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2014 MarsdenLR 2026
COURT OF APPEAL PUTRAJAYA
SHINEI GEOTECHNIQUE (M) SDN BHD & ORS – Appellant
Versus
ORIX CREDIT MALAYSIA SDN BHD – Respondent
[Civil Appeal No: W-02(NCC)(W)-2337-10/2013]
Late payment interest under a hire purchase agreement is enforceable if agreed upon, and partial payments can extend the limitation period for claims.
Headnote:(A) Limitation Act 1953 - Section 26(2) - Contracts Act 1950 - Hire Purchase Agreements - The first defendant defaulted on payments under two hire purchase agreements. The plaintiff's claim for late payment interest was contested on grounds of limitation and penalty. The court ruled that both the claim for interest and the recovery of overdue sums were valid, as the limitation period was extended by partial payments made. The trial judge found no elements of penalty in the late payment interest rate as it was mutually agreed. (Paras 7, 12, 21-23)
(B) Guarantee - The guarantee agreements tied to the hire purchase specified 'on demand' liabilities for the guarantors, paving the way for the suit against them to proceed unhindered by limitation. (Paras 26-27)
Facts of the case:
The defendants entered into hire purchase agreements in 1998. Defendants subsequently fell behind on payments and owed significant amounts in late payment interest, prompting the plaintiff's claim in 2012 after issuing a demand for overdue sums.
Findings of Court:
The payments made by the first defendant were legitimate under the agreements, and the claim for late payment interest was enforceable and did not constitute a penalty. The court found the claims against the guarantors were timely and valid.
Issues: The court addressed whether the plaintiff's claims for late payment interest were barred by limitation, whether the interest constituted a penalty, and the legitimacy of the guarantors' liability.
Ratio Decidendi: The court established that the limitation period could be extended through partial payments, interpreted the terms of the agreements as validly binding, and distinguished between agreed interest and penalties based on case law.
Result: Appeal dismissed; High Court's decision affirmed, with costs awarded.
| Table of Content |
|---|
| 1. factual background of the hire purchase agreements (Para 1 , 2 , 3 , 4) |
| 2. defendants' arguments regarding limitation and penalty (Para 5) |
| 3. court's analysis on limitation and penalty claims (Para 6 , 7 , 8 , 9 , 10) |
| 4. final decision and conclusion of the court (Para 11) |
[1] The appellants were the defendants in the COURT below. The first defendant had entered into two (2) hire purchase agreements dated 31 March 1998 (the first agreement) and 29 August 1998 (the second agreement) with the plaintiff. The second and the third defendants were the guarantors. For ease of reference, in this judgment, parties will be referred to as they were in the High COURT.
[2] Under the first agreement, the monthly instalment was to be settled over a period of three and a half (3 1/2) years while for the second agreement, it was supposed to be settled over a period of three (3) years. Both the agreements provide that interest at the rate of 0.065% calculated on a daily basis is to be paid, on monies payable to the plaintiff, which may from time to time be overdue.
[3] The first defendant had defaulted in making the monthly repayments as agreed. The first agreement was only settled in December 2005 and the second agreement, in March 2005. Due to the delay, the plaintiff imposed the late payment interest as agreed, which the first defendant had also failed to settle in full. Payment for interest for the first agreement in the sum of RM 83,837.07 was made by the first defendant on 17 December 2007; 15 March 2008 and 15 April 2008. For the second agreement, the payment of interest totalling RM129,588.66 was made on 15 April 2008 and 15 May 2008.
[4] By a letter dated 8 March 2012, the plaintiff's solicitors demanded payment from the defendants the overdue interest owing as at 6 March 2012 in the sum of RM1,189,962.09. The defendants failed to pay, hence the suit in the High COURT.
[5] In their defence, the defendants pleaded that the plaintiff's claim was barred by limitation and that the late payment interest was a penalty and was unenforceable. The defendants counterclaimed for the refund of the interest that were partly paid to the plaintiff. The basis of the counterclaim was that the payments were made under a mistake of fact and law.
[6] The matter was dealt with by the learned High COURT judge under O 14A of the Rules of 2012 where the following five (5) issues were framed for determination:-
(i) Whether the plaintiff's claim against the first defendant for the late payment interest totalling RM 1,189,962.09 under the Hire Purchase Agreement No. 101-1998-00059-4 dated 31 March 1998 (Agreement No. 1) and Hire Purchase Agreement No. 101-1998-00178-6 dated 29 August 1998 (Agreement No. 2) is barred by limitation under the Limitation Act 1953 .
(ii) Whether the plaintiff's claim against the second defendant and the third defendant as guarantors pursuant to the Letter of Guarantee and Indemnity dated 31 March 1998 and 29 August 1998 is barred by limitation under the Limitation Act 1953 .
(iii) Whether the plaintiff's claim for late payment interest at the rate of 0.065% as provided in clause 5(c) of the said agreements is a penalty or compound interest and not enforceable in law.
(iv) Whether the payment by the first defendant to the plaintiff for the sum of RM 83,837.07 and RM129,588.66 was made under a mistake of fact or law.
(v) Whether the first defendant is entitled to claim for the return of the monies paid to the plaintiff totalling the sum of RM83,837.07 and RM129,588.66.
Decision Of The High COURT
[7] The learned High COURT judge was not with the defendants on all the issues. On limitation, the learned judge said:-
"17. Dalam kes ini bayaran terakhir sewaan untuk perjanjian pertama ialah pada 12 December 2005 dan perjanjian kedua ialah 29 March 2005 yang telah terlewat daripada tarikh yang ditetapkan. Akibatnya, berdasarkan fasal 5(c), kedua-dua perjanjian, defendan pertama bertanggungan untuk membayar faedah lewat. Fasal 5(c) memperun
