412 Malayan Law Journal [2013] 9 MLJ

Hong Leong Bank Bhd v HGM Machinery Sdn Bhd (formerly A

known as Handee Engineering & Consultancy Services Sdn
Bhd) & Ors

B
HIGH COURT (PULAU PINANG) — CIVIL SUIT NO 22–51 OF 2004
ZAKARIA SAM J
22 DECEMBER 2012
C
Banking — Banker and customer — Overdraft facility — Guarantor — Failure
to settle excess in overdraft facility — Claims against guarantors — Recovery for
amount outstanding and due
D
Banking — Banks and banking business — Banking facilities — Overdraft
facilities — Failure to settle excess in overdraft facility — Claims against guarantors
— Recovery for amount outstanding and due — Whether certificate of indebtedness
challenged
E
EON Bank Bhd (‘Eon Bank’) had acquired the entire banking business of
Oriental Bank Bhd through an acquisition agreement pursuant to an order of
the High Court. Via a vesting order, the plaintiff took over all the assets,
business and liabilities of EON Bank and all pending legal proceedings and
in/to which EON Bank was a party. The first defendant was the plaintiff ’s F
customer while the second, third, fourth, fifth and sixth defendants were the
directors and shareholders of the first defendant. The second to sixth
defendants were also guarantors of the facilities given by the plaintiff to the first
defendant. The defendants had agreed to pay to the plaintiff all sums due and
owing to the plaintiff. Although the plaintiff had made the said facilities G
available to the first defendant, the first defendant failed to settle the excess in
the overdraft facility and the monthly interest due. The plaintiff then uplifted
the fixed deposits in the total sum of RM2,490,000 to fully settle the amounts
outstanding. As there remained a sum of RM1,915,079.79 due and owing to
the plaintiff after uplifting the said fixed deposits, the first defendant agreed to H
a repayment scheme to enable the first defendant to settle the said sum of
RM1,915,079.79. The first defendant failed to settle the balance amount due
and owing and subsequently, the plaintiff withdrew the said facility and
demanded from the first defendant a total sum of RM2,300,984.74
(comprising the principal sum of RM1,754,544.47 and interest of I
RM546,440.27). The plaintiff had given the defendants a final notice to settle
the total sum of RM2,417,57.79 (comprising the principal sum of
RM1,754,544.47 and interest of RM663,033.32). The first to fifth defendants
had not made any payments to the plaintiff to settle the outstanding amounts.
 Hong Leong Bank Bhd v HGM Machinery Sdn Bhd (formerly
known as Handee Engineering & Consultancy Services Sdn
[2013] 9 MLJ Bhd) & Ors (Zakaria Sam J) 413

A Hence, the plaintiff claimed against the first to fifth defendants jointly and
severally for the said sum of RM3,793,835.09, being the amount outstanding
under the said facility together with interest, together with interest at the rate
of 8% pa.

B Held, allowing the claim:

(1) The second, third, fourth and fifth defendants had not raised any valid
grounds to challenge the plaintiff ’s claim. As they did not challenge the
certificate of indebtedness, judgment was entered against them for the
sum of RM3,793,835.09 as set out in the said certificate of indebtedness
C
together with interest at the rate of 8%pa on the said sum of
RM3,793,835.09 from the date of judgment to the date of full realisation
(see paras 21, 60, 98, 122 & 168).
(2) The court did not agree with the contention of the second defendant that
D the plaintiff had failed to explain how the fixed deposits had been utilised
or applied. The plaintiff had tendered in full and frank disclosure the
‘listing of payments made’ showing how the proceeds from the
upliftment of the fixed deposits pledged with the plaintiff in respect of
the said facility had been applied or utilised in order to partly settle the
E debt due and owing to the plaintiff (see para 58).
(3) The plaintiff had acknowledged the fixed deposits pledged with the
plaintiff inclusive of interest as at December 1998 is a sum of
RM2,490,000. Accordingly, the fourth defendant was estopped from
F
contending that the total fixed deposits pledged was RM2,650,000 or
RM3,288,052.71, more so, when such sums had not been pleaded in the
fourth defence (see para 105).
(4) It was not correct for the fourth defendant to contend that the plaintiff
had withdrawn the claim against the sixth defendant hours before the
G trial commenced. The plaintiff had resolved the matter amicably with the
sixth defendant prior to the commencement of trial, resulting in the
withdrawal of the plaintiff ’s claim against the sixth, and the withdrawal
of the sixth defendant’s counterclaim for, inter alia, damages against the
plaintiff (see para 118).
H
(5) The plaintiff were justified and entitled to issue or send the said notices of
demand to the address as stated in the guarantee notwithstanding the said
letter of 5 January 1999 stating the purported ‘new address’ of the fifth
defendant given that under cl 21 of the said guarantee, the plaintiff were
I entitled to issue the said notices of demand either to the last known
address of the fifth defendant or the address as stated in the said guarantee
(see para 150).
(6) If the court should accept the contention by the fifth defendant that ‘a
proper demand must be made and it is a condition precedent to
414 Malayan Law Journal [2013] 9 MLJ

establishing a claim against a guarantor’, this would tantamount to A

defeating or overriding the purpose and intention of not only cl 17 of the
said guarantee, which makes the fifth defendant a principal debtor, but
cl 18 of the said guarantee as well, which provided that all monies which
may not be recoverable from the guarantors on the ‘footing of a
guarantee’, shall nevertheless be recoverable from the guarantors on B
demand as though they were the principal debtors (see para 165).

[Bahasa Malaysia summary

EON Bank Bhd (‘Eon Bank’) telah memperolehi keseluruhan perniagaan
perbankan Oriental Bank Bhd melalui perjanjian pengambilalihan menurut C
satu perintah Mahkamah Tinggi. Melalui perintah letakhak, plaintif
mengambilalih kesemua aset, perniagaan dan liabiliti-liabiliti EON Bank dan
semua prosiding-prosiding perundangan dan dalam/yang mana EON Bank
merupakan satu pihak. Defendan pertama merupakan pelanggan plaintif
manakala defendan kedua, ketiga, keempat, kelima dan keenam merupakan D
pengarah-pengarah dan pemegang-pemegang saham defendan pertama.
Defendan kedua hingga keenam juga merupakan penjamin-penjamin
kemudahan yang diberikan oleh plaintif kepada defendan pertama.
Defendan-defendan telah bersetuju untuk membayar plaintif kesemua jumlah
yang perlu dibayar dan terhutang kepada plaintif. Walaupun plaintif telah E
menjadikan kemudahan tersebut tersedia kepada defendan pertama, defendan
pertama gagal untuk melangsaikan lebihan dalam kemudahan overdraf dan
faedah bulanan yang perlu dibayar. Plaintif kemudiannya menarik balik
deposit-deposit tetap berjumlah RM2,490,000 untuk menyelesaikan
jumlah-jumlah yang belum dibayar. Memandangkan terdapat baki berjumlah F
RM1,915,079.79 belum dibayar dan terhutang kepada plaintif selepas
penarikan balik deposit-deposit tetap, defendan pertama bersetuju dengan
skim pembayaran semula untuk membolehkan defendan pertama
menyelesaikan sejumlah RM1,915,079.79 tersebut. Defendan pertama gagal
untuk menyelesaikan baki jumlah yang perlu dibayar dan terhutang dan G
sehubungan dengan itu, plaintif menarik balik kemudahan tersebut dan
menuntut sejumlah RM2,300,984.74 (termasuk jumlah pokok
RM1,754,544.47 dan faedah RM546,440.27). Plaintif telah memberikan
defendan-defendan notis akhir untuk menyelesaikan jumlah keseluruhan
RM2,417,57.79 (termasuk jumlah pokok RM1,754,544.47 dan faedah H
RM663,033.32). Defendan pertama hingga kelima tidak membuat apa-apa
bayaran kepada plaintif untuk menyelesaikan jumlah yang perlu dibayar. Oleh
itu, plaintif menuntut terhadap defendan pertama hingga kelima secara
bersama dan berasingan untuk jumlah RM3,793,835.09, yang merupakan
jumlah perlu dibayar di bawah kemudahan tersebut beserta faedah, dengan I
faedah pada kadar 8% setahun.
Diputuskan, membenarkan tuntutan:
(1) Defendan kedua, ketiga, keempat dan kelima tidak mengemukakan
 Hong Leong Bank Bhd v HGM Machinery Sdn Bhd (formerly
known as Handee Engineering & Consultancy Services Sdn
[2013] 9 MLJ Bhd) & Ors (Zakaria Sam J) 415

A alasan-alasan sah untuk mencabar tuntutan plaintif. Memandangkan

mereka tidak mencabar sijil keberhutangan, penghakiman dimasukkan
terhadap mereka untuk jumlah RM3,793,835.09 seperti yang
dinyatakan dalam sijil keberhutangan bersama dengan faedah pada kadar
8% setahun ke atas jumlah RM3,793,835.09 daripada tarikh
B penghakiman sehingga tarikh penyelesaian penuh (lihat perenggan 21,
60, 98, 122 & 168).
(2) Mahkamah tidak bersetuju dengan hujahan defendan kedua bahawa
plaintif gagal untuk menjelaskan bagaimana deposit-deposit tetap telah
C digunakan atau digunapakai. Plaintif telah menender pendedahan penuh
dan jujur ‘senarai bayaran dibuat’ menunjukkan bagaimana hasil
daripada penarikan balik deposit-deposit tetap yang disandarkan dengan
plaintif berhubung kemudahan tersebut digunakan atau digunapakai
bagi menyelesaikan sebahagian hutang yang perlu dibayar dan terhutang
D kepada plaintif (lihat perenggan 58).
(3) Plaintif telah mengakui deposit-deposit tetap disandarkan dengan
plaintif termasuk faedah pada Disember 1998 ialah berjumlah
RM2,490,000. Dengan ini, defendan keempat diestop daripada
menghujah bahawa jumlah keseluruhan deposit tetap ialah
E
RM2,650,000 atau RM3,288,052.71, lebih-lebih lagi, apabila jumlah
tersebut tidak diplid dalam pembelaan defendan keempat (lihat
perenggan 105).
(4) Adalah tidak benar untuk defendan keempat menghujah bahawa plaintif
F telah menarik balik tuntutan terhadap defendan keenam beberapa jam
sebelum perbicaraan bermula. Plaintif telah menyelesaikan perkara
tersebut secara baik dengan defendan keenam sebelum perbicaraan
bermula, menyebabkan penarikan balik tuntutan plaintif terhadap
defendan keenam dan penarikan balik tuntutan balas defendan keenam
G untuk, antara lainnya, ganti rugi terhadap plaintif (lihat perenggan 118).
(5) Plaintif dibenarkan dan berhak untuk mengeluarkan atau menghantar
notis-notis tuntutan kepada alamat seperti yang dinyatakan dalam
jaminan walaupun surat 5 Januari 1999 menyatakan ‘alamat baru’
H defendan kelima yang dikatakan diberikan di bawah klausa 21 jaminan
tersebut, plaintif berhak untuk mengeluarkan notis-notis tuntutan sama
ada kepada alamat terakhir defendan kelima yang diketahui atau alamat
seperti yang dinyatakan dalam jaminan (lihat perenggan 150).
(6) Sekiranya mahkamah perlu menerima hujahan defendan kelima bahawa
I ‘tuntutan yang bersesuaian perlu dibuat dan adalah merupakan satu
syarat terdahulu untuk membuktikan tuntutan terhadap seorang
penjamin’, ini sama seperti menggagalkan atau mengatasi tujuan dan niat
bukan sahaja klausa 17 jaminan tersebut, yang menjadikan defendan
kelima seorang penghutang utama, tetapi juga klausa 18 jaminan
416 Malayan Law Journal [2013] 9 MLJ

tersebut yang memperuntukkan bahawa kesemua wang yang tidak boleh A

diperolehi semula daripada penjamin-penjamin berdasarkan ‘imbangan
jaminan’, namun begitu boleh diperolehi daripada penjamin-penjamin
atas tuntutan seolah-olah mereka penghutang-penghutang utama (lihat
perenggan 165).]
B
Notes
For a case on banking facilities, see 1(1) Mallal’s Digest (4th Ed, 2012 Reissue)
para 2365.
For a case on overdraft facilities, see 1(1) Mallal’s Digest (4th Ed, Reissue) paras
2341–2344. C

