Belfield International v Sheagar: Guarantee, Loan Agreement & Moneylenders Act

In Suit No 876 of 2011, Belfield International (Hong Kong) Ltd (“the plaintiff”) sued Sheagar s/o T M Veloo (“the defendant”) in the High Court of Singapore on 4 October 2013, claiming US$358,480.57, interest, and costs under a guarantee for a loan extended to Blue-Sea Engineering Pte Ltd (“Blue-Sea”). The defendant argued the loan agreement was unenforceable under the Moneylenders Act 2008, Business Registration Act, and Hong Kong Money Lenders Ordinance. The court ruled in favor of the plaintiff, finding the loan agreement valid and enforceable, and dismissed the defendant's counterclaim.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Judgment for Plaintiff

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Belfield International sued Sheagar for US$358,480.57 under a guarantee for a loan to Blue-Sea. The court ruled in favor of Belfield International.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Sheagar s/o T M VelooDefendantIndividualClaim DismissedLost
Belfield International (Hong Kong) LtdPlaintiffCorporationJudgment for PlaintiffWon

3. Judges

Judge NameTitleDelivered Judgment
Lai Siu ChiuJudgeYes

4. Counsels

Counsel NameOrganization
Suresh s/o DamodaraDamodara Hazra LLP
R Dilip KumarGavan Law Practice LLC

4. Facts

  1. The plaintiff, Belfield International, is a Hong Kong company providing commodities brokerage and trade finance services.
  2. The defendant, Sheagar, was the managing director and effective owner of Blue-Sea Engineering.
  3. Blue-Sea was a wholly-owned subsidiary of Great Sea Holdings, in which the defendant held more than 99% of the shares.
  4. The plaintiff extended two loans to Blue-Sea, one for US$348,000 and another for US$358,000.
  5. The defendant provided a personal guarantee for the second loan of US$358,000.
  6. Blue-Sea experienced financial difficulties and was placed under provisional liquidation.
  7. The defendant failed to repay the second loan despite a demand from the plaintiff.

5. Formal Citations

  1. Belfield International (Hong Kong) Ltd v Sheagar s/o T M Veloo, Suit No 876 of 2011, [2013] SGHC 206

6. Timeline

DateEvent
Plaintiff incorporated
Worldwide financial crisis
Meeting between defendant and Henri regarding first loan
Plaintiff passed a directors’ resolution to grant Blue-Sea a loan of US$348,000
Henri and the defendant signed the first Loan Documents
First loan of US$348,000 transferred to Blue-Sea's bank account
Blue-Sea made the first monthly payment of interest and management fee
Defendant requested assistance in getting another loan for Blue-Sea
Blue-Sea’s board of directors passed a directors’ resolution accepting the second Loan of US$358,000
Henri and the defendant signed the second Loan Documents
Second Loan amount of US$358,000 remitted to Blue-Sea’s bank account by the plaintiff
Blue-Sea regularly paid the monthly interest and management fees for both the first and the second Loans
Defendant made arrangements to sell Blue-Sea
Blue-Sea was owned by Holcroft Finance Corporation
Defendant placed Blue-Sea under provisional liquidation
Henri sent letters of demand to Blue-Sea and the defendant for repayment of the first and second Loans
Defendant sent letters of undertaking to the plaintiff, undertaking to fulfil his obligations under the first and second Deeds of Guarantee and Indemnity
Plaintiff received a letter from Blue-Sea’s liquidator, Elango Subramaniam, asking the plaintiff to file a proof of debt by 8 November 2010
First Loan completely repaid by the defendant as guarantor
Second Loan remained outstanding and was due
Defendant paid the monthly interest and management fee for the second Loan
Defendant e-mailed Eric to request that he be allowed to pay the second Loan in instalments
Eric e-mailed the defendant a new letter of undertaking for the second Loan
Date from which interest is calculated
Judgment date

7. Legal Issues

  1. Enforceability of Guarantee
    • Outcome: The court held that the guarantee was enforceable.
    • Category: Substantive
    • Sub-Issues:
      • Validity of Deed of Guarantee and Indemnity
      • Applicability of Moneylenders Act
      • Applicability of Business Registration Act
      • Applicability of Hong Kong Money Lenders Ordinance
    • Related Cases:
      • [1929] 1 KB 470
      • [1999] 3 SLR(R) 842
      • [1958] AC 301
  2. Sham Loan Agreement
    • Outcome: The court held that the loan agreement was not a sham.
    • Category: Substantive
    • Sub-Issues:
      • Intention of parties
      • Due diligence
      • Credit appraisal
    • Related Cases:
      • [1967] 2 QB 786
      • [2010] SGHC 163
      • [1992] 2 SLR(R) 858
      • [2013] 2 SLR 715
      • [2001] 1 BCLC 98
  3. Moneylending Business
    • Outcome: The court held that the plaintiff was not carrying on the business of moneylending.
    • Category: Substantive
    • Sub-Issues:
      • System
      • Repetition
      • Continuity
    • Related Cases:
      • [1918] 1 KB 205
      • [1987] HKDCLR 17
      • [1906] 1 KB 584
      • (1908) 25 TLR 127

