Kuwait Finance House (Malaysia) Berhad v Wsj International Sdn. Bhd. (WA-22M-233-04/2019)

WSJ INTERNATIONAL SDN. BHD. (formerly known as WOOD STAR JAYA SDN. BHD.)

2.

3.

4.

5.

6.

7.

SELVARAJAN A/L MARUTHAMUTHU ... DEFENDANTS GROUNDS OF JUDGMENT S/N g97kmhN4bkijwUs73R6qeg

This is the Plaintiff's claim against the 2nd to 6th Defendants for recovery of monies owing under three Islamic financing facilities granted to the 1st Defendant, WSJ International Sdn Bhd (“WSJ”), which facilities were guaranteed by the other Defendants through Individual Guarantees executed in their personal capacities.

WSJ was wound up on 6 May 2019 by order of the Shah Alam High Court. Judgment in default of appearance was entered against the 7th Defendant, and the Plaintiff withdrew its claim against the 8th Defendant following an out-of-court settlement on 21 April 2025. The 2nd Defendant's counterclaim was struck out with costs on 11 January 2021.

At trial, the Plaintiff called two witnesses: PW1 (Raja Sulong Ahmad bin Raja Abd Razak) and PW2 (Chen Fong Lian). The Defendants called three witnesses: DW1 (Iqbal Bin Mohd Ayub, the 3rd Defendant), DW2 (Rashid Bin Maidin, the 5th Defendant), and DW3 (Nor Raihan Binti Ahmad Kamarudin, the 2nd Defendant). The trial was heard over eight days between June 2024 and August 2025.

The facts material to this action are largely undisputed. The Plaintiff, Kuwait Finance House (Malaysia) Berhad (“KFH”), granted several financing facilities to WSJ between 2007 and 2009, namely Murabahah Facilities, Murabahah Tawarruq Facilities, and Ijarah S/N g97kmhN4bkijwUs73R6qeg Facilities for financing vessels through Islamic sale and leaseback arrangements (collectively “the Facilities”). These Facilities were secured by, among others, individual guarantees executed by the 2nd to 8th Defendants (“the Guarantees”).

WSJ defaulted on its repayments. In 2016, KFH commenced earlier proceedings but withdrew them after entering into a settlement arrangement encapsulated in letters dated 17 May 2016 and 1 June 2016 (“the Settlement Letters”). Under the Settlement Letters, WSJ agreed to pay a total settlement sum of RM28 million in three tranches. The arrangement provided that upon full payment, the individual guarantors would be released.

WSJ paid RM27,175,184.79, leaving an outstanding balance of RM824,815.21. KFH terminated the settlement arrangement due to this default and, through its solicitors, issued letters of demand dated 8 January 2019 to the 2nd to 6th Defendants. KFH then commenced the present action, claiming the full outstanding amounts under the Facilities as at 25 March 2019, totaling approximately RM8.33 million and USD8.37 million, plus compensation fees (ta’widh).

The 2nd to 6th Defendants deny liability on several grounds, including alleged non-service of the demand, release under the Settlement Letters, and failure by KFH to prove actual loss. S/N g97kmhN4bkijwUs73R6qeg

The following issues arise for determination:

Whether the letters of demand dated 8 January 2019 were duly served on the 2nd to 6th Defendants so as to trigger their liability under the Guarantees;

Whether the 2nd to 6th Defendants were released from their obligations under the Guarantees upon KFH’s receipt of RM10 million from the sale of Frenz Hotel pursuant to the Settlement Letters;

Whether KFH is required to realise its other securities before proceeding against the guarantors;

Whether KFH’s claim for compensation fees amounts to prohibited interest (riba) under Shariah principles;

Whether KFH has proved its loss with sufficient evidence, particularly through the Certificate of Indebtedness; and

Whether equity operates to bar KFH’s claim. S/N g97kmhN4bkijwUs73R6qeg COUNSELS’ CONTENTIONS Plaintiff’s Submissions

Learned counsel for the Plaintiff, Mr. Tan Gian Chung contends that the Guarantees are “on demand” instruments where the guarantors are liable as principal debtors. Service of the demand is deemed effective under Clauses 4 and 22.1 of the Guarantees if sent by registered post or ordinary post, and deemed received three days after posting. Counsel argues that KFH produced proof of posting via certificate of posting and AR registered post. Relying on Amanah Merchant Bank Bhd v Lim Tow Choon [1994] 2 CLJ 1 (SC), counsel argues that AR registered post is a valid mode of service.

