Prosperous Resources Sdn. Bhd. v Grad Suites Sdn. Bhd. (22NCVC-601-10/2017)

Pursuant to a Service Contract dated 27.5.2014 the Defendant had engaged the services of P to assist the Defendant in the application and submission to and approval from licensed banking or financial institutions for high – end financing or syndicated loans of RM60,000,000.00.

Amongst the terms of the Contract, the Defendant was to pay to P professional fees of 4% from the Loan Sum approved by the financial institution.

P had successfully facilitated the Defendant’s application to get approval from RHB Bank Berhad for Bridging and Term Loan and Overdraft Facilities for RM62,000,000.00 in September 2014.

The professional fees payable is RM2,480,000.00, i.e., 4% from the Loan Sum.

The Defendant had made payment of up to RM790,000.00 only but failed/neglected to pay the balance professional fees of RM1,690,000.00.

P and the Defendant had an Agreement to settle the outstanding sum via letter dated 8.6.2017 (Eksibit KSB-6).

The Defendant then had paid RM200,000.00 i.e., the first installment only.

P is now claiming the above balance of the professional fees.

Balance of professional fees is subject to first drawdown of the loan.

P’s claim is premature because the 2nd Term Loan is still not due. Page 4 of 20 Background of Claim [2] Briefly, P and the Defendant entered into a contract of service (‘the contract’) dated 27.05.2014 whereby the Defendant engaged the services of P as consulted to assist the Defendant to obtain a loan from RHB Bank Bhd. (the ‘RHB’). The contract and its terms and conditions (‘T&C’) are not disputed. [3] P made the application for a loan from RHB on behalf of the Defendant, who then successfully obtained a loan of RM62,000,000.00 from the Bank. This action commenced by P’s for arrears of professional fees owing by the Defendant accrued to P under the contract. [4] Under the T&C of the contract, the Defendant was required, inter alia, to pay P professional fee for securing the loan at the rate of 4% of the loan sum approved by RHB. The schedule of payment is stipulated therein. Importantly, it was agreed that time shall be of the essence. [5] Through the assistance of P, the Defendant succeeded in obtaining from RHB approval for the following loan facilities:

Overdraft (‘O/D’) in the sum of RM5,000,000.00.

Term Loan 1 (‘TL-1’) in the sum of RM12,500,00.00.

Term Loan 2 (‘TL’2’) in the sum of RM44,000,000.00. [6] RHB’s offer dated 03.09.2014 was accepted by the Defendant dated 05.09.2014. [7] In accordance with the rate prescribed in the contract, the Defendant owed professional fee to P in the sum of RM2,480,000.00. [8] The Defendant then proceeded to pay P certain commitment and administration fees in accordance with the contract in the sums of RM30,000.00 and RM50,000.00 respectively on different dates. [9] Under the RHB’s letter of offer (‘L/O’) dated 03.09.2014 the drawdown date for the overdraft and TL1 was 6 months from the date of acceptance of the offer while for TL2 the draw down was 15 months from that date. [10] Thereafter, in accordance with the terms of the L/O the Defendant received the first drawdown for the O/D and TL1 in March 2015. However, the Defendant allegedly refused, failed and/or neglected to pay the balance professional fee (‘P/F’) of RM2,400,00.00 in full and on time for P’s services in breach of the terms of the contract. Under Clause 5 of the contract, the manner of payment was by way of deduction of the P/F from Page 6 of 20 the receipt of the 1st drawdown of the loan whereby the Defendant was required to issue a Letter of Instruction (‘L/I’) to RHB to authorise the latter to deduct the fee from the loan and pay the amount directly to P’s account. The Defendant breached the contract by its refusal, failure and/or neglect to issue the L/I upon the 1st drawdown of the O/D and TL-1 facilities. Instead, the Defendant paid small amounts at random without adhering to any schedule and the total amount paid was far short of the amount of P/F due and owing under the contract to P. [11] Due to the inconsistent and unscheduled, short payments of the P/F by the Defendant, both parties executed a letter of settlement dated 19.8.2015, wherein the Defendant agreed to utilise the loans received from RHB to pay the amount due to P in instalments. No date could be fixed for the payment of the 1st instalment by the Defendant, who could only agree to payment “to the soonest”. The Defendant then made the 1st payment of RM100,000.00 only 2 months later. Thereafter, they only paid 5 instalments when demanded by P only and those too in part payments and also at random which were not in compliance with the agreed terms in the above letter of settlement. Page 7 of 20 [12] At that time, the Defendant further failed to honour their obligations to RHB and in utilising the loans received under the O/D and TL-1 facilities also breached the T&C of the loan, particularly in failing to obtain the necessary approval from the local authority before commencing their building project. Although some 2 years had lapsed after the loan approval by RHB on 03.09.2014, the Defendant had failed to do so which resulted in the facility TL-2 having to be held in abeyance by RHB who were dissatisfied with the situation and froze any further drawdown of TL-1. As a result, RHB fixed 4.09.2018 as the 1st drawdown of TL-2 subject to certain conditions being fulfilled by the Defendant. [13] The overall conduct of the Defendant and the relevant documents showed as follows:

