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1 IN THE COURT OF APPEAL OF MALAYSIA (APPELLATE JURISDICTION) CIVIL APPEAL NO: Q-02(NCvC)(W)-1056-08/2020 BETWEEN GERBANG ALAF RESTAURANTS SDN BHD (formerly known as GOLDEN ARCHES RESTAURANTS SDN BHD) (Company No. 65351-M) … APPELLANT
Q-02(NCvC)(W)-1056-08/2020
Court of Appeal of Malaysia24 Feb 2023
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“f this document via eFILING portal 20 cockroach was sighted on the kitchen floor and has (SIC) immediately removed’. [45] Ultimately, the Restaurant was ordered to be closed under section 11 of the Food Act 1983 after an inspection by the Ministry of Health, during which cockroaches and rat droppings were found in the”
“f the FA. This issue shall be dealt with later in this judgment. [6] Consequently, on 26.12.2017, the Defendant issued a Notice of Termination (“Notice of Termination”) under section 31(3)(d) of the Franchise Act 1998 [Act 590] to terminate the FA with immediate effect on the ground that the Plaintiffs had repeatedly b”
“res, such previous breaches or failures cannot constitute valid grounds for termination. The learned trial judge opined: “58. Based on the above evidences and applying the relevant provisions of the Franchisee Act 1995, I find that the Defendant has not shown to this Court that they have “good cause” as stipulated in s”
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1 IN THE COURT OF APPEAL OF MALAYSIA (APPELLATE JURISDICTION) CIVIL APPEAL NO: Q-02(NCvC)(W)-1056-08/2020 BETWEEN GERBANG ALAF RESTAURANTS SDN BHD (formerly known as GOLDEN ARCHES RESTAURANTS SDN BHD) (Company No. 65351-M) … APPELLANT
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CHAI SU LIN
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FOREST CAFÉ KUCHING SDN BHD (Company No. 749310-K) … RESPONDENTS [In the matter of Civil Suit No.: KCH-22NCvC-7/2-2018
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CHAI SU LIN (NRIC No. 710209-13-5018) … 1st Plaintiff 2. FOREST CAFÉ KUCHING SDN BHD (Company No. 749310-K) … 2nd Plaintiff 25/07/2023 12:20:39 Q-02(NCvC)(W)-1056-08/2020 Kand. 72 And GERBANG ALAF RESTAURANTS SDN BHD (formerly known as GOLDEN ARCHES RESTAURANTS SDN BHD) (Company No. 65351-M)] … Defendant] CORAM AZIZAH BINTI NAWAWI, JCA S. NANTHA BALAN, JCA HASHIM BIN HAMZAH, JCA GROUNDS OF JUDGMENT (GERBANG ALAF No. 1) Introduction [1] For ease of reference, parties to the present appeal shall be referred to as they were before the High Court below for Civil Suit No: KCH- 22NCvC-7-2/2018. [2] The Defendant in the present case is a company incorporated in Malaysia, having its principal place of business at Level 6, Bangunan TH, No. 3, Damansara Uptown, Jalan SS21/39, Petaling Jaya, Selangor. The Defendant was granted the right to sub-franchise restaurants in Malaysia under the McDonald’s System according to the terms of a Master Franchise from McDonald’s Corporation. [3] Following the 1st Plaintiff’s intention to acquire the franchising rights in McDonald’s Restaurant, the Defendant entered into various agreements with the 1st Plaintiff on 13.2.2007. These agreements are the Franchise Agreement (“FA”), the Operator’s Tenancy Agreement (“OTA”), and the Sale and Purchase Agreement (“SPA”). [4] On the same day, the 1st Plaintiff had assigned all her rights, titles and interests in the FA, OTA and SPA to the 2nd Plaintiff through a Deed of Assignment. [5] A dispute arose between the parties in 2017 when the Plaintiffs were allegedly found to have repeatedly failed to maintain and operate the McDonald’s restaurant in a good, clean and wholesome manner. According to the Defendant, the Plaintiffs were in repeated material breach of Clause 18(b) of the FA. This issue shall be dealt with later in this judgment. [6] Consequently, on 26.12.2017, the Defendant issued a Notice of Termination (“Notice of Termination”) under section 31(3)(d) of the Franchise Act 1998 [Act 590] to terminate the