MAYBANK ISLAMIC BERHAD v 1. ) NG CHEE KAE 2. ) NG LOCK SENG

Case Significance

Illustrates how an order for sale is obtained under section 256 of the National Land Code against third-party chargors, and the confined meaning of 'cause to the contrary', which does not require a chargee to exhaust its remedies against the principal borrower before enforcing the security.

This High Court decision at Johor Bahru, delivered by Noor Hisham bin Ismail J, concerns an application by Maybank Islamic Berhad for an order for sale to enforce a charge under seksyen 256 Kanun Tanah Negara (section 256 of the National Land Code) and Aturan 83 Kaedah-Kaedah Mahkamah 2012 (Order 83 of the Rules of Court 2012). The bank had granted a Commodity Murabahah Term Financing-i facility of RM1,000,000 to a borrower company, Travelers Tours Malaysia Sdn Bhd, and that facility was secured by a third-party charge created by the two individual defendants in the bank's favour over their land in the Pulai district of Johor Bahru. When the facility fell into default, the bank served a demand and a statutory notice in Form 16D and applied for an order for sale of the charged land.

The defendants resisted the order for sale, but the Court measured their objections against the settled principle, drawn from Low Lee Lian v Ban Hin Lee Bank Berhad, that a chargor can defeat an application for an order for sale only by showing "cause to the contrary". A recurring argument in third-party charge cases — that the chargee must first exhaust its civil remedies against the borrower, or cannot proceed simultaneously against the borrower and the third-party chargors for the same debt — was held not to constitute cause to the contrary, particularly where the charge instrument expressly preserved the bank's freedom to pursue foreclosure. The Court noted that this freedom was specifically stated in section 2.05 of the charge annexure exhibited in the bank's supporting affidavit.

The Court was satisfied that the cause papers were in order on the bank's part and that the defendants had failed to show any cause to the contrary capable of defeating the foreclosure action. It accordingly allowed the application in the terms sought, with costs of RM3,000 subject to allocatur. The judgment is a useful illustration of how an order for sale is obtained under section 256 of the National Land Code against third-party chargors, and of the confined meaning of "cause to the contrary" — which does not require a chargee to exhaust its remedies against the principal borrower before enforcing the security.