Hektar Premier Sdn Bhd v Amanah International Finance Sdn Bhd (W-02(MUA)(W)-286-02/2023)

Amanah International Finance Sdn. Bhd. (Co. No.: 15951-D)

Abu Talib Bin Abdul Rahman (NRIC No. 531231-04-5015) ... Defendants (by Counterclaim) Consolidated with In the matter of High Court of Malaya in Kuala Lumpur Civil Suit No.: WA-22M-523-10/2018 Between Amanah International Finance Sdn. Bhd. (Co. No.: 15951-D) ... Plaintiff And Hektar Premier Sdn. Bhd. (Co. No.: 586618-M) Defendant] CORAM: HASHIM BIN HAMZAH, JCA WONG KIAN KHEONG, JCA ISMAIL BIN BRAHIM, JCA

By way of -

a "Letter of Offer" dated 13.5.2015; and

a "Master Equity Secured Financing-i Facility Agreement" dated 9.6.2015 (Facility Agreement) - Amanah International Finance Sdn. Bhd. (AIF) provided Tan Sri Abdul Halim Saad (HS) with a facility of up to RM80,000,000.00 (Facility) to purchase securities of Malaysian companies which must be Shariah-compliant.

The Facility was in accordance with the "Tawarruq" concept of Shariah banking system.

There were two drawdowns from the Facility by HS, namely-

a first tranche of a sum of RM40 million （ $ 1^{\mathrm{st}} $ Tranche). The $ 1^{\mathrm{st}} $ Tranche was used by HS to purchase shares in Sumatec Resources Bhd.; and

a second tranche in the amount of RM20.25 million $ (2^{nd}$ Tranche). HS used the $ 2^{nd} $ Tranche to acquire 20,000,000 shares (ESB Shares) in Efogen Sdn. Bhd. (ESB) by way of a Sale and Purchase Agreement dated 30.12.2015 [SPA (ESB)] In the SPA (ESB), Abu Talib din Abdul Rahman (ATAR), as HS's nominee, purchased ESB Shares from AIF.

On 26.1.2017, AIF and Hektar Premier Sdn. Bhd. (HP) entered into a "Assignment of Surplus Sale Proceeds" (Assignment) wherein, among others, HP had agreed to pay and discharge any amount due and owing from HS to AIF.

AIF filed Kuala Lumpur High Court Civil Suit no. WA-22M-465- 09/2018) against HS (Suit No. 465).

In Suit No. 465-

AIF claimed for, among others, a total sum of RM62,031,201.48 as due and owing from HS to AIF (as at 31.8.2018) under the Facility Agreement. In this judgment, we will describe this suit by AIF against HS as the "Original Action (Suit No. 465)"; and

HS had counterclaimed against AIF and ATAR [Counterclaim (Suit No.465)]. The Counterclaim (Suit No.465) prayed for the following relief, among others-

a declaration that the SPA (ESB) is void ab initio;

a declaration that HS's drawdown for the $ 2^{\mathrm{n d}} $ Tranche-

was contrary to Shariah principles; and

(ii) in breach of the FA; and

an order that all monies paid for the acquisition of ESB Shares, all profits and all other payments charged by AIF and paid by HS with regard to HS's acquisition of ESB Shares, be refunded to HS.

In Kuala Lumpur High Court Civil Suit no. WA-22M-523-10/2018, AIF claimed from HP for, among others, a sum of RM62,031,201.48 as due and owing from HP to AIF pursuant to the Assignment (Suit No. 523).

By virtue of a court order, Suit No. 465 had been consolidated with Suit No. 523 (Consolidated Suit).

In the Consolidated Suit, before the commencement of the trial (Trial), HS had filed an application [HS's Application (Reference to SAC)] under s 56(1)(b) of the Central Bank of Malaysia Act 2009 (CBMA) for the High Court to refer four questions regarding Shariah principles [HS's 4 Proposed Questions (Shariah Principles)] to the Shariah Advisory Council (SAC) of Bank Negara Malaysia (BNM).

The High Court had dismissed HS's Application (Reference to SAC) with costs [High Court's Decision (Reference to SAC)]. According to the High Court's Decision (Reference to SAC), reported in [2021] CLJU 2287-

HS's 4 Proposed Questions (Shariah Principles) were not novel issues;

HS's 4 Proposed Questions (Shariah Principles) did not require a determination by the SAC because HS's 4 Proposed Questions (Shariah Principles) concerned the implementation, operation and execution of the agreements between the parties which-

fell within the jurisdiction and competence of the court; and

the court could refer and take into consideration any published ruling of the SAC pursuant to s 56(1)(a) CBMA. In this regard, the court may be assisted by expert witnesses; and

in view of the reasons stated in the above sub-paragraphs (2)(a) and (b), there was no necessity for the High Court to refer HS's 4 Proposed Questions (Shariah Principles) to the SAC.

HS's appeal to the Court of Appeal against the High Court's Decision (Reference to SAC) had been dismissed with costs [Court of Appeal's Decision (Reference to SAC)].

HS did not apply to the Federal Court for leave to appeal against the Court of Appeal's Decision (Reference to SAC).

