Taiping Recovery Sdn Bhd v Bank Perusahaan Kecil & Sederhana Malaysia Berhad (W-02(W)-1867-11/2015)

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1 DALAM MAHKAMAH RAYUAN MALAYSIA (BIDANGKUASA RAYUAN) RAYUAN SIVIL NO: W-02(W)-1867-11/2015 Antara Taiping Recovery Sdn Bhd ….....…Perayu Dan

Schedule

Schedule 11 of the Settlement Agreement represented all the properties as being owned by the 4th Respondent (Sutra Beach Resort) and that Sutra Beach Resort is holding the properties on trust for the benefit of Nor Azah. However, a search on the titles of the properties in 2002 revealed that Sutra Beach Resort was the registered owner of Lot 1143 while Nor Azah was the registered owner of the 4 lots of properties. 10. As it turned out, Nor Azah failed to settle the contra losses as agreed despite demands and Taiping Recovery commenced the suit in the High Court. 6 11. On 11.6.2010, Nor Azah and Taiping Recovery entered into a Consent Judgment in the High Court of Kuala Lumpur before the Judge, the terms of which, are as follows: “By consent of the Plaintiff and the 4th Defendant it is hereby adjudge that the 4th Defendant shall pay RM29,304,802.85 in full and final settlement of the contra losses with no order as to costs and interest.” 12. The 3rd Respondent (Dignityview) and the 4th Respondent (Sutra Beach Resort) were only made parties to the Suit in 2008 when Taiping Recovery discovered 1 out of the 5 pieces of lands (i.e. Lot 1143) had been transferred from Sutra Beach Resort to Dignityview. 13. Dignityview is a company of which Nor Azah’s brother, Zain Shahrer Awin, had incorporated in October 2004. He was a director of the company from October 2004 until 2007. Today, his wife, Esah Ismail, is the main shareholder and director in Dignityview. It was Taiping Recovery’s contention that Zain controls Dignityview through his wife. 14. Sutra Beach Resort is a company controlled by Nor Azah in which, she and her brother, Zain, are directors of the company. 15. As for ISY Holdings Sdn Bhd (7th Defendant in the High Court) it is a company that had intervened in these proceedings after receiving notice of Taiping Recovery’s application for an interim injunction on Lot 1143, on which Sutra Beach Resort is located. ISY Holdings Sdn Bhd claim to own beneficial interest in the 5 pieces of land but had not filed any pleadings nor sought reliefs in the suit. The evidence 7 shows that it had purchased the shares in Dignityview and not the lands. 16. SME Bank is the Bank which had disbursed the loan sum of RM8,000,000.00 to Dignityview for the purposes of redeeming the properties, when Dignityview purchased the 4 lots of properties from Nor Azah and Lot 1143 from Sutra Beach Resort. The Dispute and Claims 17. The dispute which was tried in the High Court involved the competing and overlapping claims by Taiping Recovery, SME Bank and Dignityview in relation to the 5 pieces of land. 18. It is pertinent to note that, on 6.9.1997, Nor Azah had charged the 4 lots of properties by way of a third party charge in favour of Pacific Bank Berhad as security for the financing facilities provided by Pacific Bank Berhad to Sutra Beach Resort. The charge in favour of Pacific Bank Berhad was taken over by Pengurusan Danaharta Nasional Berhad (Danaharta) vide Vesting Order which was registered vide Presentation No. 123/2003 dated 27.8.2003, to recover the sums owed by Nor Azah to Pacific Bank Berhad. 19. Taiping Recovery had notified Danaharta of Nor Azah’s assignment of her interest in the properties to Taiping Recovery and that in the event Danaharta disposed of the properties, Taiping Recovery was to be notified and paid the balance of the proceeds, if any. Danaharta had 8 confirmed in writing to Taiping Recovery’s solicitors that it had taken note of Taiping Recovery’s interest and would duly notify Taiping Recovery of any impending disposal of the said properties. 20. In the year 2007, Prokhas Sdn Bhd, the company set up by the government to manage the residual recovery of Danaharta’s assets informed Taiping Recovery that Nor Azah had been allowed to redeem the properties. It was discovered that Lot 1143 (which was not designated as Malay reserve land) was transferred to Dignityview. 21. As of November 2008, Lot 1143 is registered in the name of Dignityview while the legal title to the properties, Lots 141, 142, 144 and 146 still remains in Nor Azah’s name. There is an injunction in place since 19.6.2009 restraining Nor Azah, her agents and nominees from dealing with the said lands. 22. Taiping Recovery is seeking a relief to enforce the security i.e. the 4 lots of lands and Lot 1143 that it claimed it received from Nor Azah and apply the proceeds from the lands to settle the debts of Nor Azah with Taiping Recovery. 23. Dignityview claimed to be the legal and/or the beneficial and/or the equitable owner of all the properties including Lot 1143 as it claimed it had purchased the said properties from Nor Azah and Sutra Beach Resort. 9 24. SME Bank applied to intervene in the suit, in July 2010 to claim their interest to the lands and sought to register a charge on the 4 properties as security for the loan which it had disbursed to Dignityview, in addition to other securities it has secured. 25. Nor Azah, who is the root cause of the problem, failed to appear during the trial of the suit. The Claim by Taiping Recovery against Nor Azah 26. The claim by Taiping Recovery against Nor Azah revolves on the following issues: i) Whether the Settlement Agreement dated 1.12.1997 entered into between Taiping Recovery and Nor Azah is enforceable in view of the Consent Judgment entered subsequent thereto, and ii) Whether Taiping Recovery can deal in the 4 lots of properties, which are Malay reserve lands. 