Syed Gamal Bin Syed Kechik Al-Bukhary v Ace Credit (M) Sdn Bhd (WA-22NCC-62-02/2023)

ACE CREDIT (M) SDN BHD [Company No.: 200301003436 (605856-V)]

CHANG AI NEE [Identity Card No.: 710422105248]

CHOONG CHEE MENG [Identity Card No.: 610726085743] …DEFENDANTS JUDGMENT Introduction [1] This is a judgment after full trial. The judgment is brief because the 2nd and 3rd Defendants had chosen to abandon their substantive defence and Counterclaim at the start of counsel’s oral submissions post trial. [2] The 1st Defendant had been wound up after the action was filed and the Liquidators had chosen not to defence the Plaintiff’s claims at the trial. Background Facts [3] The Plaintiff executed two short-term investment agreements with the 1st Defendant on 27.9.2021 and 12.20.2021 where the Plaintiff invested RM1,000,000.00 (“the 1st Agreement”) and RM 7,000,000.00 (“the 2nd Agreement”) respectively. [4] Under the 1st Agreement: a) the placement was to hold for 12 months, from 27.09.2021 to 26.09.2022; b) upon maturity of the 1st Agreement on 26.09.2022, the 1st Defendant promised a target return of 15%, to be paid 14 days after the investment matured; c) the target profits were stated to be RM150,000.00. [5] Under the 2nd Agreement: a) the placement was similarly to hold for 12 months, from 12.10.2021 to 11.10.2022; b) upon the maturity of the 2nd Agreement 11.10.2022, the 1st Defendant promised a target return of 18%, payable after the maturity period; c) the target profits were stated to be RM1,260,000.00. [6] In respect of both the 1st Agreement and the 2nd Agreement, the 2nd Defendant and the 3rd Defendant gave their personal directors' guarantee (“the Guarantees”). [7] Both the 1st Agreement and the 2nd Agreement contained entirely similar terms except for the investment amounts, target returns and the placement periods. The terms of the Guarantees of the 2nd Defendant and the 3rd Defendants in both the 1st Agreement and the 2nd Agreement were similar. [8] The Defendants failed to pay the Plaintiff the investment sums with the target returns under the 1st Agreement and the 2nd Agreement after their respective maturity dates. [9] Thus, the Plaintiff commenced this action on 14.02.2023, seeking among others: a) the restoration of his capital or investment sums; b) the payment of the target returns under the 1st Agreement and the 2nd Agreement. c) liability and satisfaction under the Guarantees. [10] The Defendants’ primary defence to the Plaintiff’s claims as pleaded was that the Plaintiff, by his conduct in placing his monies with the 1st Defendant in return for the target returns, had engaged in moneylending activities and since the Plaintiff was not a licensed moneylender, the transactions under the 1st Agreement and the 2nd Agreement were illegal and void under the Moneylenders Act, 1951. [11] As a secondary defence, the Defendants pleaded that under the terms of the 1st Agreement and the 2nd Agreement, the Plaintiff had accepted that his investments with the 1st Defendant involved a substantial degree of risks and that the returns were dependent on the performance of the 1st Defendant's investments. In particular, Section 4.03 of the agreements state: “...The Investor further agrees, represents and warrants to, and agrees with, the Company, as follows: A. It is fully aware the Investment involves a substantial degree of risk as the return of the Investor is very much dependent on the performance of the Company's investment; B. It is fully aware that any projections or predictions that may have been made available to Investor are based on estimates, assumptions and forecasts which may prove to be incorrect; and no assurance is given that actual results will correspond with the results contemplated by the various projections; ... F. That the Investor is capable of bearing the high degree of economic risks and burdens of this venture including, but not limited to, the possibility of complete loss of investment and the lack of a public market which may make it impossible to readily liquidate the investment whenever desired; ...” [12] The Defendants also had filed a Counterclaim seeking to declare the 1st Agreement and the 2nd Agreement to be null and void on the ground that they were illegal moneylending transactions. 