Small Medium Enterprise Development Bank Malaysia Berhad v Tho Mem Group Sdn. Bhd. (WA-22M-565-09/2022)

THO MEM GROUP SND BHD

IZHAM FITRI BIN ISMAIL

KHAIRUL IZWAN BIN MUSA

MOHD HASHIM BIN MOHD JAN

ISMAIL BIN JANTAN (NRIC NO. 580211-01-5215) ...DEFENDANTS GROUNDS OF JUDGMENT INTRODUCTION [1] A judgement in default of appearance (“JID”) was entered against the 1st, 2nd and 5th Defendants (“D1”, “D2”, “D5” respectively) on 26/2/2022. D1, D2, D5 appealed against that JID. I dismissed the appeal. They now appeal against my decision. BACKGROUND [2] The Plaintiff had agreed to provide the following Facilities to D1:

Commodity Murabahah Term Financing-i (CMTF-i I) RM500,000, vide letter of offer dated 6/1/2016, with D2, D3, D4 standing as guarantors;

(ii) Commodity Murabahah Term Financing-i (CMTF-i II) RM200,000, vide letter of offer dated 4/11/2016, with D2, D5 standing as guarantors;

(iii) Commodity Murabahah Term Financing-i (CMTF-i III) RM2,026,230, vide letter of offer dated 10/7/2017, with D2, D5 standing as guarantors;

(iv) Commodity Murabahah Term Financing-i (CMTF-i IV) RM73,770, vide letter of offer dated 10/7/2017, with D2, D5 standing as guarantors; and

Commodity Murabahah Revolving Financing-i (CMRF-i) RM800,000, vide letter of offer dated 4/11/2016, with D2, D5 standing as guarantors. [3] Having satisfied that D1, D2, D4 and D5 had failed to enter appearance after the expiration of the timeline as provided under the Rules of Court 2012, the learned Senior Assistant Registrar entered the JID against –

D1 for CMTF-i I, CMTF-i II, CMTF-i III, CMTF-i IV, CMRF-i;

(ii) D2 for CMTF-i I, CMTF-i II, CMTF-i III, CMTF-i IV, CMRF-i;

(iii) D4 for CMTF-i I; and

(iv) D5 for CMTF-i II, CMTF-i III, CMTF-i IV, CMRF-i. [4] Vide a separate application before me, the Plaintiff filed for a summary judgment to be entered against D3 for CMTF-i I. I had allowed that application. D3 appealed against that decision. A separate grounds of judgment had been written. FINDING [5] The main grounds cited by D1, D2, D5 application to set aside the JID against them by the learned SAR were:

the JID was irregular as the Writ and the Statement of Claim were not served on them; and

(ii) the Plaintiff’s action against them was prematurely filed as parties are in the midst of settlement negotiation. 1st ground: Irregular JID [6] The law is trite if the JID was obtained irregularly, the JID should be set aside as of right. But if the JID was obtained regularly, then the D1, D2 and D5 has the burden of showing, by their affidavit, that they had a defence on the merits. [7] The above principle is distilled from the decision of the Court of Appeal in Yap Kee Huat & Ors v. Pembangunan Warisan Murni Sejahtera Sdn Bhd & Anor [2008] 4 CLJ 175; [2008] 5 MLJ 112 (CA); [2008] 3 AMR 576; [2008] 1 MLRA 276, where it was held: “[15] It is trite that when considering an application to set aside a judgment in default, the first task is to ascertain whether it is a regular or irregular judgment. If it is an irregular judgment, then the default judgment ought to be set aside ex debito justitiae. If it is regularly obtained, then the principle expounded in Evans v. Bartlam [1937] AC 473 applies - see the judgment of the Federal Court in Hasil Bumi Perumahan Sdn Bhd & Ors v. United Malayan Banking Corp Bhd [2008] 5 MLJ 112 at 121 [1994] 1 CLJ 328;[1994] 1 MLJ

