OSK CAPITAL SDN. BHD. v LEE KAM KOAK

Case Significance

Reinforces, in the third-party-charge context, that a chargor cannot defeat a section 256 order for sale merely by disputing the underlying loan; resistance is confined to the narrow 'cause to the contrary' categories recognised in Low Lee Lian.

This High Court decision at Shah Alam, a companion to a parallel order-for-sale application, concerns an application for an order for sale of charged land under section 256 of the National Land Code, and the limited grounds on which such an order may be resisted. The plaintiff, a licensed moneylender, invoked its rights under a registered charge and sought an order for sale together with consequential relief. The charge secured a moneylending agreement executed on 27 September 2021 for a credit facility of RM3,000,000. The defendant conceded the execution of that agreement and the registration of the charge, but mounted a vigorous challenge centred on the validity and enforceability of the moneylending agreement itself. Here the charge was a third-party charge, the defendant having charged land to secure the borrower's facility.

The court applied the same controlling authority, the Federal Court's decision in Low Lee Lian, which confines the grounds on which a chargor may resist an order for sale under section 256 of the National Land Code to established categories of "cause to the contrary." On such an originating summons the judge will not enter into a discussion of the merits of the chargor's complaints. The defendant's challenge was directed at the validity and enforceability of the moneylending agreement, a matter the defendant accepted was not for determination on this application. Since that challenge did not constitute a recognised "cause to the contrary," it could not stand in the way of the registered chargee enforcing its security against the charged land.

On that basis the court held it was obliged to allow the reliefs sought by the plaintiff, granted the order for sale, and made no order as to costs. The judgment reinforces, in the third-party-charge context, that a chargor — including one who has charged land to secure another's borrowing — cannot defeat a statutory order for sale merely by disputing the underlying loan; the chargor must bring the case within one of the narrow "cause to the contrary" categories the Federal Court has recognised.