Friday, January 1, 2010

Understanding the Kelantan RM800 million case.

Reading the Statement of Claim itself is already very interesting. Happy reading...

CIVIL SUIT NO: 21-5-2004 


Syarikat Kemajuan Timbermine Sdn. Bhd.         …Plaintiff


State Government of Kelantan                          …Defendant


1.  The Plaintiff is a private limited company incorporated under the Companies Act 1965 having a registered address at 61-A, Jalan Jejaka 2, Taman Maluri, Cheras, 55100 Kuala Lumpur and having its business registered at address at    No. 9 Jalan Pasar, 41400 Klang, Selangor Darul Ehsan.

2. The Defendant is the State Government of Kelantan having its address at Pejabat Menteri Besar, Kota Darul Naim, 15502 Kota Bharu, Kelantan Darul Naim.

3. Pursuant to an agreement in writing dated 20-7-1964 (“Principal Agreement”) made between Timbermine Industrial Corporation Limited (“the Company”) and the Defendant, the Defendant granted to the Company inter alia the right to log
and extract timber according to log and extract timber according to the annual-extraction-quota in the specified area as described in the Principal Agreement.

4. The following are inter alia the express terms of the Principal Agreement.

4.1  That the Defendant shall give full authority to the Company or its    subsidiary company, their servants, agents, workmen, and assigns to enter upon the land described in the Schedule (“the Specified Area”) for a period of 33 years from the date of the Principal Agreement.

4.2  That the Specified Area means all that the state land being part of the area delineated extending to 510, 239 acres.

4.3  That the company shall pay a repayment in respect of royalties to the Defendant the sum of RM 2 million by way of 2 installments of RM 1 million each, the 1st installment to be made upon the signing of the said Principal Agreement.

5. Pursuant to the said Principal Agreement, the Company on 20-7-1964 paid to the Defendant the sum of RM I million being the 1st installment.

6. By way of a supplementary agreement in writing dated 6-11-1965 (“the Supplementary Agreement”) made between the Company and the Defendant, the said Principal Agreement was inter alia varied in that the Specified Area shall be reduced to 280,000 acres. 
 (Both the Principal Agreement and the Supplementary Agreement are collectively called “the Agreements”)

7. In 1967, the Federal Government seeking to terminate the Principal Agreement made the Principal Agreement the subject matter for a reference by the Yang Dipertuan Agong  under Article 130 of the Federal Constitution whether the Principal Agreement violated Article 111 (2) and 97 (2) of the Federal Constitution.

 7.1  The Federal Court held that the Principal Agreement does not violate any provisions of the Federal Constitution.

8. On or about 7-2-1970, the rights of the Company were assigned to the Plaintiff.

9.   The Defendant acknowledged the assignment vide letter dated 12-9-1970 that  the 1st installment of RM 1 million paid by the Company to the Defendant shall now be treated as payment made by the Plaintiff.

10. The Defendant however gave notice of termination of the Supplementary Agreements by a letter dated 18-3-75.

11. The Plaintiff refuted the termination stated above through the Solicitors’ letter dated 21-4-1975.  The Plaintiff maintains that the termination was unlawful and in breach of the terms of the Agreements, inter alia for the following reasons (particulars) of unlawfulness :

Particulars of Unlawfulness 

(a) failing to confer on the Plaintiff a notice of show cause before taking any action to terminate for purported breach of Clause 5(b) and therefore, a breach of natural justice;

(b) failing to give the Plaintiff the right to be heard if the Plaintiff’s case could have come within the exceptions in the agreement, in particular Clause 5(b) (iii).  This is yet another breach of natural justice;

(c) failing to consider that since the Plaintiff had prior to the purported termination set up an integrated timber industry by constructing the integrated timber complex .  Clause 6 of the Supplementary Agreement was applicable to deny the Defendant from terminating the Agreements; and

(d) generally, failing to act fairly in favour of the Plaintiff.

12.  In order to induce the Plaintiff to reach an amicable settlement the Defendant in a meeting on 17-6-1975 chaired by the then Minister of Information and Special Functions, YBM Tengku Ahmad Rithaudeen between the representatives of the Plaintiff, the Defendant and the Federal Government warranted and represented to the Plaintiff that a joint venture company shall be incorporated to operate the Specified Area with the Plaintiff’s and Defendant’s shareholding in the joint venture company to be on the ratio of 30% : 70% respectively (“Settlement Agreement”).

12.    As the Defendant failed to unlawfully terminated the Supplementary Agreements with the Plaintiff, in order for an amicable settlement with the Plaintiff, the Defendant through its representatives, Y.B. Datuk Nik Sulaiman who was the State Secretary of the State of Kelantan, Y.B Dr. Nik Hussain bin Haji Abd Rahman who was the EXCO member of the State of Kelantan, En. Mohd Tajul Arus who was the Director of Land and Mines of the State of Kelantan and En. Othman bin Abd Manan who was the Director of the Forestry of the State of Kelantan in a meeting chaired by the then Minister of Information and Special Functions, Yang Mulia Tengku Ahmad Rithaudeen on 17-6-1975 had agreed on behalf of the Defendant to set up a joint venture Company with the Plaintiff based on 70% shareholding owned by the Defendant and 30% of the
shareholding owned by the Plaintiff (“Settlement Agreement”) to carry out the timber industry in the specified area.

