Al-Rajhi Banking & Investment Corporation (Malaysia) Bhd v Girdhari A/L Nathumal (WA-24MFC-26-01/2023)

The Plaintiff applied for an Order for Sale of the Defendant’s charged property pursuant to s. 256 and 257 of the National Land Code 1965 and Orders 31 and 83 of the Rules of Court 2012.

Having satisfied that the Plaintiff had complied with the statutory requirements governing the application and that the Defendant failed to show the existence of any cause to the contrary, this Court allowed the Plaintiff’s application for an Order for Sale of the charged property pursuant to s. 256(3) of the National Land Code 1965.

The Defendant now appeals against that decision.

Vide the terms and condition of the letters from the Plaintiff dated 29.3.2012 and the agreements between the Plaintiff and the Defendant dated 7.10.2013, 29.11.2013, the Defendant agreed to accept the Plaintiff’s offer for a structured home financing facility in the amount of RM1,349,365.80 (“the Facility”). The Defendant pledged his property, an apartment under the strata title Geran 45264/M1/28/154, Petak No. 154, Tingkat No. 28, Bangunan No. M1, Lot 57936, Petak Aksesori No. A210, A755, A756 & A757, Mukim Batu, Kuala Lumpur (“the Property”), as a security for the Facility.

The Defendants had defaulted in the Facility instalments. Vide a letter dated 21.1.2022 the Plaintiff issued Borang 16D pursuant to s. 3 of the National Land Code 1965 to notify the Defendants of the breach and requiring them to remedy the breach within the stipulated period, and that in the event the Defendants fail to comply with the notice, the Plaintiff will proceed to obtain an order for sale of the Property.

Upon the expiration of the stipulated period, the Plaintiff then filed for an Order for Sale of the Property through a public auction.

Having satisfied that the Defendants failed to show the existence of any cause to the contrary, this Court allowed the Plaintiff’s application for an Order for Sale of the Property pursuant to s. 256(3) of the National Land Code 1965.

Gopal Sri JCA (as he was then) reading the judgment of the Supreme Court in Low Lee Lian v Ban Hin Lee Bank Bhd [1997] 2 CLJ 36 explained what constitute “cause to the contrary” under s. 256 of the National Land Code 1965 as follows: “A Judge hearing an application under s. 256 must bear in mind that the procedure under the section is meant to be speedy and summary in nature. This being the case, the trial Judge must first be concerned with whether the chargee has given the appropriate statutory notices as stipulated in the Code. Next, he must ensure that the procedural requirements prescribed by O. Rules of the High Court 1980 have been complied with. A next, he must be 4 concerned with the very narrow question whether the material produced before him by the chargor constitutes cause to the contrary. In this last respect, if the Judge is satisfied that the chargor has shown cause to the contrary, he will refuse an order for sale. Otherwise he will grant the chargee's application. The critical phrase in sub-section (3) of s. 256 to which we have lent emphasis, despite having been the subject of judicial pronouncements, continues to demand the attention of Courts. There is no doubt that, upon a plain reading of the sub-section, a High Court is entitled to refuse an order for sale of charged property once it is satisfied of the existence of cause to the contrary. But the question then arises: what is meant by "cause to the contrary"? In our judgment, cause to the contrary within s. 256(3) may be established only in three categories of cases. First, it may be taken as settled that a chargor who is able to bring his case within any of the exceptions to the indefeasibility doctrine housed in section 340 of the Code establishes cause to the contrary. .... In other words, a chargor who is able to demonstrate that the charge, the enforcement of which is sought, is defeasible upon one or more of the grounds specified under subsections (2) and (4)(b) above will be held to have established cause to the contrary under s. 256(3). The decision of Smith J in Subchent Kaur V. Chai Sau Kian [1957] CLJU 81; [1957] 1 LNS 81, of the former Federal Court in Phuman Singh V. Kho Kwang Choon [1965] CLJU 132; [1965] 1 LNS 132, of Raja Azlan Shah J (as he then was) in Overseas Union Finance Ltd. V. Lim Joo Chong [1971] CLJU 101; [1971] 1 LNS 101and that of Edgar Joseph Jr. J. (as he then was) in United Malayan Banking Corporation Bhd. v. Syarikat Perumahan Luas Sdn. Bhd. [1988] 3 MLJ 352 (affirmed on appeal) sufficiently illustrate the proposition now under discussion.”

The Defendant/Chargor did not provide any evidence under s. 340(2) or 340 (4)(b) to demonstrate that the enforcement of the charge sought by the Plaintiff is defeasible. The Defendant failed to establish the 1st category of “the cause to the contrary”.

The Supreme Court in Low Lee Lian further held: “Secondly, a chargor may show cause to the contrary within s. 256(3) of the Code by demonstrating that the chargee has failed to meet the conditions precedent for the making of an application for an order for sale. For example, failure on the part of the chargee to prove the making of a demand or service upon the chargor of a notice in Form 16D would constitute cause to the contrary. So too, where the notice demands sums not lawfully due from the chargee. See, Co-operative Central Bank Ltd. v. Meng Kuang Properties Bhd. [1991] 2 CLJ 1144; [1991] 2 MLJ 283. However, in such a case, it would be open to the chargee to subsequently serve a notice or a proper notice (as the case may be) before commencing proceedings afresh as the cause shown to the contrary does not in substance affect the chargee's right to apply for an order for sale.”

The Defendant failed to establish the 2nd category of “cause to the contrary” upon the Plaintiff showing to this Court that it had served the statutory demand Form 16D, in compliance with the requirement of s. of the National Land Code, to which the Defendant had ignored. The Defendant now argued that the said Form 16D is invalid as it failed to take into account payments made by the Defendant for the months of October 2017 - August 2022. Relying on Syarikat Kewangan Melayu Raya Bhd v Malayan Banking Bhd [1984] 1 MLJ 115, the Defendant argued that the said Form 16D is bad in law as the Defendant has been prejudiced and the Court had been misled by the defect in the notice so as to render the granting of the order for sale unjust.

