Shim Vui Geh V Dayang Masturah BT Sahari and Another Appeal

S-01(NCvC)(W)-140-03/2022 Kand.
32
18/10/2023 17:16:38
IN THE COURT OF APPEAL OF MALAYSIA

(Appellate Jurisdiction)
CIVIL APPEAL NO.: S-01(NCvC)(W)-139-03/2022
BETWEEN
SHIM VUI GEH … APPELLANT

(NRIC NO.: 630529-12-5011)
AND
DAYANG MASTURAH BT SAHARI … RESPONDENT

(NRIC NO.: 5507812-12-5052)
[In the Matter of suit No.: SDK-22NCvC-1/1-2020 (HC)

In the High Court in Sabah and Sarawak at Sandakan
Between
Dayang Masturah bt Sahari … Plaintiff

(NRIC No.: 550712-12-5052)
And
Shim Vui Geh … 1st Defendant

(NRIC No.: 630529-12-5011)
Registrar of Land Titles of Sabah … 2nd Defendant

Director of Lands and Survey Department Sabah … 3rd Defendant
S/N Ay6rnar2tkaGqZqASpmn4g 1 of 49
**Note : Serial number will be used to verify the originality of this document via eFILING portal
(Jointly tried with)
In the State of Sabah, Malaysia

Suit No.: SDK-22NCvC-26/12-2019 (HC)
Between
Mohd Harun Indra Bin Pg Elias … Plaintiff

(NRIC No.: 770619-12-5001)
And

(NRIC No.: 630529-12-5011)

HEARD TOGETHER WITH
IN THE COURT OF APPEAL OF MALAYSIA

(Appellate Jurisdiction)
CIVIL APPEAL NO.: S-01(NCvC)(W)-140-03/2022
BETWEEN
SHIM VUI GEH … APPELLANT
(NRIC NO.: 630529-12-5011)
AND
MOHD HARUN INDRA BIN PG ELIAS … RESPONDENT

(NRIC NO.: 770619-12-5001)
[In the Matter of Suit No.: SDK-22NCvC-26/12-2019 (HC)

Between
Mohd Harun Indra Bin Pg Elias … Plaintiff

(NRIC No.: 770619-12-5001)
And

(NRIC No.: 630529-12-5011)
(Jointly tried with)
In the State of Sabah, Malaysia

Suit No.: SDK-22NCvC-1/1-2020 (HC)
Between
Dayang Masturah Bt Sahari … Plaintiff

(NRIC No.: 550712-12-5052)
And

(NRIC No.: 630529-12-5011)

Director of Lands and Survey Department Sabah … 3rd Defendant]
CORAM:
LEE SWEE SENG, JCA
SUPANG LIAN, JCA
AZIMAH HAJI OMAR, JCA
JUDGMENT OF THE COURT
[1] A friend in need is a friend indeed and a wise teacher once said
“Give to the one who asks you and do not turn away from the one who
wants to borrow from you.” Yet money has, on many an occasion, soured
and spoilt friendship as can be seen here in the parties suing each other
over the true nature of money lent, the sum of which is not disputed in the
Statement of Agreed Facts (“SAFs”).
[2] This judgment shall explore whether a lender may charge
reasonable interest upon default to repay by the borrower in a friendly loan
or would the imposition of interest of any amount upon default make the
loan an illegal moneylending transaction. It shall also delve into the
interplay of the presumption of moneylending even though there is only a
single transaction of a loan at interest and the proof of the business of
moneylending by a moneylender.
[3] There is also the related issue of whether a lender may take as
“security” for a loan an option to purchase the lands put up as security for
the loan together with a sale and purchase agreement and a
memorandum of transfer duly signed when the loan was acknowledged to
have been taken and upon a default in payment, to then effect the transfer
over from the borrower to the lender. What then is the effect of such a
transfer even if the loan is a friendly loan?
At the High Court
[4] There were 2 Suits heard together in the High Court below. One
was brought by Dayang Mastura Bt Sahari (“Dayang”) in Suit SDK-
22NCvC-1/1-2020(HC) (“Dayang’s Suit”) and the other by Mohd Harun
Indra Bin Pg Elias (“Harun”) in Suit SDK-22NCvC-26/12-2019(HC)
(“Harun’s Suit”); both in the High Court in Sabah and Sarawak at
Sandakan.
[5] Dayang is Harun’s mother and it is not disputed that Harun had
asked his mother to help him to borrow from one Shim Vui Geh (“Shim”),
the 1st defendant in both the Suits. Hence Dayang had furnished her
properties as “security” for the loans.
[6] The principal defendant is Shim and we should also state at this
juncture in passing that there were the Registrar of Land Titles of Sabah
and the Director of Lands and Survey Department Sabah named as the
2nd and 3rd defendants respectively in the High Court below for both the
Suits. They took no part in the proceedings and were named only as
nominal defendants for the purpose of effecting a transfer back of the 4
pieces of land back from Shim to Dayang and Harun.
[7] The plaintiff, in both Suits heard together, had prayed for a
declaration that the loans taken as evidenced in the 3 Acknowledgements
of Indebtedness and Undertaking to Pay in Dayang’s Suit and one in
Harun’s Suit are null and void, being an illegal moneylending transactions.
[8] There was also the consequential prayers that the relevant
Options to Purchase, Sale and Purchase Agreements and Memoranda of
Transfer and indeed the transfer of 3 properties in Dayang’s Suit and one
in Harun’s Suit are null and void and an order that the properties in the
lands be transferred back to the respective plaintiffs.
[9] The defendant on the other hand had counterclaimed for a

declaration that he is the lawful and valid registered proprietor of the 4
properties and for the arrears of rental on the 4 properties and vacant
possession of the same as well as damages for the tort of injurious
falsehood and abuse of process.
[10] The High Court found for both the plaintiffs after having
concluded from the evidence adduced that the interest of 1.5% per month
or 18% per annum sought to be charged after the repayment period was
over, made the transactions an unlawful moneylending transaction and
thus the loans are null and void and unenforceable under s 15 and s 17A
of the Moneylenders Act 1951 (“MA 1951”). As for the properties
transferred over, there was no right of set-off by applying the loan sums
towards the agreed purchase price of the properties which various loan
sums corresponded to the same amount as the purchase price. That
being the case there was no purchase price paid on the purported sale of
the 4 properties and so these landed properties shall be transferred back
to the respective plaintiffs and registered proprietors of the lands.
[11] The defendant’s counterclaim was correspondingly dismissed.

Aggrieved by the decision of the High Court, the defendant had appealed
to the Court of Appeal.
Before the Court of Appeal
[12] Before us the plaintiff argued that the moneylending is a friendly

loan as not only were the plaintiff Harun and the defendant Shim, business
partners in a company called Borneo Mulia Sdn Bhd, both being
shareholders and directors, but that Shim had also known Harun’s father
and an uncle of Harun and they have some birds’ nest business together.
[13] Harun and Shim were not strangers but instead have done
business together for years and so when Harun wanted a loan, Shim as a
friend felt obliged to help with no element of interest charged for the
repayment period of some 6 months from July to December 2017 and
interest would only be chargeable at the rate of 1.5% per month on the
amount outstanding thereafter.
[14] Even then the interest was not imposed at all and the transfer of
the 4 pieces of land, 3 belonging to Harun’s mother, Dayang and one
belonging to Harun, were all done for expediency with the agreed
purchase price being the same as the various loan amounts.
[15] Shim contended that both Harun and Dayang knew about this
because some rentals were paid on the lands after the registration into
Shim’s name and it was only when Shim asked for vacant possession
after default in rental payments that Dayang and Harun filed their
respective suits to declare the moneylending transactions as an illegal one
and to obtain a declaration that the transfer of the lands to Shim were
illegal, null and void and for the lands to be transferred back to Dayang
and Harun respectively.
[16] Shim argued that there was no evidence of a system of

moneylending to others or a pattern of continuity in such a moneylending
transaction and that he had only lent to a friend and business partner in
need. As such any presumption of illegal moneylending had been
rebutted and though interest was agreed at 1.5% per month upon default
in repayment after 31.12.2016, yet none was imposed on the lands
transferred to Shim in repayments of the loans.
[17] It is not disputed that Harun had wanted more loans and so he
had convinced his mother Dayang to help by “securing” her 3 pieces of
land to Shim for 3 loans amounting to RM1.23 million after the initial loan
of RM 1,152,240.00 “secured” over Harun’s land.
[18] Both Harun and Dayang argued that the presumption of

moneylending had not been rebutted and that even a single transaction
may amount to moneylending such that as Shim does not have a licence
for moneylending, the transaction is illegal, null and void and
unenforceable.
[19] They also argued through their counsel that the learned High
Court Judge had not erred in ordering the transfer of the 4 pieces of land
back to them as there was no right of set-off under the law and as the
purchase price had not been paid, the transfer ought to have been set
aside as was so ordered by the High Court with the consequential order
of a transfer back of those 4 pieces of land to Dayang and Harun.
[20] The parties shall be referred to as Shim, Dayang and Harun;

