Payment by a guarantor under a bank guarantee can be considered part payment under s 26(2) of the Limitation Act, affecting the accrual of cause of action.

[1] This is yet another case where lack of diligence in pursuing a rightful claim in a timeous manner had resulted in the claim being dismissed by the trial court on the ground of limitation, which decision was affirmed by the court of Appeal.

[2] The appellant's case is based on a breach of contract. By a supply contract ('the contract') dated 6 June 2001 Tenaga Nasional Berhad ('the appellant') agreed to supply electricity to Pearl Island Resort Development Sdn Bhd ('the respondent') at its premises at Lot 8134, Jalan Relau, Bayan Lepas, Pulau Pinang, upon the terms and conditions as provided therein. The said premises is a club house with a golf course owned by the respondent.

[3] The respondent had defaulted in payment of its monthly electricity bills. As at 10 June 2005, the arrears of electricity bills due to the appellant was RM463,334.08. The respondent admitted the amount due to the appellant and agreed to settle the sum in ten monthly instalments.

[4] So on the same date, the respondent entered into a Settlement Agreement with the appellant to pay the arrears due to the appellant in ten monthly instalments by way of post-dated cheques, according to the Schedule of Payment which is reproduced below:

In the fourth month, the bill is inclusive of current month and arrears for bill not paid from 24 June 2005.

Note: Payments are by way of 10 post-dated. The post-dated cheques shall be dated on 24th day of each subsequent month.

[5] As a security for the payment of the bills for the supply of electricity under the contract, the respondent provided the appellant with a bank guarantee dated 8 July 2005 wherein Eon Bank Bhd ('the bank') agreed to, "guarantee the payment to the company by the Consumer of such sums of money not exceeding the sum of RM80,000.00 in all which may be owed by the Consumer to the company and remain outstanding at any time and/or times during the guarantee period [......] in respect of the supply of electrical energy ..."

[6] The respondent paid the first three monthly instalments of RM25,000.00 on 24 June 2005, 24 July 2005 and 24 August 2005 respectively. It failed to pay the monthly instalments due under the Settlement Agreement from September 2005 onwards.

[7] By a letter dated 21 September 2005, the appellant issued a notice of demand to the respondent to pay the outstanding arrears of electricity bills amounting to RM531,473.06. It demanded that payment be made in seven monthly instalments of RM75,925.00, failing which, the electricity supply to the premises would be disconnected. This outstanding amount includes the amount of arrears for the current months still outstanding. There was no response from the respondent.

[8] On 5 October 2005, the appellant disconnected the electricity supply to the respondent's premises, which it was entitled to do under the contract.

[9] On 14 February 2006, the appellant called on the bank guarantee. The bank guarantee was encashed on 31 May 2006 and the sum of RM80,000.00 was credited into the respondent's account with the appellant.

[10] On 12 November 2008 and 21 October 2010, the appellant forfeited the sums of RM13,219.47 and RM3,310.22 respectively, which were the respondent's deposits from other closed accounts with the appellant.

[11] On 28 February 2012, the appellant commenced a writ action against the respondent claiming the balance of outstanding arrears of electricity bills and charges amounting to RM510,474.16 which the respondent had defaulted despite repeated written demands to make the payments. The appellant also claimed interest at 4% per annum on the outstanding amou