Technomacy Sdn Bhd v Qsr Stores Sdn Bhd (BA-22NCvC-125-03/2021)

QSR STORES SDN BHD (NO. SYARIKAT: 201401021968 [188054-H])

PIZZA HUT RESTAURANTS SDN BHD (NO. SYARIKAT: 198401001404 [11392-U …DEFENDAN-DEFENDAN JUDGMENT Introduction [1] The agreements in this case were intended to benefit not only the involved parties but also the environment on a broader scale. The promise by the Plaintiff was to save the Defendants in energy consumption expenses. In return, the Defendants promised to pay the Plaintiff an agreed sum as consideration for the services rendered by the Plaintiff. Alas, the deal did not pan out as envisaged by the parties, resulting in the 21/05/2024 08:25:03 BA-22NCvC-125-03/2021 Kand. 85 initiation of the current lawsuit by the Plaintiff and a counterclaim by the Defendants. The Overarching Issues [2] The posers in this present suit and counterclaim, both of which are premised on breaches of contractual terms, are:

whether the Defendants owe the Plaintiff an outstanding sum as per the Statement of Claim; and

whether the Defendants are entitled to their counterclaim based on the “Guarantee Savings Shortfall” as pleaded in their Defence? [3] Flowing from the above are the following ensuing issues, namely:

whether the Plaintiff is entitled to claim for the 30% tranche and 10% tranche of the “Project Cost Per Outlet” pursuant to the terms of the agreements;

whether the repair and maintenance works were indeed carried out by the Plaintiff and if the answer is in the affirmative, whether such works were carried out pursuant to the warranty (and within the warranty period) provided for in the agreements; and

