The court ruled that the agreement was a sub-tenancy, and the Defendant's inability to perform due to COVID-19 measures precluded the Plaintiff's claims under Section 7 of the COVID-19 Act 2020.

Yong Leou Shin SCJ:

(Full Trial)

A. Introduction

[1] This action is emanated from a claim for breach of contract filed by the Plaintiff against the Defendant and counter claim by the Defendant for refund of deposit and return of assets.

[2] After full trial, this court dismissed all the Plaintiff's claims except one particular prayer ie arrears of rental for a few months and allowed the Defendant's counter claim with cost. Dissatisfied, the Plaintiff filed this appeal.

B. Salient Facts

[3] The Plaintiff is a company, providing services for hair care in the rented premises known as LG1-101 Sunway Pyramid Shopping Mall.

[4] The Defendant is an individual running a business under the style and name of Nail Story Studio providing services for manicure and pedicure.

[5] The Plaintiff has entered into an agreement with the Defendant known as the "Letter of Appointment of Independent Service Provider" ("the said Agreement").

[6] Among the salient terms of the said Agreement that are relevant to this suit are as follows:

(i) the term of the said Agreement is for a period of 3 years;

(ii) the Defendant is required to pay the sum of RM49,000.00 being the deposit which shall be refunded upon the expiry of the said Agreement; and

(iii) the Defendant is required to pay the sum of RM14,840.00 being the "Service Fees" to the Plaintiff on the 7th of every month.

[7] However, due to the COVID-19 pandemic in Malaysia, the Government of Malaysia has imposed Movement Control Order ("MCO") from 18 March 2020 till 3 May 2020, Conditional MCO ("CMCO") from 4 May 2020 till 9 June 2020 and Recovery MCO from 10 June 2020 till 31 March 2021 to combat COVID-19.

[8] The Defendant's business was badly affected during the above-mentioned period.

[9] The Defendant then vide a letter dated 19 October 2020 ("Termination Letter") informed the Plaintiff that the Defendant will cease business operation permanently on 31 October 2020.

[10] Dissatisfied with the Defendant's Termination Letter, the Plaintiff filed this suit against the Defendant claiming for the following:

(i) that the Defendant has breached the said Agreement;

(ii) the sum of RM126,000.00 being the balance "Service Fees" calculated from 31 October 2020 until 1 August 2021;

(iii) the sum of RM62,209.40 being the outstanding amount from June-October 2020; and

(iv) that the Plaintiff is entitled to forfeit the Deposit of RM49,000.00.

[11] The Defendant counter-claimed for the refund of deposits and an amount of RM8000.00 for unreturned belongings.

C. Issues To Be Tried

[12] Parties have agreed that the issues to be tried are as follows:

(i) Whether the said Agreement between the Plaintiff and the Defendant is a service agreement or a sub-tenancy agreement and if the clauses in the said Agreement are enforceable.

(ii) Whether the Plaintiff is entitled to claim for the monthly payment from June-October 2020 and the "balance Service Fees" pursuant to Clauses 3 and 7 of the said Agreement.

(iii) Whether Plaintiff is entitled to forfeit the deposit of RM49,000.00 paid by the Defendant pursuant to cl 8 of the said Agreement.

(iv) Whether there are items amounting to RM8,000.00 owned by the Defendant in the said Premise and if Defendant is entitled to claim for the sum of RM8,000.00 from the Plaintiff.

D. Parties' Submission

[13] In gist, the Defendant's submission is as follows:

(i) The said Agreement is in fact a sub-tenancy agreement and hence, s 7 of the Temporary Measures for Reducing the Impact of Coronavirus Disease 2019 (COVID-2019) Act 2020 (COVID-19 Act 2020) is applicable.

(ii) Defendant is relying on s 7 of the COVID-19 Act 2020 as the inability to fulfill the Defendant's contractual obligation was due to measures taken to prevent the spread of COVID-19. Defendant's contention is in light that the Plaintiff's claim is caught under the COVID Act 2020, Plaintiff does not have the right to claim for the monthly payment from June-October 2020 and the "balance Service Fees". Accordingly, Plaintiff is also not entitled to fo