Schedule
Schedule 2 to the Facility Agreement, in paragraph A reads as follows: Disbursement / Utilization shall be made after but not limited to the following Conditions Precedent and the Additional Conditions Precedent having been met. The Conditions Precedent and the Additional Conditions Precedent must be completed within One (1) month from the execution of the Facility Agreement failing which EXIM Bank shall have the absolute right to terminate the Facility Agreement. [22] Furthermore, clause 6.2 of the Facility Agreement states as follows: In addition to the aforesaid, EXIM Bank's obligation to make available the Facility within the Availability Period shall be subject S/N 3sbbhdJO1UMnNnam4F0vg to the fulfilment prior to the Utilisation, of the conditions precedent and the additional conditions precedent as stipulated in Schedule 2 hereof (hereinafter referred to as “the Conditions Precedent''). Additionally, EXIM Bank's obligation to continue to make available the Facility shall also be subject to the Special Conditions also as stipulated in Schedule 2 hereof. [23] This clause 6.2 makes it clear beyond peradventure that the respondent’s obligation to make the Facility available within the Availability Period to the appellant borrower is subject to the latter having first fulfilled, among others, all conditions precedent stipulated in Schedule 2 to the Facility Agreement. Critically, the above parts of Schedule 2 stipulate that all conditions precedent (all of conditions precedent and additional conditions precedent) must be fulfilled within one month from the date of the execution of the Facility Agreement. [24] Next, clause 6.4 of the Facility Agreement permits the respondent to terminate the Facility at its discretion whilst the conditions precedent have yet to be satisfied by the appellant and that the respondent’s decision in this respect shall be final and conclusive. Clause 6.4 reads thus: Pending the fulfilment in manner satisfactory to EXIM Bank of the Conditions Precedent as stipulated, EXIM Bank may at its absolute discretion terminate the Facility or suspend the availability of any Utilisation or issuance pursuant to the Facility and the decision of EXIM Bank shall be final and conclusive and shall not be questioned on any account whatsoever. [25] As mentioned earlier, it cannot now be doubted that although it had satisfied several, the appellant had not fulfilled all of S/N 3sbbhdJO1UMnNnam4F0vg the conditions precedent as specified in the Facility Agreement, certainly not within the one month from the date of the execution of the Facility Agreement as contractually agreed by the parties. [26] This, in our view, is a correct finding of the High Court, based on clear evidence such as the appellant’s own appeal letter of 28 September 2018, and the testimony of two of its directors, PW4 and PW5. [27] This non-compliance, pure and simple, by the appellant with the provisions of clause 6 and Schedule 2 entitled the respondent to invoke its right to terminate the Facility. At the same time, as a corollary, given that a number of conditions precedent remained outstanding, the respondent’s obligation to make available or drawdown on the Facility under the Facility Agreement to the appellant was never triggered. This conclusion, we observe, follows contractual provisions typically found in loan documentation, and we venture to add, for all intents and purposes, standard banking practice. [28] As such, in the case of RHB Bank Bhd v Kwan Chew Holdings Sdn Bhd [2010] 1 CLJ 665 the Federal Court ruled that the appellant bank’s refusal to release the full financing sum to enable the respondent developer to complete a housing project resulting in losses to the respondent did not breach the financing agreement because the respondent borrower failed to comply with the stipulated condition precedent. The Federal Court stated the following: “[44] From our perusal of the evidence, we hold the view that the dispute over this matter was due to the reluctance of the appellant to release what was requested by the respondent unless they S/N 3sbbhdJO1UMnNnam4F0vg were strictly payments necessary for the completion of the Taman Dangi project up to the stage of a certificate of fitness for the houses built thereon. For this, the appellant demanded quotations on specific items to be spent. On the contrary, the respondent preferred a general disclosure on how this sum was to be expended in order to revive the project. They requested for an initial lump sum of RM20,000. Instead, the appellant only permitted a sum of RM2,000. The appellant's reason for this limit was the failure of the respondent to comply with the first condition set out in their letter of offer for this facility dated 17 July 1989 which reads: To furnish the Bank with a detail breakdown on cost for purchase of window louver, glass panes, labour cost and other touch up work that need to be done to ensure issuance of Certificate of Fitness from the relevant authorities (Please provide quotations). [45] It is not in dispute that the respondent did not comply with this. If this is the case then the appellant was not at fault for refusing to release the full amount. For this reason, we find no merit in this ground”. [29] Not only did the appellant fail to comply with all of the stated conditions precedent within the requisite one-month period from the date of the Facility Agreement, which justified the respondent terminating the Facility, as discussed above. As can be seen earlier, clause 6.2 of the Facility Agreement also states that the respondent is only obligated to make the Facility available to appellant within the “Availability Period” if