1. Case Information
- Court: Supreme Court, Kuala Lumpur.Coram: Abdul Hamid Ag LP, Seah J, & Syed Agil Barakbah SCJJ.
- Decision Date: 20 September 1986.
- Parties: Zainal Abidin (Appellant/Tenant) vs. Century Hotel Sdn Bhd (Respondent/Landlord).
2. Background and Facts The respondent sublet the third floor of the Abad Century Hotel to the appellant for a three-year term starting 1 November 1980 to operate a recreation or health centre. On 7 August 1981, the respondent’s security guards prevented the appellant from accessing the premises, and on 10 August 1981, the respondent issued a letter stating the hotel would cease operations and terminated the appellant’s operation effective 30 August 1981. The appellant treated this as a wrongful repudiation and sued for damages, including loss of profits for the remaining 27 months of the lease and a 36-month renewal period.3. Issue 1: Wrongful Determination of Tenancy The court addressed whether the respondent’s actions constituted a breach that allowed the appellant to treat the contract as ended. The court held:
“…the conduct of the respondent evinced a clear intention to determine and to put an end to its obligations under the tenancy agreement (see s. 240(2) of the National Land Code 1965)”.
4. Issue 2: Enforceability of the Renewal Option The tenancy agreement contained an option for a further three-year term “at a rent to be agreed upon”. The court ruled this clause was legally ineffective:
“…an option in a lease for a further term ‘at such rental as may be agreed upon between the parties’ was, at least, where there was no relevant arbitration clause, void for uncertainty, in the absence of agreement between the parties”.
The court further clarified:
“…an option clause (like the one here) in a lease does not give rise to any legal obligations on the part of either party unless and until the Lessee gives notice in writing… and the parties have mutually agreed to the new rent“.
5. Issue 3: Proof of Loss of Profits The appellant claimed RM1,728,000 for loss of profits, supported by a summary of accounts (Ex. P13) prepared following a Customs Department investigation into under-declared service taxes. The court rejected the sufficiency of this evidence:
“In our opinion, a Government departmental investigation is quite different from an audit properly carried by a qualified accountant”.
The court found the appellant’s financial evidence lacked credibility:
“Without Ex. P13 there was no credible evidence to support the claim of the appellant for loss of profits… We think the inflated figures were inserted in order to boost the claim of the appellant against the respondent”.
6. Assessment of Damages Despite the lack of audited accounts, the court found it necessary to award a fair sum based on the established fact of under-declared income:
“…having regard to the finding of the learned Judge that the appellant’s agent had deliberately under-declared his gross income to the Customs Department since the commencement of the business, a fair sum to be awarded as damages would be the additional sum which the appellant was ordered to pay to the Customs Department“.
7. Outcome The Supreme Court dismissed the cross-appeal on liability but partially allowed the appeal regarding damages. The court set aside the “nil” award for loss of profits and substituted it with RM47,000, bringing the total judgment sum to RM114,300.
Disclaimer: This post is for informational purposes only and does not constitute legal advice. Please consult a qualified Advocate & Solicitor for your specific legal needs.
