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Case Update: Court of Appeal awards reasonable and appropriate loss of profits in wrongful disconnection of electricity case

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13 January 2023

CIVIL PROCEDURE
Public Utilities – Electricity – Wrongful Disconnection – Damages – Losses of Stock – High Court – Misdirection – Appeal

Karun Klasik Sdn Bhd v Tenaga Nasional Berhad
Civil Appeal No. W-02(IM)(NCC)-09-05/2020|Court of Appeal
- see the grounds of judgment here

Facts Karun Klasik Sdn Bhd (the ‘Appellant’) carried on business at a factory located on its premises which processes and freezes prawns mainly for export. Tenaga Nasional Berhad (the ‘Respondent’), after carrying out an inspection on the Appellant’s premises issued a 24 hours’ notice to disconnect the Appellant’s electricity supply. The Appellant denied tampering with the meter and pleaded for the Respondent not to disconnect its electricity. Nevertheless, the Respondent proceeded to disconnect the electricity supply for a period of 13 days before it was reconnected. Before and after the Respondent’s disconnection, express notice was given to the Respondent that the Respondent’s disconnection of electricity will cause the Appellant’s factory operations to stop and cause the products stored in the Appellant’s cold room to spoil or rot. Subsequently, the Respondent filed a suit against the Appellant for back billing charges due to meter tampering at the Appellant’s premises. The Appellant in turn counterclaimed for loss of business profits allegedly suffered as a result of the disconnection of electricity supply. The High Court dismissed both claims. The Appellant then appealed against the dismissal while the Respondent choose to not appeal against the dismissal but only cross-appealed against the Appellant’s appeal. The Court of Appeal dismissed both the appeal and cross-appeal. However, at the Federal Court, the Appellant’s appeal on its counterclaim was allowed and the Federal Court found the Respondent liable for wrongfully disconnecting the Appellant's electricity and ordered the High Court to assess damages payable by the Respondent. In assessing the damages, the High Court ordered no award for special damages and awarded a nominal sum of RM1,000.00 as general damages. Aggrieved with the decision, the Appellant appealed to the Court of Appeal. Hence, this appeal.

Issue Whether the Learned High Court Judge had erred in her finding as a result of misapprehending the facts of the case?

Held In allowing the appeal, the Court of Appeal held that the Learned High Court Judge had plainly erred in law and fact when she held that the Appellant was not entitled to loss of profits on the ground that it had not been pleaded. There was a failure by the Learned Judge to judicially appreciate the actual nature of the claim being the market/sale value of the products that perished, the determination of which would reasonably include both cost and loss of profit. This is despite there being ample evidence before the Court, both oral and documentary, which was not contradicted. The fact that there was a substantial quantity of the Appellant’s products in the cold rooms was supported by its conduct surrounding following the disconnection of electricity supply. It was in evidence that the Appellant repeatedly and desperately informed the Respondent that its processed prawns in the cold rooms would go to waste if electricity supply was to be disrupted. There were also pleas for the supply to be restored to avoid substantial loss. The Court of Appeal further held that the High Court was in disregard of the Federal Court’s order directing that damages be assessed for losses incurred by the Appellant following wrongful disconnection of electricity supply. It was implicit in the order that the Appellant had suffered substantial damage to its stock meant for export. Therefore, the Court of Appeal held that the Learned Judge had unreasonably rejected the evidence and decided to merely award nominal damages of RM1,000.00. In conclusion, the Court of Appeal allowed the appeal, however making a 20% deduction from the award on the grounds that the Appellant failed to mitigate its losses.

Zul Rafique & Partners
{13 January 2023}

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