Daya CMT SDN BHD V Yuk Tung Construction SDN BHD

[2016] 1 LNS 649 Legal Network Series
IN THE HIGH COURT OF MALAYA AT KUALA LUMPUR

IN THE STATE OF WILAYAH PERSEKUTUAN, MALAYSIA
(CIVIL DIVISION)
[SUIT NO: 22C-61-12/2015]
BETWEEN
DAYA CMT SDN BHD ... PLAINTIFF

(Company No: 208646-U)
AND
YUK TUNG CONSTRUCTION SDN BHD ... DEFENDANT

(Company No: 862504-A)
CONTRACT: Building contract - Performance bond - On demand

performance bond - Payment on performance bond - Right of main
contractor to call for bank guarantee - Unconscionability - Calling
for performance bond following termination of subcontract - Whether
dependent on terms of bond or on default of underlying subcontract -
Whether main contractor was guilty of unconscionable conduct by
terminating subcontract and calling for performance bond - Whether
there was basis to call for performance bond - Whether main
contractor was contractually entitled to call for performance bond
CONTRACT: Building contract - Sub-contract - Termination -

Validity of termination - Termination by main contractor -
Subcontractor's failure to carry out subcontract works regularly and
diligently - Substantial delay in completing project and increasingly
frequent strikes and work stoppage on part of subcontractor -
1
Whether main contractor was guilty of unconscionable conduct by

terminating subcontract
CIVIL PROCEDURE: Injunction - Injunction to restrain calling of

performance bond - Injunction application by subcontractor to
restrain main contractor from calling performance bond pending
disposal of suit - Whether there was unjust enrichment on part of
main contractor - Whether main contractor was in position to repay
subcontractor should subcontractor succeed at trial - Whether
subcontractor was able to show prima facie case of unconscionable
conduct by main contractor to justify restraint on main contractor
from making call on performance bond - Whether damages would be
an adequate remedy
CIVIL PROCEDURE: Injunction - Erinford injunction - Injunction

pending appeal - Special circumstances - Recovery of money -
Whether payment of money could render a successful appellant's
appeal nugatory - Whether plaintiff was able to show special
circumstances justifying Erinford injunction pending appeal
[Plaintiff’s application vide Court Encl No. 3 and Encl No. 25

dismissed with costs.]
Case(s) referred to:

Bains Harding (Malaysia) Sdn Bhd v. Arab-Malaysian Merchant Bank
Berhad & 3 Ors [1996] 1 BLJ 25 HC (refd)
Bina Jaya Mantap Sdn Bhd v. Institute of Technology Petronas Sdn

Bhd [2014] 1 LNS 239 HC (refd)
BS Mount Sophia Pte Ltd v. Join-Aim Pte Ltd [2012] SGCA 28 (refd)
Cobrain Holdings Sdn Bhd v. Expertise International A&I (M) Sdn

Bhd & Ors [2015] 6 CLJ 312 HC (refd)
2
Cocoa Processors Sdn Bhd v. United Malayan Banking Corp Bhd &
Ors [1989] 1 CLJ Rep 436 HC (refd)
Commercial Bank of Australia Ltd v. Amadio and Another [1983] 46
ALR 402 (refd)
El Traco International Pte Ltd v. CGH Development Pte Ltd [2000] 4
SLR 290 (refd)
Erinford Properties Ltd v. Cheshire County Council [1974] 2 All ER

448 (refd)
GHL Pte Ltd v. Unitrak Building Construction Pte Ltd [1999] 3 SLR
604 (refd)
Kejuruteraan Bintai Kindenko Sdn Bhd v. Nam Fatt Construction Sdn

Bhd & Anor [2011] 7 CLJ 442 CA (refd)
Kerajaan Malaysia v. Ven-Coal Resources Sdn Bhd [2014] 5 CLJ 186

HC (refd)
Kilang Kosfarm Sdn Bhd v. Kosma Nusantara Bhd (No. 2) [2002] 3

CLJ 165 HC (refd)
Kvaerner Singapore Pte Ltd v. UDL Shipbuilding (Singapore) Pte Ltd
[1993] 3 SLR 350 (refd)
Min Thai Holdings Pte Ltd v. Sunlabel Pte Ltd [1999] 2 SLR 368
(refd)
Mitsubishi Corporation & Ors v. Sepangar Bay Power Corporation
Sdn Bhd & Ors [2009] 2 CLJ 515 HC (refd)
Nafas Abadi Holdings Sdn Bhd v. Putrajaya Holdings Sdn Bhd [2004]
1 LNS 127 HC (refd)
Olex Focas Pty v. Skodaexport Co Ltd [1998] 3 VR 380 (refd)
Raymond Construction Pte Ltd v. Low Yang Tong and AGF Insurance
(Singapore) Pte Ltd [1996] SGHC 136 (refd)
Royal Design Studio Pte Ltd v. Chang Development Pte Ltd [1990] 1
LNS 124 HC (refd)
3
Sato Kogyo (M) Sdn Bhd v. Salini Malaysia Sdn Bhd [2013] 1 LNS
1114 HC (refd)
Subashini Rajasingam v. Saravanan Thangathoray & Other Appeals
[2008] 2 CLJ 1 FC (refd)
Sumatec Engineering And Construction Sdn Bhd v. Malaysian
Refining Company Sdn Bhd [2012] 3 CLJ 401 FC (refd)
Teknik Cekap Sendirian Berhad v. Public Bank Berhad [1995] 4 CLJ

697 CA (refd)
West Faulkner Associates v. London Borough of Newham [1994] 42

Con LR 144 (refd)
Wong Heng Meng & Ors v. Prince Guneratnam & Ors [2010] 1 LNS
447 HC (refd)
Yoker Sdn Bhd v. PY Mayora Indah [2014] 9 MLJ 591 (refd)
Other source(s) referred to:

