The plaintiffs are a statutory body established under Trengganu Enactment No. 3 of 1965 and the defendants are a company incorporated under the Companies Act, 1965. On December 8, 1965 the parties entered into a written agreement (P6 pages 3–7) concerning approximately 33,500 acres of land in the Mukim of Bandi and Tebak in the Districts of Kemaman, Trengganu for the purpose of planting oil palms. By this agreement the plaintiffs leased this land to the defendants for a period of forty-six years and the defendants in return undertook to clear and develop it into an oil palm estate and to incorporate a subsidiary management company to run and manage the estate. Under clause 8 of the agreement, the defendants are required to make the following payments:—

(i) land premium at the rate of $100 per acre of cultivable land — clause 8(a);

(ii) annual quit rent at the rate of $2 per acre for the first four years and thereafter at the rate of $10 per acre — clause 8(c);

(iii) development bonus at the rate of $75 per acre for every acre of fully planted land sold or sub-leased by the defendants to members of the public — clause 8(d); and

(iv) royalty at the rate of one per cent of the nett sale price of all oil palm produce derived from the said land — clause 8(e).

In the absence of any evidence to the contrary, I assume that the defendants must have been irregular with these payments and probably must have defaulted several times, because by May 19, 1975 on plaintiffs' instruction, Messrs. Adnan & Wee sent a letter of demand (exhibit P1) on May 19, 1975 requiring the defendants to pay up within ten days a sum of $1,330,768.06, being the amount due on those four items. In reply the defendants wrote to the plaintiffs on May 27, 1975 (exhibit P2) disputing that they owed the plaintiffs in the sum of $1,330,768.06. They however, admitted that their debt was only $1,015,583.23. The difference is apparently due to the manner in which the one per cent royalty was computed because the plaintiffs' computation was on the basis of finished product whilst the defendants calculated the royalty on the basis of unprocessed fruits.

Now let us revert back to the letter exhibit P2. In this letter the defendants made three alternative proposals one of which is to pay the plaintiffs "on or before the end of 1977 with interest at 11% per annum". The other two alternatives are not relevant to the issue to be decided in this case. On receipt of this letter, the plaintiffs wrote back on June 14, 1975 a letter (exhibit P3) asking for certain clarifications, one of which was "further clarification regarding the 11% interest per annum" and "the date of commencement of the interest due". The defendants gave their reply in their letter dated June 25, 1975 (exhibit P4) and wrote therein as regards interest the following:—

"As regards to the date of commencement of the 11% interest per annum, we propose to be from 1st July 1975."

It is observed that the defendants gave no answer at all to the request for "further clarification" and said nothing about the method of computation of interest, whether it was simple or compound interest.

Despite their promise to pay up the sum due together with 11% interest on or before the end of 1977 the defendants continued to default in fulfilling this promise. By the end of 1978, the amount of debt the defendants owed to the plaintiffs stood at a total sum of $1,362,274.61, inclusive of a sum of $446,442.75 by way of interest for the years 1975, 1976, 1977 and 1978 calculated at yearly rests (compound interest). The plaintiffs made another demand through their solicitors on December 4, 1978, but the defendants failed to make any payment (paragraph 7 of the statement of claim). Finally on February 24, 1978 the plaintiffs took out a writ against the defendants to commence this suit for the recovery of this debt and interest.

When the case came before me for hearing on December 22, 1981, both counsel intimated to me that t