Maybank Islamic Berhad v Transkon Sdn. Bhd. (WA-22M-1024-08/2024)

TRANSKON SDN BHD

YEE KIM MUN (NRIC NO.: 701202-10-5911) … DEFENDANTS GROUNDS OF JUDGMENT

This is an appeal by the Defendants against the decision of the Senior Assistant Registrar dated 29 August 2025, which dismissed their application to set aside a Judgment in Default of Appearance (“JIDA”) dated 8 October 2024. The appeal is brought under Enclosure 22 and has been fully argued before this Court. The Plaintiff, a licensed Islamic bank, claims outstanding sums under three Commodity Murabahah Term Financing-i facilities granted to the 1st Defendant, with the 2nd Defendant acting as guarantor. After careful consideration of the pleadings, affidavits, submissions, and authorities cited, this Court dismisses the appeal and upholds the JIDA for the reasons that follow. Background facts

The factual matrix is largely undisputed. The Plaintiff granted three financing facilities to the 1st Defendant:

CMTF-i 1 for RM1,000,000.00 (8 April 2020);

(ii) CMTF-i 2 for RM1,566,129.36 (4 July 2022), which restructured earlier Cashline-i 1 and Tradeline-i 1 facilities; and

(iii) CMTF-i 3 for RM1,961,876.99 (4 July 2022), which restructured earlier Cashline-i 2 and Tradeline-i 2 facilities.

The 2nd Defendant, a director of the 1st Defendant, executed personal guarantees and indemnities for each facility.

The Defendants defaulted on repayments. After issuing demands, the Plaintiff commenced this suit by filing a Writ and Statement of Claim on 16 August 2024. The Defendants failed to enter appearance, and the JIDA was entered on 8 October 2024 for the aggregate sum of RM5,313,671.98 due and payable as at 30 April 2024 together with the applicable ta’widh. The Plaintiff effected service of the JIDA in November 2024 at the contractual addresses of the Defendants. The Defendants took no steps until 5 June 2025, when they filed an application to set aside the JIDA (Enclosure 7), which was dismissed by the Senior Assistant Registrar on 29 August 2025.

On 11 September 2025, the Defendants filed a Notice of Appeal to a Judge in Chambers (Enclosure 22). This was followed on 30 September 2025 by an application (Enclosure 23) for a stay of execution of the JIDA pending the disposal of Enclosure 22. On 26 November 2025, I dismissed Enclosure 22. By then, Enclosure 23 had become academic and was treated accordingly.

The application addresses the following issues:

Whether the Defendants’ application to set aside the JIDA was made within a reasonable time and in compliance with the Rules of Court 2012;

(ii) Whether the JIDA was regularly obtained and properly served; and

(iii) Whether the Defendants have demonstrated a defence on the merits with triable issues. COUNSELS’ CONTENTIONS Defendant’s Contentions

Learned counsel for the Defendants, Nicole Ng Peng Ying submits that the application is not vitiated by delay. She contends that the Defendants only became aware of the JIDA upon receipt of the winding-up notice against the 1st Defendant, and that the present application was filed within thirty days thereafter. On that footing, the lapse of time between the entry of JIDA and the filing of the application is said to be excusable, as knowledge of the judgment is the operative trigger, not the date of the JIDA itself.

On the merits, counsel advances a substantive defence premised on Syariah non-compliance. Counsel argues that the Islamic banking facilities were structured without any identifiable underlying commodity and without proof that the Plaintiff had ownership of such commodity at the material time. This, counsel argues, renders the transactions void for illegality under Section 24(e) of the Contracts Act 1950, read together with Section 28 of the Islamic Financial Services Act 2013 (“IFSA 2013”). In her submission, counsel argues that the absence of these essential elements goes to the root of the contracts and deprives them of legal effect.

