GROUNDS OF JUDGMENT

Preamble

On 21 February 2002, the learned Senior Assistant Registrar entered judgment against the second and fourth defendants for:-

(i) RM100 million;

(ii) Interest on:-

(a) RM25 million at 1.5% above Pacific Bank Bhd's Base Lending Rate (BLR) per annum, compounded monthly from 14 January 1999 till date of full settlement;

(b) RM15 million at 1.5% above BSN Merchant Bank Bhd Cost of Funds per annum, compounded monthly from 15 January 1999 till date of full settlement;

(c) RM10 million at 1.5% above Public Finance Bhd's BLR per annum, compounded monthly from 15 January 1999 till date of full settlement;

(d) RM10 million at 1.5% above Interfmance Bhd's BLR per annum, compounded monthly from 2 April 1999 till date of full settlement;

(e) RM15 million at 1.5% above BSN Finance Bhd's BLR per annum, compounded monthly from 5 April 1999 till date of full settlement;

(f) RM10 million at 1.5% above BSN Commercial Bank Bhd's BLR per annum, compounded monthly from 5 April 1999 till date of full settlement;

(g) RM15 million at 1.5% above Sabah Development Bank Bhd's Cost of Funds per annum, compounded monthly from 6 April 1999 till date of full settlement; and

(iii) Costs on solicitor-client basis.

Considering the staggering amounts of money involved, not surprisingly this is the second and fourth defendants' appeal against that decision (Enclosure 29).

Background facts

The facts of this suit are relatively straightforward. The plaintiff granted a Convertible Guarantee Facility (Facility) (Exhibit BSN 1 Enclosure 20) for the first defendant who was involved in a major turnkey project. This Facility was secured by a Deed of Guarantee and Indemnity dated 17 November 1997 (Exhibit BSN 4 Enclosure 20), executed amongst others, by the second and fourth defendants as shareholders and directors of the first defendant.

Upon the written demand of the Turnkey Contractor dated 23 December 1998 (Exhibit BSN 6 Enclosure 20), the plaintiff paid out on the Facility amounting to RM100 million. The plaintiff then demanded the same with interests thereon from the defendants.

The plaintiff has already obtained judgement in default of appearance against the first and third defendants on 29 September 1999.

Two issues

At the outset, the parties agreed that the second and fourth defendants were advancing only two issues for consideration in this appeal; firstly, whether the variation in the terms of the Facility discharged their liability and secondly, whether the plaintiff's claim for interests was provided for in the Deed of Guarantee and Indemnity.

Clause 6.2 of the Facility Agreement reads as follows:-

'The obligations of the Co-Lenders to allow any utilisation of the Guarantee Facility ... shall also be subject to the following:-

2.1. ... no Event of Default under any agreement or arrangement referred to in the Security Documents shall have happened and/or be continuing; ...'.

Clause 18.1 of the same Facility Agreement reads as follows:-

'Each of the following events and occurrences shall constitute an Event of Default under this agreement:-

1.15. if the Borrower fails to pay the premium (or installments thereof) payable in respect of the said land and the Borrower shall have failed to remedy such breach within seven (7) days notice from the Security Agent.' (emphasis mine).

Firstly, I find that there has been no variation in the terms of the Facility.

Although the second and fourth defendants allege that the plaintiff allowed utilisation of the Facility despite being aware of the fact that the land premium in question had remained unpaid for the year 1997, no prima facie evidence was condescended upon in support of this allegation. The plaintiff, on the other hand, was quick to point out that the Turnkey Contractor's demand predated their 7-day notice under clause 18.1.15 (Exhibit BSN 16 Enclosure 20).

This aside, the provisions of the Facility agreement required the plaintiff to pay the Turnkey Contractor within 14 days of receipt of his demand (see ; [1996] 3