Bank Pembangunan Malaysia Berhad v Efogen Marine Sdn Bhd (WA-27NCC-3-01/2025)

The Plaintiff (“Bank”) filed a notice of application dated 5.6.2025 in Enclosure 12 for summary judgment against the Defendants. Enclosure 12 is made under Order 14 of the Rules of Court 2012. By Enclosure 12, the Bank seeks summary judgment on its pleaded claim in this action against the 1st Defendant (“Borrower”), its borrower under a term loan facility and the 2nd Defendant (“Guarantor”), the guarantor on the ground that the Defendants have no defence on the merits.

The Bank further filed a notice of application dated 5.6.2025 in Enclosure 14 to strike out the Borrower’s counterclaim on the ground that it is obviously unsustainable. Enclosure 14 is made under Order 18 rule 19 (1) (a), (b), (c) and (d) of the Rules of Court 2012.

On 15.12.2025, I allowed Enclosure 12 and entered summary judgment against the Defendants. I was satisfied that the Defendants do not have a valid defence against the Bank’s claim, let alone any triable issue. Further, I allowed Enclosure 14 and struck out the Borrower’s counterclaim. I was satisfied that the Borrower’s counterclaim is obviously unsustainable. Here are the grounds of my decision. Background facts The facility and securities

4.

As part of the security arrangement of the facility, the Borrower provided the following :

a second preferred statutory mortgage over the Vessel duly registered at the Registrar of Ships Malaysia at Port Klang on 16.9.2009 and the Suruhanjaya Syarikat Malaysia on 14.10.2009;

a debenture over all of the Borrower’s fixed and floating assets;

a third party deed of assignment of collection account held at AmBank Malaysia Bhd dated 8.9.2009, referred to as the ‘sinking fund’; and

a guarantee and indemnity agreement by the 2nd Defendant and one Johany bin Jaafar dated 15.9.2009 (“Guarantee Agreement”). Johany bin Jaafar is a director of the Borrower who has since been adjudged a bankrupt on 30.9.2021. The Defendants’ indebtedness under the facility

The Borrower defaulted in making repayments under the Facility Agreement. Accordingly, the Bank recalled and terminated the Facility Agreement. The Bank demanded from the Borrower the total balance outstanding under the Facility Agreement of RM 17,176,891.65 as at 11.5.2021 by a notice dated 31.5.2021. The Bank also demanded from the Guarantors for payment of the outstanding sum pursuant to their obligations under the Guarantee Agreement by a notice of demand dated 26.4.2021. However, both the Borrower and the Guarantor failed to settle the outstanding sum.

7.

The Vessel was sold for the sum of RM 4 million. The balance proceeds from the sale of the Vessel in the sum of RM 1,375,433.54 (after deduction of the R&M remuneration and expenses of RM 2,624,566.46) was applied towards settlement of the facility.

According to the Bank, the R&M discharged their duties diligently and in good faith. The conduct of the tender process for the sale of the Vessel was thorough and transparent, consistent with their fiduciary obligations. On 21.8.2024, after completing the sale of the Vessel, the R&M discharged themselves.

After realisation of the Vessel, there was a shortfall in the sum of RM 15,706,622.26 as at 25.11.2024. A certified statement of account was issued by the Bank on 27.11.2024 in accordance with clause 11.3 of the Facility Agreement and signed by the Bank’s authorised officer showing the indebtedness of the Defendants. In the absence of manifest error, the statement of account constitutes conclusive evidence of the sums payable by the Defendants under the facility.

Therefore, the Defendants, jointly and severally, are indebted to the Bank in the sum of RM 15,706,622.26 as at 25.11.2024 being the total balance due under the facility. The law on summary judgment

Summary judgment under Order 14 of the Rules of Court 2012 may be granted where the issue is unarguable or not triable. Especially where the issue raised is solely a question of law or where the facts are clear and undisputed.

The Supreme Court in Bank Negara Malaysia v Mohd Ismail & Ors [1992] 1 CLJ (Rep) 14 at 19 - 20; [1992] 1 MLJ 400 at 408 held : “Under an O 14 application, the duty of a judge does not end as soon as a fact is asserted by one party, and denied or disputed by the other in an affidavit. Where such assertion, denial or dispute is equivocal, or lacking in precision or is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable in itself, then the judge has a duty to reject such assertion or denial, thereby rendering the issue not triable. In our opinion, unless this principle is adhered to, a judge is in no position to exercise his discretion judicially in an O 14 application. Thus, apart from identifying the issues of fact or law, the court must go one step further and determine whether they are triable. This principle is sometimes expressed by the statement that a complete defence need not be shown. The defence set up need only show that there is a triable issue. Where the issue raised is solely a question of law without reference to any facts or where the facts are clear and undisputed, the court should exercise its duty under O 14. If the legal point is understood and the court is satisfied that it is unarguable, the court is not prevented from granting summary judgment merely because ‘the question of law is at first blush of some complexity and therefore takes a little longer to understand’.”

