Lua Thiang Poh v 1. ) Kabir Singh A/L Jagir Singh (WA-22NCC-283-06/2022)

KABIR SINGH A/L JAGIR SINGH (NRIC No.: 781008-07-5387)

JASMINDER KAUR A/P JASBIR (NRIC No.: 830413-14-6044)

MANJEET SINGH A/L DARSHAN (NRIC No.: 730124-14-5151)

KAWALJEET KAUR A/P DARSHAN (NRIC No.: 691225-10-5360)

YOKIN RESOURCES SDN BHD (Company No.: 201001005104 & 889719-P) ... DEFENDANTS GROUNDS OF JUDGMENT INTRODUCTION [1] Before the court is the Plaintiff's claim against the Defendants for the sum of RM2,300,000.00, being the principal sum allegedly invested by the Plaintiff, together with a sum of RM2,784,000.00, being the alleged return on investment pursuant to several Promissory Notes entered into between the parties. The Plaintiff contends that these Promissory Notes represent legitimate investment agreements, which the Defendants have breached. The Defendants, however, assert that these Promissory Notes constitute illegal moneylending transactions, which are void and unenforceable under the Moneylenders Act 1951 (“MLA 1951”). [2] Having carefully considered the evidence adduced, the submissions of both parties, and the applicable legal principles, I find in favour of the Defendants for reasons elaborated in these grounds. BACKGROUND FACTS [3] This case involves a dispute between the Plaintiff, Lua Thiang Poh, and five Defendants: the 1st Defendant, Kabir Singh a/l Jagir Singh (“D1”), the 2nd Defendant, Jasminder Kaur a/p Jasbir Singh (“D2”), the 3rd Defendant, Manjeet Singh a/l Darshan Singh (“D3”), the 4th Defendant, Kawaljeet Kaur a/p Darshan Singh (“D4”), and Yokin Resources Sdn Bhd (“D5”). [4] Between October 2013 and November 2015, a series of transactions took place between the Plaintiff and the Defendants. These transactions were documented in six Promissory Notes (“Promissory Notes”) executed by the parties. The Promissory Notes were prepared by the Defendants and/or their solicitors. [5] At all material times, D5 was a licensed money lender with D1 and D3 as directors, and D1, D3, and one Ravinderjit Singh a/l Jasbir Singh as shareholders. One Ms. Queck Kiok Fai (“QKF”) was named as the payee in these Promissory Notes, while the Plaintiff acted as her nominee, duly authorised to conduct all matters regarding these transactions on her behalf. [6] The first transaction occurred around October 2013 when D1 and D3 approached the Plaintiff and QKF. The Plaintiff transferred RM200,000.00 to D5 via two Public Bank (“PB”) cheques of RM100,000.00 each, dated 1.11.2013. This was documented in a Promissory Note dated 1.11.2013 (“PN

1.1”). Under PN 1.1, the Defendants agreed to pay QKF and/or the Plaintiff RM2,666.00 per month for 12 months commencing 1.12.2013. The Defendants deposited 12 post-dated cheques for these monthly payments and two undated Hong Leong Bank (“HLB”) cheques for RM100,000.00 each as security for the principal sum. [7] The second transaction occurred around March 2014. The Plaintiff transferred RM500,000.00 to D5 via five Maybank Berhad (“MBB”) cheques of RM100,000.00 each dated 1.5.2014. This was documented in a Promissory Note dated 29.4.2014 (“PN 2.1”). Under PN 2.1, the Defendants agreed to pay QKF and/or the Plaintiff RM10,000.00 per month for 12 months commencing 5.6.2014. The Defendants provided 12 post-dated cheques for these payments and five undated HLB cheques of RM100,000.00 each as security. [8] The third transaction was around September 2014. The Plaintiff transferred RM500,000.00 to D5 via three MBB cheques and two PB cheques of RM100,000.00 each dated 24.10.2014. This was documented in a Promissory Note dated 24.10.2014 (“PN 3.1”). Under PN 3.1, the Defendants agreed to pay QKF and/or the Plaintiff RM10,000.00 per month for 12 months commencing 30.11.2014. The Defendants provided 12 post-dated cheques for these payments and five undated MBB cheques of RM100,000.00 each as security. [9] The fourth transaction occurred around November 2014. The Plaintiff transferred RM500,000.00 to D5 via five PB cheques of RM100,000.00 each dated 23.12.2014. This was documented in a Promissory Note dated 23.12.2014 (“PN 4.1”). Under PN 4.1, the Defendants agreed to pay QKF and/or the Plaintiff RM10,000.00 per month for 24 months commencing 30.1.2015. The Defendants provided 24 post-dated cheques for these payments and five undated MBB cheques of RM100,000.00 each as security. [10] The fifth transaction was around January 2015. The Plaintiff transferred RM300,000.00 to D5 via one MBB cheque of RM72,000.00 and one Citibank Berhad cheque of RM228,000.00, both dated 5.2.2015. This was documented in a Promissory Note dated 5.2.2015 (“PN 5.1”). Under PN

5.1, the Defendants agreed to pay QKF and/or the Plaintiff RM6,000.00 per month for 24 months commencing 10.3.2015. The Defendants provided 24 post-dated cheques for these payments and three undated MBB cheques of RM100,000.00 each as security. [11] The sixth transaction occurred around November 2015. The Plaintiff transferred RM300,000.00 to D5 via three PB cheques of RM100,000.00 each dated 2.12.2015. This was documented in a Promissory Note dated 2.12.2015 (“PN

6.1”). Under PN 6.1, the Defendants agreed to pay QKF and/or alternatively the Plaintiff or one Lua Fei Fei as nominee RM6,000.00 per month for 24 months commencing 10.1.2016. The Defendants provided 24 post-dated cheques for these payments and three undated MBB cheques of RM100,000.00 each as security. [12] All six original Promissory Notes were subsequently replaced with new Promissory Notes (PN 1.2, PN 1.3, PN

2.2, PN 3.2, PN 4.2, and PN 5.1 remained unchanged, while PN 6.1 was the initial PN for the sixth transaction). Each PN contained a clause stating it would be automatically renewed unless the Defendants received a three months' notice in writing from the Plaintiff before the automatic renewal. The exceptions were PN 1.3 and PN

4.2, which did not explicitly contain this automatic renewal clause. [13] The Plaintiff claims that the Defendants honoured the monthly instalments initially but later defaulted. According to the Plaintiff, the Defendants continued to make monthly payments in cash for varying periods even after the expiry of certain Promissory Notes, but eventually ceased all payments. [14] On 1.6.2022 and 3.6.2022, the Plaintiff attempted to bank in all the principal cheques provided as security, but none of them cleared. The Plaintiff then filed this suit on 24.6.2022 seeking recovery of the principal sums totalling RM2,300,000.00 along with the outstanding monthly payments. [15] During the course of proceedings, D1 and D2 were adjudicated bankrupt. Of the four individual Defendants named in the suit, only three provided evidence during the trial. [16] The trial took place on 20.11.2023, 21.11.2023, 22.11.2023, and 22.11.2024. RESPECTIVE PARTIES' CASES Plaintiff's Case [17] The Plaintiff contends that between October 2013 and November 2015, D1 and D3 approached the Plaintiff and QKF to invest in D5 for monthly returns on investment. The Plaintiff, acting as nominee for QKF, advanced a total of RM2,300,000.00 to D5 across six tranches. For each tranche, the parties