SKS Credit Sdn Bhd v Chin Lin Sheng (JA-12BNCvC-11-07/2024)

CHIN LIN SHENG [NRIC No. : 880926-01-5491)

LOW KHIM JOO [NRIC No. : 771205-01-6125] …RESPONDENTS 07/12/2025 19:46:33 JA-12BNCvC-11-07/2024 Kand. 28 S/N 0dOii9F7XEankqgc3yad1g IN THE MATTER OF THE SESSIONS COURT AT JOHOR BAHRU IN THE STATE OF JOHOR DARUL TA'ZIM MALAYSIA CIVIL SUIT NO. : JA-A52ANCVC-107-06/2021 BETWEEN CHIN LIN SHENG [NRIC No. : 880926-01-5491) …PLAINTIFF SKS CREDIT SDN BHD [Company No. : 933483-W (Previously Known As MB Rich Sdn Bhd)] …DEFENDANT LOW KHIM JOO [NRIC No. : 771205-01-6125] …THIRD PARTY S/N 0dOii9F7XEankqgc3yad1g

This is the Appellant (Defendant)'s appeal against the entirety of the Sessions Court Judge's decision after a full trial dated 23 June 2024, which allowed the Plaintiff’s claim for RM217,635.53, with costs of RM8,000.00. The Court further allowed in part the Defendant’s third-party claim against the Chargor, awarding RM8,000.00 and costs of

For consistency, parties are referred to as they were at the Sessions Court.

Parties filed written submissions and authorities and submitted orally before this Court on 30 September 2025. The decision was adjourned to 27 October 2025. This is the Court’s decision.

The Plaintiff’s claim against the Defendant arises from a sale transaction involving a property charged to the Defendant by one Low Khim Joo (“the Chargor”). The Plaintiff had entered into a Sale and Purchase Agreement (“SPA”) dated 17 February 2020 with the Chargor to purchase the property. S/N 0dOii9F7XEankqgc3yad1g

5.

It was later discovered that, at the material time, the property was subject to a Prohibitory Order registered by a third party on 18 February 2020. Owing to the existence of that order, the Defendant declined to execute the discharge of charge.

The Plaintiff contended that the Defendant, having received the redemption sum with full knowledge of its purpose, was under an implied obligation either to effect the discharge or, if unable to do so, to refund the amount to the Plaintiff. The Plaintiff claimed that the Defendant’s refusal to refund the sum resulted in unjust enrichment. Accordingly, the Plaintiff sought the return of RM217,635.53 together with interest and costs.

The Defendant, in its defence, denied the Plaintiff’s claim. It maintained that there was no privity of contract between the parties, as its dealings were solely with the Chargor. The Defendant asserted that the payment was made towards the borrower’s outstanding loan and that the Plaintiff’s solicitor had proceeded to remit the amount despite the Defendant’s clear refusal to provide any undertaking. The Defendant further contended that the Prohibitory Order was a third-party encumbrance that would lapse after six months under section 338 of the National Land Code, and that it bore no duty to remove it. S/N 0dOii9F7XEankqgc3yad1g The Defendant accordingly denied any obligation to refund the payment.

At the trial before the learned Sessions Court Judge (“SCJ”), the Plaintiff called one witness, namely his solicitor, Ms Wong Siew Poh (SP1), while the Defendant called its Senior Credit Executive, Mr Goh Chin Kuan (SD1).

The learned SCJ found that although there was no express letter of undertaking, an implied undertaking arose when the Defendant accepted the redemption sum with knowledge that the purchaser’s solicitor paid it for the purpose of redeeming the property. The SCJ reasoned that the Defendant, having refused to discharge the charge due to the Prohibitory Order, was bound to refund the redemption money to the Plaintiff.

The SCJ further found that the Prohibitory Order remained subsisting at the material time and therefore prevented the registration of the discharge of the charge, resulting in the failure of the sale transaction. In her view, the Defendant could not retain the redemption money when the discharge could not be completed.

Consequently, the Sessions Court allowed the Plaintiff’s claim in full and allowed in part the Defendant’s third-party claim against the Chargor. Aggrieved by this decision, the Defendant filed the present appeal against the entirety of the Sessions Court’s judgment. S/N 0dOii9F7XEankqgc3yad1g

At the outset, this Court is mindful that, in exercising its appellate jurisdiction, it should be slow to interfere with the decision of the trial court unless it is shown that the trial court is plainly wrong when arriving at the decision under appeal [see: UEM Group Bhd v. Genisys Integrated Engineers Pte Ltd & Anor [2010] 9 CLJ 785; Azman Mahmood & Anor v. SJ Securities Sdn Bhd [2012] 6 CLJ 573; MMC Oil & Gas Engineering Sdn Bhd v. Tan Bock Kwee & Sons Sdn Bhd [2016] 4 CLJ 665].