1st Defendant wound up [13] On 14.03.2024, the 1st Defendant was wound up. Two liquidators were subsequently jointly appointed over it. Accordingly, the Plaintiff had on 06.08.2024, applied to the Kuala Lumpur (Winding Up) High Court and was granted leave to proceed with this action against the 1st Defendant under s.471, Companies Act 2016. [14] As alluded to above, at the trial of this action, the 1st Defendant did not appear to defend the claim. Neither the Liquidators nor the solicitors appointed by the Liquidators attended before this Court to indicate that they were not keen to defend the claim. Instead, the solicitors for the Liquidators merely conveyed their stance to learned counsel for the Plaintiff. The 2nd Defendant did not give evidence. Only the 3rd Defendant attended at the trial and he testified on both his own behalf and on behalf of the 2nd Defendant. Legal Issues [15] After the conclusion of the trial and when counsel attended before this Court for oral submissions, learned counsel for the 2nd and 3rd Defendants informed this Court that he would not be pursuing the contention that the 1st Agreement and the 2nd Agreement were null and void for being moneylending transactions. This meant that the 2nd and 3rd Defendants had chosen to abandon their main pleaded defence to the Plaintiff’s claim and their Counterclaim. [16] The only legal issue for this Court to determine was in respect of the clause stated in Section 4.03, namely, whether by the Plaintiff’s acceptance of the said term, the Defendants were excused from making the payments to the Plaintiff under the 1st Agreement and the 2nd Agreement since the Plaintiff had entered into the investments with open eyes that there could be complete loss of his investment sums due to investment risks. Court’s Considerations [17] The thrust of the defence based on Section 4.03 of the 1st Agreement and the 2nd Agreement was that the 1st Defendant would not be responsible to pay the Plaintiff at all in the event of the investments encountering losses due to associated market and economic risks. [18] These risks must necessarily be risks that the 1st Defendant had encountered during the period from the time the 1st Defendant invested the Plaintiff’s monies up until the maturity dates under the 1st Agreement and the 2nd Agreement. Any losses that the 1st Defendant may sustain after the aforesaid maturity dates would not be acceptable risks to the Plaintiff under Section 4.03. [19] As it is the Defendants who were seeking to rely on Section 4.03, the burden would be on the Defendants to show that the 1st Defendant was not able to pay the Plaintiff due to the occurrence of such risks that had impacted the investments made by the 1st Defendant utilizing the monies placed by the Plaintiff. [20] However, no evidence was led by the 3rd Defendant at all to explain why the 1st Defendant was not able to pay the Plaintiff the target returns and the sums invested upon the maturity of his investments under the 1st Agreement and the 2nd Agreement. [21] In fact, for the entire period from the dates the Plaintiff made his investments under the 1st Agreement and the 2nd Agreement until the respective maturity dates thereunder, the 1st Defendant had never notified the Plaintiff of any losses arising from any economic or market risks that had impacted his investments. This was the case even after the maturity dates and demands were made to the 1st Defendant for the payments under the said Agreements. [22] For the reasons above, it is my judgment that the Defendants’ reliance on Section 4.03 to avoid liability under the 1st Agreement and the 2nd Agreement and by extension under the Guarantees simply cannot be sustained. Conclusion [23] For the reasons above, this Court allowed the Plaintiff’s claims and made the following orders: a) A declaration that the Defendants have breached the 1st Agreement and the 2nd Agreement dated 27.9.2021 and 12.20.2021 respectively; b) The Defendants are joint and severally to pay the sum of RM 8,000,000.00 to the Plaintiff; c) The Defendants are jointly and severally to pay the Plaintiff the sum of RM 1,410,000.00; d) The Defendants are jointly and severally to pay interest fixed at the rate of 5% per annum on the sum of RM 1,150,000.00 from 26.9.2022 until full realization and on the sum of RM 8,260,000.00 from 11.10.2022 until full realization; e) the Defendants are jointly and severally to pay the Plaintiff’s costs fixed at RM 60,000.00 subject to payment of allocator; f) The Defendants are jointly and severally to present the 1st Agreement and the 2nd Agreement to the Stamp Office for payment of the appropriate revenue including any penalties within 30 days from the date of judgment and to file a copy of the duly stamped Agreements in Court; g) The Defendants’ Counterclaim is struck out. Dated the 18th day of December 2024 ONG CHEE KWAN Judge of the High Court of Malaya High Court of Kuala Lumpur, NCC2 & Admiralty Counsel:

Mr. Wan Zafran Pawancheek together with Ms. Suzilawati Ismail for Plaintiff Messrs. Wan Marican Hamzah & Shaik (Ampang, Selangor)

Mr. Lim Chun Yen for 1st Defendant's Liquidator

Mr. Shankar Govinth together with Ms. Nabilah Aryssa for 2nd and 3rd Defendants

Moneylenders Act 1951 2.