LIM CHEE HOLDINGS SON BHD V RHB BANK BERHAD

DALAM MAHKAMAH TINGGI MALAYA DI IPOH

GUAMAN SIVIL NO: 22-188-1994

ANTARA

LIM CHEE HOLDINGS SON BHD ..... PLAINTIF

DAN

RHB BANK BERHAD (Dahulu dikenali sebagai Kwong Yik Bank Berhad) ..... DEFENDAN

(digabungkan melalui Perintah Mahkamah bertarikh 17.3.1997)

DALAM MAHKAMAH TINGGI MALAYA DI IPOH

GUAMAN SIVIL NO: 22-59-1996

ANTARA

LIM CHEE HOLDINGS SON BHD ..... PLAINTIF

DAN

RHB BANK BERHAD (Dahulu dikenali sebagai Kwong Yik Bank Berhad) ..... DEFENDAN

[2]

ALASAN PENGHAKIMAN

Introduction

These two cases were consolidated and tried together. The cause of action in both the actions is basically breach of contract though, in the latter, negligence is added. The facts involved are briefly as follows:

The plaintiff is a housing development company involved in developing a small housing estate known as Taman Mewar (the project) in a minor town called Langkap, which is between Telok Intan and Kapar, in Perak. The total project consist of only 186 units of building which was to be made up of: 127 single story houses; 52 double story houses and 7 double story shops.

Requiring financing, the defendant, a bank, offered to lend to the defendant in 1985 a sum of RM I million for bridging loan in the form of overdraft facility and, RM 2 million for end financing. The terms of this loan are set out in the defendant's letter of offer dated 23.4.1985, and which the plaintiff accepted. This loan was suppose to be repaid in full by 22.5.1987 or by way of redemption of titles of the houses which were charged to defendant as security for the loan.

Encountering problems and admittedly also due to the economic downturn at the time the plaintiff was not able to repay the said loan upon due date. Work on the project had stopped in 1987. A rescue plan to rehabilitate the project, known as 'Project Account System' (PAS for short), was offered to the plaintiff by the defendant to continue with the project. The plaintiff accepted this.

Under this plan, which is set out in the defendant's letter of offer to the plaintiff dated the 10.8.1987, with some amendments made subsequently, the defendant will continue to finance the plaintiffs project with the amount previously offered but not fully used up and repayment is by way of proceeds from houses sold. Besides, an independent firm of accountant, M/s Hanafiah Ruslan & Mohamad (HRM), is to be appointed to "monitor progress of work done and to assist the management of the affairs of the Company (plaintiff)". In short the defendant withheld legal proceedings against the plaintiff to recover the loan then due and owing in return for some supervision in the plaintiff.

Things did not work out well under PAS. There were differences between the plaintiff and the defendant and HRM. Civil suit number 22-188-1994 is based on the grievances of the plaintiff during this period.

The extended loan under the PAS scheme, as well as some further advances made by the defendant to the plaintiff during this rehabilitation period, together with that owed under the original loan were not settled by the plaintiff. Thus, besides defending this plaintiffs claim, the defendant in this action counterclaims the plaintiff for these outstanding sums which amounted to a hefty RM 2,285,377.31 with interest and cost.

By 1990 work on the project had once again stalled. The project was considered abandoned. Then with the assistance of a government sponsored scheme known as Tabung Projek Perumahan Terbengkalai (TPPT) the defendant offered to the plaintiff a soft loan of RM1.2 million to complete phase 1 of the project within 12 months. The main feature of this loan is the appointment of another firm of accountants, Peat Marwick Consultants Sdn Bhd (PM) as an "Independent Financial Consultant of the Borrower and/or as an Independent Project Manager, to monitor and manage the completion of the Project". Progress payment from house buyers and/or their end-financiers was to be deposited into a designated account with the defendant and be utilized to repay this loan. Specific sum for redemption of each title, which remains undischarged, was agreed upon between the parties.

