Alliance Connext Sdn Bhd & Anor v.

[2022] 1 CLJ Wangsa Bu dimas Sdn Bhd 173

A ALLIANCE CONNEXT SDN BHD & ANOR v.

WANGSA BUDIMAS SDN BHD
COURT OF APPEAL, PUTRAJAYA
MOHAMAD ZABIDIN MOHD DIAH JCA
VAZEER ALAM MYDIN MEERA JCA
B
SUPANG LIAN JCA
[CIVIL APPEAL NO: S-02(NCVC)(W)-2134-11-2019]
28 OCTOBER 2021

Abstract – There is no requirement in law that a person appearing for

C
and on behalf of a company as its witness must be its current officers or
expressly authorised by an officer of the company. When any witness
appears to testify, that person is in court because the company had called
the witness on its behalf; hence requiring authorisation letter or a
resolution from the company from such witness would be superfluous.
D
CIVIL PROCEDURE: Appeal – Evidence, evaluation of – Whether there was
sufficient judicial appreciation of all evidence tendered – Whether High Court
decision ought to be disturbed – Whether witness appearing on behalf of company
required authorisation from company – Whether terms in lease agreement spelling
E out benefit of reduction of monthly rentals payable considered – Whether maker of
documentary evidence called to testify – Whether there was separate letter of
guarantee signed by parties spelling out terms of guarantee – Whether guarantor
privy to lease agreement – Whether lease agreement breached – Whether main
tenancy agreement, of which lease agreement was derived, was terminated
F Via a tenancy agreement, the respondent rented a commercial space
(‘demised premises’) and the operation of a gymnasium and fitness centre
(‘gym’) from a company (‘landlord’). The respondent then, through a lease
agreement together with additional terms contained in an attached letter of
understanding dated 1 August 2015 (‘lease agreement’), leased the demised
G premises together with the operation of the gym, inclusive of its equipment,
to the first appellant for a period of five years. The second appellant was
named as guarantor for the first appellant in respect of the rental payments
payable by the first appellant to the respondent. No separate letter of
guarantee spelling out the terms of the guarantee was executed. Sometime in
October 2016, the first appellant sub-leased the demised premises together
H
with the gym to a third party. In respect of this, the first appellant contended
it was known to the respondent. All monthly rentals due under the lease
agreement were then paid by the third party. However, subsequently, the
respondent alleged the fact regarding the sub-lease to the third party was
never known to it and therefore the appellants had breached the lease
I agreement. On 21 October 2017, it proceeded to re-enter the demised
premises and re-take its possession, together with the gym and its equipment.
The lease agreement was also terminated. Hence, the action at the High Court
174 Current Law Journal [2022] 1 CLJ

against the first appellant, claiming for the reliefs, inter alia: (i) rental arrears A
for September and October 2017 (RM56,884.20); (ii) payments of three
months rental in lieu of notice of termination (RM138,180); (iii) nine months
of guaranteed rental income (RM414,540); (iv) outstanding electricity bill
(RM18,534.81); (v) outstanding water bill (RM2,632); (vi) loss and damage
to the gym equipment (RM588,378.91); and (vii) loss of rentals for the B
remaining period of the lease agreement from 1 November 2017 to 31 July
2020 (RM1,519,998) (‘respondent’s claim’). Whereas, against the second
appellant, as guarantor, for monthly rentals during the term of the lease and
guaranteed rental income as agreed under the lease agreement. Against these
claims, the appellants filed their defence and counterclaim and contended C
that the respondent was not entitled to any reliefs because the monthly rentals
were paid in full, and in fact, there was an over-payment. There was a term
in the lease agreement which posited that, in the event the landlord reduced
the rate of monthly rentals under the tenancy agreement, the first appellant
would be entitled to a 70% reduction on the rate of the monthly rentals.
D
Through the evidence adduced by the respondent, the landlord did reduce the
rate of monthly rentals under the tenancy agreement. But this reduction
benefit had never passed to the first appellant. The first appellant had been
paying the monthly rentals at a full rate. As a result, the amount of refund
the first appellant was entitled thereto had far exceeded any arrears of
monthly rentals of September and October 2017 claimed by the respondent. E
The first appellant thus counterclaimed for this amount. At the High Court,
after a full trial, the first appellant’s counterclaim was dismissed. Whereas,
the respondent’s claim was allowed, and judgment was entered against the
first appellant for respondent’s claims (i), (iv), (v) and (vi). A judgment was
also entered against the second appellant as guarantor for respondent’s claim F
(i) while the remainder of the respondent’s claims were dismissed. Hence, the
current appeal and cross-appeal by the appellants and the respondent against
the whole of the High Court judgment and portions of the claims dismissed,
respectively. In respect of the appeal and cross-appeal, several issues were
raised by the parties, including: (i) the High Court Judge (‘HCJ’) had erred G
by rejecting the testimonies of DW1, DW2 and DW3 on the ground they
were not shareholders or directors of the first appellant or authorised to
testify on behalf of the same; (ii) the HCJ had not properly evaluated the
evidence tendered when it allowed the respondent’s claims (i), (iv), (v) and
(vi); (iii) whether the second appellant a guarantor for the first appellant
H
because, as alleged by the initial, he had never signed any documents which
specifically stated he gave his personal guarantee for the first appellant’s
performance of the lease agreement, and, that he was a not a party in the lease
agreement; (iv) the HCJ had erred in deciding there were no sufficient
evidence adduced to support the first appellant’s counterclaim; and
(v) whether the HCJ had erred in dismissing the respondent’s claims I
(ii), (iii) and (vii).
 Alliance Connext Sdn Bhd & Anor v.
[2022] 1 CLJ Wangsa Bu dimas Sdn Bhd 175

A Held (allowing appellants’ appeal in part; dismissing respondent’s cross-

appeal)
Per Vazeer Alam Mydin Meera JCA delivering the judgment of the court:
(1) The rejection of DWI, DW2 and DW3’s evidence (‘witnesses’) was a
grave error and a clear misdirection of the law, because: (i) there was
B no requirement under the law that a witness called by a company ought
to be the company’s current officers; (ii) when these witnesses were
called by the first appellant’s counsel, it was done via the authority of
the company, hence, counsel had the conduct to present the first
appellant’s case in court; (iii) all the witnesses had close nexus to the
C parties and direct knowledge on the subject matter of the present dispute,
ie, DW1 and DW3 were the directors of the first appellant during the
relevant period of the present dispute up until the takeover of the gym
by the third party while DW2 was the director of the third party at that
time, up until the time the respondent re-entered and re-took the
D possession of the demised premises and the gym. Hence, they all had
relevant testimonies to give in the trial and their evidence were clearly
admissible in law and relevant to the issues at hand; and (iv) there was
no requirement under the law for the witnesses appearing on behalf of
a company in court to first be expressly authorised. These persons were
E
in court because they were called by the company in the first place. A
need for a further letter of authorisation or a resolution from the
company before these persons could appear as witnesses would be
superfluous and mere surplusage which would bring no benefit to the
proceedings. (paras 13, 18, 20 & 22)
F (2) The HCJ’s decision on respondent’s claim (i) was set aside. The
evidence when construed as a whole, showed that there was indeed a
reduction on the rate of monthly rentals by 70% starting from July 2016
to October 2017, amounting to RM68,634, the amount which the
respondent was supposed to refund to the first appellant. Hence, the first
appellant was entitled to set-off this amount against the sum of
G
RM56,884.20 claimed by the respondent as rental arrears. By reason of
this valid set-off, there were in fact no rental arrears due and payable to
the respondent by the first appellant. As such, this was a proper case for
judicial intervention to set aside this part of the HCJ’s judgment.
(paras 25-27)
H
(3) As for respondent’s claims (iv) and (v), there was ample evidence to
support the respondent’s claim. There was no reason to interfere with
this part of the HCJ’s judgment. Whereas, regarding respondent’s claim
(vi), the only evidence tendered to support the claim was the condition
report. When PW1 was cross-examined, he testified that the document
I
was not prepared by him, but at best, by someone in the respondent’s
office. PW1 did not give the name of its maker nor did he have direct
176 Current Law Journal [2022] 1 CLJ

