10th December, 2021

Smithereens Sdn Bhd PRIVATE & CONFIDENTIAL

Level 8, Tower 1
Bangsar South City BY EMAIL/BY HAND
59100, Kuala Lumpur

Attn: Ms …..

Dear Sirs,

Re: Franchise Agreement between Smithereens Sdn Bhd and Kapital Sdn Bhd dated
24.03.2017 (“the Franchise Agreement”)
___________________________________________________________________________

We refer to the above matter and to the email from Ms. …. dated 01.03.2017. We also
refer to the telephone conversation between you and our Mr. …… on 01.03.2017, requesting
that we furnish our opinion with respect to the status of the Franchise Agreement in light of
the termination of contract between Smithereens Sdn Bhd (“Smithereens”) and Kapital Sdn
Bhd (“Kapital Boost”).

2. In order to render our opinion, we have sighted the following documents which were
forwarded to us on ______ :-

(i) The Franchise Agreement;

(ii) Recent Media Report from Star Online dated 20.03.2017; and

(iii) Undated letter from Smith Sdn Bhd (“Smith”).

3. We have perused the said documents and we have identified three (3) issues that we
shall address in this opinion. These issues are:

(i) Status of the Franchise Agreement, now that the agreement between Smith and
Smithereens is terminated;

(ii) What are the legal avenues and remedy available for the Company; and

(iii) Legal position of the Company with respect to the New Brand Proposal.

Background Facts
4. On or about______ ,

5. Based on the above facts, our advice is set out hereinbelow:-

(a) Status of the Franchise Agreement, now that the agreement between Smith and
Smithereens is terminated

6. Pursuant to the termination of the Principal Agreement between Smith and

Smithereens, the Franchise Agreement which was stemmed from the Principal Agreement
could not be enforced and/or performed by either Smith or the Company. The subject matter
of the Franchise Agreement is no longer available and the Franchise Agreement is now
frustrated.

7. We draw support from the case of MTU Asia Pte Ltd v Brightside-Who Hup (1989)
1 MLJ 10 (refer to Annexure “A”)where Chan Sek Keong JC held as follows:-

“ … The law and its rationale are aptly summarized in two passages in 9 Halsbury’s
Laws of England, 4th Ed, para 450 at p.314 which read as follows:-

The doctrine of frustration operates to excuse from further performance where (1) it
appears from the nature of the contract and the surrounding circumstances that the
parties have contracted on the basis that some fundamental thing or state of things will
continue to exist, or that some particular person will continue to be available, or that some
future event which forms the basis of the contract will take place, and (2) before breach, an
event in relation to the matter stipulated in (1) renders performance impossible or only
possible in very different way from that contemplated, but without default of either party.

The doctrine of frustration has been variously stated to depend on an implied

condition, the disappearance of the foundation of contract, the intervention of the law to
impose a just and reasonable solution, or fact of a radical change in the character of the
obligation; but the last view is now the predominant one. The view requires the
interpretation of the terms of the contract in the light of the nature of the contract and the
relevant surrounding circumstances, and an inquiry whether those terms are wide enough to
meet the new situation”

8. The basis of the Franchise Agreement is solely based on the subject matter agreed in
the Principal Agreement between Smith and Smithereens. The fundamental basis of the
Franchise Agreement now ceased to exist pursuant to the termination of the Principal
Agreement. This in return, automatically caused the foundation of contract to be impossible
to perform.

9. In this connection, we are of the view that the Franchise Agreement is now frustrated
and Smith could not compel the Company to adhere to the terms of the said Agreement,
considering that the Principal Agreement now has been terminated and Smith lost its
exclusive rights to operate, manage and/or maintain all Franchised Store in Malaysia.
(b) What are the legal avenues and remedy available for the Company

10. We refer to Section 57(2) of the Contracts Act 1950 which states that when a promise
to do an act under the contract becomes impossible to perform, it will render the contract to
become void. In the circumstance, the Company may then resort to Section 15(2) of the Civil
Law Act 1956 for the adjustment of rights and liabilities of parties for frustrated contracts.

11. Accordingly, we are of the view that the Company may claim for the deposits paid
under Schedule 2 of the Franchise Agreement (i.e.: Deposit for the Franchise Fee of
RM10,000.00 and Raw Material Deposit of RM20,000.00), followed by the General
Damages and Special Damages in consequence of the frustration of the agreement between
both parties.

12. However, please be advised that the quantum of damages (i.e.: General Damages and
Special Damages) must be proven strictly by the Company in order to allow the Court to be
able to assess the damages suffered. As in the case of Cheng Seng Hup & Ors v Wangsa
Tegap Sdn Bhd (2012) 8 MLJ 425, Zabariah Mohd J in his judgment stated as follows:-

“ [75] It is possible to calculate general damages but there must be evidence to assist
the Court in calculating it. Special damages, on the other hand, must be claimed
specially and proved strictly. Of course, general damages are such that the law will,
presume to be direct, probable or natural consequences of the action complained of but
evidence must be led to assist the Court in computing the quantum. One cannot throw
general damages, or special damages at the feet of the Court and expect the Court to
award the amount. One has to prove it by leading evidence ”

13. Further to the above, it is pertinent to note that the Franchise Agreement does not
stipulate any terms and/or clauses with regards to the Liquidated Ascertain Damages
(“LAD”). As such, the Company is not entitled to claim for the same from Smith.

( c) Legal position of the Company with respect to the New Brand Proposal

14. Based on the undated letter from Smith, it is clear that Smith is now intending to invite
all Franchised Stores to continue its operation of business under a new franchising brand,
without the involvement of the Company. We view the New Brand Proposal stated in the
said letter as an initiative of the Company to mitigate its losses and it is seen as an
attempt to sustain the good relationship with existing Franchised Stores.

15. In this regard, we are of the opinion that should the Company wish to continue its
operation of business with Smith, the Company shall first terminate the Franchise
Agreement and enter into a new agreement (i.e.: the New Brand Proposal) with Smith to
regulate the changes of the Trade Name, Trade Mark and/or commercial venture. The
new agreement will now be wholly based on the different franchising brand.

16. In doing so, it is our considered view that the Company should first request for the full
details of the New Brand Proposal prior from deciding to accept the same. We wish to
place on record that ultimately, the Company’s decision to venture into the New Brand
Proposal or to stop its dealings with Smith entirely is dependent on the Company’s
strategy and/or commercial decision to operate its business.
CONCLUSION

17. Based on the above, please be advised that the Franchise Agreement is now frustrated
due to the termination of the Principal Agreement. As a result of the same, the Company
is entitled to claim for damages and/or the deposits under the Franchise Agreement. In
the event that the Company wishes to enter into the New Brand Proposal Agreement with
Smith, the Company must first terminate the Franchise Agreement and understand that
the Company has no rights upon the said termination, to use and/or operate its business
using the Trade Name and/or Trade Mark of Smith.

18. We trust the above is of assistance, please do not hesitate to contact us if you require any
clarification with regards to the above matter.

Thank You

Yours faithfully,

_______________