Alliance - Aut

DALAM MAHKAMAH TINGGI DI SHAH ALAM
DALAM NEGERI SELANGOR DARUL EHSAN, MALAYSIA

GUAMAN NO BA-22M-18-05-2022
ANTARA
ALLIANCE ISLAMIC BANK BERHAD

(No. Pendaftaran 20070108870 [7762882-V] PLAINTIF
DAN
1. AZURA BINTI AB RAHMAN

(NO K/P: 711012- 03-5018/A2002836)
2. SAMAD BIN BAISUN DEFENDAN-DEFENDAN

(NO K/P: 671001-07-5395
IKATAN AUTORITI DEFENDAN PERTAMA

(Terhadap Permohonan Penghakiman Terus)
Peguamcara Plaintif Peguamcara Defendan Pertama
TETUAN BENJAMIN DAWSON TETUAN CHAMBERS OF

Peguambela & Peguamcara YUSMAN AZLIN ANWAR
Unit C-11-5, Level 11, Peguambela dan Peguamcara
Block C, Megan Avenue II, No. 31-4-2, Jalan 3/101C Cheras
12 Jalan Yap Kwan Seng, Business Centre, Taman Cheras
50400 Kuala Lumpur, 56100 Cheras Selangor
Emel yusmanbadar@gmail.com
Ref : 167573
SENARAI OTORITI
No Nama Kes Mukasurat
1 Bank Kerjasama Rakyat Malaysia Berhad v. Reka Indah A
Development (Penang) Sdn Bhd & Ors (Encl 18) [2021]
MLRHU 232
2 Bank Muamalat Malaysia Bhd v. Ten-Tel Construction B
Sdn Bhd & Ors [2017] MLRHU 248
3 Bank Islam Malaysia Bhd v. Azhar Osman & Other C
Cases (2010) MLRH 108
4 Bank Negara Malaysia v. Mohd Ismail & Ors [1992] 1 D
MLRA 190; [1992] 1 MLJ 400
5 Cempaka Finance Bhd v. Ho Lai Ying (trading as KH E
Trading) & Anor [2005]
SENARAI STATUT/PEKELILING
No STATUT/PEKELILING TAB
1 Guidelines on Ibra’ (Rebate) for Sale-Based Financing’ 1
2 Islamic Finance: Recovery, Rescheduling & Restructuring 2
of Islamic Financial and Capital Market Products and
Services in Malaysia (Lexis Nexis)

TAB A
Bank Kerjasama Rakyat Malaysia Berhad
[2021] MLRHU 232 v. Reka Indah Development (Penang) Sdn Bhd & Ors (Encl 18) pg 1
BANK KERJASAMA RAKYAT MALAYSIA BERHAD

v.
REKA INDAH DEVELOPMENT (PENANG) SDN BHD & ORS
(ENCL 18)
High Court Malaya, Kuala Lumpur

Atan Mustaffa Yussof Ahmad JC
[Suit No: WA-22M-141-02/2020]
15 March 2021
Case(s) referred to:

Bank Islam Malaysia Bhd v. Azhar Osman & Other Cases [2010] 1 MLRH 108;
[2010] 9 MLJ 192; [2010] 5 CLJ 54 (refd)
Bank Islam Malaysia Bhd lwn. Rhea Zadani Corp Sdn Bhd & Lain-lain [2012]
MLRHU 490; [2012] 10 MLJ 484 (refd)
Bank Kerjasama Rakyat Malaysia Berhad v. PSC Naval Dockyard Sdn Bhd
[2007] 3 MLRH 173; [2008] 1 CLJ 784 (refd)
Bank Pertanian Malaysia Bhd v. Seiko Marine Products Sdn Bhd & Ors [2016]
MLRHU 1384; [2017] 8 MLJ 355 (refd)
Bank Negara Malaysia v. Mohd Ismail Ali Johor & Ors [1992] 1 MLRA 190;
[1992] 1 MLJ 400; [1992] 1 CLJ (Rep) 14 (refd)
Cempaka Finance Bhd v. Ho Lai Ying (trading as KH Trading & Anor) [2005] 2
MLRA 736; [2006] 2 MLJ 685; [2006] 3 CLJ 544 (refd)
CIMB Islamic Bank Bhd v. LCL Corp Bhd & Anor [2013] 1 MLRH 651; [2012] 3
MLJ 869; [2011] 7 CLJ 594 (refd)
Dato' Hj Nik Mahmud Daud v. Bank Islam Malaysia Bhd [1998] 1 MLRA 380;
[1998] 3 MLJ 393; [1998] 3 CLJ 605; [1998] 3 CLJ 605; [1998] 3 AMR 2760 (refd)
Maybank Islamic Bhd v. Kamarulzaman Mohamed Nordin [2013] MLRHU 517;
[2014] 7 MLJ 685; [2013] 10 CLJ 488 (refd)
Maybank Islamic Bhd v. M-10 Builders Sdn Bhd & Anor [2016] MLRAU 532;
[2017] 2 MLJ 69; [2017] 7 CLJ 127 (refd)
National Company For Foreign Trade v. Kayu Raya Sdn Bhd [1984] 1 MLRA
190; [1984] 2 MLJ 300; [1984] 1 CLJ (Rep) 283 (refd)
Ribarua Sdn Bhd & Anor v. Bakti Kausar Development Sdn Bhd & Anor [2006] 2
MLRA 550; [2007] 2 MLJ 221; [2007] 1 CLJ 552 (refd)
\Small Medium Enterprise Development Bank Malaysia Berhad v. Savvy Valley
Sdn Bhd & Ors [2019] MLRHU 1175 (refd)
Tan Sri Abdul Khalid Ibrahim v. Bank Islam Malaysia Bhd & Another Case
[2009] 3 MLRH 843; [2009] 6 MLJ 416; [2010] 4 CLJ 388 (refd)
TSC Education Sdn Bhd v. Kolej Yayasan Pelajaran Mara & Anor [2002] 1
MLRH 190; [2002] 5 MLJ 577; [2002] 2 CLJ 581; [2002] 2 AMR 2304 (refd)
Voo Min En & Ors v. Leong Chung Fatt [1982] 1 MLRA 548; [1982] 2 MLJ 241
(refd)
Yeoh Theam Poh & Anor v. Bench Win Sdn Bhd & Anor and Other Suits [2012]
MLRHU 1801; [2013] 8 MLJ 109 (refd)
pg 2 v. Reka Indah Development (Penang) Sdn Bhd & Ors (Encl 18) [2021] MLRHU 232
Legislation referred to:

Contracts Act 1950, ss 24, 25
Rules of Court 2012, O 14 r 3
Counsel:
For the plaintiff: Muhammad Nasim Shafie; M/s Sidek Teoh Wong & Dennis
For the defendants: Ang Mei Huai; M/s Winston Ng & Teoh
[Granted summary judgment for the plaintiff.]
JUDGMENT
Atan Mustaffa Yussof Ahmad JC:
[1] This judgment concerns the Plaintiff's summary judgment application (encl
18) against the Defendants arising from a writ action filed by the Plaintiff
against the Defendants in this suit for recovery under Tawarruq Term
Financing-i Facilities granted by the Plaintiff to the 1st Defendant and related
guarantors.
[2] At the hearing of this application I granted summary judgment for the
Plaintiff. This judgment contains the full grounds for my decision.
Background Facts
[3] At the request of the 1st Defendant, the Plaintiff granted the 1st Defendant
and the 1st Defendant accepted a Term Financing-i Facility of RM27,000.00
("the 1st Facility') and a Term Financing-i Facility of RM33,000.00 ("the 2nd
Facility'). Both the 1st Facility and the 2nd Facility are referred to together as
"the Facilities".
[4] The 1st Facility was documented by the following documents:
a) Letter of Offer dated 19 April 2018 ("the 1st Letter of Offer');
b) Murabah Sale Contracts dated 18 May 2018 ("the 1st Murabahah

Sale Contract');
c) Tawarruq Term Financing-i Agreement dated 18 May 2018; and
d) Agency Letter (Wakalah) dated 18 May 2018;
[5] The 2nd Facility was documented by the following documents:
a) Letter of Offer dated 2 July 2018 ("the 2nd Letter of Offer');
b) Murabah Sale Contracts dated 9 October 2018 ("the 2nd

Murabahah Sale Contract');
c) Agency Contract (Wakalah) dated 9 October 2018; and
d) Tawarruq Term Financing-i Agreement dated 9 October 2018.
[6] As part of the security arrangement under the 1st Facility, the 2nd
Defendant, 3rd Defendant, 4th Defendant and 5th Defendant executed a Join
and Several Guarantee and Indemnity dated 18 May 2018 whereby they
agreed to guarantee payment of all outstanding sums due and owing by the 1st
Defendant to the Plaintiff.
[7] Additonally the 1st Facility was secured by assignments and a charge on
the 1st Defendant's assets documented by the following documents:
a) Charge Presentation No 0705SC2012002968 registered on 3 March

2016 over properties held under properties in Ayer Putih, Mukim E,
Pulau Pinang;
b) Supplemental Agreement to the Legal Charge (Balik Pulau Project)

dated 18 May 2018;
c) Deed of Assignment (Designated Account) (Balik Pulau Project)

dated 15 October 2012;
d) Supplemental Agreement to the Deed of Assignment (Designated

Account) dated 18 May 2018;
e) Supplemental Agreement to the Deed of Assignment (Designated

Account) dated 15 October 2012;
f) Deed of Assignment (Sales Proceed) (Balik Pulau Project) dated 15

October 2012;
g) Supplemental Agreement to the Deed of Assignment (Sales

Proceed) (Balik Pulau Project) dated 18 May 2018; and
h) Letter of Undertaking dated 16 May 2018.
[8] As part of the security arrangement under the 2nd Facility, the 2nd
Defendant, 3rd Defendant, 4th Defendant and 5th Defendant executed the
following:
a) Guarantee and Indemnity by Individuals dated 13 December 2011;
b) Guarantee and Indemnity by Individuals dated 15 October 2012;

and
c) Consent to be given by the Individual Guarantors in respect of

Restructured Facilities(ies) to be secured by the existing Guarantee
and Indemnity") dated 9 October 2018
whereby they agreed to guarantee payment of all outstanding sums due and
owing by the 1st Defendant to the Plaintiff.
[9] Additonally, the 2nd Facility was secured by assignments and charges on
the 1st Defendant's assets documented by the following documents:
a) Third Party Charge by Prisma Bumiraya Sdn Bhd Presentation No

0705SC2012002960 registered on 15 October 2012 over properties
held under properties in Mukim 11 Daerah Paya Barat, Pulau Pinang;
b) Third Party Charge by Prisma Bumiraya Sdn Bhd Presentation No

0705SC2012002961 registered on 15 October 2012 over properties
held under properties in Mukim 11 Daerah Paya Barat, Pulau Pinang;
c) Supplemental Legal Charge (Orchard Ville Project) dated 9 October

2018;
d) Supplemental Agreement to the Deed of Assignment (Designated

Account) (Orchard Ville Project) dated 15 October 2012;
e) Deed of Assignment (Sales Proceed) (Orchard Ville Project) dated

13 December 2011;
f) Supplemental Agreement to the Deed of Assignment (Sales

Proceed) (Orchard Ville Project) dated 9 October 2018;
g) Deed of Assignment (Designated Account) dated 13 December

2011;
h) 2nd Supplemental Agreement to the Deed of Assignment

(Designated Account) dated 9 October 2018; and
i) Memorandum of Deposit dated 9 October 2018.
[10] The 1st Defendant, according to the Plaintiff, defaulted by failing to pay
the Plaintiff the amounts due for payment on the relevant due dates.
[11] Through its solicitor, the Plaintiff then issued notices of demand dated 7
January 2020 to the Defendants demanding for the monthly instalment
payments in arrears under the Facilities for an amount of RM4,630,890.06 as
at 31 December 2019 stating that the Defendants are required to settle the
current amount in arrears within 7 days from the date of the letter and in the
event of failure the Facilities be automatically terminated and the Defendants
are required to settle the total amount owed within 7 days of such termination.
[12] No payment was forthcoming from all the Defendants and the Plaintiff
filed this action on 21 February 2020 against all of the Defendants claiming the
following:
a) A sum of RM 15,569,471.35 as at 18 February 2020 for the 1st

Facility; and
b) A sum of RM20,109,586.96 as at 18 February 2020 for the 2nd

Facility
together with late payment charges (Ta'widh).
[13] On 18 August 2020, the Plaintiff filed this application (encl 18) to record
judgment for the sum prayed for under the Statement of Claim above together
with late payment charges (Ta'widh).
Law On Summary Judgment (Order 14)
[14] It is trite that once an application under O 14 of the Rules of Court 2012
("ROC') is shown to have been correctly and properly filed, the burden shifts
and thus rests on the defendant who desires to resist the application to raise a
defence which shows a "bona fide triable issue", in the sense of an issue which
justifies and warrants the matter to be considered at the trial proper.
[15] Order 14 r 3 of the ROC provides that unless the defendant satisfies the
Court with respect to the claim, or the part of a claim, to which the application
relates that:
(a) there is an issue or question in dispute which ought to be tried;
or
(b) there ought for some other reason to be a trial of that claim or part,
the Court may give such judgment for the plaintiff against the
Defendant on that claim or part as may be just having regard to the
nature of the remedy or relied claimed.
[16] It is useful to refer once again to the often quoted decision of the former
Supreme Court in National Company For Foreign Trade v. Kayu Raya Sdn Bhd
[1984] 1 MLRA 190; [1984] 2 MLJ 300; [1984] 1 CLJ (Rep) 283 which ruled
as follows:
"We think it appropriate to remind ourselves once again that in every

application under O 14 the 1st considerations are (1) whether the case
comes within the Order and (b) whether the plaintiff has satisfied the
preliminary requirements for proceeding under O 14. For the purposes
of an application under O 14 the preliminary requirements are:
i. the defendant must have entered an appearance;
ii. defendant; and
iii. the affidavit in support of the application must comply

with the requirements of r 2 of the O 14.
... If the plaintiff fails to satisfy either of these considerations, the

summons may be dismissed. If however, these considerations are
satisfied, the plaintiff will have established a prima facie case and he
becomes entitled to judgment. The burden then shifts to the defendant
to satisfy the Court why judgment should not be given against him."
[17] The Plaintiff has satisfied these preliminary requirements, and this is not
disputed by the Defendants. Thus the burden is now firmly on the Defendants
to show that there is a triable issue that does not justify summary judgment to
be entered against them. If the Defendants can demonstrate even one triable
issue, this Court will not grant summary judgment. But it has to be a genuinely
triable issue as would require a trial in order to determine it (see Voo Min En &
Ors v. Leong Chung Fatt [1982] 1 MLRA 548; [1982] 2 MLJ 241).
Issues Raised By The Defendants
[18] The Defendants submitted that there are triable issues as follows:
a) The Facilities are void and invalid as they are "Hilah to Riba"
which violates the Shariah principles;
b) The existence of the commodities for the 1st Facility and the 2nd
Facility and the actual purchase and sale of the commodities are not
proven;
c) The restructuring of the Facilities was not valid;
d) The amount claimed by the Plaintiff was wrong as a rebate (Ibra')

was not given to the Defendants when the Facilities were terminated;
e) The termination of the Facilities was invalid as no written notice

was given to the Defendants to terminate the Facilities; and
f) The Facilities were inequitable as the Plaintiff had waived its right to
receive the full installment payments from the Defendants when the
Plaintiff received delayed payments from the 1st Defendant without
objection.
Analysis And Findings
Hilah To Riba
[19] The Defendants submitted that the instruments in relation to the 1st
Facility amounting to RM27,000,000.00 and the 2nd Facility amounting to
RM33,000,000.00 under the Shariah Principles of Tawarruq (Commodity
Murabahah), is "Hilah to Riba" ie a subterfuge employed by the Plaintiff to
circumvent the riba prohibition which violates the Shariah principles.
According to the Defendants, this is due to the following:
a) The difference between the sale price and the purchase price of the
Facilities is interest which is non-compliant with Shariah principles;
and
b) The Plaintiff determined a fixed profit from the outset and not on a
profit sharing basis as required in accordance with Shariah principles
founded on equity.
[20] I find that the Defendants' submissions on this issue are without merit.
[21] The Defendants' allegations regarding the issue of "Hilah to Riba" are not
directly supported by contemporaneous evidence or documents and are only
raised as bare allegations.
[22] The Defendants' obligations to the Plaintiff were formed from the
agreements entered into with the Plaintiff. The issue of "Hilah to Riba" was
never raised by the Defendants from the moment the agreements were entered
into until the failure of the Defendants to make the repayments to the Plaintiff
and the filing of the Defence. I find that the issues raised are an afterthought
and are only raised by the Defendants to evade their debts.
[23] The current position in law is that non-compliance with Shariah principles
does not render a financing facility contract illegal and unenforceable unless it
is vitiated by the vitiating factors as stipulated in s 24 of the Contracts Act
1950. This was held by the Court of Appeal in Maybank Islamic Bhd v. M-10
Builders Sdn Bhd & Anor [2016] MLRAU 532; [2017] 2 MLJ 69; [2017] 7 CLJ
127. The Court of Appeal in M-10 Builders Sdn Bhd & Anor had emphasised
that the validity of the contract in respect of Islamic financing facility should
be viewed from the law that generally governs the contract between the parties
in this country in which the non-compliance with the Shariah principle does
not vitiate the contract. It held as follows:
"[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 Contracts Act 1950
still govern Islamic contracts. It follows therefore the MOD facility
agreements are not one that can be avoided under s 24 of the
Contracts Act nor an illegal contract under s 25 and therefore remains
an enforceable agreement and must be adhered to."
[Emphasis Added]
[24] It is pertinent to note that in M-10 Builders Sdn Bhd & Anor (supra) that the
Islamic financing facility in question was a Murabahah overdraft facility. By
extension, the principles stated therein would apply to any agreement which is
in non-compliance with Shariah principles including Commodity Murabahah
transactions under the concept of Tawarruq.
[25] The courts have consistently taken a disapproving view of customers of

Islamic based facilities who have benefited from the facilities taken and then
avoid their payment obligations by raising the issue that the Islamic financing
facilities granted are non-Shariah compliant, as the Defendants are doing in
the present case. See Tan Sri Abdul Khalid Ibrahim v. Bank Islam Malaysia Bhd
& Another Case [2009] 3 MLRH 843; [2009] 6 MLJ 416; [2010] 4 CLJ 388
(High Court); Bank Kerjasama Rakyat Malaysia Berhad v. PSC Naval Dockyard
Sdn Bhd [2007] 3 MLRH 173; [2008] 1 CLJ 784 (High Court); Bank Islam
Malaysia Bhd lwn. Rhea Zadani Corp Sdn Bhd & Lain-lain [2012] MLRHU 490;
[2012] 10 MLJ 484 (High Court). This is consistent with the current position
in law as stated in Maybank Islamic Bhd v. M-10 Builders Sdn Bhd & Anor
(supra).
[26] The Defendants are thus bound by the contracts they entered into
pursuant to the Contracts Act 1950 and any non-compliance with Shariah
principles, if any, does not render the contracts invalid or void.
The Existence Of The Commodity
[27] Defendants contended that the existence of the commodities for the 1st
Facility and the 2nd Facility namely "Crude Palm Oil" ("the Commodity') as
well as the actual purchase and sale of the Commodity are not proven. The
Commodity is specified in the Murabahah Sale Contracts but the Plaintiff has
not produced any evidence such as certificates of purchase and sale of such
commodities in respect thereof.
[28] The defendants further argued that since there was no evidence of the
existence of the Commodity and also the transaction related to the purchase
and sale of the Commodity, this was a mechanism created to disguise the
transaction of the Facilities which was in fact "Hilah to Riba".
[29] I do not accept the Defendants' submissions on this point as an issue to be

tried.
[30] The commodities for the 1st Facility and the 2nd Facility have been
identified by the 1st Defendant itself and this has been confirmed in the 1st
Letter of Offer, 2nd Letter of Offer, 1st Murabahah Sale Contract and 2nd
Murabahah Sale Contract.
[31] The relevant provisions are stated below for convenience:
a) Item 6, Section 1 (Specific Terms & Conditions) of both the 1 st

Letter of Offer and 2nd Letter of Offer:
"6. Commodity
Any Shariah compliant commodity as acceptable to the Bank.

