United Overseas Bank (China) Limited, Chengdu Branch Siow Kwang Joon @ Siow Kwong Shang

JA-22NCC-22-04/2019 Kand. 238 13/03/2024 13:15:54 DALAM MAHKAMAH TINGGI MALAYA DI JOHOR BAHRU DALAM NEGERI JOHOR DARUL TA’ZIM, MALAYSIA GUAMAN NO: JA-22NCC-22-04/2019 ANTARA UNITED OVERSEAS BANK (CHINA) LIMITED, CHENGDU BRANCH …PLAINTIF DAN SIOW KWANG JOON @ SIOW KWONG SHANG (NO. K/P: 470608-01-5873) …DEFENDAN GROUNDS OF JUDGMENT [1] This is a suit by the Plaintiff for a sum of money arising from a personal guarantee executed by the Defendant dated 9.5.2014 in favor of the Plaintiff as security arising from a Facility Letter (dated 27.12.2012) and a Supplementary Facility (dated 9.5.2014) provided by the Plaintiff to Foh Chong (Guangxi) Chemical Co. Ltd (FCGC) of Renminbi (RMB) 92.5 million banking facility (FGCG Facilities). [2] The principal issue is whether there exists an agreement (referred to as “collateral agreement”) as alleged by the Defendant that was made verbally by the Plaintiff’s representative identified as ‘Kenny’ prior to signing of the said personal guarantee stipulating that Plaintiff will not Page 1 of 16 S/N o8iBqW5dn0Mxncc6ZgNmA **Note : Serial number will be used to verify the originality of this document via eFILING portal enforce the personal guarantee until Plaintiff has exhausted all avenues of recovering the outstanding debt from the borrower and other guarantors. [3] It is also the contention of the Defendant in refuting the personal guarantee dated 9.5.2014, that as the earlier Facility Letter dates 2012, the Defendant had in fact executed a guarantee as early as year 2012. Alternatively, the Defendant pleads that even if the 2014 guarantee exists, the Plaintiff would only act against the Defendant after it had exhausted all avenues against FCGC and other guarantors. With these issues taken together, it is therefore the contention of the Defendant that the Plaintiff had acted pre-maturely when enforcing the guarantee pledged by the Defendant. [4] This Court having perused the witnesses’ testimonies, the Plaintiff’s witness being Mr. Hu Wei (Tony) and the Defendant as witness himself, and the documentary exhibits tendered, allowed the claim by the Plaintiff, having been satisfied on the balance of probability that the Plaintiff has proven its case and the Defendant on the other end, has failed to prove the existence of the said ‘collateral agreement’. The reasons that formed the basis for this decision are produced below. [5] For ease of reference, all these documentary exhibits are annexed to the Plaintiff’s affidavit in support for summary judgment (enclosure 15) which was reversed on appeal by the Court of Appeal and ordered a trial of the suit. The respective documents marked as follows: “a) Facility Agreement exhibit “UOB(SJ)-1”; b) Supplementary Facility Agreement exhibit “UOB (SJ)-2”; Page 2 of 16 S/N o8iBqW5dn0Mxncc6ZgNmA **Note : Serial number will be used to verify the originality of this document via eFILING portal c) Personal Guarantee by the Defendant dated 9.5.2014 exhibit “UOB(SJ)-3”; and d) other corporate and individual guarantees “UOB(SJ)-5” to “UOB(SJ)-7” and “UOB (SJ)-4” respectively.” The Plaintiff’s case and this Court’s findings [6] SP1 Mr. Hu Wei (Tony) is a General Manager of UOB (China) Limited, Suzhou Branch. Prior to that, he was the Plaintiff’s Relationship Manager in 2006 before made a General Manager in 2015. The Plaintiff provided to FCGC, loan facilities “FCGC Facilities” of a variety types with different facilities interest rate. This can be seen from the Facility Letter tendered. Amongst other terms and conditions of the FCGC Facilities are: “a) if FCGC fails to pay any amount due and payable under the FCGC Facilities, FCGC shall be liable to pay overdue interest on the outstanding sum at the rate of an additional 50% of the Facilities Interest Rate (overdue interest); b) overdue interest arising from any overdue amount will be compounded at the end of each interest period applicable to that overdue amount and will be remain immediately due and payable; and c) FCGC shall be liable to pay all costs, fees and expenses incurred by the Plaintiff in recovering any money due and owing by FCGC under the FCGC Facilities.” [7] On 9.5.2014, the