Slag Cement (Southern) Sdn Bhd v Johor Port Berhad (JA-12BNCvC-3-01/2026)

This is an appeal by the Appellant against the whole decision of the Learned Sessions Court Judge (“the Learned Judge”) dated

19.1.2026, whereby the Respondent’s claim was allowed in the sum of RM913,924.26 together with interest at the rate of 5% per annum and costs of RM20,000.00.

Before the Sessions Court, the Respondent, as Plaintiff, claimed for the payment of surcharge imposed upon the Appellant, as Defendant, arising from the Appellant’s failure to achieve the Minimum Throughput Requirement (“MTR”) stipulated under the Principal Lease Agreement dated 5.8.1997.

It is not disputed that the Appellant failed to achieve the stipulated MTR for the years 2017 and 2018. The Appellant’s defence, however, was that such failure was attributable to the circumstances contemplated under Clause 7(4)(a) of the Principal Agreement, namely:

global or regional economic downturn;

changes in market demand; and/or

circumstances beyond the reasonable control of the Appellant.

The central issue in this appeal is whether the Learned Judge erred in the interpretation and application of Clause 7 of the Principal Agreement and whether the Learned Judge further erred in finding that the Appellant had failed to prove that its inability to achieve the MTR was caused by the exception circumstances provided under Clause 7(4)(a).

Having considered the Record of Appeal, the Grounds of Judgment of the Learned Judge, the written submissions of the parties and the authorities relied upon, this Court is of the considered view that the appeal is devoid of merit and ought to be dismissed.

The Respondent is the operator of Johor Port in Pasir Gudang. On 5.8.1997, the parties entered into a Principal Lease Agreement pursuant to which the Appellant was permitted to utilise approximately five acres of land belonging to the Respondent for the purpose of grinding slag and/or cement clinker and operating a cement terminal.

The Principal Agreement was subsequently supplemented by two further lease agreements dated 7.3.2002 and 8.10.2002, both of which remained subject to the terms and conditions of the Principal Agreement.

8.

Clause 7(4)(a), however, provides that the Appellant shall not be liable to pay surcharge if the failure to achieve the MTR was caused by:

global or regional economic downturn;

changes in market demand; or

other circumstances beyond the reasonable control of the Appellant, including force majeure.

It is common ground that the Appellant achieved only 123,603.98 metric tonnes in 2017 and 41,193.99 metric tonnes in 2018, both figures falling substantially below the contractual MTR of 300,000 metric tonnes per annum.

As a consequence of the shortfall, the Respondent issued an invoice dated 30.12.2020 claiming surcharge in the sum of RM913,924.26. The Appellant subsequently sought a complete exemption from the surcharge by relying on Clause 7(4)(a). The Respondent rejected the request. This disagreement ultimately culminated in the proceedings before the Sessions Court.

Following a full trial, the Learned Judge found that the Appellant had failed to establish that its failure to achieve the MTR was caused by the circumstances contemplated under Clause 7(4)(a). Accordingly, judgment was entered in favour of the Respondent.

Being dissatisfied with that decision, the Appellant filed the present appeal.

Having considered the Memorandum of Appeal, the written submissions of the parties and the Record of Appeal, this Court is of the view that the appeal may be determined through the following issues:

Whether the Learned Judge erred in the interpretation and application of Clauses 7(4)(a) and 7(4)(b) of the Principal

(ii) Whether the Appellant successfully proved that its failure to achieve the MTR was caused by the circumstances contemplated under Clause 7(4)(a);

(iii) Whether the Respondent Was Entitled to Recover the Surcharge of RM913,924.26 Under Clause 7 of the Principal Agreement; and PRINCIPLES GOVERNING APPELLATE INTERVENTION

Before considering the substantive issues raised in this appeal, it is necessary to restate the well-established principles governing appellate intervention in respect of findings of fact made by a trial court.

In Ng Hoo Kui & Anor v Wendy Tan Lee Peng, Administrator of the Estates of Tan Ewe Kwang, Deceased & Ors [2020] 6 MLRA 193, the Federal Court reiterated that an appellate court ought not to interfere with findings of fact made by a trial judge unless such findings are unsupported by evidence, contrary to the weight of evidence, unsustainable on the totality of the evidence, or tainted by an error of law.

