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2010 MarsdenLR 2133
HIGH COURT, JOHOR BAHRU
JAMIN TRADING SDN BHD & ANOR – Appellant
Versus
SHELL MALAYSIA TRADING SDN BHD – Respondent
[Civil Suit No. (MT -1) 22-887-2006]
Termination of a contract is valid if contractual obligations are breached, and legitimate expectation does not apply in private law contexts.
Headnote:(A) Sale and Purchase Agreement - Obligations regarding operatorship of petrol station - Contract interpretation - Evidence Act 1950 - Section 92 - The defendant’s obligation to provide operatorship to the 2nd plaintiff is binding and was breached by unlawful termination of the 2nd Agreement - The doctrine of legitimate expectation does not apply in private law contracts, and the claim for renewal by the plaintiffs was dismissed. (Paras 1-3, 4-5, 6-7)
Facts of the case:
The plaintiffs operated a petrol station under a Shell Retailer Licence Agreement which was terminated by the defendant on grounds of alleged breach of terms. The plaintiffs contended that the termination was mala fide and that the defendant had obligations under the previous Sale and Purchase Agreement to continue their operatorship.
Findings of Court:
The Court found that the defendant had fulfilled its obligations and had the right to terminate the agreement legally due to breach of terms by the plaintiffs. The expectation of continuation based on prior agreements was not upheld.
Issues: The main issues included whether the termination of the 2nd Agreement was lawful, whether there was a continuing obligation under the SPA, and if the plaintiffs had a legitimate expectation for renewal.
Ratio Decidendi: The court concluded that the obligation under the SPA had been fulfilled, hence no continuing obligation existed, and the termination was valid due to the 1st plaintiff's breach of terms specified in the agreement. The doctrine of legitimate expectation does not apply to private contracts.
Result: Claim dismissed; defendant's counterclaim allowed.
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| 1. the contractual relationship as established. (Para 1 , 2 , 3) |
Brief account of the facts
By a sale and purchase agreement dated 20.9.1984 ('the SPA') the 2nd plaintiff sold to the defendant a piece of land. The defendant agreed to offer to the 2nd plaintiff the first choice for operatorship of the petrol and service station to be constructed on the land. On 23.1.1985 the defendant was registered as the owner of the land.
On 11.9.1985 at the 2nd plaintiff's request the defendant agreed to appoint the 1st plaintiff to operate the petrol station to be constructed on the land. The 1st plaintiff operated the petrol station from 1986 until 1995. On 1.1.1996 the 1st plaintiff and the defendant entered into a Shell Retailer Licence Agreement ('1st Agreement') for a 5 year term. Subsequently on 11.11.2001 the 1st plaintiff and the defendant entered into a Shell Retailer Licence Agreement ('2nd Agreement') for the period commencing from 1.12.2001 to 10.10.2006.
On 8.8.2006 the defendant issued a show cause letter ('the Show Cause Letter') to the 1st plaintiff. The defendant informed the 1st plaintiff that they have changed their business constitution without the defendant's prior written consent, viz , (i) a previous director one En. Zaharey bin Jusoh has sold 100,000 of his shares, and (ii) Zaharey has resigned his directorship in March 2005. Notwithstanding the 1st plaintiff's reply dated 14.8.2006 the defendant terminated the 2 Agreement in a letter dated 27.10.2006 ('the Termination Letter'). The 1st plaintiff was also asked to hand over vacant possession of the petrol station to the defendant by 28.11.2006. The 1st plaintiff did not hand over vacant possession of the petrol station to the defendant. On 15.4.2008 the defendant obtained a mandatory injunction which enabled the defendant to take vacant possession of the petrol station.
Plaintiffs' case
The 2nd Agreement was a mere formality and the initial terms of the SPA were in force in that the 1st plaintiff will continue to be given the right to operate the petrol station subject to the condition that the 1st plaintiff obtains the PDA licence.
The defendant terminated the 2nd Agreement for no apparent and justified reason. The 1st plaintiff had a legitimate expectation that the 2nd Agreement will be renewed and the 1st plaintiff continue to be appointed as the operator of the petrol station. The defendant is also estopped from terminating and or refusing to proceed with the 2nd Agreement.
Defendant's defence and counterclaim
The issue of the defendant breaching the terms of the sale and purchase agreement does not arise. The contractual relationship between the 2nd plaintiff and the defendant has already ended since the sale was successfully completed and the defendant is now the registered owner of the land. The 2nd Agreement was lawfully terminated either under clauses 2.3, 22.1, 20.3.1 or 20.3.7.
The 1st plaintiff remained in occupation of the petrol station as a trespasser before the mandatory injunction was granted. Consequently, the defendant has suffered damages because (i) it has been deprived of its rights of possession of the petrol station, (ii) it has been deprived of its right to nominate a new retailer to operate the petrol station, and (iii) it has incurred loss of profits from the sale of petroleum products. The defendant is also claiming aggravated damages for loss of business and reputation.
Findings of the Court
During the trial the Court heard the evidence of En. Zahery bin Jusoh (PW1) a director of the 1st plaintiff company and Mr. Andrew Ooi Soon Hock (DW1) the health, safety, security and environmental manager for the defen
