DALAM MAHKAMAH TINGGI MALAYA DI KUALA LUMPUR

(BAHAGIAN DAGANG)

ANTARA

UNITED OVERSEAS BANK (MALAYSIA) BHD

(dahulu dikenali sebagai OUB Finance
(Malaysia) Berhad
(No Syarikat: 271809-K) ... PLAINTIF

DAN

[GUAMAN NO: D8-22-1247-TAHUN 2003]

1. DAYA NURI SDN BHD

(No Syarikat: 345448 H)
2. LEONG KIM MING
(No K/P: 8112117)
3. METAL-PRECISION TURNING & ENGINEERING SDN BHD
(No Syarikat: 189316 T) ... DEFENDAN-
DEFENDAN

DAN

[GUAMAN NO: D8-22-1248-TAHUN 2003]

1. DAYA NURI SDN BHD

(No. Syarikat: 345448 H)
2. LEONG KIM MING
(No K/P: 8112117)
3. METAL-PRECISION TURNING & ENGINEERING SDN BHD
(No Syarikat: 189316 T) ... DEFENDAN-
DEFENDAN

DAN
 [GUAMAN NO: D8-22-1249-TAHUN 2003]

1. DAYA NURI SDN BHD

(No Syarikat: 345448 H)
2. LEONG KIM MING
(No K/P: 8112117) ... DEFENDAN-
DEFENDAN

CONTRACT: Agreement - Nature of - Whether transactions entered into

by 1 s t defendant with plaintiff were hire-purchase agreements or bills of
sale - Allegation that three agreements were bills of sale and never
registered - Whether such agreements were enforceable against 1 s t
defendant

CONTRACT: Guarantee - Liability of guarantors - Joint and several

guarantors of the 1s t defendant - Whether letters of guarantee and
indemnity signed by 2nd and 3rd defendants enforceable

[Judgment entered as prayed against all the defendants in the three

suits .]

Case(s) referred to:

BSNC Leasing Sdn Bhd v. Sabah Shipyard Sdn Bhd & Ors [2000] 2 MLJ
70 (refd)
Eastern Distributors Ltd v. Goldring [1957] 2 All ER 525 at 527 (refd)

Kan Yeow Wing v. Keng Soon Motor Finance Co [1962] 28 MLJ 391 (refd)

MBF Leasing Sdn Bhd v. Ban Huat Group Holdings Sdn Bhd & Ors
[2000] MLJU 639 (refd)
Polsky v. S. & A. Services [1951] 1 All ER 185 (refd)

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Legislation referred to:

Bills of Sale Act 1950, ss. 3, 4(1)

Other sources referred to:

Halsbury’s Laws of England (4t h ed 2004 reissue) para 101 at page 60

ALASAN PENGHAKIMAN LISAN

OLEH YANG ARIF HAKIM DATO’ KANG HWEE GEE

This is my oral judgment:

The plaintiff’s claim in all the three suits arose from the hire-
purchase that the plaintiff provides to the defendants in respect of
machineries purchased by the 1s t defendant from suppliers.

Each suit involves a separate hire-purchase transaction in respect

of each set of goods and they were all heard together before the
late Justice Abdul Wahab Said Ahmad but for his untimely demise
did not deliver his judgment.

The parties are agreed that I continue from where the late Justice
Abdul Wahab Said Ahmad left off. The parties had as instructed
by His Lordship submitted written submissions.

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Three is sues were agreed to by the parties for the determination
of the last Justice Abdul Wahab Said Ahmad:

(i) w h e t h e r t h e t r a n s a c t i o n w a s a h i r e- p u r c h a s e t r a n s a c t i o n o r
a loan transaction;

(ii) i s t h e t r a n s a c t i o n i n ( i ) a b o v e i s e n f o r c e a b l e a g a i n s t t h e 1s t
defe ndant;

( i i i ) a r e t h e l e t t e r s o f g u a r a n t e e a n d i n d e m n i t y s i g n e d b y t h e 2n d
and 3 r d defendants enforceable.

