Powernet Industries Sdn Bhd v Golden Wheel Credit Sdn Bhd (WA-12ANCC-75-10/2019)

This is an appeal by the Appellant (Defendant in the Court below) against the decision of the learned Sessions Court Judge dismissing the application of the Appellant to strike out the claim of the Respondent (Plaintiff in the Court below) pursuant to Order 19 rule 19(1) of the Rules of Court 2012. I have allowed the appeal. These are the reasons for my decision.

The background facts are very straightforward. The parties will be referred to as they were in the Court below.

The Plaintiff is a licensed moneylender.

On 21.11.2017, the Plaintiff and the Defendant entered into a loan agreement whereby the Plaintiff has agreed to provide a loan of RM500,000.00 to the Defendant with interest at the rate of 18% per annum.

The moneylending agreement also includes, among others, the following terms: 3 a) the Defendant shall repay the loan in instalments which are to be paid by the 21st of every month for 24 months beginning with the first instalment on 21.12.2017; and b) the Plaintiff shall be entitled to charge simple interest at the rate of 8% per annum on the unpaid loan together with interest that is due from the date of default in repayment until the date of payment.

The loan was released to the Defendant on 21.11.2017, the date of the moneylending agreement. A stamped copy of the agreement dated 21.11.2017 was delivered to the Defendant subsequently, on 4.1.2018.

The Defendant defaulted in repayment of the loan and, by a letter of demand dated 15.2.2019, the Plaintiff demanded the outstanding sum of RM75,915.07 and notified the Defendant that the moneylending agreement will be deemed terminated if the Defendant failed to settle the said outstanding sum within 14 days from the date of the letter of demand. 4

The Defendant failed to pay the outstanding sum claimed in the letter of demand and according to the Plaintiff, the moneylending agreement was deemed terminated on 2.3.2019 and all the unpaid instalments under the moneylending agreement became due and payable on 2.3.2019.

On 26.3.2019, the Plaintiff commenced the action against the Defendant claiming for repayment of the sum of RM325,677.77 due and owing under the moneylending agreement.

The Defendant contended that the Plaintiff had breached various provisions of the Moneylenders Act 1951 (“the MA”) and applied to strike out the Plaintiff’s claim. That application was dismissed by the learned Sessions Court Judge. Hence this appeal.

The law on striking out of claims and pleadings is trite. In Bandar Builder Sdn Bhd & Ors v United Malayan Banking Corporation Bhd [1993] 3 MLJ 36, it was held as follows: 5 “The principles upon which the Court acts in exercising its power under any of the four limbs of O 18 r 19(1) of the Rules of the High Court 1980 are well settled. It is only in plain and obvious cases that recourse should be had to the summary process under this rule and the summary procedure can only be adopted when it can clearly be seen that a claim or answer is on the face of it ‘obviously unsustainable’. It cannot be exercised by a minute examination of the documents and facts of the case in order to see whether the party has a cause of action or a defence…. So long as the pleadings disclosed some cause of action or raised some question fit to be decided by the judge, the mere fact that the case was weak and not likely to succeed at the trial was no ground for the pleadings to be struck out.”

Firstly, it is contended by the Defendant that the moneylending agreement is in breach of section 16 of the MA as the loan was remitted to the Defendant on 27.11.2017 before a stamped copy of the moneylending agreement was delivered to the Defendant on 4.1.2018. There is no dispute that the loan was remitted to the Defendant before the stamped copy of the moneylending agreement was given to the Defendant.

Section 16 of the MA provides as follows: 6 “Moneylending agreement to be given to the borrower

No moneylending agreement shall be enforceable unless the agreement has been signed by all the parties to the agreement and a copy of the agreement duly stamped is delivered to the borrower by the licensee before the money is lent.

A licensee who executes a moneylending agreement which does not comply with this section shall be guilty of an offence under this Act and shall be liable to a fine not exceeding ten thousand ringgit or to imprisonment for a term not exceeding twelve months or to both.”

