Kl Petrogas Sdn Bhd (DI Bawah Penerimaan) v Sa Puncak Management Sdn Bhd (WA-22M-787-05/2025)

SA PUNCAK MANAGEMENT SDN BHD (COMPANY No.: 200301015868 (618288-H))

LOH YOOK MUN

ELISSA KWAN RU HUI

KWAN YU WEN

LIM AIK TEONG

MOHD RUSLI BIN NGAH (NRIC NO.: 570724-11-5191) … DEFENDANTS GROUNDS OF JUDGMENT

These proceedings give rise to two distinct but interrelated applications that came before this Court for determination on the same day, both of which strike at the heart of the relationship between commercial financing arrangements and statutory regulation, as well as the boundaries of director liability in corporate financing disputes. The first is Enclosure 47 (as amended by Enclosure 112), an application by the 3rd, 4th and 6th Defendants (hereinafter "the Non-Executive Directors") to strike out KL Petrogas Sdn Bhd’s (“Plaintiff”) claim against them pursuant to Order 18 Rule 19(1)(a), (b) and/or (d) of the Rules of Court 2012 (“the Rules”). The second is Enclosure 62 (as amended by Enclosure 71), an Order 14A application by the Plaintiff seeking determination of four questions of law concerning the legality of the financing facilities extended to them by the First Defendant, SA Puncak Management Sdn Bhd (“D1”).

Both applications stem from a complex commercial arrangement that began as an Islamic factoring facility but has since given rise to allegations of unlicensed moneylending, conspiracy, and unlawful interference. The relationship between the parties unfolded much like a commercial expedition into uncharted territory, driven by ambition and opportunity but insufficiently restrained by structure or discipline. The Plaintiff, now in receivership, contends that the facilities provided by D1 were, in substance, moneylending transactions contravening the Moneylenders Act 1951 ("MLA"). D1 maintains that they were legitimate Shariah-compliant factoring arrangements. Concurrently, the Plaintiff accuses D1's directors, including the Non-Executive Directors, of conspiring to injure its business.

Against that backdrop, the Court must navigate through intricate questions of commercial law, statutory interpretation, and corporate governance, in order to determine whether these disputes ought to be summarily resolved or proceed to full trial.

The factual matrix underlying these applications reveals a commercial relationship that went far beyond conventional financing. The Plaintiff is an oil and gas company that secured two major projects: the Kasawari Sub-Contract (approximately RM23 million) and the Carigali Hess Project (approximately RM167 million). In October 2023, D1, a company engaged in factoring and financing business, offered the Plaintiff two Islamic facilities to finance the Kasawari project: a Factoring-i Facility of up to RM11,806,093.00 and a Pre-Factoring-i Facility of up to RM7,611,735.83. These facilities were purportedly structured under Shariah principles of Bai' Dayn Bi Al-Sila and Tawarruq respectively.

Between January and September 2024, the Plaintiff drew down a total of RM22,232,005.74 under the Pre-Factoring-i Facility, which D1 disbursed directly to the Plaintiff's suppliers and for salary payments. Only one aspect of the Factoring-i Facility was utilized, where D1 purchased and collected RM10,912,624.34 from invoices issued by the Plaintiff to Technip MMHE JV ("TMJV"), the main contractor for the Kasawari project.

The relationship soured when D1 allegedly began pressuring the Plaintiff to execute Amendment No. 3 to the Kasawari Sub-Contract, which would have forced the Plaintiff to waive its right to claim RM19.4 million in variation orders for a mere RM4.5 million. At the behest of D1's directors, an external consultant, Daniel Schmidt, was introduced and allegedly insisted on the Plaintiff accepting these unfavourable terms. When the Plaintiff resisted, D1 issued a draft Settlement Agreement in December 2024 containing onerous terms, including a profit rate of 18% per annum and an option to convert debt into equity.

On 10 January 2025, D1 issued a letter of demand seeking execution of the Settlement Agreement and Amendment No. 3, and payment of RM150,000, despite no allegation of default in the principal sum. On 25 January 2025, D1 terminated the facilities, and on 14 February 2025, appointed receivers and managers over the Plaintiff under a debenture. The appointment of receivers caused TMJV to terminate the Kasawari Sub-Contract on 28 March 2025, and allegedly led to the diversion of the more lucrative Carigali Hess Project to Surya Nautika Sdn Bhd, a competitor of the Plaintiff, and a customer of D1.

These events prompted the Plaintiff to file this suit on 20 May 2025, naming D1 and all six directors, including D3, D4 and D6, as defendants. The Plaintiff's case against D1 centers on the illegality of the facilities under the MLA, while its case against the directors rests on tortious conspiracy and unlawful interference.

On 4 September 2025, this Court granted the Plaintiff's application for an interlocutory mandatory injunction in Enclosure 2, directing D1 to revoke the appointment of the receivers and managers and restraining further appointments pending trial. (See: KL Petrogas Sdn Bhd v SA Puncak Management Sdn Bhd & Ors [2026] 1 MLRH 373 (HC)).

