[2018] 1 LNS 24 Legal Network Series

IN THE HIGH COURT OF MALAYA AT SHAH ALAM

IN THE STATE OF SELANGOR DARUL EHSAN, MALAYSIA
[CIVIL SUIT NO: BA-22NCVC-470-08/2016]

BETWEEN

CHATIME MILK TEA LTD ... PLAINTIFF

AND

1. DURIA MANUFACTURING SDN BHD

(Reg. No: 1010427-T)

2. WONG WOIE MING

(No. K/P: 720725-08-6127) ... DEFENDANTS

CONTRACT: Loan - Friendly loan - Claim for recovery of friendly loan -

Defendant denied existence of friendly loan - Whether loan had been
converted into an investment - Whether transaction was illegal - Whether
plaintiff was involved in money lending business - Whether letter of
demand was successfully delivered and served on defendant - Whether
there was uncertainty of amount claimed

[Plaintiff’s claim allowed and defendants’ counterclaim dismissed

with costs.]

Case(s) referred to:

Aik Ming (M) Sdn Bhd & Ors v. Chang Ching Chuen & Ors & Another
Case [1995] 3 CLJ 639 CA (refd)

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AseamBankers Malaysia Berhad & Anor v. Lim Cheng Pow [2011] 1 LNS
1487 HC (refd)

Cipta Cermat Sdn Bhd v. Perbandaran Kemajuan Negeri Kedah [2007] 1

CLJ 498 CA (refd)

Duta Wajar Sdn Bhd v. Pasukhas Construction Sdn Bhd & Anor [2015] 4
CLJ 281 CA (refd)

Ngui Mui Khin & Anor v. Gillespie Bros & Co Ltd [1979] 1 LNS 60 FC
(refd)

Tractors Malaysia Bhd v. Kumpulan Pembinaan Malaysia Sdn Bhd

[1978] 1 LNS 220 FC (refd)

INTRODUCTION

1. The Plaintiff is a company incorporated in the United Kingdom

dealing with beverages whilst the First Defendant is a company
incorporated in Malaysia and the Second Defendant is a director of
the First Defendant. The First Defendant deals with fruits processing
business.

2. In this action the Plaintiff inter alia, seeks as follows:

2.1 a sum amounting to GBP200,000.00 or RM1,064,568.67

(exchange rate at GBP1.00 = RM5.329);

2.2 interest at 4% on GBP200,000.00 or RM1,064,568.67 per

month for a period of five months amounting to
RM200,000.00 as agreed upon in clause 2 of the Friendly
Loan Agreement (“FLA 2”); and

2.3 interest at 2% on GBP200,000.00 or RM1,064,568.67

amounting to GBP4,000.00 as agreed upon in paragraph 4

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of the Defendant’s letter dated 25.5.2015 (“FLA 1”) and

clause 2 of the FLA 2.

3. The Defendants seek to counterclaim inter alia, as follows:

3.1 a sum of RM200,000.00;

3.2 general damages; and

3.3 interest.

Background facts

4. On 25.5.2015 the director of the Plaintiff’s company entered

into a Friendly Loan Agreement (“FLA 1”) (Bundle B pp.68-69) with
the Second Defendant where the Plaintiff will lend GBP200,000.00
for the Defendants’ “durian production factory output expansion
purpose”. The loan period was for six months with a total interest of
2%. The repayment amount upon expiry will be GBP4,000.00 as
interest and the principal GBP200,000.00. The loan was disbursed and
credited into the First Defendant’s bank account on 26.5.2015.

5. Subsequently on 19.6.2015 the parties entered into another

Friendly Loan Agreement (“FLA 2”) (Bundle B pp.76-78) where the
terms were revised in respect of the interest chargeable. Under FLA 2
the interest was at 4% per mensem for the first to the fifth month and
2% for the sixth month plus the principal amount. The Second
Defendant a director of the First Defendant stood as guarantor upon
signing the Personal Guarantee Agreement (“PGA”) (Bundle B pp.79-
80) on the same date.

Plaintiff’s case

6. The Plaintiff called two witnesses i.e. the solicitor (PW1) who
prepared both the FLA 2 and the PGA and the second witness was a
director of the Plaintiff (PW2). It was the Plaintiff’s pleaded case that

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the FLA 1, the FLA 2 and the PGA ought to be read together and that
the Defendants had paid RM40,000.00 and defaulted the rest. PW2
denied that it was for investment purposes.

