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Case Update: Not the role of the Courts to improve the terms of a document as contracts are to be interpreted objectively

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30 September 2022

CONTRACT LAW
Termination of agreement – Whether notice of termination is valid – Whether Plaintiff had confirmed that payment of the final investment sum is not required – Interpretation of terms of agreement

555 Film Sdn Bhd & Ors v Adamancy Construction Sdn Bhd
Originating Summon No. WA-24NCC-28-01/2022 | High Court
- see the grounds of judgment here

Facts 555 Film Sdn Bhd (“1st Plaintiff”) is the producer of the film ‘Kongsi Raya’ (“Film”) while Adamancy Construction Sdn Bhd (“Respondent”) is an investor. The Defendant agreed to invest RM2,000,000 in the Film, and the agreement (“Agreement”) was executed to record the commitment of the parties in respect of the investment into, as well as the production, marketing, promotion and screening of the Film. The dispute between the parties arose from the non-payment of the third payment amounting to RM500,000 (“Final Investment Sum”) by the Defendant. The initial reason for non-payment of the Final Investment Sum is because the exact date of release could not be scheduled due to the COVID-19 pandemic, and approval from the National Film Development Corporation (“FINAS”) was not obtained. FINAS finally confirmed by way of a letter that the date of release of the Film would be 3 February 2022 (“Confirmed Date of Release”). With this Confirmed Date of Release, the 1st Plaintiff claimed that the Final Investment Sum was due in November 2021, three months prior to the Confirmed Date of Release. The 1st Plaintiff issued an invoice dated 22 November 2021 for the Final Investment Sum, and a letter of demand dated 13 December 2021, demanding payment of the Final Investment Sum. Thereafter, the Notice of Termination was issued, to terminate the Agreement. The Plaintiffs subsequently filed an Originating Summons, seeking a declaration that the Agreement is terminated while the Defendant in turn filed a counterclaim seeking a declaration that the notice of termination is invalid and that the Agreement was still in force.

Issue Whether the 1st Plaintiff was entitled to terminate the Agreement, due to the non-payment of the Final Investment Sum.

Held In dismissing the Originating Summons, the learned Judicial Commissioner Adlin Abdul Majid held that the condition for the issuance of a notice of termination, namely the non-payment of the Final Investment Sum, has not been met, and that the 1st Plaintiff was not entitled to terminate the Agreement. The learned Judicial Commissioner came to this conclusion based on the findings that the schedule of payment of the Agreement, which requires the Defendant to release the Final Investment Sum on 1 March 2021 was no longer valid, taking into account the Requests for Variation and the Confirmation of Variation. The learned Judicial Commissioner held that it was settled that contracts are to be interpreted objectively, and it is not the role of the courts to improve the terms of a document, therefore he was unable to see how the sentences in the various exchanges between parties could be construed in any way other than a confirmation that the Final Investment Sum was no longer required by the 1st Plaintiff. It is to be noted that notwithstanding the variation of the Agreement, parties had not agreed on when the Final Investment Sum was due and payable coupled with the fact that the 1st Plaintiff confirmed via the various exchanges with the Defendant that the Final Investment Sum was no longer required. With this finding, it follows that the Notice of Termination was invalid, and that the Agreement was still in force.

Zul Rafique & Partners
{30 September 2022}

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