whether the “Energy Savings Guarantee” as per the terms of the agreements have been met. The Parties, the Background Facts and Their Claims and Contentions [4] The Plaintiff, Technomacy Sdn Bhd, is a private limited company. It prides itself as “a small but diversified organization”, offering services in a range of businesses including (i) Outdoor media which includes the design, planning and buying of billboards (both static and digital), light boxes and mobile advertising boards; (ii) Comprehensive energy savings using Led lighting and Intelligent Power Optimiser, both in the planning, consultancy and commissioning; and (iii) Civil Engineering works in steel fabrication works which includes planning construction and procurement. [5] The First Defendant, QSR Stores Sdn Bhd, and the Second Defendant, Pizza Hut Restaurants Sdn Bhd, are related companies and subsidiary companies of QSR Brands (M) Holdings Berhad. Primarily, the Defendants are franchisees and run a chain of restaurants. [6] The Plaintiff had entered into “Energy Saving Agreements” on 28 April, 2014 with KFC (Peninsular Malaysia) Sdn Bhd [KFC] and the Second Defendant. Thereafter, KFC had assigned all its rights and interest in the Agreements to the First Defendant. The gist of the Agreements between the parties was for the Plaintiff to supply and install lightings and other energy saving devices at 29 KFC outlets for the First Defendant and 12 Pizza Hut outlets for the Second Defendant. [7] The Plaintiff averred that between the periods of 13 July 2014 to 24 April 2015, it supplied and installed lightings and other energy saving devices at various outlets belonging to the Defendants, and further provided repair and maintenance services at the Defendants’ outlets. [8] According to the Plaintiff, there were outstanding payments that were due and payable for the works carried out by the Plaintiff and at several meetings held between the Plaintiff and the Defendant’s representative the Defendants did not object to the works that were carried out by the Plaintiff and further did not object to the invoices issued by the Plaintiff to the Defendants. [9] This led to the issuance of a letter dated 12 October, 2010 by the Plaintiff through its solicitors to QSR Brands (M) Holdings Sdn Bhd demanding for the payments of the outstanding sums due and owing to the Plaintiff totalling over RM600,000.00. [10] On 30, October, 2019, QSR Brands (M) Holdings Sdn Bhd responded to the Plaintiff to, amongst others, dispute that it had entered into the Agreements with the Plaintiff. [11] More importantly, on 9 January, 2020, the First Defendant informed the Plaintiff that out of the 27 outlets where the Plaintiff has demanded for payment for the project cost per outlet in full, 9 outlets had been “duly verified” to have met the “Energy Savings Guarantee”. Accordingly, payment in the sum of RM127,914.45 was made to the Plaintiff. As regards the other 18 outlets, the First Defendant informed the Plaintiff that supporting documents were pending from Tenaga Nasional Berhad (that is, electricity bills) and that it reserved its rights to further evaluate the “Energy Savings Guarantee” upon receiving the same. [12] Similarly, vide a letter dated the same day, the Second Defendant informed the Plaintiff that out of the 11 outlets where the Plaintiff has demanded for payment for the project cost per outlet in full, 3 outlets had been “duly verified” as having met the “Energy Savings Guarantee”. Accordingly, payment in the sum of RM58,238.11 was made to the Plaintiff. As regards the other 8 outlets, the Second Defendant informed the Plaintiff that supporting documents were pending from Tenaga Nasional Berhad and that it reserved its rights to further evaluate the “Energy Savings Guarantee” upon receiving the same. [13] The Plaintiff averred that that was the very first time when the Defendants stated that they will need to verify the balance amounts that were due to be paid and there was no denial on the part of the Defendants of an obligation to pay for the repair and maintenance services that the Plaintiff had provided at the Defendants’ outlets. [14] Thereafter, the Plaintiff though its solicitors issued a letter dated 20 February, 2020 and demanded from the Defendants the payment of the balance sums but the Defendants did not make payments on the sums that were outstanding to the Plaintiff. [15] On 14 September, 2020, the Plaintiff commenced the present action against the Defendants. [16] The sums claimed against the First and Second Defendants are RM318,031.82 and RM176,368.86 respectively. These amounts are made up of two separate components, one being the sums arising from the project itself (Project Claims) and the other being the Repair and Maintenance Claims. The Plaintiff’s Claims [17] The Plaintiff’s case is premised on the ground that based on the terms in the agreements, it is entitled to the sums claimed. As noted in the preceding paragraph, the claims include the sums it submits as being due and owing for the project itself and for repair and maintenance works. [18] The Defendants opposed the Plaintiff’s claim for the 30% tranche and 10% tranche of the “Project Cost Per Outlet” and alleged repair and maintenance works. The Defendants’ contention was pure and simply. Since the Plaintiff had failed to meet the “Energy Savings Guarantee” as provided in the terms of the agreements, the Plaintiff is contractually