Hartajaya Benteng Timur AMR Jeli JV Sdn Bhd v United Overseas Bank (Malaysia) Bhd (WA-22NCC-337-08/2017)

This is an application by the Defendant United Overseas Bank (Malaysia) Bhd to strike out the claim of the Plaintiff pursuant to Order 18 r 19(1)(a), (b) or (d) of the Rules of Court 2012 (“ROC”). I had dismissed the application. These are the full reasons for my decision.

At all material times, the Plaintiff was a customer of the Defendant and maintained 2 accounts with the Defendant, namely current account No. 347-3011-3064 (“1st Account”) and current account No. 347-3011- 6799 (“2nd Account”). 2

By a letter dated 6.5.2005, the Plaintiff wrote to the Pengarah Kerjaraya JKR Negeri Sembilan and authorised the addressee to credit all contract proceeds from the contract referred to therein to the 1st Account maintained with the Defendant.

By various letters of mandate from the Plaintiff to the Defendant, the Plaintiff mandated the Defendant to deduct sums from the 1st Account in order to pay certain facilities granted to various companies who had been granted facilities by the Defendant. This included facilities granted to Benteng Timur Sdn Bhd and Saron Holdings Sdn Bhd.

The Plaintiff also authorised the Defendant to deduct the sum of RM200,000.00 from the proceeds of each progressive claim received and credited into the current account of Benteng Timur Sdn. Bhd to build up the sinking fund to reach an amount of RM4 million as mentioned in item 3.3 herein ( there is no item 3.3 in the letter).

The Plaintiff also authorised the Defendant to deduct the sum of RM10 million to be placed as fixed deposit in the name of Benteng Timur Sdn Bhd and charged to the Defendant to fully secure the PG facility, as mentioned in item 3.4 herein (there is no item 3.4 in the letter). 3

The Plaintiff alleged that between 2.8.2005 until 3.4.2012, the Defendant had transferred out a total sum of RM51,172,257.43 from the 1st Account. However, at the hearing Plaintiff counsel submitted that the last transaction on the 1st Account was in August 2010.

The Plaintiff alleged that in respect of the 2nd Account, in the month of August 2010, a total sum of RM1,842,139.47 was deposited into the said account and immediately withdrawn by the Defendant. In the months of December 2010 and January 2011, a total deposit of RM3,314,000.00 was deposited into the said account and all of it was withdrawn by the Defendant on 4.1.2011.

The Plaintiff also alleged that the Defendant had withdrawn all of the sinking fund of RM 4 million and the fixed deposit of RM10 million without its approval. The last withdrawal was made on or about 27.1.2010.

The Plaintiff‟s claim against the Defendant is for various accounts, and payments of sums withdrawn from its accounts.

In its defence, the Defendant admitted that it was a trustee of the monies in the said accounts maintained by the Plaintiff and that it was to 4 act with the monies in the said accounts as was mandated by the Plaintiff.

However, the Defendant contended that it had at all material times acted with the monies in the said accounts in the manner mandated by the Plaintiff.

The Defendant also relied on the defence of estoppel, as monthly statements of account had been forwarded to the Plaintiff and the Plaintiff was required therein to notify the Defendant within 60 days of the statement date failing which the entries and balances shown therein will be considered correct. The Plaintiff had never raised any queries with the Defendant as regards the statements of account forwarded to it.

The Defendant also relied on the defence of limitation. It can be seen that all the withdrawals were done more than 6 years prior to the filing of the action herein in August 2017.

The Defendant filed this application to strike out the Plaintiff‟s claim. 5

The parties had already submitted orally at a hearing before the previous Judge. After I took over the parties submitted orally before me again. After hearing oral submissions from the parties, I fixed the application for decision on 25.4.2018. One day prior to the 25.4.2018, the Defendant‟s solicitors filed a further affidavit and, on 25.4.2018, verbally applied for leave to admit the said affidavit. As the affidavit was filed too late in the day and as there was no acceptable explanation why the affidavit could not have been filed earlier, I refused to admit the said affidavit. The law on striking out

Order 18 r 19 ROC reads as follows: “19. Striking out pleadings and endorsements (O 18 r 19)

