2001 Construction of terms of contract -- Sewage mains and standard of road construction

2251 Formation -- Consideration

3 [2251] CONTRACT Formation – Consideration – Payment of a smaller sum for a larger sum due – Estoppel – Debt - Agreement to pay lesser sum in settlement - Whether agreement available as a defence - Estoppel.
Summary :

The plaintiff claimed the sum of $3,592 from the defendant arising from transactions relating to the letting of premises. The defendant alleged that there was a general settlement of all outstanding claims between him and the plaintiff under which he had agreed to pay and had paid the sum of $2,000. The plaintiff agreed that he had received the sum of $2,000 but denied that it was an overall settlement and he in support of his contention pleaded that since that settlement he had obtained judgment by default against the defendant in the sum of $2,256.96 and had been paid this sum.
Holding :

Held: (1) on the facts there was an agreement for the payment of $2,000 by the defendant to the plaintiff in settlement of all outstanding claims between them; (2) the defendant can rely on this agreement as a defence to the claim; (3) the defendant was not estopped from setting up the defence, despite the fact that he did not avail himself of it in the earlier action.
Digest :

William Teo's House and Estate Agencies v Chan Eng Swee [1965] 2 MLJ 89 High Court, Penang (Hepworth J).
2252 Formation -- Construction

3 [2252] CONTRACT Formation – Construction – Contract - Construction - Credit card arrangement - Whether binding - Whether subject to execution of formal contract.
Summary :

This was an application for summary judgment under the Rules of the Supreme Court 1957, O 14. The plaintiffs claimed a sum of $704,762.51 for the sale and supply of aviation fuel to an aircraft belonging to the defendants, at various airports, including Kuala Lumpur, for the period between June 1971 and September 1971. On 25 November 1971, the plaintiffs filed their statement of claim, and simultaneously applied for and obtained an order of attachment, before judgment, against the defendants' aircraft. On 27 November 1971, the said order

was set aside, and this formed the subject matter of a counterclaim for defamation against the plaintiffs. The defendants admitted that the fuel was supplied, but denied all liabilities. They contended that they were liable to pay at the price thereof, ab initio, to be fixed when a formal contract came to be made and executed on or about two weeks from then. Prior to the establishment of a proposed formal contract, the arrangement arrived at between the parties was contained in three letters and five credit cards. Thus, the court had to construe, inter alia, the meaning of the three letters to determine the nature of the arrangement arrived at between the parties.
Holding :

Held, allowing the application: (1) there were no triable issues. This was simply a case of construction of certain documents which passed between the parties; (2) the counterclaim was to form the subject matter of a separate action. It is settled law that a counterclaim cannot be maintained unless it is shown that the relief claimed is sufficiently connected with or allied to the subject matter of the principal claim as to make it necessary in the interests of justice that it should be dealt with along with the claim. Thus, a counterclaim for libel cannot be maintained in a claim for money lent; (3) there was an immediate binding contract based on the credit card arrangement. The letters were not expressed in such a way as to show clearly that the execution of a formal contract was made a condition precedent to the existence of a binding arrangement. There were no words appropriate for introducing a condition or stipulation. Per Raja Azlan Shah J: 'It is, I think, right that an order under O 14 should be made only if the court thinks it is a plain case and ought not to go to trial. If one simply has a short matter of construction with a few documents, the court, on summary application, should decide what in its judgment is the true construction. There should be no reason to go formally to trial where no further facts could emerge which would throw any light upon the letters that have to be construed.'
Digest :

Esso Standard Malaya Bhd v Southern Cross Airways (Malaysia) Bhd [1972] 1 MLJ 168 High Court, Kuala Lumpur (Raja Azlan Shah J).
2253 Formation -- Contract for sale of property

3 [2253] CONTRACT Formation – Contract for sale of property – Parties entered agreement to make sale and purchase agreement of property – Parties to transaction, property price and essential terms identified – Correspondence between parties did not reflect intention of parties that there should be no concluded contract until a formal sale and purchase agreement had been executed – Whether an 'open contract' – Whether enforceable as if it was embodied in document with all attendant solemnity – Whether court could imply terms into contract for sale to give it effect

Digest :

Charles Grenier Sdn Bhd v Lau Wing Hong [1996] 3 MLJ 327 Federal Court, Kuala Lumpur (Anuar CJ (Malaya). See CONTRACT, Vol 3, para 2208.
2254 Formation -- Contract for sale of property

3 [2254] CONTRACT Formation – Contract for sale of property – Parties signed memorandum of understanding ('MOU') – Purchaser paid deposit of 1% of purchase price – Balance of 9% to be paid upon signing of formal sale and purchase agreement on a certain date – Purchaser failed to sign formal sale and purchase agreement on date specified – Vendor sold property to third party – Purchaser claimed specific performance of contract based on MOU – Whether MOU resulted in a legally binding contract – Whether MOU only an agreement to negotiate
Summary :

This was an action brought by the plaintiff ('the purchaser') against the defendant ('the vendor') for specific performance of a contract of sale and purchase of a house ('the property'), based on a memorandum of understanding ('the MOU'). In accordance with the MOU, the purchaser paid a deposit of 1% of the purchase price and further agreed to pay another 9% upon signing of a formal sale and purchase agreement on or before 8 October 1993. In pursuance of this so-called agreement, the purchaser entered a private caveat over the property. The purchaser did not sign the formal sale and purchase agreement on 8 October 1993 as stated in the MOU, but on 11 October 1993. The vendor did not sign the formal sale and purchase agreement on the ground that it was not signed by the purchaser within the time period as stipulated in the MOU. The vendor then sold the property to another party, who were the interveners in these proceedings. The purchaser argued that upon signing the MOU, a binding contract came into existence. The vendor's contention was that there was no binding contract between the parties for the following reasons: (i) the MOU by itself was not a legally binding contract for the sale and purchase of the property; and (ii) even if it was, as time was the essence of the agreement, the purchaser's failure to sign the formal sale and purchase agreement on or before 8 October 1993, as required by the MOU, entitled the vendor to terminate the agreement. In the originating summons commenced by the vendor - which matter was consolidated with the main civil suit - the vendor applied to this court for the removal of the caveat entered by the purchaser.
Holding :

Held, dismissing the plaintiff's claim and ordering that the caveat be removed: (1) in cases dealing with preparatory agreements where the intention of the parties plays a crucial role in determining its effect, each case must be decided on its own

facts. In each case, it is the duty of the court to determine not only the nature of the document, but also the true intention of the parties at the time the document was executed - whether the parties intended to be bound by any contract immediately, or only on the fulfilment of certain conditions, eg the execution of a formal contract; (2) in certain exceptional cases where the intention of the parties is clearly established, an immediately binding contract may come into force, even though a formal agreement is to be executed subsequently; (3) considering the MOU as a whole, and in particular, the objective of the MOU, the 'genesis of the agreement' and the intention of the parties at the time of the signing, the MOU was not a legally binding agreement, and as such, unenforceable; (4) a legally binding agreement could only come into force upon the execution of the formal sale and purchase agreement, by which time the parties would have considered all aspects of the sale in detail, and a formal agreement prepared by the solicitors to cover all these aspects of the sale for execution. Until the execution of the formal agreement - as there is no binding contract between the parties - the parties are at liberty to resile from the so-called agreement without any legal consequences flowing from such an action. Such clearly appeared to be the intention of the parties at the time of the signing of the MOU, and that certainly is the effect of the MOU in law; (5) and (ii) the nature of the subject matter or the surrounding circumstances are such that the time specified for the performance is of the essence; (6) where there is no express provision in the contract making time of the essence, the court will then have to consider the nature of the property, the surrounding circumstances and the nature of the contract to determine whether time was intended by the parties to be the essence of the contract; (7) the MOU expressly stipulated that a formal sale and purchase agreement had to be executed and the sale transaction completed 'on or before 8 October 1993'. However, the mere stipulation of a date fixed for completion in a contract does not by itself make time to be of the essence of the contract. The nature of the property and the surrounding circumstances would still have to be considered. Considering the MOU as a whole, it appeared that time was the essence of the contract; (8) even if the MOU was regarded as a binding contract, the failure on the part of the purchaser to pay the balance of the purchase price and to execute the sale and purchase agreement within the stipulated time entitled the vendor to repudiate the contract; (9) under s 56 of the Contracts Act 1950, in a contract for the sale of land, time is of the essence in two main situations: (i) where the intention of the parties was such that time was of the essence of the contract for the fulfilment of their respective obligations;since there was no binding contract between the purchaser and the vendor under the MOU, or that even if there was one, the purchaser was in breach of the contract in not fulfilling the conditions stipulated in the MOU, the purchaser had no caveatable interest in the property.
Digest :

Abdul Rahim bin Syed Mohd v Ramakrishnan Kandasamy (Wan Ahmad Azlan bin Wan Majid & Anor, Interveners) and another action [1996] 3 MLJ 385 High Court, Kuala Lumpur (Visu Sinnadurai J).

Contract of hire purchase 3 [2256] CONTRACT Formation – Contract of hire purchase – Hire-purchase agreement . The written offer signed by the respondent without the condition precedent being fulfilled was not an offer recognised by the Hire Purchase Act and as such there could not be acceptance by the appellant of a nonexistent offer. He therefore dismissed the appellant's claim. Kuala Lumpur (Visu Sinnadurai J). the appellant had let a motor car to the respondent under a hirepurchase agreement. Holding : Held: the appellant's claim was rightly dismissed as the condition precedent imposed by s 4(1) of the Hire Purchase Act had not been complied with. He alleged that the appellant had (a) failed to comply with s 4(1) of the Act by failing to give him a written agreement consisting of a summary of his financial obligations under the proposed hire-purchase agreement as set out in the Second Schedule to the Act. Vol 3. The learned judge was right in describing the agreement as void ab initio for lack of offer and acceptance. The learned judge therefore held that the appellant had failed to prove that it had entered into a valid and proper agreement with the respondent.2255 Formation -. Summary : In this case. Interveners) and another action [1996] 3 MLJ 385 High Court. (b) failed to supply him with a copy of the hire-purchase agreement within 14 days of its execution. Abdul Razak J held that on the evidence the appellant had complied with the provision of s 5(1). See CONTRACT. The respondent denied the whole claim and sought the protection of the Hire Purchase Act 1967 (Act 212). The President of the Sessions Court found that both the provisions of ss 4(1) and 5(1) of the Act had been breached and he dismissed the claim.Agreement void ab initio . an obligation imposed under s 5(1) of the Act. 2256 Formation -. The respondent fell into arrears with the payment and the appellant brought an action for the balance outstanding under the hire-purchase agreement. . The appellant appealed. but he held that the appellant had violated s 4(1).Lack of offer and acceptance.Contract for sale of property 3 [2255] CONTRACT Formation – Contract for sale of property – Parties signed MOU – Whether intention of parties to be bound immediately upon signing of MOU or upon signing of formal sale and purchase agreement Digest : Abdul Rahim bin Syed Mohd v Ramakrishnan Kandasamy (Wan Ahmad Azlan bin Wan Majid & Anor. On appeal. para 2182.

Risk to commence on issuance of policy . Mohamed Azmi and Syed Agil Barakbah FJJ).Subject to formal agreement . On 2 December 1977. (3) there was no concluded contract of insurance between her and AIA and accordingly the claim failed.Breach ..Contract through correspondence 3 [2258] CONTRACT Formation – Contract through correspondence – Breach – Offer and acceptance of quotation . Kuala Lumpur (George J).Authority . The form of proposal ended with a declaration signed by Azian which provided that 'The assurance herein applied for shall not take effect unless and until a policy is issued and delivered to me .No concluded contract. Summary : . At the back of the receipt it was printed that 'said receipt is issued only for the account of the payer. a cashier's receipt for the first premium in favour of Azian was issued. A claim was filed on the insurer by her father and the other administrators of the estate.Damages. Digest : Borhanuddin bin Haji Jantara & Ors v American International Assurance Co Ltd [1986] 1 MLJ 246 High Court. 2258 Formation -..Digest : Affin Credit (Malaysia) Sdn Bhd v Yap Yuen Fui [1984] 1 MLJ 169 Federal Court.Contract of insurance 3 [2257] CONTRACT Formation – Contract of insurance – Payment of insurance premium does not amount to acceptance of proposal . Holding : Held: (1) receipt of the amount of $118 does not amount to a waiver of the understanding between Azian and AIA set out in the declaration that the assurance applied for was not to take effect until a policy was issued and delivered to Azian and the first premium actually paid in full. and the company is in no way committed thereby to the acceptance thereof . 2257 Formation -...Variation . Summary : In this case.Mistake . The insurer repudiated liability on the ground that there was no concluded contract.'. (2) there is no evidence to show as to how much the premium was and what the $118 represented. Kuala Lumpur (Abdul Hamid.Whether binding contract .'. one Azian bte Borhanuddin had completed a document entitled 'Application for Life Assurance' in the insurance company (AIA). No policy was issued and unfortunately Azian died in an aircrash on 4 December 1977.

Kaolin (Malaysia) Sdn Bhd ('Kaolin'). allowing the appeal: (1) on acceptance by letter dated 27 December 1969 of the quotation in the letter of 15 December. nominal damages should be awarded for the plaintiff. The plaintiffs claimed that through a series of correspondence made between the plaintiffs and defendants a contract was concluded. Kaolin was in breach of the contract.000 and costs.Correspondence between the respective parties Whether there was a contract . Digest : Ng Brothers Construction v Kaolin (Malaysia) Sdn Bhd [1985] 1 MLJ 245 High Court. there was no binding contract between them. there was a contract binding on both parties. Paya Terubong Estate Sdn Bhd. holding that there was no binding contract.The respondent. Ng Construction was therefore entitled to damages assessed at $10. Ng Construction appealed. stating that a formal agreement would be signed later. asked the appellant. Ng Construction therefore claimed damages for breach of contract. Ng Construction by letter dated 15 December 1969 gave a quotation which was accepted by Kaolin by letter dated 27 December signed by its Production Assistant.Remedies available. Kuala Lumpur (Wan Hamzah J). Holding : Held: (1) in the present case. This action was brought against the defendants. The plaintiffs are the executors and trustees of the estate of Tan Tye Chek (the deceased) who died on 22 May 1981. . Ng Construction claimed that the exchange of the two letters had created a binding contract and that Kaolin by letter of 6 January 1970 had purported to determine the contract. (3) in the circumstances. The sessions court dismissed the suit of Ng Construction.Contract through correspondence 3 [2259] CONTRACT Formation – Contract through correspondence – Damages – Offer and acceptance . Any subsequent disagreement between the parties on any proposal to vary the terms of the contract did not affect the contract. Ng Brothers Construction ('Ng Construction'). to submit a quotation for the construction of a clay factory complex for Kaolin. the main issue for decision was whether there was a contract for the sale of a certain piece of land. Holding : Held. Summary : In this case. Kaolin maintained that as no formal agreement was signed. through the crucial letters a contract was concluded. (2) in the circumstances of the present case. (2) Kaolin's letter of 27 December 1969 had been issued with authority. 2259 Formation -.

Summary : This was a claim for damages for breach of 'a contract for failure to take delivery of logs'. To prove the existence of the contract the respondents relied on the correspondence between the parties which included: (i) the appellant's offer to supply logs at $37 per ton. the method of payment was discussed.Contract through correspondence 3 [2260] CONTRACT Formation – Contract through correspondence – Whole of the correspondence must be taken into consideration – Contract by correspondence . It was argued for the plaintiffs that the parties had by the exchange of five telegrams effected a binding contract. The appellant subsequently withdrew his offer to sell at $37 per ton. 2260 Formation -. inter alia. and made a new offer of $40 per ton . (2) in this case. it is necessary to take the whole of the correspondence into consideration to ascertain whether the parties have come to a binding agreement. 2261 Formation -.000 tons of logs. the parties were still in a state of negotiation and the defendants were justified in withdrawing their offer. Penang (Edgar Joseph Jr J).Digest : Tan Geok Khoon & Gerard Francis Robless v Paya Terubong Estate Sdn Bhd [1988] 2 MLJ 672 High Court. The question was whether there was a binding contract. Holding : Held: (1) where a contract is to be found in letters.Contract through correspondence 3 [2261] CONTRACT Formation – Contract through correspondence – Whole of the correspondence must be taken into consideration – Contract evidenced by correspondence .whole of the correspondence must be taken into consideration. and that they required 2. Subsequent to the exchange of these telegrams there were letters in which. (ii) the respondents' acceptance of the offer.Whole correspondence to be looked into. Sibu (Lee Hun Hoe JC).000 tons of MLH logs to them. Summary : The respondents claimed damages from the appellant for breach of a contract to supply 2. Eventually the defendants wrote to the plaintiffs informing them that they considered the transaction unsuccessful. Digest : Lau Brothers & Co v China Pacific Navigation Co Ltd [1965] 1 MLJ 1 High Court. (iii) the appellant's instructions that payment should be by letter of credit.

Frustration 3 [2262] CONTRACT Formation – Frustration – Contract for sale of land . The defendant did not call upon the plaintiff to execute sale and purchase agreements and the houses had not in fact been erected.Whether there was a binding contract . The plaintiff brought an action for breach of contract. as they had not been required to be reserved for bumiputras. (3) in the circumstances of this case.Plea of frustration. Holding : Held: (1) there was a binding contract between the defendant and the plaintiff which had been reduced to writing in the form of the booking application and which both parties have signed. damages was the appropriate and adequate remedy. Digest : Lau Sieng Nguong v Hap Shing Co Ltd [1969] 1 MLJ 190 Federal Court.000 damages to the respondents. The defence was that there was no binding contract between the parties and if there was such contract.Breach of contract . In an appeal from the judgment of the High Court awarding $6. Digest : .which was refused by the respondents. dismissing the appeal: (1) where a contract is to be deduced from a set of documents it is necessary to look into the whole of the correspondence between the parties to see if the parties have come to a binding agreement. The appellant in his defence denied that there was a concluded contract between them. Holding : Held. in which one of the undertakings on the part of the defendant was that it should get its solicitors to prepare the sale and purchase agreement. (2) in this case the trial judge was right in holding that there was a binding contract between the parties.Booking application signed . it was clear that the defendant could sell the sub-lots agreed to the plaintiff. which undertaking the defendant was bound to perform. 2262 Formation -. Ismail Khan CJ (Borneo). (2) on the facts. the plaintiff had paid to the defendant booking fees for the purchase of two houses to be constructed by the defendant and the parties had signed a booking application which contained the terms and conditions of booking. Summary : In this case. Kuching (Azmi LP. it had been frustrated. and therefore the contract was not frustrated.Defendant not called upon to execute sale and purchase agreements .

Kwok said that the manager agreed and soon thereafter Chung forwarded a new set of invoices in the name of the Brunei company to the defendants. 2263 Formation -. Digest : .Whether defendants contracted with plaintiff or another company. But. so far as ADM is concerned. Summary : The plaintiff.Rajeswari Thedshanamurthy v Kin Nam Realty Development Sdn Bhd [1983] 1 MLJ 88 High Court. No written confirmation of the telephone call was sent to ADM.Replacement invoices . The plaintiff was to supply the goods to the defendants. In favour of the defendants are the 19 invoices in the name of the Sarawak company. Accordingly.Whether defendants contracted with plaintiff or another company. who would then remit to the plaintiff any payments which they received from Brunei Shell.06. Mr Shawaludin as managing director of ADM.Balance of account Erroneous invoices . Holding : Held: (1) the plaintiff has established that all the transactions relating to the three Shell contracts took place. The goods supplied were shipped on various dates between 25 October 1982 and 24 October 1983 and invoices and bills of lading were produced in evidence. The defence did not dispute the amount claimed.Replacement invoices .740. Polynesia Offshore Supplies Brunei ('the Brunei company') and Polynesia Offshore Supplies SB ('the Sarawak company'). subsequently discovered that 19 invoices were erroneously issued in the name of the Sarawak company instead of the Brunei company. The plaintiff's main witness was one Mr Kwok. not from the Brunei company. The defendants were awarded three contracts with Brunei Shell for the supply of chemicals. The issue is with whom was ADM in contract. being balance due to the plaintiff for goods supplied to it at its request.Erroneous invoices . a director both of the plaintiff. Kuala Lumpur (Wan Hamzah J). (2) the plaintiff is entitled to payment for $550. wrote a letter to Brunei Shell authorizing it to make payments to the Brunei company. and not with the Sarawak company. a Brunei limited company. The plaintiff company through its new accountant.Balance of account . with the Brunei company (the plaintiff). Also the prices were too low. against the defendants. The defendants said they purchased the goods from the Sarawak company. Mr Chung.740. 3 [2263] CONTRACT Formation – Goods sold and delivered . Kwok telephoned the manager of ADM (the defendant firm) asking him to disregard the 19 erroneous bills and telling him that these would be replaced with a fresh set of invoices under the Brunei company's letterhead. sued the defendant firm ('ADM') for the sum of $550.06 with costs and interest at 6% from judgment till payment.Goods sold and delivered .

(3) it was for the respondents to prove that there was a trade usage by which reproduced film positives belonged to printers who reproduce them. allowing the appeal: (1) the learned judge's finding and order as regards the sum of $500 were clearly erroneous and could not be supported by the evidence as he took no account at all of the admissions made by the respondents that the disputed item was an overcharge. Summary : In this case. Holding : Held.Polynesia Offshore Supplies (B) Bhd v Awang Damit & Anor [1986] 1 MLJ 438 High Court. The respondents sued the appellants for the sum of $500 which they alleged was the balance of printing charges and a further sum of $28. Harun J who heard the case in the High Court gave judgment for the respondents. 2264 Formation -. They also withheld payment of the extra charges claimed by the respondents for reproducing film positives used in the printing of the books because the respondents claimed ownership of the films. There were two issues in the case: (a) whether or not the appellants were bound to pay the disputed sum of $500 to the respondents.Offer and acceptance .Printing orders . their confirmation by the respondents constituted acceptance and therefore brought into existence the contracts between them. and (b) whether the respondents were entitled to the payment for the extra charges. The appellants paid all the printing charges except a disputed sum of $500 which they claimed was an overcharge by the respondents. although their reproduction costs are borne by the customers. that is. the reproduction charges without giving up ownership of the film positives to the appellants. (4) the basis of the alleged trade usage seemed unreasonable because it conflicted with the ordinary sense of justice commonly understood by reasonable men in that a person who . the appellants were a company carrying on the business of publishing books and the respondents were a firm of printers. Consequently the film ownership clause contained in the quotations was completely irrelevant and as such formed no part of the contracts at all.When contract came into existence .Whether trade usage reasonable. Bandar Seri Begawan (Roberts CJ). whose ownership was disputed. (2) the starting point in the formation of contracts between the parties was the printing orders because these orders were offers.Implied term 3 [2264] CONTRACT Formation – Implied term – Trade usage – Contract for printing and publishing .Whether there is trade usage that printer retains ownership of films . The appellants appealed. In this case the alleged trade usage was not sufficiently proved.Quotations .052 as extra charges for reproducing the film positives. There was a business relationship between the appellants and the respondents.

The plaintiffs contended that the first part of the MOU gave them enforceable rights against the defendants. Digest : Preston Corp Sdn Bhd v Edward Leong & Ors [1982] 2 MLJ 22 Federal Court. The defendants' failure to consider the nomination of the target companies and the consequent failure to enter into bona fide negotiations in respect of the sale and purchase agreement with the target companies. The MOU could be divided into two parts: (i) it prescribed the introduction of profitable companies (`the target companies') to be injected into UCM. thus there was no enforceable right that could be claimed by the plaintiffs. the plaintiffs alleged that there were various mala fide acts done by the defendants relating to negotiations with third parties despite the express lock-out provision of the MOU. it appeared that the parties intended the MOU to be subject to a formal contract to be executed by both parties after the finalization of the terms and conditions.pays for an article or for making it should be entitled to it and not be deprived of its ownership for which he has paid or is required to pay. The plaintiffs essentially claimed for compensation based on the alleged breaches of the MOU and to that extent. and if not. UCM itself was not a party to the MOU. the MOU was a legally binding contract. The issue was whether the MOU was a legally binding contract. UCM Industrial Bhd (`UCM') and the plaintiffs claimed to have control over various companies. The court would have to determine from its language and any other admissible evidence the document's true nature and purport. according to the plaintiffs. and (ii) the intended sharing of benefits consequent to the injection. Until . 2265 Formation -. The defendants contended that the MOU was not a legally binding document. Salleh Abas and Abdul Hamid FJJ).Memorandum of understanding 3 [2265] CONTRACT Formation – Memorandum of understanding – Allegation of breach – Whether memorandum was a legally binding document or merely an agreement to negotiate – Whether memorandum to be subject to a formal contract to be executed by both parties – Whether memorandum gave enforceable rights to parties – Effect of lock-out provision Summary : The parties entered into a memorandum of understanding (`the MOU') as individual shareholders. were prescribed in the MOU. The defendants were in control of a public listed company. Kuala Lumpur (Suffian LP. dismissing the claim with costs: (1) the label attached to a document was not the criteria in construing whether such document had legal effect or not. (2) from the opening paragraphs of the MOU. Further to that. whether the first part of the MOU did give enforceable rights to the plaintiffs. Holding : Held.

including time. which the plaintiffs contended gave them enforceable rights. there would be the necessity of getting approval from some relevant authorities as well as the board of directors and shareholders of UCM and the target companies. Digest : Lim Hong Liang & Anor v Tan Kim Lan @ Tan Kim Leng & Anor [1997] 5 MLJ 157 High Court. Thus. as well as the equitable mortgagees of the Company's interest in the demised property.Offer and acceptance 3 [2266] CONTRACT Formation – Offer and acceptance – Contract for sale and purchase of leasehold property – Sellers equitable mortgagees of property – Whether offer was to purchase legal and equitable title – Whether purported acceptance on terms of equitable title constituted counter-offer – Whether binding contract concluded Summary : The appellants were the debenture holders of one Motor & Leasing Pte Ltd ('the Company'). That being the case.. and not compensation as was the case here. the appellants' solicitors purported to accept the respondents' offer upon the following terms: '.. The next day.. the plaintiffs could. The respondents then refused to proceed with the sale of the demised property. in respect of the takeover by UCM of the target companies allegedly in control of the plaintiffs. (4) a lock-out provision had to have all the necessary elements.such time. The receivers then entered into negotiations with the respondents to sell the appellants' interest in the demised property. Furthermore. As a result of the Company's subsequent defaults. the appellants appointed receivers and managers under the debenture. (3) in considering the first part of the MOU. stipulate for reimbursement for reasonable costs in relation to investigation and negotiation. JTC had granted the Company a licence to enter upon the demised property under a Building Agreement. the particulars provided by the plaintiffs were insufficient for the defendants to enter into negotiations. the MOU was not intended to be legally binding on the parties. at the most. the MOU was clearly an agreement to contract or an agreement to negotiate. Thus.. On completion our client will execute an Assignment of their rights in the Building Agreement made between (JTC and the Company)'. 'We . the respondents signed the appellants' standard form letter of offer which read. This need for approval appeared in some clauses of the MOU. claiming that what they had offered to purchase was a legal . a leasehold estate owned by the Jurong Town Corporation ('JTC'). Kuala Lumpur (Haidar J). 2266 Formation -. Eventually. it could not be said that the defendants were at fault. Even though time was prescribed in the MOU. it did not give enforceable rights to the plaintiffs as claimed by them. it became no more the essence as there were a lot of uncertainties which could not be resolved within the prescribed time. hereby offer to purchase the above JTC leasehold property'. Therefore.

(2) the offer made by the respondents had been to purchase the 'JTC leasehold property'. (3) even if it were not. Accordingly. . alternatively. that the receivers in selling the property were agents of the Company. The trial judge. there had been no consensus ad idem between parties on the interest to be conveyed such as would give rise to a binding contract. on a proper reading of the terms of the debenture.further. and what they had in law offered to purchase was a legal lease of the demised property. in agreeing to sell their equitable rights in the property under the Building Agreement. that this had been done.lease. divested themselves of their powers of sale as equitable mortgagees. further. the appellants. pursuant to the debenture. and not of the appellants. the appellants were entitled to enter into any contract concluded by the receivers by virtue of the doctrine of undisclosed principal. although appointed as agents of the Company under the debenture. This power of sale was exercisable by the appellants independently of the debenture. had not effected a binding acceptance of the respondents' offer. and the respondents in turn brought a respondents' notice against the initial two findings made against them by the trial judge. They also claimed. they were entitled to assume. and had not divested themselves of their powers of sale as equitable mortgagees. by appointing receivers. had also been appointed by the appellants as agents under the equitable mortgage to sell the latter's interest in the demised property. held that although the appellants were entitled to enter into the contract as undisclosed principals of the receivers. Holding : Held. Therefore. deciding in the respondents' favour. and that as such the appellants' purported acceptance relating to an equitable lease amounted to a counter-offer which they were entitled to reject. Singapore (Karthigesu and LP Thean JJA and Goh Joon Seng J). The respondents had not been told that a legal lease had not been issued. and no contract for the sale of the appellants' interest in the property had been concluded thereby. and had been acting in this capacity in their negotiations with the respondents to sell the property. it was clear that the appellants had expressly preserved their power of sale as equitable mortgagees in the event of receivers being appointed under the debenture. dismissing the appeal and the respon-dents' notice: (1) an offer to sell or to purchase a leasehold property refers to the whole legal and equitable leasehold title in the property unless otherwise provided. and thus that the appellants were not the true vendors of the property. The appellants appealed on this substantive finding against them. that under the terms of the debenture the appellants had. (4) the receivers. by virtue of s 3(6) of the Conveyancing and Law of Property Act (Cap 61). Digest : Hongkong & Shanghai Banking Corp v San's Rent-A-Car Pte Ltd [1994] 3 SLR 593 Court of Appeal. It was clear from the offer letter that the appellants were the true vendors of the property.

It was also clear that the agreement of the parties on the sale of the land was not subject to the requirement that the agreement be signed by the parties. the defendant's solicitor presented several written amendments and additions to the first plaintiff's solicitor to be included in the agreement. allowing the application: (1) as the important terms had been fixed and agreed between the parties. The first plaintiff obtained an option through the defendant's agent (the agent) to purchase the land from the defendant for RM328. a valid contract had existed and was binding upon both parties although the option provided for the necessity that the parties sign a sale and purchase agreement on or before the appointed date and the respective rights of the parties should any party fail to sign the agreement. the facts showed that the solicitors of both parties had dealt with each other on the draft and on the acceptance of the amendments and additions suggested by the defendant's solicitor. Although the defendant was willing to compensate the plaintiff in the event of the former's default to sign the agreement. (2) as regard the agreement. the first plaintiff sent four copies of the agreement signed by the plaintiffs together with the balance of the deposit to the defendants. Subsequently. The terms of the agreement also bound the defendants because the conclusive draft contained . specific performance could still be ordered in accordance with s 19 of the Specific Relief Act 1950. and (iii) whether the defendant was bound by the agreement. a conclusive draft had existed. the first plaintiff paid half of the deposit amounting to RM6. The defendant objected to the application and submitted that the following issues must be tried: (i) whether it was the option or the unsigned agreement which should be applicable. This was done by the plaintiff.Option to purchase 3 [2267] CONTRACT Formation – Option to purchase – Existence of a valid contract – Option provides for the signing of formal agreement – Correspondence between parties on terms of agreement – Suggestions of amendments and additions by one party accepted by the other – Inclusion of co-purchaser into terms of agreement not objected by vendor – Refusal of vendor to sign formal agreement – Whether a valid contract had come into existence Summary : The plaintiffs by way of a summons-in chambers applied for specific performance of a sale and purchase agreement (the agreement) of a piece of land (the land). Holding : Held.000 to the agent. On 27 March 1995.2267 Formation -. The sale and purchase contract of the land was valid and binding on the defendant although he had refused to sign the agreement. (ii) whether the default said to have been committed by the defendant should refer to the default of the terms of the option or the agreement. The defendant refused to continue with the transaction and refused to sign the agreement and cash the cheque.000 and as a consideration.

Alternatively. Summary : In this case. the appellant gave an option to the respondent to purchase her property in Kuala Lumpur. Kuala Lumpur (Salleh Abas Ag LP.Option to purchase . The respondent applied for specific performance of the contract. 2269 Formation -. 2268 Formation -.Option to purchase 3 [2268] CONTRACT Formation – Option to purchase – Sale of land and house Option to purchase .Binding Contract. Abdul Hamid and Syed Agil Barakbah FJJ). Kuala Lumpur (Mohd Noor J). specific performance could also be ordered on the option. Subsequently. Digest : Voo Syun Mui v Yap Mooi Mooi [1984] 2 MLJ 48 Federal Court. Digest : Teo Kwong Chia & Anor v Mariam bte Ismail Civil Suit No S1-22-326-95 High Court. The plaintiffs had performed and was always ready to perform their duties under the contract. the defendant had also failed to rebut the presumption of law under s 11(2) of the Specific Relief Act 1950. The respondent exercised the option by letter delivered to one Teo Teo Sen at the appellant's house. Holding : Held: (1) there was no reason to differ from the finding of the learned trial judge that the respondent did exercise the option by tendering the 10% deposit but this was rejected by the appellant.Option exercised . the letter was returned to the respondent. (2) on the question of law. the learned judge was correct in holding that the appellant had failed to show that there were matters to be discussed between her and the respondent and which had to be embodied in a formal sale and purchase agreement. The appellant appealed. Wan Hamzah J held in the High Court that the respondent had validly exercised the option and that there was a binding contract between the parties. (3) the plaintiffs had paid to the defendant 10% of the purchase price (including the cheque of the balance of the deposit in the defendant's possession) according to the terms of the contract. He granted specific performance of the contract. From the facts.not only the amendments and additions suggested by the defendant's solicitors but also terms suggested by the plaintiff that the defendant did not object including the insertion of the first plaintiff's wife as a purchaser of the land. the defendant had refused to continue with the sale without reasonable excuse.

the clear and . the parties were reasonably expected to enter into a definite sale and purchase agreement setting out various terms and conditions positively and clearly and to be properly documented. On 31 March 1995. Holding : Held. the defendant made various suggestions. the plaintiff's solicitors forwarded a draft sale and purchase agreement (the agreement) to the defendant's solicitors. This in turn hinged on the question of whether there had been a concluded contract for the sale of the lands between the plaintiff and the defendant.000 per acre. (2) an order under s 327 of the National Land Code 1965 that all the several private caveats entered by the defendant against the lands be removed. (2) as there was no unqualified acceptance of the terms of the agreement. (4) since the total purchase price was well above RM75. inter alia. These were confirmed in a letter sent by the plaintiff to the defendant dated 27 March 1995. granting the declaration: (1) on a true and proper construction of P9. alterations and additions to the essential terms of the agreement. as the offer by the plaintiff was that the sale was to be subject to 'such terms and conditions as shall be determined or advised by [their] solicitors'. Section 7 of the Contracts Act 1950 (the Act) provides that an acceptance must be absolute and unqualified.000. The sole issue before the court was whether the defendant had a registrable interest under s 323(1)(a) of the National Land Code to enable the defendant to continue with the caveats entered by it in respect of the lands. and (3) a consequential order for an inquiry into the damages sustained by the plaintiff as a result of the defendant's caveats to be assessed by the courts. which offer was accepted by the plaintiff. counter-proposals. (5) no deposit having yet been made by the defendant to the plaintiff. it was void for uncertainty under s 30 of the Act. including. The defendant offered to purchase the lands from the plaintiff at RM35. changing the plaintiff's stakeholders to the defendant's stakeholders. the offer lapsed and the plaintiff was entitled to withdraw from the said sale and purchase as it did vide a letter date 2 May 1995. it did not constitute an absolute and unqualified acceptance of the terms and conditions offered by the plaintiff in the agreement. The defendant's counter-proposal to alter the stakeholding arrangement amounted to the introduction of a fresh term which was not accepted by the plaintiffs. (3) further. Section 5(1) of the Act provides that a proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer.000. By a letter dated 11 April 1995 (P9). The plaintiff then informed the defendant of the payment schedule and the conditions precedent which were to be incorporated into a formal sale and purchase agreement.3 [2269] CONTRACT Formation – Option to purchase – Whether there was unqualified acceptance of terms Summary : This is the plaintiff's application for the following orders: (1) a declaration that there was no concluded contract for the sale of several parcels and pieces of land (the lands) between the plaintiff and the defendant.

Person buying ticket for entry into premises .Whether there was concluded contract. 3 [2270] CONTRACT Formation – Option to purchase . The said caveats were ordered to be removed and an inquiry as to damages held. Shah Alam (Low Hop Bing J). In this action. (6) the defendant therefore had no caveatable interest to maintain. the plaintiff company claimed damages for breach of contract. 2271 Formation -. Digest : New Selangor Plantations Sdn Bhd v Talam Management Services Sdn Bhd Originating Summons No 24-507-1995 High Court.Whether he had a legal right to enter the premises. The plaintiffs alleged that the defendants had entered into a contract through their factory manager with the plaintiff company to purchase and accept from the plaintiffs 500 bags of sugar and that they failed to take delivery according to the contract.Whether there was concluded contract. (2) assuming that there was a concluded contract. In such cases.Person excluded by Committee of a Turf Club .undisputed facts of the case point to the conclusion that this case falls into the category of 'subject to contract' cases. There was conflicting evidence as to whether a contract had been entered into between the two companies through their agents. Digest : Heng Wan Co Ltd v Selangor Rice Mill Co Ltd [1967] 2 MLJ 44 High Court. Kuala Lumpur (Gill J). 2270 Formation -. . Summary : The plaintiffs were dealers in sugar and the defendants were dealers in rice. it will generally be construed that the parties are still in the process of negotiation and do not intend to be bound until a formal contract is exchanged. the defendant company could not be held liable on it because the factory manager had neither express nor implied authority to act as agent for the defendant company to enter into such a contract.Option to purchase . Holding : Held: (1) there was no evidence to show that there had been a contract for the sale and purchase of sugar. The defendant company gave evidence to the effect that their factory manager had no authority to purchase goods or place orders or otherwise enter into commitments on behalf of the company and that sugar was not used by the defendants in the milling of rice which was their main business.

no valid contract was formed and the appellant was a trespasser. There was a balance of $64. The learned senior assistant registrar took the view that there were triable issues as to the contract .Application for summary judgment . (2) as the appellant had not disclosed his identity when he purchased the ticket.Whether he had a legal right to enter the premises. Holding : Held: (1) the committee had a discretion to exclude any person from its premises. Summary : The appellant brought an action for damages for injury to his good name and reputation by reason of the respondent causing him to be wrongfully evicted by the police from the public enclosure of the Sarawak Turf Club. Digest : Anthony Read v Henry Ong [1967] 1 MLJ 197 Federal Court. bought a ticket and entered the premises.824 alleged to be due on a contract under which the respondent did some construction work for the appellant and the other person.Whether issues of fact and law to be tried . Kuching (Barakbah LP. 3 [2272] CONTRACT Formation – Practice and Procedure . The respondent then commenced action and applied for summary judgment under O 14 of the Rules of the Supreme Court 1957.Practice and Procedure . however. O 14.Application for summary judgment .824 due on the contract and the appellant and his partner issued three cash cheques for $10. 2272 Formation -. the appellant was asked by the police to leave and he did so.Rules of the Supreme Court 1957. The committee of the club had made an order excluding the appellant from the premises under its control.3 [2271] CONTRACT Formation – Person excluded by Committee of a Turf Club Person buying ticket for entry into premises .Rules of the Supreme Court 1957. The appellant and the other person were the partners of International Trade Exhibition Enterprise and the respondent had agreed to construct stalls and other structures at an international trade fair. After a report to the police. The appellant and his partner in opposing the application said that they had entered into an earlier contract with Kee Nam Importers and Exporters and that the contract relied on by the respondent was between the respondent and Kee Nam Importers and Exporters and that the partnership firm was never a party to that contract.Whether issues of fact and law to be tried . (3) the removal of the appellant was not effected either by the respondent or by the turf club.000 each but the cheques were dishonoured. Summary : The respondent had brought an action against the appellant and another person for the sum of $64. The appellant. Azmi CJ (Malaya). O 14.

under which the work was done and the proper party to be sued and she dismissed the respondent's application.Receiver of estate appointed by court . the learned judge holding that the contract was between the respondent and the appellant's partnership firm. Ipoh (Raja Azlan Shah CJ (Malaya). Ling Liong Chin. In the circumstances. dismissing the appeal: there could not be any dispute as to what the proper contract was. there were no triable issues and the appellants were not entitled to be granted leave to defend. deceased.Receiver of estate appointed by court .Reciprocal promises 3 [2274] CONTRACT Formation – Reciprocal promises – Condition precedent Summary : . Summary : In this case. Digest : Tan Yok Kim v Lee Wai Mun [1976] 2 MLJ 66 Federal Court. Holding : Held. Leave was refused in the High Court and the appellant appealed.Leave refused. Holding : Held: the appellant had not shown that there was a valid and binding agreement of sale entered into as alleged by her and the learned judge was correct in holding that this was not a proper case for the grant of leave.Probate and Administration . The appellant appealed to the Federal Court.Application for leave to begin proceedings against receiver . 2274 Formation -. 2273 Formation -. applied for liberty to begin proceedings against the receiver of the estate of Haji Mohamed Eusoff bin Mohamed Yusoff for specific performance of an alleged agreement based on an offer to sell two pieces of land belonging to the estate made by the receiver and the administrators to her late husband and accepted by him. Digest : Re Haji Mohamed Eusoff.Application for leave to begin proceedings against receiver No binding agreement . On appeal to the High Court the appeal was allowed. the appellant as executrix of the estate of her late husband. The contract was between the respondent and the appellant's firm. 3 [2273] CONTRACT Formation – Probate and Administration . Kuala Lumpur (Gill CJ (Malaya). Kok Su Win v Ng Koon Mee [1981] 2 MLJ 77 Federal Court.Leave refused.No binding agreement .

The plaintiffs had accepted Plasman's order and sent the defendants a timber sales confirmation note ('TSC 4016') restating Plasman's order. a company incorporated in France. the plaintiffs sold the goods to another buyer to mitigate their loss. if TSC 4016 amounted to an offer from the plaintiffs to the defendants. The initial dispute raised through Sociä tä . However. But when the purchaser clearly indicates that he does not intend to pay the purchase money in full the vendor is entitled to consider the contract at an end.A clause in an option providing that if the purchaser fails to complete the purchase money within the stipulated time the agreement becomes null and void and the advance forfeited. Nevertheless. 2275 Formation -. The defendants refused to accept the timber. The defendants did not sign or return the TSC 4016. the price and terms of payment under the defendants' order were different from Plasman's order.786. The defendants in January 1990 had telexed Plasman an order to purchase 750m3 of Palapi sawn timber.67 for the said goods plus warehousing and other charges and interest. a related company of Woodwork. which was passed on to the plaintiffs. The plaintiffs commenced proceedings for recovery of the sum of US$85. the same had been accepted by the defendants as implied from their conduct. Federated Malay States (David JC). contending that there was no concluded contract because the terms of their order were different from Plasman's order. Digest : Chee Ah Yew v Tuan Man [1924] 5 FMSLR 36 High Court. (2) alternatively. The timber arrived at Nantes and was discharged on the wharf. Holding : Held. bought timber through one Jean-Marie Plasman ('Plasman') who was an independent timber broker. cannot be construed as a condition precedent because the contract is already complete. Plasman on the same day telexed Woodwork Investment Co Pte Ltd ('Woodwork') an order on behalf of the defendants ('Plasman's order'). Pending the hearing. because the timber was required to be delivered promptly.Sale and purchase of goods through broker 3 [2275] CONTRACT Formation – Sale and purchase of goods through broker – Agent of purchaser – Purchase order of broker on terms different from those made by purchaser – Whether concluded contract – Mitigation of loss – Reasonable steps taken – Burden of proof on defendant Summary : The defendants. This is because Plasman as a broker in placing the Plasman's order was acting as the agent of the defendants. the plaintiffs sent the timber without receiving the signed TSC 4016. allowing the claim: (1) the defendants are bound by the terms of Plasman's order.

(4) as the contract is embodied in TSC 4016 the said goods shipped and the documents presented were conforming. 2276 Formation -. the defendants had wrongfully repudiated the contract and are liable to the plaintiffs for their loss. (3) from the circumstances of the facts in the present case.Sale and purchase of land 3 [2276] CONTRACT Formation – Sale and purchase of land – Vendor entered into agreement to sell land – Vendor had not executed necessary documents subsequent to execution of agreement – Whether purchaser could apply for specific performance of agreement – Whether agreement was valid despite vendor's failure to execute necessary documents Digest : Chan Thiam Teng v Ban Swee Heng Sdn Bhd [1992] 2 MLJ 583 High Court. . 2277 Formation -. otherwise there would not have been the need to cancel it. Singapore (Goh Joon Seng J). Johore Bahru (James Foong J). Sandakan (Ian Chin J). Nowhere did the defendants deny the existence of a contract. there was no reason for DW1 to inspect the said goods after the arrival of the 'Pan Express' on 8 May 1990. See COMPANIES AND CORPORATIONS. In any case the burden of proof that the plaintiffs have not done so is on the defendants and the defendants have not discharged this burden. If the defendants were really of the view that there was no contract under TSC 4016 especially after they had purportedly cancelled all contracts on 3 May 1990. (5) the court was also satisfied that the plaintiffs have taken reasonable steps to mitigate loss.Gä rale's telex of 12 September 1990 was 'quality and prices of goods are nä contested'.Seal 3 [2277] CONTRACT Formation – Seal – Whether seal is necessary for contract made by corporation – Contracts Act 1950. s 10(2) Digest : Chin Chen Fui v Majlis Perbandaran Sandakan & Anor Suit No S 164 of 1985 High Court. By their unilateral cancellation of the same. Vol 3. It is thus clear that until the filing of their defence the defen-dants acted on the basis that there was a contract. para 429. TSC 4016 (if it was not an acceptance of Plasman's order on behalf of the defendants) was accepted by the defendants as a valid contract between them and the plaintiffs. Digest : Sinotani Wood Pte Ltd v Rougier Sylvaco International SA [1994] 3 SLR 338 High Court.

The appellants in their defence stated that the sale was subject to contract and that they had informed the respondent's solicitors that they did not wish to sell the property. Ten per cent deposit to be paid within the course of the next few days if your buyer Mr Yeo Ah Tee agrees to the price and the terms.See CONTRACT. 1976. the appellants wrote to CH Williams. Messrs Ting Poi Tek & Co will communicate direct with you regarding the sale. We have received further instructions to inform you that our client has appointed Messrs Ting Poi Tak & Co of 30 Jalan Laksamana as his solicitors to deal with all legal matters pertaining to the above sale.60 cents ringgit. Summary : In this case. with vacant possession at a price of $5. Digest : . the respondent averred that there was a concluded contract and this was specifically admitted by the appellants in their statement of defence. Vol 3.Term "Subject to contract" .Subject to contract 3 [2278] CONTRACT Formation – Subject to contract – Correspondence .Expression of desire of parties as to manner in which transaction already agreed to will in fact go through. Holding : Held: on the evidence and the exhibits in this case it was the intention of the parties to come to a definite and complete agreement on the subject of the sale and the mere fact that a written agreement had to be drawn up and executed by them did not necessarily mean that there was no legally binding and enforceable agreement. Talhar & Wong Sdn Bhd wrote on 3 March 1976 to confirm the sale: 'We refer to our telephone conversation this afternoon in which you have kindly accepted our client's (Mr Yeo Ah Tee) further offer regarding the above. Wan Yahya J ordered that the agreement of sale be specifically performed and carried into execution. 2278 Formation -.' The appellants in this case refused to complete the agreement and the respondent applied for specific performance.40 per square foot in Singapore currency.20 per square foot for $454. The appellants appealed. plant and machinery and all ancillary facilities etc. that the lowest price I am willing to sell the said property is $5. the sale and purchase to be completed latest by March 24.Whether there was concluded contract . Talhar & Wong Sdn Bhd on 1 March 1976 as follows: 'I confirm.391. subject to contract. A legally binding and enforceable agreement was concluded on 3 March 1976 and the learned judge had not erred either in law or fact in arriving at the finding that he did. In his statement of claim. para 2074. The sale is to include all buildings.' There were further negotiations and eventually Messrs CH William. four hundred and fifty-four thousand three hundred and ninety-one dollars and cents sixty only.

000 was to be paid to the appellant as deposit. The appellant refused. the respondent had asked for an extension of time from 3 May 1993 to 15 May 1993 'for the parties to agree on the terms of the sale and purchase agreement' as the respondent's representative had gone overseas. The respondent then asked for a second extension of time on the ground that its representative was still overseas. The judicial commissioner found that there was no triable issue. the respondent offered to buy the land from the appellant. Kuala Lumpur (Salleh Abas CJ (Malaya). because there was no mention that the letter of offer was subject to contract in the respondent's statement of claim. inter alia. the appellant informed the respondent that it had received the respondent's deposit of RM180. The appellant agreed to extend the time period to 18 May 1993. The respondent then submitted the first draft of the sale and purchase agreement for the appellant's approval. dismissing the appeal with costs and ordering that the deposit money be returned to the respondent: (1) in an O 14 application. the court has to be satisfied . the respondent alleged that the letter of offer contained the words 'subject to contract'. During the hearing. By a letter dated 1 April 1993 ('the offer letter'). The appellant appealed. and informed the respondent that the appellant would execute its right to forfeit the deposit as the time period had expired without the terms of the agreement being agreed upon. and allowed the respondent's application. By a letter dated 3 April 1993. contending that the question of whether or not an agreement existed was a triable issue.Subject to contract 3 [2279] CONTRACT Formation – Subject to contract – Letter of offer to purchase land – Deposit land – Terms of formal sale and purchase agreement not agreed – Whether parties bound Summary : The appellant was the registered proprietor of a piece of land ('the land') that the respondent wanted to purchase. (ii) RM180.Lim Keng Siong & Anor v Yeo Ah Tee [1983] 2 MLJ 39 Federal Court. that: (i) the purchase price was RM9m.000 and had also accepted the respondent's offer. 2279 Formation -. The offer letter also suggested several terms and conditions. the deposit would be refunded to the respondent immediately. Holding : Held. (iii) the appellant could forfeit the deposit if the respondent failed to execute a formal sale and purchase agreement within seven days after the terms of the sale and purchase agreement had been agreed upon by both parties within 30 days from the date of receiving the letter of offer. The respondent accordingly made an application for summary judgment under O 14 of the Rules of the High Court 1980 ('RHC') against the appellant for the return of the deposit. However. and (iv) if the appellant failed to execute the formal sale and purchase agreement within the said period.

this meant that the judgment of the judicial commissioner was right when he held that there was no triable issue. it is a question of construction whether the execution of the further contract: (i) is a condition or term of the bargain. or lacking in precision or is inconsistent with undisputed contemporary documents or other statements by the same deponent. the judge has a duty to reject such assertion or denial. (3) or (ii) whether it is a mere expression of the desire of the parties as to the manner in which the transaction already agreed to will in fact go through. (2) in an O 14 application. The letter of offer from the respondent not only commenced with the words 'subject to contract' but also mentioned the conditions to be complied with before an agreement was entered into. thereby rendering the issue not triable. From the pleadings and affidavits. (5) when the words 'subject to contract' are used. it will be construed to mean that the parties are still in a state of negotiation and do not intend to be bound unless and until a formal contract is made. (7) this principle was important in this case since there was a dispute as to the existence of a contract between the appellant and the respondent.on the affidavit evidence that the defence has not only raised an issue. Therefore. 2280 Formation -. Shaik Daud dan Siti Norma Yaakob JJCA). If the letters relied as constituting a contract contemplates the execution of a further contract between the parties. Where such assertion. (6) generally when an arrangement is made 'subject to contract'. there is a binding contract and reference to the more formal document may be ignored. but also that the said issue is triable. denial or dispute is equivocal. The determination of whether or not an issue is triable depends on the facts or the law arising from each case as disclosed in the affidavit evidence before the court. Unless this principle is adhered to. there is no enforceable contract because the condition is unfulfilled or because the law does not recognize a contract to enter into a contract.Subject to contract 3 [2280] CONTRACT Formation – Subject to contract – Vendor's telex offer for sale of land accepted by purchaser – No express term that the offer or acceptance was subject to the preparation of a formal contract – No inference . the courts tend to give effect to those words unless there is strong evidence to the contrary. The agreement could only be executed if both parties agreed to the terms contained therein. Kuala Lumpur (Ahmad Fairuz. Digest : Kapital Raya Sdn Bhd lwn Bloomville Corp Sdn Bhd [1996] 3 MLJ 522 Court of Appeal. (4) the court found that from the respondent's statement of claim. the duty of a judge does not end as soon as a fact is asserted by one party. In case (i). a judge would not be able to exercise his discretion judicially in an O 14 application.since there was no contract between the appellant and the respondent. an agreement which is made 'subject to contract' is of no legal effect. there was no contract between the respondent and the appellant. it appeared that both parties had not agreed to the terms of the formal sale and purchase agreement. In case (ii). or is inherently improbable in itself. and denied or disputed by the other in an affidavit.

This led to the drawing up of a letter of offer (`the second offer') by the defendants' solicitors for the sale of all four lots. On 12 January 1979. The parties. the telex offer and the letter of acceptance did not state in any specific term that the offer or acceptance was subject to the preparation of a formal contract and neither could any inference be drawn that the parties had intended this to be so. In this case. the parties were bound absolutely by the bargain on the terms agreed. the price and the terms of payment had been identified with sufficient clarity in the telex offer. upon which the plaintiff then relied on and accepted the original telex offer. the effect of which was the same as if he had withdrawn that offer. A cheque for the sum of RM47. This had diverted the mind of the first defendant away from his original telex offer. So was the letter of acceptance which stated in no uncertain terms that the plaintiff was accepting the offer. price and terms of payment identified in the offer – Whether the telex offer was subject to terms to be drawn up and agreed to by the parties – Whether parties bound by the bargain on the terms agreed Summary : The first and second defendants were the registered co-proprietors of a piece of land (`Lot 5020').000 making a total of RM470. by proposing to purchase all four lots. subject matter. such that it could be legitimately assumed that he was no longer minded to keep the telex offer open. Holding : Held. the plaintiff had not only varied the terms but also the subject matter of the original offer and in doing so. the plaintiff and the first defendant (acting for himself and the second defendant) discussed the sale of three other lots together with Lot5020 for the additional price of RM120. it had in fact made a counter-offer. ie whether it was `subject to contract'. the first defendant decided not to proceed with the offer. and (ii) they had already withdrawn the telex offer when they proceeded with the negotiations with the plaintiff to sell Lot5020 together with three other lots. dismissing the plaintiff's claim: (1) it was a matter of construction whether the agreement reached between the parties was subject to any further terms to be drawn up and agreed between the parties. the subject matter.000 being earnest money was enclosed with the letter of acceptance and was duly acknowledged by the solicitors for the defendants. (2) a counter-offer involved the introduction by the offeree of material variation of the terms of an offer of the same subject matter. On 15 January 1979. The plaintiff was to confirm the offer on or before 15January 1979.that parties intended the offer or acceptance to be subject to a contract being executed – Parties. Therefore. . After the second offer had been drawn up.000 to the plaintiff. the defendants made an offer via telex (`the telex offer') to sell Lot 5020 for the sum of RM350.000 for all four lots. In this case. The plaintiff claimed for the specific performance of the agreement with the defendants for the sale of Lot 5020. The defendants argued that: (i) the telex offer was subject to terms to be drawn up and agreed to by the parties.

The respondents had applied for the removal of the caveat. deceased) & Anor [1997] 1 MLJ 763 High Court. 2282 Formation -. the receipt with the endorsement stating that the sum of RM47.Caveat entered against land. Holding : Held: (1) the learned judge had no power in an application for summary judgment to dismiss the action.Acceptance conditional on formal contract being drawn up .Survey as preliminary to mining operations . would not be sufficient evidence that a fresh offer had been made. there had to be a fresh offer on exactly the same term as in the original telex offer. The appellant appealed.(3) (obiter) for the acceptance of the original offer to be effective. Digest : Diamond Peak Sdn Bhd & Anor v Tweedie [1980] 2 MLJ 31 Federal Court.Submission that correspondence did not contain all terms of contract . As there was no evidence to indicate this. The respondents had failed to complete the contract and the first appellant had lodged a caveat against the land. 2281 Formation -. Digest : Malayan Flour Mills Bhd v Saw Eng Chee (Administrator of the estate of Saw Cheng Chor. (2) it clearly appeared from the facts and the circumstances of this case that there were in fact highly triable issues in the matter and the learned judge should therefore have given the respondents unconditional leave to defend. the appellant claimed specific performance of a contract for the sale of land which he claimed was embodied in an exchange of letters between the parties. All that was open to him to do in regard to the appellant's application for summary judgment under O 14A was to give the respondents unconditional leave to defend.Subject to contract 3 [2281] CONTRACT Formation – Subject to contract – Whether contract constituted by letters between parties . Penang (Raja Azlan Shah CJ (Malaya).000 was received. by itself. The learned trial judge heard both applications and he allowed the respondents' application with costs and ordered the removal of the caveat. Ipoh (Kang Hwee Gee J). dismissed the appellants' application under O 14A with costs and then went on to further order the dismissal of the appellant's action out of court with taxed costs. Summary : In this case.Failure to complete contract .

Digest : Vallentine. {bb]Held: the arrangement was a completed contract to survey and the defendant must therefore pay the amount claimed to the plaintiffs. Holding : . the court had to consider the effect of an agreement executed by the beneficiaries of the estate of the deceased with the two plaintiffs in these two joint actions.Onus of proof upon those alleging fraud . The defendant and Sze Chok Pang at a joint interview with the plaintiffs arranged with the plaintiffs to carry out a prospecting survey of the land.Failure of consideration and duty to refund . inter alia. title and interest in the land which formed the subject matter of a prospecting permit issued to the said Sze Chok Pang.Distribution of estate under Muslim Law Private caveat .Lien .Allegation of fraud .000 to a person with whom Sze Chok Pang had entered into an agreement relating to the permit to have the agreement cancelled. Summary : In this case. Dunne & Associates Ltd v Andrew SH Chang [1963] MLJ 220 High Court.Duty of counsel as officer of the court.Whether purchasers are co-purchasers in a joint venture or mere agent and principal .3 [2282] CONTRACT Formation – Survey as preliminary to mining operations – Whether completed contract – Power of attorney .Purchase of undivided share in land subject to letters of administration . right. the defendant pleaded. that there was no completed contract but only an arrangement under which the plaintiffs were to provide an estimate for a contract.000 obtained a power of attorney from one Sze Chok Pang concerning all his present and future estate. The defendant further paid a sum of $15. Kuala Lumpur (Gill J).Assignment of rights .Forfeiture of deposit . The court had also to consider whether the relationship between the said two plaintiffs was that of a principal and agent or whether they were co-purchasers in a joint venture. 2283 Formation -.Contract by attorney Whether contract under power of attorney Summary : The defendant on payment of a sum of $5.Damages for breach of contract . In a claim by the plaintiffs against the defendant for their professional fees and disbursements as mining engineers.Terms 3 [2283] CONTRACT Formation – Terms – Fraud – Contract relating to land Specific performance .Parties bound by their pleadings . The plaintiffs were aware that the permit was in the name of Sze Chok Pang and that the defendant had power of attorney in respect of it.Duty of administrators to obtain best possible price .Specific performance .

immediately lodged caveats against the land claiming that since the fundamentals of the contract such as the parties. Dagang bin Bachik v Abdul Malik bin Abdul Majid [1985] 2 MLJ 459 High Court.000. (5) as there was no binding contract. 2284 Formation -. the moneys must be refunded. totalling $11. Metroplex Development Sdn Bhd ('Metroplex'). the claim for damages must also fail. the approval of the Ruler-in-Council under s 8 of the Enactment was not necessary. there was a concluded contract and the court could infer reasonable terms into the contract in the areas not agreed upon. (4) the caveat lodged by the first plaintiff must be removed as the third co-owner of the land in question had no dealings whatsoever with the plaintiff and there was no reason why the third co-owner should ever have been encumbered with the caveat.Held: (1) no binding contract was ever made between the parties and it is not for the court to make one for the plaintiffs. a declaration that there was no concluded contract. as such.Terms 3 [2284] CONTRACT Formation – Terms – Whether imposition of condition precedent amounted to counter-offer – Whether fundamental points agreed upon – Whether court can import reasonable terms in areas not agreed upon to make agreement effective Summary : The applicant ('Macey') entered into negotiations with the second respondent. . Malacca (Shankar J). the property and the price had been agreed upon. (3) the terms of the contract were clearly too uncertain to be enforced. Macey also refused to accept the deposit contending that no agreement had been reached between the parties. (7) the claim that the assignment by the second plaintiff to the first plaintiff was unconscionable and should be set aside had not been proved and must also fail. Macey filed this application seeking. Macey argued that the land did not fall within the definition of 'Malay holdings' under s 2 of the Malay Reservation Enactment (FMS Cap 142) ('the Enactment') and. Metroplex discovered that some of the titles of the land were endorsed as Malay reservation land and insisted that the removal of the endorsements be a condition precedent suggested certain changes to the time for payment of the purchase price. for the sale and purchase of an estate ('the land') owned by Macey. as a partner of the first respondent real estate agency involved in the deal. The letter of offer from Macey included terms regarding the purchase of the land as a going concern requiring the purchaser to take over the estate workers and the time for payment of the purchase price. Metroplex and the third respondent. (2) the evidence shows both parties were under a misapprehension as to what precisely they were selling and at what price. Digest : Abdul Malik bin Abdul Majid v Asnah bte Hamid & Anor. (6) as the moneys. inter alia. had been given for a consideration that had failed.