10 Whether the Settlement Agreement entered into between Taiping Recovery and Nor Azah is enforceable in view of the Consent Judgment entered subsequent thereto? (Paragraphs 8-12 of the supplementary Memorandum of Appeal) 27. The Settlement Agreement which was executed between Taiping Recovery and Nor Azah on 1.12.1997 has described the properties which are the subject of the settlement as follows in its Recital (V1): “(VI) Whereas the person(s)/party(ies) described in Item 1 of Schedule 1 hereto (Hereinafter called “the Property’s Owner”) is/are the legal and registered owner of the Properties particulars of which are listed in Item 1 of the Schedule hereto (hereinafter referred to as “the properties”) and the property’s Owner is holding the Properties on Trust for the benefit of Datuk Nor Azah.” Item 1 of the Schedule to the Settlement Agreement described the Properties as “Lot 141, 142, 144, 146 and PT 1143 (known as Sutra Beach Resort)”, however there is nothing stated about who is the owner of the properties. The Settlement Agreement recognised that the properties were pledged to Pacific Bank Berhad, as evidenced from its Recital V11 thereof. It is further provided in Clause 2 of the Settlement Agreement that: “In consideration of Taiping Securities agreeing to the covenants as stipulated in the above Recital (V), Datuk Norazah hereby absolutely 11 assign all her interest and claim onto the Properties to Taiping Securities accepts this assignment but subject to covenants between the Institution and Datuk Nor Azah as stipulated in the above Recital (VII)” 28. In the event that the realisation of the Denko shares in Nor Azah’s account with Taiping Recovery is insufficient to settle her debt which was due to Taiping Recovery, and in the event that Datuk Nor Azah failed to pay the due sum within 7 days, Clause 3 (c) of the Settlement Agreement, provides, amongst others as follows: “In the event that Datuk Nor Azah shall fail to pay the said deficient sum or any part thereof within the said period of seven days then it shall be lawful for Taiping Securities to exercise at its absolute discretion of all the following rights and powers:- (i) To sell and/or assign the Properties or any part or parts thereof as the absolute unencumbered owner thereof at such price or prices and in such manner as Taiping Securities shall in its absolute discretion think fit or otherwise and to apply the proceeds of sale in or towards the satisfaction of the amount due or any part thereof…..” 29. Despite Taiping Recovery having knowledge that the properties were pledged to Pacific Bank Berhad as securities for the financing granted to Sutra Beach Resort, there was no proof adduced by Taiping Recovery of any consent obtained from the latter, for the Settlement Agreement to be entered into, particularly in reference to Clause 3 (c) of the same. As the 4 lots of properties have been charged to Pacific Bank Berhad since 1994, it was not permissible for Nor Azah to further 12 encumber the 4 lots of properties by way of an assignment without the consent of the 1st chargee, Pacific Bank Berhad. 30. When Danaharta took over the charge vide Vesting Order in 2003, Danaharta had, from the date of the Vesting Order acquired all Pacific Bank Berhad’s present and future rights, title and interest in and disclosed obligations with respect to the 4 lots of properties, free from any encumbrance or claim save for any registered interest prevailing as at the vesting date and disclosed claim (refer to section 14 (3) of the Pengurusan Danaharta Nasional Berhad Act 1998). 31. The claim by Taiping Recovery over the 4 lots of properties is its alleged interest pursuant to the Settlement Agreement, which is neither a registered interest nor a disclosed claim. As there was no proof of any consent obtained from Pacific Bank Berhad for the assignment of the 4 lots of properties by Nor Azah to Taiping Recovery, it negates any possibility that Taiping Recovery’s alleged interest over the 4 lots of properties is a disclosed claim. 32. Further, a Consent Judgment was recorded on 11.6.2010 between Taiping Recovery and Nor Azah before the Judge at the Kuala Lumpur High Court, the terms of which, among others, have been that Nor Azah shall pay Taiping Recovery RM29,304,802.85 in full and final settlement of the contra losses with no order as to costs and interest. 33. No reference, reservation nor qualification was made to any of the provisions of the Settlement Agreement, in particular Clause 3 (c), 13 when this Consent Judgment was entered into. The terms in the Consent Judgment are clear and unambiguous i.e. that parties agree that Nor Azah is to pay the stipulated sum in the Consent Judgment and that, it would amount to a full and final settlement of the contra losses. 34. Both parties were represented by lawyers as evidenced from the Notes of Proceedings. Since both parties have entered into the Consent Judgment, they are therefore bound by the terms. Hence, the 5 properties are no longer the subject matter of settling the debt of Nor Azah which is due to Taiping Recovery. 35. Therefore, the obligations of Nor Azah under Clause 3 (c) of the Settlement Agreement vis-à-vis the 5 properties, no longer prevails in view of the Consent Judgment entered into on 11.6.2010. Taiping Recovery’s claim against Nor Azah would be just monetary in nature to the tune of RM29,304,802.85. 