FA with immediate effect on the ground that the Plaintiffs had repeatedly breached the FA. [7] Dissatisfied, the Plaintiffs filed this action before the High Court, claiming the following reliefs, namely: a. a declaration that the Termination Notice is wrongful, null and void; b. a refund of the security deposit in the sum of RM74,517.00 paid by the 1st Plaintiff to the Defendant under the OTA; c. damages for wrongful termination; d. damages for conversion of the 1st Plaintiff’s food shop (fast food) license issued by the Majlis Bandaraya Kuching Selatan (“MBKS”) and the 2nd Plaintiff’s business license; and e. interest and cost. [8] On the other hand, the Defendant contended that the termination of the FA was lawful and filed a counterclaim against the Plaintiffs for general and special damages. [9] The matter went for a full trial and was jointly tried with two other civil suits, i.e., Civil Suit No: KCH-22NCvC-11-3/2018 and Civil Suit No: KCH-22NCvC-27-6/2019. It was agreed between the parties that these civil suits were to proceed on the issue of liability first. [10] On 3.8.2020, after a full trial, the learned trial judge decided that the Plaintiffs had proven their case against the Defendant on the balance of probabilities and that the Notice of Termination by the Defendant to the Plaintiffs was wrongful, null and void. As such, the Plaintiffs’ claim against the Defendant was allowed. [11] Aggrieved with the said decision, the Defendant filed this appeal. The Defendant’s Memorandum of Appeal [12] In the Memorandum of Appeal, the Defendant raised 15 issues to be determined in this appeal. Before us, the Defendant’s submission was focused on the following issues, namely whether the learned trial judge had erred both in fact and in law – a. in holding that there were no repeated failures on the part of the Plaintiffs to comply with Clause 18(b) of the FA; b. in holding that the Defendant had no good cause to terminate the FA under section 31(3)(d) of Act 590 without the requirement of notice and opportunity to remedy the breach; c. in holding that there was no proper notice or particulars given by the Defendant to the Plaintiffs in the Notice of Termination; d. in the interpretation and application of section 31(3)(d) of Act 590 to the facts of the case; and e. in holding that the Notice of Termination issued by the Defendant to the Plaintiffs was wrongful, null and void and that the Plaintiffs were entitled to the judgment granted. Our Analysis and Findings [13] First and foremost, the relevant part of the Defendant’s Notice of Termination to the Plaintiffs reads: “1. We refer to the above matter, our earlier Notice of Default dated 15.12.2017, correspondences and notices.
2
Please be informed that in view of the repeated breaches of the said provision of the Franchise Agreement by you, we hereby terminate the Franchise Agreement and forthwith pursuant to Section 31(3)(d) of the Franchise Act, 1998 (i.e. repeatedly fails to comply with the terms of the franchise agreement) without prejudice to our rights to exercise all other rights and remedies against you.” [14] It can be seen from the Defendant’s Notice of Termination that the FA was terminated pursuant to section 31(3)(d) of Act 590, which states – “Section 31. Termination of franchise agreement.
1
No franchisor or franchisee shall terminate a franchise agreement before the expiration date except for good cause as provided in subsections (2) and (3).
2
“Good cause” shall include, but is not limited to—
a
the failure of franchisor or a franchisee to comply with any terms of the franchise agreement or any other relevant agreement entered into between the franchisor and franchisee; and
b
the failure of franchisor or the franchisee to remedy the breach committed by him or any of his employees within the period stated in a written notice given by the franchisor, which shall not be less than fourteen days, for the breach to be remedied.