Plea of frustration. the property and the price might represent fundamentals in a contract but. Since Macey had rejected this term. there was no concluded contract. (3) the matters relating to the parties. (2) when land in a Malay reservation area is registered in the name of a non-Malay prior to the creation of the Malay reservation. 2285 Formation -. Metroplex had left in abeyance the issues regarding the taking over of the estate workers and the time for the payment of the purchase price and had instead raised the Malay reservation issue. 2286 Formation -. Digest : Syarikat Macey Bhd v Nightingale Allied Services (sued as a firm) & Ors [1995] 2 MLJ 411 High Court. Kuala Lumpur (Wan Hamzah J). allowing the application: (1) there had been no complete acceptance of all the terms contained in Macey's offer. Since the land had never been registered in the name of any Malay proprietor.Whether there was a binding contract . See CONTRACT. para 2190.Terms and conditions 3 [2285] CONTRACT Formation – Terms and conditions – Breach – Damages – Contract for sale of land . The insistance on the removal of the endorsements on the titles as a condition precedent was a major term which had to be agreed upon by the parties.Defendant not called upon to execute sale and purchase agreements . This subject matter was a new term which had to be agreed upon by the parties. The court could not import reasonable terms in order to make the agreement effective as the fundamental question relating to the title of the land and the time for payment had not been agreed upon. were many equally important and essential terms that had to be agreed upon before an agreement could be conclusive. Digest : Rajeswari Thedshanamurthy v Kin Nam Realty Development Sdn Bhd [1983] 1 MLJ 88 High Court. the endorsement on the titles under s 6(vi) of the Enactment was erroneous.Terms and conditions 3 [2286] CONTRACT Formation – Terms and conditions – Plaintiff signed a sales order – Whether sales order is a complete and concluded contract entered into by the parties Summary : . Shah Alam (James Foong J). within these and arising from these.Holding : Held.Booking application signed . Vol 3.Breach of contract . the non-Malay can transfer or charge the land to any non-Malay without the approval of the Ruler-in-Council.

Whether there is a binding contract. An interlocutory judgment was entered against the defendant. Digest : Tunku Hamman bin Tunku Sulong v City Car Plaza Sdn Bhd Suit No D2-22-196790 High Court. Holding : Held.000 to take delivery of the Lotus.000. there is a legal and binding contract to purchase and sell the Lotus based on the terms as stated in the note itself. the sales note is clear and unambiguous.337. The defendant then refunded the deposit of M$60. 2287 Formation -.Contract not signed .000 inclusive of the customs and excise duty of M$440.000 and that the plaintiff was fully aware of this fact. Summary : In this case.000.The plaintiff made an order to purchase a Lotus Esprit Turbo ST car. the purchase price inclusive of import tax has been stated to be M$330.000 but M$770. 3 [2287] CONTRACT Formation – Whether agreement has been reached between parties .000. the High Court on an ex parte application by the plaintiffs. a private limited company incorporated in Singapore. inclusive of excise and customs duty. pledging. dismissing the appeal with costs: (1) on the face of it. the plaintiff was informed that in addition to the M$330. As there appeared to be nothing incomplete or inconclusive about the sales note. The sale has been agreed to by both the plaintiff and defendant as seen from their signatures in the note.000. Later. The plaintiff then demanded by letter that the sales note be specifically performed by the delivery of the Lotus within 30 days of the date of the letter. (2) by returning the deposits to the plaintiff the moment it realized that the plaintiff was not about to stump out another M$440.Contract not signed . which the plaintiff accepted on a 'without prejudice' basis. The plaintiffs refused to pay maintaining all along that the M$330. he had also to settle the customs and excise duty on the Lotus amounting to M$440.92. The defendant appealed to set aside the judgment. inclusive of customs and excise duty. failing which legal proceedings would follow.000 stated in the sales order was the agreed price. The defendant wrote back maintaining that the price of the Lotus was not M$330.000 purchase price.Whether agreement has been reached between parties . giving them away by security or otherwise disposing or in any way dealing with any of the asset or assets in which they or any of them were beneficially interested in so far as they do not exceed the sum of $876. had ordered a Mareva injunction restraining the defendants from removing from the jurisdiction of the court. The .Whether there is a binding contract. the defendant has acknowledged that it was repudiating its contractual obligations under the sales note. A sales note No 2630 was signed by the plaintiff wherein the sale price. Kuala Lumpur (Siti Norma Yaakob J). It describes the particular model of the car to be purchased. was stated to be M$330.

The only thing that had not been done was the signing of the contract which had been prepared by the lawyer. and second the plaintiff must produce evidence that the defendant had assets within the jurisdiction and that there is a risk of the assets being removed before the judgment is satisfied. Digest : Ace King Pte Ltd v Circus Americano Ltd & Ors [1985] 2 MLJ 75 High Court. (2) there are two requirements to be satisfied before a Mareva injunction is granted by the court. First the plaintiff must show that he has a good arguable case. (b) the order for the Mareva injunction be dismissed. and (d) the plaintiffs do provide security for costs. (3) as the plaintiffs are resident in Singapore and have no assets within jurisdiction this is a suitable case to require the plaintiffs to provide the security for due performance of the order of court in lieu of the plaintiffs' undertaking to the court as to damages. Holding : Held: (1) from the evidence the parties had concluded their negotiations and an agreement had been reached on the terms and conditions of the contract. (c) the plaintiffs do provide suitable security for the due performance of the order of court in lieu of their undertaking to the court. The second defendant was a director of the first defendant company. (4) leave should be given to the third parties to intervene and as they have shown that they have to pay legitimate debts. As the plaintiffs have satisfied both these requirements. this is an appropriate case to grant a Mareva injunction.Whether agreement to make agreement resulted in a contract 3 [2288] CONTRACT Formation – Whether agreement to make agreement resulted in a contract – Whether answer depended on intention of parties which was reflected by correspondence exchanged between them and objective aim of transaction Summary : . It is also appropriate that the plaintiffs should provide security for costs. In the circumstances a contract had been concluded between the plaintiffs and the defendants.second defendant applied that: (a) the plaintiffs' writ of summons and statement of claim be dismissed on the ground that it disclosed no reasonable cause of action against the said defendants. Kuala Lumpur (Zakaria Yatim J). The second defendant was a party to the contract in addition to the first defendant. The terms of the agreement had been agreed upon but the contract between them had not been signed. The plaintiffs' claim was based on an agreement between the plaintiffs and the defendants. An application was also made by third parties for an order that the applicants be given leave to intervene in the proceedings and that the order for the Mareva injunction made against the second defendants be varied. 2288 Formation -. the order for the Mareva injunction should be amended to allow the debts to be paid.

specific performance of an agreement made on either 24 or 26 November 1989 for the sale of the property to them. contending that the agreement to sell was subject to contract. who was the registered proprietor of two shophouses ('the property'). (3) the court had examined the two letters that passed between the parties. if any. the price and the terms they considered essential with sufficient clarity. and that there was no contract concluded between the purchaser and him. It was enforceable as if it was . whether that agreement had been frustrated by the grant of the injunction in question. the estate agents sent the 10% deposit in the form of a cheque to the vendor's solicitors. inter alia. On the contrary. who accepted the purchaser's offer of RM450. The High Court judge dismissed the application. that the purchaser pay a 10% deposit by 28 November 1989 and the balance purchase price within three months from execution of the sale and purchase agreement ('the first letter'). dismissing the appeal: (1) an agreement to make an agreement does not result in a contract. a third party had caused to be issued a writ from the High Court against the estate agents and the vendor seeking. had been rendered impossible of performance. The vendor took the position that the agreement it had with the purchaser. On 29 October 1994. It was argued that the phrase 'subject to the sale and purchase agreement' appearing in the first letter showed that the parties were still negotiating. They had identified the parties to the transaction. then there is an enforceable contract.000. The vendor appealed to this court. (2) the law leans in favour of upholding bargains and not in striking them down. inter alia. The third party had also obtained an ex parte injunction restraining the vendor from entering into any agreement for the sale of the property to any other person. Such an agreement was termed an 'open contract'. the property. and (ii) if the answer was in the affirmative. and was unable to find that the parties intended that there should be no concluded contract until a formal sale and purchase agreement had been executed by them. on 29 November 1989. On 28 November 1989. The estate agents communicated with the vendor's solicitors. The issues before the court were: (i) whether there was a valid and enforceable agreement between the vendor and the purchaser. the court found their objective intention to be travelling in quite the opposite direction. together with a letter confirming the purchaser's offer to purchase the property 'subject to the sale and purchase agreement' ('the second letter'). It is for the court in each case to construe the correspondence exchanged between the parties and to say whether that is the result intended by the parties. the estate agents found the respondent as the purchaser ('the purchaser').The appellant ('the vendor'). In November 1989. and informed the purchaser accordingly. However. Holding : Held. If the court reaches an opposite conclusion. he took out a summons claiming a declaration to the effect that if there was an agreement between it and the purchaser.000 on behalf of the vendor. and that there were many terms which they had not agreed upon. such agreement had been frustrated by the grant of the injunction. engaged the services of a firm of estate agents ('the estate agents') to search for a purchaser for the property at the price of RM450. with the condition.

acting out of necessity.Whether draft deed of settlement constituted concluded agreement 3 [2289] CONTRACT Formation – Whether draft deed of settlement constituted concluded agreement – Intention of parties – No agreement on essential terms – Third party rights and interests involved – Claim by plaintiff for specific performance of contract – Principles applied Summary : The plaintiff and the two defendants are the children of one Datuk Low. Following the meetings. except for the final meeting. the mediators on or about 3 June 1991 produced a draft deed of settlement ('the draft') for approval and acceptance by the parties. the three parties were the only directors of the companies. the law will. the services of three mediators ('the mediators') were obtained but not in the nature of formal arbitration. 2289 Formation -. Kuala Lumpur (Anuar CJ (Malaya). by splitting up the companies and dividing the various properties. Digest : Charles Grenier Sdn Bhd v Lau Wing Hong [1996] 3 MLJ 327 Federal Court. (5) since the injunction came after the contract between the vendor and the purchaser had been made. the said records were approved by the parties. In order to resolve this problem. due to differences between the first defendant and his two sisters as to the control of the companies. All three parties to this suit had different percentage shares in the holding company. By letter dated 7 June 1991 the first defendant informed . Further. The records of the meetings were prepared by one of the mediators ('Low') and. In order to give it effect. After the demise of Datuk Low. who during his lifetime set up Hock Hai Plantations Sdn Bhd ('the holding company') as well as several subsidiary companies. imply terms into the contract for sale in order to make it work. In these circumstances. it was. deceased. However. there was no impediment to an application by the vendor to have the injunction dissolved so that the sale to the purchaser may be proceeded without any further delay. when read in the context of the correspondence and the objective aim of the transaction. Rather. A series of five meetings were held between 10 November 1990 and 9 February 1991 by all the parties concerned. communication was no longer possible. (4) the phrase 'subject to the sale and purchase agreement' relied on by the vendor did not point to an intention that no contract was to come into existence until a formal sale and purchase agreement had been prepared and executed. indicative of an intention to merely formalize the agreement already concluded between the parties. it had no effect upon the transaction that had already been concluded.embodied in a document with all the attendant solemnity. there was material in the record provided that reasonably supported the inference that the purchaser was really an innocent party who had entered into a contract with the vendor without any notice whatsoever of the alleged transaction on the basis of which the injunction was obtained.

one salient feature emerges and it is that there was no agreement as to the price. a declaration that the contents of the draft truly reflected a binding agreement between the parties as to the distribution of the properties set out therein and effectively an order for specific performance of that agreement. and from the welter of discussion and exchanges. on behalf of the mediators. which in truth was nothing more than negotiation. (2) one of the most important of the essentials that had to be agreed was the price. oral and in writing. yet if some particulars essential to the agreement still remain to be settled afterwards. Further. inter alia. Holding : Held. (4) it was admitted that there was no authority to arbitrate. even if there were a concluded agreement in terms of the draft. After the five meetings. whether in cash or in kind or by the exchanging of properties. and until approved. forwarded to the parties an 'arbitration award' for confirmation by the parties. dismissing the action: (1) and though the parties may have agreed on all the cardinal points of the intended contract. By letter dated 22 August 1991. meetings and negotiations were held with a view to producing a final settlement approved by all the parties. The matters could not be resolved and the parties continued to be at arm's length of one another. The first defendant contended that all the discussions. The plaintiff and the second defendant replied by joint letter and said. The first defendant suggested a meeting between the parties. there is no contract. By letter dated 12 August 1991 they informed the plaintiff and the second defendant that the draft was unacceptable as it was not a legally binding agreement and for reasons given to Low. the first defendant's solicitors informed Low that the draft was incomplete and not final and the arrangement was void for illegality under s 67 of the Companies Act 1965 ('the Act'). By letter dated 11 June 1991. The second defendant's defence was not a defence at all but it consisted of a dissertation in support of the plaintiff's claim. There was therefore no concluded contract arising at the end of the fifth meeting. (3) the plaintiff and the first defendant were still at odds then over the auditing of the accounts. but averred that he was merely involved in placing an approximate valuation of the businesses. (5) only broad principles of distribution had been settled. and a proper valuation of each and every . there existed no obligation on his part and that in any event.the mediators that the draft was unacceptable because the accounts were not completed. The parties in such a case are still only in negotiation (per Lord Blackburn in Rossiter v Miller(1878) 3 App Cas 1124). The portfolio here was large. it was void for illegality under s 67 of the Act. Low. The plaintiff commenced this action claiming. The first defendant denied the plaintiff's claim as well as the allegation that he had initiated the proposed division. 'the arbitration is an ongoing process pending finalization' and that they would await the outcome of the arbitration. It had to follow that the plaintiff and the second defendant could then await nothing more than mediation. which the first defendant was to receive for his share of the portfolio. the draft was superseded by the draft award issued by the arbitrators. The first defendant's solicitors terminated the mediators' authority on 23 August 1991. only to mediate.

(6) so vast and varied was the portfolio. AHTD instructed YC Chin to cease all work. (8) even if there were agreement on the essential terms. either party may retract. AHTD wrote a letter to YC Chin on 19 September 1984 ('the letter'). AHTD contended that the . whether in case or in kind.Whether letter constituted concluded agreement 3 [2290] CONTRACT Formation – Whether letter constituted concluded agreement – Whether 'subject to contract' – Intention of parties Summary : The respondent.asset of the portfolio had yet to be done. The plaintiff would appear to have breached the basic rule of audi alteram partem. (7) further. Muar (Richard Talalla J). The first defendant was therefore at liberty to withdraw from the negotiation at any time. subject to certain terms and conditions. that no court would order specific performance assuming that there was a concluded contract between the parties. in any event.upon a consideration of all the facts and circumstances of the case. the parties fall into the third of the three classes of the cases referred to in Masters v Cameron 91 CLR 353. Subsequently. YC Chin proceeded to perform some of their obligations stated therein. In reliance upon the letter. Digest : Lau Chee Eng v Lau Boon Kean & Anor Civil Suit No 22-33-1991 High Court. that the intention of the parties is not to make a concluded bargain at all unless and until they execute a formal contract. YC Chin Enterprises Sdn Bhd ('YC Chin') had entered into negotiations to construct low-cost houses and shophouses ('the project') for the workers of the appellant. namely. one of which was the terms and conditions in the letter were to be constituted in an agreement between YC Chin and AHTD and that appropriate indemnity clauses in favour of AHTD be incorporated in the agreement. No judicial order can be made affecting the rights of a person unless a reasonable opportunity has been given to him to show why it should not be made. Specific performance of a contract will not be ordered where it involves a degree of watching and supervision by the court which is altogether impracticable. although no formal agreement in writing had been executed. the portfolio included properties. There was no evidence that these persons were made aware of these proceedings. so complicated were the questions of law and accounting in arriving at a proper valuation of the properties and payment to the parties. the parties intended that there was to be no concluded contract until a formal document incorporating terms that were fully and comprehensively set out and agreed was executed. rights and interests of a number of persons other than the parties. stating their intention to discontinue negotiations and that any work done had been entirely at YC Chin's risk. accepting their proposals in respect of the project. 2290 Formation -. (9) so long as the parties are only in negotiation. Ayer Hitam Tin Dredging Malaysia Bhd ('AHTD').

work had been done before the coming into being of any contract and that the letter was part of ongoing negotiations for a future agreement. On the other hand, YC Chin submitted that all essential terms had been agreed and all that remained to be done was to put the terms into the form of a contract. The trial judge found that there was a contract and allowed YC Chin's claim for breach. AHTD appealed. The primary issue was whether there was a concluded contract between AHTD as employer and YC Chin as contractor.
Holding :

Held, allowing the appeal: (1) the existence of an agreement depends upon the intention of the parties, who must be ad idem. It may be inferred from the language used, the parties' conduct having regard to the surrounding circumstances and the object of the contract. The court will generally apply an objective or reasonable man test; (2) merely because the parties contemplate the preparation of a formal contract, that would not prevent a binding contract from coming into existence before the formal contract is signed. However, when an arrangement is made 'subject to contract' or 'subject' to the preparation and approval of a formal contract', it will generally be construed to mean that the parties are still negotiating and do not intend to be bound until a formal contract is exchanged; (3) having regard to the fact that the letter did not contain details such as what 'the appropriate indemnity clauses' were, together with its vital qualifying clause, 'subject to the following terms and conditions', the present case fell within the principle in Crossley v Maycock (1874) LJ Ch 379 that if an agreement is made subject to certain conditions, then until those conditions are accepted, there is no enforceable final agreement; (4) on its true construction, the letter did not constitute a contract binding in law but was only a record of terms which were agreed as a basis for the negotiation of a contract. It was a letter of intent, ie an expression in writing of a party's present intention to enter into a contract at a future date; (5) since the plaintiff had commenced the preliminary works, with the knowledge but not necessarily the consent of the defendant, the liability of the defendant would be on a quantum meruit basis not exceeding RM300,000, having regard to para (v) of the letter; (6) (obiter) the proposition in Kam Mah Theatre v Tan Lay Soon [1994] 1 MLJ 108 must be read keeping in mind the vital qualifying clause there that the socalled deposit fell to be refunded if no agreement was signed. It does not detract from the principles that: (i) an informal contract without any express details may be binding; (ii) a bargain with essential terms, though a formal document is to be drawn up with further terms, is still a bargain; and (iii) where there is a definite and complete agreement, the reservation in respect of a formal document only means that it should be put into proper shape and in legal phraseology with any subsidiary terms necessary for insertion in a formal document.
Digest :

Ayer Hitam Tin Dredging Malaysia Bhd v YC Chin Enterprises Sdn Bhd [1994] 2 MLJ 754 Supreme Court, Malaysia (Abdul Hamid Omar LP, Edgar Joseph Jr and Mohamed Dzaiddin SCJJ).
2291 Formation -- Whether telex constituted complete agreement

3 [2291] CONTRACT Formation – Whether telex constituted complete agreement
Summary :

'The failure of the plaintiffs to disclose the correct information in their ex parte application is a good ground to discharge the attachment order': per Zakaria Yatim J. In support of their ex parte application for order of attachment before judgment under s 19(1)(c) on the ground that the defendants, with intent to obstruct or delay the execution of any judgment to be obtained, were removing or have removed assets, the plaintiffs alleged in their affidavit that the defendant company had a paid-up capital of $2.00. The defendants in their affidavit stated that the paid-up capital was $200,000.00 The plaintiffs in their affidavit in reply changed their story and stated that the authorized capital of the defendant company was $25,000.00.
Holding :

Held: The plaintiffs had failed to disclose the true facts by making inaccurate statements in their affidavit in support of the ex parte application and the order should be set aside.
Digest :

Serply Sdn Bhd v Protexa Drilling (M) Sdn Bhd [1984] 2 MLJ 237 High Court, Kuala Lumpur (Zakaria Yatim J).
2292 Formation -- Whether telex messages constituted concluded agreement

3 [2292] CONTRACT Formation – Whether telex messages constituted concluded agreement – Condition precedent
Summary :

In this case, one Hiswara of PT Bina Alam, an Indonesian firm, had agreed to buy fertilizer from a Rumanian company but he had arranged with Phillips Petroleum International Inc (Phillips) to be the buyers in their name. Hiswara instructed, unknown to each other, Phillips and the second appellants to find vessels for carrying the fertilizer. Phillips instructed Stolt-Nielsen, and the second appellants instructed the respondents. The respondents negotiated with the ship brokers Polfracht Sydney to charter vessels from the first appellants in the belief that the charterers were Phillips. They conducted the negotiations by telex. A contract of affreightment was eventually drawn up and this was sent to Phillips for signature. The manager of Phillips refused to sign the contract. The first appellants then sued

Phillips and the respondents claiming damages from Phillips for breach of the contract of affreightment and in the alternative, damages from the respondents for breach of warranty of authority. The respondents in turn joined the second appellants, Hai Nguan, as third parties claiming an indemnity from them on the ground that in purporting to contract on behalf of Phillips, they had acted on the instructions of the second appellants. Choor Singh J in the High Court dismissed the action of the first appellants against Phillips holding that the respondents had no authority to act on their behalf. He concluded that a complete agreement had been reached between the respondents and Polfracht Sydney and accordingly held that the respondents were liable in damages to the first appellants for breach of warranty of authority; but he dismissed the third party proceedings of the respondents against the second appellants, holding that the respondents had not been authorized by the second appellants to enter into the contract on behalf of Phillips. The damages payable by the respondents to the first appellants were assessed at US$253,658. The respondents appealed to the Court of Appeal, which allowed the appeal. They held first that no concluded agreement had resulted from the telex exchange between the respondents and Polfracht Sydney, with the result that the respondents were under no liability to the first appellants for breach of warranty of authority. They further held that the second appellants had authorized the respondents to contract with the first appellants on behalf of Phillips. The effect of this was that if the respondents had been liable to the first appellants, the respondents would have been entitled to be indemnified by the second appellants. They ordered the second appellants to pay the costs of the third party proceedings both in the Court of Appeal and in the High Court (see [1982] 1 MLJ 53). The first appellants appealed with leave from the decision of the Court of Appeal that the respondents were under no liability to them for damages for breach of warranty of authority and the second appellants appealed against their decision that they had authorized the respondents to contract on behalf of Phillips and so must pay the costs of the third party proceedings.
Holding :

Held: (1) the decision of the Court of Appeal that there was no complete agreement between the respondents and Polfracht Sydney could not be sustained and therefore the respondents were liable in damages to the first appellants for breach of warranty of authority; (2) having considered the evidence and the judgment of the trial judge, their Lordships have come to the conclusion that the Court of Appeal were fully justified in coming to a different conclusion from the trial judge on the question whether the respondents had been authorized by the second appellant to act on behalf of Phillips; (3) with all respect to the trial judge, their Lordships having considered the contemporary documents, concluded in agreement with the Court of Appeal that the probabilities pointed overwhelmingly to the conclusion that the respondents were authorized by the second appellants to contract on behalf of Phillips; (4) the respondents must pay to the first appellants

the sum of US$253,658 with interest and the second appellants must indemnify the respondents in respect of these sums.
Digest :

Grace Shipping Inc & Anor v CF Sharp & Co (Malaya) Pte Ltd [1986] SLR 32 Privy Council Appeal from Singapore (Lord Bridge of Harwich, Lord Brandon of Oakbrook, Lord Oliver of Aylmerton, Lord Goff of Chieveley and Sir Ivor Richardson).
2293 Fraud -- Contract - Sale and Purchase agreement - Deposit allegedly paid by appellant under agreement for purchase of house - Claim for return of deposit against respondent - Respondent alleging fraud against appellant - Onus of proof on respondent.

3 [2293] CONTRACT Fraud – Contract - Sale and Purchase agreement - Deposit allegedly paid by appellant under agreement for purchase of house - Claim for return of deposit against respondent - Respondent alleging fraud against appellant - Onus of proof on respondent.
Summary :

In the court below, the appellant sued the respondent for the return of a sum of $6,000 which he claimed he had paid the respondent as a deposit under a sale and purchase agreement dated 3 January 1979 for the purchase of a terrace house. By his defence, the respondent denied both the execution of the agreement and the receipt of the deposit. He contended that he was absent from Malaysia from 17 November 1978 to 22 January 1979 and could not have entered into transaction with the appellant on 3 January 1979. He, however, admitted that he had sold the property to one Mr Chung. At the trial it became clear that what was alleged was not fraud on the part of the appellant but fraud on the part of an unknown third party who had impersonated the respondent and entered into the transaction concerned with the appellant.
Holding :

Held, allowing the appellant's claim: (1) once prima facie evidence was adduced by the appellant that it was the respondent who executed the agreement and received the deposit of $6,000 the onus shifted to the respondent to prove his allegation of impersonation. The respondent had failed to discharge this onus; (2) where fraud in the form of a criminal offence is alleged, even in civil proceedings, a higher standard of proof than that in ordinary matters is required; (3) and (c) the staleness of the case called for a finality to this unfortunate litigation; (4) a retrial should not be allowed for three separate reasons: (a) had there been no misreception and wrongful rejection of evidence, the learned President would have entered judgment for the appellant; (b) to allow a retrial would enable the respondent who was represented by counsel of considerable experience in the court below, to have a second opportunity to prove his case;the appellant should only recover the $6,000 deposit by way of refund together with interest thereon, at the

The appellant applied for an interim injunction to restrain the respondents from selling the land by public auction. 2294 Fraud -.agreed rate of 12% pa.Condition that vendor shall not without prior approval of purchaser subject the land to any other further encumbrance .410 towards the purchase price. charged the land to the second respondent. allowing the appeal: in this case the appellant had a perfectly legitimate right to pursue his remedy. however. He has also alleged fraud and has set out particulars of the fraud allegedly perpetrated against him by the first and second respondents and he seeks to defeat the indefeasible title of the second respondent on these grounds. (b) an injunction to restrain the respondents from proceeding with the sale of the land and (c) a declaration that the charge registered was void wholly or in respect of the lot agreed to be sold to the appellant. The appellant appealed. Summary : In this case. The learned judge dismissed the application. Holding : Held. a housing developer. for the purchase of a house for $163. the second respondent instituted foreclosure proceedings and the Senior Assistant Registrar of the High Court directed the sale of the land. from the date of service of the summons to the date of judgment and thereafter at the agreed rate of 8% pa until date of realisation. The first respondent. When the first respondent failed to repay the loan to the second respondent.910 and had paid a total sum of $74. Deposit by way of security for costs of the appeal should be refunded to the appellant and costs to him in the present court and the court below. Digest : Nahar Singh v Pang Hon Chin [1986] 2 MLJ 141 High Court.Application for injunction to restrain respondents from proceeding with sale of land Allegation of fraud to defeat indefeasible title of chargee . The appellant applied for: (a) an order of specific performance of the sale and purchase agreement.Specific performance 3 [2294] CONTRACT Fraud – Specific performance – Land Law . He has paid a substantial sum of the purchase price. He is also asking for .Application for specific performance of sale and purchase agreement . the appellant had entered into a sale and purchase agreement with the first respondent.Agreement for purchase of land and house with housing developer .Vendor charging the land without approval of purchaser .Application for interim injunction allowed.Foreclosure proceedings instituted by chargee . Penang (Edgar Joseph Jr J). It was provided in the agreement that after the execution of the agreement the vendor shall not without the prior approval of the purchaser subject the land to any further encumbrance.

and that the late Mr Chan during his lifetime was under no obligation to complete the option agreement. including false representations. Fraud and other defences in the alternative were pleaded in the statement of defence. dismissing the appeal: (1) the motive and opportunity for the appellant to commit fraud on the late Mr Chan by means of the option document was clear.Specific performance 3 [2295] CONTRACT Fraud – Specific performance – Whether option agreement was obtained by fraud so as to render it unenforceable – Contracts Act 1950. allegedly given by the respondent's deceased husband (`Mr Chan') in respect of a fruit plantation (`the orchard'). Digest : Lai Soon Cheong v Kien Loong Housing Development Sdn Bhd & Anor [1986] 2 MLJ 369 Supreme Court. A further issue in this case was in relation to the burden of proof of fraud in civil proceedings. s 17 Summary : The appellant's claim was for an order for specific performance of an option agreement dated 5 January 1977 (`the option agreement'). The option agreement was thus executed during the currency of the lease agreement to run over a period of nine years until the expiry of the lease in 1986. the property was leased to the appellant for 15 years at a nominal rent of RM350 per year whereby Mr Chan practically got no income at all from his land for 15 years. (ii) on 4 July 1971. In the circumstances he should be allowed an opportunity to prove his allegations. but in return. out of jungle land he would reap the . it would be sufficient to prove that the option agreement was obtained by fraud so as to render it unenforceable. Holding : Held. The orchard was also the subject matter of an earlier business arrangement between the two parties as represented by a lease agreement (`the lease agreement'). on the various findings of fact made by the learned trial judge against the appellant. Kuala Lumpur (Wan Suleiman. entered by them in 1971 for a period of 15 years.specific performance of the sale and purchase agreement against the first respondent. namely: (i) the close business friendship between the late Mr Chan and the appellant which started in 1968 when the appellant first became interested in developing the land in dispute into a fruit plantation. Hashim Yeop A Sani and Wan Hamzah SCJJ). non est factum and failure of consideration. self-evident and based on the following factors. The respondent's contention was that the purported option was obtained by fraudulent means and was therefore null and void and unenforceable. The main issue for determination in this appeal was whether. 2295 Fraud -.

Standard of proof 3 [2296] CONTRACT Fraud – Standard of proof – Allegation of fraud was civil in nature – Whether the burden of proof of civil fraud was on the balance of probabilities – Contracts Act 1950.the appellant did not come with clean hands. In this case. a balance of probability was applicable. Digest : Ang Hiok Seng @ Ang Yeok Seng v Yim Yut Kiu (Personal representative of the estate of Chan Weng Sun. In this case. An allegation of criminal fraud in civil or criminal proceedings could not be based merely on suspicion or speculation. deceased) [1997] 2 MLJ 45 Federal Court. there was motive and opportunity to commit fraud. Johor Bahru (Chong Siew Fai CJ (Sabah & Sarawak). neither Mr Chan nor members of his family had used in any of their letters the word `cheating' or `fraud' was not by itself fatal. there was fraud as defined in s 17 of the Contracts Act 1950. (3) whether the allegation of fraud in civil proceedings concerned criminal fraud such as conspiring to defraud. s 17 See contract. since the allegation of fraud was purely civil in nature and not based on or connected with a criminal offence. the civil standard was applicable. Mr Chan became curious to know the current value of his up-and-coming orchard and as such. 2297 Fraudulent misrepresentation -. Digest : Ang Hiok Seng @ Ang Yeok Seng v Yim Yut Kiu (Personal representative of the estate of Chan Weng Sun. 2296 Fraud -. where . the fact that prior to the issue of the writ. para V [43]. then the court was entitled to refuse the remedy in order to protect the respondent from being a victim of sharp practice. (2) the basis of the remedy of specific performance lay in equity and as such. What the court had to decide was whether in the totality of the oral and documentary evidence. misappropriation of money or criminal breach of trust. Further. it was settled law that the burden of proof was the criminal standard of proof beyond reasonable doubt and not on the balance of probabilities. it was easy for the appellant to exploit the situation fully by fraudulently misrepresenting that the socalled option document was not for the purpose of sale by him but merely to enable him to test the property market.Invoice for sale of printing machine stated money paid as deposit 3 [2297] CONTRACT Fraudulent misrepresentation – Invoice for sale of printing machine stated money paid as deposit – Vendor knew representation as to . However. Johor Bahru (Chong Siew Fai CJ (Sabah & Sarawak). where the allegation of fraud was entirely founded on civil fraud and not on criminal conduct or offence.as in this case .benefit of being the owner of a valuable orchard. deceased) [1997] 2 MLJ 45 Federal Court.

The representation that Inter-Print had paid XLC Agency S$200.Application for .000 by the InterPrint and the first defendant did not pay any part of that on his own behalf or on behalf of Inter-Print. the plaintiff claimed damages against the fifth defendant for fraudulent misrepresentation in relation to the supply of the machine.000 as a deposit for the purchase of the machine was false and the fifth defendant knew that it was false when she made the representation.Whether plaintiff's claim .Summary judgment 3 [2298] CONTRACT Fraudulent misrepresentation – Summary judgment – Civil Procedure .000. The fifth defendant carried on business as XLC Agency which supplied a printing machine to Inter-Print. The invoice issued by XLC Agency stated that the price was S$500.000 and the plaintiff as owner of the machine would enter into a hire purchase agreement with Inter-Print as hirers for the sum of $300.000.000 to be paid by hire purchase instalments. Digest : Singapura Building Society Ltd v Chia Yew Seng & Ors Suit No 502 of 1995— High Court.deposit was false as no deposit was paid – Representation induced finance company to enter into hire purchase agreement with hirers Summary : The first to fourth defendants were partners of Inter-Print which carried on a printing business.000 had been paid.000 for the purchase of the machine was of such a nature as would induce the plaintiff to purchase it from XLC Agency for S$500. In this action. The plaintiff contended that Inter-Print and XLC Agency proposed a hire transaction under which the plaintiff would purchase the machine from XLC Agency for S$500. (3) there was no agreement between the first defendant or Inter-Print and XLC Agency for the purchase of the machine by Inter-Print for S$500. Singapore (Lim Teong Qwee JC). leaving a balance of S$300. The representation was made by the invoice. (4) the representation that Inter-Print had paid XLC Agency a deposit of S$200.Summary judgment . 2298 Fraudulent misrepresentation -.000 and that a deposit of S$200. There was no arrangement for payment of a deposit of S$200. There would be judgment for the plaintiff against the fifth defendant for fraudulent misrepresentation for damages to be assessed. Holding : Held. Inter-Print acquired the printing machine as hirers under a hire purchase agreement with the plaintiff.000 for the purchase of the machine. allowing the claim: (1) the fifth defendant represented to the plaintiff that Inter-Print had paid her a deposit of S$200. (2) the truth was that there was no deposit of S$200.000 and to enter into a hire purchase agreement with Inter-Print with respect to it.000 paid by the first defendant or Inter-Print for the purchase of the machine.

The defendants have an arguable case or have raised triable issues in their defence. Summary : The plaintiff was a logging contractor and the first and second defendants were limited companies. The defendant towed a total of 82 logs but only 11 logs were delivered.Damages. The plaintiff claimed damages for the loss.Rules of the High Court 1980. fourth and fifth defendants were directors and guarantors of the first and second defendant companies. the first and second defendant companies agreed to pay the plaintiff a sum of $3m.based on agreement secured by fraudulent misrepresentation . It was also alleged that there was a custom in Sandakan whereby the towing contractor would only pay to the log owner $25 for every log lost during the journey from Sungei Sugut to Sandakan. Digest : Koh Siak Poo v Perkayuan OKS Sdn Bhd [1988] 3 MLJ 224 High Court. The defences of the defendant were (a) act of God and (b) frustration. Holding : Held.Whether triable issues raised .Merits of application . The plaintiff proceeded to apply for a summary judgment under O 14 of the Rules of the High Court 1980 against the defendants. The defendants denied wilful failure or neglect and contended that the agreement was secured by fraudulent misrepresentation. By a deed made between the plaintiff and the first and second defendant companies. Kuala Lumpur (Zakaria Yatim J). contending that the defendants had wilfully failed and neglected to pay the plaintiff the said sum. It was alleged that the logs were lost in a storm at sea.000 was made but subsequent cheque payments were dishonoured.Defences of act of God and frustration . A cash payment of $50. Summary : The plaintiff and the defendant had entered into a verbal contract whereby the defendant agreed to tow the plaintiff's logs from Sungei Sugut to his log pond at Sandakan.Bailee for reward 3 [2299] CONTRACT Frustration – Bailee for reward – Custom – Towing of logs Failure to deliver logs . O 14.Alleged custom relating to lost logs . The third.No satisfactory proof of custom . dismissing the application: this is not a proper case where summary judgment under O 14 should be granted. . in consideration of the plaintiff agreeing to forbear from further pursuing certain civil actions against them. 2299 Frustration -.Bailee for reward Burden of proof .

The plaintiffs appealed to the High Court.Holding : Held: (1) the storm which was encountered was not violent enough to be regarded as an act of God. which event. By a sub-contract. amounted in law to frustration of the supply contract. (3) the defendant was a bailee for reward and as in this case he had not discharged the burden of proving that the loss occurred without any negligence or default or misconduct of himself or any of his servants. In performance of part of their obligations under the sub-contract. 2300 Frustration -. (4) the alleged custom had not been satisfactorily proved in this case and the plaintiff was entitled to the value of the logs not delivered. The defendants failed to reply and as a result. (2) in a towing contract of this nature a storm must be expected and would have to be guarded against and therefore the defence of frustration must fail.Cancellation of project 3 [2300] CONTRACT Frustration – Cancellation of project – Whether project fundamental to performance of supply contract – What amounts to frustration – Radical change in the character of the obligation Summary : The defendants were sub-contractors of Turner (East Asia) Pte Ltd ('Turner'). Holding : . The defendants submitted that the supply contract needed for its foundation the continuing existence of the Gateway Project and that the cancellation of the Gateway Project had frustrated the supply contract. being beyond the control of the defendants. the defendants telexed the plaintiffs to suspend all manufacture/delivery of the equipment. The defendants' main contention was that they were prevented from accepting the equipment purchased from the plaintiffs because of the termination of the sub-contract between the defendants and Turner. The assistant registrar gave unconditional leave to the defendants to defend the action. Subsequently. the defendants agreed to buy from the plaintiffs and the plaintiffs agreed to supply to the defendants ('the supply contract') certain equipment. who were the main contractors employed by Gateway Land Pte Ltd in a development project known as the Gateway Project. The plaintiffs informed the defendants that they would not agree to an indefinite suspension of the contract and required the defendants to reply as to when they could accept delivery of the equipment. the defendants agreed to carry out and complete certain sub-contract works. Digest : Khoo Than Sui v Chan Chiau Hee [1976] 1 MLJ 25 High Court. the plaintiffs commenced proceedings for damages for breach of contract against the defendants. Kota Kinabalu (Seah J). the plaintiff was entitled to claim for the loss of the logs from the defendant.

Held. He claimed damages for detinue and for the value of the engine on its non-return on the ground that he had bailed the said engine to the defendant. That being the case. the nature of the supply contract and the surrounding circumstances could not justify a court in implying that the continued existence of the Gateway Project was fundamental to the performance of the supply contract by either party. that the defendants' reason for not accepting delivery of the equipment was that Turner had terminated the main contract and had stopped work and not because the Gateway Project had ceased to exist. The determination of the main contract led to the determination of the sub-contract by its own terms.Contract to repair 3 [2301] CONTRACT Frustration – Contract to repair – Bailment contract valid – Breach – Damages Summary : In this case. Also. (3) the ancillary contract of bailment did not necessarily fall with the main contract of repair and the defendant was in breach of his duty under the contract of bailment to give notice to the plaintiff of his loss of control of the engine about December 1943. a miner. the defendant was therefore not liable in detinue. Holding : Held: (1) the contract to repair was frustrated and discharged without breach or default on either side and the rights of the parties would have to be adjusted accordingly. if any. (3) the main contract was not frustrated but merely breached. The detention. . an iron founder for certain specified repairs just before the Japanese invasion. there was no basis for arguing that the supply contract was frustrated. It follows that the sub-contract could not have been frustrated. Secondly. frustration as a defence was not available to the defendants on the ground. Singapore (Chan Sek Keong JC). There must therefore be an award in damages to the plaintiff. was by the Japanese or as a result of their proceedings. in the circumstances of this case. any default of Turner in respect of their obligations under the sub-contract was a contingency which had been provided for in cl 21 of the subcontract. (2) in the court's view. firstly. had sent a Deutz engine to the defendant. 2301 Frustration -. counsel's argument that the continued existence of the Gateway Project formed the basis of the supply contract had no factual or legal basis. allowing the appeal: (1) taking into account the additional facts disclosed in Suit No 3599 of 1985 (in which the defendants had sued Turner for payment of sums payable under the sub-contract). Digest : MTU Asia Pte Ltd v Brightside-Woh Hup [1987] SLR 391 High Court. (2) the defendant did not detain the engine. the plaintiff.

took possession of the premises. By an agreement dated 21 November 1968. The agreement was drawn up to circumvent the application of the Control of Rent Act 1966 (Act 56/1966) which prohibits a tenant from collecting from his subtenant more than 110% of the rent which he himself pays to his landlord.500. (3) in this case. He did not take physical possession of the premises until 31 December 1977. The contract was for ten years and there was no provision in the contract for earlier termination. Instead. wares and merchandise belonging to the plaintiffs in return for commission of 2[1/2]% on all goods sold to be calculated every six months or if the amount of commission so payable for the same period fell below the sum of $9.Digest : Chong Kin Voon v Kwan Cheong & Co [1950] 3 MC 31 High Court.500 per mensem until 31 December 1975 when they stopped upon discovering that the premises had vested in the state as far back as 23 May 1975. whatever rights the defendant had in the premises were extinguished on 23 May 1975 when the . the defendant had agreed to permit the plaintiffs to display for sale at the premises goods. The main issue before the court was the date on which the contract was frustrated. s 2(1) Law Reform (Frustrated Contracts) Act 1943 (UK). The plaintiffs claimed that it was frustrated on 23 May 1975 and the defendant argued that the contract was frustrated on 31 December 1977. On 23 May 1975 the Collector of Land Revenue by notice of possession served on the defendant's landlord. wide enough to apply to the new situation: if it is not. on its true construction. 1970 Ed) – Law Reform (Frustrated Contracts) Act 1943 (UK) – Frustration . the plaintiffs were to make it up to that sum.000. 2302 Frustration -.Impossibility of performance . Summary : The defendant in this case was the tenant of premises known as Nos 110/112 Orchard Road. he consistently throughout the whole period up to 31 December 1975 received the sum of $1.Frustrated Contracts Act (Cap 33). Evidence revealed that the defendant took no part in the business of the plaintiffs. then it is at an end. Kuala Lumpur (Taylor J).Correct test of frustration 3 [2302] CONTRACT Frustration – Correct test of frustration – Frustrated Contracts Act (Cap 33. He paid a monthly rent of $215 to the owners of the property. s 1. Holding : Held: (1) the agreement of 21 November 1968 was a device to conceal a subtenancy agreement between the parties at the monthly rent of $1.500 per month from the plaintiff.Claim for refund of money paid under agreement . Singapore. In the meantime the plaintiffs continued to occupy the premises and to pay the defendants $1. (2) the correct legal test for deciding whether a contract has been frustrated is whether the contract which the parties made is.

All the borrowers defaulted in their obligations to the bank under the various loans/banking facilities whereupon a redemption agreement ('the agreement') was entered into between the plaintiff and the bank. which was one of the borrowers. several loans/banking facilities had been granted to various borrowers. The agreement provided for the redemption of the lands from the bank upon payment of a total sum of RM20m. On the strength of charges created over the lands. 2303 Frustration -. RM2m was to be paid upon execution of the agreement (which was accordingly paid) and the balance of RM18m on the expiration of 15 months from the date of the agreement. Monsia's proceedings was stayed. one of which was Monsia Investments Pte Ltd ('Monsia'). At the same time. The plaintiff was the owner of several pieces of land ('the lands'). ie the full amount due under the charges if there should be default by the plaintiff of its obligations under the agreement. Singapore (Choor Singh J). The bank also argued that the agreement did not preclude the bank from claiming more than RM18m.Delay 3 [2303] CONTRACT Frustration – Delay – By injunction – Whether injunction to restrain completion of agreement constitute frustration of the agreement Summary : The first application was by the defendant ('the bank') to strike out the plaintiff's statement of claim whereas the second application was by the plaintiff for judgment under O 14. (4) the footing on which the agreement was entered into was gone and the contract clearly was frustrated.state became the owner of the premises. On appeal to the Supreme Court. the plaintiff's request for extension of time was refused. The bank also argued that time was of the essence of the agreement and that the injunction in the Monsia suit had frustrated the agreement. The bank argued that the present action was res judicata due to the earlier foreclosure proceedings instituted by the bank. a bank guarantee of that amount was to be delivered to the bank on or before six months from the date of the agreement. The bank also contended that no specific relief should be granted to the plaintiff. Monsia. Rules of the High Court 1980 for declaratory relief and under O 18 for specific performance. At the time the agreement was entered into. the bank had already commenced proceedings to have the land sold ('the foreclosure proceedings'). obtained an ex parte injunction restraining the bank and the plaintiff from proceeding with or completing the agreement. Digest : Singapore Woodcraft Manufacturing Co (Pte) Ltd v Mok Ah Sai 1978 High Court. Subsequently. Holding : .

P sought to strike out the defence of D pursuant to O 18 r 19 or under the inherent jurisdiction of the court. The requirement to pay interest in the event of default is an indicia that time is not of essence. (3) reading the agreement as a whole and taking into account the surrounding circumstances and the factual background including the genesis and the objective aim of the transaction. P had. arranged for a loan from Bank Rakyat for D's housing project. the effect was to denude those charges of any legal effect. dismissing the bank's summons and granting the plaintiff's application: (1) the decision in the foreclosure proceedings did not preclude the plaintiff from filing and proceeding with the present action. Holding : . The agreement replaced the charges recited in it and once it was entered into.Held. 2304 Frustration -.Disappointed expectations 3 [2304] CONTRACT Frustration – Disappointed expectations – Whether contract can be frustrated on ground of disappointed expectations – Whether nonperformance of agreement attributable to defendant's own fault – Satyabrata Ghose v Mungeeram Bangur & Co AIR 1954 SC 44 (cited) Naihati Jute Mills Ltd v Khyalivam AIR 1968 SC 522 (cited) Summary : P sued D for the balance of the fees due to them for management services rendered to D in respect of a housing project. Digest : Kuala Lumpur Landmark Sdn Bhd v Standard Chartered Bank [1994] 2 MLJ 559 High Court. No application to dissolve the injunction was necessary. The bank had held back the disbursement of the loan for the project and D had contended that the contract in question had been frustrated with the result that they were not liable to pay P the fees which would otherwise be payable under the contract. In due course. acceptance of breach) the court nevertheless would exercise its discretion in the plaintiff's favour. (4) the benefit of the bank was not lost by the delay in performance occasioned by the injunction. Upon their application being dismissed by the senior assistant registrar. (5) after taking into account all matters operating against the plaintiff in the context of specific relief (delay. P obtained judgment in default of appearance against D which was set aside on the application of D. inter alia. Kuala Lumpur (Anuar J). at the request of D. that P did not perform the services as alleged in their statement of claim. it is clear that the parties did not intend time to be of the essence. D filed their defence contending. P applied for leave to enter final judgment against D under O 14 of the Rules of the High Court 1980. (2) the maximum sum recoverable in any proceeding by the bank cannot be greater than RM18m. P appealed to the High Court. (6) the order of stay granted by the Supreme Court had the automatic effect of putting an end to the injunction as well. Alternatively. unclean hands.

during his employment by the defendant. allowing the appeal: (1) in the instant case. D could not now say that they were not liable to pay P the fees which were properly due to the latter. P had therefore performed their part of the bargain pursuant to the agreement entered into by the two parties. no contract can be frustrated on the ground of disappointed expectations nor can a court absolve a party from liability to perform a contract merely because the performance becomes more onerous. There was no mention of frustration in their correspondence.Employment contract 3 [2305] CONTRACT Frustration – Employment contract – Employee absent from work due to detention order – Whether contract of employment frustrated Summary : The plaintiff. . Kuala Lumpur (Lim Beng Choon J). (3) the quantum of damages was confined to what the plaintiff could have earned if not for the breach of contract. 2305 Frustration -. terminated his service for failing to report for duty. there was no doubt that P had rendered the services which D requested them to do. (2) in the instant case. instead. The defendant refused and. While under detention. Kelang Bhd Suit No P 246 of 1981 High Court. was placed under detention for two years under the Emergency (Public Order and Prevention of Crime) Ordinance 1969. The plaintiff sued for wrongful dismissal. Seremban (Mustapha Hussain J). (2) since the plaintiff's service was terminated on the ground of being absent from work and his absence was not self imposed. the court was satisfied that D had no defence at all let alone a reasonable defence to the claim of P. The defendant claimed that the plaintiff's contract of employment had been frustrated by reason of his detention. the plaintiff requested that the defendant allow him to return to work after the detention. Digest : Lim Hua Ti t/a Amsco Merchant Bankers Trust v Syarikat Bekerjasama Perkampungan Alam Shah. up to the time he could find new employment. The plaintiff had therefore been wrongfully dismissed. the defence of frustration could not be sustained. In any event. Digest : Subramaniam v Esso Malaysia Bhd [1990] 3 MLJ 118 High Court. Holding : Held. the doctrine of frustration cannot avail D as the non-performance of the loan agreement was attributable to D's own fault. allowing the plaintiff's claim: (1) the defendant terminated the plaintiff's contract on the ground that he had been absent from work. (3) for the above reasons. That being so.Held. although it was pleaded in the defence.

See CONTRACT. Vol 3. the plaintiffs paid the sum of $500 to the defendant as deposit for the purchase of premises at No 7 Jalan Mahdali and was given a receipt for the money.2306 Frustration -. On 5 December 1941.Illegality 3 [2308] CONTRACT Frustration – Illegality – Housing Developers (Control & Licensing) Rules 1970 – Contract for purchase of land and house Application for sub-division of land .Frustration of contract . 2307 Frustration -.Impossibility of performance . 2308 Frustration -. 3 [2307] CONTRACT Frustration – Frustration of contract . Kedah (Hill J).Issue not pleaded .Claim for return of money paid in advance.Impossibility of performance . the plaintiffs were entitled to a refund of the deposit of $500.Claim for return of money paid in advance. Holding : Held: (1) in the circumstances it was impossible for the plaintiffs to perform their part of the contract within a reasonable time and therefore the contract was frustrated. . Digest : Kung Swee Heng & Anor v Paritam Kaur [1948] MLJ 170 High Court. s 24. as the plaintiff was in fear of his life at the hands of the Japanese and as for a considerable period land transfers were prohibited by the Japanese.Housing Developers (Control and Licensing) Rules 1970. rr 11 & 17 .Contracts Act 1950. (2) applying the principle laid down in the Fibrosa case [1943] AC 32. para 2087. Summary : This was a claim for the specific performance of an agreement dated 5 December 1941 or alternatively the refund of the deposit of $500.Employment contract 3 [2306] CONTRACT Frustration – Employment contract – Japanese occupation Digest : V Kandiah v Government of the Federation of Malaya [1952] MLJ 97 High Court.Whether breach of rules affects validity of contracts .Whether contract discharged by frustration Building contracts entered into by person not proprietor of land .Special condition imposed that portion of land reserved for bumiputra . The war came and the transaction between the parties could not be completed. Kuala Lumpur (Wilson J).

(4) in any case there is nothing illegal about the consideration or object of the contracts because they are only contracts for the sale and purchase of houses. the substance remained the same. ie a new agreement altogether. there was a breach of the Housing Developers (Control and Licensing) Rules 1970 but the question whether non-compliance with the rules rendered the contracts illegal by virtue of s 24 of the Contracts Act was not pleaded by the appellant and there was no proper factual basis upon which a ruling could be made. Holding : Held: (1) to invoke the doctrine of frustration the appellant must show that the completion of every one of the contracts was in substance a different obligation from what had previously been agreed to. One of the pieces of the land belonged to him and the other belonged to a company. In this case. As it took the risk so it must pay for it. . The appellant had no good reasons to expect that its application would be approved at all. (3) in regard to the land owned by Futo Trading Company. The appellant invited members of the public to book the lots and booking applications were signed. All the lots were booked before approval for conversion and sub-division of the land was obtained. (2) it was no defence for the appellant to say that the special conditions were completely unexpected because under the law the state government could even refuse the application altogether. The appellant in this case had proposed to develop two pieces of land in Kuantan into a housing estate. The appellant appealed. counsel for the appellant did not raise the issue whether acceptance of the booking constituted a binding contract between the appellant and the purchasers (the ruling of the trial judge in this issue being unassailable). Each of the contracts was and still is for the sale of houses which the appellant agreed to build. The rules therefore do not affect the validity or otherwise of the contracts which the developer has signed with the purchasers. George J overruled the appellant's arguments and gave judgment in favour of the plaintiffs in the case in the form of damages. When the appellant applied for conversion and sub-division. On the appeal. (5) the appeal must be dismissed and the ruling of the learned judge that the respondents are entitled to damages only instead of specific performance confirmed. The special condition imposed by the Pahang state government in no way changed the substance of the appellant's agreement with its purchasers. At the trial the appellant contended that he was not liable as the booking did not constitute a binding contract and that even if it did so. The appellant decided not to build any of the houses and action was brought by some of those who had booked the lots claiming specific performance of the contract. this was granted subject to the condition that a number of the lots should be reserved for bumiputra.Summary : This was an appeal from the decision of George J reported in [1983] 1 MLJ 335. the contract was rendered not only impossible of performance but also illegal by the imposition of the special condition. the Futo Trading Company.

however.Digest : Kin Nam Development Sdn Bhd v Khau Daw Yau [1984] 1 MLJ 256 Federal Court. 2309 Frustration -.Impossibility 3 [2309] CONTRACT Frustration – Impossibility – Chargee and chargor entered into redemption agreement allowing chargor to redeem land within stipulated time – Third party obtained injunction restraining completion of redemption agreement – Whether redemption agreement rendered impossible to be performed by injunction – Contracts Act 1950. Y and SH Sdn Bhd defaulted in the payment of the loans and P applied for order for sale of D's land. (3) P's statutory right of foreclosure emanating from ss 256 and 257 of the National Land Code 1965. Digest : . in another writ action. D argued that by reason of the redemption agreement P was precluded from applying for foreclosure of D's land. could not be taken away unless P was precluded from exercising such right contractually. allowing application for order for sale: (1) since the redemption agreement was created after P had applied for foreclosure of D's land. P had not waived its right to proceed with the foreclosure action by entering into the redemption agreement. MI Ltd sued both P and D. the redemption agreement suspending P's right of foreclosure. Kuala Lumpur (Salleh Abas CJ (Malaya). The redemption agreement was only meant to give a breathing space for D to redeem its land within a specified time. D alleged that P had entered into a redemption agreement with D whereby D was to deliver to P a bank guarantee within a stipulated time. s 57(2) Summary : P granted loans to Y and SH Sdn Bhd which were secured by the registration of two charges over D's land. The contractual hinderance in this case. The very essence of the redemption agreement had been frustrated as its performance would be a radical change of its original terms and conditions. the redemption agreement had been frustrated. P however contended that because of MI Ltd's injunction. MI Ltd obtained an interim injunction restraining D from completing in any manner whatsoever the redemption agreement. namely. had been frustrated by MI Ltd's injunction. Subsequently. (2) the redemption agreement had been rendered impossible to be performed because of the injunction obtained by MI Ltd. D also alleged that P's foreclosure action constituted a repudiation of the redemption agreement which D accepted. MI's interim injunction was subsequently extended until the trial of the writ action. Holding : Held. As such P could proceed with its foreclosure proceedings. D further averred that P's foreclosure action was tantamount to a colourable devise to circumvent MI Ltd's injunction.

On 5 January 1980. a fire which started from a neighbouring site completely destroyed the structure. In 1977 the appellants commenced legal proceedings against the respondent to recover possession of the premises on the ground that the respondent was a mere licensee and alternatively on the ground that even if the respondent was a tenant.Whether compensation agreement was frustrated in law. Johor Bahru (Abdul Malik Ishak J).Impossibility 3 [2310] CONTRACT Frustration – Impossibility – Conversion of the condition of premises – Whether failure to obtain conversion rendered contract legally or physically impossible of performance – Contracts Act 1950.Impossibility 3 [2311] CONTRACT Frustration – Impossibility – Destruction of premises by fire – Compensation agreement between landlord and tenant . Under the compensation agreement the respondent agreed to vacate and deliver up vacant possession of the premises to the appellants on or before 30 June 1980. Despite demands. 2310 Frustration -. Vol 3. para 2111. Kuala Lumpur (Lim Beng Choon J). The respondent forfeited the sum of $20. Summary : The respondent was a tenant or licensee of a piece of land and a structure erected at No 40-A Tannery Lane. The respondent defended the action which was compromised after negotiations by an agreement dated 13 September 1979 (the compensation agreement).Standard Chartered Bank v Kuala Lumpur Landmark Sdn Bhd [1991] 2 MLJ 251 High Court. 1970 Ed). The appellants appealed from an order of the High Court whereby judgment was given for the respondent against the appellants for the sum of $155. she was not entitled to the protection of the Control of Rent Act (Cap 266. the appellants refused to pay the balance. before the respondent could leave the premises. in consideration of which the appellants agreed to pay $200.Destruction of premises by fire . s 57(2) Digest : Ho Weng Leong v Ng Kee Chin [1996] 5 MLJ 139 High Court.142 with interest and . The appellants subsequently became the owners of the said land (the premises). The appellants refused to pay on the ground that the compensation agreement was frustrated in law.000 less certain arrears of and future licence fees.000 to the respondent on signing of the agreement and the balance of the compensation on delivery of vacant possession of the said premises. See CONTRACT.000 paid and claimed for the full sum of $167. the appellants agreed to pay a sum of $20.142 under the compensation agreement. 2311 Frustration -. Under cl 2 of the compensation agreement.

Summary : The court will not decree specific performance of an agreement for a monthly tenancy. Kulasekaram and Chua JJ). Singapore (Wee Chong Jin CJ. [1979] 2 MLJ 166. If such an agreement is frustrated or rendered impossible of performance by reason of the coming into force of the Rent Restriction Ordinance 1939.Impossibility 3 [2312] CONTRACT Frustration – Impossibility – Performance – Legislation – Tenancy of premises . Digest : Chiang Hong Pte Ltd v Lim Poh Neo t/a Tai San Plastic Factory 1984 Court of Appeal.Damages Frustration of contract. (2) the learned trial judge rightly paid attention to the contents of the negotiations leading to the making of the compensation agreement.Impossibility 3 [2313] CONTRACT Frustration – Impossibility – Performance – No control over third party Summary : .Monthly letting . when framing the compensation agreement. no damages will be recoverable by either party in respect of the period of such frustration. The parties. Digest : Abdul Kader v Shaw Brothers Ltd [1940] MLJ 270 High Court. dismissing the appeal: (1) the destruction of the structure was not due to the fault of either party. Annotation : [Annotation: See also the case of Singapore Woodcraft Manufacturing Co (Pte) Ltd v Mok Ah Sai [1978-1979] SLR 516. had not present in their minds the possibility of such a disaster and had made no express stipulation with reference to it.costs and the appellants' claim against the respondent in Suit No 541 of 1980 was dismissed. (3) the doctrine of frustration does not apply in this case and the appeal should be dismissed. 2312 Frustration -. Holding : Held.] 2313 Frustration -.Specific performance . Straits Settlements (Pedlow J).

The agreement also provided that the defendant shall be responsible to obtain the appropriate licence from the municipal council ('the council') to carry out the business of a supermarket and departmental . that it is impossible for the obligor to perform it. 2315 Frustration -. Clause 2(x) provided that the defendant may apply for a written consent from the plaintiff to rent or assign the building to third parties and such consent shall not be unreasonably withheld. as being impossible of performance by A by reason of such third party persisting in interfering with B. is not void.A contract between A and B by which A agrees to indemnify B for losses occasioned to him by the interference of a third party over whom he (A) has no control. being in England. in its nature. for the purchase of 2.Lease 3 [2315] CONTRACT Frustration – Lease – Failure to obtain licence to use premises as intended under lease agreement – Whether a lease agreement can be frustrated Summary : The plaintiff leased by way of a lease agreement a four-storey building to the defendant. warehouse and office and all purposes ancillary thereto. At the date for completion. Clause 2(viii) of the agreement provided that the building was to be used as supermarket and departmental store.000 shares in the Pahang Corp Ltd.Impossibility 3 [2314] CONTRACT Frustration – Impossibility – Performance – Scrips cannot be delivered from England Summary : A contracted through a broker with B. in Singapore. 2314 Frustration -. Holding : Held: it was no excuse for the non-performance of a condition. Digest : Caudersah & Co v Mohamed Eusoff & Co [1887] 4 Ky 158 High Court. Straits Settlements (Wood J). could not be delivered. Digest : Fraser & Co v Tan Hay Seng [1889] 1 SLJ 143 High Court. some of the scrips. The defendant in this consolidated action applied to be released from performing the agreement and for the return of the deposit paid under the agreement. possible. Straits Settlements (Goldney J). if the performance be.

it was clear that the words 'warehouse' and 'office' were used in close relation to the use of the building as a supermarket and departmental store. in particular. The defendant also tendered as documentary evidence the projected trading and profit and loss accounts of the defendant company ('the accounts') as estimates for the year 1985 to support the claim for loss of profit. The plaintiff also contended that the building was not only leased as a supermarket and departmental store but the building may also be used as 'warehouse' and 'office'. it may be concluded that the plaintiff's action amounted to a breach of their contractual obligations under the lease and had thus prevented the defendant from enjoying the benefits under the lease. however. (4) a lease agreement may be frustrated. The defendant also pleaded that the performance of the lease had become. it was clear that the lease was already in force. the facts of the case and the agreement as a whole. the agreement was impossible of . Holding : Held. impossible and the lease was thus frustrated. without any fault on the part of the defendant. were neither checked nor confirmed by the auditor of the company. The defendant alleged that the plaintiff had played an active role to frustrate the agreement and submitted that the plaintiff's refusal to perform the agreement was a breach of the condition of the agreement and even if such refusal was not a breach of the condition of the agreement. Although the rejection by the council was based on policy. The plaintiff had on 20 December 1984 written a letter to the council confirming that the building would not be used as a supermarket. it was a breach that went to the root of the contract between them and had therefore prevented the defendant from enjoying the facilities that they were entitled to under the agreement. Such 'warehouse' and 'office' were intended to be a part of the business of the supermarket. the plaintiff should have informed the council that they had leased the building for 15 years to the defendant to be used as a supermarket. In this case. Therefore. (2) the plaintiff had not acted honestly and truthfully when signing the agreement. The plaintiff submitted that the doctrine of frustration does not apply to a registered lease. The conduct of the defendant after the registration of the lease when the application for licence was rejected showed that the defendant had treated himself as having possession of the building as provided in the agreement. The council rejected the defendant's application for the licence on 22 July 1984 but only informed the defendant of the rejection on 12 February 1988. cl 2(x) read together with cl 2(viii).store on the premises. (3) based on ss 227 and 230 of the National Land Code (Act 56/1965) and the facts of the case. dismissing the plaintiff's claim and allowing the defendant's counterclaim: (1) having regard to the correspondence of the parties. The exhibits. The responsibility to obtain the licence rested with the defendant but the plaintiff ought to have disclosed to the defendant that he had written to the council to confirm that he would not use the building as a supermarket. As the plaintiff did not show that their correspondence with the council had not jeopardized the defendant's opportunity to obtain the licence. the plaintiff ought not be allowed to claim any rent under the lease.

