1. ) AHMAD SYAFIQ BIN ABD LATEB 2. ) Sharifah Noorazaliah Binti Sy A Shahabudin [Yang Kesemuanya Membawa Guaman Untuk Pihak Sendiri Sebagai Rakan Kongsi Terhad/pelanggan Dalam Perjanjian Rakan Kongsi Liabiliti Terhad Dan Perjanjian Tawarruq, Dan Juga Untuk Mewakili individu-individu lain yang telah melanggan dalam Perjanjian Rakan Kongsi Liabiliti dan Perjanjian Tawarruq sepertimana yang disenaraikan dalam Lampiran 1 yang dikepilkan bersama Writ ini] v 1. ) EAS MANAGEMENT PLT 2. ) ABU ASWAD B...

Case Significance

Illustrates that a promoter of a Shariah-compliant tawarruq investment cannot escape a contractual obligation to make scheduled payments merely by asserting that the venture has not yet turned a profit: the court entered judgment for one group of subscribers in RM3,108,685.30 with interest while dismissing another group's claim, with costs against all defendants.

This High Court decision at Shah Alam, delivered by Judge Noor Hayati binti Haji Mat, concerns a representative action by subscribers to an Islamic investment scheme alleging misappropriation of their funds. The plaintiffs sued on their own behalf as limited partners and subscribers under a limited liability partnership agreement and a tawarruq agreement (a Shariah-compliant commodity-based financing structure), and also in a representative capacity for other subscribers listed in a schedule to the writ. Their case was that the defendants, including the corporate defendant EAS Management PLT and others, had conspired and made fraudulent misrepresentations to misappropriate the subscribers' funds under the pretence of a Shariah-compliant investment, and that the operating entities had failed to make the payments scheduled under the terms of the agreements. The defendants sought to answer the claim by asserting, among other things, that the venture had simply not progressed enough to generate a profit.

The court found substantially in the plaintiffs' favour. It held that merely asserting that the company had not progressed far enough to make a profit was not a sufficient answer to the contractual obligation to make the payments the agreements stipulated, so that the failure to pay as scheduled amounted to a breach. Distinguishing between the different groups of subscribers, the court entered judgment for the plaintiffs listed in one schedule (Lampiran 2) in the sum of RM3,108,685.30 together with interest as claimed, while dismissing the claim by the plaintiffs listed in a further schedule (Lampiran 3). It ordered all the defendants to pay the plaintiffs costs of the action of RM15,000, subject to allocatur. The judgment illustrates that a promoter of a profit-sharing investment cannot escape a contractual payment obligation merely by pointing to the venture's lack of profit, and shows how a representative action distinguishes between subscriber groups when awarding relief.