Sabah Development Bank Berhad v 1. Chan Ket Phing (WA-22NCC-373-07/2019)

CHAN KET PHING

CHEN HAN WENG (NO. K/P: 800705-14-5193) … DEFENDAN DEFENDAN JUDGMENT [Enclosure 10] [1] This was an application by the Plaintiff Bank for summary judgment against the 1st and 2nd Defendants in this action. 2 Background [2] Rentak Arena Development Sdn Bhd (“Borrower”) was granted loan facilities by the Plaintiff Bank. The loan facilities granted were:

a term loan of RM12,000,000.00, a bridging loan of RM12,000,000.00 and bank guarantee facility of RM1,000,000.00 totalling an amount of RM25,000,000.00 (“First Credit Facility”);

(ii) a term loan of RM3,000,000.00 and a bridging loan of RM2,000,000.00 totalling an amount of RM5,000,000.00 (“Second Credit Facility”); and

(iii) a term loan of RM1,000,000.00 and a bridging loan of RM2,000,000.00 totalling an amount of RM3,000,000.00 (“Third Credit Facility”). [3] The First Credit Facility granted was set out in a loan agreement dated 16th June 2006 (“First Loan Agreement”). This First Loan Agreement was subsequently varied several times by additional letters of offer to inter alia extend time and change the payment schedule. [4] The Second Credit Facility granted was set out in a loan agreement dated 8th July 2008 (“Second Loan Agreement”). Again this Second Loan Agreement was also varied by an additional letter of offer dated 19th April 2010. 3 [5] The Third Credit Facility granted was set out in a loan agreement dated 8th February 2010 (“Third Loan Agreement”). [6] These facilities were for purposes related to a development project called the “Templer Hill housing project”. [7] In consideration for the Plaintiff providing the facilities to the Borrower, the Defendants executed joint and several guarantees dated 1st August 2008, 8th July 2008 and 8th February 2010, guaranteeing the repayment of the facilities by the Borrower together with interest, charges and fees due from the Borrower in relation to the facilities granted. [8] The Defendants were at all material times the directors of the Borrower. [9] Monies under the facilities were released to the Borrower but the Borrower subsequently defaulted. Despite demands it did not pay the sums borrowed. [10] Following the Borrower’s default, letters of demand were sent to the Defendants as guarantors, demanding repayment of an amount of RM51,360,888.22, due and owing by the Borrower as at 18th February 2019. [11] The demands against the Defendants were not met and hence this action against the Defendants as guarantors of the facilities granted to the Borrower. 4 [12] A joint Defence was filed by the Defendants. Despite being directors of the Borrower, the Defence filed consisted of denial of any knowledge of the Plaintiff’s claim and denials of the guarantees signed, their terms, the amounts owed and the alleged failure to pay. No particulars were provided on any aspect of the defences pleaded. The evidence [13] Two affidavits were filed by the Plaintiff in respect of its application for summary judgment. The formal requirements under Order 14 and Form 13 of the Rules of Court 2012 were complied with. [14] In the Plaintiff’s affidavit in support of the application affirmed on 18th September 2019, copies of the following documents were exhibited:

The Plaintiff’s letter of offer dated 11th May 2006 to the Borrower with the terms therein in respect of the First Credit Facility, the First Loan Agreement and subsequent letters of offer to the Borrower dated 30th August 2007, 22nd May 2008, 27th June 2008, 5th February 2009, 19th April 2010 and, subsequently, a Supplemental Loan Agreement dated 3rd September 2007, a Second Supplemental Loan Agreement dated 1st August 2008 and a Third Supplemental Loan Agreement dated 20th March 2009;

(ii) The Plaintiff’s letter of offer dated 27th June 2008 to the Borrower with the terms therein in respect of the Second Credit Facility, the Second Loan Agreement and the subsequent letter of offer to the Borrower dated 19th April 2010; 5

(iii) The Plaintiff’s letter of offer dated 26th January 2010 to the Borrower with the terms therein in respect of the Third Credit Facility and the Third Loan Agreement dated 8th February 2010;

(iv) The joint guarantees signed by the Defendant dated 8th July 2008 (although mistyped as 2018), 1st August 2008 and 8th February 2010;

A Certificate of Indebtedness as at 18th February 2019 signed by a manager of the Plaintiff setting out the outstanding amounts in respect of each of the three facilities given to the Borrower and the penalty interest payable thereon from 19th February 2019; and

