Shell Mds (Malaysia) Sdn Bhd v 1. ) Petroliam Nasional Berhad (Petronas) (WA-24NCvC-4367-11/2024)

PETROLIAM NASIONAL BERHAD (PETRONAS) (Company No.: 197401002911 (20076-K))

PETROLEUM SARAWAK BERHAD (Company No.: 201701025772 (1239938-U))

GOVERNMENT OF SARAWAK …DEFENDANTS GROUNDS OF JUDGMENT (Enclosure 84)

This is the 1st Defendant’s application, by way of Notice of Application dated 21 February 2025 under Enclosure 84, seeking an order that the present Interpleader Originating Summons be converted into a Writ action pursuant to Order 28 rule 8 of the Rules of Court 2012 (“ROC 2012”).

The Interpleader Summons was commenced by the Plaintiff, Shell MDS (Malaysia) Sdn Bhd (“SMDS”), under Order 17 ROC 2012, to resolve conflicting claims made by the 1st and 2nd Defendants concerning payment for natural gas supplied under two distinct contracts, namely –

the Petronas Gas Sales Agreement dated 17 July 2020 (“Petronas GSA”), and

the Petros Gas Sales Agreement dated 16 August 2024 (“Petros GSA”).

Following the filing of affidavits by all parties, the 1st Defendant contends that the dispute involves complex factual and legal issues that cannot be disposed of summarily on affidavit evidence, and accordingly seeks a direction for conversion to writ proceedings so that pleadings, discovery, and cross-examination may be undertaken.

The Plaintiff purchases natural gas for its gas-to-liquids operations in Bintulu. Historically, supply was governed by the 1st Defendant, as per the Petronas GSA dated 17 July 2020. However, following the Sarawak Government’s regulatory reforms under the Distribution of Gas Ordinance 2016 (DGO 2016), Petroleum Sarawak Berhad (Petros), the 2nd Defendant, was appointed as the sole aggregator and licensor for gas distribution within Sarawak.

Later in 2024, the 2nd Defendant entered into a separate Petros GSA with the Plaintiff. Both the 1st Defendant and the 2nd Defendant have since asserted entitlement to payment for gas delivered during the overlapping period, each claiming to be the lawful supplier under Malaysian and Sarawak law, respectively.

Faced with these adverse claims, the Plaintiff filed the present Interpleader Originating Summons on 8 November 2024 under Enclosure 1, seeking interpleader relief to obtain directions from this Court as to whom payment should be made and to discharge itself from further liability.

Other than the affidavits of the Plaintiff itself, affidavits and submissions have since been exchanged among 1st Defendant (Enclosures 87, 96, 100 – 101), 2nd Defendant (Enclosures 29, 81, 92, 106, 113 – 114), SMDS (Enclosures 2, 5, 18) and the Sarawak Government (Enclosures 47, 91, 111 – 112 & 115 – 116).

1st Defendant seeks an order that:

The present proceeding be converted into a Writ action under Order 28 rule 8 ROC 2012; and

Consequently, directions be made for the filing of pleadings and conduct of trial with oral evidence.

The reasons, as in the Affidavit In Support of Encik Amir Hamzah bin Ahmad, dated 21 Feb 2025 under Enclosure 87, and written submissions under Enclosures 100–101, stated that:

The interpleader dispute raises numerous factual controversies, including the validity of DGO 2016, the effect of Petros’s appointment as aggregator, and whether Petronas retains statutory authority to sell gas in Sarawak.

Resolution will require a detailed factual examination of regulatory instruments, contractual performance, and correspondence between parties.

These issues cannot fairly be decided on affidavit evidence alone.

1st Defendant relies on Order 28 rule 8, which provides that where proceedings begun by originating summons “involve a substantial dispute of fact,” the Court “may order the matter to continue as if begun by writ”. D. POSITIONS OF THE PARTIES 1st Defendant - Petronas

1st Defendant argues that the competing contentions concerning statutory authority and contractual rights necessarily entail disputed facts and questions of law of constitutional and statutory import. Conversion will ensure procedural fairness through pleadings, discovery, and oral testimony.

It contends that the interpleader mechanism cannot justly accommodate these extensive issues. Citing Tahan Steel Corp v Bank Islam Malaysia Bhd [1996] 4 CLJ 201 and Ng Hee Thoong v Public Bank Bhd [1995] 1 MLJ 281, 1st Defendant submits that whenever factual conflicts arise and where affidavit evidence is insufficient, the Court has discretion to direct conversion to writ.

Plaintiff adopts a neutral position but submits that the interpleader was properly invoked and that the Plaintiff claims no interest in the gas payments beyond discharging its liability and seeks only the Court’s direction. 2nd Defendant and the Sarawak Government

The 2nd Defendant and the Sarawak Government strongly oppose conversion. Their principal contentions under Enclosures 91, 102, 106, 111 are:

Order 17 ROC 2012 is a complete and self-contained code for interpleader proceedings; Order 28 rule 8 has no application.

