The High Court dismissed a $10.3 million suit by a trading company seeking the return of alleged unpaid investments from a business duo and ruled that the sums advanced were unlicensed moneylending.
The court found the 76 agreements to fund a joint venture wholesale food business were backed by invoices the plaintiffs knew were fabricated to provide an "air of legitimacy" to the loans granted.
"In other words, the plaintiff's primary, and indeed sole, object was to lend money at high interest," said Judicial Commissioner Audrey Lim, in judgment grounds released on Wednesday.
"In the present case, I have no alternative but to give effect to the draconian consequences of the Moneylenders Act."
Ochroid Trading and its sole director Ole Prytz Rasmussen had entered into a joint venture to invest in VIE Import & Export, started in 2003 by Ms Chua Siok Lui and entrepreneur Sim Eng Tong. VIE was de-registered in November 2012.
The series of agreements under dispute provided for "loans" to VIE for the purchase and resale of specified foods and food-related products, as well as for the funds to be repaid with a "profit" on a stated date.
There were 740 deals inked over three years from 2005.
The 76 in the suit, made over four months from December 2007, were still unpaid. Ochroid and Mr Rasmussen, through lawyer Gary Low, sued for breach of contract, among other things. They argued the agreements involved genuine investments in VIE's business and were not "loans".
Ms Chua and Mr Sim, defended by lawyers Alvin Tan and Sarbjit Singh Chopra respectively, denied the claims, countering that the agreements were unlicensed loans that cannot be enforced, under the Moneylenders Act.
They added that the plaintiffs knew that the invoices accompanying the agreements were fabricated and that there were no real goods underlying each agreement.
The judge said the evidence suggested that the plaintiffs were "trying to have their cake and eat it".
"They wanted to preserve the agreements as loans so they would not have to share in VIE's business risks and would obtain a fixed return regardless of profitability.
"At the same time, they wanted to give the impression that these loans, although at an extortionate interest rate, were not moneylending transactions but were part of a legitimate joint venture by including words such as 'cooperation' and 'profit' in the language of the agreements and by insisting on supporting invoices (which they knew would be fabricated)."
The judge also found that the plaintiffs were carrying on the business of moneylending "as there was a system and continuity in the transactions from the inception of the moneylending agreement".
Mr Rasmussen said yesterday that their lawyers were reviewing the grounds of decision and they would act according to their advice.