Toe Hong Choo v Piong Choong Fah (WA-22NCvC-682-10/2021)

The issue before me is about the illegality of a moneylending agreement under the Moneylenders Act 1951 (Act 400) [“MA 1951”] that has been the subject of many decisions from the courts of late in the search for a consistent approach that would balance the competing rights of a lender and a borrower in the wider context of what the public interest is that is intended to be protected by the MA 1951.

What is the public interest that is protected by the MA 1951? In the recent decision of the Federal Court in Triple Zest Trading & Suppliers & Ors v Applied Business Technologies Sdn Bhd [2023] 6 MLJ 818 FC [“Triple Zest”] Abdul Rahman Sebli CJ (Sabah and Sarawak) when declaring a loan agreement to lend RM 800,000 to be repaid within one month together with a further RM 800,000 as ‘agreed profit’ an illegal agreement in breach of the MA 1951 stated that the MA 1951 is to protect the public from the menace of illegal moneylenders aka ‘Ah Long’. [See Held (1) and [23]].

Salleh Abas FJ in Yeep Mooi v Chu Chin Chua & Ors [1981] 1 MLJ 14 FC also observed: “We have on another occasion observed that the Moneylenders Ordinance, 1951 does not strike at money lending but at moneylenders and at the loans lent by them. The Ordinance is never intended to apply to an individual, or any member of the public who lends money even at interest, unless he does so as a business. (Ngui Mui Khin & Anor v. Gillespie Bros & Co Ltd [1979] 1 MLRA 313).” [Emphasis added]

This tension is aptly summarised in Litchfield v Dreyfus [1906] KB 584 by Farwell J construing an English statute, The Money-lenders Act, 1900, section 6, which defines a money-lender to be "every person whose business is that of money-lending, or who .... holds himself out in any way as carrying on that business," but excepts sub-s. (d), "any person bona fide carrying on any business not having for its primary object the lending of money, in the course of which and for the purposes whereof he lends money." [Emphasis added]

Farwell J said (at pages 589 - 590) as follows: But it appears that the plaintiff has also since June, 1903, assisted two art businesses in which he is largely interested, and which he finances by taking and discounting the bills of the customers of those businesses and by taking bills for the interest due to him on the debentures which he holds in one of those businesses. There is nothing in that which can be called the business of money-lending. Further, he has also, … assisted old friends with whom he had been connected in business, amounting in all to about ten persons. They come to him and ask him for assistance from time to time, and he gives them money on easier terms apparently than they could get elsewhere, and takes their bills or the bills of their customers. But not every man who lends money at interest carries on the business of money-lending. Speaking generally, a man who carries on a money-lending business is one who is ready and willing to lend to all and sundry, provided that they are from his point of view eligible. I do not of course mean that a moneylender can evade the Act by limiting his clientele to those whom he chooses to 4 designate as "friends" or otherwise: it is a question of fact in each case. … it would be a straining of the language of the Act to hold that a man who so obliges friends is carrying on the business of a moneylender. 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. The 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. It is part of their everyday business. [Emphasis added]

To my mind, there is much sense in what were said by the judges in the cases above. With that, I now turn to the facts of the case before me.

This is a trial heard over 3 days on 02-05-2024, 14-05-2024 and 15-05- and 03-09-2024. I ruled in favour of the plaintiff at the conclusion of oral submissions hearing on 03-09-2024. I now deliver my decision with full grounds.

The plaintiff and the defendant were formerly wife and husband respectively. They were both business persons, were married for 17 5 years and blessed with three children. They were divorced on 08-09-

