March to June 2020, months which the Defendant claimed were excluded from their 2020 target calculations. Despite this exclusion, the Plaintiff failed to meet its annual targets by the end of

Nevertheless, the Plaintiff signed an acknowledgement on 31.12.2020, formally agreeing to the performance targets for 2021.

In January 2021, the Plaintiff placed purchase orders that were delivered but allegedly not invoiced by the Defendant, which the Plaintiff claimed consumed and froze their credit limit. As the year progressed, the Enhanced Movement Control Order (“EMCO”) was enforced in the Plaintiff's operating town of Jitra from 18.05.2021 to

14.06.2021. It was not until August 2021 that the Defendant finally issued an invoice, marked manually as a "BCP Recovery", for the orders placed back in January. Shortly after, on 20.09.2021, the Plaintiff signed another acknowledgement agreeing to revised performance targets. However, by the end of 2021, the Plaintiff had once again failed to achieve its targets for the year.

Due to the consecutive failures in 2020 and 2021, the Defendant sent a letter on 24.03.2022, notifying the Plaintiff of its intention to terminate the Dealership Agreement. This was followed by the official Notice of Termination issued on 27.06.2022 (“Notice of Termination”), grounded on Clauses 18.1(d) and 18.1(f) of the Dealership Agreement. The Plaintiff submitted an appeal letter on 05.07.2022, citing the pandemic, financial constraints, and system issues as reasons for their failure, but the appeal was rejected.

Consequently, the Plaintiff filed a civil suit against the Defendant in October 2022, and the matter ultimately went to trial at the High Court.

The Plaintiff’s Case The Plaintiff's primary argument is that their failure to achieve the targets was a direct result of the Defendant's faulty SAP system and negligence regarding "Back Orders". Simply put, when the Plaintiff ordered parts, the SAP system immediately deducted their credit limit. However, since the Defendant failed to deliver the parts on time, no invoices were generated. Without invoices, the Plaintiff could not make payments to clear their balance, resulting in a frozen credit limit and an automatically blocked account.

This domino effect paralysed the Plaintiff, preventing them from ordering new parts or servicing cars, thereby making the sales targets impossible to achieve. Relying on HFR Hotel Enterprises Sdn Bhd v Apex Cool Sdn Bhd [2022] MLJU 1137, the Plaintiff asserts that Section 7 of the COVID-19 Act 2020 served as a statutory shield, precluding the Defendant from enforcing termination for performance failures during the pandemic.

The Plaintiff heavily relied on PSAA Holdings Sdn Bhd v Petronas Lubricants Marketing (Malaysia) Sdn Bhd [2022] MLRHU 1229 to argue that they are entitled to claim loss of profits for a period of 3 years, for this 3-year multiplier represents the rightful loss flowing from the abrupt termination, intended to give them sufficient time to recover and rebuild their business.

Furthermore, citing Ban Chuan Trading Co Sdn Bhd v Ng Bak Guan [2004] 1 MLJ 411, the Plaintiff maintains that the Defendant’s conduct, specifically the oppressive blocking of their credit account, amounted to a destruction of their business, entitling them to damages for loss of future earnings and wasted expenditure on facility upgrades.

The Plaintiff further submitted that the termination was not genuinely about performance, but a bad-faith strategy to eliminate legacy 2S dealers who refused to spend millions upgrading to 3S centres.

The Plaintiff argued they were systematically disadvantaged (such as being barred from servicing X-Series models) and that their termination in Jitra was expedited specifically to ensure the survival of a newly appointed 3S dealer, Lee Motors.

Since the termination was abrupt and unlawful, the Plaintiff argued they are entitled to damages flowing naturally from the breach. They abandoned claims for defamation and renovation costs, solely on their profit-and-loss statements to assert a substantial loss of profits. The Plaintiff cited the foundational case of Tham Cheow Toh v Associated Metal Smelters Sdn Bhd [1972] 1 MLJ 171 to establish the principle that damages (such as loss of profits) flow naturally from a breach of contract.

The Plaintiff’s learned counsel utilised Tham Cheow Toh (supra) to argue that since the termination was unlawful, the court must assess and award damages based on the Plaintiff's projected sales and service turnaround, which historically generated close to RM600,000 to RM1 million per year. The Defence 17. The Defendant maintains that the termination was a valid exercise of express contractual rights under Clause 18.1 of the Dealership Agreement, following the Plaintiff’s admitted failure to meet sales and service targets for two consecutive years. Grounded in the principle of contractual sanctity found in Syarikat Binaan Utara Jaya v Koperasi Serbaguna Sungai Glugor Bhd [2009] 2 MLJ 546, the Defendant argues that the court must not rewrite a clear commercial bargain simply because the outcome appears harsh.

The Defendant further asserts that the Plaintiff is estopped from challenging the targets, as they voluntarily signed the target letters without protest, a position supported by L’Estrange v Graucob [1934] 2 KB 394. Crucially, the Defendant invokes Section 114(g) of the Evidence Act 1950, arguing for an adverse inference against the Plaintiff for failing to produce audited financial statements or call material witnesses to prove their alleged losses.

