Meltdown of Shopping Malls in Malaysia

Has It Begun?

In my Article published in this Newspaper on 25-02-2018, I examined the evidences and concluded that the “Crash of the Malaysian Property Market has begun”.

In this Article I will examine the Shopping Mall Industry in Malaysia and in particular in the Klang Valley with the view to find an answer to the question:-

“Meltdown of Shopping Malls in Malaysia, has it begun?

Supply of Retail (Shopping Mall) Spaces in the Klang Valley – Prior to 2018

Our journey of discovery starts with an examination of the “supply of retail (shopping mall) spaces in the Klang Valley, prior to 2018”

1.00     On 1^st November 2011, Allan Soo of Richard Ellis was quoted by the Star Online as stating as follows:-

i)          The Klang Valley would overtake Singapore in terms of retail space per capita

ii)         As of the third quarter of 2011, total retail space supply in the Klang Valley was 43.7 million sq ft housed in 133 shopping centres and hypermarkets which was equivalent to 7.1 sq ft per capita (based on population of 6.1 million)

iii)         This is higher than Bangkok, Thailand which stands at about 6.5 sq ft per capita, and equivalent to Singapore.

                    

iv)        By 2014, the Klang Valley would have 53 million sq ft of retail space housed in 149 malls and hypermarkets

v)         Only about 43 shopping centres and hypermarkets out of the existing 133 (or 30%) were performing well as at November 2011.

2.00     On 11^th August 2012, the Star Online reported as follows:-

vi)        A BIG pipeline of commercial properties in and around the city centre itching to be launched over the next decade or so is stoking concerns by the day

vii)        Close to half of the TRX real estate project will comprise office buildings. The project comes along at a time when many other mammoth commercial projects such as the re-development of the 926 hectares Rubber Research Institute (RRI) Malaysia land in Sungai Buloh and Permodalan Nasional Berhad’s proposed 100     storey Menara Warisan Merdeka are poised to take off

           

3.00     On 11^th August 2012, Lim Eng Chong of Henry Butcher Malaysia was quoted by the Star Online as stating as follows:-

viii)       As it is now, there is already an oversupply of commercial properties in and around the city centre”

4.00     On 11^th August 2012, James Wong of VPC was quoted by the Star Online as stating as follows:-

ix)        The take-up rate for commercial buildings which are being built and will be completed this year stands at below 50%”

x)         This is for commercial properties in and around the city, but the same scenario exists further away from KL, such as in Cyberjaya; there is already an oversupply situation

Conclusion of Malaysian Property Consultants on the Supply of Retail (Shopping Mall) Spaces in the Klang Valley as at August 2012_______________________________________ 

It appears that Corporate Malaysia is BULLISH on the Development of Commercial Properties in the Klang Valley into the 2020s.

Malaysian Property Consultants are almost unanimous in their interpretation of the situation involving the Supply of Retail (Shopping Mall) Spaces in Malaysia, and in particular the Klang Valley.

Malaysian Property Consultants conclude that:-

“There is an oversupply of Commercial properties including Office and Retail (Shopping Mall) spaces in Malaysia and especially in the Klang Valley”

                                            

Supply of Retail (Shopping Mall) Spaces in the Klang Valley – in March 2018

In 2018 what is the situation with the “supply of retail (shopping mall) spaces in the Klang Valley in March 2018”

American Billionaire Investor Warren Buffet's advice on investment:

"When others are bullish, we should be fearful”.

“When others are fearful, we should be bullish"     

Did Corporate Malaysia take heed of Warren Buffet's advice on their Development of Commercial Properties in the Klang Valley since 2012?

We shall examine a report published by Malay Mail Online on 14^th March 2018 with the headline:-

“Malls facing meltdown as glut continues”

In the report published on 14^th March 2018, Malay Mail stated that, and I quote:-

“True occupancy rates in Klang Valley malls may be as low as 40% in some areas according to a Financial Times (FT) article cataloguing the country’s continued obsessions with building more shopping space despite chronic oversupply”

“On the ground evidence also suggests that mall operators are still struggling”

“The FT said 18.3 per cent of respondents in its survey of 1,000 shoppers in the Klang Valley said they planned to make fewer trips to shopping malls in the next 12 months.

“The FT said 22.2 per cent of respondents in its survey of 1,000 shoppers in Kuala Lumpur said they planned to make fewer trips to shopping malls in the next 12 months.

“Data from the National Property Information Centre (NAPIC) show that in 2018 another 15% new spaces will be added to existing mall spaces”

Malaysian families do not have enough money to spend

The decline in occupancy rates in Shopping Malls in the Klang Valley, in addition to Corporate Malaysia’s BULLISH attitude towards the Development of Commercial Properties in the Klang Valley into the 2020s, may also be attributed to the fact that Malaysian families do not have enough money to spend due to inflation and rising cost of living per the finding of Ameer Ali Mydin of Mydin Hypermarket Chain.