The appellants claimed that they should have been paid salaries and allowances under the UTS scheme. The defendant was released from performing the agreement and the plaintiff was ordered to return the deposit to the defendant. 2316 Frustration -. The respondent pleaded that as the recruitment of teachers into the UTS scheme had been discontinued the offer to employ them under the UTS scheme had become frustrated. the contract does not become impossible and it is not discharged by frustration. Therefore.Condition that after training teacher would be placed on UTS scale . Digest : Teng Aik Sdn Bhd v Gama Holdings (M) Sdn Bhd Civil Suit No 821 of 1985 High Court. One of the conditions of the offer which was accepted was that the teachers would on completion of the course be accepted as teachers on the UTS scale. Summary : In this case. On the acceptance of the Abdul Aziz recommendations the .Contracts Act 1950. The claim for damages under this heading was rejected. (5) it is a well-established rule of evidence that when documentary evidence is tendered. The conflict between the intended use of the building (as stipulated in the agreement) and the policy of the council had frustrated the agreement.No fundamental or radical change in circumstances 3 [2316] CONTRACT Frustration – No fundamental or radical change in circumstances – Contract capable of being performed – Agreement for teacher training . Seremban (Faiza Tamby Chik J). By the time they completed their course of training the UTS scale had been abolished and the Abdul Aziz scheme came into force. the preparation of the accounts was not satisfactory. (2) in this case it is wrong to say that the contract was not capable of being performed and it was not therefore frustrated. primary evidence of the said document must be adduced except in cases under s 65 of the Evidence Act 1950. The learned trial judge dismissed the claim of the appellants and they appealed to the Federal Court.Contract capable of being performed .performance because of frustration. This was not complied with when the defendant tendered the accounts.Abolition of UTS on coming into force of Abdul Aziz scheme Whether contract frustrated . the appellants were a group of 86 vocational school teachers who were successful in their application for teacher training. Holding : Held: (1) where after a contract has been entered into there is a change of circumstances but the changed circumstances do not render a fundamental or radical change in the obligation originally undertaken to make the contract something radically different from that originally undertaken.No fundamental or radical change in circumstances . The appellants were offered salaries under the Abdul Aziz scheme. s 57(2).

Digest : Ramli bin Zakaria & Ors v Government of Malaysia [1982] 2 MLJ 257 Federal Court. Singapore (Rajah J). 2319 Frustration -.Premature determination of main contract 3 [2317] CONTRACT Frustration – Premature determination of main contract – Whether this frustrates supply contract – Disappearance of substratum – Radical change of circumstances Digest : Pioneer Concrete (S) Pte Ltd v Turner (East Asia) Pte Ltd Suit No 2011 of 1986 High Court.Sale and purchase of motor car . 2320 Frustration -. See CONTRACT.government put into force an improved salary scale and this was applicable to the appellants.Purpose 3 [2318] CONTRACT Frustration – Purpose – Intervention of third party frustrated purpose of contract Digest : Peter Gomez v Brentnall Beard & Co (S) Pte Ltd 1984 High Court. 2317 Frustration -. para 1928. Vol 3. Vol 3. Singapore (Lai Siu Chiu J). Thus the UTS scheme was abolished and ceased to apply to the appellants. 2318 Frustration -. Digest : Tay Ah Poon & Anor v Chionh Hai Guan & Anor [1997] 1 SLR 369 High Court. Kota Bharu (Suffian LP. para 1767. Lee Hun Hoe CJ (Borneo). para II [76]. Singapore (Rubin JC). See CONTRACT. After that the appellants were given a higher commencing salary and a more favourable scale than that of the UTS scale.Sale and purchase of HDB flat 3 [2319] CONTRACT Frustration – Sale and purchase of HDB flat – Flat became part of redevelopment scheme and compulsorily acquired – Whether contract frustrated – Whether vendors could refuse to complete sale – Whether purchasers entitled to specific performance and/or compensation See land law.

Sandakan (Richard Malanjum J).910 was paid by way of an option fee. (2) the defendant also failed to establish on the balance of probabilities any of the elements necessary to bring into play the exemption clauses of the contract. damages ought to be paid to the plaintiff instead of specific performance. The defendant on the other hand argued that: (i) the contract excluded him from being sued.138.3 [2320] CONTRACT Frustration – Sale and purchase of motor car – Failure to deliver motor car – Failure to apply for import licence of motor car – Whether contract frustrated Summary : The plaintiff sued the defendant for breach of contract in connection with his unsucessful purchase of a Honda Prelude motor car. that damages should be sufficient relief. However. The plaintiff's case was that the defendant failed to deliver one unit of the Honda Prelude motor car which was the subject-matter of the contract.200 of which 5% amounting to S$106. he argued that relief should not be allowed as the plaintiff failed to plead it. ss 5 & 18 Summary : On 29 April 1983 the respondent ('the vendor') granted an option in writing to the appellant ('the purchaser') to purchase a piece of land known as 74 King's Road ('the property'). and (iii) if liable. 2321 Frustration -. The purchase price was S$2. Plaintiff now sought for specific performance of the contract. and a sale and purchase agreement was thereby made ('the agreement'). (4) bearing in mind the lapse of time and the fact that the defendant had ceased to trade in Honda cars. allowing the claim: (1) the defendant had not proved on the balance of probabilities that it was due to an event beyond his control that he could not supply the subject-matter of the contract. There was therefore no merit in the defence of frustration or the impossibility of performance. 1970 Ed).Sale and purchase of property 3 [2321] CONTRACT Frustration – Sale and purchase of property – Compulsory acquisition – Whether doctrine applicable – Whether contract frustrated – Land Acquisition Act (Cap 272. The sale was subject to the Singapore Law . Digest : Chin Tai Kong v Chin Koi Ting Civil Suit No S 196 of 1983—High Court. Holding : Held. (3) the application for an import licence submitted by the defendant to the Director-General of Customs Department did not include a Honda Prelude. On 12 May 1983 the purchaser exercised the option and another 5% was paid. (ii) the contract had become impossible to perform due to the cancellation of the import licence.

On the same day there was made under s 5 of the Land Acquisition Act (Cap 272. the court must focus on (i) the terms and conditions of the contract made between the parties read in the light of the nature of the contract and the surrounding circumstances. allowing the appeal: (1) for instance. the vendor could on completion convey to the purchaser a good title to the property. In response the vendor. wide enough to apply to the new situation. three main issues were raised: first. the 10% deposit had been forfeited. (2) frustration is capable of being applied to a contract for the sale of land. if the answer to the first question is in the affirmative. There was no indication known to the purchaser on which he ought to have known that such an event would take place. (6) (reversing Michael Hwang JC) in deciding that the compulsory acquisition did . 1970 Ed) ('the Act') a declaration that the property was to be compulsorily acquired and on 19 July a notification of the declaration was published in the Gazette. Holding : Held. On 1 August 1983. that in view of the declaration in the Gazette the purchaser did not intend to carry on with the purchase and requested the refund of the 10% deposit.Society's Conditions of Sale 1981 and was also subject to the title of the property being in order and free from encumbrances. On 13 July 1983 the vendor's solicitors sent to the purchaser's solicitors a notice to complete within 21 days under condition 2 of the Law Society's Conditions. by her solicitors' telex dated 5 August 1983. and thirdly. (3) in order to decide whether the contract in question has been frustrated. Following that on 1 June 1985 an entry in the Registry of Deeds was made pursuant to s 18 of the Act. the legal title to a property acquired rests in the state only upon the procedures prescribed by s 18 being completed. secondly. whether the doctrine of frustration is capable of being applied to a contract for the sale of land. It was obviously not contemplated that compulsory acquisition by the government would occur. on its true construction. the purchaser counterclaimed the refund of the deposit. On 7 August 1984. which had already commenced. and (ii) the event supervening. there may be what is commonly referred to as a 'frustration of purpose'. among other things. and consider whether the agreement is. From the nature of the property the purchaser obviously purchased it for a commercial purpose. The learned judicial commissioner who tried the action (see [1992] 2 SLR 516) upheld the vendor's claim. the vendor commenced an action against the purchaser claiming the balance of the purchase price and in response. On appeal. (4) further. the purchaser's solicitors wrote to the vendor's solicitors stating. (5) the agreement has not provided for the event of compulsory land acquisition. whether in this case the agreement was frustrated by the compulsory acquisition of the property under the Act. stated that the 21-day notice had expired and as the purchaser did not intend to complete. Possession of the property was taken by the Collector on 28 May 1985 under s 16 of the Act. There is nothing in principle that 'repels' the application of the doctrine of frustration to such contracts. 7 July 1983. whether by reason of the compulsory acquisition. Completion did not take place on the stipulated date of completion.

Regard must be had to the practical impact the compulsory acquisition has on the land. The court was of the opinion that the relevance of foreseeability to the doctrine of frustration was not free from doubt and held that the rigid insistence on the fact that the event ought to have been foreseen could not be an adequate solution. the basis of the trial court's decision was that the date fixed for completion fell prior to the Collector of Land Revenue taking possession of the property and the vesting of the title thereof in the state. it is not sufficient to have regard purely to such technical aspects of the transaction. (12) it should be noted that the doctrine of frustration is not limited in its application to circumstances where the supervening event destroys or render non-existence the subject matter of the contract. (10) the second objection was that the compulsory acquisition was a possibility in Singapore in 1983 and should have been foreseen by the purchaser. In this case. However. the vendor could not on completion convey to the purchaser a good title. (8) the reality is that the purchaser had bargained not only for the legal estate but for the use of the property. Giving some sense of reality to the whole situation it cannot truly be said that the purchaser would on completion get what he had bargained for. What was even more catastrophic in this case was that the purchaser would receive as compensation for the land he had purchased (if he had completed the purchase) a sum representing the value as determined under the Act which was far below the market value of property. What he would get would be an estate which was 'unusable and unsaleable'. breach by the purchaser can only prevent frustration where there is a causal link between the breach and the event which is alleged to be frustrating. and the proviso which applies only to 'expenses incurred' has no application. and it begins with the declaration under s 5 and ends with the entry or notification under s 18. it cannot be said that the purchaser was in any way responsible for the compulsory acquisition of the property. The . the owner retains the title to the land and is able to transfer his title to the purchaser and until possession is taken by the Collector the owner is also able to give possession of the land to the purchaser. In other words.(affirming Michael Hwang JC) in Singapore compulsory acquisition of land under the Act is a process rather than an act. the first being that the purchaser have been at fault in delaying completion. There may well be 'such a change in the significance of the obligation' to justify frustration. and that as of that date the vendor was able to convey the land to the purchaser and accordingly the agreement was not frustrated by the fact of compulsory acquisition.not frustrate the agreement. the deposit paid to the vendor is recoverable from her.(reversing Michael Hwang JC) having regard to the compulsory acquisition. (11) under s 2(2) of the Frustrated Contracts Act (Cap 115). once a declaration is made the process of acquisition has started and its progress will lead almost with absolute certainty to divesting the owner of his title to the land and vesting it in the state. non-existence of the subject matter of the contract is not the only circumstance where frustration can occur. in considering whether a contract for the sale of land has been frustrated by compulsory acquisition which has begun. Technically until the entry or notification is made in the relevant register under s 18 of the Act. (7) however. (9) as for the vendor's two objections.

a declaration was issued under the Land Acquisition Act (Cap 272. 2322 Frustration -.138. 1970 Ed) ('the Act') that the land was required for a public purpose.supervening event had resulted not merely in a defect in the title. as it did.200. Singapore (Karthigesu and LP Thean JJA and Warren LH Khoo J). 8. and that the notice to complete was not valid as it was dated the same day as the date of the declaration for acquisition. but had effected a change in the nature or duration of the title. on 13 July 1983. gave the defendant a 21-day notice to complete under condition 29 of the LSCS. the defendant indicated that he did not intend to complete the purchase on the ground that cl 5 of the agreement entitled him to take this position. and as the property had become liable to compulsory acquisition before the option date. the acquisition by the government entitled the defendant to rescind the contract for mutual mistake. Giving the matter a sense of reality. condition 29 – Land Acquisition Act (Cap 272. Digest : Lim Kim Som v Sheriffa Taibah bte Abdul Rahman [1994] 1 SLR 393 Court of Appeal. On 1 August 1983. 1970 Ed). On 23 August 1984. ss 3. The title had become no longer one as provided in the agreement . The option was exercised on 12 May 1983 by the payment of a further sum of S$109. in consideration of the sum of S$106. 16. 17. The sale was subject to the Singapore Law Society's Conditions of Sale 1981 ('the LSCS') and to the title of the property being in order and free from encumbrances. The defendant requested for the refund of the 10% deposit. As completion did not take place. 18. 10. The defendant also argued that the purchase price had been agreed upon the basis of a common belief that the property was suitable for or capable of redevelopment.910.be it fee simple or in perpetuity . 6.910.Sale and purchase of property 3 [2322] CONTRACT Frustration – Sale and purchase of property – Failure to complete – Declaration of acquisition of property issued on day of notice to complete – Whether contract frustrated – Law Society's Conditions of Sale 1981. On the same day. 33. but a defeasible and unsaleable one. that the agreement had been frustrated as the Presidential declaration and the notification in the gazette prevented the plaintiff from conveying the property. The plaintiff's solicitors joined issue with these contentions and claimed to forfeit the deposit.but a defeasible one which within a short period of time would rest in the state. 5. the Collector of Land Revenue awarded the compensation of S$450. the plaintiff's solicitors. what the purchaser would have got had he completed the purchase would not be a good and marketable title.000 to the plaintiff and took . 40 & 48 Summary : On 29 April 1983. The date fixed for completion was 7 July 1983. the plaintiff granted an option in writing to the defendant to purchase a piece of land for the sum of S$2.

17 and 18 of the Act is that the vesting of property in the state is deferred until the acts described in s 18. The plaintiff. elaborated on his earlier grounds for terminating the contract. All this means. able and willing to complete'. (3) the remarks of the Privy Council in Re Robinson's [1980] 1 MLJ 255 which suggested that title to the property vested in the state upon the gazetting of the s 5 declaration was only obiter dicta and must be understood in the context of the problem it was confronted with. as the owner of the property could. As the plaintiff's interest had. alternatively. Holding : Held. even though a declaration under s 5 had been gazetted. he argued that the contract had become impossible to perform or was frustrated because there had been a radical change in the subject matter of the contract. which begins with the declaration under s 5 and ends with the entry or notification under s 18. The landowner is not divested of his legal or beneficial interest in the subject land until after possession has been taken under s 16 and the procedures described in s 18 have been carried out. plus interest and costs. The existence of such a misrepresentation was denied by the plaintiff's witnesses. The combined effect of ss 16. she was precluded from completing the sale of the property and was. The defendant's other line of defence was a right to rescind based on his reliance on the plaintiff's solicitors' alleged misrepresentation on the possibility of obtaining planning approval for development of the property. in particular. by virtue of the declaration or notification in the gazette. The plaintiff commenced this action. compulsory acquisition is a process rather than an act. therefore. not ready. It is the act of entry or notification in the appropriate register under s 18 which marks the moment when title passes to and is vested in the state. claiming for the difference between the purchase price and the compensation awarded. is that for purposes of s 33(1).possession of the property on 28 May 1985. in the context of s 33(1). the word 'acquisition'. been converted into a right to compensation. in his defence. Alternatively. the defendant was released from further performance of the contract. the reference point for computing the six-month period is the beginning of the acquisition process (s 5) rather than . deal with the property and transfer the property. There is no reason to disagree with the actual decision of the Judicial Committee that. for damages for breach of contract. however. As performance of the contract had become impossible and the agreement was frustrated. accordingly. the notice to complete was only valid if the party giving the notice was 'ready. Entry of the government's title under s 18 of the Act in the Registry of Deeds was made on 1 June 1985. The defendant. He argued that under condition 29(2) of the LSCS. the plaintiff was unable to pass good title to the property or a title free from encumbrances. able and willing to complete. (2) a notification under s 5 of the Act does not immediately deprive a landowner of his interest in the subject land so as to preclude him from completing a sale and purchase agreement already entered into but not completed. viz the interpretation of s 33 of the Act. the word 'acquisition' means the date of the gazette notification under s 5 of the Act. allowing the claim: (1) under the Act.

could give a good and marketable title despite the s 5 declaration as it does not destroy the subject matter of the contract. As the defendant was precluded from rescinding the contract. A landowner who holds the land at the date of the s 5 declaration could not be held to be an unlawful occupant of such land. (6) generalized definitions of 'good title' cannot be applied literally. It is also important to identify the mpletion. mortgages. In any case. (9) the defendant's application to amend his pleadings was not allowed as the application was made too late. rentcharges. rather than to define. but does not purport to lay down a general definition for all purposes or to supplement the powers of acquisition under the Act. therefore. The plaintiff. (8) the plaintiff's witnesses' account of the circumstances leading to the granting of the option was more credible than the defendant's. Section 20 of the SLEA would not of itself entitle the state to enter upon the land to dispossess the person who was the lawful owner at the time of the s 3 or s 5 declaration. Secondly. and also statutory liabilities which are not merely potential or imposed on all property generally. since the defendant's repudiation of the contract had been accepted by the plaintiff. or any person claiming under such landowner. Furthermore. the declaration under s 5 did not destroy the subject matter of the contract for sale and purchase of the property. (4) section 20 of the State Lands Encroachment Act (Cap 286. good title and have decided whether particular defects can be shown to affect the vendor's title on a case-by-case basis rather than attempting allembracing definitions. easements. (7) as the declaration under s 5 did not vest title in the state and the vendor was still capable of conveying title to the purchaser. A notice of intended acquisition such as a declaration under s 5 of the Act is not an encumbrance within the conveyancing meaning of that term. the defendant failed to prove that the plaintiff's solicitors said the words which allegedly formed the misrepresentation relied upon by the defendant. before the defence witnesses gave evidence. (5) the word 'encumbrance' covers all subsisting third party rights such as leases. He will only be an unlawful occupant after title has vested in the state under s 18. But a statutory liability which first attaches to the property after the date of the contract must be borne by the purchaser for the risk is on him. the Australasian cases or the Indian cases. he was also precluded from relying on the misrepresentation as a defence. The effect of the declaration under s 5 may be to diminish the value of the property but that does not impeach the vendor's title. The application should have been made. 1970 Ed) ('the SLEA') deems lands that are gazetted as state land for the purposes of the SLEA. at the latest. it is inconceivable that the Judicial Committee would have intended in this one sentence to disapprove of Hillingdon [1952] Ch 627 or to assert a different legal position from that stated inHillingdon without at least some reference to that case. he could no longer rescind the contract on the ground of misrepresentation as the contract no longer existed.the end (s 18). On the balance of probabilities. as the courts have generally tried to describe. It does not mean that the subject land vests in the state as soon as the acquisition process begins. Further. restrictive covenants. there was no evidence in support of the defendant's claim that he had relied on the misrepresentation. the amended pleading itself was totally unsatisfactory as it .

No duty of disclosure could accordingly be implied in this case. Hence. (10) the legal position as to the vendor's duty of disclosure in contracts relating to land is controversial. the plaintiff could only be entitled. if at all.gave rise to ambiguity which could only be resolved by further and better particulars or redrafting of the proposed amendment. subject only to the caveat that it must be exercised judicially. ie to compensate the aggrieved party who has been unjustly deprived of the use and benefit of the money wrongfully withheld from him. viz that the plaintiff had in effect received a windfall while the defendant had incurred a devastating loss. 2323 Frustration -. In exercising this discretion. If the amendment were allowed. Mere nondisclosure of some defect in the property known to the vendor is not misrepresentation. the court usually has regard to the underlying philosophy of the provision. Hence. Singapore (Michael Hwang JC). Digest : Sheriffa Taibah bte Abdul Rahman v Lim Kim Som [1992] 2 SLR 516 High Court.Sale and purchase of property 3 [2323] CONTRACT Frustration – Sale and purchase of property – Land compulsorily acquired by government – Whether doctrine of frustration applicable – Whether acquisition of land radically change obligations of parties under the contract – Whether appellant entitled to claim any right to compensation payable to respondent Summary : The appellant was the registered proprietor of a [1/2] share in a certain piece of land ('the land'). even if there were a duty to disclose latent defects in title.in her capacity . the respondent . A threat of acquisition of real property is not a defect in title which will entitle a purchaser to rescind the contract. the court had the discretion to award this interest under s 9 of the Civil Law Act (Cap 43). under the said principle. its ambiguity might have led to an application to strike out the pleading as affording no reasonable defence to the claim. threatened to acquire the property. The other [1/2] share formed the asset of the estate of one Hatijah bte Hj Jusoh ('the deceased'). to discretionary interest. This discretion is unfettered. there are many instances where no interest or interest for shorter periods or at lower rates is awarded. the fact that there had been a fire on the property would clearly not amount to a threat of acquisition as there was no evidence that any authority had. justice does not require any further sums to be paid by the defendant. A vendor is only required to disclose defects in his title which are latent and not patent. Due to the exceptional circumstances of this case. Although it had not been expressly pleaded. prior to 29 April 1983. although the court would normally award discretionary interest almost as a matter of course. In December 1979. After the termination of the contract. (11) the court disallowed the plaintiff's claim for interest under the agreement.

At most. the compulsory acquisition of the land had frustrated the agreement so as to discharge both the appellant and the respondent of their obligations under the agreement. The respondent contended that the agreement had been frustrated because of the compulsory acquisition of the whole land by the government. Siti Norma Yaakob and Ahmad Fairuz JJCA).000 representing 10% of the purchase price. under s 66 of the Act he was entitled to be refunded the 10% deposit he had paid to the respondent. The appellant paid to the respondent a sum of RM4. Kuala Lumpur (Shaik Daud. the appellant could not claim any right to such compensation. (3) since the subject matter of the agreement had been taken away and replaced by way of compensation.000 ('the agreement'). The principal issue raised in this appeal was whether the doctrine of frustration applied so as to discharge the parties from their obligations under the agreement. Digest : Lee Seng Hock v Fatimah bte Zain [1996] 3 MLJ 665 Court of Appeal. dismissing the appeal: (1) the doctrine of frustration. Holding : Held. a kadi's certificate was issued distributing the [1/2] share of the land in the estate of the deceased to the respondent and baitulmal in the proportion of a [1/2] share each. Compensation was awarded to the appellant for his [1/2] share of the land. as statutorily recognized by s 57(2) of the Contracts Act 1950 ('the Act').000 being the 10% deposit to be refunded to the appellant.entered into a sale and purchase agreement with the appellant to sell the deceased's [1/2] share of the land at a purchase price of RM40. as what was agreed and intended by the parties and affirmed by the agreement was a transfer of a [1/2] share of the land from the respondent to the appellant by way of a sale. resulting in the respondent and baitulmal having a [1/4] share each in the land. the whole land was acquired by the government. Since the agreement was void under s 57(2) of the Act. and the respondent for her [1/4] share of the land. The trial judge upheld this contention and ordered that the compensation payable to the respondent for her [1/4] share of the land be paid out to her less the sum of RM4. In May 1994. and it was impossible to perform the agreement. the subject matter of the agreement ceased to exist and performance of the agreement became impossible. The appellant filed an application claiming for the compensation due to the respondent less the balance of the purchase price due under the agreement. In March 1980. The appellant appealed. the appellant could not claim such compensation as being due and payable to him because the basis of the appellant's claim was dependent on the agreement. . For that reason.as the administratrix of the deceased's estate . (2) when the land was compulsorily acquired and compensation awarded. The acquisition of the land had radically changed the obligation of the respondent to sell her [1/2] share of the land to the appellant. was applicable in this case.

2324 Frustration -. 2325 Gaming or wagering contract 3 [2325] CONTRACT Gaming or wagering contract Summary : On 18 May 1934. The contract between Messrs Lewis and Peat and the plaintiff acting as agent of the defendant was not a gaming or wagering transaction. for the purchase of 30 tons of rubber. Holding : Held: (1) the evidence sufficiently disclosed a relationship of principal and agent between the defendant and plaintiff in respect of the transaction. See CONTRACT.Sale and purchase of property 3 [2324] CONTRACT Frustration – Sale and purchase of property – Vendor entered contract for sale of property with purchaser – Third party claimed vendor had earlier entered agreement to sell property to them – Application for specific performance – Third party thereafter obtained ex parte injunction restraining vendor from entering into any agreement for sale of property to any other person – Whether contract between vendor and purchaser had been frustrated Digest : Charles Grenier Sdn Bhd v Lau Wing Hong [1996] 3 MLJ 327 Federal Court. Digest : . The plaintiff stated in evidence that he had placed the order with Messrs Lewis and Peat as agent for the defendant. (2) the scope of the plaintiff's authority extended to entering into transactions as principal because the defendant had instructed the plaintiff to withhold his name. Vol 3. though he had represented himself as principal because of the defendant's expressed wish not to have his name disclosed. the defendant gave an order to the plaintiff. para 2208. Neither the plaintiff nor Messrs Lewis and Peat were therefore gaming. The next day the plaintiff sent to the defendant an advice note of the purchase. The plaintiff now claimed from the defendant the sum of $4. the transaction here could not amount to such even if the defendant was gaming. The defendant pleaded that (i) the transaction between him and the plaintiff was an agreement by way of a wager and was therefore unenforceable and (ii) the plaintiff exceeded his authority in purporting to act as principal with Messrs Lewis and Peat. an exchange and share broker and commission agent. As it required two parties to make a transaction one of gaming.018 by way of indemnity under a contract of agency. Kuala Lumpur (Anuar CJ (Malaya).

The respondent sued the appellant for goods sold and delivered but when it appeared in evidence that the goods were not delivered to the appellant but were delivered on the direction of . s 71 – Sale of goods .Whether salesman agent of buyer . s 30(1) .Whether enforceable Bills of Exchange Ordinance 1949. s 26(1). (2). In an action on a negotiable instrument. 2327 Goods sold and delivered -.Civil Law Ordinance 1956.Contracts (Malay States) Ordinance 1950.Suit on cheques .Whether enforceable .Suit on cheques . (3) and (4). s 71. Digest : Ong Guan Hua v Chong [1963] MLJ 6 Court of Appeal. Annotation : [Annotation: Distinguished in Mizrahie v Stanton Nelson & Co Ltd [1958] MLJ 97.Claim for goods sold and delivered Goods not delivered to alleged buyer but to another address at direction of salesman .Difference between English and Malayan laws .Difference between English and Malayan laws .Gaming . Kuala Lumpur (Thomas CJ). Summary : In this case. ss 29(3) and 30(1) . ss 29(3) and 30(1) .Contracts Act 1950. (3) and (4). Where at any stage of its history there has been consideration for a bill and there is no question of illegality of consideration then it can be sued on and if the original drawer is sued it is for him to prove that at no time has there been consideration. s 30(1) . the respondent was a wholesaler dealing in steel saws.Gaming .Contracts (Malay States) Ordinance 1950.Cheques given in payment of gaming transactions .Civil Law Ordinance 1956.Bills of Exchange Ordinance 1949. s 26(1). Hill and Good JJA).Enjoyment of goods 3 [2327] CONTRACT Goods sold and delivered – Enjoyment of goods – Contracts Act 1950 (Act 136). (2). 3 [2326] CONTRACT Gaming or wagering contract – Bills of exchange . Kuala Lumpur (Thomson CJ. consideration is presumed and it is for the maker or the indorser of the instrument if he wishes to defend the action to prove that there was no consideration.] 2326 Gaming or wagering contract -. it is for the plaintiff to prove consideration.Whether goods delivered to salesman as agent for the buyer . tools and other hardware products and the appellant was one of its customers. Summary : In an action based on a contract.Bills of exchange .Baker v Sharma [1937] 3 MC 15 High Court. In Malaya there is no distinction between wagering on games and other types of gaming and in every case the question of gaming is to be considered in the light of the local statutes which correspond to the English Gaming Acts of 1845 and 1892.Cheques given in payment of gaming transactions .

44 for goods sold and delivered to the defendants. Kuala Lumpur (Salleh Abas CJ (Malaya). 3 [2328] CONTRACT Goods sold and delivered – Sale of goods .Counterclaim . The claim under s 71 of the Contracts Act 1950 has therefore not been made out. A fortiori to draw such an inference against the appellant in business matters would be most dangerous. C1226. by virtue of s 71 of the Contracts Act 1950 (Act 136) the defendant is liable to pay for the same. C1950.No clear evidence of counterclaim Dismissal of counterclaim. When a statement of defence was not filed and delivered within the 14 days after appearance had been entered the plaintiffs . The writ and the statement of claim were served on the defendants on 12 June 1982. the plaintiffs claimed $137. Accordingly. none of the instalments were paid. C1057.13 for goods sold and delivered as evidenced by invoices Nos C2038. However. C1271.376.036. 2328 Goods sold and delivered -. C2198 and C2947 by the plaintiff to Tan Boon Soon as agent for the defendant. The learned trial judge gave judgment for the respondent as claimed but when the appeal was lodged.the salesman to another address. the respondent amended the statement of claim to read as follows: (a) The plaintiff's claim against the defendant is for the recovery of $140.Counterclaim .Buyer in arrears of monthly instalments . (b) Further or alternatively.Sale of goods . no written grounds of decision were given. On the evidence adduced at the trial the respondent had failed to discharge the burden. (3) the evidence showed that the respondent or its principal officer had no knowledge of the wrongdoings of the salesman until the end of November or early December 1978. Payment was to be made in specified monthly instalments to the end that the whole amount would have been settled by December 1981. the plaintiff delivered the said goods to the said Tan Boon Soon as agent for the defendant not intending to do so gratuitously and the defendant enjoyed the benefit thereof. Digest : Goh Soon Ann v Sandvik Malaysia Sdn Bhd [1984] 1 MLJ 121 Federal Court.No clear evidence of counterclaim Dismissal of counterclaim. Holding : Held: (1) in this case the respondent had completely failed to establish that the delivery was due for the appellant and that the appellant enjoyed the benefit of the delivery.Buyer in arrears of monthly instalments . (2) the onus of proving that the salesman had made the fullest disclosure and had obtained the informed consent of both the respondent and the appellant rested with the respondent. Summary : In this case. The appellant denied all knowledge of the relevant transactions and no inference of informed consent could validly be drawn without proof of knowledge by clear and cogent evidence.

Claim for price of goods . On 1 September 1982. They also asked for a stay of execution of the default judgment. a firm of solicitors called M/s Chooi & Ong filed a notice of change of solicitors giving notice that they had taken over the conduct of the matter for the defendants.entered judgment in default of defence on 12 August 1982. the defendants sought to have the default judgment set aside and asked for leave to properly enter an appearance to the writ and for leave to file a defence. Holding : Held. Kuala Lumpur (George J). a summons was taken out by M/s Hisham. 2329 Goods sold and delivered -. dismissing the appeal: (1) the book of account was regularly kept in the course of business and referred to a matter into which the court had to inquire and were therefore admissible under s 34 of the Evidence Act 1950 (Act 56).Sale of goods .Evidence of account book regularly kept in the course of business Evidence Act 1950. in the admission by the appellants which tallied with the first four . Evidence was given that the goods were ordered and delivered to the appellants' premises and that the entries in the account book were entered from the invoices. s 34. On 3 January 1984. dismissing the appeal: the application failed because the defendant company had not disclosed a bona fide reasonable defence. On 9 December 1983. 3 [2329] CONTRACT Goods sold and delivered – Sale of goods .283. Summary : In this case.Evidence of account book regularly kept in the course of business Evidence Act 1950. Holding : Held. s 34.25 for goods sold and delivered to the appellants. they filed an application seeking an extension of time so that the defendants could pursue with an appeal to have the default judgment set aside.Claim for price of goods . (2) corroboration of the entries in the book of account were to be found in the book of account itself. the respondent claimed the sum of $5. Digest : East Asiatic Company (M) Bhd v Kamanis Sdn Bhd [1985] 2 MLJ 227 High Court. By that summons. Sobri and Kadir who had on that day filed a notice of their appointment as solicitors for the defendants. The summons was heard and disposed of in chambers on 10 November 1983 and dismissed with costs. The learned trial judge gave judgment for the respondent and the appellants appealed. To support its case the respondent produced its book of account kept by it to record its transactions with several customers including the appellants.

2330 Government contracts -. Salleh Abas FJ and Charles Ho J).is not a claim for an 'ascertained sum'.Singapore Harbour Board 3 [2331] CONTRACT Government contracts – Singapore Harbour Board – Short delivery – Statutory powers – Public authorities protection . Holding : Held: the defendant was quite right to apply. in form C 1 of the said ordinance is intended to be used in cases falling within both ss 2 and 3: but at the time of issue.Singapore Harbour Board acting as warehousemen . Where an information and writ of summons for such a sum. by reason of the breach by the defendant of his contract .Short delivery from godown . was filed and issued under s 2.Singapore Ports Ordinance (Cap 149). ought to be so adapted as to meet the provisions of the particular section under which it is issued.Limitation of action . Digest : Attorney General v Chew Sin Yong & Anor [1890] 4 Ky 680 High Court. Straits Settlements (Wood J). within s 2 of the Crown Suits Ordinance XV of 1876.Public Authorities Protection Ordinance (Cap 14) as amended by Ordinance No 19 of 1939.although such loss may be calculated and found by the officers of the Crown to be a particular sum . Kuching (Chang Min Tat FJ. but a claim for 'damages or account' within s 3. Summary : The appellants claimed damages for breach of contract of bailment. 2331 Government contracts -. by striking out the alternative sentences which apply to the other section. s 2(1)(2) .Acting for benefit of public within statutory powers . and the summons was set aside with costs.Crown Suits Ordinance 3 [2330] CONTRACT Government contracts – Crown Suits Ordinance Summary : A claim for loss sustained by the Crown. Digest : Sim Siok Eng & Anor v Poh Hua Transport and Contractor Sdn Bhd [1980] 2 MLJ 72 Federal Court. They said that they were the consignees of a cargo of 3. for an order to set aside such proceedings as being irregular. by summons-in-chambers and before applying for leave to defend. The writ of summons.960 loose rubber tyres which arrived in .entries relating to them and in the oral evidence relating to the order and the supply of the goods.

25m together with . under the powers conferred on them. elected to carry on the activities of wharfingers and warehousemen themselves. Brown J held that the respondent board had not discharged their burden of proving that the loss of the tyres was not due to any fault of theirs and the respondent board could not claim the protection of the Public Authorities Protection Ordinance as they were dealing with the appellants as individuals in the course of an implied contract. Digest : Firestone Tire & Rubber Co (SS) Ltd v Singapore Harbour Board [1952] MLJ 145 Privy Council Appeal from Singapore (Lord Normand. accordingly. Lord Tucker. When C defaulted. The board were. dismissing the appeal: the board had. They alleged that the respondent board received the full number of tyres into their godown but delivered to the appellants 17 tyres short. such activities were essential to the proper running of the port for which they were responsible. and so constituted one of the main purposes for which they had received their powers. P applied for summary judgment to be entered against D for the sum of $1. entitled to the protection of the ordinance. Lord Asquith of Bishopstone and Lord Cohen). 2332 Guarantee -.Singapore on 4 July 1946 from Bombay. On appeal to the Privy Council. The Court of Appeal in allowing the appeal held that the board were directly performing their duties as dock owners under the Ports Ordinance and were entitled to protection under the Public Authorities Protection Ordinance.'Conclusive evidence' clause 3 [2332] CONTRACT Guarantee – 'Conclusive evidence' clause – Certificate stating quantum of indebtedness issued under guarantee – Certificate to be conclusive as to debt – Date at which certificate should be given – Effect of certificate Summary : D and two others guaranteed the outstanding liabilities of C. which was an incident in carrying on their business as warehousemen. P (the bank) demanded payment on the guarantee. Holding : Held. a company. The respondent board which was a statutory body incorporated by the Ports Ordinance (Cap 149) contended that under the Ordinance they have powers to manage the Singapore harbour and carry on the business of warehousemen and as the action against them was for an act done in pursuance of the Ports Ordinance it was not maintainable because it was not commenced within six months after the alleged act. The appellants on 1 August 1946 notified the respondent board of the loss of 17 tyres and on 19 June 1948 the writ was issued. neglect or default complained of as required by s 2 of the Public Authorities Protection Ordinance.

and the issue by him of the certificate is then conclusive evidence of that fact as between the parties. Singapore (Yong Pung How J). The affidavit in support of this application exhibited a certificate dated 27 March 1989 certifying the amount due by C to P as at 16 August 1986.'Conclusive evidence' clause 3 [2333] CONTRACT Guarantee – 'Conclusive evidence' clause – Clause incorporated into guarantee – Effect of clause in legal proceedings against guarantor Summary : D appealed against the decision of the senior assistant registrar in giving leave to P to enter final judgment against them. The widespread use by banks of 'conclusive evidence' clauses in loan documentation has arisen simply because of the dictates of commerce and has been supported by the assumption that money institutions. This does not affect the conclusiveness of the certificate as to the debt owing as of the date stated in the certificate. D contended that they have succeeded in raising triables issues and accordingly should be given unconditioned leave to defend. D appealed. Holding : . P applied to have D's defence struck out as disclosing no defence. The assistant registrar struck out the defence. (3) there is nothing wrong with issuing a certificate stating the amount due at some date before the date of the certificate. Digest : Bangkok Bank Ltd v Cheng Lip Kwong [1989] SLR 1154 High Court. are completely honest and reliable. a certificate issued under a 'conclusive evidence' clause is conclusive of both the liability and the amount of the debt.interest at 8% and costs. If necessary. which are themselves closely regulated by the law. dismissing the appeal: (1) in business and in commerce there are many instances when provisions are inserted into contracts by which the contracting parties agree that a designated person will have the power to issue a certificate as evidence of a fact. updated certificates can be issued later when the action comes for trial. Holding : Held. in that it purported to certify the amount owing at a date prior to the date of the certificate. 2333 Guarantee -. (2) in the absence of fraud or obvious error on the face of it. The main ground of appeal was that the certificate relied on by P was not in accordance with cl 6(c) of the guarantee under which it had been issued. D was granted unconditional leave to defend after an appeal to a judge in chambers. Any mistakes in the figures can be remedied by subsequent proceedings.

(2) furthermore. (ii) whether the principal sum was payable from the date of demand or the date of guarantee. the denial by D that they did not owe P a debt could not be entertained. 2334 Guarantee -. allowed by the learned judge. D had raised.Held. Accordingly. the learned judge was of the view that no leave to defend ought to be given to D. the following issues which they contended were triable issues: (i) whether they were guarantors and/or principal debtors. as D had failed to show that they have a good defence to P's claim or that a difficult point of law is involved or that there is a dispute as to the facts which ought to be tried. dismissing the appeal: (1) in the instant case. Ipoh (Abdul Malek J). admitted to the debt owed by them to P. dismissing the appeal: (1) having regard to the letter of guarantee. the court accordingly dismissed the appeal by D. Holding : Held.'Conclusive evidence' clause 3 [2334] CONTRACT Guarantee – 'Conclusive evidence' clause – Effect of certificate issued pursuant to clause in legal proceedings against guarantor – Certificate issued conclusive evidence of amount due under guarantee Summary : D appealed against the decision of the senior assistant registrar in allowing P's application for final judgment to be entered against them for the sum in question. (3) as D had not succeeded in raising any triable issues. D's application for a stay of execution was. (iii) whether interest was payable from the date of demand or the date of guarantee. inter alia. Ipoh (Abdul Malek J). the statement given by P as regards the actual amount due from D was conclusive in view of the existence of a 'conclusive evidence' clause in the letter of guarantee. (4) in the instant case. the conclusive evidence clause contained in the guarantee meant that a certificate given pursuant to the clause was conclusive upon the parties of the amount and existence of the principal debtor's indebtedness. D had. (2) the principal sum and interest were payable from the date of the guarantee in view of cl 1 of the guarantee. D also applied for a stay of execution pending disposal of their appeal to the Supreme Court. (3) in the instant case. by a letter. Digest : Bank Bumiputra Malaysia Bhd v Ahmad Marzuki bin Mat Zain & Ors Civil Suit No 23-456-86 High Court. D were guarantors as well as principal debtors in view of cl 10 of the guarantee. Digest : Bank Bumiputra Malaysia Berhad v Perbadanan Kemajuan Negeri Perak [1989] 1 MLJ 502 High Court. however. .

allowing the appeal: (1) in the instant case. inter alia. that P had failed to comply with s 16 of the Hire Purchase Act 1967. Vol 3. D2 contended. a guarantor. P's application for summary judgment was dismissed by the senior assistant registrar and P appealed to the High Court. See contract. para xxx.'Principal debtor' clause 3 [2336] CONTRACT Guarantee – 'Principal debtor' clause – Effect of such clause on liability of guarantor – Whether necessary for demand to be made – Whether issuance of writ a demand in itself Digest : Bank Kerjasama Rakyat Malaysia Bhd v Bank Pembangunan Malaysia Bhd Civil Suit No 23-56-87 High Court. 2336 Guarantee -. damage or expense which P may sustain by reason of D1's breach of the hire purchase agreement. 2337 Guarantee -. para 2325.'Principal debtor' clause 3 [2337] CONTRACT Guarantee – 'Principal debtor' clause – Liability of guarantor – Whether presence of such clause obviates necessity for creditor to make demand Summary : P sued D2. See CONTRACT. Kuala Lumpur (Siti Norma Yaakob J).'Conclusive evidence' clause 3 [2335] CONTRACT Guarantee – 'Conclusive evidence' clause – Presence of such clause in guarantee – Effect of such clause in legal proceedings against guarantor Digest : Development & Commerical Bank Bhd v Abdullah bin Ismail & Anor Kod No D2-23-130-88 High Court. Holding : Held. D1 had obtained an excavator on hire from P.2335 Guarantee -. the Hire Purchase Act 1967 was not applicable as the equipment hired was not one of those listed in the First Schedule to the Act. Vol 3. that there was delay in filing the ord 14 application by P and that no proper demand was given to him. (2) P had given a reasonable explanation as to why the . Kuala Lumpur (Siti Norma Yaakob J). pursuant to a letter of guarantee wherein D2 undertook to make payment upon written demand of all sums due to P under a hire purchase agreement and to indemnify P against all loss.

the judgment debt was converted into its equivalent in Malaysian currency at the rate of exchange prevailing at the date of the judgment in Singapore. It did not have the effect of turning the defendants from their position as guarantors to a position of indemnifiers so that the plaintiffs could hold them responsible for everything for which the principal debtors might be held liable under the principal agreement. The guarantee in the instant case was no longer a collateral agreement and as such there was no need for a demand as the issuance of the writ was a demand in itself. Kuala Lumpur (Siti Norma Yaakob J). only had the effect of enabling the plaintiffs to treat the defendants as the principal debtor in the circumstances set out in the clause.application for summary judgment was only made six months after D had filed their statement of defence. allowed P's appeal. The other guarantee provisions were also not wide enough to bring into their ambit cl . accordingly. that this clause was incorporated into the guarantee agree-ment. relying on cl 16F of their agreement with the principal debtor which provided that such an action would constitute a cause of action independently of any other judgment on the agreement.'Principal debtor' clause 3 [2338] CONTRACT Guarantee – 'Principal debtor' clause – Whether guarantor liable in all situations where principal debtor liable Summary : In 1987. Moreover. The plaintiffs then brought this action for the shortfall by again suing on the guarantee. Holding : Held. D had not been in any way prejudiced by the delay . on its true construction. on various grounds. In any event. (3) the presence of a principal debtor clause in the guarantee obviated the necessity for P to make a demand. (4) as all the issues raised by D had been determined by affidavit evidence. commonly known as the principal debtor clause. Digest : Credit Corp (M) Bhd v Choi Sang & Anor Civil Suit No C2-24-5650-86 High Court. the plaintiffs obtained judgment for payment of an amount in Singapore currency against the defendants under a guarantee and subsequently registered the judgment in the High Court of Malaysia. averments in the statement of defence had all been rebutted by P in their affidavit in support of the ord 14 application and no purpose would be served if the matter was allowed to proceed to trial when it could be dealt with summarily. this was substantially less than the judgment debt in Singapore currency. dismissing the claim: the clause in the guarantee deeming the defendants to be a principal debtor. the learned judge. 2338 Guarantee -. Under the procedural rules of that court. This amount was paid but due to the fluctuations in the foreign exchange rate. and contending.

It is now settled law that the presence of such a clause in a guarantee obviates the necessity for a creditor to make a demand to a guarantor as the guarantee is no longer a collateral agreement and that the issuance of the writ is a demand in itself. It was further contended that the guarantee was void under s 97 of the Contracts Act 1950 since only two out of the four sureties identified by P had executed the guarantee. Digest : NM Rothschild & Sons (Singapore) Ltd & Ors v Rumah Nanas Rubber Estate Sdn Bhd [1994] 2 SLR 160 High Court. Accordingly. the learned judge expressed doubts about the sincerity of the application. the guarantee in question was not invalid under s 97 of the Contracts Act 1950 as there was no evidence to show that it was a condition precedent to D3 executing the guarantee that the other two persons who did not sign the guarantee should also stand as sureties. accordingly. D1's resolution and the guarantee. D3 also contended that there was no proper notice of demand made on him as he was only served with a carbon copy of the notice. the fact that D3 had been served with only a carbon copy of the notice was immaterial to establish his liability under the guarantee by virtue of the presence of cl 14 in the guarantee itself. under such circumstances. namely. D3 contended. P's letter of offer. no merit in D3's contention that the guarantee lacked consideration. dismissing the application: (1) from the documentary evidence. (2) in the instant case. Digest : . (4) in the instant case. Holding : Held. 2339 Guarantee -. inter alia.'Principal debtor' clause 3 [2339] CONTRACT Guarantee – 'Principal debtor' clause – Whether presence of such clause in guarantee obviates necessity to make demand on guarantor before proceedings instituted – Whether issuance of writ a demand in itself Summary : P had obtained judgment in default of defence against D3 who had guaranteed the repayment of all sums due under certain overdraft facilities granted by P to D1. which clause was the foundation of the plaintiffs' claim. D3 was guilty of inordinate delay in filing the present application which was made almost ten months since the date of the judgment.16F of the principal agreement. There was. As D3 had not explained the delay. cl 4 of the guarantee contained a principal debtor clause. (3) in the instant case. it was very clear that D1 had benefited from such credit facilities. that the overdraft facilities never benefited D1 as they were utilized for the benefit of a third party. Singapore (Warren LH Khoo J). the guarantee which he executed lacked consideration and as such was void. Accordingly. D3 applied to have the judgment set aside on the ground that he had merits on his defence.

In the present case. The defendants raised various issues. Holding : Held: none of the defences raised on behalf of the defendants constituted a triable issue. . Holding : Held. (3) as D8 had no merits at all to defend the suit. Judgment in default of appearance was obtained by P against D8. Kuala Lumpur (Siti Norma Yaakob J). The defendants were one of the guarantors under the loan agreement. 2340 Guarantee -. Digest : Arab Malaysia Finance Bhd v Kemajuan Mugiland Sdn Bhd & Ors Suit No C3236 of 1985 High Court. the court dismissed her application to set aside the default judgment. Kuala Lumpur (Siti Norma Yaakob J).Perwira Habib Bank Malaysia Bhd v Floorwall Furnishing Sdn Bhd & Ors Kod C23-2092-86 High Court. D8 applied to set aside the default judgment on the ground that no notice of demand had been served on her. dismissing the application: (1) in the instant case. 2341 Guarantee -. Summary judgment was obtained by the plaintiffs.PP v Tan Koon Swan [1987] 1 MLJ 18 (refd) 3 [2341] CONTRACT Guarantee – PP v Tan Koon Swan [1987] 1 MLJ 18 (refd) Summary : The plaintiffs and Oversea-Chinese Banking Corp Ltd granted certain loan facilities to one Freelin Investment Pte Ltd. the guarantee in question contained a principal debtor clause and it is well settled law that the presence of such a clause in a guarantee obviates the necessity of the creditor sending a notice of demand to the guarantor. The defendants appealed. Service of the writ and statement of claim itself on the guarantor is ample notice of such a demand having been made.'Principal debtor' clause 3 [2340] CONTRACT Guarantee – 'Principal debtor' clause – Whether presence of such clause obviates necessity of creditor sending notice of demand to guarantor – Whether service of writ and statement of claim itself ample notice of demand having been made – [ Summary : P had sued D8 as a guarantor pursuant to a guarantee agreement executed between the parties. the plaintiffs sought the amounts due under the guarantee. (2) however. the letter of demand was only carbon copied to D8 and it is well settled that this is not a proper demand in law.

Digest : NM Rothschild & Sons (Singapore) Ltd & Ors v Rumah Nanas Rubber Estates Sdn Bhd [1988] SLR 313 High Court. Holding : Held. allowing the appeal and entering judgment for the plaintiff: (1) it is clear from cl 2. The dealer had since been wound up by an order of court. that it is an additional guarantee and the consideration for it is the continuing availability of facilities to be rendered by the plaintiff to the dealer under the block discounting agreement. question the omission of the plaintiff to inform him of the default of the dealer at the time he executed the guarantee. [1990] 1 MLJ 257.Agreement to compromise . (3) in his capacity as director. The dealer defaulted on its obligations to the plaintiff. Annotation : [Annotation: Affirmed on appeal.] 2342 Guarantee -. therefore. he cannot now in an attempt to dispute his liability. Kuala Lumpur (Siti Norma Yaakob J). Singapore (Thean J). Digest : BBMB Kewangan Bhd v Meor Safari bin Meor Yusoff & Ors Suit No D2-221392-91 High Court. The plaintiff sought to recover its losses by enforcing the guarantee which the fourth defendant had executed. the fourth defendant is assumed to be aware of the affairs of the dealer and to that end. (2) the consideration for the guarantee is plainly and clearly spelt out in cl 1 and there is. The plaintiff failed in its application to have final judgment against the fourth defendant.5 of the guarantee executed by the fourth defendant. The plaintiff appealed. See [1989] SLR 141. 2343 Guarantee -.Additional guarantee 3 [2342] CONTRACT Guarantee – Additional guarantee – Block discounting agreement – Time of execution of guarantee – Plaintiff did not inform defendant of dealer's default – Whether guarantee given without consideration Summary : The fourth defendant is sued on a guarantee whereby he agreed to indemnify the plaintiff against all losses which the plaintiff may sustain by reason of the plaintiff continuing to make available facilities under a block discounting agreement to Industrade ('the dealer'). no basis for the fourth defendant to allege that there is no consideration given for the guarantee.

The defendant had joined two of the co-sureties as third parties for contribution and indemnity. the defendant. All the personal and corporate guarantees were signed by the sureties concerned. The Johore Bahru proceedings were compromised and settled. the plaintiffs are a Singapore company ('the Singapore company') within the group. Secondly. Golden Lady (Malaysia) Sdn Bhd ('the principal') which is incorp-orated in Malaysia. signed the acceptance of the terms and conditions thereof. The defendant argued that the continuing nature of the guarantee would be spent and the guarantee would no longer operate once the original agreement for the confirming facilities. For a commission. asserts that there has been a . in the alternative. claimed against the defendant the sums and commission. In these consolidated actions. Firstly. subject to variations of the limits and the other terms. Later. namely. and Golden Pte Ltd. In the other action. No fresh guarantees were sought nor obtained from the personal and corporate sureties. Balfour Williamson & Co Ltd ('the UK company').000).3 [2343] CONTRACT Guarantee – Agreement to compromise – Whether plaintiff's rights reserved – Effect of guarantee – Whether guarantor discharged Summary : The plaintiffs. the plaintiffs also commenced proceedings in the High Court in Johore Bahru against the principal. Most of the principal's acceptances were signed by the defendant. they attended to the confirmation of purchases of their clients. They delivered the documents of title to the principal in exchange for usance bills of exchange duly accepted by the principal. a company incorporated in Singapore. the plaintiffs claimed against the defendant the sum. the defendant's brother.000 (£ 100. had been terminated and a new agreement had come into existence. the plaintiffs agreed to increase the confirming facility to M$560. They required credit facilities to finance purchases. In the second action. The plaintiffs' group of companies provided the finance which would have been repaid with commission and the usual charges by the principal after they had turned the goods into account. At the same time. the defendant's guarantee did not cover the facilities granted by the plaintiffs to the principal. It is common ground that 24 bills of exchange drawn by the plaintiffs and accepted by the principal were outstanding and they total the sums claimed in these proceedings. The defendant personally attended the hearing and the negotiations which led to the compromise. These companies had local factories. is a confirming house. the UK company. The facility letter was accepted by the principal on whose behalf Lee Lip Chong. a company incorporated in the United Kingdom. The claims are made against the defendant as a surety under a guarantee in writing dated 5 April 1974 and signed by the defendant in favour of the plaintiffs. The defences common to both actions briefly summarized were as follows. The defendant and her brother were at all material times directors and significant shareholders of two companies. interest and 'extension commission' defined as 'additional commission' in the confirming facility letter entered into between the plaintiffs and the principal. The principal failed to pay the bills on the due dates and the plaintiffs commenced these proceedings against the defendant in Singapore.

in the agreement between the creditor and the debtor. Liability. that was all that the expression was meant to convey. would be preserved and that it was left to the court to determine liability. that although an unconditional release of the debtor discharges the guarantor. the plaintiffs . It was said that it was part of the agreement that the plaintiffs would obtain a 'cross' guarantee from a related company to guarantee or indemnify the defendant. it does not give any or any sufficient effect to the express provisions of the guarantee.variation of a material term without her consent and that she was therefore discharged from all liability under the guarantee. it is expressly agreed that the creditor's rights against the guarantor is preserved. and they are between any one or more companies within the group of companies contractually defined on the one hand and the principal obligor on the other. Firstly. (3) if a creditor. however. In the court's view. whether or not the transactions had arisen out of a single contract. and the plaintiffs. which is to guarantee a series of future transactions as described. the plaintiffs would not have settled with the principal if they were required to give up their recourse against the defendant. the personal guarantors. had varied a material term of the principal agreement and had accordingly discharged the defendant as the surety. It was contemplated that there would be cross-corporate guarantees. it was claimed that the plaintiffs had recently settled with the principal in an action in the High Court in Johore Bahru. that the liability of the defendant. by reason of which the liability of the defendant has been discharged or extinguished. the guarantor will be absolutely discharged. in having failed to obtain it. Thirdly. Secondly. if any. without having received full payment. the creditor's rights against the guarantor may in certain circumstances be preserved despite the release. (2) the second construction point was the defendant's submission that the words 'cross guarantee of Golden Pte Ltd' meant that the plaintiffs had agreed to obtain the corporate guarantee to guarantee. attaches under the guarantee so long as the transactions are of the type mentioned in the guarantee. The changes in the 1977 facility letter were those commercially to be expected and they did not in any material respect alter the nature of the transactions so as to take them out of the ambit of guarantee. The contention of the defendant is materially flawed in two respects. The guarantee in this case extends to any liability arising out of the series of transactions within its scope and the series of transactions may be created by a contract or a series of contracts for the confirming transactions. (4) it is settled law. agrees to discharge the debtor from any further liability. to accede to the construction put upon the guarantee by the defendant would be tantamount to ignoring the essential feature of the guarantee. (5) there was in this case sufficient consensual assent on the part of both the prin-cipal and the defendant. One such circumstance is where. (6) the court accepted the evidence that in all probability. as the guarantor. giving judgment to the plaintiffs: (1) the court agreed with the construction of the guarantee as canvassed on behalf of the plaintiffs. (7) further. back-to-back so to speak. Holding : Held. if any.

.Assignment 3 [2344] CONTRACT Guarantee – Assignment – Defendant agreed to guarantee and indemnify owner – Hirer defaulted on hire purchase agreements – Owner assigned all interests. Chee Ming & Anor (Third Parties) [1989] SLR 569 High Court. other indulgence of whatsoever nature which may be' granted by the plaintiffs. (2) consequently. rights and title to plaintiff – Whether assignment valid Summary : Under two guarantee and indemnity agreements dated 15 March 1984. 2344 Guarantee -. On 10 May 1986.115. had defaulted on the hire purchase agreements on 1 August 1985 and on 28 March 1985 respectively. and on 15 November 1985 had surrendered the vehicles involved to TKSB. TVCB.'. the plaintiff had asked for final judgment against the defendant for M$273. The defendant was also ordered to pay the costs of the proceedings to the plaintiffs. was accepted. TKSB had assigned to the plaintiff by way of absolute assignment in writing all its interests. The hirer. allowing the appeal with cost: (1) the hire purchase agreements entered into by TKSB and TVCB had come to an end on 15 November 1985 when TVCB delivered the vehicles to TKSB as cl 8 of the said agreements reads 'The Hirer may at any time before the final payment hereunder falls due determine this agreement by delivering up the goods to the Owner at the Owner's address stated herein. rights and title under the said guarantee and indemnity agreements. Holding : Held. the assignment of the guarantee and indemnity agreements to the plaintiff on 10 May 1986 cannot be valid in the circumstances as it is after the date . solicitor-client's costs and alternatively for the defence to be struck out.. Singapore (Lai Kew Chai J).000 received by the plaintiffs apportioned in the ratio which their respective claims bore one with the other.also relied on the provision in cl 2 of the guarantee which provided that the guarantee would continue to bind the defendant notwithstanding 'any . The plaintiffs' contention that this provision is another circumstance under which the defendant was not relieved of her liability under the guarantee. notwithstanding the compromise agreement. The defendant appealed. By summons-in-chambers filed on 19 December 1991. Notice of this assignment was given to the defendant only on 8 March 1991.the defendant had agreed to guarantee and indemnify TKSB the payment by TVCB of all sums due and payable under two hire purchase agreements entered into between TKSB and TVCB on the same date. The senior assistant registrar granted the prayers on 27 May 1992. (8) judgment was thus given against the defendant in the sums claimed by the two plaintiffs less the sum of M$200. Digest : Balfour Williamson (Singapore) Pte Ltd v Joyce Lee Yon Yin. interest at a rate of 18% pa.27.

Although s 4(3) of the Civil Law Act 1956 does not provide a time for which such notice should be given. Kuala Lumpur (Abdul Malek J). (3) the absence of the words 'We demand from you' did not make the letter of demand less effective as the letter was to be read and understood in its entirety. Digest : UMW Industries (1985) Sdn Bhd (previously known as UMW (Malaya) Sdn Bhd) v Chang Too Sang Civil Suit No D5-22-1220-1991 High Court. s 4(3) Summary : The second defendant was sued on a guarantee dated 15 March 1982. allowing the application: (1) the original letter of demand should have been exhibited before the court to establish that the letter of demand sent to the second defendant was improper. (2) as the plaintiff's solicitors were acting as agents of the plaintiff. the court held that the reliance on an unsigned office copy failed to provide the second defendant with a defence. it should be done within a reasonable time.Assignment 3 [2345] CONTRACT Guarantee – Assignment – Notice of assignment to be given within reasonable time – Civil Law Act 1956. sent by the plaintiff's solicitors. Holding : Held. As that had not been done. 2345 Guarantee -. He further argued that the deed of assignment dated 18 January 1983 was also invalid as it was executed after the hire-purchase agreement was terminated on 11 November 1982. The inordinate delay on the part of the plaintiff provided the second defendant with a defence. which also amounts to inordinate delay and raises a triable issue on the facts of this case for which summary judgment should not have been given by the learned senior assistant registrar. (3) s 4(3) of the Civil Law Act 1956 cannot apply here since the date of the notice to the defendant on 8 March 1991 is some five and a half years after the purported termination of the relevant hire purchase agreements on 15 November 1985. wherein he guaranteed payment of rentals due from the first defendant on a hire-purchase agreement of the same date with a third party. who eventually assigned the agreement to the plaintiff. . The second defendant argued that the letter of demand was not valid as it was unsigned. and that the words 'We demand from you' were not apparent in the letter. there was nothing wrong with the solicitors sending the letter of demand on behalf of their clients.of the termination of the hire purchase agreements. The present proceedings were commenced by the second defendant for the judgment in default entered against him to be set aside. (4) notice of the assignment was made known to the second defendant about two years after the deed was entered into and three years after the agreement was terminated. not the plaintiff.

to deposit with the plaintiffs a cash amount or an approved banker's guarantee equal to 5% of the contract sum. The construction company subsequently got into financial difficulties and had to abandon the work. 80 & 86.Consideration Whether there have been variations in building contract . The construction company obtained a banker's guarantee from the defendant bank and the work commenced. Summary : In this case. ss 79. (2) no consideration for the guarantee had been given. Liability was denied on four main grounds: (1) there had been variations in the building contract. Kuala Lumpur (Siti Norma Yaakob J). Its liability was coextensive with that of the construction company.Banker's guarantee 3 [2346] CONTRACT Guarantee – Banker's guarantee – Consideration – Contracts Act 1950 (Act 136). 2346 Guarantee -. Under the contract. The plaintiffs claimed the amount guaranteed in the banker's guarantee from the defendant bank. (3) the plaintiffs had made a claim within the period of the guarantee and their claim was not barred by limitation.Whether claim maintainable when liability of principal not ascertained . the construction company agreed to carry out the works and agreed. though not to the whole of the contract sum. a construction company was successful in a tender for pile foundation and sub-structure for a building project. (2) in this case. ie to 5% of the contract sum. as it enabled the principal debtor to commence work under the building contract.Contracts Act 1950.Whether claim on guarantee time-barred . the claim was not maintainable. Holding : Held: (1) there had been no variation in the building contract as the plaintiffs had an option to accept cash or the bank guarantee and the date of taking possession of the work site was conditional on the fulfilment of the condition of giving the cash or the bank guarantee.Security deposit by bank .Guarantee .Digest : UMW Industries (1985) Sdn Bhd (formerly known as UMW (Malaysia) Sdn Bhd v Sin Yew Lee Mining Sdn Bhd & Anor Civil Suit No C5790 of 1985 High Court. there was consideration for the contract of guarantee as the creditor-bank had done something for the benefit of the principal debtor. (4) the defendant bank was not a party to the main contract but only to the contract of guarantee. as a condition precedent to the commencement of any work. 80 – Interpretation of contracts – Limitation – Building contract . Digest : . ss 79. (3) the claim was time-barred and (4) the liability of the defendant was co-extensive with that of the construction company and since the extent of the liability had not been ascertained.

shall place with the defendant a sum of $50. the defendant had indicated that it would draw down the banker's guarantee. The defendant. otherwise the defendant would call upon the banker's guarantee. Until these questions . upon the execution of the agreement. The plaintiff entered into a remisier agreement with the defendant which provides. In no way can the guarantee be read to incorporate the underlying contract as the obligation to pay is only dependent on receiving a written demand and not on any terms of the underlying contract. In that case. 2347 Guarantee -. This still holds true in case of on demand guarantees. (2) in Kirames[1991] 2 MLJ 198.000 which shall be used to guarantee the due performance by the remisier of the obligations and covenants under the agreement. Subsequently. the words of the guarantee are very clear and unambiguous that it is intended to be unconditional and payable on demand in writing. The plaintiff alleged that the defendant. The plaintiff then applied for an order that the defendant be restrained from calling. and therefore was not entitled to call on the banker's guarantee. sold some shares he had purchased on the instruction of his clients without his or his client's knowledge or consent. granting the application: (1) the principle in [biEdward Owen's case [1978] 1 All ER 976 is not wrong. inter alia. on the other hand.Perbadanan Kemajuan Negeri Selangor v Public Bank Bhd [1980] 1 MLJ 172 High Court. contrary to the KLSE terms of trading and settlement. alleged that the plaintiff had wrongfully placed the purchase order for the shares and therefore the plaintiff could not claim liability under the agreement. instead of cash. that the plaintiff. Lord Denning explained how he came to the conclusion that performance guarantee stood on a similar footing as a letter of credit. as permitted by the defendant. (3) in the present case there is no evidence that a demand has been made on the guarantee but in its letter. (4) the banker's guarantee is not an unconditional guarantee. demanding or encashing the banker's guarantee. In the circumstances the court should look at the underlying contract. Kuala Lumpur (Mohamed Azmi J). (5) there are serious questions to be tried regarding the conduct of the defendant under the terms of the agreement. This the plaintiff did by way of a banker's guarantee. thus the defendant repudiated the agreement. Holding : Held.Banker's guarantee 3 [2347] CONTRACT Guarantee – Banker's guarantee – Remisier agreement – Guarantee of due performance of agreement – Restraint against calling on bank guarantee – Serious question to be tried Summary : The plaintiff was a licenced dealer's representative under the Securities Industries Act 1983 and the defendant was a stockbroking firm. the defendant wrote to the plaintiff informing him that there was a deficit in the plaintiff's account and the plaintiff was asked to settle the amount.

