A creditor retains the right to enforce guarantees and sell secured properties by private treaty when giving appropriate notice, and the validity of claims against guarantors is upheld absent credible dispute.

Table of Content
1. factual background of the plaintiff's claims. (Para 1 , 2)
2. defendants' arguments against the plaintiff’s claim. (Para 3)

The plaintiff's claim is for the balance outstanding due and owing under credit facilities after realisation of the securities for the credit facilities against the 1^st defendant as principal borrower, and the 2^nd, 3^rd and 4^th defendants as guarantors.

Brief account of the facts

The plaintiff acquired 3 non-performing loans from United Merchant Finance Berhad ('UMF') under a vesting certificate dated 30.12.1998 under the Pengurusan Danaharta Nasional Berhad Act 1998 (Act 587) whereby the rights, title and interest in credit facilities together with the related securities and guarantees were acquired and vested in the plaintiff. The 1^st defendant was granted credit facilities by UMF in accordance with the terms of various letters of offer dated 26.7.1996, 21.8.1996, 26.8.1996, 16.1.1997 & 19.11.1997 and Loan Agreements dated 10.9.1006 and 3.10.1996 comprising 3 revolving credit facilities of RM1.5m, RM2.5m and RM800,000.00 respectively. The credit facilities were secured by, inter alia , charges created by the 1^st defendant in favour of UMF over 2 pieces of land Lots 5336 and 5337 ('the properties'). The 2^nd, 3^rd and 4^th defendants executed Joint and Several Guarantees dated 10.9.1996 (RM1.5m facility), 3.10.1996 (RM2.5m facility) and 23.11.1997 (RM800,000.00 facility). The 1^st defendant failed to make payment to UMF of the sums due and owing under the credit facilities prior to the acquisition by the plaintiff. On 24.4.2002 the charges over the properties were realised by the plaintiff by private treaty sale at a total sale price of RM 1,384,000.00 and the net proceeds of RM 1,308,933.99 applied towards reduction of the outstanding amount.

Plaintiff's claim

The plaintiff's claim is for (i) RM6,015,065.40 as at 31.7.2002; (ii) interest on RM6,015,065.40 at 2% per annum above MBB's BLR per annum on monthly rest from 1.8.2002 until realisation; (iii) penalty interest on RM6,015,065.40 at 1% per annum on monthly rest from 1.8.2002 until realisation; and costs.

Defendants' case and counterclaim

The defendants deny liability on the following grounds:

(i) That the condition precedent as to the value of the security to be provided for the grant of the credit facilities stated in the various letters of offer was not met;

(ii) The plaintiff failed to give notice of the sale of the charged lands;

(iii) The charged lands were sold at undervalue;

(iv) The amount claimed by the plaintiff is incorrect.

By way of counterclaim the defendants are claiming loss and damages for breach of the facility agreement and charge documents.

Findings of the Court

At the trial the defendants challenged the correctness of the statements of account (exhibits P23A, B & C) prepared and produced by En. Mohd Azlan Jalam Bin AB Wahab (PW4). It was put to PW4 that the statements are incorrect as it did not take into account payments made by the 1^st defendant. It was also contended that there was a change in the interest rate from the UMF BLR to the MBB BLR and that the plaintiff did not give notice of the change to the defendants. PW4 was also cross-examined extensively on (i) the penalty interest of 1% per annum charged; and (ii) the penalty interest of 3% above MBB BLR on interest due. As the charging of the said interest is expressly provided in the letters of offer, the defendants' contention is without merit. The defendants also contended that P23A - C cannot be verified because there is no corresponding statement of account by UMF for the period immediately prior to 31.12.1998. In this regard the Court observes that the defendants did not dispute or challenged the statement of accounts when they were contacted by the plaintiff in 1998 up until end 2000. The plaintiff notified the 1^st defendant of its acquisition vide letter dated 30.12.1998. In response the 1^st defendant wrote to the plaintiff on 16.3.1999 requesting for an opportun

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