Recognition Of Peer-to-Peer (P2P) Financing By The Court

Published date28 September 2021
Subject MatterFinance and Banking, Corporate/Commercial Law, Litigation, Mediation & Arbitration, Law Practice Management, Financial Services, Trials & Appeals & Compensation, Securities, Facilities
AuthorMs Claudia Cheah, Aufa Radzi and Kwang Qi Xiang

In the case of Pyo Travel (MY) Sdn Bhd & Anor v Modalku Ventures Sdn Bhd [2020] MLJU 575, the Malaysian High Court affirmed the Sessions Court's decisions in granting summary judgment in favour of Modalku Ventures Sdn Bhd ('the Plaintiff'). The Plaintiff was represented by Messrs Skrine.

In the two appeals heard together, Justice Darryl Goon (now Court of Appeal Judge) found that there were no issues to be tried in both the Plaintiff's suits against the borrowers and their guarantors ('the Defendants') for default of financing. The decision is significant as it is the first reported case whereby the Court analysed the legality of peer-to-peer financing, a growing Fintech business model which is gaining popularity in Malaysia.

Key points

  1. Peer-to-Peer financing is outside the ambit of the Moneylenders Act 1951.
  2. Modalku Ventures is legally licensed by the Securities Commissions to provide financial facilities.
  3. The interests charged by Modalku Ventures of between 12.5% to 15% per annum and late payment interest of 0.10% were not illegal, unconscionable nor exorbitant.
  4. Modalku Ventures has locus standi, or the capacity to bring an action to court against the borrowers, despite Modalku Ventures acting as 'Agents' between named 'Investors' and the borrower.


The Plaintiff acting as an 'Agent' of a list of investors ('Investors') granted financial facilities to the Defendants through its electronic platform. The facilities were secured by an Investment Note Facility Agreement ('INFA') executed by the Plaintiff, the Defendants and the Plaintiff's Investors. The Plaintiff is a Recognized Market Operator registered with the Securities Commission and the electronic platform is governed by the Capital Markets and Services Act 2007.

The Defendants defaulted in payments. The Plaintiff commenced two separate suits at the Sessions Court for RM648,311.26 against the Defendants in the first suit and RM595,221.57 against the Defendants in the second suit. The Sessions Court granted Summary Judgment and the Defendants appealed to the High Court. As the individual guarantors, issues raised and counsel for parties in both suits were the same, the High Court heard both appeals together.


The issues to be tried raised by the Defendants before the High Court were inter alia, as follows:

  1. The Plaintiff and the Plaintiff's Investors were not legally licensed to provide the financing facilities and therefore the facilities provided and the contracts entered into...

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