Temanse Aquaculture Sdn Bhd v Bank Pertanian Malaysia Berhad (Guaman No. 22M-88-06/2015)

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1 DALAM MAHKAMAH TINGGI MALAYA DI KUALA LUMPUR [BAHAGIAN DAGANG] GUAMAN NO: 22M - 88 - 06/2015 Antara TEMANSE AQUACULTURE SDN BHD ... PLAINTIF (No. Syarikat: 775634-U) Dan BANK PERTANIAN MALAYSIA BERHAD ... DEFENDAN Grounds of Judgment Azizah Nawawi, J:

Schedule

Schedule 2 of the Letter of Offer dated 15.6.2010. 7 [29] The plaintiff issued its 2nd – 5th Utilization Notices from 19.11.2012 – 17.12.2012. Following a site visit conducted by the defendant on 12.12.2012, the defendant proceeded to process the 2 nd – 5th Utilization Notices and requested for the supporting documents, which were given by the plaintiff on29.1.2013. [30] On 5.2.2013, the defendant requested the plaintiff to execute a Deed of Iqolah. On 24.2.2013, the plaintiff had requested for the defendant’s confirmation that the Deed of Iqolah is the last document required before disbursement. [31] On 13.9.2013, the defendant waived the requirement for the Deed of Iqolah but required that the plaintiff’s security parties to execute a letter of consent acknowledging the changes effected by the Supplementary Letter of Offer. However, the same were not executed. [32] On 27.09.2013 a meeting was held between the plaintiff and the defendant where the plaintiff informed the defendant that the plaintiff again effected change in the Project from “Siakap / Barramundi” to “Siakap / Barramundi and Red Tilapia” and sought for the defendant’s approval for the same. The plaintiff also sought for further variations to the Financing vis-à-vis waiver of profit on the 1st disbursement, additional Financing and replacement of guarantors. [33] Following the defendant’s letter dated 30.9.2013 requesting the plaintiff to submit documents on variations to the Financing and a site visit conducted by the defendant on 3.10.2013, the plaintiff 8 forwarded the requested documents on 22.10.2013 for the defendant’s assessment and approval. [34] In response to the plaintiff’s request, the defendant did by its letter dated 7.2.2014 inform the plaintiff that whilst the defendant was unable to accept the plaintiff’s change of fish species to “Siakap and Tilapia Merah”, the defendant was prepared to consider inter alia change of fish species to “freshwater fish species” and requested the plaintiff to furnish the necessary documents for the defendant’s consideration and approval. [35] Vide the same 7.2.2014 letter, the defendant reminded the plaintiff of its obligation to make payment of the monthly installments falling due and payable on the Financing since 1.5.2013 (being the 25th month after the 1st disbursement in April 2011). [36] The defendant issued a reminder letter dated 24.2.2014 to revert within 7 days thereof for the defendant’s further action and did also give notice that in the event no response is received, the defendant would assume that the plaintiff was no longer intent on pursuing the Financing. The defendant also did by its 24.2.2014 letter remind the plaintiff of its obligation to make payment of the monthly installments falling due and payable on the Financing. [37] By its letter dated 20.11.2014, the defendant notified the plaintiff that its proposal for variations of the Financing could not be considered by the defendant and that further action would have to 9 be taken by the defendant’s Special Asset and Management Department. [38] Vide its solicitor’s letter dated 6.4.2015, the plaintiff terminated the Financing Facilities Agreement. Findings of the Court [39] Since the parties have not agreed on the issues to be tried, and after considering the pleadings, the documents, the evidence and the submission of the parties, I am of the considered opinion that the main issues are as follows: (i) Whether there is any breach of the duty of care; (ii) Whether the defendant have breached the Facilities Agreements; and (iii) Whether the plaintiff has breached the Facilities Agreements by not paying the installment payments (counterclaim). Issue (i) breach of duty of care [40] The plaintiff’s causes of action against the defendant are as follows: (i) breach of duty of care; and (ii) breach of contract. 10 [41] With regards to the pleaded case of breach of duty of care, the relationship between the plaintiff and the defendant in this case is contractual, premised on the Facilities Agreement. In such a relationship, the fiduciary duty does not arise and therefore there is no breach of such duty. This can be seen from the judgment of Justice Ramly Ali (as His Lordship then was) in the case of Kian Lup Construction v. Hong Kong Bank Malaysia Bhd [2002] 7 MLJ 283: “Generally, banking institution provides a number of basic financial and advisory services to customers, namely: (1) traditional banking facility where customers deposit their moneys with the bank and the bank is liable to repay the money when demanded or instructed by the customer (as in the present case). These services are provided by operating a current account or savings account with the bank; (2) financial and advisory services where the bank is appointed by the customer to be the customer's advisor on matters relating to financial and advisory services. Usually these services are in addition to the first traditional services stated above; (3) financial facility where the bank provides loan or other financial facilities to customers such as overdraft facilities. In this category, the bank is a lender and the customer is a borrower. 