JANUARY 10 — By any outward appearance, it looked like a simple property deal.
Two landowners signed Sale and Purchase Agreements (SPAs) to “sell” their properties to a woman who agreed to pay the full purchase price. The contracts even had a buy-back option, which allowed the original owners to repurchase the properties if they wanted to. Everything was documented by lawyers. On paper, it was a routine conveyancing transaction.
But the Court of Appeal in Tang Ser Chiew & Another v. Lee Mei Kim ruled that it was nothing of the sort.
What was camouflaged as a routine property sale was, in reality, an illegal money-lending operation that charged a 60 per cent interest per year and used people’s homes as collateral. This resulted in the Court of Appeal invalidating the entire arrangement.
Milking the desperate
The story began with a development company that needed more than RM1 million urgently to pay stamp duty on a land it was purchasing. Without that payment, the deal would collapse.
The company’s directors could not raise the money through banks, so they turned to a private individual who offered to “help.”
But the help came at a steep price.
Instead of signing a loan agreement, the parties signed two SPAs. Under those documents, two properties belonging to the company’s directors were supposedly sold to the lender. At the same time, the directors were given the right to “buy back” their own properties, provided they repaid the money with interest at 5 per cent per month (which works out to 60 per cent per year).
In substance, it was a loan, and the properties were the security. The “sale” was just the wrapping paper.
Why disguise a loan as a sale?
Malaysia has a law that strictly controls money-lending.
Under the Moneylenders Act 1951, anyone who lends money for interest must hold a licence. There are also limits on how much interest can be charged. Most importantly, if an unlicensed moneylender gives a loan, the law says that the agreement is unenforceable.
As a result, illegal moneylenders often try to get around the law by dressing up loans as genuine property transactions. But Malaysian courts are not fooled by cleverly disguised documents.
Looking behind the paperwork
When the dispute reached the Court of Appeal, the judges did not simply read the letter of the contracts—they examined what had actually happened.
• There was no deposit.
• The sellers never received the purchase price.
• The money went straight to the lawyers.
• The so-called “buyer” was not a licensed moneylender.
• The buy-back clause, the judges concluded, was simply a disguised repayment obligation.
Dire legal consequences
Because the transaction was an illegal money-lending transaction, the law was unforgiving.
In plain terms, the court ruled that the entire arrangement was a sham designed to evade Malaysia’s Moneylenders Act. The result was devastating for the lender: the contracts were unenforceable, and she had no right to the properties.
The message to the public is simple:
If someone asks you to “sell” your house when you are really borrowing money, it may not be a sale. Instead, it may be a trap.
And if you try to hide a high-interest loan behind clever paperwork, the courts will not protect you.
This article is for informational purposes only and does not constitute legal advice. If you’re facing a similar situation, consult a qualified lawyer.
*This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail.