Finding of Ameer Ali Mydin of Mydin Hypermarket Chain

The Malaysian Insight on 5^th February 2018 highlighted the plight of Malaysian families with the headline:-

“Despite growing economy, people just don’t have enough money”

In the report published on 5^th February 2018, Ameer Ali Mydin of Mydin Hypermarket Chain was quoted by The Malaysian Insight as having said, and I quote:-

“The average consumer is unable to meet the rising cost of goods even as the country reports high economic growth”

“I think people just don’t have money”.

“The slump in growth for hypermarkets, due to low sales, occurred at prices of more than 100 common foods that shot up by 14% to 15% in the past 5 years”

“On individual items the prices increases are scary. For instance, cabbage from Cameron Highlands has gone up by a total of 29% over the last five years”

“Ikan kembung hitam (Indian mackerel) by 19%, Maggi brand Chilli Sauce by 38.8% and Ayam brand sardines by 30.6%”

If my prices go up, I’m sure my competitors’ prices would also go up. We are a market leader, our prices go up when our costs go up”

                     

“The rising price of goods have impacted sales at all hypermarkets that accounted for 50% of all groceries sold in Malaysia”

The Malaysian Insight Report also stated that:-

i)          In the first quarter of 2017, overall retail sales declined by 1.2% but hypermarket sales went down by 4.8%

ii)         In the third quarter of 2017, the retail sector shrunk by 1.1% while hypermarket growth declined by 5%

Summary of Findings

The state of the Shopping Mall Industry in Malaysia and in particular in the Klang Valley may be summarized as follows:-

i)          As early as 2012, Malaysian Property Consultants CONCLUDED that:-

“There is an oversupply of Commercial properties including Office and Retail (Shopping Mall) spaces in Malaysia and especially in the Klang Valley”

ii)         The Malaysian Insight Report published on 5^th February 2018, quoted Ameer Ali Mydin of Mydin Hypermarket Chain as having said that:-

“The average consumer is unable to meet the rising cost of goods even as the country reports high economic growth”

            “I think people just don’t have money”.

“The rising price of goods have impacted sales at all hypermarkets that accounted for 50% of all groceries sold in Malaysia”

iii)         The Malaysian Insight published on 5^th February 2018 reported that in the third quarter of 2017, the retail sector shrunk by 1.1% while hypermarket growth declined by 5%

iv)        The Malay Mail Online published on 14^th March 2018 quoting from a Financial Times (FT) article reported that:-

“True occupancy rates in Klang Valley malls may be as low as 40% in some areas and on the ground evidence also suggests that mall operators are still struggling”

Conclusion

At the outset of this Article, I asked the question “Meltdown of Shopping Malls in Malaysia, has it begun?

Based on the contents stated above, I conclude that:-

i)          There is an oversupply of Retail (Shopping Mall) spaces in Malaysia and especially in the Klang Valley since 2012

ii)         Oversupply of Retail (Shopping Mall) spaces further deteriorated between 2012 and 2017 until in March 2018 many Klang Valley malls are 40% occupied with mall operators struggling

iii)         Malaysian consumers do not have money to spend and are not able to meet the rising cost of goods

                                                                                                                                      

iv)        Many hypermarkets and other retailers have less customers resulting in reduced sales and lower profits.

v)         The decline in sales and profits experienced by hypermarkets and other retailers in the malls may lead to these hypermarkets’ and retailers’ closures.

vi)                 The closures of hypermarkets and retailers in the malls would inevitably lead to the eventual closure of the affected Malls.

The Reality

The above scenarios are already happening.

The recent announcement by Parkson that they are closing their Outlets in Maju Junction and Sungai Wang Plaza, both in Kuala Lumpur may be the sign that “the Meltdown of Shopping Malls in Malaysia, in particular in Kuala Lumpur has begun”

The Coming Global Economic Collapse – Are You Prepared?

“No man is an island” means “No one is self-sufficient; everyone relies on others”

This saying comes from a sermon by the seventeenth-century English author John Donne. 

In this article I propose to apply the expression “No man is an island” to the Economic Fortune of Malaysia viz-a-viz the Coming Global Economic Collapse by rephrasing it to read “No Country is an Island”

Many Malaysians, either through ignorance or through indifference, do not pay much attention to “Economic News” that happens in other Countries around the world, in particular Economic News that happens in Western Countries, Japan and China.

When applied to the Economic Fortune of Malaysia, this saying “No Country is an Island” means “Malaysia is not self-sufficient. Malaysia relies on other Countries for our economic survival”

In my article titled “Residential Property Supply Overhang – Causes and Solution” published in this column in February, 2019, I recommended that to solve their respective Residential Property Supply Overhang problems, developers should stop building houses priced above RM250,000.00 each and to sell their existing unsold properties at prices 50% or below 50% of their original prices.

Even without pressures from external economic forces, Malaysia already has to coup with our own “Residential Property Supply Overhang Crisis” that would likely impact the Malaysian Economy and Malaysian Banking Sector.

Global Debt – Cause for Global Economic Collapse

An individual person or family, when they borrow large sums of money from Banks, Credit Card Companies are heavily indebted and will likely face economic hardships and economic collapse that would ultimately lead them into Personal Bankruptcies.

