Teo v Vijayasundram: Co-Guarantor Liability & Misrepresentation in Indonesian Timber Venture

In 2005, in the High Court of Singapore, Teo Song Kwang and Seng Hup Realty Pte Ltd sued Vijayasundram Jeyabalan to recover losses from an Indonesian timber business venture and a guarantee claim. Teo claimed Vijayasundram was liable for a share of the business losses and one-third of a settlement Teo made with ING Bank on a guarantee they both signed. The court, presided over by Justice Tan Lee Meng, dismissed the claims related to the business losses due to insufficient proof of the amount lost. However, the court found Vijayasundram liable for one-third of the US$200,000 settlement Teo paid to ING Bank, as Vijayasundram benefited from the settlement, despite not being consulted. The court dismissed the plaintiffs' claim for contribution towards losses in the Indonesian timber business but allowed the claim related to the ING Bank guarantee.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Judgment for Plaintiff in part; claim dismissed in part.

1.3 Case Type

Civil

1.4 Judgment Type

Judgment

1.5 Jurisdiction

Singapore

1.6 Description

Teo sued Vijayasundram for losses in an Indonesian timber venture and a guarantee claim. The court dismissed most claims but found Vijayasundram liable for a portion of the guarantee settlement.

1.7 Decision Date

29 March 2005

2. Parties and Outcomes

Party Name	Role	Type	Outcome	Outcome Type	Counsels
Teo Song Kwang (alias Teo Richard)	Plaintiff	Individual	Claim Dismissed in part	Lost	Oon Thian Seng of T S Oon and Bazul Sophia Saw of T S Oon and Bazul
Seng Hup Realty Pte Ltd	Plaintiff	Corporation	Claim Dismissed	Lost	Oon Thian Seng of T S Oon and Bazul Sophia Saw of T S Oon and Bazul
Vijayasundram Jeyabalan	Defendant	Individual	Judgment against Defendant in part	Partial	Leong Wai Nam of Wong M Seow and JYP Chia Jamilah Ibrahim of Wong M Seow and JYP Chia

3. Judges

Judge Name	Title	Delivered Judgment
Tan Lee Meng	Judge	Yes

4. Counsels

Counsel Name	Organization
Oon Thian Seng	T S Oon and Bazul
Sophia Saw	T S Oon and Bazul
Leong Wai Nam	Wong M Seow and JYP Chia
Jamilah Ibrahim	Wong M Seow and JYP Chia

4. Facts

Teo and Vijayasundram were involved in an Indonesian timber business venture.
Teo claimed Vijayasundram was an equal partner, while Vijayasundram claimed he was only nominally involved.
Teo, Vijayasundram, and Hendrick Tay furnished guarantees to financial institutions for the business.
Teo settled a claim by ING Bank under a guarantee signed by him, Vijayasundram, and Tay for US$200,000.
Teo claimed Vijayasundram misrepresented that he had signed a guarantee, inducing Teo to invest more funds.
The accounts of Asiapac were qualified by the company’s auditors.
Teo did not consult Vijayasundram before settling the claim with ING Bank.

5. Formal Citations

Teo Song Kwang (alias Teo Richard) and Another v Vijayasundram Jeyabalan, Suit 406/2004, [2005] SGHC 60

6. Timeline

Date	Event
1979-01-01	Teo offered Vijayasundram a job in his lighting business.
1989-07-01	Asiapac Pte Ltd incorporated.
1990-07-02	Teo, Vijayasundram, and Hendrick Tay signed a memorandum of understanding regarding the purchase of shares in PT Profilindo Sejahtera.
1995-01-01	Vijayasundram left Teo’s lighting business.
1997-03-01	Decision made to sell assets in the Indonesian timber business.
1997-12-01	OCBC demanded repayment of US$563,803.01 from Teo.
1998-05-09	Teo paid OCBC US$264,596.86 in full settlement.
1998-01-01	District Court Suit No 50759 of 1998 filed.
1999-10-27	Hendrick Tay resigned as a director of Asiapac.
2002-03-01	ING Bank sued Teo in Singapore on a guarantee for US$700,000.
2003-04-01	Teo’s Malaysian solicitors demanded Vijayasundram pay two-thirds of the debt.
2004-01-01	Teo and Seng Hup commenced action against Vijayasundram.
2005-03-30	Judgment reserved.

7. Legal Issues

Liability of Co-Guarantors
- Outcome: The court held that Vijayasundram was liable for one-third of the settlement sum paid by Teo to ING Bank, despite not being consulted on the settlement, because he benefited from the settlement.
- Category: Substantive
- Sub-Issues:
  - Separate guarantee documents
  - Consultation on settlement agreement
- Related Cases:
  - [1998] 2 SLR 649
  - (1807) 14 Ves 160; 33 ER 482
Fraudulent Misrepresentation
- Outcome: The court found that Teo failed to prove that Vijayasundram made a fraudulent misrepresentation that induced him to inject more funds into the business.
- Category: Substantive
- Related Cases:
  - (1889) 14 App Cas 337

8. Remedies Sought

Monetary Damages
Contribution

9. Cause of Actions

Breach of Contract
Fraudulent Misrepresentation
Indemnity

10. Practice Areas

Commercial Litigation

11. Industries

Timber
Banking

12. Cited Cases

Case Name	Court	Affirmed	Citation	Jurisdiction	Significance
Prosperous Credit Pte Ltd v Gen Hwa Franchise International Pte Ltd	High Court	Yes	[1998] 2 SLR 649	Singapore	Cited to support the principle that co-guarantors can be liable to contribute towards a claim even if separate guarantee documents were signed, depending on the facts of the case and whether the documents were part of the same transaction.
Derry v Peek	House of Lords	Yes	(1889) 14 App Cas 337	England and Wales	Cited for the elements required to prove fraudulent misrepresentation, specifically that the defendant made a false representation knowingly, without belief in its truth, or recklessly, careless whether it be true or false.
Craythorne v Swinburne	Court of Chancery	Yes	(1807) 14 Ves 160; 33 ER 482	England and Wales	Cited for the equitable principle of contribution, which enables a guarantor to assume the burden of suretyship on the faith of an implied promise of contribution from his co-sureties.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute Name	Jurisdiction
No applicable statutes

15. Key Terms and Keywords

15.1 Key Terms

Guarantee
Co-guarantor
Indonesian timber business
Memorandum of understanding
Fraudulent misrepresentation
Settlement agreement
Asiapac Pte Ltd
PT Profilindo Sejahtera
ING Bank guarantee

15.2 Keywords

guarantee
co-guarantor
misrepresentation
timber business
settlement
contribution

17. Areas of Law

Area Name	Relevance Score
Guarantee	80
Credit and Security	75
Fraud and Deceit	70
Co-guarantors	70
Torts	65
Separate guarantee documents	65
Contract Law	60
Misrepresentation	60
Settlement Agreement	55
Breach of Contract	50

16. Subjects

Contract Law
Guarantees
Misrepresentation
Banking Law