Ikhwan Nasir Bin Abdul Rahman v Maybank Islamic Berhad (WA-12AM-5-03/2024)

AND Papa Brands Sdn Bhd [Company No.: 201801042322 (1304354-D)]

Retinue Consulting Sdn Bhd [Company No.: 201601040860 (1211801-K)]

Abdul Qayyum Bin Nur Zakri [NRIC No. 880726-43-5571]

Muhammad Zulaizie Bin Mohammad Zu [NRIC No.: 910913-03-5105]

Ikhwan Nasir Bin Abdul Rahiman [NRIC No.: 881202-05-5337] …DEFENDANTS GROUNDS OF JUDGMENT INTRODUCTION [1] This interlocutory appeal arises from the decision of the Learned Sessions Court Judge (“LSCJ”) delivered on 11 March 2024. The appellant, being the fifth defendant (hereafter referred to as ‘D5’), seeks to overturn the final judgment entered against him pursuant to the plaintiff’s application for summary judgment. Central to D5’s contention is the assertion that the LSCJ erred in granting summary judgment despite the existence of triable issues highlighted during the application. Conversely, the plaintiff maintains that the judgment was properly entered, contending that the circumstances of the case justified a swift resolution and the reliefs granted. For clarity and consistency, the parties in this appeal shall be referred to as they were in the court below. BACKGROUND [2] The first defendant (“D1”) was the customer of the plaintiff bank, who had applied for the financing of its wholesale food distributor business. Based on an offer letter dated 14 June 2021 (“Offer Letter”), the plaintiff granted D1 with a Commodity Murabahah Term Financing-i for the sum of RM500,000.00 for the purpose of working capital requirements (“CMTF-i”). [3] The commitment of the parties to the facilities was further evidenced by the concomitant execution of the following documents:

Corporate Guarantee executed by the second defendant (“D2”) on 14 July 2021;

Personal Guarantee executed by the third, fourth and fifth defendants (“D3”, “D4” & “D5”) on 14 July 2021; and

Asset Sale Agreement executed by D1 on 29 June 2021 evidencing the Bank’s selling price of RM732,447.90. [4] D1 failed to adhere to its obligations to make monthly installments wherein the plaintiff had vide letter dated 28 June 2023 terminated the facility and demanded the sum of RM553,140.04 as at 31 May 2023 (See Exhibit A-5, pages 146-150 of Appeal Records, Part C). [5] A formal demand was made upon D2, D3, D4 and D5, invoking the guarantees arising from the non-payment of D1’s obligations. This demand was communicated through a letters dated 28 June 2023 (see Exhibit A-6, pages 151-159, Appeal Records, Part C). [6] The plaintiff thereafter commenced legal action against the defendants at the Kuala Lumpur Sessions Court in Suit No. WA-B52M- 1329-07/2023 by filing a Writ of Summons and Statement of Claim on 18 July 2023. (See pages 12 – 16, Appeal Records, Part A). [7] Based on a Certificate of Indebtedness issued by the plaintiff’s officers, the sum of RM553,140.04 was outstanding and payable by the defendants as at 31 May 2023. The plaintiff also claims for compensation (“ta’widh”) at a rate of 1.00% per annum on the outstanding sum commencing 1 June 2023 till full 31 August 2026 (maturity date); and the current overnight daily rate of the Islamic Interbank Money Market (“IIMM-rate”) on the entire outstanding amount from expiry of maturity date till realization. (See Exhibit A-8 at pages 163-165, Appeal Records, Part C). [8] A judgment in default of appearance was entered against D1, D2, D3 and D4 on 25 August 2023. On 22 March 2024, the plaintiff applied for summary judgment under Order 14 rule 1 of the Rules of Court 2012 (“the Rules”) against D5 wherein the Sessions Court allowed the said summary judgment application on 11 March 2024. The grounds of the LSCJ can be found at pages 6 to 22 of the Supplementary Appeal Record. [9] Dissatisfied with the Sessions Court's aforesaid decision, D5 lodged an appeal via Notice of Appeal dated 22 March 2024 in Enclosure 1. (See pages 10 – 11, Appeal Records, Part A). [10] Having carefully considered the Appeal Records as well as the arguments advanced by both parties and weighed the applicable legal principles, I had on 26 August 2024 dismissed D5’s appeal with costs of RM3,000.00. This, therefore, is my judgment. ISSUES [11] The central issue in this appeal is whether D5 has successfully established the existence of a triable issue that would necessitate the arguments raised being resolved through a full trial. This overarching question is further delineated into the following sub-issues:

