Perspektif Masa Sdn Bhd v Sabah Development Bank Berhad (BA-22NCvC-490-11/2023)

The Plaintiff seeks to prohibit the Defendant from enforcing all the Security Agreement against the Plaintiff and to injunct the Defendant from filing a winding up petition.

On 26 March 2024 this Court dismissed the Plaintiff’s application with cost. The reasons for my decision are set out below. B. BACKGROUND FACTS 24/05/2024 15:48:54 BA-22NCvC-490-11/2023 Kand. 71

The Plaintiff is the developer for a mixed development project on Lot 3901, HS(D) 61423, Jalan Aman Fasa III (Kg. Berembang), Mukim Ulu Klang, Gombak, Selangor (the Project).

The Plaintiff was also the customer of Defendant. Various facilities have been granted by the Defendant to the Plaintiff at the request of the Plaintiff since 2007 until 2020.

By a Letter of Award dated 31 December 2013 the Plaintiff appointed China Railway Engineering Corporation (M) Sdn Bhd and Bismark Construction & Engineering Sdn Bhd as main contractors for the development of the said Project.

In order to guarantee payment of the completion of the works undertaken by the main contractor, the Plaintiff requested the Defendant to issue a bank guarantee in favour of China Railway Engineering Corporation (M) Sdn Bhd as the beneficiary. [7]

There is full and frank disclosure;

There is bona fide serious issue to be tried;

Damages are not adequate;

The balance of convenience lies in favour of the Plaintiff; and

The Plaintiff is able to meet its undertaking in damages, should the claim against the Defendant fails. [18] The Plaintiff submits that the Court should allow Enclosure 3 based on the following grounds: A. there are serious questions be tried as follows:

Irregularities in the issuance of the CPC despite the defective and incomplete works by the main contractor;

(ii) The call of the Bank Guarantee by the contractor is unconscionable; and

(iii) The interest rate charged by the Defendant is excessive. B. Damages would be an adequate remedy C. The balance of convenience lies in granting the injunction. D. Plaintiff has provided undertakings as to damages. E. The Plaintiff is taking positive action to settle the loan facility; and F. Urgency of this matter. EVALUATION AND FINDING OF THE COURT [19] In the application of an interlocutory injunction, I am guided by the principle enunciated by the Supreme Court in the case of Alor Janggus Soon Seng Trading Sdn Bhd & Ors v Sey Hoe Sdn Bhd & Ors [1995] 1 CLJ 461 as follows: “[5] at an interlocutory proceeding for an injunction the Court must be satisfied that there is a serious issue to be tried, which issue, before anything else, must first be established by the applicant.” First Issue: Whether the Plaintiff has raised serious issues to be tried [20] The Plaintiff asserts that there are serious issues to be tried for the Court to grant the interim injunction against the Defendant. [21] The first issue raised by the Plaintiff is whether the issuance of Certificate of Practical Completion (CPC) is regular. [22] The Plaintiff claimed that there was no site joint inspection and handing over of the works to the Plaintiff and the Defendant should have investigated the CPC before effecting payment of the guaranteed sum of RM476,000,000.00 to the beneficiary. Therefore, the Plaintiff asserts that the release of RM476,000,000.00 by the Defendant to MBSB is not proper and unconscionable. [23] In its Affidavit In Support, the Plaintiff explained the conflict that arose between the Plaintiff and the main contractor. The Plaintiff asserts that the CPC is defective. There are irregularities in the issuance of the CPC by the architect despite the faulty and incomplete work done by the main contractor. Otherwise, the Plaintiff would have profited from the project and able to pay the outstanding loan facility. [24] The Federal Court in the case of Merita Merchant Bank Singapore Ltd v Dewan Bahasa dan Pustaka [2018] supp MLJ 33 at page 44, held that – “It is trite that parties are free to enter into a contract with terms and conditions as they deem fit and these terms and conditions are binding on the parties who have in the first place agreed to be bound by it… It was a well-established principle sanctioned by the doctrine of sancity of contract that parties who make agreement must adhere to their terms.” [25] This Court refers to Sections 5.01 and 5.02 to be read together with 7.01 (g) of the Bank Guarantee Facilities Agreement. Section 7.01

of the Bank Guarantee Facilities Agreement reads – “The Borrower acknowledges and agrees that the Lender’s obligation under any BG issued hereunder is absolute and unconditional and requires payment to the beneficiary named in such BG upon first written demand thereof by the beneficiary named in such BG notwithstanding any objection on the part of the Borrower. The Lender shall at all times entitled to make any payment under the BG upon demand by the beneficiary named in such BG without further investigation or enquiry and need not concern itself with the propriety of any claim made under or in the manner required under the BG. The Borrower hereby acknowledges and confirms that it shall not entitled whether at law or equity to stop or demand the Lender to withhold any payment which is to be made by the Lender under or pursuant to any BG hereunder”. [emphasis mine] [26] The demand letter for payment of a guaranteed sum of RM476,000,000.00 from MBSB dated 7.1.2020 (Exhibit SDB-7) is found in ‘Afidavit Jawapan Defendan’ affirmed by Abdul Razak bin Hamid (Encl. 19). [27] On page 2 of the said letter, it stated as follows: “We hereby confirm that the Certificate of Practical Completion of the Works as defined in Clause 1 of the above Bank Guarantee(s) have been issued and a certified true letter of the same is attached hereto for your information and attention and urgent action. We, MBSB Bank Berhad being the Assignee of the above Bank Guarantee do hereby demand for the payment of the following Guaranteed sum(s):

