JUDGMENT

Mahadev Shankar JCA

The respondents ('the Borrowers') wanted to buy a house in Kota Tinggi ('the said house') from a developer with whom they entered into a sale and purchase agreement dated 11 April 1983. The Borrowers did not have enough money to complete the purchase. So they borrowed RM78,400 ('the loan') from the appellant ('the bank'). The loan was the subject of a loan agreement cum assignment dated 26 January 1985 ('the loan agreement').

The Borrowers insisted on using their own solicitors M/s. Lee, Loo & Bakarudin in the preparation and implementation of the loan agreement, and requested the bank to deal with these solicitors ('the Borrowers' solicitors'). The loan agreement is a formal document which is very comprehensive in its terms. The Borrowers admit they executed the loan agreement and were therefore fully bound by its terms.

By a letter dated 25 February 1985 the Borrowers' solicitors sent the loan agreement and all other collateral documents connected with the loan to the bank. In this letter they stated that they would inform the bank when the loan could be released to the developer which was to be as soon as the Borrowers had paid the differential sum between the sale price and the loan.

By a letter dated 11 May 1985 the Borrowers' solicitors notified the bank that the, differential sum had been paid and requested the bank to release the loan to the developer. By a certificate dated 23 December 1984 the developer's architects had already certified practical completion of the house.

On 7 June 1985 the bank released the loan to the developer, and notified the borrowers it had done so. Under the terms of the loan agreement the borrowers were obliged to repay the loan by monthly instalments of RM1,104 payable before the 10th day of each subsequent calendar month.

What is very evident is that right from the start the borrowers had no intention whatsoever of honouring their commitments to the bank. They defaulted paying every instalment. They ignored the bank's letters of demand. The Bank then sent them a solicitor's notice on 12 October 1995. They ignored that. The bank's solicitors sent another demand letter on 4 November 1985. They ignored that also.

By reason of these defaults which continued unabated throughout the Bank was left no alternative but to resort to its remedies under the loan agreement. Clause 11(3) thereof reads:

(3) the right and power to sell and assign the said property as the absolute unencumbered owner thereof at such price or prices and in such manner as the bank shall in its absolute discretion think fit free from any interest or otherwise and to apply the proceeds of sale in or towards the satisfaction of the loan and all principal and interest and other moneys due to the bank hereunder and all costs of and occasioned by such sale or sales and the bank shall only pay to the borrowers the balance of the proceeds of such principal and interest and other moneys aforesaid and all the costs of and occasioned by such sale and sales and no assignee or purchaser from the bank shall be concerned to ascertain whether or not any shall default has been actually arisen so as to entitle the bank to exercise its powers of sale or assignment.

Clause 17 thereof reads:

Clause 17

If the amount realised by the bank on a sale of the said property in pursuance of cl. 11(3) is less than the amount due to the bank the borrowers shall pay to the bank the difference between the amount due and the amount so realised and until payment will also pay interest on such balance at the prescribed rate with yearly rests.

The bank obtained a valuation of the house for RM110,000. It was advertised in the star dated 23 February 1986 for public auction on 26 February 1986. There were no bidders. It was put for auction again on 28 June 1986 at a reserve of RM100,000. Again there were no bidders. Yet again on 17 June 1987 at RM80,000. Again there were no bidders. On 18 March 1988 the bank's valuers by letter