Azizul Azmi Adnan JC

JUDGMENT

INTRODUCTION

[1]The plaintiff, which is now known as Affin Bank Berhad, is a licensed commercial bank. In 1985, it granted a housing loan to Mr. Wong Keng Fatt, the defendant in this action, to finance the purchase and construction of a bungalow to be located in Mukim Si Rusa, Port Dickson. Mr. Wong’s bungalow was one of several to be constructed in a development project undertaken by a company known as The Regent Housing Development Sdn. Bhd. (the Developer).

[2]The plaintiff had disbursed a significant portion of the loan to the Developer, in reliance on architect’s certificates that have been subsequently established as false. Although the certificates confirmed that up to 60% of the construction of the defendant’s house had been completed, the truth was that no such development had been carried out.

[3]In 1987, the plaintiff commenced action against the defendant to recover the amounts disbursed to the Developer, together with interest on the principal amount loaned out. For reasons unknown, there was an inordinate delay between the time the suit was filed, and the date on which the case was heard, none of which delay was the fault of either party to this action. The delay meant that the accrued interest on the RM140,000 principal amount loaned by the plaintiff has ballooned to in excess of a million ringgit as at the date of the trial in 2014.

[4]One of the principal legal issues examined in this case is whether a bank qua lender owes a duty to its customer in carrying out a disbursement of a loan.

SALIENT FACTS

[5]On 10 April 1985, the defendant entered into a sale and purchase agreement (the SPA) with the Developer to acquire a piece of land in the mukim of Si Rusa together with a double-storey detached bungalow. The land was owned by two individual proprietors, on whose behalf one Mr. Cheong Teng Kong had executed the SPA by way of a power of attorney.

[6]The purchase price under the SPA was RM280,000. Even before the execution of the SPA, the defendant had paid RM84,000 to the Developer, representing 30% of the purchase price.

[7]The defendant applied for and obtained a housing loan from the plaintiff to finance the remainder of the purchase price of the property, amounting to RM196,000. A letter of offer (the Letter of Offer) was issued by the plaintiff to the defendant on 11 May 1985 and accepted by the defendant on 15 May 1985. On 12 June 1985, a loan agreement (the Loan Agreement) and a deed of assignment (the Deed of Assignment) were entered into between the plaintiff and the defendant.

[8]For the purposes of obtaining a loan, a copy of the defendant’s income tax notice of assessment issued by the then Department of Inland Revenue (Form J) dated 5 May 1985 was submitted to the plaintiff. This form was subsequently established in evidence to have been falsified, although there is no suggestion that the defendant was in any way involved in its falsification. However, nothing in this case turns on this fact.

[9]On 13 June 1985, the plaintiff disbursed RM84,000 to the Developer. On 9 July 1985, a further RM56,000 (representing 20% of the purchase price under the SPA) was disbursed. It is important to note that there were just 26 days between the first and second disbursements.

[10]In disbursing these amounts, the plaintiff relied upon two architect’s certificates issued by William K.C. Chong Bersekutu, a firm of certified architects. These documents, dated 22 May 1985 and 6 July 1985, purported to certify that 40% and 60% respectively of the stages of work had been completed by the date of each certificate.

[11]Mr. Chong King Choong, the architect whose name and signature appeared on the certificates, was called by the plaintiff as a witness. By his testimony, he denied having certified that any of the stages of work had been completed, and gave evidence that he had only certified that 10% of the price payable under the SPA was due, on the basis that the first 10% was due upon signing of the SPA. This