The measure of damages for breach of contract focuses on loss of net profit arising from the breach, requiring the claimant to accurately prove their losses, which the appellant failed to do.

GROUNDS OF JUDGMENT

Background facts

[1]Below are the background facts, which led to the filing of this suit by the plaintiff.

[2]In 08.02.1990, a firm known as Leong Hin Enterprise (“LHE”), which is the predecessor of the plaintiff, and which is wholly owned by Dato’ Ong Pee Leong (“Dato’ Ong”) was registered.

[3]For the past 20 (twenty years), Dato’ Ong was doing business with the defendant through LHE, which, solely, sold the defendant’s petroleum based products and lubricants under the ‘Caltex’ brand (“the defendant’s products”) until Dato’ Ong became well known as “Caltex Ong”.

[4]On 14.09.2006, the plaintiff was incorporated with a high paid up capital of RM 500,000.00. According to Dato’ Ong, the Managing Director of the plaintiff, the incorporation of the plaintiff was at the request and encouragement of the defendant.

[5]According to Dato’ Ong, prior to the incorporation of the plaintiff, he was informed by the defendant that in order to be appointed as a wholesale distributor of the defendant’s products, a limited liability company with a high paid up capital of at least RM 500,000.00 and a working capital of at least RM 2 million must be set up and registered.

[6]According to Dato’ Ong, he was informed by the defendant in 2006 that this was because there was a change in the style of the defendant’s distributorship. According to Dato’ Ong, he was informed by the defendant that upon the incorporation and registration of the plaintiff, the plaintiff, as the wholesale distributor of the defendant’s products, would be required to provide warehousing for the stocks of the defendant’s products delivered by the defendant to the plaintiff and, which will be supplied by the plaintiff to the individual workshops, who buy the defendant’s products.

[7]According to Dato’ Ong, this was a fundamental change in the business model of the defendant’s distributorship because previously the distributors merely took orders from end-user workshops and relayed the orders to the defendant, which then delivered the defendant’s products directly to the end-user workshops.

[8]As Dato’ Ong was desirous of being appointed as a wholesale distributor of the defendant’s products, he acted upon the defendant’s request and encouragement and he incorporated the plaintiff with himself being the main shareholder.

[9]Upon the registration of the plaintiff, the plaintiff, immediately, began operations as a wholesale distributor of the defendant’s products.

[10]On 27.12.2006, upon the urging of the defendant, the plaintiff took a RM 1 million loan facility from the OCBC Bank Berhad to prepare itself for the setting up of a warehousing system for the defendant’s products.

[11]In August 2007, upon the urging of the defendant and in order to accommodate the amount of the increased value of the sales of the defendant’s products on behalf of the defendant, the plaintiff took another loan facility of RM 400,000.00 to be used as working capital and to finance products bought from the defendant (“Term Loan 1”).

[12]On 28.09.2007, upon the urging of the defendant, and in order to accommodate the amount of the increased value of the sales of the defendant’s products on behalf of the defendant, the plaintiff took another loan facility of RM 693,000.00 from the OCBC Bank Berhad to purchase a property at No. 8, Jalan PJU 3/41 to be used as a warehouse (“Term Loan 2”).

[13]During this period, the defendant invited the plaintiff to be the mai