Tan Swee Thiam v United Overseas Bank (M'Sia) Bhd (B-02(A)-584-03/2017)

8.3.2017. Nothing was said nor any deliberations conducted as to the contentions of the appellant. [20] At the hearing of this appeal, the respondent had filed by way of enclosure 15a, an application to introduce as fresh and further evidence, the following: i. Letter dated 2.1.2018 from the Director General of Insolvency (Selangor) [“DGI’s letter”]; ii. Valuation report dated 11.5.2016 by KPH Property Consultants (KL) Sdn Bhd; iii. Affidavit filed by the respondent explaining the remittance of the sum of RM177,680.05 on 15.9.2015 which sum was paid on 11.10.2015; iv. Decision of the High Court in BA-24FC-190-02/2016. [21] It was the submission of learned counsel for the respondent that all the above four pieces of evidence arose consequent to the appeal in which case, the application ought to be allowed under Rule 7(3A) of the Court of Appeal Rules 1994; and further, that the test laid down in Ladd v Marshall [1954] 3 All ER 745 and endorsed by the Federal Court in Lau Foo San v Government of Malaysia [1970] 1 MLRA 219, has also been met. These pieces of fresh evidence are argued to have a high influence on the appeal and also in the earlier application for an order for sale if they were put before the High Court at the material time. 11 [22] The DGI’s letter of 2.1.2018 is intended to show that contrary to the appellant’s contention that the appeal was to “save an old man’s house from auction”, in view of the appellant’s total debt, that fate is unavoidable or inevitable. According to the contents of the letter, three bankruptcy orders had been granted pursuant to separate applications made by three different creditors, namely UOB (M) Berhad, RHB Bank Berhad and CIMB Bank Berhad. 11 creditors have since lodged their respective Proofs of Debt and the total debt outstanding from the appellant is RM3,391,844.49. It was said that there were other creditors awaiting to be paid from the surplus of the proceeds of sale. [23] As for the valuation report, it revealed that the market price of the said property was RM750,000.00. As the sum owed to the respondent is RM177,680.05, there will be surplus from the intended auction sale. That surplus will be forwarded to DGI for distribution to other creditors. [24] The third piece of evidence is an affidavit proposed by the respondent explaining why the sum of RM RM177,680.05 paid on 11.10.2013 was only remitted to the DGI on 15.9.2015. [25] The fourth and final piece of evidence is the decision of the High Court dismissing the application to set aside the order for sale. Since the facts and issues are the same, the evidence ought to be admitted. [26] The application was opposed by the appellant, primarily on the basis that the conditions of rule 7A and Ladd v Marshall [supra] have not been met and that there was abuse of the procedure in rule 7A. 12 [27] In respect of the respondent’s application to introduce the four pieces of new evidence, which upon hearing the parties, we decided would be dealt with together with the main appeal, we find merit in the application. These pieces of evidence are of relevance and assistance in this appeal, and in fact are evidence that arose after the decision appealed against. The respondent’s application in enclosure 15a is therefore allowed. [28] As for the main appeal, we also found merit in the appellant’s appeal. Indeed, there was ample evidence to the contrary that the learned Judge at the High Court failed to consider, as clearly evident from the reasoning presented in this appeal. In the locus classicus decision on section 256 of the National Land Code 1965 of Low Lee Lian, the Supreme Court explained what the term “cause to the contrary” meant. It opined through the clear judgment of Gopal Sri Ram JCA [as he then was] that “cause to the contrary within section 256(3) may be established only in three categories of cases. “First, it may be taken as settled that a chargor who is able to being his case within the exceptions to the indefeasibility doctrine housed in section 340 of the Code establishes cause to the contrary… In other words, a chargor who is able to demonstrate that the charge, the enforcement of which is sought is defeasible upon one or more of the grounds specified under subsections (2) and (4)(b) above will be held to have established cause to the contrary under s 256(3). The decision of Smith J in Subchent Kaur v Chai Sau Kian [1958] MLJ 32, of the former Federal Court in Phuman Singh v Kho Kwang Choon [1965] 2 MLJ 189 of Raja Azlan Shah J (as he then was) in 13 Overseas Union Finance Ltd v Lim Joo Chong [1971] 2 MLJ 124 and that of Edgar Joseph Jr J (as he then was) in United Malayan Banking Corporation Bhd v Syarikat Perumahan Luas Sdn Bhd [1988] 3 MLJ 352 (affirmed on appeal) sufficiently illustrate the proposition now under discussion. Secondly, a chargor may show cause to the contrary within s 256(3) of the Code by demonstrating that the chargee has failed to meet the conditions precedent for the making of an application for an order for sale. For example, failure on the part of the charge to prove the making