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2010 MarsdenLR 3102
HIGH COURT, KUALA LUMPUR
ASEAMBANKERS MALAYSIA BERHAD & ORS – Appellant
Versus
GULA PERAK BERHAD & ANOR – Respondent
[Suit No. D5-22-1648-2005]
A supplemental agreement is valid and enforceable when executed voluntarily, and compromises in dispute resolution are upheld unless substantial evidence of unconscionability or lack of consideration is presented.
Headnote:(A) Contract Act, 1950 - Sections 2(d), 2(e), 2(f), 10, and 24 - Judgment concerning a supplemental agreement between lenders and a borrower regarding a disputed debt arising from a settlement agreement - Defendants disputed liability but not quantum, later withdrawing part of the counterclaim - The plaintiffs granted permission to utilize witness statements for examinations to expedite proceedings - The plaintiffs claimed unpaid interest which the defendants contested, asserting no liability post-cut-off date post-settlement agreement - The court determined the supplemental agreement was enforceable, rejecting claims of duress or lack of consideration, emphasizing the validity of compromise agreements in dispute resolution - The original agreement's terms remained binding as they were accepted in execution by all parties. (Paragraphs 1-9)
Facts of the case:
The plaintiffs are lenders to the 1st defendant, who defaulted on a debt, leading to a settlement in 2002, where the indebtedness was to be settled through Redeemable Convertible Secured Notes. The dispute centered around interest from the cut-off date until the notes were issued.
Findings of Court:
The court found no merit in the defendants' arguments and upheld the enforceability of the supplemental agreement, determining the debt remained with interest obligations. The defendants' counterclaim was dismissed.
Issues: The main issues included the enforceability of the supplemental agreement, whether consideration existed, and if the agreement was unconscionable.
Ratio Decidendi: The court ruled that the original facility agreements were binding, and the defendants did not provide sufficient evidence to overturn the supplemental agreement, reinforcing the notion that compromise agreements are valid when executed voluntarily.
Result: The plaintiffs’ claim is allowed, and the defendants' counterclaim is dismissed.
At the commencement of the hearing, parties have agreed that the case can be heard by way of: (a) witness statement for examination-in-chief; (b) preliminary cross-examination witness statement, with full liberty to further cross-examine orally (for purposes of cross-examination); (c) preliminary re-examination statement with full liberty to further re-examination if there is further oral examination. The court is extremely grateful to the parties for agreeing to such a mode as the preliminary cross-examination witness statement will save much of the court's time to deal with peripheral matters and for all practical purposes, preliminary cross-examination witness statement will stand as interrogatories and answers thereto only, as the right of oral cross-examination to the litigant is preserved during the whole trial.
Brief Facts
1. The plaintiffs are lenders and provided various facilities to the 1st defendant and/or subsidiaries. On or about December 2000, the 1st defendant defaulted. In consequence a settlement proposal was negotiated and it only materialized by all the plaintiffs consenting and executing a settlement agreement dated 25.6.2002. As per the settlement agreement it was agreed that all indebtedness calculated until 30.6.2002 (cut-off date) shall be settled by way of issuance of Redeemable Convertible Secured Notes (RCSN) to the plaintiffs in the proportions and in the manner set out in the settlement agreement.
2. The RSCN was only listed in Bursa Malaysia on 15.7.2003. In consequence there was an interest element from the cut-off date ie , 30.6.2002 until 15.7.2003 which amounted to RM20,843,766.27 which is the subject matter of the dispute here ie , whether the defendants are obliged in law to pay the interest as settlement agreement contemplated that all indebtedness will be exonerated notwithstanding the 1st defendant has agreed to pay (and in fact had paid part payment) and the 2nd defendant guaranteed the payment which is documented by a supplemental agreement dated 19.12.2003 and a letter of guarantee dated 25.8.2003.
3. In the supplemental agreement parties have agreed to convert the interest into a term loan. And now the defendants are refusing to honour the said supplemental agreement in essence by saying that the 4th plaintiff had unreasonably withheld consent to the proposed restructuring by way of issuance of RSCN (ii) as the debt has been fully paid by the issuance of RSCN the plaintiffs have no right to charge interest pursuant to the original facilities agreement from 1.7.2002 ie , the cut-off date (30.6.2002). In consequence the defendants say there is no liability after 1.7.2002 and the supplemental agreement and guarantee are bad in law and must be set aside and whatever amount paid pursuant to the supplemental agreement must be refunded.
And the learned counsel for the 1st defendant has summarised the case as follows:-
"The 1st defendant is refuting the Alleged Debt for the following reasons:-
a. The Alleged Debt arose fully due to the delay by the 4th Defendant in agreeing to the terms of the restructuring scheme when all other Plaintiffs have already agreed;
b. It was the delay by the 4th Defendant that caused the RCSN to be issued much later after the Cut-Off Date;
c. Further, the 1st Defendant did not enter into the said Supplementary Agreement voluntarily and was forced to do so;
d. Further, it is the intention of the parties as reflected in the Settlement Agreement that upon the issuance of the RCSN, all indebtedness arising from the facilities as set out in Schedul
