Back
2021 MarsdenLR 2564
COURT OF APPEAL PUTRAJAYA
UNITED OVERSEAS BANK LIMITED – Appellant
Versus
UNITED SECURITIES SDN BHD & ORS – Respondent
[Civil Appeal No: W-02(IM)(NCC)-1541-10-2020]
A non-exclusive jurisdiction clause in a loan agreement shall be interpreted as exclusive, obligating the parties to resolve disputes in the specified jurisdiction unless strong reasons are presented otherwise.
Headnote:(A) Companies Act 1965 – Section 237(3) – Loan Agreement – Court of Appeal allowed the appeal by UOB against the High Court's decision to dismiss the stay application pending the Originating Summons in Singapore – The jurisdiction clause in the Loan Agreement was found to be an exclusive jurisdiction clause directing disputes to Singapore courts. (Paras 18-40)
(B) Jurisdiction – The court clarified the interpretation of non-exclusive jurisdiction clauses in loan agreements, asserting that submission to such jurisdiction means USSB must seek resolution in Singapore. (Paras 20-25)
(C)
Issues – The issues addressed included whether the jurisdiction clause was exclusive and whether UOB had submitted to the jurisdiction of Malaysian courts through UOB Nominees. (Paras 12-56)
(D) Findings of Court – The Court held that the HCJ erred in concluding UOB had submitted to Malaysian jurisdiction and emphasized that strong reasons are required to depart from the exclusive jurisdiction clause. (Paras 40-57) (E) Result – The stay of proceedings was granted, allowing UOB to continue its legal actions in Singapore.
JUDGMENT
Introduction
[1] This is an appeal by the appellant, United Overseas Bank Limited Singapore (UOB) against the decision of the learned High Court Judge (HCJ). The HCJ had dismissed its application for a stay of the High Court proceedings (the USSB suit) filed by the 1st respondent (USSB) pending the final disposal of an Originating Summons filed by UOB in Singapore (Singapore OS).
[2] We had allowed the appeal and our reasons are as follows.
[3] The stay proceedings was premised on O 12 r 10(2) Rules of 2012 (RC 2012) on the ground that Malaysia is not the proper forum for the dispute, rather it is Singapore.
Parties
[4] The parties in the appeal will be referred to as follows:
a. UOB (the appellant);
b. USSB (the 1st respondent);
c. UOB Nominees (the 2nd respondent);
d. CCSB (the 3rd respondent) and its liquidators, the 4th and 5th respondents;
e. USSB's Receiver (the 6th respondent); and
f. Equiticorp (the 7th respondent).
Background Facts
[5] Pursuant to a Loan Agreement dated 17 December 1982 (the Loan Agreement), UOB granted a loan to USSB in USD18,700,000,00 (the Loan). The Loan was disbursed in US Dollars and duly utilised. As security for the Loan, USSB granted a Deed of Debenture dated 17 December 1982 (the Debenture) charging all of its assets to UOB. The assets included all of USSB's 2,500,000 ordinary shares in CCSB then known as City Centre Bhd (the CCSB shares). The CCSB shares were registered in UOB Nominees as required under the Debenture.
[6] USSB defaulted in repayment of the Loan. On 3 May 1985 UOB exercised its rights under the Debenture and appointed Receivers over the charged assets of USSB. USSB was wound up on 30 January 2007.
[7] CCSB too was wound up on 25 April 2000. CCSB had 16 parcels of land (the CCSB lands) which were eventually sold for RM516,275,200.00 by the Liquidators. There was a liquidation surplus of RM434 million (Surplus Proceeds). On 18 September 2017 the CCSB Liquidators filed an Application for Directions under s 237(3) of the Companies Act 1965 on the distribution of the Surplus Proceeds, namely whether UOB Nominees was the sole contributory of CCSB and if affirmative whether the Surplus Proceeds may be forwarded to it to apply the surplus based on the legal entitlement under the relevant security documents.
[8] The respondents to the Application for Directions were UOB Nominees, USSB and Equiticorp. It is to be noted that USSB and Equiticorp were then unsecured creditors of CCSB and it is not disputed the debts have been fully paid by the CCSB Liquidators.
[9] On 12 February 2018 the High Court directed the Surplus Proceeds to be paid to UOB Nominees. USSB and Equiticorp appealed to the Court of Appeal which allowed the appeal on 21 February 2019. Leave to the Federal Court was refused on 17 October 2019.
[10] On 9 December 2019 this USSB suit was filed. It essentially sought declarations that the Surplus Assets do not form part of the assets of USSB subject to the Loan Agreement and/or the Debenture; UOB and/or UOB Nominees have not established a legal entitlement to the Surplus Proceeds, UOB Nominees was not a contributory of CCSB such as to be eligible to receive the Surplus Proceeds without establishing a legal entitlement to the same and other consequential relief.
[11] On 21 April 2020 UOB filed its Singapore OS. It essentially sought orders and/or reliefs that under Singapore law all UOB's rights under the Debenture are valid and exercisable including its security over all rights attached to the shares of City Centre Sdn Bhd; and under Singapore law UOB's security over all rights attached to the shares of City Centre Sdn Bhd pursuant to the Debenture includes security over the right to the Surplus Proceeds.
[12] Then came the stay application by UOB.
Finding Of The High Court
[13] The HCJ found that UOB had submitted to the jurisdiction of the Malaysian courts. This was because it had participated in the winding up proceedings of CCSB through UOB Nominees where the questio
