Special Court orders ex-ruler to pay US$ 1 million debt
A Special Court court ordered the country's former king to settle a US$1 million (S$1.48 million) debt to a bank in a landmark verdict, ending a centuries-old tradition of shielding sultans from legal prosecution. The case, brought by Standard Chartered Bank against Tuanku Ja'afar Tuanku Abdul Rahman, was the first trial involving a Malaysian monarch since a 1993 constitutional amendment dissolved the immunity of state rulers from criminal and civil lawsuits. It ordered Yang Di-Pertuan Besar of Negri Sembilan Tuanku Ja’afar Tuanku Abdul Rahman to pay nearly US$1mil (RM3.5mil) to Standard Chartered Bank Malaysia Bhd to honour his commitment in a letter of credit over a business deal.
A special panel consisting of Chief Justice Abdul Hamid Mohamad, who sat with Chief Judge of Malaya Justice Alauddin Mohd Sheriff, Chief Judge of Sabah and Sarawak Justice Richard Malanjum and Federal Court judges Justices Ariffin Zakaria and Zulkefli Ahmad Makinudin, unanimously allowed the bank’s suit against the former King.The court was set up to hear cases involving royalty - this is its first trial involving royalty which was disposed of on Wednesday.
The suit arose after Tuanku Ja’afar had on Feb 12, 1999 established through the bank a Standby Letter of Credit (SBLC) valued at US$1mil made in favour of the Connecticut Bank of Commerce (CBC) in the United States for credit facilities to be extended to a US company called Texas Encore LLC (TEC). Tuanku Ja'afar was Malaysia's King at the time. The bank had required Tuanku Ja’afar to execute a security for the SBLC in the form of a letter of set-off over a fixed deposit in the sum of RM4.18mil in its Seremban branch.Tuanku Ja’afar had obtained an injunction on Dec 29, 1999 restraining CBC from making a call on the SBLC and restraining the bank from uplifting the fixed deposit under the letter of set-off.
On Wednesday, the Bench granted the bank’s application to withdraw the required amount from Tuanku Ja’afar’s fixed deposit account.The five-men panel also dismissed with costs a counter-suit filed by the former King seeking for a declaration that the bank was not entitled in law to uplift his fixed deposit in settlement of any liability arising from the said SBLC.Justice Abdul Hamid read out the 32-page judgment over the two suits on his last day sitting on the Bench as the top judge of the country. He said: “By merely looking at the documents alone, there is not the slightest doubt that the Standby Letter of Credit in question is an irrevocable one.SBLC is an irrevocable SBLC from its effective date on Feb 11, 1999.An irrevocable SBLC cannot be revoked unilaterally by the customer,” he said.
Justice Abdul Hamid further said that an irrevocable SBLC could only be revoked or rescinded with the consent of the beneficiary.“Neither should the issuing bank (Standard Chartered) be held liable simply because it assisted Tuanku Ja’afar to convey his intention or decision to rescind the irrevocable SBLC to the beneficiary, CBC, something it did out of respect for his status while repeatedly stressing its position that consent of the beneficiary was necessary to rescind the irrevocable SBLC,” he said.“Under the circumstances, we hold that the irrevocable SBLC was not legally revoked or rescinded,” he said.He added that the Bench “sees no merit in Tuanku Ja’afar relying on the injunction order in both suits”.“The learned counsel has argued that the loan was never released to TEC in November/December 1999 for US$1mil and therefore the certification of indebtedness dated Dec 22, 1999 and Dec 23, 1999 were false documents intended to defraud the paying bank.
“However, this submission runs counter to Tuanku Ja’afar’s pleaded case in the statement of claim. It is trite law that parties are bound by their pleadings. Thus, the learned counsel cannot now be heard to submit otherwise,” he said.
The bank had claimed that pursuant to the terms of the irrevocable SBLC facility and the Documentary Credit Application, it was entitled to be reimbursed by the defendant the sum of US$999,772.44.
On Wednesday, the Bench granted the bank’s application to withdraw the required amount from Tuanku Ja’afar’s fixed deposit account.The five-men panel also dismissed with costs a counter-suit filed by the former King seeking for a declaration that the bank was not entitled in law to uplift his fixed deposit in settlement of any liability arising from the said SBLC.Justice Abdul Hamid read out the 32-page judgment over the two suits on his last day sitting on the Bench as the top judge of the country. He said: “By merely looking at the documents alone, there is not the slightest doubt that the Standby Letter of Credit in question is an irrevocable one.SBLC is an irrevocable SBLC from its effective date on Feb 11, 1999.An irrevocable SBLC cannot be revoked unilaterally by the customer,” he said.
