Hamid Sultan J:

This is my judgment in respect of the borrower (‘Shalihudin (defendant)’) and third party (‘Ceramtec’), mortgagor of shares, in essence, claiming against the bank (‘Alliance Bank’) for loss and damage for sale of shares in breach of alleged collateral contract and/or surreptitious sale of the mortgaged shares, and the claim of Alliance Bank against the defendant for the balance sum due and owing under the facility terms.

The parties have agreed that the issue of liability to be decided first and the issue of quantum for loss and damage (if any) can be referred to the deputy registrar for assessment of damages.

This judgment involves two suits, which have been consolidated. The details are as follows:

(a)in Suit No D3–22–1589 of 2008, Ceramtec is the plaintiff, and claims against Alliance Bank for loss and damage arising from the sale of shares. The prayers read as follows:

And the plaintiff claims:

(i)Damages for loss of the benefit of the 11,420,286 shares pledged by the plaintiff to the defendant;

(ii)Further, or in the alternative to (i) above, damages for conversion;

(iii)Further, or in the alternative to (i) and/or (ii) above, damages for misrepresentation;

(iv)Further, or in the alternative to (i), (ii) and/or (iii) above, damages for breach of contract;

(v)Further, or in the alternative to (i) to (iv) above, an order that the defendant:

(A)do restore the 11,420,286 shares pledged by the plaintiff to the defendant, by way of purchase from the open market or otherwise; and

(B)do to transfer such shares to the plaintiff within 21 days of an order made herein;

(vi)Interest at the rate of 8% per annum from the date of judgment to the date of full payment upon all sum found to be due to the plaintiff;

(vii)Costs; and

(viii)Such further or other relief as this Honourable Court deems fit.

(b)in Suit No D2–22–240 of 2007, Alliance Bank is the plaintiff, and claims against the defendant for the indebted sum. The defendant has raised a counterclaim seeking several declarations, including a declaration that the shares were sold in breach of the alleged collateral contract with Ceramtec. The prayers in the said counterclaim read as follows:

WHEREFORE the defendant claims:

(a)Declaration that in all the circumstances that the Plaintiff acted wrongfully or in bad faith or both and without prejudice to the generality of the foregoing, without the prior approval of the Securities Commission, or without prior notice to the Defendant, or by acting on the stale demand dated 18.7.2005, or contrary to the representations made on 15.5.2006 that the Defendant would have time until 31.12.2006 to liquidate his account, or for a combination of one or more reasons aforesaid in forced selling the Private Placement Shares at approximately RM0.60 in the month of September 2006;

(b)Declaration that in all the circumstances, the Plaintiff acted wrongfullyand in bad faith when it demanded repayment from Ceramtec for a sum of RM9,341,861.55 on 15.8.2005 when Ceramtec was not a debtor but a third parties securities provider under the Ceramtec’s Pledges subject to the collateral contract;

(c)Declaration that the letter of demand dated 15.8.2005 to Ceramtec was an unlawful demand, it being that Ceramtec was under no obligation whether in law or in equity to honour the demand as if it were the debtor and not a third party securities provider;

(d)Declaration that there was a collateral contract between the Plaintiff, the Defendant and Ceramtec that in the event the Plaintiff was compelled to forcibly liquidate the account of the Defendant, Ceramtec would be given prior reasonable notification that all shares pledged by Ceramtec were redeemable or were to be redeemed by Ceramtec at the then prevailing market price;

(e)Declaration that the letter of demand dated 15.8.2005, albeit wronglygiven, having specified a period of 7 days for Ceramtec to pay RM9,341,861.55, the Plaintiff ought to have acted promptly on the demand by either force selling the shares pledged by C