executed the Promissory Notes wherein the Defendants agreed to pay fixed monthly instalments and provided post-dated cheques for these payments along with undated principal cheques as security for the advanced sums. [18] The Plaintiff further contends that most of these Promissory Notes contained a clause for automatic renewal after their initial term unless the Defendants received a three months' notice before renewal. Even for the Promissory Notes without explicit renewal clauses (PN 1.3 and PN 4.2), the Plaintiff argues the parties had mutual agreements to continue the arrangements, evidenced by continued cash payments beyond the original expiry dates. The Plaintiff alleges that the Defendants eventually defaulted on the monthly instalments and when the Plaintiff attempted to bank in the principal cheques in June 2022, they did not clear. The Plaintiff has therefore sued to recover both the principal sums (RM2,300,000.00) and the outstanding monthly payments (approximately RM2,780,000.00). Defendants' Case [19] The Defendants' position is that the transactions were not investments but loans with interest provided by the Plaintiff to D5. They argue that the monthly instalments were in fact interest payments and that the Promissory Notes were devices to disguise an illegal moneylending transaction. The Defendants claim that the Promissory Notes are void and unenforceable for several reasons: first, they were improperly stamped after execution contrary to the Stamp Act 1949; second, there was no consideration moving to D1 to D4 as the funds were paid to D5; and third, the transactions constitute illegal moneylending under the MLA 1951, as the Plaintiff was not licensed to carry out moneylending business. [20] The Defendants further contend that the Plaintiff failed to comply with the Promissory Notes' requirement of providing three months' notice before banking in the principal cheques. They also argue that the Promissory Notes have been fully satisfied through payments already made by D5, totaling approximately RM1,871,892.00 by cheque and RM310,000.00 in cash. The Defendants maintain that D1- D4 were acting in their capacity as directors of D5, not in their personal capacities, and thus have no personal liability for the transactions. RESPECTIVE PARTIES' SUBMISSIONS Plaintiff's Submissions [21] The Plaintiff submits that the Promissory Notes are valid and enforceable investment agreements. He argues that the notes were properly stamped, with the stamping occurring within a reasonable time after execution. The Plaintiff contends that consideration is present as the funds were advanced to D5 at the request of D1 to D4 who are directors and/or shareholders of D5. [22] On the issue of alleged moneylending, the Plaintiff submits that he is not a moneylender as defined under the MLA 1951, as he was not carrying on the business of moneylending. He was a senior executive in a multinational company with no history of engaging in moneylending activities. The Plaintiff argues that the presumption under section 10OA of the MLA 1951 does not arise, and even if it does, it has been rebutted. [23] The Plaintiff further argues that the Promissory Notes have been automatically renewed as per their terms, and the Defendants are therefore liable for continued monthly payments as well as the return of the principal sum. Defendants' Submissions [24] The Defendants submit that the Promissory Notes are void for illegality as they contravene the MLA 1951. They argue that the Plaintiff is an unlicensed moneylender, and therefore, the Promissory Notes are unenforceable under section 15 of the MLA 1951. The Defendants rely on the presumption under section 10OA of the MLA 1951, contending that proof of a single loan at interest raises a presumption that the Plaintiff is carrying on the business of moneylending. [25] The Defendants further submit that the Promissory Notes are not properly stamped as required by the Stamp Act 1949, rendering them inadmissible and unenforceable. They also argue that there is no consideration for the Promissory Notes as the funds were paid to D5 and not to D1 to D4 who are the makers of the notes. [26] Finally, the Defendants argue that the Plaintiff failed to provide the requisite 3-month notice before presenting the principal cheques for payment, as stipulated in the Promissory Notes, and therefore the enforcement action is premature. WITNESSES [27] One witness appeared for the Plaintiff as follows: a) PW1 is Lua Thiang Poh, the Plaintiff himself, a retired individual. His evidence centres on his contention that the Defendants are jointly and severally liable to return/pay him money pursuant to a series of investment transactions between them. He testified that he was approached by D1 and D3 (Kabir Singh and Manjeet Singh) around October 2013, along with QKF, about an investment opportunity in D5 (Yokin Resources Sdn Bhd). He stated that there were 6 main investment transactions spanning from 2013 to 2024, each evidenced by promissory notes. His evidence emphasises that these were investment transactions offering monthly returns, not loan agreements, as supported by written agreements and correspondence between the parties. He maintains that all correspondence consistently referred to these as investments, and that the Defendants' assertion that these were loans is merely an afterthought to escape liability. [28] Three witnesses appeared for the Defendants as follows: a) DW1 is Kabir Singh a/l Jagir Singh (D1). He testified on his own behalf and was authorised to give evidence on behalf of D2 (his wife Jasminder Kaur) and D5 (as he is a Director). His evidence disputes the Plaintiff's characterisation of the transactions as investments. He testified that the Promissory Notes signed between him and the Plaintiff were for loans given by the Plaintiff, not investments. He argued that D5 paid monthly amounts to the Plaintiff but claimed this constituted illegal moneylending. He testified that the Plaintiff's claim totaled RM5,084,000.00 but failed to account for payments and interests already paid by D5 amounting to RM2,181,892.00. He maintained that D5 did not personally benefit from these transactions and insisted the Plaintiff name them as parties despite their lack of involvement. b) DW2 is Manjeet Singh a/l Darshan Singh (D3). He is also a director of D5 and was authorised to give evidence on its behalf. His evidence was brief, confirming that the suit was for monies paid under Promissory Notes. He knew the Plaintiff personally, having been introduced by a friend, and dealt with the Plaintiff on the Promissory Notes in his capacity as Director of D5. His evidence aligned with DW1's position that these were loan transactions, not investments as claimed by the Plaintiff. c) DW3 is Jasminder Kaur a/p Jasbir Singh (D2). Her evidence was very limited. She testified that she was not involved in the Promissory Notes but signed them only because she was working for D5 and did so in good faith on the instruction of the director of D5 and the Plaintiff. She claimed the Plaintiff assured her that signing