On 25 July 2025, vide Enclosure 47 (as amended by Enclosure 112) the Non-Executive Directors applied to strike out the Plaintiff’s action.

On 28 August 2025, vide Enclosure 62 (as amended by Enclosure 71) the Plaintiff seek determination of four questions of law concerning the legality of the financing facilities extended by D1. The four specific questions of law pertain to whether the facilities constituted moneylending, the requirement for a licence, the enforceability of the agreements, and the right to restitution of the principal sums advanced.

On 21 November 2025, this Court:

Dismissed the Non-Executive Directors’ striking out application in Enclosure 47/112 with costs of RM5,000.00; and

Partially allowed the Plaintiff’s application for summary disposal in Enclosure 62/71 with costs of RM5,000.00.

Specifically on the Order 14A application, the Court ruled that as D1 did not hold a moneylender's license, the agreements pertaining to the Pre-Factoring-i Facility were unenforceable under Section 15 of the MLA. The agreements for the Factoring-i Facility remained enforceable. On restitution, the Court held that the profit elements under the void Pre-Factoring-i agreement were irrecoverable, but D1 was entitled to the return of the principal sums advanced. Following a clarification on 27 November 2025, the parties consented (without prejudice to parties’ intended appeal) to:

Quantify the refundable sum as RM9,437,274.26 in lieu of assessment;

Record the relevant paragraphs 1.1, 1.2 & 1.3 of the Re-Amended Writ to reflect the Court’s finding that only the Pre-Factoring-i Facility is void;

Argue separately the legality of the debenture and assignment as per paragraphs 1.3A and 1.3B of the Re-Amended Writ; and

Receive further directions on the Plaintiff’s claim for tort of conspiracy to injure.

Dissatisfied with the decision, the following notices of appeal were filed:

By D1 on 28 November 2025, against the ruling that the Pre-Factoring-i Facility constituted unlicensed moneylending, the related orders on the Re-Amended Writ, and the rejection of its counterclaim.

By the Plaintiff on 18 December 2025, against the affirmative answer to Question 4 on restitution and the order to return RM9,437,274.26.

By the Non-Executive Directors on 18 December 2025, against the dismissal of their striking out application. ISSUES

The issues arising from the two applications are distinct:

In Enclosure 47/112 (Striking Out): Whether the Plaintiff’s Statement of Claim discloses no reasonable cause of action against the Non-Executive Directors; is scandalous, frivolous or vexatious; or is an abuse of the court’s process, such that it should be struck out summarily; and

In Enclosure 62/71 (Order 14A): The four specific questions of law pertaining to whether the facilities constituted moneylending, the requirement for a licence, the enforceability of the agreements, and the right to restitution of the principal sums advanced. PARTIES’ CONTENTIONS AND ANALYSIS ISSUE 1: The Striking Out Application by the Non-Executive Directors Submissions of D3, D4 & D6

Learned counsel for the Non-Executive Directors, Mr. Bryan Foong Mun Loong anchored his argument on the principle in Said v Butt [1920] 3 KB 497 (HC), as elaborated in the Singapore Court of Appeal decision in PT Sandipala Arthaputra v ST Microelectronics Asia Pacific Pte Ltd [2018] 1 SLR 818 (CA) and applied locally in Cranborne Enterprises Limited & Anor v Export-Import Bank of Malaysia Berhad & 8 Others [2019] 1 LNS 1580 (HC) and Handskar (M) Sdn Bhd v Qube Medical Products Sdn Bhd & Anor [2024] 9 MLJ 237

Counsel’s core argument was that as non-executive directors, D3, D4 and D6 were merely involved in corporate decision-making for D1. Counsel submitted that where a director acts within the scope of authority and in the company’s interests, such directors are immune from personal tortious liability for the company’s acts, and cannot be said to conspire with the company, as they are, in law, the company’s directing mind.

Counsel contended that the Plaintiff’s pleadings failed to allege any facts showing they acted beyond their authority, in breach of fiduciary duty to D1, or for an improper purpose personal to each of such directors. The allegations, counsel argued, were general, vague, and failed to particularise overt acts attributable to any of the Non-Executive Directors, rendering the claim unsustainable and an abuse of process meant to harass them.

Learned counsel for the Plaintiff, Mr. Mak Lin Kum opposed the application vigorously. He argued that the principle in Said v Butt (supra) is not an absolute shield and does not apply where directors step outside their role and engage in conduct that is personally tortious, fraudulent, or undertaken for an improper purpose. Relying on authorities such as Deepak Jaikishen a/l Jaikishhan Rewachand & Anor v Intrared Sdn Bhd (previously known as Reetaj City Centre Sdn Bhd and formerly known as KFH Reetaj Sdn Bhd) [2013] 7 MLJ 437 (HC), Yong Toi Mee & Anor v Malpac Holdings Bhd & Ors [2017] MLJU 1674 (HC), and Chen Khai Voon v Lim Beng Guan & Ors [2020] MLJU 2251 (HC), counsel submitted that a company and its directors can conspire together, especially where the directors’ actions are not in the best interests of the company but are instead motivated by a predominant intention to injure a third party.