Shim being the principal defendant/appellant and Dayang being the
plaintiff in the Dayang’s Suit and Harun the plaintiff in the Harun’s Suit,
both being heard together in the High Court below.
[21] Before us too, both appeals of Shim from the decision of the High
Court in Dayang’s Suit and Harun’s Suit were also heard together.
Whether the borrowers can deny knowing or understanding what

they had signed with respect to the loans taken
[22] There is nothing wrong in lending to someone in need especially

when the borrower is known to you as a friend. It has often been said that
what is prohibited by the MA 1951 is not moneylending but the business
of moneylending without a licence. As to whether a lender is in the
business of moneylending, that is a question of fact which determination
would turn on the evidence of a system, regularity, continuity or pattern in
the lending activity.
[23] Thus, it was said in the context of the English statute on
moneylending in Litchfield v Dreyfus [1906] KB 584 by Farwell J said (at
p 590) as follows:
“… it would be a straining of the language of the Act to hold that a man who
so obliges friends is carrying on the business of a moneylender. The Act
was intended to apply only to persons who are really carrying on the
business of moneylending as a business, not to persons who lend money
as an incident of another business or to a few old friends by way of
friendship. The particular Act was supposed to be required to save the
foolish from the extortion of a certain class of the community who are called
moneylenders as an offensive term. Moneylending is a perfectly
respectable form of business. Nobody says that bankers are rascals
because they lend money.”
[24] In the SAFs for Dayang’s Suit in Enclosure 17, the amount of the
loans corresponding to the dates the loans were taken or accepted as
having being taken were admitted in para 1-3 thereof. The following was
clearly and unequivocally admitted as the acknowledgments of loans in
three (3) Deeds of Acknowledgment Indebtedness and Undertaking to
Pay dated 26.07.2016 for the sum of RM480,000.00 (“1st Deed”); dated
26.07.2016 for the sum of RM500,000.00 (“the 2nd Deed”) and dated
9.11.2016 for the sum of RM250,000.00 (“the 3rd Deed”). She
acknowledged being indebted to the Defendant in the respective sum.
[25] The relevant paragraphs 1 - 3 of the SAFs are reproduced below
“1. Pursuant to a Deed of Acknowledgment of Indebtedness and

Undertaking to Pay dated 26th July 2016 (hereinafter referred to as "the
said 1st Deed"), the Plaintiff acknowledged that the Plaintiff indebtedness
to the 1st Defendant in a sum of Ringgit Malaysia four hundred and eighty
thousand (RM480,000.00) upon the terms and conditions in the said 1st
Deed.
2. Pursuant to a Deed of Acknowledgment of Indebtedness and

Undertaking to Pay dated 26th July 2016 (hereinafter referred to as "the
said 2nd Deed), the Plaintiff acknowledged that the Plaintiff indebtedness
to the 1st Defendant in a sum of Ringgit Malaysia five hundred thousand
(RM500,000.00) upon the terms and conditions in the said 2nd Deed.
3. Pursuant to Deed of Acknowledgment of Indebtedness and

Undertaking to Pay dated 09th November 2016 (hereinafter referred to as
"the said 3rd Deed'), the Plaintiff had acknowledged that the Plaintiff
indebtedness to the 1st Defendant in a sum of Ringgit Malaysia two
hundred and fifty thousand (RM250,000.00) upon the terms and conditions
in the said 3rd Deed.
4. Among the terms and conditions of the said 1st, 2nd and 3rd Deed
were as follows:
(i) The Plaintiff undertake and agree to repay the sum indebtedness on
or before 31st December 2016 or upon demand by the 1st Defendant
in writing whichever is earlier,
And
(ii) In the event that the Plaintiff defaults, fail or neglect to repay the said
sum indebtedness or any part thereof then the 1st Defendant shall be
entitled to take legal action against the Plaintiff to recover the sum
indebtedness.”
[26] Whilst she had contended that these Deeds were signed by her
without her understanding what they were as she did not understand
English, we do not think in the circumstances of this case, she can say
that she is not bound by what she had signed; and more so in the fact that
her solicitors had agreed to in the SAFs being filed with the High Court
below. Where as in this case, she could have asked the lawyer in the
legal firm that she went to sign the 3 Deeds, the nature of the documents
she was signing, even if she had not asked but was prepared to sign
nevertheless, she is still bound by what she had signed.
[27] It is not every day that she would have gone to a solicitors’ office
to sign documents and even to part with her 3 titles to her properties.
Surely if it had been explained to her, as she said by a lawyer in the law
office that the documents she signed was to secure a loan taken on behalf
of her son, Mohd Harun Indra Bin Pg Elias, she would have asked how
much the loan is for.
[28] Whilst she may not have physically received the loans from Shim
for the loans were meant for her son Harun, we cannot now go behind the
SAFs in the High Court where she had unreservedly admitted that the
loans of RM1.23m were taken in total as evidenced in the 3 Deeds.
[29] In Harun’s case, it was a loan of RM 1,152,240.00 as evidenced

in a Deed of Acknowledgment and Undertaking to Repay dated 26.7.2016
which he agreed to repay Shim on or before 31.12.2016 or upon demand
by Shim, whichever is earlier. The SAFs appear in Enclosure 16 in
Harun’s Suit as follows:
“1. Pursuant to a Deed of Acknowledgment of Indebtedness and

Undertaking to Pay dated 26th July 2016, the Plaintiff acknowledged
that the Plaintiff indebtedness to the 1st Defendant in a sum of Ringgit
Malaysia RM1, 152,240.00 upon the terms and conditions in the said
Deed.
2. Among the terms and conditions of the said Deed were as follows:
(i) The Plaintiff undertake and agree to repay the sum indebtedness
on or before 31st December 2016 or upon demand by the 1st
Defendant in writing whichever is earlier; and
(ii) In the event that the Plaintiff defaults, fail or neglect to repay the
said sum indebtedness or any part thereof then the 1st
Defendant shall be entitled to take legal action against the
Plaintiff to recover the sum indebtedness.”
[30] The period for repayment of the loan was also stated to be on or
before 31.12.2016 or upon demand in writing, whichever is earlier. It is not
disputed that Shim did not make an earlier demand on the 4 loan sums.
There is no interest element for the agreed period of repayment. Interest
was stated as would be charged at the rate of 1.5% per month upon
default.
[31] Harun had also testified that he did not receive the said sum but
in the light of the SAFs, we do not think he is permitted to resile from what
he had agreed to. His mother Dayang and him had signed the Payment
Vouchers for their respective loans of RM480,000.00, RM500,000.00,
RM250,000.00 with respect to Dayang and RM1,152,240.00 with respect
to Harun. It is not their pleaded case that transactions and documents
supporting them were a sham.
[32] Again, Harun also tried to convince the High Court that more
than signing the documents blank including payment vouchers indicating
amounts duly received by him and Dayang, he did not know what he had
signed but that could hardly be believed from someone like him who had
studied in Australia and have some businesses with Shim in the planting
of oil palm on his land in a joint-venture with Shim. Even if he is not sure
as to the ramifications of what he had signed, surely, he could easily have
asked the solicitor attending to him, PW 3, in the legal firm instructed by
Shim to prepare the necessary documents to protect Shim’s interest.
[33] Parties who have signed a document and more so if it is before

a solicitor, cannot wriggle out of what they have signed unless it is a case
of misrepresentation, undue influence or fraud proved. It would not
generally be accepted if the parties assert that they do not know what they
signed or that they did not read what they signed. Otherwise it would be
very easy to disclaim liability merely by relying on what is essentially a
plea of non est factum.
[34] Both Dayang and Harun had subpoenaed as their witness PW 3

Teressa Binti Sirri, the lawyer from Messrs Chin Lau Wong & Foo, the
solicitors who prepared the various documents for them to sign. We can
believe her testimony when she confirmed that both Dayang and Harun
signed the documents in her presence in her legal firm and that she had
explained in Bahasa Malaysia the contents of the documents to both of
them and that they had understood the contents before they signed the
documents.
[35] Her evidence was not challenged as it was in Shim’s favour and
her evidence as a witness for the plaintiffs, Dayang and Harun, had
become the plaintiffs’ evidence. There is no good reason for us to
disbelieve PW 3, an advocate and solicitor of the High Court of Sabah and
Sarawak.
[36] In Chai Then Song v Malayan United Finance Bhd [1993] 2

CLJ 640, the appellant contended that he signed the Deed of Guarantee
with relevant particulars left blank which were subsequently filled in. The
appellant disputed the validity of the Deed of Guarantee on the grounds
that the fundamental elements of the formation of a contract have not
been fulfilled.
[37] The High Court held at page 643 that:
“A person who chose to be careless, or not bothered to find out the

contents, or not bothered to find out the contents therein, or relied
completely upon others to complete the same, is responsible for his own
actions and, he is prevented from denying the contents therein do not bind
him.
[38] Likewise, in UMW Industries (1985) Sdn. Bhd. v Kamaruddin

bin Abdullah & Anor [1989] 2 CLJ 1278 it was observed as follows:
“…..As for the 2nd defendant’s intention that he only signed blank
guarantee forms, he has only himself to blame as the plea of non est factum
does not work in favour of a person who has shown himself to be negligent.”
[39] We find that both Dayang and Harun cannot deny that they are
bound by what they sign. The question is whether the law would render
what they had signed as evidencing an illegal moneylending transaction
or that whether the ‘security” taken is valid under the law.
Whether the transactions are friendly loan transactions or illegal
moneylending transactions
[40] A “moneylender” is defined under the MA 1951 in s 2 thereof as

follows:
“‘moneylender’ means any person who carries on or advertises or

announces himself or holds himself out in any way as carrying on the
business of moneylending, whether or not he carries on any other
business.” (emphasis added)
[41] “Moneylending” is defined in s 2 of the MA 1951 as:
“‘moneylending’ means the lending of money at interest, with or without

security, by a moneylender to a borrower.” (emphasis added)
[42] Generally, a single money lending transaction cannot make one

a money lender. In Chow Yoong Hong v Choong Fah Rubber
Manufactory [1962] MLJ 74 the Privy Council adopted the statement of
Thomson J (as he then was) in Sandhu Singh v Sellathurai [1955] MLJ
117 on the interpretation of a moneylender:
“The Court of Appeal likewise dealt only with this question; and in dealing
with it concerned themselves very closely with the true meaning and effect
of section 3 of the Ordinance. This section is not in their Lordships' opinion
in the circumstances of this case of great significance, but in view of the
different approach by the Judges in the Federation of Malaysia, they think
it desirable to make some comment on it.
Section 3 provides that 'any person who lends a sum of money in

consideration of a larger sum repaid shall be presumed until the contrary
be proved to be a moneylender'. The effect of this section has been
considered by Thomson J (as he then was) in Sandhu Singh v. Sellathurai
[1955] MLJ 117 in a judgment which their Lordships respectfully approve
and adopt. To lend money is not the same thing as to carry on the
business of moneylending. In order to prove that a man is a
moneylender within the meaning of the Ordinance, it is necessary to
show some degree of system and continuity in his moneylending
transactions. If he were left to discharge this burden without the aid of any
presumption, a defendant might frequently be in a difficulty. He might have
had only one or two transactions with the moneylender and he might find it
difficult to obtain evidence about the business done by the moneylender
with other parties. Section 3 enables a defendant to found his claim on
proof of a single loan made to him at interest, it being presumed, in the
absence of rebutting evidence, that there were sufficient other transactions
of a similar sort to amount to carrying on of business.” (emphasis added)
[43] Section 3 of the MA 1951 was deleted by the Moneylenders

(Amendment) Act 2003 [Act A1193] (“MAA 2003”) and so now there is a
total absence of that section that used to read as follows:
"3. Certain persons and firms presumed to be moneylender

Save as excepted in section 2A(1) and (2), any person who lends a sum
of money in consideration of a larger sum being repaid shall be
presumed until the contrary be proved to be a moneylender." (emphasis
added)
[44] Whilst the above was deleted there was a further addition of s
10OA introduced by the Moneylenders (Amendment) Act 2011 [Act
A1390] (“MAA 2011”) that reads:
“Where in any proceedings against any person, it is alleged that such

person is a moneylender, the proof of a single loan at interest made by
such person shall raise a presumption that such person is carrying on
the business of moneylending, until the contrary is proved.” (emphasis
added)
[45] In Leong Chooi Peng v Tee Yam [2011] 1 LNS 1709 at p 41 it

was said of the above s.10OA as follows:
“Being a rebuttable presumption, those cases that deal with the meaning of
“the business of moneylending” as referred to in Muhibbah Teguh's case
(supra) might well prove relevant again in the future in resolving a once-off
friendly loan transaction with interest.”
[46] The current definition of “moneylender” was brought about by the

MAA 2011 which came into force on 15.4.2011 vide P.U.(B) 174/2011.
[47] This is to be contrasted with the old definition of “moneylender"

introduced by the MAA 2003 which came into force on 1.11.2003.
“Moneylender” was defined as meaning:
“any person who lends a sum of money to a borrower in consideration of a

larger sum being repaid to him.”
[48] What is clear here is that Shim and Harun are business partners
in an oil palm business and they are shareholders and directors in the
company incorporated for the purpose of the cultivation and harvesting of
oil palm on Harun’s land. They are clearly not total strangers who only
met for the purpose of a loan. Shim had also known Harun’s father and
an uncle of Harun and they have some birds’ nest business together.
[49] In Harun’s own words in his Witness Statement as PW 1, he had
admitted as follows:
“9. Q: What is your relation with Shim Vui Geh?
A: He is my friend and before today's matter, in year 2005 we had

entered into the Joint Venture Agreement to cultivate and
develop my land as above under the name of Borneo Mulia Sdn.
Bhd and I am one of the directors and shareholder of the
company. I had resigned as director in year 2016. So we know
each other for almost 11 years.”
[50] Whilst Harun’s mother, Dayang (PW 2), might not have met or
known Shim before the loan transactions, she was clearly introduced by
her son Harun as Harun had only one piece of land for security of the loan
and as he needed to further secure additional loans, he had asked his
mother to help. Shim’s evidence was that he had met Dayang on those
times when he went over to visit Harun during Hari Raya. In Dayang’s
own words in her Witness Statement, she had stated as a matter of fact
as follows:
“12. Q: Are you saying that you never had dealings with Shim Vui Geh
at all?
A: Sometime in 2016, my son had approached me and asked my

favour to contribute capital because he wanted to run a business,
I informed my son that I had no money but if my son insisted to
run the business, he may lend (sic) money from anyone and
used my properties as security.”
[51] The observation of the Court of Appeal in Tan Aik Teck v. Tang
Soon Chye [2007] 5 CLJ 441 at page 451-452 would be relevant here as
follows:
“....The defendant contended that from the evidence of the plaintiff himself,
the plaintiff met the defendant about two or three times before the loan was
given and as such it could not be a friendly loan. ...A friendly loan is opposed
to the normal borrowing from a moneylender or financial institution. A
friendly loan is a loan between two persons based on trust. There may
be an agreement such as an I.O.U. or security pledged to repayment
but most important there will be no interest imposed.
....In my view, a friendly loan is a loan given by the lender to the borrower
based on mutual trust whereby the borrower was to repay the loan amount
within the specified time with no interests charged..." (emphasis added)
[52] From the SAFs no interest was charged during the period of the
loan. However, interest at the rate of 1.5% per month was chargeable
after 31.12.2016 after the period of repayment of the loan. Shim argued
that though it was stated as such, he did not in reality charge any interest
even after Dayang’s and Harun’s default. However, there is a catch there
as there was nothing stated as to the market value of the 4 pieces of land
taken as security for the loans which had been transferred to Shim after
the default. More shall be said about that in our discussion on whether
the security for the loans could be by way of outright transfer documents
signed in escrow.
[53] We appreciate that in a case of friendly loan the lender should

not be made to suffer greater loss in trying to help a friend or someone in
need and to face the uncertainty of not being able to recover the loan and
the risk of non-recovery and yet not being able to charge the costs of funds
which the lender would have to bear or conversely put the money to use
profitably or even by earning interest by putting it in fixed deposit with a
bank. In trying to help someone in need the law does not require one to
be so selfless and sacrificial as not to be able to charge a reasonable
amount of interest upon default to cover the lender’s loss or the foregoing
of his gain.
[54] In Subramaniam Dhanapakiam v Ghaanthimathi [1991] 2

