Maa Credit Berhad v Best Birdnest Sdn Bhd (WA-22NCC-183-04/2023)

BEST BIRDSNEST SDN BHD [Company No: 200701017215 (775224-T)]

GREENPOWER VALUE SDN BHD [Company No: 201201027225 (1011715-V)]

DATUK LIM SUE BENG [NRIC No: 641119-10-6073)

LEE SIAH SIAN @ LEE HAY HIAN [NRIC No: 420518-06-5169] ... DEFENDANTS JUDGMENT (Enclosures 10 and 29) [1] This judgment is in respect two applications by the Plaintiff as follows: i) An application for summary judgment against the Defendants under Order 14 Rules of Court 2012 (ROC) (Enclosure 10); and ii) An application to strike out the 1st and 2nd Defendants’ Counterclaims under Order 18 Rule 19(1)(a), (b) and (d) of the ROC (Enclosure 29). [2] Both Enclosures 10 and 29 (collectively “the Applications”) were heard and decided together. It was appropriate to have both Applications heard and decided together as the 1st and 2nd Page 2 of 12 Defendants’ defence to the Plaintiff’s claim is essentially contained in their respective Defences and Counterclaims. Therefore, in determining whether the Plaintiff is entitled to summary judgment the merits of the 1st and 2nd Defendants’ Counterclaim would also be considered. A] SALIENT BACKGROUND FACTS [3] The Plaintiff is a licensed moneylender who granted a loan of RM24.5 million to the 1st Defendant pursuant to a Letter of Offer dated 9.7.2021 and Moneylending Agreement dated 13.7.2021 (collectively “the Agreement”). The 2nd, 3rd and 4th Defendants executed guarantees to secure the loan. [4] The main terms of the loan were: i) Interest rate: 10% per annum; ii) Loan duration: 5 months from disbursement; iii) Default interest: 8% per annum on arrears. [5] The loan was disbursed on 16.7.2021 and was due for repayment on 16.12.2021. [6] The 1st Defendant defaulted on repayment. [7] After the action was filed, the 1st Defendant made a part payment of RM200,000. [8] The Plaintiff claims the sum of RM31,776,003.47 as at 23.5.2023, which includes the principal sum plus interest at 10% per annum and default interest at 8% per annum on arrears. B] ISSUE RAISED BY THE DEFENDANTS (ENCLS. 10 & 29) [9] While the Defendants initially raised various issues in their pleadings regarding compliance with the Moneylenders Act 1951 (“MLA”), however, at the hearing, their submissions focused on a Page 3 of 12 single core issue: Whether the Plaintiff can continue charging the 10% contractual interest after the loan duration expired in addition to the 8% default interest. [10] The 1st Defendant argued that the 10% interest should cease after the 5-month loan period (“loan period”) with only 8% default interest applying thereafter. The 2nd, 3rd and 4th Defendants adopted similar positions. The Defendants contend that continuing to charge both rates effectively increases the interest due to the default, contrary to Section 17 of the MLA. C] THE CHARGING OF 10% INTEREST AFTER THE LOAN DURATION EXPIRED [11] The central controversy is whether the Plaintiff can continue imposing the 10% contractual interest after the loan duration expired. [12] The Defendants contend that once the 5-month loan period ended on 15.12.2021, only the 8% default interest should apply. On the other hand, the Plaintiff maintains it can continue charging 10% interest on the principal sum even after the loan period expired, while also imposing 8% default interest on arrears. [13] To put it simply, the Defendants position is that: i) The 10% interest is chargeable only within the loan period; ii) The 10% interest ceases to be chargeable after the loan period ends; iii) The 8% default interest can only be charged in place of (in lieu of) the 10% interest after the loan period ends; and iv) There cannot be two interest being charged on the loan sum concurrently, i.e. the 10% and the 8%. [14] The Plaintiff's calculation methodology, as set out in paragraph 27 of their Written Submission (Enclosure 27), is: i) Until 15.12.2021 (during loan period): Page 4 of 12 a) 10% interest on principal sum of RM24.5 million = RM1,026,986.30. b) Total sum as at 15.12.2021 = RM25,526,986.30. ii) After 16.12.2021 (post loan period/after it ended): a) 10% interest continues on the principal sum of RM24.5 million. b) 8% default interest on the arrears of RM25,526,986.30. [15] The Plaintiff’s calculation of the sums due were based on the formula in Clause 2 of the Agreement which states as follows: “2. Default

If default is made in the repayment upon the due date of any sum of Instalment payable to the Lender under this Agreement, whether in respect of principal or interest, the Lender shall be entitled to charge simple interest on the unpaid sum of instalment which shall be calculated at the rate of eight per centum per annum from day to day from the date of default in repayment of the sum of instalment until that sum of instalment is paid, and any interest so charged shall not be reckoned for the purposes of this Agreement as part of the interest charged in respect of the loan.

