Abdul Hamid Omar LP:

[1] In June 1983, the first respondent, Mae Perkayuan Sdn Bhd had desired to develop certain lands comprised in Lots 3243 to 3248, Mukim of Dungun, Terengganu, into a housing estate ("the Dungun Project"). It had also desired to purchase 6 Lots of agricultural land in Tampin, Mukim of Alor Gajah, Melaka, in total area 29.1 acres for the purpose of development into a housing estate ("the Alor Gajah Project"). To this end, the first respondent approached the appellant, Bank Bumiputra Malaysia Bhd, Kuala Terengganu ("the Bank"), for a bridging loan for the Dungun Project, and for money to purchase the land for the Alor Gajah Project.

[2] On 25 June 1983, the Bank having studied details of the proposals of the first respondent, had agreed in writing to grant what it called 'overdraft facilities' to the first respondent, in the sum of RM4,500,000 (See the facility letter Exh P2). Among the terms and conditions contained in Exh P2 were these:

Facility:	secured overdraft for RM4,5000,000.
Purpose:	(1) As building finance for proposed development of 6 Lots of land in Dungun ... RM2.4 million (2) To purchase 29.1 acres of agricultural land in Alor Gajah ... RM2.1 million
Duration:	For a period of 4 years.
Security:	Legal charge against the following: (1) (Six parcels of land in Dungun). (2) (Six parcels of land in Melaka).
Interest:	At 2.5% above Base Lending Rate. Any non-payment of interest as stipulated shall cause it to be capitalised and added to as principal sum, and interest shall be chargeable thereon at the same rate as prescribed above.
Commitment Fee:	Chargeable at 1% per annum over the unutilised drawing limit.
Repayments	To be reduced progressively by way of redemption sums for the proposed housing development in Dungun. The redemption sum shall also cover the facility for land purchase and is to be fixed later, upon request for release of titles to End-Financiers.

For your information, all facilities granted by us are subject to periodical review and repayable on demand although we do not at this time anticipate exercising our rights in this respect.

[3] The offer was accepted by the first respondent and Exh P2 constituted the contract of loan between the parties.

[4] The position by end of July 1985 was that although there was evidence that the first respondent had completed the "earthworks and site preparation", there was no evidence to show that the amount disbursed by the Bank had not been spent by the first respondent for purposes of the development of the Dungun Project.

[5] On 30 July 1985, the Bank's head office in Kuala Lumpur wrote to the manager of its branch in Kuala Terengganu a directive (Exh P13) as follows:

It has already been decided that the customers service the monthly accruing interest since November 1984 and to take steps to regularise the position of their account failing which the facility to be recalled.

From your overdraft report dated 11 July 1985 we observe that substantial excess still prevailed in the accounts. In this regards you are to implement the above decision immediately. We expect to receive a copy each of your letter to the customers within two weeks of the date of this letter.

[6] On 14 October 1985, the Bank's Manager at its branch in Kuala Terengganu wrote to the first respondent a letter (Exh P5) which said thus:

Mae Perkayuan Sdn Bhd

OD/MC/G/83/121 - RM5,200,000

Pinjaman kemudahan diatas dirujukkan.

Untuk makluman tetuan, pihak Bank telah mengambil keputusan untuk menarik balik kemudahan diatas dan seterusnya tindakan undang-undang akan diambil terhadap tetuan.

Sekian, harap maklum.

(For your information the Bank has decided to withdraw the facilities given as mentioned above and consequently legal action shall be taken against you. That is all).

[7] By letter dated 3 November 1985, the Bank's solicitors demanded repayment from the first respondent and its two guarantors, of the sum of RM4,322,813.04 being the principal sum plus interest outstanding as at 15 October 1985, failing wh