Hui Cheng Wan Agnes v Nippon SP Tech (S) Pte Ltd [2001] SGHC 208

Hui Cheng Wan Agnes v Nippon
SP Tech (S) Pte Ltd
[2001] SGHC 208

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Suit No: Suit 1069/2001
Decision Date: 31 Jul 2001
Court: High Court
Coram: Woo Bih Li JC
Counsel:  
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Judgment

Between
Hui Cheng Wan Agnes … Plaintiff
And
Nippon SP Tech (S) Pte Ltd … Defendants

Citation: Suit No 1069 of 2000/J
Jurisdiction: Singapore
Date: 2001:07:31
2001:05:14-2001:05:17; 2001:05:09-2001:05:11
Court: High Court
Coram: Woo Bih Li, JC
Counsel: Vijay Kumar Rai (V K Rai & Partners) for the plaintiff
GB Vasu (Arthur Loke Bernard Rada & Lee) for the defendants
JUDGMENT:

1. On the question of dismissal for cause, various reasons were given
by the Defendants in their letter dated 19 May 2000 to dismiss the Plaintiff.
5 reasons were given:

(a) The Plaintiff’s failure to fulfil her obligations to prepare
accounts for PT NSP for December 1999 and January 2000 (‘the 1st
reason’).

(b) and (d) can be read together. They relate to a note dated 2 February
2000 (PBD 118) written by the Plaintiff and a note dated 25 February 2000
written by her assistant Linda Lim (PBD 125) (‘the 2nd and 4th reasons’).

(c) This relates to an urgent fax from Ernst & Young on 25 January
2000 (PBD 113). It was alleged that the Plaintiff did not bring the fax
to the Defendants’ attention until the Plaintiff’s note dated
2 February 2000 although the Plaintiff knew the contents and the importance
of the matters stated in the fax (‘the 3rd reason’).

A 5th reason was stated. This relates to the Plaintiff’s legal action
against Mr Nishide for defamation in total disregard of procedure and
respect to the Defendants and to Mr Fujii, the President of Komatsulite
Manufacturing Co Ltd (‘Komatsulite’) of which the Defendants
are a subsidiary.

2. I would add that although the letter of 19 May 2000 was a letter of
dismissal, it also informed the Plaintiff that she would be paid one month’s
salary in lieu of notice.

3. On the 1st reason, I am of the view that it was part of the duty of
the Plaintiff to prepare accounts for PT NSP and she had in fact been
doing so. However the Plaintiff should not be expected to do so in Bahasa
Indonesia and Rupiah currency, which were subsequent requirements, without
more help. There was no misconduct on the part of the Plaintiff in respect
of the 1st reason.

4. On the 2nd and 4th reasons, the Plaintiff should not have simply said
that she did not want to do the accounts nor, as I find, encourage her
subordinate to write directly to Mr Nishide in those terms. However although
the Plaintiff’s conduct was wanting, it was not so bad as to warrant
a dismissal for cause.

5. (a) As for the 3rd reason, I find that the Plaintiff did bring the
Ernst & Young fax dated 25 January 2000 to Mr Nishide’s attention.
Accordingly, she did not fail to bring it to the Defendants’ attention
until 2 February 2000 as Mr Nishide can be said to be representing the
Defendants for the purpose of receiving information about the Ernst &
Young fax.

(b) In any event, Mr Kondo appeared to have been aware of the fax before
2 February 2000.

(c) The Defendants’ allegation that the Plaintiff did not explain
the fax to Mr Kondo is an allegation made in closing submission by the
Defendants for the first time and is a different complaint from that stated
in the letter dated 19 May 2000.

(d) There was no misconduct by the Plaintiff regarding the 3rd reason.

6. (a) As for the 5th reason, the Defendants did not lay down any procedure
to be followed if an employee of the Defendants wants to sue someone elsewhere.
(b) While the Plaintiff should have consulted Mr Kondo (the MD) or Mr
Teo (the GM) before initiating the suit against Mr Nishide, bearing in
mind that the suit might cause problems for Komatsulite, of which the
Defendants are a subsidiary, she was not obliged to do so.
(c) The omission by the Plaintiff to consult and the initiation of the
defamation action against Mr Nishide did not amount to misconduct to justify
a dismissal for cause.

7. When the Plaintiff refused to withdraw her defamation action against
Mr Nishide notwithstanding Mr Kondo’s and Mr Teo’s request
to her to do so, this was the straw which broke the camel’s back.
Accordingly, the Defendants issued the letter of dismissal dated 19 May
2000.

8. Taking into account all the reasons advanced by the Defendants in the
letter dated 19 May 2000 and the circumstances, the Defendants have not
established that the Plaintiff’s conduct was so bad as to justify
a dismissal without cause, although the Plaintiff’s conduct was
wanting.

9. However, the Plaintiff could not seriously expect to be retained in
the Defendants’ employment, especially when she continued with her
action against Mr Nishide notwithstanding that Mr Kondo and Mr Teo had
made it clear to her that her action was hurting the relationship between
Mr Nishide’s employers Asahi Bank and Komatsulite.

10.The Defendants did not agree to nor had they led the Plaintiff to believe
that she would be employed on a permanent or lifelong basis until retirement.
The statement, "We look forward to your continued support and contribution
for many more years to come" in letters from the Defendants to the
Plaintiff does not amount to any such representation. It is a statement
of appreciation and encouragement but nothing more.

11. Also, letters of confirmation or promotion, without more, do not amount
to any such representation.

12. Accordingly the Defendants were entitled to exercise and did exercise
their rights under clause 15 of the employment agreement dated 17 May
1989 to terminate the Plaintiff’s employment by giving one month’s
salary in lieu of one month’s notice of termination. The Defendants
have validly terminated the Plaintiff’s employment, see Delaney
v Staples [1992] ICR 483, p.488 to 489.

13. Even if the Defendants had initially omitted to give one month’s
salary in lieu of notice, the extent of the Plaintiff’s damages
would be the amount which she would have received until her employment
was lawfully terminated, see Alexander Proudfoot Productivity Services
Co Singapore Pte Ltd v Sim Hua Ngee Alvin
[1993] 1 SLR 494 and Latham v Credit Suisse Boston [2000]
2 SLR 693
. This would have been the one month’s salary in lieu
of notice.

14. The issue about the rules of natural justice is not relevant as such
rules do not apply to a termination of employment in accordance with the
terms of a contract, even if, for the sake or argument, they apply to
a dismissal under ordinary contracts of employment where there is no prescribed
procedure for a dismissal.

15. In any event, the Plaintiff knew about the concerns of the Defendants
especially about her legal action against Mr Nishide and would not budge
from her position.

16. The issue about bad faith is a red herring as the Defendants were
entitled to terminate the Plaintiff’s employment by paying one month’s
salary in lieu of notice. In any event, the Plaintiff has failed to establish
bad faith.

