1. ) TANG SER CHIEW 2. ) LIM YAR TING v LEE MEI KIM

Case Significance

Confirms that sale and purchase agreements found in substance to disguise unlicensed moneylending are sham and unenforceable under the Moneylenders Act 1951, that the section 10OA presumption shifts the burden to the lender, and that a trial judge's failure to address a pleaded illegality is an appealable error.

This Court of Appeal decision, one of two appeals heard together, concerns whether sale and purchase agreements were genuine or were a sham disguising an illegal moneylending transaction. In the High Court at Seremban, the plaintiff had succeeded in a claim for breach of contract based on a sale and purchase agreement dated 31 December 2015, and the first and second defendants — the appellants in this appeal — challenged that decision. The central question was whether the agreements were intended to disguise a loan and so contravened the Moneylenders Act 1951, rendering them unenforceable. The Court of Appeal held that the transaction between the plaintiff and the first and second defendants was in substance a moneylending transaction, and that, applying the reasoning in Triple Zest, the presumption under section 10OA of the Moneylenders Act 1951 was invoked, shifting the burden to the plaintiff to show that she was not a moneylender within the meaning of section 2. The plaintiff had offered no evidence to rebut that presumption. The Court concluded that the two sale and purchase agreements were sham agreements designed to circumvent the prohibition in section 15 of the Act against unlicensed moneylending. Significantly, the Court found that the trial judge had not addressed his mind to the issue of the moneylending transaction in his grounds of judgment at all, which was a plain and appealable error warranting appellate intervention. On that basis the Court held that the plaintiff had failed to prove her case on the balance of probabilities. Finding merit in the appeal, the Court allowed it, set aside the decision of the trial judge, and awarded costs. The decision illustrates that the courts will look through the form of a transaction to its substance: where the outward appearance of a sale masks what is in reality a loan advanced by an unlicensed lender, the arrangement offends the statutory prohibition and the purported vendor cannot enforce it.