OCBC Al-Amin Bank Berhad v 1. Palms Avenue Development Sdn Bhd (22M-85-04/2017)

PALMS AVENUE DEVELOPMENT SDN BHD

LAM BOON LING (NRIC NO. 721030-05-5134/A 2303099) … DEFENDANTS BEFORE YA KHADIJAH BINTI IDRIS JUDICIAL COMMISSIONER 2 GROUNDS OF JUDGMENT Introduction [1] This judgment is in relation to the following –

the First Defendant’s application (Enclosure 43) for an order that the execution of Judgment in Default of Appearance obtained on 25 May 2017 (Judgment in Default) be stayed pending disposal of the First Defendant’s appeal against an order dismissing the First Defendant’s application to set aside the Judgment in Default; and

the Second Defendant’s application (Enclosure 44) for an order that the summary judgment obtained on 27 October 2017 under Order 14 Rules of Court 2012 (Summary Judgment) be stayed pending the Second Defendant’s appeal against the Summary Judgment. [2] This court dismissed both Enclosures 43 and 44 with costs. The First and Second Defendants appealed. 3 [3] The appeal in respect of Enclosure 43 is registered as Rayuan Sivil No. W-02(IM)(MUA)-1120-05/2018 and Rayuan Sivil No. W- 02(IM)(MUA)-1124-05/2018 in respect of Enclosure 44. Parties [4] Plaintiff, OCBC Al-Amin Bank Berhad, is a company incorporated in Malaysia and it is in the business of providing Islamic banking services. [5] The First Defendant, Palms Avenue Development Sdn Bhd (1st Defendant) is a company incorporated in Malaysia. [6] The Second Defendant, Lim Boon Ling (2nd Defendant), an individual and at all material time a director of the 1st Defendant. Factual Background [7] Vide letter dated 14 April 2017, the Plaintiff granted to the 1st Defendant a financing facility under the Ijarah Muntahiah bi Al-Tamlik in the sum of RM3,300,000.00 for the purchase of two properties held 4 under GM237, Lot 2127, Mukim Petaling and GM238, Lot 2128, Mukim Petaling (“Asset”). [8] Subsequent thereto, the following documents were executed between the Plaintiff and the 1st Defendant -

Plaintiff’s Product Terms dated 16 April 2014;

Asset Purchase Agreement dated 9 June 2014;

Ijarah Agreement dated 9 June 2014; and

Facility Agreement dated 9 June 2014. [9] As a consideration to the Plaintiff’s agreement to grant the facilities, the 2nd Defendant executed a letter of guarantee dated 12 May

By the said guarantee the 2nd Defendant agree to jointly and severally guarantee the repayment of the facility and all monies due thereto. The 2nd Defendant also agreed to indemnify the Plaintiff from all losses, costs and expenses incurred by the Plaintiff under the Facility Agreement. By the said guarantee the 2nd Defendant is not merely a guarantor but also as principal debtor for the facilities provided. [10] Vide letter dated 10 March 2017 the Plaintiff solicitor declared an event of default pursuant to the Facility Agreement and demanded for 5 the sum of indebtedness amounting to RM2,845,622.00 as at 28 February 2017. The 1st and 2nd Defendants have failed, refused and/or neglected to pay the amount demanded under the Facility Agreement. [11] Via civil action WA-22M-85-04/2017 the Plaintiff’s claim against the 1st and 2nd Defendants, jointly and severally, the following –

the Defendants to pay a sum of money amounting to RM2,845, 622.00 to the Plaintiff;

compensation/Ta’wid at the rate of 1% per annum on all the indebted sum from 1 March 2017 until (1) day before date of judgment;

compensation/Ta’wid then at current overnight rate of Islamic Interbank Money Market (IIMM), review every month, from the date of Judgment until the date of realization. [12] On 25 May 2017, Judgment in Default of Appearance was entered against the 1st Defendant. On 13 July 2017 the 1st Defendant filed as application (Enclosure 11) to set aside the Judgment in Default. Enclosure 11 was dismissed on 27 October 2017. The 1st Defendant appealed to the Court of Appeal against dismissal of Enclosure 11 vide Notice of appeal dated 24 November 2017. 6 [13] On 27 October 2017, Summary Judgment was entered against the 2nd Defendant in favour of the Plaintiff. The 2nd Defendant appealed to the Court of Appeal vide Notice of Appeal dated 24 November 2017. [14] While the 1st and 2nd Defendants’ appeal are pending in the Court of Appeal –

the 1st Defendant filed an application seeking for the execution of the Judgment in Default be stayed pending the disposal of its appeal at the Court of Appeal – Enclosure 43; and

