Back
2021 MarsdenLR 2535
COURT OF APPEAL PUTRAJAYA
SYARIKAT RODZIAH – Appellant
Versus
MALAYAN BANKING BERHAD – Respondent
[Civil Appeal No: J-02(IM)(NCVC)-1371-07-2018]
A financial institution must substantiate claims against legal advisors with specific facts, as claims deemed scandalous or vexatious may be struck out.
Headnote:(A) Financial Services Act 2013 – Application for striking out under O 18 r 19(1) ROC 2012 – Plaintiff's claim deemed scandalous and an abuse of process – High Court dismissed the 2nd defendant's application to strike out – Court found triable issues concerning negligence and fraud necessitating a full trial. (Paras 1, 21, 35-55)
(B) Plaintiff's allegations against the 2nd defendant were premature – 2nd defendant's role limited to documentation preparation without duty to investigate underlying valuations or legality of agreements. (Paras 22-25, 39-42)
Facts of the case: The plaintiff, a banking institution, initiated a claim against the defendants for negligence and fraud related to Banking Facilities granted to a borrower which later defaulted, causing significant losses to the plaintiff.
Issues: The primary issues revolved around whether the claim against the 2nd defendant was sustainable based on allegations of negligence, fraud, and conspiracy, and whether the application to strike out the claim was justified.
Findings of Court: The Court held that the claim was not obviously unsustainable, noting the necessity for oral evidence on allegations of negligence against the 2nd defendant, concluding the plaintiff's claim was an abuse of process.
Ratio Decidendi: The court determined that the 2nd defendant had no duty to investigate the valuer's inflated figures, as this fell outside their retainer limits, and emphasized the importance of clear particulars when alleging fraud.
Result: Appeal allowed with costs.
Introduction
[1] The appellant/2nd defendant (Syarikat Rodziah) sued as a firm, filed an application for striking out of the respondent/plaintiff's (Malayan Banking Berhad) claim ("encl 15") on the basis that premised on the documentary evidence before the court, it is apparent that the plaintiff's claim is scandalous, frivolous and vexatious and/or an abuse of process pursuant to O 18 r 19(1)(b), (c) and/or (d) Rules of 2012 (" ROC 2012"). Further, the appellant/2nd defendant contends that the plaintiff's claim against the 2nd defendant is untenable and is an attempt to forum shop and issue switch.
[2] The High court on 3 June 2018 dismissed Enclosure 15, holding that the plaintiff's claim was not "obviously unsustainable". The High court is of the view that since parties are in the process of filing the documents in preparation for trial, including the relevant issues to be tried, and that since the claim by the respondent/plaintiff involves the allegation of negligence and fraud on the part of the appellant/2nd defendant, that this justifies that the claim should go for trial.
[3] We heard the appeal and having considered the Appeal Records and submission of parties, we unanimously allowed the appeal with costs. We now give our reasons for doing so. For ease of reference, parties will be referred to as they were in the High court, the appellant as the 2nd defendant and the respondent as the plaintiff.
Background Facts
[4] The plaintiff (Malayan Banking Berhad) is a licensed financial institution under the Financial Services Act 2013 . It has its registered address at 14th Floor, Menara Maybank, 100, Jalan Tun Perak, 50050 Kuala Lumpur. The plaintiff has a Business Centre at the 2nd Floor Bangunan Maybank, 84, Jalan Rahmat, 83000 Batu Pahat, Johor. The plaintiff brought a claim against the 1st and the 2nd defendant.
[5] The 1st defendant (Bahari and Co) is a partnership carrying out a practice of valuation and estate agency and is registered with the Board of Valuers, Appraisers and Estate Agents Malaysia. Its registration number is VE (2) 0255 and its business address is at Suite 1202, 12th Floor, Johor Tower, No. 15, Jalan Gereja, 80100 Johor Bahru, Johor.
[6] The 2nd defendant (Syarikat Rodziah sued as a firm), the appellant in this appeal, is a firm of solicitors having its branch address at No 30, Tingkat 1, Jalan Datuk Kapten Ahmad, 86000 Kluang, Johor. The 2nd defendant was on the plaintiff's panel of lawyers.
[7] The plaintiff offers, inter alia, financing for the purchase of property including industrial buildings.
[8] The borrower, Sentosa Timber Trading Sdn Bhd ("STT") approached the plaintiff to obtain financing for, inter alia, the purchase of 2 units of 1% storey detached industrial buildings at Taman Industri Sri Sulong and working capital ("properties").
[9] The plaintiff through Ms Saraswati Periasamy ("Ms Saraswati") by a letter dated 26 March 2015 (the "Letter of Offer") approved and granted Banking Facilities to STT for the total sum of RM5.9 million (the "Banking Facilities") to "part finance the purchase of 2 units of 1% storey detached factory building in Sri Sulong Industrial Area" ("the properties"). The relevant particulars of the Banking Facilities granted by the plaintiff to STT in relation to the properties are set out in Table A below:
[10] STT offered to the plaintiff, inter alia, the properties as security for the Banking Facilities. Additional security was given in the form of, inter alia, personal guarantees from Lim Chee Seng and Seah Boon Kiong. In this regard, Lim Chee Seng and Seah Boon Kiong, at all material times, were the directors and shareholders of STT ("Borrower's Directors").
[11] The plaintiff, in relation to the Banking Facilities, instructed the 1st defendant to carry out the valuation of the properties. Pursuant to the plaintiff's instructions, the 1st defendant provided the plaintiff with two valuation reports of the properties ("Valuation Reports").
[12] The Va
