The court confirmed that a seller cannot pass valid ownership when a sold vehicle is later proven stolen, leading to a total failure of consideration.

[1] The plaintiff, Affin-ACF Finance Berhad, is a licensed financial institution formerly known as Asia Commercial Finance (M) Berhad. The defendant, Phang Ngan Heong, is a sole proprietor carrying on business under the name and style of Syarikat Kereta Kwong Yeu.

[2] The plaintiff's claim against the defendant is for:-

i. An order that the defendant indemnify the plaintiff against all claims made or to be made by Chin Yu Shen, the hirer, arising out of the hire purchase agreement No: 027-10-06586-2 in respect of a Honda Accord car registration no WDK 6677;

ii. RM120,200 being the cost of the said vehicle paid by the plaintiff to the defendant;

iii. RM32,000 as term charges; and

iv. Interests and costs.

[3] The plaintiff's claim is disputed by the defendant who states that he had entered into a contract of sale with Chin Yu Shen and not the plaintiff. As such, he contends that there is no legal nexus between him and the plaintiff in respect of the said car Further, the defendant pleads that he is a bona fide purchaser of the vehicle from Chin Ken Koon and had conducted a physical examination including verification of the engine and chassis numbers before its purchase. He claimed to have valid possession and ownership of the vehicle to effect a transfer from the previous owner to Chin Yu Shen.

The Plaintiff's Case

[4] The plaintiff called two witnesses in support of its case. Ng Suit Huei (PW1) was the senior executive in the Credit & Marketing Department of Affin Bank Berhad ("the bank"). The plaintiff was formerly known as Asia Commercial Finance (M) Berhad. On 13 March 2001, it changed its name to Affin-ACF Finance Berhad. Vide a vesting order dated 26 May 2005, the whole business of Affin-ACF Finance Berhad was transferred to and vested in Affin Bank Berhad with effect from 1 June 2005.

[5] PW1 was previously with the credit processing department of the bank and his duties then included the processing of hire purchase loan applications, checking and verification of documents submitted for loan applications, conducting credit checks and physical inspection of second hand vehicles.

[6] PW1 testified that by way of an agreement dated 5 November 1997 between the plaintiff and the defendant, the plaintiff agreed to purchase and the defendant agreed to sell a Honda Accord car registration no WDK 6677 for a total consideration of RM120,200. This figure comprises a purchase price of RM118,000, a transfer fee of RM150 and insurance premium of RM2050. He disagreed with the suggestion that the purchase price was only RM118,000.

[7] Chin Yu Shen, the hirer, had applied for, and was approved, a hire purchase loan from the plaintiff to finance the purchase of the car The loan amount was RM80,000 with term charges of RM32,000 repayable by 60 monthly installments of RM1,867 per month commencing on 12 December 1997 and a final installment of RM1,847.

[8] PW1 disputed the defendant's contention that the contract of sale of the vehicle was between the defendant and Chin Yu Shen, the hirer He testified that the contract was between the plaintiff and the defendant as evidenced by the sales invoice. He argues that the defendant was aware about the hire purchase agreement between the plaintiff and Chin Yu Shen where it was stated in the second schedule that the plaintiff agreed to be a party "as owner". Further it was confirmed at item 5 of schedule A that the dealer/seller of the car was the defendant. The hirer paid RM40,200 directly to the defendant on account of the bank and the plaintiff then issued