Trenergy Infrastructure Sdn Bhd v Hong Leong Bank Berhad (WA-24NCC-425-09/2024)

Before the court is an Originating Summons dated 3.9.2024 filed by the Plaintiff, Trenergy Infrastructure Sdn Bhd, seeking a declaration that it is entitled to all rights and interests in funds held by the Defendant, Hong Leong Bank Berhad, in Fixed Deposit Accounts and an Escrow Account established pursuant to a Facilities Agreement dated 15.4.2021.

After careful consideration of the affidavits, written submissions, and oral arguments of both parties, I find in favour of the Plaintiff for the reasons set out below.

The Plaintiff and the Defendant entered into a Facilities Agreement dated 15.4.2021 (“the Facilities Agreement”) whereby the Defendant granted the Plaintiff banking facilities comprising a Revolving Contract Financing Line (“RCFL”) in the total sum of RM34,550,000.00 and a Specific Contract Financing Line (“SCFL”) in the sum of RM34,211,000.00 under the sublimit of the RCFL.

The RCFL was utilised by the Plaintiff as a general credit financing line, whereas the SCFL was utilised for specific contracts with Tenaga Nasional Berhad, particularly Contract TNB517/2016 Variation Orders No. 3 and No. 4 (collectively referred to as “the Contracts”). [5]

It is hereby expressly agreed and declared that, unless the Lender otherwise agrees, the security created hereunder or any security whether given now or hereafter or from time to time shall not be discharged or released except on payment of not only all monies secured hereby but also all monies whatsoever or howsoever owing or payable or due from the Borrower(s) and/or the Securities Parties to the Lender (whether such liability be present, future, actual, contingent, primary, secondary, collateral, secured or unsecured, several or joint) under any account or accounts of whatsoever nature (whether current, deposit or loan account), agreement or contract or otherwise with the Lender.

Without prejudice to any other remedies which the Lender may have, the Lender may at any time or from time to time at its discretion by providing seven (7) days' notice to the Borrower, combine, consolidate or merge all or any of the Borrower(s)' and/or the Security Parties' account or accounts of whatsoever nature (whether current, deposit or loan account), at any branch of the Lender with any liabilities of the Borrower(s) and/or the Security Parties (whether such liability be present, future, actual, contingent, primary, secondary, collateral, secured or unsecured, several or joint) under any account (whether current, deposit or loan account), agreement (including under this Agreement), or contract or otherwise with the Lender and set off or transfer any sum (whether in the same or different currencies) standing to the credit of any such account, agreement or contract in or towards the satisfaction of any of the Borrower(s)' and/or the Security Parties' liabilities to the Lender under this Agreement and the Security Documents or under any account or accounts of whatsoever nature (whether current, deposit or loan account), agreements or contracts or otherwise (whether such liability be present, future, actual, contingent, primary, secondary, collateral, secured or unsecured, several or joint) with written notice to the Borrower and the Borrower(s) hereby expressly covenants that all liabilities of the Borrower(s) after such consolidation shall also be secured by this Agreement and the Security Documents.” [28] The Defendant submits that this provision expressly contemplates the retention of securities and the exercise of consolidation rights in respect of liabilities of Security Parties “under any account or accounts of whatsoever nature” with the Lender, regardless of whether the specific facilities granted to the Borrower remain active. The Defendant argues that Section 16.04(a) specifically states that securities “shall not be discharged or released except on payment of not only all monies secured hereby but also all monies whatsoever... owing or payable or due from... the Securities Parties to the Lender,” and that this creates a continuing obligation that survives the cancellation of the particular facilities granted to the Plaintiff. Furthermore, the Defendant contends that Section 16.04(b) grants it the discretionary right to consolidate accounts and set off sums “at any time or from time to time” without any qualification that this right is dependent on the continued existence of the facilities themselves. [29] The fundamental question before this court is whether the Defendant's cancellation of the facilities on 5.3.2024 effectively terminated the Facilities Agreement, thereby discharging all future obligations of the parties. [30] The letter from the Defendant dated 5.3.2024 explicitly stated that “all the facilities granted to Trenergy Infrastructure Sdn Bhd have been cancelled with immediate effect.” The letter referenced the Defendant's earlier letter of offer and supplementary letter of offer dated 1.3.2021, as well as correspondence from Messrs Skrine dated 11.10.2022. While the Defendant attempts to draw a distinction between cancellation