(delivering the judgment of the Court): The appellant bank ("the bank") in this case sued the respondents for the sum of $331,731.32 inclusive of interest upon a contract of guarantee up to a limit of $600,000 for banking accommodation given to Leisure Industries Sdn. Bhd. The respondents are directors of the company. Whether they are the only directors has not been made clear. They jointly and severally guaranteed in written form the repayment of such advances made to the company and interest thereon at an agreed rate.

The writ was issued on December 13, 1977. On January 21, 1978 the bank took out an R.S.C. Order 14 application, supported by a proper affidavit, for summary judgment. The Assistant Registrar made an order in terms but his order was reversed in the High Court. The appellant now appeals to this court to restore the order of the Assistant Registrar.

The clauses relevant to the consideration by the court in hearing R.S.C. Order 14 application are the following:

"Clause 8. The liability of any of us hereunder shall not be affected by any failure by the Bank to take any security or by any invalidity of any security taken or by any existing or future agreement by the Bank as to the application of any advances made or to be made to the customer.

Clause 16. No one of us shall be discharged or released from this guarantee by any arrangement made after this guarantee or any dealing between the customer and the Bank without our knowledge or consent or by any variation or alteration without our knowledge or consent in the agreement between the customer and the Bank for the making of advances or otherwise giving credit or affording banking facilities to the customer by the Bank.

In other words to give full effect to the provisions of this guarantee each of us hereby waives all rights inconsistent with such provisions and which we might otherwise as sureties be entitled to claim and enforce and we declare that the Bank shall be at liberty to act as though we or each of us were principal debtors or principal debtor to the Bank for all payments guaranteed by us as aforesaid to the Bank."

These clauses expressly maintain the liability of the respondents in the event of the bank doing or omitting to do certain acts therein recited.

The respondents contend that their liabilities under the guarantee were conditional on the bank securing certain acts on the part of the company, the directors and the shareholders. Such acts are not contained in the guarantee but are present in a long letter bearing the same date as the guarantee and containing the terms and conditions under which the bank was prepared to grant the loan facilities to the company. The acceptance by the respondents of the offer was expressly made conditional upon a formal document of guarantee "incorporating substantially" the said terms.

It has nowhere been contended that there are other documents and inferentially the guarantee sued on was the legal document containing the terms between the parties and it was executed by the respondents after acceptance by them. It must therefore be a matter for argument whether the said letter is admissible in evidence to determine the existence and the application of the terms of the guarantee having regard to the provisions of sections 91 and 92 of the Evidence Act 1950. We are of the view that the said letter does not fall within the category of negotiations as to be caught by the prohibitory provisions of the Evidence Act but gives factual background which is certainly admissible. As Lord Wilberforce said in Prenn v Simmonds [1971] 3 All ER 237, 241:

"In my opinion, then evidence of negotiations … ought not to be received, and evidence should be restricted to evidence of the factual background known to the parties at or before the date of the contract, including evidence of the 'genesis' and objectively the 'aim' of the transaction."

Relying entirely on the contents of this letter, the respondents rais