[2017] 1 LNS 757
The Plaintiff’s action herein is for recovery of loan made by SMEDB to a TFT-R&D Sdn Bhd (“Borrower”) pursuant to a guarantee and indemnity given by the remaining Defendants. The first issue brought up by the Defendants is that it is uncertain whether the Guarantee is a guarantee or indemnity by reason that different consequences may arise as the result therefrom as provided in ss. 77 to 100 of the Contracts Act 1950. This is a question of construction of the Guarantee as to what its true nature is in law. It can be a guarantee, an indemnity or a hybrid of both. As held in Bank Negara Malaysia v. Mohd Ismail Ali Johor & Ors. The court is not prevented from construing and determining the nature of the Guarantee notwithstanding that this may be of some complexity. The Guarantee here by its provisions are more akin to that as found by the Federal Court in Andrew Lee Siew Ling v. United Overseas Bank (Malaysia) Bhd. The Federal Court has specifically construed principal debtor more widely as an indicia of an indemnity. This Guarantee is thus a hybrid of a guarantee and indemnity. Further, the Defendants also contended that the sum claimed by the Plaintiff included interest as well as penalty interest. Since the Borrower has been wound up, the outstanding sum as demanded by the Plaintiff is not claimable by virtue of s. 291(2) of the Companies Act 1965 read together with s. 43(6) of the Bankruptcy Act 1967 following United Malayan Banking Corp Bhd v. Lim Meng Hua [1988] 1 LNS 232; [1990] 1 MLJ 5. The Plaintiff concedes that this might have been the outcome if the Guarantee is purely and solely a contract of guarantee because the liability of the guarantor is co-extensive with that of the Borrower. This is however not the case herein because the Guarantee is also an indemnity by reason that the Defendants are plainly liable to the Plaintiff as principal debtors. The Plaintiff may also accordingly recover the interest as well as penalty interest by reason that the liability pursuant to a contract of indemnity is not hinged upon on the enforceability of the principal debt as there is no dependency on the obligation of a third person. The liability of the principal debtor under a contract of indemnity can therefore be similar or even more extensive than that of the liability of the principal borrower. Accordingly the Defendants would be correspondingly liable to the Plaintiff as that of the solvent Borrower would have been: see also Southeast Asia Special Asset Management Berhad v. Rojemah Ahmad & 2 Others [2015] 1 LNS 1179. Datuk Ganesan & Subashini acted for the plaintiff.