IN THE HIGH COURT OF MALAYA AT KUALA LUMPUR (COMMERCIAL DIVISION)
SUIT NO. D-22-NCC-558-2009
RHB BANK BERHAD
1) LEGEND EXPORTS SDN. BHD
2) KAMALADEVI A/P VELOUSAMY
3) MANIMARAN A/L MOTTAYAN … DEFENDANTS
GROUNDS OF DECISION (Enc. 5)
BEFORE HIS LORDSHIP TUAN ANANTHAM KASINATHER JUDGE HIGH COURT MALAYA
KUALA LUMPUR IN CHAMBER
The Plaintiff’s claim is based on a facility granted to the First Defendant. This included an overdraft facility and a letter of credit/trust receipts/bankers acceptance etc, amounting in the aggregate to RM 700,000. The granting of this facility is evidenced by the letter of offer dated 4th April 2005 (Exh. P2 of
Enc. 6). The security provided for this facility included a fixed deposit of RM 350,000.00 and a Letter of Set Off of 27th May 2005. The Plaintiff entitled to set off its losses against the amount held in fixed deposit (Exh. P.3 of Enc. 6). Over and above the fixed deposit, the 2nd and 3rd Defendants guaranteed repayment of any outstanding amount due to the Plaintiff in respect of this facility (Exh P.4 of Enc. 6).
The Plaintiff alleging breach of the facility agreement by the 1st Defendant, demanded payment of the outstanding sum of RM 414,362.28 by its solicitor’s letter of demand of 15th September 2009 ( Exh. P5 of Enc. 6). Upon default, the Plaintiff terminated the facility vide its solicitor’s letter of demand of 14th October 2009 (Exh. P5 of Enc. 6). The Plaintiff, after crediting the account with the sum of RM 350,000.00 held in fixed deposit against its losses of RM 718,109.28, thereafter issued the certificate of indebtedness against the Defendants in the sum of RM 325,042,02 as at 3rd March 2010 (Exh. P6 of Enc. 6). This amount included interest from 11th November 2009 to 3rd March 2010 at the rate of 3.5% above the Bank’s lending rate (BLR), which as of 11th November 2009 was 5.5%. The Plaintiff by Enc. 5 seeks the leave of this Court to sign final judgment against the Defendants for the sum of RM 316,169.58 as of 11th November 2009 together with interest on the same at 3.5% above BLR, till payment.
Issues raised by Defendant
Counsel for the Defendant relies on 3 issues as amounting to triable issues. The issues being:
a) That the application for summary judgment was filed out of time;
b) That the facility agreement was granted in breach of Sec. 60(4) of the Banking and Financial Institutions Act 1989 Act 372 and consequently illegal and
c) That the interest rate charged by the Plaintiff is inconsistent with the rate stipulated in the letter of offer.
Counsel for the Defendant submitted that Enc. 5 was filed some 6 months after the Defendant had entered appearance. Counsel contended that a delay of this duration should not be countenanced by this Court following the pronouncements in the supreme Court case of Krishnamurthy Nagaratnam & Anor v. The Malayan Finance Corp. Bhd (1986) CLJ (rep) 170; the High Court case of Gilbert Engineering Co Inc v. Zainuddin Ahmad & Ors (2003) 3 CLJ 39 and the case of Ng Hee Thoong
& Anor v. Public Bank Berhad (1995) 1 CLJ 609, a decision of the Court of Appeal.
With respect, I disagree. First, the delay, as pointed out by Counsel for the Plaintiff, is the lapse of time from the filing of the Defence rather than appearance. The delay based on the filing of the Defence is some two months only. Secondly, the dicta in the Supreme Court case of Krishnamurthy has ceased to be relevant since the introduction into our rules of O2r1A of RHC. Following the introduction of this rule, it is the duty of the Court to decide procedural objections having regard to the justice of the case and not purely based on technical considerations. In my opinion, in the light of present day litigation culture which enjoins speedy disposal of cases, Courts should endeavour to determine all applications for summary judgment on their merits, save in exceptional cases and this is not one of them. Similarly, the pronouncements of Gopal Sri Ram JCA (as he then was) in Ng Hee Toong, that a Defendant faced with an application for summary judgment was entitled to take any and all procedural objections to defeat the Plaintiff’s summons, were made before the introduction into our rules of O2r1A. Thirdly, the pronouncements of Salleh Abas LP (as he then was) in Krishnamurthy Nagaratham were by way of dicta only, as the Court, in that case, resolved the appeal in favour of the Respondent.
