ALLIANCE BANK MALAYSIA BERHAD vs TIONG CHONG BRICK WORKS SDN. BHD., LAU NGEE NAM @ LIEW YEE NAM ,WONG ING CHUNG @ ANTHONY WONG , LIEW LEE YONG,SU KIONG CHUNG (MJLR 2009b2) Clement Skinner, 4/12/2009,SS
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5 MALAYSIA
IN THE HIGH COURT IN SABAH AND SARAWAK
AT KOTA KINABALU
CIVIL SUIT NO. K22-95-2006-II
BETWEEN
10 ALLIANCE BANK MALAYSIA BERHAD … PLAINTIFF
AND
TIONG CHONG BRICK WORKS SDN. BHD. … 1st DEFENDANT
LAU NGEE NAM @ LIEW YEE NAM … 2nd DEFENDANT
WONG ING CHUNG @ ANTHONY WONG … 3rd DEFENDANT
LIEW LEE YONG … 4th 15 DEFENDANT
SU KIONG CHUNG … 5th DEFENDANT
BEFORE THE HONOURABLE JUSTICE
DATUK CLEMENT SKINNER IN CHAMBERS
20
GROUNDS OF DECISION
This is the hearing of an appeal to the Judge in Chambers by
the plaintiff against the decision of the learned Deputy Registrar given
25 on 06.06.2008 dismissing its application for summary judgment
against the 2nd, 3rd, 4th and 5th defendant under Ord. 14 Rules of the
High Court 1980 (‘the RHC’). I had earlier allowed the appeal and
granted summary judgment to the plaintiff on its claim. I now give my
reasons for doing so.
-2- [CSK.22-95-2006-II]
In 1996, the 1st 5 defendant Tiong Chong Brick Works Sdn. Bhd.
obtained banking facilities from Sabah Finance Berhand. On
21.11.2000, Multi-Purpose Bank Berhad (‘the plaintiff’) acquired all
the rights, assets and liabilities of Sabah Finance Berhad with effect
from 31.12.2000 pursuant to a Vesting Order of the High Court of
10 Malaya dated 21.11.2000.
The plaintiff granted banking facilities to the 1st defendant in the
form of two Term Loans, the 1st Term Loan was on 06.05.1996 for
RM1.8 million which was later by deed of variation dated 30.09.1996
restructured to RM1.6 million. The 1st 15 Term Loan was secured by a
joint and several guarantee executed by the 2nd, 3rd, 4th and
5th defendant; a charge over land known as CL. 045174436 and a
Debenture over the 1st defendant’s assets. The plaintiff also entered
into Hire-Purchase Agreements with the 1st defendant in respect of
20 13 units of plant and machinery.
On 11.11.1997, the plaintiff granted the 1st defendant a
2nd Term Loan as additional facilities of RM1 million. The
2nd Term Loan was secured by a joint and several guarantee
executed by the 2nd, 3rd, 4th and 5th 25 defendant.
The plaintiff alleges that the 1st defendant defaulted in its
obligations under the banking facilities as a result of which the plaintiff
issued through its lawyers, a letter of demand dated 08.01.2003
30 demanding from the defendants the amounts outstanding on the
1st and 2nd Term Loan as at 22.12.2002 of RM2,799,353.01. When
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5 no payment was received, the plaintiff, through its lawyer’s letter
dated 13.10.2003, recalled the Term Loans and demanded payment
from the defendants of all outstanding sums as at 30.09.2003
amounting to RM2,994,039.73.
10 When no payment was received on the recall of the Term
Loans, the plaintiff exercised its rights under its Debenture and
appointed a Receiver and Manager in respect of the assets of the
1st defendant.
15 The Receiver and Manager then disposed off the
1st defendant’s assets (including those under hire-purchase
agreement) to a company called Lahir Maju Sdn. Bhd. After
deductions were made from the proceeds of sale, the total balance
due and payable by the 1st defendant to the plaintiff as at 31.03.2006
20 was RM2,336,030.40.
By a further letter of demand dated 13.04.2006, the plaintiff
demanded from the 1st, 2nd, 3rd, 4th and 5th defendant the sum of
RM2,336,030.40. When no payment was received, this suit was
25 commenced against all the defendants praying for payment of:
(a) The total outstanding sum of RM2,336,030.40 as at
31.03.2006;
(b) Agreed interest at the rate of 2% per annum above the
plaintiff’s BLR currently at 6.75% per annum together with
30 default interest of 1% per annum on the outstanding sum
-4- [CSK.22-95-2006-II]
5 of RM2,336,030.40 from 01.04.2006 to date of full
payment;
(c) Costs;
(d) Legal costs on a solicitor/client basis.
Judgment has been entered against the 1st defendant but the 2nd, 3rd10 ,
4th and 5th defendant filed a defence and counter-claim.
I will hereafter refer to only the 2nd, 3rd, 4th and 5th defendant as
“the defendants”. They raised several grounds to resist the plaintiff’s
15 application for summary judgment. I will deal with each.
(a) What was the exact amount of the sales proceeds?