Cases referred to
Aik Ming (M) Sdn Bhd & Ors v Chang Ching Chuen & Ors and another appeal
[1995] 2 MLJ 770; [1995] 3 CLJ 639, CA (refd)
Alfred Templeton & Ors v Mount Pleasure Corp Sdn Bhd [1989] 1 CLJ Rep 219, D
HC (refd)
Amanah Merchant Bank Bhd v Lim Tow Choon [1994] 1 MLJ 413; [1994] 2
CLJ 1, SC (refd)
Arab-Malaysian Finance Bhd v Chong Chin Shoong [1997] MLJU 264; [1998]
1 CLJ 887, HC (refd) E
Boustead Trading (1985) Sdn Bhd v Arab-Malaysian Merchant Bank Bhd [1995]
3 MLJ 331; [1995] 4 CLJ 283, FC (refd)
Cempaka Finance Bhd v Ho Lai Ying (trading as KH Trading) & Anor [2006] 2
MLJ 685, FC (refd)
Chung Khiaw Bank Ltd v Soi Huan & Ors [1986] 1 MLJ 188 (refd) F
Citibank NA v Ooi Boon Leong & Ors [1981] 1 MLJ 282, FC (refd)
Credit Corporation (M) Berhad v Choi Sang & Anor [1989] 1 CLJ (Rep) 440,
HC (folld)
Danaharta Urus Sdn Bhd v Chou Kok Hong & Anor [2006] MLJU 350; [2006]
7 CLJ 330, HC (refd) G
MBf Finance Bhd v Hasmat Properties Sdn Bhd & Ors [1990] 1 MLJ 180, HC
(not folld)
Mok Hin Wah & Ors v United Malayan Banking Corp Bhd [1987] 2 MLJ 610,
SC (distd)
Orang Kaya Menteri Paduka Wan Ahmad Isa Shukri bin Wan Rashid v Kwong Yik H
Bank Berhad [1989] 3 MLJ 155, SC (not folld)
Public Bank v Chan Siok Lee & Ors [1989] 2 MLJ 305, HC (folld)
RHB Bank Bhd v Farlim Holding Sdn Bhd & Ors [2005] 2 MLJ 638, HC (distd)
RHB Bank Berhad v WIP Industrial Solutions (M) Sdn Bhd & Ors Suit No
D-22NC-2233 of 2010, HC (refd) I
United Asian Bank Bhd v Ceras Credit Sdn Bhd & Ors [1996] 4 MLJ 639, HC
(refd)
United Merchant Finance Bhd v Hockwood Holdings Sdn Bhd & Ors [1999] 5
MLJ 85, HC (folld)
 Hong Leong Bank Bhd v HGM Machinery Sdn Bhd (formerly
known as Handee Engineering & Consultancy Services Sdn
[2013] 9 MLJ Bhd) & Ors (Zakaria Sam J) 417

A Legislation referred to
Companies Act 1965 Form 49
Contracts Act 1950 s 91

JJ Chan (Shearn Delamore) for the plaintiff.

B KT Rajah Naidu (KT Rajah Naidu & Partners) for the second defendant.
A Param (Param & Co) for the third defendant.
CK Ung (Phee & Co) for the fourth defendant.
Ashok Kandiah (Kandiah Partnership) for the fifth defendant.
C
Zakaria Sam J:

THE PLAINTIFF’S CASE

D

[1] By an acquisition agreement dated 30 June 2000 the EON Bank Bhd had
acquired the entire banking business of Oriental Bank Bhd pursuant to the
order of court dated 5 December 2000 given under Kuala Lumpur High Court
E ex parte Originating Summons No D9–24–303 of 2000.

[2] By a vesting order dated 17 June 2011 under Kuala Lumpur High Court
Originating Summons No 24NCVC-175 of 2011, Hong Leong Bank Bhd
F took over all the assets, business and liabilities of EON Bank Bhd with effect
from 1 July 2011, and that ‘all legal proceedings which are pending and in or to
which EON Bank is a party’ shall be continued from 1 July 2001 as if Hong
Leong Bank had been a party thereto instead of EON Bank Bhd.

G [3] By an order of the High Court dated 30 January 2012, EON Bank Bhd
had been duly substituted by Hong Leong Bank as the plaintiff abovenamed
(‘the plaintiff ’).

[4] The first defendant (‘D1’) at the material time was the plaintiff ’s
H customer and the second, third, fourth, fifth and sixth defendants (‘D2, D3,
D4, D5 and D6’) were at the material time directors and shareholders of D1,
and were also guarantors of the facilities given by the plaintiff to D1.

I [5] D1 had the following facilities with the plaintiff as confirmed in the
plaintiff ’s letter of offer dated 16 November 1995, the supplementary letter of
offer dated 25 January 1996, the letter of offer dated 8 May 1996 and the
supplementary letter of offer dated 12 August 1996, namely:
(a) the overdraft facility for the amount of RM200,000;
418 Malayan Law Journal [2013] 9 MLJ

(b) the letters of credit (‘LC’)/trust receipts (‘TR’) and bankers acceptance A
(‘BA’) facility (‘the said LC/TR/BA facility’) for the amount of
RM3,800,000;
(c) the ad hoc LC/TR/BA facility (‘the said ad hoc LC/TR/BA facility’) for
the amount of RM2,000,000; and
B
(d) the temporary overdraft facility for the amount of RM800,000.

[6] Fixed deposits in the total sum of RM2,150,000 had been pledged with
the plaintiff, as confirmed in the letters of set-off dated 19 September 1995, 23
April 1998 and 27 December 1995, and 6 January 1996 respectively (‘the said C
letters of set-off ’).

[7] D2, D3, D4, D5 and D6 had executed, inter alia, a guarantee dated
4 January 1996 (‘the said guarantee’) in favour of the plaintiff, wherein they
had agreed to pay to the plaintiff all sums due and owing to the plaintiff from D
D1 together with interest thereon and costs, charges and expenses up to the
principal sum of RM4,000,000. On 11 June 1997, D6 had been discharged as
guarantor under the said guarantee.
E
[8] Although the plaintiff had made available to D1 the said facilities and D1
had duly utilised the same, D1 had since September 1998 failed to settle the
excess in respect of the said overdraft facility and the monthly interest due
under the said LC/TR/BA facility.
F
[9] The plaintiff had in or around March 1999 uplifted the fixed deposits in
the total sum of RM2,490,000 (inclusive of interest as at December 1998) to
fully settle the amounts outstanding under the said overdraft facility and the
said TOD facility and to partly settle the amounts outstanding under the said
LC/TR/BA facility. G

[10] As there remained a sum of RM1,915,079.79 due and owing to the

plaintiff under the said LC/TR/BA facility as at 8 April 1999 after the
upliftment of the said fixed deposits, D1 had agreed to a repayment scheme to
enable D1 to settle the said sum of RM1,915,079.79, the terms of which are as H
set out in the plaintiff ’s letter dated 10 April 2000.

[11] Apart from a total sum of RM180,000 paid by D1 to the plaintiff

pursuant to the said repayment scheme, which sum the plaintiff had accepted
on a without prejudice basis, D1 had failed to settle the balance amount due I
and owing under the said LC/TR/BA facility.

[12] As D1 had failed to pay the amounts outstanding under the said
LC/TR/BA facility, the plaintiff had, by their solicitors’ letter dated 14 June
 Hong Leong Bank Bhd v HGM Machinery Sdn Bhd (formerly
known as Handee Engineering & Consultancy Services Sdn
[2013] 9 MLJ Bhd) & Ors (Zakaria Sam J) 419

A 2002 to D1, withdrawn the said LC/TR/BA facility and demanded from D1 a
total sum of RM2,300,984.74 (comprising the principal sum of
RM1,754,544.47 and interest of RM546,440.27) due and owing as at 31 May
2002 together with further interest accruing and costs.

B
[13] The plaintiff had by their solicitors’ letter dated 14 June 2002 to D2,
D3, D4 and D5 respectively, informed them of the withdrawal of the said
LC/TR/BA facility and demanded from them as guarantors under the said
guarantee the said sum of RM2,300,984.74 due and owing to the plaintiff
C
under the said LC/TR/BA facility as at 31 May 2002 together with further
interest accruing and costs.

[14] The plaintiff had by their solicitors’ letter dated 7 March 2003 to
D1–D5 respectively, given them final notice to settle the total sum of
D RM2,417,57.79 (comprising the principal sum of RM1,754,544.47 and
interest of RM663,033.32) due and owing to the plaintiff under the said
LC/TR/BA facility as at 31 January 2003 together with further interest
accruing and costs.

E [15] D1 to D5 had not made any payments to the plaintiff to settle the
outstanding amounts due and owing to the bank under the said LC/TR/BA
facility.

[16] In the circumstances, the plaintiff claim against D1 to D5 jointly and

F severally the said sum of RM3,793,835.09, being the amount outstanding
under the said LC/TR/BA facility together with interest thereon as at
11 January 2011, as shown in the certificate of indebtedness dated 11 January
2011 and the statement of accounts, together with interest at the rate of 8%pa
on the said sum of RM3,793,835.09 from the date of judgment to the date of
G full realisation.

[17] Prior to the trial, the plaintiff had resolved the matter amicably with
D6, resulting in the withdrawal of the plaintiff ’s claim against D6, and the
H withdrawal of D6’s counterclaim against the plaintiff.

INDEBTEDNESS OF D1

[18] According to SP1, the indebtedness of D1, including D2 to D6, to the

I plaintiff as at 11 January 2011 is RM3,793,835.09 as shown in the certificate
of indebtedness dated 11 January 2011 and the statement of accounts tendered
at the trial.

[19] D1 and/or their solicitors on record had failed to defend the plaintiff ’s
420 Malayan Law Journal [2013] 9 MLJ

claim at the trial of the matter and that in addition, there is no evidence on A
record to rebut the plaintiff ’s oral and documentary evidence in support of the
plaintiff ’s claim that D1 do owe the plaintiff a sum of RM3,793,835.09 as at
11 January 2011.

[20] In the circumstances, the oral and documentary evidence adduced by B

the plaintiff at the trial against D1 stand unchallenged and therefore deemed to
have been admitted. Accordingly, the indebtedness of D1 to the plaintiff as at
11 January 2011 is RM3,793,835.09.

[21] Consequently, judgment is entered against D1 for the said sum of C

RM3,793,835.09 together with interest at the rate of 8%pa on the said sum of
RM3,793,835.09 from the date of judgment to the date of full realisation. D1
is ordered to pay the plaintiff costs of RM20,000.

INDEBTEDNESS OF D2–D5 D

[22] I agree with learned counsel for the plaintiff that it is conclusive in the
proceedings herein that D2–D5 as guarantors under the said guarantee, do owe
the plaintiff a sum of RM3,793,835.09 as at 11 January 2011 in respect of the E
said LC/TR/BA facility, as shown in the said certificate of indebtedness dated
11 January 2011.

