1. Case name Tinta Press Sdn Bhd v Bank Islam (M) Bhd
Judgment (1) The transactions between the parties were above board
and made with the full knowledge of the defendant who
knew that the entire exercise was to implement the
grant of a loan to him in such a way as to bring the loan
transaction within the limits of Islamic Law. His
knowledge of this is evidenced by his acceptance of the
letter of offer containing all the terms of the loan. In the
circumstances the parties were ad idem in treating the
amount of RM583,000 as the facility amount given to
the defendant by the plaintiff, which amount coincided
with the price of the land in the second sale and
purchase agreement whereby the land was resold to the
defendant and for which the charge was meant to
secure. This being the case, this Court can only accept
the plaintiff's statement of the amount of advance under
O.83 r.3(3)(a) as being RM583,000. The amount is in
accord with the intention of the parties and the
defendant cannot now dispute the amount.
(2) In any event the words "except where the Court in any
case or class otherwise directs" in the preambular part
of r.3(3) of O.83 RHC indicates that the Court may
exercise its discretion to allow a certain flexibility in
the requirements of that provision in particular cases.
The instant case is one instance where such discretion
should be exercised.
(3) A reading of r.3(3) of O.83 RHC in the context of the
purpose of the whole order can only lead to one
reasonable interpretation and that is, that there must be
an amount of interest or an amount of instalment in
arrears at the given date, but not necessarily both. The
crucial precondition is the fact of default of payment of
whatever amount. In the present case there is no
question of there being any interest because of the
Islamic nature of the loan. Be that as it may, as the
defendant's default is in respect of the instalment
payments and as this has been duly particularised by
the plaintiff, there has been compliance with the said
provision.
Note ISLAMIC CONTRACT OF BBA UPHELD
The court took the approach that the defendant when
signing the agreements was fully aware of the nature and
consequences, and he is now estopped from denying that
the plaintiff has the right to claim from him the total sale
price indicated in the property sale agreement. It will be
inequitable to allow the defendant’s claim where he
himself has willingly entered into the contract in the first
place.
3. Case name Dato’ Hj Nik Mahmud Daud v Bank Islam Malaysia Bhd
Citation [1998] 3 CLJ 605
Court / Date Court of Appeal, KL / 8 June 1998
decided
Facts • The plaintiff, on 6 May 1984, had executed two
agreements, namely the 'property purchase agreement'
and the 'property sale agreement' with the defendant
under the defendant’s BBA property financing facility.
There was a purchase by the defendant through the
former agreement of properties ('the said lands') for a
price of RM520,000 which were then resold through
the latter agreement to the plaintiff for RM629,200.
Both the agreements were signed comtemporaneously.
On 8 May 1984, the plaintiff's attorney executed two
charges of the said lands in favour of the defendant as
securities for a loan of RM629,200, which loan was
purportedly granted under the Islamic banking concept
of Al Bai Bithaman Ajil.
• In this action, the plaintiff applied for an order that the
charges dated 8 May 1984, the property purchase
agreement and the property sale agreement be declared
null and void and of no effect. It was contended by the
plaintiff that the execution of the property purchase
agreement, the property sale agreement and the charge
documents would clearly tantamount to an exercise to
defeat the very purpose and intention of the Kelantan
Malay Reservations Enactment 1930 ('the Enactment')
and the National Land Code 1965 ('the Code'). Counsel
for the defendant raised various issues to resist the
motion, inter alia, the indefeasibility of the charges
under s 340 of the Code and the interpretation of the
Enactment, vis-a-vis Al Bai Bithaman Ajil transactions.
• The motion was dismissed with costs and the appellant
appealed.
Judgment The court allowed the plaintiff’s application for order for
sale under the NLC.
(1) This court was very much persuaded by the High Court
decision of Mohamad Khalid Rahaman & Anor v
Citibank Bhd & Anor in dismissing the plaintiff’s
application. However, neither of the counsel drew to
the court’s attention that the said High Court decision
had been overruled by the Court of Appeal in Citibank
Bhd v Mohamed Khalid bin Farzalur Rahaman & Anor
Citibank Bhd v Mohamed Khalid bin Farzalur
Rahaman & Anor [2000] 4 MLJ 96. Accordingly, based
on the principle of stare decisis, this court was clearly
in error in dismissing the plaintiff’s application.
(2) As in the High Court cases of Mohamad Khalid
Rahaman & Anor v Citibank Bhd & Anor and OCBC
Bank (M) Bhd v Gunasegaran a/l Arunasalam [2000] 6
MLJ 859, the instant decision to dismiss the plaintiff’s
application was based on the more restrictive
interpretation of s 254 of the NLC, which had been
ruled by the Court of Appeal to be erroneous. In the
circumstances, the dismissal of the plaintiff’s
application cannot be upheld.
Judgment The court allowed the appeal, granted the order for sale.