After the Trial, the High Court decided as follows:

with regard to HS-

the Original Action (Suit No. 465) was allowed;

the Counterclaim (Suit No. 465) was dismissed; and

HS was ordered to pay costs of RM100,000.00 to AIF [High Court's Decision (HS)]; and

Suit No. 465 was allowed with costs of RM30,000.00 to be paid by HP to AIF [High Court's Decision (HP)]. C. Proceedings in the Court of Appeal

The following two appeals (2 Appeals) had been filed in the Court of Appeal:

an appeal had been lodged by HS to the Court of Appeal against the High Court's Decision (HS) (HS's Appeal); and

HP had appealed to the Court of Appeal against the High Court's Decision (HP) (HP's Appeal).

We have heard the 2 Appeals together because both these 2 Appeals emanated from the same Trial in the Consolidated Suit. D. Issues

The following questions arise in these 2 Appeals:

with regard to HS's Appeal-

is HS estopped by the Court of Appeal's Decision (Reference to SAC) from raising the same submission in this case, ie., the High Court should have referred to the SAC questions of Shariah principles regarding ESB Shares, SPA (ESB) and $ 2^{\mathrm{nd}} $ Tranche?;

whether there should be appellate intervention regarding the following findings of fact by the High Court-

the acceptance of the expert testimony of AIF's expert on Shariah principles; and

(ii) the factual finding that there was no "Gharar" (uncertainty) regarding the ownership of ESB Shares;

is HS estopped from challenging the validity of the SPA (ESB) by virtue of an earlier High Court's judgment which had upheld the validity of the SPA (ESB)?;

whether the SPA (ESB) was invalid due to the non-completion of AIF's "Shariah Screening Checklist" and the lack of approval from AIF's internal Shariah Committee before the release of the $ 2^{\mathrm{nd}} $ Tranche?;

on the assumption that the Facility Agreement did not comply with Tawarruq principle, would such noncompliance invalidate the Facility Agreement under s 24(a) to (e) of the Contracts Act 1950 (CA)? Even if the Facility Agreement is void under any one of the paragraphs of s 24(a) to (e) CA, should the court exercise its discretion pursuant to s 66 CA and order HS to restore the "advantage" received by HS under the Facility Agreement from AIF? In this regard, there are different approaches by our apex courts regarding the application of s 66 CA; and

did the High Court err in not drawing an adverse inference under s 114(g) of the Evidence Act 1950 (EA) against AIF for not calling Dato' Razali Rahim (RR), the then Chief Executive Officer of AIF, as a witness at the Trial?; and

in respect of HP's Appeal, whether HP was liable to AIF pursuant to clauses 2.1 and 15.4 Assignment. OUR DECISION E. Whether the High Court should have referred to the SAC issues regarding Shariah principles in respect of the ESB Shares, SPA (ESB) and $ 2^{\mathrm{nd}} $ Tranche drawdown

HS's learned counsel had submitted that the following issues regarding Shariah principles in respect of -

whether ESB Shares are Shariah-compliant;

whether the SPA (ESB) complied with Shariah principles; and

whether AIF's disbursement of the $ 2^{\mathrm{nd}} $ Tranche to HS, had breached Shariah principles - were novel and should have been referred by the High Court to the SAC pursuant to s 56(1)(b) CBMA.

With respect to HS's learned counsel, HS is estopped from relying on s 56(1)(b) CBMA to support HS's Appeal. This is because the High Court's Decision (Reference to SAC) had been affirmed by the Court of Appeal's Decision (Reference to SAC). When HS did not apply for leave of the Federal Court to appeal against the Court of Appeal's Decision (Reference to SAC), HS is now barred by the issue estoppel principle, the second limb of the doctrine of res judicata, from raising the same contention that the learned High Court Judge should have referred issues regarding Shariah principles to the SAC in respect of ESB Shares, SPA (ESB) and $ 2^{\mathrm{nd}} $ Tranche. We rely on the following two judgments of our apex court:

according to Zulkefli Makinuddin CJ (Malaya) (as he then was) in Syed Omar bin Syed Mohamed v Perbadanan Nasional Bhd [2013] 1 MLJ 461, at 473- "We also find that the plaintiff did not appeal against the decision of the learned judge striking out the first suit. The failure to appeal meant that the plaintiff accepted the correctness of the decision to dismiss its suit."; (emphasis added); and

in Yap Kim Hin & Anor v Chua Boon Hock & Ors [2025] MLJU 176, at [16] and [20], Hasnah Mohammed Hashim FCJ (as she then was) followed Syed Omar and delivered the following judgment- [20] With respect the COA was plainly wrong in varying the COA Order in Appeal 1556. The COA in Appeal 682 must take cognizance of the COA Order in Appeal 1556 and not make any order inconsistent and/or contrary to it and more importantly there was no application for leave to appeal filed against that COA Order in Appeal 1556." (emphasis added). F. Should there be appellate intervention regarding the High Court's acceptance of the expert evidence of AIF's expert on Shariah principles?

