1. Talam Corporation Berhad v 1. Bangkok Bank Berhad (22-1245-2010)

DEVELOPMENT SDN. BHD … PLAINTIFFS

RAJENDRAN PALANIAPPAN … DEFENDANTS (SUPPLEMENTARY GROUNDS OF JUDGMENT ON COSTS) [1] This Court has been urged by the counsel for the Defendants to award costs on the following basis:- 2

Party and party costs as between the 1st Plaintiff and the

(ii) Costs on an indemnity basis as between the 2nd Plaintiff and the 1st Defendant; and

(iii) Party and party costs as between the 2nd Plaintiff and 2nd Defendant. [2] However, it was submitted by the Defendants that if this Court is minded to award the costs between the 2nd Plaintiff and the 1st Defendant as per basis (ii) namely by awarding costs to the 1st Defendant on an indemnity basis then it would negate an extensive consideration of the party and party costs as between the Plaintiffs and the 2nd Defendant and also the 1st Plaintiff and the Defendants. [3] It was also submitted on behalf of the Defendants that the nature of the Plaintiffs’ claim and their conduct in respect of the trial of the action warranted the granting of costs on an indemnity basis as between the Plaintiff and the Defendants. 3 2nd Plaintiff is contractually obligated to pay the 1st Defendant’s legal costs and expense on an indemnity basis [4] It was contended by the Defendants that the 2nd Plaintiff is contractually obligated to pay the costs of the 1st Defendant on an indemnity basis by virtue of the Charge Annexure. The Defendants contended that the execution of Charge instrument in favour of the 1st Defendant vide Form 16A Charge dated 21 November 2005 (Presentation No. 92377/05) (“Charge”) and the Annexure to Form 16A Charge dated 28 November 2005 (Presentation No. 92377/05) (“Annexure”) creates and governs the legal and contractual relationship between the 2nd Plaintiff and the 1st Defendant. Thus, it is the submission of the Defendants that 2nd Plaintiff’s legal and contractual obligation are spelt out within perimeter and boundary of the Charge Annexure. On this contention, the Defendants sought reliance on two cases, namely; i. V Letchumanan v. Central Malaysian Finance Bhd. [1980] 2 MLJ 96 4 The Federal Court held that the contents of the Charge consisting of the statutory form and the annexure, read as a whole, set out the actual agreement between the parties. ii. Standard Chartered Bank Malaysia Bhd. v. Tunku Mudzaffar bin Tunku Mustapha [2005] 1 MLJ 604 Mohd Hishamudin J explicitly stated that, “a Charge Annexure is part of the charge instrument” and held that as long as the clauses in the annexure are in line with the National Land Code, it would be enforceable between both parties. [5] In support of its entitlement for costs on an indemnity basis from the 2nd Plaintiff, the Defendants have placed reliance on section 12.28 of the Annexure. Section 12.28 of the Annexure reads as follows: “SECTION 12.28 INDEMNITY

The Chargor shall nor do or omit or suffer to be done any act, matter or thing in or respecting the Said Land which contravenes the provisions of this Charge or any Act, Ordinance, Enactment, Order, rule, regulation or by-law now or hereafter affecting the same and the Chargor shall at 5 all times (hereafter indemnify and keep indemnified the Lender against all losses, actions, proceedings, costs, expenses, claims and demands in respect of any such act, matter or thing done or omitted to be done in contravention of the said provisions.

