JR JATIDIRI SDN BHD v 1. ) ACE CREDIT (M) SDN BHD 2. ) CHOONG CHEE MENG 3. ) CHANG AI NEE

Case Significance

Illustrates that a clearly worded investment agreement providing a fixed return and repayment of capital is not converted into a moneylending transaction by a risk-acknowledgment clause, and that directors who personally guarantee the returns remain liable even where the investee company has gone into liquidation.

This High Court decision at Kuala Lumpur concerns a claim by an investor against the guarantors of a company in liquidation on an investment agreement, and whether that agreement was in truth a moneylending transaction. The plaintiff had invested RM6 million with the first defendant, a licensed moneylender since gone into insolvent liquidation, under an investment agreement providing for a target return of 15% per annum over five years and repayment of the invested sum at the end of the term or on early cancellation. In consideration of the investment, the second and third defendants, directors of the first defendant, had executed an irrevocable and unconditional directors' personal guarantee. The plaintiff did not proceed against the first defendant, which was in liquidation, and pursued the second and third defendants as guarantors. The defendants raised the defence that the arrangement was a disguised moneylending transaction. The court construed the investment agreement by its language, holding that where the words are clear and unambiguous and apply accurately to the facts, the court gives them effect. It held that section 4.03, by which the plaintiff acknowledged the financial risks of the investment, did not make the target return or the repayment of the invested sum contingent on the first defendant's financial performance, and did not override sections 2.01 and 2.04, which expressly provided for the annual target return and repayment on early cancellation. The agreement was, on its terms, an investment agreement — the first defendant being the licensed moneylender that agreed to the plaintiff investing in it — and not a moneylending transaction. The court noted that the same defendants had raised and lost this moneylending defence in numerous parallel suits by other investors on the same agreement and guarantee. Finding the plaintiff had proven its case, the court allowed the claim against the second and third defendants for the return of the RM6,000,000 invested sum and the RM900,000 investment target return, with interest at 8% per annum calculated daily from June 2022 until payment, dismissed the counterclaim with costs, and awarded costs of RM30,000 to the plaintiff.