Defendants’ case

7. The Defendants called three witnesses namely the director of the

First Defendant i.e. the Second Defendant (DW1), its business partner
based in China (DW2) and the factory manager of the First Defendant
(DW3). It was the Defendants’ pleaded case that initially the
GBP200,000.00 was a loan but was converted into investment by the
Plaintiff. The Defendants further alleged the amount borrowed was
insufficient and hence required another RM250,000.00 to which the
Plaintiff agreed on condition that they should enter into another
agreement and hence FLA 2 was signed. But this RM250,000.00 was
never disbursed by the Plaintiff. It was further alleged that they were
still negotiating the repayment when the Plaintiff filed the current
suit. The Defendants also complained that apart from the loan that
was supposed to be free from interest, the Plaintiff was uncertain of
the amount claimed and that the Plaintiff has no licence or permit to
give out loan.

Issues

Whether the GBP200,000.00 was a loan or investment

8. It was not disputed that both PW1 and DW1 signed FLA 1 and
FLA 2 and DW1 signed the PGA. There is no reference to any kind of
investment but a friendly loan. I agree with the submission of the
learned counsel for the Plaintiff that upon clear and unambiguous
words in the agreement, it is not open to the court to read anything
else into it. Suffice for me to refer to Tractors Malaysia Bhd v.
Kumpulan Pembinaan Malaysia Sdn Bhd [1979] 1 MLJ 129 where

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Chang Min Tat FJ at p.130 speaking for the Federal Court stated as
follows:

“Where a contract has been reduced to writing,

“it is in the writing that we must look for the whole of the terms
made between the parties.”

per Viscount Haldane L.C. in Dunlop v. Selfridges at page 854.

And in such a circumstance, section 92 of the Evidence Act
1950 does not enable any party to that agreement to lead
evidence contradicting varying adding to or subtracting from its
terms.”.

9. The learned counsel for the Defendants referred to an email

correspondence (Bundle C p.5) and contended that the email would
prove that the loan had been converted into an investment and that the
FLA 1 was prepared only for the UK Tax Department’s purposes. The
email was sent by one Jeffy Chin to DW1, who was a common friend
of both PW1 and DW1. It carried FLA 1 in a draft form. It was clearly
stated therein as follows:

“You may revise the content and put in your company letter
head onto this agreement. Sign it on and scan it and email it
back to me. ...”.

DW1 signed FLA 1 consciously without making any amendment and

he attached FLA 1 and returned it back to Jeffy Chin on 22.5.2015.
Having read the contents of the email I do not see any indication to
convert the loan into an investment.

10. It was further argued by the learned counsel for the Defendants
that none of the Defendants’ witnesses were involved in the said
transaction as the money was transmitted to their partner in China. An
unsigned Investment and Joint-Venture Agreement (Bundle B pp.41-

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45) (“JVA”) and an email correspondence between one Carol Phoon

and DW1 (Bundle B pp.86-90) were relied upon by the Defendants in
support of their contention that the money was for investment.

11. PW2 was not cross-examined at any point of time pertaining to

any JVA with China. However, it was put to PW2 that he has no
personal knowledge of the whole transaction and the one who knew
was one Carol Phoon. According to PW2 Carol was his
employee/secretary. However, looking at the contents of the email all
they talked about was regarding the settlement proposal, the interest
and repayment and nothing concerning any JVA.

12. In Aik Ming (M) Sdn Bhd & Ors v. Chang Ching Chuen & Ors &
Another Case [1995] 1 MLRA 546 at p. 562 Gopal Sri Ram JCA (as
he then was) said:

“The content of the second rule may be stated thus. It is

essential that a party’s case be expressly put to his opponent’s
material witnesses when they are under cross-examination. A
failure in this respect may be treated as an abandonment of the
pleaded case and if a party, in the absence of valid reasons,
refrains from doing so, then he may be barred from raising it in
argument. It is quite wrong to think that this rule is confined to
the trial of criminal causes. It applies with equal force in the
trial of civil causes as well.”.

13. Therefore, it cannot be argued that these two documents

supported the contention of the Defendants. In view of the evidence
available I find it unsafe to rely on the unsigned JVA. In this regard I
find support in Duta Wajar Sdn Bhd v. Pasukhas Construction Sdn
Bhd & Anor [2014] MLRAU 1 where Idrus Harun JCA opined as
follows:

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“It is important to note that apart from the draft subcontract

agreement there is not an iota of evidence, documentary or
otherwise, which shows that the payment for the piling works
carried out by the appellant would be paid in this manner.
Accordingly, a pertinent question to ask is whether the unsigned
subcontract document binds the parties, the answer to which is
in our view decisive of this appeal. We accede to the argument
urged for the appellant that the parties had not agreed to such a
term at all. The terms as proposed in the subcontract agreement
in fact and in law, do not constitute a valid binding agreement
between both parties. Further, we must emphasise that the
appellant is under no obligation to accept terms that it could not
agree to. Such proposed subcontract agreement in law remains
only as a draft without any legal effect.”.