3
“Good cause” shall include, but without the requirement of notice and an opportunity to remedy the breach, circumstances in which the franchisor or franchisee—
a
makes an assignment of the franchise rights for the benefit of creditors or a similar disposition of the assets of the franchise to any other person; (aa) becomes bankrupt or insolvent;
b
voluntarily abandons the franchised business;
c
is convicted of a criminal offence which substantially impairs the goodwill associated with the franchisor’s mark or other intellectual property; or
d
repeatedly fails to comply with the terms of the franchise agreement.” [15] In short, under section 31(3)(d) of Act 590, the Defendant may terminate the FA for good cause, without the requirement of notice and an opportunity to remedy the breach, if the Plaintiffs had repeatedly failed to comply with the terms of the FA. [16] The Defendant’s Notice of Termination did not specify which terms of the FA that the Plaintiffs had repeatedly failed to comply with. Be that as it may, the Notice of Termination did refer to a Notice of Default dated 15.12.2017 (“Notice of Default”), earlier correspondence and notice. [17] In the Defendant’s Notice of Default issued to the Plaintiff, it was stated, among others, as follows: “Dear Sirs, re: NOTICE OF DEFAULT Repeated failure or breaches of QSC standard under the Franchise Agreement McDonald’s restaurant at Ground Floor and First Floor, Lot 2719 and Ground Floor Lot 2720, Jalan Tun Ahmad Zaidi Adruce, 93250 Kuching, Sarawak (“Demised Premises”)
1
We refer to the above matter and our earlier correspondences.
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We have been advised that pursuant to an inspection conducted by the Ministry of Health on 13 December 2017, you have been issued with the following regulatory notices –
i
Notis Perintah Tutup Premis Makanan;
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(ii) Arahan Pembersihan Tindakan Pembetulan; and
III
(iii) Notis Memerintahkan Kehadiran di Mahkamah all dated 13 December 2017.
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The above notices were issued due to your failure to maintain the cleanliness of the above Demised Premises which have resulted in rat and cockroach infestation, details of which are well within your knowledge.
4
Please note that the above incident has also reached the public domain when it was reported in the media on 14 December 2017, thus substantially impair the goodwill associated with McDonald’s reputation, brand and marks.
5
Your repeated failures to maintain cleanliness of the Demised Premises constituted a material breach pursuant to paragraph 18 of the Franchise Agreement which entitles us to terminate the Franchise Agreement. Paragraph 18(b) of the Franchise Agreement states the breach as failure “to maintain and operate the Restaurant in good, clean, wholesome manner and in compliance with the standard procedure by the McDonald’s System.
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In view of the repeated breaches of the said provision of the Franchise Agreement by you, please take note that we hereby reserve the right to terminate the Franchise Agreement pursuant to Section 31(3)(d) of the Franchise Act 1998. This will be without prejudice to all out other rights and remedies against you.” [18] Based on the evidence, the relevant correspondence includes – a. the Defendant’s letter dated 22.3.2017 informing the Plaintiffs on the outcome of the Unannounced Pest Audit dated 24.2.2017 (“the First UPA”) in which the Defendant also sought clarification and action plans from the Plaintiffs; b. the Defendant’s letter dated 31.3.2017 reminding the Plaintiffs to revert to the above letter; c. the Notice to Show Cause dated 13.6.2017 (“Notice to Show Cause”) informing the Plaintiffs of their breach of Clause 18(b) of the FA following the failed Brand Standard Visit (“BSV”) conducted by DW2 and the Unannounced Pest Audit dated 24.5.2017 (“the Second UPA”); and d. the Notice of Default. [19] Regardless of the above, the learned trial judge still held that the Defendant’s Notice of Termination was wrong in law due to the lack of details. In so holding, the learned trial judge referred to Perkayuan OKS No. 2 Sdn. Bhd v. Kelantan State Economic Development Corpn. [1995] 1 CLJ 761 (FC). [20] However, we agree with the Defendant that the facts in Perkayuan OKS No.2 (supra) can be distinguished from those in the present case. [21] In Perkayuan OKS No.2 (supra), the respondent’s notice of termination alleged that the appellant had "on various occasions assigned its rights under the main agreement to third parties without