WPP Business Services Sdn. Bhd. v Cosmopolitan Avenue Sdn. Bhd. (B52NCC-145-07/2020)

Content

1 IN THE SESSIONS COURT AT SHAH ALAM IN THE STATE OF SELANGOR DARUL EHSAN, MALAYSIA SUIT NO.: BA-B52NCC-145-07/2020 BETWEEN WPP Business Services Sdn. Bhd. (Company No.: 1132676-K (201501007343)) … Plaintiff AND Cosmopolitan Avenue Sdn. Bhd. (Company No.: 888713-V (201001004123)) … Defendant GROUNDS OF JUDGMENT A. Introduction [1] This is an application by Plaintiff for summary judgment against the Defendant under Order 14 Rule 1 of the Rules of Court 2012 for the following prayers:

Preamble

Pursuant to the Settlement Letter, the Defendant who is the Landlord had refunded half of the deposit of the Tenancy Agreement amounting to RM1,058,690.76 via an Ambank cheque no. 855860 dated 24.11.2019 to the Plaintiff (the Tenant). On 13.1.2020, the Defendant drew and sent another six (6) Ambank post-dated cheques made payable to the Plaintiff as per the terms of the Settlement Letter. However, the Plaintiff could only encash three cheques as the last three instalments of RM 00,000 each by way of post-dated cheques no. 855864, 855865 and 855866 dated 31.3.2020, 30.4.2020 and 31.5.2020 respectively were unilaterally cancelled by the Defendant. C. The Defendant’s objection [5] The Plaintiff had taken possession of the Demised Premises since July and August 2018. The Plaintiff claimed that the Demised Premises was defective and unsafe for occupation and failed to make payment of any service charges and rent since October 2018. The complaints were denied by the Defendant. As a result of the Plaintiff’s refusal to do the payment and numerous complaints, the Defendants has suffered cash 3 flow problems and both parties had agreed to negotiate for settlement. Thus, the Settlement Agreement was entered. [6] The Defendant argues that with the enforcement of Covid-19 Act 2020, they are not liable to pay the remaining payment as recorded in the Settlement Agreement as it has been frustrated and void under section 57(2) of Contracts Act 1950. The impact of the pandemic Covid-19 and the imposition of Movement Control Order, Conditional Movement Control Order and Recovery Movement Control Order from 18.3.2020 to 31.12.2020 have caused the Defendant’s construction projects halt completely. The Defendant has also not been able to lease out the Demised Premises previously let out to the Plaintiff except for one floor at below market. This situation, thus, worsen their financial situation to pay the remaining payment. D. The law on summary judgment [7] As have been decided in many landmark cases on summary judgment, the burden is on the Plaintiff to prove that the Defendants have no defence on the Plaintiff’s claim. In the case of Cempaka Finance Bhd. v. Ho Lai Ying & Anor [2006] 3 CLJ 544, the Federal Court has stated as follows, ".........In an application under Order 14 RHC, the burden is on the Plaintiff to establish the following conditions: (i) that the Defendant must have entered an appearance; (ii) that the statement of claim must have been served on the Defendant; and (iii) that the Affidavit in Support must comply with Rule 2 of Order 14 RHC in that it must verify the facts on which the claim is based and must state the deponent's belief that there is no defence to the claim. Once those conditions are fulfilled, the burden then shifts to the Defendant to raise triable issues. The law on this is trite..”. 4 [8] All the three requirements stipulated in the above case has been satisfied on prima facie by the Plaintiff and the Defendants did not make any issue on the prerequisite of Order 14. Having satisfied the requirements, it is the duty of the Defendants to prove that there is a triable issue and in their defence, the defence must be a real or bona fide defence as stated in the Court of Appeal case, Syarikat Kerjasama Serbaguna Tunas Muda Sungai Ara v. Ghazali bin Ibrahim [1985] 1 LNS 33; [1985] 2 MLJ 225 “However, in my opinion, this is essentially a case where the triability of the issue depends upon evidence as opposed to law. The facts and circumstances as deposed and found in the affidavits filed therein are sufficient to settle the issue. Here I would adopt the statement in the judgment of Ackner L.J. in Banque de Paris v de Naray [1984] 1 