COURT OF APPEAL, MALAYSIA
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www.ipsofactoJ.com/appeal/index.htm [2000] Part 2 Case 9 [CAM] |
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COURT OF APPEAL, MALAYSIA |
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Coram N.H. CHAN JCA |
Kelang Pembena Kereta Sdn Bhd - vs - T.D. Mok |
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ABU MANSOR ALI JCA HAIDAR MOHD NOOR JCA |
22 DECEMBER 1999 |
Judgment
Haidar Mohd Noor, JCA
(delivering the judgment of the court)
Two actions were filed at the High Court, Johor Bahru. They are -
Case No 22-357-1993 - a writ action by Mok Tai Dwan ("Mok") against Kelang Pembena Kereta-Kereta Sdn Bhd ("KPKK").
Case No 24-737-1993 - an originating summons by KPKK against Mok and eight others defendants.
In the writ action against KPKK, Mok prays for the following orders -
an injunction to restrain KPPK from inducing the sub-tenants from breaching their lease agreements with Mok;
an injunction to restrain KPKK from terminating the lease agreement between them;
that the lease agreement between Mok and KPKK is valid;
that KPKK appoint a contractor to change the roof of Block C and repaint Block A, B, C and D;
that the purported termination or forfeiture of the said lease by letter dated September 13, 1993 be declared invalid;
costs; and
other reliefs that the court deems fit.
In the originating summons against Mok and eight others defendants (sub-tenants of Mok), KPKK prays, inter alia, for the following orders -
that Mok and all the sub-tenants quit and vacate the property within 24 hours;
that Mok pay arrears of rental for January to August 1993 amounting to RM739,200;
that Mok and the sub-tenants pay KPKK mesne profits and / or damages;
interest at 8% from August 25, 1993 until payment;
costs; and
any other relief.
Mok filed a counter-claim against KPKK claiming that KPKK wrongfully procured breaches of their sub-tenancies with him as follows-
by communicating directly with his sub-tenants;
by offering his sub-tenants direct tenancy relationship; and
by signing direct tenancy agreements with one or more of his sub-tenants.
Mok counter-claimed for -
damages in the form of loss of rentals;
damages for wrongful forfeiture and cancellation of lease;
damages for breach of agreement;
damages for tort of wrongfully inducing breaches of contract; and
a refund of all expenditure, etc. incurred by him.
Both these actions were heard together with the consent of all the parties.
At the outset of the trial, counsel for KPKK withdrew the proceedings against the third defendant, Bensons Metal Products Sdn Bhd.
In the course of the trial, the parties, by consent, agreed that the issue of liability should be tried first and that the quantum of damages was to be assessed later, depending upon the outcome on the liability issue.
The issues which both parties requested the learned Judge to determine at the trial are -
whether, on the facts and on the proper construction to Clause 4(g), (h) and (k) of the lease agreement dated August 10, 1989, the duty to replace the roof was on Mok or on KPKK;
whether the letter of forfeiture of September 13, 1993 was justified on the facts and under the terms of the lease agreement; and
whether, on the facts, there was inducement to breach the sub-tenancies by KPKK as the landlord and whether KPKK is liable to Mok for damages under this head.
After hearing the parties, the learned Judge made the following orders as per the order by the court dated November 22, 1995 enclosed in the additional appeal record -
KPKK to replace and pay the cost of replacing the roofs to the premises known as No 64, Jalan Langkasuka, 80350 Johor Bahru erected on the land held under QT(R) 1917, Lot No TLO 1995 in the Township of Johor Bahru;
KPKK is not liable to Mok for inducing breach of contract of Mok's tenancy agreements with his sub-tenants;
KPKK is not liable to Mok in damages or at all as a result of KPKK inducing the aforesaid breach of contract; and
The issue of whether the letter of forfeiture dated September 13, 1993 issued by KPKK to Mok was justified on the facts of the case and under the terms of the lease agreement dated August 10, 1989 is to be decided after the determination of the quantum of costs of repair of the roof to the aforesaid premises which was incurred by Mok, which is to be tried at a date to be fixed by the court.
