PUTRAJAYA (April 28): The Court of Appeal dismissed a motion by Aries Telecoms (M) Bhd’s guarantors Zavarco Bhd and Zulizman Zainal on Tuesday to disqualify Messrs Lee Hishammuddin Allen & Gledhill (LHAG) and its counsel, Kumar Kanagasingam from representing Bank Pembangunan Malaysia Bhd in their counterclaim against the bank.
A three-member bench led by Datuk Lim Chong Fong unanimously dismissed Zavarco and Zulizman’s motion and ruled that the application filed under Rule 28(b) of the Legal Profession Act does not apply to the facts pleaded. Rule 28(b) states that a lawyer cannot appear in an appeal if they were a witness on an important disputed fact in the lower court, but the court found this condition was not met.
Hence, the bench that consisted of Datuk Ong Chee Kwan and newly elevated Court of Appeal judge Datuk Ahmad Shahrir Mohd Salleh, dismissed the motion and ordered them to pay RM20,000 costs.
Zavarco is the corporate guarantor and Zulizman is the personal guarantor for Aries Telecoms’ RM400 million loan from Bank Pembangunan in 2012.
The guarantors filed the motion against the law firm and Kumar, arguing there could be a conflict of interest as they might become witnesses in the appeal of the August 2022 suit to set aside the 2019 summary judgment and seek damages.
Bank Pembangunan obtained a summary judgment against Zavarco and Zulizman on May 9, 2019 after Aries Telecoms failed to repay its RM400 million loan. This led to Zavarco being liquidated and a receiver being appointed for Aries.
Zavarco and Zulizman filed a counterclaim against the bank, but it was struck out by the High Court. However, in November 2021, the Court of Appeal upheld the summary judgment but reinstated their counterclaim. The Federal Court later rejected their final attempt to challenge the judgment in April 2022.
In June 2022, Bank Pembangunan filed a separate lawsuit against its former president and 29 others over alleged corruption and fraud linked to the loan.
Following the reinstatement of their counterclaim, Zavarco and Zulizman filed another suit in August 2022 to set aside the 2019 judgment and seek damages, but the High Court struck it out in August 2023. They have since filed an appeal.
Position of conflict as they may be witness
Zavarco and Zulizman’s appeals over the counterclaim and their new suit to overturn the 2019 summary judgment and seek damages will be heard at the Court of Appeal on June 23.
Their lawyer, Gavin Jay Anand Jayapal, argued that the bank’s law firm (LHAG) and its lawyer Kumar should be removed from the case because they may need to act as witnesses if the case to set aside the 2019 judgment and seek damages is reinstated.
He said the lawyers had previously told the court there was no bribery or corruption in the 2018 case, but in a 2022 lawsuit they later included such allegations. He claimed this was inconsistent and could create a conflict of interest.
Gavin Jay also argued that if the case is reopened, the lawyers might have to testify, so they should not continue representing the bank.
However, Justice Ong in reading the bench’s ruling said that if there are issues to be proven, it should be bank officials — not the lawyers — who testify, since they are the ones responsible for the bank’s decisions.
2022 suit must be understood in proper context
Bank Pembangunan’s lawyer, Kumar, said the 2022 allegations of corruption, fraud, and conspiracy must be considered in their proper context, as they relate only to actions against former bank officers for misconduct, not to the loan agreement itself.
He said the 2022 suit would not affect the bank’s contractual rights to recover (the funds) under the facility (loan) and does not constitute a material fact for the purposes of the 2018 suit.
Kumar also added that issues of corruption and bribery should be decided at trial, and the apex court has previously noted that banks must still be able to recover loans even if some officers were corrupt; otherwise, banks and financial institutions would fail.
The 2022 Bank Pembangunan lawsuit was struck out by High Court judge Datuk Quay Chew Soon. The judge ruled that the bank did not have legal standing (locus standi) to bring the case, and that the matter had already been decided in the 2018 case (res judicata).
The case involved the RM400 million loan to Aries Telecoms in 2012 and named 30 individuals and companies.
The judge also said any misuse of the loan should be dealt with by Aries, the borrower, and noted that the earlier lawsuit did not allege wrongdoing in how the loan was used.
Three key figures charged
Three key individuals have been charged this year in connection with the RM400 million Bank Pembangunan loan case involving Aries Telecoms.
On Monday, former Silver Ridge director Wong Chee Keong was charged with allegedly submitting a false declaration related to an engineering project to deceive the bank’s officer.
Last week, businessman Shailen Popatlal (also known as Shailen Gajera) faced charges of money laundering and using forged documents. He is accused of moving over RM128 million and using fake documents to secure the RM400 million loan.
Former Aries Telecoms director Datuk Ranjeet Singh Sidhu was charged earlier in February with graft and using forged documents. He is also accused of offering an RM8 million bribe to help secure the loan.
The case is linked to a fibre-optic network project by Aries Telecoms across Peninsular Malaysia which never took off.