A sale and purchase agreement deemed a sham is unenforceable if it conceals an illegal moneylending transaction, violating public policy.

The Claim

[1] The plaintiffs' claim is for, inter alia, the following:

(a) A declaration that the 1st defendant is an unlicensed moneylender;

(b) A declaration that the Sale and Purchase Agreement dated 4 May 2016 between the plaintiffs and 1st defendant is a sham which masked an illegal moneylending agreement, and is therefore unlawful, against the law, and unenforceable;

(c) An Order that the transfer (81301/2017) of the Property (H.S.(D) 313850 PTD 89921 Mukim Pulai, Daerah Johor Bahru) ("the Property") to the 1st defendant dated 26 November 2017, and the subsequent transfer of the Property to the 2nd defendant dated 7 May 2018, be cancelled and set aside;

(d) An Order that the 2nd defendant surrender the document of title of the Property to the solicitors for the plaintiffs, for the purpose of cancelling and setting aside the transfer and to register the names of the plaintiffs as the owners of the Property;

(e) An Order that if the 2nd defendant fails to do so in the time period determined by the Court, that the Senior Assistant/Deputy Registrar sign the necessary forms to effect the transfer to the plaintiffs;

(f) An Order that the 3rd defendant make the necessary endorsement on the document of title to the Property to give effect to the Order;

(g) Further and in the alternative, for an Order that the 1st defendant surrender the accounts of the moneylending transactions between himself and the plaintiffs within 14 days of the Order of the Court.

[2] The 2nd defendant counterclaimed against the plaintiffs and 1st defendant for, amongst others, vacant possession of the Property, and against the 1st defendant for the sum of MYR16,192 calculated according to cl 10 of the sale and purchase agreement dated 15 March 2018, between him and the 1st defendant.

[3] I allowed the plaintiffs' claim, except for prayers (a) and (g) above, and dismissed the 2nd defendant's counterclaim. The 1st and 2nd defendants have appealed and the following are reasons for my decision:

The Brief Facts

[4] On 4 May 2016, the plaintiffs who are husband and wife and the former registered owners of the Property, had executed documents before an Advocate and Solicitor ("SP1"), and had entered into an agreement ("the Agreement") (exhibited at pp 23-37 of the Part B of Common Bundle of Documents ("CBD")) with the 1st defendant, an individual, for the purported sale of the Property. The Property was transferred and registered in the name of the 1st defendant on 26 November 2017 (evidenced by the Land Search Results dated 13 December 2017, exhibited at pp 68-70 of Part B of the CBD), who subsequently transferred it to the 2nd defendant, another individual, who became the registered owner of the Property on 7 May 2018 (evidenced by the Land Search Results dated 6 September 2018, exhibited at pp 97-98 of Part B of the CBD).

[5] The plaintiffs refused to vacate the Property, and proceeded to file this suit to recover the Property on the basis that the Agreement they had entered into with the 1st defendant was a sham, and in actual fact, an illegal moneylending transaction.

[6] The plaintiffs obtained a Judgment in Default ("JID") against the 1st defendant on 17 April 2018, but that JID was set aside on 6 September 2018, by which time the Property had already been transferred and registered in the name of the 2nd defendant.

The Plaintiffs' Case

[7] The plaintiffs' case is that although the documents they signed appeared to be for the execution of the sale and purchase of their Property, they were in actual fact a facade for an illegal moneylending transaction, and the terms of the Agreement itself, reveal that the same is fictitious and a sham.

[8] According to the plaintiffs, the down-payment for th