Back
2021 MarsdenLR 2215
HIGH COURT MALAYA SHAH ALAM
TAN BOON AN – Appellant
Versus
LEE PENG TOO – Respondent
[Civil Appeal No: BA-11BNCC-9-10/2019]
The court established that loans disguised as friendly loans, but involving interest, are categorized as illegal moneylending under the Moneylenders Act, which nullifies their enforceability.
Headnote:(A) Moneylenders Act 1951 – Sections 2, 10OA, and 15 – Moneylending transactions disguised as friendly loans – Loans regarded as illegal moneylending transactions due to exorbitant interest rates – Appeal by defendant allowed; magistrate's decision reversed. (Paras 43, 76, 78)
(B) Interpretation of Moneylending – The distinction between friendly loans and moneylending obligations must be discerned based on established statutory criteria and relevant case law – Interest defined under Act includes any sum over principal. (Paras 11, 31, 54)
(C) Presumption under s 10OA – The statutory presumption indicates an individual lending with interest is presumed to be a moneylender until proven otherwise, shifting the burden of proof to the lender. (Paras 19, 46)
Facts of the case: The plaintiff alleged a friendly loan of RM74,000 to the defendant, with undisputed evidence of interest payments collected over time, raising questions of legality under the Moneylenders Act. (Paras 4, 32)
Findings of Court: Plaintiff's conduct and loan structure indicated illegal moneylending; magistrate's findings were flawed, given the statutory presumptions and evidential context. (Paras 76, 78)
Issues: Whether the transaction constituted a friendly loan or illegal moneylending; implications of interest rates exceeding statutory limits and evidentiary burden in claims of unlicensed lending. (Paras 6, 76)
Ratio Decidendi: Court clarified definitions of moneylending, highlighting statutory presumptions and the implications of interest on loan validity, emphasizing that courts should discern true intentions in financial agreements. (Paras 76, 78)
Result: Appeal allowed; plaintiff's claims dismissed as illegal moneylending.
JUDGMENT
Introduction
[1] What Lee Swee Seng JCA said in the following passage relating to the moneylending transaction disguised as a sale and purchase of property in the case of Mahmood Ooyub v. Lee Chee Long , is also true regarding other forms of disguise including various forms of illegal moneylending which do not involve the use of property title:
"[1] It is not always easy to discern and distinguish the real from the fake, the genuine from the sham. It is often a world of genuine imitation that we find ourselves to be in. It is no different in the seedy world of illegal moneylending or "along" as is our local parlance for it. Human nature being what it is, we are not far from the days of The Merchant of Venice, where Shylock demanded his pound of flesh! If at all, the subterfuge and chicanery have become more sophisticated."
[2] While human ingenuity has enabled the illegal moneylenders to contrive many various forms of disguise to camouflage their moneylending transactions, the experience and knowledge gained by other people over a long period of time have led the Courts to discern the forms of disguise in vogue and to expose illegal moneylending transactions in the daylight by declaring them as illegal moneylending transactions in contravention of the law. Although the Court's exposure of a particular form of disguise in the daylight may not be as prompt as the contrivance of the disguise by ingenious moneylenders, such exposure serves as a much-needed relief to the victims of exorbitant interests charged by the unlicensed moneylenders.
[3] In relation to the use of sale and purchase of properties as a form of disguise, we now have the expository judgments of the Court of Appeal in Mahmood Ooyub v. Lee Chee Long (supra) and Global Globe Property (Melawati) Sdn Bhd v. Jangka Prestasi Sdn Bhd, to guide the courts in such type of cases. Additional guides on anlaysing this type of moneylending under disguise as property transactions can be obtained from the High Court's decisions by Evrol Mariette Peters JC in Chew Yee Hui v. Tan Siew and in Pannir Selvam Sinnaiyah & Anor v. Tan Chia Foo & Ors; [2021] 7 MLJ 384. As far as I know, there is no similar judgment of an appellate Court which provides a wide or encompassing guide for the other forms of moneylending which do not involve a property transaction. Sometimes, the details of the other forms of disguise may vary from transaction to transaction, rendering it even more difficult for the subordinate courts to discern and recognize them in particular cases.
Background Facts
[4] The Respondent in this appeal, who was the Plaintiff in the action before the Magistrate's Court below, sued the Appellant/Defendant for recovery of RM74,000/= said to be money lent to the defendant as a friendly loan. The Plaintiff also alleged that (1) to convince the Plaintiff to give the said loan, the Defendant gave six (6) undated cheques in the same amount of the loan and promised to compensate the Plaintiff for the loss of interest due to the premature withdrawal of the monies from the Plaintiff's fixed deposit account in Public Bank; (2) a loan agreement dated 14 April 2018 was signed by the parties whereby the Defendant agreed to repay the loan by instalments. The Defendant argued that (a) the money was channeled through the Defendant for high-interest investment which turned out to be a loss; and (b) further or alternatively, the loans were not friendly loans but were illegal moneylending transactions in contravention of the Moneylenders Act whereby the Plaintiff used the Defendant as intermediary to find customers. For ease of reference, the parties herein are referred to as the Plaintiff and the Defendant in the same manner as in the Magistrate's Court below.
[5] The Plaintiff was at all material times not a licensed moneylender and was not a person or an entity exempted under the First Schedule of the Moneylenders Act. There was no property sale and purchase involved in the t
