High Court · Decided 7 September 2009

Orix Capital Ltd v Personal Representative(s) of the Estate of Lim Chor Pee (deceased) and Others

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[2009] SGHC 201Case no. Suit 540/2007

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Laws this judgment relies on

Partnership Act 1890

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Introduction
[1] The plaintiff, Orix Capital Limited, is a leasing company and grants leasing facilities to customers in respect of office equipment which it purchases from suppliers like Canon Singapore Pte Ltd (“Canon”) and then leases to the end-users. In this case, the plaintiff claims amounts arising under a lease agreement involving two photocopiers on the basis that the persons liable under the lease were Lim Chor Pee (“LCP”), his son, Lim Hsi-Wei Marc (“Marc Lim”), the second defendant herein, and the third defendant, Rebecca Marie Stephanie Tai-Yeo Hsiu Erh (“Ms Yeo”). LCP died before this action was commenced and his estate (the “Estate”) was made the first defendant in the action. The Estate did not defend the action and the plaintiff has obtained judgment against it. The other defendants, however, contested the claim. Hereafter when, for convenience, I refer to “the defendants” I should be understood as referring to the second and third defendants only.
Undisputed facts
[2] At all material times LCP was a lawyer in private practice practising under the name and style of Chor Pee & Partners (“the firm”). He was the principal administrator of the firm and the person who made most, if not all, of the administrative decisions required by the firm. The office manager of the firm who implemented such decisions was one Ms Susanna Soh.
[3] Marc Lim joined the firm as a legal assistant on 1 January 1997 and was made a salaried partner with effect from 1 January 2001. Under the appointment letter signed by LCP dated 19 January 2001, Marc Lim’s appointment as salaried partner was “without any other participation in the profits or loss and assets and liabilities of the firm”. Marc Lim averred that he handled legal work and did not participate in the administrative or financial affairs of the firm.
[4] Ms Yeo joined the firm on 1 April 2003 to practise with it on a profit sharing basis without participation in the profits of the firm as a whole or in its assets and liabilities. The basic arrangement for Ms Yeo’s remuneration was that the firm and she would share profits in various proportions on files (a) handled by her in whole or in part, (b) referred by her to the firm, and (c) referred by the firm to her. There was no signed contract between Ms Yeo and the firm but the agreed terms of her practice were set out in a document which was e-mailed to Ms Yeo by LCP. This document was entitled “Profit Sharing Agreement Between Chor Pee & Partners (CPP) and Rebecca Tai-Yeo (“Partner”)” and its first clause stated that Ms Yeo would practise with CPP on a profit sharing basis without participation in the assets and liabilities of CPP pending the corportisation of CPP.
[5] The background to the plaintiff’s claim is not straightforward. The story started on 1 August 2001 when the firm entered into a lease agreement (“the Newcourt agreement”) with a company called Newcourt Financial (Singapore) Pte Ltd (“Newcourt”) for four photocopiers supplied by Canon (“the Newcourt copiers”). Under the Newcourt agreement, the firm was to pay a monthly rental of $2,955 for the Newcourt copiers for a period of 60 months ending on 31 July 2006. In February 2004, the Newcourt agreement was varied. Under the variation, the lease period was extended to 4 February 2010 and the monthly lease payments were reduced to $1,800 per month for the first 12 months of the extended period, $2,000 per month for the next year, $2,200 per month for the third year, $2,400 for the fourth year, $2,600 per month for the fifth year and $2,653.76 per month for the sixth year.
[6] In July 2004, one Ms Dora Loh, who was then employed as senior sales consultant by Canon, approached Susanna Soh with a view to concluding a deal through which the firm would acquire new photocopiers. She recommended two new models (the “Copiers”) to Susanna Soh and ascertained that the firm was then paying $1,800 per month for the Newcourt copiers. At the same time Dora Loh ascertained from Newcourt that in order to procure an early termination of the Newcourt agreement, the firm would have to pay Newcourt $164,144.34 plus GST (“the termination sum”). Having done further calculations, Dora Loh worked out that Canon’s sale price for the Copiers (taking account of the termination sum which Canon would have to pay Newcourt), would be $231,500 plus GST. Dora Loh was aware from her discussions with Susanna Soh that the firm would not be interested in upgrading its copiers if this project resulted in an additional monthly expenditure for the firm since the firm was keen to reduce its cash flow. Before putting her proposal to the firm therefore, Dora Loh approached Danny Lee, an employee of the plaintiff, and asked him whether the plaintiff would be able to purchase the Copiers for $231,500 plus GST and then lease the same to the firm for $1,800 per month.
[7] After doing his calculations, Danny Lee informed Dora Loh that the plaintiff would buy the Copiers at the price stated and it would then be willing to lease them to the firm for approximately six years at the following monthly rentals:
(a) for months 1 to 24, $1,800;
(b) for months 25 to 48, $3,500;
(c) for months 49 to 72, $5,450; and
(d) a final payment of $47,400.
[8] Based on the figures set out above, Dora Loh prepared a proposal for the firm for the lease of the Copiers which were to replace the Newcourt copiers. The proposal showed that for the first two years, the firm would pay less under the new lease than under the Newcourt agreement as varied. As part of the proposal, Canon was to pay the termination sum to Newcourt. This proposal was accepted by Susanna Soh. On or about 17 July 2004, she signed a document called a Sales Agreement (“the Sales Agreement”) issued by Canon which set out the main terms of what was described as the “Lease Purchase”.
[9] The plaintiff then prepared lease agreement number OC/LA/0804/005169 (“the Lease”) in respect of the two Copiers. The date of the Lease was 27 August 2004. The lessee was described in the schedule to the Lease as follows:
LESSEE
Name
: LIM CHOR PEE (I/C NO: S2088197F), LIM HSI-WEI MARC (I/C NO: S1601047B) & REBECCA MARIE STEPHANIE TAI-YEO HSIU-ERH (I/C NO: S1660081D) PRACTISING UNDER FIRM OF CHOR PEE & PARTNERS
Address:
[3] KILLINEY ROAD #07-01 WINSLAND HOUSE 1 SINGAPORE 239519
The Lease was signed by LCP and Marc Lim. Their signatures appeared above the stamped name of the firm and their designation was typed in as “Partners”.
[10] Canon delivered the Copiers to the firm on 29 July 2004 and 2 August 2004. Canon then invoiced the plaintiff and the plaintiff paid Canon the agreed price for the Copiers.
[11] The firm paid the monthly rental due under the Lease up till April 2005. Thereafter, the rentals due under the Lease went unpaid. On 7 July 2005, the plaintiff wrote a letter of demand to the firm in respect of the unpaid rental and by this letter notified the firm as follows:
[12] On 22 July 2005, the plaintiff’s solicitors, Messrs Piah Tan & Partners, sent a letter of demand to LCP, Marc Lim and Ms Yeo at the firm’s address. The letter stated inter alia that the three addressees had repudiated the Lease by default in payment of the monthly rental and that repudiation had been accepted by the plaintiff and the Lease had been terminated on 7 July 2005. As at 7 July, the amount due was $306,632.58 but on 19 July 2005, the firm had sent the plaintiff a cheque for $1,890 which the plaintiff was accepting in diminution of the debt due but without prejudice to the termination of the Lease and the plaintiff’s rights in respect of the same. The letter went on to demand payment of the balance of $307,627.98 due as at 22 July 2005.
[13] After receipt of the letter of demand, LCP spoke to the plaintiff’s credit manager one Ms Vivian Lim (“Ms Lim”) regarding the matter and, as a result, on 5 August 2005, Messrs Piah Tan & Partners wrote to LCP and the defendants, at the firm’s address, in the following terms:
[14] By its solicitors’ letters dated 23 August 2005 addressed to LCP, Marc Lim and Ms Yeo and delivered by hand to the office of the firm, the plaintiff granted an extension of time to 26 August 2005 in which to comply with the requirement for payment of the unpaid rental due up to August 2005. The plaintiff received the outstanding payment on 29 August 2005 and thereafter it treated the Lease as having been reinstated.