11 In the first instance, the relationship between the bank and the customer is one of a debtor and a creditor. The bank is the debtor and the customer is the creditor. For the second instance, the relationship between the bank and the customer is a fiduciary relationship. This was decided in Hedley Byrne & Co. Ltd. v. Heller & Partner Ltd. [1964] AC 165 where Lord Devlin has stated that, "there should be a special relationship between parties which imposed a duty to give careful advice." In that case, the court went on to say that the special relationship is recognised as having four characteristics, namely: (1) the advice is required for a purpose, whether particularly specified or generally described, which is made known, either actually or inferentially, to the advisor at the time when the advice is given; (2) the advisor knows, either actually or inferentially, that his advice will be communicated to the advisee, either specifically or as a member of an ascertained class, in order that it should be used by the advisee for that purpose; (3) it is known, either actually or inferentially, that the advice so communicated is likely to be acted by the advisee for that purpose without independent inquiry; and (4) it is so acted upon the advisee to his detriment. 12 As for the third instance, ie, where the bank provides loan or financial facility to the customer, the relationship is also one of a debtor and a creditor. In this case, the bank is a creditor (lender) and the customer is a debtor (borrower). From the above three scenarios, only the second instances involve a fiduciary relationship between the bank and the customer, while the first and third instances, the relationship between them is merely contractual, ie, only as debtor and creditor, not fiduciary. The fact of the present case does not warrant the relationship as fiduciary. The plaintiff operated a current account with the defendant. Therefore, the relationship is merely contractual ie, that of a debtor and creditor, not fiduciary. The defendant issued the letter dated 22 March 1996 to the plaintiff based on the information obtained from Bank Negara Malaysia under the BNM BMC for the Global Closure on CUA Customers Report. The defendant is duty bound to issue such letter under the circumstances. As required by Bank Negara Malaysia, the defendant was to instruct the plaintiff to close the account with the defendant. The letter was sent to the plaintiff directly. It is not a case where the defendant is giving, some form of "advice" as stated in Hedley Byrne'scase. Therefore, the question of fiduciary relationship does not arise. The plaintiff's alternative claim on this issue can be dismissed.” (emphasis added) 13 [42] The relationship of a bank as a creditor (lender) and the customer as a debtor (borrower) was also considered by the Court of Appeal in Aseambankers Malaysia Bhd & Ors v. Shencourt Sdn Bhd & Anor [2014] 4 MLJ 619, where the court held that the parties’ relationship as banker/customer does not give rise to any breach of duty of care. The Court of Appeal held as follows: “[92] … It was a banker customer relationship between the appellants and the first respondent while the second respondent stood as a guarantor in his capacity as the main director and shareholder of the first respondent. None of these facts alluded to by the High Court Judge created a fiduciary relationship. These facts were matters which are quite common and they usually arose in negotiations between the borrower and the lender and when the borrower was already in default. … [94] James Foong FCJ writing for the Federal Court in RHB Bank Bhd (substituting Kwong Yik Bank Bhd) v Kuan Chew Holding Sdn Bhd recognised that a banker-customer relationship is purely contractual..” … [101] The nature of the banker customer relationship is entirely contractual. There is nothing fiduciary about it. The sole intention of the bank is to make a profit. There is no special relationship between the bank and the customer...” (emphasis added) 14 [43] In the circumstances of this case where the relationship between the defendant bank and its customer (the plaintiff) is premised on the Facilities Agreements, then the fiduciary duty does not arise and therefore there is no cause of action premised on a breach of such duty. Therefore, the plaintiff’s cause of action is limited to a breach of the Facilities Agreements. Issue (ii) breach of the Facilities Agreements [44] With regards to issue (ii), I am of the considered opinion that the following issues are pertinent in this case: (a) Whether the defendant has breached the Facilities Agreement by imposing additional terms; (b) Whether the defendant has breached the Facilities Agreement because there was a delay in the disbursement of the remainder of the loans; and (c) Whether the plaintiff is entitled to the damages because of the breach by the defendant. Issue (a) Whether the defendant has breached the Facilities Agreement by imposing additional terms; [45] One of the additional terms which the plaintiff alleged to have been imposed by the defendant is on the requirement of MOF approval in respect of a change of the fish species. 15 [46] The plaintiff takes the position that from the correspondence leading to the 2008 LOO clearly shows that the purpose of the loans was for an “Integrated Aquaculture Project”, and is not limited to the farming of “patin” fish only. As such there is no requirement for consent if the plaintiff wants to change the fish species from “Patin” to other species. [47] However, the MOF’s letter dated 10.9.2008 has clearly approved the loan of RM13 million is for the purpose of “menjalankan projek Membiak, Menternak dan Memproses Ikan Patin di Tasik Kenyir, Terengganu.” [48] Pursuant to the MOF’s approval, the defendant issued the 2008 LOO to the plaintiff to offer a loan of RM13 million to part-finance the costs of breeding, rearing and processing “Patin / Pangasius” Fish at the Project Sites. [49] The 2008 LOO was revoked when the defendant issued the LOO dated 15.6.2010. However, the purpose of the financing remained unchanged, that is to part-finance the breeding, rearing and processing of ‘Patin’ fish. [50] Added to that, clause 18 of the 2010 LOO also prohibits the change in the Project without prior written consent of the defendant. [51] However, from the evidence it is shown that by 2011, the main fish was no longer ‘patin’ but ‘siakap’ fish. This can also be seen from the plaintiff’s Progress Report where it is stated that the 16 plaintiff had diversified from ‘patin’ to ‘tilapia’ in October 2009, ‘siakap’ in November 2011 and ‘keli’ in 2011. [52] With the change in the fish species in the Project, the next issue is whether the requirement to obtain the MOF approval is an additional requirement which amount to a breach of the Facilities Agreement. [53] Having considered the evidence, I find that from the parties’ previous conduct, any major policy decision involving the Project would require MOF approval and in this case, the plaintiff had also elected to obtain the approval of MOF: (i) when the plaintiff applied for the loans, the plaintiff had written to MOF for the approval of the GLC loans of RM13 million; (ii) that it is only after the approval by MOF that the defendant issued the 2008 LOO to the plaintiff; (iii) that when the plaintiff applied to replace the requirement for collateral with a corporate guarantee by ROHAS under the 2008 LOO, the plaintiff had applied for approval from the MOF, and MOF vide a letter dated 7.5.2009 had rejected the plaintiff’s application; (iv) that when the plaintiff had secured the Charged Property of a value of RM3 million, which is less than the RM5.6 million 17 under the 2008 LOO, the plaintiff also sought MOF approval of the same; (v) that the defendant only issued the 2010 LOO (dated 15.6.2010) and the execution of the Facilities Agreement after MOF had approved the plaintiff’s request vide a letter dated 10.6.2010; (vi) that the plaintiff’s proposal to change fish species and variation of the financing was discussed at the MOF GLC Fund Committee meeting and it was MOF that gave the approval for the plaintiff’s application for a variation of the project and the financing. [54] Therefore, despite clause 18 of the 2010 LOO requiring prior written consent of the defendant, but because the GLC Funds was allocated by MOF, which is also the approving body for the eligibility and amount of loans to be approved, as well having control over the policy matters, the approval of the MOF is required when there is change in the purpose of the financing as well as the variations of the financing. As such, I find that the requirement of approval from MOF is not a new condition imposed by the defendant. The requirement of MOF approval is clearly from the very beginning, from the approval of the loans, the amount of the loans, the change on the requirement of collateral and the change in the purpose of the loan and the variation of the financing. 18 [55] Added to that, since the plaintiff had accepted the Supplementary LOO dated 23.11.2012, which allowed the change of fish species, the financing of ‘siakap’ fish from ‘patin’ fish, the plaintiff cannot now complain that this is an additional requirement. Therefore, from these facts, the requirement of MOF approval is not an additional requirement, but part of the scheme which the plaintiff has accepted and complied with. [56] At the same time, the plaintiff’s case that Tuan Haji Azman, the defendant’s previous Head of Corporate Clients and International Banking, had suggested that the change of fish species was “acceptable and nothing needed to be done” is not supported by the contemporaneous documents before this court. [57] The plaintiff also complained on the requirement to furnish the audited accounts, the bank statements, the management accounts and the Progress Report amounts to imposing additional conditions for disbursements. [58] However, I am of the considered opinion that the said documents are not additional conditions, but are based on the provisions of the Facilities Agreements. Clause 12(k) of the 2010 LOO and clause 30 of the ASA provides that disbursements shall be released progressively based on actual progress of the Project. These provisions also provide that that the request for disbursements shall be accompanied by Utilization Notices supported by invoices, vouchers, progress reports and other documentary evidences. Under clause 14 of the 2010 LOO and 19 clause 21.5 of the ASA, the defendant has the right to inspect the plaintiff’s accounts and financial documents. [59] The same is with regards to the Deed of Iqolah, which the Plaintiff has failed to execute despite repeated reminders. Therefore, it cannot be said that the defendant have insisted on additional conditions before disbursement of the loans. Issue (b) Whether the defendant has breached the Facilities Agreement because there was a delay in the disbursement of the remainder of the loans [60] The plaintiff submits that the first breach is premised on the delay in the disbursements of the loans. The plaintiff submits that the defendant has breached the Facilities Agreements when it failed to disburse the RM13 million loan. Clause 6 of the 2010 LOO provides that the RM13 million loan has to be disbursed within 6 months from the signing of the Facilities Agreements, and under clause 30, monies are to be disbursed within 3 days after the issuance of the utilisation notices. [61] A similar argument was taken by the borrower in the case of Bank Pertanian Malaysia Bhd v Kristal Prima Resources Sdn Bhd & Ors [2013] 1 LNS 372 where it was contended that the project failed because the bank did not fully disburse the funds under the banking facility within 6 months. In this regard, Mohammad Ariff Bin Yusof JCA, in rejecting such argument, held as follows: 20 “[20] …The approach to construction of commercial contracts by the courts has been repeatedly defined and refined in the cases. The law favours a commercially sensible construction since such a construction will be more likely to give effect to the intention of the contracting parties. As stated in Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749. “…the standard of a reasonable commercial person is hostile to technical interpretations and undue emphasis to niceties of language.” … …On the same basis, the construction placed by the 1st Respondent that the full disbursement had to be released within 6 months from the date of signing of the Facility Agreements could not be reconciled with the express terms of the contract. We agreed with the position adopted by the Appellant that the