knowledge pertaining to its contents. Therefore, the evidence of PW1 A

based on the condition report was hearsay and inadmissible. Since no
credible evidence establishing the nature of loss and damage to the gym
equipment had been tendered, the respondent failed to discharge the
burden of proof to establish such damages on a balance of probabilities.
The HCJ’s pronouncement regarding respondent’s claim (vi) was B
misconceived in law. This part of the appeal by the first appellant was
set aside. (paras 28, 30-34 & 35)
(4) The HCJ erred in finding (i) the second appellant was the mind and will
of the first appellant; (ii) the latter would not enter into the lease
agreement in the first place if not due to the initial; and (iii) therefore, C
the second appellant had personally agreed to become the first
appellant’s guarantor. This was due to this court’s findings that: (i) the
requirement for a separate letter of guarantee signed between the parties
spelling out the terms and scope of the guarantee had not been met;
(ii) although the second appellant executed the lease agreement on behalf D
of the first appellant as its director, he was not a party to such agreement,
hence, he could not be held personally bound to the terms of the lease
agreement; and (iii) for the liability under cl. 5(l) of the lease agreement
to be binding upon the second appellant, the respondent would have to
first establish breach towards the lease agreement. However, there was E
no breach as there had been no arrears of monthly rentals payable to the
respondent due to the valid set-off established by the first appellant.
(paras 40 & 41)
(5) The HCJ erred in dismissing the first appellant’s counterclaim on the
ground that there was no evidence adduced to support it. There was F
ample evidence, as found in the documents tendered by the respondent
themselves, to prove the reduction by 70% on the monthly rentals
payable by the landlord to the respondent. Therefore, the HCJ’s
dismissal of the counterclaim was set aside and substituted with
judgment for the first appellant in the sum of RM11,749.80 together
G
with interest at 5% from the date of the counterclaim. (paras 42 & 43)
(6) The respondent relied on the provisions under cl. 5(k) of the lease
agreement for the respondent’s claims (ii) and (iii). However, for the
aforesaid clause to apply, there must be premature termination of the
lease agreement by the first appellant. In this case, the lease agreement H
was terminated by the respondent instead, by re-entering and re-taking
the possession of the demised premises. Therefore, cl. 5(k) did not come
into play. On 16 November 2017, the landlord terminated the tenancy
agreement for the reason of the respondent’s breach towards the lease
agreement. Even if the lease agreement was valid and subsisting, it too,
I
would come to an automatic end as the life and existence of such
agreement was dependent on the main tenancy agreement. Hence, the
 Alliance Connext Sdn Bhd & Anor v.
[2022] 1 CLJ Wangsa Bu dimas Sdn Bhd 177

A respondent could not have suffered any damages as claimed for any
period after the termination of the tenancy agreement. Further, for
respondent’s claims (vii), the termination of the tenancy agreement by
the landlord also caused the demised premises to not be in the legal
possession of the respondent, for it to rent it out to the first appellant.
B In turn, the respondent could not have suffered loss of rental income for
the remaining period of the lease agreement, from 1 November 2017 to
31 July 2020. To that extent, the HCJ’s decision regarding these claims
was agreeable and correct. (paras 45-47 & 48)
Case(s) referred to:
C Hong Yik Trading v. Liziz Plantation Sdn Bhd [2017] 8 CLJ 491 FC (refd)
Husdi v. PP [1979] 1 LNS 33 HC (refd)
Kotabato Corporation (M) Sdn Bhd & Anor v. Wisma Central Management Corporation
[2003] 4 CLJ 520 CA (refd)
Popular Industries Ltd v. The Eastern Garment Manufacturing Co Sdn Bhd [1990] 1 CLJ
133; [1990] 2 CLJ (Rep) 635 HC (refd)
D Ranbaxy (Malaysia) Sdn Bhd v. E.I Du Pont Nemours & Co [2012] 9 CLJ 79 CA (foll)
Sarawak Building Supplies Sdn Bhd v. The Director Of Forests & Ors [1991] 1 CLJ 373;
[1991] 3 CLJ (Rep) 706 HC (not foll)
Suruhanjaya Sekuriti v. Datuk Ishak Ismail [2016] 3 CLJ 19 FC (refd)
Tong Soon Tiong & Ors v. FA Securities Sdn Bhd [2013] 2 CLJ 448 FC (foll)

E Legislation referred to:

Companies Act 2016, s. 616
Evidence Act 1950, s. 101
Rules of Court 2012, O. 5 r. 6
For the appellants - Baldev Singh & Kelvin Wong; M/s Baldev Gan & Assocs
For the respondent - Ronny Cham; M/s Ronny Cham & Co
F
[Editor’s note: Appeal from High Court, Kota Kinabalu; Suit No: BKI-22NCVC-2-1-2018
(overruled in part).]
Reported by Syamim Ariffin
JUDGMENT
G
Vazeer Alam Mydin Meera JCA:
Introduction
[1] This is an appeal from the decision of the High Court in Kota
H
Kinabalu, Sabah. The plaintiff/respondent claimed damages for breach of
contract arising from a lease agreement, and the defendants/appellants
counterclaimed for overpayment of rental. The High Court, after full trial,
allowed part of the respondent’s claim and dismissed the appellants’
counterclaim. The appellants appealed against the whole of the judgment,
and the respondent filed a cross-appeal in respect of the portions of the claim
I
that were dismissed by the High Court. We had heard both the appeal and
cross-appeal and this is our unanimous judgment.
178 Current Law Journal [2022] 1 CLJ

Background Facts A

[2] The plaintiff/respondent had via a tenancy agreement dated

30 January 2015 (“tenancy agreement”) rented a commercial space (“the
demised premises”) in a building known as Bangunan Blue Seven from
Tropicana Development (Sabah) Sdn Bhd (“the landlord”) and operated a
gymnasium and fitness centre called “All Fit” (“the gym”). B

[3] The respondent subsequently through a lease agreement dated

1 August 2015 together with additional terms contained in an attached Letter
of Understanding (“LOU”) (collectively referred to as the “lease agreement”)
leased the demised premises together with the business of the gym complete
C
with all the gym and fitness equipment therein to the first defendant/first
appellant for a period of five years. In the lease agreement, the second
appellant was named as guarantor in respect of the rental payments payable
by the first appellant to the respondent. However, no separate letter of
guarantee was executed between the respondent and the second appellant
spelling out the terms of the guarantee. D

