Cimb Bank Berhad v Sivadevi A/P Sivalingam (02(f)-62-08/2018 (J))

1 DALAM MAHKAMAH PERSEKUTUAN MALAYSIA (BIDANGKUASA RAYUAN) RAYUAN SIVIL NO: 02(f)-62-08/2018(J) ANTARA CIMB BANK BERHAD [NO. SYARIKAT: 13491-P] … PERAYU DAN SIVADEVI A/P SIVALINGAM (NO. K/P: 680707-01-6092 / A1050889) … RESPONDEN [DALAM MAHKAMAH RAYUAN MALAYSIA DI PUTRAJAYA (BIDANGKUASA RAYUAN) RAYUAN SIVIL NO: J-02(A)-59-01/2017 ANTARA SIVADEVI A/P SIVALINGAM (NO. K/P: 680707-01-6092 / A1050889) … PERAYU DAN CIMB BANK BERHAD [NO. SYARIKAT: 13491-P] … RESPONDEN Dalam Perkara mengenai Mahkamah Tinggi di Johor Bahru Dalam Negeri Johor, Malaysia Saman Pemula No: JA-24FC-1192-08/2016 2 Dalam perkara mengenai Seksyen 256 dan Seksyen 257, Kanun Tanah Negara 1965 Dan Dalam perkara Gadaian Perserahan No. 109859/2014, yang didaftarkan pada 24.12.2014 di atas tanah yang terkandung di bawah Hakmilik Geran 308417, Lot 47137, Mukim Tebrau, Daerah Johor Bahru, Negeri Johor Dan Dalam perkara Aturan 83 Kaedah-Kaedah Mahkamah 2012 Antara Cimb Bank Berhad [No. Syarikat: 13491-P] … Plaintif Dan Sivadevi A/P Sivalingam (No. K/P: 680707-01-6092 / A1050889) … Defendan] KORAM: AHMAD HAJI MAAROP, PCA RAMLY HAJI ALI, FCJ ALIZATUL KHAIR OSMAN KHAIRUDDIN, FCJ ROHANA YUSUF, FCJ MOHD ZAWAWI SALLEH, FCJ 3 JUDGMENT OF THE COURT [1] Before us, is an appeal which relates to the issue on the applicability of limitation laws to an application for an order for sale by public auction made pursuant to sections 256 and 257 of the National Land Code 1965 (“NLC”). The High Court of Johor Bharu had granted an order for sale in respect of the land held under Hakmilik Geran 308417, Lot 47137, Mukim Tebrau, Daerah Johor Bahru, Johor (“the said Land”). On appeal, it was set aside by the Court of Appeal on the ground that the application was made out of time as envisaged by section 21(1) of the Limitation Act 1953 (“LA”). This resulted in the order for sale being set aside. [2] We have heard the appeal, and we had reserved our decision. My learned brother Justice Ahmad Bin Maarop, President of the Court of Appeal (“PCA”) had prepared a judgment, and I have read that judgment in draft. I agree with the conclusion arrived in the draft judgment that the appeal of the appellant should be allowed and for the order of the High Court to be reinstated. [3] I, however, with respect differ in my reasons for that decision, and my reasons are as stated in this judgment. I will refer to the acronym and 4 the parties, as how they were referred to in the judgment of the learned PCA. [4] For the purpose of my judgment, I will narrate the brief facts and they are these: The Plaintiff offered the Defendant together with Thamil Selvem a/l Savarimuthu as co-borrower, a loan facility known as homexpress loan. It was for the sum of RM185,320.00. They entered into a loan agreement on 18.01.2000 together with a deed of assignment to secure the loan facility. Following the issuance of title of the said Land and in place of the deed of assignment, a Third Party Charge under the NLC over the said Land was presented and registered on 24.12.2014. [5] The Defendant defaulted in the repayment of the loan. It is not in dispute that the last payment received by the Plaintiff was on 12.05.2003. The Plaintiff entered a default judgment against the Defendant in Civil Suit No.: MT4-22-659/2007 at the High Court of Johor Bahru on 20.11.2007. By consent, that default judgment was however set aside. The suit was withdrawn with liberty to file afresh. [6] The Plaintiff then issued and served on the Defendant the Notice of Default. Form 16D issued pursuant to section 254 of the NLC was served on the Defendant giving a period of 30 days to remedy the breach 5 of the NLC charge. The 30 day period expired but the Defendant did not remedy the default. The Plaintiff proceeded to file an Originating Summons No.: JA-24FC-1192-08/2016 in the High Court on 08.08.2016 for an order for sale of the said Land by Public Auction pursuant to sections 256 and 257 of the NLC. It was allowed by the High Court on 29.11.2016. [7] The Defendant appealed against the High Court decision. The Court of Appeal reversed the decision of the High Court, and set aside the order for sale. The main basis for doing so was because the Court of Appeal found that the application for the order for sale by the Plaintiff was time barred by virtue of section 21(1) of the LA. According to the Court of Appeal, the application made by the Appellant for order for sale was already in excess