BBA Financing here made disbursement dependent upon the progress of the Project. With due respect, this position is again a matter of placing a reasonable reading of the commercial sense underlying the transaction. Which bank will agree to disburse the entire facility sum in a project financing arrangement without ensuring that the project is progressing? In any event, we found Clause 12(i) in the Letter of Offer and Additional Conditions Precedent (i) in the Fourth Schedule of the Asset Sale Agreement conclusive on this point.” (emphasis added) 21 [62] The 1st Utilisation Notice was issued on 7.3.2011 for the disbursement of RM7,770,237.00 from the RM13 million loan. Pursuant to clause 30 of the ASA and the APA, the plaintiff application must be supported by documentary evidence, invoices, vouchers, bills on work progress and payments due for such progress works. Clause 30 reads: “Then, subject to the provisions of this Agreement and the actual progress of the Project, the Customer may on Business Days at any time during the availability Period, but not thereafter, request the necessary releases of the BBA Facility by giving to the Bank in each case a Utilisation Notice in the form set out in the Fifth Schedule annexed hereto duly completed and signed on behalf of the Customer supported by relevant documentary evidence, invoices, vouchers, bills on progress work completed to-date and payment due for such progress works completed by three (3) Business Days before the proposed date of payment.” [63] Added to that, clause 12 of the 2010 LOO provides the following term: “12. PENGELUARAN WANG PEMBIAYAAN Pengeluaran pembiayaan hanya akan dibuat setelah:- a) ….. …. 22 k) Pengeluaran wang akan dibuat secara berperingkat mengikut kemajuan projek sebenar dan jika perlu disokong dengan inbois, baucher, bil dan dokumen lain...” [64] Further, there are also other provisions in the APA and ASA which must be satisfied before disbursement, such that disbursement is subject to completion of all legal documentation to the satisfaction of the Bank (Clause U, 2nd Schedule APA and Clause 21, 3rd Schedule ASA), that the plaintiff having complied with and satisfied to the defendant’s satisfaction all operation of the Financing as may be stipulated from time to time (Clause V, 2nd Schedule APA and Clause 22, 3rd Schedule ASA) and the fulfilment of all other condition precedents and additional conditions contained in Clause 12k of the 2010 LOO, Schedule 2 and 3 of APA and Schedule 3 and 4 of ASA. [65] Therefore, I agree with the defendant that Clause 6 of the 2010 LOO (that the RM13 million loan has to be disbursed within 6 months from the signing of the Facilities Agreements) and clause 30 (that monies are to be disbursed within 3 days after the utilisation notices) must be read with the other provisions in the 2010 LOO and the Facilities Agreements that the application for disbursement be supported by the required financial statements, bank statements, including the latest Project Progress Report. [66] It is not in dispute that a sum of RM3.53 million was disbursed to the plaintiff on 22.4.2011, which the defendant states to be within their discretion. However, the balance sum of RM4,240,237.00 23 sought in the 1st Utilisation Notice was not disbursed as the defendant says that there must be compliance with clause 30 of the Facilities Agreement read with Clause 12(k) of the 2010 LOO, that the disbursement is also dependent on the progress of the Project and also subject to the fulfilment of the other conditions in the 2010 LOO and the Facilities Agreements. [67] With regards to the progress report of the Project, the plaintiff had replied in a letter dated 14.7.2011, enclosing inter alia, a progress report of the Project. [68] However, the defendant noted that from the Progress Report submitted by the plaintiff, there was a change in the fish species in the Project, from ‘Patin’ to ‘Siakap’. Following a meeting on 1.8.2011 and a letter dated 1.8.2011, the plaintiff is to submit a new business plan for the change in species of fish. The plaintiff submitted New Business Plan to the defendant on 4.10.2011, and to the MOF on 13.12.2011. Therefore, I am of the considered opinion and I accept the defendant’s evidence that they cannot release the balance sum under the 1st Utilization Notice until further assessment of the Project was conducted and pending approval of MOF in respect of the change of species of fish. [69] I am of the considered opinion that at this stage, the onus is on the plaintiff to comply with the conditions on disbursement, and the delay from the 1st Utilisation Notice until the submission of the Progress Report is due to the Plaintiff’s failure to comply with the condition on disbursement. 24 [70] 19. Then, in various emails dated 14.12.2011, 15.12.2011, 12.2011 and 23.12.2011, the plaintiff seeks to vary the terms of the Financial Agreements which was approved by MOF resulting in the Supplementary LOO dated 23.11.2012. [71] Therefore, I am of the considered opinion that when the plaintiff accepted the Supplemental LOO dated 23.11.2012, there is no longer any issue on the delay in the disbursement of the 1st Utilisation Notice. [72] At the same time, I find that the defendant did not breach the Facilities Agreement by delaying the disbursement of the balance of the 1st Notice of Utilization. This can be seen from the chronology of events, which are as follows: Date Event 1. 15.6.2010 2010 LOO accepted by the plaintiff for RM13 million loan to part finance Project of breeding, rearing and processing Patin fish. 2. 2.3.2011 Execution of the Facilities Agreements 3. 7.3.2011 1st Utilization Notice for RM7,770,237.00 4. 15.4.20011 Defendant disbursed RM3,530,000.00 5. 2.6.2011 Plaintiff requested for balance of RM4,240,237.00 under 1st Utilization Notice 6. 6.6.2011 Defendant requested for plaintiff’s financial statements and latest Project Progress Report in order to process the balance of the disbursement 7. 14.7.2011 Plaintiff gave latest Project progress report dated 3.7.2011 – there was a change of fish species 25 8. 