Wj Legacy Sdn Bhd v Rins Holding Sdn Bhd (WA-22IP-45-08/2023)

RINS HOLDING SDN BHD [No. Syarikat.: 202001020444 (1376764-K)]

NELLY LEU RUIXIN [No. K/P.: 951114-01-5176]

SOO CHOCK XIONG [No. K/P.: 910327-01-5793] … DEFENDAN-DEFENDAN [DALAM TINDAKAN ASAL] ANTARA RINS HOLDING SDN BHD [No. Syarikat.: 202001020444 (1376764-K)] … PLAINTIF 2! !

WJ LEGACY SDN BHD [No. Syarikat.: 202201042413 (1488110-W)]

WILLIAM CHUNG FUI CHING [No. K/P.: 860621-52-5329]

EU SUK HEE [No. K/P.: 861202-52-6268] … DEFENDAN-DEFENDAN [DALAM TUNTUTAN BALAS] GROUNDS OF JUDGMENT A. INTRODUCTION [1] This action arises out of a failed commercial arrangement for the opening and operation of a dessert outlet at 108G, Jalan Cerdas, Taman Connaught, Cheras, Kuala Lumpur, under the brand name “Beans Factory”. The core controversy is whether the arrangement was, in substance, a mere licence, as the Defendants insist, or a franchise within the meaning of section 4 of the Franchise Act 1998 (“the FA 1998”), as the Plaintiff contends. [2] The Plaintiff, WJ Legacy Sdn Bhd, was incorporated for the purpose of operating the Cheras outlet. Its directors are William Chung Fui Ching (“PW1”) and Eu Suk Hee (“PW2”). The 1st Defendant, Rins 3! ! Holding Sdn Bhd (“D1”), is the vehicle through which the Beans Factory business was offered to the Plaintiff. Nelly Leu Ruixin (D2) and Soo Chock Xiong (D3) were the human actors through whom the dealings were carried out and whose respective roles became a material point of dispute at trial. [3] Broadly, the Plaintiff contends that:

the Agreement is void and unlawful as it constitutes an unregistered franchise in contravention of the applicable law; and

the Defendants negligently, recklessly and/or fraudulently made false representations to the Plaintiff, PW1 and/or PW2 in relation to the Agreement, thereby inducing the Plaintiff to enter into the same. [4] It is the Plaintiff’s case that it was induced to pay RM270,000.00, monthly royalties, the cost of uniforms, and an initial stock payment on the footing that it was buying into a lawful and established franchise structure. It is also the Plaintiff’s case that the Beans Factory arrangement was never registered under the FA 1998 and that the agreement is therefore void and unlawful, with restitutionary consequences. [5] The Defendants’ pleaded case is that the Plaintiff merely purchased a licensing package vide the draft licencing agreement which allowed it to use the Beans Factory brand, recipes and know-how, while retaining autonomy over the day-to-day running of the business. 4! ! [6] The Plaintiff commenced this action on 10 August 2023 seeking, inter alia:

1.1. A declaration that any agreement entered between the Plaintiff and D1 is invalid and void;

1.2. A declaration that corporate veil of D1 be lifted;

1.3. A declaration that D2 and/or D3 jointly and/or severally committed fraud and/or negligent misrepresentation which caused the Plaintiff to enter into the agreement with D1 for the purpose of operating the Dessert Business;

1.4. An order that the Defendants, jointly and/or severally, shall within five (5) days from the date of judgment pay and refund to the Plaintiff the following sums by way of restitution:

1.4.1. The Licensing Fees of RM270,000.00;

1.4.2. Royalty fees of RM6,315.90 (“the Royalty Fees”);

1.4.3. Ingredients’ cost of RM18,567.50 (“the 2-Weeeks-Ingredients Cost”); and

1.4.4. Uniform cost of RM1,576.00 (“the Uniform Cost”) [7] D1 filed a Counterclaim against the Plaintiff, PW1 and PW2, alleging fraud and seeking recovery of, inter alia, outstanding royalty fees, 5! ! unpaid ingredient costs, renovation costs, and the cost of furniture, fixtures and fittings. [8] A full trial was conducted before this Court on 16, 17, 22, 24, 29 and 31 December 2025, and 15 January 2026. The Plaintiff called two witnesses (PW1 and PW2), and the Defendants called three witnesses (DW1 – Soo Chock Xiong, DW2 – Nelly Leu Ruixin, and DW3 – Liew Horng En). [9] Having considered the pleadings, agreed facts, oral evidence, contemporaneous documents, and the parties’ respective submissions, I am satisfied that the Plaintiff succeeds on the central issue that the arrangement was, in substance, a franchise. I further hold that the arrangement was void for non-compliance with the FA

However, I am not persuaded that the evidential threshold for the relief of lifting the corporate veil has been met. As for the counterclaim, it substantially fails because the rights asserted by D1 are rooted in an arrangement which the Court has found to be unlawful and unenforceable. [10] What follows are the reasons for my decision. B. BACKGROUND FACTS [11] The material facts, drawn from the agreed facts, the pleadings, and the evidence adduced at trial, are as follows: [12] On 20 July 2022, PW1 made enquiries with D1 regarding the Beans Factory business, whereupon D1 directed him to contact D3. 6! ! [13] It is the Plaintiff’s case that on 16 August 2022, PW1 and PW2 met with D3 to discuss the Beans Factory business. During this meeting, D3 represented, inter alia, that:

D1/D3 was able and prepared to grant them the right to operate the Beans Factory business, including the use of the brand name and/or trademark and its intellectual property, confidential information and trade secrets, upon payment of a fee ranging between RM250,000.00 and RM270,000.00 together with a monthly royalty fee of 5% of gross monthly sales;

save for rental of the shop premises, all matters relating to the establishment and opening of the Beans Factory outlet would be handled by D3 and/or D1; and

the Beans Factory business would not interfere with PW1 and PW2's existing employment. [14] On 14 November 2022, the Plaintiff was incorporated for the purpose of commencing the Beans Factory business. [15] On 29 November 2022, the Plaintiff rented the Cheras Shop premises. [16] On 9 December 2022, renovation works commenced. The Defendants arranged and managed all renovation-related matters and instructed the Plaintiff to take over the business only upon 7! ! completion of the renovation and once the Cheras Shop was ready for operation. [17] Between 6 December 2022 and 17 January 2023, the Plaintiff paid a total of RM270,000.00 to D1 through five separate payments. The Plaintiff characterises this as a "franchise fee," while the Defendants characterise it as "licensing fees." D1 issued Invoice No. 2022120401 dated 4 December 2022 for the said sum. [18] On 21 December 2022, D3 forwarded a draft agreement labelled "Licensing Agreement" ("the Draft Licensing Agreement") to PW1. It is the Plaintiff’s case that the Plaintiff did not review the agreement at that juncture and intended to discuss the same with D3. It is the Plaintiff’s case that D3 repeatedly postponed the discussion, and the matter was subsequently overlooked. The Draft Licensing Agreement was never executed by the parties. [19] For convenience, the salient terms of the Draft Licensing Agreement includes the following:

D1 grants the Plaintiff the right to operate the Beans Factory Business at the Cheras Shop, using the Beans Factory name and mark, for the purposes of carrying out business of selling D1’s Products (all types of food and beverages and any other products sold and supplied by D1 from time to time) at Cheras, to be conducted in accordance with all the directions, rules, regulations, memos, manuals and/or guidelines as imposed by D1 from time to time (refer to Clause 1.1 of the Draft 8! ! Agreement: ‘Licensor’s Products’, ‘said Business’, said License’ and ‘said Location’ – B1, pg. 23 & 24);

In return, the Plaintiff is required to pay to D1 a Franchise Fee and a Royalty Fee;

The Plaintiff is required to:

sell D1’s Products strictly in accordance with packaging, prices, ingredients, materials, equipment, recipes, quality and/or menus set and approved by D1;

(ii) comply at all times and continue to be in compliance with all the directions, rules, regulations, memos, manuals and/or guidelines in relation to the said Business as imposed by D1 from time to time;

(iii) at its own cost and expenses purchase D1’s Products and all its related ingredients, recipes, materials and equipment, furniture and others from D1 only and not from any other third party(ies);

(iv) use auto count POS system for the said Business at the said Location (Cheras Shop) only;

carry out the renovation, modification and/or variation on the building or structure of the said Business at the said Location (Cheras Shop) in accordance with the layout and design requested by D1; 9! !

(vi) the Plaintiff is only allowed to sell D1’s Products by carrying out the said Business at the said Location only;

(vii) any promotions, advertisements and marketing of the said Business by the Plaintiff shall be done only with the prior written approval of D1; and

(viii) allow D1 to inspect the said Location, account books and other documents of the Plaintiff at any time to ensure that the said Business at the said Location (Cheras Shop) is being carried out in accordance with all the directions, rules, regulations, manuals, memos, and/or guidelines in relation to the said Business as imposed by D1 from time to time;

In the Draft Agreement:

“Licensor’s Products” means all type of foods and beverages and any other products sold and supplied by D1 from time to time.

(ii) “said Business” means the business of selling Licensor’s Products conducted or to be conducted in accordance with all the directions, rules, regulations, memos, manuals and/or guidelines as imposed by the Licensor from time to time. 10! ! [20] On 13 and 14 February 2023, training sessions were conducted by D2 at the Cheras Shop to train the Plaintiff's staff. D1 supplied and delivered materials required for the training session and the initial stock required for commencement of operations. The Plaintiff paid RM18,567.50 for such materials and stocks. [21] On 15 February 2023, the Beans Factory Cheras outlet commenced operations. D2 and D1's employees supervised the Plaintiff's operations until 19 February 2023. [22] From February 2023 to July 2023, the Plaintiff operated the Cheras Shop under the Beans Factory brand. During this period, it is the Plaintiff’s case that:

the Plaintiff incurred expenses of RM54,844.00 for the purchase of food ingredients and equipment from D1;

the Plaintiff purchased Beans Factory uniforms from D1 amounting to RM1,576.00;

royalty fees totalling RM6,315.90 were paid to D1 for sales from

D1 imposed various operational policies/rules on the Plaintiff, including a minimum order policy, payment policy, and a notice concerning distribution of 780 paper bowls; 11! !

on 18 April 2023, pursuant to the Plaintiff's request dated 15 March 2023, the Defendants provided a document labelled "Beans Factory Franchise Stock Price List"; and

the Plaintiff lodged several complaints regarding the quality and delivery of ingredients supplied by D1. [23] On 2 June 2023, D1 issued a Warning Letter stating that the Agreement would be terminated if the Plaintiff continued sourcing ingredients from third-party suppliers. [24] The Plaintiff ceased operations under the Beans Factory brand on 4 July 2023. On 14 July 2023, the Plaintiff reopened the Cheras Shop under its own brand, "Mr. Beannie Dessert." [25] It is the Plaintiff’s case that:

the Agreement and Beans Factory Business possessed the essential characteristics of a franchise;

Beans Factory was not registered under the Franchise Act 1998; and

the following representations were untrue and made intentionally and/or recklessly; -

D1 was the lawful owner of the franchise business of Beans Factory; 12! !

(ii) D1 was entitled to grant a valid franchise;

(iii) D2 was merely an employee of D1; and

(iv) D3 was the sole founder of the Beans Factory brand and sole director and shareholder of D1. [26] Plaintiff commenced this action against the Defendants. C. ISSUES TO BE TRIED ! [27] The principal issues for determination by this Court are as follows: Original Action:

Whether the business arrangement between the Plaintiff and D1 constitutes a franchise within the meaning of Section 4 of the FA 1998;

(ii) If so, whether the said franchise arrangement is void and unlawful for non-compliance with the FA 1998;

(iii) Whether the Defendants made fraudulent and/or negligent misrepresentations which induced the Plaintiff to enter into the arrangement;

(iv) Whether the corporate veil of D1 ought to be lifted to render D2 and D3 personally liable; 13! !

Whether the Plaintiff is entitled to the following reliefs against the Defendants: a) A declaration that any agreement entered into between the Plaintiff and D1 is invalid and void; b) An order that the sum of RM270,000.00 paid by the Plaintiff as franchise/licensing fees be refunded to the Plaintiff by way of restitution; c) An order that the royalty payments amounting to RM6,315.90 be refunded to the Plaintiff by way of restitution; d) An order that the uniform costs amounting to RM1,576.00 be refunded to the Plaintiff by way of restitution.

