Chng Weng Wah v Chin Yeow Hon
| Jurisdiction | Singapore |
| Judge | Foo Tuat Yien |
| Judgment Date | 18 August 2003 |
| Neutral Citation | [2003] SGDC 192 |
| Court | District Court (Singapore) |
| Year | 2003 |
| Published date | 03 October 2003 |
| Plaintiff Counsel | Chia Foon Yeow (Tan Peng Chin LLC) |
| Defendant Counsel | Tham Feei Sy (Drew & Napier LLC) |
| Citation | [2003] SGDC 192 |
Introduction
1 The plaintiff claims repayment of a sum of $67 950 (‘the money’), which was allegedly extended as a friendly loan repayable on demand, to the defendant on 28th June 1999. The defendant says the money was paid for 50 lots of shares of Serial System Ltd, (‘the company’) which shares were to be transferred to the plaintiff after September/October 1999.
Background
2 In 1992, Serial System Ltd was incorporated as a private limited company. The plaintiff was a founding director, shareholder and Chief Operating Officer. In that same year, the defendant joined the company as an applications engineer. In 1997, the company was listed on the Stock Exchange of Singapore. In June 1999, the plaintiff (who was then the company’s Chief Operating Officer and a Director owning 24% of the shares in the company) disposed of some of his shares worth approximately $2 to $3 million to take advantage of the rise in the market share price, which was then at peak levels of $1.40 to $1.60. The defendant, who was then Director of Strategic Marketing (by his account) or Research and Development Manager (by the plaintiff’s account) and the highest ranking (non-director) staff member of the company, owned 4 400 055 shares in the company or by his estimate 1% of the company’s shares. These shares could not be sold until 12th September 2006 as there was an internal company moratorium on their sale. However, the defendant had, in 1998, been granted an option under a company Employee Share Option Scheme to buy up to 213 000 non-discounted ordinary shares at an exercise price of $0.214 per share on or after September/October 1999. There was no restriction on the sale of such shares.
3 On 28th June 1999, the plaintiff paid the defendant $67 950 in cash. The transaction was recorded by the plaintiff in his filfofax:
‘ 28th June 1999
Paid Chin
50K x 1.51
= 75.5K S$
- 7550
= 67, 950 $ ‘
The ‘50K’ in the filofax entry represents 50 lots of shares in the company. The ‘1.51’ represents the market price of the shares as at 28th June 1999. The ‘-7550’ represents a 10% discount on $75 500, being the total value of the shares.
4 The parties disagree on why the payment was made. All other facts are not in dispute. The plaintiff says the money was a loan to the defendant to motivate him and ‘make up for his disappointment in not being able to cash in on the favourable market conditions.’ The defendant agrees that the plaintiff intended to motivate him but says that the money was paid for 50 lots of the company shares to be transferred by him to the plaintiff after his exercise of the sale options in September/October 1999.
5 On 29th October 1999 defendant exercised his option and bought 213,000 option shares. In September 1999, the defendant was made a director of the company.
6 In October 2000, the plaintiff lent the defendant $70 000 to subscribe for shares in a Taiwanese company known as Wintech Microelectronics Company Ltd. On 27th November and 11th December 2000, the defendant repaid the respective sums of $30 000 and $40 000, after he sold the shares and made an estimated profit of $100 000 (after taking into account the price of the shares).
7 In February 2001, the plaintiff was ousted from the company’s board of directors. The defendant was one of the 4 directors, who voted for the ouster. Larry Chow Sou Chian, ( ‘Larry Chow”) the then Chief Operating Officer/ director who had voted against the ouster resigned and the defendant was appointed in his place. In June 2001, the plaintiff resigned as director.
8 On 24th July 2001, the plaintiff’s then solicitors send a demand letter to the defendant for repayment of the alleged loan of $67 950 made in June 1999 within 7 days or legal action would be commenced. On 1st August 2001, the defendant replied to seek an explanation on the discrepancies in the amount as stated in the letter of 24th July 2001 and while seeking further details of the loan, for example date of the loan, how it was extended, when request for loan was made, other details of the loan and reserving his right of reply upon being provided with the details, denied the plaintiff’s claim of an alleged loan. The plaintiff did not respond to the defendant’s letter.
9 On 8th July 2002, almost one year later, the plaintiff’s present solicitors sent a demand letter to the defendant for repayment of the money within 7 days or legal action would be commenced. On 12th July 2002, the defendant’s then solicitors replied asserting that there had been no loan and asked for particulars of the payment, that is the manner of payment and the purpose of the alleged payment. The plaintiff did not respond to the defendant’s letter.