[9] On 13-10-2021 the plaintiff filed this suit before me against the ex-husband defendant for repayment of loans given earlier to the defendant. [See Amended Statement of Claim in Bundle of Pleadings Bundle A Enclosure 85 pages 31 - 45]. [10] The details of these outstanding loans had been documented in an agreement dated 01-03-2015 (“Loan Agreement”) whereby the defendant acknowledged he had borrowed monies from the plaintiff his ex-wife, he now agreed to formalise the debts due and agreed to repay the sum of RM 1,520,000.00 to the plaintiff not later than 12 months from 01-03-2015 with interest at 1.3% per month from 01-03-2015 till payment. [See Friendly Loan Agreement between Plaintiff and Defendant in Common Bundle of Documents (Part B) Bundle B1 (Enclosure 88) pages 4 - 7]. [11] The Loan Agreement was signed by the plaintiff and defendant and witnessed by one Johan Mohan Bin Abdullah, an advocate and solicitor. Defence of sham agreement [12] It is significant for the purposes of my Judgment that the defendant in his Amended Defence pleaded that the Loan Agreement is a sham on the alleged reason that he had not received the said sum of RM 1,520,000.00 from the plaintiff. [See Amended Defence in Bundle of Pleadings Bundle A Enclosure 85 pages 61 - 73 at paragraphs 11 and 12]. [13] The same defence that the Loan Agreement is a sham and that he had not received the said sum of RM 1,520,000.00 from the plaintiff is reiterated in the defendant’s Summary of Case at paragraph 5. [See Defendant’s Summary of Case Bundle F2 (Enclosure 74)]. [14] It is also reiterated in the defendant’s witness statement filed in Court. [See Q and A 14 - 16, 19 and 21 in Defendant’s Witness Statement Piong Choong Fah WSDW1 (A) Enclosure 98]. [15] The Agreed Issues to Be Tried dated 14-12-2023 [Bundle E Enclosure 87] agreed by parties were also based on the defence that the Loan Agreement is a sham agreement. The Agreed Issues were-i. Agreed Issue 1 - Whether the plaintiff had loaned a sum of RM 1,520,000.00 to the defendant? and ii. Agreed Issue 2 - Whether the defendant agreed to repay the sum of RM 1,520,000.00 with administration charges calculated at 1.3% per month no later than 12 months from 01-03-2015 to the plaintiff by way of a Friendly Loan Agreement dated 01-03-2015 executed by the plaintiff and the defendant and has since failed to do so? [16] Faced with the evidence presented before the trial that he did borrow monies from the plaintiff and does owe her money, the defendant now sings a different tune in his post-trial written submissions. He now admits there is indeed a Loan Agreement but contends it is a moneylending agreement and is thus illegal. [See Defendant’s Submission (After a Full Trial) at paragraphs 5.3, 6.3 and 6.4 Enclosure 110]. Can the defendant do a U-turn on his defence? The pleaded case of the plaintiff [17] The plaintiff and the defendant were married for 17 years and have 3 children together and had obtained a divorce on 08-09-2014. [18] The plaintiff had loaned some monies to the defendant, of which the defendant had failed to repay the plaintiff despite numerous reminders by the plaintiff. [19] Consequently, the plaintiff and the defendant entered into the Loan Agreement whereby the defendant had agreed to repay the sum of RM 1,520,000.00 to the plaintiff by 02-03-2016. [20] The Loan Agreement was to account for the sums the plaintiff had lent to the defendant between 15-03-2013 to 07-02-2014 which in actual fact exceeds RM 1,520,000.00. [21] To-date, the defendant has failed to repay the plaintiff monies due and owing under the Loan Agreement. The pleaded case of the defendant [22] The defendant contends he did not borrow any monies from the plaintiff, that he only signed the Loan Agreement to appease the plaintiff and thus the agreement is actually a sham. [See Q and A 14 in Defendant’s Witness Statement Piong Choong Fah WSDW1(A) (Enclosure 98)]. The Trial Process [23] The Court heard testimonies from the plaintiff and the defendant over the course of 3 days on 02-05-2024, 14-05-2024 and 15-05-2024 as follows: i. Toe Hong Choo (English name Carryn) (PW1) who is the plaintiff; and ii. Piong Choong Fah (English name Robin) (DW1) who is the defendant. [24] The plaintiff filed written submissions enclosures number 112, 116, 121 and 124. The defendant filed written submissions enclosures number 110,115,119 and 125. The Issues to Be Tried Agreed by the Parties [25] The Agreed Issues to Be Tried dated 14-12-2023 [Bundle E (Enclosure 87)] to be determined by this Court are-Agreed issue 1 - Whether the plaintiff had loaned a sum of RM 1,520,000.00 to the defendant? and Agreed issue 2 - Whether the defendant agreed to repay the sum of RM 1,520,000.00 with administration charges calculated at 1.3% per month no later than 12 months from 01-03-2015 to the plaintiff by way of a Friendly Loan Agreement dated 01-03-2015 executed by the plaintiff and the defendant has since failed to do so? [26] Before I consider the issues, I will set down the law on the burden of proof in Malaysia. Sections 101 to 103 of the Evidence Act 1950 [27] The law on the burden of proof in Malaysia is governed by sections 101 to 103 of the Evidence Act 1950. [28] Section 101 of the Evidence Act 1950 states: Burden of proof 101 (1) Whoever desires any court to give judgment as to any legal right or liability, dependent on the existence of facts which he asserts, must prove that those facts exist. [29] Section 102 of the Evidence Act 1950 states: On whom burden of proof lies [30] Section 103 of the Evidence Act 1950 states: Burden of proof as to particular fact [31] The Supreme Court in Selvaduray v Chinniah [1939] MLJ 253 SC per Terrel Ag CJ had said- "The burden of proof under section 102 of the Evidence Enactment is upon the person who would fail if no evidence at all were given on either side, and accordingly the Plaintiff must establish his case. If he fails to do so it will not avail him to turn around and say that the Defendant has not established his. The Defendant can say 'it is wholly immaterial whether I prove my case or not. You have not proved yours' (see the Judgment of the Privy Council in Raja Chandranath Roy v. Ramjai Mazumdar 6 Bengal Law Reports, page 303)." [Emphasis added] [32] The term “burden of proof” is used in both sections 101 and102 of the Evidence Act 1950. It can be confusing. Previous cases have explained the confusion. [33] The term “burden of proof” in section 101 of the Evidence Act 1950 is the burden to establish a case which rests throughout on the party who assert the affirmative of the issue. The “burden of proof” in section 102 of the Evidence Act 1950 is the burden to adduce evidence, to make out or rebut the claim. The “burden of proof” in section 102 of the Evidence Act 1950 shifts from one side to the other according to the weight of the evidence. [See U Television Sdn Bhd and Tan Sri Dato Seri Vincent Tan Chee Yioun v Comintel Sdn Bhd [2017] 10 CLJ 580 FC per Zulkefli Ahmad Makinudin PCA at [35] [“U Television Sdn Bhd”]. [34] Because both sections 101 and 102 use the phrase “burden of proof”, some judgments in order to draw a distinction between sections 101 and 102 call the burden in section 101 as “burden of proof” and the burden in section 102 as “onus of proof’. [See U Television Sdn Bhd at [36]] or “evidential burden”. [See Cheong Heng Loong Goldsmiths (KL) Sdn Bhd & Anor v Capital Insurance Bhd [2004] 1 CLJ 357 CA per Gopal Sri Ram JCA]. Application of law to facts [35] The legal burden of proof under section 101 of the Evidence Act 1950 therefore lies on the plaintiff to prove issues 1 and 2 in the sense that she had lent the defendant a sum of RM 1,520,000.00 with administration charges calculated at 1.3% per month. If this is proven by the plaintiff, then under section 102 of the Evidence Act 1950 the evidential burden also known as onus of proof then shifts to the defendant to prove his pleaded defence that he did not borrow any monies from the plaintiff, that he only signed the Loan Agreement to appease the plaintiff and that the agreement is actually a sham agreement. Agreed issue 1 - Whether the plaintiff had loaned a sum of RM 1,520,000.00 to the defendant? [36] Learned counsel for the plaintiff Mr Kamraj Nayagam contends he has proven his client’s case. I agree. In my view the plaintiff has proven that she had lent RM 1,520,000.00 to the defendant. I do not find the defendant honest. My reasons are as follows-i. The defendant does not dispute the existence of the Loan Agreement [See Bundle B1 (Enclosure 88) at pages 4 - 7] and that he had executed it. KN At pages 4-7, Bundle B1, is this the document which you referred to as the friendly loan agreement at Question and Answer 14? PCF Yes. KN And just to be clear, you signed that agreement? PCF Yes, I was pressured to sign. [See Notes of Proceedings (Enclosure 108) at page 81, lines 11 - 18] ii. Copies of cheques and bank statements of the plaintiff lending money to the defendant have been produced in Court as Part B document i.e. agreed as to authenticity. [See Bundle B1 (Enclosure 88) at pages 8, 13, 14, 17, 18 - 21]. The defendant has shown no evidence to the contrary that the cheques and/or money transfers did not go through and that he did not receive the monies. The defendant in fact signed at pages 8 and 13 acknowledging receipt of the cheques and agreeing to the 1.3% a month. At page 17 the defendant wrote “Borrow”. iii. The Notes of Proceedings shows in regard to the Public Bank Berhad cheque No. 049371 dated 09-07-2013 for the sum of RM 200,000.00 [See Bundle B1 (Enclosure 88) at page 13] the defendant had admitted that it was his handwriting at the bottom half of the page stating “1.3% a month, thank you Carryn”: KN Page 13. Whose handwriting is that? PCF My handwriting. KN Ok. Can you read out what it says? PCF “1.3% a month. Thank you.” And her signature. [See Notes of Proceedings (Enclosure 108) at page 116, line 27 – page 117, line 23] iv. Despite having admitted that this is his handwriting acknowledging receipt of the cheque, the defendant goes on to state that the cheque at Bundle B1 (Enclosure 88) page 13 of is a forged document and that the writings have been superimposed on the page: KN I am putting it to you that you did and that the reason you wrote “1.3% a month, thank you” is because you were taking it as a loan from Carryn. PCF No, it’s not. This is superimposed. JUDGE Mr Piong, what do you mean by superimposed? PCF It means this cheque was written and then add on and then photostated. JUDGE So, what was superimposed? What? Which part is superimposed? PCF Bottom and the cheque. JUDGE The bottom and the cheque. PCF They are not genuine from one – JUDGE You mean the whole page is superimposed, are you saying that? PCF Yes, I am saying that. JUDGE Alright. KN You are saying that the page is not genuine. PCF This is not from me, it is from her. It’s not – KN Mr Piong, answer the question please. PCF Yes, yes. KN You are saying the page is not genuine. You are saying this is forged. PCF Yes. KN Your lawyers, Mr Piong, have put this document into Category B. That means that its authenticity is accepted. Are you saying that your lawyers did this wrongly? PCF No, I really don’t know. KN Pardon. PCF I mean I don’t know. KN You don’t know. So you don’t know whether it is a forged document or not. PCF I don’t know. I thought it is. v. The defendant also admitted during his cross-examination that he has always been borrowing money from the plaintiff: Notes of Proceedings (Enclosure 108) at page 94, line 7 – page 96, line 10 KN So you agree that you had borrowed RM501,500 from Carryn. PCF Correct. KN At that you had and this was done, you borrowed this money on the 15/03/2013 and you returned it in part on the 15/05/2013. PCF Correct. … Notes of Proceedings (Enclosure 108) at page 124 – 125 KN Then, her response to you is, “You are so smart, asking me all the questions that you already have the answer.” And then your reply to her is, “I owe you RM1.65 million plus interest plus RM900K of so-called land appreciation done out of goodwill to you.” Correct? PCF