Sureshraj A/L Krishnan v Pv Power Engineering Sdn. Bhd. (B-02(NCC)(W)-138-01/2021)

1.

PV POWER ENGINEERING SDN BHD YUSOF BIN ALI - RESPONDENTS [In the Matter of Shah Alam High Court Civil Suit No. BA-22NCC-44-07/2018 Between Sureshraj a/l Krishnan - Plaintiff

And PV Power Engineering Sdn Bhd.

Yusof bin Ali - Defendants] CORAM: LEE SWEE SENG, JCA HADHARIAH BINTI SYED ISMAIL, JCA M. GUNALAN, JCA JUDGMENT OF THE COURT Introduction [1] The appellant who is the plaintiff in the original suit is the lender in a loan transaction. The respondents (defendants) are the borrowers. The loan transaction was put into writing entitled “Project Support Agreement” . [2] The respondents (defendants) defaulted in their repayment of the sum loaned by the appellant. The appellant brought this action against the respondents to enforce the Project Support Agreement. [3] In their re-amended statement of defence, the respondents alleged : (i) the appellant is an unlicensed moneylender within the meaning of the Moneylenders Act 1951 ; (ii) that the Project Support Agreement dated 25.7.2016 is disguised as a contract for private funding support when it is in fact a moneylending agreement; and (iii) the Project Support Agreement dated 25.7.2016 is illegal, void and unenforceable. The respondents counter-claims for inter-alia declaratory reliefs to these effects. [4] After a full trial, the High Court held that the Project Support Agreement dated 25.7.2016 is an illegal moneylending transaction. The Court dismissed the appellant’s claims and allowed in part the respondents’ counter-claim. [5] Both the appellant and the respondents appealed against the decision of the High Court. The respondents’ appeal registered as No. B-02(NCC)-182-01/2021 is against the dismissal of the respondents’ counter-claim in prayer 13 (f) & (g), i.e their claim for the refund of the sum of RM562,900.00 allegedly repaid by the respondents to the appellant together with interest. [6] Both appeals came up for hearing before us on 19.7.2022. On the same date, we unanimously allow the appellant’s appeal and dismiss the respondents’ appeal. [7] This judgment is confined to the appellant’s claim only as the respondents did not apply for leave to appeal to the Federal Court against our decision to dismiss their appeal on the counter-claim. [8] The issues raised in this appeal are : (i) Whether or not the Project Support Agreement dated 25.7.2016 is a moneylending transaction that contravenes the Moneylenders Act 1951; (ii) Even if the Project Support Agreement is a moneylending transaction, what is the just and fair and appropriate order that the learned High Court Judge ought to have made in this case; and (iii) Whether the learned High Court Judge had erred when she wrongfully excluded material evidence namely the Whatsapp Messages (ID1). Background Facts [9] On 25.7.2016, the appellant and the respondents entered into a Project Support Agreement (PSA) for the funding of a project involving civil, mechanical and electrical facilities for PULADA (Pusat Latihan Tempur Tentera Darat) purportedly awarded to the first respondent (Pulada Project). The second respondent who is a director of the first respondent was the guarantor under the PSA. [10] The salient terms of the PSA are as follows: i) The appellant lent RM500,000.00 to the first and second respondent as project support sum and the loan is for a period of six (6) months from 25.7.2016 to 24.1.2017. ii) The first respondent must pay Guaranteed Return Sum of RM35,000 per month throughout the 6 months loan term. iii) The first and second respondent must repay the project support sum no matter what happen to the PULADA project. iv) The first respondent shall issue letter of appointment to the appellant appointing him as project administrator to manage the first and second respondent’s accounts for the PULADA project from 25.7.2016 to 24.1.2017. v) As security for the repayment of RM500,000 and the guaranteed return sum, the second respondent shall also allow the appellant to enter a private caveat on the property belonging to the second respondent and one Norsiati binti Mohamad Noor (the second respondent’s wife). The property being a double storey terrace house bearing postal address No. 7065, Jalan Sri Putri 14, Taman Putri Kulai, 81000 Kulai Johor (the property). vi) In the event the respondents breached the PSA, the appellant is entitled to take the following remedial measures against the respondents :