Justice Abdul Hamid further said that an irrevocable SBLC could only be revoked or rescinded with the consent of the beneficiary.“Neither should the issuing bank (Standard Chartered) be held liable simply because it assisted Tuanku Ja’afar to convey his intention or decision to rescind the irrevocable SBLC to the beneficiary, CBC, something it did out of respect for his status while repeatedly stressing its position that consent of the beneficiary was necessary to rescind the irrevocable SBLC,” he said.“Under the circumstances, we hold that the irrevocable SBLC was not legally revoked or rescinded,” he said.He added that the Bench “sees no merit in Tuanku Ja’afar relying on the injunction order in both suits”.“The learned counsel has argued that the loan was never released to TEC in November/December 1999 for US$1mil and therefore the certification of indebtedness dated Dec 22, 1999 and Dec 23, 1999 were false documents intended to defraud the paying bank.
“However, this submission runs counter to Tuanku Ja’afar’s pleaded case in the statement of claim. It is trite law that parties are bound by their pleadings. Thus, the learned counsel cannot now be heard to submit otherwise,” he said.
The bank had claimed that pursuant to the terms of the irrevocable SBLC facility and the Documentary Credit Application, it was entitled to be reimbursed by the defendant the sum of US$999,772.44.
Standard Chartered sued Tuanku Ja'afar in 2005 for failing to pay the bank US$1 million. It said it was entitled to be reimbursed the sum of money, which could be recovered from his fixed deposit account. But Tuanku Ja'afar filed a countersuit, seeking a declaration that the bank was not entitled in law to uplift his fixed deposit to settle the debt. His lawyers said he had tried to revoke the contract and refused to pay the debt. In his statement of defence and in his suit against the bank, he claimed that after the credit facilities were established, Texas Encore had not notified him for some months of any progress of the plant. He said he grew apprehensive and, in a letter dated April 6, 1999, wrote to the bank asking for the contract to be suspended. He contended that his personal representative, Datuk Hari Menon, had discussed the matter with Standard Chartered and was advised that the contract could not be revoked except with the consent of CBC as the beneficiary. He said Standard Chartered had, via telex, informed the US bank of the notice of rescission. Both suits were filed in 2005 at the Putrajaya Special Court, which was set up to hear cases involving members of royalty.
Standard Chartered's 2005 lawsuit marked the first successful attempt to take a ruler to trial. The bank’s lead counsel Robert Lazar said the ruling meant that Standard Chartered’s Seremban branch could now withdraw the said amount from the former King’s fixed deposit account.Mr Lazar also said Tuanku Ja'afar cannot appeal against the verdict and Standard Chartered will be able to recover the money from his bank deposits.
Later, Justice Abdul Hamid recorded his appreciation to his four fellow judges for their contributions in the preparation of the judgment and called photographers to snap their photographs and those of the lawyers inside the courtroom.“I thank you all for your assistance and may God bless you all.“We will allow pictures to be taken as it will go to archives. Fifty years later, (all) can see how young we look, “ he said to the laughter at the courtroom.
Later, Justice Abdul Hamid recorded his appreciation to his four fellow judges for their contributions in the preparation of the judgment and called photographers to snap their photographs and those of the lawyers inside the courtroom.“I thank you all for your assistance and may God bless you all.“We will allow pictures to be taken as it will go to archives. Fifty years later, (all) can see how young we look, “ he said to the laughter at the courtroom.
The 86-year-old royal head of southern Negri Sembilan state served as Malaysia's constitutional monarch between 1994 and 1999, in a unique system that allows nine hereditary state rulers to take turns being King for a five-year term. Malaysia's monarchy has a largely ceremonial role but it commands wide public respect, particularly among the ethnic Malay Muslim majority, who regard the King as the supreme upholder of Malay tradition and the symbolic head of Islam. Sultans had long remained above the law until the government made dramatic changes to the Constitution in 1993 following a state ruler's alleged assault of a hockey coach. However, Standard Chartered's 2005 lawsuit marked the first successful attempt to take a ruler to trial. Mr Lazar said Tuanku Ja'afar cannot appeal against the verdict and Standard Chartered will be able to recover the money from his bank deposits.
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