[15] On 1 January 2007, there was a default in payment of the monthly rental due. By a letter dated 18 January 2007 addressed to the Estate, the defendants and the firm, the plaintiff terminated the Lease and demanded payment of the sum it claimed was due and payable consequent on that termination. That letter of demand led to the plaintiff’s present claim. On 24 April 2007, the Copiers were repossessed by the plaintiff and sold.
[16] It should be noted that, according to Ms Yeo, on 17 May 2005, the terms of her practice with the firm changed. From 18 May 2005, she was no longer working on a profit sharing basis but became a senior associate with the firm until 17 July 2005 when she physically left the firm. Her position as senior associate officially ended on 31 July 2005.
The plaintiff’s claim and the defences
[17] This action was commenced on 23 August 2007. On 2 July 2008, the first day of the trial, the plaintiff applied to amend its statement of claim.
[18] The salient features of the amended statement of claim are as follows:
(a) first, by paragraphs 1 to 3, the plaintiff averred that at all material times, LCP and the defendants were partners practising under the name and style of the firm; that the plaintiff had leased the Copiers to LCP and the defendants for a period of 72 months from 1 September 2004 at the various rental rates specified in the Lease and that the material terms of the Lease were as set out in para 3;
(b) second, in para 4 the plaintiff averred that by reason of its default in payment of rental from April 2005, the lessee had repudiated the Lease and the plaintiff had accepted the repudiation and terminated the Lease on 7 July 2005;
(c) third, by the new para 5, the plaintiff pleaded:
[19] In the interests of clarity, I shall hereafter refer to the original contract signed by LCP and Marc Lim with the plaintiff as the “Lease” and to the agreement reached pursuant to the correspondence of August 2005 as the “August Agreement”. I note that the plaintiff’s position is that the August Agreement resulted in a revival of the Lease whereas the position taken by the defendants is that the Lease ended on 7 July 2005 and that the August Agreement was a new lease agreement in respect of the Copiers and that the same was only between LCP and the plaintiff.
[20] The defences run by the second defendant, Marc Lim, to the amended claim of the plaintiff are as follows:
(a) that the Lease terminated on 7 July 2005 and thereafter was not capable of being reinstated and the August Agreement could not bind him because he was not a partner of the firm;
(b) in any event, the Lease and the August Agreement reflect a sham transaction which should be rendered null and void;
(c) the Lease and the August Agreement are null and void as being contrary to the Moneylenders Act (Cap 188, 1985 Rev Ed);
(d) the Lease was vitiated by misrepresentations made to Marc Lim; and
(e) the Lease was vitiated by reason of undue inference or unconscionable dealing operating on Marc Lim.
[21] The defences run by the third defendant, Ms Yeo, to the amended claim of the plaintiff are as follows:
(a) the Lease did not bind Ms Yeo since she had no knowledge of and was not a signatory to the same;
(b) the Lease was unusual and it was not in the course of the firm’s ordinary course of business in that it involved the settlement of the Newcourt agreement;
(c) the Lease was a sham transaction and was null and void; and
(d) Ms Yeo could not be bound by the August Agreement as she was no longer in the firm when it was made.
[22] It can be seen from the above that there are some common issues which both defendants have raised viz whether the Lease was a sham transaction and what the legal effect of the termination of the Lease on 7 July 2005 was. In relation to the other defences raised by the respective parties, these arise from their individual and particular circumstances and therefore have to be considered separately.
The case of the second defendant
Is the plaintiff’s claim made pursuant to the Lease or to the August Agreement?
[23] The plaintiff accepted the position that because of the breach of its terms, the Lease was terminated in July 2005. It submitted that as a result, the plaintiff could have repossessed the Copiers and made a claim against the firm for the loss and damage sustained. Before this happened, however, the firm had requested the plaintiff to continue with the leasing, ie, not to repossess the Copiers and not to claim its loss. The plaintiff then agreed to accede to the firm’s request if the firm complied with the conditions set out in its solicitors’ letter of 5 August 2005 as slightly amended by the subsequent letter of 23 August 2005 (“the August 2005 conditions”). The firm accepted the August 2005 conditions and there was therefore an agreement that if they were fulfilled, the Lease would be revived or reinstated.
[24] The plaintiff further submitted that pursuant to the August Agreement:
(a) if the August 2005 conditions were not fulfilled, then the Lease remained terminated and the plaintiff would repossess the Copiers and claim against the firm;
(b) if the August 2005 conditions were fulfilled, then the Lease would be revived or reinstated and the plaintiff would not repossess the Copier nor claim against the firm.
Since, in the event, the August 2005 conditions were fulfilled, the Lease was revived and it continued to govern the parties’ relationship.
[25] The second defendant submitted that the plaintiff’s position was not tenable at law. What had really transpired by way of the plaintiff’s solicitors’ letters in August 2005 was the offer of fresh terms to LCP in order to ensure that the Copiers would not need to be repossessed. Although the solicitors used the phrase “reinstatement of the Lease Agreement” in their letters, this phrase did not reflect an existing legal concept. What had happened, the second defendant submitted, was that by its own letter of 7 July 2005 and its solicitors’ letter of 22 July 2005, the plaintiff had unequivocably accepted the repudiatory breach of contract which arose when the lessee did not make timely payment of the instalments due under the Lease. At law, once the repudiatory conduct had been accepted, the acceptance could not be withdrawn.
[26] In support of this submission, the second defendant quoted the following passage from Chitty on Contracts, (Sweet & Maxwell, 29 Ed, 2004) para 24-013:
[27] The second defendant further submitted that the terms of the Lease differed significantly from the terms of the August Agreement. Under the Lease, the lessee was to make instalment payments in the following manner:
(a) $1,800 (before GST) for the 1-24 months;
(b) $3,500 (before GST) for the 25-48 months;
(c) $5,450 (before GST) for the 49 to 72 months and a final payment of $47,400 (before GST) on 1 September 2010.
By the August Agreement, however, the payment terms were as follows:
(a) the rental arrears in the sum of $4,725 were to be paid forthwith;
(b) the sum of $200 being the plaintiff’s legal costs was to be paid by 10 August 2005;
(c) all future rental instalments were to be paid by Giro; and
(d) the instalments from September 2005 onwards would be in accordance with the previous terms of payment under the Lease.
Quite clearly, the second defendant submitted, new terms were imposed and if these had not been complied with, the plaintiff’s position would have been that the Lease was still in default.
[28] The third defendant supported the submission that on 7 July 2005 the plaintiff had clearly accepted and communicated its acceptance of the repudiation of the Lease arising from the failure to make payment of rentals when due. She agreed that after communication of its acceptance of the repudiation, the Lease came to an end and was not capable of any revival or reinstatement. She cited another well known text, Cheshire, Fifoot & Furmston’s Law of Contract (Butterworths, 2nd Singapore and Malaysia Ed, 1998) which states at p 905:
[29] The plaintiff responded to the submissions of the defendants by arguing that it was the firm that had requested the plaintiff to continue with the Lease ie not to repossess the Copiers and not to make a claim against the firm. The plaintiff had agreed to accede to the firm’s request on the basis of the August 2005 conditions. The agreement to reinstate was like any other contract – there was offer, acceptance and consideration. If parties agreed to revive a terminated contract on terms that it should continue as if it had never been terminated, there was, the plaintiff submitted, no reason why the court would not uphold the parties’ agreement.