The Court may at any stage of the proceedings order to be struck out or amended any pleading or the endorsement, of any writ in the action, or anything in any pleading or in the endorsement, on the ground that-

it discloses no reasonable cause of action or defence, as the case may be; 6

it is scandalous, frivolous or vexatious;

it may prejudice, embarrass or delay the fair trial of the action; or

it is otherwise an abuse of the process of the Court, and may order the action to be stayed or dismissed or judgment to be entered accordingly, as the case may be.” [17] The leading authority on Order 18 r 19(1) is the Supreme Court decision in Bandar Builder Sdn Bhd v United Malayan Banking Corporation Bhd [1993] 3 MLJ 26 and in particular the following part of the judgment of Mohamed Dzaiddin SCJ ( as he then was):- “The principles upon which the Court acts in exercising its power under any of the four limbs of O. 18 r. 19(1) Rules of the High Court are well settled. It is only in plain and obvious cases that recourse should be had to the summary process under this rule (per Lindley M.R. in Hubbuck v. Wilkinson [1899] 1 QB 86, p. 91), and this summary procedure can only be adopted when it can be clearly seen that a claim or answer is on the face of it “obviously unsustainable” (Attorney-General of Duchy of Lancaster v. L. & N.W. Ry. Co. [1892] 3 Ch. 274, CA). It cannot be exercised by a minute examination of the documents and facts of the case, in order to see whether the party has a cause of action or a defence (Wenlock v. Moloney [1965] 1 WLR 1238; [1965] 2 All ER 871, CA). The authorities further show that if 7 there is a point of law which requires serious discussion, an objection should be taken on the pleadings and the point set down for argument under O. 33 r. 3 (which is in parimateria with our O. 33 r. 2 Rules of the High Court) (Hubbuck v. Wilkinson) (supra). The court must be satisfied that there is no reasonable cause of action or that the claims are frivolous or vexatious or that the defences raised are not arguable.” Findings of this Court Compliance with mandate

Although the Defendant has exhibited various letters of authorisation from the Plaintiff, there were no letters authorising the Defendant to make any deductions from the 2nd Account. Defendant counsel explained at the hearing that the sums deposited into the 2nd Account were from the 1st Account and therefore the Defendant was entitled to utilise those sums deposited into the 2nd Account in partially settling the indebtedness of Benteng Timur Sdn Bhd and Saron Holdings Sdn Bhd. However, it is stated in the various letters from the Plaintiff to the Defendant that surplus sums after paying the amounts authorised to be deducted from the 1st Account should be paid into the 2nd Account. Presumably only surplus sums should be deposited into the 2nd Account. The Defendant has not explained why sums were deposited from the 1st 8 Account into the 2nd Account and then withdrawn as if they had been in the 1st Account.

There was also no letter stating what the Defendant‟s rights were in respect of the sinking fund and the fixed deposit. The Defendant contends that it is entitled to utilise the sums in the sinking fund and the fixed deposit in settling the indebtedness of Benteng Timur Sdn Bhd and Saron Holding Sdn Bhd. The letters of authorisation in respect of Saron Holding Sdn Bhd only mandated the Defendant to settle the overdues/excess of Saron Holding Sdn Bhd. The Defendant counsel submitted that at the relevant dates that the mandates were given, all the outstanding sums were already due from Saron Holding Sdn Bhd. However, a reading of the pleadings exhibited show that the facilities granted to Saron Holding Sdn Bhd were only recalled a few years after the date of the mandate so at the date the mandates were given, it cannot be said that all the facilities granted to Saron Holding Sdn Bhd were already due.

I find that it is not plain and obvious that the Defendant had acted within its mandate and whether the Defendant had so acted should be 9 decided at trial. The Plaintiff‟s claim should not be struck out on the basis that the Defendant had complied with the Plaintiff‟s mandate.

On the issue of estoppel, the Plaintiff relied on the Privy Council case of Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank Ltd and others [1986] AC 80 and the Supreme Court case of United Asian Bank Bhd v Tai Soon Heng Construction Sdn Bhd [1993]1 MLJ 182

In the Tai Hing case, 3 banks were sued for paying out on forged cheques. One of the defences relied by the banks was estoppel. One of the bank‟s rules provided that “A monthly statement for each account will be sent by the bank to the depositor by post or messenger and the balance shown therein may be deemed to be correct by the bank if the depositor does not notify the Bank in writing of any error therein within ten days after the sending of such statement.” 10

In the case of another bank, clause 10 of the agreement provided: “The Bank‟s statement of my/our account will be confirmed by me /us without delay. In case of absence of such confirmation within a fortnight, the bank may take the said statement as approved by me/us.”