D5’s Knowledge and Involvement in the Guarantee: Whether D5 was aware of and actively involved in the execution of the Guarantee and Indemnity, particularly in light of his cessation of active management of D1;

(ii) Alleged Discrepancy Between the Offer Letter and the Guarantee: Whether any inconsistencies between the terms of the Offer Letter and the Guarantee and Indemnity impact the enforceability of D5’s obligations under the Guarantee;

(iii) Consultation with Other Defendants to Negate D5’s Liability: Whether D5’s discussions or lack of consultation with other defendants can serve to mitigate or negate his liability under the Guarantee and Indemnity; and

(iv) Whether the Plaintiff's Claim is Substantiated by the Certificate of Indebtedness: Whether the Certificate of Indebtedness presented by the plaintiff is sufficient to substantiate the claim, and whether any manifest error within the certificate affects its evidentiary value. COUNSEL’S CONTENTIONS [12] Learned counsel for D5, Munira Binti Hasnim contends that the LSCJ erred in allowing the plaintiff’s application for summary judgment considering the presence of numerous raised issues that merit a trial. [13] In pointing out the errors of the LSCJ, D5 raised the following issues in his Memorandum of Appeal:

the LSCJ erred in concluding that there is no action taken by D5 to refer to the other defendants in order to resolve the claim initiated by the plaintiff;

the LSCJ erred in failing to consider that D5 was unable to verify the offer letter as he was not given a copy of the same, and the fact that the offer letter is different from the guarantee given;

the LSCJ erred in failing to consider that D5 was no longer in active management of D1 since 6 August 2021;

the LSCJ erred in finding that D5 had knowledge of the said guarantee;

the LSCJ erred in finding that the discussion D5 had with other defendants regarding indemnity given to D5 is irrelevant to the plaintiff’s claim; and

the LSCJ erred in failing to consider that D5 had no knowledge of the Certificate of Indebtedness and were never contacted by the plaintiff pertaining to the said facility. [14] The learned counsel for the plaintiff, Suraya Binti Sanusi, contends that the LSCJ made a correct decision in allowing the plaintiff’s application for Summary Judgment. It is asserted that the plaintiff has fulfilled all three requirements for Order 14 rule 1 of the Rules, wherein the defendants have failed to satisfy the Sessions Court as to why judgment should not have been given against them. [15] Furthermore, relying on the case of Orix Credit Malaysia Sdn Bhd v M/S Belquip Sdn Bhd & Ors [2007] 9 CLJ 15 (HC), the learned counsel for the plaintiff argues that D5 is essentially estopped from arguing the issue of indemnity and/or agreed settlement made between him and other defendants. This is so as the judgment in default obtained formed a conclusive proof of liability as well as quantum against D5. FINDINGS AND DECISION [16] The appropriate approach for this court in determining whether to allow or dismiss an appeal against the lower court's decision on summary judgment would be by way of re-hearing. In Ruslan Baharin Industries Sdn Bhd & Ors v Kerajaan Malaysia [2010] 7 CLJ 713 (CA), Suriyadi Halim Omar JCA (as he then was) held as follows: “[21] In United Malayan Banking Corporation Berhad v Pembinaan KSY Sdn Bhd & 2 Ors [1993] 3 CLJ 612 likewise the Supreme Court had occasion to discuss the principles of interference by an appellate court in an O.14 appeal. Mohamed Dzaiddin, SCJ in dismissing the appeal held: The approach to be taken by an appellate court in Order 14 appeal has been settled. The appellate court should not regard the appeal as reviewing the exercise of the judge’s discretion but approach the appeal as a rehearing. This principle was accepted by this court in Koh Siak Poo v Perkayuan OKS Sdn Bhd & Ors [1989] 2 CLJ 1 (Rep); [1989] 1 CLJ 30; [1989] 3 MLJ 164, following Malayan Insurance (M) Sdn Bhd v Asia Hotel Sdn Bhd [1987] CLJ Rep 182; [1987] 1 CLJ 246; [1984] 2 MLJ 300 and European Asia Bank v Punjab & Sind Bank (No 2) (CA) [1983] 1 WLR 643; [1983] 2 All ER 508, 516.” Put simply, the summary judgment application is in effect a re-heard afresh.” [17] As to the process of summary judgment, it is designed to grant judgment at an early stage of the litigation process under the appropriate circumstances in order to save time and costs associated with a full trial. The Court's power to grant summary judgment can be found in Order 14 rule 1 and 3 of the Rules. [18] Order 14 rule 1 of the Rules read as follows:-

