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2024 MarsdenLR 2297
HIGH COURT MALAYA KUALA LUMPUR
EVERFINE RESOURCES SDN BHD – Appellant
Versus
MALAYSIA BUILDING SOCIETY BERHAD – Respondent
[Civil Suit No: WA-22M-127-06/2021]
The Defendant did not breach the Facility Agreement as it acted within its rights by refusing the second drawdown and terminating the agreement due to the Plaintiff's failure to meet conditions precedent.
Headnote:(A) Facility Agreement – Terms and Conditions – The Defendant's obligation to disburse funds is contingent upon the Plaintiff fulfilling conditions precedent, including providing necessary documentation. The Defendant acted within its rights to terminate the Facility Agreement due to the Plaintiff's failure to meet these conditions. (Paras 27, 50, 51)
(B) Breach of Contract – The court found no breach of contract by the Defendant in refusing the second drawdown or in unilaterally terminating the Facility Agreement, as the Defendant's actions were justified under the agreement's terms. (Paras 50, 53)
Facts of the case: The Plaintiff, as a subcontractor, sought funding from the Defendant for two contracts with Felda but failed to provide necessary documentation for a second drawdown before the Facility expired. (Paras 4-10)
Findings of Court: The Defendant did not breach the Facility Agreement, and the Plaintiff is not entitled to any refunds or damages. (Paras 53, 54)
Issues: Whether the Defendant breached the Facility Agreement by refusing the second drawdown and terminating the agreement without reasons. (Paras 24, 50)
Ratio Decidendi: The court ruled that the Defendant's refusal to release funds and termination of the agreement were justified as the Plaintiff did not fulfill the conditions precedent outlined in the Facility Agreement. (Paras 51, 52)
Result: Plaintiff's claim dismissed with costs.
JUDGMENT
Introduction
[1] The main question to be decided by this Court is whether the Defendant committed any breach of contract when:
(i) the Defendant refused to release the 2nd drawdown for the Plaintiff's Working Capital; and
(ii) the Defendant terminated the Facility Agreement unilaterally, without providing any reasons.
[2] This Court decided to dismiss the Plaintiff's claims having found that the answers to both questions were in the negative.
[3] The Plaintiff now appeals against that decision.
Background
[4] On 23 January 2014 LSAB IBS Sdn Bhd ("LSAB") was awarded the following 2 contracts by Felda:
(i) Contract 1: Proposed Development of 300 units of Perumahan Generasi baharu Felda using Industrialised Building System at Felda Bukit Rotan Utara, Gemencheh, Negeri Sembilan ("Contract 1"); and
(ii) Contract 2: Proposed Development of 540 units of Perumahan Generasi baharu Felda using Industrialised Building System at Felda Maokil 1 (300 units) and Felda Maokil 2 (240 units), Segamat, Johor ("Contract 2").
[5] Vide a letter dated 3 February 2014, LSAB appointed the Plaintiff as its Main subcontractor for both Contracts 1 and 2.
[6] Following that, the Plaintiff applied for facilities from the Defendant. That application was consequent to a standing arrangement between Felda and the Defendant vide an MOU between them dated 22 March 2013.
[7] The Defendant agreed to provide Tawarruq - Revolving Working Capital Financing of Facilities Up To RM24.0 million to the Plaintiff to fund both Contracts 1 and 2, vide the Defendant's offer letters dated 24 June 2014 and 4 July 2014 ("Facilities"). This arrangement was subsequently translated into an agreement between the Plaintiff and the Defendant dated 10 October 2014 which include the following main terms ("Facilities Agreement"):
(i) The Facilities comprise:
(a) Tawarruq Working Capital Financing - Revolving I of up to a maximum aggregate of RM8,000,000.00, to be utilised to partially fund the Plaintiff's working capital for Contract 1;
(b) Tawarruq Working Capital Financing - Revolving II of up to a maximum aggregate of RM16,000,000.00, to be utilised to partially fund the Plaintiff's working capital for Contract 2;
(ii) The Facilities is for a period of 12 months;
(iii) The Plaintiff shall give prior notice of not less than 5 days for any drawdown; and
(iv) The Defendant is entitled at any time to terminate or suspend or withdraw the Facilities in the event that the Defendant is dissatisfied with or is concerned with the Plaintiff's capabilities to carry out the works in Contract 1 or is in the opinion that any disbursement will cause any form of risks that could affect the interest of the Defendant. The Defendant may do any of this without giving any reasons to the Plaintiff, or without any need to have a prior discussion with the Plaintiff.
[8] At the request of the Plaintiff, the Defendant made a first drawdown of the Facilities amounting to RM450,379.89 on 8 December 2014, which was utilised by the Plaintiff to pay the salaries of the Plaintiff's workers and for purposes of development works for Contracts 1 and 2. This drawdown had been paid in full by the Plaintiff.
[9] The period of the Facilities ended on 3 February 2015.
[10] Vide a letter dated 23 April 2015, the Plaintiff requested for an extension of the Facilities.
[11] The Plaintiff contended that its completion date of Contract 1 was 3 February 2015, but this date was extended to 31 March 2020. As for Contract 2, the original completion date was 3 February 2015, but the date was extended to 20 April 2021.
[12] The Defendant did not dispute the Plaintiff's contention that in January 2015 the Plaintiff requested a second drawdown. Vide an email dated 2 January 2015 the Defendant requested the Plaintiff to provide the following documents:
(i) Letter from Felda confirming that Felda was considering the extension of time requests for Contracts 1 and 2;
(ii) The Project S-Curve, updated taking into account the requested exte
