2011 MarsdenLR 3606

SULAIMAN DAUD, AZHAR MAAH, AZAHAR MOHAMED
AMBANK (M) BHD – Appellant
Versus
LUQMAN KAMIL MOHAMMED DON – Respondent

A guarantor is not liable for a contingent debt if no obligation existed prior to the revocation of the guarantee, as obligations under letters of credit only arise when documents meet specified terms.

Headnote:(A) Banking and Financial Services Law - Letter of Guarantee - Interpretation of contingent liability - The judgment assesses the legal implications of guarantees within banking facilities, particularly concerning the timing of revocation and the creation of contingent liabilities. (Para 17)

(B) Pleadings - Parties are bound by their pleadings; the court cannot decide issues not raised by litigants. The court emphasized the importance of formal pleadings in adjudicating claims. (Para 10)

(C) Letter of Credit - Obligations under a letter of credit arise only if stipulated documents are presented and comply with the terms. The document's involvement in contingent liabilities hinges on its terms. (Paras 16)

Facts of the case:
The appellant appealed a dismissal of a claim against the guarantor of a borrower who defaulted on a credit facility. The respondent claimed he was no longer liable due to a prior resignation and effective revocation of the guarantee. (Para 3)

Findings of Court:
The court held that the respondent was discharged from liability under the letter of guarantee prior to the creation of any contingent liability, thereby dismissing the appeal. (Paras 17, 18)

Issues: Whether there existed a contingent liability prior to the respondent's effective revocation of the letter of guarantee, and the binding nature of pleadings in determining liability. (Paras 5, 10)

Ratio Decidendi: The court ruled that the mere issuance of a letter of credit does not create an immediate contingent liability, and emphasized that the obligation to pay under such letters arises only upon compliance with the stipulated terms. (Paras 12, 17)

Result: Appeal dismissed.