Legal Update 12 of 2017

Is the hire purchase agreement between an owner of a vehicle and the bank rendered void if the vehicle is confiscated by the Customs Department?



Hong Leong Bank Bhd v Jeyaprakash Pillay a/l Jegaualthan and another appeal [2016] 4 MLJ 741


·   The hirer ('Jeya) decided to purchase a used car and approached the financier ('the bank) for financing.

·   The bank granted the financing and a hire purchase agreement was signed between the parties.

·     Subsequently, the vehicle was seized by the Customs for non-payment of customs duty.

·         Jeya then refused to pay any further monthly installments to the bank.

·   Jeya brought an action against the bank at the Sessions Court and demanded the refund of all installments paid until the vehicle was seized by Customs.

·      He also argued that the hire purchase agreement was of no effect [void] as the bank had failed to deliver good title to the vehicle.

·       The claim was dismissed by the Session’s Court.

·    However, the High Court reversed the decision and held that the hire purchase agreement was void and unenforceable against Jeya.

·  The High Court also ordered that the installments paid by Jeya be refunded to him.

·      The bank appealed to the Court of Appeal.


DECISION:  Appeal by the bank is allowed. 


The Court of Appeal allowed the appeal on the following grounds:- 

·      There was no wrong doing or failure on the part of the bank in relation to the seizure of the car by the Customs Dept. 

·     Moreover, Jeya was given the opportunity to regain possession of the car by paying the relevant taxes but he refused to do so. 

·       Jeya’s recourse was to the dealer, not the bank. 

·      The bank in a hire purchase transaction does not [unless stated otherwise in the Agreement], undertake to bear customs duties or taxes for vehicles which are the subject matter of hire purchase agreements. 

·      The duty or obligation to do so lies with the hirer or the dealer. 

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