Based on this principle, this Court will analyze and make its findings on the issues raised in this appeal. Based on the memorandum of appeal, the record of proceedings, and the parties’ written and oral submissions, there are at least six issues that arise for this Court’s determination:

whether the SCJ erred in law and in fact in finding that an implied undertaking arose on the part of the Defendant to refund the redemption sum of RM217,635.53 to the Plaintiff when the discharge of charge could not be effected;

whether the SCJ erred in concluding that the Prohibitory Order registered on 18 February 2020 continued to subsist and prevented the registration of the discharge of charge, thereby causing the failure of the sale transaction; S/N 0dOii9F7XEankqgc3yad1g

whether the SCJ erred in holding that Messrs WS Wong & Co acted solely for the Plaintiff, and not for the Chargor, despite the existence of a written authorisation empowering the firm to communicate with the Defendant for purposes of redemption;

whether the SCJ failed to properly evaluate the evidence of SP1 (the Plaintiff’s solicitor), particularly her admission that the Defendant had refused to provide any undertaking and that payment was nevertheless made despite such refusal;

whether the SCJ erred in imposing a refund obligation on the Defendant notwithstanding the absence of privity of contract between the Plaintiff and the Defendant and whether any equitable basis for restitution existed; and

whether the SCJ erred in awarding costs of RM8,000.00 to the Plaintiff and only RM1,500.00 to the Defendant on the third-party claim, contrary to the principle that costs should follow the event. Issue (a): Whether the SCJ erred in finding an implied undertaking to refund the redemption sum

The Plaintiff’s case rested on the assertion that the Defendant, having received the redemption sum of RM217,635.53, was bound by an implied undertaking to either discharge the charge or refund the sum if the discharge could not be effected. The SCJ accepted this contention. S/N 0dOii9F7XEankqgc3yad1g

However, the evidence is clear that the Defendant refused to provide any undertaking. SP1, the Plaintiff’s solicitor, admitted under cross-examination that she was aware of this refusal, yet advised her client to proceed with payment. An implied undertaking cannot be inferred in the face of an express refusal.

The circumstances in which a court will imply a contractual term or undertaking are strictly confined. As the Federal Court explained in Sababumi (Sandakan) Sdn Bhd v Datuk Yap Pak Leong [1998] 3 CLJ 503, a term will only be implied where it is so obvious that it goes without saying and is necessary to give business efficacy to the arrangement. The court will not re-write the parties’ bargain by implying obligations inconsistent with their express dealings or the governing statutory framework. On the facts here, the Defendant’s repeated refusal to provide any undertaking, coupled with the absence of any written promise to refund, leaves no room for implying an undertaking to refund the redemption sum.

In the present case, the Defendant’s duty under subsection 241(1) of the National Land Code extended only to executing a discharge once all lawful requirements were satisfied. Acceptance of payment, coupled with an express disclaimer of responsibility, could not give rise to an implied undertaking. The learned SCJ therefore erred in law and in fact. S/N 0dOii9F7XEankqgc3yad1g Issue (b): Whether the Prohibitory Order subsisted and prevented registration of discharge

The SCJ held that the sale failed because the property remained subject to a Prohibitory Order registered on 18 February 2020. The Court concluded that the PO prevented registration of the discharge.

Under subsection 338(5) of the National Land Code (“NLC”), a Prohibitory Order automatically lapses six months from the date it is made unless its duration is extended by a further court order. No evidence was adduced showing any renewal or re-endorsement.

On a plain reading of section 338(5) NLC, the order must therefore be treated as having expired and ceased to have legal effect by the time the transaction was due to be completed. In Mook Meng Sun v Lo Aa Kau [2002] 2 MLJ 193, it was held that once a Prohibitory Order expires, it ceases to have any legal effect, and an application for extension cannot be made after expiry. This is in line with the approach taken by the Federal Court in Meriam binti Yaacob & Ors v Shell Malaysia Trading Sdn Bhd [1984] 2 MLJ 31, that a prohibitory order cannot operate beyond the scope or duration permitted by law and has no operative effect once the underlying basis for it has ceased.

