Raus Sharif JCA (delivering judgment of the court)::

[1] This is an appeal against the decision of the High Court at Kuala Lumpur dated 30 October 2003. The High Court had allowed the plaintiff’s claim (‘the respondent’) against the defendant (‘appellant’) whereby the appellant was ordered to pay the respondent the sum of RM3,375,354.98 with interest at the rate of 11% per annum from 1 May 1992 till full settlement and costs.

[2] On 22 October 2007, we heard and allowed the appeal with costs.We now give our reasons. But first the facts.

FACTS

[3] The respondent is a bank. By a letter of offer dated 12 January 1978, the respondent availed loan facilities to Pembinaan Damo Sdn Bhd (‘the principal borrower’). The appellant together with two others, Subhas Damodaran and Prakash Damodaran stood as guarantors. On 16 February 1979 two letters of guarantee were signed jointly and severally by the three guarantors for a total loan sum of RM868,000 availed by the respondent to the principal borrower.

[4] The principal borrower defaulted on the loan. On 23 December 1980 the respondent issued a notice of demand against the principal borrower and all the guarantors (‘first notice of demand’). Pursuant thereto, on 13 March 1981 the respondent filed Civil Suit No C242 of 1981 (‘the first suit’) against the principal borrower and all the guarantors, to recover the loan. The appellant herein was the fourth defendant in the first suit.

[5] On 15 October 1981, the respondent obtained summary judgment against Subhas Damodaran and Prakash Damodaran, and on 25 May 1985, against the principal borrower. Thereafter, upon the lapse of about ten years since the filing of the first suit, the appellant on 30 March 1991 filed an application (encl 123) to strike out the respondent’s first suit against him for want of prosecution.

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[6] In response to encl 123, the respondent on 4 June 1991, filed an application (encl 126) for the first suit to ‘be struck off with liberty, being an action prematurely commenced without a proper or valid notice of demand on the defendant’.

[7] On 7 November 1991, at the hearing of encl 123 and encl 126 before the learned senior assistant registrar, the respondent applied to amend encl 126 to delete the words ‘struck off with liberty’. The amendment was allowed and order in terms was granted in respect of encl 126. The order dated 7 November 1991 reads as follows:

Upon the application of the plaintiff AND UPON READING the summons in

chambers dated 14th day of June 1991 and the affidavit of Nadarajan s/o

Govindasamy affirmed on the 13 day of June 1991 and filed herein AND

UPON HEARING Mr K Maniam of Counsel for the plaintiff and Miss Regine

of Counsel for the defendant IT IS ORDERED that the action against the

fourth defendant be and is hereby with leave withdrawn and struck off

as being an action prematurely commenced without a proper or valid

notice of demand made on the defendant AND IT IS FURTHER ORDERED that

the plaintiff do pay the fourth defendant costs as may be taxed.

With the above order, the appellant withdrew his encl 123.

[8] Thereafter, on 4 May 1992, about 11 years after the first suit and judgment against the two guarantors, and seven years after the judgment against the principal borrower, the respondent issued another notice of demand against the appellant for the sum of RM3,375,354.98 with interest thereon (second notice of demand). The second notice of demand, inter alia, stated:

We are instructed that you were availed loan facilities at your request

by our clients and that you had not adjusted or repaid the outstanding

together with arrears inclusive of interest in the sum of RM3,375,354.

98.

[9] On 8 June 1992, the respondent issued another notice of demand (‘third notice of demand’) against the appellant, inter alia, stating:

you had executed a guarantee indemnity in favour of our client for loan

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