It is not in dispute between the parties that the Receiver and
20 Manager sold off assets covered by the debenture. From letters
signed by the Receiver the proceeds of such sales amounted to
RM3,132,974.28. The defendants complain that notwithstanding this
fact, the plaintiff has at various times in its pleadings and affidavits
given differing figures for the amount available from the proceeds of
25 sale. For example, in the sale and purchase agreement relating to
the sale of the assets by the Receiver and Manager, the figure is
RM3,310,000.00, but in Paragraph 9 of its Reply to the Defence filed,
the plaintiff said the total sale proceeds was RM3,132,974.28. Then
in Paragraph 10 of its Reply the plaintiff stated that RM3,214,500.00
30 received from the sale proceeds was insufficient to settle the total
debt due under the term loan and hire-purchase accounts. The
-5- [CSK.22-95-2006-II]
5 defendants say that in Paragraph 6.4 of the plaintiff’s affidavit in reply
dated 23.07.2007 (Encl. 62) the plaintiff had exhibited the
computation of interim distribution by the Receiver and Manager
which showed the Nett Realization Proceeds of Sale as
RM2,884,451.62. Accordingly, the defendants contend that it is
10 confusing whether the total proceeds recovered was RM3,310,000.00
or RM3,132,974.00 or RM3,214,500.00 or RM2,884,451.62?
I find nothing in the point taken. It does not give rise to any
triable issue.
15
From the exhibits in the affidavits before the Court it is plain to
see that when the Receiver and Manager sold the 1st defendant’s
assets (including the machineries under the hire-purchase
agreement) the amount payable by the purchaser of those assets i.e.
20 Lahir Maju Sdn. Bhd. under a Sale & Purchase Agreement dated
19.01.2005 was RM3,310,000.00 but the sale agreement also
included a clause to the effect that the assets / equipment sold were
“subject to their availability” and in the event they were not available
the purchase price would be reduced and adjusted accordingly. In
25 the event, one asset i.e. an “Extruder” worth RM95,500.00 was not
available. Therefore, this amount was deducted i.e. RM3,310,000.00
– RM95,500.00 = RM3,214,000.00 which is the amount payable
under the Sale & Purchase Agreement dated 19.01.2005.
30
-6- [CSK.22-95-2006-II]
5 With regard to the figure of RM3,132,974.28, this amount
represents the actual sum received from the sale of the assets under
the Sale & Purchase Agreement dated 19.01.2005 and other assets
as shown in Paragraph 9 of the Plaintiff’s Reply i.e.:
Term Loans
10 (a) Total Sale Proceeds received on 28.07.2005= RM1,590,958.76;
(b) Total Sale Proceeds received on 02.12.2005 = RM 18,059.34.
Hire-purchase Loan
(a) Total Sale Proceeds received on 28.07.2005 = RM1,504,399.30;
15 (b) Total Sale Proceeds received on 02.12.2005 = RM 19,556.88.
RM3,132,974.28.
With regard to the sum of RM2,884,451.62, when the Receiver
and Manager sold the assets available which included the land and
20 buildings (plant) as well as machineries under hire-purchase, the
Receiver and Manager then issued a “Computation of interim
distributions to debenture holder and hire-purchase financier” to show
how he dealt with the proceeds. In the computation of interim
distributions which is exhibited as ‘MC 53’ to the Plaintiff’s Affidavit in
25 Reply dated 23.07.2007 (Encl. 62), the plaintiff indicated that
RM1,361,581.64 was an interim distribution to the debenture holder
while a sum of RM1,522,870.10 was for the hire-purchase financier.
These two amounts added together make RM2,884,451.62 which in
the computation ‘MC 53’ is termed as “net realization proceeds”, but
30 the defendants have deliberately chosen to misread this term in
isolation because it should be clear or obvious to anyone reading
-7- [CSK.22-95-2006-II]
5 Paragraph 6.4 of the plaintiff’s affidavit and exhibit ‘MC 53’ of that
affidavit, that the sum of RM2,884,451.62 was only an interim
distribution of the net realization proceeds shown there.
Accordingly, it is the defendants who have picket out different
10 figures appearing in the affidavits and pleadings to try to create
confusion in the hope of raising a triable issue, but in reality, there is
no confusion arising from the figures picked out by the defendants.
They are fully explained by the plaintiff and give rise to no triable
issue. The amount available for distribution was RM3,132,974.28.
15
The defendants further contended that in Paragraph 6.2 of the
plaintiff’s affidavit in reply dated 23.07.2007 (Encl. 62), the plaintiff
had in giving particulars of the amount owing under the principal
borrower’s hire-purchase account, indicated that a sum of
20 RM999,433.81 had been received as the proceeds of sale, but this
figure did not seem to have been taken into account in calculating the
actual amount outstanding by the principal borrower. I see nothing in
the point taken. One only has to refer to the plaintiff’s Reply to
Defence dated 15.01.2007 to see that in Paragraph 9 thereof, the
25 plaintiff had stated that under the particulars relating to the Hire-
Purchase Loan, under the No. 1 A/C i.e. 0/010/000567/5 the sum of
RM797,876.93 was received as sales proceeds on 28.07.2005 and
RM19,556.88 was received on 30.11.2005. These two amounts add
up to RM999,433.81. Accordingly, there is no merit in the
30 defendants’ contention that this amount had not been taken into
account in calculating the actual amount outstanding.