The 2nd Defendant filed a similar application seeking for an order that the execution of the Summary Judgment be stayed pending the disposal of his appeal at the Court of Appeal – Enclosure 44. [15] On 24 April 2018, this court dismissed both Enclosures 43 and 44 with costs. Aggrieved by the said dismissal, the 1st and 2nd Defendants appealed. Thus this ground of judgment. I will first deal with Enclosure 43 followed by Enclosure 44. 7 The law [16] The power of the court to grant a stay is discretionary. However as learned counsel for the Plaintiff has rightly pointed out, the power is to be exercised judiciously and subject to the clear principles established by court of high authority. It is trite law that for a stay of execution to be granted there must be shown the existence of special circumstances which warrant a stay. [17] As to what amount to special circumstances, the Court of Appeal in Ming Ann Holdings Sdn Bhd v Danaharta Urus Sdn Bhd [2003] MLJ 49 held – … the special circumstances must be special, not ordinary, common or usual circumstances and that go to the execution of the judgment and not to the validity or correctness of the judgment (or merits of the appeal). (emphasis added) [18] The Federal Court in Kosma Palm Oil Mill Sdn Bhd & Ors v Koperasi Serbausaha Makmur Bhd (2004) 1 MLJ 257 FC; [2003] 4 CLJ 1 FC held there are many factors that may constitute special circumstances and the fact that an appeal would be rendered nugatory if 8 stay was refused is the most common one. It is an example of special circumstances. [19] Essentially what amounts to special circumstances would depend on the facts of each case. As in most application for stay, the Defendant raises the issue of nugatory to support its application for stay. Although it is a common ground/issue it does not necessarily and automatically means it cannot be considered as a special circumstances. Again, it all depends on the facts and circumstances of each particular case. 1st Defendant’s application for stay of execution of Judgment in Default (Enclosure 43) [20] In its written submission, the 1st Defendant states the following situations which the 1st Defendant contends amount to special circumstances –

the filing of the Notice of Appeal on 24 November 2017 in Court of Appeal in itself is a ‘special circumstances’. The appeal will be rendered nugatory if the Plaintiff is allowed to proceed with the winding up proceedings 9

the 1st Defendant is an active housing as well as commercial developer with a lot of on-going project which in turn involved a lot of purchasers who are members of the public. Any winding up proceeding will have a determinative impact on the end-financing of the projects, the housing development accounts and the payment to the contractors and third parties involved in the project. As such the consequences upon the execution proceeding will not be limited to the 1st Defendant only but more importantly be disastrous against the purchasers as a whole, the bankers as well as the contractors

the winding up proceeding will have an adverse effect on the 1st Defendant’s reputation and the 1st Defendant’s commercial viability will be put into jeopardy and irreparable damage

the Plaintiff will not be prejudiced if execution were to be stayed pending appeal as the Judgment carried an interest stipulation that can be claimed if the 1st Defendant’s appeal is eventually dismissed by the Court of Appeal. Whereas the 1st Defendant and the members of the public, the purchasers 10 and bankers and contractors will be unduly prejudiced if a stay is not granted [21] The 1st Defendant submits the Plaintiff did not challenge the 1st Defendant’s assertion that it is a company of repute and that there are many on-going projects. Thus the Plaintiff had tacitly acknowledged the same. The Plaintiff being a financial institution is all too aware of the financial exposures once a developer, such as the 1st Defendant, once a winding up proceeding is commenced. Plaintiff’s contentions [22] The Plaintiff contends that the 1st Defendant’s application to stay the order dated 27 October 2017 is flawed as the said order dismisses the 1st Defendant’s application to set aside the Judgment In Default. As such there is no application for stay of the Judgment in Default dated 25 May 2017, so the Plaintiff has the right to proceed with the execution of the Judgment in Default. [23] On the merits, the Plaintiff submits for the court to exercise its discretion (to grant or otherwise a stay) the following principles established in the Federal Court case of Kosma Palm Oil Mill Sdn Bhd & 11 Ors v Koperasi Serbausaha Makmur Bhd [2004] 1 MLJ 257 are to be considered –

