26 April, 2018
In Mann Holdings Pte Ltd and another v Ung Yoke Hong [2018] SGHC 69, the High Court exercised its powers under section 116(g) of the Evidence Act to draw an adverse inference against a party who had failed to call crucial witnesses to testify at trial. Senior Judge Lai Siu Chiu held that such adverse inferences must be drawn in light of the defendant’s evidence on key events at which the witnesses were present or involved in.
Shook Lin & Bok LLP (Partner Joseph Tay, and Associates Chng Yan and Daryl Fong) acted successfully for the plaintiffs in the case.
Facts
In the above case, the plaintiffs, Mann Holdings Pte Ltd and Chew Ghim Bok, claimed for the return of a RM4 million loan they had made to the defendant, Ung Yoke Hong, pursuant to a loan agreement signed between the parties (the “Loan Agreement”).
The defendant contended that the funds were received not as a loan but as a non-refundable deposit for the acquisition of shares in Metahub Industries Sdn Bhd (“Metahub”), a company which the defendant was the majority shareholder and managing director of. The defendant relied on a draft sale and purchase agreement which had been the subject of negotiations between the defendant and a Singapore investment company Enviro Investments Pte Ltd (which the plaintiffs were shareholders in) (“Enviro”).
In the course of the trial, the defendant asserted that one Kevin Chee Ho Chun (“Chee”), a director and 1% shareholder of Metahub, was heavily involved in the conduct of negotiations for the proposed acquisition on behalf of Metahub, and had drafted the initial sale and purchase agreement as well as its numerous amended versions.
In line with the defendant’s case that the funds were received as a non-refundable deposit, the defendant contended that the Loan Agreement was only signed to acknowledge the receipt of the said deposit. In support of this, the defendant asserted that when he signed the Loan Agreement at a meeting in Legoland, Johor Bahru, in the presence of one Ng Ah Hua (“Raymond”), representing Enviro, and his brother, Ung Yoke Hooi (“Wiliam”), Raymond had assured the defendant that the RM4 million was a deposit and the Loan Agreement was merely meant to be an acknowledgement of payment.
The decision
The Honourable Senior Judge Lai Siu Chiu (“Judge”) held that the defendant had failed to discharge the burden to prove that the draft sale and purchase agreement was an enforceable agreement, while the signed Loan Agreement was not to be given effect. On the other hand, the plaintiffs had proven their case that the RM4million transferred to the defendant was a loan and not a non-refundable deposit.
In coming to her decision, the Judge cited Foo Jong Long Dennis v Ang Yee Lian Lawrence and another [2016] 2 SLR 287, for the proposition that as a starting point, in matters of commerce, there is a rebuttable presumption that the parties intend to create legal relations in any commercial arrangement that they propose. The onus on a party who asserts that a commercial arrangement is not to have legal effect is a heavy one.
The Judge also drew a parallel with the case of Pender Development Pte Ltd and another v Chesney Real Estate Group LLP and another [2009] 3 SLR(R) 1063, where the defendant alleged that an executed loan agreement between the parties for a loan of $8.284 million was not enforceable because the sum was not really a loan but a deposit under a broader agreement. In that case, the judge held that if indeed the monies extended were a deposit, the defendant would have refuted the plaintiff’s claim rigorously. Instead, the defendant chose not to respond. Similarly, in the present case, if there was indeed no loan, the defendant should have responded to the emails from Enviro to refute that the sum advanced to him was a loan. However, he did not do so. The defendant’s case was further undermined by the fact that he took steps to comply with the terms of the Loan Agreement by providing security as stipulated in the agreement.
In her judgment, the Judge took notice of the defendant’s unsatisfactory testimony as a whole. The Judge observed that the defendant’s “answers in cross-examination were patently untrue” and he “often took great liberties with the truth, sometimes to an absurd extent”. The defendant’s unsatisfactory responses to the Court’s questions included those relating to his failure to call either Chee or William as his witnesses.
Chee was a crucial witness for the defendant’s defence, which was entirely based on the draft sale and purchase agreement which Chee had prepared. When questioned by the Judge, the defendant’s explanations that he had requested both Chee and William to testify, but they both could not attend, were unsatisfactory. His explanation was further discredited by Chee’s attendance in Court in the public gallery on the first day of trial.
The Judge held that even if the Court did not draw an adverse inference against the defendant for not calling Chee to testify, such an adverse inference must be and was drawn against the defendant for William’s absence from Court, pursuant to section 116(g) of the Evidence Act, in light of the defendant’s evidence on the meeting at Legoland at which the Loan Agreement was signed, which was attended only by the defendant, William and Raymond. Section 116(g) of the Evidence Act allows the Court to presume that evidence which could be and is not produced, would if produced, be unfavourable to the person who withholds it.
Conclusion
This decision serves as a reminder that the Court will not hesitate to invoke its powers under the Evidence Act to draw adverse inferences against a party who fails to call crucial witnesses to testify.
For further information, please contact:
Joseph Tay , Partner, Shook Lin & Bok
joseph.tay@shooklin.com