17. There is no valid issue of retrenchment.

18. The Plaintiff’s claim is dismissed.

19. I will hear parties on costs.

Sgd:
WOO BIH LI
JUDICIAL COMMISSIONER

SAL Industrial Leasing
Ltd v Lin Hwee Guan
[1998] 3 SLR 482; [1998] SGCA 44

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Suit No: CA 256/1997
Decision Date: 30 Jul 1998
Court: Court of Appeal
Coram: Karthigesu JA, L P Thean JA, Yong Pung How CJ
Counsel: Leonard Hazra (David Lim & Partners) for the appellants, Vijay Kumar
Rai (VK Rai & Partners) for the respondent
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Catchwords

Companies – Directors – Powers – Whether factoring agreement and acceptance
of offer signed by director binding on company

Credit and Security – Guarantees and Indemnities – Guarantees – Factoring
agreement between appellants and respondent’s company – Director signs
guarantee to guarantee liability of company – Whether consideration provided
for guarantee – Whether guarantee binding on respondent

Credit and Security – Guarantees and Indemnities – Guarantee – Guarantee
signed by respondent company director alongside factoring agreement –
Variations made to factoring facility over time – Whether variations to
factoring facility discharged guarantee

Case Summary

Facts

The respondent Lin and one Yeo were partners in a ship repairing business
which entered into a factoring agreement with the appellants SAL. The
documents were signed by the two partners who also signed as joint and
several guarantors. Subsequently, a company was incorporated to take over
the business of the partnership with Yeo and Lin as the only directors
and shareholders. A new set of documents for a similar factoring facility
to be given to the company was executed between the parties and both directors
signed a joint and several guarantee, guaranteeing the liability of the
company to SAL. The company defaulted and SAL terminated the factoring
agreement, and called on the company to repurchase the outstanding debts
under the terms of the factoring agreement. The company failed to do so
and SAL commenced proceedings against the company to enforce the agreement
as well as against Yeo and Lin to enforce the guarantee. Only Lin defended
the claim. The trial judge held that Yeo signed the acceptance of the
letter of offer and the factoring agreement without the requisite authority
of the company and as such, the documents were not binding on the company.
However, the judge further held that the guarantee was supported by consideration
and was thus valid and binding on Lin. Lin appealed. The key issues before
the court were whether: (a) the factoring agreement was binding on the
company; (b) the guarantee was binding on Lin; (c) Lin was liable under
the guarantee; and (d) the guarantee was discharged by reason of any subsequent
events.

Held, allowing the appeal:

(1) On the evidence, the agreement was binding on the company. The board
resolution authorised the company to accept the letter of offer and the
resolution made specific reference to the terms and conditions of their
letter of offer. While it was true that the resolution did not authorise
Yeo to sign the agreement, he signed it in the presence of Lin, the only
other shareholder and director of the company. In these circumstances,
it was overtly technical to say that Yeo signed these documents without
the authority of the board. Both the acceptance of the letter of offer
and the factoring agreement were signed by Yeo on behalf of the company
with the full authority of the board and as such, the agreement was binding
on the company.

(2) The consideration provided for the guarantee as well as the guarantee
was binding on Lin. The default judgment against the company was also
conclusive for establishing the indebtedness of the company.

(3) Having regard to the wide terms of the guarantee, the variations in
question did not prejudice Lin nor discharge the guarantee. Appeal allowed.

Case(s) referred to
Bache & Co (London) Ltd v Banque Vernes
et Commerciale de Paris SA
[1973] 2 Lloyd’s Rep 437 (folld)
Bangkok Bank Ltd v Cheng Lip Kwong [1990]
2 MLJ 5
; [1989]
SLR 1154
(folld)
Charterhouse Investment Trust v Tempest Diesels
Ltd
[1986] BCLC 1 (folld)
Dobbs v National Bank of Australasia
Ltd
(1935) 53 CLR 643 (refd)
Duomatic Ltd, Re [1969]
2 Ch 365 (folld)
Jinmat bin Awang v Lai Wee Ngen [1995]
3 SLR 769
(folld)
Runciman v Walter Runciman plc [1992]
BCLC 1084 (folld)
Sutcliffe v Thackrah [1974] AC 727 (folld)

[Editorial note: An appeal from Suit No 1646 of 1993.]

Judgment

[Please note that this case has not been edited in accordance
with the current Singapore Law Reports house style.]

Judgment reserved.

LP Thean JA (delivering the judgment of the court):

1 The appellants in the proceedings below claimed against the first
defendants, Hydtrolmech Automation Services Pte Ltd (the Company), a
sum of $388,255.52 or in the alternative the sum of $387,385.63, together
with interest under or arising out of the factoring agreement expressed
to be made between the appellants and the Company. The appellants also
claimed against the second defendant, Yeo Jui Meng (Yeo) and the third
defendant, Lin Hwee Guan, the respondent in this appeal, under the guarantee
signed by both of them. Neither the Company nor Yeo took any part in
the proceedings below and before us; only the respondent resisted the
claim. The case was heard before Judith Prakash J and in a reserved
judgment (reported in [1998]
1 SLR 702
) she dismissed the appellants’ claims on the ground
that, as against the Company, the factoring agreement was not binding
on the Company and, as against the respondent, his liability under the
guarantee was accordingly not established.

Against her decision this appeal is now brought.

The facts

2 The relevant facts that gave rise to the dispute have been fully set
out in the judgment below and may be briefly stated as follows. The
respondent first became acquainted with Yeo in 1987 when the latter
was employed by a ship repairing company which used to buy various articles
from a family concern in which the respondent was working. In 1990,
Yeo left the employment and set up a ship repairing business in partnership
with a third party. That partnership did not last long and was soon
dissolved. Yeo then invited the respondent to join him in a new partnership
in the business of ship repairing. The respondent agreed and the new
partnership between them called ‘Hydtrolmech Automation Services’
(the partnership) was formed on 25 June 1990. The respondent did not
have an active role in the business and his main contribution was the
infusion of the capital, whilst Yeo was the active partner and oversaw
the day to day management of the business. It was their intention to
convert the partnership into a private limited company as soon as possible.

3 Soon after the commencement of the partnership business, Yeo informed
the respondent that the partnership faced cash-flow problems because
one of its major customers, Sembawang Shipyard Ltd (Sembawang), was
slow in making payment. To alleviate some of the problems, Yeo suggested
that the receivables from Sembawang should be factored to a factoring
company, such as the appellants.

4 Yeo and the respondent got in touch with the appellants. The main
person who dealt with them on behalf of the appellants was one Ms Teo
Lay Sim who was then an account officer. In early July 1990, she visited
the partnership’s office together with a colleague and explained
to Yeo how a factoring facility worked. After that, Ms Teo put in a
credit application to the management of the appellants and following
that on 6 July 1990, the appellants issued a letter of offer to the
partnership in which they offered to extend to the latter a factoring
credit line up to the limit of $300,000. The main terms of the facility
were that the partnership would have to pay a factoring discount charge
and a service charge and, prior to the appellants collecting payment
from the customer on the factored invoices, would receive, at the appellants’
discretion, amounts not exceeding 70% of the face value of the invoices
factored. The appellants would only accept invoices issued to Sembawang
for factoring. Further, all invoices that were not settled by the customers
within 180 days after the due date would be re-assigned to the partnership.
The two partners on behalf of the partnership accepted the offer and
signed the acceptance. In addition, they also signed the factoring agreement
on behalf of the partnership and signed the joint and several guarantee.
Their signatures on all these documents were witnessed by Ms Teo.