Similarly, when a Sovereign Country Country borrows large sums of money from Banks or from other Countries and are heavily indebted, the Citizens of that Country will face economic hardships that would ultimately lead to that Country’s Economic Collapse like what happened to Venezuela, Zimbabwe and Greece.

The International Debt Clock

Major Countries’ Indebtedness, as at 15-03-2019, based on information extracted from the website “US Debt Clock.org” are as follows:-

Country                National Debt                GDP                             Public Debt/GDP 

                             US Dollar                        US Dollar   

USA                     22,123,064,265,718         20,939,506,232,315       105.65 %

China                      9,159,547,726,521         15,327,209,801,705         59.76 %

Japan                    11,852,422,350,999           4,590,990,659,776       258.16 %

                             Australian Dollar              Australian Dollar

Australia                     908,703,379,815          1,323,000,000,000         68.68 %

                             Ringgit Malaysia              Ringgit Malaysia

Malaysia                     724,396,407,130          1,386,128,287,594          52.26 %

Economies likely to affect Malaysia’s Economy

Due to their proximity to Malaysia being located in East Asia, the economies of China, Japan and Australia would adversely affect the economy of Malaysia when they fall into recession.

As for the effect of a recession in the USA, it is said that “When America sneezes, Malaysia will catch cold”.

Economic Crisis in China  

In September 2018, Bloomberg reported that:

“Its been called a mountain, a horror movie, a bomb and a treadmill to hell. To doomsayers, China’s 34 Trillion Yuan pile of public and private debt is an explosive threat to the global economy”

“Since China is a key driver of global growth, China’s 34 Trillion Yuan pile of public and private debt is a matter of concern for everybody”.

In December 2018, Bloomberg also headlined that:

“68% Chinese Factories Cut Prices, 23% Chinese Factories Lay Off Workers in Trade War”

In January 2019, the World Bank in a Global Economic Report state that:

“A sharper than expected deceleration in China would significantly increase the probability of an abrupt global slowdown”

Property Market Crash in Australia  

Visit the You Tube Channel and type in the words “Australia Property Crash”, we will be confronted with these headlines:

“Australia – A Coming Financial Crisis?”

“What is the future of Australia’s housing market?

“Australian Property Market – How Bad Is It Going To Get?

“The Story Behind Australia’s House Price Crash”

“Economic Collapse News – Massive Housing Crisis in Sydney and Melbourne Accelerates

“Bricks and Slaughter – Exposing Australia’s Housing Crisis”

Global Economic Collapse?

In March 2019, Bloomberg headlined that:

“Global Economy Hits Its Weakest Spell since (2008) Financial Crisis”

In March 2019, Bloomberg went on to advise:

“The global economy’s sharp loss of speed through 2018 has left the pace of expansion the weakest since the global financial crisis a decade ago”

In February 2019, US Authorities reported that:

“US job cut announcements surge 117% in February 2019”

Will the feared global economic collapse and the Next Great Depression happen in the near future?

To answer that question, I will quote from International Financial Expert Egon von Greyerz, who said:

“People must understand that the world has never faced risk of this magnitude. We are now in the final seconds of the global economic collapse, the likes of which the world has never seen before. What will happen next will be worse than the fall of the Roman Empire, much worse than the South Sea and Mississippi stock market crash, and will create a disaster that will dwarf the Great Depression of the 1930s”

“The problem is simple to define and is all based around debts and liabilities. At the beginning of this century, global debt was 80 trillion dollar. When the great Financial Crisis started in 2006, global debt had gone up by 56% to 125 trillion dollar”.

“Today it is 250 trillion dollar. Essentially we are looking at the sort of apocalyptic economic collapse that I have been warning about for a long time, and most people have no idea that it is coming”.

“Nobody is going to ring a bell when the next economic crisis and major stock market crash starts. It is just going to happen, and just like the last time, most people in America and the rest of the World are going to be caught unprepared by the Economic Collapse”

Malaysians get prepared

The Global Economic Collapse and the Next Great Depression will happen! When will it happen? I do not know. All the economic signs both in Malaysia and globally indicate the Global Economic Collapse will happen.

Reduce your debt level as much as you can. If you are not able to comfortably pay your monthly Housing Loan Instalments, sell you house at the best possible price, pay the Bank what you can and negotiate to pay the balance by manageable monthly instalments.

After your house is sold, go rent a house to live with your family. There is no shame in renting a house.

BETTER BE SAFE THAN BE SORRY!

Contact Dr. Ernest Cheong

You may want to contact Dr. Ernest Cheong at ecptlco@gmail.com or gandhiproperty@gmail.com if you need personal advice or assistance. 

Lawless Bank’s Odyssey of Deceit and Fraud

In my previous Article (NST RED 4^th October 2012), I wrote about “Lawlessness in Foreclosure by some Banks”. 

In that Article, I highlighted the plight of 3 Bank Borrowers who were victims of these “Lawless Banks”. I would have thought that Malaysian Banks’ “Lawless Conduct” is confined to their non- compliance with Foreclosure Procedures.

