The court affirmed that a lender's right to terminate a facility agreement is valid if the borrower fails to fulfill conditions precedent within the stipulated timeframe, and estoppel does not apply without clear evidence of waiver.

JUDGMENT

Mohd Nazlan Mohd Ghazali JCA:

Introduction

[1] The Respondent bank had agreed to grant financing facility to the Appellant company. The Appellant later commenced a writ action against the Respondent for the termination of the facility prior to any drawdown. This appeal before us was against the dismissal of the action by the High Court .

[2] Having examined the appeal record and considered the submissions by parties, we unanimously decided to dismiss the appeal for the reasons set out hereunder.

Key Background Facts

The Parties

[3] The Appellant, being the plaintiff who initiated the suit is Evergreen Corporate Sdn Bhd, a company involved in recycling used tires into diesel, carbon black, steel wires and synthetic gas using green technology. The Respondent, as the defendant in the Court below, is the Export-Import Bank of Malaysia Berhad (EXIM Bank), a Government-owned Development Financial Institution (DFI), which principal business seeks to promote reverse investment and export of strategic sectors such as capital goods, infrastructure projects, shipping, value-added manufactured products and to facilitate the entry of Malaysian companies to new markets.

The Facility Agreement

[4] In 2016, in order to help fund the Appellant undertaking a project awarded to it to construct and operate a thermal decomposition plant with green technology capable of recycling used tires in Simpang Pulai Perak ("the Project"), the Appellant turned to the Respondent's financial institution. This started on 2 November 2016 (but further revised on 14 February 2017 and 3 March 2017) where the Respondent offered an Islamic financing facility of USD10,350,000.00 ("the Facility") to the Appellant for the Project.

[5] The offer was subsequently documented in an Ijarah Facility Agreement ("Facility Agreement") executed on 5 June 2017 where the Respondent agreed to grant the Facility to the Appellant. The Facility was for the purposes of the Project − to enable the Appellant to part finance the construction of the thermal decomposition plant and to finance 85% of the total purchase cost of the new thermal recovery unit from China.

The Conditions Precedent

[6] The Facility Agreement contains detailed terms and conditions applicable to the grant and drawdown of the Facility. In particular, and especially relevant to this appeal, in accordance with cl 6.2 read together with Schedule 2 to the Facility Agreement, the Appellant was contractually obliged to fulfil all the stipulated conditions precedent within one month from the date of the Facility Agreement − which was by 5 July 2017. It is noteworthy that there were 30 conditions precedent in total, consisting of 25 conditions precedent and five other additional conditions precedent (as defined and referred to in the Facility Agreement) that the Appellant must comply with.

The Termination

[7] On 27 August 2018 however, the Respondent issued a termination notice on the even date cancelling and terminating the Facility and the Facility Agreement. This was done on the basis that the Appellant had failed to fulfil the conditions precedent within the stipulated one-month period. The Appellant's request or appeal of 28 September 2018 for the Facility to be reinstated was rejected by the Respondent on 27 November 2019 (after the Respondent had asked for supporting documents on 8 January 2019, and the Appellant's response thereto on 21 February 2019).

[8] Thereafter, following the Respondent's rejection on 20 January 2020 of the Appellant's subsequent letter of demand dated 6 January 2020 demanding release of the financing sum, the Appellant commenced the instant suit against the Respondent on 2 July 2020.

[9] Primarily, the Appellant sought a declaration that the termination was wrongful and prayed for specific performance of the Facility Agreement, as well as for damages, interests and costs.

The Verdict Of The High Court

[10] The High Court , in dismissing the claim by the Appellant held that the Respondent's termin