13. In reliance of the representation representation and Agreement made by the Defendant on 28-11-1976, the Plaintiff upon the proposal by the Federal Government agreed to additional terms in the Settlement Agreement as follows:

13.1  That the Defendant shall pay the Plaintiff a sum of RM 3.5 million as a gesture of goodwill to maintain a good relationship with the Plaintiff; and

13.2  That the Plaintiff shall not take legal action against the Defendant to enforce their rights to the Specified Area.

14. The Plaintiff thereby and in reliance to the Defendant’s representations under the Settlement Agreement stopped all operations in the Specified Area and entrusted the said Specified area to the Defendant for the joint venture to take place.

15. In reliance of the Settlement Agreement, the Defendant ceased to renew the Plaintiff’s licenses to log timber since 1976 in anticipation of the setting up of the joint venture company with the Plaintiff.

16. The Plaintiff has received the sum of RM 3.5 million from the Defendant being the payment referred to in paragraph 13.1 above under the Settlement Agreement.

17. In reliance of the Settlement Agreement, the Plaintiff had forwarded its working paper on the joint venture company to the Prime Minister’s Department vide its letter dated 16-10-1975 including 10 copies of the working paper to the said department to be distributed to the relevant government authorities of both the State Government of Kelantan and the Federal Government.

18. Due to the Plaintiff stopping operations in the Specified Area, the Plaintiff has incurred the following expenses :-

a) Sawmilling and logging equipment    RM 2.3 m
b) Veneer and plywood equipment    RM 3.2 m
c) Intangible assets      RM 5.6 m
d) Roads, railway sidings, and infrastructures
And development costs.    RM 2.5 m
    TOTAL    RM 13.6 m 

19. On 28-7-1977, the then Secretary to the Defendant, Datuk Nik Sulaiman bin Nik Daud, wrote to the Plaintiff, thanking the Plaintiff for coming to an amicable settlement for and further advised that the State Government was still in the process of studying the future developments and related industries in the Specified Area.

20. Various follow-ups meetings were held with the Defendant between the years of 1984 and 1988 and on each occasion the Plaintiff was told that the Plaintiff’s interest in the Settlement Agreement is being acted upon and the Plaintiff will be informed in due course.

21. Thus the Plaintiff had legitimate expectations of the Defendant being the state government in carrying out its duties and obligations under the Settlement Agreement.

22. In a meeting held sometime in 1989 between the Plaintiff and the Defendant, the then Menteri Besar, Datuk Mohamamad Yaakob, requested for more information regarding the Plaintiff’s interest which the Plaintiff provided promptly vide the Plaintiff’s letter dated 14-11-1989.

23. On 24-1-1995, the Plaintiff, through its solicitors Messrs. Yusof Nor, presented the Plaintiff’s case to the new State Government of Kelantan. Upon the Plaintiff’s follow-up enquiry on 22-10-1996, the Menteri Besar’s office responded stating
that the Plaintiff’s matter is under consideration and action vide the Defendant’s letter dated 10-12-1996.

24. During a meeting on 25-3-2002 with the Plaintiff’s representatives, the Defendant through its then executive councilor (EXCO) of Planning, Finance, and Public Administration, Y.B Takiyuddin Hassan acknowledged that the State Government
was obliged to resolve the Plaintiff’s claim to the joint venture company with the Defendant.

25. Between the years 2002 and 2004, several correspondences took place between the Plaintiff’s previous solicitors, Messrs. Raja Darryl & Loh and the Defendants’ Legal Advisor.

26. In a letter dated 13-8-2002 to the Menteri Besar’s office, a copy of which was extended to the Plaintiff, the then Legal Advisor of the Defendant Tuan Haji Jalaldin bin Hussain, had also advised the Defendant that the Plaintiff’s case had
merits and further suggested that a meeting be convened to find an amicable settlement.

27. To date no action has been taken by the Defendant despite the Defendant’s Legal Advisor’s advice to find an amicable settlement as stated in paragraph 26 above leading the Plaintiff to believe that the Defendant had and has no
intention of fulfilling the Defendant’s part of the covenants and obligations of the Settlement Agreement.

