Central Sugars Refinery Sdn Bhd v Holsten Marketing (M) Sdn Bhd. (BA-22NCvC-155-04/2021)

This is a claim arising from a commercial contract for the supply of sugar. The Plaintiff seeks, among other things, a refund of the deposit and contractual late-delivery interest, contending that the Defendant failed to deliver the sugar in accordance with the agreed delivery schedule under the contract. The Defendant denies liability, contends that the Plaintiff committed a repudiatory breach by failing to pay part of the purchase price, and counterclaims for alleged losses resulting from the 04/03/2026 11:00:16 BA-22NCvC-155-04/2021 Kand. 187 Plaintiff’s conduct, asserting that it is entitled to retain the deposit.

The matter proceeded to a full trial.

Having considered the pleadings, the evidence, and the submissions of counsel, I find, on the balance of probabilities, that the Defendant failed to deliver the sugar in accordance with the agreed delivery schedule and was in breach of the contract. I further find that the Plaintiff was entitled to terminate the agreement and therefore, the Plaintiff’s claim is allowed, and the Defendant’s counterclaim is dismissed.

The reasons for my decision are as follows.

The Plaintiff, Central Sugars Refinery Sdn. Bhd. (CSR), is a private limited company incorporated in Malaysia. Its business includes the refining and supply of sugar, as well as import and shipment operations. In this matter, CSR acted as the purchaser of sugar under the relevant contractual arrangements.

The Defendant, Holsten Marketing (M) Sdn Bhd (Holsten), is also a private limited company incorporated in Malaysia. Its business involves general import, export, merchanting and trading of goods, including sugar products. In the present dispute, Holsten acted as the supplier of sugar to CSR under the contracts relied upon by the parties.

It was an agreed fact that both parties had prior commercial dealings before the dispute arose in this case.

On 1 October 2019, the parties entered into a written agreement, referred to in the proceedings as “Contract A”. Under that agreement, Holsten agreed to supply 5,000 metric tons (MT) of refined sugar at RM2,050 per MT, with delivery between 1 October 2019 and 31 December 2019.

Contract A features prominently in Holsten’s case, as they contends that the parties’ obligations must be viewed cumulatively, giving rise to what it describes as an overall arrangement of 8,000 MT.

Subsequently, on 15 October 2019, the parties executed another written contract, referred to as “Contract B”. Under Contract B, CSR agreed to purchase, and Holsten agreed to supply, 3,000 MT of sugar. The contractual structure provided for a 20% deposit, with the balance 80% payable upon delivery. Contract B also contained clauses on default and forfeiture, as well as an entire agreement clause.

It is CSR’s case that Contract B became the operative contract between the parties and that Contract A no longer governed their relationship after Contract B was executed.

Following the execution of Contract B, CSR paid deposits amounting to RM615,000.00 in October 2019. There is no dispute that Holsten received this sum. Deliveries commenced, and 250 MT were delivered on 24 October 2019 and another 200 MT on 2 January 2020.

On 6 January 2020, the parties executed an “Addendum”. The Addendum is central to the dispute. Under the Addendum, the delivery period was extended until 31 March 2020. The total quantity to be supplied was revised to 5,000 MT. A structured delivery schedule was introduced, requiring a minimum of 1,500 MT to be delivered in January 2020, a further 1,500 MT in February 2020, and the balance (1,700 MT) in March 2020.

The Addendum also provided for an additional 20% deposit of RM1,435,000.00. It introduced a clause on late delivery interest at 10% per month on the equivalent deposit for the quantity that should have been delivered. Consequently, CSR paid the additional deposit of RM1,435,000.00 in January 2020. It is therefore common ground that the total deposit paid by CSR to Holsten amounted to RM2,050,000.00. The Addendum expressly stated that all other terms and conditions of Contract B remained unchanged.

Holsten submits that the Addendum must be read together with earlier contractual arrangements, whereas CSR submits that the Addendum varies and supplements Contract B. I will return to this issue below.

The dispute arose over performance under the Addendum. For January 2020, Holsten was required to deliver at least 1,500 MT. It is not disputed that only 400 MT were delivered in January 2020. After 23 January 2020, no further deliveries were made, despite the contractual delivery period extending to 31 March 2020. In total, only 650 MT were delivered.