5 On 12 October 1990, the Company was incorporated to take over the
business of the partnership and to carry on business as ship repairers.
Yeo and respondent were the only directors and shareholders of the Company.
Both of them held 50,000 shares each. The appellants required a fresh
set of documents to be signed for a similar facility to be given to
the Company. Yeo agreed to this readily. The appellants prepared a fresh
letter of offer dated 18 October 1990 and a factoring agreement dated
23 October 1990. The terms of these documents were substantially the
same as those contained in the corresponding documents signed on behalf
of the partnership on 6 July 1990. On or about 18 October 1990 a board
resolution of the Company was passed authorising, inter alia, the Company
to accept the terms of the letter of offer. We shall set out the terms
of this resolution in detail in a moment. On 23 October 1990, Ms Teo
together with her colleague brought the documents over to the Company.
According to her, both the directors were present when the documents
were handed over. The acceptance of the letter of offer and the factoring
agreement were signed by Yeo on behalf of the Company in her presence
and in the presence of the respondent, and both the directors signed
the guarantee whereby they guaranteed the liability of the Company to
the appellants.

6 Some eight months later, on 9 July 1991, the Company accepted the
appellants’ offer to reallocate the Company’s factoring
line of $300,000 to include receivables owing from Keppel Corporation
Ltd. A letter from the Company varying the line of credit was accepted
by Yeo on behalf of the Company and both Yeo and the respondent signed
the letter also confirming their guarantee of the facility as varied.
Following that, on 21 October 1991, the parties agreed to increase the
limit of the credit line from $300,000 to $500,000, which included the
receivables owing from Jurong Shipyard Ltd. The sub-limits of the receivables
of the three customers acceptable for factoring were as follows: Jurong
Shipyard Ltd for $200,000, Keppel Corporation Ltd for $150,000 and Sembawang
for $150,000. The letter from the Company stating briefly these variations
were agreed to by the parties on 3 November 1991: it was signed by Yeo
on behalf of the Company and was also signed by Yeo and the respondent
confirming their guarantee of the facility so varied.

7 On 19 June 1992, the appellants further revised the factoring facility
by allocating the factoring line of $500,000 as follows: $50,000 for
Keppel Corporation Ltd, $300,000 for Sembawang, $50,000 for Jurong Shipyard
Ltd and $100,000 for Esso Singapore Pte Ltd (Esso). This letter of variation
was signed by Yeo on behalf of the Company on 24 June 1992. However,
on this occasion, there was no indorsement thereon signed by Yeo and
the respondent as guarantors, and the respondent claimed that he knew
nothing about this variation. Between June 1991 and July 1992, pursuant
to the factoring agreement, the appellants purchased from the Company
debts having a total face value of $664,063.65 owing by their customers,
viz Jurong Shipyard Ltd, Sembawang, Keppel Corporation Ltd and Esso.

8 On 9 January 1993, the respondent sold all his shares in the Company
to Yeo’s wife, and he resigned as a director of the Company. By
April 1993, the appellants realised that there was something amiss with
the Company. Many of the invoices it had issued to Esso and Sembawang
and which the appellants had purchased remained unpaid despite that
more than 180 days had passed since their issue. In addition, Esso and
Sembawang disputed the debts which the Company had assigned to the appellants.

9 On 17 May 1993, the appellants terminated the factoring agreement
and called on the Company to repurchase the outstanding debts. The Company
failed to do so and the appellants instituted proceedings against the
Company, Yeo and the respondent. Only the respondent defended the claim,
and he raised several defences: (i) the Company did not enter into the
factoring agreement as alleged; (ii) the guarantee executed by the respondent
was not valid or effective; (iii) there was a mistake on his part and
there were misrepresentations made by the appellants inducing the respondent
to sign the guarantee; or alternatively the defence of non est factum;
and (iv) the guarantee was discharged by subsequent conduct of the appellants.

The decision below

10 Before the learned trial judge five issues were raised: first, whether
the factoring agreement was binding on the Company; second, whether
the guarantee was valid and binding on the respondent; third, whether
the appellants had established the indebtedness of the Company to them;
fourth, whether guarantee was avoided by any mistake, misrepresentation
or the plea of non est factum; and finally whether the guarantee was
discharged by reason of any variation made to the factoring agreement
without the respondent’s consent. On the first issue, the learned
judge found that Yeo signed the acceptance of the letter of offer and
the factoring agreement without the requisite authority of the Company
and accordingly those documents were not binding on the Company. On
the second issue, the learned judge held that the guarantee was supported
by consideration and was valid and binding on the respondent. With regard
to the third issue, the learned judge held that, as the factoring agreement
was not binding on the Company, the appellants could not rely on it
to establish the Company’s indebtedness and the appellants had
not proved the actual indebtedness of the Company to the appellants.
As for the fourth issue, the learned judge found that there was no mistake
on the part of the respondent and that he was not induced by any misrepresentations
by the appellants and that the defence of non est factum was not available
to the respondent. On the final issue, the learned judge found that
the guarantee was not discharged by the variations made to the agreement.

The appeal

11 Before us the principal issues raised are as follows: (i) whether
the factoring agreement was binding on the Company; (ii) whether the
guarantee was binding on the respondent; (iii) whether the respondent
was liable under the guarantee; and (iv) whether the guarantee was discharged
by reason of any subsequent events.

The factoring agreement

12 It is not disputed that both the acceptance of the letter of offer
and the factoring agreement were signed by Yeo and, on the face of these
documents, he appeared to have signed them on behalf of the Company.
The question is whether Yeo had any authority to do so. The letter of
offer was addressed to Yeo as a director of the Company and the learned
judge held, and in our view rightly, that looking at the letter as a
whole it was addressed to the Company and not to Yeo personally. Hence
the facility stated in the letter was offered to the Company. The letter
of offer, being what it was, obviously did not contain the full terms
and conditions of the facility which were set out in the factoring agreement.
Prior to Yeo signing the acceptance of the letter of offer and the factoring
agreement a board resolution of the Company was passed on 18 October
1990 or thereabouts, and it was in the following terms:
Resolved: Working Capital Facilities.

That the company accepts the offer of Working Capital Facilities from
SAL Industrial Leasing Pte Ltd, Singapore, under the terms and conditions
enumerated in the letter of offer dated 18 October 1990 (Ref: SAL/TLS/160/90).

That Mr John Yeo Jui Meng or Mr Lin Hwee Guan be authorised on behalf
of the company from time to time to conclude with SAL Industrial Leasing
Pte Ltd such variations to the Workings Capital Facilities as such directors
may seem desirable.

That the common seal of the Company be affixed in accordance with its
articles of association, to all legal documents relating to the said
Working Capital Facilities.