(vi) The statement of account in respect of each of the three facilities given to the Borrower as at 18th February 2019. [15] One affidavit was filed by the Defendants to resist the Plaintiff’s application for summary judgment. This affidavit was affirmed by the 2nd Defendant on 16th October 2019. This affidavit filed echoed the Defendants’ Defence. It consisted of a litany of bare assertions of lack of knowledge and bare denials. [16] In addition, it was asserted that the Defendants did not receive any of the loan monies, that the Defendants were not financial experts, that they were not given any copy of the documents, that the facilities granted were very large and without the Defendants having any ability to repay, and that the guarantees were given without free will or consent. However, symptomatic of the Defendants’ defence, no particulars were given of any of these assertions. 6 [17] The Defendants’ averments in their affidavit were denied by the Plaintiff in its affidavit in reply affirmed on 15th November 2019. The Plaintiff also exhibited a copy of the letter of demand dated 6th March 2019 that was sent to the Defendants by the Plaintiff’s solicitors. Evidence of posting of the letter of demand was also exhibited. The application for summary judgment [18] Learned counsel for the Defendants referred to and sought to rely on sections 61 and 62 of the Banking and Financial Institutions Act 1989 (“BAFIA”). This would have to be prior to its repeal and the passing of the Financial Services Act 2013. It was also contended that the documents that were exhibited by the Plaintiff were not conclusive and that the Defendants were not provided with a complete set of the accounts. [19] Section 61 of BAFIA related to restriction of credit to a single customer while section 62 relates to prohibition of credit facilities to directors and officers. [20] There was however, no factual basis or evidence given as to how or in what manner either of these provisions of BAFIA might apply. In relation to section 61, there was no evidence of how the loans given might exceed the permissible limit or what that limit was. As for section 62, there was no evidence that any of the Plaintiff’s officers or directors were involved in any way with the Borrower. I therefore do not see how any reliance may legitimately be placed on these provisions of BAFIA by the Defendants. 7 [21] In any event, as learned counsel for the Plaintiff submitted, even if sections 61 and/or 62 of BAFIA were breached, it does not follow that the facilities or the guarantees are void. Reliance was placed on section 125 of BAFIA which states as follows: “125. Except as otherwise provided in this Act, or in pursuance of any provision of this Act, no contract, agreement or arrangement, entered into in contravention of any provision of this Act shall be void solely by reason of such contravention: Provided that nothing contained in this section shall affect any criminal liability of any person for an offence under this Act in respect of such contravention.” [22] No provision in the BAFIA was alluded to by the Defendants that might have rendered either the facilities or guarantees void or unenforceable (see generally Coramas Sdn Bhd v Rakyat First Merchant Bankers Bhd & Anor [1994] 1 MLJ 369). [23] Submissions were made by learned counsel that the Plaintiff did not carry out adequate or sufficient investigations to determine the ability of the Borrower to pay. No evidence was led as to why it was contended that the Borrower would not have been able to repay the facilities when they were granted. In addition, no legal authority was provided as to how this contention, even if proven, could amount to a defence for the Defendants as guarantors. [24] As for the documents tendered into evidence by the Plaintiff, the Defendants did not lead any evidence to demonstrate or even suggest that the documents might be wanting in some way, save for the bare 8 assertion that they were not conclusive. Thus, the documents tendered into evidence by the Plaintiff were not credibly rebutted as to their validity, accuracy or otherwise. [25] Furthermore, to my mind, I do not see how the allegation that the Defendants were not provided with a complete set of the accounts amounts to a defence for the Defendants as guarantors, even if true. Besides, there was no evidence that the Defendants had asked for these accounts. [26] On the other hand, as learned counsel for the Plaintiff pointed out, clause 10 of all the three guarantees states as follows: “10. It is hereby agreed that a statement of account in writing showing the indebtedness and liability of the Borrower to the Lender duly certified by any of its officers shall be binding and conclusive against the Guarantor and the Guarantor’s executors administrators and legal persona representatives.” [27] Such a statement was issued and signed by an officer of the Plaintiff and it was not demonstrated that there were any manifest errors in this statement. It is trite that such a statement or certificate, expressed and agreed to be conclusive by the parties is, in law, conclusive in the absence of any manifest error (see Cempaka Finance Bhd v. Ho Lai Ying & Anor [2006] 3 CLJ 544 (Fed Ct) at p 554 and Hong Leong Bank Bhd v. M Muthiah & Anor and Another Appeal [2014] 1 CLJ 1). 