The Defendant took the whole loan from the Overdraft Facility and part of the loan sum from the TL-1 facility but refused, failed and/or neglected to pay the balance of professional fees to P.

The Defendant’s delay had caused difficulty to RHB Bank Berhad.

The fact that the three facilities had been affected as a result of the Defendant’s delay to get started on its development project indicates that RHB assumed that the 3 facilities are in one package for the sole purpose of the project only. [14] Due to the Defendant’s conduct as alluded to above, particularly the random and short payments, P’s solicitors were instructed to issue a Letter of Demand dated 19.04.2017 to settle the balance P/F in the sum of RM1,900,000.00 within 14 days. [15] The parties then reached settlement on 7.06.2017 for the Defendant to pay the balance P/F in 6 instalments w.e.f. 10.07.2017. Despite that, the Defendant breached the terms of the Settlement Agreement (‘S/A’) dated 7.6.2017 and sought to delay payments vide a series of correspondence culminating in a letter by P’s solicitors dated 6.07.2017 granting the Defendant an extension of time until 21.12.2017 to pay the last of the 6 instalments for the balance P/F amounting to RM1.69 million subject to the same default clause. Eventually, the Defendant only managed to pay RM200,000.00, being the first instalment on 7.08.2017, leaving a balance of RM1.49 million. Thereafter, the Defendant continued Page 9 of 20 to breach the S/A. Hence, this action by P to recover the balance due with interest calculated from 7.06.2017. The Law Applicable to Summary Judgment [16] In National Company For Foreign Trade v Kayu Raya Sdn. Bhd. [1984] 2 MLJ 300 the Federal Court set out concisely the basic requirements of an O. 14 application: “We think it appropriate to remind ourselves once again that in every application under Order 14 the first considerations are (1) whether the case comes within the Order and (b) whether the plaintiff has satisfied the preliminary requirements for proceeding under Order 14. For the purposes of an application under Order 14 the preliminary requirements are:

the defendant must have entered an appearance;

(ii) the statement of claim must have been served on the defendant; and

(iii) the affidavit in support of the application must comply with the requirements of Rule 2 of the Order 14. Page 10 of 20 …If the plaintiff fails to satisfy either of these considerations, the summons may be dismissed. If however, these considerations are satisfied, the plaintiff will have established a prima facie case and he becomes entitled to judgment. The burden then shifts to the defendant to satisfy the Court why judgment should not be given against him [see Order 14 Rules 3 and 4(1)].” [17] The leading and most oft quoted authority on O. 14 is the Supreme Court case of Bank Negara Malaysia v Mohd Ismail Ali Johor & Ors. [1992] 1 CLJ(Rep) 14, where it was 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 on 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 as not triable.” [18] In Safora SA v Ranhill Berhad [2012] 1 LNS 1112, the Court of Appeal referred to the following leading authorities and observed that: Page 11 of 20 “Regarding the question of construction of a contract, Raja Azlan Shah J (as His Royal Highness then was) in Esso Standard Malaya Bhd v. Southern Cross Airways (Malaysia) Bhd [1972] 1 LNS 31; [1972] 1 MLJ 168 stated: “If one simply has a short matter of construction with a few documents, the court, on summary application, should decide what in its judgment is the true construction. There should be no reason to go formally to trial where no further facts could emerge which would throw any light upon the letters that have to be construed.” In Malayan Insurance (M) Sdn Bhd v. Asia Hotel Sdn Bhd [1987] CLJ 182 (Rep) [1987] 1 CLJ 246; [1986] 2 MLJ, 183 the Supreme Court stated: “The underlying philosophy in the Order 14 provision to prevent a plaintiff clearly entitled to the money from being delayed his judgment where there is no fairly arguable defence to the claim. The provision should only be applied to cases where there is no reasonable doubt that the plaintiff is entitled to the judgment.” Page 12 of 20 Finding on Issues Raised by the Defendant

