K.C. Vohrah J:

This is a Sessions Court matter which was taken up on appeal before me.

A company, Denson & Co. (the borrower), applied to the respondent bank (the bank) for a loan of RM60,000 to be secured by way of legal charge over a piece of property held under PT(M) 421 Lot 7975 Mukim Klang.

The appellants, solicitors and partners of a firm (the solicitors), were retained by the bank on 27 February 1987 as their solicitors in respect of the loan transaction.

On 27 June 1987 the solicitors advised the bank that the documents in respect of the loan had been completed and that the property which was approved to be charged to the bank was free from encumbrances and that the charge had been duly presented for registration.The solicitors further advised the bank to release the loan to the borrower.

On 8 July 1987, however, the solicitors informed the bank that the said property was actually caveated and was not free from encumbrances.But 5 days earlier acting on the earlier advice from the solicitors, the bank had released the RM60,000 to the borrower.

The bank sued the solicitors for negligence and claimed damages in the sum of RM66,859.40 (made up of the amount released and interest on the sum amounting to RM6,859.40) and further interest at the rate of 11% p.a. on monthly rests from 1 June 1988 till the date of payment.

While the bank claimed the sum of RM60,000 was a loan that was released while acting on the advice of the solicitors, the solicitors disputed that the sum of RM60,000 was a loan to the borrower.They alleged that the said amount was credited into another account of the borrower which reduced the indebtedness of the borrower to the bank.There were other peripheral matters that were also disputed.

The bank in the Sessions Court at Klang applied for the statement of defence of the solicitors to be struck out under O. 14 r. 21 of the Subordinate Courts Rules for not disclosing a reasonable defence, for being frivolous and vexatious and for being an abuse for the process of the Court.Alternatively, the bank applied for liberty to enter final judgment under O. 26A of the Rules .

The Judge of the Sessions Court gave judgment to the bank under O. 26A as prayed for.

In the appeal before me there was no dispute that the solicitors had been negligent but Counsel for the solicitors argued that no loss had been suffered by the bank.In the meantime Counsel for the bank conceded that the sum of RM996 as the legal fees should have been deducted from the RM60,000 released, thus leaving a balance of RM59,004 as the judgment sum with interest at 11% p.a. from 3 July 1987 up to the date of judgment in the Sessions Court and thereafter at 8% p.a. till date of realisation.

The question is, did the bank suffer loss? If so, how much was the loss?

The loan that was approved for the borrower was for "banking facilities under your current account no.1333-03791-1" (see letter of approval of bank, CTZ1 at p. 67 of appeal record). The bank on 3 July 1987 released the sum of RM60,000 less the sum of RM996 (being legal fees payable to the solicitors) (see affidavit of the manager of the bank sub-branch at Port Klang - Yap Kuan Bon paragraph 5, p. 63 of appeal record) to the borrower.This amounted to RM59,004 and was credited into the current account of the borrower, account no.1333- 03791-1 (see copy of credit advice p. 70 of appeal record).

It is difficult to see how the solicitors can deny that the bank had released the sum of RM59,004 as a loan.They averred (see para 5 of the affidavit of the second defendant, one of the 5 solicitors) that the bank credited that sum to the current account of the borrower (account no.1333-03791-1) "to reduce the borrower's overdraft standing at RM57,987.54 as at 3 July 1987 thereby creating a credit of RM1,016.46 as at 3 July 1987". What has to be noted is that the sum was released to the same account number which was stipulated in the bank's letter of approval for the loan to the borrower (see CTZ