Learned counsel for the Defendants further contend that there is a manifest error in the Plaintiff’s Certificate of Indebtedness. Counsel points out that the figure certified by the Plaintiff differs from their internal ledger by approximately RM590,000. This discrepancy, counsel argues, raises a serious and bona fide triable issue which cannot be resolved summarily and warrants the setting aside of the judgment so that the matter may be ventilated at trial.

In addition, counsel challenges the Plaintiff’s right of set-off. Counsel submits that the Plaintiff prematurely uplifted the fixed deposits before the outstanding sums had become due and payable under the facilities. On that basis, the exercise of set-off is said to be contractually and legally improper, and this too constitutes a triable issue.

Finally, counsel maintains that the Plaintiff is not entitled to rely on proposals made in the course of negotiations with the Credit Counselling and Debt Management Agency (AKPK). Counsel asserts that these communications were made on a without-prejudice basis and are therefore inadmissible. In her submission, there was no admission of liability, and any attempt to construe such proposals as acknowledging the debt is misconceived.

Learned counsel for the Plaintiff, Mr. Yeap Cheng Hoe takes a preliminary objection that the application is fatally defective for inordinate and unexplained delay. He points out that the Defendants waited some seven months before taking action and did not even pray for an extension of time. On this basis, counsel submits that the application is bad in limine and ought to be dismissed without going into the merits.

On the substantive test for setting aside, counsel relies on the principle in Evans v Bartlam [1937] AC 473 (HL), contending that the Defendants have failed to satisfy the requirement of showing a defence on the merits. The affidavits, counsel argues, contain no positive and specific averments of fact, but only bare and general denials. Such assertions, according to counsel, are insufficient to justify the exercise of the court’s discretion to set aside a regularly obtained judgment.

As regards the Syariah defence, learned counsel for the Plaintiff characterises it as an afterthought. Counsel emphasises that the Defendants had enjoyed the facilities for a substantial period, had sought restructuring of the facilities, and had never raised any complaint about Syariah compliance until after judgment was entered against them. This conduct, counsel argues, undermines the bona fides of the defence now raised.

Counsel further submits that, in any event, Section 281 of IFSA 2013 makes clear that non-compliance with Syariah requirements does not ipso facto render a contract void. Accordingly, there is no illegality within the meaning of Section 24 of the Contracts Act 1950, and the facilities remain valid and enforceable notwithstanding any alleged non-compliance. Reliance is also made by counsel on this Court’s earlier decisions involving the same Plaintiff in Maybank Islamic Bhd v Twistcode Technologies Sdn Bhd [2023] MLJU 1763 (HC) and Maybank Islamic Bhd v WHS Global Sdn Bhd [2024] MLJU 2412 (HC) to argue that a party who has enjoyed the benefits of an Islamic financing facility cannot, only after default and judgment, seek to impugn its validity on abstract Shariah grounds without any prior protest or invocation of the statutory mechanism.

On the issue of the Certificate of Indebtedness, counsel maintains that it is contractually conclusive. Counsel argues that the Defendants have failed to demonstrate any manifest error. The alleged discrepancy with the Defendants’ internal ledger is said to be illusory, as that ledger excludes unearned profit and late payment charges which are properly included in the Plaintiff’s computation. In the Plaintiff’s submission, this does not give rise to any bona fide triable issue and provides no basis to set aside the judgment. COURT’S FINDINGS ISSUE 1: Whether the Defendants’ Application is Out of Time

On the issue of delay and extension of time, the Court begins with the procedural framework. Order 42 rule 13 of the Rules of Court 2012 (“the Rules”) requires an application to set aside a judgment to be made within thirty days of receipt of the judgment. On the facts before the Court, the Defendants knew or at the very least ought to have known of the existence of the judgment as early as November 2024, when the judgment notice was served at the contractual addresses stipulated in the facility documents. Their failure to update those addresses with the Plaintiff cannot avail them. In this regard, the principle in Amfinance Bhd v Pembinaan Sistem Laju Sdn Bhd [2007] 4 MLRH 798 (HC) is apposite. A party who neglects to keep its contact particulars current cannot later rely on its own omission to explain away procedural default.