The Interest shall be calculated in accordance with the following formula; where, R represents sum of interest to be paid. D represents the number of days in default. S represents the sum of monthly instalment which is overdue.” (own emphasis added) [16] Section 17 of the MLA provides as follows: Section 17 Prohibition of compound interest Page 5 of 12 “Any moneylending agreement made on or after the commencement of this Act, for the loan of money by a licensee shall be illegal in so far as it provides, directly or indirectly, for the payment of compound interest, or for the rate or amount of interest to be increased by reason of any default in the payment of sums due under the moneylending agreement: Provided that provision may be made in any such moneylending agreement that if default is made in the payment upon the due date of any sum or instalment payable to the licensee under the moneylending agreement, whether in respect of principal or interest, the licensee shall be entitled to charge simple interest on the unpaid sum or instalment which shall be calculated at the rate of eight per centum per annum from day to day from the date of default in payment of the sum or instalment until that sum or instalment is paid, and any interest so charged shall not be reckoned for the purposes of this Act as part of the interest charged in respect of the loan.” (own emphasis added) [17] It is quite evident that the wording of Clause 2 of the Agreement and the proviso to Section 17 of the MLA are almost identical. [18] The MLA and the Agreement both provide that 8% default interest can be charged in addition to the main loan interest. This means both interest rates can run concurrently. This interpretation is logical for the following reasons: i) If only default interest can be charged after default, the 1st Defendant would be in a better position (and the Plaintiff in a worse position), as the 1st Defendant pays 10% interest during the loan period but only 8% interest after default, resulting in a 2% reduction. ii) It would be illogical for a defaulting borrower to pay less interest (from 10% to 8%) after default than during the loan period. iii) The 8% default interest is meant to be charged in addition to, not in replacement of, the main interest rate. [19] This interpretation is supported by Sections 17 and 17A of the MLA where: Page 6 of 12 i) Section 17 prohibits compound interest but specifically provides through its proviso that 8% default interest can be charged on arrears. ii) Section 17A sets maximum interest rates but does not prohibit concurrent running of contractual and default interest. [20] The concurrent charging of both rates does not make the interest exorbitant or amount to compound interest as: i) The principal sum remains unchanged. ii) The 8% is charged only on arrears as permitted by the proviso to Section 17 of the MLA. iii) The total interest remains within statutory limits. [21] In this regard, I accept the Plaintiff's position that: i) Neither the Agreement nor the MLA expressly prohibits the continuation of the 10% contractual interest after the loan duration. ii) The Agreement provides for 8% default interest as an additional interest, not as a replacement of the contractual interest. iii) Section 17(1) of the MLA, while prohibiting compound interest, contains a proviso that permits charging simple interest at 8% per annum on unpaid sums “and any interest so charged shall not be reckoned for the purposes of this Act as part of the interest charged in respect of the loan”. iv) This interpretation is supported by Lien Chung Credit & Leasing Sdn Bhd v. Chang Chin Choi [1994] 3 MLJ 488 and UOL Credit Sdn Bhd v. Coral Fields Resources Sdn Bhd & Anor [1997] 5 MLJ 426, where post-default contractual interest was permitted to continue running. [22] The Defendants’ reliance on the Federal Court case of Triple Zest Trading & Suppliers & Ors v. Applied Business Technologies Sdn Bhd [2023] 10 CLJ 187 is misplaced as: Page 7 of 12 i) That case dealt with unlicensed moneylenders charging exorbitant rates. ii) In the present case the Plaintiff is a licensed moneylender charging rates permitted under the MLA. iii) The concurrent charging of both rates does not amount to compound interest as the principal sum remains unchanged. [23] Further, the fact that the 1st Defendant made part payment after the action was filed, without disputing the interest calculation, shows that the interest issue is an afterthought (CCG Concrete Constructions (M) Sdn Bhd v. Rich Avenue Sdn Bhd [2000] 7 MLJ 46). D] OTHER ISSUES INITIALLY RAISED [24] Even though the Defendants focused their submissions on the interest calculation issue, for completeness, I will address the other issues raised in their