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G. Liability of 1^st and 2^nd Defendants is not dependent on Borrower’s liability and Borrower’s liquidation

32. 
    I refer to clause 17 of the 3 Guarantees (Clause 17) as follows:
    

“Though as between [1^st and 2^nd Defendants] and the [Borrower] [1^st and 2^nd Defendants] are sureties only for the [Borrower], yet as between [1^st and 2^nd Defendants] and [Plaintiff] [1^st and 2^nd Defendants] shall be deemed to be principal debtors for all the monies, the payment of which is hereby guaranteed and accordingly shall not be discharged nor shall [1^st and 2^nd Defendants’] liability be affected by any fact or circumstance or any act thing omission or means whatsoever, whereby [1^st and 2^nd Defendants’] liability would not have been discharged if [1^st and 2^nd Defendants] had been the principal debtors.”

(emphasis added).

33. 
    At the last page of the 3 Guarantees (whereupon the 1^st and 2^nd Defendants signed), there was a “Notice of Guarantors” which stated as follows:
    

“1. By signing this document, [1^st and 2^nd Defendants] may be liable instead of or as well as the [Borrower] for all monies due and owing by the [Borrower] to [Plaintiff] from time to time (Paragraph 1).”

(emphasis added).

34. 
    Clauses 17 and 18 read with Paragraph 1 clearly provided that the 1^st and 2^nd Defendants are principal debtors vis-à-vis the Plaintiff.
    

35. 
    In Andrew Lee Siew Ling v United Overseas Bank (M) Bhd [2012] 3 MLJ 449, at 459, the respondent bank (the Plaintiff in this case) relied on, among others, 2 clauses of the guarantee in that case which are identical to Clauses 17 and 18. The Federal Court held in Andrew Lee Siew Ling, at p. 460:
    

“It is our considered view that in the present case the appellant, being a person who has given a guarantee and more importantly an indemnity, is primarily liable for losses which the principal borrower could not have been made liable. His liability is not dependent or secondary to the liability of the principal borrower. He is a principal debtor himself. The liability under a contract of indemnity does not depend on whether the principal debt is enforceable. It has no reference in law to the obligation of any third person. In essence, the liability of the person who has given an indemnity can be more extensive than that of the liability of the principal borrower (see the cases of (1) Yeoman Credit Ltd v Latter & Anor [1961] 2 All ER 294 and (2) Chung Khiaw Bank Ltd v Soi Huan & Ors [1986] 1 MLJ 188).”
(emphasis added).

36. 
    In view of Clauses 17 and 18 (as interpreted by the Federal Court in Andrew Lee Siew Ling) as well as Paragraph 1, I reject the contention of the 1^st and 2^nd Defendants that the liability of the 1^st and 2^nd Defendants is contingent or conditional on the Plaintiff’s proof of the Borrower’s liability to the Plaintiff under the Banking Facilities. My decision is fortified by Clause 1 (the words “whether actual or contingent”) and Clause 11.1 (the words “whether such liabilities be present future actual contingent”).
    

37. 
    Clauses 4 (Clause 4), 6 (Clause 6) and 14.1 (Clause 14.1) of the 3 Guarantees provide as follows:
    

“4. Should the [Borrower] become … insolvent or being an incorporated company be wound up or liquidated, [Plaintiff] may prove in the … insolvency or winding up or liquidation of the [Borrower] for the whole amount outstanding against the [Borrower] to the exclusion of [1^st and 2^nd Defendants’] rights to be subrogated to [Plaintiff] in respect of any part payments made by [1^st and 2^nd Defendants] hereunder and no money or dividend so received by [Plaintiff] shall be treated as received in respect of this Guarantee or otherwise in relation to [1^st and 2^nd Defendants], but the full amount hereby guaranteed shall be payable by [1^st and 2^nd Defendants] until [Plaintiff] shall have received from all sources … on the ultimate balance outstanding against the [Borrower]. …

6. This Guarantee shall not be considered as satisfied by any intermediate payment or satisfaction of the whole or any part of any sum or sums of money owing as aforesaid but shall be a continuing security and shall extend to cover the ultimate balance from time to time owing to [Plaintiff] by the [Borrower] in any manner whatsoever notwithstanding the … liquidation or other incapacity or any change in the constitution of the [Borrower] or [1^st and 2^nd Defendants] …
14. This Guarantee shall not be determined or in any way prejudiced by:-
[14.1] any change in the [Borrower] … whether by reason of … liquidation … or otherwise but shall enure and be available for all intents and purposes as if the resulting … company or concern has been the one whose obligations were originally guaranteed”
(emphasis added).

