TENAGA NASIONAL BERHAD v 1. ) Serai Saujana Development Sdn Bhd 2. ) SAUJANA RESORT (M) BERHAD

Case Significance

Illustrates that a third-party indemnity claim collapses once the primary liability it is designed to cover is negated — here by an equitable lease that defeated the trespass claim against Tenaga Nasional Berhad.

This decision of the High Court of Malaya at Shah Alam is the companion appeal, heard together with the management corporation's trespass appeal, arising from the same Sessions Court judgment concerning land on which an electricity sub-station stands. Here the appellant is Tenaga Nasional Berhad, which had been brought into the litigation as one of the defendants and had in turn pursued third-party proceedings for an indemnity against the developer, Serai Saujana Development Sdn Bhd, and the previous landowner, Saujana Resort (M) Berhad. The Sessions Court dismissed both the main trespass claim and TNB's third-party indemnity claim, and TNB appealed against the dismissal of its indemnity claim.

The court's central finding was that there was an Agreement to Lease between the developer and TNB, which gave rise to an equitable lease of the sub-station land in TNB's favour from 2010. Because that equitable lease meant TNB was lawfully in occupation and the trespass claim against it failed, the premise on which TNB's indemnity claim rested fell away: with no liability established against TNB in the main action, there was nothing for the developer or the former landowner to indemnify. The court held that the appellant management corporation, as a successor in title to the developer, was bound by the Agreement to Lease following Pengurusan Perbadanan Endah Parade, and that the Sessions Court action begun in December 2019 was not time-barred. Affirming the Sessions Court judgment, the court dismissed both the main appeal and TNB's indemnity appeal, awarding costs of RM3,000 for each respondent in this appeal. Because the appellant management corporation was a successor in title bound by the Agreement to Lease, and because the equitable lease predated and defeated the trespass allegation, there was no wrongdoing in the main action for which any indemnity could be owed. The judgment illustrates that a third-party indemnity claim cannot survive once the primary liability it is meant to answer has itself been negated, and that indemnity is parasitic on an established underlying liability rather than a freestanding entitlement.