Mohamed Dzaiddin Abdullah FCJ:

[1] These two appeals arose from the decision the High Court (Commercial Division) Kuala Lumpur in two consolidated actions given on 7 December 1993.

[2] In Rayuan Sivil No: 02-747-1993, China Airlines Limited (China Airline) was dissatisfied with part of the decision of the learned Judge who ordered China Airline to pay to the respondents, Maltran Air Corporation Sdn Bhd (the agent) a sum of RM1,679,097.49 with interest at the rate of 8% per annum from 11 September 1989 date of full payment.

[3] The Judge held that this amount represented the sum due and owing by China Airline to the agent under the Airline's incentive bonus scheme for the years 1986, 1987, 1988 and 1989.

[4] The second appeal, Rayuan Sivil No: 2 Mei 1994 was brought by the agent who was dissatisfied with the decision of the trial Judge in dismissing its other claim against China Airline, in particular against the order of the Court that it was liable to pay to China Airline the sum of RM814,171.14 with interest.

[5] The agent was also dissatisfied with the order dismissing its claim against Perwira Habib Bank Berhad, the second respondent, with respect to the Banker's Guarantee given by the bank to China Airline, undated but valid from 10 August 1989 to 9 August 1990.

[6] We propose to deal with these appeals separately.

Factual Background

[7] China Airline is a foreign incorporated company registered in Malaysia as a foreign company under Part XI of the Companies Act 1965, whose main object is to carry on air transport business of China Airlines Ltd (incorporated in Taipeh, Republic of China) in Malaysia.

[8] The agent is a locally incorporated company having its registered office at 410, Kompleks Antarabangsa, Kuala Lumpur and since 1 January 1982 sold airline tickets for China Airline in Malaysia.

[9] It seemed that for the first half of 1982, the agent brought in USD350,000 worth of business.

[10] In return for the good performance by the Agent, China Airline appointed the agents as its General Sales Agent (GSA) for the Northern States of West Malaysia, namely, Penang, Kedah, Perlis, Perak, Kelantan, Trengganu and Pahang.

[11] On 21 June 1982, the GSA agreement, AB2-15, was executed between the parties in Taipeh.

[12] Loh Cheng Hoe (PW1), the Managing Director of the agent, signed for the agent, while one Eugene Chen, the Airline's Sales & Marketing Director, for China Airline.

[13] Later, in October 1982, the GSA was extended to Johor Bahru.

[14] Due to the increased volume of airline business in Kuala Lumpur, China Airline agreed to appoint the agent as its GSA for Kuala Lumpur with effect from 1 September 1983.

[15] An agreement AB19 was then executed.

[16] As AB19 was expressed to be on a year to year basis, upon its expiry on 31 August 1984, the agent's appointment as GSA for Kuala Lumpur was further renewed for 1984 and 1985.

[17] The agreement for 1985 would expire on 31 August 1986.

[18] However, on 4 July 1986, the agent was notified by letter that China Airline would not renew its appointment as GSA for Kuala Lumpur after 1 September 1986 although this notice did not affect other areas.

[19] Following the non-renewal of the GSA agreement for Kuala Lumpur, the agent was instead appointed merely as the Passenger Sales Agent (PSA). An agreement dated 1 September 1986, AH2-4, was duly executed in Taipeh.

[21] Meanwhile, under article VII(1) of the GSA agreement, the agent accepted, inter alia, the unconditional responsibility for the payments of all sums due to China Airline and for the due performance of this responsibility, it undertook to provide the Airline with a bank guarantee.