[23] In this regard, cl 19 of the said guarantee provides as follows (bundle B,

p 27): F
A certificate by any of our officers as to the money and liabilities for the time being
incurred or due to you by or from the Customer shall be conclusive evidence in any
legal proceedings against us our executors administrators or legal representatives.
G
[24] The said certificate of indebtedness dated 11 January 2011 is conclusive
evidence of the liability of D2–D5’s to the plaintiff for the sum as claimed
therein having regard to the established legal principle that such a clause is
binding on a guarantor and enables the plaintiff to tender a certificate of
indebtedness duly executed by an officer of the plaintiff in order to prove the H
quantum and correctness of the debt without the need for proof of the
indebtedness of the guarantor: Citibank NA v Ooi Boon Leong & Ors [1981] 1
MLJ 282.

[25] A certificate of indebtedness excuses the plaintiff from adducing proof I

of debt. Such a certificate shifts the burden onto the defendant to disprove the
amount claimed. A clause of this nature has been described as a conclusive
evidence clause. Such clause has been held to be binding and valid. The
conclusive evidence clause, if valid, enables the bank by producing a certificate
 Hong Leong Bank Bhd v HGM Machinery Sdn Bhd (formerly
known as Handee Engineering & Consultancy Services Sdn
[2013] 9 MLJ Bhd) & Ors (Zakaria Sam J) 421

A to dispense with such proof. It means that for the purpose of fixing the liability
of a surety, the customer’s indebtedness may be ascertained conclusively by a
certificate: Cempaka Finance Bhd v Ho Lai Ying (trading as KH Trading) & Anor
[2006] 2 MLJ 685.
B
[26] Although the plaintiff were in law only required to tender the certificate
of indebtedness dated 11 January 2011 in order to establish their claim against
D2 to D5, the plaintiff had tendered as well in full and frank disclosure the
statement of accounts showing a comprehensive and detailed computation of
C how the plaintiff had arrived at the said sum of RM3,793,835.09, being the
amount due and owing under the said LC/TR/BA facility as stated in the
certificate of indebtedness dated 11 January 2011.

[27] Apart from the fact that D2 to D5 are bound by cl 19 of the said
D
guarantee in respect of the said certificate of indebtedness dated 11 January
2011, D2 to D5 had not raised any reasonable doubt as to the veracity of the
said certificate of indebtedness dated 11 January 2011, including the statement
of accounts prepared by the plaintiff.
E
[28] In fact, learned counsel for D2, D3 and D5 during cross-examination of
SP1 had not challenged her evidence on the said certificate of indebtedness
dated 11 January 2011 and the statement of accounts, whether in respect of any
manifest error or otherwise. In the circumstances, the sums and calculations as
F stated therein are deemed to have been admitted or wholly accepted by D2–D3
and D5: Aik Ming (M) Sdn Bhd & Ors v Chang Ching Chuen & Ors and another
appeal [1995] 2 MLJ 770; [1995] 3 CLJ 639.

D2’S CASE
G

[29] D2 had resigned as a director and shareholder of D1 with effect from

3 March 1999.

H [30] Learned counsel for D2 contends that D2’s resignation from D1 had
been intimated to the plaintiff and that D2 had been assured by the plaintiff
that he would be released from liability under the said guarantee.

I [31] It was contended that D2’s liability pursuant to the said guarantee
cannot be extended to cover the restructuring or repayment scheme agreed
between the plaintiff and D1 in view of his resignation as director of D1.

[32] It was contended that D2 was not privy to the said restructuring or
422 Malayan Law Journal [2013] 9 MLJ

repayment scheme, and that the plaintiff had breached the terms and A
conditions of the said letters of offer in approving the said restructuring or
repayment scheme.

[33] It was contended that the proposal by D1 to ‘convert the balance of the
existing overdue to a term of 7 years’ would constitute a departure from the said B
letters of offer rending the said guarantee ‘null and void and not enforceable’.

[34] It was contended that D2 had been discharged from liability as

guarantor under the said guarantee essentially for the following reasons:
C
(a) the plaintiff failed to explain or give an account of the fixed deposits
pledged by D1 and also by him;
(b) the fixed deposits pledged with the plaintiff had been uplifted without his
knowledge and consent; and
D
(c) D6 was discharged without first obtaining the consent of all the other
guarantors under the said guarantee.

FINDINGS E

Resignation of D2 as director

[35] I would not entertain the contention by learned counsel for D2 that
F
D2’s resignation as shareholder and director had been intimated to the plaintiff
and that D2 had been assured by the plaintiff that he would be released from
liability under the said guarantee because such matters had not been pleaded in
D2’s defence nor established in the evidence given by D2 at the trial.
G
[36] In any event, I agree with the contention by learned counsel for the
plaintiff that the plaintiff had not discharged D2 as guarantor under the said
guarantee, for the following reasons:
(a) that the plaintiff had by way of their letter dated 10 April 2000 to D1
informed D1 that the plaintiff ‘is not agreeable to discharge the H
guarantor, Goh Hock Hai (‘D2’) as requested’;
(b) that according to SP1, the plaintiff had not discharged D2 as guarantor
under the said guarantee and that the usual practice adopted by the
plaintiff in discharging a guarantor would be a letter to that effect issued I
by the plaintiff to the guarantor eg the letter of discharge dated 11 June
1997 issued by the plaintiff to D6 (Mr Tan Kean Teik); and
(c) D2 had failed to produce any letter by the plaintiff to D2 discharging him
as guarantor under the said guarantee.
 Hong Leong Bank Bhd v HGM Machinery Sdn Bhd (formerly
known as Handee Engineering & Consultancy Services Sdn
[2013] 9 MLJ Bhd) & Ors (Zakaria Sam J) 423

A [37] I agree with the contention by learned counsel for the plaintiff that the
fact that D2 had resigned as director of D1 on 3 March 1999 does not
discharge him as guarantor under the said guarantee, as there is no provision in
the said guarantee stating that a guarantor would be discharged upon his
resignation as director of D1.
B
[38] Clause 24 of the said guarantee provides that:

You may enforce this guarantee against us at any time notwithstanding that any bills
or other instruments covered by it may be in circulation or outstanding and you may
C include the amount of the same or any of them to the whole amount outstanding or
not at your option, and this guarantee shall not be determinable by us except on the
terms of our making full provision up to the limits of our guarantee for any then
outstanding liabilities or obligations owing by the Customer to you.

D
[39] Under the said cl 24, it is clear that the said guarantee cannot be
terminated and remains binding and enforceable against the guarantor until
and unless the outstanding sums due and owing by D1 to the plaintiff has been
fully settled: Chung Khiaw Bank Ltd v Soi Huan & Ors [1986] 1 MLJ 188.
E
Restructuring or repayment schemes

[40] I do not agree with the contention by learned counsel for D2 that D2’s
liability pursuant to the said guarantee ‘cannot be extended to cover the
F
restructuring or the new repayment schemes’ agreed by the plaintiff with the
D1 by reason of D2’s resignation as director of the D1. This is because D2’s
resignation does not discharge him as guarantor under the said guarantee, and
that the said guarantee remains binding and enforceable against him until the
outstanding sums due and owing by D1 to the bank has been fully settled.
G

[41] I also do not agree with the contention by learned counsel for D2 that
the plaintiff had breached the terms and conditions of the said letters of offer in
approving the ‘restructuring or repayment scheme’ with D1. Such
H arrangements had been proposed by D1 and agreed upon by the plaintiff for
the purpose of assisting D1 in paying the outstanding debts due and owing to
the plaintiff.

[42] It is important to note that D2 had not taken any issue with the
I plaintiff ’s approval of the ‘restructuring or repayment scheme’, whether in his
defence or his evidence given at the trial.

[43] Besides, I agree with learned counsel for the plaintiff that it was within
the plaintiff ’s right to enter into any ‘restructuring or repayment scheme’ with
424 Malayan Law Journal [2013] 9 MLJ

D1. It was immaterial whether or not D2 was privy to the proposed A

‘restructuring or repayment schemes’, having regard to cl 11(c) of the said
guarantee, which provides that:

This guarantee shall be without prejudice to and shall not be affected by, nor \//shall
we be released or exonerated by and we expressly given our consent to any of the acts B
or matters following, that is to say:
(a) …
(b) …
(c) any time given or extended to the Customer and/or any other person or C
persons including anyone or more of us and the parties to any negotiable
or other security instrument guarantee or contract and any other
indulgence granted to or compromise composition or arrangement made
with the Customer and/or any other person or persons including anyone
or more of us whether with or without consent from or notice to us;
D

[44] The said proposed ‘restructuring or repayment schemes’ were

arrangements as between the plaintiff and D1 that do not affect the obligations
of D2 as guarantor under the said guarantee.
E
[45] In any event, the proposed ‘restructuring scheme’ as contained in the
plaintiff ’s said letter dated 12 February 1999 to D1 had been declared null and
void due to ‘non-completion of the restructuring documents’ by way of the
plaintiff ’s said letter fated 10 April 2000. The proposed ‘repayment scheme’ as
contained in the plaintiff ’s said letter dated 10 April 2000 was not completed F
as D1 had failed to comply with the terms thereof.

[46] I do not agree with the contention by learned counsel for D2 that the
mere proposal made by D1, by way of their letter dated 26 February 2000 to G
the plaintiff, to ‘convert the balance of the existing overdue to a term of 7 years’
would constitute a departure from the said letters of offer rending the said
guarantee ‘null and void and not enforceable’.

[47] Besides, learned counsel for the plaintiff had rightly pointed out that the H
said proposal by D1 to the plaintiff had not been agreed upon by the plaintiff,
as is apparent from the plaintiff ’s said letter dated 10 April 2000 in response to
D1’s said letter dated 26 February 2000.

Discharge of D6 I

[48] It is to be observed that the issue over D6’s discharge as guarantor under
the said guarantee was not raised as part of D2’s defence nor was it raised in the
evidence by D2 at the trial. It was therefore irregular and inappropriate that this
 Hong Leong Bank Bhd v HGM Machinery Sdn Bhd (formerly
known as Handee Engineering & Consultancy Services Sdn
[2013] 9 MLJ Bhd) & Ors (Zakaria Sam J) 425

A issue had been raised In the written submissions filed by D2’s counsel, more so,
when the issue had not been raised in the statement of issues to be tried.

[49] Be that as it may, I agree with the contention by learned counsel for the
B
plaintiff that the discharge of D6 as guarantor under the said guarantee would
not amount to a breach of the terms and conditions of the said guarantee,
thereby discharging D2 as guarantor under the said guarantee, having regard to
cl 11(d) of the said guarantee which provides that:

C This guarantee shall be without prejudice to and shall not be affected by, nor shall we
be released or exonerated by and we expressly given our consent to any of the acts or
matters following, that is to say:
(a) …

D (b) …
(c) …
(d) Any release or discharge given to any one or more of us whether with or
without consent from or notice to us:
E
[50] Under cl 11(d), the plaintiff were clearly not required to notify D2 of
the discharge of any of other the guarantors, nor were they required to obtain
the consent of D2 prior to discharging D6 as guarantor under the said
F guarantee.

[51] Moreover, s 91 of the Contracts Act 1950 provides that:

Where there are co-sureties, a release by the creditor of one of them does not
G discharge the others; neither does it free the surety so released from his responsibility
to the other sureties.