Counsel contended that the Plaintiff’s pleadings, particularly at paragraphs 179 to 226 of the Amended Statement of Claim, provided sufficient particulars of a concerted course of conduct. Counsel highlighted specific allegations: the coercive introduction and imposition of Mr. Daniel Schmidt to pressure the Plaintiff into signing an unfavourable contract variation (“Amendment No. 3”); the issuance of an oppressive draft settlement agreement with exorbitant terms; the orchestration of the appointment of receivers; and the subsequent diversion of Plaintiff’s key project (Carigali Hess) to a competitor, Surya Nautika Sdn Bhd, which was also a client of D1. Counsel argued that these acts, taken together, painted a picture of a deliberate scheme that went far beyond the ordinary exercise of a financier’s rights and suggested personal involvement and collusion by the directors.

The test for striking out under Order 18 rule 19 of the Rules is stringent and restricted to plain and obvious cases where the claim is unsustainable (Bandar Builder Sdn Bhd & Ors v United Malayan Banking Corp Bhd [1993] 3 MLJ 36 (SC)). The court must assume the pleaded facts to be true at this stage.

Upon a holistic reading of the Amended Statement of Claim, the Court finds that the Plaintiff has crossed the low threshold required to survive a striking-out application. The pleadings, while complex, allege a pattern of conduct that extends beyond the mere enforcement of financial facilities following a default. The allegations regarding the imposition of Daniel Schmidt, the terms of the draft settlement agreement, and the diversion of business to Surya Nautika are particularised with reference to specific events, communications, and parties.

Crucially, the Plaintiff pleads that Surya Nautika was a customer of D1, and that the receivers acted on the instructions of the Defendants. This raises a legitimate question as to whether the directors’ actions were solely for the benefit of D1 as a creditor, or whether they involved an element of self-dealing, conflict of interest, or an intention to cripple the Plaintiff for the benefit of another entity within the Defendants’ sphere of influence.

The authorities cited by the Non-Executive Directors, particularly Cranborne Enterprises Limited & Anor v Export-Import Bank of Malaysia Berhad & 8 Others (supra) and PT Sandipala Arthaputra v ST Microelectronics Asia Pacific Pte Ltd (supra), are distinguishable. In those cases, the pleadings failed to allege any facts that the directors acted outside their authority or in breach of duty to their own company. Here, the Plaintiff’s case is premised on the assertion that the directors’ actions, in concert, were not bona fide efforts to protect D1’s interests but were part of a scheme with an improper purpose.

The case of Yong Toi Mee & Anor v Malpac Holdings Bhd & Ors (supra), while predating PT Sandipala Arthaputra v ST Microelectronics Asia Pacific Pte Ltd (supra) correctly recognized that a company and its directors can conspire if the directors act in their personal capacities. Mohd Nazlan Mohd Ghazali J (as His Lordship then was) in Yong Toi Mee expressly affirms that a company and its directors can conspire. The principle in Said v Butt confers protection only in respect of acts done bona fide and within the scope of authority; it does not operate as a blanket immunity where those very elements are put in issue and are directly impugned by the pleaded facts. I am of the considered view that the Plaintiff's pleadings, read as a whole, are capable of supporting such a finding.

The Non-Executive Directors’ complaint about a lack of particularisation is not fatal at this juncture. The pleadings identify the actors (the directors), the key overt acts (e.g., introducing Schmidt, pushing for Amendment No. 3, the Surya Nautika arrangement), and the alleged improper purpose (injuring the Plaintiff’s business). Whether these allegations can be proven is a matter for trial, where evidence can be tested through discovery and cross-examination. It is not “plain and obvious” that the claim must fail.

Furthermore, the fact that an interim injunction In Enclosure 2 was earlier granted against D1 signals that the Plaintiff’s underlying cause of action was considered arguable. This militates against a finding that the suit is frivolous, vexatious, or an abuse of process.

In the premises, the Court is satisfied that the Plaintiff has pleaded a sufficiently particularised factual matrix to disclose an arguable cause of action in conspiracy and unlawful interference against the Non-Executive Directors. The pleadings raise serious and triable issues as to their personal involvement and state of mind, which cannot be determined at this interlocutory stage. Accordingly, the striking out application is dismissed.

D1’s submissions were comprehensive, seeking to legitimise the Pre-Factoring-i Facility. Their arguments as explained by D1’s learned counsel, Mr. Yudistra Darma Dorai rested on three main pillars. First, they argued that “pre-factoring” is merely a subset of “factoring”, both involving the purchase of receivables, with the only difference being the timing (future vs existing invoices). Counsel for D1 relied heavily on the definition of “factoring” in the Consumer Credit Bill 2025, which includes “future accounts receivables”.