(vi) D1 counterclaims against the Plaintiff, PW1 and PW2, inter alia, for the following reliefs: - a) a declaration that D1 is entitled to retain the Franchise Fee and the Royalty Fees paid; b) a declaration that Plaintiff’s corporate veil be lifted such that PW1 and PW2 shall be personally liable for any judgement granted by this Court; 14! ! c) outstanding royalty fee for the month of May 2023 in the sum of RM2,443.00; d) outstanding sum for food ingredients in the sum of RM16,327.00; and e) alternatively, a set-off of any judgment sum awarded in favour of the Plaintiff (if any) against the costs of renovation and all furniture, fixtures and/or equipment, including the point-of-sale system and the aforesaid alleged outstanding sum. My Findings ISSUE 1: WHETHER THE BUSINESS ARRANGEMENT CONSTITUTES A FRANCHISE UNDER SECTION 4 OF THE FA 1998 [28] Section 4 of the FA 1998 stipulates as follows: "For the purposes of this Act, 'franchise' means a contract or an agreement, either expressed or implied, whether oral or written, between two or more persons by which:

the franchisor grants to the franchisee the right to operate a business according to the franchise system as determined by the franchisor during the term to be determined by the franchisor;

the franchisor grants to the franchisee the right to use the mark, or trade secret, or any confidential information or intellectual property owned by the franchisor or relating to the franchisor, in the course of operating the franchise business; 15! !

the franchisor possesses the right to administer continuous control during the franchise term over the franchisee's business operations in accordance with the franchise system;

in return for the grant of the rights under paragraphs (a) and

and the obligation under paragraph (c), the franchisee is required to pay a fee or other form of consideration to the franchisor; and

the purpose of the franchise is the sale of goods or the provision of services." [29] Pursuant to s.4 of the FA, an agreement constitutes a “franchise” if the following four (4) conditions are fulfilled:

the franchisor grants the franchisee the right to operate a business according to the franchise system determined by the franchisor during a term to be determined by the franchisor [S. 4(a)];

the franchisor grants the franchisee the right to use a mark, trade secret, confidential information or intellectual property relating to the franchisor [S. 4(b)];

the franchisor possesses the right to administer continuous control during the franchise term over the franchisee’s business operations in accordance with the franchise system [S. 4(c)]; and

the franchisee is required to pay a fee or other form of consideration for the grant of such rights [S. 4(d)].

the purpose of the franchise is the sale of goods or the provision of services [s.4(e)] 16! ! [30] Further to the foregoing, the relevant principles are well established:

whether an agreement amounts to a franchise is a question of fact, determined by evaluating whether the terms of the agreement satisfy the 4 limbs/elements in s.4 of the FA 1998;

the Court may also consider the factual matrix and the manner in which the agreement was implemented and!the Court must examine the substance and totality of the arrangement between the parties, rather than the label ascribed to it by the parties, to determine whether it falls within the statutory definition of a franchise. The nomenclature used by the parties whether "licence," "franchise" or otherwise is not determinative. This principle is well established and accords with the purposive approach to the interpretation of the FA 1998. (refer cases of Munafsya Sdn Bhd v PROQUAZ Sdn Bhd [2013] 2 CLJ 189 Dr HK Fong Brainbuilder Pte Ltd v SG-Maths Sdn Bhd & Ors [2018] 11 MLJ 701 [31] Under Section 101 of the Evidence Act 1950, the burden of proving that the arrangement constitutes a franchise lies upon the Plaintiff, who asserts it. The standard of proof is on the balance of probabilities. [32] It is the Plaintiff’s case that the effect of the terms of Agreement referred to in paragraphs 19-20 of this judgement is clear and satisfies the 4 limbs under Section 4 of the FA: 17! !

D1 granted the Plaintiff the right to establish and operate the Beans Factory outlet for a five-year term in accordance with all the directions, rules, regulations, memos, manuals and/or guidelines as imposed by D1 from time to time (“Franchise System”). This satisfies Section 4(a);

D1 granted the Plaintiff the right to use the Beans Factory mark and intellectual property, confidential information and trade secrets relating to Beans Factory products owned by D1, satisfying Section 4(b);

D1 retained extensive rights to control and supervise Plaintiff’s business operations in accordance with Beans Factory System, satisfying Section 4(c);

the Plaintiff was required to pay D1 the Franchise Fee and Royalty Fee, satisfying Section 4(d); and

the purpose of the franchise is the sale of goods or the provision of services, satisfying section 4(e). [33] In determining whether the Agreement constitutes a franchise, this Court must examine each of the limbs under Section 4 of the FA and consider whether the facts and circumstances of the case establish that all the criteria prescribed by the Act have been fulfilled. 18! ! Limb (a): The franchisor grants to the franchisee the right to operate a business according to the franchise system as determined by the franchisor during the term to be determined by the franchisor [34] It is the Plaintiff’s case that although the Draft Licensing Agreement dated 1 February 2023 was never formally executed, the conduct of the parties demonstrates that they had in fact acted in accordance with its terms. [35] The Plaintiff contended that the Agreement, properly construed against the backdrop of how the relationship was actually implemented between February 2023 and July 2023, satisfies all four limbs of Section 4, namely: i. Limb (a) — D1 granted the Plaintiff the right to establish and operate the Beans Factory outlet at the Cheras Shop for a five-year term, in accordance with the directions, rules, regulations, memos, manuals and/or guidelines imposed by D1 from time to time (collectively, "the Franchise System"); ii. Limb (b) — D1 granted the Plaintiff the right to use the "Beans Factory" mark, together with the intellectual property, confidential information and trade secrets relating to the Beans Factory products owned by D1; iii. Limb (c) — D1 retained extensive rights to control and supervise the Plaintiff's day-to-day business operations in accordance with the Beans Factory system, including the imposition of minimum order policies, payment policies, 19! ! sourcing restrictions, training requirements and the issuance of a formal Warning Letter dated 2 June 2023 threatening termination for non-compliance; iv. Limb (e) — the Plaintiff paid the Franchise Fee of RM270,000.00 and a recurring Royalty Fee of 5% of gross monthly sales, plainly satisfying the requirement of "consideration" (which also engages limb (d)). [36] The Defendants, conversely, argued that the arrangement was a mere licence to use the "Beans Factory" brand, accompanied by advice, guidance and support as was provided at the Plaintiff's request. To this end, the Defendants denied the existence of any "franchise system" determined by D1. [37] The Defendants' principal answer to limb (a) is that no franchise-level Standard Operating Procedure ("SOP"), operations manual, handbook, training manual or code of conduct was ever issued by D1 to the Plaintiff. In the absence of such documentary instruments, learned counsel for the Defendants argued that there can be no "franchise system" in the statutory sense. [38] The Defendants place considerable reliance on the admissions elicited from PW1 during cross-examination, namely that no SOP was provided, no operational manuals or handbook were provided, and no franchise-level operational documents or code of conduct existed at all. 20! ! [39] Further thereto, learned counsel also place reliance on the letter from the Plaintiff's own solicitors dated 18 July 2023 (B1, pg. 312– 313), which is said to acknowledge the absence of manuals and training materials. [40] In support of this proposition learned counsel relied on the case of! Kualiti Alam Hijau (M) Sdn Bhd v HHC Industries Sdn Bhd & Ors [2025] MLJU 1575, in which it was held that where a plaintiff's pleaded allegations stand directly contradicted by admissions made by its own witness during cross-examination, the plaintiff's claim cannot succeed. [41] The Defendants also place reliance on the decision of!Aim Advance Sdn Bhd v Runningman Evolution Sdn Bhd & Anor [2022] CLJU 1921, where the Court held that the failure to satisfy the requirements of Section 4 is fatal to any contention that an agreement constitutes a franchise. [42] The Defendant further submitted that the Plaintiff cannot have been bound to operate the business for a term determined by D1, because the Plaintiff in fact ceased operations after only approximately four-and-a half months (15 February 2023 to July 2023), and D1 elected not to commence any action for damages for early termination. [43] I have considered the submissions advanced by the parties with respect to this limb. In my considered view, I find the Defendants' submission under this limb, overstates the legal necessity of written manuals. 21! ! [44] Section 4(a) requires the existence of a "franchise system as determined by the franchisor." The provision does not stipulate that the system must be embodied in a written manual, SOP, handbook or any other particular form of documentation. To read in such a requirement would produce the unwelcome result that informal, hands-on franchise systems common particularly in the food and beverage sector and in small-to-medium enterprises would fall outside the protective ambit of the FA 1998. [45] The authorities relied upon by the Defendants do not go so far as to hold that the absence of a manual is fatal. A franchise system may be evidenced by manuals, but it may equally be evidenced by the operational controls, directions, training arrangements, sourcing requirements and supervisory mechanisms imposed by the putative franchisor. [46] The proper inquiry, in my view, is whether there existed a sufficiently identifiable and structured business format, determined by the putative franchisor, with which the putative franchisee was required to comply in operating the business. The form in which that system is communicated whether by a structured manual, verbal instruction, WhatsApp message, training session, or operational notice is secondary to the question of whether the system itself exists. [47] Applying that test to the present facts, the evidence reveals a coherent and recognisable operational structure, even if not codified in any single polished document. The following features, when taken together, are noteworthy: 22! ! a. The Draft Licensing Agreement itself, although unsigned, expressly described the business as one to be carried on using D1's products, under D1's "directions, rules, regulations, memos, manuals and/or guidelines," at a designated location, using specified systems, while purchasing relevant ingredients and equipment from D1 and seeking approval for promotions and alterations. b. The evidence before this court is that the Defendants arranged and managed all renovation-related matters at the Cheras Shop, and instructed the Plaintiff to take over the business only upon completion of the renovation, once the Cheras Shop was ready for operation. The Plaintiff did not select its own fit-out, its own equipment or its own layout. c. Training sessions were conducted by D2 at the Cheras Shop on 13 and 14 February 2023 to train the Plaintiff's staff. D1 supplied the materials required for the training sessions. The Plaintiff did not develop its own training program but rather it received one. d. From 15 February 2023 (the opening date) until 19 February 2023, D2 and D1's employees supervised the Plaintiff's operations on-site. This is the classic conduct of a franchisor inducting a franchisee into the operational format. e. The Plaintiff was required to purchase ingredients and equipment from D1, and was furnished with a document expressly titled "Beans Factory Franchise Stock Price List" on 23! ! 18 April 2023 (B1, pg. 49–54). The use of the word "Franchise" by D1 itself in this document is telling, and not easily reconciled with the Defendants' present contention that the arrangement was a mere licence. f. D1 imposed on the Plaintiff and on Beans Factory Cheras a series of operational policies, including a minimum order policy (B1, pg. 56), a payment policy (B1, pg. 57), and a notice concerning the distribution of 780 paper bowls (B1, pg. 58). These are indicia of a franchisor actively prescribing operational conduct. g. The Warning Letter issued by D1 on 2 June 2023 (B1, pg. 59), threatening termination of the Agreement if the Plaintiff continued sourcing ingredients from third-party suppliers, demonstrates that D1 considered itself entitled to police compliance with the system and to enforce that system through contractual sanction. [48] When these features are viewed in totality, what emerges is a picture of controlled business format in which every operational segment which includes premises, layout, equipment, staff training, menu, pricing, ingredients, promotions and quality control was determined, supplied or supervised by D1. [49] Learned counsel for the Defendants relied on the admission made by PW1 regarding the fact that no operational manuals or handbook were provided, and no franchise-level operational documents or code of conduct existed at all. The admissions extracted from PW1 24! ! during cross-examination go no further than to acknowledge that no formal written manual or printed SOP document was provided. They do not amount to an admission that there was no system at all. Indeed, PW1's evidence-in-chief, when read together with the documentary record, was that the operational requirements imposed by D1 were communicated verbally, through training sessions, and via WhatsApp communications and written operational notices. [50] The reasoning in Kualiti Alam Hijau (M) Sdn Bhd (supra), accordingly, does not assist the Defendants in the way they put forth. I am unable to accept the Defendants’ contention that "franchise system" is synonymous with "written manual." [51] I am not persuaded by the Defendants' argument as well that the absence of a term determined by D1 is established by the fact that the Plaintiff ceased operations after only some four-and-a-half months. The statutory question is whether the franchisor possesses the right to determine the term and not whether the term was actually run to completion. The evidence is clear that: a. the RM270,000.00 Franchise Fee was quoted and paid by reference to a five-year period; and b. the Draft Licensing Agreement, in accordance with which the parties admittedly conducted themselves, contemplated a five-year term. 25! ! [52] That the relationship collapsed prematurely, and that D1 elected for commercial reasons not to sue for damages for early termination, does not negate the structural feature that the term was indeed determined by D1. [53] For these reasons, I am satisfied, on the balance of probabilities, that the Plaintiff has discharged its burden of establishing that D1 granted the Plaintiff the right to operate a business according to a franchise system determined by D1 for a term determined by D1. Accordingly, Limb (a) of Section 4 is satisfied. Limb (b): The franchisor grants to the franchisee the right to use the mark, or trade secret, or any confidential information or intellectual property [54] Section 4(b) requires that the franchisor grants to the franchisee the right to use the franchisor's mark, trade secret, confidential information, or intellectual property in the course of operating the franchise business. [55] The Plaintiff contends that this limb is plainly satisfied on the facts. D1 expressly granted the Plaintiff the right to use: i. the "Beans Factory" mark being the trade name, brand identity, signage, get-up, logo and overall trade dress under which the Cheras Shop operated; ii. the product formulations, recipes and methods relating to the preparation of the desserts sold under the Beans Factory brand 26! ! which were communicated through the training sessions conducted by D2 on 13 and 14 February 2023, and through the ongoing supply of proprietary ingredients and toppings sourced exclusively from D1; and iii. the operational know-how, confidential pricing information and supplier information embodied in the "Beans Factory Franchise Stock Price List" dated 18 April 2023, the various policy notices (the minimum order policy, payment policy, and the paper-bowl distribution notice), and the operational guidance provided by D2 during the supervisory period. [56] The Defendants, although denying the franchise characterisation overall, do not seriously dispute that the Plaintiff was granted the right to use the "Beans Factory" mark. A licence to use a brand, by definition, involves precisely such a grant. The Defendants' position is that this grant was the whole of the arrangement, whereas the Plaintiff says it was only one element of a broader, controlled franchise package. [57] The Defendants further contend that they did not part with any "trade secret" or "confidential information" in the formal sense, because no secret recipes, formulae or proprietary documents were handed over in writing. [58] In my judgment, limb (b) is plainly satisfied. First, the right to use the "Beans Factory" mark is conceded. The signage at the Cheras Shop bore the Beans Factory name. The uniforms purchased from D1 (at a cost of RM1,576.00) bore the Beans Factory branding. The 27! ! Plaintiff was permitted, indeed required, to hold the Cheras Shop out to the public as a Beans Factory outlet. The very purpose for which the RM270,000.00 was paid was to secure the right to trade under that mark. This element alone is sufficient to satisfy the requirement in Section 4(b). [59] Second, the Defendants' submission that no "trade secret" or "confidential information" was disclosed because nothing was handed over in writing, is with respect misconceived. Trade secrets and confidential information are not defined by reference to their mode of transmission. Recipes, preparation methods, plating techniques, ingredient ratios, sourcing relationships, and pricing structures can all qualify as confidential information regardless of whether they are reduced to writing. [60] The training conducted by D2 over 13 and 14 February 2023, and the supervisory presence of D2 and D1's employees from 15 to 19 February 2023, plainly involved the imparting of such operational knowledge. Plaintiff's subsequent requirement to source ingredients exclusively from D1 is consistent with preserving D1's proprietary supply chain, a form of confidential commercial information. [61] Third, the "Beans Factory Franchise Stock Price List" dated 18 April 2023 is itself a document that contains confidential commercial information, namely, D1's wholesale pricing to its outlets. The Plaintiff would not have had access to this list but for the Agreement. [62] For these reasons, I find that limb (b) of Section 4 is satisfied. 28! ! Limb (c): The franchisor possesses the right to administer continuous control during the franchise term over the franchisee's business operations [63] This is the most contested limb. The Defendants contend that any involvement by D1 in the Plaintiff's operations amounted to no more than ad hoc assistance, guidance or suggestions, rather than continuous control. The Plaintiff submitted that D1 exercised continuous operational control over all material aspects of the business. [64] Section 4(c) speaks of the franchisor possessing the right to administer continuous control during the franchise term over the franchisee’s business operations in accordance with the system. The emphasis is not merely on isolated assistance. Nor is it enough that advice was requested from time to time. The statute contemplates a retained right of supervision or command over the way in which the business is run. [65] The Plaintiff relied on a wide array of facts to prove such control. The Defendants attempted to refute those facts and explain each away as convenience, packaging, advice or ad hoc help. In my judgment the proper approach is that each item must be examined, but the ultimate question is whether the pattern of dealings reveals an overarching right of operational control. [66] This Court has carefully considered the totality of the evidence and makes the following findings: 29! !