Though plague by differences between the plaintiff and the defendant, phase 1 of the project was competed in 1995 with certificate of fitness for occupation issued. This brought to an end the rescue plan by TPPT. Practically the entire loan under this TPPT scheme was repaid except for a sum of RM 104, 824.98. But dissatisfied with the treatment by the defendant under this scheme, the plaintiff under suit number 22-59-1996 is claiming from the plaintiff damages it suffered. The defendant reacted with a counter-claim in this suit for the outstanding sum of RM 104,824.98.

With this short outline, I shall now proceed to elaborate further the basis of the plaintiff's claim in both suits.

The plaintiff's claims in case number 22-188-1994

To fully understand and appreciate the plaintiffs claim one must begin from the beginning i.e. the commencement of the business relationship between the parties with the offer of the loans for the project. The plaintiff attempted to conceal this and concentrated only on the loan offered and accepted by the plaintiff in 1987. This in fact was only a rehabilitation of the original loan that was first effect in 1985. Because of this, severe confusion in understanding the trend of the plaintiffs testimony when first read was encountered. To avoid this pitfall (intended or otherwise, to confuse the court) I shall now disclose the terms of the original loan granted in 1985. To distinguish the two, I shall be referring to the original loan as the 'original loan' and the rehabilitated loan simply as 'rehabilitated loan'.

The original loan for bridging finance of RM1 million was to be drawn down against architect's certificate certifying the progress of work done on the houses constructed. Similarly, end-financing releases were also tied up with such certification. Redemption sum for each type of houses was set as follows:

(a) for each single story -RM6, 100.00;

(b)for each double story-RM6, 100.00;

(c) for each double story shop-RM31, 000.00.

By the time of the plaintiffs default in 1987 to repay the bridging loan the entire amount allocated was not drawn down. Approximately the plaintiff only utilized a sum of RM 788,492.80 as at 31.7.1987.

When the defendant decided to rescue the project in 1987 with the rehabilitated loan, approximately only a sum of RM 211,508.00 was made available, though the letter of offer states a sum of RM 1 million bridging loan is to be granted. This sum was originally intended for use to complete 100 units of single story houses in the project but subsequently it was altered to cater for the construction of 32 units of double story houses.

The unique feature of this PAS scheme is that all proceeds of sale from houses in the project was to be paid into the designated account and there should be no withdrawal by the plaintiff therefrom unless HRM had verified and sanctioned each claim for payment by the plaintiff. The payment was essentially towards settling:

(a) building contractors-RM396, 000.00

(b) profession fees -RM10, 800.00

(c) administration -RM 140,000.00

(d) infrastructures -RM21,000.00

(e) the defendant-RM977, 600.00

The whole mechanics of this scheme is that with the proceeds of sale collected together with the remainder amount of the bridging loan still not drawn there should be sufficient funds to pay for construction and completion of the houses targeted plus repayment of the loans due to the defendant. With this, redemption of titles could follow.

Things did not work out as intended. This resulted in the loans not being repaid and the plaintiff accusing the defendant of breaching the following terms and conditions of the rehabilitated loan:

1 Delay in awarding the road and drains for 6 months

The plaintiff accuses HRM for meddling with the award of a contract to construct roads and drains to the houses then under construction at the site. Such acts had resulted in the delay in completing the houses.

2 Failing to release the balance of the bridging loan

The next accusation is on the failure and/or refusal by the defendant to:

(a) pay administrative expenses; and

(b) staff salaries;

as agreed to under the PAS arrangement.

3 Delay in paying contractor's claim

The plaintiff insists that the defendant had failed and/or delayed in paying contractors' claim of:

(a) RM52, 000.00;

(b) RM78, 000.00

which resulted in the stoppage of work and/or delay of construction works on the project.

4 Delay in payment of end finance claims

The next complaint of the plaintiff is on the delay by the defendant in paying progress payments at two different stages. The first involves those lots stated in paragraph 3(a) of the amended Statement of Claim when roads and drains were completed. The second affects houses stated in paragraph 3 (b) of the amended Statement of Claim when vacant possession was to be delivered.

