Rhb Bank Berhad Lwn. Kian Yip Furniture Sdn. Bhd & 5 Lagi


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SUIT NO. D-22-NCC-200-2009




















6. NG HIAK HING (sebagai wakil diri kepada Harta Pusaka Ng Tien Woo @


Ng Thian Woo) … DEFENDANTS








The Plaintiff granted banking facilities in the form of a Term Loan facility I; Term Loan Facility II, Term Loan Facility III and Banker’s Acceptance to the 1st Defendant. The agreement granting these facilities is contained in three letters of offer dated 13th June 1998, 12th August 1999 and 8th April 2000 duly accepted by the 1st Defendant.




It was inter-alia a term of the letter agreements that: –


a) The interest of the Term Loans I, II and III facilities was to be at the rate of 2% per annum above the Plaintiff’s Base Lending Rate (BLR) on monthly rests;


b) If the 1st Defendant fails to pay any sum on the due date, the Plaintiff is entitled to impose an additional interest of 1% per annum on monthly rests on the Term Loans I, II and III ;


c) The Plaintiff was entitled to impose interest on the Bankers Acceptance at the rate of 2% per annum above Bank Negara Malaysia’s (BNM) Funding Rate on monthly rests up to 31st December 2005. From 31st December 2005 onwards, the rate was to be 1.75 % per annum;


d) The Plaintiff was entitled to recall / cancel the Banking Facilities if the 1st Defendant fails to pay any sum on the due date or on demand;




e) The Term Loan I was to be repaid by 96 equal monthly installments of RM 48,755 each, from the date of drawdown of the facility;


f) The Term Loan II was to be repaid by 60 equal monthly installment of RM 33,408 each, from the date of drawdown of the facility;


g) The Term Loan III was to be repaid by 60 equal monthly installment of RM 30,993-12 each, from the date of drawdown of the facility;


h) The Plaintiff was entitled to, at any time, debit into any other accounts of the 1st Defendant, any sum due and owing by the 1st Defendant to the Plaintiff under the Banking Facilities and


i) The Plaintiff was entitled to, at any time and at its absolute discretion to vary its Base Lending Rate and/or margin interest imposed above the Base Lending Rate and/or the margin of interest imposed above the Plaintiff’s costs of funds and/or the commission imposed;




j) Notification of changes in the Plaintiff’s BLR were to be displayed at the premises of the Plaintiff or by any other modes deemed feed and proper by the Plaintiff and


k) Notification of changes of margin of interest by serving a notice in writing on the borrower (the 1st Defendant) and such notice deemed sufficiently served if sent by hand or by ordinary mail to the last known place of business or to the address stated in the agreement.


At the time of the conclusion of the last agreement of 8th April 2000, the BLR stood at 6.8% p.a and the BNM Funding Rate at 4% (see page 4 of Exh. A3 to Enc. 6). By a letter dated 31st December 2005 (exh. A20 to Enc. 10) addressed to the 1st Defendant, at the addressed stated in the agreement, the Plaintiff varied the interest on the Overdraft Facility and Bankers Acceptance facility to 3.5% per annum above the BLR, on monthly rests. By the same letter, the Plaintiff advised the 1st Defendant that the prevailing BLR was 6.25% p.a. The new rates to be effective from 1st January 2006.




Repayment of the Banking Facilities was secured, inter alia, by:


a) Fixed Deposit of RM 63,000 by the subject to the terms of a Memorandum of Deposit of Fixed Deposit Receipt dated 11th June 1998 and a Letter of Set-Off and 28th June 2000;


b) Debenture dated 28th June 2000 for RM 9,900,000 over the 1st Defendant’s present and future, fixed and floating assets;


c) Legal charge dated 13th July 2000 (Presentation No. 1043/2000) executed by the 1st Defendant in favour of the Plaintiff over a property held under title G.M. 1234, Lot 3787, Mukim Lenggeng, Daerah Seremban, Negeri Sembilan (Property) for the sum of RM 9,900,000;


d) Joint and several Corporate Guarantee dated 28th June 2000 executed by the 2nd Defendant in favour of the Plaintiff for the sum of RM 9,900,000, exclusive of interest and




e) Joint and several Personal Guarantee dated 28th June 2000 executed by the 3rd, 4th, 5th and 6th Defendants in favour of the Plaintiff for the sum of RM 9,900,000 exclusive of interest.


The 1st Defendant defaulted in the repayment of the Banking Facilities. By letters dated 10th June 2004, 15th June 2004 and 6th August 2009 from the Plaintiff’s solicitors to the 1st Defendant, the Plaintiff demanded from the 1st Defendant payment of the total amount due and owing by the 1st Defendant under the Banking Facilities. However, the 1st Defendant failed, neglected and/or refused to pay the sum demanded. Arising from such default, the Plaintiff caused the appointment of a Receiver and Manager (R&M) of the 1st Defendant, pursuant to the terms of the debenture executed by the 1st Defendant. On 26th October 2005, the Plaintiff partially uplifted the Fixed Deposit placed by the 1st Defendant totaling RM 35,575.83 and utilised it to reduce the amount due and owing by the 1st Defendant under the Facilities.