Not all issues raised are capable of being a triable issue. The Federal Court in Voo Min En & Ors v Leong Chung Fatt [1982] 2 MLJ 241 at 243 held : “That being the case, it is not enough for the respondent in answer to the appellants’ application to sign final judgment, to raise an issue, or any issue. He must, however, raise such issue as would require a trial in order to determine it. In other words, the issue raised must be an arguable issue. But where the issue raised is irrelevant and ineffective, or to use the words of Lord Greene, M.R. in Cow v Casey [1949] 1 KB 474, 481 “when the point is understood and the court is satisfied that it is really unarguable”, the appellants should be entitled to what they prayed for in the summon - in - chambers.”

Summary judgment should be granted in a case that ought not to go for trial. Especially one that involves construction of unsubstantial documents. And where no further facts could emerge which would throw any light upon the matter.

The Federal Court in Fadzil Mohamed Noor v Universiti Teknologi Malaysia [1981] CLJ (Rep) 53 at 59 held : “In Esso Standard Malaysia Bhd v Southern Cross Airways (M) Bhd [1971] 1 MLJ 168, I pointed out that in an O. 14 case, where it turned on the construction of few documents, and the Court was only concerned with what, in its judgment, was true construction, there could be no reason to go formally to trial where no further facts could emerge which would throw any light on the documents that had to be construed. We think we can safely apply that principle to the present case.”

In respect of the burden of proof, the onus is on the defendant to show that there are triable issues. The Federal Court in Cempaka Finance Bhd v Ho Lai Ying (trading as KH Trading) & Anor [2006] 3 CLJ 544 at 551; [2006] 2 MLJ 685 held : “[5] … In an application under O. 14, the burden is on the plaintiff to establish the following conditions: that the defendant must have entered appearance; that the statement of claim must have been served on the defendant; that the affidavit in support must comply with r. 2 of O. 14 in that it must verify the facts on which the claim is based and must state the deponent’s belief that there is no defence to the claim. … Once those conditions are fulfilled, the burden then shifts to the defendant to raise triable issues.”

Bearing the above principles in mind, I consider the issues raised by the Defendants to be unarguable or not triable. I reject the bare assertions of the Defendants, which I find to be ineffective and inconsistent with the contemporaneous documents. I am satisfied that this suit is a case that ought not to go to trial. Here is my explanation.

The Defendants raise a list of issues which they contend must be decided by trial. However, I find that these issues do not raise any serious dispute of fact that cannot be decided on undisputed contemporary evidence or that calls for further investigation or viva voce evidence. The Bank’s claim is a straightforward claim for monies due under a term loan facility. Any challenge or issue can readily be resolved on the evidence and on well - settled principles of law.

In particular, l reject the allegation of improper conduct on the part of the Bank in utilising the insurance proceeds to reduce the Borrower’s indebtedness under the facility instead of repairing the Vessel, which purportedly led to a drastically undervalued sale. First, the Defendants are wrong on the law. Second, there is not an iota of fact or evidence that supports this allegation of wrongdoing. This is a vexatious allegation without any foundation. I will address each of the Defendants’ “triable issues” in turn. Alleged unlawful debit of the insurance proceeds

The Defendants’ entire case on the unlawful debit of the insurance proceeds fails the threshold of triable issue. The Defendants argue on a wrong premise concerning the nature of insurance proceeds, the rights of a mortgagee, the effect of “repair-based” insurance valuation, and the applicability of trust principles. The Defendants confuse valuation with application

The Defendants’ argument is premised on a flawed proposition that because the insurer assessed and paid the claim on a “unrepaired damage” basis, the proceeds became “strictly for repairs” and not a general indemnity. This proposition is wrong in law.

In marine insurance, a “repair claim” versus “unrepaired damage” governs how the loss is quantified, and not how insurance proceeds must be applied once paid. There is no contractual agreement between the parties via the hull and machinery policy provisions that creates a trust or restricts the Bank’s mortgagee rights. Or fetters the Bank’s contractual entitlement under the Facility Agreement and the deed of assignment to use the insurance proceeds for Vessel repairs only.

In fact, the opposite is true. The Borrower has expressly agreed in clause 12.5 of the Facility Agreement (reproduced below) that the Bank has the discretion to use the insurance proceeds for the repairs (make good the loss or damage in respect of which the moneys are received) or to reduce the Borrower’s indebtedness under the facility (towards discharge of any money secured hereby). The Bank chose the latter and applied the proceeds in accordance with clause 12.5

of the Facility Agreement. “12.5 Application of insurance moneys

BPMB may at its discretion require all moneys received on any insurance policies taken as aforesaid, whether effected by BPMB or by the Borrower, to be applied in or towards making good the loss or damage in respect of which the moneys is received or at the option of BPMB in or towards the discharge of any money secured hereby and the Borrower shall hold moneys so received on such insurance in trust for BPMB and BPMB may receive and give a good discharge of all such moneys.

Pending the receipt of any moneys by BPMB from the insurance company, the Borrower shall continue paying to BPMB whatever moneys due and payable herein.

IF BPMB chooses to apply the moneys received under any insurance policies to make good the loss or damage in respect of which the moneys is received, the Borrower shall, in addition to continuing to pay whatever moneys due or payable herein, bear the difference between the cost of making good such loss or damage and the moneys received from the insurance company.