of facilities and termination of the Facilities Agreement, arguing that the underlying agreement remained in force, I find this distinction artificial and without substantive merit in the context of this case. The letter made no reservation of any continuing rights under the Facilities Agreement, nor did it suggest that any obligations would survive the cancellation. A plain reading of the cancellation letter, when considered alongside the Defendant's earlier correspondence agreeing to remove the Plaintiff from the proposed scheme proceedings, indicates a complete severance of the banking relationship rather than a selective termination that would preserve certain contractual rights. [31] In Lec Contractors (M) Sdn Bhd v Castle Inn Sdn Bhd (No 2) [2001] 5 MLJ 510, as cited by the Plaintiff, the High Court referred to P Ramanatha Aiyar's The Law Lexicon (Reprinted 1987 Ed), at p 1117, which states that “to rescind is to abrogate, annul, avoid or cancel a contract.” This supports the position that cancellation of the facilities effectively amounted to cancellation of the Facilities Agreement. [32] The Federal Court in Morello Sdn Bhd v Jagues (International) Sdn Bhd [1995] 1 MLJ 577 recognised and endorsed what was said by the House of Lords in Johnson v Agnew [1980] AC 367, that “on rescission only future obligations come to an end...” In Morello, the Federal Court established that “the effect in law of the contractual obligation to pay a deposit is to vest an indubitable right in the vendor to receive the deposit upon the contract coming into existence notwithstanding subsequent termination.” The court further held that “in such a situation, the rights and obligations of the parties so far as the future is concerned are discharged but those previously vested or incurred, as the case may be, remain untouched.” Applying this principle, the Plaintiff correctly submits that any agreement to merge and consolidate is no longer enforceable after the obligations of parties have been discharged, and that “the Defendant's enforcement of Clause 16.04 of the Facility Agreement after the cancellation of the Facilities is untenable.” This principle is directly applicable here, where the Defendant's cancellation of the facilities discharged all future obligations of the parties. [33] The English case of Spar Shipping AS v Grand China Logistics Holding (Group) Co Ltd [2015] 1 All ER (Comm) 879, also cited by the Plaintiff, held that “if there has been no repudiatory breach or renunciation, the option to cancel does not confer a right to damages, in the absence of clear language to the contrary, but merely confers a right to put an end to future performance obligations.” This further supports the position that the cancellation of the facilities put an end to future performance obligations under the Facilities Agreement. [34] The Court of Appeal case in Tahan Steel Corp Sdn Bhd v Bank Islam Malaysia Bhd [2012] 2 MLJ 314, as cited by the Plaintiff, held that “it is settled principle that once a contract is lawfully terminated the contract comes to an end and parties are absolved from all future obligations.” [35] The Defendant cites CIMB Bank Bhd v Maybank Trustees Bhd & Other Appeals [2014] 3 CLJ 1 (FC) and Dato' Sivananthan Shanmugam v Artisan Fokus Sdn Bhd [2015] 2 CLJ 1062 (CA) to argue that parties are bound by the terms they have expressly agreed upon and that the court has a duty to defend, protect and uphold the sanctity of contracts. While I agree with these general principles, they must be applied within the context of contract law principles regarding termination or cancellation. [36] In the present case, the Facilities Agreement's primary purpose was to provide financing facilities to the Plaintiff. Once the Defendant cancelled these facilities, the fundamental basis of the agreement ceased to exist. It would be commercially absurd to suggest that the Facilities Agreement continued to exist without the facilities that were its very subject matter. [37] The Defendant's reliance on my earlier decision in Hong Leong Bank Bhd v BTS Buildtrade Supply Sdn Bhd & Ors [2022] MLJU 3774 (HC) is distinguishable on multiple grounds. In that case, Hong Leong Bank sued BTS Buildtrade Supply Sdn Bhd (1st Defendant) and its guarantors to recover outstanding sums under two separate facilities: facilities granted directly to BTS Buildtrade, and facilities granted to BTS Construction Sdn Bhd (BTSC) for which BTS Buildtrade was a corporate guarantor. I granted summary judgment to the bank, upholding its right to consolidate. However, the factual circumstances and legal context in BTS Buildtrade differ substantially from the present matter: a) In BTS Buildtrade, the consolidation involved accounts of the same borrower (1st Defendant) who had defaulted on two separate facilities, and the accounts of a borrower (BTSC) for whom the 1st Defendant was a corporate guarantor. In our case, there was no default by the Plaintiff, and the Defendant is attempting to exercise the right of consolidation in relation to liabilities of a security party (SCB) for completely unrelated companies (LCIB and