Compounding this difficulty is the absence of any formal prayer for an extension of time. The Defendants did not seek leave to file the application out of time, nor did they place before the Court any cogent affidavit evidence to account for the seven-month lull between the date when they ought to have known of the judgment and the filing of the present application. The only explanation offered was that the delay was due to “inadvertent oversight”, which is bare, unparticularised, and wholly inadequate to justify such a prolonged inaction.

The Court is also satisfied that the delay attracts the doctrine of laches and has caused real prejudice to the Plaintiff. By the time the application was filed, the Plaintiff had already commenced winding-up proceedings. In these circumstances, the timing of the application gives the impression of a tactical manoeuvre to stall execution rather than a bona fide attempt to vindicate a genuine defence. ISSUE 2: Whether the JIDA was Regularly Obtained and Properly Served.

On the affidavit evidence, I am satisfied that the default judgment was regularly obtained. Service of the writ was effected in accordance with the contractual mode stipulated in the facility documents, which provided for service by registered post to the Defendants’ last known addresses. Under Order 10 rule 3 of the Rules, where a contract specifies a mode of service, compliance with that mode deems service duly effected. The Plaintiff has exhibited proof of posting by registered mail. There is no requirement to prove actual receipt.

As per the case of TA Securities Bhd v Ng Yen Ling [2001] 1 CLJ 102 (HC), the deemed service clause, which provides that service is effective five days after posting, is binding. The Defendants’ obligation to notify the Plaintiff of any address change was theirs alone. Their failure to do so cannot invalidate otherwise proper service. The Defendants’ non-receipt is irrelevant. The JIDA was therefore regularly obtained. ISSUE 3: Whether the Defendants have Advanced a Defence on the Merits.

Even if the application were not time-barred, the Defendants must demonstrate a defence with a real prospect of success. On the facts, it is evident that the Defendants chose not to participate in this suit until confronted with winding-up proceedings. Such conduct suggests a tactical, rather than bona fide, desire to defend the claim. In Alpine Bulk Transport Co Inc v Saudi Eagle Shipping Co Inc (The “Saudi Eagle”) [1986] 2 Lloyd’s Rep 221 (CA), the English Court of Appeal held that where a defendant’s failure to engage in proceedings is deliberate, the court should apply a stricter test: the defendant must show a “real” as opposed to merely “arguable” prospect of success. This approach which was applied in Cheah Shu Boon v American Home Assurance Company [2001] 2 CLJ 277 (HC) upholds procedural discipline and deters abuse.

Applying that stringent test here, the Defendants’ purported defences are without substance. Shariah-compliance defence

The Defendants allege that the facilities did not comply with Shariah principles, particularly because the commodities traded were not sufficiently identified. This issue was never raised prior to judgment; it is an afterthought, unsupported by positive evidence. In any event, the legal position is clear under Section 281 of the IFSA 2013: non-compliance with Shariah principles does not, by itself, render a contract void. Section 281 states as follows: “Breach or contravention not to affect contract, agreement or arrangement

Except as otherwise provided in this Act, or in pursuance of any provision of this Act, no contract, agreement or arrangement, entered into in breach or contravention of any provision of this Act shall be void solely by reason of such breach or contravention: Provided that nothing contained in this section shall affect any liability of any person for any administrative, civil or criminal actions under this Act in respect of such breach or contravention.”

The duty of financial institutions to comply with Shariah principles and the advice of the Shariah Advisory Council is provided for under Section 28 of the IFSA 2013. It follows, therefore, that a breach of this provision does not automatically void the banking facility or any related instrument. This interpretation is consistent with the constitutional framework governing financial and banking matters, which, under item 7(j) of the Federal List in the Ninth Schedule to the Federal Constitution, are to be regulated by statute law and the common law (including principles of English law).