In the case of the third bank, Rule 13 provided: A statement of the customer‟s account will be rendered once a month. Customers are desired: (1) to examine all entries in the statement of account and to report at once to the bank any error found therein. (2) to return the confirmation slip duly signed. In the absence of any objection to the statement within seven days after its receipt by the customer, the account shall be deemed to have been confirmed.”

The bank never did send any confirmation slips to the customer.

It was held that in the absence of express agreement to the contrary, the duty of care owed by a customer to his bank in the operation of his current account was limited to a duty to refrain from drawing a cheque in such manner as to facilitate fraud or forgery and a duty to inform the bank of any unauthorised cheques purportedly drawn on the account as soon as he, the customer, became aware of it. The 11 customer was not under a duty to take reasonable precautions in the management of his business with the bank to prevent forged cheques being presented for payment nor was he under a duty to check his periodic bank statements so as to enable him to notify the bank of any unauthorised debit items because such wider duties were not necessary incidents of the bank/customer relationship since the business of banking was not the business of the customer but that of the bank.

As to the effect of the express contractual terms, the Privy Council held that in no case do they constitute what has come to be called “conclusive evidence clauses”. Their terms are not such as to bring home to the customer either the „ intended importance of the inspection he is being expressly or impliedly invited to make‟ or that they are intended to have conclusive effect against him if he raises no query, or fails to raise a query in time, on his bank statements. It was said that if banks wish to impose on their customers an express obligation to examine their monthly statements and to make those statements, in the absence of query, unchallengeable by the customer after expiry of a time limit, the burden of the obligation and the sanction imposed must be brought home to the customer. The Privy Council was of the view that the provisions set out above do not meet this undoubtedly rigorous test. 12

In the United Asian Bank case, which was also a case on forged cheques, one of the bank‟s defences was estoppel. It is alleged that the respondent was estopped from claiming that the bank was liable because the bank had sent periodic statements of account which carried a notation to the effect that unless „ the appellant was notified of any discrepancy within 14 days the balances shown in the statements will be considered correct. Further, the bank had also sent confirmation slips which the respondent had acknowledged as accurately reflecting its bank balance.

The Supreme Court relied on the Tai Hing case and held against the bank.

In Boustead, the facts are as follows: “The appellant bought goods on credit from Chemitrade Sdn Bhd (“Chemitrade”). Chemitrade then entered into a factoring agreement with the respondent under which the respondent agreed to factor Chemitrade‟s book debts, i.e. the debts owed by the appellant to Chemitrade were assigned to the respondent. Notice of the assignment was given to the respondent. Chemitrade gave the respondent copies of the invoices in respect of each sale and delivery of goods to the appellant. The respondent then stamped the invoices with the indorsement that any objection was to be reported to the 13 respondent within 14 days of its receipt, („the indorsement‟) and sent them to the appellant. The appellant did not complain about any of the invoices within the 14-day period nor challenge the respondent‟s right to impose the 14-day period by way of the indorsement. The appellant paid the respondent on several of the invoices but later refused to make payment on 20 invoices (“the invoices”). The appellant argued that nothing was payable on the invoices due to a statement on the appellant‟s purchase orders that the amounts stated were to be offset against the cost of stocks returned to Chemitrade („the statement‟). The respondent denied knowledge of the statement and argued that since the appellant had not protested about the validity of the indorsement, it was entitled to assume the appellant had accepted it. The trial judge found for the respondent. The appellant appealed to the Federal Court on the grounds that the respondent, as assignee, could not unilaterally impose the 14-day limit, and that the agreement was not a valid assignment. The appellant also argued that the respondent‟s argument was in essence an estoppels, but since it was not pleaded, the trial judge erred in relying on it. On the other hand, the respondent cross-appealed against the refusal of the trial judge to enter judgment in its favour on two other items claimed for, which amounted to RM95,000.00.”