This requires the defendant to show that he has a defence on merits.” [8] The Federal Court in Lai Yoke Ngan & Anor v. Chin Teck Kwee & Anor [1997] 3 CLJ 305; [1997] 2 MLJ 565 (FC); [1997] 3 AMR 2458; [1997] 1 MLRA 284, held that the Defendant "must disclose by affidavit evidence that prima facie he has a defence on the merits. Put in another way, the affidavit must disclose that he has an arguable or triable issue on the merits". [9] Having found D1 to have failed to service its facility according to the Facility Agreements, the Plaintiff through its solicitor issued a letter of demand dated 14/7/2022 against D1, D2 and D5 as shown in Exhibit A8 to the Plaintiff’s Affidavit in Reply affirmed on 23/11/2022 (Enclosure14). The letter was sent to D1, D2 and D5 individually. Subsequently when the timeline of 14 days to comply with the Notice of Demand was not complied with, the Plaintiff’s solicitor issued the Notice of Termination of the Facilities to D1, D2 and D5 vide letters dated 4/8/2022 sent to each of them individually as shown in Exhibit A9 of the same Affidavit. The letters specifically informed them on the termination of the Facilities and demanded for them to pay the total outstanding sum of RM5,107,138.36. [10] As the 14 days set out in the Notice of Termination for D1, D2 and D5 to pay the said sum letters had expired, the Plaintiff then filed the current Writ against the Defendants, which had been regularly served on D1, D2 and D5 as shown in the Affidavit of Service in Exhibit A2 of the same Affidavit. [11] As D1, D2, D5 failed to enter appearances, the Plaintiff filed the application for Judgment in Default to be entered against them. Having satisfied with all the above facts, and that the requisite Certificate of Non Appearance had been filed, the learned SAR entered the JID in default of appearance against D1, D2 and D5 on 26/9/2022. [10] Having considered the evidence above, I am satisfied that the Writ and the Statement of Claim were served on the D1, D2 and D5 in full compliance with the Rules and the provisions of the Facility Agreements. The JID entered against them by the learned SAR was regular and had fully complied with the legal requirements. Therefore, I dismiss this ground. Premature Suit [11] D1, D2 and D5 argued that the Plaintiff filed the action against them prematurely as the Plaintiff and them were in the midst of a settlement negotiation. The negotiation stalled when the Plaintiff requested for an unreasonable settlement sum. D1, D2 and D5 also argued that the Plaintiff’s action was filed against the assurances given by AKPK vide its email dated 10/8/2022 that no legal action will be pursued against the Defendants [12] I noticed that the Bank had allowed rescheduling of the Facilities on 11/6/2020. When there was continued default, letters of reminders and letter of demand had been issued to the Defendants. When the demand was not adhered to, on 15/1/2021 the Bank’s solicitor issued a Notice of Termination. (see letter from Bank dated 16/2/2021 in the Plaintiff’s Affidavit in Support of the JID Application). Following MCO due to Covid- 19, on 19/1/2021 D1 issued a letter to the Plaintiff requesting for moratorium, to which the Plaintiff had agreed. [13] In essence, for the period of January 2021 – August 2021 – there were numerous communications between D1 and the Plaintiff for the monthly payment to be reduced to RM5,000.00 monthly (August 2021 - February 2022). [14] As for the communications between D1 and AKPK, I had perused Exhibit IF-2 to D2’s Affidavit in support of this setting aside application. The evidence showed communications via email between 19/7/2022 and 11/8/2022. [15] The Plaintiff’s counsel issued to D1 the Notice of Demand dated 14/7/2022 (exhibit A-8 to Plaintiff’s AIR) and Notice of Termination of Facility dated 4/8/2022. I noticed that consequent to that, D1 started to actively engaged with AKPK beginning on 19/7/2022. [16] The so-called email from one Rubini S Mohan of AKPK to one Hanis of D1 dated 10/8/2022 merely states “I have forwarded the letter to SME Bank, by right they should withhold all legal action. Let (sic.) wait for their reply.” [17] This email dated 10/8/2022 was issued after the Notice of Termination dated 4/8/2022. There was no document to show when actually AKPK forwarded its letter to SME Bank. There was also no evidence before this Court what was the contents of its letter. [18] With that observation, I conclude that D1 cannot rely on that one-liner statement in the AKPK’s email that “by right they should withhold all legal action” to support its contention that the Plaintiff cannot proceed with its current action against the Defendants. That one-liner statement by AKPK was never an assurance by AKPK that the Plaintiff will not or cannot proceed with legal action against the Defendants. On the contrary, the Defendants should have actively engaged with the Plaintiff to ensure the Plaintiff will not proceed to file its Suit against the Defendants despite the issuance of the Notice of Termination dated 4/8/2022. There was no such evidence before this Court. I therefore dismissed this ground. CONCLUSION [19] Having come to the above conclusions, I dismiss D1, D2 and D5’s application in enclosure 11 to set aside the JID, with costs. Dated : 13 February 2024 -signed- (MOHD RADZI BIN HARUN) Judge High Court of Malaya PARTIES: Solicitor for the Plaintiff: Bibee Noraziah Salleh, Messrs. Azam, Baba & Aqmar, 3-1, Jalan 10/23A, Medan Makmur, Off Jalan Usahawan, Setapak, 53200 Kuala Lumpur. Ref : ABA/L/2890/PROP/SME.CMTF/AH Email : azbaq98@yahoo.com Solicitors for the D1, D2 & D5: Thanusheilla Paneer Selvam, Messrs. Revathi & Partners, No. 1-11, Jalan Cenuk 2, Prima Aveure3, Batu 10, Jalan Puchong, 47100 Puchong, Selangor. Ref : RP/RK/Lit/1096/22 Email : revathipartners@gmail.com Solicitor for the D3: Nasrul Hadi Mat Saad, Messrs. Adnan Sharida & Associates, No. 3-1-1A, 3-2-2A & 2B, Jalan Medan PB2A, Seksyen 9, 43650 Bandar Baru Bangi, Selangor. Ref : ASA/IND/Liabiliti-660/NH/22 Email : litigation@adnansharida.com