not entitled to the 30% tranche and 10% tranche of payment for the remaining outlets. [19] Alternatively, if this Court were to find that the Plaintiff is entitled to the 30% tranche and 10% tranche of payment for the remaining outlets, the Defendants’ contention was that they are entitled to set off the same with the “Guarantee Savings Shortfall” due to the them by the Plaintiff, which they submit far exceeds the Plaintiff’s claims. [20] The Defendants further argued that the Plaintiff is contractually not entitled to charge the Defendants for any repair and maintenance works allegedly carried out by the Plaintiff as such works were carried out pursuant to the warranty provided for in the agreements. The Defendants’ Counterclaim [21] The basis for the Defendants’ counterclaim is that they did not enjoy the savings guarantee and therefore are entitled to claim for the savings shortfall. [22] The Plaintiff disputed the allegations raised by the Defendants in their counterclaim. The Trial [23] This matter came up for trial on 12 December, 2023 and 15 December, 2023. [24] Only one witness testified on behalf of the Plaintiff. The Plaintiff’s witness, PW1, was Mona Liana binti Jalaludin. PW1 testified in her capacity as a director of the Plaintiff and as having full knowledge of the facts relating to this dispute. [25] On the other hand, the Defendants called 3 witnesses. [26] DW1, Marina binti Mohd Nazir@Nasir, was subpoenaed as Tenaga Nasional Berhad’s representative to attend trial to give evidence and to produce documents (that is, electricity bills to which she has access to) on behalf of the Defendants. [27] DW2 was one Lee Chean Wai. He was formerly the Assistant Manager, Technical and Maintenance at QSR Brands (M) Holdings Bhd. [28] The third witness for the Defendant, DW3, was one Irving Wong Hoong Zhi. He too was an ex-employee of QSR Brands (M) Holdings Bhd. He was the Senior Manager for Strategic Development, Property and Technical Department when he was at QSR Brands (M) Holdings Bhd. The Law and Determining Factors [29] The determining factors for the resolution of the present dispute hinge on the terms of the agreements and the evidence adduced before this Court. [30] The Plaintiff alluded to a line of authorities that reiterated the approach to be adopted when interpreting the terms of a contract namely, the business common sense approach. The cases cited include Bahamas International Trust v Threadgold [1974] 1 WLR 1514, NVJ Menon v The Great Eastern Life Assurance Company Ltd [2004]4 AMR 164; [2004] 3 CLJ 96; [2004] 3 MLJ 38; [2002] 2 MLRA 510 and T & TT Enterprise Sdn Bhd v Lembaga Pembangunan dan Lindungan Tanah [2007] AMEJ 0271; [2008] 7 MLJ 385; [2007] 5 MLRH 822 Reference was also made to this additional case, that is, Rim Alliance Inc Sdn Bhd v Haniffa Properties Sdn Bhd [2013] CLJU 1334; [2015] 1 MLJ 149; [2014] 3 MLRA 659. [31] On its submission that the Defendants have not offered any reasons for their failure to call material witnesses who had knowledge on the performance of the contract, the Plaintiff referred this Court to Guthrie Sdn Bhd v Trans Malaysia Leasing Corporation Bhd [1990] 1 CLJ Rep 155; [1991] 1 MLJ 33; [1990] 1 MLRA 532 and Chan Yoke Lain v Pacific & Orient Insurance Co [1999] 2 AMR 1381; [1999] 1 CLJ 179; [1998] 1 MLJ 303; [1998] 2 MLRA 272, on the inference to be drawn from such a failure to call material witnesses. [32] The Defendants made reference to sections 101 to 103 of the Evidence Act 1950 and the Federal Court case of Letchumanan Chettiar Alagappan @ L Allagappan (as executor to SL Alameloo Achi alias Sona Lena Alamelo Acho, deceased) & Anor v Secure Plantation Sdn Bhd [2017] 3 AMR 625; [2017] 5 CLJ 418; [2017] 4 MLJ 697; [2017] 3 MLRA 501 in support of their contention that the Plaintiff bears the burden of proving its claim and that the Plaintiff has failed to do so in the present suit. [33] On the important aspect relating to the “savings guarantee”, the Defendants further relied on HTJ Development Sdn Bhd v Teoh Chin Kee & Anor [2018] AMEJ 1483; [2018] CLJU 1849; [2018] MLJU 1753; [2018] MLRHU 1463 and Tekun Nasional v Plenitude Drive (M) Sdn Bhd and Another [2021] 8 AMR 427; [2021] 10 CLJ 206; [2021] 6 MLJ 619; [2021] 6 MLRA 677. [34] In response to the authorities cited by the Plaintiff in paragraph [30] above, the Defendants added the following authorities, namely, Mulpha Pacific Sdn Bhd v Paramount Corp Bhd [2003] 6 AMR 22; [2003] 4 CLJ 294; [2003] 4 MLJ 357; [2003] 1 MLRA 577, Delta Enterprises Sdn Bhd & Ors v Asia Commercial Finance (M) Bhd & Anor [2005] 2 AMR 297; [2004] CLJU 601; [2005] 3 MLJ 293; [2004] 2 MLRA 462 and Perbadanan Kemajuan Negeri Selangor v Country Club Sdn Bhd [2016] 2 AMCR 37; [2016] 8 CLJ 211; [2017] 2 MLJ 819; [2017] 1 MLRA 46. This Court’s Decision [35] It is apparent that from the authorities relied on by both parties, each is contending that the terms in the agreements are plain, concise, and unambiguous and that the clauses in the agreements support their respective cases. The Repair and Maintenance Claims [36] This Court shall first deal with the Plaintiff’s claims relating to the repair and maintenance works. The question that has been couched is whether the repair and maintenance works were indeed carried out by the Plaintiff and if the answer is in the affirmative, whether such works were carried out pursuant to the warranty (and within the warranty period) provided