the written consent of the respondent in breach of clause 18 of the main agreement". The respondent subsequently terminated the main agreement. [22] The Federal Court through Hj. Lamin bin Hj. Mohd. Yunus PCA (as His Lordship then was) held: “We agree that the "various occasions" on which the appellant/plaintiff was alleged to have assigned and/or transferred its rights to third parties lacked details. The identity of the third parties to whom the rights were allegedly assigned and/or transferred was not particularised.” [23] In the present case, when the Notice of Default, correspondence and notice between the parties were viewed objectively, we are satisfied that they constitute sufficient notice to the Plaintiffs as to the reason for the termination of the FA. [24] In SPM Membrane Switch Sdn Bhd v. Kerajaan Negeri Selangor [2016] 1 CLJ 177 (FC), Zainun Ali FCJ (as Her Ladyship then was) in delivering the judgment of the Federal Court, held as follows: “[97] However, in our view the test to ascertain whether the communication of reasons in the notice is necessary (or conversely, superfluous) is an objective rather than a subjective one. To draw an analogy from deciding whether or not repudiatory breach has in fact occurred, the courts looks at whether or not repudiatory breach has occurred by an objective standard and will disregard the subjective belief of the party liable for breach and any of its agents. There is no reason why it should not do the same with regards notice of the reasons for termination. In our view, it is insufficient that the respondent contends to the effect that the appellant has a moment of epiphany upon receipt of the notice of termination and henceforth understands and appreciates the subjective reasons of the respondent for terminating the contract. This is not to be understood as meaning that the standard for breach is that which is subjective to the respondent, for breach is also determined objectively. Similarly this does not mean that the respondent may under no circumstances rely upon reasons which exist at the time of termination or notice apart from those that are disclosed, though this is subject to exceptions. Instead, one must appreciate that the reasons for termination are the respondent's and the respondent's only, and unless actual (or even constructive) notice of those reasons can be demonstrated, a termination notice with reasons must be provided should the contract, properly construed, require them. In the present case, one only has to ask if the reasonable person observing the exchange between the appellant and the respondent, having only the knowledge which they shared in common, would be able to understand and identify the reasons for which the respondent was claiming termination of the contract. In our view, the mere intonation of the letter does not suffice. Barring further evidence which demonstrates that the appellant should have known but wilfully chose not to know, the facts of the present case proffer no sufficient explanation. Upon reflection, the question of "whether notice of reasons, when required by contract, is satisfied by an objective or subjective standard" is of enough significance to the present case (as it decided the question of the validity of termination in the Court of Appeal) and to public policy to have been properly considered as a question of law in the appeal.” [25] We also agree with Her Ladyship Tengku Maimun Tuan Mat JCA (now CJ) in delivering the judgment for this Court in Majlis Bandaraya Pulau Pinang v. Mohd Noor Sirajajudeen & Anor [2019] 3 CLJ 770 (CA) as follows: “[51] With respect, the learned JC erred in concluding that simply because no reasons were given in the notice of termination that renders the notice of termination invalid. The question that ought to be considered in our view is not so much whether the notice of termination states any reason but whether the plaintiffs had notice that the reason for termination of the agreement is the non-payment of the monthly appointment fee. … [65] We accept that cl. 20.2 of the PMA requires the defendant to inform the plaintiffs of the reason for the termination. The notice of termination dated 4 May 2012 could have been better worded. However, on the factual matrix of this case, we entertain no doubt that the plaintiffs had actual notice of the reason for termination of the agreement ie, that the termination was due to the non-payment of the monthly appointment fee. From the previous correspondence, namely by letters dated 22 August 2011 and 7 October 2011, the plaintiffs were specifically informed of the defaulting event and were given time to remedy the