Posco Daewoo Malaysia Sdn Bhd (PDM) entered into 3 credit facility agreements (CFAs) with Tenaga Wan Bersaudara Sdn Bhd (TWB) to finance the importation of cars into Malaysia. All transactions on behalf of TWB was handled by a man named “Chua”. Out of 8 transactions, 6 went smoothly whilst Chua requested for deferment of payment for the last 2 transactions. Chua furnished PDM with post-dated cheques which was dishonoured. TWB then made part-payment through a third party but failed to settle the balance GBP1,058,862. PDM sued to recover this amount plus late payment interest.

At the High Court
The High Court dismissed PDM’s suit because PDM failed to prove that Chua was authorized to enter into the CFAs on behalf of TWB. The evidence showed that Chua fully managed the warehouse where all the cars were stored and TWB had no dealing in it whatsoever. Evidence also did not show that TWB allowed Chua to enter the CFAs.

Additionally, the High Court found that even if Chua had authority, the CFAs were void because PDM was an unlicensed moneylender.

PDM appealed against the said decision.

At the Court of Appeal
The Court of Appeal allowed the appeal.

On issue of Agency
TWB had affirmed Chua as its agent, evidenced from the fact that:


Importantly, the Court of Appeal held that if Chua was not authorized to act on behalf of TWB, TWB should have taken action to notify Chua that he was not an authorized agent and remove Chua from involvement in any dealings involving TWB.

In other words, the responsibility lies with TWB to show that Chua was not authorized to act on their behalf. The mere appearance of authority on the part of Chua was enough to render TWB responsible for Chua’s actions. It was not for PDM to ensure that Chua was in fact an authorized agent.

On issue of moneylending
Trade credit financing is not a sham document and cannot be construed as illegal moneylending.

Written by: Irdina Edzlyzam ([email protected]), pupil-in-chambers reading in the chambers of Chan Kheng Hoe ([email protected]).

23 Responses

Leave a Reply

Your email address will not be published. Required fields are marked *