Eon Bank Berhad V Osman @ Md Daud Bin Aroff & 2 Lagi

  

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THE HIGH COURT OF MALAYA AT Kuala Lumpur (COMMERCIAL DIVISION)

 

SUIT NO: D-22-163-2009

 

EON BANK BERHAD V

 

OSMAN @ MD DAUD BIN AROFF & 2 ORS GROUNDS OF JUDGMENT

 

Enclosure 32 is the Proposed Intervener application to intervene under Order 15 r 6(2)(b)(i) and (ii) and Order 92 r 4 Rules of the High Court 1980 for the following Orders:-

 

“1. Bahawa LAU JENN WEE (No. K/P: 700603-04-5177) dibenarkan untuk mencelah di dalam tindakan ini sebagai Defendan dan bahawa Writ Saman dan Pernyataan Tuntutan dipinda sedemikian dengan menambah nama beliau;

 

2. Bahawa LAU JENN WEE tersebut diberikan kebebasan untuk memasukkan kehadiran dan pembelaan dan/atau tuntutan balas dalam masa 14 hari dari tarikh penyampaian Pliding terpinda;

 

3. Kos permohonan ini dijadikan kos dalam kausa;

 

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4. apa-apa relif atau perintah dan/atau arahan lain yang selanjutnya yang mana Mahkmah Yang Mulia ini fikirkan berpatutan dan suai manfaat.

 

The Application is supported by an Affidavit in Support affirmed on 30.11.2009.

 

Brief Facts

 

The Plaintiff’s Claim in this action is premised on the Letters of offers dated 29.6.2007 and 14.11.2007 in relation to the Housing Loan Facility of RM6.5 million granted to the Defendants. A Guarantee dated 6.12.2007 was executed whereby the Guarantor is the 3rd Defendant. The amount claimed is RM6,730,544.63 with interest and costs due and owing under the said Facility.

 

The Intervener’s Application

 

1) The Proposed Intervener has commenced its suit against the 1st and 2nd Defendants [Civil Suit No. 22-276-2009].

 

2) The Proposed Intervener have entered into an Investment Agreement with the 1st and 2nd Defendants to purchase the property described as H.S. (M) 3999, Lot 25, Mukim Kuala Lumpur, Wilayah Persekutuan Kuala Lumpur.

 

3) The Proposed Intervener’s interest and rights in HS (M) 3999 Lot 25, Mukim Kuala Lumpur [the said Land] will be prejudiced should the Plaintiff, without the Proposed Intervener knowledge, obtain an order for sale over the said Land. The Proposed Intervener

 

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has entered a private caveat over the said Land and has an injunction against the Defendants.

 

4) The Proposed Intervener averred that the 1st and 2nd Defendants hold the said Land on trust for him pursuant to an Investment Agreement and therefore the Defendants do not have the capacity to enter into the Facility Agreement without the consent of the Proposed Intervener.

 

The Proposed Intervener’s Argument

 

The Proposed Intervener had invested in a project to develop the said Land. The 1st and 2nd Defendant was holding the property as a trustee of the Proposed Intervener. Therefore the Proposed Intervener is entitled to the RM2.7million.

 

The Proposed intervener’s Counsel further submits that the issue to be considered by the Court is not whether there is a nexus between the Parties. The issue before the Court is whether if any Order is made the legal interest of the proposed Intervener will be affected. The case of Kuala Lumpur Finance Bhd. v. Azmi & Co. Sdn. Bhd. [1996] 4 MLJ 650 was referred to by Counsel where the Court held that even though there was no nexus between the Parties considering there was a specific allegation against them it was just and convenient to add the Defendants so that the dispute could be resolved effectively.

 

The Plaintiff’s Argument

 

The Plaintiff submits that the matters averred by the Proposed Intervener are not matters which are questions or issues arising out or relating to or

 

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connected with any relief or remedy claimed in this action. The case of Pegang Mining Co Ltd v. Choong Sam & Ors [1969] 2 MLJ was cited.

