Supreme Priority Sdn Bhd v Ocbc Bank (Malaysia) Berhad (JB-22NCC-4-04/2022)

Reduction Amount (RM)

9.2016 800,000-00 1.10.2016 200,000-00 1.11.2016 200,000-00 1.12.2016 200,000-00 1.1.2017 100,000-00 [13] The Plaintiff upon receiving the Defendant’s letter dated 11.8.2016, appealed to the Defendant vide their letter dated 16.8.2016 to defer the said reduction to take effect from 1.1.2017 and the reduction January 16, 2023 7 sum to be reduced monthly to RM200,000.00, citing the monthly repayment of RM50,000.00 that they were committed to. In the same letter, they also informed the Defendant that their showroom will be ready for business by the month of October 2016. [14] The Defendant then vide their letter dated 2.9.2016 notified the Plaintiff that they are not agreeable to accede to the Plaintiff’s request and the monthly reduction as per their letter dated 11.8.2016 remains. In this letter, Defendant also mentioned their right to review the credit facilities to the Plaintiff as follows:- “Kindly be advised that the reduction quantum and any other such modification, amendment or variation is subject to review at any point in time or such other time as the Bank deems fit at its sole discretion. Please ensure all the Credit Facilities are to be maintained in good order with no excesses. Nothing herein contained shall in anyway impair, prejudice, diminish or otherwise adversely affect the Bank’s rights, powers and remedies under the letter(s) of offer, guarantee, facility agreement, security documents and all such other letters and/or agreements in respect of the Credit Facilities (collectively “the Documents”) in respect of the Credit Facilities (collectively “the Documents”) and you expressly covenant that the Bank’ Documents shall remain in full force and effect to secure the Credit Facilities and the payments by you of all your indebtedness to the Bank. Notwithstanding any other provisions herein, you covenant and agree that the Bank shall have the absolute and January 16, 2023 8 unfettered discretion, without reference to you, to review the Credit Facilities including but not limited to varying at any time or from time to time the terms of payment of the Credit Facilities or any other terms and conditions set out herein or under the Documents including imposing new terms and conditions or requiring full settlement of all outstanding sums, whether or not an event of default has occurred.” [15] Subsequently Defendant vide their letter dated 28.11.2016 informed the Plaintiff that upon full cancellation of the Trade facility anticipated in January 2017, reduction quantum of the Overdraft facility limit will be increased to RM200,000.00 per month effective 1.2.2017 until full settlement of the Overdraft facility. In the same letter, Defendant asked the Plaintiff to give their comments if any by 9.12.2016 failing which the Defendant will proceed with the proposed reduction of the Overdraft facility. [16] This was followed by a meeting between both parties on 1.12.2016. The discussion which took place at the said meeting was subsequently put in writing by the Defendant vide their letter dated 5.12.2016 to the Plaintiff as follows: - “As discussed, you have appealed for the reduction of Supreme’s Overdraft facility to be maintained at the existing reduction quantum of RM50,000.00 per month. Please be informed that the Bank is agreeable to your request subject to the following:- January 16, 2023 9

Efforts to be undertaken to refinance Supreme’s Overdraft facility and BP’s Term Loan facility by 30 June 2017;