On the Settlement Letters, learned counsel emphasises the doctrine of privity of contract: the guarantors were not parties to the settlement. Clause 2(g)(ii) of the Settlement Letter dated 17 May 2016 conditioned release upon “strict compliance” with all terms, which did not occur due to WSJ’s default on the final tranche. Clause 3 expressly preserved KFH’s rights against the guarantors. The receipt of RM10 million was merely part-payment, not consideration for release.

Counsel submits that under the Guarantees, KFH is entitled to proceed against the guarantors without first realising other securities, citing Bank Bumiputera Malaysia Bhd v Esah Binti Abdul Ghani [1986] 1 MLJ 16 (SC). Counsel further argues that the compensation fees claimed are permissible ta’widh (compensation S/N g97kmhN4bkijwUs73R6qeg for actual loss) under Shariah, not riba, as recognised in Bank Islam Malaysia Berhad v Helcom Engineering Corporation Sdn Bhd [2011] 1 LNS 1862 (HC) and CIMB Islamic Bank Bhd v LCL Corporation Bhd [2011] 7 CLJ 594 (HC).

Counsel relies on the Certificate of Indebtedness and statements of account as conclusive evidence of the debt, pursuant to clauses in the financing agreements. The case of Cempaka Finance Berhad v Ho Lai Ying (T/A KH Trading) & Anor [2006] 2 MLJ 685 (FC) is cited for the principle that such a certificate shifts the burden to the Defendants to prove manifest error. Counsel reiterates that no such error has been shown.

Finally, counsel denies any equitable defence, arguing that the 2nd Defendant’s allegation of intimidation and delay in returning a land title is unsupported by contemporaneous correspondence and is an afterthought.

Learned counsel for the 2nd to 6th Defendants, Mr. A. Onn argues that the letters of demand were not served in compliance with Clause 4 of the Guarantees, which requires “registered post”. The 2nd to 6th Defendants deny receiving the demands and contend that certificate of posting and AR registered post (without proof of AR cards) do not satisfy the clause. They invoke the maxim generalia specialibus non derogant, arguing that the specific service clause (Clause 4) overrides the general one (Clause 22.1). S/N g97kmhN4bkijwUs73R6qeg

On the Settlement Letters, learned counsel submits that Clause 2(g)(ii) unequivocally releases the 2nd to 6th Defendants upon receipt of the “2nd Tranche” of RM10 million. Counsel argues that KFH’s receipt of this sum constitutes good consideration for the guarantors’ release. Counsel also invokes equity, contending that the it would be unconscionable for KFH to claim the full facility amounts after receiving 97.1% of the settlement sum.

Learned counsel for 2nd to 6th Defendants challenges the quantum of KFH’s claim, alleging that it has failed to prove actual loss. Counsel argues that the Certificate of Indebtedness contains manifest errors: it omits ibra’ (rebate) for early settlement, uses incorrect exchange rates, includes unauthorised “fee receivable” and “late fee charges”, and fails to account for payments made. The case of Chen Heng Ping & Ors v Intradagang Merchant Bankers [1995] 2 MLJ 363 (CA) is cited to assert that the court is not bound by a conclusive certificate if manifest error is shown.

Counsel also contends that the compensation fees claimed are riba, prohibited under Shariah, and that KFH failed to mitigate its losses (e.g., by selling secured vessels). Counsel further alleges that KFH’s conduct in retaining the 2nd Defendant’s land title unfairly prejudiced her ability to sell the land and settle the outstanding sum. S/N g97kmhN4bkijwUs73R6qeg

I find that the letters of demand dated 8 January 2019 were duly served. Clause 4 of the Guarantees permits service by “registered post”. The Supreme Court in Amanah Merchant Bank Bhd v Lim Tow Choon (supra) held that “post” in its ordinary meaning includes both ordinary and registered post, and that AR registered post is “a sophisticated version of the ordinary registered post”. Proof of posting (certificate of posting) is sufficient; return of the AR card is not required. KFH produced certificates of posting and evidence of AR registered postings. The deemed service provision (three days after posting) thus operates.