I.N. Duncan Wallace Q.C., Hudson’s Building and Engineering
Contracts, Eleventh Edition Volume 1, London, Sweet & Maxwell,
1995
JUDGMENT OF
Y.A. TUAN LEE SWEE SENG
[1] The dispute here between a main contractor and its principal
subcontractor has a familiar story line. The subcontractor as Plaintiff here,
had been engaged by the main contractor, the Defendant here, with
respect to the construction of a mixed development of 3 blocks of 28-storey
buildings (“the Project”). The Defendant itself is being employed by the
landowner/developer as the Main Contractor for all the works under the
Project for RM270 million (“Principal Subcontract Works”). The contract
4
documents for the Principal Subcontract Works (“Principal Subcontract”)
between the Plaintiff as Principal Subcontractor and the Defendant as Main
Contractor, consisted of a Letter of Award dated 2 May 2012 and the PWD
203 (Rev 10/83) together with amendments in Attachment A to the Letter of
Award (“the Conditions of Contract”). The appendix to the Conditions of
Principal Subcontract is found in Attachment B.
[2] It was a term of the Conditions of Contract that the Plaintiff do furnish
a Bank Guarantee (“BG”) in favour of the Defendant for RM13.5 million. It
is common ground that the BG is an on-demand BG. By clause 37(c) of the
Conditions of Contract, if the Plaintiff commits any breach of its obligations
under the Conditions of Contract, the Defendant may utilize and make
payments out of or deductions from the BG or any part thereof in
accordance with the terms of the Conditions of Contract.
[3] The completion date of the Project was 14 November 2014 (“Original
Completion Date”) under clause 39. This was extended by 43 days under
clause 43 to 27 December 2014 (“Final Completion Date”).
Problem
[4] What happened was that there was substantial delay in the Project.
As is not uncommon, each blamed the other for it! One thing was clear: by
5
October 2014 there was no way the Plaintiff could complete the Principal
Subcontract Works by the Original Completion Date. Parties then entered
into a Supplemental Agreement dated 28 October 2014 to allow for
sectional completion. Originally the Project consisted of Block A of 526
units SOHO (22 storeys and 10 units shop offices); Block B of 365 units of
service apartments (21 storeys); Block C (168 units of service apartments
(21 storeys); including 7 1/2 storey podium car park and 2 storey basement
car park. Under the sectional completion, completion of Block A was
referred to as Section 1 and that of Block B and C as Section 2. The
completion date of both Sections 1 and 2 remained as 14 November 2014.
There was one exception though: the Liquidated and Ascertained Damages
(“LAD”) for Section 1 is RM30,000.00 per day and that of Section 2 is
RM40,000.00 per day; down from RM70,000.00 per day under clause 40 of
the Conditions of Contract.
[5] A Certificate of Non-Completion (“CNC”) was issued certifying that
the Plaintiff had failed to complete the Principal Subcontract Works by the
Final Completion Date. It was only on 22 November 2015 that the Plaintiff
completed Section 1 which is Block A.
6
[6] According to the Defendant there were slippages in the completion of
the Principal Subcontract Works after the Revised Work Programme was
given by the Plaintiff. There were work stoppages and strikes by the
Plaintiff’s subcontractors and workmen. The Defendant proceeded to give a
Notice under clause 51 of the Conditions of Contract requiring the Plaintiff
to remedy the defaults failing which the Defendant would terminate the
Principal Subcontract. The work stoppages and strikes continued unabated
and the site memo, dated 14 December 2015 exhibited by the Defendant in
Exhibit D 25 in the Defendant’s 1 st Affidavit, set out the number of strikes
and work stoppages. The Defendant terminated the Principal Subcontract
by its Notice of Termination dated 22 December 2015 for the Plaintiff’s
failure to regularly and diligently proceed with the Principal Subcontract
Works. The Notice of Termination is at Exhibit P 12 of the Plaintiff’s 1 st
Affidavit.
Prayer
[7] Thereafter the Defendant proceeded to make a call on the BG by its
letter dated 22 December 2015 issued to Alliance Bank Malaysia Bhd (“the
Bank”). To bring the matter up-to-date, the Plaintiff filed a Writ and this
application in Enclosure 3 on 23 December 2015. The Plaintiff moved the
Court on a certificate of urgency filed and an ex-parte Injunction was given
7
the same day, to essentially restrain the Defendant from calling on the BG
or from receiving the proceeds guaranteed under the BG of RM13.5 million
or any part thereof pending the disposal of the suit or until further order of
the Court.
[8] The grounds are that the termination of the Principal Subcontract is
unlawful and that the call on the BG was unconscionable in the
circumstances of the case. The Plaintiff said the Defendant’s
unconscionable conduct consisted of the following:
(a) The Defendant reneged on the parties agreement to allow the Plaintiff
to complete the Principal Subcontract Works by end March 2016 and
terminated the Principal Subcontract notwithstanding the Settlement;
(b) The Defendant also failed, refused and/or neglected to properly
assess the Plaintiff’s Variation Order Claims (“VO Claims”) as well as
Extension of Time Claims (“EOT Applications”);
(c) In so doing, the Defendant also misled/enticed the Plaintiff to execute
the Supplemental Agreement for the benefit of the Defendant and the
Developer when it had no intention to honour its commitment
thereunder to fairly re-assess the Plaintiff’s 3 EOT Applications;
8
(d) To cap the atrocities, the Defendant by virtue of its superior position,
also engineered the Plaintiff’s termination by interfering with the
Plaintiff’s administration of the subcontracts between the Plaintiff and
its subcontractors, resulting in various strikes that delayed the
Project; and
(e) The encashment and paying out of the BG proceeds will result in the
Plaintiff receiving monies exceeding the alleged LAD.
[9] The Plaintiff stressed that the aforesaid unconscionable conduct are
not mere disputes over interpretation of the Conditions of Contract and/or
the documents adduced and that far from it, the unconscionable conduct of
the Defendant patently demonstrates the Defendant’s abuse of its
dominant position against the Plaintiff culminating in a clear-cut oppression
of the Plaintiff as its subcontractor.
Principles
[10] Lest we forget, this Court must state at the outset that the BG is an
on-demand performance bond. This can be seen from the clear terms of
the BG that the Bank is to pay:
“...on the Beneficiary’s first demand in writing without proof or
condition and notwithstanding any contestation or protest by the
9
Principal Subcontractor or by the Guarantor or by any other third
party...”
[11] Payment on the performance bond or BG is only dependent on the
terms of the bond or guarantee and not on proof of default of the underlying
contract. In Teknik Cekap Sdn Bhd v. Public Bank Bhd [1995] 3 MLJ 449
at 454, the court stated as follows:
“Having considered the submissions it is relevant to find out what
therefore is a performance bond. As I see it there is nothing special or
unique in a performance bond. It is in fact a written contract of
