Court DecisionMY-HC

24MFC-58-03/2018

Bank Islam Malaysia Berhad v Dato' Abu Talib Bin Mohamed (24MFC-58-03/2018)

High Court of Malaysia31 Jul 2018

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Refers toBankruptcy ActExternal
“Federal Court was whether the statutory right of a chargee under the Code to rely on his security to obtain full satisfaction of the indebtedness owed to him was restricted by section 8 (2A) of the Bankruptcy Act 1967 (Bankruptcy Act) where security provided by a company which was later wound up under the provisions of”
Refers toCivil Law ActExternal
“there is no reason to limit its application only against a bankrupt and not to a wound up debtor. We are in agreement with the Court of Appeal that upon a true construction of s 4(1) and (2) of the Civil Law Act 1956, s 291(1) and (2) of the Companies Act, s 8 (2A) of the BA is equally applicable to a secured creditor”
Refers toCompanies ActExternal
“of the indebtedness owed to him was restricted by section 8 (2A) of the Bankruptcy Act 1967 (Bankruptcy Act) where security provided by a company which was later wound up under the provisions of the Companies Act 1965 and whether the application of the said section 8 (2A) is limited to secured creditors in a bankruptcy”
Refers toINSOLVENCY ACT 1967Legislation
“e the Bankruptcy (Amendment) Act 2017 (Act A1534) the Bankruptcy Act was amended. Act A1534 came into force on 6 October 39 2017 and vide the amending Act, the Bankruptcy Act is now referred to as Insolvency Act 1967 (Insolvency Act). Among the amendments made to the Bankruptcy Act was section 8 (2A). The said provisio”
Refers toLand CodeExternal
“erms and conditions herein contained. 31 3.1 Specific Charge As security for the payment of the Indebtedness by the Customer, the Chargor hereby charges the Land by way of a legal charge under the Land Code in favour of the Bank. 5.4 Concurrent proceedings Notwithstanding any provisions hereof, it is hereby expressly a”

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Refers toNational Land CodeExternal
“INTI IDRIS PESURUHJAYA KEHAKIMAN 2 GROUNDS OF JUDGMENT Introduction [1] In this foreclosure proceedings, an Order for Sale was granted by this court on 31 July 2018 pursuant to section 256 of the National Land Code read with Order 83 Rules of Court 2012 (RoC 2012) in respect of a legal charge created by the Defendant o”
Cites[2008] MLJU 180External
“.00”. The Plaintiff had, almost immediately thereafter, rectified the mistake by issuing a new Form 16D dated 12 February 2018. [26] The Defendant cited cases Malayan Banking Berhad v Zainal Abidin [2008] MLJU 180 and Co-operative Central Bank Ltd v Meng Kuang Properties [1991] 2 MLJ 283 to support its contentions that”

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Content

1 DALAM MAHKAMAH TINGGI MALAYA DI KUALA LUMPUR (BAHAGIAN DAGANG) SAMAN PEMULA NO. WA-24MFC-58-03/2018 Dalam Perkara Seksyen 256 Kanun Tanah Negara, 1965 Dan Dalam Perkara Gadaian yang didaftarkan di bawah Bil Perserahan No. 804/2017 ke atas tanah di bawah No. Hakmilik 1017, Lot 268 Presint 8, Bandar Putrajaya, Daerah Putrajaya, Negeri Wilayah Persekutuan Putrajaya Dan Dalam perkara Aturan 83, Kaedah-Kaedah Mahkamah 2012 ANTARA BANK ISLAM MALAYSIA BERHAD (98127-X) … PLAINTIF DAN DATO’ ABU TALIB BIN MOHAMED (No. K/P: 480823-01-5445) … DEFENDAN DI HADAPAN YA KHADIJAH BINTI IDRIS PESURUHJAYA KEHAKIMAN 2

Grounds Of Judgment

Introduction

In this foreclosure proceedings, an Order for Sale was granted by this court on 31 July 2018 pursuant to section 256 of the National Land Code read with Order 83 Rules of Court 2012 (RoC 2012) in respect of a legal charge created by the Defendant over a land held under No. Hakmilik 1017, Lot 268, Presint 8, Bandar Putrajaya, Daerah Putrajaya, Negeri Wilayah Persekutuan Putrajaya (Charged Property). Aggrieved with the said order the Defendant appealed.

Background Facts

Upon PFC Engineering Sdn. Bhd.’s application the Plaintiff had, via Letter of Offer dated 12 July 2017 (Exhibit BIMB-1 of Enclosure 2) granted to PFC Engineering Sdn Bhd (the Customer) a facility amounting to RM 68,000,000.00 (the Facility). Pursuant thereto the Plaintiff and the Defendant executed the Supplemental Tawarruq Facility Agreement dated 24 August 2017. 3

As security for the Facility the Defendant, who is the registered proprietor of the Charged Property, executed in favour of the Plaintiff, a legal charge over the Charged Property which is a 2½ storey semi detached house bearing postal No. 27, Jalan P8A/1, Presint 8, Putrajaya. The charge was dully registered on 1 November 2017 under Bil. Perserahan No. 804/2017 (Charge). [4]

Preamble

Pursuant to Clauses 2 and 3.2 of the Annexure to the Charge, the Defendant agrees that he shall duly pay the indebtedness and all other monies due and owing by the Customer to the Plaintiff under the terms of the Facility. [5] The Customer defaulted in its payment due under the Facility.