Citing Aseambankers Malaysia Bhd & Ors v Shencourt Sdn Bhd & Anor [2014] 4 MLJ 619, the Defendant concludes that the allegation of mala fide is not a recognised cause of action that can override the Defendant's absolute right to terminate for a documented performance default. The Trial 20. The agreed issues by both parties were as follows: a) Whether the Notice of Termination is lawful; b) Whether the Defendant had an obligation to allow the Plaintiff to service X-series models; c) Whether the Plaintiff was negligent in fulfilling orders (and if this affects termination validity); d) Relevance of Covid-19 restrictions; and e) Whether there was unilateral imposition of targets. Decision and Findings of the Court 21. Having given the matter a thorough consideration, and after weighing the oral testimonies of the witnesses against the backdrop of the extensive documentary evidence, I find that the Plaintiff has failed to discharge the burden of proving that the termination of the Dealership Agreement was unlawful. While the Plaintiff’s narrative was initially persuasive, it ultimately lacked the evidentiary and legal support necessary to overcome the express terms of the contract.

Consequently, I decide in favour of the Defendant and dismiss the Plaintiff’s claim in its entirety. It is a matter of record that the relationship between these parties spanned over a decade, a period during which the automotive industry underwent a profound transformation. The Defendant’s shift toward a 3S and 4S dealership model and the introduction of premium models such as the X-Series were legitimate exercises in corporate strategy. The core of this dispute is whether the Plaintiff, having failed to adapt to this changing landscape and missing its performance targets for two consecutive years, can now seek to invalidate a termination that was contractually permitted.

I must state that at the outset of these proceedings, my initial inclination leaned toward the Plaintiff. The reality of a legacy dealer struggling through the unprecedented hardships of a global pandemic and a rigid SAP accounting system evokes natural judicial sympathy. However, as the trial progressed, it became increasingly clear that this sympathy could not bridge the gap between the Plaintiff's grievances and the cold, hard requirements of the law.

My decision is anchored on three primary findings. First, the sanctity of the written contract must be upheld, particularly where the Plaintiff voluntarily signed and acknowledged revised performance targets during the pandemic.

Second, the Plaintiff’s primary defence, the so-called ‘Domino Effect’ of the SAP system, was both fatally unpleaded and factually unproven during the trial. Third, even if liability had been established, the Plaintiff's case on quantum was virtually non-existent due to a deliberate failure to produce audited financial records.

For the reasons I shall now set out in detail, the law must favour contractual certainty and the strict requirements of proof over the Plaintiff's plea for equitable mercy. As the subsequent parts of these grounds will demonstrate, the Plaintiff's compelling equitable grievances ultimately collapse under the weight of its own signed contractual agreements, fatal defects in its Statement of Claim regarding the alleged negligence, and an absolute failure to prove its purported financial losses legally.

One of the most striking points of inequity raised by the Plaintiff was their exclusion from servicing the new "X-Series" models, specifically the X50 and X70. For a legacy 2S dealer that had served the Defendant for over a decade, being barred from the most popular and lucrative segment of the Proton fleet felt like a strategic sidelining. The Plaintiff argued that while the Defendant continued to demand high service intake numbers, it simultaneously "shrank the pool" of available customers by preventing the Plaintiff from handling these high-volume models. On the face of it, there is a certain unfairness in demanding that a dealer meet growth targets while denying them the very tools and the specific car models needed to achieve that growth.

It is impossible to ignore that the performance failures in question occurred during the height of the COVID-19 pandemic. The Plaintiff operated within the shadow of various MCO and EMCO lockdowns in 2020 and 2021, periods marked by severe restrictions on movement and manpower. The Court recognised that for any small-to-medium enterprise, these were not just difficult times; they were an existential threat. The Plaintiff’s argument that it was unreasonable to enforce strict pre-pandemic targets during a global lockdown was, at first glance, a very persuasive plea for judicial intervention and common sense.

Finally, the Plaintiff painted a vivid picture of a concerted corporate strategy, a purge of legacy 2S dealers to make way for the new 3S and 4S centre model. The timing of the Plaintiff's termination, coinciding with the appointment of a large 3S competitor like Lee Motors in the same Jitra vicinity, gave the allegation of mala fide a layer of plausibility. The Plaintiff’s grievance was that they were being "squeezed out" not because they were incompetent, but because their business model was no longer fashionable in the Defendant’s new corporate vision. To a long-term partner who had invested significant capital into their facility, this felt less like a commercial exit and more like a planned displacement.

It was this combination of restricted market access, a systemic credit trap, and the pressures of a global pandemic that initially gave the Court pause. These were genuine, observable hardships that made the Plaintiff’s wrongful termination case seem, at least initially, quite strong.

I am not unmindful of the commercial reality facing a legacy 2S dealer. The termination of a decade-long partnership at the height of a global pandemic is, by any measure, a harsh outcome. However, the law of contract is an objective master. While I initially viewed the Plaintiff’s grievances with some sympathy, that sympathy must give way when confronted with the rigours of the evidence and the uncompromising terms of the signed agreement. Sympathy is not a substitute for proof, nor is it a legal basis to rewrite a commercial bargain.

The relationship between the parties is governed by the Dealership Agreement. Where the language of a commercial contract is clear, the Court must give effect to its provisions, even if the consequences appear harsh, as established by the Court of Appeal in Syarikat Binaan Utara Jaya (supra).

The Dealership Agreement expressly empowered the Defendant to terminate the contract. Clauses 18.1(d) and 18.1(f) explicitly state that the Defendant may terminate the Agreement if the Plaintiff fails to purchase the required minimum monthly quantities of parts and lubricants, or fails to achieve the average monthly targets. It is undisputed that the Plaintiff severely missed its targets, achieving only 61% in 2020 (even after the MCO months were excluded) and a mere 17% in 2021.

During cross-examination, SP1 admitted that the targets were negotiable, yet the Plaintiff chose not to negotiate them because they initially deemed them achievable. A party who signs a contractual document is strictly bound by its terms (L'Estrange v Graucob (supra)). Having freely consented to the targets, the Plaintiff is now estopped from retrospectively complaining that they were unilaterally imposed.

