This is a Court of Appeal case which illustrate the situation where the defendant failed to raise any triable issues to dismiss the plaintiff’s application for summary judgment.
Facts of the Case
On 31 December 1994, United Malayan Banking Corp (UMBC) granted Melewar Leisure Sdn Bhd (the first defendant/appellant) a USD 10 million banker’s guarantee for a 10-year term loan (the facility) from UMBC International Bank Ltd (UMBCL) (now known as Danaharta Managers Ltd or DML). The first defendant had charged its lease over a piece of land (the charged property) to UMBC as security for the facility. Two other person who are the second and third defendants also guaranteed the facility. On 29 March 1995, UMBC had issued a bank guarantee, on behalf of the first defendant, for USD 10 million in favour of UMBCL as per the facility. When Danaharta Managers Sdn Bhd (the plaintiff/respondent or DMSB), acquired the non-performing loans of UMBC, the rights of UMBC with respect to the facility has now vested upon the plaintiff, DMSB.
On 13 April 2001, the first defendant executed its option to convert the USD term loan with DML to a Malaysian Ringgit term loan with DML. To facilitate this conversion and upon DML’s demand, the plaintiff (DMSB) had made a payment of USD9,650,859.83 to DML. The first defendant was notified on 11 June 2001 about this payment and thus became indebted to the plaintiff in the sum of USD9,650,859.83 (or RM36,676,162.61) with interest.
When the first defendant defaulted in its repayment, the plaintiff filed a writ against the first defendant and the two guarantors to the facility. The plaintiff then proceeded to exercise its rights as chargee of the charged property and the sum realised from the sale of that property, amounted to RM38.008 million, was used to reduce the outstanding sums due from the first defendant. The plaintiff applied for summary judgment (O.14 application) against the first defendant and its guarantors for the outstanding balance, which amounted to RM10,960,008.90 as at 30 June 2005.
The senior assistant registrar (SAR) allowed the plaintiff ’s application with costs on 17 January 2006. The first defendant appealed to a judge in chambers against the summary judgment but the judge on 18 July 2006 upheld the SAR’s decision and hence the present appeal. The two guarantors did not appeal, therefore the first defendant is the only appellant.
Issues of the Case
The first defendant’s grounds of appeal were that:
the amount claimed in the summary judgment application was lower than that stated in the statement of claim and the plaintiff was amending its pleadings by affidavits
there was an alleged breach of a purported collateral contract between the first defendant and the plaintiff to sell the charged property together with an adjoining piece of land
the first defendant was placed under duress to accept a higher USD/Ringgit exchange rate
there were manifest errors on the certificate of indebtedness.
Judgements of the Court
First issue: whether the plaintiff’s pleading was defective?
The appellant alleged that by claiming a lower sum, the plaintiff was amending its pleading by affidavits.
The Court held that the respondent had in its affidavits fully explained the differing amounts claimed. Respondent had filed their writ of summons on 10 March 2005 and amended statement of claim on 26 May 2005. The proceeds of the charged property amounting to RM38.008 million was only received by the respondent on 17 June 2005, thus the particulars of the reduction of debt from the proceeds of sale could not be pleaded in the statement of claim. When the respondent filed the summary judgement application on 17 August 2005, the claim was for the balance outstanding of RM 10,960,008.90 as at 30 June 2005. The court followed the judgment in Krishnamurthy & Anor v Malayan Finance Corporation Bhd [1986] 2 MLJ 134 which held that there was no need to amend the statement of claim for the making of the adjustment.
Second issue: whether the respondent have the obligation to jointly sell the charged property together with an adjoining land?
The appellant alleged that there is a collateral contract between the appellant and plaintiff to sell the charged property together with an adjoining land.
The court found that the appellant did not plead that there was any collateral contract between the parties. The respondent also in their letter dated 9 March 2004 and 22 April 2004 informed the appellant that they were the chargee of the charged property only. Therefore, they are not able to offer sale the adjoining land to third parties. The respondent had fulfilled its duty as chargee to disposed the charged property by an open tender. The court are in the opinion that the respondent was not obligated and had legal position to undertake a joint sale.
Third issue: whether the appellant was under duress causing it to accept a higher exchange rate?
The facts show that appellant had issued a letter dated 21 May 1999 expressly confirming the conversion rate for the US Dollar loan to Ringgit term loan to be based on the prevailing conversion rate at the time of conversion. On 13 April 2001, appellant had instructed the conversion of US Dollar facility to Ringgit at current rate. Respondent had in their letter dated 11 June 2001 notify the appellant that they had paid DML the bank guarantee sum of USD 9,650,859.83 (equivalent to RM 36,676,162.61 at the rate of USD 1:RM 3.80). At all material time, the appellant had not raised any objection to the exchange rate and had made part payments as well as negotiated with the respondent to settle the debt. Hence, it was held that the appellant was estopped from claiming that they had not agreed to the exchange rate.
Fourth issue: whether there was any manifest error in the respondent’s certificate of indebtedness?
Respondent’s certificate of indebtedness dated 1 August 2005 was issued by their deputy general manager of the Recovery Operations to certify that the appellant was indebted to the respondent the sum of RM 10,960,088.90 as at 30 June 2005. Under section 6.02 of the facilities agreement, the certificate was said to be binding on the appellant unless manifest error can be shown.
The court held that there is no manifest errors on the certificate of indebtedness. Thus, the appellant’s debt can be ascertained through the certificate and it is a conclusive evidence of debt due to the bank. (see Citibank NA v Ooi Boon Leong & Ors [1981] 1 MLJ 282; Cempaka Finance Bhd v Ho Lai Ying (trading as KH Trading) & Anor [2006] 2 MLJ 685)
In conclusion, the court held that the appellant had not raised any reasonable triable issue and had no valid defence of any merit to the appellant’s claim. Thus, the respondent was entitled to the summary judgment and the appeal is dismissed with costs fixed at RM 1,000.
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