DALAM MAHKAMAH TINGGI MALAYA DI KUALA LUMPUR
(BAHAGIAN DAGANG)
GUAMAN NO: 22M-127-09/2014
ANTARA
BANK KERJASAMA RAKYAT MALAYSIA BERHAD – PLAINTIF
DAN
1. TENGGARA MUHIBBAH SDN BHD
(NO. SYARIKAT: 813106-V)
2. LEE CHOON PENG
(NO. PASSPORT: S 2126973E)
3. LIM LOKE CHOY
(NO. K/P: 561103-05-5347/5085975) – DEFENDAN-DEFENDAN
GROUNDS OF JUDGMENT
Enclosure 16 is the plaintiff’s application for this case to be disposed of by way of summary judgment under Order 14 of the Rules of Court 2012. The plaintiff’s claim against the defendants is in respect of a sum allegedly due and owing under a loan given to the 1st defendant under Islamic Banking principles, wherein the 2nd and 3rd Defendants had stood as guarantors to guarantee payment of the loan.
[2] The crux of the defendants’ objection to this application is that the whole financing transaction is tainted and is unenforceable as the sale price as provided in the Asset Sale Agreement is wrong, that it is not a fixed price but can be amended in accordance with the Base Financing Rate ( BFR) applicable at the loan disbursement date, that the BFR was less than 7% as stated in the agreement and therefore the calculation of profit is wrong and is for an excess sum which thus amounts to ‘riba’ and therefore prohibited.
[3] The defendants’ arguments are based on:
i. The definition clause in Exhibit ‘NA-3’ i.e the Asset Sale Agreement in particular the words “ unless the context otherwise requires” which appear at the beginning of
the various definitions in the agreement including the definition of “Sale Price”, which the defendants thus contend mean that the sale price can be amended
where appropriate ;
ii. Note (i) of the 2nd Schedule of Exhibit ‘NA-3’ provides that the Sale Price shall be amended accordingly based on the prevailing rate at the disbursement date;
iii. Exhibit ‘LLC-1’ of the defendants’ affidavit in reply shows that most of the installment payments requested by the plaintiff are for different sums and none are for the sum of RM472,500.00 as stated in the 2nd Schedule of Exhibit ‘NA-3’. This, the defendants argue, shows that the sale price is not fixed at RM74,340,000.00 as
defined in the Asset Sale Agreement but is to be amended; and
iv. The prevailing rate of BFR at the time of disbursement of the loan was 6.3% and not 7%. Hence the plaintiff is claiming for an excess amount which amounts to
interest or ‘riba’.
[4] I have perused the cause papers and considered submissions made by the parties.
[5] First, we must bear in mind that this is not a conventional loan agreement but a loan based on Islamic principle. The Court of Appeal in Bank Islam Malaysia Bhd v Lim Kok Hoe & Anor and Other Appeals [2009] 6 CLJ 22 had explained as follows:
“a BBA contract is a deferred payment sale contract. It is used to finance bank’s customers to purchase and own properties or assets. It involves two distinct contracts, one a Property Purchase Agreement and also a Property Sale Agreement. In a typical BBA contract, the customer will first sell the property or asset to the bank under the
Property Purchase Agreement.
The bank’s purchase price would be the amount required by the customer. That sum is called the facility amount or the financing amount. It is also described as the bank’s purchase price. The sale is a cash sale. The bank has to pay the purchase price to the customer immediately upon the completion of the documentation process. But in most cases, where a customer had entered into a Sale and Purchase agreement with a developer to purchase a house, and therefore needs financing, the bank and the customer would mutually agree that the bank shall release the amount (the bank’s purchase price) to the developer in stages against progress payment
certificates.
