Thirsty Monkeys Bar & Restaurant Sdn. Bhd. v Heineken Marketing Malaysia Sdn. Bhd. (WA-12BNCC-6-02/2022)

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1 IN THE HIGH COURT OF MALAYA AT KUALA LUMPUR IN THE FEDERAL TERRITORY, MALAYSIA CIVIL APPEAL NO. WA-12BNCC-6-02/2022

Preamble

Pursuant to the Outlet Agreement, the 1st appellant agreed to purchase Heineken Products for resale at the Outlet. In return, the respondent would provide monetary incentives in the form of sponsorship to the 1st appellant based on the volume of Heineken Products purchased, and events held at the Outlet. [9] It was also agreed that the Outlet shall exclusively sell Heineken Products. However, the 1st appellant advertised and sold products of a competitor of the respondent, Carlsberg Brewery Malaysia Berhad (“Carlsberg Products”). [10] The parties sought the following against each other: a. In the Origination Action, the 1st appellant claimed inter alia the sum of RM8,903.88 being outstanding incentives under the Outlet Agreement, the sum of RM4,520 being the price of five barrels of stale Heineken Products removed from the Outlet and damages, against the respondent. However, the 1st appellant did not pursue the claim for the price of the five barrels of Heineken Products in this appeal. b. In the Counterclaim, the respondent claimed the sum of RM38,145, being refund of sponsorship paid and the sum of RM194,069.00 being loss of profits, against the 1st appellant. The respondent also claimed against the 2nd appellant as a guarantor of the 1st appellant. C. The Decision of the Sessions Court [11] The Sessions Court dismissed the Original Action and allowed the Counterclaim. [12] The learned Sessions Court judge found as follows: a. The 1st appellant breached clauses 1.2 and 1.4 of the Outlet Agreement, as it advertised and made available Carlsberg Products at the Outlet; b. The 1st appellant breached clause 6.1 of the Outlet Agreement, as it had failed to achieve the sales target provided for in the Outlet Agreement; c. The respondent had validly and lawfully terminated the Outlet Agreement; d.

