Ambank Islamic Berhad v Seacera Group Berhad (22M-487-07/2019)

Enclosure 8 is the Plaintiff’s application for summary judgment against the Defendant in respect of the various Islamic financing facilities granted to the Defendant by the Plaintiff.

The Plaintiff’s application was allowed and the Defendant appealed.

Via Letter of Offer dated 23 May 2017 (“Letter of Offer”) and Facilities Agreement dated 9 June 2017 (“Facilities Agreement”) the Plaintiff granted to the Defendant the following facilities –

Murabahah Tawarruq Term Financing-i (“TF-i Facility”) not exceeding the limit of RM 1,260,000.00;

Murabahah Tawarruq Cashline-i (“Cashline-i Facility”) not exceeding the limit of RM 5,000,000.00; and 3

Multi Trade Finance Facilities-i (“MTF-i Facilities”) which includes, among others, Accepted Bills-i (“BA-i Facility”) not exceeding the limit of RM 5,000,000.00. [4] In so far as the MTF-i Facilities is concerned, the Defendant had only utilized the BA-i Facility under the Shariah principle of Murabahah. [5] The Plaintiff is claiming the outstanding sums (inclusive of the Asset Sale Price as described in the Agreements) under the TF-i Facility with the maturity date of 1 July 2027, Cashline-i Facility with the maturity date of 23 May 2020 and BA-i Facility with maturity dates as specified in the respective Accepted Bill-i upon issuance. The TF-i Facility, Cashline-i, Facility and the BA-i Facility are collectively referred to as “Facilities”. [6] The Facilities are secured by a third-party Legal Charge registered on 20 June 2017 executed by one Seacera Ceramics Sdn Bhd in favour of the Plaintiff over land held under GM 293193, Lot 6240, Bandar Subang Jaya, Negeri Selangor. 4 [7] The salient terms of the Facilities Agreement are as follows –

Clause 13 of the Facilities Agreement in the event of default under the Facilities, all monies due and payable by the Defendant under the Facilities shall become so due and payable and the Defendant shall, on demand, pay all monies due to the Plaintiff under the Facilities

Clause 15 of the Letter of Offer and Clause 6.3 of the Facilities Agreement the Defendant shall pay the Plaintiff late payment charges (Ta’widh) in the following manner:- Prior to maturity date / expiry of the tenure of the Facility

at the rate of 1% per annum calculated daily on the overdue instalments or upon cancellation, total outstanding balance on a non-compounded basis until date of judgment or until maturity of the financing of the Facilities, whichever is earlier. Thereafter, the Defendant shall pay the Plaintiff late payment charges 5 (Ta’widh) at the prevailing Islamic Interbank Money Market rate to be calculated daily on the said outstanding balance on a non-compounded basis until the full settlement thereof; After maturity date/expiry of the tenure of the Facility

(ii) at the prevailing Islamic Interbank Money Market rate to be calculated daily on the outstanding balance on a non-compounded basis until the full settlement thereof.

Clause 14 of the Letter of Offer that the Plaintiff will grant Ibra’ (rebate), if any, on such amount of the Asset Sale Price remaining unpaid in accordance to the Agreements. Ibra’ (rebate) will be calculated based on the following formula or any other calculation method or formula as may be prescribed by Bank Negara Malaysia:- “Rebate (ibra’) = deferred profit – early settlement charge 6

Clause 14.1 of the Facilities Agreement the Defendant shall fully indemnify the Plaintiff for all costs and expenses which the Plaintiff may incur as a consequence of the occurrence of any event of default under the Agreements

Clause 18.1(a) (i) of the Facilities Agreement any statement by the Plaintiff as to the indebtedness of the Defendant under the Facilities shall be binding and conclusive against the Defendant. [8] The Defendant had defaulted in making payments under the Facilities on the due dates. Via letters dated 19 June 2019, the Plaintiff through its solicitors has declared, inter alia, that an event of default has occurred, the Facilities are cancelled and all monies under the Facilities are immediately due and payable. The Plaintiff also demanded payment of all sums due under the Facilities. [9] The Defendant had failed, neglected and / or refused to settle the outstanding sums due to the Plaintiff with late payment charges thereon or any part thereof. 7 [10] The Plaintiff has not realized the security for the Facilities. [11] It is the Plaintiff’s case that as at 8 May 2019, the Defendant is indebted to the Plaintiff as follows –

