BFW3841 Assignment: Analysis of Bank Lending Practices and Cases

This report provides a comprehensive analysis of two significant bank lending cases: Bank Pertanian Malaysia v. Blue Valley Plantation Bhd & Ors and Bank Bumiputra Malaysia Bhd. Kuala Trengganu v. Mae Perkayuan Sdn. Bhd. & Anor. The first case examines issues of undue lending practices, fraud, and misrepresentation in relation to a land charge, highlighting the bank's shortcomings in due diligence and adherence to legal procedures. The analysis delves into the implications of amending legal documents without consent and the importance of disclosing material facts. The second case focuses on a bridging loan agreement, exploring breaches of contract, premature recall of facilities, and the application of legal principles such as contra proferentes. The report critically assesses the banks' actions, identifying instances of imprudent lending practices, lack of transparency, and failures in credit analysis and lending management, and also includes a discussion of an article related to credit analysis and lending management.

RUNNING HEAD: UNDUE LENDING PROCESS BY BANKS 1
ASSIGNMENT PART A: SUMMARY AND ANALYSIS OF THE CASE OF BANK
PERTANIAN MALAYSIA V. BLUE VALLEY PLANTATION BHD & ORS.
The case is about the land which was undivided and the case sort to find out or to seek consent of
the knowledge of the chargor or occupiers whether it amounted to fraud, dishonesty or
misrepresentation and whether there is cause to the contrary with regard to the application for an
order for sale of the land by the plaintiff (West, 2013). The first defendant in the case is a
proprietor of the land measuring 508.875 acres in Cameron highland. Some portion of the land
was sold in 1992 and 1993 by the defendant to the interveners and the later have occupied their
land. The defendant claims that his interest in the land had been reduced from 508.875 to 300
acres.
The first defendant purchased the portion of land by obtaining RM15million loan but the plaintiff
argued that the land was yet to be sub divided but the defendant proceeded to seek the consent of
the interveners and promised to exempt them from and any loss in future should it happen (Cull,
Haber & Imai, 2011).
After obtaining their consent, plaintiff solicitors prepared all the documentation for the first
defendant as the charger. The document showed that only the portion of land 300/508.875 acres
is to be charged. After the submission of the document to the land registry, solicitors without any
consent deleted the figure 300/508.875 to show that the charge should be made on the entire land
and the plaintiff got favor by getting the entire land registered under him (Chandler & Fry,
2009).
The borrower later defaulted to repay the money and the plaintiff initiated court proceedings
against the land. The charger and the interveners pleaded before the judge that the case is not
sustainable because the plaintiff through the solicitors committed fraud and acts of
misrepresentation (Tsai, Cheng & Lin, 2009).
Solicitors were therefore required to prove that all documentation were correctly filed and duly
signed by all the parties that is the charger and the chargee because it is not within their powers
to make any amendments in the documents which might cause any harm in the interest of
concerned parties without seeking clarification from the concerned parties. The solicitors had

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enough knowledge that the land in question was in the possession of the interveners and that the
first defendant didn’t own the entire piece of land and that the interest of the plaintiff was only in
the 300 acres. Creating a charge on the undivided portion of land is also not accepted under s.241
NLC but they ignored this and convinced interveners to give consent on the entire land
(Aryeetey & Udry, 2010).it is argued that the form 16A was created through fraud and
misrepresentation and therefore it is void and unenforceable in any court of competent
jurisdiction (Blackburn & Tanewski, 2010).
The charge therefore must proof that the chergor committed some fraud in preparation of
documents and must provide all the relevant facts in their application (Domeher & Abdulai,
2012). It is revealed that the plaintiff as the chargee failed to provide all material facts in
application and therefore they are guilty of not providing all the relevant facts and making
fraudulent and dishonest facts to the court. The court therefore can dismiss its application on this
application (Mabikke, 2011).
The first defendant was just a trustee when the charge was created and was not entitled to any
beneficiary of the land purchased by the interveners and could not charge the whole piece of land
in favor of plaintiff since the charge will be unlawful and invalid. The first defendant and the
interveners raised a lot of reasonable causes that will defeat the plaintiff who want the order for
the sale of land.
According to the judgement of the court, the plaintiff files a case against the first defendant to
obtain an order for the sale of land which is a subject matter of the 3rd party charge created by the
1st defendant to use it acquire a loan facility of RM 15million (Ross, 1996). the main reason of
obtaining the loan was to purchase a piece of land 300 acres. The 1st defendant was the registered
owner of the undivided land. the loan facility was used to purchase 300 acres’ portion of land
and the remaining 208 was to remain for interveners. Some defendants (interveners) have long
purchased the portion of land and occupied it long before the charge was created.
Third party was granted a loan of RM 15 million to be used to purchase a 300 acres’ piece of
land which is registered under the 1st defendants name. The guarantee for the loan was; charge on
the land, guarantee by mala (Popov & Van, 2013).

