The transaction was not characterized as a loan; the forfeiture provisions in the sale agreement were enforceable.

Shaik Daud Ismail JCA:

I have had the opportunity of reading in draft both the judgments of YA Dato' Siti Norma bt Yaakob and YA Dato' Haji Mokhtar bin Haji Sidin and I concur with both judgments.

Siti Norma Yaakob JCA:

The cause of action in this appeal is founded on a breach of a sale and purchase agreement (the agreement) dated 15 June 1983, entered into between the appellants/plaintiffs and the respondent/defendant. There is also an Annexure and a letter dated 15 June 1983 signed by all the three parties, which they have agreed to be read together and form part of the agreement. (See ss. 2.07 and 6.02 of the agreement).

The 1st appellant is a developer and at the material time was developing the 2nd appellant's lands into a commercial centre known as Damansara Town Centre. Through the agreement, the respondent agreed to purchase 1,991.66 square feet of office space at the centre, identified as Level 7-C6 and C7 (Front Portion) at the price of RM385 per square foot which works out to RM766,789.10. Under the agreement, the 1st appellant is identified as the vendor, the 2nd appellant merely lending its name in the event it is required to effect a transfer of the office space to the respondent and when that time comes the 2nd appellant is still the registered proprietor of the property purchased. (See ss. 2.01 and 2.05 of the agreement).

It is not disputed that the respondent was only able to make the initial payments amounting to RM231,789.10 under para. (a) of the Second Schedule to the agreement and fell into arrears as regards the settlement of the balance of the purchase price.

In the court below, the appellants sued the respondent for the sum of RM634,763.99, being the loss suffered by them under the agreement following the respondent's breach. In disputing this claim, the respondent raised the following defences in the alternative.

(1) That the agreement is void and illegal as it contained provisions contravening the Moneylenders Ordinance 1951.

(2) If valid, the agreement has been repudiated on 18 February 1986 and arising from this repudiation, the appellants are only entitled to forfeit 10% of the purchase price amounting to RM76,678.91 under s. 8.01 of the agreement. That 10% should be deducted from the initial payments of RM231,789.10 and the balance refunded. The respondent claims the refundable balance of RM155,110.19 by way of a counterclaim.

The learned judge, after a trial and adjourning the matter to consider the written submissions of both parties, made the following findings.

(1) The agreement is not caught by the Moneylenders Ordinance 1951 and as such it is valid and binding.

(2) The agreement had been terminated on 18 February 1986 and at that point in time, the appellants can only forfeit 10% of the purchase price from the initial payments. To that end the appellants' claim for RM634,763.99 cannot be maintained as they had charged a total of 32% interest on the balance of the purchase price. In any event the rate of default interest imposed on the outstanding instalments is a penalty and is caught by s. 75 of the Contracts Act 1950 . The appellants' claim was dismissed with costs.

(3) The counterclaim was allowed in part after due credit had been given to the default interest due on the initial payments, the default interest due on the instalment payments, the amount of the 10% purchase price and deducting their total sum from the initial payments made under the Second Schedule of the agreement, judgment was entered for the respondent for the lesser sum of RM116,738.81, interest at 12% per annum from 18 February 1986 until the date of judgment and further interest at 8% per annum from the date of judgment to the date of realisation and costs.

It is on these findings that the appeal before us is founded.

We confirm the first