Second, counsel submitted that contrary to this Court’s earlier findings in KL Petrogas Sdn Bhd v SA Puncak Management Sdn Bhd & Ors (supra), there was no regulatory lacuna making their business illegal. Counsel pointed to the Moneylenders (Exemption) Order 2005, which exempted scheduled institutions under the repealed Banking and Financial Institutions Act 1989 (“BAFIA”) carrying on factoring business from the MLA. Counsel argued that via the transitional savings provisions in sections 272(l) of the Financial Services Act 2013 (“FSA”) and 283(k) of the Islamic Financial Services Act 2013 (“IFSA”), this exemption survived the repeal of BAFIA.

Third, counsel cited common law authorities from Malaysia (Layangan Bina Sdn Bhd v MP Factors Sdn Bhd [2006] 7 MLJ 432 (HC)), Singapore (Capital Springboard Ltd & 45 others v Vangard Project Management Pte Ltd & anorther [2018] SGHC 29 (HC)), and England (Olds Discount Co Ltd v John Playfair Ltd [1938] 3 All ER 275 (HC)) to assert that a genuine purchase of debts, even at a discount, is not moneylending. The substance, counsel argued, was a sale, not a loan. In the alternative, they claimed the right to restitution of the principal sums (RM12,909,441.24) under section 66 of the Contracts Act 1950 and the common law, citing the Federal Court’s recent decision in Detik Ria Sdn Bhd v Prudential Corp Holdings Ltd [2025] 3 MLJ 22 (FC), which distinguished the harsher result in Triple Zest Trading & Suppliers v Applied Business Technologies Sdn Bhd [2023] 10 CLJ 187

Learned counsel for the Plaintiff contended that the “Pre-Factoring-i Facility” was a sham designed to disguise a loan. Dilating on this point, counsel emphasised the Federal Court’s guidance in Triple Zest Trading & Suppliers v Applied Business Technologies Sdn Bhd (supra) i.e. the court must look at the substance of the transaction. Here, funds were advanced before any invoice or receivable existed. D1’s risk is argued to be the general creditworthiness of the Plaintiff, and not the credit risk of a specific debtor on an assigned invoice. Furthermore, counsel reiterates that security was taken by way of a debenture over all the assets, which is typical of a loan facility rather than a pure factoring arrangement. Most tellingly, counsel argues that the profit rate was calculated based on the principal sum and the time period, which in substance amounted to interest.

Counsel also argued that the exemption under the 2005 Order and the transitional provisions did not apply because (a) the activity was not genuine factoring, and (b) the legislative vacuum post-FSA/IFSA meant such an activity, if not factoring, required a moneylender’s license if it was in substance lending. Counsel distinguished Layangan Bina Sdn Bhd v MP Factors Sdn Bhd (supra) and the other factoring cases as involving the purchase of existing debts.

On the issue of restitution, counsel relied on the principles in Triple Zest Trading & Suppliers v Applied Business Technologies Sdn Bhd (supra) and Lim Swee Choo & Anor v Ong Koh Hou @ Won Kok Fong and another appeal [2025] 6 MLJ 327 (FC), arguing that an illegal moneylending agreement void ab initio under Section 15 of the MLA cannot give rise to restitutionary claims. The statutory bar is absolute, and allowing recovery would defeat the MLA's deterrent purpose.

Before turning to the substantive arguments advanced by the parties, it is necessary to first examine the precise reliefs sought, as the scope of the Court’s determination under Order 14A must be confined to the prayers as framed by the applicant. The Order 14A application accordingly prays for the following reliefs: “1. That the following questions to be answered by this Honourable Court: - a. Question 1: Is the 1st Defendant’s activity pursuant to the agreements/documents listed in “Annexure A” an activity of money lending? b. Question 2: If the answer to Question 1 is in the affirmative, is the 1st Defendant’s activity of money lending carried on without a valid license issued under s. 5 the Moneylenders Act 1951? c. Question 3: If the answer to Question 2 is in the affirmative, are the agreements / documents listed in “Annexure A” unenforceable by the 1st Defendant against the Plaintiff pursuant to s. 15 of the Moneylenders Act 1951? d. Question 4 In the event the various agreements are found to be illegal, can the 1st Defendant claim the principal sums of RM12,909,441.24 from the Plaintiff under the causes of action of unjust enrichment and monies had and received?

If Questions No. 1 to 3 are answered in affirmative, and Question 4 is answered in negative: - a. Judgement to be entered for: i. Prayer 1.1 of the Re-Amended Writ (“Writ”) (including all the sub-paragraphs therein); ii. Prayer 1.2 of the Writ (including all the sub-paragraphs therein); iii. Prayer 1.3 of the Writ (including all the sub-paragraphs therein); iv. Prayer 1.3A of the Writ; v. Prayer 1.3B of the Writ; vi. Prayer 1.4 of the Writ; vii. Prayer 1.5 of the Writ (including all the sub-paragraphs therein); viii. Prayer 1.6 of the Writ; ix. Prayer 1.6(a) of the Writ in respect of the 1st Defendant; x. Prayer 1.7 of the Writ; xi. Prayer 1.8 of the Writ; xii. prayer 1.9 of the Writ; b. The 1st Defendant’s Amended Counter Claim dated 30.6.2025 be dismissed;

