JUDGMENT

Abdul Kadir Sulaiman JC:

Lau Ching Leh, Lau Pik Kiong and Wong Hock Sing (the borrowers) applied for loan from the defendants bank in the sum of RM150,000 to finance their trawler boat project. By a letter dated 11 September 1978, the defendants invited the borrowers to their office for the execution of the loan closing. The letter also requires "All collaterals/securities for the loan as stated in our letter of offer must be also be submitted for our execution".

By a letter of authorization dated 30 September 1978 addressed to the defendants, both plaintiffs authorised and consented Lau Ching Leh, one of the borrowers, to charge the title deeds in respect of two pieces of land belonging to the plaintiffs in favour of the defendants bank as security for the "loan closing referred to in your letter of 11 September 1978".

On 27 October 1978, the loan agreement was executed between the borrowers on the one part and the defendants bank on the other part. Under Clause 2 of the loan agreement the disbursement of the loan money will be done by the defendants based on withdrawal schedule to be drawn up by the defendants and would be paid to the borrowers from time to time depending on the progress of the project and the production of invoices and other documents supporting the withdrawal of the loan.

Clause 16 of the agreement stipulates that for securing the repayment of the loan and interest the borrowers agreed to provide collaterals/securities required by the defendants bank.

Notwithstanding Clause 2 of the agreement, on 28 October 1978, the whole amount of RM150,000 loan was disbursed to the borrowers in one lump sum.

On 27 November 1978, that is a month later, a memorandum of charge was executed and the two plaintiffs as chargors charging the two pieces of land to the defendants bank. The preamble states that the chargors:

desiring to render the said land available for the purpose of securing to and for the benefit of the chargee, the loan of Ringgit One Hundred and Fifty Thousand only advanced to the borrowers by the chargee pursuant to a loan agreement dated 27 October 1978 entered into between the borrowers and the chargee a copy of which is annexed herewith and do hereby charge to the chargee the said land(s).

On those facts, the plaintiffs by this application sought principally from this Court a declaration to the effect that the memorandum of charge dated 27 November 1978 and registered with the Land Registry Office on 27 July 1984 vide Sibu Instrument No. L3851/1984 was unenforceable, null and void. The grounds being that from the date of execution of the charge until its registration and right up to the date of the application, there has been no advance at all in cash made to the borrowers by the defendants and consequently unenforceable for total failure of consideration.

Counsel for the plaintiffs submitted that at the time of signing of the memorandum of charge the full amount of the loan had been paid and nothing in the memorandum of charge to say that the loan was given and released to the borrowers at the request of the plaintiffs. Clause 16 of the loan agreement are matters between the borrowers and the defendants and does not concern the plaintiffs. He further submitted that the money was released by the defendants one day after the signing of the loan agreement without any security and therefore fair to say that the defendants relied on the loan agreement entirely in releasing the loan. The defendants cannot rely on the memorandum of charge as security for the loan as the consideration, if any, is past consideration.

In dealing with matters such as this, one cannot look at the issue in isolation just because the execution of the loan agreement, the release of the loan and the execution of the charge instrument affecting the lands took place on different dates or occasions. Azmi CJ (Malaya) (as he then was) in Yang Chin Lang V. Tan Chong & Sons Motor Co. Ltd [1968] at p. 10 has this to say:

In my view o