Universal Health Care (R&D) Sdn Bhd v Ramli bin Md Saleh & Ors

Appellant(s): Xxxx

Respondent(s):

• Ramli Bin Md Saleh
• Khairul Yusri Bin Mohd Yaacob
• Mohd Zulkifli Bin Said
• Talam Transform Berhad

• YAA Datuk Seri Hashim Bin Hamzah
• YA Dato' Mohd Nazlan Bin Mohd Ghazali
• YA Dato' Collin Lawrence Sequerah

• The appellant, a creditor holding a Consent Judgment against a wholly-owned subsidiary ("the debtor company") of the fourth respondent (a listed holding company), sued the debtor's former directors and the holding company under section 304 of the Companies Act 1965 (fraudulent trading) and for conspiracy to defraud, alleging that a write-off/waiver of intercompany debts left the debtor insolvent and unable to satisfy the judgment.
• The debtor company had been a "Seller" in a Sukuk Al-Ijarah financing structure, selling a property to a special purpose vehicle, which was later pre-sold to a third party with proceeds used to partially redeem the Sukuk; the debtor's audited accounts nonetheless recorded increasing "advances" owed by the holding company and related companies, which were later assigned, written off and waived shortly after the Consent Judgment was entered.
• Both the High Court and the Court of Appeal dismissed the claim, finding no fraud; the appellant obtained leave to raise 10 questions of law before the Federal Court concerning reliance on audited accounts, the legal effect of Sukuk Al-Ijarah asset sales, and the distinction between debt write-off and waiver.

• Whether accounting entries in audited financial statements (recording "advances" owed to the debtor company) are legally binding or sufficient, under section 34 of the Evidence Act 1950, to establish an enforceable debt, or whether primary legal documentation must prevail over accounting treatment based on economic substance.
• Whether, under the terms of the Sukuk Al-Ijarah transaction documents, the debtor company retained beneficial ownership of the underlying property (and its sale proceeds) after the initial sale to the special purpose vehicle, or whether it held the property merely as bare trustee for the Sukuk Trustee/Sukuk holders, and whether the Federal Court's reasoning in Maple Amalgamated (on Bai Bithaman Ajil facilities) applies equally to Sukuk Al-Ijarah structures.
• Whether the assignment, write-off and waiver of the disputed intercompany balances constituted fraudulent trading or conspiracy to defraud the creditor, and whether the Court of Appeal's decisions departed impermissibly from the pleaded case.

• The Court held that under the Sukuk Al-Ijarah transaction documents (the Asset Purchase Agreement, Declaration of Trust, Trust Deed and Deed of Conveyance), the entire beneficial ownership of the property had been transferred to the special purpose vehicle and ultimately the Sukuk Trustee for the Sukuk holders, with the debtor company remaining only a bare trustee; consequently the proceeds from the property's subsequent sale belonged to the Sukuk holders, not the debtor company, and could not constitute "advances" owed to it.
• The Court affirmed that accounting entries are, per section 34 of the Evidence Act 1950 and established authority, merely relevant but not conclusive evidence of legal liability; economic-substance accounting treatment does not override the true legal position established by underlying transaction documents, and the "default accounting entries" here did not reflect real, enforceable debts.
• Since no legally enforceable debt existed, the assignment, write-off and waiver exercise could not amount to fraudulent trading or conspiracy to defraud (dishonesty being an essential but absent element); the Court declined to answer several questions as hypothetical, fact-specific, or not of public interest, affirmed the Court of Appeal's concurrent findings, and dismissed the appeal with costs, while separately flagging (without making findings) governance concerns over the appointment of unqualified nominee directors to the debtor company.