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Grounds publishedDecided 8 Jun 2010
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High Court

Lim Leong Huat v Chip Hup Hup Kee Construction Pte Ltd and another

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[2010] SGHC 170Case no. Suit No 779 of 2006

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Grounds of decision

Official text from eLitigation

  1. Quentin Loh J:

  2. Introduction

  3. [1] “A falling out of thieves” is an apt description of this case. For 6 weeks I heard the evidence unfold: of non-existent employees (euphemistically called “Proxies”) comprising real persons complete with identity card numbers and Central Provident Fund (“CPF”) accounts, of utilising these falsified local employees to mislead the Ministry of Manpower (“MOM”) into allotting higher foreign worker entitlements, of levying “commissions” on foreign workers from China, of fictitious invoices to build up a track record of “profit” for possible listing, of withdrawals of large sums of money from another euphemistically styled “Salary Accruals” account which enabled the directors not only to withdraw large sums of money as reimbursement of non-existent “expenses” but also to evade tax, of fictitious payments to non-existent subcontractors, of questionable loans (some of which were in the hundreds of thousands) to the company, and also of other loans which were made on one day and withdrawn or repaid on the next. And it is now my unenviable task to decide who, between the two protagonists, I am to believe.

  4. The background facts

  5. [3] The following facts, from [3]–[5], are not really in contention. Neo is about 51 years of age and was educated up to Secondary Four in the Chinese stream. His father started the family business in timber in the 1950s. Neo, (the second youngest son), and his three brothers helped their father in the timber business. In 1982, the family company, Chip Hup Timber Pte Ltd (“CH Timber”) was incorporated to take over the business. In October 1983, Neo and his brother Neo Kok Ching (“Ching”) incorporated Chip Hup Hup Kee Trading Pte Ltd, which was subsequently renamed CHKC, to venture into the construction business. In July 1989, Neo and two of his brothers incorporated Chip Hup Holding Pte Ltd (“CHH”). By then, Neo’s father had retired, leaving the family business to his 4 sons. In July 1989, Neo also incorporated Chippel Overseas Supplies Pte Ltd (“COS”) to trade in building materials. A few years after Neo’s father passed away in January 1993, two of his brothers left the family business and transferred their interests to Neo. According to Neo, his brother Ching also wanted to leave and concentrate on his own business, but since Neo needed at least 2 shareholders and directors, Ching stayed on for the time being.

  6. [4] Lim comes from Malaysia, is about 46 years of age and holds a Masters of Science in Construction Technology. Lim has always worked in the construction industry. After he graduated, he worked for about 1 year in Kuala Lumpur. He then came down to Singapore and worked for a few months in Uni Consultants before joining Heng Mah Construction Ltd (“Heng Mah”). In the 4 years that he was at Heng Mah, Lim did well. He first joined them as a site engineer. He said he was very serious about his work and totally committed to it. Within 9 months of joining, his boss noticed this and promoted him to project manager and about a year later he was promoted to general manager of Heng Mah. Heng Mah at that time was one of about 30 G8 contractors in Singapore, i.e. they could tender for building projects of unlimited value. Heng Mah also held a G7 rating for civil engineering projects, i.e. they could tender up to $50 million for civil engineering projects. Heng Mah did project work as a main contractor, whereas CHKC mostly did work as a subcontractor of the main contractor.

  7. [5] Neo said he met Lim around 1994. Prior to Lim joining CHKC, Neo was doing smaller scale civil engineering projects, mainly building roads, culverts and drainage works. Neo had plans to go into construction on a larger scale. As he said, he managed to secure a project for a lecture hall for the National Technological University around August 1994 and later a project from the Housing Development Board for 608 units. Neo needed someone to manage such projects. Although this was not seriously in contention, insofar as it is, I find that Neo sought Lim out in or around August 1994 having heard of his good work at Heng Mah. Neo promised Lim at least equal or better terms of employment than Lim then had at Heng Mah. Lim was given a Letter of Appointment as General Manager of CHKC in November 1994 with a salary of $7,000 a month which would be reviewed annually. As Lim received a bonus of $200,000 from Heng Mah for the years 1991–1993, Neo also gave Lim the same bonus at CHKC as well as an E-class Mercedes car (Lim opted for a second hand Mercedes car). Neo gave Lim a free hand to and Lim built up a team in CHKC recruiting some of his ex-colleagues at Heng Mah.

  8. [6] Before me, Neo downplayed Lim’s role in CHKC, saying he was a mere employee whom he could easily replace. However, it is obvious, and I so find, that Lim was good at his job. In 1994, CHKC’s revenue was only $6.6 million and it made a loss of about $730,000. In 1995, the revenue had almost doubled to $12.7 million and it made a profit of $728,000. In 1996, the revenue shot up more than fourfold to $59.1 million and CHKC made a profit of $1.85 million. In 1995, the revenue was $59.5 million and the profit was $1.12 million. I find that it was due to Lim’s ability that CHKC managed to take on its many projects and increase its revenues so dramatically. In time to come, Lim was given the title Projects Director and then Executive Director although he was never formally appointed a director of CHKC. Lim did not hold any shares in CHKC.

  9. [7] The secret to CHKC’s ability to carry out its work and churn out its revenue was its ability to source cheap but skilled labour from China. (AZ, which was owned and managed by Lim and did work in connection with CHKC, similarly relied on Chinese workers). At the height of their project activity, there were about 1,500 workers from China on CHKC and AZ’s records and over 1,000 workers from 1999 to most of 2002. Neo claims that at the peak of construction activity around 1999, CHKC and AZ had 1,800 foreign workers. Neo had a contact called Wu Xue Feng (“Wu”) who worked in a company in China called the Beijing Residential Development Company (“BRDC”). Wu was Neo’s source for skilled Chinese labour. In 1995, BRDC set up Zhu-Zhong Construction Singapore Pte Ltd, (“ZZC”) with Wu as its director. These Chinese workers had their own supervisors and foremen who were also fellow Chinese nationals. I find that Neo and Wu worked closely together in deploying these skilled workers from China, who came at a comparatively low price, for CHKC’s projects. I also find, having heard all the evidence, that Neo kept tight and close personal control over this Chinese labour element of the business and Lim was not involved to any appreciable degree in this aspect of the business. Neo dealt directly with Wu, without consulting Lim, and later with Wu’s deputy here, Zhang Guilin (“Zhang”). I accept Zhang’s evidence on this score. Lim’s involvement was mainly on the operational or projects side where it was more a question of labour requirements for the projects. It is not disputed that there were regular Monday meetings at CHKC throughout the relevant periods chaired by Neo with Lim representing the operational side and projects and representatives from ZZC representing the Chinese labour element.

  10. [8] It will be noticed that although the revenue of CHKC shot up dramatically after Lim came on board, its profits continued to remain at very low levels. Strangely, in the year 2000, when there was a $6 million drop in revenue, the profits went up to their highest level and similarly for 2001, although the revenue dropped a further $7 million, the profits did not correspondingly drop:

  11. Three things should be noted, and I so find, from this pattern of revenue and profit/loss:

  12. (a) The reason for the low profits in spite of the large jumps in revenue is that Neo and Lim started to implement various nefarious schemes enabling them to siphon out large sums of money from CHKC. Hence the profits were always at an artificially low level.

  13. (b) There is also a reason for the spike in profits in 2000 and 2001. There was an idea to carry out a listing. There was accordingly a reorganisation of the ‘Chip Hup’ companies in July 1998. CHH became the holding company, CHKC, CH Timber, COS and Chippel Construction Pte Ltd (“CCPL”) became its wholly owned subsidiaries; (CCPL was owned by Neo and incorporated after Lim joined CHKC). There was also a need to establish a track record of profitability to qualify for listing, hence not only the spike in profits, but as I will deal with later, fictitious invoices were also generated to raise the apparent level of profits.