Puan Naili for the plaintiff: (verbatim)

1. Refer to the respective agreements signed between the 1s t

defendant and the plaintiff. It is clear that they were hire-
purchase agreements compelling the 1s t defendant to
honour the terms stated therein.

2. See schedule to each agreement. The term of repayment is

stated therein :

- 1 st a g r e e m e n t t o p a y i n 5 9 i n s t a l m e n t s o f R M 6 ,4 7 6 . 0 0 ;
- 2nd agreement also to pa y in 59 instalments of
RM1 0 , 8 8 8 . 0 0 ;
- 3 r d agreement to pay in 60 instalments of RM6 ,6 2 5 . 0 0 .

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3. 1 s t defendant had defaulted in all the 3 agreements to pay
the requisite sums in each of the agreements thereby
contravening Clause 1 in each case.

4. Conseq uently, the plaint iff issued the three letters of

demand. See page 23 of Bundle B1.

5. The 1s t defendant failed to satisfy the demand in each case.

Hence the claim against the 1s t defendant for outstanding
installments p u r s u a nt t o C l a u s e 7 o f t h e a g r e e m e n t .
Although the plaintiff served on the 1 s t defendant a notice of
repossession in respect o f each case, the goods were not
repossessed. In all the three s uits therefore the plaintiff is
only claiming for the arrears of installments under Clause 7.

6. The 2 n d a n d t h e 3 r d d e f e n d a n t s a r e j o i n t a n d s e v e r a l
g u a r a n t o r s a n d i n d e m n o r s i n e a c h c a s e v i d e a let t e r o f
guarantee and indemnity and are therefore liable to pay for
the default of the 1 s t d efendant. The joint and several
guarantee is payable o n demand and und er Clause 14 of
the letter of guarantee and indemnity, a certificate by an
officer of the plaintiff cons titutes proof of amount owed by
the 1 s t defendant.

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Mr. S.S. Kumar for the defendants:

1. There are three defendants in the 1s t a n d 2n d suits and in the

3 r d suit there are two defendants.

2. The transaction is clearly in each case not a hire-purchase

transaction. It is a bill o f sale and should be contracted
under the Bills of Sale Act 1950. See Section 4(1) which
read as follows:

“(1) Every bill of sal e shall be attested and registered under this Act
within seven clear days after the execution thereof, or, if it is
executed in any place out of West Malaysia, then within seven
clear days after the time at which it would, in the ordinary
course of post, arrive in West Malaysia if posted immediately
after the execution thereof, and shall truly set forth the
consideration for which it was given, otherwise the following
consequences shall ensue :-

(a) in the case of a bill of sale made or given by way of

secur ity for the payment o f m o n e y b y t h e g r a n t o r t h e r e o f ,
such bill of sale shall be void in respect of the personal
chattels comprised therein; and

(b) in the case of any other bill o f sale it shall, as against all
trustees or assignees of t h e e s t a t e o f t h e p e rson whose
chattels or any of them are comprised in such bill of sale
under the law of bankrup tcy or liquidation or under any
assignment for the benefit of the creditors of such
p e r s o n , a n d a l s o a s a g a i n s t a ll bailiffs, sheriffs and other
p e r s o n s s e i z i n g a ny cha t t e l s c o m p r i s e d i n s u c h b i l l o f
sale in the execution of any process of any court
a u t h o r i z i n g t h e s e i z u r e of t h e c h a t t e l s o f t h e p e r s o n b y
whom or of whose chattels such bill has been made, and
a l s o a s a g a i n s t e ve r y p e r s o n o n w h o s e b e h a l f s u c h
process shall have been issued, be deemed fraudulent
and v o i d s o f a r a s r e g a r d s t h e p r o p e r t y i n o r r i g h t t o t h e
possession of any chattels comprised in such bill of sale
w h i c h a t o r a f t e r t h e time of filing the petition for
b a n k r u p t c y o r l i q u i d a t i o n o r o f t h e e xe c u t i o n o f s u c h

