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IN THE HIGH COURT OF MALAYA AT KUALA LUMPUR
(COMMERCIAL DIVISION)
SUIT NO: D-25-3-2009
CITIBANK BERHAD
v.
TEOH SENG KIAN
GROUNDS OF JUDGMENT
FACTS OF THE CASE
By a Share Financing Agreement dated 4.2.2005 between the
Plaintiff and the Defendant, the Plaintiff granted a Share Financing
facility of RM5 million (‘the facility’) to the Defendant upon the terms
and conditions set out in that Agreement. The salient terms of the
facility are inter alia, as follows,
(i)
An interest rate of 4.5% per annum until 30.9.2005, and
from 1.10.2005 until 30.9.2006 the interest rate of 0%
above the Plaintiff’s BLR would apply, and thereafter an
interest rate of 1.25% above BLR.
(ii)
The Plaintiff can demand at any time the whole amount
due or owing or payable to the Plaintiff together with
interest, banker’s charges and commission.
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(iii)
The whole of the outstanding amount becomes due and
payable on demand upon the occurrence of an event of
default under the Share Financing Agreement.
The Defendant utilised the facility granted by the Plaintiff based on
the terms and conditions set forth on the Share Financing Agreement.
In or around May 2005 the Financing Ratio exceeded the ratio set
out in the section IV of the First schedule of the Share Financing
Agreement resulting in the occurrence of an Event of Default.
The Plaintiff sent a Notice of Demand demanding the payment of
RM201,541.71 being the outstanding amount owing as at 8.6.2005
exclusive of the accrued interest for the month of June 2005.
However the Defendant failed/refused to make payment of the sum
demanded. The Plaintiff claims against the Defendant as follows:a)
The principal sum of RM201,547.71 as at 8.6.2005;
b)
Interest on the aforesaid sum at the rate of 4.5% per
annum above the bank’s BLR from 1.6.2005 until
30.9.2005;
c)
Interest on the sums set out above at the rate of 0%
above BLR until 30.9.2006; and
d)
Interest on the sums set out on paragraphs (a), (b) and
(c) above at the rate of 1.25% above BLR from 1.6.2006
until full realization.
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The Defendant then claim and averred that the terms and conditions
of the Share Financing Agreement are not applicable and the
Defendant is not bound by the terms and conditions.
The Defendant contended that he had opened a trading account with
OSK Securities Bhd. and has pledged the shares through the bank
for the purposes of the facility. The Plaintiff knew that the Defendant
is the major shareholder of the 3 companies, i.e Meda Inc Berhad,
Kumpulan Emas Berhad and Salcon Berhad.
It is an implied term in the facility that the Plaintiff will give sufficient
notice before any force selling and will review the force sell notice
after the due date to decide whether to force sell. In the event, the
Plaintiff decided to force sell the Plaintiff will give further notice to
the Defendant in order to remedy the breach and to regularise the
account. Therefore it is the contention of the Defendant that the
Plaintiff is in breach of the Share Financing Agreement by not giving
sufficient notice before the force selling.
The Defendant contended that the as a result of the Plaintiff’s breach
and/or negligence the price of the relevant shares declined rapidly
and were not controllable and the price of the shares in Meda Inc and
Kumpulan Emas declined to a low value. The Defendant was forced
to sell his shares in Salcon Berhad and as a result incurred huge
losses exceeding RM250,000/-.
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The Defendant counterclaims against the Plaintiff:a)
The return of all the shares sold by the Plaintiff or
alternatively damages to be assessed;
b)
Interest at the rate of 8% per annum calculated from the
date of filing of the counterclaim;
c)
Cost; and
d)
Other further relief.
Findings and decision
Upon considering the evidence and submissions by both Parties,
I ruled for the Plaintiff and allowed its claim against the Defendant
with cost. I also dismissed the Defendant’s counterclaim against the
Plaintiff. I shall now give my reasons for so ordering.
In the Statement of Defence and his Witness Statement the
Defendant had admitted that he had entered into the Agreement with
the Plaintiff. In his Answer to Question 2 he said,
“ I have obtained a share financing facility with the Plaintiff
and I have signed the letter of offer dated 28.6.2004 with the
General terms and Conditions printed behind the letter of
offer.”.
He further said in evidence that he had pledged shares for the
purpose of the facility,
“ I have pledeged 7,200,000 shares in Kumpulan Emas Berhad
(now known as Ecofirst Consolidated); 3,500,00 shares in
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Meda Inc Berhad and 1,020,000 shares in Salcon Berhad…”.
Sometime in May 2005 the Financing Ratio exceeded the ratio set
out in section IV of the First Schedule, thereby resulting in an event of
default.
Section IV of the First Schedule reads as follows,
“Financing Ratio
Sixty percent (60%) of:a) The
prevailing
market
value; or
b) The price cap fixed by the
Bank;
of which
the securities
deposited with the Bank,
whichever
is
the
lower,
against the amount of the
Facility drawn down;
With
respect
to
the
securities of any company
in which the Borrower or
his/her parent or spouse or
child
is
a
director,
the
Financing ratio for such
company is fifty percent
(50%)”.
The term ‘Financing Ratio’ is defined in Section 2.01 of the
Agreement as “...the ratio in which the Indebtedness bears the value
of the Charged Assets…”.
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As explained by PW1 (Legal Manager of Citibank Berhad), in her
Witness Statement,
“ ..Simply put, it refers to the ratio between the indebtedness
(that is to say the total sum due and owing under facility) to
the value of shares that have been pledged as security for the
facility.”.
According to PW1 on 25.5.2005 the Defendant’s facility had a
financing ratio of 73.02% and on the 27.5.2005 the financing ratio
went up to 73.73%.
