Tang Ser Chiew v Lee Mei Kim (N-02(NCvC)(W)-792-05/2024)

TANG SER CHIEW

LIM YAR TING (I/C NO: 801023055400) ... APPELLANTS (I/C NO: 520118055170) … RESPONDENT HEARD TOGATHER WITH IN THE COURT OF APPEAL OF MALAYSIA (APPELLATE JURISDICTION) CIVIL APPEAL NO. N-02(NCvC)(W)-802-05/2024 PANG VENG YAEN (I/C NO: 861110595020) … APPELLANT 07/01/2026 11:42:55 N-02(NCvC)(W)-792-05/2024 Kand. 43 (I/C NO: 520118055170) … RESPONDENT IN THE HIGH COURT OF MALAYA AT SEREMBAN IN THE STATE OF NEGERI SEMBILAN DARUL KHUSUS, MALAYSIA CIVIL SUIT NO.: NA-22NCvC-17-04/2020 … PLAINTIFF

TANG SER CHIEW

LIM YAR TING

TETUAN HEE & LIM (Didakwa sebagai Firma Guaman)

PUBLIC BANK BERHAD (No. Syarikat: 6463-H)

PANG VENG YAEN (I/C NO: 861110-59-5020) … DEFENDANTS CORAM: RAVINTHRAN A/L N. PARAMAGURU, JCA AZHAHARI KAMAL BIN RAMLI, JCA AHMAD KAMAL BIN MD. SHAHID, JCA GROUNDS OF JUDGMENT

There are two appeals jointly heard by this panel namely: i. Appeal no N-02(NCvC)(W)-792-05/2024 (“Appeal 792”), and ii. Appeal no N-02 (NCvC) (W)-802-05/2024 (“Appeal 802”)

Appeal 792 is an appeal by the 1st appellant/ 1st defendant and the 2nd appellant/2nd defendant in the court below against the decision of the learned Judicial Commissioner (“JC”) dated 1.8.2024 allowing the respondent/plaintiff’s claim for breach of contract in respect of a Sale and Purchase Agreement (“SPA”) dated 31.12.2015.

Appeal 802 is an appeal by the appellant/5th defendant in the court below against the decision of the learned JC dated 18.4.2024 ordering an injunction restraining the 1st defendant and the 2nd defendant from perfecting the transfer of the properties, the subject matter of the SPA, namely the 1st defendant’s land held under GRN 124371, Lot 2922, Pekan Bukit Kepayang, Daerah Seremban, Negeri Sembilan (“the Kepayang property”) and the 2nd defendant’s land held under HS(D) 191355 PT 32719 Mukim Labu Daerah Seremban, Negeri Sembilan (“the Labu property”), to the 5th defendant.

The parties will be referred to as they were in the court below. Back ground facts

On 30.1.2014, a company known as Stylish Houz Sdn Bhd entered into a Sale and Purchase Agreement with Koperasi Kemas for the purchase of two plots of land held under PN 44069 Lot 30941 and PN 44070 Lot 30942 both in Mukim Setul, Daerah Seremban, Negeri Sembilan (“the Setul land”) for the sum of RM 18.8 million.

One of the directors of Stylish Houz is the brother of the 1st defendant.

To transfer the Setul land, Stylish Houz had to pay stamp duty amounting to approximately RM 1, 020, 180.00.

The plaintiff had agreed to assist and the 1st and 2nd defendant by granting a loan to enable Stylish Houz to pay the stamp duty.

On 31.12.2015, the plaintiff, the 1st defendant and the 2nd defendant entered into the following agreements:

A Sale and Purchase Agreement (“SPA”) whereby the parties agreed that:

The 1st defendant and the 2nd defendant agreed to sell the Kepayang property to the plaintiff for consideration of RM 287,000.00 and the Labu Property for RM680, 340.00;

The completion period for the two SPAs was six months from the date of the SPAs;

The 1st defendant and the 2nd defendant requested a buy-back option within the completion period and offered an undertaking to complete the SPAs accordingly upon failure to exercise the buy-back option;

The 1st defendant and the 2nd defendant agreed to pay late payment interest on all refundable monies payable to the plaintiff for the two SPAs at the rate of 5% per month;

The 1st defendant and the 2nd defendant agreed to pay late delivery damages of 6% per month until actual delivery of vacant possession of the two properties to the plaintiff;

The plaintiff agreed to pay late payment interest for delay in paying the purchase price at the rate of 5% per month; and

The 1st defendant and the 2nd defendant undertake to complete the transfer of the properties to the plaintiff in the event of default by failure to exercise the buy-back option.