guarantee by a bank, other financial institutions or in some cases an
insurance company, whereby they guarantee the due performance of
a contract and in the event of a breach or non-performance of the
contract, they guarantee to pay, on a written demand being made, the
sum stipulated in the guarantee. Therefore a performance bond is
nothing more than a written guarantee, and in order to interpret the
obligations of the bank, one need only to look at the written bond
itself to determine what are the terms and conditions agreed upon
between the parties. A great deal, therefore, depends on the wording
of the bond itself.”
10
[12] Be that as it may, the cases have stated that between the beneficiary
and the party procuring the bond (the obligor) one is entitled to look at the
underlying contract between them, to see if the beneficiary’s conduct has
been unconscionable in the circumstances surrounding the underlying
contract between the parties.
[13] That unconscionability has been regarded as a distinct ground to
restrain a beneficiary from calling on a BG as separate from fraud, has
been firmly established since the decision of the Apex Court in the case of
Sumatec Engineering and Construction Sdn Bhd v. Malaysian Refining
Company Sdn Bhd [2012] 4 MLJ 1. The Federal Court speaking through
his Lordship Hamid Embong FCJ, endorsed the approach taken by the
Court of Appeal as follows:
“[17] The Court of Appeal used the following tests and principles in
coming to its conclusion, in determining the issue at hand as found in
the following passages from its judgment:
(i) The principle concerning ‘unconscionability’ was initially
propounded by Lord Denning in the case of Lloyds Bank v.
Bundy [1975] QB 326 where it was held that unconscionable
transaction between parties may be set aside by the court of
equity. This ‘unconscionable’ category is said to extend to all
11
cases where unfair advantage has been gained by an
unconscientious use of power by a stronger party against
a weaker (see also Halsbury’s Law of England, (3rd Ed), Vol 17
[1956] at p 682).
(ii) On an application for relief against unconscionable conduct, the
court looks to the conduct of the party attempting to enforce, or
retain benefit of, a dealing with a person under a special
disability in circumstances where it is not consistent with equity
or good conscience that he should do so (see Commercial
Bank of Australia Ltd v. Amadio and Another [1983] 46 ALR
402).
(iii) In the Singapore High Court, Lai Kew Chai J in the case of Min
Thai Holdings Pte Ltd v. Suniable Pte Ltd & Anor [1999] 2 SLR
368 opined that ‘the concept of unconscionability involves
unfairness, as distinct from dishonesty or fraud, or conduct so
reprehensible or lacking in good faith that a court of conscience
would either restrain the party or refuse to assist the party’.
(iv) It is not possible to define ‘unconscionability’ other than to give
some very broad indications such as lack of bona fides. What
kind of situation would constitute ‘unconscionability’
12
would have to depend on the facts of each case. This is a
question which the court has to consider on each occasion
where its jurisdiction is invoked. There is no pre-determined
categorization (see Dauphin Offshore Engineering and Trading
Pte Ltd v. The Private Office of HRH Sheikh Sultan bin Khadifa
bin Zayed Al-Nahyan [2000] 1 SLR (R) 117; and Shanghai
Electric Group Co Ltd v. PT Merak Energi Indonesia [2010] 2
SLR 329)
(v) Based on the above considerations, we are of the view that
there is no simple formula that would enable the court to
ascertain whether a party had acted unconscionably in making
a call on an on-demand performance bond or bank guarantee.
In the final analysis, whether or not ‘unconscionability’ has been
made out is largely dependent on the facts or each case. In
every case where ‘unconscionability’ is made out, there would
always be an element of unfairness or some form of conduct
which appears to be performed in bad faith.
(vi) In Bocotra Construction Pte Ltd v. AG [1995] 2 SLR (R) 262, the
Singapore Court of Appeal, stated that ‘a higher degree of
strictness applies, as the applicant will be required to
13
establish a clear case of fraud or unconscionability in the
interlocutory proceedings. It is clear that mere allegations are
insufficient’.” (emphasis added)
[14] In relation to restraining a beneficiary from calling the bond, the Court
of Appeal in Kejuruteraan Bintai Kindenko Sdn Bhd v. Nam Fatt
Construction Sdn Bhd [2011] 7 CLJ 442 held that the provisions of the
underlying contract between the beneficiary and the applicant would be
relevant to justifying a restrain on the call on the BG by the Defendant
beneficiary:
“[70] In dealing with an application for injunctive relief (as in the
present case) the court must, first of all, differentiate or distinguish
whether it is to restrain the beneficiary from making a call or demand
on the performance bond; or to restrain the bank/issuer from making
payment out of the performance bond to the beneficiary. If it is for
the earlier one, the provisions of the underlying contract
between the parties must be considered and cannot be
disregarded...” (emphasis added)
[15] With respect to the threshold test of a seriously arguable case, the
Federal Court in Sumatec Engineering (supra) explained as follows:
14
“[39] We are of the considered view that the ‘seriously arguable and
realistic inference’ test as used by the learned judicial commissioner
in Focal Asia is equally applicable to the extended exception of
unconscionability. That test therefore needs to be applied to the
relevant material facts before the court. The same test which results
in a ‘strong prima facie case’ was utilized by the Court of Appeal at
the intermediate appeal stage. And the Court of Appeal said this of
the required burden now rested on the shoulder of Sumatec:
As in the case of fraud, to establish ‘unconscionability’
there must be placed before the court manifest or strong
evidence of some degree in respect of the alleged
unconscionable conduct complained of, not a bare
assertion. Hence, the respondent has to satisfy the
threshold of a seriously arguable case that the only
realistic inference is the existence of ‘unconscionability’
which would basically mean establishing a strong prima
facie case. In other words, the respondent has to place
sufficient evidence before the court so as to enable the court to
be satisfied, not necessarily beyond reasonable doubt, that a
case of ‘unconscionability’ being committed by the beneficiary
15
(the appellant) has been established to an extent sufficient for
the court to be minded to order injunction sought. This
additional ground of ‘unconscionability’ should only be
allowed with circumspect where events or conduct are of
such degree such as to prick the conscience of a
reasonable and sensible man.” (emphasis added)
[16] The Court of Appeal case in Kejuruteraan Bintai Kindenko Sdn
Bhd v. Nam Fatt Construction Sdn Bhd [2011] 7 CLJ 442 explained the
test as follows as summarised in the headnotes:
“(6) In order to rely on the ground of ‘unconscionable conduct’ to
restrain an abusive call on a performance bond the plaintiff must
show manifest or strong evidence of some degree of the
conduct complained of; not a bare statement. The evidence need
