Indian Bank v Ramachandran and Others

• Jurisdiction: Singapore
• Judge: Goh Phai Cheng JC
• Judgment Date: 14 March 1991
• Neutral Citation: [1991] SGHC 43
• Docket Number: Suit No 9300 of 1984
• Date: 14 March 1991
• Published date: 19 September 2003
• Year: 1991
• Plaintiff Counsel: Bala Chandran (Mallal & Namazie)
• Citation: [1991] SGHC 43
• Defendant Counsel: M Ramasamy (Ang Netto Rama & Wilson),P Suppiah (P Suppiah & Co),TU Naidu (Palakrishnan & Partners),R Joethy (Choo & Joethy),J Chellam (Palakrishnan & Partners)
• Court: High Court (Singapore)
• Subject Matter: Separate guarantee executed,Failure of all sureties to sign the same guarantee,Guarantees and indemnities,Co-guarantors,Whether all sureties jointly and severally liable under the two guarantees,Credit and Security,Whether second guarantee to be construed as addendum to the first guarantee

The plaintiffs` claim is for the sum of $130,000 with interest thereon and costs against all the defendants under the terms of a guarantee dated 19 January 1982 signed by the first to sixth defendants and another guarantee dated 14 March 1982 signed by the seventh defendant only. The plaintiffs are carrying on business as bankers in Singapore. All the seven defendants were the directors of a company known as Wesmapack (Singapore) Pte Ltd (hereinafter referred to as the company) which had since March 1981 been a customer of the plaintiffs.

This action was tried by this court on 21 and 22 January 1991 and it was adjourned to 25 January 1991 when the plaintiffs` claim against the third, fourth, fifth, sixth and seventh defendants were dismissed with costs. They have now appealed to the Court of Appeal.

At the commencement of the hearing of this action, Mr R Joethy informed this court that the third and fifth defendants are bankrupt and he no longer represented them. The respective counsel for the first defendant and second defendant also informed the court that their clients consented to judgment to be entered against them in favour of the plaintiffs for the sum of $130,000 with interest on the said amount at the rate of 21/4% per annum above the plaintiffs` prime lending rate from 28 October 1983 to the date of payment, and all costs, charges and expenses which the plaintiffs might incur in obtaining or seeking to obtain payment of all or any part of the above sum, to be taxed on a solicitor and client basis. Accordingly, judgment was entered against the first and second defendants for the said sum of $130,000 with interest and costs as per para 10(b)(ii) and (c) of the amended statement of claim.

Counsel for the plaintiffs had, during the course of the hearing, asked this court to adjourn the plaintiffs` claim against the third and fifth defendants. I decided that it would not be appropriate to do so as the plaintiffs` claims against the third and fifth defendants are that they are jointly and severally liable with the other defendants in this action for the overdraft facilities granted to the company under the first and second guarantees. The outcome of the plaintiffs` claim against the third and fifth defendants must follow the outcome of their claim against the other defendants in this action.

Mr Jeganathan (PW1), a bank officer of the plaintiffs, gave evidence for the plaintiffs and the fourth, sixth and seventh defendants gave evidence before this court.

In January 1982 or thereabouts, the company applied for banking facilities from the plaintiffs. The company wanted a temporary overdraft facility of $130,000 for a period of 60 to 90 days. It intended to apply for a facility of $600,000 subsequently within 90 days. The plaintiffs were willing to extend overdraft facilities to the company provided that all the seven directors gave their personal guarantees for the facilities extended to the company. The plaintiffs prepared a guarantee on or about 18 January 1982 with the names of all the seven defendants stated therein as co-sureties and handed the same to the second defendant for execution by all the seven defendants. The said guarantee (hereinafter referred to as the first guarantee) was signed by all the defendants except the seventh defendant who was away in England pursuing a course of studies. The said guarantee was returned to the plaintiffs on 19 January 1982 by the third defendant, the general manager of the company. The third defendant informed the plaintiffs of the fact that the seventh defendant had not signed the said guarantee as he was away in England.

On 22 January 1982, the company wrote to the plaintiffs saying that they required the use of the temporary overdraft facilities on an urgent basis. The plaintiffs` manager, Mr Reddy, told the second defendant, the managing director of the company, that he wanted the guarantee of the seventh defendant and the second defendant agreed to get a separate guarantee of the seventh defendant. PW1 said in his evidence-in-chief that the plaintiffs allowed the company to use the facilities on 1 February 1982 when the second defendant, Dr Dhanapal, promised to obtain a separate guarantee from the seventh defendant when his manager, Mr Reddy, insisted that he wanted the signature of the seventh defendant before releasing facilities to the company. According to PW1, his manager instructed him to prepare a separate guarantee for the seventh defendant to sign. The plaintiffs had only one standard form for all guarantees furnished by their clients. PW1 took a standard form of the plaintiffs and typed the seventh defendant`s name and other particulars on it and the same was forwarded to the company to obtain the seventh defendant`s signature on the guarantee and it was returned to the plaintiffs sometime in March 1982 duly signed by the seventh defendant on 14 March 1982. This guarantee was dated 14 March 1982 (hereinafter referred to as second guarantee). The first and second guarantees are identical except for the fact that the first guarantee has all the names of the seven defendants shown therein as co-sureties and the second guarantee has only the name of the seventh defendant shown therein as surety.

During his cross-examination by counsel for the seventh defendant, PW1 was asked to explain what he meant when he said the second defendant told him that he (the second defendant) would get the guarantee of the seventh defendant. PW1`s reply was `We could not have released the guarantee for the seventh defendant to sign as we want to hold on to the document`. PW1 further said that as far as the plaintiffs were concerned, the second guarantee was an addendum to the first guarantee.

The company was allowed to use the overdraft facilities from 1 February 1982. Thereafter, the company utilized the overdraft facilities and by 11 March 1983, the company`s account was overdrawn by the amount of $130,619.10. Despite requests and demands, the company did not settle the amount due under the overdraft account to the plaintiffs. The company was wound up pursuant to an order of court on 11 November 1983.

By a letter dated 29 September 1984 addressed to each of the defendants, the plaintiffs through their solicitors demanded payment from the defendants of the amount due to the plaintiffs from the company. As no payment was made, the plaintiffs commenced proceedings against the seven defendants.

Paragraph 3 of the plaintiffs` statement of claim reads:

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 $130,000 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.

It is important to note that the basis of the plaintiffs` claim is that all the seven defendants are jointly and severally liable under the first and second guarantees for the payment of overdraft facilities extended by the plaintiffs to the company to the extent of $130,000 notwithstanding the fact that:

(a) the first guarantee which had all the seven defendants named therein as co-sureties was only signed by the first six defendants; and

(b) the second guarantee was only signed by the seventh defendant who is the only named surety on that guarantee.

The third, fifth and sixth defendants who filed a separate defence jointly averred that they were not liable under the first guarantee as claimed or at all for the following reasons:

(a) the third, fifth and sixth defendants signed the first guarantee on the faith, reliance and understanding...