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

• Jurisdiction: Singapore
• Court: Court of Three Judges (Singapore)
• Judge: Sundaresh Menon CJ,Andrew Phang Boon Leong JA,Judith Prakash JA,Tay Yong Kwang JA,Steven Chong JA
• Judgment Date: 22 January 2018
• Neutral Citation: [2018] SGCA 5
• Citation: [2018] SGCA 5
• Subject Matter: Money and moneylenders,Illegality and public policy,Credit and Security,Contract,Restitution,Unjust enrichment,Illegal moneylending
• Date: 22 January 2018
• Defendant Counsel: First respondent in person,Sarbjit Singh Chopra, Ho May Kim, Zheng Shengyang Harry and Lee Wen Rong Gabriel (Selvam LLC)
• Plaintiff Counsel: Gary Leonard Low, Vikram Ranjan Ramasamy, Priya d/o Gobal and Chan Min Jian (Drew & Napier LLC)
• Hearing Date: 16 October 2017
• Published date: 08 February 2018
• Docket Number: Civil Appeal No 63 of 2017

Andrew Phang Boon Leong JA (delivering the judgment of the court): Introduction

This is an appeal against the decision of the High Court judge (“the Judge”) in Ochroid Trading Ltd and another v Chua Siok Lui (trading as VIE Import & Export) and another [2017] SGHC 56 (“the Judgment”) dismissing the Appellants’ claim for the return of monies (including alleged “profit”) pursuant to 76 agreements. The Appellants mount their claim against the First Respondent in contract (for a total sum of $10,253,845, which includes the alleged “profit”) or, alternatively, in unjust enrichment (for only the principal sums totalling $8,909,500 without the “profit”). They also claim against the First Respondent and the Second Respondent for both fraudulent misrepresentation as well as for conspiring to defraud them.

The primary issue arising from the Appellants’ claim against the First Respondent in contract is legally straightforward, albeit factually intensive – whether the claim fails because the agreements were illegal moneylending contracts which are unenforceable under the Moneylenders Act (Cap 188, 1985 Rev Ed) (“the MLA”).

The alternative claim in unjust enrichment, however, is more difficult and legally significant. It concerns the issue of what impact, if any, the illegality of a contract has on an independent claim in unjust enrichment to recover the benefits conferred thereunder. This is a vexing area of the law, particularly after the recent landmark decision of the UK Supreme Court in Patel v Mirza [2017] AC 467 (“Patel”), in which the majority of a specially convened nine-judge coram dramatically shifted the law by replacing the traditional rule-based approach towards the doctrine of illegality with a discretionary policy-based test. To the extent that the present case concerns potential statutory illegality (as opposed to common law illegality), Patel is not, strictly speaking, relevant as the court in that decision confined its pronouncements to illegality at common law (although that in itself raises a difficulty which we shall elaborate upon later in this judgment). However, to the extent that the judges in Patel rendered observations on the restitutionary recovery of benefits conferred under an illegal contract through a claim in unjust enrichment as well as the impact of such recovery on traditional and established legal avenues of restitutionary recovery via doctrines such as locus poenitentiae, such observations are in fact directly relevant to the present case.

We would also like to take this opportunity to set out our views on the general relevance of Patel in Singapore law in order to clarify what the local position is on the doctrine of illegality and public policy in the context of unlawful contracts, and, in particular, what impact (if any) Patel has on the decision of this Court in Ting Siew May v Boon Lay Choo and another [2014] 3 SLR 609 (“Ting Siew May”). Before proceeding to do so, we first set out the factual background of the present case, a summary of the Judge’s decision, as well as the issues that are raised in the present appeal.

The facts Parties to the dispute

The Second Appellant (“Mr Ole”) is the sole director and shareholder of the First Appellant (“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 Mdm Lai Oi Heng (“Mdm Lai”). Mdm Lai has been in charge of managing the couple’s joint personal portfolio by channelling their wealth towards various investments since the 1970s.

The Second Respondent (“Mr Sim”) is an entrepreneur. He is the mentor of the First Respondent (“Ms Chua”), who assisted him in his business. In 2003, Mr Sim and Ms Chua started a sole proprietorship, VIE Import and Export (“VIE”), with Ms Chua as its registered owner. VIE was in the business of general wholesale trade until it was de-registered in 2012.