The specific commodity is as per the respective Murabahah
Sale Contract."
b) Section 4, Schedule 1, of the 1st Murabahah Sale Contract:
c) Section 4, Schedule 1, of the 2nd Murabahah Sale Contract:
[32] It is also clear from the documentation executed by the 1st Defendant that
it appointed the Plaintiff as a representative/agent to sell the commodities.
The relevant provisions are as follows:
a) Item 4, Section 1 (Specific Terms & Conditions) of both the 1 st

Letter of Offer and 2nd Letter of Offer:
"4. Underlying Shariah Concept & Definition: Tawarruq

(Commodity Murabahah)
Whereby the Customer requests to the Bank by issuance of a

Purchase Request to purchase the Commodity and the
Customer promises (wa'd) to purchase the Commodity from
the Bank at the Bank's Sale Price (cost plus profit)
("Murabahah Sale Price') on deferred term upon the Bank's
receiving all righis, titles and benefits to the Commodity.
Subsequently, the Customer appoints the Bank as its agent to

sell the Commodity to a commodity trader or a party other
than the Bank, at the Bank's Purchase Price (cost) for
immediate payment."
b) Item 1, Section 2 (Specific Terms & Conditions) of both the 1st

Letter of Offer and the 2nd Letter of Offer:
"1. Underlying Shariah Concept: Tawarruq (Commodity

Murabahah)
Whereby the Customer requests to-the "Bank by issuance of a

Purchase Request (as per the format of the Tawarruq Term
Financing-i Agreement) to purchase a commodity stated ("the
Commodity") and promises (wa'd) to purchase the
Commodity from the Bank at the Bank's Sale Price (cost plus
profit) ("Murabahah Sale Price") on deferred term upon the
Bank's receiving all rights, titles and benefits to the
Commodity.
Subsequently, the Customer, appoints the Bank as its agent to

sell the commodity to a commodity trader or a party other
than the Bank, at the Bank's Purchase Price (Cost) for
immediate payment.
The Customer also authorizes the Bank to collect and thereby

remit the collections therefrom to the Customer at designated
accounts) and / or other parties/ accounts as may be
instructed by the Customer in the manner set out in the
Tawarruq Term. Financings Agreement and such amount
paid to the Customer shall be deemed to form part of the
Facility made hereunder and the acknowledgement or receipt
of such parties shall be deemed as if the same had been made
or given by the Bank."
c) Agency Letter (Wakalah) dated 18 May 2018:
"I hereby instruct and authorise the Bank to sell the

Commodity for Ringgit Malaysia Twenty Seven Million
(RM27,000,000.00) only. Kindly disburse the proceeds from
such sale into the Designated Bank Account stated in my
application form acceptable to the Bank, designated or the
purpose of the above Facility."
d) Agency Contract (Wakalah) dated 9 October 2018.
"I hereby instruct and authorise the Bank to sell the

Commodity for Ringgit Malaysia Twenty Seven Million
(RM33,000,000.00) only. Kindly disburse the proceeds from

such sale into the Designated Bank Account stated in my
application form acceptable to the Bank, designated or the
purpose of the above Facility."
[33] Throughout the granting of the Facilities, neither the 1st Defendant nor
the Defendants ever questioned the validity of the Commodity and even
confirmed it. Accordingly the Defendants have contractually agreed and
acknowledged the existence of the Commodity. The dispute that is raised now
is an afterthought to avoid being liable for the amount owed.
[34] Notwithstanding the above, any allegation that the existence of the
Commodity was in doubt and the actual purchase and sale of the Commodity
are not proven is without merit. The documentation entered into by the
Plaintiff and the 1st Defendant relating to the Facilities reflect an intention of
the 1st Defendant for the Commodity to be sold in the market and for the
proceeds of which to be disbursed to the 1st Defendant to enable the 1st
Defendant to use the Facilities in a manner which is compliant with the
Shariah requirements of the Commodity Murabahah transaction. It was
observed by Rohana Yusuf J (as she then was), delivering the judgment of the
High Court, in Tan Sri Abdul Khalid Ibrahim v. Bank Islam Malaysia Bhd &
Another Case (supra) that the demand on a person to fulfil contractual
obligations in Shariah is an onerous one and challenges on the validity of an
agreement of Islamic financing transactions after reaping the benefit is
considered to be an attempt to renege on contractual obligations which have
been voluntarily agreed and acted upon. Her Ladyship said this:
"[13] The issue before me is therefore whether the challenge on the

validity of the BBA Facility Agreement is a bona fide triable issue. In
my view, questioning of the validity of an agreement after benefiting
from it and upon default, in itself lacks bona fide. I say this because
Tan Sri Khalid was in the position to obtain any Syariah or legal
advice at the time he entered into these agreements with the bank. To
turn around and challenge the validity of an agreement entered
voluntarily after reaping the benefit under it appears to be a mere
afterthought. This is also akin to a case of a Muslim who goes into a
restaurant, had a meal, only to inguire after the meal if the food is non
halal and when told that is so, refuses to pay for it. Such conduct
cannot reflect a serious concern of the Syariah compliance but more of
an attempt to renege contractual obligations which have been
voluntarily agreed and acted upon by the other party."
[35] Her Ladyship went on to state:
"[22] Whilst counsel for the Tan Sri Khalid argued that there is a
whole host of Syariah rule that must be complied with in this
transaction, it must be pointed out that there is another side to
fulfilling contractual obligations in the eyes of the Syariah. The
demand on a person to fulfil contractual obligations in Syariah is an
onerous one. I have in an earlier decision in Bank Kerjasama Rakyat
Malaysia Berhad v. PSC Naval Dockyard Sdn Bhd [2007] 3 MLRH 173;
[2008] 1 CLJ 784 HC made my observation on sanctity of contract
and the demand on performance of a contractual obligations in the
eyes of Syariah. I do not now wish to repeat them here."
[36] Also in Dato' Hj Nik Mahmud Daud v. Bank Islam Malaysia Bhd [1998] 1
MLRA 380; [1998] 3 MLJ 393; [1998] 3 CLJ 605; [1998] 3 CLJ 605; [1998] 3
AMR 2760 (Court of Appeal), the Court did not concern itself with the
intention of the parties to involve any transfer of proprietorship of the asset
which was the basis of the Islamic financing transaction as what was
important was the execution of the relevant property purchase agreement and
the property sale agreement which constituted part of the process required by
the Islamic banking procedure before a party could avail itself of the financial
facilities provided by the customer.
Restructuring Of The Facilities
[37] The Defendants submitted that there was a restructuring of the Facilities
but there was no valid termination of the original facility agreements prior to
the restructuring of the 2nd Facility was made by the Plaintiffs. The
Defendants also argued that the sale price under the restructuring was in
excess of the original sale price under the original agreements.
[38] According to the Defendants, the restructuring of the 2nd Facility was a
breach of the resolutions passed by the Shariah Advisory Council of Bank
Negara Malaysia and the 2nd Facility was invalid with reference to para 131
of Shariah Resolutions on Islamic Finance.
[39] I agree with the Plaintiff's submission that in the Defendants' affidavit in
reply, the issue of structuring the facilities refers only to the 1st Facility but the
Defendants' submission is regarding the 2nd Facility and should not be
considered by the Court. The Defendants stated in para 6 of the Defendants'
affidavit in reply as follows:
"6. Saya dinasihati peguamcara Defendan- Defendan dan saya

sesungguhnya mempercayai bahawa Plaintif dikehendaki
membuktikan secara kukuhnya samada perkataan "distruktur" dalam
perenggan 6.1 dan perenggan 6.2 dalam Afidavit Sokongan
bermaksud penstrukturan semula dan sekiranya ya, Plaintif adalah
dikehendaki membuktikan samada terdapat penamatan yang sah
terhadap perjanjian-perjanjian kemudahan asal sebelum penstrukturan
semula tersebut kononnya dibuat oleh Plaintif."
[40] It is clear from paras 6.1 and 6.2 of the Plaintiff's supporting affidavit that
the averments therein pertain to the 1st Facility. These paragraphs refer to the
1st Facility of RM27,000,000.00 in respect of the 1st Letter of Offer. This is in
furtherance to para 5 (a) of the Plaintiff's supporting affidavit which refers to
the 1st Letter of Offer in respect of the 1st Facility of RM27,000,000.00.
[41] The Defendants' submission on the facility restructuring is in respect of

the 2nd Facility as can be seen at para 11 of the Defendants' Written

Submissions:
"11. Di samping, Defendan juga telah membangkitkan isu berkenaan

samada penstrukturan semula Kemudahan Kedua tersebut adalah sah
(sila rujuk: perenggan 5.3 dan perenggan 6 dalam Pembelaan tersebut)
di mana Plaintif telah diletakkan beban untuk membuktikan samada
terdapat penamatan yang sah terhadap perjanjian- perjanjian
kemudahan asal sebelum penstrukturan semula Kemudahan Kedua
tersebut kononnya dibuat oleh Plaintif dan juga samada harga jualan
di bawah penstrukturan semula adalah melebihi harga jualan asal di
bahawa perjanjian-perjanjian asal."
[Emphasis Added]
[42] The restructuring of the 2nd Facility was never raised in the Defendants'
affidavit in reply thus this is a statement from the bar. As this issue was not
raised in the pleadings nor was it raised in the Plaintiffs' affidavit, the Court
will disregard the Defdnats' submission as the Plaintiffs should not submit by
way of submission on a point not raised in an affidavit or pleadings as this
does not meet the requirements of procedural fairness, following Ribarua Sdn
Bhd & Anor v. Bakti Kausar Development Sdn Bhd & Anor [2006] 2 MLRA
550; [2007] 2 MLJ 221; [2007] 1 CLJ 552 (Court of Appeal), TSC Education
Sdn Bhd v. Kolej Yayasan Pelajaran Mara & Anor [2002] 1 MLRH 190; [2002] 5
MLJ 577; [2002] 2 CLJ 581; [2002] 2 AMR 2304 and Yeoh Theam Poh & Anor
v. Bench Win Sdn Bhd & Anor and Other Suits [2012] MLRHU 1801; [2013] 8
MLJ 109.
[43] Even if the Defendants' submissions are focused on the meaning of the
word "distruktur" which the Defendants take to mean that there was a
restructuring of prior agreements or facilities (for which evidence was not
provided by the Defendants in the Defendants' affidavit in reply), I found that
there were no other or new facilities that were restructured as alleged by the
Defendants. The Defendants' error stems from the Defendants'
misunderstanding of the word "distruktur" in para 6.1 of the Plaintiff's
Affidavit in Support:
"6.1 Selanjutnya saya menyatakan bahawa, Kemudahan Pertama

Tersebut telah distruktur berdasarkan prinsip Syariah Commodity
Murabahah. Defendan Pertama sebagai pelanggan membuat
Permintaan Belian dan Akujanji kepada Plaintif untuk membeli
komoditi (Underlying Commodity) ("komoditi tersebut") daripada
pedagang komoditi pada harga bersamaan dengan jumlah
Kemudahan Pertama Tersebut sebanyak RM 27,000,000.00 yang
diberikan kepada Defendan Pertama;"
[Emphasis Added]
[44] I am satisfied that the word "distruktur" therein refers to the type of
facility which was formulated on the Shariah principle of "Commodity
Murabahah" and does not mean the restructuring of the facility from the
original facility to a new facility. The word "distruktur" here has the meaning
of "based", "formed" or "arranged" and thus no restructuring is involved.
Therefore, there is no violation of the resolution of the Shariah Advisory
Council of Bank Negara Malaysia and the issue regarding the selling price as
argued by the Defendants was raised in error.
Ibra' Is Not Deducted From The Amount Claimed
[45] The Defendants submitted that the amount due as at 31 December 2019
of RM41,300,758.89 claimed by the Plaintiff was wrong as the Plaintiff had
omitted to deduct a rebate (Ibra') from the amount claimed as the Facilities
were terminated by the Plaintiff before the expiry of the tenure of the Facility.
According to the Defendants, the deduction of such rebate must be made at
the time of filing of the claim and without doing this the claim of the Plaintiff
is defective.
[46] I find that this submission is of no merit.
[47] Item 6, Section 2 of both the 1st Letter of Offer and 2nd Letter of Offer
clearly provides that Ibra' is only granted when there is an early settlement of
the Murabahah Sale Price:
"6. Ibra(Rebate)
A. In the event the Customer makes an early settlement of the

Murabahah Sale Price, the Bank shall grant an Ibra' (rebate) to the
Customer in accordance with the prevailing policy and procedure of
the Bank and to be calculated based on the following formula...."
[48] The Courts have consistently held that a financier bank has no obligation
to give Ibra' where there is no early settlement of the financing.
[49] In Maybank Islamic Bhd v. Kamarulzaman Mohamed Nordin [2013]

MLRHU 517; [2014] 7 MLJ 685; [2013] 10 CLJ 488 the High Court held that
the facility provider is entitled to claim the whole outstanding amount
including unearned profit or Ibra' in the event of default on the part of the
defendant to settle the outstanding under the facility. The Court stated:
"Was the Plaintiff entitled to unearned profit
[36] The plaintiff was entitled to claim the whole outstanding amount
including "un-earned profit" in event of default on the part of the
defendant to settle the outstanding under the BBA (see Islamic
Banking Practice: From the Practitioners Perspective, Bank Islam
Malaysia Berhad, 1994 where the plaintiff as the bank which provided
the housing financing shall be entitled to claim the whole sum granted
to the defendant plus profits, (see Bank Islam Malaysia Berhad v. Adnan
Omar [1994] 2 MLRH 63; [1994] 3 CLJ 735)."
[50] In CIMB Islamic Bank Bhd v. LCL Corp Bhd & Anor [2013] 1 MLRH 651;
[2012] 3 MLJ 869; [2011] 7 CLJ 594 it was held that a facility customer was
not entitled to Ibra' when he has not made early settlement. The Court held:
"[37] The SAC in its 95th meeting held on 28 January 2010 had
decided that in line with the need to safeguard maslahah (public
interest) and to ensure justice to the financiers and customers, Islamic
banking institutions are obliged to grant ibra' to customers for early
settlement of financing based on buy and sell contracts (such as bai'
bithaman ajil or murabahah). In order to eliminate uncertainties
pertaining to customers' rights in receiving ibra' from Islamic banking
institutions, the granting of ibra' must be included as a clause in the
legal documentation of the financing. The determination of ibra'
formula will be standardised by Bank Negara Malaysia (see
Resolutions of Shariah Advisory Council of Bank Negara Malaysia on
Ta'widh, Ibra and Late Payment Charge, Islamic Banking and Takaful
Department, BNM/RH/NT 008-8, at p 2). The effective date of this
resolution is 7 June 2010.
[40] The crucial word here is "an early settlement". Do these words
include the early termination by the plaintiff upon default on the part
of the defendants?
[42] On that basis, this court finds that in paras 21 and 22 of the letter
of offer, it was agreed that the 1st defendant shall be given the right to
make early settlement on the BBA Facility and the plaintiff shall be
entitled to grant ibra1 and the plaintiffs calculation of ibra' shall be
final andding. It was further agreed that for entitlement of ibra' on
early settlement basis of the selling price, the 1st defendant is required
to give three days advance notice to the plaintiff, which early
settlement must be made on a profit payment date. However, should
the notice is less than three days, the plaintiff shall be entitled to grant
a lower ibra'.
[43] On the plain reading of the said letter, the early settlement only
refers to a situation when the 1st defendant makes early payment of
the BBA Facility before the end of the tenure without compulsion.
Unfortunately, it was not the defendants' case as until to date, there is
still no effort to settle the outstanding.
[44] For the foregoing reasons, the defendants' contention must fail.
The plaintiff is under no obligation neither duty to grant an ibra1 to
the defendants."
[Emphasis Added]
[51] See also: Bank Pertanian Malaysia Bhd v. Seiko Marine Products Sdn Bhd &
Ors [2016] MLRHU 1384; [2017] 8 MLJ 355; Small Medium Enterprise
Development Bank Malaysia Berhad v. Savvy Valley Sdn Bhd & Ors [2019]
MLRHU 1175 [Suit No WA-22M- 621-12/2018.
[52] Further, a judgment can be entered without applying Ibra' but unearned
profit will be deducted from the judgment sum when settlement is made
subsequently as held in Bank Islam Malaysia Bhd v. Azhar Osman & Other
Cases [2010] 1 MLRH 108; [2010] 9 MLJ 192; [2010] 5 CLJ 54 (High Court).
[53] In Islamic Finance: Recovery, Rescheduling & Restructuring of Islamic

Financial and Capital Market Products and Services in Malaysia (2nd edition) by
Mohd Johan Lee, the learned author provided an explanation on how a
plaintiff should plead Ibra' in a statement of claim at pp 152 to 153. It was
explained that, at the time of filling the statement of claim the plaintiff may
state that Ibra' will be given upon settlement by the customer and on the day of
settlement, the parties will then crystallise the exact amount of Ibra' if the
original facility tenure has yet to be matured/ expired. His commentary is as
follows:
"Similarly, at the time of the filling of the summons, the statement of

claims may state that ibra' will be given upon settlement by the
customer and late payment penalty will be imposed. In the judgment,
it will be prudent to state the judgment sum (before ibra') plus late
payment penalty (or ta'widh only if the financier so instructs) of RM....
This judgment sum will then further be subjected to the late payment
penalty (post-judgment) as provided under O 42 r 12A of the ROC
2012.
On the day of settlement, the parties will then crystallise the exact
amount of ibra', and late payment penalty. If a judgment is entered
into on 31 st May, 2017, the amount stated in the judgment is
RM50,000-00 and RM200 of ta'widh as of judgment date. Presuming
the customer settled the judgment debt on 30 May 2019, the financier
is entitled to 10% late payment penalty as provided under O 42 r 12A
(5% per annum for 2 years). It is at this point in time that the parties
will crystallise the ibra' amount if the original facility tenure has yet to
be matured/ expired."
[54] Paragraph 7.4 of Bank Negara Malaysia's Islamic Banking and Guideline
on Ibra' (Rebate) for Sale-Based Financing provides as follows:
"7.4 IFIs are required to ensure that the customers are duly informed
on the applicability of ibra' in the redemption statement or other
documents issued by IFIs to the customers for the purpose of recovery
(such as letter/notice of demand) and in the Statement of Claim
prepared for litigation cases. At minimum, IFIs are expected to
disclose the following:
(i) Commitment to provide ibra' in the Statement of Claim,

redemption statement and other documents such as letters or
notices of demand for the purpose of recovery; and
(ii) The formula or the manner of ibra' computation and the

relevant conditions relating to the granting of ibra' in the

redemption statement and other documents such as letters or
notices of demand."
[55] In para 19 and 20 of the Statement of Claim the Plaintiff pleaded as

follows:
"19. Walau apapun jumlah tuntutan yang dibuat disini, jika Defendan-
Defendan membuat penyelesaian penuh ke atas Kemudahan Pertama
Tersebut dan Kemudahan Kedua Tersebut sebelum tarikh matang,
maka pihak Plaintif berakujanji untuk memberikan suatu rebat/ibra'
untuk keuntungan tertangguh yang dikira dari tarikh penyelesaian
penuh hingga tarikh matang yang mana dengan pemberian
rebat/ibra1 tersebut, jumlah baki harga jualan Kemudahan Pertama
Tersebut dan Kemudahan Kedua tersebut akan berkurangan.
20. Formula pengiraan rebat/ibra' tersebut boleh diperoleh dari pihak

Plaintif dan pihak Plaintif akan mematuhi apa-apa panduan
berkenaan pengiraan rebat/ibra' yang telah diluluskan oleh Bank
Negara Malaysia."
[56] From the above, it is clear from the terms of the Letters of Offer, relevant
authorities and the pleadings of the Plaintiff that the Plaintiff had already
satisfied the requirement of its commitment to provide Ibra' and there is no
requirement for the Plaintiff to deduct Ibra' from the amount claimed in this
action.
[57] Further, the Statement of Account/ Certificate of indebtedness exhibited

by the Plaintiff is sufficient to prove the indebtedness of the Defendants where
there is no "manifest error" on the calculation of the amount owed by the
Defendants shown by the Defendants. See: Cempaka Finance Bhd v. Ho Lai
Ying (trading as KH Trading & Anor) [2005] 2 MLRA 736; [2006] 2 MLJ 685;
[2006] 3 CLJ 544.
Unlawful Termination Of The Facilities
[58] The Defendants submitted that the termination of the Facilities was
unlawful for non-compliance with the requirements under cl 12.7 of the
Murabah Sale Contracts which provides that the Defendants are required to
give written notice to the Defendants to terminate the Facilities. Clause 12.7
provides:
"12.7 (a) The Bank shall have the absolute right by notice in writing to
the Customer to determine this Agreement or to refuse to disburse the
Facility or any part thereof if the Sale Price or any compensation fee
(At Ta'widh) thereon shall become immediately payable under the
provisions of this Agreement.
(b) Upon the giving of such notice, any part of the Facility not thereto
before disbursed shall be cancelled, but any part of the Facility already
disbursed shall become due and immediately payable on demand."
[59] According to the Defendants the Plaintiff's Termination Letter dated 7

January 2020 was only a letter of demand for arrears installments and not a
termination letter as the subject heading of the letter was "Demand for Arrears
cum Termination of Facility."
[60] I find that this submission is without merit.
[61] The applicable clause is cl 12.2 (i) of the both the Tawarruq Term
Financing-1 Agreement dated 18 May 2018 and Tawarruq Term Financing-1
Agreement dated 9 October 2018 as the 1st Defendant and/or the Defendants
failed to repay the amount due and outstanding. Clause 12.2 (i) states:
"If an Event of Default has occurred the Bank may;
(i) declare that an Event of Default has occurred and simultaneously

or at any time thereafter, irrespectively whether the Event of Default is
continuing, accelerate the payment of the Sale Price and demand the
Customer to immediately pay the Sale Price or the balance due and
outstanding, as the case may be to the Bank; "
[62] Plaintiff's letter of demand dated 7 January 2020 with the subject heading
"Demand for arrears cum Termination of Facility" was issued in accordance
with the provisions of cl 12.2 (i) where it clearly states that Defendants are
required to settle current amount in arrears within 7 days from the date of the
letter. In the event of failure the Facilities provided will be automatically
terminated and the Defendants are required to settle the total amount owed
within 7 days of such termination. The relevant portion reads:
"Take further notice that, you are to pay the said amount in arrears
within SEVEN (7) DAYS from the date hereof, failing which the
abovementioned facilities shall be automatically terminated and/or
recalled and our clients upon the termination and/or recall, demand
which we hereby do the total outstanding sum of the above facilities as
at 31 December 2019 as follows:
Inequitable Termination Of The Facilities
[63] The Defendants submitted that the termination of the Facilities was
inequitable as the Defendants had made payments from time to time to the
Plaintiff and the Plaintiff had received such payments, the dates and amounts
of the payments of which the Plaintiff was fully aware of. According to the
Defendants, at all times, as the Plaintiff received delayed payments from the
1st Defendant without objection by the Plaintiff, the Plaintiff had by conduct
represented to the Defendants that the Plaintiff waived its right to receive the
full installment payments from the Defendants. Thus, the Defendants argued,
the Plaintiff was estopped by conduct to now terminate the Facilities and make
this claim against the Defendants, more so on the principles of Shariah.
[64] I find that this argument is without merit.
[65] The Defendants have a responsibility to settle all payments outstanding or

owing as provided in the agreements that have been entered into. The
Plaintiff's notices dated 7 January 2020 stated that any payment made by the
Defendants will be received by the Plaintiff without prejudice to the right of
the Plaintiff to proceed with legal action:
"TAKE FURTHER NOTICE that notwithstanding the termination

and/or recall, our client reserve their rights to accept any partial
payment made by you and/or any other party and/or credited to your
account from any available source(s) without prejudice to our clients'
right to proceed with necessary action to recover the total Outstanding
amount pursuant to the Agreement or under the Laws."
[66] In its claim, the Plaintiff had also taken into account the payments made
by the Defendants as shown in the Plaintiff's Statement of Account/
Certificate of Indebtedness. The amount in the Certificate is based on the
amount due as at 18 February 2020 which is RM15,569,471.35 for the 1st
Facility and RM20,109,586.96 for the 2nd Facility (amounting to
RM35,679,058.31 in total). The amount claimed in the Notices of
Termination dated 7 January 2020 was higher at RM41,300,758.89.
Conclusion
[67] Considering the totality of the facts and circumstances of the case as
disclosed in the affidavit evidence, It was quite clear to me that the Plaintiff
had clearly met the preliminary requirements in an O 14 application in
accordance with the principles established by National Company For Foreign
Trade v. Kayu Raya Sdn Bhd (supra) and further, applying the leading Supreme
Court case of Bank Negara Malaysia v. Mohd Ismail Ali Johor & Ors [1992] 1
MLRA 190; [1992] 1 MLJ 400; [1992] 1 CLJ (Rep) 14. Accordingly I held that
the contentions of the Defendants do not amount to triable issues or constitute
any reasonable defence.
TAB B
Bank Muamalat Malaysia Bhd
[2017] MLRHU 248 v. Ten-Tel Construction Sdn Bhd & Ors pg 1
BANK MUAMALAT MALAYSIA BHD

v.
TEN-TEL CONSTRUCTION SDN BHD & ORS
High Court Malaya, Georgetown

Lim Chong Fong J
[Judicial Review No: PA-25-45-12/2016]
22 March 2017

Bank Negara Malaysia v. Mohd Ismail & Ors [1992] 1 MLRA 190; [1992] 1 MLJ
400 (refd)
Cempaka Finance Bhd v. Ho Lai Ying (trading as KH Trading) & Anor [2005] 2
MLRA 736; [2006] 2 MLJ 685; [2006] 3 CLJ 544 (refd)
MB Islamic bank v. LCL Corporation Bhd & Anor [2013] 1 MLRH 651; [2012] 3
MLJ 869; [2011] 7 CLJ 594 (refd)
Affin Bank Bhd v. Zulkifli bin Abdullah [2005] 3 MLRH 415; [2006] 3 MLJ 67
(refd)
Bank Islam Malaysia Bhd v. Azhar bin Osman & Other Cases [2010] 1 MLRH
108; [2010] 9 MLJ 192; [2010] 5 CLJ 54 (refd)
Datuk Mohd Ali Hj Abdul Majid & Anor v. Public Bank Bhd [2012] MLRAU
503; [2013] 2 MLJ 759 (refd)
Associated Bulk Carriers Ltd v. Koch Shipping Inc (The Fuohsan Maru) [1978] 2
All ER 254 (refd)
Counsel:
For the plaintiff: Johanif Bukhari Zainal; M/s Ramli Amar Jit & Tan
For the defendants: M Kanesan (Sharmila Kanesan with him); M/s M Kanesan &
Associates
[Ordered accordingly.]
GROUNDS OF DECISION
Lim Chong Fong J:
Introduction
[1] This is the Plaintiff's application for summary judgment dated 21

