BANK PEMBANGUNAN MALAYSIA BERHAD SPRING HILL BIOVENTURES SDN BHD

BANK PEMBANGUNAN MALAYSIA BERHAD SPRING HILL BIOVENTURES SDN BHD

The Court held the impugned letters are contracts of guarantee under s79 (the principal debtor's request may be implied from surrounding documents and conduct), the letters do not impose an express obligation on the creditor to notify the surety of default, and variations to the facilities made without the surety's consent discharged the surety under section 86 (discharge as to transactions subsequent to the variation). Accordingly the Respondent was released from liabilities under the 1st Term Loan with effect from the variation date (23.10.2009) and had previously been released in respect of the 2nd Term Loan with effect from 26.7.2010; appeal allowed in part and costs awarded to the...

Citation
W-02(NCC)(W)-1721-08/2017 (Mahkamah Rayuan)
Parties
Appellant / Plaintiff / Creditor: Bank Pembangunan Malaysia Berhad; Respondent / 2nd Defendant / Surety: Spring Hill Bioventures Sdn Bhd; 1st Defendant / Borrower: Alpha Biologics Sdn Bhd
Court
NCC
Jurisdiction
Malaysia
Judgment Date
3 February 2020
Case Number
W-02(NCC)(W)-1721-08/2017 (Mahkamah Rayuan)
Procedural Posture
Civil Appeal (contracts/banking) / Court of Appeal Judgment on Appeal From High Court
Outcome
Appeal allowed in part. High Court order dismissing claim on 1st Term Loan set aside in part; Respondent released from liabilities in respect of the 1st Term Loan from 23.10.2009 and in respect of the 2nd Term Loan from 26.7.2010; agreed costs RM10,000 awarded to Appellant.
Legal Topics
Indemnity Vs Guarantee, Discharge of Surety by Variation (s86), Discharge by Giving Time/indulgence (s88), Notice/demand Obligations, Construction of Commercial Documents
Source Language
Malay/English
Contracts Banking Law Suretyship Civil Procedure Contract Interpretation Indemnity Vs Guarantee Discharge of Surety by Variation (s86) Discharge by Giving Time/indulgence (s88) +2 more

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Parties

Bank Pembangunan Malaysia Berhad

Appellant / Plaintiff / Creditor

Spring Hill Bioventures Sdn Bhd

Respondent / 2nd Defendant / Surety

Alpha Biologics Sdn Bhd

1st Defendant / Borrower

Procedural Posture

Civil Appeal (contracts/banking) / Court of Appeal Judgment on Appeal From High Court

Legal Issues

  1. 1 Whether the impugned letters of undertaking are contracts of indemnity (s77) or contracts of guarantee (s79)
  2. 2 Whether variations to the loan facilities without the surety's consent discharged the surety under sections 86 and/or 88 of the Contracts Act 1950
  3. 3 Whether the creditor was obliged by the impugned letters to notify the surety of the borrower's default and to demand payment during the tenure of the facilities

Ratio Decidendi

The Court held the impugned letters are contracts of guarantee under s79 (the principal debtor's request may be implied from surrounding documents and conduct), the letters do not impose an express obligation on the creditor to notify the surety of default, and variations to the facilities made without the surety's consent discharged the surety under section 86 (discharge as to transactions subsequent to the variation). Accordingly the Respondent was released from liabilities under the 1st Term Loan with effect from the variation date (23.10.2009) and had previously been released in respect of the 2nd Term Loan with effect from 26.7.2010; appeal allowed in part and costs awarded to the...

Court Disposition

Appeal allowed in part. High Court order dismissing claim on 1st Term Loan set aside in part; Respondent released from liabilities in respect of the 1st Term Loan from 23.10.2009 and in respect of the 2nd Term Loan from 26.7.2010; agreed costs RM10,000 awarded to Appellant.

Orders

  • Respondent released/discharged from liabilities under the 1st Term Loan with effect from variation date 23 October 2009 (section 86 Contracts Act 1950)
  • Respondent released/discharged from liabilities under the 2nd Term Loan with effect from variation date 26 July 2010 (section 86 Contracts Act 1950)