Location of the Cheras Shop ! [67] The Plaintiffs led evidence to show that D3 instructed PW1 to search for alternative locations other than those PW1 had initially proposed (Cheras Leisure Mall and Maxim Residence Taman Connaught). D3 admitted as much in his witness statement (WSDW1, Pg. 7–8, A8). While PW1 and PW2 could propose potential business locations, such proposals were subject to D3's approval. D3 ultimately approved the Cheras Shop location based on its strategic potential. PW1's testimony at trial confirmed that D3's purported "informal views or suggestions" were in substance directives, with D3 repeatedly directing PW1 and PW2 to identify a more strategic location until he was satisfied. [68] Learned counsel for the Defendants submitted that the Plaintiff’s allegation on the Cheras shop location is contradicted by PW1’s own cross-examination evidence. Initially, the Plaintiff alleged that the shop location was subject to the Defendants’ approval, and that several proposed locations were rejected before the Cheras shop was approved. However, when PW1 was asked to produce evidence of those alleged rejections, he accepted that there was no evidence proving the alleged rejections. [69] Learned counsel highlighted that PW1 further confirmed that he and/or his wife were the ones actively searching for shop locations, that he ultimately chose the Taman Connaught, Cheras shop, and that he and his wife negotiated the tenancy terms themselves. PW1 30! ! also accepted that none of the Defendants were parties to the tenancy agreement, and that the agreement did not state it was subject to the Defendants’ approval. [70] Learned counsel for the Defendants submitted that the Defendants did not have final authority to approve or reject the Plaintiff’s business premises. Their role was limited to informal views, suggestions, or commercial guidance. On that basis, the Defendants’ conduct falls short of establishing the right to administer continuous control over the Plaintiff’s business operations under section 4(c) of the Franchise Act 1998. [71] This Court finds that D3 exercised control over the selection of the shop location, going beyond mere informal advice. [72] It is in evidence that D3 admitted and testified that he had instructed PW1 to search for alternative locations other than Cheras Leisure Mall and Maxim Residence Taman Connaught, which PW1 had initially proposed for the Beans Factory business (refer: WSDW1, Pg. 7–8, A8; WSPW1, Pg. 8, A6.3–A6.5). This admission clearly establishes that PW1’s actions were subject to D3’s control. While PW1 and PW2 could propose potential business locations, such proposals were required to fall within the framework of D3’s overall overarching authority, as further evidenced by his ultimate approval of the Cheras Shop location based on its strategic potential (refer: WSDW1, Pg. 7–8, Q&A 8). [73] Further, PW1 explained during trial the manner in which D3’s purported “informal views or suggestions” were in fact conveyed. 31! ! [74] In essence, D3 exercised control by repeatedly directing PW1 and PW2 to identify a more strategic location for the business until he was satisfied. In light of the above, the evidence, including D3’s own admissions and PW’s testimony, clearly demonstrates that the Defendants exercised oversight and control over key business decisions, rather than merely providing informal suggestions as alleged.

Renovation, Equipment, Furniture, Fittings and Design [75] The Defendants admit that they were responsible for the renovation, equipment, furniture, and fittings of the Cheras Shop. They contend that these formed part of the licensing package and do not constitute operational control.! Firstly, the Defendants submitted that the renovations, equipment, furniture and fittings provided at the Cheras Shop formed part of the licensing package purchased by the Plaintiff for the sum of RM270,000.00, as reflected in the Invoice dated 04- 12-2022. It is an undisputed fact that the renovation of Beans Factory Cheras was carried out strictly according to the standardised themes, design and specifications imposed by D1, allegedly as required under the Beans Factory brand. [76] It is the Plaintiff’s case that it did not have access to the Cheras Shop during the renovation period and was not provided with the keys. Further thereto, it is also the Plaintiff’s case that it was not allowed to monitor and/or interfere in the renovation progress. 32! ! [77] It is undisputed that D1 arranged the renovation, equipment, furniture and fittings as part of what the Defendants themselves describe as the licensing package. The Plaintiff says the works were carried out to a standardised design reflecting the Beans Factory identity and that the Plaintiff was expected to wait until D1 had completed the setup before taking over operations. It was also agreed by the Parties during the trial that D1 had exclusive control over the entire renovation, design and construction of the Cheras Shop, including the installation of the signboard and the purchase of furniture and appliances. All such works were decided, arranged and implemented solely by D1 and D3 in accordance with a standardised design, layout and brand image imposed uniformly across all Beans Factory outlets in Malaysia, without any input, approval or discretion from the Plaintiff. It is the Plaintiff’s case that it had no control over the renovation process. [78] The Defendants’ answer is that these were merely pre-operational matters and therefore incapable of amounting to continuous control. I do not accept that proposition in such absolute terms. In a business-format franchise, the shopfront, layout, fixtures, signboard and furnishing are not external to operations, they are integral to the way the business is held out to the public. Control of outlet design is a classic badge of franchise control because it enforces uniform brand identity, customer experience and business method. [79] I also consider it significant that the Plaintiff had little practical say over renovation execution. Even if the Plaintiff could theoretically have offered comments, the evidence shows that D1 and D3 33! ! assumed responsibility for planning and implementation. The commercial reality was that the Plaintiff paid a substantial upfront sum and then awaited delivery of a branded outlet package in a form substantially controlled by D1. That points strongly toward a franchise-style model. [80] The fact that the above elements were included as part of a "package" does not negate the exercise of control. On the contrary, by providing and determining these elements, D1 retained authority over the physical and operational setup of the Cheras Shop, which is a hallmark of franchise control. [81] The evidence on access and keys was contested. The Plaintiff’s case was that it did not have access to the premises during renovation and was discouraged from monitoring the works. The Defendants say the keys were with the contractor for practical reasons and that any temporary access limitation cannot amount to continuous control. They also emphasise evidence that PW1 was asked at one stage to make a set of keys. [82] Standing alone, I find that this issue would not greatly advance the Plaintiff’s case. Temporary key possession during renovation may be accepted on ordinary practical grounds. I therefore place limited weight on it. What matters more is that the Defendants were the ones coordinating and directing the rollout, and ensuring that the outlet was being established in accordance with a system controlled by D1. 34! !

Staff Hiring and Training ! [83] Training sessions were conducted by D2 at the Cheras Shop. D2 and D1's employees supervised the Plaintiff's operations for the initial period after commencement. The evidence demonstrates that D1 exercised control over the training of staff and the initial supervision of the business, ensuring that operations conformed to D1's standards. [84] Operationally, D1 imposed mandatory training and ongoing supervision by requiring the Plaintiff’s employees to attend compulsory training sessions conducted by D2 on recipes, food preparation methods, SOPs and POS usage (Refer: Q&A 13, Pg. 11, WSDW1). D1 thereafter supervised the outlet during its initial days of operation and conducted monthly inspections of stock at the Cheras Shop, thereby reinforcing its continuing operational oversight. [85] D1 also exercised control over staffing matters, including the commencement of recruitment, recruitment advertisements (Refer: B1, Pg. 39) and the job scopes of the Plaintiff’s employees. The timing of recruitment and the duties assigned to the staff were determined by the Defendants, further demonstrating their control over the day-to-day operations of the Plaintiff’s business. [86] The Plaintiff’s case is that D1 exercised further centralised control over the Plaintiff’s sales data and business operations by providing, and retaining control over, the POS system, through which all sales transactions were monitored by the Defendants. The Plaintiff says it 35! ! was denied administrative access to critical POS functions, including menu settings, marketing features, and system configuration. It also alleges that it was expressly prohibited from switching off the internet connection or disconnecting the POS system at any time, thereby enabling the Defendants to maintain continuous oversight and control of its business operations. [87] The Defendants vigorously attacked the POS evidence as speculative, arguing that the system belonged to or was hosted by a third-party provider, that the Defendants had no back-end server rights, and that PW1 admitted he had no evidence of denied access. [88] DW1 testified that the POS system was maintained and hosted by an independent service provider, FeedMe, and that the Defendants had no server access. He also maintained that he could only see information through what the third-party company sent to him. Because the Defendants had no server ownership, backend access or administrative rights, they could not regulate or restrict PW1’s access to POS functions, nor exercise operational control over the Plaintiff’s business through the POS system. PW1 admitted during cross-examination that he had no evidence showing the POS system had the particular functions he claimed he was not allowed to control. [89] I accept that the POS evidence is not as technically clear as the Plaintiff presented it. It would be unsafe to make findings on server architecture or hidden software control on the basis of conjecture. 36! ! [90] In this respect I agree with the submissions advanced by learned counsel for the Defendant that bare, uncorroborated and speculative assertions cannot discharge the burden of proof. (Refer case of SOP Plantations (Suai) Sdn Bhd v Ading Layang & Ors [2004] CLJU 331) [91] In the instant case, a more clearly established fact is that menu and price changes were centrally transmitted or coordinated through the system that the Plaintiff lacked control over. Also pertinent is that the internet/POS arrangement served as a mechanism to maintain standardisation across outlets. Even if the Defendants did not own the server, they were plainly positioned as the authority managing the business configuration. [92] Accordingly, I do not rely on any unproven technical theory of surveillance. I do, however, treat the POS evidence as additional support for the conclusion that the Plaintiff operated within parameters fixed by D1. [93] The Defendants submitted that they did not impose any control over the hiring of the Plaintiff’s staff on the basis that the interviews were conducted solely by the Plaintiff. The Defendants further rely on WhatsApp communications between D3 and PW1, and contend that their involvement was limited to providing feedback in response to PW1’s inquiries, which does not amount to control. [94] In response, the Plaintiff submitted that PW1 testified during re-examination that the Plaintiff had only limited control over the hiring of staff. The Plaintiff was merely authorised by the Defendants to 37! ! conduct interviews, whereas the timing of hiring, staff duties, and even the content of recruitment banners posted on social media were determined and prepared by the Defendants. [95] The documentary evidence further demonstrates that when PW1 raised concerns regarding the timing of hiring staff, D3 informed PW1 that recruitment could only proceed after the Defendants had posted the relevant banner. D3 further indicated that the staff’s duties would be communicated once the manager was in place (refer: B2, Pg. 14-15). This clearly shows that the Defendants exercised direct control over key operational decisions, including staffing and workflow, whilst the Plaintiff’s role was confined to implementing the instructions issued by D3.

