Dr HK Fong Brainbuilder Pte Ltd v SG-Maths Sdn Bhd &

[2021] 1 MLJ Ors (Lau Bee Lan JCA) 549

A Dr HK Fong Brainbuilder Pte Ltd v SG-Maths Sdn Bhd & Ors

COURT OF APPEAL (PUTRAJAYA) — CIVIL APPEAL

NO W-02(1PCv)(W)-367–02 OF 2018
B
KAMARDIN HASHIM, KAMALUDIN MD SAID AND LAU BEE
LAN JJCA
13 AUGUST 2020

C Contract — Formation — Master licence agreement (MLA) — Parties also

executed guarantee and power of attorney — Whether the MLA 2013 was
franchise under the Franchise Act 1998 — Whether failure to register the franchise
rendered it illegal and void under the Contracts Act 1950 — Whether trial judge
erred in finding the MLA 2013 unenforceable — Whether if MLA 2013 was
D
illegal and void the personal guarantee and the power of attorney that arose from the
MLA 2013 were also illegal, void and unenforceable — Whether MLA 2013, the
guarantee and power of attorney, form a single composite transaction — Unjust
enrichment — Whether plaintiff had proven a cause of action in unjust
enrichment against first, second and third defendants
E

Civil Procedure — Appeal — Interference by appellate court — Whether there

were appealable errors committed by trial judge which warranted appellate
intervention — Counterclaim — Whether first, second and third defendants
F ought to have filed a notice of appeal against the dismissal of the counterclaim

Dr HK Fong Brainbuilder Pte Ltd (‘the plaintiff ’), was a company

incorporated in Singapore by one Dr Fong Ho Keong (‘Dr Fong’), a
Singaporean who claims to have developed a business to use certain methods to
G teach mathematics to students in primary and secondary schools (the
‘Brainbuilder’ business). Lim Sau Leong (‘the second defendant’) and Leong
Chun Piew (‘the third defendant’), who were interested in the Brainbuilder
business, set up SG-MATHS Sdn Bhd (the first defendant) in Malaysia. The
second and third defendants owned 85% of the first defendant while Dr Fong
H owned the remaining 15%. The plaintiff company entered into a Master
License Agreement (the MLA) with the first defendant on 26 February 2008
and when that expired another MLA in 2013 (the MLA 2013). The MLA
2013 allowed the first defendant to, among others, operate and manage the
‘BrainBuilder’ business in Malaysia. The parties also executed a guarantee and
I power of attorney. The plaintiff also claimed that Lum Chee Gheet (‘the fourth
defendant’), the second defendant’s daughter had taken over a registered
business from the second and third defendants and also established two other
centres (the fifth and sixth defendants), which were in competition with the
plaintiff. The plaintiff then terminated the MLA 2013 but the first defendant
550 Malayan Law Journal [2021] 1 MLJ

had not complied with the post-termination provisions in the MLA 2013. This A
prevented the plaintiff from taking over the first defendant and other
BrainBuilder Business centres operated by the first defendant. The plaintiff
filed an action for conspiracy to defraud and breach of confidence against the
six defendants. By way of this action the plaintiff sought inter alia, to compel
the second to sixth defendants to cease all businesses that were in competition B
with the plaintiff and for the return of all materials resembling the plaintiff ’s
BrainBuilder Business; to restrain the defendants from destroying the first
defendant’s business details; for general, aggravated and exemplary to be paid
by the defendants jointly and severally; and for the first, second and third
C
defendants to make restitution to the plaintiff for loss and damage. In response
the defendants alleged that they had been misled by the plaintiff to believe that
it owned the method to teach mathematics to students in primary and
secondary schools (the ‘Brainbuilder’ business), when in actual fact this
method was based on Singapore’s Mathematics Syllabus, which was owned by D
the Singapore Government. The defendants also claimed that the termination
of the MLA 2013 was an attempt by the plaintiff to take over the first defendant
without paying the agreed RM2.5m to the second and third defendants.
Consequently, the first, second and third defendants counterclaimed against
the plaintiff for a declaration that the MLA 2013 and the guarantee were E
invalid, for a refund of all monies paid by the first defendant to the plaintiff and
for damages to be assessed. The defendants argued that if the High Court ruled
the MLA 2013 was illegal, it ought to order the plaintiff to refund the sum of
RM1,078,781 paid by the first to third defendants to the plaintiff. The trial
judge found the MLA 2013 to be a franchise under the Franchise Act 1998 F
(‘the FA’) and that the plaintiff and the first defendant had breached s 6A(1) of
the FA. Since the franchise was never registered by the plaintiff under the FA,
the trial judge found it was illegal and void under the Contracts Act 1950 (‘the
Act’) and as such unenforceable against the first to third defendants. The trial
judge further held that as the MLA 2013 was illegal and void the personal G
guarantee and the power of attorney that arose from the MLA 2013 were also
illegal, void and unenforceable. The High Court held that the plaintiff failed to
establish the cause of action of conspiracy to defraud and breach of confidence
against the second to sixth defendants. The High Court also refused to order
restitution of the monies paid by the first defendant to the appellant under the H
illegal MLA 2013. Consequently, the High Court dismissed the plaintiff ’s
claim with no order as to costs and the first to third defendants’ counterclaim
with no order as to costs. This was the plaintiff ’s appeal against the decision of
the High Court and the defendants’ cross-appeal against the dismissal of its
counterclaim. The plaintiff appealed on the grounds that the trial judge had I
erred in applying the purposive approach to ascribe a wide interpretation to the
word ‘franchisor’ in s 4 of the FA to include ‘foreign franchisor’ and on the
other hand applied the literal approach to construe s 6 of the FA to warrant the
plaintiff to register.
 Dr HK Fong Brainbuilder Pte Ltd v SG-Maths Sdn Bhd &
[2021] 1 MLJ Ors (Lau Bee Lan JCA) 551

A Held dismissing the appeal and the cross-appeal and ordering the
plaintiff/appellant to pay global costs in the sum of RM10,000 to each
respondent:
(1) The trial judge was correct in his findings that the BrainBuilder Business
B is a ‘franchise’ under s 4(a), (b), (c) and (e) of the FA. Further the
purposive construction used by the trial judge is supported by the long
title of the FA. However, it is settled law that once the trial judge had
chosen to adopt the purposive then that method will replace the literal
method of construction (see paras 24–27).
C
(2) The plaintiff ’s argument that the trial judge when interpreting the FA
ought to have taken into consideration that the ‘Buku Panduan’, had no
merit. The ‘Buku Panduan’ which serves as a guideline for the registration
of franchise business was issued by the Minister of Domestic Trade and
D Consumer Affairs pursuant to s 60 of the FA. The question of taking any
judicial notice does not arise because it was clear that the ‘Buku Panduan’
has not been issued pursuant to any enabling provision under the FA for
it to have the force of law. As such, it was unnecessary to refer to the ‘Buku
Panduan’ (see paras 28–31).
E (3) Use of the word ‘shall’ in ss 6(1) and 6A(1) of the FA clearly shows
Parliament’s intention for these provisions to have mandatory effect. Dr
Fong’s explanation that it was the responsibility of the first, second and
third defendants to register the franchise was untenable in light of our
finding that s 6(1) of the FA applied to a foreign franchisor. In the
F
circumstances, the trial judge was correct in finding that the registration
of the franchise is imperative and that non-registration of the same will
render the franchise agreement void and unenforceable. Further, even if
it was the first defendant’s failure not to register the BrainBuilder
G Business under s 6A(1) of the FA, the plaintiff could have exercised the
power granted by the first defendant to the plaintiff under the power of
attorney to apply to the Registrar (as the first defendant’s lawful attorney)
to register under s 6A(1) of the FA (see paras 36–40).
(4) The finding of the learned judge that the three documents, that was the
H MLA 2013, the Guarantee and power of attorney, ‘form a single
composite transaction’ falls within the purview of the ratio of the Federal
Court in Malayan Banking Bhd v Neway Development Sdn Bhd &
Ors [2017] 5 MLJ 180. As such, the illegality of the MLA 2013 will
consequently taint the guarantee and the power of attorney. Further, by
I parity of reasoning the guarantee and the power of attorney will likewise
be void in their entirety under s 24(a) and/or 24(b) of the Act. Since the
three documents are void, it was not necessary to deal with the plaintiff ’s
appeal against the trial judge’s findings on conspiracy to defraud it and
breach of confidence. This was because both these causes of action in tort
552 Malayan Law Journal [2021] 1 MLJ

will only arise on the assumption that the three documents are valid (see A
paras 46–48).
(5) A perusal of the plaintiff ’s list of issues to be tried shows that the trial
judge was correct in stating that the cause of action in unjust enrichment
is not listed as an issue to be tried. It was clear that the plaintiff had failed
B
to prove a cause of action in unjust enrichment as the plaintiff had not
pleaded in the statement of claim that the first to third defendants had
been unjustly enriched at the plaintiff ’s expense. Hence, there were no
appealable errors committed by the trial judge which warranted appellate
intervention (see paras 50–52, 64 & 75).
C
(6) The first to third defendants by seeking restitution sought to vary a
substantive finding of the court. As such, they ought to have filed a notice
of appeal against the dismissal of the counterclaim and not seek to vary
the decision of the High Court. The defendants should not be allowed to
raise the dismissal of their counterclaim through the notice of cross D
appeal as to do so was tantamount to allowing them to seek relief through
the backdoor (see paras 67–72).

[Bahasa Malaysia summary

Dr HK Fong Brainbuilder Pte Ltd (‘plaintif ’), adalah sebuah syarikat yang E
ditubuhkan di Singapura oleh Dr Fong Ho Keong (‘Dr Fong’), seorang warga
Singapura yang mendakwa telah mewujudkan suatu perniagaan untuk
menggunakan kaedah tertentu untuk mengajar matematik kepada pelajar di
sekolah rendah dan menengah (perniagaan ‘Brainbuilder’ tersebut). Lim Sau
Leong (‘defendan kedua’) dan Leong Chun Piew (‘defendan ketiga’), yang F
berminat dalam perniagaan Brainbuilder, menubuhkan SG-MATHS Sdn Bhd
(defendan pertama) di Malaysia. Defendan kedua dan ketiga memiliki 85%
daripada defendan pertama sementara Dr Fong memiliki baki 15%. Syarikat
plaintif menandatangani perjanjian lesen induk (MLA) dengan defendan
pertama pada 26 Februari 2008 dan apabila ianya tamat MLA selanjutnya pada G
tahun 2013 (MLA 2013). MLA 2013 membenarkan defendan pertama, antara
lain, mengendalikan dan menguruskan perniagaan ‘BrainBuilder’ di Malaysia.
Pihak-pihak juga menandatangani Jaminan dan Surat Wakil Kuasa. Plaintif
juga mendakwa bahawa Lum Chee Gheet (‘defendan keempat’), anak
perempuan defendan kedua telah mengambil alih perniagaan berdaftar dari H
defendan kedua dan ketiga dan juga menubuhkan dua pusat lain (‘defendan
kelima dan keenam’), yang bersaing dengan plaintif. Plaintif kemudian
menamatkan MLA 2013 tetapi defendan pertama tidak mematuhi
peruntukan pasca-penamatan dalam MLA 2013. Ini menghalang plaintif
mengambil alih defendan pertama dan pusat Perniagaan BrainBuilder lain I
yang dikendalikan oleh defendan pertama. Plaintif memfailkan tindakan
konspirasi untuk menipu dan perlanggaran kerahsiaan terhadap keenam-enam
defendan. Melalui tindakan ini, plaintif memohon antara lain, untuk
menyebabkan defendan kedua hingga keenam bagi menghentikan kesemua
 Dr HK Fong Brainbuilder Pte Ltd v SG-Maths Sdn Bhd &
[2021] 1 MLJ Ors (Lau Bee Lan JCA) 553