The only question in an interpleader is who is entitled to the money or property, not the broader legality of competing regulatory regimes.

The Federal Court in Tetuan Teh Kim Teh, Salina & Co v Tan Kau Tiah @ Tan Ching Hai [2013] 4 MLJ 313 held that interpleader relief cannot be transformed into an adjudication of collateral claims for damages or statutory validity.

Allowing conversion would defeat the summary and neutral nature of the proceeding, turning it into an adversarial action contrary to the purpose of O. 17. E. ISSUES FOR DETERMINATION

Two questions that arise for decision are as follows:

whether Order 28 rule 8 applies to a proceeding commenced under Order 17; and

if applicable, whether the facts here justify conversion of this Interpleader Originating Summons into a Writ action. F. APPLICABLE LAW AND AUTHORITIES

Order 17 rule 1(1) ROC 2012 allows a person under liability in respect of money or property subject to adverse claims to seek relief by interpleader, provided the applicant claims no interest other than for charges or costs and is willing to pay or transfer the subject matter into court.

Order 17 rule 1(1) permits a neutral stakeholder to seek interpleader relief when exposed to adverse claims. Order 17 rule 3(1) requires that an interpleader be initiated by originating summons, except in a pending action. The rule prescribes the evidential requirements for neutrality, absence of collusion, and readiness to pay or transfer the subject matter.

The deliberate choice of originating summons in rule 3(1) indicates the Legislature’s intention for a summary and neutral process. As explained in Malaysian Civil Procedure 2024, Vol 1 para 17/3/2, the purpose is “to protect the stakeholder from double vexation and to confine the contest to entitlement, not liability.”

Order 28 rule 8(1) provides: “Where, in the opinion of the Court, the proceedings begun by originating summons involve a substantial dispute of fact, the Court may order the proceedings to continue as if begun by writ.”

The authorities establish that conversion is a matter of discretion, exercised sparingly and only where affidavit evidence is plainly inadequate; reference made to cases of Tahan Steel Corp v Bank Islam Malaysia Bhd [1996] 4 CLJ 201;Tenaga Nasional Bhd v Ong See Teong [2018] MLJU 1756; Union De Banques Arabes Et Francaises v Prodimex Resources Sdn Bhd [2021] MLJU 2767

Conversely, the line of cases on Order 28 r 8, Ng Hee Thoong, Tahan Steel, Tenaga Nasional Bhd v Ong See Teong [2018] MLJU 1756 recognises that conversion is discretionary, not automatic, and is confined to situations where “there exists a substantial dispute of fact incapable of resolution on affidavit.” As Gopal Sri Ram JCA observed in Ng Hee Thoong (at p. 285): “The judge must look at the real nature of the dispute. If the issues are purely legal or the evidence is mainly documentary, the matter ought not to be converted.”

Likewise, in Tahan Steel’s case (at p. 207): “Conversion should not be ordered lightly. It should only be exercised where there is clear necessity for oral evidence; otherwise the very object of the originating summons procedure would be defeated.”

However, in Tetuan Teh Kim Teh, Salina & Co v Tan Kau Tiah, the Federal Court held that interpleader proceedings are confined to determining entitlement to the subject matter and cannot be expanded into a trial of collateral claims. The Court emphasised that O. 17 is self-contained and summary in nature. The Federal Court (Arifin Zakaria CJ) stressed: “Stakeholders should be impartial and should not play on the same side as one of the claimants… Having found that the requirements under O 17 r 1(a) and r 3(3)(b) had not been satisfied, the Court of Appeal should have just set aside the decision of the High Court. It could not then proceed to consider the counterclaim and award damages… The Court of Appeal had no jurisdiction to do so.” (para 52)

This pronouncement makes clear that Order 17 is self-contained and non-adversarial, and collateral claims must be pursued separately.

Applicability of Order 28 Rule 8 to Order 17 Interpleader

Having considered the authorities, I am satisfied that Order 28 rule 8 does not automatically apply to interpleader proceedings. The structure of Order 17, especially rule 3(1), prescribes originating summons as the only permissible mode unless the interpleader arises in a pending action. To import O. 28 r. 8 would defeat this express design.

I accept the 2nd Defendant's submission that Order 17 is a self-contained procedural code. Rule 3(1) explicitly prescribes originating summons as the mode, and it does not provide for conversion. Reading Order 28 r 8 into this framework would amount to judicial legislation.

The Federal Court in Tetuan Teh Kim Teh described interpleader as a neutral, non-adversarial process where the stakeholder seeks protection, not a forum for parties to litigate wider rights. The court stressed that if any claimant wishes to assert independent claims or damages, it must do so by separate action, not within the interpleader. The reasoning confirms that an interpleader cannot be converted into a vehicle for resolving wider contractual or statutory disputes. The claimant, dissatisfied with the outcome, must pursue an independent action.