  14. (c) The reason for the huge loss of $20 million in 2006 was due to CHKC’s accounts having to be corrected after many of Neo’s and Lim’s nefarious schemes had come out of the shadows and into the light (see [123] below).

  15. Lim and Neo’s cosy relationship of about 12 years came to an end in late October 2006 when they had a big quarrel. Differing versions were given by Neo and Lim. Lim claimed that from 2003 to 2006, CHKC was facing cash flow problems due to the downturn in the construction industry and that he had been lending large sums of money to CHKC to tide it over. When Lim discussed repayment of these loans, Neo kept procrastinating and finally refused to make repayment and this led to a heated quarrel in the last week of October 2006. Neo claimed that unbeknown to him, Lim had been misappropriating Neo’s and CHKC’s money causing it to have cash flow problems and Lim got greedy and started to press Neo in 2005 to sell CHKC’s property at 270 Jalan Besar, Singapore, which Neo was reluctant to do because of its redevelopment potential. Neo became suspicious when Lim suggested in August 2006 that the property be sold to his brother-in-law and Lim agreed to absorb the $1 million difference between Neo’s selling price of $13.5 million and his brother-in-law’s buying price of $12.5 million. When Neo’s reluctance to sell stretched into October 2006, and Neo’s selling price had moved up to $17 million, Lim put the proverbial straw on Neo’s back by pressing for repayment of his loans at the end of October 2006. What is clear was that they fell out over money. This led to Lim’s suspension and then dismissal at the end of November 2006. Lim sued CHKC on 21 November 2006 for the return of the balance of his loans amounting to $7,205,000. Neo was later added as the 2 Defendant. As noted above, CHKC responded with a massive initial counterclaim, amounting to some $55 million, against Lim. Mdm Tan and AZ were also brought in as parties to the counterclaim. There then ensued a period of trench warfare where interlocutory proceedings were taken out and bitterly fought at every stage. There were related proceedings launched in 2007 and 2008, including a criminal prosecution (see [19] below) and Suit No 241 of 2007, a related action, which was fixed for hearing before me to follow upon the trial of this action. Some of the numerous hard-fought interlocutory applications ended up in the Court of Appeal. Finally, the Court of Appeal told the parties to stop their interlocutory skirmishes, noting, I am told by counsel, that there have been strange goings-on in CHKC, both sides appear to have “been naughty” and have something to answer for, and ordered the parties to proceed with the trial.

  16. [9] Before I go further, both counsel for Lim (Mr Khoo) and Neo (Ms Lim) had said, more than once, that at the end of the day, it is a question for the court to decide whom to believe. On many of the important issues that have to be decided, the alleged agreements or discussions or decisions only took place between Lim and Neo and no one else was present. Lim and Neo’s versions are often poles apart. For example:

  17. (a) Lim said Neo came up with and implemented the “Proxies” system and “Salary Accruals” accounts in CHKC (see [109]–[111] below) even before Lim joined CHKC in 1994.Neo on the other hand maintained that the “Proxies” system was created by Lim and that Neo never knew of the “Salary Accruals” account or ledger until after he sacked Lim;

  18. (b) It is common ground that AZ was set up in 1997 and was owned by Lim. Neo said Lim advised him to set up another entity so that if anything happened in CHKC, i.e. be it regulatory issues or too many accidents involving workmen, there would be another company, not connected to Neo, with a track record of construction work with its own ‘foreign’ employees, who could take over CHKC’s project; Neo said that he agreed to the setting up of AZ and to the assigning of some projects to AZ provided CHKC would be put in the same position as if there had been no such assignment, since they were only ‘notional assignments’ for a specific purpose and AZ would not profit from the projects. Lim on the other hand said that around 1997 he wanted to leave CHKC to set up his own construction company, however, Neo asked him not to do so and, inter alia, offered to let him set up AZ and to assign some of CHKC’s projects to it so that Lim could carry out ‘work’ in AZ and continue to work in CHKC; Lim alleged that 11 projects were thus assigned to AZ;

  19. (c) Neo alleged that his personal cheques totalling $5,404,241.06 and CHKC’s cheques totalling $2,080,000 were misappropriated by Lim; Lim denied this, and alleged that they were given to him to settle fictitious invoices issued by CHKC to AZ for works purportedly done by CHKC for AZ when no such works were in fact done; Lim alleged that these fictitious invoices were issued by CHKC to inflate its profits, and therefore CHH’s profits, to enable the latter to be listed.

  20. Insofar as the other witnesses were concerned, they were mainly corroborative. None of them were present when the important schemes and issues, including the foregoing, were discussed or decided upon by Neo and Lim.

  21. The Witnesses

  22. [10] On Lim’s side, in addition to his giving evidence, 27 other witnesses were lined up to give evidence. On Neo’s side, there was Neo himself and 19 other witnesses. Some of these witnesses were subpoenaed as they refused to give an affidavit. I am indebted to both counsel who very sensibly assessed which witnesses were really necessary and which were not, thereby eliminating from each side a large number of witnesses whose evidence would have been peripheral. For those who had filed AEICs but were not cross-examined, their statements were admitted in accordance with the agreement made between the solicitors. By very sensible and co-operative discussions, assessment and time-management decisions, counsel managed to finish the mass of evidence in 6 weeks of hearing. I am also indebted to counsel who assisted me greatly in understanding the evidence by drawing up numerous charts collating and containing the key information, including the contentions, and the source documents. They were also very useful during cross-examination. I should also mention I asked counsel about an issue that often arises during trials of this nature, where the documents are voluminous and evidence ranges over a wide area – the treatment of evidence in the bundles admitted without formal proof but without necessarily agreeing to their contents but which are not touched upon by either side. Counsel agreed with me that if documents are in the agreed bundles, i.e. they are admitted without formal proof, but the contents are not necessarily agreed to and subject to challenge or comment, and if neither side cross-examines on the contents of that document or challenges the same in submissions or comments thereon, then if I found it relevant, I was entitled to consider and take the contents of that document into account, decide what weight to place on the same and to draw my own conclusions, bearing in mind however that it had not been tested in cross-examination or otherwise been the subject of some debate.

  23. [11] As noted, on many of the crucial issues, there were only two people involved in discussion or decision making, Neo and Lim. Consequently, many of the witnesses were peripheral or corroborative rather than crucial. The witnesses of some note on Lim’s side were:

  24. Unusually, Ms Lee Gek Kwee, a handwriting expert, gave evidence for both Neo and Lim on different documents. Needless to say, I accept her evidence. She gave her evidence professionally and was quite candid as to what she could say and what she could not.

  25. [12] As for Neo, besides himself, his other witnesses of some note included:

  26. [13] Unless it is necessary, I will not refer to the evidence of all of these witnesses and their AEICs or cross-examination in this judgement. But I have borne the evidence of these other witnesses in mind, mainly for corroborative value. Unfortunately, in cases like the present, with the mass of evidence, including volumes of ledgers, accounts, vouchers, etc., going into too much detail will cause this judgment, which is largely on facts, to be unnecessarily long.

  27. My findings on facts generally

  28. [14] Both Lim and Neo were cross-examined for approximately 9 days each. In general, except for specific issues which I shall refer to under those separate issues, having heard the witnesses and considered the evidence, where there is a conflict of evidence as between Lim and Neo, I generally prefer and accept that of Lim’s over Neo’s.