The Defendants’ reliance on generalia specialibus non derogant is misplaced. Clauses 4 and 22.1 are not conflicting; they provide alternative modes of service. Both were complied with. Moreover, the Guarantees contain a “principal debtor” clause, which obviates the necessity for a prior demand (Public Bank v Chan Siok Lie [1989] 2 MLJ 305 (HC)). The writ itself constitutes a demand. Accordingly, this issue is decided in favour of KFH. ISSUE 2: Release under the Settlement Letters

I find that the 2nd to 6th Defendants were not released. The Settlement Letters are contracts between KFH and WSJ. The guarantors are not parties. The doctrine of privity of contract prevents them from relying on its terms for their benefit (Woolley S/N g97kmhN4bkijwUs73R6qeg Development Sdn Bhd v Tiara Contours Construction Sdn Bhd [2016] 2 CLJ 610 (CA)). Clause 3 of the Settlement Letter dated 17 May 2016 expressly states that nothing therein shall be construed as releasing the guarantors.

Even if they could rely on it, Clause 2(g)(ii) conditions release upon “strict compliance with the above”, which includes payment of all three tranches. WSJ defaulted on the final tranche. The Defendants’ interpretation, i.e. that release automatically follows receipt of RM10 million, ignores this condition precedent. PW1’s testimony that release required full compliance is consistent with the contractual text.

The Defendants’ equitable arguments are unavailing. Equity does not rewrite clear contractual terms. The Settlement Letters provided a mechanism for full and final settlement; WSJ did not fulfil it. KFH’s entitlement to revert to the original facility amounts upon default is explicitly reserved in Clause 2(h). There is no unconscionability in enforcing that right.

The Guarantees expressly entitle KFH to proceed against the guarantors without first realising other securities (Clauses 2(e), 2(i), 2(j)). This is consistent with established authority (Bank Bumiputera Malaysia Bhd v Esah Binti Abdul Ghani (supra)). The Defendants’ argument on this point is rejected. S/N g97kmhN4bkijwUs73R6qeg

The compensation fees claimed are ta’widh, not riba. Ta’widh is permissible compensation for actual loss arising from default, as recognised by the Shariah Advisory Council and the courts (Bank Islam Malaysia Berhad v Helcom Engineering Corporation Sdn Bhd (supra) and CIMB Islamic Bank Bhd v LCL Corporation Bhd (supra)). The financing agreements expressly provide for ta’widh. KFH’s witness explained that the fees are calculated on overdue lease rentals (for Ijarah) and deferred sale balances (for Murabahah), not on interest. The Defendants’ bare assertion that these are riba is without merit.

The Defendants’ contention that ta’widh must be donated to charity does not negate KFH’s right to claim it; it merely dictates the disposition of the funds once received. This is a matter between KFH and its Shariah compliance framework, not a defence to liability.

KFH has discharged its burden of proof. The Certificate of Indebtedness and supporting statements of account are prima facie conclusive under the financing agreements and Section 90A of the Evidence Act 1950. The Defendants’ attempt to show “manifest error” is unsubstantiated: S/N g97kmhN4bkijwUs73R6qeg

Ibra’ is not applicable because there was no early settlement by the borrower; the facilities were terminated due to default (CIMB Islamic Bank Bhd v LCL Corporation Bhd (supra)).

The alleged exchange rate error relies on an internet printout that is inadmissible and unverified.

“Fee receivable” of RM19,164.80 is recoverable under Clause 21.2 of the Ijarah Agreements as enforcement expenses.

“Late fee charges” in the statements correspond to ta’widh as explained by PW2.

The opening balances represent outstanding lease rentals, adequately explained.