If Questions No. 1 to 3 are answered in the negative: - a. Judgment to be entered for: i. Prayer 85(a) of the 1st Defendant’s Amended Counterclaim; ii. Prayer 85(b) of the 1st Defendant’s Amended Counterclaim; iii. Costs; b. The following prayers of the Plaintiff be dismissed: i. Prayer 1.1 of the Writ (including all the sub-paragraphs therein); ii. Prayer 1.2 of the Writ (including all the sub-paragraphs therein); iii. Prayer 1.3 of the Writ (including all the sub-paragraphs therein); iv. Prayer 1.3A of the Writ; v. Prayer 1.3B of the Writ; vi. Prayer 1.4 of the Writ; vii. Prayer 1.5 of the Writ (including all the sub-paragraphs therein); viii. Prayer 1.6 of the Writ; ix. Prayer 1.7 of the Writ; x. Prayer 1.8 of the Writ;

If Questions No. 1 to 4 are answered in the affirmative: - a. Judgment to be entered for: i. Prayer 85(aa) of the 1st Defendant’s Amended Counterclaim; ii. Prayer 85(b) of the 1st Defendant’s Amended Counterclaim; iii. Costs; b. The following prayers of the Plaintiff be dismissed: i. Prayer 1.4 of the Writ; ii. Prayer 1.5 of the Writ (including all the sub-paragraphs therein); iii. Prayer 1.6 of the Writ; iv. Prayer 1.7 of the Writ;

Costs in the cause;

Such further and/or other relief as this Honourable Court deems fit and just.”

The contents of Annexure A, which form part of the Order 14A application, are summarised as follows: ANNEXURE A “Agreements/documents mentioned in Questions 1 and 3 and 4: -

Letter of Offer for Islamic Factoring issued by the 1st

Defendant to the Plaintiff dated 11.10.2023 Supplemental Letter of Offer No. 1 issued by the 1st

Defendant to the Plaintiff dated 31.1.2024 Supplemental Letter of Offer No. 2 issued by the 1st

Defendant to the Plaintiff dated 8.2.2024 Supplemental Letter of Offer No. 3 issued by the 1st

Defendant to the Plaintiff dated 21.3.2024 Supplemental Letter of Offer No. 4 issued by the 1st

Defendant to the Plaintiff dated 24.4.2024 Supplemental Letter of Offer No. 5 issued by the 1st

Defendant to the Plaintiff dated 25.4.2024 Supplemental Letter of Offer No. 6 issued by the 1st

Defendant to the Plaintiff dated 2.5.2024 Supplemental Letter of Offer No. 7 issued by the 1st

Defendant to the Plaintiff dated 3.5.2024 Supplemental Letter of Offer No. 8 issued by the 1st

Defendant to the Plaintiff dated 20.5.2024 Supplemental Letter of Offer No. 9 issued by the 1st Defendant to the Plaintiff dated 27.9.2024

Factoring-i Agreement executed between the 1st Defendant and the Plaintiff dated 11.10.2023

Facilities Agreement executed between the 1st Defendant and the Plaintiff dated 11.10.2023

Debenture dated 11.10.2023 executed between the 1st

Deed of Assignment (Contract Proceeds) dated 11.10.2023 between the 1st Defendant and the Plaintiff

Notice of Assignment of Debts dated 10.10.2024 issued by the Plaintiff to the Joint Venture of Technip Energies (M) Sdn Bhd and Malaysia Marine And Heavy Engineering Sdn Bhd referred to as “Technip MMHE JV” (“TMJV”) in favour of the 1st

Defendant Statement of Accounts

Statement of accounts dated 31.1.2024

Statement of accounts dated 29.2.2024

Statement of accounts dated 31.3.2024

Statement of accounts dated 30.4.2024

Statement of accounts dated 31.5.2024

Statement of accounts dated 30.6.2024

Statement of accounts dated 15.7.2024

Statement of accounts dated 31.8.2024

Statement of accounts dated 30.9.2024

Statement of accounts dated 31.10.2024

Statement of accounts dated 30.11.2024 Statement of accounts dated 31.12.2024

The Plaintiff’s Invoice No. KLPG/TMJV/2024-001-R dated 28.2.2024 in the sum of RM 3,373,169.30

The Plaintiff’s Invoice No. KLPG/TMJV/2024-002-R dated 12.9.2024 in the sum of RM2,529,876.98

The Plaintiff’s Invoice No. KLPG/TMJV/2024-003-R dated 12.5.2024 in the sum of RM3,386,661.98

The Plaintiff’s Invoice No. KLPG/TMJV/2024-011-R dated 12.5.2024 in the sum of RM 1,622,916.08

The Plaintiff’s Invoice No. KLPG/TMJV/2024-016-R dated 18.9.2024 in the sum of RM 116,030.90”

While the questions are framed generally, the real controversy centers on the Pre-Factoring-i Facility, as the Factoring-i Facility's legitimacy is less contested. The Court must therefore analyze the legal character of each facility separately. Question 1: Is D1’s activity moneylending?