commence legal action for the recovery of RM500,000 and the guaranteed return sum;

foreclose, sell and /or auction the property;

demand for the handover and /or gain possession of the property; and

claim an interest at the rate of 8% on the total outstanding due and payable on daily basis until the actual full payment of the same. [11] The first respondent did issue a letter of appointment dated 25.7.2016 to the appellant, appointing him as the Project/Finance Manager of the PULADA project commencing from the date of the PSA with a monthly salary of RM5000.00 for the period of 6 months. The appointment letter also provides for the payment of 10% of the profits generated before tax upon completion of the said project. [12] It is the appellant’s pleaded case that the respondents had breached the terms of the PSA by failing to pay the RM500,000 within the 6 months period and only paid RM260,000 guaranteed return sum. After this suit was filed, the respondent paid a further sum of RM60,000 to the appellant. The appellant’s claim [13] At paragraph 12 of the statement of claim, the appellant prayed for the following reliefs: a) The project support sum lent in the sum of RM500,000.00; b) Guaranteed Return Sum amounting to RM545,000.00 as at June 2018; c) Guaranteed Return Sum of RM 35,000.00 per month from July 2018 till full realization; d) Interest at the rate of 8% per day on item (a),(b) and (c) above from the date of breach of the contract till full realization; e) In the alternative to (d) above,interest of 5% per annum on items (a) (b) and (c) from the date of filing of this summons till full realization; f) Cost on solicitor-cliaent basis; g) Costs of this action;and h) Any other relief deems fit and proper by the court. The respondents’ counter-claim [14] At paragraph 13 of the re-amended defence and counter-claim, the respondents sought the following reliefs: a) A declaration that the appellant is an unlicensed money lender within the meaning of Moneylenders Act 1951; b) A declaration that the Project Support Agreement is an unlicensed money lending agreement and is void, illegal and unenforceable against the respondents; c) Removal of the private caveat entered by the appellant on