In addition and without prejudice to the power, rights and remedies conferred on the Lender herein, the Chargor shall indemnify the Lender against any loss or expense (including but not limited to legal expense on a solicitor and own client basis) which the Lender may sustain or incur as a consequence of any default in payment by the Chargor of any sum due hereunder including (but not limited to) any interest or fees paid or payable on account of or in respect of any borrowed or deposit from third parties in order to maintain the amount in default or in liquidating or re-employing such funds or deposits.” [6] It was argued by the Defendants that section 12.28 of the Annexure has explicitly and unequivocally provides that the 2nd Plaintiff must indemnify the 1st Defendant in full of any legal fees incurred by the Defendants in defending this action as this action (which was filed by the 2nd Plaintiff against the Defendant) was premised on the charge document executed by the 2nd Plaintiff as registered owner of the 6 property to the 1st Defendant as security for the loan facility granted to Keuro Leasing. [7] The Defendants had therefore urged this Court to give effect to the intentions of parties to the contract. It was submitted by the Defendants that this Court is bound and must give effect to intentions of parties in the contract. (See: i.United Overseas Bank Ltd v Sin Leong Ironbed and Furniture Manufacturing Co (Pte) Ltd & 5 Ors [1988] 1 MLJ 479 ii. Oversea-Chinese Banking Corp Ltd v Sarlian Trading Sdn Bhd [1994] MLJU 556 iii. Malayan Banking Bhd v Wembley Industries Holdings Bhd [2012] MLJU 91 iv. a Essar Steel Ltd v Bayerische Landesbank And Others [2004] 3 SLR 25) [8] The Defendants have also contended that the provision stipulated under section 12.28 of the Annexure is not the only provision entitling the 1st Defendant to be indemnified by the 2nd Plaintiff of any losses or expense including legal expenses incurred by the 1st Defendant arising from the Charge instrument. Section 12.11 of the Annexure also allows the 1st Defendant to deduct such costs and expenses incurred by the 1st Defendant against the excess sale proceeds 7 obtained through the auction of the Property, the sum of which is currently retained by the 1st Defendant pending the disposal of this suit so that the 2nd Plaintiff does not need to incur any additional out-of-pocket expenses should such an order as to costs be awarded to the 1st Defendant. [9] The 1st Defendant further argued that the Defendants had defended this suit merely to protect and enforce its rights as a Chargee to the property under the Annexure, only to be sued by the Plaintiffs. The Charge Annexure being a clear and an unambiguous contract, must be given full effect by this Court. The case of Royal Selangor Golf Club v. Anglo-Oriental (M) Sdn. Bhd. [1990] 1 CLJ 995 was brought to this Court’s attention. Plaintiffs’ conduct during the whole trial justify costs on indemnity basis [10] The counsel for the Defendants had also urged this Court to award the Defendants costs on an indemnity basis based on the Plaintiffs’ conduct during the whole trial in which the Defendants had contended that the Plaintiffs had conducted themselves in an abhorrent and 8 scandalous manner. The Defendants have described the abhorrent and scandalous conducts during the whole trial as follows: i. The Plaintiff had blatantly disregard pre-trial directions as well as orders made in Court during trial by filing pertinent documents only days before the trial date and by attempting to produce additional bundles of documents even after this Honourable Court had barred them from doing so; ii. The Plaintiff had filed various and voluminous bundles of documents which do not hold up to scrutiny during the course of the trial in an attempt to overwhelm the Defendants and had inevitably wasted this Honourable Court’s time as the originals were never produced and/or were inconsistent with its copies and/or the makers of such documents were not called; iii. The Plaintiff had included last minute witnesses in order to supplement the loopholes in the Plaintiffs’ case even though such witnesses had no personal knowledge on the same and had only served witness statements for so-called subpoenaed witnesses on the actual day of examining the said witnesses; 9 iv. The Plaintiffs’ counsel had, on a variety of occasions, answered questions for the Plaintiffs’ own witnesses during the Defendants’ cross examination of the same, instructed the Defendants’ counsel to ask certain cross-examination questions and generally interrupted the Defendants’ counsel’s line of questioning on multiple occasions; and v. The Plaintiffs had attempted to withdraw purported original documents which were marked as Exhibits ID-6 to ID-9 upon the Defendants objection to the authenticity of the same, as they did not appear to be documents that were approximately Nine (9) years old and appeared to be freshly printed. [11] The Defendants had also submitted that the above conducts of the Plaintiffs had not only caused tremendous strain on the Defendants’ solicitors in responding and constantly objecting to the conduct of the Plaintiffs’ solicitors but is also evidence of the desperate, disingenuous and mischievous effort by the Plaintiffs to win at all costs without due regard to the ends of justice and the law. Entailing which, the Defendants contend that this was extremely prejudicial to the Defendants who had to constantly change their strategy and 10 adapt to the Plaintiffs’ sudden onslaught of additional documents, witnesses and witness statements. [12] The counsel for the Defendants had placed his reliance on the following cases:

An English case of Bahram Noorani v. Richard Calver [2009] EWHC 592 (QB) In Bahram Noorani, Coulson J in considering the applicable principles in determining costs opined as follows:- “Indemnity costs are no longer limited to cases where the court wishes to express disapproval of the way in which litigation has been conducted. An order for indemnity costs can be made even when the conduct could not properly be regarded as lacking in moral probity or deserving of moral condemnation: see Reid Minty v Taylor [2002] 1 WLR 2800 ). However, such conduct must be unreasonable “to a high degree. ‘Unreasonable’ in this context does not mean merely wrong or misguided in 11 hindsight”: see Simon Brown LJ (as he then was) in Kiam v MGN Limited No2 [2002] 1WLR 2810. In any dispute about the appropriate basis for the assessment of costs, the court must consider each case on its own facts. If indemnity costs are sought, the court must decide whether there is something in the conduct of the action, or the circumstances of the case in question, which takes it out of the norm in a way which justifies an order for indemnity costs: see Waller LJ in Excelsior Commercial and Industrial Holdings Limited v Salisbury Hammer Aspden and Johnson [2002] EWCA (Civ) 879 . Examples of conduct which has lead to such an order for indemnity costs include the use of litigation for ulterior commercial purposes (see Amoco (UK) Exploration v British American Offshore Limited [2002] BLR 135 ); and the making of an unjustified personal attack by one party by the other (see Clark v Associated Newspapers [unreported] 21st September 1998 ). Furthermore, whilst the pursuit of a weak claim will not usually, on its own, justify an order for indemnity costs, the 12 pursuit of a hopeless claim (or a claim which the party pursuing it should have realised was hopeless) may well lead to such an order: see, for example, Wates Construction Limited v HGP

(ii) The Federal Court’s decision in Takako Sakao (f) v Ng Pek Yuen (f) & Anor (No 2) [2010] 2 MLJ 181. Gopal Sri Ram FCJ delivering the judgment of the Federal Court opined : “What appears clear is that the discretion to award costs on an indemnity basis is unfettered. All that is required is that it must be an appropriate case warranting an award on that basis.” In the case of Mirzan Bin Mahathir v Star Papyrus Sdn Bhd [2000] 6 MLJ 29, the defendant had argued that costs on a full indemnity basis should not have been ordered by the learned SAR. On appeal, the judge then held that the menial and subservient attitude adopted by the defendant in complying with the request to include the defences of consent, justification, qualified privilege and fair comment in its defence, after initially writing to the plaintiff's solicitors that it 'bears neither any ill will nor 13 malice' against the plaintiff, is a clear indication that costs on a full indemnity basis should be paid forthwith.