TF-i Facility TOTAL(RM) Outstanding Asset Sale Price 1,877,523.00 Ta’widh as at 8.5.2019 2.68 Total outstanding sum (as at 8.5.2019) 1,877,525.68

Cashline-i Facility TOTAL(RM) Outstanding Asset Sale Price 6,141,403.05 Ta’widh as at 8.5.2019 7.09 Total outstanding sum (as at 8.5.2019) 6,141,410.14

BA-i under the MTF-i NO BILL REF PRINCIPAL AMOUNT ASSET SALE PRICE TA’WIDH OVERDUE HANDLING CHARGES TOTAL OUTSTANDING SUM DUE DATE 1 T80719FBA2080221 250,000.00 253,451.23 285.82 50.00 253,787.05 26/4/2019 2 T80719FBA2080303 251,000.00 254,625.20 132.45 50.00 254,807.65 3/5/2019 3 T80719FBA2080642 245,000.00 248,508.80 21.55 50.00 248,580.35 8/5/2019 4 T80719FBA2080950 396,000.00 401,719.43 - - 401,719.43 15/5/2019 5 T80719FBA2081428 395,000.00 400,704.99 - - 400,704.99 23/5/2019 6 T80719FBA2081656 252,000.00 255,670.22 - - 255,670.22 28/5/2019 7 T80719FBA2082327 245,000.00 248,382.21 - - 248,382.21 7/6/2019 8 T80719FBA2082441 271,300.00 275,218.39 - - 275,218.39 13/6/2019 9 T80719FBA2083237 257,000.00 260,547.87 - - 260,547.87 21/6/2019 10 T80719FBA2084063 300,000.00 304,250.47 - - 304,250.47 9/7/2019 8 The Defendant’s pleaded defence [12] It is argued by the Defendant that –

the Letter of Offer, the Facilities and the Facilities Agreement are void because the execution of the said documents are non-Shariah compliant as the execution of the same were not witnessed by two male witnesses or a male witness and two female witnesses pursuant to Verse 282 of the Quran [Surah Al-Baqarah] (“Verse 282”);

the Letter of Offer and the Facilities Agreement are void for ambiguity (“gharar”) and / or violates section 30 of the Contracts Act 1950 for not specifying the underlying assets which form the basis of the Asset Sale Price and Asset NO BILL REF PRINCIPAL AMOUNT ASSET SALE PRICE TA’WIDH OVERDUE HANDLING CHARGES TOTAL OUTSTANDING SUM DUE DATE 11 T80719FBA2084118 344,000.00 348,968.40 - - 348,968.40 12/7/2019 12 T80719FBA2084436 398,000.00 403,700.01 - - 403,700.01 18/7/2019 13 T80719FBA2084909 211,000.00 214,047.48 - - 214,047.48 26/7/2019 14 T80719FBA2085471 300,000.00 304,214.14 - - 304,214.14 2/8/2019 15 T80719FBA2085573 500,000.00 507,282.19 - - 507,282.19 8/8/2019 16 T80719FBA2085727 205,000.00 207,960.82 - - 207,960.82 9/8/2019 4,889,251.85 439.82 150.00 4,889,841.67 Total outstanding sum as at 8.5.2019 4,889,841.67 9 Purchase Price. As the underlying assets were not specified, there was mutual mistake under section 21 of the Contracts Act 1950 between Plaintiff and Defendant in respect of the identity, nature and description of the said assets;

in respect of the TF-i Facility, Cashline-i Facility and MTF-i Facilities there were no sale and purchase agreement executed between the Plaintiff and Defendant. As such there is no basis to justify the Asset Sale Price and the Asset Purchase Price which is against Shariah principles;

