Invest-Ho Properties Pte Ltd v Karuppiah Tanapalan and another

• Jurisdiction: Singapore
• Judge: Justin Yeo AR
• Judgment Date: 22 November 2017
• Neutral Citation: [2017] SGHCR 20
• Court: High Court (Singapore)
• Hearing Date: 12 October 2017,22 November 2017
• Docket Number: Suit No 843 of 2013 (Summons No 3684 of 2017)
• Plaintiff Counsel: Mr Irving Choh and Ms Melissa Kor (Optimus Chambers LLC)
• Defendant Counsel: Mr Vangadasalam Suriamurthi (V Suria & Co)
• Subject Matter: Civil Procedure,Pleadings,Striking Out,Legal Profession,Disciplinary Procedures
• Published date: 01 December 2017

Justin Yeo AR:

Party A was the intended purchaser of a piece of property owned by Parties B and C. Lawyer X acted for all of them in the conveyancing transaction. Subsequently, Parties B and C alleged that the transaction was a loan rather than a genuine sale and purchase of property, and sought to unravel the transaction. Party A commenced Suit A in the High Court, seeking an order against Parties B and C for specific performance of the transaction.

Parties B and C thereafter lodged a complaint, against Lawyer X, with the Law Society of Singapore (“the Law Society”). Disciplinary proceedings were commenced against Lawyer X for tendering advice despite knowing or having reasonable grounds to believe that the advice was to advance an illegal transaction, and for failing to report the transaction despite knowing or having reasonable grounds to suspect that it involved criminal conduct.

The disciplinary proceedings against Lawyer X were eventually brought before the Court of Three Judges. The Court of Three Judges found that the transaction was to advance an illegal purpose, and that Lawyer X should have been aware of this in the light of the highly unusual circumstances surrounding the transaction. It therefore held that the charges against Lawyer X were made out.

With the benefit of the decision of the Court of Three Judges, Parties B and C brought an application to strike out Suit A, on the grounds that it was scandalous, frivolous or vexatious, or alternatively, an abuse of the process of the court. Should Party A be allowed to continue with Suit A, and try to convince the High Court that the findings of the Court of Three Judges were incorrect?

Background Facts

Mr Karuppiah Tanapalan and Ms Vimala Devi d/o Selvadurai (“the Defendants”) were the owners of the property at Block 297 Bedok South Avenue 3 #01-04 (“the Property”). Invest-Ho Properties Pte Ltd (“the Plaintiff”) was an intended purchaser of the Property. Ms Leong Pek Gan (“Ms Leong”), an advocate and solicitor of over 30 years’ standing, was instructed to act for the parties on what appeared to be the sale and purchase of the Property. The parties entered into an Option to Purchase the Property at the sum of $651,000 and an option fee of $250,000 (“the Agreement”). The Defendants also granted a power of attorney (“the Power of Attorney”) to the Plaintiff’s Director, Mr Ho Soo Fong (“Mr Ho”), authorising and empowering him to sign all documents relating to the sale of the Property.

On 1 February 2013, the Defendants discharged Ms Leong from acting as their solicitor. On 8 February 2013, the Defendants wrote to the Plaintiff to state that the Agreement was tainted with illegality, and that they would be aborting the sale and forfeiting the $250,000 option fee. On 19 February 2013, a deed revoking the Power of Attorney was filed in the High Court.

On 12 November 2013, the Plaintiff commenced the present suit, Suit No 843 of 2013 (“Suit 843”), for specific performance of the sale and purchase of the Property pursuant to the Agreement. The parties reached a settlement in Suit 843 and recorded a consent judgment (“the Consent Judgment”) before Aedit Abdullah JC (as his Honour then was) on 10 December 2014. The Defendants subsequently attempted to set aside the Consent Judgment, but did not succeed in doing so.

The Defendants subsequently lodged a complaint against Ms Leong, inter alia for aiding and abetting an alleged unlicensed moneylending transaction. Following the complaint, the Law Society brought four charges against Ms Leong, of which the following two are particularly relevant for present purposes: tendering advice despite knowing or having reasonable grounds to believe that the advice was to advance the illegal purpose of unlicensed moneylending in contravention of the Moneylenders Act (Cap 188, 2010 Rev Ed) (“the MLA”); and failing to report the transaction despite knowing or having reasonable grounds to suspect that it involved criminal conduct under the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act (Cap 65A, 2000 Rev Ed).

A Disciplinary Tribunal was appointed under s 90 of the Legal Profession Act (Cap 161, 2009 Rev Ed) (“the LPA”). As provided for in s 90 of the LPA, each Disciplinary Tribunal shall be appointed by the Chief Justice, and shall comprise a president (being an advocate and solicitor who is a Senior Counsel, or who has at any time held office as a Judge or Judicial Commissioner of the Supreme Court) and an advocate and solicitor of not less than 12 years’ standing.