Menu, Pricing and Food Preparation [96] In relation to the products, menu and pricing, it is the Plaintiff’s case that it was restricted to selling only such desserts, food and beverages as determined by D1 at the Cheras outlet. The menu and prices were fixed unilaterally by the Defendants, and the Plaintiff was not informed of the menu items until the Training Session had taken place (pg. 16, B2). It is the Plaintiff’s case that any subsequent amendments to the menu or pricing were implemented directly by the Defendants through the POS system, without prior consultation with or approval from the Plaintiff, thereby demonstrating the Defendants’ continuing control over the Plaintiff’s business operations. 38! ! [97] In my considered view, the evidence relating to menu and pricing is among the strongest indicators of control. The Plaintiff’s case was that it could sell only D1’s products, at prices determined by D1, and that subsequent updates to menu and price were implemented and controlled centrally by the Defendants. The Defendants responded that the Plaintiff voluntarily joined because it liked the products sold at the Mount Austin outlet and naturally wanted to sell the same items. [98] In every franchise case there is usually some initial voluntary attraction to the brand and product. But the fact that a franchisee willingly enters the arrangement does not negate control thereafter. The question is whether the Plaintiff retained authority to determine what products to sell and at what prices, or whether those matters were reserved to D1. The evidence, including the parties’ own submission references, strongly favours the latter conclusion. [99] This was not a case where D1 merely supplied recipes and left the outlet to set its own offering. The outlet traded under a common menu architecture and common pricing logic. That is franchise control in substance. [100] The Defendants’ submission that the restriction on selling D1’s products does not constitute control because the Plaintiff had agreed to it, is misconceived. [101] This business arrangement reflects the essence of a franchise model, where the Plaintiff, as the franchisee agrees from the outset 39! ! to adopt the franchisor’s established business system, including its products, branding, and operational methods. The Plaintiff’s intention to sell the same products demonstrates that they entered into this business arrangement on the understanding that they would operate in accordance with the Defendants’ established franchise business concept. [102] The relevant inquiry is whether the Defendants retained the authority to determine the types of products sold by the Plaintiff, which they do not deny. This clearly demonstrates the degree of operational control contemplated under s.4 (c) of the FA 1998.

Purchase of Ingredients from D1 [103] Learned counsel for the Plaintiff submitted that the Plaintiff was contractually and operationally compelled to purchase ingredients exclusively from D1. In support of this contention, counsel relied on the Warning Letter dated 2 June 2023 issued by D1, wherein D1 expressly threatened termination of the arrangement should the Plaintiff persist in sourcing ingredients from third-party suppliers (see B1, p. 59). Counsel emphasised that this letter is not a mere reminder but constitutes documentary proof that D1 not only dictated the supply chain but actively policed and enforced its actions through the sanction available. [104] Counsel further submitted that the Defendants exercised stringent control over the Plaintiff’s supply chain and procurement processes by requiring the Plaintiff to purchase ingredients, materials, equipment, and furniture exclusively from D1, as expressly provided 40! ! in Clause 5.1(b) of the Draft Licensing Agreement (see B1, p. 25). When the Plaintiff, faced with D1’s recurring failures and delays in supplying the required stock, resorted to sourcing certain ingredients from third-party suppliers out of operational necessity, D1 responded by issuing the Warning Letter and threatening termination. Counsel argued that this conduct demonstrates that the Defendants retained, asserted, and actively enforced control over the Plaintiff’s sourcing decisions. [105] The Defendants, for their part, sought to characterise this requirement as nothing more than term of a licensing arrangement. However, in my considered view, the mandatory sourcing of ingredients from the franchisor, coupled with the enforcement mechanism of threatened termination, is a classic and well-recognised hallmark of franchise control. It is the combination of the obligation and its enforcement and not merely the existence of a supply term that elevates this arrangement beyond a simple commercial supply relationship. [106] In my view, the issue of mandatory sourcing from D1 goes to the very heart of the franchise control under section 4(c) of the FA 1998. On this issue, the Plaintiff has adduced compelling evidence, namely: a. Clause 5.1(b) of the Draft Agreement; b. the broad definition of “Licensor’s Products” in the Draft Agreement; c. the “Franchise Stock Price List” issued by D1; 41! ! d. D3’s own admission under cross-examination that the Plaintiff was required to purchase “everything” from D1, so long as D1 sold the item; and e. most significantly, the Warning Letter dated 2 June 2023, which threatened termination if the Plaintiff continued to source products from third parties. [107] The Defendants refuted this by stating that only certain toppings prepared using D1's exclusive formulae were required to be purchased from D1, and that the word "stock" appearing in the Warning Letter must be read in that confined sense. The Defendants further argued that the Plaintiff was approbating and reprobating by relying on an unexecuted draft agreement to establish purchasing control while simultaneously disavowing its validity. [108] On this issue, I find that the documents emanating from the Defendants themselves are couched in broad language and there is nothing on the face of the Draft Agreement, the Stock Price List, or the Warning Letter that confines the ingredients to toppings alone. Whatever distinction may have existed between toppings and other ingredients, the Defendants in practice asserted the right to threaten termination the moment the Plaintiff sourced goods elsewhere. From the perspective of section 4(c) of the FA 1998, what matters is the assertion and exercise of authority over procurement, not the precise scope of the items technically restricted. The Warning Letter stands as evidence that D1 claimed and exercised the right to police the Plaintiff's supply chain. 42! ! [109] This is precisely the enforcement of right that distinguishes a true franchise-type model from a conventional supplier-customer relationship. This strongly supports the conclusion that D1 exercised continuous operational control within the meaning of section 4(c). [110] In my considered view, the Defendants' attempt to narrow the purchasing restriction to toppings alone is irreconcilable with the express terms of the Draft Agreement the very instrument upon which they themselves relied when issuing the Warning Letter. The Draft Agreement plainly requires the Plaintiff to purchase the Defendants' products and related ingredients exclusively from the Defendants, and not from any third party. The defined term "Licensor's Products" is cast in broad and inclusive language, encompassing all manner of food, beverages and other products supplied by the Defendants from time to time. [111] The Defendants' contention that the word "stock" in the Warning Letter refers only to toppings is equally unsustainable. It is contradicted not merely by the language of the Draft Agreement, but by D3's own testimony, in which he conceded that "stock" encompassed toppings and other categories of goods, and was not confined to toppings alone. That admission extends across the entire spectrum of products supplied by D1. [112] Important to note that, the invoices issued by the third-party supplier upon which D1 based its allegations of breach includes a range of items that plainly fall outside any sensible definition of "toppings” including, inter alia, Jasmine Green Tea, Earl Grey Black Tea, purple 43! ! rice cans, and Korean Citron Tea. If the prohibition truly been confined to toppings as the Defendants contended, one would have expected the Warning Letter to say so in terms. Instead, the Defendants deliberately deployed the broader term "stock", which on any natural reading extends well beyond toppings. [113] In any event, D3 admitted under cross-examination that the Plaintiff was required to purchase "everything" from D1 so long as D1 was selling the item and it appeared in D1's Franchise Stock Price List (see B1, pp. 45 & 46). This admission, demonstrates the obligation imposed upon the Plaintiff. [114] Accordingly, I accept the Plaintiff's submission that the Defendants exercised continuous control over the Plaintiff's supply chain and purchasing decisions. Crucially, this control was enforced by issuing the Warning Letter alleging breach and threatening termination. The Defendants cannot be permitted to approbate and reprobate. They invoked the Plaintiff's breach when it served their interests, only to then downplay its significance and reach when the Plaintiff invokes that same obligation as proof of operational control within a franchise arrangement (see Prestaharta Sdn Bhd v Ahmad Kamal bin Md Alif & Ors [2016] 4 MLJ 39). I therefore find that this evidence strongly reinforces my conclusion that D1 exercised continuous operational control over the Plaintiff's business within the meaning of section 4(c) of the FA1998.

Imposition of Operational Policies 44! ! [115] The Plaintiff submitted that various new policies and operational rules were imposed during the operation of Beans Factory Cheras, including the following: i. all franchisees are required to make minimum order for the supply of food ingredients from D1 (B1, Pg. 45-46); ii. all franchisees are required to place such orders from D1 at least three (3) days prior to the expected delivery date (B1, Pg. 56); iii. all franchisees are required to settle the invoices within three

days after receiving the stocks (B1, Pg. 57); and iv. all franchisees to pay D1 for the supply and delivery of 780 paper bowls each month, wherein the volume is to be determined by D1 (B1, Pg. 58). [116] The Defendants denied that such policies were "imposed" on the Plaintiff. I have considered this point, and I find that the contemporaneous documentary evidence in the form of written notices issued by D1 speaks for itself. The issuance of operational policies and the requirement for compliance are consistent with the exercise of continuous control by a franchisor. [117] The operational notices relied on by the Plaintiff included minimum order requirements, ordering deadlines, payment terms, and monthly paper bowl quantities. The Defendants say these were either not proven, were hearsay, or were simply ordinary supplier terms. 45! ! [118] Nevertheless, when read with the broader contemporaneous correspondence and the parties’ own descriptions, I am satisfied that D1 did issue and communicate operating directions of a general nature to outlets trading under the Beans Factory banner. The repeated use of “franchise”, “franchisees” and “franchisor” in those notices is not determinative but it is relevant. More importantly, the notices reveal that D1 regarded itself as entitled to prescribe recurring ordering and supply practices for the outlet network. [119] D1 was not just selling goods to an independent trader. It was setting network-wide operating expectations for branded outlets and reserving to itself the right to relax or insist on compliance. That is consistent with franchise control. [120] The Defendants contend that, although the Plaintiff received multiple notices using the terms “franchise”, “franchisee” and “franchisor” (refer: B1, Pg. 45–58), these notices cannot demonstrate control, as the Plaintiff was allegedly exempted from strict compliance. [121] With respect I disagree. I agree with the Plaintiff that the notices prescribed detailed operational rules, including minimum ingredient orders, ordering timelines, payment deadlines, and mandatory monthly supplies of 780 paper bowls. Any deviation from these requirements was permitted only upon request or with the Defendants’ permission. These exceptions, specific to the Cheras branch due to operational constraints, such as freezer capacity, do not undermine the structured system of operational control. On the 46! ! contrary, the Defendants’ authority to grant exceptions underscores their ultimate control over the application of these policies.

