Malayan Banking Bhd v Lauw Wisanggeni

• Jurisdiction: Singapore
• Judge: Tan Lee Meng J
• Judgment Date: 15 September 2003
• Neutral Citation: [2003] SGHC 208
• Docket Number: Originating Summons No 329 of 2003
• Date: 15 September 2003
• Published date: 03 October 2003
• Year: 2003
• Plaintiff Counsel: Sarjit Singh Gill, SC and Pradeep Pillai (Shook Lin & Bok)
• Citation: [2003] SGHC 208
• Defendant Counsel: Tan Lee Cheng and Yeo Yen Ping (Harry Elias Partnership)
• Court: High Court (Singapore)
• Subject Matter: Consideration,Whether court should order originating summons converted to writ,Whether party seeking to rely on deed of undertaking had provided consideration,Whether forbearance to sue is consideration,Deed of undertaking,Contract,Mode of commencement,Whether necessary that consideration must move from promisee to promisor,Originating processes,Originating summons,Civil Procedure

1. The plaintiffs, Malayan Banking Berhad (“MBB”), commenced this originating summons to obtain an order that the defendant, Wisanggeni Lauw (“Lauw”), comply with a Deed of Undertaking executed by the latter on 3 July 2002. Lauw, who did not deny that he signed the Deed of Undertaking, contended that the rights of the parties can only be properly determined after a cross-examination of the persons involved in the preparation and signing of the Deed of Undertaking. As such, he sought to have the originating summons converted to a writ. After hearing the arguments of both counsel, I made the order sought by MBB and now set out the reasons for my decision.

2. The facts in this case, shorn of details, are as follows. MBB granted banking facilities to a number of companies, namely Eurocar Pte Ltd, Alps Investments Pte Ltd, Conic Heavy Equipment Pte Ltd and Victory Electronic Pte Ltd, which were owned or controlled by one Mr Kang Hwi Wah (“Kang’). These companies owed MBB a large amount of money. As Kang had financial problems, he arranged for Lauw to secure banking facilities offered by MBB to his companies by furnishing security to the bank.

3. Lauw explained that he agreed to help Kang because he felt that the latter had useful business contacts and a certain standing in the Chinese community in Singapore. In his own words, he “wished to cultivate Kang as a business contact”. As such, on 3 July 2002, he entered into a Deed of Undertaking with MBB. This Deed outlined the undertakings provided by him in relation to a Memorandum of Charge of the same date, under which E-Infohigh Limited (“E-Info”), a company wholly owned by him, executed a first fixed charge over its 30 million shares in United Fiber System Limited (“UFS”) in favour of MBB as security for the amount owed by the companies to the bank.

4. Clause 2.2 of the Deed of Undertaking provides as follows:

In the event that the value of the shares falls below the minimum threshold value at any time during the security period, the obligor shall, within 15 days of being so requested by the Bank in writing:

(a) provide to the bank additional security having a value (as may be determined by the bank in its absolute discretion) of not less than the shortfall and in the form acceptable to the bank (the “additional security”) and/or

(b) purchase from the bank all or part of the shares at the price of $0.17 per share.

5. The term “shares” in clause 2.2 of the Deed of Undertaking referred to “the 30 million UFS shares held by E-Info which are the subject of the security created under the Memorandum” while the term “minimum threshold value” in that clause was defined to mean “$5,100,000 calculated on the basis of $0.17 per share”.

6. On 17 December 2002, MBB’s solicitors informed Lauw in writing that the share value of the UFS shares had fallen below the minimum threshold value and that the bank, relying on clause 2.2 of the Deed of Undertaking, required him to furnish additional security with a value of not less than the shortfall, which amounted to $4,050,000 as at 16 December 2002. On 10 January 2003, Lauw’s solicitors replied, stating that his obligation to comply with clause 2.2 of the Deed of Undertaking only took effect one year from the date of the Deed, a claim that was not supported by the...