GOLDEN ROCK SDN BHD v MAYBAN FINANCE BERHAD

Case Significance

Confirms that a third-party chargor is not relieved of liability merely because the statutory foreclosure form omitted the borrower's indebtedness or because a surplus was alleged, particularly where the borrower has been wound up and the liquidator is best placed to determine the debt.

This Court of Appeal decision concerns the liability of a third-party chargor following foreclosure, and whether an alleged deficiency in the statutory foreclosure form relieves the chargor of liability. The appellant, Golden Rock Sdn Bhd, was the registered proprietor of two pieces of land which it charged to the respondent, Mayban Finance Berhad, standing as a third-party chargor for a revolving credit facility granted by the respondent to a borrower company. The borrower defaulted, and the respondent obtained an order for sale against the appellant's properties, though the order could not be effected because of numerous legal challenges mounted by the appellant, and the borrower was subsequently wound up. The issue on appeal was whether the fact that the Form 75 did not state the indebtedness of the borrower, and the contention that there was a surplus of money in the relevant account, meant that the chargor owed no liability to the bank. The Court of Appeal rejected that argument. It reasoned that once a borrower has been wound up, the appointed liquidator is the person best placed to know whether the company is indebted to any party claiming against it, so that the asserted surplus and the state of the borrower's indebtedness were not matters that displaced the chargor's liability on the facts. Finding that the trial judge had not erred in his findings of fact or in the application of the law, and that there was nothing plainly wrong in his decision to dismiss the appellant's case, the Court, in a unanimous decision, dismissed the appeal and ordered the appellant to pay costs of RM10,000.00 subject to allocatur, affirming the High Court's order. The decision illustrates the limited circumstances in which a third-party chargor can escape liability after an order for sale. The Court observed that the appellant's repeated challenges to the order for sale did not alter the underlying position, and that the chargor's obligations under the charge were not discharged by the asserted state of the borrower's account.