Is there a contract between a bidder and the bank at an auction?
AMBANK (M) BERHAD v. AIM EDITION SDN BHD  1 LNS 2082
- The land, in this case, was charged as security for the loan facility to Ambank (“the Bank”).
- When the borrower of the loan defaulted on the loan repayment, the Bank initiated proceedings for a judicial sale [foreclosure] of the subject lands by way of public auction.
- Aim Edition Sdn Bhd’s (“The Bidder”), bid of RM120 million was accepted at the third auction conducted on 11 November 2016.
- Following the acceptance of its bid, the Bidder signed the relevant documents and paid the requisite 10% deposit of the reserve price.
- On 5th June 2017, the Bidder was registered as the owner of the subject lands.
- Sometime in May 2017, the Bidder decided to appoint a surveyor to ascertain the actual size of the subject lands. Unfortunately it did not accord with what was stated in the Proclamation of Sale; this was because the subject land “bertindih” or overlapped with five other lots where separate titles had been issued.
- The Bidder claimed that the Proclamation of Sale held out that the size of the subject lands was 94.76 hectares. However, about 12.7655 hectares of that 94.76 hectares overlapped with five other lots in which case, the Bidder claimed that the Bank was in breach of a material term of the contract by not delivering what was contracted or promised.
- In short, the Bidder claimed that they’ve purchased 94.76 hectares but only owned 81.994 hectares, hence 13.48% less land than purchased.
- The Bidder thus claimed compensation for loss of land now held under the five lots, all which had been issued title save for one lot used for a ‘sekolah agama’.
- The Bank’s defence relied primarily on the statutory sale ordered by the Court in furtherance of its exercise of rights pursuant to a charge, contending that there was no contract of sale between the parties. The Bank further relied on the relevant Conditions of Sale which had provided that the subject lands were sold on an ‘as-is-where-is’ basis and that no misdescription of the land would entitle the respondent to any compensation.
- The Bidder’s claim was dismissed at the High Court but overturned by the Court of Appeal.
FEDERAL COURT DECISION - APPEAL ALLOWED!
- The Federal Court reinstated the decision of the High Court on the basis that public auction is a judicial sale of the subject property, judicial as it is ordered by the Court after the Court is satisfied that the grounds for ordering a sale under the National Land Code 1965 have been met. If there are any shortcomings in that sale, the remedy lies elsewhere but not in contract as there is none, to begin with.
- Given that the auction sale of the subject lands in the present appeal is conducted pursuant to an order of Court granted after the Court was satisfied that the conditions for such an order had been met, there is no contract between the charge bank and the successful bidder.