Introduction
Had the defendants entered into contracts of guarantee?
Were the contracts of guarantee enforceable against the defendants under Singapore's laws?
Liability of defendants


Introduction

In Ultra Deep Subsea Pte Ltd v Zakri bin Alwi & Ors(1) the plaintiff's claim against the defendants was based on six agreements entered between July and October 2018, which were mainly for or related to the provision of services by the plaintiff and its associate company Ultra Deep Solutions Ltd (UDS) to Redtech Offshore Sdn Bhd (RTO). The agreements were as follows:

  • a Baltic and International Maritime Council (BIMCO) Time Charter Party for Offshore Service Vessels dated 5 July 2018 between UDS and RTO;
  • a contract dated 6 July 2018 between the plaintiff and RTO for the provision of services;
  • a credit application form dated 5 July 2018 submitted by RTO to the plaintiff for trading credit for the services with which the plaintiff provided RTO;
  • a BIMCO Time Charter Party for Offshore Service Vessels dated 2 October 2018 between the plaintiff and RTO;
  • a contract dated 3 October 2018 between the plaintiff and RTO for the provision of services;
  • a credit application form dated 3 October 2018 submitted by RTO to the plaintiff for trading credit for services provided by the plaintiff to RTO.

Under the agreements, the defendants were guarantors for all outstanding sums payable by RTO to the plaintiff and UDS. The plaintiff's claim included all sums owed by RTO to UDS as the plaintiff alleged that UDS had validly assigned those sums to it.

Had the defendants entered into contracts of guarantee?

The defendants contended that the agreements were not guarantees, but were instead credit application forms by RTO. The defendants submitted that they had not signed any formal and separate guarantee documents that would make them guarantors liable to the plaintiff.

The High Court found that the defendants knew that the agreements were indeed guarantees. The defendants (as the CEO and directors of RTO) had signed the sections that the plaintiff referred to in the agreements, which spoke extensively in legal jargon of guaranteeing the sums that RTO owed to the plaintiff. Therefore, the defendants had guaranteed to the plaintiff the sums owed by RTO to the plaintiff pursuant to the agreements.

Were the contracts of guarantee enforceable against the defendants under Singapore's laws?

The defendants submitted that the contracts of guarantee were not enforceable against them as the contracts were void for uncertainty due to the alleged conflict between some of the agreements.

The High Court agreed with the opinions of the experts of both parties and held that the guarantees were enforceable against the defendants under Singapore's laws. Even if there were inconsistencies or differences between the agreements, the correct approach would be to reconcile the two and, as a last resort, apply the contra proferentum rule before taking the last measure of avoiding the contract.

Thus, the contracts of guarantee were not void or unenforceable.

Liability of defendants

The plaintiff had solely relied on statements of accounts to prove the amounts claimed against the defendants and had not adduced any invoices.

The Court held that the failure of the plaintiff to produce the invoices was prejudicial to the defendants. The plaintiff could not rely on a letter of demand to prove the amount that the defendants owed to the plaintiff and/or UDS.

Therefore, despite the finding that the defendants were guarantors for RTO, the Court dismissed the plaintiff's claim as the plaintiff had failed to prove the amount of its claim.

For further information on this topic please contact Rajasingam Gothandapani at Shearn Delamore & Co by telephone (+60 3 2027 2911) or email ([email protected]). The Shearn Delamore & Co website can be accessed at www.shearndelamore.com.

Endnotes

(1) [2022] MLJU 2566.