Liew Kum Chong v SVM International Trading Pte Ltd and others

• Jurisdiction: Singapore
• Judge: Chua Lee Ming J
• Judgment Date: 11 July 2019
• Neutral Citation: [2019] SGHC 163
• Court: High Court (Singapore)
• Hearing Date: 20 March 2019,19 March 2019,22 March 2019,18 March 2019,21 March 2019
• Docket Number: Suit No 980 of 2016
• Plaintiff Counsel: Tang Shang Wei and Gavin Neo (WongPartnership LLP)
• Defendant Counsel: A Rajandran (A. Rajandran),The fifth defendant absent.
• Subject Matter: Contract,Sham transaction,Mistake,Non est factum,Unconscionability,Credit and Security,Money and moneylenders,Illegal moneylending,Guarantees and indemnities,Guarantor
• Published date: 17 July 2019

Chua Lee Ming J: Introduction

The plaintiff, Mr Liew Kum Chong, commenced this action seeking the return of the balance outstanding on loans given to the first defendant, SVM International Trading Pte Ltd (“SVM”), the second defendant, Feasto Pte Ltd (“Feasto”) and the third defendant, Mizimegah Pte Ltd (“Mizimegah”). The plaintiff sued the fourth defendant, Ms Scarlett Merida Xi Wei Yuan (“Scarlett”) and the fifth defendant, Ms Pan Jiaying (“Pan”) as guarantors for the loans. The plaintiff claimed $200,000 against SVM, $100,000 against Feasto, $100,000 against Mizimegah, and $400,000 against Scarlett and Pan on a joint and several basis.

The trial proceeded against SVM, Feasto, Mizimegah and Scarlett. The plaintiff was unable to serve the writ on Pan, a Chinese national who was suspected to in China. The plaintiff did not attempt to effect service on Pan in China. Pursuant to O 21 r 2(5) of the Rules of Court (Cap 322, R 5, 2014 Rev Ed), the action against Pan was deemed to have been discontinued on 14 March 2018, ie 12 months after the validity of the writ had expired.

On 22 March 2019, I entered judgment for the plaintiff against SVM, Feasto, Mizimegah and Scarlett, all of whom have appealed.

Facts

Mizimegah was incorporated on 3 March 2010, Feasto on 20 December 2011, and SVM on 14 June 2013.¹ At all material times, SVM was owned equally by Scarlett and Pan, Feasto was wholly owned by Scarlett, and Mizimegah was majority owned by Scarlett. At all material times, Scarlett was the sole director of all three companies. SVM and Mizimegah were set up for purposes of “general wholesale trade” whilst Feasto was set up for purposes of “IT design”. However, it appeared that the companies had little or no business and were used as investment holding companies instead. It was not disputed that on 19 September 2012, Feasto bought a unit at 1 Dusun #01-26, One Dusun Residences, Singapore (“the Dusun property”);² on 17 June 2013, Mizimegah bought a unit at 1 West Coast Drive #01-32 NEWest, Singapore (“the NEWest property”);³ and on 18 July 2013, SVM bought a shop unit at 9 King Albert Park #01-44, Singapore (“the KAP property”).⁴

Scarlett met Pan in October 2012 and the two of them became friends. According to Scarlett, Pan claimed to be an investor with several business opportunities in China and Pan invited Scarlett to join her (Pan’s) business venture in Singapore.⁵ On 9 May 2013, a company known as Redpine Capital Private Limited (“Redpine”) was incorporated for purposes of the business venture. Pan was a director and shareholder.⁶ Scarlett left her then current employment to join Redpine full-time and was appointed as a director of Redpine upon its incorporation.⁷ She was also given shares in Redpine.⁸ Scarlett ceased to be a director and shareholder of Redpine in February 2014.⁹

On 26 September 2013, Scarlett and Pan met up with Mr Tang King Kai (“Tang”), a lawyer practising under the name of M/s Tang & Partners (“the 26 September meeting”). Also present was one Mr Lee Show Sian (“Lester”). Lester knew Pan and Tang, and had been introduced to Scarlett by Pan. The plaintiff, who was a long-time client of Tang, was not present at this meeting.

At the 26 September meeting, several things happened. Scarlett and Pan signed a Deed of Guarantee dated 26 September 2013 (“the Guarantee”).¹⁰ The Guarantee was stated to be in consideration of the plaintiff “advancing to [SVM] the sum of S$400,000.00, [Feasto] the sum of S$200,000 and to [Mizimegah] the sum of S$200,000 … as friendly loans … at [Scarlett’s and Pan’s] request”. Under the Guarantee, Scarlett and Pan jointly and severally guaranteed the payment of the loans. Scarlett and Pan signed Options to Purchase (“the OTPs”) on behalf of SVM, Feasto and Mizimegah for the KAP property,¹¹ the Dusun property¹² and the NEWest property¹³ respectively. All three OTPs were dated 26 September 2013 and given in favour of the plaintiff. Each OTP was stated to be in consideration of $100 “as Option Fee … and of [the plaintiff’s] loan” of $400,000, $200,000 and $200,000 to SVM, Feasto and Mizimegah respectively. Tang handed the following cheques to Scarlett and Pan:¹⁴ UOB cheque no. 517413 for the sum of $400,000 drawn payable to SVM; UOB cheque no. 517411 for the sum of $200,000 drawn payable to Feasto; and UOB cheque no. 517412 for the sum of $200,000 drawn payable to Mizimegah. All three cheques were issued by the plaintiff and dated 26 September 2013. According to the plaintiff, these cheques represented the disbursement of the loans which he had orally agreed to give to SVM, Feasto and Mizimegah. Scarlett handed over the original options to purchase and sale and purchase agreements (signed by SVM, Feasto and Mizimegah when they purchased the properties) and the certificates of stamp duty (collectively, “the Title Deeds”) to Tang, on the understanding that the Title Deeds would be returned upon repayment of the loans in full.

