CRYSTAL CLEAR CLEANING SDN BHD v AEON CO. (M) BHD

Case Significance

Illustrates how a contractual schedule of pre-termination steps operates as a condition precedent, so that terminating without following the prescribed procedure and documentation is wrongful and entitles the innocent party to damages for the unexpired term.

This High Court decision at Kuala Lumpur, delivered by Dato' Haji Akhtar bin Tahir J after a full trial, concerns a claim by Crystal Clear Cleaning Sdn Bhd against AEON Co. (M) Bhd for the wrongful termination of a cleaning agreement dated 27 November 2018. Under the agreement the defendant had engaged the plaintiff to provide cleaning services at fourteen of the defendant's premises for a one-year term running from 1 October 2018 to 30 September 2019. Before the term expired, the defendant terminated the agreement on 13 March 2019. The sole issue was the validity of that termination, the parties having led oral and documentary evidence about various incidents between them that were said to have led to it.

The Court examined the contractual machinery governing termination, in particular a schedule setting out the steps a party must take before terminating. It found that a precondition for taking action was that any step must first be accompanied by supporting documents, and that the inclusion of the schedule precluded termination of the agreement until all the measures it prescribed had been undertaken. On the evidence, those steps and procedures had not been followed: no supporting documents accompanied the reminder letters, and the contractual option to impose a penalty had not been exercised.

Because the prescribed pre-termination measures had not been carried out, the Court ruled that the termination was invalid, and that the plaintiff was to be compensated for the remaining six months of the agreement at the agreed monthly payment. The Court dismissed the defendant's counterclaim and awarded costs of RM100,000 to the plaintiff. The judgment is a useful illustration of how a contractual schedule of pre-termination steps operates as a condition precedent — so that terminating without following the prescribed procedure and documentation is wrongful, entitling the innocent party to damages for the unexpired term.