36. Initially, the pleaded claim of Taiping Recovery was for specific performance of the Settlement Agreement. Subsequently, when Taiping Recovery realised the 4 lots of properties are Malay reserve lands and hence subject to restrictions in dealings, it applied for an amendment to its claim which was allowed by the Court on 11.7.2011 (vide Enclosure 217) for final relief (in particular paragraph 4A) for the transfer of the 5 Lots of properties to a Malay person or a Malay holding company nominated by Taiping Recovery in specific performance of the Settlement Agreement dated 1.12.1997. 14 37. However, as this amendment was only made after the Consent Judgment dated 11.6.2010 was entered between Taiping Recovery and Nor Azah, the performance of the Settlement Agreement dated 1.12.1997 is no longer capable of being enforced. The amendment to the claim by Taiping Recovery dated 11.7.2011 would not have any effect, as the Settlement Agreement had been overtaken by the terms of the Consent Judgment entered into between Taiping Recovery and Nor Azah on 11.6.2010. 38. As the learned trial Judge had pointed out in her judgment, Taiping Recovery’s remedy lies in filing its proof of debt with the Insolvency Department as Nor Azah had been adjudicated a bankrupt. Essentially, Taiping Recovery is an unsecured judgment creditor of Nor Azah in respect of the judgment debt which is provable in the bankruptcy of Nor Azah. As an unsecured judgment creditor, Taiping Recovery’s right is therefore to lodge proof of debt in the bankruptcy of Nor Azah (refer to section 40 (3) of the Bankruptcy Act 1967). 39. We therefore find that the learned trial Judge did not err in her findings that Taiping Recovery is estopped from making a claim on the 5 properties in specific performance of Clause 3 (c) of the Settlement Agreement as Taiping Recovery has entered into and obtained Consent Judgment against Nor Azah on 11.6.2010. This would also mean that Taiping Recovery is estopped from the relief sought vide amendment at paragraph 4A of its pleadings as against Nor Azah, to enforce the Settlement Agreement. Paragraph 4A of the pleadings is set out at paragraph 47 of this Judgment. 15 Whether Taiping Recovery can deal with the 4 lots of properties? (Paragraphs 8-12 of the supplementary Memorandum of Appeal) 40. Although we have made a finding that Taiping Recovery is estopped from making a claim for specific performance of the Settlement Agreement against Nor Azah due to the terms of the Consent Judgment entered into between Taiping Recovery and Nor Azah, there is yet another issue which is of significance which has been raised by parties in their submission. 41. This is in respect to the issue, as to whether Taiping Recovery is a “Malay holding company”. It is not in dispute that the 4 lots of properties are Malay reserve lands which are subject to the Malay Reservations Enactment. 42. It is also an undisputed fact (also as confirmed by SP 1 and SP 2) that Taiping Recovery is not a Malay holding company within the meaning of Section 2 of the Malay Reservations Enactment. 43. Sections 9 (i) and 12 of the Malay Reservations Enactment restrict dealings in Malay reserve lands. Lot 1143 is not a Malay reserve land, as aforesaid, hence the argument in relation to the present issue is inapplicable to Lot 1143, it will just be confined to the 4 lots of properties (i.e. Lot 141, 142, 144 and 146). 44. In relation to Section 9 (i) of the Malay Reservations Enactment, it provides: 16 “(i) Subject to the provisions of sub-sections (ii) and (iii) of this section and sections 11 and 19, no Malay holding shall be transferred, charged, leased or otherwise disposed of to any person not being a Malay, and no memorandum of transfer, charge or lease in contravention of this section or any other sections in this Enactment shall be capable of registration in any Land Office or registry of Titles.” Section 2 of the same defines “Malay holding” as: “Malay holding” includes- (a) any registered interest of a Malay or a Malay holding company as proprietor or co-proprietor in any alienated country land comprised in any holding not more than 10 acres in area; (b) any recorded interest of a Malay as occupier or co-occupier in any country land comprised in any holding not more than 10 acres in area and occupied under a recorded possessory claim under the Settlement Enactment; (d) any registered interest of a Malay or a Malay holding company as proprietor or co-proprietor, and any recorded interest of a Malay as occupier or co-occupier under a recorded possessory claim under the Settlement Enactment, in any town or village land alienated under the Land Enactment or occupied under the Settlement Enactment and included in a Malay Reservation duly declared and gazette under the provisions of this Enactment provided, that no such interest shall be deemed to be a Malay holding until there shall have been registered against the register document of title for such land a requisition in the Form A in the First Schedule as provided in Section 6;” 17 Hence Clause 2 of the Settlement Agreement which was intended to assign the 4 lots of properties to Taiping Recovery, as security for the debt due to Taiping Recovery, clearly contravenes the Malay Reservations Enactment which imposes absolute prohibition that no Malay holding shall be transferred, charged, leased or otherwise disposed of