28. Further, in January 2003, in breach of the Settlement Agreement the Plaintiff discovered the following:-

a) that, unknown to the Plaintiff and merely 3 years after the Settlement Agreement was reached, in 1978, the Defendant had fraudulently proceeded to extract all timber from the Specified Area using parties unknown to the Plaintiff and thereafter proceeded to allocate a major portion of the Specified Area to agencies and parties, also not known to the Plaintiff, for development into villages and plantations of rubber, oil palm and other crops; and

b) that, the Defendant had actually proceeded to allocate another forest area of a substantial acreage approximating 218,000 acres of virgin jungle in the district of Kemubu in Kelantan (“the Kemubu Area”) to the
Defendant’s agency known as Perbadanan Kemajuan Iktisad Negeri Kelantan which in turn incorporated a 100% owned subsidiary known as Kompleks Perkayuan Kelantan Sdn. Bhd. to carry out the timber industry in operate the Kemubu area thereby ignoring the Plaintiff’s 30% shareholding stated in paragraph 12 above.

29. Upon discovery of the fraudulent actions of the Defendant in breach of the Settlement Agreement, the Plaintiff had on 16-5-2004, lodged a police report against the Defendant at the Gua Musang Police Station.

30. By reason of the Defendant’s fraudulent and deceitful actions that has led to the Defendant’s non performance of its covenant and obligations of the Settlement Agreement, the Plaintiffs has suffered loss and damage in that it has been deprived of its shares of the joint venture timber business which did not take place.

31. The Plaintiff further suffered loss and damage in that the Defendant had misled and deceived the Plaintiff into stopping timber operations in the Specified Area and in not taking immediate legal actions against the Defendant pertaining to the unlawful termination of the Agreements.
32. The Plaintiff has suffered special damage amounting to RM 13.6 million.

33.   And the Plaintiffs claims:

(1) A declaration that the Settlement Agreement is null and void;

(1A)  Consequently, the Agreements remain valid as their purported termination were unlawful;

(2) An order to the Defendant to do all the necessary acts within a period of six (6) months from the date of this order to be given to the Plaintiff, for the Defendant to obtain virgin forests lands in Kelantan amounting to 280,000 acres (“the New Concession”) of equivalent quality and quantity of timber present in the Specified Area as at the date the Settlement Agreement was entered to be given to the Plaintiff; and

(2) A declaration that the Plaintiff is entitled to 280,000 acres of virgin forest in State lands in Kelantan of equivalent quality and quantity of timber present in the Specified Area as at the date the Settlement Agreement (“the New Concession”); and

(3) An order to the Defendant to restore to the Plaintiff the annual-timber- extraction-quota of the Supplementary Agreement read together with the Principal Agreement for the New Concession; and 

(3)     A declaration that the Plaintiff is entitled to have the timber extraction quota for the 280,000 acres for a period of 33 years from the date of declaration for the New Concession; and

(4) An order to the Defendant to issue or cause to issue all necessary annual permits and logging licenses on time to enable the Plaintiff to carry out its logging activities in the New Concession according to the annual- logging-quota stated in order 3 above; 

(4) A declaration that the Plaintiff is entitled to all necessary annual permits and logging licenses to enable the Plaintiff to carry out its logging activities under the New Concession;

(4A)  In the event the Honourable Court finds claim (1A) above to be appropriate, loss of revenue calculated on “Earning” or “Value” basis;
(5) Alternatively, if the Honourable Court finds the Settlement Agreement remaining valid, loss of profits amounting to RM 840 million (RM3,000/per acre x 280,000 acres) (computed on “earning basis”) or alternatively on
“value basis” (to be computed) basing on the Plaintiff’s 30% interest;

(6) Special damages of RM13.6 million ; 

(7) General damages for breach of contract; 

(8) Interest on damages awarded at the rate of 8% from 28.11.1978 and/or the date of judgment to full realization. 

(9) Costs; and 

(10) Further or other relief as this Court deems fit. 

Dated this 8th day of October 2004 

Solicitors for the Plaintiff 

Dated this again on 26th day of July 2009

Solicitors for the Plaintiff


  1. TO THE PLAINTIFF: There's a MISTAKE here, aiseh... Next time, let me read and edit it first - only RM300. Cheap considering the avoidance of being embarrassed or worse. Look here:

    12. As the Defendant failed to unlawfully terminated the Supplementary Agreements

    Besides the grammatical error "terminated", the more fatal blunder is "unlawfully"; which throws the whole paragraph into disrepute.

    Just imagine what the Plaintiff would have felt - and the irreparable damage to their lawyers' credibility and reputation - had this case been undermined and lost due to this mistake ... of not giving Mat Cendana his RM300!

    [Maaf, Dato' ye - Ni ambik kesempatan untuk iklan sikit]

  2. Thanks MC, surely there is a grammatical error there but the document in Bahasa Melayu is the one used in Court and it is perfectly correct. It should read "lawfully terminated" ie gagal menamatkan perjanjian itu secara sah.
    Aiseh...MC just RM300 when we are talking about almost a billion here!

    {Maaf MC, ambil kesempatan to up your fees a lot here}

  3. Dato', ni kira second round - I've written a post about this too, and had linked it to this post - Kelantan’s RM800 Million Bonanza: Which Monkeys Punya Kerja?

  4. Mana nak dapatkan document dalam bahasa melayu.


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