Mohd Ibrahim Bin Salleh v Zurich Takaful Malaysia Berhad (WA-24NCC-21-01/2025)

The Plaintiff seeks an order to declare that the notice issued by the Defendant dated 25-6-2023 and 21-4-2023 concerning the policies bearing number T070020187 and T070020191 to be void and for an order to declare that the said policies to be reinstated.

This Court finds that the said notices issued by the Plaintiff were wrongly issued and were baseless. Therefore, the Plaintiff has successfully shown that this is a suitable case for the orders sought and that the said policies should be reinstated. B. Background Facts 3. The Plaintiff had agreed to participate in the Tafakul protection scheme offered by the Defendant sometime in March 2008 under the policies each bearing number T070020187 and

The material terms and conditions of both the policies are as follows: -

(A) Basic Certificate (4.1) MAA Takaful Berhad will pay upon surrender of this Certificate and subject to its provisions, The Death Benefit to the Beneficiary on the death of the person Covered prior to the Maturity / Expiry Date S/N DWwc6xmdekC4wgHi82A provided that due proof of such death is furnished in the form specified by the Takaful Operator. Face Amount : RM 500,000.00 Monthly Contribution: RM 1,500.00 (4.2) This Contract is made in consideration of the payment as specified in the Certificate. This Certificate and the Application for it, constitute the entire contract. All statements in the Application shall, in the absence of fraud, be deemed representations and not warranties. No statement will be used by the Takaful Operator to void this Certificate or in defense to a claim under it unless it is contained in the Application. (4.3) The Certificate shall be incontestable, except for non-payment of contribution, after it has been in force during the lifetime of the Person covered for two years from the Issue Date. (4.4) All contributions are payable on or before their due date to the Takaful Operator either at the Head office or at any of the branches of the Takaful Operator in exchange for an official receipt issued by the cashier. S/N DWwc6xmdekC4wgHi82A (4.5) A Grace Period of 31 days from its due date will be allowed for payment of each contribution after the first, which period this Certificate will remain in force. (4.6) This Certificate can remain in force even without payment of the contributions as long as the Participant Investment Account balance is sufficient to cover all Certificate fees and charges and costs of any Supplementary Contracts or Extended Benefits attached to the Basis Certificate. At the expiration of the above Grace Period, this Certificate will automatically continue, provided the Participant Investment Account Balance remains sufficient to cover all of the said fees, charges and costs. The certificate fees and charges, which continues to be applicable during the Contribution Pause, and the costs of any Supplementary Contracts or Extended Benefits attached to the Basic Certificate, will be paid when due by deducting sufficient number of units determined with reference to the Valuation Date immediately following the due date. If the Participant Investment Account Balance of the Certificate is zero or a negative value after the expiration S/N DWwc6xmdekC4wgHi82A of the Grace Period or after deductions for Certificate fees and charges and the costs of any Supplementary Contracts or Extended Benefits, the Certificate shall be lapsed immediately. (4.7) The Takaful Operator does hereby cover the person named as the Person covered on the certificate information page of the certificate, subject to all the provisions herein contained. Shariah Approved Funds – Participant Investment Account (4.8) The number of units to be allocated to the Participant Investment Account in respect of any contribution shall be determined by reference to the Unit Price on the valuation date immediately following the day the contributions are received and accepted at the head officer or a branch office of the Takaful operator…. (4.9) Partial Withdrawal and Surrender You may choose for a Partial Withdrawal and redeem a portion of the Units in issue of the Participant Investment Account. The election of such option is subject to the S/N DWwc6xmdekC4wgHi82A conditions, minimum redemption amounts and balance of the Participant Investment Account that We may determine from time to time. You may choose for Surrender and redeem all of the units of the Participant Investment Account. The Contract will terminate after We have paid the Surrender Amount to you. (4.10) For a Certificate to remain in force, the Certificate Owner is obligated to pay contribution throughout the certificate term. In the event of contribution remains unpaid at the end of the Grace Period, the Takaful Operator will utilize the Participant Investment Account balance to keep the Certificate in force. The Certificate shall lapse when the Participant Investment Account is zero or a negative value after the expiration of the Grace Period.

