Wardley Ltd v Tunku Adnan and Another

• Jurisdiction: Singapore
• Judgment Date: 11 April 1991
• Date: 11 April 1991
• Docket Number: Suit No 1779 of 1989
• Court: High Court (Singapore)

Wardley Ltd

Plaintiff

and

Tunku Adnan and another

Defendant

[1991] SGHC 195

G P Selvam JC

Suit No 1779 of 1989

High Court

Banking–Lending and security–Interest–Interest after judgment–Parties agreeing on interest rate above statutory rate stipulated by O 42 r 12 The Rules of the Supreme Court 1970–Whether term ancillary or independent–Whether guarantors required to pay interest according to this term or at statutory rate–Order 42 r 12 The Rules of the Supreme Court 1970–Banking–Lending and security–Special payments of money, charges and assignments–Guarantee under multi-currency loan–Currency of payment under loan–Whether guarantors required to pay on guarantee in Swiss francs or Australian dollars

The defendants were guarantors of a loan which the plaintiff made to four Malaysian borrowers. The loan was for the equivalent in Eurocurrency of A$1.160m which the borrowers required to purchase properties in Australia. In the event of default, interest was payable at 4 % per annum above the statutory rate (“the contractual interest”). The loan was eventually made in Swiss francs.

The plaintiff applied for and obtained summary judgment against the borrowers for the outstanding principal sum payable in Swiss francs, but the contractual interest was not payable after judgment. Both the bank and the borrowers appealed. The judge in chambers affirmed the decision on the outstanding principal sum and allowed the appeal on contractual interest. The borrowers' appeal to the Court of Appeal remains to be heard.

The plaintiff then brought the present action against the guarantors seeking summary judgment that the loan was to be repaid in Swiss francs and not Australian dollars and that contractual interest was payable after judgment. The Registrar gave summary judgment that the loan was to be repaid in Swiss francs but that contractual interest was not payable after judgment. Both the bank and guarantors appealed against these decisions to the judge in chambers.

Held, dismissing the guarantors' appeal and allowing the bank's cross-appeal:

(1) As a general rule, a debt payable at a future time involved an obligation to pay the nominal amount of the debt and in the same unit of money in the form of the permitted legal tender at the time of repayment. This was known as the nominalistic principle of monetary obligation. According to this principle, the creditor was entitled to measure the debt in and demand repayment in the same units of money lent. The units in which the debt was measured was usually referred to as the “money of account”. If repayment was not legally possible in the money of account, the debtor must pay in a permitted currency applying the rate of exchange at the time of payment. The units of money used to discharge the debt was called “the money of payment”. Thus where a debt was expressed in Swiss francs both creditor and the debtor may insist that it be discharged by the same nominal amount of Swiss francs at the time of payment. The principle of nominalism would ignore any fluctuations in the value of the money of account. Accordingly where the money of account and money of payment were different, the debtor would benefit by the depreciation of the money of account and suffer by its appreciation: at [12].

(2) However, parties to a nominalistic transaction were entitled to make their own arrangements regarding money of account and money of payment. The loan agreement clearly provided that the money of account and money of payment was Swiss francs. As such, the guarantors were liable to pay in Swiss francs: at [14].

(3) The court's function was to construe the interest provision and characterise it as an ancillary or independent term. In this case, the interest provision was expressed as an independent term which would survive any judgment for the principal debt. The plaintiff was, therefore, even after judgment for the outstanding loan amount, entitled to judgment for interest at the contractual rate until payment: at [22], [26]and [33].

Agriculturist Cattle Insurance Co,In re; ex parteHughes (1876) 4 Ch D 34 n (refd)

Economic Life Assurance Society v Usborne [1902] AC 147 (folld)

European Central Railway Co, In re; ex parte Oriental Financial Corp (1876) 4 Ch D 33 (refd)

MBF Finance Bhd v Malaysia Air Charter Co Sdn Bhd [1987] 2 MLJ 718 (refd)

Malaysia Building Society Bhd v Lim Kheng Kim [1988] 3 MLJ 175 (refd)

Malaysian International Merchant Bankers Bhd v Dhanoa Sdn Bhd [1988] 1 MLJ 257 (refd)

Miliangos v George Frank (Textiles) Ltd [1976] AC 443 (folld)

Popple v Sylvester (1882) 22 Ch D 98 (refd)

Sim Lim Finance Ltd v Pelandok Enterprises Pte Ltd [1981-1982] SLR (R) 98; [1980-1981] SLR 527 (not folld)

Sneyd, In re; Ex parte Fewings (1883) 25 Ch D 338 (folld)

Woodhouse AC Israel Cocoa Ltd SA v Nigerian Produce Marketing Co Ltd [1971] 2 QB 23, CA (refd)

Woodhouse AC Israel Cocoa Ltd SA v Nigerian Produce Marketing Co Ltd [1972] AC 741, HL (refd)

Rules of the Supreme Court1970, TheO 42r 12 (consd)

Judgments Act 1838 (c 110) (UK)s 17

Steven Ang (Godwin & Co) for the plaintiff

RChandra (Haridass Ho & Partners) for the defendants.

G P Selvam JC

1 There are two appeals before me as the judge in chambers (this court). They arose out of an action commenced by a merchant bank, Wardley Ltd (“the bank”). The defendants were guarantors of a loan...