Lloyd's Rep 23 to the following effect: "It is of course trite law that 0.14 proceedings are not decided by weighing the two affidavits. It is also trite that the mere assertion in an affidavit of a given situation which is to be the basis of a defence does not, ipso facto, provide leave to defend; the Court must look at the whole situation and ask itself whether the defendant has satisfied the Court that there is a fair or reasonable probability of the defendant's having a real or bona fide defence.". D. Findings of court [9] I cannot but agree with the contention of the Defendant that many business projects have to be suspended or stopped temporarily due to the Covid-19 pandemic and the imposition of the said MCO, CMCO and RMCO. Prevention And Control Of Infectious Diseases (Measures Within The Infected Local Areas) Regulations 2020 has come into effect on 18.3.2020 and the imposition of the MCO, CMCO and RMCO have been extended since then. [10] In considering whether the doctrine of frustration applicable to the 5 Defendant, I have referred the judgment in the High Court case in Jelas Kurnia Sdn Bhd v. Loh Yuen Seng [2020] 1 LNS 434 at page 10-12 which states as follows, “[25] In Guan Aik Moh (KL) Sdn Bhd & Anor v. Selangor Properties Bhd [2007]3 CLJ 695, the principles pertaining to the doctrine of frustration of a contract were elucidated by Gopal Sri Ram JCA (as he then was) in the following passage: It follows from the foregoing authorities that there are three elements woven into the fabric of the doctrine embodied in s. 57. First, the event upon which the promisor relies as having frustrated the contract must have been one for which no provision has been made in the contract. If provision has been made then the parties must be taken to have allocated the risk between them. Second, the event relied upon by the promisor must be one for which he or she is not responsible. Put shortly, self-induced frustration is ineffective. Third, the event which is said to discharge the promise must be such that renders it radically different from that which was undertaken by the contract. The court must find it practically unjust to enforce the original promise. If any of these elements are not present on the facts of a given case, then s. 57 does not bite. [26] I am guided also by the Federal Court in Goh Yew Chew & Anor v. Soh Kian Tee [1969] 1 LNS 47; [1970] 1 MLJ 138 in the following words of Azmi LP: The doctrine of frustration is relevant when it is alleged that a change of circumstances after the formation of the contract renders it physically or commercially impossible to fulfil the contract. The doctrine is not concerned with initial impossibility which renders a contract void ab initio, as where a party to a contract undertakes to perform an act which, at the time the contract is made, is physically impossible according to existing scientific knowledge and achievement. [Emphasis added.] [27] The doctrine of frustration, therefore, 'operates to excuse from further performance where (1) it appears from the nature of the contract and the surrounding circumstances that the parties have contracted on the basis that some future event, which forms the basis of the contract, will take place; and

Schedule

SCHEDULE [Section 7] 1. LIST OF CATEGORIES OF CONTRACTS Construction work contract or construction consultancy contract and any other contract related to the supply of construction material, equipment or workers in connection with a construction contract 2. Performance bond or equivalent that is granted pursuant to a construction contract or supply contract 3. Professional services contract 4. Lease or tenancy of non-residential immovable property 5. Event contract for the provision of any venue, accommodation, amenity, transport, entertainment, catering or other goods or services including, for any business meeting, incentive travel, conference, exhibition, sales event, concert, show, wedding, party or other social gathering or sporting event, for the participants, attendees, guests, patrons or spectators of such gathering or event 7 6. Contract by a tourism enterprise as defined under the Tourism Industry Act 1992 [Act 482] and a contract for the promotion of tourism in 7. Malaysia Religious pilgrimage-related contract”. [12] The