The Federal Court held: “(1) a reasonable man in the respondent‟s position would be entitled to assume that the appellant had agreement to the imposition of the 14- day period as it did not merely remain silent by not objecting to it but 14 had in fact made payment on some invoices. The appellant should not be allowed to question the validity of the indorsement after seven months as it would be unconscionable and inequitable for it to do so.

the doctrine of estoppels is a flexible principle by which justice is done according to the circumstances. It is a doctrine of wide utility and has been resorted to in varying fact pattern to achieve justice. The maxim „estoppel may be used as a shield but not a sword‟ does not limit the doctrine of estoppels to defendants alone. Plaintiffs too may have recourse to it. Estoppel may assist a plaintiff in enforcing a cause of action by preventing a defendant from denying the existence of some fact which would destroy the cause of action.

there was no evidence to suggest that the respondent had knowledge of the statement and therefore, it was entitled to assume that the invoices were good for payment because the appellant had not informed it otherwise. It was unjust for the appellant to suggest that the respondent ought not to have paid Chemitrade on the invoices and the respondent should therefore be estopped from asserting that nothing was due on the invoices.

there were documents to suggest that the appellant, Chemitrade and the respondent had proceeded upon the assumption that the factoring agreement was a valid assignment. It would be unjust and unconscionable to permit the appellant to now challenge the meaning which the parties gave to the document. 15

even though estoppels was not pleaded as required under O 18 r 7(1) and 8(1) of the Rules of the High Court 1980, the material facts giving rise to the estoppels were sufficiently pleaded without actually using the term „estopped‟. Furthermore, considerable evidence on the point was led at the trial by the respondent without objection from the appellant.

a court may permit a litigant to argue an unpleaded estoppel if it is in the interests of justice to do so. It is a matter within the discretion of the judge who must have due regard to all the circumstances of the case, including any prejudice that may be caused by the affected party being taken by surprise. Nevertheless, such departures should rarely be permitted, for otherwise, the rule that a party is bound by its pleadings will be rendered meaningless.

the respondent as assignee could not place itself in a better position than the assignor. The respondent took the assignment subject to all rights of set off which the appellant as debtor had against the assignor. Therefore, the two sums claimed by the respondent, which the appellant was entitled to set off against moneys due from the appellant to Chemitrade, were not allowed.”

The Federal Court said by way of obiter the following: “(1) the doctrine applies to both representations of fact and of law. 16

all that a litigant who invokes the doctrine of estoppels must do is to show that he was so influenced by the encouragement or representation that it would be unconscionable for the representor to enforce his strict legal rights. There is no need to show that he was induced to act in a particular way.

the detriment element does not form part of the doctrine of estoppels. All that need be shown is that it would be unjust to permit the representor or encourager to insist upon his strict legal rights. A judicial arbiter would be entitled to have regard to the conduct of the litigant raising the estoppels. This may include the determination whether the particular litigant had altered his position, although such alteration need not be to his detriment.”

The Federal Court referred to Tai Hing and United Asian Bank and said that it is quite clear that the Privy Council in Tai Hing was considering a case of estoppel by representation in circumstances in which there was no duty to speak and the plaintiff had merely remained silent. It was not a case where the customer had encouraged the bank to believe that the cheques were not forged. Had the evidence pointed in that direction, the Federal Court said that it had no doubt that the Privy Council would have arrived at the opposite conclusion upon the question of estoppel. 17

