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2025 MarsdenLR 4213
HIGH COURT MALAYA KUALA LUMPUR
TRENERGY INFRASTRUCTURE SDN BHD – Appellant
Versus
HONG LEONG BANK BERHAD – Respondent
[Originating Summons No: WA-24NCC-425-09/2024]
Cancellation of banking facilities effectively terminates the underlying Facilities Agreement, discharging all future obligations and rendering provisions regarding consolidation and set-off inapplicable.
Headnote:(A) Facilities Agreement - Section 16.04 - Cancellation of banking facilities - Plaintiff sought a declaration of rights to funds held by Defendant in Fixed Deposit and Escrow Accounts - Court found that cancellation effectively terminated the Facilities Agreement, discharging all future obligations, including those under s 16.04 - Claim of consolidation and set-off by Defendant post-cancellation deemed unlawful. (Paras 25-36, 87)
(B) Definition of cancellation - The court acknowledged the cancellation of facilities as fundamental breach terminating contractual obligations, making s 16.04 inapplicable. (Paras 24, 35)
(C) Events of default - Actions by the Plaintiff did not constitute default; retention of funds by Defendant following cancellation was argued as illegal and in bad faith. (Paras 60-66)
Facts of the case:
Plaintiff, seeking a declaration over funds in accounts held by Defendant, argued that all obligations were discharged upon cancellation of banking facilities, claiming Defendant's assertion of rights under s 16.04 was unlawful. (Paras 15-17)
Findings of Court:
Court concluded that the Defendant's rights under s 16.04 did not survive the cancellation of facilities, resulting in a declared entitlement of the Plaintiff to the funds. (Paras 87)
Issues: The key issues were whether cancellation terminated the Facilities Agreement and whether the Defendant could retain funds despite the Plaintiff having no outstanding obligations at cancellation. (Paras 29, 31)
Ratio Decidendi: Court asserted that cancellation of facilities implied no longer a binding agreement for future obligations, invalidating the application of s 16.04 and highlighting that provisions must align with the commercial intent of the agreement. (Paras 36-38)
Result: Plaintiff's Originating Summons is allowed with a declaration on entitlement to funds and an order for the Defendant to account for all monies. (Paras 88)
| Table of Content |
|---|
| 1. parties entered an agreement with specific terms. (Para 1 , 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10 , 11 , 12 , 13 , 15) |
| 2. plaintiff's claims based on unlawful fund retention. (Para 16 , 17) |
| 3. plaintiff asserts cancellation negated obligations. (Para 18 , 19 , 20 , 21) |
| 4. defendant argues agreement terminates differently. (Para 22 , 23 , 24) |
| 5. cancellation of facilities impacts agreement validity. (Para 25 , 26 , 29 , 30) |
| 6. high court's interpretation on contractual cancellation effects. (Para 31 , 32 , 33 , 34) |
| 7. s 16.04's interpretation regarding operational clauses. (Para 35 , 36 , 39 , 40) |
| 8. contractual terms evaluation post-termination. (Para 41 , 42 , 43 , 48 , 49 , 50) |
| 9. events of default claims from defendant. (Para 54 , 55 , 56 , 58) |
| 10. commercial intent affects interpretation of clause applicability. (Para 67 , 68 , 70 , 73) |
| 11. court order favorable to plaintiff's claims. (Para 87 , 88) |
Introduction
[1] Before the court is an Originating Summons dated 3 September 2024 filed by the Plaintiff, Trenergy Infrastructure Sdn Bhd, seeking a declaration that it is entitled to all rights and interests in funds held by the Defendant, Hong Leong Bank Berhad, in Fixed Deposit Accounts and an Escrow Account established pursuant to a Facilities Agreement dated 15 April 2021.
[2] After careful consideration of the affidavits, written submissions, and oral arguments of both parties, I find in favour of the Plaintiff for the reasons set out below.
Background Facts
[3] The Plaintiff and the Defendant entered into a Facilities Agreement dated 15 April 2021 ("the Facilities Agreement') whereby the Defendant granted the Plaintiff banking facilities comprising a Revolving Contract Financing Line ("RCFL") in the total sum of RM34,550,000.00 and a Specific Contract Financing Line ("SCFL") in the sum of RM34,211,000.00 under the sublimit of the RCFL.
[4] The RCFL was utilised by the Plaintiff as a general credit financing line, whereas the SCFL was utilised for specific contracts with Tenaga Nasional Berhad, particularly Contract TNB517/2016 Variation Orders No 3 and No 4 (collectively referred to as "the Contracts").
[5] Pursuant to the terms of the Facilities Agreement, the Plaintiff authorised the Defendant to open an Escrow Account in the Plaintiff's name for the deposit of all proceeds due under the Contracts. The Plaintiff also authorised the Defendant to open a Fixed Deposit Account where 8% of the net proceeds of the Contracts would be deposited.
[6] Sarawak Cable Berhad ("SCB") was initially the sole shareholder of the Plaintiff and executed a Letter of Guarantee dated 15 April 2021 in favour of the Defendant, thus becoming a Security Party under the Facilities Agreement.
[7] In September 2022, SCB and six subsidiaries, including the Plaintiff, applied to the High court of Sabah & Sarawak at Kuching in Originating Summons No. KCH-24NCC-1- 9/2022 for leave to convene a meeting of creditors to approve a proposed scheme of arrangement ("Proposed Scheme") and for a restraining order under ss 366 and 368 of the Companies Act 2016 .
[8] By letter dated 11 October 2022, the Defendant's solicitors, Messrs Skrine, informed the Plaintiff that this event constituted an event of default, and that the facility would be suspended.
[9] Through correspondence in 2023, the parties reached an agreement where SCB would remove the Plaintiff from the Proposed Scheme. On 20 June 2023, Messrs Krish Maniam & Co (solicitors for SCB) wrote to Skrine to inform that SCB intended to remove the Plaintiff from the Proposed Scheme of Arrangement. On 7 July 2023, Skrine replied to confirm that the Defendant agreed to the Plaintiff being removed from the Proposed Scheme Proceedings.
[10] Sometime in December 2023, Bilun Borneo Sdn Bhd ("BBSS') acquired the entire equity interest in the Plaintiff from SCB.
[11] On 29 February 2024, the Plaintiff wrote to the Defendant requesting confirmation of the current balance held in the Escrow A