Malaysian Banks’ “Lawless Conduct” is not confined to non-compliance with Foreclosure Procedures. There is evidence Malaysian Banks manipulate, use and misuse to their advantage the Provisions in Part X of the Companies Act 1965 for the Winding-Up of Insolvent Companies.

Objectives of Part X of the Companies Act 1965

The Objective of Parliament when it included Part X in the Companies Act 1965 was to provide the legal basis, provisions and mechanisms for an orderly winding-up of an Insolvent Company so that no particular “privileged” individual creditor or “privileged” group of creditors can have an advantage over other “less privileged” creditors.

When a Company is Insolvent, what it owes to creditors would be much more than what it has in assets including property and cash to pay creditors. If not restrained and prohibited by Law, the Owners and Directors of the Company would be tempted and/or pressured to favour certain creditors and pay these creditors with whatever assets and money the Company still has to the detriment of other creditors because there would no assets and money left to pay these less connected and less privileged creditors.

The Provisions in Part X of the Companies Act 1965 are intended to prevent the Owners and Directors of Insolvent Companies from favouring certain “special” creditors at the expense of other creditors of the Company.

When the Provisions in Part X of the Companies Act 1965 are implemented and enforced vigorously and fairly, all the creditors of Insolvent Companies in Malaysia would then be treated equally and fairly and can expect to receive their equal share of the Insolvent Companies’ assets and monies, proportionate to the debt owed to them individually relative to the total debt owed by the Insolvent Companies’ to all their creditors.

A Utopian Dream

It is a “Utopian Dream” to expect that the Provisions in Part X of the Companies Act 1965 are implemented and enforced vigorously and fairly at all times. It is also an “Utopian Dream” that creditors of Insolvent Companies in Malaysia can expect to be treated equally and fairly and to receive their proportionately equal share of the Insolvent Companies’ assets and monies.

The Real World

The reality in Malaysia is the rich, the powerful and the well connected will be treated differently when it comes to implementation and enforcement of the Provisions in Part X of the Companies Act 1965.

Not Level Playfield

Until now, with few exceptions, when Malaysian Banks commenced with Winding-Up proceedings against Insolvent Companies, “the field is not level”. It is a slopping and slippery field for other creditors of the Insolvent Companies.

Even when the Banks have a weak case and even when they do not comply with the Provisions in Part X of the Companies Act 1965, 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 the Insolvent Companies’ other hapless creditors.

Lawless conduct of some Malaysian Banks

Even though the Provisions in Part X of the Companies Act 1965 are intended to prevent the Owners and Directors of Insolvent Companies from favouring certain “special” creditors at the expense of their other creditors and even though these Provisions also govern the actions and conduct of Malaysian Banks in the distribution of the Assets of the Wound-Up Company, some Malaysian Banks are acting and conducting themselves as though the Provisions in Part X of the Companies Act 1965 do not exist.

To substantiate and support my above assertions, I will undertake an In-Depth Case Study of the real experiences of the Non-Bank creditors of an Insolvent Company that was Wound-Up by a “Lawless” Malaysian Bank.

Protection of Privacy

To protect the privacy of the Malaysian Bank and the Wound-Up Insolvent Company cited in this Case Study, 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.

In-Depth Case Study

In this In-Depth Case Study, the main players are called:

Wound-Up Insolvent Company:            Most Unfortunate Development Sdn Bhd

Project Name:                                      Miserable Valley Project

Malaysian Bank:                                   Most Ingenious Bank Berhad

Liquidator:                                            Most Cooperative Liquidator

 

The Lands

Most Unfortunate Development Sdn Bhd owned 4 plots of land with total 750 acres land area somewhere in West Malaysia. The 4 plots of land are issued with 4 separate individual title documents. 2 of the 4 plots of land were partly developed with residential properties with the remaining 2 plots undeveloped.

                Land Charges

The 4 title documents of the 4 plots of land were all charged to Most Ingenious Bank Berhad for Bridging Loan Facilities to develop the Miserable Valley Project with 800 residential properties.

Remaining Undeveloped Land

The remaining undeveloped land including the whole of the 2 plots with separate titles and part of 1 plot that was partly developed was 520 acres.

Winding-Up of Most Unfortunate Development Sdn Bhd

In 2007 Most Ingenious Bank Berhad, the Bridging Financier, obtained a Winding-Up Order from the High Court to wind-up Most Unfortunate Development Sdn Bhd.

Liquidator Appointed

Most Cooperative Liquidator was appointed Liquidator of Most Unfortunate Development Sdn Bhd.

Outstanding Bridging Loan in 2007

In 2007 when Most Ingenious Bank Berhad applied to wind-up Most Unfortunate Development Sdn Bhd, the outstanding Bridging Loan still owed by Most Unfortunate Development Sdn Bhd to Most Ingenious Bank Berhad was RM65 Million.

