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15 August 2023

TORT LAW

Borrower – Guarantors – Loan Facility – Professional Negligence – Damages – Appeal

Malayan Banking Berhad v Tan Soek Phee & Ors
Civil Appeal No. W-02(NCVC)(W)-2194-10/2018 | Court of Appeal

- see the grounds of judgment here

Facts Malayan Banking Berhad (the ‘Appellant’) gave a banking loan facilities to CSPM Technology Sdn Bhd (the ‘Borrowers’) which have been personally guaranteed by Chin Kwong Wah and Ng Lee Eng (the ‘Guarantors’). By reason of the default of the Borrowers and Guarantors in re-paying the loan disbursed by the Appellant together with interest accrued, the Appellant instructed the firm Messrs. Abd Aziz Chen, Advocates & Solicitors to recover the losses sustained by the Appellant from the Borrower and Guarantors. At all material times, the Respondents are the partners of Messrs. Abd Aziz Chen. Consequently, Messrs. Abd Aziz Chen on behalf of the Appellant initiated legal proceedings against the Borrower via Kuala Lumpur High Court Suit (‘Suit 43’) and the Guarantors via Penang High Court Suit (‘Suit 121’). By reason that Suit 121 was not served upon the Guarantors before the expiration of the writ, Messrs. Abd Aziz Chen thereafter re-initiated Penang High Court Suit (‘Suit 162’) against the Guarantors. In respect of Suit 162, the suit was dismissed after a full trial. Messrs. Abd Aziz Chen appealed to this Court on behalf of the Appellant but the appeal was struck off because of Messrs. Abdul Aziz Chen’s failure to file the appeal record within the prescribed time. As for Suit 43, the suit was struck off for want of prosecution and Messrs. Abd Aziz Chen failed to re-instate the suit within the limitation period. The Borrower was eventually wound up. As a result, the Appellant initiated a suit against the Respondents premised on professional negligence for failing to promptly file an appeal record and prosecute a suit within the prescribed time. The High Court judge found the Respondents negligent in these aspects but did not hold them responsible for loss of a chance due to lack of evidence, stating that the Appellate could still have sued the Guarantors at that material time. The learned judge also ruled out damages for loss of chance due to the Borrower's insolvency, implying no actual loss suffered by the Appellant. Dissatisfied with the findings of the learned High Court, both the Appellant and Respondent filed an appeal, via Appeal 2194 and Appeal 2220 respectively.

Issues 1. Whether the Respondents were professionally negligent in handling the legal proceedings against the Borrower and Guarantors.
2. Whether the Appellant was entitled to damages for loss of chance/opportunity due to the Respondents' alleged negligence.
3.  Whether the Appellant's claim for damages was valid based on the principle of "loss of chance."

Held In allowing the Appellant’s appeal (Appeal 2194) and dismissing the Respondent’s Appeal (Appeal 2220), Learned Judge of the Court of Appeal, Lim Chong Fong, upheld the High Court's finding that the Respondents were professionally negligent for failing to timely file the appeal record and prosecute suit 162 within the prescribed limitation period resulting in the Appellant losing the opportunity to recover the loan amount. While the High Court had ruled against the Appellant on the grounds that no actual loss of opportunity was proven, the Court of Appeal disagreed and in turn held that the Appellant had indeed lost the opportunity to pursue a claim against the Borrower and Guarantors due to the Respondents' negligence. The Court of Appeal emphasized that the Respondents' actions caused the Appellant to lose a substantial chance of recovering a significant sum of money. The Court of Appeal recognized that expert evidence was not necessary in this case to determine the standard of care required of solicitors, especially in a straightforward loan recovery scenario. It distinguished the case from instances involving specialized fields like intellectual property or conveyancing. The Court of Appeal concluded that the Appellant’s claim for damages was justifiable and awarded damages amounting to the difference between the total claimed and the previously awarded sum, amounting to RM622,006.00

Zul Rafique & Partners
{15 August 2023}


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