BANKING

RHB Bank Bhd v. Richland Leisure Group Sdn Bhd; Ng Seang Heng (Third Party) [2024] 2 CLJ 871 [High Court]

Brief facts

The plaintiff, RHB Bank (‘RHB’), is a licensed bank in Malaysia. The defendant, Richland Leisure Group (‘Richland’), is a junket operator that has been authorised by Genting Malaysia to operate a Local Group Casino Rebate Programme (‘Casino Rebate Programme’) at Genting’s casino. Under this programme, individuals are enrolled by agents like Richland to participate in the rebate programme when they gamble at Genting’s casino. Richland earns a commission from Genting based on the rebate structure for every player it brings in.

The dispute arose when three outward telegraphic transfer transactions executed by RHB to remit sums totaling RM1,031,000.00 from its client, Fujikura (Malaysia) Sdn Bhd (‘Fujikara’)’s bank account to Richland’s bank account premised on the forged payment instructions provided by a Ng Seng Heang (‘Ng’). The three remittance application forms reflected Fujikura as the applicant authorising remittance to Richland with a company stamp and an authorised signatory’s signature. In accordance with the Standard of Procedure of RHB, RHB would call Fujikura’s authorised personnel, to confirm each transaction before remitting the moneys. RHB did accordingly receive confirmation from Fujikura’s authorised representatives before making each of the three payments made between 11.9.2020 and 18.9.2020.

However, sometime after 18.9.2020, Fujikura filed a complaint against RHB alleging that it did not authorise or sign those three remittance application forms. Upon close investigation, RHB discovered that the signatures, stamp and authorised personnel details reflected in the three forms did not in fact match Fujikura’s actual records kept in RHB. RHB thus concluded that the three forms, were forged documents not genuinely issued or authorised by Fujikura.

Therefore, RHB attempted to recall the RM1,031,000.00 paid into Richland’s account maintained in Maybank but was unsuccessful because Richland had paid Genting RM1,031,000.00 to account for the gaming chips given to Ng. This led to the filing of this action by RHB against Richland to recover the sum mistakenly remitted to Richland.

High Court’s Decision (Justice Atan Mustaffa)

The High Court dismissed RHB’s claim and held that the following circumstances do not necessitate a refund based on natural justice and equity:

[1] RHB did not lead any evidence to challenge the common business practice of Richland to show that: (a) it was ‘highly unusual’ for a company to use its funds for an individual to gamble; (b) the total sum of RM1,031,000.00 remitted was extremely exceptional in the gambling industry; and (c) the risk of fraud was high by the nature of the gambling industry. RHB’s allegations were not supported by evidence and hence, the court ruled that the transaction between Richland and Ng were carried out in the ordinary course of Richland’s business.

[2] The funds received by Richland from third party companies were for individual players to gamble in Genting’s casino. Richland’s bank statements sufficiently proved it is in fact Richland’s common business practice to receive funds from third parties. There was no compelling reason for Richland to be put on inquiry before proceeding with the transactions for Ng.

[3] As for the opening of Ng’s account with Richland, there was no duty for Richland to verify the validity and reliability of Ng’s source of funds as it was reasonable for Richland to accept incoming funds from a third party i.e. Fujikura, whom Ng claimed he accepted the money on behalf of. Therefore, having received double confirmation from Fujikura and the bank, and Richland believing the bank would have even more stringent approval procedures, Ng’s account opening was taken to be in order and created no suspicion.

[4] Richland’s payments to Genting on two occasions were indicative of normal business transactions and did not in themselves imply any act of bad faith or an attempt to evade the consequences of the alleged fraud. Nothing was ascribed to the recall being unsuccessful due to insufficient funds. No particulars were also given as to how the ‘attempts to recall’ were made. Therefore, RHB’s contention that Richland dissipated funds from its account to put the moneys it received from RHB out of reach after becoming aware of the fraud and after RHB’s attempt to recall the moneys from Richland’s account, failed.

[5] Ng was engaged in gambling activities facilitated by Richland, consistent with Richland’s role as a junket operator of the casino rebate programme. Richland’s actions following the receipt of funds from Fujikura indicated compliance with standard business practices rather than unjust enrichment. Moreover, Richland’s swift response to the notification of fraud by RHB demonstrated its good faith and lack of involvement in any fraudulent activity. Hence, Richland’s actions were within the scope of its legitimate business operations, and no grounds existed for RHB to recover the said sum on the basis of money had and received.

Conclusion

[6] Although RHB made the payments under a mistake based on forged documents, the recovery of the moneys was not allowed when Richland was able to establish the defence of good faith.