 

The Proposed Intervener is neither privy nor conferred any rights or benefit as the Plaintiff’s claim is pursuant to the Loan Facility Agreement between the Plaintiff and the Defendants. The RM2.7million said to be paid by the Proposed Intervener to 1st and 2nd Defendants as down payment of the said Land is not relevant.

 

Any rights and liabilities the Proposed Intervener may seek to assert with regards to the said Land are not directly affected by any order which may be made in the action. The Plaintiff cited the case of Bujang bin Haji Ulis v. Nancy bte Abdullah (Imas anak Blanda & Anor as Proposed Interveners) [2007] 4 MLJ 363 where it was held that,

 

“To succeed in an interveners’ application, the applicants have to show that they have a right in the subject matter of the suit and want to be made a party to protect their interest. They must comply with the procedural requirement to intervene as set out on O15 r 6 (2) (b) (ii) of the RHC. The test in determining whether an applicant ought to be given leave to intervene is whether the applicant’s rights or liabilities to any party to the action, in respect of the subject matter of the action, will be directly affected by any order which may be made in the action. ”

 

The Plaintiff further submitted that the Proposed Intervener’s interest, if any, is merely a commercial interest in the outcome of the action. Therefore whatever the alleged business relations between the

 

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Proposed Intervener and the 1st and 2nd Defendants is not an interest entitling him to intervene.

 

It is also the Plaintiff’s submission that the rights and the obligations under the Investment Agreement can at best amount to a collateral rights and obligations.

 

On the issue of the 1st and 2nd Defendants as trustee for the Proposed Intervener vis-vis the said Land, the Proposed Intervener failed to show any legal interest in the actual proceedings.

 

The Proposed Intervener had submitted that the Plaintiff has constructive knowledge of the Proposed Intervener’s rights as installment payments to the Plaintiff were made with cheques bearing the name of Meriah Unggul Sdn. Bhd.,

 

“…pihak Plaintif mempunyai pengetahuan konstruktif berkenaan dengan hak kepentingan Pencelah kerana segala bayaran ansuran telah dibuat melalui cek atas nama sebuah syarikat dikenalai sebagai Meriah Unggul Sdn. Bhd;..”

 

[para 5(d) Affidavit of the Proposed Intervener affirmed on 22.12.2009].

 

The Plaintiff submits that the fact the payments are made by a 3rd party is insufficient to suggest that the agreements between the Defendants and the 3rd parties were within the Plaintiff knowledge. Further a company search done on Meriah Unggul Sdn. Bhd. shows that the Proposed Intervener does not have an interest in that company.

 

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The Proposed Intervener had in fact filed a civil suit against the 1st and 2nd Defendants vide KL High Court 22-276-2009.

 

The Law

 

O. 15 r. 6(2) (b) of the Rules of the High Court 1980 gives the court the powers to grant leave to intervene where:

 

(i) any person who ought to have been joined as a party or whose presence before the court is necessary to ensure that all matters in dispute in the cause or matter may be effectually and completely determined or adjudicated upon; or

 

(ii) any person between whom and any party to the cause or matter there may exist a question or issue arising out of or relating to or connected with any relief or remedy claimed in the cause or matter which in the opinion of the court it would be just and convenient to determine as between the parties to the cause or matter.

 

Order 15 r. 6(3 )RHC further sets out the test for granting or refusing leave to intervene. The applicant must show his or their interest in the cause or matter in dispute or, as the case may be, the question or issue to be determined as between him and any party to the cause or matter.