Estimated Value of Undeveloped Land

In 2007 when Most Ingenious Bank Berhad applied to wind-up Most Unfortunate Development Sdn Bhd, the estimated Market Value of the 520 acres undeveloped land owned by Most Unfortunate Development Sdn Bhd and charged to Most Ingenious Bank Berhad was between RM5.00 per sq ft and RM10.00 per sq ft that would amount to between RM112 Million to RM224 Million for the 520 acres undeveloped land..

No need to wind-up Most Unfortunate Development Sdn Bhd

If Most Ingenious Bank Berhad’s objective was to collect from Most Unfortunate Development Sdn Bhd the RM65 Million Bridging Loan stilled owed to them, there was no need for Most Ingenious Bank Berhad to wind-up Most Unfortunate Development Sdn Bhd.

Most Ingenious Bank Berhad could quite easily had applied to foreclose the 520 acres undeveloped land owned by Most Unfortunate Development Sdn Bhd and charged to Most Ingenious Bank Berhad and sell all or some of the 520 acres land and from the proceeds of sale to repay to themselves the RM65 Million Bridging Loan.

In 2007 when Most Unfortunate Development Sdn Bhd was wound-up the estimated Market Value of the 520 acres undeveloped land charged to Most Ingenious Bank Berhad was between RM112 Million to RM224 Million.

Even at the lower end of RM112 Million, the Sale proceed would be more than enough to repay the RM65 Million Bridging Loan owed to Most Ingenious Bank Berhad with another RM60 Million balance and available for Most Unfortunate Development Sdn Bhd to complete the Miserable Valley Project.

Motive of Most Ingenious Bank Berhad

What was the “Real Motive” of Most Ingenious Bank Berhad to wind-up Most Unfortunate Development Sdn Bhd ostensibly to recover the RM65 Million Bridging Loan when they could quite easily had foreclosed all or some of the 520 acres undeveloped land charged to Most Ingenious Bank Berhad and subsequently sold the foreclosed land via Public Auction Sale for between RM112 Million to RM224 Million?

With Sale proceeds of between RM112 Million to RM224 Million from the Public Auction Sale of the 520 acres undeveloped land, Most Ingenious Bank Berhad would comfortably be able to recover the RM65 Million Bridging Loan owed to them.

The “Real Motive” of Most Ingenious Bank Berhad is found in the following paragraphs.

Sale of Assets of Most Unfortunate Development Sdn Bhd

In 2008, Most Cooperative Liquidator of Most Unfortunate Development Sdn Bhd via three (3) Sale & Purchase Agreements agreed to sell to Most Lucky Company Sdn Bhd the properties/assets of the wound-up Company as follows:-

SPA1 dated 2008 (after the Winding-Up date in 2007) involving 350 acres land at the Sale Price of RM17 Million

SPA2 dated 2008 (after the Winding-Up date in 2007) involving 150 acres land at the Sale Price of RM7 Million

SPA3 dated 2008 (after the Winding-Up date 2007) involving 24.24 acres land at the Sale Price of RM1 Million

Total areas of land agreed to be sold by Most Cooperative Liquidator to Most Lucky Company Sdn Bhd via the 3 SPAs is 515.082 acres at the Total Sale Price of RM25 Million

Compliance with Section 223 of Companies Act 1965

After Most Unfortunate Development Sdn Bhd was wound-up in 2007, the disposition (sale) of the Company’s Assets has to comply with the requirements in Section 223 of the Companies Act 1965.

 Section 223 on avoidance of disposition of property reads:

“Any disposition of the property of the company including things in action and any transfer of shares or alteration in the status of the members of the company made after the commencement of the winding up by the Court shall unless the Court otherwise orders be void.” (emphasis added)

Section 223 of the of the Companies Act 1965 stipulates that the assets of a wound-up company like Most Unfortunate Development Sdn Bhd can only be sold with a Court Order from the High Court.

Non-Compliance with Section 223 of Companies Act 1965

There is no evidence to suggest that Most Cooperative Liquidator obtained an Order from the High Court that authorized the Sale of the 520 acres undeveloped land owned by Most Unfortunate Development Sdn Bhd to Most Lucky Company Sdn Bhd.

It appears that Most Cooperative Liquidator did not comply with the requirements stipulated in Section 223 of the Companies Act 1965.

The consequence of Most Cooperative Liquidator’s failure to comply with the requirements stipulated in Section 223 of the Companies Act 1965 is that the Sale of the 520 acres undeveloped land owned by Most Unfortunate Development Sdn Bhd to Most Lucky Company Sdn Bhd is VOID (no legal effect).