28.7.2016 against the second respondent’s property; d) Damages for wrongful entry of the said caveat to be assessed by the Registrar; e) Injunction to restrain the appellant from selling or auctioning the double storey terrace house bearing postal address No. 7065, Jalan Sri Putri 14, Taman Putri, 81000 Kulai Jaya, Johor; f) The sum of RM562,900.00 that has been repaid by the respondents to the appellant to be refunded to the respondents; g) Interest on the said RM562,900.00 from 25.7.2016 till full realization; and h) Costs. Amount of money lent and repaid [15] At the High Court, the appellant said he lent RM500,000.00 to the respondents by way of cash RM70,000.00 handed personally to the 2nd respondent on 25.7.2016 and the balance RM430,000.00 was credited into the respondents’ bank account on two occasions. First, he credited RM300,000.00 into the respondents’ bank account on 25.7.2016 and later, on 29.7.2016, he credited the sum of RM130,000.00 into the respondents’ bank account. On the other hand, the 2nd respondent (DW1) testified that the respondents only received RM430,000.00 from the appellant. The High Court found the appellant has failed to prove the cash payment of RM70,000.00. Thus, the High Court rightly held that the appellant lent RM430,000.00 only to the respondents. [16] With regard to repayment of the loan, the respondents have pleaded in para 6 of their re-amended defence that they have repaid to the appellant a sum of RM562,900.00 under the PSA. This fact is denied by the appellant. Instead, the appellant admitted he has received a sum of RM260,000.00 from the respondents prior to the filing of this suit as pleaded in paragraph 7 of the statement of claim and another payment in the sum of RM60,000.00 was received from the respondents after this suit was filed. Thus, the appellant admitted he has received the sum of RM320,000.00 from the respondents as repayments under the PSA. [17] It is the appellant’s evidence that the payments mentioned in para 6 of the respondents re-amended defence refer to payments for another project (not PULADA project) funded by the appellant to the respondents. [18] In reply to para 6 of the re-amended defence, the appellant explains the payments he received as follows : a) Item (1) i.e RM10,000.00 is payment of 2 months salary to the appellant as Finance Manager of the PULADA project and no relation to the project support sum; b) Item (2), (3) & (4) ie RM35,000.00, RM35,000.00 and RM35,000.00 respectively is admitted as payments of guaranteed return sum; c) Item (5), (6) & (7) ie RM49,900.00, RM100.00 and RM49,900.00 respectively is not within the appellant’s knowledge. The respondents is put under strict proof. d) Item (8) i.e RM35,000.00 is admitted as payment of guaranteed return sum. e) Item (9) RM30,00.00 is repayment for a soft loan to the 2nd respondent for project “Kerja Senggaraan Sivil, Mekanikal Dan Elektrikal Fasalitas Infra Latihan ,Rkat Desa Pulada Dan Infra Mekanikal Pusat Latihan Tempur Tentera Darat (PULADA). This loan was repaid via third party cheque. Therefore, this payment (RM30,000) has no relation to project support sum. f) Item (10) i.e RM100,000.00 is admitted as payment of guaranteed return sum. g) Item (11) i.e RM50,000.00 is payment for a soft loan taken by the 2nd respondent to obtain a tender for project “Cadangan untuk Penempatan Semula Penduduk Kg Senibong yang mengandungi 100 Unit Rumah Teres 2 Tingkat (18’ x 65’) beserta dan Kemudahan-Kemudahan lain diatas sebahagian Lot PTD 194795, Mukim Plentong, Johor”. The loan was repaid within a month after the respondents obtained the project. Therefore, this payment of RM50,000 has no relation to the project support sum. h) Item (12) i.e RM53,000.00 (Loan of RM50,000 refunded with 6% GST of RM3000) is repayment for advance payment made by the appellant to Malaysia Airports Holdings Berhad for the 2nd respondent via a Bank Draft to obtain a tender project of Malaysia Airports Holdings Berhad. So, this payment has no relation to the project support sum. i) Item (13) i.e. RM20,000.00 is admitted as payment of guaranteed return sum. j) Item (14) i.e. RM60,000.00 is admitted as payment of guaranteed return sum made on 26.7.2019 after the filing of this suit on 25.7.2018. [19] Based on the appellant’s admission that he only received payments of RM320,000.00 from the respondents, there is a balance sum of RM110,000.00 due and owing by the respondents to the appellant. Proceedings at the High Court [20] It is not in dispute that the appellant and the 2nd respondent are friends. The PSA came about when the 2nd respondent approached the appellant and showed him a Letter of Offer dated 21.11.2015 from PULADA awarding the PULADA project to the respondents. The 2nd respondent told the appellant the PULADA project is worth RM2.5 million and that the project could bring a profit of between RM1.5 million to RM1.8 million within 6 months. [21] The problem was the respondents did not have funds to start the project. By showing the Offer Letter from PULADA, the 2nd respondent convinced the appellant that the respondents had a genuine project and asked the appellant to give him RM500,000.00. [22] RM500,000.00 is an awful lot of money to part with. In anticipation of getting payments from the project, the respondents agreed to the terms contained in the PSA without any qualm. In fact, the 2nd respondent admitted he would pay the appellant in accordance with the terms of the PSA had the respondents gotten payments from the project. [23] However, the respondents did not get any payments from the PULADA project. The respondents contended that they were cheated in the PULADA project. Consequently, the respondents could not honour the PSA. [24] On 25.7.2018, the appellant brought this action against the respondents to enforce the PSA. In summary, the appellant’s case is simply this. He lends money to the respondent as project support sum and investment. To him, the PSA is a normal contract. That his investment is risk free with guaranteed return sum. That the respondents were fully aware and understood the consequences of the PSA. That before the filing of this suit, the respondents never raised any issue on the legality of the PSA. It is only after the respondents were sued and upon being advised by their lawyer, that the respondents now say the PSA is an illegal moneylending. [25] The respondents’ case is the appellant is an unlicensed moneylender and loan shark who is in the business of moneylending. They maintain their position that the PSA is a moneylending contract and is illegal for being in contravention of the Moneylenders Act 1951 (MLA) because not only the appellant charged interest of 8% per day, but for the loan of RM500,000, the respondents are required to repay three times more than the principal sum. [26] After hearing the evidence of the appellant (SP1) and the 2nd respondent (DW1), the High Court identified the issues for determination as follows:

Whether the PSA dated 25.7.2016 was in actual fact a moneylending agreement and thus contravening the Moneylenders Act 1951.

