Malaysiakini won the first round in its defence against a suit by Abdul Taib Mahmud when the Kuala Lumpur High Court dismissed the Sarawak chief minister's application to strike out parts of the news portal's statement of defence.

Judge Zabariah Mohd Yusof made her decision in chambers in dismissing the application today.

She said the paragraphs which Taib wanted removed contained facts which were relevant to Malaysiakini's defence.

"In paragraph 18, are the comments made by readers. Since a defence of fair comment has been pleaded, the paragraph is relevent and should not be struck off.

"The facts pleaded in paragraph 19 shows that there is a connection between Archipelago Shipping and the plantiff's family. Therefore, they are relevant," said Zabariah.

"Hence, the application to strike out is dismissed with cost."

taib mahmud and malaysiakini Malaysiakini was represented by counsel Fahri Azzat and Farah Mohd Afizah, while counsel Yee Mei Ken appeared for Taib.

Following this, the case will go on trial unless an appeal is filed by Taib over today's decision.

The Sarawak strongman, who has been chief minister for 27 years, had named Malaysiakini and its editor-in-chief Steven Gan as defendants, when he filed the suit at the High Court here on May 16, 2007.

This follows over a series of articles on his alleged involvement in a timber kickbacks scandal which was reported by the news portal, based on articles, which had first appeared in the Japanese press like Japan Times and Kyodo News .

Malaysiakin i has subsquently filed its statement of defence in reaction to the defamation suit filed by Taib.

However, the Sarawak chief minister responded with an application in early November 2007 to strike out several paragraphs from the statement citing it as "immaterial" to his defamation suit.

The paragraphs are mostly related to Taib family's extensive business dealings in Sarawak.

Taib denied any involvement

Taib has also filed a similar suit in the Kuching High Court against PKR's Wan Zainal Wan Sanusi and the party's Stampin branch chief See Chee How - for distributing leaflets containing articles taken from Malaysiakini and Japan Times .

According to Japan Times , a multi-million ringgit ‘bribe' was allegedly paid over a period of seven years to a Hong Kong company, Regent Star, said to be linked to Taib and his family.

The money was said to have come from a Japanese cartel consisting of nine companies which has been buying timber from Sarawak.

sarawak logging kickbacks timber wood 100407 It allegedly paid Regent Star 1.1 billion yen (RM32 million) over a period of two decades for services rendered in this transaction. This was disguised as business expenses, and was therefore not taxed.

However, the Japanese tax authorities discovered that the payments were "illegitimate expenses" as the Hong Kong agency - believed to be a paper company - did little "substantive work" to justify the payments.

The Tokyo Regional Taxation Bureau has instead classified the payment as a "rebate", which is taxable.

The newspaper reported that the shipping firms were likely to be slapped with well over 400 million yen (RM11.6 million) in back taxes along with heavy penalties for "hiding" the funds from the tax authorities.

The companies are suspected of having made payments to the Hong Kong agent for 26 years, and thus the total income concealed could be several times the figure cited by sources.

However, the Hong Kong Registrar of Companies stated in a notice that Regent Star had applied to be deregistered soon after the scandal was made public.

Malaysiakini reported the matter a week after the Japan Times article was published on March 29, 2007, and followed this up with a special issue entitled, 'RM32 mil kickbacks - tip of the iceberg' .

It reported that all owners of log carriers seeking to transport timber exports are required to appoint Taib family-linked shipping agency, Archipelago Shipping, as the sole agent for shippers to pick up logs from three key Sarawak ports - Tanjung Manis, Bintulu and Miri.

Taib had denied any involvement in the scandal and claimed he was not aware of such payments to Regent Star.

In a 10-page statement, Taib "categorically and completely refute" all the allegations. "They are absolutely false," he said.

SPECIAL REPORT: Tip of the iceberg