of 12 years. In computing the period from which time began to run, the Court of Appeal held that it should be computed from the time the cause of action arose, which was found to be from the failure of the Defendant to service the loan on 12.05.2003. From the date of default to the application date of 08.08.2016, it was held that limitation under section 21(1) had already set in. [8] In its grounds of judgment, the Court of Appeal had observed and stated as below: 6 “[30] Returning to the terms of section 21, we make the second material observation with particular focus on section 21(1). Breaking down its various components reveals that the provision envisages three contexts or types of actions in its application. The three types of actions are: i. any action to recover any principal sum of money which is secured by a mortgage or other charge of land or personal property; ii. any action to enforce such a charge of land or personal property; iii. any action to recover proceeds of sale of land or personal property. [31] In any of those three contexts, the action must be brought within 12 years from the date when the right to receive the money accrued. The computation of the 12-year period is necessarily by reference to the date when the right to receive the money accrued since no other date is offered under the terms of section 21(1). [32] Further, section 21(1) applies to both land and personal property, using the two terms distinctly just as in the case of mortgage and charge since by the definition in section 2, “personal property” does not include “land” while land includes chattels real and immovable property. By that same definition, a charge would fall within the meaning of the term “land” as a charge creates a legal and equitable interest in the land. [33] Therefore, by definition and by the express conditions and circumstances specified in section 21(1), an action in relation to a charge of land will not and cannot fall within the terms of section 21(2), as it applies to “mortgaged personal property” that necessarily excludes land; or even under section 21(4) as the interest here is a charge and not a mortgage. With this, we regret we are unable to follow the decisions in Peh Lai Huat v MBF Finance Bhd [supra] and Jigarlal K 7 Doshi @ Jigarlal a/l Kantilal v Resolution Alliance Sdn Bhd & Another [supra].” [9] To better appreciate the full implication of section 21, below is how that section reads: “Limitation of actions to recover money secured by a mortgage or charge or to recover proceeds of the sale of land

21. (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.” (emphasis added) [10] Reading the above quoted part of the grounds of judgment of the Court of Appeal, it is clear, that the Court of Appeal had construed section 21(1) of the LA to be applicable to three categories of actions as follows: i. any action to recover any principal sum of money which is secured by a mortgage or other charge of land or personal property; ii. any action to enforce such a charge on land or personal property; and iii. any action to recover proceeds of the sale of land or personal property 8 [11] In categorising the three categories above the Court of Appeal had, in my view, failed to give emphasis to the role of the punctuation comma in that clause which appears after the word “charge”. In my view, the proper construction of section 21(1) of the LA should instead be broken up into two categories only as below: i. an action to recover principal sum of money secured by a mortgage or other charge on land or personal property or to enforce such mortgage or charge; and ii. an action to recover proceeds of the sale of land or personal property. [12] The role of punctuation comma in a legal provision was decided by this Court in Dato’ Mohamed Hashim Shamsuddin v Attorney-General, Hong Kong [1986] 2 MLJ 112. The case concerns the issuance of an ex parte order by the then Chief Justice Malaya, to allow evidence to be taken before the High Court upon a request by the Hong Kong High Court. The evidence was to be used in the pending criminal proceedings in Hong Kong. The order was made pursuant to Order 66 of the Rules of the High Court 1980. An application to set aside that order was made on the basis that Order 66 cannot apply to criminal proceedings and there was no statutory authority that empowered the High Court to make such an order. The application was dismissed. 