Defendant has begun to default on the remaining payment in March 2020 until May 2020. The Plaintiff has filed this application on 16.7.2020 which is after 18.3.2020 whilst the Covid-19 Act came into force on 23 October 2020. By virtue of subsection 5(1) of Part II The Covid-19 Act, the Covid-19 Act operates retrospectively from 18 March 2020 until 31 December 2020 and may be extended further as stipulated on subsection 5(1) of the same Act, “Commencement of this Part 5. (1) This Part is deemed to have come into operation on 18 March 2020 and shall continue to remain in operation until 31 December 2020. (2) The Minister may, by order published in the Gazette, extend the operation of this Part, the extension of which shall not exceed the period of operation of this Act provided in subsection 1(2) or any extended period under subsection 1(3), as the case may be. …”. This means that any legal proceeding commences between 18 March 2020 and the date of the publication of The Covid-19 Act on 23.10.2020 will not be affected by section 7 and parties would still be allowed to exercise their rights under the Settlement Agreement even if the Defendant’s business was affected by the measures taken under the MCO, CMCO and RMCO. [13] To deny its obligation under the Settlement Agreement, the Defendant argues that the Plaintiff’s cause of action arising from the tenancy dispute and falls under the Schedule. The Plaintiff argues that its cause of action derives from the three dishonoured cheques and the Defendant has failed to 8 prove that the dishonoured cheques were issued on either the three elements as follows: (i) illegality; (ii) total failure of consideration; and (iii) fraud as stated in the case of Development & Commercial Bank Bhd. v. Brimal Sdn. Bhd. & Anor. [1991] 2 CLJ (Rep) 554 at pp.557-558. [14] Based on the affidavits filed herein, the Settlement Agreement was recorded on 18.11.2019, after long negotiations to settle the disputes between both parties which arose from the Tenancy Agreement as the Plaintiff has made several complaints of the defects and the safety of the Demised Premises for occupation. The Settlement Agreement has also recorded that the Tenancy Agreement is mutually terminated on 15.10.2019 and the Defendant had agreed to refund the rental deposit and for the additional payment for the purchase of fixtures and furniture on the demised premise for specific amounts stated in the Settlement Agreement. To fulfil its obligation under the Settlement Agreement, the Defendant had issued six post-dated cheques. [15] In my opinion, the Tenancy Agreement had been terminated and clause F in the Settlement Agreement provides for FULL AND FINAL SETTLEMENT provision is applicable in this claim. Clause F (i) clearly stated that “ …. will, all and any disputes between the Parties arising from the Tenancy Agreement be deemed fully and finally settled…..” and the Plaintiff is now enforcing its right under clause F (j) of the Settlement Agreement by electing to initiate this action under section 57(a)(ii) of the Bills of 9 Exchange Act 1949 or alternatively pursuant to Section 11 of the Civil Law Act not under the Tenancy Agreement, “(j) In the event that either party breaches or fails to comply with any one or more of the terms stipulated in paragraph 3(B)(b)- (e), 3(C)(f) and 3(D)(g) of this Letter, the innocent party can elect to take such remedies as provided for under the law and/or the Tenancy Agreement.”. [16] Sections 10 and 7 of the Covid-19 Act do not prevent the Plaintiff from instituting this action against the Defendant for an agreement not specified in the said Schedule. The Defendant has failed to prove that the Settlement Agreement falls under any of the category specified in the Schedule of section 7 The Covid-19 Act. Thus, doctrine of frustration does not apply for the remaining payment as agreed in the Settlement Agreement as it is the Defendant who has breached the Settlement Agreement by dishonouring the three post-dated cheques. The Federal Court case in Pacific Forest Industries Sdn Bhd & Anor v Lin Wen-Chih & Anor [2009] 6 MLJ 293 has said as follows, “[22] A contract does not become frustrated merely because it becomes difficult to perform. If a party has no money to pay his debt, it cannot be considered impossible to perform as it is not frustration. Neither can he plead frustration because the terms of the contract make it difficult to interpret.”