Lim Zhipeng v Seow Suat Thin

• Jurisdiction: Singapore
• Judge: Judith Prakash JA,Belinda Ang Saw Ean J,Woo Bih Li J
• Judgment Date: 08 September 2020
• Court: Court of Appeal (Singapore)
• Docket Number: Civil Appeal No 11 of 2020 and Summons No 56 of 2020
• Date: 08 September 2020

Lim Zhipeng

and

Seow Suat Thin and another matter

[2020] SGCA 89

Judith Prakash JA, Belinda Ang Saw Ean J and Woo Bih Li J

Civil Appeal No 11 of 2020 and Summons No 56 of 2020

Court of Appeal

Civil Procedure — Pleadings — Sufficiency of consideration raised for first time in plaintiff's reply and defence to counterclaim — Whether issue of consideration adequately pleaded

Contract — Consideration — Sufficiency of consideration — Whether forbearance to file proof of debt against bankrupt amounted to sufficient consideration

Contract — Formalities — Deed — Guarantee lacking physical seal — Whether sealing requirement satisfied

Held, allowing the appeal:

(1) Notwithstanding the perceived outdatedness of the sealing requirement, save to the extent that it had been removed by statute (eg, by s 41B of the Companies Act (Cap 50, 2006 Rev Ed)), it remained a necessary requirement at common law that had to be fulfilled before a document could be enforced as a deed: at [37].

(2) The sealing requirement could be satisfied notwithstanding the lack of a physical seal if the document was executed with the clear intention of delivering it as the deed of the party executing it. Whether the executing party had such an intention had to be ascertained with regard to the entire circumstances of each case: at [29] to [33], [37] and [38].

(3) In the present case, there was no physical manifestation of a seal on the Guarantee. Nonetheless, it expressly identified itself as a deed, and the execution portions of the document provided for it to be “signed, sealed and delivered” by the parties executing it. The Respondent had also visited a lawyer prior to executing the document. However, there was no evidence, apart from the Respondent's desire to assist the Debtor by granting a guarantee in favour of the Appellant, that the Respondent intended to execute a deed. On the state of the evidence, it would be extending the legal fiction too far to hold that the Guarantee had been sealed. As the sealing requirement was not satisfied, the Guarantee was not enforceable as a deed: at [40] to [44].

(4) Consideration had been adequately pleaded. It would not have been appropriate for the Appellant to pre-empt the issue of consideration and to raise it in his statement of claim, particularly as his claim was premised on a “deed of guarantee”, for which consideration was not required. Once the issue of consideration was raised in the Respondent's defence, the Appellant appropriately traversed the issue in his reply, and provided further details in his defence to counterclaim. The reply and defence to counterclaim formed part of his pleadings: at [54].

(5) Both a forbearance to sue and a forbearance to file a proof of debt sufficed as good consideration: at [56] to [60].

(6) Consideration was furnished by the Appellant. After signing the Guarantee, he kept to his end of the bargain with the Respondent by forbearing to take any action against the Debtor with respect to the debt. Such forbearance, even for a short time, amounted to good consideration, and it was irrelevant that the Appellant did not precisely identify whether his forbearance entailed a forbearance to sue or a forbearance to file a proof of debt: at [68] and [69].

(7) The enforcement of the Guarantee was not against public policy. A creditor like the Appellant could enforce the full amount of his debt as against a bankrupt (via the proof of debt process) and/or against any party who had furnished security. By enforcing a third-party security for the bankrupt's debt, the creditor did not contravene the policy underpinning the pari passu principle since the third-party security never formed part of the bankrupt's estate, and did not constitute an asset that would be divisible amongst the bankrupt's creditors. The only impact on the Appellant's right to enforce the Guarantee was that his claim against the bankrupt Debtor had to be reduced by any sum recovered under the Guarantee: at [71] and [73].

(8) The Guarantee was also not vitiated by unilateral mistake, as the Respondent was not mistaken as to her obligations under the Guarantee, which required her to serve as a guarantor for the Debtor, and to pay the debt in accordance with the repayment scheme set out in the Guarantee: at [75].

(9) The Respondent's counterclaim for the return of the $40,000, which was premised on unjust enrichment, was dismissed as a fundamental basis for the Respondent's voluntary payment was to offset the Debtor's debt, and $40,000 was indeed offset from the Debtor's outstanding debt, such that the basis for payment did not fail: at [78].