13 The learned judge found that the resolution was duly passed as a
board resolution, that is, either it was signed by both Yeo and the
respondent as directors of the Company or passed at a meeting of directors,
Yeo and the respondent being the only directors of the Company at the
time. The resolution by the first paragraph authorised the Company to
accept the ‘offer of Working Capital Facilities’ of the
appellants. The learned judge held, and we agree, that the term ‘Working
Capital Facilities’ was intended to refer to the factoring facility.
As for the second paragraph of the resolution, she held that it conferred
on each director, ie Yeo and the respondent, ‘authority to individually
conclude with the appellants’ such variations to the facility
as such director might deem desirable. The third paragraph of the resolution
authorised the affixing of the common seal of the Company to ‘all
documents relating to the said Working Capital Facilities’. Here,
the learned judge held that there were only two such documents relating
to such facility: the letter of offer and the factoring agreement, and
neither the acceptance of the letter of offer nor the factoring agreement
was executed by the Company under its common seal. The learned judge
held that the board resolution did not confer any authority on Yeo or
the respondent to enter into an agreement for such facility and, in
particular, to sign the acceptance of the letter of offer and the factoring
agreement.

14 The learned judge held that the appellants could not rely on any
implied authority conferred on Yeo to enter into the transaction. He
was never appointed as a managing director and there was no course of
conduct as a director of the Company which entitled the appellants to
assume that he was also its managing director. The acceptance of the
letter of offer and factoring agreement were signed within two weeks
of the incorporation of the Company, and it was too short a period to
infer any course of conduct by Yeo as a managing director.

15 In conclusion the learned judge held that Yeo was not authorised
by the Company to sign either the acceptance of the letter of offer
or the factoring agreement solely. She said at ¶ 46–47 of
her judgment:

46 In my judgment therefore, Mr Yeo was not authorised by the company
to sign either the agreement or the letter of offer solely and the company
may have been able to resile from its obligations thereunder. As far
as the company is concerned, however, it is very strongly arguable that
both these documents were impliedly ratified by the board thereafter
since the company acted on them for a period of almost two years during
which it submitted invoices to the plaintiffs to be factored and accepted
from the plaintiffs not only the initial payments in respect of such
invoices but also its portion of all collections made by the plaintiffs
on the invoices. The plaintiffs did not, however, plead such ratification
and thus cannot rely on it vis-a-vis the third defendant in these proceedings.

47 What the plaintiffs have pleaded in their reply is that Mr Lin is
estopped from saying that he did not know of or consent to the letter
of offer and the agreement. This pleading was in response to para 9H
of the re-re-amended defence whereby Mr Lin averred the guarantee was
discharged by injurious, prejudicial or unequitable conduct on the part
of the plaintiffs among which was failing to disclose the letter of
offer and the agreement to the third defendant and failing to get his
consent to them. The estoppel, if any, does not relate to the lack of
authority on the part of Mr Yeo and therefore it is irrelevant to this
issue. The conclusion is that the plaintiffs have not been able to establish
vis-a-vis the third defendant that the agreement was entered into. What
is the consequence of this? The answer depends on the width and true
construction of the guarantee.

16 In considering this issue it is relevant to examine the factual matrix
in which the parties were when the acceptance of the letter of offer,
the factoring agreement and the guarantee were signed. First of all,
these documents were identical in all material respects with similar
documents signed by Yeo and the respondent in July 1990 in their capacities
as partners of Hydtrolmech Automation Services (Hydtrolmech). It may
be recalled that, at that time, Yeo and the respondent were carrying
on their business in partnership under that name and they signed as
partners the acceptance of the offer of factoring facility and the factoring
agreement, and they signed in their personal capacity the joint and
several guarantee whereby they agreed to stand as surety for the liability
of the partnership. All these three documents were signed by Yeo and
the respondent at their office at the same time, that is, on 6 July
1990 in the presence of Ms Teo who witnessed their execution of those
documents, and there was no question that Yeo and the respondent knew
and understood, if not precisely, at least substantially, what those
documents provided.

17 At or about that time, Yeo and the respondent had intended to incorporate
a company to take over the business of their partnership. Towards that
end, the Company was incorporated on 12 October 1990 which then took
over the business of the partnership and continued to carry on the business
of ship repairing. It is apparent to us that upon the Company taking
over the partnership business both Yeo and the respondent required the
same factoring facility, which was previously extended to Hydtrolmech,
to be made available to the Company. In view of this, it must have been
agreed between Yeo and the respondent on the one hand and the appellants
on the other that similar documents would have to be executed by the
three of them, the Company, Yeo and the respondent, to replace the respective
documents previously executed by Yeo and the respondent in respect of
the factoring facility extended to Hydtrolmech. It is in these circumstances
that the three documents: (i) the letter of offer of factoring facility
to the Company, (ii) the factoring agreement to be made between the
Company and the appellants and (iii) the joint and several guarantee
to be executed by Yeo and the respondent, were prepared by the appellants
for execution by the parties concerned.

18 Now, it was the evidence of Ms Teo that on 23 October 1990 she and
a colleague went to the office of the Company bringing along the letter
of offer dated 18 October, the factoring agreement and the guarantee,
and that both Yeo and the respondent were present when she handed over
the documents to them. The acceptance of the letter of offer and the
factoring agreement were signed by Yeo in the presence of the respondent
and Ms Teo, and the guarantee was signed by both the respondent and
Yeo in her presence. Ms Teo herself then signed the documents as a witness
to their respective signatures. Presumably, Ms Teo’s colleague
was also present when all these documents were signed.

19 The respondent’s evidence, however, was that he had not seen
either the letter of offer or the factoring agreement, and nor had he
seen Yeo signing the documents. But he admitted that on that day at
about 10am Yeo telephoned him and requested him to be present at the
office of the Company on the same day at about 3pm to sign the guarantee
and he agreed. When he arrived at the office of the Company he met two
lady representatives of the appellants and one of them was Ms Teo. Either
Ms Teo or the other lady handed ‘several copies of one or more
documents to’ Yeo and the respondent was given ‘the Guarantee
Agreement and asked to sign’. He admitted that he signed ‘the
Guarantee Agreement’ and that he might have signed more than one
copy of that document, but all copies were taken away by the appellants’
representatives. He said that the factoring agreement was never shown
to him, that he never signed it, that he did not know of its existence
or the terms thereof, and that at no time did he agree to or consent
to the agreement. The agreement was signed by Yeo without his knowledge,
authority or consent. He became aware of the appellants’ letter
of offer and the factoring agreement only ‘sometime around June
1993’ or only after they were brought to his attention by his
solicitors.

20 The learned judge did not make a finding on the point as to whether
the documents were all signed at the same time and in particular whether
the acceptance of the letter of offer and the factoring agreement were
signed by Yeo in the presence of the respondent himself. Looking at
the evidence ourselves, we think that Ms Teo’s version of the
events of what took place at the office of the Company at the time was
inherently more probable. The respondent admitted that he was present
at the office at the time and that copies of documents were handed to
Yeo and Yeo signed them. He admitted that he signed the guarantee at
that time. Ms Teo witnessed the signing of the acceptance of the offer
and the factoring agreement by Yeo and also witnessed the signing of
the guarantee by Yeo and the respondent. She must have witnessed the
signing of these documents at or about the same time on the very same
day and at the same place. It is highly unlikely that on that day she
witnessed Yeo and the respondent signing the guarantee only and on a
different day or at a different time in the absence of the respondent
witnessed Yeo signing the acceptance of the offer and the factoring
agreement. It is significant that the respondent in cross-examination
admitted that at the meeting with Ms Teo and her colleague on 23 October
it was likely that he saw the factoring agreement being handed to Yeo.
He also admitted that he would not have objected to the Company entering
into such agreement or to Yeo signing it on behalf of the Company.

