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2025 MarsdenLR 790
HIGH COURT MALAYA KUALA LUMPUR
ARZIAH MOHAMED APANDI, JC
SHELL MDS (MALAYSIA) SDN BHD – Appellant
Versus
PETROLIAM NASIONAL BERHAD (PETRONAS) & ANOR – Respondent
[Suit No: WA-24NCVC-4367-11/2024]
The court established that maintaining the status quo through an interim injunction is essential to prevent operational disruptions and potential criminal liability amidst competing claims under conflicting federal and state laws.
Headnote:(A) Petroleum Development Act 1974 - Sections 2 and 11 - Distribution of Gas Ordinance 2016 - Competing claims for natural gas supply - Urgent application for interim injunction to maintain status quo pending resolution of interpleader proceedings - The court emphasized the need to prevent disruption to gas supply and potential criminal liability for the applicant. (Paras 1, 6, 56)
(B) Jurisdiction - The court's jurisdiction to grant injunctive relief is derived from the Courts of Judicature Act 1964 and the Specific Relief Act 1950, which allows for temporary injunctions to preserve rights. (Paras 7, 8)
(C) Balance of Convenience - The court must weigh the harm in granting the injunction against the harm that would result if denied, with the balance favoring the applicant due to potential criminal liability and operational disruptions. (Paras 47, 55)
Facts of the case:
The applicant, facing competing claims from two parties for gas supply, sought an interim injunction to prevent disruption and ensure compliance with legal obligations under conflicting federal and state laws. (Paras 2, 24)
Findings of Court:
The court found that the applicant demonstrated serious issues to be tried, and the balance of convenience favored granting the injunction to maintain the status quo and prevent irreparable harm. (Paras 55, 56)
Issues: The main issues included the validity of competing gas supply agreements and the jurisdictional conflict between federal and state legislation. (Paras 20, 21)
Ratio Decidendi: The court ruled that maintaining the status quo was essential to protect the applicant's interests and ensure compliance with applicable laws, emphasizing the need for judicial determination of the competing claims. (Paras 54, 56)
Result: The application for interim injunction was allowed with costs to be in the cause.
| Table of Content |
|---|
| 1. urgent application for injunction (Para 1) |
| 2. competing claims for gas supply (Para 2) |
| 3. execution of petronas-gsa (Para 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10) |
| 4. smds's first prayer (Para 11 , 12 , 13) |
| 5. petronas's counterarguments (Para 14 , 15 , 16 , 17 , 18 , 19 , 20 , 21 , 22 , 23 , 24 , 25 , 26 , 27 , 28 , 29 , 30 , 31 , 32 , 33 , 34 , 35 , 36 , 37 , 38 , 39 , 40 , 41 , 42 , 43 , 44 , 45 , 46 , 47 , 48 , 49 , 50 , 51 , 52 , 53 , 54 , 55 , 57) |
| 6. granting of injunction (Para 56) |
"Gajah Berjuang Sama Gajah, Pelanduk Mati Di Tengah-Tengah."
Introduction
[1] This urgent application (Encl 3) by Shell MDS (Malaysia) Sdn Bhd ("SMDS") for an interim injunction in the interpleader proceedings (Encl 1) under O 17 r 1(1)(a) of the Rules of 2012 (ROC 2012), which provides:
"Where a person is under liability in respect of a debt or in respect of any money, goods or chattels and he is, or expects to be sued for or in respect of that debt or money or those goods or chattels by two or more persons making adverse claims thereto."
[2] Encl 3 becomes urgent as the matter involve competing claims from Petronas and Petros on SMDS's payment for natural gas supply. SMDS faces immediate risks and threats of disruption to its gas supply under two competing gas supply agreements ("GSA") ie the Petronas-GSA dated 17 July 2020 ("Petronas-GSA") and the Petros-GSA dated 16 August 2024 ("Petros-GSA"). Article 17.1(c) of the Petronas-GSA puts SMDS to a 14 November 2024 deadline to top up its bank guarantee, failing which Petronas has the right to terminate the agreement. Article 11.11 permits Petronas to suspend gas supply with 7 days' notice, which can be issued at any time. The financial implications are substantial, with monthly payments in the region of RM70-100 million. SMDS risks paying twice for the same gas supply and facing potential disruption to its operations in Bintulu if it is suspended, with negative consequences on its bank guarantee facilities. SMDS has attempted to mitigate the situation by offering to set aside payments in an interest-bearing account pending resolution. Still, Petronas has proceeded to call on the bank guarantee.
[3] It begins with the execution of the Petronas-GSA in July 2020, followed by Petros's designation as the sole gas aggregator in February 2024, and culminating in the signing of the Petros-GSA in August 2024. The competing legislative frameworks is the heart of the dispute. At the federal level, the Petroleum Development Act 1974 ( PDA 1974) grants Petronas exclusive rights over petroleum operations nationwide. At the state level, the Distribution of Gas Ordinance 2016 (DGO 2016) and its 2023 amendment establish Petros as the sole gas aggregator in Sarawak. This section highlights the fundamental tension between federal and state authorities that underlies the dispute. Under s 2 1974 it states that:
"The entire ownership in, and the exclusive rights, powers, liberties and privileges of exploring, exploiting, winning and obtaining petroleum whether onshore or offshore of Malaysia shall be vested in a Corporation to be incorporated under the Companies Act 1965."
[4] Under s 11 DGO 2016 it states that:
"(1) The Minister may, by notification in the Gazette, designate any person to be a gas aggregator for the purposes of this Ordinance.
(2) A gas aggregator shall be the only person authorized to aggregate natural gas from various sources for distribution to consumers in the State."
[5] Parties came before me after their initial hearing before YA Hayatul Akmal binti Abdul Aziz on 19 December 2024. That day, SMDS made its oral submissions extensively but did not file written submissions. When Petronas sought leave to file submissions SMDS's oral submissions, SMDS objected and insisted that Petronas submit orally. This procedural impasse led YA Hayatul Akmal to direct all parties to file submissions and schedule a new hearing date before me on 6 January 2025. Her Ladyship then grante