A perniagaan yang bersaing dengan plaintif dan mengembalikan kesemua bahan

yang menyerupai Perniagaan BrainBuilder milik plaintif; untuk menahan
defendan daripada memusnahkan butiran perniagaan defendan pertama;
gantirugi am, buruk dan teladan untuk dibayar oleh defendan secara bersesama
dan berasingan; dan bagi defendan pertama, kedua dan ketiga untuk membuat
B restitusi kepada plaintif atas kerugian dan kerosakan. Sebagai balasan,
defendan mendakwa bahawa mereka telah dikelirukan oleh plaintif untuk
mempercayai bahawa ia memiliki kaedah untuk mengajar matematik kepada
pelajar di sekolah rendah dan menengah (perniagaan ‘Brainbuilder’ tersebut),
padahal sebenarnya kaedah ini berdasarkan Sukatan Pembelajaran Matematik
C
Singapura, yang dimiliki oleh Kerajaan Singapura. Defendan juga mendakwa
bahawa penamatan MLA 2013 adalah cubaan plaintif untuk mengambil alih
defendan pertama tanpa membayar RM2.5 juta yang dipersetujui kepada
defendan kedua dan ketiga. Lanjutan dari itu, defendan pertama, kedua dan
D ketiga membuat tuntutan balas terhadap plaintif untuk suatu deklarasi bahawa
MLA 2013 dan jaminan tidak sah, untuk pembayaran balik kesemua wang
yang telah dibayar oleh defendan pertama kepada plaintif dan untuk
penaksiran kerugian. Defendan berpendapat bahawa sekiranya Mahkamah
Tinggi memutuskan MLA 2013 adalah tidak sah, ianya akan memberikan
E perintah kepada plaintif untuk mengembalikan sejumlah RM1,078,781 yang
telah dibayar oleh defendan pertama hingga ketiga kepada plaintif. Hakim
perbicaraan memutuskan bahawa MLA 2013 sebagai francais di bawah Akta
Francais 1998 (‘AF’) dan bahawa plaintif dan defendan pertama telah
melanggar s 6A(1) AF. Oleh kerana francais tidak pernah didaftarkan oleh
F plaintif di bawah AF, hakim perbicaraan mendapati ianya tidak sah dan terbatal
di bawah Akta Kontrak 1950 (‘Akta tersebut’) dan dengan itu tidak dapat
dilaksanakan terhadap defendan pertama hingga ketiga. Hakim perbicaraan
selanjutnya memutuskan bahawa oleh kerana MLA 2013 adalah tidak sah dan
membatalkan jaminan peribadi dan Surat Wakil Kuasa yang berbangkit dari
G MLA 2013 juga adalah tidak sah, terbatal dan tidak dapat dilaksanakan.
Mahkamah Tinggi berpendapat bahawa plaintif gagal membuktikan kausa
tindakan konspirasi untuk menipu dan perlanggaran kerahsiaan terhadap
defendan kedua hingga keenam. Mahkamah Tinggi juga enggan
membenarkan restitusi wang yang telah dibayar oleh defendan pertama kepada
H perayu di bawah MLA 2013 yang tidak sah. Oleh itu, Mahkamah Tinggi
menolak tuntutan plaintif tanpa perintah mengenai kos dan tuntutan balas
defendan pertama hingga ketiga tanpa perintah mengenai kos. Ini adalah
rayuan plaintif terhadap keputusan Mahkamah Tinggi dan rayuan balas
defendan terhadap penolakan tuntutan balasnya. Plaintif merayu dengan
I alasan bahawa hakim perbicaraan telah terkhilaf dalam menerapkan
pendekatan tujuan untuk memberikan tafsiran yang meluas kepada perkataan
‘franchisor’ dalam s 4 AF untuk memasukkan ‘franchisor asing’ dan sebaliknya
menggunakan pendekatan harfiah dalam menafsirkan s 6 AF untuk
membenarkan plaintif untuk mendaftar.
554 Malayan Law Journal [2021] 1 MLJ

Diputuskan menolak rayuan dan rayuan balas dan memerintahkan A

plaintif/perayu membayar kos global berjumlah RM10,000 kepada setiap
responden:
(1) Hakim perbicaraan tepat dalam dapatan beliau bahawa Perniagaan
BrainBuilder adalah ‘francais’ di bawah s 4(a), (b), (c) dan (e) AF. B
Selanjutnya pendekatan tujuan yang diguna pakai oleh hakim
perbicaraan disokong oleh tajuk AF. Namun, ianya dalah
undang-undang yang mantap bahawa setelah hakim perbicaraan
memilih untuk mengguna pakai pendekatan tujuan maka kaedah
tersebut akan menggantikan kaedah pendekatan harfiah (lihat perenggan C
24–27).
(2) Hujahan pihak plaintif bahawa hakim perbicaraan ketika membuat
penafsiran AF harus mempertimbangkan sebagai ‘Buku Panduan’, tidak
mempunyai merit. ‘Buku Panduan’ yang berfungsi sebagai garis panduan
untuk pendaftaran perniagaan francais dikeluarkan oleh Kementerian D
Perdagangan Dalam Negeri dan Hal Ehwal Pengguna berdasarkan s 60
AF. Persoalan dalam mengambil notis kehakiman tidak timbul kerana
jelas bahwa Buku Panduan belum dikeluarkan berdasarkan peruntukan
di bawah AF bagi memberikan kesan dalam undang-undang. Oleh itu,
ianya adalah tidak perlu untuk merujuk kepada Buku Panduan (lihat E
perenggan 28–31).
(3) Penggunaan kata ‘hendaklah’ dalam ss 6(1) dan 6A(1) AF menunjukkan
dengan jelas niat Parlimen agar peruntukan ini memberikan kesan
mandatori. Penjelasan Dr Fong bahawa ianya adalah tanggungjawab F
defendan pertama, kedua dan ketiga untuk mendaftarkan francais tidak
dapat dipertahankan berdasarkan penemuan kami bahawa s 6(1) FA
terpakai untuk francaisor asing. Dalam keadaan tersebut, hakim
perbicaraan tepat dalam membuat dapatan bahawa pendaftaran francais
adalah mustahak dan bahawa tidak membuat pendaftaran akan G
menjadikan perjanjian francais terbatal dan tidak dapat dilaksanakan.
Selanjutnya, sekiranya ianya adalah kegagalan defendan pertama untuk
tidak mendaftarkan Perniagaan BrainBuilder berdasarkan s 6A(1) AF,
plaintif dapat menggunakan kuasa yang diberikan oleh defendan
pertama kepada plaintif di bawah surat wakil kuasa untuk memohon H
kepada Pendaftar (sebagai peguam sah defendan pertama) untuk
mendaftar di bawah s 6A(1) AF (lihat perenggan 36–40).
(4) Dapatan hakim yang bijaksana bahawa tiga dokumen, iaitu MLA 2013,
jaminan dan surat wakil kuasa, ‘membentuk satu transaksi komposit’
berada dalam dapatan Mahkamah Persekutuan dalam Malayan Banking I
Bhd v Neway Development Sdn Bhd & Ors [2017] 5 MLJ 180. Oleh itu,
MLA 2013 yang tidak sah akan menjejaskan Jaminan dan Surat Wakil
Kuasa. Selanjutnya, dengan menimbang dapatan, Jaminan dan Surat
Wakil Kuasa juga akan terbatal secara keseluruhannya di bawah s 24(a)
 Dr HK Fong Brainbuilder Pte Ltd v SG-Maths Sdn Bhd &
[2021] 1 MLJ Ors (Lau Bee Lan JCA) 555

A dan/atau 24(b) Akta tersebut. Oleh kerana tiga dokumen tersebut

terbatal, ianya tidak ada keperluan untuk menangani rayuan plaintif
terhadap dapatan hakim perbicaraan mengenai konspirasi untuk menipu
dan perlanggaran kerahsiaan. Ini kerana kedua-dua kausa tindakan ini
hanya akan timbul dengan anggapan bahawa tiga dokumen tersebut
B adalah sah (lihat perenggan 46–48).
(5) Penelitian terhadap senarai isu untuk dibicarakan oleh plaintif
menunjukkan bahawa hakim perbicaraan tepat dalam menyatakan
bahawa kausa tindakan dalam pengkayaan yang tidak wajar tidak
C disenaraikan sebagai isu yang akan dibicarakan. Ianya jelas bahawa
plaintif telah gagal membuktikan kausa tindakan pengkayaan yang tidak
wajar kerana plaintif tidak memplidkan dalam pernyataan tuntutan
bahawa defendan pertama hingga ketiga telah diperkaya secara tidak
wajar terhadap plaintif. Oleh itu, tidak ada kesalahan oleh hakim
D perbicaraan yang dapat dirayu yang membenarkan campur tangan
mahkamah rayuan (lihat perenggan 50–52, 64 & 75).
(6) Defendan pertama hingga ketiga dalam memohon restitusi berusaha
untuk mengubah keputusan penting mahkamah. Oleh yang demikian,
mereka seharusnya memfailkan notis rayuan terhadap penolakan
E tuntutan balas dan tidak berusaha mengubah keputusan Mahkamah
Tinggi. Defendan tidak seharusnya dibenarkan untuk membangkitkan
penolakan tuntutan balas mereka melalui notis rayuan balas kerana
dalam berbuat demikian sama dengan membiarkan mereka memohon
relif melalui pintu belakang (lihat perenggan 67-72).]
F
Cases referred to
Barisan Tenaga Perancang (M) Sdn Bhd v Dr Mansur Bin Hussain & Ors [2016]
MLJU 1251; [2017] 2 MLRH 177, HC (refd)
DYTM Tengku Idris Shah ibni Sultan Salahuddin Abdul Aziz Shah v Dikim
G Holdings Sdn Bhd & Anor [2002] 2 MLJ 11; [2002] 1 MLRA 116, FC (refd)
Danaharta Urus Sdn Bhd v Kekatong Sdn Bhd (Bar Council Malaysia,
intervener) [2004] 2 MLJ 257; [2004] 1 CLJ 701, FC (refd)
David Hey v New Kok Ann Realty Sdn Bhd [1985] 1 MLJ 167, FC (refd)
Dr Lee Chong Meng v Abdul Rahman bin Hj Abdullah, Returning Officer &
H Ors [2000] 6 MLJ 98; [2000] 3 CLJ 519, HC (refd)
Dream Property Sdn Bhd v Atlas Housing Sdn Bhd [2015] 2 MLJ 441; [2015] 2
CLJ 453, FC (refd)
Edwin Thomas v F&N Beverages Marketing Sdn Bhd & Anor [2016] MLJU
1437; [2016] 1 LNS 1645, HC (refd)
I Foo Loke Ying & Anor v Television Broadcasts Ltd & Ors [1985] 2 MLJ
35; [1985] CLJ Rep 122, SC (folld)
Gan Yook Chin (P) & Anor v Lee Ing Chin@ Lee Teck Seng & Ors [2005] 2 MLJ
1, FC (refd)
Kabushiki Kaisha Ngu v Leisure Farm Corp Sdn Bhd & Ors [2016] 5 MLJ
556 Malayan Law Journal [2021] 1 MLJ