Holsten’s principal justification for stopping delivery, as repeatedly emphasised in its submissions, is that CSR failed to pay RM164,000.00, which is the 80% balance of the purchase price for a delivery of 100 MT made on 23 January 2020.

CSR does not dispute the quantum of RM164,000.00, but submits that the sum was treated as a deduction from the deposit already paid because Holsten had failed to comply with the agreed delivery schedule. It is not disputed that Holsten did not issue any contemporaneous written demand or notice prior to stopping delivery.

On 12 February 2020, CSR sent an email to Holsten, calculating the late delivery penalties and highlighting the outstanding quantities to be delivered. Holsten did not respond to the email, nor did they resume delivery.

Following continued non-delivery, CSR issued a notice of demand dated 9 April 2020, calling upon Holsten to comply with its obligations (to deliver the remaining 4,350 MT). Holsten responded on 15 April 2020. For the first time, Holsten alleged non-payment of RM164,000.00 in respect of the balance of the purchase price for the 23 January 2020 delivery. In its subsequent letter, CSR explained that, since Holsten continued to retain the deposit, CSR suggested, as a matter of mitigation, that Holsten deduct RM164,000.00 from the deposit.

When deliveries were not resumed, CSR terminated the agreement by notice dated 2 June 2020. On 25 January 2021, CSR wrote to Holsten seeking a refund of the undelivered deposit of RM1,783,500.00, together with 10% late delivery interest amounting to RM713,581.24

Holsten denies liability and contends that it was entitled to forfeit the deposit under the contractual terms and section 75 of the Contracts Act 1950.

Holsten further counterclaims for alleged losses – loss of profits, transportation costs, and an increase in the purchase price. Its case is that it had procured sugar from third-party suppliers, including Ariki Seafood Pte Ltd, Halza, and Mitr Phol, and that it suffered losses of profit and related expenses when CSR did not proceed as alleged by Holsten. The supplier contracts relied on by Holsten totalled 68,500 MT (the contracted amount with CSR was only 5,000 MT).

CSR denies liability for these alleged losses and contends that any such losses arose from Holsten’s own commercial decisions and failure to perform the agreed deliveries. Issues to be Tried

The issues arising for determination are:

Which contract governs the parties’ relationship after the Addendum.

Whether Holsten breached the agreement by failing to deliver sugar in accordance with the agreed schedule.

Whether CSR committed a repudiatory breach by “failing to pay RM164,000.00”, as contended by Holsten.

Whether Holsten was entitled to stop delivery and forfeit the deposit.

Whether CSR was entitled to terminate the agreement.

Whether Holsten’s counterclaim for alleged losses is established. Analysis and Findings Credibility of DW2

At the outset of the analysis, CSR made firm submissions on the credibility of Holsten’s Managing Director, Mr Tey Poh Choon (DW2). During cross-examination, it was observed by the Court interpreter seated next to DW2 that a person in the public gallery, identified as his daughter, appeared to be communicating with him through phone messages and communication symbols such as “X” and “✓”, while he was giving evidence. The matter was immediately brought to the attention of the Court.

CSR submitted that this incident affected the credibility of DW2’s testimony. It was argued that his evidence was generally inconsistent and defensive, and that receiving real-time assistance while under oath undermined its integrity. CSR further submitted that this conduct was improper and rendered it difficult to discern which portions of his testimony were reliable.

Holsten did not file a detailed written explanation of this incident. Its position during trial was that DW2 was giving evidence based on his own knowledge and recollection, and that the substantive issues should be determined on the documentary evidence and contractual terms rather than on this episode.

It is trite that a witness must provide evidence independently and based solely on their own recollection, as it is fundamental to the integrity of a trial. The Courts have consistently held that “witness coaching”, in which a witness is influenced or instructed on what to say, is highly reprehensible and can lead to the rejection of that witness’s testimony.

I refer to the case of Taff Hotels Sdn Bhd v Permodalan Nasional Bhd [1999] 4 MLRH 377, where it was held that unnecessary or coaching conversations during testimony can taint the evidence and may be investigated.