Where in an action to which this rule applies a statement of claim has been served on a defendant and that defendant has entered an appearance in the action, the plaintiff may, on the ground that defendant has no defence to a claim included in the writ, or to a particular part of such a claim, or has no defence to such a claim or part except as to the amount of any damages claimed, apply to the court for judgment against that defendant.

Subject to paragraph (3), this rule applies to every action begun by writ other than one which includes —

a claim by the plaintiff for libel, slander, malicious prosecution, false imprisonment, seduction or breach of promise of marriage; or

a claim by the plaintiff based on an allegation of fraud.

This order shall not apply to an action to which O 81 applies. [Emphasis added] [19] The law governing summary judgment is trite and had been succinctly stated by Hashim Yeop Sani SCJ in Malayan Insurance (M) Sdn Bhd v Asia Hotel Sdn Bhd [1987] 2 MLJ 183 (SC) at page 183: "(4) The underlying philosophy in the Order 14 provision is to prevent a plaintiff clearly entitled to the money from being delayed his judgment where there is no fairly arguable defence to the claim. The provision should only be applied to cases where there is no reasonable doubt that the plaintiff is entitled to the judgment. Order 14 is not intended to shut out the defendant. The jurisdiction should only be exercised in very clear cases". [20] Upon shifting of this burden in Order 14 rule 1(1), Order 14 rule 3(1) requires the defendant satisfy the following:

Unless on the hearing of an application under rule 1 either the Court dismisses the application or the defendant satisfies the Court with respect to the claim, or the part of a claim, to which the application relates that there is an issue or question in dispute which ought to be tried or that there ought for some other reason to be a trial of that claim or part, the Court may give such judgment for the plaintiff against that defendant on that claim or part as may be just having regard to the nature of the remedy or relief claimed.

The Court may by order, and subject to such conditions, if any, as may be just, stay the execution of any judgment given against a defendant under this rule until after the trial of any counterclaim made or raised by the defendant in the action. (Emphasis added) [21] The burden which is shifted to the defendant is a tactical one. This is succinctly described in the Singapore High Court case of Ritzland Investment Pte Ltd v Grace Management & Consultancy Services Pte Ltd [2014] 2 SLR 1342 (HC) at paras [45] to [47], wherein Vinodh Coomaraswamy J held as follows: “[45] I should point out, however, that the burden which shifts to the defendant upon a prima facie case being shown is the burden on the application or a tactical burden, not the legal or even an evidential burden of proof. It would be anomalous for a defendant to bear the legal burden of proof on a summary judgment application when at trial, that burden explicitly rests on the plaintiff. And the fact that it is for the plaintiff first to show a prima facie case with knowledge of and in light of the defences raised makes clear that no evidential burden rests on the plaintiff. It is no part of the policy underlying summary judgment to reverse a plaintiff’s burden of proof. [46] The policy underlying summary judgment is twofold and comprises a private and a public element. First, summary judgment enables a plaintiff with a strong claim to secure a judgment in a period of time and at an expense which is proportionate to the dispute. Second, summary judgment proceedings enables the court to conserve scarce public resources where there is no reasonable or fair probability that deploying those resources in a full trial would make a difference to the just determination of the dispute. [47] Thus, although it is useful shorthand to speak in terms of the burden of proof shifting to the defendant, the fact remains that the court will grant summary judgment if the plaintiff shows after all the evidence is in that the there is no fair or reasonable probability that the defendant has a real or bona fide defence and (only if the defendant raises this point) that there is no other reason why there ought to be a trial.” [Emphasis added] [22] In Bank Negara Malaysia v Mohd Ismail & Ors [1992] 1 MLJ 400 (FC), the Federal Court held that where an assertion, denial or dispute is equivocal, or lacking precision or is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable in itself, then such assertion or denial will be rejected, thereby rendering the issue not triable. In other words, leave to defend will not be granted based upon "mere assertions" by defendant; instead, the Court will look at the whole situation critically to examine whether the defence is credible. [23] In the Privy Council case of Eng Mee Yong & Ors v Letchumanan [1979] 2 MLJ 212 (PC), at page 217, Lord Diplock explained it as thus: "Although in the normal way it is not appropriate for a judge to attempt to resolve conflicts of evidence on affidavit, this does not mean that he is bound to accept uncritically, as raising a dispute of fact which calls for further investigation, every statement on an affidavit however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself it may be. In making such order on the application as 'he may think just' the judge is vested with a discretion which he must exercise judicially. It is for him to determine in the first instance whether statements contained in affidavits that are relied upon as raising a conflict of evidence upon a relevant fact have sufficient prima facie plausibility to merit further investigation as to their truth". [24] Having outlined the foregoing principles, we now turn to consider the issues raised by the defendants in opposition to the plaintiff's application for summary judgment. The 6 issues raised in the Memorandum of Appeal is addressed in the following 4 sub-issues:

D5’s Knowledge and Involvement in the Guarantee [25] Based on D5’s contention, he had no knowledge of the Guarantee and Indemnity, as he ceased active management of D1 in early August

Based on this argument, D5 contends that his absence from D1’s operations absolves him of liability under the guarantee. [26] First, on the issue of lack of knowledge, I am in agreement with the submission of the learned counsel of the plaintiff and the reliance on the case of Polygram Records Sdn Bhd v The Search & Anor [1994] 3 MLJ 127 (HC) wherein Visu Sinnadurai J held as follows: - “A party who signs a written contract is bound by the terms of the contract, except in the limited cases where fraud, undue influence or misrepresentation may be established. Therefore, the argument by the group that the first contract was not binding on them since they did not ‘agree to the terms’ could be dismissed summarily.” [27] The case of National Provincial Bank Ltd v Ainsworth [1965] AC 1175 (HL) establishes the principle that contractual obligations, including guarantees, bind the parties who sign them, regardless of subsequent personal circumstances. A guarantor cannot escape liability by claiming ignorance of the terms, as the execution of the guarantee implies understanding and acceptance. [28] In Trade Indemnity Co Ltd v Workington Harbour and Dock Board [1937] AC 1 (HL), it was established that a guarantor’s knowledge of the terms is presumed unless there is compelling evidence of misrepresentation or fraud. In the present case, apart from D5’s resignation, there is no indication that D5 was coerced or misled into signing the guarantee. Notably, no police report or legal action was initiated to address any alleged fraud or misrepresentation. In the absence of such evidence, this defense appears to be no more than an afterthought. [29] Secondly, regarding the issue of D5’s resignation, it is pertinent to note that the terms of the Guarantee and Indemnity explicitly address the liability of guarantors, providing that such liability endures notwithstanding D5’s resignation as a director of D1. This is encapsulated in Clause 13, which stipulates as follows: “13. This Guarantee continues to be valid and binding on me/us despite any change (by merger, reconstruction, consolidation or amalgamation, or by retirement, expulsion, death or admission of any partner, or any other change) in the Customer or in me/us.” [30] Applying the above authorities as well as Clause 13 within the Guarantee and Indemnity, I am of the considered view that D5’s cessation of active management in August 2021 does not absolve him of his obligations under the Guarantee and Indemnity. The LSCJ rightly found that the Offer Letter and the Guarantee and Indemnity were executed prior to D5’s resignation. Furthermore, evidence indicates that D5 was fully aware of the existence of these documents, as reflected in his subsequent communications seeking to extricate himself from liability under the guarantee. Accordingly, I conclude that the Guarantee and Indemnity remain binding upon D5, notwithstanding his later disengagement from D1’s management.