[52] I agree with learned counsel for the plaintiff that the plaintiff were
H entitled to discharge D6 as guarantor under the said guarantee without
notifying or obtaining the prior consent of the other guarantors, including D2.
At any rate, D2 would have known or ought to have known about the said
discharge, having regard to the following:
I (a) that the letter dated 11 June 1997 discharging D6 as guarantor under the
said guarantee had been copied to D2;
(b) that D2 was at the time of the discharge of D6, the chairman and director
of D1;
426 Malayan Law Journal [2013] 9 MLJ

(c) D3 had, during cross-examination by learned counsel for the plaintiff, A

revealed as follows:
(i) that D2 was instrumental in all the dealings with the plaintiff and
that D2 would ‘definitely have known about the discharge of D6 as
guarantor’; and B
(ii) that he had written a letter dated 21 April 1997 on behalf of D1 to
the plaintiff under D2’s instruction to discharge D6 as guarantor;
(d) the said letter dated 21 April 1997, which had been copied to D2 as
chairman of D1 and D4 as a director of D1, states as follows: C
Please be informed that our Finance & Admin Director, Mr Tan Kean Tek,
had resigned w.e.f. 21 April 1997. Therefore, we would appreciate if you
could kindly arrange to release him as a guarantor for the existing banking
facilities that he has signed on behalf of Handee Engineering & Consultancy
Services Sdn Bhd with yourselves. D

(e) that both D3–D4 (as directors of D1) had during cross-examination by
learned counsel for the plaintiff acknowledged that D6 had been
discharged by the plaintiff at the request of D1 and that they were aware
about the said discharge. E

Fixed deposits
F
[53] It has to be pointed out that learned counsel for D2 had not disputed
nor challenged SP1’s evidence that the total fixed deposits pledged with the
bank in respect of the said LC/TR/BA facility is a total sum of RM2,150,000,
as per the said letters of set-off.
G
[54] The issue that the said fixed deposits had been uplifted without D2’s
knowledge and consent had not been raised in D2’s defence and that no such
evidence had been given by D2 at the trial. This issue had been first raised in the
written submissions filed by D2’s counsel. In the circumstances, learned
counsel for D2 is not allowed to raise the issue that the fixed deposits had been H
uplifted without D2’s consent and knowledge, more so, when this issue had not
been raised in the statement of issues to be tried.

[55] Be that as it may, I agree with the contention by learned counsel for the
plaintiff that the plaintiff were entitled to uplift the fixed deposits in order to I
partly settle the debt due and owing to the plaintiff without the knowledge and
consent of D2 having regard to the following:
(a) that cl 4 of the said letters of set-off provides as follows:
 Hong Leong Bank Bhd v HGM Machinery Sdn Bhd (formerly
known as Handee Engineering & Consultancy Services Sdn
[2013] 9 MLJ Bhd) & Ors (Zakaria Sam J) 427

A It /We hereby agree that in addition to any general lien or similar right to
which you as bankers may be entitled by law you may at any time and without
notice to me/us adjust your dues against the said advance by way of set-off or
transfer of the amount of the Fixed Deposit No … or Fixed Deposit Receipts
Nos … or any Fixed Deposits from time to time substituted for or replacing
the same upon renewal together with interest or accrued thereon in or towards
B
satisfaction of any of my/our liabilities to you on my/our current account with
you and/or on any account whatsoever and/or in any other respect whether
such liabilities be actual or contingent, primary or collateral.

(b) cl 5 of the said letters of set-off provides as follows:

C
I/We irrevocably declare and undertake that lA/Ve will have no claim against
you whatsoever on the amounts so adjusted from the Fixed Deposit Receipt
No … or Fixed Deposit Receipt Nos … or any Fixed Deposits from time to
time substituted for or replacing the same upon renewal;
D
(c) D3, as managing director of D1 had, during cross-examination,
conceded that the plaintiff have the ‘right to uplift the said fixed deposits
without giving them (the guarantors) notice’.

E [56] Apart from the fact that the plaintiff were clearly entitled to uplift the 20
said fixed deposits without the knowledge and consent D2 in order to partly
settled the debt due and owing to the plaintiff, I find that D2 would have
known or ought to have known about the said upliftment in view of the
plaintiff ’s said letter dated 12 February 1999 to D1 stating, inter alia, as
F follows:
Please note that the Bank will uplift the existing Fixed Deposit of RM2,490,000.00
(inclusive interest earned as at December 1998) to fully settle the existing overdraft
facility of RM200,000.00 and remaining unsettled temporary overdraft and interest
in arrears of RM195,000.00 as at 7th January 1999 ….
G

[57] This letter had been issued to D1 at the time D2 was the chairman and
director of D1. Incidentally, D2 in his witness statement had referred to this
letter including its contents as well. D3 had, during cross-examination,
H revealed that the D2 was instrumental in all the dealings with the plaintiff and
that ‘most of the bank restructuring’ was done by D2.

[58] I do not agree with the contention by learned counsel for D2 that the
plaintiff had failed to explain how the fixed deposits had been utilised or
I applied. As pointed out by learned counsel for the plaintiff, the plaintiff had
tendered in full and frank disclosure the ‘listing of payments made’ showing
how the proceeds from the upliftment of the fixed deposits pledged with the
plaintiff in respect of the said LC/TR/BA facility had been applied or utilised
in order to partly settle the debt due and owing to the plaintiff.
428 Malayan Law Journal [2013] 9 MLJ

[59] It is important to point out that learned counsel for D2 or for that A
matter, learned counsel for D3, D4 and D5 had not made any attempt to
challenge the said ‘listing of payments made’. SP1, who had prepared the said
‘listing of payments made’ was not asked any questions regarding the sums and
calculations set out therein. As such, the sums and calculations pertaining to
the fixed deposits as set out in the said ‘listing of payments made’ are deemed to B
have been admitted or wholly accepted.

CONCLUSION

[60] In the circumstances, I find that learned counsel for D2 had not raised C
any valid grounds to challenge the plaintiff ’s claim. Accordingly, and as learned
counsel for D2 has not challenged the certificate of indebtedness dated
11 January 2011, judgment is entered against D3 for the sum of
RM3,793,835.09 as set out in the said certificate of indebtedness dated 11
January 2011 together with interest at the rate of 8%pa on the said sum of D
RM3,793,835.09 from the date of judgment to the date of full realisation.

D3’S CASE

[61] Learned counsel for D3 contends that the banker’s acceptance E

documents (‘BA documents’) ought to have been tendered at the trial, as the
plaintiff ’s claim is based on the BA documents.

[62] It was contended that the plaintiff ’s calculation of the fixed deposits was
wrong and that, accordingly, the amount claimed by the plaintiff was wrong as F
well. It was contended that the plaintiff ’s ‘actual claim should be about
RM884,297.29’. D3 also contended that there had been a delay in the
upliftment of the fixed deposits.

[63] D3 in his evidence alleged that he was not aware whether the temporary G
overdraft of RM800,000 was utilised by D1, and that according to learned
counsel for D3, D3 was not cross-examined on this issue.

[64] It was contended that D3 did not receive the notice of demand dated
14 June 2002 and the notice of demand dated 7 March 2003 issued by the H
plaintiff. It was further contended that the service of a notice of demand on D3
is a prerequisite in law, and that the effect of the non-service of such a demand
would preclude the plaintiff from filing the claim herein.

FINDINGS I

BA documents

[65] I find that the BA documents were not required to be produced by the
 Hong Leong Bank Bhd v HGM Machinery Sdn Bhd (formerly
known as Handee Engineering & Consultancy Services Sdn
[2013] 9 MLJ Bhd) & Ors (Zakaria Sam J) 429

A plaintiff as evidence in support of their claim against D3, as the plaintiff ’s claim
is based on the said letters of offer and the said guarantee.

[66] SP1 during re-examination by learned counsel for the plaintiff

explained why the BA documents were not produced in court:
B
The Bankers Acceptance Certificates were never raised as an issue. In the letter dated
10.4.2000 at page 75 of Bundle B, the debt was already stated under the reference.
The banker’s acceptance certificates are stated there. The principal amounts are all
stated there. This letter was confirmed, accepted by the company (D1), D3 and D4,
C and that similarly, there are other letters where the debt was also admitted and
acknowledged, for example, the letter dated 12.2.1999, which is at pg 46 of Bundle
B, where the amount stated there had also been accepted. Basically the main one is
the letter of 10.4.2000, which is at pg 75 of Bundle B. So there was no issue made
of the amount owing at that point of time. So we did not think it was necessary to
D produce (the BAs)

[67] In addition, the BA documents had not been raised as an issue by D3 in

his defence, nor did the D3 issue a notice to produce to the plaintiff in respect
E of the BA documents prior to the trial.

Fixed deposits

[68] It has to be pointed out that though D3 in his defence stated that the
F fixed deposits pledged with the plaintiff is a sum of RM2,388,052.71, he had
in his evidence stated that a sum of RM3,288,052.71 had been pledged with
the bank instead.

[69] I do not agree that the fixed deposits pledged with the bank in respect of
G
the said LC/TR/BA facility is RM3,288,052.71, and that I agree with learned
counsel for the plaintiff that the fixed deposits pledged with the bank is in fact
the total sum of RM2,150,000.

H [70] According to SP1, the fixed deposits pledged with the bank in respect of
the said LC/TR/BA facility is a total sum of RM2,150,000 as per the said
letters of set-off. SP1 had, during cross-examination by learned counsel for D3,
explained that the letter of set-off dated 29 September 1998 amounting to
RM1,138,052.71, which was referred to in the written submissions filed by the
I learned counsel for D3, is actually a fresh letter of set-off to reflect the fixed
deposits in the total sum of RM900,000 in respect of the letters of set-off dated
27 December 1995 and 6 January 1996 with the addition of interest.

[71] In addition, the fact that the fixed deposits pledged with the bank in
430 Malayan Law Journal [2013] 9 MLJ

respect of the said LC/TR/BA facility is the sum of RM2,150,000 is confirmed A

by the following:
(a) paras b–c of the said supplementary letter of offer dated 25 January 1996
(an agreed document) in respect of the said LC/TR/BA facility, which
states as follows: B
(i) Pledge of RM1,250,000 fixed deposit together with letter of set-off
duly executed.
(ii) RM150,000 is to be placed quarterly in a fixed deposit as sinking
fund until it reaches RM900,000; C
(b) the plaintiff ’s letter dated 12 February 1999 issued to D1 for the
attention of D3 as managing director, the contents of which had been
confirmed and accepted by D3, which states as follow:

Existing Facility: D
(1) Pledge of RM1.25 million Fixed Deposit (3rd Party) together with
letter of Set-Off executed
(2) RM 150,000.00 is to be placed quarterly in a fixed deposit as sinking
fund until it reaches RM900,000.00 E

[72] In addition, the plaintiff ’s said letter dated 12 February 1999 issued to
D1 also states that the ‘existing fixed deposit’ inclusive of interest as at
December 1998 is a sum of RM2,490,000.
F

[73] Therefore, I agree with counsel for the plaintiff that D3, in accepting
and confirming the contents of the said letter dated 12 February 1999, had
clearly acknowledged that the fixed deposits pledged with the bank inclusive of
interest as at December 1998 is a sum of RM2,490,000. Accordingly, D3 is G
estopped from contending in his evidence that the fixed deposits pledged with
the plaintiff is a sum of RM3,288,052.71, more so, when such sum had not
been pleaded in his defence.

[74] It bears reiterating that the plaintiff had prepared and tendered the H
‘listing of payments made’ showing how the proceeds from the upliftment of
the fixed deposits in the said sum of RM2,490,000 had been applied in order
to settle or partly pay the debt due and owing to the bank and that this
document had not been challenged by learned counsel for D4 or for that
matter, by learned counsel for D2, D3 and D5. As such, the sums and I
calculations pertaining to the fixed deposits as set out in the ‘listing of payments
made’ are deemed to have been admitted or wholly accepted.

