Chapter 13 - Charge Actions, O.83 Flashcards
CHARGE ACTIONS
Overview
1) General principles on charge actions
2) Enforcement of charge
3) Procedures to apply OFS via charge action
4) Issues on charge actions procedures
5) Hearing of charge actions
6) Setting-aside OFS obtained by way of charge action
7) Appeal against OFS obtained by way of charge action
GENERAL PRINCIPLES ON CHARGE ACTIONS
Overview
1) The law & scope
2) Distinction with O.31
3) Meaning of charge
4) Meaning of foreclosure
5) Foreclosure in redemption action
GENERAL PRINCIPLES ON CHARGE ACTIONS
The law & scope
1) The law:
- O.83
2) SCOPE:
- O.83 includes a legal and equitable charge, on Registry Title under S.256 NLC.
3) OBJECT:
- Object of O.83 is to identify clearly the facts relating to liability and quantum under the charge.
4 NATURE OF PROCEEDINGS:
- The procedure is meant to be speedy & summary in nature;
- court is just concerned whether appropriate notice has been given & procedural requirements under O.83 have been complied with.
GENERAL PRINCIPLES ON CHARGE ACTIONS
Distinction between O.83 & O.31
Pancaran Nilam (M) Sdn Bhd v Malayan Banking Bhd:
- the distinction between O.83 and O.31 is that under O.83, the chargee must claim possession first before seeking to obtain an order for sale.
- A lender who has a charge, including an equitable charge must adopt the procedure laid down by O.83 if he wishes to enforce his security.
GENERAL PRINCIPLES ON CHARGE ACTIONS
Meaning of charge
Sime Bank Bhd v Mohd Hassan bin Sulaiman:
- Charge includes legal & equitable charge: O.83, r.1(2)
GENERAL PRINCIPLES ON CHARGE ACTIONS
Meaning of foreclosure
1) Citibank NA v Ibrahim bin Othman:
- the steps taken for the sale of the mortgaged property by a court order or by a power of sale contained in the mortgage so that proceeds of the sale can be sued to pay off debts of the borrower / mortgagee
2) Kandiah Peter v Public Bank Bhd:
- As the NLC does not provide for foreclosure, the chargee makes an application under O.83 to the court for sale of the land.
GENERAL PRINCIPLES ON CHARGE ACTIONS
Foreclosure in redemption action
O.83 r.5:
- Mode:
- Order:
- Court:
CHARGE ACTIONS
Procedures to apply for OFS via charge actions by way of OS
O.83, r.2
O.83, r.3
CHARGE ACTIONS
Procedures to apply for OFS via charge actions by way of writ
O.83, r.4
ISSUES ON CHARGE ACTIONS PROCEDURES
Limitation
1) Limitation:
- S.21(1): 12 years
2) CIMB Bank Bhd v Sivadevi Sivalingam (FC, 2020):
- Default in repayment of loan does not make ‘the right to receive the money accrued’ for the chargee to initiate an action in court for order for sale.
- The chargee must serve on the chargor a notice in Form 16D specifying the breach in question, requiring the chargor to remedy the breach within one month from the date of service of the notice, and warning the chargor that if the notice is not complied with, the chargee will take proceedings to obtain an order for sale.
- Only if, at the expiry of the period specified in the notice in Form 16D, the breach in question has not been remedied, then the ‘whole sum secured by the charge shall become due and payable to the chargee’ & in such a case, limitation period of 12 years will begin to run.
- It is on this date that ‘the right to receive the money accrued’ and the cause of action arises for an action pertaining to order for sale.
- Therefore, even if the Form 16D is issued after the period of 12 years, any Originating Summons filed by the chargee thereafter will not be barred by limitation under s. 21(1) of the Limitation Act.
ISSUES ON CHARGE ACTIONS PROCEDURES
Computation of time
1) The law;
- O.83, r.2(2)
2) Computation - Sivahadatcham a/l Sethuram V. Vandayar v CIMB Bank Bhd (2019):
- For the purpose of reckoning the ‘four clear days ’under O.83, r.2(2) of the ROC, Saturdays and Sundays had to be mandatorily excluded.
- When it is included, the order for sale will be irregular and have to be set aside ex debito justitiae.
ISSUES ON CHARGE ACTIONS PROCEDURES
Notice of hearing
1) The law:
- O.83, r.2(3)
2) Example - Asia Commercial Finance (M) Bhd v Kimden Housing Development:
- OTF, there was no endorsement of a notice of hearing on the outside fold of the copy of the affidavit served on the defendants, as required by O. 83 r. 2(3).
- Court held that the order for sale should be set aside since there was non-compliance of a number of rules that are fundamental and of essence to the whole proceeding relating to foreclosure.
ISSUES ON CHARGE ACTIONS PROCEDURES
Adjournment of hearing
1) The law:
- O.83, r.2(4)
2) Obligation & sufficient service of notice - Muniandy Thamba Kaundan v D&C Commercial Bank Bhd:
- O.83, r.2(4) is a statutory enunciation of the fundamental rule of natural justice as expressed in the Latin maxim audi alteram partem (hear the other side);
- “sending” a notice is a far cry from “serving” a notice.
there must be a sufficient proof of posting to effect the service. - ‘serving’ of the notice under r.2(4) requires more than simply sending the notice by post.
ISSUES ON CHARGE ACTIONS PROCEDURES
Affidavit
1) The law:
- O.83, r.3
2) Compliance with affidavit requirements - Perwira Habib Bank Bhd v Lum Choon Realty:
MAJORITY:
- Failure to comply with the requirements of the rule will render the order granted defective & liable to be set aside.
DISSENTING:
- When the order is made, the order shall state the amount due as on the date the order is made.
- Failure to comply with the rule does not render the OFS defective.
- OTF, it is held that a filure to quantify & comply with the requirements of the rule in an application for an order for sale will render any order granted defective and liable to be set aside.
3) Remedy for failure to comply with affidavit requirements - OCBC Bank (M) Sdn Bhd v CTK Enterprise Sdn Bhd: - where there is non-compliance with the provisions of the rule, a subsequent affidavit may be filed which will remedy the defect.
HEARING OF CHARGE ACTION
Duty of chargor
1) Show cause - Low Lee Lian v Ban Hin Lee Bank:
- To show cause to the contrary, chargor by:
(i) Showing that the charge is defeasible due to one of the grounds under S.340(2) & (4)(b);
(ii) Show that the chargee has failed to meet the conditions precedent for the making of an application for an order for sale, such as failure to make a demand or service of a notice in Form 16D, or that the notice demands sums not lawfully due from the charge;
* example: Co-operative Central Bank v Meng Kuang Properties [1991] 2 CLJ 1144, the court submit that there was a cause to contrary when the notice of demand and form 16D were invalid as they did not disclose the correct amount of money and interest to be claimed.
(iii) Show that the grant OFS would be contrary to the rule of law or equity.
* example: Kuching Plaza Sdn Bhd v Bank Bumiputra Malaysia Bhd [1991] 3 MLJ 163, the application for Order of Sale was set aside by the court as it was against rule of equity because if the Order of Sale was granted, it would cause the unfairness to the other parties who had interest on the land.
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2) CTC in collateral proceedings - CIMB Investment Bank Bhd v Metroplex Holdings Sdn Bhd:
- Unless the order is a nullity in Baddiadin sense, CTC could not be raised in collateral proceedings;
- Issue relating to CTC could only be raised in charge action;
- An OFS, unless set aside or appeal against, is a final order.