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The firs intervener (2nd defendant) argues that he bought 37.18 acres of the land and has made all
the payments thereof. The second intervener (3rd defendant) claimed to have bought 12.81 acres
and all payments made. Fourth intervener (5th defendant) claimed to have bought 62 acres, fifth
intervener (6th defendant) claimed to have bought 100 acres. All the interveners pleaded to the
court that their interest in the land will be adversely affected should the application of plaintiff be
granted.
The dispute in the case is that, the charge was created unlawfully and that interveners are the
actual owners of the land and they gained possession long before the charge was created. The
documents in question was defective as the original content was deleted without prior knowledge
of charger
In their affidavits, all the defendants including the interveners claimed that the plaintiff through
its solicitors committed acts of frauds like dishonest and misrepresentation of facts. They also
said that the land could not be charged since it was not already subdivided and he could have
gotten the consent of the 1st defendant who is the actual owner of the land.
Negotiations between the concerned parties was requested in order to resolve the issue and the 1st
defendant agreed to execute the charge and the interveners agreed to give consent which allowed
the 3rd party to charge 300 acres and not 508.
The plaintiff argued that their solicitors changed the document without the consent of the 1st
defendant and this was based on the rights granted to them by the 1st defendant board resolution
and the letters given by interveners but this could not be accepted by the court. The court said
that “it is unreasonable for the solicitor to say he was authorized by mere resolution”. The court
argued that nowhere said that the resolution gives powers to the solicitors to effect the changes in
the documents.
The person who was acting on behalf of the plaintiff argued that the letter issued was not
relevant to the proceedings and that it was not issued by the plaintiff but the court argued that the
deeds of the solicitors acting on behalf of the plaintiff must be instituted on the plaintiff.
The court in the determination of the case must not only apply the provision of law but also
apply aid of equity to determine the application. Despite knowing all the relevant details about
the real owners of the land, he went ahead to create a charge on the property and give out a loan

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using the property as a collateral. The plaintiff is therefore guilty of refusing to give all the
relevant material facts about the case and dishonest presentation of facts. This would have led the
court to grant the order for sale of the property wrongly if it was not for the interveners to give
the court all the relevant facts about the case.
The plaintiff depended heavily on the resolution of the board to create a charge on the whole
property to their advantage. This was in contrary to the interest of the interveners who had long
purchased the piece of land.
The plaintiff who in this case is the bank had several defects in the approval and disbursement of
loans.it acted in a dishonest manner since its solicitors who were acting on their behalf changed
the contents of form 16A to create a charge on the whole land. The bank therefore just relied on
this to approve and disburse fund. The bank also acted in a dishonest manner by false full
presentation of facts to the court with regard to the order for sale of land used as a collateral for
RM15M to be used to purchase the portion of land.
In my view, it was imprudent for the solicitors to change the contents of form 16A to create a
charge on the whole portion of land without the consent of the parties. They merely relied on the
resolutions of the board to make amendments on the documents.it was later held that the
resolutions didn’t give them any rights to make any amendments on the documents (Koch &
MacDonald, 2014).
In conclusion, the court had all the relevant grounds to satisfy itself that all other parties
including defendants but excluding the plaintiff have supplied them with all relevant facts and
have come up with many contrary reasons that are sufficient to overturn the application of the
plaintiff for order for sale of land. According to the court, the plaintiff failed to supply them with
all relevant facts in its application (Burke, 2009). The court therefore dismissed the case of
plaintiff.

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ASSIGNMENT PART B.SUMMARY AND ANALYSIS OF THE CASE OF BANK
BUMIPUTRA MALAYSIA BHD. KUALA TRENGGANU V. MAE PERKAYUAN SDN.
BHD. & ANOR.
The case decision was made at supreme court ,Kuala Lumpur and is about Perk yuan Sdn Bhd
who is the first respondent and was desirous of developing certain lands in Dugun into a had
housing estate(Dungun project)and also purchasing land in Tampin for the purpose of developing
into Alor Gajah project ,a housing state.The respondent has approached the appellant ,who after
studying the details of the proposals, granted a bridging finance that was operated under an
overdraft facility to the first respondent. The respondent defaulted in servicing the loan and the
interest and the plaintiff removed the facility and claimed for the amount outstanding inclusive of
interest and costs (Everett, 2015). The term of the agreement was that all sums disbursed by the
appealant was to be capitalised (Drakos, 2013). The respondent counterclaimed for damages for
breach of the bridging loan agreement. The deciding judge ruled in support of the respondent and
dismissed the claim and allowed counter claim. It was then held that discussions have happened
between the plaintiffs and the first defendant before the appellant accepted to grant a linking
funding and the appellants were fully aware of the fact that the 1st defendant will receive no
proceed from the investment until a sales and acquisition arrangement is sign up .In addition, the
appellant was not allowed give the recall letter citing reasons that the agreed interest has not been
paid by the 1st defendant as it was not agreed in the agreements(Garr & Kyereboah, 2013). It was
also found that the typescript words in the agreement provided for a term loan whereas the
printed words explained that the facility was only to be repaid on demand and damages for it can
be claimed. It was also clear that the revenue loss on the investment that the defendant
experienced was due to the natural occurrence due to the breach of the contract. (Yong & Kuan,
2013). The dismissal of the the appellants on the overdraft facility could prematurely recalled
could not be justified as there was no solid reasons in regulation for pardoning the first defendant
from the obligation to reimburse the facility. Critically analyse the bank was found guilty of
breaching the bridging agreement by not notifying the first respondent of the failure to pay the
interest would lead to withdrawal of the facility (Zheng, Ghoul, Guedhami & Kwok, 2013).
Furthermore, the bank had an ambiguous term as those in typescript words treated the loan as
term loan while those in printed words treated it as repayable on demand. The bank through