Applying the principle laid down by the Court of Appeal in Chin Well Fasteners Co Sdn Bhd v Sampath Kumar Vellingiri [2006] 1 MLJ 117, a party is bound by the document they sign. The Plaintiff is therefore estopped from retrospectively claiming that the targets were unilaterally imposed or impossible to achieve due to the pandemic, having explicitly agreed to them in writing. The Plaintiff’s signature is the objective manifestation of its consent. Augustine Paul FCJ (delivering the judgment of the court) in Chin Well Fasteners (supra) ruled that: "It is a well-settled principle of law that a party who signs a document which contains contractual terms is strictly bound by those terms. The signature on the document is the objective manifestation of that party’s consent to be bound by the terms therein. In the absence of fraud, misrepresentation or non est factum, the court will not look behind the signature to investigate whether the party had actually read or understood the document." [Emphasis added]

The sanctity of the written contract is not a mere procedural hurdle but the bedrock of commercial predictability. By affixing its signature to the revised performance targets during the height of the pandemic, the Plaintiff provided an objective manifestation of consent that the law cannot, and should not, look behind. Allowing a party to retrospectively plead 'equitable mercy' against their own signed benchmarks would introduce an impermissible degree of subjectivity into Malaysian commercial law, effectively transforming a clear bargain into a moving target.

During oral submissions, the Plaintiff's counsel urged this Court to invoke an adverse inference under Section 114(g) of the Evidence Act 1950 against the Defendant for allegedly withholding the Plaintiff's performance records for the first half of the year 2022. I find this argument to be entirely misconceived. The Defendant's right to terminate the Dealership Agreement crystallised due to the Plaintiff's documented and admitted failure to achieve the mutually agreed-upon targets for the years 2020 and 2021. Therefore, any performance data for the year 2022 is wholly irrelevant to the breaches that had already accrued, and no adverse inference is warranted against the Defendant for not producing those records.

The Plaintiff also attempted to rely on a letter from the Defendant dated 31.12.2020, which contained a courtesy remark thanking the Plaintiff for their contribution, to argue that the Defendant had waived or accepted the Plaintiff's performance for 2020. This argument is legally flawed. A mere courtesy remark cannot override the express terms of the commercial contract. Crucially, Clause 26.3 of the Dealership Agreement expressly provides that any delay, neglect, or indulgence by the Defendant in enforcing its rights shall not be construed as a waiver of those rights. Therefore, the Defendant's decision to give the Plaintiff an opportunity to improve in 2021 did not extinguish the Defendant's right to rely on the 2020 breaches as grounds for termination.

For completeness, the Court notes the evidentiary dispute surrounding several warning letters issued by the Defendant (marked as ID D2, ID D3, and ID D4). During cross-examination, the Plaintiff highlighted SD1's admission that there was no physical proof of delivery for these specific letters to the Plaintiff. However, even if this Court were to exclude these specific warning letters from consideration, it would not salvage the Plaintiff's case. The core breach—the abysmal failure to meet the 2020 and 2021 performance targets—was independently and overwhelmingly established by the Plaintiff's own trial admissions and the mutually signed target letters. Thus, the evidentiary status of these specific warning letters does not alter the fundamental fact of the breach.

Next, the Plaintiff's attempt to use the pandemic as a legal shield is further negated by the specific limitations of the COVID-19 Act 2020 (“the COVID-19 Act”). As a matter of statutory interpretation, this Court finds that a Dealership Agreement is not one of the specified categories of contracts protected under the Schedule to Section 7 of the Act. The COVID-19 Act is a piece of surgical legislation; its protections are confined strictly to the categories enumerated in its Schedule. A Dealership Agreement falls outside this legislative perimeter, and the Court is not at liberty to expand the statutory net through judicial activism.

It is imperative to clarify that statutory shields, such as those provided under Section 7 of the COVID-19 Act 2020, are not intended to function as absolute amnesties for pre-existing or unrelated commercial incompetence (HFR Hotel (supra)). They require a rigorous threshold of causation that the Plaintiff in this instance failed to cross. While the pandemic undoubtedly posed an 'existential threat' to small-and medium-sized enterprises, the law requires a direct, demonstrable link between the restrictive measures and the specific contractual default.

The 'mathematical impossibility' of the Plaintiff’s defence is underscored by the fact that 40% of its peers—operating under the same national restrictions—successfully met their obligations. When a majority of similarly situated entities perform, the pandemic ceases to be a legal shield and becomes a mere backdrop to the Plaintiff’s own operational failure. Judicial sympathy for the hardships of a global lockdown cannot be weaponised to forgive a breach that is mathematically untethered to the restrictive orders themselves.

The Plaintiff heavily relied on the argument that they were systematically disadvantaged because the Defendant prohibited them from servicing the lucrative new X-Series models. However, this argument fails on strict contractual interpretation.

The Dealership Agreement defines "Vehicles" as "mixed variants of PROTON vehicles distributed by the Distributor and notified by the Distributor to the Authorised Service Dealer and such Other Vehicles as may be added by written agreement between the parties". The X-Series models were launched on 12.12.2018, more than 8 years after the Dealership Agreement was signed. Because there was no subsequent written agreement adding the X-Series to the Plaintiff's portfolio, the Defendant had absolutely no contractual obligation to grant the Plaintiff the rights to service them. While the Plaintiff viewed its exclusion from the X-Series as a 'strategic side-lining', the Dealership Agreement’s definition of 'Vehicles' serves as a definitive boundary.