Uniforms ! [122] The Plaintiff was required to purchase Beans Factory uniforms from D1 for use by its staff, which is consistent with the maintenance of a unified brand image which is another characteristic of a franchise system. [123] The Plaintiff alleges that D1 exercised control by requiring staff at the Cheras Shop to wear uniforms. DW1 explained that uniform requirements were intended solely to ensure consistency across outlets and to assist customers in identifying staff for service purposes. [124] Learned counsel for the Defendants submitted that without consistent monitoring or enforcement, a mere requirement to wear uniforms is insufficient to demonstrate operational control over day-to-day business operations. [125] Learned counsel submitted that no evidence, documentary or oral, indicate that DW1 enforced the uniform policy through warnings, sanctions, or penalties during the Cheras Shop’s 3 – 4 months of operation. Accordingly, learned counsel argued that the Plaintiff fails to discharge its burden of proving that uniform requirements amounted to “continuous control” under Section 4(c) of the FA 1998. 47! ! [126] In my considered view, the remaining indicators which includes staffing input, promotional restrictions, centralised social media, Foodpanda/Shopee onboarding, and the QR ordering issue are individually of mixed strength, but cumulatively helpful. [127] I find that the uniform issue shows a desire for standardised outward presentation. The staffing evidence shows that D3 was consulted about timing, duties and hiring content, though I accept that the Plaintiff still conducted interviews and made direct hiring decisions. The social-media evidence suggests that the Defendants wanted official public communications for the outlet to remain channelled through central accounts. The online-delivery evidence suggests at the least that the Defendants were treated as the coordinating authority for those platforms. [128] I do not rest my decision on any one of these matters in isolation. For example, the evidence does not prove that staffing was wholly controlled by D1, nor do I consider a mere dress requirement by itself decisive. But taken together with the stronger indicators already discussed above, they reinforce the conclusion that the Plaintiff was operating inside a controlled Beans Factory system rather than as a genuinely independent licensee. ! [129] Having considered the totality of the evidence, this Court finds that D1 exercised continuous control over the Plaintiff's business operations, encompassing the selection of the shop location, renovation and design, staff training and supervision, menu and pricing, ingredients sourcing and supply, operational policies, uniforms, promotional activities, and operational systems. Such 48! ! control was not merely ad hoc assistance or informal guidance but was systematic, pervasive and enforced through the threat of termination. [130] The Defendants' characterisation of their involvement as mere "advice, guidance and support" is inconsistent with the contemporaneous documentary evidence and the admitted facts. I find that Limb (c) of section 4 is satisfied. Limb (d): Payment of a fee or other form of consideration [131] The Defendants have admitted the satisfaction of Limb (d). The Plaintiff paid RM270,000.00 to D1 as the principal fee, together with ongoing royalty fees of 5% of gross monthly sales. Whether characterised as "franchise fees" or "licensing fees," the payments constitute consideration paid in return for the rights granted under Limbs (a) and (b) and the obligations under Limb (c). [132] Section 4(d) requires that, in return for the rights granted under paragraphs (a) and (b) and the obligation under paragraph (c), the franchisee is required to pay a fee or other form of consideration to the franchisor. [133] This limb is not seriously contested on the facts. The evidence is unequivocal: i. The Plaintiff paid the Franchise Fee of RM270,000.00 through five (5) separate tranches between 6 December 2022 and 17 January 2023, as evidenced by D1's Invoice No. 2022120401 49! ! dated 4 December 2022 and the corresponding Maybank transfer slips (B1, pg. 17–22); ii. The Plaintiff paid royalty fees totalling RM6,315.90 for the months of February to April 2023, calculated at 5% of gross monthly sales; iii. The Plaintiff additionally paid for ingredients, equipment, uniforms and packaging supplied by D1. [134] The Defendants' attempt to characterise these payments as mere licensing fees rather than franchise fees is misconceived. The statutory language in Section 4(d) requires only the payment of "a fee or other form of consideration." Whether the parties chose to label that payment as a "licence fee" or a "franchise fee" is immaterial to whether it falls within Section 4(d). What matters is that consideration moved from the putative franchisee to the putative franchisor in return for the rights granted and the controls imposed. That requirement is amply met on the evidence. Limb (d) is accordingly satisfied. Limb (e): The purpose of the franchise is the sale of goods or the provision of services [135] The Defendants have admitted the satisfaction of Limb (e). The purpose of the Beans Factory business at the Cheras Shop was the sale of desserts, food and beverages to the public. Limb (e) is satisfied. 50! ! [136] Having found that all five limbs of Section 4 of the FA 1998 are satisfied, this Court concludes, on the balance of probabilities, that the arrangement between the Plaintiff and D1 constitutes a franchise within the meaning of the FA 1998. [137] Accordingly, I answer the first issue in the Plaintiff’s favour: the arrangement between the Plaintiff and D1 was a franchise within the meaning of section 4 of the FA 1998. ISSUE 2: WHETHER THE FRANCHISE ARRANGEMENT IS VOID AND UNLAWFUL [138] Having determined under Issue 1 that the arrangement between the Plaintiff and D1 in respect of the Beans Factory business possessed all the essential characteristics of a franchise within the meaning of section 4 of the FA 1998, the natural and inevitable outcome which this Court must now address is whether such arrangement, being unregistered, is rendered void and unlawful by operation of statute. [139] The starting point must be the express language of the FA 1998 itself. Section 6(1) of the FA 1998 provides in unambiguous terms: "No person shall operate a franchise business unless the franchise is registered under this Act." [140] Section 6A of the FA 1998, which complements section 6(1), provides: "No franchisor shall sell a franchise to any person unless the franchise is registered under this Act." 51! ! [141] These two provisions, when read together, impose a clear and absolute statutory prohibition. Section 6(1) is directed at the act of operating a franchise business, while section 6A is directed at the act of selling a franchise. Prior registration is a sine qua non to the lawful operation and sale of any franchise in Malaysia. The use of the word "shall" in both provisions, coupled with the negative formulation "No person... unless," reflects a mandatory prohibition rather than a mere directory provision. The Legislature has thereby erected a statutory gatekeeping mechanism, the purpose of which is to ensure that prospective franchisees are protected from improperly structured franchise arrangements, and that the regulator is afforded the opportunity to vet and approve franchise systems before they are offered to the public. [142] Reverting to the instant case, it is common ground that the Beans Factory business was not registered as a franchise under the FA

Equally, D1 was not registered as a franchisor in respect of the Beans Factory business. Indeed, the Defendants' entire defence was that no registration was required because the arrangement was, in their characterisation, a mere licensing arrangement and not a franchise. [143] The Defendants' position is that the parties merely entered into a licensing arrangement whereby D1 permitted the Plaintiff to use the "Beans Factory" brand in exchange for what the Defendants term "Licensing Fees" of RM270,000.00. The Defendants strenuously contend that there was no franchise system, no franchisor-determined operational terms, and no continuous control exercised 52! ! by D1 over the Plaintiff's business operations. On this premise, the Defendants submitted that the question of registration simply does not arise, and consequently, sections 6(1) and 6A of the FA 1998 have no application. [144] The Plaintiff on the other hand submitted that once the arrangement is properly characterised as a franchise within the meaning of section 4 of the FA 1998 (as I have already found under Issue 1), the absence of registration triggers the statutory prohibitions under sections 6(1) and 6A, and the consequence in law is that the arrangement is void and unlawful. [145] The Plaintiff further relies on section 24 of the Contracts Act 1950 contending that an agreement which is forbidden by law, or whose object or consideration would, if permitted, defeat the provisions of any law, is unlawful and therefore void ab initio. [146] The situations where an agreement can be declared void are provided under Section 24 Contract Act 1950: “The consideration or object of an agreement is lawful, unless-

it is forbidden by a law;

it is of such a nature that, if permitted, it would defeat any law;

it is fraudulent;

it involves or implies injury to the person or property of another; or

the court regards it as immoral, or opposed to public policy. 53! ! In each of the above cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void.” [147] Learned counsel for the Plaintiff submitted that the present arrangement falls squarely within paragraphs (a) and (b) of section 24 of the Contracts Act 1950. The agreement to operate and sell an unregistered franchise is, on the Plaintiff's case, forbidden by law, specifically by sections 6(1) and 6A of the FA 1998. Further, even if it could not be said to be directly forbidden, the operation of such an arrangement would, if permitted, defeat the provisions of the FA 1998 by allowing parties to do indirectly that which the statute expressly prohibits. [148] I have considered this issue and I accept the Plaintiff's submission that the combined effect of sections 6(1) and 6A of the FA 1998 and section 24 of the Contracts Act 1950 is that an agreement to operate or sell an unregistered franchise is doomed from inception. It is not merely voidable at the option of one of the parties; it is void ab initio. The Plaintiff's authorities, which characterise such arrangements as void and unenforceable, accord with both the plain language of the statutes and the underlying legislative policy. [149] The Defendants, for their part, did not engage substantively with the operation of section 24 of the Contracts Act 1950. Their submissions on this point is that because the arrangement was a licence and not a franchise, section 24 has no application. But this argument, as I have already noted, depends entirely upon the success of the Defendants' characterisation argument under Issue 1, which has not been accepted by this Court. Once the arrangement is 54! ! characterised as a franchise, the Defendants offered no persuasive basis upon which the arrangement could nevertheless escape the operation of section 24. [150] Having found under Issue 1 that the arrangement between the Plaintiff and D1 constitutes a franchise within the meaning of section 4 of the FA 1998, and it being undisputed that the said franchise was not registered under the FA 1998, this Court accordingly declares that the arrangement between the Plaintiff and D1 is void and unlawful for contravention of sections 6(1) and 6A of the FA 1998, read together with section 24(a) and (b) of the Contracts Act 1950. [151] The legal consequences which flow from this declaration is that D1 cannot enforce any rights which arise solely from this unlawful franchise structure. The maxim ex turpi causa non oritur actio applies with full force in that a party cannot find a cause of action upon an unlawful act. [152] Further, the Plaintiff is, in principle, entitled to restitution under section 66 of the Contracts Act 1950 in respect of benefits paid or transferred under the void arrangement. Section 66 provides that when an agreement is discovered to be void, any person who has received any advantage under such agreement is bound to restore it, or to make compensation for it, to the person from whom he received it. [153] The application of section 66 to the various heads of claim advanced by the Plaintiff including the Franchise Fee of RM270,000.00, the Royalty Fees of RM6,315.90, the ingredients cost of RM18,567.50, and the uniform cost of RM1,576.00 must, however, be assessed 55! ! having regard to the ordinary restitutionary principles and the specific facts pertaining to each head of claim. Those matters will be addressed in detail in the relevant sections of this judgment dealing with the quantum of relief. ISSUE 3: MISREPRESENTATION, FRAUD AND DECEIT [154] I now turn to the Plaintiff's claims in misrepresentation, fraud, deceit and negligence. [155] The Plaintiff alleges that the Defendants, through D3 in particular, made fraudulent and/or negligent misrepresentations which induced the Plaintiff to enter into the arrangement. The misrepresentations alleged include, inter alia, that: a. D1 was the lawful owner of the franchise business of Beans Factory; b. D1 was entitled to grant a valid franchise; c. D2 was merely an employee of D1; and d. D3 was the sole founder of the Beans Factory brand and sole director and shareholder of D1. [156] The Plaintiff relies on the statutory definitions of "fraud" and "misrepresentation" found in sections 17 and 18 of the Contracts Act 1950 respectively. 56! ! [157] Pursuant to s.17 of the Contracts Act, fraud is established where a party to a contract, or his agent, acts with intent to deceive or to induce another to enter into a contract, including:

suggesting as a fact which is untrue by someone who not believed to be true;

actively concealing a material fact despite having knowledge or belief of it;

making a promise without any intention of performing it;

any act fitted to deceive; and

any act or omission which the law specifically declares to be fraudulent. [158] Section 18 of Contracts Act provides that misrepresentation includes:

making a positive assertion of fact that is untrue and not warranted by the maker’s information, even though he believes it to be true;

committing a breach of duty which, without intent to deceive, misleads another to his prejudice and gives an advantage to the person committing it or those claiming under him; or