The same principle was reaffirmed in See Leong Chye @ Sze Leong Chye & Anor v United Overseas Bank Bhd [2019] 1 MLJ 25, Lee Ing Chin @ Lee Teck Seng & Ors v Gan Yook Chin & Anor [2003] 1 MLRA 95 and Kee Boon Suan & Ors v Adventist Hospital & Clinical Services (M) & Ors [2018] 6 MLRA 110, where the courts emphasised that considerable S/N 9LmqmtTCdEWucq41jEVtSg deference must be accorded to findings made by a trial judge who had the advantage of seeing and hearing the witnesses testify.

Similarly, in Sekawan Guards Sdn Bhd v Thong Guan Sdn Bhd [1994] 4 MLJRH 89, the Supreme Court cautioned that the function of an appellate court is not to conduct a retrial or to substitute its own factual findings merely because it might have arrived at a different conclusion.

Guided by these principles, this Court now turns to the issues raised in the present appeal. ANALYSIS AND FINDINGS Issue (i) : Whether the Learned Judge Erred in the Interpretation and Application of Clauses 7(4)(a) and 7(4)(b) of the Principal Agreement 20. The Appellant's principal complaint is that the Learned Judge misconstrued Clause 7(4)(a) of the Principal Agreement by effectively imposing an additional requirement which was never contemplated by the parties.

According to the Appellant, Clause 7(4)(a) constitutes a contractual exception clause which operates whenever the circumstances specified therein exist, and that the clause does not require the Appellant to produce any particular category of documents as a precondition to invoking the exception.

The Appellant further contends that the Learned Judge placed undue emphasis on the absence of supporting documents and, in doing so, failed to give proper effect to the true meaning and operation of Clause 7(4)(a).

The Respondent, on the other hand, submits that the Learned Judge did not impose any additional requirement beyond those contemplated by the agreement itself.

Rather, the Respondent argues that the Learned Judge merely considered whether the Appellant had discharged the burden of establishing the factual basis necessary to bring itself within the ambit of the contractual exception provided under Clause 7(4)(a).

Having carefully examined the Grounds of Judgment as a whole, this Court is unable to agree with the Appellant’s contention. In this Court’s judgment, the Learned Judge never held that Clause 7(4)(a) imposed a mandatory documentary requirement. Nor did the Learned Judge read into the agreement words which were never agreed upon by the parties.

What the Learned Judge did was to examine the entirety of Clause 7 and determine whether the Appellant had proved the facts necessary to justify reliance upon the contractual exception.

In the view of this Court, there is a significant distinction between:

imposing an additional contractual condition not found in the agreement; and

requiring a party who seeks to rely on a contractual exception to prove that the facts of its case genuinely fall within that exception. The Learned Judge plainly did the latter and not the former.

Clause 7 must be read as a whole and not in isolation. Clause 7(1) creates the primary obligation on the Appellant to achieve an annual MTR of 300,000 metric tonnes. Clauses 7(2) and 7(3) provide the consequences of non-compliance, including liability to pay surcharge in respect of the shortfall. Clause 7(4)(a) merely provides an exception to that primary obligation. Accordingly, the existence of Clause 7(4)(a) does not automatically absolve the Appellant from liability for surcharge. Regarding reading Clause 7 as a whole, this aligns with the principle of "business common sense" in contractual interpretation as reaffirmed in Aideah Communication Sdn Bhd v The New Straits Times Press (Malaysia) Berhad [2024] 3 MLRA 861 (Court of Appeal). The Court must interpret the contract in a manner that accords with the commercial logic intended by the parties at the time of execution.

The Appellant must still establish that its failure to achieve the MTR was in fact caused by one or more of the circumstances contemplated by the clause. This Court is satisfied that this was precisely the approach adopted by the Learned Judge.

Such an approach is entirely consistent with the principles recognised in Microsoft Corporation v Conquest Computer Centre Sdn Bhd [2014] 6 CLJ 876, where the Court emphasised the importance of evaluating the entirety of the documentary and factual matrix before determining the rights and liabilities of the parties.