Furthermore, the prohibition was not arbitrary. The evidence shows that servicing the highly advanced X-Series required specific facility upgrades (to 3S/4S status), special mechanical tools, and specialised training. The Plaintiff’s own witness, SP4, candidly conceded during cross-examination that a dealer who did not upgrade and purchase the necessary equipment would naturally not be able to service the X-Series models. It is an agreed fact that the Plaintiff explicitly refused the Defendant's offers to undertake this upgrading exercise.

More importantly, the Plaintiff's narrative that they were being unfairly pressured or threatened into upgrading their dealership was dismantled by their own witness. During cross-examination, the Plaintiff's witness SP3 was confronted with the Defendant's memorandum regarding the upgrade to 3S/4S status. SP3 candidly conceded that the memorandum was a 'mere offer' and not a threat. This crucial admission confirms that the Defendant merely extended a standard commercial opportunity to its dealers to improve their facilities, an offer that the Plaintiff voluntarily declined. Having declined the commercial offer, the Plaintiff cannot now claim to be a victim of systematic disadvantage.

I find SP1 to be remarkably candid under cross-examination. Crucially, the Plaintiff's own director, SP1, admitted during cross-examination that the X-Series prohibition did not cause their failure to meet the performance targets in 2020. It effectively severs the causal link between the Defendant’s policy and the Plaintiff’s default. A court cannot award damages for a 'loss' that the Plaintiff’s own primary witness admits was not caused by the grievance complained of.

During the trial, the Plaintiff's counsel heavily cross-examined the Defendant's witness (SD1) regarding Clauses 5.1 and 5.2 of the Dealership Agreement, extracting admissions that the Defendant possessed no proof of the Plaintiff's insolvency, poor customer satisfaction, or inadequate human capital at the time of termination. I find this line of argument to be a complete red herring. A perusal of the Notice of Termination confirms that the Defendant did not terminate the Plaintiff's contract on the grounds of insolvency or poor customer service. The termination was expressly and squarely predicated on the Plaintiff's admitted failure to achieve the contractual sales and service targets under Clause 18.1. Therefore, the absence of evidence regarding Clauses 5.1 and 5.2 is entirely immaterial to the lawfulness of the termination.

Furthermore, the Plaintiff’s grievance regarding market cannibalisation by the appointment of Lee Motors is a commercial complaint, not a legal one. Under the authority of Masjaya Trading Sdn Bhd v Kedah Cement Sdn Bhd [2004] MLJU 758, a non-exclusive dealership permits the principal to retain the absolute right to appoint other dealers. The Plaintiff accepted this business risk upon signing a non-exclusive agreement; the Defendant’s exercise of its commercial freedom to expand its network cannot be characterised as a breach of contract.

In the absence of a subsequent written agreement, there is no 'implied right' to new product lines. Furthermore, the law does not require a principal to subsidise a dealer’s failure to modernise; the requirement for 3S/4S upgrades was a legitimate commercial prerequisite for handling advanced automotive technology. Consequently, the Plaintiff’s refusal to upgrade was a self-imposed limitation. The 'market cannibalisation' complained of was not a breach of contract, but the natural consequence of a non-exclusive partner failing to adapt to a shifting corporate vision. B. The Domino Effect 51. The centrepiece of the Plaintiff’s defence at trial was the Domino Effect, a complex narrative alleging that the Defendant's SAP system was negligent. The Plaintiff argued that unfulfilled "Back Orders" consumed their credit limit, and because the Defendant allegedly delayed issuing invoices until the parts arrived, the Plaintiff was trapped; they could not pay off the unissued invoices to unblock their credit limit, paralysing their ability to order parts and hit their targets.

With the greatest of respect to the learned counsel for the Plaintiff, the Domino Effect theory, while intellectually creative, was never properly ventilated in the pleadings. It is trite law that a party is bound by its pleadings. Allowing a party to evolve its case during trial, such as the SAP 'credit trap', would sanction a trial by ambush, a course of action this Court is not prepared to take. This defence completely collapses on three fronts: a) The Pleading Defect 53. It is a fundamental rule of civil procedure that parties are bound by their pleadings. The specific chain of causation (Late Delivery - Delayed Invoice - Credit Block - Inability to Order) was fundamentally absent from the Plaintiff's Statement of Claim. The Plaintiff merely pleaded in Paragraph 19 that the Defendant had “negligently blocked the Plaintiff's account”.

The Federal Court in AmBank (M) Bhd v Luqman Kamil bin Mohd Don [2012] 3 MLJ 1 clearly envisaged that where material facts constituting the necessary basis to support a claim are not pleaded, the plaintiff cannot be allowed to argue these points and obtain judgment on them. Relying further on the principles of estoppel and pleadings in Boustead Trading (1985) Sdn Bhd v Arab-Malaysian Merchant Bank Bhd [1995] 3 MLJ 331, this Court finds that the Defendant was taken by surprise by this elaborate, unpleaded mechanism at trial. Consequently, the Court cannot and will not consider this unpleaded "Domino Effect" narrative. The distinction is critical: while Boustead Trading (supra) allows a court to give effect to the legal consequences of pleaded facts, it does not permit a party to introduce, for the first time at trial, an entirely new, complex technical mechanism, such as the SAP 'credit trap'.