[4] Sometime since October 2016, the first appellant had sub-leased the
demised premises together with the gym equipment as a going business
concern to a third party known as Platinum Fitness Sdn Bhd (“Platinum”).
The first appellant states that the fact of the sub-lease to Platinum was known
E
to the respondent and in fact from October 2016 it was Platinum that had
paid the monthly rental due under the lease agreement directly to the
respondent. However, the respondent denies knowledge of the sublease to
Platinum and contends that it was done without its consent.
[5] On or about 21 October 2017, the respondent re-entered the demised F
premises and took possession of the demised premises together with all the
gym and fitness equipment allegedly for breaches of the lease agreement by
the first appellant. Thereafter, via solicitor’s letter dated 6 November 2017,
the respondent confirmed the respondent’s exercise of its right of re-entry
onto the demised premises citing the terms of cl. 5(a) of the lease agreement.
G
The respondent’s solicitor further confirmed that the respondent had
terminated the lease agreement for reasons of the first appellant’s breaches
of the lease agreement without specifying what the breaches were.
[6] The respondent then commenced this action for breach of contract,
claiming the following relief: H
(i) rental arrears for September 2017 (RM7,922.80) and October 2017
(RM48,961.40) totalling RM56,884.20;
(ii) payment of three months rental in lieu of notice of termination
(RM138,180);
I
(iii) nine months of guaranteed rental income (RM414,540);
 Alliance Connext Sdn Bhd & Anor v.
[2022] 1 CLJ Wangsa Bu dimas Sdn Bhd 179

A (iv) outstanding electricity bill (RM18,534.81);

(v) outstanding water bill (RM2,632);
(vi) loss and damage to the gym equipment (RM588,378.91);
(vii) loss of rentals for the remaining period of the lease agreement from
B 1 November 2017 to 31 July 2020 (RM1,519,998);
(viii) in the alternative, damages to be assessed by the court; and
(ix) statutory interest of 5% per annum from date of judgment to date of
full payment.
C
[7] The claim against the second appellant was on the basis of the second
appellant having stood as guarantor per cl. 5(l) of the lease agreement that
stated: “The monthly rental during the term of the said lease and the
guaranteed rental income as agreed under this agreement are personally
guaranteed by Mr. Nicholas Ng Fui Ming (NRIC No. 811119-12-5249)
D
[8] The appellants in their defence and counterclaim contended that the
respondent was not entitled to any relief because rentals were paid in full and
that there was in fact over-payment of rental. The first defendant stated that
it was a term of the lease agreement that if the landlord were to reduce the
monthly rental for the demised premises under the tenancy agreement, then
E
the first appellant shall be entitled to benefit 70% of that reduction. The first
appellant stated that there was in fact a reduction of the monthly rental by
the landlord. However, the 70% benefit of that reduction was never passed
on to the first appellant. The first appellant had been paying the full rental
without the benefit of the 70% reduction, and the amount of refund that the
F first appellant was entitled thereto for overpayment had by then far exceeded
any arrears of monthly rental for September and October 2017 that the
respondent was claiming. The first defendant thus counterclaimed for this
amount. In addition to that, the second appellant denied that he had ever
given his personal guarantee as alleged, nor that he ever signed any personal
G guarantee as claimed by the respondent.
The High Court’s Decision
[9] The High Court dismissed the first appellant’s counterclaim and
allowed part of the respondent’s claim and entered judgment for the
H
following heads of claim against the first appellant:
(i) rental arrears of RM56,884.20;
(ii) outstanding electricity bill of RM18,534.81;
(iii) outstanding water bill of RM2,632.96; and
I (iv) damage and loss to gym equipment of RM588,378.91.
180 Current Law Journal [2022] 1 CLJ

The court also entered judgment against the second appellant for the sum of A
RM56,884.20 on account of the guarantee for payment of outstanding rentals
for September and October 2017 per cl. 5(l) of the lease agreement. The
remainder of the respondent’s claim was not allowed.
The Issues In This Appeal
B
[10] There were several issues raised by the appellants in this appeal and
they may be summarised as follows:
(i) The court’s rejection of the defence witnesses’ testimonies on the basis
that they were not authorised to testify on the first appellant’s behalf.
C
(ii) The allowing of the respondent’s claim in part against the first appellant,
that is the sum of RM56,884.20 as rental arrears, RM18,534.81 for
outstanding electricity charges, RM2,632.96 for outstanding water bill,
and RM588,378.91 as costs of the damage and loss to gym equipment.
(iii) The allowing of the claim in the sum of RM56,884.20 (rental arrears) D
against the second appellant on the basis that the second appellant had
guaranteed payment of the monthly rental by the first appellant.
(iv) The High Court’s dismissal of the first appellant’s counterclaim.
[11] The respondent’s issues in the cross-appeal were:
E
(i) The High Court’s rejection of the respondent’s claim for the sum of
RM138,180 being the payment in lieu of the three months’ notice of
termination.
(ii) The High Court’s rejection of the respondent’s claim for the sum of
RM414,540 being the nine months guaranteed rental income stipulated F
in the lease agreement.
(iii) The High Court’s rejection of the respondent’s claim in the sum of
RM1,519,998 for loss of rentals for the remaining period of the lease
from 1 November 2017 to 31 July 2020.
G
Appellants’ First Issue
[12] The learned High Court Judge had rejected and/or refused to consider
the testimony of DW1, DW2 and DW3 on grounds that when they testified
in court, they were neither shareholders or directors of the first appellant
company nor were they authorised by the company to testify on its behalf. H
In this regard, the learned judge said in his grounds of judgment.
Firstly, I shall deal with the issue raised by the Plaintiff that the 1st
Defendant did not offer any evidence or call any witnesses to rebut or
challenge the Plaintiff’s claim. In this case, although the Defendants had
called three witnesses to testify on their behalf, it was pointed out that I
the 1st Defendant being a company was not represented by any
 Alliance Connext Sdn Bhd & Anor v.
[2022] 1 CLJ Wangsa Bu dimas Sdn Bhd 181

A authorised person of the company to appear and give evidence on its

behalf. It was pointed out that Mr. Nicholas Ng Fui Ming was called as
DW1 and tendered DWS1 was the 2nd Defendant in this case. It was
submitted that based on the evidence he had resigned as a Director and
disposed of his shares in the 1st Defendant as from 15.07.2016. Mr. Tan
Kui Siong who was called as DW2, is a Director of Platinum Fitness Sdn
B Bhd. Mr. Thein Kim Hung who was called as DW3 was a Director of the
1st Defendant i.e. before 27.07.2016.
Based on the above facts, the arguments raised by the Plaintiff that
requires the determination of this Court is that whether the evidence of
DW1 and DW3 can be relied by this Court as the evidence of the 1st
C Defendant.
The learned trial judge then applied the dicta in the case of Sarawak Building
Supplies Sdn Bhd v. The Director Of Forests & Ors [1991] 1 CLJ 373; [1991] 3
CLJ (Rep) 706; [1991] 1 MLJ 211 relied upon by counsel for the respondent
and held as follows:
D
In respect of this issue, after having considered the authorities in Sarawak
Building Supplies (supra), I am of the view that there are merits in the
Plaintiff’s submission. Although the facts in the said case are
distinguishable, the principles laid down in the said case is applicable to
the present case. It is to be noted at the time of this hearing, DW1 and
E DW3 were no longer the Directors of the 1st Defendant. When the
Plaintiff raised the challenge that they have no authority to act and offer
evidence on behalf of the 1st Defendant, the onus lies on the 1st
Defendant to show otherwise and a witness who is authorised by the 1st
Defendant should come forward to state its position and rebut the
Plaintiff’s claim. The evidence of DW1 and DW3 in my view are just
F supportive evidence to support the 1st Defendant’s case but the principal
or main witness to defend the claim must be somebody that is authorised
by the 1st Defendant’s company. In this case despite the challenge, the
1st Defendant did not offer any reasons to show why it could not call
somebody from the 1st Defendant to take the witness stand.

