Cheong Kim Hock v Lin Securities (Pte) (in liquidation)

• Judge: Goh Joon Seng J
• Judgment Date: 05 March 1992
• Neutral Citation: [1992] SGCA 17
• Citation: [1992] SGCA 17
• Defendant Counsel: Sarjit Singh Gill and Gan Kam Yuin (Shook Lin & Bok)
• Published date: 19 September 2003
• Plaintiff Counsel: Harry Elias (Harry Elias & Partners) and OK Rai (Tang & Co)
• Date: 05 March 1992
• Docket Number: Civil Appeal No 5 of 1988
• Court: Court of Appeal (Singapore)
• Subject Matter: Appeals,Whether loan constitutes moneylending business,Credit and Security,Mere collection of interest insufficient,Civil Procedure,Moneylenders Act (Cap 188),Duties,Principles applied,Introduction of new points,Directors,Agreement for purchase of shop units at inflated price,Undue influence and breach of fiduciary duty of director,O 57 r 13(2) Rules of the Supreme Court 1970,Fiduciary duty,Illegal money-lending,No allegation of fraud,Companies,Fresh evidence,Originating processes,Money and moneylenders,Loan by company to director and third party,Purchase on eve of winding-up proceedings,Whether properly commenced and proceeded by way of originating summons,Presumption of undue influence of director unrebutted,Action for recovery of loan and rescission of contract for purchase of property at inflated price,O 5 r 2 & O 28 r 8 Rules of the Supreme Court 1970

Cur Adv Vult

This is an appeal against the decision of AP Rajah J. The appellant was the second defendant (`the appellant`) and the respondents were the plaintiffs (`the plaintiffs`) in the court below.

The appellant was at the material time the managing director of Cultural & Entertainment Holidays Pte Ltd (`C & E`). C & E entered into three agreements, all dated 25 May 1982, with Good Property Land Development Pte Ltd (`the developers`) for the purchase of three shop units, namely, #02-02, #02-02A and #02-02B respectively of the building known as Hotel Meridien Singapore for the total sum of $3,797,910.

By March 1983, C & E had paid to the developers the sum of $379,791, being 10% of the total purchase price. On 14 March 1983 one Lin Tah Hwa alias Lim Tah Hwa (`Lin`) entered into an agreement (`agreement of 14 March 1983`) with the appellant for the purchase of the said shop units from C & E as tenants-in-common in equal shares. The price was $3,797,910 less all outstanding progress payments due and owing to the developers, which with interest thereon were to be paid by Lin and the appellant in equal shares. Lin was at all material times one of three directors and one of four shareholders of the plaintiffs. The other directors and shareholders were his siblings.

Pursuant to the agreement of 14 March 1983, C & E assigned, by three deeds of assignment, all its rights, title and interest in the said shop units to Lin and the appellant.

Following the assignments, Lin and the appellant entered into three direct sale and purchase agreements with the developers dated 28 May 1983. Presumably the agreements of 25 May 1982 between C & E and the developers were surrendered to the developers for cancellation and in exchange for the fresh agreements of 28 May 1983 (`the first agreements`). As provided for by cl 6a of the agreement of 14 March 1983, Lin procured the payment by the plaintiffs of the progress payments and interest due to the developers. The loans were repayable only upon the sale of the said shop units by Lin and the appellant. Between 15 March 1983 and 20 December 1984, the plaintiffs paid on behalf of Lin and the appellant the progress payments and interest due to the developers. These payments were debited against Lin and the appellant in the plaintiffs` loan account. From 8 December 1983 to 9 September 1985 there were periodic payments to the plaintiffs of rentals received from the tenants of the said shop units. The payments and receipts were recorded in the plaintiffs` loan account. As of December 1985, the total sum of $3,086,851.61 was due from Lin and the appellant on the loan account to the plaintiffs. At that date the sum of $949,477.50 was yet to be paid to the developers.