for in the agreements. [37] Upon a perusal of the terms in the agreements and the available evidence before this Court, it is this Court’s findings that the Plaintiff has failed to prove the repair and maintenance works claims on a balance of probabilities. [38] This Court is of the considered view that the argument that the breakdown of the repair and maintenance claims cannot be ascertained is not unmeritorious. This Court is in agreement with the Defendants that the repair and maintenance claims are not borne out in the Ledger, as claimed by PW1. In addition, this Court also agrees with the Defendants that there was insufficient proof that such works have indeed been carried out. [39] Hence, the sums of RM55,677.01 and RM22,500.67 for alleged repair and maintenance works carried out by the Plaintiff at the KFC and Pizza Huts outlets respectively are disallowed. The Project Claims [40] The central issue in relation to the Plaintiff’s claims under this head is premised on whether the Plaintiff has complied with the salient terms and conditions of the Agreements. The Plaintiff’s contention is that it has and the Defendants’ submission is that that the Plaintiff has failed to do so. [41] The Defendants underscored the point that the payment for the 30% tranche and the 10% tranche of the Project Cost Per Ooulet is subject to the Plaintiff’s compliance with the provisions in the Agreements and the “Payment Schedule” in Schedule 4 of the Agreements should not be read in isolation. According to the Defendants, the Plaintiff’s entitlement to payment is subject to the fulfilment of the terms and conditions provided for in the Agreements, including but not limited to meeting the ‘Energy Savings Guarantee’ as stipulated in Section 1.6 of the Agreements read with Schedule 5 of the Agreements. As the “Energy Savings Guarantee” has not been met and/or the Plaintiff has not proven that the same has been met, the Defendants’ position is that Plaintiff is not entitled to the Project Claims. [42] As observed in paragraph [29], the pivotal factors for the resolution of the present dispute hinge on the terms of the agreements and the evidence adduced before this Court. [43] Having judiciously examined and considered the terms in the agreements and evidence adduced, this Court is of the considered view that the Plaintiff has succeeded in proving the project claims against the Defendants on a balance of probabilities. The sums claimed by the Plaintiff against the Defendants for the 30% tranche and the 10% tranche are allowed. The Counterclaims [44] The Defendants’ counterclaims are connected to their defence against the claims by the Plaintiff under the head of project claims. As this Court has concluded that the project claims are allowed on the basis that the “Energy Savings Guarantee” has been fulfilled on a balance of probabilities, the counterclaim must fail. [45] This Court would add that when the vital question of whether the energy savings devices had provided the “Energy Savings Guarantee” as assured under the terms of the agreements was posed to DW2, he could not affirmatively answer this question. The exchanges between counsel for the Plaintiff and DW2 were as follows: P’s Counsel: Now, general question were there letters issued by the defendant to the plaintiff stating that the 30% and 10% cannot be paid because the energy savings devices that were installed by the plaintiff at the Defendant’s outlet did not give the energy savings guarantee? DW2: This I’m not sure because I only in charge of a technical wise only. [46] The counterclaims by the First Defendant and the Second Defendant for the sums of RM1,616,744.50 and RM442,237.55 are disallowed. [47] The First Defendant and the Second Defendant to each pay RM15,000 as costs to the Plaintiff, subject to allocator. Concluding Observations [48] In my opening remarks, I commended the nature of the agreements for their environmentally conscious approach. [49] The “project” involved the installations of “energy saving devices” which would provide for energy savings. It also came to light that the same energy saving system known as “Comprehensive Energy Equipment IPO, ISE93-5-8A (industrial series) was installed in all the outlets for a price of RM23,620.00 for each outlet. [50] When queried by this Court as to whether the “devices” include a system that detects or senses the presence of human beings to automatically adjust the air-conditioning temperature to save on energy consumption, commonly referred to as "occupancy-based HVAC (Heating, Ventilation, and Air Conditioning) control system" or perhaps an "occupancy sensing lighting control system", the answer was that the project merely involved the replacement of fluorescent tubes and down lights with light emitting diode (LED) in all the outlets. As for the “Comprehensive Energy Equipment IPO, ISE93-5-8A, DW2 explained that it was merely a voltage stabilizer. [51] While these “energy saving devices” admittedly are not the sort of the more sophisticated devices that I had initially thought of, the disputes aside, the overriding objective of the agreements is to be lauded. Dated: 17 April, 2024 sgd [CHOONG YEOW CHOY] Judicial Commissioner High Court of Malaya Shah Alam Counsel: Ramesh K. Supramaniam with Julian Lee Chun Hon for the Plaintiff (Messrs. Ramesh K. Supramaniam) Nina Lai Jian Xian with Hamsavartheni Sivalingam for the Defendants (Messrs. Shook Lin & Bok)