In this regards, you are to forward a copy of the duly accepted letter of offer from a financial institution duly accepted by the Company and BP Auto Utama Sdn Bhd by 30 April 2017. In the event the duly accepted letter of offer is not received by 30 April 2017 or the above refinancing is not forthcoming by 30 June 2017, the Bank shall reserve the right to review Supreme and BP Credit Facilities with the Bank. As for the Company’s Trade Facility of RM300,000.00, the reduction quantum vide the Bank’s letter dated 11 August 2016 will be maintained i.e. full settlement and cancellation of the Trade facility is anticipated in January 2017.” [17] The Defendant’s letter dated 5.12.2016 also reveals that a company known as BP Auto Utama Sdn. Bhd, (presumably an associate company of the Plaintiff) having a Term Loan Facility for the sum RM876,000.00 with the Defendant. [18] From this letter dated 5.12.2016, Court notes that during the meeting between both parties on 1.12.2016, Defendant had agreed to maintain the reduction quantum of the Overdraft facility to RM50,000.00 per month as appealed by the Plaintiff but subject to the Plaintiff undertaking to refinance the Plaintiff’s Overdraft facility and BP Auto Utama’s Term Loan facility by 30.6.2017. The Plaintiff were given approximately seven (7) months to obtain refinancing. January 16, 2023 10 The Defendant once again reiterated their right to review the credit facilities in this letter similarly as stated in their letter dated 2.09.2016 to the Plaintiff. [19] Next the Tradeline facility for RM1.5 million was reduced to RM0.00 vide the Defendant’s letter dated 3.1.2017 to the Plaintiff. [20] Thereafter Plaintiff obtained refinancing from RHB Bank. This is evident from the Plaintiff’s solicitors, M/S Fadzilah, Ong Chee Seong & Associates letter dated 7.6.2017 to the Defendant requesting for a redemption statement of the loan facility granted by the Defendant to the Plaintiff. Enclosed with the said letter was the standard letter of authorization from the Plaintiff to the Defendant notifying the Defendant that they have appointed M/S Fadzillah, Ong Chee Seong & Associates to attend to the redemption and also are authorizing the Defendant to release the redemption statement to their said lawyer. [21] The Defendant subsequently vide their letter dated 13.6.2017 to the Plaintiff solicitors forwarded the redemption statement addressed to the Plaintiff’s new financier, RHB Bank Berhad. This letter was carbon copied to the Plaintiff. [22] Only after the redemption statement was issued to the Plaintiff’s new financier, the Defendant vide their letter dated 3.7.2017 to the Plaintiff notified the Plaintiff that the Overdraft facility is cancelled. January 16, 2023 11 PLAINTIFF’S CAUSE OF ACTION [23] The crux of the Plaintiff’s claim is set out in paragraphs 19, 20, 21, 23 and 24 of their Statement of Claim and can be summarized as follows:-

Defendant breached the loan facility contract.

(ii) Defendant breached the duty of care in tort and contract with regards to the loan facility.

(iii) Defendant breached the Plaintiff’s legitimate expectation with regards to the loan facility. [24] Plaintiff prays for a declaration that the Defendant was not entitled to cancel the said loan facility, general damages, punitive and/or aggravates damages, interest and cost against the Defendant. [25] Plaintiff also in paragraphs 15 and 16 of their Statement of Claim plead that the Defendant decided to terminate the loan facility pre-maturely since there was an ongoing civil action between the Defendant and one JS Valuers who had valued the Plaintiff’s property before the loan facility was granted by the Defendant to the Plaintiff. According to the Plaintiff, Defendant has made several allegations in the said civil action against the said valuer that the valuations relating to sale of some factories were inflated and hence Defendant then decided to recall the loan facility granted to the Plaintiff pre-maturely. January 16, 2023 12 THE LAW ON STRIKING OUT PLEADINGS [26] The law on striking out pleadings is trite. Please see BANDAR BUILDER SDN. BHD. & ORS v. UNITED MALAYAN BANKING CORPORATION BHD [1993] 3 MLJ 36, TAN WEI HONG (a minor suing through guardian ad litem and next friend CHUANG YIN E & Ors v MALAYSIAN AIRLINES BHD and other Appeals [2019] 1 MLJ 59 and PROTASCO BHD v PT ANGLO SLAVIC UTAMA & ORS [2020] MLJU 1413 in relation to principles governing striking out pleadings. Bearing in mind that this is a drastic power and guided by the principles established in these cases, I now proceed with the analysis and finding. ANALYSIS AND FINDING [27] This Court finds that upon a careful analysis and consideration of the chronology of facts disclosed in the correspondences between both parties as enumerated in paragraphs above and the letter of Offer for the loan facility, Plaintiff’s Statement of Claim does not disclose any cause of action against the Defendant and/or the Plaintiff claims against the Defendant is frivolous for the following reasons:-

With regards the Tranche 2 facility for the sum of RM2.0 million, from the onset Plaintiff failed to fulfil the pre-condition i.e. completion of the 3S centre and obtain issuance of Certificate of Completion and Compliance (CCC) as required by the Defendant; January 16, 2023 13

(ii) The availability period of the undrawn RM2.0 million trade line expired on 30.6.2015 and the Defendant was duly notified the Plaintiff accordingly vide their letter dated 26.10.2015.

(iii)

(iv) Vide letter dated 26.10.2015, Defendant also notified the Plaintiff that the overdraft facility will be reduced commencing 1.1.2016 and requested for submission of a fresh valuation January 16, 2023 14 report and management accounts for the year ended 30.4.2015.

This letter was followed by exchange of correspondences between both parties whereby Plaintiff appealed to the Defendant for the facilities to be maintained and to be converted into a term loan. Whereas Defendant requested the Plaintiff to submit for a fresh valuation, management accounts, requested the Plaintiff to ensure construction of the 3S centre to be completed and ready for operation on 30.4.016 together with submission of CCC application or by 30.4.2016, whichever is earlier.

