The liability of a guarantor remains intact even if the creditor fails to secure the underlying obligation, unless the guarantor proves resulting impairment to their remedies.

[1] The plaintiff is claiming for a sum of USD5,975,377.02 which represent 95% of the total outstanding amount due and owing by one Bitumen Bales (Laem Chabang) Co Ltd (the Borrower) to the plaintiff, in respect of a term loan facility which the plaintiff had granted to the Borrower and guaranteed by the defendant.

Defendant's Defence

[2] Although the defendant does not dispute the Guarantee, the defendant relies on s 92 of the Contracts Act 1950 and contends that its liability to pay the sum claimed is discharged as the plaintiff has breached the terms of the Guarantee when it failed, among others, to:

(a) Obtain certain security to the facility; and

(b) safeguard the Borrower's Machinery intended as security to the facilities, from being dissipated.

Witnesses

[3] 8 witnesses were produced by the respective parties to give evidence at the trial, 5 for the plaintiff and 3 for the defendant, as follows:-

Plaintiff's Witnesses

Name

Designation

Defendant's Witnesses

Name

Designation

Undisputed Facts

[4] The Borrower had started out as a customer of the defendant as the defendant itself had granted two insurance policies to the borrower, insuring the borrower's investment against political risks in Thailand.

[5] Sometime in 2007, the defendant had approached the plaintiff to grant a US Dollar Loan to the borrower to part-finance the purchase of machinery and equipment, and installation costs for the setting up of the borrower's bitumen packing plant in Thailand. The plant was to be set up to specifically pack bitumen in its liquid form, into bales (polymer film bags) for a company in Thailand called Transtech Pte Ltd ("Transtech"), in accordance with Transtech's specifications. The borrower was specially incorporated by its main shareholder and director, Gordon Thomas, to set up this new factory.

[6] To mitigate the risk associated with the loan to be granted by the plaintiff to the borrower, the defendant agreed to furnish an unconditional guarantee to the plaintiff for up to 95% of the plaintiff's loan and interest thereon, subject to a maximum amount of USD5,992,500.00 ("the Guaranteed Amount").

[7] In reliance on the defendant's guarantee to pay the guaranteed amount in the event of default by the borrower, the plaintiff granted to the borrower a term loan of USD5,992.500.00 ("the Term Loan"), as in the Letter of Offer, dated 23 January 2008 and the Facility Agreement dated 19 March 2008.

[8] On 19 March 8008, the defendant executed the guarantee agreement in favour of the plaintiff as security for the Term Loan ("the Defendant's Guarantee"), wherein it was agreed, inter alia, that:-

(i) The defendant unconditionally and irrevocably guaranteed to the plaintiff that the defendant shall pay to the plaintiff 95% of the outstanding Term Loan amounts due, subject to the maximum limit of the Guaranteed Amount. This is defined as USD5,992.500.00 (Clause 3.1 of the Guarantee Agreement).

(ii) The defendant shall pay to the plaintiff guaranteed amount within 60 days from the date of receiving the plaintiff's notice of claim (Clause 3.2 (c) (i) of the Guarantee Agreement.

(iii) Upon the defendant having paid or discharged the guaranteed amount to the plaintiff, the defendant would have the right to be subrogated to all rights possessed by and all securities held by the plaintiff, in respect of the borrower's debt or liability (Clause 5.1 of the Guarantee Agreement).

[9] Besides the guarantee agreement, the term loan was to be secured by various security including the following:-

(i) A debenture dated 19 March 2008 entered between the plaintiff and the borrower. The Power of Attorney to sell the assets charged hereunder is seen at Cl