A guarantee executed post-loan agreement remains valid and enforceable; liability persists despite alleged past consideration; significant for creditors in ensuring collection of debts.

Factual Background

Pursuant to a loan agreement dated 28^th July 1998 executed by the plaintiff and the first defendant, the plaintiff granted to the first defendant a term loan facility for the sum of RM1,000,000.00 to finance the purchase of machineries and equipment for furniture production upon the terms and condition stated therein. In consideration for the facility, the third defendant executed a letter of Joint and Several Guarantee And Indemnity Agreement dated 5^th February 1999 in favour of the Plaintiff, where the third defendant guaranteed the payment upon demand of all monies due and owing to the plaintiff in the event of a breach of any of the term of the loan agreement.

To secure the performance of the loan, the first defendant pledged to the plaintiff various securities namely, fixed charge debenture dated 28^th July 1998 in exhibit P9 , second debenture dated 28^th July 1998 in exhibit P10 , third party deed of assignment by Pogun Timber Products (Sabah) Sdn. Bhd. dated 11^th February 1999 and the joint and several guarantee and indemnity executed by the third defendant dated 5^th February 1999 (exhibit P3 ).

The first defendant, subsequently defaulted in the loan payment obligation under the loan agreement and as of 30^th April 2000 was indebted to the Plaintiff for an outstanding sum of RM 1,037,600.50. Pursuant to clause 13.2 of the loan agreement, the loan facility was subsequently recalled by the Plaintiff and by way of a Writ of Summons dated 7^th August 2000, plaintiff commenced action against the third defendant for an outstanding sum of RM 1,176,900.37 due and owing to the plaintiff as of 18^th July 2000 and interest and costs in paragraph 16 of the Statement of Claim .

Plaintiff's Claim

Pursuant to paragraph 16 of Statement of Claim , plaintiff's claim are as follows:-

1. payment for the outstanding sum of RM1,176,900.37 calculated daily from 19^th July 2000 until date of judgment;

2. interest at the rate of 6.5% per annum on RM1,176,900,37 from 19^th July 2.000 to date of judgment;

3. late interest at the rate of 3.5% above BLR calculated daily on RM1,176,900.37 from 19^th July 2000 until date of judgement;

4. interest at rate of 8% from date of judgment to date of realization; and

5. cost and other relief to be ordered by this Court.

Issues

1. Whether the plaintiff have proved their claim against the third defendant for the payment of the outstanding sum under the loan agreement dated 28^th July 1998, exhibit P2 .

2. Whether the guarantee and indemnity dated 5^th February 1999, which was signed and executed by the third defendant subsequent to the loan agreement, was void and unenforceable on the ground of past consideration.

3. Whether the third defendant's liability as a guarantor under the indemnity and guarantee was discharged due to plaintiff's failure to dispose or sell the assigned property which was the security for the loan.

Finding

Having considered the evidence in its entirety, it is the Court's finding that the third defendant, as guarantor for the first defendant's loan under a letter of guarantee and indemnity, is liable for all outstanding sum due and owing to the plaintiff. Accordingly, this Court allowed plaintiff's claim against third defendant as stated in paragraph 16 of the Statement of Claim with interests and costs as prayed. The following were the Court's finding to the issues raised for the Court's consideration:-

1. Whether plaintiff had proven claim against the guarantor, the third defendant, for the outstanding sum guaranteed under the joint and several guarantee and indemnity agreement

Pursuant to clause 2 of the loan agreement, the third defendant unconditionally and irrevocably guaranteed the repayment of the outstanding sum due under the loan agreement upon first written demand by the lender, in the event the borrower, the first defendant, defaul