The court affirmed that negotiations do not alter contractual obligations unless formalized in writing, and that the plaintiff's charges under the Islamic Financing Facility Agreement were lawful and binding.

JUDGMENT

Yusrin Faidz Yusoff JC:

Introduction

[1] This is the decision of the Court upon the conclusion of the full trial of the matter. The plaintiff, Export-Import Bank of Malaysia Berhad, filed this suit against the defendants, Impiana Seminyak (Labuan) Co Ltd ("D1") and Impiana Sdn Bhd ("D2"), for the recovery of outstanding sums under an Islamic Financing Facility Agreement ("the Facility Agreement") and related agreements. The plaintiff claims that the defendants breached the terms of the Facility Agreement and that the sum of USD 3,590,213.17 is due and payable together with ta'widh and costs. The defendants contend that the plaintiffs claim is premature due to an alleged moratorium granted by the plaintiff, and further argue that the penalty chargers imposed by the plaintiff are exorbitant and unreasonable. After thoroughly reviewing the evidence, I conclude that the plaintiff has successfully demonstrated their case against the defendants on the balance of probabilities. Accordingly, this is my judgment.

Background Facts

[2] The material facts of this case are largely uncontested, with the trial lasting only a single day and featuring testimony from two witnesses on behalf of the plaintiff and one for the defendants.

[3] Vide a letter of offer dated 24 July 2017, the plaintiff granted D1 an Islamic Financing Facility under the Overseas Investment Financing-i ("OIF- i") Facility, comprising two facilities: OlF-i 1 Facility (USD 3,500,000.00) and OlF-i 2 Facility (USD 500,000.00). The purpose of the OlF-i 1 Facility was to part-finance the acquisition, renovation, and refurbishment of 21 villas at The Villas Bali Resort & Spa in Seminyak, Bali, Indonesia, while the OlF-i 2 Facility was for general working capital.

[4] The Facility Agreement was executed on 15 December 2017, and D2, as the guarantor, entered into a Corporate Guarantee and Indemnity Agreement dated 8 January 2018. The Facility Agreement provided for quarterly payments of principal and profit, with a grace period for the first 12 months. The Facility which was based on the Tawarruq (Commodity Murabahah) concept was fully disbursed by February 2018. The plaintiff's sale prices were USD 5,693,599.98 for OlF-i 1 and USD 792,599.68 for OIF- i 2, which were based on the ceiling rate of 12% per annum. Notwithstanding that, the actual instalment of the plaintiffs sale price would be based on the prevailing Murabahah Profit Rate calculated at 2.5% per annum plus the applicable Islamic Cost of Funds ("COF-i").

[5] In 2020, due to the COVID-19 pandemic, D1 requested a moratorium on the repayment of the Facility. The plaintiff granted the moratorium through Supplementary Letters of Offer dated 8 December 2020 ("SL01") and 5 February 2021 ("SL02"), which deferred the payment of principal and profit for a specified period. Flowever, SL01 and SL02 also imposed additional conditions, including the requirement for D1 to maintain a Financial Service Reserve Account ("FSRA"), execute additional security documents, and maintain insurance coverage over the project.

[6] D1 failed to comply with these conditions. As a result, the plaintiff issued a Notice to Remedy dated 9 November 2021, demanding that D1 remedy the breaches within 30 days. When D1 failed to do so, the plaintiff issued a Notice of Recall and Termination dated 20 December 2021, terminating the Facility and demanding payment of the outstanding sum of USD 3,590,213.17.

[7] On 28 January 2022, the plaintiff commenced legal proceedings against the defendants, seeking the following reliefs:

a) The defendants jointly and severally pay the amount of USD 3,590,213.17 as at 15 December 2021;

b) The defendants jointly and severally pay late payment compensation ("ta'widh") on the sum of USD 3,590,213.17 at a rate of 1% per annum on the outstanding installment amount, starting from 16 December 2021 until the maturity period;

c) The defendants jointly and severally pay late payment compensation ("ta'widh") on the amount of USD 3,590,2