Wee Kah Lee v Silverdale Investment Pte Ltd

• Jurisdiction: Singapore
• Judgment Date: 11 August 2000
• Date: 11 August 2000
• Docket Number: Suit No 600044 of 2000
• Court: High Court (Singapore)

Wee Kah Lee

Plaintiff

and

Silverdale Investment Pte Ltd

Defendant

[2000] SGHC 165

Tay Yong Kwang JC

Suit No 600044 of 2000

High Court

Contract–Contractual terms–Implied terms–Loan of money–Test of necessity–Claimant lending money to company with no express term as to time of repayment–Whether term that loan should be repayable on demand to be implied into contract for loan

The plaintiff and seven other persons were shareholders in the defendant (“the company”) which was the developer of a residential property. Each shareholder contributed to the paid-up capital and advanced loans to the company for the purchase of the land, development expenses and payment of interest on the bank loans. In December 1999, the plaintiff asked the company's board of directors for the loans he had made to be repaid. The company replied that the request was premature because the sale of the properties on the development had yet to be completed and the moneys could not be paid out to shareholders. The plaintiff commenced this action to recover the sums lent on the basis that the loans were repayable on demand.

The issue before the court was whether there should be an implied term in respect of when the loans were repayable.

Held, dismissing the plaintiff's claim:

(1) In order to give business efficacy to the property development project, and applying the test of necessity, there should be an implied term that the loans would be repaid only after all moneys due to the company had been received and all creditors had been paid their dues. The loans were meant to finance the development project. It was not a case of loans being extended indefinitely as the company had to complete the project by a certain deadline and sell the units at a profit: at [39], [41] and [43].

(2) The term on repayment had to be implied even though the court accepted the plaintiff's evidence that he did not know, exactly, what the project account or the Certificate of Statutory Completion (“the Certificate”) was, and therefore could not have impliedly agreed that the loans would be repaid only when the moneys could be released from that account or only upon issuance of the Certificate: at [45].

(3) Ordinarily, costs would follow the event. However, while the company was correct in its averment that the loans were not repayable on demand, it had prevaricated as to what the implied term on repayment ought to be and so the company would not be awarded the costs of defending this action. Each party would bear its own costs: at [47] and [48].

Bethlehem Singapore Pte Ltd v Ler Hock Seng [1994] 3 SLR (R) 938; [1995] 1 SLR 1 (folld)

Seldon v Davidson [1968] 2 All ER 755 (refd)

Housing Developers (Project Account) Rules (Cap 130, R 2, 1997 Rev Ed) r 5 (j)

Tang Khin Wai (Tan Kok Quan Partnership) for the plaintiff

Leslie Yeo Choon Hsien (LJ Wong & Yeo) for the defendant.

Tay Yong Kwang JC

1 The plaintiff claimed the repayment of loans totalling $341,250 granted by him on various dates to the defendants. In their amended defence, the defendants averred that they were the developers of a property at 20B Balmoral Park (the “Jewel of Balmoral”) and that there were eight shareholders who had agreed to invest in this project, seven of whom were also directors of the company. Each shareholder contributed towards the paid-up capital and advanced loans to the defendants for the purchase of the land in question, the development expenses and the payment of interest on the bank loans.

2 Paragraphs 3 to 5 of the amended defence went on to plead:

1. 3 It was agreed among the directors/shareholders that such loans advanced to the defendants will be unsecured, interest free and with no fixed term of repayment. It was also expressly and/or impliedly agreed that such loans advanced to the defendants will not be repaid until such time that the moneys in the project account can be released pursuant to the Housing Developers (Project Account) Rules ('the Rules').

2. 4 All the shareholders/directors are aware that the progress payments received from the purchasers for the project is required to be paid into the project account with Overseas Union Trust Ltd and cannot be released unless it is permitted under the Rules. As such, it was also expressly and/or impliedly agreed among the directors/ shareholders that the profits from the sale of the project and/or the repayment of the loans advanced by the directors/shareholders will be made only after the moneys in the project account can be released pursuant to the Rules.

3. 5 The only asset of the defendants is the balance sale price to be paid by the purchaser into the project account and the existing moneys in the project account. Furthermore, as is expressly and/or impliedly agreed that the profits and/or the loans will not be repaid unless the Rules permit, the defendants deny that the sum of $341,000 is due and owing to the plaintiff.

The figure $341,000 in para 5 should read as $341,250.

The plaintiff's case

3 The plaintiff was a director and shareholder of the defendants, holding 225,000 fully paid-up shares (or 7.5% of the shareholding). At the request of the defendants, he made various payments on various dates to the defendants for payment of his shares and as loans advanced. According to the defendants' document termed “Schedule of Directors'/Shareholders' Fund Transfer and Loan”, he paid a total of $655,500 to the defendants between October 1995 and 31 March 1997. Out of this sum, $225,000 was deducted as payment for his 225,000 shares. On 8 July 1997, the defendants made a partial repayment of the loan in the amount of $89,250 to the plaintiff. The amount owing from the defendants to the plaintiffs was therefore $341,250 ($655,500 minus $225,000 and $89,250).

4 On 8 July 1997, the defendants also made five repayments of loans to the following directors/shareholders:

(a) Mr Neo Sin Nam $ 500,000.00

(b) Mdm Tok Yok Lian $ 455,000.00

(c) Mr Poh Seng Soon $ 89,250.00

(d) Mr Lim Wah Kiat $ 119,000.00

(e) Mr Tey Kian Seng $ 45,000.00

5 On 27July 1999, the defendants made two repayments of loans to:

(a) Mr Neo Sin Nam $ 154,222.00

(b) Mdm Tok Yok Lian $ 192,778.00

Including the repayment to the plaintiff, the defendants had therefore made eight repayments of loans.

6 On or about 6 December 1999, the defendants sent the plaintiff a “Confirmation of Balances” letter stating that the defendants owed the plaintiff $341,250 as at 31 August 1999 and this was confirmed by the plaintiff. The debt for this amount was therefore not in dispute.

7 All the loans granted by the plaintiff to the defendants were interest-free, unsecured and having no fixed term for repayment. In fact, the issue of interest was never discussed and the plaintiff never asked for interest to be paid nor was he paid any. There was also no discussion or agreement between the plaintiff and the other directors of the defendants on the terms of repayment.

8 The property in question was sold by the defendants on or about 11 July 1997.

9 On 5 December 1999, the plaintiff wrote to the board of directors of the defendants to ask for repayment of the loans as he “urgently required certain amount of cash flow” in his company. He also offered to dispose of his 225,000 shares at $1 per share.

10 On 9 December 1999, the defendants replied as follows:

1. 1 Your request for refund of your 'advance' is, as you must be aware, premature because the sale of the properties at the above development has yet to be completed and all progress payments paid to the company up to now have been deposited in the project account in accordance with the Housing Developers' Rules and as such the moneys therein cannot at this stage be made out to the shareholders. In any case, your request for refund of $341,250 is subject to finalisation of accounts in due course.

2. 2 As for your wish to dispose of your shares, we suggest that you take up the matter on your own without involving the Board of Directors.

The plaintiff disputed the reasons stated for not repaying him.

11 On 17 December 1999, his former solicitors sent a letter of demand for the repayment of $341,250. This caused the defendants to issue an urgent notice dated 20 December 1999 to convene a...