  29. [15] Neo’s case is that after he hired Lim, he left the entire running of CHKC to Lim. He even left the running of the accounts department to Lim. He did not know what was really going in CHKC, what was happening on the ground and he only retained the big picture. Neo said he was busy with his other businesses. He trusted Lim completely. Whatever he was asked to sign cheques or documents, so long as Lim approved it or signed on the voucher, he would just sign without asking questions. He would not check. He treated Lim like his younger brother. Neo said he and his wife even bought Lim his favourite durians and brought it to his house. Such was the level of his trust in and bond with Lim. After their big quarrel in October 2006, Neo then said he was surprised that “a mere salaried employee” could have amassed sums in excess of $7 million to “lend” to CHKC and after he dismissed Lim, he formed an investigation team to look into the accounts and affairs of CHKC and was shocked to find Lim had misappropriated monies well in excess of $40 million.

  30. [16] Under cross-examination Neo was often combative and evasive, resorting to his main theme – i.e. that he trusted Lim and left the entire running of CHKC to Lim, he did not know what was going on – instead of answering the question. Even on straightforward questions he would feign a misunderstanding, give an irrelevant answer or revert to this main theme until I intervened and repeated the question; it was only then that Neo would answer or attempt to answer the question. Neo would also anticipate counsel’s questions. I found Neo not forthright in his answers. Neo was often caught out by inconsistencies in his evidence before me and his earlier evidence given to a number of judges, both in the Subordinate and High Courts, as well as in the numerous affidavits he had affirmed in these and other related proceedings. When he was caught out, he would twist and turn, telling one untruth after another, without compunction and without remembering what his original answer was or what he said in an earlier affidavit or evidence he had given earlier in other related proceedings. Neo could change his evidence at a drop of a hat. When he was cornered in cross-examination, especially on a similar or related subject, surprising admissions emerge, e.g. during his cross-examination, after repeatedly and strenuously denying any profit sharing arrangement with Lim, this occurred:

  31. Before me Neo insisted Lim told him not to override the accounting system Lim had put in place and Neo faithfully followed Lim’s instructions. Yet in a related case, DAC 15743/08 (which involved a criminal charge against LLC arising from police reports filed against him by CHKC), Neo gave the following evidence:

  32. When confronted with this contradictory evidence, Neo first disagreed it was contradictory. Then he claimed: “I gave the wrong answer” and later said he “misunderstood.” In fact at the top of the transcript page referred to above, the learned District Judge in DAC 15743/08 had said to Neo: “[Counsel] is asking X and you are answering Y. I am writing down the answers, it does not look very good for you. Do you understand?” An example of Neo’s refusal to answer simple questions can be seen in this exchange:

  33. I set out this exchange also because it was not just a question of semantics. Neo’s case and Aileen’s evidence in support was that Lim had a stranglehold on the accounts department and any information there. Lim’s instructions to the accounts staff was that if Neo queried anything about the accounts, the accounts staff were not to answer Neo without checking with Lim first. Yet there was evidence to show that Neo could give instructions to, and get information or documents directly from the accounts department. Before me, Juliet admitted that there were times when Neo made grocery reimbursement claims and although he did not submit bills amounting to the sum he drew out, the accounts department would make payment.

  34. [17] Lim on the other hand was more forthright. When it came to difficult questions, he would answer them. When faced with something he had said earlier which was untrue, he would accept the same and apologise. At times his answers were convoluted and difficult to accept, but he did not become as combative and evasive as Neo often did. Having said that, Lim is no angel either, he knew full well that he and Neo were up to their necks in various schemes in CHKC which were clearly wrong and illegal, but his only saving grace was that he apologised each time it came up without being too evasive or telling blatant lies.

  35. [18] I also weighed what Neo or Lim told me against whatever reliable documentary, objective or contemporaneous evidence there is as well as the evidence as a whole. Given the history of this dispute, it is not surprising that I did not accept the evidence of either Neo or Lim wholesale. Because of reasons I shall come to, neither can I accept the evidence of the witnesses of each side without carefully considering not only what they are saying, but to ask whether their evidence is consistent, truthful, reliable and whether they display or have any motive for coming forward and taking sides. It would be naïve to think that in a den of thieves, those lower down the pecking order, and who see what was going on, would not succumb to temptation to dip their hands in the till as well nor can I ignore the probability that loyal lieutenants were rewarded with a share of the bounty.

  36. [19] This bruising war between Neo and Lim has a longer history than most actions today. Since Lim’s summary dismissal in November 2006, there have been numerous related suits and actions, including a criminal prosecution against LLC referred to above at [16]. There are already a number of judgments rendered in these related actions as well as the numerous applications in this action. It is clear to me, and I so find, having heard and considered the evidence, that Neo first tried to get witnesses to testify against Lim, and if they refused or decided to give evidence for Lim, he went after them if it was at all possible, with a vengeance. This can be seen when Neo first approached Yeow on 1 February 2007 to testify on his side against Lim; Yeow taped their conversation and the transcript clearly shows this:

  37. The following are some of the related proceedings initiated by Neo:

  38. (a) Neo sued Yeow in Suit No 136 of 2007 (and related Suit No 137 of 2007) for damages for conversion in relation to 3 cheques, moneys had and received and ancillary reliefs; although judgment was entered against Yeow at first instance, on appeal, the Court of Appeal agreed that the wrong party was suing as Plaintiff and the judgment was set aside; a subsequent action by CHKC against Yeow in Suit No 4717 of 2009 and Originating Summons No 804 of 2009 was dismissed by Andrew Ang J on 17 March 2010 as being time-barred;

  39. (b) Neo caused CHKC to lodge a police report against LLC, who also worked in CHKC. LLC was charged in DAC 15743/08 and after a trial, (the transcript of which was referred to in the present action to show up Neo and his witnesses’ false testimony), LLC was acquitted;

  40. (c) Neo caused CHKC to sue Jean in Suit No 142 of 2007; Jean gave evidence on behalf of Lim in this action; this action is yet to be heard;

  41. (d) Neo caused CHKC to sue LLC in Suit No 165 of 2007 for misappropriation of 7 cash cheques, an account for CHKC’s plant and machinery entrusted to him, an account for monies received for the disposal of CHKC’s plant and machinery, failure to account for the sale of scrap material and failure to exercise reasonable care and diligence in the maintenance of CHKC’s warehouse; this action was dismissed with costs by Kan Ting Chiu J on 5 February 2010;

  42. (e) Neo lodged a police report in February 2007, alleging misappropriation of CHKC and his money. Lim was investigated for criminal breaches of trust as a director; on 28 October 2008, the police wrote to Lim stating: “…in consultation with the Attorney-General’s Chambers, the police have decided not to take action against [him]”.

  43. Neo also caused Mdm Tan to be sued personally in the counterclaim. Where available, the notes of evidence in some of these proceedings and the affidavits of the numerous interlocutory proceedings were used in cross-examination of Neo and Lim and I found some of these references helpful in assessing the probity of the witnesses in this action. As noted above, Neo’s evidence in this action was very adversely affected by what he had said or deposed to in these earlier proceedings, earlier affidavits and interlocutory applications. I shall refer to them in more detail below.

  44. [20] For the reasons set out in this judgment, I reject Neo’s evidence that he left everything to Lim, did not know what was happening in CHKC and only found out a lot of alleged wrong-doing after he summarily dismissed Lim and formed a ‘task force’ to piece together what was going on in CHKC and AZ. All these three aspects are completely untrue. The following findings and facts can be conveniently made here.

  45. (a) His claim that he did not know about the Salary Accruals after drawing millions of dollars out of that account defies belief, and I find that he not only knew about the Salary Accruals, he together with Lim were instrumental in setting it up.

  46. (b) Throughout this period, from the time he recruited Lim, through the growth of the company, right up to the time he summarily dismissed Lim, Neo was the only one with the authority to sign cheques in CHKC. Despite claiming that he was so busy with his other businesses, he never allowed anyone else to sign cheques.