(iii) Alex Ting Kuang Kuo @ Ting Kuang Kuo v Credit Corp (M) Sdn Bhd [2012] MLJU 1070. Hamid Sultan J (as he then was) had stated that: “As a general rule, court is obliged to order party to party costs on a standard basis and is given the discretion to order the same on indemnity basis (see Order 59 rule 16(2) of the CR 2012). A party to party costs on indemnity basis may be ordered where there has been scandalous conduct and is meant to be punitive in nature (see EMI Records v Wallace [1982] 2 ALL E.R. 980).” [13] Based on the above propositions, the counsel for the Defendants has asked for the sum of RM558,822.30 to be paid to the Defendants by the Plaintiffs being the particulars which have been itemised in Appendix 1, 2 and 3 of their submission. 14 [14] The Plaintiffs have vehemently refuted the Defendants’ claim for costs to be paid to the Defendants on an indemnity basis. The Plaintiffs had in contrary, argued that contractual relationship between the 2nd Plaintiff and the 1st Defendant arising from the Charge Annexure had ceased upon the land was auctioned off and the proceeds of sale had been paid in full by the successful bidder to the 1st Defendant. According to the Plaintiffs, at the time when the 1st Defendant received the proceeds of sale of the land in January 2011, the contractual relationship between the 2nd Plaintiff and the 1st Defendant had ceased then. [15] It was further submitted by the Plaintiffs that the 1st Defendant cannot rely on section 12.28 of the Charge Annexure as a basis to seek costs against the 2nd Plaintiff in this action as section 12.28 of the Charge Annexure are of limited application. It was the contention of the Plaintiff that section 12.28 is only applicable to situations where the 2nd Plaintiff had contravened the provisions of the Charge Annexure or breached any written law and such contravention or breach had affected the land and it does not extend to indemnify the 1st Defendant in respect of legal costs incurred in this instant case. 15 [16] In the present case, it was contended by the Plaintiffs that it is undisputed that the 1st Defendant had obtained an Order for Sale against the land and thereafter auctioned off the same and had received the proceeds of sale, and hence the 1st Defendant’s rights and interest in the property remained intact and uncompromised. [17] The Plaintiffs further contended that section 12.28(b) of the Charge Annexure must be read and interpreted as a whole and not only to portion which has been highlighted by the Defendants. The clear provision of section 12.28(b) is that, the 2nd Plaintiff as chargor will indemnify the 1st Defendant’s legal expense and costs as the charge only in respect of the following instances:

to recover the outstanding sum under the banking facilities; and

to enforce the charge ( including the auction of the land). [18] The above proposition, according to the Plaintiffs is consistent with statutory provisions of Section 268 of the National Land Code 1965 (NLC) which limits the liability of the chargor. The Plaintiffs further submitted that section 268(3) of the NLC provides a statutory 16 protection to the 2nd Plaintiff by limiting the 2nd Plaintiff’s liabilities to the 1st Defendant up to the time of the auction of the sale. [19] The counsel for the Plaintiffs had also submitted that there is a distinction between “solicitor own client costs” and “costs on indemnity basis” provided under Order 59 rule 16(4) of the Rules of Court 2012 (ROC) and these two terms cannot have the same meaning. [20] The Plaintiffs had also referred this Court to Hamid Sultan Abu Backer J’s (as he then was) decision in Alex Ting Kuang Kuo where his lordship has explained the term “solicitor own client costs” as follows; “ [11] Solicitor-client costs, in essence, are based on indemnity basis. The solicitor-client costs are not based on what costs or fees the solicitor has agreed with the client. If the solicitor has agreed with the client a certain fees (actual costs), they are contractual and have nothing to do with taxation on a solicitor-client basis. Taxing registrar must note this distinction. For example, contract may provide that costs of litigation between the parties will be based on solicitor-client costs. This just means 17 it must be taxed on indemnity basis and not on what the solicitor has agreed with the fees for his clients. For example, where it is related to default judgment, the getting up fees will only be nominal and not what the solicitor has agreed with the clients. Even if there is a contract between the parties to assess cost on solicitor-client basis, the ultimate discretion of costs is still vested in court pursuant to the Courts of Judicature Act 1964 and as well as the RC 2012 to award appropriate amount. “ [21] The Plaintiffs had brought to this Court’s attention to Dr. Andrew Chew Peng Hui’s explanation in respect of an award on an indemnity basis. At page 352 in The Law of Costs in Civil Proceedings (Sweet & Maxwell Asia), the author had stated this: “ On the indemnity basis, “considered more favourable” to the recovering party than the standard basis costs”, all costs shall be allowed except in so far as they are of an unreasonable amount or have been unreasonably incurred; …” [22] It is also the contention of the Plaintiffs that even assuming that section 12.28 of the Annexure can be relied on by 1st Defendant, the 2nd Plaintiff cannot be made liable to full indemnification of 1st Defendant’s legal costs as the 2nd Plaintiff’s participation throughout 18 this action is very minimal. It was submitted that the 2nd Plaintiff is named and included as a plaintiff in this action simply because the 2nd Plaintiff was the registered proprietor of the property. The Plaintiffs further submitted that it is undisputed that the core issues and contentions in this action only revolve around the disputes between the 1st Plaintiff and the Defendants. Court’s decision i. on the contractual obligation of the 2nd Plaintiff [23] It is settled that award of costs at the conclusion of a trial is always within the discretionary power of the Court. When the Rules of Court 2012 (ROC) was introduced, Order 59 rule 7(2) and 19 have done away with the assessment of appropriate costs to the winning party by way of taxation proceeding. While in determining the appropriate costs, Order 59 rule 16 provides the basis of assessment. Order 59 rule 7(2) and 19 of the ROC provides as follows: Order 59 rule 7(2): “ …