5 Refusal to release document of titles for redemption

The next breach involves refusal by the defendant to release title deeds when redemption for these was requested. The affected lots were: PT 2067, 2111, 2124, 2123, 2179, 2067, 2139, 2111, 2047, 2124, 2120, 2112. All these were by purchasers who had taken government loans to finance their purchase. The next batch concerns 15 titles bearing numbers: PT 2043, 2071, 2221, 2122, 2212, 2178, 2215, 2217, 2220, 2070, 2068, 2119, 2084, 2041, 2090. According to the plaintiff, had the defendant released these titles a sum of RM593, 910.00 would be made available to finance the project.

6 Unlawfully suspending the plaintiffs account

By 1990 the defendant had suspended the plaintiffs bridging loan and end-finance account. This, the plaintiff claims is unlawful. According to the plaintiff, in consequence of this, the plaintiff was only able to complete 76 units of single story houses instead of 100 and the abandonment of the project in 1990.

Relying on the aforesaid complaints the plaintiff accuses the defendant of breaching the agreement for the rehabilitated loan. This resulted in losses which the plaintiff now requests the following orders:

(a) General damages for loss of reputation.

(b) Special damages of:

(i) a sum of RM83,334.74 with interest which the contractors, M/s Lee Brothers Construction, has obtained judgement against the plaintiff;

(ii) a sum of RM21, 097.00 which was paid to HRM;

(iii) loss of profit due to the non-sale of houses, which sum is to be assessed;

(iv) a sum of RM1, 296,333.00 for late delivery claim by the purchasers calculated up to 13.5.1993;

(v) "As for the 22 sold unbuilt lots interest accruing to the purchaser for late delivery lots at 10% p.a. of the sale price of RM25, 000.00 from 14.5.93 till handing over of vacant possession of the building";

(vi) interest and;

(vii) costs.

Defendant's defences and counter-claim in 22-188-1994

The defendant firstly denies all the allegations of the plaintiffs. In turn it asserts that the plaintiff has breached the terms of the arrangement by refusing to pay all proceeds of sale from the 100 units of single story houses and the 32 units of double story houses into the designated bank account created under PAS. Then the defendant proceeds to elaborate that due to the plaintiffs inability at that time to sell some of the houses cash flow was experienced by the plaintiff. To assist, the defendant advanced further loans, other that what was agreed upon under the PAS scheme, to the plaintiff. This lasted until 1990 when the defendant decided to suspend this arrangement since the defendant had no control over the financial affairs of the project under the PAS scheme. In addition, the defendant explains that HRM was not its servant and/or agent; HRM was an "independent accountant" and thus the defendant is not liable for HRM's actions. In any event, the defendant argues that HRM had carried out its duties within its terms of reference.

On the claim by the plaintiff for losses, the defendant puts the plaintiff on strict proof of each and every allegation made thereto. Besides, the defendant argues that even if there had been such losses, these losses were not caused by the defendant's acts. Further, these losses (if the plaintiff suffered them) are too remote in law because the defendant could not reasonably foresee them. Lastly, the losses were not a natural consequence of any of the acts of the defendant and neither did the parties contemplate them when the entered into the rehabilitated loan arrangement.

According to the defendant since the suspension of the plaintiffs account, the plaintiff had not repaid the defendant: monies advanced under the original loan, the rehabilitated loan and further advances made during the PAS period until the suspension of the plaintiffs account. This amounted to RM2, 285,377.31. The defendant is counter-claiming this amount together with "contractual and/or customary interest thereon at the rate of 3% per annum above the Defendant's Base Lending rate with monthly rest from 1st September 1994 until the date of payment"; and costs.