not necessarily be beyond reasonable doubt. The circumstances or
conduct must be of such degree as to prick the conscience of a
reasonable and sensible man.” (emphasis added)
[17] Therefore the test to be applied may be summarised as follows:
16
1. The applicant must be able to satisfy the court that he has a
“seriously arguable case that the only realistic inference is that
unconscionability has been made out”;
2. The applicant has to place manifest or strong prima facie case of
the alleged unconscionable conduct and not a bare assertion.
[18] As for the definition or meaning of “unconscionability”, the Court of
Appeal broadly indicated that unconscionability is tantamount to actions
that lack bona fides where there are an element of unfairness or some form
of conduct which appears to be performed in bad faith:
“[47] It is not possible to define “unconscionability” other than to give
some very broad indications such as lack of bona fides. What kind
of situation would constitute “unconscionable conduct” would have to
depend on the facts of each case. This is a question which the court
has to consider on each occasion where its jurisdiction is invoked.
There is no pre-determined categorization (see: Dauphin Offshore
Engineering and Trading Pte. Ltd. v. The Private Office of HRH
Sheikh Sultan bin Khalifa bin Zayed Al-Nahyan [2000] 1 SLR (R) 117;
and Shanghai Electric Group Co Ltd v. PT Merak Energi Indonesia &
Anor [2010] 2 SLR 329).
17
[48] Based on the above considerations, we are of the view that
there is no simple formula that would enable a court to ascertain
whether a party had acted unconscionably in making a call or
demand on an “on demand” performance bond. In the final analysis,
whether or not “unconscionability” has been made out is largely
dependent on the facts of each case. In every case where
“unconscionability” is made out, there would always be an element
of unfairness or some form of conduct which appears to be
performed in bad faith.” (emphasis added)
[19] The Singapore Court of Appeal in BS Mount Sophia Pte Ltd v. Join-
Aim Pte Ltd [2012] SGCA 28 at paragraph [36] and [37] said
“unconscionability” is a label applied to describe unsatisfactory conduct
tainted by bad faith. A precise definition of the concept would not be useful
because the value of unconscionability is that it can capture a wide range
of conduct demonstrating a lack of bona fides. The Singapore Court of
Appeal went on to elaborate that although unconscionability itself may not
carry a precise definition what constitutes unconscionable conduct should
be reasonably apparent, it is probably very difficult to negligently act in bad
faith, if the call on the bond is motivated by improper purposes or such a
call cannot be justified with clear evidence or in other situations where the
18
beneficiary is less than certain about his entitlement to call on the bond and
the amount and unfairness is also an element to be taken into account. In
paragraph [21] it spoke of the test as follows:
“When determining if a strong prima facie case has been made out,
the entire context of the case must be thoroughly considered, and it is
only if the entire context of the case is particularly malodorous that
such an injunction should be granted. We must emphasise that the
courts’ discretion to grant such injunctions must be sparingly
exercised and it should not be an easy thing for an applicant to
establish a strong prima facie case.” (emphasis added)
[20] In Raymond Construction Pte Ltd v. Low Yang Tong and AGF
Insurance (Singapore) Pte Ltd [1996] SGHC 136 Lai Kew Chai J at
paragraph [5] said: “The concept of ‘unconscionability’ to me involves
unfairness, as distinct from dishonesty or fraud or conduct of a kind so
reprehensible or lacking in good faith that a court of conscience would
either restrain the party or refuse to assist the party. Mere breaches of
contract by the party in question ... would not by themselves be
unconscionable.
19
[21] In Sumatec Engineering and Construction Sdn Bhd v. Malaysian
Refining Co Sdn Bhd [2012] 4 MLJ 1 at paragraph [41] it was observed
that:
“A determination on whether unconscionability applies in a particular
case would therefore depends largely on the material facts....”
[22] It goes without saying that whether or not unconscionability has been
made out would depend on the particular and peculiar facts of each case
taken as a whole and that its determination is very much fact-centric. The
Court in Kejuruteraan Bintai Kindenko Sdn Bhd v. Nam Fatt
Construction Sdn Bhd [2011] 7 CLJ 442 at p 449 speaking through her
Ladyship Zainun Ali JCA (now FCJ) expressed thus:
“[4] ... unconscionability is a doctrine which allows the courts to deny
enforceability of a contract because of abuses arising out of contract.
[5] In my view the principle underlying the unconscionability doctrine
is the prevention of oppression and unfair conduct and because the
determination of unconscionability is fact specific, courts must
consider such a claim on a case by case basis and assess the totality
of the circumstances”
20
[23] This Court agrees with learned counsel for the Defendant, Mr William
Leong, that mere breaches of the contract, without more, would not by
themselves amount to unconscionability. He referred to the following cases:
a. Mere breaches of contract is not unconscionability: Raymond
Construction Pte Ltd v. Low Yang Tong and AGF Insurance
(Singapore) Pted Ltd [1996] SGHC 136, Sumatec’s case (supra);
b. Alleged breaches of the underlying contract that the technical reports
required to call on the performance guarantee was insufficient
because it was made in a cursory manner and without using
instruments is not unconscionability: Yorker Sdn Bhd v. PY Mayora
Indah [2014] 9 MLJ 591;
c. Alleged breaches of the underlying contract to challenge the
decisions of an arbitration tribunal disputed by the obligor is not
unconscionability: Sato Kogyo (M) Sdn Bhd v. Salini (M) Sdn Bhd
[2014] 10 MLJ 614;
d. Alleged breaches of contract between the contractor and
subcontractor not involving the employer/obligor is not
unconscionability: Cobrain Holdings Sdn Bhd v. Expertise
International A&I (M) Sdn Bhd [2015] 11 MLJ 339;
21
e. A beneficiary calling on the performance bond for breaches of the
contract although disputed by the obligor is not unconscionability: El
Traco International Pte Ltd v. CGH Development Pte Ltd [2000] 4
SLR 290.
[24] Mr William Leong stated as a proposition of law that it is
unconscionable to call on the performance bond where the obligor was not
in default of the contract but the beneficiary commenced a course of
conduct which caused the obligor to default or the beneficiary participated
or caused to forge or manipulate documents to call on the performance
bond. He cited examples culled from the cases below as illustrating the
said proposition of law:
a. The beneficiary and or its consultants failed to work with the obligor
unless they pay a bribe, upon the obligor refusing to pay the bribe
and issuing a notice to terminate the contract, the beneficiary
commenced a course of conduct which afforded the beneficiary an
excuse to call on the performance bond: Bina Jaya Mantap Sdn
Bhd v. Institute of Technology Petronas Sdn Bhd [2014] 11 MLJ
352;
22
b. The obligor and the architect manipulated and certified certain