With that purchase, the property belongs to the bank. But, the customer is to buy it back from the bank and he will only be able to pay the price over a period of years. The bank will sell but the sale price will not be the same amount as the bank’s purchase price. The sale price will include the bank’s profit on the sale, which will later be calculated and added to the purchase price. The total amount is now the sale price. In effect, the bank will sell the very same property it has purchased from the customer to him at a selling price under the Property Sale Agreement. The customer then will pay the bank’s selling price over a period of years by monthly instalments. At that point the customer becomes the owner of the property again.”
[6] I have scrutinized the Asset Sale Agreement particularly the provisions therein which the defendants have been relying on. Nowhere, in my view, that the Asset Sale Agreement has provided for amendment of the sale price. Just because the definition clause begins with the words “unless the context otherwise requires”, does not mean that the sale price which is defined as “ Ringgit Malaysia Seventy Four Million Three Hundred and Forty Thousand (RM74,340,000.00) only” can be amended. In what context can it be amended? The 2nd Schedule in my opinion, merely provides for schedule of payment. The note of paragraph (B) of the Schedule provides as follows:
“….
Note
(i) The above schedule provides an Internal Rate of Return of 2.0% + Base Financing Rate (BFR) per annum which is currently at 7.0% per annum. The schedule shall be amended accordingly based on the prevailing rate at the disbursement date.
(ii) The above schedule assumes a lump sum release of the Purchase Price. In the event of progressive release of the Purchase Price and/or progressive payments received form the redemption of titles, the schedule shall be amended accordingly to maintain the
yield.”(emphasis added)
(iii) The instalments shall be payable at the end of every calendar month, the first commence on the same month of the first disbursement date.”
[7] The note above, in my view does not talk about amendment of the sale price. It merely allows amendment to instalment, after which the schedule of payment shall be amended under note (ii) “accordingly to maintain the yield”. The “yield” here in my view is the amount of RM74,340,000.00 as stated in paragraph (B) of the said 2nd Schedule. As the Sale Price has been fixed at RM74,340,000.00 if the monthly instalments are amended than the last payment will have to be adjusted, to achieve that total amount
of RM74,340,000.00.
[8] Further, I agree with the plaintiff’s submission that when the 1st defendant had executed the TF-1 Facility Agreements and the 2nd and 3rd Defendant had executed the Guarantee Agreement, the defendants were deemed to have read, understood and accepted the terms and conditions of these agreements which create a valid contract between the plaintiff and the defendants. In the case of Seloga Jaya Sdn Bhd v UEM Genisys Sdn Bhd [2010] 5 CLJ 745, the Federal Court held that:
“[25] We disagree with this contention of the appellant. Though this method of appointment of a nominated sub-contractor may be peculiar to the building industry we cannot discard the fact that the appellant and the respondent had freely consented to enter into a contract in writing with terms and conditions governing the respective rights and obligations of the parties. The consideration in the contract is the right of the respondent to be paid by the appellant upon completing the subcontracted works as specified subject of course to the appellant first being paid by the employer. We do not deny that the appointment of the respondent was thrust upon the appellant by the employer but if the appellant were serious in objecting to such nomination there is very
little in law the employer could do to force this upon the appellant. So the appellant here cannot deny that they had not freely consented to enter into this agreement with the respondent. In fact, in our opinion, this contract between the appellant and the respondent has all the hallmarks of a valid agreement described in s. 10 of the Contracts Act which says:
All agreements are contracts if they are made by the free consent of the parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void.”
[9] In the case of Smallholders Corp. Sdn Bhd v Utusan Transport Sdn Bhd [1995] 4 MLJ 587, the Court of Appeal held that:
“(3) When documents containing the contractual terms are signed then in the absence of fraud or misrepresentation the party signing it is bound, and it is wholly immaterial whether he has read the document or not.”
[10] If the defendants do not agree with the Assets Sale Price which was agreed by both parties at RM74,340,000.00, the defendants should not have signed the Assets Sale Agreement.
[11] To me, the defendants’ contention that the sale price will be amended accordingly is not acceptable and shall not become issues to be tried. The defendants had never raised any objection pertaining to the sale price when the agreement was executed by
them.