[75] SP1 during cross-examination by learned counsel for D4, had denied
 Hong Leong Bank Bhd v HGM Machinery Sdn Bhd (formerly
known as Handee Engineering & Consultancy Services Sdn
[2013] 9 MLJ Bhd) & Ors (Zakaria Sam J) 431

A that there had been a delay in the upliftment of the fixed deposits in the sum of
RM2,490,000 and had, during re-examination, explained as follows:
Around that time, there were negotiations between borrower (D1) and the Bank.
This letter dated 12.2.1999, which is at pg 46 of Bundle B, was issued by Bank,
B accepted by the borrower, and returned to the Bank on 4.3.1999. So basically the
fixed deposit was uplifted between March and the 1st week of April, which is about
1 month, so as there are many FDs, it took time to process, and it is not
unreasonable delay on the Bank’s part. My answer is that there’s no delay. But in
addition to that, if I may draw attention of the court to pg 21 of Bundle B, this is a
letter of set-off by the company in respect of the fixed deposits. When the company
C pledged the FD, they also signed the letter of set-off that gives the bank the right to
offset the fixed deposit against the loan. So this is the letter of set-off. Para 4 of this
letter of set-off. There’s no time frame. Actually it’s at the Bank’s discretion. That’s
why my answer is that there was no delay.

D
Temporary overdraft

[76] I agree with learned counsel for the plaintiff that D3 was cross-
E examined on the issue over the temporary overdraft, and that D3 had
acknowledged that he was aware that D1 had utilised the temporary overdraft.
Besides, the temporary overdraft is not the subject matter of the claim, and that
it is reiterated that the plaintiff ’s claim is for the outstanding sums due and
owing under the said LC/TR/BA facility, as confirmed in the prayers of the
F statement of claim.

Demand

[77] The notices of demand dated 14 June 2002 and 7 March 2003 (‘the said
G notices of demand’) had been sent to the D3 at the address as stated therein.
This address had been confirmed by D3 during cross-examination by counsel
for the plaintiff and Form 49 of the Companies Act 1965 dated 3 March 1999.

[78] SP2 (Bascaran a/l Mayandi) who is the search/service clerk of Messrs
H Shearn Delamore & Co, the plaintiff ’s solicitors, testified that:
(a) the said notices of demand had been sent to the defendants, including the
D3;
(b) the proof of posting is at pp 1–7 of bundle J; and
I
(c) the registered post slips at pp 1–7 of bundle J contain a ‘chop’ by the
postal authority acknowledging receipt of the said notices of demand.

[79] Learned counsel for D3 had, during cross-examination of SP2, not

432 Malayan Law Journal [2013] 9 MLJ

challenged the said evidence given by SP2 that the said notices of demand had A
been issued or sent to the third defendant at the address as stated therein.
Therefore SP3’s evidence is deemed to have been admitted.

[80] Consequently, learned counsel for D3 is estopped from challenging the

B
issuance of the said notices of demand to D3 in his written submissions on the
basis that there was ‘no address on the postal receipts’, more so, when the
issuance of the said notices of demand on D3 was not an issue raised in the
statement of issues to be tried.
C
[81] In any event, I agree with the contention by learned counsel for the
plaintiff that there is no requirement that the address of D3 had to be stated in
the postal receipts. On this issue, it is relevant to highlight the following
observation made by Haji Hamid Sultan J in RHB Bank Berhad v WIP
Industrial Solutions (M) Sdn Bhd & Ors Suit No D-22NC-2233 of 2010: D

In this instant case the plaintiff says that the letter of demand has been properly served on
the guarantors by registered post, and produces the receipt given by the post office which
has only the name of the guarantors but not the address. I must say here that those who
have experience in having posted a registered letter will attest that the post office will not E
accept any letter to be registered if it is not properly addressed to the recipient of the mail.
In addition the plaintiff in the instant case relies on cl 21 of the guarantee to say that
the letter of demand at the guarantors’ last known address by registered post of
ordinary mail shall be deemed to have been served. In the instant case the defendants
have failed to rebut the presumption of service as prescribed in the above deeming
F
clause. (Emphasis added.)

Presumption of service

[82] I agree with the contention by learned counsel for the plaintiff that it is G
immaterial whether or not the said notices of demand had been received by D3
in view of the terms and conditions of the said guarantee and, more
importantly, the established principle of law that the bank are not required to
show that the notice of demand had been received by a guarantor so as to
constitute a proper demand, but are only required to show that the notice of H
demand had been issued or sent to the guarantor.

[83] Clause 21 of the said guarantee (bundle B, p 27) provides that:

I
Any demand for payment of moneys or any other demand or notice under this
guarantee may be made by a Manager, Accountant or an Officer for the time being
of yours or by any person or firm for the time being acting as solicitor or solicitors
for you by letter addressed to us our executors administrators or legal representatives
and sent by post or delivered to our address last known to you or stated hereunder and a
 Hong Leong Bank Bhd v HGM Machinery Sdn Bhd (formerly
known as Handee Engineering & Consultancy Services Sdn
[2013] 9 MLJ Bhd) & Ors (Zakaria Sam J) 433

A notice or demand so given or made shall be deemed to be given or made or received at the
time when the letter would In the ordinary course of post be delivered. (Emphasis
added.)

[84] I find that D3 has failed to rebut the presumption of service as

B prescribed in the above deeming clause. In Amanah Merchant Bank Bhd v Lim
Tow Choon [1994] 1 MLJ 413; [1994] 2 CLJ 1, the Supreme Court held that:
On the proper construction of cl 17, since any notice may be served by sending the
same through the post addressed to the last known address of the addressee; the
C deeming provision applied to the said notice, whether or not is sent by AR registered
post. It is not necessary that the appellant must show that the AR card has been duly
acknowledged to constitute effective service of the notice of demand. It is sufficient for the
appellant to show that the notice was correctly addressed, prepaid and delivered to the post
office and acknowledged for service by the postal authority. Once these facte have been
established, the deeming provision will inevitably apply. (Emphasis added.)
D

[85] In Arab-Malaysian Finance Bhd v Chong Chin Shoong [1997] MLJU

264; [1998] 1 CLJ 887, the High Court made the following observation:
Clause 8 is a contractual provision regarding service. It is in the form of a deeming
E provision. By it, the parties agreed that, if the notice is sent by registered post, it shall
be regarded as having been received within forty-eight hours after posting. That
means they agreed that proof of actual receipt I would not be necessary. It is a contractual
device for the convenience of the parties. A party to such a device may not refuse to
accept delivery, and then rely on proof of non-delivery to claim there has been no
F receipt, because that would be to frustrate the device that he has agreed to. He must
be taken to have received the notice or whatever it was that was sent to him.
So in this case the fact that the letter came back marked ‘tidak dituntut’ cannot
displace the deeming that it had been served, because to allow it to do so would be
to permit the defendant, if he had chosen to do so, to frustrate the device by refusing
G to accept delivery of the letter. As I said, the inescapable implication is that in fact
that was what happened.
I do not have to decide whether, in law, it would be open to the defendant to rebut
the presumption of receipt provided by cl 8, because he has not attempted to do so.
A bare denial of having received the letter of demand will not do. (Emphasis added.)
H
[86] In the circumstances, it is clear that the bank were not required to tender
the AR card duly acknowledged by the D3 as contended by learned counsel for
D3. RK Nathan J in United Asian Bank Bhd v Ceras Credit Sdn Bhd & Ors
[1996] 4 MLJ 639, had this to say:
I
Where the demand clause in a guarantee does not specify that a demand notice is to
be sent by registered post or by AR registered post, there is no need to show proof of
actual receipt by way of an AR card duly acknowledged so long as the plaintiff can
show that the notice of demand was property addressed to the guarantors and
handed to the post office.
434 Malayan Law Journal [2013] 9 MLJ

Principal Debtor Clause A

[87] In any event, I agree with the contention by learned counsel for the
plaintiff that the said notices of demand were not required to be issued or sent
to D3, having regard to the ‘principal debtor clause’ in the said guarantee,
which obviates the need for the service of a notice of demand. B

[88] Clause 17 of the said guarantee provides:

Though as between us and the Customer we are sureties only for the Customer, yet
as between us and you we and each of us shall be deemed to be principal debtors for C
all the moneys the payment of which is hereby guaranteed and accordingly shall not
be discharged nor shall our liability be affected by any fact or circumstances or any act
thing omission or means whatsoever, whereby our liability would not have been
discharged if we had been the principal debtors. (Emphasis added.)
D
[89] Further, cl 18(a) of the said guarantee provides:

[90] For the consideration aforesaid and as a separate and independent

stipulation:
E
(a) we hereby agree that all sums of moneys which may not be recoverable
from us on the footing of a guarantee whether by reason of any legal
limitation disability or incapacity on or of the customer or any other fact
or circumstances, whether known to you or not shall nevertheless be
recoverable from us on demand as though we were the sole and principal F
debtors. (Emphasis added.)

[91] The cases of RHB Bank Bhd v Farlim Holding Sdn Bhd & Ors [2005] 2
MLJ 638 and Mok Hin Wah & Ors v United Malayan Banking Corp Bhd [1987]
2 MLJ 610 cited by learned counsel for D3 are distinguishable from this case G
and, hence not applicable, primarily because those cases did not consider the
issue and effect of a ‘principal debtor clause’.

[92] M Shankar J (as he then was) in Public Bank v Chan Siok Lie & Ors
[1989] 2 MLJ 305 had considered the Mok Hin Wah‘s case and the effect of a H
‘principal debtor clause’, and made the following observation:
I agree that great care should be taken when applying Mok Hin Wah‘s case to
remember that it will only apply if the words of the guarantee specifically make a
prior demand a condition precedent to suing the guarantor. There is no general rule I
that in all cases, regardless of the terms of the document, a prior precise demand is a sine
qua non to the commencing of an action. Nor is there any general rule that a prior notice
must be given in all cases. The writ itself is a notice: see Malayan Banking Bhd v Lim
Chee Leng & Anor [1985] 1 MLJ 214 …
 Hong Leong Bank Bhd v HGM Machinery Sdn Bhd (formerly
known as Handee Engineering & Consultancy Services Sdn
[2013] 9 MLJ Bhd) & Ors (Zakaria Sam J) 435

A [93] His Lordship continued:

A far clearer exposition of the law on the point is given in O’ Donovon’s Modern Law
of Guarantee at pp 379–382 … At p 380 of the text it says that even though the
amounts under the guarantee are expressed to be payable ‘on demand’ the inclusion
B of a ‘principal debtor’ clause in the body of a guarantee may obviate the necessity for
the creditor to make a demand. Reference is made to the comments of Walton J in
Esso Petroleum Co Ltd v Alstonbridge Properties Ltd [1975] 1 WLR 1474. This I hold,
that where the effect of a guarantee agreement is to make guarantors principal debtors, the
necessity for a demand could be obviated because the character of the agreement under
which payment is sought is no longer strictly collateral. (Emphasis added.)
C

[94] Siti Norma Yaakob J (as she then was) in Credit Corporation (M) Berhad
v Choi Sang & Anor [1989] 1 CLJ (Rep) 440 had also considered the Mok Hin
Wah case and the Public Bank case and made the foilowing observations:
D
The law on the effect of the presence of a principal debtor clause in a guarantee is clear in
that it obviates the necessity of a creditor to make a demand. This is so as a guarantee is
a collateral agreement and before being sued, it is only right and just that a demand
be made on the guarantor. However, the character of the guarantee changes where
there is also included a principal debtor clause in the body of the guarantee. The
E guarantee is no longer a collateral agreement and as such there is no need for a demand
as the issuance of the writ is a demand in itself. Mok Hin Wah’s case is distinguishable in
that the guarantee sought to be enforced did not contain principal debtor clause and as
such the case is not applicable to the facts of the case before me.

F Her Ladyship continued:

On the other hand, Public Bank’s case is supportive of the plaintiff ’s case as in that
case, Dato’ Shankar J was also of the view that no demand is necessary where there is a
principal debtor clause. However where a guarantee contains both a written demand
clause and a principal debtor clause, it is my considered opinion that the latter overrides
G
the condition precedent of a written demand. (Emphasis added.)