557; [2016] 8 CLJ 149, FC (refd) A

Kammins Ballrooms Co Ltd v Zenith Investments (Torquay) Ltd [1971] AC 850,
HL (refd)
Krishnadas a/l Achutan Nair & Ors v Maniyam a/l Samykano [1997] 1 MLJ
94; [1997] 1 CLJ 636, FC (folld)
Lai Soon Onn v Chew Fei Meng and other appeals [2019] 2 MLJ 96; [2018] 10 B
CLJ 48, CA (refd)
Lee Ing Chin @ Lee Teck Seng & Ors v Gan Yook Chin & Anor [2003] 2 MLJ
97; [2003] 2 CLJ 19, CA (refd)
Lim Seng Kiat & Anor v Jee Hing Lim & Anor [2015] MLRHU 1, HC (refd)
Liputan Simfoni Sdn Bhd v Pembangunan Orkid Desa Sdn Bhd [2019] 4 MLJ C
141; [2019] 1 CLJ 183, FC (distd)
Lori (M) Bhd (interim receiver) v Arab-Malaysian Finance Bhd [1999] 3 MLJ
81; [1999] 2 CLJ 997, FC (refd)
Malayan Banking Bhd v Neway Development Sdn Bhd & Ors [2017] 5 MLJ
180, FC (refd) D
Merong Mahawangsa Sdn Bhd & Anor v Dato’ Shazryl Eskay bin
Abdullah [2015] 5 MLJ 619; [2015] 5 MLRA 377, FC (refd)
Munafsya Sdn Bhd v Proquaz Sdn Bhd [2012] MLRHU 1, HC (refd)
Nabors Drilling (Labuan) Corp v Lembaga Perkhidmatan Kewangan
Labuan [2018] MLJU 636; [2019] 1 CLJ 277, HC (refd) E
Nothman v Barnet London Borough Council [1978] 1 WLR 220, CA (refd)
Ooi Soon Eng v Ng Kee Lin [1980] 1 MLJ 26; [1979] 1 LNS 61, FC (refd)
Palm Oil Research and Development Board Malaysia & Anor v Premium Vegetable
Oils Sdn Bhd & another appeal [2005] 3 MLJ 97; [2004] 2 CLJ 265, FC
(refd) F
Pang Mun Chung & Anor v Cheong Huey Charn [2018] 4 MLJ 594; [2018] 8
CLJ 663, CA (distd)
Patel v Mirza [2017] 1 All ER 191, SC (refd)
Pengerusi Suruhanjaya Pilihanraya Malaysia (Election Commission of Malaysia)
v See Chee How & Anor [2016] 3 MLJ 365; [2015] 8 CLJ 367, CA (refd) G
PP v Yap Min Woie [1996] 1 MLJ 169, FC (refd)
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93, FC (refd)
SP Multitech Intelligent Homes Sdn Bhd v Home Sdn Bhd [2010] MLJU
1845; [2010] 16 MLRH 537, HC (refd) H
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4 MLRA 11, FC (refd)
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MLRHU 1, HC (refd)
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785, FC (refd)
 Dr HK Fong Brainbuilder Pte Ltd v SG-Maths Sdn Bhd &
[2021] 1 MLJ Ors (Lau Bee Lan JCA) 557

A Legislation referred to
Contracts Act 1950 ss 24, 24(a), (b), (e), 66, 71
Courts of Judicature Act 1964 s 68(1)(c)
Franchise (Compounding of Offences) Regulations 1999
Franchise (Forms And Fees) Regulations
B Franchise (Qualifications of a Franchise Broker) Regulations 1999
Franchise Act 1998 ss 2(1)(a), 4, 4(a), (b), (c), (e), 6, 6(1) 6A, 6A(1),
6B, 14(2), 41, 60
Industrial Relations Act 1967 s 28
Interpretation Acts 1948 and 1967 s 17A
C Labuan Financial Services Authority Act 1996 s 4A
National Land Code s 340(2), Form 14A
Pengurusan Danaharta Nasional Berhad Act 1998
Rules of Court of Appeal 1994 r 8(1), (3), First Schedule Form 2
D Appeal from: Civil Suit No WA-22IP-40–08 of 2016 (High Court, Kuala
Lumpur)
Joy Appukuttan (Kelvynn Foo Wai Tzen with him) (KH Lim & Co) for the
appellant.
E Kok Pok Chin (Ong Hong Keit and Marcus Chong with him) (PC Kok & Co) for
the respondents.

Lau Bee Lan JCA:

F INTRODUCTION

[1] This is an appeal by the appellant against the decision of the learned
judicial commissioner (‘judge’) made on 19 January 2018 dismissing the
appellant’s claim with no order as to costs and dismissing the counterclaim of
G the first to third respondents with no order as to costs.

[2] The first to third respondents filed a cross-appeal dated 20 April 2018
against the said High Court decision in relation to the High Court’s refusal to
order restitution of the monies paid by the first respondent to the appellant
H under the illegal MLA 2013.

[3] We shall for easy reference refer to the parties as they were in the court
below.
I BRIEF FACTS

[4] The plaintiff, Dr HK Fong Brainbuilder Pte Ltd is a company

incorporated in Singapore by Dr Fong Ho Keong (‘Dr Fong’), a Singaporean
citizen. Dr Fong claims to have developed ‘Dr Fong’s Method’ of teaching
558 Malayan Law Journal [2021] 1 MLJ

mathematics to students in primary and secondary schools. The second and A

third defendants were Dr Fong’s best friends for 55 years and interested in the
business. Pursuant to that, the first defendant was established; the second and
third defendants owned 85% of first defendant while Dr Fong owned the
remaining 15%.
B
[5] There is another company called Dr Fong BrainBuilder Pte Ltd (‘DFB’)
which was owned by Dr Fong as well. DFB entered into a master license
agreement with the first defendant on 26 February 2008 (‘MLA 2008’) which
expired on 30 June 2012. On 18 December 2013, another MLA, (‘MLA
C
2013’), a guarantee and power of attorney were executed (‘the three
documents’). The MLA 2013 allows the first defendant to, among others,
operate and manage the ‘BrainBuilder’ business (a business to teach
mathematics to students) (‘BrainBuilder business’) in Malaysia.
D
[6] The fourth defendant is the second defendant’s daughter and former
employee of the first defendant. The plaintiff alleged the fourth defendant had
taken over a registered business called ‘Pusat Latihan Perkembangan Kaji
Kreatif ’ (‘PLPKK’) from the second and third defendants. The second and
third defendants established the fifth and sixth defendants. E

[7] The plaintiff claimed that: (i) first defendant had breached the MLA
2013 by awarding a sub-license to En Suhaimi bin Ramly to operate a franchise
in Setapak; and (ii) PLPKK and the fifth and sixth defendants are competing
businesses with the BrainBuilder business and had used Dr Fong’s method F
which is the plaintiff ’s confidential information. The plaintiff then terminated
the MLA 2013 on 8 October 2015. The first defendant did not comply with
the post-termination provisions in the MLA 2013 to enable the plaintiff to take
over first defendant’s BB centres, ie BrainBuilder Business centres operated by
the first defendant to teach mathematics using Dr Fong’s method. G

[8] The plaintiff prayed, among others: (i) that the second to sixth
defendants be restrained from dealing with the first defendant’s customers and
from disclosing the plaintiff ’s confidential information and other business
techniques; (ii) that the second to sixth defendants be compelled to cease all H
business that are in competition with the plaintiff; (iii) for the return of all
materials resembling the BrainBuilder business to the plaintiff; (iv) for an
injunction to restrain the defendants from destroying, among others, the first
defendant’s business details; (v) that the first to third defendants provide a
complete business account derived by the first defendant arising from the I
BrainBuilder business; (vi) that the receiver be appointed over the first, fourth,
fifth and sixth defendants; (vii) that general, aggravated and exemplary
damages be payable by the defendants jointly and severally; (viii) that the first,
second and third defendants make restitution to the plaintiff for loss and
 Dr HK Fong Brainbuilder Pte Ltd v SG-Maths Sdn Bhd &
[2021] 1 MLJ Ors (Lau Bee Lan JCA) 559

A damage; and (ix) costs and interest be payable to the plaintiff.

[9] The defendants asserted: that Dr Fong’s method is based on Singapore’s

mathematics syllabus (‘Singapore maths’) owned by the Singapore government
and that Singapore maths has been taught by many tuition and learning centres
B in Malaysia; they were misled by the plaintiff to believe that the plaintiff owned
the Singapore maths method; the termination was a disguise for the plaintiff ’s
assistance to take over the first defendant without paying the agreed RM2.5m
to the second and third defendants; the fourth defendant resigned after the
termination took place; PLPKK has no business; and the fifth and sixth
C
defendants did not operate the mathematics tuition centres.

[10] The first to third defendants counterclaimed against the plaintiff for a
declaration that the MLA 2013 and the guarantee are invalid; refund of all
D money paid by the first defendant to the plaintiff and damages to be assessed.

[11] At the High Court, the plaintiff ’s claim and the first to third defendant’s
counterclaim were dismissed with no order as to costs. The security for costs
furnished by the plaintiff was refunded.
E
DECISION OF THE HIGH COURT

[12] Essentially the findings of the learned judge are:

F (a) the learned judge has found as a matter of fact:
(i) the plaintiff ’s witnesses are reliable;
(ii) the defendants’ witnesses are unreliable; and
(iii) the first to third defendants have breached the MLA 2013 (on the
G
assumption that the three documents are valid ie this court reverses
the High Court decision that the three documents are void);
(b) the MLA 2013 is a franchise under the Franchise Act 1998 (‘the FA
1998’). The plaintiff has breached s 6(1) of the FA 1998 and the first
H defendant has breached s 6A(1) of the FA 1998. Since the franchise was
never registered by the plaintiff under the FA 1998, it is illegal and void
under the Contracts Act 1950 (‘the CA 1950’) and is unenforceable
against the first to third defendants;
I (c) as the MLA 2013 is illegal and void the personal guarantee of first to third
defendants given by them to the plaintiff and the power of attorney by
reason of the illegal MLA 2013 is also illegal, void and unenforceable;
(d) ss 66 and 71 of the CA 1950 cannot be applied and/or invoked;
560 Malayan Law Journal [2021] 1 MLJ

(e) the plaintiff did not plead and tender evidence for the doctrine of unjust A
enrichment;
(f) on the assumption that the MLA 2013, the guarantee and the power of
attorney are valid, the first to third defendants are held to be liable to the
plaintiff for breaches of the MLA 2013 and the second and third B
defendants are held liable to the plaintiff under the guarantee; and
(g) the plaintiff failed to establish the cause of action of conspiracy to defraud
and breach of confidence against the second to sixth defendants.

OUR DECISION C

Main appeal

Interpretation of the FA 1998

D
MLA 2013 is a franchise

[13] At the High Court the plaintiff argued that the MLA 2013 is not a
franchise but a license. However based on the memorandum of appeal, the
plaintiff appeared to have accepted the MLA 2013 is a ‘franchise’. Be that as it E
may, for completeness, we shall deal with the learned judge’s finding on why the
FA 1998 apply to the MLA 2013.