The learned counsel for HS had submitted at length that the learned High Court Judge should have decided that Associate Professor Dr. Azman bin Mohd. Noor, PW2 (Dr. Azman), was not a credible expert witness on Shariah principles.

In paragraphs 37 and 38 of the High Court's "Grounds of Judgment" (GOJ), the learned High Court Judge accepted Dr. Azman's expert testimony [High Court's Factual Finding (Acceptance of Dr. Azman's Expert Opinion)] because -

Dr. Azman had referred to paragraph G14.6 of SAC's Tawarruq Policy Document dated 28.12.2018 [SAC's Tawarruq Policy Document]; and

based on SAC's Tawarruq Policy Document and Dr. Azman's expert opinion, the variations of the Facility Agreement in this case were consistent with Tawarruq principle.

It is not disputed that the Court of Appeal does not have the audiovisual advantage enjoyed by the learned High Court Judge in this case (to listen to the oral testimonies of witnesses and assess their demeanour). In the Federal Court case of Ng Hoo Kui & Anor v Wendy Tan Lee Peng (administratrix for the estate of Tan Ewe Kwang, deceased) & Ors [2020] 12 MLJ 67, at [78], Zabariah Yusof FCJ had explained that an appellate panel can only set aside a trial court's factual finding which is a "plain" factual error as understood in the following two cumulative circumstances:

the learned High Court Judge's finding of fact cannot be reasonably explained or justified; and

no reasonable trial judge could have arrived at the factual finding.

We are not persuaded that the High Court's Factual Finding (Acceptance of Dr. Azman's Expert Opinion) was plainly wrong in the sense that-

the High Court's Factual Finding (Acceptance of Dr. Azman's Expert Opinion) could not be reasonably explained or justified; and

no reasonable trial judge could have made the same finding of fact as the High Court's Factual Finding (Acceptance of Dr. Azman's Expert Opinion). It is to be noted that Dr. Azman's expert evidence was based on SAC's Tawarruq Policy Document. This is another reason why there was no necessity for the High Court to refer questions of Shariah principles to the SAC in this case.

Two clauses in the Facility Agreement are relevant, namely-

according to clause 3.02 Facility Agreement-

the Facility "shall" be utilised by HS "exclusively for the purpose set out Item 5(b) of the First Schedule which must be Shariah-compliant";

AIF was "not bound to check and/or ensure that the Faciltiy is used exclusively for the purpose" mentioned in Item 5(b) of the First Schedule to the Facility Agreement; and

HS's obligations under the Facility Agreement "shall not in any way be prejudiced or affected or diminished by reason that all or any part of Facility is utilised for some other purpose (whether or not [AIF] has notice of that fact)"; and

in clause 5.03(l) Facility Agreement, HS had represented, warranted and undertaken with AIF that HS "shall utilise the Facility for Shariah-compliant activities only". Clause 5.03 Facility Agreement further provided that all the matters stated in the paragraphs in clause 5.03 Facility Agreement, "shall form the basis" for AIF's commitment to make and continue to make available the Facility to HS. It is clear from clauses 3.02 and 5.03(l) Facility Agreement that HS (not AIF) had the contractual duty to ensure that the Facility was only used by HS for Shariah-compliant activities. After all, HS (not AIF) was the one who was acquiring shares of Shariah-compliant companies by relying on the funds drawn down from the Facility. As there is no ambiguity in clauses 3.02 and 5.03(l) Facility Agreement, there is no room to apply the contra proferentem rule of construction in this case. G. Whether HS could rely on matters which had not been pleaded by HS in Suit No. 465

In support of HS's Appeal, learned counsel for HS had submitted as follows:

AIF had breached SPA (ESB) by not furnishing relevant documents to ATAR so as to enable ATAR to register ATAR's name as the sole owner of ESB Shares;

AIF had fraudulently concealed from ATAR and/or HS, ESB's audited reports for the financial year ending on 30.4.2015;

AIF had fraudulently misrepresented to HS and/or ATAR the value of EFS Shares;

AIF had breached paragraphs 9.2 to 9.5 of BNM's Credit Risk Management Guidelines (2019) by engaging in "double financing" and "triple financing" with regard to ESB Shares; and

the $ 1^{\mathrm{st}} $ Tranche was invalid.

We accept the submission by AIF's learned counsel that HS could not rely on the matters raised in the above paragraph 24 because such matters had not been pleaded in HS's Amended Defence and Counterclaim and HS's "Reply to Defence to Counterclaim". It is trite law that all parties are bound by their pleadings - please refer to the Federal Court's judgment delivered by Ramly Ali FCJ in Samuel Naik Siang Ting v Public Bank BHD [2015] 8 CLJ 944, at [27] to [34]. H. Was HS estopped from invalidating the SPA (ESB)?

In Kuala Lumpur High Court Civil Suit no. WA-22NCC-333-09/2016 (Suit No. 333), Puan Roziah bt. Ismail had sued Encik Johany bin Jaafar (JJ), AIF and ATAR regarding ESB Shares.