Correct. KN “Keep your word, whatever I owe you, I will surely pay you back. That’s my promise.” That’s your email as well? PCF Correct. KN “We know each other for so many years, we shouldn’t quarrel over money.” PCF Correct. KN So, as at 16/07/2016, you agreed that you owed Carryn Toe RM1.65 million? PCF No, I don’t agree. I wrote this just to make her happy. KN So you agree that you wrote it to her? PCF I don’t owe her. KN You answer the question please, Mr Piong. You agree that you wrote to Carryn Toe, “I owe you RM1.65 million plus interest plus RM900k”? PCF No, I – KN You didn’t write that? PCF I wrote that. KN You wrote – PCF Just to make her happy KN So you were lying there, if that’s what you are saying. PCF I’m just trying to, just try to be kind. KN By lying? PCF It’s not lying, it’s just a conversation. [Emphasis added] Email and WhatsApp Correspondences Containing Defendant’s Admission of the loan vi. On 29-08-2016, the plaintiff had sent an email to the defendant dated 01-09-2016 setting out the details of the loan and asked the defendant how was he going to repay her. [See Bundle B1 (Enclosure 88) at pages 26 - 28]. vii. By a reply email dated 30-08-2016 the defendant admitted the loan and proposed terms for repayment. [See Bundle B1 (Enclosure 88) at pages 29 - 30]. viii. WhatsApp messages sent by the defendant to the plaintiff to borrow monies can be seen exhibited to the Plaintiff’s Affidavit in Support affirmed by Toe Hong Choo on 09-02-2022 [See Plaintiff’s Affidavit in Support dated 09-02-2022 (Enclosure 13) at pages 129 - 151]. [37] A defendant’s Short Messaging Service (SMS) acknowledging a debt is recognised by law as a proper acknowledgement of debt. [See Yam Kong Seng & Anor v Yee Weng Kai [2014] 4 MLJ 478 FC. [38] An admission of liability via an email is also a valid admission of liability. [See Pembinaan Indah PIE Sdn Bhd v Proactive Conditioning & Monitoring Sdn Bhd [2021] MLJU 2997 HC]. [39] I now consider the defence of sham agreement pleaded by the defendant. The law - What is a sham agreement? [40] In A.G. Securities Appellant And Vaughan And Others Respondents Antoniades Respondent And Villiers And Another Appellants, [1990] 1 A.C. 417 [“A.G. Securities”] Bingham L.J. at the Court of Appeal said at page 444– A written agreement is a sham where it incorporates clauses by which neither party intends to be bound and which is obviously a smokescreen to cover the real intentions of both contracting parties: Hadjiloucas v. Crean [1987] 3 All E.R. 1008, 1014, per Purchas L.J. The accepted definition of a sham is that given by Diplock L.J. in Snook v. London and West Riding Investments Ltd. [1967] 2 Q.B. 786, 802: "As regards the contention of the plaintiff that the transactions between himself, Auto Finance and the defendants were a 'sham,' it is, I think, necessary to consider what, if any, legal concept is involved in the use of this popular and pejorative word. I apprehend that, if it has any meaning in law, it means acts done or documents executed by the parties to the 'sham' which are intended by them to give to third parties or to the court the appearance of creating between the parties’ legal rights and obligations different from the actual legal rights and obligations (if any) which the parties intend to create. But one thing, I think, is clear in legal principle, morality and the authorities (see Yorkshire Railway Wagon Co. v. Maclure (1882) 21 Ch.D. 309, C.A. and Stoneleigh Finance Ltd. v. Phillips [1965] 2 Q.B. 537), that for acts or documents to be a 'sham,' with whatever legal consequences follow from this, all the parties thereto must have a common intention that the acts or documents are not to create the legal rights and obligations which they give the appearance of creating." Put more shortly, a sham exists where the parties say one thing intending another: Donald v. Baldwyn [1953] N.Z.L.R. 313, 321, per F. B. Adams J. [Emphasis added] [41] On Malaysian cases, the Court of Appeal in Tang Lee Hiok & Ors v Yeow Guang Cheng [2022] 5 MLJ 584 CA per Gunalan Muniandy JCA followed the earlier Court of Appeal judgment of Global Globe Property (Melawati) Sdn Bhd v Jangka Prestasi Sdn Bhd [2020] 6 MLJ 333; [2020] 6 CLJ 1 [“Global Globe Property (Melawati)”] where Lee Swee Seng JCA had set out the test to determine a sham agreement. [42] Gunalan Muniandy JCA said as follows- [60] We would first adopt with approval the Court of Appeal judgment of Global Globe Property (Melawati) Sdn Bhd v Jangka Prestasi Sdn Bhd [2020] 6 MLJ 333; [2020] 6 CLJ 1 where Lee Swee Seng JCA quoting Hitch and others v Stone (Inspector of Taxes) [2001] STC 214 which referred to Snook v London and West Riding Investments Ltd [1967] 2 QB 786 pronounced on the applicable test in determining a sham agreement at para [105]: [64] An inquiry as to whether an act or document is a sham requires careful analysis of the facts and the following points emerge from the authorities. [65] First, in the case of a document, the court is not restricted to examining the four comers of the document. It may examine external evidence. This will include the parties’ explanations and circumstantial evidence such as evidence of the subsequent conduct of the parties. [66] Second, as the passage from Snook makes clear, the test of intention is subjective. The parties must have intended to create different rights and obligations from those appearing from (say) the relevant document, and in addition they must have intended to give a false impression of those rights and obligations to third parties. [67] Third, the fact that the act or document is uncommercial, or even artificial, does not mean that it is a sham. A distinction is to be drawn between the situation where parties make an agreement which is unfavourable to one of them, or artificial, and a situation where they intend some other arrangement to bind them. In the former situation, they intend the agreement to take effect according to its tenor. In the latter situation, the agreement is not to bind their relationship. [68] Fourth, the fact that parties subsequently depart from an agreement does not necessarily mean that they never intended the agreement to be effective and binding. The proper conclusion to draw may be that they agreed to vary their agreement and that they have become bound by the agreement as varied (see for example Garnac Grain Co Inc v HMF Faure & Fairclough Ltd [1996] 1 QB 650 at 683–684 per Diplock LJ, which was cited by Mr Price). [69] Fifth, the intention must be a common intention (see Snook). Not a shred of evidence in support of defence the Loan Agreement is a sham [43] Going by the definition by Bingham L.J. in A.G. Securities that “A written agreement is a sham where it incorporates clauses by which neither party intends to be bound and which is obviously a smokescreen to cover the real intentions of both contracting parties.”, it is clear that the Loan Agreement in our case is not a sham agreement. This is not a case where to use the test in Global Globe Property (Melawati), “The parties must have intended to create different rights and obligations from those appearing from (say) the relevant document, and in addition they must have intended to give a false impression of those rights and obligations to third parties”. [Emphasis added] [44] A sham agreement is thus an agreement whereby both signatories signed with a common intention to use the said agreement to give a false impression of the rights and obligations contained in the said agreement to third parties. This is totally different from what the defendant alleges i.e. that he only signed the Loan Agreement to appease the plaintiff. This is in fact a defence of duress under common law and coercion under section 15 of the Contracts Act 1950. [See Pang Chow Huat v Tan Li Sin [2024] 5 MLRH 728 HC at [33]. But duress and coercion are not pleaded as a defence and thus cannot be raised by the defendant at submissions stage. [45] In any event, I do not find a shred of evidence in support of the allegation that he only signed the Loan Agreement to appease the plaintiff. [46] The Loan Agreement was witnessed by an advocate and solicitor one Johan Mohan bin Abdullah who is the defendant’s solicitor who had entered an Appearance on his behalf to defend this suit. [See Memo of Appearance (Enclosure 4)]. The plaintiff had testified-GV Yes. Ms Toe, are you able to tell this Court how this figure of RM1.52 million was arrived at for the friendly loan agreement? THC I can explain. Refer to B1, page 27. According to page 27, there was an amount that he owed me. Here, RM820,000, and another amount is R M200,000 and the other amount is RM500,000. After added up all this will be RM1.52million. And there was an agreement, friendly loan agreement that he brought Mr Mohan to prepare the agreement and let me sign the agreement. Because he wanted to borrow more money, that’s why he brough [sic] this agreement. [See Notes of Proceedings (Enclosure 108) at page 57, lines 24 - 33] [47] The failure of the defendant to call Johan Mohan bin Abdullah to testify in his defence can only give rise to an adverse inference under section 114 Illustration [g] of the Evidence Act 1950 that if he were to testify, his evidence would affect the defendant adversely. [See Sabah Shell Petroleum Co Ltd & Anor v The Owners of and/or Any Other Persons Interested in the Ship or Vessel the ‘Borcos Takdir’ [2012] 5 MLJ 515 at [92] HC per Nallini Pathmanathan J and Marappan A/L Muthusamy v R Sivam A/L Ramasamy [2014] 4 MLJ 428 at [28] CA per Rohana Yusuf JCA]. [48] The defendant has also alleged that he was coerced into signing the Loan Agreement due to emotional blackmail in being denied access to the children. Again, not a shred of evidence has been tendered to support such a serious allegation. No emails. No WhatsApps. No police report. Not even a letter of demand to the plaintiff in response to this suit. [49] It has been confirmed by the defendant himself that there is no document to show that he was pressured to sign the Loan Agreement: KN Answer the question, please. The question is, you cannot refer the Court, you cannot show the Court any document in which you say you were pressured to sign. PCF No documents. [See Notes of Proceedings (Enclosure 108) at page 82, lines 1 - 5] [50] In conclusion on Agreed Issue 1 I hold that the plaintiff has proven that she had lent RM 1,520,000.00 to the defendant. I now move on to Agreed Issue 2. Agreed Issue 2 - Whether the defendant agreed to repay the sum of RM 1,520,000.00 with administration charges calculated at 1.3% per month no later than 12 months from 01-03-2015 to the plaintiff by way of a Friendly Loan Agreement dated 01-03-2015 executed by the plaintiff and the defendant has since failed to do so? [51] In my view the plaintiff has proven issue 2. The administration charges at 1.3% per month is a term of the Loan Agreement. [52] The defendant has also failed to adduce any evidence he had repaid the loan. In fact, he had admitted he did not make any payment to the plaintiff in his own witness statement. [53] The defendant in his Witness Statement has stated as follows: Q&A 21 – Defendant’s Witness Statement Q: Did you make any payment to the Plaintiff pursuant to the Friendly Loan Agreement? A: No, I did not, Yang Arif. This is simply because the Friendly Loan Agreement is a sham and I do not owe the Plaintiff any monies pursuant to the Agreement. The Plaintiff also did not lend me any monies pursuant to the Friendly Loan Agreement. [See Defendant’s Witness Statement (WSD1(A)) [Enclosure 95] at page 13 Q & A 21] Post-trial submissions [54] The resolution of both Agreed Issues 1 and 2 in favour of the plaintiff should have decided the suit for the plaintiff. However, at the post-trial submissions stage, learned counsel for the defendant Dato’ George Varughese raised an additional issue of illegality not pleaded in the Defence. [See Defendant’s Submission (After a Full Trial) [Enclosure 110] at paragraphs 6.1 to 7.6]. [55] In the words of learned counsel for the plaintiff in Enclosure 127 at paragraphs 13 and 14-