the court will not deprive a successful party of the fruits of his litigation until an appeal is determined

the onus is on the applicants to demonstrate the existence of special circumstances to justify stay of execution

the "nugatory approach" is one of the common factor that may constitute special circumstances and it does not constitute special circumstances by itself

the merits of the 1st Defendant’s appeal is not special circumstances [24] The Plaintiff cited s. 73 of the Courts of Judicature Act 1964 (CJA) which provides that an appeal itself shall not operate as a stay of execution (Perwira Affin Bank Berhad v Haji Zakaria Bin Haji Ismail & 7 Ors [1998] 3 AMR 2719). The Plaintiff further submits that the nugatoriness of the appeal forms only a part of the special circumstances, whereby it is only a species of the special circumstances (Affin Bank Berhad v. Tan Sri Kishu Thirathai [2004] 3 CLJ 350). 12 [25] The 1st Defendant has failed to show any merits in the appeal and/or special circumstances in the affidavits and therefore the 1st Defendant's appeal to Court of Appeal does not warrant a stay. Findings of the court [26] Before I deal with the merits of Enclosure 43, the issue raised by the Plaintiff that the 1st Defendant’s application is flawed will be dealt first. [27] The 1st Defendant’s Enclosure 43 for an order of stay is made pursuant to Order 92 rule 4 of the Rules of Court 2012 (RoC 2012). The second prayer of Enclosure 43 read as follows –

Bahawa perlaksanaan Perintah bertarikh 27.10.2017 yang diperolehi oleh Plaintiff terhadap Defendan Pertama di dalam guaman Sivil No.: WA-22M-85-04/2017 di Mahkamah Tinggi Malaya di Kuala Lumpur digantung sehingga pelupusan rayuan Defendan Pertama kepada Mahkamah Rayuan terhadap keseluruhan keputusan Yang Arif Hakim Datuk Hanipah binti Farikullah terhadap Notis Permohonan Defendan Pertama bertarikh 13.07.2017 (Lampiran 11) yang menolak permohonan Defendan Pertama untuk mengenepikan Penghakiman Ingkar Kehadiran bertarikh 25.05.2017 13 [28] Based on record, on 27 October 2017 the court had dismissed the 1st Defendant’s application Enclosure 11 to set aside the Judgment in Default. As such it appears that the 1st Defendant is asking for the dismissal order be stayed pending disposal of the 1st Defendant’s appeal against order dated 25 May 2017 dismissing the 1st Defendant’s application to set aside the Judgment in Default. [29] It is noted that the 1st Defendant did not reply to the ‘flawed application’ raised by the Plaintiff. In this respect I am in agreement with the Plaintiff that there is no application by the 1st Defendant for the Judgment in Default obtained on 25 May 2017 be stayed. [30] Be that as it may, if one were to refer towards the end of that second prayer, it relates to the 1st Defendant’s appeal against the dismissal of its application to set aside the Judgment in Default. Besides that, the whole content of the 1st Defendant’s affidavit in support of Enclosure 43 refers to and relate to the 1st Defendant providing justification in seeking for the Judgment in Default be stayed. I believe there is an error on the part of the 1st Defendant in stating the date of the Judgment in Default obtained. 14 [31] Thus I am of the view although the 1st Defendant’s application is flawed, it does not prejudice the Plaintiff in any way. The Plaintiff is well aware of the intention of Enclosure 43 and has responded to the various justification for stay forwarded by the 1st Defendant vide the Plaintiff’s affidavit Enclosure 47. As such I do not think the 1st Defendant’s flawed application has cause miscarriage of justice on the Plaintiff as to warrant dismissal on technical ground. Whether the 1st Defendant has demonstrate the existence of special circumstances to support its application [32] Based on the 1st Defendant’s affidavit in support of its application for stay (Enclosures 46 and 53), the 1st Defendant cited the following grounds for stay of the execution of the Judgment in Default –

there are merits in the appeal against the order dismissing the 1st Defendant’s application to set aside the Judgment in Default which includes, inter alia,

the 1st Defendant has not received the writ and statement of claim

(ii) the 1st Defendant has a meritorious defence against the Plaintiff’s claim 15

