Wan Zubaidah bt Wan Mahmood (No. K/P: 43500388) v CIMB Bank Berhad (No. Syarikat: 13491-P) (B-02(A)-831-04/2017)

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1 DALAM MAHKAMAH RAYUAN MALAYSIA (BIDANG KUASA RAYUAN) RAYUAN SIVIL NO.: B-02(A)-831-04/2017

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(3A) Kanun Tanah Negara 1965; Dan 2 Dalam perkara mengenai Seksyen 265(3)(b) dan Seksyen 265 (3A) Kanun Tanah Negara 1965 berkenaan Siil Rujukan Mahkamah bertarikh 24/9/2002. Antara CIMB Bank Berhad (No. Syarikat: 13491-P) … Plaintif Dan

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(ii) The Plaintiff furnishes to the Defendants computation of accounts showing detailed interest and deposits paid in any public auction held and that was forfeited by the Plaintiff;

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(iii) Defendant is at liberty to raise any objections in respect of the procedure relating to the reference made by the Pentadbir Tanah to the High Court;

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(iv) Costs in the sum of RM5,000-00 to be paid by the Plaintiff prior to refilling their application.” [15] It is pertinent that in their written submissions, learned counsel omits to mention this salient matter, namely that the withdrawal with liberty to file afresh was subject to these conditions. Instead, counsel merely states that the originating summons was withdrawn with liberty to file afresh because “the property was not within the jurisdiction of the court”. This amounted to an omission of a crucial set of facts. Counsel should always set out all material facts whether in their favour or otherwise. If not, this may well amount to misleading the Court. [16] Following this, on 12 December 2014 the Bank filed an originating summons in the High Court at Shah Alam. On 4 August 2015 the High Court granted an Order for Sale under section 265(3A) of the NLC to substitute the order for sale dated 5 October 1988 granted by the Land Administrator. However it is not evident 7 that there was compliance with the order of 24 April 2013 (‘the conditional withdrawal order’). It was not clear that the Bank produced a statement of account displaying details of the amount outstanding, the computation of interest and that credit had been fully accorded to the defendant’s debt for deposits that had been forfeited by the Bank in respect of failed auctions. [17] The defendant appealed to this Court against this order for sale. On 29 February 2016, the defendant’s appeal was allowed and the decision of the High Court of 4 August 2015 was set aside. In allowing the defendant’s appeal this Court made the following orders: “(i) Rayuan Perayu-Perayu di benarkan dengan kos RM10,000 di sini dan di Mahkamah Tinggi Kuala Lumpur Saman Pemula No: 24NCVC-785-03/2012 di bayar kepada Perayu-Perayu oleh Responden;

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(ii) Perintah mahkamah Tinggi Shah Alam, …….bertarikh 4.08.2015 di ketepikan;

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(iii) Responden di berikan kebebasan untuk memfailkan semula Saman Pemula yang serupa dengan syarat mematuhi terlebih dahulu Perintah Mahkamah Tinggi Kuala lUmpur, Saman Pemula No. 24NCVC-785-03/2012 bertarikh 26 April 2013 ia itu Responden untuk memaklumkan kepada Perayu Terhadap kiraan yang di kemukakan bersama faedah secara terperinci dengan mencatatkan sebarang deposit yang di bayar dalam 8 sebarang lelongan awam yang di adakan yang mana telah di rampas oleh Responden;…” [18] This Court in effect reiterated that it was incumbent upon the Bank to comply with the conditions set out in the conditional withdrawal order of 24 April 2013 issued by the High Court. The primary condition of relevance here is the computation of the current sum stated to be outstanding by the Bank particularly in relation to:

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(1) No action shall be brought to recover any principal sum of money secured by a mortgage or other charge on land or personal property or to enforce such mortgage or charge, or to recover proceeds of the sale of land or personal property after the expiration of twelve years from the date when the right to receive the money accrued.” [32] In the instant case it is evident from the chronology set out at the outset that default in the repayment of the facility was sometime in 1987, as this was when the Form 16D was issued in respect of the proposed auction sale under the Land Administrator pursuant to the provisions of the NLC. [33] Section 21(1) envisages that:-