If BPMB chooses to utilise the moneys received under any insurance policies to discharge all moneys hereby secured and the moneys received is less than the amount due to BPMB hereunder including interest and all moneys and other charges due and payable by the Borrower to BPMB hereunder, the Borrower shall pay BPMB the difference between the amount due and the amount so received within 14 days from the date of demand by BPMB and until such payment will also pay interest on such difference at the Prescribed Rate together with additional interest at the Late Payment Interest Rate or such other rate as BPMB may impose from time to time at its absolute discretion calculated in the manner then applicable to the moneys hereby or intended to be hereby secured.”

Under clause 6.1 of the deed of assignment of insurance policies dated 15.9.2009 (reproduced below), the Borrower expressly agreed that it will pay the insurance proceeds to the Bank. Under clause 6.2 of the said deed of assignment (reproduced below), the Bank as the assignee of the insurance proceeds may apply them in the manner provided in the Facility Agreement. “6. Dealing with insurance moneys

6.1 Payment to Assignee The Assignor shall pay all moneys hereby assigned or arising from or in connection with any of the benefits, rights, title and interest of the Assignor under the Insurance Policies, and shall procure that all such moneys be paid, to the Assignee as the Assignee may from time to time direct.

6.2 Application of insurance moneys The proceeds of any Insurance Policies assigned hereunder shall be held by the Assignee and be applied in the manner provided in the Facility Agreement.”

The Borrower also expressly agreed in clause 4.2 of the said deed of assignment that the Bank is not obliged to perform any of the Borrower’s obligations under the insurances. “4.2 Assignee not obligated Nothing in this Assignment shall be construed as requiring the Assignee to perform any of the obligations of the Assignor under the Insurance Policies and it is understood and agreed that the Assignee shall have and be under no obligations or liabilities under the Insurance Policies by reason of or arising out of this Assignment.”

The Borrower is bound by these provisions that it voluntarily agreed with the Bank and cannot argue otherwise now. No Quistclose trust

The Defendants misunderstand Quistclose trust principles and wrongly use them to argue that the Bank is holding the insurance proceeds on trust for the Borrower.

In Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567, the UK House of Lords established the principle that when money is advanced for an expressly limited purpose, paid into a segregated account and accompanied by clear instructions, it gave rise to a primary trust to carry out that purpose and a resulting trust in favour of the lender if the purpose failed. The lender therefore held a proprietary interest preventing the funds from forming part of the company’s general assets.

Briefly, the facts of the aforementioned case are these. Rolls Razor Ltd declared a final dividend of 120 %, but lacked the funds to pay it, prompting Quistclose Investments Ltd to lend £ 209,719 to the company exclusively for that purpose. The funds were deposited into a separate account at Barclays Bank, with explicit instructions that they were to be used only for the dividend. When Rolls Razor Ltd went into voluntary liquidation before the dividend was paid, the bank set off the funds against the company’s overdraft.

The House of Lords held that the loan created a primary trust to pay the dividend and a secondary or resulting trust in favour of Quistclose Investments Ltd if the dividend could not be paid. The bank had notice of the trust through the covering letter and prior communications, making it liable for applying the funds contrary to the trust. The case confirmed that a trust can coexist with a contractual obligation and emphasised equity’s role in protecting the lender’s interest, preventing the funds from becoming part of the company’s general assets.

By contrast, none of the essential elements of a Quistclose trust arise in the present case. The funds here were not segregated, not advanced for a single defined purpose, and not subject to any express or implied trust or fiduciary restriction.

Importantly, the Bank did not receive the insurance proceeds as a trustee pursuant to any restrictions. Neither did the insurers advance money to the Bank to be used for a specific purpose i.e. Vessel repairs. The subject - matter funds here are insurance proceeds paid by the insurers on a claim made on “unrepaired” basis under the hull and machinery policy to the Bank as mortgagee. There is no specific restriction in the policy on the Bank’s use of the insurance proceeds for Vessel repairs.

Accordingly, no proprietary trust interest can arise. Any recovery must proceed under the parties’ contractual or statutory rights, not the equitable principles applied in Quistclose. This means that the Bank is entitled to utilise the insurance proceeds in accordance with its rights under the security documents, which it did.

Likewise, Twinsectra Ltd v Yardley and others [2002] UKHL 12 does not apply to our case. In that case, the House of Lords found a Quistclose trust because the borrower had given a clear and enforceable undertaking that the loaned funds would be used solely for a defined purpose. Thereby allowing the lender to retain the beneficial interest until that purpose was fulfilled and raising additional issues of dishonest assistance by a third party solicitor.

Briefly, the facts of the aforesaid case are these. Twinsectra Ltd lent £ 1 million to Mr Sims on the condition that it would be used solely to advance a loan to Mr Yardley for the purchase of property. Despite this undertaking, Mr Sims passed the money to Mr Yardley’s solicitor, Mr Leach, who then allowed Mr Yardley to use £ 357,720.11 for personal debts.

None of those features exists in the present case. There was no undertaking restricting the insurers’ use of funds, no segregation or earmarking for a specific purpose, and no allegation that any third party facilitated a breach of trust. The insurance proceeds here were paid and received as part of an ordinary commercial arrangement, giving rise only to contractual or statutory rights, not any proprietary interest or fiduciary obligations. They were paid in accordance with the Borrower’s express agreement under the security documents. Accordingly, the equitable doctrines underpinning Quistclose trusts and accessory liability in Twinsectra are inapplicable to the facts of this case.

