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2025 MarsdenLR 2800
COURT OF APPEAL PUTRAJAYA
UNITED OVERSEAS BANK (MALAYSIA) BHD – Appellant
Versus
TAN CHONG WHATT & ANOR – Respondent
[Civil Appeal No: W-02(NCC)(W)-1037-06/2022]
The court ruled that guarantors, being principal debtors, retain liability for post-winding-up accrued interest regardless of creditor delays in realizing security, emphasizing the independence of their obligations. This distinguishes their rights under the Bankruptcy Act.
Headnote:(A) Contracts Act, 1950 - Sections 92 and 94 - Bankruptcy Act 1967 - Section 8(2A) - Appeal against High Court decision dismissing claim for post-winding up interest on guarantee - Guarantors argued loss of rights due to creditor's failure to realize charged assets - Court found guarantors were principal debtors and not merely sureties, thus creditor's delay did not absolve their obligations - Appeal allowed. (Paras 20, 22, 30, 41, 47)
(B) Guarantor's liability - Distinction between surety and principal debtor - The legal relationship obligates guarantors to fulfill responsibilities independent of creditor's actions under security - Section 8(2A) of Bankruptcy Act does not protect guarantors similarly to sureties. (Paras 24, 31, 42)
Facts of the case:
The appellant claimed against the respondents as guarantors for accrued interest after the winding-up of the borrower. The loan had been paid off by the liquidator, but disagreement arose regarding the additional interest accrued from the date of winding up until payment. (Paras 1, 14)
Findings of Court:
The respondents, acting as guarantors, are deemed principal debtors; the creditor's duty to realize security is not applicable for their discharge of liability for post-winding up interest. (Paras 47, 28)
Issues: Whether guarantors could be held liable for interest accrued after the borrower was wound up, and if the creditor owed any duty regarding the realization of the charged assets. (Paras 16, 19, 23)
Ratio Decidendi: The court determined that the distinction between guarantor and principal debtor is critical, impacting the enforceability of liability for post-winding up interest. Delay by the creditor to realize security does not discharge the principal debtors’ obligations. (Paras 30, 40)
Result: Appeal allowed, judgment entered against the respondents for claimed amounts.
| Table of Content |
|---|
| 1. overview of the appeal and guarantee details. (Para 1 , 2 , 4) |
| 2. contention on guarantors' liability and uob's duties. (Para 3 , 15 , 16 , 18) |
| 3. court's analysis on legal interpretations. (Para 19 , 20 , 21 , 23 , 24) |
| 4. federal court's principles regarding guarantor liabilities. (Para 25 , 26 , 27 , 28) |
| 5. impact of principal debtor status under contracts. (Para 29 , 30 , 31 , 32) |
| 6. rights of uob for post winding-up interest. (Para 33 , 34 , 35 , 36) |
| 7. clarification of uob's contractual obligations. (Para 37 , 38 , 39 , 40) |
| 8. rejection of respondents' assertions regarding uob's duties. (Para 41 , 42 , 43 , 45 , 46) |
| 9. resolution of appeals with consequential orders. (Para 47 , 48) |
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, name