In evaluating the allegations regarding the SAP system and credit limits, this Court relies on the SAP system records and printouts adduced by the Defendant (e.g., Exhibit D10). During the trial, the Plaintiff objected to the admissibility of these computer-generated documents on the basis that the makers were not called to testify. However, the Defendant had properly filed a Certificate pursuant to Section 90A of the Evidence Act 1950. Applying the principles in the case of Dato’ Kanagalingam a/l Veluppillai v Majlis Peguam Malaysia [2022] 3 MLJ 699 as submitted by the Defendant, where a Section 90A certificate is produced, the requirement to call the maker of the document is dispensed with. I find that the Defendant's SAP records are fully admissible, authentic, and accurately reflect the true state of the Plaintiff's orders and credit limits.

Furthermore, in an era where commercial disputes increasingly hinge on software-driven mechanisms like 'credit traps' or 'back-order logic,' the rules of pleading must adapt. A generic allegation of 'negligent blocking' is insufficient to put a Defendant on notice of a complex technical chain of causation. To avoid 'trial by ambush,' a Plaintiff must plead the technical architecture of the alleged failure with the same degree of specificity required for professional negligence.

The Plaintiff also sought to discredit the Defendant's evidence by highlighting that the Defendant's witnesses could not answer questions 'in unison' and that SD3 had made an error in her presentation chart. I find these attacks to be superficial. It is entirely reasonable for a large corporate entity to call multiple witnesses from different departments—such as Sales, After-Sales, and Credit Control—to testify strictly on their respective domains. A lack of identical testimony across different departments does not indicate evasion, but rather compartmentalised corporate knowledge. As for SD3's chart, the evidence shows it was a manually produced summary based on SAP data. A single human error in a manually created chart does not, by any stretch of the imagination, prove that the underlying SAP system was flawed or negligent.

The Plaintiff also attempted to rely on the testimonies of SP3 and SP4, who are representatives of other 2S dealerships, to establish that the SAP system and Back Orders systemically prevented dealers from achieving their targets. I find the experiences of other dealers to be wholly irrelevant to this suit. As submitted by the Defendant, each dealer operates under different dealership agreements, credit limits, and operating scales. Furthermore, the testimonies of SP3 and SP4 consisted entirely of self-serving oral assertions without any supporting documentary evidence to prove their own actual losses or back orders. Applying the Court of Appeal's decision in Ho Hup Construction Company Bhd v Woo Thin Choy [2016] 1 MLJ 709, such uncorroborated oral testimony must be disregarded.

In their submissions, the Plaintiff attempted to cast doubt on the Defendant's SAP evidence by arguing that the Defendant failed to produce a comprehensive, full set of SAP records to the Court. I find this argument to be entirely without merit. The burden of proving the alleged 'Domino Effect' and 'Back Orders' rested squarely on the Plaintiff. As submitted by the Defendant, relying on Datuk Nur Jazlan bin Tan Sri Mohamed & Ors v T Gopala Krishnan [2017] MLJU 412, the burden of proving a claim lies on the Plaintiff. If the Plaintiff truly believed that the entirety of the SAP records was material to proving their unpleaded defence, the proper procedural recourse was to file a formal discovery application against the Defendant prior to the trial. Having failed to do so, the Plaintiff cannot now fault the Defendant for not producing documents to prove the Plaintiff's own case, nor will this Court draw any adverse inference against the Defendant for this reason.

The Plaintiff’s narrative of a 'Domino Effect' invites this Court to scrutinise the intersection of rigid digital logic and the fluid realities of global supply chains. While the SAP system’s automated credit blocks represent a necessary 'digital gatekeeper' for corporate risk management, the Plaintiff contends it became an instrument of systemic strangulation. However, in a commercial landscape increasingly governed by algorithmic processes, a party seeking to impugn the equity of such a system must do more than allege a 'trap'; they must demonstrate that the system’s logic was not just rigid, but fundamentally decoupled from the contractual bargain—a burden the Plaintiff here failed to discharge.

Besides, by failing to plead the material facts of this specific causal chain, the Plaintiff deprived the Defendant of the opportunity to bring technical experts to rebut the SAP logic, resulting in a 'trial by ambush' that this Court cannot permit. b) The Factual Workaround 62. Furthermore, the Plaintiff's complaint that they were paralysed by the credit limit blockage ignores their own failure to mitigate their circumstances. The evidence adduced at trial, including admissions elicited during cross-examination, established that if the Plaintiff genuinely needed more credit to place future orders, they had the option to apply for an increase in their credit limit or voluntarily increase their bank guarantee. The Plaintiff's failure to take these basic commercial steps to circumvent the alleged credit limit issues further invalidates their attempt to solely blame the Defendant's SAP system for their inability to operate.

Hence, even if the Court were to overlook the pleading defect, the "credit trap" was a factual illusion. The blocking of an account upon exceeding a credit limit is a standard and necessary commercial safeguard to protect the principal from excessive credit exposure.

More importantly, admissions elicited during cross-examination from the Plaintiff's own witnesses (SP1, SP3, and SP4) destroyed the premise of impossibility. The witnesses conceded that even if unfulfilled back orders blocked its account, the Plaintiff could have easily bypassed the block and placed new orders by simply (i) making advance cash payments, (ii) increasing their security deposit, or (iii) increasing their bank guarantee. The "Domino Effect" was a flow issue. The Plaintiff's failure to utilise these financial workarounds indicates that their inability to perform was due to their own lack of capital, not the Defendant's negligence. c) Mathematical Impossibility 65. Finally, the "Back Order" defence fails on simple mathematics. The Plaintiff complained of missing orders from January 2021 valued at either RM35,027.30 or, at its highest estimation, RM90,357.95. However, the documentary evidence proves that the Plaintiff's total target for 2021 was RM442,526, and that only RM74,846 was achieved. This left a massive shortfall of over RM367,680. Even if the Court were to assume that the Defendant's system negligently swallowed the entire RM90,357.95 worth of orders, bridging that gap would still leave the Plaintiff in severe breach of their contract. The missing orders were mathematically de minimis to have caused the target failure.

