A lawful termination of a contract must occur due to a clear breach of terms, and variations to an agreement must be mutually agreed upon.

Introduction

[1] This is the appellants'/plaintiffs' appeal by way of Notice of Appeal dated 20 June 2022 against the Order dated 25 May 2022 granted by the Kuala Lumpur High Court in dismissing the appellants'/plaintiffs' claim via Originating Summons in encl 1 and in allowing the respondent's/ defendant's counterclaim via the respondent's/defendant's Affidavit in Reply in encl 4.

[2] For ease of reference, parties will be referred to as in the High Court, the plaintiffs and the defendant. Individually, the plaintiffs will be referred to as P1, P2, P3 and P4 respectively.

The Salient Facts

[3] By an agreement dated 22 November 2020 entered into between the plaintiffs and the defendant (the Agreement), the defendant as an investor agreed to invest RM2 million (the Investment Sum) in the production, marketing, promoting and screening of a film titled "Kongsi Raya" (the Film) produced by P1 using P2's license issued by the National Film Development Corporation (FINAS), and the performance of P1 under the Agreement was guaranteed by P3 and P4 who are the directors of P1.

[4] The salient terms of the Agreement, among others, are as follows:

(a) As the producer, P1 shall produce and complete the Film within the Completion Period as defined in cl 3.1 of the Agreement;

(b) P2 shall warrant that the license remains valid throughout the course of the Agreement as stated in cl 4.2 of the Agreement;

(c) As an investor, the defendant shall pay the Investment Sum to P1 in accordance with the Schedule of Payment under Annexure 1 annexed to the Agreement as provided in cl 5.1 of the Agreement; and

(d) upon completion of the Film as defined in the Agreement, P1 shall pay the defendant the Investment Return, within the Repayment Period as specified in cl 3.5 of the Agreement. Under cl 1, Investment Return is defined as the sum that is equivalent to 75% of the gross revenue collected by P1 within the Repayment Period, or the sum of RM2.42 million, which is higher, and Repayment Period means 12 months from the date next to the Completion Period, that was fixed on 31 May 2021 or otherwise extended by the defendant.

[5] The Schedule of Payment under Annexure 1 of the Agreement stipulates the timeline as to when the defendant shall release the Investment Sum in tranches to P1. For ease of reference, the Schedule of Payment is reproduced as follows:

[6] It is not disputed that the defendant had released the first two tranches of the Investment Sum to P1, respectively on 25 November 2020 and 1 February 2021. It is also not disputed that subsequent to the execution of the Agreement, the parties have mutually agreed that the Completion Period will be fixed on 30 September 2021 instead of 31 May 2021 due to Covid-19 pandemic and delay in approval from FINAS on the screening date of the Film, and the Repayment Period will begin from 1 October 2021 until 30 September 2022.

[7] A dispute arose over the payment of the 3rd tranche of the Investment Sum. On 22 November 2021, P1 issued an invoice to the defendant seeking for the release of the 3rd tranche of the Investment Sum. P1 had sent the invoice to the defendant together with marketing and promotion plan for the Film to show the defendant that marketing and promotion was being prepared. The defendant however failed to release the 3rd tranche of the Investment Sum to P1 when it was due.

[8] By way of a letter dated 13 December 2021, P1 demanded against the defendant for the release of the 3rd tranche of the Investment Sum. Premised on the defendant's failure to release the 3rd tranche of the In