Hong Guet Eng v Wu Wai Hong (liquidator of Xiang Man Lou Food Court Pte Ltd)

• Jurisdiction: Singapore
• Judge: Andrew Phang Boon Leong J
• Judgment Date: 15 March 2006
• Neutral Citation: [2006] SGHC 42
• Docket Number: Originating Summons No 1534 of
• Date: 15 March 2006
• Year: 2006
• Published date: 15 March 2006
• Plaintiff Counsel: Mak Kok Weng (Mak & Partners)
• Citation: [2006] SGHC 42
• Defendant Counsel: Christopher Tan Ming Tatt (Lee & Tan)
• Court: High Court (Singapore)
• Subject Matter: Whether plaintiff's claim time-barred under s 6 Limitation Act,Whether s 6 applicable to family and friendly loans,Section 6 Limitation Act (Cap 163, 1996 Rev Ed),Whether legislative intent to exempt family and friendly loans from application of s 6 existing,Limitation of Actions,Section 6 Limitation Act providing for applicable time-bar with regards to claims under contract,Particular causes of action,Construction of statute,Contract,Plaintiff's alleged loan to company unaccompanied by any terms or conditions,Plaintiff filing proof of debt with liquidator of company upon company's voluntary winding up over 20 years later,Statutory Interpretation

15 March 2006

Andrew Phang Boon Leong J:

Introduction

1 The present proceedings raise two points of general importance. The first relates to the possible need for reform of our Limitation Act (Cap 163, 1996 Ed) in so far as (in particular) friendly loans are concerned.

2 The second is more general and is a timely reminder that, in the quest for justice, existing legal principles must be respected. In particular, where the application of a statutory provision in the context of established and existing legal principles is clear, the courts cannot ignore it. The courts cannot, under such circumstances, “invent” a means of evading the statute. Still less can the courts “invent” a means that is itself not only inconsistent with existing legal principles but is also incapable of being independently justified. All this is both logical and commonsensical, and is virtually always confirmed or clinched by the legal coherence underlying the statutory provision and legal principles concerned.

3 Before elaborating on these two points, it would be appropriate to set out, in brief, the factual background in the present proceedings.

4 The plaintiff’s case was that she was a shareholder of a company and had made two loans to the company on 8 March 1985 and 29 May 1985 for the sums of $61,500 and $20,000, respectively. She further claimed that the company had issued two receipts, one for each loan. It is significant to note that there were no conditions or terms whatsoever accompanying this alleged loan. This is significant because this would mean that the time under the Limitation Act would begin to run from the very date of the loans themselves. There was also no basis on which the plaintiff could have argued that it was a pre-condition of the loans that the obligation to repay the loans would only run from the time of the making of a demand or on a future date. Indeed, this would probably have been so even if there were a simple “on demand” provision without more, unless the contrary could somehow be inferred from the terms of the loans themselves (see, for example, the English Court of Appeal decision of Von Goetz v Rogers [1998] EWCA Civ 1328 at [19]; the English High Court decision of Re Westminster Property Management Ltd [2002] EWHC 52 (Ch) at [43]; as well as the oft-cited observation by Chitty J in the older English High Court decision of In re J Brown’s Estate [1893] 2 Ch 300 at 304–305). Indeed, Waite LJ, in the English Court of Appeal decision of Boot v Boot (1997) 73 P & CR 137, observed thus (at 138):

There is a principle of common law, well established by authority although its logic may not be immediately apparent to a layman, that a contract of loan under which the money lent is expressed to become repayable to the lender on demand imposes an immediate obligation of repayment upon the borrower from the outset of the loan, regardless of whether any demand for payment is made or not.

It bears repeating that this was clearly a situation where there was not even an “on demand” provision present to begin with.

5 The company was wound up voluntarily on 12 July 2005 and the defendant was appointed its liquidator.

6 The plaintiff then lodged proof of debt with the defendant. However, the defendant rejected her claim. The defendant alleged, first, that the plaintiff’s husband was a signatory to the statutory declaration of solvency which was annexed to a list of the company’s assets and liabilities and that the loans were not reflected in this list.

7 The defendant also stated that the accounting records in his possession did not disclose the alleged loans to the company. In a related vein, counsel for the defendant also argued that some directors and shareholders of the company had told him that the company did not owe the plaintiff any money and that, if it did, the money had already been repaid to her. Counsel for the plaintiff raised, not surprisingly in my view, the objection of hearsay, but I did not need to rule further on this particular point for (as we shall see) the issue of limitation raised an insuperable obstacle to the plaintiff’s application in the present proceedings.