Whether P’s claim is premature? [19] The Defendant’s contention was that as the TL-2 facility had not been released by RHB so that the claim for balance of professional fee for TL-2 had not accrued yet and thus, that P’s claim was premature. [20] As rightly contended by P, the above contention was contrary to the terms of the contract, the RHB letter of approval, the manner of incomplete payments by the Defendants and the exchange of correspondence between the 2 parties on the Settlement Agreement between them. [21] Clause 5 of the contract stipulates in express terms that the balance of professional fee is required to be paid as a lump sum after the first drawdown of the loan wherein before the drawdown the Defendant was required to issue a Letter of Instruction (‘L/I’) to the financial institution concerned to deduct the balance professional fee from the loan and credit it directly into P’s account. However, the Defendant failed and/or refused to do so and was, thus, in clear breach of Clause 5 of the contract. RHB’s letter dated 03.09.2014 made it clear that the O/D and TL-1 facilities were to be released first followed by TL-2. The purpose of TL-1, amongst others, Page 13 of 20 was for the payment of professional fees, which was not part of the purpose of TL-2. [22] According to RHB’s terms, the professional fee was payable in full at the time of the 1st drawdown of the O/D and TL-1 facilities. The 3 facilities were offered as a package to finance the Defendant’s project. Upon the 1st drawdown of the O/D and TL-1 facilities the Defendant had begun to enjoy the use of the loan package obtained through P’s assistance. Hence, it constituted the 1st drawdown of the loan under clause 5(iii) of the contract and the professional fee (‘P/F’) became payable regardless of the release or drawdown of TL-2. The whole package was jeopardized by the conduct of the Defendant themselves in failing to commence the project, i.e., by their own default. [23] There was further the evidence of random and unscheduled payments by the Defendant in small and inconsistent portions that did not comply with the terms of the contract of the S/A. [24] Subsequently, when the Defendant entered into the S/A with P to settle their debt, they did not raise the issue of the claim for professional fee being not due yet or premature but instead, appealed to P for patience pending the disposal of the withdrawal issue with RHB. There was Page 14 of 20 apparently a ban on the Defendant’s claim imposed by RHB, which did not concern P, that had to be lifted. Hence, there was no issue at all of P’s claim being premature, which must be regarded as not a bona fide issue.

Whether Settlement Agreement (‘S/A’) dated 19.8.2015 is binding on P? [25] Reference was made to the terms of the S/A whereby P agreed to the Defendant’s proposal as follows: “1. A RM100,000.00 to be payable to your esteem company (date to be determined and will advise to you to the soonest).

The dedicated bill for consultant management invoice to be claimable to RHB amounted to RM5,900,000.00.

On each and every total amount of the RM5,900,000.00 claimed from RHB, a 30% to the total amount claimed from RHB will be payable to your company…” [26] The Defendant contended that in view of the above P’s balance P/F was subject to the approval of the Defendant’s claim from RHB which was informed to P’s solicitors vide letter dated 30.05.2017. A further letter dated 30.06.2017 is purportedly also to the same effect. As such, that P Page 15 of 20 was bound by the T&C in the aforesaid S/A by virtue of the provisions of Section 63 of the Contracts Act, 1950 which prescribes that: “If the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed.” [27] P’s reply to the above contention is this. By reason of the Defendant’s own default of the terms of the S/A, it is of no assistance to their case. Inter alia, the facts show that the 1st instalment of RM100,000.00 was paid only more than 2 months thereafter. Subsequently, random payments were made 5 times on inconsistent/ irregular intervals that did not adhere to the express terms of the S/A. Most importantly, the total payment amounted to only RM460,000.00, which was far short of the amount due of more than RM1.7 million. I, therefore, agree with P that by reason of the Defendant’s blatant default of their own proposed settlement, the S/A was no longer binding on P and could not defeat P’s claim by way of estoppel.

