Protect your interests while helping out a loved one

Text Keith G Emuang

Two years after Christopher Fong loaned his cousin $8,000 to start a flower business, he is still 'chasing' for payment. He had approached his cousin on several occasions but was scolded each time. Both families have not been on speaking terms since.

Many cases like this often go unreported to avoid the embarrassment and nasty public fallout. Several lawyers Family spoke to advise that family member or not, one should always draw up a proper agreement with witnesses present.     

It's better to clarify things up front than go into a he-says-she-says contest where the dirt starts coming out and the relationship is further damaged, says one lawyer.

Awkward money situations are preventable and sometimes, a simple 'no' is all it takes. Nonetheless, we may find ourselves wanting to help out a family member. We asked lawyer Rama Chettiar, Director of ACIES Law Corporation, for his advice on several possible scenarios.  

Q I was asked to act as guarantor for my niece who's getting a scholarship. What are my legal obligations should she break the bond?
One must carefully consider the legal consequences as the guarantor's legal liabilities are the same as that of her niece. A failure to fulfil the legal obligations in the scholarship agreement will render the niece liable in damages to the third party. The third party has the right to proceed against the guarantor for all the damages payable by the niece.

The guarantor should study the scholarship agreement and, in particular, what is the likely exposure if her niece were to breach the scholarship agreement or break the bond. This is found in the liquidated and ascertained damages (LAD) clause.

Q I loaned my uncle $25,000 to start a new business. It went burst after a year and he has been avoiding me since. Is there any way I can get my money back?
A friendly loan is a loan where interest is not charged at all or if charged, the rate of interest is the same as the CPF rate of interest. I assume that this money lending transaction is within the definition of a friendly loan.

If the uncle denies the loan and there are no loan documents, it does not mean that the loan cannot be proved. Secondary evidence such as cheques issued to the uncle or witnesses of the transaction are also good enough to prove the loan.

Civil proceedings will only give the lender a judgement if he can prove his case successfully. A judgement is a court document, which will declare that the uncle owes $25,000 and has to pay up. If he refuses or neglects to do so, the nephew has to initiate "enforcement of judgement" proceedings in the Subordinate Courts.

Q I provided some services for my uncle’s business but after some time, he stopped paying me. I obtained a judgement from the Small Claims Tribunal but he has since defaulted on it. How can I claim my money back?
Since a judgement as already been given against your uncle, the next stage is enforcement of judgement proceedings. There are several ways of doing this. Seizure and sale can be employed where the bailiff attempts to seize items from your uncle’s office amounting to the sum owed. If your uncle has no assets or has hidden them well, I would advise to investigate into your uncle's financial affairs.

One can do so by applying for a judgement debtor summons, where the uncle will be summoned to appear in court for the purposes of examining him on his financial affairs. If the uncle refuses to attend court or answer the questions truthfully, he can be sent to jail. Bankruptcy may not be available if the amount of the money owed is less than $10,000. I would advise to consult a lawyer.

Q My cousin was charged with a crime. Bail was offered and my aunt has asked me to act as a bailor for him. What should I know before committing myself?

Assuming you fulfil the requirements of a bailor (i.e. are 21 years old and above, and not an undischarged bankrupt), you have to deposit the entire bail sum with the court or provide security for the bail amount before the accused is released.

The duty of the bailor is to ensure that the accused attends court on all the hearing dates. If the accused fails to turn up, the judge will ask the bailor to 'show cause' or explain why the accused is not present in court.

If the bailor fails to give a good reason or did nothing, the judge can order the bail monies to be forfeited either in whole or in part. Do take note that bailors are required to attend court on all the dates the accused has to appear.

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