Case:

Brief Facts:

• The Appellant, Sureshraj (“Lender”) and the Respondents, PV Power Engineering Sdn Bhd and Yusof Ali (“Borrowers”) entered into a Project Support Agreement (“PSA”) for the funding of a project involving civil, mechanical and electrical facilities for PULADA (Pusat Latihan Tempur Tentera Darat) purportedly awarded to the Borrowers.
  
  
• The terms of the PSA provided that amongst others, the Lender will loan RM500,000.00 to the Borrowers for a period of six (6) months from 21.7.2016 to 24.1.2017. The Borrowers were expected to repay the loan at the end of the 6 month period.
  
  
• In the event the Borrowers breach the PSA, the Lender is entitled to, amongst others, claim an interest at the rate of 8% on the total outstanding due and payable on daily basis until the actual full repayment of the same.
  
  
• The Borrowers subsequently failed to pay the RM500,000.00 within the 6 months period and had only paid RM320,000.00 to the Lender.
  
  
• The Borrowers asserted that they were cheated in the PULADA project thus could not honour the PSA. Aggrieved with the situation, the Lender brought an action against the Borrowers to enforce the PSA. The Borrowers contended that the Lender is an unlicensed moneylender and loan shark who is in the business of moneylending. The Borrowers took the position that the PSA is a moneylending contract and is illegal for being in contravention of the Moneylenders Act 1951(“MLA 1951”) because of the high interest which required them to repay 3 times more than the principal sum.
  
  
• At the High Court, the Lender argued that he lent RM500,000.00 to the Borrowers by way of cash RM70,000.00 handed personally to Yusof Ali on 25.7.2016 and the balance RM430,000.00 was credited into the Borrowers bank account on two occasions. On the other hand, the Borrowers argued that they only received RM430,000.00 from the Lender.

THE DECISION OF HIGH COURT (HC)

• The HC found that the Lender has failed to prove the cash payment of RM70,000.00. Thus, it was held that the Lender only lent RM430,000.00 to the Borrowers.
  
  
• Further, the HC held that the PSA contained elements of moneylending ingredients in that the money lent to the Borrowers carried interest of 8% per day and returns in massive proportion.
  
  
• The HC provided that even though the Lender makes a single loan transaction, such elements in a contract would invoke a presumption by virtue of Section 100A MLA 1951 against the Lender that he is carrying on the business of moneylending, until the contrary is proved.
  
  
• The HC subsequently found that the Lender had failed to negate the aforementioned presumption and held that the PSA Agreement is an illegal moneylending transaction, hence unenforceable.

THE DECISION OF COURT OF APPEAL (COA)

• The COA found that Borrowers were making a bare allegation and the responsibility of proving that the Lender is a moneylender falls on the Borrowers.
  
  
• The COA found that there was no evidence adduced by the Borrowers to prove that the Lender had carried on or advertised or announced himself or held himself as carrying the business of moneylending as a moneylender.
  
  
• In light of this, the COA found that the PSA in reality a friendly loan hence, legal and enforceable.
  
  
• The COA held that the 8% interest per day is wrong and no court of law would allow such claim.
  
  
• However, since the Lender had dropped his claim for the 8% interest per day during trial, the COA allowed the Lender’s claim for the sum of RM110,000.00, being the balance sum owed by the Borrowers to the Lender as in this case the loan amount which was established is RM430,000.00 and subsequently the sum of RM320,000.00 was repaid by the Borrowers.