8. Remedies Sought

  1. Monetary Damages
  2. Interest
  3. Legal Costs

9. Cause of Actions

  • Breach of Guarantee
  • Breach of Contract

10. Practice Areas

  • Commercial Litigation

11. Industries

  • Finance

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Snook v London and West Riding Investments LtdQueen's BenchYes[1967] 2 QB 786England and WalesCited for the definition of a 'sham' document as one not intended to create the legal rights and obligations it appears to create.
Raffles Town Club Pte Ltd v Lim Eng Hock Peter and others (Tung Yu-Lien Margaret and others, third parties)High CourtYes[2010] SGHC 163SingaporeCited for the definition of a 'sham' document as one not intended to create the legal rights and obligations it appears to create.
TKM (Singapore) Pte Ltd v Export Credit Insurance Corp of Singapore LtdCourt of AppealYes[1992] 2 SLR(R) 858SingaporeCited for the definition of a sham transaction as one which is good in form but false in fact.
Chng Bee Kheng and another (executrixes and trustees of the estate of Fock Poh Kum, deceased) v Chng Eng ChyeCourt of AppealYes[2013] 2 SLR 715SingaporeCited for the principle that the person alleging a document is a sham has the burden of proving that the parties intended the document to be a pretence.
National Westminster Bank plc v Jones and othersEngland and Wales High Court (Chancery Division)Yes[2001] 1 BCLC 98England and WalesCited for the principle that there is a very strong presumption that the parties intended to be bound by the provisions of the agreements which they entered into.
Agus Anwar v Orion Oil LtdHigh CourtYes[2010] SGHC 6SingaporeCited regarding the features of the concept of a 'business' laid down in the common law.
Federal Lands Commissioner v Benfort Enterprise and another and other actionsHigh CourtYes[1997] 3 SLR(R) 895SingaporeCited for the purpose of the disability under s 17(1) of the Business Registration Act (Cap 32, 1985 Rev Ed).
Weller v DentonKing's Bench DivisionYes[1921] 3 KB 103England and WalesCited in Federal Lands Commissioner v Benfort Enterprise and another and other actions [1997] 3 SLR(R) 895 at [13]–[14] regarding the purpose of the disability under s 17(1) of the Business Registration Act (Cap 32, 1985 Rev Ed).
Foster v DriscollKing's Bench DivisionYes[1929] 1 KB 470England and WalesCited for the principle that a contract will not be enforceable as being contrary to the fundamental public policy of the forum if the contracting parties had at the outset a common intention to use the contract to commit an act in a friendly foreign country which is illegal by the law of that country.
Peh Teck Quee v Bayerische Landesbank GirozentraleCourt of AppealYes[1999] 3 SLR(R) 842SingaporeCited for explaining the principle in Foster v Driscoll.
Regazzoni v K C Sethia (1944) LtdHouse of LordsYes[1958] AC 301United KingdomCited for elaborating on the principle in Foster v Driscoll.
Hong Kong Shanghai (Shipping) Ltd v The owners of the ships or vessels “Cavalry” (Panamanian Flag) and othersHong Kong High CourtYes[1987] HKLR 287Hong KongCited for the conditions that must be satisfied for a particular loan transaction, expressly governed by a foreign law, to be caught by the Hong Kong Money Lenders Ordinance.
China Merchants Bank v Minvest International Limited and Hu Xiang Dong JamesUnknownYes[2001] HKCU 982Hong KongCited for approving and applying the conditions stated in Hong Kong Shanghai (Shipping) Ltd v The owners of the ships or vessels “Cavalry” (Panamanian Flag) and others [1987] HKLR 287.
Chow Wun Sing Winston v Yiu Chun LukCourt of AppealYesCACV 295/2006Hong KongCited for the test for determining whether a person was carrying on the business of moneylending.
Edgelow v MacElweeKing's Bench DivisionYes[1918] 1 KB 205England and WalesCited for the expression 'business' connotes some degree of system, repetition and continuity.
R v Cheng Chun-hungHong Kong District Court Law ReportsYes[1987] HKDCLR 17Hong KongCited for the expression 'business' connotes some degree of system, repetition and continuity.
Litchfield v DreyfusKing's Bench DivisionYes[1906] 1 KB 584England and WalesCited for the principle that a man who carries on a moneylending business is one who is ready and willing to lend to all and sundry.
Newman v PykeUnknownYes(1908) 25 TLR 127England and WalesCited for the factors considered in determining whether a plaintiff was in the business of moneylending.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
Moneylenders Act 2008Singapore
Business Registration ActSingapore
Business Registration ActSingapore
Business Registration ActSingapore

15. Key Terms and Keywords

15.1 Key Terms

  • Guarantee
  • Loan Agreement
  • Moneylender
  • Sham Agreement
  • Business Registration
  • Excluded Moneylender
  • Principal Debtor Clause
  • Letter of Undertaking
  • Provisional Liquidation
  • Due Diligence
  • Credit Appraisal

15.2 Keywords

  • Guarantee
  • Loan
  • Moneylender
  • Business Registration
  • Singapore
  • Hong Kong

17. Areas of Law

Area NameRelevance Score
Guarantee90
Guarantor80
Guarantees and indemnities80
Contract Law70
Banking and Finance60
Banking Law60
Moneylending Law60
Breach of Contract50
Credit and Security50
Commercial Litigation40
Commercial Law40
Commercial Disputes40
Agency Law40
Company Law30
Corporate Law30

16. Subjects

  • Contract Law
  • Banking Law
  • Financial Law