At paragraphs 6.1 — 8.7 of the Defendant’s Submissions, the Defendant has now raised new allegations for the first time i.e. that the Friendly Loan Agreement is allegedly illegal and that it is void by statute as it is allegedly a money lending agreement.

It must be highlighted that the allegation of money lending is not an issue that has been pleaded by the Defendant. [Emphasis added] [56] Additional issues now arise which I will number them for convenience. These issues are in my mind- Issue 3 - Whether the court can take cognisance of illegality even if it is not pleaded? Issue 4 - Can the defendant raise alternative versions of fact? Issue 5 - Can the defendant on the facts of this case raise the argument that the Loan Agreement is illegal under the MA 1951 when it is not pleaded as a defence? Issue 6 - Assuming issues 3 to 5 are answered in favour of the defendant, in the sense that based on the facts of this case the court can take cognisance of illegality even if it is not pleaded, is the Loan Agreement illegal? [57] I will consider issues 3 to 6 in the order I have set out above. Issue 3 - Whether the court can take cognisance of illegality even if it is not pleaded? The law [58] The law on whether the court can take cognisance of illegality even if it is not pleaded has been analysed extensively by the Federal Court in the leading judgment of Jeffrey Tan FCJ in Merong Mahawangsa Sdn Bhd & Anor v Dato’ Shazryl Eskay Abdullah [2015] 8 CLJ 212 FC [“Merong Mahawangsa”]. [59] Learned counsel for the plaintiff has cited in his written submissions [Enclosure 121 at paragraph 3] the following paragraph in Merong Mahawangsa as setting out the ratio decidendi of the judgment of Jeffrey Tan FCJ- Abdullah [2015] 8 CLJ 212 … It was held that the courts shall not turn a blind eye to any existence of illegality as quoted below: “[35] Clearly, therefore, courts are bound at all stages to take notice of illegality, whether ex facie or which later appears, even though not pleaded, and to refuse to enforce the contract.” [60] As many cases were cited by Justice Jeffrey Tan FCJ in his judgment one must not read each citation or paragraph in Merong Mahawangsa in isolation. To me the clearest exposition of the law is in the following paragraphs- [24] Where a transaction is not on its face manifestly illegal, the ordinary rule applies that only evidence relevant to a pleaded allegation is admissible. In North Western Salt Co Ltd v. Electrolytic Alkali Co Ltd [1914] AC 461, the court was faced with an argument as to illegality in circumstances where the point had not been taken, or not properly been taken before. Viscount Haldane stated where a transaction is not on its face manifestly illegal, the ordinary rule applies that only evidence relevant to a pleaded allegation is admissible. It is no doubt true that where on the plaintiff’s case it appears to the Court that the claim is illegal and that it would be contrary to public policy to entertain it, the Court may and ought to refuse to do so. But this must only be when either the agreement sued on is on the face of it illegal or where, if facts relating to such an agreement are relied on, the plaintiff’s case has been completely presented. If the point has not been raised on the pleading so as to warn the plaintiff to produce evidence which he may be able to bring forward rebutting any presumption of illegality which might be based on some isolated facts, then the Court ought not to take a course which may easily lead to a miscarriage of justice. … [25] Devlin J, in Edler v. Auerbach [1949] 2 All ER 692, said that North Western Salt v. Electrolytic Alkali Company authorised four propositions: That case authorises, I think, four propositions: first, that where a contract is ex facie illegal, the court will not enforce it, whether the illegality is pleaded or not; secondly, that where, as here, the contract is not ex facie illegal, evidence of extraneous circumstances tending to show that it has an illegal object should not be admitted unless the circumstances relied on are pleaded; thirdly, that where unpleaded facts, which, taken by themselves, show an illegal object, have got in evidence (because, perhaps, no objection was raised or because they were adduced for some other purpose), the court should not act on them unless it is satisfied that the whole of the relevant circumstances are before it; but, fourthly, that where the court is satisfied that all the relevant facts are before it and it can see clearly from them that the contract had an illegal object, it may not enforce the contract, whether the facts were pleaded or not. The last proposition is the most important for the purpose of this case and I think that it fairly synthesises the relevant dicta. The court must pronounce on the transaction if, in the words of Viscount Haldane LC ([1914] AC 469), the “case has been completely presented”, or, in Lord Moulton’s words (ibid 476): “the contract and its setting be fully before the court” … Where notice of the issue is not given on the pleadings, there is a danger that that assumption may break down, and the decision in North-Western Salt Co Ltd v. Electrolytic Alkali Co Ltd is a warning against overlooking that danger. In Rawlings v. General Trading Co ([1921] 1 KB 645), Scrutton LJ treated the decision as making it clear: … that where all the facts are before the court, and it can see clearly that it is contrary to public policy to enforce the agreement, the court should act, though the pleadings do not raise the point. (see also Chitty on Contract 30th Edition Volume 1 at paragraph 16 - 205). [Emphasis added] [61] To summarise, the principles of law on whether our Courts can consider unpleaded illegality were set out in North Western Salt Co Ltd v Electrolytic Alkali Co Ltd [1914] AC 461 and recast in four principles by Devlin J in Edler v Auerbach [1949] 2 All ER 692 [“Edler”]. [62] These four principles were approved by our Federal Court in Lo Su Tsoon Timber Depot v Southern Estate Sdn Bhd [1970] 1 LNS 68; [1971] 2 MLJ 161, per Ismail Khan CJ (Borneo) (Azmi LP and Yong J concurring), and in Merong Mahawangsa at [31 – 33]. The four principles are-i. Where a contract is ex facie illegal, the court will not enforce it, whether the illegality is pleaded or not. ii. Where a contract is not ex facie illegal, evidence of extraneous circumstances tending to show that it has an illegal object should not be admitted unless the circumstances relied on are pleaded. iii. That where unpleaded facts, which, taken by themselves, show an illegal object, have got in evidence (because, perhaps, no objection was raised or because they were adduced for some other purpose), the court should not act on them unless it is satisfied that the whole of the relevant circumstances are before it. iv. Where the court is satisfied that all the relevant facts are before it and it can see clearly from them that the contract had an illegal object, it may not enforce the contract, whether the facts were pleaded or not. Application to facts [63] Arising from the answer to issue 3 that the court can still take cognisance of illegality even if it is not pleaded provided certain conditions set out in the four principles from Devlin J’s judgment in Edler are satisfied, - which were approved by our Federal Court in Merong Mahawangsa - two issues arise. These are-i. Issue 4 - Can the defendant raise alternative versions of fact? ii. Issue 5 - Can the defendant on the facts of this case raise the argument that the Loan Agreement is illegal under the MA 1951 when it is not pleaded as a defence? [64] I will start with issue 4. Can the defendant raise alternative versions of fact? [65] This issue arises as the defendant had pleaded that the Loan Agreement is a sham. He testified that there were no moneys loaned to him. Can he now in his post-trial submissions admit moneys were indeed loaned to him but it is an illegal moneylending? The applicable law on alternative pleadings of facts and reliefs [66] The following principles can be distilled from decided cases-i. The general rule is that a party is not precluded from pleading inconsistent causes of action in the alternative based on two or more inconsistent sets of material facts, as long as the facts are not mixed up and are stated separately in order to demonstrate on what facts each alternative relief is based. [See Philipps v Philipps (1878) 4 QBD 127 English Court of Appeal at [134] and Ng Chee Weng v Lim Jit Ming Bryan and another [2012] 1 SLR 457 Singapore CA [“Ng Chee Weng”] at Held (3) and [33 and 39]]. ii. An exception to the general rule is that a party cannot assert two inconsistent versions of the facts where he knows or must know that one version is false. This is because while a party has the right to plead inconsistent rights in the alternative, the alternative versions of the facts cannot offend common sense and justice. [See Brailsford v Tobie (1888) 10 ALT 194 [“Brailsford”], Ng Chee Weng at Held (4) and [35 - 37] and Chandra Winata Lie v Citibank NA [2015] 1 SLR 875 Singapore HC per Vinodh Coomaraswamy J at [69] [“Chandra Winata”]]. Application to facts [67] To my mind, the defendant cannot in his pleaded Defence and in his testimony in court say that the Loan Agreement is a sham, that there were no moneys loaned to him; and now in his post-trial submissions admits there is a Loan Agreement, that moneys were indeed loaned to him but it is an illegal moneylending agreement in breach of the MA [68] Cases are clear that the defendant cannot assert two inconsistent versions of the facts where he knows or must know that one version is false. This is because while a defendant has the right to plead inconsistent rights in the alternative, the alternative versions of the facts cannot offend common sense and justice. [See Brailsford, Ng Chee Weng at Held (4) and [35 - 37] and Chandra Winata at [69]]. [69] A defendant cannot approbate and reprobate. [See Tec D (Malaysia) Sdn Bhd & Anor v Refinenetworks Sdn Bhd [2022] MLJU 2238 HC at [39] per Jamhirah Ali JC and Melangking Oil Palm Plantation Sdn Bhd v Hassnar B. HJ. Ebrahim @ Assainar & Anor [2013] MLJU 1618 HC at [25] per Supang Lian J]. [70] Similar observations were made by Wong Kian Kheong J in Wong Thian Choy & Anor v Goodnite Sdn Bhd & Anor [ 2019] CLJU 1391 HC [“Wong Thian Choy”]- [37] I find as a fact the following: I made the above findings of fact due to the following evidence and reasons: … MA is in direct contradiction with the 1st Defendant’s averment that the 1st Defendant has no record regarding its receipt of the Plaintiffs’ Loans. Such a contradiction clearly shows the 1st Defendant’s lack of bona fides in this case. [Emphasis added] [71] A further ground that the defendant cannot assert two inconsistent versions of the facts where he knows or must know that one version is false is that such a U-turn on facts will be treated as an abuse of process which will not be permitted by a court of law in order to protect the integrity of the judicial process and to safeguard the administration of justice. [See Founder Group (Hong Kong) Ltd v Singapore JHC Co Pte Ltd, [2023] 2 SLR 554 Singapore CA] [“Founder Group”]. [72] In Founder Group the Singapore Court of Appeal held that a party that had pleaded as a defence that an agreement is a sham agreement cannot in the same proceedings rely on an arbitration clause in the said sham agreement to stay a winding up petition presented against it. Sundaresh Menon CJ said- [51] … At the hearing before the Judge, counsel for JHC submitted that the Contracts were in fact sham transactions. JHC’s position was therefore that there had never been any genuine intent on JHC’s part to enter into the Contracts, or to be bound by any of the obligations set out therein, and in our judgment, this must logically include the arbitration agreements. If this was indeed the case, then JHC would not be entitled to invoke the arbitration clauses contained in the very agreements that it said were not intended to give rise to valid obligations. … [61] …As this court observed in BWG v BWF [2020] 1 SLR 1296 at [56], an abuse of process may arise where the debtor adopts an inconsistent position in the same or related proceedings, in the absence of a clear and convincing reason to do so: 56 Another example of abuse of process might be where a debtor adopts an inconsistent position as regards a defence which it raises to dispute the debt to restrain a winding-up application. The debtor may have taken an inconsistent position in the same proceedings or in related proceedings. This is analogous to the situation where a debtor had previously admitted that it owes the debt, but subsequently disputes it. The assertion of inconsistent positions may be treated as an abuse of process in order to protect the integrity of the judicial process and to safeguard the administration of justice… [Emphasis added] [73] Issue 4 is thus answered in favour of the plaintiff in that the defendant is not allowed to raise the alternative factual argument that there is indeed a Loan Agreement but it is illegal. This holding alone is sufficient to dispose of the trial in favour of the plaintiff. For completeness, I will still consider issues 5 and 6. Issue 5 [74] Assuming that issue 4 is answered in favour of the defendant, which is not the case, I now move to issue 5. Can the defendant on the facts of this case raise the argument that the Loan Agreement is illegal under the MA 1951 when it is not pleaded as a defence? [75] To my mind, the defendant on the facts of this case cannot raise the argument that the Loan Agreement is illegal under the MA 1951 when he has not pleaded it as a defence. This is because, applying the first principle from Devlin J in Edler – “where a contract is ex facie illegal, the court will not enforce it, whether the illegality is pleaded or not” - the Loan Agreement is not ex facie illegal. A Loan Agreement can be legal or illegal under the MA 1951. It all depends on facts extraneous to the said loan agreement. [76] What is prohibited by the MA 1951 is not moneylending but the business of moneylending without a licence. As to whether a lender is in the business of moneylending, that is a question of fact. [See Shim Vui Geh v Dayang Masturah bt Sahari and another appeal [2024] 1 MLJ 755 CA at [22] per Lee Swee Seng JCA] [“Shim Vui Geh”]. [77] The second principle from Devlin J in Edler – “Where a contract is not ex facie illegal, evidence of extraneous circumstances tending to show that it has an illegal object should not be admitted unless the circumstances relied on are pleaded”- does not allow the defendant to raise the argument that the Loan Agreement is illegal when he has not pleaded in his defence the extraneous circumstances tending to show that it has an illegal object. [78] The third principle from Devlin J in Edler – “that where unpleaded facts, which, taken by themselves, show an illegal object, have got in evidence (because, perhaps, no objection was raised or because they were adduced for some other purpose), the court should not act on them unless it is satisfied that the whole of the relevant circumstances are before it”- is not applicable as the Court is not satisfied that the whole of the relevant circumstances are before it. [79] This is because what is prohibited by the MA 1951 is not moneylending but the business of moneylending without a licence. Section 10 [OA] of the MA 1951 only raises a presumption as to the business of moneylending. As illegality under the MA 1951 was not pleaded as a defence the plaintiff was not put on notice the need for her to put in evidence facts rebutting the said presumption. This case is therefore different from the facts in Merong Mahawangsa where the plaintiff had pleaded facts in his Statement of Claim and in his witness statement which the Federal Court in Merong Mahawangsa held amounted to admissions to illegal influence peddling. [See Merong Mahawangsa at [77]]. [80] The fourth principle from Devlin J in Edler – “where the court is satisfied that all the relevant facts are before it and it can see clearly from them that the contract had an illegal object, it may not enforce the contract, whether the facts were pleaded or not” - cannot be invoked by the defendant as the requirement that the “court is satisfied that all the relevant facts are before it and it can see clearly from them that the contract had an illegal object”, is again not satisfied. [81] In conclusion, on issue 5 I hold that the defendant on the facts of this case cannot raise the argument that the Loan Agreement is illegal under the MA 1951 when he has not pleaded it as a defence. Issue 6 – Assuming issues 3 to 5 are answered in favour of the defendant, in the sense that based on the facts of this case the court can take cognisance of illegality even if it is not pleaded, is the Loan Agreement illegal? The law on moneylending in Malaysia [82] The MA 1951 applies to the whole of Malaysia. [See section 1[2] of the MA 1951]. [83] The MA 1951 does not prohibit moneylending per se. It merely prohibits the business of moneylending without a licence. This is clear from the Long Title and the definition of a ‘moneylender’ in section 2 read with the prohibitions in sections 5 and 15 of the MA 1951. Section 10[OA] MA 1951 provides that in any proceedings against any person where it is alleged that such person is a moneylender, proof of a single loan at interest made by such person shall raise a rebuttable presumption that such person is carrying on the business of moneylending. [See Shim Vui Geh; and Wong Thian Choy at [36] per Wong Kian Kheong J citing his earlier judgment in Barisan Tenaga Perancang (M) Sdn Bhd v Dr Mansur Hussain & Ors [2017] 2 MLRH 177, at [48] which was affirmed by the Court of Appeal in a judgment given by Abang Iskandar Abang Hashim JCA in Dr Mansur bin Hussain & Ors v Barisan Tenaga Perancang (M) Sdn Bhd [2019] 1 LNS 661 CA]. [84] For easier analysis, the current and relevant provisions of the MA 1951 are set out below:

Section 5 Licences to be taken out by moneylender

No person shall carry on or advertise or announce himself or hold himself out in any way as carry on or advertise or announce himself or hold himself out in any way as carrying on the business of moneylending unless he is licensed under this Act. Section 10[OA] Presumption as to the business of moneylending 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. Section 15 Contract by unlicensed moneylender unenforceable No moneylending agreement in respect of money lent after the coming into force of this Act by an unlicensed moneylender shall be enforceable. [85] To interpret the above sections of the MA 1951 it is useful to consider the substantial amendments made to the MA 1951 in the years 2003 and 2011 as well as the Hansard record which preceded the 2011 amendments. A history of the 2003 and 2011 amendments to the MA 1951 Moneylenders (Amendment) Act 2003 (Act A1193) [86] The Moneylenders (Amendment) Act 2003 (Act A1193) which came into operation on 01-11-2003 amended the MA 1951 among others as follows: i. Introduced a new long title to the MA 1951; ii. Deleted section 3 of the MA 1951 [Certain persons and firms presumed to be moneylenders]; iii. Introduced a new section 5 to the MA 1951 [Licences to be taken out by moneylender]; and iv. Amended section 15 to the MA 1951 [Contract by unlicensed moneylender unenforceable]. Moneylenders (Amendment) Act 2011 (Act A1390) [87] The Moneylenders (Amendment) Act 2011 (Act A1390) which came into operation on 15-04-2011 amended the MA 1951 among others as follows: i. Provided a new definition of “moneylender” in section 2 of the MA 1951; ii. Amended section 5 to MA 1951; and iii. Introduced a new section 10[OA] to the MA 1951 [Presumption as to the business of moneylending]. The changes in the definition of “moneylender” in section 2 MA 1951 [88] The definition of ‘moneylender’ in The Moneylenders (Amendment) Act 2003 (Act A1193), prior to revocation in 2011 by Act A1390, is- “moneylender” means any person who lends a sum of money to a borrower in consideration of a larger sum being repaid to him. [89] The current definition of ‘moneylender’ brought about by The Moneylenders (Amendment) Act 2011 (Act A1390) is – ‘moneylender’ means any person who carries on or advertises 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. [90] As can be seen from the changes to the definition of “moneylender” in section 2 MA 1951 set out above it is clear that the legislature amended the definition of ‘moneylender’ to ensure that the MA 1951 does not prohibit moneylending per se. The intention is to prohibit the business of moneylending without a licence. The changes to section 5 MA 1951 [91] The wording of section 5 in The Moneylenders (Amendment) Act 2003 (Act A1193), prior to revocation in 2011 by Act A1390, is-Licence to be taken out by moneylender

(1) No person shall conduct business as a moneylender unless he is licensed under this Act.

Any person who carries on business as a moneylender without a valid licence, or who continues to carry on such business after his licence has expired or been suspended or revoked shall be guilty of an offence under this Act and shall be liable to a fine of not less than twenty thousand ringgit but not more than one hundred thousand ringgit or to imprisonment for a term not exceeding five years or to both, and in the case of a second or subsequent offence shall also be liable to whipping in addition to such punishment. [92] The current section 5 brought about by The Moneylenders (Amendment) Act 2011 (Act A1390) is-Licences to be taken out by moneylender

(1) No person shall carry on or advertise or announce himself or hold himself out in any way as carry on or advertise or announce himself or hold himself out in any way as carrying on the business of moneylending unless he is licensed under this Act.