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(ii) the enforcement of a charge on land is not to be effected after the expiration of twelve years from the date when the right to receive the money accrued; 14 [34] The date when the right to receive the money accrued must mean the date when the borrower defaulted in his repayment obligations resulting in a recall or termination of the facilities. In the instant case, this would appear to have occurred in 1987. [35] In the instant case the subject charge was first sought to be enforced vide the issuance of a Form 16D in 1987. Twelve years from 1987 is 1999. As such the time limit for the enforcement of the charge would have expired by the end of 1999 or before 2000, given that there is no specific date of default specified. [36] It might be argued by the Bank that the correct date from which to compute the limitation period is the date when the Form 16D was issued in respect of the commencement of proceedings under section 256 of the NLC, after the issuance of the “Sijil Rujukan Mahkamah” by the Land Administrator on 4 May 2004. However it has to be borne in mind that the substitution of the proceedings pursuant to section 265(3)(b) of the NLC to order for sale proceedings in the High Court pursuant to section 256 does not amount to the accrual of a cause of action as is envisaged in computing when time begins to run for the purposes of limitation. [37] This is because in accordance with well accepted authorities on the computation of the limitation period (see Nasri v Mesah [1971] 1 MLJ 32 and Tenaga Nasional Bhd v Kamarstone Sdn Bhd [2014] 1 CLJ 207), time begins to run from the date when “…….the right to receive the money accrued” pursuant to section 21(1) of the Limitation Act 1953. 15 [38] In Nasri v Mesah, the Federal Court held that “a cause of action arises at the time when the debt could first have been recovered by action. The right to bring an action may arise on various events; but it has always been held that the statute runs from the earliest time at which an action could be brought.” It went on to hold that: “the right of action accrues” means one and the same thing when one speaks of the time from which the period of limitation as prescribed by law should run.” [39] In the instant case, it is undisputable that the right to receive the debt from the 2nd defendant accrued as early as 1987 when the 2nd defendant as borrower defaulted on repayments in respect of the loan facility. [40] It was in that context that the first Form 16D was issued so as to enable the Bank as chargee to commence proceedings under section 265(3) given that the sale of the subject land was to be dealt with by the Land Administrator. [41] As such the issuance of a fresh Form 16D in 2012, after a delay of some eight years does not denote the date when the right to receive the monies accrued. In other words the issuance of the Form 16D does not and cannot enable or facilitate the creation of a “cause of action” for the purposes of limitation. [42] As stated by this Court in Sivadevi a/p Sivalingam v CIMB Bank Berhad (Civil Appeal No: J-02(A)-59-01/2017) in relation to the purpose of the Form 16D (see paragraph 58 of the judgment, mid-way): 16 “…..The notice is intended to first indirectly remind the charger of his obligations by pointing out the specific breach; telling the charger to remedy the breach within the time period specified in the notice; before finally warning the chargor that if the notice is not complied with, proceedings to obtain an order for sale will be sought. Where the chargor does not heed the requirements in the notice the charge is then entitled to apply for an order for sale under section 256. The above sets out the mechanism or the process that must be followed before the chargor may apply to the Court for an order for sale of the charged property. But, in sofar as how long has the chargor got before the chargor may get round to enforcing that right to seek an order for sale is concerned, the provisions of the Limitation Act 1953 will have to be considered. According to the decisions in Peh Lai Huat v MBF Finance Bhd and Jigarlal K Doshi @ Jigarlal a/l Kantilal v Resolution Alliance Sdn Bhd & Anor, section 21(2) operates only from when the chargor fails to remedy the default or breach as specified in the Form 16 D notice”. [43] This Court in Sivadevi’s case when on to consider in detail the interplay between the contractual rights of recovery of a debt under the charge documentation i.e. the substantive contractual rights of the parties versus the provisions of the NLC (see paragraphs 60 – 76 of the judgment). It concluded: “…. Sections 254 to 256 (of the NLC) provide for the procedure, method, mechanism, manner or means of enforcing the right for an order of sale. However, the substantive right of the chargee to approach the Court for the remedy of an order for sale of the charged land is still dependent on the remedy of an order for sale of the charged land is still dependent on there being a breach of the express or implied agreements. The express agreements are to be found in the charge documents while the implied agreements are as provided under section 249 of the National Land Code. 17 As expounded by the Federal Court in S & M Jewellery Trading Sdn Bhd v Fui Lian-Kwong Hing Sdn Bhd, the right to pursue the statutory remedy of sale is triggered by the event of breach or default in the underlying contractual agreement and in the terms of the charge…..” [44] This Court concluded that the provisions of the NLC, namely section 256, affords a chargor-debtor an opportunity to remedy the breach before the chargee-bank enforces its right to pursue an order for a judicial sale as statutorily prescribed. As such it cannot or ought not to be equated with the date when the Bank’s right to receive the money accrued. In short the date when the debt first arose for the purposes of computation of a limitation period and the date when the Bank affords the chargor-debtor notice that