Defendant as one of the shareholders of FCGC and director of several companies of Foh Chong Group (the directorship and shareholding is as reflected in the Defendant’s own affidavit), executed a personal guarantee in favor of the Plaintiff as security under the FCGC Facilities (Guarantee). The terms and conditions of the Page 3 of 16 S/N o8iBqW5dn0Mxncc6ZgNmA **Note : Serial number will be used to verify the originality of this document via eFILING portal Guarantee, which to this Court all the terms and conditions imposes the same strength of focus and liability on FCGC and the Defendant, are as follows: “a) the Defendant agreed to pay all monies and discharge all obligations, liabilities, whether actual or contingent, due, owing or incurred by FCGC under the FCGC Facilities, including all liabilities in connection with commission, fees and other charges and all legal costs (on a solicitor and client basis) and other costs charges and expenses incurred by you in relation to FCGC or in enforcing or seeking to enforce any security or obtaining or seeking to obtain payment of all or any part of the monies or amounts guaranteed on a full indemnity basis; b) the total amount recoverable from the Defendant under the Guarantee shall be limited to principal sum of RMB95 million or its equivalent in whatever currency denominated as shall be required by the Plaintiff at the date of payment with interest and commission thereon and all costs, charges and expenses (including legal fees on a solicitor-client basis) incurred by the Plaintiff in recovering the monies due and owing by FCGC; c) a statement signed by the Plaintiff’s manager or any one of the Plaintiff’s officers as to the monies and liabilities for the time being due or incurred to the Plaintiff from or by FCGC shall be final and conclusive evidence against the Defendant of the indebtedness of FCGC to the Plaintiff for all purposes, including legal proceedings; d) any demand for payment or any other demand or notice under the Guarantee may be made by the Plaintiff’s manager or any one of the Plaintiff’s officers or by any persons or firm for the time being acting as the Plaintiff’s solicitors by letter sent by post addressed to the Defendant; Page 4 of 16 S/N o8iBqW5dn0Mxncc6ZgNmA **Note : Serial number will be used to verify the originality of this document via eFILING portal e) the Defendant shall be deemed as a principal debtor to the Plaintiff for all the monies, the payment of which is guaranteed under the Guarantee, and the Defendant shall not be discharged nor shall the Defendant’s liability be affected by any fact or circumstance or any act, thing, omission or means whatsoever, whereby the Defendant’s liability would not have been discharged if the Defendant had been principal debtors; and f) the Guarantee shall be governed by and interpreted in accordance with the laws of Malaysia.” [8] Of equal standing with these terms of the Guarantee is the undertaking by the Defendant in paragraph 18 of the said Guarantee, to indemnify the Plaintiff in full against all loss, damage, liabilities, costs and expenses whatsoever which the Plaintiff may sustain or incur as a result of or arising from the FCGC Facilities. [9] Apart from the guarantee by the Defendant, there are also other guarantees comprising of as follows: “a) one personal guarantee executed by Li Muk Kwai (brother in law of the Defendant) on 9.5.2014; b) 3 corporate guarantees by FCGC and FCGC of Chengdu and FCGC of Pengshan; all on 31.12.2012.” [10] The normal cause of event took place where FCGC utilized the FCGC Facilities but having done so, failed to fully settle the moneys due and owing under the said facilities. Despite demands by the Plaintiff, FCGC has failed to settle the moneys due and owing under the FCGC Facilities since 31.1.2015 being the sum of (in RMB currency) to-date as follows: Page 5 of 16 S/N o8iBqW5dn0Mxncc6ZgNmA **Note : Serial number will be used to verify the originality of this document via eFILING portal a. Principal RMB 61,580,961.92 b. Interest RMB 1,005,224.77 c. Overdue Interest RMB 21,643,455.75 d. Costs and expenses RMB 993,817.20 Total RMB 85,223,459.63 [11] SP1 in his testimony, denied the involvement of one ‘Kenny’ and Jian Yun Hao as contended