IN THE HIGH COURT OF MALAYA AT KUALA LUMPUR (COMMERCIAL DIVISION)
SUIT NO. D22-288-2009
RHB BANK BERHAD
1) KIAN SDN BHD
2) ONG SIEW KEE
3) NG HIAK HING
4) NG HIAK HIAN
GROUNDS OF DECISION (Enc. 5)
BEFORE HIS LORDSHIP TUAN ANANTHAM KASINATHER JUDGE HIGH COURT MALAYA
KUALA LUMPUR IN CHAMBER
By a letter of offer dated 3rd February 2000 and a Facility Agreement dated 28th February 2000, the Plaintiff granted, inter alia, the following banking facilities to the 1st Defendant. First, an overdraft facility of RM 500,000. Secondly, a multi trade line facility comprising of letter of credit / trust receipt / bankers acceptance and shipping guarantee of RM 1.5 million. The facilities hereinafter collectively referred to as ‘the banking facilities’. At the material time, the 1st Defendant was also a guarantor under a corporate guarantee dated 28th February
2000. This corporate guarantee having been furnished by the 1st Defendant to secure the repayment of banking facilities of RM 1.5 million granted by the Plaintiff to one Kian Impex Sdn. Bhd. (‘the Kian Impex Guarantee’).
The terms of the Facilities Agreement inter alia included the following:-
CLAUSE 7 – NOTICE OF DEMAND
“Any demand for payment of the moneys intended to be hereby secured may be made by a notice in writing requiring payment within seven (7) days from the date thereof and may be signed on behalf of the Bank by the Manager Assistant Manager Accountant or any other officer of the Bank or by any solicitor or firm of solicitors purporting to act for the bank”.
(Clause 7 page 49)
CLAUSE 12 – EVENTS OF DEFAULT
“Without prejudice to the Bank’s right to demand for payment under Clause 7 herein, the whole of the
said Facilities interest . upon the happening of
any of the following events:-
g) if a petition against the Borrower or any other Security Party or any of the Borrower’s affiliates or related corporations
shall be presented or an order is made or a resolution be passed for the winding up of the Borrower or any other Security Party or any of the Borrower’s affiliates or related corporations”.
(Clause 12.1(g) page 52)
CLAUSE 16 – CROSS DEFAULT
“notwithstanding the provisions relating to the repayment of moneys as herein provided the Borrower hereby expressly agrees that if any sums shall be due from the Borrower or the Borrower’s related or associated companies to the Bank from time to time or at any time or if the Borrower or the Borrower’s related or associated companies may be or become liable to the Bank anywhere on banking account or any other account current or otherwise in any manner whatsoever or if default is made in the provisions of such accounts or in any other banking facilities granted by the Bank to the Borrower or the Borrower’s related or associated companies or if default is made in the payment of any moneys due under the accounts of any other party of which the Borrower is/are guarantor(s) / indemnitor(s) then in such event the said Facilities and all advances herein together with all moneys payable under such accounts or other banking facilities aforesaid shall
immediately become due and payable and this Agreement and the other Security Documents shall become immediately enforceable and the Bank shall be entitled to exercise all the rights, powers and privileges conferred by this Agreement, the other Security documents at law or in equity”.
Clause 16.1 page 58
On 20th December 2004, HSBC petitioned for the Winding-Up of the 1st Defendant. The Plaintiff thereafter issued a letter of demand dated 27th December 2005 alleging breaches of clauses 12.1 and 16.1 of the Facilities Agreement. Breach of clause 16.1 arising from the 1st Defendant’s failure to rectify a default by Kian Impex in respect of the banking facilities afforded to it by the Plaintiff. Presumably acting on the assurance of the solicitors for the 1st Defendant that the Winding-Up petition was doomed to fail, the Plaintiff did not act on its letter of demand until August 2009. In August 2009, the Plaintiff issued a second letter of demand, this time relying solely on breach of clause 16.1. This is understandable since in the interim, the 1st Defendant successfully set aside the Winding-Up order obtained by HSBC (Exh. ATJ6 to Enc. 6). The second letter of demand of 26th August 2009 was based entirely on the breach of clause 16.1 of the Facilities Agreement. Again, this is understandable since in the interim, the Plaintiff had obtained judgment against Kian Impex arising from its default of the facilities granted by the Plaintiff do it (see
paragraph 8 of Enc. 8 and Exh. ATJ 13 to Enc. 8). On the
same date, the Plaintiff issued a letter of demand against the 2nd to the 4th Defendants demanding payment of the monies due and payable by the 1 Defendant in respect of the personal guarantees executed by them.