38. 
    Based on Clauses 4, 6 and 14.1, it is clear that the Borrower’s liquidation does not affect the liability of the 1^st and 2^nd Defendants to the Plaintiff under the 3 Guarantees. Accordingly, the 3 Guarantees do not require the Plaintiff to file a POD with the Borrower’s liquidator. This construction is supported by clause 10 of the 3 Guarantees (Clause 10) which reads as follows:
    

“[Plaintiff is] to be at liberty but not bound to resort for [Plaintiff’s] own benefit to any other means of payment at any time and in any order as [Plaintiff thinks] fit without in consequence diminishing [1^st and 2^nd Defendants’] liability to [Plaintiff] hereunder and [Plaintiff] may enforce this Guarantee for the payment of the ultimate balance after resorting to other means of payment or for the balance due at any time notwithstanding that other means of payment have not been resorted to and in the latter case, without entitling [1^st and 2^nd Defendants] to any benefit from such other means of payment so long as any money remains due or payable (whether actually or contingently) from the [Borrower] to [Plaintiff] and in addition, [Plaintiff] shall be at liberty to require payment by [1^st and 2^nd Defendants] without taking any proceedings first to enforce such payment by the [Borrower]”

(emphasis added).
H. Obligation of 1^st and 2^nd Defendants to indemnify Plaintiff

39. 
    It is clear from the wording of Clauses 1 and 18 that the 1^st and 2^nd Defendants have an obligation to indemnify the Plaintiff irrespective of the Borrower’s liability under the Banking Facilities. In the following cases, the Court of Appeal decided that the contractual provisions in question gave rise to an obligation to indemnify and those provisions were not merely “guarantee” obligations:
    

(a) Sia Siew Hong, at 33-34; and

(b) Leong Weng Choon v Consolidated Leasing (M) Sdn Bhd [1998] 3 MLJ 860, at 865-866.

40. 
    Section 77 CA defines a contract of indemnity as follows:
    

“A contract by which one party promises to save the other from loss caused to him by the conduct of the promisor himself, or by the conduct of any other person, is called a “contract of indemnity”.”

41. 
    I am of the view that the distinction between a contract of indemnity (as defined in s 77 CA) and a contract of guarantee (as defined in s 79 CA) may not be as important as the actual terms and conditions of the contract in question. As stated above, the nature and extent of the parties’ rights and obligations are dependent on the wording of the contract which the parties have freely made.
    

I. Joint and several liability under 3 Guarantees

42. 
    Clause 22 of the 3 Guarantees (Clause 22) provides as follows:
    

“Where this Guarantee is signed by more than one person, any liability arising under this Guarantee shall be deemed to be the joint and several liability of such persons …”

(emphasis added).

43. 
    Clause 22 empowers the Plaintiff to proceed with This Application against the 1^st, 2^nd and/or 3^rd Defendant as the Plaintiff deems fit. In any event, the Plaintiff has already obtained the 3^rd Defendant’s Default Judgment. The joint and several liability of co-guarantors is illustrated in the majority judgment of the Court of Appeal in AEH Capital Sdn Bhd v AM-EL Holdings Sdn Bhd & Another Appeal [2008] 4 MLJ 487, at 516.
    

J. Plaintiff can set off under 3 Guarantees

44. 
    Clauses 10 and 11.1 conferred power on the Plaintiff to set off any amount from the sum due from the 1^st and 2^nd Defendants under the 3 Guarantees. Accordingly, the Plaintiff was entitled under Clauses 10 and 11.1 to set off the following amounts:
    

(a) HBTA’s Set-off;

(b) amount in the Sinking Fund;
(c) Borrower’s FD;
(d) 1^st Defendant’s FD;
(e) proceeds from Government Contract; and
(f) FD Interest
(Plaintiff’s Set-off).

45. 
    It is to be noted that the Plaintiff had stated in its affidavit that despite the Plaintiff’s Set-off, the 1^st and 2^nd Defendants still owed sums under the 3 Guarantees (Outstanding Sums).
    