Furthermore, the Plaintiff's narrative regarding these 'missing' orders suffers from a severe lack of evidentiary particulars. A review of the trial evidence reveals that SP1 did not actually testify that the orders vanished entirely; rather, SP1 conceded that the 6 orders in question were 'partially fulfilled'. Crucially, SP1 failed to identify or particularise exactly which items were delivered, which were not, and which were merely late. Without these strict particulars, the Court is left entirely unable to ascertain the true value of the allegedly unfulfilled items, rendering the Plaintiff's claim that these specific items caused their target failure wholly unproven.

During submissions, the Plaintiff attempted to rely on the cross-examination of the Defendant's witness, SD1, arguing that SD1 had admitted the 'Domino Effect' would cause a dealer to miss their targets. I have reviewed the transcript of this exchange and find the Plaintiff's reliance to be misconceived. The questions posed by the Plaintiff's counsel to SD1 were entirely general and hypothetical, presenting a fictitious scenario involving an RM90,000 order and an RM50,000 credit limit. SD1's agreement that a dealer would fail in such a scenario was merely an answer to a hypothetical question, not an admission of the Plaintiff's actual factual matrix. Because the Plaintiff failed to adduce concrete evidence that they actually experienced this exact scenario, SD1's hypothetical testimony does not assist the Plaintiff's case.

To succeed in their claim, the Plaintiff must satisfy the 'but-for' test of causation. They must prove that 'but for' the Defendant’s alleged negligence (the SAP trap), they would have achieved their targets. The evidence suggests the opposite. With a massive shortfall of over RM367,680 in 2021, the RM90,357.95 in 'missing' orders is mathematically irrelevant. Even in a hypothetical scenario in which the Defendant were perfectly efficient, the Plaintiff would still have been in substantial breach of Clause 18.1. The alleged negligence was not the causa causans (the immediate cause) of the Plaintiff’s failure; their lack of market penetration and service turnaround was.

The Defendant cannot be held liable for exercising a clear contractual right to terminate an underperforming dealer. The Plaintiff failed to meet mutually agreed-upon targets, failed to properly plead their negligence claim, and failed to prove that the Defendant's actions caused their operational downfall.

The Plaintiff's final attempt to salvage its case rests on the allegation of mala fide, or bad faith. The core of their argument is that the termination was not genuinely about performance targets, but favoured larger 3S centres at the expense of legacy 2S dealers. However, the law on this point is clear and uncompromising. Following the principle established in Seven Seas Industries Sdn Bhd v Philips Electronic Supplies (M) Sdn Bhd [2008] 5 MLJ 157, a contractually valid termination cannot be rendered unlawful merely by alleging bad faith or an ulterior corporate motive.

In a commercial context, if a party has an express right to terminate, as the Defendant did here under Clause 18.1 following the admitted target failures, the Court will not look behind that right to speculate on the true motivation of the terminating party. To do so would be to invite an impermissible level of subjectivity into commercial law. Consistent with the principle in Aseambankers (supra), this Court affirms that there is no general, free-standing duty of 'good faith' in Malaysian law that can be invoked to override the express, unambiguous terms of a commercial bargain. While the Plaintiff invites the Court to imply an equitable duty of 'fairness' to protect legacy dealers, doing so would amount to rewriting the contract. The Defendant’s motive—whether to favour 3S centres or otherwise—is legally irrelevant once the contractual trigger for termination has been factually met.

On the other hand, a careful review of the trial evidence reveals that none of the Plaintiff's witnesses adduced any substantive proof to support this serious allegation. The assertion that the Defendant engineered the Plaintiff's termination to facilitate the survival of Lee Motors was merely a submission from the Bar made by the Plaintiff's counsel. As established in Streamax Resources Sdn Bhd v Suriahni bt Abdullah [2021] MLJU 1698 and Transocean Drilling Sdn Bhd v Ketua Pengarah Hasil Dalam Negeri [2022] MLJU 2541, explanations or factual assertions made by counsel from the Bar do not constitute evidence and cannot be taken into consideration by this Court.

Moreover, the Plaintiff's fundamental grievance that the prohibition from servicing the X-Series models caused their financial downfall remains an unproven assertion. As rightly submitted by the Defendant during oral arguments, if the Plaintiff truly believed that access to the X-Series was the decisive factor between success and failure, the evidentiary burden lay on them to prove it. The Plaintiff could have easily subpoenaed representatives from Lee Motors— the very 3S dealer they complained about—to adduce comparative financial and sales data for the years 2020 and 2021. Such evidence would have demonstrated what a dealer equipped with the X-Series in that specific region could actually achieve. Having failed to adduce any such comparative evidence, the Plaintiff has failed to establish a causal link between the X-Series prohibition and their failure to meet the contractual targets. The Court cannot speculate on the profitability of the X-Series segment when the Plaintiff failed to adduce comparative data from the very competitor it sought to blame.

Furthermore, the Plaintiff's attempt to seek RM500,000 in special damages for alleged 'mala fide' conduct is procedurally fatal. It is trite law that aggravated and exemplary damages must be specifically pleaded and strictly particularised in the Statement of Claim. The Court of Appeal recently reaffirmed this strict pleading requirement in Bukit Tinggi Hospital Sdn Bhd & Anor v Navin Sharma a/l Karam Chand [2026] 1 MLJ 172. As the Plaintiff failed to plead any particulars of aggravated damages or mala fide losses in their Statement of Claim, they are wholly precluded from seeking such reliefs at trial.