Preamble

Pursuant to a winding up petition filed in Kuala Lumpur High Court Companies Winding Up No: WA-28NCC-610-09/2017, the Customer was ordered to be wound up via order dated 5 January 2018. [6] The Plaintiff in its capacity as the chargee issued and served, via its solicitors, on the Defendant a Notice of Default With Respect To A Charge (Form 16D) dated 12 February 2018 demanding the Defendant to pay, within 1 month from the date of the service of the said notice, the sum RM 129,549,212.86 being the sum due and payable under the 4 Facility as at 7 February 2018. A notice on even date, namely, Notice Of Entry Into Possession By Going Into Occupation (Form 16K) was also issued on the Defendant. The Defendant failed to remedy the said breach within the stipulated time. Hence, the Plaintiff filed this originating summons to enforce the Charge. Plaintiff’s Submissions [7] It is the Plaintiff’s case that it has duly issued and served the statutory notice Form 16D dated 12 February 2018 in compliance with section 254(1) of the Code by:

specifying the breach in question i.e. that the Defendant was indebted to the Plaintiff under the Facility for the amount as stated in the said notice;

the Plaintiff required the Defendant to remedy the breach within one (1) month of the date on which the notice is served; and

the Plaintiff warned the Defendant that, if the Form 16D is not complied with, the Plaintiff will take proceedings to obtain an order for sale. 5 [8] The initial Form 16D dated 9 February 2018 served on the Defendant had mistakenly stated the amount of the Facility obtained by the Customer as RM 68,000.00 when in actual fact the amount obtained by the Customer was RM 68,000,000.00. The Plaintiff had rectified the mistake by subsequently issuing another notice Form 16D dated 12 February 2018. The Plaintiff submits the mistake in Form 16D dated 9 February 2018 does not render the said notice invalid as the Defendant was not prejudiced or misled. Other than the clerical mistake on the amount of the Facility, there is no other mistake on the Form 16D. The amount demanded in Form 16D dated 9 February 2018 and Form 16D dated 12 February is the same. The Defendant’s claim that he did not received Form 16D dated 12 February 2018 is untenable since the said form was sent to the same address as Form 16D dated 9 February 2018 was sent and received by the Defendant. [9] It is the Plaintiff’s contentions that it has complied with the procedural requirement stated in Order 83 of the RoC 2012. This includes, inter alia, service of the originating summons, the Affidavit in Support of the originating summons and the further affidavit which shows the sum remaining due under the Charge on the hearing date of the originating summons. 6 [10] Based on Clause 3.2 of the Charge Annexure which provides that the Charge is a continuing security and the Supreme Court case in Low Lee Lian v Ban Hin Lee Bank Bhd [1997] 1 MLJ 77 the Plaintiff is entitle to enforce the Charge without having to establish first the liability of the Customer pursuant to the Facility granted by the Plaintiff [11] With regards to the imposition of late payment charges, under the Supplemental Tawarruq Facility Agreement, Customer has agreed to pay the Bank late payment charges by way of ta’widh. The Plaintiff has sufficiently informed the Customer that the Customer is subject to Ta'widh and the rate at which such Ta'widh is to apply. Thus the Defendant is bound by the terms and conditions of the documents he signed and estop from disputing it. [12] It is also the Plaintiff’s submission that in Islamic finance transaction, after a receiving order or winding up is recorded by the court, the secured creditors are entitled to claim the late payment charge / ta’widh and seek recovery of the full unearned profit in a sale-based transaction. 7 Defendant Submissions [13] The Defendant opposed the originating summons on the following grounds – Forms 16D and 16K are defective

Via letter dated 9 February 2018 from the Plaintiff’s solicitor, the Defendant received Form 16D and 16K both dated 9 February 2018 (the 9 February 2018 Forms). The 9 February 2018 Forms was defective and invalid because it had stated of a financing facility granted by the Plaintiff in the sum of RM 68,000.00. As far as the Customer and Defendant are concerned, they had never obtained such financing facility from the Plaintiff.

At all material times the Defendant had never received Form 16D and Form 16K both dated 12 February 2018 (the 12 February 2018 Forms) which was referred by the Plaintiff in the originating summons. 8

The inconsistencies and discrepancies in respect of the amount of Facility stated in Form 16D dated 9 February 2018 and Form 16D dated 12 February 2018 creates significant confusion which prejudices the Defendant on the actual claim by the Plaintiff. Despite the inconsistency, there were no sufficient explanation given by the Plaintiff whether the 9 February 2018 Forms were applicable or whether Form 16D dated 12 February 2018 supersedes Form 16D dated 9 February 2018.

Both the 9 February 2018 Forms and the 12 February 2018 Forms are invalid and defective. Therefore the Plaintiffs action for an order for sale would also be without basis as the said forms are core to the Plaintiffs action. No notice of demand and notice of default

Prior to the letter dated 9 February 2018 from the Plaintiff’s solicitor, the Defendant was never served with any notice of demand and notice of default in relation to the default of the Customer under the financing facility. As the Defendant was not aware of the Customer’s default the contents and validity of 9 the forms are disputed. The Defendant deny that has committed a breach of the terms and conditions of the Charge. Plaintiff ought to establish liability against the Defendant

The financing facility was granted by the Plaintiff to the Customer and the Defendant is merely a third party chargor. Therefore the Plaintiff’s cause of action against the Defendant shall only arise after the Plaintiff has established the Customer’s liability through a judgment. In order to obtain judgment against the Customer, the Plaintiff will have to seek leave from the liquidator and/or the winding up court. Plaintiff action is an abuse of process

As this is an Islamic banking facility which is based in Islamic principles, according to the principles of fairness propounded under Islamic / Shariah law the Plaintiff has a duty to exhaust all other remedies and securities prior to initiating a claim against a third party chargor. Plaintiff ought to take the necessary steps to exhaust and to enforce all other securities especially the ones given by the Customer themselves to reduce the sums purportedly due and owing to the Plaintiff, if any. The 10 Defendant is neither the borrower nor a guarantor of the financing facility, as such the Plaintiffs act of initiating this originating summons against the Defendant as a third party chargor is unjustifiable.