of a demand or service upon the chargor of a notice in Form 16D would constitute cause to the contrary. So too, where the notice demands sums not lawfully due from the chargee. See Co-operative Central Bank Ltd v Meng Kuang Properties Bhd [1991] 2 MLJ 283. However, in such a case, it would be open to the chargee to subsequently serve a notice or a proper notice (as the case may be) before commencing proceedings afresh as the cause shown to the contrary does not in substance affect the chargee’s right to apply for an order for sale. Thirdly, a chargor may defeat an application for an order for sale by demonstrating that its grant would be contrary to some rule of law or equity. This principle finds its origins in the judgment of Aitken J in Murugappa Chettiar v Letchumanan Chettiar [1939] MLJ 296, 298 where he said: I agree that equitable principles should not be invoked too freely for the purpose of construing our Land Code, but surely a Chargor, who shows that there would be no need to sell his land if the chargee has been paid up in full what is due from himself in another capacity, has shown good and sufficient cause why the land should not be sold. Section 149 of the Land Code obviously contemplates that there may be cases in which charged land should not be sold, even though there has been default in payment of the principal sum or interest thereon secured by the charge; and it seems to me that a chargor 14 may ‘shew cause’ either in law or in equity against an application for an order for sale, and that the Courts should refuse to make an order in every case where it would be unjust to do so. By ‘unjust’ I mean contrary to those rules of the common law and equity which are in force in the Federated Malay States.” [29] After further examination of the facts and reasonings in Murugappa Chettiar v Letchumanan Chettiar and the Privy Council decision in Keng Soon Finance Bhd v MK Retnam Holdings Sdn Bhd & Anor [1989] 1 MLJ 457, the Supreme Court went on to conclude as follows: “It is thus clear that to fall within the scope of the principle in Murugappa Chettiar’s case, the chargor must be able to point to a statutory direction or some rule of common law or doctrine of equity operating in his favour and against which an order for sale would militate. Anything that falls short of this requirement will not amount to cause to the contrary under s 256(3)…” [30] The Supreme Court reminded of the distinction between rights ad rem and rights in personam. The action to set aside a charge upon one or more grounds of defeasibility under section 340 of the National Land Code is an action in rem. In the opinion of the Supreme Court: “For when it succeeds, the consequence is to set at naught the chargee’s rights under the registered charge as against the whole world. On the other hand, a chargor who is able to demonstrate that the chargee is under a personal obligation that binds his conscience not to enforce the charge, though not in a position to bring his case within one or more of the exceptions to the indefeasibility provision 15 may nevertheless proceed to enforce that obligation against the chargee. This is an action in personam. The consequences of succeeding in such an action will have the effect of getting the chargee to defeat his own title or of depriving him of some or all of his rights under the registered charge, including the right to obtain an order for sale. See, Oh Hiam & Ors v Than Kong [1980] 2 MLJ 159. Of course, it is not incumbent upon the chargor to bring an action to enforce the obligation of conscience operating against the chargee. He may, by establishing such an obligation of conscience, rely upon it to thwart an application under s 256 of the Code.” [31] The Supreme Court then went on to illustrate by reference to the cases of Public Finance Bhd v Narayansamy [1971] 2 MLJ 32 and Overseas Chinese Banking Corporation Ltd v Lee Tan Hwa [1989] 1 MLJ 261, what would fall within the principle in Murugappa Chettiar’s case that would amount to strong and compelling reasons to justify the withholding of the relief under section 256. To act in the absence of such conditions “would be to ignore the mandatory language of s 256(3) read with s 340 of the Code.” [32] On the facts and circumstances in this appeal, we are strongly compelled to intervene not because we feel “sorry for the borrower” or because we regard “the lender as arrogant, boorish or mannerly,” but entirely because the principle in Murugappa Chettiar’s case applies in the factual context of the allegations raised. The allegations were not mere allegations but were of merit, confirmed by the respondent’s own actions. The payment of the Redemption Sum at the material time is not at all imagined. It is confirmed by the respondent’s own affidavits and letters sent at the material 16 time to the DGI – see paragraph 10 of the respondent’s affidavit in reply and pages 48 to 50, 55 to 68 of the Record of Appeal. [33] We find the contents of the correspondence highly relevant and instructive as to the intent and decisions of the respondent. In its solicitors’ letter to the DGI, the respondent inter alia stated:

3.

