Indian Bank v Raja Suria and Others

• Jurisdiction: Singapore
• Judge: Lai Kew Chai J
• Judgment Date: 14 May 1993
• Neutral Citation: [1993] SGCA 37
• Date: 14 May 1993
• Subject Matter: Guarantor,Standard form joint and several guarantee for overdraft facilities,Six co-sureties executed guarantee naming all seven cosureties while seventh co-surety executed another guarantee in which he was the only nominated surety,Whether the two guarantees could be read as part of one transaction,Two separate guarantees executed,Intention of parties,Enforcement thereof,Guarantees and indemnities,Joint and several guarantee,Six co-sureties executed guarantee naming all seven co-sureties while seventh co-surety executed another guarantee in which he was the only nominated surety,Whether co-sureties were jointly and severally liable when no one guarantee signed by all co-sureties,Credit and Security
• Docket Number: Civil Appeal No 25 of 1991
• Published date: 19 September 2003
• Defendant Counsel: R Joethy (Choo & Joethy),P Suppiah (P Suppiah & Co)
• Court: Court of Appeal (Singapore)
• Plaintiff Counsel: K Bala Chandran with Wong Khai Leng (Mallal & Namazie)

This appeal arose out of an action by the appellant bank (`the bank`) against seven individuals alleged to have jointly and severally guaranteed the debt of a company known as Wesmapack (S) Pte Ltd (`Wesmapack`). Only the second and the fourth respondents were active respondents in this appeal. The circumstances in which the alleged guarantee came about were somewhat unusual and they raised the issue central to this appeal, viz which document or documents contain or evidence the contract of guarantee in favour of the bank? In the High Court, the claims of the bank against the second and fourth respondents were dismissed with costs. The bank also failed before us in its appeal which was dismissed with costs.

The facts may be briefly summarized as follows. Wesmapack opened an account with the bank on 21 March 1981 and several transactions were carried out. On 18 January 1982, Wesmapack wrote to the bank for a $130,000 overdraft facility for a 60-90 day period (`the overdraft facility`) to cover the purchase of container trucking equipment for the company`s business. The overdraft facility was to be followed by an application for a term loan of $400,000 and another overdraft facility of $200,000. The letter continued:

This term loan and overdraft will be secured by pledging the equipment and if required personal guarantee of all directors.

The seven defendants in the court below were the seven directors of Wesmapack.

A guarantee dated 19 January 1982 (`the first guarantee`) in the bank`s standard form was then prepared naming the seven directors as joint and several guarantors of all money and liabilities owed or thereafter owing by Wesmapack to the bank. The guarantee was limited to the sum of $130,000 with interest from the date of demand or discontinuance of the guarantee to date of payment. The first guarantee was signed by the first six defendants only. The seventh defendant (the fifth respondent in this appeal) was away at the material time in England attending a chartered accountancy course. By a letter dated 22 January 1982, Wesmapack made an urgent request for the use of the overdraft facility.

Wesmapack drew on the overdraft facility on 1 February 1982. On 2 February, the bank sent Wesmapack a sanction ticket for the overdraft facility and this stated that a security for the facility was the `Personal guarantee of all directors for all facilities sanctioned.`

Subsequently, the seventh defendant received, in England, a copy of the bank`s standard form guarantee in identical terms as the first guarantee. This was dated 14 March 1982 and named only the seventh defendant as guarantor. He signed it and returned it by post. This guarantee will be referred to as `the second guarantee`.

Wesmapack last drew on the overdraft facility on 15 June 1982. The bank made several demands on Wesmapack for repayment of the moneys advanced but these were not met. The company was wound up on 11 November 1983. The bank then made demand upon the seven defendants by way of letters dated 29 September 1984. The debt then owing by Wesmapack was about $180,000 by way of principal and $60,000 by way of interest. The letters did not specify the documents relied upon as constituting the guarantee. The demands were not met.

The bank`s amended statement of claim sets out the basis of the defendants` liability as follows:

(3) In consideration of the plaintiffs making advances or otherwise giving credit to the company, the defendants pursuant to the following written personal continuing guarantees duly signed by the defendants jointly and severally guaranteed the payment on demand of all moneys due to the plaintiffs from the company on, inter alia, overdraft and default guarantee facilities granted to the extent of $130k,000.00 and all interest thereon:

Date Amount Guarantors

19 January 1982 $130,000 The abovenamed first, second, third, fourth, fifth and sixth defendants.

14 March 1982 $130,000 The abovenamed seventh defendant.

While not altogether a model of clarity, the italicized words just about indicated the bank`s position that the two guarantees were in fact one contract of guarantee between itself and the seven defendants. This remained the bank`s case here and below.

At the commencement of the trial, the first and second defendants consented to judgment being entered against them and the third and fifth defendants, being bankrupts, were not in court and took no part in the trial. The third and fifth defendants were the first and third respondents in this appeal.

The defence of the fourth defendant (the second respondent) was that the first guarantee was void as the seventh defendant had not signed it. The defence of the sixth defendant (the fourth respondent) was similar. The seventh defendant contended that he was not liable under the second guarantee as he was unaware of the existence of the first guarantee and under the impression that the other directors would also be executing the second guarantee.

Evidence as to circumstances

The bank`s sole witness was an officer with the bank, one Jeganathan. He stated that he received instructions from the manager of the bank, who had had a meeting with the second defendant, to prepare the first guarantee. The document was then handed to the second defendant. It was returned the next day by the third defendant with the six signatures on it. Jeganathan was told that the seventh defendant did not sign it as he was abroad. It was not clear when Jeganathan knew that the seventh defendant was studying abroad.

Jeganathan stated that his manager insisted that he wanted the guarantee of the seventh defendant. The manager told this to the second defendant who then agreed to get a separate guarantee from the seventh defendant. Jeganathan then prepared the second guarantee and sent it to Wesmapack. It was returned by Wesmapack to the bank.

Jeganathan stated that the bank`s view was that the second guarantee was merely an addendum to the first and the two guarantees constituted the basis of the defendants` liability to the bank.

The evidence of the fourth defendant was that the first guarantee was brought to his home and he signed it there. He said that he would not have signed it if he had known that the seventh defendant was not going to sign it. He further stated that he was not given a copy of the guarantee.

He claimed, under cross-examination, that he had not played any active role in Wesmapack during his directorship between early January 1982 and his resignation on 18 March 1982. He said that he played no part in Wesmapack`s application for facilities from the bank and that he did not know the seventh defendant apart from the fact that the latter was the brother of the second defendant. He insisted that he did not see any of the documents relating to the overdraft facility and that he did not know about the second guarantee. His testimony was somewhat contradicted by the documentary evidence of late January 1982 showing him as a...