September 2016 ("Application") for recovery of loan disbursed to the
Defendants pursuant to a Tawarruq Islamic banking facility.
[2] The Plaintiff is a licensed bank.
[3] The First Defendant is private limited incorporated company and the
Second to Fourth Defendants are individuals. The Second Defendant is a
director of the First Defendant.
pg 2 v. Ten-Tel Construction Sdn Bhd & Ors [2017] MLRHU 248
[4] The affidavits that were filed for purposes of this Application ("Affidavits")
are as follows:
(i) Plaintiff's affidavit in support of Mostapa bin Othman affirmed on

14 September 2016;
(ii) Defendants' affidavit in reply of Mohd Fowzi bin Shaik Abdul

Rahman affirmed on 20 October 2016;
(iii) Plaintiff's affidavit in reply of Mostapa bin Othman affirmed on 8

November 2016;
(iv) Defendants' affidavit in reply (1) of Mohd Fowzi bin Shaik Abdul
Rahman affirmed on 25 November 2016; and
(v) Plaintiff's affidavit in reply (1) of Mostapa bin Othman affirmed on

7 December 2016.
[5] After having read the pleadings, Affidavits and the written submissions
filed by the parties, I heard oral arguments of counsel on 20 February 2017. I
thereafter dismissed the Application with costs of RM4,000.00. I further
directed an early trial and fixed the case management date on 21 March 2017
towards that end.
[6] The Plaintiff is dissatisfied with my decision and has on 14 March 2017
appealed to the Court of Appeal.
[7] Consequently, I furnish hereinbelow the grounds of my decision.
Salient Facts
[8] At the request of the First Defendant, the Plaintiff vide a letter of offer
dated 5 January 2015 ("Letter of Offer") agreed to provide financing to the
First Defendant for the amount of RM1,500,000.00 known as Muamalat
cashline-I based on the Tawarruq concept ("Facility"). The First Defendant
accepted the offer of the Plaintiff in the Letter of Offer which incorporated the
following commodity transaction documents:
(i) Purchase Requisition which comprised of Purchase Request,

undertaking to Purchase (Wa'd Mulzim), Restricted Agency to
Conclude Purchase and Agency to Accept Delivery and Take
Possession of Underlying Asset;
(ii) Letter of Agency; and
(iii) Murabahah Sale Contract.
[9] The Plaintiff and the First Defendant thereafter executed a Muamalat
Cashline-I (Tawarruq) Facility I-Agreement dated 2 February 2015 ("Facility
Agreement") as well as a Memoranda of Deposit on Fixed Term Account-I

also dated 2 February 2015 ("Memoranda of Deposit").
[10] As security for the Facility given to the First Defendant, the Second to
Fourth Defendants executed a joint and several guarantee for the due
repayment of the Facility dated 2 February 2015 ("Letter of Guarantee and
Indemnity").
[11] Subsequently vide a letter dated 12 March 2015, the Plaintiff revised
several clauses in the Letter of Offer and this revision has been accepted by the
First Defendant.
[12] The Plaintiff and the First Defendant thereafter further executed another
Memoranda of Deposit on Fixed Term Account-I dated 29 April 2015.
[13] The First Defendant subsequently failed to adhere to the terms set out in
the Letter of Offer and Facility Agreement. As at 29 March 2016, the Plaintiff
overdrawn the MCash account by RM94,857.34 besides not having placed
RM150,000.00 into the Fixed Term Account-I.
[14] Accordingly, the Plaintiff through its solicitors Messrs Ramli Amar Jit &
Tan sent a notice of demand to the Defendants to remedy the default of the
First Defendant.
[15] However by the refusal or failure of the Defendants to so remedy, the

Plaintiff on 22 April 2016 terminated and recalled the Facility given to the
First Defendant. In addition, the Plaintiff also demanded for payment of the
total outstanding balance of RM2,387,523.97 as at 14 April 2016 from the
Defendants.
[16] Upon the liquidation of the Fixed Term Account-I, the Plaintiff claimed
that the First Defendant is indebted to the Plaintiff in the amount of
RM1,894,476.14 and a certificate of indebtedness dated 24 May 2016 has been
issued by the Plaintiff to that effect.
[17] The Defendants nevertheless failed, neglected and refused to settle the
outstanding amount and this suit is hence filed by the Plaintiff to claim for
RM1,894,476.14 up to 24 May 2016 being the alleged sum due to the Plaintiff
together with Ta'widh at 1% per annum on the amount in arrears from the due
date to the date of termination and/or Ta'widh at the rate of 1% per annum on
the balance principal sum from the date of the termination until date of
judgment or maturity date (whichever comes first) and further at a market rate
of Islamic Money Bank (Pasaran Wang Islam bank) on the balance principal
sum until full payment thereof, legal costs on solicitor-client basis and costs.
Contentions And Findings
[18] The law on summary judgment is settled and I need to just refer to two
cases of high authority.
Firstly, Azmi SCJ said as follows in the supreme court case of Bank
Negara Malaysia v. Mohd Ismail & Ors [1992] 1 MLRA 190; [1992] 1
MLJ 400:
"In our view, basic to the application of all those legal

propositions, is the requirement under O 14 for the court to be
satisfied on affidavit evidence that the defence has not only
raised an issue but also that the said issue is triable. The
determination of whether an issue is or is not triable must
necessarily depend on the facts or the law arising from each
case as disclosed in the affidavit evidence before the court. On
the treatment of conflict of evidence on affidavits, Lord
Diplock speaking in the Privy Council on Eng Mee Yong &
Ors v. Letchumanan 5 had this to say at p 217:
Although in the normal way it is not appropriate for a

judge to attempt to resolve conflicts of evidence on
affidavit, this does not mean that he is bound to
accept uncritically, as raising a dispute of fact which
calls for further investigation, every statement on an
affidavit however equivocal, lacking in precision,
inconsistent with undisputed contemporary
documents or other statements by the same deponent,
or inherently improbable in itself it may be.
Although Lord Diplock was dealing with an

application for removal of caveat in that particular
case, we are of the view that the above principle of
law is relevant and applicable in all cases where a
judge has to decide a case or matter on affidavit
evidence.
Under an O 14 application, the duty of a judge does not end

as soon as a fact is asserted by one party, and denied or
disputed by the other in an affidavit. Where such assertion,
denial or dispute is equivocal, or lacking in precision or
isinconsistent with undisputed contemporary documents or
other statements by the same deponent, or is inherently
improbable in itself, then the judge has a duty to reject such
assertion or denial, thereby rendering the issue not triable. In
our opinion, unless this principle is adhered to, a judge is in no
position to exercise his discretion judicially in an O 14
application. Thus, apart from identifying the issues of fact or
law, the court must go one step further and determine whether
they are triable. This principle is sometimes expressed by the
statement that a complete defence need not be shown. The
defence set up need only show that there is a triable issue.
Where the issue raised is solely a question of law without

reference to any facts or where the facts are clear and
undisputed, the court should exercise its duty under O 14 If

the legal point is understood and the court is satisfied that it is
unarguable, the court is not prevented from granting a
summary judgment merely because 'the question of law is at
first blush of some complexity and therefore takes a little
longer to understand'.(See Cow v. Casey 6 and European Asian
Bank AG v. Punjab & Sind Bank 7 at p 516.)."(Emphasis is
mine.)
Secondly, Steve Shim CJ (Sabah & Sarawak) said as follows in the

federal court case of Cempaka Finance Bhd v. Ho Lai Ying (trading as
KH Trading) & Anor [2005] 2 MLRA 736; [2006] 2 MLJ 685; [2006] 3
CLJ 544:
[5] "Quite clearly, the Court of Appeal has put the burden on
the plaintiff to prove his case in an O 14 application. With
respect, that cannot be the correct proposition of law. In an
application under O 14, the burden is on the plaintiff to
establish the following conditions: that the defendant must
have entered appearance; that the statement of claim must
have been served on the defendant; that the affidavit in
support must comply with r 2 of O 14 in that it must verify the
facts on which the claim is based and must state the
deponent's belief that there is no defence to the claim (see
Supreme Leasing Sdn Bhd v. Dior Enterprises & Ors [1989] 3
MLRH 718; [1990] 2 MLJ 36). Once those conditions are
fulfilled, the burden then shifts to the defendant to raise triable
issues. The law on this is trite. In National Company for
Foreign Trade v. Kayu Raya Sdn Bhd [1984] 1 MLRA 190;
[1984] 2 MLJ 300 the Federal Court has stated thus:
We think it appropriate to remind ourselves once

again that in every application under O 14, the first
considerations are (a) whether the case comes within
the order and (b) whether the plaintiff has satisfied the
preliminary requirements for proceeding under O 14,
For the purposes of an application under O 14, the
preliminary requirements are:
(i) the defendant must have entered an

appearance the defendant must have entered
an appearance;
(ii) the defendant must have entered an

appearance the statement of claim must have
been served on the defendant; and
(iii) the defendant must have entered an

appearance the affidavit in support of the
application must comply with the
requirements of r 2 of the O 14......If the

plaintiff fails to satisfy either of these
considerations, the summons may be
dismissed.If however, these considerations are
satisfied, the plaintiff will have established a
prima facie case and he becomes entitled to
judgment. This burden then shifts to the
defendant to satisfy the court why judgment
should not be given against him.
[6] The proposition of law enunciated by the Federal Court in

National Company has been applied in numerous cases. We
accept the correctness of that proposition......" (Emphasis is
mine)
[19] Mr M Kanesan of counsel for the Defendants in gist raised three alleged
triable issues, to wit:
(i) The principal amount claimed by the Plaintiff is highly excessive

and not calculated in accordance with the terms of the Facility
Agreement;
(ii) The principal amount claimed by the Plaintiff did not take into
account the Ibra (rebate) that the Plaintiff agreed to take into account
pursuant to the Facility Agreement; and
(iii) The Ta'widh claimed by the Plaintiff is not in accordance with the
Facility Agreement.
[20] On the other side, Mr Johanif Bukhari Zainal of counsel for the Plaintiff
contended that the amount claimed is proper and correct in accordance with
the Facility Agreement. The amount due is also conclusive because a
certificate of indebtedness has been issued accordingly. The Plaintiff relied on
the case of MB Islamic bank v. LCL Corporation Bhd & Anor [2013] 1 MLRH
651; [2012] 3 MLJ 869; [2011] 7 CLJ 594 wherein summary judgment was
granted.
[21] First and foremost, I have enquired from Mr Johanif for the details of the
derivation and computation of the sum of RM1,894,476.14 as certified in the
Plaintiff's certificate of indebtedness. He candidly admitted that the derivation
and computation were neither reflected nor shown in the affidavits before me.
He could only confirm that Ibra has not been taken into account in the
principal sum claim and that the claim for Ta'widh is based on the guidelines
issued by the Bank Negara Malaysia.
[22] Issues (i) and (ii) as raised by the Plaintiff appear connected and I will take
them together. In this regard, it is undisputed that the Facility has been
prematurely terminated by the Plaintiff. However the Plaintiff has denied the
First Defendant Ibra or rebate in the computation of its principal sum claim.
[23]I am aware that there is a provision on Ibra in s 3.14 of the Facility

Agreement wherein s 3.14(a) provides that "The Bank shall grant ibra' in case of
early settlement of the Facility to the Customer." Upon my reading of that
provision, it is my view arguable whether s 3.14(a) also applies to a terminated
facility for default instead of merely a terminated facility due to early
settlement by the customer only as adopted by the Plaintiff. In my opinion, the
facility is cancelled prematurely in either case and a rebate ought to be given in
principle: otherwise the bank would be unjustly enriched. It would have been
different if there is a clear express provision in the aforesaid cl 3.14 that Ibra
would not apply in a terminated facility for default. I also noticed that in Affin
Bank Bhd v. Zulkifli bin Abdullah [2005] 3 MLRH 415; [2006] 3 MLJ 67 and
Bank Islam Malaysia Bhd v. Azhar bin Osman & Other Cases [2010] 1 MLRH
108; [2010] 9 MLJ 192; [2010] 5 CLJ 54, the courts were hesitant to permit the
bank from denying the customer earning the rebate on unearned profit
practiced by Islamic banks.
[24] It is therefore my view that the applicability or otherwise of Ibra is a

triable issue here and I am left to wonder what would be the sum truly due to
the Plaintiff if Ibra is effected to reduce the amount certified in the Plaintiff's
certificate of indebtedness.
[25] Next as to issue (iii) on the Plaintiff's claim for Ta'widh, the Bank Negara
Malaysia Guidelines on late Payment Charges for Islamic Banking Institutions
issued on 17 December 2012 ("BNM Guidleines") provide as follows:
"5 February 2 Principle 2: Ta'widh
The IBI shall be compensated up to the amount of actual loss incurred

as a direct result of the delay in repayment or default by the customer.
The IBIs are allowed to be compensated by way of ta'widh up to (or

equivalent to) the actual amount of losses incurred by the IBIs, subject
to the overall combined rate limit. In determining the compensation
rate of actual loss incurred, the IBIs are required to observe the
reference rate as prescribed by the Bank as follows:
(i) The actual loss to be compensated from any default

payment, from the date of payment until the maturity date
shall not be more than 1% per annum:
(a) on the overdue instalments of the Islamic financial

product in case the case of default scheduled
payments (Diagram 2.1); or
(b) on outstanding balance (outstanding principal and

accrued profit) of the Islamic financial product in the
case of default causing the entire facility to be recalled
or brought to court for judgment prior to maturity
(Diagrams 2.2 and 2.3).
(ii) The actual loss to be compensated from default payment

which exceeded the maturity date shall not be more than the
prevailing daily overnight Islamic Interbank rate (IMM) on
the outstanding balance (outstanding principal and accrued
profit) of the Islamic financial product (Diagrams 2.4 to 2.6).
(iii) The reference rate for the actual loss shall be determined
at the point of default on a monthly basis from the payment
due date. (refer to illustration in Appendix 1).
(iv) The ta'widh earned shall also be included in the

computation of profit distributable to depositors/investment
income holders.
......
9.3.2 Ta'widh
The judgment creditor can be compensated for the actual loss based on
ta'widh. The ta'widh rate for the judgment creditor is the prevailing
daily overnight Islamic Interbank rate (IMM) on the judgment amount
awarded. The actual loss, where applicable, excludes the courts order
for costs."
[26] From my review of the Plaintiff's claim for Ta'widh, it appears that the
claim may not be wholly in consonance with cl 5 February 2 item of the BNM
Guidelines. The Plaintiff has only claimed for it qualitatively in words without
showing the actual derivation and computation quantitatively. As contended
by the Defendant, this is itself also dependent upon the precise determination
of the principal sum that is overdue but which is presently unverifiable by
reason of the Ibra issue. Be that as it may, I am aware that is also a provision
for compensation of Ta'widh in s 3.17 of Facility Agreement which is not
identical to that provided in the BNM Guidelines. Section 3.17 of the Facility
Agreement reads:
"Notwithstanding anything contained in this Agreement, the

Customer(s) hereby agree covenant and undertake to pay to the Bank
compensation on overdue installments and payments of the Selling
Price on the date of maturity of the Facility as follows:
(a) for failure to pay any installments of the Facility from the
date of first utilization until date of maturity of the Facility,
the compensation rate that shall be applied is one per centum
(1%) per annum on the overdue amount or any other method
approved by Bank Negara Malaysia. Notwithstanding the
above, the amount of compensation fee (ta'widh) shall not be
compounded on the overdue installments;
(b) for failure to pay any installments and which failure

continues beyond the maturity date of the Facility, the
compensation rate that shall be applied is the Bank's current
Islamic Money Market Rate on the balance of the Selling
Price or any other method approved by Bank Negara
Malaysia; and
(c) The Ta'widh shall be calculated as follows:-
(i) Default payment during the financing period and

before maturity:-
Overdue installment(s) amount x 1% No. of Days

Overdue 365/366 (leap year)
ii) Default payment which exceeded the maturity date

:-
Outstanding Principal Amount x IIMM x No of Days

Overdue 365/366 (leap year)
(d)The amount of such compensation shall not be

compounded on the overdue installment amount or
outstanding principal."
The Plaintiff has not affirmatively committed in the affidavits as to which

mode of compensation is applicable as well as applied in its claim. This issue
of Ta'widh is thus another triable issue.
[27] I am cognizant that the Plaintiff has issued a certificate of indebtedness

that is conclusive in respect of the principal sum claimed pursuant to s 15.12 of
the Facility Agreement. I am also mindful that in the Federal Court case of
Cempaka Finance Bhd v. Ho Lai Ying (trading as KH Trading) & Anor (supra),
Steve Shim (CJ Sabah & Sarawak) held as follows:
"......The judgment of Shankar J in MIMB v. G & C Securities

(unreported) and the judgment of Bank Bumiputra Malaysia Bhd v.
Doric Development Sdn Bhd [1986] 1 MLRH 475; [1988] 1 CLJ 361
provided authority for the proposition that such a certificate is indeed
binding unless there is manifest error.
This observation appeared to has escaped the attention of the Court of

Appeal in the present case. In the result, the Court of Appeal took the
position that the conclusiveness of the certificate of indebtedness exh
P3 was binding only upon the parties and that the court would still
have to determine whether sufficient evidence had been adduced to
prove quantum and the correctness of the amount claimed. With
respect, such a proposition goes against the entrenched principles
enunciated by Raja Azlan Shah CJ (Malaya) (as His Highness then
was) in Citibank NA v. Ooi Boon Leong & Ors [1980] 1 MLRA 221;
[1981] 1 MLJ 282 when he said inter alia:
We have often said in this court many a time that where the
issues are clear and the matter of substance can be decided
once and for all without going to trial there is no reason why
the Assistant Registrar or the judge in chambers, or, for that
matter, this court shall not deal with the whole matter under
the RSC O 14 procedure. In the present case, the guarantee
contains a clause which enables the bank by producing a
certificate of indebtedness by its officer to dispense with legal
proof of the actual indebtedness of the respondents.... It means
that, for the purpose of fixing liability of the respondents, the
company's indebtedness may be ascertained conclusively by a
certificate.
The above dictum establishes firmly the conclusive nature and extent
of a certificate of indebtedness. A certificate of indebtedness operates
in the field of adjectival law. It excuses the plaintiff from adducing
proof of debt. Such a certificate shifts the burden onto the defendant to
disprove the amount claimed." (Emphasis is mine).
[28] Nonetheless, I am satisfied the Defendant has sufficiently identified

several reasons as aforesaid as to why there the Plaintiff's certificate of
indebtedness contained manifest errors and hence inconclusive.
[29] Lastly. it has been seen in Datuk Mohd Ali Hj Abdul Majid & Anor v.
Public Bank Bhd [2012] MLRAU 503; [2013] 2 MLJ 759 that summary
judgment may be allowed with damages to be assessed for a claim of
unliquidated damages or general damages if liability is admitted by or
established against a defendant and the damages are not disputed. This is
hardly the case here because there is no admitted or undisputed amount which
can presently be ascertained: see also the English Court of Appeal case of
Associated Bulk Carriers Ltd v. Koch Shipping Inc (The Fuohsan Maru) [1978] 2
All ER 254, CA where summary judgment was denied.
Conclusion
[29] In the circumstances and for the foregoing reasons, I find and hold that
the First Defendant herein (and accordingly the other Defendants as well who
undertook co-extensive liability) had raised triable issues and I hence made the
decision as so ordered.
TAB C
Bank Islam Malaysia Bhd
v.
108 Azhar osman & Other Cases [2010] 1 MLRH
BANK ISLAM MALAYSIA BHD

