Al Sakb Capital Berhad v Rahman Brothers Automotive Sdn. Bhd. (WA-22M-1624-10/2023)

RAHMAN BROTHERS AUTOMOTIVE SDN. BHD. (COMPANY NO.: 200301022536 [624956-V])

RABIATUL ADAWIYAH BTE ABDUL RAHMAN (NRIC NO.: 710721-06-5506) … DEFENDANTS GROUNDS OF JUDGMENT

In works such as The Firm and The Pelican Brief, the formal documentation of a deal rarely tells the full story, and the true dispute 1 emerges only when the parties’ obligations are tested. The present case reflects that familiar dynamic. This action concerns a dispute arising from a written agreement dated 22 December 2022, described as a Musharakah Agreement, entered into between Al Sakb Capital Berhad (“the Plaintiff”) and Rahman Brothers Automotive Sdn Bhd (“D1”). The second Defendant, Rabiatul Adawiyah Binti Abdul Rahman (“D2”), a director of D1, executed a written undertaking to indemnify the Plaintiff in consideration of the Plaintiff’s agreement to grant D1 an extension of time for repayment under the Agreement. The Plaintiff now claims substantial sums from the Defendants, alleging breaches of that Agreement.

The factual matrix is largely derived from documents and is not significantly in dispute. On 22 December 2022, D1, through a letter of the same date, appointed the Plaintiff as its “Strategic Investment Partner.” This was immediately followed by the execution of the Musharakah Agreement.

The stated purpose of the Agreement was a joint venture for D1, a Proton car dealer, to purchase Proton model vehicles. Pursuant to the Agreement, the Plaintiff was to provide a Musharakah Capital of RM1,000,000.00. A sum of RM50,000.00 was deducted as a management fee, and a net amount of RM950,000.00 was disbursed to D1. 2

The Agreement stipulated, inter alia, a fixed monthly “Distributable Profit” payment of RM50,000.00 to the Plaintiff, a term of six months, and a Loss Sharing Ratio of 95% to the Plaintiff and 5% to D1. D1 made the profit payments for the first four months but subsequently defaulted.

Following a meeting between the parties, a settlement was recorded in a letter from the Plaintiff’s solicitors dated 7 August 2023 (“EOT Letter”), which was signed by D2 in her capacity as a director of D1 and in a personal capacity. This letter extended the repayment period for the Musharakah Capital to 22 December 2023. Notwithstanding this extension, the Plaintiff commenced the present action on 23 October 2023, claiming the full capital, all outstanding profit payments, late payment charges, and the value of a motor vehicle namely a Proton X70.

The trial concluded in one day with the testimony of four witnesses, namely:

PW1 – Muhammad Faried Bin Misnan;

(ii) PW2 – Muhammad Tarmizi Bin Lumri;

(iii) DW1 – Mazzita Binti Mohamed; and

(iv) DW2 – Rabiatul Adawiyah Binti Abdul Rahman. 3

Having considered the full submissions of the parties, this Court on 25 November 2025 dismissed the Plaintiff’s claim in its entirety. It was following this dismissal that the Plaintiff filed its Notice of Appeal on 24 December 2025.

From the pleadings and submissions, the following issues fall for determination:

Whether the Plaintiff’s action is premature;

(ii) Whether the Plaintiff has proven its loss according to the terms of the Musharakah Agreement; and

(iii) Whether the Musharakah Agreement is an illegal and unenforceable contract. CONTENTIONS OF PARTIES Plaintiff’s Contentions

Learned counsel for the Plaintiff, Encik Muhammad Syahmi Akif Bin Jamili argues that the Plaintiff’s case is founded on a straightforward assertion of breach. Counsel argued that D1’s failure to adhere to the 4 payment schedule, both before and after the EOT Letter, constituted a repudiatory breach, entitling the Plaintiff to sue for all outstanding sums immediately. It was contended that the Defendants’ subsequent conduct in seeking extensions and admitting liability precluded them from raising defences related to the nature of the agreement.

Counsel maintained that the Plaintiff’s computation, based on the fixed sums in the Agreement, was correct and that the Defendants’ allegations of losses were an afterthought.

Regarding the prematurity of the suit, counsel for the Plaintiff relies on Clause 2.7 of the EOT Letter, suggesting it allowed for immediate action upon any breach. Counsel argues that the Defendants are approbating and reprobating by relying on the EOT Letter while alleging the underlying Agreement is a sham.

Should the Agreement be found void, counsel argues that the Plaintiff is entitled to seek restitution of the principal sum of RM1,000,000.00 under Section 66 of the Contracts Act 1950, drawing an analogy with the licensed lender in Golden Wheel Credit Sdn Bhd v Dato’ Siah Teong Din [2025] CLJU 1799 (CA).

Learned counsel or the Defendants, Mr. Damian Kiethan A/L Anthony Jeyakumar advanced three primary arguments. First, it was strenuously contended that the suit was filed prematurely. Counsel 5 highlighted that EOT Letter, signed by D2, explicitly extended the deadline for repayment of the principal sum to 22 December 2023. Therefore, counsel argued, by filing the writ on 23 October 2023, the Plaintiff initiated proceedings nearly two months before this deadline, at a time when the obligation to repay the principal had not yet fallen due.

