A defaulting borrower is not entitled to be notified of a proclamation of sale in auction of property secured under an assignment agreement where such notification is not mandated by the terms of the agreement.

Abu Bakar Jais JCA:

Introduction

[1] The Appellant provided a banking facility to the Respondent for the latter to buy a penthouse. The Respondent defaulted in payments for the facility. The Appellant did not sue. Instead, the Respondent sued the Appellant. The Respondent sued the Appellant because of alleged wrongful acts of the Appellant in auctioning that penthouse after default by the Respondent on the instalment payments.

[2] The High Court gave judgment for the Respondent. The Appellant is before us in the appeal against that decision of the High Court. The Respondent raised a preliminary objection and also argued several points in the substantive appeal itself.

[3] Among others, the dispute involved questions whether in the circumstances of this case, the Proclamation of Sale for the public auction must be legally notified or served to the Respondent and whether legally, the Appellant's valuation report prepared could be used as a guide in arriving at the appropriate price of the penthouse for the purposes of the said auction.

Background Facts

[4] The Appellant provided the Islamic Banking Facility ("the Financing") to the Respondent to buy a penthouse at Mount Kiara, Kuala Lumpur ("the Property") pursuant to the Property Purchase Agreement and Property Sale Agreement (collectively called the "Agreements" unless otherwise indicated) executed between both parties. For the Financing, the Respondent assigned the Property to the Appellant as reflected in a deed ("Deed of Assignment") and also provided a Power of Attorney ("PA") for the same. The arrangement for the Financing is commonly known as Loan Agreement Cum Assignment ("LACA").

[5] The Financing was terminated and cancelled by the Appellant on the basis that the Respondent defaulted in the instalment payments for the facility. The Appellants then solicitors sent the demand letter seeking outstanding payments. The letters were sent to two last known addresses of the Respondent. The first is at the Property, admitted to be the place of residence of the Respondent and the second, at Subang Jaya as stated in the documents for the Financing.

[6] As consequence of non-payments for the facility, the Appellant sent letters dated 9 May 2014 and 30 May 2014 seeking the entire sum due of more than RM 1 million from the Respondent. Subsequently, the Agreements was terminated as the payment requested was not met.

[7] There was a further event of default as the Respondent was declared a bankrupt on 14 May 2014. This was later annulled on 10 April 2015.

[8] The Appellant then arranged for a valuation report of the Property and took steps to auction the same. The Proclamation of Sale ("Proclamation") for the public auction was advertised in a local newspaper, the Malay Mail and a copy was left at the Respondent's letter box at the Property. A copy was also given to the officer at the Management Office of the Property for it to be handed to the Respondent.

[9] The public auction thereafter proceeded on 10 January 2015 and the Property was sold at the reserve price of RM 2.1 million to two bidders at the auction.

[10] Some five months later, the Respondent sued the Appellant at the High Court (the basis for the present appeal) for contract and tort for alleged failure of the Appellant to essentially provide notice of the Proclamation and not selling the Property at the proper price. Also sued in the same action were the Auctioneer, Appellant's solicitors and the two successful bidders at the auction. Except for the Appellant, the suit was withdrawn against the Auctioneer and the Appellant's solicitors. Consent Judgment was also entered with the two bidders where the Respondent agreed to deliver vacant possession and costs to the two bidders.

[11] The High Court proceeded with the suit against the Appellant and decided for the Respondent and ordered the Appellant to pay RM 1.4 million with interest to the former and also costs.

Summary Of The High Court's Decision

[12] The High Court decided