Tan Cheong Hoor v Public Bank Berhad (6463-H) (A-02(NCVC)(A)-2595-12/2017)

1 DALAM MAHKAMAH RAYUAN MALAYSIA (BIDANG KUASA RAYUAN) RAYUAN SIVIL NO.: A-02(NCVC)(A)-2595-12/2017 ANTARA Tan Cheong Hoor (No. K/P : 660807-02-5641) Tan Lie Ping (No. K/P : 721202-08-5648) … PERAYU PUBLIC BANK BERHAD (6463-H) … RESPONDEN [DALAM MAHKAMAH TINGGI MALAYA DI TAIPING, PERAK SAMAN PEMULA NO: AB-24NCVC-79-07/2017 2 Aturan-Aturan 7, 28 dan 83, Kaedah-Kaedah Mahkamah 2012 Seksyen 8(2A) Akta Kebankrapan 1967 Seksyen 41 Akta Spesifik Relief 1950 Gadaian No. 0799SC2009050502 hartanah yang dipegang di bawah no. hakmilik 61490 Lot 11466 Mukim 12, Daerah Barat Daya Pulau Pinang 3 Gadaian No. 802/2010 hartanah yang dipegang di bawah no. hakmilik HSM 2388 PT 13680 Mukim Pengkalan Kundor Kota Setar Negeri Kedah Deed of Assignment bertarikh 1/09/2006 dan hartanah no. yang dikenali sebagai Parcel No. 3A, Storey No. 02, Bangunan No. IE, yang beralamat 1B-02-3A, Jalan RU Satu, Bandar Baru Ayer Hitam 11500 Pulau Pinang Seksyen 133 Akta Perkhidmatan Kewangan 2013 4 Perkara 8(1) Perlembagaan Persekutuan Seksyen 417 dan 418 Kanun Tanah Negara 1965 ANTARA Tan Cheong Hoor (No. K/P: 660807-02-5641) Tan Lie Ping (No. K/P: 721202-08-5648) … PLAINTIF-PLAINTIF PUBLIC BANK BERHAD (6463-H) … DEFENDAN 5 CORUM: VERNON ONG LAM KIAT, JCA (now FCJ) YEW JEN KIE, JCA HAS ZANAH BINTI MEHAT, JCA JUDGMENT OF THE COURT INTRODUCTION [1] The appellants filed the Originating Summons (OS) in the High Court to inter alia, challenge the foreclosure of two properties by the defendant bank. The High Court dismissed the appellants’ claim. This is the appellant’s (1st and 2nd plaintiffs in the High Court) appeal. For convenience, the parties shall be referred to as they were in the High Court. SALIENT FACTS [2] In 2005, the 1st and 2nd plaintiffs obtained a housing loan of RM90,971.00 from the defendant (‘Housing Loan’) to finance the purchase of an apartment. The Housing Loan was secured under a Deed of Agreement over the apartment. [3] In 2009, the defendant granted to Lakudang (M) Sdn Bhd (‘Lakudang’) a fixed loan, an overdraft facility and a trade bills facility 6 amounting in total to RM1.1m (collectively referred to as ‘Business Facilities’). The Business Facilities were secured by (i) guarantees by the 1st plaintiff and one Tan Cheong Yuen, (ii) a charge created by the 1st and 2nd plaintiffs over a double-storey house (‘Penang Property’) located in Bayan Lepas, Penang (‘Penang Charge’), and (iii) a charge created by the 1st plaintiff and one Tan Cheong Sin over a double-storey house (‘Kedah Property’) located in Alor Setar, Kedah (‘Kedah Charge’) [4] In 2013, due to Lakudang’s default under the Business Facilities, the defendant took out action against Lakudang and the plaintiffs for the recovery of the monies due and owing and foreclosure proceedings to enforce the Penang and Kedah Charges. Meanwhile, the defendant had consolidated the outstanding amounts due under the Housing Loan and the Business Facilities. [5] In 2014, the defendant obtained summary judgment against Lakudang, the 1st plaintiff and Tan Cheong Yuen in the Taiping High Court for the recovery of monies due under the Business Facilities. [6] On 19.2.2014, the defendant obtained an Order For Sale pursuant to the Kedah Charge over the Kedah Property at the Alor Setar Land Office. The Kedah Property was successfully auctioned off in 2016 for RM498,000.00. [7] On 20.5.2014, the defendant obtained an Order For Sale pursuant to the Penang Charge for the Penang Property at the Penang High Court. The Penang Property was only successfully auctioned off in 2016 for RM931,500.00. 7 [8] Meanwhile, unbeknown to the defendant, Lakudang was wound-up on 21.7.2014 and the 1st plaintiff was adjudged a bankrupt on 2.9.2014. THE HIGH COURT ACTION [9] In 2017, the plaintiffs filed an OS in the High Court at Taiping seeking to set aside the Orders For Sale of the Kedah and Penang Properties including other reliefs. The plaintiff’s action was dismissed by the High Court on the following grounds. a) The defendant was entitled to consolidate the accounts held by the plaintiffs under the Housing Loan and the Business Facilities pursuant to the various security documents between the plaintiffs and the defendant; b) The defendant was not obliged to accept the plaintiffs’ request for the Kedah and Penang Properties to be sold by way of private treaty because the defendant qua chargee was entitled to foreclose on the properties; c) The defendant was entitled to claim interest on the Business Facilities because the Orders For Sale were obtained before the dates on which the 1st plaintiff was adjudged a bankrupt and Lakudang was wound-up; and d) Based on the documentary evidence, the plaintiffs were in fact represented by the legal firm of Teoh Saw & Associates. 