(B) Supplementary Certificate (4.11) This Supplementary Certificate is issued in conjunction with but does form part of the Basic Certificate and is valid only if the above Supplementary Certificate Form S/N DWwc6xmdekC4wgHi82A Number is stated on the Certificate Information Page of the Basic Certificate or Endorsement. It is issued in consideration of the payment of Takaful Charges applicable to this Supplementary Certificate. If, while this Supplementary Certificate is in force, the person covered shall die, the Takaful Operator shall, upon receipt and approval of proofs, pay the following benefits:-

Funeral Expenses immediate Payment – RM 2,000

Additional Death Benefit – RM 5,000.00 (4.12) Termination This Supplementary Certificate automatically terminates: -

If the Participant Investment Account Balance of the Basic Certificate becomes a zero or negative value.

If the Basic Certificate becomes a death claim, matures, expires or is surrendered.

When a written request for termination of the said Supplementary Certificate is submitted to the Takaful Operator for endorsement to that effect.

The Plaintiff claims that he has paid the required contribution of RM 1500.00 for both policies from 2007 to 2024. This is not denied by the Defendant.

The Plaintiff decided to withdraw part of the accumulated Participant Investment Account value from the accounts held with the Defendant under the terms of the 2 policies to the sum of RM 65,000.00 from each PIA. This was undertaken on 15-6-

In the form filled in by the Plaintiff the following clause appears: -

6.1 Cash Withdrawal Benefit allows you to withdraw part of the accumulated Participant Investment Account Value prior to certificate maturity. This benefit is subject to a minimum amount of RM 500 (per withdrawal) and the minimum balance that needs to be maintained in the PIA is RM 1,000 (after withdrawal) and this requirement may S/N DWwc6xmdekC4wgHi82A vary, subject to plan that you’ve purchased. The Cash Withdrawal will reduce your PIA balance hence may not be sufficient to meet your ultimate savings goal. If PIA is insufficient for future tabarru deduction, this may result in termination of Certificate.

6.2 Please take note that any of the following reasons can impact your fund value in the future and may result in your fund to be insufficient to sustain your certificate until the end of contractual term:- - not paying contribution when it is due - choosing not to increase contributions when increasing protection cover - poor investment returns - making partial withdrawals from the fund(s) - choosing not to increase contribution or perform top-up when the takaful charges / other increased.

6.3 There may be a risk that the certificate might not have sufficient fund value to sustain and lapse before the end S/N DWwc6xmdekC4wgHi82A of contractual term if you choose to proceed with the partial withdrawal. To maintain your certificate coverage until the end of contractual term and avoid having your investment-linked insurance certificate from being terminated, we recommend you proceed with one of the below option: - - increase contribution - make a single top-up contribution payment. - increase basic contribution or reduce takaful cover by reducing sum cover/ removing riders.

The Plaintiff states that he received 2 notices from the Defendant each dated 21-4-2023 and 25-6-2023. The following was stated by the Defendant in the two letters: -

7.1 Letter dated 21-4-2023 – Account T070020191

That the Defendant did not receive the sum of RM1500.00 but only received the sum of RM 342.65 for the months of April to June 2023. The sums of S/N DWwc6xmdekC4wgHi82A RM 1, 157.35 for each month are due from the Plaintiff.

(ii) Our records show that your Investment Account Balance is not able to keep your Certificate in force. Therefore, this certificate has lapsed. We are deeply concerned as this would mean that you and your family would not be able to enjoy the protection and other benefits as provided by your contract.

(iii) We believe that you value the financial protection which you had provided for your loved ones. Therefore, we strongly urge you to reinstate your certificate. Every effort must be made to keep your valuable certificate in force so as not to lose the benefits of your past payments.

(iv) All you have to do is to pay the Total Amount as stated above.

7.2 Letter dated 25-6-2023 – Account T070020187

That the Defendant had received over payments of RM5, 952.27 and that there is excess payment of RM 4, 452.27 for the months of June to August 2028.

(ii) Similar notice as stated earlier.

The Plaintiff claims that he was informed unofficially by the insurance agent, Mohd Redzuan bin Mohd Jaafar that the contribution was increased to RM 3000.00 for each policy. No such official notice was issued to him. He also states that as produced in the policy exhibited, the Defendant did not have any right to increase the policy contribution and he did not agree to increase the same at any material time.

The Plaintiff claims that the notice to discontinue the 2 policies and the decision that the said policies have lapsed is wrong and unlawful. He claims that he continued to pay the contribution due to the Defendant under the terms of the policies of each RM

1500.00 per month. Therefore, the Defendant did not have any valid reason for the discontinuance or for them to declare that the policies have lapsed.

The Defendant on the other hand claims that the Participant Investment Account has now depleted due to the withdrawals and the Plaintiff’s decision not to top up the said accounts, renders the policy to be unable to pay the contribution due of RM 3,000.00. This can be seen in the letters dated 5-11-2022 and 5-5-2022 issued by the Defendant to the Plaintiff.

