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2021 MarsdenLR 3660
HIGH COURT MALAYA KUALA LUMPUR
FISCAL PIONEER SDN BHD – Appellant
Versus
CHIANG DYI WOEI – Respondent
[Suit No: WA-12BNCC-21-10/2020]
The validity of a friendly loan agreement is upheld when no evidence of illegality is proven and credible testimonies support its existence.
Headnote:(A) Friendly Loan Agreement – Terms and enforceability – Appellant defaulted in repayment of RM1,300,000.00 loan and disputed its validity, alleging illegality linked to a gaming scheme – Appellate court upheld trial court's judgement preferring testimony of respondent's witnesses over defendant’s arguments on illegal transaction. (Paras 15-36, 89-90)
Facts of the case: Respondent provided a loan of RM1,300,000.00 to Appellant, which included security over property; Appellant partially repaid and later disputed legality of the loan, claiming it was tied to an illegal gaming scheme.
Findings of Court: Trial court determined loan agreement valid, emphasizing credible evidence from Respondent; Appellant’s defenses deemed unsubstantiated. (Paras 17, 32, 36)
Issues: Whether the loan agreement was valid and whether the transaction constituted an illegal scheme. (Paras 25-26)
Ratio Decidendi: The court found no evidence of illegality; it ruled that the loan was valid, and all documentary evidence supported that the loan was a legitimate transaction. (Paras 89-90)
Result: Appeal dismissed, costs awarded. (Para 50)
JUDGMENT
Introduction
[1] This is the Appellants appeal against the decision of the Sessions Court dated 24th September 2020 which allowed the Respondent/Plaintiff to enter Judgement against the Appellant/Defendant in the sum of RM937,000.00 together with interest and costs of RM10,000.00.
[2] The decision of the learned Sessions Court Judge ("SCJ") was arrived at after conclusion of a full trial in which a total of 7 witnesses had testified.
[3] Parties had filed their respective written submissions and learned counsel had submitted orally before me on the merits of their case. I will in this Judgment set out the background facts, the findings and conclusions made by the SCJ, the rival contentions and then conclude with my decision on whether appellate intervention is warranted upon an analysis of the facts and evidence adduced.
Background Facts
[4] The Respondents claim is premised on recovering a friendly loan which it had granted the Appellant.
[5] On 26th April 2017, the Appellant and the Respondent entered into a Friendly Loan Agreement (the "Loan Agreement") whereby, among others, it provided the following:
i) The Respondent granted a loan of RM1,300,000.00 to the Appellant (the "Loan Sum"). The Appellant agreed to repay the Loan Sum on or before 26th January 2018;
ii) The Appellant agreed to use its property known as Unit No T3-3-4, Level 3, Maju Linq di Lingkaran approximately measure 18.39 sqft as part of a Master Title PN51070 Lot 101156 Mukim Petaling Daerah Kuala Lumpur (the "Property"), as security pursuant to the loan obtained in the event of a default under the Agreement.
[6] On 26th April 2017, both parties further executed a Power of Attorney (the "POA") whereby the Appellant agreed, among others, to grant the Respondent authority over the Property.
[7] Sometime in the evening of 26th April 2017 (the "Evening Meeting"), the Respondent provided the Loan Sum to one of the Appellant's representatives and an acknowledgement letter was signed by the Appellant confirming receipt of the full Loan Sum from the Respondent.
[8] On 12th November 2017, the Appellant paid to the Respondent a total sum of RM330,000.00 as part of the Loan Sum.
[9] On 13th March 2018, the Appellant issued a letter to the Respondent confirming, among others, that the Property is being used as a security for the Loan Sum and the POA is enforceable until full payment to the Respondent is completed. It was also agreed by both parties that the Appellant was required to obtain consent from the Respondent in the event the Appellant intended to sell the Property to other third parties.
[10] On 8th August 2018, the Respondent's previous solicitors issued a letter of demand for the payment of RM970,000.00 as the outstanding balance of the Loan Sum to be paid to the Respondent. However, the Appellant only paid RM33,000.00 on 13th September 2018. Another letter of demand was issued on 8th November 2018 (the "2nd LOD") via the Respondent's solicitors demanding the sum of RM937,000.00, being the outstanding balance Loan Sum (the "Outstanding Sum").
[11] In reply to the 2nd LOD, the Appellant via its solicitors, issued a letter to the Respondent and denied its liability for repayment of the Loan Sum and failed, refused and/or neglected to settle the Outstanding Sum. Further, the Appellant claimed that the Friendly Loan was invalid as it involved a quick money scheme game ('skim cepat kaya') (the "Gaming Scheme").
[12] On 14th March 2019, the Respondent filed this action claiming RM937,000.00 being the total outstanding Balance Loan Sum.
[13] Through its Defence, the Appellant pleaded that the Friendly Loan Agreement is null and void as it is an illegal transaction involving the Gaming Scheme. The Appellant further contended that there is no outstanding sum as the loan has been contra with the credit points received by the Respondent from the Appellant.
[14] The Appellant had also pleaded in para 14 of its amended defence that the sum paid out by the plai