It would have seemed pretty clear that the moneylending agreement which is in breach of section 16 of the MA is on that ground unenforceable. However, in this case, the parties had agreed to waive section 16 of the MA as the Defendant was facing critical financial problems and needed the loan to be disbursed to it immediately. The Defendant’s director admitted in his affidavit that the parties had agreed to waive section 16 of the MA as the Defendant was facing critical financial problems and needed the loan to be disbursed to it immediately. Also, the Defendant has never raised this issue prior to these proceedings. 7

In Boustead Trading (1985) Sdn Bhd v Arab-Malaysian Merchant Bank Bhd [1995] 4 CLJ 283, the Federal Court, on the doctrine of estoppel , said this: “The time has come for this Court to recognise the doctrine of estoppels is a flexible principle by which justice is done according to the circumstances of the case. Estoppel is a doctrine of wide utility and could be resorted to in varying fact patterns to achieve justice. Indeed the circumstances in which the doctrine may operate are endless. It is not an integral part of the doctrine of estoppels that a litigant who invokes the doctrine of estoppels must prove that he was induced by the conduct of his opponent to act in a particular way, as all that a representee need do is to place sufficient material before a Court from which an inference may fairly be drawn that he was influenced by his opponent’s acting. Likewise, the requirement that the representee should have acted to his detriment is also not part of the doctrine. In this respect, all that needs to be shown is that, in the particular circumstances of a case, it would be unjust to permit the representor or encourager to insist upon his strict legal rights. A Court may permit a litigant to argue that his opponent is estopped from raising a particular contention if it is in the interest of justice to do so. It is really a matter of the case lies, must have due regard to all the circumstances of the case”. 8

The Defendant argued that it is not open to the Plaintiff to contend that the Defendant has waived compliance with the provisions of the MA. The provisions of the MA are designed to protect the borrowers. Borrowers such as the Defendant could not waive or contract himself out of the MA. The Court of Appeal in AEH Capital Sdn Bhd v Am-El Holdings Sdn Bhd [2008] 4 MLJ 487 said: “[139] The Moneylenders Act 1951 (Act 400) has been enacted by the legislature for the protection of the borrowers and the moneylender has only himself to blame if he does not comply strictly with the provisions therein (F Xavier v K Kathamuthu Konar [1958] MLJ 286; and Ang Khye Pang v Chop Ban Aik [1939] MLJ 282). According to the case of Kartar Singh v Mahinder Singh [1959] MLJ 248, moneylenders must learn the importance of strict compliance with the technical requirements of the Ordinance if they wish to recover their money. And according to Raja Azlan Shah J (as His Royal Highness then was) in Overseas Union Finance Ltd v Lim Joo Chong [1971] 2 MLJ 124, at p 126 that: This is indeed a lesson to be learnt by moneylenders in future to be more careful when lending money on a security and also to be sure that the Moneylenders Ordinance has been fully complied with the Moneylenders Ordinance is calculated to protect borrowers from unscrupulous moneylenders but careless moneylenders are also caught by it”. 9

I am of the view that none of the authorities cited by learned counsel for the Plaintiff state that a party cannot be estopped from relying on a statute such as the MA. In fact, it is trite law that a party can be estopped from relying on a statute and there are many cases where a party is estopped, for instance, from relying on the Limitation Act. I am of the view that whether the Defendant is estopped from relying on a breach of section 16 of the MA in the facts of the present case is an issue of fact which should be decided at a full trial. After all, it was to accommodate the situation of the Defendant and for the benefit of the Defendant that the loan was released immediately to the Defendant and the Defendant had agreed to the non-compliance with section 16 of the MA. The question whether the Defendant, having taken advantage of the benefit conferred on him can turn around and allege that the moneylending agreement is unenforceable for contravention of section 16 of the MA when parties have waived section 16, is, I think, an issue that should go for trial. I would not strike out the Plaintiff’s claim on this ground.

The Defendant has also alleged that the moneylending agreement is illegal for breach of section 23 of the MA. Section 23 of the MA prohibits the moneylender from charging the borrower expenses other than stamp duties, fees payable by law and legal costs. In this case, the 10 Plaintiff has imposed a processing fee of RM10,000.00 on the Defendant which has been paid. That much is not disputed.

The Plaintiff argued that the imposition of a fee in breach of section 23 of the MA does not render the moneylending agreement unenforceable, as shown in the wording of section 23 itself. Section 23 of the MA provides as follows: “Prohibition of charge for expenses on loans by licensee [23] Any moneylending agreement between a license and a borrower or intending borrower for the payment by the borrower or intending borrower to the licensee of any sum on account of costs, charges or expenses other than stamp duties, fees payable by law and legal costs incidental to or relating to the negotiations for or the granting of the loan or proposed loan shall be illegal, and if any sum is paid to a licensee by a borrower or intending borrower as, for or on account of any such costs, charges or expenses other than as aforesaid that sum shall be recoverable as a debt due to the borrower or intending borrower, or in the event of the loan being completed, shall, if not so recovered, be set off against the amount actually lent and that amount shall be deemed to be reduced accordingly”.