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 assignment or of executing such process, as the case
may be, and after the expiration of seven days after the
execution of such bill of sale are in the possession or
apparent possession of the person making such bill of
sale or of any person against whom the process has
issued under or in the execution of which such bill has
been made or given as the case may be. ”

3. See Section 3 definition of “bill of sale ” - “ includes the

agreements for the hire of per sonal chattels entered into for
th e purpose of securing the repayment to the lessor of such
chattels of money advanced by him to the hirer; and th e
h i r e r s h a l l i n e v e r y s u c h ca s e b e d e e m e d t o b e t h e g r a n t o r
of the bill of sale and the lessor shall be deemed to be the
grantee thereof”. The goods were purchased by the 1 st
defendant initially at all times; invoices were issued to the
1 s t defendant and the 1s t d e f endant paid the initial payment
to the seller of the goods. There were no invoices or
documents to show ownership o f goods by the pla intiff in the
bundle of documents or even in the trial. So the plaintiff was
never the owner of the goods such that it could not hire the
goods on hire-purchase to the 1s t defendant.

4. As the Bills of Sale were never registered it is in each case

void and unenforceable.

5. See BSNC L e a s i n g S d n B h d v. Sabah Shipyard Sdn Bhd &

Ors [2000] 2 MLJ 70 per Gopal Sri Ram JCA at page 82:

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 “The present case is a far cry from Au Yong Kun Min v.
Tractors Malaysia Bhd. Here, Wing Teik and Sabah Shipyard
did not express any intention as to when property in the turbine
(which comes within the category of ‘specific goods ’) will pass
from the one to the other. Neither is there any form of conduct
or circumstances from which such intention is to be deduced.
The rule expresse d i n s. 20 of the Sale of Goods Act 1957
therefore applies with full force. Accordingly, the property in the
turbine passed from Wing Teik to Sabah Shipyard when the
contract was made. There is, as the learned judge has found,
no evidence to show any sale either by Sabah Shipyard or
Wing Teik to BSNC Leasing. The property in the turbine
therefore remained at all material times with Sabah Shipyard. ”

And at page 83:

“Returning to the present case, if one were to go behind the

principal document one would discover not a shred of evidence
to show that the turbine in question had been sold to BSNC
Leasing at any point in time before the execution of the hire-
purchase agreement. Yet the hire- purchase agreement refers
to BSNC Leasing as owner of the turbine which is plainly not
the truth. Further, it describes the purchase price to be RM20m
when in fact it was RM49m. Again, as the learned judge
pointed out, there are clauses in the hire- purchase agreement
which restrict Sabah Shipyard’s right to dispose of the turbine.
Yet, Sabah Shipyard, to the knowledge of BSNC Leasing
proposed to install the turbine into a power barge and dispose
off the finished product. In these circumstances it is amazing
how BSNC Leasing could possibly have treated the transaction
as a genui ne hire- purchase. In my judgment, the fair inference
to be drawn from the totality of the evidence is that Sabah
Shipyard owed Wing Teik RM29m and the hire-purchase
agreement was used as a device to cloak the real transaction
which was a loan upon the security of goods. In short, the hire-
purchase agreement was an unregistered bill of sale. Not being
in the statutory form, it was non-registrable and was therefore
void. Accordingly, the learned judge was entirely correct in
dismissing BSNC Leasing’s summons for leave to repossess
the turbine.”

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6. See also MBF Leasing Sdn Bhd v. Ban Huat Group Holdings
Sdn Bhd & Ors [2000] MLJU 639 per Muhammad Kamil bin
Awang J at page 598:

“Now applying the above principles to the instant case,

the evidence seems to show that the owner of the vehicles
was Selayang Auto Works in whose name the vehicles were
registered. The appellant was not the owner of the vehicles.
The respondent had duly paid a deposit of RM35,000 to
Selayang Auto Works in respect of the vehicles, (vide Exh.
P1). At the material time the hire - purchase agreement was
non existence. That is to say, the vehicles were purchased by
the respondent when it made the deposit to the Selayang
Auto Works, and the vehicles were released or transferred to
the respondent . The Hire- purchase Agreement (P4) between
the appellant and the respondent came into existence at a
later date on 1 st January 1991. It seems obvious that the
execution of Exh. P4 later was a sham, a mere device to cloak
a loan given by the appellant to the respondent for the
payment of balance of the purchase price. The appellant was
never the owner of the vehicles and must therefore fail in their
action. The agreement P4 was unenforceable as the appellant
was not a licensed money lender and as the agreeme nt had
not been registered as a bill of sale. See United Investment &
Finance Ltd v . Abdul Rahman & Anor [1 9 6 6 ] 2 M L J .”

7. In respect of the letter of guarantee and indemnity signed by

the other defendants, since the principal agreement is void
the guarantee cannot be enforced. See Halsbury’s Laws of
England (4 t h ed 2004 reissue) para 101 at page 60 - it is
clear no primary liability of the 1s t defendant exists so cannot
be enforced guarantee against the guarantor.

8. With respect to ind emnity, see page 12 sub -h e a d i n g

i n d e m n i t y o f B u n d l e B 1 , r e f e r r i n g t o “ we shall on written

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 demand indemnify you ” - letter only says demand made to
the guarantor on the guarantee and not indemnity. The
indemnity sought for was only for the sum of RM50.00 to
c o v e r t h e c o s t o f issuing the letter of demand .

Reply by Miss Sharoniit Kaur for the plaintiff in place of Puan Naili:

1. Agreed there are three suits as submitted.

2. All the three suits concerned hire-purchase agreement not

bill of sale. See page 7 of B1 - letter of request cum
agreement of 1 s t d e f e n d ant to the plaintiff to purchase
certain machines from Belton Sdn Bhd and to let them out to
the 1 s t defendant on hire-purchase.

Reply by Puan Naili for the plaintiff:

1. The evidence given by SP1 clearly states that 1s t defendant

had paid 10% as a deposit and he did pay the 10%. See
Schedule - t a b l e o f p a y m e n t a t p a g e 7 o f B u n d l e s B 1 , B 2
a n d B 3 s h o w s deposit cash of RM32,400.00, RM55,597.65
and RM36, 775.00 respectively. The balance of 90% of
purchase price in all the three transactions were paid by the
plaintiff. This is clear from all the three schedules, in B1
RM291,600.00, B2 RM493, 000.00 and B3 RM300,000.00.
Submit: plaintiff became owner of goods upon payment and

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 t h e r e f o r e t h e t r a n s a c t i o n s w e r e h i r e -p u r c h a s e t r a n s a c t io n s
as per pages 7 to 10 of Bundles B1, B2 and B3 and not a
Bill of Sale.

2. Also see evidence of SD1 where upon cross-examination by

the plaintiff’ s counsel, agreed that the agreements were
hire-purchase agreements.

FINDINGS AND DECISION

Whether or not the plaintiff will succeed in these three suits will
depend on whether in substance the three agreements entered
into between the parties were hire-purchase agreements and not
bills of sale which were never registered and therefore void and
unenforceable.

To decide this issue it would be desirable to follow the time

honoured test of Lord Goddard CJ in Polsky v. S. & A. Services
[1951] 1 All ER 185 as set out in Kan Yeow Wing v. Keng Soon
Motor Finance Co. [1962] 28 MLJ 391 as follows:
“The principles applicable in determining whether a hire-
purchase agreement is a bill of sale and therefore void for non-
registration are as follows : (1) If a person deliberately, with a clear
understanding of what he is doing, and with all appropriate formalities,
sells his property to a finance company and then hires it back under a
hire-purchase agreement, the agreement is not a bill of sale. (2) If the
purpose of the transaction is to enable the hirer to dispose of the
property to a customer, the courts will the more readily hold that the
agreement is not a bill of sale. (3) If the hire-purchase agreement is a
mere device to cloak a loan, the document is a bill of sale. (4) In

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 considering whether the real transaction is one of loan, it is necessary
to look behind the docume nt to discover its true nature. (5) If the facts
are not truly stated in the document, this is a circumstance tending to
show that the document is a mere cloak. North Central Wagon
Finance Co. Ltd. v. Brailsford & Anor. [1962] 1 All ER 502 followed. ”

Havin g considered the evidence recorded by His Lordship the late

Justice Abdul Wahab Said Ahmad there could be no doubt that all
the three agreements entered into by the 1s t defendant were indeed
hire-purchase agreements .