[14] His Lordship took cognisance that the MLA 2013 does not use the
word ‘franchise’ but relied on Barisan Tenaga Perancang (M) Sdn Bhd v Dr F
Mansur Bin Hussain & Ors [2016] MLJU 1251; [2017] 2 MLRH 177 at
para 39 (decision was affirmed by this court) in that the court is not bound by
label or description given by parties to the MLA 2013. The learned judge held
that the MLA 2013 is a franchise under the FA 1998 and therefore the FA 1998
applies to MLA 2013 for the following reasons: G

(1) ‘franchise’ under s 4 of the FA 1998 means a contract or an agreement,

expressed or implied, whether oral or written, between two or more
persons by which all the four cumulative conditions of a ‘franchise’
stipulated in s 4(a), (b), (c) and (e) of the FA 1998 are fulfilled in the H
MLA 2013 (‘four prerequisites’). They are:
(a) the franchisor grants to the franchisee the right to operate a business
according to the franchise system as determined by the franchisor during a
term to be determined by the franchisor;
I
(b) the franchisor grants to the franchisee the right to use a mark, or a trade
secret, or any confidential information or intellectual property, owned by
the franchisor or relating to the franchisor, and includes a situation where
the franchisor, who is the registered user of, or is licensed by another person
to use, any intellectual property, grants such right that he possesses to permit
 Dr HK Fong Brainbuilder Pte Ltd v SG-Maths Sdn Bhd &
[2021] 1 MLJ Ors (Lau Bee Lan JCA) 561

A the franchisee to use the intellectual property;

(c) 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; and
B (d) [Deleted by Franchise (Amendment) Act 2012 (Act A 1442)]
(e) in return for the grant of rights, the franchisee may be required to pay a fee
or other form of consideration.
(f) [Deleted by Act A 1442]. (Emphasis added.)
C (2) the unrebutted oral evidence of the second and third defendants
regarding the operation of the first defendant’s BrainBuilder business
proves that such a business fufills all the four prerequisites;
(3) cll 11.2, 11.9, 13.1 and 23.2 of the MLA 2013 state that the first
D defendant shall comply with manuals. The plaintiff has provided the
first defendant with a ‘Franchise Operations Manual’ (‘FOM’) to
operate the BrainBuilder business;
(4) Dr Fong and the plaintiff (whose alter ego is Dr Fong) have actual
E knowledge of the fact that the MLA 2013 is a franchise agreement based
on the following evidence:
(a) Dr Fong’s email dated 11 April 2013 to the second defendant referred to
the first defendant as a master franchisee;
F (b) Ms Anne Hooi Yoke Ling (‘Ms Hooi’) was the plaintiff ’s solicitor who
drafted MLA 2008 and the three documents. During
cross-examination, Dr Fong admitted that he had been advised by
Ms Hooi by way of an email dated 24 December 2013 to register the
BrainBuilder business as a franchise but he did not act on that advice.
G The learned judge attached great weight to Miss Hooi’s email which was
sent to Dr Fong only six days after the execution of the three documents
on 18 December 2013;
(c) Dr Fong explained during re-examination that the first defendant had
H been given the ‘task’ to register BrainBuilder business as a franchise; and
(d) counsel for the plaintiff cross-examined the third defendant regarding
Dr Fong requesting him to look into the issue of franchise way back in
December 2013 and he disagreed with the proposition that he was
concerned that Bumiputera quota in the first defendant will be
I
implemented.
562 Malayan Law Journal [2021] 1 MLJ

Whether s 6 of the FA 1998 apply to the plaintiff? A

[15] Returning to the mainstream, we shall now touch on the primary

grounds of appeal canvassed by the plaintiff. First, the plaintiff took issue with
the purposive approach applied by the learned judge in ascribing a wide
interpretation to the word ‘franchisor’ in s 4 of the FA 1998 to include ‘foreign B
franchisor’ and on the other hand applied the literal approach to construe s 6 of
the FA 1998 to warrant the plaintiff to register. The plaintiff submits the
function of the court is not to add words into the statute but to give the words
of the statute its ordinary and natural meaning citing Foo Loke Ying & Anor v
C
Television Broadcasts Ltd & Ors [1985] 2 MLJ 35 at p 39; [1985] CLJ Rep 122
at p 126 f (SC) and Krishnadas a/l Achutan Nair & Ors v Maniyam a/l
Samykano [1997] 1 MLJ 94 at p 98; [1997] 1 CLJ 636 at p 645 a-b (FC).

[16] With respect we find there is no merit in the plaintiff ’s aforesaid D

submission. For ease of comprehension the relevant parts of ss 6, 6A and 6B of
the FA 1998 are reproduced:
6 Registration of franchisor
(1) A franchisor shall register his franchise with the Registrar before he can operate a E
franchise business or make an offer to sell the franchise to any person.
(2) Any franchisor who fails to comply with this section, unless exempted by the Minister
under section 58, commits an offence and shall, on conviction, be liable —
(a) (a) If such person is a body corporate, to a fine not exceeding two hundred and F
fifty thousand ringgit, and for a second or subsequent offence, to a fine not
exceeding five hundred thousand ringgit;
6A Registration of franchisee of foreign franchisor
(1) Before commencing the franchise business, a franchisee who has been granted a
G
franchise from a foreign franchisor shall apply to register the franchise with the Registrar
by using the prescribed application form and such application shall be subject to the
Registrar’s approval.
6B Registration of franchisee
A franchisee who has been granted a franchise from a local franchisor or local master H
franchisee shall register the franchise with the Registrar by using the prescribed
registration form within fourteen days from the date of signing of the agreement
between the franchisor and franchisee. (Emphasis added.)

[17] We accept the principles governing the interpretation of a statute I

propounded in Foo Loke Ying and Krishnadas a/l Achutan Nair. However in the
context of the appeals before us, we are of the view that the learned judge was
correct in adopting the purposive approach in the interpretation of the material
provisions in the FA 1998 for the reasons which follow.
 Dr HK Fong Brainbuilder Pte Ltd v SG-Maths Sdn Bhd &
[2021] 1 MLJ Ors (Lau Bee Lan JCA) 563

A [18] His Lordship’s purposive approach is justified by the fact of:

(a) his finding that ‘[S]s 6, 6A and 6B FA have been introduced by Act
A1442 with effect from 1 January 2013, [P]art 1 ofthe Interpretation
Acts 1948 and 1967(FA), (by virtue of s 2(1)(a) of the FA and in
B particular s 17A of the IA) applies to interpret FA’; and
(b) his reliance on Palm Oil Research and Development Board Malaysia &
Anor v Premium Vegetable Oils Sdn Bhd & another appeal [2005] 3 MLJ
97; [2004] 2 CLJ 265 that ‘In accordance with s 17A of the IA, this
court gives a purposive interpretation of ss 6, 6A and 7 of the FA’ which
C is ‘[as] intended by Parliament through Act A 1442 [for] all franchises,
local and foreign, to be registered with the Registrar (Purposive
Construction)’.

D [19] Contrary to the plaintiff ’s submission that the learned judge’s reliance
on Palm Oil Research is misplaced since the case is premised on the
interpretation of tax law, with respect we are of the view that the said case is of
assistance for the principle that the Federal Court applied s 17A of the IA to
give a purposive construction of albeit, a tax statute. This is bolstered by the
E case of DYTM Tengku Idris Shah ibni Sultan Salahuddin Abdul Aziz Shah v
Dikim Holdings Sdn Bhd & Anor [2002] 2 MLJ 11 at p 21; [2002] 1 MLRA
116 at p 121 wherein the Federal Court held ‘This purposive approach has now
been given statutory recognition by our Parliament enacting s 17A in the
Interpretation Acts 1948 and 1967 (Act 388) … [and] [i]n view of the statutory
F recognition we can and should adopt a purposive approach in the
interpretation of ‘Ruler’ for the purposes of arts 181, 182 and 183 (of the
Federal Constitution)’ (per Haidar Mohd Noor FCJ (as he then was)).

[20] Learned counsel for the plaintiff argues that s 6 of the FA 1998 does not
G
apply to the plaintiff, a foreign franchisor for the following reasons:
(a) the FA 1998 should be viewed as a whole wherein it makes specific
reference to ‘foreign franchisor’ in s 6A FA of the 1998;

H
(b) the word ‘foreign’ does not appear in the word ‘franchisor’ in s 6 FA of
the 1998;
(c) s 4 of the FA 1998 and the ‘Buku Panduan’ published in the Official
Portal of the Ministry of Domestic Trade and Consumer Affairs defines
‘franchisor’ as to include a master franchisee and not a foreign
I franchisor. We shall address the issue of whether the ‘Buku Panduan’ has
the force of law hereafter;
(d) it is a principle of interpretation of statute that where the Legislature
includes a particular term in one part or section of a statute but omits it
564 Malayan Law Journal [2021] 1 MLJ

in another part or section of the same, it must be the Legislature’s A

intention to disparate inclusion or exclusion, citing the case of this court
in Lai Soon Onn v Chew Fei Meng and other appeals [2019] 2 MLJ 96 at
p 117; [2018] 10 CLJ 48 at pp 66–67 para [54];
(e) premised on the Parliamentary debates, the FA 1998 was amended by B
Act A1442 that included s 6A where the words ‘foreign franchisor’ was
introduced. However there were no amendments to s 4 of the FA 1998
on the definition of ‘franchisor’ or to s 6 of the FA 1998 to add the words
‘foreign franchisor’. Hence the Legislature did not intend to compel
foreign franchisors to be registered; C
(f) the long title to the FA 1998 relied on by the learned judge to mean the
Act is to provide registration must be the registration of local franchisor,
local master franchisee and local franchisee; and
(g) the principle of expressio unius est exclusion alterius applies wherein the D
express mention of ‘foreign franchisor’ in s 6A of the FA 1998 and its
exclusion from s 6 of the FA 1998 implies the Legislature’s deliberate
intention of omission in the latter section citing Dr Lee Chong Meng v
Abdul Rahman bin Hj Abdullah, Returning Officer & Ors [2000] 6 MLJ
98 at p 107; [2000] 3 CLJ 519 at p 527 f, g and i (HC). E

[21] We do not disagree with the fact that reference to the long title of a
statute as the learned judge did in following Danaharta Urus Sdn Bhd v
Kekatong Sdn Bhd (Bar Council Malaysia, intervener) [2004] 2 MLJ 257 at F
p 281; [2004] 1 CLJ 701 at p 736 when the Federal Court ‘referred to the
preamble to the Pengurusan Danaharta Nasional Berhad Act 1998 to ascertain
the object of that statute’ and Parliamentary Debates can be an aid to the
construction of a statute as acknowledged by the learned judge premised on
Danaharta Urus at pp 737–741). Neither do we disagree with the principle of G
expressio unius est exclusion alterius. However with respect we are unable to
accept the submission of the plaintiff in deducing why the Legislature did not
intend to compel foreign franchisors to be registered.

[22] We agree with the findings of the learned judge that the BrainBuilder H
business ‘is a ‘franchise’ under s 4(a), (b), (c) and (e) of the FA’. Further the
purposive construction alluded in para 19(b) above is supported by:
(a) the long title of FA 1998 which states ‘to provide for the registration of
… franchises’; I
(b) Parliamentary debates with respect to the passing of Act A1442 on 17
July 2012 wherein the learned judge stated the objectives of ‘the
requirement to register franchises on the part of franchisors and
franchisees are as follows:
 Dr HK Fong Brainbuilder Pte Ltd v SG-Maths Sdn Bhd &
[2021] 1 MLJ Ors (Lau Bee Lan JCA) 565

A (i) to enable the Registrar to supervise the development of the franchise

industry in this country;
(ii) to protect franchisees from being defrauded;
(iii) to encourage entrepreneurs to participate in the franchise industry; and
B (iv) to attract foreign investors to invest in our Malaysian franchise
industry.

(c) the wide definition of ‘franchisor’ in s 4 of the FA to mean ‘a person who

grants a franchise to a franchisee and includes a master franchisee with
C regard to his relationship with a subfranchisee, unless stated otherwise in
this Act’; and
(d) the learned judge took cognisance of the fact that to concede to the
submission of the plaintiff that s 6(1) of the FA applies only to local
D ‘franchisors’ will result in two scenarios:
(a) this will create an absurdity wherein local franchisors have to register their
franchises with the Registrar under s 6(1) FA but foreign franchisors are
exempted from such a requirement. Under s 58FA, only the ‘Minister’
(defined in s 4 FA as the Minister for the time being charged with the
E responsibility for matters relating to franchises) may exempt a franchisor,
local and foreign, from the requirement of registration under s 6(1) FA; and
(b) this will create an injustice to franchisees of foreign franchises [as
compared to franchisees of local franchises which are required to be registered
under s 6(1) FA]. This is because if a foreign franchisor is not required to
F register the foreign franchise with the Registrar under s 6(1) FA, the foreign
franchisor may wriggle out from compliance with mandatory provisions
legislated by Parliament in FA for the protection of franchisees of foreign
franchises. (Emphasis added.)

