1. ) Nandakumar a/l Subramaniam 2. ) Shanthi Rama Rao Nagarathnam v 1. ) Setia Invest Sdn Bhd 2. ) Mohan a/l Thangarasu 3. ) Murugan a/l Chadayan

Case Significance

Illustrates that where a Deed of Settlement records an admitted debt, the burden shifts to the debtor to prove that later payments reduced that debt rather than discharging separate obligations such as investment dividends.

This High Court decision concerns a suit to recover a substantial "friendly loan" secured by a personal guarantee, and the evidential contest over whether monthly payments made by the borrower reduced the loan or represented something else. The plaintiffs sued to recover RM7.1 million said to be due under a Deed of Settlement dated 11 January 2021, which recorded indebtedness arising from three earlier friendly loans, supported by an Irrevocable Letter of Continuing Personal Guarantee and Indemnity of the same date. The first defendant, Setia Invest Sdn Bhd, was the borrower; the second and third defendants were guarantors. It was not disputed that the Deed of Settlement was valid or that repayments totalling RM900,000.00 had been made to reduce the debt. The live issue was whether further monthly payments of RM20,600.00, routed through third-party companies, were additional repayments of the friendly loan, as the defendants contended, or were instead dividends payable under a web of separate investment and supplemental investment agreements entered into around the same period. Examining the tangle of agreements — several of which were referred to but never adduced in evidence — the court found it not improbable that the monthly sums were dividends rather than loan repayments, given the buy-back obligations contemplated under the investment agreements. It concluded that the primary liability of the first defendant under the Deed of Settlement was proved on a balance of probabilities, that once the evidential burden shifted the defendants failed to discharge it, and that the guarantee stood unchallenged where one defendant did not appear to defend. The court allowed the plaintiffs' claim, ordering payment of the outstanding RM7,100,000.00, interest at 5% per annum from 12 January 2022 until full settlement, and costs of RM50,000.00. The judgment illustrates how courts allocate the burden of proof when a debtor asserts that payments discharged a settled debt.