to any person not being a Malay. Clearly, as Taiping Recovery is not a Malay holding company, the intended assignment of the 4 lots of properties is therefore prohibited by section 9 (i) of the Malay Reservations Enactment. Likewise, Clause 3 (c) of the Settlement Agreement which purportedly gives power to Taiping Recovery to deal with the 4 lots of properties is also prohibited by the provisions of the same. Based on authorities, the term “…or otherwise disposed of….” which are contained in the Malay Reservations Enactment includes the prohibition on assignment of properties to Taiping Recovery by Nor Azah. (refer to Fauziah Ismail & Ors v Lazim Kanan & Orang-Orang yang Tidak Di ketahui [2012] 7 CLJ: Haji Hamid bin Ariffin & Anor v Ahmad bin Mahmud [1976] 2 MLJ 79; Wan Ismail & Anor v Musa Mat Jani & Anor [1990] 3 CLJ Rep 340). Such dealings and assignment on the 4 lots of properties renders it null and void and pursuant to section 21 (i) of the Malay Reservations Enactment which provides that such dealings or disposal whatsoever and all attempts to deal in or dispose of any Malay holding contrary to the provisions of the said Enactment shall be null and void. 18 45. When SP 1 and SP 3 were cross examined, they testified that Taiping Recovery was given a Power of Attorney pursuant to Clause 4 of the Settlement Agreement. SP 4 testified and confirmed that Taiping Recovery has dealt with the 4 lots of properties in its capacity as an attorney pursuant to the said Power of Attorney. However, section 12 of the Malay Reservations Enactment provides: “12. Restriction as to dealings by attorneys Every memorandum of transfer, charge or lease of a Malay holding which is executed on behalf of the proprietor thereof by any person who purports to act as attorney of such proprietor shall be void and no such memorandum of transfer, charge or lease shall be capable of registration in any Land Office or Registry.” Therefore, Clause 4 of the Settlement Agreement which purportedly gives the power of attorney to Taiping Recovery to deal with the 4 properties including the power to sell and transfer the 4 properties in the event of default, clearly contravenes section 12 of the Malay Reservations Enactment, which renders it void and unenforceable. 46. It appears that the object and purpose of the Settlement Agreement and the power of attorney provided therein, are unlawful as it contravenes the express provisions of the Malay Reservations Enactment. Consequently, the Settlement Agreement and the power of attorney as provided therein are unlawful and illegal which render them void pursuant to: 19 i) section 24 (a) and (b) of the Contracts Act 1950; ii) section 57 of the Contracts Act 1950 which provides for an agreement to do an impossible act. 47. Taiping Recovery must have realized the hurdle that it had to surmount with regards to the provisions of the Malay Reservations Enactment, when it sought an amendment to its relief at paragraph 4A of the Statement of Claim, whereby it sought the following relief against Nor Azah: “That the fourth Defendant do satisfy the contra loss by transferring the pieces of land known as Lots 141, (GM141), 142 (GM161), 144 (GM254) and 146 (GM166) in Mukim Merang, daerah Setiu, tempat Wakaf Ru Tapai, Negeri Terengganu (“the properties”) to a Malay person or Malay holding company nominated by the Plaintiff (Taiping Recovery) in specific performance of the Settlement Agreement.” Essentially by this amendment, Taiping Recovery is seeking the assistance of the Court in enforcing the Settlement Agreement to compel Nor Azah to satisfy the Consent Judgment in the sum of RM29,304,802.85 to transfer the 4 properties to a Malay person or a Malay holding company nominated by Taiping Recovery. We are of the view that this relief sought by Taiping Recovery is a back door way of circumventing the purport and intent of the Malay Reservations Enactment, which this Court should not and would not lend its hand to achieve such an objective. If this is not an abuse of process of the court, we do not know what is. Clearly, the amended 20 relief sought in paragraph 4A of the Amended Statement of Claim is designed to circumvent the express prohibitions of the Malay Reservations Enactment. Therefore, Taiping Recovery’s claim/interest over the 4 lots of properties which is premised upon the Settlement Agreement is illegal and void and is thus unenforceable. 48. As far as Lot 1143 is concerned, the registered proprietor was originally Sutra Beach Resort. Pursuant to the 1st Sales and Purchase Agreement dated 10.11.2005 between Dignityview and Sutra Beach Resort for RM8,000,000.00, Sutra Beach Resort Sdn Bhd had sold and transferred Lot 1143 to Dignity View and the transfer has been perfected and duly registered. Taiping Recovery claimed that pursuant to the Settlement Agreement, Nor Azah had assigned Lot 1143 to Taiping Recovery. However, Nor Azah is not the registered proprietor of Lot 1143 and hence does not have the right to deal nor create an assignment of Lot 1143 in favour of Taiping Recovery. Nor Azah clearly has no basis to assign the property to Taiping Recovery. Hence Taiping Recovery’s claim/interest over Lot 1143 also fails on this account. 49. Premised on the above, the claim by Taiping Recovery against Nor Azah, Dignityview and Sutra Beach Resort falls. The learned trial Judge did not err when she dismissed the claim by Taiping Recovery against the 3 Respondents herein. 