Case(s) referred to

Bachoo Mohan Singh v PP [2010] 4 SLR 137 (refd)

Benzline Auto Pte Ltd v Supercars Lorinser Pte Ltd [2018] 1 SLR 239 (refd)

Broadley Construction Pte Ltd v Alacran Design Pte Ltd [2018] 2 SLR 110 (refd)

Chan Siew Lee Jannie v Australia and New Zealand Banking Group Ltd [2016] 3 SLR 239 (refd)

Crears v Hunter (1887) 19 QBD 341 (refd)

Currie v Misa (1875) LR 10 Exch 153 (refd)

Cuthbert, Re; ex parte Monnoyer British Construction Co Ltd v The Trustee [1936] 1 All ER 342 (refd)

Cytec Industries Pte Ltd v Asia Pulp & Paper Co Ltd [2009] 2 SLR(R) 806; [2009] 2 SLR 806 (refd)

First National Securities Ltd v Jones [1978] Ch 109 (refd)

Gay Choon Ing v Loh Sze Ti Terence Peter [2009] 2 SLR(R) 332; [2009] 2 SLR 332 (folld)

Malayan Banking Bhd v Lauw Wisanggeni [2003] 4 SLR(R) 287; [2003] 4 SLR 287 (refd)

Sarah Jane Sandilands, Re [1871] LR 6 CP 411 (refd)

TCB Ltd v Gray [1986] Ch 621 (refd)

United Overseas Bank Ltd v Lea Tool [1998] 1 SLR(R) 373; [1998] 2 SLR 625 (refd)

Facts

The Appellant creditor (“the Appellant”) made a substantial loan of about $500,000 to the debtor (“the Debtor”). As a result of his financial difficulties, the Debtor was unable to make the scheduled repayments of the loan. In May 2017, the Debtor was made a bankrupt by an institutional creditor. While he was seeking to annul the bankruptcy order, the Appellant continued to press the Debtor for repayment.

The Debtor then asked his mother, Seow Suat Thin (“the Respondent”), to act as guarantor for his debts to the Appellant. The Respondent agreed, and a document titled “Deed of Guarantee” (“the Guarantee”) was signed by the Appellant and Respondent in September 2017.

Under the Guarantee, the Respondent agreed to guarantee the remaining $490,000 owed by the Debtor to the Appellant, and to pay the debt in tranches, according to the expected dates of sale of certain properties belonging to her. The Guarantee was signed by the Respondent in the presence of a lawyer, who read the document and translated it to her. Although the Guarantee, which was identified as a “deed”, purported to have been “signed, sealed and delivered”, no physical seal was affixed to it.

After the Guarantee was signed, the Respondent paid the Appellant $40,000 out of the sale proceeds of one of her properties. She did not make any further payments thereafter. In view of her default, the Appellant took out an action to claim the outstanding sum under the Guarantee.

The High Court judge (“the Judge”) dismissed the Appellant's claim, finding that the Guarantee was not enforceable as a deed as it had not been sealed. Hence, consideration had to be given for the Guarantee to be enforceable. However, the existence of consideration had not been adequately pleaded nor, in fact, provided. As there was no consideration, the Judge allowed the Respondent's counterclaim for the return of the $40,000 that she had paid to the Appellant. The Appellant appealed against the entirety of the Judge's decision.

Legislation referred to

Bankruptcy Act (Cap 20, 2009 Rev Ed) ss 88A(2), 88A(4)

Companies Act (Cap 50, 2006 Rev Ed) ss 41B, 41B(1)

Rules of Court (Cap 322, R 5, 2014 Rev Ed) O 18 r 3, O 18 r 13

Law of Property (Miscellaneous Provisions) Act 1989 (c 34) (UK) s 1(1)(b)

Tan Wen Cheng Adrian and Tan Choon Yuan Delson (August Law Corporation) for the appellant in Civil Appeal No 11 of 2020 and the applicant in Summons No 56 of 2020;

Kanthosamy Rajendran and Prasanna Prabhakaran (RLC Law Corporation) for the respondent in Civil Appeal No 11 of 2020 and Summons No 56 of 2020.

8 September 2020

Judgment reserved.

Judith Prakash JA (delivering the judgment of the court):

Introduction

1 This appeal involves a creditor, a debtor and a guarantor. The creditor is Lim Zhipeng (“the Appellant”). He made a substantial loan to the debtor, Cheong Wee Ker Derek (“the Debtor”) who subsequently brought in his mother, Seow Suat Thin (“the Respondent”), to act as guarantor for his indebtedness.

2 As a result of his financial difficulties, the Debtor was made a bankrupt by another creditor. While the Debtor was trying to make arrangements to set aside the bankruptcy order, the Appellant kept pressing him for the repayment of the debt. The Respondent agreed to assist her son in staving off the Appellant. A document entitled “Deed of Guarantee” (“the Guarantee”) was subsequently signed by the Appellant and the Respondent. However, after making a part-payment towards the debt, the Respondent defaulted on the Guarantee.

3 Some months later, the Appellant sued the Respondent, seeking to enforce the Guarantee. He also filed his proof of claim against the Debtor, who remained a bankrupt. The Appellant's action was dismissed by the High Court, primarily on the ground of lack of consideration. This case presents an opportunity for this court to assess the requirements of a deed, in particular the precise ambit of the sealing requirement. We also consider whether sufficient consideration can be furnished by the forbearance to file a proof of debt, as opposed to the ordinary forbearance to sue.

Facts

Events leading up to the Guarantee

4 The Appellant and the Debtor have been acquainted for more than 20 years, as they had attended the same secondary...