EVIDENCE REQUIRED TO PROVE THE EXISTENCE OF A LOAN
In Lazarus Century Construction Pte Ltd v SLH Development Pte Ltd [2022] SGHC 283, Kwek Mean Luck J considered the nature of documentary evidence required for a party to prove that it provided a loan to another.
Facts. In this matter in the High Court of Singapore, the plaintiff, Lazarus Century Construction Pte Ltd (“Lazarus”) claimed that it made a loan of $1.398m (the “Plaintiff’s Loan”) to the defendant, SLH Development Pte Ltd (“SLH”), and sought return of the Loan. While SLH did receive the sum of $1.398m by way of ten cheques from September 2015 to January 2017, SLH denied that the $1.398m it received was a loan from Lazarus. Instead, SLH asserted that the $1.398m it received from Lazarus was for the repayment of previous loans extended from SLH to Lazarus.
In September 2015, Lazarus commenced work as the main contractor for a project, for which SLH was the developer. Lazarus claimed that the Plaintiff’s Loan was entered into between a director of Lazarus, James, and the director of SLH, Chan.
Lazarus’s case was that Chan promised James that Chan would award two other projects to Lazarus and waive the requirement for Lazarus to provide a performance bond for the project and the two other projects, if Lazarus could grant interest-free loans totaling around $1.5m to SLH from time to time, with the defendant repaying the same upon the completion of the projects.
A General Manager of Lazarus testified that Chan promised to repay the Plaintiff’s Loan upon the confirmation of final accounts. The statement of final accounts was signed by Chan on 12 April 2018.
Evidence. As a starting point, Lazarus did not call any witnesses who were party to the alleged verbal agreement, nor was Lazarus able to provide any written loan agreement or contemporary correspondence to evidence the loan (at [7]).
Instead, to prove the existence of the Plaintiff’s Loan, Lazarus relied on ten payment vouchers signed by another director of Lazarus, Chua, which described a loan from Lazarus to SLH for certain amounts. These payment vouchers were dated between 2015 and 2016 (at [8]).
However, Kwek Mean Luck J found that “these payment vouchers have limited value as documentary evidence, as none of them have been counter-signed by the defendant” (at [9]). As the section in the payment vouchers for SLH’s acknowledgement of receipt of the payment vouchers was blank, Kwek Mean Luck J considered that “[s]uch payment vouchers cannot be said to be any form of acknowledgement by the defendant or Chan of the Loan. Neither is there any good explanation why such payment vouchers were prepared but not countersigned” (at [9]). Further, Chua conceded during cross-examination that there was no way to independently verify that the payment vouchers were created on the relevant dates because he did not get Chan to sign them. Therefore, Kwek Mean Luck J held that the ten payment vouchers did not, without more, assist in proving Lazarus’ case in relation to the existence of the Plaintiff’s Loan.
Contradictions. Kwek Mean Luck J also considered that there were three sets of written correspondence from Lazarus to SLH that severely undercut Lazarus’ case.
The first set of written correspondence was an email from Lazarus to SLH on 17 November 2016, in which a Statement of Account was attached. That Statement of Account detailed ten separate payments from the plaintiff to the defendant amounting to $1.478m which were characterised as repayments to SLH for advance payments from SLH. While Lazars submitted that the Statement of Account was only a draft for discussion, there was nothing in email or the Statement of Account itself that stated that it was only a draft. In fact, the Statement of Account was signed on each page, dated 17 November 2016, and stamped with Lazarus’ company stamp. Kwek Mean Luck J considered that this Statement of Account in fact supported SLH’s case that it was Lazarus that had taken a loan from SLH (at [17]).
The second set of written correspondence was another email from Lazarus to SLH dated 15 February 2017 enclosing a revised Statement of Account, which detailed ten separate repayments from Lazarus to SLH, amounting to a reduced aggregate amount of $1.398m. While the Statement of Account dated 15 February 2017 was substantially similar to the Statement of Account on 17 November 2016. Kwek Mean Luck J considered that the two Statements of Account objectively indicated that Lazarus made the payments to SLH as repayments for loans from SLH, and not as part of the Plaintiff’s Loan (at [31]).
The third set of written correspondence was an email and letter that James wrote to Chan on 21 July 2017. James wrote to Chan in an email stating, amongst other things, that “[r]egarding the repayment, the money will be deducted from the claim”. This email enclosed a letter from James to Chan, in which James requested for a $50,000 loan from Mr Chan to assist Lazarus through financial difficulties. Kwek Mean Luck J considered that it was “puzzling why James would ask for a loan of $50,000 from Chan to pay the plaintiff’s suppliers for the Project, if indeed the defendant was then owing the Plaintiff $1.389m” (at [33]) and “[t]hat James instead asked for a loan of $50,000 from Chan, is in fact contrary to this and reinforces that there was no Loan from the plaintiff to the defendant” (at [34]).
Decision. Based on the above, Kwek Mean Luck J held that there was no documentary evidence from Lazarus that supported the existence of the Plaintiff’s Loan, and on the contrary, the documentary evidence from Lazarus showed that Lazarus took a loan from SLH and that the payments for $1.398m were repayments from Lazarus for advances made by SLH (at [37]).
On this basis, Kwek Mean Luck J dismissed Lazarus’ claim.
Conclusion. The key takeaway from the decision in Lazarus Century Construction Pte Ltd v SLH Development Pte Ltd [2022] SGHC 283 is for parties to ensure that any loan extended to another party is properly documented. This could be by way of, for example, payment orders signed by both parties at the time of the loan, or by way of correspondence to record the loan that was entered into as well as the terms of the loan.
In this regard, when it comes to payment vouchers, it is important to note that any such documentation should be signed by both parties, seeing as the High Court in this case said that the lack of a counter-signature from the defendant meant that the payment vouchers exhibited by the plaintiff had limited value as documentary evidence.
Another important lesson to be learnt is for parties to ensure that all correspondence in relation to any loan is consistent, and does not contradict the existence of a loan. If an employee has sent an email to the other party that contains words to the effect of there being no such loan, the Court can consider such an email to find that the evidence in relation to the existence of a loan is contradictory and inconsistent.
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