Hong Leong Finance Ltd v Goh Khim Teik and Another

• Jurisdiction: Singapore
• Judge: L P Thean JA
• Judgment Date: 11 December 1993
• Neutral Citation: [1993] SGHC 296
• Docket Number: Suit No 10685 of 1985
• Date: 11 December 1993
• Year: 1993
• Published date: 19 September 2003
• Plaintiff Counsel: Anthony Lee (Bih Li & Lee)
• Citation: [1993] SGHC 296
• Defendant Counsel: Sng Kheng Huat and Cheong Chuh Feng (Low Yeap & Co)
• Court: High Court (Singapore)
• Subject Matter: Discharge from liability,Whether defendant still liable,Guarantee subsequently altered to delete names of two co-sureties without defendant's consent,Credit and Security,Co-guarantors,Defendant signing guarantee on understanding that four others would execute it,Guarantees and indemnities

Cur Adv Vult

The plaintiffs are a finance company. In July 1982 or thereabout, they granted a loan of $4m to a company, Chinese Pottery Arts & Handicraft Pte Ltd (`the company`), and among the securities provided for the loan was a guarantee in writing dated 28 July 1982 executed by Lim Shu Jin (`Lim`), Goh Khim Teik (`Goh`) and James Chan Chao Jan (`Chan`). The company subsequently defaulted in repayment of the loan and the plaintiffs enforced the securities against the company. Subsequently, the company was wound up compulsorily. The plaintiffs commenced this action against Goh and Chan, the first and second defendants, for the amount due under the guarantee. At or before the time the action was instituted, Lim had absconded and could not be found. As for Goh, although he was sued in this action, the writ was not served on him. It appears that Goh had passed away. Only Chan, the second defendant, was served and he entered an appearance and contested the claim of the plaintiffs.

Chan admitted the execution of the guarantee, but in his defence he averred as follows:

(i) It was agreed between him and the plaintiffs as a condition of the guarantee that he and four other persons would execute the guarantee, namely, Lim, Goh and two others, Goh Jit Lin (`Jit Lin`) and Lim Geok Mooi (`Geok Mooi`) whose names originally appeared on the guarantee. After the execution of the guarantee by Chan and whilst the guarantee was in the possession and custody of the plaintiffs, it was materially altered by the deletion of the two parties, Jit Lin and Geok Mooi, as co-sureties without his knowledge and consent, and thereby the guarantee was rendered void. As the plaintiffs had failed to fulfil the condition that the guarantee be signed by the five sureties, Chan was thereby discharged from all liability under the guarantee.

(ii) Chan was induced to execute the guarantee by the misrepresentation of the plaintiffs that the loan of $4 m to the company would be secured by the personal guarantee to be executed by the five persons as well as the corporate guarantees to be furnished by Kai Union Investments Pte Ltd, Kai Union Trading Pte Ltd and Kai Union Corporation Pte Ltd. However, it subsequently transpired that in truth and in fact only the three of them, Chan, Lim and Goh, executed the personal guarantee and no other guarantee was given.

As the trial progressed and the evidence unfolded, it was evident to me that Chan`s sole defence was that it was intended that the guarantee was to be executed by the five persons named therein but that after the execution of the guarantee by him, the names of Jit Lin and Geok Mooi therein were deleted without his knowledge and consent with the result that neither of them executed the guarantee and, in consequence, he was not liable under the guarantee.

I now turn to the evidence adduced before me. First, I refer to the guarantee in question. As originally prepared, it was expressed to be executed by the five persons, namely, Lim, Goh, Chan, Jit Lin and Geok Mooi (`the five persons`). However, it was executed only by Lim, Goh and Chan. On the face of the guarantee there were alterations made, namely, the deletions of the following particulars: (i) the names and addresses of Jit Lin and Geok Mooi on p 1 thereof, (ii) the names of these two persons as signatories in the testimonium clause, and (iii) the attestation certificates intended to be given in respect of their execution. Chan admitted that he executed the guarantee. He did not admit that he had agreed at any time to the alterations that were made thereon. The alteration on p 1 was initialled by one of the signatories; it was accepted that it was not initialled by Chan.

