The facts of this case are that by an Offer Letter dated 15th February 2000 and a Facilities Agreement dated 3rd July 2000, the Plaintiff agreed to provide an overdraft facility of RM600.000 and an multi option lines comprising of letter of credit, trust receipts, banker receipts and bank guarantee facilities totaling RM4 million to Pigas Engineering Sdn. Bhd( Pigas). The bank guarantee arose because of the need to provide a performance bond in favour of Petronas Gas (Petronas) for a project undertaken by Pigas for the construction and commissioning of the Tanjung Langsat lateral project (Project). The contract with Petronas having been signed on 27th April 2000.

The First, Second and Third Defendants were, at all, material times, Directors and shareholders of Pigas. The First and Second Defendants executed a letter of guarantee dated 3rd July 2000 undertaking to indemnify the Plaintiff against all losses incurred by it in respect of the facilities. The Third Defendant, in turn, executed a letter of guarantee to the same effect in favour of the Plaintiff effective 23rd October 2000.

For reasons which are unclear, Pigas became indebted to Sapura Diving Services Sdn. Bhd (Sapura) during the year 2001. Sapura commenced Winding-up proceeding against Pigas in respect of this debt. Sapura agreed to discontinue the Winding-Up petition against Pigas in consideration of the shareholders including the Defendants entering into a Share Sale Agreement relinquishing their shareholding in Pigas to the extent in excess of 50 % in favour of Sapura. The execution of this agreement on 5th April 2001 and the Share Sale Agreement was preceded purportedly by the removal of the First Defendant as a Director of Pigas by the Second and Third Defendants. This caused him to write a letter to the Plaintiff alerting it to the risk of Pigas being Wound-Up and of other on-going irregularities in the affairs of Pigas (see exh. IFK 9 to Enc. 23). This letter from the First Defendant prompted the Plaintiff on 10th February 2001 to freeze all credit facilities availed to Pigas with immediate effect.

The First Defendant served notice revoking his position as guarantor on 7th February 2001. However, by this time the Plaintiff had already provided the performance bond on 27th November 2000 expiring in May 2002. The performance bond was extended to November 2002 by a letter of extension dated 3rd April 2002. The letter of 3rd April 2002 expressly stipulated that 'this extension forms an integral part of the original letter of guarantee number TF001 GO17622 dated 27th November 2000. All other terms and condition of the guarantee remain unchanged'. On 12th September 2002, Petronas made a demand on the performance bond, during the extended period. The sum demanded of RM1,358,578.50 representing 10 % of the contract sum for the project, was duly satisfied by the Plaintiff and thereafter debited to the account of Pigas. The Plaintiff notified Pigas of the payment to Petronas and the ensuing debit of its current account for this amount. The debiting of Pigas's current account caused it to be overdrawn in the sum of RM1,316,954 (see Exh GTS3 to Enc. 34). This outstanding sum was subsequently reduced by the proceeds of fixed deposit receipts held by way of security. The sum forming the subject matter of the claim against the three Defendants is for the overdrawn account in Pigas's current account less the fixed deposit proceeds together with interest. The Plaintiff issued a letter of demand to Pigas copied to the Defendants on 24th September 2002 notifying them of the amount overdrawn in the current account of Pigas after crediting the account with the fix deposit proceeds. This letter expressly stated that the subject matter of the claim is 'as a Result of the pay-out on Petronas Gas Berhad's claim on the 16th September 2002'. The Defendants have failed/refused to pay the sum resulting in the filing of this claim and more particularly two applications for su