the plaintiff is not entitled to claim the outstanding sum as the basis and / or method of computation of the outstanding asset sale prices and the late compensation (Ta’widh) were not explained in detail and it is not contained in any of the Plaintiff documents; and

in respect of the BA-i Facilities, the profit rate was not provided for in the Letter of Offer and Facilities Agreement. The bills stated at no. 4 to 14 in paragraph 11 (c) of the 10 Plaintiff’s Statement of Claim has yet to mature as at 8 May 2019. The law [13] Pursuant to Order 14 rules 1 and 2 of the Rules of Court 2012 (“RoC 2012”), in an application for summary judgment, it is incumbent on an applicant seeking the same to prove the following –

the statement of claim has been served on the defendant;

the defendant has entered appearance; and

the applicant has affirmed an affidavit verifying the facts on which the statement of claim is based. The applicant is also required to affirm his belief that the defendant has no defence to the statement of claim. [14] Upon the fulfilment of the above preliminary requirements the burden is on the defendant to prove under Order 14 rules 3 and 4 of the RoC 2012 that there is an issue or question in dispute which ought to be tried (National Company For Foreign Trade v. Kayu Raya Sdn Bhd [1984] 1 CLJ (Rep) 283, [1984] 2 MLJ 300; Cempaka Finance Bhd v. Ho Lai Ying & Anor [2006] 3 CLJ 544, [2006] 2 MLJ 685). An application for 11 summary judgement may also be dismissed by the court if the defendant satisfies the court that there ought for some other reason to be a trial namely there are circumstances that ought to be investigated by the court (United Merchant Finance Bhd v. Majlis Agama Islam Negeri Johor [1999] 2 CLJ 151, [1999] 1 MLJ 657). [15] As what amount to triable issue, the Supreme Court in Bank Negara Malaysia v Mohd Ismail & Ors [1992] 1 MLJ 400; [1992] 2 CLJ Rep 186; [1992] 1 CLJ 653 held – In our view, basic to the application of all those legal propositions, is the requirement under O 14 for the court to be satisfied on affidavit evidence that the defence has not only raised an issue but also that the said issue is triable. The determination of whether an issue is or is not triable must necessarily depend on the facts or the law arising from each case as disclosed in the affidavit evidence before the court… Under an O 14 application, the duty of a judge does not end as soon as a fact is asserted by one party, and denied or disputed by the other in an affidavit. Where such assertion, denial or dispute is equivocal, or lacking in precision or is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable in itself, then the judge has a duty to reject such assertion or denial, thereby rendering the issue not triable. In our opinion, unless this principle is adhered to, a judge is in no position to exercise his discretion judicially in an O 14 application. Thus, apart from identifying the issues of fact or law, the court must go one step further and determine whether they are triable. This principle is sometimes expressed by the statement 12 that a complete defence need not be shown. The defence set up need only show that there is a triable issue. Findings of the court Preliminary requirements [16] There is no dispute that the Plaintiff’s Statement of Claim was served on the Defendant. The Defendant had entered their appearance vide Memorandum of Appearance dated 26 July 2019 (see enclosure 5). [17] In their affidavit in support (enclosure 9) of the summary judgment application, the Plaintiff has set out adequate facts including the salient terms upon which the Facilities was granted in particular the TF-i Facility, Cashline-i Facility and MTF-i Facilities. The relevant contemporaneous documents in relation to the Facilities including the Letter of Offer and the Facilities Agreement are produced as Exhibit AIB-1 to enclosure 9. [18] The Plaintiff has also deposed that the Defendant are justly and truly indebted to the Plaintiff in the sums claim as particularised in paragraph 4 and 14 of the Plaintiff’s affidavit enclosure 9 and that the said sums is still due and owing. It is further averred by the Plaintiff the Defendant has no defence to their claim. The Plaintiff’s statement 13 verifying the indebtedness due under the Facilities is produced as Exhibit AIB-3 of enclosure 9. [19] Base on the aforesaid, this court finds the Plaintiff has fulfilled the preliminary requirements. Thus the Plaintiff has established a prima facie case in respect of its claim against the Defendant. [20] The burden therefore shifts on all the defendants to prove that there are issue or question in dispute which ought to be tried or there ought for some other reason to be a trial, namely, there are circumstances that ought to be investigated by the court. Purported triable issues raised by the Defendant [21] As to the execution of the Letter of Offer and the Facilities Agreement which were not witnessed by two male witness or a male witness and two female witnesses, reference is made to the case Maybank Islamic Bhd v. M-IO Builders Sdn Bhd & Anor [2017] 2 MLJ 69 where the Court of Appeal held that – [28] ...We are mindful that, in the earlier case on Islamic banking, Bank Kerjasama Rakyat Malaysia Bhd v Emcee Corporation Sdn Bhd [2003] 2 MLJ 408; [2003] 2 AMR 177 the legal position was clearly 14 stated by Abdul Hamid Mohamad JCA that even though the facility was an Islamic banking facility, it does not mean that the applicable laws are not the same laws. In this regard the real issue confronting the court was whether a contract which did not comply with Shariah on one hand, but in compliance with the law of contracts on the other hand, would be legally enforceable... ... [30] ...We are therefore of the view firstly, the provisions of the Contracts Act 1950 still govern Islamic contracts. It follows therefore the MOD facility agreements are not one that can be avoided under s 24 of the Contracts Act nor an illegal contract under s 25 and therefore remains an enforceable agreement and must be adhered to. [22] Thus in so far as the applicable law for Islamic banking facility is concerned, the law is still the same as the law governing conventional banking. As pointed out by the Plaintiff, there is no legal requirement for the Letter of Offer and the Facilities Agreement to be witnessed by two male witness or a male witness and two female witnesses. In fact in the Shariah Standards And Operational Requirements on Murabahah issued by Bank Negara Malaysia on 23 December 2013 and the Shariah Standards And Operational Requirements on Tawarruq issued on 10 June 2016 and 28 December 2018, there is no requirement for the execution of the sale and purchase contract to be witnessed in the manner contended by the Defendant. Thus the said issue is not tenable and unfounded. 15 [23] With regards to the issue of the underlying assets, perusal of the Facilities Agreement reveals the following –