Plaintiff’s refusal and failure in exhausting all other remedies / securities especially when there were four other securities given to the Plaintiff for the financing facility, is contrary to the Shariah principles which renders this entire proceedings pre-mature and / or invalid.

Clause 5.4 of the Charge Annexure which enables the Plaintiff to initiate an action against the Defendant regardless of whether all other remedies have been exhausted is null and void as it contradicts the Shariah principles. Manifest error in the Plaintiff’s claim

The Plaintiff had provided various different figures for sums purportedly due and owing under the financing facility. Initially the Plaintiff claim a sum of RM 129,549,212.86. Eventually the final amount claim was RM 128,073,664.57 without any 11 explanation how the amount was reduced or whether there were part-payments made. The various different sums / figures claimed by the Plaintiff is prejudicial to the Defendant.

The Plaintiff’s claim for RM 128,073,664.57 from the Defendant as at 19 July 2018 had clearly included unearned profits which the Plaintiff ought to have not claimed at this stage of the proceedings. Accordingly the amount claimed is wrong and would amount to unjust enrichment on the Plaintiff, if the order for sale is granted.

In view of the fact that the Customer had already been wound up on 5 January 2018, the principle sum as well as the ta’widh / compensation claimed by the Plaintiff ought to be capped as at the date of the winding order made, that is, 5 January 2018. Consequently, the Plaintiff’s Statement of Account as at 19 July 2018 is not conclusive as it clearly contains manifest error. As a result, the Plaintiff failed to prove at this juncture the actual mount due (if any). [14] As submitted and explained by both parties in their submissions, the main issues to be decided in this Court is whether there exist a 12 ‘cause to the contrary’ in the Plaintiff’s case and whether Plaintiff is entitled for an order for sale as prayed in the originating summons. The Law [15] The originating summons was filed pursuant to section 256 of the Code which reads as follows – 256 Application to Court for order for sale

subsidiary title, and to the whole of any divided share in, or any lease of, any such land. 13 [16] For purpose of enforcing the charge, section 254 of the Code requires the chargee to comply with the following provisions –

warning the chargor that, if the notice is not complied with, he will take proceedings to obtain an order for sale. and Provided that paragraph (a) shall not apply to any charge to secure the payment of an annuity or other periodic sum. 14 [17] Besides the above provisions, the Plaintiff is also required to comply with the procedural provisions stated under Order 83 RoC 2012 –

Application and interpretation (O. 83 r. 1)

foreclosure;

reconveyance of the property or its release from the security; 15

Claims for delivery of possession or payments of moneys (O. 83 r. 2) 16

Action for delivery of possession or payment of moneys (O. 83 r. 3) 17 [18] In Low Lee Lian’s case the Supreme Court laid down the procedure to be adopted by the court when hearing an application for an order for sale – [8] 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. 83 Rules of the High Court 1980 have been complied with. And next, he must be 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. [19] With regards to what constitute “cause to the contrary”, the court held that a chargor may show cause to the contrary under s. 256(3) of the Code if it can satisfy the court in the following manner –

by demonstrating that the charge is defeasible upon one or more of the grounds specified under subsections (2) and

(4)(b) of the said section 256 (ii);

by demonstrating that the chargee has failed to meet the conditions precedent for the making of an application for an order for sale, such as failure to make a demand or service 18 of a notice in Form 16D, or that the notice demands sums not lawfully due from the charge; and

by demonstrating that its grant would be contrary to some rule of law or equity. Findings of the Court [20] Having considered the parties’ affidavits and submission I am of the view there is no merits in the Defendant’s objection. It is my finding the grounds put up by the Defendant resisting the originating summons does not constitute cause to the contrary. The reasons are stated below. Whether the chargee has given the appropriate statutory notices as stipulated in the Code [21] It is the Defendant’s contention that Form 16D dated 9 February 2018 (Exhibit D-1 of Enclosure 4) is defective and invalid because the said notice had wrongly stated the amount of the facility as RM 68,000.00 which the Defendant said neither he nor the Customer has obtained such facility from the Plaintiff. The Defendant said because of the inaccurate statement he was confused and prejudiced. 19 Other than such assertion, the Defendant did not demonstrate how he was prejudiced by such inaccurate statement. Looking at both the notices, Form 16D dated 9 February 2018 and Form 16D dated 12 February 2018, all of the other statements contained therein are the same. For ease of reference Form 16D dated 12 February 2018 is reproduced below – Kanun Tanah Negara Borang 16 D (Seksyen 254) NOTIS KEMUNGKIRAN MENGENAI SUATU GADAIAN Kepada : Dato’ Abu Talib bin Mohamed (480823-01-5445) di No. 21, Jalan 16/6, 46350 Petaling Jaya, Selangor, Penggadai di bawah gadaian yang diperihalkan dalam Jadual di bawah ini bagi tanah yang tidak dipecahkan atas tanah yang diperihalkan sedemikian.

