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2012 MarsdenLR 247
HIGH COURT MALAYA PULAU PINANG
AFFIN BANK BERHAD – Appellant
Versus
GOH HOCK HAI (ENCL 7) – Respondent
[Civil Suit No: 22NCVC-365-2011]
A guarantor's liability is determined by the guarantee terms and prior demands; if the claim is filed after the limitation period, it is time-barred, as reaffirmed in this judgment.
Headnote:(A) Limitation Act 1953 - Section 6(1) - Action for recovery based on a Letter of Guarantee dated 14 August 1997 - Plaintiff’s claim was time-barred as the cause of action arose from the first demand made on 3 April 2001, and the action instituted on 31 May 2011 exceeded the six-year statutory limit. (Paras 18, 44, 78)
(B) Contract Law - Guarantor's liability determined by the specific terms of the guarantee - The first demand remained operative since it was not invalidated or withdrawn, establishing a clear cause of action against the Defendant. (Paras 23, 25, 76)
(C) Abuse of Process - Court’s jurisdiction to strike out claims that are legally unsustainable or time-barred was affirmed. (Paras 73, 76)
Facts of the case:
The Plaintiff sought RM7,023,217.43 from the Defendant as repayment under a Letter of Guarantee following default by the principal borrower, having made demands in 2001 and 2011. The Plaintiff discontinued previous suits without judicial invalidation of earlier demands. (Paras 4-14, 64)
Findings of Court:
The real demand was the first demand made in 2001, and the Plaintiff's claim was filed after the statutory limitation had already set in. The Plaintiff's action could not proceed as it was outside the legally permitted timeframe. (Paras 44, 76)
Issues: Determining which demand constituted the operative demand for the cause of action and whether the claim was subject to limitation period as prescribed by the Limitation Act 1953. (Paras 18, 25)
Ratio Decidendi: The Plaintiff was bound by the timing of the first demand, which was confirmed by their own actions in the earlier suit. The absence of a valid later demand did not create a new cause of action. Due to limitation, the Plaintiff's action could not be sustained. (Paras 24, 76)
Result: Application by the Defendant permitted and the Plaintiff’s action was struck out with costs.
| Table of Content |
|---|
| 1. the basis for plaintiff's judgment claim. (Para 1 , 2 , 3) |
| 2. background facts regarding banking facilities. (Para 4 , 5 , 6 , 9) |
| 3. arguments on the validity of demands and limitation. (Para 16 , 18 , 20 , 21) |
| 4. precedents on the nature of guarantees and demands. (Para 23 , 25 , 30 , 34) |
| 5. court's conclusion on the statute of limitations. (Para 44 , 71 , 78) |
| 6. final order on the defendant's application. (Para 79 , 80) |
Introduction
[1] In this action filed by the Plaintiff on 31 May 2011, the Plaintiff sought for judgment to be entered against the Defendant for RM7,023,2178.43, interest and costs on the basis of a Letter of Guarantee dated 14 August 1997 issued by the Defendant to BSN Commercial Bank (Malaysia) Berhad (the Plaintiff's predecessor-in-title and rights).
[2] Enclosure 7 was the application by the Defendant under O 18 r 19(1)(a), (b), (c) and (d) of the Rules Of The High 1980 (RHC 1980) to have the Writ and Statement of Claim struck out on the sole ground (as it transpired ultimately) that the Plaintiff's action now brought against the Defendant was statutorily time barred and unsustainable.
[3] The Plaintiff had vide Encl 12 on the other hand, sought also for leave to enter summary judgment against the Defendant under O 14 of the RHC 1980. Enclosure 12 was however stood down pending the outcome of Encl 7.
Background Facts - In Summary
[4] Sometime in July 1996, BSN Commercial Bank (Malaysia) Berhad had granted to one Handee Engineering and Consultancy Services Sdn Bhd (Principal Borrower) banking facilities in terms of Term Loan, Overdraft facilities and Trade-line Credits, totaling in the sum of RM6,285,000/-. The banking facilities were to be secured in the main by certain charges over land and the joint and several guarantees of the directors of the Principal Borrower, one amongst whom was the Defendant in this action.
[5] The Principal Borrower defaulted on the facilities in 2001 and a demand was issued by the Plaintiff pursuant to terms of the Letter of Guarantee on 3 April 2001 on the guarantors (the first demand ) for the settlement of the Principal Borrower's outstanding liability then which was stated to amount to a total of RM6,569,352.53 as at 28 February 2001.
[6] An action was then commenced by the Plaintiff vide Penang High Court Guaman No: 22-200-2001 (the 2001 Suit ) wherein the Defendant in this current action was named as the second defendant in that suit. The amount claimed was RM6,620,291.57 together with various interests and costs as at 31 March 2001.
[7] On 6 December 2004 by a Notice of Discontinuance, the Plaintiff discontinued the 2001 suit against only the Defendant in this current action.
[8] The 2001 suit as aforesaid appeared to have been maintained or continued by the Plaintiff against the Principal Borrower and the remaining two guarantors, and a Judgment entered against all of them only on 19 May 2010.
[9] On 28 February 2005 the Plaintiff had issued a Certificate of Indebtedness which was to the effect that the amount due from the Principal Debtor (by then known as HGM Machinery Sdn Bhd) and from the guarantors (including the Defendant in the current action) as at 28 February 2005 was RM7,023,217.43 inclusive of interest and other charges to that date.
[10] The Plaintiff then on 5 April 2005 proceeded to file a fresh suit, namely, Penang High Court Guaman No: 22-183-2005 (2005 suit) against the Defendant in the current action, as the sole defendant in this said 2005 suit. The claim in this 2005 action was to recover from the Defendant the sum of RM7,023,217.43 and further interest from 1 March 2005 and costs.
[11] On 20 October 2010 the Plaintiff however also withdrew this 2005 suit against the Defendant with liberty (as it would appear from the Timbalan Pendatar's notes of proceedings of that date) to file afresh.
[12] The reason offered by Counsel for the Plaintiff for the withdrawal of the 2005 suit against the Defendant was that the Plaintiff ha
