Guarantors who are also principal debtors are not protected under surety provisions of the Contracts Act and remain liable for post-winding-up accrued interest.

JUDGMENT

Choo Kah Sing JCA:

Introduction

[1] This appeal emanates from a High Court decision dated 10 May 2022 wherein the learned High Court judge dismissed the appellant's claim.

[2] The appellant, United Overseas Bank (Malaysia) Bhd ("UOB"), claimed against the respondents premised on a guarantee dated 25 November 2014 ("the Guarantee"). The Guarantee was executed by the respondents together with two others, namely Gerald Yeo @ Yeo Ah Khe and Wang YingDe, who agreed to be jointly and severally liable for a loan facility granted to one CHN Commodity Trade Centre Sdn Bhd (in Receivership / In Liquidation) ("Borrower") for a sum of RM30,000,000.00 ("the loan sum"). The loan sum was to facilitate the Borrower to part finance the purchase of 170 shop units ("the Charged Assets") in a shopping complex.

[3] The heart of the contention in this appeal is whether the appellant could claim against the guarantors for the charges of accrued interest post winding-up of the Borrower. The claim was not the loan sum. In fact, the loan sum had been redeemed or paid off by the liquidator based on a redemption statement dated 30 October 2017 issued by UOB.

(Note: This appeal (W-02(NCC)(W)-1037-06/2022 ["Appeal 1037"]) was heard together with another appeal W-02(NCC)(W)-1036-06/2022 ("Appeal 1036") wherein the appellant there was UOB, and the respondent was Gerald Yeo @ Yeo Ah Khe. The facts and issues for the two appeals were the same. On 26 August 2024, this Court delivered only one decision which was binding on both appeals)

Brief Facts

[4] The Borrower took a loan from UOB and secured it with several security documents, and one of them was the Guarantee. On 27 November 2014, UOB issued a Letter of Notification to inform, inter alia, that the joint and several Guarantee for the loan sum was to be executed by the respondents and Gerald Yeo @ Yeo Ah Khe only. Wang YingDe had been released or discharged from the Guarantee which he had signed earlier.

[5] On 4 December 2015, the Borrower was wound-up by the High Court of Kuala Lumpur (in a Winding-Up suit No 28NCC-812-09/2015). The Winding-up petition was filed by the Joint Management Body of Complex Pandan Safari Lagoon. Tharma Iswara a/l S. Subramaniam ("the Liquidator") was appointed as the liquidator of the Borrower.

[6] On 19 September 2016, UOB through its firm of solicitors Messrs. Skrine wrote to the Liquidator demanding the Borrower to pay a sum of RM30,539,923.60 as the outstanding loan sum as at 4 December 2015 (the date of the Winding-up Order). At the same time, UOB also demanded from the respondents (and Gerald Yeo @ Yeo Ah Khe) as guarantors to the Borrower the sum of RM32,934,735.33 as at 4 September 2016 with running interest thereon at the rate of 3.5% per annum above the Base Lending Rate ("BLR") on monthly rests from 5 September 2016 until date of full payment. No payment was forthcoming from the Borrower or the guarantors. UOB then took further action by invoking its right to appoint a Receiver and/or Manager to deal with the Charged Assets.

[7] Pursuant to the Facilities Agreement as well as the Debenture both dated 25 November 2014, the filing of a winding-up petition against the Borrower would constitute as an event of default under the Events of Default clauses in both the security documents, namely cls 24.2.7 and 11.2.2.8 respectively.

[8] The winding-up petition against the Borrower was filed on 30 September 2015. As such, UOB was entitled under the Debenture (cl 11.3.3) to appoint Receiver(s) and or Manager(s) to deal with the Charged Assets. The powers of the Receiver(s) and or Manager(s) were expressly stated in s 11.4 of the Debenture. On 23 November 2016, UOB appointed one Dato' Heng Ji Keng and Mr Andrew Heng ("R&Ms") as the Receivers and Managers of the Charged Assets. The appointment of the R&Ms only took place on 23 November 2016, although UOB could have appointed the R&Ms as early as on 30 September 2015.

[9] After the appointment of the R&Ms, the affairs of the B