situation… … [68] Although the notice itself did not state in so many words the reason for the termination, the fact remains that the plaintiffs knew that non-payment of the monthly appointment fee would trigger an event of default and that the defendant will exercise its right to terminate the plaintiffs' appointment. Further, from the date of receipt of the notice of termination until the date the termination was to take effect which was well within the required period for the plaintiffs to cure the remedy, the plaintiffs had every opportunity to pay the sums due to the defendant, which they did not.” [26] Based on the above, we agree with the Defendant that the learned trial judge was wrong in holding that there was no proper notice or particulars given by the Defendant to the Plaintiffs in the Notice of Termination. [27] In addition, we are of the considered view that there was no need for the Defendant to specify in great detail the reasons for the termination of the FA since the defaulting event was already communicated through the correspondence between the parties. The Plaintiffs always knew about the breaches and were warned of the consequences. [28] Next, as can be seen in the Notice of Default, correspondence and notice between the parties, the Plaintiffs were alleged to have repeatedly breached Clause 18(b) of the FA, which states – “18. Material Breach. The parties agree that the happening of any of the following events shall constitute a material breach of this Franchise and violate the essence of Licensee obligations, and without prejudice to any of its other rights or remedies at law or in equity, Licensor at its own election may terminate this Franchise upon the happening of the following events: …
b
Licensee shall fail to maintain and operates the Restaurant in a good, clean, wholesome manner and in compliance with the standards prescribed by the McDonald’s System.” [29] To determine whether the termination of the FA by the Defendant was lawful, the learned trial judge must determine whether there was evidence to show that the Plaintiffs had repeatedly failed to comply with Clause 18(b) of the FA. [30] On this issue, the learned trial judge found that – “37. I am in agreement with Plaintiff’s contention that the Defendant has grounded on the termination of the Franchise Agreement based on repeated failures and that the Defendant did not however adduce any evidence for these repeated failures except for what the Defendant alleged as pest infestation which I find, is not credible.” [31] In the present case, the Defendant submitted that the learned trial judge was wrong in holding that there was no evidence of repeated failures on the part of the Plaintiffs to comply with Clause 18(b) of the FA. We agree with the Defendant for the following reasons. [32] First, there is evidence of DW2, the Defendant’s Manager of the Risk Management Department. He was the one who prepared the Unannounced Pest Audit Reports dated 24.2.2017 and 24.5.2017 (“the Pest Audit Reports”), inclusive of the photographs which showed the cleanliness issues in the Restaurant. The Pest Audit Reports disclose that: a. the Restaurant was subject to pest infestation and potential pest-related risks; b. there were food safety risks to the customers; c. there were safety risks to the customers and the Restaurant’s employees; and d. the Restaurant has been infested by pests. [33] We agree with the Defendant that the Pest Audit Reports indicate that the Restaurant was suffering from cleanliness issues at least on two occasions, i.e., during the First UPA and the Second UPA. [34] However, the learned trial judge found the Pest Audit Reports to be not credible. He did not attach any weight to the said reports. He preferred the Rentokil Service Reports (from January to December 2017) prepared by Rentokil Initial (M) Sdn. Bhd. (“Rentokil”) engaged by the 2nd Plaintiff since 1.9.2010 over the Pest Audit Reports. To summarise, the learned trial judge found that: a. the Rentokil Service Reports did not show that there was any pest infestation, mainly rats and cockroaches infestation, during the period; and b. If there was any infestation, it was only common ants not recorded in DW2’s second Pest Audit Report. [35] In short, the learned trial judge found that the Rentokil Service Reports did not support DW2’s findings in the Pest Audit Reports. This is one of the main reasons the learned trial judge found the Pest Audit Reports to be unreliable. [36] However, we agree with the Defendant that the learned trial judge had erred in his findings above for the following reasons: a. the learned trial judge did not provide any