Leong Siow Leng v Herbalife Products Malaysia Sdn. Bhd. (WA-22NCC-548-08/2024)

The Plaintiff sued the Defendant for wrongful termination of her membership in the network marketing and direct selling business for “Herbalife Nutrition” products. The Defendant alleged that Herbalife Nutrition products supplied by the Plaintiff were found to be offered for sale on several e-commerce platforms by unidentified online sellers. The case turns on whether the Plaintiff is responsible for breach of the direct-selling rules that bind all members of the enterprise, and whether it warranted the termination that ended her business. S/N /yRcBr5xcUC2SiiuxmsIVQ

The Plaintiff became an independent distributor of the Defendant’s Herbalife Nutrition products on 28-2-2003 by completing a membership application and agreement. The Defendant’s sales and marketing plan entitles its independent distributors to earn financial incentives in the form of commissions from their own sales and those of their downline members (i.e. ‘Royalty Overrides, Production Bonuses and other bonuses’). The Plaintiff achieved the status of “Supervisor” on 1-3-2003 and “Top Achievers Business Team” on 1- 7-2006.

The parties agree that there is no employer-employee relationship between the Defendant and its independent distributors. It is also not disputed that, as pleaded by the Defendant, the Plaintiff is a “self-employed independent contractor” and that her relationship with the Defendant is governed by, inter alia, a set of rules of conduct Rev. 06/30/23 (“Herbalife Rules of Conduct”). The Herbalife Rules of Conduct explicitly characterise the parties’ relationship as follows: “3.1.2 Members are Self-Employed As a Member, you are a self-employed independent contractor deciding, among other things, your schedule, how much time you wish to devote to your business, your expenses and methods of operation. As an independent contractor, you are not an employee, agent, franchisee, fiduciary or beneficiary of Herbalife Nutrition or any other Member. As an independent S/N /yRcBr5xcUC2SiiuxmsIVQ contractor, you will have no rights or benefits that an employee of Herbalife Nutrition may have nor will you make any claim to the contrary.”

The Plaintiff did not challenge the applicability of the version of the Herbalife Rules of Conduct adduced or its terms.

In February 2022, trap purchases of Herbalife Nutrition products were made by the Defendant from the e-commerce websites, namely Shopee MY, Shopee SG and Lazada SG. On 4-7-2022, the Defendant issued a letter to the Plaintiff to suspend her membership, allegedly “due to concerns about the accuracy and legitimacy of [the Plaintiff’s] order activity and in view of [the Plaintiff’s] Membership’s ties to either the sale of Herbalife Nutrition products or the distribution of Herbalife Nutrition products to Non-Members for resale on Shopee Malaysia…” (“Notice of Suspension”). In the Notice of Suspension, the Plaintiff was also asked to remove the Herbalife product listings found on the 3 e-commerce platforms and provide documents and information on transactions she made in December 2021 to January 2022, principally for the purpose of identifying the persons to whom she had supplied products.

After investigations, the Defendant concluded that the Plaintiff had breached Rules 4.3.2 and/or 6.4.1 of the Herbalife Rules of Conduct and, exercising its discretion under Rule 10.1.4, the Defendant terminated the Plaintiff’s membership by a letter dated 1-3-2023. The Plaintiff appealed the decision by letter from her solicitors dated 27- 3-2023. The Defendant’s solicitors notified the Plaintiff that the appeal S/N /yRcBr5xcUC2SiiuxmsIVQ was referred to the Review Committee. After several follow-up communications, the Plaintiff was notified on 2-1-2024 that the appeal was rejected. Analysis and findings

The Defendant defended the action on the basis that the Plaintiff's claim concerned the wrongful termination of her distributorship agreement. The Plaintiff did not challenge this premise although this Court noted that the Plaintiff did not explicitly plead a contractual claim. In the Statement of Claim, the plea is that the Defendant had “wrongfully and without just cause, terminated the Plaintiff’s membership and therefore unjustly enriched itself.”

It is common ground between the parties that the primary factual issues for determination relate to whether the Plaintiff breached Rules 4.3.2 and/or 6.4.1 of the Herbalife Rules of Conduct and, consequently, whether the Defendant’s termination of the Plaintiff’s membership on 1-3-2023 was valid, and the remedies available. As no pleading point was raised, this Court considered the claim as a claim in contract, with the Herbalife Rules of Conduct representing the terms of the contract as the parties appear to have accepted. Alleged breach of contract

9.

The evidential burden shifts to the Defendant to show that the negative propositions are incorrect i.e. that the Plaintiff did breach the rules, only after the Plaintiff adduces some evidence, however slight, to meet her initial evidential burden. This is not a case where proof of the breach is peculiarly within the knowledge of the Defendant or that the negative proposition is incapable of proof. As no evidence was tendered by the Plaintiff but her own denial, this Court had no solid basis to shift the evidential burden to the Defendant.