Any person who carries on or advertises or announces himself or holds himself out in any way as carrying on the business of moneylending without a valid licence, or who continues to carry on such business after his licence has expired or been suspended or revoked shall be guilty of an offence under this Act and shall be liable to a fine of not less than two hundred and fifty thousand ringgit but not more than one million ringgit or to imprisonment for a term not exceeding five years or to both, and in the case of a second or subsequent offence shall also be liable to whipping in addition to such punishment. [93] As can be seen from the changes to section 5 MA 1951 set out above it is again clear that the legislature amended section 5 to make clear that the MA 1951 does not prohibit moneylending per se. It merely prohibits the business of moneylending without a licence. Changes to section 15 MA 1951 [94] The Moneylenders (Amendment) Act 2003 (Act A1193) made changes to section 15 as follows-Section 15 of the principal Act is amended-

by substituting for the words “contract for the repayment of” the words “moneylending agreement in respect of”;

by substituting for the colon appearing immediately after the word “enforceable” a full stop; and

by deleting the proviso to that section. [95] Thus, the current section 15 MA 1951 reads as follows-Contract by unlicensed moneylender unenforceable

No moneylending agreement in respect of money lent after the coming into force of this Act by an unlicensed moneylender shall be enforceable. [96] My analysis of the legislative changes to the MA 1951 shows that the prohibition in section 15 of the MA 1951 is intended to curb and to protect the public from loan sharks or “Ah Longs”. Sections 2, 5, 10[OA] and 15 of the MA 1951 are not and should not be interpreted too widely by the Courts to include what is called loosely ‘friendly’ loans by a lender to another family member or to a relative or to a friend, social, business or otherwise. Hansard [97] A reading from the 2nd and 3rd reading for the Moneylenders (Amendment) Bill 2010 - which was subsequently enacted as The Moneylenders (Amendment) Act 2011 (Act A1390) - as reproduced in the Hansard No. 52 dated 14-10-2010 shows that Parliament’s concern was to tighten the MA 1951 to curb and to protect the public from loan sharks or “Ah Longs”- “(Pg 56) Sehubungan dengan itu, bagi melindungi dan mencegah orang ramai daripada terperangkap dengan ceti haram dan ‘ah long’ maka rang undang-undang ini dicadangkan iaitu Akta 400 dipinda bagi membolehkan perniagaan memberi pinjam wang dipantau dan dikawal selia dengan lebih menyeluruh. Pada masa yang sama ia juga membolehkan penguatkuasaan yang berkesan dan sempurna dilakukan untuk membendung pemberi pinjam wang daripada mengancam keselamatan peminjam-peminjam. … [Emphasis added] [98] I now examine the question – Does the fact that a lender charges interest in a friendly loan to another family member or to a relative or to a friend, social or business turns it into a business of moneylending which requires the lender to have a licence? The charging of interest merely raises a presumption that the lender is carrying on the business of moneylending until the contrary is proved [99] Since what is prohibited by the MA 1951 is not moneylending but the business of moneylending without a licence, the fact that interest is charged in a loan does not turn a moneylending transaction with interest into a moneylending transaction that is prohibited by the MA 1951 unless the lender has carried on an unlicensed moneylending business. [See Pan Global Equities Sdn Bhd & Anor v Taisho Company Sdn Bhd [2005] 3 CLJ 734 at 737 - 738 CA [“Pan Global Equities”] and Wong Thian Choy per Wong Kian Kheong J citing his earlier judgment in Barisan Tenaga Perancang (M) Sdn Bhd v Dr Mansur Hussain & Ors [2017] 2 MLRH 177, at [48]]. [100] In Pan Global Equities Gopal Sri Ram JCA said-I now turn to the moneylending defence. There is no doubt that in respect of all the monies advanced to the appellants the respondent charged interest over and above the rate it had to pay its bankers. The learned trial judge nevertheless rejected this defence on the ground that the respondent did not carry on the business of moneylending… The real issue before the learned judge was the true nature of the relationship between the respondent and the appellants at the material time. And that relationship was one of a shareholder and his company. It was in its capacity as shareholder that the respondent advanced monies to the respondent. This is therefore not a case of the respondent carrying on the business of money lending on the facts. It is commonplace in the corporate environment for shareholders or directors of a company to advance it funds at interest to tide it over difficult periods of financial hardship. Such transactions are necessary for keeping companies in a position to meet their debts as and when they fall due. If the courts proceed to treat these transactions as pure money lending within the Moneylenders Act 1951, then no shareholder or director will ever be able to recover genuine advances albeit bearing interest made to his or her company during a time of want. Business in the corporate sector as we know it will come to a literal standstill and companies instead of looking to survival will face extinction. In my judgment, the 1951 Act, by its spirit and intendment is designed to protect individuals who because of their impoverishment are caught in the jaws of unlicensed lenders. It was certainly not designed to apply to fact patterns such as those that exist in the present instance. [Emphasis added] [101] This is what Wong Kian Kheong J said in Wong Thian Choy at [36]- [36] Firstly, I opine that cases decided regarding MA before the enforcement of A1193 and A1390, should be read with caution. It is decided in Barisan Tenaga Perancang (M) Sdn Bhd v. Dr Mansur bin Hussain & Ors [2017] 2 MLRH 177, at [48], as follows: “[48] I am of the following view regarding MA:

the title to MA and the above provisions in MA show Parliament’s intention for MA to regulate the business of moneylending and not to regulate all kinds of moneylending transactions. Section 5(1) and

MA prohibit unlicensed moneylending business and certain acts related thereto. MA does not prohibit any moneylending transaction with interest unless the lender has carried on an unlicensed moneylending business;

s. 10OA MA provides that in any proceedings against any person where it is alleged that such person is a moneylender, proof of a single loan at interest made by such person shall raise a rebuttable presumption that such person is carrying on the business of moneylending. Even if a presumption arises under s. 10OA MA against a certain party, that party may adduce evidence to rebut this presumption by proving that the party is not carrying on moneylending business. A party is only required to adduce evidence on a balance of probabilities to rebut a statutory presumption - please see the Supreme Court’s judgment delivered by Wan Suleiman SCJ in Akin Khan bin Abdul Rahman v. Public Prosecutor [1987] 2 MLJ 217, at 218-219; and

s. 15 MA applies only to a moneylending agreement by an unlicensed moneylender who is carrying on business of moneylending. This is because of the definition of “moneylender” in s. 2 MA.” (emphasis added). The High Court’s decision in Barisan Tenaga Perancang has been affirmed by the Court of Appeal in a judgment given by Abang Iskandar Abang Hashim JCA (as he then was) in Dr Mansur bin Hussain & Ors v. Barisan Tenaga Perancang (M) Sdn Bhd [2019] 1 LNS 661. [Emphasis added] Evidence to rebut the presumption under section 10[OA] MA 1951 that a person is carrying on the business of moneylending until the contrary is proved The law [102] Section 10[OA] MA 1951 provides for a presumption as to the business of moneylending 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. [Emphasis added] [103] This presumption of moneylenders was drafted differently in an earlier section 3 of the MA 1951 which had been deleted by The Moneylenders (Amendment) Act 2003 (Act A1193). This section 3 [which had been deleted] reads as follows-Section 3. Certain persons and firms presumed to be moneylenders. Save as excepted in section 2A (1) and (2), any person who lends a sum of money in consideration of a larger sum being repaid shall be presumed until the contrary be proved to be a moneylender. Rational for the presumption [104] The rational for the presumption in the deleted section 3 has been given by the Privy Council in Chow Yoong Hong v Choong Fah Rubber Manufactory [1962] 1 MLJ 74 PC [“Chow Yoong Hong”] when the Privy Council approved and adopted the statement of Thomson J in Sandhu Singh v Sellathurai [1955] 1 MLJ 117 as can be seen from this passage of the judgment of the Privy Council- …. Section 3 provides that ‘any person who lends a sum of money in consideration of a larger sum repaid shall be presumed until the contrary be proved to be a moneylender’. The effect of this section has been considered by Thomson J (as he then was) in Sandhu Singh v Sellathurai [1955] 1 MLJ 117 in a judgment which Their Lordships respectfully approve and adopt. To lend money is not the same thing as to carry on the business of moneylending. In order to prove that a man is a moneylender within the meaning of the Ordinance, it is necessary to show some degree of system and continuity in his moneylending transactions. If he were left to discharge this burden without the aid of any presumption, a defendant might frequently be in a difficulty. He might have had only one or two transactions with the moneylender and he might find it difficult to obtain evidence about the business done by the moneylender with other parties. Section 3 enables a defendant to found his claim on proof of a single loan made to him at interest, it being presumed, in the absence of rebutting evidence, that there were sufficient other transactions of a similar sort to amount to carrying on of business. [Emphasis added] [105] As stated earlier, section 3 of the MA 1951 was deleted by the Moneylenders (Amendment) Act 2003 (Act A1193). But the rationale for the presumption in section 3 given by the Privy Council applies equally to the presumption in section 10[OA] MA 1951 in my view. To rebut the presumption [106] For a lender to rebut the presumption under section 10[OA] MA 1951 he needs to prove on a balance of probabilities that he is not carrying on a moneylending business. [See Barisan Tenaga Perancang (M) Sdn Bhd v Dr Mansur bin Hussain & Ors [2017] 2 MLRH 177 HC, at [48] per Wong Kian Kheong JC citing Wan Suleiman SCJ in Akin Khan bin Abdul Rahman v Public Prosecutor [1987] 2 MLJ 217, at 218 - 219]. [107] The types of evidence relevant to rebut the presumption under section 10[OA] MA 1951 would be-i. An existing relationship between the lender and borrower that shows that the lender is not carrying on a business of moneylending. [See Pan Global Equities at 737 - 738 discussed above, Shim Vui Geh at [48] and Wong Thian Choy at [37]]. ii. Absence of a system and continuity in moneylending transactions on the part of the lender. [See Sandhu Singh v Sellathurai [1955] 1 MLJ 117 per Thomson J approved by the Privy Council in Chow Yoong Hong, Shim Vui Geh at [57], Larut Matang Supermarket Sdn Bhd v Liew Fook Yung [1995] 1 MLJ 375 and Chou Kwong Hing v Ling Yu Ngie [2017] 1 LNS 765 at [63 - 64]]. iii. The lender has never carried or advertised himself as a moneylender [See Wong Thian Choy at [37]]. iv. The interest charged is not at an exorbitant rate. In Triple Zest the Federal Court held that an ‘interest’ rate of 100% is an exorbitant rate and unless the presumption that the lender is carrying on the business of moneylending is rebutted by the lender such a lender will be considered as carrying on a moneylending business which requires a licence under the MA