Preamble

Bahawasanya, kamu telah melakukan suatu kemungkiran terhadap peruntukan-peruntukan gadaian ini dengan gagal membayar balik Kemudahan Business Financing-i berjumlah RM68,000,000.00 oleh pemegang gadaian, Bank Islam Malaysia Berhad (98127-X) yang beralamat di Corporate Recovery Department, Level 15, Menara Bank Islam, No. 22, Jalan Perak 50450 Kuala Lumpur dan baki jumlah keseluruhan yang masih terhutang kepada pihak pemegang gadaian adalah sebanyak RM129,549,212.86 setakat 07.02.2018 dengan butiran seperti berikut:- 20 Harga Jualan 133,044,812.88 (-) Bayaran diterima (1,120,396.92) (-) Ibra’/Rebat (2,377,204.65) Baki Harga Jualan 129,547,211.31 (+) Caj Kos Pelbagai

0.00 (+) Caj Ta’widh 2,001.55 (-) Bayaran caj-caj diterima (0.00) Baki Pembiayaan / Jumlah Tuntutan 129,549,212.86 Dan bahawasanya kemungkiran itu telah berterusan selama tempoh sekurang-kurangnya tiga puluh (30) hari sebelum tarikh notis ini. Kami, sebagai Pemegang Gadaian, menurut kuasa-kuasa yang diberi oleh Seksyen 254 Kanun Tanah Negara, dengan ini menghendaki kamu supaya memulihkan kemungkiran itu di dalam tempoh satu (1) bulan dari tarikh penyampaian notis ini. Dan ambil perhatian bahawa, jika kamu gagal memulihkan pelanggaran itu dalam tempoh yang tersebut, maka kami akan memohon suatu Perintah Jualan. Bertarikh pada 12 Februari, 2018. t.t. .......................................................... Peguam bagi Pemegang Gadaian Tetuan Sidek Teoh Wong & Dennis Peguambela & Peguamcara Kuala Lumpur. 21