[95] Clement Skinner JC (as he then was) in United Merchant Finance Bhd v
Hockwood Holdings Sdn Bhd & Ors [1999] 5 MLJ 85 had also considered the
H Mok Hin Wah and Public Bank cases and made the following observations:

Learned counsel for the third defendant, at the resumed hearing, informed me that
in view of the authorities above cited and because by cl 2.1 of the guarantee in this
case the guarantors had agreed to be principal debtors and not just sureties, he was unable
I to contend that the guarantee the court is now considering is an ‘on demand’ guarantee
…

[96] The plaintiff by the terms of the guarantee abovementioned is clearly

entitled to look to D3 as principal debtor for payment of a present debt owing
436 Malayan Law Journal [2013] 9 MLJ

as opposed to a collateral debt and without having to give to the D3 any prior A
notice or demand in respect of any default having been made by the D1.

[97] In the above circumstances, and as it is conceded by learned counsel for

the D3 that this guarantee is not a ‘demand guarantee’, I find that the plaintiff
sending notices of demand to addresses other than that stated in cl 18.1 of the B
guarantee would not make any difference in this case as the filing and service of
the writ herein on the third defendant constituted a sufficient demand obliging
the third defendant to pay. (Emphasis added.)

CONCLUSION C

[98] In the circumstances, I find that learned counsel for D3 had not raised
any valid grounds to challenge plaintiff ’s claim. Accordingly, and as learned
counsel for D3 had not challenged the certificate of indebtedness dated
11 January 2011, judgment is entered against D3 for the sum of D
RM3,793,835.09 as set out in the said certificate of indebtedness dated 11
January 2011 together with interest at the rate of 8%pa on the said sum of
RM3,793,835.09 from the date of judgment to the date of full realisation.

D4’S CASE E

[99] D4 contends that the fixed deposits pledged with the plaintiff is not a
sum of RM2,150,000 as contended by the plaintiff, but a sum of
RM2,650,000 or RM3,288,052.71, having regard to the said letters of set-off F
tendered at the trial by the plaintiff.

[100] D4 further contends that the interest applied and claimed by the
plaintiff in the certificate of indebtedness dated 11 January 2011 is wrong and
not in accordance to the ‘terms of the contract’. D4 therefore claims that there G
is a manifest error in the certificate of indebtedness dated 11 January 2011.

[101] D4 also contends that he had been discharged as guarantor under the
said guarantee, given that the plaintiff had not secured a fixed deposit in the
sum of RM500,000 from D1, and as the plaintiff had discharged D6 as H
guarantor under the said guarantee.

Fixed deposits

[102] It is to be observed that though D4 in his defence had stated that the I
fixed deposits pledged with the bank in respect of the said LC/TR/BA facility
is RM2,388,052.71, learned counsel for D4 in his written submissions is now
taking the position that the fixed deposits pledged is RM2,650,000 or
RM3,288,052.71.
 Hong Leong Bank Bhd v HGM Machinery Sdn Bhd (formerly
known as Handee Engineering & Consultancy Services Sdn
[2013] 9 MLJ Bhd) & Ors (Zakaria Sam J) 437

A [103] I do not agree that the fixed deposits pledged with the bank in respect
of the said LC/TR/BA facility is RM2,388,052.71 or RM2,650,000 or
RM3,288,052.71 as contended by learned counsel for D4. As explained earlier,
I agree with the contention by learned counsel for the plaintiff that the total
fixed deposits pledged with the bank is the total sum of RM2,150,000 (see my
B findings in relation to D3’s case above).

[104] It is reiterated that, the plaintiff ’s said letter dated 12 February 1999 to
D1, the contents of which had been confirmed and accepted by D4, states,
inter alia, that the ‘existing fixed deposit’ inclusive of interest as at December
C 1998 is a sum of RM2,490,000.

[105] Therefore I agree with the contention by learned counsel for the
plaintiff that D4, in accepting and confirming the contents of the said letter
D
dated 12 February 1999, had acknowledged that the fixed deposits pledged
with the plaintiff inclusive of interest as at December 1998 is a sum of
RM2,490,000. Accordingly, learned counsel for D4 is estopped from
contending in his written submissions that the total fixed deposits pledged is
RM2,650,000 or RM3,288,052.71, more so, when such sums had not been
E
pleaded in the D4’s defence.

[106] In addition, and as stated earlier, learned counsel for D4 had not
challenged the ‘listing of payments made’ showing how the proceeds from the
upliftment of the fixed deposits in the said sum of RM2,490,000 had been
F applied in order to settle or partly pay the debt due and owing to the plaintiff
and that hence, the sums and calculations pertaining to the fixed deposits as set
out in the ‘listing of payments made’ are deemed to have been admitted or
wholly accepted.

G Fixed deposit of RM500,000

[107] The sum of RM500,000 as stated in the letter of offer dated 8 May
1996 (bundle B, pp 29–33) referred to by learned counsel for D4 in his written
submissions is a fixed deposit meant to be pledged in respect of the ad hoc
H facility, and not the said LC/TR/BA facility.

[108] It is undisputed that the plaintiff ’s claim is not for the ad hoc facility,
but for the said LC/TR/BA facility only, as confirmed in the prayers of the
statement of claim.
I
[109] SP1 had, during cross-examination by learned counsel for D4, stated
that:
(a) a total sum of RM2,150,000 had been pledged with the plaintiff as fixed
438 Malayan Law Journal [2013] 9 MLJ

deposits in respect of the said LC/TR/BA facility, and that the sum of A
RM500,000 as stated in the said letter of offer 8 May 1996 is in respect
of the ad hoc facility; and
(b) that the ad hoc facility was a short term facility which had expired or
settled on 8 September 1996 ie more than 14 years ago and hence, not a
B
subject matter of the claim.

[110] In the circumstances, it is clear that the the ad hoc facility including
the said fixed deposit of RM500,000 pledged in respect thereof, which had
been raised as in issue by learned counsel for D4, is irrelevant because it is not C
the subject matter of the plaintiff ’s claim herein for the outstanding amounts
due under the said LC/TR/BA facility.

[111] It is significant to point out that the contention by learned counsel for
D4 that the plaintiff had failed to secure the fixed deposit of RM500,000 is D
fundamentally at odds with the position taken in D4’s defence and his witness
statement ie that the bank had failed to take into consideration the said sum of
RM500,000 in the calculation of the fixed deposits pledged with the plaintiff.

Interest E

[112] I agree with the contention by learned counsel for the plaintiff that the
plaintiff were justified and correct in imposing interest at the rate of BLR +
2.5% + 1% as stated in the certificate of indebtedness dated 11 January 2011,
having regard to the following: F
(a) SP1 had, under cross-examination by learned counsel for D4, disagreed
that the interest of BLR + 2.5% + 1%pa as stated in the certificate of
indebtedness dated 11 January 2011 was higher than the interest as stated
in the letters of offer dated 16 November 1995 and 12 August 1996 (in G
respect of the said LC/TR/BA facility); and
(b) that SP1 had, during re-examination, by learned counsel for the plaintiff,
clarified as follows:
The interest that the D4’s Counsel was referring to was the normal rate if there H
was no default by the borrower … At page 4 of Bundle B (letter of offer dated
16.11.1995) under the 4th paragraph ‘overdue interest’, which provides: ‘…
BLR + 4% + 1% penalty on overdue BAs or such other rates as may be determined
by Lender from due date until date of payment’. This is the rate as per the letter
of offer. Overdue rate is actually BLR+ 4% +1%. But sometime later, there
I
was a Bank Negara direction to reduce the interest rate from 4% to 2.5%. This
was in line with the direction by Bank Negara during the financial crisis
period in order to help the borrowers. So in fact, the interest that was claimed
in the Certificate of Indebtedness from 1.10.1998 onwards is actually lower
than the interest as stated in the letter of offer dated 16.11.1995. So there was no
 Hong Leong Bank Bhd v HGM Machinery Sdn Bhd (formerly
known as Handee Engineering & Consultancy Services Sdn
[2013] 9 MLJ Bhd) & Ors (Zakaria Sam J) 439

A prejudice to the borrower. In fact it was better for the borrower. So there is no
mistake in the Certificate of Indebtedness.

[113] In the circumstances, although the interest as stated in the certificate of

indebtedness dated 11 January 2011 was BLR + 2.5% + 1%, and not BLR +
B
4% + 1% as stated in that part of the said letter of offer dated 16 November
1995 under ‘overdue interest’, SP1 had already explained that the 4% had been
reduced to 2.5% in line with the direction by Bank Negara, and that the
interest claimed by the plaintiff (as stated in the certificate of indebtedness
dated 11 January 2011) was actually lower than the rate as stated in the said
C
letter of offer dated 16 November 1995 and hence, causes no prejudice to D4.

[114] Incidentally, D4 had under cross-examination by learned counsel for

the plaintiff conceded that he was not complaining about the interest rate
D imposed by the plaintiff in the said certificate of indebtedness dated 11 January
2011, which is lower than the rate as stated in the said letter of offer dated 16
November 1995.

[115] At any rate, even if, at all, the interest claimed by the bank as stated in
E the certificate of indebtedness dated 11 January 2011 was not ‘in accordance to
the rate specified in the overdue interest column (in the said letter of offer dated
16 November 1995)’, as alleged by learned counsel for D4, the plaintiff were
nonetheless justified and correct to charge interest at the reduced rate of BLR
+ 2.5% + 1%, having regard to the following:
F
(a) it is provided for in the said letter of offer dated 16 November 1995 that
the plaintiff does ‘reserve the right to vary interest in accordance with
prevailing market conditions at its own discretion’; and
(b) that cl 12(a) of the said guarantee states as follows:
G
12. We hereby expressly give our consent to your doing at all times without
discharging or releasing us or in any way affecting this guarantee the
following:
(a) determine or vary any credit to the Customer and/or open and/or
H continue with any other account or accounts current or otherwise of
the Customer with you at any branch or branches;

[116] Mahadev Shankar J (as he then was) in Chung Khiaw Bank Ltd v Soi
I
Huan & Ors [1986] 1 MLJ 188 had made the following observation:

The next line of defence is that the bank unilaterally varied the terms upon which
the company was to repay its borrowings and that this variation automatically
discharged the sureties. Reference is made to vol 18 of Halsbury’s Law of England
(3rd Ed), pp 502–507. But cll 8–10 of the guarantee in so many words permitted
440 Malayan Law Journal [2013] 9 MLJ

the bank to resort to other means of payment at any time and in any order that the A
bank thought fit or to vary or modify the securities held by the bank, and to give
time to the company and to vary credit given to the company, without in any way
prejudicing the rights of the bank against the guarantors.

B
[117] For these reasons, the contention by learned counsel for D4 that the
interest applied and claimed by the plaintiff in the certificate of indebtedness
dated 11 January 2011 is wrong and that the ‘certificate of indebtedness has
manifest error on the surface of said document and is not a conclusive evidence’
is therefore misconceived and devoid of merit. C

Discharge of D6

[118] It is not correct for learned counsel for D4 to contend that the plaintiff D
had withdrawn the claim against D6 ‘11 hours before the trial commenced’.
According to SP1, the plaintiff had resolved the matter amicably with D6 prior
to the commencement of trial, resulting in the withdrawal of the plaintiff ’s
claim against D6, and the withdrawal of D6’a counterclaim for, inter alia,
damages against the plaintiff. E

[119] I do not agree with the contention by learned counsel for D4 that the
discharge of D6 as guarantor under the said guarantee automatically discharges
the other guarantors, including D4, under the said guarantee, having regard to
cl 11(d) of the said guarantee and s 91 of the Contracts Act 1950, and for the F
reasons which I have given earlier in my findings against D2’s case.