KPKK appealed against that part of the judgment of the learned Judge wherein he held that it is the duty of KPKK to replace and pay the cost of replacing the roofs of the said premises (Civil Appeal No J-02-791 of 1995).
Mok, in turn, appealed against that part of the judgment of the learned Judge wherein he held that KPKK is not liable to Mok for inducing breach of contract of Mok's tenancy agreements with his sub-tenants (Civil Appeal No J-02-854 of 1995).
We heard the arguments of the parties on March 25, 1999 in respect of both appeals as agreed, wherein we reserved judgment. We now proceed to give our decision and the grounds thereof.
We do not propose to set out the facts in full as they are sufficiently set out by the learned Judge in his judgment. We will refer to the facts in so far as they are relevant to the issues before him.
CIVIL APPEAL NO.: J - 02 - 791 - 1995
A lease agreement dated August 10, 1989 ("the said lease") was executed between KPKK and Mok in respect of the lease of industrial land held under QT (R) 1917 Lot No TLO 1995 in the township of Johor Bahru ("the said land") together with five blocks of buildings collectively referred to as No 64, Jalan Langkasuka, 80350 Johor Bahru ("the demised premises"). KPKK granted a lease of the said land for a term of six years commencing October 1, 1989 and terminating on September 30, 1995. lt was agreed that the monthly rental for the first 36 months shall be at RM84,000 and thereafter at RM92,000. There was also an option to renew the said lease for another two years.
The demised premises were initially used as a car-assembly plant which ceased operations sometime in 1986 or 1987. The said premises were then left unoccupied until 1989 when the said premises were rented out to Mok. It is not disputed that under Clause 5(e) of the said lease, Mok shall be at liberty to sub-lease or sub-let the said premises. Mok subsequently entered into several sub-tenancy agreements with the second to nine defendants as cited in the originating summons.
Be that as it may, the dispute between KPKK and Mok is centred on the interpretation of Clauses 4(g), (h) and (k) of the said lease. It would be useful therefore to reproduce the relevant sub-clauses of Clause 4 of the said lease which read -
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(g) |
to keep the demised premises in proper sanitary condition and in tenantable repair at all times during the term of this tenancy, fair wear and tear excepted; |
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(h) |
to permit the Lessor or his agent with or without workmen at all reasonable times to enter upon and examine the condition of the demised premises and to give the Lessee written notice to effect any reasonable repairs thereto in a proper and workmanlike manner, provided if the Lessee shall fail to comply with such notice within a reasonable time, then the Lessor may effect such repairs in a proper manner and workmanlike manner, and the costs thereof shall become a debt due from the Lessee to the Lessor recoverable forthwith (fair wear and tear excepted); |
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(k) |
Notwithstanding anything herein stated, to repair and maintain the roof, gutter, drainage and sewerage system, walls, floors, paintwork, water tanks, doors, windows and fencing, roadways and yards of the demised premises. |
The learned Judge was of the opinion that the authorities referred to and considered by him seems to suggest that the correct approach to a dispute of this nature is to ask the following questions -
what was the state of the building on the date the said lease was entered into;
what is the precise term of the said lease in dispute;
what is the damage;
what is the amount of repair required;
whether the disputed works amounts to "repair" or whether it can be considered as giving the landlord a wholly different thing which he demised;
if the disputed works amounts to a replacement, would it tantamount to restoring the building in a renewed form of a greater value than it was at the commencement of the said lease; and
what is the cost of the repair.
For a start, we would accept the principle stated by Wilmer LJ in Sleafer v Lambert Metropolitan [1959] 2 All ER 378 at p 387-
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It is well established that, in the absence of agreement to the contrary, the law imposes no obligation on a landlord to keep the demised premises in repair. |
The relevant clause of the said lease that will have to be considered would be sub-clauses 4(g) and (k). Sub-clause 4(g) imposes on Mok as the lessee to keep the demised premises in tenantable repair at all times during the term of the tenancy, fair wear and tear excepted. Sub-clause 4(k) imposes on Mok, as lessee, also notwithstanding anything stated therein to "repair and maintain the roofs, gutter, drainage ... of the demised premises".
