Bayerische Landesbank Girozentrale v Khaw Hock Seang

• Jurisdiction: Singapore
• Judge: Tan Lee Meng J
• Judgment Date: 28 February 2003
• Neutral Citation: [2003] SGHC 42
• Court: High Court (Singapore)
• Published date: 07 October 2003
• Year: 2003
• Plaintiff Counsel: Rebecca Chew and Poh Yan Fen (Rajah & Tann)
• Defendant Counsel: Edwin Tay and Xhuanelado Owen (Edwin Tay & Co)
• Subject Matter: Credit and Security,Guarantees and indemnities,Whether defendant signed the guarantee that plaintiff was trying to enforce.
• Citation: [2003] SGHC 42

1. The plaintiffs, Bayerische Landesbank Gironzentrale (“BLG”), a bank, instituted legal proceedings against the defendant, Mr Khaw Hock Seang (“Khaw”), to enforce their rights under a guarantee allegedly signed by the latter to secure a loan given by the bank to South Development Ltd (“SDL”). Khaw denied having signed the guarantee and pleaded in the alternative that the guarantee was signed on the basis of representations by the bank’s staff that it will not be stamped or enforced until the securities required by the bank had been handed over.

Background

2. Khaw, a Malaysian businessman, is a director and the sole shareholder of SDL. In a letter dated 19 May 1997, BLG granted SDL a multi-currency revolving credit facility of MYR14.5m, which was to be secured by, among other things, the following:

(a) a first party charge over deposits and credit balances to be executed by the Borrower;

(b) a security agreement relating to shares and other securities to be executed; and

(c) Khaw’s personal guarantee.

3. Khaw accepted the bank’s offer on behalf of SDL, which authorised him to operate the account. BLG asserted that Khaw executed the guarantee that he was required to furnish in late May 1997. This guarantee required Khaw to pay BLG on demand all moneys owing by SDL, including interest, and costs and expenses incurred by BLG to enforce its terms.

4. Khaw utilised the credit facility granted to SDL to invest in various share counters on the Malaysian Stock Exchange. Unfortunately, massive losses were suffered and when SDL failed to make the necessary payments to the bank, the credit facility in question was withdrawn. Relying on Khaw’s guarantee, BLG’s solicitors sent a letter of demand to him by AR registered post on 24 July 2001. In the letter, BLG demanded the payment of USD5,479,653.10, the amount outstanding as at 2 July 2001 under the credit facility granted to SDL, together with interest and bank charges from and including 3 July 2001 until the date of full payment.

5. Khaw had discussions with BLG’s staff with respect to the settlement of SDL’s losses. He was also appointed the spokesman of a group of BLG’s other Malaysian clients, who owed the bank money after suffering similar losses in stocks and shares, to negotiate a deal with the bank. However, the massive debt incurred by SDL was not settled. As such, BLG instituted legal proceedings against Khaw to enforce the guarantee.

Withdrawal of Khaw’s alternative defence

6. On the first day of the trial, Khaw abandoned his alternative defence that BLG’s staff had represented to him that the guarantee will not be stamped and acted upon until all the requisite securities required by the bank had been handed over. When cross-examined, Khaw admitted that no one in the bank made the said representations to him. He said that the representations had been made to his colleague. No light was shed on what role this colleague played in relation to SDL’s account. This prompted BLG’s counsel, Ms Rebecca Chew, to submit that Khaw lied when he asserted in his defence and affidavit of evidence-in-chief that the said representations were made by the bank’s staff to him.

Whether Khaw signed the guarantee

7. With the withdrawal of Khaw’s alternative defence, the only issue to be resolved was whether or not he signed the guarantee in question. For this purpose, it is pertinent to note that Phipson on Evidence, 15^th ed, states as follows at pp 1072-1073:

The handwriting and signature of unattested documents, or of documents which, though attested, are not required by law to be so, may be proved (1) by calling the writer; or (2) by calling a witness who saw the document signed; or (3) by calling a witness who has acquired a knowledge of the writing … or (4) by comparison of the document in dispute with any other proved to the satisfaction of the judge to be genuine; or (5) by experts, with or without comparison, or (6) by the admissions of the party against whom the document is tendered …. The above methods, being equally admissible and equally primary, may be resorted to indifferently; subject, of course, to comment should weaker proof be tendered where stronger might have been adduced.

8. Admittedly, the evidence presented by BLG was not altogether satisfactory. BLG’s main witness, Mr Wong Teck Long (“Wong”), was the bank’s relationship manager in the private banking department at the material time and he handled matters relating to SDL’s account and Khaw. He left BLG in 1998 and is now working for another bank. He testified that he was sure that Khaw signed the guarantee. However, he could not recall whether this was done in his presence. He said that he could have been present when Khaw signed the guarantee either in Singapore or in another country, as he often travelled abroad to meet his wide base of clients. He added that he could also have posted the relevant document to Khaw for the latter’s signature. If this had been done, he would have compared the signature on the guarantee with Khaw’s signature on the specimen signature card in the bank after the signed guarantee had been returned to him. Wong added that apart from checking the signature, he would have telephoned Khaw to confirm that the guarantee had been duly signed before he signed on the document as a witness of Khaw’s signature. He also revealed that a second round of verification of the signature on the guarantee would have been conducted by BLG’s operations department.

9. If Wong was not present when Khaw signed the guarantee, he should not have signed as a witness. It was common ground that if there was such an error on Wong’s part, the lack of a witness did not, without more, affect the validity of the guarantee. A guarantee “will not be a forgery merely simply because it contains a false representation that a solicitor witnessed the guarantor’s signature” (see The Modern Contract of Guarantee by James O’Donovan and John Phillips, 3^rd ed, p 113).

10. Although Wong impressed me as a truthful and an unbiased witness, BLG wisely chose not to rely solely on his evidence to prove that Khaw signed the guarantee. The bank asserted that Khaw’s response to their assertion that he signed the guarantee showed that he must have signed it. For a start, it was pointed out that if Khaw did not sign the guarantee, he would have made this clear to the bank as soon as he knew that the latter relied on its terms. He claimed that he first knew about the guarantee in December 2001. However, he...