 

His Lordship Gopal Sri Ram JCA(as he then was) in DATO’ DR HJ MOHAMED HANIFFA HJ ABDULLAH & ORS v. KOPERASI DOKTOR MALAYSIA BHD AND ORS & ANOTHER APPEAL [2008] 3 CLJ 323

 

said that ,

 

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“..In such a case what the rule does is “to enable the court to prevent In the first place, it is important to note that the rule permits intervention on two separate grounds. In sub-para (i) it enables intervention where the presence of a party before the court is necessary. In sub para. (ii) intervention is enabled where a party to an action claims relief or a remedy which will materially affect the non-party-intervener’s rights. In such circumstances, the court is empowered to permit intervention if it forms the view that to do so will be just and convenient. Take the obvious case of an action for specific enforcement of a contract for the sale of immovable property brought by a purchaser against the vendor. If the vendor has resold the property to a third party, such third party may be entitled to intervene and be added as a party to the purchaser’s action because his rights under the second sale will be materially affected by the relief claimed by the plaintiff-purchaser injustice being done to a person whose rights will be affected by its judgment by proceeding to adjudicate upon the matter in dispute in the action without his being given an opportunity to be heard.” (Pegang Mining Co Ltd v. Choong Sam & Ors [1969] 2 MLJ 52, per Lord Diplock.) The second observation I would make is this. The court should not read the requirements of the rule as though they are words in a penal statute calling for strict compliance with them before intervention may be permitted. Put differently, the rule should be widely or liberally interpreted.

 

(See, Pegang Mining Co Ltd v. Choong Sam). But the court should also bear in mind that “it must be an interpretation of the language used” by the rule because the rule “does not give power to add a party whenever it is just or convenient to do so”

 

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(Vandervell Trustees Limited v. White [1971] AC 912, per Viscount Dilhorne). In other words, no “process of giving a wide or liberal interpretation to the rule can be employed to alter it or to give it an enlarged meaning which, on a fair and reasonable interpretation, it does not bear.” (Vandervell Trustees Limited v. White per Lord Morris).

 

In the instant case the Plaintiff had granted to the 1st and 2nd Defendants a Housing Loan Facility of RM6.5 million. The Housing Loan Facility was offered and accepted by the 1st and 2nd Defendants on 9.7.2007. A Guarantee was provided by the 3rd Defendant. A Third Party First Legal Charge over the said property was executed under the Housing Loan. The Defendants defaulted in payments. Therefore the Plaintiff initiated this action against them.

 

According to the Proposed Intervener the 1st and 2nd Defendants is in actual fact holding the Land in trust for him pursuant to an Investment Agreement dated 18.7.2007 to develop the Land into low density residential development. Among the Terms of the Agreement is that the 1st and 2nd Defendants intend to obtain a loan from a financial institution to part finance the purchase of the Property.

 

In Pegang Mining Co Ltd v. Choong Sam & Ors [1969] 2 MLJ 52,

 

Lord Diplock said (at page 55):

 

“The cases illustrate the great variety of circumstances in which it may be sought to join an additional party to an existing action. In their Lordships’ view one of the principal objects of the rule is to enable the court to prevent injustice being done to a person whose rights will be affected by its judgment by proceeding to adjudicate

 

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upon the matter in dispute in the action without his being given an opportunity of being heard. To achieve this object calls for a flexibility of approach which makes it undesirable in the present case, in which the facts are unique, to attempt to lay down any general proposition which could be applicable to all cases”.

 

The Privy Council went on further to say that,

 

“It has been sometimes said as in Moser v. Marsden and in In re

 

I.G. Farbenindustrie A.G. that a party may be added if his legal interests will be affected by the judgment in the action but not if his commercial interests only would be affected. While their Lordships agree that the mere fact that a person is likely to be better off financially if a case is decided one way rather than another is not a sufficient ground to entitle him to be added as a party, they do not find the dichotomy between “legal” and “commercial” interests helpful. A better way of expressing the test is: will his rights against or liabilities to any party to the action in respect of the subject matter of the action be directly affected by any order which may be made in the action?”

