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2021 MarsdenLR 1786
HIGH COURT MALAYA KUALA LUMPUR
COMMON GROUND TTDI SDN BHD – Appellant
Versus
KEN TTDI SDN BHD;COMMON GROUND WORKS SDN BHD & ORS – Respondent
[Civil Suit No: WA-22NCVC-650-10/2020]
Third parties are not liable for contractual claims due to lack of privity, and misrepresentation claims based on future statements are actionable only if they assert existing facts.
Headnote:(A) Rules of Court 2012 – Order 16 rule 6 – Application to set aside a third-party notice – Allegations of breach of the Tenancy Agreement – Defendant's claims against third parties found to be unsustainable due to lack of privity of contract and corporate separation principles – Entire agreement clause in Tenancy Agreement superseded prior representations – Application allowed with costs. (Paras 16, 49, 65)
(B) Inducement of breach of contract – Directors/shareholders cannot induce breach of contract as they are not considered strangers to the contract. (Paras 60, 64)
(C) Misrepresentation – Future profits or returning of contributions are not actionable representations. (Paras 51, 52)
Facts of the case: Dispute arose from a Tenancy Agreement between landlord and plaintiff, with defendant counterclaiming against directors of the tenant company for indemnity, alleging misrepresentation and breach. (Paras 4, 6, 31)
Findings of Court: Defendant's claims against third parties for indemnity and breach of contract were unsustainable due to contractual privity issues and lack of actionable misrepresentation. (Paras 19, 36)
Issues: Whether third-party notice can be set aside due to lacking a binding contract to support claims of breach, misrepresentation, or inducement of breach. (Paras 16, 63)
Ratio Decidendi: Court emphasized principles of separate legal personality; claims reliant on claims against non-contractual parties are presumptively unsustainable without contractual nexus. (Paras 36, 40)
Result: Application to set aside third-party notice allowed, with costs awarded to third parties. (Para 65)
JUDGMENT
Introduction
[1] This is an application by a third party litigant to set aside a third party notice under O 16 r 6 of the Rules of 2012. At the conclusion of the hearing, which was conducted by way of remote communication technology via zoom, I allowed the application and highlighted the main grounds for the same. This judgment contains the full reasons for the decision.
Key Background Facts
[2] The plaintiff company is involved in the business of managing co-working space, shared office, event spaces, meeting rooms and cafe services in various locations throughout Klang Valley. The plaintiff sub-lease such spaces to various sub-tenants. The defendant is the owner of a property known as Menara Ken TTDI in Kuala Lumpur. The first third party is the holding company of the plaintiff company and the second and third parties are the promoters and first directors of the first third party. They are also directors of the plaintiff company.
[3] By virtue of a Tenancy Agreement dated 15 September 2019 ("the Tenancy Agreement") entered into between the defendant as the landlord and the plaintiff as the tenant, the defendant agreed to let the whole of Level 11 of the defendant's Menara Ken TTDI ("the Demised Premises") to the plaintiff for a fixed term period of three (3) years. This was to commence from 1 November 2017 and to expire on 31 October 2020.
[4] Towards the end of this period, the parties got embroiled in a dispute. In essence, the defendant maintained that on 31 October 2020 the Agreement had expired but the plaintiff in contrast contended that there was a concluded renewed tenancy of the Demised Premises, and had therefore still remained on the Demised Premises. The plaintiff filed a suit against the defendant who counterclaimed against the plaintiff.
[5] The defendant also turned to the third parties. Third party proceedings were allowed to be instituted against them where the defendant claimed that in the event the defendant is found to be liable to the plaintiff, the defendant should be entitled to claim indemnity and/or contribution from the third parties.
[6] In addition, the defendant also claimed against the third parties for the following:
(i) An Order that the third parties are jointly and severally liable with the plaintiff to the defendant for, amongst others, outstanding rentals and monies due under the Tenancy Agreement;
(ii) Interest due on the outstanding amount under the Tenancy Agreement; and
(iii) Double rental for unlawful holding over of the Demised Premises.
[7] It is the stance of the defendant that its claim for the reliefs that essentially the Tenancy Agreement would not even been in existence had it not been for the representations and the inducements made by the third parties. It was asserted that the third parties were the ones dealing with the defendant prior to the entering of the Tenancy Agreement between the defendant and the plaintiff. The plaintiff company did not even exist at the material time as it was a company which was incorporated solely for the purpose of entering into the Tenancy Agreement.
[8] Several representations, which were said to be based on the financial projections prepared by the third parties, were made to the defendant, inducing the latter into letting the Demised Premises. This resulted in the defendant having to incur cost and expenses to contribute to 80% of the fit-out costs, and the monthly rentals (which are not fixed) received were lower than the conventional rate of rental of comparable tenancies and is still deprived of possession of the Demised Premises to date, even though the Tenancy Agreement had expired and the defendant is the lawful owner of the Demised Premises.
The Present Setting Aside Application
[9] In this instant application, the third parties, in pursuance of O 16 r 6 and O 18 r 19 of the Rules of 2012 ("RC 2012"), sought for the third party notices dated 26 November 2020 against them to be set aside, the statement of claim da