Separately, the Plaintiff's choice to withhold its audited accounts while presenting management drafts is a tactical decision that carries heavy legal consequences. In commercial litigation of this magnitude, the Court expects the best evidence to be produced. The deliberate suppression of verified financial records leaves a void in the Plaintiff’s case that no amount of oral testimony can fill.

The Plaintiff's reliance on draft accounts marked 'for management purposes only' falls far short of the 'best evidence' rule. As established in Popular Industries Limited v Eastern Garment Manufacturing Sdn Bhd [1990] 2 CLJ 635, the difficulty of operating during a pandemic does not dispense with the necessity of strict proof.

The Plaintiff’s case on quantum was not merely unproven; it was deliberately shielded from scrutiny. A critical admission at trial compounded the unreliability of the Plaintiff's financial evidence. During cross-examination, SP1 admitted that actual audited accounts for the relevant periods existed but were intentionally omitted as evidence. The tactical decision to withhold audited financial statements in favour of 'management drafts' invites a robust application of the adverse inference under Section 114(g) of the Evidence Act 1950. In commercial litigation of this magnitude, the Court cannot be expected to 'grope in the dark' or award damages based on unverified projections when the 'best evidence'—the audited truth—was within the Plaintiff's power to produce.

C. The Quantum Beyond the factual abandonment of the renovation claim at trial, the Plaintiff’s attempt to concurrently claim RM1,000,000 for loss of future profits (expectation loss) and RM500,000 for wasted renovation costs (reliance loss) is legally impermissible. As enunciated in Anglia Television Ltd v Reed [1971] 3 All ER 690 and Ban Chuan Trading (supra), a plaintiff must elect between claiming their net outlay (wasted expenditure) or their loss of profits. Allowing both would amount to double recovery. Thus, the claim for renovation costs fails in limine.

With respect to the loss of profits, the Plaintiff's reliance on a 3-year multiplier is legally and factually unsustainable. The Dealership Agreement between the parties was for an initial fixed term of only 2 years. Even though the parties continued the relationship after the initial expiry, the law dictates that such a contract cannot exist in perpetuity and is terminable upon reasonable notice. A claim for loss of profits that exceeds the initial contractual term is wholly disproportionate to the contractual bargain. The Plaintiff led no evidence to suggest that 3 years constitutes a 'reasonable notice' period. Therefore, the multiplier is speculative and arbitrary.

During submissions, the Plaintiff relied heavily on PSAA Holdings (supra) and Tham Cheow Toh (supra) to justify their claim for damages flowing from the breach. I agree with the Defendant's rebuttal that these cases are clearly distinguishable and inapplicable. PSAA Holdings involved a defendant who unlawfully failed to provide the contractually mandated 30-day notice of termination, whereas in the present case, the Defendant lawfully exercised its termination rights with proper notice. Furthermore, while Tham Cheow Toh establishes the principle that damages flow from a breach, it does not dispense with the strict evidentiary requirement for a plaintiff to mathematically prove the exact quantum and duration of their losses, a burden the Plaintiff has entirely failed to discharge here.

Finally, the Plaintiff failed to establish the net loss required for a damages award. The Plaintiff’s witnesses admitted that immediately following the termination, the business did not shut down; instead, it continued operations by servicing vehicles from other brands, including Honda, Toyota, and Perodua. This is a clear act of mitigation. However, the Plaintiff produced no financial records for this post-termination period. Without these figures, the Court cannot calculate the actual loss. The law only compensates for the net loss, the difference between what the Plaintiff would have earned from Proton and what it actually earned from its new ventures. By failing to provide a transparent view of its post-termination revenue, the Plaintiff made it mathematically impossible for the Court to assess damages. Furthermore, the claim for loss of profit is mathematically flawed. Following Ban Chuan (supra), a Plaintiff must prove net profit, not just gross turnover. Most recently, the Federal Court in National Feedlot Corporation Sdn Bhd & Ors v Public Bank Bhd [2024] 6 MLJ 326 reiterated that the failure to produce audited accounts and the failure to account for post-termination revenue from other brands, such as Honda and Perodua, break the causal link required to prove actual loss. Consequently, the claim for damages is both unproven and speculative.

I am with the Defendant’s learned counsel that the Plaintiff’s reliance on Tham Cheow Toh (supra) is misplaced, for that case dealt with specific, foreseeable losses arising from a specific breach. Here, the Plaintiff is essentially claiming for the loss of a 'chance' to make a profit in a fluctuating, pandemic-hit market. Malaysian law distinguishes between a proven loss of profit and the loss of a speculative commercial opportunity. Without audited records showing a consistent profit margin pre-termination, the Plaintiff asks this Court to compensate them for a 'hope' of earnings. Under the authority of National Feedlot (supra), such a claim is legally invisible and cannot be sustained.

It must also be noted that several other heads of claim, specifically those for defamation and the costs associated with facility renovations, were completely abandoned during the trial, with no evidence offered to support them. In the end, the Plaintiff’s case on damages was not just unproven; it was virtually non-existent. Without strict proof of loss, even a successful liability claim would have resulted in nothing more than a nominal award.