v.
AZHAR OSMAN & OTHER CASES
High Court Malaya, Kuala Lumpur
Rohana Yusuf J
[Originating/Writ Of Summons Nos: D4-22A-395-2005, D4-22A-399-2005, D4-22A-
195-2006 & D4-22A-263-2006]
28 January 2010
JUDGMENT
Rohana Yusuf J:
Introduction
[1] There are two sets of appeal that went before the Court of Appeal relating to Bai
Bithaman Ajil ("BBA") contracts in Islamic banking. The first set of appeal involves 11
Writs of Summons and one originating summons. They were heard together and
decided by the Court of Appeal on 26 August 2009 and reported in Bank Islam
Malaysia Bhd v. Lim Kok Hoe & Anor and Other Appeals [2009] 2 MLRA 397; [2009]
6 CLJ 22. The Court of Appeal held that a BBA contract is valid and enforceable and
reversed an earlier decision of the High Court in Arab-Malaysian Finance Bhd v.
Taman Ihsan Jaya Sdn Bhd & Ors; Koperasi Seri Kota Bukit Cheraka Bhd (Third
Party) And Other Cases [2008] 3 MLRH 233; [2008] 5 MLJ 631; [2009] 1 CLJ 419.
Subsequent thereto all cases involving BBA contracts that were heard together thereat
were sent to this court for determination of the quantum of plaintiff's claim. The
quantum of the plaintiff's claim in these writs of summons and the amount due under the
originating summonses had in fact been determined by me on 28 January 2010.
[2] Another set of appeal came before another panel of the Court of Appeal on 20
October 2009. That panel followed its earlier decision and again the cases were sent to
this court for determination of the quantum of plaintiff's claim in the writs of summons,
as well as the amount due under the originating summonses. The proceedings before
me, which were actions in the second set of appeal, involve two Writs of Summons
registered as D4-22A-263-2006 and D4-22A-195-2006, and two Originating
Summonses registered as D4-22A-395-2005 and D4-22A-399-2005 respectively.
Pursuant to the order of the Court of Appeal, parties were notified to appear before the
learned deputy registrar for case management and all the cases were set to be heard
together on a specified date. However, only the solicitors for the plaintiff were present
on that date.
[3] The plaintiff in each of these four cases is Bank Islam Malaysia Berhad ("BIMB").
For the purpose of hearing before me on the issue of quantum, BIMB filed an affidavit
for each of the cases stating the latest statement of account in support of its claim. On
the day set for hearing, none of the defendants appeared, except Encik Azhar bin
Osman, who is the defendant in the Originating Summons D4-22A-395-2005. He
appeared in person. All the four cases are based on BBA contracts.
v.
[2010] 1 MLRH Azhar osman & Other Cases 109
[4] Learned counsel for BIMB, Encik Oommen Koshy (Encik Aedyla Bokari with him)
contended that in a BBA contract the bank has a legal right to claim for the full sale
price as stipulated in the Property Sale Agreement ("PSA"). Accordingly he argued that
in an application pursuant to an originating summons, the court ought to grant an order
for sale based likewise, on the full sale price, irrespective of a premature termination.
The bases of Encik Oommen Koshy's arguments are two. First, he contended that this
court should honour and enforce the clear written terms of the contract and should not
interfere with the intention of parties by imputing any other term. Since parties had
agreed as to the amount of sale price as stipulated in the PSA, the defendant is under a
legal obligation to pay the full sale price, irrespective of when a breach occurs.
Secondly, by virtue of the doctrine of stare decisis, this court is bound by the decision
of the Court of Appeal in Lim Kok Hoe which, according to Encik Oommen Koshy,
upheld and acknowledged the obligation to pay the full sale price under the PSA.
[5] Before I proceed to analyse the arguments of learned counsel, it would be
appropriate for me to state here the practice of this court in determining the quantum of
plaintiff's claim under a terminated BBA contract generally, both in an application for
order for sale as well as a claim for a judgment sum in a writ of summons. It is worth
noting also that writing a decision on Islamic banking cases can be rather challenging
because of the scarcity of precedent to refer to. Perhaps this is because Islamic banking
in Malaysia is still in its stage of infancy, with just over 30 years in practice, as
compared to over 250 years of conventional banking. It is made more difficult in these
cases when there is no opposing counsel to argue the defendant's case and elucidate the
issues that may cause injustice to the defendant. It is also my observation that typically
the contract documents used in these transactions are, more often than not, a modified
version of the standard banking document, which not surprisingly, made reading more
arduous. Be that as it may, what I propose to do here is to set some of the practices and
legal position, which to my mind is appropriate, given the existing set of laws, in
determining the quantum of plaintiff's claim under BBA contracts.
Present Practice
[6] The nature of a BBA contract is well explained in the Court of Appeal's decision in
Lim Kok Hoe, and I can do no better. In a typical BBA contract, the first transaction
begins with a Property Purchase Agreement ("PPA"). As in the present case D4-22A-
263-2006, vide the PPA the defendant sells his property to the BIMB for a sum of
RM177,960 and almost simultaneously BIMB sells it back to him at a price of
RM451,895.04 under the PSA. There are, depending on the circumstances, variations as
to the manner in which a bank pays the purchase price under the PPA to the customer.
In a case where the construction of the property is completed, the bank will pay by lump
sum payment of the full purchase price. In other instances, payment may be made
progressively, which usually depends on the stage of completion. Ordinarily the
repayment by the customer under the PSA is on deferred payment basis by way of
periodical instalments for an agreed tenure which may run to 20 years or more. Again
depending on the terms agreed, payment of the instalments may commence immediately
upon the initial payment or after payment by the bank of the full purchase price under
the PPA. As security for the payment of the instalments by the customer under the PSA,
a charge over the property is created in favour of the bank.
v.
[7] Upon default by the customer, the bank may enforce the charge by applying for an
order for sale and simultaneously file a writ of summons for judgment sum. An
application for an order for sale is made by way of an originating summons. Section
256(2) of the National Land Code, 1965 ("NLC") states that, an application for an Order
for Sale, must be made in accordance with the law relating to civil procedure, namely,
the procedures as laid down under the Rules of the High Court 1980, ("RHC") O 83 of
the RHC provides for inter alia, the procedure for a sale of a charged property. Section
257(1)(c) NLC, requires an order for sale made by the court "shall specify the total
amount due to the chargee at the date on which the order is made ..." whilst under O 83
r 3 of the RHC, requires that there must be particularisation of the account between the
chargor and chargee which includes "the amount remaining under the charge" (see O 83
r 3(3)(d)). Thus, an additional or supplementary affidavit would be required in an
application for an order for sale for the purpose of specifying the amount due to the
chargee at the date on which the order is made.
[8] In specifying the amount due, the issue which confronts a BBA contract is this. The
PSA stipulates the sale price, the payment of which is by way of instalments for a
specified tenure of the contract. The agreement is however silent on the amount due to
the bank when the tenure of the BBA contract has not completed. The non completion
may be due to prepayment or termination due to breach. Also, it is silent on the amount
payable when the bank has not paid the purchase price in full under the PPA. What I
have gathered thus far from cases involving Islamic banks that have come before me,
which includes Hong Leong Islamic Bank Berhad, RHB Islamic Bank Berhad, Bank
Kerjasama Rakyat Malaysia Berhad and Affin Islamic Bank Berhad, is this. When a
customer wants to prepay under a BBA contract, the bank will issue a redemption
statement. Usually the redemption statement will stipulate the amounts payable for
prepayment at each monthly interval for period three months thereafter. The redemption
statement usually states that, if prepayment is made at the end of January for instance,
the redemption sum would be less than if a prepayment is made at the end of February
and so forth. The redemption sum is computed based on when payment is due. The
computation, as I understand it, is based on the full sale price under the PSA less the
paid instalments. Since the tenure of the contract has not completed, the bank will
further deduct as ibrar (a term used in Islamic banking for rebate) what it refers to as
"unearned profit". Unearned profit, as the name suggests, is the amount which has yet to
be earned by the bank. I have been made to understand, from a testimony given by a
representative of RHB Bank in another case, "unearned profit" is based on an
Amortization table used by these Islamic banks. According to his testimony, the
Amortization table is essentially an internal document in the form of a table that is used
in the banking industry throughout the globe. It enumerates or tabulates the banking
transaction and the particulars of which are as shown herein below. Adjustments are
made to the amount in the table in the course of transaction, depending on whether the
instalments are paid early or otherwise. What I would like to illustrate here is the
method of computation used by the bank based on this table in determining the balance
sale price and the rebate granted to customers. A word of caution is necessary in
referring to this table. This table represents an ideal BBA transaction. In reality of a
banking transaction, there may be late payment of instalment by a customer. Then the
bank will have to readjust the respective figures in the table accordingly.
v.
Eg, for illustration purposes only
Balance
Payment Financing Unearned
Installment Selling
No. Amount Profit/Ibrar
Price
0 100,000.00 48,912.97 148,912.97
1 1,128.13 99,517.70 48,267.14 147,784.85
111 1,128.13 22,087.88 1,602.82 23,690.70
112 1,128.13 21,102.40 1,406.17 22,562.57
113 1,128.13 20,110.56 1,323.88 21,434.44
114 1,128.13 19,112.31 1,194.00 20,306.31
115 1,128.13 18,107.62 1,070.57 19,178.19
116 1,128.13 17,096.43 953.62 18,050.06
117 1,128.13 16,078.72 843.21 16,921.93
118 1,128.13 15,054.43 739.37 15,793.80
119 1,128.13 14,023.53 642.14 14,665.67

v.
120 1,128.13 12,985.97 551.57 13,537.54
121 1,128.13 11,941.71 467.71 12,409.41
122 1,128.13 10,890.70 390.58 11,281.29
123 1,128.13 9,832.91 320.25 10,153.16
124 1,128.13 8,768.29 256.74 9,025.03
125 1,128.13 7,696.79 200.11 7,896.90
126 1,128.13 6,618.37 150.41 6,768.77
127 1,128.13 5,532.98 107.66 5,640.64
128 1,128.13 4,440.59 71.93 4,512.51
129 1,128.13 3,341.14 43.25 3,384.39
130 1,128.13 2,234.59 21.67 2,256.26
131 1,128.13 1,120.89 7.24 1,128.13
132 1,128.13 0.00 0.00 0.00

v.
This table illustrates a BBA transaction where the customer sells to the bank vide a PPA
an assets of the customer for a sum of RM100, 000. The bank sells back to the customer
under the PSA for RM148,912.97, payable in 132 instalments of each RM1,128.13. The
first column denotes the instalment numbers which is on monthly basis. As an example,
if a customer defaulted on payment of instalment No 112 in the first column, the
balance selling price due to the bank will be RM23,690.70. This figure appears in the
last column. If the sum is paid immediately, the bank will grant an ibrar by deducting
the unearned profit of RM1,406.17 as shown in the "unearned profit" column. However,
if the amount is not paid immediately, for example, it is only paid on the date when
instalment No 124 is due; the unearned profit that the bank will deduct as ibrar will be
recomputed taking into account the non payment of the outstanding instalment from
date of default to the payment date. It must be born in mind that the figure in the
"unearned profit" column in the instalment number 124 does not automatically apply
but need adjustment based on punctuality of instalment payment. In the event that no
payment is made till the end of the tenure that is, when instalment No 132 becomes due
or thereafter, the bank would be entitled to receive the sum of RM23,690.70 with no
rebate, as there would be no further unearned profit left to be deducted as ibrar. The
balance sale price of RM23,690.70 would be the maximum amount that the bank could
claim as there is no interest chargeable thereon after judgment is obtained. If I am
permitted to state here, compared to conventional banks, Islamic banks' claim will be
capped to the sale price and no more. Needless to say, depending on the terms of the
contract the bank may also be entitled to other ancillary charges due, including late
payment charges.
[9] In an ongoing trial before me based on BBA contract, a witness from the BIMB
testified that in all cases of BBA contracts despite stipulating the full sale price as being
payable, the bank grants ibrar or rebate on a termination due to breach or for
prepayment. The granting of ibrar by BIMB is in line with the practice of other Islamic
banks. That being the case in an Order for sale application too the sum stipulated under
s 257(1)(c) NLC shall be the amount payable in the event that a customer intends to
tender payment under s 266(1) of the NLC. Under this section if a chargor tenders
payment to court of the amount due and payable before the conclusion of the auction
(that is to say, before the hammer falls), the order for sale ceases to have effect.
[10] From the above it may be said that the approach of the Islamic banks that deduct
unearned profit as ibrar is consistent with the requirement of s 266(1) NLC while at the
same time facilitate cases of prepayment. Thus, in all application for order for sale
before me, I have allowed the sum specified under s 257(1)(c) NLC, to be the sum due
and payable at the date on which the order is made; based on the total sale price less the
amounts paid under the instalments and further deducting the unearned profit of the
bank computed at the day on which the order for sale is made, as illustrated in the
Amortization table above. In taking this approach, I am mindful that the law strictly
requires the bank when applying for an order for sale to state the amount due on the date
on which the order for sale is made. In a case where the tenure of the contract has
completed there would be no further unearned profit to be deducted and the full sale
price would be the amount due and payable. Even if it is long overdue, the amount due
v.
and payable remains the same because the sale price under the PSA does not attract any
interest.
[11] Similar approach is taken by this court in proceedings under a writ of summons.
Judgment is entered on the quantum of plaintiff's claim based on full sale price under
the PSA less the amounts paid under instalments at the time the writ was filed or
thereabout. This sum will further be deducted by the amount of unearned profit (if any)
on the date of realisation as ibrar. This is because, unlike the application for an order for
sale, there is no requirement for the plaintiff to state the amount due and payable on the
date of judgment.
Argument By The Bank
[12] For the banks, often it is argued that the court must enforce the full sale price,
irrespective of the time, breach occurs. In other words, it is not the business of the court
to interfere with written terms of the contract since the customer has agreed to pay the
full sale price upon default. This argument is premised on the underlying presumption
that a BBA contract is a sale transaction and not a loan transaction. Hence, a sale price
must be met at all cost. It is also the belief of the proponent of this argument that, by
inserting a rebate clause in the agreement it will create uncertainty on the sale price and
the gharar operates. Besides, since it is a sale agreement, the sale price does not change,
lest it will not reflect the transaction as a true sale. As a matter of practice however, the
bank in all instances will grant a rebate at its discretion.
[13] With due respect, I find this argument untenable. Whilst it is true that the Court of
Appeal in Lim Kok Hoe held that a BBA contract in a way differs from conventional
banking because it is a sale transaction, it cannot however be regarded as a sale
transaction simpliciter. The BBA contract is secured by a charge and concession as ibrar
is given as a matter of practice to all premature termination. Further, it is not a simple
sale because even if the bank does not make payment of the full purchase price under
PSA the bank would still be entitled to claim the amount already paid. Whereas in a
simple sale if the first leg of the transaction fails, the bank's right to the amount paid
will not ipso facto accrue since the sale was never completed.
[14] If we were to take Encik Oommen Koshy's argument to the extreme, is this court
expected to order that a full sale price be paid by a customer even if the bank had not
made payment of the full purchase price under the PPA? That is quite difficult to
reconcile and surely cannot be so. In fairness the bank cannot be allowed to argue that a
sale transaction must be adhered strictly to the letter only on the part of the customer.
Why a bank should insists on payment of the full sale price and thereafter as a matter of
practice grant a rebate to the customer simply to show that it is a sale transaction may
have its purpose but to place the customer in such a precarious position is quite
something else, particularly when such grant is at the bank's absolute discretion. From
the practice of the bank it is clear that the insistence on enforcing payment of the full
sale price appears to be merely an attempt to adhere to written text but I doubt if such
appearance achieve its purpose. This is because, despite the written term of the
agreement, the bank in reality does not enforce payment of the full sale price upon a
premature termination. It always grants rebate or ibrar based on "unearned profit".
v.
[15] According to Encik Oommen Koshy's argument also, the notion of enforcing
payment of the full sale price followed by the grant of rebate or ibrar at the absolute
discretion of the bank is in line with the spirit of a sale transaction. When questioned as
to how a customer would then know what the amount of rebate would be, he suggested
that, if there is surplus in the amount received from an auction, the bank would be
obliged to refund to the customer the surplus from the proceeds. It is unclear what is
meant by surplus. If surplus means an amount over and above the sale price, there is no
reason for the bank to withhold the same. The bank must refund such surplus as
retaining it amounts to unjustified enrichment on the part of the bank. Surplus must
therefore mean the amount over and above the sum due to the bank and this amount
may be refunded at the discretion of the bank. In other words, he suggested that, though
rebate is always granted, it not a matter of right that the customer is entitled to it. Any
aggrieved customer, according to Encik Oommen Koshy also, can always bring an
action to the Court for determination, as to whether he is entitled to a rebate or the
amount of rebate is correct.
[16] Ingenious as this argument may be, regrettably I differ in my view. I dread to
imagine that such a day would come because if a customer were to seek for a
determination as suggested, then what would be the contractual terms upon which the
court is to determine. This is particularly so, since it is also Encik Oommen Koshy's
argument that the court ought not to interfere. Even if as a last resort, justice demands
equitable interference, the court would have little choice but to fall back on generally
accepted practice of Islamic banks. That being so, I simply cannot appreciate, let alone
understand, why a customer must go through such an excruciating process when at the
end of the day he comes to the same position namely, that in determining the correct
amount of rebate, the court would apply what would be the generally accepted practice
of Islamic banks. In other words the approach to be taken then would be the same
approach taken by this court here and now. Further, it must be said that Encik Oommen
Koshy's suggestion would simply add to the burden already suffered by the aggrieved
customer in terms of time and expenses, which this court should not condone,
particularly since the issue could be resolved at this proceeding.
[17] Thus far, there are a few decisions of the High Court that relate to the quantum of
plaintiff's claim in BBA contract. The first of such cases is, Affin Bank Bhd v. Zulkifli
Abdullah [2005] 3 MLRH 415; [2006] 3 MLJ 67; [2006] 1 CLJ 438. In that case it was
held that the bank cannot claim the full sale price of the property in the event of default
by the customer. The learned judge in that case allowed the balance due on the date of
judgment by computing the profit on a per day basis that is due to the bank until full
settlement. The court took an approach of determining the bank's profit per day and
allowing the same up till date of realisation. This case was later followed by Malayan
Banking Bhd v. Marilyn Ho Siok Lin [2006] 1 MLRH 644; [2006] 7 MLJ 249; [2006] 3
CLJ 796. The High Court in Malayan Banking Berhad did not allow the full sale price
to be the amount stipulated for an order for sale but instead follow Affin Bank's
approach. Further to that, the court ruled that it would not be equitable to allow the bank
to recover the full sale price as defined in the instrument when the tenure of the facility
was determined prematurely. In Malayan Banking Bhd v. Ya'kup Oje & Anor [2007] 2
MLRH 1; [2007] 6 MLJ 389; [2007] 5 CLJ 311, the High Court also did not allow the
v.
plaintiff to enforce payment of the full sale price stipulated in the application for order
for sale but instead ordered the bank to put up an affidavit to indicate the amount of
rebate to be granted before allowing an order for sale. This is because, His Lordship
Hamid Sultan Abu Backer JC (as he then was) was of the view that Shariah banks is not
a charitable institution and are entitled to earn profits out of their investment and when
there is default it should adjust its profits according to the facts and justice of the case as
required under the Sharia principles and practice.
[18] In all the above decisions, when a BBA contract is prematurely terminated upon
default by the borrower, the court did not allow the bank to enforce the payment of the
full sale price in a premature termination. The underlying principles which come to fore,
derived from these decisions is clear. The court does not enforce payment of the full
sale price but intervene on equitable grounds, albeit based on different approaches. I am
doing the same for the following reasons.
[19] In my view, if I were to grant an order for the full sale price in an order for sale
application, it will defeat the requirement of s 266(1) of the NLC. I am guided by the
decision of the Federal Court in Perwira Habib Bank Malaysia Bhd v. Lum Choon
Realty Sdn Bhd [2005] 2 MLRA 53; [2006] 5 MLJ 21; [2005] 4 CLJ 345; [1996] 3
AMR 3499. Section 266 NLC is designed out of concern to protect the chargor. As held
by the Federal court in that case it has the objective of protecting the chargor who is on
the brink of having his property sold at an auction to know exactly where he stands in
terms of the amount of repayment in order to give him the opportunity to redeem his
position under s 266 NLC. If I were to follow Encik Oommen Koshy's argument, it
would mean that when a customer wants to tender payment under s 266(1) NLC he will
have to fork and pay the bank the full sale price and then wait at the mercy of the bank
for a rebate. Even in a situation when the bank did not pay the full purchase price under
the PSA, the burden lies on him to tender the full sale price under the PSA. Thereafter,
he will be kept wondering if he is entitled to any rebate and how much (if any). If the
customer eventually receives a rebate but feels that it is insufficient, he will have come
to court for determination. Surely, that cannot be the intention of s 266. Regretfully, I
must say that in such a scenario, the protection intended by s 266 will be rendered
meaningless.
[20] The practice of the banks in deducting the unearned profit as ibrar is not ignoble. In
the same breath, it is inconceivable how stipulating the terms of the rebate will be
repugnant to Sharia. The latter however creates unnecessary anxiety in customers. For
that and other reason stated herein, I have, for the purpose of determining the quantum
of claim, taken an approach to enforce an implied term of Islamic banking practice in
the case before me. In this respect, I am guided by the Federal Court case of Sababumi
(Sandakan) Sdn Bhd v. Datuk Yap Pak Leong [1998] 1 MLRA 332; [1998] 3 MLJ 151;
[1998] 3 CLJ 503; [1998] 3 AMR 2160. In Sababumi Zakaria Yatim FCJ (as he then
was) stated in that case that the court may infer an implied term from evidence that the
parties to a contract must have intended to include it in the contract, though it has not
been expressly set out in the contract. Therefore when an Islamic bank practices
granting of rebate on a premature termination, it creates an implied term and legitimate
expectation on the part of the customer. Accordingly it is only proper that such
expectation and practice be read into the contract.
v.
[21] Learned counsel for the plaintiff also contended that the term "unearned profit" is
rather alien to Islamic banking contract as it is not in tandem with Sharia practice. I am
not so clear what is meant by that because from the practices of Islamic banks that I
have come across, the banks confirm that deduction of the unearned profit is a common
practice and "unearned profit" is an accepted term. Terminology per se cannot be made
a reason not to follow an approach that has well been received by the banking industry.
To my mind using the terminology ibrar with no interpretation or explanation is indeed
more alien to the bank's customers. Ibrar is merely an Arabic term which means a
rebate. The rebate to be granted is in fact based on the unearned profit of the bank. It is
for that reason that I am more comfortable using the term "unearned profit" as it is
capable of being commonly understood in the banking circle, as it is based on the
Amortisation table. It would also be easily explained and capable of being understood
by the customers as well. Besides, in my view using Arabic terminology per se does not
make any transaction a Sharia transaction.
[22] I must vehemently stress that the purpose of this proceeding is to deal with what
would be considered fair and equitable in the circumstances and to lay emphasis on
what would be the better and appropriate approach in dealing with the plaintiff's
quantum with particular reference to the manner of its determination while being
mindful of the parties' position. In doing so, the bank should not be allowed to enrich
itself with an amount which is not due while at the same time taking cognisance of the
customer's right to redeem his property. Therefore where the BBA contract is silent on
issue of rebate or the quantum of rebate, by implied term I hold that the bank must grant
a rebate and such rebate shall be the amount of unearned profit as practiced by Islamic
banks.
[23] That said, this issue in fact could have been easily resolved. The legal
documentations used by Islamic banks should have addressed the peculiarity of Islamic
banking transaction, instead of adopting a cut and pace approach of the conventional
banking documents. If the documents of the banks had in fact specified a formula of
rebate or ibrar, it will demystify the intricacies of a BBA transaction. It will be easily
understood by the customer who would then not be put in the dark as to what is ibrar
and what would be the amount of ibrar he should be receiving. In that way, the court
need not have to interfere with the terms of the agreement or to add implied terms as I
am now doing.
Stare Decisis
[24] Encik Oommen Koshy also contended that this court should enforce the full sale
price instead of adhering to the present practice for another reason. He argued that,
following the doctrine of stare decisis, this court is bound by the decision of the Court
of Appeal in Lim Kok Hoe which had given full acknowledgement of the right of the
bank to enforce payment of the full sale price under the PSA. The basis of his
contention is as follows. The Court of Appeal in Lim Kok Hoe referred to the cases of
Bank Islam Malaysia Berhad v. Adnan Omar [1994] 2 MLRH 63; [1994] 3 CLJ 735;
[1994] 3 AMR 2291, Dato' Hj Nik Mahmud Daud v. Bank Islam Malaysia Bhd [1995] 3
MLRH 667; [1996] 4 MLJ 295; [1998] 3 CLJ 605; [1998] 3 AMR 2760, and Bank
Kerjasama Rakyat Malaysia Bhd v. Emcee Corporation Sdn Bhd [2003] 1 MLRA 7;
v.
[2003] 2 MLJ 408; [2003] 1 CLJ 625; [2003] 2 AMR 177. All these cases are based on
BBA contracts which according to the learned counsel were upheld by the Superior
Court. In all of them the full sale price has been allowed.
[25] Before I deliberate on the issue of stare decisis, it would be useful to appraise
ourselves on the application of this doctrine. Stare decisis, according to Oxford
Dictionary of Law 5th edition literally means "to stand by things decided." This is the
maxim which underlay the basis of the doctrine of binding precedent. It is necessary to
abide by former precedent when the same points arise again in litigation. In other words,
it is to stick with what has been decided. It is axiomatic that the principle of stare
decisis operates on the basis that "like cases should be decided alike". The application
of this doctrine in England is found in Young v. Bristol Aeroplane Co Ltd [1944] 1 KB
718. In that case the Court of Appeal held that the House of Lord's decision binds the
Court of Appeal and that the court is bound by its own earlier decisions except for three
situations namely:
(i) the court is entitled to decide which of the two conflicting decisions of its own to
follow;
(ii) the court can refuse to follow a decision of its own which, though not expressly
overruled, cannot, in its opinion, stand with a decision of the House of Lords; and
(iii) the court is not bound to follow a decision of its own if it is satisfied that the
decision was given per incuriam.
Per incuriam refers to a judgment of a court which has been decided without
reference to a statutory provision or earlier relevant judgment. A judgment per
incuriam need not be followed as precedent. A lower court therefore, is free to
depart from an earlier judgment of a superior court where that earlier judgment was
decided per incuriam. However, ordinarily in the common law jurisdiction, the
ratio decidendi of a judgment must be followed and is said to be binding on the
court below.
[26] The same principle was also adopted by the courts in Malaysia. In Dalip Bhagwan
Singh v. PP [1997] 1 MLRA 653; [1998] 1 MLJ 1; [1997] 4 CLJ 645; [1997] 4 AMR
4029, the Federal Court referred to Young v. Bristol Aeroplane Co Ltd [1944] 1 KB 718
and held that the doctrine of stare decisis dictates that a court, other than the highest
court, is obliged generally to follow the decisions of the courts at a higher level or at the
same level. In Dato' Tan Heng Chew v. Tan Kim Hor & Another Appeal [2006] 1
MLRA 89; [2006] 2 MLJ 293; [2006] 1 CLJ 577 the Federal Court finds that this
doctrine has attained to status of immutability and judicial hierarchy, and must be
observed to avoid uncertainty in the law. In Lembaga Tatatertib Perkhidmatan Awam
Hospital Besar Pulau Pinang & Anor v. Utra Badi K Perumal [2001] 1 MLRA 145;
[2001] 2 MLJ 417; [2001] 2 CLJ 525; [2000] 2 AMR 2234 the Federal Court states that
it is necessary for each lower tier in the court structure to accept loyally the decision of
the higher tiers and chaotic consequences would follow should the lower tier fail in this
duty. In Hairul Hisham Salim v. Dato' Zainal Abidin Zin & Anor [2002] 3 MLRH 631;
[2003] 5 MLJ 567; [2003] 2 CLJ 712; [2003] 3 AMR 297, the court observes that, "the
principle of stare decisis encapsulates the doctrine that a ratio decidendi of a superior
v.
court must be followed and is binding on the court below". The ratio decidendi of a case
can be defined as the principle of law on which the court reaches its decision. It has to
be deduced from the facts and the reasons that the court gives for reaching its decision
as well as the decision itself.
[27] Coming back to the present case, the pertinent question to be asked is what then of
the Court of Appeal decision in Lim Kok Hoe that binds this court, bearing in mind that
under the doctrine of stare decisis that binding precedent is the ratio decidendi. It must
be noted at the outset that the decision of the Court of Appeal in Lim Kok Hoe revolves
around the issue of validity and enforceability of BBA contracts. Having deliberated on
the arguments of counsel, the Court of Appeal upheld the validity of BBA agreement as
enforceable contract. The reasons are stated in the judgment of His Lordship Mohd
Raus JCA (now FCJ) at p 23. Applying the doctrine of stare decisis to Lim Kok Hoe,
this court is bound to hold that a BBA contract is valid and enforceable agreement. In
fact, the Court of Appeal did not make any finding on the issue of quantum of claim.
The way I see it, it was not raised at the Court of Appeal and it is for that reason that the
cases are sent down for the quantum of claim to be determined.
[28] Encik Oommen Koshy in his submission contended that in Lim Kok Hoe the Court
of Appeal referred with approval, the earlier decisions in Bank Islam Malaysia Bhd v.
Adnan Omar [1994] 2 MLRH 63; [1994] 3 CLJ 735; [1994] 3 AMR 2291, Dato' Hj Nik
Mahmud Daud v. Bank Islam Malaysia Bhd [1995] 3 MLRH 667; [1996] 4 MLJ 295;
[1998] 3 CLJ 605; [1998] 3 AMR 2760, and Bank Kerjasama Rakyat Malaysia Bhd v.
Emcee Corporation Sdn Bhd [2003] 1 MLRA 7; [2003] 2 MLJ 408; [2003] 1 CLJ 625;
[2003] 2 AMR 177. According to him all these decisions involve the decisions of the
High Courts which were upheld by the superior court. The decisions ultimately,
according to him, tantamount to the superior court acknowledging the right to enforce
payment of full sale price in a BBA contracts.
[29] I cannot agree with that argument. This is because, if I were to apply the doctrine
of stare decisis, only a ratio decidendi of a superior court decision will bind the lower
tier. By merely citing all these decisions with approval it cannot be said that the Court
of Appeal adopts the decision of these cases in toto. It would be indeed necessary to
analyse what, the reference to all these cases entail.
[30] After a careful scrutiny of the cases I find that none of the decisions has established
the ratio decidendi suggested. In Bank Islam Malaysia Bhd v. Adnan Omar the bank
sought for an Order for Sale based on BBA contract for the full sale price of
RM583,000. The case particularly revolves on the issue of non-compliance of O 83 of
RHC. It was argued that, O 83 r 3(3)(c) requires a claim of interest which the bank
failed to specify and comply. The court held that there is no question of interest because
of Islamic nature of transaction and thus the failure to comply with O 83 is not fatal.
The finding of the High Court was accordingly upheld in an unreported decision of the
Supreme Court as mentioned in Lim Kok Hoe at p 39. Since there is no report on the
Supreme Court decision of this case, I do not have the benefit of reading the ground of
decision of the Supreme Court nor the grounds of appeal in the case. Thus, though the
effect of the decision of the Supreme Court decision in Adnan Omar, results in the sale
price being granted in full by the court, nevertheless it is not the ratio decidendi of that
v.
decision. In Datuk Hj Nik Mahmud Nik Daud v. Bank Islam Malaysia Berhad the Court
of Appeal enforces a BBA contract and held that the BBA contracts do not transgress
the Malay Reservations Enactment 1930 of Kelantan.
[31] In Bank Kerjasama Rakyat Malaysia Berhad v. Emcee Corporation Sdn Bhd
[2003] 1 MLRA 7; [2003] 2 MLJ 408; [2003] 1 CLJ 625; [2003] 2 AMR 177, the Court
of Appeal enforces a BBA contract. Abdul Hamid Mohammad JCA (as he then was) in
that case states that "though the facility given by the appellant to the respondent was an
Islamic banking facility. But that did not mean that the law applicable in this application
was different from the law applicable if the facility was given under conventional
banking". This remark cannot be taken literally. It cannot be taken to mean that the law
of contract which recognizes the sanctity of a contract and the right to enforce the
contract to its letter, as a ratio decidendi that the sale price is enforceable. Reading it
contextually, the observation is made by His Lordship in that case to show that the
Islamic banking contract is subject to the same law and legal system as any banking
contract. It is true that the Court of Appeal in Lim Kok Hoe acknowledges these cases
which ultimately resulted in granting and enforcing payment of the full sale price under
the PSA, however none of the cases had in the judgment treated it to be the ratio
decidendi of the decision.
[32] In fact to my mind, it is apparent from Lim Kok Hoe's decision that the reference
made by the Court of Appeal to all these cases is to reinforce its decision in upholding
the validity and enforceability of BBA contracts. This is clear at p 39 of the judgment
when the Court of Appeal states that "it is clear that the validity and enforceability of
BBA contract had been ruled by the Superior Courts". Hence applying the doctrine of
stare decisis it is binding on Court of Appeal in Lim Kok Hoe to follow the Superior
Court. I am not able to find any affirmation on the quantum to be enforced in a BBA
contract by the Superior Court. Thus, I am clear that there is no binding precedent by
the Superior Court for me to follow to enforce the sale price under the PSA at all costs.
There is not a slightest suggestion in Lim Kok Hoe that the issue of quantum has been
canvassed before the court by counsel. Furthermore, by the very fact that the Court of
Appeal sent the cases back to this court for determination of quantum, says it all.
[33] In conclusion, for the reasons adumbrated above, I hereby allow the plaintiff's
claim with costs, in the Writ of Summons Suit No 22A-263-2006 for the outstanding
sum of RM391,634.66 and in Suit No 22A-193-2006 for the sum of RM190,476.54.
These judgment sums are subjected to deduction of the unearned profit by the plaintiff
(if any) upon full realization.
[34] As for the originating summons, a new hearing date of 22 February 2010 is fixed
for the plaintiff in the Originating Summons No D4-22A-395-2005 in order for BIMB
to file supplemental affidavit to state the outstanding sum, after deducting the unearned
profit due to be deducted, on the date the order for sale is to be obtained. At the request
of BIMB, Originating Summons No D4-22A-399-2005 is hereby struck out.
TAB D
190 Bank Negara Malaysia v. Mohd. Ismail Ali Johor & Ors [1992] 1 MLRA
BANK NEGARA MALAYSIA

