Lim Beng Cheng v Lim Ngee Sing

• Jurisdiction: Singapore
• Judge: Judith Prakash J
• Judgment Date: 29 October 2015
• Neutral Citation: [2015] SGHC 282
• Plaintiff Counsel: Peh Chong Yeow (Advent Law Corporation)
• Date: 14 October 2015
• Published date: 15 June 2018
• Hearing Date: 17 March 2015,22 May 2014,21 May 2014,14 October 2015,20 May 2014,18 March 2015,07 July 2015
• Subject Matter: Contract,Formation,Moneylenders Act,Remedies,Specific performance,Acceptance,Illegality and public policy,Statutory illegality
• Docket Number: Suit No 416 of 2013
• Citation: [2015] SGHC 282
• Defendant Counsel: A Rajandran (M/s A Rajandran)
• Court: High Court (Singapore)
• Year: 2015

Judith Prakash J: Introduction

The plaintiff says that on 11 October 2010, he entered into an agreement with the defendant (“the October 2010 Agreement”) under which the defendant promised to transfer to the plaintiff a 46.5% stake in a strata title property (“the KG Avenue Unit”) in consideration for the release from debt owed to the plaintiff. The October 2010 Agreement is the last in a series of agreements signed by the parties that date back to April 2008. The defendant’s position is that no contract was made on 11 October 2010 because he did not agree to the plaintiff’s offer and the plaintiff did not provide good consideration for the October 2010 Agreement. In any event, even if a contract existed, it would be unenforceable because the underlying transaction entered into in April 2008 offended the laws against moneylending.

Background The parties

Both parties are businessmen. They share the same surname but have no familial relationship to each other at all. They met in 2007 shortly after the defendant acquired an office property adjacent to the plaintiff’s business premises.

The plaintiff owns and runs a software development company called “Hiwire Data & Security Pte Ltd”. His office is located at 200 Jalan Sultan, #08-06, Textile Centre, Singapore. The defendant purchased the neighbouring office unit, #08-07, Textile Centre (“Unit 08 TC”), on 20 July 2007 and sub-divided it into two office units which, from time to time thereafter, were rented out to third parties. The defendant is a part-time property agent and an active investor in the property market.

Whilst the parties participated in a number of agreements, their perspectives on the facts before the court are diametrically opposed to each other. The dichotomy arises from the defendant’s portrayal of the plaintiff as a moneylender seeking to recover an extortionate loan and the plaintiff’s portrayal of himself as a businessman who was persuaded by the defendant to enter into an investment in property which subsequently entangled him in a whole series of transactions with the defendant.

According to the plaintiff, the parties shared a friendly relationship. The defendant brought fruit to the plaintiff’s office and gave him mooncakes during the mid-autumn festival. Both parties also went out for lunch or coffee breaks together, sometimes with a few of the plaintiff’s employees. The plaintiff and defendant had a number of casual discussions which often revolved around property investments. The defendant says otherwise. According to him, the parties were merely casual acquaintances and not very familiar with each other. They went out together for meals only occasionally and, when they did, they paid for their own meals. They never discussed property investments; instead, the plaintiff would remind the defendant to repay the sums allegedly borrowed from him. Any food given to the plaintiff was given out of courtesy and because the plaintiff had seen the defendant carrying it around.

The agreements between the parties

Between 24 April 2008 and 11 October 2010, the parties entered into seven alleged agreements on six occasions. The first and last of these agreements are the most crucial in this trial.

The first agreement: the 24 April 2008 Option to Purchase Unit 08 TC

The defendant says that he approached the plaintiff for a loan on 23 April 2008 because he urgently needed money and the plaintiff’s office was right next to Unit 08 TC. According to the plaintiff, the defendant claimed to have exercised an option to purchase 200 Jalan Sultan, #18-08, Textile Centre (“Unit 18 TC”), a residential unit in the same building as the parties’ offices. The defendant explained that his co-investor had backed out from the purchase and he urgently needed $240,000 to complete the purchase the following day.

The defendant then offered to sell Unit 08 TC to the plaintiff for $240,000 on the condition that he could “buy back” the option from the plaintiff by 28 July 2008 for $340,000. According to the plaintiff, the defendant was willing to buy the option back at a price which would give the plaintiff a profit of $100,000 because he was anticipating a capital gain of $400,000 if he completed the purchase of Unit 18 TC; its market value was $680,000 at that time whereas the price at which the defendant was buying it was only $280,000. The defendant proposed that if he was unable to buy back the option, the plaintiff would be entitled to act on it and complete the purchase of Unit 08 TC for $240,000. The plaintiff was initially hesitant; but ultimately accepted the defendant’s offer after being assured that it was in order and that the defendant would definitely “buy back” the option since Unit 08 TC was worth more than $240,000.

