Midf Amanah Investment Bank Berhad v Tan Sri Muhammad Ikmal Opat Bin Abdullah (WA-22NCC-674-09/2024)

This judgment deals with the Plaintiff’s application for summary judgment for outstanding sums under a margin facility. The Defendant claimed that the Plaintiff had breached its duty to conduct the forced sale of the shares charged as security for margin facility granted by the Plaintiff upon the Defendant’s default.

This Court found the Defendant’s contention to be wholly without any merits and did not give rise to a bona fide triable issue to merit the matter to go to trial.

By an Agreement vide the Plaintiff’s Letter of Offer dated 12.12.2019, Supplemental Letters of Offer dated 13.3.2020,

6.9.2021, the Share Margin Financing Agreement dated 23.12.2019 made between the Plaintiff and the Defendant, the Plaintiff did, upon the request of the Defendant, agree to grant a Share Margin Financing Facility of RM30,000,000.00 (“the Facility”) to the Defendant to finance the purchase of securities listed on Bursa Malaysia which are acceptable to the Plaintiff and placed through the Plaintiff and to re-finance existing share margin facility granted by other party. [4] In consideration of and as further security for the Facility, the Plaintiff was provided with a Power of Attorney dated 23.12.2019, Memorandum of Charge on Shares dated 23.12.2019 and Letter of Pledge cum Memorandum of Deposit of Stocks and Shares dated 23.12.2019. [5] In breach of the terms and conditions of Facility, the Defendant failed to comply with the terms and conditions on which the Facility was availed including but not limited to failing to maintain the Required Equity Ratio of 250% since 18.1.2024 under the Facility. [6] Whilst the Plaintiff has via its letter dated 5.2.2024 granted indulgences to the Defendant including but not limited to agreeing for the Defendant to settle the outstanding amount under the Facility via a repayment schedule between 8.2.2024 to 30.6.2025 and allowing the Defendant a reduced Required Equity Ratio of 150%, at all times during the tenure of the restructured facility (“1st Indulgence”), the Defendant failed and or neglected to make payment of outstanding sums under the Facility and or maintain the Equity Ratio of at least 150% since 5.2.2024 under the Facility. [7] This breach continued despite the Plaintiff’s letter dated 6.2.2024 providing notice to the Defendant to rectify the position and shortfall by 12.30pm on 6.2.2024, the Plaintiff’s letter dated 28.2.2024 rejecting the Defendant’s proposal to waive the requirement to maintain the Equity Ratio above 150% at all times during the tenure of the restructured facility and requiring the Defendant to maintain the Equity Ratio above 150% by third (3rd) business day after the date of the Plaintiff’s letter dated 1.3.2024 rejecting the Defendant’s request for thirty (30) business days to comply with the Equity Ratio above 150% and requiring the Defendant to maintain the Equity Ratio above 150% by third (3rd) business day after the date of the letter, failing which the Plaintiff shall force sell the Mortgaged Securities without giving any further notice to the Defendant in such manner and upon such terms and conditions as the Plaintiff shall think fit and shall apply the proceed thereof in reducing the balance of the Facility. [8] By reason of the Defendant’s failure to comply with the above, the Plaintiff has proceeded to exercise its right to force sell the Mortgaged Securities. [9] Notwithstanding the same, the Plaintiff did provide further opportunity to remedy via its letter dated 6.5.2024 (2nd Indulgence), allowing the Defendant time to revert with a detailed proposal for the repayment of outstanding amount of the Facility as at 5.5.2024 and a detailed description of the additional security and the date the additional security will be pledged to ensure the Equity Ratio is maintained above 150% at all times during the tenure of the restructured facility. The Defendant however failed and or neglected to do so. [10] By reason of such continued failure to remedy the breaches, the Plaintiff therefore proceeded to sell the Mortgaged Securities with the sale completed by 20.5.2024. [11] The sale of the Mortgaged Securities was insufficient to satisfy all outstanding amounts and the Defendant remained in a state of continued breach and default of the Defendant’s obligations. [12] The Plaintiff therefore through its solicitors, did by its letter of demand cum recall or termination dated 2.7.2024 (“the Demand/Recall”) seek that the Defendant within seven (7) days from the date of the said Demand or Recall make payment of the sums outstanding as stipulated below together with all continuing interest, costs and charges due and payable. The Plaintiff did by such Demand or Recall also give notice to the Defendant that the Facility stood terminated and cancelled. PARTICULARS Share Margin Financing Facility as at 30.6.2024 (inclusive) PARTICULARS FACILITY (RM) TOTAL (RM) Prior to the sale of shares Outstanding principal amount as at 5.3.2024 (ADD) Interest accrued from 1.3.2024 to 5.3.2024 25,498,440.77 32,852.39 Outstanding as at 5 March 2024 25,531,293.16 After the sales of shares (LESS) Sale of shares (LESS) Cash in Trust (14,023,869.10) (226.62) (LESS) TOTAL PROCEED OF SHARES (14,024,095.72) (ADD) Interest accrued from 6.3.2024 to 30.6.2024 taking into account sale(s) of shares 447,255.75

30.