[30] I do not accept the plaintiff’s submissions. It is clear from the texts and also accords with commonsense that once a contract has been terminated, it comes to an end and is not capable of being revived, even by the parties’ agreement. Instead, when there is such an agreement, what the parties create is a new contract. In this case, the Lease ended on 7 July 2005 when the plaintiff exercised its right of election and chose to terminate the Lease rather than to allow it to continue to run. Having done this, the plaintiff was then entitled to exercise all its remedies accruing under the Lease. The plaintiff chose not to do this. Instead, at LCP’s request and on the basis that certain new terms were agreed to, it entered into a new contract in respect of the lease of the Copiers. The plaintiff may have thought that it was reviving the Lease but this was not the legal consequence of its action. The plaintiff sought to distinguish between the Lease which it said was revived and the August Agreement which it said was the contract formed by LCP’s request to it and its counteroffer containing the conditions that had to be complied with before it would allow the rental of the Copiers to continue. However, what the plaintiff called the “Reinstatement Agreement” actually became part of the new contract for the lease of the Copiers and this contract comprised the new terms set out in the plaintiff’s solicitors’ letters and the other terms contained in the terminated Lease.
[31] The August Agreement came into effect when the August 2005 conditions were complied with. The plaintiff took no legal action at that stage against any of the defendants to recover the sums due as at 7 July 2005. Nor did it take any action to recover the Copiers. The Copiers remained in the possession of the firm for a further 20 months or so. The next default of payment of rental took place in January 2007 and the Copiers were repossessed in April 2007.
[32] In its statement of claim, the plaintiff averred that it had reinstated the Lease pursuant to the August Agreement (or, in its terminology, the “Reinstatement Agreement”) and that the Lease had continued as if it had never been terminated. It pleaded that in breach of the Lease and/or the Reinstatement Agreement the lessee had defaulted in payment of the rental due on 1 January 2007 and by reason thereof had repudiated the Lease and/or the August Agreement. It then claimed damages arising as a consequence of the repudiation of the Lease and/or of the August Agreement. In my judgment, this pleading while endeavouring to have things both ways actually showed that the plaintiff was not taking a consistent stand. If it was the plaintiff’s position that the Lease had been revived and was the legal contract between the parties in January 2007, then the plaintiff should not have pleaded that there was a breach of the August Agreement. In its submissions the plaintiff had said that the August Agreement had been complied with and that had led to the revival of the Lease. This argument was not consistent with a pleading that the August Agreement had been breached. Perhaps the plaintiff recognised the possibility that the August Agreement was actually the new contract combining the terms of the Lease and of the August 2005 conditions. This would explain why the plaintiff pleaded that the August Agreement had been breached.
[33] In any case, I am satisfied that when the plaintiff started this action in August 2007, it was suing on the basis of the new contract to lease out the Copiers that was concluded in August 2005. It was this contract that was breached when the instalment due on 1 January 2007 was not paid and it was this breach which constituted a repudiation of the new contract. The plaintiff accepted this repudiation and terminated this new contract on 18 January 2007 and then took action to enforce its remedies by repossessing the Copiers and, subsequently, commencing this suit. Thus, the plaintiff’s claim herein was not made pursuant to the Lease.
Who were the parties to the new contract?
[34] The plaintiff’s contention was that the new contract was entered into between the plaintiff and all three defendants. In its amended statement of claim at [5], the plaintiff pleaded that the offer for reinstatement came about because LCP:
[35] I first consider the position of the second defendant and will deal with the third defendant’s position later when I come to her defences. The second defendant stated that he was unaware that LCP had made any representation to reinstate the Lease. Even if LCP had done so, he did not do so as agent of the second defendant or on the latter’s behalf. Nor did the second defendant consent to the new contract. He therefore took the position that he was not a party to it.
[36] It is common ground that the second defendant had no direct dealings with the plaintiff either when the Lease was first concluded or in July or August 2005. It was accepted that LCP himself had spoken in July 2005 with Ms Lim of the plaintiff and had asked her to “reinstate” the Lease.
[37] The second defendant contended that he had never held himself out to the plaintiff as a partner of the firm in July/August 2005 and if the plaintiff had agreed to enter into a new contract, it had done so relying purely on LCP and had not relied on the fact of the second defendant’s position in the firm. He said that since he did not hold himself out as a partner of the firm and because he was not a true partner and the plaintiff did not rely on any such holding out, he could not be liable for the claim as a partner. In effect, the second defendant contended, that for the plaintiff to succeed, it would have to show that first, he had held himself out as a partner and second, acting on that representation, the plaintiff had acted to its detriment.
[38] At all material times, the second defendant was a “salaried partner” of the firm. He admitted this status in his pleadings. Further, the Law Society confirmed that its records showed that the partners of the firm as at 27 August 2004 were LCP, the second and the third defendant. There was no change in the second defendant’s position as at July/August 2005 and there is no evidence that during that period he informed the Law Society of any change in his status vis-à-vis the firm. The actions taken to inform the Law Society of the second defendant’s position in the firm show a holding out to the world at large of his status.
[39] Whilst between themselves LCP and the second defendant knew that the latter was a “salaried partner” rather than a full equity partner, this distinction was not made known to the world at large. As Megarry J said in Stekel v Ellice [1973] 1 WLR 191 at 198:
[40] The following passage from Lindley and Banks on Partnership (Sweet & Maxwell, 18 Ed, 2002) at p 95 is instructive:-
[41] The plaintiff submitted that it had relied on the fact that the second defendant was a partner in the firm. The plaintiff was informed that he was a partner and thereafter made searches on him and he was subsequently referred to in the plaintiff’s credit proposal as a partner. This process of reliance culminated in the second defendant being specifically named as a party to the Lease in his capacity as a partner. I accept that the plaintiff knew that the second defendant was a partner of the firm before the Lease was issued and consequently inserted his name in the Lease as one of the partners of the firm. The second defendant signed the Lease and did not object to this description in any way. If he had thought about it, he would have realised that the plaintiff was entering into a Lease with the persons whom they considered to be the partners of the firm.
[42] The second defendant relied on the case of Nationwide Building Society v Lewis [1998] Ch 482 (“Nationwide”) for the proposition that reliance cannot be presumed and must be proven. That proposition is correct but the present case is distinguishable on the facts. In the Nationwide case the court found as a fact that the plaintiff, Nationwide, only knew of the existence of the partner it was trying to hold liable, one Mr Williams, after it had entered into the contract. On that basis, the court necessarily found that the plaintiff did not rely on Mr Williams being a partner at the time of the contract. As pointed out above, the plaintiff here made enquiries and ascertained that the second defendant was a partner before it drew up the Lease and thereafter inserted his name in the Lease as a partner of the firm.
