Agreements masquerading as lawful transactions yet underlying illegal moneylending practices are unenforceable under the Moneylenders Act 1951.

Lee Swee Seng JCA:

[2] When confronted with two versions, one by the plaintiff saying that it is an ordinary sale and purchase transaction and another by the defendant saying it is a sham sale and purchase agreement meant only as a collateral to the moneylending transaction, the court would have to comb the evidence carefully to see if there are gaps that could not be explained away in the sale and purchase transaction and unusual features that will militate against a genuine sale and purchase transaction as well as the conduct of the parties.

[3] This appeal seeks to unravel the singular problem of whether the sale and purchase agreement is a genuine transaction or a sham designed to bypass the mandatory and strict requirements of the Moneylenders Act 1951 , non-compliance of which would make the agreement unenforceable in being null and void for breach of statutory prohibitions.

Proceedings In The High court

[4] At the High court the plaintiff claimed for specific performance and for removal of the defendant's caveat against the Property and damages to be assessed for wrongful entry of the private caveat by the defendant to prevent the transfer of two pieces of land on which stands two lots of a 4½-storey shop office ("the Property") which bears the name Wisma Global Globe.

[5] Apparently the transfer could not be effected because when the defendant was alerted by its bank that there was a surplus from its redemption of its loan with its bank CIMB Islamic Bank, it raised the alarm that it had not instructed the redemption and that it had not agreed to sell the Property to the plaintiff.

[6] The defendant's defence was that it was an unlicensed moneylending transaction for a loan of RM1.2 million which it admitted having borrowed through its director Dato' Zamri Bin Rahmat, DW3 from one Dato' Adly bin Kamarudin through his nominated company, the plaintiff. The loan was disbursed to the defendant's associate company Global Globe Maintenance Sdn Bhd. DW3's friend one Encik Mohd Syazwal bin Israini had introduced Dato' Adly to him.

[7] According to the defendant, Dato' Adly instructed Dato' Zamri to go and see his solicitors Messrs Nohairi & Co and to sign all the documents prepared as a collateral for the loan before the loan would be released.

[8] DW3 duly complied and executed the documents on the understanding that the sale would not be effected but that it was just a collateral for the plaintiff in case anything should happen to him or that he should be adjudged a bankrupt.

[9] Dato' Zamri duly furnished the security in the property and deposited the relevant documents with the said solicitors.

[10] The defendant said in its defence that though the loan was for RM1.2 million, the Sale and Purchase Agreement ("First SPA") at pp 496-512 of the Record of Appeal, dated and stamped on 9 February 2015, had stated the deposit paid as RM1.6 million. The defendant pleaded that the difference of RM400,000.00 is the interest charged by the plaintiff for repayment of the loan within three months or the receipt of the sum claimed in court by the defendant against Jabatan Kerja Raya ("JKR").

[11] It was later discovered by the defendant during the stage when the plaintiff applied for summary judgment in encl 6 under O 81 of the Rules of 2012, that there was another different Sale and Purchase Agreement ("SPA") exhibited, previously unbeknown to the defendant, with the same date and