On 24 April 2008, the defendant granted the plaintiff an option to purchase Unit 08 TC for $240,000 (“the April 2008 Option”). The plaintiff says that the defendant prepared the option, whereas the defendant says the opposite. The April 2008 Option was signed at the office of, and witnessed by, Mr Mak Kok Weng (“Mr Mak”), an advocate and solicitor. The purchase price of the unit stated on the April 2008 Option was $300,000 instead of $240,000, but this made little difference to the plaintiff for two reasons: first, the price was essentially academic as the defendant had assured the plaintiff that he would buy back the option and, secondly, even if the defendant did not do so, the plaintiff would be unlikely to suffer a capital loss despite having to pay an extra $60,000 to complete the purchase.

The plaintiff duly exercised the April 2008 Option and tendered three cashier’s orders for a total sum of $240,000 on the same day. On 28 April 2008, Mr Mak lodged a caveat over Unit 08 TC on the plaintiff’s behalf (“the April 2008 Caveat”).

The second agreement: the July 2008 Joint Venture Agreement

On or about 24 July 2008, a few days before the expiry of the period to buy back the April 2008 Option, the defendant told the plaintiff that he could not raise the $340,000 needed to exercise his repurchase right. The plaintiff says that the defendant asked him to waive his rights under the April 2008 Option and instead enter into a joint venture agreement under which the plaintiff would be deemed to have contributed $340,000 to the purchase of Unit 18 TC (for clarity I repeat that this was the residential unit that the defendant had purchased in April 2008 with the funds derived from the April 2008 Option).

The parties signed a joint venture agreement the same day (“the July 2008 JVA”). Under this agreement, the defendant was to sell Unit 18 TC and the plaintiff would be entitled to the first $340,000 of the sale proceeds and half of any net sale proceeds beyond the first $680,000. The plaintiff says that this document was prepared by the defendant whereas the defendant says that the plaintiff prepared and asked him to sign it.

Additionally, the plaintiff says that the defendant agreed that if he defaulted on the July 2008 JVA, the plaintiff would be entitled to buy Unit 18 TC for $476,000 (ie, by paying another $136,000 above his deemed contribution of $340,000). This, however, was a verbal agreement.

The third agreement: the August 2008 Agreement

According to the plaintiff, on 15 August 2008, the defendant asked him to vary his rights under the July 2008 JVA by accepting a 10-year repayment plan on a principal sum of $340,000, under which the defendant would pay: $3,418.15 per month for the first two years (representing the monthly instalment of principal and interest at 3.85% per annum); $3,437.79 per month for the third to the tenth year (representing the monthly instalment of principal and interest at 4% per annum); and $1,000 per month (representing the plaintiff’s share of rental income).

This variation agreement (“the August 2008 Agreement”) was handwritten by the defendant. It has two interesting features. First, the property referenced in this agreement was not Unit 18 TC but Unit 08 TC. Secondly, it provided that there would be “no sharing of selling profits”. The plaintiff says that the defendant did not give him any reason for this but he suspected that the defendant was acting on rumours of an en bloc sale of Textile Centre; the plaintiff thought that the value of Unit 18 TC would be assessed at about $1.5m and that the defendant did not want to share this windfall with the plaintiff. The plaintiff says that the defendant proposed the terms of the August 2008 Agreement and that he accepted those terms. The defendant’s explanation, however, is that the plaintiff insisted on the change for his own benefit because the value of the residential property (ie, Unit 18 TC) had fallen below that of the commercial property (ie, Unit 08 TC) in the light of the financial crisis. At the trial, however, he said he was forced to enter into this agreement because the plaintiff did not pay $136,000 under the July 2008 Agreement. According to him, the plaintiff dictated the terms of the August 2008 Agreement to him and that was why the document was in his handwriting.

After the agreement was signed, the defendant commenced the payment of the monthly instalments via bank transfers.

The fourth and fifth agreements: the November 2008 Deed and the November 2008 Option to Purchase Unit 08 TC

According to the plaintiff, shortly before 28 November 2008 the defendant visited him and proposed replacing the August 2008 Agreement with a set of twin agreements. The plaintiff accepted the offer. Unsurprisingly, the defendant says that it was the plaintiff who drafted these agreements and asked the defendant to sign them.

One of these agreements was a deed (“the November 2008 Deed”) under which the defendant promised to pay: $3,418.15 per month for the first two years; $3,437.79 per month for the third to the ninth year (the plaintiff, however, says that this was a mistake and the...