The Court begins with the statutory definition. Section 2 of the MLA defines "moneylending" as "the lending of money at interest," with "interest" being "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." This definition, as interpreted by the Federal Court in Triple Zest, focuses on substance over form. Therefore, labels like "profit" or "agreed profit" are irrelevant if the substance is interest.

The Court has also considered the scholarly analysis presented in the article “Leasing and Factoring Companies Offering Shariah-Based Financing Products in Malaysia: Reference to the Financial Services Act 2013 (FSA) and the Islamic Financial Services Act 2013 (IFSA)” by Ulfah Mansurah Zainudin and Ahmad Azam Othman, published in the Journal of Contemporary Islamic Studies (2024). This academic work provides valuable context to the regulatory landscape and substantiates several key points in the Court’s reasoning.

The article confirms the central regulatory dilemma faced by the Court. It notes that with the repeal of the BAFIA, the explicit category of “scheduled institution” – which clearly encompassed leasing and factoring companies – was removed. While the FSA and IFSA provide a pathway for such companies to operate as “prescribed financial institutions” (FSA) or engage in “Islamic financial intermediation activities” (IFSA), the article concludes that there remains an absence of “explicit legal provisions that specifically categorise leasing and factoring companies as non-banking financial institutions” (pages 8-9). This academic observation aligns with and reinforces the Court’s finding that a degree of legislative ambiguity exists, particularly for entities operating in the niche of Shariah-compliant pre-factoring. This ambiguity necessitates a careful, substance-over-form analysis by the courts when assessing the true nature of such financial products.

While the article discusses factoring and leasing broadly, its focus on the need for clearer regulation implicitly acknowledges the potential for products to stray from their core definitions. The Court’s critical distinction between the legitimate Bai’ Dayn-based Factoring-i Facility (purchase of existing receivables) and the Murabahah/Tawarruq-based Pre-Factoring-i Facility (advance against future cash flows) is a practical application of the regulatory precision called for by the academics. The article’s reference to the case of Chee Pok Choy v Scotch Leasing Sdn Bhd [2001] 2 CLJ 321 (CA) is particularly instructive. In that case, the Court of Appeal held that an institution’s name (“Leasing”) was not determinative; what mattered was the enabling law under which it operated. This precedent bolsters the Court’s reasoning in the present case: the label “Pre-Factoring-i” is not conclusive; the determinative factor is whether its substance aligns with a permissible activity or falls into the realm of regulated moneylending.

From the evidence presented, the Factoring-i Facility involved D1 purchasing specific, identified invoices issued by the Plaintiff to TMJV. Under this arrangement, D1 advanced up to 80% of the invoice value, collected directly from TMJV, and remitted the balance to the Plaintiff after deducting its charges. This structure aligns with the classic definition of factoring recognized in Boustead Trading (1985) Sdn Bhd v Arab-Malaysian Merchant Bank Bhd [1995] MLJ 331 (FC) and Consolidated Factoring (M) Sdn Bhd v Tong Teik Co Sdn Bhd [1993] 1 CLJ 115 (HC). The key element is the absolute assignment of existing receivables, with the factor assuming the collection risk.

The Court finds that the Factoring-i Facility amounts to a genuine factoring arrangement, not moneylending. The profit earned represents a discount on purchased debts, not interest on a loan. D1’s collection of RM10.9 million from TMJV and remittance to the Plaintiff demonstrates this factoring function. The Court accepts that legitimate factoring businesses are exempt from the MLA, whether by the Moneylenders (Exemption) Order 2005 or by the transitional provisions of the IFSA. Therefore, to the extent the agreements relate to the Factoring-i Facility, they do not constitute moneylending.

On the other hand, the Pre-Factoring-i Facility presents a fundamentally different character. The Court must examine its substance rather than the label "Islamic financing" or "Tawarruq" that the parties attached to it. Several features compel the conclusion that this facility is moneylending in substance:

First, the advances were made not against existing invoices, but against the Plaintiff's general need for working capital. The RM22.2 million was disbursed directly to suppliers and for salaries before any receivable was created. The Letter of Offer explicitly states that disbursements were made "against invoices, purchase orders, transport documents and/or any documentary evidence from the supplier(s)," not against invoices issued by the Plaintiff to its customer. This is not the purchase of receivables; it is the provision of general financing.

Second, the repayment mechanism confirms the lending character. The Plaintiff's obligation was not limited to the collection of assigned receivables. The Letter of Offer clause on "Payment of the Selling Price" states that repayment shall be "set-off against the payment received under the invoice financed under the Facility or using the funds of the Client, whichever is applicable." This full recourse against the Plaintiff, regardless of whether TMJV pays, is the hallmark of a loan, not a factoring arrangement where the factor assumes the credit risk.

Third, the security structure is inconsistent with genuine factoring. In true factoring, the purchased receivables themselves serve as the primary security through absolute assignment. Here, D1 required a debenture over all the Plaintiff's present and future assets, including those unrelated to the Kasawari project. The Debenture and Deed of Assignment were not incidents of a receivables purchase but classic security instruments for a loan.

