MOHD FARID BIN MOHAMED SANGIDO v 1. ) ACE CREDIT (M) SDN BHD 2. ) CHANG AI NEE 3. ) CHOONG CHEE MENG

Case Significance

Illustrates how a court construes investment-scheme documents by the parties’ intention and enforces personal guarantees against a defence of illegality under the Moneylenders Act 1951.

This High Court decision at Kuala Lumpur, in the Commercial Division, determines a claim by an investor against a credit company and two individuals who had given personal guarantees, arising out of an investment scheme. The investor and the first defendant had entered into an agreement dated 23 September 2021 under which one million ringgit was placed for a twelve-month period at a fixed return, and two further defendants provided personal guarantees of the same date; the credit company had since been wound up. The defendants resisted the claim on the footing that the arrangement should be construed as something other than a straightforward obligation to repay — arguing that they were not obliged to pay the promised profits and principal if the first defendant was not profitable, that the document was in substance a loan rendering the scheme an illegal moneylending transaction under the Moneylenders Act 1951, and that the individual defendants had not truly agreed to guarantee performance. The Court construed the agreement according to the intention of the parties as reflected in its written terms and the documentary record, and rejected each defence. It preferred the investor’s evidence as consistent with the documents and reflective of the parties’ real intention, and found the defendants’ contrary account to be an afterthought constructed to defend the claim. It also rejected the contention that statutory provisos barred a creditor from proceeding against guarantors, holding that those provisions did not restrict the right of a debtor or investor to institute proceedings against a guarantor. The Court preferred the plaintiff’s witness as consistent with the contemporaneous instruments and treated the defendants’ witness as having given afterthought evidence, which it declined to accept. Concluding that the defendants had not been honest in seeking to deny liability, the Court, per Dato’ Indera Mohd Arief Emran bin Arifin J, entered judgment for the investor as claimed with costs of RM15,000 payable jointly and severally, and dismissed the defendants’ counterclaim for declarations of illegality and damages. The judgment illustrates how investment-scheme documents are construed and how guarantors’ liability is enforced.