[43] I find that on the facts of this case there was a holding out by the second defendant that he was a partner of the firm. This holding out came from the records of the Law Society and, specifically in relation to this transaction, from information given by Susanna Soh to Dora Loh of Canon when the latter asked her who the partners of the firm were. Susanna Soh was the administrative manager of the firm and authorised to give out information about it in the ordinary course of business. This information was duly passed on to the plaintiff and, in my opinion, it is not detrimental to the plaintiff’s case that it accepted the information from Dora Loh and did not make an independent enquiry with the firm or the second defendant. It must be remembered that it was Dora Loh who was trying to set up the transaction for the hire of the new Copiers and who acted as intermediary between the plaintiff and the firm. In this commercial situation, one that had arisen many times over the years between the plaintiff and Canon, it was reasonable for the plaintiff to act in this way. That acceptance was subsequently shown to have been justified when the second defendant signed the Lease without demur. I also accept that the plaintiff relied on this holding out as to the second defendant’s status even if it was were mainly influenced by LCP’s attributes as indicated by the evidence of one of its witnesses.
[44] The reliance adverted to above was in relation to the Lease. The issue now before me relates to the parties to the August Agreement. As stated above, there had been no change in the second defendant’s position in the firm by then. He was still being held out to the world as a partner of the firm. LCP was still running the firm and when he spoke to the plaintiff’s representative and asked the plaintiff not to take enforcement action but to continue to lease the Copiers to the firm, he must have been acting not only on his own behalf but also on behalf of the second defendant. It is worth noting in this respect that LCP was responding to the letters of 5 July 2005 and 22 July 2005 addressed to himself, the second defendant and the third defendant which letters demanded repayment of the amount due on the Lease. As the second defendant’s status in the firm had not changed, he had not withdrawn from LCP the authority to represent him as a partner of the firm. It is settled law that a partner is an agent for his partners (see s 5 of the Partnership Act (Cap 391, 1994 Rev Ed) (“Partnership Act”). Accordingly when LCP asked the plaintiff to continue the Lease he was acting on behalf of (and was seen by the plaintiff as acting on behalf of) the second defendant as well. The plaintiff in responding to LCP’s request was clearly intending to deal with all three persons whom it considered partners of the firm. It’s solicitors’ letter of 5 August 2005 in which it laid down the terms for “reinstatement” of the Lease was addressed to all three of them.
[45] In my judgment, as far as the second defendant was concerned, the contract that subsequently that came into existence with the plaintiff was a contract which bound him. It was made on his behalf with the plaintiff by LCP and as a partner in the firm he was bound by his partner’s/agent’s agreement. LCP’s actions were directed, if not wholly, at least substantially, at procuring the continued availability of the Copiers for the use of the firm and therefore were effected for the purpose of the business of the firm. The second defendant testified that all administrative matters relating to the business of the firm were handled by LCP and that he was content to leave such matters to LCP. On the facts of this case, no argument could be made that LCP had in fact no authority to act for the firm in relation to the Copiers. The plaintiff, having clearly considered the second defendant to be one of the persons liable to it for the default in the payment of rental for the Copiers, continued to rely on the second defendant’s position as a partner of the firm when it made its offer to reinstate the Lease.
Was the Lease (and consequently the new contract) a sham transaction that was void?
[46] The next defence taken by the second defendant was that the Lease was a sham transaction and therefore was null and void and not binding on him. He submitted that the plaintiff was fully aware that it was not simply financing the lease of the Copiers but was also refinancing an existing debt owed by the firm and the repayment of a sum which included an exorbitant amount as interest. In the second defendant’s submission the plaintiff knew that the transactions were sham because:
(a) The plaintiff’s Goh Hock Leong gave evidence in chief that the plaintiff had no knowledge of the details of the transaction save that the purchase price of the Copiers was $231,500 (before GST).
(b) Danny Lee also gave evidence that he was informed by Dora Loh that Canon was prepared to sell the Copiers to the plaintiffs at $231,500 (before GST) and that he was asked to work out the monthly rental payable by the firm starting at $1,800.
(c) During cross examination of Mr Goh and Danny Lee they wanted to insist that all they knew was that the purchase price of the Copiers was $231,500 but after some pressing Mr Goh was forced to admit that there was a credit approval document that the plaintiff had not disclosed earlier. When this was produced subsequently, it clearly stated that the purpose of the facility to the firm was to:
(i) purchase the Copiers;
(ii) cater for a rollover of $120,000 payable by the firm.
(d) Mr Goh had maintained that the rollover amount was just an estimate of $120,000 from his experience in the industry but this assertion was shown to be a lie when Danny Lee conceded in cross examination that Dora Loh had told him that the estimated amount that had to be settled was $110,000 and that the plaintiff knew that the sum of $231,500 included an amount that had to be paid to another financial institution;
(e) Dora Loh’s evidence was that she had informed Danny Lee that there was an outstanding sum due to Newcourt and that she had faxed the Sales Agreement that Susanna Soh had signed with Canon on behalf of the firm to Danny Lee before the plaintiff’s Release Letter was issued. The Sales Agreement stated that “Canon will early settle the existing lease contract with NewCourt Financial for the old Copiers”.
[47] The second defendant found it suspicious that the plaintiff’s witnesses had repeatedly insisted that the value of the Copiers was $231,500. Mr Goh had insisted that the price of the Copiers was this sum whilst Danny Lee maintained under cross-examination that the plaintiff’s management never asked about the value of the Copiers and even claimed that the plaintiff did not know the exact worth of the same. The second defendant contended that as the owner of the equipment, the plaintiff should be concerned about the value of the Copiers if the transaction it was entering into with the firm was a true and straightforward lease. The fact that the plaintiff claimed not to be bothered by the value of the Copiers was startling since this was the only collateral that it had. In the second defendant’s submission, the fact that the plaintiff was not concerned about the Copiers was telling because what it showed was that the plaintiff had in mind a disguised transaction where the firm would be “lent” money up to certain limit to ostensibly enjoy the use of the Copiers but in effect to also repay the outstanding sum owing to the earlier financier.
[48] The second defendant drew my attention to the case of Orix Capital Ltd v Symrise Holding Pte Ltd [2008] SGHC 79 where the same plaintiff had sued the defendant Symrise Holding Pte Ltd (“Symrise”) for breach of an agreement to lease nine copiers. The third defendant in that case was a supplier of office equipment who sold the plaintiff the nine copiers. Symrise denied the claim on the basis that not a single copier had been delivered to it and this was a leasing scam perpetuated by the plaintiff and the supplier. Further, an inflated price of $919,794.50 was paid for the nine copiers which were worth only $18,000 each. The plaintiff’s claim against Symrise was dismissed. The judge found that the leases in question were not genuine leases. He also found that the perpetrator of the scam was the supplier and that there were enough unusual features in the transaction to have put the plaintiff on enquiry.
[49] The second defendant submitted that the plaintiff knew that the deal that Canon was bringing to it was not a straightforward transaction. The total sum repayable by the firm under the Lease was $304,500. This was a huge premium over and above the true value of the Copiers which Dora Loh had testified were sold for about $65,025.66. The plaintiff’s management imposed a credit limit of $250,000 for the transaction with the firm and this showed that it was fully aware of the true nature and value of the transaction. As a financing company specialising office equipment, the plaintiff would have known the market value of the Copiers and therefore must have known that it was involved in a sham and not a true lease of just copiers. The second defendant did not know any of these matters and the transaction was unconscionable insofar as he was concerned. His evidence was that all he was told was that he had to sign the Lease. He did so without knowing the true position and the terms of repayment which meant that he would become liable to pay a sum of $304,500 over six years for two machines worth around $65,000 were clearly harsh, unfair and oppressive.