v.
MOHD. ISMAIL ALI JOHOR & ORS
Supreme Court, Kuala Lumpur

Mohd Azmi Borneo, Gunn Chit SCJJ, Mohd Jemuri Serjan CJ
[Civil Appeal No. 03-67 Of 1989]
27 January 1992
JUDGMENT
Mohd. Azmi SCJ:
This appeal concerned a claim by Bank Negara Malaysia for liquidated damages in
the sum of RM70,000 (Ringgit seventy thousand only) for breach of a scholarship
agreement entered into on 21 July 1980 between the bank and the scholar, the 1st
respondent with the 2nd and 3rd respondent as guarantors. In an application for
summary judgment under O. 14 Rules of the High Court 1980 , the Senior
Assistant Registrar was satisfied on affidavit evidence that there was no triable
issue and accordingly entered judgment against the three respondents on 24 August
1988. On an appeal to a Judge in chambers, the learned Judge set aside the order of
the SAR and issued a certificate of no further argument. On further appeal by the
bank, we restored the order of the SAR by a majority decision (Gunn Chit Tuan
SCJ dissenting).
At the conclusion of the appeal, we indicated that we would give our reasons and
we do so now.
From the scholarship agreement, there was no dispute that it was the scholar, the
1st defendant in the Court below who approached the bank for a grant of
scholarship to enable him to pursue a course of study in the University of Malaya
leading to the award of an Honours Degree in Law. The bank agreed to grant the
scholarship upon the terms and conditions contained in the agreement. One of
these conditions which formed the consideration for the grant of the scholarship
was contained in Clause l(c) of the agreement which provided:
1. The Scholar with the approval and consent of the Sureties, hereby agrees:
(a) ...
(b) ...
(c) that he will upon being required to do so by The Bank or any Ministry or
body (whether corporate or unincorporate that may be so determined by the
bank in a post consistent with the qualifications obtained by The Scholar to
which he may be appointed for a period of ten (10) years from the date of his
[1992] 1 MLRA Bank Negara Malaysia v. Mohd. Ismail Ali Johor & Ors 191
appointment upon the terms and conditions for the time being usually applicable to
such post and at a salary in accordance with the scales of salaries for the time being
in force relating thereto.
This was followed by Clause 3(e) in which the scholar agreed:

(e) in the event of The Scholar leaving the service of The Bank or the Ministry
or body (whether corporate or unincorporate) that The Scholar may be
required by The Bank to serve before fulfilling his obligation under this
agreement to serve The Bank or the Ministry or body (whether corporate or
unincorporate) for a period of ten (10) years The Scholar and The Sureties
shall be jointly and severally liable for themselves, their heirs, executors,
administrators and assigns to pay to The Bank on demand by way of
liquidated damages the sum of ringgit Seventy Thousand Only (RM70,000).
In support of the application for summary judgment Encik Nordin Haji Nasir, the
Personnel Manager of Bank Negara in his affidavit sworn on 18 January 1988
affirmed inter alia that:
4. By the said agreement and in consideration of the plaintif granting him a
scholarship to pursue a course of study the 1st defendant inter alia undertook
to serve the plaintif for a period of ten years upon completion of the said
studies.
5. In breach of the said agreement the 1st defendant left the service of the
plaintif without completing the 10 years as agreed.
6. In response to demands from the plaintif and/or its solicitors the 1st
defendant, inter alia , admitted the plaintif's claims. There is now shown before
me a letter of admission and marked as Exhibit BNM2.
There were three letters written by the scholar which were relevant on the issue of
admission of liability. The first letter with the address of the scholar given as
"Jabatan Pengawalan Bank, Bank Negara Malaysia" was the resignation letter
dated 3 October 1984 as follows:
Tuan,
Perletakan Jawatan sebagai Pegawai Pentadbiran
Berhubung dengan perkara di atas, dengan ini saya memberi notis 1 (satu)
bulan, seperti yang dikehendaki dalam surat lantikan saya bertarikh 13 Julai
1984 (Bilangan: Est 200), meletakkan jawatan sebagai Pegawai Pentadbiran di
Bank Negara Malaysia.
2. Sebagai bekas pemegang biasiswa Bank Negara, saya akui bahawa saya
tertakluk dengan syarat-syarat perjanjian biasiswa yang ditandatangani oleh
saya dengan Bank Negara pada 21 Julai 1980 yang mana saya dikehendaki
membayar RM70,000 kepada pihak bank sekiranya saya meninggalkan bank
sebelum habis tempoh perkhidmatan 10 tahun.
3. Sekiranya saya memulakan perkhidmatan di pekerjaan lain, saya berjanji
untuk membayar balik jumlah RM70,000 ini secara ansuran dalam tempoh 15
tahun, menurut kadar yang berpatutan yang ditetapkan oleh Bank Negara.
4. Saya juga faham bahawa surat pemberian notis sebulan perletakan jawatan
ini dianggap berkuatkuasa selepas tempoh tersebut sekiranya saya tidak
mengemukakan surat menarik balik keputusan ini.
Sekian, terima kasih.
Yang benar,
t.t
(Mohd. Ismail Ali Johor)
The second letter was dated 14 December 1984, which appeared on p. 77 of the
appeal record, and in that letter the scholar referred to his letter of resignation
where he had requested for fifteen years within which to pay the bank the
RM70,000 liquidated damages. After being informed that the request had been
turned down, he wrote the second letter to the bank to allow him to pay within
eight years instead of fifteen years.
Exhibit BNM2 was the third letter written by the scholar dated 24 December 1985
and it contained an unequivocal admission of liability for breach of the scholarship
agreement. The scholar reiterated his request to pay the agreed liquidated damages
by instalments. The letter addressed to the solicitor of Bank Negara and copied to
the guarantors is set out below:
Dear Sir,
Re: Breach of Scholarship Agreement
The above mentioned matter and your demand letter dated 10 December 1985
refers.
I would like to inform you and your clients that I was just admitted to the
Malaysian Bar on 24 August 1985 and now I am only working as a legal
assistant in a legal firm. Hence, my income are fixed and it is really impossible
for me to raise the said sum of RM70,000 within fourteen (14) days or even
years in lump sum.
By virtue of the above and the state of financial difficulties I am at present, I
humbly request and shall appreciate if your clients could accept my proposal
to pay the sum of RM70,000 by way of monthly instalment to commence
immediately in the following manner:
1. RM400 x 12 = RM 4,800
2. RM500 x 12 = RM 6,000
3. RM600 x 24 = RM14,400
4. RM700 x 64 = RM44,800
Total = RM70,000
As I am very new to this practising world, I hope you and your clients would
appreciate that legal proceedings may certainly affect my prospects. Most
certainly should execution proceedings be levied for the lump sum it may halt
my career which will not benefit anyone.
While I was working with your clients, I found that there was no post for legal
officer and the post that was given to me was only as an administrative officer
and your clients day by day give me hope that they are going to set up a legal
department. However as I waited patiently there were not even a proposal to
set up such department and as such my knowledge accumulated would have
been of no avail. Due to this I decided to put to good use of my qualifications
and join the private sector as legal assistant.
Nevertheless I do not wish to evade liability but satisfy your clients claim
within my means.
I sincerely hope you can convey my proposal to your clients and urge them to
accept the same or if my proposal is not acceptable I will be grateful to receive
a reasonable counter-proposal from your end.
Thanking you.
Yours sincerely,
t.t
c.c: Guarantors
In his written judgment, the learned Judge delved in the principles to be applied
under an O. 14 application and referred to the case of Anglo-Italian Bank v. Wells 38
LT 201 for the proposition that "when the Judge is satisfied not only that there is
no defence but no fairly arguable point to be argued on behalf of the defendant, it is
his duty to give judgment for the plaintif". Apparently the learned Judge found
some difficulties in the application of the words "no fairly arguable point to be
argued", and he attempted to formulate some sort of definition for those words. He
then referred to the Privy Council case of Ooi Boon Leong & Ors. v. Citibank NA,
[1984] 1 MLRA 654; [1984] 1 MLJ 222 for the proposition that if the defence can
raise serious questions in law or fact to resist the plaintif's claim, summary
proceeding under O. 14 is not deemed appropriate. According to the learned Judge
it has been said that even though the defendants may not be able to pin-point any
precise "issue or question in dispute which ought to be tried", but nevertheless if it

is apparent to the Court that for some other reasons there ought to be trial,
judgment should not be given under O. 14. It seemed to us that this last statement
might have been drawn from the judgment in Alloy Automotive Sdn. Bhd v.
Perusahaan Ironfield Sdn. Bhd.[1985] 1 MLRA 309; [1986] 1 MLJ 382; [1986] CLJ (Rep)
45 where Lee Hun Hoe CJ in dealing with summary jurisdiction conferred by O.
81, RHC had this to say at p. 57:
A defendant ought not to be shut out from defending unless it is very clear
that he has no case in the action. A complete defence need not be shown. The
defence set up need only show that there is a triable issue or question or that
for some reason there ought to be a trial.
The learned Judge also referred to the statement of Bowen LJ in Blaiberg v. Abrams ,
[1977] LTJ 255 for the proposition that although the Court was not bound to
require documentary evidence from the plaintif, however, if he elected to produce
one in an affidavit to support his application or in an affidavit in reply, then the
Court was bound to look at all the circumstances before deciding whether the
defence set up is a bona fide defence.
In our view, basic to the application of all those legal propositions, is the
requirement under O. 14 for the Court to be satisfied on affidavit evidence that the
defence not only has raised an issue but also that the said issue is triable. The
determination of whether an issue is or is not triable must necessarily depend on
the law arising from each case as disclosed in the affidavit evidence before the
Court. On the treatment of conflict of evidence on affidavits, Lord Diplock
speaking for the Privy Council in Eng Mee Yong & Ors. v. V.Letchumanan [1979] 1
MLRA 143 had this to say at p. 217:
Although in the normal way it is not appropriate for a Judge to attempt to
resolve conflicts of evidence on affidavit, this does not mean that he is bound
to accept uncritically, as raising a dispute of fact which calls for further
investigation, every statement on an affidavit however equivocal, lacking in
precision, inconsistent with undisputed contemporary documents or other
statements by the same deponent, or inherently improbable in itself it may be.
Although Lord Diplock was dealing with an application for removal of caveat in
that particular case, we are of the view that the above principle of law is relevant
and applicable in all cases where a Judge has to decide a case or matter on affidavit
evidence.
Under an O. 14 application, the duty of a Judge does not end as soon as a fact is
asserted by one party, and denied or disputed by the other on affidavit. Where such
assertion, denial or dispute is equivocal, or lacking in precision or is inconsistent
with undisputed contemporary documents or other statements by the same
deponent or is inherently improbable in itself, then the Judge has a duty to reject
such assertion or denial, thereby rendering the issue as not triable. In our opinion,
unless this principle is adhered to, a Judge is in no position to exercise his
discretion judicially under an O. 14 application. Thus, apart from identifying the
issues of fact or law, the Court must go one step further and determine whether
they are triable. This principle is sometimes expressed by the statement that a
complete defence need not be shown. The defence set up need only show that there
is a triable issue.
Where the issue raised is solely a question of law without reference to any facts or
where the facts are clear and undisputed, the Court should exercise its duty under
O. 14. If the legal point is understood and the Court is satisfied that it is
unarguable, the Court is not prevented from granting a summary judgment, merely
because "the question of law is at first blush of some complexity and therefore
takes a little longer to understand". (See Cow v. Casey [1949] AER 197; and
European Asian Bank AG v. Punjab & Sind Bank [1983] 2 AER 508 at 516).
The fundamental question in this appeal was whether the learned Judge had
applied the principles to which we had alluded, to the facts and circumstances of
the present case. The learned Judge identified the first issue to be the failure of the
appellant bank to appoint the scholar in a post consistent with his legal
qualification. In the memorandum of appeal, the appellant bank contended that
the learned Judge erred in law in regard to the scholar's defence that it was a
condition precedent under the scholarship agreement that the scholar should be
given a post consistent with the qualifications obtained by him and that the
appellant's alleged breach of it extinguished his obligations under the agreement.
Based on the scholar's letter of resignation dated 3 October 1984 and the other two
letters of admission of liability to pay RM70,000 damages, it was clear that his
present assertion on the issue of liability was absolutely inconsistent with the three
undisputed contemporary documents. His assertion that the post given to him was
inconsistent with his legal qualification was also equivocal and lacking in precision
having regard to the obvious fact that he knew or ought to know when he entered
into the scholarship agreement that at all material times the appellant was engaged
in the business of central banking and not the business of a legal firm. On
completion of his law studies, the scholar was attached to "the Bank Regulations
Department whose function was to administer all legislation relating to banks".
The scholar construed the post as merely administrative since the appellant had not
set up its own legal department. To him the post was inconsistent with his
qualification. The learned Counsel for the appellant argued that whether the post
was or was not consistent with his legal qualification was a subjective question. We
would say that being employed for only four months after graduation, it would be
presumptuous for any new law graduate to suggest that working in the Regulations
Department of Bank Negara Malaysia was completely out of place with his first
degree law qualification. Be that as it may, the complaint regarding unsuitability of
the post though mentioned in the third letter, was never raised as a basis for
extinguishing his liability in any of the three contemporaneous letters written by