Non-Compliance with Section 233 of Companies Act 1965

Most Cooperative Liquidator failed to perform and shirked his duty as the Appointed Liquidator as stipulated in Section 223 of the Companies Act 1965 when he did not take into custody the 520 acres undeveloped land owned by Most Unfortunate Development Sdn Bhd and instead without Court Authorization, he sold the 520 acres land to Most Lucky Company Sdn Bhd at the Sale Price of RM25 Million that represented a massive discount from the 520 acres land’s estimated Market Value as follows:-

Estimated Market Value           RM112 Million 100%

Sale Price                                 RM25 Million                 22% (78% discount)

Estimated Market Value           RM224 Million 100%

Sale Price                                 RM25 Million                 11% (89% discount)

Violation of Penal Code

Most Cooperative Liquidator by agreeing to sell and subsequently sold the 520 acres undeveloped land owned by Most Unfortunate Development Sdn Bhd to Most Lucky Company Sdn Bhd at the Sale Price of RM25 Million that represented variously from 11% to 22% of the 520 acres land’s estimated Market Value of RM112 Million to RM224 Million has violated and committed an offence against the Penal Code for Fraudulent Deeds and Disposition of Property, Criminal Misappropriation of Property and Criminal Breach of Trust.

Non-Compliance with Section 293 of Companies Act 1965 on Undue Preference

The RM25 Million proceeds from the Sale of the 520 acres land was believed to have been paid exclusively by Most Cooperative Liquidator to Most Ingenious Bank Berhad towards settlement of the RM65 Million Bridging Loan..

Most Cooperative Liquidator’s action to pay exclusively to Most Ingenious Bank Berhad the RM25 Million from the sale of the 520 acres land to the total exclusion of the rights of other creditors of the Company is an act of non-compliance with Section 293 of the Companies Act 1965 that forbids “Undue Preference” by the Liquidator towards any creditor of the wound-up company.

Violation of Banking and Financial Institution Act 1989

Most Ingenious Bank Berhad has a subsidiary company called Most Ingenious Nominees Sdn Bhd. There are Directors and Shareholders of Most Ingenious Nominees Sdn Bhd who are also Directors and Shareholders of Most Lucky Company Sdn Bhd, the Purchaser of the 520 acres undeveloped land owned by Most Unfortunate Development Sdn Bhd from Most Cooperative Liquidator.

Due to the presence of common Directors and Shareholders in Most Ingenious Nominees Sdn Bhd and in Most Lucky Company Sdn Bhd, Most Ingenious Bank Berhad has violated and committed an offence against the Banking and Financial Institution Act 1989.

Estimated Costs to Revive and Complete Miserable Valley Project

It is estimated the total costs to revive and complete the 800 residential properties (housing lots only) in the Miserable Valley Project is between RM90 Million to RM100 Million.

Who should pay for Costs of Revival and Completion

Now that Most Cooperative Liquidator had sold the 520 acres undeveloped land to Most Lucky Company Sdn Bhd at a Sale Price of RM25 Million that represented a massive 78% to 89% discount on the 520 acres land’s estimated Market Value, there is now no more asset or money left in Most Unfortunate Development Sdn Bhd to revive and complete the 800 residential properties (housing lots only) in the Miserable Valley Project.

Massive Failure of Government Regulatory and Enforcement Authorities

There are sufficient Laws in Malaysia to supervise and control the activities of Property Developers, Banks and Liquidators. Some of these Laws I cited above like the Companies Act 1965 and the Banking and Financial Institution Act 1989. We do not need more Laws.

We need more vigorous, fair and unbiased enforcement of existing Laws.

The manner in which Most Ingenious Bank Berhad, Most Cooperative Liquidator and Most Lucky Company Sdn Bhd managed to manipulate and circumvent the Law to the extent they can with impunity and without Court Sanction openly violate the Provisions of Section 223 of the Companies Act 1965 to dispose of the 520 acres undeveloped land of Most Unfortunate Development Sdn Bhd at a massive 78% to 89% discount represents a “Massive Failure of Government Regulatory and Enforcement Authorities” to enforce the Law and to protect the hapless purchasers of the Miserable Valley Project.

Justice for Purchasers of Miserable Valley Project

Now that there is no asset and no money left in Most Unfortunate Development Sdn Bhd to pay for the RM90 Million to RM100 Million costs required to revive and complete the 800 residential properties (housing lots only) in the Miserable Valley Project, where and to whom can the Purchasers of the Miserable Valley Project turn to for help to revive and complete the properties they purchased in the Miserable Valley Project more than 10 years ago?

Most of these Purchasers had fully paid for the properties they purchased. There are still some Purchasers who are still paying the Banks for the Loan taken to pay for the properties they purchased more that 10 years ago.

Where can these hapless victims of the misdeeds of Most Ingenious Bank Berhad, Most Cooperative Liquidator and Most Lucky Company Sdn Bhd go to for Justice? 

Tip of the Iceberg

The incidences cited in above Case Study 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 and Liquidators, Law Enforcement and Regulatory Authorities in Malaysia including Bank Negara Malaysia, the Malaysian Bar Council, the Attorney General 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.

Contact Dr. Ernest Cheong

You may want to contact Dr. Ernest Cheong at ecptlco@gmail.com or gandhiproperty@gmail.com if you need personal advice or assistance.

400 House Buyers Cheated

How could this happen? Who should be punished?

