The court held that a pleading should not be struck out if it discloses a reasonable cause of action, regardless of its merits.

[1] The background of this appeal may be stated briefly as follows. There are two civil actions involved. One of them is Johor Bahru Civil Suit No: 22-98-1994. It was filed in the High Court at Johor Bahru (hereinafter referred to as "the JB action"). The other is Kuala Lumpur High Court Civil Suit No: D1-22-501-1994 (hereinafter referred to as "the KL action"). These two civil actions arose from a syndicated term loan of RM20 million granted under a Facility Agreement dated 30 June 1992 by Perdana Merchant Bankers Bhd (formerly known as Intradagang Merchant Bankers (M) Berhad) and five other financial institutions which were the six lenders (hereinafter collectively referred to as "the lenders") to a company called Carah Enterprise Sdn Bhd (hereinafter referred to as "Carah"). Carah (the fifth appellant in this appeal) is the plaintiff in the JB action where the defendant is Perdana Merchant Bankers Bhd (hereinafter referred to as "Perdana") which was sued in its capacity as principal and trustee, the manager and agent for the aforesaid five financial institutions.

[2] In the KL action, the plaintiffs are the lenders and the four defendants (the first to fourth appellants) are the guarantors of the term loan under the said Facility Agreement. In the JB action the lenders through Perdana by their summons in chambers dated 8 June 1994 applied to strike out Carah's writ of summons and statement of claim, under O 18 r 19(1)(a), (b) and (d) of the Rules of the High 1980 and at the same time applied for summary judgment under O 14 of the Rules of the High on their counterclaim against Carah. In the KL action, the lenders by summons in chambers dated 8 July 1994 applied for summary judgment under O 14 on their claim against the first to fourth appellants.

[3] On 22 September 1994, on the application of the lenders, Mohd Ghazali Mohd Yusoff, JC (as he then was) made a consent order to transfer the JB action to Kuala Lumpur High Court and thereby be consolidated with the KL action. Apparently, the parties agreed that the two consolidated actions be heard as one.

[4] On 19 May 1995, the lenders' two summonses in chambers aforesaid were heard by the senior assistant registrar and on 26 June 1995 the senior assistant registrar dismissed the lenders' applications in the two summonses in chambers, that is to strike out Carah's writ of summons and statement of claim under O 18 and she dismissed the application for summary judgment under O 14 by the lenders in the counterclaim in the JB action and the claim in the KL action.

[5] Being dissatisfied with that decision, the lenders appealed to the judge in chambers. The learned judge who heard the appeal invited counsel representing both parties to prepare and submit their written submissions. He, however, did not hear oral arguments. In his decision on 21 June 1996 the learned judge held that there are no triable issues in those two actions and allowed the appeal by the lenders with costs and set aside the order made by the senior assistant registrar. Accordingly, the writ of summons and statement of claim by Carah in the JB action were struck off under O 18 and the lenders' application for summary judgment on the counterclaim was allowed. The learned judge also allowed the lenders' application for summary judgment in their claim against the first to fourth appellants in the KL action. Against that decision the appellants (the four defendants in the KL action and Carah in the JB action) appealed to this Court.

[6] After hear