Digest : . The plaintiff issued a writ claiming that the guarantees were invalid. in the event the plaintiff's action succeeded there could be difficulties in recovering the amount paid. In the context. The guarantees provided for the first defendant to pay the second defendant any sum owed by the plaintiff to the second defendant under the general sales agency agreement ('the agreement') upon a written demand accompanied by a certificate by the second defendant certifying the sum due to the second defendant under the agreement. There was therefore some basis for the plaintiff's fears that if the first defendant was allowed to pay the second defendant. (2) on the facts in this case there were a number of serious issues to be tried. attempting to pull a fast one. The balance of convenience is in favour of the plaintiff. by a letter of demand and a certificate. and any dispute between the plaintiff and the second defendant was irrelevant.are decided at the trial. The plaintiff alleged that the amount certified by the second defendant was in fact an amount which was not covered by the guarantees. The balance of convenience was accordingly for the granting of the injunction until the disposal of the plaintiff's suit. could come under fraud. Kuala Lumpur (Zakaria Yatim J). The plaintiff provided the second defendant with two bank guarantees issued by the first defendant bank ('the guarantees'). (3) there was sufficient material before the court to show that the second defendant could be in financial difficulties. requested the first defendant to pay under the guarantees. the defendants should be restrained from calling on the banker's guarantee. The second defendant argued that the plaintiff had assumed all the rights and liabilities of Abadi under the agreement. The second defendant was also a foreign company. Holding : Held. The second defendant.Banker's guarantee 3 [2348] CONTRACT Guarantee – Banker's guarantee – Whether bank should pay under banker's guarantee – Whether there was fraud Summary : The second defendant had appointed Abadi Transportation Sdn Bhd ('Abadi') to be its general sales agent. Digest : Nik Sharifuddin bin Nik Kadir v Mohaiyani Securities Sdn Bhd [1994] 3 MLJ 551 High Court. The plaintiff applied for an interim injunction to restrain the first defendant from paying the second defendant under the guarantees. The second defendant further contended that the first defendant should honour the guarantees in the absence of fraud. 2348 Guarantee -. allowing the application: (1) fraud in this context should be given a wide rather than a narrow meaning.

However. the question of whether D's application for relief against T was made before the right to do so had accrued should go to trial. he may get a declaration of his right to contribution. Holding : Held. Digest : Ban Hin Lee Bank Bhd v Gan Boon Wah & Ors Suit No 1254 of 1990 High Court. the contribution to be made after he has paid the claim. T appealed.Co-sureties 3 [2350] CONTRACT Guarantee – Co-sureties – Contribution from co-surety – Summary judgment for contribution before liability to pay arose Summary : D were sued as guarantors of the debts of their company. he may obtain a declaration of his right to contribution.Pelancongan Abadi Sdn Bhd v Ban Hin Lee Bank Ltd & Anor Civil Suit No D322-493-91 High Court.in the present case. . North Borneo and Brunei 2350 Guarantee -. Singapore (Kan Ting Chiu JC). the court held that the evidence established the liability of the second defendant as guarantor under the contract. (3) relief may be granted in the following circumstances: (a) when a surety has paid the creditor's claim. Digest : Chop Fah Loong v Chong Sze Kiat & Ors [1954] SCR 47 Supreme Court. 2349 Guarantee -.Breach of contract 3 [2349] CONTRACT Guarantee – Breach of contract – Sale of pepper – Liability of guarantor – Del credere agent Summary : In this case. (2) (c) where a surety admits a claim. allowing the appeal: (1) a surety can claim contribution from his co-sureties only after he has paid a larger sum than his proportion of the debt to the creditor. D joined T as third parties to the suit. Kuala Lumpur (VC George J). a surety may be entitled to quia timet declaratory relief before he makes payment. he is entitled to contribution from his co-sureties. (b) when the creditor has obtained judgment against the surety. D obtained summary judgment against T before judgment was granted against them in the main action. Sarawak. claiming contribution from them as cosureties. They resisted the claim. the contribution to be made after he has paid the creditor.

Only D1-D6 executed the guarantee. . This second guarantee was identical to the first. if any one of those fail to enter the agreement. s 2 .Transactions entered into by confirming house . (3) where a promise is intended to be made by several persons jointly. In the instant case the court found that D4 and D6 did not know that D7 had not signed the first guarantee and did not consent to the same.Whether transaction entered into with confirming house a moneylending transaction . Later. s 2. and it was P's duty to see that it was executed by the proper parties. (5) there was no intention shown that the parties agreed to merge the two guarantees. (2) it was a condition precedent that the first guarantee be executed by all the persons named as sureties. (4) if one of the intended co-sureties did not sign the first guarantee. and the P sued D1-D7 for payment on the ground that they were jointly and severally liable under the two guarantees. and no liability was incurred by such of them as had entered into the agreement. and there was no mention of a second guarantee in the first guarantee.Co-sureties 3 [2351] CONTRACT Guarantee – Co-sureties – Failure of all sureties to sign guarantee – Separate guarantee executed – Whether all sureties jointly and severally liable Summary : P granted Wespack ('the company') overdraft facilities of S$130.Moneylenders Ordinance 1951. The company sub-sequently went into liquidation.Commercial law . Digest : Indian Bank v G Ramachandran & Ors [1991] SLR 684 High Court.Confirming house . save that it was executed by the D7 only.Moneylenders Ordinance 1951. D7 executed a separate guarantee. there was no contract. Holding : Held.Functions and obligations Transaction not moneylending .2351 Guarantee -.000 on condition that all the company's directors (D1-D7) executed personal guarantees for the facilities extended. dismissing the claim: (1) P were not entitled to enforce the two guarantees against D1-D7 because the first guarantee was not signed by D7 and the second guarantee could not in law be regarded as an addendum to the first guarantee. Singapore (Goh Phai Cheng JC).Confirming house 3 [2352] CONTRACT Guarantee – Confirming house – Transaction not moneylending transaction – Practice and procedure . P must show that the co-sureties who signed it consented to dispense with the execution of the guarantee by the co-surety who had not signed.Guarantee . 2352 Guarantee -. before the company was allowed to draw on the facilities. D7 was away from Singapore. or to execute the instrument of the agreement.

Whether consideration was past .Guarantee for overdraft facilities executed after grant of overdraft .Guarantee . An appeal to the High Court was dismissed and the appellants appealed to the Federal Court. a London confirming house and a Singapore company relating to the financing of purchases of goods by the Singapore company. the order under O 14 was correctly made. Holding : Held: (1) confirming houses are a recognized institution in the promotion and participation of export trade and their business being distinct.Whether consideration was past .Whether guarantee was a continuing guarantee or invalid guarantee . Johore Bahru (Raja Azlan Shah CJ (Malaya). arguing that there was delay on the . The respondents applied for final judgment under O 14 and their application was granted by the assistant registrar. the transactions entered into by them with the parties in the export trade could not be held to be moneylending transactions. Summary : The first defendant company had been operating an account with the plaintiff bank for overdraft facilities since 1980. A guarantee was executed by the second. There being no triable issue. 2353 Guarantee -. Subsequently. the plaintiff bank filed a claim against the defendants for a sum of moneys due and owing by the first defendant under the account. (2) the learned judge was correct in holding that the appellants' statement of defence did not disclose any serious defence requiring trial. Digest : Ngui Mui Khin & Anor v Gillespie Bros & Co Ltd [1980] 2 MLJ 9 Federal Court.Whether guarantee was a continuing guarantee or invalid guarantee. third and fourth defendants (who were directors of the first defendant company) jointly and severally on 31 July 1981. The defendants appealed against the decision of the senior assistant registrar. The appellants gave a guarantee to the respondents with respect to those transactions.Consideration 3 [2353] CONTRACT Guarantee – Consideration – Continuing guarantee – Banking . The respondents obtained judgment in the Singapore High Court against the Singapore company and as the judgment remained unsatisfied.Guarantee for overdraft facilities executed after grant of overdraft . The senior assistant registrar granted the plaintiff's application under O 14 of the Rules of the High Court 1980.Summary : In this case.Contract . they sued the appellants on the guarantee. The appellants in their defence contended that they were not liable on the guarantee because the transactions between the respondents and the Singapore company were in essence moneylending transactions. certain transactions took place between the respondents.

Digest : Development & Commercial Bank Bhd v Syarikat Farmco Sdn Bhd & Ors [1988] 3 MLJ 275 High Court.Whether consideration was past . (3) the third defendant's tardiness in pursuing . the effect of which is that any statement issued by the plaintiff as to the amount due from the first defendant is conclusive evidence of the third defendant's indebtedness as a guarantor. there is good consideration given to both the continuing guarantees. (2) clause 8 of both guarantees is a conclusive evidence clause.Whether guarantee was a continuing guarantee. The plaintiff gave them time but the defendants unfortunately failed to honour their own proposal. Kuantan (Lamin J). the guarantee must be treated as a continuing guarantee because it guaranteed not only the overdraft existing at the time but also those in the future.Whether guarantee was a continuing guarantee .part of the plaintiff in filing its application to enter final judgment and that the consideration for the guarantee was past consideration and therefore the guarantee was not binding on the defendants. Holding : Held.Banking .Guarantee . includes guaranteeing not only facilities existing at the time of execution of the guarantee but also facilities to be made in the future. As such. dismissing the appeal: (1) the delay was apparently caused by the defendants themselves in that they requested for time with the view of settling the account and serving the interest accruing. Such a statement was issued by the plaintiff wherein the principal sum stated is less than the total limits of the two guarantees. He contended that as the guarantees were executed after the credit facilities were advanced to the first defendant. who was sued as a guarantor pursuant to two guarantees. It was also submitted that the judgment in default was entered for sums in excess of that claimed in the statement of claim.Guarantee executed after advance of credit facilities . Holding : Held.Guarantee . dismissing the application: (1) a continuing guarantee. applied to set aside a judgment in default entered against him. 2354 Guarantee -. (2) by the terms of the letter of guarantee.Guarantee executed after advance of credit facilities Whether consideration was past .Consideration 3 [2354] CONTRACT Guarantee – Consideration – Continuing guarantee – Contract . such as the one in this case. they contained past consideration and as such were not enforceable against him. Summary : The third defendant.

The application to set aside is therefore dismissed. At the time the guarantee was executed. Kuala Lumpur (Siti Norma Yaakob J). The court had to decide: (1) whether the purported consideration given by the plaintiff came within the act or forbearance described as consideration in s 2 of the Contracts Act 1950 ('the Act'). the relationship between the plaintiff and Haco subsisted for so long as the advance remained outstanding. Haco failed to settle the term loan and the plaintiff obtained judgment against it. Holding : Held. the first defendant. The plaintiff then sought to recover the sum owed by Haco from the defendants by sending a letter of demand to the first defendant. Digest : Perwira Habib Bank Malaysia Bhd v Fast Travel (M) Sdn Bhd & Ors [1988] 3 MLJ 210 High Court. it could be said that the guarantee was to compensate the plaintiff 'who had already voluntarily done something' (by providing the loan to Haco) for the first defendant. It also satisfied the proviso to s 26(b) of the Act as. as the act or forbearance on the part of the lender continued after the loan was disbursed. The defendants signed a separate agreement with the plaintiff whereby they agreed to be joint and several guarantors of the said loan. (3) the act or forbearance therefore came squarely within the meaning of s 2(d) and fell outside illustration (c) of s 80 of the Act.his rights has greatly prejudiced the plaintiff as it had incurred expenses in executing the judgment. 2355 Guarantee -. it was thus given for a past consideration. it was clear that although the term advance had been fully disbursed to Haco before the execution of the letter of guarantee. it was still outstanding and thus still forebearing on the plaintiff. inter alia. and (2) whether that consideration fell outside illustration (c) of s 80 of the Act.Consideration 3 [2355] CONTRACT Guarantee – Consideration – Continuing guarantee – Letter of guarantee executed after loan fully disbursed to borrower – Whether past consideration given by lender to guarantor Summary : This was an appeal from the decision of the deputy registrar granting the plaintiff leave to sign final judgment against the first defendant. (2) in the present case. Counsel for the first defendant submitted that as the agreement of guarantee was executed after the term advance had been fully disbursed to Haco by the plaintiff. consideration subsisted between the lender and the guarantor in respect of the loan taken by the principal debtor. the repayment of which was to be guaranteed jointly and severally by. in the broader sense. dismissing the first defendant's appeal: (1) in cases of continuing guarantees. Digest : . The plaintiff had granted a term advance to one Haco Sdn Bhd.

2357 Guarantee -. The respondent claimed on the second guarantee.Malaysia Smelting Corp Bhd v Foong Weng Yee & Ors Civil Suit No 22-75-91 High Court. Holding : Held. (Seah SCJ dissenting): the learned trial judge was entitled to hold that forbearance could be inferred from the surrounding circumstances in this case and that there was therefore consideration for the guarantee. Ipoh (Kang Hwee Gee JC). were directors of a company. These were granted to the company. the company through the second appellant as the managing director applied to the respondent. for overdraft facilities. The plaintiffs averred that the amount due as at . The question in issue was whether there was a valid consideration for the guarantee. Universal subsequently went into liquidation and was unable to discharge its liability to the plaintiffs. a bank. second and sixth appellants executed a guarantee in the sum of $430. in consideration of the plaintiffs supplying wire rods and giving credit to Universal Wire Mesh Pte Ltd ('Universal'). The first. The appellants appealed. 2356 Guarantee -. An action was brought for the recovery of the amounts due.000. the defendants issued to the plaintiffs a guarantee in which the defendants agreed to pay the plaintiffs on demand in writing all sums in excess of the first S$100. The company executed a debenture in the sum of $430. Kuala Lumpur (Lee Hun Hoe CJ (Borneo).000 which would become due to the plaintiffs from Universal. save the sixth appellants.Consideration 3 [2356] CONTRACT Guarantee – Consideration – Forbearance to sue Summary : The appellants in this case. as he held that there was a request for forbearance to sue and there was forbearance in fact. Digest : Osman bin Abdul Ghani & Ors v United Asian Bank Bhd [1987] 1 MLJ 27 Supreme Court. Subsequently. All the appellants executed a guarantee for the same amount. In May 1975. The learned trial judge held that there was valid consideration for the guarantee given by the appellants. the company executed a further debenture in the sum of $1 million. two years after the execution of the first guarantee. On the evidence he was not wrong to come to the conclusion which he did.000.Consideration 3 [2357] CONTRACT Guarantee – Consideration – Guarantee for supply of equipment – Guarantee enforced in respect of management fees Summary : On 21 April 1986.

Holding : Held. Vol 3.000 which were then or would thereafter become due to the plaintiffs from Universal. a sum of S$184.000. There was nothing to suggest that these supplies were not made by the plaintiffs in reliance on the guarantee. There was nothing in the guarantee to suggest.630. credit or other accommodation – Whether guarantee supported by consideration Digest : Bank of India v Dr Pravinchand P Shah Suit No 2324 of 1987 High Court. giving judgment to the plaintiffs: (1) none of the defences raised had any merit. (2) the plaintiffs had adduced evidence which showed that after the issue of the guarantee.630. The defendants pleaded that there was no consideration given by the plaintiffs for the guarantee. Singapore (Kan Ting Chiu J). para IX [64]. Digest : Intraco Ltd v Wan Soon Construction Pte Ltd Suit No 738 of 1987 High Court. claimed S$100. that the guarantee would cover only the liability of Universal for the goods supplied by the plaintiffs. para 2380.31 December 1986 was S$207. (3) the terms of the guarantee were extremely wide and covered all sums in excess of the first S$100. or from which it could be implied. 2358 Guarantee -. Singapore (LP Thean J). See CONTRACT.27 alleged to be due.Consideration 3 [2359] CONTRACT Guarantee – Consideration – Letter guaranteeing repayment of third party's debt in instalments – Forbearance to sue – Whether forbearance to sue sufficient consideration for guarantor's undertaking to pay debt See contract. They also averred that of the sum of S$207.Consideration 3 [2358] CONTRACT Guarantee – Consideration – Guarantee in consideration of plaintiff continuing to give advances. Digest : .000 represented management fees and that they were not liable for such management fees. the plaintiffs supplied and continued to supply iron rods to Universal on credit. It was clearly not arguable that no consideration for the guarantee was past consideration.27 and pursuant to the terms of the guarantee. 2359 Guarantee -.

P sued and applied for summary judgment against them. allowing the appeal: (1) in the instant case. In the circumstances. that the guarantee was given for a past consideration and as such was void and unenforceable. P demanded repayment of the loans from D2-D4. inter alia. 2360 Guarantee -. P's claim was for the outstanding sum due and owing by D to P. The learned judge was of the view that the instant case was not a plain and obvious case for an ord 14 judgment. 2361 Guarantee -. D2-D4 argued that the . P appealed to the High Court. Upon the failure of D2-D4 to repay the loans. Counsel for D4 submitted. s 80 Summary : P granted loans to D1. Digest : Public Bank Bhd v Tradikon Sdn Bhd Civil Suit No D4-23-2468-87 High Court. the question of past consideration did not arise. D4 had guaranteed payment of all sums of money due and owing by D1 to P under two loan facilities granted by P to D1. Holding : Held. Since the guarantee was a continuing guarantee.Imperial Steel Drum Manufacturers Sdn Bhd v Wong Kin Heng [1997] 2 SLR 695 High Court.Consideration 3 [2360] CONTRACT Guarantee – Consideration – Past consideration – Continuing guarantee – Whether guarantee unenforceable and invalid for want of consideration Summary : D4 appealed against the decision of the senior assistant registrar in allowing P to enter final judgment against him.Consideration 3 [2361] CONTRACT Guarantee – Consideration – Past consideration – Whether consideration for guarantee was past consideration because loans were disbursed before execution of guarantee – Contracts Act 1950. There was no evidence to show whether the interest charged was that as specified in the letter of offer or at a lesser or higher rate. Singapore (S Rajendran J). Kuala Lumpur (Zakaria Yatim J). the consideration was a good consideration. The senior assistant registrar refused to allow P's application for summary judgment against D2-D4. (2) it was however not clear in the instant case whether D4 was charged interest by P at the agreed rates as specified in the letter and offer. D2-D4 guaranteed D1's repayment of the loans on demand by P. The loans were disbursed in full to D1 before D2-D4 executed the letter of guarantee. D4's appeal was allowed.

D had guaranteed the payment on demand of all moneys and obligations of E Sdn Bhd due and owing to P up to a specified limit. (2) in the instant case. Held. Kuala Lumpur (Zakaria Yatim J). Digest : Perwira Habib Bank Malaysia Bhd v Utara Realty Sdn Bhd & Ors Civil Suit No C3-23-3100-86 High Court. Kuala Lumpur (Anuar J). the senior assistant registrar was right in granting D conditional leave to defend as there was doubt as to the bona fide of the defence.Consideration 3 [2363] CONTRACT Guarantee – Consideration – Whether past consideration may constitute good consideration – Benefit given before execution of guarantee must have been given 'at the desire' of the guarantor – Contracts Act 1950. Digest : GBH Ceramics Sdn Bhd v How It @ Low Aik & Anor Civil Suit No D1-23-124988 High Court. 2363 Guarantee -.Consideration 3 [2362] CONTRACT Guarantee – Consideration – Past consideration – Whether guarantee void – Construction of guarantee – Whether guarantors liable for debts incurred before signing of guarantee Summary : D appealed against the decision of the senior assistant registrar giving them conditional leave to defend.consideration for the guarantee was past consideration because the loans had been disbursed in full to D1 before the execution of the guarantee. 2362 Guarantee -. s 2(d) Summary : The plaintiffs sued the second defendant ('the defendant') for RM310.26 under a guarantee dated 3 October 1986 ('the guarantee'). This case was therefore not a proper one for summary judgment. P had sued D on a guarantee which D contended was void for past consideration. no loan had been disbursed yet. dismissing the appeal: (1) having regard to the terms of the guarantee. it was the intention of the parties that D gave the guarantee not only for liabilities incurred after but also before the signing of the guarantee. Holding : Held. however.875. the consideration was past consideration because the loans had been disbursed before the execution of the letter of guarantee. In this case. dismissing the appeal: from the words of the letter of guarantee. being money lent to the first .

The trial herein therefore only concerned the plaintiffs' claim against the defendant. he was virtually asking the manager of the plaintiffs to see him at a coffee house and not the other way round. (8) 'a surety is also not discharged if by a clause in the guarantee. (2) in the case of a guarantee in respect of a loan that has already been disbursed at the time of the execution of the guarantee. past consideration can still be good consideration even if the benefit was not given at the time of the execution of the guarantee in a one-off transaction provided the benefit that was given before the execution of the guarantee was given 'at the desire' of the guarantor. viz whether the consideration for the guarantee was past consideration. the loan. Judgment had been entered against the first defendant upon an O 14 application. (4) since the defendant and his wife are the only directors of the first defendant and thereby stood to benefit from the loan. albeit indirectly. (7) given the court's finding as to the defendant's character and as regards the events in the coffee house. (5) the defendant did not appear to be a person who could be pushed into doing something against his will.defendant. as the deeming provision of s 16(2) of the Act does not apply here. and (4) whether the defendant had agreed to the terms stated in the guarantee ('exh P4'). and since the defendant. on the evidence. it could be inferred. he had agreed to the creditor dealing with the security in the manner complained of' (Low Kee Yang. (3) on the authorities and ss 2(d) and 80 of the Act. This issues which arose in this case were: (1) whether there was consideration for the guarantee. allowing the plaintiffs' claim: (1) the case of Perwira Habib Bank (M) v Saiyo [1991] 2 CLJ 1849 appears to dispense with the requirement that the 'something done' (the loan) must be 'at the desire' of the guarantor as laid down in s 2(d) of the Contracts Act 1950 ('the Act'). Such a result cannot be what the law had intended. (6) the burden rests on the defendant to prove undue influence. He also had two months to ponder whether to sign the guarantee. and where no further money was advanced or intended to be advanced after the execution of the guarantee. On the facts. (3) whether the plaintiffs' failure to appoint a receiver for the first defendant discharged the defendant from his liability under the guarantee. such guarantee can only be enforced against the guarantor if the loan was given at the 'desire' of the guarantor. The Law of Guarantees in Singapore and Malaysia at p 162). (2) whether undue influence had been exerted to procure the guarantee. from the letters produced in court. there could not have been undue influence so as to dominate the will of the defendant. There was therefore no merit to this defence regarding the plaintiffs' failure to appoint a receiver. This is a requirement under s 2(d) of the Act. it could not be true that the defendant was totally unprepared for the coffee house meeting and it is equally untrue that he was there faced with the guarantee for the first time and without sufficient time to consider the same. Holding : Held. must have been 'at the desire' of the second defendant. (9) . appeared to be in total charge of the first defendant. Further. The court agreed with the plaintiffs' counsel's argument that the defendant cannot complain about the very thing which he had agreed by the provisions of the guarantee.

The words 'until further notice' can only mean that the rate is subject to increase or decrease at the discretion of the plaintiff.Interest rate on overdraft increased without guarantor's consent or knowledge . The guarantee. There is no doubt as to the quantum under the guarantee and it is spelt out in cl 1 of the guarantee. appealed against an O 14 judgment obtained by the plaintiff.Whether permissible by terms of overdraft . Kuala Lumpur (Siti Norma Yaakob J).000' limit of liability and the interest rate were not stated at the time the defendant executed exh P4. Tawau (Ian Chin JC). ie all sums of money due on any account of the first defendant. Digest : Hongkong and Shanghai Banking Corp v Syarikat United Leong Enterprise Sdn Bhd & Anor [1993] 2 MLJ 449 High Court. that the increase in the rate of interest from 15% to 16% pa was made without his consent and knowledge. (2) cll 1 and 15 of the guarantee give the plaintiff the power to treat the second defendant as a principal debtor and since the second defendant has not.'Until further notice' . Holding : Held. he had not raised any triable issue as to warrant upsetting the senior assistant registrar's order.Construction . Digest : Development & Commercial Bank Bhd v Tengku Noone Aziz bin Tengku Mahmood & Anor [1988] 3 MLJ 228 High Court. Summary : The second defendant. inter alia. There is no provision as to prior notice or that the consent of the second defendant needs to be sought before the plaintiff can exercise its right to revise the rate of interest.counsel for the defendant submitted that the plaintiffs had to prove that the defendant had agreed to all the terms in exh P4 because the defendant had executed exh P4 in blank. who was being sued as a guarantor. is still valid even though signed in blank. raised any objection to the amount claimed. 2364 Guarantee -.Construction 3 [2364] CONTRACT Guarantee – Construction – Banking . ie the 'RM288. 2365 Guarantee -. dismissing the appeal: (1) the term on the rate of interest payable states '15% pa until further notice'. until the appeal. The second defendant contended.Meaning of. in the absence of fraud and misrepresentation.Guarantor sued for principal debtor's debt on overdraft facilities .

Judgment in default of appearance . the plaintiff commenced legal proceedings against the defendants in their capacity as sureties for the recovery of the debt.Surety liable as principal debtor as well . if the judgment was regularly obtained. Summary : The first defendant along with the other defendants had signed a joint and several guarantee in favour of the plaintiff in consideration of the plaintiff granting a loan to an incorporated company ('the borrower'). On 13 August 1987. On 23 January 1987. the plaintiff obtained judgment in default of appearance against him.Principles applicable . it was contended that (i) the plaintiff's claim was premature in law. notwithstanding the terms of the guarantee. the first defendant did not enter an appearance and so. As regards ground (b). his solicitors wrote stating that they had instructions to accept service of the creditor's petition. Eventually. the plaintiff had to recover from the borrower the amounts outstanding following enforcement of the charge.Whether action against surety premature . and (iv) the guarantee was void and of no effect in that the first defendant had been induced to execute the same by misrepresentation on the part of the plaintiff that. alternatively.Security in the form of land available . frivolous and an abuse of the process of the court. The loan was secured by a charge over the borrower's land.Interest on judgment debts . As regards ground (a).Indulgence given to principal debtor . It was contended that the plaintiff's suit was premature in law because it had not been proved that service of a notice of demand dated 31 January 1985 had been effected on the first defendant. but only if. (ii) the plaintiff's claim was misconceived.Misrepresentation Whether guarantee void.Bona fides .Rules of the High Court 1980. (iii) the plaintiff's claim for interest was misconceived in law. that the notice of demand was .Reliance on common and public knowledge by court . the first defendant was personally served with a bankruptcy notice and a copy of the default judgment.Laches . it was contended that it was not legally permissible for the plaintiff to obtain judgment for interest at the rate of 14% pa for the post-judgment period.Notice of demand Service . On 7 November 1986.3 [2365] CONTRACT Guarantee – Construction – Civil procedure . when the bankruptcy petition came on for hearing counsel for the first defendant informed the court that an application to set aside the default judgment would be filed but it was only on 9 February 1988 that the first defendant applied to have the judgment set aside on the grounds: (a) the judgment was not regularly obtained in that the plaintiff had entered judgment for a sum in excess of that which was lawfully due to the plaintiff.Setting aside .Contract Guarantee . Although served with the writ of summons and statement of claim.Value of land . on 18 March 1986.Independent covenant to pay interest Doctrine of merger . and (b) in the alternative. he had a good defence on the merits. regard being had to the provisions of O 42 r 12 of the Rules of the High Court 1980 in existence at the material time which provided for interest at the rate of 8% pa on judgment debts. the plaintiff would only have recourse to the first defendant if. O 42 r 12 .

(3) the first notice of demand to the first defendant had not been nullified by the plaintiff's letter of 19 February 1985 to the borrower granting the borrower an indulgence. it was stated categorically that the plaintiff had the right to recall the loan if at any one time the borrower defaulted in the terms of repayment. The notice of demand was apparently received at the address for service of the first defendant given in the guarantee by someone on behalf of a company known as Material Handling and Engineering Sdn Bhd. having regard to a letter dated 19 February 1985 to the borrower's solicitors granting an indulgence to the borrower. Holding : Held. action would be taken to recover the loan and interest. In . with regard to the value of the land. action would be taken to recover the loan and interest. The first defendant also contended that as the plaintiff had obtained an order for sale of the borrower's land and the sale was pending. The giving of seven days' notice to the borrower before the bringing of proceedings against the guarantor. Moreover. It was also argued that the plaintiff's letter of indulgence of 19 February 1985 to the borrower's solicitors stating that the period of the loan was extended until 30 November 1985 contradicted the plaintiff's subsequent letter of 15 March 1985 stating that unless the instalment payments for principal and interest were paid by 31 March 1985. (2) the notice of demand had been properly served in accordance with the provision of the guarantee regarding the mode of service of notices and demands. (4) there was no contradiction between the plaintiff's letter of indulgence dated 19 February 1985 stating that the period of the loan was extended until 30 November 1985 and the plaintiff's letter of 15 March 1985 stating that unless the instalment payments were paid by 31 March 1985. It was also contended by the first defendant that a second notice of demand dated 29 October 1985 addressed to him was also bad because instead of giving a seven days' notice of demand to the borrower before giving a notice of demand to the first defendant. was mere surplusage and so was of no consequence. assuming there was such a requirement. The plaintiff had therefore not obtained judgment in excess of that which was lawfully due. the plaintiff's solicitors had sent the second notice of demand to the borrower and all the defendants on the same day. In the final paragraph of the letter of indulgence. the plaintiff could enforce the guarantee. The plaintiff was therefore entitled to obtain judgment for interest at the contractual rate in respect of the post-judgment period. market conditions justified the plaintiff's action in proceeding against the defendants. dismissing the application: (1) the covenant for the payment of interest was not merely ancillary but was an independent covenant and was not extinguished in the judgment. (5) the second notice of demand was not issued prematurely as the first defendant was liable as a principal debtor and not merely as a surety so that once the borrower was in default. (6) the provisions of the guarantee as a whole were such that the plaintiff was not bound or required in law to realize the security before enforcing the guarantee. the present suit was a useless piece of litigation as the value of the land exceeded the judgment sum.null and void. the doctrine of merger being inapplicable.

Construction .000) only on behalf of Messrs Senibert Sdn Bhd. (3) in this case therefore the order of the learned trial judge would be varied to one of payment of such sum as may be found due in respect of policies sold and premium collected after the date of the letter of guarantee. the first defendant's conduct in attempting to negotiate a settlement with the directors of the plaintiff and that too after receiving a bankruptcy notice did nothing to help his defence that he had been induced by misrepresentation by the plaintiff to sign the guarantee. 2366 Guarantee -. the first defendant had been guilty of laches and his conduct had not been bona fide. (7) in considering an application to set aside a default judgment regularly obtained. In this case.Guarantee . Summary : In this case. Penang (Edgar Joseph Jr J). Digest : Malaysia Building Society Bhd v Lim Kheng Kim & Ors [1988] 3 MLJ 175 High Court. the court can quite properly take into account the conduct of the defendant apart from the question of merits. Messrs Senibert Sdn Bhd had been sued for RM202.this connection. In the same suit a claim was made against the appellant for the sum of RM100. Moreover.Liability of guarantor . Ong Hock Sim and Wan Suleiman FJJ).Whether liable for liabilities incurred before date of guarantee. Digest : Chew Soon Tat v Malaysia National Insurance Sdn Bhd [1977] 1 MLJ 241 Federal Court. 2367 Guarantee -. (2) a guarantor would only be liable for debts or liabilities incurred after the date of the guarantee. Holding : Held: (1) the letter of guarantee could not be impugned on grounds of absence or want of consideration.226. The learned trial judge gave judgment in favour of the respondent.19 in respect of policies sold and premium collected on behalf of the respondent. the appellant gave a letter of guarantee to the respondent whereby the appellant undertook to stand guarantee to the extent of one hundred thousand dollars (RM100. Judgment in default was entered against them. a judge is entitled to rely on what is common and public knowledge when considering the rise or fall in the value of land. The appellant appealed.000 in terms of the letter of guarantee. Kuala Lumpur (Ali Ag LP.Construction 3 [2366] CONTRACT Guarantee – Construction – Contract .

dismissing the application: (1) the guarantee in question covered both past and future advances as its wordings were the same as those guarantees held by the court to cover past and future advances. the defendants had agreed to the opening of the accounts for the use of the sister company. There was also evidence to infer. the defendants being directors of the company. However. Also. namely the sister company. the default judgment was invalid as it. and (c) the company which they guaranteed repayment for was wound up within six months of the creation of a debenture in favour of the plaintiffs and thus attracted the operation of s 294 of the Companies Act 1965. On 18 March 1985. included advances made before the execution of the debenture. the quantum of liability under the guarantee remained unaffected because the guarantee provided for the defendants to be liable. Besides cl 7 of the guarantee expressly provided for the guarantee not to be in any way prejudiced or affected by the said . inter alia. Here. s 294 Summary : The plaintiffs granted credit facilities on 22 February 1983 of RM250. (2) in so far as liability is concerned. even past advances can be good consideration provided that they were at the 'desire' of the guarantors. Besides. Judgment in default of appearance was entered. There was therefore consideration for the guarantee. (3) bank statements showed that the company had utilized the loan facility through its two accounts in two different branches of the plaintiffs' bank. The plaintiffs stated in this offer that this offer was to supercede and cancel the plaintiffs' previous letter of offer dated 22 February 1983. (b) the overdraft facilities were utilized by another company. As such. Holding : Held. additional credit of up to RM700. the plaintiffs were suing on the guarantee. even assuming that the sister company on occasions had to pay money into and out from the two accounts for its own purposes and benefit. the circumstances surrounding the execution of the guarantee showed that the parties intended it to be so.000 to a company of which the defendants were its directors. (4) s 294 was only relevant if the plaintiffs were suing on the debenture or had acted under it to recover any moneys due thereunder.3 [2367] CONTRACT Guarantee – Construction – Covered past and future advances – Consideration – Past advances can be good consideration – Facilities utilized by one not named in guarantee – Intention of parties important – Companies Act 1965. money was disbursed before and after the execution of the guarantee. When the borrower company failed to repay the plaintiffs. Instead. and not the company referred to in the guarantee. The defendants applied to set aside the default judgment on the ground that they have a good defence on merits.000 was granted to the company. They contended that: (a) there was no consideration for the guarantee because the overdraft facilities were given before the execution of the guarantee and there was no evidence that money was released after the date of the guarantee. the latter took out a writ against the defendants as guarantors. that the loan was at their desire.

the guarantors. Tawau (Ian Chin JC). P submitted. Digest : Sabah Bank Bhd v Ho Juan Hua & Anor [1993] 3 MLJ 113 High Court.debenture. Ipoh (Peh Swee Chin J).749. Holding : Held.77 respectively being the balance of the price of goods sold and . Digest : Bank Bumiputra Malaysia Bhd v Syarikat Sungei Lesong Sdn Bhd Civil Suit No 24-462-86 High Court. the court should strive to give effect to the intention of the parties if the words employed by them could give rise to such an intention.25% pa until satisfaction and costs.84 and M$193.Construction 3 [2369] CONTRACT Guarantee – Construction – Extent of guarantors' liabilities – Whether guarantors liable for debts incurred before signing of guarantee Summary : P in this suit filed an action against D1 and D2 claiming for M$458.2 million the ceiling of the guarantee. dismissing the appeal and reducing the judgment sum to M$2. 2369 Guarantee -.064. however.946.Construction 3 [2368] CONTRACT Guarantee – Construction – Dispute as to limit of guarantee – Court to give effect to intention of parties Summary : P had earlier obtained summary judgment against D2 and D3. D submitted that the judgment sum should be for M$2.2 million which was the limit of the amount of the guarantee. having regard to the amended ord 42 of the Rules of the High Court 1980 which allows for contractual rate of interest for judgment sum instead of 8% which was previously allowed. The guarantee was also not in respect solely of the moneys due under the debenture. Therefore. (2) the learned judge agreed that interest should be at 15.2 million: (1) the express mention of the words 'the guaranteed sum' in the guarantee taken together with the other provisions therein would make the sum of M$2.554.23 with contractual rate of interest at 15. Unless the court was driven irresistibly to a conclusion of repugnancy with other clauses in the guarantee. D appealed to the learned judge against the judgment. to the contrary. for the sum of M$3.25% pa as claimed. 2368 Guarantee -. the alleged invalidity of the debenture under s 294 did not reduce the amount the defendants were liable to pay under the guarantee.

On 14 July 1967. under cl 17 of the partnership agreement. accordingly.000.delivered to them. carried on business as sharebrokers in a firm known as Chua & Co under a deed of partnership dated 1 June 1956. plaintiff in the action. the learned judge was of the view that it was clearly within the contemplation of the parties that the guarantors were to be liable for debts incurred not only after but also before the signing of the guarantee. together with one SR Doshi.749. first defendant in the action (now deceased). in the legal construction of the guarantee. The claim against D3 to D6 was as guarantors by virtue of their being the signatories to the guarantee in which they undertook. Digest : Carlsberg Brewery Malaysia Bhd v Soon Heng Aw & Sons Sdn Bhd & Ors [1989] 1 MLJ 104 High Court. P's appeal was. Kota Bharu (Idris J). Summary : The appellant. It is immaterial. the first defendant elected.Construction 3 [2370] CONTRACT Guarantee – Construction – Guarantee . to purchase the appellant's share in the firm 'at the net value . to jointly and severally pay P all moneys due from D1 and D2 up to a maximum of M$200. Holding : Held. On 29 June 1967. that the party signing it knew nothing of the circumstances or the dealings between the debtor and creditor because generally a person signing such an instrument must be taken to have intended that which the words themselves naturally import having regard to the circumstances that exist. The senior assistant registrar gave unconditional leave to D to defend the claim for the balance sum being satisfied that D3 to D6 had succeeded in raising several triable issues. (2) in the instant case. allowed. the rights and liabilities of the parties depended upon the true construction of the guarantee. and one Tan Tuan Boon.811.27 only. 2370 Guarantee -. whether he has taken care to make himself acquainted with the circumstances or not. the appellant gave notice of his retirement from the partnership.84 against D1 with interest but as against D3 to D6 final judgment was obtained against them for the sum of M$26. Having regard to the plain meaning of the words used in the guarantee. Subsequently. default or miscarriage of another (principal debtor) who is primarily liable to a third party (the creditor). P obtained final judgment for the sum of M$458.Claim under Extent of liability. allowing the appeal: (1) the term 'guarantee' means an accessory contract whereby one party (the guarantor or surety) undertakes to be answerable for the debt. inter alia. P appealed to the High Court against that part of the judgment in which the senior assistant registrar gave D unconditional leave to defend.

the respondent bank. guaranteed payment of the purchase price of the appellant's share to the extent of $62. Malacca [1971] 2 MLJ 100 Federal Court. was appointed under this subsequent agreement. 2371 Guarantee -. The appellant brought two actions.475. The valuer assessed the appellant's share at more than the amount guaranteed. The guarantee in the present case had to be looked at with reference to the special circumstances under which it was given. The guarantee itself provided that the amount payable was to be fixed or ascertained by valuation as provided under the partnership agreement. The third partner knew and approved of this appointment. second defendants in the action. Kuala Lumpur (Ong CJ (Malaya).475. (2) a guarantee. On 22 December 1967. Both actions were in relation to the contract for sale and purchase of the appellant's share in the business. must be construed reasonably. The fact that the subsequent agreement between the appellant and the first defendant had not come into existence on the date of the guarantee was therefore entirely immaterial. the first against the first defendant and the third partner before the date of guarantee.thereof as ascertained by a single independent valuer if the parties agree upon one or three independent valuers one to be appointed by each of the parties' to the agreement. as required under cl 17 of the partnership agreement. The fundamental issue between the parties depended upon the construction placed upon the words of the guarantee and hence the liability of the second defendants/respondents. Digest : Chow Yoke Pui v Hongkong & Shanghai Banking Corp. The learned trial judge ([1971] 1 MLJ 190) gave judgment for the appellant against the first defendant but dismissed his claim against the second defendants/respondents as the agreement between the appellant and the first defendant was made subsequent to the guarantee and therefore the appellant could not rely upon the guarantee given by the second defendants/respondents in his present claim which was based entirely on the agreement between him and the first defendant and the award made by the adjudicator. like every other contract. However. and the second action against the second defendants/respondents after the date of guarantee. allowing the appeal: (1) the exact amount payable by the first defendant under the contract of sale and purchase was not known at the date of the guarantee. it must be construed by the words used. It was the contract for the sale and purchase of the appellant's share in the partnership which was the basis for the guarantee which was limited to $62. Holding : Held. both actions were compromised by an agreement which clearly stipulated that it was being made under the partnership agreement for the purpose of ascertaining the value of the appellant's share in the business.Construction . A valuer. but also with regard to the surrounding circumstances.

Joint and several guarantee to the bank given by directors of company . (3) when the bank took a fresh guarantee from the new directors it necessarily followed that the defendants as old directors were absolved of their liabilities. (2) the directors had signed the guarantee in their personal capacity and they were liable on it even if they had ceased to be directors. The matter came before the senior assistant registrar and he found that the defendants had shown no defence and ordered summary judgment to be entered against them.Additional guarantee taken from new directors . (4) the bank unilaterally varied the terms upon which the company was to repay its loan.3 [2371] CONTRACT Guarantee – Construction – Guarantee . the court made an order for winding up of the company. They raised the following pleas: (1) the liability of a guarantor is secondary and does not arise until the liability of the principal debtor has been legally established. (3) a fresh guarantee was taken from new directors in addition to the existing guarantee.554. The defendants appealed against this order. On 31 July 1984. (2) directors who had signed the guarantee were only to be liable thereon as long as they held office in the company as directors. Additional guarantees were taken from the new directors for the company's indebtedness.Guarantor's liability is secondary but can become primary by agreement .151. Summary : In this case. The company had taken a loan from the plaintiff bank which was guaranteed jointly and severally by the four directors. The directors subsequently sold their shares to the knowledge of the bank and new directors of the company were appointed in their place. The bank sent a notice of demand to the company and the guarantors.Surety is not discharged if the contract of guarantee empowers the creditor to extend the time . ss 81. (4) the agreement of guarantee was widely worded and permitted the bank to vary the terms of guarantee. 86 & 88. Holding : Held: (1) the guarantee was so worded as to make the liability of the guarantors primary and coextensive with the company.Old directors not discharged . On 8 September 1984. and (5) the bank was guilty of laches.Contract Act 1950. (5) the terms of the guarantee empowered the bank to extend time to the company. The bank applied for summary judgment against the defendants on the ground that there was no defence to their action.Guarantors can be sued even before a judgment had been obtained against the principal debtor . the bank initiated action against the defendants for recovery of the money under the letter of guarantees.New directors appointed . the defendant and three others were directors of Tuahbina Sdn Bhd.Variation of contract .Extension of time to principal debtor . In February 1983 the indebtedness of the company to the bank amounted to $3.Surety not discharged if agreement authorizes the creditor to vary the terms . (6) the decision of the senior assistant registrar that summary judgment be entered against the .

The present action was brought by the plaintiffs against the defendants on the ground that contractual interest was payable after judgment and that the loan was to be repaid in Swiss francs and not Australian dollars. Digest : Wardley Ltd v Tunku Adnan & Anor [1991] SLR 721 High Court.235. 2372 Guarantee -. (2) the function of a court presented with a claim for a contractual rate of interest higher than the statutory rate is to construe the interest provision and characterize it as an ancillary or independent term. Holding : Held. interest was payable at 4[1/2]% pa above deposit rate ('the contractual interest'). dismissing the defendants' appeal and allowing the plaintiffs' cross-appeal: (1) parties to a transaction may always make their own arrangements regarding money of account and money of payment. Per curiam: The Sim Lim case [1981] 1 MLJ 280 was decided on an incorrect reading of the Economic Life Assurance case [1902] AC 147. The plaintiffs were. In the event of default.Construction 3 [2372] CONTRACT Guarantee – Construction – Liability of guarantors to repay loan in the same manner as borrowers – Determining the 'money of payment' Summary : The defendants were guarantors of a loan made by the plaintiffs to four Malaysian borrowers.defendants for $2. The plaintiffs applied for and obtained judgment for the outstanding principal sum and contractual interest against the borrowers. The loan was for an equivalent amount in Eurocurrency of A$1. In the instant case. therefore. Singapore (Selvam JC). . Consequently. The loan agreement clearly provided that the money of account and money of payment was the Swiss franc. Digest : Chung Khiaw Bank Ltd v Soi Huan & Ors [1986] 1 MLJ 188 High Court. entitled to judgment for interest at the contractual rate until payment. Johore Bahru (Shankar J).16m which the borrowers required for the purchase of properties in Australia.000 with interest thereon at the rate provided by the guarantee was affirmed. the interest provision was expressed as an independent term which would survive any judgment for the principal debt. the guarantors are liable to pay in Swiss francs. The loan was eventually made in Swiss francs. The registrar's decision in that case had in effect introduced words into O 42 r 12 of the Rules of the Supreme Court 1970 without justification.

Annotation :

[Annotation: Affirmed on appeal. See [1993] 1 SLR 337.]
2373 Guarantee -- Construction

3 [2373] CONTRACT Guarantee – Construction – Nature of guarantor's liability under guarantee – Whether prior demand a condition precedent to creation of liability in guarantor – Regard to be had to language of instrument and nature of liability it creates
Digest :

Kwong Yik Bank Bhd v Transbuilder Sdn Bhd & Ors [1989] 2 MLJ 301 High Court, Kuala Lumpur (Shankar J). See CONTRACT, Vol 3, para 2327.
2374 Guarantee -- Construction

3 [2374] CONTRACT Guarantee – Construction – Overdraft facility – Extent of guarantor's liability
Summary :

The letter of guarantee was executed by the defendant and witnessed by an advocate and solicitor. Clause 4 of the guarantee, inter alia, provided that the guarantee 'shall be a guarantee to the extent of RM200,000 for the purpose of securing not only an equivalent amount but (subject always to the said limit of RM200,000) the whole of the money or general balance ... with interest on the sum claimable ...'. The company defaulted and the plaintiff applied for and obtained summary judgment against the defendant. The defendant appealed, contending that she did not sign the letter of guarantee and that if she was found to have so signed, her liability under the terms of the guarantee did not exceed RM200,000.
Holding :

Held, allowing the appeal and giving the defendant leave to defend: (1) it was clear that the defendant signed the letter of guarantee witnessed by an advocate and solicitor. The defendant merely denied signing the letter of guarantee and denied ever being a guarantor. A denial cannot be taken as a defence to establish a plea of non est factum. The defendant must prove that when she signed the letter of guarantee, she acted with reasonable care. The burden of proof was on the defendant and it was a heavy one. There was thus no triable issue on the first contention; (2) the interpretation of a clause in a guarantee is subject to its wordings; (3) the court was of the opinion that under cl 4 of the guarantee, the defendant's liability was limited to RM200,000. Interest at the agreed rate was claimable. Thus the letter of demand served by the plaintiff on the defendant must

specify clearly the interest demanded. That could be done in a full trial; (4) the defendant was thus given leave to defend the case.
Digest :

Malayan Banking Bhd v Hafsah bte Abdullah Civil Suit No 22-32-1992 High Court, Malacca (Ariffin Jaka JC).
Annotation :

[Annotation: The judgment was delivered in Bahasa Malaysia.]
2375 Guarantee -- Construction

3 [2375] CONTRACT Guarantee – Construction – Plaintiff seeking to enforce guarantee against defendant – Whether necessary to issue fresh demand to defendant for balance sum outstanding before suit instituted
Summary :

P had granted a bridging loan to R Sdn Bhd to undertake a housing development project. As security for the loan, R Sdn Bhd had charged the same piece of land to P. In addition, D had signed a guarantee in favour of P in consideration of P granting the above loan to R Sdn Bhd. When R Sdn Bhd defaulted in repayment of the loan, P sought to enforce the guarantee against D. When the O 14 application against D was pending, P had commenced foreclosure proceedings against R Sdn Bhd. An order for sale was subsequently granted but the land could only be auctioned off for a sum which was not sufficient to settle the amount due from R Sdn Bhd in full. Before the senior assistant registrar, P failed in their application for summary judgment under O 14. P then appealed to the High Court. In the appeal, D contended that having regard to cl 7 of the guarantee, a fresh demand should have been made for the balance outstanding and since this was not done, he could not be held liable to meet payment for the balance of the loan. D also contended that the doctrine of merger applied so as to discharge him from his personal liability to make repayment. It was D's contention that since the order for sale was a judgment, his personal liability under the guarantee had been extinguished as it had merged with the order for sale.
Holding :

Held, allowing the appeal: (1) in interpreting a deed like a guarantee, due regard must be given to the guarantee as a whole in order to ascertain the true meaning and intention of the parties as expressed by the several clauses in the guarantee and that the words and expression of each clause must be so interpreted to bring them into harmony with the other provisions of the guarantee; (2) in the instant case, having regard to the guarantee as whole, there was no necessity to issue a fresh demand to D bearing in mind that the liability of D was established once there was default on the part of R Sdn Bhd be it for the full loan outstanding or for the

balance of the loan outstanding. Accordingly, the demand made by P to D before the foreclosure proceedings were commenced was a proper demand and to that end a fresh demand was not necessary; (3) the doctrine of merger has no application to proceedings to enforce a charge. That being the case, D could not plead merger as a means of escaping liability under the guarantee.
Digest :

Hong Leong Finance Bhd v Yap Yong Seong @ Yap Eng Ching Civil Suit No C23-858-86 High Court, Kuala Lumpur (Siti Norma Yaakob J).
2376 Guarantee -- Construction

3 [2376] CONTRACT Guarantee – Construction – Whether guarantee is in fact contract of indemnity – Question of construction in each particular case – Regard to be had to language of instrument and surrounding circumstances
Digest :

Siow Kwang Joon & Anor v Asia Commercial Finance (M) Bhd [1996] 3 MLJ 641 High Court, Johor Bahru (Abdul Malik Ishak J). See CONTRACT, Vol 3, para 2291.
2377 Guarantee -- Construction

3 [2377] CONTRACT Guarantee – Construction – Whether guarantor can avail himself of defence of counterclaim or set-off of debtor
Summary :

The appellant was one of four guarantors of a loan granted by the respondent. When the principal debtor defaulted, the respondent sued the principal debtor and the guarantors, including the appellant. Judgment was entered against, inter alia, the appellant under the O 14 procedure. The appellant's appeal to the Supreme Court was dismissed. Thereafter, the respondent filed a bankruptcy petition against the appellant in August 1992. Upon service of the petition, the appellant filed a notice by debtor of intention to oppose petition. At the hearing of the petition, the appellant took a preliminary objection as to jurisdiction, which was peremptorily dismissed. The main hearing on the petition and the notice to oppose was adjourned. At the resumed hearing, the Deputy Registrar ruled that the notice to oppose was wrong in law and dismissed the said notice. There being no further objections to the petition, the Deputy Registrar proceeded to grant the receiving and adjudication orders. The appellant appealed against both the decision to dismiss the preliminary objection and the decision to allow the respondent's petition. In the course of the appeal, the appellant filed an affidavit in September 1995, the admissibility of which was opposed by the respondent.

Holding :

Held, allowing the appeal: (1) if a judgment debtor wishes to raise issues other than to cross-claim, set off or counterclaim in opposition to a bankruptcy petition, he has to proceed by way of r 117 of the Bankruptcy Rules 1969 and file a notice to show cause against the petitioning creditor accompanied by a summons-inchambers and an affidavit in support pursuant to r 18 of the rules; (2) and that the failure to adduce such evidence beforehand was not due to indolence or a lackadaisical attitude in the preparation of his case or insufficient preparation at the pre-trial stage; (3) in this case, the reception of the evidence sought to be adduced was not justified. The matters raised in the affidavit could have been obtained with reasonable diligence before trial. Further, such evidence would not have an important influence on the result of the case. The appellant's claim for mismanagement was not quantified; (4) the afffidavit was not admissible as there was inordinate delay in its filing; (5) the appellant, being a guarantor, could not avail himself of the defence of counterclaim or set-off. A guarantee was to be construed as a whole against the factual matrix of the background; (6) presentation was synonymous with filing in relation to s 5(1)(d) of the Bankruptcy Act 1967 and the rules made thereunder, namely r 101; (7) r 101(2) of the Bankruptcy Rules 1969 did not apply as there had been no evidence of the place of business of the appellant for the greater part of one year immediately preceding the presentation of the petition; (8) the court had no jurisdiction to hear the petition pursuant to s 23(1)(b) of the Courts of Judicature Act 1964 as the appellant was resident in Tawau; (9) reasonable care or diligence ought to be exercised in endeavouring to obtain the evidence sought to be adduced earlier. A party seeking to adduce fresh evidence ought to satisfy the court that he has made all reasonable, cogent and positive efforts in pursuit of obtaining the best evidence to prove his case;on the principle of forum conveniens, the court should decline jurisdiction to hear the petition.
Digest :

Re Lim Hong Kee David [1995] 4 MLJ 564 High Court, Kuala Lumpur (Kamalanathan Ratnam JC).
2378 Guarantee -- Continuing guarantee

3 [2378] CONTRACT Guarantee – Continuing guarantee – Agreement executed after execution of guarantee – Whether guarantor discharged from liability for payment of moneys due under agreement
Summary :

P sued D1 pursuant to two agreements entered into between the parties. D2-D4 were sued as guarantors pursuant to three letters of guarantee and indemnity executed by them. In due course, P obtained summary judgment against D. On appeal by D to the High Court, it was contended that summary judgment should

(2) in addition to the letter of guarantee signed by the appellant. In pursuance of this guarantee the respondent bank made advances to the company amounting to $534.Bank allowing overdrafts exceeding limit .000 the payment of all advances made by the respondent bank to the Malaysia Timber and Granite Products Ltd. It was argued.000 without consulting the appellant. In both agreements.Other guarantees accepted by bank . ss 86. it was also contended that they were not liable for the payment of moneys due under the second agreement as the said agreement was executed after the execution of the guarantee. the same parties were involved. the guarantee was a continuing guarantee and the variations in the first agreement by the execution of the second agreement did not discharge D4's liability under the guarantee for payment of moneys due under the second agreement. the subject matter was the same and both the agreements had to be read together as forming a series of transactions between P and D1. Holding : Held. Judgment was given in favour of the respondent bank in the High Court and the appellant appealed to the Federal Court. (2) as there were no other triable issues left to be tried and as whatever issues raised had been dealt with adequately by affidavit evidence.Letter of guarantee . To that end. the respondent bank had varied the contract within the meaning of s 86 of the Contracts Act 1950 (Act 136) and therefore discharged the appellant from his liability under the guarantee.408.Continuing guarantee 3 [2379] CONTRACT Guarantee – Continuing guarantee – Construction – Contract . 2379 Guarantee -. the learned judge dismissed the appeal of D and confirmed the order of the senior assistant registrar. inter alia. dismissing the appeal: (1) in the instant case. Summary : The appellant had given a letter of guarantee by which he agreed to guarantee up to a limit of $75.74. D4's liability was not limited to the amount due under the first agreement but to the principal amount limited in the guarantee.Continuing guarantee . The respondent bank demanded payment from the company but no payment was made. 92. the respondent bank had also accepted guarantees given by the directors of the company and as a result the .000 from the appellant. The respondent bank claimed the payment of the guaranteed sum of $75.Whether contract varied . Digest : Pembangunan Leasing Corp Sdn Bhd v WL Credit & Leasing & Ors Code No D223-2198-87 High Court.Contracts Act 1950.Limitation of liability .not have been entered as triable issues had been raised. that (1) by giving advances to the company considerably over the limit of $75. On behalf of D4. Kuala Lumpur (Siti Norma Yaakob J).

There was also a provision in the letter of guarantee empowering the bank to make further advances to the company. as agent of the respondents. (2) the letter of guarantee stated that it was to be in addition to any collateral or other security held or to be held by the bank. having exceeded $100. 2380 Guarantee -. had been supplied with cars on credit for sale by him. (3) as a surety the appellant could have recourse against the assets of the company but because of the further advances made by the respondent bank the company had to go into compulsory liquidation and so the appellant's remedy had been impaired.Continuing guarantee 3 [2380] CONTRACT Guarantee – Continuing guarantee – Contract . Lee Hun Hoe CJ (Borneo). There was $129.000'. dismissing the appeal: (1) the appellant in this case had signed a continuing guarantee. the appellant contended that he was relieved from liability as the credit facilities given to his son.911 due to the respondents by the appellant's son at the date of the letter of guarantee. car distributors.000 ([1967] 1 MLJ 123). The guarantee was not limited only to the amount of the overdraft existing on the date of the letter of guarantee. The letter of guarantee was signed in consideration of the respondents' forbearance to sue the appellant's son and to grant further credit facilities to him.appellant's guarantee became merged in those other guarantees and therefore the appellant's liability had been discharged.000. on guarantee.Guarantee Construction . Summary : On 19 February 1964. In an action by the respondents on the letter of guarantee. Kuala Lumpur (Suffian LP. the appellant signed a letter of guarantee as guarantor for the debt due by his son who. guaranteeing the overdraft existing at the time when he signed the letter of guarantee as well as overdrafts to be made in the future. Holding : . Holding : Held. On appeal. the trial judge held that the appellant was liable on the guarantee to pay the respondents $100. (3) the respondent bank had done nothing inconsistent with the appellant's rights.Credit facilities in excess of maximum amount guaranteed Effect of. was contrary to condition (a) of the letter of guarantee and was therefore void ab initio. Digest : Heng Cheng Swee v Bangkok Bank Ltd [1976] 1 MLJ 267 Federal Court. The relevant part of the letter of guarantee stated that the appellant 'guarantee the performance and fulfilment by the said Yang Pin Joo of any obligation and liabilities due from him to you on the understanding that: (a) the maximum credit balance monthly shall not exceed $100.