Scarlett deposited the three cheques into the respective bank accounts of SVM, Feasto and Mizimegah. Shortly thereafter, the monies were withdrawn from the accounts. According to Scarlett, the monies were withdrawn and handed to Pan in Lester’s presence.

Sometime in middle to late October 2013, the plaintiff attended a dinner at Putien restaurant at 127 Kitchener Road together with Tang, Lester, and Pan. Scarlett was not present at the dinner. According to the plaintiff, Pan hosted the dinner to thank him for extending the loans to SVM, Feasto and Mizimegah.

It was the plaintiff’s case that the loans were repayable within “2 to 3 months”.¹⁵ In her oral testimony, Scarlett said that it was agreed at the 26 September meeting that the loans would be for two months.¹⁶ Sometime in early December 2013, after the plaintiff began chasing for payment, Pan issued a cheque (post-dated to 18 December 2013) for $800,000 drawn in favour of Tang.¹⁷ The cheque was drawn on Redpine’s account.

On 20 December 2013, Tang presented the Redpine cheque for payment. However, the cheque was dishonoured.

On 1 January 2014, in a text message from Scarlett to Tang sent at 11.33pm, Scarlett said that she “[had] now received $400k from Ms Pan” and would “return part of the $800k loan to [the plaintiff]”, provided that the plaintiff agreed that this repayment would allow her to redeem two of the three properties (i.e. the Dusun and NEWest properties).¹⁸ In another message to Tang on 3 January 2014, Scarlett described the $400,000 as having been given by Pan “as part payment of the $800k loan”.¹⁹ Scarlett also said that Pan would pay the balance of the loan on 8 January 2014. Scarlett asked for the three properties to be “released” upon “full payment to the lender Mr Liew” and requested Tang to arrange a meeting on 8 January 2014.

On 8 January 2014, at 8.36am, Tang sent a message to Scarlett, saying that the three properties would be returned to Scarlett and Pan upon payment of the loan of $800,000 in full.²⁰ Tang also said that “[w]e can meet today to do the exchange and redemption once you confirm that you have all the money”.

In the event, there was no meeting on 8 January 2014. Pan did not make any payment towards the loan on that day; neither did Scarlett pay the plaintiff the $400,000 that she had received from Pan.

By way of three letters dated 20 February 2014, the plaintiff demanded repayment of $400,000, $200,000 and $200,000 from SVM, Feasto and Mizimegah respectively.²¹ Between 24 February 2014 and 2 June 2014, Pan made part payments to the plaintiff on behalf of SVM, Feasto and Mizimegah, amounting to $400,000 in total. The plaintiff applied the repayments proportionally across the three loans to SVM, Feasto and Mizimegah. Accordingly, the balance amounts outstanding were: $200,000 from SVM; $100,000 from Feasto; and $100,000 from Mizimegah.

By way of a letter dated 9 June 2014 under the letterhead of Tang & Partners, Tang informed Scarlett that Pan had paid $400,000 to the plaintiff, and enclosed copies of the receipts of the payments made by Pan.²² The receipts were either in Tang’s name or in his name “for and on behalf of” the plaintiff. In the same letter, Tang asked Scarlett to pay the balance of $400,000 which she had previously received from Pan (see [12] above).

However, Scarlett refused to pay the balance of $400,000. In her message dated 16 June 2014 to Lester, Scarlett denied that the $400,000 received from Pan had been “entrusted” to her as part payment of the plaintiff’s loan, and that “Tang should go and get the $400k from [Pan] instead”.²³ Under cross-examination, Scarlett denied that the $400,000 received from Pan was intended by Pan to be paid to the plaintiff, and claimed that that amount was to repay other loans that Pan had taken from her.²⁴

On 14 September 2016, the plaintiff filed the present action. I should emphasise that the plaintiff’s claim was only for the amounts outstanding on the loans to SVM, Feasto and Mizimegah. The plaintiff had not exercised any of the OTPs and all the OTPs had expired. The plaintiff only relied on the OTPs as evidence of the loans.

The defences

SVM, Feasto, Mizimegah and Scarlett (together, “the Defendants”) raised four defences: The loans to SVM, Feasto and Mizimegah were sham transactions; the true borrower was Pan. The Guarantee should be set aside on the ground of unconscionability. The Guarantee should be set aside on the ground of non est factum. The loans and the Guarantee were not enforceable under the Moneylenders Act (Cap 188, 2010 Rev Ed) (“MLA”).

The Defendants’ respective defences could have been clearer but to the extent that they alleged that the OTPs were invalid or unenforceable, that was irrelevant since the plaintiff did not seek to enforce the OTPs in this action. The OTPs remained relevant as evidence of the loans unless Scarlett could prove that she was not aware of their contents. As...