-8- [CSK.22-95-2006-II]
5 The defendants next said that reading the particulars in
Paragraph 9 of the plaintiff’s Reply to Defence and Paragraph 6.4 of
its Affidavit in Reply dated 23.07.2007 (Encl. 62), there is confusion
whether the sales proceeds which was apportioned to settle the
amounts owing under the 1st Term Loan (Trench A and Trench B)
and the 2nd 10 Term Loan was RM1,609,018.10 or RM1,361,581.46? I
find no merit in this contention.
The confusion is that of the defendants’ own making. The sum
of RM1,361,581.46 reflects the interim net realization proceeds of the
15 assets covered by the debenture without taking into account the
future cost of realization and repayment of advances as clearly
reflected in exhibit ‘MC 53’ of Encl. 62, whereas the amount of
RM1,609,018.10 as stated in Paragraph 9 of the Reply is comprised
of the sums of RM1,590,958.76 being sales proceeds received on
20 28.07.2005 plus RM18,059.34 received on 02.12.2005 i.e. after
taking into account future costs of realization and payment of
advances. Accordingly, no triable issue arises here as well.
(b) Did the Receiver and Manager wrongly apportion the
25 proceeds of sale?
The defendants complained that from the proceeds of sale of
the assets of the principal borrower, the Receiver and Manager had
wrongly apportioned and paid out part of the proceeds towards the
30 hire-purchase financier. It was the contention of the defendants that
the proceeds of sale should have been dealt with in accordance with
-9- [CSK.22-95-2006-II]
5 the order of priority set out in Clause 21.1 of the Debenture, which if it
had been done would have substantially reduced their (the
guarantors) liability under the guarantees they had signed, since the
Term Loans (Trench A and B) which amounted to RM1,577,499.89
as at 30.09.2003 would have been fully paid off, and, part of the
10 amount owing under the Legal Charge over the land would have
been paid.
I do not agree. Clause 21.1 of the Debenture expressly states
in its relevant parts that:
15 “………. the net profits of carrying on the said
business and the net proceeds of any sale shall,
subject to the rights of the secured creditors (if any)
ranking in priority to this Debenture ………. shall be
applied by the Receiver and Manager as follows …..”.
20
Clearly, the owners of the equipment under hire-purchase or the
financier that provided the hire-purchase loan have a priority to be
paid out of the proceeds of sale.
25 Further, even if they do not, then the mistake, if any, is that of
the principal borrower’s own agent i.e. the 1st defendant’s own agent
since the debenture expressly states in Clause 20.1 that any
Receiver and Manager appointed “shall be the agent of the Borrower
and the Borrower shall be solely responsible for his or their acts or
30 defaults”. Accordingly, the defendants cannot have any cause of
complaint against the plaintiff for what the Receiver and Manager did.
-10- [CSK.22-95-2006-II]
Any complaint of the defendants should be addressed to the 1st 5
defendant and cannot give rise to any triable issue here.
The defendants had also contended that because the Receiver
and Manager had wrongly apportioned the proceeds of sale, they
10 have become discharged of their liability under the guarantees they
signed. It must follow from what have just said above about what
Clause 21.1 of the Debentures states regarding the order of priority of
payment of any proceeds of sale and whose agent the Receivers and
Managers were, that this contention has no merit at all and given rise
15 to no triable issue.
(c) Whether the outstanding amount claimed by the plaintiff is
inconsistent?
20 The defendants complain that quite apart from wrongly stating
the amount of the proceeds of sale, the plaintiff has also stated the
amount claimed inconsistently, thus giving rise to confusions in its
claim. Thus, the defendants pointed out that in Para 21 of its
Statement of Claim, the plaintiff pleaded that the outstanding amount
25 as at 30.09.2003 prior to the sale by the Receiver and Manager was
RM2,994,391.73 but in Paragraph 23 of the same Statement of
Claim, the amount given after the sale by the Receiver and Manager
as at 31.03.2006 was RM2,336,030.40. The defendants further point
out that by Paragraph 8 of its Reply to Defence, the plaintiff
30 recognized and admitted that due to a typographical error in
Paragraph 21 of its Statement of Claim the correct figure should be
-11- [CSK.22-95-2006-II]
5 RM2,994,391.73 after deduction of the sales proceeds as at
30.09.2003, but it is not known whether the outstanding amount of
RM2,994,391.73 is outstanding as at 31.09.2003 or 31.03.2006 and
before or after deducting the proceeds of sale?
10 I find nothing in the point taken, as it should be plain to anyone
reading the pleadings that there is an obvious typing error in
Paragraph 8 of the Reply to Defence, in that, the words “after
deduction” should read “before deduction” and “30.09.2003” should
read “30.03.2006” instead because Paragraph 8 of the Reply to
15 Defence expressly refers to Paragraph 21 of the Statement of Claim
which addresses and set out the total balance due and owing before
deducting the proceeds of sale as at 30.09.2003. The defendants
would also know this as the same position is reflected in the plaintiff’s
notices of demand to all the defendants dated 13.10.2009 which were
20 exhibited as ‘MC 17’ to ‘MC 21’ of the plaintiff’s affidavit dated
04.05.2007 (Encl. 40). The defendants had clearly received this
notice of demand because on 03.11.200 3 they signed a joint letter in
which the plaintiff’s letter of demand of 13.10.2003 is referred to and
the defendants informed the plaintiff that the 1st defendant principal
25 borrower had submitted a proposal for settlement of the banking
facilities (see ‘MC 41’ in Encl. 62).
