James Foong JCA:

Introduction

[1] On 29 March 2007, we allowed this appeal with costs. We now give our reasons for doing so. We will commence with the brief background facts, followed by the pertinent ground relied on by the trial judge in his judgment and then our reasons for allowing this appeal.

Brief Background Facts

[2] The 1st respondent is a private limited company involved in the business of manufacturing plywood in East Malaysia. The appellants were at one time its directors and shareholders. When the appellants decided to sell their shareholdings in the 1st respondent to a third party, the 1st respondent by letter dated 28 August 1996 (exh. P1) confirmed that a sum of RM10,134,000 is due and owing to the appellants in the following proportion:

(a) to the 1st appellant a sum of RM5,134,000;

(b) to the 2nd appellant a sum of RM5,000,000.

[3] Simultaneous to the execution of the shares sale agreement between the appellants and the third party purchaser, the 1st respondent on 12 November 1996 issued a letter (exh. P2) to the appellants confirming the following:

1. acknowledging RM10,134,000 as the outstanding sum due to the appellants in the proportion listed above;