Furthermore, the effect of a prohibitory order is limited. It does not create new proprietary rights or override pre-existing interests in the land. As affirmed by the Federal Court in Samuel Naik Siang Ting v Public Bank Bhd [2015] 6 MLJ 9, adopting the earlier decision in S/N 0dOii9F7XEankqgc3yad1g Chua Hee Hung & Ors v QBE Supreme Insurance Bhd [1990] 1 MLJ 480, a prohibitory order is merely a protective mechanism and cannot defeat an existing beneficial or equitable interest. In the present case, the Prohibitory Order obtained by a third-party creditor neither displaced the Defendant’s rights as chargee nor imposed on the Defendant any positive obligation to procure its removal. The Defendant’s duty remained confined to executing a discharge when permitted by law.

Accordingly, the SCJ’s conclusion that the Prohibitory Order remained subsisting and that the Defendant was responsible for its removal was unsupported by evidence and contrary to law. Issue (c): Whether Messrs WS Wong & Co acted solely for the

The SCJ found that Messrs WS Wong & Co acted exclusively for the Plaintiff, thereby treating the payment as one made purely on the Plaintiff’s behalf.

The evidence contradicts this. Exhibit D7, a letter signed by the Chargor and witnessed by SP1, expressly authorised the firm to obtain the redemption statement and to deal directly with the Defendant for purposes of redemption. The existence of this written mandate demonstrates that the firm acted with the Chargor’s authority. S/N 0dOii9F7XEankqgc3yad1g

Rule 5(ii) of the Legal Profession (Practice and Etiquette Rules) 1976 permits an advocate and solicitor to act for more than one party provided consent is obtained in writing. This is consistent with the Privy Council's holding in Clark Boyce v Mouat [1994] 1 AC 428 that dual representation is permissible where both clients have given informed consent. Exhibit D7 constitutes written authority from the Chargor authorising Messrs WS Wong & Co to obtain the redemption statement and deal with the Defendant for purposes of redemption. By virtue of sections 187 and 188 of the Contracts Act 1950 [Act 136], an agent acting within the scope of written authority binds the principal. Therefore, the SCJ's finding that Messrs WS Wong & Co. acted solely for the Purchaser is inconsistent with the documentary evidence and established legal principles. Issue (d): Whether the SCJ failed to properly evaluate SP1’s evidence

This Court is of the view that SP1’s testimony, when properly considered, favoured the Defendant’s version. Under cross-examination, she conceded that the Defendant had refused to provide any undertaking, yet she proceeded with the payment. This admission undermines the premise of an implied obligation.

The learned SCJ failed to address this inconsistency. Accordingly, an appellate court may intervene where the trial judge misappreciates or omits to consider material evidence. [see: Gan Yook Chin (P) & S/N 0dOii9F7XEankqgc3yad1g Anor v Lee Ing Chin @ Lee Teck Seng & Ors [2005] 2 MLJ 1; and Syarikat Kenderaan Melayu Kelantan Bhd v Transport Workers Union [1995] 2 MLJ 317].

Given SP1’s position as the Plaintiff’s solicitor and the person who advised payment, her evidence required heightened scrutiny. When read as a whole, it supports the Defendant’s contention that no undertaking was ever given. Therefore, the SCJ’s reliance on her evidence was misplaced. Issue (e): Whether the SCJ erred in imposing a refund obligation despite lack of privity

It is a settled principle that contractual rights and obligations arise only between parties to the contract. As stated in Kepong Prospecting Ltd & Ors v Schmidt [1968] 1 MLJ 170 and subsequently reaffirmed by the Federal Court in Suwiri Sdn Bhd v Government of the State of Sabah [2008] 1 CLJ 123 and RHB Islamic Bank Bhd v AmGeneral Insurance Bhd & Ors [2019] 7 CLJ 687, a third party who is a stranger to the contract has no right to enforce it.

The Defendant’s dealings were solely with the Chargor under the loan and charge documents. The Plaintiff was a stranger to that relationship. Payment of the redemption sum was made in furtherance of the Chargor’s obligation, not under any agreement between the Plaintiff and the Defendant. S/N 0dOii9F7XEankqgc3yad1g

The Plaintiff’s reliance on section 73 of Contract the [Act 136] and the doctrine of unjust enrichment is misplaced. By its express terms, section 73 of Act 136 only permits recovery where money is paid “by mistake or under coercion”. As explained by the Federal Court in Malayan Banking Bhd v Ching Suit Fee [2012] 3 CLJ 606, a payment made with full knowledge of the relevant facts does not fall within section 73 of Act 136, and, adopting the classic statement in Kelly v Solari (1835–1842) All ER Rep 320, a payer who acts with full knowledge of the facts, and without any fraud on the other side, cannot afterwards recover that payment merely because he regrets the transaction or has misunderstood the law.

