Tan Sim Lay and Another v Lim Kiat Seng and Another

• Jurisdiction: Singapore
• Judge: Choo Han Teck JC
• Judgment Date: 13 May 1996
• Neutral Citation: [1996] SGHC 103
• Docket Number: Suit No 114 of 1994
• Date: 13 May 1996
• Published date: 19 September 2003
• Year: 1996
• Plaintiff Counsel: Remesha Pillai (Karuppan Chettiar & Husain)
• Citation: [1996] SGHC 103
• Defendant Counsel: Jeffrey Chua (Rodyk & Davidson)
• Court: High Court (Singapore)
• Subject Matter: Sums advanced alleged to be investments for profit,Whether returns were interest,Money and moneylenders,Illegal money-lending,Credit and Security,Parties to transactions were strangers,ss 2, 3, 15 Moneylenders Act (Cap 188),Meaning of interest

Background

The plaintiffs are the shareholders and directors of a construction company called Hui Seng Engineering Construction Pte Ltd. They are also co-directors in two other companies called Lee Hup Construction Pte Ltd and Yashin Construction Pte Ltd. The first defendant is the widower of the second defendant who died before the matter came to trial. At the material time the defendants carried on a licensed moneychanging business at Woodlands. They were then also actively operating a grocery and supermarket owned by the first defendant`s family.

On 26 October 1993, the defendants signed an agreement (the agreement) with the plaintiffs. By this agreement the defendants admitted a debt and agreed, inter alia, to pay the plaintiffs the sum of S$1,097,250.00 and a further sum of RM215,250.00 by instalment in consideration of the plaintiffs forebearing to sue on the said debt. By a further term, the defendants agreed to grant an option to the plaintiffs in respect of their house at Hillview Way as well as two Housing and Development Board (HDB) properties at Woodlands. The plaintiffs alleged that the defendants failed to keep up with the instalment payments and they, therefore, instituted the present proceedings for breach of the agreement. The defendants aver in defence, inter alia, that the said agreement was a settlement agreement arising from a series of unlawful moneylending transactions in which the plaintiffs lent money as unlicensed moneylenders to the defendants. The plaintiffs` case was that the money were advanced purely as `investments` in the defendants` moneychanging business.

The plaintiffs` case

The first plaintiff`s evidence was that he was introduced to the defendants sometime in June 1993. He said that the first defendant represented to him that `enormous profits` could be made in the moneychanging business and approached the first plaintiff to invest in his moneychanging business. On account of this representation, the first plaintiff persuaded the second plaintiff to invest money in the defendants` moneychanging business. Under cross-examination the first plaintiff recounted how he was introduced to the first defendant and how the plaintiffs began investing in the first defendant`s business. He said that a friend of his called `Chua` telephoned the first defendant from the first plaintiff`s office. About May 1993 when the plaintiffs came back from a trip to Malaysia they visited the defendants` moneychanging shop at Woodlands. They satisfied themselves that the first defendant was in the moneychanging business. About a week later the first defendant telephoned the first plaintiff. No details of this conversation was adduced in evidence. He then decided to invest in the defendant`s business. His evidence (as well as that of the second plaintiff) was that various sums of money were advanced to the defendants between June and September 1993. There was no record of any accounting between them or even by the plaintiffs themselves of these transactions. The first defendant would contact the first plaintiff and tell him the amount of money required, the length of time it would be required and the profits which would be made. The plaintiffs would then hand the money in cash to the first defendant who in turn would give a post-dated cash cheque for the same amount to the plaintiffs. In the plaintiffs` joint affidavit of evidence-in-chief they stated that a separate post-dated cheque for the profits would also be made out and handed to the plaintiffs. These cheques were post-dated to the date when the capital and profit were to be paid o ver to the plaintiffs. The plaintiffs referred to the date in which the capital and profit were to be paid over to him as the `completion date`. On the completion dates the first defendant would hand over the capital and profit in cash to the plaintiffs who would then return the first defendant`s post-dated cheques. This procedure replaced the one which the plaintiffs considered to be troublesome. Under the earlier procedure the advances made by the plaintiffs to the defendants were recorded on a type written acknowledgment entitled `Investment Return`. It was drafted by the plaintiffs` lawyer. The first plaintiff said that his lawyer drafted this document on another piece of paper and he (the first plaintiff) re-typed it. This was exhibited as 1PB52. The lawyer gave evidence as to how the instructions for this draft was given. His evidence was as follows:

Tan and Tng approached me because they wanted to put some money into a moneychanging firm. The plaintiffs were not prepared to have the agreement fully documented. They were only looking for a simple form of agreement. Their instructions to me were that they were supposed to give some money to a moneychanger and the moneychanger was supposed to give them back a certain amount being their returns. I told the plaintiffs that at best, at the barest minimum, there must be an acknowledgment of receipt of money and a promise to return. Based on their instructions and my advice I drafted 1PB52.