The correctness or otherwise of the above finding may be better appreciated upon this Court’s evaluation of the overall evidence available on the alleged breach of Rules 4.3.2 and/or 6.4.1 of the Herbalife Rules of Conduct, assuming the evidential burden shifted to the Defendant.

Product sales to non-members for resale

Rule 4.3.2 of the Herbalife Rules of Conduct provides as follows: “4.3.2 Product Sales to Non-Members for Resale No Member may sell or otherwise provide Herbalife Nutrition products to non-Members who intend to S/N /yRcBr5xcUC2SiiuxmsIVQ resell them.” The rule prohibits members from selling or otherwise providing Herbalife Nutrition products to non-members who intend to resell them. Resale to existing customers

In respect of this allegation, it would appear that the Plaintiff did place orders for Herbalife Nutrition products for one or more ex-members in December 2021 after their membership had been terminated. Based on the Plaintiff’s own records, this Court noted that the volume of sales of Herbalife products by the Plaintiff to the ex-members over a 2-month period in December 2021 and January 2022 were as follows: a) Liong Poh Hoon (terminated on 14-10-2021) – 19 items; b) Tan Bee Lan (Pauline) (deleted on 13-10-2019) – 10 items; c) Tong Kuan Lup (deleted on 17-12-2020) – 11 items; and d) Yee Yun Lin (terminated on 1-10-2021) – 7 items. The Defendant contends that they could not reasonably have been intended solely for the personal consumption of these ex-members, but there was insufficient material for this Court to make any finding on that suggestion. S/N /yRcBr5xcUC2SiiuxmsIVQ

In any case, the Defendant relied principally on evidence of the Plaintiff’s disclosed records of sales of Herbalife Nutrition products and the following exchange in a telephone conversation between the Plaintiff and a Member Business Practices and Compliance personnel of the Defendant (Aaron Wong, DW1) on 22-7-2022: Aaron: Ah, from what I see here, you provided me with a few names, like Miss Pauline and Miss Wei Ying. I know they are our ex-members. I also took a look, that they stopped doing, being our members in October last year. So I just wanted to understand from you, Ms Leong, …0:26:30 [inaudible] LSL: Ok Aaron, I tell you, because at that time, the company, when the company investigated them, they came and informed me. Then they said they couldn’t buy the products anymore. But they have their customers who want to consume this product. When I heard that, I also felt that, since they were member before and are my downlines, and now they can’t buy the products, I thought I was just purely helping them order. Aaron: But-- [interrupted] LSL: So far, I have ordered a few times. S/N /yRcBr5xcUC2SiiuxmsIVQ

It is not immediately clear who the Plaintiff was referring to in the extract of the telephone conversation above. The inference from the Plaintiff’s own words, read in their proper context, is that one or more of the ex-members wanted the Herbalife Nutrition products to re-sell to their own customers. Certainly, Liong Poh Hoon was identified as a direct downline of the Plaintiff whose termination was expressly notified to the Plaintiff by letter on 14-10-2021.

In cross examination, this much was admitted by PW1: So at the time you were aware that they were buying products to sell to their downline members, correct? I do not know they sell to their downline. No this is your answer to Aaron during the call, correct? I read the relevant part again. Yes. So correct, right? You’re aware about it, right? That they wanted to sell to the downline members. Yes or no? Yes, I think so, yeah.

The evidence was equivocal, but this Court considered that the evidential burden shifted back to the Plaintiff to either clarify her answer in re-examination and/or call these witnesses to make the S/N /yRcBr5xcUC2SiiuxmsIVQ case that she was not referring to them when she made the statement to DW1 in the phone call or that they did not purchase the Herbalife Nutrition products for resale. At the trial however, no further evidence was adduced to displace the inference arising from the Plaintiff’s own words.

Counsel for the Plaintiff suggested that the Plaintiff had sold the Herbalife Nutrition products to ex-members before they were terminated i.e. while they were still members under investigation. Strictly speaking, this would not have constituted a breach of Rule 4.3.2 of the Herbalife Rules of Conduct. However, the Plaintiff did not give any evidence to that effect, nor was any objective evidence proffered of other transactions that she might have been referring to, to suggest that she only sold products to suspended members.