A2 finally alleged in his defence that he executed the letter of guarantee in blank. Digest : Yang Chin Lang v Tan Chong & Sons Motor Co Ltd [1968] 2 MLJ 8 Federal Court. dismissing the appeal: (1) A2 not only knew about the loan facility at the time of signing the letter of guarantee but was also instrumental in getting the loan facility for A1. Kuala Lumpur (Barakbah LP. the guarantee was not supported by any valid consideration. A2 appealed to the High Court. D is entitled to change the interest rate at its own discretion without having to inform and to obtain consent from A1 or A2. Digest : . Holding : Held. A2 next contended that since there was a change in the interest rate. inter alia. on demand. A2 firstly argued that as the guarantee was executed after the loan facility was granted. there was a variation of the guarantee agreement. It is clear from the letter of guarantee that it is a continuing guarantee. (2) under the loan agreement. A resolution to this effect was passed and was signed by A2 and A3 as A1's directors. D's offer of a loan facility was subject to a resolution from A1's board of directors authorizing A1 to accept the loan facility. A1 applied for a loan facility from D and A2 signed the application. A1 defaulted on the loan facility and D claimed from A1-A3.Continuing guarantee 3 [2381] CONTRACT Guarantee – Continuing guarantee – Guarantee was executed after loan was granted – Whether guarantee was supported by good consideration Summary : A2 was A1's executive chairman. were already printed on the letter of guarantee. Any variation in the interest rate without the knowledge and consent of A2 does not affect A2's liability under the letter of guarantee. 2381 Guarantee -.Held. D granted the loan facility to A1 whereby A2 and A3 guaranteed to pay D. The learned senior assistant registrar granted D summary judgment against A1-A3. Azmi CJ (Malaya). the signature and particulars of A2. There is therefore good consideration for A2's guarantee. Furthermore. (3) all the terms of the guarantee except. dismissing the appeal: the learned trial judge did not misdirect himself that the case of Oriental Bank of Malaya Ltd v Subramaniam [1958] MLJ 35 was applicable and the decision of the trial judge should be affirmed. A2 knew all the time that A1 was applying for a loan facility. Any person who signs the letter of guarantee before the particulars are filled in should know that he is signing a letter of guarantee and no other document. all money due to P from A1.

the consideration was a good consideration. the question of past consideration did not arise. The learned judge was of the view that the instant case was not a plain and obvious case for an ord 14 judgment. D4's appeal was allowed. Kuala Lumpur (Zakaria Yatim J). inter alia. In appealing against an ord 14 summary judgment entered against him. P's claim was for the outstanding sum due and owing by D to P.Malayan Banking Bhd v Senorita Holdings Sdn Bhd & Ors Civil Suit No C2-233364-1986 High Court. Since the guarantee was a continuing guarantee. allowing the appeal: (1) in the instant case. (2) it was however not clear in the instant case whether D4 was charged interest by P at the agreed rates as specified in the letter and offer. Kuala Lumpur (Zakaria Yatim J). Holding : . In the circumstances. 2382 Guarantee -. There was no evidence to show whether the interest charged was that as specified in the letter of offer or at a lesser or higher rate.Continuing guarantee 3 [2383] CONTRACT Guarantee – Continuing guarantee – No facility extended to principal borrower at time of execution of guarantee – Whether guarantor discharged from liability Summary : P sued D3 and two guarantees executed in consideration of P granting various banking facilities to M Sdn Bhd. Counsel for D4 submitted. D4 had guaranteed payment of all sums of money due and owing by D1 to P under two loan facilities granted by P to D1. no facility had yet been extended to the principal borrower. Holding : Held.Continuing guarantee 3 [2382] CONTRACT Guarantee – Continuing guarantee – Nature of – Whether guarantee unenforceable for want of good consideration Summary : D4 appealed against the decision of the senior assistant registrar in allowing P to enter final judgment against him. Digest : Public Bank Berhad v Tradikon Sdn Bhd & Ors Civil Suit No D4-23-2468-87 High Court. 2383 Guarantee -. D3 disputed liability under the second guarantee on the grounds that he did not execute the guarantee and that at the time of its execution. that the guarantee was given for a past consideration and as such was void and unenforceable.

the second and the first appellant informed the respondent that they wanted to withdraw themselves as guarantors. was totally silent in regard to the right of the guarantor to revoke the guarantee. costs and expenses whatsoever' which may be incurred by the respondent. The sessions court ('the trial court') allowed the respondent's claim for the sum of RM44.772. In consideration of the respondent extending the hire purchase facility to the prospective customer. Digest : United Asian Bank Bhd v Jayachandran & Ors Civil Suit No D2-23-34-87 High Court. there was evidence to show that P had in due course made further advances to the principal borrower under the guarantee.Held. The appellants appealed. The issues before the court were: (i) whether the guarantee was revoked by each of the appellants when their written . Kuala Lumpur (Siti Norma Yaakob J). Larkin undertook to indemnify the respondent against 'all damage. losses. D3's plea of non est factum must be defeated by his own negligence in not ascertaining the true contents of the document he had executed. 2384 Guarantee -. s 83 Summary : Pursuant to a master agreement dated 14 May 1977 ('the master agreement') executed between the respondent and a motor dealer company known as Larkin Motor Trading Sdn Bhd ('Larkin'). In any event. it was quite irrelevant that no facility was extended to the principal borrower at the time of the execution of the guarantee.Continuing guarantee 3 [2384] CONTRACT Guarantee – Continuing guarantee – Notice of revocation – Whether notice was clear and explicit – Whether guarantee was revoked by each of the guarantors when their written notices of withdrawals were transmitted to the respondent – Contracts Act 1950. Larkin failed to indemnify the respondent. D3 had signed on each page of the guarantee as acknowledgment of the fact that he had fully read and understood its contents. (2) the guarantee in the instant case was a continuing guarantee. dismissing the appeal: (1) in the instant case. By letters dated 18 March 1977 and 21 November 1985 respectively. The guarantee document. at the material times. which was collateral to the master agreement. They signed a guarantee document dated 14 May 1977 to that effect. the court confirmed the order of the registrar and dismissed the appeal. the respondent provided hire-purchase facilities to Larkin's customers when those customers purchased motorcars from Larkin. directors of Larkin and they stood as guarantors and they guaranteed all sums due to the respondent under the master agreement. The appellants were sued by the respondent for the debts of Larkin. Clause 8(f) of the master agreement stated that the guarantee was a continuing guarantee.39 with interest and costs. (3) as the issues raised by D3 had been dealt with sufficiently by affidavit evid-ence. Accordingly. The appellants were. In the circumstances.

(5) to ascertain and determine whether a contract is one of guarantee or of indemnity is entirely a . by notice to the creditor. in regard to future transactions. the second appellant had effectively revoked his suretyship on 18 March 1977 and he could not now be accountable to indemnify the respondent. It was argued that the second appellant as the representative of Larkin should not have signed the guarantee document and be one of the guarantors. the surety cannot be held accountable for any advances made. unless there is a provision in the guarantee document to the contrary. at any time. It was also argued that the guarantee document was void as it was founded on a master agreement which was void for uncertainty as it bore two different dates. It was argued that the guarantee document offended against s 2 of the Hire Purchase Act 1967 and consequently. In the court's judgment. Generally. Evidence was given that Larkin was represented by the second appellant when it signed the master agreement with the respondent. (4) the second appellant withdrew himself as a guarantor on 18 March 1977. ie the issue of illegality. and (ii) whether each of the appellants signed a guarantee or an indemnity document. It was also argued that the court had the jurisdiction to hear and adjudicate on that fresh point. Holding : Held. and the second appellant also stood as one of the guarantors and he signed the guarantee document. It was argued by counsel for both appellants that there was an effective revocation of the guarantee document by the appellants within the ambit and scope of s 83 of the Contracts Act 1950 ('the Act'). when a guarantee is continuing. or liabilities incurred because after giving notice he longer stands as a surety. the notice must be couched in a language which is both clear and explicit so that the recipient would understand the contents of the revocation. But if there is no provision in the contract of guarantee for withdrawal of the surety. ie before the guarantee document was dated (14 May 1977) and stamped (16 May 1977). this section gives a blanket statutory power to revoke the continuing guarantee. A fresh point which was not argued before the trial court was raised by counsel for the appellants. The inference that can be drawn from this was that the second appellant must have signed the guarantee document. Thus. It complied with the requirement that the terms of effective revocation as to future liability be in writing. The revocation must not only be an expression of a wish by the guarantor that the guarantee must be withdrawn. allowing the appeal with costs: (1) and (d) by notice to the creditor. (3) the words employed in the letter of revocation of the first appellant were clear and explicit and it could easily be understood by the respondent. and it took into account the payment of existing liability of the first appellant. on or before 18 March 1977. the surety may withdraw at any time as to future transactions by giving notice to the creditor. it was null and void and of no effect. whether a guarantee has been revoked is dependent on the facts of each particular case. (2) it is important that to revoke a guarantee. It was a good notice and it had revoked the continuing guarantee. Once this happens. which was undated at the material time.notices of withdrawal were transmitted to the respondent.

(10) it is now settled law that any contract including a contract of indemnity like the present case which is prohibited by statute. 2385 Guarantee -. Even though it was not argued before the trial court nor pleaded. either expressly or by necessary implication. (c) by the surety. At any rate. (9) it is entirely up to the discretion of the appellate court whether to allow a fresh point which was not argued before the trial court to be ventilated in the appellate court. is illegal and void. ss 1(2). no liability would attach to them. Digest : Siow Kwang Joon & Anor v Asia Commercial Finance (M) Bhd [1996] 3 MLJ 641 High Court. the court was obliged to consider the illegality issue. ss 86.Whether omissions on part of the creditor discharged guarantors from their liabilities .Contracts Act 1950. 94 3 [2385] CONTRACT Guarantee – Contracting out of Contracts Act 1950 (Act 136). 92 & 94. the master agreement was duly stamped on 16 May 1977 and that gave it a semblance of legality. can be ascertained.illegality need not be specifically pleaded. and being a business agreement it must be construed fairly and broadly. 92. (8) the master agreement. the respondent bank had sued the appellants on a contract of guarantee for banking accommodation given to a company.Whether parties can contract out of provisions of Contracts Act which define circumstances in which a surety is discharged from his obligations to the creditor . 86. illegal and of no effect.Contracting out of Contracts Act 1950 (Act 136). The contract of guarantee which was in fact a contract of indemnity contravened s 2 of the Hire Purchase Act 1967 and it was void. Both s 93 of the Evidence Act 1950 and s 30 of the Act cannot be invoked to strike down the master agreement as those sections relate to the ambiguity or defectiveness or uncertainty of the language employed in any agreement and not on the point as raised by counsel for the appellant. 92. 94 – Guarantee . ss 86. (7) the appellants here merely signed an indemnity to indemnify the respondent. Summary : In this case. (b) as to future transaction. and since they had revoked that indemnity. 2. Johor Bahru (Abdul Malik Ishak J). it was abundantly clear that it was couched as an indemnity. This would not vitiate the master agreement. The authorities show the need to construe the agreement in a reasonable way by taking into account all the surrounding circumstances. (6) upon reading the guarantee document. The only defect as submitted in regard to the master agreement was that it bore two dates. it is apparent that a continuing guarantee may be revoked: (a) at any time. (11) pursuant to s 83 of the Act. especially the nature of its terms. The words: 'we É jointly and severally agree to pay to you by way of indemnity' explicitly described the role of the guarantors as indemnifiers to the respondent under the master agreement.question of construction in each particular case. The appellants were the directors .

the directors and the shareholders. Two questions therefore arose. The appellants conceded that in the absence of the Contracts Act 1950 (Act 136). The respondent bank applied for summary judgment under O 14 of the Rules of the Supreme Court. whether it can properly be said that the omission from the debenture of a power to sell out of court was a variance of the agreement by the company to grant a fixed and floating charge within the meaning of s 86 of the Contracts Act relied on by the appellants. The assistant registrar made an order in terms but this order was reversed in the High Court. the prohibition should be expressed in the statute and not left by the legislature to be picked out as an implication based upon sections dealing with different subject matters. Secondly. ss 86. Holding : Held: (1) if freedom to contract is to be curtailed in relation to a particular subject matter. Firstly. The issues could more appropriately have been decided without the expense of a full trial with witnesses. When the Contracts Act intends to render an agreement void it says so in express terms as in ss 25 to 31. The appellants relied on the fact that the respondent bank had not obtained (a) a valid debenture on the company's assets containing a provision to enable receivers to be appointed in the event of default. if parties cannot contract out. 92 and 94. however. The appellants appealed. It is doubtful. (2) the clauses in the guarantee are therefore valid and it becomes unnecessary to decide whether the appellants would have been discharged under all or any of the sections of the Contracts Act relied on by the appellants assuming that the clauses of the guarantee relied upon by the respondent bank are void.see [1981] 1 MLJ 282. Such acts were not stated in the guarantee but were stated in a letter which set out the terms and conditions of the cases. cll 7(5). The Federal Court allowed the appeal of the respondent bank against the order of the High Court . and whether in the terms of the Act the appellants would have been discharged by the omission of the respondent bank to obtain the undertakings called for by the letters of agreement. whether those clauses of the guarantee were valid or whether they were void because parties could not contract out of the sections of the Contracts Act. The appellants had contended that their liabilities under the guarantee were conditional on the respondent bank securing certain acts on the part of the company. The advances were not repaid and the respondent bank sued the appellants. . 8 and 16 of the guarantee would prevent the appellants being discharged from the liability by the omissions of which they complain. (b) a letter of undertaking from the shareholders who held 40% of the issued share capital not to divest their shareholdings without the bank's consent.of the company and in the contract of guarantee they had agreed to waive their rights in respect of any variation or alteration of the contract between the respondent bank and the company. (3) the action was not suitable for summary disposal under O 14 since the defence did raise matters for serious arguments. whether such omissions on the part of the respondent bank were matters which discharged the appellants from their liabilities upon the true construction of the sections of the Contracts Act referred to.

Section 4. still a shortfall due to the consortium ('the shortfall') and upon the respondent's failure to meet the shortfall. appointed a receiver and manager ('the receiver') to manage MPCSM's business pursuant to the debenture. acting as agent for the consortium. had provided credit facilities to Malaysian Prestressed Concrete Strand Manufacturing Sdn Bhd ('MPCSM' ). however. Lord Brightman and Lord Templeman). Lord Keith of Kinkel. There was. The respondent lastly argued that the receiver's borrowing of RM1. 2386 Guarantee -. The respondent therefore claimed that due to the respondent's negligence.5m was to be repaid to OB in priority to the amount owed by MPCSM under the debenture. The respondent further alleged that the receiver had held the proceeds of the sale of the assets for an unreasonable length of time. The receiver obtained a valuation of MPCSM's assets ('the assets') by professional valuers and advertised the sale of the assets in a local newspaper.Contracting out of surety's rights 3 [2386] CONTRACT Guarantee – Contracting out of surety's rights – Creditor appointed receiver who sold principal debtor's assets – Whether surety could allege that receiver had been negligent in selling principal debtor's assets at undervalue – Whether parties had agreed that surety could not complain of creditor's impairment of principal debtor's securities Summary : A consortium of financial institutions. including the appellant. Lord Edmund-Davies.by way of the hearing of a preliminary issue. it would not be appropriate for the appellants to be given leave to defend. The respondent firstly contended that the shortfall was due to the receiver's negligence in the discharge of his duties as agent for the consortium. the assets had been sold at a significantly low price. The receiver borrowed RM1. since a decision has been reached on the merits of the defence and nothing remains to be tried. the appellant applied as agent of the consortium for summary judgment against the respondent. The credit facilities were secured. The senior assistant registrar dismissed the application and the appellant appealed to the High Court. inter alia. MPCSM defaulted in repayment of the credit facilities and the appellant. whereby the RM1. by a guarantee provided by the respondent and a debenture executed by MPCSM. However.01 of the guarantee executed by the respondent . Digest : Ooi Boon Leong & Ors v Citibank NA [1984] 1 MLJ 222 Privy Council Appeal from Malaysia (Lord Fraser of Tullybelton.5m from OB was questionable and provided a triable issue. during which MPCSM had to incur default interest. The receiver then sold the assets and eventually remitted the proceeds of the sale to the appellant. The respondent alleged that the receiver should have advertised the sale of the assets in foreign journals and should have obtained a proper valuation of the assets.5m from the Oriental Bank ('OB') with the consent of the consortium.

the sale proceeds were held in interest-earning fixed deposits and the sale proceeds were released together with the earned interest. without affecting its rights against the respondent. to vary or substitute the securities held or to release such securities ('s 5. did not provide a bona fide triable issue. In the meantime. Kuala Lumpur (VC George J). The guarantee also stated in s 5. its directors and guarantors had not come up with anybody who could make a better offer.Contracts Act 1950 (Act 136). that the consortium was at liberty. MPCSM.01. however difficult. (5) the real market value is what is offered by a willing buyer and is acceptable to a willing seller. Holding : Held. The respondent had not shown that the raising of the RM1. nevertheless. (3) the effect of the provisions of the debenture made it unarguable that the receiver had acted as agent of MPCSM. (4) whether a greater response would have been achieved by advertising the sale of the assets in foreign journals. The respondent's mere contention without any acceptable basis that the assets had been sold at a significantly low price.01 and 5. The court will. 2387 Guarantee -. (8) the agreement for the sale of the assets provided that the proceeds of the sale had to be held by the solicitors until certain matters had been attended to. was mere speculation.01'). is understood and the court is satisfied that it is unarguable.01'). that the respondent's obligations would not be impaired by any failure of the consortium to assert any right or remedy against MPCSM in respect of any security ('s 4. inter alia. allowing the appeal: (1) it is settled law that a guarantor can contract away rights which he would otherwise have. (2) ss 4. s 79 . (6) what was offered in this case was consistent with the valuation of the professional valuers. (9) summary judgment should not be granted when any serious conflict of facts or any real difficulty as to a matter of law arises.5m was relevant to the running of MPCSM's business and had been ploughed back into MPCSM.provided.01 had the effect of preventing the respondent from complaining that the securities were released for less than their worth. give final judgment once a point of law.5m loan from OB was not necessary or was done improperly. Even the right of subrogation can be contracted away. It depends on the terms of the guarantee. The respondent's allegation that there was lack of advertising concerning the sale of the assets. inter alia. Digest : Amanah Merchant Bank Bhd v Sumikin Bussan Kaisha Ltd [1992] 2 MLJ 832 High Court. (7) the debenture allowed the receiver to raise money that might be required to carry on the business of MPCSM. the respondent's allegation that the receiver had held the sale proceeds for an unreasonable length of time did not provide a bona fide triable issue. was thus insufficient to satisfy the court that there was a bona fide triable issue in negligence. In fact. the appellant had shown that the RM1. Accordingly.

it is now settled law that guarantees are not to be construed in any different way from any other contract. (3) the respondent was therefore responsible to pay the bank for (i) the principal sum under the charges.000 and memoranda of charges were executed accordingly.3 [2387] CONTRACT Guarantee – Contracts Act 1950 (Act 136).Whether contract of guarantee Contracts Act 1950.83 and subsequently brought an application for the sale of the respondent's undivided share and interest in the land and for payment from the proceeds of sale of the amount claimed. the Sarawak Vanguard Limited.000.Contra proferentem rule. In any event.000. 2388 Guarantee -. The promise to pay was made by the respondent in consideration of the bank granting accommodation to the company and the respondent was not in the position of a surety or guarantor. overdraft facilities up to $45. The bank asked for payment of the amount due under the charges as at 30 April 1979 which it claimed amounted to $163. ss 90. The appellant appealed. Summary : In this case. The respondent objected to the application stating in effect that his right of redemption extended only to paying $85. s 79 .Interpretation . Holding : Held: (1) the present case was not a contract of guarantee. in consideration of the appellant bank giving a company. that is. 94 . So construed it was clear that interest became payable on sums from time to time they were drawn and sums became payable when they were drawn.000 and (ii) in respect of interest plus bank charges and conversion as from 28 September 1979. the date on which the bank made the demand for payment. The learned trial judge ruled that the respondent was to repay on demand the balance for the time being due owing (i) in respect of advances of various types up to the total limit of $85.Overdraft .000 and then to $85.176.Interpretation of deed . Digest : Kong Ming Bank Bhd v Leong Ho Yuen [1982] 2 MLJ 111 Federal Court. (2) the charges in the present case can be construed in accordance with their expressed intention. (ii) interest at 12% per annum calculated on daily balances with monthly rest from the date of utilization of overdraft facilities by the company and (iii) interest from the date of demand till the date of settlement.When interest payable Construction of memoranda of charges . Subsequently the amount secured was increased to $60.000 plus interest from the date of demand till the date of full settlement. Neither the company nor the respondent had paid anything to the bank.Contracts Act 1950 (Act 136).Banking . the respondent executed a memorandum of charge over his half undivided share and interest in a piece of land in Kuching. s 79 – Construction of contract – Contract . Kuching (Lee Hun Hoe CJ (Borneo). $85.

94 . Digest : Perwira Habib Bank Malaysia Bhd v Wastecol Manufacturing Sdn Bhd & Ors [1988] 3 MLJ 215 High Court.Judgment in default of appearance . ss 90.Guarantee . ss 92. 94 – Banking .3 [2388] CONTRACT Guarantee – Contracts Act 1950 (Act 136). In this case. s 94. the bona fides of the application is doubted.Delay of nine months in filing application . However. They are still in existence and. The third defendant applied to have the judgment set aside. mere forbearance on the part of the plaintiff to enforce the debentures does not discharge the liability of the third defendant under the guarantee.Guarantee enforced without debenture rights being resorted to first . Holding : Held.Contracts Act 1950. (2) the third defendant's objection to the plaintiff not exercising its rights to appoint a receiver cannot provide a line of defence to the third defendant as the plaintiff's conduct is protected by cl 8 of the guarantee which allows the plaintiff to enforce the guarantee notwithstanding that other means of payment have not been resorted to.Bona fides of application doubted . contending that the plaintiff's failure to exercise its rights under the debentures had prejudiced him and under s 94 of the Contracts Act 1950 (Act 136).No explanation given .Contracts Act 1950. Summary : The plaintiff obtained a judgment in default of appearance against the third defendant as guarantor of the first defendant's credit facilities given by the plaintiff. (3) moreover.Whether s 94 of the Contracts Act 1950 applicable .Whether guarantor thereby prejudiced and thus discharged from liability Whether s 94 of the Contracts Act 1950 applicable . the plaintiff also held two debentures over the fixed and floating assets of the first defendant. under s 90 of the Contracts Act 1950. as a guarantor. the third defendant's rights to the debentures are still preserved. the plaintiff did not take any action to appoint a receiver to take over the assets of the first defendant. In addition to the third defendant's personal guarantee.Contracts Act 1950 (Act 136). the plaintiff has not lost the benefit of the two debentures.Contract . dismissing the application: (1) s 94 of the Contracts Act 1950 has no relevance as it refers to cases where a creditor has lost or parted with a security. (4) as no reason was given by the third defendant as to the delay of about nine months in filing the present application. Kuala Lumpur (Siti Norma Yaakob J).Application to set aside . 2389 Guarantee -.Guarantee enforced without debenture rights being resorted to first . he is discharged from his liability under the guarantee to the extent of the value of the first defendant's assets.Whether guarantor thereby prejudiced and thus discharged from liability . s 94 Civil Procedure .

Guarantee .Whether any impairment of security . Whether that amounted to negligence or a breach of implied warranty or duty. The second contention is that the bank. (2) in the instant case. 94 – Contract . there is the contention that there was an implied warranty that the bank was obliged to enforce the charge under the debenture before proceeding to enforce the guarantee. The O 14 judgment as against the third defendant is set aside and the third defendant is given unconditional leave to defend.Whether any impairment of security . there certainly was a debenture which was not caused to be crystallized.Whether bank was negligent or in breach of implied warranty for not crystallizing debenture . and whether or not the third defendant had bargained away his rights preserved by ss 92 and 94 of the Contracts Act 1950. Holding : Held. was negligent on its part and also that the omission of the bank to appoint receivers amounts to the bank being guilty of a breach of an implied warranty or of a duty it owed to the guarantors.Debenture not crystallized . The plaintiff bank had granted certain banking facilities to the first defendant company secured by a debenture by which all the assets of the first defendant company were charged to the bank. The third defendant resisted the bank's claim against him and filed a defence and opposed the O 14 application where ss 92 and 94 of the Contracts Act 1950 (Act 136) were invoked.3 [2389] CONTRACT Guarantee – Contracts Act 1950 (Act 136). The second and third defendants are guarantors thereof. 2390 Guarantee -.Contracts Act 1950. and in any event whether as a result there had been an impairment of the security.Action by bank against guarantors . (3) accordingly the appeal is allowed with costs.Banking facilities secured by debenture . Digest : Development & Commercial Bank Bhd v Almas Motors Corp (M) Sdn Bhd & Ors [1988] 3 MLJ 229 High Court.Deed of guarantee .Whether bank was obliged to enforce charge under debenture before proceeding to enforce guarantee .Whether bank was negligent or in breach of implied warranty for not crystallizing debenture . in not crystallizing the debenture and appointing receivers. Summary : This is the third defendant's appeal against an O 14 judgment against him.Debenture not crystallized . ss 92.Contracts Act 1950.Whether bank was obliged to enforce charge under debenture before proceeding to enforce guarantee .Banking . ss 92 & 94 .Banking facilities secured by debenture Action by bank against guarantors . ss 92 & 94. all provide triable issues. The debenture was not crystallized by the bank. Kuala Lumpur (VC George J). First. allowing the appeal: (1) two aspects of the suggested defence merit consideration.

N. The defendant. It was then agreed that the purchase contract was made between D and N directly and as security for the commission. (2) although the deed signed by the defendant was referred to as a guarantee. it was in fact a primary obligation.000 metric tons as specified in the personal deed of guarantee. the plaintiffs later discovered that they could procure such steel through a Hong Kong company. allowing the plaintiffs' claim: (1) the fact that the final price was lower by US$1 and the fact that only 10. not US$250/mt and 20. The plaintiffs accordingly instituted proceedings for the recovery of the commission. Digest : Nivekra International Trade Co v Ban Ah Ping Suit No 1773 of 1994—High Court. Singapore (S Rajendran J). The shipment of steel was delivered to D but D did not pay the commission to the plaintiffs despite repeated reminders. the plaintiffs accepted a guarantee from the defendant for the agreed commission. This was clear from cl (c) of the guarantee.000 metric tons of steel. there was a total failure of consideration and hence no commission was payable. Holding : Held. 2391 Guarantee -. It was agreed between the parties that the plaintiffs would source and purchase steel originating from West Siberia and in turn sell the steel to D.Demand for payment 3 [2391] CONTRACT Guarantee – Demand for payment – Allegation that demand was in excess of the sum claimed – Whether demand was valid and effective .000 metric tons were contracted for in the first instance made no difference to the defendant's liability under the personal guarantee to pay the commission. However. the chairman of D. It was alleged that the N contract was for US$251/mt and and for 10. executed a deed of guarantee in favour of the plaintiffs in which he guaranteed that he would pay commissions due to the plaintiffs for the supply of steel wire rods.3 [2390] CONTRACT Guarantee – Deed of guarantee – Personal guarantee given for commissions payable to trading company – Trading company to source and sell steel rods to defendant's company – Contract made between defendant's company and steel supplier directly – Whether commissions payable – Contracted price and quantity different from price and quantity stated in guarantee – Guarantee a primary obligation Summary : The plaintiffs were a French trading company incorporated in France. The defendant contended that the plaintiffs were only entitled to a commission if they concluded the contract on the terms contained in the guarantee and at the stipulated price and as they did not do that. The defendant claimed that the plaintiffs had nothing to do with the contract entered into between D and N.

the principal and interest due under each of the three facilities had been set out separately. the amounts due on the principal and interest were all separately set out for each facility in the two letters of demand. thus the appellants were in a position to know exactly what was being demanded of them in respect of the said facilities. The senior assistant registrar granted leave to the plaintiff to enter summary judgment against the second. The appellants also contended that the plaintiff had demanded for a sum in excess of the sum claimed and that the demand was not valid and ineffective. The plaintiff had pleaded the contractual terms regarding interest on which it relied in full. Further. Besides. on the facts. if such was the situation which led to the appellants being misrepresented. (2) on the facts. The appellants appealed against the decision of the senior assistant registrar. on the conclusive evidence clause in the guarantee agreement to bind the second. third and sixth defendants. dismissing the appeal: (1) the statement of claim was adequately pleaded. the appellants would have or . third and sixth defendants who were guarantors to the second and third facility agreement. The action in this case was only for the recovery on the second and the third facilities. Thus. the amounts under each being clearly identified. Out of the three. Also. there was no way of ascertaining whether interest claimed was actually due. Since the plaintiff/respondent's solicitors were not representing the appellants. the letters of demand were valid and effective. To plead anything more would be tantamount to pleading evidence. Holding : Held. amongst others. In the circumstances. (3) the issue of misrepresentation raised by the appellants was also devoid of merit. the contention of the appellants that the plaintiff/respondent had demanded a sum in excess of that claimed was as unmeritorious as was a bare denial to an action. it was apparent that in the letters of demand. The appellants raised several issues. the plaintiff/respondent had not demanded anything it was not entitled to. the principal amounts due on each facility claimed and the interest rates charged. Therefore. including the rates and mode of computation. The main issues were that the statement of claim was inadequately pleaded in that it failed to particularize the mode of computation of interest and the rate of interest and the time period for which interest was levied for each of the amounts claimed under the second and third facility agreements. this action related to only two of the said facilities and whereas the plaintiff/respondent had also clearly pleaded in the statement of claim that in respect of the first facility the plaintiff/respondent intended to file a separate action to recover the sums due under the said first facility. The respondent relied. there was no legal duty on them to advise the appellants.Summary : The plaintiff granted three credit facilities to the first defendant. in the present case. The demand made was for three separate facilities. The appellants also alleged that the guarantees were voidable having been obtained as a result of misrepresentation as they had not been advised by the plaintiff's solictors as to the consequences of having persons who were beyond the jurisdiction of the court as joint guarantors.

inter alia. 2392 Guarantee -. then and only then the second letter of demand was to be sent to D5 asking him to indemnify P. (2) D5's letter of guarantee required two letters of demand to be sent by P to D5. all sums due to P under the 'master agreement'. D2-D5 appealed to the High Court. since the existence of such a clause was prima facie evidence of the debt due. the said certificate of indebtedness was held to be conclusive of the sums owed by the appellants. (4) (obiter) the presence of a conclusive evidence clause per se could not prevent the guarantors from questioning the correctness or otherwise of the account sought to be produced as conclusive evidence against them. D1 defaulted in paying to P under the 'master agreement'. dismissing D2-D4's appeal. In the event of D1's failure to pay. P then sent separate letters of demand to D1-D5 requiring them to pay the sum due to P under the 'master agreement'. inter alia. such condition must be satisfied by the creditor before the guarantor is rendered liable. Digest : Bank Industri Malaysia Bhd v Huston Electronics Co (M) Sdn Bhd & Ors [1997] 1 MLJ 818 High Court.ought to have protested this fact at the earliest opportunity or at least raise it in the affidavits to enable the plaintiff/respondent to rebut. D5's letter of guarantee therefore . if the conclusive evidence clause was to be disputed. third and sixth defendants had not alleged nor shown any grounds to vitiate the certificate of indebtedness. P applied for summary judgment against D2-D5. then there ought to be a proper challenge taken. The first written demand required to be given by P to D5 was for the payment by D1. The senior assistant registrar gave final judgment in P's favour against D2-D5. D5 executed a separate letter of guarantee whereby. Kuala Lumpur (Kamalanathan Ratnam JC). D5 guaranteed upon demand made to D5. Holding : Held. D2-D4 guaranteed upon demand D1's payment to P of all sums due to P under the 'master agreement'. As the second. They ought not to have raised it during the submission without any basis. allowing D5's appeal: (1) where the terms of the guarantee require that certain remedies be taken against the principal or that certain collateral securities be obtained by the creditor from the principal. However.Demand for payment 3 [2392] CONTRACT Guarantee – Demand for payment – Guarantee requires first letter of demand for payment by principal debtor to be sent to guarantor – Creditor did not send first letter of demand to guarantor – Creditor merely demanded guarantor to indemnify creditor – Whether guarantor was liable to indemnify creditor Summary : P entered into an agreement with D1 (the 'master agreement') whereby. D1's rights in hire purchase agreements were assigned to P.

Holding : Held. In relation to each of the S$10. In the circumstances. P's second letter of demand was therefore bad. then the second defendant would be liable to pay the plaintiffs by virtue of a personal guarantee dated 26 November 1981 which the second defendant had signed in favour of the plaintiffs. It is not disputed that if it was found that the first defendants had not paid the amount. dismissing the plaintiffs' claim and awarding the second defendant 90% of his party and party costs: (1) the question was whether the plaintiffs had proved . The first defendants had been wound up.000 when in fact only S$40. inter alia.000 said to be outstanding on a trading account between the plaintiffs and the first defendants in respect of which the second defendant was sued as a guarantor. (3) in this case P had failed to send the first letter of demand to D5 and had thus failed to comply with the condition precedent as stipulated in the guarantee.000 was handed over. that the second defendant had procured the forgery of the relevant payment voucher to show a payment of S$240. The plaintiffs said that these sums had not been paid.Demand for payment 3 [2393] CONTRACT Guarantee – Demand for payment – Guarantor alleged sum owed has been paid – Plaintiffs alleged fraud on part of guarantor – Burden on proof Summary : The plaintiffs are in the business of supplying bunker fuels and lubricants. the plaintiffs alleged that the second defendant had tricked their representative into signing two different vouchers for two different cheques of S$10. In relation to the S$200.000 had been paid. There were also allegations that the second defendant procured the forgery of a payment voucher for the sum of S$13. but the second defendant said that they had. The S$220. one of S$200. Kuala Lumpur (Zakaria Yatim J).stipulated that it was a condition precedent that the first letter of demand must be sent to D5 before sending the second letter of demand.000 claims. Digest : Mayban Finance Bhd v Industrade Credit Corp Sdn Bhd & Ors Civil Suit No D422-1048-89 High Court. D5 was not liable to pay P when he received the second letter of demand. The plaintiff carried on the suit against the second defendant personally. 2393 Guarantee -. the plaintiffs alleged. The first defendants were shipping agents and charterers of vessels.000 and two of S$10. The plaintiffs' claim was for a sum of S$220.000 each when only one cheque of S$10.737.000 each. and were the plaintiffs' customers.000 claimed by the plaintiffs were made up of three sums.000 claim.83 so as to show that was the final balance of the sum owing by the first defendant and that the payment of the sum resulted in a full and final discharge of all outstanding debt to the plaintiffs.

The court was driven to deciding the case on the undisputed facts and the intrinsic probabilities. 2394 Guarantee -. The bank had not given the defendant a chance to buy the property. although the initial asking price was S$600. The case arose out of a joint and several guarantee which the defendant signed in December 1985 with four others wherein they jointly and severally agreed to repay the palintiff all moneys owing by Cang Ceng Engineering (B) Pte Ltd amounting to B$6. The defendant alleged that the bank and/or their servants/agents had failed to disclose material facts to him before he signed the said guarantee and that he was induced into signing as a result of the plaintiff's misrepresentation. not made any the easier by the fact that none of the principal fact witnesses involved on either side inspired much confidence in their ability or willingness to tell the court what they were sworn to tell. The burden was clearly on the plaintiffs to make good these allegations.000. The property was sold to one Chua Heng Hoe (another director of Cang Ceng Engineering (B) Pte Ltd for S$475.250. Digest : Hin Leong Trading (Pte) Ltd v Mondale Maritime Enterprises (S) Pte Ltd & Anor Suit No 5803 of 1983 High Court.Demand for payment 3 [2394] CONTRACT Guarantee – Demand for payment – Payment not made – Allegation of misrepresentation – Guarantor had opportunity to go through the guarantee before signing – Whether such guarantee was binding Summary : The plaintiff's claim against the defendant was for the sum of B$833. Holding : . Bearing in mind the burden and standard of proof applicable. involving as it did allegations of fraud.their case. A further issue concerned the sale of the security by the plaintiff pertaining to property in Singapore (`the porperty') which belonged to Cang Ceng Engineering (B) Pte Ltd . (3) the court found it difficult to believe that the second defendant would have chosen a new recruit to his firm to perpetrate the fraud that was alleged against him. The odds were about even in regard to the strengths and weaknesses of their respective cases.21 for banking facilities granted to Cang Ceng Engineering (B) Pte Ltd being the outstanding balance owed by Cang Ceng Engineering (B) Pte Ltd comprising overdraft facilities and fixed loan. (2) this was a difficult case. The defendant's contention was that the said guarantee was to secure new banking facilities but that he was told that it was to secure further security required by the plaintiff to continue granting the banking facilities to Cang Ceng Engineering (B) Pte Ltd. Singapore (Warren LH Khoo J).414.000.000.and which had an open market value at S$730. the plaintiffs had not proved their case on the evidence.000.

that the guarantee was invalid because of the winding-up proceedings against the company. 2395 Guarantee -. The bank should have made an offer to the other directors including the defendant as well instead of dealing with Chua Heng Hoe alone . accordingly there was no impediment against . D reassured him by issuing the letter of guarantee.000 and the price sold to Chua Heng Hoe at S$475. He could have counter-checked but he chose not to do so . The sale of the property was a forced sale as the bank was interested only in getting its own redemption sum back.therefore the defendant could not now disclaim liabliity for it. the bank had been negligent and had given no regard to the interest of other guarantors. D pleaded. The bank had failed to obtain the best price possible. The defendant therefore was not liable to the extent of the difference between the market price valued at S$730. there was no duress. The bank has a duty not only to itself but to the mortgagor to reduce as much as possible the balance due and owing.Demand for payment 3 [2395] CONTRACT Guarantee – Demand for payment – Payment not made – Defence of duress – Defence that guarantee invalid because of winding-up proceedings – Companies Act (Cap 50). P issued a cheque for S$100. founded on the consideration that P was to forego the shares and the directorship. (3) on 6 October 1986. Digest : Standard Chatered Bank v Tan Seng Hin Suit No MR 41 of 1993—High Court. ordering judgment for P: (1) the offer.Held: (1) the defendant was bound by the guarantee since he had the document before him and he had the opportunity to go through it before he signed. An offer was made to P by the company whereby the company would appoint P to the position of executive director. that the guarantee was given under duress and secondly. was superceded by the parties' agreement not to proceed with the matter and for P's payment to be refunded. (2) no particulars of duress were pleaded and by D's admission. When P pressed for payment. provided P bought 100.000 shares. even if it was accepted by P. firstly. (2) the bank was under a duty to use all reasonable care and to obtain the best possible price. The agreement.000 in consideration of P forebearing to sue the company HE ('the company') of which D was the managing director and major shareholder. (3) in selling the property at a reduced price. was binding on the parties.as the other directors' interests would necessarily be affected. Held.000. s 262(3) Summary : P sued D on a letter of guarantee dated 6 October 1986 issued by D whereby D promised to pay P S$100.000 but did not confirm his acceptance of the offer. He eventually decided not to take up the offer and asked D for the refund of his money. there was no winding-up order made against the company nor any provisional liquidator appointed. Miri (Elizabeth Chapman JC).

It was conceded that all the guarantors received carbon copies of the notice of demand meant for the first defendant.Demand for payment 3 [2396] CONTRACT Guarantee – Demand for payment – Whether carbon copies of demand meant for borrower but sent to guarantors constitute proper demand Summary : The plaintiff/respondent had brought a claim for money lent to the first defendant under overdraft facilities and interest thereon. 2396 Guarantee -. The loans were guaranteed under continuing guarantees and indemnities by the other five defendants for the payment of all money owing by the first defendant still remaining unpaid on the general balance of the first defendant's account with the plaintiff. Kuala Lumpur (Salleh Abas LP. When the defendants failed to pay the stated sum the plaintiff filed a writ and statement of claim against them. Digest : Mok Hin Wah & Ors v United Malayan Banking Corp Bhd [1987] 2 MLJ 610 Supreme Court. allowing the appeal: (1) the notice of demand in this case was made only to the first defendant and not to any of the six guarantors including the four appellants. Singapore (Kan Ting Chiu JC). 2397 Guarantee -. the right to sue was not lost because P could apply to court for leave to sue the company. Digest : Kwok Wai Hon v Wong Yew Kee Suit No 1095/87 High Court. Holding : Held. Seah and Syed Agil Barakbah SCJJ). (2) since bank guarantees invariably specify that the liability of the guarantor is to pay on demand. Judgment was given for the plaintiff and the defendants/appellants appealed. The main issue in the appeal was whether the notice sent by the plaintiff was a proper demand under the guarantees. (4) even if there had been a winding-up order made or a provisional liquidator appointed. the words are not devoid of meaning or effect but make the demand a condition precedent to suing the guarantor.P suing the company.Demand for payment 3 [2397] CONTRACT Guarantee – Demand for payment – Whether carbon copies of demand meant for borrower sent to guarantors constitute proper demand – Proper demand must be made Summary : .

At first instance. The notice was ignored and the respondent filed an action against the housing developer and the guarantors. A proper demand must be made and it is a condition precedent to establishing a claim against a guarantor. The respondent's evidence was to the effect that firstly. the learned judge of the High Court allowed the appeal. Yong Pung How J (as he then was) dismissed the appellants' claim on the ground that the respondent's guarantee was never a condition for the appellants paying out the money to WSP Ltd in the first place. Holding : Held. the application for further credit facilities took the form of a letter dated 14 October 1976.000. 2398 Guarantee -.957. Digest : Orang Kaya Menteri Paduka Wan Ahmad Isa Shukri bin Wan Rashid v Kwong Yik Bank Bhd [1989] 3 MLJ 155 Supreme Court. to repay on demand advances made by the appellants to a company called WSP Ltd. Secondly. the respondent had stipulated that he would not sign a guarantee for the company's debts until he obtained a majority shareholding in it. allowing the appeal: the learned judge was wrong in holding in this case that no antecedent demand was required to create a cause of action and that the mere filing of the writ and the service thereof was a sufficient demand. Holding : .The respondents in this case were bankers and had granted to a housing developer an overdraft facility of $100. The appellant appealed to the Supreme Court. The respondents sent a demand letter to the housing developer requesting it to settle the excess and to regularize the account.42 from the respondent on the basis of a guarantee in writing signed by him on 6 October 1978. obliging the appellant to pay. On appeal. The appellant filed a defence to the effect that no formal letter of demand was served on him and therefore the respondents had no cause of action against him. The senior assistant registrar gave him unconditional leave to defend. 14 days before the respondent joined the board of directors of WSP Ltd. Here the letter of guarantee is clear. Kuala Lumpur (Lee Hun Hoe CJ (Borneo). The said facility was secured by joint and several guarantees of the directors of the housing developer. including the appellant.Demand for payment 3 [2398] CONTRACT Guarantee – Demand for payment – Whether credit facilities extended in reliance of guarantee Summary : In this action the appellants claimed a sum of S$122. The appellants appealed. Carbon copies of the said letter were sent to all the guarantors including the appellant. The housing developer defaulted and was in breach of the said facility. in reliance upon the said guarantee.

At the close of the plaintiffs' case. The third defendant had guaranteed jointly and severally the payment of all credit. There was no necessity for the notice to state that the company had defaulted in its payments because the third defendant had signed the guarantee wherein it was stated he 'guarantees. 2399 Guarantee -. the third defendant all along knew that it was sent in regard to the guarantee. (2) since the third defendant made a submission of no case to answer. bills and credit notes of the company. the third defendant made a submission of no case to answer and did not lead any evidence. their solicitors wrote a notice of demand to the third defendant for the payment of moneys due by the company. Holding : Held. on demand in writing being made. this did not render it defective as the defendant knew his liability was for that amount only. On 10 September 1977 the company's factory was burned down and the company could not carry on its business. Accuron Sdn Bhd had been the plaintiffs' client and the third defendant was one of its directors. allowing the plaintiffs' claim: (1) there was a proper demand made to the third defendant which was individually sent to him and signed by the plaintiffs' solicitors. It was clear from the evidence that it was upon the third defendant's request that the second defendant was released from all liabilities on the undertaking by the third defendant to execute the guarantee.Demand for payment 3 [2399] CONTRACT Guarantee – Demand for payment – Whether proper notice of demand made on guarantor – Whether creditor should realize other securities first before calling on guarantee – Whether accounts provided by creditor conclusive Summary : The plaintiff bank claimed against the third defendant a sum of RM900. Singapore (Lai Kew Chai. The company failed to fulfil the terms and conditions of the plaintiffs. the due payment of all advances'.Held. Therefore the . including personal guarantees by its directors. (2) there was no sufficient evidence to justify interfering with the learned judge's finding that the credit facilities listed were not extended at the respondent's request. dismissing the appeal: (1) the appellants failed to call witnesses who were essential to disprove the respondent's evidence. Thereafter.000 with interest at 16% pa from 12 March 1983 until realization. Digest : Indian Overseas Bank v Lim Hug Hiong Civil Appeal No 79 of 1990 Court of Civil Appeal. The company was given various facilities and in return it gave various securities. on the plaintiffs' instruction.000. Rajendran and FA Chua J). Although the notice of demand could have been better drafted. Although the notice stated a figure higher than RM900. Since 1974. all the evidence led by the plaintiffs is deemed to be true.

claim that there was no consideration for the guarantee fails; (3) there is nothing in law which prevents the plaintiffs from enforcing their rights in the guarantee before realizing other securities given by the company. The claim that the plaintiffs' action was premature therefore is without merit; (4) the third defendant's claim that the money from the insurance policy was not taken into account is clearly refuted by the evidence; (5) the third defendant was bound by the guarantee to accept the accounts stated by the plaintiffs as being conclusive; (6) the appointment of receivers was made for the benefit of the company and in any event, the guarantee was binding on the third defendant regardless whether the company was wound up or not.
Digest :

United Asian Bank Bhd v Chin Tai Thai & Ors Civil Suit No C 1436 of 1984 High Court, Kuala Lumpur (Wan Adnan J).
Annotation :

[Annotation: The judgment was delivered in Bahasa Malaysia.]
2400 Guarantee -- Discharge

3 [2400] CONTRACT Guarantee – Discharge – Contracts Act 1950 (Act 136), s 99 – Guarantee - Letter of guarantee - Co-sureties agreed to honour guarantee Discharge of debt by plaintiff - Claim against defendants for equal share of contribution - Contracts Act 1950, s 99.
Summary :

The plaintiff together with the first, second, third and fourth defendants became cosureties to the Bank of Tokyo for the debt of the Big Bear Supermarket Sdn Bhd, the debtor, for the sum of $250,000. They held themselves liable to pay to the bank if the debtor did not do so, under a letter of guarantee. Later, the bank called upon the defendants as co-sureties to honour their guarantee. The plaintiff duly paid $194,564.78 towards the discharge of the debt then outstanding by virtue of which the guarantee was discharged. He then called upon the defendants to contribute equally towards the amount disbursed by him, but they refused. He then sued each of the defendants for the sum of $49,141.19 as their equal share of contribution and interest. The plaintiff had also charged his land for $180,000 and the wife of the first defendant had charged hers for $70,000 making a total of $250,000. The plaintiff's claim against the first defendant was disallowed by the senior assistant registrar. The plaintiff appealed against the said order.
Holding :

Held, allowing the appeal: s 99 of the Contracts Act 1950 (Act 136) makes it quite clear that if any of the co-sureties had paid the creditor towards the discharge of the debt and obtained a discharge (of which in this case there was no dispute), then the

others were equally liable to contribute to the sum paid towards that discharge. If the payment had effected to discharge the first defendant's land as the additional security, it did not alter the defendant's liability to contribute since a discharge of the debt under the guarantee as provided by s 99 had been effected.
Digest :

Wong Kim Swee v Wong Chee Mun & Ors [1984] 2 MLJ 221 High Court, Kuala Lumpur (Abdul Razak J).
2401 Guarantee -- Discharge

3 [2401] CONTRACT Guarantee – Discharge – Letters of revocation – Service – To discharge only in respect of future transactions – Contracts Act 1950, s 83
Summary :

The appellants claimed RM925,103.73 against the first and second respondents, and RM100,000 against the third respondent. At the hearing of the O 14 application, the first and second respondents were allowed unconditional leave to defend the sum of RM144,383.02 and the third respondent the sum of RM19,279.29. Both the appellants and respondents appealed against the decision. The appellants alleged that by a letter of guarantee dated 24 October 1983 ('the first guarantee') the three respondents agreed to guarantee the payment by a company to the extent of RM800,000 in respect of goods sold and delivered by the appellants to the said company. It also alleged that by another guarantee dated 10 October 1985 ('the second guarantee'), the first and second respondents agreed to guarantee for the same to the extent of RM200,000. The said company was now indebted to the appellants in the sum of RM925,103.73 for goods sold and delivered and the respondents had failed to satisfy the debts despite demands made. The respondents admitted that the company was indebted to the appellants but claimed that the amount was only RM180,000. According to the respondents, the second guarantee was valid, but alleged fraud on the appellants' part in respect of the first guarantee. They contended that under the first guarantee, they had agreed to guarantee only RM100,000. Besides, the guarantee form, which they were asked to sign on every page, was blank, with the amount RM800,000 subsequently inserted by the appellants without the respondents' knowledge. When the fraud was discovered, the respondents claimed to have served on the appellants two notices revoking both guarantees, to which claim the appellants denied. Even if the notices had been duly served, the appellants argued that they were still not valid as at the time of service, the said company was indebted to the appellants in the amount of RM780,720.71.
Holding :

Held, allowing the appellants' appeal and dismissing the respondents' cross-appeal: (1) on the treatment of conflict of evidence on affidavits, 'although in the normal

way it is not appropriate for a judge to resolve conflicts of evidence on affidavit, this does not mean that he is bound to accept uncritically, as raising a dispute of fact which calls for further investigation, every statement on an affidavit however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statement by the same deponent, or inherently improbable in itself may be' (per Lord Diplock in Eng Mee Yong v Letchumanan [1979] 2 MLJ 212); (2) and (e) the area sales manager of the appellant company, who deponed that he had signed TKL-1 as a witness to the signature of each of the respondents who were signatories to the first guarantee, confirmed that the respondents had only signed at the end of the agreement and not on every page; (3) on the supposition that the respondents were to be believed, there was still the principle that the plea of non est factum does not work in favour of a person who has shown himself to be negligent; (4) on a critical analysis of the affidavits, it was highly improbable that there was any service of the letters of revocation on the appellants as the stamp chop on the notices referred to the appellants' warehouse department and not their address as stated in the letters of guarantee. Besides, the stamp used to acknowledge receipt of documents by the warehouse department was not in the form shown in the letters of revocation. These averments were not rebutted by the respondents; (5) if there had been a proper service of the notices of revocation, there was still no triable issue raised as the notices of revocation were bad in law. By s 83 of the Contracts Act 1950, a guarantor is allowed to discharge himself only in respect of future transactions whilst the respondents here were attempting to discharge themselves of all transactions; (6) the appellant had also produced statements of account showing the amounts owing, and a certificate produced by their auditors confirming the amount due, which was binding unless there was manifest error, whilst the respondents had not only not attempted to show that the statements or the certificate were erroneous, but had been inconsistent in their averments of the amount they owed; (7) on an examination of the affidavits, the defence of fraud raised by the respondents was inherently improbable for the following reasons: (a) no reasonable businessman would sign a blank guarantee regardless of the amount guaranteed; (b) the exhibit in the appellants' affidavit purported to be the first guarantee ('TKL-1'), did not fit the description given by the respondents. It did not contain the respondents' signatures on every page, but only on the last two pages. The respondents also did not deny TKL-1 as the very document executed by them; (c) if it were true that the respondents had signed on every page, all that the appellants had to do, if they wanted to cheat, was to insert the amount in the appropriate space in the allegedly signed page 2 of the blank form instead of removing the allegedly signed first three blank pages and substituting them with fresh unsigned ones as implied by the respondents. This allegation was therefore difficult to believe and did not make sense; (d) the two letters of revocation did not mention anything about fraud but gave the reasons for the revocation as recent developments and changes in management policy;the respondents have failed to show that there was a fair or reasonable probability that they had a bona fide defence.

Digest :

Goodyear Malaysia Bhd v Tan Kok Hai & Ors [1993] 3 CLJ 471 High Court, Shah Alam (Mohd Hishamudin JC).
2402 Guarantee -- Discharge

3 [2402] CONTRACT Guarantee – Discharge – Surety guaranteed lessee's payment to lessor for lease of machineries – Surety informed lessor that lessee was taking machineries out of state – Lessee was 16 months in arrears – Whether lessor was negligent in not repossessing machineries – Whether lessor's negligence discharged surety's liability – Contracts Act 1950, s 92(c)
Summary :

P, a finance company, leased machine equipment to H Sdn Bhd. D agreed to guarantee payment of lease rental by H Sdn Bhd to P and to indemnify P up to 50% of the loss incurred by P. Subsequently, D wrote a letter to P, informing them that H Sdn Bhd were preparing to move the machinery outside Sabah. P replied that under the lease agreements H Sdn Bhd could not take the machinery outside Sabah without P's prior written consent. P further stated that H Sdn Bhd had been informed of this requiremnent under the lease agreements. P, however, took no steps to investigate or inspect the machinery and were content to leave them in the hands of H Sdn Bhd. D then notified P that the machinery had been taken out of Sabah. H Sdn Bhd, after only paying a month's rental, failed to pay 16 months' rental. P claimed from D 50% of the sum due to P from H Sdn Bhd. P applied for summary judgment against D. H Sdn Bhd subsequently went into receivership. D argued that P had been negligent in not repossessing the machinery after H Sdn Bhd were 16 months in arrears and after being informed that H Sdn Bhd were preparing to take the machinery outside Sabah. D thus alleged that P's negligence had deprived D of its right of recourse to the machinery in the event of H Sdn Bhd's default under the lease agreements. D accordingly claimed that they were discharged from their liability to P. P relied on the guarantee contracts providing, inter alia, that any omission on P's part would not discharge D's liability. P also argued that since the machinery belonged to them, the machinery could not become a security for D to have recourse to.
Holding :

Held, dismissing the application: (1) the underlying philosophy in O 14 of the Rules of High Court 1980 is to prevent a plaintiff clearly entitled to the money from being delayed where there is no fairly arguable defence to the claim. Order 14 of the 1980 Rules should only be applied where there is no reasonable doubt that plaintiff is entitled to judgment; (2) P was negligent in not acting in D's interest. D's liability is thus discharged under s 92(c) of the Contracts Act 1950.
Digest :

the variation of the rate of interest by P without the consent of D2 had the effect of discharging D2 as to transactions subsequent to the variation as provided for under s 86 of the Contracts Act 1950. P obtained summary judgment against D1-D5 . since judgment was obtained in excess of what P was entitled to. Sabah (Syed Ahmad Idid JC). D2-D5 as D1 Sdn Bhd's directors guaranteed D1 Sdn Bhd's repayment of sums due to P. D2 had acted as guarantor to a loan given by P to D1.Sabah Finance Bhd v UMW (East Malaysia) Sdn Bhd Civil Suit No K620 of 1988 High Court. One of the clauses of D2-D5's letter of guarantee provided that the guarantee would be determined as to future transactions by D2-D5 giving P 14 days' written notice ('clause 6').Discharge 3 [2403] CONTRACT Guarantee – Discharge – Variation of terms of agreement without consent of surety – Whether surety discharged as to transactions subsequent to variation – Contracts Act 1950. Holding : Held. the judgment in default was clearly an irregular judgment and ought to be set aside ex debito justitiae. Counsel for D2 contended that the interest claimed by P was in excess of that allowed in the loan agreement and that D2 as guarantor was not informed of the increase in the rate of interest. the learned judge exercised his inherent power in the interest of justice and ordered that P's appeal be dismissed and that D2 be given unconditional leave to defend the action. s 86 Summary : [Mal] P appealed against the decision of the senior assistant registrar ordering that the judgment in default against D2 be set aside and that D2 be given conditional leave to defend the action. Kuala Lumpur (Zakaria Yatim J). D1 Sdn Bhd failed to pay sums due to P.Discharge 3 [2404] CONTRACT Guarantee – Discharge – Whether guarantors had been discharged from liability – Whether guarantors had complied strictly with letter of guarantee in respect of discharge Summary : P granted. inter alia. (2) in the instant case. dismissing the appeal: (1) in the instant case. 2404 Guarantee -. 2403 Guarantee -. overdraft facilities to D1 Sdn Bhd. Although D2 did not file any notice of appeal against the decision of the senior assistant registrar. Digest : United Asian Bank Bhd v Kamariah bte Mohd Yusoff & Ors Suit No C24-5082-86 High Court.

D2-D5 were only entitled to claim damages by way of counterclaim. A also alleged that D's action on the covenant to pay and the separate charge action in respect of PD Sdn Bhd's land amounted to duplicity of proceedings. (3) D2-D5 were thus still liable under the letter of guarantee. Holding : Held. D applied for and obtained an order for sale of PD Sdn Bhd's land. D obtained summary judgment against both A1 and A2 from the learned senior assistant registrar. A2 was the guarantor of the loan. D2-D5 also claimed that they had disposed of their shares in D1 Sdn Bhd and had resigned as its directors. dismissing the appeal: (1) even if there was negligence on P's part. Moreover in D2-D5's letters D2-D5 were not asking to be released in respect of 'future transactions'. all the causes of action available to D in respect of the loan merged. D then sued A1 and A2. The successive auctions of PD Sdn Bhd's land were however unsuccessful. Accordingly D's action in respect of the loan should not be allowed until the sale of PD Sdn Bhd's land was effected. A finally argued that once D obtained an order for sale. Digest : Malayan Banking Bhd v Bakelite Manufacture Sdn Bhd & Ors Civil Suit No C6068 of 1985 High Court. A appealed to the High Court. there arose an equity in favour of A2 which disallowed D's action against him until the sale was completed. D2-D5 alleged that they had sent letters to D1 Sdn Bhd stating their discharge as D1 Sdn Bhd's guarantors and copies of such letters had been sent to P.Equity 3 [2405] CONTRACT Guarantee – Equity – Chargee obtained order for sale of land but sale was not completed – Chargee sued guarantor – Whether there arises equity in guarantor's favour to bar chargee's action against guarantor until sale is completed Summary : D lent money to A1 secured by a third party charge over PD Sdn Bhd's land. D2-D5 purported to rely on 'clause 6' to argue that they had been discharged as guarantors. Kuala Lumpur (Zakaria Yatim J). (2) D2-D5 had not complied strictly with 'clause 6' because firstly their letters were not addressed to P but were only copied to P.from the senior assistant registrar. D2-D5 appealed to the High Court firstly on the ground that P had acted negligently in failing to safeguard the assets of D1 Sdn Bhd and consequently this had greatly diminished the value of D1 Sdn Bhd's assets. A1 defaulted on the loan. A firstly argued that the order for sale is a judgment and once it was obtained. 2405 Guarantee -. Holding : .

Such an accepted practice is given judicial notice. a charge action is commenced by way of an originating summons and a separate writ action is commenced on the covenant to pay as against the borrower and/or guarantor. (6) even if a guarantor can raise an equity in his favour. the defendant was obliged to execute a personal guarantee. even if the order for sale of land and judgment on the covenant to pay could be sought in the same action. In Malaysia. (5) obiter dicta of a case refer to statements made 'by the way as it were' which are not necessary for the decision arrived at.Held. obiter dicta should not be given the weight of the decision of the case or the grounds of that decision. Digest : Supreme Finance (M) Bhd v Bukit Barat Development Sdn Bhd & Anor Civil Suit No C23-2717-86 High Court. dismissing the appeal: (1) an order for sale of land under s 256(3) of the National Land Code 1965 cannot amount to a judgment under O 42 r 1 of the Rules of High Court 1980 because no execution proceedings can be instituted on such an order. (4) D was only entitled to apply for an order for sale of PD Sdn Bhd's land and could not apply for judgment on the covenant to pay as against PD Sdn Bhd. there was no duplicity of proceedings if separate actions were taken to obtain the order for sale and judgment on the covenant to pay. The doctrine of merger does not therefore apply. Kuala Lumpur (VC George J).Estoppel 3 [2406] CONTRACT Guarantee – Estoppel – Failure to execute guarantee – Estopped by conduct from denying intention to give guarantee – No duty to advise defendant to seek independent legal advice – No satisfaction of judgment sum from principal debtors – Whether claim had been compromised Summary : The defendant appealed an order granting the plaintiffs' application for a declaration that pursuant to an agreement with the defendant in conjunction with a settlement. 2406 Guarantee -. There was therefore no duplicity of proceedings when D sued A on the covenant to pay. The points raised by A are now unarguable. As such. (3) in any event. an order that the Registrar of the Supreme Court be authorized to execute the guarantee if the defendant failed to do so within the stipulated period and that the signature by the registrar will have the same effect as execution by the . he can only obtain a stay of execution of the judgment obtained against him until the sale has been completed or until it has been shown that the sale cannot be effected within a reasonable time. (7) leave to defend is given where a difficult question of law is raised but in this case the conflict of authority has now been resolved. (2) it is not the practice in Malaysian courts to seek an order for sale and a judgment on the covenant to pay in the same proceedings. an order for specific performance of the execution of the guarantee in the terms of the draft guarantee.

In an affidavit opposing the application. By a deed of assignment and a mortgage in escrow. (3) the wording of the letter of confirmation clearly showed that as between the defendant and his parents and the company.defendant and costs. The plaintiffs were not precluded from instituting an action against him as they had not obtained satisfaction of the judgment sum from the principal debtor. In consideration of the loan. Between September 1991 and June 1992. a company mortgaged a property to the plaintiffs to secure a loan.000 on the conditions that an initial sum of S$50. (4) as the plaintiffs had not compromised their claim. An agreement was reached to settle for a lesser sum of S$550. he claimed that the company had incurred substantial interest as a result of the late release of funds by the plaintiffs and that he had a good defence as the plaintiffs had elected to take judgment against the three parties in the suit. which was undated. (2) the law does not impose a duty on the plaintiffs to advise the defendant to seek independent legal advice as there was no fiduciary or confidential relationship between them. The plaintiffs commenced proceedings. Further. he failed to do so. The mortgaged property was sold in March 1989 but the proceeds were insufficient to settle the loan and in August 1991. the parties consent to judgment in the suit. a joint and several guarantee was executed whereby the signatories undertook to pay the loan or any balance with interest due and owing on demand in writing from the plaintiffs. (5) the defendant had not . The defendant was estopped from raising any objections to the plaintiffs' enforcement of their rights as his conduct subsequent to the signing of the letter led them to believe that he would and indeed did comply with the settlement agreement in making the payments. He knew the plaintiffs and his father wanted him to sign the guarantee for the company debts. the defendant claimed. that he had not understood the full significance of what he was signing when he signed the letter of confirmation. damage or expense arising as a result of any default by the parties with an undertaking that the defendant pay the total amount on demand plus interest in the event of default. inter alia. the defendant (the son of the signatories) execute a guarantee/indemnity to guarantee due performance and indemnify the plaintiffs in respect of any loss. they were precluded from taking proceedings against him. He then paid the instalments for nine months after signing the letter. granting the plaintiffs an order in the terms of their application: (1) the defendant knew the purpose and nature of the letter of confirmation when he signed it.000 be paid with monthly instalments of S$5000 commencing in October 1991. they were not estopped from enforcing the letter of confirmation against the defendant. his liability was secondary. Despite several requests for the defendant to execute the guarantee. He was educated and read the letter himself. Holding : Held. the defendant paid the instalments then defaulted with the result that the whole amount became due and payable. a suit was brought for the balance. the three parties indemnify the plaintiffs in respect of all legal costs and the plaintiffs would not waive any indebtedness until they had received full payment.