G [13] With all due respect, we find that the learned trial judge had erred in
not giving proper consideration to the evidence of the appellants’ witnesses
by misapplying the law. Firstly, there is no requirement in law that a witness
called by a company must be current officers of the company or must be
expressly authorised by an officer of the company for that person to appear
as its witness in court. In that regard, there cannot be any challenge to a
H
witness called by a company to produce the authorisation.
[14] The case of Sarawak Building Supplies Sdn Bhd v. The Director Of Forests
& Ors [1991] 1 CLJ 373; [1991] 3 CLJ (Rep) 706; [1991] 1 MLJ 211 relied
on by the learned trial judge concerned a challenge to the authority of a
I solicitor or counsel acting for a company and had nothing to do with
competency of a witness to testify on a company’s behalf. The dicta of that
182 Current Law Journal [2022] 1 CLJ

case deals with the representative capacity of a solicitor or counsel to act for A
a company. This is clearly seen from the judgment of Haidar J (as he then
was) in that case where he held that:
As regards litigation by an incorporated company, as a rule the directors
are the persons who have authority to act for the company, but in the
absence of any contract to the contrary in the articles of association, the B
majority of the members are entitled to decide, even to the extent of
overruling the directors, whether an action in the company's name should
be begun or allowed to proceed. The secretary of a company cannot
institute proceedings in its name in the absence of express authority to
do so; but proceedings begun without authority may subsequently be
ratified. C

The lack of authority of the solicitors to act can be challenged at any stage of the
proceedings. Once the challenge has been made, the burden of proving that the suit
had been instituted with proper authority rests on the plaintiff company (see Syawal
Enterprise Sdn. Bhd. & Anor. v. Dayadiri Sdn. Bhd. [1990] 3 CLJ 165).
(emphasis added) D

[15] It is trite law that the first appellant being a company, cannot appear
in court by its officers or directors and may ordinarily appear only by
counsel instructed on its behalf. This requirement is found in O. 5 r. 6 of the
Rules of Court 2012 read together with s. 616 of the Companies Act 2016.
See: Kotabato Corporation (M) Sdn Bhd & Anor v. Wisma Central Management E
Corporation [2003] 4 CLJ 520; [2003] 4 MLJ 473, CA. It is in that context
that the dicta of Haidar J in Sarawak Building Supplies Sdn Bhd v. Director of
Forests & Ors (supra) must be taken. The first appellant had adhered to this
requirement of the law, and indeed there was no challenge to counsel’s
authority to represent the first appellant in proceedings. The challenge was F
instead to the competency of the first appellant company’s witnesses. When
learned counsel for the respondent, Mr Ronny Cham, was queried by this
court if he had any statutory or case authority for his proposition that only
current officers of a company or a person expressly authorised by the
company can appear as a competent witness for and on behalf of a company, G
he answered in the negative. Mr Ronny Cham reiterated that he was merely
relying on Sarawak Building Supplies Sdn Bhd v. Director of Forests & Ors (supra)
for that proposition, which we must point out is an entirely misplaced and
erroneous reliance.
[16] Learned counsel for the appellants on the other hand referred to a H
decision of this court in Ranbaxy (Malaysia) Sdn Bhd v. E.I Du Pont Nemours
& Co [2012] 9 CLJ 79 CA, which was more on point. The issue in Ranbaxy
was whether a party to a civil proceeding must personally attend court and
give evidence. Ramly Ali JCA (as he then was) held:
I
 Alliance Connext Sdn Bhd & Anor v.
[2022] 1 CLJ Wangsa Bu dimas Sdn Bhd 183

A [67] The appellant’s complaints relating to grounds 3-6 of the

memorandum of appeal, in essence can be summarised as follows:
(a) there was no representative from the respondent company in court; and the
respondent was not physically present to give testimony before the learned
judge;
B ...
[68] The present case is a civil case, where the court decides based on the
evidence adduced during trial on the balance of probabilities. Under s. 101
of the Evidence Act 1950 the person who asserts the existence of any fact
must prove the fact exists. Section 102 of the same Act stipulates that the
C burden of proof in a suit or proceeding lies on that person who would
fail if no evidence at all were given on either side. What the respondent
needs to do (as the defendant to the present claim) is to enter appearance
within time and to be represented by counsel to handle the proceeding
on its behalf; to file the necessary statement of defence and counter claim
as well as other follow-up documents to get the matter ready for trial. All
D these had been duly done by the respondent.
[69] For the purpose of trial, the respondent needs to adduce evidence, either by calling
its witnesses to testify in court and to tender documentary evidence in order to prove
its defence and counterclaim. In this case the respondent had called seven
witnesses to testify on its behalf.
E [70] Section 118 of the Evidence Act 1950 provides that all persons shall be
competent to testify unless the court considers that they are prevented from
understanding the questions put to them or from giving rational answers
to those questions by tender age, extreme old age, disease or any other
cause of the same kind. Section 120(1) of the Evidence Act 1950 states
that in all civil proceedings the parties to the suit shall be competent
F
witnesses. Thus, a party to a suit may be competent to give evidence but
he may not be compelled to do so. Section 134 of the Evidence Act 1950,
makes it clear that no particular number of witnesses shall in any case be
required for the proof of any fact. The evidence of every witness is to be
judged on its own merits.
G [71] There is no law to say that a party to a civil proceeding must personally attend
court and give evidence to support its claim or counterclaim. The respondent may,
at its own discretion call any number of witnesses whose evidence are relevant to prove
its defence and counter claim. (emphasis added)
[17] The above pronouncement by this court in Ranbaxy was referred to
H with approval by the Federal Court in Tong Soon Tiong & Ors v. FA Securities
Sdn Bhd [2013] 2 CLJ 448, where in considering whether an undischarged
bankrupt was a competent witness, Suriyadi Halim Omar FCJ had this to
say:

I
184 Current Law Journal [2022] 1 CLJ

[19] Section 118 of the Evidence Act 1950 is a specific provision that deals A
with issues of witnesses and highly relevant in shedding some light on
the matter at hand. It reads:
All persons shall be competent to testify unless the court considers
that they are prevented from understanding the question put to
them or from giving rational answers to those questions by tender B
years, extreme old age, disease, whether of body or mind, or any
other cause of the same kind.
[20] The above provision refers to categories of witnesses who may be
disqualified from giving evidence by reason of tender age, extreme old
age, incapacitated by diseases whether of body or mind, or any other
C
cause of the same kind. The sole test of competence under this section
is his intellectual capacity ie, his understanding (Evidence Practice and
Procedure by Augustine Paul 3rd edn. p. 915; Sidek Ludan v. PP [1995] 1
LNS 219). Under the illustration of Explanation a mentally disordered
person or lunatic is not incompetent to testify unless he is prevented by
his condition from understanding the questions put to him and giving D
direct rational answers to them. Even a dumb witness is a competent
witness if he can give evidence in an intelligent manner eg, by writing or
by signs (Chai Kor v. PP [1965] 1 LNS 16). But eventually the court must
ascertain their competency (Kee Lik Tian v. Public Prosecutor [1984] 1 LNS
55).
[21] In Ranbaxy (Malaysia) Sdn Bhd v. E.I Du Pont Nemours & Co [2012] 9 E
CLJ 79 the Court of Appeal said:
Section 118 of the Evidence Act 1950 provides that all persons shall
be competent to testify unless the court considers that they are
prevented from understanding the questions put to them or from
giving rational answers to those questions by tender age, extreme F
old age, disease or any other cause of the same kind. Section
120(1) of the Evidence Act 1950 states that in all civil proceedings
the parties to the suit shall be competent witnesses ...
[22] For completeness of argument, even though the sixth plaintiff ie, the
bankrupt was an interested witness in a certain sense, suffice for us to say G
that if his testimony was tainted then some form of corroboration was
required in order for the court to act on it. It must be borne in mind that
there is no legal presumption that the evidence of an interested witness
is to be disbelieved. Eventually everything falls back on the court to decide
whether his evidence is to be accepted or not (Liow Siow Long v. PP [1969]
1 LNS 98; Rattan Singh v. PP [1970] 1 LNS 132). H
[23] Within the context of s. 118 of the Evidence Act 1950 a bankrupt,
unless falling within the above legislated restricted categories, surely
cannot per se be equated with lack of intellectual capacity to understand.
And neither is bankruptcy a disease. To wind it up, under the Evidence
Act 1950 a debtor’s status as a bankrupt is not a disability that will dilute
I
 Alliance Connext Sdn Bhd & Anor v.
[2022] 1 CLJ Wangsa Bu dimas Sdn Bhd 185

A his competency to testify, especially if all the rules of evidence have been
complied with. That being so the sixth plaintiff’s evidence under the
Evidence Act 1950, and despite being a bankrupt, is admissible.
[24] With the absence of any law that deems or states that a bankrupt’s
evidence is inadmissible without more we therefore answer the question
B for determination in the negative. The quality, relevancy or admissibility
of a specific piece of evidence adduced by the bankrupt is a separate
matter subject to the rules of evidence, to be decided by the presiding
judge.
[18] The principles enunciated by the Court of Appeal in Ranbaxy and the
C
Federal Court Tong Soon Tiong & Ors v. FA Securities Sdn Bhd (supra) are very
much applicable to the present case. The first appellant company, through
its solicitor/counsel having conduct of the matter had called three witnesses,
namely DW1, DW2 and DW3. Clearly, the solicitor in so doing was acting
on the authority given to him by the first appellant, for it is the solicitor/
counsel who has conduct of the matter and present the company’s case in
D
court. These witnesses are for all intents and purposes the company’s
witnesses, and they were in court voluntarily. In this case, DW1 was an
ex-director of the first appellant and was also the second defendant in the suit.
DW2 was a director of Platinum Fitness, the company that had taken over
the lease, management and operations of the gym from the first appellant, and
E DW3 was an ex-director of the first appellant during the material time. They
all had relevant testimony to give in the trial, for all of them had close nexus
with the parties, and had direct knowledge of the subject matter of the dispute
between the parties. The respondent’s pleadings also allude to this fact, in
particular the second appellant (DW1) who is alleged by the respondent to
F be the mind and will of the first appellant at all material times.
[19] A party to an action may call witnesses to support its claim or
counterclaim or to establish its defence of a claim in several ways. One way
is to procure their voluntary attendance in court, and the other is to issue a
subpoena to compel a witness to attend. When a person is subpoenaed as a
G witness, it can hardly be said that the person is authorised by the company
to testify on its behalf, for he may be a reluctant witness. That person is
summoned by the court via the subpoena and compelled to attend court and
give relevant testimony at trial, which evidence may be useful to the court
in determining the issues at hand. The subpoena is issued by the court in the
H name of the Yang di-Pertuan Agong to compel attendance in court. Such
attendance is not merely a civic or public duty but a legal obligation, the
disobedience of which attracts penal sanction.
[20] There is no requirement in law, nor does it not serve any useful or
practical purpose, to require a person appearing as a witness for a company
I to be expressly authorised to do so by the company. When any witness
appears to testify in court for and on behalf of a company, that person is in
186 Current Law Journal [2022] 1 CLJ

court because the company had called the witness to appear as a witness on A
its behalf. To that extent, that person is termed the company’s witness. It
would be superfluous to require a further letter of authorisation or a
resolution from the company. This would be mere surplusage which brings
no benefit to the proceedings. These witnesses are no different from a witness
called by a non-corporate individual litigant. B
[21] In any event, in the present case, when DW1 was challenged by
learned counsel for the respondent on his authority to appear as witness for
the first appellant, DW1 had categorically stated that he was authorised by
the general manager of the first appellant with whom he had been discussing
the suit. DW1 was thus giving evidence for himself as the second appellant/ C
defendant in the action as well as for the first defendant. All three witnesses
of the first appellant had direct knowledge of the matters in dispute and were
relevant and competent witnesses.
[22] Thus, we find that the learned trial judge had clearly misdirected
himself when he decided not once but twice to disregard the evidence of the D
first appellant’s witnesses. The learned High Court Judge in dismissing the
first appellant’s counterclaim once again misdirected himself when he said:
The basis of the Plaintiff’s objection to the counterclaim is the same as
argued earlier on in this case that the 1st Defendant did not offer any
witness to testify on behalf of the 1st Defendant. Based on the said E
arguments, it was submitted that the counterclaim here was a non-starter.
As I have decided earlier in this judgment that the 1st Defendant did not offer any
witnesses to oppose the Plaintiff’s claim, similarly here I will take the same stance
and on the said reasoning, I find the 1st Defendant’s counterclaim here ought to be
disposed on the same grounds. In the circumstances, I ruled that the
F
counterclaim herein has not been proven. (emphasis added)
These findings by the trial judge have greatly prejudiced the first appellant.
The evidence of DW1, DW2 and DW3 are clearly admissible in law as they
are all competent witnesses. The law only requires the first appellant to call
witnesses who are competent and whose testimony would be relevant. The G
facts of the case show that DW1 and DW3 who were directors of the first
appellant during the relevant period in dispute up to the takeover of the gym
business by Platinum had personal knowledge regarding the agreement
between the first appellant and respondent, and the ensuing dispute. DW2
became a director of the first appellant from the time when Platinum came
H
into the picture by way of the sub-lease until the time when the respondent
re-entered the demised premises and took possession of the gym and
terminated the lease agreement. Hence, all three witnesses are relevant to the
issues at hand and had remained credible under cross-examination. Thus, we
do not find any reason why the evidence of DW1, DW2 and DW3 ought
to be rejected. They are principally witnesses of the court, whose testimony I
 Alliance Connext Sdn Bhd & Anor v.
[2022] 1 CLJ Wangsa Bu dimas Sdn Bhd 187