In Suit No. 333-

ATAR had pleaded that the SPA (ESB) was valid;

Mohamed Zaini Mazlan J (as he then was) in the High Court had-

allowed Suit No. 333 against JJ; and

dismissed Suit No. 333 against AIF and ATAR [High Court's Judgment (Suit No. 333)]; and

according to the High Court's Judgment (Suit No. 333), at [38] and [39], the SPA (ESB) was valid.

By virtue of the High Court's Judgment (Suit No. 333), HS is now estopped from asserting that the SPA (ESB) is invalid due to a breach of the Tawarruq concept. We rely on the following judgment of the Court of Appeal delivered by Idrus Harun JCA (as he then was) in Leisure Farm Corp Sdn Bhd v Kabushiki Kaisha Ngu (formerly known as Dai-Ichi Shokai) & Ors [2017] 5 MLJ 63, at [16] to [18]: [16] Learned counsel for the second respondent further reinforces the submission of the first respondent when he submits the remaining point before us. His contention is couched in forceful but deferential terms when he says that the appellant's assertion in para 29 of the affidavit in support of the committal application was made in this court during the hearing of the said application to the effect that this appeal had been rendered illusory and nugatory. The appellant, however, is now saying that it is not academic. That, learned counsel submits, is not permitted. Learned counsel's argument directed before us as we understand it, is that, in view of its earlier stand in the committal proceedings, judicial estoppel would operate to now estop the appellant from taking an inconsistent position during the appeal. It is clear to this court that the object of judicial estoppel is to prevent a party who assumes a particular position in litigation to take an inconsistent position in later litigation. Christopher Clarke J explained the law on judicial estoppel in OJSC Oil Co Yugraneft (in liquidation) v Abramovich and others [2008] EWHC 2613 (Comm) and we now quote the relevant excerpts: The Court of Appeals for the Sixth Circuit explained the position in Edwards v Aetna Life and Casualty 690 F 2s 595 (1982): The policies supporting judicial estoppel are different from those that support the more common doctrines of issue preclusion, equitable and collateral estoppel. Courts apply equitable estoppel to prevent a party from contradicting a position taken in a prior judicial proceeding ... Equitable estoppel enables a party to avoid litigating, in the second proceeding, claims which are plainly inconsistent with those litigated in the first proceeding. Because the doctrine is intended to ensure fair dealing between the parties, the courts will apply the doctrine only if the party asserting the estoppel was a party in the prior proceeding and if that party has detrimentally relied upon his opponent's prior position. See Id at 689-90. Collateral estoppel prevents relitigation of factual matters that were fully considered and decided in a prior proceeding. Thus, collateral estoppel operates to prevent repetitive litigation. The doctrine of judicial estoppel applies to a party who has successfully and unequivocally asserted a position in a prior proceeding; he is estopped from asserting an inconsistent position in a subsequent proceeding... Unlike equitable estoppel, judicial estoppel may be applied even if detrimental reliance or privity does not exist. ... This distinction reflects the difference in the policies served by the two rules. Equitable estoppel protects litigants from less than scrupulous opponents. Judicial estoppel, however, is intended to protect the integrity of the judicial process. ... Scarano v Central R Co, 203 F 2d 510, 512-13 (3rd Cir 1953) ('such use of inconsistent positions would most flagrantly exemplify that playing 'fast and loose with the courts' which has been emphasized as an evil the court should not tolerate'). The essential function of judicial estoppel is to prevent intentional inconsistency; the object of the rule is to protect the judiciary, as an institution, from the perversion of judicial machinery. ... Collateral estoppel is essentially a finality rule, which serves to conserve judicial resources by precluding the litigation of issues previously decided. Judicial estoppel addresses the incongruity of allowing a party to assert a position in one tribunal and the opposite in another tribunal. If the second tribunal adopted the party's inconsistent position, then at least one court has probably been misled ... [17] Also cited by learned counsel in the course of his oral submission on this point is this court's decision in the case of Zulpadli bin Mohammad & Ors v Bank Pertanian Malaysia Bhd [2013] 2 MLJ 915 in which it was held that the respondent's own admission in the earlier suit as well as the amended statement of claim in the present suit showed that the appellants were innocent victims as much as the respondent was. The respondent was estopped from taking a position different from that pleaded in its defence in the earlier suit. Clearly, the essential function of judicial estoppel is to prevent intentional inconsistency while the object of the rule is to protect the court from the perversion of judicial machinery. Judicial estoppel seeks to address the incongruity of allowing a party to assert a position in one court and the opposite in another tribunal (Peguam Negara Malaysia v Nurul Izzah bt Anwar & Ors [2017] MLJU 273). [18] On the facts of the present case, we are satisfied that the appellant had unequivocally assumed a position that the transfer of the entire issued and paid up shares of the second respondent to the third party new shareholders defeats, overcomes and renders illusory and nugatory this very appeal. The appellant cannot now change its stance in this appeal adopting a completely different position that specific performance should be ordered in their favour in respect of the subject matter which has ceased to exist. Such position, we would say, is incongruous with their position manifested in its affidavit and argument in the earlier proceedings and thus certainly flies in the face of the appellant's earlier position it stood for during the committal proceedings." (emphasis added). I. Should the Court of Appeal set aside the High Court's finding of fact that there was no "Gharar" (uncertainty) regarding the ownership of ESB Shares?

