QUESTION 3

Ms. Cute obtained a loan from Bank Kaya Berhad and as security it created a
third-party legal charge over a double storey terrace house located in Batu Berendam,
Melaka. All the charge documentations were duly prepared by Bank Kaya Berhad’s
solicitor, Ms. Sweetie. Ms. Sweetie then instructed her legal clerk to proceed to
present the charge for registration at the land registry.
However, Sweetie’s legal clerk, Mr. Mimpi had used up part of the
registration fee to pay for his personal loan thus he forwarded the fake presentation
statement from the land registry to Bank Kaya Berhad in order for them to release the
loan sum. Consequently, the land registry rejected the submission for the registration
of charge on the ground that insufficient registration fee was tendered for the
registration. Mr. Mimpi also hid the rejected loan documentation in his drawer and
told Sweetie that the documentation was still pending registration by the land registry.
Due to her busy schedule, Ms. Sweetie did not take the initiative to check the status of
registration via e-portal of the land registry. Meanwhile, Bank Kaya Berhad had duly
released the full loan sum to Ms. Cute based on the letter of advice to release the loan
sum signed by Ms. Sweetie.
Few months later, Mr. Mimpi resigned from Sweetie's legal firm. After two
years, Ms. Sweetie receives a phone call from Bank Kaya Berhad asking for the duly
registered original title and certified true copy of the duplicate charge documents as
Ms. Cute had defaulted in the loan and the bank intends to commence legal action to
recover the loan. Upon checking her file and searching the office, Ms. Sweetie was
shock and discovered the charge documents, unregistered and hidden in the drawer of
the old clerk, namely Mr. Mimpi. Ms. Sweetie informed Bank Kaya Berhad about
what had happened and that the charge has not been registered. Ms. Sweetie tried to
contact Mr. Mimpi but unable to reach him.
Advise Bank Kaya Berhad on its rights and what can be done to protect its
interest on the said agricultural land. Discuss the liabilities of Ms. Sweetie too.

Answer:
The first issue in this question is whether Bank Kaya Berhad, as the chargee,
has the right to redeem the loan sum.
As for the authorities, the case of Malayan Banking Bhd v Zahari bin Ahmad
is applicable where in this case the creation of equitable charges by virtue of a loan
agreement and an assignment which is not absolute was allowed. The bank was an
equitable chargee due to the fact that there was no issuance of document of title in
respect of the said property. The Court then held that the equitable chargee has the
right to sell the property by way of application for sale under Order 83 of the Rules of
Court 1980. Besides that, in the case of Chuah Eng Khong v Malayan Banking Bhd, it
was held that the loan agreement would still amount to an equitable mortgage because
the assignment of the right, title and interest in the land was expressly or obviously for
the purpose of securing the loan given to the borrower to purchase the land.
In applying the case of Malayan Banking Bhd, the creation of equitable
charges by virtue of a loan agreement is allowed. In the current matter, Ms Cute had a
loan agreement to charge the property with Bank Kaya Berhad. Although the said
property was not registered, but as an equitable charge, the chargor has the right to
sell the property by way of application for sale under Order 83 of the Rules of Court.
Aside from that, when applying the case of Chuah Eng Khong, although the
agreement may not contain the term ‘mortgage’ the loan agreement would still
amount to an equitable charge which can be seen in the previous case as the borrower
has assigned to the lender all his rights, title and interest of said property by way of
security for the loan borrowed. Thus, the lender is entitled to claim the entire loan
sum in the event of a default.
In conclusion, Bank Kaya Berhad, as the chargee, has the right to redeem the
loan sum.

The second issue is whether Bank Kaya Berhad’s solicitor, Miss Sweetie, had
breached the duty of care owed to Bank Kaya Berhad.
As for the laws, Section 88(1) of the Legal Profession Act states that the Bar
Council may if it has reasonable cause to believe that an advocate and solicitor, or a
clerk or servant of an advocate and solicitor, has been guilty of dishonesty in
connection with that advocate and solicitor’s practice as an advocate and solicitor or
in connection with any trust of which that advocate and solicitor is a trustee, issue a
certificate to that effect and thereupon the Schedule, except paragraph 7 thereof, shall
apply in relation to that advocate and solicitor. The High Court held in the case of
Mulpha Kluang Maritime Carriers Sdn Bhd v Philip Koh Tong Ngee & Ors that “It is
a duty of a solicitor to ensure that all the documents pertaining to the transaction of
land must be properly prepared, to carry out a thorough inquiry and to ensure that all
the details which are stated in the transaction documents is correct.In the present case,
as a solicitor, the defendants owed the plaintiff a duty of care to exercise professional
skill, care and diligence demanded by law in advising all legal aspect with regard to
the transactions in handling the sale and purchase of the two lots.”
In accordance to Section 88(1) of the Legal Profession Act, Ms. Sweetie’s
legal clerk, Mr. Mimpi, had used up part of the registration fee to pay for his personal
loan and forwarded the fake presentation statement from the land registry to Bank
Kaya Berhad. Besides that, he had also hid the rejected loan documentation in his
drawer and told Sweetie that the documentation was still pending registration by the
land registry. By applying the case of Mulpha Kluang Maritime Carriers Sdn Bhd v
Philip Koh Tong Ngee & Ors to the argument in question, Ms. Sweetie had failed to
take an initiative to check the status of the registration via e-portal of the land registry
and without thorough checking, she had signed the letter of advice to release the loan
sum. Bank Kaya Berhad had duly released the full loan sum to Ms Cute based on the
said letter. Hence, she owed Bank Kaya Berhad a duty of care to exercise professional
skill, care and diligence demanded by law.
In conclusion, with regards to the aforementioned reasons, Miss Sweetie had
breached the duty of care owed to Bank Kaya Berhad.