United Overseas Bank (Malaysia) Berhad v Sri Ram A/L M.S. Sarma, 22-08-2014

• Judge: WONG KIAN KHEONG
• Judgment Date: 22 August 2014
• Court: High Court (Malaysia)
• Record Number: D22NCC-637-11/2013

44

IN THE HIGH COURT OF MALAYA AT KUALA LUMPUR

(COMMERCIAL DIVISION)

CIVIL SUIT NO: D22NCC-637-11/2013

BETWEEN

UNITED OVERSEAS BANK (MALAYSIA)

BERHAD ...PLAINTIFF

AND

1 SRI RAM a/l M.S. SARMA

2 LORRAINE CRESCENTIA XAVIER

3. NORIZAN BIN HAJI MOHD AMIN …DEFENDANTS

GROUNDS OF JUDGMENT

(Plaintiff’s summary judgment application)

A. Background

1. The plaintiff bank (Plaintiff) gave the following banking facilities (Banking Facilities) to Benteng Timur Sdn. Bhd. (Borrower):

(a) overdraft facilities; and

(b) performance guarantee (PG) facility.

2. In consideration of the Banking Facilities, among others, the following 3 guarantees (3 Guarantees) had been executed in the Plaintiff’s favour:

(a) a guarantee was signed on 11.11.1999 (1^st Guarantee) by the first defendant (1^st Defendant), second defendant (2^nd Defendant) and third defendant (3^rd Defendant);

(b) a guarantee was executed by the 1^st and 2^nd Defendants on 25.9.2007 (2^nd Guarantee); and

(c) a guarantee was signed on 19.8.2008 by the 1^st and 2^nd Defendants (3^rd Guarantee).

3. The Borrower had utilized and subsequently defaulted on the Banking Facilities. Consequently, the Plaintiff filed Civil Suit No. 22 NCC-988-06/2012 in Kuala Lumpur High Court (1^st Suit) to recover the outstanding sums due under the Banking Facilities against the –

(a) Borrower; and

(b) 1^st to 3^rd Defendants.

4. By way of 2 letters dated 24.8.2012 and 13.9.2012 from the Plaintiff’s solicitors (Plaintiff’s Letters dated 24.8.2012 and 13.9.2012), the Plaintiff proposed for the Borrower to repay certain outstanding sums under the Banking Facilities subject to certain conditions imposed by the Plaintiff (Plaintiff’s Proposal).

5. In the 1^st Suit, the Borrower and all the 3 Defendants were represented by Messrs Rabinder Budiman & Associates (RBA).

6. By way of a letter dated 13.9.2012 from RBA to the Plaintiff’s solicitors (RBA’s Letter dated 13.9.2012), all the defendants in the 1^st Suit agreed to the Plaintiff’s Proposal (Settlement). Accordingly, on 25.9.2012 the Plaintiff discontinued the 1^st Suit with liberty to file afresh and with costs of RM5,000 to be paid to the Plaintiff by the all the defendants in the 1^st Suit.

7. I allude to the 1^st Suit and the Settlement as there are certain letters exchanged between the parties in respect of the 1^st Suit and the Settlement which are relevant to this case. I will discuss the effect of these letters later in this judgment.

8. The Borrower failed to comply with the terms of the Settlement and was subsequently wound up by the Kuala Lumpur High Court on a petition presented by a creditor of the Borrower.

9. The Plaintiff’s solicitors demanded the payment of outstanding sums from –

(a) the 1^st and 2^nd Defendants by way of a letter dated 25.6.2013 (Plaintiff’s Demand); and

(b) the 3^rd Defendant by way of a letter dated 25.6.2013.

10. There was no reply to the above demands by the 1^st to the 3^rd Defendants. Hence, this action based on the 3 Guarantees (This Suit).

11. In This Suit, the Plaintiff obtained judgment in default of appearance against the 3^rd Defendant on 17.12.2013 (3^rd Defendant’s Default Judgment).

12. The Plaintiff by way of notice of application in court enclosure no. 31 applied for summary judgment against the 1^st and 2^nd Defendants for the outstanding sums due under the 3 Guarantees (This Application).

B. Principles applicable to summary judgment applications

13. In This Application, it is not disputed by the 1^st and 2^nd Defendants that the following 3 matters (3 Conditions for Summary Judgment) required by Order 14 rules 1(1) and 2(1) Rules of Court 2012 (RC) have been satisfied:

(a) the statement of claim in this case (SOC) has been served on the 1^st and 2^nd Defendants;

(b) the 1^st and 2^nd Defendants have entered appearance; and

(c) the Plaintiff has affirmed an affidavit verifying the facts on which the SOC is based (Plaintiff’s 1^st Affidavit) and the belief of the deponent of the Plaintiff’s 1^st Affidavit that there is no defence to the SOC.