A if relevant and admissible, assists the court in making its determination of the
issues. In this regard, we must be reminded of the well-established principle
that “there is no property in a witness”. See the judgments of the Federal
Court in Husdi v. PP [1979] 1 LNS 33; [1979] 2 MLJ 304; and Suruhanjaya
Sekuriti v. Datuk Ishak Ismail [2016] 3 CLJ 19. Therefore, the rejection of the
B evidence of these defence witnesses is a grave error on the part of the learned
trial judge that warrants appellate intervention.
Appellants’ Second Issue
[23] The first appellant contends that the allowing of the respondent’s
claim by the High Court for RM56,884.20 in rental arrears, RM18,534.81
C
for outstanding electricity charges, RM2,632.96 for water bill arrears, and
RM588,378.91 as loss and damage to the gym equipment was wrong as it is
unsupported by evidence.
[24] In respect of the arrears of rental for the months of September and
D October 2017, the first appellant states that there is a valid set-off. The lease
agreement was for five years commencing from 1 August 2015 until 31 July
2020 at a monthly rental of RM46,060. It is common ground that the
monthly rental of RM46,060 comprised two distinct parts, namely:
(i) the sum of RM26,060 as rental for the demised premises; and
E
(ii) the sum of RM20,000 for the use of the gym equipment.
[25] Pursuant to cl. 5 of the LOU, it was agreed that if the landlord were
to reduce the monthly rental of RM26,060 payable by the respondent under
the tenancy agreement, the first appellant shall be entitled to a refund of 70%
F of that reduction. There is undisputed evidence that the landlord did reduce
the monthly rental for the demised premises from RM26,060 to
RM21,484.40 from July 2016. Hence, there was a reduction of RM4,575.60
per month, of which the first appellant was entitled to 70%. Nevertheless,
the first appellant paid the full monthly rental to the respondent. The first
appellant states that from July 2016 to October 2017, its total entitlement for
G
the 70% reduction would amount to RM68,634, which the respondent must
refund to the first appellant. However, the respondent failed to do so.
[26] Hence, the first appellant submits that there is overpayment of the
monthly rental from July 2016 and the refund of this overpayment due from
H the respondent amounting to RM68,634 is more than sufficient to set-off the
claim of RM56,884.20 in rental arrears for the months of September and
October 2017. This in essence is also the first appellant’s counterclaim.
[27] When the evidence is construed as a whole, we find merit in the first
appellant’s contention. The uncontroverted evidence, and in fact the
I documentary evidence adduced by the respondent themselves, shows that the
first appellant is entitled to the set-off of RM68,634 against the sum of
188 Current Law Journal [2022] 1 CLJ

RM56,884.20 claimed as rental arrears. Thus, we find that the learned trial A
judge had failed to properly evaluate the evidence when he allowed the
respondent’s claim for the sum RM56,884.20 as rental arrears. We find that
by reason of this valid set-off, there were in fact no rental arrears due and
payable to the respondent by the first appellant. Had there been proper
judicial appreciation of the evidence, this would have been quite apparent. B
Thus, we find that this is a proper case for appellate intervention to set aside
this part of the judgment.
[28] As for the sum of RM18,534.81 for outstanding electricity charges and
RM2,632.96 as arrears in the water bill that was allowed by the High Court,
we find that there is ample evidence to support this claim by the respondent. C
There is documentary evidence in the form of outstanding bills from the
respective utilities companies that remain unpaid for the period where the
first appellant was in occupation of the demised premises. Hence, we find no
reason to interfere with this part of the judgment of the High Court.
[29] As for the sum of RM588,378.91 allowed by the High Court as loss D
and damage to the gym equipment, the learned trial judge in his grounds of
judgment stated as follows:
The next issue for determination here is the Plaintiff’s claim for loss and
damages of the equipment as a result of the breach of the Lease
Agreement. In support of the claim, the Plaintiff relied on the testimony E
of its witnesses and also the Fixed asset list that was exhibited. Based on
the exhibit, it was submitted that the 1st Defendant was liable.
In response the 1st Defendant relied on the arguments that the
agreement had been vitiated by the misrepresentation of the Plaintiff as
the equipment in issue was not the Plaintiff’s equipment but was merely F
leased from another company i.e. Excel Fitness. In short, it is not the
Plaintiff’s equipment. In support the Defendant relied on the evidence
adduced in the cross-examination of PW1 to support its arguments on
this point.
In response to this issue, the Plaintiff relied on its earlier arguments that G
in this case, the 1st Defendant had not offered any evidence in the trial
as it had failed to call any witness to testify on its claim in this case. It
was further submitted in the circumstances, the issue raised in the
submission on this point was merely arguments from the Bar and ought
to be rejected. It was submitted that as this point was not proven, the
Court ought to decide the issue in favour of the Plaintiff as it had proved H
that the equipment in issue were unusable and no longer fit for its purpose
after the 1st Defendant had breached the Lease Agreement. In respect of
this issue, I find there are merits in the Plaintiff’s arguments. The defence
raised is one of misrepresentation which is a serious challenge as it affects
the validity of the agreement if proven. In order to prove such a defence,
the 1st Defendant ought to present sufficient evidence to prove on the I
balance of probability that it was misrepresented by the Plaintiff on this
 Alliance Connext Sdn Bhd & Anor v.
[2022] 1 CLJ Wangsa Bu dimas Sdn Bhd 189

A issue. Based on the evidence adduced in the trial, the burden is not
discharged by merely relying on some parts of the evidence of PW1 and
DW1. The evidence of these witnesses, even if it shows that the
equipment belonged to another company would not be sufficient to show
the element of misrepresentation to vitiate the agreement as contended
by the 1st Defendant. In the present case, the Lease Agreement had also
B clearly stated that the 1st Defendant is bound by Clause 5(c).
On this issue, based on the clear provisions of the Lease Agreement and
the oral evidence of PW1 and the exhibits produced by the Plaintiff, it is
my finding that the Plaintiff has proved on the balance of probabilities that
it is entitled to recover the loss and damages for the equipment as
C claimed.
[30] Now, we find that the only evidence adduced in support of this head
of claim is the condition report found at pp. 399-406 of the record of appeal
(vol 2). The learned trial judge had also referred to this document in his
grounds of judgment as the “fixed assets list”. Though this document was
D placed as a Part B document in the bundle of documents at trial, the first
appellant disputed the contents thereof and hence it was incumbent upon the
respondent to prove the alleged loss and damage.
[31] When scrutinised, the condition report (or the fixed assets list as the
learned trial judge calls it) seems to be a tabulation of the depreciation of the
E assets in that list at the rate of 15% percent per annum over several years
together with a table of summary of the alleged condition of some of the gym
equipment after termination of the lease agreement when they were
repossessed by the respondent. There are some values attached to these items
by the respondent. The respondent’s claim for the loss of value of these gym
F equipment was singularly based on this document. PW1 was cross-examined
on this condition report/fixed assets list, he confirmed that the document was
not prepared by him. He testified that the condition report was prepared by
his accountant/auditor. He did not have any direct knowledge of the contents
of the document. When further queried by counsel for the first appellant,
G PW1 had this to say:
Q44: PUT: Do you agree with me that there is no reference made in any
part of the document (pages 79-86) recording or showing that it was
prepared by your accountant auditor?
A: I am not sure because I asked the office to do for me.
H
[32] At best, the evidence is that the condition report was prepared by
someone in the respondent’s office, and we are not sure who it was. In fact,
PW1 did not give the name of the maker of the document. Neither did PW1
have direct knowledge of the contents of the condition report. In the
circumstance, we would have to agree with submissions of learned counsel
I
for the appellants that the evidence of PW1 based on the condition report is
hearsay and inadmissible. The learned trial judge seems not to have given
proper and due consideration to this important issue of admissibility.
190 Current Law Journal [2022] 1 CLJ