K. Can there be Alleged Set-off under 3 Guarantees?

46. 
    Unlike the Plaintiff’s Set-off which is expressly allowed in the 3 Guarantees, the following clauses in the 3 Guarantees do not permit any set-off by the 1^st and 2^nd Defendants against the Outstanding Sums:
    

“[11.2] no part of the Credit Balances referred to in [Clause 11.1] shall be repayable to [1^st and 2^nd Defendants] or otherwise except with [Plaintiff’s] prior consent (Clause 11.2) …

19. All sums payable by [1^st and 2^nd Defendants] shall be paid to [Plaintiff] in full … without set off or counterclaim or any restriction condition or deduction whatsoever (Clause 19)”
(emphasis added).

47. 
    Clause 6 clearly stipulates that the 3 Guarantees are a “continuing security” which “shall not be considered as satisfied by any intermediate payment or satisfaction of the whole or any part of any sum” owing under the 3 Guarantees.
    

48. 
    In view of Clauses 6, 11.2 and 19, I am unable to accept the Alleged Set-off.
    

49. 
    The Alleged Set-off is also rejected on the following grounds:
    

(a) the Plaintiff had adduced affidavit evidence that the Alleged Set-off had already been taken into account by the Plaintiff in computing the Outstanding Sums;

(b) there are 3 admissions of indebtedness in this case (3 Admissions of Indebtedness) which clearly shows that there is no merit in the Alleged Set-off. I will discuss the 3 Admissions of Indebtedness later in this judgment; and
(c) except for HBTA’s Letter dated 27.6.2005, there is no documentary evidence to prove the Alleged Set-off. I do not attach much weight to HBTA’s Letter dated 27.6.2005 because that letter was given before the -

(i) execution of the 2^nd and 3^rd Guarantees;

(ii) 3 Admissions of Indebtedness; and
(iii) Settlement (which was later defaulted by the Borrower).
L. 3 Admissions of Indebtedness

50. 
    The strongest evidence which substantiates the Outstanding Sums and refutes the Alleged Set-off, is the 3 Admissions of Indebtedness as follows:
    

(a) the Borrower sent a letter dated 22.2.2012 to the Plaintiff (Borrower’s Letter dated 22.2.2012). The Borrower’s Letter dated 22.2.2012 was signed by the 1^st Defendant as the Borrower’s Chief Executive Officer (CEO) and stated the following -

“Date: 22 FEB 2012
THE MANAGER

[Plaintiff]

…
RE: BANKING FACILITIES

We refer to our meeting on 16 Feb 2012 with regards (sic) to global settlement of the above accounts.
I have been informed that in total the group and the undersign owed the bank approximately 23 million.

…

Further more I am requested to service and pay down my personal account to approved limit and service the said account.

…

We trust you would hold all legal proceedings and facilitates us to complete our project.
We look forward to your support.

…

Yours faithfully,

[Borrower]
… … … …

[1^st Defendant]

[CEO]”
(emphasis added);
(b) RBA’s Letter dated 13.9.2012 -
“13^th September 2012 Strictly Without Prejudice
[Plaintiff’s solicitors]

…
RE: 1) [1^st Suit]

…

Reference is made to the above matter … We further refer to [Plaintiff’s Letters dated 24.8.2012 and 13.9.2012] …
… We have been instructed by our client that on a strictly without prejudice, our client agreeable (sic) to accept all terms and conditions as stated in [Plaintiff’s Letters dated 24.8.2012 and 13.9.2012].
As such we require your kind cooperation to withdraw [1^st Suit] forthwith.

…

cc Client

…

Attn: [1^st Defendant]

(your phone message dated 13^th September 2012 to Dato’ Rabinder Singh [counsel for defendants in the 1^st Suit] is referred)”
(emphasis added); and
(c) a letter dated 18.3.2013 from Saron Holdings Sdn. Bhd. (SHSB) to the Plaintiff (SHSB’s Letter dated 18.3.2013) -
“[SHSB]

…

DATE: 18 MARCH 2013

[Plaintiff]

…

RE: BANKING FACILITIES GRANTED TO [SHSB] & [Borrower]

…

Please be informed that we will settle the amount due to you as in your above letters in the month of April 2013 as we are expecting getting (sic) our funds from JKR soon. Currently we have paid you diligently.
Please kindly stop any legal proceedings as we are sincere to settle the above matter.

