Zaki Tun Azmi CJ:

[1] The dispute in this appeal is whether the respondent is obliged to refund RM1 million paid as a deposit to the respondent by the appellant for the purchase of all RM5 million worth of respondent's shares in Jernih Karya Sdn Bhd ("Jernih Karya") pursuant to a Letter of Undertaking dated 24 June 1997 ("Letter of Undertaking") with certain conditions as will be explained later. If the answer is in the negative, the appellant will then have to pay the balance of RM4 million to the respondent, since RM1 million had been previously paid.

[2] Sometime around June 1997, the Ministry of Finance ("MOF") approved the establishment of a securities broking firm known as First Securitites Sdn Bhd ("First Securities") pursuant to s 12 of the then Securities Industries Act 1983 [1]. First Securities shall be a holder of a dealer's licence to carry on business as a securities broking firm and it shall be wholly owned by Dioncorp Sdn Bhd. Dioncorp Sdn Bhd in due course shall apply to be a member company of the then Kuala Lumpur Stock Exchange (now known as Bursa Malaysia).

[3] With the approval of the MOF, Yayasan Bumiputra Sabah held 51% of the equity in Dioncorp Sdn Bhd and Jernih Karya, a private limited company, holds the other 49% of the equity. The respondent together with another person by the name of Madrigal Gumba, are the shareholders of Jernih Karya. The respondent held 240 paid up shares in Jernih Karya.

[4] The appellant, a public listed company in the then Kuala Lumpur Stock Exchange, wanted to gain control over First Securities. The appellant appointed Madrigal Gumba to purchase the 240 shares held by the respondent in Jernih Karya. With such transfer of shares, Madrigal Gumba's shareholding in Jernih Karya would increase to 900 shares. The appellant will then purchase all 900 shares held by Madrigal Gumba in Jernih Karya for the sum of RM22 million. Through this scheme, the appellant will control Jernih Karya. Indirectly through Jernih Karya, the appellant will have 49% of the equity in Dioncorp Sdn Bhd, the company that wholly owns First Securities. This would enable the appellant to be in control of First Securities.

[5] A Letter of Undertaking was given by the appellant to the respondent to transfer the 240 shares to Madrigal Gumba in consideration that the appellant pays the respondent a sum of RM5 million. That undertaking to transfer the respondent's 240 shares to the appellant was subject to the two following conditions contained in the letter of undertaking:

i. A deposit of Ringgit Malaysia One Million (RM1,000,000.00) only upon execution and stamping of the following documents:

(a) Sale and Purchase Agreement between Madrigal B Gumba and Chase Perdana Berhad in respect of the purchase by the latter of a certain number of shares in Jernih Karya Sdn Bhd.

(b) Execution of the Shareholders Agreement between Yayasan Bumiputra Sabah and Chase Perdana Berhad in respect of the Joint Venture Investment Company known as Dioncorp Sdn Bhd.

ii. The balance sum of Ringgit Malaysia Four Million (RM4,000,000.00) only shall be paid upon the approval of the Foreign Investment Committee and any other relevant authorities as may be necessary of the Sale & Purchase Agreement between Chase Perdana Berhad and Madrigal B Gumba described under 1(a) above. The Deposit shall be refundable in the event the approval herein are not obtained within a three months from the date hereof. (Emphasis added)

[6] For the purpose of this appeal, the Foreign Investment Committee will be referred to as "FIC" and "any other relevant authorities as may be necessary" includes the Ministry of Finance's ("MOF") approval as stipulated under Securities Industries Act 1983 (then in force) and the 1987 Regulations[2].

[7] The Sale & Purchase Agreement between the appellant and Madrigal Gumba, ("the Agreement") was executed on 26 June 1997. The contents of cl 5 of the agreement are similar to the terms of the letter of undertaking which state as follow