The Plaintiffs claim in case number 22-59-1996

As disclosed, subsequent to the suspension of the plaintiffs account in 1990 the project was abandoned. It was revived under the government's sponsored rescued TPPT scheme. This began in October 1992. But under the TPPT scheme only phased 1 was to be resuscitated. This concerned 113 units of single story houses and 32 units of double story in the project. As disclosed, redemption amount for the undischarged titles still in the hands of the defendant was agreed between the parties. It is the allegation of the plaintiff that against what was agreed upon, the defendant had "willfully inflated the amount of redemption". This was in respect of titles for lot 2041, 2181, and 2182. Besides, there is accusation of the defendant for delaying the redemption process for lots: 2221, 2212, 2177, 2117, 2122, 2178, 2119, 2115, 2070, 2043, 2071, 2139, 2123, 2179, 2111, 2112, 2047, 2124 and 2120. Because of these, the plaintiff accuses the defendant of breaching the agreement under the TPPT scheme.

Apart from the above, the plaintiff also claims that, the by implication and understanding at various meetings between the parties, the defendant ought to provide substantial end financing loan to purchasers of the houses. Since the defendant only provided for 60% of the purchase price to buyers of houses, many had to seek loan from other financial institutions that offered higher amount. For this, the defendant is in breach of this implied agreement.

Then in paragraph 6 of the amended Statement of Claim, the plaintiff suddenly accuses the defendant of negligence for failing to ensure that the project was to be completed within reasonable time. For particulars of negligence, the plaintiff sets out the following:

1. Failing to cooperate with the plaintiff or the consultant in complying with the "spirit of intention of the agreement".

2. Failing to release monies for the completion of the project.

3. Failing to release end-finance for the completion for "16 units".

4. Falling to "expeditiously process the end finance loans of purchasers in spite of requests by the consultant, PM.

5. Delaying the issue of letters of undertaking to Bahagian Pinjaman Perumahan (BPP) for those purchasers borrowing from the government.

On these allegations, the plaintiff avers that "the defendant had been malicious and mischievous" in causing loss and damage to the plaintiff. And the plaintiff now wish to be compensated with:

1. general damages for breach of contract;

2. special damages for: (a) payment made to consultant amounting to RM154, 326.36; (b) claims by purchasers for late delivery of houses (to be assessed); and

3. interest and costs.

The defendant's defence in case 22-59-1996

The defendant denies the claims of the plaintiffs. In turn it accuses the plaintiff of having breached the terms of TPPT in:

(a) selling some of the units of houses in phase 1 below the minimum selling price stipulated;

(b) and failing to pay all sale proceeds into the project account.

As there is still a sum of RM104, 824.98 due and owing by the plaintiff under the TPPT scheme, the defendant is counter-claiming from the plaintiff this amount together with interest and costs.

Analysis of case number 22-188-1994

I shall deal with each of the allegations of the plaintiff in turn: though not in the order of priority as set out above. This will be followed by the analysis of the defendant's counter-claim.

Delay in releasing the balance of the bridging loan

The essence of the PAS scheme was to rescue the project which was abandoned in 1987. The mechanics of this concept was to firstly work out a budget and then identity the source of funds to finance the scheme. The budget was obviously formulated since it was incorporated in the defendant's letter of offer to the plaintiff dated 10.8.1987. Details of this budget are disclosed in the earlier part of this judgement. Though items of expenditure are listed the source of fund to support this venture is not specified except that the bridging loan remains at RM1 million. As this was a rehabilitation of the original loan, all parties agreed that in respect of bridging loan the amount would only be the balance of what was not fully utilized under the original loan. This means that only a relatively minor sum of RM211, 507.20 was left. By simple arithmetic deduction, this was insufficient to support the projected expenditure. Thus the source of fund, as explained by witnesses by the defendant and evasively admitted by the plaintiff, must come from, besides the balance of the unused bridging loan, the total sales proceeds of the 100 units of single story houses and 32 units of double story houses (with initial sales proceeds collected before the PAS arrangement took effect excluded). Such sales proceeds collected were to be deposited in a designated account and as agreed by the parties could only be released by the defendant to pay towards those agreed items of expenditure after HRM had verified the claims and gave its approval.