was merely procedural and nothing more, and she trusted the Plaintiff. She confirmed she was neither a shareholder nor director of D5 and did not benefit from the monies received from the Plaintiff. ISSUES [29] From the facts of the case, defences relied on by the Defendants and the submissions of parties, the court frames the following main issues for deliberation which this court considers pivotal to the resolution of this case: a) Whether the Promissory Notes are admissible in evidence given that they bear physical stamps that were affixed after execution and lack proper endorsement by the Lembaga Hasil Dalam Negeri (Inland Revenue Board) (“LHDN”) without meeting the "duly stamped" requirement under the Stamp Act 1949. b) Whether the Promissory Notes are valid and enforceable when the consideration was paid to the D5 while D1 to D4 signed as makers of the promissory notes. c) Whether the transaction between the parties constituted a genuine investment arrangement or an unlicensed moneylending transaction disguised as an investment. d) Whether the Plaintiff has successfully rebutted the presumption under section 10OA of the MLA 1951 that he was carrying on the business of moneylending, and if not, whether the promissory notes are void and unenforceable under section 15 of the MLA 1951. e) Whether the Plaintiff's failure to provide the requisite 3-month written notice before presenting the principal cheques for payment, as stipulated in clause 2(b) of the Promissory Notes rendered the enforcement action premature and invalid. f) Whether an adverse inference should be drawn against D4 under section 114(g) of the Evidence Act 1950 for her failure to testify during the trial. ANALYSIS AND FINDINGS OF THE COURT The Validity of the Promissory Notes - Stamping Requirement [30] The Plaintiff contends that the Promissory Notes are duly stamped in accordance with the Stamp Act 1949, pointing to the physical stamps affixed to the first page of each Promissory Note. The Defendants, on the other hand, argue that the Promissory Notes are not properly stamped as they lack proper endorsement by LHDN, and they assert that promissory notes must be stamped before or at the time of execution. [31] Section 2 of the Stamp Act 1949 defines “duly stamped” as follows: “duly stamped as applied to an instrument, means-

the instrument bears an adhesive or impressed stamp of not less than the proper amount or the amount of initial duty or the amount of advance duty paid under subsection 37(1) and that such stamp has been affixed or used in accordance with the law for the time being in force.” [32] Section 41 of the Stamp Act 1949 stipulates: “Save where express provision to the contrary is contained in this Act, all instruments chargeable with duty and executed by any person in Malaysia shall be stamped before or at the time of execution.” [33] Section 47 of the Stamp Act 1949 further states: “Save where other express provision is made by this or any other Act, any unstamped or insufficiently stamped instrument not being a cheque or promissory note drawn or made within Malaysia may be stamped after execution on payment of the unpaid duty if the instrument is presented for stamping within thirty days of its execution if executed within Malaysia, or within thirty days after it has been first received in Malaysia if it has been executed out of Malaysia.” [34] The Plaintiff submits that the Promissory Notes fulfill the definition of the interpretation of the Stamp Act 1949 and were stamped accordingly. The Plaintiff also further submits that the Defendants' Counsel never challenged the presence of the stamp during trial and that there is no documentary evidence provided by the Defendants to support their contentions. [35] However, a review of the cross-examination transcript reveals that the Defendants did in fact question the validity of the stamping, though focusing on the absence of franking or endorsement by LHDN rather than the timing of the stamping. The Plaintiff conceded in cross-examination that the Promissory Notes do not bear the franking of LHDN, although he maintained that there was “obvious stamp” on the documents. This was the evidence in the Plaintiff’s cross-examination: “DC: Okay do you agree with me that this Promissory Note are not 4 stamped in Lembaga Hasil? I understand it is stamped by the Defendants. No, no. Is not stamped. There is only a stamp there, its not stamped by the Lembaga Hasil. I'm not aware. Now I put it to you Mr. Lua that this document has not been stamped in the Lembaga Hasil. What I'm saying is that there is no franking of confirmation from Lembaga Hasil. It’s just a mere stamp, 10 dollars. It appears so. It appears so? It appears so. Nevertheless the, That’s okay Mr. Lua. That’s all, alright. Same goes for all the other Promissory Notes, that it has not been stamped? It is stamped. It is stamped. There is obvious stamp there. It’s a Hasil stamp.” [36] While the specific issue of timing of the stamping was not directly addressed during cross-examination, this does not preclude the court from considering this issue based on the documentary evidence before it and the applicable legal principles. It is evident from an examination of the Promissory Notes that they bear stamps dated after the execution date. For instance, PN 1.1 is dated 1.11.2013, while the stamp is dated 4.11.2013. [37] Section 47 of the Stamp Act 1949 expressly excludes promissory notes from the provision allowing stamping after execution. This position was confirmed by the Federal Court in Navaradnam v Suppiah Chettiar [1973] 1 MLJ 173, where it was held that promissory notes may not, under any circumstances, be stamped after execution. In that seminal case, the facts were strikingly similar to our present case. The respondent, a licensed moneylender, had given three loans to the appellant between December 1969 and August

On each occasion, the promissory note was filled in and signed by the appellant, who delivered it to the respondent together with cash for the stamp fee. The respondent then took the promissory note on the same day to the Stamp Office, where it was stamped. During cross-examination, it was revealed that each promissory note had been stamped after it was signed by the debtor. [38] Ong CJ, delivering the majority judgment in Navaradnam, addressed the specific issue of whether promissory notes could be stamped after execution. His Lordship stated: “In conclusion I would add that the words 'before', 'at' and 'after' refer plainly to different points of time in relation to any relevant act or event. They are far from synonymous. Section 47 has expressly excepted promissory notes from the general provisions of section 41 applicable to all dutiable instruments whatsoever. Promissory notes may not, under any circumstances, be stamped after execution. This is mandatory. Hence they must be stamped before execution, because stamping 'at the time of execution' is a physical impossibility.” [39] Ong Hock Sim FJJ, concurring in Navaradnam, further reinforced this position, stating: “Either the stamping is after