JUDGMENT

Hj. Mohd. Azmi bin Dato' Hj. Kamaruddin SCJ:

When allowing this appeal and setting aside the order of the High Court dated 11 September 1990 striking out the appellant's Bankruptcy Petition, we indicated that we would be giving our reasons. We do so now.

By a 1983 Loan Agreement, the appellant Bank gave credit facilities to San Hong Brick Sdn. Bhd. (hereinafter referred to as the Principal Borrower) by way of a term loan and overdraft facility on the securities of (1) a first legal charge created by the Principal Borrower over its 25.33 acres of land in Gurun, Kedah, (2) a debenture over fixed and floating charges over all the assets of the Principal Borrower, and (3) a joint and several personal guarantee by Mr. Samuel (the respondent), Mr. Eng Bong Hiang, Mr. Ooi Soo Nee and Madam Tan Phaik Thoo, who were all directors of the Principal Borrower. Pursuant to the Loan Agreement a contract of guarantee was executed on 26 November 1983, by Mr. Samuel together with the other three directors, in their personal capacity. The guarantee was in the usual form in which the guarantors inter alia "jointly and severally unconditionally and irrevocably guarantee payment on demand ... of all monies and liabilities whether certain or contingent now or hereafter owing or incurred to the Bank" by the Principal Borrower "on any account or in any manner whatever ...". It was not in dispute that in breach of the Loan Agreement, the Principal Borrower had failed to make repayment of the banking facilities given by the appellant Bank. It was also common ground that the appellant Bank had taken action to recover the loan by winding-up proceedings against the principal borrower. On 26 February 1988 it had also obtained from the Senior Assistant Registrar a summary judgment of RM11,272,312.43 against Mr. Samuel under the contract of guarantee, comprising of RM3,861,938.32 being due on the term loan and RM2,702,885.36 under the overdraft facility together with interests thereon. The Order 14 summary judgment of RM11.2 million was upheld by the High Court, but an attempt by Mr. Samuel to appeal out of time to the Supreme Court did not materialise. In the result, the summary judgment must be accepted as a final judgment in which no stay of execution had been granted, despite the fact that a statement of defence and a counterclaim had been filed by Mr. Samuel against the Bank for the sum of RM6.25 million as special damages and an unspecified sum in general damages. The counter-claim arose from Mr. Samuel's defence in the Order 14 proceedings in which he was the 5th defendant - the other four defendants being the Principal Borrower (1st defendant) and the remaining three co-guarantors cum directors (2nd, 3rd and 4th defendants). In essence, his defence was that the 2nd, 3rd and 4th defendants (the other three co-guarantors) had obtained the Bank credit facilities for the Principal Borrower by false representation. By paragraphs 8 and 9 of his defence, he contended that in order to induce the appellant Bank to grant the banking facilities to the Principal Borrower (1st defendant), the 2nd, 3rd and 4th defendants had manufactured false documents. By paragraph 10, Mr. Samuel also contended that the appellant Bank in granting the facilities had acted recklessly not caring whether the documents produced by the 2nd, 3rd and 4th defendants were true or false. The appellant Bank was also alleged to have assisted the 2nd, 3rd and 4th defendants in misusing the banking facilities by siphoning money from the account of the Principal Borrower for their own use to the detriment of the Principal Borrower and Mr. Samuel himself. By reason thereof, Mr. Samuel contended that the appellant Bank was liable to him and as well as to the Principal Borrower for the losses incurred. It was on this basis, that the counterclaim was launched against the appellant Bank for special and general damages.

We make no comments on any right of action that Mr. Samuel might have h