Mahadev Shankar JCA:

Our decision to allow this appeal was unanimous. Our reasons now follow.

The appellant (Visia) was previously known as Sim Lim Finance (M) Berhad (Sim Lim). For all practical purposes they are the same legal entity because Visia were the successors in title to Sim Lim and inherited all its rights and liabilities.

On 10 October 1981 Sim Lim entered into a Master Agreement with the first respondent (the dealer) for a credit facility of RM4 million. We refer to this agreement hereafter as the first Master Agreement. Appeal Record p. 97. It was very comprehensive agreement. The dealer traded in motor vehicles. It did so on hire-purchase terms.

Whenever it found a customer, hire-purchase documents would be executed. These would provide that the ownership of the vehicle was vested in Sim Lim and the vehicle would be registered accordingly with the Registrar & Inspector of Motor Vehicles (R.I.M.V.). Thereupon the dealer would collect the full agreed market value of the vehicle from Sim Lim. Possession of the vehicle would move from the dealer to the hirer. Notional delivery of the vehicle would be way of the handing over by the dealer to Sim Lim of the Registration Book, which would have Sim Lim's claim endorsed thereon. The dealer's repayment of this sum and all the interest accruing over the duration of the hire-purchase agreement was to be effected by the dealer collecting the payments made by the hirer and remitting the same to Sim Lim.

As can readily be appreciated Sim Lim was taking the greatest risk. It was putting the money required for the capital acquisition up-front to the dealer. In exchange it got the pieces of paper giving title to the vehicle and another piece of paper from the dealer undertaking to collect the moneys periodically from the hirer who had possession of the vehicle.

By way of security for the due performance of the dealer's obligations of the first Master Agreement, the second and third respondents executed a written guarantee at the same time. So it is also dated 10 October 1981 (the first guarantee). Appeal Record p. 122. The consideration stated was Sim Lim's entering into the first Master Agreement.

On 1 June 1982 Sim Lim entered into a second Master Agreement with the dealer (the second master agreement). It is in the same terms as the first master agreement. (The transactions were to be maintained under a second account Appeal Record p. 110 for a credit facility of RM800,000.) Again a similar guarantee was contemporaneously executed by the second and third respondents. Appeal Record p. 124.

A high degree of fidelity was required from the dealer if Sim Lim was to get its money back. The dealer had to, first of all, ensure that the hire-purchase transactions were genuine and not phantom paper transactions. The moneys payable had to be diligently collected and remitted. Repossession in the case of defaulters had to be energetically carried out. For one reason or another, differences arose between the parties and a very large sum of money with interest thereon accrued due.

By 1987 Sim Lim's name had already changed to Visia, and the parties dealt with each other using Visia's name. In other words the respondents had accepted Visia as the assignee and successor in title of Sim Lim. Visia began to press for repayment. There were negotiations.

These negotiations terminated in a letter dated 24 July 1987. The letter was signed by the second respondent only. He confirmed that effective from 1 August 1987 the credit facility under both the first and second agreements would be terminated. The rest of the letter deals with the new arrangments for the collection and remittance of outstanding amount on existing Hire- Purchase Agreements. Obviously Visia was not satisfied that the first and second guarantees were enough for the amount then due. So they asked for additional security. The respondents agreed. Clause 4a of the letter reads:

4a) As additional securities for the a