| Detail | Description |
|---|---|
| Case Name | Lee Ah Chor v Southern Bank Bhd |
| Citation | [1991] 1 MLJ 428 |
| Court | Supreme Court (Kuala Lumpur) |
| Coram | Abdul Hamid Omar LP, Gunn Chit Tuan and Jemuri Serjan SCJJ |
| Date of Judgment | 10 December 1990 |
Brief Facts: The respondent (Southern Bank Bhd) granted an overdraft facility of $700,000 to a company (Sin Hup Woh Transport and Trading Agencies Company Bhd). This facility was guaranteed jointly and severally by the directors, including the appellant (Lee Ah Chor), under a first continuing guarantee dated 6 January 1982. A second guarantee was executed on 19 September 1983 by four directors, excluding the appellant. The bank’s solicitor demanded payment of $506,242.35 from the company, and upon non-payment, the bank commenced proceedings against all guarantors. The appellant appealed against the judgment given against him.
Issues for Determination on AppealThe counsel for the appellant submitted three issues for the court’s determination:
- Whether a proper demand was made on the appellant.
- Whether the appellant was released from his liability under the first guarantee by reason of the respondent having obtained the second guarantee from the directors.
- Whether the failure to specify the rate of interest by leaving it blank in the first guarantee renders the first guarantee void for uncertainty.
Decision: The Supreme Court dismissed the appeal. The court held:
- Where a vital issue was not raised in the pleadings, it could not be allowed to be argued and to succeed on appeal.
- The service of the notice by the solicitor, acting for the bank, was a valid service, as the first guarantee clearly provided that the notice could be made by an officer of the bank or by the solicitor as agent of the bank.
- The guarantee was valid despite the omission of the rate of interest because it had to be considered together with the letter of offer from the bank, which fixed the interest at 16% per annum, and this rate was accepted by the appellant without protest when statements of accounts were sent.
- The appellant’s liability under the first guarantee for the sum of $700,000 was clearly preserved by clause 5(iii) of the first guarantee, which states that any other guarantee would not prejudice or diminish the original guarantee.
- There was no evidence that the second guarantee was intended to be a substitution for the first; instead, the evidence showed the respondent intended the two guarantees to subsist side by side. The guarantors in the two documents were not identical, and the amount guaranteed and terms of repayment were also different.
Relevant Excerpts from the Court:
- “It does not seem necessary for us to emphasize and repeat the importance of pleadings in a civil suit… Where a vital issue was not raised in the pleadings it could not be allowed to be argued and to succeed on appeal...”
Disclaimer: This post is for informational purposes only and does not constitute legal advice. Please consult a qualified Advocate & Solicitor for your specific legal needs.
Disclaimer: This case could be subject to further appeal.
