Nissho Iwai International (Singapore) Pte Ltd v Kohinoor Impex Pte Ltd and Another

• Jurisdiction: Singapore
• Judge: Lim Teong Qwee JC
• Judgment Date: 16 May 1995
• Neutral Citation: [1995] SGHC 127
• Docket Number: Suit No 156 of 1994 (Registrar's Appeals Nos 203 and 205 of 1995)
• Date: 16 May 1995
• Year: 1995
• Published date: 19 September 2003
• Plaintiff Counsel: Jimmy Yim and S Sivananthan (Drew & Napier)
• Citation: [1995] SGHC 127
• Defendant Counsel: Anwarul Haque, Sharmini Yogarajah and Patrick Ee (Haridass Ho & Pnrs)
• Court: High Court (Singapore)
• Subject Matter: Arrangement to procure credit,s 15 Moneylenders Act (Cap 188),Whether a loan in contravention of the Moneylenders Act,Credit and Security,Money and moneylenders

Cur Adv Vult

This action was commenced by writ issued on 1 February 1994 and para 2 of the statement of claim endorsed on it states:

The plaintiffs` claim against the first defendants is for the sums of US$428,373.38 and S$1,770,145.15 as at 31 December 1993 inclusive of interests being credit extended by the plaintiffs to the first defendants at the first defendants` request. Full particulars of the sums owing to the plaintiffs have been rendered to the first defendants by way of invoices and reminders issued by the plaintiffs to the first defendants.

The claim against the second defendant is for money payable under a deed of indemnity dated 10 March 1992. The plaintiff applied for judgment under O 14 and on 16 September 1994 Senior Assistant Registrar Tan Puay Boon granted leave to defend on condition that the defendants provided security in the amount of $2.4m by bank guarantee. Both the plaintiff and the defendants have appealed but since final judgment has been entered for failure to provide security the plaintiff is not proceeding with its appeal and no order is made on Registrar`s Appeal No 205 of 1994.

Mr Haque submits that both defendants should be given unconditional leave to defend. For the first defendant he says that the transactions were loans by an unlicensed moneylender and consequently unenforceable under s 15 of the Moneylenders Act (Cap 188). Secondly, the amount due is disputed. For the second defendant he says that the deed of indemnity sued on is in substance a guarantee and if the loans are unenforceable the second defendant is not liable. Further, the plaintiff is in breach of an express covenant under the deed of indemnity or alternatively of a collateral contract and there has been failure of a condition precedent and finally the deed is void for misrepresentation.

Moneylenders Act

(1) Money lent

The claim against the first defendant is for money payable for credit extended. It is not pleaded that the plaintiff is a bank or other financial institution and particulars of the credit extended are not given. Before the senior assistant registrar it was at first argued that the underlying transactions were sales of timber. The first defendant would find a supplier, the plaintiff would then buy from the supplier and on-sell the timber to the first defendant on credit. The second defendant who is a director of the first defendant said that the money claimed arose out of (1) bid bonds or performance bonds established by the plaintiff for the first defendant and (2) letters of credit established by the plaintiff in favour of the first defendant`s sellers. Before me there is now an affidavit by Shoichi Tanaka in which he corrected himself and said that the plaintiff did not buy any timber from the first defendant`s suppliers and it follows although he did not say so that the plaintiff did not sell any timber to the first defendant either. The credit extended to the first defendant arose out of the performance bonds and letters of credit arranged for it by the plaintiff. There were at least three such bonds arranged in 1990 and the plaintiff`s claim includes at least one sum of about $91,000 for money paid under a performance bond. Mr Haque does not contend that this part of the claim specifically is for money lent but treats it together with the claim in respect of letters of credit.

Section 15 of the Moneylenders Act provides:

No contract for the repayment of money lent by an unlicensed moneylender shall be enforceable: ... .

The first question to consider is whether any money was lent in the arrangements between the plaintiff and the first defendant. These arrangements must be considered as a whole and the substance must be looked at. As Lord Herschell LC said in Alexander Knox McEntire & Anor v Crossley Brothers Ltd at pp 462, 463:

... I quite concede that the agreement must be regarded as a whole - its substance must be looked at. The parties cannot, by the insertion of any mere words, defeat the effect of the transaction as appearing from the whole of the agreement into which they have entered. If the words in one part of it point in one direction and the words in another part in another direction, you must look at the agreement as a whole and see what its substantial effect is.

