FACTS

On 17.9.84 the 1st defendant opened a current account with the plaintiff and on 5.10.84 applied for the overdraft facility. The said application was initially refused. However, Koh Teck Lee (PW1), the Bank Officer of the plaintiff, confirmed that a temporary overdraft facility for RM150,000.00 was granted to the 1st defendant and that it commenced on 19.12.84. Whilst the said temporary overdraft facility was in progress, the 1st defendant appealed to the plaintiff by way of a letter dated 8.1.85. In the meantime, a letter of credit [2] (LC) facility for RM90,000.00 was also granted to the 1st defendant which was to become due on 15.5.85.

By its letter dated 1.3.85 the plaintiff rejected the appeal dated 8.1.85 and requested settlement of the outstanding balance of RM142,567.39 as at 1.3.85 in the current account with accrued interest therein with a further request that the LC be settled on the due date.

Then by way of a letter of offer dated 26.4.85 the plaintiff granted overdraft facility to the 1st defendant for the sum of RM300,000.00 with an interest rate at 3% above the base lending rate (BLR) which at that time was 12% per annum. The security for the facilities was to be two-fold:

(i) Registered first fixed charge for RM300,000 to be created by the 2nd defendant over a single storey semi-detached house held under Title No. C.T. 13890 Lot No. 70, Sec 86A, Town and District of Kuala Lumpur.

(ii) Original continuing unconditional joint and several personal guarantee for RM300,000 to be executed by the 2nd, 3rd and 4th defendants.

[3] The 1st defendant accepted the terms of the letter of offer by its acknowledgement letter dated 29.4.85. The 2nd, 3rd and 4th defendants also executed the joint and several guarantees on 7.5.85. Subsequently on 22.5.85 the plaintiff debited into the 1st defendant's account the LC facility of RM90,276.16. However, by 30.4.86 the bank statement at page 71 of the agreed bundle of documents (ABD 71) showed that the 1st defendant started operating the overdraft facility in excess of the limit of RM300,000.00. The plaintiff then wrote to the 1st defendant on 3.12.86 (ABD 30) that there has been an excess of RM20,306.25 as at 2.12.86 and requested the 1st defendant to regularise the account. By way of a reply dated 9.12.86 (ABD 31) the 1st defendant admitted not having conducted the overdraft facility satisfactorily and appealed for time 'to settle the liability in full' and confirming that settling the overdraft was its main intention.

Although ABD 30 indicated that if the excess was not settled in 7 days the plaintiff would recall the facility, the plaintiff did not do so. Tan Kwe Hee (PW2), the Deputy Manager, Credit Control and Monitoring, testified that the bank did not recall the facility because of ABD 31 and also because the 2nd defendant as the Managing Director of the 1st defendant met with PW2 [4] to propose a settlement of the excess of the overdraft limit. The proposed settlement and the meeting was referred to in the plaintiff's letter dated 9.2.87 (ABD 32) to the 1st defendant with a reminder that since the 1st defendant had not complied with the proposal, the plaintiff was recalling the facility with immediate effect and that the 1st defendant was to settle the outstanding overdraft account plus whatever interest was to be charged within 7 days, failing which legal proceedings would be instituted. Whilst not referring to the letter dated 9.2.87, the 1st defendant referred to ABD 30 again pleading for time and this time enclosing a post-dated cheque for RM10,000.00 with an assurance of full settlement. The plaintiff responded by rejecting the proposed settlement of the 1st defendant and making a counter-proposal with a fair warning that if there was a failure on the part of the 1st defendant to comply, legal proceedings would be instituted. The 1st defendant's response was to send a further cheque for RM5,000.00. By its letter dated 4.4.87 the plaintiff, whilst creditin