innocently causing a party to the agreement to make a mistake as to the substance of the subject matter of the agreement. 57! ! [159] The Plaintiff also relied on the test for the tort of deceit as formulated by the Singapore Court of Appeal in!Panatron Pte Ltd & Anor v Lee Cheow Lee & Anor [2001] 3 SLR 405, tracing the lineage of the tort to Pasley v Freeman (1789) 3 TR 51, and crystallised by the House of Lords in Derry v Peek (1889) 14 App Cas 337, where Lord Herschell laid down the now-classic formulation that, to succeed, a plaintiff must prove that a false representation has been made (1) knowingly, or (2) without belief in its truth, or (3) recklessly, careless whether it be true or false. [160] The Plaintiff further invokes the elaboration by Lord Maugham in,! Bradford Third Equitable Benefit Building Society v Borders [1941] 2 All ER 205 where the essential elements of the tort were identified as follows: i. there must be a representation of fact made by words or conduct; ii. the representation must be made with the intention that it should be acted upon by the plaintiff; iii. the plaintiff acted upon the false statement; iv. the plaintiff suffered damage by so doing; and v. the representation must be made with knowledge that it is false, or wilfully false, or at least made in the absence of any genuine belief that it is true. 58! ! [161] The Defendants, for their part, mount a vigorous defence. They submitted that: a) no false representations were ever made and in the absence of such representations, the Plaintiff's claims for fraud and the tort of deceit fail at the threshold; b) the Plaintiff has failed to prove that the Defendants made the alleged representations; c) there was no inducement; d) PW1's own testimony defeats the claim for misrepresentation; and e) the Plaintiff's proposal to enter into a licensing agreement is inconsistent with an allegation of fraud and deception. [162] The Defendants placed strong reliance on the decision of the Federal Court in!Takako Sakao v Ng Pek Yuen & Anor [2010] 1 CLJ 381, where it was emphasised that "a plea of fraud at common law will not succeed absent proof of an intention to deceive." The Defendants stressed that common law fraud is distinct from equitable fraud, and that the higher threshold of an intention to deceive must be discharged. [163] The Defendants also cite Yeohata Machineries Sdn Bhd & Anor v Coil Master Sdn Bhd & Ors [2016] 2 CLJ 414, where the Court of Appeal reaffirmed the five essential elements of fraudulent 59! ! misrepresentation drawn from Derry v Peek and Bradford v Borders, and Victor Cham & Anor v Loh Bee Tuan [2006] 3 CLJ 770, where the Court of Appeal confirmed that fraudulent misrepresentation comes under the tort of deceit and the plaintiff must establish reliance on a false representation made knowingly or recklessly. [164] I have carefully considered the rival submissions, the documentary evidence, and the oral testimony of the witnesses. [165] I am satisfied on the evidence that the Plaintiff was induced to enter into the arrangement on the basis that it would be allowed to open and operate a branded Beans Factory outlet under a lawful business format supplied by D1. The evidence of the August 2022 meeting, the payment structure, the royalty model, the control features, the later notices, and the use of franchise terminology all support that inference. The Plaintiff did not walk into a simple trademark licence of the sort one might see where a small business buys permission to use a logo while otherwise remaining operationally independent. [166] The Plaintiff has pointed to a consistent pattern of contemporaneous documentation and communication in which the impugned arrangement was described in unmistakable franchise terms: a. the Beans Factory Franchise Stock Price List (B1, page 45); b. D1's Order Policy Notice (B1, page 56); c. D1's Payment Policy Notice (B1, page 57); 60! ! d. D1's Notice on Distribution of 780 Paper Bowls (B1, page 58); e. the WhatsApp communications between D3 and PW1, including the messages dated 5 December 2022, 13 January 2023, 3 February 2023, 11 February 2023, and 15 February 2023, in which D3 used terms such as "franchise", "franchising fee", "franchisor" and/or "franchisee" (B2, pages 11, 14, 16, 20, 21). [167] I find the Defendants' explanation that these documents were prepared and issued by an intern without their knowledge or approval to be unconvincing. The documents were issued under D1's letterhead and circulated not only to the Plaintiff but to other Beans Factory outlets. The absence of any contemporaneous retraction, clarification, or correction by D1, D2, or D3 amounts to an adoption and affirmation of the contents of the said notices. A director who allows an intern to issue policy notices on company letterhead, and who is aware of those notices, cannot disown them after the fact when it becomes convenient to do so. [168] I am unable to accept D3's explanation, given in cross-examination, that his use of the terms "franchise", "franchising fee", "franchisor", and "franchisee" was the product of a language barrier and that he intended only "partnership" (Lines 5–26, page 5, NOP 6). This explanation is contradicted by his own admissions acknowledging knowledge of Malaysian franchise registration requirements and the operational control features of the arrangement (Lines 11–37, page 6; Lines 2–36, page 7, NOP 4). It is also belied by the documentary 61! ! record, which reveals a clear and telling pattern: informal communications use the word "franchise", while formal documents (such as the Draft Licensing Agreement and the invoice of 4 December 2022) use the word "licence". The selective avoidance of the term "franchise" only in those documents where legal consequences could arise is itself indicative of awareness of the regulatory regime. I accept the Plaintiff's submission that the language-barrier explanation is an afterthought designed to shield the Defendants from liability for operating an unregistered franchise. [169] The question here is whether the Defendants represented to the Plaintiff that D1 was lawfully entitled to grant such a franchise. On that question, the cumulative weight of the documentary evidence, set against the regulatory backdrop of the FA 1998, leads me to conclude that the Defendants did so represent. [170] The next question is whether the representations were made with knowledge of their falsity, or recklessly without caring whether they were true or false, in accordance with the test in Derry v Peek and as restated in Panatron and Yeohata Machineries. [171] D3, as the principal human actor in the dealings with the Plaintiff, was responsible for the legal compliance of D1's business. The FA 1998 is a regulatory statute imposing registration requirements, and ignorance of statutory obligation, in the case of a person actively conducting himself as a franchisor, does not provide a refuge. D3's own evidence at trial, in which he admitted awareness of the distinction between a "franchise" and a "licence" and acknowledged knowledge of the operational control features inherent in franchise 62! ! structures, undermines the suggestion that he genuinely and honestly believed D1 was lawfully able to grant the rights it purported to grant. [172] I am prepared to find that the Plaintiff was misled and that the representations were at least made recklessly within the meaning of Derry v Peek, that is, without any genuine belief in their truth and without caring whether they were true or false. I am also prepared to find that D3, as the principal human actor in the dealings, bore personal responsibility for making or conveying those representations. [173] However, I stop short of a positive finding of deliberate fraud in the strictest sense as articulated in Takako Sakao. The evidential record reveals carelessness, opportunistic use of terminology, and a willingness to confer a business format without regulatory compliance. It does not, in my judgment, compel a finding that D2 and D3 set out from the very beginning with a fully formed dishonest design to defraud in the technical sense required for the gravest finding of deceit against all defendants personally. [174] Several considerations lead me to that conclusion. The use of the word "franchise" in commercial speech, while relevant, is not by itself conclusive of subjective dishonesty. The evidential picture surrounding D2's and D3's corporate roles was clouded, but not every inconsistency justifies the strongest fraud finding. In my judgment, I find that the arrangement was unlawful and that D1 must make restitution, without stretching the evidence beyond its proper limit. The standard for a finding of common law fraud, as the Federal Court emphasised in Takako Sakao, requires proof of an actual 63! ! intention to deceive-a standard which, on the facts before me, is not fully discharged. [175] That said, recklessness within the Derry v Peek formulation is itself sufficient to ground a finding of actionable misrepresentation in deceit, and I so find against D1 (through D3) and against D3 personally. [176] The Defendants argued that PW1 did not fully review the Draft Licensing Agreement when it was forwarded on 21 December 2022, and only sought legal advice approximately six months later in June 2023, and that this militates against a finding of inducement. They further argued that the Plaintiff's own proposal to enter into a licensing agreement is inconsistent with an allegation of fraud. [177] I am not persuaded by either argument. The evidence shows that D3 repeatedly postponed substantive discussions regarding the Draft Licensing Agreement. More significantly, the arrangement had already been substantially entered into by the time the Draft Licensing Agreement was forwarded. In this regard, the Plaintiff had already incorporated, rented the premises, commenced paying the Franchise Fee, and the renovation works had already begun. The Draft Licensing Agreement was presented as a formality to document an arrangement that had already been set in motion by D3's representations. [178] In any event, the test of inducement is whether the representation was a (not the sole) cause of the Plaintiff entering into the transaction. On the evidence, I am satisfied that the representations made by D3 that D1 owned, operated, and could lawfully confer the 64! ! Beans Factory franchise business were a material inducement to the Plaintiff parting with RM270,000.00, incurring renovation expenses, paying ongoing royalties, and committing to a lengthy commercial undertaking. [179] The Plaintiff additionally alleges that D2 and D3 misrepresented their respective positions in D1 that being D3 representing himself as the founder, director, and shareholder, when in truth D2 was the sole director and shareholder, and D3 was merely a representative and/or employee. This representation is supported by: a. D3's business card (B1, page 2), in which he held himself out as a principal of D1; b. the Warning Letter signed by D3 as "director" of D1 (B1, page 59); c. D2's admission during evidence that she did not inform the Plaintiff, PW1 or PW2 of her sole ownership of D1; and d. D3's own testimony in court claiming the Beans Factory business as his own. [180] This misrepresentation is, in my view, established. However, I bear in mind that the misrepresentation as to corporate roles must be measured against its causative significance. The arrangement would, in all likelihood, have been entered into regardless of who held the shares of D1, provided that D1 itself was held out as the relevant entity. The misrepresentation as to corporate roles is 65! ! therefore relevant context and it goes to the conduct of D2 and D3, but is not itself the primary engine of loss. [181] Applying the principles in Derry v Peek, Panatron, Bradford v Borders, Yeohata Machineries, Victor Cham, and Takako Sakao, and applying sections 17 and 18 of the Contracts Act 1950, I hold as follows: a. The Plaintiff has established actionable misrepresentation sufficient to support declaratory and restitutionary relief against D1 arising from the unlawful arrangement. b. The representations were made recklessly within the meaning of Derry v Peek, without any genuine belief in their truth, and they induced the Plaintiff to enter into the arrangement and to suffer loss. c. D3 was materially involved in conveying the impugned representations and bears personal responsibility for them. d. I am, however, not satisfied that the evidence establishes the strictest form of common law fraud, that is, a fully formed dishonest design to deceive within the meaning articulated in Takako Sakao against D2 in the same direct, personal way in which it has been established against D3. e. The Plaintiff therefore succeeds on Issue 3 on the footing of fraudulent/reckless misrepresentation against D1 and D3, but I make no separate affirmative finding of deceit against D2 on this issue alone. 66! ! ISSUE 4: LIFTING OF THE CORPORATE VEIL [182] The Plaintiff seeks a declaration that the corporate veil of D1 (Rins Holding Sdn Bhd) be lifted so as to render D2 (Nelly Leu Ruixin) and D3 (Soo Chock Xiong) personally and jointly liable, together with D1, for the losses suffered by the Plaintiff arising from the unlawful and unregistered franchise arrangement. The Defendants strenuously oppose this relief, contending that there is no basis whatsoever to pierce the corporate veil in the absence of fraud or improper conduct on the part of D2 and D3, and that the doctrine of separate legal personality must be respected. [183] The Plaintiff's submissions, may be summarised as follows: a. D2 and D3 carried on the business of D1 under the "Beans Factory" brand with the intent to defraud and/or for fraudulent purposes; b. D2 and D3 were the directing minds and the controlling will of D1 at all material times, and were directly and personally responsible for the false representations made to the Plaintiff, PW1 and PW2 which induced them to enter into the unlawful arrangement; c. D3 was the primary individual who negotiated with PW1 and PW2, made representations regarding the franchise, received the Franchise Fee on behalf of D1, and orchestrated the entire 67! ! arrangement which has been found to be void and unlawful for contravention of the Franchise Act 1998; d. D2 personally conducted the training of the Plaintiff's staff at the Cheras Shop on 13 and 14 February 2023 and supervised the operations of Beans Factory Cheras together with D1's employees from 15 February 2023 to 19 February 2023; and e. In the circumstances, the corporate veil of D1 ought to be lifted, and D2 and D3 ought to be held jointly and severally liable with D1 for the consequences of their fraudulent and unlawful conduct. [184] The Plaintiff invokes the doctrinal foundation laid down in!Salomon v A Salomon & Co Ltd [1897] AC 22 and the recognised exceptions to it. The Plaintiff relies, in particular, on the established jurisprudence which permits the lifting of the corporate veil where the company has been used as an instrument of fraud, or where individuals have used the company as a façade to perpetrate wrongdoing. The Plaintiff submitted that the present case falls squarely within those exceptional categories. [185] The Defendants submitted that: a. the doctrine of separate legal personality, as enshrined in Salomon v A Salomon & Co Ltd, is a foundational principle of company law which is not to be lightly disturbed; b. the corporate veil can only be lifted in exceptional and well-defined circumstances, principally where the company has 68! ! been used as a vehicle to perpetrate fraud or to evade existing legal obligations; c. since the Plaintiff has failed to establish fraud, deceit or dishonesty against D2 and D3 personally applying the strict standard of proof set out in Takako Sakao, there is no proper jurisdictional foundation upon which to lift the veil; d. D2's involvement was limited and operational and confined to training and short supervisory assistance and is not the kind of conduct which supports the drastic remedy of veil-piercing; e. D3 acted, at all material times, in his capacity as a representative of D1, and not in any personal capacity which would justify personal liability; f. to lift the veil in the absence of clear and cogent evidence of fraud would set a dangerous precedent and undermine commercial certainty. [186] The starting point of my discussion is of course,! Salomon v Salomon. A company is a separate legal entity, distinct from its directors and shareholders. The doctrine of separate legal personality is one of the cornerstones of modern commercial law, and it would be wrong to dilute that principle save in the most carefully defined circumstances. [187] It is, however, equally established that the veil may be lifted where the corporate form has been used as an instrument of fraud, or as 69! ! a façade or sham to conceal the true facts, or as a vehicle for the perpetration of wrongdoing. The question is whether the present case falls within such an exception. [188] The law on the lifting of the corporate veil is well-settled. The starting point remains Salomon v Salomon (supra). a company is a separate legal entity from its shareholders and directors. The exceptions to that principle are narrow. Veil-piercing is generally available where the corporate form has been used as an instrument of fraud or to evade existing legal obligations, or where the company is a mere façade concealing the true facts. [189] Having found under Issue 3 that the Plaintiff has not established deliberate fraud or deceit in the strict common law sense against D2 and D3 personally, I am bound to conclude that the conventional gateway for lifting the corporate veil, namely fraud or sham, is not made out on the evidence before me. The findings I have made are confined to actionable misrepresentation (including reckless misrepresentation) sufficient to support restitutionary relief against D1, and to D3's material involvement in the conveying of those representations. [190] The Plaintiff's claim against D2 stands on an even weaker footing. The evidence establishes that D2 conducted staff training and supervised operations between 13 and 19 February 2023. That is conduct entirely consistent with her role as an officer of D1, and falls well short of the threshold required to disregard her separate legal personality. The fact that she may have been the registered sole director and shareholder of D1 (a matter relevant to credibility under 70! ! Issue 3) does not, of itself, make her personally liable for the company's obligations. [191] As for D3, while I have found that he was the directing mind in conveying the impugned representations, I have specifically declined to find that he acted with a deliberate dishonest design. In those circumstances, it would be inconsistent and indeed inappropriate to impose joint and several personal monetary liability on him through the veil-piercing route. The Plaintiff's remedy lies in restitution and damages against D1, the contracting entity which received the Franchise Fee. [192] For the reasons set out above, the Plaintiff's application to lift the corporate veil of D1 and to impose joint and several personal liability on D2 and D3 is dismissed. The doctrine of separate legal personality is to be respected, and the Plaintiff's remedies are properly directed against D1. ISSUE 5: RELIEFS AND RESTITUTION ! [193] Having found that the arrangement is void and unlawful, the Plaintiff is entitled to restitution. The principle of restitution operates to restore the Plaintiff, so far as possible, to the position it would have been in had the unlawful arrangement not been entered into. [194] The Defendants submitted that even if the arrangement is a franchise, restitution requires mutuality — i.e., the Plaintiff must also return any benefits received from D1. Learned counsel for the Defendants argued that the Plaintiff’s entitlement to restitution must 71! ! be subject to set-off, in view of the multiple benefits it had enjoyed / received from D1, including but not limited to the renovation, equipment, furniture, fittings, POS system, ingredients and take-away packaging. [195] In RHB Bank Berhad v Travelsight (m) Sdn Bhd (no. Syarikat: 50037-a) & Ors [2014] MLJU 1467, Federal Court explained the remedy of counter restitution in the following manner: “[13] … Where a transaction is rescinded there must be full restitution on both sides. The defendant must make restitution to the claimant and the claimant will make counter restitution ... In short, rescission of a transaction requires mutual restitution by both parties. It is through restitution and counter-restitution that the effects of the transaction will be reversed and the parties put back to the position in which they were before they entered into it” (Duress, Undue Influence and Unconscionable Dealing, supra, paragraph 28-015). There must be mutual restitution. “There ought … to be a giving back and a taking back on both sides” (Newbigging v Adam

