OCBC v Daewoo Singapore: Frustration of Contract & Guarantee Obligations Due to Financial Crisis

Oversea-Chinese Banking Corp Ltd (OCBC) sued Daewoo Singapore Pte Ltd and Daewoo Korea for defaulting on a US$7 million loan. Daewoo Singapore, the borrower, and Daewoo Korea, the guarantor, claimed the contract was frustrated due to the Asian financial crisis and Korean government policies. The High Court of Singapore allowed OCBC's appeal, finding no frustration of contract and granting judgment for OCBC.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Appeal allowed.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

OCBC sued Daewoo Singapore for loan default, with Daewoo Korea as guarantor. The defendants claimed frustration of contract due to the Asian financial crisis, but the court ruled against them.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Oversea-Chinese Banking Corp LtdPlaintiffCorporationJudgment for PlaintiffWon
Daewoo Singapore Pte LtdDefendantCorporationClaim DismissedLost
Daewoo KoreaDefendantCorporationClaim DismissedLost

3. Judges

Judge NameTitleDelivered Judgment
Lim Teong QweeJudicial CommissionerYes

4. Counsels

Counsel NameOrganization
Herman JeremiahHelen Yeo & Partners
Tan Cheng YewTan Cheng Yew & Partners

4. Facts

  1. OCBC granted Daewoo Singapore a US$7 million loan.
  2. Daewoo Korea guaranteed the loan.
  3. Daewoo Singapore defaulted on the loan repayment.
  4. OCBC demanded payment from both Daewoo Singapore and Daewoo Korea.
  5. Daewoo Singapore and Daewoo Korea claimed frustration of contract due to the Asian financial crisis.
  6. Daewoo Korea cited Korean government policies to reduce debt equity ratios as a reason for non-payment.

5. Formal Citations

  1. Oversea-Chinese Banking Corp Ltd v Daewoo Singapore Pte Ltd and Another, Suit 1477/1999, [2000] SGHC 104

6. Timeline

DateEvent
OCBC granted Daewoo Singapore a short term loan of US$7m.
Daewoo Korea gave a guarantee for the loan.
OCBC demanded payment of US$7,014,104.51 from Daewoo Singapore.
OCBC gave notice of default to Daewoo Korea and demanded payment.
Action commenced to recover the loan and interest due.
Judgment issued for OCBC.

7. Legal Issues

  1. Frustration of Contract
    • Outcome: The court held that the Asian financial crisis and Korean government policies did not constitute frustration of contract.
    • Category: Substantive
    • Sub-Issues:
      • Impossibility of performance
      • Fundamentally different situation
    • Related Cases:
      • [1952] AC 166

8. Remedies Sought

  1. Monetary Damages

9. Cause of Actions

  • Breach of Contract
  • Breach of Guarantee

10. Practice Areas

  • Commercial Litigation
  • Banking Litigation

11. Industries

  • Banking
  • Finance

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Re North Otago Dairy Co Ltd, ex p JB MacEwan & CoSupreme CourtYes[1905] 24 NZLR 748New ZealandCited regarding the implied term of a contract where a company's power to carry on business is taken away.
King v Michael Faraday & Partners LtdNot AvailableYes[1939] 2 All ER 478England and WalesCited regarding a situation where the condition on which a contract was made was that there should be a salary out of which a sum should be paid.
Metropolitan Water Board v Dick, Kerr & CoHouse of LordsYes[1918] AC 119United KingdomCited regarding an implied term of a contract which excuses a party from performing the contract in certain circumstances.
Tamplin Steamship Co Ltd v Anglo-Mexican Petroleum Products Co LtdHouse of LordsYes[1916] 2 AC 397United KingdomCited in relation to the principle of implied terms in contracts.
British Movietonews Ld v London and District Cinemas LdHouse of LordsYes[1952] AC 166United KingdomCited regarding the interpretation of a contract in light of unexpected events and whether the contract continues to bind the parties.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
No applicable statutes

15. Key Terms and Keywords

15.1 Key Terms

  • Frustration of contract
  • Guarantee
  • Asian financial crisis
  • Korean Won devaluation
  • Corporate workout programme
  • Debt equity ratio
  • Undue preference

15.2 Keywords

  • Loan
  • Guarantee
  • Frustration
  • Financial Crisis
  • OCBC
  • Daewoo

17. Areas of Law

Area NameRelevance Score
Guarantor90
Frustration90
Guarantees and indemnities80
Guarantee80
Debtor and Creditor80
Contract Law70
Breach of Contract70
Performance of Contract70
Banking and Finance60
Interpretation of contractual terms60
Bankruptcy50

16. Subjects

  • Contract
  • Banking
  • Finance