The case of Gilbert Engineering is not helpful to the Defendant’s cause as the late Vincent Ng J (as he then was) expressly stated in the course of his Lordship’s judgment that delay in recourse to a summary judgment application is not per se fatal (see page 42). The application for summary judgment was disallowed, on the facts of that case, because His Lordship ruled inter alia that there were material defects in the affidavit filed in support of the application for summary judgment. The ratio of His Lordship’s decision in Gilbert Engineering is best encapsulated in this passage from His Lordship’s judgment:
The end result of the 6th Defendant’s various challenges was not favourable to the Plaintiff. On its own, perhaps some of the defects in form or format pointed out by the 6th Defendant could be explained away or treated as an irregularity. But when the same were considered as a whole, they had the cumulative fatal effect on the Plaintiff’s summary judgment application as they have occasioned prejudice to the due administration of justice.”
The pronouncements of Gobal Sri Ram JCA (as he then was) in Ng Hee Thong are, in my opinion, not helpful, to the Defendant’s cause, either. First, His Lordship’s observations concerning the effect of delay in the filing of an summary judgment application were by way of dicta only. Secondly, His
Lordship acknowledged that his observations, in any event, were premised on there being ‘no bona fide triable issue’ (see page 615), which is the case here. Thirdly, this decision of the Court of Appeal was also before the introduction of O2r1A in our rules.
Accordingly, I dismiss the preliminary objection raised by the Defendant.
I agree with the submission of Counsel for the Plaintiff that sec. 60(4) of the BAFIA does not render the facility granted by the Plaintiff to be illegal. In my opinion, the mere fact that the security provided by the Defendant by way of fixed deposit is less than the facility, does not attract the provisions of Sec.60 (4) of BAFIA. This is because, this was not the only security furnished by the Defendant. It is not in dispute that the 1st Defendant, additionally, provided guarantees by the remaining Defendants and such guarantees qualify to be treated as part of the security provided for the facility. This is evident from the definition of property in the Act.
The thrust of the submission of Counsel for the Defendant on this issue was that, the interest rate in the claim is based on 3.5% above the bank’s base lending rate (BLR) whereas the
interest rate stipulated in the facility agreement for the overdraft facility is 3.5% above the Bank Negara Malaysia funding rate. Counsel for the Plaintiff countered this submission with the reply that the rate stipulated in the offer letter was only applicable, until default. Upon default, the Plaintiff was entitled to base its interest rate on the outstanding sum on the BLR. This entitlement, according to Counsel, is permitted by clause 7 of the Offer Letter (see clause 7 at page 20 of Enc. 6). Counsel for the Defendant, then, contended that the Plaintiff could only rely on clause 7 after giving notice to the Defendant and there was no such notice served on the Defendant. With respect, there is no merit in this submission since clause 7 expressly provides that the change in the interest rate to BLR, upon default by the Defendant, is to be determined at the Plaintiff’s sole discretion and may be imposed without any notice to the Defendant. In any event, it is evident from the Bank’s letter of demand of 14th October 2009 that the interest claimed of 3.5% above its BLR was specifically mentioned in this letter of demand.
For the reasons set out in this judgment, I grant the Plaintiff leave to sign final judgment in terms of prayers (a) and (b) of Enc. 5 against the Defendants. 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: 27th April 2010
Ms. Noraini Samingon
(Tetuan Kington & Tan) … for the Plaintiff
Mr. Muthu Raman
(Tetuan Muthu & Partners) … for the Defendants