The wording “and if any sum is paid to a licensee by a borrower on account of any such costs, charges or expenses other than as aforesaid 11 that sum shall be recoverable as a debt due to the borrower or, in the event of the loan being completed shall, if not so recovered, be set off against the amount actually lent and that amount shall be deemed to be reduced accordingly” implies that the amount of the loan can be recovered and the unauthorised sum shall be set off against the loan. Accordingly, section 23 of the MA itself saves the moneylending agreement from being void. I agree with the submission of the Plaintiff and the claim cannot be struck out on the ground of the imposition of the processing fee of RM10,000.00.

The Defendant also argues that there is a breach of section 27 of the MA. Section 27 of the MA provides as follows: “[27] Attestation of moneylending agreement

A moneylending agreement shall be attested by an Advocate and Solicitor of the High Court, an officer of the Judicial and Legal Service, a Commissioner for Oaths, District Officer, Justice of Peace or such other person as may be appointed by the Minister generally for such purpose.

The attestor shall explain the terms of the moneylending agreement to the borrower, and shall certify on the agreement that the borrower appears to understand the meaning of the terms of the agreement. 12

Any moneylending agreement which is not attested in accordance with this section shall be void and have to effect and shall not be enforceable”.

The authorities show that a breach of section 27 will render the moneylending agreement void and unenforceable.

The Federal Court in Joginder Kaur v Sohan Singh [1984] 2 MLJ 54 said the following: “If that was so, we would agree that there might be contravention of section 27(1) of the Moneylenders Ordinance, 1951 which requires inter alia that the money borrowed shall be paid over by the lender to the borrower in the presence of the attestor who shall certify the fact upon the promissory note. Sub-section (2) thereof provides that any promissory note not so attested as required shall be void and the lender is not entitled to recover any loan for which such note is taken as security. In short a breach of such provision will render the contract unenforceable to the detriment of the lender, (See Menaka v Lum Kum Chum [1977] 1 MLJ 91 PC)”.

Similarly in Amwang Credit Sdn Bhd v Goh Che Chern [2014] 5 MLJ 843 (CA), although the Court of Appeal allowed the appeal and remitted the case back to the High Court for rehearing, the Court of 13 Appeal agreed with the decision of the High Court Judge that the third transaction in that case was unenforceable for being in contravention of section 27(3) of the Moneylenders Act 1951, as the signature on the promissory note was not attested as required: “[24] With regard to s 27 of the Act 400, the learned High Court Judge had correctly found that the attestation requirement only applies to the third transaction, and that since the required attestation is not present on the promissory note, the third transaction is, by virtue of sub-s 27(3), unenforceable”.

The copy of the moneylending agreement exhibited by the Defendant was not attested in accordance with section 27 of the MA. However, the Plaintiff exhibited a copy of the moneylending agreement which complied with section 27. Accordingly, I am of the view that the issue as to whose version of the moneylending agreement is the proper agreement should go for trial and it is not a proper ground to strike out the Plaintiff’s claim.

The Defendant also argued that the Plaintiff is in breach of section 21 of the MA when it did not produce with the writ of summons and 14 statement of claim a statement of account as prescribed in section 19 of the MA.

Section 21 of the Moneylenders Act 1951 provides as follows: “21. Accounts under section 19 to be produced when suing in court

Where proceedings are taken in any court by a licensee for the recovery of any money lent after the commencement of this Act or the enforcement of any moneylending agreement or security made or taken after the commencement of this Act in respect of money lent either before or after the commencement of this Act, he shall produce a statement of his account as prescribed in section 19”.

The statement of account to be produced when suing must show the following particulars as prescribed in section 19 of the Moneylenders Act 1951: “19. Obligation to supply information as to state of loan and copies of documents relating thereto

In respect of every moneylending agreement with regard to money lent by a licensee whether made before or after the commencement of this Act licensee shall, on any reasonable demand in writing being made by 15 the borrower at any time during the continuance of the moneylending agreement and on tender by the borrow of the sum of three ringgit for expenses, supply to the borrower or, if the borrower so requires, to any person specified in that behalf in the demand, a statement of account in English figures signed by the licensee showing –

the date on which the loan was made, the amount of the principal of the loan and the rate per centum per annum or the amount of interest charged; and

the amount of any payment already received by the licensee in respect of the loan and the date on which it was made; and

the amount of all sums due to the licensee for principal but unpaid and the dates upon which they became due and the amount of interest due and unpaid in respect of each such sum; and

the amount of every sum not yet due which remains outstanding and the date upon which it will become due”.