…
Yours faithfully,

… … … …

[1^st Defendant]

Executive Chairman”
(emphasis added)”

51. 
    I am aware that RBA’s Letter dated 13.9.2012 is marked “strictly without prejudice”. Nonetheless this letter is admitted as evidence and considered for the purpose of This Application because –
    

(a) there was already a Settlement which led to the discontinuance of the 1^st Suit. The Federal Court in Malayan Banking Bhd v Foo See Moi [1981] 2 MLJ 17, at 18, held that “without prejudice” letters which led to a settlement of disputes were admissible as evidence; and

(b) RBA’s Letter dated 13.9.2012 was expressly referred to in paragraph 6.6 the Plaintiff’s 1^st Affidavit and was also exhibited therein. Yet, the 1^st and 2^nd Defendants did not object to the admissibility of RBA’s Letter dated 13.9.2012. In fact, the 1^st and 2^nd Defendants filed an affidavit which “disputed all the paragraphs” in the Plaintiff’s 1^st Affidavit. It is clear that the 1^st and 2^nd Defendants have waived their right to object to the admissibility of RBA’s Letter dated 13.9.2012 – please see the Singapore High Court’s judgment in AB Chew Investments Pte Ltd lwn Lim Tjoen Kong [1989] 3 MLJ 328, di 331-332.

52. 
    I made reference to SHSB’s Letter dated 18.3.2013 because that letter expressly mentioned the Borrower’s indebtedness under the Banking Facilities and was signed by the 1^st Defendant. Furthermore, the 1^st and 2^nd Defendants did not object to the admissibility of SHSB’s Letter dated 18.3.2013.
    

53. 
    I attach great weight to the 3 Admissions of Indebtedness because -
    

(a) there was no letter from the 1^st and 2^nd Defendants to withdraw or deny the 3 Admissions of Indebtedness; and

(b) RBA’s Letter dated 13.9.2012 constituted evidence of the Settlement which was carried out by the Plaintiff’s subsequent discontinuance of the 1^st Suit.

54. 
    In KM Quarry Sdn Bhd v Ho Hup Construction Co Bhd [2006] 7 MLJ 203, at 218-221, the High Court affirmed a summary judgment given by the learned senior assistant registrar (SAR) on the ground that there was an admission of indebtedness by the defendant company in that case.
    

M. No manifest error in Plaintiff’s Certificate of Indebtedness

55. 
    Clause 12 of the 3 Guarantees (Clause 12) provides as follows:
    

“A statement signed by [Plaintiff’s manager] or any one of [Plaintiff’s officers] as to the monies and liabilities for the time being due or incurred to you from or by the [Borrower] shall be final and conclusive evidence against [1^st and 2^nd Defendants] of the indebtedness of the [Borrower] to [Plaintiff] for all purposes including legal proceedings.”

(emphasis added).

56. 
    Firstly, I refer to the Federal Court’s judgment in Cempaka Finance Bhd, at p. 691-692, which followed an earlier Federal Court case of Citibank NA v Ooi Boon Leong & Ors [1981] 1 MLJ 282, at 284 -
    

“In the result, the Court of Appeal took the position that the conclusiveness of the certificate of indebtedness exh P3 was binding only upon the parties and that the court would still have to determine whether sufficient evidence had been adduced to prove quantum and the correctness of the amount claimed. With respect, such a proposition goes against the entrenched principles enunciated by Raja Azlan Shah CJ (Malaya) (as His Highness then was) in Citibank NA v Ooi Boon Leong & Ors [1981] 1 MLJ 282 when he said, inter alia:

We have often said in this court many a time that where the issues are clear and the matter of substance can be decided once and for all without going to trial there is no reason why the assistant registrar or the judge in chambers, or, for that matter, this court shall not deal with the whole matter under the RSC O 14 procedure. In the present case, the guarantee contains a clause which enables the bank by producing a certificate of indebtedness by its officer to dispense with legal proof of the actual indebtedness of the respondents. … It means that, for the purpose of fixing liability of the respondents, the company's indebtedness may be ascertained conclusively by a certificate.

The above dictum establishes firmly the conclusive nature and extent of a certificate of indebtedness. A certificate of indebtedness operates in the field of adjectival law. It excuses the plaintiff from adducing proof of debt. Such a certificate shifts the burden onto the defendant to disprove the amount claim.

