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Case Update: Judicial sale conducted pursuant to an order of Court does not create a contract with successful bidder

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CONTRACT LAW
Judicial Sale – Public Auction – Bank – Land – Proclamation of Sale – Breach of Contract – Compensation – Statutory Right – National Land Code

Ambank (M) Berhad v AIM Edition Sdn Bhd
Civil Appeal No: 02(f)-33-07/2020(B)| Federal Court
- see the grounds of judgment here

Facts The original registered owners of 94.76 hectares of land had defaulted on their loan repayment causing Ambank (M) Berhad (the ‘Appellant’) to initiate proceedings for a judicial sale of the land by way of a public auction. AIM Edition Sdn Bhd (the ‘Respondent’) submitted a bid which was accepted and the relevant documents were signed. Sometime later, the Respondent decided to appoint a surveyor to ascertain the actual size of the land. The Respondent was informed that the actual size of the land did not accord with what was stated in the Proclamation of Sale. Around 12.7 hectares of land overlapped with 5 other lots thus the Respondent claimed that the Appellant was in breach of a material term of contract by not delivering what was contracted or promised. The claim was dismissed at first instance but allowed on appeal. Hence the Appellant filed this appeal at the Federal Court.

Issue Whether a judicial sale pursuant to section 257 of the National Land Code 1965 gives rise to a contract between the charge bank and a successful bidder?

Held In unanimously allowing the appeal, the Federal Court examined the relationship between a successful bidder in an auction conducted pursuant to an order for sale issued by the High Court, and the bank who initiated the sale, and whether these parties are in any contractual relationship upon which the parties may sue for any shortcomings that may subsequently arise. The Federal Court answered the question of law posed in the negative and emphasised that the public auction is a judicial sale of the subject property, judicial as it is ordered by the Court after the Court is satisfied that the grounds for ordering a sale under the National Land Code 1965 have been met. The judicial sale of the property which is subject of the charge was sought for by the chargee bank who was merely enforcing its statutory rights as a chargee when the chargor defaulted or was in breach of the underlying contract between them. The Federal Court further held that earlier decisions of the Federal Court in Ranjit Singh a/l Jarnail Singh v Malayan Banking Berhad [2016] 1 MLJ 165,  and M&J Frozen Foods Sdn Bhd & Anor v Siland Sdn Bhd & Anor [1994] 1 MLJ 294 are instructive and of application, thus the current and correct position in law. Hence, the Respondent is the registered owner with indefeasible title to 94.76 hectares which is consistent with what was ordered by the High Court and as set out in the Proclamation of Sale. The fact that other titles have been issued which seemingly encroached on the respondent’s land means that the respondent ought to be pursuing other remedies but not in contract as there is none to begin with.

ZUL RAFIQUE & Partners
{15 December 2021}

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