Therefore, a witness must give evidence independently and without external assistance (reference was made to the case of Tan Kay Soon v Tan Ching Ling [2020] 9 MLJ 15). Any form of prompting or communication from the gallery while a witness is under oath is inappropriate. I do not make any finding of intentional deception. However, the incident raises legitimate concerns as to the independence of DW2’s testimony.

That said, this matter does not determine the case. The issues before the Court turn primarily on the proper construction of the written contracts, the delivery records, the payment trail, and the contemporaneous correspondence. My findings are based principally on those objective materials.

Insofar as there are disputes of fact not resolved by documents, I have approached DW2’s evidence with caution. Where his oral testimony is unsupported by contemporaneous records or is inconsistent with objective evidence, I prefer the documentary record and the evidence of CSR’s witnesses where supported by such documents.

In arriving at my decision, I have considered the issues framed by both parties, including the twelve issues set out by Holsten in paragraph 6 of its written submissions. Those issues concern, among others, the proper construction of the contractual arrangements between the parties, the alleged non-payment of RM164,000, Holsten’s cessation of delivery, CSR’s termination of the contract, the forfeiture of deposit, and Holsten’s counterclaim. I address these issues in turn below.

Holsten submits that there were three contracts, namely Contract A dated 1 October 2019, Contract B dated 15 October 2019, and the Addendum dated 6 January 2020, and that these must be read cumulatively. They contend that the Addendum “revoked the contract of 3,000 MT” and that the parties’ arrangement should be understood as an 8,000 MT arrangement. Holsten further submits that CSR cannot rely solely on Contract B and that Contract A remained operative.

CSR submits that Contract B is the operative agreement, and that the Addendum was executed “to vary, revise and modify” Contract B. They rely on the clause in the Addendum that states “all other terms and conditions remain unchanged,” and submit that Contract B continues but is varied by the Addendum in respect of quantity and delivery schedule.

In addition, CSR submitted that whether it is Contract A or B is ultimately irrelevant, as both parties agreed that Holsten was required to deliver 5,000 MT of sugar, regardless of whether the Addendum is read with Contract A or B. Both contract terms are the same except Contract B specifies 3,000 MT instead of 5,000 MT in Contract A. CSR submits that the enforceable agreement between the parties is Contract B, read together with the Addendum.

Having considered the wording of the Addendum and the conduct of the parties after 6 January 2020, I accept CSR’s submission.

The Addendum expressly revised the total quantity to 5,000 MT and extended the delivery period to 31 March 2020. It introduced a new delivery schedule and provided for an additional 20% deposit of RM1,435,000. It also provided that all other terms and conditions of Contract B remain unchanged. The payment structure, deposit mechanism, and default clauses in Contract B continued to regulate the parties’ dealings after the Addendum.

I do not accept Holsten’s submission that the Addendum revoked Contract B entirely or that Contract A revived in a manner inconsistent with Contract B. I therefore find that Contract B continues to govern the parties’ relationship, as varied by the Addendum.

To further support this stand, CSR referred to clause 13 of Contract B (an entire agreement clause), which states that it supersedes all prior agreements, which, in my view, leaves no room for additional terms or any variations to be implied and/or incorporated into the contract, except the terms of Contract B itself.

Clause 13 of Contract B states: “This contract contained the entire agreement between the parties and supersedes all such prior agreements with respect to matter expressly set forth herein. No modification shall be made to this contract except in writing and signed by both parties. This contract shall be binding upon the parties and their respective heirs, executors, administrators, successors, assignees, and personal representatives.”

An entire agreement clause is a standard contractual provision used to define the boundaries of a contract. The primary effect of an entire agreement clause is to merge all prior negotiations, representations, and agreements into the written document, thereby precluding parties from relying on oral promises or collateral warranties not found within the “four corners” of the contract.

In the case of Wong Yee Boon v Gainvest Builders (M) Snd Bhd [2020] 1 MLRA 481(FC), it was emphasized that where a contract contains an entire agreement clause, parties are estopped from relying on any purported representations made outside the scope of the agreement. The Federal Court held that no extraneous evidence can be considered to interpret, supplement, or contradict the obligations set out in the written document.

