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2025 MarsdenLR 2924
HIGH COURT MALAYA KUALA LUMPUR
SHELL MDS (MALAYSIA) SDN BHD – Appellant
Versus
PETROLIAM NASIONAL BERHAD (PETRONAS) & ANOR – Respondent
[Suit No: WA-24NCVC-4367-11-2024]
The court ruled that an interim injunction was necessary to maintain the status quo amidst competing gas supply claims, ensuring compliance with federal and state regulations while preventing legal and financial harm to the applicant.
Headnote:(A) Petroleum Development Act 1974 - Distribution of Gas Ordinance 2016 - Rules of Court 2012 - Interpleader proceedings and injunctions - Competing claims from two gas supply agreements create jurisdictional conflicts - Serious issues regarding statutory validity and compliance necessitate judicial determination - Injunction granted to maintain status quo and prevent disruption in gas supply while ensuring lawful payment obligations are met. (Paras 2, 4, 6, 56)
(B) Jurisdiction - Court's powers to grant injunctions derived from statutory provisions; necessity established for interim relief to prevent harm pending resolution of competing claims. (Paras 7, 8, 10, 47)
(C) Balance of Convenience - Evaluation of harm anticipated from granting versus denying injunctive relief favors maintaining status quo amid conflicting claims, particularly in light of potential legal repercussions for the applicant. (Paras 47, 54, 55)
Facts of the case:
Application arose from Shell MDS (Malaysia) Sdn Bhd's urgent need for injunctive relief amid disputes over gas supply agreements with Petronas and Petros, both asserting rights to supply gas to the applicant. The company faced potential financial risks amid competing claims for payments related to a substantial ongoing gas supply.
Findings of Court:
The court highlighted ongoing operational challenges faced by the applicant and the legal complexities introduced by federal and state jurisdictions. Additionally, harm in denying relief could lead to significant financial and legal consequences for the applicant.
Issues: The primary concerns involved establishing the rightful recipient of payment under two conflicting gas supply agreements, while addressing compliance with potentially conflicting federal and state regulations.
Ratio Decidendi: The court determined that maintaining the status quo through an injunction was essential to avert potential legal consequences while ensuring the applicant's continued operation, emphasizing the delicacy of the balance between conflicting legislative frameworks.
Result: The application for interim injunction granted, preserving the existing operational status of the applicant pending court determination.
| Table of Content |
|---|
| 1. conflicting claims between petronas and petros (Para 2 , 3 , 4 , 18 , 19) |
| 2. court's jurisdiction and powers for injunctions (Para 7 , 8 , 9) |
| 3. petronas’s assertion concerning balance of convenience (Para 14 , 15 , 16) |
| 4. arguments regarding adequacy of remedy and equitable relief (Para 30 , 31 , 32 , 33 , 34) |
| 5. injunction protects rights pending resolution (Para 55 , 56) |
"Gajah Berjuang Sama Gajah, Pelanduk Mati Di Tengah-Tengah."
Introduction
[1] This urgent application (Encl 3) by Shell MDS (Malaysia) Sdn Bhd ("SMDS") for an interim injunction in the interpleader proceedings (Encl 1) under O 17 r 1(1)(a) of the Rules of Court 2012 (ROC 2012), which provides:
"Where a person is under liability in respect of a debt or in respect of any money, goods or chattels and he is, or expects to be sued for or in respect of that debt or money or those goods or chattels by two or more persons making adverse claims thereto."
[2] Encl 3 becomes urgent as the matter involves competing claims from Petronas and Petros on SMDS's payment for natural gas supply. SMDS faces immediate risks and threats of disruption to its gas supply under two competing gas supply agreements ("GSA") ie the Petronas-GSA dated 17 July 2020 ("Petronas-GSA") and the Petros-GSA dated 16 August 2024 ("Petros-GSA"). Article 17.1(c) of the Petronas-GSA puts SMDS to a 14 November 2024 deadline to top up its bank guarantee, failing which Petronas has the right to terminate the agreement. Article 11.11 permits Petronas to suspend gas supply with 7 days' notice, which can be issued at any time. The financial implications are substantial, with monthly payments in the region of RM70-100 million. SMDS risks paying twice for the same gas supply and facing potential disruption to its operations in Bintulu if it is suspended, with negative consequences on its bank guarantee facilities. SMDS has attempted to mitigate the situation by offering to set aside payments in an interest-bearing account pending resolution. Still, Petronas has proceeded to call on the bank guarantee.
[3] It begins with the execution of the Petronas-GSA in July 2020, followed by Petros's designation as the sole gas aggregator in February 2024, and culminating in the signing of the Petros-GSA in August 2024. The competing legislative frameworks are the heart of the dispute. At the federal level, the Petroleum Development Act 1974 ( PDA 1974) grants Petronas exclusive rights over petroleum operations nationwide. At the state level, the Distribution of Gas Ordinance 2016 (DGO 2016) and its 2023 amendment establish Petros as the sole gas aggregator in Sarawak. This section highlights the fundamental tension between federal and state authorities that underlies the dispute. Under s 2 1974 it states that:
"The entire ownership in, and the exclusive rights, powers, liberties and privileges of exploring, exploiting, winning and obtaining petroleum whether onshore or offshore of Malaysia shall be vested in a Corporation to be incorporated under the Companies Act 1965."
[4] Under s 11 DGO 2016 it states that:
"(1) The Minister may, by notification in the Gazette, designate any person to be a gas aggregator for the purposes of this Ordinance.
(2) A gas aggregator shall be the only person authorized to aggregate natural gas from various sources for distribution to consumers in the State."
[5] Parties came before me after their initial hearing before YA Hayatul Akmal binti Abdul Aziz on 19 December 2024. That day, SMDS made its oral submissions extensively but did not file written submissions. When Petronas sought leave to file submissions SMDS's oral submissions, SMDS objected and insisted that Petronas submit orally. This procedural impasse led YA Hayatul Akmal to direct all parties to file submissions and schedule a new hearing date before me on 6 January 2025. Her Ladyship then granted an ad interim order of Encl 3 until the hearing of Encl 3. What had also transpired on that day
