IN THE COURT OF APPEAL OF MALAYSIA
(APPELLATE JURISDICTION) THE PALACE OF JUSTICE PUTRAJAYA
CIVIL APPEAL NO. P-02-812-2009
MD MUSTAFFA BIN MD SHERIFF
Respondent RHB BANK BERHAD
(FORMERLY KNOWN AS KWONG YIK BANK BERHAD)
[In the matter of the High Court of Malaya at Penang, Originating
Summons No. M1-24-895-2004]
RHB Bank Berhad
(Formerly known as Kwong Yik Bank Berhad)
Md Mustaffa bin Md Sheriff]
Zaleha Zahari, JCA Mohd Hishamudin Yunus, JCA Linton Albert, JCA
DISSENTING JUDGMENT OF MOHD HISHAMUDIN YUNUS, JCA
This is an appeal by the appellant/defendant (Md Mustaffa) against the decision of the learned Judge of the High Court of Penang given on 15 April 2009.
The learned Judge on 15 April 2009 had allowed the respondent’s/plaintiff’s (RHB Bank) application under section 256 of the National Land Code (‘the NLC’) for an order for sale of the appellant’s land that had been charged to the respondent under the NLC as a security in respect of an overdraft facility granted by the respondent bank to the appellant.
I am allowing the appeal with costs.
Section 256 of the NLC provides –
Application to Court for order for sale
256. (1) This section applies to land held under –
(a) Registry title;
(b) The form of qualified title corresponding to Registry title; or
(c) subsidiary title,
and to the whole of any divided share in, or any lease of, any such land.
(2) Any application for an order for sale under this Chapter by a chargee of any such land or lease shall be made to the Court in accordance with the provisions in that behalf of any law for the time being in force relating to civil procedure.
(3) On any such application, the Court shall order the sale of the land or lease to which the charge relates unless it is satisfied of the existence of cause to the contrary.
The respondent bank had in 1985 provided the appellant with an overdraft facility in the sum of RM350,000 with interest at the rate of 3.0% above the BLR per annum.
The appellant defaulted in the repayment of the overdraft facility. The respondent therefore served on the appellant a notice in Form 16D pursuant to section 254 of the NLC. This provision states –
Service of default notice, and effect thereof
254. (1) Where, in the case of any charge, any such breach of agreement as is mentioned in subsection 253(1) has been continued for a period of at least one month or such alternative period as may be specified in the charge, the chargee may serve on the chargor a notice in Form 16D-
(a) specifying the breach in question;
(b) requiring it to be remedied within one month of the date on which the notice is served, or such alternative period as may be specified in the charge; and
(c) warning the chargor that, if the notice is not complied with, he will take proceedings to obtain an order for sale.
(2) Where, after the service of any such notice, the charged land or lease becomes vested in any other person or body, the notice shall be as valid and effectual against that person or body as it was against the person or body on whom it was served.
(3) If at the expiry of the period specified in any such notice the breach in question has not been remedied –
(a) the whole sum secured by the charge shall (if it has not already done so) become due and payable to the chargee; and
(b) the chargee may apply for an order for sale in accordance with the following provisions of this Chapter;
Provided that paragraph (a) shall not apply to any charge to secure the payment of an annuity or other periodic sum.
The Form 16D notice as issued and served by the respondent on the appellant states –
KANUN TANAH NEGARA BORANG 16D SEKSYEN 254
NOTIS PERLANGGARAN MENGENAI SESUATU CAGARAN
Encik Md Mustaffa Bin Md Sheriff DST 10, Jalan Jeretak
Setapak Garden, Gombak 53300 Kuala Lumpur
Encik Md Mustaffa Bin Md Sheriff 164, Jalan C3 Taman Melawati 53100 Kuala Lumpur
Pencagar di bawah cagaran yang diperihalkan dalam jadual di bawah mengenai tanah yang diperihalkan sedemikian.
BAHAWASANYA anda telah melanggar peruntukan-peruntukan cagaran ini dengan:-
Kegagalan menyempurnakan bayaran kembali kemudahan Pinjaman Overdraf yang diberikan kepada kamu sebanyak RM350,000.00 dan faedah keatasnya menurut terma-terma lampiran Gadaian ini dan sehingga 30hb Januari 2004 jumlah yang terhutang adalah sebanyak Rm1,779,683.30 termasuk faedah pada Kadar Pinjaman Asas (KPA) + 3% setahun (KPA bank pada 30.1.2004 adalah 6% setahun) dari 31/1/2004 sehingga pembayaran penuh
seperti yang dituntut dalam surat tuntutan peguamcara pemegang cagaran yang bertarikh 12hb Februari 2004.
DAN BAHAWASANYA perlanggaran ini telah berterusan untuk suatu tempoh sekurang-kurangnya TUJUH (7) HARI sebelum daripada Notis ini.