The Federal Court in Boustead also said this: “Thus far we have dealt with the operation of the doctrine in the context of there having been offered some active encouragement by the party sought to be estopped. But we do not apprehend the law to be different when the encouragement comes in the form of silence. The true principle in such cases is to be found in the following passage in the judgment of Thesiger LJ in De Bussche v Alt (1878) 8 Ch D 286 at p 314: If a person having a right, and seeing another person about to commit, or in the course of committing an act infringing upon that right, stands by in such a manner as really to induce the person committing the act, and who might otherwise have abstained from it, to believe that he assents to its being committed, he cannot afterwards be heard to complain of the act. In MAA Holdings Sdn Bhd & Anor v Ng Siew Wah & Ors [1986] 1 MLJ 170, VC George J (now JCA) was faced with a case where the defendant had remained silent while the purchaser had paid moneys to him. Of the defendant‟s silence, that learned judge said at p 176: Having silently stood by and allowed the purchasers to find and pay the balance of the purchase price and then wait for another 38 days before insisting on compliance of the requirement to apply to the FIC although 18 the parties had expressly agreed that whether the FIC approval was obtained or not was not to have any effect on the contract is I think the height of inequity. Robert Goff J stated the principle of this aspect of equitable estoppels in Societe Italo-Beige v Palm Oils [1982] 1 All ER 19 at pp 26-27 thus: „The fundamental principle is that stated by Lord Cairns LC, viz, that the representor will not be allowed to enforce his rights where it would be inequitable having regard to the dealings which have thus taken place between the parties. To establish such inequity, it is not necessary to show detriment; indeed, the representee may have benefited from the representation and yet it may be inequitable, at least without reasonable notice, for the representor to enforce his legal rights. Take the facts of Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130; [1956] 1 All ER 256, the case in which Denning J breathed new life into the doctrine of equitable estoppels. The representation was by a lessor to the effect that he would be content to accept a reduced rent. In such a case, although the lessee has benefited from the reduction in rent, it may well be inequitable for the lessor to insist on his legal right to the unpaid rent, because the lessee has conducted his affairs on the basis that he would only have to pay rent at the lower rate; and a court might well think it right to conclude that only after reasonable notice could the lessor return to charging rent at the higher rate specified in the lease. Furthermore it would be open to the court, in any particular case, to infer from the 19 circumstances of the case that the representee must have conducted his affairs in such a way that it would be inequitable for the representor to enforce his rights, or to do so without reasonable notice.‟ Lord Denning in WJ Alan & Co Ltd v El Nasr Export and Import Co [1972] 2 QB 189 said: „If one party by his conduct, leads another to believe that the strict rights arising under the contract will not be insisted upon, intending that the other should act on that belief, and he does act on it, then the first party will not afterwards be allowed to insist on strict legal rights when it would be inequitable for him to do so.”

In this case, it is not in dispute that on a monthly basis, statements of account in respect of the 1st and 2nd Accounts have been forwarded to the Plaintiff and the Plaintiff did not raise any query thereon. However, the Plaintiff says that it was not until 2014 when reading one of the Defendant‟s affidavits filed in other proceedings that the Plaintiff first came to know that the withdrawals were not proper. This is despite the notation in each statement of account that the entries and balances shown therein will be considered correct unless the Plaintiff notified the Defendant of any discrepancies within 60 days from the statement date. 20

The issue is whether I should follow United Asian Bank case which is more on point with the facts of the present case or the Boustead case.

Even if the Plaintiff is estopped from querying the items in the statements of accounts of the 1st and 2nd Accounts, there are still the withdrawal from the sinking fund and fixed deposit in respect of which no statements of account were given to the Plaintiff so the Plaintiff cannot be estopped from querying the withdrawals from the sinking fund and the fixed deposit.

It is my finding that it is not plain and obvious that the Defendant can rely on the defence of estoppel as a ground to strike out the Plaintiff‟s claim. 21

On the issue of limitation, where the defence of limitation is pleaded as a defence, it cannot be said that the statement of claim does not disclose a reasonable cause of action. Accordingly, the reliance upon Order 18 r 19 (1)(a) ROC must fail (see Ronex Properties v John Laing Construction Ltd and Others [1983] 1 QB 398). However, the Defendant can rely on the other limbs of Order 18 r 19.

If one takes the limitation period for a claim for recovery of the monies withdrawn as being 6 years from the date of the withdrawal and since this Suit was filed in August 2017, all the impugned withdrawals would have been made more than 6 years prior to August 2017. Accordingly the claim for the recovery of money should be time barred.

However, there is an issue as to when the action is deemed to have been brought for the purpose of limitation.

The Plaintiff had previously filed an identical action against the Defendant in Kuala Lumpur High Court Suit No. 22NCC-425-12/2015 (Suit 425) and discontinued Suit 425. In its solicitors‟ letter dated 22

14.4.2016 enclosing the Notice of Discontinuance the Plaintiff said that “the parties‟ position with regard to limitation will be preserved as on the date Suit was filed in the event the suits are filed afresh.”

