KUALA LUMPUR (Aug 24): Former 1Malaysia Development Bhd (1MDB) chief executive officer Arul Kanda Kandasamy and former treasury secretary general and 1MDB board member Tan Sri Mohd Irwan Serigar have failed in their bid to strike out a US$6.59 billion lawsuit filed by the state-owned fund against them.

High Court Judicial Commissioner Datuk Raja Ahmad Mohzanuddin Shah Raja Mohzan in dismissing the striking out bid said the matter was not suitable to be decided via affidavits to the court and summary judgement.

“As a result of analysis of all the arguments and issues presented to me and raised by the parties, it is clear that the issues presented to me including allegations of fraud and conspiracy, cannot be decided and resolved merely by affidavits.

“All of the issues before me cannot be resolved by a simple straightforward approach. In other words the assessment of the facts in front of me prevents me from being able to dispose of all the issues in a summary manner as requested by the defendants,” he said.

He said the matter needs to go to trial, and the court needs to hear witnesses from all three parties to come to a decision.

1MDB filed the suit in May 2021 against the duo for alleged breach of fiduciary duty, breach of trust and conspiracy to misappropriate 1MDB funds as well as to execute an employment extension agreement.

In its statement of claim, 1MDB claimed that both Arul Kanda and Mohd Irwan were liable for breach of duties and breach of trust, which resulted in the strategic development company suffering losses amounting to US$1.83 billion in relation to its investment in 1MDB-Petrosaudi Ltd, which was converted into stakes in Brazen Sky Ltd and then converted into an investment in Bridge Global Fund.

It also alleged that Arul Kanda and Mohd Irwan committed a breach of trust and conspiracy by misappropriating US$3.5 billion of 1MDB money and paying it to Aabar Investments PJS Ltd — a shell company pretending to be a subsidiary of International Petroleum Investment Company (IPIC) — and subsequently paying another US$1.265 billion to IPIC in May 2017.

1MDB also claimed that Mohd Irwan had conspired with Arul Kanda to cause the fund to implement an employment extension agreement that resulted in it paying RM2.91 million to Arul Kanda, regardless of 1MDB's interests, causing it to suffer losses and damage.

Among others, the strategic development company is seeking US$6.59 billion from the duo as a result of the purported breaches, and the return of the RM2.91 million from Mohd Irwan in relation to the employment extension agreement.

Mohd Irwan applied to strike out the suit against him in February last year, on grounds that the legal action was premature as 1MDB's claim over its Brazen Sky investment and its payment to Aabar were unsustainable because the court had yet to determine that 1MDB suffered losses of US$1.83 billion and US$3.5 billion from the transactions, as well as who was to be held responsible for the losses. Arul Kanda applied to strike out the suit in June last year.

Raja Ahmad, however, said the dismissal of the striking out application was not the end for Arul Kanda and Mohd Irwan, and assured that the court will hear their arguments when the matter goes to trial.

“The dismissal of these two applications is not the end for the defendants as rest assured that this court will eventually give its utmost attention and consideration to the same arguments raised by the defendants herein along with some other available defences raised at the appropriate stage of proceedings when the time comes, which is the trial itself,” he said, adding that this also applies to the plaintiff in the case, which is 1MDB.

Raja Ahmad further explained that the issues raised by 1MDB in the suit “merit further and thorough” investigation by the court process of a trial.

Counsels Datuk Lim Chee Wee, Brendan Navin Siva, Aida Haryani Salamon and Wong Sze Some appeared for 1MDB.

Arul Kanda was represented by lawyers Lee Leong Soon and Hing Hong Jer, while Mohd Irwan’s legal team comprised counsels Lavinia Kumaraendran, Mavin Thillainathan and Amitaesh Theva.

Raja Ahmad then ordered Arul Kanda and Mohd Irwan to each pay costs of RM10,000 to 1MDB, and fixed Sept 14 for further case management.