BG2018-028 : RM135,000,000.00 Total Guaranteed Sum: RM476,000,000.00 Kindly remit payment in accordance with the terms of the above BGs in any event no later than twenty one (21 days) from the date of receipt of this written demand”. [28] Based on the principle decided by the Federal Court and subject to terms in the Bank Guarantee Facilities Agreement this Court is satisfied that there is no obligation on the part of Defendant to make inquiries of any claim made under the bank guarantee by the beneficiary. Once the beneficiary made demands under the bank guarantee, the Plaintiff is bound to honour it. [29] Under the Bank Guarantee Facilities Agreement, the Plaintiff agreed that if the bank guarantee is called upon and the payment is then made by the Defendant to the beneficiary, the Plaintiff shall immediately reimburse the Defendant the sum paid, failing which the Defendant is entitled to charge an additional penalty fee at the rate of 3% per annum above the Bank’s Prime Lending Rate. [30] After the bank guarantee was released by the Defendant to MBSB, the Plaintiff took positive action by requesting the Defendant to convert the bank guarantee of RM476,000,000.00 into a term loan facility. [31] The Defendant has agreed to accept the proposal made by the Plaintiff to restructure the amount of RM476,000,000.00 into a term loan facility. The said arrangement is shown in exhibits SBD9, SDB10, and SBD11 of Enclosure 19. [32] The Defendant asserts that as at 20 October 2023 the Plaintiff is indebted to the Defendant in total the sum of RM936,644,754.19 under the Term Loan Facilities. This Court found that before the issuance of the notice of demand dated 28.1.2020 by the Defendant, the Plaintiff had not protested nor raised any complaints regarding the error on CPC or fraudulent act on the part of Defendant in releasing the bank guarantee. [33] It was submitted by the Defendant that the injunction application is designed as a tactical manoeuvre to delay the Defendant’s effort to recover monies from the Plaintiff under the Term Loan Facilities. [34] The Plaintiff submitted that the Defendant changed the nature of BG from conditional to unconditional BG and on demand which prejudice the Plaintiff’s rights. [35] The Plaintiff also submitted that the bank guarantee was converted to Term Loan Facility by the Defendant with exorbitant interest, way above BLR under Bank Negara. Since Defendant is not bound by Bank Negara, the question of law arises; under what law does the Defendant charge interest or lend money? [36] This Court found that based on the contemporaneous documents, the agreement for term loan facility was entered into upon request made by the Plaintiff. The Plaintiff had enjoyed the benefit of monies advanced by the Defendant. [37] In the considered opinion of this Court, the Plaintiff's conduct in filing a lawsuit and seeking an injunction to prevent the Defendant from enforcing the security agreement is without merit. [38] Based on the analysis on the affidavits and exhibits filed in this application, this Court found that the Plaintiff has failed to establish a serious issue that needs to be tried. Second Issue: Whether an injunction restraining the Defendant from enforcing all Security Agreement should be granted on the ground of unconscionability. [39] The Plaintiff submitted that the Plaintiff’s application for interim injunction should be granted on the basis of unconscionability. [40] In the Federal Court’s case of Sumatec Engineering and Construction Sdn Bhd v Malaysian Refining Company Sdn Bhd [2012] 3 CLJ 401, the issue is whether MRC’s call for the bank guarantee amounted to unconsionable conduct, and this in itself was sufficient ground to challenge the calling for payments under the said bank guarantee. [41] Abdull Hamid Embong FCJ, in delivering the judgment held – “[1] The principle recognising unconscionability as a separate and distinct ground to restrain a beneficiary from making a call on a performance bond accorded with good commercial sense (Kejuruteraan Bintai Kindenko Sdn Bhd v. Nam Fatt Construction Sdn Bhd & Anor; Focal Asia Sdn Bhd & Anor v. Raja Noraini Raja Datuk Nong Chik & Anor). Thus, unconscionability may now be raised as a distinct ground. The determination on whether unconscionability applies in a particular case would therefore depend largely on the material facts.” [emphasis mine] [42] Based on the above principle, this Court has a duty to carefully evaluate the material facts in determining whether the unconscionable conduct was proven by the Plaintiff to grant the interim injunction. [43] In Sumatec Engineering and Construction Sdn Bhd (supra) it was held as follows: “[22] The strict approach towards the non interference by the courts on the bank's obligations is best explained in this oft-quoted passage of Kerr J in Harbottle (Mercantile) v. National Westminster Bank Ltd [1978] 1 QB 146 who said: It is only in exceptional cases that the courts will interfere with the machinery of irrevocable obligations assumed by banks. They are the life-blood of international commerce. Such obligations are regarded as collateral to the underlying rights and obligations between the merchants at either end of the banking chain. Except possibly in clear cases of fraud of which the banks have notice, the courts will leave the merchants to settle their disputes under the contracts by litigation or arbitration as available to them or stipulated in the contracts. The courts are not concerned with the difficulties to enforce such claims; these are risks which the merchants take.” [23] And to further emphasise that banks should be "left free to honour its contractual obligation" these passages from Edward