But here we have evidence that the plaintiff was not paying ball. The plaintiff was not crediting into the designated bank account all monies collected from the proceeds of sale of the 100 units of single story houses as well those 32 units of double story. Without such income, as explained, there was shortage of cash to finance the scheme. Further, it defeats the role of HRM who was to assist and supervise in this rescue attempt. In short, the essence of the PAS arrangement was lost.

Though admitting that the plaintiff had not paid in all the proceeds of sale of the houses as agreed, the plaintiff argued that it applied such monies collected towards payment of staff salaries and administrative charges to run the plaintiff's operation in the project. But this was the crux of the problem. When the plaintiff took matters into its own hands then the entire system under PAS was thrown into confusion. HRM then refused to approve claims for staffs salary and administrative charges since these were already paid out of proceeds of sale. A chicken and egg situation had occurred, to my mind, due to the fault of the plaintiff.

Though eventually some subsequent staffs salary and administrative charges claims were approved by HRM and paid by the defendant, this issue of non payment of all proceeds of sale into the designated account continued to mar the entire process until the defendant suspended the PAS scheme due to the inability of both HRM and the defendant to monitor and supervise the project. . This brought an end to this rescue attempt in 1990.

On the evidence so tendered I am of the view that the defendant has not breached any terms of the agreement in failing to pay staff salaries and administrative charges. The defendant under the PAS arrangement can only pay when it received sanction from HRM. When HRM refused to authorize payment then the defendant cannot be at fault.

Delay in awarding the roads and drains tender for 6 months

The scope of HRM's duties as described in the letter of offer of 10.8.1987 is to: "monitor the progress of work done and to assist in the management of the affairs of the Company (plaintiff)". Further, HRM was to "direct and control the payments of the cost of construction". Within this perimeter did HRM exceed its authority when the tendering and award exercise for the roads and drains was conducted?

From the explanation offered by Mr. Eapan, the representative of HRM at the material time, HRM advice was solicited by the general manager of the plaintiff, one Mr. Freddy Choo, on this tender and award. Mr Eapan explained that the plaintiff adopted such approach because HRM was controlling payment of construction claim. This he said was also within the ambit of HRM's scope of work. Mr. Eapan then continued to state that the entire exercise i.e. from the time the tender for this job was discussed to the time when it was verified and awarded there was no delay; it was within the normal time frame taken for such undertaking bearing in mind that the initial tender far exceeded the market cost for such works. For this, the assistance of one Mr. Quay was called in by HRM to help.

Judging from the testimony forwarded by Mr. Eapan, I am of the opinion that what HRM did was within its scope of work assigned to it. It was within the confines of "assisting" the plaintiff and this was, after all, at the request of the plaintiff. I believe in this latter assertion since Freddy Choo, the person whom HRM alleged to have made the request, was not called to deny this fact. Further, the plaintiff seems to have agreed and proceeded along with this exercise. If the plaintiff had disputed HRM's authority to meddle in this affair, the plaintiff would not have continued to subject itself to the directions of HRM on this matter.

In any event what has all these to do with the defendant? Under the letter of offer, HRM is described as an "Independent Accountant". In such capacity, I agree with Mr. Leong's (counsel for the defendant) submission that HRM was a "professional middleman" (borrowing the words from the judgment in Pembenaan Leow Tuck Chui & Sons Sdn Bhd v Dr. Leela's Medical Center Sdn Bhd [1995] 2 CLJ 345; (1985) 2 MLJ 2 57). Being an independent professional person I am of the view that HRM was neither a servant and/or agent of the parties who jointly agreed to its appointment. Being an independent person, acts and deeds of HRM cannot be attributed to either the plaintiff or the defendant. In this case, the complaint of the plaintiff is against the acts or omissions of HRM. They have nothing to do with the defendant. Since the defendant is not responsible for HRM then this allegation must also fail on this aspect, as well as all others concerning the actions and/or omissions of HRM being imputed to the defendant.