9 [28] In her oral arguments, learned counsel for the Defendants also contended that the Borrower had provided securities which included a piece of land charged and the Plaintiff had not taken steps to dispose and/or to enforce that security to reduce the debt. [29] However, as learned counsel for the Plaintiff pointed out, the Plaintiff is not bound to realise securities provided before proceeding against the Defendants as guarantors (see Bank Bumiputra (M) Bhd v Esah Abdul Ghani [1985] CLJ (Rep) 41). [30] In addition, clause 17 in all three of the guarantees states to similar effect as follows: “17. This Guarantee is in addition to and not in substitution for any other rights which the Lender may have under or by virtue of the terms of the Loan Agreement or otherwise howsoever and may be enforced against the Guarantor without first having recourse to any such securities or rights and without first having recourse to any steps or proceedings against the Borrower or any other person or persons and on discharge by payment or otherwise shall remain the Lender’s property.” Conclusion [31] Having regard to the foregoing, I was satisfied that were no bona fide triable issues raised, and thus no bona fide defence established, to the Plaintiff’s claim in this action. 10 [32] Accordingly, summary judgment was entered in favour of the Plaintiff for the sum of RM51,360,888.22 as at 18th February 2019 together with interest thereon at the rate of 1.75% per annum on the Plaintiff’s Prime Lending Rate (currently the Prime Lending Rate being 7% per annum) calculated on a daily accrual basis from 19th February 2019 until full realisation and penalty interest at the rate of 1% per annum calculated on a daily basis from 19th February 2019 until full realisation. [33] The Plaintiff also sought solicitor and client costs but no sum was stated. However, what learned counsel submitted on behalf of the Plaintiff was for costs in the sum of RM5,000.00. Learned counsel for the Defendants submitted that costs should be in the sum of RM1,500.00. Having heard the submissions, costs in the sum of RM5,000.00 was awarded to the Plaintiff. Dated this 15th Day of January 2020 -SGD- (DARRYL GOON SIEW CHYE) Judge High Court of Malaya Kuala Lumpur (Commercial NCC 3) 11 COUNSEL FOR THE PLAINTIFF: Gan Yi Hong (Ms Eng Tiong Mei with her) Liz Yap Ngeok Ting (Messrs Jal & Lim Unit 507, Block D, Phileo Damansara 1 No. 9, Jalan 16/11, Seksyen 16 Off Jalan Damansara 46350 Petaling Jaya, Selangor Darul Ehsan (Tel: 03-7620 1218 Fax: 03-7620 6218). COUNSEL FOR THE DEFENDANTS: Santhi Mohan (Messrs Santhi Mohan & Associates A4-11-1110, Leisure Commerce Square Pusat Dagang Setia Jaya (Bali) 9, Jalan PJS 8/9, Bandar Sunway 46150 Petaling Jaya, Selangor Darul Ehsan. (Tel: 03-7874 3764 Fax: 03-7874 0386). CASES CITED  Bank Bumiputra Malaysia Bhd v Esah binti Abdul Ghani [1986] 1 MLJ 16  Bank Negara Malaysia v. Mohd Ismail & Ors [1992] 1 CLJ REP 14; [1992] 1 CLJ 627; [1992] 1 MLJ 400  Cempaka Finance Bhd v Ho Lai Ying (trading as KH Trading) & Anor [2006] 2 MLJ 685  CIMB Bank Bhd v Anthony Lawrence Bourke & Anor 2019] 2 MLJ 1  CIMB Bank Bhd v Tan Hua Peng @ Tan Kwah Peng [2012] 8 MLJ 442  Coramas Sdn Bhd v Rakyat First Merchant Bankers Bhd & Anor [1994] 1 MLJ 369).  Kok Swee Chin v General Factoring & Credit Sdn Bhd [2004] 6 MLJ 276  Malayan Banking Bhd v Foo See Moi [1981] 2 MLJ 17  Malayan Insurance (M) Sdn Bhd v Asia Hotel Sdn Bhd [1987] CLJ (Rep) 182  Microsoft Corporation v Yong Wai Hong [2008] 6 CLJ 223  National Company for Foreign Trade v Kayu Raya Sdn Bhd [1984] 1 CLJ (Rep) 283  Ng Hee Thoong & Anor Public Bank Bhd [1995] 1 MLJ 281 12  Perkapalan Shamelin Jaya Sdn Bhd & Anor v Alpine Bulk Transport New York [1997] 3 MLJ 818  RHB Bank Bhd v Yu Yuan Vegetarian Food Trading Sdn Bhd & Ors [2012] 1 MLJ 562  RHB Sakura Merchant Bankers Bhd v Tan Sri Dato’ Ting Pek Khiing (No 1) [2004] 5 MLJ 315 LEGISLATION AND LEGAL TEXT CITED  Order 14 Rules of Court 2012  Section 125 of Banking and Financial Institution Act 1989 (Act 372) (“BAFIA”)