21 50. The above takes care of the grounds raised by the Appellant in paragraphs 8-12 of the supplementary Memorandum of Appeal. The Claim by Dignityview Whether Dignityview is a “Malay”? (Paragraph 1 of the Supplementary Memorandum of Appeal) 51. It is not in dispute that Dignityview entered into 2 Sales and Purchase Agreements to purchase the 5 properties. 52. The 1st Sales and Purchase Agreement is in relation to Lot 1143, which was dated 10.11.2005, between Dignityview and Sutra Beach Resort for RM8,000,000.00 which had been duly transferred and perfected. Dignityview created a 1st party charge over the Lot 1143 and charge registered in favour of SME Bank. 53. The 2nd Sales and Purchase Agreement is also dated 10.11.2005 between Dignityview and Nor Azah whereby Nor Azah agreed to sell the 4 properties for RM2,000,000.00. 54. On 18.11.2005, SME Bank granted financing facility of RM9,000,000.00 to Dignityview (to redeem the outstanding debt with Danaharta who was the chargee of the 5 lots properties). The charge on the 5 lots were redeemed when Lot 1143 was sold by Sutra Beach 22 Resort (Charged in favour of SME Bank) to Dignityview and 4 lots of properties were sold by Nor Azah to Dignityview. 55. Taiping Recovery claims that Dignityview does not fall within the definition of “Malay” of the Malay Reservations Enactment. 56. The learned trial Judge made a finding that the transfer of Lot 1143 by Sutra Beach Resort to Dignityview is valid (refer to para 64 of the learned Judge’s grounds of judgment). The learned trial Judge premised her findings on the “Notice of Resolution (Borang 11) Article 2 of the Article of Association of Dignityview” which had amended Article 2 on 2.2.2006 by adding in paragraph 2, new paragraphs i.e. paragraph 2(e), 2(f), 2(g), 2(h) which reads verbatim as follows: “ALTERATION OF ARTICLE OF ASSOCIATION IT IS HEREBY RESOLVED: THAT the provisions of the Article of Association be amended in the following manner: “New clause 2 (e), (f), (g) & (h) be added to clause 2 of the Article of Association to be read as follows: (e) He is a Malay or a Malay Company or Corporation as defined in these Article. (f) He will not hold the share registered in his name or any part of them as trustee or agent or otherwise for the benefit of any person who is not a Malay or a Malay Company or Corporation as defined in these Article; (g) He will not permit himself to be under the control of a person who is not a Malay or a Malay Company or Corporation as defined in these 23 Article in the exercise of his rights and privileges and in the performance of his duties pursuant to these Article. (h) The shares issued will be 100 % Malay only or a Malay holding Company whose share are wholly held by Malay. Any transfers of each share is prohibit to any person who is not a Malay.” 57. Based on the aforesaid amendment to the Articles of Association of Dignityview the learned trial Judge found that, when Dignityview entered into the Sales and Purchase Agreements on the 4 lots of properties, Dignityview is a Malay holding company under the Malay Reservations Enactment. Hence the learned trial Judge found that there is no legal restriction for Dignityview to enter into the said Sales and Purchase Agreement with Nor Azah in dealing with the 4 lots of properties which are Malay reserve lands. 58. However we disagree with the findings of the learned trial Judge in this respect for the reasons following hereto. 59. Section 2 of the Malay Reservations Enactment defines a “Malay Holding Company” as follows: “Malay holding company” means a company incorporated pursuant to any written law for the time being in force relating to companies- (a) all members of which are Malays: b) the articles of association of which prohibit the transfer of its shares to any person who is not a Malay; and (c) one of the objects of which is to deal in Malay holdings; and a Malay holding company, as so defined, shall, for the purposes of paragraphs (a) and (b), be deemed to be a Malay;” 24 Reading the above provision, it appears that all the paragraphs (a), (b) and (c) of section 2 of the Malay Reservations Enactment must be fulfilled before a company can be categorized as a “Malay holding company” under the Enactment due to the usage of the word “and” at the end of paragraph (b). In other words, paragraphs (a), (b) and (c) of section 2 of the Malay Reservations Enactment must be read conjunctively. (Refer to :  Yew Lean Finance Development (M) Sdn Bhd v Director of lands & Mines, Penang [1977] 2 MLJ 45 at page 48;  Menteri Besar Negeri Pahang Darul Makmur v Seruan Gemilang Makmur Sdn Bhd [2010] 5 CLJ 123]. 60. Dignityview asserts that it is a Malay holding company capable of receiving good title over the properties. In determining whether it is so, the crucial evidence lies on Dignityview’s : i) Memorandum and Articles of Association; and ii) Form 11 i.e. Notice of resolution for the addition of Dignityview’s objective and amendment of Dignityview’s Articles of Association which was lodged with the Companies Commission of Malaysia. The object of a company is found in its Memorandum of Association. 