[50] From the above submissions, it can be seen that there are two arguments in this part of the second defendant’s case. The first is that the transaction was a sham and not binding on him. The second was that in any case the terms of the transaction were harsh, unfair and oppressive and he should not be obliged to pay them.
[51] Dealing first with the sham transaction argument, I must observe that the facts in this case cannot be equated with those in the case that the plaintiff brought against Symrise. In the latter case, the office equipment concerned was never leased to Symrise and the transaction was completely bogus. In this case, the firm was supplied with the Copiers and had the use of them right up to April 2007. So here, there was an underlying commercial purpose for the transaction and that purpose was achieved.
[52] I must admit that during the course of the trial it did concern me that whilst the market value of the Copiers was around the $65,000 mark, the Lease obliged the lessees to pay a total of $304,500 for it. Upon considering the plaintiff’s submissions and the pertinent facts relating to the transaction, however, I have come to the conclusion that although the repayment obligation was disproportionate to the value of the Copiers considered in isolation, this did not render the transaction a sham.
[53] In TKM (Singapore) Pte Ltd v Export Credit Insurance Corporation of Singapore Ltd [1993] 1 SLR 1041 (“TKM Singapore”) at 1056, a sham transaction was defined as one which is “good in form but false in fact”. In Yorkshire Railway Wagon Co v Maclure (1882) 21 Ch D 309 (“Yorkshire Railway”), the Cornwall Minerals Railway Co (“the railway company”) needed to raise £30,000 and approached the plaintiffs (“the wagon company”) to loan them that sum. If the borrowing had materialised it would have infringed a statutory limit on borrowing imposed on the railway company. The railway company eventually agreed with the wagon company to sell part of its rolling stock to the wagon company and at the same time entered into a hire-purchase agreement with the wagon company in respect of the rolling stock sold. The directors of the railway company gave personal guarantees for the due payment of the hire. Upon default in payment of the hire by the railway company, the wagon company sued the railway company and the guarantors who argued that the sale and hire-purchase transactions were a sham to conceal a borrowing which was illegal.
[54] The Court of Appeal upheld the sale and hire-purchase transactions as real transactions and found that they were not a cloak for another transaction. In the words of Lindley LJ at p 317:
Lindley LJ had also observed at p 318:
[55] In the Yorkshire Railway case, notwithstanding that:
[56] In TKM Singapore, the parties entered into an agency agreement which one party subsequently claimed was a sham. GP Selvam JC followed the Yorkshire Railway case and formulated the test to ascertain whether a transaction is a sham: whether the documents were intended to create legal relationships and whether the parties did actually act according to the apparent purpose and tenor of the documents.
[57] Applying the test to the case before him, Selvam JC upheld the agency agreement and said at p 1058:
[58] Applying the test formulated in the TKM Singapore case to determine whether the Lease here is a sham transaction, I must therefore ascertain whether, first, the Lease was intended to create a legal relationship; and secondly, whether the parties acted according to the apparent purpose and tenor of the Lease.
[59] I agree with the plaintiff’s submission that the Lease was intended to and did create a legal relationship between the plaintiff and the lessees named therein under which both parties had rights and obligations. There is no evidence to support any other finding.
[60] The “purpose and tenor” of the Lease was the leasing of the Copiers by the plaintiff to the firm for which the firm had agreed to pay rental. The parties acted according to this purpose and tenor – the plaintiff purchased the Copiers from Canon at the price of $231,500 for the specific purpose of leasing the same to the firm, the Copiers were delivered to the firm and the firm paid the rental as set out in the Lease. One consequence of entering into the Lease was that the pre-existing indebtedness to Newcourt was fully settled by Canon. Applying the test in the TKM Singapore case, that consequence would not be relevant in determining whether the Lease was a sham transaction. The payment to Newcourt was incidental to the Lease. The plaintiff did not agree to and did not pay Newcourt. The agreement regarding the payment to Newcourt was between Canon and the firm. If for any reason Canon had failed to pay Newcourt, any recourse that the partners of the firm might have had would have been against Canon and not against the plaintiff. The plaintiff had no legal obligation to anyone to pay Newcourt and the plaintiff’s only relationship with the firm arose when the Lease was signed.
[61] Further, it is a necessary corollary to a sham transaction that the parties to the sham intended to practice deception or some form of covert arrangement. In the present case, each party – the plaintiff, the firm (in the person of LCP) and Canon – knew the terms of each transaction between them and willingly entered into it. None of the parties had any intention to deceive, no one was deceived and the Lease was not designed to be a “mere blind or cloak for something behind”.
[62] As noted above, the second defendant made much of the fact that the plaintiff had not disclosed its credit approval document. He claimed that that document showed the plaintiff’s knowledge that the price of $231,500 included a sum needed to refinance the outstanding debt to Newcourt and hence showed that the plaintiff knew the “sham” nature of the transaction. I do not agree. Even though the plaintiff might have known that Canon was selling the Copiers to it at $231,500 because Canon was going to settle the firm’s debt, that knowledge did not transform the Lease into a sham transaction. There was no evidence that the plaintiff in fact knew who the other financier was. Dora Loh maintained that she did not give such information to the plaintiff nor did she inform the plaintiff of the breakdown of the price of $231,500. The plaintiff must have known that this price was much above the market value of the Copiers but it was willing to pay the same to Canon because there was an intended lessee which was prepared to lease the Copiers for six years at a total rental of $304,500.
[63] The plaintiff submitted that it was a leasing company and its business was to buy machines to lease out. If there was no intended lessee, the plaintiff would not purchase any machines. The value of the Copiers as viewed from the plaintiff’s perspective it said must have direct reference to the total rental that the intended lessee was prepared to pay. It was not correct to equate “value” with “retail price”. The main component for a leasing company in determining value would be the rate of return and the main criterion for determining whether to enter into leasing arrangements with a particular individual or company was creditworthiness. This appeared to me to be a reasonable submission, justifying the plaintiff paying more than the retail price of the equipment before leasing out the same as long as the intended lessee was not deceived in any way as to the value of this equipment and knew what it was paying for.
[64] In this case, the evidence available showed that LCP and Susanna Soh were fully aware of what the transaction entailed and were agreeable to it. In July 2005, the firm was not using two of the Newcourt copiers and was seeking to manage its cash flow. LCP’s main concern at that time appeared to be cash flow. The firm was aware that if it returned those copiers to Newcourt, it would be liable to pay Newcourt a substantial termination sum. Further, if the firm continued with the arrangement with Newcourt, the monthly rental of $1,800 would be increased to $2,000 per month in the not too distant future. The plaintiff’s offer meant being able to maintain the monthly rental at the $1,800 level for a further 24 months. I accept that Canon’s proposal appeared attractive to the firm (although it might not have been so to persons using a more long term perspective) because it met the following requirements of the firm namely:
(a) it would have two new copiers as opposed to four older ones;
(b) the current rental rate would be maintained for at least two years; and
(c) the liability to pay Newcourt the termination sum would be settled by Canon.
[65] The plaintiff submitted that there was benefit to the firm in entering into the Lease, at least in the short term. Susanna Soh acknowledged that she considered Canon’s proposal attractive. Furthermore, all parties had equal bargaining power; all parties had a choice. No one forced the firm into the Lease. If the proposal from Canon was not attractive to the firm, it could easily have been rejected and the firm could have carried on with the Newcourt copiers and paid Newcourt the monthly rental due to it. The Sales Agreement and the Lease which follows it were in accordance with the intentions of the parties and the lease terms were as stated in the Sales Agreement.
[66] Moving to the allegation that the Lease was harsh and oppressive, the second defendant relied on Multiservice Bookbinding v Marden [1979] 1 Ch 84 (“Multiservice”), where the plaintiff company and its two sureties executed a mortgage over the business premises as security for a loan from the defendant. There was a clause in the mortgage which stated that any sum payable by way of principal or interest was to be increased or decreased proportionately if at the close of business on the day preceding payment day, the rate of exchange between Sterling and the Swiss Franc was to vary by more than three percent. On the facts, the plaintiff there failed, but what the second defendant here relied on were the following observations of the judge, Browne-Wilkinson J. He said at p 110:
[67] Further, Browne-Wilkinson J went on to say at p 111:
[68] The second defendant submitted that it was unfair and oppressive of the plaintiff to take advantage of a situation in which the firm was facing a financial crunch and was attempting to get out of that position as evidently was the case here. The surreptitious manner in which Mr Goh sought to hide the credit approval document, the evidence in chief of all the plaintiff’s witnesses which completely glossed over any knowledge of the true value of the Copiers and Mr Goh’s and Danny Lee’s evasiveness and reluctance to acknowledge that they knew the market value of the Copiers combined with the firm’s precarious situation must, the second defendant said, lead to the irresistible inference that the circumstances were such that it was an unfair, oppressive and unconscionable transaction that the plaintiff had foisted upon the second defendant and therefore it should be rendered null and void.
[69] I must reject the above submissions. There was no evidence at all that the plaintiff knew about the firm’s “precarious” financial position. The firm was not forced in any way to enter into the transaction and the transaction was structured in the way that it was because of the firm’s request that the monthly rentals be reduced to $1,800 for the first two years. The transaction enabled the firm to get new machines and also eased its cash flow situation. The plaintiff never met with the second defendant and had no idea that he was not fully aware of the firm’s situation. As far as the plaintiff was concerned, the second defendant was a partner of the firm and should have known its situation and been able to assess whether the Lease was beneficial for the firm or not. The second defendant signed the Lease and did not at any time communicate his ignorance to the plaintiff. The plaintiff had no responsibility to ensure that the second defendant, a qualified lawyer in private practice for many years, understood the transaction. In fact, the second defendant was even more qualified than the normal lessee to know what he was getting into in signing the Lease. His protestations of the plaintiff acting unfairly and oppressively ring hollow. The transaction was taken to the plaintiff by Canon. There was no direct dealing between the firm and the plaintiff and there was nothing to indicate that the plaintiff had acted in the “morally reprehensible manner” that would be required for me to find that the bargain was unfair and unconscionable.
Is the Lease void for being contrary to the Moneylenders Act?
[70] The Moneylenders Act (Cap 188, 1985 Rev Ed) (“the MLA”) provides that any person who lends money in consideration of a larger sum being repaid shall be presumed, until the contrary is proved, to be a moneylender (see s 3). The second defendant argued that the plaintiff was a moneylender. He accepted that there was no direct loan by the plaintiff to the firm. Rather, he said, the money was paid by the plaintiff to Canon who in turn made repayment of the sum outstanding from the firm to Newcourt. In effect, however, this meant that the plaintiff was repaying the sum due from the firm to Newcourt. Canon was just the entity through which the payment was made and the plaintiff stood in the shoes of Newcourt and acted as the financier for the Copiers. The plaintiff had therefore advanced moneys to repay the outstanding indebtedness to Newcourt as well as to finance the lease of the Copiers. The actual value of the Copiers was $65,000 but the amount payable by the firm under the Lease was $304,500 in total and this reflected that the plaintiff had lent a sum in consideration of a greater sum being repaid. Further, the excess sum to be repaid was exorbitant and akin to exorbitant interest. The transaction was a disguised moneylending transaction and should be avoided as being contravention of the MLA. This was an argument that was echoed by the third defendant.
[71] The plaintiff’s response was that the essence of a moneylending transaction is a loan of money and if there is no loan there can be no moneylending. It cited the case of City Hardware Pte Ltd v Kenrich Electronics Pte Ltd [2005] 1 SLR 733 (“City Hardware”) in support.
[72] In City Hardware, the plaintiff and the defendant entered into a trading relationship whereby the defendant would order goods from suppliers in the name of the plaintiff. The goods were delivered by the suppliers directly to the defendant. The plaintiff paid for the goods using its banking facilities and then sold the goods to the defendant at a mark-up. The defendant sought to avoid the transactions as constituting moneylending in contravention of the MLA. The defendant did not have money to pay for the goods which it wanted to buy. The defendant thus got the plaintiff to buy and pay for the goods and on-sell them to the defendant with a mark-up.
[73] VK Rajah J held that the transactions were not moneylending. Each transaction involved the purchase of real goods by the defendant. The transactions were not structured or intentionally disguised to evade the MLA. The highest mark-up tagged on by the plaintiff was about nine percent more than the original price, which would have included a reasonable profit after taking into account the charges and interest that the plaintiff had to pay its bank. It should be noted that this decision was reached in a situation where one party had available bank facilities which the other party wanted to use and the parties had discussed this and agreed to an arrangement where there would be “loan” of one party’s credit facilities to the other with the “lender” receiving a gain in terms of commission or profit margin.
[74] The MLA was also considered in the subsequent Court of Appeal case of Donald McArthy Trading Pte Ltd v Pankaj s/o Dhirajlal [2007] 2 SLR 321. The Court of Appeal approved the decision in City Hardware. It made the following pertinent observation at [9]:
[75] In the present case, the second defendant admitted in cross-examination that the firm wanted to upgrade its copiers and therefore entered into the Sales Agreement with Canon. He further agreed that the firm had agreed with Canon to acquire the Copiers by lease and then admitted that the genesis of the Lease was the desire of the firm to upgrade the Copiers. It was apparent to me that there was never any intention on the part of the firm to borrow money from the plaintiff. Nor did the plaintiff intend to lend money to the firm. The firm wanted new copiers and it wanted to regulate its outlay on rental for a further period. Canon which was interested in selling the Copiers proposed a scheme whereby both its interests and the firm’s interests could be served. Canon then agreed to sell the Copiers to the plaintiff at an agreed price for the purpose of leasing the Copiers to the firm and the plaintiff entered into the Lease with the firm. The Copiers were delivered and used by the firm. Canon then paid off Newcourt.
