A lender's failure to act promptly in recovering secured debt can result in claims being barred by limitation, and subsequent suits may be deemed abuse of process if they arise from previously settled matters.

[1] This case raises the interesting question as to when a bank's cause of action to recover the principal and interests arises. Much would depend on how the default event is worded. The borrower contended that as he had failed to service the loan from the commencement of the instalments, the cause of action would arise from the moment the bank gives a letter to remind for payment and to remedy the breach. The banker argued that the cause of action arises only after a formal demand is made to recall the full principal amount of loan and interest accrued. A further interesting question is whether the determination of a shortfall after the auction of the security gives rise to a fresh cause of action.

Parties

[2] The plaintiff through its predecessor-in-title MBf Finance Bhd granted a loan to the defendant. It was for the purchase of an office lot in an office complex known as Ue3 Corporate Suites. The land on which the office complex was built is in the name of Miharja Development Sdn Bhd. The developer is Uncang Emas Sdn Bhd. Both Miharja Development Sdn Bhd as owner of the land and the developer had given a Power of Attorney to the MBf Property Services Sdn Bhd as Project Manager of the project.

[3] The defendant is a borrower of MBf Finance Bhd. He took a loan of RM282,600.00 under a loan agreement dated 16 December 1996. There was also a deed of assignment of the same date entered into between the defendant and MBf Finance Bhd. Under the assignment the defendant assigned all his rights, title and interests in the office lot to MBf Finance Bhd as security for the loan.

Problem

[4] The purchase price of the office lot was RM471,070.00. It was about 1,308 square feet. He was told by a sales agent that he only needed to pay RM10,000.00 as an initial down payment for the purchase to the developer. The balance would be financed by MBf Finance Bhd as the development is part of the MBf Group. He was brought by the sales agent to the office of MBf Finance Bhd at Plaza MBf in Jalan Ampang. There he was given the assurance by a credit officer of MBf Finance Bhd that the developer would give a letter to MBf Finance Bhd that he had paid the difference between the purchase price and the loan sum. According to him in his pleading and in his witness statement, when he asked how this could be possible, he was told that the developer and MBf Finance Bhd are members of the MBf Group of Companies and that such a letter of confirmation was not an issue.

[5] He gave evidence (Q&A5 in DWS-1) that on or about 15 December 1996, he received a letter dated 13 December 1996 sent by MBf Property Services Sdn Bhd to the solicitors for MBf Finance Bhd confirming that he had paid the difference between the purchase price and the loan sum of RM188,470.00 to the developer for the said office lot. The said letter is exhibited at p 183 of Bundle F (Common Bundle of Document Part B). It was carbon-copied to the defendant and MBf Finance Bhd. The plaintiff denied this and in reply thereto stated that any payments made to third parties is not relevant and not binding on the plaintiff. The plaintiff emphasised that what it is claiming is the loan sum that the defendant had defaulted in payment.

[6] In 1997 the defendant decided not to proceed with the purchase of the office lot and he did not take vacant possession of it when requested to do so by MBf Property Services Sdn Bhd by their letter of