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2025 MarsdenLR 4461
HIGH COURT MALAYA KUALA LUMPUR
TRENERGY INFRASTRUCTURE SDN BHD – Appellant
Versus
HONG LEONG BANK BERHAD – Respondent
[Originating Summons No: WA-24NCC-425-09/2024]
The cancellation of facilities under a Facilities Agreement terminates the agreement and discharges all future obligations, including rights of consolidation and set-off, which do not survive post-cancellation.
Headnote:(A) Facilities Agreement - Section 16.04 - Cancellation of facilities - Declaration sought regarding entitlement to funds held in Fixed Deposit and Escrow Accounts - Court found that cancellation of facilities effectively terminated the Facilities Agreement and discharged all future obligations, including rights of consolidation and set-off - No valid events of default occurred to justify Defendant's actions. (Paras 25, 30, 87)
Facts of the case:
The Plaintiff and Defendant entered into a Facilities Agreement granting banking facilities. Following a change in ownership and subsequent cancellation of facilities, the Plaintiff sought a declaration for rights to funds held by the Defendant. (Paras 1, 16, 30)
Findings of Court:
The court ruled that the cancellation of facilities terminated the Facilities Agreement and all future obligations, including the right of consolidation under Section 16.04, did not survive post-cancellation. (Paras 87)
Issues: The key issues included whether the cancellation of facilities terminated the Facilities Agreement and if the rights under Section 16.04 survived such cancellation. (Paras 29, 39)
Ratio Decidendi: The court held that the cancellation of facilities rendered the Facilities Agreement void of its essential purpose and that Section 16.04 was tied to ongoing performance obligations which ceased upon cancellation. (Paras 30, 87)
Result: Originating Summons allowed; Plaintiff entitled to funds held by Defendant. (Paras 88)
Introduction
[1] Before the court is an Originating Summons dated 3 September 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 April 2021.
[2] 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.
Background Facts
[3] The Plaintiff and the Defendant entered into a Facilities Agreement dated 15 April 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.
[4] 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] Pursuant to the terms of the Facilities Agreement, the Plaintiff authorised the Defendant to open an Escrow Account in the Plaintiff's name for the deposit of all proceeds due under the Contracts. The Plaintiff also authorised the Defendant to open a Fixed Deposit Account where 8% of the net proceeds of the Contracts would be deposited.
[6] Sarawak Cable Berhad ("SCB") was initially the sole shareholder of the Plaintiff and executed a Letter of Guarantee dated 15 April 2021 in favour of the Defendant, thus becoming a Security Party under the Facilities Agreement.
[7] In September 2022, SCB and six subsidiaries, including the Plaintiff, applied to the High court of Sabah & Sarawak at Kuching in Originating Summons No. KCH-24NCC-1- 9/2022 for leave to convene a meeting of creditors to approve a proposed scheme of arrangement ("Proposed Scheme") and for a restraining order under ss 366 and 368 of the Companies Act 2016 .
[8] By letter dated 11 October 2022, the Defendant's solicitors, Messrs Skrine, informed the Plaintiff that this event constituted an event of default, and that the facility would be suspended.
[9] Through correspondence in 2023, the parties reached an agreement where SCB would remove the Plaintiff from the Proposed Scheme. On 20 June 2023, Messrs Krish Maniam & Co (solicitors for SCB) wrote to Skrine to inform that SCB intended to remove the Plaintiff from the Proposed Scheme of Arrangement. On 7 July 2023, Skrine replied to confirm that the Defendant agreed to the Plaintiff being removed from the Proposed Scheme Proceedings.
[10] Sometime in December 2023, Bilun Borneo Sdn Bhd ("BBSS') acquired the entire equity interest in the Plaintiff from SCB.
[11] On 29 February 2024, the Plaintiff wrote to the Defendant requesting confirmation of the current balance held in the Escrow Account and Fixed Deposit Accounts, immediate processing of the withdrawal of funds, and release of funds in the Escrow Account. In this letter, the Plaintiff explicitly informed the Defendant that it was now wholly owned by BBSB and had "completely departed from Sarawak Cable Group of Companies."
[12] On 5 March 2024, the Defendant replied by informing the Plaintiff that the facilities granted to the Plaintiff (ie, the RCFL and SCFL) were cancelled with immediate effect.
[13] Following the cancellation of facilities, on 21 March 2024, the Defendant's solicitors informed the Plaintiff that despite the cancellation, the Defendant was purportedly entitled to retain the balance held in the Escrow Account and Fixed Deposit Accounts pursuant to s 16.04 of the Facilities Agreement. The Defendant claimed that since SCB was a Security Party to the Facility, the Plaintiff's accounts would be consolidated and/or merge