KPKK's own witness, Kim Li Wang (DW 1) under cross-examination admitted in his report (D31) that he made a visual inspection of the building and found it in a tenantable condition. This would be in line with Mok's evidence that he was not allowed to take his contractors in before signing the said lease. In the event, without making any technical or structural inspection, all parties had thought that the roof was just in a bad condition and could be repaired in the true sense of that term by patching etc. It was on this basis that Mok accepted the demised premises on an "as is" position. Hence Mok was prepared to spend and did spend a sum of RM1 million for repairs and renovations on the demised premises to make it habitable and tenantable.
However, it was only after the constant and repeated complaints from Mok's sub-tenants regarding leaking problem that structural inspections were carried out which disclosed that the roof was beyond repair. Alam Jurutera was commissioned by United Motor Works (the parent company of KPKK) to do a structural inspection of the roof and the report dated July 20, 1990 confirmed that the roof was structurally defective i.e. roof trusses were swaying and was beyond repair.
KPKK contended that the roof was in a way damaged or dilapidated caused by chimney removals by Mok. However, it seems clear that the cause of the roof failure was clearly stated as structural defects and excessive corrosion. In any event such an important matter as saying that Mok was responsible for the roof damage, according to the counsel for Mok, should have been specifically pleaded by KPKK and opportunity given to rebut. The issue of the roof being beyond repair and needing replacement was clearly demonstrated by United Motor Works itself replacing the roof on one block of Bensons' factory and Mok replacing the roof in Block C, with each claiming the right of reimbursement from the other. It seems clear to us on the evidence that the cause of the roof failure was due to structural defects and excessive corrosion and not the fault of Mok. Clearly Mok could not possibly envisage these structural defects when he took possession of the demised premises for the reasons stated earlier on.
We now come to the next important issue, that is, whether the word "repair" as stated in sub-clause 4(k) includes "replacement" as contended by KPKK and disagreed to by Mok as being his responsibility.
The learned Judge after reviewing the cases of Sleafer v Lambert Metropolitan Borough Council [1959] 3 All ER 378 and Felton v Brightwell [1967] NZLR 276 referred to by counsel for KPKK stated at p 31 of his judgment -
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It is my view that the cases referred to above were decided on facts which differ from the instant case. In the first case, the item in issue was merely the handle or knocker of the front door and in the second case, the item in issue was only the service line supplying the farm with electricity that needed replacement. To me, those items are only subsidiary parts of the demised premised. The facts of both cases show that only repair or part-replacement were required to put both items into good working condition-there was no need to replace the door or the whole electrical system respectively. That being so, I am of the view that the facts in the two cases cited above can be distinguished from the instant case wherein the issue is whether under the terms of the said lease agreement, the duty to 'replace' the roofs as opposed to 'repair' is upon the lessee, i.e. Mok. I do not think that one can term the replacement of the whole roof of a building as 'repair'. |
In considering the approach to take to disputes of this nature, the learned Judge relied on Brew Brothers Ltd v Snox (Ross) Ltd [1970] 1 QB 612 and Ravenseft Ltd v Davstone Ltd [1980] 1 QB 12. In respect of Brew Brothers Ltd, Sachs LJ, at p 640 stated-
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It seems to me that the correct approach is to look at the particular building, to look at the state in which it is in at the date of the lease, to look at the precise terms of the lease, and then come to a conclusion as to whether, on a fair interpretation of those terms in relation to that state, the requisite work can fairly be termed repair. However large the covenant it must not be looked at in vacao. |
In Ravenseft Ltd, Forbes J, said at p 21-
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The true test is, as the cases show, that it is always a question of degree whether that which the tenant is being asked to do can properly be described as repair, or whether on the contrary it would involve giving back to the landlord a wholly different thing from that which he demised. In deciding this question, the proportion which the cost of the disputed work bears to the value or cost of the whole premises, may sometimes be helpful as a guide. |
The word "repair" was considered by Hoffman J in Post Office v Aquarius Properties Ltd [1985] 2 EGLR 105, where at p 107, he said-