7.(2) At the conclusion of the proceedings, the Court will hear submissions from the parties as to the quantum of costs to be 19 awarded and shall order such costs as it deems fit. The Court shall direct that the submissions of the parties on costs are to be tendered as part of the substantive submission of the case or separately and there shall be annexed to the submission of costs a bill for such costs which shall be in Form 117, and shall include particulars of the following:

work done including the value of getting up; and

all disbursements reasonably incurred. …… ” Order 59 rule 19: “ ….

19.

The amount of costs (excluding disbursement) that are payable shall be at the discretion of the Court and shall be determined upon the conclusion of the trial.

In fixing the costs payable, the Court shall have regard to the relevant circumstances including but not limited to the factors set out in the rule 16.” [24] This Court was urged to award the Defendants costs on an indemnity basis on the premise that the contractual relationship between the 1st Defendant (as chargee) and the 2nd Plaintiff (as Chargor) arising from the Charge Annexure must be given effect or must be enforced. On behalf of the Defendants it was argued that the 2nd Plaintiff is 20 contractually obligated to indemnify the 1st Defendant the entire legal expenses incurred by the 1st Defendant in defending the 2nd Plaintiff‘s action against it. This present action, according to the Defendants is an action arising from contractual relationship derivative from the Charge Annexure. [25] This Court is not inclined to accept the Defendants’ contention that the 2nd Plaintiff is contractually obligated to indemnify the 1st Defendant’s legal expenses in respect of this present action. This Court is of the view that even though this action is somehow or rather connected to the foreclosure proceeding arising from the Charge Annexure, but one must ask this question; whether this action is within the boundary or perimeter of section 12.28 of the Annexure or section 12.11 of the Annexure for that matter. Now, the present action was filed by the Plaintiffs primarily on the allegation that when the 1st Defendant proceeded with the Order for Sale, and the property was sold at an undervalued price. The Plaintiffs also alleged that 1st Defendant had not given the 1st Plaintiff time and opportunity to redeem the land despite the fact that there was a purported MBI agreement within the knowledge of the Defendants. On these 21 grounds, the Plaintiffs claim that they are entitled to recover damages or loss suffered from the Defendants for selling off the property vide the foreclosure action. [26] This Court is in full agreement with the submission of the Plaintiffs’ counsel that the contractual relationship between the 2nd Plaintiff and the 1st Defendant arising from the Charge Annexure had ceased upon the land being auctioned off and the proceeds of sale had been paid in full by the successful bidder to the 1st Defendant. The Defendants had received the proceeds of sale and the property no longer belongs to the 2nd Plaintiff and hence the Charge Annexure has come to its end. Thus, the provisions in the Annexure no longer bind both the parties and are no longer enforceable. [27] To extend the application of the Annexure to what has been submitted by the Defendants would be erroneous and this Court is not inclined to allow such extensive and unlimited application of the Charge Annexure. The Defendants must fail on this ground. 22 ii. Does Plaintiffs’ conduct during the whole trial justify costs on an indemnity basis [28] This Court is of the considered view that the conducts of the Plaintiffs which were set out by the Defendants do not justify costs on an indemnity basis. [29] The principle justifying costs be awarded on indemnity which has been laid down by the authorities cited by both the Plaintiffs and the Defendants is crystal clear. In this case, there is no reason why this Court should punish the Plaintiff to show its disapproval the way in which litigation has been conducted by the Plaintiff. The Plaintiffs in filing this action have not conducted themselves in manners which are against moral probity that deserves to be condemned by this Court. Nor do the Plaintiffs’ conduct can be described as unreasonable to a high degree. Authorities have decided that unreasonable in this context does not mean merely wrong or misguided in hindsight. This action is also not the pursuit of a hopeless claim (or a claim which the party pursuing it should have realised was hopeless) or weak claim. 23 [30] Based on the above findings, the Defendants must also fail on this ground. [31] Be that as it may, this Court must again, emphasise that the claim pursued by the Plaintiff although not warranting costs on an indemnity basis, this Court must still consider all of the facts surrounding the case. In determining the appropriate costs to be awarded to the Defendants, this Court must not lose sight of the provisions stipulated under Order 59 rule 16 of the ROC (on basis of assessment) as well as Order 59 rule 8 of the ROC pertaining other special matters that can be taken into account by the Court in exercising its discretion in awarding costs. Order 59 rule 8 provides as follows;

