Raus Sharif JCA (delivering judgment of the court)::

[1] This is an appeal against the decision of the High Court at Kuala Lumpur dated 30 October 2003. The High Court had allowed the plaintiff’s claim (‘the respondent’) against the defendant (‘appellant’) whereby the appellant was ordered to pay the respondent the sum of RM3,375,354.98 with interest at the rate of 11% per annum from 1 May 1992 till full settlement and costs.

[2] On 22 October 2007, we heard and allowed the appeal with costs.We now give our reasons. But first the facts.

FACTS

[3] The respondent is a bank. By a letter of offer dated 12 January 1978, the respondent availed loan facilities to Pembinaan Damo Sdn Bhd (‘the principal borrower’). The appellant together with two others, Subhas Damodaran and Prakash Damodaran stood as guarantors. On 16 February 1979 two letters of guarantee were signed jointly and severally by the three guarantors for a total loan sum of RM868,000 availed by the respondent to the principal borrower.

[4] The principal borrower defaulted on the loan. On 23 December 1980 the respondent issued a notice of demand against the principal borrower and all the guarantors (‘first notice