[120] Apart from the fact that the plaintiff were entitled to discharge D6 as
guarantor under the said guarantee without notifying and/or obtaining the G
prior consent of the other guarantors, including D4, I find that D4 would have
known or ought to have known about the discharge of D6, having regard to the
following:
(a) that D4 had, during cross-examination by learned counsel for D5,
conceded that D6 had been discharged by the bank ‘at the request of the H
first defendant’;
(b) that D4 had, during cross-examination by learned counsel for the
plaintiff, conceded that he was aware that the said request for discharge of
D6 had been made; and I

(c) that that the said letter dated 21 April 1997 from D1 to the plaintiff,
which had been copied to the fourth defendant as director of the first
defendant, states as follows (bundle J, p 8):
 Hong Leong Bank Bhd v HGM Machinery Sdn Bhd (formerly
known as Handee Engineering & Consultancy Services Sdn
[2013] 9 MLJ Bhd) & Ors (Zakaria Sam J) 441

A Please be informed that our Finance & Admin Director, Mr Tan Kean Teik,
has resigned w.e.f. 21 April 1997. Therefore, we would appreciate if you could
kindly arrange to release him as a guarantor for the existing banking facilities
that he has signed on behalf of Handee Engineering & Consultancy Services
Sdn Bhd with yourselves. (Emphasis added.)
B
CONCLUSION

[121] In the circumstances, I find that learned counsel for D4 had not raised
C any valid grounds to challenge the plaintiff ’s claim, nor has he shown any
manifest error in the said certificate of indebtedness dated 11 January 2011,
including the statement of accounts prepared by the plaintiff.

[122] Accordingly, judgment is entered against D4 for the sum of

D RM3,793,835.09 as set out in the said certificate of indebtedness dated
11 January 2011 together with interest at the rate of 8%pa on the said sum of
RM3,793,835.09 from the date of judgment to the date of full realisation.

D5’S CASE
E
[123] D5 does not deny executing the said guarantee, which is the subject
matter of the claim against D5.

F [124] D5 also does not dispute the certificate of indebtedness dated

11 January 2011, which reflects the amount outstanding pursuant to the
facilities that were taken by D1 from the plaintiff.

[125] D5’s brother in law, Mr Lian Teng Hai (‘DW4’) testified that D5 had
G been discharged as guarantor under the said guarantee on the basis, inter alia,
that D2 had informed him that the plaintiff had ‘agreed to release D5 as
guarantor and that the paperwork would be in place soon’. According to D5,
DW4 had told her that ‘the directors of D1 had informed him that the consent
of the plaintiff to release (her) as guarantor had been secured’.
H

[126] Learned counsel for D5 contends that D5 wrote and delivered to the
plaintiff, a letter dated 5 January 1999 informing them, inter alia, that she had
been informed by D1 that the plaintiff had consented to her release as
I guarantor and her new address in Kuala Lumpur.

[127] This letter was delivered by post and hand by DW4 to the plaintiff.
During cross-examination, SP1 did not deny the fact that the plaintiff had
been in receipt of D5’s letter said dated 5 January 1999.
442 Malayan Law Journal [2013] 9 MLJ

[128] Learned counsel for D5 contends that on 12 February 1999, the A

plaintiff wrote a letter to D1 proposing a restructuring of the credit facilities,
whereby D5 was no longer required to be a guarantor to the facilities.

[129] It was contended that if the plaintiff took the position that the
contents of the said letter dated 12 February 1999 was null and void, the B
plaintiff should have responded to D5’s letter dated 5 January 1999 to inform
her that they did not consent to D5 being released as guarantor.

[130] It was further contended that the plaintiff, despite having been
informed of the D5’s new address on 5 January 1999, did not communicate C
with D5 until the existence of these proceedings was brought to D5’s attention
through DW4.

[131] Learned counsel for D5 submitted that by reason of the plaintiff ’s said
conduct, the doctrine of estoppel by conduct must operate against the plaintiff D
in respect of its insistence that D5 continue to be obligated to the plaintiff
pursuant to the terms of the said guarantee. In support of his contention, he
cited the case of Boustead Trading (1985) Sdn Bhd v Arab-Malaysian Merchant
Bank Bhd [1995] 3 MLJ 331; [1995] 4 CLJ 283, and Alfred Templeton & Ors v
Mount Pleasure Corp Sdn Bhd [1989] 1 CLJ Rep 219. E

[132] It was contended that the plaintiff had led D5 to believe that she had
been released as a guarantor and that by failing to rebut the contents of D5’s
said letter dated 5 January 1999, the plaintiff had encouraged D5 into
believing that she had been released. It was therefore submitted that it would be F
unjust to permit the plaintiff to insist upon their strict legal rights in that the
D5 defendant continues to be liable under the terms of the said guarantee.

[133] Learned counsel submitted that the said guarantee is an on demand

guarantee. He cited the case of Mok Hin Wah & Ors v United Malayan Banking G
Corp Bhd [1987] 2 MLJ 610 in support of his contention that a demand was
required in order to create a cause of action against D5.

[134] Learned counsel also cited the case of Orang Kaya Menteri Paduka Wan
Ahmad Isa Shukri bin Wan Rashid v Kwong Yik Bank Berhad [1989] 3 MLJ 155 H
in support of his contention that, despite there being a principal debtor clause
in the said guarantee, a demand was still required to be served upon D5 in order
to establish a claim against her. He also cited the High Court decision in MBf
Finance Bhd v Hasmat Properties Sdn Bhd & Ors [1990] 1 MLJ 180 on this
issue. I

[135] Coming back to the facts of this case, the address of D5 in the
execution page of the said guarantee is stated to be No 12, Jalan Sentosa,
Tanjung Bungah Penang.
 Hong Leong Bank Bhd v HGM Machinery Sdn Bhd (formerly
known as Handee Engineering & Consultancy Services Sdn
[2013] 9 MLJ Bhd) & Ors (Zakaria Sam J) 443

A [136] D5 said in evidence that her correspondence address had been

changed from the said Tanjung Bungah address to No 28, Jalan SS 22A/3,
Damansara Jaya, 47400 Petaling Jaya and that notice of this change of address
was given to the plaintiff vide her said letter dated 5 January 1999.

B [137] It is not in dispute that the plaintiff had issued or sent the said notices
of demand to D5 at the address as stated in the said guarantee ie No 12, Jalan
Sentosa, Tanjung Bungah Penang.

C [138] Learned counsel for D5 argued that it would ‘defy logic’ for the
plaintiff to issue the said notices of demand to the Tanjung Bungah address
when the plaintiff had been informed of D5’s new address at No 28, Jalan SS
22A/3, Damansara Jaya, 47400 Petaling Jaya.

D [139] Learned counsel for D5 therefore submitted that the plaintiff had sent
the said notices of demand to the wrong address of D5 and that hence, must be
deemed to have not sent a proper demand on the guarantor.

FINDINGS
E
Discharge of D5

[140] Contrary to the contention by learned counsel for D5, the plaintiff
had not discharged D5 as guarantor under the said guarantee, for the following
F reasons:
(a) that according to SP1, the plaintiff had not discharged D5 as guarantor
under the said guarantee and that the usual practice adopted by the
plaintiff in discharging a guarantor would be a letter to that effect by the
G plaintiff to the guarantor eg the letter of discharge dated 11 June 1997
issued by the bank to D6, Mr Tan Kean Teik;
(b) that there was no letter by the plaintiff to D5 discharging her as guarantor
under the said guarantee, nor was there any letter by D5 (or D1 and/or
their directors) to the plaintiff requesting for a discharge of D5 as
H guarantor under the said guarantee; and
(c) that the said letter dated 12 February 1999 to D1 did not state that D5
had been discharged as guarantor under the said guarantee and that in
any event, this letter had been declared null and void by virtue of the
I plaintiff ’s said letter dated 10 April 2000 to D1.

[141] In the circumstances, I agree with the submission by learned counsel

for the plaintiff that the evidence by DW4 that the plaintiff had discharged D5
as guarantor under the said guarantee is self-serving and unsubstantiated, more
444 Malayan Law Journal [2013] 9 MLJ

so, in the light of DW4’s acknowledgments made during cross-examination by A

learned counsel for the plaintiff:
(a) that he had no personal knowledge that the plaintiff had discharged D5
as guarantor under the said guarantee;
(b) that there was no letter by the plaintiff to D5 stating that D5 had been B
discharged as guarantor under the said guarantee;
(c) that there was ‘no wording to that effect’ in the said letter dated
12 February 1999 that the plaintiff had agreed to discharge D5 as
guarantor under the said guarantee; C

(d) that based on the said letter dated 10 April 2000, the said letter of
12 February 1999 had been declared null and void, and had no effect;
and
D
(e) that he had formed the view or assumed that D5 had been discharged as
guarantor under the said guarantee on the basis of what D2 had allegedly
told him and his own interpretation of the contents of the said letter
dated 12 February 1999, which letter had subsequently been declared
null and void.
E

[142] It is significant to note that DW4’s evidence that the D2 had told him
that the plaintiff had ‘agreed to release the D5 as guarantor and the paper work
in respect of the same would be put in place soon’ is hearsay evidence and
inadmissible, as the D2 had given no such evidence to this effect. F

[143] It is apt to point out that though D2 during cross-examination by

learned counsel for D5 had stated that he ‘talked to D3 and D4 to talk to the
banker’ pertaining to the request for the discharge of D5 as guarantor under the
said guarantee: G
(a) D3 during cross-examination by counsel for the D5 had stated as follows:
(i) that he was not aware that D5 was ‘trying to release herself from the
said guarantee, nor was he aware that there were attempts to
discharge her as guarantor under the said guarantee; and H
(ii) that to his knowledge, D5 had not been discharged as guarantor
under the said guarantee and that it was only D6 who had been
discharged as guarantor under the said guarantee;
(b) that D4 during cross-examination by learned counsel for the plaintiff had I
stated that he was aware that there were efforts made by D5 (not D1
and/or their directors) to apply for her discharge as guarantor under the
said guarantee, but that he was not aware of any letter from the plaintiff
discharging D5 as guarantor under the said guarantee.
 Hong Leong Bank Bhd v HGM Machinery Sdn Bhd (formerly
known as Handee Engineering & Consultancy Services Sdn
[2013] 9 MLJ Bhd) & Ors (Zakaria Sam J) 445

A [144] In the circumstances, I agree with the contention by learned counsel

for the plaintiff that the evidence by D5 that DW4 had told her that ‘the
directors of D1 had informed him that the consent of the plaintiff to release
(her) as guarantor had been secured’ is not only hearsay evidence and hence,
inadmissible, but is uncorroborated by the evidence by D2, D3 and D4 who,
B at the material time, were directors of D1.

[145] Needless to say, D5’s evidence in relation to her alleged discharge as

guarantor under the said guarantee must be disregarded, more so, having
C
regard to her acknowledgments made during cross-examination by learned
counsel for the plaintiff, as follows:
(a) that she had no personal knowledge that the plaintiff had consented to
release her as guarantor and that this had merely been conveyed to her by
DW4;
D
(b) that she is not sure whether the plaintiff ’s consent to release her as
guarantor had been secured; and
(c) that she had not received any letter from the plaintiff informing her that
E she had been discharged as guarantor under the said guarantee.

[146] The plaintiff had not led D5 to believe that she had been released as a
guarantor nor did they encourage D5 into believing as such, for the following
reasons:
F
(a) that the plaintiff had not issued any letter to D5 informing her that she
had been discharged as guarantor under the said guarantee;
(b) that the plaintiff had not confirmed nor accepted the contents of the said
letter dated 5 January 1999 by D5 (unlike the said letters dated
G 12 February 1999 and 10 April 2000 by the plaintiff to D1, which
contents had been confirmed and accepted by D1’s then directors);
(c) that the plaintiff were not obliged to respond to the said letter dated
5 January 1999 and that in any event, the fact that they have not
H responded to that letter does not automatically mean that D5 had been
discharged as guarantor under the said guarantee; and
(d) that in the circumstances, and in the absence of a letter from the plaintiff
to D5 discharging her as guarantor under the said guarantee, the said
I letter dated 5 January 1999 stands at best a unilateral attempt on the part
of D5 to discharge herself as guarantor under the said guarantee.

