JUDGMENTBY: SEAH SCJ

(delivering the Judgment of the Court): We allowed the appeal, set aside the default judgment dated June 2, 1984, and ordered that the appellants be given unconditional leave to defend. Here are our reasons for doing so.

The respondents are a licensed bank carrying on business in Kuala Lumpur. On May 9, 1978 the appellants executed a letter of guarantee to be jointly and severally liable to the respondents for due repayment of the loan of Malbina Sdn. Bhd. together with interest, charges commission and costs. It appeared that on July 20, 1977, Ashaari bin Hj. Ahmad, Kamaruddin bin Suleiman, Lim Sin Kit and Norimah binti Hj. Ahmad, the 1st, 2nd, 3rd and 4th defendants in the court below, also signed a letter of guarantee, jointly and severally guaranteeing to the respondents due repayment of all moneys which shall at any time be due to the respondents from Malbina Sdn. Bhd. together with interest, charges, commission and costs.

On February 11, 1982, the respondents obtained judgment against Malbina Sdn. Bhd. for the sum of $ 141,222.52 together with interest and costs vide Kuala Lumpur High Court Civil Suit No. C186/1979. By a letter dated July 8, 1983, addressed to each of the four defendants abovementioned as well as the appellants herein, the respondents demanded payment of the said judgment sum of $ 141,222.52 and interest thereon. When all the four defendants and the appellants failed to settle the judgment sum and interest the respondents took out a writ against all the six of them. Judgment in default of defence was entered against both the appellants on June 2, 1984.

Application was made to set aside the default judgment. First, it was submitted by learned counsel for the appellants that when they executed the letter of guarantee on May 9, 1978, there was no consideration and if there were consideration, it was based on past consideration. The respondents filed an affidavit in reply stating, inter alia, that they were in the midst of commencing legal proceedings against Malbina Sdn. Bhd. unless the outstanding debt was paid by January 31, 1978. As Malbina Sdn. Bhd. were unable to repay the debt and in order to allow the respondents to forbear from instituting legal action the appellants executed the letter of guarantee aforesaid. It is pertinent to note that both the appellants were not appointed directors of Malbina Sdn. Bhd. until April 4, 1978 (see page 49 of the record). In Osman bin Abdul Ghani & Ors v United Asian Bank Bhd [1987] 1 MLJ 27 this court held that forbearance could be inferred from the facts of the case. There the respondent bank was on the verge of suing the company (principal debtor) but was willing to forbear when the appellants, who were directors of the company at the material time, gave the second guarantee. Clearly, the second guarantee was given for the benefit of the company by giving the company time to arrange for the payment of the debt. Here, when the respondents threatened to sue Malbina Sdn. Bhd. by January 31, 1978, both the appellants were not directors of the company. Nor was there any evidence to indicate that they were in any way connected with the company at the material time. Secondly, learned counsel for the appellants argued that the letter dated April 28, 1978 (see page 50 of the record) and addressed to the respondents was a request for a "temporary" overdraft of $ 50,000.00 and not for a "continuing" overdraft facilities. Lastly, it was contended by learned counsel for the appellants that if the appellants were to be held legally liable their liability should be limited to the maximum sum of$ 50,000.00 only.

The learned judge did not appear to attach any legal significance to the differences between "temporary" and/or "continuing" overdraft and therefore did not seem to have considered them in his judgment. However, the learned judge disposed of these submissions in this manner:

"Paragraphs 11 and 13 of enclosure 21 set out the circumstances in

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