9 [13] In dismissing that setting aside application, the Supreme Court first found that the enabling provision for Order 66 was section 16(l) of the Courts of Judicature Act 1964. In the majority judgment of the Supreme Court, speaking through Abdoolcader SCJ at page 122 of the judgment, His Lordship had stated thus: “To advert now to the question of the statutory source or enabling provision for the enactment of Order 66, I would refer to the provisions of section 16 of the 1964 Act for rules of court to be made (by the Rules Committee constituted under section 17 of the 1964 Act) for the purposes specified therein, in paragraph (l) whereof states as follows: “for regulating the taking of evidence before an examiner or on commission or by letters of request, and for prescribing the circumstances in which evidence so taken may be read on the trial of an action.” (emphasis added) [14] Relying on the above section 16(l), it was submitted by learned counsel in that case that the word “action” in the above provision connoted a civil action only and would not apply to criminal proceedings. [15] In His Lordship judgment, Abdoolcader SCJ pointed out that the punctuation comma after the words “letter of request” in that provision was significant. According to His Lordship, “section 16(l) …must be read disjunctively in the light of the comma …and followed by the word “and”, hence the provision of paragraph (l) of section 16 10 relating to the regulating of the taking of evidence by letter of request apply equally to civil and criminal proceedings.” [16] What this would mean is that the comma in section 16(l) above, had the effect of breaking the provision into two categories of cases; i. for regulating the taking of evidence before an examiner or on commission or by letters of request; and ii. for prescribing the circumstances in which evidence so taken may be read on the trial of an action. [17] In the case of Sathiyamurthi v Penguasa/Komandan, Pusat Pemulihan Karangan, Kedah [2006] 6 MLJ 593, this Court had to construe section 399(1) of the Criminal Procedure Code in relation to its application to Inquiry proceedings under the Drug Dependants (Treatment and Rehabilitation) (Amendment) Act 1998. It was argued that the report of the medical officer ought to have been served on the Appellant pursuant to section 399(1). While the Deputy Public Prosecutor took the position that section 399(1) applied only to inquiries conducted under the Criminal Procedure Code. [18] The Court then went on to consider section 399(1) as reproduced below: 11

399. “Reports of certain persons

(1) Any document purporting to be a report under the hand of any of the persons mentioned in subsection (2) upon any person, matter or thing examined or analysed by him or any document purporting to be a report under the hand of the Registrar of Criminals upon any matter or thing relating to finger impressions submitted to him for report may be given in evidence in any inquiry, trial or other proceeding under this Code unless that person or Registrar shall be required to attend as a witness –

(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’ has no application to this case. The proceeding in the court below was not - to quote the words of the subsection - ‘an action … brought to recover any principal sum of money secured by a mortgage.’” [30] Abdul Aziz Mohamad CJA, at page 475 in Peh Lai Huat (supra) held that: 17 “The only reason why I decided that the appeal should be dismissed was the reason that is stated in para 3 of the judgment of my learned brother Gopal Sri Ram FCJ, that is, that s 21(1) of the Limitation Act 1953 did not apply to the respondent’s action because it was not an action brought to recover any principal sum of money secured by a charge but was an action in exercise of the right to the statutory remedy of an order for sale.” (emphasis added) [31] The Supreme Court in Malaysian International Merchant Bankers Bhd v Dhanoa Sdn Bhd [1988] 1 MLJ 257, at page 258, held that the claim of the Appellant for an order for sale was merely in the exercise of a statutory remedy as chargee. [32] In United Malayan Banking Corp Bhd v Chong Bun Sun and another application [1994] 2 MLJ 221, Visu Sinnadurai J at page 228 of the judgment observed that: “It is clear from these provisions of the NLC that the law confers a special statutory right on the chargee to obtain an order for sale. This right of the chargee is independent of any other causes of action which the chargee may have against the chargor under the charge, or