DALAM MAHKAMAH RAYUAN MALAYSIA (BIDANGKUASA RAYUAN )
RAYUAN SIVIL NO. P-02(IM)(NCVC)-1211-05/2012
AFFIN BANK BERHAD
(dahulunya ‘BSN Commercial Bank (Malaysia) Berhad)
GOH HOCK HAI DAN … RESPONDEN
(Dalam Perkara Mengenai Mahkamah Tinggi Malaysia di Pulau Pinang
Guaman No. 22-NCVC -365-2011
Affin Bank Berhad
(dahulunya ‘BSN Commercial Bank (Malaysia) Berhad)
Goh Hock Chai DAN … Defendan
RAMLY BIN HJ. ALI, JCA ZAHARAH BINTI IBRAHIM JCA ANANTHAM KASINATHER, JCA
ANANTHAM KASINATHER, JCA DELIVERING JUDGMENT OF THE COURT
1. Sometime in July 1996, BSN Commercial Bank (Malaysia) Berhad had granted to one Handee Engineering and Consultancy Services Sdn Bhd (Principal Borrower) banking facilities in terms of Term Loan, Overdraft facilities and Tradeline Credits, totaling in the sum of RM 6,285,000. The Banking facilities were to be secured in the main by certain charges over land and the joint and several guarantees of the directors of the Principal Borrower, one amongst whom was the respondent in this appeal. The Principal Borrower defaulted on the facilities in 2001 and a demand was issued by the appellant pursuant to terms of the Letter of Guarantee on 3rd April 2001 on the guarantors (“the first demand”) for the settlement of the Principal Borrower’s outstanding liability then which was stated to amount to a total of RM 6,569,352.53 as at 28th February
2001. An action was then commenced by the appellant vide Penang High Court Guaman No. 22-200-2001 (“the 2001 Suit”) wherein the respondent in this appeal was named as the second defendant in that suit. The amount claimed was RM 6,620,291.57 together with various interests and costs as at 31st March 2001.
2. On 6th December 2004 by a Notice of Discontinuance, the appellant discontinued the 2001 suit against only the respondent in this appeal. The 2001 suit as aforesaid appears to have been maintained or continued by the appellant against the Principal Borrower and the remaining two guarantors, and Judgment entered against all of them only on 19th May 2010. On 28th February 2005, the appellant had issued a Certificate of Indebtedness which was to the effect that the amount due from the Principal Debtor (by then known as HGM Machinery Sdn Bhd) and from the guarantors (including the respondent in this appeal) as at 28th February 2005 was RM 7,023,217.43 inclusive of interest and other charges as of that date.
3. The appellant then on 5th April 2005 proceeded to file a fresh suit, namely, Penang High Court Guaman No. 22-183-2005 (“the 2005 Suit”) against the respondent in this appeal, as the sole defendant in this said 2005 suit. The claim in this 2005 action was to recover from the respondent the sum of RM 7,023,217.43 and further interest from 1st March 2005 and costs. On 20th October 2010, the appellant however also
withdrew this 2005 suit against the respondent with liberty (as it would appear from the Deputy Registrar’s notes of proceedings of that date) to file afresh. The reason offered by counsel for the appellant for the withdrawal of the 2005 suit against the respondent was that the appellant had realized that no ‘demand’ had been made on the respondent for the amount claimed in this 2005 suit as such.
4. On 25th February 2011, the appellant proceeded to issue a Letter of Demand on the respondent demanding that the respondent pay the appellant, under the terms of what was described there as a ‘Guarantee and Indemnity Agreement’ (not dated in the said Letter of Demand), the sum of RM 7,023,217.43 as at 28th February 2005 (“the second demand”). The amount demanded by the appellant in this second demand (25th February 2011) is the same amount as was stated in the Certificate of Indebtedness of 28th February 2005, that is some six years before. The respondent then moved the High Court to strike out the appellant’s claim for the sum of RM 7,023,217.43 on the grounds that the claim is barred by the statute limitation.
(The background facts set out herein are the same facts set out in the judgment of the Learned High Court Judge with the necessary modification)
5. The submission of counsel for the respondent is essentially that the appellant’s cause of action against the respondent as a guarantor under the Letter of Guarantee of 14th August 1997 had arisen at the time when the first demand (3rd April 2001) was made on the respondent. This first demand had not been withdrawn nor had it at anytime been declared to be an invalid demand. Accordingly, learned counsel for the respondent submitted that this first demand was and remained the ‘true demand’ for all intents and purposes against the respondent. In the circumstances, learned Council submitted that the six year period for purposes of limitation had to be calculated from the date of this demand, namely 3rd April 2001. When calculated in this manner, according to the learned counsel, the appellant’s claim is statute barred and consequently the claim is in abuse of the process of the court in that the appellant no longer had any actionable cause of action against the respondent (S.6 (1), Limitation Act, 1953).