As an alternative finding on quantum, the Defendant correctly submitted during oral submissions that even if this Court had found the termination to be unlawful, the Plaintiff would at best be entitled to merely nominal damages. Having failed to produce their finalised audited accounts or post-termination financial records to prove their actual net losses after taking on Honda, Toyota, and Perodua vehicles, the Plaintiff wholly failed to discharge their strict burden of proof. Applying the principles in Popular Industries (supra), where a plaintiff establishes a breach but fails to adduce sufficient, credible evidence to quantify their loss, the court can only, at best, award nominal damages.

For the avoidance of doubt, the aforementioned principle regarding nominal damages serves strictly as an alternative finding on quantum to address the Defendant's oral submissions. The foundational prerequisite for any award of damages—even nominal damages—is the establishment of a breach of contract or an infringement of a legal right. As established in Popular Industries (supra), nominal damages may only be awarded 'upon proof of the contravention of a right'. This was further affirmed by the Court of Appeal in Sony Electronics (M) Sdn Bhd v Direct Interest Sdn Bhd [2007] 1 CLJ 611, which held that nominal damages signify that 'there is an infraction of a legal right'. As this Court has definitively ruled that the Defendant's Notice of Termination was lawfully issued in accordance with the express terms of the Dealership Agreement, there is absolutely no breach of contract on the part of the Defendant. Absent any liability or legal wrong committed by the Defendant, the Plaintiff's claim collapses entirely, and they are not entitled to any compensation whatsoever, not even nominal damages.

Turning to the specific reliefs sought, the Plaintiff prayed for a declaration that the termination of the Dealership Agreement was unlawful. Even if this Court had found the termination unlawful, this declaratory relief would be legally incompetent. The proviso to Section 41 of the Specific Relief Act 1950 strictly prohibits the Court from making a bare declaration where the plaintiff, being able to seek further relief, omits to do so. In this suit, the Plaintiff elected only to claim for damages and explicitly chose not to seek specific performance or reinstatement of the Dealership Agreement. Consequently, the declaratory relief sought possesses no practical utility and is dismissed.

Finally, regarding the Plaintiff's specific pleaded relief for the return of a deposit amounting to RM28,171.02, the Court notes that the Plaintiff failed to lead any substantive evidence to sustain this claim during the trial. The Defendant submitted that this sum had already been settled on a goodwill and without prejudice basis prior to the conclusion of the proceedings. Because the Plaintiff failed to put their specific theory regarding this deposit to the Defendant’s witnesses during cross-examination, and adduced no proof of the outstanding debt, this specific relief is likewise dismissed. Conclusion 88. In the final analysis, commercial certainty must prevail over equitable sympathy. The Plaintiff’s grievances, while articulately presented, cannot overcome their own signed admissions, the strict boundaries of civil pleadings, and an absolute failure to legally and mathematically prove their alleged losses.

Having carefully considered the totality of the documentary evidence, the oral testimonies of the witnesses, and the comprehensive submissions of both parties, this Court finds that the Defendant's Notice of Termination was issued lawfully and in strict accordance with the express terms of the Dealership Agreement.

Consequently, the Plaintiff’s claim is dismissed in its entirety with costs. Dated: 6th April, 2026 -------------------------------------------------------------------- YA Dr. Hj. JOHN LEE KIEN HOW @ MOHD JOHAN LEE JUDGE HIGH COURT OF MALAYA ALOR SETAR Table of Authorities Cases Anglia Television Ltd v Reed [1971] 3 All ER 690 Aseambankers Malaysia Bhd & Ors v Shencourt Sdn Bhd & Anor [2014] 4 MLJ 619 Ban Chuan Trading Co Sdn Bhd v Ng Bak Guan [2004] 1 MLJ 411 Dato’ Kanagalingam a/l Veluppillai v Majlis Peguam Malaysia [2022] 3 MLJ 699 Datuk Nur Jazlan bin Tan Sri Mohamed & Ors v T Gopala Krishnan [2017] MLJU 412 Bukit Tinggi Hospital Sdn Bhd & Anor v Navin Sharma a/l Karam Chand [2026] 1 MLJ 172 Ho Hup Construction Company Bhd v Woo Thin Choy [2016] 1 MLJ 709 L'Estrange v Graucob [1934] 2 KB 394 Solicitor for the Plaintiff : Megalai V. Raman Messrs. Meg Nacha Zahir & Co Advocates & Solicitors Solicitors for the Defendant : SY Liew & Yiew De Quan Messrs. Shearne & Delamore Advocates & Solicitors Masjaya Trading Sdn Bhd v Kedah Cement Sdn Bhd [2004] MLJU 758 National Feedlot Corporation Sdn Bhd & Ors v Public Bank Bhd [2024] 6 MLJ 326 Popular Industries Limited v Eastern Garment Manufacturing Sdn Bhd [1990] 2 CLJ 635 PSAA Holdings Sdn Bhd v Petronas Lubricants Marketing (Malaysia) Sdn Bhd [2022] MLRHU 1229 Seven Seas Industries Sdn Bhd v Philips Electronic Supplies (M) Sdn Bhd & Anor [2008] 5 MLJ 157 Sony Electronics (M) Sdn Bhd v Direct Interest Sdn Bhd [2007] 1 CLJ 611 Streamax Resources Sdn Bhd v Suriahni bt Abdullah [2021] MLJU 1698 Syarikat Binaan Utara Jaya (a firm) v Koperasi Serbaguna Sungai Glugor Bhd [2009] 2 MLJ 546 Tham Cheow Toh v Associated Metal Smelters Sdn Bhd [1972] 1 MLJ 171 Transocean Drilling Sdn Bhd v Ketua Pengarah Hasil Dalam Negeri [2022] MLJU 2541