Fourth, the profit structure reveals the lending nature. D1 charged profit monthly irrespective of collection performance, even during months with no new disbursements. The profit continued to accrue after D1 terminated the facilities on 25 January 2025, and exceeded 100% per annum on the net principal advanced. This is not a discount on purchased debts but interest calculated on a principal sum, running with time. As held in Triple Zest Trading & Suppliers v Applied Business Technologies Sdn Bhd (supra), any excess over principal, "by whatsoever name called," is interest within Section 2 of the

Fifth, the timing of the advances is telling. The "pre-factoring" advances were made before any invoice existed. The Consumer Credit Bill 2025's reference to "future accounts receivable" cannot save this arrangement. Under ejusdem generis, general words follow specific ones in the same genus. In the context of factoring, "future accounts receivable" must mean debts already in existence but not yet due (e.g., installment payments under an existing contract), not contingent obligations dependent on future invoices yet to be issued.

The Court rejects D1’s submission that "future invoices" are equivalent to "future accounts receivable." As explained in Malaysia National Insurance Bhd & Anor v Suruhanjaya Syarikat Malaysia & Anor [2004] 4 MLJ 472 (HC), a contingent claim that may never arise is not a book debt capable of assignment. A debt must be "a sum of money which is now payable or will become payable in the future by reason of a present obligation" (Webb v Stenton & Others, Garnishees

11 QBD 518 (CA)). The Plaintiff's future invoices to TMJV were not present obligations; they were contingent on future performance and pricing. In essence, D1 was not buying a chose in action; it was making a general advance.

The Court also rejects the Tawarruq characterization. Tawarruq is a sale-based financing structure that constitutes "Islamic banking business" under the IFSA, requiring licensing. D1 was not licensed under the IFSA. Its attempt to cloak a conventional loan in Islamic terminology does not alter the substance. The Court notes, with concern, that D1’s pleadings emphasized the Tawarruq structure, yet its submissions made no attempt to explain how Tawarruq principles were actually applied to justify the profit charges. This selective reliance suggests a contrived argument.

In short, the Court’s answer to Question 1 is that the Pre-Factoring-i Facility constituted moneylending; whilst the Factoring-i Facility did not. Question 2: Was the moneylending unlicensed?

D1 concedes it does not hold a moneylending licence. It relies on the Moneylenders (Exemption) Order 2005 and Section 2A(1) of the MLA for exemption. However, this exemption applies only to its legitimate factoring business, not its moneylending activities.

The Court finds that the Pre-Factoring-i Facility, being moneylending, required a licence under Section 5 of the MLA. D1 had none. The letters from Bank Negara Malaysia and Ministry of Finance were not Gazette notifications under Section 2A(2) of the MLA, as required by Aseam Credit Sdn Bhd v Eminent Avenue Sdn Bhd (supra) and Bank Industri (M) Bhd v Technopro Corp (M) Bhd & Ors [1998] MLJU 421 (HC). They merely acknowledged D1’s status as a scheduled institution for leasing and factoring under the repealed BAFIA, not authorization for moneylending.

The Court notes that the Consumer Credit Bill 2025, even if in force, would not assist D1. Section 2(3) of the Bill requires it to be read together with, not in derogation of, the MLA. The Bill's recognition of factoring does not retroactively legalize past moneylending, nor does it exempt from licensing requirements under the MLA.

Accordingly, the Court answers Question 2 in the affirmative. The Pre-Factoring-i Facility was operated without a valid licence under the MLA, whereas the Factoring-i Facility does not require such a licence. Question 3: Are the agreements unenforceable under section 15 of the MLA?

Section 15 of the MLA provides: "No moneylending agreement in respect of money lent after the coming into force of this Act by an unlicensed moneylender shall be enforceable." This provision is absolute and mandatory. The Federal Court in Triple Zest emphasized that courts must not lend assistance to unlicensed moneylending, as it would defeat the statute's deterrent purpose.

However, the section refers to "moneylending agreement." The agreements in Annexure A are composite documents covering both facilities. The Court must therefore sever the unenforceable portion relating to the Pre-Factoring-i Facility from the enforceable portion relating to the Factoring-i Facility.

The Court rejects the Plaintiff’s submission that the entire suite of agreements must be struck down. This would be disproportionate and would unjustly enrich the Plaintiff by allowing it to retain the disbursements made by D1. The proper approach is to declare only those provisions relating to the Pre-Factoring-i Facility, and any security securing obligations thereunder, as unenforceable.

Therefore, the Court’s answer to Question 3 is that the agreements are partially unenforceable i.e. to the extent they relate to the Pre-Factoring-i Facility or secure obligations thereunder, they are void. The Factoring-i Facility provisions remain enforceable. Question 4: Can D1 claim the principal sum through restitution?

This is the most complex question, involving the interplay between statutory illegality and equitable restitution. The Plaintiff argues Triple Zest bars all recovery. D1 argues Detik Ria permits restitution to prevent unjust enrichment.