MAKA kami sebagai pemegang cagaran, dengan kuasa yang telah diberikan kepada kami di bawah Seksyen 254, Kanun Tanah Negara, dengan ini menghendaki anda dalam tempoh tujuh (7) hari daripada tarikh penyampaian Notis ini meremedikan perlanggaran itu.
DAN sila ambil perhatian sekiranya anda gagal meremedikan perlanggaran itu dalam tempoh yang ditetapkan itu, maka kami akan memohon untuk mendapat perintah jualan.
Bertarikh pada 16hb Februari 2004
Peguamcara Bagi Pihak
NORDIN TORJI & YUSSOF AHMAD
The appellant did not take any action as required by the above form and section 254.
In opposing the present originating summons application, it is the contention of the appellant that he was under no obligation to comply with the requirement of the Form 16D as there is a serious error in the form in that the sum alleged to be owing as stated in the Form 16D (i. e. RM1,779,683.30 as at 30 January 2004, inclusive of interest) is incorrect. It is contended that, by reason of this error, the Form 16D in question is defective and invalid.
The respondent concedes in its affidavit of 10 July 2006 (and also in submission) that this sum as stated in the Form 16D is erroneous. The respondent in its affidavit admitted the error in the following manner –
4. Saya merujuk kepada perenggan 3(a) dan 4 Afidavit tersebut dan menyatakan terdapat kesilapan pada tarikh jumlah tersebut dikira iaitu dalam ekshibit ‘CCY-7’ Afidavit Pertama Plaintif yang diikrarkan pada 18/6/2004.
5. Saya menyatakan bahawa jumlah yang dituntut oleh Plaintif adalah betul dan setakat 3/8/2006 jumlah terhutang oleh Defendan adalah RM2,791,539.14. Dilampirkan di sini Sesalinan Penyata Akaun setakat 3/8/2006 untuk jumlah RM2,791,539.14 di mana butir-butir kiraan dinyatakan dengan jelasnya sebagai ekshibit ‘A-1’.
As the respondent’s affidavit has referred to paragraphs 3(a) and 4 of the appellant’s affidavit affirmed on 23 March 2006, I shall now refer to paragraphs 3 and 4 of the appellant’s affidavit. The paragraphs read as follows:
(3) Saya merujuk kepada afidavit-afidavit wakil plaintif yang diikrar pada 11-8-05 dan 6-3-06. Saya sekali lagi mengulang bahawa penyata akaun plaintif adalah salah kerana di dalam ekshibit CCY-7 afidavit pertama plaintif yang diikrar pada 18-6-2004 dinyatakan seperti berikut:-
3(a) Jumlah penghakiman seperti pada 30-4-1998 ialah RM1,248,311.62 dan jumlah hutang pada 1-5-2000 ialah RM1,251,258.78. Adakah ini bermakna jumlah faedah untuk 2 tahun hanya merupakan RM2,947.16?
3(b) Di dalam affidavit yang diikrar pada 6-3-06, di perenggan 4 butir-butir akaun hanya mengatakan tentang jumlah pendahuluan dan amaun yang belum dibayar setakat 6-4-06. Saya mengatakan kiraan ini adalah tidak betul kerana kiraan ini dibuat tanpa
mengambil kira pembayaran semula dan sebagainya. Adalah wajib untuk plaintif menyatakan tentang pembayaran semula, akaun tertunggak dan faedah dan faedah penalty yang tertunggak. Tanpa butir-butir ini bagaimana kita tahu jumlah RM2,678,261.12 itu betul dan tepat.
(4) Plaintif telah gagal mengemukakan akaun terperinci bagaimana jumlah RM2,678.261.12 itu dikira. Jumlah pinjaman defendan hanyalah RM350,000.00. Tuntutan plaintif adalah hampir 8 kali ganda dari jumlah pinjaman.
If the sum of RM1,779,683.30 as stated in Form 16D, as at 30 January 2004, is erroneous, as admitted by the respondent, then, what should be the correct sum then that was due and owing as at 30 January 2004? Unfortunately the respondent’s affidavit does not go on to explain as to what should be the correct sum as at that date (30 January 2004). Instead, paragraph 5 of the respondent’s affidavit above merely states as to what is the correct sum that was due and owing as at 3 August 2006.
However, it is to be noted that in the said affidavit, the respondent has exhibited a statement of account (Exh. A-1). Now, if we were to examine this statement of account, we will note that as at 31 January
2004 the sum owing is now stated to be RM2,222,067.16, that is to say, a much larger sum than that stated in Form 16D. Hence, there is a substantial difference between the sum as stated in Form 16D and the sum as stated in the statement of account in Exh. A-1, a difference of RM442,383.86 (RM2,222,067.16 – RM1,779,683.30).
To repeat what has been said above, based on the above statement of account (at Exh. A-1), the amount as claimed by the respondent to be owing, as at 3rd August 2006, was RM2,791,539.14 (see paragraph 5 of the respondent’s affidavit of 10 July 2006). For the record, when the learned High Court Judge ultimately made the order for sale on 15 April 2009, the amount owing as claimed and as accordingly stated in the order for sale (also based on the statement of account at Exh. A-1) was RM3,618,626.64.
