Conditions precedent must be fulfilled for the disbursement of loan facilities, and failure to comply absolves the lender of any breach.

[1] This is an appeal by the defendant against the decision of the learned High Court Judge at Tawau High Court made on 23 December 2011 whereby the plaintiffs' claim against the defendant was allowed on the ground that the defendant was liable for breach of contract for its failure to disburse the financing facilities earlier granted by the defendant to the 1st plaintiff.

Brief Facts

[2] The facts of the case are as follows:

(a) On or about 6 November 2003, the 1st plaintiff applied to the defendant at its Tawau branch for loan facilities up the sum of RM1,500,000.00 for the purpose of taking over and operating a then existing prawn farm owned and operated by Panduan Era Sdn Bhd (2nd plaintiff) at Jurangan, Tawau;

(b) In support of its application for the loan facilities, the 1st plaintiff submitted to the defendant a set of supporting documents and having evaluated the documents, the defendant had on 8 March 2004 by two separate Letters of Offer to the 1st plaintiff granted the following Islamic Banking loan facilities, namely:

(1) a revolving Murabahah working capital financing to the limit of RM700,000.00; and

(2) a cash note facility in the sum of RM750,000.00;

(c) The capital financing facility was offered by the defendant to the 1st plaintiff as a working capital for the purpose, inter alia, to finance the latter for the purchases of goods, raw materials, parts and equipment and other expenses in relation to the 1st plaintiff's prawn farming business. Meanwhile the cash note facility was offered to the 1st plaintiff as a term loan facility to redeem the CL land and NT land from Affin Bank Berhad;

(d) The 1st plaintiff accepted both the defendant's offers on 11 March 2004 and in consideration of the defendant's agreement to grant the two loan facilities, the 2nd plaintiff at the request of the defendant executed one set of memorandum of charge with Annexure on or before 28 June 2004 to create a third party second charge upon CL105331913 as security for the two loan facilities granted by the defendant. The charge was registered on 24 July 2004 under memorial no 30312062/63;

(e) In consideration of the defendant's agreement to grant the two loan facilities, the 3rd plaintiff at the request of the defendant executed one set of memorandum of charge with Annexure on or before 28 June 2004 to create a third party second charge upon NT103024273 as security. This charge was later registered under memorial no 101000052/53 on 29 July 2004;

(f) In furtherance to the acceptance of the defendant's offers, the 1st plaintiff and the defendant executed the following documents prepared by Messrs Chin, Mirdin & Co in preparing, drawing up and execution of the loan documentations:

(i) Cash note facility:

(a) The asset sale agreement dated 28 June 2004;

(b) The asset sale purchase dated 28 June 2004; and

(c) The Qurdh Al-Hassan loan agreement dated 28 June 2004.

(ii) Capital financing facility:

(a) The financing facility agreement dated 28 June 2004;

(g) In reliance to the defendant's promise to grant the loan facilities, the 1st plaintiff commenced its tiger prawn culture project in July 2004 including pond preparation and hatchery operation and further incurred costs on prawn feedings and general business operation;

(h) Despite the acceptance of the Letters of Offer by the 1st plaintiff and the creation of the second charge upon the CL land and the NT land respectively, the defendant refused or failed to disburse and/or allow the drawdown of the loans to the 1st plaintiff;

(i) By reason of the defendant's delay to allow drawdown the cash note facility, the outstanding sum due from the 2nd and 3rd plaintiffs to Affin Finance Berhad under the 1st legal charge upon the CL land and the NT land respectively was levied with interest and the total outstanding sum of RM750,000.00 had accrued to approximately RM811,000.00 by Octo