propertygandhi

Lawlessness in Foreclosure Procedures practised by some Malaysian Banks

In my previous Article (NST RED 24^th August 2012), I asked a question “How to Survive a Bank Foreclosure?” For a copy of the 24^th August 2012 Article please visit the NST Red website.

In that Article, I examined the 5 Defences available to Malaysian Housing Loan Borrowers (Chargors) when faced with foreclosure proceedings against them by Malaysian Banks. These 5 Defences include:-

Defence No. 1

Malaysian Banks are required to issue to and personally serve on the defaulting Housing Loan Borrower a “Default Notice” in Form 16D in compliance with Section 254 of the National Land Code 1965. Form 16D is a default notice to be issued when the loan granted by the bank to the defaulting borrower is repayable by monthly instalments over a period of time, like a housing loan repayable over a period of 30 years.

Defence No. 2

Malaysian Banks are not permitted to issue the defaulting Housing Loan Borrower a “Default Notice” in Form 16E issued under Section 255 of the National Land Code 1965. Form 16E is a default notice to be issued when the loan granted by the bank to the defaulting borrower is repayable on demand in one payment like an Overdraft granted to businesses.

Defence No. 3

The “Reserve Price” fixed by the Court for the purposes of the Sale of the foreclosed property by Public Auction should be its “Market Value” as stipulated in Section 257 (1) (d) of the National Land Code of 1965 as follows:-

“Every order for sale made by the Court under section 256 shall require the Registrar of the Court to fix a reserve price for the purpose of the sale, being a price equal to the estimated market value of the land or lease in question”

The definition of “Market Value” as adopted by the Board of Valuers, Appraisers and Estate Agents, Malaysia is as follows:

“Market value is the estimated amount for which an asset should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.”

Defence No. 4

After you have signed all the legal documents to “Charge” your property/house to the lending Bank and after the “Legal Charge” was registered by the Land Office in the name of the lending Bank and many years later the lending Bank “lost” the “Original Copy” of the title document, the lending Bank has no right and no authority to apply for a “Replacement Title”

Section 166 (2) of the National Land Code 1965 stipulated that the person or body to apply for replacement titles are as listed below:-

a)         The proprietor of the land in question

b)         Any person or body claiming through the proprietor

Defence No. 5

After the foreclosed property was sold at the public auction, the successful bidder/purchaser after having paid the 10% Deposit would be required to pay the balance 90% of the Purchase Price within the time period stipulated in the Proclamation of Sale issued by the Court. That period is usually 90 days from the date of the sale.

An application from the purchaser for an extension in time to settle the balance of the Purchase Price can only be granted by the Chargor (borrower). The lending Bank cannot on their own, unilaterally grant the Purchaser the extension of time they applied for.

Failure on the part of the lending Bank to obtain the Chargor’s (borrower’s) consent to grant the extension of time to pay the balance of the Purchase Price would render the Sale of the borrower’s property at the Public Auction void (has no legal effect and unenforceable) (refer to Supreme Court Judgment in M&J Frozen Food Sdn Bhd v Siland Sdn Bhd & Anor [1994] 1 MLJ 294 SC).

Lending Bank’s failure to comply

Should the lending Bank fail to comply with any or all of the above requirements that also represent the borrower’s defences, the Bank’s failure to comply may render the Sale of the borrower’s property at the Public Auction void (has no legal effect and unenforceable).

Not Level Playfield

Until now, with a few exceptions, when Malaysian Banks commenced with foreclosure proceedings against their borrowers, “the field is not level”. It is a slopping and slippery field for the borrowers.

Even when the Banks have a weak case and even when they do not comply with foreclosure procedures stipulated by Law, by the sheer weight and power of their money and their battery of high powered litigation lawyers, Malaysian Banks will invariably prevail and win against their hapless borrowers.