the appellant has first fulfilled all of the conditions precedent. S/N 3sbbhdJO1UMnNnam4F0vg [30] The expression “Availability Period” is defined under clause 1.1 as “the period as specified under item 3(c) of Schedule 1 hereto”, and this item is defined as follows: Within a period of Twelve (12) months from the date of this Facility Agreement or such other date which shall be deemed to include any extension thereof made by EXIM Bank at its sole and absolute discretion, provided that the first Disbursement / Utilization shall be made within Three (3) months from the date of this Facility Agreement. Failure to make such Disbursement / Utilization shall entitle EXIM Bank to revoke / withdraw from granting the Facility. [31] We state that it is basic banking practice that the obligation of a lender to make any or each drawdown under the loan or credit facility must be subject to the satisfaction of conditions precedent formulated by the lender as being relevant to the borrower and the loan. These conditions precedent, as drafted into the agreement, are the sine qua non of the drawdown; and for some conditions precedent, for each subsequent drawdown. There is therefore no obligation on the part of the lender such as the respondent to make any drawdown of the Facility if the borrower like the appellant herein does not fulfil all of the conditions precedent as contractually agreed upon in the Facility Agreement. [32] There are in the case before us effectively two time periods governing the contractual right of the respondent bank to terminate the Facility vis-à-vis the issue of the appellant’s fulfilment of the conditions precedent. The first was that the respondent could terminate if all the conditions precedent were not met within one month from the date of S/N 3sbbhdJO1UMnNnam4F0vg the Facility Agreement. This, the appellant failed to meet fully, which led to the respondent exercising its right to cancel and terminate the Facility. [33] The second was that the respondent was also entitled to terminate the Facility if there was no disbursement or utilization of the Facility within the Availability Period which ended on 4 June 2018, which was 12 months from the date of the Facility Agreement. Again, since the appellant did not utilize the Facility within that period due to its failure to fulfil all of the conditions precedent, this also, separately, in pursuance of Clause 6.2, entitled the respondent to cancel the Facility at any time after the Availability Period ended, which the respondent in fact in our view lawfully did on 27 August 2018. [34] At the hearing, counsel for the appellant highlighted that since there was no drawdown of the Facility within the Availability Period, clause 2.2 should have applied and the Facility had therefore been automatically terminated instead. Clause 2.2 states as follows: 2.2 The Facility shall be available within the Availability Period as stipulated in Item 3(c) of Schedule 1 hereof. Any portion of the Facility not utilized upon the expiry of the Availability Period shall be automatically cancelled unless otherwise previously extended by EXIM Bank, and shall not be available for further Utilization by the Customer unless agreed to by EXIM Bank at its sole and absolute discretion and at the request of the Customer. [35] We however observe that the letter of termination issued by the respondent dated 27 August 2018 did not mention clause 2.2 but the above-stated Schedule 2 to the Facility Agreement, specifically on the failure of the appellant to comply with the requirement to fulfil S/N 3sbbhdJO1UMnNnam4F0vg all conditions precedent within the one-month period as the basis for its termination of the Facility given the non-compliance. We provide again the same, as follows: Disbursement / Utilization shall be made after but not limited to the following Conditions Precedent and the Additional Conditions Precedent having been met. The Conditions Precedent and the Additional Conditions Precedent must be completed within One (1) month from the execution of the Facility Agreement failing which EXIM Bank shall have the absolute right to terminate the Facility Agreement. [36] For completeness, it should also be stated that there is no evidence that the respondent had ever granted the appellant any extension for the disbursement or utilisation of the Facility, vis-à-vis the Availability Period of the Facility which ended on 4 June 2018, being 12 months from the date of the Facility Agreement. (C) Whether the respondent is estopped from relying on Clause 6 and Schedule 2 to the Facility Agreement to terminate after the lapse of the one month period [37] However, the crux of the appellant’s grievance in this appeal is that the respondent should be estopped from insisting on strict compliance with the said clause 6 and Schedule 2 because the appellant posited that the respondent had by its conduct represented to the appellant that notwithstanding the expiry of the one month period, the appellant could still pursue towards complying with the remaining conditions precedent. S/N 3sbbhdJO1UMnNnam4F0vg [38] The appellant submitted that the principle of estoppel by convention applied to the facts of the instant case. We agree with the submission that an estoppel by convention may arise where parties to a transaction act on an assumed state of facts or law, the assumption being either shared by them both or made by one and acquiesced in by the other. [39] Crucially, the effect of an estoppel by convention is to preclude a party from denying the assumed facts or law if it would be unjust to allow him to go back on the assumption (see K. Lokumal & Sons (London) Ltd. v. Lotte Shipping