Marwiya Binti Miswan v Dede Resources Sdn Bhd (BA-12BNCvC-44-07/2024)

The Plaintiff/Respondent operates a retail florist shop. The Plaintiff’s pleaded case is that the Defendant/Appellant was appointed as a retail supervisor trainee on 1-10-2020, but only signed an Employment Arrangement Contract on 1-4-2021 (“Agreement”). The Agreement provides that she must work for at least five (5) years from the date of the Agreement, failing which the Defendant must pay back RM60,000.00 for a “Floral Design Training Course” that the Plaintiff would provide.

The Defendant resigned on 24-9-2021, a little over five (5) months after signing the Agreement, allegedly with no notice. The Plaintiff sued and claimed for the sum of RM60,000.00, salary in lieu of a contractual 12-week notice amounting to RM6,300.00 and loss of profits in the sum RM171,900.00 from January 2022 until September 2022 from business at a new shop that the Plaintiff said it could not open because the Defendant resigned.

The claim for loss of profits was abandoned and not pursued at trial. According to the submissions of counsel at the appeal, the parties had also agreed upon the claim for salary in lieu of notice to be paid by the Appellant. The amount, as determined and awarded by the learned Session Court Judge, was RM2,100.00 and this was not a subject matter of the appeal.

The appeal turned solely on the following issues: a) Whether the alleged “Floral Design Training Course” worth RM60,000.00 was provided; and b) Whether the clause that provided for the payment of the RM60,000.00 as a Compensation Amount is void under Section 75 of the Contracts Act 1950.

The salient terms of the Agreement were as follows: “4. Terms & Arrangement for Floral & Balloons Design

4.1 You hereby accept the Floral Design Training Course which is provided by the Company (“the Course”). Both parties understand that the payment of the Course amounts to Ringgit Malaysia Sixty Thousand (“RM60,000”) (“Course Price”)

4.2 In respect of the Course Price, the Parties hereby agree that the Company will bear the Course Price. In consideration, you hereby agree that you would like to work for the Company at least five (5) years starting from the date of this Agreement.

4.3 In the event that you breach Clause 4.2 above or has caused the Company to terminate your employment for whatsoever reason within five (5) years starting from the date of this Agreement, it is agreed that you shall pay the whole Course Price as agreed as compensation amount to the Company (“Compensation Amount”).

4.4 In regard to the Compensation Amount as set out in Clause 4.3 above, you hereby agree to pay the Compensation Amount within seven (7) days from the date of demand made by the Company.”

The Defendant’s pleaded case is that she did not receive training under any “Floral Design Training Course” but learned on the job from her own research and from copying other floral arrangements. The Defendant also took the position that the Compensation Amount was disproportionate to any loss, unreasonable, exorbitant, deterrent and/or unconscionable.

The Plaintiff argued that the Defendant was never promised training by external trainers, and that she did undergo the “Floral Design Training Course” in the form of daily on-the-job instructions from the Plaintiff’s director, Ms. Liew (PW1). As for the Compensation Amount, the Plaintiff’s position was that RM60,000.00 was agreed when the Defendant signed the Agreement.

Based on the evidence, it was not seriously disputed that no formal or structured “Floral Design Training Course” was provided by the Plaintiff whether by internal or external trainers, no course content or materials were identified and no set time or period were identified when the training was said to have been delivered.

By the Plaintiff’s own evidence, the Course had been delivered since the Plaintiff started working as a Shop

The Sessions Court found in the absence of any definition, that “Floral Design Training Course” was as PW1 testified i.e. “adalah cukup hanya dengan tunjuk ajar yang diberikan oleh Plaintif dan diterima oleh Defendan.”

Whether what transpired amounts to the Course training or not is a matter of contractual interpretation on what was objectively intended by “Floral Design Training Course” in Clause 4 of the Agreement. The construction of a contract is a question of law to be decided by the court and this Court found the Sessions Court’s interpretation to be plainly wrong.

The Federal Court in SPM Membrane Switch Sdn Bhd v Kerajaan Negeri Selangor [2016] 1 CLJ 177 said this: "[78] Thus the nub of this appeal is, when one has to choose between two competing interpretations, the one which makes more commercial sense should be preferred if the natural meaning of the words is unclear. It is noteworthy that the same approach was taken by Lord Hodge (in the majority decision of Arnold v. Britton), where His Lordship accepted the unitary process of construction in Rainy Sky SA v. Kookmin Bank [2011] 1 WLR 2900 para 21 that: '... if there are two possible constructions, the Court is entitled to prefer the construction which is consistent with business common sense and to reject the other.'

The objective intent of “Floral Design Training Course”, gathered from the words in Clause 4 of the Agreement, is that the Course obviously refers to one or more structured training sessions with a clear teaching program delivered over an identifiable time by an identifiable trainer/trainers, whose value can be objectively determined to be RM60,000.00, defined as the Course Price.

The informal on-the-job instructions and “tunjuk ajar” by a superior form part and parcel of the ordinary interaction in a florist shop. Those interactions are neither quantifiable nor ordinarily compensable when the employee leaves. The employee could leave at any point of the bonded period, yet the Compensation Amount remains the Course Price of RM60,000.00, which is illogical.