G
[23] In our judgment the purposive construction taken by the learned judge
is in accord with the position adopted by the Federal Court at p 121 in DYTM
Tengku Idris Shah ibni Sultan Salahuddin Abdul Aziz Shah when it referred to
Kammins Ballrooms Co Ltd v Zenith Investments (Torquay) Ltd [1971] AC 850
H at p 899 wherein Lord Diplock quoted a passage in Nothman v Barnet London
Borough Council [1978] 1 WLR 220 where Lord Denning MR said at p 228,
as follows:
In all cases now in the interpretation of statutes, we adopt such a construction as will
‘promote the general Legislature purpose’ underlying the provision. It is no longer
I necessary for judges to wring their hands and say: ‘There is nothing we can do about
it.’ Whenever the strict interpretation of a statute gives rise to an absurd and unjust
situation, the judges can and should use their good sense to remedy it by reading words in,
if necessary so as to do what Parliament would have done, had they had the situation in
mind. (Emphasis added.)
566 Malayan Law Journal [2021] 1 MLJ

[24] It is apposite for us to refer to the statements of the learned judge at A

sub-paras (3) and (4) of para 40 at p 36 of his grounds of judgment (‘grounds’)
which read:
(3) additionally or alternatively, a literal interpretation of s 6(1) FA together with the
wide definition of ‘franchisor’ in s 4 FA, requires a foreign franchisor to register the B
franchise with the Registrar (Literal Interpretation);
(4) based on the Purposive Construction and Literal Interpretation, the plaintiff is
required to register the BrainBuilder Business franchise with the Registrar under s
6(1) FA … (Emphasis added.)
C
[25] Whilst we agree with the purposive approach taken by the learned
judge, with respect we do not agree with the learned judge’s aforesaid
statements as emphasised because having opted to adopt the purposive
approach, then ‘[i]t is a matter for the purposive approach to replace the literal
[method of construction]’. As opined by the Federal Court at p 121 in DYTM D
Tengku Idris Shah ibni Sultan Salahuddin Abdul Aziz Shah when it referred to
Kammins Ballrooms.

[26] On the issue of whether the ‘Buku Panduan’ has the force of law, the
E
plaintiff submits:
(a) the learned judge when interpreting the FA 1998 ought to have taken
into consideration that the ‘Buku Panduan’ has the force of law. The
cases of Edwin Thomas v F&N Beverages Marketing Sdn Bhd &
Anor [2016] MLJU 1437; [2016] 1 LNS 1645 at paras 79–80 and F
Nabors Drilling (Labuan) Corp v Lembaga Perkhidmatan Kewangan
Labuan [2018] MLJU 636; [2019] 1 CLJ 277 at pp 289 paras [34],
290 [35]–[37], 291 [37] were cited;
(b) the ‘Buku Panduan’ which serves as a guideline for the registration of
G
franchise business was issued by the Minister of Domestic Trade and
Consumer Affairs pursuant to s 60 of the FA 1998; and
(c) relying on the case of David Hey v New Kok Ann Realty Sdn Bhd [1985]
1 MLJ 167 for the proposition that the Federal Court had taken judicial
notice of the ‘Guidelines for the Regulation of Acquisition of Assets, H
Mergers and Take-overs’, the plaintiff urges this court to take judicial
notice that the Buku Panduan by the Minister provides a proper
explanation ofthe definition of the word ‘franchisor’ (in s 6 of the FA
1998)’.
I
[27] We observe that there is a common denominator in both cases
highlighted to us by the plaintiff ie there is an enabling provision allowing the
issuance of the ‘guidelines’ in question. In Edwin Thomas, the High Court held
Practice Note No 1 of 1987, a set of guidelines has the force of law because it
 Dr HK Fong Brainbuilder Pte Ltd v SG-Maths Sdn Bhd &
[2021] 1 MLJ Ors (Lau Bee Lan JCA) 567

A was issued under s 28 of the Industrial Relations Act 1967. On the other hand,
in F&N Beverages Marketing, the Guidelines for Carrying on Offshore Leasing
Business in Labuan 2003 was held by the High Court to be made by the
Lembaga Perkhidmatan Kewangan Labuan (respondent) pursuant to the
power conferred on it under s 4A of the Labuan Financial Services Authority
B Act 1996.

[28] Based on our research, the Franchise (Forms And Fees) Regulations
(PU(A) 422 of 1999) is the only regulations made by the Minister pursuant to
s 60 of the FA 1998. The other two regulations are:
C
(a) Franchise (Qualifications of a Franchise Broker) Regulations 1999
(PU(A) 423 of 1999) made by the Minister pursuant to s 14(2) of the FA
1998; and

D (b) Franchise (Compounding of Offences) Regulations 1999 (PU(A) 424

of 1999) made by the Minister pursuant to s 41 of the FA 1998.

In light of the above, with respect we make this observation that the submission
on behalf of the plaintiff that the Buku Panduan was issued by the Minister of
E Domestic Trade and Consumer Affairs pursuant to s 60 of the FA 1998 is
misconceived.

[29] The question of taking any judicial notice does not arise because in light
of the existence of the three aforementioned regulations, it is clear that the
F Buku Panduan has not been issued pursuant to any enabling provision under
the FA 1998 for it to have the force of law. We therefore find it unnecessary to
refer to the Buku Panduan.

Validity of the MLA 2013

G

[30] For reasons discussed earlier the learned judge held ‘[T]he plaintiff is
required to register the BrainBuilder Business franchise with the Registrar
under s 6(1) of the FA 1998. The plaintiff ’s failure of non-registration amounts
H to a contravention of s 6(1) of the FA 1998 (the plaintiff ’s breach). It is not
disputed by first to third defendants that first defendant’s failure to register the
BrainBuilder business franchise with the Registrar under s 6A(1) of the FA
1998 has breached s 6A(1) of the FA 1998 (the first defendant’s breach)’.

I [31] The learned judge then held the effect of the plaintiff ’s breach and first
defendant’s breach (two breaches) depends on whether ss 6(1) and 6A(1) of the
FA 1998 are intended by Parliament to be mandatory or directory provisions.
The learnedjudge further held that our Legislature has intended ss 6(1) and
6A(1) of the FA 1998 to be mandatory provisions for the following reasons:
568 Malayan Law Journal [2021] 1 MLJ

(a) based on four High Court decisions that have held franchise agreements A
are void and unenforceable due to failure to register the franchise in
question namely:
(i) SP Multitech Intelligent Homes Sdn Bhd v Home Sdn Bhd [2010] MLJU
1845; [2010] 16 MLRH 537 at p 539; B
(ii) Munafsya Sdn Bhd v Proquaz Sdn Bhd [2012] MLRHU 1 at para 72;
(iii) Lim Seng Kiat & Anor v Jee Hing Lim & Anor [2015] MLRHU 1 at para
16; and
(iv) Tea Delights (M) Sdn Bhd v Yeap Win Nee [2016] 7 MLJcon 92; [2015] C
MLRHU 1 at paras 9–16;
(b) use of the word ‘shall’ in ss 6(1) and 6A(1) of the FA 1998 clearly shows
Parliament’s intention for these provisions to have mandatory effect and
reliance was placed on the judgment of Mohd Dzaiddin FCJ (as he then D
was) in Public Prosecutor v Yap Min Woie [1996] 1 MLJ 169 at pp
172–173; and
(c) Parliamentary debates clearly shows the Legislature’s intention for ss
6(1) and 6A(1) of the FA 1998 to be mandatory provisions. E

[32] The learned judge recognised the court has a discretion to invoke the
doctrine of severance to ‘save’ the lawful part of a contract by severing the illegal
provisions under cl 48.1 MLA 2013. However His Lordship was of the opinion
he could not apply the doctrine of severance because: F
(a) an invocation of the doctrine of severance will undermine ss 6(1) and
6A(1) of the FA 1998 which are intended by Parliament to be
mandatory provisions; and
(b) the two breaches held by him do not concern a particular term of the G
MLA 2013 which is illegal and can be severed from other lawful
provisions of the MLA 2013 but rather concerns the lack of registration
of the first defendant’s BrainBuilder business and taints the entire MLA
2013.
H
[33] The learned judge held in view of the two breaches, the MLA 2013 is
void in its entirety under s 24(a) of the CA 1950 ie, the MLA 2013 is forbidden
by ss 6(1) and 6A(1) of the FA 1998 and/or under s 24(b) of the CA 1950, the
MLA 2013 is of such a nature that, if permitted, would defeat ss 6(1) and 6A(1)
of the FA 1998. The learned judge relied on Merong Mahawangsa Sdn Bhd & I
Anor v Dato’ Shazryl Eskay bin Abdullah [2015] 5 MLJ 619; [2015] 5 MLRA
377 where the Federal Court held that when a party has alleged a contract is
illegal, the court has a duty to consider the validity of the contract based on s 24
of the CA 1950 (per Jeffrey Tan FCJ at paras 70–71).
 Dr HK Fong Brainbuilder Pte Ltd v SG-Maths Sdn Bhd &
[2021] 1 MLJ Ors (Lau Bee Lan JCA) 569

A [34] The learned judge held the decision to invalidate the entire MLA 2013
based on s 24(a) and/or s 24(b) of the CA 1950 is not unjust to the plaintiff
because Dr Fong and the plaintiff (Dr Fong is plaintiff ’s alter ego) have been
legally advised by the plaintiff ’s solicitors (Miss Hooi) vide Miss Hooi’s email
dated 24 December 2014 to register the first defendant’s BrainBuilder business
B franchise under the FA 1998 but which was ignored based on the misconceived
idea that shares in the first defendant may have to be given to Bumiputeras (see
sub-para 4(d) of para 15 above).

[35] On the issue of validlity, essentially the learned plaintiff counsel argues
C
that:
(a) s 6 of the FA 1998 only penalises the master franchisee, the first
defendant. Where there is express provision to render a franchise
agreement null and void, it must be construed that the mere presence of
D a penal provision in s 6 of the FA 1998 cannot be equated to imply that
the MLA 2013 is illegal, null or even void; and
(b) the MLA 2013 in fact complies with s 6A of the FA 1998. This is done
through the presence of cl 15.1(f ) of the MLA 2013 that obliges the first
and third defendants to inter alia register the BrainBuilder business.
E

[36] In essence the abovesaid arguments are similar to the plaintiff ’s

contentions at the High Court in para 36 of the grounds:
(3) s 6(2) FA provides for penal consequences if there is a breach of s 6(1) FA by a
F local franchisor. There is however no criminal sanction for a contravention of s
6A(1) FA by the franchisee of a foreign franchise. Accordingly, Parliament does not
intend to invalidate MLA (2013) for the first defendant’s failure to register the
BrainBuilder Business franchise with the Registrar under s 6A(1) FA (1st
Defendant’s Failure).
G
[37] The plaintiff further argues that the learned judge erred in placing too
much reliance on the single correspondence between the plaintiff and its’
solicitor’s email dated 24 December 2013 that the plaintiff could have used the
power of attorney to register under s 6A of the FA1998 when he failed to
H consider sufficiently the evidence of Dr Fong’s email dated 26 December 2013,
what Dr Fong communicated to the second and third defendants at a meeting
on 8 July 2014, the first to third defendants were provided with the franchise
manual, Dr Fong’s explanation of his email from his solicitor that the task was
on the first to third defendants to register (para 6.19 of the plaintiff ’s main
I submission).

