JUDGMENT

Abdul Wahab Said J:

The plaintiff sought a declaration that the Term Loan Facility of 26 December 1996 and the Security Documents are void and illegal. The plaintiff also sought to restrain the defendants from exercising any rights thereunder, including the appointment of a Receiver and Manager pursuant to the Debenture dated 20 February 1997. The defendants appealed against the decision of the SAR on 17 April 2000, dismissing the 1st and 2nd defendant's application to strike out the plaintiff's amended statement of claim with costs.

Factual Matrix

The 1st defendant is a licenced offshore bank in Labuan, wholly owned by Citibank N.A., U.S.A. The 2nd defendant is incorporated in Malaysia and a wholly owned subsidiary of Citibank N.A. In September 1993, the Kuala Lumpur Branch of Citibank N.A. agreed to arrange USD15 million to be secured by a Standby Letter of Credit given by the Hong Kong Branch of Citibank N.A.

The 'in principle' approval of Bank Negara Malaysia (controller of Foreign Exchange) was obtained on 23 November 1993 for an offshore loan from a financial institution based in Labuan. Public Bank (L) Ltd. made the USD15 million term loan available to the plaintiff. Eventually, the parties agreed that the Standby Letter of Credit be provided by the Singapore Branch of Citibank N.A. instead of the Hong Kong branch. A specific approval of the offshore Term Loan Facility was obtained from Bank Negara on 22 December 1993.

Under the terms of the Offshore Term Loan Facility, the second instalment payment was due on 31 October 1996. Discussions on arranging for a re-financing of the facility had gone on since early to mid 1996.

The parties agreed that Bank Negara approval be sought for the refinancing and deferment of the principal sum for 12 months. On 4 October 1996 Bank Negara agreed to the refinancing by the 1st defendant of the existing offshore Term Loan Facility. On 9 October 1996, Bank Negara agreed to a deferred repayment schedule. The revised schedule is in three instalments, all payable to the 1st defendant. Instalment payments of USD1,250,000 are payable on 31 October 1997 and one bullet instalment of USD11,875,000 is payable on 31 October 1998.

On 15 October 1996, Public Bank (L) wrote to say that it agreed to the refinancing and deferment of the 2nd instalment from 31 October 1996 to 27 December 1996. On 19 October 1996, the 1st defendant issued a Letter of Offer for USD14,375,000 (1996 Term Loan Facility) to refinance the outstanding sum under the existing US15 million granted by Public Bank (L).

On 26 December 1996 a loan agreement in respect of the 1996 Term Loan Facility exclusively to fully repay the existing indebtedness to Public Bank (L) was executed. Various securities were required under the loan agreement and the 2nd defendant was constituted a security agent. A redemption sum of USD14,385,696.42 as at 31 December 1996 was remitted by the 1st defendant to Public Bank (L) after receiving a request from the plaintiff for a drawdown. This settles in full the entire existing indebtedness to the plaintiff.

Under the loan agreement, the final bullet instalment of RM 11,875,000 was due and payable on 31 October 1999. By various letters, the 1st defendant agreed for the payments to be extended from 31 October 1999 to 30 November 1999 and from 30 November 1999 to 15 December 1999. The extension of time was given pending negotiations for restructure of a 1996 loan whilst reserving its right under the Offshore Term Loan Facility.

The 1st defendant by a letter of 8 December 1999 offered to restructure the 1996 loan subject to fulfillment of certain conditions precedent and accepted by the plaintiff. The plaintiff failed to fulfill the preconditions of the 1st defendant's letter of offer. On 17 December 1999, the 1st defendant extended the performance of pre conditions to 20 December 1999 that the plaintiff nevertheless failed to fulfill.

The conditional restructuring of the 1996 Off-Shore Term Loan Facility lapsed.