execution or it is before or at the time of execution. If the stamping is after execution, then clearly the case does not fall within section 17.” His Lordship also cited Rohini v AI Fernandes AIR 1956 Bom 421, where Chagla CJ held: “With very great respect to the Madras High Court, it is difficult to understand the significance of the expression 'practically simultaneous'. Either the stamping is after execution or it is before or at the time of execution. If the stamping is after execution, then clearly the case does not fall within section 17.” [40] This principle was reiterated in Tay Yong Chai v Chong Jin Kok [2012] 1 LNS 680, where the High Court stated: “This means that cheques and promissory notes cannot be stamped after execution unlike other instruments where late payment of duty is allowed. In the case of Navaradnam v Suppian Chettiar [1973] 1 LNS 98; [1973] 1 MLJ 173, the Federal Court held that the only provision for stamping documents after they are executed is contained in section 47 and promissory notes are expressly excluded from that provision. In the premises, the Federal Court ruled that a promissory may not, 'under any circumstances', be stamped after execution.” [41] The Plaintiff relies on VSP Suppiah Chettiar v KS Navaradnam [1972] 2 MLJ 60 to argue that stamping within a “reasonable time” might be permissible. This reliance is misplaced for several reasons. First, this decision is the Court of Appeal judgment that was subsequently appealed to the Federal Court in Navaradnam v Suppiah Chettiar [supra], which overturned it. Second, even in VSP Suppiah Chettiar, the court was not unanimous on this issue. While the majority (then Justice Sharma) held that stamping shortly after execution was sufficient, there was a strong dissenting judgment that disagreed with this interpretation. [42] Importantly, Gill FJ's dissenting view in VSP Suppiah Chettiar, which argued for a more liberal interpretation allowing stamping shortly after execution, was explicitly rejected by the Federal Court in Navaradnam. Ong CJ acknowledged in Navaradnam that he was initially “so swayed by the same arguments that I was minded to dismiss this appeal. But, having had the advantage of reading the judgment in draft of my brother H. S. Ong F.J., I have no doubt, on further consideration, that this appeal should be allowed. Where the law is clear, it must be upheld, however unfair or absurd it may appear to the judiciary, for hard cases make bad law.” [43] The Federal Court in Navaradnam also addressed and specifically rejected any interpretation that would allow stamping “at the time of execution” to include a reasonable time after execution. The court stated: “To construe 'at' as including 'a reasonable time after' is therefore a violation of one of the cardinal rules of construction,” citing Lord Greene M.R. in Re a Debtor (No. 335 of 1947) [1958] 2 All ER 533 536 that “If there is one rule of construction for statutes and other documents, it is that you must not imply anything in them which is inconsistent with the words used.” [44] Additionally, the Promissory Notes do not bear the necessary endorsement by the LHDN, a fact acknowledged by the Plaintiff's witness during cross-examination. While the Plaintiff's witness maintained that the stamps were “Hasil stamps,” the absence of proper franking or endorsement by the revenue authorities further calls into question the validity of the stamping. Even if the issue of timing were not determinative, this lack of proper endorsement would still render the stamping defective under the requirements of the Stamp Act 1949. [45] In light of the above, I find that the Promissory Notes are not duly stamped as required by the Stamp Act 1949. The combination of improper timing (stamping after execution) and lack of proper endorsement renders the stamps ineffective. Consequently, the Promissory Notes are inadmissible in evidence and unenforceable under section 47 of the Stamp Act 1949, which stipulates that instruments not duly stamped shall not be admitted in evidence for any purpose. The Validity of the Promissory Notes – Consideration [46] The Plaintiff contends that valid consideration was provided for the Promissory Notes as the funds were advanced to D5 at the request of D1 to D4 who are directors and/or shareholders of D5. The Defendants argue that there is no consideration for the Promissory Notes as the funds were paid to D5 and not to D1 to D4 who are the makers of the notes. [47] Section 26 of the Contracts Act 1950 provides that an agreement made without consideration is void, subject to certain exceptions. The classic definition of consideration, as stated in Currie v Misa [1875] LR 10 Ex 153 and cited in Sritharan Naidu a/l Sundara Rajoo v Dato' Dr Gengatharan @ Jeganathan a/l Venkatesan & Anor [2019] 1 LNS 535 (CA), is that a “valuable consideration in the sense of the law may consist either in some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other.” Viscount Haldane LC further elaborated in Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915] AC 847, as cited in the same case, that consideration is “an act of forbearance of one party, or the promise thereof, is the price for which the promise of the other is bought, and the promise thus given for value is enforceable.” [48] In Sritharan Naidu, the plaintiff uncle sued his nephew (the defendant) for breach of an oral agreement. The uncle claimed that he had approached his nephew to be the applicant for a loan of RM960,000 from OCBC Bank as the bank deemed the uncle “too old” for the loan. The aunt's shop-house was charged as security for the loan, and the full loan sum was paid into the nephew's account. The nephew disbursed only RM300,000 to the uncle and withheld the balance of RM660,000. Despite these facts, the Court of Appeal found no valid contract existed due to lack of consideration, stating: “It is a fundamental principle in the law of contracts that every agreement can only exists in law if there is consideration... Although past consideration is valid consideration and the value of the consideration is irrelevant, it remains that there must be consideration. The consideration must move from the uncle and/or the aunt to the nephew. Put simply, what was it in the arrangement for the nephew? What was the nephew to receive in return for agreeing to lend his name and to become the borrower for his uncle?” [49] The Court of Appeal in Sritharan Naidu found that despite the familial relationship between the parties and the fact that the uncle had charged his property as security for the loan, there was no consideration moving to the nephew. The court stated: “We have tried to rationalize what that consideration might be, but we are unable to discern any. As mentioned, the third party charge is not consideration for the purpose of the oral contract between the uncle, aunt and the nephew.” The court went on to conclude that without consideration, the arrangement was “but a moral arrangement having no legal consequences and with the parties never intending any legal relationship to be formed between