if he does not remedy the breach, the Bank is going to proceed to enforce its rights by way of judicial sale are two different dates that serve different purposes. The latter is procedural or adjectival, while the former marks the trigger of a substantive contractual right to receive a debt. [45] More significantly, the latter (i.e. the issuance of a Form 16D under section 256 of the NLC) cannot be utilised interchangeably with the first (i.e. the date when the Bank gives notice to the debtor of a fundamental breach namely default in the repayment of the debt entitling the Bank to recall the entire loan and terminate the loan facility) so as to conclude that time starts to run from the date when the Form 16D was issued for the purposes of computation of the limitation period, as extensively and comprehensively explained by this Court in Sivadevi’s case as well as Lim Ban Hooi and Wong Yoke Wan v Malayan Banking Berhad (Civil Appeal No: W- 02(A)-842-05/2016). 18 [46] For these reasons we are of the considered view that the Bank’s application for a judicial sale under section 256 of the NLC is caught by limitation under the provisions of section 21(1) of the Limitation Act 1953. As such the Bank is unable to enforce its charge in view of the fact that more than 12 years have accrued since the date when the default in the repayment of the debt arose in 1987. It is to be noted that the relevant date is the date of default in repayment and not the date of issuance of the Form 16D. [47] In so concluding, we followed and adopted the reasoning in Sivadevi’s case, which, with respect, we concur. It is of considerable importance that the adjectival provision in section 256 of the NLC is not utilised to circumvent the substantive legal provisions of the Limitation Act 1953. It bears repetition that section 256 of the National Land Code serves the specific purpose of providing notice of the chargee’s intention to initiate a judicial sale of the charged land to the debtor. It therefore affords the debtor an opportunity to remedy his failure to repay the debt. It does not amount to the actual enforcement of the creditor’s substantive legal right. That will only ensue upon the pronouncement and effecting of an order for sale judicially. [48] By contrast, the provisions of the Limitation Act 1953 in section 21 prescribe substantive legal rights because it provides that the creditor or chargee cannot pursue any right created by a charge over land after the expiry of a period of twelve years. To that extent it statutorily brings to an end the substantive rights of the chargee to recovery of its debt by way of a judicial sale after a period of twelve years from when the debt first became due. This affords 19 finality and certainty to commercial banking law. That right cannot easily be displaced. It ought not to be displaced simply because a creditor chooses to issue a form indicating that it is about to enforce its rights, if such notice comes well after the period statutorily prescribed by Parliament under the Limitation Act 1953, this would amount, in effect, to a circumvention of section 21. That ought not to be countenanced. To do so would be to give a creditor a free rein as to when it chooses to enforce its rights as chargee. This could theoretically ensue for an indeterminate period. Apart from contravening the express provisions of the Limitation Act 1953, it would cause undue prejudice and hardship to the debtor, who would be burdened with a far increased sum than that envisaged by the initial loan in view of the levy of interest. And that is precisely the case here, where the initial debt was in the region of RM180,000-00 and now stands at no less than RM643,000 odd, some 30 years later. [49] This brings us to the issue of the levy of interest over this period. For what period of time is interest on the debt due recoverable under the provisions of section 21(5) of the Limitation Act 1953? [50] This question may well be academic given our conclusion above, namely that the entire debt is time barred under section 21(1) of the Limitation Act 1953. 20 [51] However an application of section 21(5) (see supra) provides that no recovery of arrears of interest payable in respect of a sum of money secured by a charge may be brought after the expiry of six years from the date when then interest became due. The provisos in subsection (a) and (b) are not applicable in the instant case. [52] It would therefore follow that no arrears of interest is recoverable for a period of six years from 1987, which is the date we have identified as that when the cause of action accrued, or when the debt was first due and repayable to the Bank. It is the relevant date for the purposes of computation of the limitation period. [53] It is therefore immediately apparent that the Bank’s claim for interest over a period of almost 30 years, more so compounded interest at rates that are not immediately discernible from the statement of account produced, runs awry of and contravenes the provisions of section 21(5). [54] For this reason too we are again not convinced that the Bank is entitled to an order for sale as sought vide the Originating Summons filed. We are of the unanimous view that the learned Judge erred in granting the prayers sought, for the reasons set out above. On the contrary it would appear that the debtor has more than sufficiently established cause to the contrary as provided under the NLC. 21 [55] As such the appeal is allowed and the order of the High Court is set aside. Costs are awarded to the appellant in the sum of RM8,000-00 subject to allocatur. The deposit is refunded. Nallini Pathmanathan Judge Court of Appeal Malaysia Dated : 11th June 2018 For the Appellant : Suria Kumar Messrs Suria Kumar & Co Advocates & Solicitors No. 34A, Jalan Kemuja Off Jalan Bangsar 59000 Kuala Lumpur For the Respondent : Ahmad Zamri (Ooi Hean Ping with him) Messrs Che Mokhtar & Ling Advocates & Solicitors 15th Floor, Wisma KWSG Jalan Kampung Attap 50460 Kuala Lumpur Signed