Moneylender gets to regain unpaid loan principal despite breach

The Court of Appeal in Malaysia has ruled that a licensed moneylender, Million Cash Mortgage Sdn Bhd, can recover unpaid loan principals from borrowers despite breaching a statutory requirement to provide stamped loan agreements before disbursing funds. The decision was unanimous and set aside previous High Court rulings in three cases involving loans totaling RM890,000.

Justice Wong Kian Kheong explained that while Section 16(1) of the Moneylenders Act 1951 renders an agreement unenforceable if it lacks a duly stamped copy, it does not void the agreement itself. The court held that the Moneylenders Act allows the licensed moneylender to seek restitution under the equitable doctrine of unjust enrichment if the borrower is enriched by the lender's services while the lender bears the costs.

The High Court had dismissed Million Cash's claims based on earlier case law, but the Court of Appeal rejected this approach, noting that Section 16 uses the phrase "shall not be enforceable" rather than "void." The court also dismissed the company's reliance on Section 66 of the Contracts Act 1950, which only applies when an agreement is found to be void.

However, Million Cash could still rely on the equitable doctrine of unjust enrichment, which requires four elements: enrichment, enrichment at the expense of the lender, unjust retention of the money, and no valid defence to restitution.

The court stressed that Million Cash's breaches were technical in nature and did not undermine the borrower protection provisions of the Moneylenders Act. The borrowers were ordered to repay the outstanding principals with 5% interest from March 11, until full payment, and Million Cash must relinquish any land charges securing the loans once the debts are settled.