Ochroid Trading Ltd and another v Chua Siok Lui (trading as VIE Import & Export) and another

• Jurisdiction: Singapore
• Judge: Audrey Lim JC
• Judgment Date: 22 March 2017
• Neutral Citation: [2017] SGHC 56
• Plaintiff Counsel: Gary Leonard Low, Vikram Ranjan Ramasamy, Priya d/o Gobal and Yap Zhan Ming (Drew & Napier LLC)
• Docket Number: Suit No 238 of 2014
• Date: 22 March 2017
• Hearing Date: 08 September 2016,16 January 2017,22 November 2016,17 November 2016,16 November 2016,06 September 2016,07 September 2016,15 November 2016
• Subject Matter: Illegal moneylending,Credit and security,Money and moneylenders
• Published date: 26 January 2018
• Defendant Counsel: Sarbjit Singh Chopra and Ho May Kim (Selvam LLC),Alvin Tan Kheng Ann (Wong Thomas & Leong)
• Court: High Court (Singapore)
• Citation: [2017] SGHC 56
• Year: 2017

Audrey Lim JC: Introduction

The plaintiffs claim against the defendants for breach of contract, unjust enrichment, fraudulent misrepresentation and conspiracy to defraud, arising out of a series of 76 agreements concluded between December 2007 and March 2008. These agreements fall into two categories – those entered into between the first plaintiff and the first defendant (“Orion Agreements”), and those concluded between the second plaintiff and the first defendant (“Ole Agreements”).

The plaintiffs allege that they entered into a joint venture to invest in the defendants’ wholesale food business (which was registered in the first defendant’s name), and had advanced a sum of money to the first defendant pursuant to each one of the Orion and Ole Agreements to fund the business’s purchase and resale of food products overseas. The sum disbursed under each agreement was to be returned with profit by a stipulated date. The claim in contract and unjust enrichment is premised on the first defendant’s failure to repay the plaintiffs as agreed. The plaintiffs also allege that the defendants had induced them to advance the moneys by falsely representing that the moneys were for the business purposes stated in the Orion and Ole Agreements when that was not the case, and that the defendants had conspired to defraud them. The plaintiffs claim a total of $10,253,845 comprising $8,909,500 advanced under the 76 Orion and Ole Agreements and $1,344,345 in profit.¹

The defendants’ primary defence is that the Orion and Ole Agreements were loans which are unenforceable as unlicensed moneylending transactions under the Moneylenders Act (Cap 188, 1985 Rev Ed) (“the MLA”). They have also pleaded that the Orion Agreements are unenforceable under the Business Registration Act (Cap 32, 2004 Rev Ed) (“the BRA”) as the first plaintiff had carried on business without being registered under that Act. In addition, they deny that there was any misrepresentation or conspiracy to defraud the plaintiffs because, among other things, the plaintiffs knew that the agreements were improper.

Background and parties’ respective cases

The second plaintiff (“Mr Ole”) is the sole director and shareholder of the first plaintiff (“Orion”). He is an experienced businessman who has been involved in various businesses since the 1980s, primarily in the retail of beverages and fruit juices. Mr Ole is married to one Mdm Lai Oi Heng (“Mdm Lai”). Mdm Lai is not involved in her husband’s businesses, but has been in charge of managing the couple’s joint personal portfolio by using their wealth to invest in properties, shares, bonds and other investments since the 1970s. The second defendant (“Mr Sim”) is an entrepreneur. He is the mentor of the first defendant (“Ms Chua”), who assists him in his business. They started a company, VIE Import & Export (“VIE”) on 11 July 2003, with Ms Chua as its registered owner. VIE was in the business of general wholesale trade until it was de-registered on 3 November 2012.²

Mdm Lai first met the defendants around the end of 2003 when she obtained Mr Sim’s help to settle a dispute. Mdm Lai and Mr Sim became good friends. Subsequently, from early 2005, Mdm Lai and VIE entered into a series of agreements. The agreements were recorded in writing. On their face, they were for Mdm Lai to provide “loans” to VIE for the purchase and resale of specified foods and food-related products overseas. The agreements provided that the funds were to be repaid with a “profit” on a stipulated date (“the Repayment Date”). Each agreement was also supported by a tax invoice from VIE stating the type, quantity and price of the goods which it related to.

On Mdm Lai’s request, the party providing the funds under the agreements was changed from Mdm Lai to Orion around end 2007 (ie, the Orion Agreements), and then from Orion to Mr Ole from about end February to March 2008 (ie, the Ole Agreements). As noted above, 76 of the Orion and Ole Agreements concluded between December 2007 and March 2008 remain unpaid. They form the subject-matter of this Suit. In total, between 2005 to early 2008, there were 740 such agreements between Mdm Lai, Orion or Mr Ole (as the party providing the funds) and VIE under which more than $58m was disbursed (“the Agreements”).³

Both parties accept that there is more to the Agreements than meets the eye. In particular, it is common ground that the tax invoices are not genuine documents and do not reflect actual transactions performed by VIE. Unsurprisingly, the plaintiffs’ and the defendants’ account of the true nature of the Agreements and of what transpired during the material period are starkly different.

