Gopal Sri Ram JCA:

[1] After a short trial at which viva voce evidence was led, and at the conclusion of which written argument was put in, Abdul Malek J, in a reserved decision which he handed down on 24 November 1993, entered judgment for the respondent in the sum of RM203,072.56 with interest. He also awarded half the costs of the suit. By the same order, he dismissed two other items claimed by the respondent totaling about RM95,000. The appellant appealed against the finding of liability against it, while the respondent cross-appealed against the refusal of the learned Judge to enter judgment in its favour for the two sums we spoke of a moment ago.

[2] The respondent's writ, as originally framed, claimed a sum of RM391,832.53. On 6 May 1992, the High Court, upon a summons for judgment, entered judgment for the sum of RM93,431.75 and gave the appellant unconditional leave to defend as to the balance. It is pursuant to that order that the trial mentioned earlier took place, resulting in respect of which the appeal and cross-appeal are directed.

[3] The background to the dispute between the parties may be shortly stated.

[4] A company known as Chemitrade Sdn Bhd ("Chemitrade") sold and delivered goods to the appellant for distribution to retailers. The sales were on credit. That meant that Chemitrade, after delivering the goods, had to wait for a period of time before receiving payment from the appellant. At the material time, the appellant owed Chemitrade approximately RM45,000. This apparently placed some constraint on Chemitrade's purse. It needed money for its business.

[5] So on 23 October 1989, Chemitrade entered into an agreement ("the Factoring Agreement") with the respondent under the terms of which the respondent agreed to factor Chemitrade's book debts. The arrangement works in this way.

[6] A manufacturer or supplier would sell its goods to a third party on credit. It would raise an invoice against the buyer for the sale. It then has a choice. It could wait until the end of the credit period expired and claim payment on the invoice. Or it could "sell" the invoice to a factoring house, such as the respondent, at a discount and almost immediately receive a percentage of the face value of the invoice. The factoring house having paid on the invoice then informs the buyer (with whose consent the arrangement has been entered into) that at the expiry of the original period of credit the full amount due on the invoice should be paid to it.

[8] By a letter dated 13 February 1990, Chemitrade gave the appellant notice of the assignment to the respondent of the debts owed it by the appellant. It was copied to the respondent. Among other things, it recites that a sum of approximately RM45,000 was then due from the appellant to Chemitrade. The letter has a footnote which reads as follows:

We acknowledge that we have notice of the above Factoring arrangement between Arab- Malaysian Merchant Bank Berhad and Chermitrade Sdn Bhd and confirm that the above outstanding amount is correct.

[9] Below that footnote appears a signature of someone described as the authorised officer of the appellant.

[10] On the following day, that is 14 February 1990, the respondent wrote to the appellant a letter in the following terms:

Arab-Malaysi