pleadings: i) The execution of the Agreement at the 1st Defendant’s Premises during MCO with proper attestation by solicitors does not invalidate the Agreement. This is supported by Hap Seng Credit Sdn Bhd v. Rentak Arena (M) Sdn Bhd [2017] 9 MLJ 169 where the Court accepted a moneylending agreement executed at the borrower’s premises. ii) Delivery of stamped Agreement shows the stamped Agreement was delivered before disbursement through the 3rd Defendant on 15.7.2021, with disbursement following on 16.7.2021, satisfying Section 16 of the MLA. iii) Regarding the Plaintiff’s receipt of the RM200,000 part payment in which a receipt was issued. Following Delta Leasing Sdn Bhd v. Fatimah Masni & Anor [2021] 1 LNS 1666, such administrative non-compliance would not affect the validity of the transaction. Page 8 of 12 [25] None of these issues raise triable questions warranting trial. The Counterclaims by the 1st and 2nd Defendants, being premised on these same grounds, are plainly and obviously unsustainable. E] ENCLOSURE 29 [26] The 1st and 2nd Defendants’ sought the following declarations in their Counterclaims: i) The Agreement (Letter of Offer, Moneylending Agreement and Letter of Undertaking) is void and unenforceable; ii) The Guarantee and other securities are also void and unenforceable. [27] The grounds for the reliefs sought in both Counterclaims arise from the same allegation raised in respect of Enclosure 10 regarding the alleged contravention of various provisions of the MLA and Regulations, as well as the calculation of interest. [28] Hence, I reiterate my findings above. F] CONCLUSION [29] I would highlight at this juncture that the Defendants are not disputing the loan, the principal sum, the 10% interest charged during the loan period and the 8% default interest. They mainly object to the continued charging of the 10% interest after the loan period ended. This does not mean there is no debt in existence. [30] Having considered the submissions and evidence before me, I find no triable issues that warrant this matter to proceed to trial (Bank Negara Malaysia v. Mohd Ismail Ali Johor & Ors. [1992] 1 CLJ (Rep) 14; National Company for Foreign Trade v. Kayu Raya Sdn. Bhd. [1984] 1 CLJ Rep 283). I also find that the 1st and 2nd Defendants’ Counterclaims are obviously unsustainable (Seruan Gemilang Makmur Sdn Bhd v. Kerajaan Negeri Pahang Darul Makmur & Anor [2016] 3 MLJ 1) Page 9 of 12 [31] In arriving at my decision, I have taken into consideration that there is no conflict of evidence regarding the facts in the present case (Seruan Gemilang (supra)). [32] For the reasons stated above, I allowed both the Plaintiff’s Applications with costs. Dated this 27th day of December, 2024 -SGD- (WAN MUHAMMAD AMIN BIN WAN YAHYA) Judge High Court of Malaya, Kuala Lumpur (Commercial Division (NCC 3)) COUNSEL FOR THE PLAINTIFF Teoh Chye Yi (Cheong Tick Soon together with her) Messrs Raja, Darryl & Loh Tingkat 26, Menara Hong Leong, No. 6, Jalan Damanlela, Bukit Damansara, 50490 Kuala Lumpur Tel: 03-26329999 Emel: rdl@rdl.com.my Page 10 of 12 COUNSEL FOR THE 1ST DEFENDANT Mohammad Danial bin Hazizan (Amber Tan Wey (pupil-in-chambers) together with him) Messrs S Ravenesan No. 54-1, Jalan Telawi, Bangsar Baru, 59100 Kuala Lumpur Tel: 03-22800120 Emel: generalkl@srv.com.my COUNSEL FOR THE 2ND DEFENDANT Kriishand a/l Gopala Krishnan (Muhammad Thaqif Rusyaidi together with him) Messrs Kriishand G Krishnan 40-1, Jalan Telawi, Bangsar Baru, 59100 Kuala Lumpur Tel: 03-22013350 Emel: office@kgklaw.com.my COUNSEL FOR THE 3RD DEFENDANT Jasneeta Kaur Bhullar Messrs Azmi Fadzly Maha & Sim A4-2-5, Solaris Dutamas, No. 1, Jalan Dutamas 1, 50480 Kuala Lumpur Tel: 03-62064220 Emel: general@afa-law.com Page 11 of 12 COUNSEL FOR THE 4TH DEFENDANT Nik Nurul Atiqah binti Nik Yusof Messrs Faizah Lim & Assoc. LG001, Lower Ground Floor, Dynasty Hotel, 218 Jalan Sultan Azlan Shah, 51200 Kuala Lumpur Tel: 03-40412388 Emel: ohylaw@yahoo.com LEGISLATION / RULES CITED Rules of Court 2012 ▪ Order 14 ▪ Order 18 Rule 19(1)(a), (b) and (d) Moneylenders Act 1951 ▪ Section 16 ▪ Sections 17 and 17A CASES CITED

Bank Negara Malaysia v. Mohd Ismail Ali Johor & Ors. [1992] 1 CLJ (Rep) 14

CCG Concrete Constructions (M) Sdn Bhd v. Rich Avenue Sdn Bhd [2000] 7 MLJ 46

Delta Leasing Sdn Bhd v. Fatimah Masni & Anor [2021] 1 LNS 1666

Hap Seng Credit Sdn Bhd v. Rentak Arena (M) Sdn Bhd [2017] 9 MLJ 169

Lien Chung Credit & Leasing Sdn Bhd v. Chang Chin Choi [1994] 3

National Company for Foreign Trade v. Kayu Raya Sdn. Bhd. [1984] 1 CLJ Rep 283

Seruan Gemilang Makmur Sdn Bhd v. Kerajaan Negeri Pahang Darul

Triple Zest Trading & Suppliers & Ors v. Applied Business

UOL Credit Sdn Bhd v. Coral Fields Resources Sdn Bhd & Anor [1997] 5 MLJ 426