Lawless conduct of some Malaysian Banks

Even though there are Laws and Procedures that govern the actions and conduct of Malaysian       Banks when they foreclose the properties of their defaulting borrowers and when they subsequently sell these foreclosed properties through Public Auction Sale, some Malaysian Banks are acting and conducting themselves as though these Laws and Procedures do not exist very much like the Cowboys of the American Wild West in the 1800s.

Exaggerations and Unsubstantiated Allegations?

To substantiate and support my assertions that some Malaysian Banks are acting and conducting themselves as though there are no Laws and No Procedures governing their conduct when they foreclose and sell by public auction their defaulting borrowers’ properties and behaving very much like the Cowboys of the American Wild West in the 1800s, I will undertake three (3) Case Studies of real experiences of actual Bank Borrowers who were victims of these “Lawless Conduct” of some Malaysian Banks.

Protection of Privacy

To protect the privacy of the Malaysian Banks and their Borrowers cited in these Case Studies, we have changed and disguised their respective names and identities and renamed the location of the properties involved. Except for these privacy issues, all the events and incidences stated in this Article are true and they did in fact happen.

Case Study No 1

Let us call the Borrowers Mr & Mrs Nathan.

In October 2004, Mr & Mrs Nathan purchased a single storey terrace house somewhere in Selangor at a Purchase Price of RM200,000 (Ringgit Malaysia Two Hundred Thousand) from the Developer, Most Reliable Development Company Sdn Bhd.

To part pay for the RM200,000 Purchase Price, Mr & Mrs Nathan applied for and obtained a RM160,000 (Ringgit Malaysia One Hundred and Sixty Thousand) Housing Loan from a Malaysian Bank, Most Sympathetic Bank Berhad.

At the time Mr & Mrs Nathan purchased the single storey terrace house, there was no Individual Title Document issued for the property. To secure the repayment by Mr & Mrs Nathan of the RM160,000 Housing Loan granted to them by Most Sympathetic Bank Berhad, Mr & Mrs Nathan signed a Loan Agreement Cum Assignment with Most Sympathetic Bank Berhad.

With the Loan Agreement Cum Assignment signed by Mr & Mrs Nathan giving Most Sympathetic Bank Berhad a Legal Assignment over their terrace house, should Mr & Mrs Nathan fail to honour their obligations and faithfully pay their monthly Housing Loan Instalments, Most Sympathetic Bank Berhad would have the right to sell Mr & Mrs Nathan’s terrace house through Public Auction Sale without having to obtain an Order for Sale from the High Court for as long as Mr & Mrs Nathan’s terrace house has still not been issued with an Individual Title Document (refer to Federal Court Judgment in Phileoallied Bank (M) Bhd v Bupinder Singh A/L Avatrar Singh & Another (2002 2 MLJ 513).

Sometime in 2012, the Developer, Most Reliable Development Company Sdn Bhd wrote to Most Sympathetic Bank Berhad’s Lawyers to inform them that the Individual Title Document for the terrace house has been issued.

In spite of being notified that the Individual Title Document for the terrace house has been issued, Most Sympathetic Bank Berhad did not instruct their Lawyers to make arrangements to transfer and to register the Individual Title Document for the terrace house in the names of Mr & Mrs Nathan and at the same time to register their Charge in the Title Document for the terrace house.

Consequently in April 2013, Most Sympathetic Bank Berhad appointed an Auctioneer to issue a Proclamation of Sale and proceeded to sell Mr & Mrs Nathan terrace house without applying for and without obtaining an Order for Sale from the High Court even though the Individual Title Document for the terrace house has been issued.

Violation of Federal Court Judgment

Most Sympathetic Bank Berhad’s actions clearly contravened the Federal Court Judgment in Phileoallied Bank (M) Bhd v Bupinder Singh A/L Avatrar Singh & Another that only permitted the foreclosure and public auction sale of the foreclosed property without applying for and obtaining an Order for Sale from the High Court when the Individual Title Document for the property has already been issued and Most Sympathetic Bank Berhad through their Lawyers have been notified.