MLJ 447, where interest upon default was volunteered by the borrower
and paid from time to time, the Singapore High Court had no problem in
allowing judgment to be entered even upon a summary judgment
application as follows:
“In the present case, the defence was no defence. The loans were friendly
loans between two long-time friends. Interest was not demanded but
accepted when offered. The interest was not exorbitant and varied in
accordance with the generosity of the defendant. The plaintiff did not
lend to all and sundry. On these facts, there was no question of the plaintiff
being a moneylender as defined in the Act. If there had been a trial, the
result would have been the same.” (emphasis added)
[55] Long time ago before most of us were born, Spenser-Wilkinson

J in Esmail Sahib v Noordin [1951] MLJ 98, observed though in the
context of the difference between the English Act and the then Singapore
Ordinance with respect to Moneylending as follows:
“There is however one important difference between the English law on this
subject and the local law. Section 3 of the Moneylenders Ordinance reads
as follows:
3. Save as excepted in paragraphs (a), (b), (c), (d) and (f) of the definition
of ‘Moneylender’ in section 2, any person who lends money at interest or
who lends a sum of money in consideration of a larger sum being repaid
shall be presumed, until the contrary be proved, to be a moneylender.
Counsel were unable to cite any local authority which could assist me in
determining the effect of this section and I have been in some doubt as to
the extent of the burden of proof cast by this section upon a plaintiff who
has in fact lent money at interest. It is difficult to see how else a plaintiff
can discharge this burden except by himself giving evidence to the
effect that he is not a moneylender and by submitting to cross-
examination on the point.” (emphasis added)
[56] Whilst there is no longer the presence of a s 3 presumption, yet

there is a new s 10OA which is a rebuttable presumption that the proof of
a single loan at interest made by such person shall raise a presumption
that such person is carrying on the business of moneylending. Assuming
that interest would cover interest upon default, Shim was unshaken in
cross-examination with respect to any allegation that he had lent to others
at interest. Under the MA 1951, any person who lends money at interest
is presumed to be a moneylender and becomes an unlicensed
moneylender if he does not have a licence under the MA 1951, rendering
the loans unenforceable and irrecoverable.
[57] Harun and Dayang had no evidence to offer on any allegations

of a system, regularity, pattern or continuity where Shim’s lending is
concerned other than to themselves. Thus, the presumption under s
10OA had been more than rebutted by Shim.
[58] We further state that the interest here is interest charged for the
duration of the loan and that upon default, the Court may allow a
reasonable interest to cover the costs of the funds for the lender and in
any event not exceeding the 5% per annum interest that the Court may
award on a monetary claim.
[59] The power of the High Court to grant interest on a debt claimed
is found in s 25(2) of the Courts of Judicature Act 1964 [Act 91] (“CJA”)
and paragraph 7 of the Schedule to the Act. Section 25(2) of CJA states:
“Without prejudice to the generality of subsection (1) the High Court shall
have the additional powers set out in the Schedule: Provided that all such
powers shall be exercised in accordance with any written law or rules of
court relating to the same.”
[60] Paragraph 7 of the Schedule to the CJA then confers upon the
Courts as follows:
“Power to direct interest to be paid on debts including judgment debts,

or on sums found due on taking accounts between parties, or on sums
found due and unpaid by receivers or other persons liable to account to the
Court.” (emphasis added)
[61] The High Court is also vested with the power and discretion to
strike down the interest charged upon default that exceeds the statutory
limit of 8% per annum for secured loan or 12% per annum for unsecured
loan or not to grant any interest at all if the conduct of the lender has the
element of taking advantage of the borrower in distress and high-handed
at that.
[62] We appreciate that there is an argument that s 10OA of the MA

1951 applies only to criminal proceedings and not civil proceedings as it
is parked under PART IV under EVIDENCE and that the sections within it
deal with for example s 10L on Evidence of accomplice and agent
provocateur, s 10M with Protection of informers and information, s 10N
with Admissibility of statements by accused persons, s 10O on Provisions
as to evidence and s 10OA on Presumption as to the business of
moneylending. Then there are s 10OB on Evidence and records of
previous conviction and s 10OC on Diary of proceedings in investigation.
[63] We are not so persuaded as the legislators have used in some

instances “criminal proceedings” as opposed to “any proceedings”. In s
10L, s 10N(6) and (7) reference is made to “criminal proceedings” in
contradistinction to s 10M(3), s 10O(2) and s 10OA where the expression
“any proceedings” is used.
[64] Moreover on the earlier sections in s 10M(1) and (2) reference is

made to “any civil or criminal proceedings”, thus allowing us to conclude
that the legislator was very conscious of the fact of the distinction that
makes a difference.
[65] Furthermore the reference to “any proceedings” in s 10M(3) is

with respect to “any proceedings relating to any offence under this Act”
and in s 10O(2) it is “in any proceedings for an offence under this Act.”
When it comes to s 10OA there is a shift in the language used to that of
“in any proceedings against any person.” As we are aware, in the
proceedings in the High Court below, both Dayang and Harun have a
claim against Shim. Their claims would come within the meaning of “any
proceedings against any person.” They thus qualify to use the
presumption that Shim was carrying on the business of moneylending. Be
that as it may, Shim had more than rebutted the presumption when his
evidence that he had not lent to others had not been challenged.
[66] The relevant sections of the MA 1951 are set out below for ease
of reference:
“10M. Protection of informers and information

(1) Except as hereinafter provided, no complaint as to an offence
under this Act shall be admitted in evidence in any civil or criminal
proceedings, and no witness shall be obliged or permitted to disclose the
name or address of any person who gave the information, or the substance
and nature of the information received from him, or state any matter which
might lead to his discovery.
(2) If any application, particular, return, account, document or written

statement which is given in evidence or liable to inspection in any civil or
criminal proceedings contains any entry in which any person who gave
the information is named or described, or which might lead to his discovery,
the court before which the proceedings are held shall cause all such entries
to be concealed from view or to be obliterated so far as may be necessary
to protect such person from discovery, but no further.
(3) If in any proceedings relating to any offence under this Act, the
court, after full inquiry into the case, is of the opinion that the person who
gave the information wilfully made in his complaint a material statement
which he knew or believed to be false or did not believe to be true, or is of
the opinion that justice cannot be fully done between the parties to the
proceedings without the discovery of the person who gave the information,
the court may require the production of the original complaint, if in writing,
and permit inquiry and require full disclosure concerning that person.
10N Admissibility of statements by accused persons
(6) Where in any criminal proceedings against a person for an
offence under this Act, evidence is given that the accused, on being
informed that he might be prosecuted for it, failed to mention any such fact,
being a fact which in the circumstances existing at the time he could
reasonably have been expected to mention when so informed, the court, in
determining whether the prosecution has made out a prima facie case
against the accused and in determining whether the accused is guilty of the
offence charged, may draw such inferences from the failure as appear
proper; and the failure may, on the basis of those inferences, be treated as,
or as capable of amounting to, corroboration of any evidence given against
the accused in relation to which the failure is material.
(7) Nothing in subsection (6) shall in any criminal proceedings—

(a) prejudice the admissibility in evidence of the silence or other
reaction of the accused in the face of any thing said in his
presence relating to the offence in respect of which he is
charged, in so far as evidence thereof would be admissible apart
from that subsection; or
(b) be taken to preclude the drawing of any inference from any

silence or other reaction of the accused which could be drawn
from that subsection.
10O Provisions as to evidence