The case of Western Trading Ltd v Great Lakes Reinsurance (UK) SE (formerly Great Lakes Reinsurance (UK) plc) [2016] EWCA Civ 1003 does not assist the Defendants either. That case concerns an insured claiming reinstatement costs without intention to reinstate. It is not the authority for the proposition that the utilisation of insurance proceeds must be for the very purpose for which the insurance was invoked. It also does not hold that a mortgagee receiving insurance proceeds is bound to apply them to repairs. It does not create a general “purpose principle” binding third party mortgagees.

Consequently, the Quistclose trust argument is legally irrelevant and unsupported by the hull and machinery policy wording. The Defendants’ reliance on the English cases of Quistclose, Twinsectra and Great Lakes to argue that a Quistclose trust arises over the insurance proceeds is misplaced. General Accident case misapplied and distinguishable

The Defendants incorrectly use the case of General Accident Fire & Life Assurance Corp v Midland Bank Ltd [1940] 3 ALL ER 252 to argue that Bank has no claim to the insurance proceeds because it suffered no loss. In that case, the court dealt with a composite insurance policy covering several parties with distinct and unrelated interests, holding that each insured was entitled only to indemnity for its own loss and that parties who merely endorsed or handled the insurers’ cheques had no proprietary claim to the proceeds. The case turned entirely on the structure of indemnity insurance and the position of parties who were effectively conduits, not beneficiaries.

None of those features arise here. Our case does not involve multiple insureds, apportionment of indemnity, or disputes about the effect of endorsements. There is no dispute that the Bank is the “mortgagee” endorsed on the hull and machinery policy cover note and the “assignee of the insurance proceeds” under the deed of assignment, which includes proceeds paid under the policy. The Bank is the sole beneficiary and entitled to receive the indemnity paid out under the policy. The Defendants’ argument fails. No policy clauses that the Bank should use the insurance proceeds for repair of the Vessel

The Defendants argue that the hull and machinery policy provisions show that the Bank has misappropriated the insurance proceeds. However, the Defendants are mistaken on the meaning of the ITC (Institute Time Clauses) Hulls 1 / 10 / 83 clauses. Clauses 10, 14 and 18 are applied out of context. To explain :

Clause 10 (Notice of Claim and Tenders) focuses on the administrative process following an accident or damage to the vessel. It primarily allows underwriters to control the repair process, ensuring costs are reasonable and repairs are necessary.

Clause 14 (New for Old) stipulates that insurance claims for partial losses or damage to the vessel are settled without any deduction for depreciation, meaning new parts are paid for in full when they replace old, damaged ones.

Clause 18 (Unrepaired Damage) spells out that the measure of indemnity for claims for unrepaired damage shall be the reasonable depreciation in the market value of the vessel at the time the insurance terminates, resulting from such unrepaired damage, but not exceeding the reasonable cost of repairs.

None of these clauses prescribe how the Bank ought to utilise the insurance proceeds. Nor do they restrict a mortgagee’s security rights under the policy or create any obligation enforceable against the Bank. Importantly clause 18 itself confirms that insurers may pay even where repairs are not carried out. This is fatal to the Defendants’ “strictly for repairs” contention. The Facility Agreement destroys the Defendants’ argument

As mentioned earlier, clause 12.5 of the Facility Agreement defeats the Defendants’ argument that by debiting the insurance proceeds, the Bank “pocketed trust funds meant for repairs”. On top of that, the Defendants’ attempt to confine this clause to “insurance premiums” and not “insurance proceeds” is linguistically wrong. It is contradicted by the very structure of the Facility Agreement. Undoubtedly, “Insurance policies taken as aforesaid” refers to the policies deposited as security, not to premiums.

Clause 13.23 (right to debit premiums) does not limit clause 12.5. The two clauses operate in different commercial contexts. If the Defendants’ interpretation were correct, the Bank would have no rights over insurance proceeds in a secured lending transaction - a proposition commercially absurd and legally unsustainable. “Legitimate Expectation” is legally irrelevant

The Defendants’ reliance on “legitimate expectation” is a red herring. There is no representation by the Bank, no reliance pleaded, no detriment shown, and no estoppel can arise against express contractual rights. Allowing an insurance claim to be processed does not waive security rights, restrict application of proceeds or give rise to fiduciary obligations. Alleged contradictions are legally immaterial

The Defendant makes much ado about “recovery” versus “payout flow”. That is beside the point. Whether the proceeds were applied as part of loan recovery or via insurance payout administration is immaterial.

The undisputed facts remain that the Bank is the named mortgagee under the hull and machinery policy, the proceeds were part of the security (under the deed of assignment), and the Bank was contractually entitled (under the Facility Agreement) to apply them to reduce the Borrower’s indebtedness. No triable issue arises from semantics. Insurers’ decision does not bind the Bank

The Defendants’ reliance on the insurers’ determination is misconceived. The insurers decide only liability and quantum vis - à - vis the insured. Insurers do not control downstream application of proceeds by a secured mortgagee. Insurers’ assessment cannot override the Facility Agreement or rewrite the deed of assignment or fetter the Bank’s enforcement rights.