[12] There is no dispute that the 1st defendant had made some payments and later defaulted. Hence, under section 8.01 of the Asset Sale Agreement, the plaintiff is entitled to claim the whole outstanding amount including unearned profit. Refer to Maybank Islamic Bank v Kamarulzaman Mohamad Nordin [2013] 10 CLJ
488.
[13] Under Clauses 15 and 16 of the Joint and Several Guarantee and Indemnity dated 28th September 2009, the 2nd and 3rd defendants have agreed to indemnify the plaintiff on demand as a principal debtor against all losses etc by reason of any default of the 1st defendant.
[14] The plaintiff had sent Notice of Demand and Termination dated 25th June 2014. Not only had the defendants failed to remedy the default, they also had failed to respond to the said Notice and Termination. If it is true that the defendants did not agree with it, they should have objected promptly. In David Wong Hon Leong v Noorazman bin Adnan [1995] 4 CLJ 155, the Court of Appeal held that:
“ During argument, we registered our surprise at the learned judge’s reluctance to enter judgment for this sum of RM100,000. After all, the appellant had failed to respond to the letter of 17th December 1991. If there had never been an agreement as alleged, it is reasonable to expect a prompt and vigorous denial. But, as we have pointed out, there was no response whatsoever from the appellant.”
[15] As such, I agree with the plaintiff that the defendants must not now be allowed from denying the agreed Sale Price and their liabilities.
[16] In Exhibit ‘NA-10’ of Affidavit in Support, enclosure 24, the plaintiff had exhibited certificate of indebtedness and statement of account signed and certified by its Assistant Vice President. The certificate of indebtedness and statement of account clearly show details of indebtedness of the defendants.
[17] Pursuant to clause 9.01 of the Asset Sale Agreement and clause 16 of the Joint and Several Guarantee & Indemnity Agreement, the parties had agreed that a statement and/or certificate issued by the plaintiff certifying the outstanding balance due and payable by the defendants shall be conclusive evidence against the defendants. The law on this aspect is trite. Unless there can be shown manifest error, that certificate is conclusive evidence of the outstanding amount which is in fact due and payable. Refer to the Court of Appeal in Chen Heng Ping & Others v Intradagang Merchant Bankers (M) Sdn Bhd [1995] 3 CLJ 690 and the Federal Court in Cempaka Finance Bhd v Ho Lai Ying & Anor [2006] 3 CLJ 544.
[18] The defendants, to my mind, have failed to show any manifest error on the certificate of indebtedness, thus this court accepts the certificate as a final and conclusive evidence of the defendants’ debt to the plaintiff.
Conclusion
[19] The preliminary requirement for summary judgment had been laid down clearly by the Federal Court in National Company For Foreign Trade v Kayu Raya Sdn Bhd [1984] 2 CLJ 220 i.e :
i. The defendant must have entered an appearance ;
ii. The statement of claim must have been served on the defendant ; and
iii. The affidavit in support of the application must comply with the requirements of r.2 of the O.14. If these considerations are satisfied, the plaintiff will have established a prima facie case and he comes entitled to judgment. The burden then shifts to the defendant to satisfy the court why judgment should not be given against him.
[20] To me, based on the above facts and evidence, the plaintiff has obviously fulfilled the considerations needed to establish a prima facie case in a summary judgment application as enunciated by Kayu Raya’s case (Supra). On the part of the defendants, I am of the view that they have failed to discharge the burden shifted on them, to satisfy the court why judgment should not be given against them.
[21] I therefore, I allow enclosure 16 with cost.
DATO’ ZALEHA BINTI YUSOF
JUDGE
HIGH COURT OF MALAYA
KUALA LUMPUR
Dated: 25th February 2015
For the Plaintiff: Aziz bin Mohamed with Nur Athirah bt Ahmad; Messrs Zulpadli & Edham
For the Defendants: Chong Poh Ken; Messrs Ong, Chong & Tan