by the Defendant in his statement of defence. ‘Kenny’ was alleged by the Defendant to have made certain ‘Warranties and Representations’ to the Defendant. SP1 in his evidence said that Kenny was a former General Manager of the Plaintiff when Plaintiff was first set up in 2006 but resigned and left his employment with the Plaintiff in 2009 (resignation letter produced) rendering it improbable for Kenny to do so. [12] As to Jiang Yun Hao, SP1 was Yun Hao’s team leader in 2007 when Yun Hao started work with the Plaintiff on 4.1.2007. Yun Hao only became Foh Chong Group’s Relationship Manager in the second half of 2007. Yun Hao resigned from the Plaintiff on 14.5.2010. [13] SP1 did not recall that he, together with Yun Hao had a meeting with the Defendant, Yang Ping and Zhang Zi Jie in 2006 as contended by the Defendant, said by the Defendant to have taken place at the reception/meeting room at the entrance of the Chengdu Branch that gave rise to the ‘Warranties and Representations’. SP1 said he knew Defendant when introduced briefly by Kenny in 2007 at the Chengdu Branch but there was no conversation on the FCGC Facilities. Page 6 of 16 S/N o8iBqW5dn0Mxncc6ZgNmA **Note : Serial number will be used to verify the originality of this document via eFILING portal [14] As to Yang Ping and Zhang Zi Jie, SP1 knew Yang Ping when he started to deal with him in 2007 as Foh Chong’s Relationship Manager whilst only knew Zhang Zi Jie on 10.3.2021 when Zhang Zi Jie visited Chengdu Branch. [15] The ‘Warranties and Representations’ alleged by the Defendant to have been made by Kenny was refuted by SP1 as Kenny had resigned in 2009 before the Guarantee was executed on 9.5.2014. For completeness, the ‘Warranties and Representations’ contained in the Bundle of Pleadings are as follows: “a) there would be five guarantors for the FCGC Facilities, i.e. three corporate guarantors and two individual guarantors including the Defendant; b) all five guarantors would execute a guarantee agreement containing identical terms as the guarantee that would be executed by the Defendant; c) the Plaintiff would only act against the Defendant after it had exhausted all avenues against FCGC and the other guarantors; and d) the Plaintiff would exhaust all avenues to recover any outstanding debt from FCGC and the other guarantors before it proceeded with any legal action against the Defendant wherein any such action would be for any alleged debt of FCGC less whatever that was received from FCGC and the other guarantors.” [16] SP1 in cross-examination, was referred to a letter dated 10.3.2000 suggesting that from the content of the said letter with terms as ‘security’ and ‘existing security’ present, there was already in existence a guarantee by the Defendant. SP1’s reply suggest that he was uncertain as the letter Page 7 of 16 S/N o8iBqW5dn0Mxncc6ZgNmA **Note : Serial number will be used to verify the originality of this document via eFILING portal was in fact just a term sheet, not a legal document coupled with the presence of word ‘proposed’ to suggest otherwise. This Court agrees that this shows it was at the discussion stage and therefore pre-mature to suggest there was already in existence a guarantee. [17] Therefore SP1’s stand that he was uncertain to conclude that the Defendant would have signed a guarantee around 27.12.2012 as suggested by counsel for the Defendant (as opposed to the date reflected in the Statement of Indebtedness prepared by the Plaintiff SP1 to be 9.5.2014) is credible. However, SP1 agreed that based on this letter dated 10.3.2000, the relationship of UOB Bank in China with Foh Chong had started since 2000. [18] SP1 further testified that actions against FCGC, Foh Chong (Pengshan) Chemical Co Ltd, Foh Chong (Chengdu) Chemical Co Ltd and Li Muk Kwai to enforce the guarantees under the FCGC Facilities were commenced with enforcement action by way of bankruptcy proceedings for recovery in all the corporate guarantees and default judgment obtained against individual guarantor Li Muk Kwai. [19] SP1 explained the absence of the relevant and necessary documents pertaining to the enforcement actions and default judgment arose because those documents were in the possession of the legal department and the bad