The learned High Court Judge decided that there was no Gharar in respect of the ownership of ESB Shares which could invalidate the SPA (ESB) - please refer to paragraphs 55 to 64 GOJ.

In our view, the High Court's Judgment (Suit No. 333) [which decided on the validity of the SPA (ESB)] , clearly justified the High Court's decision that there was no Gharar regarding the ownership of ESB Shares. The allegation of Gharar was an afterthought by HS which was raised for the very first time after the filing of the Original Action (Suit No. 465) by AIF against HS.

In any event, the High Court's factual finding that there was no Gharar in respect of the ownership of ESB Shares, was not a plain factual error which warrants appellate intervention in HS's Appeal. J. Was the SPA (ESB) invalid due to the non-completion of AIF's "Shariah Screening Checklist" and the lack of approval from AIF's internal Shariah Committee before the release of the $ 2^{n d} $ Tranche?

HS's learned counsel had invited us to invalidate the SPA (ESB) on the ground that when the $ 2^{\mathrm{nd}} $ Tranche was released by AIS for HS's purchase of ESB Shares -

AIF's own internal Shariah Screening Checklist had not been completed; and

AIF's internal Shariah Committee had not approved the SPA (ESB).

In paragraphs 52 to 54 GOJ, the learned High Court Judge rejected the above submission on the ground that the "incompetence and lackadaisical attitude" of AIF's officers would not invalidate the SPA (ESB) because AIF's Shariah Screening Checklist was a "mere Checklist" which could not invalidate the SPA (ESB). We agree because, as explained in the above paragraph 20, premised on SAC's Tawarruq Policy Document and Dr. Azman's expert opinion, the variations of the Facility Agreement in this case were consistent with Tawarruq principle. Hence, the validity of the SPA (ESB). K. Whether non-compliance with Tawarruq principle would invalidate the Facility Agreement under s 24(a) to (e) CA

Section 24(a) to (e) CA provides as follows: "s 24. What considerations and objects are lawful, and what not

it is forbidden by a law; The consideration or object of an agreement is lawful, unless -

it is of such a nature that, if permitted, it would defeat any law;

it is fraudulent;

it involves or implies injury to the person or property of another; or

the court regards it as immoral, or opposed to public policy. In each of the above cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void." (emphasis added).

In Maybank Islamic Bhd v M-IO Builders Sdn Bhd & Anor [2017] 2 MLJ 69, at [28] to [30], Rohana Yusuf JCA (as she then was) delivered the following judgment in the Court of Appeal: "ILLEGALITY [28] The purported non-compliance with the murahabah principles does not in our view, render the contract illegal and unenforceable. The learned judge had wrongly construed the principles of illegality of contract in her judgment. 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 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. Before we proceeded to resolve this dichotomy, we remained unclear in the first place as to whether or not an agreement which does comply with certain requirement of Shariah as found by the learned judge in this case, would render the agreement unlawful and enforceable from the Shariah perspective itself. [29] Having said that, we would begin our discussions on the issue of illegality by looking at s 24 [CA]. The section lists out five instances where a contract may be void or unlawful. All the five instances hinge on whether the considerations or objects of the contract in question is lawful or otherwise. A contract is said to be void or unlawful if the consideration or object of the contract is forbidden by law. It is also unlawful if it is of such a nature that, if permitted, it would defeat any law. Another instance is where the contract is a fraudulent contract ie the contract entered into or designed to defraud a person. Yet another instance is where the contract involves or implies injury to the person or property of another. A contract could also be void or unlawful if the court regards it as immoral, or as against public policy. We did not find any of the aforementioned circumstances been cited by the respondents to contend a case of illegality. In other words s 24 [CA] does not come into play at all. The sole ground for holding that the agreement of MOD facility a nullity was purely from failure to comply with Shariah principles that governs the same. [30] The English court had also applied English laws to enforce a murahabah contract. In Islamic Investment Company of the Gulf (Bahamas) Ltd v Symphony Gems NV and others [2002] All ER (D) 171 after hearing evidence from Shariah scholars on the principles of Shariah concerning the nature of a murahabah agreement, the court found that the agreement in dispute did not satisfy the essential requirements of murabahah, yet found the English law applies and had given effect to the contract based on English law. Similarly in the case of Shamil Bank of Bahrain EC v Beximco Pharmaceuticals Ltd and others [2004] 4 All ER 1072, the principles of Shariah in the English case was inserted by virtues of the governing law clause under the agreement. The governing law clause was stated as 'subject to the principles of Glorious Syariah, this agreement shall be governed by and construed in accordance with the laws of England'. We agreed with that approach and in our view the validity of the contract in this case should be viewed from the law that generally governs the contract between parties in this country. This approach would be in consonant with what was stated in the case of Bank Rakyat v Emcee. We are therefore of the view firstly, the provisions of the [CA] still govern Islamic contracts. It follows therefore the MOD facility agreements are not one that can be avoided under s 24 [CA] nor an illegal contract under s 25 and therefore remains an enforceable agreement and must be adhered to." (emphasis added).