10 On 1st October 2002, the plaintiff issued his writ of summons. Apart from the plaintiff’s personal filofax record and this exchange of letters in 2001 and 2002, there was no other documentary record between the parties on the $67 950 transaction.
Burden of Proof
11 The plaintiff argues that the onus lies on the defendant to prove that the transaction is not a loan. As the defendant admits receiving the money and their relationship does not give rise to a presumption of advancement, there is a prima facie obligation on the defendant to repay to the plaintiff. This being the case, it is for the defendant to prove that that the transaction was not a loan. It is clear that the plaintiff must prove that the $67 950 was paid as a loan. The case of Seldon v Davidson [1968] 1 WLR 1083, where the burden of proof was on the defendant to establish that it was a gift because the relationship of the parties did not give rise to a presumption of advancement, is clearly not applicable. Seldon v Davidson was distinguished by the Court of Appeal in the case of Lai Meng v Harjantho Johnny [1999] 3 SLR 524. Similarly, in our case, there is no allegation of a gift, the defence being that the money was for the purchase of 50 lots of shares in the company. In any case, even if the burden of proof is on the defendant, I find that the defendant has discharged the burden of proof.
12 To understand the conduct of the parties and assess the credibility of their cases, it is necessary to know the relationship between the parties beginning from June 1999, when the money was paid. The plaintiff, who was then the Chief Operating Officer of the company, was subsequently made the Chief Executive Officer in the later part of 1999. In June 1999, the defendant was either the Research and Development Manager or the Director, Strategic Marketing. He was made a director in September 1999. In essence their relationship as the plaintiff saw it is summarised at paragraph 1a of the statement of claim;
‘ At the material time, the Plaintiff was a founder director and the Chief Operating Officer of Serial Systems Limited (the ‘Company’), a company listed on the Stock Exchange of Singapore (the ‘Exchange’). The Defendant was a Research and Development Manager/Director of the Company. The Defendant was the Plaintiff’s subordinate.’
and in the plaintiff’s oral evidence. when he said 'We worked very well. He was my subordinate'. When the plaintiff was ousted from the company’s board of directors in February 2001, he was ‘upset’ to know that the defendant was one of the 4 directors, who had voted to oust him. In his evidence, the plaintiff’s witness, Larry Chow, the former Chief Operating Officer of the company confirmed that the relationship had soured ‘Because the plaintiff before the meeting has nurtured the defendant and he does not expect the defendant to vote for the motion.’
13. I dismissed the plaintiff’s claim as I found that the plaintiff had failed to establish his case on a balance of probabilities. The defendant’s version of events is more credible. In reviewing the totality of the evidence, I am convinced and find that the money was paid by the plaintiff to the defendant as consideration for 50 lots of shares in the company.
14 The plaintiff’s reasons for the alleged loan are reproduced below.
14.1 In the plaintiff’s affidavit he states: ‘ In recognition of his years of service and dedication to the company, the board of directors, including myself decided to make the defendant a director in the later part of 1999. On my part, in order to motivate the Defendant further and to ‘make up’ for his disappointment in not being able to cash in on the favourable market conditions, I personally extended a friendly loan to the Defendant. I also recall that at about that time, the Defendant told me that he was a joint owner of a HDB flat with his mother and also owned another condominium unit at Hillview Green. He was hence quite cash- strapped and the loan could assist his financial needs.’
14.2 The plaintiff’s evidence on cross-examination is as follows:
‘ Q: You said you wanted to reward the defendant for his hard work and service. Is that correct ?
A: Yes.
Q: When you reward someone, is it not like a gift to them ?
A: To reward someone as an employee of the company, I will only do so when the employee has good performance. As a Chief Executive, I would not regard it as a gift. They would have to work for it.
Q: You have just admitted that you wanted to reward the defendant because he was hardworking and that you would not do so, unless they work hard. In other words, the reward must be a gift. My next question – The reward will come with no expectation as to payment. You will agree ?
A: Yes.
Q: So it would be absurd to call it a reward if someone is expected to repay it?
Q: I reward the defendant by giving him more shares. If the company does well, the shares go up. On that basis, I do not expect repayment. This is because the reward is contributed by the defendant.
Further on in cross-examination:
‘ Q: How did you decide on the amount to allegedly lend to the defendant?
A: In order to impress upon the defendant the power of the sales options, I chose to simulate 50 000 worth of shares sold by the defendant and if the...
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