I accept CSR’s contention that the entire agreement clause was intended to achieve contractual certainty on the terms. Contracts are subject to revision by both contracting parties. Once agreed upon, having an entire agreement clause would clarify the binding terms in the document containing the clause, rather than elsewhere (see the Court of Appeal case of Master Strike Sdn Bhd v Sterling Heights Sdn Bhd [2005] 3 MLJ 585).

In addition, it was submitted, and I agree that all conduct of the parties aligns with the terms in Contract B. CSR issued the purchase order for 3,000 MT on 16 October 2019, Holsten issued a proforma invoice for 3,000 MT and not 5,000 MT(as in Contract A), and Holsten’s witness confirmed this (DW1).

Having determined the governing agreement, I turn to the question of performance.

CSR submits that under the Addendum, Holsten was required to deliver a minimum of 1,500 MT in January 2020, 1,500 MT in February 2020, and the balance in March 2020. CSR emphasizes that only 400 MT were delivered in January 2020 and that deliveries ceased entirely after 23 January 2020. CSR submits that this constituted a “serious and continuing breach” of the Addendum.

Holsten does not dispute the shortfall in quantity delivered. Instead, it submits that it was “ready and willing to deliver” and that it stopped delivery only because CSR “failed to pay RM164,000.00” on a “cash on delivery basis.”

On the evidence, it is common ground that only 650 MT were delivered in total, and that no deliveries were made after 23 January 2020, notwithstanding that the delivery period under the Addendum extended until 31 March 2020. Holsten has not produced documentary evidence demonstrating allocation of stock or specific arrangements for delivery of the remaining quantities after 23 January 2020.

Holsten, by its conduct, accepted that CSR had been making payments within a reasonable period after delivery. This was affirmed by Holsten’s witnesses. Though they asserted that they were not in agreement with the practice, it was still accepted. However, Holsten failed to deliver or intentionally stopped delivery in accordance with the schedule, and no explanation or notice was given. They had remained silent since 23 January 2020 and had only raised the issue of non-payment of RM164,000.00 in response to the CSR demand letter.

I therefore find, on the balance of probabilities, Holsten had failed to deliver sugar in accordance with the agreed delivery schedule under the Addendum, and that such failure constituted a breach of contract, regardless of the alleged non-payment by

Holsten now holds to the term “Payment upon delivery,” which requires payment on the same day as delivery. However, I find, from the evidence, that it was a consistent course of dealings between the parties, that payment had not been made on the very same day of delivery, and that Holsten has been accepting the deferred payments from CSR. It was not objected to then, I see no valid reason for them to use this term rigidly now, after their unsubstantiated failure to deliver. As submitted by CSR, Holsten is estopped, by conduct, from relying on the strict “payment on the same day” term as justification for suspending further deliveries (see the Federal Court in Boustead Trading

Sdn Bhd v Arab-Malaysian Merchant Bank Bhd [1995] 3 MLJ 331).

Furthermore, there was no evidence that Holsten communicated to CSR that future deliveries would be suspended unless payment was made strictly on the same day. In the absence of such notice, it cannot revert unilaterally to strict enforcement. Alleged Non-Payment of RM164,000 and Whether It Justified

Holsten’s principal submission is that CSR “failed to pay RM164,000.00,” being the balance of 80% of the purchase price for the delivery made on 23 January 2020. That payment was strictly on a “cash on delivery” basis. Holsten contends that this failure constituted a breach, entitling it to “stop delivery” and to treat the contract as at an end.

CSR does not dispute the quantum of RM164,000.00. However, it submits that the said sum was treated as a deduction from the deposit already paid, “as a mitigative measure,” in light of Holsten’s prior failure to comply with the Addendum delivery schedule. CSR further submits that Holsten had no right to stop delivery when it was itself already in breach of the minimum January delivery requirement of 1,500 MT.

In view of the parties’ respective positions, it is unneccesarily to make a definitive finding as to whether there was a technical non-payment in the strict sense contended by Holsten. Even assuming, as Holsten submits, that CSR did not make a separate cash payment of RM164,000.00 upon delivery, I find that such conduct was not repudiatory.

