Periasamy Ramachandran v Sathish: Indemnity & Contribution Rights Among Co-Guarantors
Periasamy Ramachandran and Nallathamby Poongkoddy (Plaintiffs) sued Sathish s/o Rames and Cradle Wealth Solutions Pte Ltd (Defendants) in the High Court of the Republic of Singapore, seeking an indemnity from Cradle as the principal debtor and contribution from Sathish as a co-guarantor after the plaintiffs discharged a loan liability. The court considered the basis and scope of the rights to an indemnity from a principal debtor and to contribution from co-guarantors. The court granted the defendants unconditional leave to defend.
1. Case Overview
1.1 Court
High Court of the Republic of Singapore1.2 Outcome
The plaintiffs were granted unconditional leave to defend.
1.3 Case Type
Civil
1.4 Judgment Type
Judgment
1.5 Jurisdiction
Singapore
1.6 Description
Plaintiffs sought indemnity from a principal debtor and contribution from a co-guarantor after discharging a loan liability. The court considered the rights to indemnity and contribution.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Periasamy Ramachandran | Plaintiff | Individual | Leave to defend granted | Neutral | Bernard Sahagar s/o Tanggavelu |
| Nallathamby Poongkoddy | Plaintiff | Individual | Leave to defend granted | Neutral | Bernard Sahagar s/o Tanggavelu |
| Sathish s/o Rames | Defendant | Individual | Leave to defend granted | Neutral | Muhammad Hariz Bin Badrul Jamali Tahir, Muhammed Riyach Bin Hussain Omar |
| Cradle Wealth Solutions Pte Ltd | Defendant | Corporation | Leave to defend granted | Neutral | Muhammad Hariz Bin Badrul Jamali Tahir, Muhammed Riyach Bin Hussain Omar |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Elton Tan Xue Yang | Assistant Registrar | Yes |
4. Counsels
| Counsel Name | Organization |
|---|---|
| Bernard Sahagar s/o Tanggavelu | Lee Bon Leong & Co. |
| Muhammad Hariz Bin Badrul Jamali Tahir | H C Law Practice |
| Muhammed Riyach Bin Hussain Omar | H C Law Practice |
4. Facts
- The plaintiffs guaranteed a loan to Cradle, which was named as borrower on the loan documents, and mortgaged their home as further security.
- The first defendant, a director of Cradle, was a co-guarantor alongside the plaintiffs.
- The plaintiffs and Cradle entered into a formal investment agreement, under which the plaintiffs would invest a sum of money into Cradle and expect a certain monthly rate of return.
- The parties allegedly orally agreed that the loan monies would be used by the plaintiffs for the purpose of their investment in Cradle.
- The parties allegedly orally agreed that the monthly pay-outs from the investment would also include the instalments required to service the loan.
- Cradle defaulted in the repayment of the loan.
- The lender exercised its rights under the guarantee against the plaintiffs, who then sold their home and used the proceeds to discharge Cradle’s liability.
5. Formal Citations
- Periasamy Ramachandran and another v Sathish s/o Rames and another, Suit No 132 of 2020 (Summons No 1862 of 2020), [2020] SGHCR 8
6. Timeline
| Date | Event |
|---|---|
| Letter of Offer dated | |
| Term Loan Agreement dated | |
| Guarantee executed | |
| Loan disbursed to Cradle via bank transfer | |
| Plaintiffs received letter of demand from Lender's solicitors | |
| Lender commenced HC/OS 1361/2019 against the plaintiffs and the first defendant | |
| Completion of sale of Property | |
| Assistant registrar held outstanding interest payable by the plaintiffs was $230,634 | |
| Plaintiffs commenced this suit | |
| Plaintiffs filed HC/SUM 1862/2020 | |
| Hearing date | |
| Hearing date | |
| Judgment reserved |
7. Legal Issues
- Right to Indemnity
- Outcome: The court found that there was a fair or reasonable probability that the plaintiffs would not be entitled to seek an indemnity as against Cradle.
- Category: Substantive
- Related Cases:
- [2020] SGHC 173
- [2009] EWCA Civ 413
- [1953] 1 WLR 573
- Right to Contribution
- Outcome: The court found that there was a fair or reasonable probability that the first defendant has a real or bona fide defence, which is that there is some agreement, understanding or common intention between the parties that the first defendant is not in a position of equality with the plaintiffs as co-guarantors with respect to the Loan, with the consequence that it is inequitable for the plaintiffs to seek contribution from the first defendant.