6.2024 (inclusive) 11,954,453.19 [13] Despite the Plaintiff’s solicitors’ letter dated 2.7.2024, the outstanding sum as at 30.6.2024 remained unpaid. [14] In a further exercise of discretion by the Plaintiff, the Plaintiff through its solicitors, did by a letter of demand dated 9.9.2024 (“the 2nd Demand”) allowing an additional seven (7) days to make payment of the sums outstanding as at 31.08.2024 (3rd Indulgence). The Plaintiff did also by such 2nd Demand clarifying the Outstanding Amount as at 31.8.2024: The Outstanding Amount is computed from:

outstanding Principal Amount: (Crystallized Sum for Default Interest) of RM11,834,502.21 being principal amount outstanding as at 31.7.2024

prescribed Interest: being RM216,046.28 as at 31.8.2024 and accruing at a rate of 9.5% on the aggregate of the Outstanding Principal Amount and the total interest outstanding for the previous month.

default Interest: being interest of 8.5% accruing on the Crystallized Sum for Default Interest charged commencing from 1.8.2024 onwards (1.8.2024 – 31.8.2024 = RM85,201.95).

the Crystallized Sum for Default Interest is subject to any reduction to the Crystallized Sum for Default Interest by reason of payments by the Defendant and the Crystallized Sum for Default Interest is fixed strictly for the purpose of the calculation of Default Interest and shall be without prejudice to continuing Prescribed Interest and Default Interest which will continue to accrue on the sums outstanding as at 31.8.2024 until full and final settlement. [15] Despite the above indulgences and clarification, the Defendant has continued to fail and neglect to pay any sums due and owing under the Facility. By reason of the same, the Plaintiff commenced this action on 27.9.2024 against the Defendant. Triable Issues [16] The Defendant raised only one triable issue, namely that there was delay and or negligence by the Plaintiff in the sale of Mortgaged Securities. [17] More specifically, the Defendant contended that the Plaintiff was under a duty to act prudently and without unreasonable delay in conducting the forced sale of the Mortgaged Securities. Given the volatility of the Mortgaged Securities, the timing of the sale is critical in ensuring that the Plaintiff secures the most favourable price available for the Mortgaged Securities. The Defendant contended that the Plaintiff had failed to act within a reasonable time frame which had allowed the market value of the Mortgaged Securities to decline further from 0.125 sen on 5.2.2024 to as low as 0.006 sen during the forced sale period. [18] The Defendant contended further that the Plaintiff needed to adduce expert evidence to support the reasonableness of its action in selling the Mortgaged Securities. Court’s Considerations [19] In the first place, it must be stated that the manner of sale of the Mortgaged Securities have been expressly provided in the terms of the Facility. This means that the Defendant had contractually agreed to the Plaintiff selling the Mortgaged Securities in accordance with the terms of the Facility. [20] In this regard, Clauses 3.5 and 7.2 provide that the Plaintiff is entitled to carry out the sale of the Mortgaged Securities in such manner and upon such terms and conditions as the Plaintiff shall think fit, if the Defendant failed to maintain the Required Equity Ratio or Equity Ratio above 150% during the tenure of the Facility. [21] The aforesaid means that the Plaintiff had absolute discretion in carrying out the sale of the Mortgaged Securities once the Defendant fails to maintain the Required Equity Ratio or if the Equity Ratio was not maintained above 150% during the tenure of the Facility by the Defendant. [22] In this case, the Defendant did not dispute that the Required Equity Ratio was not maintained or that the Equity Ratio was not maintained above 150%. [23] Thus, the Defendant has no contractual basis to question the manner in which the Plaintiff sells the Mortgaged Securities as absolute discretion has been given to the Plaintiff by the Defendant under the terms of the Facility. [24] Further by Clauses 3.5.3 and 7.2, the Defendant had agreed that the Plaintiff shall not be held liable for any loss or depreciation in the value of the Mortgaged Securities arising from any cause whatsoever. This must necessarily include the sale of the Mortgaged Securities under the aforesaid Clauses 3.5 and 7.2. [25] The aforesaid alone is sufficient to dispose the Defendant’s objection to the Plaintiff’s application for summary judgment. [26] In any event, apart from making bare assertions that the Plaintiff had not acted with prudent