Accordingly, there can be no confusion about the fact that the
amount of RM2,994,391.73 is the amount outstanding under the
30 Term Loans as at 30.09.2003 as so clearly stated in the plaintiff’s
-12- [CSK.22-95-2006-II]
5 letters of demand dated 13.10.2003 and in Clause 21 of the
Statement of Claim.
The defendants contended that the plaintiff should not be
allowed to point out these obvious typographical errors to the court
10 and rely on the correct position in this application without having
taken any steps to formally amend its pleadings in accordance with
Ord. 20 RHC. I do not agree. The Rules of Court are there to serve
and not to obstruct or hinder the parties in attaining redress. The
defendants say that in the absence of an application to amend, the
15 Statement of Claim should be taken as it is and in view of such
erroneous outstanding amount, summary judgment as prayed should
be dismissed. I do not agree. Ord. 14, r. 3 RHC expressly states that
on the hearing of an application for summary judgment
“the Court may give such judgment for the plaintiff against the
20 defendant on that claim or part as may be just having regard to the
nature of the remedy or relief claimed”.
The relief claimed here is repayment of banking facilities
guaranteed by the defendants. It would not be just to dismiss the
25 plaintiff’s application for some obvious typographical errors which
could not possibly cause confusion to the defendants about the
amount claimed and at as what date.
30
-13- [CSK.22-95-2006-II]
5 (d) The plaintiff did not plead material facts regarding the
Hire-Purchase Agreements.
The defendants complain that even though the Receiver and
Manager apportioned the proceeds of sale towards payment of the
10 hire-purchase facility, no facts or particulars were pleaded about the
hire-purchase agreements. I find the above contention does not give
rise to any triable issue for the simple reason that the plaintiff’s cause
of action is not founded on the hire-purchase agreement. It became
necessary for the plaintiff to refer to the hire-purchase facilities only
15 because the Receiver and Manager gave an account of how he had
dealt with the proceeds of sale of the assets of the principal borrower
under the debenture. Accordingly, there was no need for the plaintiff
to plead facts relating to the hire-purchase agreement to enable it to
formulate a complete cause of action against the defendants.
20
(e) Were the letters of demand defective?
It is the defendants’ contention that the amounts stated in the
plaintiff’s letter of demand dated 08.01.2003 and 13.10.2003 are
25 different from the amount mentioned in the affidavit affirmed by the
plaintiff in support of its Ord. 14 application on 04.05.2007. According
to the defendants since a precise demand had not been made
against them, the demand was defective which rendered the demand
an improper demand by reason whereof the plaintiff’s action against
30 them as guarantors must fail. I do not agree.
-14- [CSK.22-95-2006-II]
5 In Bank of Baroda v Panessar & Ors [1987] 2 WLR 208, it was
held that there is no need to specify a precise amount in a letter of
demand for it to constitute a proper demand. Likewise in Bunburry
Foods Pte Ltd V The National Bank of Australasia Ltd [1984] 51 ALR
609, it was held that it is not essential to the validity of a notice of
10 demand that it should correctly state the amount of the debt.
Quite apart from that, the defendants here had covenanted in
the 2nd paragraph of the guarantee that they undertook the liability “as
principal debtors” and not merely as sureties. There is case law to
15 the effect that in such a situation a prior demand is not a must before
the surety may be sued (see the Court of Appeal decision in Allied
Bank (Malaysia) Sdn. Bhd. v Yau Jiok Hua [2006] 3 CLJ 27).
Accordingly, in this case a prior letter of demand was not even
necessary before the defendants were sued. Accordingly, there can
20 be no triable issue raised on this ground.
The defendants also complained that the plaintiff’s letters of
demand dated 13.04.2006 were not received by them and so the
plaintiff’s action is premature. I see nothing in the point taken. The
25 letters of demand of 13.04.2006 were sent to the defendants by
Registered Post and proof of such posting was exhibited as ‘MC 39’
to the affidavit of Martina Chin affirmed on 20.06.2007 (Encl. 52).
Those letters of demand were sent to the postal addresses of each of
the 2nd, 3rd, 4th and 5th defendant’s addresses disclosed in a search
30 conducted at the Companies Commission of Malaysia on the
1st defendant borrower on 07.10.2003.
-15- [CSK.22-95-2006-II]
5 Quite apart from that, even if the defendants did not receive the
letters of demand of 13.04.2006, they did receive the earlier demand
made on 13.10.2003 because they wrote to the plaintiff on
03.11.2003 saying so. (See Exh. ‘MC 41’ to the affidavit of Martina
Chin affirmed on 23.07.2007 Encl. 62). Accordingly, it is not open to
10 the defendants to say they did not receive a letter of demand. Even
further still, since a prior letter of demand is not a must on a principal
debtor, which these defendants are, their contention that they did not
receive the last in the series of three letters of demand does not give
rise to any triable issue.
15
It was for all the above reasons that I granted the plaintiff’s
application for summary judgment against the defendants in the
terms prayed for in their Statement of Claim.
20
25
DATUK CLEMENT SKINNER
Judge
30 Date : 2009
-16- [CSK.22-95-2006-II]
5 Counsel
For Plaintiff : Mr. Nicholas Fernandez
Messrs. Fernandez & Co.