6. Learned counsel for the appellant categorically maintained that she was relying on the second demand (25th February 2011) as the date for the calculation of the commencement of the period
of limitation. Counsel also contended that that since the 2001 suit had been withdrawn against the respondent (in this current appeal), the situation was akin to there being ‘no demand’ being made on the guarantee or subsisting against the Respondent and the first demand of 3rd April 2001 was no longer operative. The unreported case of Arab Malaysian Credit Berhad v. Ngui Ing Kang & 2 Ors (In the High Court of Sabah and Sarawak at Sibu Civil Suit No. 22-97 of1998)  1 LNS 98 was cited as authority for the proposition that in all cases where the first demand did not constitute a proper demand, the party required to issue the demand, was entitled to issue a fresh demand and it is the latter demand that would constitute the ‘real demand’. Counsel for the appellant however admitted that there had not been any express withdrawal by the appellant of the first demand in any event. Further counsel contended that since the subject “Letter of Guarantee” was a continuing guarantee, the appellant was free and entitled to issue a ‘demand’ on the respondent at any time and that the second demand dated 25th February 2011 was issued in that context and was to be treated as the ‘true demand’ made against the respondent for purposes of enforcement of the guarantee. The case of Sia Siew Hong v. Lim Gim Chian  3 CLJ 26 was cited as authority for the proposition that where the guarantee was a continuing one and the guarantor had agreed to the guarantee being enforced ‘at any time’, this would amount to the guarantor having agreed to abandon the statutory defence of limitation. Be that as it may, no evidence was led of any
payment having been made by the principal borrower into the account after the first demand and certainly there was no payment after the issuance of the certificate of indebtedness in 2005. This is evident from the fact that the amount demanded in the second demand is identical to the amount stated in the certificate of indebtedness.
7. Learned counsel for the appellant also raised in her written submission, the following two grounds:
a) that since the banking transaction included ‘charges over land’, the period before ‘limitation’ set in was in any case twelve years under section 21 of the Limitation Act, 1953, and / or;
b) that since the respondent (the guarantor) had in the terms of the guarantee instrument acknowledged that he would be deemed a ‘principal debtor’, the cause of action against the respondent arose independently of any ‘demand’ and this action could be pursued so long as the ‘debt’ of the Principal Borrower was established by the appellant.
DECISION OF THE COURT
8. At the outset, we wish to emphasize that our courts have always accepted the commencement of the period of limitation to be the date of the accrual of the cause of action. In the case of a contract of guarantee, the cause of action would invariably accrue on the date of the breach (see Nasri v. Mesh  1 MLJ 32). In the context of a demand guarantee, time commences to run from the date of demand. Justice Zakaria Yatim J (as he then was) pronounced the date of commencement in the case of a demand guarantee to be as follows: “in my opinion, when the above demand was made to the 2nd defendant, a cause of action arose against him. Therefore time started to run from the date of the letter of demand for the purpose of the Limitation Act 1953” (see Bank Bumiputera Malaysia Berhad v. Fu Lee Development Sdn Bhd & 7 Ors  2 MLJ202 at 204).
9. Since it is not in dispute that we are concerned here with a ‘demand guarantee’, it follows that for the purposes of the Limitation Act, the cause of action against the respondent accrued due from the date of the first demand.. This must necessarily mean that the 2011 action is statute barred. Learned counsel for the appellant sought to overcome this obstacle by contending that the first demand ceased to be valid notwithstanding the absence of any overt action by the appellant to withdraw the same, upon the withdrawal of the
2001 Suit. According to counsel, the withdrawal of the 2001 Suit had the effect in law of invalidating the first demand. Numerous authorities were cited by counsel including the case of Arab Malaysian Credit Berhad v. Ngui Ing Kang & 2 Ors (supra) as authority for this proposition.
10. With respect, we have carefully considered all the authorities cited by the learned counsel for the proposition set out in paragraph 9 above and are unable to agree with counsel. In our judgment, the case of Arab Malaysian Credit Berhad v. Ngui Ing Kang & 2 Ors (supra) is only relevant in cases where the first demand is invalid per se as in the case of Mok Hin Wah v. UMBS  CLJ REP 219 SC where the demand letters took the form of carbon copies. On the facts of the case of Arab Malaysian Credit Berhad v. Ngui Ing Kang & 2 Ors (supra), the learned Judge dismissed the claim because the amount claimed in the action was materially different from the amount stated in the Letter of Demand thereby causing His Lordship to rule that there had been no proper demand. According to His Lordship, the Letter of Demand was so “lacking in precision” as to amount to an invalid demand. Clearly, this is not the case with the first demand issued by the appellant in this case.