or reasonably, no evidence has been adduced in support of the Defendant’s contention. [27] On the contrary, the Plaintiff had adduced evidence to demonstrate that the Plaintiff had acted in a timely and diligent manner, well within the parameters set by the terms of the Agreement. In fact, the timing of the sale had benefitted the Defendant. [28] Firstly, the fact that the sales occurred later than earlier was simply because the Plaintiff, in good faith, had repeatedly extended indulgences and entertained negotiations with the Defendant prior to exercising its contractual right to initiate the forced sale of the Mortgaged Securities. Therefore, it ought not lie in the mouth of the Defendant, who had the benefit of several opportunities (not disputed by the Defendant) to remedy the breach, to now complain of any prejudice said to arise by reason of the same. [29] Secondly, the staggered sale of the shares as contended by the Defendant from 5.4.2024 until 20.5.2024 was in line with good practice to avoid the effects of ‘share dumping’ which would have had an adverse impact on the share price (and potentially cause a lower recovery). Judicial recognition of share dumping can be seen in the following authorities: Wang Ruiyun v Gem Global Yield Fund Limited [2010] HKCU1266 “[4] As a prospective purchaser, the Defendant, a well-known investor, represented a substantial attraction for the Plaintiff. A sale of a large number of shares to such an investor would have the advantage of significantly enhancing the value of the shares in the market. Were the Plaintiff to unload his shareholding in Bestway directly on the open market, a contrary effect would have been achieved. It would likely have resulted in a considerable diminution in the price of the shares with the public perceiving the exercise as share dumping. … [24] The blatant dumping of large numbers of shares on the market by the Defendant through Merrill Lynch drove down the daily closing price of the shares. As the actual price payable by the Defendant was determined by reference to the daily closing price in the 15 Trading Days after the Draw Down Notice, the artificially low price engineered through dumping had the effect of reducing the Purchase Price payable by the Defendant.” Wee Kok Bin v Aseambankers Malaysia Berhad [2012] 5 MLJ 778 The Court there considered allegations of share dumping in the open market and the adverse effects on the share’s trading price [see paras 7 & 23]. There the limit-down thresholds were hit on more than one occasion triggering a suspension which further caused the price to drop even further. Facts which are not present in our case. [30] Further, Bursa Malaysia Rules already provide limits for a reduction in share prices on the open market where there is a 30% ‘limit down’ threshold. The absence of any allegation of a breach of this standard only confirmed that all the Plaintiff’s transactions were within the legal trading limits. [31] Based on the above, there was no factual basis for the alleged delay or negligence and instead the Plaintiff had shown that it had acted properly, within the scope of its contractual rights, and in accordance with the terms of the Facility. Any decline in the market value of the Charged Shares was due to factors entirely outside the Plaintiff’s control and could not be attributed to any failure or delay on the Plaintiff’s part. Indeed, the Defendant had adduced no such evidence. [32] Seeing as the sale of the Mortgaged Securities was on the open market and based on the market price at the material time, there is no necessity for any independent expert opinion, or a full trial as contended by the Defendant. In this regard, the Defendant himself failed to adduce any expert opinion to support his contention that the decline in the share value was due to the Plaintiff’s conduct. [33] In this respect, the authorities relied on by the Defendant to suggest that the valuation of shares constitutes a technical issue which requires expert evidence do not apply in our instance as the same arise from completely different circumstances. Conclusion [34] In the premises, the Plaintiff’s application for summary judgment under Enclosure 6 was allowed with costs. Dated the 8th day of April 2025 ONG CHEE KWAN Judge of the High Court of Malaya High Court of Kuala Lumpur, NCC2 & Admiralty Counsel:

Counsel for Plaintiff: Mr. Koo Yin Soon together with Ms. Pauline Koh (Messrs. Shearn

Delamore & Co.) Counsel for Defendant:

Wang Ruiyun v Gem Global Yield Fund Limited [2010] HKCU1266

Wee Kok Bin v Aseambankers Malaysia Berhad [2012] 5 MLJ 778

Bursa Malaysia Rules