(6) the guarantee agreement was valid even though it was undated when signed. The second defendant negotiated the settlement terms and a consent judgment was entered between all the parties. applications for striking out may still be made so long as the action has not been set down for trial. The guarantee was undated. However. allowing the application. the court did not have the power to recall its judgment. The plaintiff brought an action to impeach the consent judgment obtained in the earlier suit. (4) the second defendant had implied authority to act for the plaintiff in the earlier suit. Digest : Hong Leong Finance Ltd v Son Boon Seng Originating Summons No 1175 of 1993 High Court. The plaintiff now claimed that he only learned of the earlier suit when he was served with a bankruptcy notice a year later. Holding : Held. A consent judgment which has been perfected and extracted cannot be rectified by alteration or variation. Even after pleadings are closed. (5) while the general rule is that no person is to be adversely affected by a judgment in an action he was not a party to. Lee then appointed the second defendant law firm to represent him. The defendants sought to strike out the action by the present application. Singapore (Lai Siu Chiu J). Affidavits in support of such applications should contain particulars and not bare averments. (2) since the sealed copy of the consent judgment had been extracted. its authenticity could not be questioned.shown in either his affidavits or arguments any valid reason why the letter of confirmation should not be enforced. (1) an application to strike out pleadings under O 18 r 19(2) of the Rules of the High Court 1980 must not be considered with evidence. M and the plaintiff (in his absence as he could not be located). there were two exceptions: a privy who is estopped by res judicata.Execution of undated guarantee 3 [2407] CONTRACT Guarantee – Execution of undated guarantee – Whether guarantor bound by guarantee Summary : The first defendant company obtained judgment against company M in an earlier suit. the courts have now resorted to the affidavits to adjudicate such applications. The sealed copy of the consent judgment was extracted. M settled the judgment debt only in part. (3) once the defendants filed the memorandum of appearance. 2407 Guarantee -. He denied authorizing Lee to act on his behalf. to protect the interests of all the defendants in that earlier suit. (7) there was no slip of the type . because it was signed by a director and there was no fraud or misrepresentation. The plaintiff and Lee were directors of M and guaranteed the outstanding amount due to the first defendant. and a person whose conduct precludes him from challenging the judgment.

The trial judge having decided the issues raised in favour of the respondent. 'carrying on business'. As one of the grounds of his decision. 'borrowing company' – Whether guarantee amounts to granting unsecured credit facilities – Whether granting of guarantee a 'dealing' in foreign exchange currency – Finance Companies Act 1969. 4. in particular s 2 which defines 'borrowing business' as. was prohibited by s 4 of the Act and. whether prohibited 3 [2408] CONTRACT Guarantee – Granting of. the matter was brought before the Supreme Court and arguments raised on substantially the same issues. On 25 August 1980.Granting of. (4) the issuance of the guarantee amounted to a dealing by the appellant in foreign exchange currency which was prohibited by s 6 of the Act. the matter was brought before the High Court under O 33 r 2 of the Rules of the High Court 1980 for the determination of preliminary issues of law. (3) the guarantee was tantamount to granting to the principal debtor unsecured credit facilities. by the borrower . and that: (1) the guarantee was not an investment as there was no application of money in the purchase of some property from which interest or profit was expected and which property was purchased in order to be held for the sake of income which it could yield. the trial judge had concluded that the term 'investment' set out by . and s 4 which prohibits the appellant from carrying on business other than borrowing business. having obtained judgment against the principal debtor for the balance of the amounts owing by the latter. of the borrower's funds'.. inter alia. thereby enabling the principal debtor to receive cash. 6 & 20(1) Summary : The appellant is a licensed borrowing company within the meaning of the Finance Companies Act 1969 ('the Act'). not being an investment. (2) the issuance of guarantee. Digest : Siang Yam Beng v Marushin Canneries (M) Sdn Bhd & Anor [1995] 4 MLJ 691 High Court. agreeing to guarantee the repayment of all moneys owing by a third party ('the principal debtor') to the respondent. 2408 Guarantee -. The appellant contended that: the activities of the appellant was governed by the Act. the 'investment . by consent of all parties. Johor Bahru (Abdul Malik Ishak J). ss 2. was therefore void and unenforceable by the operation of s 24 of the Contracts Act 1950.. The appellant having denied liability under the guarantee on several grounds. goods and/or services from the creditor or a third person and was in contravention of s 20(1) of the Act. The respondent brought this action against the appellant.. the appellant entered into an agreement with the respondent. whether prohibited – Whether ultra vires company's objects – Construction of objects clause in light of statutory prohibition – Meaning of 'investment'..envisaged by the slip rule in O 28 r 11 of the Rules of the Supreme Court (O 20 r 11 of the Rules of the High Court). not being a borrowing business.

All other clauses in the memorandum of association which do not so conform must either be regarded as powers of the appellant (where they can be regarded as ancillary to the primary objects) or must necessarily be ignored and regarded as prohibited by virtue of s 4. which provides that the Act shall be without prejudice to the provisions of the Companies Act 1965 and that where there is a conflict between the two Acts. Holding : Held. there was no financial accommodation coming from the appellant in favour of the respondent. and interpret it according to its popular . The issuance of the guarantee is.Macnaghten J in IRC v Rolls-Royce [1944] 2 All ER 340 and by Lord Greene MR in IRC v Desoutter Bros [1946] 1 All ER 58 was not exhaustive and that the giving of guarantees as a business was an investment within s 2 of the Act. borrowing. Having regard to s 49 of the Act. the word 'investment' is not a term of art and the court must look at the statutory provision in which the word is used. dismissing the appeal: (1) the distinction between the primary objects and the powers of a company has a decisive bearing on the determination of the appeal. Only objects which conform to the requirements and/or fall within the scope of s 2 would be regarded as primary objects of the appellant. there was no disclosure in what manner. The clauses relating to granting of guarantees are not such objects and must. The ground is without merit. That being the case. In granting the guarantee. (3) the words 'carrying on business' has been interpreted to connote a succession of acts having the acquisition of gain for their object. (7) applying Desoutter's case. (4) the issuance of the guarantee to the respondent cannot be construed as a granting of credit by the appellant. the objects which fall within the definition of borrowing business can be easily identified. nor can there be since the guarantor's undertaking is always a collateral undertaking to answer for the debt or to fulfil the obligation of another on his default. the provision of guarantee by the appellant company cannot form part of its borrowing business. Under the circumstances. In the instant case. be regarded as powers which are ancillary to the primary objects. a profit would be derived therefrom or that there was a succession of issuance of guarantees by the appellant. the objects clause in the memorandum of association of the appellant must be examined in the light of ss 2 and 4 of the Act. (2) having regard to the appellant's memorandum of association. selling or lending of foreign currency. overruling the lower court) the trial judge was wrong to extend the meaning of 'investment' to include the issuance of guarantees. by their very nature. therefore. if the issuance of a guarantee was regarded as a business. the word 'dealing' in s 6 of the Act cannot be construed to include the issuance of a guarantee in the sense that it is tantamount to either buying. (5) the contention that the issuance of the guarantee amounted to a dealing by the appellant in foreign exchange currency in contravention of s 6 of the Act is equally untenable. (6) (held further. the only conclusion possible is that the appellant did not in this instance carry on the business of providing guarantees. the former will prevail. In the court's view. not caught by s 4 of the Act and is instead valid and enforceable against the appellant.

the key words in s 2 of the Act are 'the investment of the borrower of the borrower's funds'. Holding : . inadvertently or otherwise. as there was no compelling evidence of the fiscal advantages of issuing guarantees as a business. Malaysia (Jemuri Serjan CJ (Borneo).Guarantee and indemnity 3 [2409] CONTRACT Guarantee – Guarantee and indemnity – Discharge of guarantee – Need for acknowledgment Summary : The plaintiffs' claim is for S$192. we are not precluded from dealing with any points of law relevant and applicable to the determination of the issues even if they were never adverted to and canvassed by both counsel. (8) further. in all the leading cases. The said defendants denied liability on the grounds that they had given notice by way of post to terminate the guarantee to take effect six months from 22 December 1982. thereby causing more injustice. To arrive at the correct decision. In the instant case.000 without their consent.000 to S$350.conception.' Digest : Arab Malaysian Finance Bhd v Meridien International Credit Corp Ltd London [1993] 3 MLJ 193 Supreme Court. that there was a material variation in the terms of the contract in that the facility amount was increased from S$300. The present action proceeded only against the first and third defendants.08 plus interest against the defendants as guarantors under a guarantee and indemnity dated 6 January 1982. consideration of any points of law which have a crucial and decisive bearing on the determination of the issues before us is not only fully justified but also necessary as to do otherwise would leave the questions of law fully unanswered. 2409 Guarantee -. and that the plaintiffs continued financing the beneficiary even though they knew that the beneficiary was in breach of the financing agreement. In the instant case. (9) (per curiam) 'Since we are at this stage dealing primarily with preliminary points of law. the element of income features prominently and plays a decisive role on whether the money or property from which it was derived was an investment. the laying out of money in the purchase of some property from which interest or profit is expected and which property is purchased in order to be held for the sake of the income which it will yield. or because it never occurred to them that these points of law were relevant to the proper determination of the issues on account of wrong perception of the crux of those issues. it would not be justifiable for the court to make an affirmative determination on an important issue such as this grounded on mere speculation. namely. Consequently the provision of the guarantee does not come within the meaning of 'investment'.962. It is explicit from this definition that there must be 'investment of the funds' in the popular sense.

(2) by the terms of the guarantee the defendants guaranteed the payment by the beneficiary of all sums due under the financing agreement and also undertook to indemnify the plaintiffs against all losses arising as a result of the beneficiary's failure to pay. the court was inclined to say that the version of PW1 was more credible. which purchase was financed partly by a loan facility from the plaintiffs. There was thus a guarantee by the directors of the first defendant with regard to this grant of the loan facility. There was no limit set nor was there any collateral agreement or warranty to the defendants that the limit would be S$300.000 and no more. The sixth defendant was a shareholder and director of the first defendant. Singapore (Goh Joon Seng J). including the guarantee. The first defendant purchased a parcel of land from the plaintiff. having received no acknowledgment or confirmation from the plaintiffs that they would be discharged.Guarantee for loan facility 3 [2410] CONTRACT Guarantee – Guarantee for loan facility – Guarantee dated after loan disbursement – Whether there was consideration for guarantee – Whether guarantee was wrongly dated – Loan given for benefit of defendant – Evidence Act. The sixth defendant contended that there was no consideration for the guarantee. (2) besides what was said by PW1. The date given in the guarantee was 18 June 1982 whilst the loan of the first defendant was debited on 31 May 1982. the cover letter addressed to the first defendant enclosing the various documents. was dated 8 March 1982. allowing the claim: (1) the defendants. s 92 – Contracts Act 1950. Having considered as a whole the evidence of PW1 and that of the sixth defendant. (3) further financing was stopped after it was discovered that the goods had been sold on a 'returnable' basis. 2410 Guarantee -. And the cover letter from the plaintiff addressed to the legal firm of PW1 enclosing the documents duly signed by the plaintiff was dated 20 March 1982 as well. allowing the plaintiff's claim: (1) the plaintiff relied quite heavily on the testimony of PW1 and it was the testimony of PW1 that the guarantee was duly signed in March 1982. (3) the court was satisfied on the balance of probabilities that the plaintiff had established that indeed the sixth defendant signed the guarantee in . Digest : Hong Leong Finance Ltd v Tan Kia Poh & Ors Suit No 7079 of 1985 High Court.Held. ss 2(d) & 80 Summary : This was a claim made by the plaintiff against the sixth defendant pursuant to a guarantee in writing. there was also documentary evidence which favoured his version. Otherwise a limited guarantee would have been entered into. For instance. took no steps to ensure that their liabilities were indeed discharged. Holding : Held.

but up to a limit of M$150.March 1982.120. (2) in any event. P obtained O 14 judgment against D2 and D4 who appealed to the High Court. P's customer. Accordingly.Guarantor's liability . even if the guarantee was said to have only been signed on 18 June 1982.67. (4) the plaintiff should be entitled to invoke proviso (a) of s 92 of the Evidence Act to admit oral evidence regarding the date of the signing of the guarantee. The evidence adduced showed that the guarantee was wrongly dated. D2 and D4 jointly and severally guaranteed the payment to P on demand of all sums of money owing from D1.000 by M$120. inter alia. Digest : Borneo Development Corporation Sdn Bhd (in Voluntary Liquidation) v Concept Marketing (Sandakan) Sdn Bhd & Ors Suit No S66 of 1989—High Court. P sued D for the sum in question. 2412 Guarantee -. their appeals were dismissed by the court. ie after the release of the loan on 31 May 1982. Upon default by D to pay the sum owing. D2 and D4 were estopped from questioning the correctness of the amount certified by P to be owing by D1.000. at least by implication. Sandakan (Richard Malanjum J). the plaintiff should be able to rely on ss 2(d) and 80 of the Contracts Act. It was contended. in the circumstances of the instant case. the application of the de minimis rule would overcome the contention that the demand was bad being in excess of M$150. dismissing the appeals: (1) having regard to the conclusive evidence clause in the guarantee and s 3 of the Bankers' Books (Evidence) Act 1949.67 which exceeded the limit provided under the guarantee. that the loan was given to the first defendant on request and for the benefit of the first defendant.Guarantor's liability 3 [2411] CONTRACT Guarantee – Guarantor's liability – Amount demanded exceeding limit under guarantee – Whether demand bad – De minimis rule Summary : By a letter of guarantee. Digest : Chung Khiaw Bank Ltd v Entlink Sdn Bhd & Ors Civil Suit No D3-23-2453-87 High Court. Kuala Lumpur (VC George J). Holding : Held. if not directly. that P's demand made on D2 and D4 pursuant to the guarantee was bad as it was for a sum of M$150. 2411 Guarantee -. (3) as there were no triable issues raised by D2 and D4 which warranted a full trial. (5) the evidence adduced did show.

Holding : Held. P applied for summary judgment for the sum in question. Kuala Lumpur (Mahadev Shankar. From time to time. In this case. for billing purposes. P claimed the sum in question against D. Digest : Lim Wah Siang v Perwira Affin Bank Bhd [1997] 1 MLJ 374 Court of Appeal. The third defendant appealed. Upon H Sdn Bhd defaulting in payment of the products supplied. 2413 Guarantee -. D agreed to guarantee the due payment. In respect of purchases by the companies. dismissing the appeal: the point taken up by counsel for the third defendant was devoid of any merit since he was unable to point to any provision of the law where the third defendant could not sign in the circumstances he did.3 [2412] CONTRACT Guarantee – Guarantor's liability – Attestation of guarantor's signature – Signature of guarantor attested by an undischarged bankrupt – Whether judgment ought to be given against the guarantor Summary : The first defendant failed to satisfactorily service the loan facilities given by the plaintiff. the invoices. The main ground of appeal was that the plaintiff obtained judgment against the third defendant under O 14 of the Rules of the High Court 1980 in spite of his signatures on the debentures being attested by a director who was an undischarged bankrupt. Abu Mansor and Abdul Malek Ahmad JJCA). No provision of the law was pointed to the court which forbade an undischarged bankrupt from witnessing a signature. P supplied the products as providedg for under the terms of the said arrangement. D opposed the application made under O 18 r 19 contending that . The plaintiff sued and obtained judgment against the first defendant and three other defendants who were the guarantors for the loan. of all such products. would be in the name of the company placing the order and addressed to H Sdn Bhd for payment. In the alternative. P applied under O 18 r 19 of the Rules of the High Court 1980 for D's statement of defence to be struck out on the ground that it disclosed no reasonable defence and that it was frivolous and vexatious. on demand by P. the third defendant did sign and became a guarantor.Guarantor's liability 3 [2413] CONTRACT Guarantee – Guarantor's liability – Construction of guarantee – Whether guarantee invalid Summary : By a consumer contract made between P and H Sdn Bhd. In consideration of P agreeing to supply the products on credit to H Sdn Bhd. P agreed to supply shell petroleum products on credit to H Sdn Bhd and to the various companies listed in the contract.

As the statement of defence was frivolous. the court found that D had failed to show that he had a reasonable defence. It must be construed reasonably not only by the words used but also with regard to the surrounding circumstances. it should be given a reasonable business meaning and should not be construed so as to render it ineffective or illusory. Thus. The court took the view that a guarantee should be considered simply like any other commercial contract. such a delay on the part of P in making the application to strike out the defence is not fatal in the circumstances as the application may be made even after the pleadings are closed. there was a delay of nearly 16 months before P applied for summary judgment under O 14. (2) however.Guarantor's liability 3 [2414] CONTRACT Guarantee – Guarantor's liability – Guarantors liable to pay on demand – Creditor extending time to pay to principal debtor – Whether claim against guarantors premature – Interpretation of guarantee Summary : P appealed against the decision of the senior assistant registrar refusing to grant P's application to enter judgment against D for sums of money due on overdraft facility and trust receipt facility granted by P to D1. In regard to the O 14 application. it was struck out and judgment was. (5) in the result. D contended that it should be dismissed as there was inordinate delay on the part of P in making the application. Kota Kinabalu (Mohamad Noor J). the amounts claimed by P were covered by the guarantee as they were the debts of H Sdn Bhd. Holding : Held. (4) in the instant case. D2-D5 were guarantors.triable issues had been raised in the statement of defence. P applied for an order that the defence of D be struck out and judgment be entered in favour of P. accordingly. Alternatively. Counsel for D submitted that the claim against D1 was premature as P had agreed to grant D1 . who by letters of guarantee. entered for P. there was evidence to show that the service of the notice of demand on D was properly made. Digest : Shell Marketing Co of Borneo Ltd v Tan Sri Datuk Wee Boon Ping Civil Suit No K776 of 1987 High Court. As P had given no satisfactory explanation for the delay. agreed to pay on demand all sums from D1 to P. vexatious and an abuse of the process of the court. the court dismissed the O 14 application. It could not also be denied that there was consideration for the guarantee which was in the nature of a continuing guarantee. allowing P's application to strike out the statement of defence: (1) in the instant case. (3) in the instant case. 2414 Guarantee -. P also appealed against the order of the registrar granting D unconditional leave to defend the action.

787 and therefore the balance of the purchase price was RM29. P's appeal against D1 was dismissed by the court. Holding : Held. their liability to pay was not affected in any way by P granting time to D1 to pay the debt. The learned trial judge then found that the amount recoverable was RM3.000 on the repairs.time to settle the outstanding sums.200 after spending RM6. The learned trial judge found that no notice was required to terminate the hiring but if notice was required the letter was sufficient notice for that purpose. having regard to the letters of guarantee signed by them. The appellants sent a letter to the hirer informing him that as he had failed to pay the instalments they had instructed their representative to repossess the tractor.Claim of arrears of hire-rent . By the letters of guarantee. the question which arose for consideration was whether P's claim against D1 was premature in view of the extension of time given by P to D1 to pay the outstanding sums. so that by that date he was in arrear with the rent to the extent of RM19.Guarantor's liability 3 [2415] CONTRACT Guarantee – Guarantor's liability – Hire-purchase agreement – Arrears of hire-rent – Hire-purchase .451 under the agreement and up to 6 May 1994 had paid by way of hire-rent the sum of RM13. Digest : Development & Commercial Bank Bhd v Uni-Commercial Sdn Bhd & Ors Suit No C3-23-4424-86 High Court.247.Repossession by owner .034. dismissing P's appeal against D1 and allowing the appeal against D2-D5: (1) in the instant case. He also held that the respondent as guarantor was liable to pay the sums due under the agreement. (2) in the case of D2-D5. Kuala Lumpur (Zakaria Yatim J). The appellants resold the seized tractor for RM32. D2-D5 had no defence to the claim. Counsel also submitted that D2-D5's liability to pay had not yet arisen due to P granting time to D1 to pay the debt.Hirer cannot recover any payment made under agreement .Notice to terminate . so . the first defendant had paid a total of RM19. D1 had accordingly succeeded in raising triable issues. 2415 Guarantee -.Right to recover .124.788.336 when the total amount due as hire-rent was RM33. ss 75 and 98. The hirer had paid the initial payment of RM6.Contracts (Malay States) Ordinance 1950. D2-D5 agreed to pay P on demand made upon them. Summary : The was an appeal from the decision of the High Court on a claim by the appellants for instalments due under a hire-purchase agreement of a tractor. In view of the provisions contained in the letters of guarantee and in the circumstances of the case.047 made up as follows: The agreed hirepurchase price was RM49. The court accordingly allowed P's appeal against them.

The plaintiffs had also failed to give written notice of such assignment before the commencement of this action. The plaintiffs also signed a dealers recourse agreement with the financier. and the notice of the assignment of the guarantees. Suffian and Gill FJJ). (3) the appellants were therefore entitled to judgment in the sum of RM19.the amount they recovered was RM26.788 in respect of arrears of hire-rent and RM500 in respect of repossession fees making a total of RM20. Digest : Anglo-American Corp (M) Sdn Bhd v Datok Phua Cheng Leong [1969] 2 MLJ 12 Federal Court. The plaintiffs indemnified the financier for the losses on a recourse basis.Guarantor's liability 3 [2416] CONTRACT Guarantee – Guarantor's liability – Hire purchase of tractors – Dealers recourse agreement – Guarantees given in favour of financier – Default – Assignment of guarantees by financier to dealer – Whether dealer could recover from guarantors after having indemnified financier Summary : The plaintiffs sold the first defendant two tractors. that is RM3. and then claimed from the second and third defendant guarantors.200. The appellants were entitled to recover the balance of instalments due. The first defendant entered into hire-purchase agreements with a financier for the tractors. The guarantees were signed between the financier and the guarantors. 2416 Guarantee -. and the financier repossessed the tractors.047. The second and third defendants guaranteed the first defendant's payments.) The preliminary objection of the second and third defendants were that the plaintiffs had failed to plead the dealers recourse agreement from whence their rights originated. allowing the appeal: (1) the learned trial judge had misdirected himself in law and had failed to distinguish between the claim for arrears of monthly hire-rent and the claim by way of compensation for depreciation. and the amount already paid by the hirer and the amount realized by the resale of the property were wholly irrelevant to this claim. contrary to s 4(3) of the Civil Law Act 1956. the assignment of the guarantees by the financier to the plaintiffs. Kuala Lumpur (Azmi LP. The learned trial judge gave judgment for the appellants for the difference. The first defendant failed to pay the instalments. (The financier assigned the guarantees to the plaintiffs.288 with interest as claimed. Holding : Held. (2) no case had been made out by the respondent for equitable relief which could exempt him from liability to pay the hire-rent. Holding : . and indemnified the plaintiffs against losses suffered through the first defendant's default.

Digest : UMW (East Malaysia) Sdn Bhd v Syarikat World Business & Ors Suit No K34 of 1984 High Court. the guarantor. allowing P's petition: (1) it is clear from the authorities that where a loan has been secured by two collateral securities.Guarantor's liability 3 [2417] CONTRACT Guarantee – Guarantor's liability – Interpretation of guarantee – Whether creditor entitled to proceed against guarantor instead of chargor for realization of debt – Bank Bumiputra Malaysia Bhd v Esah bte Abdul Ghani [1986] 1 MLJ 16 (apprvd) Malaysian International Merchant Bankers Bhd v G & C Securities Sdn Bhd & Anor [1988] 2 MLJ 471 (apprvd) Bank Bumiputra Malaysia Bhd v Doric Development Bhd & Ors [1988] 1 CLJ 311 (apprvd) Malaysia Building Society Bhd v Lim Kheng Kim & Ors [1988] 3 MLJ 175 (approvd) Re Majory [1955] 1 Ch 600 (consd) Re Fraser [1892] 2 QB 633 (consd) Re Davies (1876) 3 Ch D 461 (consd) Re Flatau (1888) 22 QBD 83 (consd) Sovereign General Insurance Sdn Bhd v Koh Tian Bee [1988] 1 MLJ 304 at 305 (apprvd) Lesco Development Corp Sdn Bhd v Malaysia Building Society Bhd [1988] 2 MLJ 184 (distd) Summary : P sued D. upholding the preliminary objection: the plaintiffs' right to sue depended on a written assignment of the guarantees to them.Held. Kota Kinabalu (Tee Ah Sing JC). one in the form of a charge and the other in the form of a guarantee. to recover the amount owing by X. P was estopped from proceeding against him after foreclosure of the land in the originating summons. Holding : Held. The parties were bound by their pleadings. 2417 Guarantee -. bankruptcy proceedings based on that judgment was instituted against D. Since this had not been done. the borrower. Subsequently. D contended that as his liability only arose when the proceeds of sale of the land were insufficient to pay all moneys due to P by X. the averments were out of s 4(3) of the Civil Law Act. D applied for the bankruptcy proceedings to be set aside or to be stayed under s 97 of the Bankruptcy Act 1967. there is nothing to prevent the lender from proceeding . Judgment in default was obtained against D. to whom P had lent a sum of money. and written notice of the assignment being given to the guarantors before the commencement of the action. D also contended that the civil suit was brought prematurely against him as no proper letter of demand was sent to him so that the default judgment obtained therein was not proper and accordingly the bankruptcy proceedings based on that judgment should not be allowed. It was further contended that the creditor's petition was bad in law as it wrongly stated that the act of bankruptcy occurred on a day which was one day before the event.

P applied for summary judgment to be entered against D4. the validity of the final judgment could not be inquired into. whether D's liability had arisen must depend upon the terms of the guarantee agreement executed between the parties. the misstatement in P's petition was merely a formal defect or irregularity which was remediable under s 131 of the Bankruptcy Act 1967 as no injustice could be said to arise from it. ex parte Equity Finance Corp Bhd [1989] 3 MLJ 428 High Court. the court made a receiving and adjudication order against D. P had earlier provided D1 with a term loan and a revolving credit facility. In any event. No appeal was lodged by D against the judgment nor was there any application for stay of proceedings as a result of it. D4 contended that they were discharged from all liabilities under the . 2418 Guarantee -. ordered a stay of the bankruptcy proceedings pursuant to s 97 of the Bankruptcy Act 1967 pending the judicial sale of the land with liberty to P to apply if the sale should prove abortive. As the sale had proven abortive and upon the application of P. found no merit in D's contention that P was estopped from proceeding against him after foreclosure of the land in the originating summons. In the instant case. Johore Bahru (LC Vohrah J). (2) in the instant case. The court accordingly held that in the absence of any fraud. (4) the court. The court. the guarantee agreement in the instant case did not specifically provide for an actual notice of demand to be sent to D before any liability could arise against him. 325 (cited) MIMB v G & C Securities (Kuala Lumpur High Court Civil Suit 231657-86) (unreported) (cited) Bank Bumi v Doric Development Sdn Bhd [1984] 1 MLJ 222 (cited) Burnes v Trade Credits Ltd [1981] 2 All ER 122 (distd) National Bank of Greece SA v Pinios Shipping Co (No 1) [1989] 1 All ER 213 (cited) Summary : P sued D4 pursuant to a guarantee by which D4 guaranteed the repayment of all moneys due and payable by D1 to P.against the guarantor instead of the chargor for realization of the debt. however.Guarantor's liability 3 [2418] CONTRACT Guarantee – Guarantor's liability – Interpretation of guarantee – Whether guarantor discharged from liability under guarantee upon restructuring of credit facility – Heng Cheng Swee v Bangkok Bank Ltd [1976] 1 MLJ 267. (3) in the instant case. the question of the propriety of the notice of demand was argued at length by counsel for D at the hearing of the O 14 application but was rejected by the senior assistant registrar who gave summary judgment in favour of P. the liability incurred by D was as principal debtor and not merely as surety. Under cl 6 of the guarantee. Digest : Re Tosrin bin Jarvanthi. collusion or miscarriage of justice having been established. There was no evidence that D attempted to pay up at any time before the day in question. accordingly. 274 (cited) Bank Bumi v Kredin [1989] 1 MLJ 323.

Digest : Yong Tze Kiok & Ors v Citibank NA [1990] 1 MLJ 222 Court of Appeal. Kuala Lumpur (VC George J). P had earlier in 1981 executed five guarantees with D for certain sums of money advanced by D. Holding : Held. . pursuant to two guarantees executed in 1986. the guarantors. the amount to be lent was up to the discretion of D. The senior assistant registrar dismissed P's application and P appealed to the High Court. Upon a true construction of the documents. P was granted leave to enter final judgment against D4. (2) as there were no bona fide triable issue raised in the appeal. DS Hunter and Bokhary. Brunei (D Cons Ag President. D4 was not discharged from its liability under the guarantee until all amounts payable by D1 had been paid. that D. the High Court reversed the decision of the registrar. there was nothing in the guarantees executed which imposed on D the obligation to lend to the principal debtor a further B$2m. the present appeal by P to the Court of Appeal. the creditor. indulgence. allowing the appeal: (1) with regard to the terms of the guarantee. On appeal by D. In any event. consent and so on. Commissioners). Holding : Held. D4 contended that this was a triable issue.guarantee as P had restructured the facility or deferred the repayment schedule. had not fulfilled its own obligations under the guarantees in that it had failed to lend a further B$2m. The registrar gave P unconditional leave to defend the action brought by D. Under the terms of the guarantee. D4 by the terms of the guarantee had bargained away its rights to make complaints on matters which it sought to have issues tried.Guarantor's liability 3 [2419] CONTRACT Guarantee – Guarantor's liability – Interpretation of guarantees – Whether creditor in breach of its obligations under guarantees Summary : D sued P. inter alia. Hence. 2419 Guarantee -. dismissing the appeal: (1) in the instant case. P was not even obliged to give reasons for delay. P alleged. Digest : D & C Nomura Merchant Bankers Bhd v Gunung Kuari Sdn Bhd & Ors Civil Suit No C23-537-86 High Court. (2) the court dismissed the counterclaim of P1 and P4 as the issues in the counterclaim were the same as those in the claim and depended likewise upon P being able to establish upon D an obligation to lend a further B$2m.

D were clearly seeking to improve on their statement of defence. D raised two issues. D had also added a third issue in that P was estopped from enforcing the guarantee as there were pending foreclosure proceedings instituted by P against AP Sdn Bhd to realize the facility by the sale of the other security for the loan. that the notices of demand were bad in law and that there had been a variation in the amount guaranteed. There was nothing in the guarantee which prohibited P from suing D just because there were pending .Guarantor's liability 3 [2420] CONTRACT Guarantee – Guarantor's liability – Loan to principal debtor secured by absolute deed of assignment and guarantee – Deed of assignment executed – Whether execution of absolute deed of assignment extinguished debt – Whether guarantee not extant and consequently not available for enforcement See contract.Guarantor's liability 3 [2421] CONTRACT Guarantee – Guarantor's liability – Nature of – Loan to principal debtor secured by registered charge and guarantee – Foreclosure proceedings instituted by creditor against principal debtor – Whether creditor estopped from enforcing guarantee Summary : P sued D in their capacities as guarantors for the repayment of a loan granted by P to AP Sdn Bhd of which D were the directors at the material time. the principal debtor. para VIII [49]. Digest : Raju Jayaraman Kerpaya v Chung Khiaw Bank Ltd [1997] 2 MLJ 590 Court of Appeal. However. particularly so in this case when the plea of estoppel alone was relied upon as D chose to abandon the other issues raised in their statement of defence. By raising the issue of estoppel in their affidavit for the first time. The instant application was an appeal by D against the summary judgment entered against them by the senior assistant registrar. The loan facility was secured by a first legal charge over a factory and the personal guarantees of D. Holding : Held. namely. Siti Norma Yaakob and Ahmad Fairuz JJCA). in a joint affidavit opposing P's ord 14 application. This was not permissible. In their statement of defence. dismissing the appeal: (1) it is a cardinal principle of pleadings that parties to an action are bound by their own pleadings. 2421 Guarantee -. Kuala Lumpur (Gopal Sri Ram. (2) the plea of estoppel merits no consideration as the instant suit against D was to enforce a different security altogether to the one commenced against AP Sdn Bhd.2420 Guarantee -.

foreclosure proceedings instituted by P against the principal debtor. (3) the presence of cl 28 in the charge documents. dismissing D's appeal: (1) in the instant case. The agreement was signed between P and D1 under which a fixed term loan was granted to D1. (4) D's appeal was. Digest : Development & Commercial Bank Bhd v Abdullah bin Ismail & Anor Kod No D2-23-130-88 Hgh Court. D appealed against the decision of the senior assistant registrar on the ground that P could only proceed against D2 and D3 if there had been a shortfall in the proceeds of sale realized by the sale of D2's charged property. did not abrogate the right of P to elect which of two securities it wished to proceed with. was expected to meet the difference. accordingly. Kuala Lumpur (Siti Norma Yaakob J). As far as D1 was concerned.Guarantor's liability 3 [2422] CONTRACT Guarantee – Guarantor's liability – Nature of – Loan to principal debtor secured by registered charge and guarantee – Whether creditor's right to enforce guarantee dependent upon whether there is a shortfall in proceeds of sale in foreclosure proceedings Summary : P sued D for a sum of money due on a loan agreement. This was an action in rem and very distinct from the action in personam available under the contract of guarantee against D2 and D3. the fact that the guarantee itself contained a conclusive evidence clause sealed D's liability under the guarantee. D contended that P's conduct in enforcing the guarantee against D2 and D3 was premature. as chargor. only the liabilities of D2 and D3 were disputed. The loan was secured by a first legal charge on a piece of property belonging to D2 and the joint and several guarantee of both D2 and D3. As the foreclosure proceedings were still pending and the sale not finalized. dismissed. P may even enforce both . (3) in the instant case. P was at liberty to seek the directions of the court or the Land Administrator regarding the sale of D2's land to offset the amount due to it. which seeks to cover the situation where the proceeds of sale were insufficient to satisfy the amount due on the loan agreement. the right to sue against them had not arisen yet. it was not questioning its liability under the loan agreement. The senior assistant registrar allowed P's application for summary judgment under O 14 of the Rules of the High Court 1980 for the sum claimed against D1 as the principal debtor and D2 and D3 as guarantors. The present suit was instituted against D following their defaults. Holding : Held. in which case D2. As the chargee. 2422 Guarantee -. Accordingly. (2) the liabilities of D2 and D3 are personal liabilities and are in no way affected by the charge created by D2 in favour of P.

(2) under the first clause of the letter of guarantee.securities. as was done in this case. D3 was also a director of D1 to which P had granted overdraft facility. Kuala Lumpur (Shankar J). Holding : Held. P were entitled to judgment for the amount of the overdraft facility plus the interest which accrued thereon at the agreed rate. Digest : Kwong Yik Finance Bhd v Mutual Endeavour Sdn Bhd & Ors [1989] 1 MLJ 135 High Court. Clause 14 made each of the guarantors a principal debtor. 2423 Guarantee -. Regard must be had to the language of the instrument and the nature of the liability which it creates. D3 and the other directors ignored the notice. In any event. Kuala Lumpur (Siti Norma Yaakob J). Digest : Kwong Yik Bank Bhd v Transbuilder Sdn Bhd & Ors [1989] 2 MLJ 301 High Court. accordingly. no antecedent demand was required to create a cause of action and the mere filing of the writ and the service thereof was a sufficient demand obliging D3 to pay. 2424 Guarantee -. P had earlier given notice by AR Registered letter to D3 and the other directors that they required the balance sum owing by D1 to be settled within seven days. The only ground on which D3 denied liability to pay the sum claimed was that P's letter aforesaid was not a proper demand and as no demand had been made from him for payment of the same. P's letter was a demand on D3 as well as all the other directors of D1 and D1 itself. action of P was premature.Guarantor's liability . the obligation of D3 was not a collateral promise to pay on demand if the primary debtor did not pay. D3 had. (4) in the instant case. dismissed by the learned judge. allowing P's application: (1) the issue as to whether a prior demand is a condition precedent to the creation of liability in a guarantor must depend on the precise terms of the guarantee. (4) the appeal of D was. guaranteed repayment of the sum pursuant to a letter of guarantee. together with the other directors of D1. (3) in the instant case.Guarantor's liability 3 [2423] CONTRACT Guarantee – Guarantor's liability – Nature of – Whether guarantor liable as principal debtor under guarantee – Whether prior demand a condition precedent to creation of liability in guarantor Summary : P applied for summary judgment against D3 for a sum of money owing by D1. if it was found that one security was insufficient to settle the debt.

an event which happened during the currency of the guarantee. Holding : Held. that the guarantee was invalid as a fourth person who was to have signed as a co-guarantor had yet to execute the guarantee. Digest : Bank Kerjasama Rakyat Malaysia Bhd v Bank Pembangunan Malaysia Bhd Civil Suit No 23-56-87 High Court. accordingly. In the instant case. Upon default in repayment. The presence of such a clause obviates the necessity for a demand as the issuance of the writ was a demand in itself. (2) in any event. Kuala Lumpur (Siti Norma Yaakob J). Judgment in default of appearance was entered against D1. P applied for summary judgment against D2-D4. pursuant to a letter of guarantee wherein D guaranteed the repayment of a term loan which P had granted to two stock brokers. D2-D4 contended. P sued D1 as principal borrower and D2-D4 as guarantors for the sum owing. inter alia. In opposing the application. the repayment of which was guaranteed by D2-D4. Holding : . the guarantor. The senior assistant registrar granted summary judgment against D and D appealed to the High Court. the principal debtors. 2425 Guarantee -. what was more important was that the liability must arise during the currency of the guarantee and it matters not that the enforcement of such a liability took place after the expiry of the guarantee. dismissing the appeal: (1) under cl 1 of the guarantee.3 [2424] CONTRACT Guarantee – Guarantor's liability – Notice of sent after expiry of guarantee period – Whether liability as guarantor discharged Summary : P sued D. D's liability to meet payment of the term loan arose immediately upon the default of the principal debtors to service the interests due.Guarantor's liability 3 [2425] CONTRACT Guarantee – Guarantor's liability – Validity of guarantee Summary : P had granted credit facilities to D1. The principal debtors had defaulted almost immediately when they failed to service the interest payable on the drawdown. the learned judge. (3) since all the issues raised had been adequately replied by affidavit evidence. the presence of a principal debtor clause in the guarantee had changed the character of the guarantee such that it was no longer a collateral agreement. dismissed D's appeal. D contended that his liability as a guarantor had been validly discharged as the notice of demand was not sent during the currency of the guarantee but only well after the expiry of the guarantee period.

there was nothing to show that a fourth person was to sign as a co-guarantor. (4) as the liability of D2 as a guarantor had been established. 2426 Guarantee -. it was clear that P had the absolute discretion to vary the terms of the facility without resorting to D2 and to contract out of ss 86 and 94 of the Contracts Act 1950. the court allowed P's application for summary judgment to be entered against D2-D4. the following issues: (a) that there was delay in the filing of the O 14 application. (3) the statement of account exhibited by P detailing the amount that had been disbursed and the calculation of accrued interest showing the total amount outstanding. ss 86 & 94 Summary : P sued D2 as a guarantor for the sum in question. D2 was. was admissible in evidence as it had been verified and affirmed by the general manager of P as coming from the original records of P. and (c) that ss 4 and 5 of the Bankers' Books (Evidence) Act 1949 had not been complied with. (b) that there had been a variation of the terms of the loan agreement without his knowledge. as no triable issue was raised. (2) in the result. allowing P's application: (1) having regard to the evidence in the instant case. In his appeal to have the O 14 judgment entered against him set aside. not discharged from his liability as a guarantor as a result of the variation in question. the O 14 application was filed just two months after D2 had filed his statement of defence. dismissing the appeal: (1) in the instant case. D2 raised. Kota Kinabalu (Syed Ahmad Idid JC). As D2 had not shown that he had been in any way prejudiced by the delay.Held. Digest : United Malayan Banking Corp Bhd v Sabakaya Credit Sdn Bhd & Ors Civil Suit No K256 of 1988 High Court. inter alia. the court took the view that the delay of two months could not be considered in any way unreasonable. P's application for summary judgment was allowed by the registrar. This was sufficient to show compliance with ss 4 and 5 of the Act. Holding : Held.Guarantor's liability 3 [2426] CONTRACT Guarantee – Guarantor's liability – Variation of terms of principal contract without knowledge of guarantor – Whether guarantor discharged from liability – Contracts Act 1950. (2) having regard to the wide terms of the guarantee. accordingly. Digest : . There was no representation by P to D2-D4 that a fourth person was to join them as guarantor and this could be seen from the fact that the name of the fourth person was not typed on the guarantee document. the court dismissed the appeal with costs.

Kuala Lumpur (Siti Norma Yaakob J). It was also argued for P that he was released from his liability under the first guarantee by reason of D having obtained the second guarantee. See CONTRACT. The overdraft facility was serviced by a charge over eight parcels of properties and guaranteed jointly and severally by the board of directors of X Bhd. Accordingly. D had by a letter demanded payment of a sum of money from X Bhd.Guarantor's liability 3 [2427] CONTRACT Guarantee – Guarantor's liability – Whether guarantors liable when notice of demand sent to address different from that expressly stated in the guarantee – Interpretation of clause deeming service Digest : Teck Guan Trading Sdn Bhd v Hydrotek Engineering (S) Sdn Bhd & Ors [1996] 4 MLJ 331 High Court. dismissing the appeal: (1) the issue of whether a proper demand was made on P was not pleaded and argued in the High Court. Another guarantee had subsequently been executed but this time by only four directors of X Bhd. This subsequent guarantee was also a continuing guarantee and it covered the overdraft as well as two term loans which had been approved but not released. Having regard to cl 11 of the guarantee. para 1834. (2) even if the issue was considered. being the sum in excess of the overdraft. the second guarantee . 2427 Guarantee -. of whom P was a member. excluding P. the issue should not be allowed to be argued and to succeed on appeal. 2428 Guarantee -. It was contended for P that he was not liable under the guarantee as no proper demand was made on him. D commenced proceedings against all the guarantors. Kota Kinabalu (Ian Chin J). Vol 3. As no payment was forthcoming.Guarantor's liability 3 [2428] CONTRACT Guarantee – Guarantor's liability – Whether proper demand made – Whether subsequent guarantee given in substitution for and to discharge first guarantee Summary : D had earlier granted an overdraft facility to X Bhd. It was therefore proper and valid for the solicitor in question to act on behalf of D by signing and sending the notice of the demand to P. Holding : Held.Co-operative Central Bank Ltd v Low Wah Shak & Ors Civil Suit No C23-2341987 High Court. The High Court found in favour of D and P appealed to the Supreme Court. (3) in the instant case. it was not a mandatory but a discretionary requirement for the notice of the demand to be effectually given by an officer of D. P's contention on this point would still have failed.

P had filed the O 14 application after the grace period given to D to settle the debts had expired. The ord 14 application was. and to discharge. (2) in the instant case. the delay on the part of P in filing the O 14 application was not inordinate. The affidavit had complied with the requirement as to the verification of the facts on which the claim was based.Guarantor's liability 3 [2429] CONTRACT Guarantee – Guarantor's liability – Whether proper demand made on guarantors Summary : P had granted a loan to D1 the repayment of which was guaranteed by D2-D4. the court found that there was no concrete proof that the letter of demand had actually reached him in the absence of the relevant AR card for his letter. In the appeal to the High Court. accordingly. Malaysia (Abdul Hamid Omar LP. that (i) P's affidavit supporting the O 14 application was defective as it did not verify at all the facts on which the claim was based. In regard to D2. the first guarantee. D defaulted in repayment of the loan and failed to pay the sum owing despite repeated demands by P. accordingly. Digest : Lee Ah Chor v Southern Bank Bhd [1991] 1 MLJ 428 Supreme Court. the letters of demand sent to D3 and D4 were valid as they had been sent to them individually by registered post. Subsequently. Holding : Held. The AR cards in respect of the letters sent to D3 and D4 had all been exhibited. Digest : . The court. D contended. the delay had been satisfactorily explained by P. More importantly. 2429 Guarantee -. Accordingly. D3 and D4 but allowed the appeal by D2. Gunn Chit Tuan and Jemuri Serjan SCJJ).was not given in substitution for. held that D2 was not served with the letter of demand. (3) in the instant case. P sued D for the sum owing and O 14 judgment was entered against D in due course. inter alia. the affidavit in support of P's O 14 application was not defective. (4) in the result. there was evidence to show that it was the intention of D that the first and second guarantees should subsist side by side and not one in substitution for another. (ii) there had been an inordinate delay on the part of P in filing the O 14 application. the court dismissed the appeal by D1. allowing D2's appeal: (1) in the instant case. not defective and wanting in the circumstances. The amount guaranteed under the first guarantee was different from that in the second guarantee where the terms of repayment of the term loans themselves were different. and (iii) there was no proper demand made on D2-D4 who were guarantors.

the guarantee was to the Malayan Banking Ltd for granting overdraft facilities to the company. Holding : Held: the learned trial judge was right in concluding that the respondent was entitled to be fully indemnified in respect of the guarantee. the respondent. 2430 Guarantee -. (c) the learned judge drew a wrong conclusion that the resolution of the company was intended by the appellant to indemnify the respondent in respect of the guarantee issued by him.Guarantor 3 [2430] CONTRACT Guarantee – Guarantor – Liability of – Failure of plaintiff to create assignment of properties in hire-purchase agreements acquired by it under block discounting agreement – Whether guarantor prejudiced Digest : Mayban Finance Bhd v Aik Soon Auto Sdn Bhd (formerly known as Aik Soon Auto Finance Sdn Bhd) & Or Suit No D2-22-1752-91 High Court. was appointed a director of a company. a consultant engineer and employee of the company. Kuala Lumpur (Siti Norma Yaakob J See CONTRACT. para 1610. (b) the learned judge was wrong in holding that an assurance from a director of a company without more.Indemnification 3 [2431] CONTRACT Guarantee – Indemnification – Contract . when acted upon could bind the company. The overdraft debt was not paid and the bank obtained judgment against the respondent and some of the other directors. As director he joined with the other directors to guarantee debts or other liabilities of the company and other connected companies by issuing letters of guarantee. The respondent relied on the oral assurance of the shareholders of the companies and a resolution of the appellant company and claimed to be indemnified against all claims. Vol 3. 2431 Guarantee -. The appellant appealed. . The learned trial judge made a declaration that the respondent was entitled to be fully indemnified in respect of the guarantee. It was argued on appeal that (a) the learned judge was wrong to conclude that there was sufficient evidence from which he could draw the inference that the appellant had agreed to indemnify the respondent on the guarantee either orally or in writing. Summary : In this case.Resolution of company.MBF Finance Bhd v Hasmat Properties Sdn Bhd & Ors [1990] 1 MLJ 180 High Court. Ipoh (Abdul Malek J). In this case.Guarantee Whether plaintiff entitled to be fully indemnified in respect of guarantee for overdraft facilities .

dismissing the appeal with costs: (1) it has already been agreed that there was to be a grace period of three months after the execution of the assignment within which the guarantee was to be executed. A joint and irrevocable guarantee dated 14 April 1984 was executed by the four guarantors. and (ii) the assignment is not enforceable. In view of this prior arrangement. title and interest in all the secured and unsecured debts due and payable by the borrower to the plaintiff.02(b) of the assignment. and the plaintiff sought to enforce the guarantee against the defendant. to that extent. agreeing to indemnify the plaintiff in the event of default by the assignee in failing to fulfil cl 3. the assignee was to secure the personal guarantees of four named guarantors. s 80 of the Contracts Act 1950 has been sufficiently fulfilled. the assignee and the borrower.Digest : Euco International Sdn Bhd v PF Chen [1984] 2 MLJ 61 Federal Court. The defendant appealed on the grounds. the plaintiff succeeded in its application to enter final judgment against the defendant. Under cl 3. (2) the principal debtor is the assignee and at the time the guarantee was executed. A deed of assignment was executed by the plaintiff. the . the benefit still accrued to the assignee.02(b) of the assignment. there is no question of the consideration being a past consideration and. the plaintiff assigned all its rights. inter alia. Pending such payment. the balance of the purchase consideration was to be settled by a final payment of M$2m by the assignee to the plaintiff within two years from the date of the execution of the assignment. The assignee failed to do so. On 14 January 1984. that (i) there was no good consideration given for the guarantee as it was not executed contemporaneously with the assignment. (3) if there is any doubt as to the relationship of the parties and their liabilities.Indemnification 3 [2432] CONTRACT Guarantee – Indemnification – Indemnity for liabilities of assignee – Guarantors agreed to indemnify plaintiff in the event of assignee's default – Guarantee not executed contemporaneously with assignment – Whether good consideration for guarantee – Whether assignment enforceable Summary : The plaintiff had extended term loans and banking facilities amounting to M$16.59 to the borrower. Before the senior assistant registrar. it cannot be said that the consideration is past purely based on the time when the guarantee was executed.188. 2432 Guarantee -. Since the lapse of time had been agreed to by all the parties.144. as no written notice as envisaged by s 4(3) of the Civil Law Act 1956 has been sent by the plaintiff to the borrower. Holding : Held. even though there is a lapse of time of three months between the execution of the assignment and the execution of the guarantee. Kuala Lumpur (Lee Hun Hoe CJ (Borneo). who is one of the guarantors. to the assignee.

Since the indemnities did not incorporate any precondition similar to that expressed in the bank guarantees. P sought reimbursement for the total amount paid out to Yayasan Pahang under the bank guarantees by enforcing the indemnities executed by D. (2) the fact that the bank guarantees might well have a precondition attached to them was quite immaterial to D's liability under the indemnities as different considerations were expressed in both sets of documents and they were executed by different parties. D denied liability contending that P had been negligent in paying out the sums demanded by Yayasan Pahang as such payment was conditional upon the firm being in possession of a valid licence to extract logs to be issued by the Forest Department of Pahang. dismissed D's appeal against the O 14 judgment entered against them. the indemnities in question contained no precondition that binds P before making payment out to Yayasan Pahang. (5) lack of authority to sign the assignment has no relevance to the liability of the defendant. Abdul Ghafar Baba & Ors. Third Parties Civil Suit No D2-22-867-90 High Court. At the request of the firm. The senior assistant registrar allowed P's application for summary judgment and D appealed to the High Court. P issued four bank guarantees as security for the due performance by the firm of its obligations under three timber concession agreements executed by the firm with Yayasan Pahang. (4) lack of a written notice does not render the assignment illegal or unenforceable. To secure the four bank guarantees.recitals in the guarantee are clear in meaning and intent and recital (c) repeats the time frame when the guarantee must be given. dismissing the appeal: (1) in the instant case. Kuala Lumpur (Siti Norma Yaakob J). D executed four indemnities. as he is being sued under the guarantee he executed and not under the assignment. Holding : Held. . Yayasan Pahang had agreed to allow the firm to fell and purchase all the timber logged in the designated concession areas in consideration of the firm paying a sum of money to it. 2433 Guarantee -. as the assignment then becomes an equitable assignment that binds all the parties to the assignment. D could not now import such precondition into the indemnities. In due course. (3) as there were no triable issues raised by D.Indemnifiers' liability 3 [2433] CONTRACT Guarantee – Indemnifiers' liability – Whether right to be indemnified absolute – Interpretation of indemnities Summary : D were partners of a firm which in turn was a customer of P. Digest : Citibank NA v Choong Kok Min. By the expressed language contained in the indemnities. D had held themselves out to be personally liable to P for any payment made out by P under the bank guarantee. the court. accordingly.

proceedings whatsoever which may be taken or made against the plaintiffs. the plaintiffs demanded for . ss 70. Kuala Lumpur (Siti Norma Yaakob J).Indemnity 3 [2434] CONTRACT Guarantee – Indemnity – Construction – Whether instrument was a guarantee or indemnity – Contracts Act 1950. Upon default or delay in payment by the plaintiffs to FELDA. on 16 November 1987. suits. losses. FELDA issued a summons against the plaintiffs wherein FELDA claimed for the Guaranteed Sum. (d) the Indemnity and Guarantee should continue to remain in force and should be valid until the plaintiffs' liability under the Guarantee shall cease. the first defendant together with the second and third defendants executed their indemnity (`Indemnity') and indemnity and guarantee (`Indemnity and Guarantee') respectively in favour of the plaintiffs on 8 June 1983. 77 & 79 Summary : The plaintiffs had on the application and/or request of the first defendant made on 7 June 1983 issued a guarantee (`the Guarantee') in favour of the Federal Land Development Authority (`FELDA') for an amount of RM503. they jointly and severally undertook and agreed to guarantee the performance and compliance by the first defendant of its obligations to the plaintiffs.05 (`Guaranteed Sum'). 2434 Guarantee -. The first defendant defaulted in performing its contract with FELDA and as a result thereof FELDA terminated the contract entered into between itself and the first defendant and made a call on the Guarantee. Thereafter. The first defendant agreed to accept vouchers or other evidence of payment made by the plaintiffs as conclusive evidence against the first defendant of its liability under the Indemnity and further agreed that the Indemnity shall remain in force and shall be valid until the plaintiffs' liability under the Guarantee ceased.Digest : Perwira Habib Bank Malaysia Bhd v Sim Ah Hee & Anor Code No C23-2336-86 High Court. The second and third defendants further jointly and severally undertook and covenanted that: (a) the plaintiffs may at their absolute discretion compromise all claims.818. demands. damages. expenses and all liabilities arising from the plaintiffs providing the Guarantee in favour of FELDA. (b) vouchers or other evidence of payment made by the plaintiffs by reason of the Guarantee should be accepted as conclusive evidence against them. In consideration of the plaintiffs agreeing to issue the Guarantee. It was a term of the Guarantee that the Guaranteed Sum shall be paid by the plaintiffs forthwith on demand made by FELDA without FELDA having to assign any reason whatsoever for such demand. The plaintiffs. made full payment of the Guaranteed Sum to FELDA and the proceedings taken by FELDA against the plaintiffs were discontinued. (c) the Indemnity and Guarantee may be enforced against them at any time. actions. the first defendant undertook to indemnify the plaintiffs against all claims. payments. Under the Indemnity and Guarantee given by the second and third defendants. Pursuant to the Indemnity.

(5) the plaintiffs were seeking for an equitable right to full indemnity or restitutory reimbursement from the third defendant under s 70 of the Contracts Act 1950 and they could not be denied this right.Interest 3 [2435] CONTRACT Guarantee – Interest – Applicability of standard interest clause where interest rate not stated Digest : Bank of India v Dr Pravinchand P Shah Suit No 2324 of 1987 High Court. 2435 Guarantee -. the first defendant was wound-up on 24 November 1989 whilst the second defendant was adjudicated bankrupt on 16 February 1987 leaving the third defendant the only person on record to be held liable under the Indemnity and Guarantee. The third defendant filed an amended defence of bare denial and requested the plaintiffs to prove the existence of the Indemnity and Guarantee and in the alternative pleaded that the said Indemnity and Guarantee was void and unenforceable for want of consideration. Digest : Capital Insurance Bhd v Kumpulan Pantai Sdn Bhd & Ors Civil Suit No D3-23969-88— High Court. However. the third defendant pleaded that he stood discharged of his liability because the plaintiffs had paid the Guaranteed Sum to FELDA after their liability under the Guarantee had ceased. (2) upon demand by FELDA. (4) the plaintiffs' liability to pay FELDA crystallised as soon as a demand was made and the plaintiffs were forced to pay upon the issuance of the writ against them. which otherwise would have been available in the ordinary contracts of guarantee. allowing the plaintiffs' claim: (1) although the document executed by the plaintiffs had been described as a guarantee.reimbursement and indemnity from all the defendants of the Guaranteed Sum. when read as a whole. the plaintiffs were obliged to pay in accordance with the express terms of the undertakings without proof or any conditions or notwithstanding there being a dispute between FELDA and the first defendant. Singapore (Kan Ting Chiu J). it appeared to be nothing less than an indemnity to pay to FELDA an equivalent in cash instantly and unconditionally upon demand. Holding : Held. The third defendant further argued that the Indemnity and Guarantee was a guarantee executed by him in respect of the first defendant's obligations to the plaintiffs and as there appeared to be a variation on the Indemnity by giving extension of time towards completion. (3) s 77 read together with s 79 of the Contracts Act 1950 did not enable the plaintiffs herein to plead the `usual equities' against FELDA's demand under the Guarantee. Kuala Lumpur (Rekhraj J). .

Digest : United Asian Bank Bhd v Lloyds Bank International Ltd & Anor Civil Suit No C 7018 of 1985 High Court. being the balance due as interest calculated from the date of the first drawdown together with further interest at the rate of 8% pa until realization and costs. The guarantee in question was a demand guarantee. This was so as the transaction was a commercial one where the only benefit derived by P could only be on the profit to be made on the interest due and it was highly inconceivable that the parties should agree to such interest being due from the date of demand. entered judgment for P for the sum claimed. P was entitled to charge interest on the first drawdown made to the principal borrower and not from the date of demand. D2 and D3 appealed against the decision. 2437 Guarantee -. The senior assistant registrar had held that there were no triable issues and had granted P's application for summary judgment. allowing P's claim: (1) having regard to the terms of the guarantee.Interest 3 [2436] CONTRACT Guarantee – Interest – Calculation of – Interpretation of guarantee – Whether interest payable runs from date of demand or from date of first drawdown – Malayan Banking Bhd v Tan Fong Guan & Ors [1975] 2 MLJ 49 (consd) Kong Ming Bank Bhd v Leong Ho Yuen[1982] 2 MLJ 111 (cited) Summary : The only issue raised in the suit is whether the interest payable under the guarantee executed by D in favour of P runs from the date of demand as contended by D or from the date of the first drawdown as contended by P. P had claimed from D the sum representing the interest calculated from the date of the first drawdown and not from the date of demand. para xxx. Kuala Lumpur (Siti Norma Yaakob J). D2 and D3 contended that they were liable for a lesser sum under the guarantee and that it was wrong for P to calculate the interest owing before the date of demand. .See contract. (2) the court. Holding : Held. 2436 Guarantee -. Vol 3.Interest 3 [2437] CONTRACT Guarantee – Interest – Calculation of – Whether permissible to calculate interest owing before date of demand – Interpretation of guarantee Summary : P had earlier obtained summary judgment against D2 and D3 who were guarantors for the sum in question. accordingly.

Ipoh (Abdul Malek J).Contracts Act 1950.Letter guaranteeing repayment of third party's debt in instalments 3 [2439] CONTRACT Guarantee – Letter guaranteeing repayment of third party's debt in instalments – Whether guarantor could avail himself of counterclaim . s 91. Digest : Public Finance Bhd v Ching Yik Credit Sdn Bhd & Ors Civil Suit No 23-266-86 High Court. in respect of payment of insurance premiums.Guarantee . s 91 – Practice and procedure . The relevant explanatory letters from P had in fact clarified the mode of calculation: (2) as there were no triable issues raised.Joint guarantee 3 [2438] CONTRACT Guarantee – Joint guarantee – Contracts Act 1950 (Act 136). a partner of SP & Low Agencies. Holding : Held: (1) on the facts the writ of summons had been properly served on the third defendant.Application to set aside default judgment Defence on merits . Kuala Lumpur (Mohamed Azmi J). It was alleged that (1) the third defendant had not been properly served with the writ of summons and (2) the letter of guarantee had been automatically revoked when the constitution of the partnership of SP & Low Agencies was changed. The third defendant had stood as guarantor with the second defendant for the first defendant. (2) the guarantee in this case was not joint but several but even assuming that it was a joint guarantee the common law principle that a release of a joint guarantor without the consent of the other would release him from his obligation under the bond is not applicable in this country because of s 91 of the Contracts Act 1950 (Act 136).Holding : Held. Summary : The third defendant applied to set aside a judgment in default of appearance entered against him. 2438 Guarantee -. it was abundantly clear that interest could be levied before the date of demand.Release . dismissing the appeal: (1) upon a proper reading of the terms of the guarantee. 2439 Guarantee -. (3) the applicant had not shown a prima facie defence on the merits in law or in fact and therefore the application must be dismissed. Digest : Taisho Marine & Fire Insurance Co Ltd v Wong Poo Peng & Ors [1976] 1 MLJ 78 High Court. the learned judge affirmed the decision of the senior assistant registrar and dismissed D's appeal.

Shortly after the Singapore action was started. Automatic commenced proceedings in Malaysia against the plaintiffs for damages for late delivery of the steel drums.14 was outstanding for the steel drums delivered by the plaintiffs.Letter guaranteeing repayment of third party's debt in instalments 3 [2440] CONTRACT Guarantee – Letter guaranteeing repayment of third party's debt in instalments – Whether terms of letter constituted primary undertaking to pay debt of third party – Whether terms of letter mere guarantee or indemnity Summary : At the request of Automatic Packing & Services Sdn Bhd (Automatic).14.257. In response. Automatic failed to pay the debt and the plaintiffs commenced an action against the defendant in Singapore. Holding : . Automatic was wound up on the petition of the plaintiffs when they were unable to pay the judgment debt. The suit against the plaintiffs in Malaysia was later struck off. Digest : Imperial Steel Drum Manufacturers Sdn Bhd v Wong Kin Heng [1997] 2 SLR 695 High Court. By another letter dated 2 April 1992. No payment was made at the time due for the first instalment. a Malaysian company. The plaintiffs later obtained summary judgment against Automatic in their action. the defendant contended. Singapore (S Rajendran J).016. that there was no or no adequate consideration for the alleged guarantee and that the claim against Automatic had not been finally disposed off by virtue of Automatic's counterclaim and the appeal against the order for summary judgment in Malaysia. A sum of RM$1. the plaintiffs supplied steel drums to Felda Refinery Corp (Felda). Although an appeal was filed against the order for summary judgment. in respect of the debt. that the letter of 2 April 1991 was not a guarantee as it was signed by him on behalf of Automatic. 2440 Guarantee -. the plaintiffs commenced separate proceedings against Automatic in Malaysia for the debt of RM$1. para IX [64]. inter alia. Felda also subsequently sued Automatic in Malaysia in respect of matters arising from the steel drums. the defendant was alleged by the plaintiffs to have personally guaranteed repayment of the outstanding debt by Automatic in instalments.016. The defendant signed a letter dated 4 March 1991 which acknowledged the debt and agreeing to its repayment by specified instalments. At the trial of the action in Singapore.257.against beneficiary – Whether counterclaim of merit – Whether comity of nations required Singapore courts to allow litigation of counterclaim in Malaysia first See contract. The plaintiffs sought a personal guarantee from the defendant. who managed Automatic.