Second, and in the alternative, it was argued that even if the claim was not premature, the Plaintiff’s computation was fundamentally flawed. The Defendants emphasized that the Plaintiff had chosen to frame the transaction as a Musharakah, a profit-and-loss sharing contract. Relying on the audited financial statements of D1 for 2023, which showed a net loss, and the testimony of their witness, DW1, it was submitted that the Plaintiff could not simply demand the full capital and fixed profits without first accounting for its 95% share of the venture’s losses. The Plaintiff, counsel argued, could not approbate and reprobate by relying on the profit-sharing aspects of the contract while wilfully ignoring the loss-sharing obligations.

Thirdly, learned counsel for the Defendants assert that the Musharakah Agreement is an illegal moneylending arrangement disguised as a legitimate joint venture, rendering it a sham contract void from the outset. In support of this position, counsel highlight a fundamental dissonance between the Agreement’s terms and the parties’ actual conduct. Specifically, counsel note that post-dated cheques for purported "profits" were issued on the very day the Agreement was signed, prior to any business activity. Furthermore, 6 fixed monthly payments of RM50,000 were made consistently, even during periods when D1 was sustaining substantial losses. Such conduct is argued to be contrary to the contractual clause providing for loss-sharing. Counsel also emphasize the complete absence of any discussions, calculations, or documentation typical of a joint venture, such as records pertaining to income, expenses, or asset purchases.

This characterization of the transaction as a loan is reinforced, counsel argues, by contemporaneous evidence: internal payment vouchers and WhatsApp messages explicitly refer to the arrangement as a "loan" and to payments as "instalments". This conclusion is further bolstered by the Plaintiff’s own conduct, as its employee was found to have advertised money-lending services to the public, and the Plaintiff itself does not hold a required moneylender’s license.

Relying on the principles established in Mahmood bin Ooyub v Li Chee Loong and another appeal [2020] 6 MLJ 755 (CA) and Triple Zest Trading & Suppliers v Applied Business Technologies Sdn Bhd [2023] 10 CLJ 187 (FC), counsel for the Defendants contend that such a sham agreement is void ab initio for illegality. As a direct consequence, counsel argues, the guarantee or indemnity provided by D2 is also invalid. Finally, counsel submits that restitution under Section 66 of the Contracts Act 1950 is unavailable for illegal contracts, and therefore any loss must lie where it falls. 7 COURT’S FINDINGS ISSUE 1: Whether the Plaintiff’s Action is Premature.

After careful consideration of the evidence and submissions, the Court finds the Defendants' position persuasive, specifically on the issue of prematurity. The Court first determined that the letter of 7 August 2023 constituted a clear, unambiguous, and binding settlement agreement, effectively varying the terms of the original Musharakah Agreement. The cornerstone of this variation was Clause 2.5, which established a new, fixed date for the return of the principal capital, stating unequivocally that D1 “shall return the Capital of RM1,000,000.00 upon the expiry of the extended term of the Agreement which is by 22 December 2023.” By accepting the benefit of the extension and the personal undertaking of D2 in consideration for it, the Plaintiff became bound by this revised timeline.

Consequently, the Court found that the Plaintiff’s cause of action for the recovery of the RM1,000,000.00 principal only accrued on 23 December 2023. The filing of this suit on 23 October 2023 was therefore premature and cannot be countenanced, as it undermines the certainty and sanctity of contractual settlements.

The Court expressly rejected the Plaintiff's attempt to circumvent the clear deadline in Clause 2.5 by invoking the acceleration clause, Clause 2.7. This clause provides that upon "any breach of 8 obligations," the "whole outstanding sum... shall be due and payable immediately."

The Court's reasoning for dismissing this argument is rooted in a fundamental principle of contractual interpretation: an acceleration clause is triggered by a breach of a substantive obligation, not by the non-occurrence of a future date. The Plaintiff’s suit was not filed in response to a breached covenant, such as a failure to make a scheduled payment or a violation of a material term during the extended period. Instead, it was filed based solely on the fact that the principal was not yet repaid before the agreed-upon maturity date of 22 December 2023.

In essence, the Plaintiff sought to use Clause 2.7 to unilaterally nullify the core concession of the settlement i.e. the agreed extension. The Court found this interpretation to be commercially absurd and legally untenable. It would render Clause 2.5 meaningless and allow a party to grant an extension with one hand while using a general acceleration clause to retract it with the other at any time, creating precisely the kind of contractual uncertainty the law seeks to prevent.

Therefore, as no breach triggering Clause 2.7 was alleged or proven to have occurred prior to the suit’s filing, the Plaintiff’s reliance on it was found to be without merit. The claim for the principal sum is not maintainable at this stage, as the Plaintiff "jumped the gun" on its own agreed-upon deadline. 9 ISSUE 2: Whether the Plaintiff has Proven its Loss According to the Terms of the Musharakah Agreement.

On the second issue, which pertains to the very foundation of the Plaintiff’s claim, the Court finds that the Plaintiff has failed to prove its loss according to the contract it relies upon. The Plaintiff’s entire claim is predicated on the Musharakah Agreement. The law is clear that a party who founds its case on an agreement must abide by all its material terms. It is incontrovertible that a defining characteristic of a Musharakah contract is the sharing of losses in a pre-agreed ratio.

25.