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"repair" is an ordinary English word. It also contains a timely warning against attempting to impose crudities of judicial exegesis upon the subtle and often intuitive discrimination of ordinary speech. All words take meaning from the content and it is, of course, necessary to have regard to the language of the particular covenant and the lease as a whole, the commercial relationship between the parties, the state of the premises at the time of the demise and any other surrounding circumstances which may colour the way in which the word is used. In the end, however, the question is whether the ordinary speaker of English would consider the word "repair" as used in the covenant was appropriate to describe the work which has to be done. |
Bearing in mind the authorities quoted above, this is what the learned Judge answered the questions posed by him (p 54 of his judgment)-
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I think the answers to the first four questions have been answered in the instant case, viz., I have found that the roofs were in a bad condition at the commencement of the lease and that they were beyond repair and need to be replaced. I am also of the view that Mok has not breached his covenant to repair as the replacement of the roof was not within the contemplation of Clause 4(g) and (11) of the lease agreement l am of the view that if it was Mok's responsibility to replace the roofs, it is tantamount to restoring the said premises in a renewed form of a greater value than it was at the commencement of the lease and this finding can be supported by the evidence of DW1, the manager for the properties division of UMW in 1989, who stated in evidence as follows -
This would seem to suggest that if Mok replaced the roofs at his own cost, it would definitely enhance the value of the said premises as it would be able to attract higher rental and that to me would amount to restoring the said premises in a renewed form of a greater value than it was at the commencement of the lease. With regard the cost of the disputed works, no evidence was adduced at the trial as to what would be the estimated costs of replacing the roofs. However, at p 193 of volume 1 of the agreed bundle of documents introduced at the trial, a letter from a company called Metro Setia Sdn Bhd dated August 10, 1990 which was addressed to Mok as a result of the latter's enquiry, could serve as guide as to the estimated cost of replacing the roofs - that letter states that the costs to dismantle the existing roofing sheets and to install new roofing sheets for Blocks G1, G2, A, B, F and the canteen would be in the region of RM464,217.50 if colour sheets are used and in the region of RM432,202.50 if non-colour sheets are used. This, to me, is a substantial sum in relation to the lease. |
The learned Judge went on further to state his finding at p 58 thus -
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Looking at the proportion which the estimated cost of the disputed work bears to the value of the lease to Mok and the expenditure that he had to bear when he undertook repairs of the said premises at the commencement of the lease, I would think that to insist that Mok is responsible to replace the roofs and bear its cost would go far beyond what any reasonable person would have contemplated under the word "repair". The roofs were beyond repair as stated by the engineer's report and to me the replacement of the roofs cannot be termed "repairs'' within the terms of the covenant. |
On the fair wear and tear issue the learned Judge stated at p 59 thus -
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I think the evidence is clear that the roofs were beyond repair due to "fair wear and tear" and need to be replaced and that being so, is excepted from Mok's covenant to repair. The engineer's report dated March 5, 1991 confirm that the roofs are in that condition known as "fair wear and tear" when he stated (with regard to Block G2 of the said premises) that " the condition of the entire roof of this building was badly rusted and corroded as well. This showed that the surrounding air had a high level of corrosiveness. |
After giving due consideration to the submissions of counsel for both parties and the grounds of judgment of the learned Judge, we agree that on the facts and on the proper construction to sub-clauses 4(g), (h) and (k) of the said lease, he was correct in finding that the duty to replace and pay the costs of replacing the roofs to the said premises was clearly on KPKK.
In the circumstances the appeal of KPKK. is dismissed with costs and the deposit to go towards taxed costs. The order of the learned Judge is affirmed.
CIVIL APPEAL NO. J - 02 - 854 - 1995
The issue in this appeal is whether, on the facts, there was inducement by KPKK to the sub-tenants of Mok to breach their sub-tenancies with Mok and whether KPKK is thereby liable to Mok for damages.