any offer of contribution or offer of settlement under Order 22B;

the conduct of all the parties, including conduct before and during the proceedings; 24

The conduct of the parties in relation to any attempt at resolving the cause or matter by mediation or any other means of dispute resolution; and

in particular, the extent to which the parties have followed any relevant pre-action protocol or practice direction for the time being issued by the Registrar.” [32] This action on its face seems to be a simple case but as the trial proceeded, the case expanded to be a complex case involving complex issues of law regarding land ownership, its valuation, contractual validity, locus standi of the Plaintiffs, matters of estoppel and res judicata, beneficial entitlements, evidential burdens, fiduciary duties, and even procedural rules. [33] There were four separate applications heard during the trial itself which required submissions and hearings to be carried out as well as several other prior interlocutory applications that delayed the matter for 4 years before a trial date was even fixed. The extent of which this matter required specialized skill and knowledge was reflected in the fact that land valuers and solicitors were called to give evidence; 25 [34] The trial was conducted in 29 days, some of which went on very late at night and was conducted on the premise of voluminous bundles of documents comprising 18 bundles of documents, 15 witnesses had testified, 15 volumes of notes of proceedings and where both parties had filed about 300 pages worth of written submissions with equally voluminous bundles of authorities; [35] The value of the claim is RM33,000,000.00 and the basis of the claim involved a settlement agreement for the sum of RM241,367,317.09 and for a Property allegedly claimed to be valued at RM RM48,697,902.00. [36] This Court is in total agreement with the Defendants that taking into consideration the numbers of bundle of documents filed in court, witnesses called to testify and days of trial as well as the legal issues involved in this legal action, these factors must be reflected in the costs to be awarded by this Court. 26 [37] Hence, based on the foregoing, the sum of RM 300,000.00 is reasonable considering the circumstances of this action. This Court hereby orders the Plaintiffs to pay the Defendants a global sum of RM300,000.00 in costs. ...................................................... (DATUK AZIMAH BINTI OMAR) Judicial Commissioner High Court Shah Alam Selangor Darul Ehsan Dated the 03rd December 2015