By 23 January 2020, Holsten had already failed to deliver the minimum 1,500 MT required for January 2020. Holsten was also holding a total deposit of RM2,050,000.00. Holsten did not issue a contemporaneous written demand or formal notice before ceasing all deliveries. In these circumstances, I am of the view that the alleged non-payment of RM164,000.00 did not go to the root of the contract and did not entitle Holsten to cease performance entirely.

I have considered Holsten’s submission that strict contractual terms must be enforced notwithstanding past indulgence. However, on the evidence, I do not find that Holsten gave clear notice that it would insist on strict compliance before ceasing delivery.

I therefore reject Holsten’s submission that CSR’s alleged non-payment justified its cessation of delivery.

Holsten submits that the contract does not expressly permit set-off and that any deduction from the deposit was wrongful. CSR submits that its treatment of RM164,000.00 as a deduction was a reasonable response to Holsten’s breach and that it remained entitled to insist on performance.

I do not find it necessary to recognize a broad contractual right of set-off in CSR’s favour. The question is whether CSR’s conduct deprived it of the right to insist on performance or to terminate.

In light of Holsten’s prior and continuing breach of the delivery schedule, I find that CSR’s treatment of RM164,000.00 as a deduction from the existing deposit did not constitute a repudiatory breach. It did not disentitle CSR from insisting that Holsten comply with the Addendum.

Holsten submits that CSR’s termination was “wrongful and premature.” CSR submits that it issued a notice of demand dated 9 April 2020 and subsequently terminated the agreement on 2 June 2020 after continued non-delivery.

The evidence shows that deliveries had ceased entirely after 23 January 2020 and were not resumed despite the extended delivery period. In light of Holsten’s continuing breach of the Addendum, I find that CSR was entitled to terminate the agreement. The termination was lawful and justified.

Holsten asserts that CSR “refused to accept” the sugar. I find that contemporaneous evidence as submitted by CSR did not support this allegation. The documents exhibited by Holsten show a proposal to refund the unutilized deposit to CSR. I am of the view that these documents support Holsten’s intention of not proceeding to deliver the sugar to CSR.

Holsten relies on the contractual forfeiture clause and section 75 of the Contracts Act 1950 (CA) and submits that, upon CSR’s breach, it was entitled to retain the deposit as compensation.

CSR submits that forfeiture is not automatic and that Holsten must show that the sum retained represents reasonable compensation.

In relation to forfeiture and section 75 of the CA, both parties referred to the Federal Court decision in Cubic Electronics

Sdn Bhd v Mars Telecommunications Sdn Bhd [2019] 2 CLJ In that case, the Federal Court clarified the approach to forfeiture clauses and the application of section 75. The Court held, among other things, that a clause providing for forfeiture does not operate automatically; the party seeking to rely on such a clause must first establish breach, and the Court retains supervisory jurisdiction to ensure that the sum retained represents reasonable compensation and does not operate as a penalty.

Applying the principles set out in Cubic Electronics, forfeiture does not operate automatically. The party seeking to rely on such clause must first establish breach and demonstrate that the sum retained represents reasonable compensation.

For the reasons already stated, I have not found that CSR committed a repudiatory breach. In the absence of a breach on the part of CSR, the question of reasonable compensation under section 75 does not arise in Holsten’s favour.

Further, in view of Holsten’s own breach of the delivery schedule, the forfeiture of the substantial deposit would not constitute reasonable compensation but would constitute a penalty.

I therefore reject Holsten’s submission that it was entitled to forfeit the deposit.

Holsten’s counterclaim before the Court is for the following relief: a) Loss of profit of RM2,248,950.00; b) Transport cost, expenses, customs charges and others totalling RM12,852.00; c) Increase in purchase price of RM 56,361.53; d) General damages to be assessed; and e) A declaration that the debit notes dated 11/2/2020and 3/3/2020 and the late interest of RM 713,581.24 are not valid and cancelled.

Holsten submits that it had entered into arrangements with third-party suppliers, including Ariki Seafood, Halza, DSAK Trading and Mitr Phol Sugar Corporation, and that it suffered losses because it was left with excess sugar when CSR did not proceed as alleged.