It is submitted for the Defendant that the moneylending agreement is void and unenforceable since the Plaintiff did not attach to its Writ of summons the statement of account as prescribed in section 19 of the MA. 16

In support of the above submission, the appellant refers to Arjan Singh Son of Inder Singh v Hashim Angulia [1941] MLJ 55. In this case, the Court held that when a moneylender sues upon a moneylending contract, a statement of his account as prescribed in section 7 of the Moneylenders Ordinance (in pari material with section 19 of the Moneylenders Act 1951) must be produced at the time of suing and particulars should accordingly be filed with the writ of summons. This is what the court said: “Section 9(1) of the Moneylenders Ordinance (Cap. 218) reads as follows: Where proceedings are taken in any court by a moneylender for the recovery of any money lent on or after the first day of January, 1936, or the enforcement of any agreement or security made or taken on or after the aforesaid date, he shall produce a statement of his account as prescribed in section 7 – The subsection refers back to section 7(i) which prescribes the information which the moneylender is required to supply upon a demand in writing. The particulars required to be supplied include, inter alia, the date of the loan (section 7 (x)(a)). Admittedly the indorsement on the writ gives the date of the promissory note, but not the date of the loan. The defect, therefore, is one of substance. The only question of 17 difficulty is whether under section 9(1) the particulars have to be given when the writ is issued, or can be supplied at any time before trial. It appears to me that the particulars are necessary to enable the defendant to formulate his defence, and that accordingly the particulars should be filed with the writ. This is also the inference to be drawn from the marginal note to section 9(x) which reads “Accounts under section 7 to be produced when suing in Court – A party ‘sues’ when he issues his writ”.

The Court went on to hold at p. 56 of the report that non-compliance with this statutory requirement is an irregularity which the Court cannot waive and will entitle a defendant to have the writ of summons set aside with costs: “When the irregularity is non-compliance with the provisions of statute law, the provisions of Order 63 rule 1 are not applicable (see Annual Practice 1940 p. 1554, note “Dispensing with strictness of Rules). The applicants are accordingly entitled to have the writ set aside with costs ex debito justititae”.

The Appellant also refers to Malaysian Court Practice, 2017 Edition, Vol 2 LexisNexis 2017 on Rule of Court 2012 at p. 1691 which states the following: 18 “[79.3.2] In addition to the particulars in the statement of claim, the Moneylenders Act 1951 (Act 400) s 21(1) requires that in an action for the recovery of money lent or for the enforcement of any moneylending agreement or security made or taken in respect of money lent, a statement of the moneylender’s account as prescribed in s 19 must be produced (i.e. to annex the account to the writ). For the form of this account, see Sch 1A. Non-compliance with this requirement is an irregularity which the court will not waive and will entitle the borrower-defendant to have the action dismissed the costs; failure to produce the statement of claim is therefore fatal: Arjan Singh Son of Inder Singh v Hashim Angullia [1941] MLJ 55; Ramasamay Chettiar v Wong Poh Fatt [1960] MLJ 43; Teja Singh v Rattan Singh [1961] MLJ 39, CA”.

As can be seen from the above authorities, the requirements in section 21 are mandatory. Failure to comply with the said provision is fatal and renders the claim liable to be struck out. This position of the law is settled since the case of Arjan Singh son of Inder Singh v Hashim Angullia supra in 1941. The position was reiterated by the Court of Appeal in Chee Pok Choy v Scotch Leasing Sdn Bhd [2001] 4 MLJ 346 at p. 363: “There are three other points that I think may be conveniently made now. The first is that O 79 r 5 of the RHC calls for mandatory compliance of the 19 requirements of rr 2 and 3 where a moneylender’s action is begun by originating summons. Since the respondent did not comply with the requirements of O 79 of the RHC, it follows that its originating summons was fatally flawed. An additional flaw that fatally infected the application for foreclosure was the non-compliance with the mandatory provisions of s 21 of the Act. These matters, in particular the breach of the statute, had the effect, in my view, of rendering the respondent’s originating summons a nullity. If authority is required in support of this view, it is to be found in the judgment of the former Court of Appeal in Teja Singh v Rattan Singh [1961] MLJ 39, where Thomson CJ said: For myself I do not consider it necessary to examine the grounds of appeal in detail. The law in this country is perfectly well settled and has been settled since as long ago as 1941. It is no case of a moneylender being taken by surprise by a new technical defence. The law has been well known to the moneylending community since 1941 and was discussed as recently as 1956 in the case of Ramasamy Chettiar v Wong Poh Fatt [1960] MLJ 43 where Pretheroe J, after referring to the decision of Terrel J, in the earlier case of Arjan Singh v Hashim Angullia & Ors [1941] MLJ 55 held (I am reading from the headnote): ‘When a moneylender embarks on any proceedings in any court, a statement of his account as prescribed by s 21(1) of the Moneylenders Ordinance 1951, must be produced at the time the originating summons was filed. Non-compliance with this 20 statutory requirement is an irregularity which the court cannot waive and will entitle the respondent to have the originating summons dismissed with costs”.