(2) When in any proceedings for an offence under this Act it is
necessary to prove that a person was, or was not, the licensee, a certificate
purporting to be signed by the Registrar and certifying that the person was
or was not, the licensee, shall be admissible as evidence and shall
constitute prima facie proof of the facts certified in such certificate, without
proof of the signature or the authority of the Registrar to issue the certificate.
10OA Presumption as to the business of moneylending
Where in any proceedings against any person, it is alleged that such
person is a moneylender, the proof of a single loan at interest made by such
person shall raise a presumption that such person is carrying on the
business of moneylending, until the contrary is proved.” (emphasis added)
[67] On the facts of this case, we find that with or without the aid of
the rebuttable presumption under s 10OA of the MA 1951, Shim had given
evidence that he is not in the business of moneylending, with the
corresponding characteristic element of a system, regularity, pattern or
continuity of lending at interest and Dayang and Harun had not been able
to adduce any evidence to contradict that. He had also given evidence of
all the businesses he is involved in as a businessman and the licenses for
the various businesses including trading, logging, construction, cement,
transportation, fertiliser, cleaning business, hardware and plantation.
[68] With respect, the learned High Court Judge had erred in finding
that the transactions were moneylending transactions when there was no
evidence of a system, pattern, regularity or continuity of Shim being
involved in any moneylending transactions. We are constrained therefore
to disturb this finding of fact of the learned trial Judge in the High Court,
guided as we are by the dicta of Steve Shim (CJ (Sabah & Sarawak)) in
Gan Yook Chin & Anor and Lee Ing Chin & Ors [2004] 4 CLJ 309 FC
on appellate intervention:
“The Court of Appeal had clearly borne in mind the central feature of
appellate intervention ie, to determine whether or not the trial court had
arrived at its decision or finding correctly on the basis of the relevant law
and/or the established evidence. In so doing, the Court of Appeal was
perfectly entitled to examine the process of the evaluation of the evidence
by the trial court. Clearly, the phrase "insufficient judicial appreciation of
evidence" merely related to such a process.”
Whether the lender is allowed to take a “security” for the loans by

way of an outright transfer after the borrowers have defaulted in
payment of the loans
[69] At the same time as the Deed of Acknowledgment and

Undertaking to Repay was signed, the borrowers Dayang and Harun were
also asked to sign an Option to Purchase, a Sale and Purchase
Agreement and a Memorandum of Transfer Form under the Sabah Land
Ordinance together with the land titles to the respective properties
(collectively referred to as the “security documents”) being deposited with
Shim’s solicitors.
[70] The “security documents” for Harun’s land with respect to

Harun’s Suit relate to a piece of land measuring 58.29 hectares situated
at Kg. Suan Lamba, Sandakan held under CL 075536220.
[71] As for the “security documents” for Dayang’s lands with respect
to Dayang’s Suit are as follows:
“(i) One (1) unit of double storey semi-detached house known as Lot No.
188, Astana Heights, Phase 2A situated at Jalan Lalang, Off Mile 1 y2,
North Road Sandakan held under Master Title No. CL 075145103 ("Lot
188");
(ii) One (1) unit of double storey semi-detached house known as Lot No.
189, Astana Heights, Phase 2A situated at Jalan Lalang, Off Mile 1 y2,
North Road Sandakan held under Master Title No. CL 075145103 ("Lot
189") and
(iii) One (1) unit of double storey detached house situated at Mile 1.5,
Jalan Utara, Jalan Bunga Botan, Sandakan held under TL 077515443
("detached house").”
[72] Shim’s lawyer, one Miss Teresa Binti Siri (PW 3) of Messrs Chin
Lau Wong & Foo, who prepared the “security documents”, explained to
them that they were the security documents for the loans in the event that
the loans could not be repaid on time by 31.12.2016. The lawyer PW 3
was a lawyer of Shim’s choice and both Harun and his mother Dayang
were not separately represented.
[73] In giving evidence for the plaintiffs Dayang and Harun, PW 3 said
under cross-examination in Answer to Questions 278 and 279 in the Notes
of Proceedings as follows:
“Q 278:
Did they acknowledge to you that they understood and agreed to the
contents of the documents?
A:
Yes. They understood and agreed to the contents of the documents before
they signed. And I remember for this particular Mohd Harun bin Pg Elias
after I explained when I said “kalau kamu gagal bayar duit ini, dalam tempoh
yang dinyatakan disini iaitu Deed of Indebtedness and Undertaking to pay,
Shim Vui Geh akan melaksanakan hak dia didalam Sale and Purchase
agreement berkaitan dengan tanah kamu iaitu dalam mukasurat 65 Bundle
B and after that he said to me “itu kalau, kan puan?” those are his exact
words, I remember exactly.
Q 279:
Did you also explain the same “kalau kamu gagal bayar duit ini, dalam
tempoh yang dinyatakan disini iaitu Deed of Indebtedness and Undertaking
to pay, Shim Vui Geh akan melaksanakan hak dia didalam Sale and
Purchase agreement...” to puan Dayang as well?
A:
Yes, I also explained the same.”
[74] Clearly from her explanation which we have no reason to

disbelieve, the documents signed were used as “security documents” to
effect a transfer upon default by Dayang and Harun after 31.12.2016.
Thus, the Payment Vouchers were even written as “being full payment of
the said purchase price.” Both Dayang and Harun would have to trust the
solicitor as PW 3 confirmed that all the documents including the Sale and
Purchase Agreements, the Memoranda of Transfer and payment
vouchers were kept in her solicitors’ office.
[75] PW 3 Teressa further explained under cross-examination as

follows in Answer to Question 281:
Q 281:
Can you explain why all these documents were kept in your firm?
A:
Because these documents were only be enforced if there is a default on the
part of Encik Mohd Harun bin Pg Elias and Puan Dayang in payment of the
sum due to Shim Vui Geh.
Q 281:
Do you agree with me that those documents were only to be dated if and
when Encik Harun and Puan Dayang failed to cancel the sale of the
properties by end of December 2016 and Mr Shim exercised the option to
purchase?
A:
Yes, agree.”
[76] When the loans could not be repaid, the respective Options to
Purchase was exercised, the Sale and Purchase Agreements were dated
together with their corresponding Memoranda of Transfer to effect the
registration of the properties to Shim.
[77] Whilst most of the Deeds of Acknowledgment and Undertaking

to Repay were in July 2016 with one dated 9.11.2016 with respect to the
loan of RM250,000.00 by Dayang, the period for repayment of the loans
without interest was by 31.12.2016. The security documents employed
being not a registered charge, the borrowers would have to trust Shim to
honour his word that the properties would not be transferred to Shim until
after 31.12.2016. We note that in the Deeds of Acknowledgment and
Undertaking to Repay, Shim would be at liberty to demand for an earlier
repayment which in any event, did not happen in the 2 appeals before us.
[78] We note that there was no expiry date for the Options to
Purchase given to Shim such that Shim can exercise what is made to look
like an Option to Purchase at any time. Both Dayang and Harun would
have to trust Shim that he would not exercise the Options to Purchase
earlier than 31.12.2016.
[79] Under the Sabah Land Ordinance (Cap 68)(“SLO”), security over
land is created by way of a charge. The instrument of charge is in the
Memorandum of Charge in Schedule XV (section 104) of the SLO. It is
stated in the Memorandum of Charge as follows:
“In consideration of the principal sum of ringgit lent to me/us by (hereinafter

called "the chargee(s)"), the receipt of which sum I/we hereby acknowledge,
do hereby, bind myself/ourselves to pay to the chargee(s) on the day of
every month/year commencing on the day of , 19 , the said sum and interest
thereon at the rate of per cent per annum by equal payments of ringgit being
the total amount of the principal sum and interest then due.
In default of payment of the interest or of any part thereof, or of the

principal sum hereby secured, it shall be lawful for the said
chargee(s), after the expiration of one month's notice served upon
me/us by the. chargee(s) or his/their agent as serving officer, to obtain
an order from the Collector for the sale of the said land in accordance
with the provisions of the Land Ordinance.” (emphasis added)
[80] A security for a loan taken cannot be allowed to be created by

way of an outright transfer in the form of an “Option to Purchase”, a “Sale
and Purchase Agreement” signed and a “Memorandum of Transfer” in
Schedule XIII form to the SLO signed in escrow.
[81] Just as in the case of the National Land Code (“NLC”) in West
Malaysia, the provisions of the SLO are exclusive and exhaustive with
respect to the remedies available with the necessary safeguards for a
borrower being built into the statutory provisions and protection. See
Kimlin Housing Development Sdn Bhd (Appointed Receiver and
Manager)(In Liquidation) v Bank Bumiputra (M) Bhd & Ors [1997] 2
MLJ 805, a decision of the Supreme Court.
[82] The Sabah Land Rules (G.N. 505 of 1930) have a whole portion
devoted to “SALE OF LAND BY CHARGEE” from Rules 14(1) to (20).
These sub-rules are designed to give the borrowers or chargors the
mantle of protection of the law. There is the notice requirement under
Schedule H with respect to “NOTICE BY CHARGEE IN CASE OF
DEFAULT.”
[83] After the expiry of the Notice by the Chargee, the chargee would
then proceed under Rule 14(2) by way of an “APPLICATION BY
CHARGEE FOR SALE OF LAND” by way of the Form in SCHEDULE I.
[84] The Collector would then subsequently pursuant to Rule 14(2)