At least in Duta Wajar, the draft subcontract agreement was

forwarded to the appellant but here none at all and since there was no
evidence to indicate any agreement on the part of the appellant the
Court of Appeal held that the subcontract remained as a draft.

14. The so-called common friend Jeffy Chin was not called to testify
either by the Plaintiff or the Defendants. I do not think his evidence is
material. The email he sent to DW1 was sufficient for me to come to a
conclusion that the transaction is a loan. Similarly, in the case of
Carol Phoon as I have adverted to earlier the subject matter of the
correspondence was the proposal to settle the loan and nothing else.

Status of FLA 1 and FLA 2

15. It was also the Defendants’ pleaded case that the Plaintiff has no
licence or permit to give out loans (paragraph 4.5 Statement of
Defence). It was indeed put to PW2 that he has no licence to do so.
By this I took it that the Defendants would be contending that the
transaction was illegal. However, in the course of the submission the

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learned counsel for the Defendants in response to my query stated that

he would not submit on this issue.

16. Be that as it may, there was no evidence to suggest that the

Plaintiff was holding out as carrying money lending business. In
Money Lenders Act 1961 (Revised 1989) (“MLA 1961”) section 2
provides:

“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;”.

In Ngui Mui Khin & Anor v. Gillespie Bros & Company Ltd [1979] 1
MLRA 313 where the Salleh Abas FJ (as he then was) at p.317 held as
follows:

“At the outset we wish to observe that the Moneylenders

Ordinance, 1951 does not apply to moneylending but only to
moneylenders. It does not make every moneylending transaction
illegal and unenforceable. It is only a moneylending transaction
of a moneylender which is the subject-matter of the Ordinance
and must comply with its provisions on pain of being declared
illegal and unenforceable by the court. We make this simple and
obvious observation because it was canvassed very strongly
before us by counsel for the appellants that since the
transactions between the respondents and the client are
moneylending transactions, the respondents must be a
moneylender and the guarantee which the appellants signed is
therefore unenforceable. This submission overlooks the fact that
the party to a transaction who thereby becomes the creditor may
or may not be a moneylender. He is a moneylender if within the
meaning of s. 2 of the Ordinance he can be said to be a person
“whose business is that of moneylending”. To prove business

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requires some sort of continuity or system or repetition of

similar transactions. (Chow Yoon Hong v. Choong Yah Rubber
Manufactory [1960] 1 MLRA 447; [1962] MLJ 74). If business
of moneylending cannot be proved by factual evidence so as to
make a person a moneylender, presumption under s. 3 can be
prayed in aid. Here if it is proved that “a person lends a sum of
money in consideration of a larger sum being repaid” such
person is presumed to be a moneylender unless the contrary is
proved. However, s. 2 and s. 3 of the Ordinance excludes a
number of persons, organisations and societies from the scope of
the definition and presumption of a moneylender. These two
sections, therefore, do not regard their businesses as those of
moneylending, though the transactions of which they are parties
involve the lending of money. One such person specially
excluded from being a moneylender is mentioned in para (c) of
s. 2 of the Ordinance. He is “any person ... bona fide carrying on
any business not having for its primary object the lending of
money in the course of which and the purposes whereof he lends
money”. The English Moneylenders Act, 1900 contains a similar
exclusion clause, which has been the subject of many judicial
decisions. The principle established by all these decisions, we
respectfully agree, is that the question whether a person is a
moneylender or not is one of fact and that our task is to see
whether the primary or principal object of his business as
distinguished from incidental parts of his business is one of
moneylending.”.

17. The pleadings do not contain any averment disclosing that the
Plaintiff was involved in money lending business. In fact, paragraph
4.4 of the Statement of Defence referred to a visit by the Plaintiff to
the First Defendant’s factory in Kamunting, Taiping. It was more of a
business dealing where the First Defendant was going for expansion.

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There was no evidence adduced by the Defendants to suggest that the

Plaintiff was carrying out money lending business. Therefore, it is my
considered judgment that the loan albeit with interest is not illegal
under the MLA 1961.

Service of notice of demand/summons

18. Clause 3 of the PGA provides that the service shall be by hand
or registered post. The learned counsel for the Plaintiff submitted that
the letter of demand was successfully delivered and served by courier
service. The proof of service was tendered in court (Bundle B pp.83-
85). The learned counsel for the Defendant contended that such
service was bad as it was not in compliance with clause 3.