[76] In my judgment, the above transaction was not a moneylending transaction. It was a commercial decision made by commercial parties at arm’s length. There were benefits to the firm from accepting Canon’s proposal in relation to the acquisition of the Copiers and although on the face of it, it may have appeared that the firm was going to pay an exorbitant price for the Copiers, this was not in fact the case bearing in mind that there was already a liability on the second defendant who was a partner of the firm at the time of the Newcourt transactions to pay Newcourt rental for the Newcourt copiers. Even if the contract was not terminated, the second defendant would have remained liable to pay Newcourt rental. In entering into the Lease, he was not, therefore, taking on an entirely new liability. The plaintiff was in the business of leasing out office equipment and the Lease was part and parcel of its usual business and could not be considered a moneylending transaction.
Was the Lease vitiated by misrepresentations made to the second defendant?
[77] The second defendant submitted that he was induced to enter the Lease by reason of misrepresentation. His evidence was that the first time he came to know of the Sales Agreement was in 2007 after LCP’s death. It was only after he read that document that he came to know of the obligation to Newcourt. The plaintiff had not revealed to him in July 2004, at the time he signed the Lease, that there was another debt obligation due to Newcourt which had to be settled. He asserted that the plaintiff’s management procured the second defendant’s signature to the Lease through Canon’s Dora Loh and the firm’s Susanna Loh and LCP without disclosing those material facts and thereby led him to believe that he was signing for the lease of the Copiers only and for nothing else.
[78] In the second defendant’s submission, the plaintiff was under a duty of good faith to disclose that the $231,500 was being paid in reality not only to purchase the Copiers but also to settle the Newcourt obligation. Since the plaintiff did not make such disclosure, it was in breach of duty and could not rely on the second defendant’s signature of the Lease.
[79] I have no hesitation in rejecting those arguments. The second defendant has not satisfied me that there was a legal duty on the part of the plaintiff to inform him that there was a sum due and payable to Newcourt. To the outside world, the second defendant was a partner of the firm and as such could be reasonably assumed to be familiar with the firm’s affairs and its obligations. It was not for the plaintiff which was a third party trying to conduct business with the firm to tell the second defendant that if the contract with Newcourt was to be terminated, there would be a termination sum payable to Newcourt. Secondly, the Sales Agreement stated that Canon would make payment to Newcourt and it was signed by Susanna Soh as the office manager after LCP accepted Canon’s proposal. The second defendant may have been unaware of this but the persons who had a duty to inform him of it would have been within the firm rather than the plaintiff.
Was the Lease vitiated by reason of undue inference operating on the second defendant or unconscionable dealing?
[81] The second defendant’s position was that he had initially resisted signing when he noted that the sum to be repaid under the Lease was a hefty one. Only the plaintiff would have benefited from a second signatory and Susanna Soh and LCP were its instruments for arranging for the second defendant to be the second signatory. He further contended that he had been subjected to pressure from LCP and signed the Lease because of undue influence.
[82] To establish the undue influence, the second defendant asserted that his father and employer had admonished him that it was not his decision to make by withholding his signature and that the situation in the firm was such that litigation lawyers were threatening to resign unless there were better copiers for their workload. LCP further told him that the document was one that was standard and originating from the plaintiff who wanted it returned immediately. In these circumstances, the second defendant averred, he had no alternative but to sign the Lease. In his mind, had he not obliged, his employer would have seen the imminent departure of one or more key litigation lawyers. Such loss would have seriously affected the firm. Since there had been several other departures leading to the decline of the firm in terms of numbers and earnings, he was concerned that another departure would be the final straw. The second defendant was concerned for his father who had a persistent cough and, as a dutiful son and employee, was left with no choice but to sign the document.
[83] The second defendant further submitted that it was immaterial that the plaintiff and Canon did not know exactly what was happening within the firm. It was sufficient to draw an appropriate inference that the plaintiff required a second signature on the Lease and Dora Loh knew this agreement and therefore through her and Susanna Soh, the plaintiff arranged for and was content for LCP to be its instrument to exert pressure on the second defendant to sign the Lease.
[84] There is, in my judgment, no merit in the above submissions. The evidence was not sufficient to establish undue influence, duress or pressure. It must be remembered that:
(a) the second defendant was a trained and qualified lawyer at the time he signed the Lease;
(b) the second defendant had considerable work experience by the time he signed the Lease, having worked at a lawyer from 1993 before joining the firm in 1997;
(c) the second defendant was 41 years old at the time he signed the Lease and, given his professional training and work experience, he was a mature adult able to exercise his own will; and
(d) when the third defendant asked the second defendant at LCP’s wake why he had signed the Lease, the second defendant did not mention undue influence. About a month later, when he was thinking of possible defences, he did not mention undue influence either. He was more concerned with arguing that the firm was a sole proprietorship of LCP.
[85] I do not doubt that the second defendant was a concerned and dutiful son to LCP. This cannot by itself establish undue influence. By the time a man reaches 41, he should be able to think for himself and hold on to a position that he believes to be correct even in the face of disapproval from his parent. All the more in the case of a man who has been professionally trained and working as a legal adviser for many years. The facts relied on to establish undue influence were weak and unconvincing. I agree with the plaintiff that the defence of undue influence is clearly unsustainable.
Conclusion on the position of the second defendant
[86] Having considered the various defences put forward by the second defendant, I find that none of them affords him a valid defence to the action. Accordingly, as against the second defendant, there shall be judgment for the plaintiff for the following:
(a) the sum of $298,276.47;
(b) interest on the sum of $257,460 at 0.065% per day from 24 August 2007 until date of payment;
(c) costs on an indemnity basis pursuant to cl 18(b) of the Lease.
The case of the third defendant
[87] The third defendant’s pleaded case is as follows:
(a) the Lease which described the “Lessee” as LCP and the second and third defendants, did not bind her since she had no knowledge of and was not a signatory to the same. The third defendant only learnt of the Lease when a letter of demand dated 18 January 2007 was received by her. She had stopped working in and left the firm on 17 July 2005;
(b) the Lease was unusual and was not in the firm’s ordinary course of business in that it involved the settlement of an existing lease contract between the firm and Newcourt;
(c) the Lease was a sham transaction and was null and void; and
(d) the Lease was terminated by the plaintiff on or about 7 July 2005 and was allegedly “reinstated” sometime in August 2005 and since the third defendant had left the firm before the reinstatement of the Lease, she was not bound by the reinstated lease.
[88] As far as the pleading that the Lease was a sham transaction is concerned, I have dealt with that in [51] to [65] above and need not repeat those arguments and conclusions here. As for the other averments, they broadly raise the issue of whether the third defendant was a party to either the original Lease or the August Agreement.
Was the third defendant bound by the Lease?
[89] There are several sub-issues arising under this heading. They are as follows:
(a) on the true construction of the Lease, was it intended to be made with the third defendant as an individual so that she would only be liable thereunder if she signed it?
(b) if the Lease was with the partnership of the firm, was the third defendant a partner?