(ii) Alleged Discrepancy Between the Offer Letter and the Guarantee [31] On this issue, D5 argues that the Offer Letter, which he was not provided, differs materially from the Guarantee and Indemnity, creating ambiguity regarding his obligations. He basically contends that this discrepancy undermines the enforceability of the guarantee. [32] It is trite law that guarantees are generally construed independently of other documents unless expressly incorporated. A guarantee is basically a promise by one person (‘surety’ or ‘guarantor’) to answer for the default of another (‘principal debtor’) to a third person (‘creditor’). Section 79 of the Contracts Act 1950 defines it a “a contract to perform the promise, or discharge the liability, of a third person in case of his default”. The essential characteristic of a guarantee is that the guarantor’s liability is collateral to the principal’s liability, and fully dependent upon the principal debtor’s primary liability and contingent upon his default. Based on Section 81 of the Contracts Act 1950, although guarantor’s liability is co-extensive with the principal debtor, parties are free to otherwise provide by way of contract. [33] Based on Clause 17 of the Guarantee and Indemnity, D5’s liability is categorized as ‘principal debtor’ and are liable ‘upon demand’. Further to D5 being principally liable upon demand, Clause 30 of the Guarantee and Indemnity states as follows: “30. As a separate and additional obligation, I /we irrevocably and unconditionally undertake to indemnify you against all losses, damages, liabilities, costs and expenses which you may sustain or incur, as a result of or arising from your advances, credit or other banking facilities granted to the Customer, except if such losses, damages, liabilities, costs and expenses are due to any error, omission, misrepresentation or negligence caused by you.” [34] This clause underscores the dual obligations of D5, both as a guarantor and an indemnifier. Section 77 of the Contracts Act 1950 defines indemnity as a promise to hold another harmless from loss arising out of a transaction or resulting from the conduct of another. Such a clause offers greater protection to the plaintiff in the event of D1’s default, as it imposes liabilities that are more difficult to displace than those arising under a guarantee. [35] Unlike guarantees, indemnity clauses survive the termination or material variation of the underlying contract. Based on Section 78 of the Contracts Act 1950, they also provide broader compensation than damages, as they are not necessarily subject to the principle of co- extensiveness, which limits a guarantor's liability to the scope of the principal debtor’s obligations. [36] Turning to D5’s argument regarding discrepancies between the terms of the Offer Letter and the Guarantee and Indemnity, I find no inconsistency between these documents. Clause 10(d) of the Offer Letter explicitly mentions the need for a joint and several guarantee, while the Guarantee and Indemnity refers to the facilities granted by the plaintiff to D1. In any event, I hold that the Guarantee and Indemnity is a standalone and binding agreement, independent of the Offer Letter. While the Offer Letter may provide context, any alleged discrepancies do not affect the enforceability of the Guarantee and Indemnity. Accordingly, D5’s argument on this ground is dismissed, as it does not raise a triable issue.