(ii) On the same day, and alongside the two SPAs, the 1st defendant requested the plaintiff that:

the purchase price for the two properties to be paid directly to Messrs Param Sundram’s clients’ account, so that the firm could settle the stamp duty for the registration and charge for the Koperasi Land Sale on behalf of

due to a shortage in the proceeds of the sale of the two properties, the 1st defendant also requested for a friendly loan of RM 99, 840.00 to cover the total stamp duty of RM 1, 067, 180.00 and;

the 1st defendant agreed to return the RM 99, 840.00 on or before 30.6.2016.

Messrs Param Sundram then disbursed the said monies to Stylish Houz. The plaintiff then lodged a caveat over the two properties.

The 1st defendant and the 2nd defendant did not exercise the buy-back option, nor did they transfer the two properties to the plaintiff pursuant to the two SPAs. They also failed to provide the discharge documents for the Kepayang property and defaulted on the loan instalments for the Labu property.

The 1st defendant and the 2nd defendant thereafter entered into two other Sale and Purchase Agreements to sell both the Kepayang property and the Labu property to the 5th defendant.

Summary of the decision of the learned JC The learned JC found that there was a valid contract binding the parties as the defendants had failed to prove misrepresentation, coercion or undue influence. Further, the learned JC found that the defendants did not plead a defence of non-est factum to assert any vitiating factors affecting their free consent during the execution of the two SPAs. According to the learned HCJ, the 1st defendant’s contention that he did not read and comprehend the two SPAs was an afterthought, raised for the first time when he testified in court. The 1st defendant and the 2nd defendant were also precluded by section 91 and 92 of the Evidence Act 1950 from contradicting the terms of the two SPAs. The learned JC further found that there was a valid collateral contract between the plaintiff and the 1st defendant and the 2nd defendant. On the evidence before him, the learned JC was satisfied that the 1st defendant and the 2nd defendant had also proved that the 1st defendant and the 2nd defendant had breached the two SPAs and concluded that their defence consisted of bare denials. Analysis and our findings. Appeal no 792

The defendants raised the issue of illegality of the loan transaction. It was contended that the transactions were, in fact, moneylending transactions, disguised as a Sale and Purchase Agreement. This issue was pleaded in paragraph 26 of the 1st defendant and 2nd defendant’s Statement of Defence as follows:

ACT 1951) Defendan Pertama dan Defendan Kedua sesungguhnya menafikan Perenggan 26 dalam Pernyataan Tuntutan Terpinda 6hb Julai, 2020 dan menyatakan bahawa ini adalah suatu Perjanjian Jual Beli yang palsu sham direka untuk memintas pernatuhan wajib dan ketat AKTA PEMBERI PINJAM WANG 1951 (Moneylenders Act 1951).

The learned JC did not discuss the issue of moneylending transactions in his grounds of judgment. However, this issue was raised as one of the grounds of appeal in the Additional Memorandum of Appeal filed by the 1st defendant and 2nd defendant’s as follows:

Hakim Bicara Terpelajar telah terkhilaf dari segi undang-undang dan fakta dengan tidak mengambil kira keterangan dan/atau pliding-pliding sama ada yang menunjukkan bahawa kedua-dua Perjanjian Jual Beli bertarikh 31.12.2015 bagi hartanah Kepayang dan hartanah Labu adalah suatu transaksi pinjaman wang untuk faedah dan bukan suatu Jualan langsung hartanah.

Hakim Bicara Terpelajar telah terkhilaf dari segi undang-undang dan fakta dengan tidak mengambil kira keterangan dan/atau sebarang pengakian oleh Plaintif atau saksi-saksi bahawa ini adalah wang sebagai pinjaman ynag diberikan oleh pemberi pinjaman wang tidak berlesen dan rumah-rumah di sini telah diberikan sebagai cagaran.

Hakim Bicara Terpelajar telah terkhilaf dari segi undang-undang dan fakta apabila tidak mengambilkira bahawa keseluruhan transaksi itu telah melanggar Akta Pemberi Pinjam Wang 1951.

In this respect, learned author Tan Kee Heng in Civil and Criminal Appeals in Malaysia, Fourth Edition summarised the law as follows: [4.196] An appeal to the Court of Appeal is merely a continuation of the trial and all that the Court of Appeal does is to review the case and enter such judgment as ought to have been entered by the High Court.418 Given that the appeal is a continuation of a hearing, the Court of Appeal is in a good position to make a finding on an issue which the trial court failed to make.419 The only difference between a suit and an appeal is that an appeal only reviews and corrects the proceedings in a cause already constituted but does not create the cause.420

In view of the powers conferred upon us in this appeal, we shall address the issue of moneylending first.