This led to the Plaintiff to issue a Margin Call dated 25.5.2005
informing the Defendant the facility was in excess of the weighted
financing ratio. The Defendant was required to regularize the account
within 3 days from the date of notice. The Notice also stipulated
that if the Financing ratio exceeds 20% above the weighted financing
ratio then the Plaintiff would have to force sell the pledged shares
regardless of the 3 days grace period.
The Defendant failed to regularise the account and the Plaintiff
commenced force selling on 27.5.2005.
It is the contention of the Defendant that the date of the agreement
does not correspond with the date as stated in the pleadings. The
Defendant does not deny signing the letter of offer and utilizing the
facility. In fact he admitted to this in his Witness Statement and also
when he gave evidence in open Court. PW1 explained that the date
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specified in the Statement of Claim was actually the date that the
document was signed. This was not challenged nor rebutted by the
Defendant. The Defendant also does not dispute the letter of offer.
The Defendant also admitted that it had signed the agreement.
Furthermore the letter of offer once issued shall be automatically
incorporated in the agreement and the amount of the facility and any
additional security shall be binding upon the Parties. This is provided
under Section 2.01 of the agreement under the definitions of “Letter
of Offer”.
This Court does not accept the Defendant‘s argument that because
of
the difference of the dates in the Statement of Claim the Plaintiff
cannot rely on the terms of conditions of the agreement. The
Statement of Defence shows that the Defendant did not deny signing
the Agreement or the existence of such an agreement between the
Parties.
The Defendant alleges that he was not given sufficient notice to
remedy the irregularity. However under the terms and conditions of
the Agreement the Plaintiff will only issue a request. Margin Call
Notice is defined as,
“…a notice in such form, manner and content as may be
prescribed by the Bank from time to time informing the
Borrower that a Margin Call has occurred and requesting the
Borrower to comply with the Financing Ratio within such time
as stipulated in the margin call Notice.”.
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The Defendant contended that an officer of the Bank had indicated
that the period will be adequate and reasonable. DW1 testified that
one Miss Yau Wen Yi had represented that the Defendant would be
given Margin Call Notice of not less than 5 trading days and as for
force selling 1 trading day notice would be given. However no witness
was called by the Defendant to support this contention nor was there
documentary evidence to substantiate it.
The terms and conditions agreed upon will prevail over any oral
evidence. Section 92 of the Evidence Act specifically excludes
evidence to contradict, vary, add to or subtract from any of the terms
of a contract in writing, except in any of the situations spelled out
in the proviso,
“ 92. Exclusion of evidence of oral agreement When the terms
of any such contract, grant or other disposition of property, or
any matter required by law to be reduced to the form of a
document, have been proved according to section 91, no
evidence of any oral agreement or statement shall be admitted
as between the parties to any such instrument or their
representatives in interest for the purpose of contradicting,
varying, adding to, or subtracting from its terms..”.
In Keng Huat Film Co. Sdn Bhd. v. Makhanlall (Properties) Pte.
Ltd. [1983] 1 CLJ 186 (Rep) Mohamed Azmi FJ said:
“ For the construction of a written agreement the established
doctrine is firstly to exclude evidence of negotiations leading
up to the contract on the ground that it is only the final
agreement which records a consensus and as such evidence
of negotiations is unhelpful; and secondly to exclude
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evidence of the parties' subjective intentions so that any
individual purpose which either of them hopes to achieve by
the agreement and their own interpretation and understanding
of the agreement is not admissible. As against this, evidence
of surrounding circumstances and factual background have
always been admissible.”.
Edgar Joseph Jr J in the his judgment of United Malayan Banking
Corp Bhd v. Tan Lian Keng & Ors [1989] 1 LNS 122,
“ .. the Evidence Act 1950, by s 91 excludes extrinsic evidence
being adduced of the terms of a document by providing that
no evidence may be given in proof thereof except the
document itself and by s 92 an interdict is imposed on the
admissibility of extrinsic evidence being adduced by the
parties thereto in variance or in contradiction or in addition or
in substraction of the terms of a document..”.
The Defendant contended that an officer of the Bank had indicated
that the period will be adequate and reasonable. However no witness
was called by the Defendant to support this contention nor was there
documentary evidence to substantiate it.
In the light of the above, it is my finding that the Share Financing
Agreement clearly defined the terms and obligation of the parties.
The Plaintiff has complied with the terms and conditions by giving the
request and notices as required to the Defendant.
Based on the reasons above as well as the oral and documentary
evidence, the Plaintiff has proved its case on a balance of
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probabilities and hence this claim is allowed with cost. With regards
to the counterclaim this court is of the view that the whole basis of
the claim is based on the Agreement, the Defendant did not give any
particulars of the breach by the Plaintiff. The Defendant adduced 6
documents. However the Defendant did not called the maker of the
documents to explain the contents. The reports tendered by the
Defendant merely reported that the market situation at the point of
time from the point of view of the reporter. The other documents
(D2-D4) are extracts of annual reports of the share counters involved.
The reports only give an analysis of the shareholdings. It did not
relate to the claim before the Court in particular to the Plaintiff or the
Defendant.
Therefore based on the evidence adduced the Defendant failed to
prove on the balance of probabilities its counter claim and therefore
the counterclaim is dismissed with cost. The total global cost awarded
is RM15,000/-.
sgd.
( HASNAH BINTI DATO’ MOHAMMED HASHIM )
Judicial Commissioner
High Court of Malaya
Kuala Lumpur.
18th October 2011
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Counsels:
For the Plaintiff/Respondent: [Messrs. Shearn Delamore & Co.].
For the Defendant/Appellant: [Messrs. SC Lim & Partners].