Abdul Malik Ishak JCA (delivering judgment of the court)

INTRODUCTION

[1]The learned judicial commissioner ('JC') of the Penang High Court dismissed the application of the plaintiff bank for summary judgment against the defendant guarantor. Aggrieved, the plaintiff bank appealed to this court.

THE FACTS

[2]The plaintiff bank by way of a letter of offer dated 25 February 1997 and a revolving credit facility agreement dated 22 March 1997 granted a revolving credit facility in the sum of RM750,000 to the borrower by the name of Utec Trading Sdn Bhd ('the borrower'). The terms of the said revolving credit facility were later revised as reflected in the additional letter of offer dated 15 April 2000 styled as the 'Revolving Fund Facility under (the) New Principal Scheme (NPGS)'.

[3]The letter of offer dated 25 February 1997 alluded to the sum of RM750,000 as the revolving fixed facility. The tenure would be up to a maximum period of 72 months from the date of the initial drawdown. And the security was fastened on:

(a)the guarantee cover by Credit Guarantee Corporation Malaysia Bhd ('CGCMB') for an amount of RM615,000;

(b)the joint and several guarantee by all the directors of the borrower in their personal capacities; and

(c)the deposit of the Al-Mudharabah General Investment Account Certificate for an amount of RM150,000 to be placed under lien with the plaintiff bank throughout the duration of the revolving fixed facility.

[4]The revolving credit facility agreement dated 22 March 1997 makes allowance for the variation of the interest rate at cl 3.08 thereto. And by way of cl 9.01(b), the borrower has to punctually pay all its indebtedness under the agreement when due and owing. The events of default are amply set out in cl10.01(a)–(l).

[5]The additional letter of offer dated 15 April 2000 styled as the NPGS alluded to the recent credit review conducted by the officers of the plaintiff bank which showed that the borrower's balance outstanding of RM689,315.89 under the existing NPGS revolving credit facility of RM750,000 had to be revised on the following terms:

(a)by 12 fixed equal monthly instalments of RM14,000 each commencing March 2000;

(b)thereafter, by another 12 fixed equal monthly instalments of RM19,000 each commencing March 2001;

(c)subsequently, by 11 fixed equal monthly instalments of RM23,000 each commencing March 2002; and

(d)a final instalment of RM151,139.85 which shall be set off against the Al-Mudharabah General Investment Account Certificates ('Al-Mudharabah') of RM150,000 including dividend placed under lien with the plaintiff bank and the borrower is required to pay the difference between the actual amount realised from the Al-Mudharabah account and the balance outstanding under the revolving credit facility, if any.

[6]Now, by way of a letter of guarantee dated 22 March 1997, the defendant guarantor together with Cheng Yoke Yoon agreed to stand as guarantors to the borrower. Clause 1 is the crucial clause in the letter of guarantee. It is worded in this way:

To pay and satisfy to you on demand all every and any part of the said Loan and interest thereon …

[7]The recital to the letter of guarantee dated 22 March 1997 binds the defendant guarantor together with Cheng Yoke Yoon because they 'hereby agree with undertake and guarantee to you (referring to the plaintiff bank)'. Clause 13 states that it is a continuing guarantee and it is worded in this way:

13. This Guarantee is expressly intended to and shall be a continuing guarantee for all moneys whatsoever now or from time to time owing to you by the Borrower notwithstanding that the Borrower may at any time or times cease to be indebted to you for any period or periods and notwithstanding any settlement of account or accounts.

[8]And by cl 16 of the letter of guarantee dated 22 March 1997, the guarantee binds the guarantor's successors-in-title and assigns and personal representation (representatives). The guarantee too, by virtue of cl 18(iii), binds the defendant guarantor to