Case:

Brief Facts:

• Triple Zest Trading & Suppliers Sdn Bhd (TZT) along with its directors sought a loan from Applied Business Technologies Sdn Bhd (ABT), which did not have a moneylending license.
  
  
• ABT agreed to provide a loan of RM800,000 with an additional RM800,000 as agreed profit.
  
  
• TZT offered collateral, including land titles and four undated cheques totalling RM1.6 million.
  
  
• When TZT defaulted, ABT sued TZT, its directors, and one Mumtaz.
  
  
• TZT argued they never consented to the profit agreement, claimed the transaction was illegal moneylending, alleged undue influence, and contended Mumtaz had no involvement in the loan agreement or collateral pledge.
  
  
• Pursuant to the Moneylenders Act 1951 [MA 51] a “moneylender” is defined as “any person who carries on…or holds himself out in any way as carrying on the business of moneylending, whether or not he carries on any other business”.
  
  
• MA 51 also defines “moneylending” as “lending money at interest with or without security by a moneylender to a borrower”.
  
  
• MA 51 further states that “where in any proceedings against any person, it is alleged that such person is a moneylender, the proof of a single loan at interest made by such person shall raise a presumption that such person is carrying on the business of moneylending until the contrary is proved”.

THE DECISION OF HIGH COURT

• The High Court ruled in favour of ABT, ordering TZT to pay RM1.6 million plus interest, comprising the loan amount and the agreed profit.
  
  
• The court found no evidence that ABT operated as a moneylender.
  
  
• The matter was then appealed to the Court of Appeal.

THE DECISION OF COURT OF APPEAL (CA)

• The Court of Appeal partially allowed TZT’s appeal, ruling that they were only liable to repay the principal loan excluding the agreed profit.
  
  
• An appeal to the Federal Court was then made.

THE DECISION OF FEDERAL COURT

• The Federal Court overturned the Court of Appeal’s decision and held the entire agreement was null and void for being contrary to public policy.
  
  
• The Federal Court held that the “agreed profit” was in fact interest within the provisions of MA 51.
  
  
• The Federal Court also held that ABT was carrying on the business of moneylending when they lent the RM800,000.00 with the “agreed profit” of RM800,000.00.
  
  
• The Federal Court also held that ABT failed to rebut the presumption that they were in the business of moneylending. They failed to provide any evidence to show they were not in the business of moneylending.
  
  
• The Federal Court also held that the decision of the Court of Appeal to allow the principal sum of RM800,000.00 to be recovered was disturbing as it legitimised illegal moneylending by allowing illegal moneylenders to recover the principal loan amount in spite of the illegality of the transaction.