PROBLEM QUESTION - Apply IPAC method (Ie, identify Issues and legal principles, analyse the issues applying the principles, draw a conclusion).

Peter and Thanh are married. They are also directors of a small software company called HiTec PteLtd. HiTec supplies a number of software products to retail outlets in Singapore. Peter and Thanh have requested a $70,000 loan to HiTec from their bank NotFriendly.

Following the Covid-19 lockdown, NotFriendly has been auditing the accounts of clients that it categorises as High Risk. HiTec is categorised as High Risk.

When Peter and Thanh request that NotFriendly lend $70,000 to HiTec, NotFriendly requests a financial update report.

Peter is a qualified bookeper whereas Thanh considers herself to be incompetent in dealing with money. Peters main leisure activity is meditation and whenever he and Thanh experience problems in running HiTec, he likes to absent himself on meditation retreats. Whenever he is on a retreat, Thanh copes with HiTec business as best she can. She thinks she is making guesses about HiTecs finances.

When NotFriendly requested a financial update report, Peter decided to leave on a two-week meditation retreat. Left by herself, Thanh did her best to prepare the update report. She was shocked to discover from the monthly accounts prepared by HiTecs accountant that HiTec owed $50,000 to three creditors, all of whom had recently sent letters threatening to take legal action to recover their debts. One letter said, We are going to close you down.

Peter had received the letters and put them in drawer without telling Thanh. Thanh knows that HiTec has only $10,000 in its NotFriendly account. Thanh texts Peter in a panic asking him what she should do. He replies, Maybe just say in the report that we have a debt of $20,000 but our debtors have said that we can pay the debt in six months time. Thanh sends the update report to NotFriendly saying stating that HiTec has liabilities of $20,000 and letters from its creditors agreeing to repayment in six months time. NotFriendlys loan assessment officer is suspicious of this statement and requests more information.

You are a lawyer. Thanh comes to you for advice (Peter is still meditating). Advise her of her potential legal liability and that of Peter. What action can be taken, and is likely to be taken, by NotFriendly and the three creditors?