- Category: Substantive
- Related Cases:
- [2005] SGHC 60
- [2009] SGHC 195
- [1991] SGHC 113
- (1807) 33 ER 482
- (1787) 1 Cox 318
- (1995) 38 NSWLR 116
8. Remedies Sought
- Indemnity
- Contribution
9. Cause of Actions
- Breach of Guarantee
- Claim for Indemnity
- Claim for Contribution
10. Practice Areas
- Commercial Litigation
11. Industries
- Finance
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Berghoff Trading Limited and others v Swinbrook Developments Limited and others | English Court of Appeal | Yes | [2009] EWCA Civ 413 | England and Wales | Cited as a parallel case where a partnership was not required to indemnify its partners who had guaranteed the repayment of a loan extended to the partnership by a bank. |
| Re Aathar Ah Kong Andrew | High Court | Yes | [2020] SGHC 173 | Singapore | Cited for the principle that a guarantor has a right to be indemnified or reimbursed by the principal debtor after the guarantor makes payment to the creditor. |
| Teo Song Kwang (alias Teo Richard) and Another v Vijayasundram Jeyabalan | High Court | Yes | [2005] SGHC 60 | Singapore | Cited for the principle that a guarantor who pays a creditor is entitled to call upon his co-guarantors to contribute towards the payment. |
| Tng Kay Lim v Wong Fook Yew and Another | High Court | Yes | [2009] SGHC 195 | Singapore | Cited for the principle that a guarantor who pays a creditor is entitled to call upon his co-guarantors to contribute towards the payment. |
| Ban Hin Lee Bank Berhad v Gan Boon Wah and Others (Chew Sing Hoong and Others, Third Parties) | High Court | Yes | [1991] SGHC 113 | Singapore | Cited for the principle that a guarantor who pays a creditor is entitled to call upon his co-guarantors to contribute towards the payment. |
| Anson v Anson | English High Court | Yes | [1953] 1 WLR 573 | England and Wales | Cited as an authority supporting the existence of the right to indemnity and providing a useful explanation of the origins of the right. |
| Ritzland Investment Pte Ltd v Grace Management & Consultancy Services Pte Ltd | Singapore Court of Appeal | Yes | [2014] 2 SLR 1342 | Singapore | Cited for the principle that there is a “fair or reasonable probability” that there is a relevant parallel to Berghoff with the result that the parties may be taken to have excluded any implied right on the part of the plaintiffs to seek an indemnity against Cradle. |
| Duff v Coughlin | Supreme Court of Canada | Yes | (1914) 50 S.C.R. 100 | Canada | Cited for the principle that unless precluded by agreement express or implied or by some equity or estoppel arising from the conduct of the parties the surety is entitled to require the principal debtor to discharge his obligation to the creditor in so far as that may be necessary to relieve the surety. |
| Wong Chin Juan (trading as SE Automobile Investment) v Absolute Euromotors Pte Ltd and others | High Court | Yes | [2010] SGHC 1 | Singapore | Cited for the principle that the right to contribution arises not as a matter of contract but equity. |
| Craythorne v Swinburne | Court of Chancery | Yes | (1807) 33 ER 482 | England and Wales | Cited for the principle that the right to contribution arises not as a matter of contract but equity. |
| Dering v Earl of Winchelsea | Court of Exchequer | Yes | (1787) 1 Cox 318 | England and Wales | Cited for the availability of contribution between co-guarantors who were not even aware of each other’s existence when they provided their guarantees. |
| Official Trustee in Bankruptcy v Citibank Savings Ltd | Supreme Court of New South Wales (Equity Division) | Yes | (1995) 38 NSWLR 116 | Australia | Cited for guidance on equity’s approach toward the right of contribution. |
| Bater and Anor v Kare | Supreme Court of Canada | Yes | [1964] SCR 206 | Canada | Cited for the principle that where two persons are under an obligation to the same performance, though by different instruments, if both share the benefit which forms the consideration, they must divide the burden; if only one gets the benefit he must bear the whole. |
| Day v Shaw and another | English High Court (Chancery Division) | Yes | [2014] EWHC 36 (Ch) | England and Wales | Cited for the principle that a court could regard a shareholder in the company which had borrowed the money as someone who had taken the benefit of the loan. |
| Lim Kim Yiang and another v Foo Suan Seng and others | Court of Appeal | Yes | [1991] 2 SLR(R) 141 | Singapore | Cited for the well-established prohibition against implication in such circumstances. |
| Akfel Commodities Turkey Holding Anonim Sirketi v Townsend, Adam | Court of Appeal | Yes | [2019] 2 SLR 412 | Singapore | Cited for the principle that while the plaintiffs have established a prima facie case for judgment, the defendants have demonstrated the existence of a fair or reasonable probability of a real or bona fide defence, and therefore ought to be granted unconditional leave to defend. |
13. Applicable Rules
| Rule Name |
|---|
| Order 83 of the Rules of Court (Cap 322, R 5, 2014 Rev Ed) |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| No applicable statutes | |
15. Key Terms and Keywords
15.1 Key Terms
- Guarantee
- Indemnity
- Contribution
- Co-guarantor
- Principal debtor
- Loan agreement
- Investment agreement
- Private Placement Agreement
- Alleged Oral Agreement
15.2 Keywords
- guarantee
- indemnity
- contribution
- co-guarantor
- loan
- singapore
- high court
16. Subjects
- Guarantees
- Indemnities
- Loans
- Banking
- Finance
17. Areas of Law
- Credit and Security
- Guarantees and Indemnities
- Contract Law
- Equity