On 6 February 1986 Lin and the appellant entered into three agreements (`the second agreements`) with the plaintiffs, whereby Lin and the appellant sold the three shop units to the plaintiffs for the total price of $4,036,329.50. Special condition 8(a) of each of the three second agreements read:

The vendor is simultaneously selling to the purchaser three (3) units of premises namely #02-40, #02-41 and #02-42 Meridien Shopping Centre ... for the total sale price of $4,036,329.50 which includes the sum of $949,477.50 that has yet to be paid by the vendor to the developers, and excluding the said sum of $949,477.50 that has yet to be paid to the developers, the net sale price of the said three units of premises would be $3,086,852 which is equal to the amount owing by the vendor to the purchaser ....

Units #02-40, #02-41 and #02-42 were formerly known as #02-02B, #02-02A and #02-02 respectively. On the same day Lin and the appellant executed three deeds of assignment assigning their right, title and interest in the said shop units to the plaintiffs.

The plaintiffs` purchase of the shop units was eventually approved by a board resolution of 17 February 1986 at which all the directors voted in favour of the purchase, with Lin abstaining.

On 28 February 1986 a creditor of the plaintiffs filed a petition in Companies Winding-up No 183 of 1986 against the plaintiffs and immediately thereafter, provisional liquidators were appointed.

Following their appointment, the provisional liquidators obtained a valuation from General Appraisal Associates, a firm of valuers. According to this valuation, the market value of the said shop units was $1.73m and the forced sale value was $1.211m.

On 21 March 1986 the provisional liquidators, through their solicitors, addressed Lin and the appellant as follows:

On 6 February 1986 you purported to sell the above-named properties to the company at the total price of $4,036,329.50 when the value was approximately $1.73m according to a professional valuation recently obtained by our clients. In view of the above and the circumstances then prevailing, the agreements for sale purported to be signed by the company are null and void.

According to the company`s accounts, you are indebted to our clients jointly and severally in the sum of $3,086,852 (including interest up to 30 November 1986). We will let you know the accrued interest up to date in due course.

You are required to repay the said sum to our clients within three days hereof, failing which legal proceedings will be commenced against you.

On 9 April 1986 the plaintiffs, through their provisional liquidators, lodged a caveat at the Registry of Titles claiming `interest as an unpaid lender by way of lien` on the said shop units. On 18 July 1986 the provisional liquidators were appointed liquidators of the plaintiffs. On 22 August 1986 adjudication and receiving orders were made against Lin in Bankruptcy No 881 of 1986 based on an act of bankruptcy for failing to comply with a bankruptcy notice dated 20 March 1986.

On 17 February 1987 the plaintiffs` solicitors wrote to the appellant as follows:

We refer to our letters to you dated 21 March 1986 and 22 March 1986 respectively. Copies of these letters are enclosed herewith for your ease of reference.

We regret to note that to date you have failed to make any payment to our clients.

In the circumstances, our clients shall exercise the company`s rights to the vendor`s lien against the above properties to the extent of the outstandings due to the company on the basis that the company paid all the progress payments in respect of the said properties.

Take notice that unless you make payment forthwith of the sum of $3,179,457.56 together with interest thereon at the rate of 12% pa from 15 March 1986 until payment, we have our client`s instructions to commence legal proceedings against (sic) for recovery of the said sum and interest and for a declaration of their lien over the properties and powers to sell the same, without further reference to you.

Receiving no satisfaction or payment from the appellant, the plaintiffs commenced proceedings by way of this originating summons on 4 July 1987 against the Official Assignee for Lin as the first defendant, and against the appellant as the second defendant, seeking:

(i) a declaration that they are entitled to rescind, and have validly rescinded the second agreements of 6 February 1986;

(ii) a declaration that the plaintiffs have a lien over the said shop units to the extent of $3,179,457.56 and interest thereon at 12% pa from 1 March 1986 to date of payment or judgment;

(iii) an order that the first and second defendants do pay the plaintiffs the following -

(a) ) the sum of $3,179,457.56;

(b) ) interest thereon at the rate of 12% pa from 1 March 1986 until payment or judgment;

(iv) an order that the plaintiffs be at liberty to apply to enforce the lien if the defendants default in making payment of the sum ordered to be paid under para 3 thereof; and

(v) costs.

The originating summons came up for hearing on 14 September 1987 before Chan Sek Keong JC (as he then was). An order in terms was made...