them.” [50] In the present case, D1 to D4 signed the Promissory Notes as makers, personally undertaking to make the monthly payments and to return the principal sum. However, the funds were paid to D5, not to D1 to D4. There is no evidence of any consideration moving from the Plaintiff to D1 to D4. Like the nephew in Sritharan Naidu who received no benefit for taking on the significant obligation of a loan, D1 to D4 here received no benefit for signing the Promissory Notes and undertaking significant financial obligations. D1 to D4 did not personally receive any part of the funds advanced, which went entirely to D5. This parallels how the nephew in Sritharan Naidu did not receive any of the loan money, which was intended solely for his uncle's benefit. [51] The Plaintiff relies on Pengerusi Majlis Agama Islam Wilayah Persekutuan v Alwasayet Travels & Tours Umrah Services Sdn Bhd [2021] MLJU 3120 (HC) to argue that the Contracts Act allows consideration to be paid by a third party. In that case, the Plaintiff (who was not a party to a tenancy agreement) had paid RM115,550 as a rental deposit directly to D4 (the landlord) for premises rented by D3 (a company). When the tenancy was terminated, the Sessions Court ordered the deposit to be returned to the Plaintiff rather than to D3. The High Court allowed D4's appeal, holding that the deposit should be returned to D3 as the contracting party, not to the Plaintiff who had merely paid the consideration. Akhtar Tahir J examined sections 41 and 42 of the Contracts Act 1950 and stated: “It is the duty of the promisor to provide the consideration but the MLA 1951 allows the consideration to be paid by a 3rd party.” [52] The court explained: “In summary the above provisions allows the consideration to be paid by a 3rd party. In this case the consideration was paid by the Plaintiff and not the promisor and D4 had the knowledge that the consideration was paid by a 3rd party by virtue of the payment being made by way of a cheque in the name of the Plaintiff. [The] effect of payment of consideration by a 3rd party is as stated in section 42 of the MLA 1951 that the promisee cannot now enforce the payment of the consideration against the promisor.” [53] However, a critical distinction is that the court in Pengerusi Majlis Agama Islam Wilayah Persekutuan was addressing a different legal question - namely, whether a third party who had paid consideration on behalf of the promisor could claim performance directly from the promisee. The court held that “the payment of consideration by the Plaintiff as a 3rd party does not make the Plaintiff a party or privy to the agreement” and “under the terms of the agreement on termination of the tenancy agreement the deposit must be returned to the promisor and not to the 3rd party.” This case actually reinforces rather than undermines the principle that consideration must ultimately benefit the promisor, not a third party. [54] The situation in Pengerusi Majlis Agama Islam Wilayah Persekutuan is fundamentally different from the present case. In the case, the third party paid consideration on behalf of the promisor, fulfilling the promisor's obligation to provide consideration to the promisee. In our case, the consideration (the funds) was paid directly to D5, not to or on behalf of D1 to D4 who are the promisors under the Promissory Notes. Far from supporting the Plaintiff's position, Pengerusi Majlis Agama Islam Wilayah Persekutuan reinforces the basic contract law principle that a contract must involve consideration that benefits the promisor, either directly or indirectly. [55] The principle established in Sritharan Naidu is directly applicable to this case. Just as the Court of Appeal in that case found that there was no consideration moving to the nephew, I find that there is no consideration moving to D1 to D4 in this case. The parallels are striking: in both cases, the individual defendants signed loan documents for funds that were meant to benefit others, with no direct benefit to themselves. In Sritharan Naidu, the Court of Appeal dismissed the uncle's claim in limine on the ground that there was no valid contract due to lack of consideration, concluding that “this oral arrangement between the parties is but a moral arrangement having no legal consequences.” [56] The fact that D1 to D4 are directors and/or shareholders of D5 does not alter the fundamental principle that consideration must move to the promisor. The corporate personality of D5 is distinct from that of its directors and shareholders. The principle of separate legal entity established in Salomon v A Salomon & Co Ltd [1897] AC 2 has been consistently upheld in Malaysian jurisprudence. Any benefit to D5 as a separate legal entity does not automatically constitute consideration to its directors or shareholders in their personal capacity. Without evidence that the directors personally received some benefit, right, interest, profit or benefit, or that the Plaintiff suffered some detriment at their personal request (not at the request of the company), there is no consideration moving to D1 to D4. [57] In light of the above, I find that the Promissory Notes are void for lack of consideration. D1 to D4 received no benefit from the transaction, which was solely between the Plaintiff and D5. The corporate veil remains intact, and D1 to D4's status as directors or shareholders does not constitute consideration. The Nature of the Transaction - Moneylending or Investment [58] The Plaintiff contends that the transaction between the parties was an investment arrangement whereby he invested funds in D5. The Defendants argue that the transaction was a loan arrangement disguised as an investment, amounting to illegal moneylending by the Plaintiff. [59] To determine the true nature of the transaction, it is necessary to examine the evidence, including the Promissory Notes, communications between the parties, and their conduct. [60] The Promissory Notes themselves do not explicitly state whether the transaction is an investment or a loan. However, they contain several features characteristic of loan agreements, including fixed monthly payments (akin to interest), security in the form of post-dated cheques, and provisions for the return of the principal sum. The structure of the transaction—advancing a sum of money in return for regular fixed payments and the eventual return of the principal—is consistent with a loan rather than an investment. [61] In Manivanan Kuppusamy v Datuk Ganesan Subramanian [2025] CLJU 86 (HC), the plaintiff sued the defendant for RM450,000 claimed to be an outstanding loan. The parties had been acquainted for over twenty years when the defendant sought financial assistance from the plaintiff to sustain and develop his solar energy business through his company. The plaintiff transferred approximately RM650,000 to the defendant's company between August 2019 and November 2019, and both the plaintiff and his associate were appointed as directors of the company (though they received no shares or remuneration). The defendant later made a partial repayment of