cogent reason why DW2’s evidence and Pest Audit Reports were not credible. The evidence relating to the repeated failures to observe cleanliness was captured in photographs and annexed to the Pest Audit Reports. There was nothing to show that the photographs had been fabricated or unauthentic. The unannounced pest audits were even conducted in the presence of the Plaintiffs’ representatives. b. the learned trial judge found that none of the Rentokil Service Reports showed any infestation of cockroaches and rats. However, the report dated 24.10.2017 (Exh. P6) clearly showed other pests, such as flies, ants, cockroaches and rats. This was confirmed by PW3 himself during cross-examination. c. the learned trial judge considered that DW2’s Pest Audit Reports did not show that there were ants and flies as stated in the Rentokil Service Reports. On this, we agree with the Defendant that the unannounced pest audits done by DW2 were not carried out simultaneously with Rentokil’s. Naturally, the outcome would be different. The issue remains whether the Plaintiffs had repeatedly failed to maintain the Restaurant in a clean and wholesome manner. d. the learned trial judge’s observed that DW2 was being ambiguous with his answer by referring to Rentokil Service Reports, which stated, ‘keep it clean always’. PW3, who prepared the report, gave evidence that – “Q162: Do you agree that in most of the various Service Reports you had made in respect of your routine treatment at Forest Café Kuching Sdn Bhd you had recommended the customer to keep the premises clean at all time, isn’t that correct? Yes. Q163: Do you agree that the reason why you had recommended Forest Café to keep the premises clean is that if the premises was clean, they will be less risk of pest issues at the premise, do you agree? Yes. Q164: From your routine treatment at the premises of Forest Café Kuching Sdn Bhd you had found the place to be not clean, do you agree? Yes.” [37] The learned trial judge also failed to consider the evidence given by PW2 and PW3 (who had prepared their respective Rentokil Service Reports) that there were pest infestation issues in the Restaurant. During cross-examination, PW3 agreed that the service reports he prepared showed some pest problems at the Restaurant and that it was not in a clean condition when he conducted his service. PW3 also agreed during cross-examination that the restaurant had continuously suffered from pest issues and that no proper pest proofing was done. DW4, in fact, corroborated PW3’s evidence. [38] Second, is the evidence of DW1, the Defendant’s Operation Consultant/Business Consultant. He provides consultation on matters related to the operations and business of McDonald’s Restaurants, such as maintaining Quality, Service and Cleanliness (“QSC”) based on McDonald’s standards, guidance on people development, operational and business planning. [39] DW1 gave evidence that he conducted a Brand Standard Visit (“BSV”) on 19.5.2017. He also prepared a report regarding the visit. The primary purpose of the BSV was to review the condition and operation of the Restaurant against the standards prescribed by McDonald’s in the FA. [40] The visit was conducted in the presence of the Plaintiffs’ Operation Manager and the Plaintiffs’ representative. The outcome of the BSV was communicated to the 1st Plaintiff through an e-mail dated 30.5.2017. The report was also attached therein. The pertinent findings of the BSV were that the kitchen area was very disorganised, there was a lack of detailed cleanliness on the equipment and poor overall cleanliness. Photographs taken during the visit were also exhibited in the report. [41] Third, is the evidence of PW6, the 2nd Plaintiff’s manager at the material time. She was subpoenaed to give evidence in court. During cross-examination, PW6 admitted that there were cockroaches and rats in the Restaurant before 13.12.2017. PW6 also confirmed that there were complaints from the customers that they saw rats and cockroaches within the vicinity of the Restaurant. [42] PW6 was treated as an interested witness by the learned trial judge merely because PW6 gave evidence that he had reported the sighting of the rats to the 1st Plaintiff, but the 1st Plaintiff denied having been so informed. [43] We are of the view that the learned trial judge had misconstrued the evidence of PW6. PW6 gave evidence that the team management was informed of the sighting. According to PW6, the team management consisted of Peter, Norlia, Nazim and Alif. There was nothing in the evidence to show that the 1st Plaintiff was a part of the team management. Therefore, the learned trial judge treated