No one entering into the Agreement, which in essence, is an employment contract, would have had in mind that a “Floral Design Training Course” refers to on-the-job instructions and “tunjuk ajar” by a superior and that she will have to repay the employer RM60,000.00 if she resigns within five (5) years because of it. That is not a construction that makes any business common sense.

On the facts, the Defendant did not receive training under any “Floral Design Training Course” as it should be properly understood to mean in the Agreement.

If this Court is wrong and the Course was delivered, the question asked in the alternative is whether it is worth RM60,000.00 such that a stipulation for its refund as Compensation Amount in Clause is a penalty and not recoverable liquidated damages under Section 75 of the Contracts Act 1950.

Section 75 of the Contracts Act 1950 provides as follows: “When a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, or if the contract contains any other stipulation by way of penalty, the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or, as the case may be, the penalty stipulated for."

The Federal Court has clarified and summarised the principles applicable as to when liquidated damages is recoverable in Cubic Electronics Sdn Bhd (in liquidation) v Mars Telecommunications Sdn Bhd [2019] 2 CLJ 723: "[74] In summary and for convenience, the principles that may be distilled from hereinabove are these: …

(iv) In determining what amounts to "reasonable compensation" under s. 75 [CA], the concepts of "legitimate interest" and "proportionality" as enunciated in Cavendish (supra) are relevant.

A sum payable on breach of contract will be held to be unreasonable compensation if it is extravagant and unconscionable in amount in comparison with the highest conceivable loss which could possibly flow from the breach. In the absence of proper justification, there should not be a significant difference between the level of damages spelt out in the contract and the level of loss or damage which is likely to be suffered by the innocent party.

(vi) s. 75 [CA] allows reasonable compensation to be awarded by the court irrespective of whether actual loss or damage is proven. Thus, proof of actual loss is not the sole conclusive determinant of reasonable compensation although evidence of that may be a useful starting point.

(vii) The initial onus lies on the party seeking to enforce a damages clause under s. 75 [CA] to adduce evidence that firstly, there was a breach of contract and that secondly, the contract contains a clause specifying a sum to be paid upon breach. Once these two elements have been established, the innocent party is entitled to receive a sum not exceeding the amount stipulated in the contract irrespective of whether actual damage or loss is proven subject always to the defaulting party proving the unreasonableness of the damages clause including the sum stated therein, if any.

(viii) If there is a dispute as to what constitutes reasonable compensation, the burden of proof falls on the defaulting party to show that the damages clause including the sum stated therein is unreasonable."

The Sessions Court Judge’s reasoning for concluding that the Compensation Amount was not unreasonable is as follows: “[30] Mahkamah berpandangan, sifat perniagaan Plaintif yang memerlukan seorang pekerja yang bukan sahaja komited tetapi berbakat menjadi ukuran kepada nilai pampasan di dalam klausa 4.1 dan 4.2 memandangkan kebolehan untuk mengubah bunga bukan merupakan kemahiran biasa tetapi memerlukan kepada kemahiran semulajadi, minat dan bakat spesifik. Oleh yang demikian, apabila Plaintif telah mendapati Defendan adalah calon yang sesuai, untuk bekerja dengannya, harapan Plaintif untuk Defendan berkhidmat dengannya sekurang-kurangnya untuk tempoh 5 tahun menggambarkan bahawa pekerjaan tersebut memerlukan “masa” untuk Plaintif memberi Latihan bagi mempertingkatkan kemahiran Defendan yang boleh membawa keuntungan kepada pihak

Based on the above, the Sessions Court Judge appears to have taken the view that the RM60,000.00 Course was only worth that amount after at least five (5) years of on-the-job training. On this reasoning alone, the Compensation Amount was admittedly disproportionate in the case of an employee who resigned in under a year. Considering her finding on the issue of what a RM60,000.00 “Floral Design Training Course” looks like, Clause 4 of the Agreement is essentially a five (5)-year bond with an arbitrary penalty.

Further, this Court found that the Compensation Amount by any other assessment, is also an amount wholly disproportionate to the legitimate interest of the Plaintiff, extravagant and unconscionable in amount in comparison with the highest conceivable loss to the Plaintiff which could possibly flow from the Defendant’s breach by resigning before the end of the five (5)-year bond.

This Court is fortified in its view by the Plaintiff’s own evidence that the “Floral Design Training Course” started when the Defendant started working as a Shop Assistant earning RM1,250.00 per month before the Agreement was even signed, and the Defendant’s onerous scope of work and punishing work hours under the Agreement despite earning a gross monthly salary of only RM2,100.00 per month.

For the above reasons, the appeal was allowed in part and the Judgment of the Sessions Court ordering the Defendant to pay the Plaintiff RM60,000.00 and the sum of RM6,000.00 costs order was set aside. Costs here and below were ordered to be paid by the Plaintiff to the Defendant in the sum of RM10,000.00 subject to allocator. Bertarikh : 9 September 2025 SGD ELAINE YAP CHIN GAIK PESURUHJAYA KEHAKIMAN MAHKAMAH TINGGI MALAYA SHAH ALAM Peguam bagi pihak Perayu/Defendan: Faten Nadia binti Azarudi (Messrs Thomas Philip Peguam bagi pihak Responden/Plaintif: Tirasak Chiranakorn Chua (Messrs Enho Grace & Partners)