Beneficiaries Claimed They Were Tricked into an Illegal Moneylending Deal — Court of Appeal ruled They Were Actually Victims of Their Own Lawyer Instead

In Norrisah Abu Bakar & Ors v Thunder heights Sdn Bhd & Ors [2026] CLJU 267, The Court of Appeal unanimously dismissed the appeal by the beneficiaries/administrators of the estate of the late Abu Bakar. The Appellants had claimed that the Sale and Purchase Agreement (SPA) dated 15 July 2008 with Thunder Heights Sdn Bhd was a sham transaction designed to disguise an illegal moneylending arrangement (RM1 million loan at 10% per month interest, dressed up as rental payments under a simultaneous Tenancy Agreement). The Court of Appeal affirmed the High Court’s finding that the SPA was a genuine arm’s-length commercial transaction and that the Appellants were victims of their own solicitors rather than of an illegal moneylending scheme. The appeal by the 5th Appellant, being an undischarged bankrupt, was declared incompetent while the remaining Appellants’ appeal was dismissed with costs.

A client was recently caught in a strikingly similar conveyancing crisis where a substantial deposit paid to solicitors as stakeholders in a land purchase has allegedly been released improperly in what appears to be a fraudulent or sham transaction. This recent Court of Appeal decision and this week’s Malay Mail report of a man losing RM1.3 million after a ‘law firm’ released the deposit in a fake land deal are deeply sobering. In both matters, the real victims placed their trust and money with law firms that were supposed to protect their interests, only to discover later that the funds had vanished without proper completion of the deal. These cases serve as a stark reminder that clients must exercise rigorous due diligence when appointing solicitors, insist on independent verification of all fund movements, and never assume stakeholder safeguards are automatic. Once the money is released, recovery is often protracted, costly, and uncertain.

Background of the Case

• The subject land (Grant No. 18602, Lot 4087, Mukim Sungai Buloh) was originally owned by Abu Bakar bin Habib Khan, who died in 1988.
• A 30-year lease to Petronas Dagangan Berhad was terminated after litigation; the dispute was settled in March 2008.
• The beneficiaries (Appellants) wanted to convert the land’s use from agricultural to commercial so they could lease it profitably, but they lacked funds after the Petronas litigation.
• Their solicitors, Messrs Amara & Ho (Vasantha Amarasekera), introduced them to a financing arrangement through clerk Chua Jeam Datt.
• On 15 July 2008 the Appellants executed an SPA to sell the land to Thunder Heights Sdn Bhd (1st Respondent – a newly incorporated company) for RM1 million.
• On the same day, Messrs Amara & Ho entered into a one-year Tenancy Agreement with Thunder Heights at RM100,000 per month (RM80,000 allegedly to the 2nd Respondent, licensed moneylender F.K. Capital Berhad; RM20,000 commission to the 3rd Respondent).
• The deposit (RM200,000) and balance (RM800,000) were paid to the Appellants’ solicitors as stakeholders, but the beneficiaries never received the funds.
• Thunder Heights later sold the land to MSB Holdings Sdn Bhd for RM4.4 million (2013).
• The Appellants sued in 2014 seeking to set aside the transactions on the ground of illegality under the Moneylenders Act 1951 and s. 24 of the Contracts Act 1950. They later abandoned the claim to set aside title and sought only damages.

Court Rulings

High Court: Dismissed the Appellants’ claim after a full trial.

• Held that the SPA was a genuine sale and purchase agreement, not a sham.
• Key reasons:
  • No loan agreement, repayment schedule or any contemporaneous moneylending documents existed.
  • The purchase price of RM1 million was reasonable in light of the land’s agricultural status, the high cost of conversion (premium alone exceeded RM2 million in 2015), the failed earlier sale to Strategic City for RM1.6 million, and the Appellants’ urgent need for cash.
  • The simultaneous Tenancy Agreement was explained as commercial – enabling the purchaser to market the land under a Dealer-Owned Dealer-Operated (DODO) petrol-station scheme while the solicitors acted for the purchaser in negotiations with oil companies.
  • The 2nd Respondent’s role was that of a “collection agent” for the newly incorporated 1st Respondent.
• Concluded that the Appellants were victims of their own solicitor Vasantha (later struck off) and the fugitive clerk Chua, not of an illegal moneylending transaction.
• Awarded total costs of RM120,000 against the Appellants.

Court of Appeal: Appeal dismissed; High Court decision affirmed.

• Applied the appellate test: intervention only if the decision is “plainly wrong” (Henderson v Foxworth, Tengku Dato’ Ibrahim Petra, etc.).
• Found the High Court judge’s evaluation of the evidence (absence of loan documents, commercial context, prior conduct of the Appellants acknowledging the SPA in 2010 proceedings) was reasonable and supported by the evidence.
• Noted that the Appellants’ 2010 suit against the purchaser and their own solicitors treated the SPA as genuine (they sued for the purchase price), which undermined their later “sham” allegation.
• Held that the doctrine of res judicata did not strictly apply but the 2010 proceedings were strong evidence of a genuine transaction.
• Reiterated that the Appellants failed to call the two administrators who actually signed the SPA, and their sole witness (10th Appellant) had previously sworn affidavits treating the SPA as valid.
• Appeal by the undischarged bankrupt 5th Appellant declared incompetent.

Key Takeaways

• Sham-transaction claims are fact-sensitive and require compelling evidence: Mere “unusual features” (same-day SPA & TA, involvement of a moneylender as collection agent, below-market price allegation) are insufficient if there is a plausible commercial explanation and no loan documentation.
• Absence of loan papers is often fatal to an illegal-moneylending defence: Under Section 17A of the Moneylenders Act 1951, courts place heavy weight on the lack of any contemporaneous loan agreement, repayment schedule or accounting records.
• Prior pleadings and affidavits can fatally undermine a later “sham” case: A party’s earlier acknowledgment of the SPA as genuine (e.g., in a 2010 suit for the purchase price) provides strong evidence against a subsequent illegality claim, even if res judicata does not strictly apply.
• Solicitor misconduct can completely shift the narrative: Courts may view the client as the victim of their own lawyer (and fugitive clerk) rather than of the counterparty, especially when funds were paid to the solicitors as stakeholders but never remitted.
• Appellate courts remain highly deferential to trial findings: The COA will not re-weigh evidence or substitute its own view unless the High Court’s decision is “plainly wrong”.
• Bankruptcy of a party still renders an appeal incompetent: The 5th Appellant’s appeal was struck out on this settled procedural ground.