Owen Engineering Ltd v. Barclays Bank International Ltd[1978] QB .” [44] Paragraph 26 of the Plaintiff's submissions raise the issue of no joint site inspection session conducted before the Defendant released the bank guarantee to MBSB. I have found that the issue relating to a joint site inspection was never raised by the Plaintiff prior to the filing of this suit. Besides that, this Court is unable to determine the issue of bona fide elements on the part of MBSB in calling the bank guarantee, as MBSB is not a party named by the Plaintiff. [45] It is observed that there was also no communication between parties regarding allegation of negligence on the part of Defendant in releasing the RM476,000,000.00 under bank guarantee to the beneficiary. After 30.1.2020 until October 2023, the contemporaneous documents indicated these facts:

Plaintiff requested for the term loan facility from the Defendant to reimburse the RM476,000,000.00.

(ii) The Plaintiff signed the security for charge to secure the term loan granted by the Defendant.

(iii) The Plaintiff failed to pay the instalment for principal loan under the term loan facility and there was a letter of demand issued by the Defendant.

(iv) There was a request made by the Plaintiff to defer the payment due to the Defendant. [46] This Court conclude that there was no element of unconscionability in the Defendant's conduct in releasing the bank guarantee to MBSB. Defendant is bound to adhere to the terms and conditions in the agreement relating to the bank guarantee. [47] In this present case the Plaintiff failed to show any facts which could amount to unconscionable conduct by the Defendant in releasing the bank guarantee to MBSB. Third Issue: whether the Plaintiff has made a full and frank disclosure of all relevant materials including matters which may be unfavourable to the Plaintiff. [48] This issue is raised by the Defendant. According to the Defendant, the Plaintiff in obtaining the ex-parte injunction order did not come to this Court with clean hands and failed to make a full and frank disclosure. The Defendant submitted that the Plaintif has failed to exhibit the complete chronology of events pertaining to the Plaintiff’s proposed settlement. [49] In the case of Kosmo Palm Oil Mill Sdn Bhd & Ors v Koperasi Sebausaha [2004] 1 MLJ 316, the Court of Appeal decided that – “[9] It is trite law that in any ex parte application it is essential that there must be frank and fair disclosure of all relevant materials including points that may be unfavourable to an applicant”. [50] The Court of Appeal in Kosmo Palm Oil referred to the case of Siporex Trade SA v Comdel Commodities Ltd [1986] 2 Llyod’s Law Rep 428. In the case of Siporex Trade SA v Comdel Commodities Ltd, the duty to give full and frank disclosure requires parties seeking interim injunctions to disclose all material facts to the court, even when the application is heard inter partes. This duty is essential to ensure fairness and transparency and to prevent any misleading or incomplete information submitted by the applicant to the court for consideration. [51] One glaring omission, that this Court observed is the failure on the part of the Plaintiff to disclose, for example, the clause that was referred to earlier in this grounds of judgment in paragraph 24, which provided as follows: “The Lender shall at all times entitled to make any payment under the BG upon demand by the beneficiary named in such BG without further investigation or enquiry and need not concern itself with the propriety of any claim made under or in the manner required under the BG. The Borrower hereby acknowledges and confirms that it shall not entitled whether at law or equity to stop or demand the Lender to withhold any payment which is to be made by the Lender under or pursuant to any BG hereunder” [52] The Court accepted the Defendant’s assertion that the Plaintiff has failed to disclose all material facts when the ex-parte interim injunction was obtained by the Plaintiff. D. CONCLUSION [53] This Court concluded that the Plaintiff has failed to fulfil the threshold for an interim injunction against the Defendant. The balance of convenience favoured refusal of the injunction. [54] Therefore, Enclosure 3 is dismissed with costs of RM5,000.00 subject to allocator. Dated : 24 May 2024 -sgd- ............................................................... HAZIZAH BINTI KASSIM Judicial Commissioner Shah Alam High Court (NCvC10) To the parties’ solicitors:

For the Plaintiff : Leornard Raj, Lay Zhi Ying, R. Thayakugan, Jennifer Hiu Jing Yin dan Syahirah Suhaimy Messrs Othman Hashim & Co. (Kuala Lumpur)

For the Defendant : Marianne Loh dan Jay Koh Mui Woon Messrs Shook Lin & Bok (Kuala Lumpur)