UCSSB); b) In BTS Buildtrade, the consolidation was exercised while the facilities were still active, whereas in our case, the Defendant had already cancelled the facilities before attempting to exercise the consolidation right; c) In BTS Buildtrade, the borrower (1st Defendant) was still a corporate guarantor of BTSC at the time of consolidation. In our case, the Plaintiff was no longer owned by or connected to SCB, having been acquired by BBSB; d) The consolidation in BTS Buildtrade satisfied the requirement under clause 15.04(a) of the charge that “the Security Parties to the Lender (whether such liability be present, future, actual, contingent, primary, secondary, collateral, secured or unsecured, several or joint) under any account or accounts of whatsoever nature, agreement or contract or otherwise with the Lender.” This was because the 1st Defendant was directly a Security Party under both facilities. In our case, the Plaintiff itself is not a Security Party to the facilities granted to LCIB and UCSSB; and e) Most importantly, the facilities in BTS Buildtrade had not been cancelled by the bank. The bank was exercising its consolidation rights as part of enforcement action for defaulted facilities. The issue of survivability of the consolidation clause post-cancellation was never considered. [38] I therefore find that the Defendant's cancellation of facilities on 5.3.2024 effectively terminated the Facilities Agreement and discharged all future obligations of the parties, including the right of consolidation and set-off under Section 16.04. Survivability of Section 16.04 Post-Cancellation [39] The Plaintiff argues that Section 16.04 of the Facilities Agreement is a term related to the performance of the contract, specifically tied to the provision of financing facilities, and therefore does not survive post-cancellation. The Plaintiff draws a distinction between arbitration clauses (which survive termination) and other contract clauses like Section 16.04. [40] The Defendant contends that Section 16.04 is a security provision that is not directly tied to the performance of the contract and should survive even after the cancellation of facilities. The Defendant also relies on Section 16.02 of the Facilities Agreement, which states that securities, liabilities, and obligations created by the agreement shall continue to be valid and binding for all purposes notwithstanding any change affecting the borrower. [41] The question before this court is whether Section 16.04 of the Facilities Agreement, which provides for the right of consolidation and set-off, survives the cancellation of facilities. [42] In Yip Chee Seng and Sons v Orna Construction Corporation [1998] MLJU 93, a construction contract dispute involving the building of a golf course, the High Court considered the survivability of arbitration clauses after termination of the underlying contract. The defendant had terminated the agreement for alleged breach, but when disputes arose over payment claims totaling over RM3 million, the defendant argued that the arbitration clause was no longer operative following termination. Augustine Paul JC (as he then was) analysed several cases including Heyman & Anor v Darwins, Ltd [1942] AC 356, where Viscount Simon LC and Lord Macmillan made a crucial distinction between arbitration clauses and ordinary clauses. The court in Yip Chee Seng noted: “What is commonly called repudiation or total breach of contract, whether acquiesced in by the other party or not, does not abrogate the contract, though it may relieve the injured party of the duty of further fulfilling the obligations which, by the contract undertaken by the repudiating party, the contract is not put out of existence, though all further performance of the obligations undertaken by each party in favour of the other may cease. It survives for the purpose of measuring the claims arising out of the breach and the arbitration clause survives for determining the mode of settlement.” [43] This distinction is critical to our analysis. In Yip Chee Seng, where the plaintiff sought to refer post-termination claims to arbitration while the defendant resisted on grounds that the contract termination had rendered the arbitration clause inoperative, the learned judge concluded that “the arbitration clause survives for the purpose of measuring the claims arising out of the breach as that is the mode of settling claims agreed by the parties in the event there is a dispute.” The survivability of arbitration clauses is an exception to the general rule that contractual obligations cease upon termination because arbitration clauses serve a specific procedural function rather than creating substantive obligations. [44] By contrast, Section 16.04 of the Facilities Agreement is not procedural but substantive in nature. It creates ongoing obligations directly tied to the operational performance of the contract. Unlike arbitration clauses which provide a mechanism for resolving disputes arising from the contract after termination, the consolidation and set-off provision in Section 16.04 is an active, operational aspect of the financing