Advocates and Solicitors
10 KOTA KINABALU
For 2nd to 5th Defendant : Ms. Emily Lo with Mr. William Lee
Messrs. J. Ambrose & Partners
Advocates and Solicitors
15 KOTA KINABALU
5 MALAYSIA
IN THE HIGH COURT IN SABAH AND SARAWAK
AT KOTA KINABALU
CIVIL SUIT NO. K22-95-2006-II
BETWEEN
10 ALLIANCE BANK MALAYSIA BERHAD … PLAINTIFF
AND
TIONG CHONG BRICK WORKS SDN. BHD. … 1st DEFENDANT
LAU NGEE NAM @ LIEW YEE NAM … 2nd DEFENDANT
WONG ING CHUNG @ ANTHONY WONG … 3rd DEFENDANT
LIEW LEE YONG … 4th 15 DEFENDANT
SU KIONG CHUNG … 5th DEFENDANT
BEFORE THE HONOURABLE JUSTICE
DATUK CLEMENT SKINNER IN CHAMBERS
20
GROUNDS OF DECISION
This is the hearing of an appeal to the Judge in Chambers by
the plaintiff against the decision of the learned Deputy Registrar given
25 on 06.06.2008 dismissing its application for summary judgment
against the 2nd, 3rd, 4th and 5th defendant under Ord. 14 Rules of the
High Court 1980 (‘the RHC’). I had earlier allowed the appeal and
granted summary judgment to the plaintiff on its claim. I now give my
reasons for doing so.
-2- [CSK.22-95-2006-II]
In 1996, the 1st 5 defendant Tiong Chong Brick Works Sdn. Bhd.
obtained banking facilities from Sabah Finance Berhand. On
21.11.2000, Multi-Purpose Bank Berhad (‘the plaintiff’) acquired all
the rights, assets and liabilities of Sabah Finance Berhad with effect
from 31.12.2000 pursuant to a Vesting Order of the High Court of
10 Malaya dated 21.11.2000.
The plaintiff granted banking facilities to the 1st defendant in the
form of two Term Loans, the 1st Term Loan was on 06.05.1996 for
RM1.8 million which was later by deed of variation dated 30.09.1996
restructured to RM1.6 million. The 1st 15 Term Loan was secured by a
joint and several guarantee executed by the 2nd, 3rd, 4th and
5th defendant; a charge over land known as CL. 045174436 and a
Debenture over the 1st defendant’s assets. The plaintiff also entered
into Hire-Purchase Agreements with the 1st defendant in respect of
20 13 units of plant and machinery.
On 11.11.1997, the plaintiff granted the 1st defendant a
2nd Term Loan as additional facilities of RM1 million. The
2nd Term Loan was secured by a joint and several guarantee
executed by the 2nd, 3rd, 4th and 5th 25 defendant.
The plaintiff alleges that the 1st defendant defaulted in its
obligations under the banking facilities as a result of which the plaintiff
issued through its lawyers, a letter of demand dated 08.01.2003
30 demanding from the defendants the amounts outstanding on the
1st and 2nd Term Loan as at 22.12.2002 of RM2,799,353.01. When
-3- [CSK.22-95-2006-II]
5 no payment was received, the plaintiff, through its lawyer’s letter
dated 13.10.2003, recalled the Term Loans and demanded payment
from the defendants of all outstanding sums as at 30.09.2003
amounting to RM2,994,039.73.
10 When no payment was received on the recall of the Term
Loans, the plaintiff exercised its rights under its Debenture and
appointed a Receiver and Manager in respect of the assets of the
1st defendant.
15 The Receiver and Manager then disposed off the
1st defendant’s assets (including those under hire-purchase
agreement) to a company called Lahir Maju Sdn. Bhd. After
deductions were made from the proceeds of sale, the total balance
due and payable by the 1st defendant to the plaintiff as at 31.03.2006
20 was RM2,336,030.40.
By a further letter of demand dated 13.04.2006, the plaintiff
demanded from the 1st, 2nd, 3rd, 4th and 5th defendant the sum of
RM2,336,030.40. When no payment was received, this suit was
25 commenced against all the defendants praying for payment of:
(a) The total outstanding sum of RM2,336,030.40 as at
31.03.2006;
(b) Agreed interest at the rate of 2% per annum above the
plaintiff’s BLR currently at 6.75% per annum together with
30 default interest of 1% per annum on the outstanding sum
-4- [CSK.22-95-2006-II]
5 of RM2,336,030.40 from 01.04.2006 to date of full
payment;
(c) Costs;
(d) Legal costs on a solicitor/client basis.
Judgment has been entered against the 1st defendant but the 2nd, 3rd10 ,
4th and 5th defendant filed a defence and counter-claim.
I will hereafter refer to only the 2nd, 3rd, 4th and 5th defendant as
“the defendants”. They raised several grounds to resist the plaintiff’s
15 application for summary judgment. I will deal with each.
(a) What was the exact amount of the sales proceeds?