(1) Although the facility was an Islamic banking facility,
that did not mean that the law applicable in this
application was different from the law that was
applicable if the facility was given under conventional
banking. The charge was a charge under the National
Land Code. The remedy available and sought was a
remedy provided by the Code. The procedure was
provided by the National Land Code and the Rules of
the High Court 1980. The court adjudicating it was the
High Court. So, it was the same law that was
applicable, the same order that would be, if made, and
the same principles that should be applied in deciding
the application.
(2) It was clear that the first installment should be paid
after the appellant bank released the facility to the
marginal deposit account. Clause 3.1 of the second
agreement talked about the first release of the facility
but nothing was mentioned about the amount of first
release. ‘First release’ was not defined either, but it said
that upon the first release being made the installment
period began to run. That there was a ‘first release’ or
‘releases’ was beyond any doubt. The installments
became payable and were paid partly. In the
circumstances, the demand could not be said to be
premature. There was nothing that brought it within the
three categories of cause to the contrary established in
Low Lee Lian v Ban Hin Lee Bank Bhd [1997] 1 MLJ
77. In the circumstances, the respondent failed to show
a cause to the contrary that warranted the refusal of the
order.
Judgment The court granted order for sale of defendant's property for
a reduced sum.
(1) The non-compliance of O.83 r.3(7) RHC was curable
by virtue of O.1A and O.2 r.3 RHC. The court shall
have regard to the justice of the case rather than non-
compliance of the rules. Further, the defendant was not
prejudiced by the non-compliance thereof.
(2) The defendant had not shown to the court that she had
satisfied the pre-conditions for the plea of non est
factum to apply. As such, that allegation should be
dismissed.
(3) The case of Affin Bank Bhd v. Zulkifli Abdullah was an
authority for the proposition that it would not be
equitable to allow the bank to recover the sale price as
defined when the tenure of the facility was terminated
prematurely. Further, it was in the public interest that
the Islamic Banking industry continued to flourish in
this country and abroad. Adopting the interpretation
given by the learned judge in the Affin case would
enhance the process.
Judgment The Court allowed the appeal with costs here and below.
(1) The trial judge’s comparison between a BBA contract
and a conventional loan agreement was not appropriate.
A BBA contract was a sale agreement whereas a
conventional loan agreement was a money lending
transaction. As such, the profit in a BBA contract is
different from the interest arising in a conventional loan
transaction. Thus, the trial judge was plainly wrong
when he equated the profit earned by BIMB as being
similar to riba or interest when the two types of
transaction cannot be similar and when the BBA
contract is in fact a trade transaction. Further, the
comparison between a BBA contract and the
conventional loan agreement is of no relevance and
serves no purpose as the law applicable in a BBA
contract is no different from the law that is applicable
in a conventional loan agreement. The law is the law of
contract and if the contract is not vitiated by any
vitiating factor such as fraud, coercion, undue
influence, etc the court had a duty to protect the
sanctity of the contract entered into between the parties.
(2) By replacing the sale price under the PPA with an
equitable interpretation of the same and by substituting
the obligation of the customer to pay the sale price with
a loan amount and profit computed on a daily basis the
trial judge was in fact rewriting the contract for the
parties. It is trite law that the court should not rewrite
the terms of the contract between the parties that it
deems to be fair or equitable.
(3) The trial judge had misinterpreted the meaning of
‘Islamic banking business’ under s 2 of the Islamic
Banking Act 1983 (‘the Act’). ‘Islamic banking
business’ as defined in s 2 of the Act does not mean
banking business whose aims and operations are
approved by all the four mazhabs. Further, the judges in
civil courts should not take it upon themselves to
declare whether a matter is in accordance to the religion
of Islam or otherwise as it needs consideration by
eminent jurists who are properly qualified in the field
of Islamic jurisprudence. Moreover, as we had the legal
infrastructure to ensure that Islamic banking business as
undertaken by the banks in this country did not involve
any element not approved by Islam, the court had to
assume that the Syariah Advisory Council under the
aegis of Bank Negara Malaysia had discharged its
statutory duty to ensure that the operation of the Islamic
banks was within the ambit of Islam.
(4) In any event it was clear that the validity and
enforceability of the BBA contract had been ruled upon
by the superior courts. It is trite law that based on the
doctrine of stare decisis a decision of the superior court
is binding on all courts below it. In the light of this, the
trial judge ought to have held himself bound by those
decisions instead of ignoring or disregarding the
decisions of the Supreme Court or the Court of Appeal
as that would create misapprehensions in the judicial
system.
Judgment The court allowed the appellant’s appeal, and decided that
this is a fit and proper case for full trial and cannot and
should not be disposed off summarily. It is trite that the
BBA concept is valid and is now widely used.
Judgment The court allowed the appellant’s appeal, and decided that
this is a fit and proper case for full trial and cannot and
should not be disposed off summarily. It is trite that the
BBA concept is valid and is now widely used.
Judgment The court dismissed the appellant’s appeal, and upheld that
operations of financing facility under the contract of BBA.
The court held that there are no triable issues to move a
full trial.