11. The issue before us, as before the Learned High Court Judge, was really one of which of the two demand letters represented the real or operative ‘demand ‘ to determine when the cause of action against the respondent arose and correspondingly the
time from which any statutory time bar under the Limitation Act 1953 had to be calculated. The learned High Court Judge following the decision of this court in Nik Che Kok @ Nik Soo Kok v. Public Bank  2 CLJ157 CA ruled that time began to run from the earliest time at which the action could have been brought by the appellant, which the learned judge ruled to be from the date of the first demand on the guarantor. With respect, we do not see any reason to disagree with His Lordship on this ruling particularly in the face of the pronouncements of Raus Sharif JCA (as His Lordship then was) to the following effect:
“Further, even if the guarantees are to be considered as an ‘on demand’ guarantee, it must be pointed out that in this case the respondent had launched the first suit against the principal borrower and all the three guarantors, the appellant included,
on the basis of the first Notice of Demand dated 23 December 1980. Based on this cause of action, final judgment had been entered against the principal borrower and two of the guarantors. In the circumstances, it would be untenable for the respondent to suggest that for the appellant alone, the cause of action did not accrue with the first notice of demand but was held in abeyance or postponed for about 11 A years until it issued the second notice of demand on 4th May 1992”.
in the case of Joseph Thambirajah v. Bank Buruh(M) Berhad  2 MLJ 773.
Accordingly , applying the principles of law enunciated by this court in Nik Che Kok @ Nik Soo Kok v. Public Bank (supra) and the observations of this Court in Joseph Thambirajah v. Bank Buruh(M) Berhad (supra), we are of the considered view that the learned High Court Judge was right in ruling the first demand to be valid and the 2011 action statute barred.
12. The second submission of learned counsel for the appellant was essentially that because the guarantee was a continuing guarantee, the appellant was entitled to make a second demand and for this reason, the second demand was valid irrespective of the validity or otherwise of the first demand. Much reliance was placed by counsel on the case of Sia Siew Hong v. Lim Gim Chian (supra) in support of this submission. With respect, we find no merit in this submission as the case of Sia Siew Hong v. Lim Gim Chian (supra) is clearly distinguishable on the facts. In that case, the guarantee was not a demand guarantee. A careful examination of pages 31 and 32 of the reported judgment of the Court of that case will reveal the absence of any need for a demand to enforce the guarantee. In any event, the learned judge’s ruling in that case that the action could be filed after six years was based on two grounds. First, because of the inclusion in the contract of guarantee of
words that the guarantee was enforceable “at any time”. Secondly, because the action was filed following the sale of the charged property at an auction. Against this backdrop, the defence of limitation was raised in the context of the action having been filed more than six years after the initial default by the principal debtor. His Lordship Justice Sri Ram (as he then was) in dismissing the defence of limitation had this to say:
“It is therefore clear that the respondents’ land was lost to them when it fell under the hammer at the public auction conducted pursuant to the order of High Court made on 9th August 1993. Accordingly, the loss which the respondent were entitled to recover by action upon the contract they had with the appellant occurred on that date and not at any earlier moment in time. The writ having been filed within six years from the said date, the respondents’ action was not barred by limitation”.
Thus, it is evident that the pronouncements of this court in Sia Siew Hong v. Lim Gim Chian (supra) do not support the submission of learned counsel for the appellant on the second issue.
13. We do not propose to deal with the third and fourth issues raised by learned counsel for the appellant because they have
been dealt with by the learned High Court Judge in a manner which appears to us to be correct in law.
For the reasons contained herein, we dismissed this appeal with costs and ordered the appellant to pay costs of RM 10,000 to the respondent. Deposit to be refunded to the appellant.
ANANTHAM KASINATHER JUDGE
COURT OF APPEAL MALAYSIA PUTRAJAYA
DATE OF DECISION: 6th SEPTEMBER 2012 DATED THIS: 8th FEBRUARY 2013
COUNSEL FOR THE APPELLANT:
Ms. Ong Wee En Tetuan Shahrizat Rashid & Lee Peguambela & Peguamcara Tingkat 7, Wisma Leader No. 8, Jalan Larut 10050 Pulau Pinang
COUNSEL FOR THE RESPONDENT:
Mr. V. Amareson Tetuan Amareson & Meera Peguambela & Peguamcara Tingkat 1, No. 10-A Lebuh King 10200 Pulau Pinang
1. Arab Malaysian Credit Berhad v. Ngui Ing Kang & 2 Ors (In the High Court of Sabah and Sarawak at Sibu Civil Suit No. 22-97 of1998)  1 LNS 98
2. Sia Siew Hong v. Lim Gim Chian  3 CLJ 26 CA
3. Nasri v. Mesh  1MLJ32
4. Bank Bumiputera Malaysia Berhad v. Fu Lee Development Sdn Bhd & 7 Ors  2 MLJ 202
5. Mok Hin Wah v. UMBS  CLJREP 219 SC
6. Nik Che Kok @ Nik Soo Kok v. Public Bank  2 CLJ 157 CA
7. Joseph Thambirajah v. Bank Buruh(M) Berhad  2 MLJ 773