Having examined the impugned Form 16D, I am inclined to accept the evidence furnished by the Plaintiff that this notice had been properly and regularly served on the Defendant. It is a good notice.

The 3rd category where the Defendant as a chargor may defeat the Plaintiff’s application for an order for sale is by demonstrating that its grant would be contrary to some rule of law or equity.

The Defendant attempted to demonstrate this 3rd element by arguing that the Plaintiff cannot enforce the Facility agreements as it is void ab initio, in contravention with Shariah principles and that they are sham agreements based on the following reasons:

The Defendant applied for a straight forward housing loan where he borrowed monies from the Plaintiff and the Plaintiff provides him with the loan where the Defendant would service by way of monthly instalments to repay the loan amount with interests. The Defendant entered into the Facility agreements with the Plaintiff with that intent;

(ii) The Defendant learnt later that the Facility agreements were for some commodity transactions;

(iii) The Defendant never agreed to deal with any commodity transactions with the Plaintiff as he is never a commodity trader and does not intent to get involved in any commodity business with the Plaintiff;

(iv) The Defendant had never agreed to purchase any crude palm oil commodity or CPO as provided in the Facility agreements;

The Plaintiff had never provided to the Defendant any “trade line facility” in the amount of RM1,349,365.80 as claimed by the

(vi) The Plaintiff had refused to accept monthly payments from the Defendant after the month of August 2022 onwards; and

(vii) The amount claimed by the Plaintiff is an unjust enrichment. [15] Based on the above grounds, the Defendant argued that the Facility agreements are unenforceable as they are against public policy and unlawful pursuant to s. 24 (e) of the Contracts Act 1950, and based on the Federal Court decision in Yogananthy a/p AS Thambaiya v Harta Pusaka Idris bin Osman [2020] 5 MLJ 455, which held : “[55] Public policy doctrine as a consideration to void a contract is recognised at common law as well. It is a principle which declares that no man can lawfully do that has the tendency to be injurious to the public welfare. Ex dolo malo non oritur actio. It promotes public good. More importantly, under this doctrine, freedom for contract of private dealings is restricted by law for the common good of the community. It takes into account the interests of persons other than the parties. So, if a contract is voided on ground of public policy, it does not necessarily mean that the defendant has a better case than the plaintiff on its merits, rather, on a wider consideration of the general public good, the plaintiff’s claim is injurious to the common welfare and ought not to be enforced. A well-entrenched legal principle has been that a right of action cannot arise out of fraud, see speech of Lord Mansfield in Holman v Johnson [1775] Cowp 341 at p 343.” [16] This Court agrees with the Plaintiff that no evidence furnished by the Defendant to show that he had objected to all or any part of the agreements he entered with the Plaintiff on the Facility. On the contrary, the Defendant’s acceptance of all the terms of the facility agreements had been shown by the Defendant’s full utilisation of the Facility to his benefits and his monthly payments, until the time when he defaulted. This Court rely on the decision of Tan Sri Abdul Khalid Ibrahim v Bank Islam Bhd [2010] 4 CLJ 388, the authority cited by the Plaintiff’s counsel, where Rohana Yusuf J. (as her Ladyship was then) held: “In my view, questioning of the validity of an agreement after benefiting from it and upon default, in itself lacks bona fide. I say this because Tan Sri Khalid was in the position to obtain any Syariah or legal advice at the time he entered into these agreements with the bank. To turn around and challenge the validity of an agreement entered voluntarily after reaping the benefit under it appears to be a mere afterthought. This is also akin to a case of a Muslim who goes into a restaurant, had a meal, only to inquire after the meal if the food is non halal and when told that is so, refuses to pay for it. Such conduct cannot reflect a serious concern of the Syariah compliance, but more of an attempt to renege contractual obligations which have been voluntarily agreed and acted upon by the other party.” [16] It is my finding that the action of the Defendant questioning of the validity of the Facility agreements after benefiting from it and upon default, in itself lacks bona fide and a mere afterthought. The commodity transactions questioned by the Defendant formed part and parcel of the Facility agreement agreed upon by the Defendant, which were agreements based on the Islamic financing concept of Al Bai’ Bithaman Ajil. This had been clearly provided and explained in Clause 2.1 of the Master Commodities Sale Agreement which had been executed by the Defendant. [18] As the Defendant had full knowledge of the terms and conditions of the agreements he entered into, he is now estopped from arguing the illegality and unenforceability of the agreements. CONCLUSION [19] Based on the foregoing reasons, and having satisfied that the Plaintiff had complied with the statutory requirements governing its application and also having determined that the Defendant failed to show the existence of any cause to the contrary, this Court allowed the Plaintiff’s application for an Order for Sale of the Property pursuant to s. 256(3) of the National Land Code 1965. Dated : 15 February 2024 -signed- (MOHD RADZI BIN HARUN) Judge High Court of Malaya PARTIES: Solicitor for the Plaintiff: Muhammad Fariz bin Yazid. Messrs. Zulpadli & Edham, No. 24, Jalan Perumahan Gurney, 54000 Kuala Lumpur. Ref : IZP.1673.18.TS Email : general@zulpadliedham.com Solicitor for the Defendant: M. Rajenthirakumar. Messrs. Kumar Associates, No. 5, Jalan Maran, Off Jalan Kuantan, Titiwangsa 53200 Kuala Lumpur. Ref : KA/1/805/2023 Email : kumas@kumarassoc.com