Kerry Logistics (M) Sdn Bhd v Pomelo Fashion Malaysia Sdn Bhd (WA-12ANCvC-211-12/2024)

This appeal is all about the interpretation of a Service Agreement made between the parties. The Appellant/Plaintiff filed a Notice of 26/08/2025 15:25:27 WA-12ANCvC-211-12/2024 Kand. 17 S/N VjuiLKgNeEaIpy2np8Vsw Application pursuant to Order 14A of the Rules of Court 2012 on 25th June 2024, raising 2 questions for determination. The learned Sessions Court judge answered those 2 questions and dismissed the Appellant’s claim with costs. Hence, this appeal was filed by the Appellant/Plaintiff.

After hearing submissions by learned counsel, I decided that this Court ought to dismiss the appeal as the learned Sessions Court judge had interpreted the clauses correctly. There is no appealable error.

The Appellant is in the business of providing, inter alia, warehouse services.

On 16th June 2023 the Appellant/Plaintiff and the Respondent/Defendant entered into a warehouse service agreement in which the Appellant as the service provider was to provide warehouse services as specified in Schedule III of the said agreement (“the Service Agreement”) to the Respondent.

Even though the Service Agreement was dated in June 2023, the contract term was stated to commence earlier, from 15th August 2022 to 31st December 2023 ("the Term").

On 29th July 2023, the Respondent/Defendant issued a Notice of Termination to terminate the Service Agreement. Reliance was S/N VjuiLKgNeEaIpy2np8Vsw placed on Clause 12.1 thereof, to be effective from 1st October 2023, i.e. by giving 60 days' notice.

The Appellant disputed the termination, taking the position that the said Clause 12.1 was inapplicable arguing that the Respondent could not terminate without cause under Clause 12.1. The Appellant’s Interpretation of Clause 12.1 8. The Appellant reads Clause 12.1 to be applicable only upon or subject to the occurrence of events stated under paragraphs (a) to

of Clause 12.1.

In other words, the Appellant contends that the Respondent does not have the right to unilaterally terminate the Service Agreement without cause by merely giving 60 days prior notice without the occurrence of any events as stipulated under Clause 12.1(a) to (d). Analysis of the Law and the Service Agreement 10. It is trite that if the words used in a contract are clear, the courts must give effect to the ordinary meaning of those words. This was reiterated by the Federal Court in SPM Membrane Switch Sdn Bhd v Kerajaan Negeri Selangor [2016] 1 MLJ 464.

And in cases of there being two competing interpretations, the court should apply a commercial sense approach. In Catajaya Sdn Bhd v Shoppoint Sdn Bhd & Ors [2021] 2 MLJ 374, Hasnah Hashim FCJ (as the Rt. Hon. Chief Judge of Malaya then was) held as follows: S/N VjuiLKgNeEaIpy2np8Vsw “[65] In interpreting a clause in an agreement it is pertinent to take into consideration the context of the agreement as a whole, to examine the relevant clauses in detail and to consider the relevant factual matrix to give guidance as to the true intent of the parties. When one has to choose between two rival interpretations, the one which made more commercial sense should be preferred if the natural meaning of the words were unclear. In this case the provisions of the SSA are clear and unambiguous. Lord Hodge in Wood v Capita Insurance Services Ltd [2017] UKSC 24 summarised the court’s task in the construction of the terms of a contract:

The court’s task is to ascertain the objective meaning of the language which the parties have chosen to express their agreement. It has long been accepted that this is not a literalist exercise focused solely on a parsing of the wording of the particular clause but that the court must consider the contract as a whole and, depending on [2021] 2 MLJ 374 at 398the nature, formality and quality of drafting of the contract, give more or less weight to elements of the wider context in reaching its view as to that objective meaning. In Prenn v Simmonds [1971] 1 WLR 1381 (1383H-1385D) and in Reardon Smith Line Ltd v S/N VjuiLKgNeEaIpy2np8Vsw Yngvar Hansen-Tangen [1976] 1 WLR 989 (997), Lord Wilberforce affirmed the potential relevance to the task of interpreting the parties’ contract of the factual background known to the parties at or before the date of the contract, excluding evidence of the prior negotiations. When in his celebrated judgment in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 Lord Hoffmann (pp 912–913) reformulated the principles of contractual interpretation, some saw his second principle, which allowed consideration of the whole relevant factual background available to the parties at the time of the contract, as signalling a break with the past. But Lord Bingham in an extra-judicial writing, A new thing under the sun? The interpretation of contracts and the ICS decision Edin LR Vol 12, 374- 390, persuasively demonstrated that the idea of the court putting itself in the shoes of the contracting parties had a long pedigree. [66] For the reasons adverted to above, we take the view that termination clause in an agreement ought to be construed strictly.”