In my Article (NST RED 21^st September 2012) on “BTS cure for abandoned housing projects”, I stated that the primary causes for abandoned housing projects are:

“From 1983, when the first abandoned housing project was recorded, until 1997, the year the East Asian Economic Crisis hits Malaysia, due to over certification of progressive payment claims by the respective Project Architects and over-payments by the Banks from the respective borrowers housing loan accounts, many housing projects with funding inadequacies ceased construction activities thereby resulting in an increasing number of abandoned housing projects being recorded with corresponding increases in the incidences of “Non Performing Loans (NPLs)” affecting Malaysian Banks”.  

400 conned into buying non-existent houses around Klang

I refer to a report in The Star of Tuesday, 23 October 2012 where on page 6 it was stated that “Five property agents have conned at least 400 people into buying non-existent houses priced between RM150,000 and RM280,000”

As extracted from the newspaper report, the “facts” as reported by The Star of Tuesday, 23 October 2012 are as follows:-

1.0       These 400 house buyers had booked the houses during a property fare in 2006 in Kuala Lumpur

2.0       Some of the victims were made bankrupts by the banks for not settling any of their payments

3.0       These 400 house buyers paid 10% Deposits to the property agents

4.0       These 400 house buyers signed the Sale and Purchase Agreements without the presence of lawyers

5.0       The Selangor Police Chief, Deputy Commissioner Datuk Tun Hisan Tun Hamzah was quoted by The Star in the same report as having said “a check showed that the supposed projects in Meru and Banting do not exist at the mentioned location” 

6.0       DSP Datuk Tun Hisan was also quoted by The Star as having said that Police had identified six banks that had approved loans for the non-existent projects.

7.0       After waiting for almost 6 years, some 138 of the 400 house buyers lodged a Police Report

8.0       The Star of Tuesday, 23 October 2012 reported that Police are investigating the possibility of involvement of parties from local banks suspected of collaborating with the so-called agents.

Malaysian house buyers’ worst nightmares

This Report The Star of Tuesday, 23 October 2012 represents the realization of Malaysian house buyers worst nightmare.

Safeguards, checks and balances?

How could these 400 house buyers have been cheated? What happened to the Rules and Regulations in the Housing Development (Control and Licensing) Act 1966 that were intended to protect house buyers from being cheated?

Who should be held accountable?

According to the The Star report, the main characters involved in this episode include the 400 house buyers, the five “property agents”, the “absentee lawyers” and the six banks. We shall examine their actions and conduct individually:

i)          The “Property Agents”

Section 22c (1) of the Valuers, Appraisers and Estate Agents Act 1981 (the Valuers Act) stipulated that:

“No person shall unless he is a registered estate agent and has been issued with an authority to practice under section 16 practise or carry on business or take up employment under any name, style or title containing the words ‘Estate Agent’, ‘House Agent’, ‘Property Agent’, ‘Land Agent’, ‘House Broker’ or the equivalent thereto”.

Legal status of “Property Agents”

In the light of section 22c (1), we now ask this question: “are these 5 ‘property agents’ Registered Estate Agents and are they legally permitted to act as ‘property agents’?”. If the answer is “no”, then these five “property agents” had committed offences against the Valuers Act and they should be reported to the Board of Valuers, Appraisers and Estate Agents to be prosecuted under section 30 of the Valuers Act and if convicted to be punished under section 31 of the Valuers Act.

ii)         The “absentee Lawyers”

The Star report stated that the 400 house buyers signed the Sale and Purchase Agreements “without the presence of lawyers”. If true then the lawyers who prepared the Sale and Purchase Agreements are guilty of negligence and dereliction of their professional duties if they subsequently signed the respective Sale and Purchase Agreements without having personally verified the signatures of each of the 400 house buyers by having them (the house buyers) sign the Sale and Purchase Agreements before them (the Lawyers).

Validity of Sale and Purchase Agreements

Are the Sale and Purchase Agreements signed by the 400 house buyers without the presence of lawyers legally valid? If these 400 house buyers did not sign their respective Sale and Purchase Agreements in the presence of lawyers, then unless their signatures were witnessed by another adult person, their respective Sale and Purchase Agreements are at risk of being declared invalid and unenforceable.

iii)        The Banks

 

The six Banks’ role in this unfortunate episode can be defined as follows:-

a)         The six Banks’ role in processing and approving the respective housing loan applications from the 400 house buyers.

b)         The six Banks’ role in disbursing the housing loans granted to the 400 house buyers.

            Adequate Safeguards

There are sufficient safeguards in the Housing Development (Control and Licensing) Act 1966 and the Banking and Financial Institutions Act 1989 that could have protected the 400 house buyers/borrowers and saved them from being conned and cheated.

We shall examine these safeguards and discover where the six Banks had failed to perform their fiduciary duties to the 400 house buyers/borrowers.

a)         Loan application stage

When the six Banks received the Applications for Housing Loans from the 400 house buyers, did the Banks require the Loan Applicants to submit to the Banks their respective Sale and Purchase Agreements?

If the Banks did require and the Loan Applicants did submit their Sale and Purchase Agreements, did the Banks ask the Loan Applicants if they had signed their respective Sale and Purchase Agreements in front of the Lawyer?