In the course of the proceedings before the Disciplinary Tribunal, Ms Leong called Mr Ho as her witness (The Law Society of Singapore v Leong Pek Gan [2015] SGDT 4 (“Leong Pek Gan (DT)”) at [62]). Mr Ho disagreed that the Agreement and Power of Attorney were being used in an illegal moneylending transaction, and explained the commercial and other considerations for the unusual terms in the documents (Leong Pek Gan (DT) at [63]). Mr Ho was questioned by counsel for the Law Society on these issues, and was found to be unable to offer credible explanations (Leong Pek Gan (DT) at [64]). The Disciplinary Tribunal concluded that Ms Leong was “blissfully oblivious to the suspicious nature of the entire transaction”, and therefore determined that cause of sufficient gravity existed under s 83(2)(b) and (h) of the LPA (Leong Pek Gan (DT) at [67] and [86]).

On 20 October 2015, the Law Society informed the Defendants of the developments in the disciplinary proceedings, and indicated that it would be making an application to the Court of Three Judges to decide on the appropriate sanction against Ms Leong.

Based on the report of the Disciplinary Tribunal, the Defendants took out an application to stay the execution of the Consent Judgment pending the outcome of the hearing before the Court of Three Judges. The parties agreed that enforcement would be held in abeyance pending the decision of the Court of Three Judges.

On 19 August 2016, the Court of Three Judges rendered its decision in Law Society of Singapore v Leong Pek Gan [2016] 5 SLR 1091 (“Leong Pek Gan”). In relation to the two charges mentioned at [8] above, the Court of Three Judges held that the Law Society had to prove, inter alia, that the transaction involved an illegal purpose, namely, unlicensed moneylending in contravention of the MLA (Leong Pek Gan at [58]). This, in turn, raised the following two sub-issues (Leong Pek Gan at [59]): whether there was a loan in the first place (or, in other words, whether the Agreement was in substance a loan); and whether Mr Ho and the Plaintiff were carrying on a business of moneylending.

The Court of Three Judges proceeded to analyse each of these sub-issues, surveying the applicable law and principles relevant to each inquiry, as well as the evidence adduced in the proceedings. On the first sub-issue, the Court of Three Judges found that five aspects of the transaction were highly unusual and cast serious doubts on the genuineness of the transaction (Leong Pek Gan at [62]). The Court of Three Judges considered Mr Ho’s evidence in coming to this conclusion, and reproduced a passage from the cross-examination of Mr Ho (Leong Pek Gan at [66]):

… Ho’s evidence that the entire sum of $19,750 was meant as commission for Mr Sara for introducing him, through Rajan, to the Property is rather contrived. … Ho could not explain this discrepancy in the amount of commission that was allegedly paid to Mr Sara, apart from saying that perhaps, his (Ho’s) nephew, who had cashed in the cheque, had taken $50. In addition, Ho had no good explanation as to why it was necessary for the Vendors to pay Mr Sara’s commission through him, as evidenced by the following exchange:

Q Mr Ho, you can tell them, ‘This is your commission that you owe Mr Sara. You pay him directly. Don’t waste my time.’ Correct? You could have told them this, right? A Yes, the reason why---the reason because this Sara don’t want to see him. Er, see---see these family people. I don’t know what happened. This one, I don’t know. If---if she [ie, the Complainant] want to see them early, she can---er, sorry. He can direct introduce, but he get another person to introduce. That are the reason. And even, they want cash, you know? I said, ‘I got the cheque.’ She said, ‘Don’t want, you go and get ca---cash for me.’ So I have to get my nephew. Er, the cheque they give it to my nephew. I ask my nephew, ‘Go and collect it.’

[emphasis added]

The Court of Three Judges concluded that the form of the transaction was merely a façade to disguise what was, in substance, a loan (Leong Pek Gan at [69]). On the second sub-issue, the Court of Three Judges considered the law relating to the business of moneylending, and observed that what constitutes the “business” of moneylending is “heavily dependent on the facts and context before the court concerned” (emphasis added) (Leong Pek Gan at [76]). After examining the evidence, the Court of Three Judges observed: 82 … In our view, Ho/[the Plaintiff] have not rebutted the presumption on a balance of probabilities. Indeed, had it been necessary, we would have been prepared to find that the Transaction fell foul of the MLA even if the presumption under s 3 did not apply. 83 The loan transaction between Ho/[the Plaintiff] and the Vendors was not an isolated one, and we are satisfied that there was system and continuity in the way in which Ho/[the Plaintiff] went about their moneylending. In this regard, we draw attention to another transaction that was raised in the course of the proceedings. Ho admitted to having entered into an option to purchase a flat at Chai Chee owned by one Chua and his wife … According to Ho, Chua required a high option fee as he owed money to loan sharks … 84 We find it extremely difficult to believe that Ho was simply a good...