give the chargor a “NOTICE BY COLLECTOR THAT CHARGEE HAS
APPLIED FOR ORDER FOR SALE OF LAND” in Schedule J to show
cause why the application should not be granted.
[85] At the hearing the Collector under Rule 14(9) is to determine by

order in the form of Schedule K the amount due under the charge and
order the sale of the land charged. The sale shall be by way of a public
auction and the auctioneer shall be nominated by the Collector under Rule
14(10).
[86] The Collectors shall also under Rule 14(11) determine the
conditions of sale and he shall also put a reserve price on the land and
cause such public notice to be given of the sale as he may in the interest
of the parties or of either of them think advisable, and may postpone the
sale if he thinks fit.
[87] There also other safeguards are provided as in Rule 14(12) - (14)
with respect to the chargor’s rights as follows:
“(12) At any time prior to the fall of the hammer the owner of the land
shall have the right to stop the sale upon payment of the sum due together
with all costs.
(13) The chargee may himself bid at the sale.
(14) No officer employed in the Land Office of the district and no officer
having any duty to perform in connection with any sale under the Ordinance
shall either directly or indirectly bid for, acquire, or attempt to acquire any
interest in property offered at such sale.”
[88] See also a consideration of the safeguards in the case of a

security taken by way of a charge under the NLC in the Court of Appeal
case of Global Globe Property (Melawati) Sdn Bhd v Jangka Prestasi
Sdn Bhd [2020] MLJU 424 para [151] - [153].
[89] Whilst there is no express prohibition against taking custody of

the title to the property and having a sale and purchase agreement drawn
up and the Memorandum of Transfer as security for a loan, all to be
effected upon default, yet if such a practice is permitted, it would defeat
the purpose of the law. The safeguards afforded to borrower, with many
not having the power to negotiate the terms of the loan when in dire need
of money, would be illusory when such a borrower has to sign the transfer
of his land over to the lender in escrow.
[90] It is another mirage for the lender to say that he is not charging
interest upon default when the land taken as security would normally be
of higher market value than the amount of the loan. This was precisely
what Shim was trying to impress the High Court below in that he did not
charge interest at all even after default after 31.12.2016 and that it was
Harun who actually volunteered to pay the interest on the friendly loan.
However, no valuation report was produced to assuage any concerns of
the borrowers that the market value of the 4 pieces of land are not in
excess of the amount borrowed.
[91] There was also evidence before the High Court that Shim could
charge Harun’s land to Public Bank for RM2.8 million and Shim’s
explanation was that he had spent money to grow the oil palm which is
ready for harvesting and also because of his credit-worthiness. That is
precisely the problem when an outright transfer for the amount of the loan
is taken. There was no notice of assessment of stamp duty produced by
Shim for the transfer of the properties, which if produced would indicate
the Stamp Duty Office’s valuation of the properties.
[92] In the unlikely event that the market value is less than the amount
of loan taken, the lender could still claim the shortfall, albeit by suing the
borrower. However, when the market value is more, there is no refund of
the amount in excess to the borrower after applying the auction price paid
towards settlement of the loan sum. Rule 14(17) of the Sabah Land Rules
provides as follows:
“(17) The purchase money arising from any such sale shall be applied
firstly in the payment of any rent and fees due to the Government; secondly
in payment of the expenses and costs of, and incidental to, the notices,
summonses and sale; thirdly in payment of the moneys which may then be
due or owing to the chargee; fourthly in payment of subsequent charges if
any in the order of their priority, and the surplus if any shall be paid to
the chargor or other person entitled thereto.” (emphasis added)
[93] The consideration for such a contract is unlawful as a charge

should have been created over the lands in question and not the sale and
purchase agreements and memoranda of transfer and so these
agreements and instruments of transfer are thus void under s 24(b) of the
Contracts Act 1950 [Act 136], in that, if permitted, would defeat the
purpose of the SLO as follows:
“What considerations and objects are lawful, and what not

24. The consideration or object of an agreement is lawful, unless—
(a) it is forbidden by a law;
(b) it is of such a nature that, if permitted, it would defeat any law;
(c) it is fraudulent;
(d) it involves or implies injury to the person or property of another; or
(e) the court regards it as immoral, or opposed to public policy.
In each of the above cases, the consideration or object of an agreement is
said to be unlawful. Every agreement of which the object or consideration
is unlawful is void.” (emphasis added)
[94] We were given to understand that such a practice is very

prevalent and that the Court should respect the freedom of the parties to
contract. We must state emphatically that no matter how prevalent a
practice is, it cannot be lawful if the consideration if permitted would defeat
the purpose of the law designed to protect the weaker and more
vulnerable party.
[95] In Global Globe Property (Melawati) Sdn Bhd v Jangka

Prestasi Sdn Bhd Bhd (supra) the Court of Appeal observed as follows:
“[152] The device of using a sale and purchase agreement as a security
for a loan is clearly to circumvent the protective provisions of the
Moneylenders Act 1951.
Even if the plaintiff lender is not a moneylender at all it would be an

aberration to allow such a person to charge interest of RM400,000.00 for a
loan of 3 months when even a licensed moneylender would blush under it.
A person who is not a moneylender cannot under the guise of a
friendly loan exact more onerous terms than what a licensed
moneylender is permitted as that would turn the law upside down.”
(emphasis added)
[96] In Global Globe Property (Melawati) Sdn Bhd v Jangka

Prestasi Sdn Bhd Bhd (supra) the Court of Appeal concluded as follows:
“[154] The transaction is illegal as it is forbidden by the Moneylenders Act

1951 and further if allowed, would defeat the purpose of the law. It would
also be against public policy.”
[97] As for freedom of contract, we must say it needs to be

circumscribed by the paternal protection of the law especially when there
is a clear inequality of bargaining powers. One can imagine the abuse
that would come in its wake if such a practice is approved by the Court.
Licensed moneylenders and bankers would happily jump into the
bandwagon and in future take a transfer in escrow and immediately
transfer the landed properties upon default and make a huge profit from a
so-called more efficient transaction where there is no need to go before
the Collector.
[98] A borrower in dire financial straits has little freedom of contract

for otherwise they would probably have gone to the banks to borrow.
Freedom of contract implies some choice or room for bargaining which
the borrowers here did not have. See the House of Lords case of Suisse
Atlantique Société D'armement Maritime SA v NV Rotterdamsche
Kolen Centrale [1966] 2 All ER 61 and our Federal Court case of CIMB
Bank Bhd v Anthony Lawrence Bourke & Anor [2019] 2 MLJ 1.
[99] It was Denning LJ in John Lee & Son (Grantham) Ltd and
Others v Railway Executive [1949] 2 All ER 581 who captured the reality
of unbridled freedom of contract as:
“Above all, there is the vigilance of the common law while allowing for
freedom of contract, watches to see that it is not abused.”
[100] Regulation 10(1) of the Moneylenders (Control and Licensing)