19. The Second Defendant did not deny receiving the letter of
demand. To my mind a document delivered by courier is as good as by
hand. In AseamBankers Malaysia Bhd & Anor v. Tan Sri Dato Lim
Cheng Pow [2012] 2 AMR 711 one of the issues raised was the
service of the put option notice which was either to be delivered
personally or by prepaid registered as provided under Clause 10.1 of
the Put and Call Option Agreement. Mary Lim Thiam Suan J (as she
then was) held as follows:

“With respect, I must disagree with the defendant. It is my

considered view that service through the assistance of a courier
service does not mean anything more than personal service. The
intent of clause 10.1 is to ensure that the defendant knows of the
exercise of the option by the plaintiffs. To do that, he is either
notified personally or through a prepaid registered letter. There
is evidence in court that the notice sent by courier was received.
A signature appears against the defendant’s name. There is no
further obligation imposed on the second plaintiff to ensure and
prove that it was the defendant who had actually received the
notices.”.

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Likewise, in the case before me the letter of demand was received by

the Second Defendant. Thus I find that the service was not defective.

Contradicting sum/amount

20. It was pointed out by the learned counsel for the Defendants that
there was uncertainty of the amount or sum claimed by the Plaintiff.
This issue to my mind is a non-starter. What matters is the reliefs
prayed for in the Statement of Claim and the evidence adduced before
me. I do note that the interest rate in FLA 1 differs from FLA 2.
Nonetheless, the Second Defendant agreed to the terms stipulated in
FLA 2 and in addition he signed the PGA.

21. The letters of demand (Bundle B pp.81-82) stated in clear terms

referring to the agreements dated 19.6.2015 and they were the FLA 2
and the PGA. The amount stated was correct. The sum RM160,000.00
is the interest at 4% per mensem. Having paid RM40,000.00 the
balance is RM160,000.00. The Defendants in particular the Second
Defendant did not demonstrate in what way he was misled. In fact, I
do not see how he could be misled as the terms are plainly spelt out in
clause 2 of the FLA 2.

Counterclaim

22. The Defendants in their counterclaim averred to their losses in

the business in China. In order to succeed they have to prove that the
Plaintiff agree to invest or become a partner or in any way involved in
the business venture in China. As I have discussed earlier in this
judgment and concluded that the GBP200,000.00 was a friendly loan,
I do not see how the counterclaim can succeed.

23. The JVA is not signed by any party. The sum borrowed from the
Plaintiff was transmitted to China - that was the decision solely made
by the Defendants. The agreement in Bundle B pp.47-67 is between

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DW1 and DW2’s company, even that is also unsigned. DW3 admitted
under cross-examination that he has no knowledge of FLA 1, FLA 2
and the PGA. According to DW3 during the visits by the PW1 and
Jeffy Chin they had discussion over the investment in China.

24. In Cipta Cermat Sdn Bhd v. Perbandaran Kemajuan Negeri

Kedah [2007] 2 MLJ 746 at p.752 Gopal Sri Ram (as he then was) had
this to say:

“Let me take the first issue. Learned counsel for the plaintiff
argued that there was a concluded contract. He submitted that
the parties were already ad idem without the need of a more
formal sale and purchase agreement. The defendant’s case is that
there was no binding contract because the formal agreement had
not been signed by both sides. I agree with the plaintiff’s
submission. I think there was a concluded contract despite the
want of a duly executed formal agreement. Just look at the facts.
You have an offer by the defendant. You have an acceptance by
the plaintiff. And you have consideration. You also have
certainty of parties, certainty of price and certainty of the
property. And you have the unequivocal acts of part
performance by the plaintiff which are referable to an existing
contract between the parties (see Steadman v. Steadman [1974] 2
All ER 977).”.

So there may exist a concluded contract even there is no formal

written agreement but the facts must support the existence thereof
which I could not find in this case.

Conclusion

25. In the circumstances I allowed the Plaintiff’s claim and

dismissed the Defendants’ counterclaim with costs.

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(ABD MAJID DATO’ HAJI TUN HAMZAH)

Judicial Commissioner
High Court Malaya
Shah Alam

Dated: 10 JANUARY 2018

Counsel:

For the appellant - Tan Chi Sian; M/s P. Y. Hoh & Tai
Advocates & Solicitors
Suite A-8-2, Level 8 Block A,
Megan Avanue 1,
No. 189, Jalan Tun Razak,
50400 Kuala Lumpur
Tel : 03 - 2166 8817
Faks : 03 - 2162 8825
For the respondent - Loh Chun Hoo; M/s Stanley Chang & Partners
Advocates & Solicitors
Unit C312, 3rd Floor, Block C
Damansara Intan
No. 1, Jalan SS 20/27
47400 Petaling Jaya
Selangor
Tel : 03 - 7118 8855
Faks : 03 - 7118 2899

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