JUDGMENT

Lee Hun Hoe CJ (Borneo):

The appellant/1st defendant appealed against a declaration made by the learned Judge on 23 June 1982 that the respondent/plaintiff is entitled to be fully indemnified in respect of a guarantee for overdraft facilities. Out of four grounds of appeal one was abandoned. The first ground is that the learned Judge was wrong to conclude that there was sufficient evidence from which he could draw inference that the appellant had agreed to indemnify the respondent on the guarantee either orally or in writing. The second ground is that the learned Judge was wrong to hold that an assurance from a director of the company, without more, when acted upon, could bind the company. Lastly, that the learned Judge drew wrong conclusion in that a document (P2) was intended by the appellant to indemnify the respondent in respect of the guarantee issued by him.

We would only summarise the salient facts. The respondent is a consultant engineer. He was an employee of Euco Development Sdn. Bhd. (2nd defendant) which is a subsidiary of Euco International Sdn. Bhd. (appellant). The 3rd, 4th, 5th and 6th defendants are brothers. They own shares in and are directors of the appellant which holds 570,200 shares out of 842,725 in the 2nd defendant company. The balance of 221,525 shares are held by Lee Wah Nominees. The plaintiff was appointed director of the 2nd defendant company. He was not a shareholder of either the appellant or the 2nd defendant company. He is also the director of Euco Prefab Sdn. Bhd. and Euco Engineering Sdn. Bhd. which are associated and connected with the 2nd defendant company. They are also the subsidiaries of the appellant.

As director, the respondent was expected, from time to time, to join other directors to guarantee debts or other liabilities of one or more of the companies by issuing letters of guarantee. On 25 January 1967 he joined the 4th, 5th and 6th defendants in giving a guarantee (P1) to the Malayan Banking Ltd. for granting overdraft facilities up to RM300,000 to the 2nd defendant company. Subsequently, the 2nd defendant company failed to pay the bank on the overdraft facilities for which the guarantee (P1) was issued. The bank obtained judgment against the respondent, the 4th and 6th defendants on 7 January 1975 in Kuala Lumpur High Court Civil Suit No. 608 of 1971. The respondent has so far paid RM250,000 to the bank. Hence he claimed against the defendants to be fully indemnified against all sums paid by him to the bank. He relied on the oral assurance and also on the documentary evidence in the form of P2 which was signed by the four brothers in the following terms:-

EUCO INTERNATIONAL LIMITED

We, the undersigned, the Directors of Euco International Limited for the time being pursuant to Art. 91 of the Articles of Association, hereby make the following

RESOLUTION: INDEMNITY TO GUARANTORS OF SUBSIDIARY COMPANIES FOR OVERDRAFT AND OR LETTERS OF CREDIT FACILITIES:

Resolved that In consideration of Letters of Guarantee furnished by Messers. John Eu. Roy Eu, and P.F. Chen to the bankers of our Subsidiary Companies for overdraft and or letters of credit facilities, we hereby agree jointly to hold ourselves responsible for such Letters of Guarantee and to indemnify the Guarantors for any out of pocket expenses including the sum guaranteed with interest thereon if they are called upon by the Bankers to make good such facilities.

Dated this 23 July 1964

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Article 91 reads:-

Resolution signed by 91. A resolution in writing signed by all by the Directors shall be as Directors to be valid effective for all purposes as a resolution passed at a meeting of the

Directors duly convened, held and constituted. In case any Director is absent From the Federation of Malaya, a resolution signed by all the other Directors shall be valid and effectual.

In support of their contention the appellant cited Hely-Hutchinson v. Brayhead Ltd. & Anor. [1967] 3 All ER 98 @ 102 and Freeman and Lockyer (a firm) v. Buckhurst Pa