[33] It is trite law that the respondent bears the burden of proof to establish A
the damages that it says that it has suffered. See: Popular Industries Ltd. v. The
Eastern Garment Manufacturing Co Sdn Bhd [1990] 1 CLJ 133; [1990] 2 CLJ
(Rep) 635. The burden of proof rests throughout the trial on the party who
asserts that the facts exist (See: s. 101 of the Evidence Act 1950 and the
judgment of the Federal Court in Hong Yik Trading v. Liziz Plantation Sdn Bhd B
[2017] 8 CLJ 491). Hence, it would be incumbent upon the respondent to
adduce sufficient evidence of the loss and damage to the gym equipment and
how the value of the loss was ascertained.
[34] In this case, we find that the respondent has failed to discharge that
burden on a balance of probabilities. There is no credible evidence C
establishing the nature of loss and damage to the gym equipment. There is
no evidence showing that any of the witnesses had inspected the equipment
and found them to be in a state of disrepair. Neither is there any credible
evidence showing how the valuation as to the alleged loss or diminution in
value to the itemised equipment in the condition report was arrived at. PW1 D
did not give any direct evidence from his personal knowledge in support of
the respondent’s claim for the sum of RM588,378.91. The court cannot rely
on a document containing a summary of claim made by hitherto unknown
person as sufficient evidence of loss suffered by the respondent.
[35] Thus, we find that the pronouncement by the learned judge that the E
respondent had “proved on the balance of probabilities that it is entitled to
recover the loss and damages for the equipment as claimed” is misconceived
in law, and in fact, for there is hardly any evidence to support this claim.
Therefore, we allowed this part of the appeal by the first appellant and set
aside the award of the sum of RM588,378.91.26 F
Appellants’ Third Issue
[36] The third issue is whether the second defendant is guarantor for the
payment of the monthly rentals and the guaranteed rental income in the event
of default by the first defendant. The respondent’s pleaded case is that the
G
second defendant was at all material times a director and shareholder of the
first appellant and that it was at the request of the second appellant that the
respondent had entered into the lease agreement with the first appellant. In
the amended statement of claim, the respondent states:
4.1 It was the express and/or implied condition of the Lease Agreement that the H
2nd Defendant, being the mind and will of the 1st Defendant, held himself
out as guarantor for the due performance and observance by the 1st Defendant
of all the covenants and obligations on its part to be performed under the Lease
Agreement and to keep the Plaintiff indemnified against all loses and
damages incurred and/or suffered or to be incurred and/or suffered
by the Plaintiff arising out of any breach, non-observance or non- I
performance by the 1st Defendant of its covenants and obligations
under the Lease Agreement [Clause 3(n)].
 Alliance Connext Sdn Bhd & Anor v.
[2022] 1 CLJ Wangsa Bu dimas Sdn Bhd 191

A 4.2 Furthermore by Clause 5(l) of the Lease Agreement it was expressly

agreed that the monthly rental during the term of the lease and the
guaranteed rental income as agreed under the Lease Agreement are
personally guaranteed by Mr Nicholas Ng Fui Ming (NRIC No.
811119-12-5249) of No. 49, Reservoir Garden Phase II, 88200
Penampang, Sabah, Malaysia.
B
The respondent’s pleaded case is that the second appellant had impliedly or
expressly guaranteed “the due performance and observance by the first
defendant of all the covenants and obligations on its part to be performed
under the lease agreement”. It was on the basis of this pleaded case that the
respondent’s claim for relief against the second appellant mirrored that
C
against the first appellant.
[37] The second appellant denied the respondent’s allegation of implied or
express guarantee and stated that his role in the lease agreement was to
merely sign the agreement for the first appellant as a director then, and other
D than that he was not a party to the lease agreement. A scrutiny of the
document shows that the parties to the lease agreement were only the
respondent and the first appellant. According to the second appellant, this
fact is apparent from the wordings at the beginning of the lease agreement
where it states: “It is agreed between the parties hereto that ...”, which is
clearly indicative of the fact that it was an agreement purely between
E
respondent and the first appellant, who were the only named contracting
parties. The second appellant submits that he has no privity of contract with
the respondent and that cl. 5(l) of the lease agreement is not binding on him
as a non-party to the agreement.

F [38] The second appellant further states that he had never signed any
documents with the respondent wherein he specifically gave his personal
guarantee for the first appellant’s performance of the contract as alleged by
the respondent. In addition, the second appellant contends that there is no
evidence showing that he was the mind and will of the first appellant. He
asserts that the evidence in fact shows the contrary, that is the second
G
appellant was only a minority shareholder (40%) and that there were other
shareholders and directors in the first appellant company. The second
appellant had subsequently sold off his entire shareholding and resigned as
director of the first appellant in July 2016. And shortly thereafter the
respondent dealt with Platinum in respect of the lease agreement.
H
[39] However, the learned trial judge in his grounds of judgment found that
the guarantee stated in cl. 5(l) of the lease agreement between the respondent
and the first appellant was binding on the second appellant to create a
personal guarantee. This is what the learned judge said in his grounds of
judgment:
I
192 Current Law Journal [2022] 1 CLJ

In my view the terms in the clause is clear and unambiguous. It is clearly A

stated that the 2nd Defendant had agreed that he would personally stand
as the guarantor for the 1st Defendant.
Although the 2nd Defendant denied and claimed that he was not
providing a personal guarantee to the 1st Defendant, he was not able to
provide or introduce any probable evidence to suggest that he has taken B
steps to dispute or contradict the intention as stated in Clause 5(l) above.
His denial at this stage without more, to my mind is merely an
afterthought to deny liability as a personal guarantor to the 1st
Defendant.
In this regard to this issue, I am more inclined to accept the evidence of
C
PW1 which I think is more probable in the circumstances when he stated
that the 2nd Defendant was the mind and will of the 1st Defendant and
he would not have agreed to enter the Lease Agreement with the 1st
Defendant if the 2nd Defendant had not agreed to be personally
responsible for the operation of the gym and agreed to stand as guarantor.
[40] We find that the learned judge had erred in making that determination. D
Firstly, even if the PW1 had agreed for the respondent to enter into the lease
agreement on the basis of the second appellant having agreed to stand as
guarantor for the payment of the monthly rental, there is no document
evidencing the actual terms of the guarantee between the respondent and the
second appellant. In this regard, we agree with learned counsel for the E
appellants that the second appellant, who is not a party to the lease
agreement, though he may have executed it on behalf of the first appellant
as its then director, he cannot be personally held to be bound by the terms
of the lease agreement. We are of the view that there is still a requirement
for a separate letter of guarantee to be executed by the second appellant in F
favour of the respondent spelling out the terms and scope of the guarantee.
There is none here.
[41] Secondly, even if cl. 5(l) of the lease agreement is said to bind the
second appellant, the respondent would have to first establish breach of the
lease agreement occasioned by the non-payment of the monthly rental by the G
first appellant for the second appellant’s liability as guarantor to arise.
However, by virtue of our earlier finding that there were no arrears in the
monthly rental due and payable, there is no breach by the first appellant in
this regard, and as such liability under cl. 5(l) does not arise, and has not been
established. In the circumstance, we are of the view that cl. 5(l) is inoperative H
against the second appellant. In light of this, we find that the learned trial
judge had erred in law and in fact by ordering the second appellant to pay
the sum of RM56,884.20 to the respondent. Hence, we allow the appeal
against this part of the judgment and set aside the High Court’s order in that
respect.
I
 Alliance Connext Sdn Bhd & Anor v.
[2022] 1 CLJ Wangsa Bu dimas Sdn Bhd 193

