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2011 MarsdenLR 2208
COURT OF APPEAL PUTRAJAYA
TAHAN STEEL CORP SDN BHD – Appellant
Versus
BANK ISLAM MALAYSIA BHD – Respondent
[Civil Appeal No: W-02(IM)-1734-2010]
The lawful termination of Islamic financing agreements necessitates the discharge of related security documents, while damages require proof, leading to nominal awards if evidence is insufficient.
Headnote:(A) Judicial Interpretation of Contracts - Islamic Financing Agreements - Al-Istisnaa' Agreements - Breach of Contract - Termination - The court granted a declaration that the plaintiff's termination of the Al-Istisnaa' agreements was lawful. (Paras 5, 90)
(B) Damages - Nominal Damages Award - The court awarded nominal damages of RM50,000 due to insufficient evidence of actual loss. (Paras 49, 90)
(C) Counterclaim - Rights and Obligations - The counterclaim by the defendant was allowed for RM143,590,488.09 minus deductions, despite the plaintiff's breach assertion. (Paras 68, 104)
(D) Legal Principle - A party cannot benefit from its own wrong; counterclaims remain valid despite alleged wrongful actions if separate legal principles govern them. (Paras 59, 96) (E) Dissenting Opinion - There was partial dissent regarding the handling of consequential reliefs and damages assessment. (Paras 70, 90)
Facts of the case:
The plaintiff executed two Al-Istisnaa' agreements for financing a mill project but claimed unlawful termination due to the defendant’s failure to release funds. The defendant counterclaimed based on unpaid sale price under the agreements.
Findings of Court:
The court upheld the termination of the agreements and analyzed the interplay of damages and rights under Islamic finance.
Issues: The main issues included the validity of the termination of contracts and the calculation of counterclaims.
Ratio Decidendi: The court emphasized the independence of financing agreements while reaffirming that parties' obligations end upon lawful termination.
Result: Appeal allowed in part; counterclaim ordered for a modified sum based on the analysis.
The jurisdiction relevant to this case is primarily the Malaysian courts, specifically the Court of Appeal Putrajaya, as indicated by the case's procedural context and location of the decision (!) (!) . The case involves Malaysian law, particularly the Contracts Act 1950 and principles of Islamic finance law, which are applicable within Malaysia's legal framework. The case also references the authority of the High Court of Kuala Lumpur, further establishing the jurisdiction as Malaysia. Therefore, the legal proceedings and rulings are within the jurisdiction of Malaysia's judicial system.
| Table of Content |
|---|
| 1. facts of the case leading to appeals (Para 1 , 2 , 3 , 4 , 5 , 6 , 7 , 8 , 9) |
| 2. details on the appellant's and respondent's appeals (Para 10 , 11 , 12 , 13) |
| 3. court comments on claims and counterclaims (Para 14 , 31 , 34 , 51) |
| 4. delineation of claims by the appellant against the respondent (Para 26 , 27 , 28 , 29) |
| 5. decisions by the high court (Para 32 , 49 , 50) |
| 6. court's analysis of the securities related to termination of contracts (Para 35 , 36 , 37 , 38 , 39 , 40) |
| 7. analysis of damages and liability (Para 41 , 91) |
| 8. court's finding on counterclaim and its implications (Para 59 , 60 , 61 , 62) |
| 9. conclusion and order on appeals (Para 68) |
| 10. conclusion on appellant's claims and the adequacy of proof for damages (Para 93 , 94 , 96 , 99 , 100) |
[1] This is an appeal against the decision of the High Court of Kuala Lumpur of 1 June 2010. Before the High Court, the appellant was the plaintiff, and the respondent, the defendant.
[2] There is also a cross-appeal by the respondent on its counterclaim, but only in respect of quantum.
[3] The claim of the appellant/plaintiff against the respondent/defendant before the High Court is for breach of Islamic financing agreements called Al- Istisnaa' agreements, namely, the Al-Istisnaa' purchase agreement ('the APA') and the Al-Istisnaa' sale agreement ('the ASA). The appellant/plaintiff sought before the High Court several declarations, an injunction and general damages.
[4] The respondent/defendant, on its part, denies that it was in breach of the Al- Istisnaa' agreements and made a counterclaim against the appellant/plaintiff for the full payment of the sale price under the ASA, minus the following sums: (1) the sum under the APA that was not released to the appellant/plaintiff; and (2) the sum that had been paid by the appellant/plaintiff (see para 46 of the statement of defence and counterclaim). The net sum claimed under the counterclaim is RM143,590,488.09 (this is the figure as stated in para 48(a) of the statement of defence and counterclaim).
[5] At the conclusion of the trial, the learned trial judge allowed the appellant's/ plaintiff's claim - but only partially. First, the learned High Court judge granted the appellant's/plaintiff's prayer for a declaration that the termination by the appellant/plaintiff of the Al-Istisnaa' facility agreements, that is, the APA and the ASA dated 14 May 2001 is lawful and valid. That part of the order of the High Court granting the declaration reads:
(1) tuntutan oleh Plaintif untuk satu deklarasi bahawa penamatan Perjanjian-Peijanjian Kemudahan Al-lstisnaa' bertarikh 14.5.2001 oleh Plaintif adalah sah dan mengikut undang-undang, diberikan.
[6] Secondly, the High Court awarded the appellant/plaintiff nominal general damages in the sum of RM50,000.
[7] The High Court, however, dismissed the appellant's/plaintiff's prayer for a declaration that by reason of the lawful and valid termination of the APA and the ASA the respondent/defendant is, as a consequence, not entitled to rely or enforce the securities given by the appellant/plaintiff for the facility agreements (the various security documents eg deeds of assignment, guarantee agreements, debenture, undertaking, are listed in para 33(2) of the statement of claim).
[8] The learned High Court judge also dismissed the appellant's/plaintiff s other consequential claims or reliefs (including a prayer for an injunction to restrain the respondent/defendant from enforcing the securities).
[9] The learned High Court judge, however, allowed the respondent's/ defendant's counterclaim that it be paid in full the sale price under the ASA (minus the undisbursed sum under the APA and the sum paid by the appellant/ plaintiff), but subject to certain deductions.
The Appellant's/Plaintiff's Appeal
[10] The appellant's/plaintiffs appeal is against:
(a) the award of nominal general damages of RM50,000;
(b) the refusal of the High Court to grant consequential reliefs in the form of declarations in respect of the