  47. (c) When asked the inevitable question, if he trusted Lim so much, left Lim in total control of and to run CHKC, including total control of the accounts department, so much so that he had to ask Lim if he wanted to draw out any money, and if he was so busy with his other businesses, why did he not allow Lim to be a cheque signatory? His rather pathetic response was: “I would… if he requested. …since he didn’t make the request I would take it that it is not necessary.” (see [61] below). The look Neo had on his face when forced to give that rather feeble excuse said it all, he had been hoisted on his own petard.

  48. (d) It has been noted that around the end of October 2006, Neo and Lim had a big quarrel. Just before this, Neo said in his AEIC that Lim produced a print-out showing a cash flow deficit of $483,000 for CHKC. Neo’s evidence was that he looked at it and pointed out an entry for payment of $36,143.51 to a company called Khoon Engineering and protested that the print-out was wrong because CHKC had made payment to Khoon Engineering two days earlier. To remember a payment of only $36,143.51, out of a whole list of 25 items, when it was made and to which entity is, by any measure, quite remarkable for a man who says he did not know what was going on and that he signed cheques blindly. More than that, when Neo went on in an almost uncontrolled outburst in recounting their big quarrel, he unwittingly showed he knew a lot of details in relation to the cash flow and operations – Neo could say that an entity called Welltech had a joint venture with CHKC and that project was subcontracted to another company called Qing Dao; and that Khoon Engineering was a subcontractor for that project and there had been a payment of some $360,000 to $370,000, and therefore the payment to Khoon Engineering should come out of that payment that was in relation to Qing Dao and should not affect CHKC’s cash flow.

  49. (e) I find that Neo was an experienced and savvy businessman. He had previous experience in the family and other businesses well before 1994. I find that he was careful with money and hence no one else was allowed to sign cheques in CHKC. I find that someone like Neo did not sign cash cheques or cheques with large sums and no payee inserted without him knowing what they were for.

  50. (f) Similarly, Neo said that he trusted Lim so much, yet he considered Lim ‘a mere employee’ whom he could replace quite easily. Neo cannot have his cake and eat it. Lim was either very capable or he was not and easily replaceable. If he was the latter, then I find it hard to understand why Neo would trust Lim so much and leave the running of CHKC and its accounts completely to Lim. The objective evidence shows that Lim was a very capable person when it came to construction work and running construction projects. There is clear enough evidence that Lim’s successor, hired by Neo, was nowhere as capable and I find that on the evidence:

  51. (i) CHKC’s subcontract with Chip Eng Seng Contractors (1988) Pte Ltd on the large Duxton Plain project was terminated by an agreement dated 19 February 2009; the recital states: “Whereas [CHKC] is unable to continue to fulfil its obligations under the abovementioned Sub-Contract Agreement. Henceforth [CHKC] requests to withdraw from the above Sub-Contract Agreement”; and

  52. (ii) CHKC’s subcontract (CHKC Quotation dated 7 August 2007, Letter of Acceptance dated 3 September 2007) with Ssangyong Engineering and Construction Co Ltd for the Marina Bay Sands Integrated Resort project was terminated as a result of CHKC’s inability to perform and poor quality work: see the affidavit of Kim Jong Min dated 3 June 2008 in Suit 379 of 2008 where Ssangyong Engineering and Construction Co Ltd sued CHKC.

  53. [21] In the course of his evidence, Neo said he found it shocking that a “mere employee” could find so much money to lend CHKC. Before me, Neo claimed that Lim was easily replaceable, did not help CHKC become profitable because Lim had no connections, did not bring in the business and played a small part in the growth of CHKC. Neo said it was the Chinese workers who earned the money for CHKC. These claims, like his claim of not knowing what was going on in CHKC, were nothing but an act for the purposes of this action. Neo forgot what he told Lai Siu Chiu J in Suit No 136 of 2007 on 11 March 2009. The transcript there reads:

  54. I have found that Lim enabled CHKC to dramatically increase its revenues once he came on board. The figures at [8] above speak for themselves. Would Lim continue to work for Neo if his only remuneration was some $7,000 a month, $200,000 bonus a year and some expenses and perks, like provision of a car? It is obvious that Lim’s only reward for his good work was money. Lim was never offered any and did not hold a single share in CHKC or Neo’s related companies. Even when Neo was thinking of re-structuring his companies for a listing, no question of giving Lim a share in the companies arose.

  55. [22] At this juncture, I set out one of the main schemes of manipulation that was carried out in CHKC. To mislead the MOM on the number of CHKC’s local employees, CHKC made up a large list of apparent local employees which were euphemistically called “Proxies” in CHKC. They were not real employees. They never came to CHKC’s office and did not do any work whatsoever for CHKC. These Proxies were relatives or close friends of Neo, Lim and some of their employees. There was even a form generated in CHKC to set out the relevant details of these Proxies and this included their proper names, NRIC numbers, addresses and who ‘introduced’ them to the Proxy list. CHKC faithfully paid the employer’s and employees’ portion of the CPF contributions of these Proxies every month to the CPF. But they were not otherwise paid any salary. The Proxies went along because they had extra contributions to their CPF accounts for free. This inflated employee list enabled CHKC to obtain a higher quota of foreign workers from MOM. The “notional salaries” which would have been paid, had these Proxies been real employees, less the CPF contributions were then credited into a Salary Accruals account or ledger. Neo, and later, Lim, drew out millions of dollars from this Salary Accruals account on the basis that they had personally paid these ‘employees’ their salaries and were seeking reimbursement from CHKC.

  56. [23] I find that CHKC was able to leverage off this cheaper Chinese labour thereby making large profits from their project work and enabled Neo and Lim, through diverse ways and means, to siphon off a significant portion of these profits through, inter alia, the Salary Accruals and other “expenses” without having to account for these sums as profits and therefore evade tax. There is sufficient evidence, and I so find, that Neo contributed a large number of names for this “Proxy” list. His own witness, Juliet, said clearly, not once but twice, that Neo contributed a large number of the Proxies. It is quite incredible for Neo to claim he did not know that this was going on. Anyone, even with only a modicum of arithmetical ability, will know that such large profits in the Salary Accruals available for distribution and the low profits each year in the accounts just do not add up. Neo says it was Lim who dreamt up this scheme and Lim says it was Neo because when he joined CHKC it was already in place. I will deal more with the “Proxies” and Salary Accruals systems below at [121]–[128].

  57. [24] I also make the following findings. About 3 years or so after Lim joined CHKC, in or around 1996 or 1997, Lim wanted to leave and set up his own business. It will be recalled from [8] above, that CHKC’s revenue leapt from $6.6 million in 1994 to $59.5 million in 1997 and to $78.8 million in 1998; (it is noteworthy that in Neo’s Opening Statement, he recounted that between 1997 to 2006, CHKC was engaged in about 60 construction projects with a total contract value of $543 million). I accept that to entice Lim to stay, Neo offered Lim a profit sharing deal as Lim has alleged. Neo also allowed Lim to set up AZ as Lim’s own vehicle to work on some projects and allowed Lim to draw out money from CHKC, like Neo was, through various channels. I reject Neo’s version that he allowed AZ to be set up provided it routed all its profits back to CHKC as if no assignment had taken place. Between the two of them, CHKC was the cash cow generating huge sums of money which were available tax free. It would be totally in keeping with Neo’s character to ensure Lim also had a share of the spoils, not only to keep him working for Neo, but also because neither could have a hold or tell on the other as they were both in the same boat as far as the authorities were concerned. I therefore find that Lim had the means to lend money to CHKC when it required money. When Mdm Tan was under cross-examination I asked her to show me her CDP Statements. She did so and I was satisfied she had the means to make loans to CHKC.