Schedule

JADUAL TANAH * DAN KEPENTINGAN Bandar/ Pekan/ Mukim No.* Lot/ Petak/P.T Jenis dan Hakmilik Bahagian Tanah (Jika Ada) Berdaftar * pajakan kecil (Jika Ada) Berdaftar gadaian (Jika Ada) (1) Bandar Putrajaya (2) Lot 268 Presint 8 (3) Geran 1017 (4) Semua Bahagian (5) Tiada (6) No. Per: 480/2013 No. Per: 804/2017 [22] Form 16D dated 12 February 2018 has expressly and specifically notified the Defendant of the following – (a) the Defendant’s breach as a chargor and the sum due and payable under the Charge; (b) the Defendant is required to remedy the breach within 1 month of the date the said notice is served; and (c) that legal proceedings to obtain order for sale would be initiated against the Defendant in the event the notice is not complied with. 22 [23] The above notice has essentially complied with the requirements of section 254 (1) (a), (b) and (c) of the Code. Importantly, the charge under which the said Form 16D was issued was described in the schedule which appears below the said notice. Particulars of the charge describe in the said notice are exactly the same with the description of the charge created by the Defendant on 24 August 2017 as can be seen at Exhibit BIMB-3 of Enclosure 2. Exhibit BIMB-3 is the charge instrument executed by the Defendant under section 242 of the Code. According to the said instrument, the Defendant agreed as follows – Saya, ABU TALIB BIN MOHAMED (No. K/P: 480823-01- 5445/0736052) adalah seorang warganegara Malaysia yang beralamat di No. 21, Jalan 16/6, 46350 Petaling Jaya, Selangor Darul Ehsan. * tuanpunya *tanah/bahagian yang tak dipecahkan atas tanah yang tersebut dalam jadual di bawah ini; * pemajak-pemajak kecil dalam *pajakan/pajakan kecil yang tersebut dalam jadual di bawah ini bagi tanah yang tersebut itu Bagi maksud menjamin:- (a) ... (b) pembayaran wang sebanyak RM133,044,812.88 kepada pemegang gadaian yang tersebut namanya di bawah ini, berserta Faedah/tanpa Faedah, dan sebagai balasan – BANK ISLAM MALAYSIA BERHAD (No. Syarikat: 98127-X) telah memberi suatu kemudahan pembayaran berjumlah RM 68,000,000.00 23 di bawah “Business Financing-i” kepada PFC ENGINEERING SDN. BHD. (No. Syarikat: 268327-K). (c) ... Dengan ini menggadaikan “tanah/bahagian yang tidak dipecahkan atas tanah pajakan/pajakan kecil tersebut untuk membayar kepadanya wang yang tersebut itu beserta faedah atasnya mengikut peruntukan-peruntukan yang dilampirkan di sini. Bertarikh pada 24 haribulan Ogos 2017 [24] Thus, for purpose of securing the repayment of RM 133,044,812.88 (the Plaintiff’s sale price) and in consideration of the Plaintiff granting the Facility for the sum RM 68,000,000.00 to the Customer the Defendant has agreed to charge the Charged Property to the Plaintiff. Besides that, the schedule attached to the Annexure to the charge clearly spelt out the sum of the Facility obtained by the Customer is RM 68,000,000.00 (see item 5 of the Schedule to the Charge). [25] It must be noted in his affidavit the Defendant did not, at any time, deny executing the Charge instrument Exhibit BIMB-3 of Enclosure 2. The Defendant also did not dispute the signature which appears on the Charge instrument and on the Annexure to the charge is his signature. Thus the Defendant is bound by the terms and conditions of the Charge (Bank Islam Malaysia Bhd v Mustaffar @ Mustaffa Bin Yacob & Anor 24 [2012] 6 MLJ 252 and Maybank Islamic Bhd v Kamarulzaman bin Mohamed Nordin [2014] 7 MLJ 685). Under such circumstances, it is unsustainable for the Defendant to contend that the inconsistencies in respect of the amount of facility obtained by the Customer has prejudiced or misled him. In this respect, I accept the Plaintiff’s explanation that the inconsistency was due to clerical mistake, which is something not inherently improbable considering the number of the numerical “0” which appears in “68,000.00” and “68,000,000.00”. The Plaintiff had, almost immediately thereafter, rectified the mistake by issuing a new Form 16D dated 12 February 2018. [26] The Defendant cited cases Malayan Banking Berhad v Zainal Abidin [2008] MLJU 180 and Co-operative Central Bank Ltd v Meng Kuang Properties [1991] 2 MLJ 283 to support its contentions that the Form 16D are invalid and defective and that the Plaintiff action for order for sale has no basis as the Forms are core to the Plaintiff’s action. While the courts in Zainal Abidin bin Abdullah and Meng Kuang Properties dealt and ruled the Form 16D issued in those case were defective, the pertinent point one need to bear in mind is that whether a Form 16D issued by a chargee is in compliance with the statutory provisions under the Code is really a question of fact. In Zainal Abidin’s case the Form 16D was held to be defective and invalid because the 25 period stated in the Form 16D for the chargor to cure the default under the charge was 7 days whereas the period given in form 16D issued to the defendant to remedy the default was 14 days. In the case of Meng Kuang Properties, the sum demanded by the plaintiff in the Form 16D had included the element of default interest. Clause 5 of the charge annexure required a notice to be served before any default interest could be imposed. As there was no evidence to show that such notice had in fact been given either to the borrower or the defendant, the Form 16D was held to be ineffective and invalid. [27] In the instant case, under clause 5.1 (a) of the Annexure to the Charge, the Plaintiff is required to notify Defendant of its breach of the terms and conditions of the Charge and default under the Facility by issuing the statutory notice under the Code. Via Form 16D dated 12 February 2018 the Defendant was accordingly notified and given a period 30 days (a generous period compared to the period stated in clause 5.1 (a) of the Annexure to the Charge which is 7 days) to remedy the breach / default. [28] As rightly pointed out by the Defendant neither the Defendant nor the Customer had obtained the amount of facility stated in Form 16D dated 9 February 2918. However the basis of the Plaintiff’s originating 26 summons is the Form 16D dated 12 February 2018 (which has correctly state the amount of Facility as RM 68,000,000.00) and not Form 16D dated 9 February 2018. As stated above, the amount of the Facility obtained by the Customer from the Plaintiff was RM 68,000,000.00 and in consideration of Plaintiff making the Facility available to the Customer, the Defendant executed the Charge for purpose of guaranteeing the repayment of the sum RM 133,044,812.88 under the said Facility. Thus there is nothing wrong with Form 16D dated 12 February 2018 which has replaced Form 16D dated 9 February 2018. In this context, reference is made to Zainal Abidin bin Abdullah’s case where having ruled, inter alia, the plaintiff’s Form 16D was defective, the learned High Court Judge