Empire International Holdings Ltd v Mok Kwong Yue and Another

• Jurisdiction: Singapore
• Judge: Tan Lee Meng J
• Judgment Date: 28 September 2004
• Neutral Citation: [2004] SGHC 221
• Docket Number: Suit No 52 of 2004 (Registrar's
• Date: 28 September 2004
• Year: 2004
• Published date: 28 September 2004
• Plaintiff Counsel: Goh Kok Yeow (De Souza Tay and Goh)
• Citation: [2004] SGHC 221
• Defendant Counsel: Andrew Ee (Andrew Ee and Co)
• Court: High Court (Singapore)
• Subject Matter: Illegal money-lending,Contract,Whether amounting to consideration for guarantor's promise to guarantee repayment of debts already incurred and future advances,Consideration,Whether loans by respondent to appellant's company amounting to illegal moneylending transactions,Money and moneylenders,Whether guarantor entitled to ask for account of shares pledged as security for credit facilities prior to discharge of guarantor's obligations under guarantee,Credit and Security,Promise to advance additional funds,Guarantor,Section 2 Moneylenders Act (Cap 188, 1985 Rev Ed),Guarantees and indemnities,Respondent an investor in appellant's company,Respondent an investment and holding company,Whether guarantor's right to rely on set-off or counterclaim as defence to claim under guarantee may be excluded by terms of guarantee

28 September 2004

Tan Lee Meng J:

1 The appellant, Mr Mok Kwong Yue (“Mok”), appealed against the summary judgment entered against him by the assistant registrar with respect to a claim on a continuing guarantee executed by him in favour of the respondent, Empire International Holdings Limited (“Empire”), an investment and holding company incorporated in Mauritius. I dismissed his appeal and now give the reasons for my decision.

Background

2 The facts in this case are as follows. Mok and one Mr Subbarao Pinamaneni (“Subba”) wanted to use their company, Subba Mok LLC, to acquire a majority stake in International Microelectronics Products Inc (“IMP”), a NASDAQ-listed company based in California that makes and sells electronic products for the semiconductor business. They negotiated a stock purchase agreement with IMP on 8 June 2002 and looked for investors who were prepared to pay various amounts for the purchase of IMP shares.

3 Empire was one of the interested investors. On 27 June 2001, a memorandum of understanding (“MOU”) was entered into between Empire and Subba Mok LLC. Pursuant to the terms of the MOU, Empire advanced a loan of US$1m to enable Subba Mok LLC to acquire a controlling interest in IMP. In June 2002, Empire injected further funds into the project. On 30 November 2002, Mok and Subba executed a comprehensively drafted continuing guarantee (“the Guarantee”) in favour of Empire with respect to loans already advanced by Empire for the acquisition of a majority stake in IMP as well as for future loans. The Guarantee was a standard form bank guarantee commonly used by banks in Singapore and elsewhere. It is pertinent to note that by 30 November 2002, Empire’s loan account with the principal borrowers reached US$8,998,763.78 and this fact was acknowledged in writing by Mok.

4 Empire’s relationship with Mok and Subba soured thereafter and on 14 June 2003, Empire issued a letter of demand to the principal debtor as well as Mok and Subba to repay the loans in question. On 12 December 2003, another letter of demand was sent to the principal debtor and to Mok and Subba to settle the loan account. When the loans were not repaid, Empire instituted the present proceedings against Mok and Subba in January 2004.

5 Empire sued Mok and Subba as guarantors of the principal debtor. It relied on cl 1 of the Guarantee dated 30 November 2002, which provides as follows:

The Guarantor hereby unconditionally and irrevocably guarantees and undertakes, as a continuing obligation, to pay to Empire upon first written demand by Empire all amounts and discharge all obligations and liabilities which are now or shall at any time or times be owing or repayable by the Borrower to Empire …

6 Empire also relied on cl 17 of the Guarantee, which provides as follows:

As a separate, additional and continuing obligation, the Guarantor unconditionally and irrevocably undertakes with Empire that, should the Guaranteed Amounts not be recoverable from the Guarantor under Clause 1 for any reason whatsoever (including but without prejudice to the generality of the foregoing, by reason of any provision of any documents relating to the Guaranteed Amounts being or becoming void, unenforceable or otherwise invalid under any applicable law) then, notwithstanding that that may have been known to Empire, the Guarantor will, as original, primary and independent obligor, upon first written demand by Empire under Clause 1, make payment of the Guaranteed Amounts by way of a full indemnity in such currency and otherwise in such manner as Empire may specify by notice to the Guarantor and that the Guarantor will indemnify Empire against all losses, costs, charges and expenses to which it may be subject or which it may incur whilst acting in good faith under or in connection with the Guaranteed Amounts or this Guarantee.

7 On 4 June 2004, Empire’s application for summary judgment against Mok pursuant to O 14 of the Rules of Court (Cap 322, R 5, 2004 Rev Ed) was heard by the assistant registrar who entered judgment against Mok for US$8,998,763.78, the sum owed by the principal debtor to Empire as at 30 November 2002. Mok appealed against the assistant registrar’s decision.

The appeal

8 At the hearing of the appeal, no evidence was tendered to contradict Mok’s written acknowledgment of the amount owed to Empire as at 30 November 2002. When asserting that Empire was not entitled to summary judgment, Mok relied on four main arguments. The first was that the Guarantee executed by him on 30 November 2002 was unenforceable because Empire did not furnish any consideration for the obligation that he assumed under the said guarantee. Secondly, even if the Guarantee was enforceable, summary judgment should not have been entered against him because he was entitled to a set-off against Empire’s claim. Thirdly, Empire was not entitled to recover the loans in question because the loans to the principal debtor were illegal moneylending transactions that were prohibited by the Moneylenders Act (Cap 188, 1985 Rev Ed). Finally, summary judgment should not have been entered against him because Empire had not accounted for shares handed over by him, Subba and Subba Mok LLC as security for credit facilities.

9 Mok’s assertion that the Guarantee could not be enforced by Empire, because consideration was not furnished by the latter for his promise to guarantee the principal debtor’s loans, will first be considered. As the Guarantee was a continuing guarantee, this assertion did not rest on solid ground. That a promise to advance additional funds may be consideration for a promise to...