This principle has received clear judicial affirmation. The Court of Appeal in Maybank Islamic Bhd v M-10 Builders Sdn Bhd & Anor [2017] 2 MLJ 69 (CA) confirmed that Shariah non-compliance is a regulatory matter between the bank and Bank Negara Malaysia, not a vitiating factor in civil recovery unless it offends the Contracts Act 1950.

In Bank Kerjasama Rakyat (M) Berhad v Koperasi Serbaguna Iman Malaysia Berhad [2020] MLJU 438 (HC) Atan Mustaffa Yussof Ahmad JC (as His Lordship then was) held that by virtue of section 281 of IFSA 2013 any failure to adhere to Shariah principles does not result in the contract being void, invalid, or unenforceable. This ruling was subsequently upheld on appeal, first by the Court of Appeal on 13 April 2021, and conclusively by the Federal Court on 4 March

(See: Koperasi Serbaguna Iman Malaysia Berhad v Bank Kerjasama Rakyat (M) Berhad - Court of Appeal Civil Appeal No. W-02(IM)(MUA)-31-01/2020 and Koperasi Serbaguna Iman Malaysia Berhad v Bank Kerjasama Rakyat (M) Berhad - Federal Court Civil Appeal No. 02(i)-46-

Therefore, even if the Plaintiff failed to formally identify the specific commodities traded, such omission does not, by operation of Section 281 of the IFSA 2013, render the banking facilities void, invalid, or unenforceable. At all material times, the 1st Defendant never indicated that it would take delivery of the commodities in lieu of the cash proceeds; rather, the Defendants accepted the cash advances, utilised them for their business purposes, and at no stage denied receiving such funds. Having enjoyed the full benefit of the contractual arrangement structured precisely to raise cash, they cannot now invoke technical Shariah objections to defeat their repayment obligations. As authoritatively affirmed by the Court of Appeal and Federal Court in Bank Kerjasama Rakyat (M) Berhad v Koperasi Serbaguna Iman Malaysia Berhad (supra) Shariah non-compliance is a regulatory matter cognizable only by Bank Negara Malaysia, not a vitiating factor in civil recovery proceedings unless it offends the Contracts Act

Consequently, the facilities remain valid, binding, and fully enforceable.

On the issue of the amount claimed, the Plaintiff places considerable weight on the conclusive evidence clauses embedded within the Facilities Agreement as well as the Guarantees. Relying on the Federal Court authority in Cempaka Finance Bhd v Ho Lai Ying (trading as KH Trading) & Anor [2006] 2 MLJ 685 (FC), counsel for the Plaintif submits that such clauses are legally effective in shifting the evidential burden onto the defendants to disprove the certified debt or demonstrate ‘manifest error.’ Where the debtor adduces evidence that casts real doubt on the certificate’s accuracy (showing ‘manifest error’ or fraud), the clause’s conclusiveness is broken, and the creditor must prove its debt normally.

I am of the considered view that the reference to “manifest error” would allow a comeback if there is a material mistake in the calculations. In the case of Amey Birmingham Highways Ltd v Birmingham City Council [2018] EWCA Civ 264 (CA), the English Court of Appeal held as follows: “83. Is this a case of manifest error? There are two helpful recent authorities on this issue, namely IIG Capital LLC v Van Der Merwe [2008] EWCA Civ 542; [2008] 2 All ER (Comm) 1173 and North Shore Ventures Ltd v Anstead Holdings Inc [2011] EWCA Civ 230; [2012] Ch 31.

IIG was a claim for payment against guarantors. The defendants had bound themselves to pay on demand, absent manifest error. Lewison J, the trial judge, rejected the suggestion that there was manifest error. He said that a manifest error was "one that is obvious or easily demonstrable without extensive investigation". The Court of Appeal approved the judge's approach to that issue and upheld his decision: see the judgment of Waller LJ at [33] to [35]. Lawrence Collins and Rimer LJJ agreed.