A Appellants’ Fourth Issue

[42] This issue concerns the dismissal of the first appellant’s counterclaim
for the refund of the 70% entitlement in the rental reduction by the landlord.
We have covered this issue earlier when discussing the first issue. The
learned judge in dismissing the counterclaim had once again erroneously held
B that there were no evidence to support the first appellant’s counterclaim.
This erroneous finding was made by the learned trial judge after erroneously
disregarding the evidence of the three defence witnesses. Now, for the same
reasons discussed earlier, when the testimonies of these three witnesses are
considered, we find that there is ample evidence to prove the first appellant’s
C counterclaim. There is evidence of the reduction of the monthly rental by the
landlord given to the respondent. This evidence is uncontroverted and is in
fact found in the documents tendered by the respondent themselves. Under
the terms of the lease agreement the first appellant was entitled to 70% of the
said reduction. Hence, there is overwhelming evidence establishing the first
D appellant’s counterclaim. The learned judge was clearly wrong in dismissing
the counterclaim.
[43] The first appellant claims the sum of RM68,634 in the counterclaim,
which after the set-off of RM56,884.20 for the September and October 2017
rental arrears, the amount that the first appellant would still be entitled is
E RM11,749.80. Thus, we set-aside the High Court’s dismissal of the
counterclaim and substitute it with judgment for the first appellant in the sum
of RM11,749.80 together with interest at 5% from the date of the
counterclaim.
Respondent’s Issues In The Cross-Appeal
F
[44] The respondent’s cross-appeal relates to the dismissal by the High
Court of these three heads of claim:
(i) the claim for the sum of RM138,180 being payment in lieu of the three
months’ notice of termination.
G
(ii) the claim for the sum of RM414,540 being the nine months guaranteed
rental income stipulated in the lease agreement.
(iii) the High Court’s rejection of the respondent’s claim in the sum of
RM1,519,998 for loss of rentals from 1 November 2017 to 31 July
H 2020.
[45] The learned judge in his grounds of judgment has quite comprehensively
dealt with these heads of claims. In respect of the claim for the sum of
RM138,180 being the payment in lieu of the three months’ notice of
termination and the sum of RM414,540 as the nine months guaranteed rental
I income, the respondent had relied on the provisions of cl. 5(k) of the lease
agreement which provides that in the event that the first appellant wishes to
194 Current Law Journal [2022] 1 CLJ

terminate the agreement before the expiry of the same, the first appellant is A
required to give three months’ notice and is also required to pay nine months
of monthly rental as guaranteed rental income.
[46] The operative words in cl. 5(k) are:
The Lessee shall be entitled to terminate this Agreement before the expiry B
of the lease by giving three (3) months prior notice in writing to the Lessor
of its intention and by paying the Lessor a sum equal to nine (9) months
of the monthly rental (hereinafter referred to as “the guaranteed rental
income”) as agreed liquidated damages ... (emphasis added)
The learned trial judge rejected both these heads of claims and we agree with
C
that decision but for reasons other than those stated in the grounds of
judgment. Firstly, for cl. 5(k) of the lease agreement to apply, there must be
premature termination by the first appellant. Here, the lease agreement was
not terminated by the first appellant, instead it was the respondent who
terminated the lease agreement by re-entering and taking possession of the
demised premises. And subsequently confirming the termination by issuing D
the termination letter dated 6 November 2017. Hence, the provisions in
cl. 5(k) of the lease agreement does not come into play.
[47] Further, ten days later, ie, on 16 November 2017, the landlord
terminated the tenancy agreement with the respondent for reasons of the
E
respondent’s breach of that agreement; which meant that even if the lease
agreement were still valid and subsisting, it too would have come to an
automatic end, as the life of the lease agreement was dependent upon the life
and existence of the main tenancy agreement between the landlord and the
respondent. Hence, the respondent could not have suffered any damages as
claimed for any period after the termination of tenancy agreement by the F
landlord. To that extent, we find that we are in agreement with the learned
trial judge that to allow these two heads of claim would amount to
unreasonable and unwarranted compensation being awarded to the
respondent.
G
[48] As for the claim for the loss of rental in the sum of RM1,519,998 from
1 November 2017 to 31 July 2020, the learned judge had this to say:
In respect of this claim, the short answer is that there is no basis for this
Court to consider this claim as the Landlord had terminated the Tenancy
Agreement with the Plaintiff on 16.11.2017. With the termination of the
H
agreement with the Landlord, the Plaintiff’s Lease Agreement with the
1st Defendant also came to an end. In the circumstances, the Plaintiff’s
claim for the loss of rental therefore has no basis.
The uncontroverted evidence shows that the respondent’s tenancy agreement
with the landlord was terminated by the landlord as of 16 November 2017
I
for reasons of non-payment of monthly rentals. Following the termination,
the respondent was no longer in possession of the demised premises. Hence,
 Alliance Connext Sdn Bhd & Anor v.
[2022] 1 CLJ Wangsa Bu dimas Sdn Bhd 195

A we find the learned trial judge was entirely correct in rejecting this claim as
the respondent no longer had legal possession of the demised premises to rent
it out to the first appellant, and to have suffered the loss of rental income for
the remaining period of the lease agreement from 1 November 2017 to
31 July 2020.
B Conclusion
[49] By reason of the foregoing, we allowed the appellants’ appeal in part
and dismissed the respondent’s cross-appeal. The order of the High Court
was varied to the extent of our judgment as stated above and we made the
following orders:
C
(i) The first appellant’s appeal is allowed in part
(a) The first appellant’s appeal against judgment for rental arrears of
RM56,884.20 and damage and loss to gym equipment of
RM588,378.91 is allowed. The High Court judgment against the
D first appellant for rental arrears of RM56,884.20 and damage and
loss to gym equipment of RM588,378.91 is set aside.
(b) The first appellant’s appeal against judgment for outstanding
electricity bill of RM18,534.81 and water bill of RM2,632.96 is
dismissed. The High Court judgment against the first appellant for
E
outstanding electricity bill of RM18,534.81 and water bill of
RM2,632.96 is affirmed.
(c) The first appellant’s appeal against the dismissal of its counterclaim
is allowed. The High Court’s dismissal of the counterclaim is set
F aside and substituted with judgment for the first appellant in the sum
of RM11,749.80 together with interest at 5% from the date of the
counterclaim.
(ii) The second appellant’s appeal is allowed. The High Court judgment
against the second appellant for the sum of RM56,884.20 is set aside.
G
(iii) The respondent’s cross-appeal is dismissed.
(iv) The order of costs made by the High Court is set aside.
(v) There shall be no order of costs here and below. Each party to bear their
own costs.
H