Article

Note: Requiring an LC in a transaction with Telematics, Inc. (Beneficiary), a U.S. corporation, but unable to obtain it under his own credit, Sadacharamani a/l Govindasamy retained G. Narayanan a/l Gopala Panniker (Broker) to find an entity that was willing to lend its credit facilities. Broker arranged for Glenford Pte Ltd. (Surety/ Applicant) to apply for an LC from Standard Chartered Bank, Singapore (Issuer). When its fee of US$95,000 was not paid, Broker sued. After a trial in which the liability and existence of the LC were at issue, the Kuala Lumpur High Court entered judgment in favor of Broker against Sadacharamani a/l Govindasamy (Judgment Debtor).

Although Judgment Debtor had not applied for a stay of execution, Judgment Debtor moved for an injunction to stay collection of the judgment when Broker sought to place him into bankruptcy. The Kuala Lumpur High Court, Tengku Maimun binti Tuan Mat, J., dismissed the motion.

Judgment Debtor based this claim for an injunction on its suspicion of fraud on the part of Broker due to discovery of a different Issuer LC application form and a subsequent investigation. The investigation revealed: (i) that a person allegedly connected with Issuer stated orally, but would not state in writing, that no LC had been issued; (ii) that a search of company records in Singapore did not reveal any record for Applicant; and (iii) a written confirmation from Beneficiary that the LC was not executed.

While noting that a judgment can be impeached based on deliberate fraud by the prevailing party, the Judge noted that the party seeking to impeach the judgment must show proof of fraud. The Judge noted that the allegations of fraud were contested: (i) the Judge dismissed as inadmissible the summary of an oral representation by Issuer's employee whose relationship to the transaction and Issuer were not disclosed; (ii) the Judge noted that a variation in the form application, given that it was made in 1998 "does not in itself show that fraud has been practised." "There is no evidence to show that it is not open for the [Issuer] to vary its Application Form"; and (iii) the Judge noted that the name of the Applicant for which the company search had been done differed from the name used by Broker in its complaint and pointed to evidence that a company in that name had been incorporated in Singapore since 1980.

Noting the timing of the application for injunction in relation to the bankruptcy notice and that Judgment Debtor had raised "suspicions, surmises and conjecture," but not facts or legitimate inferences, the Judge concluded that Judgment Debtor was "trying to evade bankruptcy proceedings through the back door and this amount[ed] to abusing the process of [the] court." Accordingly, the Judge ruled that these issues were barred by the doctrine of res judicata.

Comment:

The claim of fraud was properly refused. However raised, it should be tested by a rigorous standard.

[JEB/plc]

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