The principal submission of Counsel for the 1st Defendant was that the 1st letter of demand was premature. Counsel contended that the Plaintiff’s demand made on 27th December 2005 was premature since it had made known to the Plaintiff that there was no merit in the Winding-Up petition filed by HSBC. It was also the submission of Counsel that the 1st Defendant amply demonstrated this subsequently by having the Court of Appeal set aside the Winding-Up order made by the High Court. With respect, the fact that the Winding-Up order was set aside by a Court of Appeal does not render the petition to fall outside the scope of clause 12.1(f) of the Facilities Agreement. In my judgment, clause 12.1 (g) was operative upon the filing of the petition and not the outcome of the petition. Counsel for the Defendant, then, submitted that the Plaintiff is precluded from relying on the letter of demand of 27th December 2005 since the 1st Defendant was thereafter allowed the use of the facilities until the second demand on 26th August 2009. According to Counsel, the delay in the issuance of the second letter of demand is suggestive of bad faith on the part of the Plaintiff.
With respect, there is no merit in the issue raised by Counsel. First, the delay in the issuance of the first letter of demand is not fatal since clause 38.1 of the Facility Agreement expressly stipulates that any delay of the part of Plaintiff in exercising its rights shall not impair its vested rights nor can such delay amount to a waiver of its rights. Secondly, the fact of the matter is that when issuing its second letter of demand, the Plaintiff ceased to rely on clause 12.1 and instead relied on the breach of clause 16.1. The Plaintiff was fully entitled to rely on the cross default clause since as of that date, the first Defendant was in default of the cross default clause, in respect of the corporate guarantee, arising from the judgment obtained by the Plaintiff against Kian Impex. The judgment obtained in 2007, being confirmed in 2009. Accordingly, in my judgment, the issue raised by Counsel for the 1st Defendant has no merit and consequently does not warrant a trial of the issue.
On behalf of the guarantors, Counsel for the 2nd Defendant contended that the 2nd Defendant is a relatively elderly woman who does not understand the English language. With respect, I find this submission difficult to comprehend since this is the first time, this is being alleged by the 2nd Defendant. Surely the 2nd Defendant should have raised this issue shortly after the execution of the guarantee in the year 2000 if she had any difficulty in understanding the terms of the guarantee. Secondly, it is significant that the address of all the
guarantors is 76-1, Jalan Putra, Kuala Lumpur. Accordingly, it is reasonable to assume that the guarantors are all from one family. By reason thereof, since the other guarantors understood the language, there is every reason for this Court to believe that the contents of the guarantee would have been explained to the 2nd Defendant by the remaining Defendants before she executed the guarantee. In the circumstances, I do not see any justification to order a trial in respect of the remaining Defendants.
Since the Defendants have not raised any triable issue, I grant the Plaintiff leave to sign final judgment against the Defendants in terms of prayers (a) and (b) of Enc. 5. I order the Defendants to pay costs of RM 350 to the Plaintiff.
(Y.A. Tuan Anantham Kasinather)
Pesuruhjaya Kehakiman Mahkamah Tinggi Kuala Lumpur
Date of Decision: 25th May 2010
Ms. Karen Tee
(Tetuan Azhar & Goh) … for the Plaintiff
Ms. S. Janagasutha
(Tetuan Mathews June & Lachimanan) … for the Defendant