(iii) the Plaintiff’s claim in the sum of RM2,845,622.00 is unfounded. Plaintiff had never served on the 1st Defendant a confirmation as to the amount due from the 1st Defendant under the agreement

(iv) The Plaintiff’s claim against all the Defendants will result in unjust enrichment and it is oppressive and malicious

if the execution of the Judgment in Default is not stayed, the 1st Defendant will be adversely affected and will suffer irreparable damage which cannot be compensated with costs. The 1st Defendant will lost its reputation, assets and a promising future. The substantial amount of the judgment sum adversely affect the 1st Defendant’s reputation and the on-going projects as well as future projects

the Plaintiff will not be prejudiced if the execution is stayed

the stay is required to maintain the status quo between Plaintiff and Defendant. 16 Whether merits in the appeal against dismissal of the setting aside Judgment in Default amount to special circumstances [33] In this respect reference is made to the case of Kosma Palm Oil where the Federal Court held that the special circumstances must relate to the enforcement of the Judgment in Default and not as to whether the Judgment in Default was valid or correct. The Court had this to say – Mr Lipfriend raised a further point. He said that under RSC Ord 47 r. 1, there is power, in the case of a writ of fi fa, or elegit, to stay proceedings if there are special circumstances which render it inexpedient to enforce the judgment or in case the applicant is unable from any cause to pay the money. I think that is appropriate here. The circumstances there again are circumstances which go to the enforcement of the judgment: and not those which go to its validity or correctness. As Abdul Hamid Mohamad JCA (as he then was) said in Ming Ann Holdings Sdn Bhd v. Danaharta Urus Sdn Bhd [2002] 3 CLJ 380 at p. 403: The weight of authorities appears to me to say that the special circumstances must be special, not ordinary, common or usual circumstances and that go to the execution of the judgment and not to the validity or correctness of the judgment (or merits of the appeal). 17 Lee Hun Hoe CJ (Borneo) said in the Federal Court in Re Kong Thai Sawmill (Miri) Sdn Bhd; Ling Beng Sung v. Kong Thai Sawmill (Miri) Sdn Bhd & Ors (No 2) [1974] 1 LNS 136; [1976] 1 MLJ 131 at p. 132: Allegations that there has been misdirection that the verdict of judgment was against the weight of evidence, or that there was no evidence to support the verdict or judgment, are not special circumstances on which the court will grant the application. See Monk v. Bartram [1891] 1 QB

It is therefore unnecessary for me to consider the merits of the respective case of the applicants and respondents. (emphasis added) [34] Accordingly the factors forwarded by the 1st Defendant that it has a meritorious appeal is irrelevant for the purpose of its application to stay the execution of the Judgment in Default. Thus merits of the appeal is not special circumstances. Moreover, the appeal itself is not supposed to operate as a stay of execution (s. 73 CJA). Execution of the Judgment in Default will adversely affect the 1st Defendant’s reputation, assets, on-going projects and will cause irreparable damage which cannot be compensated with costs [35] Having perused the 1st Defendant’s affidavits, I am of the view the 1st Defendant has failed to discharge the burden of demonstrating, to the satisfaction of the court, there exist special circumstances that go to the 18 enforcement of the Judgment in Default. I say so for the following reasons –

there is no evidence adduced by the 1st Defendant that it is a reputable entity

there is no evidence adduced in respect of the 1st Defendant’s assets which will be lost in the event stay is not granted