RM210,000, and the parties executed a Deed of Settlement in which the defendant agreed to repay the outstanding RM450,000 within twelve months. When the defendant defaulted, the plaintiff commenced legal action. [62] Like our case, the defendant in Manivanan argued that the transaction was an investment rather than a loan, attempting to avoid repayment obligations. The High Court found this defense lacked credibility, particularly highlighting the absence of any investment agreement. [63] Ahmad Shahrir Mohd Salleh J in Manivanan stated: “The total absence of any investment agreement coupled with the defendant's vague and inconsistent testimony had in effect significantly dented the credibility of his defence. In the absence of evidence to substantiate his defence, the defendant's position appeared untenable.” This observation is directly applicable to our case, where despite claiming an investment arrangement, the Plaintiff has not produced any formal investment agreement that would typically outline profit-sharing mechanisms, risk allocation, or the Plaintiff's rights as an investor in D5. [64] While there are references to “investment” in some communications between the parties, there are also numerous references to “interest” and “principal money return.” For instance, at page 487 of B2 (Enclosure 17), the Plaintiff's WhatsApp message to D3 states: “I'm prepared to defer but not waive (part of) the interest payment.” Similarly, at page 496 of B2 (Enclosure 17), there is a spreadsheet which explicitly mentions “outstanding interest.” [65] The Plaintiff argues that the term “interest” was used interchangeably with “Return on Investment” (ROI). However, this explanation is not convincing. The consistent use of terminology associated with loans, such as “interest” and “principal money return,” strongly suggests that the parties understood the transaction to be a loan arrangement. [66] The High Court in Manivanan further cited Muhammad Najmi bin Mohd Sani v Ahamad Asmadi bin Sakat [2019] MLJU 676 (HC), noting: “In the case of Muhammad Najmi bin Mohd Sani v Ahamad Asmadi bin Sakat [2019] CLJU 959; [2019] 1 LNS 959; [2019] MLJU 676; [2019] AMEJ 0735, the High Court held that the reference to the repayment of money within a specified time frame was indicative of a loan rather than an investment. The court reasoned that in the context of a genuine investment, it would be illogical to require a fixed return of funds. This is because by its very nature investments inherently carry the uncertainty of profitability making the assurance of repayment inconsistent with the character of an investment.” [67] This principle articulated in both Manivanan and Muhammad Najmi is directly applicable to our case. The Promissory Notes provided for fixed monthly payments regardless of D5's business performance and the eventual return of the principal sum in full. As the High Court in Manivanan observed, genuine investments inherently carry uncertainty of profitability, making fixed returns inconsistent with investment characteristics. In a true investment, the investor shares in both the profits and losses of the business venture. Here, the Plaintiff was insulated from any business risk through guaranteed fixed payments and return of principal, a hallmark of loan arrangements rather than investments. [68] Additionally, in Manivanan, the court found it significant that the defendant admitted “no discussions had taken place regarding returns on the alleged investment,” stating “this admission was especially significant in light of the fact that the company had recorded a profit... Despite this substantial profit, no returns were paid to the plaintiff further contradicting the defendant's claim that the transaction was, in substance, an investment.” Similarly, in our case, there is no evidence of discussions about profit-sharing mechanisms that would reflect D5's actual business performance, which contradicts the characterisation of the transaction as an investment. [69] Furthermore, the conduct of the parties suggests a loan arrangement. The Plaintiff advanced the funds to D5, received fixed monthly payments, and expected the return of the principal sum. This is more consistent with a creditor-debtor relationship than an investor-investee relationship. [70] In light of the above, I find that the transaction between the parties was a loan arrangement, not an investment. The Plaintiff advanced funds to D5 with the expectation of receiving fixed payments and the eventual return of the principal sum, which is characteristic of a loan rather than an investment. Application of the MLA 1951 [71] Having found that the transaction was a loan arrangement, the next issue is whether it falls within the ambit of the MLA 1951 and whether the Plaintiff is a moneylender as defined under the MLA 1951. [72] Section 2 of the MLA 1951 defines “moneylender” as: “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 business.” [73] Additionally, the same section defines “moneylending” as “the lending of money at interest, with or without security, by a moneylender to a borrower” and “interest” is defined to include “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.” These definitions are crucial for a holistic understanding of the MLA 1951's application. [74] Section 10OA of the MLA 1951 provides: “Where in any proceedings against any person, it is alleged that such person is a moneylender, the proof of a single loan at interest made by such person shall raise a presumption that such person is carrying on the business of moneylending, until the contrary is proved.” [75] The Plaintiff contends that he is not a moneylender as defined under the MLA 1951 and that the presumption under section 10OA does not arise. The Defendants, on the other hand, argue that the Plaintiff is an unlicensed moneylender, and the Promissory Notes are therefore unenforceable under section 15 of the MLA 1951. [76] In Triple Zest Trading & Suppliers & Ors v Applied Business Technologies Sdn Bhd [2023] 10 CLJ 187, the Federal Court confronted a remarkably similar situation. In that case, the respondent had agreed to lend RM800,000 to the appellants subject to repayment with an additional RM800,000 as “agreed profit.” The respondent argued that it was not a moneylender as defined under the MLA 1951. Abdul Rahman Sebli CJSS, delivering the judgment of the Federal Court, emphasised that the focus should not solely be on the definition of “moneylender” but must consider the definitions of “moneylending” and “interest” when interpreting the MLA 1951. His Lordship stated: “The trial judge erred in focusing too much on the meaning of 'moneylender' without regard to the meaning of 'moneylending' and 'interest' when the three meanings must be read together and harmoniously... By whatsoever label it was given, the RM800,000 was 'any amount by whatsoever name called in excess of the principal paid or payable to a moneylender'. If a rose by any other name would smell as sweet, a corpse flower by any other name would smell as foul.” [77] The Federal Court in Triple Zest held: “The