A sham sale agreement linked to an illegal moneylending transaction is void and renders any property transfer unenforceable under related laws.

Quay Chew Soon J:

Introduction

[1] This suit concerns a piece of land situated at Daerah Seberang Perai Tengah, Pulau Pinang ("land"‌). Originally, the land was owned by the Plaintiff ("P"‌). It was subsequently transferred to the Defendant ("D"‌). P claims that the transfer is void and sues to recover the land.

[2] After a full trial, I allowed P's claim. Here are the grounds of my judgment.

Background Facts

The Loan From The Defendant To The Plamtiff

[3] P's business was affected by the Covid - 19 pandemic and he was facing financial difficulties. In June 2021, he borrowed money from D ("loan"‌). D is not a licensed moneylender.

[4] There is no written agreement between the parties in relation to the loan. The loan from D to P was disbursed through several payments from June to August 2021.

[5] The total amount of the loan is RM163,850.00 This amount was admitted by D, and is supported by the bank statements produced by him. (See pp 3 to 29 of Bundle B3 of the Common Bundle of Documents, encl 25).

[6] D had imposed interest on the loan at a rate of 6 % per month. This is substantiated by a WhatsApp conversation between the parties in September 2021. (See pp 55 to 61 of Bundle B1 of the Common Bundle of Documents, encl 15).

[7] P had made some repayments to D from time to time between July 2021 and March 2022. D admitted to receiving the repayments from P amounting to RM 44,530.00. Accordingly, the debt owing by P to D is RM 119,320.00 ("debt"‌), ie RM 163,850.00 less RM 44,530.00.

The Documents Executed By The Plaintiff

[8] As the loan was still not fully repaid, D suggested to P to obtain a bank loan in order to settle the debt. D asked P to go to the office of the law firm of Messrs Lim & Sharifah ("said law firm"‌) to sign some documents.

[9] P thought he was signing loan documents. He was made to believe that the documents which were to be signed at the office of the said law firm are documents in relation to obtaining a bank loan and to charge the land to the bank.

[10] P subsequently signed certain documents and surrendered the title deed to the land for the purposes of obtaining a bank loan. P says the signing happened in July 2022. D says it occurred in September 2021.

[11] As it turned out, the document signed by P is actually a sale and purchase agreement in respect of the land ("SPA"‌). The SPA is dated 7 September 2021.

The Transfer Of The Land From The Pjajntjff To Defendant

[12] Later on, P was informed by D that the bank loan application will be delayed. As his credit score was affected due to him delaying repayment of the instalments on his hire purchases.

[13] Around November 2022, D kept pressuring P to repay the loan. D threatened to take the land from P if he fails to make repayment.

[14] Out of precaution, P sent a WhatsApp message in January 2023 to the said law firm. Stating that he never intended to sell the land and his other property (a shop lot). The WhatsApp message reads:

"We are not going to sale our land and shop lot. For your info. Already discuss with person in charge. Ah Max."‌

[15] In August 2023, D informed P that the land has been transferred to D.

[16] Through