1.8.2011 Meeting between the plaintiff and defendant 9. 4.10.2011 Plaintiff reverted with New Business Plan Summary (2011-2018) and Cash flow Forecast 10. 13.12.2011 Plaintiff sought MOF approval on change of fish species and extension of time for repayment 11. 14.12.2011 Plaintiff’s email to defendant – seeking variation (5th request) on financing. Meeting between plaintiff and defendant Defendant reminded plaintiff of documents requested in defendant’s letter dated 6.6.2011 12. 15.12.2011 Plaintiff’s email to MOF seeking variation on financing. 13. 23.11.2011 Plaintiff’s email to defendant on its discussion with MOF on proposal for variation of financing 14. 29.12.2011 Plaintiff forward financial documents as requested by defendant in its letter dated 6.6.2011 15. 9.1.2012 Site visit by defendant and MOF officers 16. Jan/Feb 2012 Plaintiff forwarded documents on project for defendant’s assessment and MOF approval 17. April 2012 MOF GLC Fund Committee meeting – discuss on plaintiff’s proposal for variation of financing 18. 9.10. 2012 MOF GLC Fund Committee meeting – discuss on plaintiff’s proposal for variation of financing 19. 9.11.2012 MOF approved plaintiff’s proposal for variation of financing 20. 23.11.2012 Supplementary LOO on change of purpose of financing and repayment terms. [73] From the above facts, the delays cannot be said to be due to the breach by the defendant, but the failure of the plaintiff to furnish the progress reports, the financial documents, the issue on the change of species of fish, the submission of proposal to MOF and 26 the time taken by MOF to consider the plaintiff’s application for a variation of the facilities. [74] The plaintiff also submit that the defendant has breached the Facilities Agreement for the delay and/or failure to disburse the remainder of the Financing by the 2nd – 5th Utilisation Notices dated 29.11.2012, 13.12.2012, 13.12.2012 and 17.12.2012.The salient facts pertaining to the 2nd – 5th Utilization Notices are as follows: Date Events 1. 19.11.2012 – 17.12.2012 2nd to 5th Utilization Notices 2. 12.12.2012 Pre-disbursement site visit by the defendant 3. 11.1.2013- 29.1.2013 Emails between the plaintiff and the defendant on the lack of supporting documents. Plaintiff only forwarded the last missing supporting document on the 2nd – 5thUtilization Notices to the Defendant on 29.1.2013. 4. 5.2.2013 Defendant requested the plaintiff to execute Deed of Iqolah 5. 24.2.2013 Plaintiff requested for the Defendant’s confirmation that the Deed of Iqolah is the last document before disbursement, expected timeline for disbursement and the sums to be disbursed on the 2nd – 5th Utilisation Notices 6. 18.3.2013 Defendant gave its confirmation that Deed of Iqolah is the last document before disbursement, timeline for disbursement and the sums to be disbursed on the 2nd – 5th Utilisaiton Notices 7. April – July 2013 Plaintiff’s letters of complaints to the defendant 27 Defendant issued reminders to plaintiff to execute Deed of Iqolah 8. 1.5.2013- 23.5.2013 Monthly instalment under financing due on 1.5.2013. Defendant’s reminder letters to plaintiff to pay monthly instalment due under the Facilities Agreements. 9. 13.9.2013 Defendant waived the Deed of Iqolah but required the plaintiff’s security parties to execute a letter of consent acknowledging the changes effected by the 2012 Supplementary LOO. 10. 27.9.2013 Meeting between plaintiff and defendant. Plaintiff requested for 6th variation of Financing and defendant requested documentation. 11. 30.9.2013 Defendant requested documentation to process plaintiff’s request for variation. 12. 3.10.2013 Site visit by defendant. 13. 22.10.2013 Plaintiff forward documents to defendant. 14. Oct – Dec 2013 Exchange of emails between plaintiff and defendant on documentations. 15. 7.2.2014 Defendant informed the Plaintiff that whilst the Defendant was unable to accept the Plaintiff’s change of fish species to “Siakap and Red Tilapia”, the Defendant was prepared to consider inter alia change of fish species to “freshwater fish species” (to avoid the Plaintiff seeking further variations to the Financing in the event further change to fish species is effected) and requested the Plaintiff to furnish the necessary documents for the Defendant’s consideration and approval. The Defendant also did remind the Plaintiff of its obligation to make payment of the monthly instalments falling due and payable on the Financing since 1.5.2013. 28 16. 24.2.2014 Defendant issued a reminder to the Plaintiff on the Defendant’s 7.2.2014 letter and asked that the Plaintiff revert within 7 days thereof, failing which the Defendant would assume that the Plaintiff was no longer intent on pursuing the Financing. Defendant reminded the Plaintiff to make payment of the monthly instalments due and payable under the Financing. 17. 18.3.2014 Plaintiff’s letter enclosing an updated Cash Flow Projection 18. May – Nov 2013 Emails between the plaintiff and the defendant on further documents on the plaintiff’s request for variations 19. 20.11.2014 Defendant refused plaintiff’s request for change in financing. 20. 6.4.2015 Plaintiff terminated the Facilities Agreements. [75] Premised on the evidence before this court, I find that the plaintiff’s 2nd – 5th Utilisation Notices were not sufficiently supported by documentary evidence and the plaintiff had only adduced the documents by its emails dated 29.01.2013 and 05.02.2013. The plaintiff had also failed to execute the Deed of Iqolah since 5.2.2013 despite repeated reminders issued by the defendant and/or its solicitors. Added to that, when the defendant was prepared to waive the Deed of Iqolah, but only require the plaintiff to obtain the consent and acknowledgement of the Guarantor/Chargor vis-à-vis the changes made vide the Supplementary LOO, the plaintiff still refused to adhere to such request. 