presumption under s 10OA of the MA applied against the respondent 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 (who had no licence to carry on the business of moneylending) 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 was true.” [78] The Federal Court in Triple Zest clarified that section 10OA reverses the onus of proof, stating: “This is wrong because by the reversal of the onus of proof by s 10OA of MA51, the burden was not on the appellants to prove that the respondent was carrying on the business of moneylending. Rather, the burden was on the respondent to prove to the contrary that it was not carrying on the business of moneylending.” [79] The Federal Court went on to hold that the transaction was in fact an illegal moneylending transaction disguised as a transaction with “agreed profit,” making it void ab initio. Importantly, the court ruled that not only was the “agreed profit” unrecoverable, but the principal loan sum was also unrecoverable under the principle that “a loss lies where it falls” when an agreement is found to be illegal. [80] In Lee Kuang Gen v Tan Sri Dato' Seri Dr M Mahadevan Mahalingam & Other Appeals [2024] 2 MLRA 219 (CA), three appeals arose from two separate suits. In the first suit, David Choong (“DC”) sued Tan Sri Dato' Seri Dr M Mahadevan (“TSM”) and others seeking a declaration that TSM had illegally loaned money to DC in transactions which were unenforceable under the MLA 1951. In the second suit, TSM sued DC and Lee Kuang Gen (“LKG”) claiming they had induced him through misrepresentation to enter into Sale of Gold Agreements (“SOGAs”) amounting to RM10,493,500. TSM contended these were genuine gold transactions, while DC argued they were disguised loan transactions with interest. The Court of Appeal, after examining the banking documents and communications between the parties, found in favor of DC, holding that the transactions were in fact cash loans disguised as gold sales. The court held: “We are of the considered opinion that a rebuttable presumption that TSM had carried on a moneylending business by granting six (6) cash loans to DC without a moneylender's licence has arisen pursuant to s 10OA of the MLA. The rebuttable presumption arises because there are undisputed contemporaneous documents in the form of the TSM remittance forms, TSM bank statements and DC bank statements which proved that DC had obtained the loans and paid interest at 9% p.a. to TSM.” [81] The court further articulated the necessary standard to rebut the presumption: “To successfully rebut the presumption under s 10OA of the MLA, TSM must prove on the balance of probabilities that by entering into the six (6) loan transactions with DC, he was not engaging in an act of 'lending of money at interest, with or without security, by a moneylender to a borrower', within the meaning of 'moneylending' by s 2 of the MLA.” [82] This is particularly relevant to our case as in Lee Kuang Gen, the court emphasised that it is “trite law that the Court does not look at labels attached to a document but will examine the contents of the same in its particular circumstances to determine the true relationship between the parties and the type of transaction that they have entered into.” The court looked beyond the “investment” and “dividends” labels to identify the true nature of the transaction, finding that these were in fact “interest” payments on cash loans. [83] The Plaintiff relies on Dr Mansur Bin Hussain & 3 Ors v Barisan Tenaga Perancang (M) Sdn Bhd & 4 Ors [2019] 1 LNS 661 (CA) to argue that the presumption under section 10OA has been rebutted because he was engaged in a legitimate profession. However, a close reading of Dr Mansur reveals significant distinguishing factors. In Dr Mansur, the Court of Appeal upheld the High Court's finding that: “Dr. Mansur had not adduced any evidence to prove that Datuk Chai had... carried on or advertised or announced himself as carrying on, or held himself out as carrying on moneylending business within the meaning of s. 5(1) and (2) MA... Even if this court assumes that a rebuttable presumption has arisen under s. l0OA MA (whereby Datuk Chai is presumed to have carried on moneylending business), I find as a fact that Datuk Chai had adduced sufficient evidence to rebut such a presumption on a balance of probabilities. This is due to the undisputed evidence that Datuk Chai has his own construction and property development companies. In other words, there is irrefutable evidence that Datuk Chai carries on a legitimate business other than moneylending.” [84] Critically, in Dr Mansur, the alleged moneylender had adduced affirmative evidence establishing that he was primarily engaged in construction and property development businesses, not moneylending. Moreover, Dr Mansur involved a Share Sale Agreement with an Option to Repurchase, which the court found to be legitimate legal documents prepared by lawyers representing both parties, with provisions protecting both parties' interests. [85] In the present case, the Plaintiff's mere assertion that he was a senior executive in a multinational company does not automatically rebut the presumption. Unlike in Dr Mansur, the Plaintiff has not adduced substantive affirmative evidence to establish that he was primarily engaged in another legitimate business rather than moneylending. Additionally, the Promissory Notes in the current case have features that strongly indicate a loan arrangement, including fixed payments regardless of the profitability of D5's business, security in the form of post-dated cheques, and provisions for the return of the principal sum. The communications between the parties also contain references to “interest” and “principal money return.” The totality of evidence suggests a loan arrangement disguised as an investment. [86] Furthermore, D5, as a licensed moneylender, is bound by section 17A of the MLA 1951, which limits the interest rate for secured loans to 12% per annum and for unsecured loans to 18% per annum. As the Federal Court in Triple Zest emphasised, we must look at the substance of the transaction, not merely the labels assigned to it. The regular fixed payments required under the Promissory Notes, which were unrelated to the profitability of D5, bear all the hallmarks of interest payments. In fact, the Plaintiff himself used the term “interest” in his communications, only later claiming that this term was used interchangeably with “Return on Investment.” [87] A critical point highlighted in Triple Zest is the danger of allowing unlicensed moneylenders to evade the law by simply using different terminology: “Without being derogatory, the decision of the courts below can be likened to allowing a robber to claim back his cost and expenses in a botched robbery attempt. It makes a mockery of the MA51 and the Financial Services Act 2013. While banks and licenced moneylending companies need to obtain licences and abide by strict monetary regulations, unlicensed moneylenders need only to use the term 'agreed profit' in place of 'interest' as 'consideration' in carrying on their