In the present case, the Learned Judge did not construe Clause 7(4)(a) in isolation. Instead, the Learned Judge examined the contractual mechanism created under Clause 7 in its entirety before concluding that the Appellant had failed to establish the applicability of the exception.

This Court also finds the observations of the Federal Court in Kee Boon Suan & Ors (supra) to be relevant. The Federal Court reiterated that an appellate court ought not to interfere with findings arrived at after a comprehensive evaluation of documents and evidence unless there exists a demonstrable error.

In the present appeal, this Court finds no such error. The Learned Judge did not misdirect himself in law nor construe Clause 7 in a manner inconsistent with the language chosen by the parties.

In reality, what the Appellant seeks is for this Court to substitute the Learned Judge’s interpretation and factual inferences with interpretations and inferences more favourable to the Appellant. With respect, that is not the function of an appellate court.

This Court is therefore satisfied that the Learned Judge correctly interpreted and applied Clauses 7(4)(a) and 7(4)(b) of the Principal Agreement. Accordingly, Issue (i) is answered in favour of the Respondent. Issue (ii): Whether the Appellant Successfully Proved that Its Failure to Achieve the MTR Was Caused by the Circumstances Contemplated under Clause 7(4)(a)

In the view of this Court, this constitutes the central issue in the present appeal. It is common ground that the Appellant failed to achieve the contractual MTR during both material years.

Indeed, the Appellant itself acknowledges that the throughput achieved in 2017 was only 123,603.98 metric tonnes, whilst the throughput achieved in 2018 was only 41,193.99 metric tonnes. Accordingly, the real question is not whether the MTR was achieved.

The true question is whether the Appellant successfully established that its failure to achieve the MTR was caused by:

global or regional economic downturn;

changes in market demand; or

circumstances beyond its reasonable control.

The burden of proving those matters is governed by sections 101,102 and 103 of the Evidence Act 1950. Section 101 provides that whoever desires a court to give judgment as to any legal right or liability dependent upon the existence of facts asserted by him must prove that those facts exist. Section 102 provides that the burden of proof lies upon the person who would fail if no evidence at all were given on either side. Section 103 further provides that the burden of proving any particular fact lies on the person who wishes the court to believe in its existence.

In Tan Kah Khiam v Liew Chin Chuan & Anor [2006] 2 MLRA 246, the Court reaffirmed the settled principle that the party making an assertion bears the burden of proving that assertion through sufficient and credible evidence.

In the present case, it is the Appellant who asserts that the failure to achieve the MTR was attributable to the circumstances set out in Clause 7(4)(a). Accordingly, the burden of proof rests squarely upon the Appellant.

The principal weakness in the Appellant’s case lies in its failure to establish a causal nexus between the circumstances relied upon and the failure to achieve the contractual throughput target. There is an important distinction between:

proving that an economic downturn or market change existed; and

proving that such downturn or market change actually caused the Appellant’s failure to achieve the MTR. This court refers t the case of Intan Payong Sdn Bhd v. Goh Saw Chan Sdn Bhd [2004] 5 MLRH 374. This case establishes that the burden of proving force majeure lies on the party asserting it, and they must prove that the event actually prevented the performance of the contract, rather than merely making it more difficult or expensive.

The distinction is crucial. Clause 7(4)(a) does not provide an exemption merely because an economic downturn exists. Rather, the clause requires proof that the failure to achieve the MTR resulted from such circumstances.

Accordingly, the Appellant was required to establish not merely the existence of the alleged circumstances, but also a clear causal nexus between those circumstances and the shortfall complained of. In the case of Smart Avenue Property Sdn Bhd v. BBCC Development Sdn Bhd [2025] 5 MLRH 1, this case encapsulates the modern principle that a party relying on S/N 9LmqmtTCdEWucq41jEVtSg force majeure or a contractual exception must prove a clear nexus (connection) between the event and the specific failure to perform the obligation. This means that the mere existence of an economic downturn is insufficient without proof of how it directly impeded the achievement of the MTR.