Whether the S/A was subject to the release of the loan by RHB? [28] The Defendant contended that their proposed settlement vide a subsequent letter dated 20.06.2017 that their claim by invoice to RHB was Page 16 of 20 in the process of being approved together with the payment made on 7.08.2017 reflected that it was bona fide in seeking to settle the P/F due and payable to P. [29] However, the proposed settlement vide the subsequent letter was clearly an afterthought that sought to vary the clear terms of the S/A concluded on 7.06.2017 by attempting to connect the S/A with the release of moneys by RHB which was not the expressed intention. There was plainly no consensus on the subsequent proposal dated 7.06.2017 as P did not agree to it. It was further superceded by another letter by the Defendant dated 5.07.2017 which dropped the proposal and agreed to settle the P/F in 6 instalments via post-dated cheques as the Defendant was short of funds. The proposed settlement on 20.06.2017 thus became irrelevant and was overtaken by the proposal on 5.07.2017 to settle without conditions. [30] RHB’s letter dated 28.09.2016 made the situation amply clear that the Defendant’s difficulty in obtaining release of funds from RHB stemmed from the Defendant’s own failure in commencing construction of the project and nothing else. As highlighted by P, their contractual obligation was merely to the extent of securing approval from RHB for the said loan facilities. Having performed that obligation, the Defendant’s obligation was Page 17 of 20 to abide by the T&C imposed by the bank for release of the facilities. The Defendant could not use their own default of the same as a defence against P’s claim. Such a defence has to be regarded as unsustainable. Vide their letter to P’s solicitor dated 20.9.2017, which was the last letter pertaining to the S/A, the Defendant themselves conceded that it was their responsibility to resolve the problem with RHB. In short, there was no basis at all to associate their debt to P due under the contract between these 2 parties with disbursement of the loan from RHB.

Whether there was a concluded S/A between P and the Defendant? [31] This is the final issue relied upon by the Defendant to oppose the present O. 14 application. It was contended on behalf of the Defendant that the series of correspondence between the Defendant that P’s solicitors showed that no S/A had been concluded between the parties as the schedule of repayment had not been agreed to. In the same breath, the Defendant pointed out that they had informed P’s solicitors that the Defendant would be relying on the provisions of the S/A but it was P who had refused to comply with the agreed terms of payment. Further that the series of payments by the Defendant were bona fide. Page 18 of 20 [32] From the sequence of events adverted to preceding P’s notice of demand followed by the commencement of this action, it is indisputable that it was the Defendant who had failed, refused and/or neglected to settle the debt due to P in a timely manner and on schedule in accordance with the agreed terms of settlement. Instead, they sought to add new terms inconsistent with the S/A and made payments at random that did not comply with the S/A. Further, the total payment made was not even close to the debt being fully settled. Hence, the Defendant cannot now take advantage of their own default and assert that no S/A was concluded by reason of what was clearly their incapacity to settle the debt lawfully due to P’s own problems with the financial institution caused by their failure to commence the project. [33] In effect, the present issue is undoubtedly a non-issue and certainly not triable. Conclusion [34] Having read the submissions and contentions of counsel for the parties, the pleadings, the affidavits and considered the grounds of application, I conclude as follows. Page 19 of 20 [35] The Court finds that P (‘P’)’s claim as pleaded against the Defendant is plain and obvious, simple and straightforward. It is basically dependent on the construction of documents material to the claim and issues advanced by the Defence as being triable. [36] D, through their Defence and affidavit have failed to raise any triable issues or defence on the merits against P’s claim. The issues raised by D do not have any merits in law or fact and contrary to the conduct of D themselves and undisputed documentary evidence preceding the commencement of this action. [37] I, therefore, find that this is a fit and proper case for final judgment to be entered against D summarily as no valid grounds or bona fide defence have been raised for the claim to proceed to trial. [38] I accordingly grant an Order in Terms of prayers a), b) and costs to be determined by the Court. Costs of RM4,000.00 to P subject to allocatur. Page 20 of 20 Dated : 16 May 2018 (GUNALAN A/L MUNIANDY) Judge High Court of Malaya Shah Alam COUNSEL: For the Plaintiff : Miss Lai Mei Fong Messrs Murad & Foo Pulau Pinang For the Defendant : Miss Sarah Benedict Messrs J. M. Chong Vincent Chee & Co. Kuala Lumpur