It is not in dispute between the parties that the Receiver and
20 Manager sold off assets covered by the debenture. From letters
signed by the Receiver the proceeds of such sales amounted to
RM3,132,974.28. The defendants complain that notwithstanding this
fact, the plaintiff has at various times in its pleadings and affidavits
given differing figures for the amount available from the proceeds of
25 sale. For example, in the sale and purchase agreement relating to
the sale of the assets by the Receiver and Manager, the figure is
RM3,310,000.00, but in Paragraph 9 of its Reply to the Defence filed,
the plaintiff said the total sale proceeds was RM3,132,974.28. Then
in Paragraph 10 of its Reply the plaintiff stated that RM3,214,500.00
30 received from the sale proceeds was insufficient to settle the total
debt due under the term loan and hire-purchase accounts. The
-5- [CSK.22-95-2006-II]
5 defendants say that in Paragraph 6.4 of the plaintiff’s affidavit in reply
dated 23.07.2007 (Encl. 62) the plaintiff had exhibited the
computation of interim distribution by the Receiver and Manager
which showed the Nett Realization Proceeds of Sale as
RM2,884,451.62. Accordingly, the defendants contend that it is
10 confusing whether the total proceeds recovered was RM3,310,000.00
or RM3,132,974.00 or RM3,214,500.00 or RM2,884,451.62?
I find nothing in the point taken. It does not give rise to any
triable issue.
15
From the exhibits in the affidavits before the Court it is plain to
see that when the Receiver and Manager sold the 1st defendant’s
assets (including the machineries under the hire-purchase
agreement) the amount payable by the purchaser of those assets i.e.
20 Lahir Maju Sdn. Bhd. under a Sale & Purchase Agreement dated
19.01.2005 was RM3,310,000.00 but the sale agreement also
included a clause to the effect that the assets / equipment sold were
“subject to their availability” and in the event they were not available
the purchase price would be reduced and adjusted accordingly. In
25 the event, one asset i.e. an “Extruder” worth RM95,500.00 was not
available. Therefore, this amount was deducted i.e. RM3,310,000.00
– RM95,500.00 = RM3,214,000.00 which is the amount payable
under the Sale & Purchase Agreement dated 19.01.2005.
30
-6- [CSK.22-95-2006-II]
5 With regard to the figure of RM3,132,974.28, this amount
represents the actual sum received from the sale of the assets under
the Sale & Purchase Agreement dated 19.01.2005 and other assets
as shown in Paragraph 9 of the Plaintiff’s Reply i.e.:
Term Loans
10 (a) Total Sale Proceeds received on 28.07.2005= RM1,590,958.76;
(b) Total Sale Proceeds received on 02.12.2005 = RM 18,059.34.
Hire-purchase Loan
(a) Total Sale Proceeds received on 28.07.2005 = RM1,504,399.30;
15 (b) Total Sale Proceeds received on 02.12.2005 = RM 19,556.88.
RM3,132,974.28.
With regard to the sum of RM2,884,451.62, when the Receiver
and Manager sold the assets available which included the land and
20 buildings (plant) as well as machineries under hire-purchase, the
Receiver and Manager then issued a “Computation of interim
distributions to debenture holder and hire-purchase financier” to show
how he dealt with the proceeds. In the computation of interim
distributions which is exhibited as ‘MC 53’ to the Plaintiff’s Affidavit in
25 Reply dated 23.07.2007 (Encl. 62), the plaintiff indicated that
RM1,361,581.64 was an interim distribution to the debenture holder
while a sum of RM1,522,870.10 was for the hire-purchase financier.
These two amounts added together make RM2,884,451.62 which in
the computation ‘MC 53’ is termed as “net realization proceeds”, but
30 the defendants have deliberately chosen to misread this term in
isolation because it should be clear or obvious to anyone reading
-7- [CSK.22-95-2006-II]
5 Paragraph 6.4 of the plaintiff’s affidavit and exhibit ‘MC 53’ of that
affidavit, that the sum of RM2,884,451.62 was only an interim
distribution of the net realization proceeds shown there.
Accordingly, it is the defendants who have picket out different
10 figures appearing in the affidavits and pleadings to try to create
confusion in the hope of raising a triable issue, but in reality, there is
no confusion arising from the figures picked out by the defendants.
They are fully explained by the plaintiff and give rise to no triable
issue. The amount available for distribution was RM3,132,974.28.
15
The defendants further contended that in Paragraph 6.2 of the
plaintiff’s affidavit in reply dated 23.07.2007 (Encl. 62), the plaintiff
had in giving particulars of the amount owing under the principal
borrower’s hire-purchase account, indicated that a sum of
20 RM999,433.81 had been received as the proceeds of sale, but this
figure did not seem to have been taken into account in calculating the
actual amount outstanding by the principal borrower. I see nothing in
the point taken. One only has to refer to the plaintiff’s Reply to
Defence dated 15.01.2007 to see that in Paragraph 9 thereof, the
25 plaintiff had stated that under the particulars relating to the Hire-
Purchase Loan, under the No. 1 A/C i.e. 0/010/000567/5 the sum of
RM797,876.93 was received as sales proceeds on 28.07.2005 and
RM19,556.88 was received on 30.11.2005. These two amounts add
up to RM999,433.81. Accordingly, there is no merit in the
30 defendants’ contention that this amount had not been taken into
account in calculating the actual amount outstanding.
-8- [CSK.22-95-2006-II]
5 The defendants next said that reading the particulars in
Paragraph 9 of the plaintiff’s Reply to Defence and Paragraph 6.4 of
its Affidavit in Reply dated 23.07.2007 (Encl. 62), there is confusion
whether the sales proceeds which was apportioned to settle the
amounts owing under the 1st Term Loan (Trench A and Trench B)
and the 2nd 10 Term Loan was RM1,609,018.10 or RM1,361,581.46? I
find no merit in this contention.