under any other law. The remedy of the chargee to obtain an order for sale may therefore be described as a ‘statutory right’ conferred on the chargee by the NLC. Wan Yahya SCJ in M & J Frozen Food Sdn Bhd v Siland Sdn Bhd & Anor [1994] 1 SCR 197 described this right of the chargee as follows (at page 309): The order for sale confers on the chargee only the statutory right to a judicial sale. A sale under ss 256 or 260 of the NLC 18 is a judicial sale ordered by the court on the application of the chargee. The point that needs emphasis is that, the remedy of the chargee under the NLC is a special remedy. The action brought by the chargee, and the adjudication of it by the courts, are different to that when other causes of action are instituted by the chargee… The chargee may, if he so chooses, besides resorting to this statutory right, pursue any other cause of action against the chargor for the money lent to the chargor. He may sue for a debt, or on a guarantee (if any), or on the contract.” [33] Section 21(1) of the LA bars an action for recovery of monies secured by a charge or mortgage. It should not bar the charge action for a sale of the security. In Wong Soon Kion v Cimb Bank Bhd [2018] MLJU 1847, the Court of Appeal said, at paragraph 7 that: “In the first instance, it is necessary to recognise that the plaintiff qua chargee’s application in the court below for an order for sale was in exercise of their statutory remedy under a registered charge against the defendant qua chargor in default of the provisions of the NLC. Subsection 256(3) of the NLC enjoins the Court to make the order for sale unless it is satisfied of the existence of cause to the contrary.” [34] The Supreme Court in Kandiah Peter v Public Bank Bhd [1994] 1 MLJ 119 at page 122, held that “A chargee who makes an application for an order for sale in foreclosure proceedings under s.256 of the Code does not commence an action. He merely enforces his rights as a chargee by exercising his statutory remedy against the chargor in default. The chargee, therefore, does not 19 sue for a debt.”. In Kandiah Peter v Public Bank Bhd (supra), the Supreme Court at page 122 observed that: “A chargee who makes an application for an order for sale in foreclosure proceedings under section 256 of the Code does not commence an action. He merely enforces his rights as a chargee by exercising his statutory remedy against the chargor in default. The chargee, therefore, does not sue for a debt. It is also clear that his claim for an order for sale is not based upon a covenant but under the registered charge. The order for sale when made under section 256 of the Code is not a judgement or a decree. The court hearing the application for foreclosure does not make, and in any event ought not to make, any adjudication upon any substantive issue.” This is true, since as a chargee he is merely asking that the security that he holds be sold. [35] This Court in Low Lee Lian v Ban Hin Lee Bank Bhd [1997] 1 MLJ 77 had once again restated the trite legal position that an order for sale made pursuant to section 256 of the NLC is not a judgment as it is purely an exercise of statutory remedy against a defaulting chargor under the NLC. [36] Whilst acknowledging that the statutory defence of limitation does not apply to an application for an order for sale, there are other available defence legal and equitable available to the defaulting chargor. Since 20 statutory limitation cannot apply, can the chargee take its own time, to enforce a charge? The Court of Appeal had expressed this concern as observed at paragraph 65, of the grounds of judgment below: “If the time period of 12 years runs only from when the chargee decides to issue the Form 16D notice and then only after the failure to remedy the default, as is suggested in the case of Peh Lai Huat and Jigarlal, the time requirements of “at least one month or such other alternative period as may be specified in the charge” mentioned in section 253, would have been rendered meaningless and of no effect. If the time period of 12 years does not run from when the breach of the agreement took place whence the right to receive money accrued has been disaffected, a chargee may well decide not to do anything for the next 100 years, and still be in time to enforce the ad rem right of order of sale.” [37] If the chargee bank takes forever to act or to enforce the charge, defences such as laches, acquiescence and other equitable defences may be