Amar Mohd Jemuri Serjan CJ (Borneo):

[1] This appeal arose out of the decision of the High Court at Kuala Lumpur on certain preliminary issues on points of law raised by the respondent by way of an application under O 33 r 2 of the Rules of the High 1980. The issues involve the interpretation of certain provisions of the Borrowing Companies Act 1969 (Act No 6) which later on, by amendment, was known as the Finance Companies Act 1969, (the Act) and referred to as such throughout our judgment.

[2] The first defendant was at all relevant times a licensed borrowing company within the terms of the Finance Companies Act 1969,. By a Letter of Guarantee dated the 25 August 1980, the first defendant, in consideration of the plaintiff's agreeing at the 1st defendant's request to enter into or continue with shipping and/or commercial and/or financial transactions with Malaysia Air Charter Co Sdn Bhd (the Principal Debtor) relating to the purchase of aircraft and spares by the said Debtor, agreed to guarantee the repayment to the plaintiff on demand of all sums of money due and owing to the plaintiff by the said Principal Debtor arising out of any transactions aforesaid or otherwise, together with all costs, commissions, interests, charges and expenses of whatsoever nature provided that the total amount recoverable from the first defendant shall not exceed RM2,340,000, exclusive of such costs, commissions, interests, charges and expenses. The issue of the Letter of Guarantee was duly authorised by the Board of the first defendant. Subsequent to the issue of the Letter of Guarantee, the plaintiff entered into financial transactions covered by the guarantee with the Principal Debtor and in respect of the balance of the amounts owing by the Principal Debtor the plaintiff obtained judgment against it in Kuala Lumpur High Court Civil Suit No: C1255 of 1984. The first defendant denied liability under the guarantee on several grounds.

[3] The 2nd, 3rd, 4th and 5th defendants apparently were at all relevant times Directors of the first defendant. By consent of the parties, the following issues were raised for the determination of the High Court as issues on points of law:

(1) Whether the issuance of the Guarantee dated 25 August 1980 by the first defendant to the plaintiff to secure the repayment by Malaysia Air Charter Co Sdn (hereinafter called "the Principal Debtor") of money due and owing by the Principal Debtor to the plaintiff is prohibited by the Finance Companies Act 1969;

(2) Whether the issuance of such Guarantee is illegal, void or unenforceable;

(3) Whether the issuance of such Guarantee by the first defendant is ultra vires its activities under the Finance Companies Act 1969;

(4) Whether the issuance by the first defendant to the plaintiff of the Guarantee constituted the granting of an unsecured credit facility which is prohibited by s 20 of the Finance Companies Act 1969;

(5) If the answer to issue (4) is in the positive, whether the guarantee was thereby rendered void and unenforceable;

(6) Whether the issuance of the Guarantee amounted to a dealing by the first defendant to the plaintiff in foreign exchange currency and therefore prohibited by the Finance Companies Act 1969;

(7) Whether the issuance of the Guarantee by the 1st defendant to the plaintiff is contrary to public policy;

(8) Whether there is consideration for the Guarantee; and

(9) Whether the Guarantee issued by the second defendant is invalid under s 97 of the Contracts Act 1950.

[4] His Lordship in the High Court answered Questions Nos (1), (2), (3), (4) and (5) in the negative. Questions Nos (6), (7), (8) and (9) were not pursued seriously. Questions Nos (6), (7) and (9) were also answered in the negative but Question No (8) in the affirmative.

[5] It would appear that the decision of his Lordship was primarily based upon two main reasons. After discussing various authorities cited before him, particularly Wragg, In re Wragg v. Palmer [1919] 2 Ch 58; IRC v. Rolls-Royce