Director ordered to pay over $770,000

Court rejects his claim of signing guarantee for photocopier lease without reading it

A founding director of a travel agency that folded last year was yesterday ordered to pay more than $770,000, with interest, to a finance company over the lease of nine photocopying machines.

Mr Johnny Lim Cheng Onn, 48, who agreed to be a guarantor for Five Stars Tours in 2011 when it entered into a lease agreement with Orix Leasing, claimed he had signed the guarantee without reading it.

He contended that he did not know of the "absurd" sum that Five Stars had to pay under the agreement until he received a letter from Orix's lawyers last year.

He said all he was told - by his older brother Ken Lim Cheng Chuan, the agency's managing director, and the employee who handed him the papers to sign - was that it was a lease for nine photocopiers.

But his "short and bare" claims cut no ice with the High Court, which ruled against him yesterday. Judicial Commissioner Debbie Ong said that if Mr Lim had signed the guarantee without reading it or being clear in his mind about the extent of his liability, he cannot subsequently say that he had not agreed to the terms.

VALIDITY NOT AFFECTED

If he had chosen to trust his brother, the second defendant, on the matter, it is his choice, but this does not affect the validity of the guarantee he had signed.

JUDICIAL COMMISSIONER DEBBIE ONG

She noted that Mr Lim was a director who had access to documents that set out details of the lease. "If he had chosen to trust his brother, the second defendant, on the matter, it is his choice, but this does not affect the validity of the guarantee he had signed."

The two brothers had personally agreed to guarantee the payment of money owed by Five Stars to Orix. Under the lease agreement, Five Stars was supposed to pay monthly instalments amounting to $970,120 over six years.

The sum was not only for the lease but also included a $526,403 loan from Orix for Five Stars to pay off its previous lease with the photocopier supplier, and a six-year maintenance contract.

When the company defaulted on payment, Orix sued Five Stars and the two directors for $772,405.91. Orix obtained judgment against Five Stars and Mr Ken Lim in March last year. The company has been wound up and Mr Ken Lim is now a bankrupt.

Five Stars Tours was a popular travel and coach company that closed down suddenly in January last year, leaving thousands who had planned to travel during the Chinese New Year holiday scrambling for alternatives.

A version of this article appeared in the print edition of The Straits Times on September 29, 2015, with the headline 'Director ordered to pay over $770,000'. Print Edition | Subscribe