The Standard Chartered Bank

- vs -

Konwah Enterprise Sdn Bhd

Judgment

Mokhtar Sidin JC

1. This is an appeal by the second, third, fourth, fifth and sixth defendants against the decision of the senior assistant registrar who had given judgment in favour of the plaintiff against them as well as the first defendant on the application by the plaintiff for summary judgment under O 14 r I of the Rules of the High Court 1980.

2. In the present appeal the plaintiff as banker had extended overdraft banking facilities to the first defendant, and these facilities, as is normal in banking practice, were secured by a first legal charge created over a piece of land (‘the land’) belonging to the second and third defendants, viz land held under HS (D) 24364 PT No 13718 mukim of Petaling. In addition to that charge which had been duly registered, by a guarantee in writing dated 17 October 1985, the second, third, fourth, fifth, sixth and seventh defendants agreed with the plaintiff to guarantee the due payment on demand to the plaintiff of all money and liabilities owing or incurred by the first defendant on any current or other account or in any manner whatsoever with interest thereon with daily rests up to the limit of $400,000.

3. The plaintiff made demand on all the defendants for the repayment of the overdraft facilities given when the amount advanced including interest was approximately $360,000. On 4 April 1987 the second and third defendants, as chargors of the land, informed the plaintiff that they proposed to sell the land by private treaty at the price of $280,000 in order to repay part of the overdraft facilities advanced by the plaintiff and owing by the first defendant. The plaintiff agreed to the proposal and the sale was subsequently carried out and the sum of $280,000 (the proceeds of the sale) was paid to the plaintiff accordingly to reduce the overdraft account of the first defendant.

4. The claim by the plaintiff by its amended statement of claim was reduced accordingly after taking into consideration the payment of $280,000. The senior assistant registrar gave judgment in favour of the plaintiff for the sum claimed in the amended statement of claim.

5. Being dissatisfied with the decision of the learned senior assistant registrar, the second, third, fourth, fifth and sixth defendants appealed to the judge in chambers. On the hearing of the appeal, it was contended on behalf of the defendants that the decision of the learned senior assistant registrar was wrong and should be set aside and the appeal allowed on the following grounds:

   • firstly, the amount claimed and stated to be owing by the defendants to the plaintiff had not been proved at all either by the affidavit filed or by any certificate of indebtedness; and

   • secondly, it was the contention of the fourth, fifth and sixth defendants that the plaintiff had failed to discharge the duty of care which it owed to them, i.e. the fourth, fifth and sixth defendants, to obtain the true market value of the land at the time when the plaintiff had agreed to the sale of the land by the chargors, i.e. the second and third defendants.

6. Let me deal first with the second ground. In support of this contention the defendants produced the valuation report prepared by Jurukon Hartanah Kuala Lumpur which concluded that the fair market value of the land is about $340,000. This conclusion is arrived at by way of comparison of the sale of similar property within the same locality in the mukim of Petaling as follows:

   Date	Lot No.	Consideration
   14 Aug 1985 16 June 1985 08 Aug 1986 23 Dec 1987	PT 13728 PT 13705 PT 13708 PT 13704	$317,900 $290,000 $305,000 $280,000

7. After going through that evidence and considering it carefully, I am of the opinion that the sale of the land at the price of $280,000 reflects the fair, or substantially the fair, market value of the land at the material time. It is pertinent to point out that the sale of the land was not at the initiative of the plaintiff. The sale was done by the second and third defendants who are the owners and chargors. It was the second and third defendants who negotiated with the third party for the sale and purchase of the land by private treaty, as opposed to a sale by public auction under the provisions of ss 253 to 269 of the National Land Code 1965. Only after the conclusion of such negotiation that the second and third defendants requested the plaintiff to release the land and discharge the charge on payment of $280,000. The plaintiff acceded to this request. The second and third defendants as owners and chargors of the land did not complain about the sale. Learned counsel for the defendants cited the judgment of Lord Denning in the case of Standard Chartered Bank v Walker [1982] 3 All ER 938 at p 942 where the learned judge said:

   .... The receiver is the agent of the company, not of the debenture holder, the bank. He owes a duty to use reasonable care to obtain the best possible price which the circumstances of the case permit. He owes this duty not only to the company (of which he is the agent) to clear off as much of its indebtedness to the bank as possible, but also owes a duty to the guarantor, because the guarantor is liable only to the same extent as the company. The more the overdraft is reduced, the better for the guarantor. It may be that the receiver can choose the time of sale within a considerable margin, but he should, I think, exercise a reasonable degree of care about it. The debenture holder, the bank, is not responsible for what the receiver does except in so far as it gives him directions or interferes with his conduct of the realization. If he does so, then it too is under a duty to use reasonable care towards the company and the guarantor.

8. With respect, I entirely agree with the statement of law in the above case which was cited with approval by VC George J in Development & Commercial Bank Bhd v Almas Motors Corporation (M) Sdn Bhd [1988] 3 MLJ 229. In my opinion, however, Standard Chartered Bank [1982] 3 All ER 938 does not assist the defendants for that case can be easily distinguished from the present case in that the second and third defendants are not the agents of the plaintiff. Furthermore, as emphasized, the plaintiff is not responsible for the act of the second and third defendants in the sale of the land; neither did the plaintiff give any direction or interfere with the act of those defendants. If at all the second and third defendants are treated to be agents, they are the agents for the other defendants. Thus the other defendants must take the responsibility of the acts of the second and third defendants. As such I am of the view that there is no merit in the contention of the defendants of this ground.

9. As to the first ground it was contended on behalf of the defendants that there were discrepancies in the affidavit of Ng Yin Hing affirmed on 7 December 1988. No figures were ever mentioned in that affidavit. The affidavit referred to the statement of claim which was subsequently amended to take into consideration the sum of $280,000 which was paid by the second and third defendants to the plaintiff. The amount due and payable at the time of the hearing of the O 14 application before the learned senior assistant registrar was as stated in the affidavit of Lim Jian Hoo affirmed on 14 July 1987. The defendants failed to adduce any evidence to show that the amount stated is wrong in order to raise a triable issue. It is only the allegation of the defendants that the value of the land was more than $280,000 and thus the amount due and payable to the plaintiff should be much less. For the reasons I have stated above I am satisfied that the land was sold at $280,000 and this sum had been taken into account by the plaintiff.

10. In passing, learned counsel for the defendants submitted that s 94 of the Contracts Act 1950 to be applicable in this case. In my view s 94 is not applicable in this case for the simple reason that sale of the land was not carried out by the plaintiff but by the second and third defendants who are the owners and the chargors of the land.

11. Accordingly, I am of the view that there is no merit in the appeal of the second to sixth defendants and that they did not raise any triable issue. As such I dismiss this appeal with costs.

Cases

Standard Chartered bank v Walker [1982] 3 All ER 938; Development & Commercial Bank Bhd v Almas Motors Corporation (M) Sdn Bhd [1988] 3 MLJ 229

Legislations

Contracts Act 1950: s.94

National Land Code 1965: s.253 to s.269

Rules of the High Court 1980: Ord.14 r 1

Representations

KY Chang for the appellants/defendants.

WH Tang for the plaintiff/respondent.