21 We find ourselves unable to accept the respondent’s evidence
that he did not know of the existence of the factoring agreement or
the terms thereof and did not agree or consent to the agreement. As
we have shown, he and Yeo as partners of Hydtrolmech had previously
signed a factoring agreement with the appellants, and he knew that as
the Company had taken over the business of Hydtrolmech and was in need
of factoring facility, a factoring agreement had to be made between
the appellants and the Company. We accept Ms Teo’s evidence that
on 23 October at the office of the Company she handed to Yeo and the
respondent the letter of offer dated 18 October, the factoring agreement
and the guarantee and that Yeo signed the acceptance of the letter of
offer and the factoring agreement in the presence of the respondent
and Ms Teo, and that both Yeo and the respondent signed the guarantee
in her presence. The respondent obviously knew what the documents before
him and Yeo were and knew what Yeo was signing. We think that he understood
fully well at that time that Yeo was signing the acceptance of the letter
of offer and the factoring agreement for and on behalf of the Company
and that he and Yeo were signing the guarantee guaranteeing the liabilities
of the Company in respect of the factoring facility to be provided by
the appellants. He might not have examined in detail the terms and conditions
of the documents and appreciated the full consequence and effect of
the documents. Those aspects of the matter he probably left to Yeo to
deal with, as he had left it to Yeo to look after the day to day management
of the Company. However, such omission on his part would not prevent
the documents from taking effect. The inescapable inference is that
the respondent consented to Yeo signing those documents.

22 It bears recounting in the words of the learned judge what the respondent
knew of the transaction. The learned judge said at ¶ 52:

The evidence showed that Mr Lin [the respondent] knew that the company
had cashflow problems caused by slow payment by Sembawang and that it
did not have much money. He knew that the company would not be paid
immediately it issued its invoices. Probably he knew that credit terms
had been agreed to. He definitely knew that the purpose of taking the
factoring facility was to solve the cashflow problem and that on selling
its invoices to the plaintiffs, the company would receive up to 70%
of the invoiced amount prior to payment by Sembawang or other approved
customers. He agreed that this was similar to borrowing money from a
bank. He also knew the plaintiffs would collect payment from the customers
but that the terms of the facility were such that if the customers did
not pay, the company would have to pay the plaintiffs the amount of
the invoice.

23 In these circumstances, we are unable to agree with the learned judge
that the agreement was not binding on the Company. First, the board
resolution authorised the Company to accept the letter of offer and
the resolution made specific reference to ‘the terms and conditions
enumerated in the letter of offer dated 18 October 1990 (Ref: SAL/TLS/160/90)’.
Hence, the letter of offer had already been accepted by the board of
directors of the Company. It is true that the resolution did not authorise
Yeo to sign the factoring agreement on behalf of the Company. It is
also true that the resolution authorised the affixing of the Company’s
seal to the factoring agreement and the Company’s seal was not
so affixed to either the acceptance of the letter of offer or the factoring
agreement. But that resolution only gave the authority for the use of
the Company’s seal; it did not prescribe that the factoring agreement
was to be executed in that manner. Such an agreement is not required
to be executed under the seal of the Company, and may be executed under
the hand of any director of the Company, provided that the director
had the authority to sign it on behalf of the Company. The relevant
factual position here was that Yeo and the respondent were the only
shareholders and directors of the Company at the time and Yeo signed
the factoring agreement on behalf of the Company in the presence of
and with the knowledge and consent of the respondent. The respondent
and Yeo constituted the board and both of them were present at the time:
one signing the documents and the other seeing and consenting to the
former signing them. In these circumstances, it would be overly technical
to say that Yeo signed these documents without the authority of the
board. In our judgment, both the acceptance of the letter of offer and
the factoring agreement were signed by Yeo on behalf of the Company
with the full authority of the board and in consequence the agreement
was binding on the Company.

24 Further, it was not disputed that the Company acted on the acceptance
of letter of offer and factoring agreement for a period of almost two
years, during which time it submitted invoices to the appellants to
be factored and accepted from the appellants the initial payments in
respect of such invoices and its portion of all collections made by
the appellants on the invoices. In such a case, it really was not open
to the Company to say that it was not bound by the agreement.

25 Our conclusion that the Company is bound by the agreement signed
only by Yeo is fully supported by authorities. In Re Duomatic Ltd [1969]
2 Ch 365, the liquidators of a company sought to recover certain sums
of money paid to two directors as salaries on the ground that the payments
had never been voted and approved at a general meeting. It was held,
inter alia, that where all shareholders with the right to attend and
vote at a general meeting had assented to the matter which a general
meeting could approve that assent, although informally given, was as
binding as a resolution passed at a general meeting. Buckley J said
at p 373:

The fact that they did not take that formal step but that they nevertheless
did apply their minds to the question of whether the drawings by Mr
Elvins and Mr Hanly should be approved as being on account of remuneration
payable to them as directors, seems to lead to the conclusion that I
ought to regard their consent as being tantamount to a resolution of
a general meeting of the company. In other words, I proceed upon the
basis that where it can be shown that all shareholders who have a right
to attend and vote at a general meeting of the company assent to some
matter which a general meeting of the company could carry into effect,
that assent is as binding as a resolution in general meeting would be.

26 In the local case of Jimat bin Awang v Lai Wee Ngen [1995]
3 SLR 769
this court came to the same conclusion. There, the directors
of the Company who were also the only shareholders duly resolved at
a board meeting to issue shares to a new shareholder but no shareholders’
meeting was held separately to authorise the issue of those shares.
It was held by this court that the board resolution being an informal
and unanimous assent of all the shareholders was de facto also a resolution
of the shareholders.

27 The same principle applies by analogy to assent given informally
by directors of a company. Where, as here, all the directors assent
to an agreement and one of them signs it on behalf of the company such
assent is tantamount to a resolution of the board and the agreement
is binding on the company. In Charterhouse Investment Trust v Tempest
Diesels Ltd [1986] BCLC 1, the plaintiff companies took action against
the defendant to enforce an agreement for the transfer by the defendant
of its tax loss to the plaintiffs in connection with the take-over of
some of the shares of the defendant. One of the arguments raised in
opposition to the claim was that the agreement was not approved by the
board of directors. In disposing of this argument Hoffmann J (as he
then was) said at p 9:

It was also submitted that Mr Allam had no authority on behalf of Tempest
[the defendant] to agree to surrender its tax losses. The matter was
never formerly considered by the Tempest board and Mr Sainsbury and
Mr Fawcett knew nothing about it. On the other hand, I have said that
Mr Sainsbury and Mr Fawcett were content to acquiesce in whatever lawful
terms were agreed between Mr Allam on the one hand and Mr Fenton and
Mr Davies, for the Charterhouse Group, on the other. I therefore find
that although there was no formal board meeting, all members of the
Tempest board informally acquiesced in Mr Allam’s agreement on
behalf of Tempest to surrender the tax losses. This, it was conceded,
would be sufficient to vest him with authority.

