Lena Leowardi v Yeap Cheen Soo

• Jurisdiction: Singapore
• Judge: Tan Siong Thye JC
• Judgment Date: 11 March 2014
• Neutral Citation: [2014] SGHC 44
• Court: High Court (Singapore)
• Docket Number: Suit No 931 of 2012
• Year: 2014
• Published date: 20 August 2016
• Hearing Date: 14 January 2014,18 December 2013,17 December 2013
• Plaintiff Counsel: S Gunaseelan (S Gunaseelan & Partners)
• Defendant Counsel: Ong Ying Ping, Lim Seng Siew (OTP Law Corporation),.
• Subject Matter: Credit and Security,Money and Moneylenders
• Citation: [2014] SGHC 44

Tan Siong Thye JC: Introduction

The Plaintiff, Lena Leowardi, took out an action to claim two sums, namely $200,000 and $340,000, from the Defendant, Yeap Cheen Soon. These were loans advanced by the Plaintiff to the borrower, Choong Kok Kee (“Choong”) and the Defendant guaranteed the repayment of these loans. Choong defaulted on these loans. The Plaintiff seeks to recover these two sums from the Defendant. The key issue in this case is whether the loans made by the Plaintiff to Choong constitute the business of illegal moneylending prohibited under the Moneylenders Act (Cap 188, 2010 Rev Ed) (the “Act”). If yes, it will render the guarantees by the Defendant unenforceable pursuant to s 14(2)(a) of the Act. Therefore, the Plaintiff’s case must be dismissed. If no, judgement must be entered for the Plaintiff as the Defendant chose to submit a no case to answer at the close of the Plaintiff’s case.

Facts Introduction of Choong to the Plaintiff

The Plaintiff is an Indonesian business woman. She lives at 304 Orchard Road, Lucky Plaza Apartments, Singapore. She is acquainted with PW1, Thomas Tan Boon Chai, who owns a jewellery store known as “Boon Chai Jewellery” in the same building.

On 29 November 2010, PW1 was introduced to Choong by his long-time friend Grace Soh. Ms Soh came to his store together with Choong and Steven Pang Kia Boon. Choong informed PW1 that he was the beneficiary of funds under his brother-in-law’s estate in the United Kingdom worth US$7.2m (the “Funds”). Choong also told PW1 that the Funds had already been transferred to Bank Negara, Malaysia so as to enjoy a lower tax rate. Choong requested from PW1 a loan of $140,000 to pay the administrative fees required to release the Funds. He promised to repay the loan within three to four weeks together with a reward of $100,000. PW1 then lent $140,000 to Choong. Subsequently, PW1 lent further sums to Choong despite Choong not returning him any money. He lent to Choong $250,000 on 20 January 2011, $44,000 on 11 February 2011 and $25,000 on 25 April 2011. These loans were also advanced to enable Choong to pay the alleged administrative fees so as to secure the release of the Funds.. According to PW1’s police report,¹ he was promised a reward of $163,000 by Choong in return for all the loans.

In March 2011, Choong asked PW1 to lend him $200,000 for the same purpose as mentioned above. However, PW1 was unable to do so. PW1 then approached the Plaintiff and informed her of Choong’s situation and asked if she could lend Choong the money. PW1 also informed her that he wanted to help Choong retrieve the Funds so that Choong could repay him the loan monies he had already advanced. However, the Plaintiff was initially suspicious of the matter and requested for more information and proof.

Sometime in March 2011, PW1 introduced the Plaintiff to Choong. The latter told the Plaintiff about the Funds and how he needed money to secure their release. Choong also produced some documentary proof to verify his tale. The Plaintiff informed Choong that she would only be willing to lend him the money if he could obtain a guarantee from a third party for the repayment of any loan advanced. The Plaintiff also requested for the loan agreement to be drawn up by a lawyer.

The First Loan Agreement

On 22 March 2011, the Plaintiff met Choong and the Defendant at the lawyer’s office of Messrs Oliver Quek & Associates to execute the loan agreement (the “First Loan Agreement”). The Plaintiff met the Defendant for the first time on that occasion. The Defendant was the guarantor for this loan agreement. Under this agreement the Plaintiff agreed to lend $200,000 to Choong. The latter was to repay the said sum within 6 weeks of the date of the agreement. There was no provision for any interest payment for the loan. The Defendant pledged his apartment at 3 Petain Road #03-02, Singapore as security for this Loan. Subsequently, the Plaintiff advanced the $200,000 to Choong.

Prior to the meeting on 22 March 2011, the Plaintiff had signed a promissory note issued by Choong on 20 March 2011. The promissory note stated that Choong was to pay the Plaintiff $400,000 in return for her “investment” of $200,000. The Defendant was not aware of this promissory note.

