Banking & Finance

In this practice area

Banking and Finance collects the disputes between financial institutions and their customers, guarantors and counterparties. The judgments concern the banker-customer relationship, facility and guarantee agreements, the recovery of debt, and the statutory framework governing banks and financial services.

The banker-customer relationship is a recurring subject. Judgments examine the bank's duty of confidentiality, framed both as an implied contractual term and as a statutory duty under the Banking and Financial Institutions Act, and the consequences of an unauthorised disclosure. Facility agreements form a second strand: whether a bank's breach of a facility agreement exonerates the borrower and guarantors from repayment, whether a bank breached its obligations by withholding payment when served with notice of a Mareva injunction, and the "relation back" theory in that context.

Illegality and the outer limits of lending run through the collection. The courts consider whether a purported loan was in truth an illegal moneylending transaction in contravention of the Moneylenders Act 1951, the distinction between a friendly loan and unlicensed moneylending, and the effect of section 10P of that Act on the validity of a loan agreement. Documentary credit also appears, including the standard for examining documents presented under a letter of credit and the UCP 600, together with the treatment of a forged cheque presented on a joint account.

The cases sit mainly in the High Court, with appeals to the Court of Appeal and the Federal Court on questions of principle about the rights and duties of banks. As a whole the area shows how the Malaysian courts enforce the bargains between lenders and borrowers — giving effect to facility and guarantee agreements and to the recovery of debt — while policing the boundary set by the moneylending legislation and the bank's own duties to its customer. The frequency of guarantor disputes reflects how much commercial lending in the corpus is secured by personal and corporate guarantees whose enforceability is then tested in court.