25 (Refer to :  Section 18 of the Companies Act 1965;  Arab Malaysian Finance Bhd v Meridian International Credit Corporation Ltd London [1993] 3 MLJ 193 at page 203;  Director General of Inland Revenue v Lahad Datu Timber Sdn Bhd [1978]1 MLJ 203 at page 206] Paragraph 3 of the original Memorandum of Association of Dignityview does not allow Dignityview to be a Malay holding company. Clearly, when Dignityview was incorporated it was never in contemplation that Dignityview was to be a Malay holding company. The Memorandum of Association of Dignityview or the amendment thereto made via Notice of Resolution on 2.2.2006 does not contain “one of the objects of which is to deal in Malay Holdings” as required by paragraph (c) of section 2 of the Malay Reservations Enactment. The amendment which included as its object reads: “To acquire and take over all or any of the assets and liabilities of Sutra Beach Resort Sdn Bhd for enabling the company to continuously carry on with the activities as that carried out by the said business,” 61. The issue before us is whether the insertion of the abovementioned “objects” qualifies Dignityview to be a Malay holding company as defined under section 2 of the Malay Reservations Enactment. We found that the amendment only extends to allowing it to take over assets and liabilities of Sutra Beach Resort. Sutra Beach Resort is not 26 a Malay holding company and not the registered owner of the 4 lots of properties. The registered owner of the 4 lots of properties is Nor Azah. The 4 lots of properties are not assets and liabilities of Sutra Beach Resort. The object inserted does not extend to and qualify Dignityview to be a Malay holding company as defined under the Malay Reservations Enactment. It does not set out as its object to deal with Malay holdings as defined in the Malay Reservations Enactment. 62. In view that Sutra Beach Resort is also not a Malay holding company, it is thus not capable of dealing in Malay holdings. Hence the insertion of Dignityview’s object clause therefore cannot extend to mean something far more and beyond the stated object, i.e. to only acquire the assets and liabilities of Sutra Beach Resort, and this cannot include the acquiring of the 4 lots of properties, which are Malay reserve lands. The phrase “to enable the company (Dignityview) to continuously carry on with the activities as that carried out by the said business (Sutra Beach Resort)” cannot extend to mean that it now allows Dignityview to deal in Malay holdings simply because Sutra Beach Resort:- i) was not in the business of dealing in Malay Holdings; ii) is not the registered proprietor of the 4 lots of properties. 27 This point was never addressed by the learned trial Judge in her grounds. 63. Further, part of the Memorandum of Association shows that one of the directors of Dignityview is not a Malay person (refer to page 7 of the Core Bundle), thus defeating the requirement of para (a) of the definition of “Malay holding company” under section 2 of the Malay Reservations Enactment. 64. In any event, even if assuming for a moment, that amendment to the Memorandum of Association of Dignityview places Dignityview as a Malay holding company within the definition of the Malay Reservations Enactment (which we have made a finding that it does not), this would still not remedy the flaw that Dignityview is not a Malay holding company on the date when the Sales and Purchase Agreement was entered into on 10.11.2005. The amendment to the Memorandum of Association of Dignityview was only made on 2.2.2006 , i.e. after the Sales and Purchase agreement was entered into, on 10.11.2005 between the parties. This means, at the time when the Sales and Purchase Agreement was entered into between Dignityview and Nor Azah, Dignityview was not a Malay holding company within the definition of the Malay Reservations Enactment. We noted too that it was never submitted nor suggested before us that the amendment to the Memorandum of Association of Dignityview was meant to act retrospectively. 28 65. Therefore, the learned trial Judge erred when she made a finding that the transfer of the 4 lots of property to Dignityview by Nor Azah is valid as Dignityview is a Malay holding company pursuant to the amendment to its Memorandum of Association made on 2.2.2006, without considering paragraphs (a ) and (c) of the definition of “Malay holding company” under section 2 of the Malay Reservations Enactment. Premised on the above, Dignityview does not have any objective within its Memorandum of Association which permits it to deal in Malay holdings and accordingly Dignityview is not a Malay holding company within the definition of the Malay Reservations Enactment. 66. Therefore the learned trial Judge’s finding that Dignityview is a Malay holding company and can deal with Malay reserve lands is plainly wrong. When did the date of the prohibition in section 9 of the Malay Reservations Enactment on the transfer of the properties take effect? 67. Section 9 (i) of the Malay Reservations Enactment restricts transfers, charges and leases of Malay reserve lands to a non Malay. However, a Malay holding may be transferred to certain specified bodies with the approval of the Sultan in Council (Refer to section 9 (iii) and (iv) of the same). 68. Section 21 of the same specifically provides that all attempts to deal with Malay holdings which is contrary to the provisions of the 29 Malay Reservations Enactment shall be null and void. The words “all attempts…” must necessarily mean that the prohibition is at the point when parties entered into the Sales and Purchase Agreement . It cannot be at the point of registration of the transfer. To suggest otherwise would be contrary to the express provisions of section 9 and section 21 and which would defeat the whole purpose and intention of the legislature in protecting Malay reserve lands (refer to Fauziah Ismail & Ors v Lazim Kanan & Orang-Orang Yang Tidak Di Ketahui [2013] 7 CLJ 37 at page 48-49 at paragraphs 18- 23; Robert Lee @ Robert Seet & Anor v Wong Ah Yap & Anor [2007] 4 MLJ 393 at page 405: Wan Ismail & Anor v Musa bin Mat Jani & Anor [1990] 3 MLJ 178 at page 179). 