documents to expose the obligor to LAD when he obligor was not so
liable: BS Mount Sophia Pte Ltd v. Join-Aim Pte Ltd [2012] SGCA
28;
c. Where the obligor’s non-performance of the contract was induced by

the beneficiary’s very own actions, where the non-performance was
due to the beneficiary’s refusal to pay the interim payments: Royal
Design Studio Pte v. Chang Development [1992] 2 MLJ 229;
d. Where the beneficiary had repeatedly obstructed the obligor from

carrying on the works: Raymond Construction Pte Ltd v. Low Yang
Tong and AGF Insurance (Singapore) Pte Ltd [1996] SGHC 136;
e. Where the beneficiary fails to fulfill his major obligation as stated in

the contract such as to open a letter of credit: Kvaerner Singapore
Pte Ltd v. UDL Shipbuilding (Singapore) Pte Ltd [1993] 3 SLR 350;
f. Where the beneficiary owes a substantial sum of money to the obligor

and had issued bounced cheques yet called on the performance
bond: Royal Design (supra) and Raymond Construction (supra);
g. Where the beneficiary was aware that the obligor was entitled to
the benefit of a force majeure clause for not-fulfilling its
contractual
23
obligations due to severe floods but proceeded to call on the
performance bond: Min Thai Holdings Pte Ltd v. Sunlabel Pte Ltd
[1999] 2 SLR 368;
h. Where the beneficiary threatened to make a call on the performance
bond unless the obligor paid the lower tier subcontractor which had a
financial connection to the beneficiary but for which there is no
contractual provision allowing the beneficiary to make such a
direction: Bains Harding (Malaysia) Sdn Bhd v. Arab-Malaysian
Merchant Bank Bhd [1996] 1 MLJ 425.
[25] Mr William Leong also distilled the following principle from his
analysis of the cases: that where the amount of the performance bond
called is excessive to the amount due to the beneficiary, the conduct of the
beneficiary in calling on the bond may be unconscionable:
a. The beneficiary called for the full amount when part of the works
was not due, such part that was premature was unconscionable: El
Traco’s case;
b. The beneficiary called for the full amount of the performance bond
when the contractual amount had been reduced by 65%: GHL Pte
Ltd v. Unitrak Building Construction Pte Ltd [1999] 3 SLR 604;
24
c. The obligor had completed 95% of the works and the amount called
was more than the value of the remaining works and value for
repairs: Nafas Abadi Holdings Sdn Bhd v. Putrajaya Holdings Sdn
Bhd [2004] 1 LNS 127;
d. The beneficiary had called on the full amount of the performance
bond a greater part of which had already been repaid: Olex Focas
Pty v. Skodaexport Co Ltd [1998] 3 VR 380 Supreme Court of
Victoria.
[26] Bearing in mind then the above test, this Court shall proceed to
consider the various grounds raised by the Plaintiff/Applicant to ascertain if
they meet the threshold test of a strong prima facie case of
unconscionability.
Whether the Defendant’s termination of the Principal Subcontract
before the revised completion of end March 2016 is unconscionable
[27] It is apposite at this juncture to appraise ourselves of some of the key
terms of the Conditions of Contract. By clause 39 the Completion Date is
14 November 2014 unless extended in accordance with clause 43. If the
Plaintiff fails to complete the Principal Subcontract Works and the SO
certifies by way of the Certificate of Non-Completion the Plaintiff shall pay
25
the defendant LAD at RM70,000.00 a day as stated in Clause 40. Clause
43 Deals with Extension of Time (“EOT”). It provides that upon it becoming
reasonably apparent to the Plaintiff that progress of the Works is delayed
the Plaintiff is to give notice of the causes of delay and if in the opinion of
the SO that the delay is caused by any of the causes listed in sub-
paragraphs (a) - (k) therein the SO shall grant a fair and reasonable
extension of time for completion of the Principal Subcontract Works.
[28] By clause 45 the Plaintiff is required to make good the defects within
the Defects Liability Period at its cost and if the Plaintiff fails to do so the
Defendant shall be entitled make good the defects and deduct the cost
from the retention sum or from the Bank Guarantee. The Defendant is
entitled under clause 50 to deduct any money owing by the Plaintiff from
any sums payable to the Plaintiff.
[29] There is also an amended Clause 51 on “Special Conditions” where
by a new Clause 51(c)(iv)(a) has been added to provide that all progress
payments payable after the notice of determination shall be suspended
until receipt of the Final Contract Sum from the Employer or expiration of
the Defects Liability Period (whichever is the later) under the Contract and
thereafter until the costs of construction of completion of the Principal
26
Subcontract Works and making good defects thereto, damages for delay
[including but not limited to liquidated damage incurred by the Contractor
under the Contract] and all other costs, loss or expense incurred by the
Contractor shall have been ascertained.
[30] The Plaintiff took possession of the Site on 15 May 2012. The
Original Completion was 14 November 2014 and the Final Completion Date
is 27 December 2014. The Plaintiff pursuant to paragraph 7.1 of the Letter
of Award submitted a Revised Master Construction Schedule on 27
September 2012 to complete the entire Project incorporating Blocks A, B
and C within 900 days by 14 November 2014. The Architect by a letter
dated 15 October 2012 accepted the Works Programme and agreed that
pursuant to paragraph 7.1 of the Letter of Award, all parties shall follow the
Works Programme. The Revised Master Construction Programme is
Exhibit D-4 in the Defendant’s 1 st Affidavit page 33-76 and the Architect’s
letter dated 15 October 2012 is Exhibit D-5 in the Defendant’s 1st Affidavit
page 77.
[31] There is evidence that the Plaintiff was unable to carry out the works
in accordance with the Works Programme. The Defendant submitted that
delay occurred almost from the beginning and continued to deteriorate over
27
time. The Plaintiff failed to meet its Works Programme and had to revise it
4 times. The Defendant has produced a series of letters written by the
Defendant, the consultants and the Plaintiff itself contemporaneously
documenting the ever increasing accumulative delay. When it became
apparent that the Project could not be completed by the Original
Completion Date, the Defendant had to take stock of the situation and
confront the consequences of what may follow. A delay in handing over
vacant possession to the purchasers would result in the claims from
purchasers against the landowner/developer with the cascading
consequence of the landowner/developer claiming the same from the
defendant as main contractor.
[32] Parties entered into negotiations and executed a Supplemental

Agreement on 28 October 2014 to address the problem of delay in
completion. The salient terms of the Supplemental Agreement are
reproduced below:
SUPPLEMENTAL AGREEMENT
THIS SUPPLEMENTAL AGREEMENT is made this 28th day of

October 2014
28
NOW IT IS HEREBY AGREED as follows:-
1. The Contractor has at the request of the Principal

Subcontractor agreed to include within the Principal Subcontract
completion of the Works in sections (“Sections”) within the meaning in
Clause 41 of the Conditions of the Principal Subcontract with Block A
and related works necessary for handover of units in Block A to
purchasers being Section 1 and balance of the Principal Subcontract
Works being Section 2. The sections are as set out as in Appendix A to
this Supplemental Agreement.
2. The Dates for Completion of both Section 1 and Section 2 are

as per the Date for Completion of the Principal Subcontract Works set
out in the Letter of Award, ie, 14 November 2014.
3. The Liquidated and Ascertained Damages for Section 1 shall

be RM30,000.00 and for Section 2 shall be RM40,000.00 for each
day the same remain incomplete.
4. The provisions of Clause 41 of the Condition of the Principal

Subcontract and all other provisions express or implied relating to
Sectional Completion shall apply to the completion of Section 1 and
the completion of the Balance of the Works.
29
5. Save and except where expressly amended the Principal
Subcontract shall continue to be in full force and effect. For the
avoidance of doubt, the Principal Subcontractor’s entitlement to
extension of time (if any) for the completion of the Principal
Subcontract Works shall not be extinguished.
6. In no event shall any delay failure or omission on the part of
either party in enforcing or pursuing any right, power, privilege, claim
or remedy, which is conferred by this Contract or this Supplemental
Agreement or any of the obligations, be deemed to be or construed
as:-
(a) a waiver thereof, or of any other such right power,
privilege, claim or remedy in respect of the particular
circumstances in question; or
(b) operates so as to bar the enforcement or exercise
thereof, or of any other such right, power, privilege, claim or
remedy, in any other instance or at any time thereafter;
7. As this Supplemental Agreement is executed at the request of
the Principal Subcontractor, the principle of contra proferentem shall
not apply to the construction of this Supplemental Agreement.
30
[33] Instead of a single completion of all the 3 Blocks A, B and C, there is
now substituted a sectional completion of Block A under Section 1 and
Blocks B and C and the remainder works under Section 2. There was also
the reduction of LAD of RM70,000.00 per day to RM 30,000.00 per day for
Block A and RM40,000.00 per day for Blocks B and C. What is obvious is
that the more onerous operation of the LAD of RM70,000.00 per day is now
buffeted with a reduced LAD of RM30,000.00 for Block A with the hope that
Block A might be completed soon. Once Block A is completed LAD would
stop to run and the Plaintiff may then concentrate on Section 2 of the works
and any delay would only attract the reduced LAD of RM40,000.00. It was a
workable way forward considering the worrying state of affairs.
[34] In the meanwhile the rights of both parties are reserved and
preserved under the original Principal Subcontract and that was clearly
spelt out in Clause 6 of the Supplemental Agreement. The Plaintiff would
have to submit a fresh Works Programme. New target dates of completion
were incorporated in the Plaintiff’s 3rd and 4th Works Programmes. Block A
was supposed to be completed by May 2015 but when the progress was
agonizingly slow, the Defendant wrote to the Plaintiff on 6 May 2015,
expressing its anxious concerns that Block A would not meet the target
date of May 2015 or even June 2015 and likewise too Blocks B and C
31
targeted for completion by January 2016. The Defendant also reminded the
Plaintiff that LAD to purchasers is mounting by each month’s delay. See
Exhibit D-17 at p 110 of Defendant’s 1st Affidavit.
[35] The Plaintiff again fell behind schedule and submitted a 4 th Revised
Works Programme to complete the Project by 31 March 2016 which the
Defendant used for monitoring purposes. The Defendant also impressed
upon the Plaintiff of serious concerns on the increasingly frequent
occurrences of strikes and work stoppages. A list of the number of strikes
was provided with instruction to catch up on the delay. See letter dated 14
September 2015 in Exhibit D - 18 at p 115 of Defendant’s 1st Affidavit.
[36] There were further delays on the 4th Revised Works Programme and
the lamentable lack of progress such that realistically it would be nigh
impossible to complete the Project even by end March 2016. Learned
counsel for the Defendant submitted that the Defendant and the
consultants had given numerous warnings that the Plaintiff will be liable to
pay LAD for the delay and the Principal Subcontract will be terminated
unless the Plaintiff put in additional working hours, personnel and
equipment to catch up with the 4 th Revised Works Programme but to no
32
avail. See one such letter from the Defendant to the Plaintiff dated 30
September 2015 in Exhibit D-9 at p 134 in the Defendant’s 1st Affidavit.
[37] By that letter, the Defendant informed the Plaintiff, it was under
pressure to deliver the units to the purchasers and the Defendant cannot
accept delay beyond 31 March 2016 as indicated in Plaintiff’s 4 th Revised
Works Programme. However, delay, strikes and stoppages continued.
Therefore the Defendant issued a notice under Clause 51 on 3 December
2015 and terminated the Principal Subcontract on 22 December 2015 when
the default was not remedied. A summary of the documentary evidence
produced in Defendant’s 1 st Affidavit Volume 1 is set out at paragraph 40
pages 25-27 of the Defendant’s Main Submission.
[38] A copy of the said Notice to Rectify Breach dated 3 December 2015
is reproduced in full below for an appreciation of the context of the
termination:
Yuk Tung Construction Sdn Bhd
Our ref : YC/CR/DAYA/L/261