The lawyer`s draft was not produced and neither was the original 1PB52. The first plaintiff claimed that it was returned to the first defendant, but the latter disputed this. There was a further dispute over this document. The photocopy carried the signatures of the defendants but the first defendant said that neither the second defendant nor himself had signed it but they had signed a piece of paper in blank. In any event, the first plaintiff said that he found that this was not a convenient way of recording the transactions and he resorted to the simpler form. Subsequently, the only record of the advances were the cheques which he had to deposit with the plaintiffs as security and the short receipt and promissory notes exemplified in 2PB2 to 2PB13. This evidence was not disputed. The receipt was in the following form:

I, Lim Kiat Seng NRIC 1632148F hereby acknowledge the receipt of $205,000.00 in cash from Tan Sim Lay NRIC 0142966C on 6.7.93 at 12pm.

The promissory notes read as follows:

I, Lim Kiat Seng NRIC 1632198F to repay Tan Sim Lay the sum of $205,000 in cash by 11.7.93 at 12pm. Failing which to do so, I agree to bear the responsibility on the full cost of $205,000 including interest and expenses incurred.

The promissory notes would be signed and dated whenever money was advanced. In the above example taken from 2PB3, the date of the signing of the note was 6 July 1993 and the repayment date was 11 July 1993. The plaintiffs say that the sum of $205,000 included the `profits`. The first defendant did not dispute that the principal sum was $200,000 but he said that the $5,000 difference was interest payable and not `profits`.

According to the first plaintiff`s evidence, in the first transaction a sum of $200,000 was advanced for a period of five to six days and a profit of $5,000 was paid by the defendants. Mathematically, this works out to 152.1% pa based on a six-day repayment period. It is also the plaintiffs` evidence that the profits would be declared before the money was advanced by the plaintiffs. He explained that the actual amount, as opposed to a percentage, would be fixed when the capital was advanced. According to the first plaintiff the funds would normally be `invested` with the defendants for `six days, sometimes one day and sometimes three days`.

The first plaintiff said that by September 1993 the total amount of capital and profits due to the plaintiffs were S$1,097,250.00 and RM215,250.00. He said that he arrived at these figures by adding up the sums in the cheques which the first defendant had given him. These were the cheques which the first defendant gave to the plaintiffs whenever he received a sum of money from them. The first plaintiff said that these figures were accepted by the first defendant when they met in October 1993 to discuss the debt. Consequently, the plaintiffs and the defendants executed the agreement, exhibited as PB1. The defendants paid the first instalment pursuant to the schedule in the agreement. This was not disputed. In respect of the second instalment, the plaintiffs said that only RM100,000 was paid but the first defendant disputed this. He said that the full instalment of S$105,000 was paid. The plaintiffs further said that the defendants failed to honour the term that an option over their Hillview house would be given to the plaintiffs because it transpired that an option had already been given to a person called Tan Hoo Yoong. The options in respect of the HDB premises were also not granted to the plaintiffs. Mr Pillai, counsel for the plaintiffs submitted that the plaintiffs were proceeding on the breach of PB1 in so far as the failure to honour the instalment payments and the option in respect of the Hillview house only. For reasons unexplained the plaintiffs did not rely on the failure to grant an option to purchase the HDB premises.

The defendants` case

The first defendant`s evidence was that he was in financial difficulties in late 1992 because he was robbed of $400,000 and had also to incur expenses when his shops were damaged by fire. His insurers paid him only $40,000 although his losses were about $100,000. An acquaintance called Chua recommended the first defendant to the plaintiffs as a person who could lend him money. Hence, in March 1993 the first defendant borrowed S$600,000 and RM100,000 to keep his businesses going as well as to pay interest charges to other moneylenders, in particular, one Tan Hoo Yoong. The plaintiffs visited the defendants` shop and agreed to lend them money. The S$600,000 was disbursed by the plaintiffs in three sums of S$200,000 each. The interest payable was S$5,000 every six days. The RM100,000 was disbursed in one sum and the interest payable was RM5,000 every six days. The overall interest payable monthly was about S$75,000 and RM25,000 respectively. Between June and September 1993, the defendants took further...