The Learned Judge found that although the Appellant alleged the existence of economic downturns and market changes, it failed to produce sufficient evidence demonstrating how those factors adversely affected its operations to the extent that the contractual throughput targets could not be achieved. This court referring to the principle established in the case of Universiti Teknologi Malaysia v. Maraya Sdn Bhd [2009] 8 MLRH 773, the Court held that a financial or economic crisis (such as the 1997/1998 crisis) is generally regarded as a "business risk" rather than a force majeure event that excuses liability, unless the contractual terms explicitly state otherwise. Therefore, by applying this principle to our case here, the Appellant remains liable for the commercial risks inherent in the lease. Having reviewed the Record of Appeal, this Court is satisfied that such finding was amply supported by the evidence.

The evidence relied upon by the Appellant was largely directed towards establishing the existence of economic conditions and market changes. However, the existence of those conditions does not automatically establish that they caused the Appellant’s failure to achieve the contractual throughput target. S/N 9LmqmtTCdEWucq41jEVtSg The Learned Judge correctly recognised this distinction. The Learned Judge further considered the Respondent’s request dated 17.8.2021 for supporting information and documentation substantiating the Appellant’s reliance upon Clause 7(4)(a).

The evidence reveals that despite being afforded the opportunity to substantiate its position, the Appellant failed to furnish sufficient supporting materials capable of demonstrating how the alleged economic conditions translated into the substantial throughput deficits recorded for 2017 and

In Microsoft Corporation v Conquest Computer Centre Sdn Bhd [2014] 6 CLJ 876, the Court recognised that the assessment of evidence necessarily includes consideration of evidential deficiencies and the absence of materials which one would reasonably expect to be produced.

In the present case, the operational records, customer data, throughput analyses and supporting commercial information necessary to establish the alleged causal relationship were matters peculiarly within the Appellant’s knowledge and control. Such evidence was not sufficiently produced. Referring to the principle in Tindok Besar Estate Sdn Bhd v. Tinjar Co [1979] 1 MLRA 81, which states that oral evidence which contradicts contemporary documents (or the absence of documents that ought to exist) must be scrutinised with great caution. The absence of operational records or customer data as mentioned in here is a critical evidential gap. The Learned S/N 9LmqmtTCdEWucq41jEVtSg Judge was therefore entitled to conclude that the Appellant had failed to discharge the burden imposed upon it by sections 101, 102 and 103 of the Evidence Act 1950. This Court finds no error in that conclusion. Accordingly, Issue (ii) is answered in favour of the Respondent. Issue (iii) : Whether the Respondent Was Entitled to Recover the Surcharge of RM913,924.26 Under Clause 7 of the Principal Agreement.

Having found that the Appellant failed to establish the applicability of Clause 7(4)(a), the next question is whether the Learned Judge was correct in concluding that the surcharge imposed by the Respondent was contractually due and payable.

In this regard, the Court must return to the contractual framework agreed upon by the parties. Clause 7(1) imposed upon the Appellant the obligation to achieve the stipulated MTR. Clauses 7(2) and 7(3) prescribe the contractual consequences of failing to achieve that obligation, including the imposition of surcharge upon the shortfall.

It is undisputed that the Appellant failed to achieve the contractual MTR for both 2017 and 2018. It is equally undisputed that the surcharge claimed by the Respondent was calculated pursuant to the contractual mechanism provided under Clause 7. The only basis upon which the Appellant sought to avoid liability was its reliance upon Clause 7(4)(a).

However, for the reasons already discussed under Issue (ii), this Court agrees with the Learned Judge that the Appellant failed to establish the factual foundation necessary to invoke that contractual exception. Once the contractual exception failed, the primary contractual obligation remained operative. The contractual consequence stipulated by the parties therefore followed.

In other words, liability to pay surcharge arose not because the Respondent exercised any discretion in its favour, but because the parties themselves had contractually agreed that surcharge would become payable upon a shortfall unless the circumstances under Clause 7(4)(a) were established. The Learned Judge therefore correctly gave effect to the bargain struck by the parties. This Court finds no basis to interfere with the Learned Judge’s conclusion that the surcharge in the sum of RM913,924.26 was contractually due and payable. Accordingly, Issue (iii) is answered in favour of the Respondent.