28 Another authority on the same point is Runciman v Walter Runciman
plc [1992] BCLC 1084 where a director’s term of office was extended
by the board of directors without a formal board resolution and the
question arose as to whether the extension was valid. It was held that
as the extension had been concurred by all the directors such extension
was valid, as the directors could determine these matters by informal
means. Simon Brown J in his judgment said at p 1092:

That directors, provided they act unanimously, can act informally appears
clearly established — Re Bonnelli’s Telegraph Co, Collie’s
Claim (1871) LR 12 Eq 246 and Charterhouse Investments Trust Ltd v Tempest
Diesels Ltd [1986] BCLC 1 so decide, the latter on the basis that informal
acquiescence by other board members in an otherwise unauthorised agreement
by one of their number binds the company. So in my judgment in the present
case. And, indeed, I conclude that Mr Johnson’s and Mr McIntyre-Brown’s
involvement went beyond mere informal acquiescence. As the plaintiff
told me in evidence, when they were acquainted with the proposals following
approval by the non-executive directors they, as directors, had the
opportunity to query them. The mere fact that they never apparently
did so and that their views were not more explicitly canvassed seems
to me nothing to the point: by the time of the implementation of the
various salary increases, and more obviously still by the time the plaintiff
came to assert his notice term, such terms were indeed ‘as determined’
by the other board members, and none of them could possibly have been
heard to assert the contrary.

Whether the guarantee was binding on the respondent

29 We now turn to the issue whether the guarantee is valid and enforceable
against the respondent. It is argued on behalf of the respondent that
there was an absence of consideration and the guarantee is therefore
invalid. The basis for this argument is that the guarantee was expressed
to be given in consideration of the appellants agreeing to grant and
continue to grant credit facilities to the Company and on the evidence
no such credit facilities had been given to the Company. The factoring
facility, so it is argued, is not a credit facility. We have no hesitation
in rejecting this argument; it has no merit whatsoever. First, as a
matter of construction, the factoring facility agreed to be provided
by the appellants under the letter of offer and the agreement fell within
the term ‘credit facilities’ in the guarantee. Secondly,
as a matter of undisputed fact, the factoring facility was provided
to the Company pursuant to the letter of offer and the factoring agreement
and it was in consideration of such facility that the guarantee was
given by the respondent and Yeo to the appellants. The learned judge
dealt with this argument very adequately at ¶ 53 of her judgment:

The object and commercial purpose for the factoring facility offered
by the plaintiffs which the company in its resolution accepted was to
raise immediate finance for use by the company in its operational expenses.
In these circumstances, I think that the description of the consideration
in the guarantee ie grant credit, was wide enough to cover the factoring
facility offered and actually made use of by the company even though
in form, that facility was a facility for the purchase of debts and
was not a loan facility. There can be no doubt that by reason of the
facility, the company obtained finance for its activities and, since
the factoring was done on recourse terms, in the commercial sense that
finance had to be regarded as essentially in the nature of credit. It
is also noteworthy, though perhaps not strictly germane, that the third
defendant himself made a point of saying that he had been told that
the guarantee was to be given for the purpose of the company obtaining
factoring facilities. He was not under any misapprehension therefore
as to the nature of the underlying transaction that he was guaranteeing.
I therefore hold that the guarantee does cover indebtedness of the company
to the plaintiffs arising out of the factoring facility utilised.
and we agree entirely with her.

Whether the respondent was liable under the guarantee

30 We now turn to the liability of the respondent under the guarantee,
and the question is whether the appellants had established the indebtedness
of the Company owing to them. In proving the indebtedness of the Company
the appellants, inter alia, invoke cl 3 of the guarantee which reads
as follows:
Any acknowledgement in writing by the Company or by any person authorised
by the Company of the amount of his/its indebtedness (whether acknowledgement
be express or implied) shall be conclusive evidence of such indebtedness
against me/us and any judgment obtained by you against the Company or
proof in bankruptcy or winding up or any statement of account furnished
by you certified by any of your authorised officers shall be binding
and conclusive on and against me/us, my/our executors and administrators
or successors.

This clause has two limbs, and each operates independently of the other.
The first relates to an admission by the Company as to its own indebtedness
which is deemed by that clause to be conclusive. The second relates
to matters external to the Company, which the clause deems as conclusive
evidence of the existence and quantum of its indebtedness. It is this
second limb which the appellants invoke. The appellants rely on (i)
the statement of account and the letter of confirmation dated 14 December
1993 and (ii) the judgment obtained against the Company on 30 November
1993, to establish the indebtedness of the Company.

Statement of account

31 By their letter dated 14 December 1993, the appellants demanded payment
of $388,255.52 from the respondent and enclosed in the letter was a
statement of account showing the amount payable by the Company as at
9 December 1993. The letter was signed by the appellants’ senior
manager of operation, Ms Monica Heng, and the statement of account was
certified by her as the true copy. The body of the letter read as follows:

Dear Sirs,

Re: Factoring Agreement No FA/00085/90 dated 23 October 1990 Outstanding
Debt We confirm that as of 9 December 1993 there was a sum of $388,255.52
due and owing from Hydtrolmech Automation Services Pte Ltd to us. Enclosed
herewith is a copy of our statement of account as at 9 December 1993.

Yours faithfully,
Ms Monica Heng, Senior Manager, Operations.

The statement of account commenced with a debit balance (carried forward)
as at 30 April 1993 and following that were the items of debit and credit
for the period from that date to 9 December 1993, and at the end thereof
it stated that the amount of $338,255.52 was payable as at the latter
date. The statement of account, however, was not signed by Ms Monica
Heng as such; in other words it was not certified by her that the account
was true and correct and that the amount of $338,255.52 was payable.
Her signature there was to certify that the document was a true copy
of the statement of account.

32 The learned judge held that the statement of account and the letter
of 9 December 1993, did not satisfy the requirements of cl 3 to enable
the appellants to rely on them as conclusive evidence of the indebtedness
of the Company. The document enclosed in the letter was only a certified
true copy of a statement of account which was itself not signed as such;
the signature there was in respect of the certification that it was
a true copy. The letter only confirmed that a certain amount was due
and owing from the Company. These two documents did not, individually
or collectively, amount to a ‘statement of account … certified
by an authorised officer’ within cl 3. The learned judge took
the view that it was only a letter of confirmation written by the appellants
as to the sums that were indebted to them, and not a certificate issued
by the appellants. She said at ¶ 61:

The first document was a certified true copy of a statement of account.
The second was a letter of confirmation written on behalf of the plaintiffs
as to a certain amount due. In my judgment, they did not either individually
or together constitute a certificate by a person described as an authorised
officer that the statement of account of the customer was correct as
required by the clause.
The learned judge then referred to certain passages from the judgment
of the High Court of Australia in Dobbs v National Bank of Australasia
Ltd (1935) 53 CLR 643 and continued:

… [W]hen a conclusive evidence clause calls for a certificate
to be issued by an ascertained or ascertainable person what must be
provided is such a certificate and not just a confirmation of indebtedness.
The importance of the certificate and the reason for its conclusiveness
is that the person giving it is carrying out the contractually prescribed
duty of acting as an arbiter whose arbitration the parties have agreed
to accept. In this case, Ms Heng did not purport to act as such arbiter.