(ii) Whether the presumption pursuant to s.10OA Moneylenders Act 1951 has been invoked.

(iii) Whether the plaintiff has rebutted the presumption.

(iv) Whether the Whatsapp Messages, ID1 can be admitted in evidence.

Whether the defendants can claim for restitution from the plaintiff. [27] The learned Judge dealt with issue (i), (ii) and (iii) first. Looking at the terms of the PSA which contain elements of moneylending ingredients in that the money lent to the respondents carried interest of 8% per day and returns in massive proportion, the Court agrees with the respondents that the presumption under section 10OA of the MLA applies against the appellant. Section 10OA MLA 1951 reads as follows: 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.” [28] With the presumption being invoked against the appellant, the appellant has the evidential burden to rebut the presumption on a balance of probabilities. [29] In his rebuttal evidence, the appellant denied he was a moneylender. He referred to the money he lent to the respondents as “funding support” and “investment”. He contended that his investments with the respondents were risk free and that he would be guaranteed a profit whether or not the respondents made their profits. That the money he lent to the respondents is not moneylending as alleged by the respondents. The appellant also informed the Court that he was dropping his claim for interest of 8% per day because he realised this claim is a mistake. Instead, he is now claiming for the return of the principal sum only with interest of 5% per annum. [30] When cross-examined by counsel for the respondents as to why he says he was not an unlicensed moneylender, the appellant’s reply was as follows: “Q :.. You’ve testified that you are an accountant. How does being an accountant disqualify you from being an unlicensed moneylender? Sorry, I don’t quite understand the question. You deny being an unlicensed moneylender? Yes You deny it because you say you’re an accountant? OK How is it that just because you are an accountant, you cannot be an unlicensed moneylender? I don’t quite understand. Q: Someone can be an accountant and can also be an unlicensed moneylender, would you agree? How can it be unlicensed moneylender, I don’t quite understand. [31] The appellant’s answers to the above questions show he was unable to explain why being an accountant, he cannot be an unlicensed moneylender too. His answers did not sit well with the learned Judge. For this reason, the learned Judge found that the appellant’s denial that he was a moneylender was uninspiring and did not convince the court that he was telling the truth. The Court rejected the appellant’s counsel submission that the appellant did not reply satisfactorily to the questions put to him because he could not understand counsel. [32] We, however noted that the learned Judge did not make a finding whether the appellant is a moneylender or not. [33] Upon analysing the appellant’s evidence, the learned Judge concluded that the appellant had failed to rebut the presumption under section 10OA of the MLA 1951 on the balance of probabilities. This is what Her Ladyship said at para [114] of her judgment: “[114] I find as a fact that the plaintiff has failed to rebut the presumption placed on him via s.10OA MLA on a balance of probabilities. Pursuant to s.10OA MLA, proof of a single loan at interest made by a party shall raises the presumption that he is in the business of moneylending. Contrary to the contention put forth, the need to show that the person carries on or advertises or announces himself or holds himself out in any way as carrying on the business of moneylending does not apply to this situation and is thus inconsequential. Accordingly, I hold that the plaintiff has failed to discharge the legal and evidential burden to prove on a balance of probabilities against the defendants. I find that the PSA was a disguise. What it concealed was moneylending transaction couched in terms of a seemingly innocuous funding support agreement.” [34] The High Court followed the Court of Appeal decision in the case of Global Globe Property v Jangka Prestasi [2020] 6 ML J