. [17] In addressing the inability of the Defendant to perform its contractual obligation, I find that the Defendant has admitted their indebtness in paragraph …10 (a) of their Afidavit Balasan affirming that “Bagi pihak Defendan, Defendan dulu dan kini benar-benar bersedia untuk memenuhi obligasi pembayarannya di bawah Surat Penyelesaian…”, and in paragraph 10 (d), “Saya 10 difahamkan pihak-pihak menyetujui pemulangan wang dan pembayaran melalui ansuran kerana Plaintif mengetahui Defendan adalah syarikat yang banyak bergantung kepada aliran tunai untuk memenuhi obligasi pembayarannya.”. The Defendant has also affirmed that the impact of the disease virus Covid-19 has affected its business tremendously. [18] The legal burden now is shifted on the Defendant to prove the existence of those facts under section 101 of the Contracts Act 1950 and was explained in the Federal Court case of Hong Yik Trading v. Liziz Plantation Sdn Bhd [2017] 8 CLJ 491 as follows: “[12] It is settled law that the burden of proof rests throughout the trial on the party who asserts that the facts exist (section 101 of the Evidence Act 1950). Where a party on whom the burden of proof lies has discharged that burden, then the evidential burden shifts to the other party. However, if the party on whom the burden of proof lies fails to discharge it, the other party need not call any evidence.”. This court has a duty to weight and access each evidence adduced even by way of affidavit including any contemporaneuos documents to support the averments made by a deponent. The Court of Appeal in Guan Teik Sdn Bhd v. Hj Mohd Noor Hj Yakob & Ors [2000] 4 CLJ 324 held as follows, “Held: Per Siti Norma Yaakob JCA: [1] Where conflicting evidence is presented, it is the duty of the court not only to weigh such evidence on a balance of probabilities but also to look at all the surrounding factors and to weigh and evaluate the contemporaneous documents that may tend to establish the truth or otherwise of a given fact. [2] The trial judge erred when he failed to direct his mind to the probative effect of the contemporaneous documents.”. I have perused the said Afidavit Balasan Defendan and found no evidence to convince me that the Defendant is facing financial difficulties as a result of their business suspension or discontinuance and cash flow problems. 11 [19] The Defendant has contended that a summary judgment allowing the remaining payment to be made to the Plaintiff would be in conflict with the public policy and drawn my attention to the High Court case of Banque Nasionale De Paris v. Wuan Swee May & Anor [2004] 4 CLJ 387 which explains the consideration to be taken on the issue of public policy as follows, “… So, when a Malaysian court is considering the issue of public policy in Malaysia, it should look at Malaysian law, Malaysian government policy, Malaysian moral values and all other relevant factors then prevailing in Malaysia, including what I have mentioned earlier. I know that some people may not feel comfortable with the use of the words "government policy". In my view, it is a relevant factor. I am also of the view that it is wrong to "marginalise" government policies in considering what is the public policy in Malaysia. Who can better claim to represent the public than a democratically elected government? Who is more responsible for the welfare of the people and the country than the government of that country? Who is more responsible for the law and order, economy, education and indeed everything affecting the people and the country, than the government of that country?”