The confusion is that of the defendants’ own making. The sum
of RM1,361,581.46 reflects the interim net realization proceeds of the
15 assets covered by the debenture without taking into account the
future cost of realization and repayment of advances as clearly
reflected in exhibit ‘MC 53’ of Encl. 62, whereas the amount of
RM1,609,018.10 as stated in Paragraph 9 of the Reply is comprised
of the sums of RM1,590,958.76 being sales proceeds received on
20 28.07.2005 plus RM18,059.34 received on 02.12.2005 i.e. after
taking into account future costs of realization and payment of
advances. Accordingly, no triable issue arises here as well.
(b) Did the Receiver and Manager wrongly apportion the
25 proceeds of sale?
The defendants complained that from the proceeds of sale of
the assets of the principal borrower, the Receiver and Manager had
wrongly apportioned and paid out part of the proceeds towards the
30 hire-purchase financier. It was the contention of the defendants that
the proceeds of sale should have been dealt with in accordance with
-9- [CSK.22-95-2006-II]
5 the order of priority set out in Clause 21.1 of the Debenture, which if it
had been done would have substantially reduced their (the
guarantors) liability under the guarantees they had signed, since the
Term Loans (Trench A and B) which amounted to RM1,577,499.89
as at 30.09.2003 would have been fully paid off, and, part of the
10 amount owing under the Legal Charge over the land would have
been paid.
I do not agree. Clause 21.1 of the Debenture expressly states
in its relevant parts that:
15 “………. the net profits of carrying on the said
business and the net proceeds of any sale shall,
subject to the rights of the secured creditors (if any)
ranking in priority to this Debenture ………. shall be
applied by the Receiver and Manager as follows …..”.
20
Clearly, the owners of the equipment under hire-purchase or the
financier that provided the hire-purchase loan have a priority to be
paid out of the proceeds of sale.
25 Further, even if they do not, then the mistake, if any, is that of
the principal borrower’s own agent i.e. the 1st defendant’s own agent
since the debenture expressly states in Clause 20.1 that any
Receiver and Manager appointed “shall be the agent of the Borrower
and the Borrower shall be solely responsible for his or their acts or
30 defaults”. Accordingly, the defendants cannot have any cause of
complaint against the plaintiff for what the Receiver and Manager did.
-10- [CSK.22-95-2006-II]
Any complaint of the defendants should be addressed to the 1st 5
defendant and cannot give rise to any triable issue here.
The defendants had also contended that because the Receiver
and Manager had wrongly apportioned the proceeds of sale, they
10 have become discharged of their liability under the guarantees they
signed. It must follow from what have just said above about what
Clause 21.1 of the Debentures states regarding the order of priority of
payment of any proceeds of sale and whose agent the Receivers and
Managers were, that this contention has no merit at all and given rise
15 to no triable issue.
(c) Whether the outstanding amount claimed by the plaintiff is
inconsistent?
20 The defendants complain that quite apart from wrongly stating
the amount of the proceeds of sale, the plaintiff has also stated the
amount claimed inconsistently, thus giving rise to confusions in its
claim. Thus, the defendants pointed out that in Para 21 of its
Statement of Claim, the plaintiff pleaded that the outstanding amount
25 as at 30.09.2003 prior to the sale by the Receiver and Manager was
RM2,994,391.73 but in Paragraph 23 of the same Statement of
Claim, the amount given after the sale by the Receiver and Manager
as at 31.03.2006 was RM2,336,030.40. The defendants further point
out that by Paragraph 8 of its Reply to Defence, the plaintiff
30 recognized and admitted that due to a typographical error in
Paragraph 21 of its Statement of Claim the correct figure should be
-11- [CSK.22-95-2006-II]
5 RM2,994,391.73 after deduction of the sales proceeds as at
30.09.2003, but it is not known whether the outstanding amount of
RM2,994,391.73 is outstanding as at 31.09.2003 or 31.03.2006 and
before or after deducting the proceeds of sale?
10 I find nothing in the point taken, as it should be plain to anyone
reading the pleadings that there is an obvious typing error in
Paragraph 8 of the Reply to Defence, in that, the words “after
deduction” should read “before deduction” and “30.09.2003” should
read “30.03.2006” instead because Paragraph 8 of the Reply to
15 Defence expressly refers to Paragraph 21 of the Statement of Claim
which addresses and set out the total balance due and owing before
deducting the proceeds of sale as at 30.09.2003. The defendants
would also know this as the same position is reflected in the plaintiff’s
notices of demand to all the defendants dated 13.10.2009 which were
20 exhibited as ‘MC 17’ to ‘MC 21’ of the plaintiff’s affidavit dated
04.05.2007 (Encl. 40). The defendants had clearly received this
notice of demand because on 03.11.200 3 they signed a joint letter in
which the plaintiff’s letter of demand of 13.10.2003 is referred to and
the defendants informed the plaintiff that the 1st defendant principal
25 borrower had submitted a proposal for settlement of the banking
facilities (see ‘MC 41’ in Encl. 62).
