Edgar Joseph Jr. SCJ:

This was an application by the second and the third defendants to set aside a judgment in default of defence on two separate grounds; namely, that the judgment was not regularly obtained and, in the alternative, that there was a defence on the merits.

The application was opposed by the plaintiff, a Finance Company ("the plaintiff company").

After hearing Counsel in chambers I had granted the application to set aside the judgment in default of defence on the ground that the judgment was not regularly obtained. But the plaintiff company being dissatisfied with my decision applied for further argument, and I acceded to that request, by hearing further argument about one week ago.

The history of the matter which calls for the consideration of the Court may be shortly stated.

The plaintiff company is and was at all material times to this suit a licensed finance company within the meaning of the Finance Companies Act 1969, carrying on the business, inter alia, of financing leasing transactions.

The first defendant is and was, at all material times to this suit, an incorporated company with its registered office at 2, Main Road, Sungai Lalang, Bedong, Kedah, ("the defendant company").

The second and the third defendants are husband and wife and were, and are, at all material times to this suit, directors of the defendant company.

By a lease agreement in writing dated 17 August 1982, made between the plaintiff company of the one part and the defendant company of the other part ("the lease agreement"), the plaintiff company had agreed to lease to the defendant company five units of equipment defined in the schedule thereto ("the equipment") upon the terms and conditions appearing therein.

It is necessary to advert to some of the more important provisions of the lease agreement so far as material to this case.

The lease agreement provided, inter alia, for the payment of a deposit of RM56,840, receipt whereof the plaintiff company duly acknowledged, and payment of the balance sum by 36 monthly rent instalments of RM8,779 each.

The lease agreement further provided that the defendant company had agreed, inter alia, as follows:

(1) to keep the equipment at 2, Main Road, Sungai Lalang, Bedong, Kedah. (2) to pay interest at the rate of 2% per month flat on any monies payable under the lease agreement which might from time to time be overdue; and (3) to pay the costs of repossession, storage, repair and maintenance of the equipment.

Now, in consideration of the plaintiff company agreeing to lease the equipment to the defendant company and entering into the lease agreement, the second and the third defendants had by a guarantee agreement in writing dated 17 August 1982 ("the guarantee") agreed to undertake and guarantee the payment by the defendant company of all sums of monies which might become payable by the defendant company under the terms and conditions of the lease agreement and the due performance and observance by the defendant company of the stipulations and conditions therein contained.

It was alleged by the plaintiff company that in breach of the lease agreement the defendant company had made default as follows:

(1) after payment of 14 rent instalments amounting to RM122,906, it had failed to pay any of the subsequent agreed rent instalments payable under the lease agreement; and (2) the equipment had not been kept at the address stipulated in the lease agreement.

It was further alleged that by reason of the breaches aforesaid, the plaintiff company had given due notice thereof to the defendant company, and made repeated demands for the return of the equipment and/or for payment of the outstanding balance sum of RM249,964.40 (with particulars), yet the defendant company had failed to comply with the same.

It was contended, that by reason of the alleged breaches, the defendant company had repudiated the lease agreement.

Accordingly, by a letter dated 30 November 1983, the plaintiff comp