There is no response from the Defendant or its solicitors exhibited before me.

Suit No. 425 was filed in December 2015. There is accordingly an issue to be tried whether the parties had agreed that if a fresh suit were to be filed against the Defendant, the action should be deemed to have been filed in December 2015 in which case a part of the Plaintiff‟s claim cannot be said to be time barred.

The Plaintiff also relied on section 22(1) of the Limitation Act 1953 to contend that no limitation period applies to its action. Section 22(1) provides as follows: “Section 22. Limitation of actions in respect of trust property.

No period of limitation prescribed by this Act shall apply to an action by a beneficiary under a trust, being an action –

in respect of any fraud or fraudulent breach of trust to which the trustee was a party or privy; or 23

to recover from the trustee trust property or the proceeds thereof in the possession of the trustee, or previously received by the trustee and converted to his use.”

The Plaintiff has not pleaded a cause of action for fraudulent breach of trust. However, as to the second limb of section 22(1), whether the claim is against a trustee for having converted trust property to its use, I am of the view that is an issue that should be decided in a trial.

Accordingly, I am of the view that it is not plain and obvious that the Plaintiff‟s action is barred by limitation.

The Plaintiff‟s action is also for an account to be given by the Defendant. The Defendant alleges that it is not an accounting party because there is no fiduciary duty owing to the Plaintiff. In any event there is no money owing to the Plaintiff (see Alcatel-Lucent (M) Sdn Bhd (formerly known as Alcatel Network Systems (M) Sdn Bhd v Solid Investments Ltd and another appeal [2012] 4 MLJ 72.) 24

In Alcatel, the Court of Appeal held that for there to be a complete cause of action for taking of accounts, the plaintiff has to plead and prove that the defendant must be liable to pay a certain sum of monies to the plaintiff and the defendant is an accounting party to the plaintiff.

In Baboo Janokey Doss v Damoder Das [1843] Moore Ind App 175, Dr Lushington of the Privy Council ruled: “Again , it must be remembered that the decree cannot stand unless it be first clearly proved that the appellants are, if anything should be found due to the respondents arising from the acts and dealings of ramchund, liable to answer that demand; we cannot make a decree, ordering them to account, without first determining that they are liable to pay if anything be found due. A decree for an account is not, as appears to have been assumed, a mere direction to inquire and report. It proceeds, and must always proceed, upon the assumption that the party calling for it is entitled to the sum found due. It is a decree affirming his rights, only leaving it to be inquired into, how much is due to him from the party accounting.”

However, the Defendant has admitted in its Defence that it is a trustee for the Plaintiff. Accordingly it is not plain and obvious that the 25 Defendant is not an accounting party. As for whether the claim for an account is time barred, section 6(2) of the Limitation Act 1953 provides as follows: “6. Limitation of actions of contract and tort and certain other actions.

An action for an account shall not be brought in respect of any matter which arose more than six years before the commencement of the action.”

I have already found that it is not plain and obvious whether the action herein shall be deemed to have commenced on the filing of Suit 425 in December 2015. If that is the case, then part of the action might not be time barred. Although a large part of the withdrawals were affected more than 6 years prior to December 2015 some of them were affected later.

Accordingly it is also not plain and obvious that the claim for an account is wholly time barred.

In the circumstances of the case, based on the evidence before me, this is not a plain and obvious case where the whole of the Plaintiff‟s 26 claim should be struck out. I accordingly dismiss the application to strike out the Plaintiff‟s claim with costs of RM5,000.00 subject to allocator. Wong Chee Lin Judicial Commissioner Kuala Lumpur High Court Commercial Division Dated: 19th April 2018 27 Solicitors for the Plaintiff T Gunaseelan, Dennis Xavier, Keshrinjeet Singh & Vinod Messrs Gunaseelan & Associates Advocates & Solicitors Unit B-2-1, VIVA, No. 378 Jalan Ipoh 51200 Kuala Lumpur Tel : 03-4045 3421 / 4045 3091 Fax: 03-4045 3422 Solicitors for the Defendant Ng Sai Yeang & Wong Chee Chien Messrs Raja, Darryl & Loh Advocates & Solicitors Tingkat 18, Wisma Sime Darby