A similar approach was taken by the Federal Court in Wee Tiang Yap v Chan Chan Brothers [1984] 1 CLJ (Rep) 433, where a tenant who continued paying rent with knowledge of the landlord’s lack of title was held estopped from using section 73 of Act 136 to reclaim those payments.

On the Plaintiff’s own evidence, the redemption sum was remitted with full knowledge that the Defendant had refused to provide any undertaking. There was neither mistake nor coercion; the payment was a conscious commercial decision taken with full appreciation of the risks. In these circumstances, section 73 of Act 136 affords the Plaintiff no assistance, and the broad notion of “unjust enrichment” cannot be used to circumvent the statutory limits on restitution.

In any event, there was no evidence adduced by the Plaintiff that the Defendant received or retained any amount beyond what was S/N 0dOii9F7XEankqgc3yad1g properly due under the loan account. On these facts, no equitable or restitutionary duty to refund arises. The SCJ therefore erred in imposing any refund obligation upon the Defendant. Issue (f): Whether the SCJ erred in awarding costs

The Defendant further challenged the costs order, contending that the award of RM8,000.00 to the Plaintiff and only RM1,500.00 to the Defendant on the third-party claim was inconsistent with Order 59 rules 8 and 16 of the Rules of Court 2012, which provide that, as a general rule, costs shall follow the event.

It is trite that an order as to costs lies within the discretion of the trial court. However, that discretion must be exercised judicially, on proper principles and by reference to matters connected with the cause of action. In PETRONAS v Cheah Kam Chiew [1986] 1 LNS 81, the Supreme Court reiterated that while an appellate court will be slow to interfere with a costs order, intervention is justified where there is an error of law or where the discretion is exercised on grounds wholly unconnected with the cause of action.

In the present case, this Court has already found that the SCJ erred both in law and on the facts in imposing on the Defendant an implied obligation to refund the redemption sum, and in treating the Plaintiff as having a restitutionary or contractual claim against the Defendant. Once those primary findings are set aside, the foundation upon which the SCJ awarded costs of RM8,000.00 to the Plaintiff necessarily falls S/N 0dOii9F7XEankqgc3yad1g away. In substance, the Plaintiff ought not to have succeeded at all against the Defendant.

As for the third-party proceedings, the costs award of only RM1,500.00 to the Defendant was made against the backdrop of the SCJ’s erroneous conclusion that the Defendant was liable in restitution to the Plaintiff. The Defendant was compelled to join the Chargor in order to protect its position in respect of the redemption sum and the underlying loan account. In circumstances where the Plaintiff’s claim against the Defendant fails entirely on appeal, the modest award of RM1,500.00 in the Defendant’s favour on the third-party claim cannot be said to reflect the true event of the litigation or the effort expended.

In my view, therefore, this is a proper case for appellate intervention on costs. The SCJ’s exercise of discretion was premised on findings which this Court has overturned and the resulting orders do not accord with the principle that costs should, in general, follow the event. The appropriate order is that the Plaintiff should bear the Defendant’s costs in the Sessions Court and that the Defendant should be awarded a fair and proportionate sum in respect of the third-party proceedings, to be taxed if not agreed.

For the appeal, bearing in mind the nature of the issues and the outcome, costs should likewise follow the event. Accordingly, the Defendant is entitled to its costs of this appeal, fixed at RM8,000.00 subject to the allocator. S/N 0dOii9F7XEankqgc3yad1g

Based on the above, this Court finds that the evidence does not support the finding of any implied undertaking or refund obligation on the Defendant. The SCJ’s conclusions were reached on a misapprehension of both the facts and the law.

Accordingly, the Defendant’s appeal is allowed with costs of RM8,000.00, subject to the allocator.

The SCJ judgment dated 23 June 2024 is set aside. Dated : 28 October 2025 Dr. Noradura Binti Hamzah Judicial Commissioner High Court Civil 2 Johor Bahru S/N 0dOii9F7XEankqgc3yad1g Solicitor for the Appellant : Vinodsagaran A/L Gunasakaren together with Jackson A/L Daniel Messrs. Law Chambers Of Vin Sa & Ian Solicitor for the First Respondent : Soo Chian How Messrs. C. H. So & Associates Second Respondent : Low Khim Joo S/N 0dOii9F7XEankqgc3yad1g