  58. [25] I also find that around 2003, CHKC started facing cash flow and financial difficulties. This coincided with a downturn in the construction industry. Lim put forward an accounting expert, Mr Aw Eng Hai, whose evidence was, in the event, not pivotal. But Mr Aw produced a chart which convincingly showed that from about May 2003 onwards, the amount of CHKC’s cheques which had not been presented for payment, increased dramatically. CHKC had a system of issuing cheques but not releasing them to payees until there were sufficient funds to honour those cheques. This increase in cheques not presented shows it was taking longer for these cheques to be paid. Mr Aw’s evidence was largely unshaken by cross examination. In fact Neo accepted this was a valid indication of a cash flow problem in an earlier affidavit. CHKC’s own witnesses, Wendy Loh Chen Yi, Aileen, and one Raymond Lee, also testified that CHKC did not pay any more substantial bonuses from 2002 to 2003 and they instead received red packets of a few hundred dollars. I now turn to deal with the individual claims and counterclaims.

  59. The Claims and Counterclaims

  60. Lim’s claim

  61. [26] Lim claims the following against CHKC:

  62. (a) $7,205,000 being the total sum lent by Lim to CHKC over the period 2003–2006 to alleviate CHKC’s cash flow problems; and

  63. (b) Various monthly sums allegedly agreed between Lim and Neo (on behalf of CHKC) as COF compensation to Lim in consideration of Lim procuring funds to lend to CHKC.

  64. [27] Lim has an alternative claim for $6,405,000 in respect of dishonoured cheques issued by CHKC to secure his advances to it. Lim also claims, as against CHKC and Neo, damages for conspiring to injure and defraud him by inducing CHKC to breach its obligations to (i) repay the sum of $7,205,000 to Lim and (ii) pay Lim the COF compensation.

  65. CHKC’s counterclaim

  66. Counterclaim against Lim

  67. [28] CHKC originally counterclaimed the sum of $55,074,700.88. As the action ran its course through interlocutories and discovery, the counterclaims were eventually reduced to $40,065,271.25. These counterclaims against Lim comprise the following:

  68. (a) $6,084,741.06 being the monetary value of Neo’s cheques which Neo had handed over to Lim as loans made to CHKC, but which Lim had wrongfully deposited into his, Mdm Tan’s or AZ’s bank accounts or cashed out;

  69. (b) $2,080,000 being the monetary value of CHKC’s cheques which were intended as part repayment of Neo’s loans to CHKC, but which were instead misappropriated by Lim and deposited into his or AZ’s bank accounts or cashed out;

  70. (c) $2,300,416 comprising the sums of (i) $1,552,880 (being the value of cheques made out to specified third parties) and (ii) $747,536 (being the value of cash cheques), all of which were purportedly made as payments to fictitious third party subcontractors, but were in fact misappropriated by Lim;

  71. (d) $6,110,863.24 comprising the sums of (i) $5,161,671.65 which Lim had misappropriated from CHKC through the creation of false book entries in CHKC’s accounts; and (ii) $949,191.59 being a debt due and owing by AZ to CHKC which Lim had caused to be wrongly reflected in CHKC’s accounts as settled by AZ when it was not in fact settled;

  72. (e) $2,822,230.03 (this amount was revised from CHKC’s original counterclaim of $2,922,510.03) being the total amount of wrongful overpayment of salaries to Lim, Mdm Tan and Yeow; and

  73. (f) $20,667,020.92 (or such other sums found due) being the monetary value of losses and damages caused to CHKC as a result of Lim’s and/or AZ’s unlawful retention of the profits due on 11 of CHKC’s building construction projects (“the 11 Projects”) which had been assigned by CHKC to AZ.

  74. Counterclaim against Mdm Tan

  75. [29] CHKC counterclaims the following against Mdm Tan:

  76. (a) $2,015,500 being the monetary value of Neo’s cheques credited into Mdm Tan’s bank account; and

  77. (b) $1,584,960 (this amount was revised from CHKC’s original counterclaim of $1,685,240) being the total amount of wrongful overpayment of salaries to Mdm Tan.

  78. The claim of $2,015,500 forms part of CHKC’s claim of $6,084,741.06 against Lim described in [28(a)] above, while the claim of $1,584,960 forms part of CHKC’s claim of $2,822,230.03 against Lim described in [28(e)] above. The total value of CHKC’s counterclaim against Mdm Tan is $3,600,460.

  79. Counterclaim against AZ

  80. [30] CHKC counterclaims the following against AZ:

  81. (a) $1,240,000 being the monetary value of Neo’s cheques which were either credited into AZ’s bank account or recorded as loans from AZ to CHKC;

  82. (b) $900,000 being the monetary value of CHKC’s cheques which were intended as part repayment of Neo’s loans to CHKC, but were instead credited into AZ’s bank account;

  83. (c) $949,191.59 being the value of monies due and owing from AZ to CHKC but which had been falsely recorded as settled; and

  84. (d) $20,667,020.92 (or such other sums found due) being the monetary value of profits wrongfully retained by AZ from CHKC in relation to the 11 Projects.

  85. The claim of $1,240,000 forms part of CHKC’s claim of $6,084,741.06 against Lim described in [28(a)] above, while the claim of $900,000 forms part of CHKC’s claim of $2,922,510,03 against Lim described in [28(b)] above. The claim of $949,191.59 forms part of CHKC’s claim of $6,110,863.24 against Lim described in [28(d)] above. Finally, the claim of $20,667,020.92 is the same claim CHKC has brought against Lim described in [28(f)] above. The total value of CHKC’s counterclaim against AZ is $23,756,212.51.

  86. [31] Having listed the various claims and counterclaims, I now proceed to review the evidence and set out my findings on each claim.

  87. Lim’s claim for $7,205,000

  88. [32] Lim’s case is that CHKC was experiencing financial difficulties starting from 2002 due to the general downturn in the construction industry. Thus, from about July 2003 to September 2006, at Neo’s request, Lim advanced various interest free loans ranging from $25,000 to $500,000 to CHKC. These loans were made mostly through cheques although a cash sum of $100,000 was provided in one instance. For each loan made to CHKC, Neo (on behalf of CHKC) would personally sign a cheque for the corresponding amount and give it to Lim to hold as security for repayment.

  89. [33] By September 2006, the total value of Lim’s loans to CHKC amounted to $7,635,000, of which $430,000 was subsequently repaid, leaving a balance of $7,205,000. When Lim subsequently demanded the return of all outstanding monies during their big quarrel in October 2006, Neo refused. Lim was subsequently suspended from employment by CHKC on 9 November 2006. On 15 November 2006, Lim presented some of the cheques CHKC had given him as security for payment, but all the cheques were dishonoured.

  90. [34] CHKC did not dispute that Lim had lent the sum of $7,205,000 to it. CHKC accepted that $7,635,000 had been credited to its account by Lim and CHKC made repayment of $430,000. But CHKC argued that it was entitled to treat the $7,205,000 as part restitution of monies which Lim had misappropriated from it. Further, CHKC’s case is that if Lim had not misappropriated the sums set out at [28] above, there would have been no cash flow problems and CHKC would not have had to borrow any money from Lim. CHKC’s defence against Lim’s claim for $7,205,000 is therefore dependent solely on its counterclaim against Lim. In the event that CHKC does not succeed in proving Lim misappropriated those sums of money set out in its counterclaim, it would be liable to repay the $7,205,000 to Lim as CHKC admits the existence of the debt.

