GROUNDS OF JUDGMENT

The issue to be tried in this case is whether there exists a legally binding agreement between the plaintiff and the defendant.

The Facts

The plaintiff is an investment subsidiary company of the Koperasi Pekerja-Pekerja Kerajaan Sabah Berhad, a co-operative registered under the Co-Operative Societies Act, 1993. The defendant is a commercial bank operating under Islamic principles.

By letter dated 11.8.2001 the defendant offered banking facilities to the plaintiff known as Facility I in the sum of RM9 million bridging finance comprising of RM3 million for the purpose of redeeming 2 charged land titles from Borneo Mortgaging Finance Berhad and RM6 million to part finance the development of 400 units of mixed housing and apartments on the said lands. Facility II is a performance guarantee of RM1.5 million in favour of the Ministry of Local Government and Housing being 5% of the development costs of RM29,759,010.00 for phase I of the housing development project. The offer letter is at ABD182-193. The plaintiff duly accepted the offer (ABD196).

At the request of the plaintiff the offer in respect of Facility I was amended by the defendant by substituting RM4 million (from the original RM5 million) for the redemption of the 2 charged titles and RM5 million (from the original RM4 million) for the part financing of the 400 units of houses (ABD194-205). This amendment was conveyed by letter dated 9.10.2001 (ABD194-195). The plaintiff duly accepted the amended offer. In the same letter the defendant made it clear that "All other terms and conditions shall remain unchanged." The unchanged terms and conditions refer to the terms and conditions in the offer letter dated 11.8.2001.

It was an express term of the amended offer that the plaintiff should utilize Facility I within 12 months from the date of execution of the security documents and that the plaintiff should repay Facility I to the defendant within 30 months.

By letter dated 26.8.2002 (ABD483) whilst the security documents were being prepared, the plaintiff requested the defendant to vary the development cost for Facility II from RM29,759,010.00 to RM28,000,000.00. At around the same time the defendant discovered that one of the landed properties had been charged to Maybank and this was never revealed by the plaintiff to the defendant earlier.

The plaintiff commenced preliminary works on the site in reliance upon the letters of offer dated 11.8.2001 and 9.10.2001 respectively despite the fact that no formal written agreement was executed and despite the fact that the legal documents had not been executed between the parties.

By letter dated 16.12.2002 the plaintiff informed the defendant of the mobilization of all equipment on the 2 lands by the plaintiff's contractors and had enquired about the delay in the drawdown of the facility. In response the defendant by letter dated 27.2.2003 informed the plaintiff that they were waiting for a third party opinion on the facilities in order to update the defendant's financing committee.

On 6.5.2003 the plaintiff wrote to the defendant informing, amongst others, that the vendors of the 2 lands intended to rescind the sale and purchase agreements and to sell the lands to other parties and had thus requested the plaintiff to expedite drawdown of the facility.

By letter dated 21.8.2003 the defendant informed the plaintiff that the facilities previously offered to them were withdrawn and cancelled (ABD210). The legal and security documents had not been signed at the time of the cancellation and the facilities had not been disbursed.

According to the plaintiff the cancellation of the facilities resulted in them failing to purchase the two lands and that in consequence they were forced to abandon the housing development on the said lands. The plaintiff claims that they suffered loss of RM12,986,746.05 as a result of the defendant's action.

The Issue

The issue is whether the defendant was in breach of contract when it cancelled the facilitie