TUTORIAL 4 (Adapted from CLP 2008)

Question 1

Premium Bank Bhd.(PBB) had granted an overdraft of RM900,000/- and other banking
facilities to ABSB upon the security of a Third party Charge created in their favour by
registered proprietor ABC. ABSB had informed PBB that it wished to continuously reduce its
overdraft and so made 2 payments of RM100,000/- each whereupon the overdraft was reduced
to RM700,000/-. Later a third payment of RM250,000/- was paid without any further
instructions. ABSB then defaulted in further payments and the account was overdrawn by
RM680,000/-

PBB applied to Court for an order for sale to recover the sum of RM680,000/- ABC objected
that it would be inequitable as PBB had failed to utilize the RM250,000/- to reduce the
overdraft to RM450,000/-

The Judge applied the principle in Low Lee Lian v Ban Hin Lee Bank Bhd.[1997] and refused
to grant the Order of Sale.

You are required to:-

(i) give the procedure for the application for Order of Sale by PBB
(ii) advise PBB on the viability of the appeal.

Question 2 (Adapted from CLP 2008)

Popular Bank Bhd. (PBB) granted GLH a housing loan of RM200,000/- secured by a charge
over the land held under a Land Office Title. GLH defaulted on the loan repayment and PBB
served a Form 16D notice. Thereafter PBB applied to the Land Administrator (LA) for an Order
of Sale under s260NLC. The LA granted the Order of Sale (!st.Order of Sale). After 2
unsuccessful public auctions the LA withdrew the land from sale and issued a certificate of
reference to the High Court under s. 265(3)(b) NLC. Meanwhile GLH made part payments
which were accepted by PBB towards reducing the amount outstanding. PBB then applied to
the High Court for a substitute order of sale in the presence of GLH who did not object to this
2nd. Order of Sale. Subsequently however GLH applied to to set aside the 2nd. Order of Sale.
The High Court dismissed the application.

GLH now approaches you to appeal on the grounds that:-

(i) PBB did not comply with s.265(3) NLC
(ii) The Judge erred in law and in fact in ruling that he was functus officio when
deciding on the application
(iii) PBB had breached s.266 NLC with the compromise and acceptance of payments
after the 1st. Order of Sale.

Advise GLH.

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Question 3 (Adapted from CLP July 2010)

Bina Cepat S/B (Vendor) was the developer of an exclusive housing project known as
Heavenly Homes which was to consist of 15 units of individually designed houses to be built
on a 3 acre piece of land owned by it. All 15 units were sold upon launching and standard
SPA’s were executed with the buyers.

Each SPA contained a provision that the Vendor could subject the land to encumbrances
provided that upon delivery of vacant possession in 24 months, it would be free of
encumbrances.

The Vendor took a loan of RM 1 million from Wangsenang Bank Bhd.(WBB) to finance the
project. As security for the loan the land was charged to WBB. According to the loan agreement
WBB would release an initial sum of RM200,000/- to the Vendor upon registration of the
charge and the balance would be released progressively according to the Architect’s Certificate
of Completion. It was also a term that interest was to be paid on all amounts released by WBB.
The charge was duly registered and the initial sum of RM200,000/- was released to the Vendor.
However, Vendor ran into financial difficulties and was unable to service the interest.
Nevertheless, Vendor managed to complete the progressive construction of the project and
tendered its Architect’s certificate for payment. However WBB refused to release further
monies unless the interest was paid.

Consequently, the project was stalled. WBB meanwhile applied to court for sale of the land on
the basis of the charge held by it. The Purchasers are naturally anxious and seek your advice.

Advise the Vendor and the Purchasers the application for sale by WBB could be resisted.