CASE OF THE WEEK

HEADNOTES

Bank Islam Malaysia Berhad ('Bank Islam') filed a debt recovery action against Tan Sri Abdul Khalid bin Ibrahim ('Khalid') based on a Bai Bithaman Ajil facility ('BBA Facility') executed between the parties. In an earlier suit against Bank Islam, Khalid alleged the bank had acted in defiance of a collateral contract between the parties in terminating the BBA Facility. In its suit, Bank Islam had obtained summary judgment against Khalid but the Court of Appeal set it aside and ordered a trial as the views of experts concerning the Islamic financing facility conflicted. When resisting the summary judgment application, as well as in his statement of defence, Khalid had challenged the validity of the BBA Facility agreements and the legality of Bank Islam's sale of certain pledged shares as being contrary to Islam and/or Syariah principles. Bank Islam then applied (vide encl. 59) under s. 56 of the Central Bank of Malaysia Act 2009 ('CBMA') for the court to refer certain Syariah questions to the Syariah Advisory Council of Bank Negara Malaysia ('SAC') for its ruling. Khalid objected to encl. 59, inter alia, on the ground (i) the court had previously made such a reference to the SAC at the summary judgment stage and was now estopped from repeating the procedure and (ii) that besides contravening the Federal Constitution, ss. 56 and 57 of CBMA came into effect after the instant actions were filed and thus they could not operate retrospectively to negate his substantive right to call expert witnesses to testify on matters involving Syariah or Islamic law.

Held (allowing encl 59 with costs):

(1) Sections 56 and 57 of the CBMA were procedural in nature. There was no adverse impairment of any pre-existing substantive right of Tan Sri Khalid. It entailed nothing more than the application of a new procedure as far as Syariah issues were concerned; the only difference being that as from 25 November 2009, the court's discretionary power, that existed under s 16B (8) of the repealed Central Bank Act 1958, was taken away and the ruling of the SAC was binding on the Court. (paras 36 & 43)

(2) The proposition that Tan Sri Khalid had a vested right to lead expert evidence was untenable because the SAC was a statute-appointed expert tasked with ascertaining Islamic law for Islamic financial business since the amendment to the Central Bank Malaysia Act 1958 in 2003, well before the instant action was brought before the court. (para 44)

(3) Sections 56 and 57 of CBMA were valid federal laws enacted by Parliament pursuant to Item 4(k) of the Federal List (List I) in the Ninth Schedule of the Federal Constitution. Should there be any question concerning a Syariah matter, the Court had to invoke s. 56 (para 45)

(4) The letter from the court to the SAC at the summary judgment stage merely enquired if there was any existing resolution passed by SAC in respect of BBA contracts. It was not a reference to SAC for a ruling on a Syariah issue. (paras 28-29)

(5) The SAC did not perform a judicial or quasi-judicial function. Its function was confined to the ascertainment of Islamic law on a financial matter. The court still had to decide the ultimate issues which had been pleaded. (para 45)

Case(s) referred to:

Bank Islam Malaysia Bhd v. Lim Kok Hoe & Anor And Other Appeals [2009] 6 CLJ 22 CA (refd)

Bank Shamil of Bahrain v. Beximco Phamaceutical Ltd & Others [2004] All ER (D) 280 (refd)

Curtis v. Johannesburg Municipality 1906 TS 308 (refd)

Gerald Fernandez v. Attorney-General, Malaysia [1970] 1 LNS 27 FC (refd)

Goopan Govindasamy v. A Subramaniam & Anor [1980] 1 LNS 22 FC (refd)

Haw Tua Tau v. PP [1978] 1 LNS 60 HC (refd)

Howard Smith Paper Mill Ltd et al v. The Queen [1957] SCR 403 (refd)

Keith Sellar v. Lee Kwang and Tennakon v. Lee Kwang [1980] 1 LNS 36 FC (refd)

Khajah Husain 'Ali v Shazadih Hazari Begum, 12 WR (refd)

L'Office Cherifien des phosphates v. Yamashita-Shinnihon Steamhip Co Ltd [1994] 1 AC 486 (refd)

Lee Chow Meng v. PP [1978] 1 LNS 88 FC (refd)

Lim Phin Khian v. Kho Su Ming [1996] 1 CLJ 529 SC (refd)

Lim Sing Hiaw v. PP [1964] 1 LNS 92 FC (refd)

Maxwell v. Murphy [1957] HCA 7 (refd)

Newell v. The King [1936] HCA 50 (refd)

Tan Sri Abdul Khalid Ibrahim v. Bank Islam Malaysia Bhd & Another Case [2010] 4 CLJ 388 HC (refd)

Tribunal Tuntutan Pembeli Rumah v. Westcourt Corporation Sdn Bhd & Other Appeals [2004] 2 CLJ 617 CA (refd)

Yew Bon Tew v. Kenderaan Bas Mara [1983] AC 553 (refd)

Legislation referred to:

Central Bank of Malaysia Act 1958 (repealed), s. 16B(8)

Central Bank of Malaysia Act 2009, ss. 56(1)(b), 57

Federal Constitution, arts. 8, 74 part ix

Other source(s) referred to:

Engku Rabiah Adawiah Engku Ali, Constraints and Opportunities in Harmonization of Civil Law and Shariah in the Islamic Financial Services Industry [2008] 4 MLJ i

Islamic Banking: Perspective on Recent Case Development [2009] 1 MLJ xci

For the plaintiff - Malik Imtiaz (Mathew Philips, Asma Mohd Yunus, Azinuddin Karim & Janine Gill with him); M/s Thomas Philip

For the defendant - Alan Adrian Gomez (Ganesan Nethi with him);
M/s Tommy Thomas

Reported by Ashok Kumar