The court affirmed that non-fulfillment of all conditions precedent allows a bank to validly terminate a financing agreement, irrespective of partial compliance.

Atan Mustaffa Yussof Ahmad J:

[1] This dispute stems from a financing agreement between the plaintiff industrialist and defendant financier bank that was terminated by the latter. The plaintiff contends that the defendant bank in arbitrary fashion terminated the facility without disbursing the promised sums which remained pending fulfilment of stipulated contractual conditions and prerequisites as would reasonably enable commencement of works towards the recycling plant construction project. The defendant bank claims non-compliance of the said prerequisites for continued financial backing, leading to valid termination owing to unfinished prerequisites despite passage of stipulated time frames. However, the plaintiff avers that it was in total compliance to deserve release of funds per initial contractual expectations and claims of attendant legitimate expectation in the premises. Hence the core issue at stake here lies in determining whether the termination rested on legal footing or amounted to commercially unreasonable conduct.

Background Facts

[2] The Plaintiff, Evergreen Corporate Sdn Bhd ("Evergreen"), is a company involved in recycling used tires into diesel, carbon black, steel wires and synthetic gas using green technology. The Defendant, Export-Import Bank of Malaysia Berhad ("EXIM"), is a financial institution that provides various financing facilities to domestic and international companies to support development of strategic projects in line with the Government's economic objectives.

[3] In 2016, Evergreen conceived a project to construct and operate on a commercial scale, a thermal decomposition plant with green technology capable of recycling used tires in Simpang Pulai, Perak ("the Plant'). The Plant would allow Evergreen to increase the output, efficiency and sustainability of its recycling business.

[4] The proposed capacity was 4 production lines in the Plant, which could process 800 metric tonnes of used tires per day. The end recycled products would comprise of diesel, carbon black, steel wires and synthetic gas.

[5] The estimated project cost was USD 10.35 million. As Evergreen did not have sufficient funds, it approached EXIM to secure an Islamic project financing facility.

[6] On 2 November 2016, EXIM offered an Islamic financing facility of USD 10,350,000 ("the Facility') to Evergreen for the construction of the Plant and purchase of a Thermal Recovery Unit to be installed in the Plant. The offer was revised on 14 February 2017 and 3 April 2017. Subsequently, the parties entered into an Ijarah Facility Agreement ("Facility Agreement') on 5 June 2017 where EXIM agreed to grant Evergreen the Facility. The Facility Agreement set out the detailed terms and conditions applicable to the grant and drawdown of the Facility.

[7] Pursuant to cl 6.2 read together with Schedule 2 of the Facility Agreement, Evergreen was required to fulfil all the stipulated conditions precedent within one month from the date of the Facility Agreement, which was by 5 July 2017. There were altogether 30 conditions precedent consisting of 25 conditions precedent and 5 additional conditions precedent that Evergreen had to comply with. As security for the Facility, Evergreen charged a piece of land held under title PN 352495 (formerly HSD 92915), Lot 302294, Mukim Sungai Raya, Daerah Kinta, Negeri Perak ("the Land') to EXIM on 27 March 2018.

[8] In