The Second Loan Agreement

In April 2011, Choong requested for more money from the Plaintiff and showed her a document purporting to prove that he needed to pay more money to secure the release of the Funds. The Plaintiff agreed to loan him a further sum of $380,000. Similarly, another loan agreement was executed at the office of Messrs Oliver Quek & Associates on 15 April 2011 (the “Second Loan Agreement”). Under the Second Loan Agreement, Choong promised to repay the $380,000 within 6 months. Like the First Loan Agreement, the Second Loan Agreement also had no provision for any interest payment. The Defendant was not a party to the Second Loan Agreement and instead, it was Choong who pledged his HDB Apartment at Block 212 Bishan Street 23 #06-249, Singapore, as security under the Second Loan Agreement.

After the Plaintiff had advanced the $380,000 to Choong, the latter issued her another promissory note which she duly signed on 18 April 2011. Under this promissory note, Choong agreed to pay the Plaintiff an additional $250,000 on top of the loan of $380,000.

The Third Loan Agreement

Choong continued to ask for a further loan from the Plaintiff in May 2011. The Plaintiff, Choong and the Defendant then entered into another loan agreement on 25 May 2011 at the office of Messrs Oliver Quek & Associates (the “Third Loan Agreement”). The Plaintiff agreed to lend $340,000 to Choong who promised to return it within 6 months. There was, again, no provision for interest payment. The Third Loan Agreement provided that the Defendant would personally guarantee the repayment of this loan. Similar to the First Loan Agreement, the Defendant also pledged his apartment at 3 Petain Road #03-02, Singapore as security for the Third Loan Agreement. The Plaintiff subsequently advanced the $340,000 to Choong the following day.

The Defendant was also unaware that Choong had given the Plaintiff a promissory note for this loan. The promissory note was signed by the Plaintiff and Choong on 26 May 2011. Under the promissory note, Choong promised to pay the Plaintiff an additional $340,000 in addition to the loan amount.

The Fourth Loan Agreement

On 7 June 2011 the Plaintiff gave a further loan of $120,000 to Choong (the “Fourth Loan Agreement”). The circumstances under which this loan was entered into were different. No formal loan agreement was executed. Instead, the loan was evidenced by a hand-written promissory note which stated that a “friendly loan” of $120,000 was advanced by the Plaintiff to Choong. There was no mention of any additional payment or reward. There was also no provision of a guarantee or security in the promissory note. However, the Plaintiff said that PW1 verbally guaranteed the repayment of the $120,000. The Defendant was not involved in this loan.

The Aftermath

Choong never received the Funds which he supposedly inherited. He defaulted on all of the loan agreements and was declared bankrupt. The Plaintiff was also unable to enforce the security against the HDB apartment pledged by Choong under the Second Loan Agreement. The Plaintiff then commenced the present proceedings against the Defendant as guarantor for the First and Third Loan Agreements. She seeks to retrieve from the Defendant the loan monies amounting to $540,000 which she had advanced to Choong.

Defendant’s submission of no case to answer

At the close of the Plaintiff’s case, the Defendant made a submission of no case to answer. The Defendant argues that “accepting the plaintiff’s evidence at its face value, no case has been established in law”: Bansal Hemant Govindprasad and another v Central Bank of India [2003] 2 SLR(R) 33 at [11]. It is the Defendant’s submission that the loan transactions were unlicensed moneylending activities prohibited by the Act. This is because the Plaintiff lent sums of money to Choong in consideration of a larger sum being repaid. Therefore, the plaintiff is presumed to be a moneylender under s 3 of the Act. The Defendant submitted that the Plaintiff has failed to rebut this presumption. Hence loan agreements including the guarantee are unenforceable pursuant to s 14(2)(a) of the Act. : 14(2). Where any contract for a loan has been granted by an unlicensed moneylender, or any guarantee or security has been given for such a loan — (a) the contract for the loan, and the guarantee or security, as the case may be, shall be unenforceable …

The Plaintiff’s case

The Plaintiff argued that the presumption of being a moneylender does not apply to her as she had not lent Choong money in consideration of a larger sum being repaid. The Plaintiff maintained that the loans given to Choong were interest-free. She also submitted that she did not ask for the promissory notes. According to her, it was Choong who gave her the promissory notes after she handed him the monies. She said she could not object and signed the promissory notes as requested by Choong. Hence, the Plaintiff regarded the promissory notes as invalid. She maintained that she only regarded the loan agreements, which were drafted by a lawyer, to be valid and enforceable contracts. Thus, she is only claiming against the Defendant under the loan agreements and not under the promissory notes. Therefore, the presumption under s 3 of the Act does not arise and the Plaintiff has not contravened the Act.

The Plaintiff also argued that, in any event, even if the presumption applied to her, it was rebutted as she was not in the business of moneylending. She claimed she loaned the money to Choong to help her friend, PW1, to recover his monies. She was only prepared to grant loans to Choong provided each of these loans was secured...