Mohamed Dzaiddin FCJ:

[1] The appellant (the bank) is a limited company incorporated in Hong Kong and carrying on banking business at its branch at 232 Des Voeux Road, Central, Hong Kong. The 1st respondent (Nadinusa) is a private limited company incorporated under the Companies Act 1965 whilst the 2nd respondent (Hashbudin) was at all material times, a director and shareholder of Nadinusa. The respondents were customers of the bank and had been granted banking facilities. Sometime in 1986, the respondents defaulted in repaying various sums of money owed to the bank under these facilities. The bank then commenced the following proceedings against them:

a) In Kuala Lumpur High Court Civil Suit No: 3447 of 1986 (the First Suit) the Bank's claim against Hashbudin was for the sum of RM7,870,849.19 together with interest thereon at the rate of RM3,722.28 per day from 1 September 1986 until judgment and interest on the judgment debt at the rate of 8% per annum from the date of judgment to the date of realisation and costs. Hashbudin, in his defence, admitted taking the loan but pleaded that the purpose of the said loan was to purchase 1,300,000 shares in Worldwide Holdings Berhad ("Worldwide"). In his counterclaim, Hashbudin asked for an order, inter alia, directing the Bank to deliver up to him the share certificates in respect of the 1,300,000 shares of Worldwide. On 7th and 8 January 1988 the Bank caused to be issued stop notices in respect of the 1,300,000 shares.

b) In Kuala Lumpur High Court Civil Suit No: 84 of 1987 (the Second Suit) Hashbudin was sued as a guarantor for Nadinusa for various sums of money in respect of past due bills, outstanding overdraft facility and in respect of outstanding sum under a standby letter of credit and interest. On 26 November 1987, summary judgment was entered against Hashbudin by the Court. Hashbudin had appealed to the judge in chambers.

c) In Kuala Lumpur High Court Originating Summons No: 369 of 1986 (the Third Suit) the Bank sought declarations against Nadinusa, Malayan United Bank Berhad and Malayan United Finance Berhad (SF shares) and its nominees that the shares in the Supreme Finance Berhad were pledged by Nadinusa; that the 4,050,000 SF shares were pledged by Supreme Corporation Berhad; and that SF shares registered in MUI's nominee were held on behalf of the Bank.

[2] In addition, there were two other actions which arose from the above suits. In Kuala Lumpur High Court Originating Summons No: 4290 of 1986 Malayan United Bank Bhd (MUI Bank) became the plaintiff, and Nadinusa and the bank the 1st and 2nd defendant respectively and in Kuala Lumpur High Court Bankruptcy No: D2-43-2872-88, the bank filed a bankruptcy action against Hashbudin.

Pleadings

[3] In the instant case, the respondents, being the plaintiffs in the Court below, by their solicitors Messrs Sri Ram, Zulkifli and Kumar (for short Sri Ram & Co) commenced an action against the bank on 4 November 1988 claiming, inter alia, that the First, Second and Third Suits had been settled. By para 9(b) of the statement of claim, they averred that the First Suit had been compromised and a settlement in respect thereof had been effected by an exchange of correspondence passing between their solicitors, Sri Ram & Co, John Gomez & Associates, and a duly authorised agent of the bank. The letters relied on by Hashbudin are dated 29 April, 3 May, 4 May, 9 May and 10 May 1988 marked as P3, P4, P5, P6 and P7 respectively. We shall refer to these letters in more detail shortly. By para 9(c), it was contended that these letters taken together and read as a whole constituted a binding agreement between Hashbudin and the bank compromising the First Suit upon the terms that in full and final settlement of Hashbudin's personal account with the bank, Hashbudin would deliver to the bank the Worldwide shares together with blank transfer forms duly executed. He would also deliver to the bank duly executed resignation letters of all the directors an