Businessman who funded bankrupt's lawsuit ordered to pay $156,000 in legal costs after suit failed
SINGAPORE – A bankrupt turned to a businessman for a loan to clear his bankruptcy so that he could sue his brother over a property inheritance dispute.
In all, Mr Rakesh Kumar Sharma got a loan totalling $316,750 from Mr Kor Yong Koo.
Mr Rakesh, however, lost the suit against his brother Ashok and his wife and was ordered to pay $156,000 in legal costs to the couple.
He did not, and on Sept 1, Mr Kor was ordered to pay the amount by the High Court.
Justice Kannan Ramesh, in giving his judgment grounds, said: “There is no hiding the fact that Mr Rakesh was a bankrupt when Mr Kor first started disbursing monies to him.”
He added: “This prima facie meant that Mr Rakesh had little if any means of repaying the loan unless one accounted for the recovery from (the lawsuit). Mr Kor knew that.”
The judge made clear that Mr Kor was liable, as he furnished the funds “for the purpose of obtaining a profit from the fruits of the litigation”, based on the facts of the case.
He further said that Mr Kor’s position was different from a lender who extends general-purpose interest-bearing loans to people with little or no money who then use the funds to finance litigation.
Such lenders, unlike Mr Kor, should not be liable to bear the litigation costs, he added.
But in the case of Mr Kor, the judge noted that he sought to recover exorbitant profits, as shown by the 30 per cent annual interest rate on the loan.
Hence, he could not be deemed a “pure funder”, said Justice Kannan in his oral judgment.
The judge found the basis for giving the loans hinged on the money being recovered from the outcome of Mr Rakesh’s lawsuit (Suit 963) against his brother, with the interest rate designed in a manner for Mr Kor to enjoy a share of the proceeds.
“Accordingly, I find that Mr Kor had the requisite ‘close connection’ with Suit 963,” Justice Kannan said.
The saga began in October 2013 when Mr Rakesh was made a bankrupt for the second time.
In 2014, he asked Mr Kor for the loan to travel to India to stake his claim on his father’s properties there and to start litigation against Mr Ashok Kumar Sharma and his wife in relation to his inheritance.
Mr Kor, whose business is in ship chandling and textiles, gave $100,000 initially to clear the second bankruptcy and agreed to further sums at a monthly interest rate of 2.5 per cent.
Both bankruptcies were annulled in 2015, with Mr Kor disbursing $316,750 altogether to Mr Rakesh.
In May 2017, Mr Rakesh lost his suit and was ordered to pay $156,000 in costs to the couple.
He did not pay and his brother made him a bankrupt and sued Mr Kor for the money.
Mr Ashok’s lawyer Mahmood Gaznavi argued, among other things, that Mr Kor, although a non-party in the suit between the brothers, exercised control over it.
Mr Kor’s lawyers Rabi Ahmad and Varsha Krishnan countered, among other things, that he was merely a disinterested party who provided a personal loan to be repaid with interest, regardless of the outcome of Suit 963.
Justice Kannan found the evidence showed the prospect of Mr Rakesh repaying the loan was “inextricably linked to the success of Suit 963”.
He said: “By providing funds to annul both bankruptcies, Mr Kor removed the only obstacle to Mr Rakesh commencing Suit 963. As such, it is plain beyond peradventure that had Mr Kor not done so, none of the costs in Suit 963 would have been incurred.”
Mr Kor was also ordered to pay another $18,994 for the costs of the hearing before Justice Kannan.
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