In conclusion, even if the factual allegation of the Defendants is taken at its highest, the defence still discloses no sustainable defence and raises no triable issue. The Defendants’ arguments rest entirely on misapplied English trust jurisprudence and a poor understanding of the contractual terms. On the law and the facts, the debit of the insurance proceeds is expressly authorised by contract and consistent with settled mortgagee principles. The Defendants’ argument is incapable of defeating summary judgment. Alleged neglected maintenance

The Defendants argue that once the Bank had taken possession of the Vessel, they are accountable for its upkeep, which the Bank failed to do. They use the Canadian decision of Sterne v Victoria & Grey Trust Co. 49 O.R. (2d) 6 to argue that the Bank as mortgagee has a duty akin to a “prudent man” to manage and preserve the secured asset properly. This argument is flawed on the law and the facts. The Bank has no duty in law to maintain and upkeep the Vessel for the Borrower

Firstly, the sale of the Vessel was not in exercise of its mortgagee rights under the mortgage but its rights as debenture holder under the debenture. It is not the Bank, but the R&M acting as agents for the Borrower who takes control of the Vessel.

At law, the duties of an R&M appointed under a debenture are limited and well - defined. An R&M’s primary function is to take control of the company’s assets and realise them for the benefit of the debenture holder, not to expend funds to upkeep or improve the assets. The recognised duties are:- (i) a duty to act in good faith, and (ii) a duty to take reasonable care to obtain the proper market price at the time of sale. Other duties sometimes discussed in case law, such as (iii) carrying on the company’s business, and (iv) duties toward unsecured creditors, are irrelevant here. None of these impose any obligation on an R&M to maintain, repair, reinstate, or preserve the asset during receivership.

Hence, the R&M owes no general duty of care to the company and is only bound to act in good faith. In situations where the R&M sells the property of the company, he is under a duty to take reasonable precautions to obtain the true market value of the property at the date on which he decides to sell it. When the property is sold, the relevant question is not whether the price obtained was reasonable but rather, whether the R&M had taken reasonable efforts to obtain the best possible price.

On unchallenged contemporary documentary evidence, the R&M discharged through documented, contemporaneous steps to secure the best obtainable price for the Vessel. There is no positive, contemporary document or expert / survey report that shows the Vessel’s condition had deteriorated during the receivership or that the Vessel was sold at undervaluation. On the contrary, the affidavit evidence is unrebutted that the R&M had taken reasonable efforts to obtain the best possible price for the Vessel under the condition that she was in and prevailing market interest.

Secondly, even if the Bank is regarded as a mortgagee in possession, there is no contractual obligation under the mortgage or under the law that the Bank becomes affirmatively responsible to repair, reinstate, or improve the secured asset.

A mortgagee in possession is not a trustee of the mortgagor’s business, is not obliged to improve the property, is not under a duty to deploy capital or insurance monies to repair, and is only obliged not to commit waste and not to wilfully or recklessly diminish value. Hence, there is no such alleged duty and more importantly, mere non - repair of the Vessel, (and that was based on the considered recommendation of the R&M) does not amount to a breach of that alleged duty.

Thirdly, the case of Sterne is misapplied. Sterne does not support the Defendants’ proposition. It concerns the duty of a mortgagee exercising a power of sale, and the obligation to obtain the best reasonably obtainable price at sale. It does not impose any duty to repair or reinstate or expend insurance proceeds or to operate the mortgagor’s business for profit.

That case concerned a mortgagee who had already exercised its power of sale and was therefore under a positive duty to take reasonable care to obtain the best price reasonably obtainable. The breach arose because the mortgagee relied on flawed appraisals, mis - marketed the property, and sold it at an undervalued price.

None of those circumstances exist in the present matter. No power of sale was exercised by the Bank. The Vessel was sold not by the Bank but by duly - appointed R&M acting under statutory and contractual mandates, in good faith, and at a price exceeding prevailing market value. There is no allegation, let alone evidence of mis - marketing, undervaluation, or improvident disposition. The Defendants’ reliance on Sterne is therefore misplaced and irrelevant to the issues here. The Bank has no duty in law to repair the Vessel

The Defendants conflate lack of repair with negligent maintenance. This conflation is fatal.

As explained earlier, there is no duty imposed by law or under the security documents on the Bank to repair the Vessel. The Bank’s decision not to repair, even where funds exist, is legally permissible. Especially where the repair costs may exceed commercial utility, market conditions are adverse, and further capital exposure is unjustified.

The R&M are appointed by the Bank pursuant to the debenture to realise its security. In exercise of their duty and obligations to the Bank, the R&M had to decide on the best option to obtain greatest recovery. Having considered the Vessel condition and prevailing circumstances, the R&M recommended on their professional opinion and that a higher sale price would be achieved by selling the Vessel without repair on an “as is where is” basis. There is no evidence of any waste or reckless damage or deterioration caused by the Bank’s decision not to repair. The Bank has no duty in law to apply the insurance proceeds to repair the Vessel

The Defendants’ “available funds” argument simply repeats the same legal error addressed under the “unlawful debit” issue. It bears reiterating that insurance proceeds do not impose a repair obligation, valuation on a repair basis does not equate to mandatory repair, and there is no clause in the hull and machinery policy or the Facility Agreement that obliges repairs. Once the insurance proceeds are part of the security, the Bank is entitled to apply them in accordance with its contractual rights.