14. The 3 Conditions for Summary Judgment has been decided by our Federal Court in the following cases:

1. Cempaka Finance Bhd v. Ho Lai Ying & Anor [2006] 3 CLJ 544, at 551-552; and

2. National Company for Foreign Trade v Kayu Raya Sdn Bhd [1984] 1 CLJ (Rep) 283, at 285.

15. As held in Cempaka Finance Bhd and National Company for Foreign Trade, once the 3 Conditions for Summary Judgment have been satisfied by the Plaintiff, the burden of proof then shifts to the 1^st and 2^nd Defendants to resist This Application by satisfying the court under Order 14 rule 3(1) RC that there is “an issue or question in dispute which ought to be tried”.

16. Assuming the 1^st and 2^nd Defendants could not raise any triable issue, This Application may still be dismissed under Order 14 rule 3(1) RC if “there ought for some other reason to be a trial”, namely there are circumstances that ought to be investigated by this court – the Federal Court’s judgment in United Merchant Finance Bhd v Majlis Agama Islam Negeri Johor [1999] 1 MLJ 657, at 666-668 (“some other reason for trial”).

17. Based on the above Federal Court judgments, I will first consider whether the 1^st and 2^nd Defendants have raised any triable issue and assuming that they are unable to do so, I will then determine whether there is “some other reason for trial”

C. Contentions of 1^st and 2^nd Defendants

18. Learned counsel for the 1^st and 2^nd Defendants, Mr. K. Mano, contended that the following matters should be tried in This Suit:

(a) whether the liability of the 1^st and 2^nd Defendants is contingent or conditional on the Plaintiff establishing the Borrower’s liability to the Plaintiff under the Banking Facilities. According to the 1^st and 2^nd Defendants, as the Plaintiff has failed to prove the Borrower’s liability to the Plaintiff under the Banking Facilities, there is a triable issue as to whether This Suit is pre-mature or otherwise;

(b) in view of the winding up of the Borrower, whether the Plaintiff should have filed a proof of debt (POD) with the Borrower’s liquidator in accordance with rule 92 of the Companies (Winding-up) Rules 1972;

(c) the Plaintiff could not rely on a certificate of the indebtedness of the 1^st and 2^nd Defendants given by the Plaintiff’s Senior Vice President (Plaintiff’s Certificate of Indebtedness) as the Plaintiff did not produce a statement of the Borrower’s bank accounts to evidence the Borrower’s indebtedness to the Plaintiff under the Banking Facilities;

(d) there are certain funds with the Plaintiff which could be used to set off the Borrower’s outstanding sums due to the Plaintiff under the Banking Facilities. The PG facility was given by the Plaintiff in respect of a contract awarded by the Government of Malaysia (Government Contract) to a joint venture company, “Hartajaya-Benteng Timur-AMR Jeli JV Sdn. Bhd.” (HBTA). HTBA sent a letter dated 27.6.2005 to the Plaintiff (HBTA’s Letter dated 27.6.2005) which –

(i) authorized the Plaintiff to debit HTBA’s current account with the Plaintiff so as to settle the Borrower’s liability under the Banking Facilities (HBTA’s Set-off);

(ii) allowed the Plaintiff to deduct RM200,000 from the proceeds of each progressive claim received in respect of the Government Contract to build up a sinking fund to a maximum of RM4 million (Sinking Fund); and

(iii) stated that the Borrower had a RM10 million fixed deposit (Borrower’s FD) with the Plaintiff to secure the PG facility.

The 1^st Defendant had placed a fixed deposit of RM500,000 with the Plaintiff to secure the Borrower’s repayment of the Banking Facilities (1^st Defendant’s FD).

The 1^st and 2^nd Defendants submitted that there was a triable issue as to whether the Borrower owed any sum to the Plaintiff under the Banking Facilities in view of –

(1) HBTA’s Set-off;

(2) funds in the Sinking Fund;

(3) the Borrower’s FD;

(4) the 1^st Defendant’s FD;

(5) payment from proceeds from the Government Contract; and

(6) the interest earned by the Borrower and the 1^st Defendant from the Plaintiff for the Borrower’s FD and 1^st Defendant’s FD respectively (FD Interest)

(Alleged Set-off);

(e) whether the Plaintiff’s Certificate of Indebtedness contained manifest errors as the Plaintiff’s Certificate of Indebtedness did not state anything about the Alleged Set-off; and

(f) it was unconscionable for the Plaintiff to obtain summary judgment...