Memandangkan pembayaran Amaun Tertunggak tersebut berlaku selepas Penhutang Penghakiman telah diisytiharkan bankrap, kami dengan sesungguhnya percaya bahawa sanksi atau persetujuan pihak Tuan berkenaan dengan pembayaran Amaun Tertunggak dan penebusan Hartanah tersebut adalah diperlukan.

Kami melampirkan bersama surat ini salinan-salinan dokumen-dokumen yang berkenaan dengan Hartanah tersebut, untuk rujukan and rekod pihak Tuan.

Sekiranya pihak Tuan bersetuju dan tidak mempunyai sebarang bantahan berkenaan dengan pembayaran Amaun Tertunggak dan penebusan Hartanah tersebut, UOBM akan melepaskan gadaian yang didaftarkan bagi manfat UOBM atas Hartanah tersebut dan kami akan memajukan dokumen-dokumen asal yang berkaitan dengan Hartanah tersebut kepada pihak Tuan, untuk tindakan lanjutan pihak Tuan. 17

Semoga pihak Tuan dapat memberi maklum balas dengan kadar yang segera. [34] The above letter reveals not only the respondent’s acceptance of payment and settlement of the Redemption Sum, but shows complacency on the part of the respondent in that there was a prolonged lapse of time between the acceptance of payment before the respondent started its line of inquiry with the office of the DGI and before the respondent finally forwarded the payment of the Redemption Sum to the DGI. The letter further reveals the respondent’s decision and intention to lift the charge on the said property, that it was merely seeking the DGI’s sanction for its actions and decisions because the appellant had been adjudged a bankrupt. [35] DGI did not reply immediately. Its office replied the respondent’s letter of 28.8.2014 letter on 13.2.2015. Aside from telling the respondent that its office does not handle sales by way of private treaties, it reminded the respondent of its rights as chargee under section 8(2) of the Bankruptcy Act 1967 and the National Land Code; that it will not object to the enforcement of such rights, that the respondent was not to receive any direct payment from the appellant in settlement of his loans with the respondent as such action would contravene section 115(2) of the Bankruptcy Act 1967. [36] Bearing in mind that the insolvent state of the appellant was upon the respondent’s own petition – see bankruptcy search result at page 18 of the Record of Appeal, that the respondent is not a private individual but an 18 institution whose business is to lend money and hold as securities or collateral for such loans landed properties such as the said property, that it was advised by legal counsel at all times, we are surprised, to put it mildly, that the respondent can refer to these various actions as not being in the least prejudicial to the rights and interests of the appellant as the outstanding loans had still not been settled – see paragraph 12 of affidavit in reply at page 50 of the Record of Appeal. [37] Yet another troubling issue is the matter of service of the relevant documents on the appellant. The respondent had relied on the last known address as indicated in the loan documents. The evidence however, plainly show that the respondent was in receipt of the Notice of Redemption wherein the appellant’s latest address was clearly imprinted. It must therefore be taken to have been aware of this address or at least, put on notice in that regard. [38] In our view, having relied on the Notice of Redemption and having accepted payment for which the respondent was thus seeking the agreement of the DGI to keep the payment and treat the loan as redeemed and the charge lifted, we find that good conscience and the rules of equity militate against the granting of the respondent’s application for an order for sale of the said property. These are strong and compelling reasons to justify the withholding of the relief sought under section 256 of the Code. [39] While the procedure under section 256 is meant to be speedy and summary in nature, the learned Judge hearing such applications for an order for a judicial sale, must nevertheless be concerned as to whether the 19 appellant has been properly served; that the procedural requirements of Order 83 of the Rules of Court 2012 have been complied with; and that within the “very narrow question whether the material produced before him by the chargor constitutes cause to the contrary”. The learned Judge is required to carry out a careful and objective assessment of the factual material placed before the Court. The judge is however, not required to express any view on the merits of any or all of the points taken by the appellant, “save to say whether, having regard to the three narrow categories …laid down…and the relevant authorities upon each category, cause to the contrary has been established to his satisfaction.” The judge “does not make, and in any event ought not to make, any adjudication upon any substantive issue” – see Supreme Court