To begin with, it is only appropriate for this Court to consider the statutory provisions regulating the moneylending transactions in Malaysia namely the Moneylenders Act 1951. Section 2 defines the relevant terms in moneylending activities: “interest” does not include any sum lawfully charged in accordance with this Act by a moneylender for or on account of stamp duties, fees payable by law and legal costs but, save as aforesaid, includes any amount by whatsoever name called in excess of the principal paid or payable to a moneylender in consideration of or otherwise in respect of a loan “moneylender” means any person who carries on or advertises or announces himself or hold himself out in any way as carrying on the business of moneylending, whether or not he carries on any other business; “moneylending” means the lending of money at interest, with or without security, by a moneylender to a borrower; “moneylending agreement” means an agreement made in writing between a moneylender and a borrower for the repayment, in lump sum or instalments, of money borrowed by the borrower from the moneylender.

The prohibition against unlicensed moneylending transaction is provided for under sections 5(1), 5(2) and 15 of the Act as follows: 5 (1) -No person shall carry on or advertise or announce himself or hold himself out in any was as carrying on the business of moneylending unless he is licenced under this Act 5 (2) -Any person who carries on or advertises or announces himself or hold himself out in any way as carrying on the business of moneylending without a valid licence, or who continues to carry on such business after his licence has expired or been suspended or revoked shall be guilty of an offence under this Act and shall be liable to a fine of not less than two hundred and fifty thousand ringgit but not more than one million ringgit or to imprisonment for a term not exceeding five years or to both, and in the case of a second or subsequent offences shall also be liable to whipping in addition to such punishment. 15 -No moneylending agreement, in respect of money lent after the coming into force of this Act by an unlicenced moneylender shall be enforced.

Based on the definitions in section 2 above, the pertinent question to be determined is whether the two SPAs were sham transactions intended to circumvent the Moneylenders Act 1951. We find assistance in the judgment of Lee Swee Seng JCA (as he then was) in Mahmood bin Ooyub v Li Chee Loong and another appeal [2020] 6 MLJ 755; [2020] CLJU 660; [2020] 1 MLRA 609. It was held that: “[211] It therefore behoves the trial Court, when there is the allegation that the agreement is a sham and a fabrication with the object of circumventing the law, to examine the external evidence to see If the pieces in the puzzle would fit to form a coherent whole. The Court must probe further to see if there are unusual features in the agreement as is here, a sale and purchase agreement and examine the circumstantial evidence such as the conduct of the parties that may arouse suspicion if not setting off the alarm bell. … [214] The Court in scrutinizing the transaction is duty bound to shine the search light of consistency and coherence and to see if there are contradictions that cry out for an explanation. [215] No one factor is conclusive but if when taken together more questions are raised than there are satisfying answers, then in all probabilities the agreement is a sham and fabrication to camouflage and counterfeit the real transaction, which if allowed would contravene the law. The dressing up and decoy is deliberately if not delicately designed to escape detection by the enforcement authority and to deceive the weaker party when the crunch comes. The ‘deal’ is structured in such a way that the substance is shielded from detection. [216] It is against that backdrop that this Court had weighed in on the evidence of suspicious circumstances and unusual features, the tell-tale signs and the indicia for dismantling and discarding the façade and exposing the transaction for what it really is – an illegal moneylending transaction. [217] The following are some of the suspicious circumstances and unusual features that would justify a further probing as pointing in the direction of a sham agreement like a SPA masking the illegal moneylending transaction:

The borrower ‘vendor’ is directed to use the services of a solicitor acting for the lender purchaser with no separate representation;

Some directions to make repayments into designated accounts unrelated to the SPA;

The borrower ‘vendor’ is made to sign a slew of documents all in one go and often not given a copy;

The purchase price is fixed by the lender ‘purchaser’ and commonly well below market price as reflected in the government stamp duty assessment;

An unusually large amount of cash deposited and sometimes in many small denominations which source the lender ‘purchaser’ has difficulty explaining;

The borrower ‘vendor’ not being kept posted as to the progress of the transaction and often realised it when it is too late that the property has been transferred inti the name of a third party that he had never met before;

The unusually high deposit paid of more that 10% of the purchase price and sometimes even the whole of the purchase price paid upon signing the SPA;