In the instant case, the relevant cll 27 and 7.03 of the loan agreement and guarantee agreement respectively are sufficiently clear. A clause of this nature has been described as a conclusive evidence clause. Such a clause has been held to be binding and valid by courts in Australia and England. In Dobbs v National Bank of Australiasia (1953) 53 CLR 643 the Australian court made the following observation which we think is instructive:

… The bank could recover without the production of a certificate if, by ordinary legal evidence, it proved the actual indebtedness of the customer. But the (conclusive evidence) clause, if valid, enables the bank by producing a certificate to dispense with such proof.

It means that for the purpose of fixing the liability of a surety, the customer's indebtedness may be ascertained conclusively by a certificate. … 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 certificate of indebtedness, exh P3, issued in accordance with cll 27 and 7.03 aforesaid, are lucid enough. There is nothing to indicate or suggest any manifest error on the face of the said certificate nor is any fraud shown.”
(emphasis added).

57. 
    Learned counsel for the 1^st and 2^nd Defendants relied on the High Court’s decision in Oriental Bank Bhd v Jaafar Sidek Mohd Salam & Ors [1990] 2 CLJ (Rep) 585, at 586-587, which held as follows:
    

“I consider that as guarantors, the defendants are entitled to know the true extent of the principal borrower’s liability for after all, their own liability is secondary to that of the principal borrower. Moreover, unlike the normal run of things, where the principal borrower is a company and the guarantors its directors, the principal borrower in this case is a private person who benefitted solely from the overdraft and whose dealings with the plaintiff may well be conducted without any conceivable knowledge of the defendants.

As for the plaintiff’s objection that the application was nothing more than an attempt to go behind clause 19 of the guarantee, I do not consider there is any merit to that objection as the presence of a conclusive evidence clause, per se, cannot prevent the guarantors from questioning the correctness or otherwise of the account sought to be produced as conclusive evidence against them. This is more so when the guarantors have no say in the affairs of the principal borrower. …
Then again there is the imposition of the interest rate of 13.75% per annum at monthly rests. Under clause 1 of the guarantee, the defendants had agreed to pay interest at the rate or rates from the time being agreed between the 1st defendant and the plaintiff. It is not disputed that such rate was agreed at 3.75% per annum above the plaintiff’s base lending rate. There is documentary evidence to show that the plaintiff’s base lending rate had been reduced to 7% per annum in which case the plaintiff is only entitled to charge interest at 10.75% and not 13.75% as is now claimed. In the light of such apparent likelihood of the 1st defendant’s account being incorrect, the application cannot be intended to have the effect of circumventing clause 19 of the guarantee. For the clause to operate against the defendants, the plaintiff must first establish that any certificate it issues on the 1st defendant’s indebtedness can be accepted as correct and I consider that this is a condition precedent which must be fulfilled by the plaintiff. In this case, the defendants have given me good reasons to question the accuracy of the plaintiff’s certificate issued under clause 19, and under such circumstances I consider that the certificate can no longer be regarded as being conclusive as evidence against the defendants in these proceedings. I do not see anything objectionable to the defendants requesting whether the 1st defendant enjoyed any other facility from the plaintiff prior to the overdraft now being claimed. Neither can it be regarded as oppressive for the plaintiff to disclose its base lending rate for the periods specified by the defendants. The defendants had sought verification of the true amount due to the 1st defendant and as I have stated, as guarantors under the guarantee they had executed, their liability is very much dependant on the 1st defendant’s true state of indebtedness.”
(emphasis added).

58. 
    It is pertinent to note the following material facts of Oriental Bank Bhd -
    

(a) the plaintiff bank had already obtained summary judgment from the learned SAR against the borrower and guarantors (at p. 586). The borrower had been adjudged a bankrupt but the guarantors had appealed against the SAR’s summary judgment to the learned judge (Appeal);

(b) pending the disposal of the Appeal, the guarantors had applied for further and better particulars (FBP) of the borrower’s indebtedness to the plaintiff bank (at p. 586); and
(c) the guarantors had adduced documentary evidence to show that the plaintiff bank’s base lending rate (BLR) had been reduced and the plaintiff bank could not charge a higher interest (at p. 587).

59.