Peh Swee Chin FCJ:

This appeal raises difficult and complicated questions of law between a borrower of money for the payment of the purchase price of some land which he had bought by agreement and the lender of the said money to whom the borrower had assigned his right title and interest in the said land to the lender. The questions arise out of the matter of rates of interest payable on money lent in such a security transaction.

The appellant/borrower entered into a loan agreement with lender/respondent dated 26 March 1984 and entitled "Loan Agreement cum Assignment" whereby the appellant borrowed RM60,000 and agreed to pay interest thereon. In consideration thereof, the appellant inter alia, "assigns unto the Lender all his rights, title and interest in the said lot ... by way of security for Loan hereby granted".

The payment of the rates of interest is of crucial importance in this appeal and the relevant cl. 1(i), (ii) and (iii) provide as follows:

1(i) To repay to the Lender on demand the Loan together with interest thereon at the rate of twelve per centum (12%) per annum (hereinafter referred to as "the Prescribed Rate" which expression shall where the context so permits include any other rate or rates which the Lender may from time to time stipulate in the manner hereinafter provided) AND until demand as aforesaid to repay to the lender the Loan together with interest thereon at the Prescribed Rate by one hundred and twenty (120) equal monthly instalments of Ringgit Eight Hundred and Eighty-Five only (Ringgit 885.00)

each (hereinafter referred to as "the Monthly Installments" the first of such payments to be made on the 1st day of the month following next after the date on which the full amount of the Loan has been paid or advanced to or on behalf or for the benefit of the Borrower (or at such other time as the Lender may in its absolute discretion stipulate) and the subsequent instalments to be paid at regular successive intervals of one (1) month until the full amount of the Loan and interest thereon together with all other monies owing and payable to the Lender shall have been fully paid and satisfied.

The appellant is hereafter called "the borrower" and the respondent, "the lender". The loan agreement cum assignment is hereafter "the said loan agreement".

The borrower defaulted in the payment of interest and instalments and the lender filed an action in the Sessions Court on 16 December 1987 stating in the statement of claim to the effect that by virtue of the default, the whole of the sum lent together with interest thereon become wholly due and payable. The borrower claimed:

(a) the sum of RM80,644.84;

(b) interest thereon at the rate of 10% per annum at yearly rests and penalty interest of 1% per annum above the prescribed rate on the arrears of instalment both calculating from 13th day of November 1987 until satisfaction;

(c) vacant possession of the said property:

(d) costs of this action;

(e) such further or other relief as this Court deems fit and just

Summary judgment was granted by the Sessions Court in terms of the prayers aforesaid in open court, most probably after a contest. Extracted summary judgment in the appeal record does not state that summary judgment was granted on account of the non-appearance of the borrower and his counsel; neither does it mention the presence of any counsel.

It is important to note that neither party appealed against the summary judgment. Therefore the judgment in the Sessions Court was final and conclusive between the same parties.

Then on 15 August 1994 the lender based on the summary judgment, caused to be issued a bankruptcy notice of the same date claiming a total sum of RM132,177.76 with the break-down figures shown there in as follows:

Judgment sum RM 80,644.84

Interest @ 10% per annum on the sum of RM80,644.84 from 13/11/87 to 3/10/88 (x 325 days) RM 7,180.70

Penalty interest @ 11% per annum (i.e. 1% per annum above prescribed rate) on the a