Background to the dispute

Mdm Lai first met the Respondents 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.

At Mdm Lai’s request, the party providing the funds under the agreements was changed from Mdm Lai to Orion around end 2007 (hereinafter referred to as “the Orion Agreements”), and then from Orion to Mr Ole from about end February to March 2008 (hereinafter referred to as “the Ole Agreements”). In total, between 2005 and 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”).

Both sides accept that the Agreements are not entirely proper. In particular, it is common ground that the tax invoices are not genuine documents and do not reflect actual transactions performed by VIE. What is disputed is the true nature of the Agreements and the events which transpired during the material period.

Subsequently, VIE failed to repay the Appellants under the 76 Orion and Ole Agreements, which were concluded between December 2007 and March 2008. The sum outstanding under the Orion and Ole Agreements was $10,253,845, comprising $8,909,500 as the principal sums yet to be repaid and $1,344,345 as the “profit” due to the Appellants. The Appellants therefore sued Ms Chua (trading as VIE) for breach of contract (for the entire outstanding sum) and in unjust enrichment (for the unpaid principal sums alone). They also sued Ms Chua and Mr Sim for falsely representing to them that the monies were for business purposes and for conspiring to defraud them. The two latter claims are therefore the only substantive causes of action against Mr Sim.

It should be noted from the outset that the claims in contract and unjust enrichment are against Ms Chua in her capacity as the sole proprietor of VIE. In fact, it was VIE which was the contracting party to the Agreements as made clear by the wording of the contracts, and the fact that they were endorsed with VIE’s stamp. In this regard, it is undisputed that Mr Sim was the main controller of VIE and Ms Chua was acting as his assistant.

The decision below

In the proceedings below, the High Court dismissed the Appellants’ claims against the Respondents in full. We will examine the Judge’s analysis of each claim in greater detail in the course of our judgment, but at this stage it suffices to set out a brief summary of her grounds of decision.

First, on the breach of contract claim, the Judge found that: The Agreements were based on a template dictated by Mdm Lai who insisted on an invoice (which she knew to be false) to accompany each Agreement so that the transactions would not look like moneylending transactions (at [48] of the Judgment); The objective language of the Agreements and the substance of the transactions indicated that the Orion and Ole Agreements were loan contracts rather than “investments” as claimed by the Appellants (at [47]); and The evidence demonstrated that the Appellants were unlicensed moneylenders under the MLA and the Orion and Ole Agreements were unenforceable under s 15 of the same Act (at [80]).

Second, on the unjust enrichment claim, the Judge found that, since the Orion and Ole Agreements were unenforceable under s 15 of the MLA, the claim in unjust enrichment should also fail. The alternative claim was a backdoor attempt to enforce an unenforceable loan contract (at [84]).

Third, on the claim in fraudulent misrepresentation, the Judge found that there would have been no representation by the Respondents to the Appellants or to Mdm Lai that the monies advanced to VIE would be used to purchase the goods mentioned in the invoices, let alone any reliance placed by them on any such representation or on the invoices. This was because the Agreements were moneylending transactions and it was Mdm Lai who insisted on the fabricated invoices to mask the nature of the Agreements (at [91]).

Fourth, on the claim in conspiracy to defraud, there was no agreement between the Respondents to do certain acts with the intent to cause damage to the Appellants. Once again, the manner in which the Agreements were structured with the accompanying false invoices was done with the full knowledge of Mdm Lai and the Appellants. The monies advanced under the Agreements were thus purely loans and there were no terms limiting their use (at [92]).

The issues in this appeal

In this appeal, there are three main issues before us: Whether the Orion and Ole Agreements fall foul of the MLA and are thus unenforceable; If so, whether there can nevertheless be restitutionary recovery of the principal sums disbursed under the Orion and Ole Agreements pursuant to an independent cause of action in unjust enrichment; and Whether the claims in fraudulent misrepresentation and conspiracy to defraud are made out against the Respondents.

Our decision

Before we turn to our analysis of the issues in the present appeal, we first set out the law on the doctrine of illegality and public policy in the context of unlawful contracts.

The doctrine of illegality and public policy in the context of unlawful contracts Introduction

As this Court observed in Ting Siew May (at [33]), “[i]t bears repeating that the law relating to illegality and public policy is generally confused (and confusing)”. This is not surprising, given the very nature of the subject itself. Indeed,...