Triple Zest Case: Lending with Interest Without a Licence Can Cost You Everything

Keywords: Moneylenders Act 1951 Malaysia, illegal moneylending, unlicensed loan Malaysia, Triple Zest case, lending without licence, recover principal and interest

Introduction

If you lend money in Malaysia with interest—but without a Moneylenders Licence—you could lose not just your profit, but your entire capital.This is the harsh lesson from the recent Triple Zest Trading & Suppliers Sdn Bhd v Applied Business Technologies Sdn Bhd case, decided by the Federal Court on 19 June 2023.

Case Summary

• Loan Amount: RM800,000

• Agreed Profit: RM800,000 (100% return)

• Total to be repaid: RM1.6 million

• Dispute: The borrower failed to repay as agreed, and the lender sued for both principal and profit.
  

Court Journey:

1. High Court: Ruled in favour of the lender.

2. Court of Appeal: Allowed recovery of principal only, not the “profit.”

3. Federal Court: Overturned entirely—lender gets nothing.
   

Why the Lender Lost Everything

The Federal Court found:

1. Presumption of Moneylending

   • Under Section 10OA, Moneylenders Act 1951, if someone claims you are a moneylender, the law presumes it’s true unless you can prove otherwise.

   • Lending with interest = presumed to be “carrying on a moneylending business.”

2. Labels Don’t Matter

   • Calling interest “agreed profit,” “profit share,” or “guaranteed returns” does not change its legal nature. The court looks at the substance, not the wording.

3. Section 15 – Agreements Void

   • Any loan agreement made by an unlicensed moneylender is unenforceable.

   • That means no principal, no interest—nothing can be recovered through the courts.
     

Key Legal Principles from Triple Zest

• Unlicensed moneylending is a complete defence for borrowers.

• Principal is not automatically recoverable—Federal Court explicitly rejected the old assumption that only interest is lost.

• Burden of proof is on the lender to show they are not in the business of moneylending.
  

Why This Matters to Business Owners & Investors

Many people—especially private investors—structure loans with “profit” or “returns” clauses without realising it could be classified as illegal moneylending.

If a dispute arises, you risk:

• Losing your entire investment in court.

• Being investigated for offences under the Moneylenders Act 1951.
  

Safer Alternatives to Unlicensed Lending

If you want to fund a business or person without falling foul of the Act:

1. Avoid charging interest unless you hold a valid Moneylenders Licence.

2. Take equity instead—buy shares and receive returns via legally declared dividends.

3. Use secured trade terms—sell goods/services on credit with clear payment terms, backed by security.

4. Consider joint ventures—properly documented arrangements where returns are tied to business performance.
   

Final Takeaway

The Triple Zest decision sends a clear message:If you lend money with interest but without a valid licence, the courts can strip you of both your interest and your principal.

Be wary: one badly structured deal could erase your entire capital overnight. AUTHOR PROFILE

Rudi Cheu is the principal of Rule & Co. Advocates & Solicitors; a Malaysian law firm focusing on practical and cost-effective solutions for debt recovery and commercial disputes. With nearly a decade of debt recovery experience under his belt; Rudi is passionate about helping businesses navigate debt recovery challenges and shares insights at www.rulecolaw.com/blog.

He can be reached via Whatsapp: +60102028095 or via email: rudi.cheu.law@gmail.com