(vi) Thereafter, Defendant notified the Plaintiff that upon review of their latest financials that has deteriorated and non-compliance of covenants, the Tradeline facility of RM1.5 million will be reduced via 5 monthly reductions as scheduled commencing on 1.9.2016 and ending on 1.1.2017.

(vii) The Plaintiff thereafter appealed for the reduction of the said Tradeline facility to be deferred to 1.1.2017 and the monthly reduction sum to be RM200,000.00 and notified the Defendant that the showroom will be ready for business in the month of October. The Defendant then informed the Plaintiff that they were unable to accede to the Plaintiff request.

(viii) The pre-condition that the 3S showroom centre should have been completed and ready for operation by 31.7.2016 was never fulfilled by the Plaintiff despite the extension granted by the Defendant. Plaintiff in their letter dated 14.12.2015 January 16, 2023 15 informed the Defendant that the showroom will be ready by March, 2016. Thereafter, Defendant extended the dateline for the completion and ready for operation by 30.4.2016 vide their letter dated 21.1.2016. This dateline was further extended by the Defendant to 31.7.2016 vide their letter dated 3.6.2016. This was followed by the Plaintiff’s letter dated 16.8.2016 informing the Defendant the showroom will ready for business by the month of October, 2016. However, there is no evidence that even in October, 2016, this pre-condition was fulfilled.

(ix) Thereafter, Defendant then notified the Plaintiff that the upon full settlement and cancellation of the Trade facility anticipated in January, 2017, the Overdraft facility limit will be reduced effective 1.2.2017 until full settlement. Next during a subsequent meeting between both parties, Defendant agreed to the Plaintiff’s request to maintain the reduction quantum of the Overdraft facility to RM50,000.00 per month subject to the Plaintiff refinancing the facility by 30.6.2017.

Plaintiff subsequently refinanced the loan facility with RHB Bank. [28] Thus, the above chronology of facts from the correspondences between both parties merely discloses that Defendant as a banker were exercising their contractual right that was agreed to and accepted by the Plaintiff in the Letter of Offer, to review the loan facility. January 16, 2023 16 [29] The Defendant did grant indulgence to the Plaintiff by maintaining the reduction quantum of the overdraft facility to RM50,000.00 pending the Plaintiff refinancing the loan facility. [30] The pre-condition that the 3S showroom centre should have been completed and ready for operation by 31.7.2016 was never fulfilled by the Plaintiff despite the extension granted by the Defendant. [31] The Plaintiff themselves agreed to refinance the Overdraft facility and requested for redemption statement from the Defendant. [32] The availability period of the undrawn RM2.0 million Tradeline expired on 30.6.2015. As for the Tradeline facility for RM1.5 million, it was reduced by the Defendant upon review of the Plaintiff’s financials which had deteriorated and non-compliance of the covenants. The Overdraft Facility was only cancelled after Plaintiff requested for redemption statement to refinance the loan facility. [33] Only after the Plaintiff refinanced the Overdraft facility, the Defendant issued a letter dated 3.7.2017 notifying the Plaintiff cancellation of the Overdraft facility. This seems to be a formal notification for record purposes from the Defendant as a banker. [34] Plaintiffs’ cause of action against the Defendant is on the premise the Defendant cancelled or terminated the Overdraft facility unilaterally despite knowing that the Plaintiff’s business was running smoothly and no default in payment by the Plaintiff. This is pleaded in paragraphs 19 and 20.1 of their Statement of Claim as follows :- January 16, 2023 17 “19. Melalui surat bertarikh 03.07.2017, Defendan telah memaklumkan kepada Plaintif bahawa kemudahan Overdraf telah dibatalkan.