33 With respect, we are unable to agree with the learned judge. First,
we think that the letter and the statement of account together satisfied
the requirements of cl 3. The letter confirmed that as of 9 December
1993 a sum of $388,255.52 was due and payable by the Company and specifically
referred to the statement of account enclosed in it, and that statement
of account showed that as of that date that amount was due and payable.
In our opinion, the letter and the statement of account read together,
in effect, constituted a statement of account certified by an authorised
officer of the appellants falling within cl 3. In Bangkok Bank Ltd
v Cheng Lip Kwong
[1990]
2 MLJ 5
; [1989]
SLR 1154
, the bank had a conclusive evidence clause in the guarantee
that was similarly worded as cl 3 and the ‘certificate’,
which was a letter, issued under the guarantee was similar to the one
here. The letter there merely stated: ‘We confirm that as (sic)
16 August there was a sum of $4,981,712.10 due and owing from Brighton
Project Pte Ltd to us.’ It was accepted that such a letter amounted
to a certificate falling within the conclusive evidence clause in the
guarantee.

34 Secondly, we do not think that the case of Dobbs v National Bank
of Australasia Ltd supports the proposition that the person giving a
certificate under a conclusive evidence clause ‘is carrying out
the contractually prescribed duty of acting as an arbiter’. In
that case, the bank brought an action against the defendant and two
others on a joint and several guarantee given to the bank, and the guarantee
contained, inter alia, a conclusive evidence clause in the following
terms:

A certificate signed by the manager or acting manager for the time being
of your head office or of any other office of your bank at which the
banking account of the customer shall for the time being be kept stating
the balance of principal and interest due to you by the customer shall
be conclusive evidence of the indebtedness at such date of the customer
to you.

One of the main arguments raised before the High Cou rt of Australia
was that the clause was void as it sought to oust the jurisdiction of
the court upon an issue essential to the guarantor’s liability
and to substitute for the judgment of the court the determination or
opinion of an officer of the bank. In a joint judgment by Rich, Dixon,
Evatt and McTiernan JJ the court rejected this argument and said at
p 652:

A clear distinction has always been maintained between negative restrictions
upon the right to invoke the jurisdiction of the courts, and positive
provisions giving efficacy to the award of an arbitrator when made or
to some analogous definition or ascertainment of private rights upon
which otherwise the courts might have been required to adjudicate. It
has never been the policy of the law to discourage the latter. The former
have always been invalid.
and later said:

Parties may contract with the intention of affecting their legal relations,
but yet make the acquisition of rights under the contract dependent
upon the arbitrament or discretionary judgment of an ascertained or
ascertainable person. Then no cause of action can arise before the exercise
by that person of the functions committed to him. There is nothing to
enforce; no cause of action accrues. But the contract does not attempt
to oust the jurisdiction.

35 The court there was dealing with the argument of ouster of jurisdiction
by the conclusive evidence clause and in rejecting that argument it
relied on the analogous situation of an arbitration where parties could
by contract make the acquisition of rights thereunder ‘dependent
upon the arbitrament or discretionary judgment of an ascertained or
ascertainable person’, ie the arbitrator or a tribunal other than
the court, and such a contract would not be considered as ousting the
jurisdiction of the court. There is nothing in the judgment to suggest
that an authorised person in issuing a certificate under a conclusive
evidence clause, as in that case, is performing the duty of an arbiter
‘whose arbitration the parties have agreed to accept’.

36 In our opinion, it cannot be said that Ms Monica Heng in certifying
the amount of indebtedness of the Company was performing the function
of an arbiter. She was a servant or agent of the appellants and not
an independent person. She was certainly not an arbiter resolving any
dispute between the appellants and the Company and was not under any
‘contractually prescribed duty’ to act as such. She acted
for the appellants in certifying the indebtedness of the Company, which
certification Yeo and the respondent on the one hand and the appellants
on the other had agreed would be used as evidence of the indebtedness
of the Company, and if so used would be conclusive evidence against
Yeo and the respondent.

37 We are reinforced in our view by the decision of the House of Lords
in Sutcliffe v Thackrah [1974] AC 727, where the architects were sued
by the building owner for having negligently certified in interim certificates
amounts in excess of what was due to the contractor under the building
contract and the building owner suffered a loss as a result thereof,
as the contractor subsequently went into liquidation and the building
owner could not recover the excess amount paid. Before the House of
Lords it was argued that even though the architects were not formally
appointed to act in the arbitral capacity, they nevertheless were required
to act in the capacity of an arbitrator or quasi-arbitrator in certifying
the amounts and that being so they were entitled to the like immunity
as that enjoyed by an arbitrator. This argument was rejected by the
House. It was held that the architects in issuing such certificates
did not act as arbitrators between the parties and that their duty was
to act fairly and they were liable to the building owner in negligence.
Lord Morris of Both-y-Gest said at p 751:
The fact that a building owner and contractor agree that they will treat
the certificates of the owner’s architect as conclusive evidence
that work has been duly completed does not itself establish that the
architect was an arbitrator between them. Neither does the circumstance
that by its very nature the architect’s function involves that
he will act impartially and fairly. He must certainly so act because,
there being a contract for work to be done according to the terms of
the contract, his function is to see that the contract is carried out.
But that does not without more make him an arbitrator. His duty is to
act fairly when exercising his professional skill in considering whether
work done satisfied the contract requirements as to work to be done:
if that circumstance constituted him an arbitrator then at almost every
stage he would be an arbitrator. His duty to act fairly does not at
all conflict with, but rather is a part of, his duty to safeguard and
look after the interests of the building owner who has employed him.

38 The purpose of a conclusive evidence clause is to enable the beneficiary
of the guarantee, normally a bank or financial institution, to dispense
with any proof of actual indebtedness of the principal debtor. It means
that, for the purpose of fixing liability of a surety, the indebtedness
of the principal debtor may be ascertained conclusively by a certificate:
Dobb v The National Bank of Australia Ltd (supra) at p 651. A certificate
issued under a conclusive evidence clause is conclusive as to both liability
and the amount of debt, in the absence of fraud or obvious error: Bangkok
Bank Ltd v Cheng Lip Kwong (supra) at p 8. Neither fraud nor obvious
error was pleaded in this case. In Dobbs v The National Bank of Australia
Ltd, the court said, at p 651:

It was contended, however, for the appellant that, upon its true construction,
the clause did not make the certificate conclusive of the legal existence
of the debt but only of the amount. It is not easy to see how the amount
can be certified unless the certifier forms some conclusion as to what
items ought to be taken into account, and such a conclusion goes to
the existence of the indebtedness. Perhaps such a clause should not
be interpreted as covering all grounds which go to the validity of a
debt; for instance, illegality, a matter considered in Swan v Blair
(1835) 3 Cl & Fin 610. But the manifest object of the clause was
to provide a ready means of establishing the existence and amount of
the guaranteed debt and avoiding an inquiry upon legal evidence into
the debits going to make up the indebtedness. The clause means what
it says, that a certificate of the balance due to the bank by the customer
shall be conclusive evidence of his indebtedness to the bank.