Co. Pte. Ltd. [1985] 2 Lloyd’s Rep. 28; Norwegian American Cruises A/S v. Paul Mundy Ltd. [1988] 2 Lloyd’s Rep. 343; Treitel, The Law of Contract, 9th ed. (1995), pp. 112-113). In other words, here, the appellant contended that the respondent had led the appellant to believe that the respondent would not insist on the strict compliance with clause 6 and Schedule 2 to the Facility Agreement. [40] Does this principle apply here? We do not think so. Neither does the similar principle of estoppel by conduct - where the party estopped has led the other party to believe in a certain fact - applies. [41] We do recognise, as correctly found by the High Court, that pursuant to the terms of the Facility Agreement, the appellant had proceeded to take steps and expended funds towards ensuring the fulfilment of the conditions precedent, which were its pre-disbursement obligations. [42] This included making payments of fees and deposits to the respondent, professional fees to the project lawyers and consultants, S/N 3sbbhdJO1UMnNnam4F0vg securing relevant approvals from authorities, preparing the required documents, furnishing information and documents to the respondent, evaluating suitable technology providers capable of meeting technical specifications, as well as negotiating the relevant construction contract. The appellant also claimed to have made a purchase of property which was charged to the respondent, in the sum of RM11,000,000.00. [43] Apart from such compliance with some of the conditions precedent which cost not an insubstantial sum of money, a number of the conditions precedent were in fact satisfied well after the expiry of the one month period following the execution of the Facility Agreement, which we repeat was on 5 July 2017. The charge over the property was registered in favour of the respondent much later on 27 March 2018. Another major condition fulfilled was the approval from the Department of Environment, which was obtained even later on 11 June 2018. [44] We therefore appreciate the contention of the appellant that by the respondent’s conduct of accepting partial or late compliance with conditions precedent, such as registering the land charge in March 2018 and accepting subsequent payments and documents from appellant after July 2017, the respondent should be estopped from insisting on enforcing its rights as it had arguably waived the original one month timeframe such that time was no longer of the essence of the contract. Hence, the termination without giving a new timeframe was premature and unlawful. [45] We do not find this contention convincing. It is misconceived. We say so in light of the terms of the Facility Agreement. [46] We should in that respect briefly emphasise at this juncture, that one of the key governing principles of interpretation of contracts is S/N 3sbbhdJO1UMnNnam4F0vg that evidence given by witnesses or submissions by counsel on the interpretation of contracts such as the instant Facility Agreement (and Charge Annexure) is by and large irrelevant if not entirely inconsequential. [47] This is because it is for the Court to interpret the same, it being a question of law, as made clear in authorities such as the decision of this Court in NVJ Menon v. The Great Eastern Life Assurance Company Ltd [2004] 3 CLJ 96. We state that the words employed concerning the respondent’s right under clause 6.4 of the Facility Agreement to terminate the Facility Agreement are clear, unequivocal and unmistakable. [48] The language of clause 6.4 plainly states that the respondent “may at its absolute discretion terminate the Facility” as long as the conditions precedent are left unfulfilled. Provided there are conditions precedent still unfulfilled within the one month period, the respondent therefore has the absolute discretion to terminate the Facility, as it had done so. [49] Crucially too, the clause does not state that the termination right must be exercised immediately on expiry of the one month period, or that it ought to be invoked during any particular timeline after the expiry of that one month period. Clause 6.4 is therefore independent of any time period. [50] It cannot be emphasised enough that the Court will give effect to the plain and unambiguous meaning of the terms in a contract as expressed by the parties, in the sense of what a reasonable person would have understood the contract to mean, unless there is ambiguity in the meaning of that term (see the Federal Court decision in SPM Membrane S/N 3sbbhdJO1UMnNnam4F0vg Switch Sdn Bhd v Kerajaan Negeri Selangor [2016] 1 MLJ 464). This reinforces the rule that construction of contracts is to be based on the plain and ordinary meaning of the provisions of the contracts, having regard to the entirety of the contractual context, barring genuine ambiguities. [51] In the Court of Appeal decision in Syarikat Binaan Utara Jaya (A Firm) v Koperasi Serbaguna Sungei Glugor Berhad [2009] 2 AMR 50, Abdul Malik Ishak, JCA made the following key observation:- “[15] Of course, it is trite that when interpreting a contract, the language of the contract must be taken into consideration. The intention of the parties is to be primarily gathered from the language employed in the contract itself. If, and only if the language is vague, the surrounding circumstances may be looked into in order to assist in interpreting the contract (Bipin Behari Deb v. Masrab Ali and Others [1961] AIR Vol. 48, 173 Assam). [16] I am fortunate that the contract here is in writing and so the parties are confined within the four corners of the document in which they have chosen to seal their agreement and neither of them can adduce evidence to say that his intention