debt department hence not produced. SP1 however maintained the stand that if required, he would see to it being furnished. With this reply from SP1, the matter on enforcement action then ends here. Page 8 of 16 S/N o8iBqW5dn0Mxncc6ZgNmA **Note : Serial number will be used to verify the originality of this document via eFILING portal Defendant’s case [20] It is an agreed fact that the Defendant executed a personal guarantee in favor of the Plaintiff as security under the FCGC Facilities. It is his testimony that he was merely a nominee director and became a guarantor upon being approached by Mr. Li Muk Kwai acting on a request made by the Plaintiff to Li. [21] Firstly, this Court observed that the letter dated 10.3.2000 from the Bank addressed the Defendant as Chairman and this is consistent with SP1’s earlier testimony that the Defendant being the principal of Foh Chong Group and not Mr. Li. In the absence of any evidence from SP1 and with Mr. Li not called as a witness, the only admissible evidence is limited to the fact that the Defendant was the principal but how or what moved him to be an individual guarantor as suggested by the Defendant’s evidence arose from the Plaintiff’s request made to Li, would amount to a belated disclosure as it was never suggested to the Plaintiff. [22] It is also important to note that the Defendant SD1 also said Li persuaded him to execute the guarantee on the basis that there were also other company (corporate) guarantors which would absorb any debt if things go wrong. This Court noted that the existence of the corporate guarantor was admitted by the Plaintiff in his affidavit in support for summary judgment application. [23] However, the absence of Li as witness to testify to the additional fact contended by the Defendant that these corporate guarantors would absorb the debt first prior to resorting the claim towards the Defendant falls within the scope of hearsay evidence and thus, inadmissible. Page 9 of 16 S/N o8iBqW5dn0Mxncc6ZgNmA **Note : Serial number will be used to verify the originality of this document via eFILING portal [24] The Defendant in his statement of defence and testimony claimed a person by the name of Kenny, had pledged orally a set of warranties and representations to the Defendant prior to the execution of the Defendant’s Guarantee. The warranties and representations made by Kenny as contended by the Defendant are as extracted earlier in paragraph 15 above. [25] Yet, this Court observed that despite its significant importance, there was no written confirmation put forward by the Defendant directed to Kenny or the Bank to address and verify the contents of the warranties and representations, that was said to have been made orally by Kenny. [26] When cross-examined, SD1 agreed that he did not meet Jiang Yun Hao and SP1 in 2006 but instead said he met them in 2004 before the setting up of the bank in China. SD1 further said that there was a demand made yet orally, to Kenny on the refusal by the Bank to honor the warranties and representations but no subpoena was issued to Kenny for his attendance in court, despite him (Kenny) now being an independent person to testify to that effect having resigned from the Plaintiff on 1.2.2009. [27] Ultimately, the version put forward by the Defendant is unsubstantiated, not supported by any other evidence, unlike that of the Plaintiff where resignation letter of Kenny was tendered. This moved an inference by this Court that it is highly improbable for Kenny to moot verbally the warranties and representations as suggested by the Defendant. Page 10 of 16 S/N o8iBqW5dn0Mxncc6ZgNmA **Note : Serial number will be used to verify the originality of this document via eFILING portal Determination by this Court [28] Having perused the pleadings filed particularly the Amended Statement of Defence and the Agreed Facts by the Defendant, this Court noted two diverse stands taken by the Defendant. In the Amended Statement of Defence, the Defendant in paragraph 7 contended that the Defendant did not execute the Guarantee dated 9.5.2014 but yet in the ‘Agreed Facts’, the Defendant admitted executing a personal guarantee in favor of the Plaintiff as security under the FCGC Facilities (the Supplementary