8 SUBMISSION OF COUNSEL [10] Learned counsel for the plaintiffs raised the following main points. First, it was submitted that the charged properties were auctioned after the six month timeline under s 8(2A) of the Bankruptcy Act 1967 (BA 1967). As such, the defendant was not entitled to charge interest on the outstanding amounts (Pilecon Realty Sdn Bhd v Public Bank Bhd [2013] 2 CLJ 893; AmBank (M) Bhd v Abdul Rahim Osman [2014] 10 CLJ 173). Therefore, the amounts stated in the statements of accounts and claims issued by the defendant are null and void. As a result, the foreclosure proceedings in the Alor Setar Land Office in respect of the Kedah Charge and in the Penang High Court in respect of the Penang Charge are also void and void. If the Orders For Sale are null and void, then the sale under the auctions should also be set aside and the purchase price monies refunded to the buyers (Muniandy A/L Thamba Kaundan v Development & Commercial Bank Bhd [1996] 2 CLJ 586; Badiaddin Mohd Mahidin v Arab Malaysian Finance Bhd [1998] 2 CLJ 75; Malayan Banking Bhd v PK Rajamani [1997] 3 CLJ Supp 355; Malayan Banking Bhd v Fu Xing Aluminium dan Kaca Sdn Bhd [2006] 8 CLJ 282). [11] The plaintiffs were not served with the cause papers and were unaware of the foreclosure proceedings in the Penang High Court. The defendant’s failure to serve the cause papers on the plaintiffs is a breach of both substantive and procedural law. As such, the foreclosure proceedings are irregular and the Order For Sale is null and void (Kekatong Sdn Bhd v Bank Bumiputra Malaysia Bhd [1998] 2 CLJ 266). 9 [12] Learned counsel for the plaintiffs also argued that the charged properties ought to have been sold by private treaty at a higher price. As the charged properties were sold in public auctions at lower prices, the plaintiffs have suffered financial losses (South East Asia Special Asset Management Bhd v Foo Shvy Fang [2013] 7 CLJ 667). [13] Learned counsel also argued that the defendant consolidated the Housing Facility and the Business Facilities in breach of clause 38 of the Facility Agreement (Public Finance Bhd v Hock Seng Housing Development [1991] 3 CLJ 496 (Rep)). [14] In reply, learned counsel for the defendant argued that there was no appeal against the two Orders For Sale. This application was only filed by the plaintiffs to set aside the Orders For Sale some three years after the Orders For Sale were granted. As such the Courts had no power to set aside the Orders For Sale which were regularly obtained, perfected and executed (Hock Hua Bank Bhd v Sahari bin Murid [1981] 1 MLJ; Badiaddin, supra). Further, the Alor Setar Land Office and the Penang High Court are now functus officio (Mui Bank Bhd v Cheam Kim Yu (Beh Sai Ming Intervener) [1992] 2 MLJ 642). In addition, the plaintiffs were duly served with the cause papers relating to the foreclosure proceedings of the Kedah and Penang Properties. The Plaintiffs had the opportunity to raise any issue and submit at the proceedings but they failed to do so. They are now estopped and barred by res judicata and issue estoppel and ought not to be allowed to challenge the Orders For Sale (Serac Asia Sdn Bhd v Sepakat Insurance Brokers Sdn Bhd [2013] 5 MLJ; Asia Commercial Finance (M) Bhd v Kawal Teliti Sdn Bhd [1995] 3 MLJ 189). 10 [15] Learned counsel for the defendant also argued that the plaintiff ought to have applied under s 418 of the National Land Code 1965 if they were unhappy with the decision of the Alor Setar Land Office. The plaintiffs are not permitted to circumvent the statutory remedy by filing the Originating Summons in this case (Land Executive Committee of Federal Terrotory v Syarikat Harper Gifillan Bhd [1981] 1 MLJ 234). [16] Learned counsel for the defendant submitted that the defendant was entitled to consolidate the plaintiffs’ account with the Business Facilities account pursuant to clauses 35 and 36 of the Facilities Agreement under the plaintiffs’ account, and under clauses 1(x) of Appendix IV of the Letter of Offer 2 in respect of the Business Facilities, clauses 3, 6, 43, 46 of the Kedah and Penang Charge Annexures. As such, the plaintiffs are bound by their contractual obligations under the said documents. [17] Learned counsel also argued that the monies due and owing under the Business Facilities are repayable not only by Lakudang and the 1st plaintiff; the other parties liable are Tan Lie Ping and Tan Cheong Sin, both of whom are not bankrupts. As such, interest may continue to be charged on the monies owed; and s 8 of the BA 1967 is not applicable to the properties or persons against whom no receiving order is made (Andrew Lee Siew Ling v United Overseas Bank (M) Bhd [2031]1 MLJ 449). At any rate. Learned counsel pointed out that out of goodwill, the defendant had only levied the loan interest until 2.9.2014, i.e., the date of bankruptcy of the 1st plaintiff (co-chargor of the Kedah and Penang Properties). 