Contracts deemed void under the Moneylenders Act due to procedural non-compliance do not imply illegality, allowing for restitution claims under Section 66 of the Contracts Act.

Faizah Jamaludin JCA:

Introduction

[1] The appellant is a moneylender licensed under the Moneylenders Act 1951 ("MLA 1951"). The respondent was, at all material times, a shareholder and Director of Instant Bonus Sdn Bhd ("Instant Bonus"), a property development company. Instant Bonus was the developer of a project known as "Robson Hill Residency".

[2] The appellant and the respondent entered two moneylending agreements dated 9 July 2018 and 24 August 2018 ("Moneylending Agreements"). Both Moneylending Agreements were in the statutory form for "Moneylending Agreement (Unsecured Loan)" provided in Schedule J of the Moneylenders (Control and Licensing) Regulations 2003 ("Regulations 2003") made by the Minister under s 29H MLA 1951.

[3] The Moneylending Agreement dated 9 July 2018 ("1st MLA") was for the loan sum of RM2,000,000.00, and the Moneylending Agreement dated 24 August 2018 ("2nd MLA") was for the loan sum of RM1,500,000.00. The interest charged for both agreements was at the rate of 1.5% per month, which is equivalent to 18% per annum.

[4] Simultaneous to entering into the 1st MLA and 2nd MLA, the respondent wrote Letters of Instruction ("LOIs") dated 9 July 2018 and 24 August 2018, respectively, to the appellant, instructing the latter to disburse the loan sums under the Moneylending Agreements to Instant Bonus.

[5] The loans were secured by guarantees executed by Instant Bonus dated 9 July 2018 and 24 August 2018, respectively, where it unconditionally guaranteed the loan sums and all outstanding sums due and owing by the respondent under the 1st MLA and 2nd MLA, respectively ("Guarantees").

[6] Pursuant to the Moneylending Agreements, the LOIs, and the Guarantees, the appellant disbursed the total sum of RM3,423,500.00 to Instant Bonus. The sum of RM76,500.00 ("transaction costs") was deducted from the RM3.5 million total loan sum as transaction costs borne by the respondent. Out of the total loan sum disbursed to Instant Bonus, only the sum of RM40,000.00 was repaid to the appellant.

[7] Instant Bonus was wound up in 2019. The appellants had filed a proof of debt dated 18 September 2019 to the liquidators of Instant Bonus for the sum of RM3,761,035.12.

[8] The appellant filed Suit No. WA-22NCC-596-12/2020 at the KL High Court ("Suit 596") in December 2020 against the respondent, seeking only the return of the outstanding sum of RM3,383,500.00 ("Unpaid Principal") of the monies disbursed to Instant Bonus pursuant to the Moneylending Agreements, the LOIs, and the Guarantees.

[9] The appellant did not seek to enforce the Moneylending Agreements in Suit 596. It explicitly pleaded that it was not seeking the repayment of the Unpaid Principal under the MLA 1951. The appellant acknowledged that the Moneylending Agreements are void and unenforceable due to non-compliance with the requirements of the MLA 1951; specifically, the agreements utilised the prescribed form for unsecured loans in Schedule J rather than the form required for secured loans in Schedule K of Regulations 2003, and the interest rate imposed was 18% per annum — the maximum rate for unsecured loans — inste