The court held that the absolute assignment of properties allows the Plaintiff to auction them and claim outstanding debts, with the Certificate of Indebtedness serving as conclusive evidence, shifting the burden of proof to the Defendants.

JUDGMENT

Atan Mustaffa Yussof Ahmad J:

[1] COVID-19 upended markets and crushed businesses, leaving countless loan agreements in shambles. So the borrower fell into arrears, and long negotiations with the bank proved fruitless, prompting the present debt recovery action. The borrower and guarantors now cry foul, alleging settlement talks were still ongoing when the legal claim unexpectedly surfaced.

[2] Yet beyond assertions of prematurity, the defendants dispute the very nature of the loan security - an assignment of property interests - which the bank contends allows it to liquidate the security. The pivotal issue thus emerges: does this assignment amount to an absolute transfer of rights empowering the plaintiff to unilaterally sell the assets? Or is it a mere charge granting limited rights subject to court sanction? The loan may have soured, but legal rights and remedies turn on whether assignment was total or partial. For between absolute transfer and restrictive charge lies a gulf of consequence should negotiations break down. On which side the agreement truly lies will determine if this action jumps the gun.

Background Facts

[3] The 1st Defendant, Millennium Skill Training Academy Sdn Bhd, obtained three term loans (Term Loan 1, Term Loan 2 and Term Loan 3) from the Plaintiff, RHB Bank Berhad, between August 2016 to September 2016, amounting to RM3,680,000.00. The loans were secured by personal guarantees from the 2nd to 4th Defendants. The loans were documented by the Facilities Agreement dated 15 November 2016 and the Facility Agreement dated 17 March 2017 ("the Facility Agreements"). The personal guarantees were documented by a Personal Guarantee dated 15 November 2016 ("the Personal Guarantee") executed by the 2nd Defendant, 3rd Defendant and 1st Defendant.

[4] The 1st Defendant also executed 3 Deeds of Assignment dated 15 November 2016 and 17 March 2017 ("Deeds of Assignment") in favour of the Plaintiff, assigning the 1st Defendant's rights, title, interest and benefits in 3 properties, Lot 19, 20 and 21 held under title GM 3547, Lot 1475, in Mukim Serendah, District of Hulu Selangor, to the Plaintiff as security for the repayment of the three term loans granted.

[5] The term loans had monthly installment amounts due from the 1st Defendant to the Plaintiff. The 1st Defendant paid the monthly installments from 2016 until 21 August 2019, but was allegedly in default of RM46,773.03 as of 21 August 2019.

[6] When movement restrictions were imposed in Malaysia due to the COVID-19 pandemic, the 1st Defendant's business suffered severely, making it harder for them to continue paying the monthly installments. The 1st Defendant is a company that has been providing vocational trainings to underprivileged students since 2009, including through the Malaysian Skills Malaysia programme. The 1st Defendant was also appointed in June 2021 as a training provider under a government programme.

[7] Despite the COVID-19 impact, the 1st Defendant endeavoured to make monthly installment payments, although at lower amounts that were at times agreed to by the Plaintiff. This included monthly amounts of RM3,000 that the 1st Defendant had continued to pay. However, the 1st Defendant was eventually unable to electronically deposit these RM3,000.00 monthly sums into the loan accounts.

[8] On 14 February 2023, the Plaintiff filed the present legal action claiming RM3,895,975.12 plus interest of 9.95%. Concurrently, the Plaintiff attempted to auction off the 3 properties belonging to the 1st Defendant that were pledged as security for the loans, through auctions on 7 April 2023 and 31 May 2023.

The Plaintiff's Claim

[9] In this action the Plaintiff is claiming:

a) RM1,403,826.01 due under Term Loan 1 as of 7 February 2023;

b) RM1,412,609.24 due under Term Loan 2 as of 7 February 2023;

c) RM1,079,539.87 due under Term Loan 3 as of 7 February 2023; and

d) Interest on Term Loans 1, 2 and 3 at the rate of 3.50% per annum above the Plaintiff's Base Lending Rate (whic