Chiong Hoe Kean v 1. ) Chiong Hoe Keat 2. ) Alliance Bank Malaysia Berhad

Case Significance

Holds that technical objections to the execution of a bank guarantee — allegations of forgery, an incorrect address and witnessing irregularities — were insufficient to displace the presumption of due execution, so the guarantor was bound and judgment entered for the bank at RM7,289,524.37.

This High Court (Shah Alam) decision determines two suits heard together arising from the same factual background concerning the validity of a signature affixed to a bank guarantee. One suit was filed by the borrower, who challenged the enforceability of the guarantee, while the other was instituted by Alliance Bank Malaysia Berhad seeking to enforce it. Given the commonality of facts and issues, the court ordered that the two suits be heard together.

The borrower's case was that the signature on the Joint and Several Letter of Guarantee was a forgery, so that the instrument was void and unenforceable, and he pointed to alleged procedural defects including an incorrect address and irregularities in the witnessing process by the Notary Public. The bank's case rested on the presumption that the security documents had been duly executed and were binding, and it maintained that the guarantee had been duly executed, that the signature was authentic, and that the borrower was bound by its terms. The dispute therefore turned on the authenticity of the signature and the effect of the alleged procedural irregularities, engaging sections 101, 67 and 73(2) of the Evidence Act 1950 concerning the burden of proof and the comparison of signatures.

The court held that the technical objections raised regarding the execution of the document were not sufficiently compelling to invalidate the Letter of Guarantee, particularly given the nature of the document and the bank's position as a bona fide lender. It found that the guarantor, having signed the Letter of Guarantee, was bound by its terms, and that the arguments of abuse of process and double recovery raised in the enforcement suit were not sustainable, the bank being entitled to pursue the available avenues to recover the outstanding debt. In the result the borrower's suit was dismissed with costs, and judgment was entered in favour of Alliance Bank against the defendants for the sum of RM7,289,524.37 in the enforcement suit.