the scholar. We therefore held the view that the learned Judge erred in law in
taking the assertion as a triable issue on affidavit evidence, having regard to the
unequivocal admission of liability under the scholarship agreement to pay the
appellant RM70,000 for breach of contract. Liability was admitted without
qualification, and only the mode of payment was in dispute.
The second issue identified by the learned Judge was said to be one of estoppel
which allegedly involved both questions of law and fact. The learned Judge
entertained the scholar's assertion that the appellant bank was estopped from
instituting the suit since it had in September 1986 agreed not to take any action
against him if he consented to serve as a legal officer in the Attorney-General's
chambers. Regretfully, we could not find any evidence to support such an
undertaking by the bank to relieve the scholar from liability under the scholarship
agreement, although the party to benefit from the contract may change, as
envisaged in Clause l (c) and (e). The alleged estoppel arose from a letter written by
the appellant bank dated 22 September 1984 to the Attorney-General and copied to
the scholar. The letter reads:
Tuan,
Permohonan Berkhidmat Dengan Jabatan Peguam Negara - Encik Mohd.
Ismail bin Ali Johor
Dengan hormat, saya merujuk kepada permohonan Encik Mohd. Ismail bin
Ali Johor (bekas kakitangan Bank Negara Malaysia) bertarikh 15 September
1986, dan dengan ini mengesahkan bahawa pihak Bank Negara Malaysia
bersetuju memindahkan perjanjian perkhidmatan beliau kepada Jabatan
Peguam Negara. Pemindahan ini tertakluk kepada Encik Mohd. Ismail
berkhidmat dengan Jabatan Peguam Negara selama tempoh kontrek beliau.
Sekian dimaklumkan.
Yang benar,
t.t.
(Sharifah Mariah Alfah)
Pengurus,
Bahagian Personel.
The learned Judge rightly reminded himself that this letter was sent in September
1986, that is, before the scholar put in his resignation letter of 3 October 1984. But
what his Lordship had apparently failed to appreciate was that if the scholar had
been successful in his application for a post in the Attorney-General's Department,
there would have been a novation or assignment of the scholarship agreement, and
the scholar would then have been obliged to work in the Attorney-General's
Department for the balance of the ten years. However, it was an undisputed fact
that the scholar's application was rejected by the relevant Service Commission and
he never got the job in the Attorney-General's Department.
On the admitted facts we failed to see how there could be estoppel by conduct. The
contingency or condition precedent to which the appellant bank had agreed to
release the scholar's services in favour of the Attorney-General's Department had
not occurred notwithstanding the fact that the scholar only came to know officially
of the rejection on 6 October 1987, that is, about 3 years after he had put in his
resignation letter. If the affidavit evidence had been critically analysed, it would be
plain to conclude that the appellant bank would have no choice but to withdraw
the present suit filed on 13 December 1986, if the intended novation or assignment
of the scholarship agreement had gone through. On the basis of the bank's letter
dated 22 September 1984, for any novation or assignment of right to be effective,
the scholar must first be employed by the Attorney-General's Department. But
unfortunately for the scholar, this did not materialise. On the facts and
circumstances of this case, we were of the opinion that the issue of estoppel ought
to have been rejected having regard to the facts and circumstances of the case. The
learned Judge ought to have resolved the assertion on estoppel, based on the
uncomplicated facts and the law, without sending it for trial. For similar reasons
we were also not impressed with the new argument on waiver by the learned
Counsel of the respondents. What the learned Counsel termed as waiver was in
actual fact a contingency agreement on novation or assignment of right, and for
reasons already stated, the scholar would not possibly bring himself within either s.
63 of the Contracts Act (see Government of Ma1aysia v. Adnan bin Awang & Ors.
[1980] 1 MLRH 355; [1977] 2 MLJ 1 or the common law principle as enunciated in
Payana Reena Saminathan & Anor. v. Pana Lana Palaniappa [1914] AC 618 at 622.
There was obviously no triable issue either on estoppel or waiver.
It is unfortunate that the issue of estoppel which in our view was a red herring, had
clouded his Lordship's decision on the importance of the three letters which
separately and cumulatively contained a clear an admission of liability by the
scholar to pay the appellant bank RM70,000 as liquidated damages for breach of
the scholarship agreement. His Lordship was of the opinion that even assuming
that any of the letters to be admission of liability, it would still be debateable
whether the appellant bank was not precluded from relying on the admission by
reason of the alleged estoppel by subsequent conduct. As a matter of law we must
disagree, having regard to the clear absence of triable issue on estoppel.
In our opinion, the learned Judge had erred in law in not exercising his discretion
judicially under O. 14 by accepting uncritically the assertions of the scholar made
on behalf of all the respondents, although they were equivocal, lacking in precision
and as well as inconsistent with undisputed contemporary documents. In the event,
this Court was entitled to hear full arguments on the legal points and exercised its
power to grant summary judgment under O. 14 to the appellant instead of sending
it back to the High Court.
We had therefore allowed this appeal by setting aside the order of the High Court
and restoring the original order of the Senior Assistant Registrar. At our request,
learned Counsel for the appellant agreed to advise his client to allow the
respondents to pay the judgment sum by instalments to alleviate his financial
difficulties in meeting his liabilities under the scholarship agreement. We also
ordered that each party to pay its costs in this appeal.
Gunn Chit Tuan SCJ (Dissenting):
Bank Negara Malaysia ( hereinafter referred to as "the appellant") had instituted an
action against one Mohd. Ismail bin Ali Johor and two others (hereinafter referred
to as "the respondents"). In a statement of claim dated 13 December 1986, it was
alleged that by an agreement in writing dated 21 July 1980, in consideration of the
appellant granting the said Mohd. Ismail bin Ali Johor a scholarship to pursue a
course of study in the University of Malaya leading to the award of an Honours
Degree in Law, the first respondent undertook to serve the appellant for a period of
ten years upon completion of his studies, failing which he would pay the appellant
liquidated damages of RM70,000. It was also alleged that the first respondent,
having commenced serving the appellant on 1 June 1984, left on 3 November
1984, in breach of the said agreement. The other two respondents were sued in
their capacity as guarantors for the due performance of the said agreement.
In a joint statement of defence, the respondents claimed that the appellant had
breached a condition of the agreement by failing to provide the first respondent
with a post consistent with the qualification obtained by him and that the
obligation of the first respondent to serve the appellant under the said agreement
was extinguished. It was also averred that in any event the sum of RM70,000 was a
penalty claim which was time barred as the action was filed after the expiry of one
year from the date of the breach. In the further alternative, it was averred that the
appellant had waived its right under the agreement as it had entered into a new
agreement with the respondents whereby it agreed not to claim the said sum of
RM70,000 in the event that the first respondent was prepared to work in the
Attorney-General's Chambers. The first respondent accepted that offer when he
applied to the Attorney-General's Chambers for a post on 15 September 1984, and
attended several interviews but was not successful when he received a letter dated 6
October 1987, from the Attorney-General's Chambers. It was contended that at
any rate the appellant was estopped from claiming against the respondents.
On 18 January 1988, the appellant applied under O. 14 of the Rules of the High
Court 1980 , for summary judgment and not under O. 27 of the said Rules for
judgment on admission.In an affidavit in support affirmed by the Personnel
Manager of the appellant, it was asserted that in response to demands from the
appellant, the first respondent admitted the appellant's claim and a letter written by
the first respondent dated 24 December 1985 (p. 59 of the appeal records) was
annexed to the said affidavit to show the extent of the admission. The first
respondent filed an affidavit in reply and produced some contemporaneous letters
to support the claims made by him in the joint statement of defence. The second
respondent also filed an affidavit to oppose the appellant's application. In addition
to adopting the points raised by the first respondent, the second respondent also
stated that the appellant had varied the agreement by increasing the scholarship
grants without the knowledge and consent of both guarantors who were therefore
discharged from their obligations.
In answer to the first respondent's claims, the appellant filed another affidavit
exhibiting a letter written by the first respondent on 14 December 1984 (p. 77 of the
appeal records), which the appellant claimed amounted to an admission on the
part of the first respondent regarding his breach of the agreement and an offer
made to pay the sum of RM70,000 by monthly instalments. Lim Beng Choon J,
who heard this application in the High Court at Kuala Lumpur, cited Jessel MR in
Anglo-Italian Bank v. Wells [1878] 39 LT 197 that "when the Judge is satisfied not
only that there is no defence but no fairly arguable point to be argued on behalf of
the defendant it is his duty to give judgment for the plaintif." The learned Judge
however stressed that the important words were "no fairly arguable point to be
argued", and stated, after referring to the Privy Council case of Ooi Boon Leong &
Ors. v. Citibank NA [1984] 1 MLRA 654; [1984] 1 MLJ 222 that if the defence can
raise serious questions on law or fact to resist the plaintif's claim, summary
proceedings under O. 14 were not appropriate. His Lordship also pointed out that
even if a defendant may not be able to pin-point any precise issue or question in
dispute which ought to be tried but nevertheless if it is apparent to the Court that
there ought for some other reason to be a trial on that claim, judgment should not
be given under O. 14. Lastly the learned Judge referred to Blaiberg v. Abrams
[1910] 77 LTJ 255, in which Bowen LJ has stated that "in deciding whether the
defence set up is a real defence or not, all the circumstances must be looked at".
Applying the principles enunciated in the cases referred to by him, the learned
Judge noted that the first issue raised by the defence was that since the appellant
had failed to appoint the first respondent to a post which was consistent with his
legal qualifications, it had breached the following terms of the agreement:
(i) 1 (a) xxx
(b) xxx
(c) that he will upon being required to do so by The Bank serve The Bank or
any Ministry or body (whether corporate or incorporate) that may be so
determined by The Bank in a post consistent with the qualifications obtained
by The scholar to which he may be appointed for a period of Ten (10) years
from the date of his appointment upon the terms and conditions for the time
being usually applicable to such post and at a salary in accordance with the
scales of salaries for the time being in force relating thereto.;
(ii) 3 (a) xxx

(b) xxx
(c) xxx
(d) that upon his being appointed in accordance with Clause 1(c) above, to a
post consistent with the qualifications obtained by him, The scholar
undertakes upon being so required to do by The Bank to provide a fidelity
bond or other appropriate guarantee for his continued service with The Bank
or the Ministry or body (whether corporate or incorporate) that The Scholar
may be required by The Bank to serve for a period of Ten (10) years such bond
or guarantee providing inter alia against:
(i) his resignation or leaving the service in breach with this agreement;
(ii) or his dismissal for misconduct including negligence or indifference to
his studies under this agreement; or
(iii) his refusal to serve in any post, appropriate to his qualifications and
the exigencies of the service, to which he is appointed.
The first respondent also produced the letter written by him to the
Attorney-General dated 15 September, 1985, wherein it was stated `inter alia ' that
"Sebelum saya berkhidmat dengan firma guaman tersebut saya pernah berkhidmat
sebagai Pegawai Pentadbiran selama Empat (4) bulan di Bank Negara Malaysia,
Kuala Lumpur." The learned Judge also observed that in a letter written by the first
respondent on 24 December 1985, it is stated that:
While I was working with your clients, I found that there was no post for legal
officer and the post that was given to me was only as an administrative officer
and your clients day by day give me hope that they are going to set up a legal
department. However, as I waited patiently there were not even a proposal to
set up such department and as such my knowledge accumulated would have
been of no avail. Due to this I decided to put to good use of my qualifications
and join the private sector as legal assistant.
That first issue could only, in the learned Judge's opinion, be resolved at a trial
proper.
The second issue involved the first respondent's claim that the appellant was
estopped from instituting the suit as it had in September 1984 agreed not to take
any action against the first respondent if he consented to serve as a legal officer in
the Jabatan Peguam Negara. In support of his claim, the first respondent exhibited
a letter written by the appellant dated 22 September, 1984, to the Attorney-General
and copied to the first respondent (p. 66 of the appeal records), in which it was
stated as follows:
Tuan,
Permohonan Berkhidmat Dengan Jabatan Peguam Negara
Encik Mohd. Ismail Bin Ali Johor
Dengan hormat, saya merujuk kepada permohonan Encik Mohd. Ismail bin
Ali Johor (bekas kakitangan Bank Negara Malaysia) bertarikh 15 September
1984, dan dengan ini mengesahkan bahawa pihak Bank Negara Malaysia
bersetuju memindahkan perjanjian perkhidmatan beliau kepada Jabatan
Peguam Negara. Pemindahan ini tertakluk kepada Encik Mohd. Ismail
berkhidmat dengan Jabatan Peguam Negara selama tempoh kontrek beliau.
Sekian dimaklumkan.
Yang benar,
(Sharifah Mariah Alfah)
Pengurus,
Bahagian Personel.
The learned Judge considered that as the appellant's cause of action was based on
the breach of the agreement when the first respondent left its service on 3
November 1984, the above letter might support his allegation of estoppel as the
first respondent relying on that representation had applied for a post of legal officer
in the Jabatan Peguam Negara. His Lordship again considered that that was a
triable issue because it was necessary to find out why the appellant wrote the said
letter and what was the legal effect of the representation made in it. For the reasons
stated in his grounds of judgment, the learned Judge was satisfied that the
appellant was not entitled to obtain summary judgment under O. 14 and therefore
allowed the appeal of the first respondent against the order of the Senior Assistant
Registrar in granting judgment to the appellant.
I would with respect agree that the first issue which ought to be tried is whether the
appellant, as alleged by the respondents in their joint statement of defence, had
breached a condition of the said agreement by failing to provide the first
respondent with a post consistent with the qualifications obtained by him and that
the obligation of the first respondent to serve the appellant under the said
agreement has therefore been extinguished. Then there is also the issue as to
whether the action of the appellant was time-barred when it was instituted against
the respondents. Again I would agree that yet another issue to be tried is whether
the appellant had waived its right under the said agreement as it had, as alleged by
the respondents, entered into a new agreement with the first respondent and was
therefore estopped from claiming against the respondents. All these issues ought,
as considered by the learned Judge with whom I agreed, to be tried and decided at
a proper trial.
The scope of O. 14 proceedings meant for cases which are virtually uncontested or
uncontestable is now determined by the Rules of the High Court 1980. Generally
where a defendant shows that he has a fair case for defence, or reasonable grounds
for setting up a defence, or even a fair probability that he has a bona fide defence, he
ought to have leave to defend. Order 14 is not intended to shut out a defendant.
The jurisdiction should only be exercised in very clear cases. ( Malayan Insurance
(M) Sdn. Bhd. v. Asia Hotel Sdn. Bhd. [1986] 1 MLRA 269; [1987] 2 MLJ 183; [1987]
CLJ (Rep) 182 , Gunung Bayu Sdn. Bhd. v. Syarikat Pembinaan Perlis Sdn. Bhd. [1987] 1
MLRA 20; [1987] 2 MLJ 332; [1987] CLJ (Rep) 120 ). It was held in the well-known
House of Lords' case of Jacobs v. Booth's Distillery Co. [1901] 85 LT 262 that a
complete defence need not be shown. The defence need only show that there is a
triable issue or question or that for some other reason there ought to be a trial, and
leave to defend ought to be given. In fact even though the defence is not clearly
established, but only reasonable probability of there being a real defence, leave to
defend should be given (Manager v. Cash [1889] 5 TLR 271).
The words used in the present O. 14 r. 3(1) that the defendant should have leave to
defend if he satisfies the Court "that there ought for some other reason to be a trial"
of the claim are wider in their scope than the former O. 14 r. 1 which provided that
the defendant should have leave to defend if he "shall disclose such facts as may be
deemed sufficient to entitle him to defend the action generally." It was stated by
Megarry J in Miles v. Bulls [1969] 1 QB 258; [1968] 3 AER 632 that it sometimes
happens that the defendant may not be able to pin-point any precise "issue or
question in dispute which ought to be tried," nevertheless it is apparent that for
some other reason there ought to be a trial, for example where a question of fact as
to whether the plaintif has fulfilled his part of the contract (Ford v. Harvey [1893] 9
TLR 328) or against a surety where there is a reasonable doubt of his liability
(Lloyds Banking Co v. Ogle [1876] 1 Ex. D 263).
Moreover when an O. 14 appeal has been heard by a lower Court, the appellate
Court would not interfere with the decision unless special circumstances are shown
(see United Malayan Banking Corp. Ltd. v. Ipoh Mining Co. (M) Ltd.[1964] MLJ 69).
In that case, the former Federal Court followed its decision in Ho Chooi Soon V. The
Indian Overseas Bank Ltd. [1960] 1 MLRA 253; [1960] 1 MLJ 286and the old English
case of Wing v. Thurlow 10 TLR 151. In the present case, I was unable to detect any
special circumstances and I was of the view that Lim Beng Choon J was right in
holding that the issues referred to above ought to be tried and that the appellant
was not entitled to obtain summary judgment under O. 14.
Further, reference might be made to the decision of this Court in Alloy Automotive
Sdn. Bhd. v. Perusahaan Ironfield Sdn. Bhd. [1985] 1 MLRA 309; [1986] 1 MLJ 382;
[1986] CLJ (Rep) 45 where in a judgment delivered by Lee Hun Hoe CJ Borneo (as
he then was) it was held inter alia that summary jurisdiction conferred by O. 81 ,
which provides a procedure similar to O. 14 , must be used with great care. In that
case, the defence had alleged not only variation but also estoppel and in view of
that it could not be said that liability for breach of contract had been clearly
established and that unconditional leave to defend should be given.

This was not an uncontested case and in my view it was not uncontestable. The
respondents have reasonable grounds for setting up a bona fide defence although it
might be argued that the defence is not likely to succeed. However, the respondents
should not be shut out from laying their defence and there are reasons why there
ought to be a trial. In all the circumstances of this case, I would therefore dismiss
the appeal with costs.
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TAB E
Cempaka Finance Bhd
[2005] 2 MLRA v. Ho Lai Ying & Anor i
CEMPAKA FINANCE BHD

v.
HO LAI YING & ANOR
[2005] 2 MLRA 736
Federal Court, Putrajaya

Steve LK Shim CJSS, Abdul Hamid Mohamad, Pajan Singh Gill FCJJ
[Civil Appeal No: 03-1-2004 (W)]
7 March 2005
Civil Procedure: Summary judgment — Certificate of indebtedness conclusive —

Burden of proof of debt — Whether there was any manifest error on the certificate
Contract: Claim for moneys lent — Certificate of indebtedness — Whether there was
any manifest error on the certificate — Whether certificate of indebtedness final and
conclusive evidence of amount owed in the absence of manifest error on certificate
The appellant had agreed to grant the 1st respondent a fixed loan of RM1.5
million under a loan agreement. The guarantee agreement was signed by the
2nd respondent. When the 1st respondent defaulted, the appellant filed a suit
against both respondents in the High Court. In the following year, the appellant
filed a summons in chambers for a summary judgment, under O 14 of the Rules
of the High Court 1980 (‘RHC’) which was granted by the senior assistant
registrar (‘SAR’). The appellant had relied on two specific clauses in the loan
and guarantee agreements to establish the conclusiveness of the certificate
of indebtedness. The SAR granted an order in terms of the application. The
respondents then appealed to the judge in chambers who upheld the registrar’s
decision. The respondents further appealed to the Court of Appeal where the
decision of the High Court was reversed. Subsequently, this court granted leave
to hear the appeal upon two questions: (i) whether a certificate of indebtedness
issued in accordance with the express provisions of the contract which provide
that the certificate was final and conclusive of the matters stated therein, was
final and conclusive evidence of the amount in the absence of any manifest
error on the certificate; (ii) whether apart from producing a certificate of
indebtedness, the appellant had a further obligation to produce statements of
account to prove the debt in an application for summary judgment.
Held: (allowing the appeal with costs)

Per Steve Shim CJ (Sabah & Sarawak)
(1) The appellant had the burden to prove its case in an application under
O 14 of the RHC by establishing the following conditions: (i) that the
respondents had entered appearance; (ii) that the statement of claim must
have been served on the respondents; (iii) that the affidavit in support must
comply with O 14 r 2 of the RHC in that it must verify the facts on which
the claim was based on and must state the deponent’s belief that there was
Cempaka Finance Bhd
ii v. Ho Lai Ying & Anor [2005] 2 MLRA
defence to the claim. When those conditions were fulfilled, the burden
would be shifted to the respondents to raise issues to be tried. The law on
this is trite. The Court of Appeal had misapplied the relevant principles
concerning the application for summary judgment under the O 14 of the
RHC by reversing the burden of proof. (paras 4-5)
(2) The Court of Appeal’s position in regard to the conclusiveness of the

certificate of indebtedness was contradictory to principles that had established
the conclusive nature and extent of a certificate of indebtedness. A certificate of
indebtedness operates in the field of adjectival law which excuses the plaintiff/
appellant from adducing proof of debt. Such a certificate shifts the burden onto
the defendant/respondent to disprove the amount claimed. (para 6)
(3) The certificate of indebtedness that was issued in accordance to the specific
clauses under the agreements was lucid enough. There was nothing to indicate
or suggest any manifest error on the face of the said certificate nor was any
fraud shown. Based on the circumstances and authorities cited, the answer to
the first question must be in the affirmative whereas the second question had to
be answered in the negative. (para 7)

Bank of Commerce (M) Bhd v. Tan Boon Soon & Anor [1993] 5 MLRH 79; [1995] 1
CLJ 69; [1995] 1 AMR 156 (refd)
Chen Heng Ping & Ors v. Intradagang Merchant Bankers (M) Bhd [1995] 1 MLRA
606; [1995] 2 MLJ 363; [1995] 3 CLJ 690 (refd)
Citibank NA v. Ooi Boon Leong & Ors [1980] 1 MLRA 221; [1981] 1 MLJ 282 (refd)
D & C Nomura Merchant Bankers Bhd v. Gunung Kuari Sdn Bhd [1989] 2 MLRH
391; [1990] 1 CLJ (Rep) 752 (refd)
Dobbs v. National Bank of Australiasia [1953] 53 CLR 643 (refd)
National Company for Foreign Trade v. Kayu Raya Sdn Bhd [1984] 1 MLRA 190;
[1984] 2 MLJ 300; [1984] 1 CLJ (Rep) 283 (refd)
Supreme Leasing Sdn Bhd v. Dior Enterprises & Ors [1989] 3 MLRH 718; [1990] 2
MLJ 36 (refd)
Legislation referred to:

Rules of the High Court 1980, O 14
Counsel:
For the appellant: K Anantham (together with Chee Yoke Yung & Nadrah Mohamed);
M/s Shatar Tan & Chee
For the respondent: SL Tan; M/s SL Tan & Assoc
Cempaka Finance Bhd
[2005] 2 MLRA v. Ho Lai Ying & Anor iii
*This page is intentionally left blank

Cempaka Finance Bhd
736 v. Ho Lai Ying & Anor [2005] 2 MLRA
JUDGMENT
Steve Shim CJ (Sabah & Sarawak):
[1] Leave to prosecute this appeal was granted by this court on 23 March 2004
upon the following two questions:-
1. Whether a certificate of indebtedness issued in accordance with the

express provisions of the contract which provide that the certificate is
final and conclusive of the matters stated therein is final and conclusive
evidence of the amount in the absence of any manifest error on the
certificate;
2. Whether apart from producing a certificate of indebtedness pursuant

of the contract (sic) which provided that the certificate was final and
conclusive of the matters stated therein, the appellant had a further
obligation to produce statements of account to prove the debt in an
application for summary judgment.
[2] As a preliminary note, we should mention that by a vesting order dated

22 December 2000, the business of Cempaka Finance Bhd (the appellant
herein) was taken over by United Finance Bhd which in turn, on 25 June
2001, changed its name to Southern Finance Bhd Under a loan agreement
dated 17 July 1996, the appellant agreed to grant the 1st respondent a
fixed loan of RM1.5 million. In consideration, the 2nd respondent signed
a guarantee agreement on the same date. The 1st respondent defaulted. In
consequence, the appellant filed a suit against both respondents in the High
Court on 29 May 1998. Thereafter, on 19 April 1999, the appellant filed a
summons in chambers under O 14 Rules of the High Court 1980 for summary
judgment. The matter came before the senior assistant registrar who, on 17
August 1999, granted an order in terms of the application. The respondents
then appealed to the judge in chambers. The judge upheld the decision of the
senior assistant registrar. On further appeal by the respondents, the Court of
Appeal reversed the decision of the High Court.
[3] It seems clear that the central issue canvassed before the judge in chambers
relates to the questions now postulated for our consideration. The questions
concern specifically the certificate of indebtedness found in cl 27 of the loan
agreement and in cl 7.03 of the guarantee agreement. Now cl 27 stipulates:-
If and when the loans shall be withdrawn or revoked and/or the said
account or accounts whatsoever in respect thereof shall be closed,
a statement by the Director, General Manager, Manager, Assistant
Manager, Sub-Manager, Secretary, Accountant or any other duly
authorized officer or agent of the Lender for the time being as to the
amount of such balance and the money and liabilities for the time
being incurred or due to the Lender by or from the Borrower(s) shall
be accepted by the Borrower(s) and/ or any person or persons deriving
Cempaka Finance Bhd
[2005] 2 MLRA v. Ho Lai Ying & Anor 737
title from the Borrower(s) and/ or the successors in title and assigns
of the Borrower(s) as final and conclusive evidence for all purposes
whatsoever including for purposes of legal proceedings.
And cl 7.03 stipulates:-
It is hereby agreed that any admission or acknowledgment in writing by

the Borrower(s) or any authorized person on behalf of the Borrower(s)
or a statement of account in writing showing the indebtedness of the
Borrower(s) in relation to the subject matter of this Agreement duly
certified by an authorized officer of the Lender shall be binding and
conclusive against the Guarantor(s) and his heirs, executors, personal
representatives and successors.
[4] In this connection, the appellant had relied on the two clauses to establish
the conclusiveness of the certificate of indebtedness in support of its application
for summary judgment under O 14 Rules of the High Court 1980. Therein,
the High Court held that the certificate of indebtedness, exh P3, certified by
a duly authorised officer of the appellant was binding as to quantum and
liability relying, it seems, on the case of Chen Heng Ping & Ors v. Intradagang
Merchant Bankers (M) Bhd [1995] 1 MLRA 606; [1995] 2 MLJ 363; [1995] 3
CLJ 690. It further held that there was no manifest error on the face of the
said certificate nor was there any fraud. As such, there were no triable issues
involved. The application was therefore granted in terms. However, on appeal
by the respondents, the Court of Appeal took a different stand. That stand
has been attacked in this Court by the appellant on two fronts. The first is
that the Court of Appeal has erred in law in not giving effect to the principles
relating to summary judgment applications set out in National Company for
Foreign Trade v. Kayu Raya Sdn Bhd [1984] 1 MLRA 190; [1984] 2 MLJ 300;
[1984] 1 CLJ (Rep) 283 and requiring further proof from the appellant of the
respondents' indebtedness. This is obviously directed at the following passage
of its judgment:-
Thus, a plaintiff would be entitled to obtain summary judgment

without trial if he can prove his case clearly which to us would mean
that the plaintiff has to establish the existence of certain facts and must
prove that those facts exist before the court can determine the issue as
to whether the defendant has a defence or has raised an issue against
the claim which ought to be tried.
Quite clearly, the Court of Appeal has put the burden on the plaintiff to
prove his case in an O 14 application. With respect, that cannot be the
correct proposition of law. In an application under O 14, the burden is on the
plaintiff to establish the following conditions: that the defendant must have
entered appearance; that the statement of claim must have been served on the
defendant; that the affidavit in support must comply with r 2 of O 14 in that it
must verify the facts on which the claim is based and must state the deponent's
belief that there is no defence to the claim. (See Supreme Leasing Sdn Bhd v. Dior
Cempaka Finance Bhd
Enterprises & Ors [1989] 3 MLRH 718; [1990] 2 MLJ 36.) Once those conditions
are fulfilled, the burden then shifts to the defendant to raise triable issues. The
law on this is trite. In National Company for Foreign Trade v. Kayu Raya Sdn Bhd
[1984] 1 MLRA 190; [1984] 2 MLJ 300; [1984] 1 CLJ (Rep) 283, the Federal
Court has stated thus:-
We think it appropriate to remind ourselves once again that in every

application under O 14, the first considerations are (a) whether the
case comes within the Order and (b) whether the plaintiff has satisfied
the preliminary requirements for proceeding under O 14. For the
purposes of an application under O 14, the preliminary requirements
are:-
(i) the defendant must have entered an appearance;
(ii) the statement of claim must have been served on the defendant;
and
(iii) the affidavit in support of the application must comply with the
requirements of r 2 of the O 14.
If the plaintiff fails to satisfy either of these considerations, the

summons may be dismissed. If however, these considerations are
satisfied, the plaintiff will have established a prima facie case and he
becomes entitled to judgment. This burden then shifts to the defendant
to satisfy the Court why judgment should not be given against him."
The proposition of law enunciated by the Federal Court in National Company