[See 35, 48, 51 - 52 and 57]. An existing relationship between the lender and borrower that rebuts the presumption [108] In Shim Vui Geh the Court of Appeal held that the presumption was rebutted as it was clear that the loan was given in the context of an existing relationship as business partners in an oil palm business and as shareholders and directors in the company incorporated for the purpose of the cultivation and harvesting of oil palm on the borrower’s land. This is what Lee Swee Seng JCA said- [48] What is clear here is that Shim and Harun are business partners in an oil palm business and they are shareholders and directors in the company incorporated for the purpose of the cultivation and harvesting of oil palm on Harun’s land. They are clearly not total strangers who only met for the purpose of a loan. Shim had also known Harun’s father and an uncle of Harun and they have some birds’ nest business together. [Emphasis added]. [109] In Wong Thian Choy the High Court held that the presumption was rebutted. Wong Kian Kheong J said- [37] I find as a fact the following:

the Plaintiffs are not “moneylenders” within the meaning of s. 2 MA; and

the Plaintiffs’ Loans are not moneylending agreements by unlicensed moneylenders which are rendered unenforceable under s. 15 MA. I made the above findings of fact due to the following evidence and reasons:

the Plaintiffs are genuine businessmen who own companies which participate actively in the furniture industry. In fact, the Plaintiffs have served as office-bearers in KLSFIA and KLSFEA;

as stated in the above sub-paragraph 21(3)(a) and (b), there are reasonable explanations for the Plaintiffs’ Loans;

the 1st Defendant did not adduce any evidence to show that the Plaintiffs had carried on, advertised, announced themselves or held themselves out in any way as carrying on the business of moneylending as understood in s. 5(1) MA;

if the Plaintiffs had carried on the business of moneylending under s. 5(1) MA, the 1st Defendant’s Letter (26.10.2017) (sent by the 1 st Defendant’s own solicitors) would have stated as such. Furthermore, a letter dated 30.11.2017 from the 1st Defendant’s solicitors to the Plaintiffs’ solicitors, did not allege that the Plaintiffs had engaged in an illegal moneylending transaction in this case. Hence, any averment by the 1st Defendant that the Plaintiffs’ Loans are prohibited by MA, constitutes an afterthought;

the Plaintiffs’ Loans are derived from funds in the Plaintiffs’ personal bank accounts. It is highly unlikely for unlicensed moneylenders to lend money by using funds from their own personal bank accounts because there will then be a paper trial which can expose the identity of the unlicensed moneylenders; [Emphasis added]. [110] In Pan Global Equities Gopal Sri Ram JCA said-I now turn to the moneylending defence. There is no doubt that in respect of all the monies advanced to the appellants the respondent charged interest over and above the rate it had to pay its bankers. The learned trial judge nevertheless rejected this defence on the ground that the respondent did not carry on the business of moneylending… The real issue before the learned judge was the true nature of the relationship between the respondent and the appellants at the material time. And that relationship was one of a shareholder and his company. It was in its capacity as shareholder that the respondent advanced monies to the respondent. This is therefore not a case of the respondent carrying on the business of money lending on the facts. It is commonplace in the corporate environment for shareholders or directors of a company to advance it funds at interest to tide it over difficult periods of financial hardship. Such transactions are necessary for keeping companies in a position to meet their debts as and when they fall due. If the courts proceed to treat these transactions as pure money lending within the Moneylenders Act 1951, then no shareholder or director will ever be able to recover genuine advances albeit bearing interest made to his or her company during a time of want. Business in the corporate sector as we know it will come to a literal standstill and companies instead of looking to survival will face extinction…In my judgment, the 1951 Act, by its spirit and intendment is designed to protect individuals who because of their impoverishment are caught in the jaws of unlicensed lenders. It was certainly not designed to apply to fact patterns such as those that exist in the present instance. [Emphasis added]. [111] Similarly, in the case before me the plaintiff and husband were wife and husband. They were married for 17 years and blessed with three children. She had lent monies to him, while married to him, at his request to tide him over. [See Plaintiff’s Witness Statement Toe Hong Choo at Q and A 2]. There is really not a shred of evidence she was carrying on a moneylending business vis a vis her husband. Absence of a system and continuity in moneylending transactions on the part of the lender [112] The Privy Council in Chow Yoong Hong approved and adopted the following statements of Thomson J in Sandhu Singh v Sellathurai [1955] 1 MLJ 117- …. Section 3 provides that ‘any person who lends a sum of money in consideration of a larger sum repaid shall be presumed until the contrary be proved to be a moneylender’. The effect of this section has been considered by Thomson J (as he then was) in Sandhu Singh v Sellathurai [1955] 1 MLJ 117 in a judgment which Their Lordships respectfully approve and adopt. To lend money is not the same thing as to carry on the business of moneylending. In order to prove that a man is a moneylender within the meaning of the Ordinance, it is necessary to show some degree of system and continuity in his moneylending transactions… [Emphasis added] [113] I accept that there can be a situation where a moneylender is just starting his business of moneylending, this is his first loan and so there is no degree of system and continuity in his moneylending transactions. A moneylender may also be doing a one-off loan. [114] In short, there can be the beginning of a business of moneylending by the plaintiff starting with her first loan to the defendant or just a one-off loan. But the absence of some degree of system and continuity in moneylending transactions on the part of the plaintiff coupled with other factors like an existing husband and wife relationship between the plaintiff and the defendant that explains the rational for the loan mean that the presumption has been successfully rebutted in the case before me. The lender has never carried or advertised himself as a moneylender [115] There is no evidence before me that the plaintiff has carried or advertised herself as a moneylender. This fact is a relevant fact that rebuts the presumption of carrying on the business of moneylending. See Wong Thian Choy per Wong Kian Kheong J set out above. The interest charged [116] In Triple Zest Abdul Rahman Sebli CJ (Sabah and Sarawak) [delivering judgment of the Federal Court] held that the High court below had failed to make any finding of fact that the respondent lender had rebutted the presumption of carrying on the business of moneylending when it made a ‘one-off’ loan at 100% interest. Abdul Rahman Sebli CJ (Sabah and Sarawak) said- [19] …, we have no doubt that the respondent was ‘carrying on the business of moneylending’ as the RM800,000 that it lent to the appellants was lent at interest of RM800,000. … [46] In the context of the present case, what it means is that if no evidence was led by either side on the question of whether the respondent was carrying on the business of moneylending, the burden of proof would not have been discharged by the respondent. Whether or not the respondent had succeeded in rebutting the statutory presumption under s 10OA of the MA51 is essentially a question of fact. But the court’s finding must be based on hard evidence and not on conjecture unrelated to evidence. [47] By not even addressing his mind to s 10OA of the MA51, it was not possible for the learned trial judge to have come to the right decision on the question of whether the respondent had succeeded in discharging its legal burden of proving that the single or ‘one-off’ loan that it gave to the appellants was not moneylending ‘at interest’. [48] With due respect to the learned judges of the Court of Appeal, by agreeing with the learned trial judge that the presumption of moneylending under s 10OA of the MA51 had been rebutted by the respondent on the balance of probabilities, they had not only perpetuated but had compounded the error committed by the learned High Court judge. There was no such finding of fact by the learned trial judge. [Emphasis added] [117] In the case before me the administrative interest charged is an agreed sum of 1.3% per month. I do not find this rate so exorbitant to fall within the facts of Triple Zest such that the presumption of ‘carrying on the business of moneylending’ cannot be rebutted by the plaintiff based on the other factors I have set out above. [118] In Pan Global Equities the loan was at a rate higher than what the borrower had paid its bankers. This fact alone does not mean that the presumption of ‘carrying on the business of moneylending’ cannot be rebutted by the plaintiff based on the other factors I have set out above. Gopal Sri Ram JCA said-I now turn to the moneylending defence. There is no doubt that in respect of all the monies advanced to the appellants the respondent charged interest over and above the rate it had to pay its bankers. The learned trial judge nevertheless rejected this defence on the ground that the respondent did not carry on the business of moneylending… The real issue before the learned judge was the true nature of the relationship between the respondent and the appellants at the material time. And that relationship was one of a shareholder and his company. It was in its capacity as shareholder that the respondent advanced monies to the respondent. This is therefore not a case of the respondent carrying on the business of money lending on the facts. It is commonplace in the corporate environment for shareholders or directors of a company to advance it funds at interest to tide it over difficult periods of financial hardship. … In my judgment, the 1951 Act, by its spirit and intendment is designed to protect individuals who because of their impoverishment are caught in the jaws of unlicensed lenders. It was certainly not designed to apply to fact patterns such as those that exist in the present instance. [Emphasis added] [119] In the Singapore case of Subramaniam Dhanapakiam v Ghaanthimathi [1991] 2 MLJ 447 HC loans were given by the plaintiff to the defendant based on a long friendship. Chan Sek Keong J accepted that the presumption of money lending was rebutted and said- “… The loans were friendly loans between two long-time friends. Interest was not demanded but accepted when offered. The interest was not exorbitant and varied in accordance with the generosity of the defendant. The plaintiff did not lend to all and sundry. On these facts, there was no question of the plaintiff being a moneylender as defined in the Act. … [Emphasis added] Conclusion on Issue 6 – is the Loan Agreement illegal under the MA 1951? [120] Based on the cases above I hold that based on the facts presented to me the presumption under section 10 [OA] of the MA 1951 that the plaintiff is carrying on the business of moneylending has been successfully rebutted. [121] In conclusion, I hold that the plaintiff is not a moneylender within the meaning of section 2 MA 1951 and that the Loan Agreement is not a moneylending agreement by an unlicensed moneylender which is rendered unenforceable under section 15 MA 1951. [122] I thank counsel for the parties for their submissions which had greatly assisted me.

