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2020 MarsdenLR 2549
COURT OF APPEAL PUTRAJAYA
PAN NORTHERN AIR SERVICES SDN BHD – Appellant
Versus
MAYBANK ISLAMIC BERHAD & ANOTHER APPEAL – Respondent
[Civil Appeal Nos: W-02(MUA)(W)-2512-12/2018 & W-02(MUA)(W)-2522-12/2018]
Islamic banking contracts must adhere to agreed Ta'widh rates, and parties can reserve rights upon settlement payments, allowing claims for refunds of excess charges.
Headnote:(A) Islamic Banking Contracts – Ta'widh – Nature and calculation of Ta'widh in an Islamic banking context – Court addresses whether Ta'widh is chargeable prior to maturity and under what conditions – Ta'widh established at 1% per annum under the agreements – High Court's error in allowing higher rates – Authority of BNM Guidelines regarding Ta'widh confirmed (Paras 1-148).
(B)
Accord and Satisfaction – Parties reserved rights upon payment of settlement sum – Payment was conditional and the Borrower entitled to seek refund of excess charges – Claim within limitation period as right arose upon payment (Paras 115-149).
Facts of the case:
Dispute involved the correct Ta'widh charged on a loan after the Borrower defaulted, leading to legal action for refund of excess payment claimed. Borrower paid RM42,045,000.00 but disputed Ta'widh rates imposed (Paras 1-5, 19-22, 148).
Findings of Court:
The Court allowed the Borrower's claim for the refund of excess Ta'widh of RM5,005,285.79 and determined the appropriate Ta'widh rate to be the agreed contract rate of 1% per annum, ordering costs to be awarded (Paras 146-149).
Issues
: Main issues include whether the correct Ta'widh rate was applied and whether accord and satisfaction barred the claim for excess payments (Paras 27-28, 95-96).
Ratio Decidendi:
The Court found that the imposition of Ta'widh above the contractually agreed rate was improper and ruled that the Borrower's conditional payment did not constitute full accord and satisfaction, maintaining their right to claim an excess refund (Paras 148-149).
Result:
The Borrower's appeal was allowed, and refund of excess Ta'widh was ordered.
[1] This judgment grapples with the issue of what is the correct Ta'widh rate that is chargeable under an Islamic Banking contract for a loan that was paid after default of the instalment payments and before the maturity date of the loan.
[2] It also deals with the concomitant issue as to whether when a Shariah question is raised on the charging of Ta'widh should the Court invariably have to refer the matter to the Shariah Advisory Council ("SAC") or is it entitled to look at available rulings of the SAC and decide accordingly.
[3] There was also the contractual issue as to when the payment for the outstanding loan was made was there an accord and satisfaction when the borrower said the payment was made subject to the lender charging the right amount for the Ta'widh said to have been incurred.
[4] When the borrower disagreed with the lender's charging of Ta'widh, both on the rate and the calculation, it brought an action for recovery of what was allegedly overpaid at which instance the lender raised the defence of limitation having set in.
[5] Correspondingly the lender had counterclaimed for the sum of RM1,000,000.00 in Ta'widh as a discount given for the settlement sum paid in the event that the Court were to hold that there was no accord and satisfaction.
[6] The High Court dismissed the Plaintiff Borrower's claim on ground that the Defendant Bank was entitled to charge Ta'widh at the rates imposed by the Bank and that the calculation was right. The High Court further held that there was accord and satisfaction with the payment of the sum of RM42,045,000.00 by the Borrower, being the amount calculated by the Bank and to be paid on or before the date stipulated by the Bank with the Bank giving an RM1,000,000.00 discount on the Ta'widh.
[7] With that finding, the High Court struck out the Defendant Bank's Counterclaim for the RM1,000,000.00, which discount on the Ta'widh would no longer be binding in the event that there was no accord and satisfaction.
[8] For ease of reference the borrower which was the Plaintiff in the High Court below shall be referred to as the Borrower or the Appellant and the Bank who was the Defendant in the High Court shall be referred to as the Bank or Respondent.
[9] The Bank had also appealed against the decision of the High Court, more on an abundance of caution, in that should the Borrower succeed in this appeal on its claim for a refund of excess Ta'widh paid then the Bank said it is also entitled consequentially and correspondingly for a refund of the discount or waiver of RM1,000,000.00 given for the Ta'widh charge.
[10] Both the appeals were heard together with the arguments taken in the Borrower's appeal as the outcome would settle how the Bank's appeal is to be decided.
The Financing Facility Agreements
[11] Learned counsel for the Borrower had succinctly summarised the key unvarnished facts below with respect to the various Islamic Financing Agreements and the events leading to the disputes, which narration of the fact we gladly adopt.
[12] The Appellant/Borrower had vide a Letter of Offer from Malayan Banking Berhad ("MBB") dated 1 August 2005 obtained an Islamic Financing Facility for the total sum of RM41,016.200.00 ("the Facility") to finance the performance of a contract with the Malaysian Centre of Remote Sensing Agency, Ministry of Science, Technology and Innovation ("The Employer").
[13] The Borrower had accepted the Facility and the Aqad for the acceptance of the Facility has been made to comply with the Shariah requirements.
[14] Amongst the terms of the Facility is as follows:
[15] Upon acceptance of the Facility, 5 separate Al-Bai Bithaman Ajil ("BBA") Facilities Agreements has been executed between the Borrower and Malayan Banking Berhad as follows:
1. Al-Bai Bithaman Ajil [1] ("BBA-1")
(a) Asset Purchase Agreement dated 15 February 2006
(b) Asset Sale Agreement dated 15 February 2006
(collectively referred to as "the BBA -1 Facility Agreements")
2. Al-Bai Bithaman Ajil