In the present case, the 1st Defendant proposed “conversion” seeks to expand the dispute into questions of constitutional authority, statutory interpretation, and commercial rights between the 1st Defendant, the 2nd Defendant, and the Sarawak Government. These are distinct and collateral to the limited purpose of determining to whom the Plaintiff should pay for gas supplied.

Hence, Order 28 r. 8 is inapplicable. The interpleader framework is self-contained, and its purpose would be subverted if the Court were to transform it into an ordinary civil action between the Defendants.

Accordingly, I find that Order 28 r 8 has no application to proceedings under Order 17. The two regimes serve different purposes, whereby Order 17 protects the neutral stakeholder and Order 28 governs ordinary OS cases between adversarial parties.

Whether Conversion is Nevertheless Justified on Facts

Even if I were wrong on that point, I find no basis for conversion. The factual matrix is substantially documentary, namely the Gas Sales Agreements, the DGO 2016, and related governmental instruments. The competing claims turn on legal entitlement, not witness credibility.

1st Defendant has not identified specific material facts requiring oral evidence or cross-examination. Its arguments concern the extent of statutory authority under federal and state laws is a matter of law, not fact. As observed in NVJ Menon v Great Eastern Life Assurance Co Ltd [2004] 3 MLJ 38 (CA), the existence of complex legal questions does not automatically necessitate a writ procedure.

The alleged “disputes of fact” raised by the 1st Defendant concern regulatory interpretation, not evidential conflict. Whether the DGO 2016 validly vests licensing power in the 2nd Defendant, or whether the 1st Defendant retains authority under federal law, are pure questions of law determined from legislation, official instruments, and correspondence, all already exhibited in the affidavits.

No party has identified any witness whose credibility must be tested by oral evidence. As observed by the Court of Appeal in Lai Soon Onn v Chew Fei Meng [2019] 2 MLJ 96 (at para 42), “the presence of numerous documents and complex legal questions does not of itself create a triable issue of fact.”

The interpleader remains confined to determining who is entitled to the monies in dispute. All parties have filed voluminous affidavits and authorities under Enclosures 102, 106, 111, 113, 115, 116. The evidential record is adequate for summary determination.

Permitting conversion would convert a neutral stakeholder application into a full trial between quasi-sovereign entities, contrary to both the letter and spirit of Order 17. As observed in Panzana Enterprise Sdn Bhd v MPK Builders Sdn Bhd [2021] CLJU 1237, the Court’s task in interpleader “is confined to deciding entitlement; it is not the forum to resolve collateral commercial or regulatory disputes.”

Interpleader proceedings are designed precisely for situations of this nature where rival claimants advance competing legal entitlements over a neutral stakeholder’s liability. Conversion would only multiply proceedings and delay resolution.

Finally, I note that efficiency and proportionality favour maintaining the matter under Order 17. Conversion would multiply pleadings, costs, and delay, defeating the very rationale of interpleader proceedings.

The Court also notes that all parties are well-represented by senior counsel and have filed comprehensive affidavits and submissions Enclosures 102, 106, 111, 113. The evidential record is sufficient for adjudication without oral testimony.

For these reasons, I find:

Order 17 ROC 2012 is a self-contained procedure for interpleader relief. Order 28 rule 8 does not apply.

Even if it were applicable, this case does not present substantial disputes of fact warranting conversion. The controversies are primarily legal and documentary.

To permit conversion would transform a neutral interpleader into an adversarial trial inconsistent with the statutory purpose of Order 17.

Accordingly, Enclosure 84 is dismissed. The matter shall proceed within the existing interpleader framework, and the parties are to confine their submissions to the question of entitlement to the interpleaded payments. Costs in the cause.

Case management: The Court will fix further directions for the continued interpleader hearing. Dated : 8th October 2025 ……………………………………………… (YA PUAN MAHAZAN BINTI MAT TAIB) JUDGE HIGH COURT OF MALAYA KUALA LUMPUR For The Plaintiff : Christopher Leong Sau Foo & Janet Chai Pei Ying Messrs. Chooi & Company Advocates & Solicitors For The Defendant 1 : Khoo Guan Huat, Datuk Azian binti Mohd Aziz, Grace Teah, Ahmad Faiz & Khoo Yuan Ping Messrs. Mohamad Hanafiah Zakaria Advocates & Solicitors For The Defendant 2 : Foo Joon Liang & Kho Jia Yuan Messrs. Gan Partnership Advocates & Solicitors For the Defendant 3 : FC Muhammad Muhairi Attorney General’s Chambers, Malaysia For the Defendant 4 : Dato Sri JC Fong, Mohd Adzrul Bin