The Court of Appeal refused to allow a company that had engaged in unlicensed moneylending to recover a principal sum loaned to a borrower, saying that to do so would "make a nonsense" of the purpose of the Moneylenders Act (MLA) to deter illegal moneylending.

In a rare sitting of five Judges of Appeal instead of the usual three, Singapore's highest court rejected an appeal by the trading company, which wanted back about $10.25 million it claimed were investments and, if not paid, would result in the borrowers being unjustly enriched.

The court found the money to be illegal loans instead and said in judgment grounds released on Monday that the case underlined the "strong need to deter illegal moneylending due to its status as a serious social menace in Singapore".

The lender's claim that the borrowers would benefit unfairly "cannot succeed, because to permit recovery of even the principal sums would undermine and stultify the fundamental social and public policy against unlicensed moneylending which undergirds the MLA", wrote Judge of Appeal Andrew Phang on the court's behalf.

In the case, Ochroid Trading and its sole director, Mr Ole Prytz Rasmussen, had entered into a joint venture in VIE Import & Export, started in 2003 by Ms Chua Siok Lui and Mr Sim Eng Tong. VIE was de-registered in November 2012.

The series of agreements under dispute involved "loans" to VIE for the purchase and resale of specified foods and food-related products. The funds were to be repaid with a "profit" on a stated date.

Some 76 deals made over four months from December 2007 that became the subject of the suit were still unpaid.

Ochroid and Mr Rasmussen sued in the High Court for breach of contract, among other things. They sought the return of about $10.25 million including the alleged profit, or, alternatively, $8.9 million excluding the alleged profit. They argued that the agreements involved genuine investments in VIE's business and were not "loans".

The High Court dismissed their claims in March last year and their appeal was heard in October by the apex court, headed by Chief Justice Sundaresh Menon and which included Judges of Appeal Andrew Phang, Judith Prakash, Tay Yong Kwang and Steven Chong.

The appellants were represented by a team of lawyers led by Mr Gary Low, while the first respondent, Ms Chua, appeared in person and the second respondent, Mr Sim, was defended by a quartet of lawyers led by Mr Sarbjit Singh Chopra.

The apex court affirmed the High Court findings that the transactions were loans and Ochroid and Mr Rasmussen were unlicensed moneylenders under the MLA.

The court made it clear that although the parties' agreements were made as part of a commercial relationship, the policy of the Act "extends not just to the rogue 'loan shark' who preys on the poor and vulnerable, but to anyone who engages in the business of moneylending within the meaning of the MLA without licence".

The court said there is no general right of "restitutionary recovery" - recovery of the principal sum excluding interest - under Singapore law where the contract is prohibited under statute and/or common law.

There are exceptions to the right. For instance, if the plaintiff entered into the illegal contract under a mistake or on the basis of fraud or if a party backs out of the contract before its illegal purpose is effected, said the court in its judgment.