Charge -Cause to contrary
 S.256(3)
 The court will not allow the application of the
chargee for the order for sale, on the ground that
the sale would cause to the contrary.
 Cause to the contrary means: contrary to the law
and equity.
 Keng Soon Finance v MK Retnam Holdings Sdn
Bhd
Any attempt to refuse relief merely on the ground
that the court felt sorry for the borrower that it
regarded the lender as arrogant, boorish or
unmannerly. Hence if there is no cause to the
contrary, the court is obliged to make an order for
sale on the application of the charge.
 Low Lee Hian v Ban Hin Lee Bank
The App had executed a 3rd party land charge in
favour of the resp bank as security for an loan of
RM 600,000 granted by the resp to the borrower.
When the borrower subsequently defaulted, the
resp applied for an order for sale which was
granted.
I: Whether there was “cause to contrary”?
H: It is not sufficient merely to allege a breach by
the charge of the loan agreement or the terms of
the annexure to the charge instrument. An
allegation that the chargee had acted in breach
of sale is insufficient to defeat the application for
order of sale.
o ‘cause to the contrary’ within section 256(3)
might be established only in 3 categories of
cases:
(a) the case within any of the exceptions to
the indefeasibility doctrine in section 340.
(b) the chargee had failed to meet the
conditions precedent for the making of an
application for an order for sale
(c) the grant of an order for sale would be
contrary to some rule of law or equity.
CIRCUMSTANCES WHERE CAUSES TO CONTRARY
HAVE BEEN HELD EXIST BY THE COURT: (6)
1. Defective or improper Statutory Notice of
Demand (Form 16E)
Sykt kewangan Melayu Raya v Malayan Banking
Berhad
There were 2 loans under one account with the R.
R issued notice under Form 16D to demand for
outstanding amount. LA granted the order for sale.
The app appealed.
On the ground that:
Form 16 D provides with a heading “NOD with
respect to a charge” and it was secure not by a
charge by 2 charges.
There should have been 2 notices specifying how
much was claimed under each charge.
H: Notice merely said that charger failure to pay
principle loan and its interest was sufficient for
s.254(1).
Cempaka Finance Berhad v Ho Lai Ying
H: The conclusive nature and the extent of a
certificate of indebtedness. Such certificate
released the plf from need to show proof of
indebtedness and placed the burden on the def to
rebut the amount claimed. Thus if there is no
proper notice given to the charger or where the
notice demands for a sum to which the charge is
not entitled the existence of cause to the contrary
can be established.
2. Misleading Contents of Statutory Notice
 The content of statutory notice is misleading so as
to have the effect of prejeducing or misleading
the chargor, whereby the saving provisions of the
Interpretation Acts is not applicable.
 Eg. Wrong calculation of interest on a factor - not
permitted by consent of the parties and claims
such amount as due in Form 16D. (cause to the
contrary under S 256(3) – ground of refusing the
chargee’s application for foreclosure.)
3. Defeasible Charge
 Charge become defeasible by factors under S
340(2) such as fraud, forgery, or void for
insufficient instrument.
 Keng Soon Finance Berhad v MK Retnam Sdn Bhd
H: The court refused an application by the chargee
for an order for sale, stating that there is a duty
on the part of the chargee to enquire if the
housing developer (the chargor) has a valid
developer’s licence. (fraud)
 Diamond Peek Sdn Bhd v United Merchant
Finance
H: The failure of the court (when granting the
order for sale) to specify the date of public auction
is fatal. S 257(1)(b) which states that such a date
must be specified, is mandatory. Failure to comply
with mandatory provision will make the order for
sale invalid.
 Overseas Chinese Banking Corporation v Lee Tan
Hwa
H: The interveners (bona fide purchaser)
successfully prevented the chargee from selling
the charged land on the basis that one firm of
solicitors had acted for all the parties and the
chargee were aware prior to the registration of
the charge that the chargor retained only a
limited interest in the land due to the sale of most
of it to the interveners.
4. Contravention of Statutes
 The agreement or contract for the loan secured by
the charge is not enforceable by reason of non-
compliance with existing statutory provisions
such as those contained in Moneylender Act 1951
or because to enforce the charge would defeat
any law.
 Keng Soon Finance v MK Retnam Holdings Sdn
Bhd
The def entered into a SNP with a purchaser to sell
the land with a house to the purchaser. They
agreed to “may subject the land sold to the
purchaser to encumbrances at any time after the
signing of this agreement', provided that the
land 'shall be free from any encumbrance
immediately prior to the handing over of vacant
possession of the building to the purchaser”. The
def created a charge on the land in favour of the
plf as security of bridging loan to the def. He later
defaulted. The plf applied for order for sale.
H: The charge was invalid and unenforceable as cll
3 and 4 of the agreement only allowed the def to
create encumbrances which would not place the
lands in jeopardy of being sold, and not a charge.
The plf’s loan was extended but it was not entitled
for foreclosure.
 (refer to above case)
The def did not have a valid housing developer
license. The plf w/o making enquiries properly as
to whether the def had a valid developer’s license
or not was opined by the court as adding and
abetting the unlicensed housing developer. S.
241(3) gives powers to the charger to charge its
land subject to any prohibition or limitation
imposed by NLC or any other written law for the
time being in force which in this case referred to
Housing Developer Act. The def did not have
capacity as a charger to affect a charge under NLC.
Hence the court will not enforce a contract which
is expressly or impliedly prohibited by statute.
Such a contract is unenforceable whether the
parties means to break law or not.
5. Invalid Service of statutory s.431(1)
Malayan United Finance v Tan Ah Moi
I: Whether Form 16 E and a lawyer letter to both
of the defendants could only served on the
address of the 1st defendant?
s.431(1)(c)(i) method of service- by leaving the
notice in a cover addressed – at the person usual
or last know abode.
H: It is insufficient for the plf to leave only one
Form 16E to both defendants whom living at the
same address. The notice must be served on both
defs using diff envelope.
6. Delay
Public Finance Bhd v Hock Seng Housing
Development Sdn Bhd
12/8/1977, the defs(RP) had executed a charge in
favour of the plfs of Land A.
23/3/1983, the defs charged Land B to the plfs.
The interveners had bought one of the lands in
Land A and paid in full. Upon knowing foreclosure
proceedings was to take place, they were notified
that the redemption was RM 8,000. When they
wanted to make the payment, the redemption
sum increased to RM 90,000 due to consolidation
of charge of Land A and Land B.
Land B had been sold by public auction on
26/5/1990. The defs argued that the
consolidation of Land A and Land B had been
made on 7/10/1988 which was after the order for
sale has been made under Land B on 30/9/1985
(when Land B was no longer available). The
auction was executed a month before the notice
to consolidate appeared.
H: The action by the plf in obtaining more than
what they entitled can only amount to cause to
contrary. The duty of the court not only to apply
law but to invoke the aid of equity to be satisfied
on order to determine “cause to contrary” exist.