Cytec Industries Pte Ltd v Asia Pulp & Paper Co Ltd

• Jurisdiction: Singapore
• Judge: Choo Han Teck J
• Judgment Date: 09 February 2009
• Neutral Citation: [2009] SGHC 32
• Docket Number: Suit No 161 of 2007
• Date: 09 February 2009
• Year: 2009
• Published date: 13 February 2009
• Plaintiff Counsel: Yap Yin Soon and Edmund Tham Weiheng (Allen & Gledhill LLP)
• Citation: [2009] SGHC 32
• Defendant Counsel: Adrian Tan and Ho Kheng Lian (Drew & Napier LLC)
• Court: High Court (Singapore)
• Subject Matter: Particular causes of action,Affixation of company seal,Consideration,Limitation of Actions,Contract,Section 4 Limitation Act (Cap 163, 1996 Rev Ed),Whether document executed as a deed,Whether parties could contract out of limitation provisions,Consideration purportedly set out in preliminary statements

9 February 2009 Judgment Reserved

Choo Han Teck J:

Introduction

1 This dispute revolves around the construction and validity of a corporate guarantee. On 18 October 1999, the plaintiff, Cytech Industries Pte Ltd, concluded a Letter of Intent (“LOI”) with APP Chemicals International (Mau) Ltd (“APP Chemicals”). The LOI confirmed APP Chemical’s intent to purchase products from the plaintiff and the plaintiff’s willingness to sell. If the plaintiff proved to be up to mark as a supplier, a Purchase Agreement (“PA”) would then be awarded to it. On 28 February 2000, the defendant Asia Pulp & Paper Company Ltd, the parent company of APP Chemicals, entered into a guarantee with the plaintiff, whereby it undertook to guarantee the payment obligations of APP Chemicals (“the Guarantee”). The Guarantee was backdated to 25 October 1999 and its salient terms are as follow:

Preliminary Statements

(i) Whereas, at the request of the Guarantor, the Supplier has entered into or will enter into a purchase agreement (such agreement, as amended from time to time, together with all documents entered into in connection therewith, the “Purchase Agreement”) with APP Chemicals International (Mau) Limited, a subsidiary of Guarantor and a corporation organized and existing under the laws of Mauritius, for the purchase of chemicals from the Supplier which APP Chemicals International (Mau) Limited will on-sell to the subsidiaries of the Guarantor;

(ii) Prior to the execution of the Purchase Agreement, each sale transaction between the Supplier and APP Chemicals International (Mau) Limited may be evidenced by purchase orders, acknowledgements, invoices and other documents usual and customary for transactions of this type. The Purchase Agreement and all such other prior documents shall be referred to as the “Transaction Documents”;

(iii) Whereas, a condition precedent to the transactions contemplated in the Transaction Documents is that the Guarantor shall have executed and delivered this Guarantee on or prior to the date hereof; and

(iv) Whereas, in satisfaction of such condition, and because of the direct and indirect benefits to the Guarantor from the transactions contemplated by the Transaction Documents, the Guarantor agrees to provide this Guarantee as set forth herein.

(v) Now, therefore, in consideration of the foregoing preliminary statements and the Supplier entering into the Transaction Documents, the Guarantor hereby represents, warrants, covenants and agrees as follows:

(roman numericals added)

Article 1 Guarantee

The Guarantor hereby unconditionally and irrevocably guarantees and promises to duly and punctually pay to Supplier on written demand of Supplier, if the Guaranteed Party fails to pay any of its obligations on their respective due dates and the non payment is not cured within 30 days notice by Guarantor or by Supplier to the respective Guaranteed Party, on a full, unsubordinated and unsecured basis to the Supplier all amounts of any nature whatsoever payable under the Transaction Documents by APP Chemicals International (Mau) Limited (the “Guaranteed Party”) to the Supplier as and when due, whether upon stated maturity, acceleration or otherwise (such payment obligations being the “Obligations”); provided always that the total amount in US Dollars of monies recoverable under this Guarantee shall not exceed US$5,000,000.00 (Five Million US Dollars).

Article 2 Guarantee Absolute

The Guarantor absolutely guarantees that the Obligations will be paid or performed in accordance with the terms of the Transaction Documents to which the Guaranteed Party is a party, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Supplier with respect thereto. The Guarantor understands and agrees that its obligation to pay the amounts in Article 1 is a direct and primary undertaking to the Supplier to pay such amounts even though the Guaranteed Party may have no obligation under any Transaction Document to pay such amounts. To the maximum extent permitted by law, the liability of the Guarantor under this Guarantee shall be irrevocable, absolute and unconditional, irrespective of (and the Guarantor shall not be released by):

…

(e) any other act, omission or circumstances (including, without limitation, any statute of limitation) which might otherwise constitute a defense available to, or a discharge of, the Guarantee Party or the Guarantor.

Article 10 Continuing Guarantee

This Guarantee is a continuing guarantee and shall (i) remain in full force and effect until the payment and performance in full of the Obligations and all other amounts payable and actions required to be performed under this Guarantee, (ii) be binding upon the Guarantor, its successors and assigns, (iii) inure to the benefit of the Supplier and their respective successors, transferees and assigns and (iv) be enforceable by the Supplier, to the extent expressly provided for in the Purchase Agreement.

The parties’ contentions

2 The defendant took the position that execution of the PA is required under the Preliminary Statements of the Guarantee and that it forms part of the consideration for the same, and the fact that no PA was entered into between APP Chemicals and the plaintiff meant that the Guarantee was unenforceable for want of consideration. Further, the defendant argued that the parties never intended that the Guarantee be executed as a deed. In particular, the defendant said in its written submission, filed on 7 November 2008, (at [24]) that:

The Plaintiffs cannot ignore that the law that the parties to the Guarantee must evince an intention to execute the document as a deed. All the authorities relied on by the Plaintiffs contain the same underlying principle: in deciding whether or not a document is a deed, it must be shown that the parties intended to execute the document as a deed. Once that all important intention is present, the Court will then decide whether the other requirements of being signed, sealed and delivered are fulfilled.

The defendant also submitted that part of the plaintiff’s claim was time-barred.

3 On its part, the plaintiff contended that the Guarantee was executed as a deed and, alternatively, consideration was furnished by the plaintiff in any event. It also submitted that the scope of the Guarantee covered pre-PA purchases made by APP Chemicals. As for the limitation defence raised by the defendant, the plaintiff took the position that the former was not entitled to plead a limitation defence as a result of Article 2(e) of the Guarantee.

The decision of the court

The consideration issue

4 I shall begin with the “deed” issue first. When the requisite intention is clear, the courts have held that the non-affixation of a seal on a deed was of no material consequence: see First National Securities Ltd v Jones [1978] Ch 109. What then are the consequences when a company affixes its common seal...