Gunn Chit Tuan J:

This is an appeal by the abovenamed defendants against that part of my decision whereby I set aside my order made in chambers for a stay of execution against the 2nd to the 8th defendants pending determination of the first defendant's counterclaim against the plaintiff.

All the defendants had appealed to the Judge in chambers against the decision of the learned Registrar who on 12 October 1987, had ordered that the plaintiff be allowed to sign final judgment against them pursuant to O. 14 r. 1 of the Rules of the High Court 1980, and that the costs of the application be borne and paid by the defendants.

After hearing arguments in chambers on 12 May 1988. I allowed the appeal in part by varying the rate of interest awarded by the Registrar from 16.5 per cent per annum to 8 percent per annum from 12 August 1987 to the date of realisation, but upheld the Registrar's decision to enter judgment in favour of the plaintiff. I also ordered that there be a stay of execution against all the defendants pending disposal of the first defendant's counterclaim against the plaintiff.

The plaintiff was dissatisfied with the order made by me in chambers and applied for adjournment to open Court for further arguments, but the abovenamed defendants did not so apply under O. 56 r. 2 of the Rules of the High Court 1980.

On 28 February 1989, Mr. Siew Yew Ming, Counsel for the plaintiff, submitted that there should be no stay of the execution of the judgment pending disposal of the first defendant's counterclaim unless there was a plausible counterclaim which was not frivolous or vexatious. He submitted that the first defendant had not made out a plausible counterclaim as its claim for misrepresentation was without reasonable chance of success.

As against the 2nd, 3rd, 4th, 5th, 6th, 7th and 8th defendants Counsel for the plaintiff submitted that they were not entitled to avail themselves of the first defendant's counterclaim whatever its merits. He referred to P.H. Grace Pte. Ltd. & Ors. v. American Express International Banking Corporation [1987] 1 MLJ 437 and stated that the material facts of that case were similar to the present case and the Court of Appeal of Singapore had ruled that although at common law guarantors were entitled to avail themselves of the counterclaim of the principal debtor, yet in that case there should be no stay of execution on the judgment against the guarantors. He pointed out that the Singapore Court of Appeal had ruled that as the whole purpose of a guarantee was to secure quick payment in the event of default by the principal debtor, it would be inconsistent with commercial realities to stay execution of judgment obtained against guarantors of a loan pending disposal of a counterclaim set up by the principal debtor. Counsel also pointed out that Thean J in that case had quoted with approval the following passage from the English Court of Appeal decision in Continental Illinois National Bank and Trust Company of Chicago v. Papanicolaou (The Times, 15 July 1986):

Guarantees such as this are the equivalent of letters of credit and only in exceptional circumstances should the Court exercise its powers to stay execution. The fact that a counterclaim which was likely to succeed existed would not by itself be enough... It might be that the existence of such a counterclaim coupled with cogent evidence that the bank would, if paid, be unable to meet a judgment on the counterclaim would suffice, but nothing of that nature arises here.

In so far as the 2nd, 3rd, 4th, 5th, 6th, 7th and 8th defendants were concerned, it was the contention of Mr. Choo, Counsel for the abovenamed defendants, that at common law they were entitled to avail themselves of the counterclaim or set off of the first defendant. He referred to the following passage in para. 190 of Halsbury's Laws of England (4th Edn.):

On being sued by the creditor for payment of the debt guaranteed, a surety may avail himself of any right of set o