We adopt the above judgment in M-IO Builders. The following reasons, in our view, support M-IO Builders:

the first legislation in this country regarding Islamic banking was the Islamic Banking Act 1983 (IBA). The IBA had been repealed by the present Islamic Financial Services Act 2013 (IFSA). There is nothing in the IBA and IFSA which provides that if a "financing facility" [defined in s 2(1) IFSA] offered by a "licensed Islamic bank" [defined in s 2(1) IFSA] has breached a Shariah principle, such a breach in itself would invalidate the financing facility; and

if Parliament had intended to invalidate a contract based on a breach of Shariah principle, Parliament would have expressly included a new paragraph in s 24 CA to provide that a financing facility which is contrary to a Shariah principle, is void. Our legislature, however, has not done do.

Premised on M-IO Builders and the reasons stated in the above paragraph 36, even if it was assumed that the SPA (ESB) was inconsistent with Tawarruq concept, such a fact in itself could not mean that the Facility Agreement was void under s 24(a) to (e) CA. Furthermore, HS's Counterclaim did not pray for an invalidation of the 1 $ ^{st} $ Tranche.

Even if the Facility Agreement is rendered void under any one of the paragraphs in s 24(a) to (e) CA, s 66 CA is relevant. According to s 66 CA- "s 66. Obligation of person who has received advantage under void agreement, or contract that becomes void When an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under the agreement or contract is bound to restore it, or to make compensation for it, to the person from whom he received it." (emphasis added).

Before the delivery of the Federal Court's judgment in Detik Ria Sdn Bhd v Prudential Corp Holdings Ltd & Anor [2025] 3 MLJ 22 Detik Ria Sdn Bhd v Prudential Corp Holdings Ltd & Anor [2025] 3 MLJ 22, our highest courts have adopted different approaches in the application of s 66 CA. We cite the following decisions of our apex courts with regard to the invocation of s 66 CA (in chronology):

the opinion of the Privy Council delivered by Lord Fraser in Menaka v Lum Kum Chum [1977] 1 MLJ 91, at 94 to 95 (an appeal from Malaysia). In Menaka, by virtue of s 66 CA, the Privy Council upheld the Federal Court's award of interest on a loan sum granted by a licensed moneylender (the loan was void due to a non-compliance with s 8 of the then Moneylenders Ordinance 1951);

the two judgments in the Federal Court case of Badiaddin bin Mohd Mahidin & Anor v Arab Malaysian Finance Bhd [1998] 1 MLJ 393, namely-

Mohd. Azmi FCJ, at p. 410 to 412 [concurred by Eusoff Chin CJ and Wan Adnan FCJ (as he then was)]; and

Gopal Sri Ram JCA (as he then was), at p. 430 to 432;

the judgement of the Federal Court delivered by Ramly Ali FCJ in Tan Chee Hoe Sdn Bhd v Code Focus Sdn Bhd [2014] 3 MLJ 301, at [39], [43] to [46], [55] and [59(c)]. The Federal Court in Tan Chee Hoe granted interest on the return of money paid for shares of a company which contravened s 132C(1) of the then applicable Companies Act 1965; and

in the Federal Court case of Triple Zest Trading & Suppliers & Ors v Applied Business Technologies Sdn Bhd [2023] 6 MLJ 818, at [28], [29] and [34], Abdul Rahman Sebli CJ (Sabah & Sarawak) refused to grant restitutionary relief under s 66 CA to an unlicensed moneylender.

When there are conflicting judgments of our apex courts on a question of law, all courts (other than the Federal Court) should apply the latest judgment of the apex court. We rely on the following judgment of the Federal Court delivered by Peh Swee Chin FCJ in Dalip Bhagwan Singh v Public Prosecutor [1998] 1 MLJ 1, at 8 and 14: "This time, the applicant was dissatisfied with the decision of the High Court and he applied for leave to refer to the Supreme Court certain questions of law. The Supreme Court, on 4 February 1991, the application in respect of the following questions: QUESTION 1 In an appeal against acquittal at the close of the case of the prosecution, can an appellate judge refuse to apply with or without assigning any reason, the latest decision of the Supreme Court on a point of law and adopt an earlier decision of the Federal Court? If the House of Lords, and by anology, Federal Court, departs from its previous decision when it is right to do so in the circumstances set out above, then also by necessary implication, its decision represents the present state of the law. When two decisions of the Federal Court conflict on a point of law, the later decision therefore, for the same reasons, prevails over the earlier decision." (emphasis added).