Next, I turn to the viva voce evidence. The material witness called by the plaintiffs is the solicitor (`the solicitor`) who prepared the guarantee and who witnessed and attested the execution thereof by the three persons, Lim, Goh and Chan. The Solicitor was at the material time acting for the plaintiffs and also for the company. His evidence, in so far as material, was briefly this. He received instructions from the plaintiffs to prepare the security documents with reference to the loan proposed to be granted to the the company. A copy of the letter of offer dated 13 July 1982 written by the plaintiffs to the company was furnished to him, and on the basis of that he prepared the security documents. At that stage, his office had received from Lim a copy of Form 49 showing (among other things) the names of the directors of the company and he or his conveyancing clerk in preparing the guarantee relied on that form. The guarantee as prepared by his office contained the names and addresses of all the five persons. The name of Jit Lin was inserted due to an oversight, as he or his conveyancing clerk was under the impression that Jit Lin was still a director of the company, whereas, in fact, Jit Lin had resigned as director on 12 July 1982. As for Geok Mooi, he was informed by Lim that she had resigned on 27 July 1982. On the date when Chan, Lim and Goh came to his office to execute the guarantee, the guarantee had already been prepared with the names of Jit Lin and Geok Mooi included but deletions of their names and addresses and other particulars relating to them were then made by his conveyancing clerk. The deletions were made known to all the three of them who were before him. He spoke to them in English. He explained that as the two ladies had ceased to be directors of the company, only the three of them would be signing the guarantee and they agreed and signed it. His conveyancing clerk was present in the room. She explained the content of the guarantee to Chan in Chinese. The deletion on p 1 was initialled by one of them. However, he could not say whether it was Lim or Chan who initialled against the alteration on that page. His explanation that only one of them initialled against the alteration was that they all agreed that one of them should do so and that that was sufficient. He denied that one Benny Ban was present.

The other witness called by the plaintiffs is Lim Weh Hong, the manager of the plaintiffs, but his evidence was merely of a formal nature and was of no assistance in relation to the issue before me.

Chan gave evidence in his defence, and his evidence was this. He is a Taiwanese and a jewellery and pottery designer. In 1980 or therabout, he was employed by the company as a designer. Lim was the one who actually engaged him. He also knew Goh, Jit Lin and Geok Mooi, and all of them worked in the company. Goh was in charge of personnel and administration and was also a director of the company. Jit Lin was like a `foster sister` to Lim and was in charge of financial matters and was a director of the company. As for Geok Mooi, she is the younger sister of Lim and was also a director of the company. Sometime in June 1982, Lim wanted him to apply for permanent residence and asked him to be a director of the company, as holding a directorship would be beneficial to his application. He therefore agreed and was appointed a director on 12 July 1982. On 27 July 1982, he was informed by Lim that all the five of them, who were directors of the company, would have to execute a joint and several guarantee to the plaintiffs to secure a loan to be granted to the company. He was told by Lim that if he did not join in signing the guarantee the company would not be able to obtain the loan. He agreed to execute the guarantee on that basis, namely, that all five of them would execute the guarantee. On the morning of 28 July 1982, he, Lim, Goh and one Benny Ban went in Lim`s car to the lawyer`s office to execute the guarantee. Lim told him that Jit Lin and Geok Mooi would go to the lawyer`s office themselves, as they normally went to work late. When they arrived there, Lim went into the lawyer`s room first and a few minutes later came out and asked him and Benny Ban to go in, and when they were inside the guarantee was produced for him to sign. The lawyer was an Indian and did not introduce himself. Nor did the lawyer explain to him the terms of the guarantee. There was a language barrier between them as he did not speak and understand English. He signed the guarantee, and at the time when he signed it he noticed that Lim had already signed it, that the names of all five of them appeared on the guarantee and that the names of Jit Lin and Geok Mooi were not deleted. If their names had been deleted he would not have signed it. He signed it also because Lim had signed it. He was inside the lawyer`s room for a few minutes and after he had signed the guarantee, he went out and Goh then went into the room, and he waited outside.

He testified that he could not speak or understand English; he spoke only Mandarin and the Hokkien dialect. He did not own any share in the company and had no say in the running of the company. He planned the production and designed the pottery. He admitted in cross-examination that he is a director of a few companies and was involved in business. In particular, he is a director of China Town Jewellery Industries Pte Ltd and a director of Hsing Chiao Trading Pte Ltd. He and Benny Ban are working in the same company.

Benny Ban was called by Chan to give evidence. His testimony was as follows. He was at that time in the employment of the company as the operation and administration manager and was also one of the three assistants to Lim, who was the chairman and managing director. He was later appointed by Lim as the secretary of the...