(c) was there any representation on which the plaintiff relied that the third defendant was a partner?
(d) if the third defendant was a partner and was represented as such to the plaintiff, would s 5 of the Partnership Act apply to bind her to a contract of which she was ignorant?
[90] I accept the third defendant’s evidence that she did not know about the execution of the Lease in August 2004 and only learnt of it in January 2007. Though the second defendant stated that in December 2006 the third defendant had asked him why he had signed the Lease, he must have made a mistake as to the date of her query since it was clear from her e-mail to him of 20 January 2007 that she knew nothing about the Lease until that day itself when she had received the letter of demand from the plaintiff’s solicitors.
[91] The third defendant submitted that the Lease could not be an agreement between the plaintiff and herself because first she did not know of its existence until January 2007 and secondly there was no evident intention that she was to be bound by the Lease as a “partner” of the firm. While LCP and the second defendant executed the Lease as “partners”, this designation was not ascribed to the third defendant under the description of the lessee in the Schedule of the Lease. That schedule stated against the name of the lessee the three names of LCP, the second and third defendants followed by the description “Practising under firm of Chor Pee & Partners”. There was no specific description of the third defendant as a partner and the execution portion of the Lease showed that it was signed by LCP and the second defendant whose respective designations were stated as “partners” of the firm, but “for and on behalf of the Lessee”. In this regard, she submitted that any contention that LCP and/or the second defendant had intended to represent that the third defendant was a partner could not be substantiated on a true construction of the Lease.
[92] The third defendant contended that on a true construction of the Lease, it was intended to be an agreement between the plaintiff and the three persons named as “Lessee”. The evidence pointed to the fact that the plaintiff was quite happy to contract only with LCP a person who the plaintiff’s senior management was comfortable with. Mr Goh said LCP was known to the plaintiff’s chief executive officer as “a very long veteran” and that he considered that LCP’s “business was a very strong business”. The plaintiff was, it was submitted, even prepared to disregard the third defendant’s history of bankruptcy proceedings because of its reliance on LCP’s reputation and business. Furthermore, the plaintiff was prepared to have only LCP and the second defendant sign as “Lessee”. The third defendant’s signature was neither required nor sought and the irresistible conclusion must be that the plaintiff was prepared to contract with only LCP and his son. In any event, if there was any ambiguity in the construction of the Lease as to whether the third defendant was to be a contracting party, as the plaintiff drafted the Lease, the contra proferentum rule ought to be applied in the third defendant’s favour.
[93] The plaintiff submitted that the Lease was entered into between the plaintiff and the partnership of Chor Pee & Partners, in other words, with all the partners of the firm. The third defendant was bound by the Lease because she was a partner of the firm and also because she was named as a partner in the Lease. If it was the plaintiff’s intention that the Lease was to be between the plaintiff and the three persons named as “Lessee”, there would have been no need to mention “Chor Pee & Partners” in the Lease. It would simply have stated the names of those three persons. The plaintiff was prepared to contract with LCP who was a senior member of the bar since the legal profession was given a high credit rating by the plaintiff. It did not follow from this, however, that the plaintiff was happy to contract with LCP alone or that it did contract with LCP alone. As a partner of the firm, the third defendant was bound by the Lease notwithstanding that she did not sign it.
[94] I accept the plaintiff’s submission that the Lease was between the plaintiff and the ostensible partners of the firm as partners of the firm. I do not think there was any ambiguity in the way that the lessee was described. All three names were set out in the Lease and the relationship of the three persons to the firm was specified. As far as the execution of the document was concerned, the plaintiff had accepted that it would be signed by LCP and the second defendant as partners for “for and on behalf of the lessee”. The issue that arises is whether the third defendant was bound by that signature and this depends on the other issues discussed below.
[95] First, was she a partner of the firm? The third defendant’s submission was that she was not a partner because there was only a profit sharing agreement between her and LCP and under this agreement, it was clear that she would not have any participation in the assets and liabilities of the firm. The third defendant had testified that the original intention was that she was to be a consultant rather than a partner in the firm but this was not possible because she did not have the requisite years of practice to qualify as a consultant. Once she joined the firm, she had no voice in the administration or management of the firm or access to its accounts. All management functions were discharged by LCP.
[96] The third defendant also alleged that there was no representation to the plaintiff that she was a partner. At the outset, the plaintiff’s check with the Law Society did not shed any light on whether she was a partner of the firm. There was an e-mail dated 12 July 2004 from Dora Loh to Danny Lee in which Dora Loh gave the latter the names and NRIC numbers of LCP, the second and third defendants as being those of the three partners of the firm. Dora Loh testified that she had obtained this information from Susanna Soh as Danny Lee required it. The third defendant submitted that there was no evidence of Dora Loh being authorised by any of LCP, the second or third defendants to communicate this representation that they were the three partners of the firm to the plaintiff. Susanna Soh had given evidence that her main duty as office manager was to oversee the procurement of the office equipment for the firm. The third defendant therefore contended that given this role, Susanna Soh was in no position to provide accurate information on the status of the third defendant in the firm to Dora Loh and the latter was reckless to have accepted such information from Susanna Soh.
[97] The evidence showed a situation in which the third defendant, although she had no interest in the assets of the firm and was only entitled to participate in the fees earned from certain categories of files, basically those that she handled, was held out to the world as a partner. The Law Society’s records reflected her as a partner of the firm and she was also described as “Partner” in the Profit Sharing Agreement which set out the terms of her practice with the firm. This agreement also provided for LCP to indemnify her against any claims by third party brought against the firm as a result of transactions or acts of lawyers arising from the practice of the firm. Further, the third defendant’s own evidence was that in her discussions with LCP, she had agreed to be known as a partner to the outside world. The questions and answers were as follows:
Having consented to be held out as a partner, the third defendant should have been aware that she would become liable for the transactions of the firm in its usual business. It was for this reason that she was given the indemnity against third party liabilities reflected in the Profit Sharing Agreement.

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Orix Capital Ltd v Personal Representative(s) of the Estate of Lim Chor Pee (deceased) and Others

Laws this judgment relies on

Grounds of decision

Introduction

Undisputed facts

LESSEE

Name

The plaintiff’s claim and the defences

The case of the second defendant

Is the plaintiff’s claim made pursuant to the Lease or to the August Agreement?

Who were the parties to the new contract?

Was the Lease (and consequently the new contract) a sham transaction that was void?

Is the Lease void for being contrary to the Moneylenders Act?

Was the Lease vitiated by misrepresentations made to the second defendant?

Was the Lease vitiated by reason of undue inference operating on the second defendant or unconscionable dealing?

Conclusion on the position of the second defendant

The case of the third defendant

Was the third defendant bound by the Lease?