(supra) has been applied in numerous cases. We accept the correctness of that
proposition. In reversing the burden of proof as the Court of Appeal in the
instant case has done, it has, in our respectful view, misapplied the relevant
principles relating to an application for summary judgment under O 14 Rules
of the High Court 1980.
[5] We now turn to the second broadside launched by the appellant. Here, the
appellant contends that the Court of Appeal has erred in law in not giving effect
to cl 27 of the loan agreement entered into between the appellant and the 1st
respondent and cl 7.03 of the guarantee agreement between the appellant and
the 2nd respondent, described as the conclusive evidence clauses. This relates
to the following passage in the judgment of the Court of Appeal which states:-
The sole question before us is whether the respondent had sufficiently

established their case against the appellants, namely, that the
appellants as at 29th November 1997 owed the respondent the said
sum of RM1,554,019.74. We do not think so. Exhibit P3 would only
be conclusive evidence if it had been illustrated in the respondent's
affidavit in support of their application for summary judgment as to
how the sum mentioned therein was arrived at. It is our view that
the mere production of exhibit P.3 was insufficient to show that
Cempaka Finance Bhd
the respondent had clearly established that the said sum was due
and owing. The court cannot just assume that the amount shown
therein is correct. No documentary evidence such as in the form of
monthly statement of accounts and the amount of interest imposed
on the monies released were introduced by the respondent. Under the
circumstances, we cannot come to the conclusion that the respondent
had clearly proven their case.All the said documents showed is that the
said facility was granted to the first appellant with the second appellant
as the guarantor. What we were gravely concerned with is whether the
evidence introduced up to now is sufficient prima facie to establish the
respondent's case. The law on the burden of proof is governed by the
provisions found in Chapter VII of Part III of the Evidence Act, 1950.
In accordance with s 101 of the Act, the legal burden of establishing
that the said sum stated in exhibit P3 is owing from the appellants to
the respondent lie on the latter. The conclusiveness of exhibit P 3 is
binding only upon the parties. The court would still have to determine
whether sufficient evidence has been adduced to prove the quantum
and correctness of the amount claimed by the respondent.
The Court of Appeal thereafter cited in support the High Court case of Bank of
Commerce (M) Bhd v. Tan Boon Soon @ Tan Po Lo trading as Messrs Syarikat Soon
Tatt Trading & Anor [1993] 5 MLRH 79; [1995] 1 CLJ 69; [1995] 1 AMR 156.
[6] Although the case of Chen Heng Ping & Ors v. Intradagang Merchant Bankers
(M) Bhd [1995] 1 MLRA 606; [1995] 2 MLJ 363; [1995] 3 CLJ 690 (CA),
was relied on by the High Court in holding a certificate of indebtedness to be
binding unless manifest error on the face of it or fraud is shown, the Court of
Appeal in the instant case, seems to place no significance on this. Nor has it
considered the fact that in Chen Heng Ping the court was able to distinguish the
factual peculiarities in Bank of Commerce. It was a case where an error was
manifested on the face of the certificate of indebtedness because the guarantee
agreement had limited the guarantor's liability to RM140,000 whereas the suit
had claimed for RM259,000. Indeed, the Court of Appeal in Chen Heng Ping
cited with approval the observation expressed by VC George J in D & C Nomura
Merchant Bankers Bhd v. Gunung Kuari Sdn Bhd [1989] 2 MLRH 391; [1990] 1
CLJ (Rep) 752 when he said:-
it was agreed that a certificate of indebtedness by an authorised officer
of the plaintiff shall be binding and conclusive against the guarantors
of the amount payable by the 1st defendant.
In the instant case, there is such a certificate of indebtedness under the
hand of an authorised officer of the plaintiff bank. The judgment of
Shankar J in MIMB v. G & C Securities (unreported) and the judgment of
Bank Bumiputra (M) Bhd v. Doric Development Sdn Bhd [1987] 1 MLRH
408; [1988] 1 MLJ 462; [1998] 1 CLJ 361, 463 provided authority for
the proposition that such a certificate is indeed binding unless there is
manifest error.
Cempaka Finance Bhd
This observation appeared to has escaped the attention of the Court of Appeal
in the present case. In the result, the Court of Appeal took the position that the
conclusiveness of the certificate of indebtedness exh P3 was binding only upon
the parties and that the court would still have to determine whether sufficient
evidence had been adduced to prove quantum and the correctness of the
amount claimed. With respect, such a proposition goes against the entrenched
principles enunciated by Raja Azlan Shah CJ (Malaya) (as His Highness then
was) in Citibank NA v. Ooi Boon Leong & Ors [1980] 1 MLRA 221; [1981] 1 MLJ
282 when he said inter alia:-
We have often said in this court many a time that where the issues
are clear and the matter of substance can be decided once and for all
without going to trial there is no reason why the Assistant Registrar
or the judge in chambers, or, for that matter, this court shall not deal
with the whole matter under the RSC O 14 procedure. In the present
case, the guarantee contains a clause which enables the bank by
producing a certificate of indebtedness by its officer to dispense with
legal proof of the actual indebtedness of the respondents.It means that,
for the purpose of fixing liability of the respondents, the company's
indebtedness may be ascertained conclusively by a certificate.
The above dictum establishes firmly the conclusive nature and extent of a
certificate of indebtedness. A certificate of indebtedness operates in the field
of adjectival law. It excuses the plaintiff from adducing proof of debt. Such a
certificate shifts the burden onto the defendant to disprove the amount claimed.
[7] In the instant case, the relevant cls 27 and 7.03 of the loan agreement and
guarantee agreement respectively are sufficiently clear. A clause of this nature
has been described as a conclusive evidence clause. Such a clause has been
held to be binding and valid by courts in Australia and England. In Dobbs v.
National Bank of Australiasia [1953] 53 CLR 643, the Australian Court made the
following observation which we think is instructive:-
The bank could recover without the production of a certificate if,

by ordinary legal evidence, it proved the actual indebtedness of the
customer. But the (conclusive evidence) clause, if valid, enables the
bank by producing a certificate to dispense with such proof. It means
that for the purpose of fixing the liability of a surety, the customer's
indebtedness may be ascertained conclusively by a certificate.But
the manifest object of the clause was to provide a ready means of
establishing the existence and amount of the guaranteed debt and
avoiding an inquiry upon legal evidence into the debits going to make
up the indebtedness.
The certificate of indebtedness, exh P3, issued in accordance with cls 27 and
7.03 aforesaid, is lucid enough. There is nothing to indicate or suggest any
manifest error on the face of the said certificate nor is any fraud shown. In
the circumstances and given the authorities cited, we take the firm view that
Cempaka Finance Bhd
the answer to the first question must be in the affirmative whereas the second
question has to be answered in the negative. Having considered the questions
in the context of the established facts, it is appropriate, we think, to allow this
appeal with costs. Deposit to the appellant to account of taxed costs.
TAB 1
Guidelines on Ibra’ (Rebate) for
Sale-Based Financing
Last updated: 31 January 2013 (first issuance on 1 November 2011)

BNM/RH/GL 012-5 Islamic Banking and Takaful Guideline on Ibra’ (Rebate) for Sale-Based
Department Financing
Table of Contents
PART A OVERVIEW ....................................................................................................... 1
1. Background ........................................................................................................ 1

2. Purpose .............................................................................................................. 3
3. Applicability ........................................................................................................ 3
4. Legal provisions ................................................................................................. 4
5. Effective and Implementation Date .................................................................... 5
PART B POLICY REQUIREMENTS ............................................................................... 6
6. Principle Requirements ...................................................................................... 6

7. Commitment to Provide Ibra’.............................................................................. 7
8. Calculation of Ibra’ ............................................................................................. 8
9. Disclosure at the Point of Entering a Contract ................................................. 12
10. General and Administrative Policy ................................................................... 13
Appendices.......................................................................................................................... 15
Appendix I Illustration for fixed rate financing ........................................................... 15

Appendix II Illustration for variable rate financing ...................................................... 18
Appendix III Illustration of ibra’ in non-delivery/non-possession of asset.................... 21
BNM/RH/GL 012-5 Islamic Banking and Guideline on Ibra’ (Rebate) for Sale-Based Page
Takaful Department Financing 1/21
PART A OVERVIEW
1. Background
1.1 Ibra’ represents the ‘waiver on right of claim’ accorded by a person to

another person that has an obligation (zimmah) which is due to him. Ibra’ or
‘rebate’ refers to an act by a person relinquishing his rights to collect
payment due from another person. In the context of Islamic finance, an
Islamic financial institution (IFI) may grant ibra’ to its customers of a sale-
based financing (such as murabahah and bai’ bithaman ajil) who settled their
debt prior to the agreed settlement period as stipulated in the agreement
concluded by both parties.
1.2 In a sale-based financing contract, a customer is required to settle the

selling price (comprising the principal sum and profit margin),
regardless as to whether the contract is on deferred or spot basis. For
deferred payment financing, principally an IFI has the right to claim from the
customer the outstanding selling price that will also include the deferred
profit portion even in early settlement. Under this circumstance, IFI is
encouraged to grant ibra’ by forgoing the IFI’s right over the debt of the
remaining deferred profit portion to its customer in early settlement cases.
1.3 Granting of ibra’ by IFIs is an important consideration for the IFIs to remain
competitive with conventional financial institutions, as conventional financial
institutions allow customers to pay the principal and accrued interests up to
the date of early settlement only. Apart from the event where customers
approach the IFIs for early settlement, other circumstances tantamount to
settlement prior to maturity where ibra’ could also be granted include
settlement arising from a restructuring exercise, default cases and
termination of contracts.
1.4 Given that ibra’ is a discretionary consideration of the IFIs, the right to grant
ibra’ remains with the IFIs. However, it has been observed that while a
number of IFIs grant discretionary ibra’ and include such commitment in the
offer letter and legal documents of the financing, there are also IFIs that are
silent on the applicability of granting ibra’. The different practices among the
IFIs need to be harmonised to avoid confusion to the public and provide
greater transparency and clarity.
Shariah Advisory Council Resolutions
1.5 The Shariah Advisory Council of Bank Negara Malaysia (SAC) has issued
several resolutions on ibra’ from 2000 to 2010 1 .
1.6 In the 13th Meeting on 10 April 2000, the SAC issued a resolution where IFIs
may incorporate a clause on the undertaking to provide ibra’ to customers
who make early settlement in the financing agreement on the basis of public
interest (maslahah). The inclusion of an ibra’ clause in the financing
agreement would require IFIs to honour the undertaking or promise to grant
ibra’ to its customers.
1.7 In the 101st Meeting on 20 May 2010, the SAC issued a subsequent
resolution to further safeguard public interest and to ensure that customer
protection is carried out consistently as follows:
(a) Bank Negara Malaysia (the Bank) as the authority may require the IFIs
to accord ibra’ to their customers who settled their debt obligation
arising from sale-based contract prior to the agreed settlement period;
(b) The Bank may also require the terms and conditions on ibra’ to be
incorporated in the financing agreement to eliminate any uncertainty
with respect to the customer’s entitlement to receive ibra’ from the IFIs;
and
(c) The ibra’ formula will be standardised by the Bank 2 .
1
Matters on ibra’ were discussed in the 12th, 13th, 24th, 32nd and 101st meetings of the SAC.
2. Purpose
2.1 The Guidelines on Ibra’ for Sale-Based Financing (the Guidelines) set out
the requirements on the application and implementation of ibra’ with the
objectives to promote transparency and equitable mechanism of the granting
of ibra’ by IFIs. The Guidelines also specify the requirements relating to the
granting of and incorporation of an ibra’ clause in the financing
documentation and other relevant documentation, calculation and disclosure
requirements.
3. Applicability
3.1 These Guidelines are applicable to:

(i) Islamic banks licensed under the Islamic Banking Act 1983 (IBA);
(ii) Banks licensed under the Banking and Financial Institutions Act 1989
(BAFIA) to carry on Islamic banking business provided under section
124 of BAFIA;
(iii) Development financial institutions prescribed under the Development
Financial Institutions Act 2002 (DFIA) to carry on Islamic banking
business provided under section 129 of DFIA; and
(iv) Takaful operators registered under the Takaful Act 1984 (TA).
[All the institutions hereafter referred to as Islamic financial institutions (IFIs)].
3.2 The Guidelines shall apply to all financing based on sale contracts 3 , except
for salam and istisna’ contracts. Both salam and istisna’ contracts require
different treatment in the context of ibra’ in view of the different obligation of
the contracting parties, in particular, the obligation on the delivery of the
underlying assets. Sale-based financing shall include both fixed and floating
rate structures based on deferred payment basis, unless stated otherwise.
2
In the context of the implementation of ibra’, the Bank provides the parameters on the calculation
of ibra’ instead of standard formula.
3
IFIs are not restricted to grant rebate for financing based on other types of contracts for examples
equity-based, lease-based or hybrid financing contracts, where applicable.
3.3 Credit card facility shall be excluded from these Guidelines. Essentially,
credit card financing is governed under the Credit Card-i Guidelines 4 and in
practice, all credit card customers who enter into sale-based contracts would
automatically be given rebate (which is similar to ibra’) for credit card facility
that is terminated prior to maturity and in the implementation of tiered pricing
structure.
3.4 IFIs may but are not required to apply the requirements of the Guidelines for
financing facilities offered to employees.
4. Legal provisions
4.1 The Guidelines are issued pursuant to section 53A of the Islamic Banking
Act 1983 (IBA), section 126 of the Banking and Financial Institutions Act
1989 (BAFIA), section 126 of the Development Financial Institutions Act
2002 (DFIA) and section 69 of the Takaful Act 1984(TA).
4.2 The Guidelines shall be read together with the following guidelines issued by
the Bank:
(i) Guidelines on Product Transparency and Disclosure;
(ii) Guidelines on the Imposition of Fees and Charges on Financial
Products and Services;
(iii) Guidelines on Late Payment Charges for Islamic Financial Institutions;
and
(iv) Other relevant regulations, guidelines or circulars that the Bank may
issue from time to time.
4
Issued by the Payment Systems Policy Department.
5. Effective and Implementation Date
5.1 For IFIs other than takaful operators, the Guidelines shall be effective from 1
November 2011. The requirements under paragraph 6 shall take effect
immediately.
5.2 For IFIs other than takaful operators, the requirements under paragraphs 7,
8, 9, and 10 shall be fully implemented from 1 July 2012. Earlier
implementation is encouraged.
5.3 For takaful operators, the effective and implementation date of the
Guidelines is 31 January 2013.
PART B POLICY REQUIREMENTS
6. Principle Requirements
6.1 IFIs are required to grant ibra’ to all customers who settle their
financing before the end of the financing tenure. Settlement prior to the
end of the financing tenure by the customers shall include, but is not limited
to the following situations:
(i) Customers who make an early settlement or early redemption,
including those arising from prepayments;
(ii) Settlement of the original financing contract due to financing
restructuring exercise;
(iii) Settlement by customers in the case of default; and
(iv) Settlement by customers in the event of termination or cancellation of
financing before the maturity date.
6.2 Under the variable rate financing concept, the IFIs shall grant ibra’ on the
difference between the amount of profit calculated based on the
ceiling/contracted profit rate (CPR) and the amount of profit based on the
effective profit rate (EPR). Ibra’ must be granted if the profit amount based
on EPR is lower than the profit amount based on CPR.
6.3 IFIs must grant ibra’ to:

(i) all existing customers who have ongoing financing contracts with the
IFIs which were entered into prior to the effective date as stipulated in
paragraph 5.1; and
(ii) all new customers who enter into financing contracts after the effective
date as stipulated in paragraph 5.1 and 5.3.
7. Commitment to Provide Ibra’
7.1 To ensure legal certainty of providing ibra’, IFIs are required to incorporate in
their offer letter and other legal documentation related to the sale-based
financing, a clause on its commitment to provide ibra’. The provision on ibra’
must at minimum specifies the following:
(i) The situation where ibra’ shall be granted by the IFI; and
(ii) The ibra’ formula for each situation, where relevant.
7.2 The insertion of the above provisions on commitment of ibra’ and formula
shall be applicable to new financing arrangements made on or after the
implementation date as provided in paragraph 5.2 and 5.3. For ongoing
financing contracts entered prior to the implementation date, IFIs are
required to inform the customers on the applicability of ibra’ and the formula
via notices 5 .
7.3 The customers should be informed on the relevant conditions and

procedures on the granting of ibra’ by the IFI. For new financing
arrangements made on or after the implementation date as provided in
paragraph 5.2 and 5.3, such conditions and procedures shall be
communicated to customers individually via the product disclosure sheet 6 .
For ongoing financing contracts entered prior to the implementation date,
IFIs are required to inform the relevant conditions and procedures to the
customers together with the notices on the applicability of ibra’ as provided in
paragraph 7.2.
7.4 IFIs are required to ensure that the customers are duly informed on the
applicability of ibra’ in the redemption statement or other documents issued
by IFIs to the customers for the purpose of recovery (such as letter/notice of
5
Refer to the relevant requirements on notices to the customer, in particular notice of changes as
stipulated under the Guidelines on Product Transparency and Disclosures.
6
Format of product disclosure sheet can be referred to the Guidelines on Product Transparency
and Disclosures.
demand) and in the Statement of Claim prepared for litigation cases. At

minimum, IFIs are expected to disclose the following:
(i) Commitment to provide ibra’ in the Statement of Claim, redemption
statement and other documents such as letters or notices of demand
for the purpose of recovery; and
(ii) The formula or the manner of ibra’ computation and the relevant
conditions relating to the granting of ibra’ in the redemption statement
and other documents such as letters or notices of demand.
8. Calculation of Ibra’
8.1 In principle, IFIs may grant ibra’ up to the total amount of the outstanding
financing or selling price to the customer.
8.2 Nevertheless, upon settlement of a financing prior to the maturity date by the
customer, IFIs are expected to recover the outstanding cost of purchase
(outstanding principal amount of financing) from the customers. As such, the
amount of ibra’ that may be granted by the IFIs to the customers is the
amount of deferred profit 7 at the point of settlement of the financing.
Early Settlement Charges
8.3 The IFIs are not allowed to claim any penalty charges from customers
making early settlement 8 during a specified time period 9 . IFIs are not
allowed to charge customers who make early settlement unless the charges
represent the cost incurred by the IFIs due to early settlement by the
customer.
8.4 The charges that may be imposed on the customers for partial or full
settlement during the specified time period9 as determined by IFIs shall
7
Deferred profit is equated to ‘unaccrued profit’ in accounting terms. The adoption of deferred profit
term is to better reflect the nature of sale contract with a deferred payment.
8
As specified in the 24th and 86th meetings of the SAC.
9
In practice known as ‘lock-in period’.
reflect a reasonable estimate of the costs incurred by the IFIs as a direct

result of settlement prior to maturity. Such cost may include:
(i) Costs that have not been recovered because a financing contract has a
structure with discount elements at the initial period of financing; and
(ii) Initial costs that have not been recovered (e.g. for zero moving cost
products).
8.5 The early settlement charges should not penalise or act as a barrier to
prevent customers from switching or closing a financing account. The
charges must exclude any consideration of the following costs:
(i) Loss of profit that would have been received if the financing continues
until the end of the specified time period9 or expected tenure; and
(ii) Marketing cost and other costs associated with obtaining new
customers.
Early Settlement by Customer

1st Facility Maturity
Drawdown Settlement Date Date
Cost of Purchase / Principal
Accrued Profit Ibra’ (rebate)
Early settlement charges (if applicable)
Diagram 1: Ibra' arising from early settlement prior to maturity
Note: Refer to Appendices I & II for illustration on early settlement by customers.
8.6 Relevant fees and charges other than the early settlement charges, if
applicable may be imposed to customers based on the Guidelines on the
Imposition of Fees and Charges on Financial Products and Services 10 .
10
Issued by the Consumer and Market Conduct Department.
Late Payment Charges
8.7 The late payment charges 11 , if any, at the point of settlement prior to maturity
are to be calculated separately from the ibra’ calculation. The late payment
charges shall be reflected in the settlement amount of the customer.
Diagram 2 illustrates the ibra’ and the late payment charges application.
Settlement amount = Outstanding selling price – Ibra’ + Late payment charges
Settlement After Foreclosure of Residential House
1st Facility Non-payment Maturity

Auction &
Foreclosure Judgement
}
Drawdown Settlement Date
Cost of Purchase / Principal
Accrued Profit Ibra’ (rebate)
Post-
Pre-judgement LPC* judgement Early settlement
*LPC = Late payment charges LPC charges (if applicable)
Diagram 2: Ibra' arising from settlement via foreclosure
8.8 In implementing requirements provided in paragraphs 8.3 to 8.7, IFIs are

encouraged to act compassionately and to give due consideration in
determining the amount of the early settlement charges, late payment
charges and settlement amount paid by customers, particularly those faced
with mitigating circumstances beyond the control of the customers such as
out of job, illnesses, loss of asset due to natural catastrophe or fire and
abandoned projects.
Termination of Financing Arising from Non-delivery or Non-Possession

of the Underlying Asset
8.9 Although sale-based financing necessitates the existence of the asset, there
are cases of financing facility being terminated due to non-delivery or non-
11
The mechanism on late payment charges must be based on the Guidelines on Late Payment
Charges for Islamic Financial Institutions issued by the Islamic Banking and Takaful Department
and the Consumer and Market Conduct Department.
possession of asset. These cases may originate from abandoned 12 projects