In this connection, the Defendants’ reliance on the Great Lakes case is again misplaced. The reinstatement principles addressed in that case have no relevance to a mortgagee’s entitlement to insurance proceeds. The Great Lakes case concerned the proper measure of indemnity under an insurance policy where the insured had both a contractual obligation and a genuine intention to reinstate a damaged building, leading the English Court of Appeal to hold that reinstatement cost, not market value, was the correct basis of recovery. It does not hold that a mortgagee must repair or lose entitlement to insurance proceeds if it chooses not to.

None of those elements are present here. This case does not involve an insured seeking reinstatement costs, nor any contractual duty to rebuild or repair. Rather, the Bank receives the insurance proceeds in its capacity as mortgagee / assignee, entitled to apply them in reduction of the secured debt under the facility. The Bank has no obligation, whether contractual, statutory, or equitable, to reinstate the Vessel. Alleged “misrepresentation” is not pleaded and unsustainable

The allegation of misrepresentation is not pleaded with particulars, unsupported by any representation identified and inconsistent with the security documents.

There is no duty on a mortgagee to disclose future enforcement intentions, declare whether it will repair or object to an insurance claim. Silence does not amount to representation. Knowledge that a claim is being processed does not amount to a promise to repair or an estoppel or bad faith or actionable misrepresentation. Alleged loss of charter income is too remote

The Defendants’ claim for lost charter income, loss of use, economic loss, is untenable in law. The Bank owes no duty to run the Vessel as a profit - making enterprise for the Borrower. The alleged inability to charter arises from the mortgagor’s default and the Vessel’s pre - existing condition, not from any breach of duty by the Bank. Alleged diminished value

The Defendants’ entire diminished - value argument collapses at the threshold. Firstly, because the Bank is not a mortgagee exercising its power of sale. Secondly, the authorities they rely upon (i.e. Cuckmere Brick Co Ltd and another v Mutual Finance Ltd [1971] 1 Ch 949; [1971] 2 W.L.R. 1207 and Palk and another v Mortgage Services Funding plc [1993] Ch 330; [1993] 2 All ER 481) apply only when the mortgagee is exercising a power of sale. That is not the case here.

In Cuckmere Brick, the mortgagee and its agents were found negligent for failing to advertise the property’s full development potential, resulting in a likely undervalue sale. While in Sterne, the mortgagee failed to take reasonable care to obtain the true market value of the mortgagor’s property. In contrast, in the present case, the R&M were appointed to manage and sell the Vessel as the Defendants’ agents, they exercised their duties in good faith, conducted the sale properly, and achieved a sale price above market value. There was no omission or negligent mismanagement. And the Bank, as mortgagee, had no obligation to repair or operate the Vessel to enhance its value. Accordingly, the principles in Cuckmere Brick and Sterne regarding mortgagee negligence and undervalue sale are legally inapplicable here.

Palk concerned a mortgagor invoking the court’s equitable jurisdiction under section 91 (2) of the Law of Property Act 1925 to compel a sale against a mortgagee who sought to delay the sale for speculative reasons, causing the mortgagor’s debt to spiral due to accruing interest. The decision turned on protecting a mortgagor from manifest unfairness arising from the mortgagee’s refusal to sell and its attempt to gamble on future market recovery.

Our case is different. There is no question of a mortgagor seeking equitable relief, no dispute about timing of sale, and no allegation of the Bank acting oppressively or speculatively. The Vessel was already sold by duly appointed R&M, acting as the Defendants’ agents, at a price above market value, following a proper process. The Palk principles on the court’s discretionary power to order a sale to prevent worsening hardship have no application to a dispute about insurance proceeds after a completed sale, where neither unfairness nor delayed realisation arises.

The duty to take reasonable care to obtain true market value does not arise merely because a mortgagee is in possession or the asset is unrepaired or the mortgagee chooses when to enforce. The duty is triggered only at the point of sale, and in relation to the manner of sale, the timing of sale, and the marketing and conduct of sale. Here, there is no evidence that the sale of the Vessel was conducted improperly or that a sale achieved less than market value. Without an impugned sale, Cuckmere Brick and Palk have no application.

In any event, these cases do not assist the Defendants.

Cuckmere Brick stands for a narrow and settled proposition.

A mortgagee conducting a sale must take reasonable steps to obtain the true market value at the time of sale. It does not impose a duty to repair before sale, to invest additional capital, to improve the security or to maximise the mortgagor’s upside.

The Defendants’ attempt to extend a sale - conduct duty into a general maintenance obligation is legally indefensible.

(ii) Properly read, Palk is damaging to the Defendants’ case.

Palk confirms that a mortgagee may sit back and do nothing, is not obliged to realise its security, and may delay sale pending market conditions.

The “duty to be fair” described in Palk governs how rights are exercised, not whether enforcement must occur or whether repairs must be undertaken.