there is no evidence adduced to show the so called many on-going projects which the 1st Defendant is currently undertaking and the future projects which the 1st Defendant will undertake and the manner how the projects will be adversely affected if execution of the Judgment in Default is not stayed [36] The 1st Defendant submits since the Plaintiff did not challenge the 1st Defendant’s assertion that it is a company of repute the many on-going projects, the Plaintiff had tacitly acknowledged the same. With respect, I do not agree. In the first place, it is the duty of the 1st Defendant to demonstrate the existence of special circumstances. 19 [37] Accordingly, the 1st Defendant is duty bound to demonstrate by providing credible evidence to show the instances of special circumstances, in this case – that the 1st Defendant is of a reputable standing and that the 1st Defendant has many on-going projects. There is no such evidence adduced by the 1st Defendant to convince the court of the same. There is only mere and bare, general and non-specific assertions which, to my mind, does not absolved the 1st Defendant from the burden of proving its reputation and the purported many on-going projects regardless of the Plaintiff’s failure to reply. [38] The averment of alleged loss of reputation, projects and assets are mere allegation without any credible evidence to substantiate it. It is the 1st Defendant’s fear of losing its projects and assets and in this respect what was said in the case of Kosma Palm Oil is relevant and applicable to the 1st Defendant’s situation – As Abdul Hamid Mohamad JCA (as he then was) said in Ming Ann Holdings Sdn Bhd v. Danaharta Urus Sdn Bhd [2002] 3 CLJ 380 at p. 407: The grounds relied on by the appellants are nothing more than 'fear of losing'; fear of losing business, fear of losing customers, fear of losing suppliers, fear of losing goodwill, fear of not being able to collect its debts from third parties, in case the appellant company is wound up. All 20 that the applicant has to do to avoid such 'fears' is to settle the judgment debt. (emphasis added) Thus the 1st Defendant’s fear can be overcome by settling the judgment debt stated in the Judgment in Default. [39] There is also no evidence adduced to show that the Plaintiff would not be in a position to compensate the 1st Defendant in the event no stay is granted and the 1st Defendant won the appeal. In this respect reference is made to the following passage of the Federal Court judgment in the case of Kosma Palm Oil Mill – The onus is on the applicants to demonstrate the existence of special circumstances to justify the grant of a stay of execution. The reasons must relate to the enforcement of the judgment. They must be deposed in the affidavit filed in support of the application (see Syarikat Berpakat v. Lim Kai Kok [1983] 1 MLJ 406). Where it is alleged that there is a danger of the unsuccessful party not being repaid if its appeal is successful for any reason like, for instance, the insolvency of the other party, this must be shown in the affidavit (see The Annot Lyle [1886] 11 PD 114). This issue was dealt with articulately by Malik Ishak J in Wu Shu Chen (sole executrix of the estate of Goh Keng How, deceased) v. Raja Zainal Abidin Raja Hussain & Anor [1996] 2 CLJ 353… (emphasis added) 21 Plaintiff is not prejudiced if execution of the Judgment in Default is stayed and stay is required to maintain status quo [40] The Judgment in Default obtained by the Plaintiff is valid and good judgment unless it is set aside on appeal (Sri Jeluda Sdn Bhd v Pentalink Sdn Bhd [2008] 3 MLJ 692; Patel Holding Sdn Bhd v Estet Pekebun Kecil Sdn Bhd [1990] 2 CLJ Rep 611, [1990] 2 CLJ 280). Thus the Plaintiff is entitled to enforce the Judgment in Default and ought not to be prejudiced by depriving it from enjoying the benefits of the judgment debt obtained. [41] With regards to maintaining status quo, due to the 1st Defendant’s failure to prove there are special circumstances which justify stay of the execution of the Judgment in Default, I am of the view maintaining status quo is a non-issue. Enclosure 44 – the 2nd Defendant’s application for stay of the execution of the Summary Judgment [42] The grounds submitted by the 2nd Defendant in seeking for a stay is as follows – 22

the 2nd Defendant has a meritorious case in the appeal filed against the Summary Judgment obtained against the 2nd Defendant. The grounds includes –

Plaintiff’s claim against the 2nd Defendant is vehemently disputed

(ii) the 2nd Defendant is not aware of the Agreement and the indebtedness between the 1st Defendant and the Plaintiff