in Kandiah Peter v Public Bank Bhd [1994] 1 MLJ 119. [40] Although the learned Judge in the present appeal address the matter of service and compliance with the requirements of Order 83 and the National Land Code, which consideration we find to have been erroneous given the factual matrix, more significantly, the learned Judge had failed to carry out the requisite assessment of the factual material placed before the Court so as to decide the very narrow question of whether such material produced by the appellant constitutes cause to the contrary. Had the learned Judge undertaken that exercise, and had done so carefully and objectively, the learned Judge would have found, as we have, that the appellant had in fact satisfactorily shown cause to the contrary as to why the relief under section 256 of the Code ought to be withheld from the respondent; that the appellant’s complaints fall within the principle in Murugappa Chettiar’s case. 20 [41] The evidence produced showed that the Redemption Sum had been fully paid up, that the respondent had every intention of lifting the charge, and that it kept the Redemption Sum for a substantial period before approaching the DGI to sanction its actions. After it had failed in procuring the DGI’s sanction, the respondent never advised the appellant or the appellant’s wife about the state of affairs; it even failed to respond to the appellant’s letters. The circumstances presented in the instant appeal are not dissimilar to those that arose in Overseas Chinese Banking Corporation Ltd v Lee Tan Hwa [supra]. There, the bank with prior knowledge [acquired through common solicitors], that the chargor had entered into agreements with sub-purchasers for the sale of a portion of the land to them, accepted the creation of a registered charge in its favour as security for a loan made to the chargor. When the chargor defaulted, the bank applied for an order for sale under section 256 of the Code. The sub-purchasers intervened and opposed the application. [42] Although fraud was not found, the learned Chief Justice nevertheless refused the bank’s application for the following reasons: “Under the circumstances, I hold that the plaintiff knew through their solicitors that the interveners were purchasers of a portion of the land. The charge of the whole land to the plaintiff could not be a valid charge since a substantial portion of it was not absolutely owned by the two defendants. There is nothing to prevent the plaintiff from proceeding against the defendants or any party who was negligent in handling the charge transactions. Now that the first intervener had completed the [purchase and had gone into possession, it would not be justified and would be plainly unconscionable to 21 deprive him of the shophouse he had bought by holding that the charge was valid when in fact it was void, and consequently I refused to grant the plaintiff’s application to have the land sold by public auction.” [43] Similarly, the principle in Murugappa Chettiar’s case applies in this appeal. [44] Learned counsel for the respondent had further submitted that the monies paid by the appellant’s wife be held under a Quistclose trust. We do not find it necessary to address this issue as this is entirely for the appellant’s wife to take up as an action in personam. It would be outside the ambit of the present appeal to consider that issue on the merits or make the orders suggested. [45] Suffice to say that learned Senior Federal Counsel from the office of the DGI had advised us that by its letter dated 18.1.2018, the DGI had informed the respondent that it was agreeable to the respondent’s proposal to redeem the charge on the two terms expressed therein [there was a third term which has since been withdrawn]. Those terms being that the DGI will pay the sum of RM167,296.75 in settlement of the outstanding loans with the respondent; and that the respondent will deliver the title to the said property free from the registered charge for the action of the DGI. This letter containing the aforesaid terms was tendered as exhibit “A” in these proceedings. Seeing that the respondent was still intent in redeeming the charge, we find strong compelling reasons to warrant and justify the refusal of the respondent’s application. 22 [46] For all the foregoing reasons, and on the terms set out in exhibit A, we unanimously allow the appeal with no order as to costs. The decision of the High Court is set aside. Dated: 18th June 2019 (MARY LIM THIAM SUAN) Judge Court of Appeal Malaysia Counsel/Solicitors For the appellant: Ong Keh Keong Messrs Ong Partnership Suite B-06-12, 6th Floor Plaza Mont Kiara 50480 Kuala Lumpur For the respondent: Chua Por Ron (Mohd Hisyam Hilmi bin Abd Rahman with him) Messrs Chua & Patners Suite 8-12A-6, Level 12A No. 8, Menara Olympia Jalan Raja Chulan 50200 Kuala Lumpur