(iii) Consultation with Other Defendants to Negate D5’s liability [37] Here learned counsel of D5 contends that the LSCJ erred in concluding that D5 failed to consult with other defendants to resolve the claim. Counsel instead argues that such consultation did take place and was in fact necessary to ensure a coordinated defense and to mitigate liability. Counsel for D5 argues that discussions with other defendants which leads to an indemnity arrangements vide the indemnity letter (Exhibit IN-5 at pages 191-197 Appeal Records, Part C) are material to the claim and should be considered in determining his liability. [38] The plaintiff’s learned counsel took the position that D5’s consultation with other defendants as well as the provision of indemnity is irrelevant to D5’s liability under the Guarantee and Indemnity as the guarantee imposes direct and primary liability, independent of any collaboration with co-defendants. Counsel for the plaintiff argues that, in any event, the plaintiff is not privy to such letters of indemnity. [39] In China and South Sea Bank Ltd v George Tan [1990] 1 AC 536 (PC), the plaintiff bank extended a loan of HK$30 million to a company, with George Tan acting as surety. At the time the plaintiff bank demanded repayment, it held a mortgage over shares worth more than the loan amount, but the value of these shares later became worthless. George Tan contended that his liability to the bank should be extinguished or reduced due to the bank’s failure to sell the shares at an opportune time. On appeal from the Hong Kong Court of Appeal, the Privy Council dismissed this argument. Lord Templeman, delivering the judgment, observed that "the creditor must decide in his own interest if and when he should sell" (at page 545). [40] Applying this principle to the present case, I find that the negotiations between the guarantors and the resultant agreement of D1, D2 and D3 to indemnify D5 vide 3 letters all dated 10 July 2023 have no bearing on the plaintiff's rights, particularly if the plaintiff did not consent to or participate in such arrangements. Ultimately, the decision rests solely with the plaintiff, whose rights under the Guarantee and Indemnity remain unaffected by internal discussions or agreements among the defendants. As rightly determined by the LSCJ, D5 is at liberty to initiate a separate action to enforce the indemnity provided by the co-defendants. [41] In essence, under the terms of the Guarantee and Indemnity, each guarantor is independently liable; wherein any consultation among guarantors is neither a requirement nor a precondition for the plaintiff to enforce liability. I am therefore of the considered view that the LSCJ is correct in holding that the indemnity arrangements among the defendants are irrelevant to the plaintiff's claim. Consequently, there is no necessity for this Court to examine viva voce evidence from D5 and other defendants to establish such an arrangement. [42] Here, I further note that the LSCJ in his grounds of judgment went on to consider the effect of the conclusive evidence clause within the Guarantee and Indemnity. This clause explicitly stipulates that the entry of a judgment against the borrower, D1, constitutes conclusive proof of D5’s liability. The implications of this clause will be discussed in the following paragraphs which deals with conclusive proof of the quantum due. iv) Whether the Plaintiff's Claim is Substantiated by the Certificate of Indebtedness. [43] On the issue of the correctness of the amount claimed, the learned counsel for D5 argued that D5 never received the Certificate of Indebtedness. Dilating on this aspect the learned counsel for D5 contends that the plaintiff cannot rely on the same as conclusive proof of amount due and payable by D5. [44] The learned counsel for the plaintiff on the other hand argues for the application of conclusive evidence clauses within the Offer Letter. Proof of quantum has been agreed to be based on a certificate of indebtedness as at 31 May 2023 which in absence of manifest error would be deemed conclusive evidence of the amount stated to be due. (See Exhibit A-8 at pages 163-165, Appeal Records, Part C). [45] On this issue of quantum, I find that the Offer Letter and the Guarantee and Indemnity contain conclusive evidence clause. This can be seen in Clause 19 of the General Terms and Conditions of the Offer Letter which states as follows:

Evidence of indebtedness: In any legal action or proceedings relating to the Facility, a certificate of the Bank as to any amount due to it under the Facility shall, in absence of manifest error, be conclusive evidence that such amount is in fact due and payable. [Emphasis added] [46] Whereas clause 11 of the Letter of Guarantee each stipulates as follows: “Any admission or acknowledgement in writing by the Customer (or any person authorized by the Customer) of the amount that the Customer is indebted to you, or any judgment recovered by you against the customer in respect of such indebtedness, will be binding and conclusive against me/us. A statement signed by your manager, secretary or any of your officers, as to the moneys and liabilities owing by the Customer, will be final and conclusive evidence against me/us including for legal proceedings.” [Emphasis added] [47] It is noteworthy that the first limb of Clause 11 of the Guarantee and Indemnity stipulates that a judgment entered against the borrower (D1) shall be deemed conclusive proof of liability against any of the guarantors. As previously considered by the LSCJ, this provision significantly strengthens the plaintiff’s claim against D5. The plaintiff is entitled to rely on the effect of this clause as well as the case of Orix Credit Malaysia Sdn Bhd v M/S Belquip Sdn Bhd & Ors (supra) in respect of the findings that a default judgment against principal borrower amounts to conclusive evidence on liability against guarantors. [48] The second element of Clause 11 establishes that any determination of the amount owed by the defendants is final and binding as to the sum payable. This provision serves to eliminate the need for prolonged inquiries into the precise calculation of the outstanding debt, thereby sparing the parties the burden of sifting through financial records to identify potential discrepancies. It ensures efficiency and certainty in the enforcement of obligations under the Guarantee and Indemnity. [49] As to the contention that the Certificate of Indebtedness ought to have been issued to D5, I find no provision within the relevant clauses of the Offer Letter or the Guarantee and Indemnity mandating the issuance of such a certificate prior to the plaintiff's application under Order 14. [50] In AMMB International (L) Ltd v Penas Holdings Sdn Bhd & Anor [2005] 2 MLJ 509 (HC), Abdul Malik Ishak J (as His Lordship then was) rejected the proposition advanced in Malayan Banking Bhd v Yeo Sun Tong [1999] 4 CLJ 425 (HC), which suggested that the details of a Certificate of Indebtedness must be fully pleaded. Instead, His Lordship preferred the Federal Court’s decision in Citibank NA v Ooi Boon Leong & Ors [1981] 1 MLJ 282 (FC), which clarified that such certificates serve an evidentiary purpose. [51] Bound by the doctrine of stare decisis, I must likewise adhere to the principle established by the Federal Court. Accordingly, I find that the Certificate of Indebtedness need not be pleaded in detail or served prior to an Order 14 application, as its purpose is evidentiary rather than procedural. [52] As for its purpose vis-à-vis the issue of quantum, in Citibank N.A. v Ooi Boon Leong & Ors (supra) at page 284, the Federal Court held that the indebtedness of the borrower may be ascertained conclusively by such certificate: “In the present case the guarantee contains a clause which enables the bank by producing a certificate of indebtedness by its officer to dispense with legal proof of the actual indebtedness of the respondents. Clause 19 provides thus “A certificate by an officer of the bank as to the money and liabilities for the time being due or incurred to the bank from or by the customer shall be conclusive evidence in any legal proceedings against us or any one of us or our personal representatives.” It means that, for the purpose of fixing liability of the respondents, the company’s indebtedness may be ascertained conclusively by a certificate: see Dobbs v National Bank of Australasia Ltd (1935) 53 CLR 643; Bache & Co v Banque Vernes [1973] 2 LLLR 437. In the circumstances the respondents are bound under clause 19 to accept the certificate of indebtedness duly executed by the Assistant Vice-President of the Branch as conclusive evidence of the debt due to the bank. On this footing the bank would be entitled to judgment as prayed for.” (Emphasis added) [53] Lord Denning MR in Bache & Co (London) Ltd v Banque Vernes Et Commerciale De Paris SA [1973] 2 Lloyd's Rep 437 (CA) had this to say at page 440: "[t]hat, as a matter of principle, the conclusive evidence clause was binding according to its terms and, if notice of default was given in pursuance of the conclusive evidence clause it was binding according to its terms, the clause was not contrary to public policy." [54] The Federal Court in Cempaka Finance Bhd v Ho Lai Ying (trading as KH Trading) & Anor (supra) through the judgment of Steve Shim CJSS quoted with approval of the case of Dobbs v National Bank of Australasia [1953] 53 CLR 643 (HC), where the High Court of Australia made the following observation: "... The bank could recover without the production of a certificate if, by ordinary legal evidence, it proved the actual indebtedness of the customer. But the (conclusive evidence) clause, if valid, enables the bank by producing a certificate to dispense with such proof. It means that for the purpose of fixing the liability of a surety, the customer's indebtedness may be ascertained conclusively by a certificate.... But the manifest object of the clause was to provide a ready means of establishing the existence and amount of the guaranteed debt and avoiding an inquiry upon legal evidence into the debits going to make up the indebtedness". [55] Steve Shim CJSS in Cempaka Finance Bhd case also held that "a certificate of indebtedness operates in the field of adjective law. It excuses the plaintiff from adducing proof of debt. Such a certificate shifts the burden onto the defendant to disapprove the amount claimed". (at paragraph 11). [56] The reference to “manifest error” nevertheless would allow a comeback if there is a material mistake in the calculations. In the case of Amey Birmingham Highways Ltd v Birmingham City Council [2018] EWCA Civ 264 (CA), the English Court of Appeal held as follows: “83. Is this a case of manifest error? There are two helpful recent authorities on this issue, namely IIG Capital LLC v Van Der Merwe [2008] EWCA Civ 542; [2008] 2 All ER (Comm) 1173 and North Shore Ventures Ltd v Anstead Holdings Inc [2011] EWCA Civ 230; [2012] Ch 31.

