JUDGMENT

Low Hop Bing JCA:

Appeal And Cross-Appeal

[1] On 21 May 2007, the learned judge of the Ipoh High Court:

(1) allowed the claim of the respondent ("the plaintiff") and ordered the appellant ("the defendant") to pay the plaintiff the sum of RM944,228.84, as damages for trespass, together with interest at 8% p.a. from the date of judgment to the date of realization, and costs, but dismissed the plaintiff's claim for exemplary and aggravated damages; and

(2) dismissed with costs the defendant's counterclaim against the plaintiff.

[2] The defendant has now appealed against the decision of the High Court given in favour of the plaintiff.

[3] On the other hand, the plaintiff has filed a cross-appeal against the dismissal of the plaintiff's claim for exemplary and aggravated damages.

Finding Of Facts

[4] The narrative of the relevant facts, as found by the learned judge after a full trial, may be unfolded below.

[5] Pursuant to a tenancy agreement dated 5 February 2001 ("the agreement") the defendant as landlord let to the plaintiff, as tenant, the vacant land held under HS(D) KA 81943, No. P.T. 162011, in the mukim of Hulu Kinta, district of Kinta, Perak ("the land") for a term of three years commencing 15 December 2000 at a monthly rental of RM3,500, with an option to renew for a further period of two years. The purpose of the tenancy was to set up an entertainment outlet, upon the terms and conditions contained in the agreement.

[6] On 2 February 2001, the plaintiff paid the defendant a sum of RM7,000 being the rental for two months viz December 2000 and January 2001; and a further sum of RM21,000 as security deposit.

[7] Clause 5.5 of the agreement contains a covenant that the plaintiff shall comply with all statutes, ordinances or regulations, present or future, affecting or relating to the use of the land, and that the erection of all structures on the land shall comply with the requirements of any authority having jurisdiction over or in respect of the land. (A reference hereinafter to a clause is a reference to that clause in the agreement).

[8] Pursuant to cl. 5.9, the plaintiff covenanted, inter alia, not to use the land for any unlawful purpose.

[9] The defendant had on 28 March 2001 taken possession of the land and demolished the structures which the plaintiff had caused to be erected thereon.

[10] Other facts will appear under the relevant issues for determination later in our judgment.

Plaintiff's Covenants

[11] Defendant's learned counsel Datuk N Chandran (assisted by Mr Philip Koh, Mr Chan Kok Leong, Mr Yap Boon Hau, Mr Leong Cheok Keng and Mr Ranjan Chandran) submitted for the defendant that the plaintiff has failed to fulfil its covenants in that the plaintiff had not obtained the approval of the relevant authority to erect the structures on the land; and the licences from the authorities for the purpose of carrying on the entertainment outlet.

[12] Mr Vijaya Segaran (Mr Lee Soon Ming and Mr Danial Rahman with him) argued that the plaintiff's notice of termination was simply based on a failure to pay rental, and nothing turned on the plaintiff's failure to obtain the approval or licences, as a result of which the defendant was estopped from raising the illegality issue.

[13] The above conflicting submissions call for the determination of the following question:

Upon a true construction of cl. 5.5 and cl 5.9 of the tenancy agreement, is the plaintiff in breach of the covenants pertaining to compliance with all statutes, ordinances or regulations, present and future, affecting or relating to the use of the land, and not to use the land for any unlawful purpose, so as to bar the plaintiff from bringing an action under the agreement against the defendant?

[14] The determination of this question revolves around the construction of the covenants contained in cl. 5.5 and cl. 5.9, in the light of the evidence adduced at the trial.

[15] Clause 5.5 and cl. 5.9 had been referred to above and would