Preamble

Pursuant to clauses 7.3 and 7.4 of the Outlet Agreement, the respondent is entitled to damages; and e. The respondent has proven the damages in the sum of RM38,145 being refund of sponsorship and the sum of RM155,924 being loss of profits. D. Considerations and Findings Principles of appellate intervention [13] Intervention of a decision of a lower court by a higher court is justified when the lower court is shown to be plainly wrong in arriving at its decision. [14] Gan Yook Chin & Anor v Lee Ing Chin & Ors [2004] 4 CLJ 309 is instructive. The Federal Court held as follows: “In our view, the Court of Appeal in citing these cases had clearly borne in mind the central feature of appellate intervention ie, to determine whether or not the trial court had arrived at its decision or finding correctly on the basis of the relevant law and/or the established evidence. In so doing, the Court of Appeal was perfectly entitled to examine the process of evaluation of the evidence by the trial court. Clearly, the phrase "insufficient judicial appreciation of evidence" merely related to such a process. This is reflected in the Court of Appeal's restatement that a judge who was required to adjudicate upon a dispute must arrive at his decision on an issue of fact by assessing, weighing and, for good reasons, either accepting or rejecting the whole or any part of the evidence placed before him. The Court of Appeal further reiterated the principle central to appellate intervention ie, that a decision arrived at by a trial court without judicial appreciation of the evidence might be set aside on appeal. This is consistent with the established plainly wrong test.” (emphasis added) [15] In this case, I found the learned Sessions Court judge had arrived at his decision with due appreciation of the evidence before him. The learned judge had assessed the facts of the case and properly applied the provisions of the Outlet Agreement and the law to these facts. Findings of the Sessions Court [16] In this regard, I agree with the findings of the Sessions Court on four material points, namely: a. That the 1st appellant breached the Outlet Agreement; b. That the respondent lawfully terminated the Outlet Agreement; c. That the respondent is entitled to damages sought; and d. That the 2nd appellant is liable as a guarantor of the Outlet Agreement. Finding 1: The 1st appellant breached the Outlet Agreement [17] The learned Sessions Court judge reached this finding based on factual considerations and his interpretation of the Outlet Agreement. [18] He found that Carlsberg Products were advertised and made available at the Outlet, as evidenced by photos and the Facebook page of the Outlet, which show Stella Artois and Hoegaarden being advertised. It is not in dispute that Stella Artois and Hoegaarden are Carlsberg Products. [19] With Carlsberg Products being advertised and being available at the Outlet, the learned Sessions Court judge found the 1st appellant to be in breach of clause 1.2 of the Outlet Agreement, which provides as follows: “1.2 The Outlet Owner further agrees that the Outlet shall be the exclusive outlet(s) of HMMSB and ensure that products brewed, marketed or distributed by HMMSB's competitors are not advertised, promoted, sold or otherwise made available at the Outlet.” (emphasis added) [20] The court sees no reason to interfere with the findings of the learned Sessions Court judge, both in fact and in law. The relevant provision of the Outlet Agreement expressly prohibits the advertisement, promotion and making available of the respondent’s competitors’ products at the Outlet. Yet, the available evidence clearly shows that Carlsberg Products were both advertised and made available at the Outlet. As such, the 1st appellant had breached the Outlet Agreement. Finding 2: The respondent lawfully terminated the Outlet Agreement [21] Provisions on breach and termination are set out in clause 7 of the Outlet Agreement. Clause 7.1 provides as follows: “HMMSB may issue a notice to the Outlet Owner upon any breaches of the Outlet Owner under this Agreement and require the Outlet Owner to rectify or remedy the specified breaches. In the event the Outlet Owner fails to rectify or remedy the breaches specified therein within seven (7) days (or such longer period that HMMSB may allow in writing) from the date of the notification, HMMSB is entitled to forthwith terminate this Agreement by notice.” (emphasis added) [22] There were two notices to remedy breaches issued to the 1st appellant. The first is dated 20 February 2019 (“1st Notice to Remedy”) and the second is dated 2 December 2019 (“2nd Notice to Remedy”). They are collectively referred to as the “Notices to Remedy”. [23] In the 1st Notice to Remedy, the respondent referred to a routine inspection carried out on or about 12 September 2018, during which the respondent detected that the 1st appellant had been marketing and distributing Carlsberg Products in breach of the Outlet Agreement. The notice referred specifically to Carlsberg signages installed, Carlsberg banners and materials displayed and Carlsberg Products made available, at the Outlet. The 1st appellant was required to remedy the breach within seven days of the 1st Notice to Remedy. [24] The 2nd Notice to Remedy, issued almost nine months later, referred to the 1st Notice to Remedy, and to the particulars of breach in the 1st Notice to Remedy, which the 1st appellant had not rectified. The 1st appellant was given a further seven days to remedy the breach, failing which the respondent stated that it would take steps to terminate the Outlet Agreement. [25] The breaches were not remedied, and on 10 December 2019, the respondent issued a notice to the 1st appellant, to terminate the Outlet Agreement (“Notice of Termination”). In the Notice of Termination, the respondent also sought a refund of the sponsorship that the 1st appellant had received, in the amount of RM38,145. [26] The appellants put forward three main points in arguing that the termination of the Outlet Agreement was invalid: a. The breaches referred to in the 1st Notice to Remedy did not occur: i. I am unable to agree with this argument. It is evident from the findings of fact of the learned Sessions Court judge, that photos and the Facebook page of the Outlet show Carlsberg Products being advertised and made available at the Outlet. ii. This is in clear breach of the Outlet Agreement. It therefore follows that at the time the 1st Notice to Remedy was issued, and thereafter, the breach of the Outlet Agreement had occurred and was continuing. iii. The 1st appellant further claimed that as the respondent had removed its draught machines on 29 January 2019, before the 1st Notice to Remedy was issued on 20 February 2019, there was no breach to be remedied. The 1st appellant alleged that the respondent had instead accepted the 1st appellant’s termination of the Outlet Agreement. The 1st appellant’s claim of RM8,903.88 of outstanding incentives under the Outlet Agreement flows from this allegation. iv. I am in agreement with the Sessions Court that there is no merit in the 1st appellant’s argument. The learned Sessions Court judge found that the evidence provided by the 1st appellant on the respondent’s alleged acceptance of the termination of the Outlet Agreement was too weak and did not support such a conclusion. In reaching this finding, the learned Sessions Court judge considered WhatsApp messages respond to the Notices to Remedy. However, the Sessions Court found that the Notices to Remedy the learned Sessions Court judge, that although the appellants denied receiving the 1st Notice to Remedy, the 2nd appellant accepted that Surendran A/L R Appudurai, a director of the 1st Surendran received the 1st Notice to Remedy, and as such, the 1st appellant was not required to act on the notice. However, I note that save for exchanged, reports issued, as well as the removal of the respondent’s draught machines from the Outlet. I see no reason to depart from his findings of fact. b. The Notices to Remedy were not served on the appellants: i. were within the knowledge of the appellants. ii. appellant and the 4th defendant in the Counterclaim (“Surendran”) did receive the notice. The learned judge also noted that the notice issued to Surendran was referred to in a letter dated 20 September 2019 from the 1st appellant’s solicitors to the respondent. iii. The appellants’ argument is essentially that only This finding is based on an observation made by It is not in dispute that the appellants did not and attachments to the 1st Notices to Remedy issued to the different parties are exactly the same. Thus, the stand taken by the appellants that they need not have acted on a notice contains allegations of breach by the 1st (“DW1”) had also testified that he had personally brought four copies of the 1st Notice to Remedy, which include those addressed to the appellants, to Citi-link Express, and arranged for them to be received by a director of the 1st appellant which appellant, defies commercial logic. iv. couriered. v. Further and in any event, the 2nd Notice to Remedy was subsequently issued to the 1st appellant. This 2nd Notice of Breach referred to the breaches alleged in the 1st Notice of Breach. In this appeal, the appellants did not raise any issue in relation to the receipt of the 2nd Notice to Remedy by the 1st appellant. vi. As such, based on the facts as set out, I am of the view that the Sessions Court judge is correct in finding that the appellants were served with the 2nd Notice to Remedy and had knowledge of the 1st Notice to Remedy. the recipients and their addresses, the content of The respondent’s first witness, Loke Wai Mun c. The Notice of Termination is invalid, as the 1st Notice to Remedy was not served on the appellants: i. With the court’s finding that the appellants were duly served with the 2nd Notice to Remedy and had knowledge of the 1st Notice to Remedy, this argument must necessarily fail. [27] Thus, I found that the respondent had duly complied with the steps required to be taken to terminate the Outlet Agreement, as set out in clause 7 of the agreement. The respondent had issued the Notices to Remedy, requiring the 1st appellant to remedy the breaches committed, and subsequently issued the Notice of Termination. [28] The Outlet Agreement was therefore lawfully terminated. Finding 3: The respondent is entitled to damages [29] The respondent sought the following in the Counterclaim: a. The sum of RM38,145, being refund of sponsorship provided by the respondent to the 1st appellant; and b. The sum of RM194,069, being loss of profits. [30] To address the question of the respondent’s entitlement to damages, the first points of reference are the following provisions of the Outlet Agreement: “1.3 Subject to the Outlet Owner having complied with all terms of his Agreement and in consideration with clause 1.1 above, HMMSB shall during the Term offer to the Outlet Owner the Sponsorships as set out in item E of the Schedule.”

