Overseas Union Bank Ltd v Lea Tool and Others

• Jurisdiction: Singapore
• Judge: Warren Khoo L H J
• Judgment Date: 04 February 1998
• Neutral Citation: [1998] SGHC 37
• Docket Number: Suit No 1624 of 1995
• Date: 04 February 1998
• Year: 1998
• Published date: 19 September 2003
• Plaintiff Counsel: Geraldine Chia (Bee See & Tay)
• Citation: [1998] SGHC 37
• Defendant Counsel: Savliwala Din (Salem Ibrahim & Partners)
• Court: High Court (Singapore)
• Subject Matter: Guarantee,Deeds,Whether guarantee signed by one of three guarantors binding,Change in directors,Grant of banking facilities to company on security of directors' personal guarantee,Facilities already drawn down when guarantee signed,Past consideration,Whether sufficient evidence of intention to sign and deliver document as a deed,Credit and Security,Guarantees and indemnities,New director signed separate document,Signature on blank space opposite words 'signed, sealed and delivered',Document not executed under seal,Intention for all directors to provide joint and several guarantee,Contract,Whether guarantee void for lack of consideration,Consideration,Deeds and Other Instruments

Judgment:

WARREN LH KHOO J

Cur Adv Vult

This is a claim by the plaintiff bank on two guarantees, one executed by the second and third defendants (Mr Tham and Mr Li) and another by the fourth defendant (Mr Lew) alone, both guarantees purporting to secure the indebtedness of the first defendant company to the plaintiff bank. This judgment deals solely with the position of the fourtth defendant, the claims against the other two defendants having been dealt with under the default provisions of the Rules of Court. I shall refer to the fourth defendant simply as the defendant.

2.The company`s banking relationship with the bank started some years ago. From July 1988, the bank had been granting the company facilities of various kinds. The amounts and the kinds of facilities varied from time to time. On each occasion when there was a change in the amounts of the facilities granted or in the nature of the facilities granted, the bank would require that the directors of the company sign a guarantee as security, in addition to any other security agreed. A directors` resolution accepting the facilities and referring to these requirements was also required.

3.In May 1991, following such changes in the facilities granted, the directors were accordingly required to sign a guarantee. The directors at that time were Mr Tham and Mr Li. The two of them together signed a guarantee in the bank`s standard form of personal guarantee. This guarantee was dated 6 June 1991. By the terms of the guarantee (cl 16 - see below), they were jointly and severally bound.

4.A year passed. There were internal differences in the company. Mr Li was removed as a director. The defendant was appointed in his place. There had been no change in the facility granted. At least no one contends there was any change. But there was this change in the composition of the board of the company. The bank wanted the defendant to be a guarantor, not in replacement of Mr Li, but in addition to both Mr Li and Mr Tham. This was reflected in the terms of the resolution which the bank required, the relevant part of which read:

That the above facilities be secured by the continuing joint and several guarantees of Messrs Tham Weng Key, Li Kwok Wah and Mr Lew Keh Lam.

5.Now, as stated above, Mr Tham and Mr Li had already executed a guarantee in June 1991. Instead of getting all three gentlemen to sign together on the bank`s standard form of personal guarantee, officers of the bank thought that it would be enough just to get the defendant to sign one on his own since Mr Tham and Mr Li had already signed one previously. So, a guarantee, in exactly the same standard form as the one Mr Tham and Mr Li had earlier signed, was prepared.

6.Mr Chua, the bank`s branch credit officer, who prepared the guarantee, gave it to Mr Tham and asked Mr Tham to get it signed by the defendant. Mr Tham got the defendant to sign it and returned the document to Mr Chua. Mr Chua then dated it, and witnessed the defendant`s signature after verifying it against the specimen signatures in the bank`s records. This was in accordance, he says, with the bank`s usual practice. I do not accept the defendant`s evidence that when he signed the document, the blanks on the first page (the company`s name and the maximum guaranteed amount) had not been filled in. This was not put to Mr Chua when Mr Chua had been on the stand. Contrary to what the defendant says, I also find on a balance of probabilities that the defendant`s name as the signatory was also there when he signed it.

7.However, it is undisputed that the defendant`s was the only name there. Mr Tham`s and Mr Li`s were not. This was all in accordance with Mr Chua`s view that since Tham and Li had already signed a guarantee before, it was not necessary to involve them again.

8.The company defaulted, and the bank brought this suit against all three gentlemen as guarantors for the amount owed by the company. The bank relies on the 1991 guarantee for its claim against Tham and Li, and on the 1992 guarantee for its claim against the defendant. Can the bank do it? That is the main question in this suit.

9.A somewhat similar but not quite the same problem arose in the case of Indian Bank vs Raja Suria & Ors [1993] 2 SLR 497 . In that case, a company had been granted overdraft facilities by the appellant bank, to be secured, inter alia, by the personal guarantee of all the directors of the company. The company had seven directors. A guarantee in the bank`s standard form was prepared, naming the seven directors as joint and several guarantors. Six of the seven directors signed the guarantee thus prepared. The seventh was away in England. A separate document in identical terms to the first guarantee but naming only the seventh director as guarantor, was sent to him. He signed it there, and returned it to the bank. The company subsequently defaulted on the debt, and the bank sued all the seven directors, relying on the two guarantees thus signed by them.

10.Upholding the decision of the High Court (Goh Phai Cheng JC), the Court of Appeal held that the bank could not sue any of the directors. Two issues were raised in the case. First, there was the argument for the bank to the effect that the two guarantees formed part of a single transaction, and they should be read together. On this point, Lai Kew Chai J, delivering the judgment of the Court of Appeal, noted that the action of the bank was based on the joint and several guarantee of the seven defendants as contained in the two documents. He said that the bank, therefore, had to show that the two documents in fact formed one...