The law regarding the tort of inducement to breach of contract is summarised in Greig v Insole [1978] 2 All ER 449 at p 484 thus-
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At common law it constitutes a tort for a third person deliberately to interfere in the execution of a valid contract which has been concluded between two or more other parties, if five conditions are fulfilled: First, there must be (a) "direct" interference or (b) "indirect" interference coupled with the use of unlawful means: see per Lord Denning MR in Torquay Hotel Co Ltd v Cousins (1969) 2 Ch 106, at 138. As to the meaning of "interference" this is not confined to the actual procurement or inducement of a breach of contract. It can cover a case where the third person prevents or binders one party from performing his contract even though this be not a breach: see per Lord Denning MR. Secondly, the defendant must be shown to have knowledge of the relevant contract. Thirdly, he must be shown to have had the intent to interfere with it. Fourthly, in bringing an action, other than a quia timet action, the plaintiff must show that he has suffered special damage, that is, more than nominal damage: see Rookes v Barnard [1964] AC 1129, at 1212, per Lord Devlin. In any quid timet action, the plaintiff must show the likelihood of damage to him resulting if the act of interference is successful: see Emerald Construction Company Limited v Lowthian (1966) 1 WLR 691, at 703, per Diplock LJ. Fifthly, so far as it is necessary the plaintiff must successfully rebut any defence based on justification which the defendant may put forward. |
Slade J went on further to emphasise one point on the same page thus -
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lf these five conditions are fulfilled and the defendant is shown to have had that intention to interfere with the relevant contract which is necessary to constitute the tort it is quite irrelevant that he may have acted in good faith and without malice or under a mistaken understanding as to his legal rights; good faith, as such, provides no defence whatever to a claim based on this tort: see, for example South Wales Miner's Federation v Glamorgan Coal Co Ltd (1905) AC 239 per Lord Macnaghten. |
The summary laid down in Greig was considered by the Federal Court in Loh Holding Sdn Bhd v Peglin Development Sdn Bhd [1984] 2 MLJ 105 at p 108.
Several grounds were relied on by Mok that KPKK induced breaches of contract by dealing directly with Mok's sub-lessees. The relevant clause in the said lease is sub-clause 5 (a) and it reads -
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That the Lessee paying the rent here in reserved and performing all covenants on his part shall peacefully hold and enjoy the demised premises during the term of this Lease (or any renewal thereof) without interruption by the Lessor or any person claiming through under or in trust for him [subject however to clause 4(11) above], or by any other person whosoever and howsoever arising. |
It is not disputed that, according to sub-clause 5(e) of the said lease, Mok shall be at liberty to sub-lease or sub-let the demised premises. Mok subsequently entered into several sub-tenancy agreements with several companies.
No doubt the main dispute between KPKK and Mok relates to whose responsibility it was to repair or replace the roof of the demised premises and this has been dealt with by us earlier on, the issue here is really whether there was evidence, be it documentary or oral, to show that KPKK had induced the sub-tenants of Mok to commit breaches of the sub-tenancy agreements between Mok and his sub-tenants thereby causing loss and damage to Mok as a result thereof.
DIRECT TENANCY AGREEMENTS
There was evidence that KPKK entered into direct tenancy agreements (Exhs P34 A-D) with four of Mok's sub-tenants, namely -
on April 5,1995 with Superpoly Packaging Sdn Bhd (the fourth sub-tenant defendant);
in July, 1994 with Bensons;
Metal Sdn Bhd (the former third sub-tenant defendant);
in December, 1994 with Kensia Industries Sdn Bhd (the seventh sub-tenant defendant); and
in January, 1995 with I&S Enterprise.
From the dates of the tenancy agreements, it seems clear that the direct tenancy agreements were executed by KPPK after the termination of the main lease. This is borne out by the letter dated September 13, 1993 sent by the solicitors for KPKK to Mok's solicitors. The said lease was subsequently forfeited on September 22, 1993. Hence, the issue of KPKK inducing the sub-tenants of Mok to breach the sub-tenancy agreements with him did not arise.
SECRET COLLATERAL AGREEMENT WITH BENSONS METAL PRODUCTS SDN BHD ("Bensons")
Before the learned Judge, Mok's counsel referred to a letter dated August 11, 1989 from Bensons and addressed to KPKK and reproduced in his judgment. Incidentally, Mok's lease with Bensons was also signed on August 11, 1989.
