The Tai Ping Insurance Company Ltd v Fan Chun Wah and Another

• Judgment Date: 09 April 1998
• Date: 09 April 1998
• Docket Number: Suit No 2278 of 1996
• Court: High Court (Singapore)

The Tai Ping Insurance Co Ltd

Plaintiff

and

Fan Chun Wah and another

Defendant

[1998] SGHC 102

SRajendran J

Suit No 2278 of 1996

High Court

Credit and Security–Guarantees and indemnities–Individual liability of directors giving indemnity–Co-guarantors–Resigned director's name in indemnity instrument but no signature–Whether indemnity binding on all when one signature missing–Whether intention for all persons named in indemnity document to be liable–Whether indemnity document conclusive evidence of intention–Effect of erroneous insertion of ex-director's name in indemnity document

The plaintiff filed this action against the first and second defendants for payment of $1,649,900 pursuant to an indemnity given by them.

The first and second defendants were directors of Sung Foo Kee Construction (Singapore) Pte Ltd (“SFK Construction”), which was awarded a construction contract by the Housing & Development Board (“HDB”). The contract required SFK Construction to take out a Contractor's All Risks Insurance Policy (“CAR policy”) and provide a security bond jointly with a third party whereby SFK Construction and the third party would be jointly and severally liable to pay HDB immediately upon demand a sum of up to $1,649,900. The plaintiff issued the CAR policy in SFK Construction's favour and provided the security bond. The transaction was handled through an insurance broker. Prior to issuing the CAR policy, the plaintiff told the broker that it required SFK Construction and its directors, to sign the plaintiff's standard form of indemnity as guarantors. At that time, the plaintiff did not know any details about SFK Construction's directors. Subsequently the brokers told the plaintiff that the two directors had signed on the indemnity form and that Cheng Hung Fat (“Cheng”) whose name was on the form had not signed because he was no longer a director. The plaintiff only wanted the signatures of existing directors. The signed indemnity forms, dated 1 November 1994, were returned signed by SFK Construction, the first and the second defendants. Against Cheng's name was written “resigned”. This accorded with what the plaintiff had been told. SFK Construction was subsequently placed under judicial management and in July 1996 the plaintiff received a demand from the HDB, under the security bond, for payment of a sum of $1,649,900, which was duly remitted.

In these proceedings, the second defendant did not enter appearance and judgment in default of appearance was entered against him. The first defendant contended that the indemnity was not binding on him, as he had signed the indemnity document on the basis that all four parties named therein would sign, and that if he had known that Cheng was not going to sign, he would also not have signed. He conceded that Cheng had resigned from SFK Construction well before 1 November 1994, but alleged that he believed the plaintiff had requested and Cheng had agreed to sign the indemnity. He further pleaded an understanding between the plaintiff and himself that the indemnity would be signed by all four parties.

Held, allowing the plaintiff's claim:

(1) The court rejected the first defendant's testimony that the plaintiff had agreed that Cheng should be a guarantor and that he signed the indemnity on the basis that Cheng would also sign. The court found that the insertion of Cheng's name on the indemnity was an error made either by the broker or SFK Construction. The first defendant had signed the indemnity document knowing that Cheng's name had been included in error, and there was no question of Cheng signing the indemnity: at [18] and [19].

(2) In a case like this where the document was to be executed by more than one guarantor who were to be jointly and severally liable, it was not necessary that all must sign the document before any was bound. It was crucial to determine the common intention of the parties, which could be discovered from the instrument itself as well as from other sources. The instrument afforded evidence of this intention but was not necessarily conclusive either for or against the existence of that intention: at [20].

(3) Here where Cheng's name was inserted in error not by the plaintiff, but by either the brokers or SFK Construction, it was the common intention of the parties that only the first and second defendants...