By letters dated 6th August 2009 from the Plaintiff’s solicitors to the 2nd, 3rd, 4th, 5th and 6th Defendants, the Plaintiff demanded from them, payment of the total amount due and owing by the 1st Defendant under the




Banking Facilities and guaranteed by them under the Corporate and the Personal Guarantees. However, the 2nd, 3rd, 4th, 5th and 6th Defendants failed, neglected and/or refused to pay the sum demanded.


The Plaintiff filed this claim in October 2009 seeking judgment for RM 12,482,407.63. This amount representing the amounts due from the Defendants to the Plaintiff in respect of all of the Banking Facilities, at the time of the filing of the claim. A breakdown of this figure will reveal that out of the Plaintiff’s claim for RM 12,482,407.63, the sum of RM 5,294,329.71 is for default in settling bankers acceptances. The interest included in this sum was derived at the rate of 3.5% above BLR, on monthly rests, as per the Plaintiff’s letter of 31st December 2005. The same rate of interest is sought to be recovered from 1st August 2009 until the date of payment. The remaining balance is for default in settling the monies due in respect of the remaining banking facilities and carries interest at 3.0% p.a. above BLR inclusive of 1% default interest. The Plaintiff filed an application for summary judgment (Enc. 5) on 17th December 2009, seeking judgment to recover the smaller sum of RM 11,349,979.75. The difference between the amount claimed in the writ and the summons arising from the 1st Defendant’s account being credited with the sum




of RM 1.4 million received from the R&M, being proceeds of sale of assets by R&M.


Counsel for the Defendant contends that leave to sign final judgment should be refused as there are triable issues raised in the statement of defence and the affidavits filed by the 4th Defendant, the issues raised as being triable may be summarised as follows:


a) The interest imposed by the Plaintiff on the amounts due for banker acceptances at the rate of 3.5% p.a above BLR, on monthly rests, is manifestly wrong. Counsel for the Defendants’ contends that the rate prescribed in the contract is 2.0% p.a above BNM’s Funding Rate after 31st December 2005 and not with monthly rest. According to Counsel, the interest included in the sum of RM 5,294,329.71 is excessive by reason of the invocation of the higher interest rate. This discrepancy, it is submitted amounts to a manifest error in the certificate of indebtedness and consequently a triable issue. Both Counsel conceding that they have no knowledge of the prevailing BNM Funding Rate. The Plaintiff’s position is that by




its notice of variation of 31st December 2005, it had varied the previous contractual rate of 1.75% p.a. above BNM’s Funding Rate to 3.5% above its BLR. The Defendant denies receipt of the letter of 31st December 2005. Additionally, Counsel for the Defendant cites the case of Perwira Affin Bank Berhad v. Orison Sdn. Bhd & 2 Ors (2004) 1 AMR 442 as authority for the proposition that a term in a contract which allows the lender such as the Plaintiff to arbitrally alter the rate of interest is void for uncertainty;


b) The interest in the case of the remaining facilities included a 1% default rate, which Counsel contends is arguably penal and consequently unlawful and


c) The Plaintiff has not disclosed the securities held by it and less till the proceeds received by it from the securities held by it. Counsel cites the case of Arab Malaysian Bank Berhad v. Wanderpak Manufacturing Sdn. Bhd & Ors (2002) 8 CLJ 34 and contends that debtors have the right to know when the debenture




crystallized since a surety is entitled to the benefit of the creditors security.


Now, whether the first issue is triable depends on the validity of the notice of variation of 31st December 2005. In my judgment, this notice is valid whether received by the 1st Defendant or otherwise. I opine to this effect because the notice was dispatched to number 76, Jalan Putra, 50350 Kuala Lumpur and this is the same address contained in the letter agreement of 8th April 2000 (see Exh. A 3 to Enc. 6). According to clause ii of this agreement, such a notice when dispatched by ordinary mail to this address is deemed to have been sufficiently served on the 1st Defendant (see Amanah Merchant Bank Bhd v. Lim Tow Choon (1994) 2 CLJ 1). Incidentally, R&M had already taken control of the management of the 1st Defendant at this point of time and this probably explains why the 3rd to the 5th Defendant, as directors, may not have seen this letter of notification. As regards, the challenge to the validity of the variation clause based on the judgment of Justice Abdul Malek Ishak (as he then was) in Perwira Affin Bank, I find no merit in the same. With respect, in the course of his judgment, His Lordship acknowledged that a variation clause resulting in interest being payable at a variable rate, is, nevertheless, valid, so




