JUDGMENT

Pajan Singh Gill FCJ:

[1] Leave was granted by this Honourable Court on 15 August 2005 to the appellants, upon the following questions of law:

1. (a) Whether, as a matter of law, it is open to and in conformity with justice for the High Court or the Court of Appeal to find that the three relevant certificates in a drawing notice (Schedule 4 in the present case) were available on the date of the notice or date of the release of the loan granted to the borrower, when the undisputed evidence of all the witnesses for the lender and borrower shows that these three certificates were in fact or in reality, not available on the material date when the certificate of the project consultants was issued about four months after the release of the loan.

(b) Whether, as a matter of law and in the interest of justice, in the event that the Federal Court finds that the above three certificates were in fact or in reality not available on the date of the drawing notice or on the date when the loan was released the Court of Appeal or the Federal Court has a duty to interfere with the erroneous findings of the trial judge that the three certificates were available when they were not available.

2. Whether, as stated at the trial by the witnesses of the 1st respondent and the 5th appellant, the changing or variation by the 1st respondent as lenders from two draw downs of the loan to one single full draw down without the consent or agreement of the 5th appellant as the borrower constitutes a breach of contract and duty of care on the part of the 1st respondent.

3. Whether failure by the 1st respondent as lender to make a valid demand to recall the Performance Guarantee given by a bank in Germany, where the applicable law was German Law, constitutes negligence or failure to exercise reasonable skill and care on the part of the lenders.

4. Whether, in the event that the 1st to 6th respondent are found to have acted negligently and in breach of the contract, they were entitled to appoint the 7th respondent as receiver and manager over the assets of the 5th appellant, in the circumstances.

Background Of The Case

[2] There were 2 consolidated suits in this appeal, namely Kuala Lumpur Court Civil Suit No. D1 (D9) 22-501-1994 and Johor Bahru High Court Civil Suit No. 22-98-1994. Both these suits were heard before the Judicial Commissioner, who made the following orders:

- The learned Judicial Commissioner dismissed the claim of the present 5th appellant, the borrower as against the 1st respondent, the lender.

- The learned Judicial Commissioner allowed the counterclaim of the 1st respondent as against the 5th appellant.

- The learned Judicial Commissioner dismissed the claim of the 5th appellant against one Lim Tian Huat, the 7th respondent, who acted as Receiver and Manager of the 5th appellant, pursuant to the terms of a debenture executed between the 1st respondent and the 5th appellant.

- Finally, the learned Judicial Commissioner allowed the claim of the 1st to 6th respondent as against the 1st to 4th appellants as guarantors of the loan facility granted by the 1st respondent to the 5th appellant.

[3] The convenient way of approaching this case is to first sketch the background, and then to examine defences pleaded by the 5th appellant, Carah Enterprise Sdn. Bhd.

[4] At the risk of oversimplifying, but in order to provide a framework for a sketch of the background, we state at the outset that the most substantial issue in this case is whether the 1st respondent a financial institution in executing an order to transfer money, had done so in unauthorized manner. It is therefore, necessary to examine the contemporary documents and the oral evidence, with considerable care.

[5] The facts basically revolved on a loan facility of RM20 million granted by the 1st to 6th respondent to the 5th appellant to finance its project for purchasing a Cold Storage with Tube Ice Factory and Machinery to process pineapples from a company in Germany named Rheinhold