Part B

The case of Bank Bumiputera Malaysia Berhad Kuala Terrengganu(the bank) v Mae Perkayuan
Sdn Bhd (the company) was about the bank granted an overdraft facility to the company, made
up of two part as follows:
i.

The first RM 2.4 million was as building finance for proposed development of 6 Lots of

ii.

land in Dungun, Terrengganu and

The second RM 2.1 million was to purchase a piece of land in Alor Gajah.

The bank withdrew the facility due to respondents failure to service the interest. Upon
approving the bridging loan, the bank knew that the company would not have any income until
the sale and purchase agreements were signed, and have no obligation to pay the bank.
Therefore, the bank was not entitled to recall the loan on the ground that the interest had not been
serviced by the company. Damages were awarded to the borrower as loss of profit which the
borrower would have earned if the housing development project had been completed.
The Bank failed to outline the standard of procedure (SOP) properly. The Bank claimed that
Bank have the right to withdraw the facility based on clause subject to periodical review and
payable on demand.
First, the bank did not perform any periodical review that is crucial since the decision to
withdraw facility depends on the review made by the Bank. Withdrawing a facility without
assessment is unfair to the company, since the company did comply with the terms and
regulations set by the Bank. Besides that, the bank did not give any notice to client before
withdrawing the facility. Following the SOP, the Bank should notify the company before
withdrawing the facility. The bank claimed demand letter for repayment of interest was issued,
30

only after the facility was withdrawn. By issuing the demand letter after the facility was
withdrawn, it shows that the bank did not follow the SOP.
The Bank breached the Contract Act 1950 for withdrawing the facility on the ground that the
company was not servicing the interest on the amount disbursed. Referring to the agreement, the
terms are clearly stated that interest not paid will be capitalized and added to the principal sum
and further interest would be chargeable. Besides that, the Bank admitted that there was nothing
in the agreement require the company to make repayment by fixed installment or impose penalty
remaining unpaid.
The Bank had breached the compliance (internal policy) of its bank by not stating clear and
consistent terms and condition. This error made would lead to breach of contract and the bank
would have to compensate for the company loss. Bank Bumiputera made a huge mistake by
stating the term differently for typescript and printed version. The word term loan and
repayable on demand, is two different words and have opposite meaning, and if put into
contracts, the court would recognize the typescript words by applying the contra proferentes rule.
However, if the bank had no intention to grant a term loan in this case, the bank should attempt
to rectify the contract. In this case, the Bank treated the loan as on demand loan without
rectifying and breached the contract by recalling the loan prematurely.
Besides that, Bank committed ethical issue of trust, when Bank withdrew the facility before
maturity period specified in the contract. The customer have faith in the banks promise to a loan,
for a fixed term and when the overdraft was cut off, the company could not meet his liability and
suffer losses.

31