When a Debt Is Settled but the Title Is Still Held

 

The Guarantor’s Burden in Sabah

For more than two decades, a guarantor’s property has remained encumbered by a charge, even though the principal debt was fully settled in 2004. This situation raises serious questions about fairness, equity, and the role of state‑owned institutions in serving the public.

 

The Bank’s Reply

On 15 December 2025, Sabah Development Bank Berhad, through its solicitors Jayasuriya Kah & Co., replied to my queries. Their letter acknowledged my correspondence and set out the Bank’s position:

 

That foreclosure rights subsist for sixty years under Item 114 of the Sabah Limitation Ordinance.

 

That the Bank’s claim is not solely based on interest, but on monies secured by a third‑party charge dating back to 1984.

 

That the ongoing foreclosure proceedings are independent of the earlier judgment, and therefore not affected by limitation periods applicable to judgment enforcement.

 

This is the Bank’s stated position.

 

My (Agent's) Reply

With respect, this reliance is inapplicable. My reply sets out the following:

 

The principal indebtedness was fully settled by 2004.

 

The remaining sum of RM254,526.34 represents interest calculated as at 17 September 2004.

 

No further interest has been levied since 2004, as confirmed by the Bank’s own statement of account.

 

No enforcement action has been taken for more than twenty years, leaving the claim dormant.

 

In these circumstances, the continued subsistence of the charge raises serious equitable concerns:

 

Limitation principles: Enforcement of judgments is subject to statutory limitation. Dormant claims cannot be revived indefinitely.

 

Equity and fairness: Holding property hostage for decades after the debt has been satisfied operates oppressively.

 

Case law: In Ladang Tawai Sdn Bhd v Mohamed Yaacob & Anor [1992] 2 MLJ 445, the court declined to permit enforcement of stale claims, emphasising the importance of legal certainty and the prejudice caused by prolonged inaction.

 

Further Legal Considerations

Recent case law strengthens the position that foreclosure proceedings cannot be left dormant indefinitely. In Thameez Nisha Hasseem v Maybank Allied Bank Berhad [2023] 4 MLRA 492, the Federal Court held that foreclosure proceedings are subject to the 12‑year limitation period under section 21(1) of the Limitation Act 1953. The Court further ruled that a chargee’s rights may be extinguished by operation of law if enforcement is not pursued within that period. This authority directly undermines reliance on a 60‑year limitation under the Sabah Limitation Ordinance, and confirms that stale foreclosure claims should not be revived decades later.

 

Even if limitation were not to apply, equity will not permit enforcement where there has been unconscionable delay and prejudice caused by the chargee’s inaction. The alleged debt dates back decades, and although the Bank attempted to auction the property at one point, the auction was unsuccessful. Thereafter, the matter remained dormant for years. Such extraordinary lapse of time has materially prejudiced the guarantor, who has been unable to deal with the property, while evidence and witnesses have been lost to the passage of time. Enforcement now would amount to an abuse of process and a denial of fair dealing, and equity demands that the foreclosure be restrained.

 

Outstanding Accounting Issues

The Bank’s own statement of account raises further questions:

 

The basis for charging interest on RM1,740 from 09.12.1987 to 27.06.1988 and RM219,514.52 from 11.02.1988 to 27.06.1988, even though the adjudged sum was only determined on 29.06.1988.

 

Continued charging of interest despite payments received from the disposal of other properties.

 

The derivation of figures used to calculate interest in 1990, including the apparent inconsistency where RM254,526.34 is said to “include” RM257,042.42.

 

These entries suggest that the account has not been fully reconciled and requires clarification. The contradictions in Jayasuriya’s letter—denying that the claim pertains solely to interest while admitting that no interest has been charged since 2004—only deepen the confusion.

 

A Call for Resolution

The principal debt has long been settled. No interest has accrued for over twenty years. No enforcement action has been taken. Yet the guarantor’s property remains encumbered.

 

This situation is not only legally questionable but also inequitable. It undermines confidence in state‑owned institutions whose mission should be to serve the public fairly.

 

In light of the Federal Court’s clarification that foreclosure actions are subject to limitation, and the undeniable prejudice caused by decades of delay, the only fair and lawful course is for the Bank to discharge the charge and bring closure to a matter that has lingered far too long.