8 Finally, and most importantly, the defendant stated that the alleged loans were time-barred as the loan had been made more than 20 years ago.

9 The present proceedings were initiated by the plaintiff in order to seek an order of court to reverse this decision by the defendant.

10 The defendant raised various arguments, which have been described in the briefest of fashions above, against the plaintiff’s application.

11 In my view, however, the defendant’s final argument, centring on limitation, was the most compelling. If the plaintiff’s claim was indeed time-barred, that would have been the end of the matter. Indeed, I held that this was in fact so and dismissed the plaintiff’s application.

12 Not surprisingly, perhaps, counsel for the plaintiff argued vigorously that his client’s action was not time-barred. He argued, in particular, that the relevant law had in fact been amended in England and provided, in what is now s 6 of the UK Limitation Act 1980 (c 58) (“the UK Act”), that loans such as those in the present proceedings would not be time-barred. This particular (UK) provision is in fact reproduced at [21] below. The crucial issue, as we shall see, is whether or not the English position represents, in fact, the present Singapore position as well.

13 Counsel for the plaintiff also relied on the Singapore High Court decision of Tang Boon Loong v Chin Mui Lan [1994] SGHC 48 – in particular, on the concluding part of the judgment. I will have occasion to return to this decision later.

14 I should add that counsel for the plaintiff also attempted to rely on s 4 of our Limitation Act, arguing that the defence of limitation under this Act had not been “expressly pleaded as a defence thereto in any case where under any written law relating to civil procedure for the time being in force such a defence is required to be so pleaded”. He also referred, in this regard, to various provisions in the Rules of Court (Cap 322, R 5, 2004 Rev Ed). I did not, with respect, find this particular argument at all persuasive – if nothing else, because the present proceedings were quite different in nature, and did not, inter alia, involve any pleadings as such. However, even if the plaintiff could proffer such an argument (which seemed to me, as just mentioned, untenable in any event), I would have been prepared to allow the defendant to amend his pleadings. Indeed, I asked counsel for the defendant whether he would like to do so, on the assumption that counsel for the plaintiff’s argument was correct in the first instance and he answered in the affirmative – albeit not without some puzzlement for the reasons just stated.

Issues arising in the context of the Limitation Act

Legislative reform in other jurisdictions (with a focus on the UK context) and its potential impact in the Singapore context

15 I begin with what seems to be a self-evident proposition, having regard to the factual matrix of the present proceedings which I have set out briefly above. The plaintiff’s claim, based as it was on a contract, was clearly time-barred by virtue of s 6(1) of our Limitation Act. The material part of s 6(1) itself reads as follows:

Limitation of actions of contract and tort and certain other actions.

6.—(1) Subject to this Act, the following actions shall not be brought after the expiration of 6 years from the date on which the cause of action accrued:

(a) actions founded on a contract or on tort;

…

16 It should be noted that our Limitation Act is based on the UK Act. However, the latter was expressly amended in the context of, inter alia, friendly loans as a result of the UK Law Reform Committee’s recommendation in Law Reform Committee, Twenty-First Report (Final Report on Limitation of Actions) (Cmnd 6923, September 1977) (“the UK Report”). In the UK Report, the UK Law Reform Committee first reviewed – in a helpful and succinct manner, in my view – the then existing law in the area. I can do no better than to set out their views on the then existing state of the law, as follows (at paras 3.20–3.21):

3.20 This particular defect [in the law] is caused by the rule that where no time is specified in a contract of loan, or where the loan is expressed simply to be repayable “on demand”, time starts to run in favour of the borrower from the date of the loan. Although the precise scope of this rule may be open to some doubt, it has been applied in a number of cases and was treated as well settled as respects promissory notes and other straight-forward loans by the end of the 19th Century. The principle underlying this rule appears to be that the cause of action accrues from the first moment the lender could have taken steps to claim the money.

3.21 Although the courts have declined to apply a similar rule to a guarantee and have shown themselves in more recent cases disposed to treat the question whether a demand is a prerequisite to the accrual of the cause of action as being a genuine question of construction, nevertheless it seems that a loan made without any express provision as to repayment, or expressed to be repayable simply “on demand” without any further qualification, is still likely to be treated as giving rise to a cause of action forthwith, with the result that the Limitation Act can be successfully pleaded to a claim made more than six years from the date of the loan.

17 The Committee then proceeded to outline the main reason why injustice would result, especially in the non-commercial context, as follows (at para 3.22 of the UK Report):

3.20 It has been represented to us that, although this rule probably causes little injustice in the case of commercial loans, it can cause real hardship where the loan is made between friends or members of the same family. It is by no means uncommon for money to be lent in these circumstances without any...