BASIC FORECLOSURE PROCEEDINGS – HIGH COURT CHARGE ACTION (REGISTRY TITLE)
A letter of demand (LOD) will be issued to the Borrower/Chargor requesting for the arrears to be paid; failing which, a letter of recall (LOR) will then be issued to the Borrower/Chargor requesting for whole outstanding amount.
Before the Chargee can make the application to the courts, Form 16D must be issued against the Chargor pursuant to Section 254 NLC 1965. The Chargor is required to remedy the breach within one month of the date on which such Form 16D was served.
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The application is made by Originating Summons (“OS”) supported by affidavit (“AIS”) in accordance with Order 83 ROC 2012. A Further Affidavit will be filed to state the particulars of the amount remaining due under the charge as at the hearing date of the OS (Order 83 rule 3 ROC 2012).
A copy of OS and AIS will be served unto the Chargor not less than 4 clear days before the first hearing day (Order 83 rule 2 (2) ROC 2012). If the Chargor is absent from the hearing and the hearing is adjourned, the Chargee shall serve on the Chargee a written notice together with any Further Affidavit intended to be used at the hearing day not less than 2 clear days before the next hearing day (Order 83 rule 2 (4) ROC 2012).
Affidavit of service must be filed to prove the abovementioned service of cause papers.
Section 256 (3) NLC 1965 provides that the Court shall order the sale of the land to which it relates unless there is cause to the contrary. The burden of proving cause to the contrary is on the Chargor. In the case of Low Lee Lian v Ban Hin Lee Bank Bhd [1997] 2 CLJ 36, the Federal Court held that “cause to the contrary” can be established in the following categories:-
- Failure to satisfy the notice requirement in Form 16D;
- Failure to comply with the procedural requirements of Order 83 ROC 2012;
- Exceptions to the indefeasibility doctrine in Section 340 NLC 1965; and
- Grant of Order for Sale would be contrary to rule of law or equity.
In the event the Chargor can prove cause to the contrary, the Chargee’s application will be dismissed.
In the instance where the Chargor fails to prove such cause to the contrary, an Order for Sale will be granted with cost and a tentative auction date will be fixed by the Court. The Order for Sale will then be served unto the Chargor.
After the granting of an Order for Sale, an application is made by Notice of Application supported by affidavit exhibiting the said Order for Sale and a copy of the Valuation Report. A valuation report will deemed to be valid if it is made within 2 years from the date of filing of application (Practice Direction No. 1/2014).
- The Registrar of the Court will then fix an auction date (if the earlier auction date cannot be used) and a reserve price for the purpose of the sale, which is equivalent to the estimated market value of the land. (Section 257 (1)(d) NLC 1965). The auction will be held virtually via e-lelong webpage (https://elelong.kehakiman.gov.my/BidderWeb/Home/Index) and the applicable POS will be generated by the e-lelong department.
- Solicitors for the Bank is to e-file the following before the auction date:-
- Copy of Title;
- Copy of Charge and Charge Annexure;
- Affidavit of Service proving that the POS has been posted and advertised as required by the Court;
- Receipt confirming that the ‘execution fee’ (equivalent to 3% of the reserve price of the property) has been paid. ** execution fee is non-refundable and needs to be paid once only (ie before the 1st auction fixed).
Parties who are interested to participate in public auction shall register as Bidders in the e-Lelong System . Every interested bidder has to pay 10% of the reserve price by way of bank draft to the e-Lelong Operation Centre, Kuantan Court Complex via Pos Laju Services or by hand; or by hand to any of the High Courts of Malaya in Peninsular Malaysia, no later than 1 working day before the public auction is conducted. The Successful bidder has to pay the balance purchase price (“BPP”) within 120 days. In the event the successful bidder fails to settle the BPP within 120 days, the 10% deposit will be forfeited by the Chargee. A new Notice of Application to fix new auction date shall be filed within 8 weeks from the expiration of 120 days.
The Chargee may also withdraw the auction anytime before the auction date (by filing Notice of Discontinuance) if there is payment made by the Chargor. Nonetheless, if the Chargee intends to proceed with auctioning the property again, he may do so by filing a fresh Notice of Application.
Article by
LEE YI HAN
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Dean Dennis
This article on basic foreclosure proceedings and high court charge actions is incredibly insightful! It breaks down the complex legal process into easy-to-understand steps. A must-read for anyone facing foreclosure or working in real estate law. Thank you for this valuable resource!”