Held. The letter was really a document evidencing the terms that had already been agreed to by the parties and no further agreement by the plaintiffs was necessary to give it legal effect. From the evidence. the letter was an indemnity given to the plaintiffs by the defendant. the defendant had in fact acknowledged that the plaintiffs were granting him an indulgence in allowing him to pay the outstanding debt of Automatic in instalments. Digest : Imperial Steel Drum Manufacturers Sdn Bhd v Wong Kin Heng [1997] 2 SLR 695 High Court. by the terms of the letter of 2 April 1991. s 29 Summary : . a document containing an offer by the defendant to pay the debt by instalments and the plaintiffs' failure to sign the letter to indicate their acceptance of the instalment plan was not fatal to the existence of a binding contract between the parties. the defendant was keeping the suit in Malaysia alive solely for the purpose of frustrating or delaying the plaintiffs' claim. (3) in the letter of 2 April 1991. The words used indicated that the defendant was not merely guaranteeing the debt of Automatic but undertaking primary liability to pay Automatic's debt in the amounts stated therein. Such forbearance to sue was a sufficient consideration for the indemnity. Singapore (S Rajendran J). allowing the plaintiffs' claim: (1) the defendant's claim that he had signed the letter of 2 April 1991 only on behalf of Automatic was not accepted as it was abundantly clear from the face of the document that what was required therein was both his personal undertaking to pay the debt and Automatic's confirmation of the debt and repayment schedule. the defendant. (2) the letter of 2 April 1991 was not. (5) the evidence led by the defendant fell hopelessly short of establishing the existence of any counterclaim that Automatic might have had against the plaintiffs. (4) as the commercial purpose of the guarantee was that the plaintiffs would have gotten their money from the defendant if they could not get it from Automatic. whatever the merits of Automatic's counterclaim against the plaintiffs. The indulgence consisted of the plaintiffs forbearing to take immediate steps to enforce their claim against Automatic in exchange for the defendant's undertaking to pay the debt in instalments. 2441 Guarantee -. In view of the paucity of evidence that could support the counterclaim and the dilatoriness in proceeding with the appeal in Malaysia. was bound to pay to the plaintiffs the amounts stated therein. the submission that the comity of nations required the Singapore courts to allow the litigation of the matter in Malaysia first was devoid of merit. Thus. in the context in which it was prepared and signed.Limitation of time for demand under guarantee 3 [2441] CONTRACT Guarantee – Limitation of time for demand under guarantee – Whether valid – Contracts Act 1950 (Act 136).

The respondents were sued as the guarantors of the company. (3) all the elements were present which would justify the exercise of the discretion in favour of the respondents. Summary : The plaintiff bank gave a loan to the first defendant and by way of security. the first defendant executed a charge in its favour.80 being the amount allegedly owed by Syarikat Baiduri (M) Sdn Bhd on an overdraft account. inter alia. Holding : Held: (1) an appellate court could only interfere in this case with the exercise of the discretion if the court below had clearly acted on some wrong principle. The second defendant.03 of the charge document was that the plaintiff bank was obliged to have the charged properties sold first and only then was it entitled to sue the first or second defendants for the balance. Kuala Lumpur (Raja Azlan Shah Ag CJ (Malaya). the loan was not repaid in accordance with the wishes of the plaintiff and the plaintiff initiated an action against the first and second defendants for the repayment of the debt. (2) in dealing with the application the learned judge committed no error of law. The senior assistant registrar gave summary judgment for the plaintiff and the defendants appealed against this decision.Whether creditor bank can commence legal proceedings against borrower/chargor and guarantor before realization of security. The application was allowed in the High Court and the appellants appealed to the Federal Court. also executed a written guarantee for the repayment on demand of all sums owing by the first defendant. that the effect of art 11.402. The respondents tried to explain why the action was not defended and also alleged that they had a good defence to the action. Neither did he fail to consider all matters demanding consideration nor act on any wrong principle. committed some error of law or failed to consider matters which demanded consideration.Loan secured by charge and guarantee . Holding : . The defendants contended. Subsequently. 2442 Guarantee -.The appellants claimed a sum of $73.Loan secured by charge and guarantee 3 [2442] CONTRACT Guarantee – Loan secured by charge and guarantee – Guarantor sued by creditor before realization of security – Whether possible – Banking . Judgment in default was obtained by the appellants and the respondents applied that the judgment be set aside. Digest : Bank Bumiputra Malaysia Bhd v Majlis Amanah Ra'ayat [1979] 1 MLJ 23 Federal Court. who was the director of the first defendant.

(2) the fact that the plaintiff had failed to proceed against the deceased in the previous suit did not mean that the matter had been abandoned. is prevented from suing the defendants in the present suit. Digest : Malaysian International Merchant Bankers Bhd v G & C Securities Sdn Bhd & Anor [1988] 2 MLJ 471 High Court. The first defendant was the administratrix and the second defendant the administrator of the guarantor (the deceased). It was plain and obvious that the issue was settled and unarguable. The notice of demand was also properly served as it was issued by way of certificate of posting to both defen-dants by the plaintiff's solicitors under cl 11 of the said guarantee.Nature of guarantee 3 [2443] CONTRACT Guarantee – Nature of guarantee – Whether demand guarantee – Whether guarantor liable when creditor had proceeded against co-guarantors only in previous suit – Joint and several liability – Whether action brought within limitation period – Res judicata Summary : This was an application by the plaintiff for summary judgment against the defendants. (2) whether the plaintiff. allowing the application: (1) the plaintiff's claim was not time-barred. as cl 3 of the guarantee provided that all moneys due from the first defendant could nevertheless be recoverable from the second defendant as principal debtor and cl 4 provided that the guarantee was in addition to and not a substitution for any other rights which the plaintiff bank may have had under the charge. after having obtained judgment against the other co-guarantors in a previous suit (in which the deceased was also a defendant) ('the previous suit') but not against the deceased. 2443 Guarantee -. Holding : Held. dismissing the appeal: art 11. There was no bar to an action against one guarantor even if the plaintiff had obtained judgment against the other guarantors. It was open to the plaintiff bank to proceed simultaneously against the second defendant as well. On the facts the action was brought well within the 6-year period under s 6(1)(a) of the Limitation Act 1953. A perusal of the clauses of the guarantee showed it was a demand guarantee and the cause of action only arose when the notice of demand was served on the guarantor. The issues before the court were: (1) whether the plaintiff's claim against the defendant was time-barred. Kuala Lumpur (Shankar J).Held. The plaintiff in the present case . and whether the defendants in the present suit were not liable because the plaintiff had failed to proceed against the deceased in the previous suit. The guarantors' liability under the said guarantee was joint and several.03 of the charge document does not impose any such obligation upon the plaintiff bank. (3) whether the doctrine of res judicata applied to the present suit.

2444 Guarantee -. Digest : United Malayan Banking Corp Bhd v Datin Theresah Bte Abdullah & Anor Civil Suit No 22(23)-7 1993 High Court.Notice of demand 3 [2444] CONTRACT Guarantee – Notice of demand – Lawful mode of service – Interpretation of meaning of 'post' in letter of guarantee – Whether includes AR registered post – Whether return of AR card and acknowledgement essential – Proper mode of service depends on provision in individual letter of guarantee Summary : . and that the matter directly and substantially in issue had been heard and finally decided by the court which heard it. It was clear from that clause that it was included to make Pembenaan Sri Pati Sdn Bhd an additional collateral guarantor in favour of the plaintiff. The clause after the guarantors' signatures could not vary the guarantors' liability thereunder. dispute or argument. the matter directly and substantially in issue was never finally decided. For the doctrine of res judicata to apply the defendant had to show that there was a former suit between the same parties for the same matter and upon the same cause of action. Muar (Low Hop Bing JC). The plaintiff's claim was plain and obvious and summary judgment ought to be given. There was no room for controversy. There was further no triable issue on the identity of the customer of the plaintiff as contended by the defendants. though the further affidavit had been allowed to be read in the defendant's submission and had been taken into account. (5) the defendant's application to the court to file a further affidavit which touched on the status of the customer Chua Lai Seng did not render any assistance to the defendant in the contest against the plaintiff's application for summary judgment. In the previous suit. It was clear from cl 1 of the guarantee that the borrower. The fact that a further clause appeared in the guarantee stating the name of Pembenaan Sri Pati Sdn Bhd as the customer did not arise in any ambiguity as it was a clause that appeared after the guarantors had signed the guarantee in which the said Chua Lai Seng was stated as the customer. Further when the plaintiff filed the present suit. it had elected to proceed with the present suit and consequently not to proceed or had abandoned the previous suit. Chua Lai Seng. (4) the further ground raised by the defendant that the plaintiff had submitted defective affidavits could not stand as the plaintiff had stated in its affidavit that it verily believed that there was no defence to the action in accordance with O 14 r 2 of the Rules of the High Court 1980.did not seek and obtain judgment against the deceased although judgment was sought and obtained against all the other co-guarantors as there was no cause of action against him then as no notice of demand had been served on him before he died. was the customer for the purpose of the said guarantee. (3) neither the doctrine of res judicata nor the doctrine of constructive res judicata had any application in the instant case.

and in any event. It was the appellant's contention that the notice of demand must be deemed to have been duly served upon the respondent by virtue of a clause ('the clause') in the said letter of guarantee which stated that ' any notice sent through the post in an envelope addressed to the last known place of address of the person to be served shall be deemed to be served on the following day that on which it is posted'. in dismissing the appellant's case. and the fact that the said notice of demand was sent by AR registered post would not make any difference as registration is merely one way of sending a notice. however . (4) however. no distinction should have been made between an ordinary post and an AR registered post.The respondent was sued by the appellant bank under a letter of guarantee following the default of the principal borrowers for whom the respondent acted as guarantor in respect of a revolving bankers acceptance facility which was granted by the appellant bank to the principal borrowers. (2) the word 'post' in its ordinary and natural meaning is wide enough to cover both registered post and ordinary post. The central issue before their Lordships was whether upon the true construction of the clause in the said letter of guarantee. (5) their Lordships were also of the view that it was unnecessary for the appellant to show that the AR card had been returned by the respondent together with an acknowledgement of receipt in order to prove that the said notice of demand had been effectively served. The appellant had sent a notice of demand via AR registered post to the respondent at his last known address. The word 'post' ought to have been given its ordinary and natural meaning. it could be held that the clause only applied to notices sent by ordinary post and not those by AR registered post. as it is common for letters of guarantee to expressly prescribe the mode of service for notices of demand. held that the clause was only applicable to notices sent by ordinary post. be borne in mind that the proper mode of service for a notice of demand in a given case will depend on the words of the relevant clause as contained in the relevant letter of guarantee. allowing the appellant's appeal: (1) in construing the clause in the said letter of guarantee. a liberal approach rather than a strict contra proferentem rule should have been adopted. giving a reasonable construction to the words of the clause having regard to the prevailing surrounding circumstances. The trial judge. and that it was only upon the return of the AR card to the appellant together with the respondent's acknowledgement of receipt that the said notice of demand was effectively served. and thus in the absence of such a prescription it was not justifiable for the court to hold that the said notice of demand must be sent by ordinary post in order that the deeming provision in the clause would take effect. It was sufficient that the appellant showed that the notice of demand was correctly . (3) it must. and in the context of the clause. the said notice of demand would only have been effectively served upon the respondent if the relevant AR card was returned to the appellant together with an acknowledgement of receipt by the respondent. the clause in the instant case did not prescribe that a notice of demand must be sent by a specific mode of posting. Holding : Held.

(3) in the circumstances. D2-D6 had guaranteed repayment of the sum in question. Therefore. Kuala Lumpur (Jemuri Serjan CJ (Borneo). in a separate notice of appeal. P in its affidavit averred that six letters of demand were sent to the addresses of D by AR Registered post as well as by ordinary post. Holding : Held: (1) in regard to D1. Since the guarantors had agreed on this mode of service in respect of the letters of demand. (2) as for D2-D6. P's appeal in . Even if there was proof of posting. the other four AR Registered letters were all retoured. This in itself raised a triable issue. none had been returned to P as mails 'unclaimed'. Counsel for D contended. the deeming provision in the clause would inevitably apply. inter alia. that D did not receive letters of demand from P before the writ was filed. the agreement clearly provided for a letter of demand to be sent to D1 before P could file the writ. appealed against the decision of the same senior assistant registrar given on the same date refusing to allow D1 unconditional leave to defend the action.addressed. D1 was at all material times a customer and account holder of P. In regard to the letters of demand sent by ordinary post.Notice of demand 3 [2445] CONTRACT Guarantee – Notice of demand – Letters of demand sent to guarantors by ordinary post – Whether a sufficient demand – Construction of guarantee Summary : P appealed against the decision of the senior assistant registrar in refusing to enter final judgment against D pursuant to O 14 of the Rules of the High Court 1980. P's affidavit did not prove that the letters had been actually posted by someone. Once these facts have been established. 2445 Guarantee -. the learned judge found that D2-D6 had not raised any triable issue. P claimed the sum in question being the amount outstanding inclusive of interest due on a temporary overdraft facility granted and advanced by P to D1. the learned judge was of the view that the letters sent to them by ordinary post were deemed to be a sufficient demand made to them. it could not be presumed that the letters reached D1 and D2-D6. it was only a presumption that the letter reached D1 and this presumption was rebuttable. prepaid and delivered to the post office and acknowledged for service by the postal authority. In the case of the letters of demand sent by AR Registered post. D2-D6 were guarantors of D1. except for the letters sent to D3 and D4. they had agreed that letters of demand could be sent to them at their addresses as stated in the guarantee agreement. Digest : Amanah Merchant Bank Bhd v Lim Tow Choon [1994] 1 MLJ 413 Supreme Court. D1.

and further. (2) that the defendants had revoked the guarantee by notice and were therefore discharged as guarantors. s 3 Summary : This was an appeal against the decision of the senior assistant registrar allowing final judgment of a claim arising from a guarantee given upon a bridging loan. Kuala Lumpur (Zakaria Yatim J). (2) the letters sent by the borrowers were not notices of revocation since they were not from the defendants. any notice may be despatched by registered post addressed to the defendants. each of which were addressed by the borrower to the plaintiff. It appeared that the plaintiff did send letters of demand to the defendants by AR Registered post but the AR cards were not returned to the plaintiff. 2447 Guarantee -.Notice of demand 3 [2446] CONTRACT Guarantee – Notice of demand – Letters sent by AR registered post but AR cards not returned – Whether there was delivery to guarantors – Post Office Act 1947. The plaintiff. The third and fourth defendants/guarantors raised the following issues: (1) that there were no proper letter of demand from the plaintiff. the AR registered letters sent to the defendants at their respective addresses were deemed to have been received by them. showing that the letters were delivered to the defendants' addresses. Holding : Held. requesting the plaintiff to release the . 'guaranteeship'. however. Kuala Lumpur. As for D1.. they did not ask for the guarantee to be revoked but requested the plaintiff to consider the release of the guarantee. Digest : Perwira Habib Bank Malaysia Bhd v Sehatian Development Sdn Bhd Civil Suit No C23-2066-86 High Court. The question is whether delivery to the defendants' addresses can be deemed to be delivery to the defendants. the defendants produced two letters.respect of D2-D6 was accordingly allowed. Regarding the second issue. produced a certificate of posting from the Postal Department. Under the letter of guarantee. the learned judge allowed its appeal and granted it unconditional leave to defend the action. Digest : Southern Bank Bhd v Mega Lestari (M) Sdn Bhd & Ors Suit No C24-4400-86 High Court. Kuala Lumpur (Zakaria Yatim J).Notice of demand . dismissing the appeal: (1) by virtue of s 3 of the Post Office Act 1947.. 2446 Guarantee -.

. (2) the clause also did not prescribe a particular form of service.. It merely provide that if the demand was sent by post. Kuala Lumpur (Zakaria Yatim J). if it chose the latter mode of service. The defendants further contended that fresh letters of demand should have been issued to them after certain partial payments had been made to the plaintiff.. Rather.'. inter alia. it was deemed to be served. including personal service.Notice of demand . The defendants contended. it cannot rely on the deeming provision and will have to prove by evidence that service was effected.. that no proper demand had been made by the plaintiff against the defendants in that: (1) the letters of demand were required to be executed by an officer of the plaintiff but was instead executed by the plaintiff's solicitor. Holding : Held. It does not prohibit solicitors who were duly authorized to act on behalf of the plaintiff to issue the demand. The plaintiff was entitled to use any mode of service. by sending the same by post addressed to me/us . 2448 Guarantee -.3 [2447] CONTRACT Guarantee – Notice of demand – Notice to be sent 'by post' and stated to be 'sufficient if signed by any officer of the Bank' – Notice sent by hand and signed by solicitor of bank – Whether notice valid – Whether fresh notice required after partial payment Summary : This was an appeal against the decision of the senior assistant registrar awarding summary judgment against the defendants. The plaintiff had advanced money to the first defendant secured by continuing guarantees furnished by the second to fourth defendants. (3) there was no legal basis for contending that the effect of a demand notice was obviated by partial payment and that a new notice was necessary every time payment was made. and shall be sufficient if signed by any officer of the Bank . A relevant clause in the letters of guarantee state: 'A demand in writing shall be deemed to be duly given to me/us [the defendants] . (2) the specified mode of service (ie by post addressed to the guarantors) had not been complied with as the letters of demand had been sent by hand. However. Digest : United Asian Bank Bhd v Dyalchands Sdn Bhd & Ors [1993] 4 CLJ 630 High Court.. the cause of action remained until the trial of the action even though some moneys had been paid by the guarantors.. dismissing the appeal: (1) the material words in the guarantee clause do not explicitly state that a letter of demand shall be signed by a bank officer but merely that it shall be sufficient if signed by a bank officer.

Notice of demand 3 [2449] CONTRACT Guarantee – Notice of demand – Whether a condition precedent to suing guarantors – Guarantors liable as principal debtors under guarantee – Whether 'principal debtor' clause obviates necessity to make demand on guarantors before proceedings instituted Summary : P. this did not. Carbon copies of the letter was sent to each of the directors of T Sdn Bhd. a banker. although P was liable as a principal debtor under the guarantee. When T Sdn Bhd defaulted under the facility. P appealed to the Supreme Court. Malaysia (Lee Hun Hoe CJ (Borneo). Digest : YM Orang Kaya Menteri Paduka Dato Wan Ahmad Isa Shukri bin Wan Rashidi v Kowng Yik Bank Bhd [1989] 3 MLJ 155 Supreme Court.3 [2448] CONTRACT Guarantee – Notice of demand – Whether a condition precedent to establishing claim against guarantor – Guarantor liable as principal debtor under guarantee Summary : D had earlier granted an overdraft facility to T Sdn Bhd. The facility was secured by a joint and several guarantee of the directors of T Sdn Bhd. D who were each directors of S Sdn Bhd executed a guarantee to cover the indebtedness of S Sdn . D had no cause of action against him. however. P was one of the directors of T Sdn Bhd. On appeal by D. P filed a defence to the effect that no formal letter of demand was served upon him and therefore. From the decision of the learned judge. allowing the appeal: (1) in the instant case. Judgment in default was subsequently obtained against the company and the other directors. mean that he was not entitled to a proper demand which was a condition precedent to establishing a claim against him under the guarantee. D sent a letter of demand to T Sdn Bhd requesting payment of the sums due. T Sdn Bhd and the directors ignored the notice. (2) a guarantor must never be made liable beyond the precise terms of his commitment and is entitled to insist on a rigid adherence to the terms of his obligation by the creditor. The senior assistant registrar gave P unconditional leave to defend. 2449 Guarantee -. Holding : Held. (3) for the above reasons. the learned judge held that no antecedent demand was required to create a cause of action and the mere filing of the writ and the service thereof was a sufficient demand obliging P to play. had given certain credit facilities to S Sdn Bhd. their Lordships disagreed with the decision of the learned judge and allowed the appeal of P.

Against this judgment. In . When the judgment obtained by P against S Sdn Bhd remained unsatisfied. 2450 Guarantee -.Bhd and undertook to pay on demand all sums owing by S Sdn Bhd to P. (3) a judgment which has been taken for too much if it is issued under the seal of the court is enforceable like any other judgment of the court. the judgment will crystallize in the suit. S Sdn Bhd did not take objection to the amount at the first instance and it did not appeal. P's application for summary judgment against D was allowed by the senior assistant registrar. At best the judgment is voidable at the instance of the aggrieved party who has the onus to satisfy a subsequent court that it is just and proper that the judgment in question should be set aside. As an excessive claim nullified the judgment. Holding : Held. In the instant case. Nor is there any general rule that a prior notice must be given in all cases. If there is no appeal against it. dismissing the appeal: (1) there is no general rule that regardless of the terms of the guarantee. a prior precise demand is a sine qua non to the commencing of an action. Digest : Public Bank Bhd v Chan Siok Lie & Ors [1989] 1 MLJ 47 High Court.Notice of demand 3 [2450] CONTRACT Guarantee – Notice of demand – Whether service of notice defective – Validity of guarantee Summary : P had granted overdraft facilities to T Sdn Bhd. inter alia. (2) the effect of the guarantee agreement was to make D the principal debtors which would accordingly obviate the necessity for a demand as the character of the agreement under which payment was sought was no longer strictly collateral. S Sdn Bhd subsequently defaulted in paying to P the sums owing under the various credit facilities. guaranteed repayment of the amount payable by the company to P. Kuala Lumpur (Shankar J). as one of the directors of T Sdn Bhd. It was also contended for D that the judgment obtained earlier against S Sdn Bhd was a nullity because it was far too much. D could derive no assistance from this as the matter was clearly res judicata. P through their solicitors sent an AR registered letter to each of D demanding payment of the sums still left owing by S Sdn Bhd. D7. it was accordingly argued that it should equally nullify the demand against D as guarantors. D ignored the notice and P instituted the present action against them. D contended. D appealed to the High Court. Accordingly. that a notice of demand was a condition precedent to suing them as guarantors and that the notice of demand should state precisely the amount due and owing by the principal debtor so that D could elect whether to comply with it. the terms of the guarantee did not require the giving of a prior demand by P as a condition precedent to suing D.

Moreover. The second issue raised related to non-compliance of s 4 of the Bankers' Books . had defaulted in the repayment of the two loans granted pursuant to two agreements signed with P. Digest : Southern Bank Bhd v Toh Choe Beng & Ors Civil Suit No 1320A of 1984 High Court. It was also contended that the guarantee was invalid as the name of T Sdn Bhd appearing therein was incomplete and that the rate of interest had been left out.Notice of demand 3 [2451] CONTRACT Guarantee – Notice of demand – Whether there was proper and effective service of such notices on guarantors – Appeal by guarantors against order for summary judgment – Rules of the High Court 1980. queried or objected to. P obtained summary judgment against them under O 14 of the Rules of the High Court 1980. the service of the notice of demand on D7 was not defective. although addressed to D1. accordingly. allowing P's claim: (1) in the instant case. The first related to the service of the notices of demand on them in that the notices of demand.due course. inter alia. had been sent by registered post. Ipoh (Abdul Malek J). O 14 Summary : P sued D4 and D5. (3) in the result. been satisfied in the instant case. was acknowledged and received by a company which was in no way connected to these proceedings. The principle that a demand is a condition precedent to suing a guarantor had. 2451 Guarantee -. Holding : Held. it was contended that there was no proper service of such notices which were sent to them by way of AR registered post as the AR cards were returned without any due acknowledgment by them. The notice of demand. which was served on D7 at his last known address. which was also sued by P. D7 contended. the court gave judgment as prayed for by P against D7. Two issues were raised in their appeal against the ord 14 judgment entered against them . who were directors of D1. in their capacities as guarantors for the repayment of two fixed loans granted by P to D1. In the case of D4 and D5. that the service of the notice of demand by P on him was defective. D7 appealed to the Supreme Court which granted him unconditional leave to defend the action and ordered that the matter be heard before another High Court judge. summary judgment was entered against D7 for the amount owing. the amount stated in the notice was the correct amount due and owing. (2) the incomplete name of the company and the blanks as regards the rate of interest could not invalidate the guarantee as no doubt had been raised as to which company D7 was signing for as director and because the interest rate had been stated in the offer letter and all subsequent statements of accounts to which D7 had not protested. D1.

P's solicitors sought to remedy their omission by filing an affidavit to comply with the requirements of s 4 on the day the appeal was heard. there was a triable issue raised. Digest : Public Bank Bhd v Rasatulin Holdings Sdn Bhd & Ors [1989] 1 MLJ 47 High Court.Defendants filed claim against second third party for indemnity against plaintiff's claim and costs Second third party one of the joint and several guarantors . accordingly. Summary : On 26 February 1982. the learned judge considered that this omission on their part should not be taken against him. Holding : Held. as the notices of demand were not properly and effectively served on D.000 respectively. 2452 Guarantee -. ie the plaintiff. Holding : Held: (1) in this case the principal debtor. there was no proper and effective service of the notices of demand on D and this in itself afforded a defence to them. Bank Bumiputra Malaysia Bhd (the plaintiff) filed a suit against the first defendant as the principal debtor on three overdraft facilities to the extent of $350. (2) in relation to the second issue raised in the appeal.000 and $150. Since the appeal was in the nature of a rehearing and as P had done whatever was necessary to remedy their omission even though that was done at the eleventh hour. ie the first defendant. allowed. The defendants subsequently brought third party proceedings on 21 May 1982 against the first and second third parties. has not paid the creditor. the second third party applied by summons-in-chamber to strike out the statement of claim of the defendants under O 18 r 19 of the Rules of the High Court 1980. In the case of the second third party the defendants claimed against him to be indemnified against the plaintiff's claim and costs in this suit on the grounds that the second third party was one of the joint and several guarantors to the aforesaid guarantee.000.Application by second third party to strike out defendants' statement of claim. Kuala Lumpur (Siti Norma Yaakob J). the effect of which was to render evidence on the entries of D1's accounts kept by P inadmissible.(Evidence) Act 1949. allowing the appeal: (1) in the instant case.Overdraft facilities 3 [2452] CONTRACT Guarantee – Overdraft facilities – Overdraft facilities Guarantee . the principal sum and interest or any part thereof. D's appeal was. (3) in any event. On 6 February 1984.000. making a total of $650. The second to fifth defendants jointly and severally guaranteed the aforesaid overdraft facilities by executing a letter of guarantee to that effect. and has .Plaintiff filed suit against defendants . $150.

The plaintiff continued to carry out the works under the contract until 14 April 1995. There was no allegation by the defendants that the plaintiff was in default in the performance of . Digest : Bank Bumiputra Malaysia Bhd v Darnaz Enterprise Sdn Bhd & Ors [1986] 2 MLJ 222 High Court. The payments were described as advances and were secured under an advance payment guarantee.Performance bond 3 [2453] CONTRACT Guarantee – Performance bond – Bank guarantee to remain in force 60 days after date stated in certificate of final completion – Contract provided that defendant contractor could at its absolute discretion terminate contract with plaintiff subcontractor – Defendant terminated contract – Defendant demanded plaintiff to pay plaintiff's creditors failing which defendant would call on guarantee – Whether defendant had right to do so Whether bank guarantee had ceased to have effect Summary : On 30 November 1992. third and fourth defendants whereunder the plaintiff was to carry out certain insulation and painting works as subcontractor to the defendants in respect of the defendants' contract with the main contractor. During the course of the plaintiff's work. including the plaintiff and another Japanese company called Meisei Corporation. even though the cosurety has not been required by the creditor to pay anything. when the defendants terminated the contract pursuant to art 20 of the contract. two performance bonds were provided by the plaintiff and issued by the first defendant ('the bank') in the form of guarantees. several payments were made by the defendants to the plaintiff for the materials supplied. 2453 Guarantee -. A surety against whom an action is brought on his guarantee may obtain indemnification by issuing a third party notice against the principal debtor. A surety is not entitled to call upon his co-surety for contribution until he has paid more than his portion of the debt due to the principal creditor. the principal debtor cannot call in the surety. who were capable of undertaking such work. provided the co-surety has not been released by the creditor. ie the second third party.no cause of action against the surety. Kuala Lumpur (Gunn Chit Tuan J). but while the surety can call in the principal debtor. Further payments were also made pursuant to the terms as set out under two supplementary agreements. which provided that the contractor had the right at any time. the plaintiff entered into a contract ('the contract') with the second. ie the second to the fifth defendants. for any reason and at its absolute discretion to terminate the contract for convenience by notice in writing to the plaintiff. The services provided were highly specialized and there were only six contractors in the world. Pursuant to the contract. also do not have a cause of action against him because they have not each paid anything to the creditor. (2) the second third party's co-sureties.

and gave it to Meisei Corporation with which the second defendants had a financial connection. Thus. Holding : Held. the plaintiff applied to the court for an interlocutory injunction restraining the defendants from accepting any money from the bank under the guarantees. Accordingly.its work. (2) even if the above was wrong. at the expense of the plaintiff. Pending trial of the issues in question. and that the defendants called on the bank guarantees to pay off the lower tier subcontractors so that Meisei Corporation could continue to utilize the lower tier subcontractors' services to complete its work. failing which the defendants would seek payments under the bank guarantees. Nowhere in art 20 nor anywhere in the contract was there a right in the defendants to demand of the plaintiff that the plaintiff pay its debts to the lower tier subcontractors and/or in the event of the plaintiff failing to do so the defendants would be at liberty to make demand and receive payment under the bank guarantees. the presumption under s 114 of the Evidence Act 1950 arose. an examination of art 20 disclosed a number of obligations. Accordingly.3 of the contract. allowing the application: (1) pursuant to art 9. The plaintiff argued that the defendants had conveniently terminated the contract. and the defendants demanded the plaintiff to pay its creditors (the lower-tier subcontractors). Further. the bank guarantee ceased to have force and effect. (3) in view of the defendants' refusal to tell the court whether one or more of the defendants had an interest in Meisei Corporation and to disclose the new contract with Meisei Corporation. However. On the other hand. the event to final completion of the contract by the plaintiff was not to take place. payment by the defendants or the requirement by them of the plaintiff to make payment of the debts was gratuitous. The plaintiff further argued that it had met all its obligations to the defendants up to the date of termination and was entitled to payments under the contract. (4) there were serious questions for trial in this case. the bank guarantee was to remain in force and effect until 60 days after the date stated in the certificate of final completion. Therefore. none of which embraced the right of the defendants to make demand under the bank guarantees. and there could be no certificate of final completion. The plaintiff contended that the defendants were not entitled to make such claims. Meisei Corporation took over the plaintiff's work. and the supposition that the defendants had used art 20 as a device to terminate the contract so as to enable Meisei to enjoy the benefit of whatever profits remained of the contract must be true. and had acted in bad faith and in unconscionable manner. the defendants claimed that they had made substantial overpayments to the plaintiff. damages would not be an adequate remedy . the defendants in this case had prematurely terminated the contract in accordance with art 20 of the contract. upon the act of the defendants rendering final completion impossible. The plaintiff would therefore be entitled to the order for an interlocutory injunction. After the termination of the contract. the defendants were guilty of fraud. or the liability of the defendants to submit to such demand and payment under the bank guarantees without objection.

202 and requested for payment . Kago Petroliam Sdn Bhd ('Kago'). para 2150. Vol 3. The plaintiff need only place sufficient affidavit evidence before the court to satisfy the court that a case of fraud or the likelihood of a fraud being committed had been established to an extent sufficient for the court to be minded to grant the injunction sought. See CONTRACT. That would expose the plaintiff to being wound up The balance of convenience favoured the plaintiff. Digest : Bains Harding (Malaysia) Sdn Bhd v Arab-Malaysian Merchant Bank Bhd & Ors [1996] 1 MLJ 425 High Court.640. as it had been deprived of the profits it would have earned had the contract not been terminated. Esso paid the full price in exchange for two letters of guarantee ('the performance bonds').Performance bond 3 [2455] CONTRACT Guarantee – Performance bond – On demand performance bond – Whether issuer bank required to pay on demand – Whether payment dependent on contract between plaintiff and defendant – Whether demand must be in any particular form of words Summary : The appellant.to the plaintiff because if the defendants were allowed to call on the bank guarantees and the bank made payment. Singapore (S Rajendran J). for the latter to sell and deliver certain construction materials ('the goods') to Esso. 2455 Guarantee -. It was agreed that Esso would be entitled to deduct a maximum of 10% of the purchase price in respect of any delays in delivery by Kago. Esso informed Kago that damages for delay amounted to 90% of the total sum of DM484. The word 'fraud' itself need not to be mentioned. which was equivalent to the deductions Esso would have been entitled to make. However. Kuala Lumpur (Richard Talalla J).202.562 and DM17. issued by Bank Bumiputra Malaysia Bhd. a claim of fraud need not be proved beyond reasonable doubt.Performance bond 3 [2454] CONTRACT Guarantee – Performance bond – Call by buyer – Whether in breach of contract Digest : Magenta Resources (S) Pte Ltd v China Resources (S) Pte Ltd [1996] 3 SLR 62 High Court. agreed with the respondent. the plaintiff might not be able to reimburse the bank. at Kago's request. Esso Petroleum Malaysia Inc ('Esso'). 2454 Guarantee -. Subsequently. from time to time on specified dates which were regarded as being of the essence. (5) in an interlocutory application for an injunction. totalling DM484. for the sums of DM466.

(4) in this case. All that was required to trigger them was a demand in writing. were pure 'on demand' guarantees. Kuala Lumpur (Anuar CJ (Malaya). (2) since the performance bonds were on demand performance bonds. Kago's remedy was in damages and Esso would undoubtedly be able to pay. it was not open to the judge to inquire into any breach of such underlying contract as he seemed to have done. allowing the appeal: (1) the performance bonds were stated to be 'unconditional' guarantees and. Esso's application to the High Court to set aside the injunctions was dismissed and it has appealed. Without replying. Esso made a written demand on the performance bonds addressed to Bank Bumiputra Malaysia Bhd. Newform was required to furnish a performance bond to the plaintiffs. obtained an ex parte injunction restraining Esso from receiving any part of the moneys under the performance bonds and alleged that: (a) the delays were caused by Esso's refusal to accept the goods. although no injunction could have been granted against Bank Bumiputra. they were independent of any underlying contract between Esso and Kago. however. However. Therefore. inter alia. (3) there was nothing to suggest that the demand was not proper. Kago was not prevented from applying for an interlocutory injunction against Esso despite the fact that the effect of that was to restrain Bank Bumiputra. they are sufficient. Digest : Esso Petroleum Malaysia Inc v Kago Petroleum Sdn Bhd [1995] 1 MLJ 149 Supreme Court. No particular form of words is required and if the words used are in apparent conformity with the wording in any particular bond. It had complied with the requirement that all claims made under the performance bonds were to be made in writing. at the time of acceptance of the delayed goods. and (b) Esso had not.Performance bond 3 [2456] CONTRACT Guarantee – Performance bond – Want of consideration – Duty of disclosure – Whether payment on demand or upon proof of loss – Whether principal contractual terms were uncertain – Validity of bond despite premature termination of principal contract Summary : The plaintiffs entered into a contract with Newform for Newform to supply and install a formwork system. 2456 Guarantee -. Under the contract. Holding : Held. Kago.within seven days. Payment was not made and Kago wrote to Esso for particulars justifying the claim. indicated its intention to claim damages. on a true construction. the balance of convenience lay with Esso as. Newform obtained a bond from the defendants wherein it was stated that 'in consideration of the employer not insisting on the .

that was consideration in the first form.contractor paying 5% of the total value of the contract as a security deposit for the contract. Particular regard must be given to the purpose for which performance bonds are issued. Due to unsatisfactory work by Newform. there being no formal written contract. (6) consideration can take the form of a detriment to the promisee or a benefit to the promisor. Digest : Sembawang Construction Pte Ltd & Anor v UMBC Insurans Sdn Bhd. (b) the plaintiffs had failed to make proper disclosures to them. the guarantor hereby guarantees the due and faithful performance of the contract by the contractor'. They should not be construed to be conditioned to proof of breach except in clear cases where payment is expressed to be so conditioned. (3) the plaintiffs did no more than to agree to accept the defendants' bond. The defendants did not identify any area of uncertainty and their complaint was only that they were unaware that there was no formal contract signed between the plaintiffs and Newform. the plaintiffs terminated the contract with Newform and made a demand under the bond. (e) the bond cannot be enforced after the plaintiffs had terminated their contract with Newform. there was no justification for imposing a qualification that it shall cease to have effect if the principal contract was terminated prematurely. (d) the guarantee was void as the contractual terms were uncertain. The defendants should exercise reasonable care when they assumed the responsibility of becoming guarantors. Singapore (Kan Ting Chiu J). Where the parties have agreed that the bond was to be effective for a stated period. Mehar Singh & Ors (Third Parties) Suit No 417 of 1993 High Court. They ought to know that there may be delays and complaints in the course of construction works but they made no inquiries. they can rightly be said to have not insisted on the security deposit. Holding : Held. If they had agreed to accept a performance bond and made provision for that in the contract instead of a security deposit. . contending that: (a) the bond furnished was not supported by consideration because there was no right to a security deposit spelt out in the contract between the plaintiffs and Newform. The defendants refused to make payment. (4) a purposive construction taking into account the essential characteristics of performance bonds was to be adopted. allowing the plaintiffs' claim: (1) as employers.there is no law that a performance bond is only valid and enforceable while the principal contract is in force. one being that they were not informed by the plaintiffs about Newform's poor performance and delay. There was no merit in the contention that they had failed in their duty of disclosure to the defendants. (2) when the plaintiffs waived the security deposit. the plaintiffs were entitled to insist that a security deposit be paid under the contract. (5) a party seeking to avoid a contract on the ground of uncertainty must identify the areas of uncertainty and show that they are so serious as to vitiate the contract. (c) the guarantee is conditional upon the employer actually suffering loss.

Consequently bank D2 issued bank guarantees in favour of D1 upon request by P. Accordingly there was no question to be tried. was therefore admissible. To prevent D2 from honouring its obligations. P in turn executed letters of indemnity in favour of D2. Before 'the order' was recorded. If P's allegation was true. This was because P would be adequately compensated by D1-D2 in damages if its action was successful. P applied to set aside 'the order' on the ground that during the negotiations. D1's officers had fraudulently misrepresented that P's request for extension of time to perform 'the agreements' would be favourably considered by D1. The parties' conduct after the recording of 'the order' also showed that P's allegation of fraud did not give rise to any serious question to be tried. On the telex it was written 'without prejudice'. D1 reminded P about its obligation under 'the order'. P applied to the High Court for an interlocutory injunction to restrain D2 from paying D1 under the bank guarantees. the fraud must be on the performance guarantee itself and not on any other document. Four different drafts of 'the order' were exchanged before it was finalized. D2 was thus obliged to honour them unless it had notice of fraud committed by D1. Digest : Patel Holdings Sdn Bhd v Estet Pekebun Kecil & Anor [1989] 1 MLJ 190 High Court. the parties had negotiations in which they were represented by solicitors. dismissing the application: (1) the guarantees issued by D2 were in fact performance bonds. Penang (Wan Adnan J). P then by telex requested extension of time from D1. Subsequently the parties compromised and a consent order was recorded ('the order'). P agreed to provide security for the performance of its obligations under 'the agreements'. A dispute arose in respect of 'the agreements' and P sued X and D1. After the recording of 'the order'. P made no such allegation and there was no evidence that D1's claim on the performance guarantee was fraudulent. the balance of convenience was not in P's favour. (4) even if there was a serious question to be tried. Holding : Held. (2) the facts showed that the parties to 'the order' had given particular attention to time being of the essence of 'the order' and had so agreed.2457 Guarantee -. P's telex although written 'without prejudice'. . it would have insisted for such a clause to be included in 'the order'. (3) at the time of P's telex. there were no negotiations or attempted negotiations between the parties.Performance bond 3 [2457] CONTRACT Guarantee – Performance bond – Whether bank issuing performance bonds could dishonour them – Whether bank had notice of fraud committed by beneficiary in respect of bonds Summary : P entered into agreements to purchase crude palm oil from X ('the agreements').

In their defence. The defendants executed two letters of indemnity in favour of the plaintiffs.2458 Guarantee -. The principal wrote to the plaintiffs informing them that if the contractor failed to remedy the breach. the second and third defendants alleged that: (i) the letters of indemnity were signed in blank upon the representations of the first defendant. when made. The allegation of fraud here has been made only by general assertion against the first defendant and stands totally mute against the plaintiffs. It thus cannot be said that the representations. which is a stringent form of . (3) the plaintiffs had issued a performance guarantee. and (ii) a fraud had been perpetrated upon them by the contractor's agent and the plaintiffs' agent acting in collusion. He has only himself to blame for signing the blank guarantee forms. Holding : Held. Abama Sdn Bhd. On being informed by the plaintiffs that they intended to settle the principal's claim made under the insurance guarantees and to recover the full sum from the defendants. allowing the plaintiffs' appeal: (1) the plea of non est factum is not available in favour of a person who has shown himself to be negligent. at the request of the contractor. Subsequently. undertaking to indemnify the plaintiffs should the contractor fail to carry out the required works under the contract between the principal and the contractor.Performance guarantee 3 [2458] CONTRACT Guarantee – Performance guarantee – Different from contract of guarantee – Stringent form of contract – Third party providing indemnity to cover issuer of performance guarantee – Effect of third party's countermand – Whether third party liable to full indemnity for claims arising out of payment on performance guarantee Summary : The plaintiffs issued two insurance guarantees in favour of Paya Kamunting Development Sdn Bhd ('the principal'). (2) the plea of fraud has to be specifically pleaded and particularized as required under O 18 r 12(1)(a) and (b) of the Rules of the High Court. The senior assistant registrar ('the SAR') dismissed the plaintiffs' application for summary judgment. the defendants countermanded the payment payable under the letter of guarantee for the reason that they were no longer under any obligaton to meet the payments in the face of breach of the contract on the part of the principal. before or at the time the defendants signed the letters of indemnity. were that of the plaintiffs. there was a breach of the contract by the contractor. The plaintiffs appealed. undertaking to keep them indemnified against all claims and demands arising out of the guarantees. their guarantees shall be called in. The defendants acted as guarantors. The principal issued a writ against the plaintiffs to enforce the guarantees and were granted judgment. The plaintiffs claimed against the defendants under the letters of indemnity for the payment made by them to the principal under the order of the court. The plaintiffs then refused the payment to the principal because of the defendants' countermand. and the defendants.

(4) the personal liability to pay under the performance guarantee crystallizes as soon as the first demand is made but here the defendants countermanded against payment and the plaintiffs were forced to pay under an order of court. the beneficiary. D2 was obliged to honour them unless it had notice of clear fraud committed by D1. The plaintiffs are now just seeking for themselves the equitable right to full indemnity or restitutionary reimbursement which they are no doubt absolutely entitled to. As there was no evidence in the instant case that the claim was fraudulent. (4) . upon request made by P. having regard to the conduct of the parties before and after the execution of the consent order. P had agreed to provide a security deposit in the form of a bank guarantee in the name of D1 for the due performance of P's obligations under the agreement.contract under s 77 of the Contracts Act 1950 ('the Act'). the fraud must be on the performance guarantee itself and not on any other document. P sought. (2) in order to prevent D2 from honouring its obligations. The claim on the performance guarantee by D1 must be fraudulent. In the present suit. an interlocutory injunction to restrain D2 from making payment of the sum under the guarantees and to restrain D1 from receiving the same until after the trial of the action. accordingly. 2459 Guarantee -.Performance guarantee 3 [2459] CONTRACT Guarantee – Performance guarantee – Nature of – Bank obliged to honour guarantee unless it has notice of clear fraud committed by beneficiary – Whether claim on performance guarantee by beneficiary fraudulent Summary : P had earlier entered into three agreements with NARSCO Bhd for the purchase of crude palm oil. not entitled to the injunction. the learned judge found that P's allegation of fraud did not give rise to any serious question to be tried. the learned judge found that there was no question to be tried and P was. P alleged that D1 committed fraud in respect of the consent order. inter alia. (3) in any case. Under each agreement. The parties subsequently compromised and a consent order was recorded. A dispute arose and P then commenced a civil suit against NARSCO Bhd and D1. D2 had issued the guarantees to D1. under s 70 of the Act. Kuala Lumpur (KL Rekhraj JC). Holding : Held. Digest : Malaysian Assurance Alliance Bhd v Yeam Sai Ming & Ors [1996] 5 MLJ 345 High Court. It is not a contract of guarantee under s 79 of the Act which requires strict construction so that no liability is imposed on the surety which is not clearly covered by the terms of the guarantee. dismissing the application: (1) the guarantees in the instant case were performance guarantees.

the balance of convenience lay in favour of not granting the interlocutory injunction as P would be adequately compensated by D or either of them by way of damages for the loss sustained in the event that P succeeded in the action. the second and third defendants were directors in the first defendants and the first defendants was a company in the seventh defendant's group. temporary and of comfort only until the issue of the seventh defendant's corporate guarantee. The three transactions which the first defendants concluded with the plaintiffs were for the benefit of Sejati. 2460 Guarantee -. the plaintiffs had already obtained judgment against the first defendants. except in certain specific instances which were . entering judgment for the plaintiffs and granting the second and third defendants' claim for an indemnity: (1) there was no agreement between the plaintiffs and the second and third defendants that the personal guarantees furnished by them would. be interim. At the time of the transactions. By the time the action came up for trial. Holding : Held. (3) it was clear law that. the plaintiffs had required various guarantees.in the instant case. The seventh defendant had then acquired an interest in a company called Sejati. They also claimed that the guarantees were to be a temporary and interim comfort pending the furnishing of a corporate guarantee by the seventh defendant. Penang (Wan Adnan J). This clause was clear and interest would continue to accrue at 16% pa until payment was actually made whether such payment was obtained before or after judgment. (2) the hire-purchase agreement provided for interest at the rate of 16% till payment was made.Personal guarantor 3 [2460] CONTRACT Guarantee – Personal guarantor – Director providing guarantee for benefit of company – Right to be indemnified – Contractual interest to run till date of payment and not only to judgment Summary : The first defendants had entered into three hire-purchase agreements with the plaintiffs. The second and third defendants contested the action on the grounds that they had no knowledge of the hire-purchase transactions. As security for the payment obligations. They had also taken out third party proceedings against the seventh defendants claiming an indemnity if they were found liable to the plaintiffs. Digest : Patel Holdings Sdn Bhd v Estet Pekebun Kecil & Anor [1989] 1 MLJ 190 High Court. in any of the transactions. They had joined the first defendants on the request of the seventh defendant. The first defendants defaulted and the plaintiffs issued process against the first defendants and the various guarantors who included the second and third defendants.

Common law principle not applicable to contracts in Malay States . Ipoh (Maclntyre J). If they had not been directors of the first defendants they would not have incurred the liabilities under the guarantees. Summary : The common law principle that the release of a joint guarantor without the consent of the other would release him from his obligation under the bond is not applicable to contracts in the Malay States. See CONTRACT. (4) the second and third defendants were at all times acting in the best interest of the seventh defendants. 2463 Guarantee -. Digest : Hong Leong Finance Limited v Famco (S) Pte Ltd & Ors [1993] 1 SLR 348 High Court. Singapore (Judith Prakash JC). Digest : Song Bok Yoong v Ho Kim Poui [1968] 1 MLJ 56 High Court. an agent had a right against his principal to be reimbursed for all expenses and to be indemnified against all losses and liabilities incurred by him in the execution of his authority.not applicable here. 2462 Guarantee -. The right of indemnity extended to personal liabilities incurred by the agent in the execution of his duties. ss 45 & 91. Vol 3.Contracts (Malay States) Ordinance 1950.Release of guarantors 3 [2461] CONTRACT Guarantee – Release of guarantors – Contract . 2461 Guarantee -. It did not lie in the mouth of the entity which urged the second and third defendants to assume this responsibility to say that it will not indemnify them against the consequences of their action. In the Malay States the law relating to contracts is contained in the Contracts (Malay States) Ordinance 1950 in which some of the provisions are at variance with the principles of the common law.Rescission 3 [2462] CONTRACT Guarantee – Rescission – Inequality of bargaining power – Misrepresentation – Non est factum Digest : Malayan Banking Bhd v Kim Produce Pte Ltd & Ors and another action [1991] SLR 414 High Court Singapore (Sinnathuray J).Guarantors Release of joint guarantor without consent of the other . para 2368.Rescission .

In the instant case. against Ong Chi Hui @ Ong Sing Chiat @ Ong Yue Hwee ('Ong') and Loi Sai Kwang ('Loi') as guarantors under two letters of guarantee. Malayan Banking Bhd. (2) Ong. allowing the plaintiffs' claim against Ong and dismissing the plaintiffs' claim against Loi: (1) Loi had misplaced his faith in Lui who was an untrustworthy person. he knew he was signing letters of guarantee and knew what guarantees were all about. In both the actions Ong and Loi gave guarantees in favour of Kim Produce Pte Ltd ('Kim Produce'). There was no inequality of bargaining power and the principles in the Avon Finance case and the plea of non est factum were not available to Ong. Ong is the fifth defendant in Suit No 1979 of 1981 ('the first suit') and the third defendant in Suit No 1980 of 1981 ('the second suit'). There were also material contradictions between Ong's testimony and his son's testimony which were not reconcilable. was an experienced businessman who. The applications were made on Kim Produce and T Bin's behalf by their managing director. and also between Lui and the plaintiffs. which are consolidated in this action. in the course of his business. on the other hand. The two guarantees were given in consideration of the plaintiffs granting credit facilities to Kim Produce and T Bin. The plaintiffs gave the guarantee documents to Lui who obtained the signatures of Ong and Loi as guarantors in respect of credit facilities granted to Kim Produce and T Bin. the principal debtor in the first suit and T Bin (Singapore) Pte Ltd ('T Bin'). Hence. The plaintiffs had already obtained judgment against Kim Produce and T Bin in respect of moneys owing to the plaintiffs and the sole issue was the question of liability or otherwise of Ong and Loi under the two guarantees to make good the sums owed by Kim Produce and T Bin. the principles in the Avon Finance case [1985] 2 All ER 281 applied to absolve Loi. Loi did not have the benefit of independent legal advice and the circumstances in which the plaintiffs obtained Loi's signatures on the letters of guarantee were unfair to him. Loi is the sixth defendant in the first suit and the fourth defendant in the second suit. There had been an inequality of bargaining power between Loi and Lui.Revolving bankers acceptance facility .3 [2463] CONTRACT Guarantee – Rescission – Misrepresentation – Plea of non est factum – Application of principles in Avon Finance case Summary : The plaintiffs. Holding : Held. signed many guarantees. Singapore (Sinnathuray J). 2464 Guarantee -. brought two actions. Hasannudin Guntur @ Felix Lui ('Lui'). Digest : Malayan Banking Bhd v Kim Produce Pte Ltd & Ors [1991] SLR 414 High Court. the principal debtor in the second suit.

secondly. This was done unilaterally without any request from the borrowers for an extension. from 22 August 1985 to 22 August 1986. The granting and acceptance of the facility was evidenced by a Bankers Acceptance Agreement dated 20 September 1984 ('the agreement') executed by the plaintiffs with the borrowers. no further extensions were granted as by that date the borrowers were in default. Since the borrowers incurred no liability during the period from 12 June 1984 to 11 June 1985.000 and another RM1. two further temporary extensions of three months each were approved by the plaintiffs. his liability was limited to RM2m. pursuant to which he undertook to pay the plaintiff bank all sums due under a revolving bankers acceptance facility ('the facility') granted by the plaintiffs to a company. The plaintiffs' reason for doing so was to maintain the good banker and customer relationship which existed then between the plaintiffs and the borrowers.678m during the currency of the second temporary approval. thereby incurring a liability amounting to RM322. a temporary approval as opposed to a formal extension was granted then as there was a backlog of accounts to be reviewed by the plaintiffs' executive committee. The borrowers were informed of the extension and this was duly accepted by them. On 10 June 1985. and thereafter it could be renewed for further periods. its subsidiaries and associated companies ('the borrowers'). Under the guarantee. firstly. After 20 February 1987. After 22 August 1986. a RM2m facility was available to the borrowers for a one-year period commencing from 12 June 1984 until 11 June 1985. The defendant contended. He contended. The defendant was a director of the borrowers at the material time. Under cl 5 of the agreement. the amount claimed by the plaintiffs following the borrowers' default in payment. He further contended that the further extensions granted by the plaintiffs were in respect of fresh facilities granted by the plaintiffs to the borrowers for which fresh letters of guarantee should have been executed by him if he were to be made liable for their indebtedness during the extended periods. the plaintiffs formally approved an extension of the facility for one year.3 [2464] CONTRACT Guarantee – Revolving bankers acceptance facility – Subsequent renewals of facility – Whether guarantor's liability for default in payments limited only to period of original facility – Whether extensions were fresh facilities – Whether guarantee a continuing guarantee Summary : The trial of this suit was confined to the second defendant ('the defendant') who was sued under a guarantee dated 3 October 1984. Further. that the letter of demand dated 4 March 1988 was . ie for the period from 12 June 1984 to 11 June 1985. he was therefore not liable to meet the plaintiffs' demand for any debt incurred by the borrowers after 12 June 1985. that his liability under the guarantee was only limited to the indebtedness incurred by the borrowers during the currency of the agreement. the Chief Executive of the plaintiff bank gave a temporary approval extending the availability of the facility for three months to commence from 12 June 1985 to 11 September 1985. The evidence showed that the borrowers utilized the facility during the currency of the one-year period. On 22 August 1985.

the court should not give any consideration to this point. The plaintiffs argued that: (1) as the defendant had not pleaded that he did not receive the letter of demand in his defence. he must have been fully aware that the facility was utilized during the renewal periods. The very fact that the borrowers utilized the facility during the currency of the second temporary approval lends further support to the conclusion that the facility was not a fresh facility but the same one renewed for the benefit of the borrowers. (3) there is no evidence to show that the facility granted after 22 August 1986 was a fresh facility. The AR card was never returned to the plaintiffs. acknowledged the one-year renewal and in his said capacity.not posted in compliance with cl 17 of the guarantee (ie to be served on him personally or by sending such notice through the post addressed to his last known address) but. was sent by AR registered post. Any notion that they had done so in contravention of cl 5 is dispelled by the subsequent conduct of the borrowers in accepting the renewals and utilizing the facility during the currency of the renewals. and has put the plaintiffs to strict proof of such a demand. he was debarred from doing so at trial. there is the glaring evidence that there was no break in the availability of the facility but that it continued until 20 February 1987. instead. as the director. dismissing the plaintiffs' claim: (1) cl 5 of the agreement empowers the plaintiffs to renew the facility for further successive periods after 11 June 1985. By so pleading. (2) there is no merit to the objection that the extensions were fresh facilities which were not covered by the guarantee he signed. The defendant argued that the plaintiffs consequently had no cause of action against him as the notice of demand had not been effectively served on him. (5) the defendant in his statement of defence has denied the plaintiffs' allegation in their statement of claim that a demand for payment was made to the defendant through their solicitors' letter dated 4 March 1988. On the contrary. Holding : Held. As such. the defendant has raised an issue on the letter of demand itself and the burden is on the plaintiffs to prove that such a notice had been sent to and received by the defendant. Clause 9 of the agreement does empower the plaintiffs to recall the facility on demand. (4) the guarantee executed by the defendant therefore is a continuing guarantee. Further. The defendant. there was evidence that the facility granted after that date was the same facility but renewed for a period of time as empowered by cl 5 of the agreement. covering all liabilities incurred by the borrowers not only during the currency of the original facility but also during the currency of subsequent renewals of the same facility. and also chose not to lead any evidence in court. it was not intended to introduce a new term for the renewed facility but only to emphasize the plaintiffs' remedy for default as contained in cl 9 of the agreement. and (2) since the defendant chose not to rely on this defence in the earlier O 14 proceedings. and when the letter informing the borrowers of the extension makes mention of it. (6) the fact that the defendant had not specifically pleaded that he did not receive the letter of demand . he cannot now claim that there was no 'mutuality' as far as the renewals are concerned.

makes no difference to and carries no weight affecting the plaintiffs' burden of proof that such notice had been effectively sent; (7) at the O 14 stage, the defendant need only raise one triable issue acceptable to the court to enable him to defend this suit. As such, the fact that the issue of demand was not raised at the O 14 proceedings does not debar the defendant from relying on it at the trial so long as he had made an issue of it in his pleadings; (8) sending a letter by AR registered is 'greater' than sending it by ordinary post as the postman must obtain an acknowledgment of receipt of the letter on the AR card. It is only upon the return of the AR card with the said acknowledgment that it can truly be said that the letter of demand has been effectively served on the guarantor. Anything short of that can never amount to the letter of demand having been served on the guarantor where posting is done through AR registered post; (9) to constitute a proper demand, the burden is on the plaintiff to prove that the AR card has been returned duly acknowledged. As this burden has not been discharged by the plaintiffs, the plaintiffs have not been able to establish a cause of action against the defendant under the guarantee.
Digest :

Amanah Merchant Bank Bhd v Lim Tow Seng & Ors [1993] 2 MLJ 241 High Court, Kuala Lumpur (Siti Norma Yaakob J).
2465 Guarantee -- Rights of surety

3 [2465] CONTRACT Guarantee – Rights of surety – Contribution from co-surety – Co-surety also the principal debtor – whether right to contribution available – Contracts Act 1950, s 98
Summary :

P and D1 entered into three lease agreements wherein certain equipment were leased by P to D1. D1 and D2 guaranteed payment of all rentals due to P under the agreements. Subsequently, D1 defaulted in paying the due rentals. P then filed the present suit against D. In due course, P applied for summary judgment to be entered against D. The senior assistant registrar granted D conditional leave to defend the action upon their depositing a sum of money into court. D appealed to the High Court against the order of the senior assistant registrar. D1 contended, inter alia, that it had no legal entity to enter into any contractual relations and as such the three lease agreements were void and unenforceable. Liability was also disputed by D2 on the ground that he could not claim contribution from D1, as coguarantor, as the latter was also the principal debtor.
Holding :

Held, dismissing the appeal: (1) in the instant case, although the three lease agreements had been entered into by D1, it was the partners of the firm who were bound by the agreements and as such, there was no substance in D1's submission

that the agreements were void and unenforceable as they were executed by a firm; (2) under s 98 of the Contracts Act 1950, in every contract of guarantee, there is an implied promise by the principal debtor to indemnify the surety and the surety is entitled to recover from the principal debtor whatever sum he had rightfully paid under the guarantee. As such there is nothing to prevent D2 seeking contribution against D1, even though D1 is also the principal debtor; (3) since all the issues raised by D had been satisfactorily replied by affidavit evidence and as D had not succeeded in showing that the senior assistant registrar had been wrong to order conditional leave to defend, the court, accordingly, dismissed D's appeal with costs.
Digest :

Supreme Leasing Sdn Bhd v Low Chuan Heng & Anor Civil Suit No 24-2918-86 High Court, Kuala Lumpur (Siti Norma Yaakob).
2466 Guarantee -- Subrogation

3 [2466] CONTRACT Guarantee – Subrogation – Whether guarantor had right of subrogation – Whether guarantor had paid sum due to creditor – Whether guarantor had paid into court sum due to creditor
Summary :

X lent money to P1 Sdn Bhd. The loan was secured by debentures created by P1 Sdn Bhd over its land in X's favour. D, the majority shareholder of P1 Sdn Bhd, also guaranteed P1 Sdn Bhd's repayment of the loan to X. Subsequently P1 Sdn Bhd was placed in receivership and P2 was appointed as its receiver and manager. P2 then entered into a sale and purchase agreement whereby P1 Sdn Bhd's land was sold to a third party. D entered a private caveat in respect of P1 Sdn Bhd's land and had also applied for an injunction to restrain P1-P2 from selling P1 Sdn Bhd's land. X had commenced action against D based on the guarantee given by D but D had disputed the sum due to X. P1-P2 filed this present application to remove D's caveat. D firstly argued if the sum due to X had been settled by D as a guarantor, D would have a right of subrogation and this would entitle D to enter the caveat. D then alleged that the valuation of P1 Sdn Bhd's land before it was sold by private treaty to the third party, was not proper and this would therefore cause D to suffer loss.
Holding :

Held, allowing the application: (1) subrogation did not apply in this case because D had not settled the sum due to X. Nor had D paid into court the debt due to X. D had instead disputed the amount due to X; (2) if a suffcient sum of money had been paid by D into court despite the fact that D had disputed such a sum as being due to X or if the total amount due to X had been settled, D would have a right to enter a caveat in respect of P1 Sdn Bhd's land. In this case however D could not be said to have a caveatable interest in P1 Sdn Bhd's land; (3) P2 was entitled to sell P1 Sdn

Bhd's land by way of private treaty under the debentures and P2 was also satisfied that the sale price was sufficient. Since the sale and purchase agreement had already been concluded, it was too late for D to take any action; (4) D had therefore failed to raise any serious question to be tried. The question of balance of convenience did not consequently arise. D's caveat was accordingly removed.
Digest :

Malayan Prestressed Concrete Strand Manufacturing Sdn Bhd & Anor v Malaysian Ropes Sdn Bhd [1991] 3 MLJ 482 High Court, Ipoh (Abdul Malek J).
Annotation :

[Annotation: The judgment was delivered in Bahasa Malaysia.]
2467 Guarantee -- Substitution of guarantors

3 [2467] CONTRACT Guarantee – Substitution of guarantors – Whether change in guarantors releases other guarantors – Provision in contract giving creditor power of substitution – Conditions precedent in agreement not complied with – Whether creditor could waive conditions precedent
Summary :

In 1986, F Ltd entered into three option agreements under which certain parties were entitled to require F Ltd to purchase specified shares from them. To finance the possible purchase, F Ltd entered into a syndicated loan agreement with the plaintiff banks under which the banks guaranteed payment for the shares to the vendors. F Ltd was obliged to reimburse the banks. The obligations of F Ltd were guaranteed by D and five other individuals. In August 1986, a director of F Ltd was jailed for criminal breach of trust. This was one of the events of default provided for specifically in the credit agreement. The guarantors, including D, purported to terminate their guarantees with immediate effect. In October 1986, F Ltd was required to purchase the shares under the option agreements and the vendors called upon the banks to pay on their guarantees. P thereafter sued D on their guarantees of F Ltd's liabilities. Summary judgment was obtained and D's appeal to the High Court was dismissed (see [1988] 2 MLJ 210). D appealed to the Court of Appeal. They argued, inter alia, that conditions precedent to the issue of the bank guarantees had not been complied with and that they had been released from liability since new guarantors had been introduced without their consent.
Holding :

Held, dismissing the appeal: (1) the agreement between F Ltd and the banks provided that F Ltd might not make its first request for the issue of a bank guarantee until the agent had confirmed receipt of certain specified documents. However, as between the banks and F Ltd there was nothing in the agreement to prevent the banks from waiving these conditions precedent and to act on any

request of F Ltd even if the request did not satisfy the said conditions precedent. If the conditions precedent had been imposed also for the benefit of D, it would have been easy to provide in the agreement or the guarantee that D's guarantee would not come into force until the condition precedent had been complied with in accordance with its terms; (2) as to the argument that D were released from liability under the guarantee because two of the original guarantors were replaced by new guarantors without the consent of D, the Court of Appeal agreed with the learned judge that D were not prejudiced at all and the guarantee itself provided that such a change in the security arrangements would not be a defence to D's liability as surety; the appeal was accordingly dismissed.
Digest :

Rumah Nanas Rubber Estates Sdn Bhd v NM Rothschild & Sons (Singapore) Ltd & Ors [1989] SLR 141 Court of Appeal, Singapore (Wee Chong Jin CJ, Chan Sek Keong and Chua JJ).
2468 Guarantee -- Surety's right against creditor

3 [2468] CONTRACT Guarantee – Surety's right against creditor – Duty of creditor – Duty to prevent security from becoming worthless – Loan secured by mortgage of shares – Shares sufficient to cover loan at date of default – Creditor proceeding against surety after shares became worthless – Whether creditor has a duty to surety
Summary :

A, a bank, advanced money to D. The loan was secured by the mortgage of shares and by a guarantee executed by R. D defaulted on the loan. At that time, the shares were worth a sufficient amount to cover the indebtedness to A. However, A did not sell the mortgaged shares and they subsequently became worthless. A then proceeded against R on his guarantee, obtaining summary judgment. On appeal to the Court of Appeal, unconditional leave to defend was given to R, who had contended that the bank as creditor should have sold the shares to recover its money before the shares became worthless. A appealed to the Privy Council.
Holding :

Held, allowing the appeal: (1) the creditor had three sources of repayment. It could sue the debtor, sell the mortgaged securities or sue the surety. All these remedies could be exercised simultaneously or contemporaneously or successively or not at all; (2) if the creditor chose to sue the surety and not pursue any other remedy, it was bound to assign the security to the surety on being paid in full. If the creditor chose to exercise the power of sale, it must sell at the current market value but had a discretion to decide when and if to sell. The creditor does not become a trustee of the mortgaged securities and the power of sale for the surety unless and until the creditor is paid in full and the surety, having paid the debt, becomes entitled to a

At the trial what was before the court were as follows. Digest : China & South Sea Bank Ltd v Tan [1989] 3 All ER 839 Privy Council Appeal from Hong Kong (Lords Keith. If the surety is worried that the mortgaged securities may decline in value. the surety could pay off the debt. In respect of the term loan account. (3) the surety contracts to pay the debt if the debtor does not pay. 2469 Guarantee -. In the end.000 payable on demand. being the difference between the term loan judgment sum of S$60. and (b) a term loan. the plaintiffs confined themselves to four of the six items of expenses. allowing the plaintiffs' claim: (1) none has been identified. All that the guarantors undertook to bear under cl 13(b) were costs and expenses incurred in recovering moneys due under the guarantee itself.000 less S$48. the claim stood at S$11. (2) the court accepted the defendant's contention that the total principal sum for which he is liable should not exceed S$120.transfer of the securities to him. In respect of the overdraft account. also of S$60. then he may request the creditor to sell and if the creditor did not do so.05% pa. so .69.296.25 = S$122.19.703. It exceeded the limit by S$2.442.31. On calculation. particularly the enforcement proceedings.296.280. the amount realized from the garnishee proceedings. repayable by 1 August 1985.31. Neither is there anything in the guarantee agreement obliging the guarantors to bear such costs and expenses.Terms of guarantee 3 [2469] CONTRACT Guarantee – Terms of guarantee – Costs and expenses incurred not provided for Summary : The plaintiffs by a letter dated 8 November 1983 granted to M/s Moving Pictures Pte Ltd ('the company') the following credit facilities: (a) an overdraft facility of S$60. The creditor is not under a duty to exercise his power of sale at any particular time or at all. the only claims that had to be dealt with at length are (a) in respect of the overdraft account. the plaintiffs' solicitors' costs. The plaintiffs have not shown how the costs and expenses incurred in the overdraft action and the term loan action. R's defence failed and the appeal was allowed.838. (4) as A had done no act injurious to R or inconsistent with R's rights and did not breach any duty to R. This must be taken off the shortfall claimed. cannot be sustained. the principal sum which was debited to the company would be S$127.S$4. and (b) in respect of the term loan account. by elimination. Oliver and Goff).44 . Holding : Held. Each carried interest at the rate of 11. Templeman.000. Ackner.19. take over the benefit of the securities and sell them. the shortfall of S$11.000. can be considered to be costs and expenses incurred in recovering moneys due 'under the guarantee'.838. The claim therefore.

on the ground that they executed the guarantees under the undue influence of D1.838. D3-D4 also alleged that they signed blank guarantee agreements without any explanation given to them. Singapore (Warren LH Khoo J). 2470 Guarantee -. the contract is not enforceable. (3) in the instant case.Undue influence 3 [2470] CONTRACT Guarantee – Undue influence – Whether guarantees were executed under undue influence of third party – Contracts Act 1950. Upon the failure of Syarikat S to repay the loan. D1-D4 guaranteed the repayment of the loan by Syarikat S on demand by P. if a party enters into a contract as induced by a person who is not a party to the contract. The plaintiffs' conduct of these proceedings leaves much to be desired.296.458.if the plaintiffs and their advisers had been more responsive to the expressed desire of the defendant to settle the matter. D3-D4 applied to the High Court to set aside the default judgment. under the common law. (3) D3-D4 merely made bare allegations of D1's undue influence without giving any particulars. Holding : Held. P sued D1-D4 and obtained judgment in default of appearance against them. there is no provision in the principal agreement dealing with the costs and expenses of recovering moneys due under it. The common law should therefore be considered as a principle of law in addition to s 16 of the 1950 Act and is not inconsistent with such a provision. or been started at all. nor that P had any real or apparent authority over D3-D4. In the circumstances there is no order as to costs. s 16 Summary : P advanced money to Syarikat S. D3-D4 had to prove the other contracting party. D1 and D3 were married to each other while D4 was D3's mother. firstly.31 . However. this suit need never have proceeded beyond the writ stage. dismissing the application of D3-D4: (1) to establish undue influence under s 16 of the Contracts Act 1950.12 which sum the court allowed.19 = S$8. This was insufficient to raise the question of undue influence as a triable issue. Digest : . P was in a position to dominate their will and that P had obtained an unfair advantage by using that position. namely. (2) there was no evidence that P had dominated the will of D3D4. Digest : Banque Indosuez v Pang Giap Oon Suit No 6200 of 1985 High Court. (4) the guarantees were valid in the absence of fraud or misrepresentation despite the fact that the particulars were not filled in at the time they were signed by D3-D4.S$2.that what the plaintiffs are entitled to claim is S$11.

