Abdul Hamid Mohamad CJ (delivering judgment of the court):

[1]There are two related suits. In the first suit, No 5 of 2005, the plaintiff is the Standard Chartered Bank of Malaysia ('SCBMB') and the defendant is, in brief, the Yang Di Pertuan Besar of Negeri Sembilan ('DYMM'). The claim is for the sum of US999,772.44 and commission at the rate of 0.125% per month or alternatively for a declaration that SCBMB is entitled to set-off the said sum and commission fee against the fixed deposit of DYMM with SCBMB pursuant to the letter of set-off. The claim arises from a standby letter of credit ('SBLC') issued by SCBMB at the request of DYMM to the benefit of Connecticut Bank of Commerce ('CBC'), the beneficiary of the SBLC. The amount has been paid to CBC. Hence, SCBMB claims against DYMM.

[2]DYMM counter-sued SCBMB. He prayed for a declaration that SCBMB was not entitled in law to uplift or apply or appropriate the fixed deposit sum in settlement of any liability arising from the said SBLC, damages and costs. That is suit No 6 of 2005.

[3]We shall now give a very brief chronology of events.

[4]By a letter dated 5 February 1999 addressed to the Seremban Branch of SCBMB, DYMM applied for the establishment of a SBLC in favour of CBC, the beneficiary.

[5]On 12 February 1999 SCBMB established SBLC No 312010325732-A ('the SBLC') in favour of CBC. The SBLC was for USD1,000,000.

[6]By a letter dated 15 February 1999 SCBMB required DYMM to execute a security for the SBLC in the form of a letter of set-off over a fixed deposit in the sum of RM4,180,000 deposited by DYMM with the Seremban branch of SCBMB. The letter of set-off was executed by DYMM.

[7]By a letter dated 6 April 1999, DYMM wrote to SCBMB asking for the SBLC to be suspended.

[8]By telex dated 16 April 1999 to the confirming bank, Standard Chartered Bank New York ('SCBNY'), the SCBMB on behalf of DYMM gave notice of rescission of the SBLC.

[9]So much of these facts are agreed by the parties.

[10]DYMM further asserts that as at 16 April 1999 the loan by CBC to Texas Encore LLC ('TEC') for which the SBLC was issued had not been released by CBC to TEC.

[11]There was no communication on the notice of rescission dated 16April 1999 either from SCBMB, SCBNY or CBC with DYMM until 15December 1999.

[12]Then, on 15 December 1999, by a telephone communication SCBMB was informed by SCBNY that SCBNY had been given notice of drawing on the SBLC for the purpose of retiring off the loan given by CBC to TEC. A copy of the said message dated 15 December 1999 was relayed by SCBMB to DYMM. In that message SCBNY indicated that they had confirmed the SBLC with CBC.

[13]DYMM through his attorney (Dato' Hari Menon) immediately communicated with SCBMB and was told by SCBMB by an e-mail dated 16December 1999 that the onus was on DYMM getting an injunction. DYMM applied for and obtained an ex parte injunction on 18 December 1999, restraining, inter alia, CBC from making a call on the SBLC and also restraining SCBMB from uplifting the fixed deposit of RM4.18m under the letter of set-off.

[14]SCBMB was notified of the order on 18 December 1999 by personal delivery at its branch in Seremban and Kuala Lumpur headquarters.

[15]On 22 December 1999, and again on 24 December 1999 SCBNY as confirming bank, paid out monies under the SBLC to CBC. On 29December 1999 DYMM obtained an injunction order on an inter parte basis, on the same terms as the ex parte order obtained earlier.

[16]On 22 December 1999 SCBMB's account with SCBNY was debited for USD314,772.44 and on 21 December 1999 for USD685,000 equivalent to the sum paid by SCBNY to CBC.

[17]Those were assertions made by DYMM.

[18]The SCBMB's case may be summarised as follows:

(a)The SBLC was irrevocable and as such was still in force at the material time. It could only be revoked with the consent of the beneficiary and such consent was clearly not forthcoming.

(b)Upon presentation of documents that were regular on their face, SCBNY as confirming bank was under an obligation to