[38] With respect, we are of the view that the submission of the plaintiff in
paras 36–38 above is untenable in light of our finding that s 6(1) of the FA
1998 applies to a foreign franchisor. Contrary to the plaintiff ’s submission that
570 Malayan Law Journal [2021] 1 MLJ

the cases of SP Multitech, Munafsya Sdn Bhd, Lim Seng Kiat and Tea Delights A
have no application as they are concerned with the relationship between a local
franchisor and/or master franchisee, we are of the view that the learned judge
did not err in placing reliance on these cases for the principle that registration
of franchise is imperative and non-registration of the same will render the
franchise agreement void and unenforceable. Taking it at the highest, even if it B
was the first defendant’s failure not to register the BrainBuilder business under
s 6A(1) of the FA 1998, we agree with the learned judge’s finding that the
plaintiff could have exercised the power granted by the first defendant to the
plaintiff under the power of attorney to apply to the registrar (as the first
C
defendant’s lawful attorney) to register under s 6A(1) of the FA 1998.

[39] Further, since it is our finding that s 6(1) of the FA 1998 applies to a
foreign franchisor, we will now turn to the submission of the plaintiff that the
court should be slow to striking down commercial contracts. In support of this D
proposition, the plaintiff refers to Lori (M) Bhd (interim receiver) v
Arab-Malaysian Finance Bhd [1999] 3 MLJ 81; [1999] 2 CLJ 997. This was
also the contention of the plaintiff at the High Court (refer para 36 of the
grounds). We accept the dicta of the Federal Court at p 1010 a-b as highlighted
to us by the plaintiff, ie: E
It is a familiar proposition that courts should be slow to find illegality and strike
down commercial transactions (see, eg St John Shipping Corporation v Joseph Rank
Ltd [1956] 3 All ER 683, 690, 691; Central Securities (Holdings) Bhd v Haran bin
Mohamed Zaid [1979] 2 MLJ 244, 247).
F
which we observe is repeated at pp 1015–1016 a–c. however in the very passage
which the plaintiff quoted in submission lies a very material principle of law
stated by the Federal Court (at p 1015 h) which we find the plainiff overlook
and which we stress as follows:
G
It is true that s 3 of the Civil Law Act 1956, directs our courts to apply the Common
Law of England in force at the date of its coming into effect; that is 7 April 1956,
only in so far as the circumstances permit and save where no provision has been made by
statute law. (Emphasis added.)
H
[40] In Merong Mahawangsa, the question upon which leave was granted to
appeal against the order of the Court of Appeal from a High Court decision was
whether an agreement to provide services to influence the decision of a public
decision maker to award a contract was a contract opposed to public policy as
defined under s 24(e) of the CA 1950 and therefore void. In allowing the I
appeal, the Federal Court, among others, at p 387 para [16] opined:
[16] Section 24 of the Act stipulates five circumstances in which the consideration
or object is unlawful, namely, where: (a) it is forbidden by a law; (b) it is of such a
nature that, if permitted, it would defeat any law; (c) it is fraudulent; (d) it involves
 Dr HK Fong Brainbuilder Pte Ltd v SG-Maths Sdn Bhd &
[2021] 1 MLJ Ors (Lau Bee Lan JCA) 571

A or implies injury to the person or property of another; or, (e) the court regards it as
immoral, or opposed to public policy. ‘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 … The provisions of s 24 of our Contracts
Act 1950 referred to earlier are explicit statutory injunctions. The statute provides
B expressly that the considerations or objects referred to in paras (a), (b) and (e) of s 24 shall
be unlawful and the agreement which ensues shall be unlawful and void. Paragraph (a)
deals with what is forbidden or prohibited by law; para (b) deals with what could
defeat the object of any law; and para (e) deals with public policy’ (Chung Khiaw
Bank Ltd v Hotel Rasa Sayang Sdn Bhd & Anor [1990]1 MLRA 348 per Hashim
Yeop Sani CJ (Malaya), delivering the judgment of the court), which statements
C ‘continue to be good law’ (Fusing Construction Sdn Bhd v Eon Finance Bhd & Ors And
Another Appeal [2000] 1 MLRA 330, 337 per Gopal Sri Ram JCA, as he then was,
delivering the judgment of the court. (Emphasis added.)

We observe that in respect of Lori Malaysia, the Federal Court at p 388 para
D [20] stated:
[20] Even so, in Lori Malaysia Bhd v Arab-Malaysian Finance Bhd, this court
counselled that courts should be slow to strike down commercial contracts on the
ground of illegality, contrary to the view expressed in Chung Khiaw Bank Ltd v Hotel
E Rasa Sayang Sdn Bhd & Anor.

The foregoing statement was preceded by what the Federal Court stated at p
388 para [19]:
It is perfectly settled, that where the contract which the plaintiff seeks to enforce, be it
F express or implied, is expressly or by implication forbidden by the common law or statute,
no court will lend its assistance to give effect. (Cope v Rowlands [1836] 2 M&W 149,
157 per Parke B, which was quoted with approval in Tan Chee Hoe & Sons Sdn Bhd
v Code Focus Sdn Bhd [2014] 3 MLJ 301; [2014] 4 MLRA 11 per Ramly Ali FCJ,
delivering the judgment of the court). ‘Under s 2(g) of the Contracts Act, an
G unlawful agreement is not enforceable’ (Lori Malaysia Bhd v Arab-Malaysian
Finance Bhd [1999]1 MLRA 274, per Edgar Joseph Jr FCJ, delivering the
judgment of the court). (Emphasis added.)

Thereafter the Federal Court at p 407 para [71] held, among others,
H ‘[W]henever the illegality of a contract is raised or become apparent, it is the
duty of the court to take it up, by reference to s 24 of the Act’. This legal
principle was correctly adopted by the learned judge at para 34 above. Hence
we find there is no error on the learned judge’s part in respect of his findings in
paras 34–35 above.
I
[41] Under the head of argument on illegality, learned counsel for the
plaintiff submits that even if s 6 of the FA 1998 did apply to the plaintiff, the
section does not render the MLA 2013 illegal for non-registration. To this end
counsel urges the court to consider the recent developments on illegal contracts
572 Malayan Law Journal [2021] 1 MLJ

in the judgment of the Supreme Court of the United Kingdom in Patel v A

Mirza [2017] 1 All ER 191, Pang Mun Chung & Anor v Cheong Huey
Charn [2018] 4 MLJ 594; [2018] 8 CLJ 663 and Liputan Simfoni Sdn Bhd v
Pembangunan Orkid Desa Sdn Bhd [2019] 4 MLJ 141; [2019] 1 CLJ 183. We
shall revisit these cases later.
B
Guarantee provides for indemnity

[42] Learned counsel for the plaintiff submits the learned judge erred when
he held that the second and third defendants’ guarantee and the power of
C
attorney are illegal and void under s 24(a) and (b) of the CA 1950 arising from
the illegality of the MLA 2013 as there was an indemnity from the second and
third defendants to the plaintiff pursuant to cl 2 of the guarantee and the
indemnity is collateral to the MLA 2013 and cannot be vitiated by any illegality
that may strike down the MLA 2013. In support thereof, the plaintiff cites: D
(a) Law of Contract (4th Ed) where the learned author, Dato’ Seri Visu
Sinnadurai makes the following observation at para 4.56 p 267:
[4.56] Other principles relating to collateral contracts: consideration,
illegality and breach. The following principles of law stated in Chitty on E
Contracts, General Principles, (301h Edn) at paragraph 12-006, should be
noted:
Consideration for the collateral contract is normally provided by entering
into the main contract, but a collateral contract may also be actionable even
if the main contract is unenforceable, eg illegality. Breach of the collateral F
contact will give rise to an action for damages for its breach, but not as a
general rule to a right to treat the main contract as repudiated; and
(b) Rimba Muda Timber Trading v Lim Kuoh Wee [2006] 4 MLJ 505 at pp
510–511; [2006] 3 CLJ 93 at p 99 where ‘the Federal Courl found G
favour with the argument that although the sub-contract was held to be
illegal the respondent’s claim is founded on the collateral rights acquired
under the contract’.

[43] With respect we are not persuaded by the above submission of the H
plaintiff. We are more incline to agree with the approach taken by the learned
judge for the reasons which follow. The learned judge held the three documents
ie the MLA 2013, the guarantee and the power of attorney form a single
composite transaction premised on the following reasons:
I
(1) the 3 Documents concern the same BrainBuilder Business;
(2) the 3 Documents are prepared by the same solicitor, Ms Hooi;
 Dr HK Fong Brainbuilder Pte Ltd v SG-Maths Sdn Bhd &
[2021] 1 MLJ Ors (Lau Bee Lan JCA) 573

A (3) clause 5.3 MLA (2013) provides that ‘all persons with ownership interest’
in MLA (2013) ‘must’ execute the Guarantee in the form provided in
Appendix 3 to MLA (2013) (Appendix 3). The Guarantee is exactly in the
form of Appendix 3;
(4) clauses 1 to 4 of the Guarantee solely concern the obligations of the first
B defendant under MLA (2013);
(5) clause 34 MLA (2013) states that to ‘secure the performance’ of the first
defendant of the obligations under MLA (2013), the first defendant
irrevocably appoints, among others, the Plaintiff as the first defendant’s
C attorney. Hence, the execution of the PA. Clause 1 PA provides that the
first defendant has irrevocably appointed, among others, the Plaintiff as
the first defendant’s attorney; and
(6) the 3 Documents were executed on the same day (18.12.2013) and their
execution was witnessed by Ms Hooi.
D
[44] In Malayan Banking Bhd v Neway Development Sdn Bhd & Ors [2017]
5 MLJ 180 on the findings of the courts below, the Federal Court (per Richard
Malanjum CJ (Sabah and Sarawak) (as he then was) stated (at p 187 [12]):
E [12] The primary reason given by the High Court in dismissing the claim was that
the term loan was for an illegal purpose in that it was given for the purchase of the
native land in contravention of ss 17(1) and 64(1) of the SLO [Sabah Land
Ordinance]. It was held that s 17(1) of the SLO clearly prohibits any dealing
between a native and a non-native in respect of a native land. As such, it was ruled
F that since the transaction was tainted with illegality the whole sale and purchase
agreement was void by virtue of s 24(a) and (b) of the Contracts Act 1950. In turn,
all the other instruments connected with the sale and purchase agreement such as
the deed of assignment and the letters of guarantee were also tainted with illegality.

G Having found the leave question (at 185 [2]) to be academic, the Federal Court
(at 190[22]) in essence held where a contract is void under any paragraph in
s 24 of the CA 1950, any other contract, instrument or document which is
related to the void instrument may be tainted with illegality and may also be
rendered void.
H
[45] We are of the view that the finding of the learned judge that the three
documents ‘form a single composite transaction’ falls within the purview of the
ratio of the Federal Court in Malayan Banking that ‘ ... any subsequent and
documentation that linked to or arose out of the purchase would have been tainted
I with such illegality’. Thus we agree with the learned judge’s finding that the
illegality of the MLA 2013 will consequently taint the guarantee and the power
of attorney. Further, by parity of reasoning, we also agreed the guarantee and
the power of attorney will likewise be void in their entirety under s 24(a) and/or
24(b) of the CA 1950.
574 Malayan Law Journal [2021] 1 MLJ

Unjust enrichment A

[46] Since we rule that the three documents are void, we do not find it is
necessary to deal with the appeal brought by the plaintiff against the learned
judge’s findings on conspiracy to defraud it and breach of confidence. This is
because both these causes of action in tort will only arise on the assumption B
that the three documents are valid. The learned judge took cognisance of the
same and stated ‘In the event that the Court of Appeal reverses the above
decision that the three documents are void, I will proceed to decide whether the
1st to 3rd Defendants have breached the MLA (2013) and Guarantee’ (para 55
of the grounds). C

[47] It is apposite at this juncture to refer to the learned judge’s grounds at

para 35:
35. Learned counsel for the plaintiff and defendants have cited an impressive array D
of cases on illegal contracts. I am of the view that whether a contract or transaction
has breached a provision of law, depends on the construction of that provision. As
such, cases on illegality depend on the interpretation of the particular law which has
been contravened.
E
It is in this context that learned counsel for the plaintiff submits that the
learned judge erred when he failed to consider sufficiently the principles laid
down in Sababumi (Sandakan) Sdn Bhd v Datuk Yap Pak Leong [1998] 3 MLJ
151 at p 176; [1998] 3 CLJ 503 at pp 540 and 541, namely, ‘… one must find
out first if the statute prohibits or forbids the act which the parties have F
contracted to do by the contract in question, and NOT whether the statute
prohibits the contract or the making of the contract in question by the parties
…’.

