CIMB Bank Berhad v Wellcom Communications (M) Sdn Bhd & 4 Lg (WA-22NCC-207-06/2018)

WELLCOM COMMUNICATIONS (M) SDN BHD (Company No.: 203350-K)

DATO’ VIJAYAKUMAR A/L RATNAVELU (NRIC No.: 621224-10-8021)

MD ISA BIN SALIM (NRIC No.: 520331-04-5019)

JAMALUDIN BIN AHMAD (NRIC No.: 650101-01-5469)

WELLCOM COMMUNICATIONS (NS) SDN BHD … DEFENDANTS

This is an application by the Plaintiff for summary judgment of its claim against the 2nd, 3rd and 4th Defendants, I have allowed the application. These are the full reasons for my decision. 2

By an Agreement (Facilities Agreement dated 13.9.2012, Supplemental Facilities Agreement dated 30.12.2015 and various Letter of Offer/Supplemental Letters of Offer dated 10.7.2012, 16.11.2012,

3.6.2013, 14.9.2015, 26.10.2015 as executed by the 1st Defendant Borrower) made between the Plaintiff and the 1st Defendant Borrower (“the Agreement”), the Plaintiff did upon the request of the Defendants herein granted and availed the Facility specified below to the 1st Defendant Borrower upon the terms and conditions of the said Agreement. The Facility is a Term Loan Facility of RM21 million (restructuring and converting a Revolving Credit Facility and Multi – Option Line Facility previously availed).

In breach of the terms and conditions of the Agreement and despite the Plaintiff’s solicitors letter of demand dated 26.01.2018, the 1st Defendant Borrower failed to make prompt payment and settlement of the arrears sums failing due and payable on the said Term Loan Facility.

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days from the date of the said Demand make payment of the RM17,771,140.74 outstanding as at 30.4.2018 together with all continuing interest, costs and charges due and payable.

In breach of the terms and conditions of the Agreement, the 1st Defendant Borrower failed and neglected to promptly and fully pay the Indebtedness or at all.

By a Guarantee and Indemnity and Corporate Guarantee both dated 13.9.2012 (“the Guarantee”), the 2nd, 3rd, 4th and 5th Defendants (the 2nd Defendant and 4th Defendants are Directors of the 1st Defendant Borrower and 5th Defendant who signed and accepted the above lending documents) (collectively “the Defendants/Guarantors”) did in consideration of the Plaintiff inter alia making or continuing advances or giving credit or banking facility to the 1st Defendant Borrower as the Plaintiff thinks fit, the 2nd, 3rd, 4th and 5th Defendants unconditionally and irrevocably guaranteed inter alia prompt payment on demand of the Aggregate Indebtedness including all costs charges and expenses including legal costs on a solicitor client basis. 4

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In breach of the terms and conditions of the Guarantee and Agreement, the Defendants failed and neglected to promptly and pay the Indebtedness. Instead the said sums continue to be due, owing and payable on the Term Loan Facility together with all further interest, costs charges and expenses.

The sum of RM17,731,370.69 remains outstanding as at 4.9.2018 together with all continuing interest, costs and charges due and payable after taking into account the payments received since 30.4.2018 from the 5th Defendant’s Escrow Account.

The Plaintiff commenced action against the Defendants and applied for summary judgment against the 2nd, 3rd, 4th and 5th Defendants. 5

In a summary judgment application, it is established law that once an order 14 application is demonstrated to be properly filed, the burden shifts and rests on the Defendant who seeks to resist the application to raise a defence which shows a “bona fide triable issue”, in the sense of an issue which justifies and warrants the matter to be considered at a full trial.