Subparagraph

(li) continuing to assist in the promotional activities to be carried out at the Outlet on such terms and conditions as may be determined by HMMSB and/or as may be agreed between. HMMSB and the Outlet Owner, from time to time the Guarantor hereby unconditionally and irrevocably guarantees as a continuing obligation, the proper and punctual payment by the Outlet Owner of the Guaranteed Amounts and unconditionally and irrevocably undertakes as continuing obligation to HMMSB that if for any reason the Outlet Owner does not make such payment the Guarantor shall pay the Guaranteed Amounts upon first written demand by HMMSB.” (emphasis added) [48] The term “Guarantee Amount” is defined in paragraph 2.4 as: “… all moneys, obligations and liabilities including the Debt now or at any time hereafter or from time to time due, owing or incurred to HMMSB by the Outlet Owner in whatever manner …” [49] The term “Debt” is defined in paragraph 2.1 as: “… all or any part of the principal amount of the price of the goods or products already supplied or to be supplied from time to time by HMMSB to the Outlet Owner and/or Outlet and any sponsorship, advertising & promotional sponsorship support and/or all amounts paid and/or provided by HMMSB to the Outlet Owner and/or Outlet …” [50] With the above provisions, and pursuant to section 79 of the Contracts Act 1950, which provides that a contract of guarantee is a contract to perform the promise or discharge the liability of a third person in case of default, the 2nd appellant is liable for damages claimed by the respondent against the 1st appellant. Allegation of breach of the Competition Act 2010 [51] The court also considered the appellants’ claim that the Outlet Agreement contravenes the Competition Act 2010. The appellants relied specifically on section 10 of the Competition Act 2010, which provides as follows: “(1) An enterprise is prohibited from engaging, whether independently or collectively, in any conduct which amounts to an abuse of a dominant position in any market for goods or services.

Subsection

(2) Without prejudice to the generality of subsection (1), an abuse of a dominant position may include –