Default judgment

39 On 30 November 1993 the appellants entered judgment in default of
appearance in the action against the Company in the sum of $387,385.65
and interest thereon at the rate of 3.5% per annum above the prevailing
prime rate of the Development Bank of Singapore Ltd and costs. The appellants
rely also on this judgment to establish the indebtedness of the Company.

40 The learned judge held that the term ‘judgment’ in cl
3 does not include a default judgment but only a judgment obtained after
proof of indebtedness has been established. She considered that if the
phrase ‘any judgment’ were to be interpreted to include
a default judgment, a careless creditor could obtain judgment against
a principal debtor, who had absconded or refused to defend, for more
than what was actually due, and on that basis of such judgment would
obtain a judgment against the surety who would not be able to adduce
any evidence to dispute the amount of the principal debtor’s indebtedness.

41 With respect, we have some difficulty in accepting such reasoning
for not accepting a default judgment for the purpose of cl 3, because,
a fortiori, the same reasoning is applicable against accepting a certificate
of indebtedness. But such a document is conclusive evidence of the indebtedness
of the Company under cl 3. We agree with the learned judge that a careless
creditor could claim and enter judgment against the principal debtor,
who had absconded or refused to defend, for an amount more than what
he is entitled to; similarly such a creditor could certify in the certificate
of indebtedness more than what is actually due. In both cases the surety
may not be in a position to adduce evidence to dispute the claim; indeed
in most cases he would not be able to do so. However, these are the
risks which a surety has to accept, just as he has to accept the risk
of insolvency of the principal debtor. He has also to accept that where
a guarantee contains a conclusive evidence clause, as in this case,
the beneficiary of the guarantee — whether it be a bank or other
financial institution — is a person who can be relied upon to
act honestly in his claim: Bache & Co (London) Ltd v Banque Vernes
et Commerciale de Paris SA [1973] 2 Lloyd’s Rep 437, 440 and Bangkok
Bank Ltd v Cheng Lip Kwong [1990]
2 MLJ 5
, p 8; [1989]
SLR 1154
, p 1159. We can find no reason for limiting ‘judgment’
only to one that was obtained after proof of the indebtedness before
the court. A default judgment is good and enforceable unless and until
it is set aside.

Whether the guarantee was discharged

42 Counsel for the respondents argues that the guarantee was discharged
by reason of two variations to the facility extended to the Company,
which were not agreed to by the respondent. The first variation was
contained in the plaintiff’s letter of 19 June 1992, under which,
whilst the overall facility limit of $500,000 remained as specified
in the letter of 21 October 1991 (which the respondent had agreed),
the sub-limit in respect of Sembawang was increased from $150,000 to
$300,000 and a sub-limit of $100,000 was provided for Esso. The second
variation took place on 22 July 1992, when the appellants advanced payments
in the aggregate amounting to $550,583.80 which exceeded the $500,000
limit expressed in the letter of offer of 19 June 1992.

43 On this issue we need to consider the terms of the guarantee. Clause
1 of the guarantee, so far as material, provides that the guarantors
guaranteed the payment to the appellants of ‘all sums which are
or may become payable or due by the Company to [the appellants] together
with all interest thereon and any other charges’. This clause
is extremely wide and no limit is stated in the guarantee, and no reference
is made to either the letter of offer or the factoring agreement. It
is an ‘all money’ guarantee under which the guarantors guarantee
all moneys due and payable from the Company from time to time. Further,
by cl 2 the guarantee is not affected by any intermediate satisfaction
or payment by the Company and is to be a continuing guarantee and extends
to cover all sums of money which for the time being constitute the balance
to the appellants on any account and is to continue in full and force
and effect until all moneys guaranteed have been paid in full. Purely
on the construction of these terms the guarantee is not affected by
any variations of any arrangement made between the appellants and the
Company. The guarantee is good for all moneys due and payable by the
Company from time to time.

44 Next, there are cll 4 and 9 which made provisions for any variation
made between the appellants and the Company from time to time. These
two clauses, so far as material, provide as follows:

4 My/our liability hereunder shall not in anyway be discharged, diminished
or affected by:

(c) the … variation of any agreement which you may have with the
Company … and to such extent as may be necessary to give effect
to this subclause, this guarantee shall be treated as an indemnity;

9(i) Though as between the Company and myself/ourselves, I/we are sureties
only for the Company, yet as between us, I/we shall be deemed to be
principal debtors for all sums of monies the payment of which is hereby
guaranteed. Accordingly, I/we shall not be discharged nor shall my/our
liability be discharged by any thing whatever whereby my/our liability
would not have been discharged if I/we have been principal debtors.

45 The factoring agreement was silent on the limit of the facility provided
to the Company, but the limit was stated in the letter of offer. It
was clearly contemplated that the limit of the facility would be subject
to changes from time to time and this was understood by the respondent.
He himself was a party to the board resolution of the Company which
authorised him or Yeo to conclude with the appellants ‘such variations’
as he or Yeo ‘may deem desirable’. The evidence showed that
both the variations in question were negotiated and agreed to by Yeo,
and the Company had had the benefit of these variations.

46 Having regard to the wide terms of the guarantee we do not think
that the variations in question prejudiced the respondent and discharged
the guarantee. First the guarantee by reason of its express terms was
not affected by any variation made between the Company and the appellants.
Second, the variations fell within the scope of the variation provided
in cl 4. The first variation did not affect the limit of the facility.
The overall limit remained at $500,000 and only sub-limit in respect
of the debts to purchased from Sembawang was increased from $150,000
to $300,000 and $100,000 was provided as a sub-limit for the facility
in respect of the receivables due from Esso. The second variation increased
the limit by $50,000, and although this variation increased the limit
of the facility, it was nevertheless a variation and fell within the
scope of cll 4 and 9. The learned judge with some reluctance came to
the conclusion that such variation fell within cl 9(i) of the guarantee.
We think that it fell within cl 4(c) too.

Conclusion

47 As we have held, the letter of confirmation dated 9 December 1993
and the certified copy of the statement of account amounted to a certificate
under the conclusive evidence clause. The appellants are relying on
this certificate to establish their claim and they are entitled to do
so. The amount certified as due and payable as at 9 December 1993 was
$388,255.52.

48 In the result, the appeal is allowed and the judgment below is set
aside. There will be judgment for the appellants in the sum of $388,255.52
with interest at 3.5% per annum above the prevailing prime rate of the
Development Bank of Singapore Ltd from 10 December 1993 to the date
hereof. We award to the appellants the costs here and below. There will
be the usual consequential order for repayment to the appellants of
the deposit in court as security for costs.

Appeal allowed.

Reported by Wan Wai