Cause to the contrary defective notice

The first circumstances where the aggrieved person can say that the chargee fails to meet the conditions to seek the order for sale is when the statutory notice of demand served was defective or improper. The notice can be said to be defective when the chargee included default interest which was more than the prescribed interest.

In the case of Co-operative Central Bank Ltd v Meng Kuang Properties1, the ‘existence of cause to the contrary’ revolves around the validity or otherwise of the notice of demand sent by the solicitors of the plaintiff bank on 9 January 1988 and the subsequent statutory notice in Form 16D sent by the same party on 19 January 1988.

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The attacks mounted by the defendant company against the validity of the said notice of demand and the statutory notice in Form 16D are basically that (i) the sum mentioned in both the notices exceeds the actual sum owed and payable by the borrower and (ii) the plaintiff bank has not established their entitlement to default interest. In this case, the court held that the wrongful demand for payment of the default interest to which the plaintiff bank is not entitled must necessarily render the notice of demand and the Form 16D ineffectual and invalid.

The notices were defective because the plaintiff demanded payment of something which the plaintiff had no right. Therefore, the plaintiff bank was not prima facie entitled to the remedies sought by them. Other than that, in the case of Multi Purpose Bank Bhd v Maimoon bt Abdul Razak2, the defendant contended that the plaintiff had without the consent from the defendant, adopted a new method of computing interest (from’1.

75% above the prevailing base lending rate’ to the calculation of interest based on ‘monthly rest’), the outstanding sum due under the charge and consequently stated in Form 16D have been incorrectly stated and therefore, the statutory notice becomes ineffective and invalid. The court held that, the plaintiff has proceeded to base its calculation of interest on a factor that is not permitted by mutual consent of the parties and claiming such amount as due and owing in the statutory notice (Form 16D of the NLC), then it is a cause to the contrary in refusing the application.

The notice of demand can also said to be defective when there is no specific details of breach in Form 16D and the amount claim is more than allowed. The example can be seen in the case of RHB Bank Bhd v Syarikat Sungei Nal Timber Industries Sdn Bhd3. In this case, the court was asked to decide on the position of Form 16D on the basis that (i) it was not served; and (ii) no specific details of the breach; and (iii) the amount claimed was more and thus not allowed. The court held that, the breach as stated in Form 16D is sufficient for the purpose of section 254(1)(a) of the National Land Code 1965.

The notice in the Form 16D is in relation to the failure to pay the amount demanded in the earlier notice of demand. Therefore, the plaintiff was right in stating in the Form 16D that the said breach was as a result of failure to pay the amount demanded in the said letter of demand. The details of the breach is sufficient to be stated in the letter of demand sent earlier to the defendant. Thus, if there is no proper notice given to the chargor or where the notice demands a sum which more than what the chargee entitled to, the existence of cause to the contrary can be established.

The second circumstances where ‘the cause to the contrary’ can be established under this category is when there is invalid service of statutory notice. Service of statutory notice must be done in accordance with section 431 of National Land Code 1965. If the chargee fails to comply with the section, the service of notice can be said to be invalid. Section 431 of the NLC states that the notice may be served on a person or body by delivering the notice personally to the person or by delivering the notice at the person’s last known address, or by pre-paid registered post, or by substituted service.

In the case of Malayan United Finance v Tan Ah Moi4, the first defendant argued that the claim was not valid as there was defect in respect of the service of notice to the defendants. The court was in the opinion that there is no communication to the defendants because Section 431(1)(c)(i) was not complied with. Under that provision, it is not enough to just leave a delivery notice addressed to two people living at the same address. Notice shall be contained in a sealed envelope and the envelope must be addressed to the said persons.

If there are two people to be served at the same address, each one must be given notice in a separate envelope addressed to him. That was not done in this case. As there is no delivery, the right to apply for the sale of land that has not yet arisen. The court therefore refused to grant order for sale. The third circumstances where ‘the cause to the contrary’ can be established under this category is when the application is made to the wrong tribunal.

It is important to determine which tribunal is the right one to initiate a foreclosure proceeding. It can be determine by looking at the title of the land. Under section 256 of the National Land Code 1965, if the land is held under Registry title or the Final title, the application for an order for sale by the charge should be made to the High Court. And if the land is held under Land Office title, section 260 of the same Code stated that the application for an order for sale should be made to the Land Administrator in the Form 16G.

In the case of Tan Teng Pan v Wong Fook Shang5 , the chargee in this case applied for order for sale of land belonged to the chargor for the recovery of due sum by the chargor to the chargee under a charge presentation which was duly registered by the Collector of Land Revenue. The issue in this case is whether the court had jurisdiction to entertain the application when the land in question was land held under a land office title. Based on section 260 and 261(1) of the National Land Code 1965, the court held that it has no jurisdiction to entertain the application which should have been made to the Collector of Land Revenue.

The application was therefore dismissed. Lastly, ‘cause to the contrary’ can also be established under this category when there is delay. In the case of Public Finance Bhd v Hock Seng Housing Development Sdn Bhd6, the application for consolidation of accounts and for an order for sale was sought after foreclosure action against one charge had commenced and an order for sale for it was already made. Even though the consolidation of accounts is permitted under the charge annexures, the court was in the view that it ought to be before any action is taken for the foreclosure of any of the charges for the accounts to be consolidated.

The plaintiffs here had exercised their right to consolidate a little too late considering their earlier action to foreclose one of the two charges, taking into account the fact that the order for sale was made three years before, and the first auction date one month before the notice to consolidate. The application was dismissed on the ground that the delay to consolidate was inequitable to the purchasers and, therefore, amounted to a cause to the contrary.

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Cause to the contrary defective notice. (2016, Jul 07). Retrieved from