Mere documentary evidence is not enough to prove that Petroleum Nasional Bhd (Petronas) did not discriminate against the state of Terengganu in regards to payment of oil royalty, the Court of Appeal heard today.

The state's counsel Tommy Thomas said his client is entitled to call officials from other state governments which are believed to have entered into agreements with Petronas, similar to the one entered by Terengganu.

"We contend that there was unfair discrimination by Petronas. This is one of our basis in filing the breach of contract suit against the company and the federal government. We need to call officials from Sabah and Sarawak and other states who are still receiving their income (on oil royalty) from Petronas.

"We would also call witnesses from Terengganu to tell the court how they are treated on payment of royalty. From these facts, the court can then come to a conclusion whether or not we (Terengganu) are discriminated," he added.

Thomas urged the court to dismiss with cost the Petronas' and federal government's appeal against the Kuala Lumpur High Court ruling on Aug 29 last year which rejected their application for a summary judgment seeking the court to decide the case solely on documentary evidence.

Bad faith

High Court judge Ariffin Zakaria had ruled then that the case needs to be resolved via a full trial, stating that if he was to accept the application to decide the case by determining certain preliminary legal issues, the state would be prejudiced.

The Terengganu government is suing Petronas for failing or refusing to pay RM850 million in cash for petroleum obtained in the first half of 2000. The discontinuation of the payment came at the heels of the 1999 general election in which opposition PAS took control of the state.

Continuing his submissions, Thomas said that the plaintiffs also needed to call witnesses from the federal government to ascertain whether the latter had played a role in directing Petronas to stop the payment.

This is to prove their claim for aggravated damages from the federal government whom was alleged to have acted in bad faith against the state, he added.

The lawyer said the state will also be relying on the doctrine of estoppel based on the 25 payments that were issued by the oil giant since the first agreement was signed in 1975.

Commercial entity

He also said they needed witnesses to negate Petronas' defence that it is a statutory corporation and therefore sheltering behind the jurisprudence that estoppel cannot be used against the executive, the state and public companies.

"We deny that it is a statutory corporation but a commercial entity with business all over the world. We will call witnesses from Petronas to tell the court its nature of operations, revenue and so on... to prove that it is a commercial corporate giant," he said.

In the event that the court is convinced that Petronas is a statutory corporation, Thomas said his client still has a case of legitimate expectation and will need to call witnesses to prove it.

He also reminded the court that depriving Terengganu of a normal trial would severely prejudice its case but going to trial will not in any way be prejudicial for Petronas and the federal government.

In the interest of all parties, Thomas said justice would be best served by a full trial as happens in most civil suits in the country.

Lawyer Cecil Abraham and senior prosecutor Azahar Mohamed - who are acting for Petronas and the federal government respectively - will make their replies on July 26.

The appeal is heard before Justices Mohd Nor Ahmad, Hashim Mohd Yusof and Richard Malanjum.