The obligations under a guarantee executed by a primary obligor are enforceable despite claims of unconscionable conduct by the bank; the liability remains independent of the borrower's actions.

JUDGMENT

Azizah Nawawi JCA:

Introduction

[1] This is an appeal against the decision of the learned Judicial Commissioner dated 15 September 2020, dismissing the appellant's application for summary judgment of its claim. The appellant's claim against the respondent is for the sum of RM236,796,198.64, which the appellant claimed to be due and owing by the respondent under a Guarantee dated 5 December 2012, executed by him in favour of the appellant.

[2] Having considered the Appeal Record and the submissions of the parties, we have allowed the appeal with costs.

The Salient Facts

[3] Asian Broadcasting Network (M) Sdn Bhd ("ABN") was awarded a contract to develop an affordable subscription based digital cable system (the "ABN Project") by the Government of Malaysia.

[4] Subsequently ABN entered into Facilitation Fund Agreement dated 30 July 2012 with the appellant, Bank Pembangunan Malaysia Berhad ("the Bank") and the Government of Malaysia whereby the Government agreed to provide ABN with a grant of RM100 million to part finance the ABN Project.

[5] The Facilitation Fund Agreement also provided that the Government, pursuant to a Management Agreement dated 8 August 2011, appointed the Bank to manage, monitor, administer and disburse the Government grant to ABN.

[6] By a Letter of Offer dated 19 October 2012 ("LOO dated 19 October 2012"), Letters of Changes dated 27 November 2012, 6 February 2013 and 22 April 2014 ("Letters of Changes") and a Facility Agreement dated 5 December 2012 ("Term Loan Agreement"), the Bank granted a term loan facility of RM450 million ("Facility") to ABN, the borrower.

[7] The Facility was secured by a personal guarantee dated 5 December 2012 executed by the respondent, in favour of the Bank ("Guarantee"). The respondent, Tan Sri Datuk (Dr) K Ketheeswaran is the Group Chairman of ABN Media Group Sdn Bhd, who owns 70% of the issued and paid up capital of ABN.

[8] Under the terms of the Guarantee, the respondent had agreed, inter alia:

(i) to unconditionally and irrevocably guarantee to pay the Bank on demand all monies and liabilities which are at any time become due, owing or incurred by the Borrower, ABN to or in favour of the Bank under the Term Loan Agreement (clause 2.2);

(ii) upon the occurrence of an event in default, the Guarantee will become immediately enforceable and the powers conferred under the Guarantee will become immediately exercisable (clause 4.1);

(iii) the obligations and liabilities expressed to be undertaken by the respondent under the Guarantee are those of a primary obligor and not merely a surety (clause 5.3); and

(iv) a statement of account issued by the Bank as to the amount of monies and liabilities due to the Bank the Borrower ABN will be final and conclusive proof of indebtedness of the Borrower under the Term Loan Agreement and will not be questioned on any account whatsoever (clause 15.2).

[9] ABN was wound up on 8 May 2017 pursuant to a winding up petition filed by Sony Malaysia Sdn Bhd. The winding up of ABN constituted an Event of Default under the terms of the Term Loan Agreement, which triggered the claim to be made against the respondent under the Guarantee.

[10] As at 26 July 2017, the amount due and owing by the Borrower, ABN to the Bank under the Facility is RM236,796,198.64.

[11] By a letter dated 26 July 2017, the Bank's solicitors demanded for payment of the sum of RM236,796,198.64 from the respondent pursuant to the terms of the Guarantee.

[12] When the respondent failed, refused and/or neglected to pay the sum demanded, the Bank commenced this action against the respondent for recovery of the sum due and owing under the Guarantee.

[13] In a separate action, ABN had commenced Civil Suit No: BA-22NCC-23-03-2021 against the Bank seeking general damages for loss and damage suffered by ABN owing to the Bank's delayed and erratic disbursements of the Facility, its unconscionable conduct and its premature suspension of the Facility, which caused the ultimate failure of the ABN Project