This is in keeping with the requirements of Order 14 r 3 of the ROC 2012 which provides that unless the defendant satisfies the Court with respect to the claim, or part of a claim, to which the application relates that:

there is an issue or question in dispute which ought to be tried; or

there ought for some other reason to be a trial of that claim or part thereof,

The Court may give such judgment for the Plaintiff against the Defendant on that claim or part as may be just having regard to the nature of the remedy or relief claimed. 6

In the often quoted decision of the former Supreme Court in National Company For Foreign Trade v Kayu Raya Sdn Bhd [1984] 2 MLJ 300 it was authoritatively ruled as follows: “We think it appropriate to remind ourselves once again that in every application under Order 14 the first considerations are (1) whether the case comes within the Order and (b) whether the Plaintiff has satisfied the preliminary requirements for proceeding under Order 14. For the purposes of an application under Order 14 the preliminary requirements are:-

The defendant must have entered an appearance;

(ii) The statement of claim must have been served on the Defendant; and

(iii) The affidavit in support of the application must comply with the requirements of Rule 2 of Order 14. …If the plaintiff fails to satisfy either of these considerations, the summons may be dismissed. If however, these considerations are satisfied, the plaintiff will have established a prima facie case and he becomes entitled to judgment. The burden then shifts to the defendant to satisfy the Court why judgment should not be given against him.” 7

I would also like to refer to the leading judgment of the former Supreme Court on summary judgment applications in Bank Negara Malaysia v Mohd Ismail & Ors [1992] 1 MLJ 400 which held as follows: “In an application under O. 14, the court has to be satisfied on affidavit evidence that the defence has not only raised an issue but also that the said issue is triable. The determination of whether an issue is or is not triable depends on the facts or the law arising from each case as disclosed in the affidavit evidence before the court. A complete defence need not be shown. The defence set up need only show that there is a triable issue. Under an O 14 application, the duty of a judge does not end as soon as a fact is asserted by one party and denied or disputed by the other in an affidavit. Where such assertion, denial or dispute is equivocal, or lacking in precision or is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable in itself, then the judge has a duty to reject such assertion or denial, thereby rendering the issue not triable. Unless this principle is adhered to, a judge is in no position to exercise his discretion judicially in an O 14 application.”

After filing the action, the Plaintiff discovered that the 1st Defendant had applied for a Judicial Management Order which meant that the Plaintiff could not proceed with the action against the 1st Defendant. Although the Judicial Management Order was subsequently set aside by 8 the Court, there was a stay of execution order so the Plaintiff was only proceeding with the summary judgment application against the other Defendants. However, one day prior to the hearing, the 5th Defendant also filed an application for a Judicial Management Order so the Plaintiff could only proceed against the 2nd, 3rd and 4th Defendants as guarantors.

The first issue raised by the said Defendants was that the Plaintiff had reduced the sum claimed pursuant to sums withdrawn from the Escrow account before the filing of the Statement of Claim and yet the same was not pleaded. The said Defendants contended that this was improper and a change in substance from the Statement of Claim.

The Statement of Claim stated that the sum of RM17,771,140.74 was due and owing as at 30.4.2018. Payments had been made from the Escrow Account from 7.5.2018 to 10.7.2018. Although some of the payments were made prior to the date of the Statement of Claim, I am of the view that it is in order for the Plaintiff to deduct the payments made and no prejudice is caused to the said Defendants.

The authorities on the point confirm that a Plaintiff may proceed to ask summary judgment for the above latest outstandings. 9

Melewar Leisure Sdn Bhd v Danaharta Managers Sdn Bhd [2010] 6 MLJ 317 The Court of Appeal accepted the dicta in of the Supreme Court Krishnamurthy vs Malayan Finance Corporation Bhd “the difference between the amount claimed and the amount to be signed in the judgment was fully explained by the respondents to the effect that credit had to be given for the value of the cars which the respondents repossessed between the date of the writ and the date of the summons in chambers. There was n o need to amend the statement of claim for the making of the adjustment.” The Court rejected the Defendant’s challenge on alleged obligations not borne out by the contemporaneous documents and entered judgment against the Defendants.

The said Defendants also questioned the interest rate imposed by the Plaintiff. The said Defendants submitted that the Plaintiff is not entitled to claim interest at the rate of 3.5% per annum above the Plaintiff’s Base Lending Rate on daily rests. On this issue, it is clearly provided in the Supplemental Facilities Agreement that if any principal 10 amount of the Term Loan and/or interest is not paid by the due date for payment thereof, interest at the default rate of 3.5% per annum above the Plaintiff’s Base Lending Rate will be levied on such amount from the due date until the date of actual payment in full. It is also provided in clause 4.4 of the Facilities Agreement that interest shall accrue from day to day which entitles the Plaintiff to claim interest on daily rests.

