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

• Jurisdiction: Singapore
• Court: Court of Appeal (Singapore)
• 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)
• Plaintiff Counsel: Harry Elias (Harry Elias & Partners) and OK Rai (Tang & Co)
• Published date: 19 September 2003
• Docket Number: Civil Appeal No 5 of 1988
• Date: 05 March 1992
• 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...