 

In the instant case this Court will have to determine whether the Proposed Intervener’s rights in respect of the subject of the action by the Plaintiff will be directly affected by any order which may be made in this proceeding. In Arab Malaysian Merchant Bank Bhd v. Jamaludin bin Dato’ Mohd Jarjis [1991] 1 MLJ 27 at page 28 Gunn Chit Tuan SCJ (as he then was) said,

 

“One of the class of cases covered by the said rule, which allows intervention by persons not parties, is where the proprietary or

 

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pecuniary rights of the intervener are directly affected by the proceedings or where the intervener may be rendered liable to satisfy any judgment directly or indirectly. The ambit of this class has been materially widened by the decision of the UK Court of Appeal in Gurtner v. Circuit, the effect of which is to include any case in which the intervener is directly affected not only in his legal rights but in his pocket. In this connection, we would refer to and respectfully adopt the following dictum of Lord Denning MR, in that case, in which His Lordship said as follows:

 

It seems to me that, when two parties are in dispute in an action at law and the determination of that dispute will directly affect a third person in his legal rights or in his pocket, in that he will be bound to foot the bill, then the court in its discretion may allow him to be added as a party on such terms as it thinks fit. By so doing, the court achieves the object of the rule. It enables all matters in dispute to be effectually and completely determined and adjudicated upon between all those directly concerned in the outcome. ”

 

The test in determining whether an applicant ought to be given leave to intervene is whether the proprietary or pecuniary rights of the Proposed Intervener are directly affected by the proceedings or where the Proposed Intervener may be rendered liable to satisfy any judgment directly or indirectly. The Proposed Intervener pursuant to the Investment Agreement invested in the project by giving the 1st and 2nd Defendant RM2.7 million as initial investment deposit towards the purchase of the property for development. The 1st and 2nd Defendants

 

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were actually holding the property as a trustee of the Proposed Intervener as agreed under the Investment Agreement.

 

In the instant case the Parties by the Investment Agreement had agreed that the 1st and 2nd Defendant hold the Property in Trust. However the claim against the 1st and the 2nd Defendant by the Proposed Intervener is not proprietary but merely for monetary and commercial reasons. This can be seen from the prayers in the pending suit S-22-276-2009 which the Proposed Intervener filed against the 1st and 2nd Defendants. Among the Prayers in that suit are,

 

“1. Satu pengisytiharan bahawa Perjanjian Pelaburan bertarikh 18.9.2007 masih lagi sah dan berkuatkuasa;

 

2. Satu perintah pelaksanaan spesifik Perjanjian Pelaburan bertarikh 18.9.2007;

 

3. Satu perintah injunksi_;

 

4. Secara lanjutan dan/atau alternative gantirugi am menggantikan pelaksanaan spesifik (damages in lieu of specific performance) untuk ditaksirkan dan dibayar oleh defendan-Defendan kepada Plaintif”

 

The issue of the trust can be determined in the Proposed Intervener’s suit against the 1st and 2nd Defendants i.e. KL High Court S-22-276-2009.

 

The purpose of the purchase of the property was to develop it and that the Proposed Intervener had agreed that 1st and 2nd Defendants will obtain a Loan from a financial Institution for the balance sum. It is

 

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settled law, on the authorities, that a party may be added if his “legal interests” will be affected by the judgment in the action but not if his commercial interests alone would be affected: per Lord Diplock in Pegang Mining Co. Ltd. v. Choong Sam & Ors. [1973] 1 LNS 107.

 

The claim by the Plaintiff is for the Housing Loan Facility which was granted to the 1st and 2nd Defendants. If judgment is entered against the 1st and 2nd Defendants then it would be the Defendants that they will have to pay to the Plaintiff the amount due. As for the property the Proposed Intervener has entered a private caveat over the land. The object of Order 15 r 6(2)(b)(i) and (ii) is to prevent multiplicity of proceedings. In this case the Proposed Intervener has a pending suit against the 1st and the 2nd Defendants. The Proposed Intervener has failed to show that his legal interest will be affected by the judgment in this action.

 

For the reasons set out above Enclosure 32 is dismissed with cost.

 

HASNAH BINTI DATO’ MOHAMMED HASHIM

 

Judicial Commissioner High Court of Malaya Kuala Lumpur.

 

15 July 2010.

 

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