The unusually long period of time, sometimes as long as one year, for the lender ‘purchaser’ to complete the purchase when the purchase price is already below market value;

The lender ‘purchaser’ caveat may not be lodged until there is manifestation of objection by the borrower ‘vendor’ to the transfer; and

The rather common act of harassment and criminal intimidation when the borrower ‘vendor’ refuses to grant vacant possession because he had never intended to sell the property. [218] The above list is by no means exhaustive and there will be doubtless variations of it and so one would have to look for the similarities in the differences and well as the differences in the similarities as human ingenuity knows no bound”

Further guidance may be gleaned from the case of Global Globe Property (Melawati) Sdn Bhd v Jangka Prestasi Sdn Bhd [2020] 6 MLJ 333 ; [ 2020] 6 CLJ 1; [2020] 5 MLRA 140 where Lee Swee Seng JCA (as he then was) once again had the occasion to deliberate on the same issue and held: “[23] Whenever an allegation is made that an agreement and related documents prepared are a sham to camouflage what the law specifically prohibits; the court must tread cautiously and comb carefully the evidence presented. It is only to be expected that generally all tracks would be covered so as not to leave behind anything coming close to resemble a smoking gun” …. [99] A sham agreement is slimily resorted to in creating a smokescreen to shield the real transaction from surfacing for the eyes of the authorities to scrutinise and sanction. Often it has less than an honourable purpose for otherwise why a sham. It is a devise to divert an observer the other way, if not to distract him from being detained by what is real, and often less palatable if not downright perverse. It is as old as mankind and after all there is nothing new under the sun but accepting always that sunlight is the best disinfectant and the electric light the best policeman. … [101] In the House of Lords case of AG Securities v Vaughan & Ors [1990] 1 AC 417, Bingham LJ explained a “sham agreement” as follows: A written agreement is a sham where it incorporates clauses by which neither party intends to be bound and which is obviously a smoke screen to cover the real intention of both contracting parties: Hadjiloucas v Crean [1987] 3 All ER 1008, 1014, per Purchas LJ. The accepted definition of a sham is that given by Diplock LJ in Snook v London and West Riding Investments Ltd [1967] 2 QB 786, 802: As regards the contention of the plaintiff that the transactions between himself, Auto Finance and the defendants were a ‘sham’, it is, I think, necessary to consider what, if any, legal concept is involved in the use of this popular and pejorative word. I apprehend that, if it has any meaning in law, it means acts done or documents executed by the parties to the ‘sham’ which are intended by them to give to third parties or to the court the appearance of creating between the parties legal rights and obligations (if any) which the parties intend to create. But one thing, I think, is clear in legal principle, morality and the authorities (see Yorkshire Railway Wagon Co v Maclure (1882) 21 Ch D 309, CA and Stoneleigh Finance Ltd v Phillips [1965] 2 QB 537) that for acts or documents to be ‘sham’ with whatever legal consequences follow from this, all the parties thereto must have a common intention that the acts or documents are not to create the legal rights and obligations which they give the appearance of creating. [102] Put simply, a sham exists where the parties say one thing intending another (see Donald v Baldwin [1953] NZLR 313, at p.321. per FB Adams J)

The Federal Court decision in Triple Zest Trading & Suppliers Sdn Bhd & Ors v Applied Business Technologies Sdn Bhd [2023] 6 MLJ 818; [2023] 10 CLJ 187; [2024] 1 MLRA 144 considered, inter alia, the gravity of the unlicensed moneylending transaction and emphasised the presumption provision of section 10OA of the Moneylending Act 1951. In this regard, Abdul Rahman Sebli CJSS held: [55] The presumption under s 10OA of MA51 applied against the respondent as a matter of law and not “even if” it applied as implied by the Court of Appeal. It applied as a matter of law because it was alleged in the pleadings that the respondent was a moneylender. This automatically kicked in the presumption that the respondent was carrying on the business of moneylending “until the contrary is proved”. Failure to rebut the presumption must lead to a finding that the presumed fact is true. [56] To successfully rebut the presumption under s 10OA of MA51, the respondent must prove on the balance of probabilities that by entering into the loan agreement with the appellants, it was not engaging in an act of “lending of money at interest, with or without security, by a moneylender to a borrower”, which is the meaning ascribed to the word “moneylending” by s 2 of MA51.”

In the context of the present appeal, and applying the principles of law as stated above, it is imperative that we consider the following facts:

One Mr Param Sundaram, a solicitor at the legal firm where the plaintiff works, had offered to assist Stylish Houz to pay stamp duty in respect of the purchase of the Koperasi land.