Delay in paying the contractor's claim

This covers two areas. The first is for the sum of RM52, 000.00. The plaintiff alleged that the claim for this sum was presented to the defendant in October 1987 but was only approved by HRM on the 22.12.1987 and paid by the defendant on 7.1.1988. What the plaintiff fails to point out was that HRM was only appointed in November 1987 and subsequent to this, there was administrative arrangement to be attended to such as a proposed change to the signatories of cheques of the plaintiff. These took some time to be sorted out. Evaluating these circumstances, I do not find the two weeks gap between the time of HRM's approval to the time when the defendant effected payment unreasonable.

As for the second sum of RM78, 000.00 it was made to HRM on the 18.12.1987 and paid by the defendant on the 13.2.1998. What is missing here is when HRM approved this claim. As the defendant is not responsible for the acts or omissions of HRM, any allegation of delay on the part of the defendant must be restricted to the time when the certification of payment was given by HRM to the time when the defendant effected the payment. Since the plaintiff advances this allegation of delay, it is upon the plaintiff to tender evidence to show that the defendant delayed payment after HRM had certified this claim. But no such evidence was presented. For this, I find no merits in this plaintiffs assertion.

Refusal to release document of titles for redemption

According to what is pleaded, this plaintiffs complaint is confined two categories of buyers: (a) those purchasers who took government loan and (b) those not under group (a) above.

Under the original loan agreement, redemption amount for each type of houses to be built on mortgaged lots was agreed upon. The respective amounts are disclosed in the earlier part of this judgment. However, when the rehabilitated loan was effected no redemption amount was mentioned. Subsequently in 1988 the defendant only agreed to allow the discharge of charge and release of title deeds "upon the receipt of the full sales proceeds". As for government loan, the defendant "agreed to sign the discharge of charge and release the titles upon receipt by us the land cost ("partial redemption sum") from the Treasury, Government subject to your (the solicitor, M/s Lim Seong Chun & Co) undertaking to pay over the balance of the loan upon receipt of the same by you, from the Treasury Government".

This drew criticism from the plaintiff who argues that the redemption amount applicable previously should be practiced. I am not impressed with this approach. Ever since the loan was rehabilitated the entire process had changed. The success of the whole exercise depended on the payment of all proceeds of sales into an account where money therefrom could only be released after verification and sanction of HRM. When this was not complied with and when the defendant discovered that the plaintiff was breaching the PAS scheme arrangement by keeping certain proceeds of sales the defendant had the right to alter the redemption procedure. This is understandable: if full sale proceeds was not received and redemption allowed as previously practiced, then the defendant would be loosing its securities for the loan or loans it made to the plaintiff. Further, this is not in breach of any terms in the rehabilitation agreement of 10.8.1987 since, as the plaintiff contends, no such term was ever stated in the first place. Secondly, even if the redemption was to follow that of the original loan, but due the breach caused by the plaintiff in not paying the entire proceeds of sale into the designated account the defendant was lawfully entitled to imposed its own procedure.

The titles under category (b) which are: i.e. PT 2043, 2071, 2221, 21222, 2212, 2178, 2215, 2217, 2220, 2070, 2068, 2119, 2084, 2041, 2090, were refused redemption by the defendant on the same reasons stated above, principally, the breach by the plaintiff in not paying into the designated account all proceeds of sales leading to the imposition of new redemption procedure. Further, some of these were refused redemption after the defendant had suspended the plaintiffs account in 1990. Since the reason for refusal to redeem these titles is justified, I dismiss this plaintiffs contention that the defendant has breached the agreement by its refusal to redeem these titles.

As for the titles in category (a) i.e. PT 2067, 2111, 2124, 2123, 2179, 2067, 2139, 2111, 2047, 2124, 2120, 2112 (involving government loan) the defendant admitted that these were not released. The reason advanced was that: land cost (partial redemption sum) for these loans were not received from the solicitor, M/s Lim Seong Chun & Co. I find this explanation reasonable and in line with the arrangement expressed above. For this reason, I again find no merits in this plaintiffs claim.