29 [76] Further, the plaintiff was also in breach of the terms and conditions of the Facilities Agreement when the plaintiff has failed to pay the monthly profit charges of RM40,625.00 which was due and payable on 1.5.2013. [77] The situation is further complicated by the plaintiff effecting further changes in the Project by breeding, rearing and processing “Tilapia Merah “Siakap” as its main/primary fish species (now in place of “Siakap/Barramundi”) and sought the approval vis-à-vis the change in fish species as well as other variations to the Financing. The defendant was still prepared to consider the variations sought and requested the plaintiff to provide the necessary documents for assessment but the plaintiff was not forthcoming with their response and continued to default in the repayment of the monthly instalments. [78] Therefore premised of the above facts, I agree with the defendant that the plaintiff’s allegation of breach against the defendant for non-disbursement of the remainder of the Financing clearly cannot stand. [79] In Bank Pertanian Malaysia Berhad v PSK Vega Sdn Bhd [2015] MLJU 916, the Bank had granted a RM18 million loan to the defendant to finance and agricultural fruit orchard project (for the specific purpose of planting jackfruit, banana and papaya) pursuant to MOF’s approval of the defendant’s loan application to MOF. During a site visit, the Bank raised several concerns in that the progress of the Project did not commensurate with the initial disbursement of the RM 6,150,000; (ii) the packing house and 30 processing factory were not built; (iii) only approximately 50 acres of the land were planted against the supposed 400 acres; and (iv) failure of defendant in making equity contribution for purposes of the Project as per its financial statement, which were never rectified and therefore the Bank withheld disbursement. The defendant also sought various changes in the Project, including the utilisation of funds and Bank requested which was not approved by MOF. The High Court held that the Bank was entitled under the terms of the lending documents to withhold further disbursements as the defendant did not take steps to rectify the breaches or provide the requested information sought by the Bank. [80] In Malaysia Debt Ventures Bhd v MK Construction & Communication Sdn Bhd & Ors [2012] MLJU 308, the High Court held that in accordance to the terms of the agreements, the Bank was entitled to release disbursement accordingly upon being satisfied that the documentations are adequate prior to disbursements based on the express terms and conditions of the lending documents. It was further held that: “On the strength of the above provisions, the submissions of the Defendants that they were entitled to the immediate disbursement of the 2nd Facility, for me, is misconceived as there is no obligation on the Plaintiff to meet the burning need of the 1st Defendant on instant basis. …The Plaintiff should have been satisfied first with the documentary evidence submitted by the 1st 31 Defendant in support of its Request for Disbursement before any disbursement could be made. There is nothing in the Letter of Offer dated 16.3.2009 and the Master Facility Agreement dated 10.4.2009 which the Court finds that could give an interpretation of what constitutes satisfaction to the Plaintiff but, in my considered view, based on its plain and ordinary meaning, satisfaction to the Plaintiff would necessarily mean documentary evidence and/or the fulfillment of the conditions precedent acceptable to, and at the sole discretion of, the Plaintiff.” (emphasis added) [81] To conclude, I find that the defendant has not breached the Facilities Agreement because a delay in the disbursement of the remainder of the loans. (c ) Whether the plaintiff is entitled to the damages because of the breach by the defendant. [82] If I am wrong in my findings above, the next issue is whether the plaintiff is entitled to any damages because of the breach by the defendant. [83] The plaintiff’s claim on damages are as follows: (i) A declaration that the Defendant is not entitled to recover the RM3.53 million that was disbursed to the Plaintiff; (ii) Claim for general damages to be assessed by the Court; 32 (iii) Loss of profit of RM19,577,973.00 (‘Siakap’ Projection) or RM3.3 million per year (‘Patin’ Projection); (iv) The sum of RM4,912,000.00 being the Plaintiff’s Equity Participation in the Project; and (v) Aggravated and exemplary damages [84] It is trite law that the plaintiff bears the burden of proving its damages. In order for the plaintiff to be able to claim damages, the plaintiff must prove the damage and it is not enough to merely write down the particulars and rely on the same. In Tan Sri Khoo Teck Puat & Anor v. Plenitude Holdings Sdn. Bhd. [1995] 1 CLJ 15, the Federal Court held as follows: “Before we embark upon a detailed consideration of the specific issues which arise for decision, there are three preliminary matters which, at the outset, require emphasis. Firstly, that part of the judgment which provides that the vendor shall pay to the purchaser damages to be assessed for wrongful termination of the agreement with costs and that Tan Sri Khoo and the vendor shall pay to the purchaser damages tobe assessed for breaches of the undertakings, even though affirmed on appeal, can in no way relieve the purchaser of satisfying the fundamental requirement of having to prove its loss (if any) arising from those breaches. To hold otherwise would amount to dispensing with proof of quantum altogether, and that 33 cannot be the law. In so saying, we reminded of the words of Lord Goddard in Bonham – Carter v. Hyde Park Hotel Ltd 64 TLR 177 at p. 178: Plaintiffs must understand that if they bring actions for damages it is for them to prove their damages; it is not enough to write down the particulars, so to speak, throw them at the head of the court, saying: ‘this is what I have lost, I ask you to give me these damages’ They have to prove it”. (emphasis added) [85] In Popular Industries Ltd v. Eastern Garment Manufacturing Sdn Bhd [1990] 1 CLJ 133; [1989] 3 MLJ 360, the Court held at p. 367: “It is axiomatic that a plaintiff seeking substantial damages has the burden of proving both the fact and