(ii) Mr Param Sundaram had offered to loan the money, for the purpose of paying the stamp duty, on condition that;

The interest charged would be 5% per month from the date of the loan until the full payment is paid; and

The 1st defendant and the 2nd defendant gave collateral leading to the signing of the SPA for the Kepayang and Labu properties.

(iii) The loan sum was extended by the plaintiff and to be paid directly into Messrs Param Sundaram by the plaintiff.

(iv) The 1st defendant and the 2nd defendant never personally received the money.

The cheque pertaining to the loan amount was paid by Param Sundaram and not by the plaintiff.

(vi) There was no deposit sum or earnest money paid by the plaintiff with regard to the purchase of the Kepayang and Labu properties. The two SPAs did not require these sums to be paid by the purchaser.

(vii) The plaintiff does not have a valid moneylending licence.

(viii) The interest rate of 5% per month (60% per annum) which exceeds the maximum interest rate of 12% per annum for secured loans under section 17A of the Moneylenders Act 1951.

(ix) The loan given by the plaintiff with interest at 5% per month falls under the definition of “moneylending” transaction under section 2 of the Moneylenders Act 1951.

The above facts, when considered in totality reveal that the real intention of the parties was to enter into a loan transaction. The primary concern of the 1st defendant and the 2nd defendant at that material time was to finalise the purchase of the Koperasi land. The final hurdle before the purchase could be concluded was the payment of the stamp duty amounting to RM1,067,180.00. The evidence led by the plaintiff supports this inference. The offer by the plaintiff to assist the 1st defendant and the 2nd defendant financially which resulted in the purported purchase by the plaintiff of the 1st defendant and 2nd defendant’s properties and the additional friendly loan from the plaintiff to the 1st defendant and the 2nd defendant.

However, the facts discussed in paragraph 23 (i) to (ix) above should have alerted the learned JC that the two SPAs were not what the parties intended them to be. In particular, the buy-back option would effectively required the 1st defendant and the 2nd defendant to pay back the purchase price paid by the plaintiff, failing which interest of 5% per month would be charged on all refundable monies payable to the plaintiff. In other words, the 1st defendant and the 2nd defendant are required to pay back the purchase price under disguise of exercising the buy-back option. In addition, the absence of payment of any deposit and/or earnest money is not a usual term of a Sale and Purchase Agreement.

To the contrary, the 1st defendant and the 2nd defendant had alleged in paragraph 26 of the statement of defence that that the transaction between the plaintiff and the 1st defendant and the 2nd defendant was a moneylending transaction. Hence, applying Triple Zest (supra) the presumption under section 10OA of the Moneylenders Act 1951 is thus invoked. The burden is now shifted to the plaintiff to show that she is not a moneylender as defined by section 2 of the Moneylenders Act 1951. As it is, there is no evidence proffered by the plaintiff to rebut the presumption. We are of the respectful view that the two SPAs are sham agreements to circumvent the prohibition under section 15 of the Moneylenders Act 1951.

At the risk of repetition, the learned JC did not address his mind to the issue of moneylending transaction in his grounds of judgment. This, in our view, is a plain error committed by the learned JC. This is an appealable error warranting appellate intervention by this court. We find that the plaintiff has failed to prove her case on a balance of probabilities.

On this ground, we find merit in the appeal. Appeal no 792 is hereby allowed. The decision of the learned JC is hereby set aside with costs of rm 50,000.00 subject to allocator.

In view of our decision in Appeal 802, the plaintiff’s claim against the 5th defendant is now baseless. The plaintiff is not a party in the Sale and Purchase Agreement between the defendants. We are minded of the fact that the 5th defendant did not give evidence during the trial. However, since the two SPAs with the 1st defendant and the 2nd defendant is in fact a moneylending transaction, contrary to section 15 of the Moneylending Act 1951, the plaintiff has no beneficial right over the Kepayang and Labu property. It follows that she has no claim against the 5th defendant.

In the circumstances, we find merit in the 5th defendant’s appeal. The 5th defendant’s appeal is hereby allowed and the order of the learned JC against the 5th defendant is hereby set aside. Costs of RM 20,000.00 to the 5th defendant subject to allocator. Dated: 28 October, 2025 -sgd-AZHAHARI KAMAL BIN RAMLI JUDGE

Shobah Veera

Vishnu Varna [ Tetuan Hakem Arabi & Associates] For the Respondents: (1) Sritharan C. Nadarajan

Praveen Paniselvam [Tetuan Nor Affiza & Co]