CSR submits that it is not privy to Holsten’s third-party arrangements, that any procurement in excess of contractual requirements was done at Holsten’s own risk, and that CSR’s conduct did not cause any alleged inability to sell excess sugar.

Upon perusing the documents and submissions, I find that the evidence shows that Holsten procured quantities of sugar beyond what was contractually required for delivery to CSR (68,500 MT), with the intention of selling to other customers. Holsten’s obligation to CSR was for refined sugar. Its reliance on coarse sugar procured from Ariki, described as “similar,” does not alter its contractual obligation. I also find that the quantities of sugar ordered by Holsten were disproportionate to the 5,000 MT required for CSR. Therefore, Holsten failed to prove that it had purchased the sugar (from the other suppliers) specifically for delivery to CSR.

The immediate cause of any alleged loss was Holsten’s own decision to cease delivery under the Addendum. That decision was not shown to have been compelled by any repudiatory breach on the part of CSR. In fact, CSR had consistently demonstrated its willingness to accept Holsten to continue the deliveries. Therefore, I find that Holsten failed to prove causation or to link CSR directly to the losses they allegedly suffered (see Lim Tze Sian v Coverright Surface Malaysia Sdn Bhd [2017] 1 MLJ 418).

Hence, I find that any losses alleged by Holsten arose from its own commercial decisions and were not caused by any breach on the part of CSR. In any event, Holsten has not produced sufficient documentary evidence to establish causation and quantum.

The counterclaim is therefore dismissed.

For the reasons set out above, I find, on the balance of probabilities, that Contract B dated 15 October 2019 continued to govern the parties’ relationship, as varied by the Addendum dated 6 January 2020. The Addendum revised the quantity and delivery schedule but did not revoke Contract B.

I further find that Holsten failed to deliver sugar in accordance with the agreed delivery schedule under the Addendum. The cessation of delivery after 23 January 2020 constituted a serious and continuing breach of contract.

Even assuming that there was a technical failure by CSR to make a separate payment of RM164,000.00 upon delivery on 23 January 2020, I find that such conduct was not repudiatory in nature and did not entitle Holsten to cease performance. Holsten was therefore not justified in stopping further deliveries.

In light of Holsten’s continuing breach, CSR was entitled to terminate the agreement by notice dated 2 June 2020.

Holsten has not established any basis under the contractual terms or section 75 of the CA to forfeit the deposit. Applying the principles in Cubic Electronics, forfeiture in the present circumstances would not amount to reasonable compensation.

Holsten has also failed to prove its counterclaim. Any alleged losses were not shown to have been caused by any breach on the part of CSR and, in any event, were not proved by satisfactory evidence.

Accordingly, Holsten’s counterclaim is dismissed and CSR's claim is allowed as prayed in the Statement of Claim, prayer i, ii and iii : “i. Judgment in the sum of RM1,783,500.00 (the “Total Outstanding Sum”) or such sum as ordered by this Honourable Court shall be paid by the Defendant to the Plaintiff; ii. Late delivery interest at the rate of 10% per month on the amount of the Plaintiff’s deposit retained by the Defendant equal to the quantity of supply of Goods, as described in the Statement of Claim, which should be delivered by the Defendant to the Plaintiff from 01-01-2020 to 02-06-2020 in the sum of RM713,581.24; iii. Interest at the rate of 5% per annum on all such sums adjudged to be paid by the Defendant to the Plaintiff from the date of filing of the Writ until full and final payment by the Defendant of the sums adjudged to be paid by this Honourable Court, or interest at a rate and for such period as this Honourable Court deems fit;”

Costs of RM80,000.00 are awarded to CSR, subject to the allocator. Dated this: 3rd March 2026 ~signed~ (NOOR HAYATI BINTI HAJI MAT) JUDGE HIGH COURT OF MALAYA SHAH ALAM, SELANGOR For the Plaintiff : Suaran Singh Sidhu together with Lucy Lee Zhe Hui and Cheryl Chung Ke Han Messrs Law Partnership For the Defendant : C. Sivasankar Messrs R. Kengadharan & Co.