  91. Lim’s claim for COF compensation

  92. Lim’s case

  93. [36] The figure of $16,800 per month was arrived at through the following method:

  94. (a) The average sum advanced by Lim to CHKC in the form of loans for the period August 2003 – September 2004 was computed to be $4.84m, being the average of $5.93m and $3.75m.

  95. (b) Lim and Neo then estimated the value of individual loans made to CHKC within this 14-month period and calculated the monthly COF compensation for that individual loan based on the corresponding estimated interest rates for that period. This is illustrated in the following table:

  96. (c) The figure of $16,837.50 was then rounded down to $16,800 “for convenience”.

  97. [37] There were three subsequent revisions to the COF compensation as follows:

  98. (a) From October 2004 to May 2005, Lim advanced additional sums of $2,100,000 to CHKC. Lim and Neo (on behalf of CHKC) agreed to increase the monthly COF compensation to $4,800 on top of the $16,800 agreed on earlier.

  99. (b) From July 2005 to August 2005, Lim advanced a further sum of $1,185,000 to CHKC. Lim and Neo (on behalf of CHKC) agreed to increase the monthly COF compensation to $4,375 on top of the sums of $16,800 and $4,800 agreed on earlier.

  100. (c) From August 2005 to October 2005, Lim advanced a further sum of $1,165,000 to CHKC. Lim and Neo (on behalf of CHKC) agreed to increase the monthly COF compensation to $6,751 on top of the sums of $16,800, $4,800 and $4,375 agreed on earlier.

  101. [38] Finally, Lim and Neo (on behalf of CHKC) also agreed subsequently that for the months of November 2005 and January – June 2006, Lim would receive additional COF compensation as follows:

  102. These sums were on top of the monthly sums of $16,800, $4,800, $4,375 and $6,751 agreed on earlier but each sum was only payable for that particular month.

  103. [39] The monthly sums of $16,800, $4,800, $4,375 and $6,751 were paid to Lim through regularly issued cash cheques. The one-off payments from November 2005 to June 2006 described in [38] above were also made to Lim through cash cheques of $10,000 each. All these payments were not recorded in CHKC’s accounts as payments to Lim, but were instead disguised through the issuance of payment vouchers as payments to entirely fictitious subcontractors named “Khor Ah Teck”, “Liu Bi Yu”, “Shi Chun Bing” and “Peng Chao”. Lim’s explanation was that CHKC’s accounts did not reflect the existence of the loans made by Lim to CHKC, because the cheques issued by CHKC as security for the loans were already treated in CHKC’s accounts as being already paid to Lim.

  104. [40] Lim alleged that CHKC suddenly ceased paying the monthly COF compensation from September 2006. Lim therefore claims the sums of $16,800, $4,800, $4,375 and $6,751 per month from October 2006 until CHKC repays the principal loan of $7,205,000.

  105. CHKC’s case

  106. [41] CHKC’s position on this issue was one of bare denial. It denied that any oral agreement ever existed between Lim and Neo for CHKC to pay COF compensation. In fact, CHKC is also counterclaiming against Lim for the sum of $747,536 being the value of cash payments made to fictitious subcontractors, but were allegedly misappropriated by Lim. CHKC’s case is that Lim is belatedly raising the COF compensation claim as a fabricated defence against CHKC’s counterclaim of $747,536 for payments made to fictitious subcontractors. This counterclaim of $747,536 forms part of CHKC’s counterclaim of $2,300,416 against Lim as described in [28(c)] above.

  107. My findings

  108. [42] Having considered the evidence, I find that Lim has not proved an oral agreement between him and CHKC for the latter to pay COF compensation as alleged and pleaded by Lim. My reasons are as follows. First, I find Lim’s entire story behind the computation of the initial COF compensation sum of $16,800 to be unnecessarily convoluted. Lim had stated during cross-examination that he had obtained the funds to lend to CHKC from various sources e.g. relatives, Mdm Tan, and bank overdrafts. Lim thus estimated the interest rate for his COF compensation based on his source of funds. For example, he would arrive at 2% for loans from relatives, 3% for loans from Mdm Tan (based on her bank mortgage), and 5.75% for the overdraft facilities. However, Lim also admitted during cross-examination that all these monies had been mixed up in his bank account. All his loans to CHKC were made in the form of cheques drawn on his bank account. In these circumstances, I find it very artificial for Lim to estimate the loans he made for various periods from August 2003 to September 2004 and assign an interest rate to each period. It is noteworthy that one of Lim’s brothers-in-law, Mr Poh Geok Seng, who lent Lim $400,000 for one or two months said he did not charge any interest.

  109. [43] Secondly, there were inconsistencies in Lim’s own evidence. Based on the table of estimated loans provided at [36(b)] above, Lim had allegedly lent the sum of $1m to CHKC by August 2003 at a rate of 5.75%. However, Lim’s own AEIC shows that the total value of cheques he had drawn in CHKC’s favour at the end of August 2003 was $430,000, of which $130,000 had been repaid by mid-August. When Lim was pressed on this point during cross-examination, his answer was that the figure of $1m was an estimate, which I find to be quite circular and evasive. Lim further testified in cross-examination that the table of estimated loans had been typed out by Aileen, but this point was never disclosed in his AEIC, nor was it put to Aileen when she was cross-examined.

  110. [44] Finally, Lim had only given details for computing the initial COF compensation of $16,800. When CHKC’s counsel asked him during cross-examination as to how he arrived at the additional monthly sums of $4,800, $4,375 and $6,751, Lim could only say that he and Neo arrived at those sums by basing each additional loan he made on an estimated flat rate of about 5.75%. However, I note that when Lim lent CHKC $1,185,000 from July 2005 to August 2005, the additional COF compensation was calculated to be $4,375. Yet, when he subsequently lent CHKC $1,165,000 from August 2005 to October 2005, for a substantially similar amount of money, the additional COF compensation was calculated to be $6,751. Lim explained in cross-examination that the additional monthly sums took into consideration monies which CHKC had already repaid to him, but he was unable to recall how much he was repaid. I find it very odd that Lim could give so many details on calculating the initial COF compensation of $16,800 but not have any figures when it came to computing the other monthly sums. I also find it odd that Lim arrived at the figure of $16,800 by rounding down from $16,837.50 “for convenience”, and yet he did not round down the additional COF sums of $4,375 and $6,751 when they were agreed on.

  111. [45] Taking all the above factors into account, it is my view that the scheme for computing the various COF sums was contrived and designed, with the benefit of hindsight, to match the sums of $16,800, $4,800, $4,375 and $6,751 being paid by CHKC to the fictitious subcontractors on a regular basis. Reviewing Lim’s formula to calculate the sum of $16,800, for example, gave me a strong feeling that this figure of $16,800 was first arrived at, and that someone had worked backwards to construct a formula which would bring in the other sums he had lent to CHKC from August 2003 – September 2004. This would explain why Lim’s method of computation was so artificial and convoluted. I therefore do not accept that Lim has discharged his burden of proof in proving that there was an oral agreement as alleged by him in his pleadings for CHKC to pay COF compensation until his loans to CHKC were repaid. However, like some of the issues in this trial, I had to deal with half-truths told by each side. I find that there were some interest payments made to Lim for some of the funds he raised, especially from third parties. CHKC did pay Lim various sums as “interest” on his loans; it is just that Lim has not proved, on a balance of probabilities, the amounts he is claiming. I accept the evidence of Lim’s brother-in-law, Dr Wong Wei Khiang, who came across as a witness of truth and who came through cross-examination unscathed, that when his initial interest-free loan turned into a longer term loan, Lim agreed to pay him interest at the same rate that Standard Chartered Bank would have given Dr Wong i.e. 2% per annum. However Dr Wong’s loan was a modest $200,000. He was paid interest of $4,000 per annum from around the third quarter of 2003. He has not received any interest from 2007 to date and his principal has also not been repaid to date. CHKC’s Manual Cashbook also disclosed that there were 5 entries amounting to $23,150 in 2005 in 2005, in Aileen’s handwriting, as follows:

  112. This contradicts Aileen’s evidence in chief at [84(g)] and is one of many instances of inconsistencies, (especially as it was in her own handwriting), which led me to reject Aileen’s evidence as being totally unreliable. For the avoidance of doubt, I also find that Neo did sign those repetitive cheques, like the $16,800, knowingly, see eg, the Manual Cashbook, 3 EAB 11 at p.8572, where there is a similar entry carrying the description: “Cash Lim Leong Huat … $16,800”. Neo, as already noted above, is not someone who signs cheques without knowing what they are for. I accept and find that there were some interest payments made to Lim by CHKC, and that it was agreed to by Neo, but Lim has not proved what these sums were. Lim’s legal team only identified the 5 payments of $4,800 and $4,375 from June to September 2005 set out in “PWB-49” with Mr Khoo saying “… we have identified at least five examples of that.” Given the thoroughness of the legal teams, I doubt if there are others. I have not found any other similar entries in 3 EAB 11 (the Manual Cashbook) These payments were therefore not as regular and over as long a period as Lim has alleged. And the burden of proof is on him.

  113. [46] Accordingly, this does not mean that CHKC’s counterclaim of $747,536 against Lim for the return of monies already paid to him (but recorded as payments to fictitious subcontractors) is automatically made out. I will deal with this issue along with the rest of CHKC’s counterclaims in more detail below.

  114. CHKC’s counterclaim for misappropriated cheques

  115. CHKC’s case

  116. [47] CHKC’s case is that from 1999 – 2003, Lim had represented to Neo that CHKC was facing cash flow problems. Neo was thus induced to make loans totalling $6,084,741.06 to CHKC by handing Lim signed cheques from his personal account, with the name of the payee left blank. Instead of depositing Neo’s cheques into CHKC’s account, Lim misappropriated them in the following manner:

  117. (a) Neo’s Citibank cheque No 943909 for the sum of $300,000 was deposited into Mdm Tan’s bank account;

  118. (b) Neo’s UOB cheque No 112437 for the sum of $380,000 was deposited into AZ’s bank account; and

  119. (c) The balance of Neo’s cheques totalling $5,404,741.06 were deposited variously into Lim’s, Mdm Tan’s or AZ’s bank accounts or cashed out.

  120. [48] CHKC also alleged that between January 2000 and May 2005, Lim had caused it to issue six cheques totalling $2,080,000 which were meant to repay Neo’s loans to CHKC. Instead of paying those cheques to Neo, Lim had caused them to be deposited into his or AZ’s bank accounts, or cashed out.

  121. Lim’s, Mdm Tan’s and AZ’s case

  122. [49] Lim denied misappropriating any of Neo’s or CHKC’s cheques, and contended that the cheques were dealt with in the following manner:

  123. (a) Neo’s Citibank cheque No 943909 for the sum of $300,000 was deposited into Mdm Tan’s bank account as repayment for a loan of $300,000 made by Mdm Tan to CHKC;

  124. (b) Neo’s UOB cheque No 112437 for the sum of $380,000 was deposited into AZ’s bank account as repayment for a loan of $380,000 made by AZ to CCPL; and

  125. (c) The balance of Neo’s cheques totalling $5,404,741.06, along with CHKC’s cheques totalling $2,080,000, were used to pay off fictitious invoices issued by CHKC and CCPL for purported work that was not done by either company (“the Fictitious Invoices Scheme”).

  126. Neo’s Citibank cheque for $300,000

  127. [50] Lim and Mdm Tan stated in their AEICs that the latter had originally made a loan of $300,000 to CHKC by way of OUB cheque No 263904 dated 29 January 2002. In exchange, CHKC through Neo issued its UOB cheque No 341396 for the same amount as security for repayment. However, Neo subsequently changed his mind about using CHKC’s UOB cheque for repayment and instead issued his personal cheque, being Citibank cheque No 943909 for repayment of Mdm Tan’s loan. Lim then instructed Jean to cancel CHKC’s UOB cheque but through a misunderstanding, CHKC’s UOB cheque was instead banked into Mdm Tan’s account on 8 February 2002. To rectify the error, Lim issued OUB cheque No 263928 from Mdm Tan’s account on the same day to repay CHKC for the mistaken overpayment. The final result was that the net balance between CHKC and Lim/Mdm Tan was zero.

  128. Neo’s UOB cheque for $380,000

  129. [51] Lim asserted that AZ had made a loan of $380,000 to CCPL and that Neo had given his UOB cheque No 112437 to Lim in the knowledge that it was being used to repay the loan owed by CCPL.

  130. Fictitious Invoices Scheme

  131. [52] According to Lim, Neo had plans to list CHKC’s holding company, CHH, on the Main Board of the Singapore Exchange (“SGX”) sometime between 1998 and 2002. To meet SGX’s listing requirement of a track record of cumulative consolidated pre-tax profits over three years of operations, Neo needed to have a track record of profits and planned to inflate the pre-tax profits of CHKC and CCPL to $7.5 million. Accordingly, Neo hatched the Fictitious Invoices Scheme for CHKC and CCPL to generate artificial revenue by issuing fictitious invoices to AZ and various third parties. These invoices would be indirectly paid for by Neo and CHKC.

  132. [53] Pursuant to this arrangement, CHKC and CCPL issued fictitious invoices totalling $7,490,878.35, which were paid in the following manner:

  133. (a) $4,396,977.30 was paid by AZ to CHKC and CCPL in the form of cheques;

  134. (b) $2,544,367.80 was set off against progress payments made by CHKC to AZ in respect of work done by AZ for CHKC; and

  135. (c) $549,533.25 was paid by Lim to CHKC and CCPL in the form of cash.

  136. [54] In order to conceal the real source of the funds for the Fictitious Invoices Scheme, Neo’s and CHKC’s cheques were credited into Lim’s, Mdm Tan’s and AZ’s bank accounts, or cashed out. These monies were eventually used to reimburse Lim and AZ for the payments they made to settle the fictitious invoices. Since the Fictitious Invoices Scheme was designed to evade detection, individual cheques issued by Neo/CHKC were not intended to match any particular invoice. As a result, the total value of invoices issued ($7,490,878.35) was $6,137.29 more than the total value of Neo’s and CHKC’s cheques ($7,484,741.06) used to reimburse Lim and AZ.

  137. My findings

  138. Neo’s Citibank cheque for $300,000

  139. [55] Lim/Mdm Tan transferred $600,000 from Mdm Tan’s account to CHKC by two OUB cheques of $300,000 each. In return, CHKC’s UOB cheque for $300,000 was deposited into Mdm Tan’s account. The issue therefore is whether the balance of $300,000 owing to Mdm Tan had been repaid by CHKC separately. CHKC sought to rely on an extract from an account named ‘ACA 25’ in its general ledger as evidence that the $300,000 owing to Mdm Tan was recorded as a loan owing to Lim, which was repaid separately by CHKC. Thus, CHKC argued that Neo’s Citibank cheque was misappropriated by Lim and deposited into Mdm Tan’s account instead of being used to pay off the $300,000 owing by CHKC.

