Borrowers’ appeal dismissed, court orders repayment of RM50mil loan

The Court of Appeal says Ace Credit (M) Sdn Bhd did not commit any substantive illegality and was entitled to have the loan repaid under the Contracts Act 1950.

The Court of Appeal ordered Pioneer Conglomerate Sdn Bhd and KBH Marine Industry Sdn Bhd to repay Ace Credit (M) Sdn Bhd loans totalling RM50 million to prevent unjust enrichment.

PUTRAJAYA:

 The Court of Appeal has upheld the validity of two moneylending transactions collectively worth RM50 million, ruling that they remain enforceable despite technical non-compliance with the Moneylenders Act 1955.

Justice Lim Chong Fong, delivering the court’s unanimous verdict, said the contravention was not serious, noting also that lender Ace Credit (M) Sdn Bhd had not attempted to conceal the purpose of the loan agreements.

In dismissing the appeals brought by Pioneer Conglomerate Sdn Bhd and KBH Marine Industry Sdn Bhd, Lim said:

“There is no substantive illegality. Moreover, we find that the agreement has been wholly performed by Ace Credit, but Pioneer has defaulted in repaying the loan, particularly the principal sum.”

In a written judgment released recently, the judge said that the High Court was correct in holding the agreements void, and that restitution ordered under Section 66 of the Contracts Act 1950 was appropriate to prevent unjust enrichment.

Also on the bench hearing the appeal were Justices Che Ruzima Ghazali, now a Federal Court judge, and Alwi Abdul Wahab, who agreed there was no merit in the appeal to warrant appellate intervention.

The parties were ordered to bear their own costs.

Ace Credit, a licenced moneylender had in 2017 disbursed a RM35 million to Pioneer and a RM15 million loan to KBH Marine Industry for investment purposes. KBH Marine also pledged its property as security for the loan.

Both defaulted in the payment and Ace Credit filed a suit for recovery of the money.

However, KBH Marine and Pioneer also filed their respective claims, contending that the moneylending transaction was unlawful and therefore invalid and void.

The High Court agreed that the transactions had violated certain provisions of the Act, resulting in the agreement and security documents being unenforceable.

Despite this, the High Court ordered restitution under Section 66 of the Contracts Act 1950 — requiring KBH Marine and Pioneer to return the loan sum to Ace Credit.

Lawyers Dinesh Nandrajog, Loo Man Keith and Lim Chun Yen appeared for Ace Credit, while Rajakumaran Muthusamy represented Pioneer. Tan Swee Cheng and Daphne Choy acted for KBH Marine. - FMT