Mohamed Dzaiddin SCJ(delivering the judgment of the court)

This is an appeal by KL Engineering Sdn Bhd ('the first appellant'), a private limited company incorporated in Malaysia under the Companies Act 1965 ('the Act'), carrying on business at No 47, Jalan SS20/11, Petaling Jaya, from the decision of the High Court Kuala Lumpur given on 27 February 1990, dismissing an appeal against the decision of the sessions court judge in Kuala Lumpur dated 17 May 1989. The appeal was originally brought by the first and second appellant, but at the outset of the hearing of this appeal, Encik Guy Varegheese, counsel for the second appellant, withdrew the latter's appeal. Accordingly, we struck out the second appellant's appeal with costs.

The factual background to the action at the Kuala Lumpur Sessions Court was as follows. The respondent, a licensed finance company, sued the first appellant as hirer of one unit of Nikko Concrete Batching Plant ('the equipment') under a hire-purchase agreement ('P7') purported to have been signed by the second appellant and Kow Yuen Wah on 13 September 1986. Both the second appellant and Kow Yuen Wah had also on the same date executed a letter of guarantee ('P13'). When the first appellant defaulted in the payment of the monthly instalments and failed and/or neglected to return the equipment to the company upon notice of termination of hire being served on the three defendants, the respondent commenced action against them, praying for judgment in the sum of RM31,007.48 and for the return of the equipment.

The main defence of the three defendants in the court below, including that of the first appellant, was the lack of authority on the part of the second defendant, Kow Yuen Wah, to execute P7 on behalf of the first appellant. Paragraph 6 of the defence states:

Further or alternatively, the first defendant contend that one of the persons purporting to sign for the first defendant is the second defendant who was at all material times not a director of the first defendant. The second defendant was at all material times not authorized to act for or on behalf of the first defendant in any matter.

At the trial, Ms Beh Soak Heang (PW1), the marketing assistant of the respondent company, testified that at the material time, she was a clerk at the Petaling Jaya branch office in charge of hire-purchase agreements. Her duty was to process the documents after loans were approved. On the material day, she received from the first appellant an application form dated 8 September 1986 (P1), together with the company's memorandum and articles of association (P2), Form 24 (P3) and Form 49 of the Act (P4) for processing. When the first appellant's loan was approved on 13 September 1986, she called in the directors, whom she identified as the second appellant and his brother, James Kow Yuen Wah, to sign P7 as directors of the company. After verifying their identities, both persons signed P7 and P13 in her presence. Under cross-examination, she stated that the officer in charge of approving loans was Kenneth Wong (who was not called as a witness). She did not know whether Mr Wong had checked the documents with the Registrar of Companies before handing them to her. However, she admitted that she did not check the authenticity of any of these documents.

Mr Kow Sak Chow (DW1), the managing director of the first appellant, testified that Kow Yuen Wah was a director of the company until 1982. At this stage, another copy of Form 49 (D14) was produced and shown to DW1 who stated that this form was filed in the Registry of Companies by his secretary. According to him, in 1986, Kow Yuen Wah was not a director of the first appellant. He denied that the first appellant had entered into any hire-purchase agreement with the respondent.

The second appellant testified to the effect that at the material time, he was a director of the first appellant, but denied that the signatures on P7 and P13 were his. He also stated that he had no