Tutorial Questions (No.

4)

TLB 8

4(a) The first case is Public Islamic Bank Berhad v Ratha Vadevel. In this case, the
defendant obtained from the plaintiff a housing loan to fund the purchase of a property. As
security for the loan granted by the plaintiff to the defendant, the defendant charged the
property to the plaintiff. The defendant failed to pay the monthly instalments for the loan and
later, after all the notices, the plaintiff exercised its rights as the chargee and made this
application for an order for sale to realize the security. The court in this case allowed the
plaintiff's application as the defendant has failed to discharge her burden to show a cause to the
contrary within the meaning of s 256(3) of the National Land Code (NLC) 1956.

As been enumerated in Low Lee Lian v. Ban Hin Lee Bank Bhd, there are three
category of cases which may amount to a cause to the contrary. Firstly, if the chargor could
bring himself within any of the exceptions to the indefeasibility doctrine under s 340 of the
NLC, secondly, if the chargor can demonstrate that the chargee has failed to satisfy the
conditions precedent for the making of an order for sale and thirdly, if the chargor can
demonstrate that a grant of the order for sale would be contrary to some rule of law or equity.

As for the first category, does the defendant is within any of the exceptions to section
340(2) of the NLC? The defendant claims that she was misled into an arrangement to obtain
loan for RM 200,000.00 from the plaintiff, but this claim is not supported with evidence. In
regard with the issue whether the registration of the charge in favour of the plaintiff was
obtained by forgery or through an insufficient or void instrument, I find that this issue does not
arise as the defendant did not deny signing the charge documents in the manner of Form 16A
of the NLC.

The second case is Keng Soon Finance Bhd. v MK. Retnam Holdings Sdn. Bhd:
The developer in this case obtained bridging finance from the chargee to develop its land to be
sold of the sub-purchasers. The loan is to be disbursed progressively. The chargee released the
first progress payment. When the developer failed to pay the interest on the first progress
payment, the chargee called off the deal. The chargor requested the release of further amount
from the chargee including submitting an architect certificate to the chargee to inform of the
progress of the development. The chargee did not heed to all request made by the chargor.
Instead the chargee applied for an order for sale of the charged property to recover the first
progress payment released to the chargor.

The Privy Council decided that there was no existence of cause to the contrary. Order
for sale should be granted. For there to be an order for sale, there must be something that was
done either was promised or it was a part of the law that prevented you from obtaining the
order for sale. And if there were nothing for the sort then there is nothing to be challenged.
Section 256(3) of the NLC is mandatory. The court ‘shall’ order a sale unless it is satisfied of
the existence of ‘cause to the contrary’. Granted that these words have been construed in
Malaysia as justifying the withholding of an order where to make one would be contrary to
some rule of law or equity, they clearly cannot extend to enabling the court to refuse relief
simply because it feels sorry for the borrower or because it regards the lender as arrogant,
boorish or unmannerly. It must have a very good solid reason to challenge the order for sale.

The third case is OCBC Bank (Malaysia) Berhad v Kang Hai Realty Sendiriran
Berhad. The defendant is the registered owner of land executed a charge dated 8 February
2006 over the land in the plaintiff's name as security for a sum of RM10,000.000.00 Tradeline
Facility. However, the defendant's failure to effect the full payment of the facility as demanded
constituted a breach of the terms of the charge. The court in this case allowed the plaintiff’s
application. The defendant alleged that the said resolution was invalid on the grounds of fraud
and conspiracy but they did not produced any sufficient and credible evidence to support the
allegations. The court stated that the charge cannot be retrospectively nullified by a Consent
Order obtained several years later. As the plaintiff has shown that it has met all the statutory
requirements and conditions precedent for the making of an application for an order for sale
under s 256 of NLC, their application is allowed.

4(b) The issue is whether the ground stated by Kim that the account number in the Notice
of Demand is erroneous would be sufficient to constitute cause of the contrary within Section
256(3) National Land Code 1965 in opposing the Order for Sale application by Bank Miskin.

In the case of Low Lee Lian v Ban Hin Lee Bank Berhad, it was shown that the cause
to the contrary can be established in three categories of cases. First,the chargor is able to bring
his case within any of the exceptions stated in s 340 (2) NLC. Second, the chargor can
demonstrate that the chargee has failed to meet the conditions precedent for making the
application for order for sale. Third, the chargor can defeat an application for order for sale by
demonstrating that it grant would be contrary to some rule of law or equity. Specifically, in
Perwira Affin Bank Berhad v Saad bin Abdullah & Anor, an application for order for sale
was dismissed by court on the ground that the demand (in form 16D) is invalid. This proves
that defective or improper statutory notice of demand can also constitute cause of contrary as
in the case.

Applying in present case, Kim wants to challenge the application on the ground that the
account number in the Notice of Demand is erroneous. As there is defective or improper
statutory notice of demand in the notice, therefore, Kim can challenge the application by using
this ground.

To conclude, the error of account number in the Notice of Demand is sufficient to

constitute cause of the contrary within Section 256(3) National Land Code 1965. Kim can
challenge the Order for Sale application by Bank Miskin based on this ground.