23 March 2018
A | A

Banking & finance feed-image   

Couple wins suit against claim investments were illegal loans

Straits Times
14 Mar 2018
K.C. Vijayan

Owner of investment firm argued he need not pay back $6.21m owed

When the owner of an investment company failed to deliver the high returns he had promised to investors, he claimed the monies he had received were in fact loans.

And since they were illegal under the Moneylenders Act, Mr K. Kalaivanan (Kalai), the sole director of Right Angle Investment Holdings, said he did not have to pay back the sums owed.

The High Court ruled last Thursday that even though the returns promised were "astonishing", they were in fact investments, and not illegal loans. For example, one contract offered 50 per cent returns for three months, as well as guaranteed return of the capital sum.

Justice Hoo Sheau Peng, who said she was "troubled" by the rate of returns on the deals and the "propriety of the investments", added: "I must admit that these terms, which would be incredibly attractive for investors, caused me to pause and reflect whether these were truly genuine investments."

But on examination of the evidence and circumstances, she found they were investments, not loans.

Mr Kalai had claimed they were loans to reverse a settlement he had agreed to in 2016 with his cousin, Madam Renuga and her husband, Mr Shanker Neela Segaran.

The Singaporean couple had invested millions in Mr Kalai's firm between 2009 and 2015. In simple contracts he had drawn up, Mr Kalai promised returns of between 10 per cent per month and 50 per cent for three months.

When he failed to deliver after some initial returns, the couple sent a letter of demand in May 2016 for more than $13 million before settling on $8.66 million. Mr Kalai paid $2.45 million but did not settle the rest. Last year, the couple sued for the $6.21 million unpaid, and other costs.

In her judgment, Justice Hoo said she had to consider a number of issues to decide if the monies were loans or investments. One was the nature of the contracts.

During a six-day hearing last year, defence lawyer Gregory Vijayendran from Rajah & Tann argued that the transactions were only "simple contracts" contrived to hide the fact that they were actually loans. They were not detailed, contemporaneous investment agreements, he said.

But lawyer V. Subramaniam from United Legal Alliance countered for the couple and said Mr Kalai did not provide the investment agreements despite the couple's requests. When he was pressed in 2014, he supplied simple contracts.

Justice Hoo also noted that the contracts were not prepared by the couple but by Mr Kalai.

She said the monies extended to Mr Kalai were not loans because he had offered a guarantee of capital to investors in a write-up, where he spelt out how his firm was expecting high returns from specific investments. For example, the write-up claimed Right Angle was expecting a return of 40 per cent from one particular investment, and promised the couple a return of 50 per cent in three months.

Justice Hoo also noted that from 2009 to 2015 there was not a single document or message produced by Mr Kalai to show the transactions were loans.

"Kalai sought to portray himself as someone who was very much at the mercy of the plaintiffs" but he was "like the plaintiffs, no babe in the woods", she wrote.

His assertions that the monies were loans were an "afterthought", said Justice Hoo, who added that Mr Kalai might have used some of the invested monies to cover business expenses and to repay other investors.

The judge ordered the $6.21 million to be paid with 12 per cent per annum interest from January 2017.

Source: Straits Times © Singapore Press Holdings Ltd. Permission required for reproduction.