IIG was a claim for payment against guarantors. The defendants had bound themselves to pay on demand, absent manifest error. Lewison J, the trial judge, rejected the suggestion that there was manifest error. He said that a manifest error was "one that is obvious or easily demonstrable without extensive investigation". The Court of Appeal approved the judge's approach to that issue and upheld his decision: see the judgment of Waller LJ at [33] to [35]. Lawrence Collins and Rimer LJJ agreed.

North Shore was an action by a lender against the two guarantors of the loan. Clause 3.4 of the guarantee stated that a certificate signed by the claimant for the amount of the indebtedness was conclusive evidence against the guarantors, unless manifestly incorrect. The Court of Appeal approved the test for manifest error formulated by Lewison J in IIG. The court held that the certificate was invalidated by manifest error, because it did not take into account an agreed variation in the rate of interest.

At [61] Smith LJ said: "On reflection I have come to the conclusion that for a party to rely on a manifest error in a certificate does not depend upon his ability to demonstrate the error immediately and conclusively. In the present case, the guarantors were able to recognise immediately that the certificate was based upon the interest rates as set out in the original loan agreement and not as varied in November 2004. They could see that it was manifestly incorrect. They could not immediately demonstrate that conclusively; they could not do so until the court had determined the issue of variation. But they were right, as this court has now held. I would hold that the certificate was manifestly incorrect and was of no effect."

Finally, in relation to the law, I should refer to IG Index v Colley [2013] EWHC 748 (QB). In a very thorough judgment Stadlen J reviewed the authorities on manifest error. At [813] to [814] he held that the court could have regard to extrinsic evidence.” [57] This principle is reaffirmed in the recent judgment of Flowgroup Plc v Co-Operative Energy Ltd [2021] EWHC 344 (Comm) (HC), wherein the English High Court held that for a challenge based on a manifest error clause to succeed, there must be a plain and obvious mistake. However, whether such an error has indeed occurred is a matter of fact, and need not be glaringly apparent from the face of the certificates themselves. In the Flowgroup case, the error in issuing the certificates only came to light once the underlying contractual obligation was properly scrutinized. [58] In applying these authorities, it is evident that the determination of a manifest error requires the Court to consider that certain errors may only become apparent upon reaching specific legal conclusions. While such errors may not be immediately or conclusively evident at first glance, they may still qualify as manifest errors when scrutinized in the proper context. [59] From the affidavit evidence presented, I find no indication that D5 has identified any manifest error within the Certificate of Indebtedness. As the certificate forms an integral part of the plaintiff’s evidentiary framework under the Order 14 procedure, D5’s failure to raise any element of manifest error in the Affidavit of Opposition undermines the credibility of his defense. Accordingly, the LSCJ’s decision to dismiss D5’s objections regarding the form and procedure for determining the accuracy and conclusiveness of the amount due was both appropriate and correctly made.

[60] Having carefully considered the arguments advanced by both parties, I have dismissed D5’s appeal in Enclosure 1, with costs awarded in the sum of RM3,000. The LSCJ’s decision to allow the plaintiff’s summary judgment application against D5 is therefore affirmed. ..…………………………………. (YUSRIN FAIDZ BIN YUSOFF) Judicial Commissioner High Court of Malaya Kuala Lumpur Dated: 27th December 2024 COUNSEL: For the Appellant / Fifth Defendant: Munira Binti Hasnim Messrs Siow Kim Leong No. 28, Tingkat 2, Jalan Yam Tuan, 70000 Seremban, Negeri Sembilan. For the Respondent/ Plaintiff: Suraya Binti Sanusi Messrs. Yong Dan Rakan-Rakan No. 12-1, Tingkat 1, Jalan Tiara 2D/KU1, Bandar Baru Klang, 41150 Klang, Selangor Darul Ehsan. CASE REFERENCE:

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