Facility, inclusive). [29] The fact that Mr. Li also executed a guarantee dated 9.5.2014 makes it highly credible for this Court to come to a deduction that the Defendant had similarly executed a guarantee on the same date. This would have been necessitated by the amendments made to the Facility Letter issued earlier that appeared in the Supplementary Agreement dated 30.4.2014 that would have prompted the need for 2 new guarantors. [30] In addition, the ‘collateral agreement’ in the form of ‘warranties and representations’ were alleged to have been made orally by Kenny in 2006 to the Defendant in the presence of SP1 (Tony), Jiang Yun Hao, Mr. Li, Yang Ping and Zhang Zi Jie. Tony (SP1) did not recall such meeting. Most importantly, SD1 the Defendant himself similarly was not able to remember the said meeting. In addition, it is neither logical nor of any benefit for Kenny to make such representations when there never exist any such financial facility offered by the Plaintiff to FCGC at that point of time. [31] Furthermore, this Court having found that the existence of the oral collateral agreement not proven, proceeded to consider that even if Page 11 of 16 S/N o8iBqW5dn0Mxncc6ZgNmA **Note : Serial number will be used to verify the originality of this document via eFILING portal accepting that it exists and acting in a great caution, finds this Court in agreement with the submission by the Plaintiff that admission of collateral agreement would go against section 92 of the Evidence Act 1950 that provides as follows: “CHAPTER VI - EXCLUSION OF ORAL BY DOCUMENTARY EVIDENCE Section 92. Exclusion of evidence of oral agreement. When the terms of any such contract, grant or other disposition of property, or any matter required by law to be reduced to the form of a document, have been proved according to section 91, no evidence of any oral agreement or statement shall be admitted as between the parties to any such instrument or their representatives in interest for the purpose of contradicting, varying, adding to, or subtracting from its terms: Provided that— (a) any fact may be proved which would invalidate any document or which would entitle any person to any decree or order relating thereto, such as fraud, intimidation, illegality, want of due execution, want of capacity in any contracting party, the fact that it is wrongly dated, want or failure of consideration, or mistake in fact or law; (b) the existence of any separate oral agreement, as to any matter on which a document is silent and which is not inconsistent with its terms, may be proved, and in considering whether or not this proviso applies, the court shall have regard to the degree of formality of the document; (c) the existence of any separate oral agreement constituting a condition precedent to the attaching of any obligation under any such contract, grant or disposition of property, may be proved; Page 12 of 16 S/N o8iBqW5dn0Mxncc6ZgNmA **Note : Serial number will be used to verify the originality of this document via eFILING portal (d) the existence of any distinct subsequent oral agreement, to rescind or modify any such contract, grant or disposition of property, may be proved except in cases in which the contract, grant or disposition of property is by law required to be in writing, or has been registered according to the law in force for the time being as to the registration of documents; (e) any usage or custom by which incidents not expressly mentioned in any contract are usually annexed to contracts of that description may be proved if the annexing of any such incident would not be repugnant to or inconsistent with the express terms of the contract; and (f) any fact may be proved which shows in what manner the language of a document is related to existing facts.” [32] The existence of an oral collateral agreement was said by the Defendant to have been created in 2006 before the formation of the written FCGC Facilities in 2012 and 2014. The clear wordings of section 92 is extracted to be as follows: “no evidence of any oral agreement or statement shall be admitted as between the parties to any such instrument or their representatives in interest for the purpose of contradicting, varying, adding to, or subtracting from its terms”. [33] Surely, the