. [20] Since initially virus covid-19 emerged in Malaysia, Government of Malaysia has made several policies not only to curb the spread of the virus in the public and community but also the impact it has on our business and economy sectors. The Government has taken measures to stimulate the economy and support many businesses to adapt in a new norm to deal with the impact of virus Covid-19 and enacted the Covid-19 Act. As stated in the Explanatory Statement to the Covid-19 Bill, the Covid-19 Act was enacted among others to support the economy recovery and to mitigate financial impact due to Covid-19. As there is a specific statute enacting this issue, the statute should be construed as a whole and to read its object and purpose 12 which is well explained in the Federal Court case, Master Mulia Sdn Bhd v. Sigur Rus Sdn Bhd [2020] 9 CLJ 213 as follows, “[27] In construing a statute, effect must be given to the object and intent of the Legislature in enacting the statute. Accordingly, the duty of the court is limited to interpreting the words used by the Legislature and to give effect to the words used by it. The court will not read words into a statute unless clear reason for it is to be found in the statute itself. Therefore, in construing any statute, the court will look at the words in the statute and apply the plain and ordinary meaning of the words in the statute. Second, if, however the words employed are not clear, then the court may adopt the purposive approach in construing the meaning of the words used. This is consonant with s. 17A of the Interpretation Acts 1948 and 1967 which provides for a purposive approach in the interpretation of statutes. Therefore, where the words of a statute are unambiguous, plain and clear, they must be given their natural and ordinary meaning. The statute should be construed as a whole and the words used in a section must be given their plain grammatical meaning. It is not the province of the court to add or subtract any word; the duty of the court is limited to interpreting the words used by the Legislature and it has no power to fill in the gaps disclosed. Even if the words in a statute may be ambiguous, the power and duty of the court "to travel outside them on a voyage of discovery are strictly limited." Third, the relevant provisions of an enactment must be read in accordance with the legislative purpose and apply especially where the literal meaning is clear and reflects the purposes of the enactment. This is done by reference to the words used in the provision; where it becomes necessary to consider every word in each section and give its widest significance. An interpretation which would advance the object and purpose of the enactment must be the prime consideration of the court, so as to give full meaning and effect to it in the achievement to the declared objective. As such, in taking a purposive approach, the court is prepared to look at much extraneous materials that bear on the background against which the legislation was enacted. It follows that a statute has to be read in the correct context and that as such the court is permitted to read additional words into a statutory provision where clear reasons for doing so are to be found in the statute itself (Tunku Yaacob Holdings Sdn Bhd v. Pentadbir Tanah Kedah & Ors [2015] 3 CLJ 1017; [2016] 1 MLJ 200 (FC); Kesatuan Pekerja-Pekerja Bukan Eksekutif Maybank Bhd v. Kesatuan Kebangsaan Pekerja-pekerja Bank & Anor [2017] 4 CLJ 265 (FC); Merck KGaA v. Leno Marketing (M) Sdn Bhd, Registrar of Trade Marks (Interested Party) [2018] 6 CLJ 167 (FC); Fairise Odyssey (M) Sdn Bhd v. Tenaga Nasional Bhd [2019] 8 CLJ 20 (FC); Ireka Engineering & Construction Sdn Bhd v. Pwc Corporation Sdn Bhd & Other Appeals [2020] 1 CLJ 193; [2019] 6 MLRA (FC); Jack-In Pile (M) Sdn Bhd v. Bauer (Malaysia) Sdn Bhd & Another Appeal [2020] 1 CLJ 299 (FC); Asia Pacific Higher Learning Sdn Bhd v. Majlis Perubatan Malaysia & Anor [2020] 3 CLJ 153 (FC)).”. 13 [21] In determining whether the decision of this court in this application will be in conflict with the public policy, I have referred to Powernet Industries Sdn Bhd v. Golden Wheel Credit Sdn Bhd [2020] 10 CLJ 374 in which the Court of Appeal has said in the following words, “[39] Counsel also referred to the Federal Court's decision in Chase Perdana Bhd v. Md Afendi Hamdan [2009] 6 CLJ 501; [2009] 6 MLJ 783; [2009] MLJU 717 (FC) where it was held (p. 510 (CLJ); p. 790 (MLJ)) that the requirement for the approval of the Foreign Investment Committee ("FIC") as a condition precedent for the purchase of shares cannot be waived because the relevant statutory provision in relation the FIC's approval was enacted for the benefit of the public. [40] The Federal Court held that: [18] The law on this is quite established. Once it is enacted by legislation