In that case, it is not disputed that the plaintiff does not have a moneylending licence. The Court held even though the plaintiff makes a single loan transaction with interest charged, it triggered the presumption in s.10OA of the Moneylenders Act 1951 that it is a moneylending transaction. [35] With regard to issue (iv) on the admissibility of the Whatsapp Messages (ID1), the learned Judge held ID1 is not admissible in evidence as the appellant did not fully comply with the requirements of section 90A of the Evidence Act 1950. [36] With regard to issue (v), namely the respondents’ claim for restitution, the learned Judge dismissed the respondents’ counter-claim on the ground the 2nd respondent is not a victim but a shrewd businessman who knew what he had gotten himself into. The Judge opined that probably the lure of making large profits from the PULADA project had spurred him to throw caution to the wind and accept the terms spelt out in the PSA even though the terms were terribly one sided. We agree with the finding of fact made by the learned Judge on this issue. Our Decision [37] Section 2 of the Moneylenders Act 1951 defined “moneylender” as follows : “moneylender” means any person who carries on or advertised or announces himself or holds himself out in any way as carrying on the business of moneylending, whether or not he carries on any other business.” [38] The parties who alleges the appellant is a moneylender are the respondents. Therefore, the burden of proving the appellant is a moneylender falls on the respondents. On this issue, we find the respondents were making a bare allegation. There was no evidence adduced by the respondents to prove that the appellant had carried on or advertised or announced himself or held himself as carrying the business of moneylending as a moneylender. The fact that the appellant lent money to the respondents does not make him a moneylender. We find support in the following cases. [39] In Ng Mui Khin v Gillespie Bros [1979] 1 LNS 60, the Federal Court held : “At the outset we wish to observe that the Moneylenders Ordinance 1951 does not apply to moneylending but only to moneylenders. It does not make every moneylending transaction illegal and unenforceable. It is a moneylending transaction of a moneylender which is the subject matter of the Ordinance and must comply with its provisions on pain of being declared illegal and unenforceable by the court. We make this simple and obvious observation because it was canvassed very strongly before us by counsel for the appellants that since the transactions between the respondent and the client are moneylending transactions, the respondent must be a moneylender and the guarantee which the appellants signed is therefore unenforceable. This submission overlooks the fact that the party to a transaction who thereby becomes the creditor may or may not be a moneylender. He is a moneylender if within the meaning of section 2 of the Ordinance, he can be said to be a person “whose business is that of moneylending”. To prove business requires some sort of continuity or system or repetition of similar transactions (Chow Yoong Hong v Choong Fah Rubber Manufacturer [1962] AC 209 at 218; [1962] ML J 74).” [40] In Wong Kim Fatt v Yong Kwet Yin [1996] 1 ML J 45, the appellant, a lawyer gave two personal loans to the respondent. In a claim by the appellant to recover the loaned sums, the respondent argued the appellant is a moneylender and the loans transactions are moneylending without licence. It was further argued that the previous transactions where money passed from the appellant to the respondent show there was a semblance of system and continuity about these transactions. Justice Abdul Malik Ishak J rejected the respondent’s argument and held: “1. From the affidavit evidence, it was clear that the appellant did not advertise or held himself out in any way as a moneylender as defined by s.2 of the Act. The allegation of moneylending was merely a bare allegation which was unsupported by any concrete evidence…

2.A simple personal loan cannot be construed under the law to be a moneylending transaction. As Farwell J said in Litchfield v Dreyfus [1906] KB 584, particularly at p590: The Act was intended to apply only to persons who are really carrying on the business of moneylending as a business, not to persons who lend money as an incident of another business or to a few old friends by way of friendship. This particular Act was supposed to be required to save the foolish from the extortion of a certain class of the community who are called moneylenders as an offensive term. Moneylending is a perfectly respectable form of business. Nobody says that bankers are rascals because they lend money.

