SA Puncak Management Sdn Bhd v KL Petrogas Sdn Bhd

Appellant(s): Sa Puncak Management Sdn Bhd

Respondent(s): Kl Petrogas Sdn Bhd (Di Bawah Penerimaan)

• YA Datuk Wong Kian Kheong
• YA Datuk Ismail Bin Brahim
• YA Datuk Dr Shahnaz Binti Sulaiman

• The financier had granted two Islamic facilities (an Islamic Factoring Facility and an Islamic Pre-Factoring Facility) to the oil and gas company to finance its work under a project, with the pre-factoring facility structured as a "whole turnover agreement" assigning the company's future receivables before invoices were issued.
• After the financier terminated the facilities and appointed receivers and managers over the company, the company sued alleging the facilities breached the Moneylenders Act 1951 (MA) and were therefore void, while the financier counterclaimed for sums due under the facilities and against two guarantors.
• The High Court, in determining preliminary questions under Order 14A, held that the Pre-Factoring Facility (but not the Factoring Facility) constituted unlicensed moneylending under s 5(1) MA and was therefore unenforceable under s 15 MA, save that the financier could recover the principal sum on grounds of unjust enrichment.

• Whether s 5(1) MA prohibits merely an "activity of moneylending" or only the carrying on of a "business of moneylending", and whether a whole turnover agreement (assignment of future receivables before invoicing) constitutes moneylending business requiring a licence under MA.
• Whether, even if the Pre-Factoring Facility breached MA, the financier was exempted from MA by virtue of its status as a scheduled institution under the Banking and Financial Institutions Act 1989 and the relevant Ministerial Exemption Order.
• Whether an alleged breach of Shariah principles (excessive profit) in an Islamic financing facility, in itself, renders the facility void or unenforceable under civil law, and whether new evidence/stay applications filed on appeal (including a stay pending a companies scheme of arrangement) should be allowed.

• The Court of Appeal held that s 5(1) MA prohibits only the carrying on of a "business" of moneylending, not a mere "activity" of moneylending, and that the Pre-Factoring Facility, being a genuine whole turnover/debt-financing arrangement (evidenced by direct payments to the company's suppliers, employees and creditors), did not constitute an unlicensed moneylending business; in any event, the financier was exempted from MA under the applicable Exemption Order.
• The Court held that even if Shariah principles were breached by excessive profit, this did not by itself invalidate the facility under the Contracts Act 1950, following established authority that Shariah non-compliance does not automatically render an Islamic finance contract void; consequently, all preliminary questions were answered in the financier's favour, its appeal was allowed, and the company's appeal (on the unjust enrichment finding) was dismissed as no longer arising.
• The Court also dismissed the company's applications to adduce further evidence (as it was "existent evidence" failing both the Ladd v Marshall conditions and RCA r 7(3A)) and to stay the appeals pending a companies scheme of arrangement, and ordered the company to pay the financier the full judgment sum with interest and costs.