The Defendant states in its affidavit that it had issued notices to the Plaintiff informing him that the Participant Investment Account is not sufficient to cover the takaful charges. The takaful charges exceeds the monthly contribution of RM

1500.00 paid by him. The remaining value in the Participant

Investment Account is RM 1,059.28 for T070020191 and RM 06 for T070020187. Despite the said notices, the Plaintiff failed to increase the monthly contribution as required by the Defendant. C. Decision of this Court 12. I find that the Defendant’s contention that the cessation of the policy is valid on the ground that the Participant Investment S/N DWwc6xmdekC4wgHi82A Account has been substantially reduced due to the withdrawals undertaken by the Plaintiff and it is no longer able to be utilized to pay the takaful charges that are due from the Plaintiff.

The Defendant relies on the terms of the policy reproduced earlier. For ease of reference, I again reproduce the relevant clause relied by the Defendant: -

Basic Certificate A Grace Period of 31 days from its due date will be allowed for payment of each contribution after the first, which period this Certificate will remain in force. This Certificate can remain in force even without payment of the contributions as long as the Participant Investment Account balance is sufficient to cover all Certificate fees and charges and costs of any Supplementary Contracts or Extended Benefits attached to the Basis Certificate. At the expiration of the above Grace Period, this Certificate will automatically continue, provided the Participant Investment Account Balance remains sufficient to cover all of the said fees, charges and costs. The certificate fees and charges, which continues to be S/N DWwc6xmdekC4wgHi82A applicable during the Contribution Pause, and the costs of any Supplementary Contracts or Extended Benefits attached to the Basic Certificate, will be paid when due by deducting sufficient number of units determined with reference to the Valuation Date immediately following the due date. If the Participant Investment Account Balance of the Certificate is zero or a negative value after the expiration of the Grace Period or after deductions for Certificate fees and charges and the costs of any Supplementary Contracts or Extended Benefits, the Certificate shall be lapsed immediately. Partial Withdrawal and Surrender You may choose for a Partial Withdrawal and redeem a portion of the Units in issue of the Participant Investment Account. The election of such option is subject to the conditions, minimum redemption amounts and balance of the Participant Investment Account that We may determine from time to time. S/N DWwc6xmdekC4wgHi82A You may choose for Surrender and redeem all of the units of the Participant Investment Account. The Contract will terminate after We have paid the Surrender Amount to you. For a Certificate to remain in force, the Certificate Owner is obligated to pay contribution throughout the certificate term. In the event of contribution remains unpaid at the end of the Grace Period, the Takaful Operator will utilize the Participant Investment Account balance to keep the Certificate in force. The Certificate shall lapse when the Participant Investment Account is zero or a negative value after the expiration of the Grace Period.

(ii) Supplementary Certificate This Supplementary Certificate automatically terminates: -

If the Participant Investment Account Balance of the Basic Certificate becomes a zero or negative value.

If the Basic Certificate becomes a death claim, matures, expires or is surrendered.

When a written request for termination of the said Supplementary Certificate is submitted to the Takaful Operator for endorsement to that effect.

The Defendant also refers to the Certificate Information Sheet that contains the following: - We wish to draw your attention to the following important information:-

For a Certificate to remain in force, the Certificate Owner is obligated to pay contribution throughout the certificate term. In the event of contribution remains unpaid at the end of the Grace Period, the Takaful Operator will utilize the Participant Investment Account balance to keep the Certificate in force. The Certificate shall lapse when the Participant Investment Account is zero or a negative value after the expiration of the Grace Period.

Based on the above clauses, the Defendant suggests as the Plaintiff did make the voluntary withdrawal from his PIA and his S/N DWwc6xmdekC4wgHi82A failure to comply with the notices to make the required top up then the policies have become not sustainable justifying the decision to lapse the said policies.

The Defendant suggests that the Plaintiff is bound by what the terms of the policies and he cannot be allowed to renege on the said terms. The Defendant refers to Polygram Records Sdn Bhd v The Search & Anor [1994] 3 CLJ 808 and Sawarn Singh a/l Mehar Singh v RHB Insurance Bhd [2014] 7 MLJ

416.

The Defendant further refers to the decision of the Courts in Lee Boon Siong v Great Eastern Life Assurance Malaysia Berhad [2020] 1 LNS 1223, Dato’ Abdul Subahan v Khoo Khay Oon [2024] MLJU 1674, Premah a/p Karuppiah v Arab Malaysian Eagle Assurance Bhd [2003] 4 MLJ 51 and Amgeneral Insurance Bhd v Veheng Global Traders Sdn Bhd [2017] MLJU 2319.