(iii) no documents or notice in relation to the Agreement was sent to the 2nd Defendant

(iv) the 2nd Defendant did not consent to be a guarantor and principal debtor to the indebtedness under the Agreement and not privy to any guarantee made in the name of the 2nd Defendant or on behalf of the 2nd Defendant

the Plaintiff’s claim in the sum of RM2,845,622.00 is unfounded. Plaintiff had never served on the 2nd Defendant a confirmation as to the amount due from the 2nd Defendant under the Facility Agreement 23

(vi) the Plaintiff’s claim against all the Defendants will result in unjust enrichment and the claim is oppressive and malicious

if the execution of the Judgment in Default is not stayed, the 2nd Defendant’s rights, interest, reputation and financial standing will be adversely affected and will suffer irreparable damage which cannot be compensated with costs

the Plaintiff will not be prejudiced if the execution is stayed

the stay is required to maintain the status quo between Plaintiff and Defendant. Whether merits in the appeal against the granting of the Summary Judgment amount to special circumstances [43] My view in respect of this ground is as stated in the above paragraphs 33 to 34 above. Thus merits of the 2nd Defendant’s appeal does not amount to special circumstances. 24 Execution of the Judgment in Default will adversely affect the 2nd Defendant’s rights, interest, reputation and financial standing will be adversely affected and will suffer irreparable damage which cannot be compensated with costs [44] Having perused the 2nd Defendant’s affidavits, it is my considered opinion that the 2nd Defendant has failed to demonstrate the above factor as special circumstances. This is due to the absence of affidavit evidence to support the 2nd Defendant’s allegation that his rights, interest, reputation and financial standing will be adversely affected by the execution of the judgment obtained by the Plaintiff. [45] There is no credible evidence to show that the 2nd Defendant is a person of reputable standing. The 2nd Defendant at all material time is a director of the 1st Defendant and by virtue of that position he stood as guarantor to the facility obtained by the 1st Defendant from the Plaintiff. However such a position is not credible evidence of his high reputation and strong financial standing which can be considered as special circumstances. [46] Furthermore, the 2nd Defendant has also failed to demonstrate that the Plaintiff will not be in a position to compensate the damage suffered 25 by the 2nd Defendant in the event no stay is granted and the Defendants won the appeal. In this respect reference is made to the following passage of the Federal Court judgment in the case of Kosma Palm Oil Mill – The onus is on the applicants to demonstrate the existence of special circumstances to justify the grant of a stay of execution. The reasons must relate to the enforcement of the judgment. They must be deposed in the affidavit filed in support of the application (see Syarikat Berpakat v. Lim Kai Kok [1983] 1 MLJ 406). Where it is alleged that there is a danger of the unsuccessful party not being repaid if its appeal is successful for any reason like, for instance, the insolvency of the other party, this must be shown in the affidavit (see The Annot Lyle [1886] 11 PD 114). This issue was dealt with articulately by Malik Ishak J in Wu Shu Chen (sole executrix of the estate of Goh Keng How, deceased) v. Raja Zainal Abidin Raja Hussain & Anor [1996] 2 CLJ 353… (emphasis added) The Plaintiff will not be prejudiced if the execution is stayed and stay is required to maintain status quo [47] My view in respect of the above issues is as stated in paragraphs 40 and 41 above. 26 Conclusion [48] Based on the affidavit evidence and submissions both the 1st and 2nd Defendants has failed to discharge the burden to demonstrate the existence of special circumstances which warrant this court to exercise its discretionary power to order for the execution of the Judgment in Default and Summary Judgment be stayed pending their appeals in the Court of Appeal. Thus I dismissed Enclosures 43 and 44. ( KHADIJAH BINTI IDRIS ) JUDICIAL COMMISSIONER HIGH COURT (COMMERCIAL DIVISION) DATED 13 JUNE 2018 Counsel: Plaintiff : Shantini Koshy of Messrs Yong & Rakan-Rakan Defendant : Muhammad Faris Abrar bin Othman and Jason Wee Chuan Yuan of Messrs Asyraf, Vivek & Wee (for the 1st and 2nd Defendants)