Unlawful Extension of Time to Pay

When it came time for the Purchaser to pay the balance 90% of the Purchase Price, he could not pay and applied to Most Sympathetic Bank Berhad for an extension in time to pay. Without obtaining the consent of Mr & Mrs Nathan, Most Sympathetic Bank Berhad unilaterally and acting on their own (flawed) authority granted the Purchaser time extension to pay the balance 90% of the Purchase Price.

Violation of Supreme Court Judgment

Most Sympathetic Bank Berhad’s actions clearly contravened the Supreme Court Judgment in M&J Frozen Food Sdn Bhd v Siland Sdn Bhd & Anor [1994] 1 MLJ 294 SC) that an application from the purchaser for an extension in time to settle the balance of the Purchase Price can only be granted by the Chargor (borrower). The lending Bank cannot on their own, unilaterally grant the Purchaser the extension of time they applied for.

Case Study No 2

Let us call the Borrower Miss Natalia.

In January 2007, Miss Natalia purchased a Condominium Unit somewhere in Selangor at a Purchase Price of RM300,000 (Ringgit Malaysia Three Hundred Thousand) from the Developer, Most Trustworthy Development Company Sdn Bhd.

To part pay for the RM300,000 Purchase Price, Miss Natalia applied for and obtained a RM270,000 (Ringgit Malaysia Two Hundred and Seventy Thousand) Housing Loan from a Malaysian Bank, Most Compassionate Bank Berhad.

At the time when Miss Natalia purchased the Condominium Unit, there was no Individual Strata Title Document issued for the property. To secure the repayment by Miss Natalia of the RM270,000 Housing Loan granted to her by Most Compassionate Bank Berhad, Miss Natalia signed a Loan Agreement Cum Assignment with Most Compassionate Bank Berhad.

With the Loan Agreement Cum Assignment signed by Miss Natalia giving Most Compassionate Bank Berhad a Legal Assignment over her Condominium Unit, should Miss Natalia fail to honour her obligations and faithfully pay her monthly Housing Loan Instalments, Most Compassionate Bank Berhad would have the right to sell Miss Natalia’s Condominium Unit through Public Auction Sale without having to obtain an Order for Sale from the High Court for as long as Miss Natalia’s Condominium Unit has still not been issued with an Individual Strata Title Document (refer to Federal Court Judgment in Phileoallied Bank (M) Bhd v Bupinder Singh A/L Avatrar Singh & Another (2002 2 MLJ 513).

Sometime in 2012, the Developer, Most Trustworthy Development Company Sdn Bhd wrote to Miss Natalia to inform her that the Individual Strata Title Document for the Condominium Unit has been issued.

A copy of the Developer, Most Trustworthy Development Company Sdn Bhd’s letter to Miss Natalia was SENT TO the Lender, Most Compassionate Bank Berhad. By this copy of the letter from the Developer, Most Trustworthy Development Company Sdn Bhd, the Lender, Most Compassionate Bank Berhad HAD NOTICE  that Individual Strata Title Document for the Condominium Unit has been issued.

In spite of being notified that the Individual Strata Title Document for the Condominium Unit has been issued, Most Compassionate Bank Berhad did not instruct their Lawyers to make arrangements to transfer and to register the Individual Title Document for the Condominium Unit in the name of Miss Natalia and at the same time to register their Charge in the Title Document for the Condominium Unit.

Consequently in July 2013, Most Compassionate Bank Berhad appointed an Auctioneer to issue a Proclamation of Sale and proceeded to sell Miss Natalia’s Condominium Unit without applying for and without obtaining an Order for Sale from the High Court even though the Individual Strata Title Document for the Condominium Unit has been issued.

Violation of Federal Court Judgment

Most Compassionate Bank Berhad’s actions clearly contravened the Federal Court Judgment in Phileoallied Bank (M) Bhd v Bupinder Singh A/L Avatrar Singh & Another that only permitted the foreclosure and public auction sale of the foreclosed property without applying for and without obtaining an Order for Sale from the High Court when the Individual Strata Title Document for the property has not been issued.