pleaded against it. After all, section 256(3) of the NLC allows the chargor to raise the cause to the contrary when it states that: “(3) On any such application, the Court shall order the sale of the land or lease to which the charge relates unless it is satisfied of the existence of cause to the contrary.” (emphasis added) A chargor may therefore resist an application for an order for sale if he may establish “cause to the contrary”. This phrase received interpretation by this Court in Low Lee Lian v Ban Hin Lee Bank Bhd (supra). The phrase encapsulates three situations as to when a cause to contrary may set in. At the same time it demonstrated that a cause to 21 contrary may occur when it is a breach of any rule of law or equity. In the words of Gopal Sri Ram JCA (sitting in the Federal Court), at pages 83-84: “Thirdly, a chargor may defeat an application for an order for sale by demonstrating that its grant would be contrary to some rule of law or equity. This principle finds its origins in the judgment of Aitken J in Murugappa Chettiar v Letchumanan Chettiar [1939] MLJ 296 at p 298 where he said: I agree that equitable principles should not be invoked too freely for the purpose of construing our Land Code, but surely a chargor, who shows that there would be no need to sell his land if the chargee paid up in full what is due from himself in another capacity, has shown good and sufficient cause why the land should not be sold. Section 149 of the Land Code obviously contemplates that there may be cases in which charged land should not be sold, even though there has been a default in payment of the principal sum or interest thereon secured by the charge; and it seems to me that a chargor may ‘show cause’ either in law or equity against an application for an order for sale, and that the courts should refuse to make an order in every case where it would be unjust to do so. By ‘unjust’ I mean contrary to those rules of the common law and equity which are in force in the Federated Malay States.” (emphasis added) [38] The case of Phileoallied Bank (Malaysia) Bhd v Sakuntalathevy Manickavasagam [2007] 1 MLJ 581, was where after ten years had elapsed the chargee decided to enforce the charge. The chargor 22 pleaded laches and acquiescence. The learned judge, however, found that the chargee has indeed provided a credible explanation for the delay and that in any event, the chargor did not come to Court with clean hands and was thus considered disentitled from raising an equitable defence. The High Court in the case did not rule out the possibility of pleading said equitable defences. On its own facts, it was denied by the High Court because the chargee had given acceptable explanation for taking such a long time. Therefore, while a chargor may not avail himself of a statutory limitation defence, it does not mean that he is precluded from raising an equitable defence. [39] In view of the above discussions, I will proceed to answer the first Leave Question posed below: Whether proceedings commenced by a chargee for sale of land pursuant to section 256 or section 260 of the National Land Code 1965 is subject to section 21(1) or section 21(2) of the Limitation Act 1953. Premised on the reasons that I have stated earlier, my answer will be, the proceedings commenced by a chargee for sale of land pursuant to section 256 or section 260 of the NLC is therefore not subjected to section 21(1) of the LA. 23 [40] I will now deal with section 21(2) of the LA as posed on the above Leave Question. This section clearly applies to a foreclosure action in respect of a mortgaged personal property. The phrase “personal property” is defined to exclude land. This provision, therefore, applies to any other property excluding land or chattels real. Since an application for an order for sale always involves land, section 21(2) has no application to a charge action, in any event. [41] In view of the above, I do not find it necessary to deal with the other leave questions posed. On the reasons as stated, I agree that the appeal should be allowed with costs. [42] My learned brother Justice Mohd Zawawi Bin Salleh FCJ had read this judgment in draft and had expressed his agreement with this judgment. signed ROHANA YUSUF Judge, Federal Court, Malaysia Dated: 15 November 2019 24 Counsel for the Appellant: Jeyanthini Kannaperan (Pauline Koh with her) Messrs. Shearn Delamore & Co Counsel for the Respondent: Pang Kong Seng (Yap Che Kai with him) Messrs. K S Pang & Co