PW6 as an interested witness without legal basis. There was nothing in the evidence to show that PW6 had any direct interest in the result of this litigation (see Mohd Nahar Abu Bakar v. PP [2013] 5 CLJ 977 (CA) at para 28 of the judgment). In the present case, PW6 was called by the Plaintiffs, and her evidence was never impeached. [44] Fourth, the learned trial judge relied on a service report prepared by Intertek, a company specialising in quality and safety assurance which the Defendant appointed as a third-party auditor. The learned trial judge only referred to the part of Intertek Visit Reports where the ‘food safety’ was reported as ‘acceptable’ but did not consider another part of the report which stated, ‘one fly was sighted at area of food wrapping table, one cockroach was sighted on the kitchen floor and has (SIC) immediately removed’. [45] Ultimately, the Restaurant was ordered to be closed under section 11 of the Food Act 1983 after an inspection by the Ministry of Health, during which cockroaches and rat droppings were found in the Restaurant. We agree with the Defendant that even though the Restaurant was allowed to reopen the following day, this does not negate the presence of cockroaches and rats in the Restaurant in the first place. [46] Based on all of the above, we are of the considered view that the learned trial judge had erred in his findings that there was never any pest infestation or repeated breaches on the part of the Plaintiffs to comply with the Franchise Agreement in circumstances where there was ample evidence adduced to show otherwise. [47] The next issue is whether the learned trial judge erred in the interpretation and application of section 31(3)(d) of Act 590 to the facts of the case. The learned trial judge was of the opinion that since the Plaintiffs have complied with the Defendant’s requests and remedied the previous breaches or failures, such previous breaches or failures cannot constitute valid grounds for termination. The learned trial judge opined: “58. Based on the above evidences and applying the relevant provisions of the Franchisee Act 1995, I find that the Defendant has not shown to this Court that they have “good cause” as stipulated in section 31(3) (d) of the Franchise Act 1995 to terminate the Franchise Agreement or that the Plaintiffs have “repeatedly fails to comply” with the terms of the Franchise Agreement. I find that the fact that efforts to remedy are made by the Plaintiffs cannot amount to “repeated failures”. Further I find that since the Plaintiffs have complied with and remedied the previous breaches and/or failures, such previous breaches and/or failures cannot constitute valid grounds for termination. This is to be distinguished from situations where a party has refused or failed to remedy breaches or failures repeatedly.
59
Thus the Defendant’s reliance on section 31(3) (d) of the Franchise Act 1995 is thus erroneous and the termination is thus wrongful.” [48] We disagree with the learned trial judge. [49] In our view, the fact that a failure to comply or a breach of the terms of the FA has been remedied does not extinguish the fact that there was a failure to comply or a breach in the first place. If the failure to comply or the breach is repeated, even though the earlier breach has been remedied, the repetitive nature constitutes a repeated breach of the FA. Section 31(3)(d) of Act 590 caters to such circumstances. Hence, whether the failure or the breach has been remedied or not is irrelevant to the termination of the FA under section 31(3)(d) of Act 590. Indeed, to hold otherwise would defeat the objective of this provision. Conclusion [50] In conclusion, based on all of the above reasons, we found that the learned trial judge’s decision was plainly wrong, and there are merits to this appeal. We are of the view that there was a misappreciation of evidence resulting in the misdirection by the learned trial judge. [51] Therefore, we allow this appeal with cost and set aside the order of the learned trial judge. Consequently, the Defendant’s counterclaim is allowed, and damages are to be assessed. Dated: 21 July 2023 -sgd- (HASHIM BIN HAMZAH) Judge Court of Appeal, Malaysia Solicitors For The Appellant: Mekanda Singh Sandhu, Satinder Singh Sandhu, Libat Langub, Ganit Libat & Pearly Tew Siew Wei Tetuan Dr. Yaacob & Ismail Advocates & Solicitors 1st Floor, 10B & 10C Lorong 6, Jalan Rubber 93400 Kuching Sarawak Solicitors For The Respondent: Shirleen Ong & Alvin Yong Sze Lung Tetuan Alvin Yong Advocates Lot 155, (1st Floor) Lorong Datuk Abang Abdul Rahim 5A 93450 Kuching
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