Case Study No 3

Let us call the Borrower, the Late Mr. Tan.

In May 1989, the Late Mr. Tan purchased a 2 storey shophouse somewhere in Selangor. It is unclear what the Late Mr. Tan paid for the 2 storey shophouse.

However, we have records that to part pay for the Purchase Price of the 2 storey shophouse, the Late Mr. Tan borrowed RM80,000 from a Malaysian Bank, Most Understanding Bank Berhad.

The Late Mr. Tan in November 1990 charged the Title Document for the 2 storey shophouse to Most Understanding Bank Berhad as Security for the RM80,000 Loan.

The Late Mr. Tan DIED in October 1991WITHOUT a Will.

In August 1995, Administrators were appointed for the Estate of the Late Mr. Tan. The Pemberian Suratkuasa Pentadbiran Di Bawah Seksyen 13 of the Akta Harta Pesaka Kecil (Pembahagian) 1955 was also filed with the Selangor State Authorities.

In August 1997, without prior notice given to the Administrators, the 2 storey shophouse was sold by Public Auction on the Application of Most Understanding Bank Berhad at a Sale Price of RM400,000.

Prior to the Public Auction Sale the Estate of the Last Mr. Tan was not notified in accordance with the Provisions stipulated in Section 254 of the National Land Code 1965.

After the 2 storey shophouse was sold by Public Auction in August 1997, the Administrators of the Estate of the Late Mr. Tan confronted Officers of the Most Understanding Bank Berhad to ask for the balance of the proceeds from the Auction Sale to be paid to the Estate of the Late Mr. Tan after paying the Most Understanding Bank Berhad the outstanding loan amount.

Officers of the Most Understanding Bank Berhad asked the Administrators of the Estate of the Late Mr. Tan to deal with their Lawyers.

The Lawyers for the Most Understanding Bank Berhad produced a Voucher of their Firm that purportedly showed that the balance of the proceeds from the Public Auction Sale amounting to RM240,000 was paid to a Law Firm that the Lawyers for the Most Understanding Bank Berhad claimed was the Lawyers acting for the Estate of the Late Mr. Tan.

The Administrators of the Estate of the Late Mr. Tan then requested the Lawyers for the Most Understanding Bank Berhad to produce the Appointment Letter issued by the Estate of the Late Mr. Tan as evidence that this purported Law Firm was actually appointed to represent the Estate of the Late Mr. Tan and are authorised to accept the RM240,000 balance of the proceeds from the Auction Sale.  

The Lawyers for the Most Understanding Bank Berhad could not produce the Appointment Letter.

Recently, the Administrators of the Estate of the Late Mr. Tan wrote to the Most Understanding Bank Berhad to ask for the balance of the proceeds from the Auction Sale to be paid to the Estate of the Late Mr. Tan.

Later Officers from the Most Understanding Bank Berhad contacted the Administrators of the Estate of the Late Mr. Tan and a meeting was arranged for the Parties to meet in early 2013. Unfortunately this meeting was cancelled by Officers of the Most Understanding Bank Berhad before it happened.

That was the last time the Administrators of the Estate of the Late Mr. Tan heard from Officers of the Most Understanding Bank Berhad.

The collective actions of the Lawyers and Officers of Most Understanding Bank Berhad as detailed above needed to be examined and investigated for possible fraud, misappropriation of funds and fraudulent activities.

Tip of the Iceberg

The incidences cited in the above 3 Case Studies and the experiences of the victims are just the tip of the iceberg.

To give justice to Malaysians who are victimised and even defrauded by lawless Employees and Officers of Malaysian Banks and dishonest Lawyers, Law Enforcement and Regulatory Authorities in Malaysia including Bank Negara Malaysia, the Malaysian Bar Council and Malaysian Police need to look into and investigate unlawful activities within the Malaysian Banking System so that confidence and trust in the Malaysian Banking System can be restored after ALL the bad apples are removed.