The Court must carefully analyze these authorities. Triple Zest involved an unlicensed moneylender who deliberately disguised a loan to charge 100% interest. The Federal Court refused restitution, holding that allowing recovery of principal would reward illegality and create incentives for unlicensed lending. The key factor was the lender's deliberate evasion of licensing requirements for profit.

Detik Ria refined this principle. There, the Federal Court distinguished between transactions that are void for statutory non-compliance and those that are illegal in the sense of being contrary to public policy.

It held that where a party is not an unlicensed moneylender but a legitimate commercial entity, and where denying restitution would cause severe injustice, recovery of principal may be permitted under Section 66 of the Contracts Act 1950.

The Court finds that D1, despite its regulatory non-compliance, is not a loan shark in the Triple Zest mold. It is a registered factoring company that extended genuine factoring facilities. Its Pre-Factoring-i Facility, while improperly structured and requiring licensing, was not a predatory scheme designed to trap borrowers in cycles of debt. The profit rates, while excessive, were disclosed upfront, and the advances were used for legitimate business purposes.

More importantly, allowing the Plaintiff to retain the principal sum would constitute unjust enrichment. The Plaintiff has received the full benefit of the advances, its suppliers were paid, salaries were met, and it was able to perform on the Kasawari project. To allow it to keep these sums without repayment would be manifestly unjust and would shift the loss entirely to D1, which had no unlawful intent beyond regulatory non-compliance.

The unenforceability of the agreement does not automatically extinguish the underlying obligation to return the principal sum advanced. The recent Court of Appeal decision in Golden Wheel Credit Sdn Bhd v Dato’ Siah Teong Din [2025] CLJU 1799 (CA) (per Faizah Jamaludin JCA) is directly on point. Following Golden Wheel Credit, a transaction can be void and unenforceable for non-compliance with statute without being "illegal" in a manner that completely bars restitution.

This common law principle of restitution aligns with Islamic principles which is the structure adopted by parties to this Factoring facilities. The Quran explicitly prohibits the unjust consumption of wealth (akl al-mal bil-batil): “O you who have believed, do not consume one another's wealth unjustly but only [in lawful] business by mutual consent.” (Surah An-Nisa’, Surah 4, Ayat 29)

The Plaintiff’s retention of the principal capital, for which it provided no counter-value, constitutes precisely this prohibited injustice. While the flawed Tawarruq structure voids the profit element, the core debt (dayn) of the principal remains. Shariah mandates the restitution of this principal amount to prevent an unlawful windfall (maal haram), a principle that aligns with the common law doctrine of unjust enrichment.

Consequently, the answer to Question 4 is in the affirmative. D1 is entitled to restitution of the principal sum advanced under the Pre-Factoring-i Facility, to be calculated after deducting all amounts collected from TMJV and all profit/fees charged. The Court notes that the parties have subsequently, by consent, quantified this sum as RM9,437,274.26. Accordingly, judgment is entered in favour of D1 for the said sum.

This Court therefore order the following:-

Enclosure 47/112 (Striking Out Application): DISMISSED with costs of RM5,000.00 to the Plaintiff;

Enclosure 62/71 (Order 14A Application): ALLOWED IN PART:

Question 1: YES for Pre-Factoring-i Facility; NO for Factoring-i Facility.

(ii) Question 2: YES for Pre-Factoring-i Facility;

(iii) Question 3: PARTIALLY (Pre-Factoring-i Facility void);

(iv) Question 4: YES, subject to the qualifications above. The effect is that D1’s counterclaim for RM23,376,473.58 is dismissed to the extent it claims profit or interest; and the Plaintiff is to return the principal sum of RM9,437,274.26 to D1.

Costs of RM5,000.00 to the Plaintiff for the Order 14A Application;

Parties to attend case management to address the following issues:

The validity of the Debenture and Deed of Assignment in light of the partial voidability finding; and

(ii) Directions for trial of the tortious conspiracy an unlawful interference claims against all defendants. Dated: 5th January 2026 Yusrin Faidz Bin Yusoff Judicial Commissioner High Court of Malaya Kuala Lumpur Counsel for the Plaintiff: Mak Lin Kum (together with Layyin Teh Binti Hassan) Messrs Mak LK & Co., Suite 11.02, Level 11, Centrepoint South Midvalley, Lingkaran Syed Putra, 59200 Kuala Lumpur. Counsel for D1, D2 & D5: Yudistra Darma Dorai (Together with Melody Tham Cheng Yee & Dheveendra Krishana Kumar) Messrs Raj, Ong & Yudistra, Suite 50-4-13 & 50-4-12, Tingkat 4, Menara UOA Damansara, Damansara Heights, Jalan Dungun, 50490, Kuala Lumpur. Counsel for D3, D4 & D6: Bryan Foong Mun Loong (Together with Muhammad Hiqmar Danial Bin Hidzir & Goh Hong Mun) Messrs Cheang & Ariff, Loke Mansion, No. 273A, Jalan Medan Tuanku, 50300 Kuala Lumpur. CASE REFERENCE:

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