Court upheld that procedural compliance is essential, with judgments in default susceptible to challenge when rules are not followed.

Abdul Malik Ishak J:

Background Facts

At all material times, Silver Touch Sdn Bhd (In Receivership and under Liquidation) was a customer of the plaintiff, a bank. By a facility agreement made between the plaintiff and Silver Touch Sdn Bhd ("borrower"), the terms of which are set out in the letters of offer dated 16 May 1992 and 8 July 1994 and duly accepted by the borrower, the plaintiff granted to the borrower overdraft facilities of RM1.0 million and RM1.038 million respectively. It was a term of the facility agreement that all charges and legal expenses including the fees of the plaintiff's solicitors were on the basis of a solicitor and client and shall be borne by the borrower. On or about 31 October 1996, the borrower defaulted in paying monies due under the facility agreement comprising of the entire outstanding sum of RM1,625,010.03 being principal and RM17,932.66 being accrued interest which became immediately due and payable.

Calculation wise, as at 27 October 1997, the total sum of RM1,746,988.15 together with a further interest thereon at the rate of 4% above the plaintiff's base lending rate became due and outstanding from the borrower to the plaintiff under the facility agreement (hereinafter referred to as the "said outstanding sum as at 27 October 1997"). By letter dated 29 October 1997, the plaintiff's solicitors Messrs Chor Pee Anwarul & Company demanded payment of the said outstanding sum as at 27 October 1997 but the borrower played possum and throughout the borrower had failed, neglected and refused to pay the sum demanded or any part thereof.

Now, in consideration of the plaintiff making available the overdraft facility of RM1.0 million, and by the letter of guarantee dated 2 December 1992, the first, second and third defendants agreed to jointly and severally guarantee the repayment of RM1.0 million which became due and payable by the borrower to the plaintiff under the facility agreement including all costs and charges and expenses. Since the borrower had defaulted, the plaintiff's solicitors Messrs Chor Pee Anwarul & Company wrote a letter of demand dated 29 October 1997 addressed to the first, second and third defendants and demanded the repayment of the said outstanding sum as at 27 October 1997, but all the three defendants jointly failed, neglected and refused to pay the same.

The liability of the first defendant did not end there. As security for the overdraft facility of RM1.038 million, the first defendant executed the letter of set-off dated 9 July 1994 ("the said letter of set off") with respect to the first defendant's fixed deposit vide receipt no: 01318282 and every renewal thereto. Under the said letter of set-off, the plaintiff was entitled to transfer and set-off any sums standing to the credit of the fixed deposit and apply those sums for the payment of the sums due from the borrower to the plaintiff. Being prudent and pursuant to the said letter of set-off, the plaintiff did, after giving the first defendant due notice, uplift the fixed deposit with the intention of transferring the sums standing to its credit to the borrower's account.

The uplifting of the fixed deposit belonging to the first defendant by the plaintiff gave rise to interesting consequences. It was said that due to the mistake of the plaintiff, on or about 8 October 1996, the sum of RM1,038,096.85 being the amount of the fixed deposit ("the said amount") was credited into the first defendant's personal account no:01-013-12728- 64 instead of the borrower's account no: 01-013-12537-46. Naturally, the first defendant was elated and he then issued three cheques drawn on his personal account:

Cheque numbers Amounts in Ringgit Malaysia

(1) 345297 300,000.00

(2) 345298 460,000.00

(3) 345300 296,850.00

The first defend