The Defendant suggests that the failure of the Plaintiff to top up the sums required in the PIA renders the policies lapse. Counsel for the Plaintiff also suggests that his client’s decision to continue to accept the contribution sum of RM 1500.00 per month do not change the fact that the PIA was not increased as required under the terms of the Agreements referred to earlier. The failure to top up and ensure the PIA sums are sufficient to cover all sums outstanding will render the policy to automatically lapse.

I find that the above interpretation of the said policies is incorrect. The terms referred to by the Defendant only refers to a situation where the Plaintiff fails to pay the contribution sum of RM 1500.00 per month. If the said sum is missed and not paid within the required time frame or within the grace period of 31 days after the sums are due, then the sums retained in the PIA will be utilized to make the contribution sum required during the lifetime of the policies. The clauses referred to by the Defendant do not give it the right to render the policies to automatically lapse as suggested by the Defendant.

Furthermore, as demonstrated by the Plaintiff, he has paid the contribution sum. The Plaintiff has also shown that the Defendant do not have any right to increase the Contribution sum at any material time. There is no clause that is referred to by the Defendant and it has not provided any notice to the Plaintiff or obtained his agreement to increase the Contribution sum to any sum higher than RM 1500.00 per month. As this sum was paid continuously by the Plaintiff, the Defendant did not have any right to consider the policies as lapsed or terminated as suggested in the letters referred to earlier.

I also find that the withdrawals of the sums from the PIA by the Plaintiff do not give rise to any right on the part of the Defendant to claim that the policy has lapsed. When I consider the termination clause as it appears in the Supplementary Certificate, it only applies to the benefits as contained in the supplementary certificate i.e. the death benefits as follows: -

Funeral Expenses immediate Payment – RM 2,000.00

Additional Death Benefit – RM 5,000.00 S/N DWwc6xmdekC4wgHi82A This was not the termination by the Defendant. It would have been different if the termination or cessation was only relating to the Supplementary Certificate but instead the Defendant chose to issue the said notice to the whole policy. This is not what parties agreed to and I cannot therefore sustain the decision made by the Defendant.

Even if the PIA fund reduced to a negligible sum does not mean that the Basic Certificate comes to an end. That only arises if the policy comes to its full fruition, death of the Plaintiff or when the Contribution Sum is not paid. This right to terminate or consider the policy ends do not arise when the PIA amount is negligible or zero. That is not what parties had agreed to and for the Defendant to interpret the said policy in such a way is wrong.

I agree with the Plaintiff’s argument that the said policies must be read in accordance with the general principles when interpreting contractual terms. See Malaysia National Insurance Sdn Bhd v Abdul Aziz bin Mohamed Daud [1979] S/N DWwc6xmdekC4wgHi82A 2 MLJ 29 and Syarikat Uniweld Trading v The Asia Insurance Co Ltd [1996] 2 MLJ 160.

I find that the evidence shows that the Plaintiff did pay the required contribution amount of RM 1500.00 per month. There is no other obligation. If he chooses to withdraw from the PIA, then the said sums in the said account will be reduced and he will take a risk that at the end of the contract, the sums in the PIA will not achieve the targeted returns that he wishes to make. Even if the sums in the PIA sums are reduced to zero, it does not mean that the Takaful policy lapses as there is no such clause that requires that fact. There is no such right provided under the said policies agreed between the parties. The said sum in the PIA will only be used if the Plaintiff fails to pay the sum of RM 1500 per month and not other sums as suggested by the Defendant. Therefore, the Defendant has not shown that its decision to issue the two notices were correctly made. S/N DWwc6xmdekC4wgHi82A D. Orders of this Court 25. For the above reasons, I find that the notices issued by the Defendant to have been wrongly issued. I allow the prayers sought by the Plaintiff with costs of RM 20,000.00 subject to allocator. Dated 11 August, 2025 (DATO’ INDERA MOHD ARIEF EMRAN BIN ARIFIN) JUDGE HIGH COURT OF MALAYA KUALA LUMPUR NCC 5 FEDERAL TERRITORY OF KUALA LUMPUR S/N DWwc6xmdekC4wgHi82A Counsel: For the Plaintif : Mohd Ya’acob B Bakanali Messrs. Lainah Yaacob & Zulkepli For the Defendant : Francis Pereira together with Gowri Ramanathan