Date : 3 December 2015
DAYA CMT SDN BHD

Plot 81, Lebuhraya Kampung Jawa,
11900 Bayan Lepas,
Penang.
33
Attn : Mr. Nathan Tham Jooi Loon / / Mr. William Tham Wooi Loon /
Datuk T.S Lim
Dear Sir,
CADANGAN MENDIRIKAN PEMBANGUNAN BERCAMPUR 3

BLOK 28 TINGKAT YANG MENGANDUNGI: 1) BLOK A: 526 UNIT
SOHO (22 TINGKAT) DAN 10 UNIT KEDAI PEJABAT, 2) BLOK B:
365 UNIT APARTMENT SERVIS 21 TINGKAT, 3) BLOK C: 168
UNIT APARTMENT SERVIS 21 TINGKAT TERMASUK 7 ½
TINGKAT PODIUM TEMPAT LETAK KERETA DAN 2 TINGKAT
BASEMEN TEMPAT LETAK KERETA DI ATAS LOT 30844, BATU
6, JALAN SUNGAI BESI, DALAM BANDARAYA KUALA
LUMPUR UNTUK TETUAN YUK TUNG LAND SDN BHD
- Failure by Principal Sub-Contractor (“PSCor”) to act and
allowing further delay at Towers B & C despite Contractor’s
“Notice to take action to catch up with further accumulating
delays”
We refer to and write further to our letter ref. YC/CR/DAYA/245 of 30-
9-15 wherein we had stated in the closing paragraph of the letter that
“it is absolutely crucial that you take all measures to catch up with
the progress to ensure completion at both Blocks by 31-3-16 and
we will be monitoring the situation anxiously ...” (emphases in the
original).
We have indeed been monitoring the progress since late September

2015 and are in fact alarmed by the continuing further slippage in
progress to the critical structural works base on your Progress Report
for Period Ending 15-11-15:
i. Whilst the Rev 4 programme indicated your completing 3 floors

plus the roof structure (about L25 to L27 plus roof structure) at Block
B from 28-9-15 to 15-11-15 you managed to complete only about 1.2
floors; and
ii. At Block C Rev 4 programme shows your completing 5 floors

from 28-9-15 to 15-11-15 (commence L22 to complete L26) but
you managed to complete only about 3 floors.
34
Accordingly, we are left with absolutely no alternative but to

demand that you act to substantially achieve completion of structural
works at Block B up to Roof level and all brickwalls L24 & L25, and
Block C up to L26 and all brickwalls up to L21 & L22 within the 14
days period following your receipt of this letter of this letter by
recorded delivery. Rev 4 programme indicates completing these as a
minimum by mid-December 2015.
Failure by you shall entitle us without prejudice to any of our rights
and/or remedies under the Principal Sub-Contract and/or at law to
determine your employment under the Principal Sub-Contract on the
basis that you:
are failing to proceed regularly and diligently with the Works in

accordance with the requirement of Clause 51(a) paragraph (ii) of
the Conditions of Principal Sub-Contract;
and/or
failing to execute the Works in accordance with the Principal Sub-
Contract or persistently neglecting to carry out your obligations
under the Principal Sub-Contract in that you are seriously failing to
take such measures as to ensure that the completion of Section 2
of the Works are not further delayed beyond that we which we had
previously agreed, ie, end-March 2016.
We trust that the above is clear and that you will act accordingly
failing which we shall act in accordance with Clause 51(a) paragraph
(ii) and/or Clause 51(a) paragraph (iii) of the Conditions of Principal
Sub-Contract to determine your employment under the Principal Sub-
Contract.
Thank you.
Yours faithfully,
YUK TUNG CONSTRUCTION SDN BHD
- sgd -
LIM KIM CHAI, JP
35
S.O. & Chairman

c.c. Zone Architect - Mr. Gan B.P /Ms.Noor
Fadzilaniza
Dr Y G Tan Jurutera Perunding - Dr Y.G. Tan / Mr. K.P
Lee
Global Alliance - Ir. Vincent Tan
Quanticonsult Sdn Bhd - Sr. Toh Siew Hock /Sr.
Chuan S.S
Yuk Tung Construction - Mr. Leow Chee Wah
[39] As of the date of termination of the Principal Subcontract on 22

December 2015, there was an accumulative delay of 404 days and after
deduction of the 43 days extension, the delay was 361 days.
[40] The Plaintiff, on the other hand, contended that the Defendant’s own
contemporaneous correspondence reveals an agreement between parties
that the Plaintiff will be allowed to complete the Works by “end-March 2016”
as extracted from the above Notice to Rectify Breach:
“...failing to execute the Works in accordance with the Principal Sub-

