Standard Chartered Bank M’sia v Hew Hai Woon

Loo Peh Fern highlights the pitfalls for a chargee who signs a charge-in-substitution on behalf of a chargor

 

 

Brief facts

The Defendant charged a property to the Plaintiff as a security for two loans granted by the Plaintiff to the Defendant. At the time when the loans were granted, the strata title to the property had not been issued. Accordingly, the Defendant assigned his rights in the property to the Plaintiff under a Loan Agreement Cum Assignment ("LACA") as security for the loans.

 

The LACA contained a power of attorney ("PA") in favour of "the Manager of the (Plaintiff) bank for the time being in Kuala Lumpur".

 

In 1998, the Defendant defaulted in the repayment of the loans. The Plaintiff terminated the loan facilities and demanded that the Defendant pay the amount in arrears, failing which the Plaintiff would sell the property pursuant to the LACA.

 

The strata title to the property was issued sometime in 2002. On 4 December 2002, the Plaintiff, purporting to exercise its rights under the PA, registered a charge in respect of the property. The charge was signed by one Nor Maziah Yaacob ("Nor Maziah"), a Manager of the Plaintiff bank.

 

Appearing below Nor Maziah's signature on the charge was a statement that the Defendant was represented by the Plaintiff. Nor Maziah's signature was attested by a solicitor who stated in the attestation clause that Nor Maziah was an attorney of the Plaintiff bank.

 

The Plaintiff did not provide a copy of the charge (and annexure) to the Defendant.

 

Subsequent to the registration of the charge, the Plaintiff issued another demand letter and a statutory Form 16D to the Defendant. The Plaintiff then applied to Court for an order to sell the Defendant's property pursuant to the relevant provisions of the National Land Code ("NLC") and the Rules of the High Court.

 

 

Issues

The issues for decision by the High Court were as follows:-

 

(1) whether a charge executed in the circumstances described above, was fatally defective; and

(2) whether the withholding by the Plaintiff of a copy of the charge from the Defendant rendered the charge unenforceable.

 

 

Decision

The High Court answered both the issues posed to it in the affirmative and dismissed the Plaintiff’s application.

 

As regards the 1st issue, i.e. the execution of the charge by the Plaintiff, the judge held that although Nor Maziah purported to sign the charge on behalf of the Defendant, that objective had not been achieved.

 

The judge referred to his earlier decision in Young Kee Chan & Ors v Phileo Allied Finance (M) Bhd [2000] 4 CLJ 603, 612 where he held that:-

 

"… where a person signs an agreement as an attorney, the fact of signing as an attorney must be stated clearly at the execution clause. It is not a matter to be taken lightly or that could be glossed over."

 

The judge then stated that if Nor Maziah had signed the charge as attorney of the Defendant, that fact and the registration particulars of the PA should be clearly stated below her signature and name.

 

The judge also observed that the attestation clause stated that she was an attorney of the Plaintiff, not the Defendant.

 

The judge further held that although the Plaintiff affirmed that Nor Maziah was a manager of the Plaintiff, they had failed to produce any evidence to show that she was a manager attached to a Kuala Lumpur office of the Plaintiff as required by the PA.

 

On the 2nd issue, the judge held that the right of a chargor to be supplied with a copy of the charge and annexure is implied in the NLC. The judge was of the opinion that it was unlawful for a chargee to retain the chargor's copy of the charge and annexure unless the chargor could not be traced or was avoiding service of the charge.

 

In the present case, the judge held that the Plaintiff's deliberate withholding of the Defendant's copy of the charge without lawful excuse was an unlawful act that rendered the charge unenforceable.

 

 

Conclusion

The decision in Standard Chartered Case does not create any new law. It does not affect the right of a chargee to exercise the powers granted to it under a power of attorney to execute a charge-in-substitution to replace an assignment created in its favour. However, the case is noteworthy as it emphasises:-

 

1. the importance for a chargee and its solicitors to ensure that the terms of the power of attorney are strictly complied with and that the capacity in which the chargee's representative signs the charge on behalf of the chargor and the attestation thereof by the chargee's solicitors are correctly set out in the charge;

2. the requirement for the chargee to make concerted efforts to provide a copy of the charge to the chargor and, if such efforts are unsuccessful, to ensure that the steps taken are properly documented.

 

 

LOO PEH FERN ( This e-mail address is being protected from spambots. You need JavaScript enabled to view it )

 
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