69. Accordingly, when Dignityview entered into the Sales and Purchase Agreement to purchase the 4 lots of properties from Nor Azah, it is prohibited from doing so, as it is not a Malay holding at the time of the execution of the Sales and Purchase Agreement. Therefore, the Sale and Purchase Agreement for the transfer of the 4 lots of properties is prohibited by section 9 (i) read together with section 21 and is therefore invalid and void pursuant to section 24 (a) and (b), section 25 of the Contracts Act 1950. 30 The Claim by SME Bank against Dignityview SME Bank’s claim against Dignityview for the registration of Charge in relation to the properties in its favour (Paragraph 2 of the supplementary Memorandum of Appeal) 70. The sales and purchase of the properties is premised on the terms of the loan agreement entered into between SME Bank and Dignityview and the fact that SME Bank had disbursed the loan to Dignityview. 71. The claim by SME Bank revolves on the issue of whether SME Bank can receive a charge from Dignityview. 72. There is no issue that SME Bank is a Malay holding company as per P23, i.e. an amendment to the 2nd Schedule to the Malay Reservations Enactment made on 1.10.2007 through a Gazette Notification dated 25.10.2007, where SME Bank was included in the list in the 2nd Schedule so as to comply with section 9 of the Malay Reservations Enactment. This amendment took effect on 15.2.2006 which was before the Charge on the 5 lots of properties was registered on 28.12.2006. 73. We have made a finding earlier that Dignityview does not have the right to deal with the 4 lots of properties, it being not a Malay holding company under section 2 of the Malay Reservations Enactment. The Sales and Purchase Agreement between Dignityview and Nor Azah 31 with regards to the 4 lots of properties is null and void as it contravenes the Malay Reservations Enactment. Therefore, Dignityview does not possess a good title over the 4 lots of properties. Consequently, SME Bank cannot secure its charge over the 4 lots of properties. 74. Further, evidence show that SME Bank had disbursed the loan to Dignityview in April 2006 for the redemption of the 5 properties despite it being fully aware that the terms and conditions precedent as stipulated by SME Bank itself have not been met by Dignityview. RM8,000,000.00 was disbursed in April 2006 although it was within the knowledge of SME Bank that the security documents vis-à-vis the 5 pieces of properties had not been perfected. There was no explanation by SME Bank with regards to this issue. 75. As can be seen in RR Jilid 8 at page 1247-1249, on 13.4.2006, SME Bank informed Dignityview that it granted an extension of time until 31.5.2006 for Dignityview to complete/perfect the security documents, failing which the offer for loan will automatically be cancelled. However, SME Bank did not deem the offer cancelled when Dignityview failed to perfect the security documents despite the expiry of the extension period. 76. It is to be further noted that Clause 6 of SME Bank’s Letter of Offer dated 18.11.2005 states that SME Bank had imposed a special condition in its offer which reads: 32 “Pengeluaran wang boleh dilaksanakan sebelum syarat 5 (c), gadaian disempurnakan dengan syarat pengesahan daripada Jabatan Undang-Undang Bank ini bahawa kaveat persendirian telah dimasukkan ke dalam surat hak milik hartanah yang dicadangkan dibiayai oleh bank ini.” 77. There was no evidence of any private caveat lodged upon the properties prior to disbursing the loan, and neither was there any explanation by SME Bank for this omission on its part. 78. Section 6.01 of the Loan Agreement between Dignityview and SME Bank stipulates that the following event (amongst others) is specified as a condition precedent to the disbursement of the loan: “This (Loan) Agreement and all other securities hereinbefore referred to which are required to be registered shall have been presented for registration with such registries as the Bank may deem necessary or expedient;” 79. However the charge was presented for registration in December 2006 whilst the loan was disbursed to Dignityview in April 2006, 8 months earlier. No explanation was given by SME Bank as to why this was so. It appears that it had waived the fulfilment of its own terms and condition precedent before disbursement of the loan. Therefore, we are of the view that by this act of waiver by SME bank of its own condition precedent, SME bank is estopped and has no basis to assert its rights now to register a charge over the properties. Hence the claim by SME Bank must fail. 33 80. Therefore, premised on our findings (that Dignityview is not a Malay holding company and that SME Bank had waived its rights when it disbursed the loan without fulfilling the condition precedent), the learned trial Judge clearly erred in her findings in allowing the claim by SME Bank against Nor Azah i.e.: i) SME Bank’s claim for the transfer of the 4 lots of properties to Dignityview; and ii) SME Bank’s claim for the charge on the said properties to be registered in its favour. The Counter Claim of Dignityview against Nor Azah (Paragraph 1 of the Memorandum of Appeal) 81. The counter claim by Dignityview against Nor Azah is, for interalia, a declaration that a valid Sale and Purchase Agreement has been executed between Dignityview and Nor Azah on 11.10.2005 and that Dignityview is the rightful owner of the 4 lots of properties and that Nor Azah shall execute a transfer form to transfer the 4 lots of properties to Dignityview. 