If the Loan Applicants told the Banks that they did not sign the Sale and Purchase Agreements in front of the Lawyer, the Banks should have immediately rejected the house buyers Loan Applications.

If the Banks did not require and the Loan Applicants did not submit their Sale and Purchase Agreements, on what basis did the Banks approve the Applications and grant the Loans to the 400 house buyers?

If the Banks knew the 400 house buyers did not sign their respective Sale and Purchase Agreements in front of the Lawyer and if the Banks did not require the Loan Applicants to submit their Sale and Purchase Agreements, and the Banks still went ahead to approve the Loan Applications and still granted the Housing Loans, the Banks would have failed to perform their fiduciary duties to the 400 house buyers/borrowers.

a)         Loan disbursement stage

Even if the Banks, either through negligence or oversight granted the Housing Loans to the 400 house buyers and subsequently realized their mistakes, the Banks could still rectify their mistakes at the Loan Disbursement Stage.

The Banks could delay the loan disbursement process and require the Loan Applicants to submit their Sale and Purchase Agreements. From the facts now known to us, the Banks did not delay the Loan Disbursement process. They went ahead to disburse the loans.

Detection of non-existent houses

Even if the Banks had commenced with their loan disbursement process, there are provisions in the Housing Development (Control and Licensing) Act 1966, that when complied with, would allow the Banks to be alerted to the fact that the houses purchased by their 400 borrowers did not exist.

Clause 4 (1) and the Third Schedule of Schedule G {Sale and Purchase Agreement (Land and Building)} of the Housing Development (Control and Licensing) Regulations 1989 provides for the “Schedule of Payment of Purchase Price”. At every stage of the “Schedule of Payment”, such payment is contingent on the execution of the specified works by the Developer. 

Whilst Clause 4 (2) states that “Every notice referred to in the Third Schedule requesting for payment shall be supported by a certificate signed by the Vendor’s (Developer’s) architect or engineer in charge of the housing development and every such certificate so signed shall be proof of the fact that the works therein referred to have been completed” the Banks do have the fiduciary duty to their 400 house buyers/borrowers to at least verify the existence of the houses purchased by their 400 house buyers/borrowers.

From the facts now known to us, it is apparent the six Banks did not take steps to verify the existence of the houses purchased by their 400 house buyers/borrowers.

Relationship of Trustee and Beneficiaries

After the six Banks had approved the Loan Applications and granted the Housing Loans to the 400 house buyers/borrowers who had accordingly signed their respective Housing Loan Agreements with the Banks, the Loan Sums so granted to the 400 house buyers/borrowers are NO LONGER THE PROPERTIES of the Banks. The Loan Sums belong to the 400 house buyers/borrowers. The Banks are merely TRUSTEES to the 400 house buyers/borrowers who are the BENEFICIARIES.

The disbursement/release of the Loan Sums from the house buyers/borrowers Loan Accounts with the Banks is subject to both the provisions of the Housing Development (Control and Licensing) Regulations 1989 AND the Trustee Act 1949.

From the facts now known to us, the Banks did not disburse/release the Loan Sums from the house buyers/borrowers Loan Accounts in accordance with the provisions of the Housing Development (Control and Licensing) Regulations 1989 AND the Trustee Act 1949.

From the facts now known to us, because they did not disburse/release the Loan Sums from the 400 house buyers/borrowers Loan Accounts in accordance with the provisions of the Trustee Act 1949, the Banks DID NOT PERFORM their fiduciary duties to their customers, namely the 400 house buyers/borrowers.

iv)        Liability of the Banks

It is apparent that the Banks, due to the negligence and their failure to perform their fiduciary duties to their customers, are liable for the losses and damages suffered by the 400 house buyers/borrowers.

v)         Acts of corruption and/or fraud?

It is suggested that the Police, when they investigate the possibility of involvement of parties from local banks suspected of collaborating with the so-called agents may consider looking into the causes and/or reasons why the six banks did not comply with the provisions stipulated in the Housing Development (Control and Licensing) Regulations 1989 AND the Trustee Act 1949 for the disbursement/release of the Loan Sums from the house buyers/borrowers Loan Accounts with these Banks. Were there financial incentives provided for the staff of local Banks to act in contravention of the Law when they disburse/release the Loan Sums that amounts to acts of corruption and/or fraud?

Education, Information, Empowerment 

Have you ever wondered aloud “How I wish I know the real Market Price of my Property” or “How I wish I know how much to pay for the Property I want to buy”.

                  

For years in Australia property owners and purchasers alike were able to have these questions answered when they visited On-Line Property Price Search Websites like http://www.domain.com.au and http://www.realestate.com.au.  You may want visit these sites and check them out for yourself.

In British Columbia, Canada there is a site that is similar to the above Australian sites. You may want visit http://www.landcor.com and check them out for yourself.

In Britain there is a site that is similar to the above Australian and Canadian sites. You may want visit http://www.propertydata.com and check them out for yourself.

Contact Dr. Ernest Cheong

You may want to contact Dr. Ernest Cheong at ecptlco@gmail.com or gandhiproperty@gmail.com if you need personal advice or assistance.