Development Bank of Singapore Ltd v Yeap Teik Leong and Others

• Jurisdiction: Singapore
• Judge: Chao Hick Tin JC
• Judgment Date: 15 September 1988
• Neutral Citation: [1988] SGHC 74
• Docket Number: Suit No 1467 of 1987
• Date: 15 September 1988
• Published date: 19 September 2003
• Year: 1988
• Plaintiff Counsel: Scott Thillagaratnam (Khattar Wong & Partners)
• Citation: [1988] SGHC 74
• Defendant Counsel: Peter Lee Kian Huat (Shook Lin & Bok),Tan Jing Quee (Jing Quee Chin Joo & Teck Hui)
• Court: High Court (Singapore)
• Subject Matter: Whether guarantee valid,Guarantor,Scope of guarantee alleged unclear,Guarantees and indemnities,Past consideration,Not all directors of company signing guarantee,Alleged material variation to terms of loan,Whether defence sham,Credit and Security

This was an action by Development Bank of Singapore Ltd, the plaintiffs, against the defendants as guarantors. The relevant guarantee was executed in consideration of the plaintiffs making advances, loan credit and other banking facilities to Richfield Realty Pte Ltd (the company), a company in which all the five defendants were directors. The company was ordered to be wound up by the High Court on 27 February 1987.

On an application by the plaintiffs, summary judgments were entered against the second and fourth defendants by order of the senior assistant registrar. The two defendants appealed. Having heard the parties, I dismissed the appeal. They have now appealed to the Court of Appeal.

Background

The company sought loans from the plaintiffs to finance its development project at Eunos Road 5/Eunos Road 4. That was an Urban Redevelopment Authority project. Initially on 18 January 1982, the plaintiffs offered to issue two letters of guarantee for the amounts of $404,000 and $160,000 respectively in favour of Urban Redevelopment Authority (URA). One of the terms of the offer was that a joint and several guarantee from the following directors of the company be obtained, ie Yeap Teik Leong, Yap Siong Lim, Tan Eng Wan, Wing Hong How and Lim Chin Hin (the five directors). As required by the Plaintiffs, the board of directors of the company passed a resolution accepting the offer on the terms set out in the plaintiffs` letter of 18 January 1982. A guarantee was accordingly executed by the five directors on 10 February 1982 (the first guarantee).

Following further discussions with the representatives of the company, the plaintiffs offered in their letter of 22 February 1982, the following comprehensive banking facilities to the company totalling $31.5m:

Facility Limit

Term loan $ 25m

Overdraft (OD) $ 5m

Letter of guarantee $ 1.5m

Total $ 31.5m

The terms of the offer included the following:

(i) a joint and several guarantee from the five directors;

(ii) the OD facility and the term loan shall be utilized for the payment of development costs, excluding land premium and interest payable to the URA (cl 2(1)(d)).

The company was also required to furnish a resolution of its board of directors accepting the terms of the offer. The resolution of the board was accordingly passed on 5 March 1982.

As an interim measure, the plaintiffs on 23 February 1982 by a letter offered to the company a temporary overdraft of up to $3m pending the completion of the legal documentation for the facilities of $31.5m. This offer was again made subject to the personal guarantee of the five directors. The board of directors of the company by resolution accepted this offer on 5 March 1982. The five directors by a written note on a copy of the letter of offer stated that they `jointly and severally confirm that (their) guarantee dated 10 February 1982 shall extend to secure the abovementioned temporary OD facility of $3m`.

As part of the required documentation for the $31.5m facilities, the plaintiffs on 25 May 1982 forwarded to M/s Jing Quee & Chin Joo, Advocates and Solicitors, who acted for the company and the five directors in this matter, a guarantee for the directors` execution. The guarantee was returned by M/s Jing Quee & Chin Joo on 8 June 1982 after it was duly executed by the five guarantors (the second guarantee). Though the second guarantee was dated 17 January 1983 it was in fact executed by the five guarantors on 8 June 1982 as was evident from the two certificates attached to the guarantee issued by Mr Lim Chin Joo, Advocate & Solicitor. The date on the guarantee was left blank by the guarantors and it was filled in later by the plaintiffs when the overdraft and loan facilities had been finalized and were about to be activated by the company.

In the meantime on 30 November 1982, following discussions, the plaintiffs offered the company an additional temporary overdraft facility of up to $1m. This was over and above the $3m offered earlier on 23 February 1982. This offer was again subject to the personal guarantee of the five directors who were required to confirm that the first guarantee shall be extended to cover the additional $1m temporary overdraft. The five directors gave their confirmation on the duplicate copy of offer. Like the temporary overdraft facility for $3m this facility `shall be retired upon the activation of the $3.5 m banking facilities`.

Finally, on 17 January 1983, following further discussions, the plaintiffs offered to the company a further temporary overdraft facility of $2,120,000 on the security of some shares and the personal guarantees of two directors and one other person. However, nothing in the claim in this action related to this letter of offer and there was no need to be concerned with it.

Issues raised

The fourth defendant raised four issues to justify the granting of leave to defend the action. They were:

(i) the second guarantee was not enforceable as not all the directors of the company signed the guarantee;

(ii) the scope of the second guarantee was unclear. Did it cover the $3m overdraft or the $31.5m loan?

(iii) material variation was made to the terms of the loan after the second guarantee was signed by the fourth defendant; and

(iv) past consideration.

The second defendant besides associating himself with the arguments raised by the fourth defendant, also raised the point that the plaintiffs, by leaving the execution of the guarantee with the fourth defendant, made the fourth defendant their agent and were bound by the representation made by the fourth defendant when the latter represented to the second defendant that all the directors of the company would be signing the guarantee. At the hearing below, the second defendant also raised the point of non est factum. However, this point was not pursued before me.

First issue

According to the affidavit filed on 27 November 1987 by the fourth defendant, immediately prior to the winding-up of the company its board of directors consisted of Lim Chin Hin, Yeap Teik Leong, Yap Siong Lim, Tan Eng Wan, Chew Hui Thong and Wing Hong How alias Woon Foong How. The fourth defendant alleged that during the...