Having carefully considered the Record of Appeal, the Grounds of Judgment of the Learned Sessions Court Judge, the written submissions of the parties, the documentary evidence adduced at trial and the authorities relied upon by both parties, this Court finds that the appeal is devoid of merit.

This Court is satisfied that the Learned Judge correctly identified the real issue in dispute between the parties. Contrary to the Appellant's contention, the Learned Judge did not impose any additional contractual requirement which was not contemplated by the parties under the Principal Agreement.

Instead, the Learned Judge correctly recognised that while Clause 7(4)(a) provides an exception to liability for surcharge, the burden nevertheless remains upon the Appellant to establish that its failure to achieve the MTR was in fact caused by one or more of the circumstances contemplated under that clause.

This Court further finds that the Learned Judge properly applied sections 101, 102 and 103 of the Evidence Act 1950 in determining where the burden of proof lay.

Once it became common ground that the Appellant had failed to achieve the contractual MTR of 300,000 metric tonnes per annum, the evidential burden shifted squarely onto the Appellant to establish the applicability of Clause 7(4)(a). Having reviewed the evidence, this Court agrees with the Learned Judge that the Appellant failed to discharge that burden.

Although the Appellant sought to rely upon alleged economic downturns, changes in market demand and circumstances beyond its control, the Appellant failed to establish a sufficient causal nexus between those matters and its inability to achieve S/N 9LmqmtTCdEWucq41jEVtSg the contractual throughput target. The evidence adduced by the Appellant established, at most, the existence of certain economic and market conditions during the relevant period.

However, the evidence fell short of demonstrating that those conditions were the operative cause of the substantial throughput shortfall recorded in 2017 and 2018.

This Court also agrees with the Learned Judge that the absence of adequate supporting documentation and information was a relevant consideration in assessing whether the Appellant had discharged its burden of proof. The Learned Judge was entitled to conclude that the evidence as a whole was insufficient to bring the Appellant within the scope of the contractual exception contained in Clause 7(4)(a).

Consequently, the contractual mechanism governing surcharge remained operative and the Respondent was entitled to recover the surcharge imposed pursuant to Clause 7 of the Principal Agreement. Most importantly, this Court finds no basis upon which the findings and conclusions of the Learned Judge may properly be disturbed.

The findings made by the Learned Judge were supported by evidence, were consistent with the applicable legal principles and did not disclose any misdirection of law or error warranting appellate intervention.

Applying the principles laid down in Ng Hoo Kui & Anor v Wendy Tan Lee Peng, Administrator of the Estates of Tan Ewe Kwang, Deceased & Ors [2020] 12 MLJ 67, See Leong Chye @ Sze Leong Chye & Anor v United Overseas Bank Bhd [2019] 1 MLJ 25, Lee Ing Chin @ Lee Teck Seng & Ors v Gan Yook Chin & Anor [2003] 2 MLJ 97, Kee Boon Suan & Ors v Adventist Hospital & Clinical Services (M) & Ors [2018] 5 MLJ 321 and Sekawan Guards Sdn Bhd v Thong Guan Sdn Bhd [1995] 1 MLJ 811, this Court is satisfied that there exists no proper basis for appellate interference.

For all the foregoing reasons, this Court concludes that the appeal must fail.

Accordingly, the Court makes the following orders:

The Appellant's appeal is hereby dismissed.

The decision of the learned Sessions Court Judge dated 19 January 2026 is hereby affirmed in its entirety.

Costs of RM10,000.00 are awarded to the Respondent subject to allocatur. S/N 9LmqmtTCdEWucq41jEVtSg DATED :16TH JULY 2026 -SIGNED-MANIRA BINTI MOHD NOR JUDICIAL COMMISSIONER CIVIL 4 HIGH COURT JOHOR BAHRU For the Plaintiff Gopal Sinvasan together with Michelle Cheaw and Rishpal Singh Messrs Kenth Partnership Kuala Lumpur For the Defendants Nurul Ameerah Natasya binti Ismail Ridha Messrs Shaikh David & Co Kuala Lumpur S/N 9LmqmtTCdEWucq41jEVtSg