reason on the part of the Defendant to admit this oral collateral agreement would be for this purpose and would go against the clear words of section 92. Even if taking the argument one step further that it falls under the exception provisos, the provisos ought to be read strictly so as not to go against the clear intention contained in the prohibition as stated above. Page 13 of 16 S/N o8iBqW5dn0Mxncc6ZgNmA **Note : Serial number will be used to verify the originality of this document via eFILING portal [34] The provisos suggest that the Court ought to exercise its discretion to admit oral collateral agreement if it falls under any of the provisos and the illustration that follows in the said provision will assist a smoother analysis. To begin, proviso (a) permits admission if it demonstrates a clear lack of element for a valid contract and illustration (b) exemplifies it for want of capacity or lack of consideration. [35] Proviso (b) maybe relevant to be considered by this Court ‘if the existing written contract contains omission and silent on a material point and the admission of the oral collateral agreement not inconsistent with the existing terms contain in the written agreement’. This Court having visited the testimonies of the witnesses and the documentary evidence, is of the view that in any commercial transactions involving financial facility that sees movement of cash from one party to another, a formal written contract must certainly be drafted with the aim that recovery in the event of default would be easy and plain sailing. This explains why, in this present case the additional individual guarantors were looped in to facilitate the amended ‘Financial Facility’. [36] Secondly, if the recovery action is subject to the consideration exercise depending on priority list of guarantors i.e. corporate over individual, then it would be to their interest (Mr. Li and the Defendant) to insist to have this term transparently written. The absence of a written term means the existing formal agreement is silent on this point and this Court ought not to permit reliance on or admission of this oral collateral agreement that is inconsistent with the existing formal FCGC Facilities terms and conditions to ‘pay on demand’ (see: Seven Seas Industries Sdn Bhd v Philips Electronic Supplies (M) Sdn Bhd & Anor [2008] 5 MLJ 157). Page 14 of 16 S/N o8iBqW5dn0Mxncc6ZgNmA **Note : Serial number will be used to verify the originality of this document via eFILING portal [37] Other provisos would be subject to the example as found in other illustrations as a means to guide in the interpretation of the provisos and a clear example can be seen in illustration (h). This Court, having done so arrives to the conclusion that it is not safe to admit the oral collateral agreement, having remind itself that firstly, the existence of this oral warranties and representations not proven by the Defendant on a balance of probability and secondly, this exercise on section 92 is merely an exercise in alternative should the first decision reached by this Court is flawed. [38] For all these reasons above, the relief sought by the Plaintiff is allowed. The Certificate of Indebtedness as annexed in affidavit-in- support for Summary Judgment enclosure 15 exhibit “UOB(SJ)-8” and cost is relied upon by this Court in coming to this decision. (see: Cempaka Finance Bhd v Ho Lai Ying (trading as KH Trading) & Anor [2006] 2 MLJ 685, FC). Signed (NURULHUDA NUR’AINI BINTI MOHAMAD NOR) Judge High Court of Malaya Johor Bahru Dated: 11th March 2024 Page 15 of 16 S/N o8iBqW5dn0Mxncc6ZgNmA **Note : Serial number will be used to verify the originality of this document via eFILING portal COUNSEL For the Plaintiffs: Andrew Chiew Ean Vooi (Nicola Tang Zhan Ying with him) (Chris Lim Yen Hao) Messrs. Lee Hishammuddin Allen & Gledhill Advocates & Solicitors Level 6, Menara 1 Dutamas Solaris Dutamas, No. 1 Jln Dutamas 50480 Kuala Lumpur For the Defendant: Ranjit Singh (K. C. Tho Hazel Siau with him) Messrs K. C. Tho & Partners Unit 23-06, Level 23 Menara Landmark No. 12 Jln Ngee Heng 80000 Johor Bahru Page 16 of 16 S/N o8iBqW5dn0Mxncc6ZgNmA **Note : Serial number will be used to verify the originality of this document via eFILING portal