as provided in the Shariah Standards And Operational Requirements on Tawarruq issued by Bank Negara Malaysia on 28 December 2018 (“BNM-Tawarruq 2018”) tawarruq involves two sets of separate and independent sale and purchase contracts in relation to an assest. The first set involves the sale of an asset by a seller to a purchaser on a deferred basis. Subsequently, the purchaser of the first sale will sell the same asset to a third party on a cash and spot basis;

in compliance with this Shariah requirement the Defendant has issued to the Plaintiff an irrevocable Purchase Request and Undertaking to Purchase dated 9 June 2017 (see Exhibit AIB-8 page 137 of enclosure 11) where the Defendant requested the Plaintiff to purchase the asset and the Defendant undertake to purchase the asset from the Plaintiff at the Asset Sale Price (RM 1,269,360.00) upon the Plaintiff’s purchase of the asset from the relevant third party. Pursuant thereto, vide the Murabahah Sale Contract dated 22 June 2017 (see Exhibit AIB- 16 4 page 2 of enclosure 11) the Plaintiff agreed to sell and the Defendant agreed to purchase the asset which was specifically describe in the Murabahah Sale Contract as crude palm oil at the Asset Sale Price (RM 1,269,360.00) the payment of which was to be by way of deferred payment (clause 4.1 of the

the second set of the sale and purchase contract which concerned the sale of the asset by the Plaintiff (appointed by the Defendant vide the Agency Agreement dated 9 June 2017 as their agent to purchase and sell the asset) to a third party can be seen from the Certificates and Agency Agreement at Exhibit AIB-9 pages 139 – 151 of enclosure 11.