relationship. [45] The Plaintiff relies on the case of AIA International Limited v Lee Khoi Hee [2013] HKCU 2473, as referenced in Hong Leong Assurance Berhad v Ling Yu Kian Leong [2022] MLJU 3387 (HC), to argue that contractual terms survive termination only based on their specific nature and the intention of the parties. A careful examination of both cases supports the Plaintiff's position. [46] In AIA International, the Hong Kong District Court considered whether an insurance commission clawback clause survived the termination of an agent's agreement. The clause provided: “If the Company (AIA) shall refund the premium to the policyholder on any policy and cancel the policy for any reason whatsoever the Career Representative shall repay to the Company (AIA) on demand the amount of Commissions and Bonuses received on the premiums so refunded.” Judge Kent Yee held that this clause survived termination, stating at paragraph 24: “It is plain that AIA depends on its agents to procure business and hence make profits out of concluded insurance policies. Its agents are entitled to share the fruits by earning commissions with reference to such profitable businesses procured by them. In the event that the businesses so procured by way of insurance policies have to be cancelled and refund has to be made to those policyholders, AIA cannot reap any profits from such aborted businesses. It follows that no fruits can be shared with its agents out of such aborted businesses and the agents should refund any commissions previously received to AIA.” [47] Similarly, in Hong Leong Assurance, Ong Chee Kwan J analysed a commission clawback provision in an insurance agency agreement. The court identified the specific rationale for clawback clauses in the insurance context, citing AIA International with approval. Justice Ong Chee Kwan found at paragraph 57 that “such 'claw back' clauses must survive the termination of an agent's or agency manager's agreement” for specific reasons: “(a) to avoid instances where an agent retains unjust profit after resignation by adopting dubious or underhanded tactics to procure business for an insurer;

but for the survival of such 'claw back' clauses, an agent would be entitled to retain commissions even when a policy was rightly rescinded due to an agent's own faults such as misrepresentation;

to avoid the possibility of any collusion between an agent and a policyholder which causes loss to an insurer; and

the existence and survival of such a clause is necessary to protect the legitimate interests of an insurer.” [48] The cases demonstrate that whether a contractual term survives termination depends on its specific nature, purpose, and the intention of the parties. While the courts in AIA International and Hong Leong Assurance held that commission clawback clauses survive termination, they did so based on the particular nature and function of such clauses in the insurance context. The clawback clauses in those cases prevent unjust enrichment where an agent has received commission for a policy that is subsequently cancelled with full premium refunded. Such situations nullify the very transaction from which the agent earned commission, creating a direct causal connection between the agent's work, commission payment, and policy cancellation. [49] By contrast, Section 16.04 is not designed to prevent unjust enrichment arising from nullification of the underlying transaction. Rather, it is a security provision allowing the Bank to consolidate accounts and set off liabilities. This provision is directly tied to the operational continuity of the financing relationship and the ongoing provision of banking facilities. Once those facilities were cancelled, the operational relationship ceased, and the provision lost its purpose. [50] Furthermore, and crucially, the clawback clauses in AIA International and Hong Leong Assurance related directly to the specific transactions between the parties to the contract. In our case, the Defendant seeks to apply Section 16.04 not to secure the Plaintiff's own obligations, but to secure obligations of SCB in respect of facilities granted to entirely different companies (LCIB and UCSSB). This goes well beyond the rationale for survival articulated in the insurance cases. [51] The Defendant's reliance on Section 16.02 of the Facilities Agreement is also misplaced. Section 16.02 provides: “SECTION 16.02 CHANGE IN BORROWER(S) OR SECURITY PARTIES

The securities, liabilities and/or obligations created by this Agreement shall continue to be valid and binding for all purposes whatsoever notwithstanding any change whether by reason of amalgamation, bankruptcy, death, insanity, incorporation, liquidation, reconstruction, winding up or otherwise howsoever in the name, style, constitution or composition of the Borrower(s) and/or Security Parties and it is expressly declared that no change of any sort whatsoever in relation to or affecting the Borrower(s) and/or Security Parties shall in any way affect the security liabilities and/or obligations created by this Agreement in relation to any transaction whatsoever whether past, present or future.

