JUDGMENT

Mohd Ghazali Yusoff JCA:

By letter of offer dated 6 June 1996, the respondent, a local bank offered to the 1st appellant, a locally incorporated company a term loan facility as requested by the latter for the sum of RM7,629,643 to fully finance its quest to take up the rights issue of 3,051,857 shares of a public company named A & M Realty Berhad on the terms and conditions therein set out. The 1st appellant accepted the offer. The terms and conditions set out in the said letter of offer included the following:

(a) as security, the respondent required the following:

(i) a pledge of 763,000 shares of RM1 each in A & M Realty Bhd plus 3,051,857 of the same shares from the rights issue;

(ii) a pledge of 100,000 shares of RM1 each in HIL Industries Bhd;

(iii) joint and several guarantees of the 2nd and 3rd appellants, directors of the 1st appellant, for the sum of RM7,629,643;

(b) that the interest rate shall be at base lending rate (which was then 8.80% per annum) plus 2.25% per annum and that the interest rate may be varied at any time at the respondent's discretion;

(c) that interest charged should be settled before the end of the following month; without prejudice to any other right of the respondent, the respondent may debit the 1st appellant's account with the interest charged and impose a penalty interest of 1% per annum or such higher rate as shall be imposed by the respondent at any time from time to time above the prescribed rate on any late payment or instalment with minimum of RM1.

The 1st appellant confirmed the acceptance of all the terms and conditions contained in the said letter of offer. The 2nd and 3rd appellants, as authorised signatories, affixed their signatures to that letter (hereafter referred to as "the said agreement). The 2nd and 3rd appellants executed a letter of guarantee on 12 September 1996 and the respondent consequently released the monies under the said term loan facility to the 1st appellant on 1 October 1996. The 1st appellant subsequently defaulted.

By separate letters of demand dated 10 August 1998 the respondent's solicitors demanded from the appellants the sum of RM8,064,037.72 being the amount due as at 31 July 1998. Since there was no response, the respondent, by writ dated 30 September 1998 claimed from the appellants the said sum of RM8,064,037.72 outstanding as at 31 July 1998 with interest at 2.25% per annum above the base lending rate (which was then 11.40% per annum) and an additional 1% penalty interest on the whole outstanding amount calculated on monthly rests till date of full settlement.

On 19 March 1999 the respondent filed an application for summary judgment. Subsequent to the filing of the application for summary judgment, the respondent exercised its right to dispose off the pledged shares and applied the proceeds towards reducing the amount owing by the 1st appellant. The reduced amount then due, as at 30 June 1999, was RM4,871,324.63 and this was the amount that the respondent claimed in its application for summary judgment against the appellants.

On 30 September 1999 the learned senior assistant registrar allowed the respondent's application to enter summary judgment for the said sum of RM4,871,324.63 and interest on that sum at 2.25% per annum above the base lending rate then at 7.65% per annum and penalty interest of 1% on the whole outstanding amount calculated on monthly rests from 1 July 1999 till date of full settlement. The appellants appealed to the Judge in chambers.

On 1 March 2001 the learned judge dismissed the appeal in relation to the said sum and interest claimed, viz., he affirmed the decision of the learned senior assistant registrar that summary judgment be entered against the appellants for the said sum of RM4,871,324.63 and interest on that sum at 2.25% per annum above the base lending rate then at 7.65% per annum. He however ordered that leave be given to the appellants to defend upon the issue of the 1% penalty interest claimed as he was