said – However, it needs to be mentioned that the plaintiff is free to institute a fresh foreclosure proceeding against the said property by issuing and serving a new and proper Form 16D on the defendants - see Low Lee Man's case (supra). [29] The Plaintiff in the instant case did not pursue Form 16D dated 9 February 2018 for its foreclosure proceedings so as to avoid the risk of the proceeding being rejected and penalised with costs. Instead it took the right action by issuing a new Form 16D dated 12 February 2018 and proceed this foreclosure proceeding premised on the said Form 16D. 27 Accordingly there is no issue of Form 16D dated 12 February 2018 being invalid and ineffective. It is self-evident why the Defendant chose to rely on Form 16D dated 9 February 2018 and not Form 16D dated 12 February 2018 – so as to create the supposedly confusion state to challenge the validity of Form 16D dated 12 February 2018. [30] Another complaint raised by the Defendant is that he did not receive the Form 16D dated 12 February 2018. In this respect it is interesting to note that both Form 16D dated 9 February 2018 and 12 February 2018 were addressed and sent to the same address. The address where both Forms 16D were sent is the same address which was given by the Defendant as the Address for Service when he executed the Charge document and the Annexure thereto (see definition “Address for Service” read with item 1(a) of the schedule to the Charge). Based on the Defendant’s affidavit, the Defendant is still residing at the Address for Service. The individual who had posted Form 16D and Form 16K both dated 12 February 2018 had made a statutory declaration dated 14 March 2018 that he had sent both the forms which was accompanied with a letter of the Plaintiff’s solicitor dated on even date via registered post to the Address for Service (see Exhibit BIMB-5 enclosure 2). As such there is no reason for this court to accept the 28 Defendant’s bare denial that he has not received Form 16D dated 12 February 2018. Whether the Plaintiff has complied with the procedural requirements prescribed by Order 83 of RoC 2012 [31] It is the Plaintiff’s contentions that it has served the originating summons and Affidavit in support thereto on the Defendant’s solicitor on 23 March 2018. The first hearing date of the originating summons was fixed on 28 May 2018. Going by the date of service and the hearing dates of the originating summons, it appears the Plaintiff has complied with Order 83 rule 2(2) of RoC 2012 which requires the originating summons and Affidavit in Support to be served on the Defendant not less than four (4) clear days before the first hearing date of the originating summons. However there was no affidavit of service filed to that effect. Be that as it may, compliance with the said Order 83 rule 2(2) was never raised by the Defendant’s counsel as one of the grounds in resisting the originating summons. As such, there is no issue of non-compliance with the requirement stipulated under Order 83 rule 2(2) of the RoC 2012 on the part of the Plaintiff. 29 [32] One of the prayers sought by the Plaintiff in the originating summons was for possession of the Charged Asset. For such prayer to be brought to the attention of the Defendant, Order 83 rule 2(3) of the RoC 2012 requires an endorsement to such effect be made on the outside fold of the copy of the affidavit (in support of the originating summons) served on the Defendant. Based on the Affidavit in Support of the originating summons which was filed in court, the said affidavit bore such endorsement on the first page of the said affidavit. The fact there was no affidavit of service of the Affidavit in Support was filed is not fatal as it was never the complaint of the Defendant that Plaintiff did not comply with Order 83 rule 2(3) of the RoC 2012. As it was never disputed that the originating summons and the Affidavit in Support (which bores the endorsement for possession) was served on the Defendant, the Plaintiff’s intention for possession of the Charged Property was duly notified to the Defendant. Thus the Plaintiff has complied with the said 83 rule 2(3). Apart from that, the Plaintiff has also complied with Order 83 rule 3(2) of the RoC 2012 by exhibiting a copy of the Charge in the Affidavit in Support (Exhibit BIMB-3 of Enclosure 2). [33] In compliance with Order 83 rule 3(3) and (6) of the RoC 2012, the Plaintiff has also shown, via its further affidavit, the particulars of the remaining due under the Charge as at the hearing date on 19 July 2018 30 and 31 July 2018. Based on the affidavits Enclosure 8, the amount remaining due as at 19 July 2018 was RM 128,073,644.57 and Enclosure 14 shows the remaining due as at 31 July 2018 was RM 127,706,413.55. Both the affidavits were duly served on the Defendant as shown in the affidavits of service filed by the Plaintiff in Enclosures 11 and 15 respectively. The service of the affidavits Enclosures 8 and 14 was not disputed by the Defendant. It is only the amount remaining due as stated in the affidavits was disputed by the Defendant. This issue will be discussed below. Whether the Plaintiff ought to establish liability against the Customer before initiating the foreclosure proceedings against the Defendant Whether the foreclosure proceedings is an abuse of process of court [34] The salient terms and conditions of the Charge as stipulated in the Annexure to the Charge are as follows – 2. Covenant To Pay In consideration of the Bank having agreed at the request of the Customer to make available or continuing to make available the Facility to the Customer upon the terms and conditions of the Financing Document, the Chargor hereby covenants that it shall duly pay or discharge to the Bank the Indebtedness in accordance with the terms of the Financing Document upon the terms and conditions herein contained. 