Third parties not in privity of contract are not liable to indemnify for damages; res judicata principles do not apply when suits involve different parties and contracts.

Suraya Othman JCA:

Introduction

[1] Digital Viva Sdn Bhd, the 1st respondent/plaintiff filed a writ action, Civil Suit No: 22NCVC-110-03-2015 ("2015 suit") against Tyewei Marketing Sdn Bhd, the 2nd respondent/defendant in the High Court seeking damages and costs for breach of a licensing contract dated 15 August 2012. The 2nd respondent/defendant took a third party proceedings against Majlis Bandaraya Petaling Jaya (MBPJ), the appellant/third party to seek indemnity for the breach of contract between the 1st respondent and 2nd respondent.

[2] The High Court on 3 November 2016 allowed the 1st respondent/ plaintiff's claim against the 2nd respondent/defendant for damages in the sum of RM15,843,600.00 and costs of RM25,000.00 and ordered the appellant/third party to fully indemnify the 2nd respondent/defendant for the breach of the licensing contract between the 2nd respondent/defendant and 1st respondent/plaintiff on the basis that the breach by the 2nd respondent/ defendant in the licensing contract in the 2015 suit was as a direct result of the appellant/third party's breach of the letter of award contract dated 13 April 2012 between the appellant/third party and the 2nd respondent/defendant in another earlier Civil Suit No: 21NCVC-48-07-2013 ([2014] MLRHU 612]) ("2013 suit"). In the 2013 suit the appellant/third party was the defendant and the 2nd respondent/defendant was the plaintiff. The High Court in the 2013 suit found the appellant/third party liable to the 2nd respondent and the Court of Appeal on appeal by the appellant/third party affirmed the decision of the High Court.

[3] The High Court in the 2015 suit (present suit) in finding the appellant/third party liable to indemnify the 2nd respondent/defendant further ordered that the appellant/third party to pay the damages in the sum of RM15,843,600.00 and costs of RM25,000.00 directly to the solicitors for the 1st respondent/ plaintiff.

[4] The appellant/third party, dissatisfied with the High Court's decision appealed to us. We heard the appeal on 5 March 2018 and allowed the appellant's appeal with costs of RM10,000.00 to the appellant. We now give our reasons for our decision and for ease of reference, in this judgment, parties will be referred to as they were in the High Court: the appellant/third party as MBPJ, the 1st respondent, Digital Viva as the plaintiff and the 2nd respondent, Tyewei Marketing as the defendant.

Background Facts

[5] The defendant owns and operates recycling boxes using solar power known as 3R Box. Under a contract dated 15 August 2012 (licensing contract), the defendant agreed to grant a licence to the plaintiff for exclusive rights to utilise the advertising panels of its 500 recycling 3R Boxes in Petaling Jaya in exchange for a monetary consideration.

[6] The licensing contract states that the defendant had obtained the approval from MBPJ to install and maintain the 3R Boxes for five years. The defendant installed 200 3R Boxes but was unable to install the balance 300 3R Boxes as the defendant could not obtain MBPJ's approval to do so. The plaintiff then filed this present suit, Civil Suit No: 22NCVC-110-03-2015 ("2015 suit") against the defendant for breach of the licensing contract and claimed the sum of RM51,579,200.00 which represented the alleged loss suffered by the plaintiff arising from the said breach. Alternatively, the plaintiff sought general damages, to be assessed by the High Court.

[7] On 5 May 2015, the defendant filed its defence which acknowledged the existence of the said contract but contended that its failure to install the remaining 300 3R Boxes was due to MBPJ's breach in another earlier contract with it dated 13 April 2012. This contract was a contract between the defendant (as plaintiff) and MBPJ (as defendant) premised on a letter of award dated 13 April 2012.

[8] The defendant then sought and was granted leave from the High Court to file a third party notice against MBPJ seeking full contribution or indemnity on th