Unanimous Decision by the Court of Appeal
On 14.10.2025, the Court of Appeal (comprising the Honourable Justices Dato’ Che Mohd Ruzima Bin Ghazali, Datuk Seri Mohd Firuz bin Jaffril, and Tuan Ong Chee Kwan) unanimously allowed our Client’s appeal and reinstated the Sessions Court’s judgment, which held the company’s Director personally liable under a Guarantee and Indemnity.
This appeal was argued by Jonathan Khaw, who represented our Client, a subsidiary of a China-listed construction group involved in modular building and formwork systems.
Background of the Case
The dispute arose from a commercial supply arrangement in which our Client supplied Self-Climbing Platform (SCP) modules for a high-rise construction project. Despite delivery and utilisation of the modules, the contracting company failed to pay the outstanding balance under the Sales Contract.
To secure payment, the company’s Director executed a Guarantee and Indemnity, assuming liability as principal debtor and guarantor. The Sessions Court found in favour of our Client, concluding that multiple payment demands had been made, through correspondence, WhatsApp messages, telephone calls, and personal meetings, and that the Director had acknowledged but ignored them.
However, on appeal, the High Court of Shah Alam set aside the Sessions Court’s judgment against the Director, ruling that our Client’s claim was ‘premature’ in the absence of a ‘formal written demand’, but nonetheless upheld judgment against the company only.
The appeal ultimately turned on a ‘familiar’ commercial question:-
- What amounts to a valid “demand” under an on-demand guarantee?
The Court of Appeal’s Findings
The Court of Appeal disagreed with the High Court’s reasoning and found that the Sessions Court’s factual findings were supported by the evidence. The Appellate Court held that the trial judge had correctly determined that the demands made through various forms of communication satisfied the “on demand” requirement under the said guarantee.
The Court of Appeal reaffirmed that the purpose of a demand is to notify the guarantor that payment is required, and that the law does not impose a rigid requirement for the demand to be in writing where actual notice has been given and acknowledged.
In doing so, the Court of Appeal emphasised that appellate courts should exercise restraint in disturbing findings of fact made by a trial court unless those findings are plainly wrong. Having found no such error, the Court reinstated the Sessions Court’s judgment in full and dismissed the cross-appeal.
Importance of the Decision
This decision provides valuable guidance on the operation of “on demand” clauses in personal guarantees. It confirms that Courts will focus on the substance of communication rather than its form, and that practical modes of communication, such as messaging applications and/or verbal requests, may suffice to constitute a valid demand, depending on the circumstances.
For businesses that extend credit and/or supply materials, the appellate’s decision emphasises the importance of maintaining contemporaneous records of communication. For guarantors, it highlights that liability may arise once a clear and unequivocal demand for payment has been made, even if not made in a formal written notice.
*Note: This article is provided solely for educational purposes and does not constitute legal advice.*