On this issue, this is what the learned Judge stated in his judgment-
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With regard to the "secret collateral agreement" made between KPKK and Bensons, I am of the view that that agreement, if at all it was one, was too remote under the circumstances to amount to an interference or even a deliberate attempt to interfere with the sub-tenancy agreement entered into between Mok and Bensons. DW 4, the general manager of Bensons, explained that Bensons' letter to KPKK dated August 11, 1989 (reproduced earlier) was merely a "safety blanket" in case something went wrong with the main lease between Mok and KPKK. In his evidence, he explained that a sudden end to the main lease will cause Bensons problems in having to look for alternative premises to move their machineries and equipment. To me that letter merely confirmed an understanding that had been arrived at by both Bensons and KPKK on the eve of the said lease - It was more like a memorandum of understanding rather than an agreement in relation to this "secret collateral agreement", the evidence also show that KPKK wrote a letter to Bensons on February 9, 1993 which read -
To me, the second letter confirms that the alleged agreement was more an understanding between the two parties and that that letter, at most, amounts to an invitation to treat on the part of KPKK - they wanted to know whether Bensons was still interested to continue renting that part of the said premises in the eventuality Mok failed to remedy his default with regard to the payment of rent. lt was not a wrongful act and cannot amount to an actionable interference. |
We see nothing wrong with the learned Judge's finding on this issue.
SERVICE OF NOTICE BY KPKK TO REMEDY THE BREACH ON THE SUB-TENANTS OF MOK
KPKK's solicitors by letter dated August 23, 1993 sent a notice to Mok to remedy the breach with regard to the non-payment of rental and copies of the notice were delivered to several of Mok's sub-tenants including Bensons and they acknowledged receipt thereof by signing on KPKK's copy of the notice.
Mok's counsel argued that this action of serving that notice upon the sub-tenants was wrong in law. This is a non-issue really and as rightly put by the learned Judge "I cannot fathom such an argument". The learned Judge further on stated -
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DW 2 have explained that they did not wait for seven days before serving that notice as they did not want the sub-tenants to be caught unaware. Furthermore, service of such a notice on the sub-tenants also do not seem to contravene - s 235 of the National Land Code. Under the circumstances, I am of the view that KPKK's action do not amount to an actionable interference. |
We have no reasons to disagree with his finding.
We are satisfied that on the evidence before him, the learned Judge had not misdirected himself on the facts and the law applicable thereto. In the circumstances there are no grounds for us to disagree or interfere with his decision (Khoo Teck Puat v Plenitude Holdings Sdn Bhd [1993] 1 AMR 607; United Asian Bank Bhd v Tai Soon Heng Construction Sdn Bhd [1993] 1 AMR 612.
The appeal is therefore dismissed with costs. The deposit to KPKK towards the taxed costs. The order of the learned Judge is affirmed. As the costs issue in the High Court is yet to be determined, we would leave this issue to be decided by the High Court. Similarly, in respect of paragraph (d) of the order of the High Court set out earlier on, as ordered by the learned Judge, it is to be tried at a date to be determined by him. We will leave it at that.
Cases
Brew Brothers Ltd v Snox (Ross) Ltd [1970] 1 QB 612; Greig v Insole [1978] 2 All ER 449; Ravenseft Ltd v Davstone Ltd [1980] 1 QB 12; Sleafer v Lambert Metropolitan [1959] 2 All ER 378; Felton v Brightwell [1967] NZLR 276; Loh Holding Sdn Bhd v Peglin Development Sdn Bhd [1984] 2 MLJ 105; Post Office v Aquarius Properties Ltd [1985] 2 EGLR 105; Khoo Teck Puat v Plenitude Holdings Sdn Bhd [1993] 1 AMR 607; United Asian Bank Bhd v Tai Soon Heng Construction Sdn Bhd [1993] 1 AMR 612
Representations
Civil Appeal No. J-02-791-95
DP Naban, Nitin Nadkarni and KA Gan (Lee Hishamuddin) for Appellant
Cyrus Das and Trevor George De Silva (Zaman & Co) for Respondent
Civil Appeal No. J-02-854-95
Dr Cyrus Das and Trevor George De Silva (Zaman & Co) for Appellant
DP Naban, Nitin Nadkarni and KA Gan (Lee Hishamuddin) for Respondent
Notes:-
This decision is also reported at [2000] 2 AMR 1337; [2000] 2 CLJ 132; [2000] 1 MLJ 613
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