Hashim Yeop A Sani J:

This is a claim by the plaintiff bank for the recovery of the sum of $75,000 with interest and costs based on a contract of guarantee executed by the defendant on 4 August 1966. A copy of the contract of guarantee is at enclosure (13) in the Agreed Bundle (P1). In their pleadings the plaintiffs state that in pursuance of the said letter of guarantee the plaintiffs made advances to the Malaysia Timber and Granite Products Ltd (hereinafter referred to as "MTGP") which together with interest, commission and banking charges amounted to $534,408.74 as at 27 July 1969. By letter dated 7 December 1968 the plaintiffs through their solicitors to MTGP demanded payment of the sum of $462,039.39 being the amount then due as neither MTGP nor the defendant had paid the said sum or any part thereof. By a further letter dated 11 August 1969 the plaintiffs through their solicitors to the defendant demanded payment of the said sum of $75,000 but the defendant had not paid the said sum or any part thereof. It is the contention of the plaintiffs that the contract of guarantee is a continuing one and that the liability of the defendant on the said guarantee is limited to the principal sum sued for.

The defendant does not deny the guarantee but seeks to avoid it. In his pleadings he seek to invoke a number of legal defences both under the Contract Law and Equity. His defences may be summarised as follows. First he alleges fraud or misrepresentation by one Gary Wong, his nephew, and/or the Plaintiff bank which induced him to execute the said letter of guarantee. Therefore he contends, the contract of guarantee is voidable at his instance under s. 19 of the Contracts Act, 1950, or invalid under s. 95 and/or 96 of that Act. Secondly he alleges that there were a number of variations made in the contract, which variations were made without the knowledge or consent of the defendant and therefore he is discharged as a surety thereby under s. 89 of the Contracts Act, 1950. On this point he alleges that approvals of applications by MTGP for increasing the overdraft limit from time to time after 4 August 1966 were material circumstances which the plaintiffs should not have withheld from him in view of s. 86 and/or 92 of the Contracts Act, 1950. The defendant contends that there is an implied term in the contract of guarantee that the maximum overdraft by the plaintiff bank to MTGP would be limited to $75,000 even though the said guarantee permitted loans of an unlimited amount. By allowing the amount of overdraft to exceed $400,000 after the date of the said guarantee when the plaintiff bank knowing fully well that the paid-up capital of MTGP was only $250,000 it is the defendant's view that the plaintiffs' action was reckless and speculative. MTGP has now been ordered into compulsory liquidation with liabilities totalling over $1m. This the defendant contends has impaired his right to resort first to MTGP for remedy and therefore the actions of the plaintiffs have to that extent prejudiced his right. Finally, the defendant invokes the rule in Clayton's case as codified in s. 62 of the Contracts Act, 1950 to the current account of MTGP with the plaintiff bank and that whatever liability that the defendant may have to the plaintiff as at the date of such variation has been settled and wiped out by the payments into the same account after the date of such variation.

The facts of this case are in my view straightforward. The contract of guarantee in question was handed to the manager of the plaintiff bank (PW1) by the said Gary Wong. It is not in dispute that there had never been any communication between the defendant and the plaintiff bank until a copy of the notice of demand dated 7 December 1968 from the plaintiff bank to MTGP followed by the notice of demand dated 11 August 1969 from the plaintiff bank to the defendant. It is admitted also that before and after 4 August 1966 that is the date of the contract of guarantee in