Singapore (Rajah J). Vol 3. 2473 Guarantee -. Upon H Co's default.Validity 3 [2473] CONTRACT Guarantee – Validity – Compliance with Finance Companies Act 1969. 2472 Guarantee -. P sued D upon the guarantee. D was a director of H Co and a guarantor of the loan.Unilateral cancellation of guarantee 3 [2471] CONTRACT Guarantee – Unilateral cancellation of guarantee – Guarantor a director of borrowing company – Resignation of director – Whether director can withdraw from guarantee Summary : P advanced money to H Co. Even if D did purport to terminate the guarantee. Kuala Lumpur (Zakaria Yatim J). para 2375. such unilateral termination was ineffective. allowing P's claim: it was held that the evidence submitted by D regarding the cancellation of the guarantee was fabricated. D resigned from H Co and purported to give notice of his resignation and rescission of the guarantee to P. See CONTRACT. The second defendant had also entered into the relevant guarantee with the plaintiff and was also liable as a . Kuala Lumpur (Zakaria Yatim J). Holding : Held.Validity 3 [2472] CONTRACT Guarantee – Validity – Blank guarantee agreements were executed without explanation – Whether guarantees were valid Digest : Malaysia French Bank Bhd v Abdullah bin Mohd Yusof & Ors [1991] 2 MLJ 475 High Court. Digest : Indian Overseas Bank v Goh Teng Hoon [1988] 3 MLJ 372 High Court.Malaysia French Bank Bhd v Abdullah bin Mohd Yusof & Ors [1991] 2 MLJ 475 High Court. Based on this agreement and at the request of the first defendant. 2471 Guarantee -. the plaintiff had bought hire purchase agreements from the first defendant. s 20 Summary : This was an application by the plaintiff for summary judgment against the defendants for moneys due under a block discounting agreement.

SK Brothers Enterprise Sdn Bhd & Anor Civil Suit No D 5-22-1685-92 High Court. It does not cover the purchase of debts and therefore when the relevant agreement was entered into. Section 127(2) of the BFIA was amended to add 'provision of finance' which covers the business of acquiring debts. (2) however. the validity of the guarantee rested on the validity of the main agreement. the plaintiff's application for summary judgment was dismissed. 2474 Guarantee -.Validity 3 [2474] CONTRACT Guarantee – Validity – Deed of guarantee over hire-purchase transaction – Particulars of deed and agreement left blank when executed – Default on hire-purchase payments – Validity of deed – Whether past consideration present – Responsibility of persons executing blank documents . bank or any other financial institution approved by Bank Negara Malaysia. However the position changed with the enactment of the BFIA.principal debtor. under s 20 of the FCA. (4) as regards the discrepancies in the accounts. The second defendant argued in respect of the plaintiff's claim for 18% interest that the plaintiff had to first prove damages despite the provision in the block discounting agreement of the penalty rate of interest which the second defendant felt was excessive. it was void under the FCA. there was no triable issue as the plaintiff had admitted the error and had accordingly amended their statement of claim. loans or credit facilities in access of RM 5. Therefore. a triable issue had been raised. no finance company may give unsecured advances. a block discounting agreement is now legally binding. Thus. Digest : Cempaka Finance Bhd v Menang . Kuala Lumpur (Abdul Malek J). (3) in respect of the claim for interest of 18%. The first defendant subsequently failed to pay the moneys due. (5) although the second defendant had not been able to raise any triable issue. Holding : Held. there was no issue for trial as the provisions were clearly stated in the relevant agreement. He also argued that the notice of demand against the second defendant was bad because it did not take into consideration two payments which had been made. The first defendant claimed that the plaintiff had contravened ss 2 and 127 of the Banking and Financial Institutions Act 1989 ('the BFIA') and ss 4 and 20 of the Finance Companies Act 1969 ('the FCA'). Under s 4 of the FCA 'borrowing business'as defined in s 2 of the FCA includes the lending or the investment by the borrower of the borrowers funds. dismissing the application: (1) the effect of the block discounting agreement was the purchase by the plaintiff of debts owed to the first defendant. The amendments to the BFIA were retrospective.000 except to a registered finance company. Section 128(9) of the BFIA repeals the FCA but transactions under the FCA continue to be valid. As it would appear that this transaction did not comply with s 20 of the FCA.

. or relied completely upon others to complete the same. s 69 Summary : . Both the agreement and the deed were signed by the first defendant and the appellant respectively on or before 11 January 1984. (2) a person who chose to be careless. Subsequently. the first defendant.096. When the deed was executed by the appellant. and (c) there was an issue of past consideration.'. 2475 Guarantee -.Validity 3 [2475] CONTRACT Guarantee – Validity – Guarantor denied signing guarantee – Nature of proof needed – Evidence Act (Cap 97). The opening sentence of the deed expressly stated. Johore Bahru (James Foong J). To 'convince' the first defendant to purchase the said tractor. He secured a purchaser.Summary : The appellant was a sales executive with a company selling tractors. There was such a hire-purchase agreement intended to be executed between the first defendant and the respondent at the material time. is responsible for his own actions and is prevented from denying that the contents therein bound him. These relevant particulars were only completed on 15 August 1984 when the hirepurchase sum was to be released by the respondent. for one tractor and arranged hire-purchase financing with the respondent for the first defendant. Holding : Held. 'In consideration of your entering into the hire-purchase agreement . The tractor was therefore repossessed and sold leaving a balance of RM18. the appellant executed a deed of guarantee ('the deed') for the due performance of the first defendant of the terms stated in the agreement. dismissing the appeal: (1) there was no trace of past consideration in the transaction. (b) since he was sued on a guarantee. it was a printed form with relevant particulars left blank. the first defendant defaulted in the hire-purchase payments under the agreement. and obtained judgment in default of appearance..31 which the respondent claimed against the first defendant. Hence. the agreement being a principal document also bore no relevant particulars when executed. Digest : Chai Then Song v Malayan United Finance Bhd [1993] 2 CLJ 640 High Court. The appellant disputed the respondent's claim on the grounds that: (a) the deed was invalid without the relevant particulars inserted at the material time of execution. and this did take place when the appellant executed the deed. or not bothered to find out what the contents of documents are. This culminated with a hire-purchase agreement ('the agreement') between the parties. the fundamental elements on the formation of a contract had not been fulfilled.

the court held that s 69 does not apply to preclude the use of indirect or circumstantial evidence. Holding : Held. All these matters were deposed to in the plaintiff's manager's affidavit-in-chief and were not challenged in crossexamination. the guarantee was stated to be given in consideration of the plaintiff making or continuing to give advances. Further. or otherwise giving credit or other accommodation to Jaico. the company of which the principals were directors. Evidence was also led on the defendant's conduct in face of the bank's claim against him as a guarantor. The court was therefore satisfied that the defendant had signed the guarantee.The plaintiff bank's claim against the defendant was founded on a guarantee it said he executed in its favour. the defendant did not deny the guarantee until about a year and a half after the plaintiff sent a formal letter of demand to the defendant through its solicitors. Digest : Bank of India v Dr Pravinchand P Shah Suit No 2324 of 1987 High Court. asserted that the guarantee was not supported by consideration and disputed the amount owed by the principal debtor. 2476 Guarantee -. the defendant had also attended discussions with the plaintiff's representatives. it would include the continuance of the Foreign Bills Purchased facility granted to Jaico and the agreement not to take immediate action to recover Jaico's outstandings. (4) on the amount due under the guarantee. The defendant denied signing the guarantee. (3) on the issue of whether the guarantee was supported by consideration. The defendant had also admitted in a letter dated 1 September 1987 to being a guarantor. the primary provision between the principals and the plaintiff continued to operate as a governing provision. For example. allowing the plaintiff's claim: (1) primary proof of the guarantee was given by the production of the guarantee at the hearing. "Accommodation" refers to the facilities a bank provides and indulgences it grants to its customers. the defendant guaranteed the payment of Jaico's liabilities including interest and agreed to pay interest on the sum claimable from him under the guarantee but the rate of interest was left blank. In context of the present guarantee. It does not render it necessary that direct evidence of the handwriting of the person alleged to have executed the deed must be given by some person who saw the signature affixed.Validity . In the situation. Singapore (Kan Ting Chiu J). (2) on the defendant's argument that the plaintiff had failed to prove the guarantee under s 69 of the Evidence Act (Cap 97) because it did not lead evidence on the defendant's signature. both in Singapore and in Penang about settlement of the debts due to the plaintiff. The court found on the evidence that the parties did not think of or agree on a figure and what appeared in the guarantee was an incomplete standard clause that could not be applied.

Furthermore. inter alia. After successfully acquiring and utilizing the ECR facility. There was some delay in the issuance of the BEFIP.97. it would not have made any difference as the Companies Act 1965. As the company had been ordered to be wound up. The company was offered a credit facility referred to as an Export Credit Refinancing (Pre and post shipment) facility (the ECR facility) for RM3m subject to certain terms.3 [2476] CONTRACT Guarantee – Validity – Whether guarantee executed by company required company seal to be affixed – Whether consideration for guarantee past consideration – Whether directors of company aware they were signing guarantee – Whether any variation of terms of the guarantee discharging guarantors – Whether liability of guarantors discharged if creditor has alternative remedy Summary : The plaintiff (the bank) applied for summary judgment against the first defendant (the company) as borrower in a credit facility and against the second to sixth defendants as guarantors (the guarantors). bearing in mind s 226(2) of the Companies Act 1965. which was a condition precedent for the granting of the ECR. Even if he had.481. no company seal need be affixed at all to the guarantee . who were directors of the company. Counsel for the guarantors did not submit as to what the non-compliance of the banking laws were. that all export transactions were to be covered by a Banker's Finance Insurance policy (the BEFIP) and that the guarantors. and the company requested and was granted an extension of time to accept the ECR facility. the hearing of the application for summary judgment was ordered to be proceeded against the guarantors only. execute a joint and several guarantee for RM3m. counsel's argument that the agreement was not valid as the common seal of the company was not affixed to the loan document and that it was not stamped was without merit and misleading. s 35(4) does not make it mandatory for a company to affix its common seal to a contract unless required by law or by its memorandum or articles of association. the company subsequently breached one of the conditions by failing to settle an outstanding sum of RM998. The company had made an application to the bank for credit facilities to finance the company's purchase of raw materials and for finance of exports. The guarantors were fully aware that the agreement was in the form of several documents and correspondence. Holding : Held. and counsel had not identified the loan document requiring the company's seal to be affixed and also did not make submission on this point. With regards to the Companies Act. The plaintiff filed a writ of summons claiming the sum and subsequently filed this application for summary judgment. as the company was unable to fulfil certain requirements in obtaining it. allowing the application: (1) the guarantors' argument that the ECR facility was untenable in law as the plaintiff had failed to comply with the legal formalities and requirements of the Bankers Act and the Companies Act could not stand. The guarantors opposed the ap-plication.

but all these were made before the agreement to make available the ECR facility was finalized. The guarantors could not discharge their liability under the guarantee by identifying a source from which the plaintiff might be able to recover his loss. (3) there was also no merit in the denial of the guarantors that they were not liable for the outstanding sum. (5) the guarantors' contention that the plaintiff could seek indemnity under the BEFIP was a non-issue. There were some indulgences granted by the bank at the company's request such as one of the directors being excluded from being a guarantor and the extension of time to enable the company to fulfil the conditions to enable it to accept the bank's offer of the ECR facility.Variation 3 [2477] CONTRACT Guarantee – Variation – Co-sureties failing to execute – Deletion of co-sureties' names from deed of guarantee – Whether presumption that alterations made before execution applies Summary : . When it was executed would be irrelevant as it formed part of the same transaction and the said guarantee was not past consideration. The guarantors were all directors of the company and it was resolved at a meeting of the board of directors that they would be guarantors for the ECR facility. (4) there was nothing to support the contention that the guarantors were discharged due to the contract between the company and the plaintiff being varied.document executed by the guarantors since it was entered into in their personal capacity. Digest : Perwira Habib Bank Malaysia Berhad v Campell Industries Sdn Bhd & Ors Civil Suit No 22-237-1992 High Court. (2) the guarantors' assertion that they had no knowledge that they had executed any document in their capacity as guarantors. 2477 Guarantee -. The argument that the said guarantee executed amounts to past consideration and was therefore invalid could not hold water. It was part of the same transaction wherein the plaintiff had agreed to make available the ECR facility and without it being executed the company would not have been able to utilize the ECR facility. The words of the guarantee document made it clear that they had agreed not only to repay all the liabilities of the company incurred after the execution of the guarantee but also in respect of liabilities incurred as at the time of execution. Counsel did not address the court as to what were the variances or acts or omissions he was referring to. Johor Bahru (Mohd Ghazali J). They were signatories to the guarantee document and were fully aware they had executed that document as guarantors. if at all they existed. or in the alternative. The guarantee was one of several conditions imposed by the plaintiff and accepted by the company at a meeting of its board of directors. that the guarantee was invalid was equally without merits. None of the requests could tantamount to variances which could discharge or release the guarantors from their liability.

inter alia. Certainly. to alter it afterwards would be fraudulent. The company subsequently defaulted in repayment of the loan and the plaintiffs commenced this action. and.. the authorities seem to show that. Digest : . And this is consistent with good sense: for every deed expresses the mind of the parties at the time of its execution. the short answer to the plaintiffs' argument is that the guarantee was expressed to be executed by five parties under seal but only three parties had so executed it. there is a presumption in law that any alteration appearing upon the face of a deed. and among the securities provided for the loan was a guarantee in writing dated 28 July 1982 executed by Lim Shu Jin ('Lim'). In July 1982 or thereabout. in many cases. a perfected instrument. as far as he is concerned. it is not in so far as Chan is concerned. Chinese Pottery Arts & Handicraft Pte Ltd ('the company'). highly criminal (Simmons v Rudall (1851) 1 Sin NS 115).in this case. they granted a loan of S$4m to a company. and is still not. when there are interlineations. It transpired that the guarantee was prepared by the plaintiffs' solicitors with the names and addresses of all five of the company's directors as co-sureties. This case is therefore distinguishable from those cases in which the presumption of law was invoked. The plaintiffs contended otherwise and additionally submitted that as the guarantee was executed under seal. (3) and so. the names of two of those directors. in the absence of evidence to the contrary. (4) in the case of deeds. Chan's sole defence was that it was intended that the guarantee was to be executed by the five persons named therein (who were the existing directors of the company) but that after the execution of the guarantee by him. was made before the execution of the deed. the presumption is that they were made before execution . Jit Lin and Geok Mooi therein were deleted without his knowledge and consent with the result that neither of them executed the guarantee and in consequence he was not liable under the guarantee. the court concluded that Chan. executed the guarantee on the basis or understanding that all the five persons would sign the guarantee. The document as a whole is not a deed .not yet at any rate until it is executed by the other two parties. he would be relieved from his obligation if all the others did not sign. The defendant alleged that the alterations were made after he had executed the guarantee and without his knowledge or consent.. Goh Khim Teik ('Goh') and James Chan Chao Jan ('Chan'). However. It was not. he is not bound by the guarantee. Holding : Held. and as the absence of the execution thereof by Jit Lin and Geok Mooi had not been agreed to by him. dismissing the claim: (1) where a surety had executed a document in the belief derived from the form of the document that it would be executed by all the sureties named as such in the document as persons who were to sign. the executed document had those names and addresses deleted.The plaintiffs are a finance company. against Chan for the amount due under the guarantee. (2) on the evidence.

Guarantees provided by directors . and (3) whether the variation is such that it goes to the root of the contract and therefore the guarantees fail. 2478 Guarantee -.94 to the bank. The defendants' main contentions are (1) the guarantors gave their guarantees on the basis of the approval letter and conditional upon the security being obtained so that the money be disbursed in accordance with such approval. Singapore (LP Thean JA). (2) assuming the variation did take place. (2) the two clauses of the guarantees were sufficient for the bank to vary the securities which had been agreed to by the defendants or to grant whatever indulgence to the companies without obtaining prior consent of the defendants. These two clauses.762. and Mandarin owed $2.73 as at 6 July 1977.Hong Leong Finance Ltd v Goh Khim Teik & Anor [1994] 1 SLR 366 High Court. The bank now proceeds against the second defendant (Yap Seng Hock) and the third defendant (Yee Soo We @ You Su We) on their guarantees.Defence of variation .049. On 6 July 1977.Bank's right of variation Contracts Act 1950.Bank's right of variation . Summary : The three defendants in these consolidated actions were guarantors for banking facilities granted by the plaintiff bank to two companies (Seiko and Mandarin) in which they were directors. Seiko owed the bank $1.Interest rate not specified in guarantees . are valid and binding on the .912.Sums of money paid by receiver not credited to companies' accounts . On 3 June 1985.65 to the bank. whether such variation could be considered being one which absolved the defendants.Defence of variation . and neither the companies nor the defendants were prejudiced by these variations. s 86. They do not deny the debts but seek to avoid the guarantees which did not specify the rate of interest payable.Contracts Act 1950.Whether variation absolves guarantors from liability .Guarantees provided by directors for banking facilities granted to their companies . Holding : Held: (1) both the defendants as directors had knowledge of the variations made by the bank which were granted for their benefit.Companies unable to pay debts due to bank . the receiver of Mandarin sent a sum of $329. These two sums were kept in suspense accounts and were not credited to the respective accounts of Seiko and Mandarin.Banking . the receiver of Seiko sent a sum of $399.Variation 3 [2478] CONTRACT Guarantee – Variation – Contracts Act 1950 (Act 136). s 86 – Contract .Claim on guarantees against guarantors .266.19 as at 28 June 1977. although contrary to s 86 of the Contracts Act 1950 (Act 136).388.Claim on guarantees against guarantors . Both companies were unable to pay their debts to the bank and have been liquidated.Banking facilities granted to companies . s 86 .064.

dismissing the appeal: (1) in the instant case.guarantors. with proper reduction of the amounts paid by the receivers. It transpired that P had increased the rate of interest stipulated in the loan agreement without being authorized to do so.Variation . The senior assistant registrar. D2 had the right ex debito justitiae to have the judgment set aside. P had obtained judgment in excess of what they were entitled to. the judgment in default was clearly an irregular judgment. D2 did not appeal against the decision of the registrar in regard to the grant of conditional leave to defend. (3) the defendants were therefore liable as guarantors for the respective debts of Seiko and Mandarin as at the dates of demand served upon them. Johore Bahru (Yusoff Mohamed J). Digest : Malayan Banking Bhd v Yap Seng Kee & Ors [1988] 1 MLJ 313 High Court. (3) for the above reasons. in setting aside the judgment in default. (5) costs to the bank to be taxed. Holding : Held. s 86 Summary : P appealed against the decision of the senior assistant registrar ordering that the judgment in default entered against D2 be set aside and granting D2 conditional leave to defend the action. Digest : United Asian Bank Bhd v Kamariah bte Mohd Yusoff & Ors Suit No C24-5082-86 High Court. (4) an interest of 5% pa (as conceded by counsel for the bank) is payable on the guarantees. D2 had guaranteed the repayment to P of certain credit facilities granted by P to D1. the court invoked its inherent jurisdiction in the interest of justice and ordered that unconditional leave to defend the action be given to D2. 2480 Guarantee -. (2) the variation in the terms of the loan agreement which was effected without D2's consent had discharged D2 as to his obligations under the guarantee with regard to transactions subsequent to the variation.Variation 3 [2479] CONTRACT Guarantee – Variation – Material variation – Consent of surety not obtained – Surety discharged as to transactions subsequent to variation – Contracts Act 1950. should have granted unconditional leave to D2 because in the circumstances of the case. Kuala Lumpur (Zakaria Yatim J). There was no evidence that D2 was informed of the increased or that he had given his consent to such increase. 2479 Guarantee -.

The defence of D2 and D3 was that the arrangement between P and the receivers was done without their consent. Vol 3. H began to default in the repayments. P entered into a hire purchase agreement with H for two hydraulic presses. On 17 February 1983 P entered into a further hire purchase agreement with H in respect of two furnaces.3 [2480] CONTRACT Guarantee – Variation – Material variation – Consent of surety not obtained – Surety discharged from obligations under guarantees – Contracts Act 1950. for S$90. Out of this sum P applied S$20. Of the sum claimed S$73.451.575.000 to dismantle the machinery.141. D2 and D3 also claimed that they were not liable for late payment interest incurred after H were wound up. H were put into receivership. D2 and D3 were not sued under the new arrangement. Both agreements were guaranteed by D2 and D3.74 was late payment interest. On 18 February 1987 the receivers entered into an arrangement with P to pay off the outstanding instalments and by 1989 had paid a total of $114. P then brought an action against D1-D4. as guarantors.435 (S$12. P appealed. allowing the appeal: (1) P's arrangement with the receivers was not a variation or modification of the agreements.113.Variation 3 [2481] CONTRACT Guarantee – Variation – Novation – Release of gurantors – Late payment interest – Obligation to pay after principal is wound up Summary : On 1 October 1982. the reason being that it would have cost S$20. There was nothing to vary or modify as the agreements had expired by effluxion of time. Holding : Held. P's claim was for the indebtedness of H which had accrued up to the date of presentation of the windingup petition. Subsequently in September 1986. s 86 Digest : Kidurong Land Sdn Bhd & Anor v Lim Gaik Hua & Ors [1990] 1 MLJ 485 Supreme Court. Malaysia (Lee Hun Hoe CJ (Borneo). para 2714. A winding-up petition was presented against H on 6 October 1986 and the company was wound up on 6 February 1987.83 of which was late payment interest) to settle all amounts due under the 1983 agreement. but P did not repossess the machinery. Instead they allowed H to continue with the hirings until both agreements expired by effluxion of time.57 being the balance due under the 1982 agreement. P applied for summary judgment and D2 and D3 were given unconditional leave to defend. (2) H's obligation to pay interest on the overdue instalments . and amounted to a variation of the agreements. 2481 Guarantee -. less the sums paid by the receivers. therefore releasing them as guarantors. See CONTRACT.

Alteration insubstantial and to the benefit of sureties .Variation without surety's consent . the appellant bank sued the respondents on a contract of guarantee for banking accommodation given to a company. Digest : Singapore Finance Ltd v Huang Liang Yu & Ors Suit No 1419 of 1989 High Court. . s 86. Vol 3. The respondents were the directors of the company and in the contract of guarantee they had agreed in effect to waive their rights in respect of any variation or alteration of the contract between the appellant bank and the company.ceased to be payable on the date of the presentation of the winding-up petition on which the company was wound up.47 and there would be judgment for that amount. the directors and the shareholders.Variation 3 [2482] CONTRACT Guarantee – Variation – Variation of interest rate of loan – Whether creditor could vary interest rate without knowledge and consent of surety Digest : Malayan Banking Bhd v Senorita Holdings Sdn Bhd & Ors Civil Suit No C2-233364-1986 High Court. P were therefore not entitled to charge overdue interest after 6 October 1986. The appellant bank then applied for summary judgment under O 14 of the Rules of the Supreme Court. para 2288. 2482 Guarantee -.Variation 3 [2483] CONTRACT Guarantee – Variation – Waiver – Construction – Contract Contract of guarantee . Summary : In this case. (b) a letter of undertaking from the shareholders who held 40% of the issued share capital not to divest their shareholdings without the bank's consent. The assistant registrar made an order in terms but this order was reversed in the High Court. Singapore (Chan Sek Keong J). Such acts were not contained in the guarantee but were contained in a letter which set out the terms and conditions of the loan. Kuala Lumpur (Zakaria Yatim J). The respondents had contended that their liabilities under the guarantee were conditional on the bank securing certain acts on the part of the company.Waiver of rights by sureties Contracts Act 1950.297. See CONTRACT. The advances were not repaid and the appellant bank sued the respondents. 2483 Guarantee -. P were therefore only entitled to recover S$49. The respondents relied on the fact that the bank had not obtained (a) a valid debenture on the company's assets containing a provision to enable receivers to be appointed in the event of default.

if any. In his statement of defence. D2 and D3 jointly and severally guaranteed the repayment of the overdraft facility to P. Kuala Lumpur (Raja Azlan Shah CJ (Malaya). Digest : Citibank NA v Ooi Boon Leong & Ors [1981] 1 MLJ 282 Federal Court. (3) in any event the contract of guarantee in this case contained express provisions giving the bank the right to do or omit to do certain things without thereby prejudicing the right against the respondents. for the purpose of the Limitation Act 1953.Holding : Held: (1) the letter from the bank containing the terms and conditions of the loan did not fall within the category of negotiations so as to be caught by the prohibitory provisions of the Evidence Act but gave factual background which was admissible. Dissatisfied with the decision. s 86 Summary : P had earlier granted an overdraft facility to D1. In this case. In the circumstances. time started to run from the date of the letter of demand in question. in this case were so fleeting and patently non-prejudicial to the respondents as to fall into the de minimis non curat lex rule. P's application for summary judgment against D2 was dismissed by the registrar. As the respondents had agreed to waive any variation or alteration and the bank had proceeded with the performance of the contract on that basis it would be inequitable to allow them to resile from the contract. Upon default in repayment. a cause of action arose against D2 only when a demand was made by P on him to pay the sum owing. P sued D for the sum owing under the facility. D2 also contended that he was discharged from liability as a guarantor as there had been a substantial variation of the principal contract. Holding : Held. Accordingly. allowing the appeal: (1) having regard to the terms of the guarantee. On this footing the bank was entitled to summary judgment. 2484 Guarantee -. (2) the variations. the bank had obtained an order for the sale of the assets of the company under the debenture and there was no evidence that any of the shareholders had in fact transferred their shares. D2 contended that P's action against him was time barred.Variation 3 [2484] CONTRACT Guarantee – Variation – Whether there was substantial variation of principal contract – Whether guarantor discharged from liability – Contracts Act 1950. (4) in this case the respondents were bound under the contract of guarantee to accept the certificate of indebtedness duly executed by the Vice-President of the bank as conclusive evidence of the debt due to the bank. P's . P appealed to the High Court.

Kuala Lumpur (Zakaria Yatim J). (3) as there were no triable issues raised by D2 in the appeal. Digest : Bank Bumiputra Malaysia Bhd v Fu Lee Development Sdn Bhd & Ors [1991] 2 MLJ 202 High Court. Such an extension was not disadvantageous to D2. the second to sixth defendants each executed a guarantee agreeing that in consideration of the plaintiff granting the loan to the first defendant. The first defendant failed to pay the sum borrowed but. Holding : Held.claim against D2 was not time-barred. informed them he had secured a loan from a finance company with which he would pay the plaintiff. He had failed to provide details of the amount of interest accrued due and unpaid on the original sum loaned . Only the first.000 towards settlement of the loan (the said settlement) but managed to pay only RM35. second and fifth defendants had entered appearance as the other defendants had since died. It was agreed that the first defendant was to pay RM740. Simultaneously on the same day. the plaintiff. 2485 Guarantee -. The loan was secured by a charge over a piece of land owned by the first defendant and both parties signed a memorandum pursuant to s 16(1) of the Moneylenders Ordinance (the Ordinance). a private limited company carrying on the business of licensed moneylenders. D2 was not discharged from liability as a guarantor. granted the first defendant a loan of RM365. it was an advantage to D1 as well as to D2 and D3. In the circumstances. In fact.000 with interest at a rate of 12% per annum. after several meetings with the plaintiff. the court ordered that summary judgment be entered against D2 in favour of P. (2) in the instant case.Variation of guarantee 3 [2485] CONTRACT Guarantee – Variation of guarantee – Whether security discharged without guarantors' consent – Whether guarantors discharged from guarantee Summary : In 1986. each of them would guarantee to pay the plaintiff on demand all sums owing by the first defendant. The plaintiff had failed to comply with the provisions of the Moneylenders Ordinance and the requirements of O 79 of the Rules of the High Court 1980. the extension of the period of the overdraft facility was not a substantial variation of the principal contract. dismissing the application: (1) this was a moneylender's action interpolated with a claim for breach of agreement regarding the said settlement. In order to secure the moneys from the finance company the plaintiff had to release the charge over the said land to allow it to be charged to the finance company.000. The plaintiff filed a writ claiming the remaining sum with interest and applied for summary judgment.

Unless they had given their consent the discharge of the charge on the land would. (2) the plaintiff's argument that the statement of defence was vague. without giving the plaintiffs sufficient notice to enable them to redeem these shares. another company in the MBF group.as required by O 79 r 3. the pleadings showed that negotiations to settle the loan was made between the plaintiff and the first defendant and it was not clear if the guarantors participated in the negotiations. This was an application for summary judgment and the defendants could raise defences over and above those pleaded in their statement of defence. s 86. The plaintiffs also alleged breach of an oral agreement not to sell some 3. Whether the discharge of the said charge was a variance by the plaintiff was a question of law which remained undetermined and leave to defend should be given to the second and fifth defendants. Accordingly. a company in the MBF group of companies.When does defendant acquire right of exoneration 3 [2486] CONTRACT Guarantee – When does defendant acquire right of exoneration – Ascertaining amount owing when there is a fluctuating sum – Shares deposited as security – Mitigation by wronged party Summary : The plaintiffs.3 million shares in MBFI (Australia) Ltd. there was a clear inference that the interest charged was excessive and the transaction was harsh and unconscionable and substantially unfair. Johor Bahru (Mohd Ghazali J). . Further s 21(2) of the Ordinance allowed the court to re-open harsh and unconscionable moneylenders transactions and on a calculation of the interest under the agreement. claimed against the defendants damages for breach of duty as mortgagees in connection with the sale of shares mortgaged by the plaintiffs to the defendants to secure credit facilities granted to MBF Leasing ('the borrowers'). if the suit went to trial it would enable the court to re-open the transaction and take an account between the plaintiff and the first defendant on the agreement purporting to close the previous dealing which was made to settle the matter regarding the outstanding loan. He had also failed to produce a statement of account in accordance with s 19 of the Ordinance as required by s 21 of the same Ordinance. The issue was whether the defendant had a defence and not whether the statement of claim provided him with a defence. (3) although counsel for the defendants did not put forward any defence for the second and fifth defendants as guarantors. on the surface of it. 2486 Guarantee -. have released them from their undertakings as it would be tantamount to a variance of the original loan agreement within the contemplation of the Contracts Act 1950. being part of the shares subject to mortgage. contained concoctions and did not give details was without merit. Digest : Lien Chong Credit & Leasing Sdn Bhd v Srisaga Holdings Sdn Bhd & Ors Civil Suit No 22-189-199 High Court.

the right to do so would not arise. the Pembagunan Farlim Sdn Bhd. it is not possible to tailor the amount to be sold to the amount needed to liquidate the borrower's liability. the price fluctuates from day to day.Whether guarantors have equity against creditor 3 [2487] CONTRACT Guarantee – Whether guarantors have equity against creditor Summary : In this case. (8) the burden was on the defendants to show that the steps taken were unreasonable. what the defendants could acquire would be the right to be exonerated from their obligations under the guarantee by requiring the borrowers as the principal debtors to pay off the amount which the defendants were liable to pay to UOB under the guarantee. and the court should not be astute to find fault with him when placed in such a position. allowing the plaintiffs' claim: (1) under general guarantee law principles. the mortgagee can reasonably be expected to monitor the realisation of the security to see that no more is liquidated than is necessary to protect his own interest as the mortgagee.Holding : Held. This could only be done if the guarantee was terminated. (4) a mortgagee has to act in good faith in exercising his power of sale. The . In either event the amount owing to the bank would be ascertained and the defendants would then be in a position to call on the borrowers to pay off the amount due. a company. (6) since where shares are concerned. he cannot be faulted if the quantity sold turns out to be more than is required for that. so long as the mortgagee makes a reasonable effort to guard against excessive sale. (2) but the defendants can only do so when the amount for which they are liable under the guarantee had been ascertained. and they have to be sold in the event of default. since otherwise the amount would fluctuate. Singapore (Warren LH Khoo J). upon the borrowers committing a default. Digest : MBf International Ltd v Royal Trust Merchant Bank Ltd [1993] 3 SLR 216 High Court. (5) where shares are deposited as security. and the overdraft account closed. For this purpose the company obtained a loan of $2 million from the respondent bank. However. The appellants who were directors of the company executed a guarantee for the loan and as a further security the land of the company upon which the housing estate was to be developed was charged to the bank. 2487 Guarantee -. Without either event occurring. the plaintiff is only required to act reasonably. (3) in a case where there is a fluctuating sum. the only way to have an ascertained sum due was either for the bank to close the account on its own initiative or for the defendants to serve a termination notice on the bank. (7) the law requires the wronged party to take all reasonable steps to mitigate the loss and damage arising from the breach. was developing a housing estate in Raub.

Specific performance .Sale of immovable property . r 12 . r 12 .42 by way of principal and interest. Digest : Tengku Farid bin Tunku Hussain & Ors v United Asian Bank Bhd [1985] 2 MLJ 199 Supreme Court.Housing Developers (Control and Licensing) Act 1966.project failed and the houses which were already built were neglected. Holding : Held: (1) although a guarantor has an equity against the creditor if he can show that the creditor is attempting to place the whole burden of the debt unfairly upon him. the appellants were the registered owners of land. Between the equities of the appellants and the purchasers.Breach 3 [2488] CONTRACT Housing development contract – Breach – Damages/specific performance – Housing Developers (Control and Licensing) Rules 1970 – Contract .Specific performance . were partially built and sold to members of the public.Land law . 11.Breach of contract .Housing development contract . They entered into two separate contracts with the respondents for the sale of a portion of the land to be developed.Specific performance of part of contract . the appellants as guarantors have no equity to prevent the respondent bank as creditor from proceeding upon the guarantee to recover the sum owing to them.335.Specific performance . By the first contract. ss 3. Summary : In this case. the appellants agreed to sell to the respondents . in this case the lands which were charged as a security for the loan were also sold to several purchasers and these purchasers too have equities. All the 223 lots in the housing estate.Breach of contract . 2488 Housing development contract -.832.Damages .Indemnity for failure to complete housing development in time . (2) in the circumstances of this case.Housing developers . except 78 of them. The appellants applied to the court to stay the proceedings against them until after the bank had foreclosed charges and realized their securities against the company.Housing Developers (Control and Licensing) Rules 1970.Sale of building lots .Housing Developers (Control and Licensing) Act 1966 Specific Relief Act 1950.Remoteness . the court shall protect those of the purchasers because theirs are the innocent ones. Wan Suleiman and Syed Agil Barakbah SCJJ). The remaining 78 were still vacant land but there was no evidence that they were not sold.Breach of contract .Damages .Housing Developers (Control and Licensing) Rules 1970. Kuala Lumpur (Salleh Abas LP. 14 & 18 . The respondent bank took out a writ against the company claiming a total sum of $3. The application was refused and the appellants appealed.Land law . Subsequently the respondent bank took proceedings against the appellants on the guarantee.

inter alia. the appellants have transferred to the respondents only one terrace lot under the first contract and one semi-detached lot under the second contract. He found that the appellants were in breach of both the contracts for their failure to transfer the various lots to the respondents. By the second contract. Holding : Held. In addition to specific performance. The appellants had nominated themselves as the licensed housing developer for the first contract and submitted a draft building contract which was rejected by the respondents as it did not conform with the provisions of the Housing Developers (Control and Licensing) Act 1966 (Act 118) and the rules made thereunder.$117.60 specified building lots for the price of $5.000 to the appellants consisting of $300. Out of the 85 lots sold.000 for each lot.000 calculated at the rate of $14. The respondents have paid the sum of $426. the learned judge also ordered damages for increased cost of construction .000 as land price and $254. Ten of the bungalow lots under the second contract were found to be commercially useless as it would cost about $13 million to level the land.000 calculated at the rate of $7. The appellants also agreed to nominate a licensed housing developer who would build a terrace house on each lot in conformity with the plans and specifications annexed to the first contract for the construction price of $840.000 for each house. the respondents entered into individual contracts with members of the society whereby each member became entitled and bound to acquire one of the lots and the terrace house to be erected thereon in accordance with the terms of the first contract.200 as indemnity under the Housing Developers (Control and Licensing) Rules 1970. The respondents have paid the sum of $720.500 for the 11 bungalows. the appellants were ordered to refund the contract price of $203. In respect of the first contract. For the ten useless bungalow lots. damages for additional costs in constructing the 60 terrace houses and $187. dismissing the appeal: (1) by the first contract and by the appellants' own nomination of themselves as developers. The appellants appealed to the Federal Court but the appeal was dismissed .000 as development price. the appellants agreed to sell to the respondents specified land and to obtain 25 separate titles to the land divided into lots for the erection of 14 semi-detached houses and 11 bungalows. he ordered specific performance for the transfer of the remaining 59 terrace-lots to the respondents and he also awarded compensation for consequential loss which included.000 for each lot and to clear and level the lots for a development price of $420.300 as development price.000 with interest. he ordered specific performance for the transfer of the remaining 13 semi-detached lots and one bungalow lot. With regard to the second contract. The appellants appealed from the decision of the Federal Court.300 for these lots comprising of $172.see [1985] 1 MLJ 285.000 as land price and $420. the appellants became engaged in the business of housing development by agreeing to construct more than four units of . The learned trial judge held that the first contract was a sale of land with houses and therefore caught by housing developers legislation.000 for the nine semi-detached houses and $148. Following the first contract.

there was a separate price and a separate completion date for the sale of the land. (5) in this case. (7) in regard to the second contract. (8) in this case. In the present case. In respect of the other bungalow lots.the learned judge was correct in awarding damages in respect of all the 11 bungalow lots on the basis of the difference between the 1978 cost of building the bungalows and the cost of building the same bungalows at the date of the trial. The learned judge was right in awarding damages for the delay occasioned by the appellants' default. By the first contract and the appellants' own nomination of themselves as developers too. the appellants cannot deprive the respondents of the land for which the respondents have already paid in full the land purchase price and the development. the appellants sold the sites of the terrace houses for the land purchase price. The Act of 1966 and the rules were designed to improve and supplement common law remedies and do not expressly or by implication deprive a litigant of a contractual remedy which is not dealt with under the rules. The court may refuse to order specific performance of an agreement to build or of an obligation to obtain a licence or to obtain approval for plans. Under the first contract and the nomination. (2) r 12 of the Housing Developers (Control and Licensing) Rules 1970 makes provision for the possibility that the land may be vested in a proprietor who is not the developer and in that case the rules relating to the terms and conditions of a contract of sale are to apply so far as appropriate to both the proprietor and the developer. the trial judge was correct in awarding damages in lieu of specific performance. (3) s 15 of the Specific Relief Act 1950 (Act 137) makes provision for specific performance in circumstances which obtain in this case. the appellants were and remain the proprietors of the land until they transfer the building lots.housing accommodation in one development with the view of selling the housing accommodation thus constructed. it was the duty of the appellants to obtain a licence and to obtain approval of the building plans. the appellants became the housing developers under a contract to construct and sell 60 terrace houses to the respondents for the construction price. the learned judge was correct in making an order for specific performance in respect of the lot that was unaffected by problems of terrain. agreed to level and clear the sites for the development price and agreed to construct the terrace houses with a view of selling them to the respondents for the construction price. (6) the learned judge was also right in awarding damages for the difference between the construction price and the cost to the respondents of employing another builder to carry out the development at the date of the trial of the action. there has been delay in the delivery of the vacant possession of the housing accommodation and the appellants must pay for that delay under the rules just as they would have to pay under common law rules. (4) under the first contract. but that is no reason why the court should not award damages for breach of contract. By refusing to build the houses for the construction price. Digest : . as they were in fact practically and commercially useless for the purpose for which they were bought.

or assisting in providing. The application for the licence was made in the name of Teo Kwee Chuan. notwithstanding that the licence must be held in the name of a natural person. the public entertainment. 11 & 18 – Public Entertainments Rules 1969. Lord Ackner and Sir Robert Megarry).Agreement for management and operation of discotheque 3 [2489] CONTRACT Illegality – Agreement for management and operation of discotheque – Public entertainment licence to be obtained by respondents – Appellants to manage and operate the discotheque – Whether agreement in breach of Public Entertainments Act and Rules – Public Entertainments Act (Cap 257). Lord Templeman. the Public Entertainments Rules 1969 ('the Rules') in general. Holding : Held. (2) the word 'licence' in ss 3 and 18(1) of the Act is used in reference to the public entertainment itself and not in reference to the person or organization providing. Amara would obtain the licence to operate the discotheque. ss 3. The legality of the agreement turned on the interpretation of the Public Entertainments Act (Cap 157) ('the Act') and the Rules made thereunder. the Rules and the conditions of the licence. rr 3(2) & 5 Summary : The question before the court was the legality of an agreement between the first respondents ('Amara') and the appellants ('Nova') ('the agreement') by the terms of which Nova agreed to operate and manage a discotheque for Amara on the latter's premises. According to the agreement. and s 3 of the Act and r 5 of the Rules in particular. for the due performance of the public entertainment in accordance with the provisions of the Act.City Investment Sdn Bhd v Koperasi Serbaguna Cuepacs Tanggungan Bhd [1988] 1 MLJ 69 Privy Council Appeal from Malaysia (Lord Keith of Kinkel. The court below had decided that the agreement was in breach of the Act and the Rules and therefore illegal and unenforceable. the regulation is the regulation of public entertainment itself. (4) the Act and the Rules envisage the licensee's accountability to the licensing authority and not his 'accountability' to a third party . What the Act and the Rules intended to prohibit is the providing of public entertainment in respect of which there is no license issued. under pain of the penalties provided in the Act. The licence was issued in Teo's name without any reference to his connection with Amara Hotel or for that matter to Nova. Lord Fraser of Tullybelton. (3) the plain and ordinary meaning of r 5 of the Rules is that a licensee shall not transfer or lend the licence issued to him for the purpose of public entertainment other than the one for which it was issued. 2489 Illegality -. 6. the second respondent ('Teo') who at the material time was a director of Amara Hotel and was described as such in the application form. As the Act itself clearly indicates. The appellants appealed. allowing the appeal: (1) the scheme of the Act and the Rules is to issue the licence to a natural person or persons and to hold them responsible.

In or before 1957. The plaintiff appealed. the shop was occupied and continued to be occupied by the purchaser. which operated a business in the shop. In this case. The learned Chief Justice held in favour of the plaintiff on the first point but in favour of the vendor on the second.Refusal on vendor's part to transfer interest in land .Agreement relating to transfer of 'shophouse property' 3 [2490] CONTRACT Illegality – Agreement relating to transfer of 'shophouse property' – Agreement relating to transfer of 'shophouse property' . The plaintiff alleged that the vendor was in breach of the agreement in that the vendor had sold his shares and interests including a 'shophouse property' to the purchaser. be he another natural person or a corporation. a transfer to him could not be valid or be registered without the approval of the Sultan in Council. engaged by the licensee to provide or 'supply' the public entertainment for which the licence is issued to the licensee. and he dismissed the action.Whether agreement contravenes ss 23 and 27 of Land Code and illegal . Digest : Nova Management Pte Ltd v Amara Hotel Properties Pte Ltd & Anor [1994] 1 SLR 263 Court of Appeal. The vendor claimed that the said agreement was not binding on him and that even if it did. 'Accountability' and 'control' in the sense referred to by the court below are matters of contract between the licensee and person. The subject matter of the suit was the land on which the shop stood. the public entertainment provided by Nova as agents of Amara was covered by the licence issued to Teo as Amara's representative. The plaintiff claimed that the 'shophouse property' consisted of a building together with the land on which it had been erected. Holding : . 2490 Illegality -. Karthigesu and LP Thean JJA). The purchaser was not 'a natural born subject of His Highness' and by virtue of the proviso to s 23 of the Land Code.such as the appellants. (5) under the Act. Singapore (Yong Pung How CJ.Contract not illegal .Land Code. deceased (the purchaser).Specific performance against vendor . The contracting parties were entitled in equal undivided shares to a piece of land on which stood a shop. by the plaintiff or by the plaintiff's relatives until it was burnt down on 16 July 1979. On 26 June 1957. ss 23 & 27. the public entertainment can be provided by the licensee or by someone engaged by him for the purpose. Summary : The plaintiff/appellant was the executor of the estate of Chong Vui Nee. it was void for illegality. Chong had entered into a contract in writing with the defendant/respondent (the vendor). They were the only partners in a company called the Ghee Hoe Company.

Huggins and Bewley. Bandar Seri Begawan (Briggs P. Digest : Chong Kon Fah v Yong Siau [1983] 1 MLJ 271 Court of Appeal. North Borneo and Brunei See CONTRACT. it took over the architectural practice of the partnership firm of BEP Akitek on 1 April 1974. inter alia. The defendants are. Sarawak. There was no evidence that it was the intention of the parties to do something illegal. Prior to the incorporation of the plaintiffs. (3) the court could not confirm the plaintiff's title. Commissioners). (4) this was not a case where consent had been refused. The objects under the memorandum of association included carrying on the practice of architects.no injustice would result if an order of specific performance were made. failing which the form should be executed by the chief registrar. Upon its incorporation. the firm of BEP Akitek had been engaged by the defendants as project architect for some of the defendants' projects. 2492 Illegality -.Agreement to sell interest in partnership 3 [2491] CONTRACT Illegality – Agreement to sell interest in partnership – Consent of other partner refused – Partnership Ordinance (Cap 67 of Sarawak) Digest : Lau Hock Chiong v Sim Kheng Hong 1960 Supreme Court.Architectural services 3 [2492] CONTRACT Illegality – Architectural services – Claim for outstanding fees – Incorporated company not registered as architect – Whether services rendered through natural persons who were registered – Architects Act 1976. On 29 May 1974 the plaintiffs informed the defendants. Confirmation of the title must rest upon the decision of the Sultan in Council. property developers. in relation to one of the projects. but it could order the vendor to do what he ought to have done long since. the building became part of the land and it would have needed very different language to show all that was being sold was a right to occupy a building.Held. The respondent was ordered to execute the appropriate form of transfer within one month. allowing the appeal: (1) in law. What might happen if approval was refused did not fall for consideration here. (2) one should therefore assume that it was their intention to sell and purchase the land with the requisite approval. about the incorporation . s 17 Summary : The plaintiffs are a company incorporated in Singapore on 2 March 1974 with unlimited liability. para 3048. 2491 Illegality -. Vol 3.

In the events that followed no agreements on fees and other terms was arrived at. (3) accordingly. There is nothing in s 17 which renders it inconsistent to construe 'person' as including a company and the provisions of s 17 therefore apply to a company. the plaintiffs were named therein as the architects.000 in full settlement of the balance of fees amounting to $316. fee or remuneration for any professional service rendered as an architect in Singapore'. The plaintiffs were then appointed by the defendants as architects for one of their projects. corporate or unincorporate. should the defendants decide to continue with the projects at Institution Hill and Grange Road at agreed fees as the project architect for those two projects. The partnership of BEP Akitek was sold to the plaintiffs 'as a going concern'. All applications for development approval for the projects were submitted by the plaintiffs. it was the plaintiffs who undertook the professional architectural work though the same was executed by registered architects who were either shareholders or employees of the plaintiffs. This was subject to the plaintiffs being retained.318 due to them. 1970 Ed) and/or the 1976 Act in force at the material time. The plaintiffs commenced proceedings claiming as a firm of architects practising in partnership for the sum of $946. Clearly. the plaintiffs' claim was unenforceable under the Architects Act (Cap 213. The defendants agreed to the plaintiffs taking over as the project architect for that project. The defendants subsequently discharged the plaintiffs as architects for their projects. Holding : Held. The defendants by their amended defence filed on 2 May 1990 contended that the plaintiffs are an incorporated company and as such 'are not a "registered architect" within the meaning of the Architects Act' and 'are prohibited by law from claiming or recovering any charge fee or remuneration from the defendants' for work done by them as architects. The plaintiffs have also not suffered any loss due to the 'premature termination' as they were fully occupied with other projects. In the typical floor plans for some proposed condominium housing developments. .of BEP Akitek (Pte) and of its taking over the practice of BEP Akitek.668 being loss of expected profits due to the unlawful termination by the defendants of their professional services as architects. Section 2(1) of the Interpretation Act (Cap 1) defines 'person' to include any company or association or body of persons. and the plaintiffs at the request of the defendants agreed to accept $100. The plaintiffs thereupon amended their claim to one for damages for wrongful termination of their services in causing the defendants to be provided with professional architectural services through their members and employees who were registered architects in respect of the defendants' projects. dismissing the plaintiffs' claim with costs: (1) s 17 of the Architects Act 1976 prohibits any person not registered under it from practising as architects and by sub-s (2) 'no person other than a registered architect shall be entitled to recover in any court any charge. The Pertamina Building project was later cancelled by the employers. (2) the purpose of incorporation of the plaintiffs was to carry on the practice of architects under the name of the plaintiffs.

the licensee. Digest : Nam Seng Co v Wing Yew (Tawau) Co Sdn Bhd [1978] 2 MLJ 198 Federal Court. transfer or subletting was subject to written approval of the State Forest Officer and of the Yayasan. The respondent was similarly an assignee whom the first defendant. the respondent and the Yayasan Trengganu held a forest permit over part of a forest reserve.Assignment of forest permit 3 [2494] CONTRACT Illegality – Assignment of forest permit – Assignee alleging that he was compelled to repudiate contract – Assignment of forest permit Whether illegal . The appellant and two others had sued the respondent and two others and the respondent had applied for the writ of summons and the action to be dismissed on the ground. 2493 Illegality -. purported to substitute in place of the appellant. The learned judge was of the opinion that the assignment of the licence was in breach of the Forest Enactment 1968 and the Forest Rules 1969 and therefore illegal and void. Summary : In this case.Digest : BEP Akitek (Pte) v Pontiac Land Pte Ltd [1992] 1 SLR 251 High Court. Kota Kinabalu (Suffian LP. The appellant appealed. that is. that the claim was based on an illegal contract. the appellant who was the third plaintiff in the civil action claimed to be the assignee of a forest licence granted to first defendant. extract and haul timber in the area. Singapore (Goh Joon Seng J). The forest permit and the agreement with the Yayasan Trengganu contained similar conditions. The appellant agreed to accept assignment from .Assignment of forest licence 3 [2493] CONTRACT Illegality – Assignment of forest licence – Breach of enactment Summary : In this case. dismissing the appeal: the learned trial judge was correct in holding that the purported assignment of the forest licence was illegal and void and therefore that the action should be dismissed. inter alia. 2494 Illegality -. By an agreement with the Yayasan Trengganu the respondent undertook to fell.Assignee alleging that he was compelled to repudiate contract . He therefore made the order dismissing the action. assignment. Lee Hun Hoe CJ (Borneo). Holding : Held.Onus of proof.

the respondent subject to those conditions. 2496 Illegality -.Assignment of rights in a licence for timber extraction 3 [2496] CONTRACT Illegality – Assignment of rights in a licence for timber extraction – Breach of express condition in licence granted under Forest Rules 1954 Summary : . Abdul Malek Ahmad and Mokhtar Sidin JJCA). Holding : Held: (1) in the circumstances of this case. 2495 Illegality -. Digest : Yap Cheng Kim v Zahid Safian bin Tawaf [1980] 1 MLJ 302 Federal Court. ss 5 & 21 See contract. The learned trial judge dismissed the claim and the appellant appealed. para III [57]. The appellant had failed to discharge the onus and therefore the appeal must be dismissed. He brought an action to recover the sums paid alleging that the respondent had conducted himself in such a way as to compel the appellant to repudiate the contract of assignment. Digest : Datuk Yap Pak Leong v Sababumi (Sandakan) Sdn Bhd [1997] 1 MLJ 587 Court of Appeal. as approval could have been obtained from the State Forest Officer. (2) the onus was on the appellant to prove what was the conduct of the respondent and what were the conditions of the agreement which entitled her to withdraw from the agreement and to recover payment. Kuala Lumpur (Gopal Sri Ram.Assignment of rights and benefits under gaming licence 3 [2495] CONTRACT Illegality – Assignment of rights and benefits under gaming licence – Licence granted to turf club for gaming activities – Club assigned its rights and benefits under its licence to respondent via written agreement – Licence subsequently amended by the authorities – New licence granted with condition prohibiting any transfer or assignment of licence rights – Whether written agreement became void and illegal after issuance of new licence – Parliament's intention not to be frustrated – Contracts Act 1950. Kota Bharu (Raja Azlan Shah CJ (Malaya). The appellant advanced moneys to the respondent in payment of royalty and also incurred other expenses. the contract of assignment would have been legal. s 24(b) – Pool Betting Act 1967.

Singapore (Lai Siu Chiu J). inter alia.Charge 3 [2498] CONTRACT Illegality – Charge – Developer sold land to purchaser – Charged land to bank for loan subsequently in breach of r 12 of Housing Developers (Control and Licensing) Rules 1970 – Provisions in agreement allowed developer to do so – Whether contrary to letter and spirit of Rules – Whether charge illegal – Whether charge void ab initio – Housing Developers (Control and Licensing) Rules 1970.000. allowing the appeal: (1) the agreement in this case was clearly in breach of the provisions of ss 23 and 24 of the Forest Enactment and therefore illegal and any claim based thereon cannot be enforced. s 24 . r 12 – Contracts Act 1950. This society appointed Jesselton Development Ltd as their attorney and the Jesselton Development Ltd in turn appointed the respondents in their place as attorneys for the licensees. See CONTRACT. Ismail Khan CJ (Borneo). Sabah had issued a licence for the extraction of timber to the Beaufort Timber Extraction Co-operative Society.Building approval 3 [2497] CONTRACT Illegality – Building approval – Failure to obtain approval under Building Control Act before commencement of renovations – Whether contract ex facie illegal Digest : Yeoh Swee Inn v Cheang Jen Boon and another action (No 1) Suit Nos 1820 and 109 of 1993 High Court. The appellants subsequently entered into an agreement with the respondents. Digest : Lo Su Tsoon Timber Depot v Southern Estate Sdn Bhd [1971] 2 MLJ 161 Federal Court. 2498 Illegality -. raised for the first time a point of illegality: that the agreement was an assignment of the rights of the licensees under the licence in contravention of an express condition in the licence and was therefore illegal. whereby the respondents in effect transferred their rights in the licence to the appellants. Holding : Held. 2497 Illegality -. the appellants.This was an appeal against the judgment of the High Court at Kota Kinabalu whereby the respondents obtained judgment against the appellants in the sum of $255. Vol 3. In their grounds of appeal. The Forest Officer. para 1742. Kota Kinabalu (Azmi LP. (2) the power of attorney given to the appellants was a colourable device to deceive others into believing that the appellants were operating as agents for the licensees.

Digest : Keng Soon Finance Bhd v MK Retnam Holdings Sdn Bhd (Bhagat Singh s/o Surian Singh & Ors. Kuala Lumpur (Anuar J). See COMPANIES AND CORPORATIONS. Interveners) [1996] 2 MLJ 431 High Court.Consequences of 3 [2500] CONTRACT Illegality – Consequences of – Plaintiff company charging lands to defendant as security for loan granted to its director – Charge void and unenforceable – Whether plaintiff company can recover lands from defendant given as security – Companies Act 1965. Kuala Lumpur (NH Chan J). Vol 3. See CONTRACT. Interveners) [1996] 2 MLJ 431 High Court. para 2818. Vol 3. . See CONTRACT. Kuala Lumpur (Anuar J). Vol 3. s 133 Digest : Che Wan Development Sdn Bhd v Co-operative Central Bank Bhd [1990] 2 MLJ 365 High Court. 2499 Illegality -. para 2818. para 156.Charge 3 [2499] CONTRACT Illegality – Charge – Developer sold land to purchaser – Developer unlicensed in breach of s 5 of Housing Developers (Control and Licensing) Act 1966 – Bank granted bridging loan to developer – Developer created charge over land in favour of bank – Whether charge illegal Digest : Keng Soon Finance Bhd v MK Retnam Holdings Sdn Bhd (Bhagat Singh s/o Surian Singh & Ors. 2500 Illegality -.