If the Borrower and/or Security Parties being a firm is dissolved by reason of the introduction of a further partner or partners into the firm or the death or retirement of any existing partners from the firm or the amalgamation of the firm with another firm or in consequence of a corporation taking over all the assets of the firm this Agreement and/or the Security Documents shall continue and in addition to the debts and liabilities of the old firm shall apply to all money and liabilities due or incurred to the Lender from or by the new firm or corporation as aforesaid thereby constituted as though there had been no change in the firm as previously constituted.” [52] While Section 16.02 provides that securities, liabilities, and obligations created by the agreement shall continue to be valid and binding notwithstanding any change affecting the borrower or security parties, this provision is aimed at ensuring that changes in the borrower's name, style, constitution, or composition do not affect the securities created. It does not address the situation where the Defendant itself has cancelled the facilities. [53] I therefore find that Section 16.04 of the Facilities Agreement does not survive the cancellation of facilities, as it is directly tied to the performance obligations under the agreement. Alleged Events of Default [54] The Defendant submits that several events of default occurred, including the Plaintiff's involvement in the scheme proceedings and the change in the Plaintiff's shareholding to BBSB without the Defendant's consent, which allegedly constitutes an event of default under Section 12.01(x)(ii) of the Facilities Agreement. Section 12.01(x)(ii) provides that an event of default occurs “if the Borrower or any of the Security Parties ceases or threatens to cease to carry on its business or if there is any change in the partners, major shareholders and/or management of the Borrower or any of the Security Parties.” [55] The Plaintiff contends that it had no outstanding obligations to the Defendant at the time of cancellation, and that it had disclosed its change in shareholding to BBSB in its letter dated 29.2.2024, which the Defendant did not treat as an event of default in its immediate response. [56] The first alleged event of default is the Plaintiff's involvement in the scheme proceedings in September 2022. The Defendant's letter dated 11.10.2022 explicitly stated that this constituted an event of default: “In view of this material adverse development which constitutes an event of default under the security documents governing the Banking Facilities, we have instructions to inform you that all Banking Facilities granted to you by our Client shall be suspended with immediate effect pending our Client's review of the situation.” [57] However, the parties subsequently reached an agreement where the Plaintiff would be removed from the Proposed Scheme. On 7.7.2023, the Defendant, through its solicitors, explicitly agreed to the Plaintiff being removed from the Proposed Scheme Proceedings, stating: “We have instructions to confirm that our Client, Hong Leong Bank Berhad (the only scheme creditor for Trenergey Infrastructure Sdn Bhd/ 6th Applicant) is agreeable to your clients' request to have the 6th Applicant removed from the proposed Scheme Proceedings.” [58] This agreement effectively waived any default arising from the Plaintiff's initial involvement in the scheme proceedings. [59] The second alleged event of default is the change in the Plaintiff's shareholding from SCB to BBSB without the Defendant's consent. The Defendant relies on Section 12.01(x)(ii) of the Facilities Agreement, which provides that an event of default occurs “if there is any change in the partners, major shareholders and/or management of the Borrower or any of the Security Parties.” [60] However, the Plaintiff explicitly disclosed this change in shareholding to the Defendant in its letter dated 29.2.2024, stating that “TISB is now wholly owned by Bilun Borneo and therefore has completely departed from Sarawak Cable Group of Companies.” The Defendant's response on 5.3.2024 did not treat this change in shareholding as an event of default; it simply cancelled the facilities without citing this as a reason. [61] Furthermore, it was only in the Defendant's letter dated 21.3.2024, more than two weeks after the cancellation of facilities, that the Defendant attempted to exercise its rights under Section 16.04. In that letter, the Defendant's solicitors stated: “We are also instructed to give you notice that pursuant to Section 16.04(b) of the Facilities Agreement, our client shall after 7 days of this letter, proceed to combine, consolidate and/or merge Trenergy's Accounts with the liabilities of Sarawak Cable Berhad under the Corporate Guarantees signed by Sarawak Cable Berhad in respect of the facilities granted to Leader Cable Industry Berhad and Universal Cable (Sarawak) Sdn Bhd and set off all monies held in the said accounts towards part satisfaction of the liabilities of Sarawak Cable Berhad to our client.” [62] The timing of this notice - coming more than two weeks after the cancellation and without any prior mention of consolidation rights in the immediate