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negotiations with the the first respondent has granted it loans. The key limitations in this case is
that the law had no grounds for pardoning the 1st defendant from the obligation of repaying the
loan. Also the bank was not allowed to give out recall letter citing reason of failure to repay the
agreed interest. It is of clear opinion that the plaintiff has not done survey and permit the the
customer enough repayment time to make the payment before issuing recall letter. Because of
this therefore, the 1st respondent is allowed to get compensations. The case is decide borrowing
judgement from the Halsbury’s England decision on Lending management and credit analysis.
The bank made several grave tactical mistakes which later turn to haunt it in the quest for justice
is they made an ambiguous terms of the agreement is the typescript treats the loan as term loan
while printed words treats it as repayable on demand. The bank issued a recall letter before its
accrued right to do so has been reached. Furthermore, the bank failed to notify the first
respondent of the penalty of failure to service the interest and withdrew the overdraft facility
without notice. In my view the first respondent deserved the claim as what the bank relied on in
the appeal was not part of of the agreement and does relate to the lending is all the proceed
receive by the bank was to be capitalised.
DISCUSSION OF THE ARTICLE ‘OPERATING WITH IMPUNITY’ IN RELATION
TO CREDIT ANALYSIS AND LENDING MANAGEMENT.
Impunity means operating without fear of punishment or discipline. In credit analysis and
lending management the article relies entirely on a single document (Sathye, Bartle & Boffey,
2013). Credit analysis is the technique through which one measures the credit worthiness of the
business is to measure whether the business is able to honour the financial obligations of its own
when they accrued (Buchory, 2016). The goal of this is to assess the ability of the borrower in
relation to the facility to be given with a sole objective of determining the risk associated. This is
done by determining the probable chance of possible default by the client at some level of
confidence and spreading it over the entire life cycle of the loan facility. This will assist the
lender to establish the estimated amount it can suffer incase of such default. Credit analysis
includes various analysis of different economic financial elements and carrying out various
changes and trends in such elements. Analysts make projections on the possible chance that a
debtor will no repay. Before approving a loan, the bank would consider all this factors.

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Traditionally most banks rely on subjective judgement to access the credit risk of a corporate
borrower. Today the borrowers consider the many things such as the reputation of the customer,
capacity to pay. At the moment, various methods of credit scoring have been formulated to assist
lending firms to assess the credit worthiness of an individual. For example, according to
univariate scoring, accounting elements of the debtor is compared to the general industry and
trend established (Harris, 2013). If lending was to take place in an environment where there is no
fear of punishment the environment was naughty as the borrowers could take the loan and failed
to service them as they are no grounds in law that could iniate an action. The lenders on their
hand would also have discriminated against the borrowers as the would not have honour the
credit policy and on their judgement would recall a contract of facility without notice and
warning and this would have been costly to the borrowers(Puri, Rocholl & Steffen, 2011) The
borrowers would take a loan and default it and by lack of elaborate disciplinary measures would
run away averting the loan leaving the lenders in financial indebtness.On the other way round
lack of actionable punishment may make the business environment in the economy good as the
borrowers are willing to invest in all manner of risk opportunities as they are not coerced to pay
the loan (Panagopoulos & Vlamis, 2009).Similarly the borrowers would being not wary of
other issues in the economy may be scared in essence that they will fear to invest as there no
grounds in law for them to reclaim their investment back. Before granting a loan facility, the
bank must consider key aspects of the borrower with the primary emphasis being the cash flow
of the borrower. The key measure of settlement activity is the debt ratio. An analyst will
determine the cash made by the firm before interest and other expense without depreciation and
other operating expenses. However univariate when use in credit analysis and lending
management has one limitation i.e. they are categorical rather than ratio level values. Although
univariate levels are still in use in credit analysis as per the article most academics and increasing
number of practitioners seem to disapprove the ratio analysis as a method assessing performance
of business enterprise. Many respected theorists downgrade the arbitrary rules of thumb that are
widely used by practioners and favour instead of the application of stastical rigorous statistical
techniques. Under the journal commercial bankers need to go a credit training to understand how
to manage the lending process in an environment where there is no threat of punishment
(Bouvatier & Lepetit, 2012). This will enable them to understand on all the evaluating process
before making a lending decision (Muzindutsi & Mposelwa, 2016).

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