Regulations 2003 (“the Regulations”) provides that every agreement for
moneylending transaction with security shall be in the form prescribed in
Schedule K and makes it a criminal offence for non-compliance.
Paragraph (4)(a) of Schedule K further provides that where the security is
an immovable property, the property shall be dealt with as provided for
under Order 83 of the Rules of Court 1980 which is now to be read as
Rules of Court 2012 with respect to Charge Actions.
[101] Regulation 10(2) of the Regulations declares as void and of no

effect and unenforceable any agreement for moneylending not in
compliance with the prescribed form and in this case Schedule K and
includes addition to the prescribed form. A Sale and Purchase Agreement
is not a proper moneylending agreement in compliance with Schedule K.
[102] A lender of a friendly loan cannot create for himself a form of
security in an outright transfer of the land of the borrower put up as
security when even licensed moneylenders and the banks cannot do that.
It would be contrary to public policy to allow a mischief sought to be
remedied by a statutory provision to be defeated on the basis of freedom
of contract. See para [54] of the Federal Court case of Cubic Electronics
Sdn Bhd (in liquidation) v Mars Telecommunications Sdn Bhd [2019]
6 MLJ 15.
Whether the transfer of lands to the Lender and duly registered in

his name is liable to be set aside
[103] The 4 pieces of land having been transferred under a void

agreement and instrument are liable to be set aside. In the Federal Court
case of Borneo Housing Mortgage Finance Berhad v Time
Engineering Berhad [1996] 2 MLJ 12 at p 24, Edgar Joseph Jr FCJ
explained as follows when dealing with the SLO:
“The preliminary point we should like to deal with is: whether the system of
land tenure in Sabah is based upon the Torrens registration system?
Nowhere in the Land Ordinance is there any provision conferring

indefeasibility of title to or interests in land which is a feature of
central importance to the Torrens system of land registration. This is
to be contrasted with the position in Peninsular Malaysia and
Sarawak, where there are express provisions conferring such
indefeasibility. (See ss 92(1) and s 340 of the National Land Code 1965
and s 131 of the Sarawak Land Code (Cap 81) respectively.) Moreover, in
Sabah, unlike Peninsular Malaysia and Sarawak, in appropriate
circumstances the doctrine of adverse possession may be invoked against
private owners of land. (See s 6 of the Sabah Land Ordinance (Cap 68)
which merely bars any claim to any right, title or interest in state land only
based on adverse possession thereof).
…….
Similarly, in the earlier case of Lin Nyuk Chan v Wong Sz Tsin [1964] MLJ
200, the old Federal Court, which comprised Thomson LP, Wee Chong Jin
CJ (Singapore) and Wylie CJ (Borneo), at a time when our apex court was
still the Privy Council, expressed the view that the Land Ordinance
provides for a modified Torrens system of land registration….”
(emphasis added)
[104] Section 88 of the SLO is often relied on to support the argument

that upon registration the title of the registered proprietor is indefeasible.
It reads:
“No new title and no dealing with, claim to or interest in any land except,
land still held under native customary tenure without documentary title shall
be valid until it has been registered in accordance with the provision of
this Part.” (emphasis added)
[105] The more recent Federal Court case of Sia Hiong Tee & Ors v
Chong Su Kong & Ors [2015] 4 MLJ 188 has reiterated as follows:
“[29] Section 88 of the SLO on the other hand does not incorporate
the concept of indefeasibility of title as found ins 340 of the NLC…
…..
[30] From the plain reading of s 88 of the SLO, we find there exists a
lacuna in this provision when compared with s 340 of the NLC which
embodies the concept of indefeasibility of title. Registration under the
SLO does not confer indefeasibility of title, deferred or immediate. We
are of the view that in the absence of statutory intervention in the like of the
proviso to s 340 (3), there is no protection afforded to the bona fide
purchaser for value without notice such as the appellants in the present
case. Therefore, with respect, we differ from the view expressed by Richard
Malanjum J in Ngui Yu Thau v Wong Mu Khyun & Or, at p 289 where he
stated: ‘Thus in Sabah with specific reference to land the principle as
enunciated by the Federal Court in Adorna Properties Sdn Bhd applies
notwithstanding the lacuna in the Ordinance. In other words no one derives
good title, right or interest from or through a forged instrument unless he
satisfied the doctrine of bona fide purchaser for value and without notice.’
[31] We are of the view that s 88 of the SLO must be considered on its
own without being unnecessarily influenced by the provisions of the NLC
because they are poles apart. Section 88 of the SLO merely deals with the
registration of new title, dealing with claim to or interest in any land, other
than land held under native customary tenure without documentary title. It
requires such title or dealing, etc to be registered for it to be valid under the
SLO. In other words, it does not deal with the issue of defeasibility or
indefeasibility of title as contained in s 340 of the NLC.
[32] The fact that the names of the appellants found their way on
the register of title does not automatically confer on the appellants an
indefeasible title. In other words, it is open to enquiry as to how the
appellants got themselves registered as owners of the land. That was
precisely what the courts below did in the present case and came to the
conclusion that the appellants could not get valid title to the land on the
ground that the power of attorney which was used as authority to transfer
the land was a forgery. In its judgment the Court of Appeal stated:' ... in this
case that the power of attorney that was used as authority to transfer the
said land to the appellants is a forgery, we agree with the learned trial judge
that the title of the appellants to the property is defeasible and that the
appellants could not have acquired a valid title to the said land though the
land has been registered in the name of the appellants.'
[33] We agree with the finding of the courts below that the instrument
of transfer in the present case was an invalid or void instrument of
transfer as it was executed on the authority of a forged power of attorney,
therefore, it could not give rise to a valid title in law and the SLO does
not seek to give validity to such a title even though the appellants were
bona fide purchasers for value without notice. There is nothing in the SLO
giving protection to such purchasers. Such statutory protection must be
expressly provided in the SLO (Gibbs w Messer [1891] AC 248).”
(emphasis added)
[106] The transfer of the 4 titles to Shim and duly registered in his
name is not indefeasible as the agreements and memoranda of transfers
are void for the reasons given and thus the registrations have to be set
aside and the 4 pieces of land reverted to the original proprietors in
Dayang and Harun.
[107] We therefore agree with the High Court though for a different
reason. The High Court had held that there was no express reference to
a set off in the Options to Purchase and the Sale and Purchase
Agreements with respect to a right of set-off in relation to the loans taken
as reflected in the Deeds of Acknowledgment of Indebtedness and
Undertaking to Pay. There was however also no prohibition as to a set-
off. We agree with learned counsel for Shim that when there is no
prohibition on a set-off, the common law would apply.
[108] Learned counsel for Shim drew our attention to a decision of the
Ontario Supreme Court case of Citibank Canada v. Confederation Life
Insurance Co. (1996) CanLII 8269 (ON SC) that held as follows:
“[35] Set-off may arise contractually, or at law (including by statute), or

in equity: see, generally, Telford v. Holt (1987), 41 D.L.R. (4th) 385 (S.C.C.).
……
[37] For set-off at law to occur, the following circumstances must arise:
1. The obligations existing between the two parties must be

debts, and they must be debts which are for liquidated sums
or money demands which can be ascertained with certainty;
and,
2. Both debts must be mutual cross-obligations, i.e. cross-claims

between the same parties and in the same right.
[38] Not surprisingly, for set-off to occur in equity, the requirements

are more relaxed. There is no necessity for mutuality. The cross-
obligations need not be debts, but may be for a sum of money whether
liquidated or unliquidated. However, the cross-claims for money must be
connected or interrelated in some manner which would make it unjust to
permit one party to enforce payment without accounting for the existence
of the other claim.”
[109] We are of the considered view that it would be too much of a

coincidence for the Deeds of Acknowledgment of Indebtedness and
Undertaking to Pay to be dated the same date as the Option to Purchase.
The reasonable inference is that both Dayang and Harun were aware that
should they default on the loans taken, the loan sums would be set-off as
the agreed purchase price for the respective pieces of land.
[110] It would also be very odd that the price stated in the Options to
Purchase and the Sale and Purchase Agreements and the Memoranda of
Transfer all reflect the same purchase prices as the loan sums
acknowledged in the 4 different Deeds of Acknowledgment of Debt and
Undertaking to Pay unless it is a case of an agreement to set-off these
amounts of loans from the purchase price of the respective properties
“secured” for the respective loan sums.
[111] Moreover, the relevant clause in the Sale and Purchase