Consequently, this Court finds that the Defendant had proved on a balance of probabilities with the available evidence, that the Plaintiff did breach Rule 4.3.2 of the Herbalife Rules of Conduct. The limited evidence was in fact her own admission that, for whatever reason she may have had for doing so, she had sold Herbalife Nutrition products to one or more ex-members, knowing that they intended to re-sell them to their own customers. Resale via online sales

Now, the thrust of the inquiries carried out by the Defendant’s Member Business Practices and Compliance team in 2021/2022 was principally directed towards the sale of Herbalife Nutrition products online on e-commerce platforms, a matter that the Plaintiff was aware S/N /yRcBr5xcUC2SiiuxmsIVQ of even before her own investigation, because according to her own evidence, her downline members had informed her that they were investigated for this reason.

Such online sales were also allegedly linked to the Plaintiff’s product orders and the Defendant relies on the following claims to implicate the Plaintiff:

On 22-2-2022 and 24-2-2022, sale of Herbalife products on Shopee MY by online seller “globalsale99@globasale2u” were allegedly traced to sales made by the Plaintiff under Order No. 2L04006649;

On 25-2-2022, sale of Herbalife products on Lazada MY by online seller “emallconnect” were allegedly traced to sales made by the Plaintiff under Order No. 2L04006649;

On 1-3-2022, sale of Herbalife products on Shopee SG by online seller “bestmart99.sg” were allegedly traced to sales made by the Plaintiff under Order Nos. 2L04006649 and 2L04007842; and

There is alleged barcode evidence on the Herbalife products from the Defendant’s trap purchases that were traced back to sales made by the Plaintiff.

It is conceded that the Plaintiff is not the online seller identified as globalsale99@globalsale2u, emallconnect and bestmart99.sg. According to the Defendant however, there is “video evidence” to S/N /yRcBr5xcUC2SiiuxmsIVQ match the barcodes on the products to the Plaintiff’s orders, but this Court had no sight of it as the “video evidence” was not presented in court during the trial. The concept of tracing products through barcode identification is neither implausible nor inherently unreliable, but the Plaintiff denies the link. As the said evidence was referenced but not presented in Court, this Court did not consider it.

In any case, to discharge its evidential burden of implicating the Plaintiff in the supply of Herbalife products to unidentified non-members for resale on the e-commerce platforms in breach of Rule 4.3.2 of the Herbalife Rules of Conduct, it is not sufficient to simply link the Herbalife products being sold on these platforms to the Plaintiff. A person to whom the Plaintiff innocently sold the products could subsequently have formed part of a chain of resale of those products that ended up online.

In the same transcript of recording of the conversation between the Plaintiff and Aaron Wong on 22-7-2022, the following downlines of the Plaintiff were identified as being associated with online selling – Goi Chong Long, Teo Li Yan, Ho Qiu Hin, Choong Ngok Ling, Leong Zi Keow. They are not the same individuals identified from the Plaintiff’s record of sales as the ex-members that the Plaintiff had assisted to secure products for.

Apart from the alleged barcode tracing, there were no particulars of how the Plaintiff is implicated in the knowing supply of Herbalife Nutrition products to the unidentified online sellers. The Defendant was clearly focused on getting the Plaintiff to investigate and secure evidence that her downlines were engaged in that activity and did not S/N /yRcBr5xcUC2SiiuxmsIVQ themselves possess evidence to implicate any member or non-member. In fact, the online selling of Herbalife products continued based on the Plaintiff’s own trap purchasers in November 2024.

Thus, even assuming that it was proved that Herbalife Nutrition products sold online could be traced to the Plaintiff, it was not proved that the Plaintiff knew that any customer or downline members (or ex-members) that she had sold products to intended to re-sell them online. Considering the transcript of the Plaintiff’s frank conversation with DW1 and her testimony in Court, this Court is satisfied that the Plaintiff was unaware that she might have been indirectly facilitating the online resale of Herbalife products as the Defendant contends.

(ii) Price advertising

Rule 6.4.1 of the Herbalife Rules of Conduct provides as follows: “6.4.1 Price Advertising Independent Herbalife Nutrition Members are independent business persons and may sell Herbalife Nutrition products, Nutrition-produced literature, and promotional items at any price they choose. It is prohibited, however, to advertise prices or pricing information such as “special offer,” “__% off”,” free shipping” or “special discounts” to the GENERAL public (i.e., persons who have not had prior personal contact, related to Herbalife Nutrition products or opportunity, with the Member placing the advertisement).” The rule prohibits the advertising of prices or pricing information in the sale of Herbalife products to the general public. S/N /yRcBr5xcUC2SiiuxmsIVQ

The Defendant attributes the price advertising of Herbalife products on Shopee MY, Shopee SG and Lazada MY by the unidentified online sellers globalsale99@globasale2u, bestmart99.sg and emallconnect to the Plaintiff because she had allegedly “caused, facilitated or enabled the advertisement and/or sale” of Herbalife products on the said public online platforms.

