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2022 MarsdenLR 404
HIGH COURT MALAYA PULAU PINANG
AFFIN BANK BERHAD – Appellant
Versus
ABDUL AZIZ MOHD – Respondent
[Originating Summons No: PA-24FC-600-10/2019]
The court upheld the validity of the foreclosure Order For Sale, finding proper service of documents and affirming the charge's terms do not require consent for additional loans.
Headnote:(A) National Land Code 1965 – Sections 256(3), 340, 431 – Foreclosure proceedings – The Defendant sought to set aside the Order For Sale based on improper service of cause papers and other grounds – The court found that the Plaintiff properly served the cause papers and Form 16D, complying with legal requirements – Additionally, the Charge was a continuing security that did not require the Defendant's consent for additional loan facilities – The Reserve Price set for the auction was deemed appropriate – Application dismissed. (Paras 8, 12, 30, 104, 106)
(B) Service of Cause Papers – The Plaintiff adhered to the terms of the Charge to serve cause papers to the Defendant’s last known address – There was no evidence provided by the Defendant to prove a change of address that was communicated to the Plaintiff. (Paras 46, 52, 54, 72)
(C) Additional Loan Facilities – The court determined that no consent was required from the Defendant for the Plaintiff to provide additional loan facilities, as per the terms of the Charge. (Paras 78, 88)
(D) Evaluation of Reserve Price – The court evaluated and confirmed the Reserve Price set for auction was appropriate and based on the market value, as claimed by the Defendant was unsubstantiated. (Paras 92, 96)
Based on the provided legal document, the court addressed and dismissed the defendant’s application to set aside the Order For Sale of the property. The court found that the plaintiff had properly served the cause papers and the Form 16D default notice in accordance with the relevant statutory provisions and contractual terms (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) .
The addresses used for service, particularly No 9-H, were deemed the last known addresses in the plaintiff’s records, and the defendant had not provided any evidence of notifying the plaintiff of a change of address (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) . The defendant’s assertion that he did not receive the cause papers was not substantiated, and the court held that the service was in compliance with the contractual and statutory requirements (!) (!) .
Furthermore, the court clarified that the plaintiff was not obligated to obtain the defendant’s consent for providing additional loan facilities, as the charge was a continuing security agreement that authorized such actions without explicit consent (!) (!) (!) (!) (!) (!) (!) .
Regarding the valuation and reserve price, the court found the set reserve price appropriate, based on the market value, and noted that the defendant failed to produce a valuation report to substantiate his claim that the property’s value was higher than the reserve price (!) (!) (!) (!) (!) (!) (!) (!) (!) .
In conclusion, the court dismissed the application to set aside the Order For Sale, affirming that the service of cause papers and the Form 16D was proper, the plaintiff had no obligation to seek the defendant’s consent for additional facilities, and the reserve price was justified. The defendant was ordered to pay costs to the plaintiff (!) .
JUDGMENT
A. Prelusion
[1] The Defendant executed a charge in favour of the Plaintiff bank. The charge was over the Defendant's property ("Property"). The Plaintiff commenced foreclosure proceedings. The Plaintiff obtained an Order For Sale. The Property was about to be auctioned. The Defendant applied to set aside the Order For Sale. Should the Order For Sale be set aside?
[2] The Defendant submitted 4 grounds to set aside the Order For Sale. These grounds were:
i. the foreclosure cause papers were not properly served on him;
ii. the required Form 16D default notice under a charge was not properly served on him;
iii. the Order For Sale resulted from a default under additional loan facilities given by the Plaintiff. The Plaintiff did not get the Defendant's consent to give the additional loan facilities;
iv. the reserve price that was set for the Property was too low. The Defendant argued that it was much lower than the current market value of the Property.
B. Only One Prayer In The Defendant's Application Needed To Be Determined
[3] I first set out the parameters of the Defendant's Application.
[4] The Defendant's Application, as initially filed, sought the following Orders:
i. that leave be granted for him to make the Application;
ii. that the Orders of November 2019 and April 2021 to auction the Property (which I will collectively call the "Order For Sale") be set aside;
iii. that the auction that was set for 17 August 2021 be stayed pending the disposal of the Defendant's Application.
[5] Prayer (i) was redundant. The Defendant did not need leave to file the Application. So I did not have to deal with prayer (i).
[6] Prayer (iii) was already granted. The previous Court that heard the Application granted an Order on 16 August 2021-the day before the scheduled auction-to stay the auction.
[7] That left prayer (ii). The parties agreed that I only needed to decide on prayer (ii)-whether to set aside the Order For Sale.
C. The Law On The Setting Aside Of An Order For Sale
[8] Several provisions of the National Land Code 1965 ("NLC") are relevant and applicable to a decision on this issue. The first provision is s 256(3), which provides that "the Court shall order the sale of the land to which the charge relates unless it is satisfied of the existence of cause to the contrary".
[9] The locus classicus for what is meant by "cause to the contrary" is the case of Low Lee Lian v. Ban Hin Lee Bank , . Our Supreme Court propounded that "cause to the contrary within s 256(3) may be established only in three categories of cases".
[10] The first category is where the chargor (here: the Defendant) is able to bring his case within any of the exceptions to the indefeasibility principle contained in s 340 of the NLC.
[11] In the context of our matter, s 340 of the NLC provides that the chargee's (here: the Plaintiff's) rights under the charge are indefeasible. When a charge is indefeasible, it means that the charge is valid; it cannot be nullified; it cannot be canceled. And since the charge is indefeasible, the Order For Sale-which was obtained because there was a default under the charge-should not be set aside.
[12] But s 340 also provides for the exceptions to this principle of indefeasibility. If, for instance, the Defendant here could show that there was fraud, or misrepresentation, or some unlawful act by the Plaintiff- then the charge becomes defeasible. It becomes invalid, or nullified, and should be canceled. This is the "cause to the contrary". Then, naturally, the Order For Sale should be set aside.
[13] The second category of cases to establish a cause to the contrary is where the Defendant was able to demonstrate that the Plaintiff had failed to satisfy the required conditions for the Court to grant the Order For Sale.
[14] For example, to enable the Plaintiff (chargee) to get the Order For Sale, the Plaintiff must have served the required Form 16D on the Defendant (chargor). Form 16D is a default notice. It notifies the Defendant