the amount of damages before he can recover. If he proves neither, the action will fail or he may be awarded only nominal damages upon of the contravention of a right. Thus nominal damages may be awarded in all cases of breach of contract (see Marzetti v. Williams 109 ER 842). And, where damage is shown but its amount is not proved sufficiently or at all, the court will usually decree nominal damages. See, for example Dixon v Deveridge (1825) 2 C & P 109; 172 ER 50 and Twyman v. Knowles 138 ER 1183”. (emphasis added) 34 [86] The plaintiff claim for damages is based on a breach of the Facilities Agreement under section 74 of the Contracts Act 1950. With regards to section 74 of the Contracts Act 1950, in Malaysian Rubber Development Corp Bhd v Glove Seal Sdn Bhd [1994] 3 MLJ 569 SC, it was held by Mohamed Dzaiddin SCJ at page 575/b-e: “In considering the above question, it is important to bear in mind that the normal measure of damages for breach of contract in this country is prescribed by s 74(1) of the Contracts Act 1950, which is the statutory enunciation of Hadley v Baxendale (1854) 9 Ex 341 (Teoh Kee Keong v Tambun Mining Co Ltd [1968] 1 MLJ 39 ; Bank Bumiputra Malaysia Bhd Kuala Terengganu v Mae Perkayuan Sdn Bhd & Ors [1993] 2 MLJ 76 , SC). In essence, the section states that the party may recover any loss or damage for any breach which: (a) naturally arose in the usual course of things; or (b) which the parties knew, when they made the contract, to be likely to result from the breach of it. For the sake of completeness, it should be mentioned that our courts have treated the position under the second limb of the section to be similar to the second limb of Hadley v Baxendale, which is, the party may recover damages which may ‘reasonably be supposed to have been in contemplation of both the parties, at the time they made the contract’ (emphasis added) 35 [87] In Voo Nyuk Fah & Anor v Lam Yat Kheong & Anor [2012] 5 CLJ 229, the Court held as follows: “It is trite law that the task of accounts and assessment of damages is an exercise of judicial discretion. Such discretion is based is a judicial one, as it is not exercised based on whims and fancies, but be reference, guidance and application of established judicial principles and of course having regard to all the facts and evidence adduced before the officer or the judge who undertakes the assessment.” [88] Premised on the settled principles above, I will now deal with the pleaded issues on damages. (i) A declaration that the defendant is not entitled to recover the RM3.53 million that was disbursed to the plaintiff [89] I agree with the defendant that pursuant to the express terms and conditions of the Facilities Agreements, and upon the plaintiff’s breach in failing to make payment of the monthly installments, the defendant is entitled to recover the RM3.53 million that was disbursed to the plaintiff. (See section 33.4 of the ASA). (ii) Claim for general damages to be assessed by the Court [90] On this, I agree with the defendant that the plaintiff has failed to prove this claim for general damages as no evidence was given to support the same. 36 (iii) Loss of profit of RM19,577,973.00 (the ‘Siakap’ Projection) or 3.3 million per year (the ‘Patin’ Projection) [91] In Sony Electronics (M) Sdn Bhd v Direct Interest Sdn Bhd [2007] 1 CLJ 611, the Court of Appeal gave clear instructive guidance on how to prove loss of profits. Zainun Ali JCA (as she then was) delivering the judgment of the Court at page 625 said this: "[66] Thus even if the authenticity of the statements was not called into question, it is still incumbent upon the respondent to prove their contents and to show how they are related to the alleged breach of the agreement (if respondent were to depend on the said documents to prove its case). [67] We would go further and say that even if the source documents, ie, account books were in evidence, the one vital link which is missing is the presence of a person of skill, of whom Ramlan is not one. [68] This person of skill is required, on the strength of s. 34 of the Evidence Act, to prove the entries and documents as he is "someone having personal knowledge of the transactions reflected in such entries..." [69] His 'skills' would be critical in this case, in giving professional input as regards, inter alia: 37 (a) The percentage of the loss; (b) Whether the loss is due to the loss of a particular contract; (c) Giving a comparative study of business trend of the respondent (calculating loss of future business); (d) In calculating gross margin or the net margin; (e) Chart the performance of the company etc. [70] As in the Popular case ([1990] 1 CLJ 133), there was also a set of purportedly audited accounts but which lack: (a) Books to substantiate the statements; (b) Accountant/accountants who themselves audited the accounts to testify to the truth and accuracy of the statements. [71] If the said accounts were to be admitted, then someone is to testify from where they were obtained. [72] Thus in the absence of that person of skill to prove the respondent's documents, the respondent's claim for Damages remain obscure, unacceptable and consequently inadmissible. 38 [73] The essence of all these is that, the burden of proof in terms of admissibility and relevancy never shifted from the respondent". [92] In the present case, the plaintiff merely relied on its Cash Flow Projection annexed to its 2007 and 2011 Business Plans to show a purported loss of profit. However, the said Business Plans were not supported by any underlying documentary evidence to substantiate the figures therein. Added to that, in her evidence under cross examination, PW1 had admitted that the same is based on assumptions: “JYT Yes, My Lady. Do you agree that even the projection that you refer to is dependent on various assumptions on selling price, feed price etc? Of course, My Lady. All projections are based on assumptions. … Do you have the documents to show that this was the cost sale price of Patin? No. Do you have documents here to show that you had contracts with third parties for the supply of fish of this quantum? We have already established earlier today that we had no such contracts in the bundles. Do you have documents to show the different operating costs that have been referred to page 34? The salaries? All your different figures that have been mentioned here. Not in the bundles, My Lady. …. 