I accept the submission of Puan Naili counsel for the plaintiff that
the schedule of payment in each agreement constituting the offer
of the plaintiff to the 1s t defendant “to let on hire” the goods to the
1 s t defendant clearly shows that the cash deposit of RM32, 400.00,
RM55, 597.65 and RM36, 77 5.00 respectively had been paid by
the 1s t defendant leaving the balance of RM291,600.00,
RM493, 000.00 and RM300,000.00 in each of the purchases to be
paid by the plaintiff.

The plaintiff is entitled to rely on the cold prints of the three

agreements which the 1s t defendant had signed as prima facie
evidence that indeed the parties had entered into legitimate hire-
purchase agreements for unscheduled goods following which the
onus would shift to the defendants to prove that the transactions
as recorded were not hire-purchase transactions but were in fact
unregistered bills of sale.

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The defendants had failed to adduce any other cogent evidence
to show otherwise apart from the evidence of the 2n d defendant
Leong Kim Ming (in paragraphs 7 and 8 of his witnes s statement)
that the 1s t defendant had purchased the goods from the supplier
by making the initial payment and that the plaintiff had paid the
balance of the purchase price in each case. But the manner by
which a hirer acquired the goods to be hired out on hire-purchase
need not necessarily constitute the only deciding factor that the
goods were not taken on hire purchase. As Delvin J observed in
Eastern Distributors Ltd v. Goldring [1957] 2 All ER 525 at 527
(applied in B S N C L e a s i n g S d n B h d v. S a b a h S h i p yard Sdn Bhd &
Ors [2000] 2 MLJ 70 at 82):

“There is, however, nothing to prevent the owner of a vehicle from

selling it to a hire-purchase company, pocketing the price and paying it
back by instalments; and provided the sale is a genuine one and not
a sham, effect will be given to it as a hire-purchase agreement.
(Emphasis added.) ”

Given that the goods were in fact supplied by legitimate suppliers

whose existence was never in doubt, there is hardly any reason to
find the transactions a sham. It is more prob able than not the
purchases of the goods directly by the 1s t defendant instead of by
the plaintiff from the suppliers were made for the sake of business
convenience.

For the foregoing reasons, it is my findings that the transactions

entered into by the 1s t defendant with the plaintiff in all the three

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cases were legitimate hire-purchase agreements and not a
transaction registrable under s ection 4 (1) of the Bills of Sale Act
1950. They are therefore enforceable against the 1 s t defendant.

The 2n d a n d 3rd defendants in Suit Nos. D8-22-1247 -2003 and D8-

22-1248-2003 and the 2 nd defendant in Suit No. D8 -22-1249-2003
are joint and several guarantors of the 1s t defendant in each case
and are therefore co -extensively liable for the default of the 1s t
defendant.

There shall accordingly be a judgment as prayed against all the

defendants in all the three suits.

DATO’ KANG HWEE GEE

Hakim Mahkamah Tinggi
Bahagian Dagang 8
Kuala Lumpur.

Tarikh: 23 JANUARY 2009

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Didengar pada 20.8.2008, 21.8.2008, 16.10.2008, 13.11.2008,
1.12.2008, 19.1.2009, 23.1.2009.

Kaunsel:

Puan Naili binti Mohd Hilmi

Tetuan Goh & Partners ... bagi pihak Plaintif

Encik SS Kumar
Tetuan SS Kumar & Associates ... bagi pihak Defendan-
Defendan dalam
semua kes

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