(for example, housing under construction), mandatory purchase by
government, fraud by vendor/manufacturer, theft, act of God and seizure of
asset by custom. IFIs are required to apply due consideration in handling
cases of non-possession of asset by the customer. In some situations, IFIs
may suffer losses due to non-payment of financing while the customer may
ends up without any asset.
8.10 In the case of non-possession of asset by the customer and where there is a
portion of the principal amount yet to be disbursed such as in the case of
abandoned project (for housing under construction), IFIs are not allowed to
claim the undisbursed principal amount. Instead, upon settlement by
customers, the IFIs should grant ibra’ on the undisbursed principal amount.
Note: Please refer to Appendix III for illustration for settlement amount by customer in the
non-delivery/non-possession of asset.
8.11 Principally, IFIs may only recover the disbursed cost of purchase and waive
the profit portion in the case of non-possession of asset by the customer. In
some circumstances, IFIs may have already accrued some portion of profit
for a certain period during the term of the financing contract. In this situation,
IFIs are allowed to claim the accrued profit portion of financing up to the date
of the first sign of inability to deliver the asset, for example, the date of the
last amount disbursed to the contractor/manufacturer or when the project is
categorised as ‘late’ 13 or the pronouncement of court order to stop
construction. Diagram 3 illustrates ibra’ arising from non-delivery of asset.
8.12 IFIs are expected to perform their due diligence as a counterparty of the sale
contracts/transactions involving assets that are under construction or
12
Abandoned project as defined by Ministry of Housing & Local Government (MHLG) or IFIs’
internal definition. Should IFIs wish to adopt internal definition, the identification criteria and
processes shall take into account the interest of the customer and at least at par with the
definition of MHLG.
13
Late project as defined by MHLG or IFIs’ internal definition. Should IFIs wish to adopt internal
definition, the identification criteria and processes shall take into account the interest of the
customer and at least at par with the definition of MHLG.
manufacturing. IFIs are expected to establish a monitoring mechanism to

identify signs of non-delivery of assets such as ensuring that there is a
frequent or periodic communication with the customer and
contractor/manufacturer.
House Non-delivery due to Abandoned Project

1st Facility 1st observation of Classified as abandoned Maturity
Drawdown no progress & settlement Date
Disbursed Cost of Purchase Undisbursed Cost of Purchase - Ibra’ (rebate) 1
Accrued Profit Ibra’ (rebate) 2
Early settlement charges (if applicable)

*1 – Ibra’ on undisbursed cost of purchase/ principal by IBIs to developer
2- Ibra’ on deferred profit
Diagram 3: Ibra' arising from non-delivery of asset
9. Disclosure at the Point of Entering a Contract
9.1 IFIs are required to disclose the application of an ibra’ formula through an
illustration to be customised according to the terms of the financing for ease
of reference and understanding to the customers. The illustration shall
include, among others a payment schedule that discloses new items in
addition to the requirements under Schedule II, Paragraph 1.2 (b)
‘Guidelines on Product Transparency and Disclosure’. The additional
disclosure items are:
(i) Amount to be paid for each instalment. For variable rate financing, IFIs
to disclose the CPR and the prevailing EPR and the amount to be paid
for each instalment under CPR and prevailing EPR;
(ii) Apportionment of principal and profit payment in each instalment;
(iii) Outstanding principal and outstanding selling price after each
instalment; and
(iv) Deferred profit.
9.2 IFIs are required to provide the illustrative payment schedule from the first
instalment until the last instalment for fixed rate financing (inclusive of fixed
multi tier rate financing). For variable rate financing where the effective profit
rate would be subject to periodic changes, IFIs shall provide payment
schedule that reflects 12-month instalments to serve as a guide to the
customers. Please refer to Appendices I and II for the respective illustration
of payment schedule for fixed and variable rate financing.
9.3 IFIs are required to inform the customer that the illustration is only indicative
in nature and the circumstances that may trigger changes in the amount
provided in the payment schedule. Examples of such triggers are changes in
the effective profit rate (for variable rate financing), prepayments, partial
payments, and promptness of instalment payment by the customers.
10. General and Administrative Policy
10.1 IFIs are required to put in place clear and comprehensive internal policies
and procedures governing the implementation of ibra’, in particular for
foreclosure and litigation cases. The internal policies should include, but not
limited to the following:
(i) A list of costs for early settlement charges approved by the IFI’s Shariah
Committee; and
(ii) Processes and procedures in determination of ibra’ including the process
of coordination between the departments involved in the determination of
ibra’ (i.e. legal, recovery, litigation departments and Shariah unit within
the IFIs), especially in litigation cases and non-delivery of asset.
10.2 The Shariah Committee of the IFI is expected to perform an effective

oversight over the implementation of ibra’. In particular, the Shariah
Committee is expected to undertake that they are satisfied with:
(i) IFI’s internal policies and procedures for each situation of ibra’ and its
implementation; and
(ii) The determination of early settlement charges that is reflective of

reasonable costs incurred by the IFIs.
10.3 To ensure accurate and reliable amount of ibra’ is given to the customers,
IFIs must put in place an effective management information system and
accounting system that are capable to:
(i) Generate timely and accurate payment schedule, letter/notice of
demand and redemption statement for settlement and recovery
purposes;
(ii) Track the effective profit rate used at each instalment for each financing
facility (for variable rate financing); and
(iii) Trace and identify the cost incurred by the IFIs for the purpose of
determining a reasonable early settlement charges as specified in
paragraphs 8.3 to 8.5.
10.4 IFIs shall ensure that the legal documentations are prepared and litigation
cases are handled by qualified and skilled personnel or external service
providers. In this regard, the IFIs must ensure that the personnel or the
external service providers possess the necessary and adequate
understanding of the ibra’ policy and its implementation.
Appendices
Appendices I and II provide samples of illustration for fixed rate and variable rate
Bai’ Bithaman ‘Ajil (BBA) home financing-i that comprise of customised payment
schedule under an ideal situation together with the application of ibra’ and settlement
amount formula.
Appendix I Illustration for fixed rate financing
Terms of the financing are as follows:

Selling price : RM 365,136.00
Contracted profit rate (CPR) : 9.0%
Financing period : 180 months (15 years)
Cost of Purchase/Principal (COP) : RM 200,000.00
Instalment mode : Monthly
Illustrative Customised Payment Schedule for Fixed Rate BBA

(to be disclosed by each instalment by IFIs)
Payment Outstanding Outstanding Deferred
No. Installment Profit payment COP payment
date Selling Price COP Profit
0 30-06-2009 - - - 365,135.97 200,000.00 165,135.97
1 31-07-2009 2,028.53 1,500.00 528.53 363,107.44 199,471.47 163,635.97
Year 1 2 31-08-2009 2,028.53 1,496.04 532.50 361,078.91 198,938.97 162,139.93
3 30-09-2009 2,028.53 1,492.04 536.49 359,050.38 198,402.48 160,647.89
4 31-10-2009 2,028.53 1,488.02 540.51 357,021.85 197,861.96 159,159.87
5 30-11-2009 2,028.53 1,483.96 544.57 354,993.32 197,317.40 157,675.91
6 31-12-2009 2,028.53 1,479.88 548.65 352,964.79 196,768.74 156,196.03
7 31-01-2010 2,028.53 1,475.77 552.77 350,936.26 196,215.98 154,720.26
48 30-06-2013 2,028.53 1,277.62 750.91 267,766.53 169,598.40 98,167.98
49 31-07-2013 2,028.53 1,271.99 756.55 265,738.00 168,841.85 96,895.99
50 31-08-2013 2,028.53 1,266.31 762.22 263,709.47 168,079.63 95,629.68
51 30-09-2013 2,028.53 1,260.60 767.94 261,680.94 167,311.70 94,369.08
52 31-10-2013 2,028.53 1,254.84 773.70 259,652.41 166,538.00 93,114.24
53 30-11-2013 2,028.53 1,249.04 779.50 257,623.88 165,758.50 91,865.20
170 31-08-2023 2,028.53 160.06 1,868.47 20,285.87 19,473.07 812.28
171 30-09-2023 2,028.53 146.05 1,882.49 18,257.34 17,590.58 666.23
172 31-10-2023 2,028.53 131.93 1,896.60 16,228.81 15,693.98 534.30
173 30-11-2023 2,028.53 117.70 1,910.83 14,200.28 13,783.15 416.60
174 31-12-2023 2,028.53 103.37 1,925.16 12,171.75 11,857.99 313.23
175 31-01-2024 2,028.53 88.93 1,939.60 10,143.22 9,918.39 224.30
Year 15 176 29-02-2024 2,028.53 74.39 1,954.15 8,114.69 7,964.25 149.91
177 31-03-2024 2,028.53 59.73 1,968.80 6,086.16 5,995.44 90.18
178 30-04-2024 2,028.53 44.97 1,983.57 4,057.63 4,011.88 45.21
179 31-05-2024 2,028.53 30.09 1,998.44 2,029.10 2,013.43 15.12
180 30-06-2024 2,028.53 15.10 2,013.43 0.57 0.00 0.00
*COP: Cost of Purchase/Principal
Disclaimer: This schedule indicates the ideal payment of instalments by customer. The
values illustrated above may change according to a number of variables such as promptness
of payments by customer, different amount of disbursement and prepayments.
Illustration on the application of formula:
(i) Early settlement of financing
Customer approached an IFI for early settlement at the 48th instalment. The
early settlement charges are not imposed on the customer.
(i) Deferred profit = RM 98,167.98;
(ii) Outstanding selling price = RM 267,766.53
(iii) Instalment due but unpaid at 48th instalment = RM 2,028.53
(iv) Late payment charges = RM 0.00
(v) Early settlement charges = RM 0.00
Formula:
Ibra’ = Deferred profit – Early settlement charges
= 98,167.98 – 0.00
= 98,167.98
Settlement amount = Outstanding selling price + Instalments due – Ibra’

= 267,766.53 + 2,028.53 – 98,167.98
= 171,627.08
(ii) Settlement after foreclosure of asset
Customer defaulted 11 instalments (from 37th to 47th instalment). Within the

period, the IFI executed foreclosure proceedings and auctioned the asset.
Proceeds amounting to RM185,000.00 were received by IFI from the
auction. The IFI determined the amount of early settlement charges (the
Bank has approved computation and components of this charge) to be
RM300.00 (amount is only for illustrative purposes).
(i) Deferred profit at 48th instalment = RM 98,167.98
(iii) Late payment charges = RM 1,025.42 (Illustrative amount only)
(iv) Early settlement charges = RM 300.00
(v) Instalment due but unpaid = 11 instalments & 48th instalment

= 12 x RM 2,028.53 = RM 24,342.36
Formula:
Ibra’ = Deferred profit – Early settlement charges

= 98,167.98 – 300.00
= 97,867.98
Settlement amount = Outstanding selling price + Instalments due

+ Late payment charges – Ibra’
= 267,766.53 + 24,342.36 + 1,025.42 – 97,867.98
= 195,266.33
Since the proceeds from auction is less than the settlement amount to be
payable by customer, the IFI claims the difference of:
Amount claimed = 195,266.33 – 185,000.00
= 10,266.33
Appendix II Illustration for variable rate financing
Below is a sample of illustration for variable rate BBA home financing-i comprising a
customised payment schedule under an ideal situation and an illustration on the
application of ibra’ and settlement amount formula. The terms of the facility are as
follows:
Selling price : RM 365,136.00
Contracted profit rate (CPR) : 9.0%
Effective profit rate (EPR) : 3.5% (prevailing rate at point of contract)
Financing period : 180 months (15 years)
Cost of Purchase (Principal) : RM 200,000.00
Instalment mode : Monthly – Instalment amount according to EPR
Illustrative Customised 12-Months Payment Schedule for Variable Rate BBA

Contracted Selling Price (RM) : 365,135.97 165,136
Contracted Profit Rate (CPR) : 9.0%
Financing Period : 15 years (180 months)
Cost of Purchase (COP) / Principal 200,000.00
Payment Mode: Monthly - Installment amount according to EPR
Prevailing
Installment Contracted Profit
Payment Installment Effective COP Outstanding Outstanding Deferred
No. (Prevailing Profit Rate payment
Date (CPR) Profit Rate payment Selling Price COP Profit
EPR) (CPR) (CPR)
(EPR)
0 30-06-2009 - - 9.0% - - - 365,135.97 200,000.00 165,135.97
1 31-07-2009 2,028.53 1,429.77 9.0% 3.5% 1,500.00 528.53 363,107.44 199,471.47 163,635.97
2 31-08-2009 2,028.53 1,429.77 9.0% 3.5% 1,496.04 532.50 361,078.91 198,938.97 162,139.93
3 30-09-2009 2,028.53 1,429.77 9.0% 3.5% 1,492.04 536.49 359,050.38 198,402.48 160,647.89
4 31-10-2009 2,028.53 1,429.77 9.0% 3.5% 1,488.02 540.51 357,021.85 197,861.96 159,159.87
5 30-11-2009 2,028.53 1,429.77 9.0% 3.5% 1,483.96 544.57 354,993.32 197,317.40 157,675.91
6 31-12-2009 2,028.53 1,429.77 9.0% 3.5% 1,479.88 548.65 352,964.79 196,768.74 156,196.03
7 31-01-2010 2,028.53 1,429.77 9.0% 3.5% 1,475.77 552.77 350,936.26 196,215.98 154,720.26
8 28-02-2010 2,028.53 1,429.77 9.0% 3.5% 1,471.62 556.91 348,907.73 195,659.06 153,248.64
9 31-03-2010 2,028.53 1,429.77 9.0% 3.5% 1,467.44 561.09 346,879.20 195,097.97 151,781.20
10 30-04-2010 2,028.53 1,429.77 9.0% 3.5% 1,463.23 565.30 344,850.67 194,532.67 150,317.97
11 31-05-2010 2,028.53 1,429.77 9.0% 3.5% 1,459.00 569.54 342,822.14 193,963.14 148,858.97
12 30-06-2010 2,028.53 1,429.77 9.0% 3.5% 1,454.72 573.81 340,793.61 193,389.33 147,404.25
Disclaimer: This schedule indicates the payment of instalments by customer. The values
illustrated above may change according to a number of variables such as promptness of
payments by customer, prepayments, differing disbursement amount and the daily difference
between the effective profit rate (EPR) and the contracted profit rate (CPR).
Illustration on the application of formula:
Early settlement of financing

Customer approached an IFI for early settlement at the 48th instalment through the
means of refinancing, the early settlement charge is imposed on the customer as
approved by the IFI which amounts to RM300.00 (amount is only for illustrative
purposes). Extract of the payment schedule:
Contracted Effective Profit

Payment Installment Installment COP Outstanding Outstanding Deferred
No. Profit Rate Profit Rate payment
Date (CPR) (EPR) payment Selling Price COP Profit
(CPR) (EPR) (CPR)
0 30-06-2009 - - 9.0% - - - 365,135.97 200,000.00 165,135.97
1 31-07-2009 2,028.53 1,429.77 9.0% 3.5% 1,500.00 528.53 363,107.44 199,471.47 163,635.97
2 31-08-2009 2,028.53 1,429.77 9.0% 3.5% 1,496.04 532.50 361,078.91 198,938.97 162,139.93
47 31-05-2013 2,028.53 1,429.77 9.0% 3.5% 1,283.21 745.32 269,795.06 170,349.31 99,445.60
48 30-06-2013 2,028.53 1,429.77 9.0% 3.5% 1,277.62 750.91 267,766.53 169,598.40 98,167.98
49 31-07-2013 2,028.53 1,381.16 9.0% 3.0% 1,271.99 756.55 265,738.00 168,841.85 96,895.99
(a) Deferred profit = RM 98,167.98

(b) Early settlement charges = RM 300.00
(c) Outstanding selling price = RM 267,766.53
(d) Instalment due but unpaid (48th instalment based on EPR) = RM 1,429.77
(e) Ibra’ due to fluctuations of EPR (equivalent to the difference between profits based
on EPR & CPR) = RM 26,942.67 (amount is only for illustrative purposes)
Formula:
Ibra’ at settlement = Deferred profit – Early settlement charges
= 98,167.98 – 300.00
= 97,867.98

+ Late payment charges – Adjustment on ibra’ due to
fluctuations of EPR (if any) – Ibra’ at settlement
= 267,766.53 + 1,429.77 + 0.00 – 0.00 – 97,867.98
= 171,328.32
Essentially, the IFI has granted total ibra of:

Total ibra’ = Ibra’ at settlement + Actual ibra’ due to fluctuations of EPR
= 97,867.98 + 26,942.67
= 124,810.65
Note: The Bank acknowledges that there are several payment structures adopted by
IFIs for variable rate financing such as flexible instalment according to the prevailing
EPR, periodically adjusted instalment and fixed instalment. The above illustration
reflects the mode of flexible instalments payable by customer which is based on the
movement of EPR. The adoption of fixed or periodically adjusted payment terms for
the variable rate financing would render IFIs to review or make adjustments on ibra’
to reflect the actual ibra’ due to difference between amount calculated based on CPR
and those based on prevailing EPR as mentioned in paragraph 6.2. IFIs should
accordingly customise the illustration based on the terms and methodology adopted
by the IFIs.
Appendix III Illustration of ibra’ in non-delivery/non-possession of asset
Non-delivery of the house due to abandoned project
At the 13th instalment, a property under construction was abandoned. An IFI has only
reimbursed RM 80,000.00 out of RM 200,000.00 of the principal amount. Extract of
the customised payment schedule as follows:
Illustrative Customised Payment Schedule

Selling Price (RM) : 365,135.97
Contracted Profit Rate (CPR) : 9.0%
Financing Period : 15 years (180 months)
Cost of Purchase (COP) / Principal : 200,000.00
Grace Period : 2 years (24 months)
Payment Outstanding Outstanding Deferred

No. Installment Profit Payment COP Payment
Date Selling Price COP Profit
0 30-06-2009 - - - 365,135.97 200,000.00 165,135.97
1 31-07-2009 1,500.00 1,500.00 0.00 363,635.97 200,000.00 163,635.97
2 31-08-2009 1,500.00 1,500.00 0.00 362,135.97 200,000.00 162,135.97
3 30-09-2009 1,500.00 1,500.00 0.00 360,635.97 200,000.00 160,635.97
4 31-10-2009 1,500.00 1,500.00 0.00 359,135.97 200,000.00 159,135.97
5 30-11-2009 1,500.00 1,500.00 0.00 357,635.97 200,000.00 157,635.97
6 31-12-2009 1,500.00 1,500.00 0.00 356,135.97 200,000.00 156,135.97
7 31-01-2010 1,500.00 1,500.00 0.00 354,635.97 200,000.00 154,635.97
8 28-02-2010 1,500.00 1,500.00 0.00 353,135.97 200,000.00 153,135.97
9 31-03-2010 1,500.00 1,500.00 0.00 351,635.97 200,000.00 151,635.97
10 30-04-2010 1,500.00 1,500.00 0.00 350,135.97 200,000.00 150,135.97
11 31-05-2010 1,500.00 1,500.00 0.00 348,635.97 200,000.00 148,635.97
12 30-06-2010 1,500.00 1,500.00 0.00 347,135.97 200,000.00 147,135.97
13 31-07-2010 1,500.00 1,500.00 0.00 345,635.97 200,000.00 145,635.97
14 31-08-2010 1,500.00 1,500.00 0.00 344,135.97 200,000.00 144,135.97
(i) Deferred profit = RM 145,635.97

(iii) Instalment due = RM 1,500.00
(iv) Principal/Cost of purchase not disbursed = RM 120,000.00
(v) Late payment charges = RM 0.00
Formula:
Ibra’ = Deferred profit + Undisbursed principal/COP – Early settlement charges
= 145,635.97 + 120,000.00 – 0.00
= 265,635.97

+ Late payment charges – Ibra’
= 345,635.97 + 1,500.00 + 0.00 – 265,635.97
= 81,500.00
TAB 2

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DALAM MAHKAMAH TINGGI DI SHAH ALAM

DALAM NEGERI SELANGOR DARUL EHSAN, MALAYSIA

ALLIANCE ISLAMIC BANK BERHAD

1. AZURA BINTI AB RAHMAN

2. SAMAD BIN BAISUN DEFENDAN-DEFENDAN

IKATAN AUTORITI DEFENDAN PERTAMA

Peguamcara Plaintif Peguamcara Defendan Pertama

TETUAN BENJAMIN DAWSON TETUAN CHAMBERS OF

No Nama Kes Mukasurat

1 Bank Kerjasama Rakyat Malaysia Berhad v. Reka Indah A

Development (Penang) Sdn Bhd & Ors (Encl 18) [2021]

2 Bank Muamalat Malaysia Bhd v. Ten-Tel Construction B

Sdn Bhd & Ors [2017] MLRHU 248

3 Bank Islam Malaysia Bhd v. Azhar Osman & Other C

Cases (2010) MLRH 108

4 Bank Negara Malaysia v. Mohd Ismail & Ors [1992] 1 D

MLRA 190; [1992] 1 MLJ 400

5 Cempaka Finance Bhd v. Ho Lai Ying (trading as KH E

Trading) & Anor [2005]

1 Guidelines on Ibra’ (Rebate) for Sale-Based Financing’ 1

2 Islamic Finance: Recovery, Rescheduling & Restructuring 2

of Islamic Financial and Capital Market Products and

Services in Malaysia (Lexis Nexis)

BANK KERJASAMA RAKYAT MALAYSIA BERHAD

High Court Malaya, Kuala Lumpur

Case(s) referred to:

Legislation referred to:

[Granted summary judgment for the plaintiff.]

Atan Mustaffa Yussof Ahmad JC:

[4] The 1st Facility was documented by the following documents:

a) Letter of Offer dated 19 April 2018 ("the 1st Letter of Offer');

b) Murabah Sale Contracts dated 18 May 2018 ("the 1st Murabahah

c) Tawarruq Term Financing-i Agreement dated 18 May 2018; and

d) Agency Letter (Wakalah) dated 18 May 2018;

[5] The 2nd Facility was documented by the following documents:

a) Letter of Offer dated 2 July 2018 ("the 2nd Letter of Offer');

b) Murabah Sale Contracts dated 9 October 2018 ("the 2nd

c) Agency Contract (Wakalah) dated 9 October 2018; and

d) Tawarruq Term Financing-i Agreement dated 9 October 2018.

a) Charge Presentation No 0705SC2012002968 registered on 3 March

b) Supplemental Agreement to the Legal Charge (Balik Pulau Project)

c) Deed of Assignment (Designated Account) (Balik Pulau Project)

d) Supplemental Agreement to the Deed of Assignment (Designated

e) Supplemental Agreement to the Deed of Assignment (Designated

f) Deed of Assignment (Sales Proceed) (Balik Pulau Project) dated 15

g) Supplemental Agreement to the Deed of Assignment (Sales

h) Letter of Undertaking dated 16 May 2018.

a) Guarantee and Indemnity by Individuals dated 13 December 2011;

b) Guarantee and Indemnity by Individuals dated 15 October 2012;

c) Consent to be given by the Individual Guarantors in respect of

a) Third Party Charge by Prisma Bumiraya Sdn Bhd Presentation No

b) Third Party Charge by Prisma Bumiraya Sdn Bhd Presentation No

c) Supplemental Legal Charge (Orchard Ville Project) dated 9 October

d) Supplemental Agreement to the Deed of Assignment (Designated

e) Deed of Assignment (Sales Proceed) (Orchard Ville Project) dated

f) Supplemental Agreement to the Deed of Assignment (Sales

g) Deed of Assignment (Designated Account) dated 13 December

h) 2nd Supplemental Agreement to the Deed of Assignment