The plaintiffs’ case

According to the plaintiffs, Mr Sim called Mdm Lai sometime in January or February 2005 to inform her that he had committed to an order of frozen ducks (“the first order”) which he was unable to fulfil due to insufficient funds. He asked Mdm Lai if she would enter into a joint venture with him and VIE on a “cost and profit sharing basis”.⁴ Mr Sim said to her that he knew many purchasers in Europe who required Asian food products for sale to restaurants. He further added that he had previously been involved in the wholesale food business for a few years and that it was very lucrative.

More specifically, Mr Sim informed Mdm Lai that she could invest $50,000 in the first order, being 60% of the cost of the frozen ducks, while he would bear the remaining 40% of the cost. He told her that she would receive a return of $50,000 within two months, with an additional $8,000 comprising 60% of the total profits which VIE would make on the resale of the ducks. VIE would receive the remaining 40% of the profits.⁵ Mr Sim also explained to Mdm Lai that VIE was his Singapore vehicle to service European buyers, and that if Mdm Lai invested in the business, the defendants would be able to increase her wealth.

Mdm Lai agreed to invest $50,000 in the first order. Before she released the money to VIE, Ms Chua faxed two documents to her.⁶ The first was an undated agreement (“the First Agreement”) from VIE as follows:

AGREEMENT OF LOAN

The company VIE Import & Export took a loan of SGD50,000 from Mdm Lai Oi Heng as co-operation for frozen duck business under INV05/0201. As agreed by both parties, profit will be base (sic) on 15%. The due amount of SGD58,000 shall be paid on 15th May 2005.

[Signed, and stamped with VIE’s stamp]

The second document was a tax invoice 05/0201 (“the First Invoice”) issued by VIE corresponding to the First Agreement. The First Invoice bore various particulars such as the invoice date (7 February 2005), the buyer of the goods (an alleged customer of VIE named “BAF Import & Export GmbH”), the buyer’s address, the description and unit price of the goods, the quantity to be shipped and the total amount which the customer would pay (€51,840). The First Invoice also showed the date of shipment of the goods with the ports of shipment and destination. Finally, the First Invoice had VIE’s stamp and the buyer’s company stamp and/or a signature.

Around 12 May 2005, VIE repaid Mdm Lai $58,000 for her investment based on the First Agreement. Thereafter, she continued to invest in VIE’s purported business through similar agreements between VIE and herself from early 2005 to December 2007 (“ML Agreements”). There were around 600 such ML Agreements concluded.⁷ Each of them was worded in a similar manner to the First Agreement, save that the “loan” amount, type of goods, percentage of “profit”, total amount to be repaid and the Repayment Date varied. Each ML Agreement was also accompanied by an invoice from VIE similar to the First Invoice. The “profit” for the ML Agreements ranged from 14% to 17% of the sum advanced by Mdm Lai, depending on the type of food product stated in the agreement.

Mdm Lai testified that her understanding of how each investment operated was as follows.⁸ Mr Sim would first obtain an order from one of VIE’s customers. The customer would confirm the order by signing on VIE’s invoice before VIE sourced for a supplier.⁹ At the end of each month, the defendants would fax to Mdm Lai a batch of the ML Agreements together with the corresponding invoices. These related to VIE’s confirmed orders for the next month. VIE required Mdm Lai to then transfer moneys to it as per the ML Agreements, and these funds were used to purchase the goods needed to meet the orders.

The Repayment Date was typically about two months after Mdm Lai transferred the moneys to VIE. She said that Mr Sim had informed her that it took about two months for VIE to buy the goods from its supplier, ship them to its customer and for the customer to pay VIE so that it could repay Mdm Lai. She was also warned that if the money was not transferred to VIE on time, it would not be able to meet its customers’ orders punctually and could be penalised for up to 30% of the purchase price.

For the ML agreements, VIE duly returned the sums advanced by Mdm Lai, with the stipulated profit. By 2006, the amount Mdm Lai and Mr Ole invested in VIE’s purported business grew larger, and they allegedly became increasingly uncomfortable with investing in a sole proprietorship. They wanted their investments to be protected and were concerned about whether VIE was “properly paying its taxes”.¹⁰ These concerns were conveyed to Mr Sim, who agreed to transfer VIE’s business to a company to be jointly owned by Mr Sim and Mdm Lai. Hence Orient Asia Holdings Limited (“Orient Asia”) was incorporated in Hong Kong in August 2006. Mdm Lai held 60% of the shares in Orient Asia and Mr Sim’s wife, Mdm Zhao Fei Yuan (“Mdm Zhao”), held the remaining 40% on his behalf. Despite Mdm Lai’s insistence, the defendants failed to transfer VIE’s business to Orient Asia as agreed. Mr Sim was evasive on the reason why this was not done. But to appease Mdm Lai, he made her a signatory to VIE’s bank account with UOB Bank....