A bank’s duty of good faith in lending is not a recognized cause of action within Malaysian law, with banker-customer relationships treated as purely contractual unless explicitly stipulated otherwise.

[1] After a full trial of two civil suits that were heard together which lasted for twenty one days, the High Court allowed the 1st respondents claim and dismissed the appellants loan recovery claims. The High Court also ordered that the appellants pay the respondents damages totalling RM117.5 million with further damages to be assessed. The High Court also dismissed the appellants claims for recovery of the monies loaned to the respondents.

[2] Civil Suit No: D2-22-443-2006 carried the appellants loan recovery claims while Civil Suit No: D2-22-665-2006 constituted the 1st respondents claim. These were the details of the two civil suits that were consolidated and heard together.

[3] The decision of the High Court for these two civil suits may conveniently be summarised in this way:

(i) The Appellants Loan Recovery Claims - Suit No: 443

(a) the appellants loan recovery claims were dismissed and the counterclaim of the respondents was allowed;

(b) the respondents were held not liable to repay a single cent of the outstanding facilities which had financed the development of the 1st respondents land known as "Galaxy Ampang" comprising a shopping centre and an office block ("the project");

(c) all security for the facility was ordered to be released forthwith and discharged, including the security over the project land; and

(d) the 4th appellant to pay RM2 million to the 2nd respondent.

(ii) The 1st Respondents Claim - Suit No: 665

(a) the 1st respondents claim was allowed;

(b) the 1st respondent was awarded damages of RM115.5 million with further damages to be assessed;

(c) the damages awarded included the appellants having to repay the Malaysian Alliance Assurance Berhads ("MAAs") loan; and

(d) general damages and the balance of the 1st appellants claim to be assessed by the Court.

The Facts

[4] On 27 June 1996, the appellants, as syndicated lenders, had granted facilities worth RM62.5 million to the 1st respondent to finance the 1st respondents project. The main director and shareholder of the 1st respondent is the 2nd respondent and he is also the guarantor of the facilities. The 1st appellant played a major role. As security agent, all security for the facilities were given to the 1st appellant including an assignment over the project land and a debenture.

[5] Pursuant to the terms of the first letter of offer and the facility agreement, the 1st respondent agreed, inter alia:

(a) that the revolving credit facility of RM4 million was to be utilised by the 1st respondent as its working capital;

(b) that Tranche "A" of the bridging loan for the sum of RM28.5 million was for the purpose of facilitating the redemption of the 1st respondents land from Bank Kerjasama Rakyat Malaysia Berhad;

(c) that Tranche "B" of the bridging loan was for the sum of RM15 million for part-financing of the construction and development of phase 1 of the 1st respondents project; and

(d) that Tranche "C" of the bridging loan was for the sum of RM15 million for part-financing of the construction and development of phase 2 of the project.

[6] Sometime in 1997/1998, the 1st respondent had problems with its main contractor compounded by the bad economic crisis. This prompted the 1st respondent to request for the cancellation of the remaining bridging loan in Tranche "C" amounting to RM15 million which was initially intended to finance the building of the office block of the project. With the gloomy economic scenario, the project stalled.

[7] On 26 April 1999, there was a letter of offer by the 4th appellant which was accepted by the 2nd respondent wherein the 4th appellant will participate in the proposed restructuring of the facilities in consideration of the RM2 million fixed deposit receipts