Export-Import Bank of Malaysia Bhd v. Sun Holding (Sun Park Hotel) Co Ltd & Ors [2024] 9 CLJ 495 [Court of Appeal]

Brief facts

The appellant, Export-Import Bank of Malaysia Bhd (‘the Bank’) was a development financial institution while the first respondent, Sun Holding (Sun Park Hotel) Co Ltd (‘Sun Holding’) was a Laotian company. The second and third respondents as well as one Dato Cheok Thian Sang were guarantors (collectively referred to as ‘the guarantors’).

In 2002/2003, the Government of Lao PDR requested Sun Holding associated with Rancang Timur Sdn Bhd to construct a hotel. Consequently, by a master agreement and a land lease agreement, the Government of Lao PDR leased to Rancang Timur Sdn Bhd a plot of land located alongside the Mekong River (‘land’). Sun Holding procured loan financing amounting to USD14,000,000 to develop the hotel and tourist complex from the Bank (‘loan’).

Subsequently, the Bank and Sun Holding agreed to the re-structuring of the loan as well as the provision of an additional loan of USD29,237,359.56 (‘additional loan’) and accordingly executed the restructuring agreement. In 2009, the loan facilities were terminated as a result of default on the re-structured loan and the Bank demanded re-payment of the sum of USD35,852,060.66. The Bank thus exercised its power of sale over the secured property. The Bank then commenced a suit against Sun Holding and the guarantors for the recovery of the loan arrears. However, Sun Holding and the guarantors counterclaimed for breach of duty of care in respect of the Bank’s disposal of the security of the loan facilities.

High Court’s Decision

The High Court Judge (‘HCJ’) allowed the counterclaim and ordered a fresh valuation to be conducted on the secured property to determine its market value and the direct loss due to the undervaluation of the secured property at the time of the sale. The court applied English common law principles of tort on duty of care and held that it is trite principle of law that a mortgagee in exercising its power of sale over secured property, owes a duty of care to the mortgagor when it sells the secured property. From the evidence, it is clear that the sale of the secured property was sold by the Bank with no proper valuation and thus the Bank breached the duty of care in exercising its power of sale of the secured property.

Dissatisfied, the Bank appealed.

Court of Appeal’s Decision (Judgment delivered by Lim Chong Fong JCA) :-

Two principal issues that arose were:

(i)whether the Bank has the duty of care in law to ensure the best possible price was obtained whilst disposing the land; and

(ii) whether, if so, the duty of care had been negatived by the contractual provisions entered into by the parties in connection with the loan.

Decision on Issue 1:

[1] According to the Bank, the applicable law of tort of negligence is Lao PDR law as the land was situated in Lao PDR, the land was mortgaged to the Bank under Lao PDR law and Sun Holding was a Lao PDR registered company.

[2] Since Sun Holding and the guarantors were the parties who pursued the counterclaim for the Bank’s breach of duty of care, they bore the legal burden of proof to show that their counterclaim was sustainable under Lao PDR law. They did not lead any expert evidence whatsoever on the law of tort of negligence of the Lao PDR and thus failed to satisfy the double actionability rule which was critical in law for them to succeed on their counterclaim. The double actionability rule holds that an action for a tort done in a foreign country can only be successful in forum/domestic courts if it is actionable under both the laws of the forum country and the foreign country.

Decision on Issue 2:

[3] The Court of Appeal made no finding on this second issue though some observations were made.

[4] Since the parties have expressly agreed to a cl. 7(a) of the security agreement that the security may be realised at such prices as it may deem best, this provision negatived any duty of care allegedly owed by the Bank to Sun Holding and the guarantors not to dispose of the land without prior ascertainment of its true market value.

[5] The Bank relied on the case of CIMB Islamic Bank Bhd v. Khairuddin Abu Hassan [2021] 4 CLJ 375 which provides that the documents pertaining to the property, i.e. the property purchase agreement, the property sale agreement, the deed of assignment and the power of attorney, showed that Sun Holding and the guarantors willingly agreed to hand over the property to the Bank for sale by public auction. The documents did not require the Bank to notify Sun Holding and the guarantors about the auction. Consequently, there was no duty on the Bank to notify them about the proclamation. 

[6] The Bank could not be found negligent, had not acted mala fide, had not committed fraud and could not be said to have breached its contractual obligation to Sun Holding and the guarantors. Therefore, it did not matter whether there was correspondence sent to notify Sun Holding and the guarantors about the proclamation. At best, the letters sent were extra or additional service provided at the courtesy of the Bank as a bank to Sun Holding and the guarantors being its customers. It was sent beyond the duty imposed on the Bank. The advertisement of the proclamation in the Malay Mail, which was not widely circulated, had no effect. 

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