Unlawfully suspending the plaintiff's account

The suspension the plaintiffs account came after the plaintiff refused to comply with the defendant's request to pay into the designated account all proceeds of sales. This nonpayment was confirmed by HRM, the independent accountant. As the plaintiff had breached this fundamental term of the contract of 10.8.1987, I do not find this action of the defendant in suspending the plaintiffs account unlawful.

Delay in paying off end finance claims

In the claim by the plaintiff that end finance was not released or being delayed on a number of specified titles, lengthy explanations were offered by defendant's witnesses on virtually every title referred to. Detail records of when each of these applicants applied for end-finance to the time of the loan release were tendered in evidence. From them, the main reasons for the alleged delay and refusal to release end finance were due to problems of one kind or other.

Common among most were: insurance coverage to secure the housing loan, a requirement by most financier to ensure payment in the even of death of borrower, was not taken up by the borrower; borrower had defaulted in paying interest on outstanding sum released to developer up to that stage of work; offer of loan not accepted or taken up by the applicant; loan and security documentation was not complete, such as, where the borrower did not sign the charge and transfer documents in favour of the defendant. Other hiccups were; request for payment by the plaintiff not with accompanied architect's certificate of progress of work done up to that stage of claim, and the time taken in processing the loan which has to be forwarded from branch office to head office of the defendant for approval.

This was then aggravated by the suspension of the plaintiffs account and the abandonment of the project in 1990 and before the revival under the TPPT scheme. When the project was abandoned some end-finance applications were put on hold and when the project was once again resurrected the applicant had no desire or delayed in pursuing with the loan.

All these delays were not, in my opinion, due to the fault of the defendant. As such the defendant committed no breach of agreement in respect of this accusation.

One other point associated with this, is the accusation by the plaintiff that the defendant did not make available end finance facility to all the 132 purchasers of houses in the project. On this issue, I agree with Mr. Leong's submission that under the rehabilitated loan agreement of 10.8.1987 (even with subsequent alterations thereto) end-finance was only to 53 purchasers. I do not find any evidence that implies otherwise, as claimed by the plaintiffs counsel, Mr. Choy.

Defendant's Counter-Claim in 22-188-1994

The plaintiff has counter-claimed the plaintiff for a sum of RM2, 28,377.31 with interest and cost. This arose from releases made by the defendant to the plaintiff under the original loan followed by the rehabilitated loan, and additional advances made during the PAS operational period to assist when the original RM1 million bridging loan was insufficient. The plaintiff did not seriously contest these amounts except to harp on the allegations of the defendant's breach of contract.

With supporting evidence adduced by the defence to proved this sum due and owing by the plaintiff, I am satisfied that the defendant has proved its counterclaim against the plaintiff.

Analysis of case number 22-59-1996

After careful study and analysis of a confused amended Statement of Claim in this case, I find that the basis of the plaintiffs claims in this suit is associated with events relating to the TPPT scheme. It contains two causes of action: breach of contract and negligence.

I shall fist deal with the claim for breach of contract. This involves three parts: (a) willfully inflated the redemption sum and (b) delayed in releasing end-finance and (c) delayed in processing the redemption of the specified titles. Besides, there is the issue of whether an implied contract eame into existence where the defendant agreed with the plaintiff to grant substantial end-financing to purchasers but breached it by only offering 60% of the purchase price as loan.

(a) Willfully inflating the redemption sum

In the 3rd schedule of the TPPT Agreement the redemption amount is specified for each title listed therein. Here, the plaintiff is alleging that the defendant, not complying with what was agreed changed the amount of redemption on 3 titles: PT 2041,2181,and 2182.

The defendant did not deny this but explained that it was carried out because the plaintiff had reduced the selling price of the houses. This, according to the defendant, affected the repayment amount under the TPPT scheme. Explaining further, the defendant said that when the plaintiff reduced the selling price of the houses under phase 1 there would be insufficient income to repay the defendant for loan advanced. Thus if the titles were redeemed on the amount as set down under the 3rd schedule the defendant would find itself holding inadequate security. Once again, a chicken and egg situation arose.

