KUALA LUMPUR (July 8): Imprisoned former prime minister Datuk Seri Najib Razak has maintained that he was not the 'shadow director' calling the shots in SRC International Sdn Bhd.

"Najib was never a de facto or shadow director of SRC. He did not control the SRC board’s decisions, nor did he owe fiduciary duties to SRC akin to a director," defence counsel Muhammad Farhan Shafee told the High Court on Tuesday in SRC’s ongoing civil suit against the ex-PM.

He added that Najib's "formal roles or shareholder approval rights" are part of "lawful governance structures".

"[This] did not make him the 'controlling mind' of SRC in breach of duty. In other words, responsibility, duty, trust and ultimately liability rest with the board," he said.

Farhan was submitting at the end of the defendant's case in the civil suit, where among others, the company claimed that US$120 million (RM508.62 million) of company funds went into Najib's personal account.

The Finance Ministry-linked company was established in 2011 to seek alternative energy sources, in line with national policy. However, the funds sought were all squandered.  

SRC was once a unit of the scandal-plagued 1Malaysia Development Bhd (1MDB), but came under Minister of Finance Incorporated's (MOF Inc) umbrella in 2012.

In 2010, 1MDB had requested for a RM3 billion grant, to set up a special purpose vehicle, SRC. It was granted only RM20 million, which led them to turn to Retirement Fund Incorporated (KWAP) for funding.

The current legal action, filed in 2021, concerns a RM4 billion loan from KWAP, which was given to SRC in two tranches, in the second half of 2011 and the first half of 2012.

The company is seeking a declaration from the court that Najib is liable to account for the company's losses of US$1.18 billion, due to breach of duties and trust.

It is also asking for an order for Najib to compensate US$120 million, and for former chief executive officer Nik Faisal Ariff Kamil to pay US$2 million to SRC, as well as damages.

This matter is different from Najib's criminal case where he was found guilty of criminal breach of trust, money laundering, and abuse of power of SRC funds amounting to RM42 million, which was received between Dec 26, 2014, and Feb 10, 2015.

Najib is currently serving his prison sentence for that case after the apex court dismissed his final appeal in August 2022.

Initially, the suit also named former company board members Tan Sri Ismee Ismail, Datuk Suboh Md Yassin, Datuk Mohammed Azhar Osman Khairuddin, Datok Shahrol Azral Ibrahim Halmi, and Datuk Che Abdullah @ Rashidi Che Omar as defendants.

They were dropped later, only for Najib to bring them back again as third parties. A defendant can initiate this against a third party who is not part of the main suit, in order to claim contribution, indemnity, or any remedy which is claimed by the plaintiff.

On Tuesday, Farhan impressed upon the court that the company’s board and management had autonomy, responsibility, and control over company operations and handling of the KWAP loan.

"The board executed all relevant transactions and bore responsibility for oversight.

"If misappropriation occurred, it was due to the board’s own decisions (or dereliction thereof), as even taking the purported instructions of [Najib] at its highest, he ultimately vested responsibility to the board to properly manage the funds," Farhan said.

He added that the suit ought to be dismissed. However, if the court finds that Najib is liable to any of SRC's claims, the above-mentioned directors have to shoulder responsibility and indemnify Najib instead, due to their "negligence, breach of duty, and control over SRC’s affairs".

"Those individuals were the ones who operationally enabled and failed to prevent the loss; equity and good conscience demand that they indemnify [Najib] for any amount he is held liable to pay,

"This would ensure that the ultimate burden of SRC’s losses is borne by the truly culpable parties," he said.

The trial before Datuk Ahmad Fairuz Zainol Abidin will continue on Aug 25.

Read also:
Najib on SRC: 'I have certain regrets', but claims had no knowledge of what was taking place
Najib says he had no control over SRC's funds
Lawyer claims US$120m of SRC funds in Najib’s account 'returned' as part of US$620m given back to Tanore Finance Corp
Najib still mum on documentary evidence of funds in accounts
Najib: Nik Faisal not a link between me and SRC