More recently this statement of the law has been applied in Welsh Development Agency v Export Finance Co Ltd . See at p 161 per Dillon LJ and p 187 per Staughton LJ. The difficulty in this case lies in the fact that the arrangements have not been reduced to writing.

The second defendant in his affidavit of 20 April 1994 said:

4 On or around December 1989, due to the regularity of trade between the first defendants and third party buyers, the plaintiffs approached the first defendants with a view to discussing the possibility of the plaintiffs extending credit facilities to the first defendants (hereinafter referred to as `the relationship`).

5 The first defendants agreed to this and the relationship began thereafter in January 1990 in the following manner:

(a) The plaintiffs would establish bid bonds or performance bonds on the basis of the documents presented by the first defendants to the plaintiffs.

(b) The plaintiffs would provide purchase financing in cases where the first defendants had in their possession the export letters of credit and presented the same to the plaintiffs who would establish purchase letters of credit in favour of the suppliers.

(c) Where the first defendants did not have in their possession export letters of credit, the first defendants would present the buyers` contract which are either on sight payment/delayed payment basis to the plaintiffs who would establish purchase letters of credit in favour of the suppliers.

6 On shipment, documents for negotiations prepared by the first defendants would be submitted to the plaintiffs for their onward presentation/negotiation through their banks. Upon receipt of payment, the plaintiffs would credit the same to the first defendants less the plaintiffs` cost and expenses.

The plaintiff is the wholly-owned subsidiary of Nissho Iwai Corp a substantial Japanese trading company. The Singapore branch was in business for a number of years and in 1991 the plaintiff was incorporated. Presumably it has since acquired the benefit of the parent company`s contractual arrangements with the first defendant and the book debts but nothing turns on this. From time to time the first defendant bought quantities of timber. The terms of payment in each case required a letter of credit available against a sight draft accompanied by the documents. The first defendant on-sold the timber. In some cases it had the buyer`s letter of credit in hand before it was required to establish a letter of credit to its own seller. In some other cases it would only have the contract note. The second defendant also said that in a few cases the timber was bought as stock and was not immediately on-sold so that there was neither a letter of credit nor a contract note in hand. In each case where the arrangements were carried into effect the plaintiff applied to its own bank and the bank issued a letter of credit in favour of the first defendant`s seller. In one of these letters of credit which was produced the documents required included bills of lading to the order of the plaintiff and in another when the timber was carried by road the documents were to the order of the plaintiff`s bank. Either requirement would be perfectly consistent with the arrangement for negotiation by the plaintiff or `through` its bank. In an affidavit filed on 6 April 1995 after the conclusion of the hearing the second defendant produced the first defendant`s invoices to its buyers and matched these to the timber it had bought and for which the plaintiff had arranged for letters of credit to be issued and from these I note (1) in some cases the first defendant sold on letter of credit payment terms and the letters of credit were available against sight drafts and (2) where no letters of credit were issued the drafts were drawn at sight with a few exceptions where no maturity period was specified. All drafts were drawn `through` the plaintiff`s bank as shown in the first defendant`s invoices which I understand meant in the circumstances that they were either payable at or to the order of the plaintiff`s bank. The plaintiff`s bank paid under the letter of credit it had issued, received the shipping and other documents and negotiated the documents and in those cases where the buyer had established a letter of credit, it negotiated the documents and collected payment under the buyer`s letter of credit. It is common ground that the plaintiff allowed 60 days from the date its bank paid under its letter of credit and charged the first defendant (1) a commission of 1.5% of the amount of the letter of credit, (2) bank charges and (3) interest at varying rates for 60 days. An invoice is then delivered by the plaintiff to the first defendant. The invoice refers to a sale of the timber by the plaintiff to the first defendant consistently with the plaintiff`s case as at first argued before the senior assistant registrar and the charges in it are for the price which is the same price payable by the first defendant to its supplier, the 1.5% commission, bank charges and interest for 60 days. Obviously there were shortfalls in the bank`s collections giving rise to the claim against the first defendant. The first defendant was also required in some cases to provide a bid bond to tender for the supply of timber and a performance bond as a condition of its sale. The plaintiff applied to its own bank to provide the bond and where the bank was called upon to pay the plaintiff`s account would be debited and the plaintiff claimed reimbursement against the first defendant.

To lend money is in its ordinary sense to make a loan of money and in Lee Chin Yen, The Law of...