Notice of interest variation must be provided to the chargor; absence thereof affects validity of demand.

Shaik Daud Ismail JCA:

This was an appeal from the decision of the High Court which had granted an order of sale of a third party charge of property belonging to the appellant which had been charged to the respondent. It is not disputed that the land belonging to the appellant HS(D) 24077, No. PT 23065 Mukim

Kuala Lumpur (the said land) was charged to the respondent as consideration for banking facilities to a company called Bekal Tulin Sdn Bhd of which the appellant was at all material time one of its directors.

On the default of repayment of the banking facilities, the respondent issued an originating summons for an order of sale of the charged property. The appellant thereupon issued a summons-in-chambers for an order that the originating summons be struck out. The learned judge dismissed the application to strike out and, allowed the originating summons and ordered the sale of the property. At the hearing of this appeal learned counsel for the appellant abandoned the appeal against the striking out order but proceeded only on the appeal against the order of sale.

We found that there was only one issue which merited our consideration. It was the contention of the learned counsel for appellant, that the demand was defective in that the respondent had demanded a sum in excess of what was due. It was contended that the letter of offer of the facilities provided for only 10% of interest but the letter of demand asked for 14.5% on the RM1 million overdraft facility and 20% on the excess of RM410,282.04.

We found that while it is true that the letter of offer provided for a 10% interest a perusal of the charge documents showed that the facilities were granted together with interest at 18% per annum. The charge documents also made provisions for variation of interest at the instance of the respondent and they also provided for penalty interest. It is not disputed that the charge documents were executed by the appellant in the presence of his own solicitors. Therefore, he could not be heard to say that the variation of interest by the respondent was a unilateral act.

While we agree with the submission of the counsel for the respondent that cl. 3 the charge documents provides for variation of interest and also for penalty interest to be imposed, under cl. 1(A), it cannot be gainsaid that in order for the respondent to do either or both, written notice must be given to the principal borrower and the chargor. In the present appeal it was submitted and we found it to be so, that the affidavit of the appellant sworn on 27 February 1992 categorically averred at para. 14 that there was no notice of the change of interest, given to him. In the affidavit in reply to this affidavit, the respondent never denied this averment. From this it can be safely inferred that no such notice was given to the appellant. This is fortified by the submission of the learned counsel for the respondent before us that if no notice was given then the court can order a readjustment of the interest.

In the present appeal we found that the appellant had not established sufficient 'cause to the contrary' within s. 256(3) of the National Land Code 1965, to warrant us to disturb the finding of the learned judge to refuse the application for sale. We had dismissed the appeal with costs, but in the light of the lack of evidence that the respondent had given notice to the appellant of the variation of the interest, we ordered that the amount due reflect a claim of interest at 18% per annum as provided for by the charge. We also ordered the deposit to go to the account of taxed costs.