82. However, Dignityview, not being a Malay holding company is in no position to purchase the 4 lots of properties, as it would contravene section 9 of the Malay Reservations Enactment. Consequently, the Sales and Purchase Agreement that was entered between Dignityview 34 and Nor Azah for the purchase of the 4 lots of land is therefore null and void. 83. As for Lot 1143, the land is not a Malay reserve land. The sale and purchase has been completed and the land has been transferred to Dignityview. Sutra Beach Resort Sdn Bhd has received the RM8,000,000.00 being full payment for the sale of the Lot 1143 to Dignityview. Whether the Sales and Purchase Agreement between Nor Azah, Sutra Beach Resort with Dignityview for Lot 1143 was designed to defeat the claims by Taiping Recovery? (Paragraph 3 of the supplementary Memorandum of Appeal) 84. The learned trial Judge did not accept the argument by Taiping Recovery that the sales and purchase transaction between Nor Azah and Dignityview was not done bona fide and it was a conspiracy to defeat the claims by Taiping Recovery. The reason advanced by Taiping Recovery is that Zain, who is a director of Dignityview is the younger brother to Nor Azah and that the 4 lots of properties were sold at below the prevailing market price compared to the valuation in IDP 8 which suggested the market price to be at around RM22,000,000.00. (Refer to paragraph 74 of the grounds of judgment). 85. Taiping Recovery alleged that Dignityview has acquired the properties to defeat the creditors, and that arising from its equitable interest in 35 the 4 lots of properties and Lot 1143 under the Settlement Agreement, the transfer from Sutra Beach Resort to Dignityview is tainted with fraud and thus invalid. 86. However, the learned trial Judge found that there is no proof or basis for such an argument by Taiping Recovery and that the maker of IDP8 was never called, hence she did not attach much weight on the evidence of IDP8. The learned trial Judge found that the sales and purchase transaction is a valid transaction and that valuable consideration was received. 87. We find that the learned trial Judge was not plainly wrong in her findings. We therefore agree with the learned trial Judge, in that there is no proof to support the contention of the purported fraud by Dignityview or that the sales and purchase transaction was not done bona fide. However, we disagree that the sale and purchase of the 4 lots of properties is valid for the reason that Dignityview is not a Malay holding and hence is prohibited by the Malay Reservations Enactment to deal with the 4 lots of properties. Crucial witness pertaining to the execution of the Sales and Purchase Agreement between Nor Azah, Sutra Beach Resort and Dignityview was not called to give evidence (Paragraph 7 of the supplementary M emorandum of Appeal) 88. Taiping Recovery alleged that SD 1, Mohd Badaruddin bin Ismail has given evidence pertaining to the Sales and Purchase transaction 36 despite him not having knowledge on the matter. Nor Azah, a crucial witness was not in court to testify. 89. However, SD 1 disagreed that he has no knowledge on the matter and there was no conflicting evidence of any kind produced in court to discredit the evidence of SD 1. We are of the view that the testimony provided by the witness is contemporaneous with the documents produced. In any event this is not a crucial point or ground that would have a determining influence on the validity and enforceability of the Settlement Agreement, of which Taiping Recovery is seeking for relief. Conclusion 90. In summary we therefore make the following Orders: (i) As far as the claim by Taiping Recovery against Nor Azah (2nd Respondent), Dignityview (3rd Respondent) and Sutra Beach Resort (4th Respondent), we upheld the decision of the learned trial Judge who had dismissed the said claim. (ii) As far as the claim by SME Bank (1st Respondent) against Nor Azah, we set aside the order of the High Court which had allowed its claim (i.e. a claim for a declaration that Nor Azah is liable to transfer the 4 lots of properties to Dignityview and a mandatory injunction that Nor Azah shall transfer the 4 lots of properties to Dignityview). 37 (iii) As far as the claim by SME Bank against Dignityview, we set aside the order of the High Court which had allowed the claim (i.e. a claim for a declaration that a valid Sale and Purchase Agreement has been executed between Dignityview and Nor Azah on 10.11.2005 and a specific performance that Dignityview shall create and register a first party charge over the 4 lots of properties in favour of SME Bank upon the transfer of the 4 properties to Dignityview). 91. In the upshot, we therefore allow this Appeal in part accordingly with no order as to costs. Parties to bear their own costs. Deposit is refunded to the Appellant. Signed by: Zabariah Mohd Yusof Judge Court of Appeal Malaysia Date: 22.11.2017 38 COUNSEL: See Jooi Hong & Kaylee Tan for the Appellant (P1) Messrs Belden S. Maniarasan & Fatin Nadhirah for the 1st Respondent (SME-P2) Messrs Adam Abdullah & Mani Dato Jasbeer Singh & Revathi K for the 3rd Respondent (Dignity View-D5) Messrs Jasbeer Nur & Lee Vasugi Vasuthavan for the 5th Respondent (ISY Holdings-D7) Messrs Syed Alwi, Ng & Co.