34 Ch D 582, 595 per Bowen L.J.). Money must be repaid and the property returned. Atlas/liquidators must make restitution of the purchase price before counter-restitution of the property. But in spite of the order dated 15.11.2002, Atlas/liquidators refused to refund the purchase price but yet claimed the property, which with respect was the exact scenario that Kang Hwee Gee J. said would not happen…” [196] Learned counsel for the Defendants also place reliance on the High Court case of Khor Yiap Seng (berniaga sebagai SD Pan Gourmet Resources) v Soo Geok Ki (berniaga sebagai Pan Ya Resources) & Ors [2023] MLJU 752 which similarly concerned dispute as to the nature of business arrangement, i.e. whether is a 72! ! franchise or licence. Although the Court found that the arrangement was a franchise and that the franchise fees ought to be returned, yet the Court held that such return is subject to deduction, The High Court held as follows: “[81]…On the contrary, the Plaintiff had accepted that he had moved into the renovated premise, he had commenced the Panya Bakery business, and the Defendants had delivered the bakery supplies throughout the entire time from the first day the Plaintiff was operating the bakery until the day he decided to close shop. It is my finding that this fact provided the Defendants with a clear defence to extinguish or reduce the Defendants’ liability to make restitution. … [84] Following the above findings, I declared that the Plaintiff is entitled to the return of the sum of RM350,000 that he has paid to the Defendants. [85] However, it is my ruling that the said sum shall exclude the sum for the provisions of the bakery food items supplied by the Defendants to the Plaintiff throughout the time when the bakery was in operation. I am satisfied through the evidence before me that the Defendants had supplied the provisions of the pastries and organic foods to the Plaintiff for the period 1/7/2019 to 15/7/2019 as showed by the invoices dated 1/7/2019 and 30/7/2019, with the total sum of RM81,734.08. Aside from that, as the parties were not disputing the fact that the Plaintiff had moved into the renovated and rented premise to commence the bakery business, I allow the Defendants’ claims of RM18,100 paid in advance for the said rented premise. [86] The said sum of RM81,734.08 and RM18,100 shall be deducted from the RM350,000, and the Plaintiff shall be entitled to the balance. This final sum shall be paid to the Plaintiff within 30 days from the date of the judgment.” 73! ! [197] Based on the above authorities, learned counsel for the Defendants submitted that both parties are required to restore the benefits they have respectively derived from the transaction. Restitution operates on the principle of mutuality to ensure that neither party is unjustly enriched at the expense of the other. [198] Accordingly, learned counsel emphasised that even assuming that element of “mutuality” does exist, any restitution that this Honourable Court may consider must be subject to a set-off in favour of D1, taking into account all benefits provided to the Plaintiff, including but not limited to renovation, equipment, furniture, fittings, ingredients, and take-away packaging. Failing to apply such a set-off would result in unjust enrichment of the Plaintiff. [199] This Court considers the following heads of claim:

Franchise/Licensing Fee of RM270,000.00 [200] The sum of RM270,000.00 was paid by the Plaintiff to D1 as consideration for the right to operate the Beans Factory business. The arrangement being void, the basis for this payment has wholly failed. The Plaintiff is entitled to restitution of this sum. However, the Court must consider whether any set-off or deduction is warranted to account for benefits received by the Plaintiff, including the use of D1's renovation, equipment, furniture and fittings, and the Beans Factory brand during the period of operation (approximately 15 February 2023 to 4 July 2023). 74! ! [201] The Defendants submitted that the licensing fee included the supply of renovation, equipment, furniture and fittings. The Plaintiff operated the Cheras Shop for approximately 4.5 months and subsequently reopened the same premises under a new brand, "Mr. Beannie Dessert," on 14 July 2023 — a mere 10 days after ceasing operations under the Beans Factory brand on 4 July 2023. The Defendants contended that the Plaintiff continued to utilise the renovation, furniture and fittings provided by D1 for the Mr. Beannie Dessert business, and that restitution, if ordered, must account for the benefits received and retained by the Plaintiff. [202] This Court acknowledges the principle of mutuality in restitution. Where an arrangement is declared void, restitution should ideally restore both parties, so far as possible, to their pre-contractual positions. However, the application of this principle must be tempered by the circumstances of the case, including the illegality of the arrangement and the respective culpability of the parties. [203] In the present case, it was D1, through D2 and D3, who orchestrated the unlawful franchise arrangement. The Plaintiff was the innocent party who was induced to enter into the arrangement. The FA 1998 is a regulatory statute enacted for the protection of franchisees, inter alia, by imposing registration requirements and disclosure obligations on franchisors. To deny the Plaintiff restitution on the basis of mutuality would defeat the protective purpose of the FA 1998 and would effectively reward the Defendants for their own unlawful conduct. [204] This Court is guided by the principle enunciated in Sinnaiyah & Sons Sdn Bhd v Damai Setia Sdn Bhd [2015] 5 MLJ 1, where it 75! ! was held that where a statute renders an agreement void for illegality, monies paid under such agreement are recoverable, particularly where the parties are not in pari delicto and where the statute was enacted for the protection of the class of persons to which the plaintiff belongs. [205] It is trite that, in such circumstances, the Defendants, as tortfeasors, are liable to compensate the Plaintiff for damages sufficient to place him in the position he would have been had the tort not been committed. Such damages include all expenditure reasonably and properly incurred as a direct consequence of the tort. (refer Abdul Razak bin Datuk Abu Samah v Shah Alam Properties [1999] 2 MLJ 500) [206] The applicable legal framework here is s.66 of the Contracts Act 1950 as affirmed by the Court of Appeal in Abdul Razak (Supra), which held that upon rescission of a contract induced by fraudulent misrepresentation, the Plaintiff is entitled to recover all expenditures reasonably and properly incurred as a consequence of the deceit. In the present case, such recoverable expenditures include the Franchise Fee of RM270,000.00, royalty fees of RM6,315.90, the initial ingredient payment of RM18,567.50, and the uniform payment of RM1,576.00. [207] Further and in any event, I agree with the Plaintiff’s stance that a party who has engaged in an illegal transaction ought not to be permitted to obtain restitutionary relief where such relief would defeat the purpose of the law prohibiting the illegality. In the present case, permitting D1 to claim set-off or counter-restitution 76! ! would effectively allow them to recover benefits obtained under the unlawful Agreement, thereby undermining the statutory scheme under the FA. Although framed as a claim for set-off or restitution, D1’s position is, in substance, an attempt to enforce or obtain credit for benefits arising from an illegal arrangement. This is impermissible. The Court should not lend its aid to a party seeking to rely on its own illegality. [208] In any event, the Defendants’ claim for set-off is barred by illegality. It is a trite principle that no court will lend its aid to a party whose cause of action is founded upon an illegal act (see: Tan Chee Hoe & Sons Sdn Bhd v Code Focus Sdn Bhd [2014] 3 CLJ 1; Dr HK Fong Brainbuilder Pte Ltd v SG-Maths Sdn Bhd & Ors [2021] 1 MLJ 54; and Tea Delights (M) Sdn Bhd v Yeap Win Nee [2016] 7 MLJcon 92) [209] In the circumstances, this Court finds that the Plaintiff is entitled to restitution of the sum of RM270,000.00. The Defendants' argument on mutuality does not operate to bar the Plaintiff's claim in circumstances where the Defendants were the architects of the illegal arrangement and the Plaintiff was the party whom the FA 1998 was designed to protect. [210] As regards the Defendants' contention that the Plaintiff continued to benefit from the renovation, furniture and fittings after ceasing the Beans Factory operations, this Court notes the following: 77! !

The renovation, furniture and fittings were provided as part of the unlawful franchise arrangement and were integrated into the Cheras Shop premises rented by the Plaintiff;

The Plaintiff had already paid for these items as part of the RM270,000.00 fee;

The Defendants did not adduce sufficient evidence to establish the residual value of the renovation, furniture and fittings at the time the Plaintiff ceased the Beans Factory operations; and

Any benefit derived by the Plaintiff from the continued use of the physical premises (as distinct from the Beans Factory brand and system) is incidental and does not warrant a reduction of the restitutionary sum, given that the Plaintiff bore the cost of rental independently. [211] Accordingly, this Court orders the Defendants to refund to the Plaintiff the sum of RM270,000.00.

Royalty Fees of RM6,315.90 [212] The Plaintiff paid royalty fees totalling RM6,315.90 to D1 for sales from February 2023 to April 2023. These royalty fees were paid pursuant to the unlawful franchise arrangement. The basis for such payment having failed by reason of the illegality and voidness of the arrangement, the Plaintiff is entitled to restitution of this sum. 78! ! [213] This Court orders the Defendants to refund to the Plaintiff the sum of RM6,315.90.

Ingredients Cost of RM18,567.50 ! [214] The Plaintiff paid RM18,567.50 for materials and stocks supplied by D1 for the training sessions and the initial stock required for the commencement of operations. [215] The Defendants submitted that the ingredients and stocks were supplied for the Plaintiff's use and were consumed in the course of operating the business. As such, the Plaintiff received the benefit of the goods supplied and is not entitled to a refund. [216] This Court considers this submission carefully. Unlike the franchise fee and royalty fees, the ingredients and stocks were tangible goods supplied and consumed by the Plaintiff in the course of business operations. The Plaintiff derived direct benefit from these goods. While the arrangement under which they were supplied is void, the Plaintiff cannot be said to have received no value for this expenditure. [217] However, this Court notes that the supply of ingredients was an integral part of the franchise arrangement. The Plaintiff was required to purchase ingredients exclusively from D1, and the pricing of such ingredients was determined by D1. Had the Plaintiff not been bound by the unlawful franchise arrangement, it would have been at liberty to source ingredients from any supplier at competitive market prices. The evidence also shows that the 79! ! Plaintiff lodged complaints regarding the quality and delivery of ingredients supplied by D1. [218] On balance, this Court finds that this claim for restitution of ingredients cost presents a more nuanced question. The ingredients were consumed and the Plaintiff derived value from their use. Accordingly, this Court declines to order full restitution of the ingredients cost of RM18,567.50. This head of claim is dismissed.

Uniform Cost of RM1,576.00 ! [219] The Plaintiff purchased Beans Factory uniforms from D1 amounting to RM1,576.00. These uniforms bore the Beans Factory branding and were required as part of the franchise system. Upon cessation of the Beans Factory business, the uniforms became of no practical use to the Plaintiff. [220] This Court finds that the uniforms were purchased pursuant to the unlawful franchise arrangement and are specific to the Beans Factory brand. Unlike consumable ingredients, the uniforms have no residual value to the Plaintiff outside the franchise arrangement. The Plaintiff is entitled to restitution of this sum. [221] This Court orders the Defendants to refund to the Plaintiff the sum of RM1,576.00. ! [222] In summary, the Plaintiff is awarded restitution in the following amounts: 80! ! No. Head of Claim Amount (RM) Awarded 1 Franchise/Licensing Fee 270,000.00 Yes 2 Royalty Fees 6,315.90 Yes 3 Ingredients Cost 18,567.50 No 4 Uniform Cost 1,576.00 Yes Total 277,891.90 ISSUE 6: THE COUNTERCLAIM [223] D1’s counterclaim sought, among other things, declarations entitling it to retain the RM270,000.00 and the royalty fees already paid, recovery of an outstanding royalty of RM2,443.00 for May 2023, recovery of RM16,327.00 said to be owing for takeaway packaging or ingredients, and substantial further sums for renovation costs, furniture, fixtures and fittings. It also alleged deceit by the Plaintiff, PW1 and PW2. [224] By way of Counterclaim, D1 alleges that the Plaintiff, PW1 and PW2 committed acts of fraud against D1 and seeks the following reliefs:

Outstanding royalty fees of RM2,443.00 for May 2023;

Outstanding ingredients fees of RM16,327.00;

Renovation costs; and

Cost of furniture, fixtures and fittings. 81! ! [225] The burden of proving the Counterclaim lies upon D1, on the balance of probabilities, pursuant to Section 101 of the Evidence Act 1950.