31 3.1 Specific Charge As security for the payment of the Indebtedness by the Customer, the Chargor hereby charges the Land by way of a legal charge under the Land Code in favour of the Bank. 5.4 Concurrent proceedings Notwithstanding any provisions hereof, it is hereby expressly agreed that upon default or breach by the Chargor of any term, covenant, stipulation and/or undertaking herein provided and on the part if the Chargor to be observed and performed, the Bank shall hereafter have the right to exercise all or any of the remedies available whether by this Charge or the Financing Document or the Security Document or by statute or otherwise and shall be entitled to exercise such remedies concurrently, including pursuing all remedies of sale or possession pursuant to the Land Code and civil suit to recover all monies due and owing to the Bank. [35] In the case of Low Lee Lian, it was held by the Federal Court as follows – Now, it is trite that a chargee/creditor may pursue any or all remedies to recover monies lent by him. He may enforce his statutory charge against the chargor by way of proceedings in rem under s. 256 of the Code. He may sue the principal debtor (who may or may not be the chargor) upon the personal covenant contained in any loan agreement that was entered into between the parties. He may proceed against the surety who has guaranteed the loan. And he may pursue all of these courses simultaneously, contemporaneously or successively. (emphasis added) 32 [36] Premised on the terms and conditions of the Charge and the authorities cited, the Plaintiff is entitled to enforce the securities created in consideration of the Facility being made available to the Customer either simultaneously, contemporaneously or successively, unless there is an agreement to the contrary (Chan Boi Loi v Public Bank Bhd and another application [2011] 1 MLJ 478). Thus there is no merits in the Defendant’s contentions that liability against the Customer ought to be established prior to the commencement of this foreclosure proceedings against him. Since the Defendant has voluntarily agreed to be bound by the terms of the Charge it is not now open to him to challenge the above terms and conditions (Maybank Islamic Bhd v Kamarulzaman bin Mohamed Nordin [2014] 7 MLJ 685). The contentions that clause 5.4 of the Annexure to the Charge is null and void as it contradicts the Syariah principles of fairness is misconstrued as the remedy sought by the Plaintiff here is its rights as a chargee pursuant to the Charge created by the Defendant under the Code read with the RoC 2012 (Bank Kerjasama Rakyat Malaysia Bhd v. Emcee Corporation Sdn Bhd [2003] 1 CLJ 625). Accordingly, the issue of violation of the Shariah principles and abuse of court process is a non-starter. 33 Whether the sum demanded in Form 16D dated 12 February 2018 should be capped as at the date the Customer was wound up [37] It is the Defendant’s contentions that the sum claimed in the Form 16D dated 12 February 2018 ought only to include the principle sum and ta’widh as at the date the Customer was wound up, that is, 5 January Defendant cited 2 High Court cases – Zainal Abidin bin Abdullah (which adopted the ruling in Affin Bank Berhad v Zulkifli Abdullah [2006] 1 CLJ 438) and Bank Islam Malaysia Bhd v Azhar Osman & Others [2010] 5 CLJ 54, [2010] 9 MLJ 192. The said 2 cases essentially ruled that the bank cannot claim for the full realization for the full balance sale price in cases where the financing facility granted is prematurely terminated as to do so would be unconscionable as it includes profit from the unexpired tenure of the financing facility granted. In the case of Azhar Osman, the court said – 34 [14] … From the practice of the bank it is clear that the insistence on enforcing payment of the full sale price appears to be merely an attempt to adhere to written text but I doubt if such appearance achieve its purpose. This is because, despite the written term of the agreement, the bank in reality does not enforce payment of the full sale price upon a premature termination. It always grants rebate or ibrar based on 'unearned profit'. [38] In the instant case the Plaintiff has, in accordance with Order 83 rule 3, filed an affidavit to produce the statement of account of the Facility to show the particulars of the amount remaining due under the charge as at the hearing date (19 July 2018) of the originating summons. The particulars are as follows – Amaun (RM) Harga Jualan 133,044,812.88 (-) Bayaran diterima (1,125,929.28) (-) Ibra’/Rebat (3,863,889.45) Baki Harga Jualan 128,054,994.15 (+) Caj Kos Pelbagai 1,624.60 (+) Caj Ta’widh 17,025.82 (-) Bayaran caj-caj diterima (0.00) Baki Pembiayaan / Jumlah Tuntutan 128,073,644.57 The Plaintiff had also filed an affidavit to show the outstanding amount as at 31 July 2018, the date on which the Order for Sale was granted. 35 PENYATA AKAUN PEMBIAYAAN Setakat 31 Julai 2018 Pelanggan : PFC ENGINEERING SDN BHD Kemudahan : BUSINESS FINANCING-I OF RM 68,000,000.00 Hartanah : GERAN 1017, LOT NO 268 PRESINT 8, BANDAR PUTRAJAYA, PUTRAJAYA, WILAYAH PERSEKUTUAN PUTRAJAYA Penggadai : DATO’ ABU TALIB BIN MOHAMED Amaun (RM) Harga Jualan 133,044,812.88 (-) Bayaran diterima (1,125,929.28) (-) Ibra’/Rebat (4,235,560.65) Baki Harga Jualan 127,683,322.95 (+) Caj Kos Pelbagai 4,211.00 (+) Caj Ta’widh 18,879.60 (-) Bayaran caj-caj diterima (0.00) Baki Pembiayaan / Jumlah Tuntutan 127,706,413.55 [39] Based on the particulars of the accounts above, the Plaintiff has granted ibra’ in respect of the unearned profit in the sum RM 3,863,889.45 (as at 19 July 2018) and RM 4,235,560.65 (as at 31 July 2018) which is deducted from the selling price. Such deduction is in accordance with clause 2.5(b) of the Supplemental Tawarruq Facilty Agreement dated 24 August 2017 (Exhibit BIMB-2 of Enclosure 2). Since ibra’ is granted, the outstanding sum claimed against the Defendant does not include unearned profit for the unexpired tenure as alleged by the Defendant. In so far as ta’widh is concerned, pursuant to 36 clause 2.6 of the Supplemental Tawarruq Facilty Agreement, the Defendant is liable to pay ta’widh. [40] The cases of Zainal Abidin bin Abdullah and Azhar Osman however did not deal with the issue contended by the Defendant - that the principle sum and ta’widh claim should only be capped as at the date the Customer was wound up. The Plaintiff cited MK Associates Sdn Bhd v Bank Islam Malaysia Bhd [2015] 6 CLJ 97 to counter the Defendant’s argument on capping the sum claim. However the case MK Associates is of no assistance because the basis in which the High Court rejected the defendant / bank claim for ta’widh after the plaintiff / company was wound because at the time when the parties executed the financing agreements in 1998, ta’widh was not practiced by the Islamic financial institutions (ta’widh came into force on 1 January 1999 via the Shariah Advisory Council Resolution). [41] In the case Pilecon Realty Sdn Bhd & Ors and another appeal [2013] 3 MLJ 1, it concerned the right of a bank as a chargee under a charge created by a company in consideration of a conventional loan granted by the bank to the said company. The bank / chargor argued as long as its security had not been realised, it was entitled to charge interest at the default rate as prescribed in the loan agreement. 