Clause 12.1 of the Service Agreement is the disputed clause. It states:

In order to understand and interpret the said Clause 12.1, it is necessary to look at the “Events of Default” stated in the Service Agreement as well as at Clause 17. Screenshots of the Events of Default in Clause 13 and of Clause 17 are pasted below for reference:

The first “Event of Default” defined in Clause 13(a) is if the customer, i.e. the Respondent in this case, fails in paying any sum payable under the Service Agreement. A “Remedy Period” of 14 working days is stated. What happens if the Respondent (customer) fails to remedy by paying the Appellant within the 14 days after receiving notice to pay? In such a situation, the Appellant would obviously be entitled to terminate the Service Agreement on the ground of a fundamental breach of contract by the Respondent S/N VjuiLKgNeEaIpy2np8Vsw customer. It would be absurd to argue that the Appellant would still need to give a further notice and to wait for 60 days to terminate the Service Agreement.

Likewise, none of the other events which are defined as “Event of Default” defined in Clause 13(b), (c), (d) and (e) of the Service Agreement would make sense if either party would still need to give 60 days notice, i.e. to wait for 60 days to terminate the Service Agreement. It would defy commercial sense as well as common sense if it were to be so construed. Clause 13(c) provides another good example of the absurdity if Clause 12.1 is to be construed as submitted by learned counsel for the Appellant as Clause 13(c) covers the situation where a winding-up order has been made against either party. In such situations, instant termination forthwith would obviously have been intended as it is fair and necessary – without having to give 60 days notice.

Clause 12.1(d) of the Service Agreement mentions Clause 17. Now, Clause 17 is all about having to comply with orders, directions and regulations received from the Government of Malaysia. In other words, it is about complying with the law – which must be complied with regardless of whether either party likes it or not. Neither party is at liberty to tell the Government of Malaysia to hold on for 60 days while notice is being given to the other party. That is why Clause 12.1 regards this as an exception to the requirement for the 60 days notice for termination. In other words, there is no S/N VjuiLKgNeEaIpy2np8Vsw need to give 60 days notice if it is to comply with orders, directions and regulations received from the Government of Malaysia.

The 60 days notice period under Clause 12.1 was required only when either party had wanted to terminate the Service Agreement as a matter of contractual rights, without having to give any reason for its decision.

In the circumstances, I conclude that by applying the common sense and the commercial sense approach as enunciated in Catajaya Sdn Bhd v Shoppoint (supra), Clause 12.1 should be read to mean that “This Agreement may be terminated by either Party by a sixty (60)-day prior written notice” without having to give any reason or excuse for termination.

As for the second phrase in the said Clause 12.1 “except specifically provided, as follows”, I find that it refers to those special events, including the Events of Default defined in Clause 13(a) to (e), when there would be no need to give 60 days notice to terminate. This is because those are events which would justify termination upon the expiry of a period of only 14 working days, for eg. failure to pay within 14 working days after receiving written notice to do so, or upon a winding-up order being made – which would render the wound-up party legally incompetent to continue to perform the Service Agreement. In such situations, surely the other party could not be still expected to issue a sixty (60)-day prior written notice.

With respect, any other interpretation of Clause 12.1, read with Clause 13 and Clause 17, will lead to absurdity and a breach of trite principles of construction of contract. I have no doubt that had the parties intended to make the Service Agreement terminable only in the event of Events of Default as defined in Clause 13, it could have been simply so drafted. Conclusion 21. The precise questions posed pursuant to Order 14A in the court below were as follows:

By reason of the terms and conditions of the Service Agreement, as analysed above, I agree with the learned Sessions Court judge’s S/N VjuiLKgNeEaIpy2np8Vsw S/N VjuiLKgNeEaIpy2np8Vsw Counsel for the Appellant: Chew Chun Wei SOLICITORS FOR THE APPELLANT: MESSRS HAN & PARTNERS Advocates & Solicitors 23-8, Menara Oval Damansara, No. 685, Jalan Damansara, 60000 KUALA LUMPUR. Counsel for the Respondent: Surendra Ananth A/L Anandaraju SOLICITORS FOR THE RESPONDENT: MESSRS SURENDRA ANANTH Advocates & Solicitors No.4, Dalaman Tunku, Bukit Tunku, 50480 KUALA LUMPUR. S/N VjuiLKgNeEaIpy2np8Vsw

SPM Membrane Switch Sdn Bhd v Kerajaan Negeri Selangor [2016] 1 MLJ 464.

Catajaya Sdn Bhd v Shoppoint Sdn Bhd & Ors [2021] 2 MLJ 374.

Order 14A of the Rules of Court 2012