[123] For the reasons above, I allow prayers [a] and [c] of the Amended Statement of Claim enclosure 52. The defendant is to pay RM 1,520,000.00 together with administration charges calculated at one point three per centum (1.30%) per month from 01-03-2015 until the settlement of the loan to the plaintiff with costs of RM 70,000 to the plaintiff subject to allocatur. ………(signed)……………. Leong Wai Hong Judicial Commissioner High Court of Malaya Kuala Lumpur (NCVC 10) Dated: 24th September 2024. COUNSEL: 1) Kamraj Nayagam, Maya Gayathri, Nicole Lee Shih En and Shafiqa Amira (Pupil in Chambers) for plaintiff. (Mah-Kamariyah & Philip Koh (Petaling Jaya)) 2) George Varughese and Vinobha Anthony Doss for defendant. ((George Varughese (Petaling Jaya)) LEGISLATION REFERRED TO: 1) Moneylenders Act 1951 (Act 400) ss. 1(2), 2, 3, 5, 5(1), 5(2), 10(OA) and 15. 2) Moneylenders Ordinance, 1951. 3) Money-lenders Act, 1900 s.6. 4) Contracts Act 1950 s. 15. 5) Evidence Act 1950 ss. 101, 102, 103 and 114 Illustration [g]. CASES REFERRED TO: 1) A.G. Securities Appellant And Vaughan And Others Respondents Antoniades Respondent And Villiers And Another Appellants, [1990] 1 A.C. 417. 2) Akin Khan bin Abdul Rahman v. Public Prosecutor [1987] 2 MLJ 217. 3) Barisan Tenaga Perancang (M) Sdn Bhd v Dr Mansur Hussain & Ors [2017] 2 MLRH 177. 4) Brailsford v Tobie (1888) 10 ALT 194. 5) BWG v BWF [2020] 1 SLR 1296. 6) Chandra Winata Lie v Citibank NA [2015] 1 SLR 875. 7) Cheong Heng Loong Goldsmiths (KL) Sdn Bhd & Anor v Capital Insurance Bhd [2004] 1 CLJ 357 CA. 8) Chou Kwong Hing v Ling Yu Ngie [2017] 1 LNS 765. 9) Chow Yoong Hong v Choong Fah Rubber Manufactory [1962] 1 MLJ 74 PC. 10) Donald v. Baldwyn [1953] N.Z.L.R. 313, 321. 11) Dr Mansur bin Hussain & Ors v Barisan Tenaga Perancang (M) Sdn Bhd [2019] 1 LNS 661 CA. 12) Edler v. Auerbach [1949] 2 All ER 692. 13) Founder Group (Hong Kong) Ltd v Singapore JHC Co Pte Ltd, [2023] 2 SLR 554. 14) Garnac Grain Co Inc v HMF Faure & Fairclough Ltd [1996] 1 QB 650. 15) Global Globe Property (Melawati) Sdn Bhd v Jangka Prestasi Sdn Bhd [2020] 6 MLJ 333; [2020] 6 CLJ 1. 16) Hadjiloucas v. Crean [1987] 3 All E.R. 1008. 17) Hitch and others v Stone (Inspector of Taxes) [2001] STC 214. 18) Larut Matang Supermarket Sdn Bhd v Liew Fook Yung [1995] 1 MLJ

19) Litchfield v Dreyfus [1906] KB 584. 20) Lo Su Tsoon Timber Depot v Southern Estate Sdn Bhd [1970] 1 LNS 68; [1971] 2 MLJ 161 21) Marappan A/L Muthusamy v R Sivam A/L Ramasamy [2014] 4 MLJ

22) Melangking Oil Palm Plantation Sdn Bhd v Hassnar B. HJ. Ebrahim @ Assainar & Anor [2013] MLJU 1618 HC. 23) Merong Mahawangsa Sdn Bhd & Anor v Dato’ Shazryl Eskay Abdullah [2015] 8 CLJ 212 FC. 24) Ng Chee Weng v Lim Jit Ming Bryan and another [2012] 1 SLR 457. 25) Ngui Mui Khin & Anor v. Gillespie Bros & Co Ltd [1979] 1 MLRA 313. 26) North Western Salt Co Ltd v. Electrolytic Alkali Co Ltd [1914] AC 461. 27) Pan Global Equities Sdn Bhd & Anor v Taisho Company Sdn Bhd [2005] 3 CLJ 734. 28) Pang Chow Huat v Tan Li Sin [2024] 5 MLRH 728 HC. 29) Pembinaan Indah PIE Sdn Bhd v Proactive Conditioning & Monitoring Sdn Bhd [2021] MLJU 2997 HC. 30) Philipps v Philipps (1878) 4 QBD 127 31) Raja Chandranath Roy v. Ramjai Mazumdar (1870) 6 BLR 303 32) Rawlings v. General Trading Co ([1921] 1 KB 645). 33) Sabah Shell Petroleum Co Ltd & Anor v The Owners of and/or Any Other Persons Interested in the Ship or Vessel the ‘Borcos Takdir’ [2012] 5 MLJ 515 at [92] HC. 34) Selvaduray v Chinniah [1939] MLJ 253 SC. 35) Tang Lee Hiok & Ors v Yeow Guang Cheng [2022] 5 MLJ 584 CA. 36) Tec D (Malaysia) Sdn Bhd & Anor v Refinenetworks Sdn Bhd [2022] MLJU 2238 HC. 37) Triple Zest Trading & Suppliers & Ors v Applied Business Technologies Sdn Bhd [2023] 6 MLJ 818 FC. 38) Sandhu Singh v Sellathurai [1955] 1 MLJ 117. 39) Shim Vui Geh v Dayang Masturah bt Sahari and another appeal [2024] 1 MLJ 755 CA. 40) Snook v. London and West Riding Investments Ltd. [1967] 2 Q.B. 786. 41) Stoneleigh Finance Ltd. v. Phillips [1965] 2 Q.B. 537. 42) Subramaniam Dhanapakiam v Ghaanthimathi [1991] 2 MLJ 447 HC. 43) U Television Sdn Bhd and Tan Sri Dato Seri Vincent Tan Chee Yioun v Comintel Sdn Bhd [2017] 10 CLJ 580 FC. 44) Yam Kong Seng & Anor v Yee Weng Kai [2014] 4 MLJ 478 FC. 45) Yeep Mooi v Chu Chin Chua & Ors [1981] 1 MLJ 14. 46) Yorkshire Railway Wagon Co. v. Maclure (1882) 21 Ch.D. 309, C.A. 47) Wong Thian Choy & Anor v Goodnite Sdn Bhd & Anor [ 2019] CLJU 1391 HC. LITERATURE REFERRED TO: 1) Chitty on Contract 30th Edition Volume 1. HANSARD REFERRED TO: 1) No. 52 dated 14-10-2010.