The Appellant also refers to Associated Finance Corporation Ltd v Poomani [1972] 1 MLJ 117 p. 119. In this case, the Court dismissed the application by the moneylender-applicant for an order for sale to enforce a charge created by the respondent in his favour as security for a loan granted on the ground that the agreement was unenforceable as the applicable failed to comply with the requirement of section 21(1) read with 19(1) of the Moneylenders Ordinance 1951: “It is further stated therein that the statement of account given in the form in the First Schedule to the Ordinance shall be deemed to be sufficient. Upon examination of the statement of account attached to the summons it is apparent that it contains only particulars of two of the four tables set out in the First Schedule viz. Table II and Table III. The applicants need not have to set out the particulars in four tables but in whatever number of tables they set out the particulars the tables must contain all the particulars mentioned in section 19(1)(a), (b), (c) and (d). In the present case the applicants have failed to set out the date on which the loan was made as required by section 19(1)(a) in any of the two given tables and this failure to comply with the requirement of section 21(1) read with 19(1) of the said Ordinance is an irregularity which cannot be waived. (Ramasamy Chettiar v Wong Poh Fatt [1960] MLJ 43)”. 21

The Plaintiff contends that section 21 does not state when the statement of account is to be produced and that the Plaintiff can produce the statement of account during trial and it is not necessary to produce it at the time of filing of the writ of summons. The Plaintiff states that the case of Arjan Singh is a pre-World War II case and is obsolete as it referred to the Moneylenders Ordinance which has been replaced by the MA. I do not agree with the Plaintiff. The important point is that the case talked about section 9(1) of the Moneylenders Ordinance which is in pari material with section 21(1) of the MA. The case was also quoted with approval by the Court of Appeal in Aseam Credit Sdn Bhd v Eminent Avenue Sdn Bhd [2008] 1 MLJ 441 when the Court said: “[21] There is no shortage of authority, both English and local, that states that the provisions of the Moneylenders Act 1951 must be strictly complied with, the detraction of which will not get the sympathy of any court (Kartar Singh v Mahinder Singh [1959] MLJ 248; Subchent Kaur v Chai Sau Kian [1958] MLJ 32; Teja Singh v Rattan Singh [1961] MLJ 39; Arjan Singh Son of Inder Singh v Hashim Angullia & Ors [1941] MLJ 55). Founded on those findings of facts, that the appellant had not sufficiently established that it was an exempted entity at the relevant time, coupled with the obvious evidence that it had breached a large number of provisions in the Moneylenders Act 1951, we were satisfied that ‘cause to the contrary’ had been established within the 22 meaning of s 256(3) of the National Land Code. We thus unanimously had no reservation in dismissing this appeal with costs”.

Although the other cases cited by the Defendant concerned Originating Summonses, they are relevant to the present case as they all establish that the statement of account prescribed under section 19 of the MA must be produced at the time the court process originated and that would be at the date of filing of the writ of summons in the case of a writ action as in the present case.

Accordingly, I am of the view that the Plaintiff has breached section 21 of the MA in not producing the statement of account together with its writ of summons and its claim should on that ground be struck out. However, it is open to the Plaintiff to file a fresh action against the Defendant provided it complies with the requirement of section 21 of the MA. Accordingly, I would allow the appeal but hold that the Plaintiff is at liberty to file a fresh action against the Defendant. Wong Chee Lin Judge Kuala Lumpur High Court Commercial Division Dated: 3rd December 2019 23 Solicitors for the Appellant Elyazura Binti Md Shaarani @ Md Nawi & Lua Ai Siew Messrs Soo Thien Ming & Nashrah Advocates & Solicitors Aras 9, Menara Bangkok Bank Berjaya Central Park No. 105 Jalan Ampang 50450 Kuala Lumpur Tel : 03-2181 9999 Fax: 03-2181 9550 Solicitors for the Respondent Alfred Lai Choong Wui & Toh Mei Swan Messrs Alfred Lai & Partners Advocates & Solicitors No. 36-2, Jalan 1/116B