For the reasons already set out earlier, this allegation against the Plaintiff is wholly unproved in the absence of any evidence that the Plaintiff had knowingly supplied Herbalife products for online selling. On an objective reading of Rule 6.4.1 of the Herbalife Rules of Conduct, this Court rejects a construction that implicates any supplier of Herbalife products sold to a third party, as having thereby advertised or supplied products in breach of the rule against price advertising, just because products that originated from her ended up being advertised for sale that way by a third party in possession of those products. Validity of termination of membership

The Herbalife Rules of Conduct do not stipulate that breach of Rules 4.3.2 and 6.4.1 of the Herbalife Rules of Conduct are events of default that would automatically result in the termination of membership. Instead, there is a grievance mechanism and Rule 10.1.2 provides that the Defendant “shall have sole and absolute discretion to determine the appropriate penalty based on the nature of the violation and consequence that resulted or could result” and provides for a range of possible sanctions, up to and including termination of membership: S/N /yRcBr5xcUC2SiiuxmsIVQ “10.1.2 Sanctions Violations of the Rules may result in legal or regulatory challenges for Herbalife Nutrition and endanger the business for all Members. For this reason, penalties may be substantial. Herbalife Nutrition shall have sole and absolute discretion to determine the appropriate penalty based on the nature of the violation and consequence that resulted or could result, including: • Suspension of all Member rights and privileges. • Monetary sanctions. • Obligation to reimburse Herbalife Nutrition’s legal fees. • Prohibition from attending or speaking at Herbalife Nutrition sponsored events. • Disqualification from participation in the annual Mark Hughes Bonus. • Disqualification from participation in the Production Bonus program. • Permanent loss of lineage. • Volume and earnings adjustments; and/or • Termination of Membership (see “Termination or Deletion of a Membership” below). If Herbalife Nutrition concludes that other Members assisted, encouraged or were party to the violations, Herbalife Nutrition also may hold such Members responsible for the violations.” S/N /yRcBr5xcUC2SiiuxmsIVQ

Although this may appear harsh, the Defendant had a contractual right to impose at its absolute discretion, any sanction for breach of the rules. The Plaintiff has not pleaded that the relevant contractual term is unfair or that the termination was disproportionate. Neither has she pleaded that the termination was wrongful because the original grounds stated in the Notice of Suspension were not ultimately established. Rather, her case rests simply on the proposition that she committed no breach of the Rules.

According to the Defendant, its guidelines on MPC Resolution impose a zero-tolerance policy for members of the Plaintiff’s status to sell Herbalife products to non-distributors for resale, with termination of membership as the penalty. Evidence of this from the Director of MPC (Antonio Chen, DW2) was not challenged. It must be reiterated that the relationship between the Plaintiff and Defendant is strictly contractual with no employment or fiduciary overlay and so the duty of the Court is only to consider the parties’ contractual rights.

The Plaintiff did sell Herbalife Nutrition to ex-members knowing that they intended to re-sell the products. Although there was no evidence of any aggravating factors and no evidence was led one way or another on this point, it is not this Court’s function to substitute its own views as to the appropriateness of the internal processes and penalties for breaches of the Herbalife Rules of Conduct, those being contractual rights and obligations to which they agreed. S/N /yRcBr5xcUC2SiiuxmsIVQ

For the above reasons, this Court is constrained to conclude that the termination of the Plaintiff’s membership by the Defendant was not wrongful.

Based on these broad grounds, the Plaintiff’s claim is dismissed with costs of RM20,000.00, subject to allocatur.

For completeness, this Court will add as a footnote that even if the termination of the Plaintiff’s membership was found to be wrongful, the remedies available for the unlawful repudiation of a contract sound only in damages, whether special or general, subject to proof in the ordinary way. The Plaintiff did not pray for damages to be assessed or adduce any proof of such damages. Specific performance of a distributorship would not follow where damages are an adequate remedy. Further, the Defendant is also not an accounting party vis-à-vis the Plaintiff based on the established relationship between the parties as set out from the outset. Bertarikh: 08 Julai 2026 ELAINE YAP CHIN GAIK PESURUHJAYA KEHAKIMAN MAHKAMAH TINGGI MALAYA KUALA LUMPUR S/N /yRcBr5xcUC2SiiuxmsIVQ Peguam Untuk Plaintif: Lee Teong Ghee (Tiong Khay Lee bersamanya) Tetuan T G Lee & Associates Untuk Defendan: Kumara Guru Naiker a/l Muruthy (Ong Wei Ying bersamanya) Tetuan Christopher Lee & Ong S/N /yRcBr5xcUC2SiiuxmsIVQ