39 The contracts that support the sales revenue that you’ve referred to of RM19 million from 2012 to 2020. Not present in the documents? We do not have the contract, My Lady.” (see page 97 NOP) [93] In Sime UEP Properties Bhd v. Woon Nyoke Lin [2002] 3 CLJ 719, the Court of Appeal held that the Respondent had failed in her claim for damages and loss of profit as she had only tendered a projection of the sales she might have made as a result of her business if the rental of kiosk had succeeded. The court said that: “It is clear from the authorities that in order to succeed in claims for damages for loss of profit one must establish the actual losses one would have suffered as a result of the breach. A projection as in this case is not sufficient to establish the would be losses of profit…” (emphasis added) [94] The decision in Sime UEP Properties Bhd (supra) was followed by the Court of Appeal in of Government of the State of Sabah v. Suwiri Sdn Bhd [2005] 4 CLJ 727 where the majority held that: “As for the claim for damages for breach of contract, the respondent must strictly prove its loss or damage. In the present case, the learned JC awarded the respondent RM21,890,113.75 as damages for the defendant’s alleged breach of contract on the unchallenged evidence 40 of PW2 which appeared to the JC to be clear and comprehensive. However, on the evidence, the respondent had failed to prove it. A profit projection even though unchallenged is not sufficient to establish the would-be losses of profit especially taking into account the exigencies, risks and fluctuations in the logging and timber trade which will have an impact on the alleged projected profits (see Sime UEP Properties Bhd v. Woon Nyoke Lin [2002] 3 CLJ 719; KPM Khidmat Sdn Bhd v. Tey Kim Suie [1994] 3 CLJ 1)” (emphasis added) [95] In Bank Muamalat Malaysia Bhd v. Sophisticated Pipe Industry Production Sdn Bhd [2011] 9 CLJ 748, the defendant attempted to rely on purchase orders and forecast of estimated profits and loss account, if his factory had eventually started operations to show his loss of profit. The High Court in this case held that the defendant had failed to prove actual loss of profit as it was too remote and not reasonably for see able. [96] Since the plaintiff’s case is premised only on the Projection Report which are based on mere assumptions, I find that the plaintiff has failed to prove the alleged loss of profit of RM19,577,973.00 and/or RM3.3 million per year and/and general damages. 41 (iv) The sum of RM4,912,000.00 being the plaintiff’s Equity Participation in the Project [97] In respect of the claim for the plaintiff’s own equity participation, I agree with the defendant that no primary documents were adduced to establish the RM4,912,000.00 said to be disbursed. Further, the plaintiff who had invested such monies as part of the plaintiff’s own Project plans cannot claim that such sums are to be refunded by the defendant. (v) Aggravated and exemplary damages [98] For a claim for aggravated and/or exemplary damages, the Court of Appeal in Zulkiply bin Taib & Anor v. Prabakar a/l Bala Krishna & Ors and other appeals [2015] 2 MLJ 607 held that exemplary damages are only awarded in the following 3 categories of cases: (i) where there is oppressive, arbitrary or unconstitutional action by a government servant; (ii) if the conduct of the defendant is calculated by him to make profit for himself which may well exceed the compensation payable to the plaintiffs; and (iii) where exemplary damages are authorised by statute. 42 [99] Since the plaintiff’s case does not fall within any of the 3 categories set out in the above case, this claim for aggravated and exemplary damages is therefore without any basis. Conclusion (the plaintiff’s claim) [100] Premised on the reasons enumerated above, I am of the considered opinion that the plaintiff has failed to prove its case on the balance of probability against the defendant, either on liability or on damages. Counterclaim [101] The issue here is whether the plaintiff has breached the Facilities Agreement and whether the defendant is entitled to recover the sums that was disbursed to the plaintiff. [102] It is not in dispute that the defendant had disbursed the sum of RM3,530,000.00 to the Plaintiff. [103] It is also not in dispute that the plaintiff did not make any payments when the instalments are due and payable. Pursuant to para 2 and 3 of the Supplementary LOO dated 23.11.2012, the plaintiff was given a moratorium period for the 1st – 24th month (during which profit and principal sum repayments are not necessary), a 25 – 48 month grace period (during which principal sums repayments are not necessary) and the monthly instalment was amended to RM40,625.00 per month for the 25th – 48th month. Since the first disbursement was made in April 2010, the 43 plaintiff is required to make its first monthly repayment of RM40,625.00 on 1.5.2013 (i.e. the first day of the 25th month after disbursement). [104] Therefore, I agree with the submission of the defendant that the defendant’s letters dated 23.5.2013, 30.9.2013, 7.2.2014 and 24.2.2014 were properly and correctly issued and that by reason of the plaintiff’s breach, the defendant is entitled to the sum of RM4,098,668.49 being the balance Sale Price due and owing as at 31.7.2015 together with compensation (ta’widh) for late payment as prayed for in the Counterclaim. (AZIZAH BINTI HAJI NAWAWI) JUDGE HIGH COURT MALAYA (Appellate and Special Powers Division 2) KUALA LUMPUR Dated: 28 November 2017 For the Plaintiff : Richard Kok and Azlan Abd Hamid Messrs Rhiza & Richard Kuala Lumpur. For the Defendant : Datin Jeyantini Kannaperan and Marina Nasution Messrs Shearn Delamore & Co Kuala Lumpur.