Overseas Union Bank v Lew Keh Lam

• Judge: Karthigesu JA
• Judgment Date: 26 August 1998
• Neutral Citation: [1998] SGCA 49
• Published date: 19 September 2003
• Subject Matter: Appeals,Whether valid consideration existing for a continuing guarantee,Consideration,Whether leave can be given retrospectively,Guarantee,Contract,Whether appeal to be struck off for not obtaining leave of court pursuant to s 76(1)( c)(ii) of the Bankruptcy Act,Civil Procedure,s 76 Bankruptcy Act (Cap 20)
• Defendant Counsel: Savliwala Fakhruddin Huseni and Yap Pett Chin (Salem Ibrahim & Partners)
• Court: Court of Three Judges (Singapore)
• Plaintiff Counsel: K Shanmugam SC and Ronald Choo Han Woon (Allen & Gledhill)

Judgment:

KARTHIGESU JA

(delivering the grounds of judgment of the court): This appeal concerns a claim for moneys under a guarantee. We allowed the appeal and entered judgment for the appellant (`the bank`) for $312,186.10 together with interest at the rate of 4% pa with monthly interests from 27 July 1995 to 5 August 1998, the date of our judgment. We now give our reasons.

2.From July 1988, the bank had been granting Lea Tool & Moulding Industries Pte Ltd (`the company`) facilities of various kinds. These facilities varied in nature and amounts from time to time. Every time there was such a change, the bank would require two things. Firstly, the directors of the company to sign a guarantee as security, in addition to any other security agreed. Secondly, a directors` resolution accepting the facilities and referring to these requirements.

3.In May 1991, pursuant to such changes in the facilities, the directors of the company at that time, Tham Weng Kay (`Tham`) and Li Kwok Wah (`Li`), signed a guarantee in the bank`s standard form of personal guarantee dated 6 June 1991. Under the terms of the guarantee, they were jointly and severally liable.

4.A year later in 1992, owing to disagreement over the management of the company, Li was removed as a director and the respondent was appointed in his place. In view of this change in the directors of the company, the bank wanted the respondent to be a guarantor in addition to both Tham and Li. Subsequently, a guarantee, identical to the standard form signed by Tham and Li in June 1991 was signed by the respondent alone.

5.This was done in the following way. Chua, who was the bank`s branch credit officer, prepared the guarantee and gave it to Tham and asked him to get it signed by the respondent. After Tham had procured the respondent`s signature, he returned it to Chua. Chua then dated the guarantee and signed it as a witness after verifying the respondent`s signature against the specimen signatures in the bank`s records. Chua also gave evidence that this was in accordance with the bank`s usual practice. The respondent was the only guarantor named on the guarantee form.

6.The company defaulted and the bank sought to claim the amount owed by the company from all three guarantors in their capacity as guarantors. The bank relied on the 1991 guarantee for its claim against Tham and Li, and the 1992 guarantee against the respondent. The court below only had to deal with the bank`s claim against the respondent as the bank had already entered a judgment against Tham and Li under the default provisions of the rules of court..

7.The learned judge in the court below held that the bank was not entitled to claim from the respondent for the following reasons. Firstly, the intention of the parties was that the respondent was to join Tham and Li as joint and several guarantors, and as all three had not signed on the same guarantee form, it was well-established in law that such a guarantee was invalid. He relied on Indian Bank v Raja Suria & Ors [1993] 2 SLR 497 .

8.Secondly, there was no consideration for the respondent`s promise to be a guarantor. This was because when the respondent signed the guarantee, the facilities that were granted by the bank in exchange for the 1991 guarantee had been fully drawn down and no new facilities had been granted. Furthermore, the bank had not recalled or threatened to recall the facilities. As such, the learned judge held that there were no requested exchange of promises and hence no consideration. He also dismissed the alternative argument that the guarantee was executed as a deed. There was no seal and he held that there was no intention to execute the guarantee as a deed.

9.The learned judge rejected the bank`s submission that a sole personal guarantee was created by the respondent when he signed the 1992 guarantee. His finding of fact was that the intention was to create a joint and several guarantee with all three, ie Tham, Li and the respondent. The only reason why the guarantee only had the respondent`s signature was the bank`s erroneous belief that it was enough for the respondent to sign the 1992 guarantee as Tham and Li had previously signed the 1991 guarantee and neither of them had been released of their obligations.

10.He based his findings of the parties` intention firstly on the directors` resolution required by the bank in conjunction with the making of the respondent a guarantor which stated, inter alia, that:

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

The learned judge felt that this statement indicated that the intention was for all three of them to be joint and several guarantors. Secondly, the bank`s standard form of personal guarantee was designed to be used by either one or more guarantors. This was achieved by the use of the device `I/We` and `me/us` in all the provisions referring to the guarantor or guarantors and by the general provision in cl 16 which reads:

This guarantee where there are more than one guarantor shall be binding on us jointly and severally ... and shall be construed in the manner and with the effect as if each of us had executed a separate guarantee.

Hence he reasoned that the fact that such a form was used showed that the implied intention was that all three should be included in it as guarantors and to quote from his judgment, `the paramount intention was for all three to be jointly and severally liable, and not for two to be jointly and severally liable and the remaining one to be solely liable.`

11.Before us the bank argued that all along, the intention had been to create a separate personal guarantee with the respondent alone. The flow of the argument can be summarised as follows: (a). The respondents` signature was the only one that appeared on the 1992 guarantee.

(b). On the face of...