20.1 Berdasarkan surat bertarikh 03.07.2017, Defendan secara unilateral menghentikan pinjaman tersebut walaupun menyedari bahawa Plaintif sedang menjalani perniagaan secara lancar dan tanpa sebarang keingkaran pinjaman tersebut.” [35] However as enumerated above, the facts do not disclose a cause of action against the Defendant for cancellation of the Overdraft facility. [36] The above facts do not disclose the loan facility being terminated or arbitrarily recalled by the Defendant. It only discloses facts pertaining to the Defendant’s right as the banker to exercise their right to review the loan facility and failure by the Plaintiff as the Borrower to fulfil the pre-conditions, deterioration of their financials and not complying with the covenants imposed by the Defendant as a banker. [37] On this point, I find support in the Court of Appeal’s decision in OCBC BANK (MALAYSIA) BHD V. LIM HOCK KOK & ANOR [2017] 9 CLJ 454 which held as follows :- “(1) The LO and the FA were a valid contract. If a contract entered into between the parties is valid, it would be incumbent upon the court to uphold the bargain that has been struck between the parties. Clause 12(3) of the FA January 16, 2023 18 gave the appellant an unrestricted and unimpeded right to require the respondents to furnish further security. There was nothing in cl. 12(3) that required the appellant to give any ground, justification or reason for the exercise of the right. Even though the appellant exercised the right after a second valuation of the charged property showed a diminution in the value, this did not confer any right on the respondents to know how and why there was a substantial difference in the valuation. The HCJ conferred extra rights to the respondents and imposed an obligation on the appellant which the contracting parties had never agreed to. It is not for the court to rewrite a contract freely entered between two contracting parties or to read into a contract conditions that have not been put there by the parties. (paras 11, 14 & 15)

This case involved nothing more than an enforcement of the appellant's contractual rights as provided for under the FA. The difference in the two valuation reports had nothing to do with the exercise of the appellant's rights under cl. 12(3) of the FA and did not qualify as a triable issue. The issue at hand was the proper and correct interpretation of the FA, in particular cls. 12(3) and 13. The appellant had properly exercised its contractual right pursuant to the FA. (paras 21 & 22)

The respondents were bound by the terms and conditions stipulated in the LO and the FA. Their January 16, 2023 19 defence did not address or touch on such contractual rights in cl. 12(3) of the FA to require the respondents to furnish additional security. The respondents' claim that they did not default in the payment of monthly instalments was not and could not be a defence to the breach of their obligations in cl. 12(3) of the FA. The respondents' case was an attempt to deflect attention from their contractual obligation or liability to the appellant. It was clear in O. 14 r. 1(1) of the ROC that the appellant was entitled to apply to the court for judgment on the ground that the respondents have no defence to the claim. The respondents failed to satisfy the court in accordance with O. 14 r. 3(1) of the ROC that there was an issue or question in dispute manifested in the defence which ought to be tried or that there ought, for some other reason, to be a trial of that claim. (paras 16, 17 & 21).” [emphasis added] [38] Further, there are no documentary evidence before the Court to substantiate the Plaintiff’s allegations that the Defendant decided to recall the facility from the Plaintiff pre-maturely due to the Defendant making several allegations that the valuations were inflated against the said valuer in their civil action against the valuer, JS Valuer. The cause papers in the said civil action produced by the Plaintiff has no bearing to the facility granted by the Defendant to the Plaintiff herein. [39] Neither is there any finding yet in the said civil action which is still pending against the said valuer that supports the Plaintiff’s January 16, 2023 20 contention that Defendant pre-maturely decided to recall the loan facility due to them having made several allegations against the valuer that the valuations were inflated. As it stands, it is merely a speculation by the Plaintiff. [40] The facts herein also disclose that the Plaintiff themselves after the meeting with the Defendant, voluntarily decided to refinance the loan facility instead of fulfilling the earlier covenants imposed by the Defendant Bank. As such, the Plaintiff is estopped from bringing this claim against the Defendant now. [41] This is not a case where Defendant banker arbitrarily terminated or recalled the loan facility. [42] Court is also of the view that based on the enumerated facts above, the question of Plaintiff having a legitimate expectation to the loan facility does not arise. [43] The Supreme Court’s decision in BANK BUMIPUTRA MALAYSIA BHD KUALA TRENGGANU V MAE PERKAYUAN SDN BHD & ORS [1993] 2 MLJ 76, relied on by the Plaintiff with regards to the legitimate expectation to the loan facility, can be distinguished. The facts in that case disclosed that the bank knew full well that the Borrower company would receive no income whatsoever from the project until sale and purchase agreements were signed. The Supreme Court further held that until the Borrower company commenced receiving proceeds of sale from the house purchasers, it was under no obligation to pay to the bank anything towards the principal sum or towards interest. Therefore, the Supreme Court found that the Bank was not entitled to issue the recall letter purely January 16, 2023 21 on the ground that interest had not been serviced by the Borrower company and further by recalling the loan mid-term, the Bank had breached the Agreement. [44] As such, the facts in MAE PERKAYUAN’S (supra) case is clearly distinguishable from the facts in our present case and the question of the Plaintiff’s having a legitimate expectation to the loan facility granted by the Defendant does not arise. [45] Learned counsel for the Plaintiff submitted that the doctrine of legitimate expectation only applies in the realm of public law by relying in the Court of Appeal’s decision in GPQ SDN BHD v CONSTANT VIEW SDN BHD [2017] 6 MLJ 728. However, I beg to differ. In the realm of company law, more often than not, legitimate expectation is raised by shareholders who claim to be oppressed. Please also see the decision of the Court of Appeal in LUGGAGE DISTRIBUTORS (M) SDN BHD v TAN HOR TENG @ TAN TIEN CHIT & ANOR [1995] 2 CLJ 713 wherein His Lordship Gopal Sri Ram (as he then was) in delivering the judgement in a case not relating to public law matters referred to legitimate expectation. However as stated above, the question of legitimate expectation does not arise in our present case based on the facts highlighted above. [46] Next, Court also finds further support in the decision by Liza Chan JC in AURA INDAH JAYA SDN BHD V OCBC BANK (M) BHD [2021] 10 MLJ 21 wherein Her Ladyship held as follows:- “1) This was not a complicated or technical case that could only be properly proved by oral evidence. The plaintiff’s January 16, 2023 22 only cause of action was predicated on a breach of contract. That issue could be resolved by a construction of the BA T&C and the General T&C. A trial would not throw further light on the matter as it could be decided, once and for all, without going to trial. Justice demanded that the action be dismissed as it could not succeed; neither should the defendant be put through the costly process of a full trial. (paras 56 & 57)

