Enc. 11 is an application to set aside a judgment of default entered against the 1st and 3rd Defendants by the Plaintiff.

As the default judgment, was entered regularly, the Defendants sought to set aside the judgment on the grounds that they had a good defence to the Plaintiff's claim. The defences raised by their Counsel are:

a) That upon the restructuring the debt owed by the Defendants evidenced by Exh. HPM 1 to Enc. 10, all three Defendants were responsible pro-rata for the debt (see paragraph 10 of enc. 10);

b) The effect of this restructuring agreement (Exh. HPM 1) is that all three Defendants would enjoy the benefits of the proceeds of sale of the secured properties. Apparently, three properties were held by the Plaintiff by way of security for the debt. In other words, all three Defendants would only be liable for the original indebtedness less the sale proceeds, (see paragraph 11 of Enc. 10) and

c) The default judgment was not for the right amount when you take into account the facts set out in paragraphs (a) and (b) above, since two of the properties were returned to the parties to the agreement. According to the Defendant, the two properties involved proceeds of RM5 Million and RM7,084,000 (see paragraphs 13 and 14 of Enc. 10).

In my opinion, the defences raised by the 1st and 3rd Defendants revolve around the interpretation of the letter agreement dated 31st May 2001, Exh. HPM 1. The Defendants to Enc. 11 contend that upon their acceptance of this agreement, they were entitled to the proceeds accruing due from the sale of the securities charged to the predecessor in title to the Plaintiff and consequently the Plaintiff, as well. The Defendants allege that the proceeds amounted in the aggregate to some RM12,084,000. By reason thereof, the Defendants contend that any claim against them can only be pursuant to the terms of the letter agreement of 31st May 2001 and after giving credit for the sale proceeds. To the extent that the Plaintiff's claim is based on the original loan and guarantee documents, the claim is defective, in law.

In my judgment, a careful examination of the letter agreement reveals that the 1st and 3rd Defendants entitlement to rely on the terms of the agreement, Exh. HPM 1, is conditional on the Plaintiff being paid the sum of RM20 million by the three principal borrowers including the 1st Defendant within 3 month of 31st May 2001. It is only upon the receipt of the said sum of RM20 million that the Plaintiff is obliged to enter into a novation agreement with the 2nd and 3rd Defendants as guarantors and for the payment by them of the smaller sum of RM13,602,773.60. This agreement to be entered to within one month of the receipt of the RM20 million. It is not in dispute that the 1st Defendant did not pay the agreed sum of RM20 million within the three month period. The letter agreement expressly provides under the caption of 'security' that the Plaintiff is entitled to revert to and enforce all its rights existing pursuant to the original facility and security arrangement including the guarantee executed by the 2nd and 3rd Defendants upon default. Additionally, the contents of the HPM 1 under the caption of 'default' empowers the Plaintiff to enforce its rights upon default for the total outstanding amount, which is defined as including any amount which had been waived under the terms of HPM 1. In other words, the waiver of some RM4 million granted in the HPM 1 could be withdrawn upon default and the Plaintiff entitled to revert to its rights under the original facility and guarantee agreements.

As the guarantee executed by the 3rd Defendant contained a certificate of indebtedness clause and as the certificate has been exhibited, (see Exh. CHK 23 to Enc. 13), I do not find any merit in the 1st and 3rd Defendants' contention that the amount of the default judgment is excessive. In fact, the default judgment does not appear to include the RM4 million waived under HPM 1, notwithstand