A financial institution cannot benefit from its own negligent mistakes when issuing settlement letters without due diligence.

[1] This is an appeal against the decision of the Sessions Court which had, after a full trial, dismissed a loan recovery claim filed by the appellant against the respondent.

[2] At the conclusion of the hearing of the appeal, I gave judgment for the respondent, pronounced the key reasons for the same, and dismissed the appeal. This judgment contains the full grounds for my decision.

Key Background Facts

[3] The appellant is Bank Simpanan Nasional, a bank established under the Bank Simpanan Nasional Act 1974. Pursuant to a letter of offer dated 20 November 2000, the appellant granted a housing loan facility of RM116,375.00 inclusive of MRTA insurance premium of RM3,375.00 to the respondent ("the Facility") in connection with the purchase by the latter of a double storey terrace house held under master title H S (D) 32202 PT No 20057, Mukim Rawang, Daerah Gombak, Selangor ("the Said Property") pursuant to a sale and purchase agreement dated 22 June 2000 with Bakti Dinamik Sdn Bhd ("the Sale and Purchase Agreement").

[4] The financing extended to the respondent was then documented and secured by a Loan Agreement cum Assignment executed by the parties on 11 April 2001.

[5] The respondent however failed to effect repayment by installment, resulting in the appellant taking steps to sell the Said Property in accordance with the terms of the Loan Agreement cum Assignment. Whilst the appellant's efforts to dispose of the Said Property by way of a public action were not successful, the respondent, with the knowledge of the appellant, was able to find buyers for the Said Property and executed a sale and purchase agreement on 22 December 2005 with Mohd Maimun Abdul Rashid and Siti Mariah Idris as the purchasers of the Said Property for RM85,000.00 from the respondent ("the Sale Agreement").

[6] Almost the entirety of the consideration for the Sale Agreement of RM85,000.00 was then paid to the appellant as part of the repayment of the Facility, who asserted that there still remained outstanding a remainder payment of RM95,923.27 as at 28 December 2012 towards full settlement of the Facility. This said amount of shortfall formed the basis of the claim by the appellant against the respondent at the Sessions Court filed in January 2013.

Summary Of Principal Contention By Parties

[7] The thrust of the defence of the respondent at the Sessions Court and repeated in this appeal is that the claim filed by the appellant cannot be sustained because the appellant had in its letter to the respondent dated 26 March 2008 in exh P-23 ("the Full Settlement Letter") expressly stated that the respondent had fully settled the Facility. This was further followed by the entry by both the appellant and the respondent into the usual legal arrangements to terminate the security arrangement pertaining to the Said Property. Thus, a Deed of Receipt and Reassignment was executed on 21 May 2008, where in consideration of the respondent stated to having repaid all monies owing under the Facility to the appellant, the obligations of the respondent under the Loan Agreement cum Assignment (strictly, the latter) as well as the security or interests pertaining to the Said Property were released and discharged.

[8] The respondent further denied having received any notice or letter of demand in respect of any shortfall concerning the Facility subsequent to the execution of the said Deed of Receipt and Reassignment.

[9] The appellant on the other hand, strongly argued, albeit only first pleaded in its reply to the defence of the respondent in the proceedings before the Sessions Court that the Full Settlemen