[147] Therefore, contrary to the contention by learned counsel for D5, it

would not be unjust for the plaintiff to ‘insist on their strict legal rights in that
446 Malayan Law Journal [2013] 9 MLJ

D5 continues to be liable under the terms of the said guarantee, more so, A
considering the following:
(a) that the said guarantee is an agreement which had been entered into by
D5 and that she is accordingly bound by the terms and conditions
therein; B
(b) that there is no term in the said guarantee allowing D5 to unilaterally or
arbitrarily determine the said guarantee by way of the said later dated
5 January 1999, or otherwise. On the contrary, cl 24 of the said guarantee
provides as follows:
C
You may enforce this guarantee against us at any time notwithstanding that
any bills or other instruments covered by it may be in circulation or
outstanding and you may include the amount of the same or any of them to
the whole amount outstanding or not at your option, and this guarantee shall
not be determinable by us except on the terms of our making full provision up to the
limits of our guarantee for any then outstanding liabilities or obligations owing by D
the Customer to you. (Emphasis added.)

(c) that under the said cl 24, it is clear that D5 is not entitled, whether by way
of the said letter dated 5 January 1999, or otherwise, to unilaterally or
arbitrarily determine the said guarantee until and unless the outstanding E
sums due and owing by D1 to the bank have been fully settled.

NOTICE OF DEMAND
F
Address

[148] It is not disputed that the said notices of demand had been issued or
sent to D5 at the address as stated in the said guarantee ie No 12, Jalan Sentosa, G
Tanjung Bungah, Penang.

[149] Learned counsel for D5 argues that:

(a) the plaintiff were not entitled to issue or send the said notices of demand
H
to the address as stated in the said guarantee, but should have issued or
sent the same to the address as stated in the said letter dated 5 January
1999 ie No 28, Jalan SS 22A/3, Damansara Jaya, 47400 Petaling Jaya;
and
(b) the D5 had not received the said notices of demand. I

[150] I agree with learned counsel for the plaintiff that the plaintiff were
justified and entitled to issue or send the said notices of demand to the address
as stated in the guarantee notwithstanding the said letter of 5 January 1999
 Hong Leong Bank Bhd v HGM Machinery Sdn Bhd (formerly
known as Handee Engineering & Consultancy Services Sdn
[2013] 9 MLJ Bhd) & Ors (Zakaria Sam J) 447

A stating the purported ‘new address’ of the D5 given that under cl 21 of the said
guarantee, the plaintiff are entitled to issue the said notices of demand either to
the last known address of D5 or the address as stated in the said guarantee.
Clause 21 provides that:
B Any demand for payment of moneys or any other demand or notice under this
guarantee may be made by a Manager, Accountant or an Officer for the time being
of yours or by any person or firm for the time being acting as solicitor or solicitors
for you by letter addressed to us our executors administrators or legal representatives
and sent by post or delivered to our address last known to you or stated hereunder and
C a notice or demand so given or made shall be deemed to be given or made or received
at the time when the letter would in the ordinary course of post be delivered.
(Emphasis added.)

[151] It is interesting to note that D5 and her witness, SD4 in their

D respective evidence, had made the following revelations:
(a) that the said letter dated 5 January 1999 by the D5 was in fact not written
by D5;
(b) the address of D5 as stated in the said guarantee ie No 12, Jalan Sentosa,
E Tanjung Bungah, Penang was in fact not the address of D5, but a friend
of DW4; and
(c) the ‘new address’ as stated in the said letter dated 5 January 1999 ie No
28, Jalan SS 22A/3, Damansara Jaya, 47400 Petaling Jaya was in fact not
F the address of the D5 as well.

[152] In short, none of the addresses as provided by D5, whether in the said
guarantee or the said letter dated 5 January 1999, were in fact her addresses.
Incidentally, there was no address stated in D5’s witness statement tendered at
G the trial.

[153] Apart from the plaintiff ’s contractual entitlement to issue or send the
said notices of demand to D5 at the address as stated in the said guarantee, I
agree with the contention by learned counsel for the plaintiff that, given the
H circumstances of this case, the plaintiff had rightly issued the said notices of
demand to the address as stated in the said guarantee, being an agreement that
she had executed, as opposed to the ‘new address’ as stated in the said letter
dated 5 January 1999, which address, as it turns out was not the address of D5.

I
448 Malayan Law Journal [2013] 9 MLJ

Presumption of service A

[154] In any event, it is immaterial whether or not the said notices of

demand had been received by D3 in view of the terms and conditions of the
said guarantee and, more importantly, the established principle of law that the
bank are not required to show that the notice of demand had been received by B
a guarantor so as to constitute a proper demand, but are only required to show
that the notice of demand had been issued or sent to the guarantor (see my
findings in relation to D3’s case).
C
[155] It has to be remembered that learned counsel for D5 is not disputing
that the said notices of demand had been issued or sent to D5 at the address as
stated in the said guarantee, but are only disputing the fact that D5 had
received the said notices of demand.
D
Principal debtor clause

[156] Besides, I also agree with the contention by learned counsel for the
plaintiff that the said notices of demand were not required to be issued or sent
to D5, having regard to the ‘principal debtor clause’ in the said guarantee, E
which obviates the need for the service of a notice of demand (see my findings
in relation to D3’s case).

[157] Apart from the case of Mok Hin Wah v United Malayan Banking Corp
Bhd [1987] 2 MLJ 610, which is distinguishable on its facts and hence not F
applicable herein (see my findings in relation to D3’s case), learned counsel for
D5 also cited the case of Orang Kaya Menteri Paduka Wan Ahmad Isa Shukri bin
Wan Rashid v Kwong Yik Bank Berhad [1989] 3 MLJ 155 in support of his
contention that, despite there being a principal debtor clause in the guarantee,
a demand was still required to be served upon a guarantor in order to establish G
a claim against him. He also cited the High Court decision in MBf Finance Bhd
v Hasmat Properties Sdn Bhd & Ors [1990] 1 MLJ 180 on this issue.

[158] The Orang Kaya’s case is distinguishable on its facts because in that
case, only a carbon copy of the notice of demand had been issued to the H
guarantors, whereas in this case, the actual notices of demand had been issued
or sent to D5 at the address as stated in the said guarantee, as conceded by
learned counsel for D5.

I
 Hong Leong Bank Bhd v HGM Machinery Sdn Bhd (formerly
known as Handee Engineering & Consultancy Services Sdn
[2013] 9 MLJ Bhd) & Ors (Zakaria Sam J) 449

A [159] In addition, in the Orang Kaya’s case, the effect of a ‘principal debtor
clause’ had not been fully considered. In this regard, Heliliah bt Mohd
Yusof JCA (as she then was) in Danaharta Urus Sdn Bhd v Chou Kok Hong &
Anor [2006] MLJU 350; [2006] 7 CLJ 330 had observed as follows (at p 343):

B The Orang Kaya case is still distinguishable. No detailed consideration was shown
on the effect of a principal debtor clause and is therefore not appropriate as an
authority that is binding on the present case. In any case I agree that more emphasis
was placed on the copy of the demand sent being only a carbon copy and therefore
did not constitute a proper demand following the Supreme Court decision in Mok
Hin Wah v UMBC [1987] 2 MLJ 610.
C

[160] As pointed out by learned counsel for the plaintiff, the High Court in
the cases of Public Bank v Chan Siok Lee & Ors [1989] 2 MLJ 305, Credit
Corporation (M) Berhad v Choi Sang & Anor [1989] 1 CLJ (Rep) 440, and
D United Merchant Finance Bhd v Hockwood Holdings Sdn Bhd & Ors [1999] 5
MLJ 85 had fully considered the effect of a ‘principal debtor clause’.

[161] In this context, it is relevant to re-highlight cl 17 of the said guarantee

ie the ‘principal debtor clause:
E
17. Though as between us and the Customer we are sureties only for the Customer,
yet as between us and you we and each of us shall be deemed to be principal debtors
for all the moneys the payment of which is hereby guaranteed and accordingly shall
not be discharged nor shall our liability be affected by any fact or circumstances or any act
F thing omission or means whatsoever, whereby our liability would not have been
discharged if we had been the principal debtors. (Emphasis added.)

[162] Is also relevant to re-highlight cl 18 of the said guarantee, which

provides that:
G
18 For the consideration aforesaid and as a separate and independent stipulation:
(a) we hereby agree that all sums of moneys which may not be recoverable from
us on the footing of a guarantee whether by reason of any legal limitation
disability or incapacity on or of the Customer or any other fact or
H circumstances, whether known to you or not shall nevertheless be
recoverable from us on demand as though we were the sole and principal
debtors. (Emphasis added.)

[163] It is important to note that the Supreme Court in the Orang Kaya’s
I case had not considered as well the effect of a clause such as cl 18 of the said
guarantee.
450 Malayan Law Journal [2013] 9 MLJ

[164] In the circumstances, I find that the Orang Kaya’s case is not applicable A
to the case herein, and is therefore not binding on this court.

[165] I am inclined to agree with the contention by learned counsel for the
plaintiff that if the court should accept the contention by learned counsel for
D5 that ‘a proper demand must be made and it is a condition precedent to B
establishing a claim against a guarantor’, this would be tantamount to defeating
or overriding the purpose and intention of not only cl 17 of the said guarantee,
which makes the D5 a principal debtor, but cl 18 of the said guarantee as well,
which provides that all monies which may not be recoverable from the
guarantors on the ‘footing of a guarantee’, shall nevertheless be recoverable C
from the guarantors on demand as though they were the principal debtors.

[166] The case of MBf Finance Bhd v Hasmat Properties Sdn Bhd & Ors
[1990] 1 MLJ 180, being a High Court decision, is not a decision which is D
binding on this court, and that the decisions by Mahadev Shankar J (as he then
was) in the Public Bank case, Siti Norma Yaakob J (as she then was) in the Credit
Corporation case and Clement Skinner J (as he then was) in United Merchant
Finance case, all of which had held that the presence of a ‘principal debtor
clause’ obviates the necessity to issue a notice of demand upon the guarantors E
as the ‘issuance of the writ is a demand in itself, ought to be preferred and
applied by this court instead.

[167] In the circumstances, and quite apart from my finding that the said
notices of demand had been properly served upon D5 for the reasons set out F
above, I find that, having regard to the terms and conditions of the said
guarantee and the case authorities, there was in any event no requirement to
issue a notice of demand upon D5 as a pre-condition to commencing the claim
herein against her to recover the outstanding sums due under the said
LC/TR/BA facility. G

CONCLUSION

[168] For these reasons, I find that learned counsel for D5 has not raised any H
valid grounds to challenge the plaintiff ’s claim. Accordingly, and as learned
counsel for D5 had not challenged the certificate of indebtedness dated
11 January 2011, judgment is entered against D5 for the sum of
RM3,793,835.09 as set out in the said certificate of indebtedness dated 11
January 2011 together with interest at the rate of 8%pa on the said sum of I
 Hong Leong Bank Bhd v HGM Machinery Sdn Bhd (formerly
known as Handee Engineering & Consultancy Services Sdn
[2013] 9 MLJ Bhd) & Ors (Zakaria Sam J) 451

A RM3,793,835.09 from the date of judgment to the date of full realisation.

Costs

[169] Each the defendants to pay costs of RM20,000 to the plaintiff.

B
Claim allowed.

Reported by Afiq Mohamad Noor

C