cancellation letter of 5.3.2024 - suggests that the Defendant did not initially consider the change in shareholding as an event of default justifying the exercise of its rights under Section 16.04. [63] The letter also confirmed the Defendant's position regarding the binding nature of the agreement despite the change in shareholding: “The terms of the Facilities Agreement are binding on you regardless of any change in the shareholding or management of your company.” [64] However, notably, the letter did not cite the change in shareholding as constituting an event of default under Section 12.01(x)(ii) of the Facilities Agreement, instead focusing solely on SCB's continuing indebtedness as a Security Party in relation to other unrelated facilities granted to LCIB and UCSSB. [65] Even if the change in shareholding did constitute an event of default, the Defendant's cancellation of the facilities was a complete response to this default, effectively terminating the Facilities Agreement. Having taken this step, the Defendant cannot then seek to exercise rights under the very agreement it has effectively terminated. [66] I therefore find that there were no valid events of default that would entitle the Defendant to exercise its rights under Section 16.04 of the Facilities Agreement after the cancellation of facilities. Commercial Intent and Purpose of the Facilities Agreement [67] The Plaintiff argues that the Defendant's interpretation of Section 16.04 would render it a perpetual clause, enforceable indefinitely, which could not have been the intention of the parties. The Plaintiff contends that this interpretation lacks commercial sense. [68] The Defendant submits that Section 16.04 is a security provision that protects the Defendant's interests and should be interpreted according to its clear and unambiguous language, regardless of commercial considerations. [69] In interpreting the Facilities Agreement, I must consider not only the literal meaning of its terms but also the commercial intent and purpose of the agreement as a whole. [70] The primary purpose of the Facilities Agreement was to provide financing facilities to the Plaintiff. All other provisions, including Section 16.04, were ancillary to this primary purpose and should be interpreted in this context. [71] If I were to accept the Defendant's interpretation of Section 16.04, it would mean that even after the Defendant itself has cancelled the facilities and effectively terminated the agreement, it could still exercise rights under the agreement indefinitely. This would render Section 16.04 a perpetual clause, enforceable years or even decades after the cancellation of facilities, as long as SCB remains indebted to the Defendant in any capacity. [72] Such an interpretation lacks commercial sense and could not have been the intention of the parties when they entered into the Facilities Agreement. The Facilities Agreement was intended to govern the provision of financing facilities to the Plaintiff, not to create a perpetual security for unrelated liabilities of third parties. [73] Furthermore, the Defendant's interpretation would lead to the commercially absurd result where the Plaintiff, now owned by BBSB (an entity unrelated to SCB), would continue to be liable for SCB's debts indefinitely, despite no longer having any relationship with SCB. [74] In AIA International Limited, Judge Kent Yee carefully analysed when contractual terms survive termination, stating at paragraph 21: “Whether a particular term can survive termination should be a matter of inference taking into account the nature of the term and the intention of the parties and not really to be decided with regard to how the contract is terminated absent express provisions.” [75] The court in AIA International further emphasised at paragraph 22 that “context is of cardinal importance to construction of contractual terms,” adopting principles from Fully Profit (Asia) Limited v The Secretary For Justice for and on behalf of the Directors of Lands (FACV17/2012) and Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896. The court examined “the background of the Agreement and the commercial purpose of Clause 5 to find out whether it can survive the termination and thus is still enforceable.” [76] Applying these principles to the present case, I must consider the specific nature of Section 16.04 and the intention of the parties in the context of the Facilities Agreement as a whole. Unlike the clawback clause in AIA International, which served a clear commercial purpose of preventing unjust enrichment in a specific transaction between the contracting parties, Section 16.04 cannot reasonably be interpreted as intending to create an indefinite security for unrelated third-party liabilities after the principal contract has been terminated by the Defendant's own act of cancelling the facilities. [77] This interpretation is further supported by Ong Chee Kwan J's analysis in Hong Leong Assurance Bhd v Ling Yu Kian Leong, where the court considered the fairness and commercial sense of contractual provisions. While upholding the specific clawback clause in that case, Justice Ong Chee Kwan recognised at paragraph 85 that terms that allow a party “to exercise it totally uninhibited and or at his whims and fancy” should be limited, noting that “discretion must be exercised honestly and in good faith and must not be capriciously, arbitrarily or unreasonably.” [78] I therefore find that the commercial intent and purpose of the Facilities Agreement do not support the Defendant's interpretation of Section 16.04 as a perpetual clause enforceable even after the cancellation of facilities. Conduct of the Parties [79] The Plaintiff highlights the conduct of the parties, particularly the correspondence between April and July 2023, where the Defendant agreed to remove the Plaintiff from the Proposed Scheme Proceedings without any reservation of rights under Section 16.04. [80] The Defendant contends that its conduct does not waive its rights under the Facilities Agreement, and that it was entitled to exercise its rights under Section 16.04 upon the occurrence of events of default. [81] The conduct of the parties is relevant to understanding their intentions and the proper interpretation of the Facilities Agreement. [82] In the correspondence between April and July 2023, the Defendant, through its solicitors, agreed to the Plaintiff being removed from the Proposed Scheme Proceedings. This agreement contained no reservation of rights under Section 16.04 of the Facilities Agreement. [83] Furthermore, when the Plaintiff informed the Defendant of the change in shareholding from SCB to BBSB in its letter dated 29.2.2024, stating that “TISB is now wholly-owned by Bilun Borneo Sdn Bhd and therefore has completely departed from the Sarawak Cable Berhad's Group of Companies. As such, we believe that you have no rights whatsoever to retain the funds in the aforesaid Escrow Account and the Fixed Deposit Accounts for whatever reasons,” the Defendant's immediate response was to cancel the facilities, not to exercise its rights under Section 16.04. [84] It was only after the cancellation of facilities, on 21.3.2024, that the Defendant attempted to exercise its rights under Section 16.04. This sequence of events suggests that the Defendant itself did not initially consider Section 16.04 to be operative after the cancellation of facilities. [85] The Defendant's conduct is inconsistent with its current position that Section 16.04 survives the cancellation of facilities and can be enforced in relation to unrelated liabilities of SCB. [86] I therefore find that the conduct of the parties supports the conclusion that Section 16.04 of the Facilities Agreement does not survive the cancellation of facilities, especially not for the purpose claimed by the Defendant. Conclusion and Order [87] For the reasons stated above, I find that: a) The Defendant's cancellation of facilities on 5.3.2024 effectively terminated the Facilities Agreement and discharged all future obligations of the parties, including the right of consolidation and set-off under Section 16.04; b) Even if the Facilities Agreement continued to exist in some form after the cancellation of facilities, Section 16.04 would not survive as it is directly tied to the performance obligations under the agreement, distinguishable from procedural clauses such as arbitration clauses that survive termination; c) Contractual provisions that survive termination typically address specific transactions directly between the contracting parties to prevent unjust enrichment or unfairness. Section 16.04 cannot be reasonably extended to secure unrelated third-party obligations after the Defendant's own cancellation of the facilities; d) The Defendant's reliance on previous banking consolidation cases is misplaced as those cases involved fundamentally different circumstances where the facilities remained active and the consolidation involved direct relationships between the parties; e) There were no valid events of default that would entitle the Defendant to exercise its rights under Section 16.04 of the Facilities Agreement after the cancellation of facilities; f) The commercial intent and purpose of the Facilities Agreement do not support the Defendant's interpretation of Section 16.04 as a perpetual clause enforceable even after the cancellation of facilities; and g) The conduct of the parties supports the conclusion that Section 16.04 of the Facilities Agreement does not survive the cancellation of facilities. [88] Accordingly, the Plaintiff's Originating Summons is allowed with the following orders: a) A declaration that the Plaintiff is entitled to all rights and interests in all monies (including accrued interest) held by the Defendant in the Fixed Deposit Accounts and Escrow Account established pursuant to the Facilities Agreement dated 15.4.2021; b) The Defendant shall, within fourteen (14) days from the date of this Order, account for all monies (including accrued interest) from the Fixed Deposit Accounts and Escrow Account established pursuant to the Facilities Agreement dated 15.4.2021; and c) Costs of RM8,000 to be paid by the Defendant to the Plaintiff. 30 June 2025 ATAN MUSTAFFA YUSSOF AHMAD Judge Kuala Lumpur High Court (Commercial Division) Counsel: For the Plaintiff: Celinne Teh (Messrs Haris Ibrahim Kandiah Partnership) For the Defendant: Karen Teh (Messrs Skrine)