MWA Capital Pte Ltd v Ivy Lee Realty Pte Ltd (in liquidation)

• Jurisdiction: Singapore
• Judge: Woo Bih Li J
• Judgment Date: 30 August 2017
• Neutral Citation: [2017] SGHC 216
• Court: High Court (Singapore)
• Docket Number: Companies Winding Up No 200 of 2015 (Summonses Nos 4766 of 2016, 303 of 2017 and 2281 of 2017)
• Year: 2017
• Published date: 21 November 2018
• Hearing Date: 19 May 2017,24 April 2017
• Plaintiff Counsel: Benedict Teo and Zhang Yiting (Drew & Napier LLC)
• Defendant Counsel: defendant absent,Michael Palmer and Jaime Lye (Quahe Woo & Palmer LLC),Gan Theng Chong and Andrew Tan (Lee & Lee),Stephen Wong (Sterling Law Corporation)
• Subject Matter: Companies,Winding up,Credit and Security,Money and moneylenders,Interest
• Citation: [2017] SGHC 216

Woo Bih Li J: Introduction

On 19 May 2017, I dismissed a challenge by two creditors of Ivy Lee Realty Pte Ltd (“the Company”) against the decision of the liquidators of the Company to affirm the interest rates charged by another creditor, MWA Capital Pte Ltd (“MWA”), in MWA’s proof of debt. MWA is a licensed moneylender. The two creditors are Evan Lim Industrial Warehousing Development Pte Ltd (“Evan Lim”) and LR Properties Pte Ltd (“LR Properties”). I will refer to them collectively as “the Opposing Creditors”. They have each filed an appeal against my decision.

Background

The Company was controlled by Lee Siew Noi Ivy (“Ivy Lee”). It was developing a condominium at 6, 8 and 10 Devonshire Road and at 130 Killiney Road. These various addresses have been collectively referred to as “the Devonshire 8 Property”.

The project ran into financial difficulties. Although the Company had borrowed from United Overseas Bank Limited (“UOB”), it continued to borrow from others. The loan in question was the one granted by MWA.

On 4 July 2014, the Company signed a loan agreement with MWA for $10 million (“the Loan Agreement”). The Company also executed: an undated Deed of Assignment (“the Deed of Assignment”) whereby it assigned all its rights, titles and interest in the Devonshire 8 Property (excluding unit #05-01) to MWA; an undated Option to Purchase in which the Company granted MWA the right to buy unit #05-01 at the Devonshire 8 Property; and a Note of Contract dated 4 July 2014 in relation to the loan.

Ivy Lee also executed a personal guarantee dated 4 July 2014 in favour of MWA.

On 10 December 2014, a charge was registered by MWA pursuant to the Deed of Assignment.

On 26 March 2015, MWA commenced Suit No 285 of 2015 (“Suit 285”) against the Company following the Company’s failure to repay MWA’s loan.

On 27 March 2015, MWA commenced Suit No 289 of 2015 against Ivy Lee on her guarantee. Both suits were then consolidated (with a third action against another company, U-Asia Pte Ltd) in Suit 285.

On 3 August 2015, I granted MWA summary judgment on part of its claim against the Company with unconditional leave to the Company to defend the balance of MWA’s claim.

As the Company failed to pay MWA the amount awarded under the summary judgment, the Company was ordered to be wound up on 9 November 2015. Suit 285 against the Company was stayed but continued against Ivy Lee and U-Asia Pte Ltd.

Subsequently, Ivy Lee and U-Asia Pte Ltd entered into a settlement agreement dated 25 January 2016 with MWA (“the Settlement Agreement”) pursuant to mediation. The Company was not a party to the Settlement Agreement.

The liquidators of the Company have sold the Devonshire 8 Property and the sale was completed on 8 July 2016. The sale price was $25.9 million. The net sale proceeds, after full payment to UOB, the mortgagee, were $14,441,228.74. Another $18,431.84 was received by the liquidators from other sources. Therefore, the sum available for distribution to creditors was $14,459,660.58.

The liquidators received the following proofs of debts:

S/No	Name of Creditor	Amount
(1)	MWA	Original proof of debt: $20,096,551.75 First revised proof of debt: $23,025,181.95 Second revised proof of debt: $20,944,618.65
(2)	Ivy Lee	Original proof of debt: $2,548,696.06 Revised proof of debt: $10,748,696.06
(3)	Mdm Ong Hwee Yin	$ 1,100,000.00
(4)	Evan Lim	$ 4,115,031.00
(5)	LR Properties	$ 4,387,328.40
(6)	Legal Solutions LLC	$ 69,673.20
(7)	EPM Partners	$ 1,800.00
(8)	Hilborne Law LLC	$ 19,792.50
(9)	Commissioner of Stamp Duties (IRAS)	$ 253,603.00
	Total:	$41,640,542.81

On 30 September 2016, the liquidators filed Summons No 4766 of 2016 (“SUM 4766/16”) in the winding up proceedings. The first prayer for relief sought an order that the liquidators be authorised to recognise the charge which MWA had registered.

