(1) 1 The first and second defendants are the special administrators appointed by Pengurusan Danaharta Nasional Bhd, the third defendant (‘Danaharta’), to administer the third plaintiff.

(2) 2 Naza Properties Sdn Bhd, the intervener, was the successful bidder of the tender which bought the third plaintiff for RM15 million.

Brief Facts

(3) 3 The third plaintiff obtained credit facilities of RM5 million from Malayan Banking Bhd to build a hotel on its land and as security thereto, the third plaintiff charged the land and the hotel to the bank. However, the third plaintiff failed to repay the loan and it became non-performing. As a result, the loan account and the charge were vested in Danaharta. On 24 July 2000 Danaharta appointed the special administrators to administer the third plaintiff.

(4) 4 Earlier, on 12 July 2000 the first and second plaintiff entered into an unconditional bank guarantee within 30 days of the execution of the sale and purchase agreement (‘SPA’). The purchaser failed to procure the bank guarantee on 12 August 2000 and thereby the SPA was deemed terminated on that date.

(5) 5 On 24 July 2000 Danaharta, in the exercise of its powers under the Pengurusan Danaharta Nasional Berhad Act 1998 (‘the Act’), appointed the first and second defendants as special administrators to administer the third plaintiff. Within three weeks the special administrators obtained a valuation report from Vigers (KL) Sdn Bhd which valued the hotel at RM16,340,000. The special administrators advertised the sale of the hotel by tender from 11 October 2000 until 15 November 2000. There were three bidders for RM6 million, RM10 million and RM15 million and the special administrators sold the hotel to the highest bidder for RM15 million, namely the intervener in this action. The intervener paid the full price of RM15 million and completed the sale and entered into vacant possession of the hotel on 31 March 2002.

The Market Value

(6) 6 The plaintiffs produced three valuation reports by:

(1) Henry Butcher for RM42 million dated 8 January 2000;

(2) NB Valuer for RM43 million dated 30 December 2000; and

(3) CA Lim for RM43 million dated 31 January 2001.

(7) 7 Whereas the defendant produced one yaluation report for RM16.3 million and RM19.8 million dated 16 August 2000.

(8) 8 The hotel was sold for RM15 million on 15 November 2000. The plaintiffs’ valuers valued the hotel for the purpose of intended sale, for a fair asking price and for sale respectively; whilst the defendants’ valuer, was for the purpose of disposal.

(9) 9 The plaintiffs’ valuers applied the comparison method and the depreciated replacement cost method whilst the defendants’ valuer applied the discounted cash flow method and the cost method on a break-up basis.

(1) The Comparison Method

(10) 10 This valuation approach entails comparing the hotel with similar properties that were sold recently and noting as well as making appropriate adjustments on the characteristics, merits and demerits of those properties in order to arrive at the value of the hotel.

(11) 11 Henry Butcher made a market observation of the supply of Hotel rooms in Penang at 12,123 rooms which they said needed to lower the room rates in order, to generate more demand for hotel accommodation during the major tourist drawing events such as Visit Penang Year, Penang International Film Festival, Food Festival, and Shopping Carnival. The room rates for 27 hotels in Penang are between RM100 to RM5,000 per room and the occupancy rate is between 40% to 80%. Henry Butcher compared the sale transaction of five hotels in Penang and in particular Park Inn International Hotel for RM44 million (RM220,000 per room) in 1994 which is six years earlier in time.

(12) 12 NB compared the hotel with four comparable hotels which are within 1/2 km to 2 km from the hotel but their beach fronts are not as good. The four hotels are:

(i) Paradise Tanjong Bungah (RM125 –RM145 — 70%)

(