Termination clauses in contracts must be strictly interpreted, requiring clear communication and the opportunity for remedying breaches to uphold validity.

Hasnah Mohammed Hashim FCJ:

Introduction

[1] This appeal raises the questions whether the law in Malaysia regarding termination clauses ought to be strictly interpreted, and whether headings in a contract can be used to assist in the interpretation of that contract.

Question 1

Whether the law in Malaysia should be that termination clauses ought to be construed strictly; and

Question 2

Whether headings in a contract can be used to assist in the interpretation of the contract.

[3] At the commencement of the hearing of this appeal, learned counsel for the appellant had applied by an oral application to include an additional question for this Court's consideration and determination. This oral application, however, was objected by learned counsel for the respondents. The proposed additional question is as follows:

In a sale of shares of a company (that is in liquidation), whether time for payment of the balance purchase consideration is suspended in the face of the operation of s 223 of Companies Act 1965 ( CA ).

[4] In support of his application, learned counsel for the appellant argued that the operation of s 223 CA was a legitimate concern at the material time when payment of the balance purchase consideration was due and the purported termination of the agreement between the appellant and the respondents. There were winding-up petitions filed against Mampu Jaya Sdn Bhd (Mampu Jaya), the previous owner of the Land, and that the Land, a subject matter of this appeal, was sold after the winding-up process. In the light of the winding up of Mampu Jaya the balance purchase price would first be finalised.

[5] Learned counsel for the respondents objected to the third question as not only was the question proposed at the eleventh hour but more importantly it had bypassed the whole leave process application. According to learned counsel, the third question proposed is based on a completely new argument, different from the arguments raised and considered in the courts below. The issue relating to the sale of the Land and that Mampu Jaya was in liquidation was an afterthought. The appellant knew when it entered into the Share Sale Agreement (SSA) that Mampu Jaya was in liquidation. In support of this learned counsel for the respondents referred to the letter of the solicitor dated sometime in March 2009 after the termination notice.

[6] We agreed with learned counsel for the respondents' contention that the additional third question had indeed bypassed the leave process. The central issue in this appeal as reflected in the leave question is the purported termination of the agreements between the parties in particular the interpretation of the termination clause in the agreement. Therefore, the appellant's application to add the third leave question is dismissed.

[7] The appeal before us essentially relates to the interpretation of the terms under the SSA dated 29 August 2008 entered between the appellant, Catajaya Sdn Bhd and the respondents. The appellant, the defendant in the High Court, was sued by the respondents in respect of the termination of the SSA and a Power of Attorney cum Agreement (PA) for the sale of respondents' respective shares in the 1st respondent to the appellant. The 2nd and 3rd respondents were the only shareholders of the 1st respondent. The appellant had also filed a counterclaim against the respondents seeking reliefs under the SSA. The learned High Court Judge after a full trial allowed the claim and dismissed the counterclaim with costs of RM70,000.00 to the respondents. Aggrieved with the decision of the High Court, the appellant appealed to the Court of Appeal. The Court of Appeal dismissed the appeal.

The Factual Background

[8] Mampu Jaya was the previous owner of a piece of land measuring approximately 1.189 hectares held under Geran No GM 817 Lot 1423, Tempat 3 1/4 Petaling Road, Mukim Kuala Lumpur (the Land). On 9 January 2008, Shop