Clarifying legal parameters: the limitations of the Covid-19 Act for debt and liability amidst the pandemic

Brief Facts

The Tenant, Tee and Putt Minigolf Sdn Bhd, initiated legal proceedings against the Landlord, Bele Time Management Sdn Bhd, alleging unlawful termination of the Tenancy Agreement and seeking damages exceeding RM1.6 million.

The Tenant claimed that since the termination took place during the protected period under Part II of the Temporary Measures for Reducing the Impact of Coronavirus Disease 2019 Act 2020 (Covid-19 Act), it is automatically deemed unlawful, entitling them to damages exceeding RM1.6 million for the setting up of a state-of-the-art minigolf center at the Landlord’s shopping mall.

In response, the Landlord counterclaimed against the Tenant, seeking a declaration that the termination based on breaches occurred before the Movement Control Order on 18.3.2020 is valid. The tenancy commenced in December 2019, and the Tenant’s breaches include the failure to obtain relevant licenses (including license to sell liquor) and failure to pay rent since the commencement of the Tenancy in December 2019.

Decision

After a protracted legal battle since year 2020, including two interlocutory applications and appeal to the Court of Appeal, the Johor Bahru High Court delivered its judgment on 25.3.2024 briefly as follows:-

• The Covid-19 Act does not apply to the Tenant's claims in this case, as the breaches of the Tenancy Agreement occurred prior to the Movement Control Order on 18.3.2020. Moreover, the protection provided under Part II of the Covid-19 Act ceased on 22.10.2022. Therefore, the Tenant's claims are unfounded, and the Johor Bahru High Court dismissed the Tenant's claims.

• The Landlord's Counterclaim was upheld. The Tenant did not specifically dispute its breaches, instead they repeatedly relied on the protection granted under the Covid-19 Act, which the Johor Bahru High Court found to be inapplicable in this instance.

Please note that the Grounds of Judgment have not yet become available.

Key Takeaways

1. The Malaysian Courts consistently maintain that the Covid-19 Act cannot serve as a basis for litigants to evade liability or debt merely because such debt or the enforcement of liability arose during the Covid-19 pandemic.

2. The defence of Covid-19 for non-payment of debt has become common post-pandemic. However, debtors invoking this defence should demonstrate that the debt became due during the protected period under Part II of Covid-19 Act and their business falls within the scope of the Covid-19 Act. More importantly, the debtors should provide credible evidence that their business has been affected by measures prescribed in the Prevention and Control of Infectious Diseases Act 1988, such as the Movement Control Order.

3. Therefore, the defence of Covid-19 is not automatic.