What is an Order For Sale?
In cases where a person would like to borrow money from the Bank, it is common for the Bank to require the borrower to provide a security (collateral) for the loan. Normally the security comes in a form of a property that has a higher value than the loan amount granted and this security would then be “charged to the Bank”. Hence, the borrower would be called “chargor” and the Bank would be called “chargee”.
However, if a chargor fails to repay the loan granted to him, the chargee in attempt to recover the loan, is able to exercise its rights to apply for an Order For Sale by way of public auction. Before applying for an order for sale, the charger would typically send out a notice either Form 16D or Form 16E to allow the chargee to remedy the default within a month. However, if the chargee still does not remedy the breach, the charger would proceed with the application.
According to Section 256(3) of the National Land Code 1965, it states that the Court has the authority to order the sale of the land unless the Court is convinced that there is a cause to contrary. Therefore, there is a possibility that the application could be set aside if the Court is satisfied that by granting the order for sale would amount to an undesirable judgment. The duty to prove that there is a cause to contrary falls on the person who claims that there is a cause of contrary, which is most likely the chargor.
How then does a chargor prove that there is a cause to contrary?
The leading case that explains the term “cause to contrary” is Low Lee Lian v Ban Hin Lee Bank Bhd  1 MLJ 77 where the learned Gopal Sri Ram JCA had stated three grounds where granting order of sale would be contrary to the rule of law.
The first one is that, the case of the chargor falls within the exceptions to indefeasibility doctrine in Section 340 of the NLC. Section 340(2)(b) states that the title or interest of any such person or body shall not be indefeasible where registration was obtained by forgery, or by means of an insufficient or void instrument. Briefly, this would mean that if there is any fraud involve in the registration of charge or title, the application may be set aside.
Secondly, a cause to contrary exists when a chargor is able to show that the chargee has failed to meet the conditions precedent for making an application of an order of sale. The application for an order for sale is laid out in the Order 83 of the Rules of High Court 2012. Failure to comply with the rules would give reason to the Court to set aside the application. Also, in the case of Co-operative Central Bank v Meng Kuang Properties  2 CLJ 1144, the court submit that there was a cause to contrary when the notice of demand and form 16D were invalid as they did not disclose the correct amount of money and interest to be claimed.
The third cause of contrary that was provided in Section 256(3) of National Land Code 1965 is when a chargor could establish that the grant of an order for sale by the court will be contrary to some rule of law or equity. In the case of Kuching Plaza Sdn Bhd v Bank Bumiputra Malaysia Bhd  3 MLJ 163, the application for Order of Sale was set aside by the court as it was against rule of equity because if the Order of Sale was granted, it would cause the unfairness to the other parties who had interest on the land.
There is a cause of contrary if:-
- Charge is not registered
- Contravention of statutes
- Invalid service of statutory notice
- Defective or improper statutory notice of demand
- Application made to wrong tribunal
A contrary to any rule of Equity happens when:-
- A charge had knowledge that the land was previously sold to the 3rd parties prior to the registration of the charge in their favour but still applied for the Order For Sale.
- A chargor turned to the 3rd party to redeem the charged property and had in fact collected the redemption sums from the 3rd party, then they are under some equitable duty.
- The charge did not comply with the instruction from the borrower.
Thus, there is a possibility that an application of the Order For Sale may be set aside by the Court on these three grounds. If there is still difficulty in trying to stop the application of the chargee, it is always advisable to look for further legal advice on the chances of the case and get the help of experienced litigators to challenge the Order For Sale application.