11 [18] Learned counsel also argued that the defendant was entitled to exercise its statutory rights under the NLC 1965 to recover the monies owed to it by way of judicial sale of the Kedah and Penang Properties. As such, there is no basis to the plaintiffs’ argument that the properties should have been sold by private treaty. At any rate, the proceeds of the auction sales from the Kedah and Penang Properties were enough to satisfy the indebtedness of Lakudang and the 1st plaintiff; and the surplus therefrom were returned to the respective parties. This fact was not rebutted by the plaintiffs. [19] Learned counsel for the defendant further argued that the debts owing under the Business facilities were not only repayable by Lakudang and the 1st plaintiff. The other security parties, Tan Lie Ping and Tan Cheong Sin who have not been adjudicated bankrupt, were also liable on the same. As such, s 8(2A) of the BA 1967 does not apply and interest may continue to be charged on the accounts. (Andrew Lee Siew Ling v United Overseas Bank (M) Bhd [2013] 1 MLJ 449). It was also pointed out that out of goodwill, the defendant only charged interest as against the 1st plaintiff up to 2.9.2014 only, being the date of bankruptcy of the 1st plaintiff. [20] In reply to the issue that the charged properties should have been sold by private treaty, learned counsel for the defendant argued that the defendant is the registered legal chargee of both the Kedah and Penang Properties and that the same have not been redeemed from the defendant. As such, the defendant qua chargee was entitled to dispose of the charged properties by way of judicial sale under the NLC 1965. The 12 defendant is not the legal owner of the charged properties and therefore cannot dispose of the same by private treaty. [21] Lastly, learned counsel for the defendant argued that the 1st plaintiff had admitted in his own affidavit that that Messrs. Teoh Saw & Associates were in fact appointed by him in respect of the Deed of Receipt and Reassignment. Therefore, the plaintiffs’ assertion is baseless and without merit. DECISION [22] We have considered the oral submissions and the written submissions placed before us at the hearing of this appeal. We are satisfied that all the issues raised by the plaintiffs in the High Court were without merit. In the first instance, the defendants as legal registered chargee of the Kedah and Penang Properties were entitled to their statutory remedy of judicial sale in the event of default of the Business Facilities. The fact of the default in the repayments under the Business Facilities was not disputed. The issues raised by the plaintiffs in the High Court and before this Court including the private treaty point, the interest issue, the consolidation of the Housing Facilities and the Business Facilities accounts, in particular could and ought to have been raised in the foreclosure proceedings; but the plaintiffs did not and no explanation was forthcoming for their gross omission and neglect. In the result, the High Court and the Alor Setar Land Office had become functus officio after the Orders For Sale had been perfected and the auctions carried out. Accordingly, it is too late in the day for the plaintiffs to raise these 13 arguments. The attempt to raise these issues in this OS is but an attempt to circumvent the law and the legal process. It was a collateral attack on the Orders For Sale which cannot be countenanced. [23] We are in agreement with the arguments advanced by learned counsel for the defendant in answer to all the points raised by the plaintiffs in their counsel’s oral and written submissions. As such, we do not think it is necessary to repeat the same. For the foregoing reasons, we do not think that the learned High Court judge was plainly wrong or that the learned judge had misappreciated the evidence on the affidavit or had misapplied the law. Accordingly, we are constrained to dismiss this appeal with costs. DATED: 27 JULY 2021 sgd (HAS ZANAH BINTI MEHAT) Judge Court of Appeal Malaysia Putrajaya COUNSEL/SOLICITORS: For the Appellants: For the 1st and 2nd Appellant: R. Rajasurian & Mohd Jamil Yaacob (Messrs. Khalil Zaki & Associates) For the Respondents: Chan Kok Keong & Sharon Lim Pei Hsien (Messrs. Shook Lin & Bok)