JUDGMENT

Edgar Joseph Jr. SCJ:

The facts which gave rise to the dispute which resulted in the litigation in the High Court (Commercial Division), Kuala Lumpur, and which in turn led to this appeal are simple and may be stated shortly. But, before we proceed to do so, we wish to say at the outset, that in this judgment, unless the context otherwise requires, it would be more convenient to refer to the appellant Coramas Sdn. Bhd., the first respondent Rakyat Merchant Bankers Bhd., and the second respondent Rakyat First Nominees Sdn. Bhd., as the plaintiff, the first defendant and the second defendant, respectively.

By an alleged oral agreement confirmed by a letter dated 14 December 1989 signed by the Managing Director of the plaintiff, Mr. Patrick Lim Hong Koon, addressed to the first defendant, the latter had agreed to sell and the plaintiff had agreed to purchase 7.8 million shares in Kesang Corporation ("Kesang") at a price of RM2.70 per share amounting to RM21.06 million. The terms of that letter were as follows:

14 December 1989

Rakyat First Merchant Bankers Berhad, 9th Floor, Bangunan Angkasa Raya, Jalan Ampang, 50450 Kuala Lumpur.

Attention: Ms. Yong Siew Kat

Dear Ms.

Re: 7,800,000 Shares In Kesang Corporation Bhd.

I refer to the telephone conversation with your Ms. Yong Siew Kat this morning.

This is to confirm that we have agreed to purchase from you 7.8 million shares in the above company at the price of RM2.70 per share totalling RM21.06 million.

As agreed we shall jointly appoint a firm of solicitors to take delivery of the shares from you and to arrange for payment by them to you thereafter.

Thank you.

Yours faithfully Coramas Sdn. Bhd.

Patrick Lim Hong Koon Managing Director

A consortium of lenders managed by the first defendant had then extended a term loan/stand by credit of RM36,000,000 to an incorporated company known as Safuan Holdings Sdn. Bhd. ("Safuan") upon the security, inter alia, of a pledge of 7.8 million shares ("the shares") in a publicly listed company known as Kesang Corporation Bhd. ("Kesang"), registered in the name of the second defendant. Safuan having made default in the repayment of the loan, the consortium of lenders had decided to enforce the security by sale of the shares.

Accordingly, by an alleged oral agreement confirmed by a letter dated 14 December 1989, signed by the Managing Director of the plaintiff Mr. Patrick Lim Hong Koon addressed to the first defendant, the first defendant on behalf of the lenders had agreed to sell to the plaintiffs and the plaintiffs had agreed to purchase the shares at a price of RM2.70 per share amounting to RM21.06 million. For brevity and convenience we shall refer to this transaction as "the proposed sale and purchase transaction".

At first, payment of the purchase price was to have been effected in full by a single payment but later this term of the alleged agreement was varied by mutual consent the effect of which was that the legal firm of Mah Kok & Din were to act as stakeholders, that the plaintiff would take delivery of the shares from the shareholders in two trenches of 5 million and 2.8 million respectively, upon payment by way of cashier's orders of the sums of RM13.5 million and RM7,560 million, in respect of each trench.

It was common ground that the plaintiff's intention in embarking upon this proposed transaction was to resell the shares to a third party, namely, Aeroway Sdn. Bhd. ("Aeroway"), at a profit, that is to say, at a price of RM3.10 per share and it was from the expected proceeds of this re-sale that the plaintiff had expected to settle the amount payable under its alleged agreement with the first defendant.

Be that as it may, pursuant to the proposed sale and purchase transaction, the second defendant delivered the first trench of 5 million shares to the stakeholders within the stipulated time who in turn made payment in respect thereof by two cheques of RM13.5 million and RM7,560 million, respectively, to the f