Contract or persistently neglecting to carry out your obligations under
the Principal Sub-Contract in that you are seriously failing to take
measures as to ensure that the completion of Section 2 or the Works
are not further delayed beyond that we which we had previously
agreed, ie, end-March 2016.” (Emphasis added)
36
[41] The Plaintiff further argued that the facts also disclosed that the
Defendant reneged on the “End-March” agreement and terminated the
Subcontract vide its Notice of Termination on 22 December 2015. Learned
counsel for the Plaintiff submitted that apart from substantially affecting the
Plaintiff’s financial as well as reputational well being, the Defendant’s
wrongful termination is also maliciously used as a premise for the
Defendant to unconscionably call on the BG.
[42] Learned counsel for the Plaintiff, Mr Alan Wong, drew the Court’s
attention to the following unfolding of events which revealed the
reasonableness of the Plaintiff’s actions and correspondingly, what he
castigated as the unconscionability of the Defendant’s conduct in the
following proposals from the Defendant to resolve the various disputes
between the parties:
(a) The Defendant will grant an extension of the Principal Subcontract for
the Completion of Section 1 by 23 October 2015 and Section 2 by 30
June 2016;
(b) In consideration thereof, the Plaintiff will pay the Defendant LAD of
RM20,000,000.00;
37
(c) The Defendant is entitled to deduct the said RM20,000,000.00 from
the Final Certificate;
(d) In the event the Plaintiff fails to complete Section 2 by 30 June 2016,
the Plaintiff is entitled to immediate payment of the RM20,000,000.00;
and
(e) The Plaintiff has to guarantee payment of said RM20,000,000.00 by
way of a bank guarantee as well as the 5% retention sum and that
the bank guarantee shall be maintained until the revised completion
date for Sections 1 and 2, substituting the original contractual
completion date.
[43] Learned counsel for the Plaintiff was candid enough to admit that the
parties did not reach an agreement on the proposed settlement.
Nevertheless he argued that it was undeniable that there was no urgency
to have the Principal Subcontract terminated considering that:
(a) The Defendant agreed to allow the Plaintiff to complete the Works by
end-March 2016 at the earliest; or
(b) The Defendant was also prepared to have the Works completed by
30 June 2016 as per the settlement.
38
[44] Towards the last quarter of 2015, there was evidence of a chronic
cash flow problem on the part of the Plaintiff, with the Defendant having a
justifiable doubt as to the ability of the Defendant to catch up with time lag
in the Revised Works Programme. The Plaintiff’s Director, Mr Nathan Tham
wrote in his email of 20 October 2015 to the Defendant acknowledging that
the Plaintiff was responsible for the delay. He claimed that the Bank had
withdrawn the finance facility because the Plaintiff was unable to obtain the
EOT. The Plaintiff had requested the Defendant to allow the EOT in return
for the Plaintiff waiving any increase in preliminaries and undertaking to pay
the LAD for Blocks A, B and C purchasers directly and also to purchase
unsold units. He admitted that without financing, the Plaintiff would not be
able to settle the subcontractors and catch up on progress. See email
dated 20 October 2016 in Exhibit D-93 of the Defendant’s 1 st Affidavit
Volume 1 page 415.
[45] The Defendant responded by its email dated 5 November 2015
stating that it had already rejected the terms that Mr Nathan had proposed
at a meeting on 16 October 2015. However, the Defendant had instead,
proposed a settlement for the reduction of the LAD payable by the Plaintiff
from RM 32 million to RM 20 million provided it is secured by a Bank
Guarantee. See Exhibit P-8 of the Plaintiff’s 1st Affidavit.
39
[46] Mr Nathan replied in his letter dated 11 November 2015 by referring

to what he had understood to be an agreement said to have been made in
June 2015 that the Plaintiff would only pay the LAD at the rate payable by
the developer/land owner, Yuk Tung Land Sdn Bhd to the purchasers and
not the LAD rate payable by the Plaintiff under the Principal Subcontract.
See Exhibit P-9 of the Plaintiff’s 1st Affidavit.
[47] The Defendant denied this and took the Plaintiff’s reply in Exhibit P-9
as a rejection of the Defendant’s proposal in Exhibit P-8 and informed the
Plaintiff that the Defendant would charge the full LAD rate. The Defendant
also gave notice to the Plaintiff to comply with the 4th Revised Work
Programme. See Exhibit P-10 of the Plaintiff’s 1st Affidavit. The Defendant
then gave Notice to the Plaintiff to comply with the 4th Revised Work
Programme. See Exhibit P-10 of the Plaintiff’s 1st Affidavit which is
reproduced below to show the lack of a consensus ad idem as late as 12
November 2015:
Yuk Tung Construction Sdn Bhd
Our ref : YC/CR/DAYA/L/255

Date : 12 th November 2015
DAYA CMT SDN BHD

Plot 81, Lebuhraya Kampung Jawa,
11900 Bayan Lepas,
40
Penang.
Attn: Mr. Nathan Tham / Datuk T.S Lim / Mr. Joe Tan
Dear Sir,
CADANGAN MENDIRIKAN PEMBANGUNAN BERCAMPUR 3

BLOK 28 TINGKAT YANG MENGANDUNGI: 1) BLOK A: 526 UNIT
SOHO (22 TINGKAT) DAN 10 UNIT KEDAI PEJABAT, 2) BLOK B:
365 UNIT APARTMENT SERVIS 21 TINGKAT, 3) BLOK C: 168
UNIT APARTMENT SERVIS 21 TINGKAT TERMASUK 7 ½
TINGKAT PODIUM TEMPAT LETAK KERETA DAN 2 TINGKAT
BASEMEN TEMPAT LETAK KERETA DI ATAS LOT 30844, BATU
6, JALAN SUNGAI BESI, DALAM BANDARAYA KUALA
LUMPUR UNTUK TETUAN YUK TUNG LAND SDN BHD
- Re: Proposed Amicable Settlement and Completion of the
Project
We refer to your letter dated 11 November 2015.
We deny in the strongest terms your allegation that we had agreed to
only charge you the LAD based on the amount payable to the end
purchasers upon completion of Block A and to consider EOT for
Blocks B and C to enable you to obtain financing. We did not at any
time agree to such a proposal.
We have maintained at all times that your company is liable to the full
LAD payable under Clause 40 of the Contract. This is shown in each
certificate of payment and our correspondence to you.
Following your proposal in your email dated 20 October 2015, we

informed you in our letter of 5 November 2015 that we are only
prepared to accept an amount of RM20 million provided this is
secured by the Bank Guarantee and the 5% Retention Sum.
Based upon your letter of 11 November 2015, we take it that you are
not agreeable to our proposal. In the circumstances we shall claim
the full amount of the LAD under Clause 40 and all rights and
remedies available to us under the Contract.
41
Please take note we hold you strictly to the works programme

Revision 4. We shall exercise our rights to terminate the Contract if
your progress does not meet the works programme.
Thank you.
Yours faithfully,
YUK TUNG CONSTRUCTION SDN BHD
- sgd -
LAY KOK KEONG
Contracts Manager
c.c. Zone Architect - Mr. Gan B.P /Ms.Noor