the Cashline-i Facility is also based on the Shariah principle of Murabahah Tawarruq. In compliance with the Shariah requirement the Defendant has issued to the Plaintiff an irrevocable Purchase Request and Undertaking to Purchase dated 9 June 2017 (see Exhibit AIB-8 page 138 of enclosure 11) where the Defendant requested the Plaintiff to purchase the 17 asset and the Defendant undertake to purchase the asset from the Plaintiff at the Asset Sale Price upon the Plaintiff’s purchase of the asset from the relevant third party. Pursuant thereto, vide the Murabahah Sale Contract dated 22 June 2017 (see Exhibit AIB-5 page 5 of enclosure 11) the Plaintiff agreed to sell and the Defendant agreed to purchase the asset which was specifically describe in the Murabahah Sale Contract as crude palm oil at the Asset Sale Price (RM 6,800,000.00) which was to be paid on a deferred basis (clause 4.1 of the Murabahah

the second set of the sale and purchase contract which concerned the sale of the asset by the Plaintiff (appointed by the Defendant vide the Agency Agreement dated 9 June 2017 as their agent to purchase and sell the asset) to a third party can be seen from the Certificates and the Agency Agreement at Exhibit AIB-10 pages 152 – 164 of enclosure 11.

in respect of the BA-i Facility, the documents pertaining to the BA-i Facility which are the respective Accepted Bills-i 18 Applications (together with Appendix 1 which indicate the applicant being the Defendant, the seller / supplier of the asset which is referred to as the “Goods” in the respective bills and the value / price of the asset), Invoice and Delivery Order addressed to and received by the Defendant) and Accepted Bills-i Contract Notes (which is executed by the Defendant who offered to purchase the asset from the Plaintiff at the value / price stated in the Accepted Bills-i Applications) clearly describes the asset as porcelain tiles (see Exhibit AIB-6 of enclosure 11). [24] The documents exhibited by the Plaintiff shows that at all material times the Defendant has full knowledge of the assets that was transacted for purpose of complying with the Shariah requirements in relation to the Facilities. The assets in relation to the TF-i Facility and Cashline-i Facility, namely, crude palm oil, fulfil the requirements stipulated in the Shariah Standards And Operational Requirements issued by Bank Negara Malaysia on 28 December 2018 on Tawarruq (“BNM-Tawarruq 2018”) Based on paragraph 13 of the BNM-Tawarruq 2018, the said assets at the point of transaction were, inter alia, tangible, valuable, identifiable, deliverable, in existence and owed by the seller. 19 Crude palm oil does not fall within the category of assets which are prohibited from being traded (see paragraph 13.4 BNM-Tawarruq 2018). [25] In relation to the BA-i Facility, based on paragraph 13 of the Shariah Standards And Operational Requirements on Murabahah issued by Bank Negara Malaysia on 23 December 2013 (“BNM-Murabahah 2013”) the assets traded also fulfil the requirements stipulated in BNM-Murabahah 2013. The assets, namely porcelain tiles were tangible, valuable, identifiable, deliverable, in existence and owed by the seller. Porcelain tiles does not fall within the category of assets which are prohibited from being traded (see paragraph 13.3 of BNM-Murabahah 2013). [26] It is pertinent to note that the Defendant did not dispute that they have executed the Facilities Agreements and all the documents relating to the Facilities in particular the respective Purchase Request and Undertaking to Purchase and the Agency Agreement in relation to the TF-i Facility and Cashline-i Facility and the Accepted Bills-i Applications and Accepted Bills-i Contract Notes in respect of the BA-i Facility. The Defendant also did not dispute that the Facilities were disbursed to them and that they had utilized the Facilities to their benefit. 20 [27] Since the underlying assets are specifically identified in the various documents relating to the Facilities and the same are Shariah compliant, there is no issue of uncertainty (‘gharar’) as to the underlying assets. Under the circumstances the Defendant’s allegations that the Letter of Offer, Facilities Agreement and the Facilities are void due to a mutual mistake as to the underlying assets is flawed and untenable. It is obvious such allegations raised only after the instant action is filed against the Defendant is mala fide and a desperate attempt on the part of the Defendant to evade their contractual liabilities under the Facilities which was granted in accordance with Shariah principles. [28] With regard to the contentions of the Defendant that the TF-i Facility and Cashline-i Facility is Syariah non-compliance because the Facilities failed to comply with the policy document (BNM-Tawarruq 2018 and BNM-Murabahah 2013), I agree with the Plaintiff that such contentions are bare assertions as the Defendant failed to explain in what manner the Facilities are Shariah non-compliant vis-à-vis the said policy documents. [29] With regards to the Defendant’s contentions that the basis or the method of computation of the outstanding sale price and ta’widh is not explained – 21