Premised on Dalip Bhagwan Singh, with regard to s 66 CA, we will apply the latest Federal Court's judgment in Detik Ria. We reproduce below the relevant part of the judgment of Nallini Pathmanathan FCJ in Detik Ria, at [153], [167], [168], [175], [178] and [192] to [199], as follows: [153] Since the contract is found to be one that became void, we found that s 66 [CA] is relevant and applicable to determine the remedial obligations of the parties. [167] This is a remedy or more accurately perhaps, a statutory consequence, that requires judicial discretion in order to determine the situations in which this broad-based principle is applicable. Our courts have, in this vein, routinely held that s 66 is a discretionary remedy (Badiaddin binMohdMahidin & Anor v Arab Malaysian Finance Bhd [1998] 1 MLJ 393 at p 411). The principles under which this discretion should be exercised have been canvassed in our caselaw. [168] We wish to draw attention however, to the specific context of a breach of a statutory prohibition and the need to give primacy to the statutory purpose of the prohibition. When considering if a contract is void for the contravention of a statute, the statutory purpose is analysed to evaluate if said purpose of that statute necessitates a finding that the contract is void. When assessing the statutory purpose where the s 66 enquiry is concerned, the statutory purpose is analysed to evaluate if the purpose of the statute militates for, or against, the grant of a s 66 remedy. [175] The other factor which militates strongly in favour of the application of s 66 is the fact that the parties might well receive an unjust windfall should s 66 not be applied. [178] Indeed, in Tan Chee Hoe & Sdn Bhd v Code Focus Sdn Bhd [2014] 3 MLJ 301, the Federal Court granted s 66 relief despite the fact that both parties had knowledge of the illegality, namely the contravention of s 132C of the Companies Act. (See also: Paragon Union Bhd v Prestamewah Development Sdn Bhd & Anor and another appeal [2018] 4 MLJ 307.) HOW IS S 66 TO BE APPLIED? [192] Therefore, the grant of the s 66 remedy warrants the formulation of a guide to determining whether the s 66 remedy is engaged or not. Where a contract is 'discovered to be void' or 'becomes void', the guidelines for the application of s 66 are as follows. [193] First, the centrality of the illegality in the statute is to be considered. This is a matter of construction of the particular statute. [194] Second, the proportionality of denying s 66 relief to the illegality should be considered. There are numerous factors which should be considered in assessing proportionality:

whether the contract was performed or executed;

whether allowing the claim would defeat the purpose of the prohibiting statute;

the nature and extent of the illegality;

the extent of the culpability of the parties;

the intent of the parties in embarking on the transaction or omission as the case may be;

the nexus between the illegality and the contract; and

whether the denial of relief is proportionate to the illegality. [195] In this context, the extent of the parties' culpability for the illegality should be considered. Culpability refers to the degree of blameworthiness or responsibility of a person for their actions or omissions that lead to the illegality. Culpability is different and distinct from knowledge. Knowledge refers to the awareness or understanding of facts or circumstances related to that act or omission. In other words, culpability is a broader concept than knowledge in that it encompasses more than just the intent and mental state of the individual at the time of the act or omission. In short, knowledge is a component of culpability. [196] We reiterate that the presence of knowledge alone is not a complete bar to the s 66 remedy but is an important factor to be considered in determining culpability. Culpability, more particularly the extent of culpability, is one of the decisive factors in determining whether a remedy under s 66 should be granted. [197] Finally, the court should consider holistically if the denial of relief is proportionate to the illegality. [198] Put simply, the following factors, in this order, may be considered in determining if s 66 relief should be granted:

the centrality of the illegality in the context of the particular statute breached;

proportionality:

culpability;

(ii) was the contract performed? and

(iii) is the denial of s 66 relief a proportionate response to the illegality? [199] The foregoing factors set out in the guidelines are not exhaustive. It is important that these factors are not utilised in a mechanistic and rigid fashion but considered holistically and given weight in accordance with the facts of the particular case. (See Ting Siew May v Boon Lay Choo and Another [2014] SGCA 28, Ochroid Trading Limited (formerly known as OrionTrading Limited) & Anor v Chua Siok Lui & Anor [2018] SGCA 5 and Patel.)” (emphasis added).

On the assumption that the Facility Agreement is void under any one of the paragraphs in s 24(a) to (e) CA, premised on the guidelines laid down in Detik Ria, we have no hesitation to exercise our discretion under s 66 CA to order HS to restore to AIF a sum of RM62,031,201.48 (as at 31.8.2018) which constitutes the funds drawn down by HS pursuant to the Facility together with "ta'widh" (late payment compensation) at the prevailing Islamic Inter-Bank Money Market rate (to be calculated from 1.8.2018 until full settlement of the same). It is to be noted that in Menaka and Tan Chee Hoe, interest was granted on sums of money ordered to be restored under s 66 CA. The reasons for the exercise of our discretion pursuant to s 66 CA are as follows:

AIF did not breach IFSA or any statutory provision;

the purpose of the Facility Agreement was for AIF to provide an Islamic financing facility to HS, an ordinary commercial transaction;

the Facility Agreement had been fully performed as HS had fully drawn down RM80,000,000.00 from the Facility;

by reason of clauses 3.02 and 5.03(l) Facility Agreement, HS (not AIF) had the contractual duty to ensure that the Facility was only used by HS for Shariah-compliant activities. In other words, HS was more culpable than AIF with regard to any breach of Shariah principle in this case; and

if we have declined to exercise our discretion to grant restitution pursuant to s 66 CA in favour of AIF in this case, this would mean an unjustifiable windfall for HS (in excess of a sum of RM60,000,000.00). Such an outcome is grossly disproportionate to the breach of Shariah principle in this case. L. Should an adverse inference be drawn against AIF for not calling RR to testify at the Trial?