By signing the application forms, the plaintiff agreed, and was bound by, the BA T&C and the General T&C. Upon a proper construction of cl. 4.3 of the BA T&C and cl. 12.3 of the General T&C, and giving these clauses their natural and ordinary meaning, the defendant was entitled to close the three bank accounts and was not required to give any reason for doing so. It was axiomatic that the duty of the court was to give effect to the intention of the parties, as expressed. Furthermore, there is no duty, under general law, to give reasons when terminating a contract unless the contract itself stipulates the grounds for a valid termination. (paras 28, 36 & 37)

Clauses 12.2 and 12.3 of the General T&C were separate provisions for termination. Clause 12.2 provided four reasons or circumstances in which the bank may close the bank accounts while under cl. 12.3, both the plaintiff and the defendant have a right to close the three bank accounts by giving notice to the other January 16, 2023 23 without assigning any reason for such closure. To attribute the meaning as the plaintiff wished, to cl. 12.3, would offend the basic principle of law that does not require the court to imply words into the document or attribute to the parties an intention which they never had. (para 38)

Estoppel applied against the plaintiff from bringing this action to dispute the validity of the closure of the three bank accounts. After the bank accounts were closed, the balance was refunded to the plaintiff by way of a cashier’s order, which was encashed by the plaintiff without any objection or protest. The plaintiff had abused the court’s process by bringing the present action. Furthermore, with the action struck out, there was no more live issue for encl. 10; encl. 10 was rendered academic. (paras 47, 52 & 60)” [emphasis added] [47] Based on the decision AURA INDAH JAYA SDN BHD (supra), Court also finds that the Plaintiff is estopped form bringing this action after agreeing with the Defendant to refinance the loan facility. [48] Lastly as decided in AURA INDAH JAYA SDN BHD (supra), Court also finds that the issues in this case can be resolved by construction of the terms and conditions of the Loan Agreement and correspondences between the parties without the need for any oral evidence. A trial would not shed any further light on the documentary evidence that is produced before the Court now as it January 16, 2023 24 could be decided, once and for all, without going to trial and the Defendant ought not be put through the costly process of a full trial. DECISION [49] In the upshot, based on the forgoing reasons, I allow the Defendant’s application with cost and the Plaintiff’s claim is struck off. Dated this 21st December 2022 at Muar in the State of Johore. t.t. SURIA KUMAR DJ PAUL Judicial Commissioner High Court of Malaya Muar Johore Darul Ta’zim Counsels: For the Plaintiff : Manian K Marappan with Nursyahira Binti Sama’on For the Defendant : Tan Koon Heo with Adrian Tan Yen Sern January 16, 2023 25 Solicitors: For the Plaintiff Messrs Manian K. Marappan & Company Advocates & Solicitors Suite 7-02, 7th Floor, Wisma Sing Long No. 9, Jalan Zabedah 83000 Batu Pahat Johor [Ref. No. : MKM/BP/10343/2022/mayen] For the Defendant Messrs K.H. Tan & Co. Advocates & Solicitors No. 5-18, Tingkat 1 Jalan Ibrahim 84000 Muar Johor. [Ref. No. : TKH/OR/1209/22] Hearing Date : 1st November 2022, 18th December 2022 Decision Date : 16th January 2023