North Shore was an action by a lender against the two guarantors of the loan. Clause 3.4 of the guarantee stated that a certificate signed by the claimant for the amount of the indebtedness was conclusive evidence against the guarantors, unless manifestly incorrect. The Court of Appeal approved the test for manifest error formulated by Lewison J in IIG. The court held that the certificate was invalidated by manifest error, because it did not take into account an agreed variation in the rate of interest.

At [61] Smith LJ said: "On reflection I have come to the conclusion that for a party to rely on a manifest error in a certificate does not depend upon his ability to demonstrate the error immediately and conclusively. In the present case, the guarantors were able to recognise immediately that the certificate was based upon the interest rates as set out in the original loan agreement and not as varied in November 2004. They could see that it was manifestly incorrect. They could not immediately demonstrate that conclusively; they could not do so until the court had determined the issue of variation. But they were right, as this court has now held. I would hold that the certificate was manifestly incorrect and was of no effect."

Finally, in relation to the law, I should refer to IG Index v Colley [2013] EWHC 748 (QB). In a very thorough judgment Stadlen J reviewed the authorities on manifest error. At [813] to [814] he held that the court could have regard to extrinsic evidence.”

This principle is reaffirmed in Flowgroup Plc v Co-Operative Energy Ltd [2021] EWHC 344 (Comm) (HC), wherein the English High Court held that for a challenge based on a manifest error clause to succeed, there must be a plain and obvious mistake. However, whether such an error has indeed occurred is a matter of fact, and need not be glaringly apparent from the face of the certificates themselves. In Flowgroup Plc v Co-Operative Energy Ltd (supra), the error in issuing the certificates only came to light once the underlying contractual obligation was properly scrutinized.

Applying this to the facts of our case, the critical question is: have the Defendants adduced such evidence? Based on the affidavit evidence, the Defendants point to discrepancies between the Plaintiff’s Certificate of Indebtedness and their own internal ledger. Nevertheless, on careful examination, the internal ledger tellingly excludes unearned profit and late charges, components expressly provided for in the facility agreements. This does not constitute ‘manifest error’ as contemplated in Flowgroup Plc v Co-Operative Energy Ltd (supra) and Amey Birmingham Highways Ltd. (supra). Consequently, the conclusive evidence clause stands, and the Defendants have not discharged the burden shifted to them. The Plaintiff’s certified amounts are therefore accepted. Negotiations and “without prejudice” correspondence

The Defendants seek to exclude settlement correspondence. However, where such correspondence shows an admission of liability and only negotiates terms of repayment, it is admissible (Ted Bates (M) Sdn Bhd v Balbir Singh Jholl [1979] 2 MLJ 257 (FC)). Here, the Defendants’ repeated proposals to the Plaintiff and applications to AKPK acknowledged the debt and sought time to pay. They never disputed liability. The lesser quantum occasionally discussed in negotiations reflected potential rebates (ibra) for early settlement, not a concession on the outstanding debt. Such discussions do not bind the Plaintiff to a reduced sum. Set-off against fixed deposits

On the Defendants’ contention that the Plaintiff acted prematurely in exercising its right of set-off, this court is of the view that such argument is misconceived both on the wording of the contractual documents and on settled principles of banking law. The Memorandum of Deposit expressly authorises the Plaintiff to combine and set off the deposits against any sums “which shall at any time be due and payable” by the Defendants. Under the facilities, a sum becomes due and payable not only upon formal termination, but also upon the occurrence of an event of default, including failure to service instalments when due.