illegal moneylending activities.” [88] Additionally, it is worth emphasising the public policy considerations that underpin section 15 of the MLA, which renders unenforceable any moneylending agreement by an unlicensed moneylender. As the Federal Court in Triple Zest noted, citing Yeow Guang Cheng v Tang Lee Hiok & Ors [2020] 1 LNS 1696 (CA): “To deter unlicensed moneylenders from continuing with their nefarious business, it is in the public interest for unlicensed moneylenders to be deprived of their illegal 'principal loan sums', interest and whatever ill-gotten property or benefit enjoyed from their unlawful moneylending business.” [89] In light of the above, I find that the Plaintiff has failed to rebut the presumption under section 10OA of the MLA 1951 that he was carrying on the business of moneylending. Consequently, as an unlicensed moneylender, the loan agreement embodied in the Promissory Notes is void and unenforceable under section 15 of the MLA 1951, which stipulates that no moneylending agreement in respect of money lent by an unlicensed moneylender shall be enforceable. Notice Requirement and Breach of the Promissory Notes [90] Given my findings on the previous issues, it is not strictly necessary to address the issue of notice requirement and breach of the Promissory Notes. However, for The Defendants contend that the Plaintiff failed to provide the requisite 3-month notice before presenting the principal cheques for payment, as stipulated in the Promissory Notes. The Plaintiff argues that the Defendants were already in breach of the Promissory Notes by failing to make the monthly payments, which justified the presentation of the principal cheques for payment. For completeness, I will briefly address this issue. [91] Clause 2(b) of the Promissory Notes requires the Plaintiff to give the Defendants a 3-month notice in writing before banking in any Principal Cheques made out by the Defendants. This is a clear condition precedent to the Plaintiff's right to present the principal cheques for payment. [92] During cross-examination, the Plaintiff admitted that he did not terminate the agreement in writing or provide the requisite notice before presenting the principal cheques for payment. This admission is recorded at pages 41 and 42 of the Notes of Evidence dated 20.11.2023: “DC: Alright. So now when you demanded by filing this suit for the principal sum and also unpaid instalment, did you terminate the agreement in writing? I did not terminate them in writing.” [93] The Plaintiff relies on clause 3 of the Promissory Notes, which provides for Events of Default, including failure to make payment of any sum due under the Promissory Notes. Clause 3(b) states that if an Event of Default occurs, the Plaintiff may terminate the agreement and demand on the Defendants repayment of any sums outstanding. [94] However, clause 3(b) also requires the termination and demand to be in writing, “which is to be sent following Clause 5.” As the Plaintiff admitted, he did not terminate the agreement in writing, which means he did not comply with this requirement. [95] The Plaintiff further relies on Ching Yik Development Sdn Bhd v Setapak Heights Development Sdn Bhd [1996] 3 MLJ 675 (CA) to argue that the Defendants' breach of the fundamental obligation to make the monthly payments entitled him to treat himself as discharged from the obligation to provide a 3-month notice. However, this principle cannot override the express terms of the Promissory Notes, which clearly require written termination and notice. [96] In light of the above, I find that the Plaintiff did not comply with the notice requirement in the Promissory Notes. This non-compliance would render the enforcement action premature, even if the Promissory Notes were otherwise valid and enforceable. Adverse Inference [97] The Plaintiff seeks to draw an adverse inference against D4 under section 114(g) of the Evidence Act 1950 for her failure to testify during the trial. The Defendants' counsel stated that they would not be calling D4 due to medical issues but did not provide a medical certificate at that time. The medical certificate was submitted later during the submissions phase.[95] Section 114(g) of the Evidence Act 1950 allows the court to presume “that evidence which could be and is not produced would if produced be unfavourable to the person who withholds it.” [98] In Ravindhran Kutty Krishnan v Pro-Tech Interior Design & Construction Sdn Bhd [2019] 1 LNS 2321, the Court of Appeal drew an adverse inference where a key witness was not called and no medical certificate was produced to support the claim that the witness was unable to attend due to medical conditions. [99] In the present case, while the Defendants initially failed to produce a medical certificate, they later submitted a medical letter during the submissions phase, documenting that D4 suffers from depression and anxiety and had experienced a mild heart attack outside the courtroom. This medical documentation provides a legitimate reason for D4's inability to testify. [100] Furthermore, D4's testimony would not have materially altered the outcome of this case. D4 is one of the makers of the Promissory Notes, and her obligations are the same as those of the other individual Defendants who did testify. The issues in this case primarily revolve around legal questions, such as the validity of the Promissory Notes and the application of the MLA 1951, rather than factual disputes that would require D4's testimony. [101] In light of the above, I decline to draw an adverse inference against D4 under section 114(g) of the Evidence Act 1950. The Defendants have provided a legitimate reason for D4's inability to testify, and her testimony would not have materially altered the outcome of this case. CONCLUSION AND ORDER [102] In conclusion, I find that: a) The Promissory Notes are not duly stamped as required by the Stamp Act 1949, rendering them inadmissible in evidence and unenforceable; b) The Promissory Notes are void for lack of consideration, as there is no consideration moving to D1 to D4 who are the makers of the notes; c) The transaction between the parties was a loan arrangement, not an investment; d) The Plaintiff has failed to rebut the presumption under section 10OA of the MLA 1951 that he was carrying on the business of moneylending, rendering the loan agreement void and unenforceable under section 15 of the MLA 1951; e) Even if the Promissory Notes were otherwise valid and enforceable, the Plaintiff did not comply with the notice requirement, rendering the enforcement action premature; and f) No adverse inference is drawn against D4 for her failure to testify. [103] Accordingly, I find that the Plaintiff has not proven his claim on a balance of probability and dismiss the Plaintiff's claim in its entirety. The Plaintiff shall pay the Defendants' costs of this action. 6 August 2025 ATAN MUSTAFFA YUSSOF AHMAD Judge Kuala Lumpur High Court (Commercial Division) Counsel: For the Plaintiff: See Tian Xin (Messrs Choo Dee Wei) For the Defendants: Pramjit Kaur (Messrs Mann & Associates)