Section 114(g) EA states as follows: "s 114. Court may presume existence of certain fact The court may presume the existence of any fact which it thinks likely to have happened, regard being had to the common course of natural events, human conduct, and public and private business, in their relation to the facts of the particular case. ILLUSTRATIONS The court may presume -

that evidence which could be and is not produced would if produced be unfavourable to the person who withholds it; ..." (emphasis added).

According to HS, RR had fraudulently misrepresented the value of ESB Shares. Hence, HS's learned counsel had invited the learned High Court Judge to make an adverse inference under s 114(g) EA against AIF for not calling RR to give evidence in this case. The High Court declined to draw such inference. We are of the view that the learned High Court Judge did not err in this respect because -

as explained in the above paragraphs 24(3) and 25, HS did not plead regarding AIF's misrepresentation of the value of ESB Shares [Alleged Misrepresentation (AIF)]. Consequently-

HS could not rely on the Alleged Misrepresentation (AIF) in this case; and

RR was not a material witness in this case. It is trite law that an adverse inference can only be drawn under s 114(g) EA against a party for suppressing material evidence in a case - please refer to the Supreme Court's judgment delivered by Mohd. Azmi SCJ in Munusamy v Public Prosecutor [1987] 1 MLJ 492, at 494; and

there was no reason why HS could not apply for a court subpoena to compel RR to give evidence at the Trial. In the Court of Appeal case of Alliance Connext Sdn Bhd & Anor v Wangsa Budimas Sdn Bhd [2022] 2 MLJ 154, at [22], Vazeer Alam JCA (as he then was) had explained that "there is no property in a witness". M. Outcome of HS's Appeal

As explained in Parts D to L, HS's Appeal is dismissed with costs.

In paragraphs 71 and 72 GOJ, the High Court allowed Suit No. 523 due to clauses 2.1 and 15.4 Assignment.

We reproduce below clauses 2.1 and 15.4 Assignment: "2.1 Covenant to pay: In consideration of [AIF] having granted or extended and/or agreed to grant or extend the Facility to [HS], [HP] covenants with [AIF] that it will duly and punctually pay or discharge to [AIF] the Secured Amounts and discharge all its obligations in accordance with the provisions of the Security Documents.

4 Independent payment obligations: Each of [HP's] obligations to pay, repay or indemnify under any of the provisions of this Assignment or any other Security Documents constitute separate and independent obligations, shall give rise to separate and independent causes of action, shall apply irrespective of any waiver or indulgence granted in respect of any other obligation from time to time, shall remain in full force and effect despite any judgment, order, claim, filing of any proof for a liquidate amount in respect of some other obligation." (emphasis added).

Firstly, we are not able to accept the submission by HP's learned counsel that AIF was only entitled to claim from HP under the Assignment only if-

there was a sale of HP's land; and

there was a surplus of the sale proceeds. With respect, the above contention is not borne out by clauses 2.1 and 15.4 Assignment.

Secondly, HS had defaulted with regard to the Facility Agreement. Hence, there was a debt due and owing from HS to AIF pursuant to the Facility Agreement [HS's Debt (AIF)]. HS's Debt (AIF) would entitle AIF to claim against HP under clauses 2.1 and 15.4 Assignment. In other words, AIF's claim against HP was not premature.

In view of the clear words of clauses 2.1 and 15.4 Assignment, we have no hesitation to dismiss HP's Appeal.

Premised on the above evidence and reasons-

with regard to HS's Appeal-

HS's Appeal is dismissed;

the High Court's Decision (HS) is affirmed; and

HS shall pay to AIF costs of HS's Appeal in a sum of RM40,000.00 (subject to allocatur fee); and

in respect of HP's Appeal-

we refuse HP's Appeal;

the High Court's Decision (HP) is maintained; and

costs of RM20,000.00 shall to be paid by HP to AIF (subject to allocatur fee). DATE: 10 NOVEMBER 2025 WONG KIAN KHEONG Judge Court of Appeal For Appeal No: W-02(MUA)(W)-190-02/2023) For Appeal No: W-02(MUA)(W)-190-02/2023Counsel forMr. Kalearasu VelooAppellant:Encik Mohd. Faiz Iskandar Hamzah & YM Tunku Muhamad Musyrif bin Tunku Mafuza (Messrs Arief & Iskandar)Counsel forDato’ David Morais, Encik Shaikh Abdul SaleemRespondent:Ms. Pavitra Pillai, Ms. Sara Jailany & Ms. Teoh Jo Vi (Messrs Shaikh David & Co.)For Appeal No: W-02(MUA)(W)-286-02/2023Counsel forEncik Khalid Yusoff &Appellant:Encik Jasreezal Amar Nooris bin Jasli (Messrs Abu Talib Shahrom)Counsel forDato’ David Morais, Mr. Shaikh Abd SaleemRespondent:Ms. Pavitra Pillai, Ms. Sara Jailany & Ms. Teoh Jo Vi (Messrs Shaikh David & Co)