37 Whereas Pilecon Realty an unsecured creditor of the borrower / chargee took the position the bank was not entitled to interest subsequent to the date. The issue before the Federal Court was whether the statutory right of a chargee under the Code to rely on his security to obtain full satisfaction of the indebtedness owed to him was restricted by section 8 (2A) of the Bankruptcy Act 1967 (Bankruptcy Act) where security provided by a company which was later wound up under the provisions of the Companies Act 1965 and whether the application of the said section 8 (2A) is limited to secured creditors in a bankruptcy situation or whether it is also applicable to secured creditors in a winding up situation. [42] The Federal Court held – [45] The provisions of the BA [Bankruptcy Act 1967] in relation to the debts of a bankrupt are clearly applicable to an insolvent company by virtue of s 291(1) and 291(2) of the Companies Act… [46] Section 8, and in particular, sub-s (2A) of the BA, are clear and unambiguous. In the absence of an express provision limiting its application, there is no reason to limit its application only against a bankrupt and not to a wound up debtor. We are in agreement with the Court of Appeal that upon a true construction of s 4(1) and (2) of the Civil Law Act 1956, s 291(1) and (2) of the Companies Act, s 8 (2A) of the BA is equally applicable to a secured creditor in relation to a winding up situation. 38 … [48] On the issue of a secured creditor's right to interest being limited up to a period of only six months as found by the Court of Appeal, the facts of this case show that the bank had filed the civil suit against Transbay in 2001, obtained judgment on 22 August 2003; filed a foreclosure action of the charged property way back in 2002 and obtained an order for sale on 7 October 2003; filed an application to wind up Transbay in 2005 and obtained a winding up order on 27 January 2006. The bank however only managed to sell the said property by way of a tender exercise on 22 July 2008. [49] Based on our reading of s 8 (2A), a secured creditor is given a timeline of six months to sell the charged property failing which they are not entitled to interest. Since the charged property was realised some two years six months after the winding up of Transbay, the bank had failed to meet the statutory limit of six months under s 8 (2A) of the BA. As such the bank should not be entitled to any interest. The Court of Appeal had therefore erred in allowing interest for period a six months. [43] Thus section 8 (2A) of the Bankruptcy Act is also applicable to a secured creditor in relation to a winding up situation and a secured creditor is only entitle to charge interest after the date the company is wound up if the secured creditor realised the charged property within 6 months after the date of the winding up order was made. [44] Vide the Bankruptcy (Amendment) Act 2017 (Act A1534) the Bankruptcy Act was amended. Act A1534 came into force on 6 October 39 2017 and vide the amending Act, the Bankruptcy Act is now referred to as Insolvency Act 1967 (Insolvency Act). Among the amendments made to the Bankruptcy Act was section 8 (2A). The said provision now reads as follows – (2A) Notwithstanding subsection (2), no secured creditor shall be entitled to any interest in respect of his debt after the making of a bankruptcy order if he does not realize his security within twelve months from the date of the bankruptcy order. (emphasis added) [45] Thus pursuant to section 8 (2A) of the Insolvency Act, a chargee is entitled to charge interest after the making of a bankruptcy order or a winding up order if the charged property is liquidated within 12 months from the date of the bankruptcy order or a winding up order. Based on the Pilecon Realty case, if the chargee failed to realize the charged asset within the said 12 months, the chargee is not entitle to impose interest. [46] Although the instant case is in relation to granting of Islamic Financing facility, I am of the view the principles of section 8 (2A) of the Insolvency Act is applicable to the instant case in respect of imposition of ta’widh is concerned. In this respect reference is placed on Bank 40 Kerjasama Rakyat Malaysia Bhd v. Emcee Corporation Sdn Bhd [2003] 1 CLJ 625 where the Court of Appeal held – As was mentioned at the beginning of this judgment the facility is an Islamic banking facility. But that does not mean that the law applicable in this application is different from the law that is applicable if the facility were given under conventional banking. The charge is a charge under the National Land Code. The remedy available and sought is a remedy provided by the National Land Code. The procedure is provided by the Code and the Rules of the High Court 1980. The court adjudicating it is the High Court. So, it is the same law that is applicable, the same order that would be, if made, and the same principles that should be applied in deciding the application. [47] At the same time it is pertinent to note that the Bank Negara Guidelines on Late Payment Charges for Islamic Banking Institutions for Late Payment Charges (BNM/RH/GL 008-14) allows Islamic banking institutions to impose ta’widh being the amount of compensation in respect of actual loss incurred by the said institutions due to default by customer. Pursuant to paragraph 5.2.2 of the said guideline the actual loss to be compensated in case of default of scheduled payment is not to be more than 1% per annum on the overdue instalments. In the instant case, under clause 2.6 (a) of the Supplemental Tawarruq Facility Agreement the Customer has agreed to pay to the Plaintiff late payment charges by way of ta’widh at the rate of 1% per annum on overdue 41 instalment until date of full payment. Thus the Defendant is bound by the agreement and liable to pay ta’widh (Bank Islam Malaysia Bhd v Lim Kok Hoe & Anor and other appeals [2009] 6 MLJ 839). The ta’widh charged by the Plaintiff as can be seen from the statement of account is at the date of Order for Sale granted which is actually not the date of full payment because the Charge has yet to be realized. Thus the Defendant is not prejudiced. [48] In any event the Defendant did not show how the calculation of the amount outstanding (including calculation of ibra’ and ta’widh) under the Facility as stated in the statement of account was wrong. Pursuant to clause 9.2 of the Annexure to the Charge, the amount outstanding as stated in the statement of account is conclusive evidence that such amount is due and payable by the Defendant under the Facility. Conclusion [49] Premised on the reasons stated above I am of the view the issues raised by the Defendant in opposing the originating summons does not constitute cause to the contrary in the context of Low Lee Lian’s case. I 42 accordingly allowed the originating summons in terms of the prayers sought therein, in particular the Order for Sale. ( KHADIJAH BINTI IDRIS ) JUDICIAL COMMISSIONER HIGH COURT (COMMERCIAL DIVISION) DATED 29 NOVEMBER 2018 Counsel: Plaintiff/Respondent : Syed Fadzil Bin Hashim of Messrs Sidek Teoh Wong & Dennis Defendant/Appellant : Jasneeta Kaur Bhuller of Messrs Azmi Fadzly Maha & Sim

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