Singapore: Are Guarantors Penalised More Heavily Than The Borrower In Case Of The Borrower's Default?

Last Updated: 25 July 2018
Article by Doreen Sim and Yin Wei Lee

An analysis of Pereira, Dennis John Sunny v United Overseas Bank Ltd [2017] SGCA 62 (Pereira)

Guarantors are key elements of many loans – they reduce the need for borrowers to provide collaterals while still giving creditors security of repayment, sometimes by offering their own assets as security for the loans granted to the borrowers. While creditors may choose to seek repayment directly from the guarantor in case of the borrower's default by, amongst others, enforcing a mortgage taken out against the guarantor's property, should courts still consider whether there is a reasonable prospect that the guarantor may be able to redeem the mortgage in full before enforcing the mortgage against him?

The High Court and the Court of Appeal considered this question in Pereira, Dennis John Sunny v United Overseas Bank Ltd [2017] SGCA 62 (Pereira) and the Court of Appeal ultimately held that it would have jurisdiction to grant a stay of execution of an order for possession under a mortgage against a guarantor if there is a reasonable prospect that the guarantor would be able to redeem the mortgage in full. The effect of this decision is to accord parallel treatment to both the borrower and the guarantor in terms of the enforcement of mortgages against them, thereby upholding fairness to the guarantor and preserving the commercial viability of providing guarantees.

Below, we explain (A) facts of the Pereira case, (B) the difference in the approach taken by the High Court and the Court of Appeal and (C) the commercial implications of these two decisions.

A. Facts of the Pereira Case

The United Overseas Bank Ltd (UOB) granted loan facilities to a company (Borrower) which was majority-owned by Mr Pereira. The loan facilities were secured by personal guarantees provided by Mr Pereira (the Guarantor), whose liability under those guarantees was in turn secured by a mortgage over his properties. Subsequently, the Borrower defaulted on the repayment under the loan facilities.

UOB then applied to the court for an order that the Guarantor deliver possession of the properties, which was granted on 24 August 2016 and stayed until 30 November 2016 with respect to one of the properties (the Property). However, even so, the Guarantor could not deliver possession of the Property on the scheduled date.

Therefore, the Guarantor applied for a stay of execution of the order "until 31st March 2017 or such earlier time that the [company's shares] [are] sold or otherwise dealt with, with liberty to apply for an extension if an impending sale is in the midst of completion".

The Guarantor argued that the stay should be granted as there was a reasonable prospect that the Borrower would be able to repay its debt to the UOB soon with a fresh injection of funds into the Borrower if the prospective offer for the acquisition of its shares went through. The Guarantor's application was dismissed by the Assistant Registrar, whose decision was upheld on appeal to the High Court. The Guarantor then appealed to the Court of Appeal.

B. Difference in the approach taken by the High Court and Court of Appeal

The High Court dismissed the Guarantor's application for a stay of execution on three grounds:

  1. Since UOB did not have to enforce the debt against the Borrower before seeking remedies against the Guarantor, it was irrelevant whether there was a reasonable prospect that the Borrower would be able to repay its debt to UOB.
  2. The High Court distinguished an earlier case, Hong Leong Finance Ltd v Tan Gian Huay and another [1999] 1 SLR(R) 755, on the basis that it dealt with the direct enforcement of security between a borrower and a creditor, where the borrower was given a short reprieve to satisfy his debt if there was a reasonable prospect of him doing so. However, there was no legal basis for a guarantor to require a creditor to wait for the borrower's repayment before enforcing against him due to a reasonable prospect of such repayment. Otherwise, the commercial value of a guarantee would be defeated.
  3. In any case, there was no evidence of a reasonable prospect of the company in satisfying its debt to UOB.

While the Court of Appeal affirmed the High Court's decision not to grant the Guarantor a stay of execution, it did so on a different ground. Specifically, the Court of Appeal rejected both the first and second grounds of the High Court's decision. While a creditor may elect whom to enforce the debt against, once he has so chosen and the enforcement involves the realisation of a mortgage, the court may stay the execution of an order for possession by the creditor for a short period of time if there is a reasonable prospect of the mortgagor redeeming the mortgage in full. The court may grant the stay irrespective of whether the mortgagor is the borrower or the guarantor.

However, the Court of Appeal ultimately held that while a stay of execution could in principle be granted in favour of the Guarantor, the stay was not granted on the basis that the short reprieve had already been spent.

C. Commercial Implications

The Court of Appeal's approach to grant a short reprieve to both the borrower and the guarantor prior to the enforcement of mortgage against them on the ground of reasonable prospect of the mortgagor redeeming the mortgage in full is a fair one since there is no reason why the treatment of the mortgagor should differ depending on the mortgagor's identity, and a fortiori, no worse treatment for the guarantor.

This should be the case so that the commercial attractiveness of guarantees as a security mechanism is not over-enhanced to the point where a creditor is incentivised to constantly look to the guarantor first instead of the borrower due to the relative ease of enforcing the mortgage against the guarantor vis-a-vis the borrower.

This will prevent the scales from being tipped too much in favour of the borrower, thus mitigating issues of potential unfairness to the guarantor of having the mortgage enforced against him, possibly to the point of his bankruptcy, while the borrower may be fully solvent and yet possibly the sole beneficiary of the loan. In such case, the commercial viability of providing guarantees as a form of security will also be preserved in the eyes of potential guarantors.

Dentons Rodyk would like to thank and acknowledge Manager, Innovation & KM Solutions Rocio Perez and Ying Bao Yip for their contributions to the article.

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions