AJ KASTURI SDN BHD v 1. ) PANNIRSELVAM A/L MANNAR 2. ) UZINANI BINTI MOHD SANI 3. ) NG SEE HUA 4. ) LEE PENG KOON 5. ) LEE LEONG HUAT 6. ) NG SOON TEAM 7. ) TEH HOCK CHUN 8. ) KHOO SAY POOW 9. ) EI KIAN SEONG

Case Significance

Illustrates that the illegality defence and the in pari delicto principle do not automatically bar every party connected with an unlawful moneylending scheme; the court will assess the relative culpability of the parties before denying relief.

This Court of Appeal decision, one of three related appeals heard together, concerns whether a party to sale and purchase agreements that were found to disguise illegal moneylending is barred by its own participation from pursuing a claim. The agreements over land, ostensibly sales, were held to be sham transactions designed to disguise moneylending arrangements in contravention of the Moneylenders Act 1951, the properties having been provided as security for loans. A key question was whether the appellant, having been party to arrangements tainted by illegality, was precluded from relief by the doctrines of in pari delicto potior est conditio defendentis (where both parties are equally at fault the defendant's position is the stronger) and ex turpi causa non oritur actio (no action arises from a shameful cause). The High Court had, in effect, shut the appellant out. The Court of Appeal took a different view. It found in favour of the appellant that it was not in pari delicto and was therefore not barred from pursuing its claim against the respondents, distinguishing the appellant's position from that of a party equally responsible for the illegality. Having reached that conclusion, and having found the trial judge's decision unsustainable and plainly wrong, the court allowed the appeals, set aside the decision below, and dismissed the respondents' counterclaims, directing that the issue of damages be taken and determined at the High Court. The court reasoned that to bar a borrower-side party from complaining of a lender's illegal scheme could perversely reward the very illegality the Moneylenders Act 1951 is designed to suppress, and that the relative positions of the parties therefore mattered. It was on that footing that the appellant, not being equally at fault, was permitted to pursue its claim rather than being met with an automatic bar. The judgment illustrates that the illegality defence and the in pari delicto principle do not automatically bar every party connected with an unlawful moneylending scheme, and that the court will assess the relative culpability of the parties before denying relief.