In this regard, whilst we acknowledge that ‘This difference is real, though very G
subtle.’ (per Peh Swee Chin FCJ (as he then was) at p 541 b), a common thread
runs through the decisions of Lamin Mohd Yunus PCA (as he then was), Peh
Swee Chin FCJ and Zakaria Yatim FCJ (as he then was) ‘that the said
agreement is a contract or amounts inevitably to a contract to do an act
forbidden or prohibited by s 21 under the said statute (Pool Betting Act 1967)’ H
and ‘This is contrary to s 24(a) of the Contracts Act and the agreement is
therefore illegal and void’. Such a contract is unenforceable. Similarly on the
facts of this appeal, the learned judge has correctly found the two breaches
render the MLA 2013 void in its entirety under s 24(a) and/or 24(b) of the CA
1950 alluded in paras 31 and 34 above. I

[48] Returning to the mainstream, we shall now turn to the plaintiff ’s appeal
on unjust enrichment. As to whether the plaintiff can rely on the doctrine of
unjust enrichment, the learned judge appropriately relied on Dream Property
 Dr HK Fong Brainbuilder Pte Ltd v SG-Maths Sdn Bhd &
[2021] 1 MLJ Ors (Lau Bee Lan JCA) 575

A Sdn Bhd v Atlas Housing Sdn Bhd [2015] 2 MLJ 441; [2015] 2 CLJ 453 at paras
110 and 117–118 where the Federal Court held the court may grant restitution
to a plaintiff when the following four cumulative conditions of a cause of action
in unjust enrichment have been proven by the plaintiff:
B (1) the defendant had been enriched;
(2) the defendant’s enrichment has been gained at the Plaintiff ’s expense;
(3) the defendant’s retention of the benefit is unjust; and
(4) the defendant has no defence to extinguish or reduce the defendant’s
C liability to make restitution.

[49] According to the learned judge the plaintiff has failed to prove a cause of
action in unjust enrichment as the plaintiff did not plead in the statement of
claim that the first to third defendants have been unjustly enriched at the
D
plaintiff ’s expense. From the pleadings point, whilst it is true that the plea for
unjust enrichment is found in the plaintiff ’s reply to the first to third
defendants’ defence as submitted by the plaintiff, however we agree with the
learned judge that the plaintiff did not plead in the statement of claim
E regarding any advantage received by the first defendant under a void MLA
2013 as the plaintiff has taken the position that the MLA 2013 is valid and has
not breached the FA 1998. Further a perusal of the plaintiff ’s list of issues to be
tried shows that the learned judge was correct in stating that the cause of action
in unjust enrichment is not listed as an issue to be tried. Hence there is no error
F on the learned judge’s part in terms of pleadings.

[50] From the evidential perspective, the learned judge has considered the
evidence before him and correctly concluded that the plaintiff has failed to
prove that the first to third defendants have been enriched at the expense of the
G plaintiff and the retention of the benefit is unjust and evidence has been
adduced that the first defendant has paid the plaintiff pursuant to the MLA
2013 (para 54 of the grounds). We find the learned judge did not err as the
purported evidence premised on the plaintiff reliance of the findings of the
learned judge at para 9.3.1, 9.3.2, 9.3.3 and 9.3.4 is misplaced as these are
H findings of the learned judge on the assumption the three documents are valid
(para 55 of the grounds onwards). It is our finding that the three documents are
void and hence, contrary to the plaintiff ’s submission, these findings of the
learned judge do not apply.

I [51] We will now consider the applicability of Patel v Mirza, Pang Mun
Chung and Liputan Simfoni. In Patel v Mirza, Mr Patel paid Mr Mirza
£620,000 pursuant to a contract under which Mr Mirza was to use the money
to trade in RBS (bank) shares with the benefit of insider information which Mr
Mirza is to procure. The anticipated insider information however was not
576 Malayan Law Journal [2021] 1 MLJ

forthcoming and the contract lapsed. No such insider information was A

provided and the trade/bet failed to take place. Mr Mirza refused to refund the
£620,000 back to Mr Patel. So, Mr Patel sued Mr Mirza for the refund of the
money actually paid by Mr Patel to Mr Mirza. Mr Patel succeeded in his claim
for restitution of the monies actually given.
B
The members of the UK Supreme Court differ in their reasoning: Lord
Toulson with whom Lady Hale, Lord Kerr, Lord Wilson, Lord Hodge and
Lord Neuberger agree whilst Lord Mance agreed with Lord Clarke and Lord
Sumption. C

[52] At p 191 e-f, the UK Supreme Court stated:

The principal issue was whether a party to a contract to carry out an illegal activity
was precluded from recovering money paid under the contract from the other party
under the law of unjust enrichment. D

[53] Following Patel v Mirza whether unjust enrichment can apply to an

illegal contract is subject to three considerations, namely:
(a) to consider the underlying purpose of the prohibition which has been E
transgressed and whether that purpose will be enhanced by denial of the
claim;
(b) to consider any other relevant public policy on which the denial of the
claim may have an impact; and
F
(c) to consider whether denial of the claim would be a proportionate response
to the illegality.

These principles can be gleaned from the judgment of the UK Supreme Court
at paras 120–121 as follows: G
[120] The essential rationale of the illegality doctrine is that it would be contrary to the
public interest to enforce a claim if to do so would be harmful to the integrity of the legal
system (or, possibly, certain aspects of public morality, the boundaries of which have
never been made entirely clear and which do not arise for consideration in this case).
In assessing whether the public interest would be harmed in that way, it is necessary (a) H
to consider the underlying purpose of the prohibition which has been transgressed and
whether that purpose will be enhanced by denial of the claim, (b) to consider any other
relevant public policy on which the denial of the claim may have an impact and (c) to
consider whether denial of the claim would be a proportionate response to the illegality,
bearing in mind that punishment is a matter for the criminal courts. Within that I
framework, various factors may be relevant, but it would be a mistake to suggest that
the court is free to decide a case in an undisciplined way. The public interest is best
served by a principled and transparent assessment of the considerations identified,
rather by than the application of a formal approach capable of producing results
which may appear arbitrary, unjust or disproportionate.
 Dr HK Fong Brainbuilder Pte Ltd v SG-Maths Sdn Bhd &
[2021] 1 MLJ Ors (Lau Bee Lan JCA) 577

A [121] A claimant, such as Mr Patel, who satisfies the ordinary requirements of a

claim for unjust enrichment, should not be debarred from enforcing his claim by
reason only of the fact that the money which he seeks to recover was paid for an
unlawful purpose. There may be rare cases where for some particular reason the
enforcement of such a claim might be regarded as undermining the integrity of the
B justice system, but there are no such circumstances in this case. I would dismiss the
appeal. (Emphasis added)

[54] In Pang Mun Chung, the appeal is primarily concerned with the
application of the defence of illegality and public policy in relation to an action
C brought to enforce a trust. The Court of Appeal referred to Patel v Mirza at pp
681 [67] and 685 [83] opined:
[83] In the present case, we take the view that the public policy of denying the first
defendant an unjust windfall must take precedence over whatever policy advanced
D in favour of applying the illegality defence. In this connection, we are reminded of
the oft-quoted passage in St John Shipping Corp v Joseph Rank Ltd [1957] 1 QB 267
of Devlin J as follows (at p 288):
Although the public policy in discouraging unlawful acts and refusing them
judicial approval is important, it is not the only relevant policy consideration.
E There is also the consideration of preventing injustice and the enrichment of one
party at the expense of the other.

[55] Applying the ‘proportionality test’ to the facts of this case learned
plaintiff counsel submits the following:
F
6.35.1 By allowing the Plaintiff ’s claim, it would not undermine the purpose of the
prohibiting rule since Parliament has considered the consequence of contravening
s.6(1) FA 1998. (s.6(2) FA 1998).
6.35.2 [P]arliament did not intend to render the MLA 2013 illegal for breach of
G s.6(1) FA 1998.
6.35.3 The nature and gravity are procedural, as opposed to contracts where the
object and/or purpose is unlawful (Lim Kar Bee v Duofortis Properties (M) Sdn Bhd
[1992] 1 CLJ Rep 173
H 6.35.4 The conduct of the parties here is clear. The 1st to 3rd Defendants did
nothing to procure the registrations despite the obligation to do so under the MLA
2013 and repeated reminders made by the Plaintiff at meetings.
6.35.5 On the issue of centrality and remoteness of the illegality to the contract, s.6
FA 1998 obliges the franchisor to register before he can operate a franchise business
I but it does not prevent parties from executing the MLA 2013.
6.35.6 The consequences of denying the claim would mean that the Defendants
will benefit from its own breach, at the expense of the Plaintiff.
578 Malayan Law Journal [2021] 1 MLJ

[56] With respect we are of the considered opinion that there is no merit in A
the plaintiff ’s above said submission. First, we agree with the learned judge’s
findings in respect of the two breaches (plaintiff ’s breach and the first
defendant’s breach) in paras 31 and 34 above.

[57] Next it is pertinent to note that the Court of Appeal in Pang Mun Chung B
held:
[28] Dealing now with the issue of illegality, we observe, at the outset, that the law in
this regard can be segregated broadly into contracts that are illegal under statute
(statutory illegality) or contracts which are illegal at common law. There is no suggestion C
in the present case of any statutory illegality. We need only concern ourselves with
illegality at common law which must be grounded upon established heads of public
policy as the case law suggests. This principle is also embodied in s. 24(e) of the
Contracts Act which provides that any agreement of which the consideration or
object is immoral or opposed to public policy is void. (Emphasis added)
D
(per Harmindar Singh Dhaliwal JCA at 673 [28])

On this score the case of Pang Mun Chung can be distinguished as the said case
concerns with illegality at common law premised on established heads of
public policy and s 24(e) of the CA 1950 whilst the appeal before us concerns E
with contracts that are illegal under statute (statutory illegality) as alluded in
para 34 above.

[58] In Liputan Simfoni, among others, the facts are the respondent
(plaintiff ) was the registered proprietor of a piece of land. An imposter F
company claiming to be the plaintiff applied to the third defendant, Pendaftar
Tanah and Galian, Wilayah Persekutuan Kuala Lumpur for a replacement issue
document of title alleging that it had lost the original document of title to the
land. The third defendant issued a replacement document of title and the
imposter company entered a sale and purchase agreement (‘first SPA’) to sell the G
land to the second defendant. Upon completion of the sale, the second
defendant was registered as the owner of the land. The second defendant
entered into a sale and purchase agreement with the appellant (first defendant),
Liputan Simfoni for the sale of the land (‘second SPA’). The plaintiff
commenced a suit against all three defendants seeking, among others, H
declarations that the transfers of the land to the first and second defendants
were void ab initio and orders that the subject land be restored to the plaintiff
and the third defendant to rectify the entries in the document of title of the
subject land. The High Court allowed the plaintiff ’s claim, holding, among
others, that the transfer of the land from the second defendant to the pt I
defendant was obtained by a void instrument which in turn rendered the title
of the first defendant defeasible pursuant to s 340(2) of the NLC and the land
was restored to the plaintiff. The Court of Appeal affirmed the High Court
decision. Leave to appeal was allowed to the first defendant, among others, on
 Dr HK Fong Brainbuilder Pte Ltd v SG-Maths Sdn Bhd &
[2021] 1 MLJ Ors (Lau Bee Lan JCA) 579

A the question of law ‘(v) whether a finding that a sale and purchase agreement is
void ab initio pursuant to s 24(b) of the CA 1950 renders the Form 14A under
the NLC void, despite the Form 14A being a valid instrument duly registered
in favour of the subsequent bona fide purchaser with the Land Office’.