The second prayer for relief sought an order that the liquidators be authorised to repay monies to MWA as a secured creditor out of the net proceeds of sale of the Devonshire 8 Property and monies received in relation to that property with any balance to be distributed as dividends to unsecured creditors.

On 20 January 2017, the liquidators filed Summons No 303 of 2017 (“SUM 303/17”) in the winding up proceedings. The first prayer for relief was for an order authorising the liquidators to pay MWA $12 million out of the net proceeds of sale of the Devonshire 8 Property and monies received in relation to that property in full satisfaction of the proof of debt lodged by MWA.

The two summonses came for hearing before me on 24 April 2017. The hearing was then adjourned to 19 May 2017. Before 19 May 2017, Evan Lim filed Summons No 2281 of 2017 (“SUM 2281/17”) on 18 May 2017. The third prayer for relief in SUM 2281/17 was for an order to reverse or modify the liquidators’ decision to affirm the interest rates charged by MWA. All three summonses were heard on 19 May 2017.

Apparently the validity of the charge registered by MWA was initially in issue. This was because the Deed of Assignment was initially undated although it was executed on 4 July 2014. It was undated apparently because the Company had agreed with UOB not to create any other security over the Devonshire 8 Property without UOB’s consent. Subsequently, MWA dated the Deed of Assignment on 8 December 2014 and registered the charge on 10 December 2014, more than 30 days after the date of execution (ie, 4 July 2014).

By the date of the first hearing before me (24 April 2017), the validity of MWA’s charge was no longer in issue.

There was also a second issue as to whether previous payments made by the Company to MWA should have been applied towards payment of principal or interest. MWA had applied the payments towards interest and not principal. By the time of the first hearing before me, this was also no longer in issue, ie, it was accepted that MWA was entitled to apply the previous payments towards interest and not principal, subject to one qualification which I will mention later.

A third issue was whether LR Properties could claim a resulting trust for the monies it had expended. This claim was dropped at the first hearing before me.

A fourth issue was whether the interest rate stated in the Settlement Agreement was applicable to the Company. At the first hearing before me, the parties (ie, the liquidators, MWA and the Opposing Creditors) agreed that as the Company was not a party to the Settlement Agreement, it did not bind the Company.

By the date of the second hearing (19 May 2017), the remaining issue before me was whether the interest rates charged by MWA under the Loan Agreement should be upheld. The liquidators were of the view that they should. Naturally MWA was also of the view that the rates should be upheld. The Opposing Creditors disagreed.

Prayer 3 of SUM 2281/17 was therefore the prayer in contention. LR Properties supported the summons, which had been filed by Evan Lim. After hearing submissions, I dismissed that prayer. Following from that, I allowed prayers 1, 2 and 3 of SUM 4766/16.

I also granted leave to the liquidators to withdraw SUM 303/17 since they were not proceeding with that summons.

As mentioned above, the Opposing Creditors have each filed an appeal against my decision to dismiss the challenge to MWA’s interest rates under the Loan Agreement.

I come back to the qualification I mentioned at [20]. If I had reduced the interest rates of MWA, then a question might arise as to whether any of the previous payments or part thereof by the Company should be applied towards the principal if the payments made were more than enough to pay the reduced interest rates. As I did not reduce the interest rates, the question became academic.

The Moneylenders Act

The relevant provisions in s 23 of the Moneylenders Act (Cap 188, 2010 Rev Ed) (“MLA”) state:

Re-opening of certain transactions

23.—(1) When proceedings are brought in any court by a licensee for the recovery of a loan or the enforcement of a contract for a loan or any guarantee or security given for a loan, and the court is satisfied that the interest or late interest charged in respect of the loan is excessive and that the transaction is unconscionable or substantially unfair, the court shall re-open the transaction and take an account between the licensee and the person sued.

(2) In taking an account under subsection (1), the court may re-open any account already taken between the parties to the proceedings and relieve the person sued from payment of any sum in excess of the sum adjudged by the court to be fairly due in respect of such principal, interest and late interest as the court, having regard to the risk and all the facts and circumstances of the case (including facts and circumstances arising or coming to the knowledge of any party after the date of the transaction), may determine to be reasonable. (3) In relieving the person sued under subsection (2), the court may, without prejudice to its power to grant any further or other equitable relief — (a) order the licensee to repay any excess paid to him; (b) set aside either wholly or in part, or revise or alter, any guarantee or security given or the contract for the loan; and (c) if the licensee has disposed of the security, order the licensee to indemnify the borrower or other person sued for the loss of the security. (4) Any court shall have and may exercise the powers referred to in subsections (1), (2) and (3) in relation to proceedings for relief brought by a borrower, a surety or other person liable to repay a loan to a licensee, notwithstanding — (a) any provision or agreement to the contrary; (b) that the time...