The Defendants did not call any witness to rebut the certificate’s accuracy. Their reliance on Chen Heng Ping & Ors v Intradagang Merchant Bankers (supra) is misplaced; that case required evidence of manifest error, which they have not produced. The recent Federal Court decision in Big Man Management Sdn Bhd v Tenaga Nasional Bhd [2025] 5 MLJ 290 (FC) reaffirms that the standard of proof for damages is balance of probabilities, not scientific precision. KFH’s documentary evidence meets that standard. S/N g97kmhN4bkijwUs73R6qeg

The 2nd Defendant’s allegation that KFH’s retention of her land title caused her to lose a sale is not supported by evidence. The title was deposited voluntarily by WSJ as security for indulgence. KFH returned it upon request. No contemporaneous complaint of intimidation or pressure was made until much later. Equity requires “clean hands”; the Defendants have not shown any inequitable conduct by KFH that would bar its claim.

For the reasons above, I find that the Plaintiff has proved its case on a balance of probabilities. The 2nd to 6th Defendants are jointly and severally liable under the Guarantees for the sums claimed.

Accordingly, I allow the Plaintiff’s claim with costs. Judgment is entered in favour of the Plaintiff against the 2nd to 6th Defendants, jointly and severally, for:

RM4,253,573.20 under the Murabahah Facilities as at 25 March 2019, with compensation fee at the Plaintiff’s current Islamic Money Market Rate (R-rate) per annum on the balance unpaid sum of RM3,221,061.11 from 26 March 2019 until full realisation;

USD8,368,018.42 under the Murabahah Tawarruq Facilities as at 25 March 2019, with compensation fee at the Plaintiff’s current Islamic Money Market Rate (R-rate) per annum on the S/N g97kmhN4bkijwUs73R6qeg balance unpaid sum of USD7,392,575.33 from 26 March 2019 until full realisation;

RM4,078,706.12 under the Ijarah Facilities as at 25 March 2019, with compensation fee at the Plaintiff’s current Islamic Money Market Rate (R-rate) per annum on the outstanding lease rentals from 26 March 2019 until full realisation; and

Costs of RM75,000.00 to be paid by the 2nd to 6th Defendants jointly and severally to the Plaintiff. Dated: 16th April 2026 Yusrin Faidz Bin Yusoff Judicial Commissioner High Court of Malaya Kuala Lumpur S/N g97kmhN4bkijwUs73R6qeg Counsel for the Plaintiff: Tan Gian Chung (Together with Sanjiv N. Naddan) Messrs. Shook Lin & Bok 20th Floor, Ambank Group Building, No. 55, Jalan Raja Chulan, 50200 Kuala Lumpur. Counsel for the 2nd to 6th Defendants: A. Onn Messrs. Onn & Partners No. 13, Jalan Kemuja, Off Jalan Bangsar, 59000 Kuala Lumpur. CASE REFERENCE:

Amanah Merchant Bank Bhd v Lim Tow Choon [1994] 2 CLJ 1

Bank Bumiputera Malaysia Bhd v Esah Binti Abdul Ghani [1986] 1 MLJ 16 (SC).

Bank Islam Malaysia Berhad v Helcom Engineering Corporation Sdn Bhd [2011] 1 LNS 1862 (HC).

CIMB Islamic Bank Bhd v LCL Corporation Bhd [2011] 7 CLJ

Cempaka Finance Berhad v Ho Lai Ying (T/A KH Trading) & Anor [2006] 2 MLJ 685 (FC).

Chen Heng Ping & Ors v Intradagang Merchant Bankers [1995]

Public Bank v Chan Siok Lie [1989] 2 MLJ 305 (HC).

Woolley Development Sdn Bhd v Tiara Contours Construction Sdn Bhd [2016] 2 CLJ 610 (CA). S/N g97kmhN4bkijwUs73R6qeg

Big Man Management Sdn Bhd v Tenaga Nasional Bhd [2025] 5 MLJ 290 (FC).

Section 90A of the Evidence Act 1950. S/N g97kmhN4bkijwUs73R6qeg