JUDGMENT

Mohd. Jemuri Serjan SCJ:

By a letter dated 6 January 1982 the respondent, Southern Bank Berhad, (the bank) granted an overdraft facility of RM700,000 to Sin Hup Woh Transport and Trading Agencies Company Bhd. (the company). The overdraft facility was serviced by a charge over 8 parcels of properties and guaranteed jointly and severally by the board of directors of the company of whom the appellant was a member. The guarantee which was executed on 6 January 1982 was a continuing guarantee to the limit of RM700,000. By a letter dated 13 January 1984 the respondent's then solicitor demanded payment of a sum of RM506,242.35 being the sum in excess of the overdraft from the company. As no payment was forthcoming the respondent commenced proceedings by a writ of summons dated 1 September 1984 against all the guarantors. According to the amended statement of claim the amount claimed by the respondent was for a sum of RM1,311,792.85 together with interest thereon at 16% per annum from 17 July 1984 to the date of satisfaction. The liability on the guarantors including the appellant arose out of the guarantee dated 6 January 1982 and another guarantee dated 19 September 1983 which was executed only by four directors of the company, excluding the appellant and two other directors. The second guarantee was also a continuing guarantee and to cover the overdraft as well as two term loans which had been approved but not released. The guarantors' liability under the second guarantee was up to the limit of RM900,000 in respect of credit facilities, made up of apparently the approved term loans of RM200,000 and RM90,000 and the overdraft of RM700,000.

In the appeal before us learned Counsel for the appellant submitted that there were only three issues for our determination:

(i) Whether a proper demand was made on the appellant;

(ii) Whether the appellant was released from his liability under the first guarantee by reasons of the respondent having obtained the second guarantee from the directors; and

(iii) Whether the failure to specify the rate of interest by leaving it blank in the first guarantee renders the first guarantee void for uncertainty.

On the first issue it was contended for the appellant that the notice was given by Mogan & Co., the then solicitor for the respondent, and not by one of its officers as provided under Clause 11 of the first guarantee which prescribed the mode in which the notice or demand were to be made. Since there was non-compliance with the prescribed mode the notice of demand was therefore nugatory. In this connection Central Provident Fund Board v. Ho Bock Kee [1981] 2 MLJ 162 and Mobil Oil Australia Ltd. v. Costa [1969] 14 FLR 343 were quoted as authorities. It was further contended that the demand made was for payment of the sum of RM506,242.35 which was in excess of the overdraft limit of RM700,000 for which sum the appellant was only liable under the first guarantee.

With regard to the second issue the contention was that since there was a change in the constitution of the board of directors in 1983, and the resignation of the appellant on 30 March 1983, and the second guarantee was executed only by the newly constituted board of directors but without the appellant, the respondent intended to exclude the appellant as a guarantor. The respondent consequently was estopped from relying on the first guarantee. Furthermore, since no separate overdraft facilities were granted for RM990,000 as claimed in the amended statement of claim, the sum of RM700,000 in the first guarantee therefore merged into the second guarantee. Thus, the appellant was discharged from his liability because of the substitution of the second guarantee for the first guarantee.

The submission by learned Counsel for the appellant on the third issue centered on the uncertainty of the rate of interest. Because the rate of interest which was an essential element of the guarantee was omitted from the guarantee, the guarantee was void. Mu