long as it bears some reference ‘to an external yardstick’. His Lordship then quoted with approval the passage in Halbury’s Law of England to the effect that the rate of interest may be varied, if permitted, by the provisions of the contract, so long as they are ‘subject to some ceiling, lest it be arguable that the power to vary was invalid as unreasonable, or should be limited by reference to some external yardstick such as retail price in debts or the bank of England’s minimum lending rate’. The question of the reasonableness of the rate of interest arising from variation is irrelevant in Malaysia since there is no equivalent to section 11.(1) of the United Kingdom Unfair Contract Terms Act 1997. As regards, the issue of certainty, this depends on whether the Plaintiff relied on an external yardstick in its letter agreement with the Defendant. The answer most certainly is yes. The yardstick being the BLR. The letter agreement not only used the BLR as the yardstick but it also expressly provided for the BLR prevailing on any one day to be advertised for the benefit of the members of the public in a place in the Plaintiff’s premises [see clause ii (a) of Exh. A3 to Enc. 6]. Since the permitted variation of the rate of interest was with reference to an external yardstick, in my opinion, this is sufficient, in law, to enable the relevant clause in the letter agreement to meet the requirements for certainty in the




law contract. As regards the entitlement to levy interest on monthly rests, I interpret clause i(e) as authorising the Plaintiff to charge interest on monthly rests even after 31st December 2005 since the second limb serves to qualify the rate of interest whilst retaining the rest of the contents of i(e) in its original form including the entitlement to charge interest on monthly rests. Even if I am wrong in my interpretation of this clause, in my judgment, the Plaintiff’s entitlement to charge interest on Bankers Acceptance on monthly rests is preserved by clause 3.(i) of the Annexure to the charge (see Exh. A6 to Enc. 6).


The issue of default interest giving rise to a triable issue was raised before the Court of Appeal in the case of Pusat Bandar Damansara v. Yap Han Soo & Sons Sdn. Bhd. (2000) 1 MLJ 513. The Court of Appeal in refuting Counsel’s contention to this effect, in that case, pronounced that so long as the rate was not unreasonably excessive and had been agreed to in the contract, it cannot constitute manifest error to the binding nature of the certificate of indebtedness. I adopt the pronouncements of Siti Normah JCA (as she then was) in that case, in rejecting this issue as amounting to a triable issue.




As regards the final issue raised by Counsel for the Defendant, in my judgment, the only obligation imposed, by law on the Plaintiff as regards the disclosure of the securities held by it, is the need for it to disclose such securities in its statement of claim. This obligation has been applied strictly by our Courts since the decision of the Federal Court in United Malayan banking Corporation Bhd v. Palm & Vegetable Oils (M) Sdn. Bhd & Ors (1983) 1 MLJ 206. A careful perusal of paragraph 10 of the statement of claim reveals the disclosure by the Plaintiff of the securities held by it. As regards the proceeds of sale, the obligation imposed, by law, on the Plaintiff is to ensure that credit is given to the debtor i.e the Defendant, for all proceeds of sale received by the Plaintiff. This is to ensure that there is no double recovery. It is trite, that a Defendant can set aside in limine any default judgment obtained by a Plaintiff for a sum in excess of what is due to it. On the facts of this case, the Plaintiff very correctly reduced the amount claimed in the statement of claim by the amount received from the R&M in the application for summary judgment (see Krishnamurty & Anor v. Malayan Finance Corporation Bhd. (1996) 2 MLJ 134). The case of Arab Malaysian Bank v. Wanderpak Manufacturing Sdn. Bhd. is clearly distinguishable as in that case, the Plaintiff had not pleaded the securities held by it. The Plaintiff, nevertheless,




made reference to the securities in their written submission causing the judge to rule that the Plaintiff ought, by reason thereof, to disclose whether the securities had been crystallized and the proceeds realised therefrom. As the Plaintiff had not done so, the judge ruled that the Defendant had raised the triable issue. In this case, not only has the Plaintiff disclosed the proceeds but, under the terms of the security documents, the R&M appointed by the Plaintiff to undertake the realization exercise is deemed to be an agent of the 1st Defendant when performing his duties. Additionally, the Plaintiff has led evidence that the R&M is in communication with the directors of the 1st Defendant on matters concerning the realization of the assets of the 1st Defendant.


I have not dealt with the position of the guarantors as their Counsel rightly appears to have adopted the position that the liability of the guarantors follows that of the 1st Defendant.


Following the decision of Bank Negara Malaysia v. Mohd Ismail Ali Johor & Ors (1992) 1 CLJ (Rep) 14, where the issue raised is solely a question of law without reference to any facts or where the facts are clear and undisputed, the Court should exercise its duty under O14.




If the legal point is understood and the Court is satisfied that it is unarguable, the Court is not prevented from granting summary judgment. Having perused the affidavits and the accompanying exhibits and studied the submission of Counsel, I am satisfied that the issues raised by Counsel for the Defendants do not warrant a trial of the issues. Accordingly, I grant the Plaintiff leave to enter final judgment against all the Defendants in terms of the prayers (a), (b), (i) and (ii) of Enc. 5. I order the Defendants to pay costs of RM 350 to the Plaintiff.




(Y.A Tuan K. Anantham)


Pesuruhjaya Kehakiman Mahkamah Tinggi Kuala Lumpur


Date of Decision: 29th March 2010




Mr. C. S. Mong


(Tetuan Lee Hishamuddin


Alen & Gledhill) … for the Plaintiff


Ms. T. Gunaseelan


(Tetuan Gunaseelan & Associates) … for the Defendants



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