3.The appellant gave only two personal loans to the respondent, and it could not be argued that these two isolated personal loan transactions could be construed as evidence of ‘system and continuity’ of a moneylending business (see p 54D); Newton v Pyke (1908) 25 TLR 127 and Baju Ria v Liau Kim Lian [1995] 1 ML J 128 distinguished.” [41] In the present case, it is an undisputed fact that the appellant had to obtain funds from his relative to help the 2nd respondent. Even though the appellant has testified that some of the repayments made by the respondents are repayments for the respondents’ other projects funded by the appellant, in our view, the previous loans are also personal loans given when the respondents required monetary assistance from the appellant. There was no evidence that the appellant gave loan to other people apart from the respondent. [42] Based on the facts and circumstances of this case, we find the respondents have failed to prove that the appellant was a moneylender as defined in section 2 of the Moneylenders Act 1951. [43] Consequently, we find the learned Judge had erred in law and in fact when she refused to consider the submission put forth by the appellant on section 2 of the Moneylenders Act and failed to make a finding that the appellant is not a moneylender. For the same reason, we also find the learned Judge erred in concluding the PSA to be an unlicensed moneylending transaction. [44] Since it is our finding that the appellant is not a moneylender, the net effects are : (i) the presumption under section 10OA of the Moneylenders Act 1951 has been rebutted; and (ii) the PSA was in reality a friendly loan agreement not disguised as a contract for private funding support. [45] The meaning of friendly loan can be found in the case of Tan Aik Teck v Tang Soon Chye [2007] 5 CL J 441, where Mokhtar Sidin JCA states: “A friendly loan is opposed to the normal borrowing from a moneylender or financial institution, A friendly loan is a loan between two persons based on trust. There may be an agreement such as an I.O.U or security pledged to repayment but most important there will be no interest imposed.” [46] In the present case, it is not in dispute that clause 7 of the PSA imposed 8% interest per day on the outstanding sum. The appellant’s claim for this exact interest is pleaded in prayer 12 (d) of the statement of claim. There is no denial that the 8% interest per day is not only exorbitant, but obviously is wrong. No court of law would allow such a claim. Realising the mistake, during the trial, the appellant told the court that he was dropping his claim in prayer 12 (d). Instead, the appellant claimed for interest of 5% per annum. [47] The learned Judge did not state whether the 8% interest per day remains a live issue. Instead the learned Judge said at para [95] of the judgment as follows: “[95] It was observed that the plaintiff attempted to charge interest at 8% per day on the outstanding sum. Although he told the court that he was dropping that claim when cross-examined it still did not do his credibility any favour. It would have given a better impression if the plaintiff had entirely excluded this prayer from his claim in the Statement of Claim in the first place. By maintaining that exorbitant claim in the SOC only sealed the court’s conviction that he was charging illegal interest.” [48] We disagree with the learned Judge’s reasoning in para [95] above. In our view, the appellant had the right to abandon his claim on the 8% interest at any stage of the proceeding on the ground of mistake. It makes no difference whether the claim is pleaded in the statement of claim and withdrawn later or the claim is not pleaded at all. The end result is the same, ie, the appellant does not wish to pursue the claim anymore. After all, there is no rule of law that says one should not plead a claim only to withdraw it later. The Court always adopts a flexible approach. Not a strict rule. And the Court would generally allow a party’s application to withdraw their claim unless it is an abuse of process. Once the Court allows the application, the claim is considered to no longer existing or to be in issue. The court should not penalised the appellant for making a wrong claim which is later rectified. Therefore, it is our considered view that the learned Judge erred in law and in fact when Her Ladyship concluded as long as prayer 12 (d) remains in the statement of claim, it means the appellant is charging illegal interest. [49] Consequent to the appellant’s dropping his claim on interest of 8% per day, clause 7 of the PSA is severed from the agreement. With the exclusion of clause 7, the PSA is a friendly loan simpliciter as defined in the case of Tan Aik Teck v Tang Soon Chye [2007] 5 CL J 441. In his evidence, the appellant said that all he asked for from the court is for the respondents to repay him the principal sum he loaned. He is not claiming for the guaranteed return sum. In this case, the sum loaned was RM430,000.00. The sum repaid is RM320,000.00. Thus, he is claiming for the return of the balance sum of RM110,000.00 . [50] In view of our finding that the PSA is a friendly loan, there is no necessity for us to consider the issue of admissibility of Whatsapp Messages (ID1) and the applicability of the law propounded in Patel v Mirza [2017] 1 ALL ER 191. [51] For the aforesaid reasons, we allow the appellant’s appeal and set aside the decision of the High Court in respect of the appellant’s claim. We enter judgment for the appellant for the sum of RM110,000.00 with interest of 5% per annum from the date of filing of the writ on 25.7.2018 till satisfaction. We also order the respondents to pay costs of RM35,000.00 here and below to the appellant subject to allocator. Dated 2nd November 2022 Hadhariah binti Syed Ismail Judge Court of Appeal For the Appellant : Mr NV Sree Harry (Mahendra Mahason, Enoveetha Bhaskaran, & Tanisha Sree Harry with him); Messrs Sree Harry & Co. For the Respondents : Adi Radlan bin Abdul Rahman (Dato‘ Syed Faisal Al-Edros bin Syed Abdullah with him); Messrs Adi Radlan & Co.