The plaintiff acknowledged that these houses were sold below the minimum selling price stipulated under the TPPT Agreement but stressed that it had the consent of the defendant and PM (Peat Marwick).

After pursing the evidence relating to this issue, I find no evidence to support the charge that the defendant had consented to permit the plaintiff to sell the said houses below the agreed minimum selling price. When the plaintiff refused to abide by the terms of the agreement and breached the contract the defendant can renounced the agreement and imposed terms of its own. For this the defendant cannot be faulted.

(b) Delayed in releasing end-finance

Though paragraphs 5 (2) of the amended Statement of Claim speaks of delay in processing redemption of titles but upon careful perusal it involves accusation of the defendant in delaying the release of end-finance. This is certainly very misleading and speaks poorly on the quality of the plaintiffs pleadings. Be that as it may, concentrating on the accusation of the delay in releasing end-finance for lots held under titles number PT2119, 2178, 2122, 2070, request for payment by the plaintiffs solicitor Ms Lim Seong Chun & Co was made to the defendant on the 29.10.1993. But this was paid on the 15.12.1993. Given this short time span between request and payment and the explanation for the procedure and period involved to comply with it, I do not consider there was delay concerning the release of end-financing on these titles. I accept the following explanation offered by the defendant:

In respect of lot 2043 PM had advised the defendant not to release end-finance to this lot since this land was not specified in the 3rd schedule of the TPPT Agreement.

For lots 2215 and 2071 the defendant gave the dates of request and release. From these, I do not detect any delay in the release of end-finance.

For the 9 titles stated in paragraph 5 (2) (h) of the amended Statement of Claim the revised redemption amount has come into effect at the material time.

As for other titles, where delay is claimed, I find no evidence to support this plaintiffs contention.

(c) Delayed in processing the redemption of the specified titles.

The plaintiffs accusation of the defendant's delay in redeeming certain specific titles is spelled out in paragraph 3 (v) of the amended Statement of Claim. But these are all proved to be unfounded when the entire history of these lots was disclosed via documents and testimonies of plaintiffs witnesses. From these, I find no evidence of delay on the part of the defendant in processing the redemption of the titles mentioned.

Implied contract to provide substantial end-finance

Again after perusing the evidence adduced in this case, I find nothing to support this contention. The amount of loan to be offered to a purchaser by an end-financier is surely dependent on many subjective factors, such as: the age of the applicant, his income and his ability to repay. With these for consideration I do not believe that the defendant did agree with the plaintiff to offer a standardized amount of loan for every purchaser.

Claim of negligence

On the cause of action based on negligence, I find no evidence being lead by the plaintiff to establish what duty of care the defendant owed the plaintiff and ambit of such duty of care. Without this, this Court is unable to determine whether on the evidence adduced the alleged breaches of negligence are within the confines and scope of the duty of care accused to be owed. In the absence of this essential factor being established, I have to dismiss this claim of negligence by the plaintiff.

Defendant's Counter-Claim in 22-59-1996

The defendant's counter-claim against the plaintiff is for a sum of RM104, 824.98. This does not seem to be disputed by the plaintiff. With the statements of accounts of the defendant produced I find this counter-claim of the defendant proved.

Conclusion

Based on my reasons aforesaid, I hereby dismiss the plaintiffs claims in both civil suits number 22-188-194 and 22-59-1996 with cost and allow the defendant's counter-claim in both these suits with costs.

Dated: 20.2.2002

(DATO' JAMES FOONG CHENG YUEN )

Hakim

Mahkamah Tinggi Ipoh.

Peguam-Peguam

En. K.L. Choy, En. Arthur Yeong, En. S. Gunasegaran dan Cik Mary Lim bagi pihak Plaintiff Tetuan K.L. Choy& Co

En. Leong Wai Hong dan Cik Claudia Cheah bagi pihak Defendan. Tetuan Skrine