PANG VENG YAEN v LEE MEI KIM

Case Significance

Confirms that where sale and purchase agreements are sham instruments disguising unlicensed moneylending contrary to the Moneylenders Act 1951, their illegality prevents the lender from asserting derived rights against a subsequent purchaser or claiming a beneficial interest in the property.

This Court of Appeal decision was heard together with a related appeal and concerns the consequences, for a further party, of finding that sale and purchase agreements were a sham concealing an illegal moneylending transaction. In the High Court at Seremban the plaintiff had succeeded on a claim founded on a sale and purchase agreement dated 31 December 2015, and this appeal was brought by the fifth defendant, who was connected to the property that was the subject of that agreement. The overarching issue in both appeals was whether the agreements contravened the Moneylenders Act 1951 and were therefore unenforceable, and, if so, what effect that had on the plaintiff's ability to assert rights arising from them. The Court of Appeal held that the transaction underlying the agreements was in substance a moneylending transaction, that the presumption under section 10OA of the Act was invoked and unrebutted, and that the two sale and purchase agreements were sham agreements designed to circumvent the prohibition in section 15 against unlicensed moneylending. Because the agreements were unenforceable for illegality, questions of privity and beneficial interest fell away: the plaintiff, relying on instruments tainted by illegality and not being a party to the sale and purchase agreement in the ordinary sense, could not assert rights against a subsequent purchaser or claim a beneficial interest in the property founded upon them. The Court also identified as a plain and appealable error the trial judge's failure to address the moneylending issue in his grounds of judgment. Finding that the plaintiff had failed to prove her case on the balance of probabilities, the Court allowed the appeal and set aside the decision below with costs. The decision confirms that the taint of illegal moneylending attaches not only to the immediate lender but to the whole structure erected on the sham agreements, so that no party can build an enforceable claim to the property on foundations the statute forbids.