Agreements for example Clause 2 of Harun’s Sale and Purchase
Agreement expressly stated that the purchase price (which is the same
amount as the loan sum) had been received as full payment, even prior
to the Agreement being dated though already signed in escrow at the time
of signing the Deeds of Acknowledgment of Debt and Undertaking to Pay.
[112] Shim had acted consistent with his understanding of the parties’
agreement on this which is the reason why he did not have to sue them in
Court to recover the loan sums upon default. The fact that there was
rental payments by Dayang to Shim after the transfer of Dayang’s three
properties to Shim would be a strong indication that Dayang knew of the
transfer of her three properties to Shim. There were also WhatsApp
messages from Shim to Dayang when there was default in rentals for Lot
188 and 189 in Astana Heights.
[113] When she defaulted in payment and when she and her son
Harun sued to recover the properties, Shim then counterclaimed for
vacant possession of the properties and for a declaration that he is the
lawful owner of the 4 properties.
[114] Ordinarily Shim would have been entitled to set-off the loans
given against the purchase price of the 4 properties if not for the fact that
this Court has held that the Sale and Purchase Agreements and the
Memoranda of Transfer are void with the result that no set-off is possible.
Whether the Counterclaim for the tort of injurious falsehood and the
tort of abuse of process could be sustained
[115] In the light of the above reasons given, Shim’s Counterclaim for
the tort of injurious falsehood and the tort of abuse of process said to have
arisen as a result of Dayang and Harun making false statements, cannot
be sustained.
[116] In a Court of law, the Court may believe certain averments of the
parties and disbelieve certain averments for reasons given by the Court.
That cannot give rise to the tort of injurious falsehood nor the tort of abuse
of process.
[117] Generally, statements made in judicial proceedings cannot be a

matter of a separate tort of injurious falsehood or defamation. In
deserving cases where much of the Court’s time has been dissipated
listening to allegations that could not be substantiated or supported by
facts, the Court shall not hesitate to mulct a party with costs.
[118] In a case that justifies prosecution for perjury the Court would
direct the parties affected to make a police report or furnish a copy of the
notes of proceedings to the Attorney General as the Public Prosecutor.
[119] Likewise, the action of Dayang and Harun could not be said to
be an abuse of process for they managed to get back their 4 properties.
Going by the standard asked of Shim for this Court to uphold, Shim himself
would be guilty of abuse of process in depriving the plaintiffs of their
properties other than through the approved method of a charge being
properly created for the loans taken. We need say nothing more.
Decision
[120] In the light of our above findings that the loans were friendly
loans, having satisfied ourselves that Shim was not a moneylender within
the meaning of the MA 1951, the proper order should be that this appeal
is to be allowed in part and that each of the respondents, Dayang and
Harun, shall each repay the appellant Shim the sum acknowledged to be
owing to the appellant in the SAFs.
[121] For this purpose we allowed judgment to be entered against

Dayang for RM1,230,000.00 together with interest at 5% per annum from
the date of our decision on 17.3.2023 to date of realisation and another
judgment for RM1,152,240.00 against Harun with interest at 5% per
annum from the same date to date of realisation.
[122] We struck down the default interest of 1.5% per month as it was
Shim’s stand that he did not charge this default interest even though it
was provided for as suggested by Harun. He of course had not told us
how the properties that he had transferred to himself were all so
coincidentally equal to the amount of the loans given.
[123] Save for the above, the rest of the order of the High Court is
affirmed and maintained.
[124] Each party shall bear their own costs here and costs in the High
Court is affirmed.
Dated: 17 October 2023.
Sgd.
LEE SWEE SENG
Judge
Court of Appeal
Malaysia
For the Appellant:

Tsang Hieng Yee
Messrs Tsang & Co.
For the Respondent:

Sharatha Masyaroh binti John Ridwan Lincon
Messrs Lincon & Co.
Legislation referred to:
Moneylenders Act 1951
Moneylenders (Amendment) Act 2003
Moneylenders (Amendment) Act 2011
Courts of Judicature Act 1964 [Act 91]
Contracts Act 1950 [Act 136]
Sabah Land Ordinance (Cap 68)
Sabah Land Rules (G.N. 505 of 1930)
Moneylenders (Control and Licensing) Regulations 2003
Cases referred to:

Borneo Housing Mortgage Finance Berhad v Time Engineering
Berhad [1996] 2 MLJ 12
Chai Then Song v Malayan United Finance Bhd [1993] 2 CLJ 640
Chow Yoong Hong v Choong Fah Rubber Manufactory [1962] MLJ 74
CIMB Bank Bhd v Anthony Lawrence Bourke & Anor [2019] 2 MLJ 1.
Cubic Electronics Sdn Bhd (in liquidation) v Mars
Telecommunications Sdn Bhd [2019] 6 MLJ 15.
Esmail Sahib v Noordin [1951] MLJ 98
Gan Yook Chin & Anor and Lee Ing Chin & Ors [2004] 4 CLJ 309
Kimlin Housing Development Sdn Bhd (Appointed Receiver and
Manager)(In Liquidation) v Bank Bumiputra (M) Bhd & Ors [1997] 2
MLJ 805
Global Globe Property (Melawati) Sdn Bhd v Jangka Prestasi Sdn
Bhd [2020] MLJU 424
John Lee & Son (Grantham) Ltd and Others v Railway Executive
[1949] 2 All ER 581
Leong Chooi Peng v Tee Yam [2011] 1 LNS 1709
Litchfield v Dreyfus [1906] KB 584
Sandhu Singh v Sellathurai [1955] MLJ 117
Sia Hiong Tee & Ors v Chong Su Kong & Ors [2015] 4 MLJ 188
Subramaniam Dhanapakiam v Ghaanthimathi [1991] 2 MLJ 447
Suisse Atlantique Société D'armement Maritime SA v NV
Rotterdamsche Kolen Centrale [1966] 2 All ER 61
Tan Aik Teck v. Tang Soon Chye [2007] 5 CLJ 441
UMW Industries (1985) Sdn. Bhd. v Kamaruddin bin Abdullah & Anor
[1989] 2 CLJ 1278

Shim Vui Geh V Dayang Masturah BT Sahari and Another Appeal

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S-01(NCvC)(W)-140-03/2022 Kand.

IN THE COURT OF APPEAL OF MALAYSIA

SHIM VUI GEH … APPELLANT

DAYANG MASTURAH BT SAHARI … RESPONDENT

[In the Matter of suit No.: SDK-22NCvC-1/1-2020 (HC)

Dayang Masturah bt Sahari … Plaintiff

Shim Vui Geh … 1st Defendant

Registrar of Land Titles of Sabah … 2nd Defendant

In the State of Sabah, Malaysia

Mohd Harun Indra Bin Pg Elias … Plaintiff

Shim Vui Geh … 1st Defendant

Registrar of Land Titles of Sabah … 2nd Defendant

HEARD TOGETHER WITH

IN THE COURT OF APPEAL OF MALAYSIA

MOHD HARUN INDRA BIN PG ELIAS … RESPONDENT

[In the Matter of Suit No.: SDK-22NCvC-26/12-2019 (HC)

Mohd Harun Indra Bin Pg Elias … Plaintiff

Shim Vui Geh … 1st Defendant

(Jointly tried with)

In the State of Sabah, Malaysia

Dayang Masturah Bt Sahari … Plaintiff

Shim Vui Geh … 1st Defendant

Registrar of Land Titles of Sabah … 2nd Defendant

JUDGMENT OF THE COURT

At the High Court

[9] The defendant on the other hand had counterclaimed for a

[11] The defendant’s counterclaim was correspondingly dismissed.

Before the Court of Appeal

[12] Before us the plaintiff argued that the moneylending is a friendly

[16] Shim argued that there was no evidence of a system of

[18] Both Harun and Dayang argued that the presumption of

[20] The parties shall be referred to as Shim, Dayang and Harun;

Whether the borrowers can deny knowing or understanding what

[22] There is nothing wrong in lending to someone in need especially

[25] The relevant paragraphs 1 - 3 of the SAFs are reproduced below

“1. Pursuant to a Deed of Acknowledgment of Indebtedness and

2. Pursuant to a Deed of Acknowledgment of Indebtedness and

3. Pursuant to Deed of Acknowledgment of Indebtedness and

[29] In Harun’s case, it was a loan of RM 1,152,240.00 as evidenced

“1. Pursuant to a Deed of Acknowledgment of Indebtedness and

[33] Parties who have signed a document and more so if it is before

[34] Both Dayang and Harun had subpoenaed as their witness PW 3

[36] In Chai Then Song v Malayan United Finance Bhd [1993] 2

[37] The High Court held at page 643 that:

“A person who chose to be careless, or not bothered to find out the

[38] Likewise, in UMW Industries (1985) Sdn. Bhd. v Kamaruddin

[40] A “moneylender” is defined under the MA 1951 in s 2 thereof as

“‘moneylender’ means any person who carries on or advertises or

[41] “Moneylending” is defined in s 2 of the MA 1951 as:

“‘moneylending’ means the lending of money at interest, with or without

[42] Generally, a single money lending transaction cannot make one

Section 3 provides that 'any person who lends a sum of money in

[43] Section 3 of the MA 1951 was deleted by the Moneylenders

"3. Certain persons and firms presumed to be moneylender

“Where in any proceedings against any person, it is alleged that such

[45] In Leong Chooi Peng v Tee Yam [2011] 1 LNS 1709 at p 41 it

[46] The current definition of “moneylender” was brought about by the

[47] This is to be contrasted with the old definition of “moneylender"

“any person who lends a sum of money to a borrower in consideration of a