B [59] Having considered, among others, Patel v Mirza at pp 220 [123] and
221 [124] (which passage was highlighted to us by counsel for plaintiff ). Hasan
Lah FCJ (as he then was) (delivering judgment of the Federal Court at p 222
[125]–[126] held:
C [125] Having carefully considered the authorities cited by the parties, we are
inclined to agree with the contention of learned counsel for the first defendant that
the second SPA is not void. We agree with the view that the courts should be slow
in striking down commercial contracts on the ground of illegality. The compliance
with the Stamp Act 1949 and the Real Property Gains Tax 1976 are not the prerequisite
for the second SPA to be enforceable. There is no prohibition under the two Acts to
D preclude the first defendant from acquiring rights to the subject land. The Stamp Act
1949 provides a penalty for breach of its provisions. Similarly, under the Real
Property Gains Tax Act 1976 there are penalties for breach of its provision. In
addition, it is provided that tax due and payable may be recovered by the
Government by civil proceeding as a debt to the Government. The object of the two
E Acts is to raise revenue. There is therefore no sufficient nexus such as would satisfy the
test laid down in Curragh Investment Ltd. The first defendant’s infringement of the
two Acts therefore did not prevent it from suing on the contract which is legal.
[126] In addition, we find that the test laid down by Lord Toulson in Patel that is to
say, the trio considerations, is a sensible one, which we should follow. Applying the
F test to the facts of this case, we find that it is an overkill for the first defendant to lose
the subject land for the infringement of the two Acts which is punishable by a fine
upon conviction. (Emphasis added.)

[60] In our considered opinion, the case of Liputan Simfoni can be

G distinguished. Unlike the findings of the Federal Court as emboldened above,
in this appeal, for the given reasons it is a prerequisite for all franchisors and
franchisees (local and foreign) to register their franchises with the Registrar
under ss 6(1), 6A(1) and 6B FA 1998, otherwise the entire MLA 2013 is void
under ss 24(a) and/or 24(b) CA 1950 as held by the learned judge (paras 74(4)
H and 75 of the grounds).

[61] Save for Pang Mun Chung and Liputan Simfoni which were not
ventilated before the High Court, the learned judge was not oblivious of the
development of case law, among others, Patel v Mirza (at para 51 of the
I grounds) but expressed that ‘[he was] not able to apply the cases cited
(including Patel v Mirza) because we have our own s 66 of the CA.
Furthermore as a matter of stare decisis, [he was] bound by the Federal Court’s
judgment in Tan Chee Hoe & Sons’. We agree with the approach taken by the
learned judge for the reasons which follow.
580 Malayan Law Journal [2021] 1 MLJ

[62] Since we agree with the learned judge that the three documents are void, A
in terms of whether any remedy is available to the plaintiff, one of the
provisions to consider is s 66 CA of the 1950. We find the learned judge
appropriately refer to Tan Chee Hoe & Sons Sdn Bhd v Code Focus Sdn
Bhd [2014] 3 MLJ 301; [2014] 4 MLRA 11 as the Federal Court, among
others, at paras 37–38 (per Ramly Ali FCJ) (as he then was) stated: B

[37] The effect of a void contract or agreement is provided for under s 66 [CA]
...
[38] ... The Privy Council in Harnath Kaur v lnder Singh [1922] LR 50, lA 69 in C
considering a claim based on s 65 of the Indian Contracts Act 1872 [CA (India)]
(which is identical to ours 66 [CA]) ruled:
an agreement, therefore, discovered to be void is one discovered to be not
enforceable by law, and on the language of the section, would include an
agreement that was void in that sense from its inception as distinct from a D
contract that becomes void.

[63] The learned judge proffered reasons why he was unable to invoke s 66
of the CA 1950 as follows:
E
48. I am unable to invokes 66 CA in this case because the first defendant has made
payments under the MLA (2013) to Dr Fong and the plaintiff regarding the first
defendant’s right to operate BrainBuilder Business. As such, the first defendant has
not received any advantage under the MLA (2013) to be restored to the plaintiff
under s 66 CA. Moreover, the plaintiff has taken the position in this case that MLA F
(2013) is valid and has not breached FA. Hence, the plaintiff did not plead in the
SOC and adduce any evidence regarding any advantage received by the first
defendant under a void MLA (2013).
49. The material facts in Tan Chee Hoe & Sons can be easily distinguished from this
case because the purchaser in a sale of shares contract in Tan Chee Hoe & Sons has G
received a deposit of 10% of the sale price from the vendor (an advantage under the
contract) and this deposit is rightfully ordered by the Court of Appeal (affirmed by
the Federal Court) to be restored to the vendor under s 66 CA. In this case, no
deposit has been paid by any party under the MLA (2013).
H
Cross-appeal

[64] Through its notice of cross appeal dated 20 April 2018, the defendants
seek to vary part of the decision of the learned judge on three grounds:
I
(a) the defendants seek to allege that the learned judge ought to have
refunded to the first defendant monies that were paid to the plaintiff
(‘first ground’);
(b) the defendants seek to raise the issue that the first to third defendants
 Dr HK Fong Brainbuilder Pte Ltd v SG-Maths Sdn Bhd &
[2021] 1 MLJ Ors (Lau Bee Lan JCA) 581

A were not pari delicto to the alleged illegality of the MLA 2013 (‘second
ground’); and
(c) the defendants allege that the learned judge ought to order cost against
the plaintiff pursuant to grounds 1 and 2.
B
[65] On the first ground, learned counsel for the defendants in oral
submission merely argue that since the High Court ruled the MLA 2013
(franchise) was illegal, the High Court ought to refund RM1,078,781 to the
first to third defendants that was paid to the plaintiff. The following dicta of the
C Federal Court in Tan Chee Hoe & Sons at p 32 [59] was drawn to our attention:
(c) being a void contract, by virtue of s 66 of the Contracts Act 1950, the court of
law may order restoration of whatever consideration or advantage paid or given
under that contract.

D
[66] With respect in our judgment the defendants’ submission has no merit
whatsoever. We are of the view that the said refund is part of the relief which the
first to third defendants seek in prayer 4 of their counterclaim ie ‘Satu Perintah
bahawa Plaintif hendaklah dalam masa 7 hari dari tarikh Perintah atau
E Penghakiman ini memulangkan semua wang yang telah dibayar oleh
Defendan kepada Plaintif atau wakil Plaintif (Fong Ho Kheong)’.

[67] Rule 8(1) read with 8(3) and Form 2 in the First Schedule of the Rules
of Court of Appeal 1994 allows the filing of notice of cross appeal to only vary
F the decision. In Kabushiki Kaisha Ngu v Leisure Farm Corp Sdn Bhd &
Ors [2016] 5 MLJ 557; [2016] 8 CLJ 149 at p 157 [15], the Federal Court
opined:
[15] In construing r 8 and Form 2 of the RCA 1994, the Court of Appeal had rightly
considered the critical words used, namely ‘should be varied … specifying the
G
grounds thereof ’ and ‘to be varied to the extent’. Following this, the Court of Appeal
had rightly held that the word ‘vary’ by itself should be given its ordinary and
natural meaning as stated in The Concise Oxford Dictionary to mean ‘change, make
different, modify’.
H [16] We also agree with the Court of Appeal’s finding that it had considered the clear
provisions under r 5 of the RCA 1994, and holding that r 5 of the RCA 1994
provided for an appeal to be lodged against the whole or part of any judgment or
order of court, and such an appeal in contrast to a cross-appeal is by way of a
re-hearing … Hence, if it was the substantive finding of the court that was intended
to be attacked, it behoved upon the party aggrieved to file a proper notice of appeal.
I
[68] In Pengerusi Suruhanjaya Pilihanraya Malaysia (Election Commission of
Malaysia) v See Chee How & Anor [2016] 3 MLJ 365; [2015] 8 CLJ 367 at p
394 para [77], the Court of Appeal, among others, stated:
582 Malayan Law Journal [2021] 1 MLJ

… a cross-appeal is only meant for variation of ‘the decision’ appealed against and A
not for variation, reversal or setting aside of any other decision of the High Court
unrelated to the appeal filed by the appellant.

[69] Since what the first to third defendants seek to vary is a substantive
finding of the court which relief is part of the counterclaim dismissed by the B
High Court, the defendants ought to have filed a notice of appeal against the
dismissal of the counterclaim and not seek to vary the decision of the High
Court.
C
[70] In addition, we are not minded to allow the defendants to raise the
dismissal of their counterclaim through the notice of cross appeal as to do so is
tantamount to allowing them to seek relief through the backdoor and results in
deprivation of relevant praecipe to the government. An added reason is that the
fourth to sixth defendants have no basis to raise this allegation in the notice of D
cross appeal as they are not privy or parties to the MLA 2013.

[71] In relation to the third ground, it is our view there can be no variation
on the issue of cost since we find there is no basis to sustain the first ground and
the second ground has been abandoned by the defendants. Further, we are of E
the view that since the issue of cost does not arise in the notice of appeal dated
15 February 2018 filed by the plaintiff, the defendants ought to have filed the
appeal against the decision of the learned judge for not granting cost to the
defendants instead of seeking the same through the notice of cross appeal.
F
[72] Further thereto, if the defendants seek to only appeal against the
decision of the learned judge on cost, then they ought to have first obtain leave
of the court pursuant to s 68(1)(c) of the Courts of Judicature Act 1964 (‘the
CJA’). The Federal Court in Ooi Soon Eng v Ng Kee Lin [1980] 1 MLJ
26; [1979] 1 LNS 61 held where no such leave was obtained under s 68(1)(c) G
of the CJA, the appeal fails in limine.

CONCLUSION

[73] We have carefully considered the written and oral submissions of the H
respective counsel and have perused the records of appeal before us. For all the
foregoing reasons we are of the view there are no appealable errors committed
by the learned judge which warrant appellate intervention (see Federal Court
case in Gan Yook Chin (P) & Anor v Lee Ing Chin@ Lee Teck Seng & Ors [2005]
2 MLJ 1 at p 10 para [14] which endorsed the view of the Court of Appeal in I
Lee Ing Chin @ Lee Teck Seng & Ors v Gan Yook Chin & Anor [2003] 2 MLJ
97; [2003] 2 CLJ 19, Dream Property at p 473 para [89] and UEM Group Bhd
(previously known as United Engineers (M) Bhd v Genisys Integrated Engineers Pte
Ltd & Anor [2018] supp MLJ 363 at p 381; [2010] 9 CLJ 785 at p 807 para
 Dr HK Fong Brainbuilder Pte Ltd v SG-Maths Sdn Bhd &
[2021] 1 MLJ Ors (Lau Bee Lan JCA) 583

A [40] as to when appellate intervention is warranted). In the circumstances we

unanimously dismiss both the appeal and the cross-appeal. We order the
appellant to pay global costs in the sum of RM10,000 to each respondent
subject to payment of allocatur.

B Order accordingly.

Reported by Kohila Nesan