  140. [56] The problem with CHKC’s evidence is that this extract from ACA 25 which it relied on only appears to be a statement of accounts between Lim and CHKC. It does not show, on balance, that the $300,000 owing to Mdm Tan was in fact paid to Lim. As Lim disputed that he was ever paid this amount, CHKC should have adduced some evidence of payment like receipts or bank records. Since CHKC did not adduce further evidence on this point, I am unable to find that the balance of $300,000 owing to Mdm Tan was paid off by CHKC to Lim. Consequently, I accept Lim’s evidence that Neo’s Citibank cheque was used to repay the $300,000 owing to Mdm Tan instead of being misappropriated by Lim. Therefore, CHKC’s counterclaim for the $300,000 fails.

  141. Neo’s UOB cheque for $380,000

  142. [57] I have no trouble finding from the evidence that Neo knew, and intended his UOB cheque for $380,000 to be a repayment of AZ’s loan to CCPL. Neo admitted during cross-examination that he had signed his UOB cheque for $380,000 after Lim had filled in AZ’s name as the payee. Neo also admitted, from his own AEIC, that he would pay attention to the name of the payee written on his cheques and even question Lim why “Cash” was written instead of CHKC’s name in some instances. Therefore, Neo must have known and I so find that the cheque was meant to pay AZ instead of CHKC. In my judgment, CHKC’s counterclaim for the $380,000 therefore fails.

  143. Fictitious Invoices Scheme

  144. [58] I now deal with the bulk of CHKC’s counterclaim for misappropriated cheques. The crux of the dispute between the parties in this area essentially turns on Lim’s word against Neo’s. Neo denied any knowledge of the Fictitious Invoices Scheme and accused Lim of starting the scheme to reduce AZ’s taxable income, while Lim maintained that Neo was the mastermind behind the scheme. In the midst of all this finger-pointing, I would note that it is not necessary for either party to establish who exactly came up with the Fictitious Invoices Scheme. What is clear to me, and I so find, is that both Neo and Lim were up to their necks in this convoluted scheme and that what matters more is that Neo was well aware that his and CHKC’s cheques were being used to further such a scheme. I would also note that CHKC did not challenge Lim’s evidence that the $7,490,878.35 worth of fictitious invoices issued were all paid off to CHKC and CCPL.

  145. [59] Having heard the evidence, I find that the idea to list was Neo’s however the Fictitious Invoices Scheme was something that was hatched by both Neo and Lim in furtherance of Neo’s idea to list his company. I have no doubt that Neo was indeed aware of the Fictitious Invoices Scheme when he was signing his and CHKC’s cheques. If Neo really intended to make loans to CHKC, he would simply have filled in CHKC’s name as the payee on his cheques instead of signing them in blank. The converse would also have applied when Neo, as CHKC’s sole signatory, was signing CHKC’s cheques as repayment for his loans. It was unbelievable that Neo would have signed off on so many of his and CHKC’s cheques without verifying where the money was being paid. Furthermore, the directors’ loan account in CHKC’s audited accounts shows that Neo actually made substantial loans to CHKC after and not before 2003. As Neo had signed off on all of CHKC’s accounts, it must have been clear to him that any loans he purportedly made from 1999 – 2003 were not being paid to CHKC. Lastly, Lim produced an extract from an account named ‘ACA 11’ in CHKC’s general ledger which showed that Neo had actually drawn a total of $6,440,438.48 from CHKC between 1 June 1999 and 31 May 2003, compared to $2,345,000 which he put into CHKC during the same period. Obviously, Neo must have realised that CHKC had no cash flow problems prior to 2003 if he was able to draw so much money out of the company.

  146. [60] Despite this clear evidence, Neo continued to maintain during the trial that he trusted Lim completely and simply signed everything Lim put in front of him, be it cheques or audited accounts. As stated earlier, I do not believe this story of Neo’s at all. Although he tried to portray himself as a gullible boss who was easily misled by Lim, I find him to be a very street-wise and shrewd businessman who did not trust people blindly. Neo himself admitted during cross-examination that he was careful with his personal cheques:

  147. Since Neo was careful enough to ensure that he had the funds available to honour his cheques, and having heard his evidence, I find that he would also be careful about where his funds were going. Further Mr Khoo produced an analysis, which was not denied by Neo, to show that only 7.29% of the CHKC cheques were cash cheques. I find that Neo was careful about signing cash cheques or cheques without a payee and such cheques were for special purposes. Mr Khoo also produced another analysis which showed a comparison between the Director’s loan balances in the Audited Accounts for FY 1999 – FY 2006 and the amount of Neo’s cheques allegedly misappropriated. For example, FY 2000, the audited accounts showed Neo’s director’s loan balance at $21,843 but the amount of cheques ‘misappropriated’ was $400,000. Again for FY 2001, the director’s loan balance was $50,591 but the amount of cheques ‘misappropriated’ was $1,370,000 and the respective figures for FY 2002 and FY 2003 were $2,596 compared to $2,757,700 and $0 compared to $1,157,041.06. It is clear to me beyond doubt that Neo knew his alleged “loans” to CHKC were not going into CHKC. Neo is not the kind of person who would keep quiet for so many years if Lim was indeed ‘misappropriating’ his money.

  148. [61] The fact that Neo was the sole signatory for CHKC’s cheques is also a very important indicator that Neo was careful with CHKC’s finances. It is impossible to think he had designated himself as CHKC’s sole signatory only to rubber-stamp every single cheque his subordinates brought to him. As noted before, when Neo was cross-examined on why he did not make Lim a signatory to CHKC’s accounts if he trusted Lim so much, Neo gave the most incredible answer:

  149. I have no doubt that Neo was blatantly lying on this score. He made himself the sole signatory for CHKC’s cheques because he did not trust anyone else completely enough to give away that mandate. I do not believe that he was signing his and CHKC’s cheques for four years without knowing where the monies were going.

  150. [62] Neo also gave conflicting evidence regarding the restructuring of the Chip Hup group of companies and the intended listing of CHH. He first stated in his AEIC that he decided to restructure the Chip Hup group in 1998 at Lim’s suggestion. However, he then went on to state that the main purpose of the restructuring was to enable him to take over the shares of CH Timber from his late father’s estate. I find it hard to reconcile these two positions because it is unlikely that Lim would have suggested the idea of restructuring for a purpose which had absolutely nothing to do with him. It seemed more likely to me that Neo was trying to downplay the fact that listing was one of his main motives for restructuring the Chip Hup group.

  151. [63] Neo continued this strategy of downplaying his ambition to list CHH during trial. He said that he had only considered listing CHH in 2000. However, this is contradicted by his statutory declaration following the restructuring of the Chip Hup group in 1998, which indicates that one of the reasons behind the restructuring was to “[b]etter reflect the performance track record of these [sic] group of companies with the view that a public offer of any of these companies’ shares may be made.” Neo’s evidence is also contradicted by the testimony of his own witness, KK Lim, who was the former auditor for the Chip Hup group of companies. KK Lim stated in his AEIC that Neo had actually discussed the possibility of listing with him in 1999, in contrast to Neo’s evidence that listing was only considered in 2000. Neo further tried to say it was Lim who was actively pursuing plans for an initial public offering. When Lim’s counsel asked Neo why this allegation was never included in any of his previous affidavits, Neo amazingly replied that he had not mentioned it to his lawyers. That was clearly another lie.

  152. [64] In my view, Neo certainly gave a lot more thought to the idea of listing CHH than he would have this Court believe. As noted above, Lim did not own any shares in any of the companies nor was there any hint that Lim would be given shares in due course. Neo, not Lim, was the ultimate owner of the Chip Hup group of companies. He was the one who stood to gain the most from a successful listing of CHH’s shares. I find it very unlikely that he would have simply waited until 2000 before making inquiries about listing when that was already one of the purposes for restructuring the Chip Hup group in 1998. I find that Neo’s involvement definitely went beyond just making inquiries with financial advisors. Neo was actively pursuing his goal of a listing until he found he did not have the support of the banks to do so.

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