Accordingly, there can be no confusion about the fact that the
amount of RM2,994,391.73 is the amount outstanding under the
30 Term Loans as at 30.09.2003 as so clearly stated in the plaintiff’s
-12- [CSK.22-95-2006-II]
5 letters of demand dated 13.10.2003 and in Clause 21 of the
Statement of Claim.
The defendants contended that the plaintiff should not be
allowed to point out these obvious typographical errors to the court
10 and rely on the correct position in this application without having
taken any steps to formally amend its pleadings in accordance with
Ord. 20 RHC. I do not agree. The Rules of Court are there to serve
and not to obstruct or hinder the parties in attaining redress. The
defendants say that in the absence of an application to amend, the
15 Statement of Claim should be taken as it is and in view of such
erroneous outstanding amount, summary judgment as prayed should
be dismissed. I do not agree. Ord. 14, r. 3 RHC expressly states that
on the hearing of an application for summary judgment
“the Court may give such judgment for the plaintiff against the
20 defendant on that claim or part as may be just having regard to the
nature of the remedy or relief claimed”.
The relief claimed here is repayment of banking facilities
guaranteed by the defendants. It would not be just to dismiss the
25 plaintiff’s application for some obvious typographical errors which
could not possibly cause confusion to the defendants about the
amount claimed and at as what date.
30
-13- [CSK.22-95-2006-II]
5 (d) The plaintiff did not plead material facts regarding the
Hire-Purchase Agreements.
The defendants complain that even though the Receiver and
Manager apportioned the proceeds of sale towards payment of the
10 hire-purchase facility, no facts or particulars were pleaded about the
hire-purchase agreements. I find the above contention does not give
rise to any triable issue for the simple reason that the plaintiff’s cause
of action is not founded on the hire-purchase agreement. It became
necessary for the plaintiff to refer to the hire-purchase facilities only
15 because the Receiver and Manager gave an account of how he had
dealt with the proceeds of sale of the assets of the principal borrower
under the debenture. Accordingly, there was no need for the plaintiff
to plead facts relating to the hire-purchase agreement to enable it to
formulate a complete cause of action against the defendants.
20
(e) Were the letters of demand defective?
It is the defendants’ contention that the amounts stated in the
plaintiff’s letter of demand dated 08.01.2003 and 13.10.2003 are
25 different from the amount mentioned in the affidavit affirmed by the
plaintiff in support of its Ord. 14 application on 04.05.2007. According
to the defendants since a precise demand had not been made
against them, the demand was defective which rendered the demand
an improper demand by reason whereof the plaintiff’s action against
30 them as guarantors must fail. I do not agree.
-14- [CSK.22-95-2006-II]
5 In Bank of Baroda v Panessar & Ors [1987] 2 WLR 208, it was
held that there is no need to specify a precise amount in a letter of
demand for it to constitute a proper demand. Likewise in Bunburry
Foods Pte Ltd V The National Bank of Australasia Ltd [1984] 51 ALR
609, it was held that it is not essential to the validity of a notice of
10 demand that it should correctly state the amount of the debt.
Quite apart from that, the defendants here had covenanted in
the 2nd paragraph of the guarantee that they undertook the liability “as
principal debtors” and not merely as sureties. There is case law to
15 the effect that in such a situation a prior demand is not a must before
the surety may be sued (see the Court of Appeal decision in Allied
Bank (Malaysia) Sdn. Bhd. v Yau Jiok Hua [2006] 3 CLJ 27).
Accordingly, in this case a prior letter of demand was not even
necessary before the defendants were sued. Accordingly, there can
20 be no triable issue raised on this ground.
The defendants also complained that the plaintiff’s letters of
demand dated 13.04.2006 were not received by them and so the
plaintiff’s action is premature. I see nothing in the point taken. The
25 letters of demand of 13.04.2006 were sent to the defendants by
Registered Post and proof of such posting was exhibited as ‘MC 39’
to the affidavit of Martina Chin affirmed on 20.06.2007 (Encl. 52).
Those letters of demand were sent to the postal addresses of each of
the 2nd, 3rd, 4th and 5th defendant’s addresses disclosed in a search
30 conducted at the Companies Commission of Malaysia on the
1st defendant borrower on 07.10.2003.
-15- [CSK.22-95-2006-II]
5 Quite apart from that, even if the defendants did not receive the
letters of demand of 13.04.2006, they did receive the earlier demand
made on 13.10.2003 because they wrote to the plaintiff on
03.11.2003 saying so. (See Exh. ‘MC 41’ to the affidavit of Martina
Chin affirmed on 23.07.2007 Encl. 62). Accordingly, it is not open to
10 the defendants to say they did not receive a letter of demand. Even
further still, since a prior letter of demand is not a must on a principal
debtor, which these defendants are, their contention that they did not
receive the last in the series of three letters of demand does not give
rise to any triable issue.
15
It was for all the above reasons that I granted the plaintiff’s
application for summary judgment against the defendants in the
terms prayed for in their Statement of Claim.
20
25
DATUK CLEMENT SKINNER
Judge
30 Date : 2009
-16- [CSK.22-95-2006-II]
5 Counsel
For Plaintiff : Mr. Nicholas Fernandez
Messrs. Fernandez & Co.
Advocates and Solicitors
10 KOTA KINABALU
For 2nd to 5th Defendant : Ms. Emily Lo with Mr. William Lee
Messrs. J. Ambrose & Partners
Advocates and Solicitors
15 KOTA KINABALU