I am accordingly of the view that the Plaintiff is entitled to claim interest at the rate of 3.5% per annum above the Plaintiff’s Base Lending Rate on daily rests against the said Defendants.

Another issue raised by the said Defendants is that the payment in settlement made on the Term Loan Facility vide the Defendants’ Escrow Account (albeit containing insufficient funds) absolves the Defendants’ obligation to satisfy all sums due and payable on the said Term Loan Facility.

In answer to this, I agree with the submission of the Plaintiff that regardless of the 5th Defendant’s Escrow Account provided to the Plaintiff as security, it is clear that the 1st Defendant’s obligation to make payment on sums falling due and payable remains and that existence of 11 such account does not absolve the 1st Defendant borrower and/or the guarantors of the obligation to make payment.

Section 9.1 of the Facilities Agreement provides inter alia that the Facilities in so far as they are not otherwise paid or discharged by the Borrower in accordance with the terms and/or conditions of the Agreement, shall be repaid by the Borrower on demand by the Bank and until such demand is made, the Borrower shall repay the Facilities together with any interest thereon at the Prevailing Rate and any other charges stated under this Agreement timeously without further notice from the Bank.

Section 2(j) of the Guarantee and Indemnity inter alia allows for the Bank to be at liberty to resort to any other means of payment without diminishing the liability of the Guarantors and the Bank may enforce this Guarantee and Indemnity for the payment of the balance due at any time so long as monies remain due from the Borrower to the Bank.

The Defendants were at all times duly alerted of the insufficient payments received from the Escrow Account and did not at any time contemporary to the lending and failure to pay instalments suggest that the Escrow Account absolved the 1st Defendant and/or its guarantors 12 from their repayment obligations and/or that the Plaintiff was negligent in “administering” the 5th Defendant’s Escrow Account.

Clearly the Defendant cannot now suggest that the Escrow Account absolves the Defendants or that the Plaintiff is guilty of “negligence” and “irregular administration” of the Escrow Account. The authorities accept that bare, unsubstantiated and unproven averments do not give rise to triable issues.

The said Defendants also submitted that this suit is premature because of the Judicial Management Order obtained by the 1st Defendant. Although that order has been set aside, there is a stay of execution obtained by the 1st Defendant. The said Defendants submitted that the monies due and owing to the Plaintiff are the subject matter of the Judicial Management application and therefore the said Defendants submitted that the application and the suit of the Plaintiff should be stayed pending the disposal of the Judicial Management appeal.

I am of the view that there is no merit in this submission. The Judicial Management Order only concerns the 1st Defendant and the Plaintiff is not proceeding against the 1st Defendant. There is nothing in 13 the Judicial Management Order that restrains the Plaintiff from commencing and proceedings the action against the guarantors pursuant to the Guarantee and Indemnity. There is no reason to stay the action against the guarantors.

In the premises, I am of the view that the said Defendants have not succeeded in showing any triable issue in answer to the Plaintiff’s claim and accordingly, I allowed the Plaintiff’s application for summary judgment with costs of RM5,000.00 subject to allocator. Wong Chee Lin Judicial Commissioner Kuala Lumpur High Court Commercial Division Dated: 14th September, 2018 14 Solicitors for the Plaintiff Sathya A/P Kumardas @ V G Kumar Das & Marina Binti Nasution Messrs Shearn Delamore & Co Advocates & Solicitors 7th Floor, Wisma Hamzah Kwong Hing No. 1, Leboh Ampang 50100 Kuala Lumpur Tel : 03-2027 2849 Fax: 03-2034 2763 Solicitors for the Defendants Ramesh A/L Kanapathy Messrs Chellam Wong Advocates & Solicitors Unit L-06-08, No. 2, Jalan Solaris