3. Express conditions to
charges can be found
in the CHARGE
ANNEXURE (charge
agreement).
Conditions imposed
by the parties that are
not mentioned in the
NLC provisions.
e.g. right to
consolidate charges.
4. S.249 – Fixed obligations of chargor:
1) To pay all sums secured. i.e. repay the loan.
2) Pay rent (land revenue) to the State Authority.
3) Observe and perform all conditions to which the
land is subject.
(see s.250 for obligations of the chargor that can be
altered or amended.)
5. A charge that fails to comply with fixed requirements is
VOID.
Examples:
1) Where the charge is to secure an
UNENFORCEABLE LOAN. (e.g. a loan that does not
follow the provisions of the Moneylenders Ordinance
1951 – see Phuman Singh’s case and Associated
Finance Corp Ltd. v. Poomani.
6. 2) Where title of
the chargee is
defeasible due to
fraud in the transfer,
the charge is
also null and
void. (See Owe
Then Kooi’s case)
3) Where
consideration for the
charge over the
land is PAST
CONSIDERATION
(See Lau Ngiik
Ping’s case)
10. 1. Where breach of charge agreement hs
continued for more than a month, the chargee
will serve on the chargor a Notice in Form
16D.
11. Contains 3 things:
a) specifies the breach in question.
b) requires it to be remedied within 1 month.
c) warns the chargor that if the notice is not complied
with, the chargee will take proceedings to get an
order for sale.
However, if the principal sum secured is payable ON
DEMAND (must ascertain this from the Charge
Annexure), the chargee will issue Form 16E (see).
12. 2) After the period to remedy the breach or to
pay the sum has lapsed, the chargee applies to
the High Court through Originating Summons
supported by an affidavit for an order for sale
of the land. (See s.256(2), cross refer to Rules
of Court 2012, Order 83)
13. 3) Court will grant order for sale through
s.256(3) NLC:
“On any such application, the Court shall order the
sale of the land or lease to which the charge
relates unless it is satisfied of the existence of
cause to the contrary.”
14. See s.257(1):
a) provide for sale to be by public auction.
b) requires the sale to be held on a date not
less than 1 month from the date of the
order.
c) specify the total amount due to the chargee at
the date of the order.
d) require the Registrar of the court to fix a
reserve price for the purpose of sale.
15. e) that a bidder during the auction must
have 10% of the reserve price;
f) that the 10% is deposited into the chargor’s
account.
g) specifies that the balance purchase price be
paid within 120 days from the date of the sale,
with no extension.
h) that if not paid within 120 days, the deposit of
10% will be forfeited.
16. 4) The Court
Registrar serves a
copy of the order
for sale on the
chargor. (s.258(1)(a))
and advertises the sale
to be done by public
auction.
(newspapers and
posters).
5) Chargee
prepares the
conditions of sale
according to court order
and deposits the
IDT/duplicate lease to
the court a week before
auction date.
17. 6) Under section
259, sale will be
carried out by an
officer of the
court or a
licensed auctioneer.
(see s.259(2) as
to duties of the
auctioneer).
18. 7) Successful bidder
(‘purchaser’) in
the public
auction, upon paying
the full purchase
price, will receive
from the
auctioneer 2 things:
1.Form 16F (CERT.
OF SALE BY
COURT)–
registrable as an
instrument of dealing
at
the Land Registry
office.
2. The IDT/duplicate
lease.
19.
20. 4 Issues:
1) Whether serving the wrong notice of
demand effects the charge action?
2) Whether failure to specify the exact breach
rendered notice ineffective?
3) Whether duration of notice of demand can
be changed?
4) Effect of failure to serve the Notice of
Demand according to provisions of the NLC.
21. V.A.M Hussain v BP Malaysia Sdn. Bhd. [1970]
Held:
The proper notice to issue where the principal
sum is payable on demand should be Form 16E.
22. Fed. Ct. held:
“Form 16D can be used whether or not the
principal sum is payable on demand. Form 16E
can only be used where the principal sum is
payable on demand.”
Result? CONFUSION.
23. Federal Court cleared the confusion and held:
(a) Where there has been a breach of any
obligation Form 16D may be used, regardless
of the nature of the obligation, including the
payment of the principal sum on demand; and
(b) where the principal sum is payable on
demand then either notice in Form 16D or
Form 16E may be served.
24. If Form 16E has been served, and there is non-
compliance by the chargor, there is no need to
follow up with Form 16D.
Can straightaway apply for an order for sale.
(See Bank Bumiputra Malaysia Bhd. v. Mahmud
[1989] 1 MLJ 381.)
25. No. If the details of the breach had been specified
in detail in an earlier letter of demand, failure to
specify the details of the breach in Form 16D will
not effect its validity.
(See RHB Bank Bhd. lwn Syarikat Sungei Nal
Timber Industries Sdn. Bhd. [2007] 4 MLJ 567.)
26. S.254(1)(b) stipulates the period to pay the
amount demanded in the notice of demand (Form
16D) to be ‘within 1 month… or such alternative
period as may be specified in the charge.’
Q: whether the chargee could stipulate a period
lesser than one month?
27. Court of Appeal (literally interpreting the words in
s.254(1)(b)) held that the chargor and chargee
may agree to accept a statutory notice of less than
one month.
NLC expressly permits this.
28. See s. 431(1) NLC on method of service.
What is the method of service for a company?
S.431(1)(b)(ii) – delivering the notice at the body’s
registered office or usual or last known place of
business to its servant or agent – or leaving it in a
cover addressed to the registered office or last
known place of business – or pre-paid registered
post at the body’s registered office or last known
place of business .
29. In Kekatong Sdn. Bhd v BBMB [1998] , the
App./chargor had changed its registered office
address and had duly informed the Registrar of
Companies in Form 44.
Chargee enforced the charge and sent Form 16D to
the previous registered address.
Order for sale given. App. applied to set it aside on the
ground that there was failure to serve the notice of
demand.
30. Such service was not in accordance with the NLC
and was therefore VOID.
Ratio: (Gopal Sri Ram, JCA):
1) Ownership of land is a fundamental right under
Art. 13 FC. Any deprivation must be in strict
compliance of both, substantial and procedural
law.
2) Effect of order for sale and the subsequent
public auction, etc. are designed to
permanently deprive a registered proprietor of his
land.
31. 3) The provisions of the NLC that govern the
enforcement of registered charges exist not
only as a means of a lender recovering his money
but also for the protection of the chargor. The
court, by treating the service provision in s. 431(1)
NLC as mandatory will ensure that the protection
given by the NLC is not rendered illusory.
Thus, the order for sale was void as F.16D was
not served in the manner prescribed by the NLC.