has been misstated or overlooked in the agreement or that some essential features of the contract has been omitted or ignored. To allow such evidence would involve the plain violation of s. 92 of the Evidence Act 1950 (Afshar M. M. Tacki v Dharamsey Tricamdas [1947] AIR (34) 98 Bombay)”. [52] We find no ambiguities here, vis-à-vis the terms of the Facility Agreement. They are also not capable of two possible interpretations. Neither did the appellant attempt to argue to either of such effect. Clauses 6.2 and 6.4, as well as Schedule 2 are not equivocal. Nothing about them or any other terms of the Facility Agreement are less than plain. S/N 3sbbhdJO1UMnNnam4F0vg [53] Governed by such clear and specific terms of the Facility Agreement, the respondent’s conduct of accepting any partial or late compliance of conditions precedent cannot therefore, be taken to have somehow constituted a waiver from the necessity for the appellant to adhere to the one month timeframe. The respondent did not acquiesce or waive the requirement for the fulfilment of all of the conditions precedent. [54] The respondent was therefore, in our view, acting lawfully in accordance with the terms of the Facility Agreement when it decided to terminate the Facility. [55] The failure by the appellant to fulfil all of the conditions precedent could not therefore be attributed to the respondent. Significantly too, the appellant did not at the earlier material time challenge the validity of the termination of the Facility Agreement. This in our view lends considerable credence to the respondent’s complaint that the appellant’s grievance in this regard was more of an afterthought. [56] Moreover, the appeal of the appellant on this ground could not succeed also because of the existence of clause 25.1 of the Facility Agreement, which although not a point raised before us, is a clear contractual term found in the Facility Agreement which was part of the appeal record. This is also a standard clause usually appearing in loan documents. The provision reads as follows: 25. WAIVERS, MODIFICATIONS AND INDULGENCE / 25. REVIEW OF THE FACILITY 1 No neglect, failure or delay by EXIM Bank in exercising any right, power or privilege hereunder or under this Agreement and/or the relevant Security Documents shall operate as a waiver S/N 3sbbhdJO1UMnNnam4F0vg thereof nor shall any single partial exercise of any right, power or privilege preclude any further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein and in this Agreement and/or the relevant Security Documents provided are cumulative and not exclusive of any rights and remedies provided by law and in equity. [57] A similar provision is found in clause 7.4 of the Charge Annexure which states thus: 7.4 WAIVER Time shall be of the essence of this Charge but no failure or delay on the part of EXIM Bank in exercising nor any omission to exercise any right, power, privilege or remedy accruing to EXIM Bank under this Charge or any of the other Security Documents shall impair any such right, power, privilege or remedy or be construed as a waiver thereof or any acquiescence in such default; nor shall any action by EXIM Bank in respect of any default or any acquiescence in any such default, affect or impair any right, power, privilege or remedy of EXIM Bank in respect of any other or subsequent default. [58] As such, in light of the foregoing clauses, even if the respondent had neglected, failed or delayed in exercising its contractual right to terminate the Facility (which was not the case), this clause 25.1, as contained in the Facility Agreement executed by the parties, made it abundantly clear that such neglect, failure or delay ought not to operate as a waiver. [59] We are mindful of the position of the appellant that as the respondent did not immediately terminate the Facility, but instead arguably appeared to have accepted the appellant complying with the S/N 3sbbhdJO1UMnNnam4F0vg other remaining conditions precedent despite the lapse of the one-month period, such conduct of the respondent had the effect of the respondent being estopped from insisting on reliance on the strict terms of the Facility Agreement. Or that what had subsequently transpired between the parties created an estoppel against the respondent. [60] Nonetheless we observed that the appellant had not been able to substantiate its allegation of any such conduct of assurance and representations made by the respondent. There was in evidence nothing in writing that could adequately support the appellant’s claim of the application of estoppel against respondent. [61] At the risk of repetition, we add that in the instant case, despite the assertion that the respondent had somewhat acquiesced in not insisting on adhering to the one-month period, it is demonstrably clear from the facts that: a) the Facility Agreement conferred on the respondent the clear and specific right to terminate the same, which is not limited or specified in time; b) the appellant did, after the termination, in its letter of 28 September 2018 appeal against the termination - in which the appellant also apologised for the delay, which was rejected by the respondent; c) no extension was granted by the respondent to extend time either in respect of the one-month period or pertaining to the Availability Period; and d) the delay on the part of the appellant to meet all of the conditions precedent could not be attributed to the respondent. S/N 3sbbhdJO1UMnNnam4F0vg [62] These facts and circumstances would in our view militate against any finding that the appellant could have taken the position that the respondent had waived the strict compliance with clauses 6 and