Outstanding Royalty Fees of RM2,443.00 ! [226] D1 claims outstanding royalty fees of RM2,443.00 for May 2023. The Defendants submitted that these royalty fees are due and payable pursuant to the arrangement between the parties. [227] I have found that the arrangement between the parties constitutes an unregistered franchise which is void and unlawful under the FA

A void arrangement cannot give rise to enforceable obligations. The royalty fees claimed by D1 were payable under the very arrangement which has been declared void. Accordingly, D1 has no legal basis to claim outstanding royalty fees under a void arrangement. [228] This head of the Counterclaim is dismissed.

Outstanding Ingredients Fees of RM16,327.00 ! [229] D1 claims outstanding ingredients fees of RM16,327.00 allegedly owed by the Plaintiff for ingredients supplied. [230] Unlike the royalty fees, which are inextricably linked to the franchise arrangement, the supply of ingredients involves the delivery of tangible goods. The supply of goods may give rise to an independent obligation to pay, separate from the franchise 82! ! arrangement, under the law of restitution or on a quantum meruit basis. [231] However, this Court notes that the mandatory sourcing of ingredients from D1 was a condition of the unlawful franchise arrangement and was enforced through D1's Warning Letter of 2 June 2023 threatening termination. The pricing of ingredients was unilaterally determined by D1 through the "Beans Factory Franchise Stock Price List." The Plaintiff was not at liberty to source ingredients from alternative suppliers at competitive prices. [232] In the circumstances, the supply of ingredients was so closely intertwined with the unlawful franchise arrangement that it cannot be severed and treated as an independent transaction. Furthermore, D1 did not adduce sufficient documentary evidence to substantiate the claim for RM16,327.00 with the necessary particularity including detailed invoices, delivery orders acknowledged by the Plaintiff, and proof that the goods were in fact delivered and accepted. [233] This head of the Counterclaim is dismissed.

Renovation Costs ! [234] D1 claims renovation costs incurred in fitting out the Cheras Shop. The Defendants submitted that the Plaintiff continued to enjoy the benefit of the renovation after ceasing the Beans Factory operations, having reopened the premises as "Mr. Beannie Dessert." 83! ! [235] I found earlier that the renovation was provided as part of the unlawful franchise arrangement and was included within the RM270,000.00 fee paid by the Plaintiff. The Defendants admitted that they were responsible for the renovation as part of the "licensing package." Having already received RM270,000.00 from the Plaintiff (which included the cost of renovation), D1 cannot now separately claim the renovation costs as an independent head of loss. [236] Furthermore, D1's claim for renovation costs is premised on the Plaintiff's alleged continued use of the renovation after ceasing the Beans Factory business. However, the renovation was carried out on premises rented by the Plaintiff. The renovation works, once completed and affixed to the premises, became part of the Plaintiff's leased premises. D1 did not retain any proprietary interest in the renovation works, and there was no agreement (whether in the Draft Licensing Agreement or otherwise) requiring the Plaintiff to dismantle or return the renovation works upon termination. [237] This head of the Counterclaim is dismissed.

Cost of Furniture, Fixtures and Fittings ! [238] D1 claims the cost of furniture, fixtures and fittings supplied to the Cheras Shop. Similar to the renovation costs, the Defendants submit that these were provided as part of the licensing package and that the Plaintiff continued to use them after cessation of the Beans Factory business. 84! ! [239] This Court again notes that the furniture, fixtures and fittings were provided as part of the RM270,000.00 fee, which the Defendants themselves characterise as the "licensing fee" encompassing these items. D1 cannot claim separately for items already paid for by the Plaintiff as part of the lump sum fee. [240] Moreover, D1 has not established a legal basis for the recovery of furniture, fixtures and fittings. There was no executed agreement requiring the return of such items. The Draft Licensing Agreement was never signed by the parties. In the absence of any contractual or proprietary basis, D1's claim for the cost of furniture, fixtures and fittings must fail. [241] This head of the Counterclaim is dismissed.

Fraud by the Plaintiff, PW1 and PW2 [242] D1 alleges that PW1 and PW2 committed fraud against D1. The Defendants contend that the Plaintiff's claim is a mere afterthought, contrived only after D1 discovered that the Plaintiff had sourced substitute toppings from a third-party supplier, and that within 10 days of ceasing the Beans Factory operations, the Plaintiff reopened the Cheras Shop under its own brand. The Counterclaim is also brought against PW1 (William Chung Fui Ching) and PW2 (Eu Suk Hee) personally, in their capacity as directors and/or shareholders of the Plaintiff. [243] There is no basis whatsoever in law or on the evidence to fix PW1 and PW2 with personal liability in respect of any of the heads of 85! ! claim advanced by D1. D1 has not pleaded, much less proven, any factual matrix justifying the lifting of the corporate veil of the Plaintiff. The principle in Salomon v A Salomon remains good law and is reflected in section 20 of the Companies Act 2016. [244] The bare allegation of "fraud" against PW1 and PW2 in D1's Counterclaim is unparticularised and unsupported by any cogent evidence. PW1 and PW2 acted at all material times as officers of the Plaintiff company, and there is no evidence that they used the corporate form as a sham or facade to perpetrate fraud upon D1. [245] Indeed, the evidence at trial established the contrary: it was PW1 and PW2 who were misled into believing that the arrangement constituted a valid franchise, and who paid the substantial sum of RM270,000.00 in reliance upon that belief. The suggestion that they perpetrated fraud upon D1 is, with respect, untenable. [246] Accordingly, the Counterclaim against PW1 and PW2 personally is dismissed. [247] To establish fraud, D1 must prove:

a false representation of fact by the Plaintiff, PW1 and/or PW2;

made with knowledge of its falsity or recklessly;

with the intention that it be acted upon by D1; and 86! !

that D1 did in fact act upon the representation and suffered damage. [248] D1 has not established any of the requisite elements of fraud. The evidence shows that:

The Plaintiff entered into the arrangement in good faith, paying RM270,000.00 and operating the Beans Factory business for approximately 4.5 months;

The Plaintiff's decision to source substitute toppings from a third-party supplier was prompted by complaints regarding the quality and delivery of ingredients supplied by D1;

The Plaintiff ceased the Beans Factory operations upon legal advice that the arrangement was unlawful;

The Plaintiff's subsequent opening of "Mr. Beannie Dessert" was a commercially rational decision to mitigate its losses, given that it was bound by a tenancy agreement for the Cheras Shop premises and had incurred substantial costs; and

D1 has not proven that any representation by PW1 or PW2 was false, or that such representation induced D1 to enter into or continue the arrangement. [249] The Defendants' characterisation of the Plaintiff's actions as "fraud" is wholly unsubstantiated. The Plaintiff's conduct is entirely 87! ! consistent with a party that discovered the unlawfulness of the arrangement and took steps to protect its legitimate interests. [250] D1's claim for fraud is dismissed. ! [251] Having considered the totality of the evidence, this Court finds that D1 has failed to establish any of the heads of its Counterclaim on the balance of probabilities. The Counterclaim is dismissed in its entirety. [252] Before I conclude, I find it apposite that I address several particular arguments that featured prominently. [253] First, the Defendants placed great reliance on the proposition that the Plaintiff made independent decisions on matters such as plumbing, toilet issues, temporary closure and other day-to-day incidents. I accept that the Plaintiff did exercise some ordinary managerial autonomy. But franchise control does not mean the franchisee becomes incapable of ordinary decisions. The statutory question is whether the franchisor retained the right of continuous control over the business model and material operations. That threshold can be met even though the outlet operator still handles routine local matters. [254] Secondly, the Defendants argued that the Plaintiff voluntarily sought guidance from D1 and therefore cannot transmute requested advice into evidence of control. There is force in the reminder that not every answer to an inquiry becomes a command. However, a relationship may still be one of franchise control where the franchisee repeatedly 88! ! has to go back to the brand owner because the brand owner has reserved authority over key matters. The question is not who asked the first question in a WhatsApp exchange. The question is who had the final say on the subject matter and whether that final say was reserved as of right. [255] The Defendants placed considerable emphasis on the fact that within ten days of ceasing operations on 4 July 2023, the Plaintiff reopened the Cheras Shop on 14 July 2023 under the brand "Mr. Beannie Dessert". The Defendants invited the Court to draw adverse inferences from this fact in support of their Counterclaim. [256] I have considered this contention but find it to be without legal merit in the context of the Counterclaim. [257] The Counterclaim is not, in substance, an intellectual property infringement action. D1 has not pleaded a coherent cause of action in passing off, copyright infringement, or trade mark infringement. The claim for "continued use" is essentially a contractual claim arising from the franchise/licensing arrangement. [258] Once the franchise arrangement is held to be illegal and void, the contractual restrictions purporting to prohibit the Plaintiff from continuing in the dessert business (or from using similar menu items or layouts) become equally unenforceable. D1 cannot derive enforceable contractual rights from a void agreement. [259] Insofar as D1 may have any common law rights in respect of its menu, recipes or brand elements, those rights would have to be asserted by way of properly pleaded and proven causes of action 89! ! grounded in intellectual property law, not by way of an omnibus claim under a void franchise arrangement. D1 has not done so. [260] The mere fact of the Plaintiff's reopening under a different brand within ten days of cessation may, at most, be relevant to the Defendants' allegations regarding the Plaintiff's motives. However, it does not, of itself, give rise to any enforceable claim against the Plaintiff in the context of this Counterclaim. [261] For the foregoing reasons, I conclude with respect to D1’s counterclaim as follows: a. The arrangement between the Plaintiff and D1, having been held to constitute an unregistered franchise contrary to section 6 of the FA 1998, is illegal and void; b. Each head of claim in D1's Counterclaim being the royalty fees, ingredients fees, renovation costs, and costs of furniture, fixtures and fittings is inextricably founded upon the illegal arrangement and cannot be enforced by this Court; c. The claim against PW1 and PW2 personally is unsustainable in the absence of any pleaded or proven basis for lifting the corporate veil of the Plaintiff; d. The principle of mutuality in restitution, properly applied in light of the policy of the FA 1998, does not assist D1; and e. The allegations concerning the Plaintiff's continued use of D1's menu and brand elements in the operation of "Mr. Beannie 90! ! Dessert" do not give rise to any enforceable cause of action in the context of this Counterclaim. f. Accordingly, D1's Counterclaim against the Plaintiff, PW1 and PW2 is dismissed in its entirety with costs.

! [262] In light of the foregoing, this Court makes the following orders: Original Action a. It is declared that the agreement and arrangement between the Plaintiff and D1 for the operation of the Beans Factory dessert business constitutes a franchise within the meaning of Section 4 of the FA 1998. b. It is declared that the said franchise arrangement is void and unlawful for contravention of Sections 6(1) and 6A of the FA

c. The Plaintiff's application to lift the corporate veil of D1 and to impose joint and several personal liability on D2 and D3 is dismissed. d. It is ordered that the D1, shall pay to the Plaintiff the following sums by way of restitution: i. RM270,000.00 (franchise/licensing fee); ii. RM6,315.90 (royalty fees); and 91! ! iii. RM1,576.00 (uniform cost), e. It is ordered that interest at the rate of 5% per annum on the sum of RM277,891.90 shall run from the date of filing of this action (10 August 2023) until the date of full realisation. f. The Plaintiff's claim for restitution of ingredients cost of RM18,567.50 is dismissed. Counterclaim: g. D1's Counterclaim against the Plaintiff, PW1 (William Chung Fui Ching) and PW2 (Eu Suk Hee) is dismissed in its entirety. [263] The D1 shall pay costs to the Plaintiff in respect of the Original Action and Counterclaim in the sum of RM 20,000.00. [264] Accordingly, judgment is entered for the Plaintiff in the Original Action in the sum of RM277,891.90, together with interest and costs, and D1's Counterclaim is dismissed with costs. Dated this day of 20th May 2026. -Sgd-EDWIN PARAMJOTHY MICHAEL MUNIANDY JUDICIAL COMMISSIONER COMMERCIAL DIVISION (NCC 7) HIGH COURT OF MALAYA KUALA LUMPUR 92! ! Counsel: For the Plaintiff : Chia Hui Ming and Ivy Chin (Messrs. Chia Hui Ming & Co.) For the Defendants : Lai Yee Fan and Bennis Lee Kah Xin (Messrs. Benjamin Tan & Co.)