Therefore, once the Defendants fell into arrears and failed to remedy the default after demand, the outstanding sums were contractually accelerated and immediately recoverable. At that point, the Plaintiff’s right of set-off crystallised as a matter of contract. Formal termination was not a condition precedent to the exercise of that right. To hold otherwise would defeat the commercial purpose of the security, which is to enable the bank to promptly realise collateral upon default. Accordingly, the Plaintiff was entitled in law and in contract to apply the fixed deposits in reduction of the Defendants’ indebtedness once default had occurred and remained uncured.

Accordingly, the complaint that the set-off was exercised before formal termination does not raise any triable issue on the legality of the Plaintiff’s conduct. It neither discloses a breach of the contractual terms nor impugns the validity of the debt. At its highest, it is a technical objection divorced from the substance of the Defendants’ admitted default. It therefore does not amount to a bona fide defence and cannot defeat the Plaintiff’s claim for recovery.

For the reasons above, I find no merit in the appeal. The Defendants have offered no credible explanation for their delay. The default judgment was regularly obtained. Even if the application were considered on its merits, the defences raised are speculative, an afterthought, and do not disclose a real prospect of success under the stringent test applicable to tactical applications.

Accordingly, the appeal in Enclosure 22 is dismissed with costs of RM5,000.00. The default judgment dated 8 October 2024 stands. The stay of execution sought in Enclosure 23 is rendered academic and is likewise dismissed with no order as to costs. Dated: 3rd February 2026 Yusrin Faidz Bin Yusoff Judicial Commissioner High Court of Malaya Kuala Lumpur For the Plaintiff: Yeap Cheng Hoe Messrs. CH Yeap Maluda Cheh No. 18-3A, Udarama Komplek, Jalan 3/64A, Off Jalan Ipoh, 50350 Kuala Lumpur. For Defendants: Nicole Ng Peng Ying Messrs. Raja Seelan & Associates, C-6-4, Level 6, Wisma Goshen, Plaza Pantai, No. 5, Jalan 4/83A, Off Jalan Pantai Baru, 59200 Kuala Lumpur.

Evans v Bartlam [1937] AC 473 (HL).

Maybank Islamic Bhd v Twistcode Technologies Sdn Bhd [2023] MLJU 1763 (HC).

Maybank Islamic Bhd v WHS Global Sdn Bhd [2024] MLJU

Amfinance Bhd v Pembinaan Sistem Laju Sdn Bhd [2007] 4

TA Securities Bhd v Ng Yen Ling [2001] 1 CLJ 102 (HC).

Alpine Bulk Transport Co Inc v Saudi Eagle Shipping Co Inc (The “Saudi Eagle”) [1986] 2 Lloyd’s Rep 221 (CA).

Cheah Shu Boon v American Home Assurance Company [2001] 2 CLJ 277 (HC).

Maybank Islamic Bhd v M-10 Builders Sdn Bhd & Anor [2017]

Bank Kerjasama Rakyat (M) Berhad v Koperasi Serbaguna Iman Malaysia Berhad [2020] MLJU 438 (HC).

Koperasi Serbaguna Iman Malaysia Berhad v Bank Kerjasama Rakyat (M) Berhad - Court of Appeal Civil Appeal No. W-

Koperasi Serbaguna Iman Malaysia Berhad v Bank Kerjasama Rakyat (M) Berhad - Federal Court Civil Appeal No. 02(i)-46-

Cempaka Finance Bhd v Ho Lai Ying (trading as KH Trading) & Anor [2006] 2 MLJ 685 (FC).

Amey Birmingham Highways Ltd v Birmingham City Council [2018] EWCA Civ 264 (CA).

Flowgroup Plc v Co-Operative Energy Ltd [2021] EWHC 344 (Comm) (HC).

Ted Bates (M) Sdn Bhd v Balbir Singh Jholl [1979] 2 MLJ 257 (FC).

Section 24 of the Contracts Act 1950.

Section 28, & 281 of the Islamic Financial Services Act 2013.

Order 42 rule 13 of the Rules of Court 2012.

item 7(j) of the Federal List in the Ninth Schedule to the Federal Constitution.