the Plaintiff in their affidavits has set out the method to compute ta’widh (prior to maturity date / expiry of tenure of the Facilities and after maturity date / expiry of tenure of the Facilities) which substantially reproduced clause 15 of the Letter of Offer. The provision in the said clause 15 was adopted by clause 6.3 of the Facilities Agreement; and

clause 5 of the Letter of Offer read with clause 12 of the same sets out the basis and computation of the outstanding asset sale price in relation to the TF-i Facility, Cashline-i Facility and BA-i Facility. In relation to the BA-i Facility, the Plaintiff also issued Advices which sets out the profit rate and the profit amount in respect of each bill on the maturity date. There is no evidence to show that the Defendant objected to the Advices issued. Statement of Indebtedness [30] Pursuant to clause 18.1(a) (i) of the Facilities Agreement the Plaintiff issued a Statement of Indebtedness, as in Exhibit AIB-3 of enclosure 9, verifying the indebtedness of the Defendant under the Facilities. Such statement is binding and conclusive against the 22 Defendant unless the Defendant can show there is manifest error on the face of the statement (Cempaka Finance Berhad v. Ho Lai Ying (Trading as KH Trading) & Anor [2006] 2 MLJ 685; Tengku Azman bin Tengku Adnan & Anor v Hong Leong Bank Bhd [2015] 2 MLJ 139). The Defendant failed to provide evidence to show manifest error or that the method of calculation of the indebtedness was wrong. Thus the Statement of Indebtedness is conclusive evidence of the Defendant’s indebtedness under the Facilities. [31] The Defendant has executed and without any challenge on the validity of the Letter of Offer and Facilities Agreement in relation to the Facilities which was availed to the 1st Defendant. The Defendant is therefore bound by the terms and conditions of the Letter of Offer and the Facilities Agreement (Chong Hin Trading Co Sdn Bhd & Ors vs Malayan Banking Berhad [2004] 4 CLJ 436) Bank Muamalat Malaysia Bhd & Ors v Redha Resources Sdn Bhd & Ors [2017] 2 MLJ 686). Furthermore having benefitted from the Facilities and in absence of any duress, misrepresentation or fraud it is not open to the Defendant to make baseless allegations that the Letter of Offer and Facilities Agreement are Shariah non-compliant in order to evade their contractual liabilities in relation to the Facilities (Bank Muamalat Malaysia Bhd lwn Kong Sun Enterprise Sdn Bhd & Yang Lain [2012] 10 MLJ 665; Abdul 23 Khalid Ibrahim v. Bank Islam Malaysia Bhd & Another Case [2010] 4 CLJ 388). Conclusion [32] Premised on the above, the issues raised by the Defendant are not bona fide let alone triable. As such this is a fit and proper case to be disposed of summarily by way of affidavit evidence. Accordingly order in terms of prayer (a) – (i) of enclosure 8 and costs of RM 4,000.00 was granted in favour of the Plaintiff. ( KHADIJAH BINTI IDRIS ) JUDGE HIGH COURT (COMMERCIAL DIVISION) DATED 24 JANUARY 2020 Counsel: Plaintiff : Ng Hooi Huang and together with Cheah Faan Jin of Messrs Shook Lin & Bok Defendant : Raja Nurul Iylia Raja Mohd Tajuddin and together with Intan Sharina Ahmad Sharizal of Messrs