Palk recognises that the mortgagee’s interest has priority, the mortgagor’s interest is subordinate, and commercial self - interest is permitted.

The Defendants’ suggestion that Palk imposes a duty to repair or reinvest insurance proceeds is contradicted by the judgment itself.

Moreover, the insurance proceeds form part of the secured assets. Valuation of the insurance claim on a “unrepaired damage” basis does not amount to an obligation to repair. The Bank is entitled under the security documents to apply the proceeds towards debt reduction.

Finally, the allegation that the Bank sought “quick financial gain” is misconceived. It is unsupported by evidence. In any event, the Borrower itself has agreed under the security documents that the Bank is entitled to protect its own interest. That entitlement is at the core of secured lending. It is not disputed that the Borrower defaulted and committed breaches under the Facility Agreement and is indebted to the Bank for the amount claimed in this action. Alleged statutory breach

The Defendants’ statutory breach case fails at the threshold because neither the Financial Services Act 2013 nor BNM (Bank Negara Malaysia) policy documents confer a private right of action on borrowers. Regulatory standards do not apply

The Defendants’ reliance on the Financial Services Act 2013 and BNM guidelines is misconceived. These instruments regulate financial institutions vis - à - vis BNM. They and do not create private law duties or actionable rights against the Bank. BNM standards are prudential and supervisory, enforceable by BNM, not by private litigants as a sword to resist debt recovery.

Similarly, the Bank and the R&M owed no obligation to repair, preserve, or operate the Vessel for the Defendants’ benefit. Insurance proceeds were applied in accordance with the security documents. The R&M’s sale of the Vessel complied with contemporaneous broker valuations and market conditions. Allegations of undervalue, lost profits, or diminished charter income are speculative. Guidelines cannot rewrite contractual rights or common law duties

The Defendants’ reliance on BNM guidelines to override express contractual rights, manufacture repair obligations, or resurrect inapplicable trust theories is misconceived. Prudential guidelines govern internal risk management and regulatory compliance. They do not dictate how a mortgagee applies insurance proceeds, impose duties to repair collateral, or convert commercial discretion into fiduciary obligations.

Courts consistently recognise that “soft law” cannot subvert hard law. Guidelines may inform regulatory compliance, but cannot negate freely agreed security enforcement rights. A statutory or regulatory breach gives rise to a private law claim only if the duty is owed to a defined class and is intended to be actionable in damages. (See the High Court case of Tuan Hj Zulkifli bin Hj Hussain & Ors v IOI Corp Bhd & Ors [2011] 4 AMR 359; [2012] 4 CLJ 401; [2012] 7 MLJ 215, the UK House of Lords case of X (Minors) v Bedfordshire CC [1995]

Public law obligations or regulatory compliance do not create private law claims. (See the Supreme Court case of Petaling Tin Bhd v Lee Kian Chan & Ors [1994] 2 AMR 929; [1994] 2 CLJ 346; [1994] 1 MLJ 657, the High Court case of Aun Huat & Brothers Sdn Bhd & Ors v Sime Darby Bhd & Anor [2003] 4 AMR 208; [2003] 6 MLJ 49). Applying these principles here, the BNM guidelines cannot override the Bank’s contractual rights or impose duties on the R&M. “Preservation of collateral value” does not equate to duty to repair or reinvest

The Defendants wrongly equate the regulatory concept of “preservation of collateral value” with a duty to repair, restore, or deploy capital on the Vessel. This equivalence is legally and commercially false.

In regulatory parlance, preservation of value encompasses monitoring, classification, provisioning, enforcement strategy, and recovery planning. It does not require improving the asset, speculating on hypothetical future value, reinvesting insurance proceeds, or assuming operational risk.

Decisions such as placing the Vessel in cold lay - up, delaying its sale, or applying proceeds to debt reduction are purely commercial judgments. They cannot be construed as statutory breaches or a basis to resist summary judgment. Misapplication of BNM Standards 15.1 - 15.3 (problem credit)

The Defendants’ reliance on BNM Standards 15.1 - 15.3 is misplaced. These standards govern internal credit risk management. They are designed to ensure banks identify distressed exposures, adopt recovery strategies, and maintain independent oversight. They do not impose duties toward the borrower.

Recovery through enforcement, application of insurance proceeds, or reduction of exposure is entirely consistent with Standards 15.1 -

15.3. There is no requirement under these standards to repair the debtor’s asset, maximise hypothetical upside, or delay enforcement for speculative gains.

In the circumstances, the Defendants do not have a bona fide defence to the Bank’s claim. They have failed to demonstrate any genuine triable issue, or any other reason why the Bank’s claim should proceed to trial. The so-called “triable issues” are not legally or factually tenable. These issues are easily answered on uncontradicted affidavit evidence. None of the Defendants’ allegations (whether concerning the utilisation of the insurance proceeds, the valuation and sale of the Vessel, the conduct of the tender exercise, the payment of insurance premiums or the accuracy of the statement of account) amount to triable issues capable of defeating the Bank’s application for summary judgment.