that parties are required to comply with any provision, parties must comply with such provision. It is not for any person to waive legislative requirements by an agreement unless the legislation allows it to be done. Legislation enacts laws which in its opinion are for the benefit of the public. It is not for the courts, or anybody for that matter, to say that it need not be followed. ..... [82] It is relevant in this context to note that a party may not contract out of the protection which Parliament had intended that they should have. The principle in this regard is to be found in the decision of the House of Lords in: Johnson v. Moreton [1980] AC 37; [1978] 3 All ER 37; [1978] 3 WLR 538; 37 P & CR 243; 122 Sol Jo 697, [1978] 2 EGLR 1; 241 Estates Gazette 759. [83] The following passage from the Court of Appeal's decision in Philleoallied Bank (Malaysia) Bhd v. Bupinder Singh Avatar Singh & Anor [1999] 2 CLJ 1023; [1999] 3 MLJ 157 (CA) (per Gopal Sri Ram JCA at p. 1053 (CLJ); pp. 185 to 186 (MLJ)) is also relevant and instructive: The authorities are unanimous upon the proposition that whether it is permissible for a litigant to waive or contract out of the provisions of a written law depends upon the language of the particular statute. And where the language is unclear, it depends upon the purpose of the statute and upon whether its overall purpose would be defeated by permitting a waiver 14 or contracting out. The most recent statement of the principle is to be found in the judgment of Edgar Joseph Jr FCJ, in the landmark decision of the Federal Court in Kimlin Housing Development Sdn Bhd (Appointed receiver and manager) (In liquidation) v. Bank Bumiputra (M) Bhd & Ors [1997] 2 MLJ 805. His Lordship there said (at pp 820G-821B): The question whether a person entitled to the performance of a statutory duty can effectively waive performance of the duty by the person bound and the latter can effectively contract out of performing the duty, depends on the language of the particular statute and, if this is not clear, on the overall purpose of the statute and whether this purpose would be defeated by permitting waiver and contracting out. Trietel on Contract (at p 782) has correctly pointed out: Difficult questions can arise where a person attempts by contract to waive a right conferred on him by statute. Although there is a general principle that a person may waive any right conferred on him by statute (quilibet potest renunciare juri pro se introducto), difficulties arise in determining whether the right is exclusively personal or is designed to serve other more broad public purposes. In the latter situation, public policy would require that the right be treated as mandatory and not be waivable by the party for whose benefit it operates. Whether a statutory right is waivable depends on the overall purpose of the statute and whether this purpose would be frustrated by permitting waiver. (emphasis added)”. [22] Based on the above authorities and reasons, I am of the view that the Defendant is not entitled to get protection under the Schedule of section 10 of the Covid-19 Act which is designed to protect the specified contracts temporarily except for the remaining payment of the rental deposit and purchase of fixtures and furniture. [23] Both parties have never disputed the legality of the Settlement Agreement. It is a general principle that parties are bound by the contract and the Defendant is bound to fulfil its obligation under the Settlement Agreement. 15 E. Conclusion [24] Having read all the evidence and reasons, I find that the Defendant has failed to raise any triable issue on the followings: (a) the category of the Settlement Agreement under the Covid-19 Act; (b) the unexpected pandemic of Covid-19 has an impact on its current financial status; and (c) the Settlement Agreement, if enforced is in conflict with the public policy. On the balance of the probabilities, the Plaintiff’s application in Enclosure 5 is allowed with cost of RM2500/-. (ROHATUL AKMAR BT ABDULLAH) Judge Sessions Court 9 Shah Alam Selangor 25th January 2021 Solicitors for Plaintiff : Mr Eddie Chuah Seong Eng Miss Chong Ker Ling Messrs Wong & Partners Kuala Lumpur Solicitors for Defendant: Miss Caitlin Tan Messrs Shearn Delamore & Co. Kuala Lumpur 16