It is the contention of the respondent that the error in Form 16D as to the amount due was not fatal as the error did not prejudice or mislead the appellant in any way, citing Syarikat Kewangan Melayu Raya Bhd v. Malayan Banking Bhd  1 MLJ 115 where the Federal Court held (at p. 118) –
In our view, whether a notice of default with respect to a charge or charges in Form 16D is bad in law would depend on whether the chargor has been prejudiced or misled by any defect in the notice so as to render the granting of the order of sale unjust, and this in turn must necessarily depend on the circumstances of each particular case.
In my judgment, in the present case, the error in the Form 16D that was served on the appellant clearly had misled the appellant. He was notified that the sum owing was only RM1,779,683.30, when the actual sum owing was a much bigger sum, that is, RM2,222,067.16. And he had been prejudiced; for, even if he were to offer to pay the respondent the sum of RM1,779,683.30 within the prescribed timeframe as stipulated in the form, the respondent would not have accepted it as a full settlement sum as it was an erroneous sum. Therefore, he would not be able to remedy the breach by tendering a sum of RM1,779,683.30, even if he was in a position to tender such a sum to the respondent; for it was not the settlement sum that the respondent had in mind.
I must add that in my judgment service of Form 16D on a chargor is not a mere formality. It is a serious process putting the chargor to notice as to how much he actually owes the chargee and giving him an opportunity to settle the sum owing; and it serves as a warning to the chargor as to the consequences should he fail to make the payment. Form 16D is a statutory form and service of the form on the chargor is a statutory obligation on the part of the chargee under the NLC. Without serving the Form 16D on the chargor, the chargee is legally incompetent to apply to the Court for an order for sale of the charged property. I am unable to accept the argument of the respondent that it does not matter whether the sum stated in the form is correct or otherwise – all the more so where, as in the present case, the error is not a matter of a few cents or ringgit, but a substantial sum. Issuing and serving the Form 16D is not a statutory duty or obligation that may be taken lightly or that may be carried out by the chargee in a cavalier manner. Moreover, it must be borne in mind that a person’s right to his property is a fundamental right protected by the Federal Constitution: no person shall be deprived of his property save in accordance with the law (Article 13 of the Federal
Constitution). In Kekatong Sdn. Bhd. v. Bank Bumiputra Malaysia Bhd.  2 CLJ 266 Gopal Sri Ram JCA (as he then was) said:
The ownership of immovable property and all things appurtenant thereto is a very valuable right and is a fundamental right by art. 13 of the Federal Constitution. Accordingly, any deprivation of immovable property must be in strict compliance of both substantial and procedural law;
It must be pointed out that the respondent admitted that there was a mistake in the sum due in the Form 16D only after the appellant had filed two affidavits disputing the correctness of the account maintained by the respondent in respect of the appellant’s overdraft facility.
It must also be pointed out that there is nothing in the respondent’s affidavit stating that had the appellant paid the sum of RM1,779,683.30, as stated in the Form 16D, within the time frame as prescribed by the form (that is, within 7 days), the respondent would have written off or waived the difference of RM442,383.86, and would have regarded the whole debt owing to the respondent as having
been fully settled, even though the sum paid was much lesser than
the sum that was actually due.
In Lum Choon Realty v. Perwira Habib Bank Malaysia Bhd.  4 MLJ 409, Mokhtar Sidin JCA, in delivering the unanimous judgment of the Court of Appeal said (at p. 423):
The learned judge was of the view that the discrepancy was so small that it did not affect the order for sale. With the greatest respect to the learned judge we are of the view that in an application for sale the precise amount should be stated in the notice of demand. The whole idea is to let the borrower know the actual figure he has got to pay in order to redeem the property. Otherwise when the borrower pays the amount (which in this case is less than the actual one) the lender will still have a lien on the property based on the balance.
In conclusion I hold that the Form 16D, by reason of the substantial error in it, is invalid, null and void. Since there was no valid Form 16D issued and served on the appellant, the respondent was in no position, legally, to make an application to the Court for an order for
sale pursuant to section 256 of the NLC. In other words, before the High Court, the appellant had been able to show cause to the contrary (see Low Lee Lian v. Ban Hin Lee Bank Bhd.  2 CLJ 36). Therefore the respondent’s originating summons should have been dismissed by the High Court.
[Appeal allowed with costs.]
(Dato’ Mohd Hishamudin bin Mohd Yunus) Judge, Court of Appeal Palace of Justice Putrajaya
Date of decision: 29 June 2011
Date of written grounds of judgment: 16 January 2012
Encik Ravichandran (Messrs Omar Bakhi Ahmad) for the appellant
Encik Terrence Phillips (Messrs Nordin Torji & Yusof Ahmad) for the respondent