The Defendants’ assertions are speculative. They are contradicted by contemporaneous documents, contractual terms, and their own conduct. The Defendants have not produced any credible fact which, if tested at trial, could displace the Bank’s contractual rights under the Facility Agreement or the certified statement of account. Their defence consists of bare denials and self - serving narratives that do not meet the threshold of a defence on the merits. As settled authorities make clear, fanciful allegations, conjecture, or matters engineered to delay repayment do not give rise to triable issues. The Bank’s claim is liquidated, contractually established, and undisputed on the material facts. The counterclaim is obviously unsustainable

Lastly, I will deal briefly with the Borrower’s counterclaim. The counterclaim, set out at paragraphs 21 to 31 of the defence and counterclaim, is an attempt to invert liability. The Borrower, the defaulting borrower under the term loan facility, seeks damages on the basis that the Bank’s realisation of its own security was not commercially optimal. The heads of claim of alleged differences in disposal value, marketing reach and sale costs, are unsubstantiated.

Paragraph 28 of the defence and counterclaim candidly concedes that the alleged “loss and damage” is “still being ascertained”, confirming that the counterclaim is speculative. The further claim in paragraph 30 for restitution of the insurance payout and sinking fund is untenable, amounting to a demand for sums to which the Bank is lawfully entitled under the security documents.

The allegations raised are not supported by any evidence. Instead, they are easily contradicted by undisputed, contemporary, documentary evidence. Based on the evaluation of available evidence, it is plain that the Borrower has no sustainable action against the Bank on the counterclaim. Furthermore, any assertion of fraud should be rejected. First, fraud is not pleaded in the defence and counterclaim. There is also no evidence of this from the affidavits. The assertions raised in the affidavits are clearly rebutted on the evidence. I consider that the counterclaim is just a ploy by the Defendants to distract from their straightforward indebtedness to the Bank under the security documents. Conclusion

In conclusion, this is a standard case of recovery action by a bank. The Bank demanded the Borrower and the Guarantor to settle the sums indebted to the Bank under the Facility Agreement and the Guarantee Agreement, but they failed to do so. As part of its recovery action, the Bank decided to enforce its rights under the debenture to sell the Vessel. The R&M was appointed, and a tender sale was conducted to attract bids for the Vessel at fair market value on “as is where is basis”.

There was no mismanagement or any unscrupulous activity by the R&M in carrying out the tender sale exercise or the Bank in the handling of the insurance claims and payment of the insurance proceeds. There was no fraud as suggested. All the Defendants have is a string of frivolous and vexatious allegations.

The Defendants have not raised any issue that is genuinely triable on the law and undisputed evidence. The Bank is entitled to summary judgment on their straightforward claim. The counterclaim, which is based on these untenable assertions, is obviously unsustainable.

I therefore allowed the Bank’s summary judgment application in Enclosure 12. I awarded interest on the judgment sum at the rate of 5 % per annum from the date of judgment until full settlement. I awarded costs of RM 10,000 to the Bank in respect of Enclosure 12.

I further allowed the Bank’s striking out application in Enclosure 14. I awarded costs of RM 10,000 to the Bank in respect of Enclosure 14. Dated 20 January 2026 Quay Chew Soon Judge High Court of Kuala Lumpur (Commercial Division NCC 2 & Admiralty 9) Counsels Jeremy Mark Joseph and Siti Deelora Nor Ahmad Rajkumar (Messrs. Joseph & Partners) for the Plaintiff James Au and Bailey Fernandez (Messrs. Au & Partners) for the Defendants Case reference 1. Bank Negara Malaysia v Mohd Ismail & Ors [1992] 1 CLJ (Rep) 14 2. Voo Min En & Ors v Leong Chung Fatt [1982] 2 MLJ 241 3. Fadzil Mohamed Noor v Universiti Teknologi Malaysia [1981] CLJ (Rep) 53 4. Cempaka Finance Bhd v Ho Lai Ying (trading as KH Trading) & Anor [2006] 3 CLJ 544 5. Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567 6. Twinsectra Ltd v Yardley and others [2002] UKHL 12 7. Western Trading Ltd v Great Lakes Reinsurance (UK) SE (formerly Great Lakes Reinsurance (UK) plc) [2016] EWCA Civ 1003 8. General Accident Fire & Life Assurance Corp v Midland Bank Ltd [1940] 3 ALL ER 252 9. Cuckmere Brick Co Ltd and another v Mutual Finance Ltd [1971] 1 Ch 949; [1971]

Palk and another v Mortgage Services Funding plc [1993] Ch 330; [1993] 2 All

ER 481 Tuan Hj Zulkifli bin Hj Hussain & Ors v IOI Corp Bhd & Ors [2011] 4 AMR 359; [2012] 4 CLJ 401; [2012] 7 MLJ 215

X (Minors) v Bedfordshire CC [1995] 3 WLR 152)

Petaling Tin Bhd v Lee Kian Chan & Ors [1994] 2 AMR 929; [1994] 2 CLJ 346; [1994] 1 MLJ 657

Aun Huat & Brothers Sdn Bhd & Ors v Sime Darby Bhd & Anor [2003] 4 AMR 208; [2003] 6 MLJ 49 Legislation reference 1. Order 14 and Order 18 rule 19 (1) (a), (b), (c) and (d) of the Rules of Court 2012 2. Section 91 (2) of the Law of Property Act 1925 3. Financial Services Act 2013