Fadzilaniza
Dr Y G Tan Jurutera Perunding - Dr Y.G. Tan / Mr. K.P Lee
Global Alliance - Ir. Vincent Tan
Quanticonsult Sdn Bhd - Sr. Toh Siew Hock /Sr.
Chuan S.S
Yuk Tung Construction - Mr. Leow Chee Wah
[48] Learned counsel for the Plaintiff was also careful to state that, as a
matter of fact, there was no concluded settlement. Be that as it may,
learned counsel for the Plaintiff proceeded to argue that as the parties
were still negotiating, the Defendant should not have, in the midst of the
negotiation, issued a Notice to Rectify Breach and thereafter to terminate
the Principal Subcontract. Going back to basics, when parties are
negotiating, there would of course be offers and counter-offers and when
the Defendant takes the view that the negotiations have come to an end as
in a stalemate, it would mean that there has been no successful negotiated
42
settlement. Such a conduct cannot by any stretch of the imagination, be
said to be unconscionable on the part of the Defendant. Otherwise one
would have to contend with a new proposition of law that unless both
parties agree that the negotiations have ended, parties must continue to
negotiate ad infinitum until a settlement is reached!! That would be a subtle
but sustained pressure applied to the parties until a settlement is
concluded. No one would dare to begin to negotiate even on a without
prejudice basis, for once embarked upon it would be a case of no return!
Nothing can be further from the truth. A counter-offer, as has been
understood for as long as contract law has been around, cancels the
original offer and is a fresh offer altogether. A non-acceptance of that
means that there is no negotiated settlement.
[49] He censured the so-called termination as nothing but a charade to
“justify” the Defendant to call upon the BG, thus unjustifiably denying the
Plaintiff’s opportunity to complete the Works as agreed.
[50] It must be appreciated that the peculiar and potentially problematic
properties of a construction contract is such that upon failure of a contractor
to proceed regularly and diligently with the works, the employer may give a
notice to rectify breach and thereafter to terminate the contract. In other
43
words, the employer does not have to wait until after the completion date is
over before his right to terminate arises. Otherwise the employer would
have to endure what may be a painfully slow progress in the works,
unrealistically hopeful against hope that the contract would be completed
on time when every bit of evidence points to the contrary. Clause 51(a)
paragraph (ii) of the Conditions of Contract allows the Defendant to so
terminate the Principal Subcontract for the Plaintiff’s failure to proceed
regularly and diligently with the Works and Clause 51(a) paragraph (iii) for
the Plaintiff’s failure to execute the Works in accordance with the Principal
Subcontract or persistently neglecting to carry out its obligations under the
Principal Subcontract, respectively.
[51] The clause is reproduced below:
“51. Determination of Contractor’s Employment
(a) Without prejudice to any other rights or remedies which the

Government may possess, if the Contractor shall make default in any
one or more of the following respects, that is to say:
(ii) if he fails to proceed regularly and diligently with the Works, or
44
(iii) if he fails to execute the Works in accordance with this Contract
or persistently neglect to carry out his obligations under this
Contract, or
then the SO may give him a notice by registered post or by recorded
delivery specifying the default, and if the Contractor shall either
continue such default for fourteen (14) days after receipt of such
notice or shall at any time thereafter repeat such default (whether
previously repeated or not), then the Government may thereupon by
a notice sent by registered post or by recorded delivery determine the
employment of the Contractor under this Contract.”(Emphasis
added.)
[52] The meaning of the expression “to proceed regularly and diligently”
has been dealt with in Kerajaan Malaysia v. Ven-Coal Resources Sdn
Bhd [2014] 11 MLJ 218. It was explained in West Faulkner Associates v.
London Borough of Newham [1994] 42 ConLR 144 as follows:
“In the JCT contracts the phrase requiring the contractor ‘to proceed
regularly and diligently with the works’ means that the contractor must
proceed continuously, industriously and efficiently with appropriate
45
physical resources so as to progress the works steadily towards
completion substantially in accordance with the contractual
requirements as to time, sequence and quality of work. The clause
requires the contractor to proceed both regularly and diligently.
Failure in either respect entitles the employer to terminate the
contract.”
[53] That right was available to the Defendant before the Original
Completion Date and by extension the Revised Completion Date. That right
could not have vaporized and vanished after the expiry of the Completion
Dates when in fact the Supplemental Agreement entered into when there
was no hope of the Plaintiff completing the Works by the Original
Completion Date specifically preserved and reserved the rights of the
parties under the Conditions of Contract. The Defendant has the option
whether or not to terminate the Principal Subcontract after the Certificate of
Non Completion was issued. It is certainly not an easy decision to make.
On the one hand there are the repeated overtures from the Plaintiff that
things would improve at its end and with the change in their main
subcontractor, it should be able to speed up the Works and catch up with
lost time. With that in place the Plaintiff submitted their 3rd Revised Works
Programme and after falling behind, a 4th Revised Works Programme. On
46
the other hand the Defendant has to weigh the further delay in the Works
once the Principal Subcontract is terminated as there is a need to retender
the balance Works and the corresponding increase in costs and the LAD
claims from purchasers with every day of delay.
[54] Surely it cannot be a case that when the Plaintiff submitted the target
date for Sectional Completion with its Revised Works Programme and the
Defendant having accepted it, the Plaintiff now has the advantage that the
Principal Subcontract cannot be terminated, come what may save if it has
stopped work or abandoned the Works completely. Surely the Defendant
cannot be in a far worse position unless it has expressly agreed. Otherwise
the Defendant would have suffered a double whammy: agreeing to a
reduced LAD and a Sectional Completion and yet being required to endure
however agonizingly slow the progress in the balance Works even when
realistically, the balance Works cannot be completed by those target dates.
[55] The Plaintiff’s submission that by extending the completion date to
end March 2015 or June 2015 or for that matter January 2016, the
Defendant has affirmed the breach and can only claim damages for
delayed completion is misplaced. It was of course only reasonable for the
Defendant, after the CNC had been issued, for the Defendant to request
47
the Plaintiff to submit the Revised Works Programme with a target date for
completion. The various dates proposed by the Plaintiff in its Revised
Works Programme are target dates for completion and they do not take
away the right of the Defendant to terminate the Principal Subcontract for
the grounds contained in the Conditions of Contract, which remained valid
and subsisting, unless varied to the limited extent provided under the
Supplemental Agreement. These are dates given by the Plaintiff pursuant
to paragraph 7.1 of the Letter of Award. It is not an extension of time under
Clause 43 of the Conditions of Contract.
[56] The learned author I.N. Duncan Wallace Q.C. in Hudson’s Building
and Engineering Contracts, Eleventh Edition Volume 1, London, Sweet &
Maxwell, 1995 observed at paragraph 4.128 as follows:
“....In addition to express provisions for completion by a stated date,
virtually all construction contracts, for very good practical reasons,
also contain provisions requiring due diligence or expedition by the
contractor at all times prior to completion. Thus, the English standard
forms provide that the contractor “shall ....regularly and diligently
proceed with the [works] .......but in fact, even in the absence of such
provisions, it is submitted that there must be an implied term that the
48
contractor will proceed with reasonable diligence, although no doubt,

in cases where a completion date is stipulated in the contract, the
degree of required progress will be measured against the prospects of
completion by that date. The reason for this latter implied term, it is
submitted, is that, otherwise, an owner will be forced to stand by
helpless until the perhaps distant completion date,
notwithstanding a rate of progress clearly inadequate to achieve
the promised date and certain to cause irremedial future loss to
the owner.”(emphasis added)
[57] Looking at the dispute that has arisen over the different
interpretations on the Supplemental Agreement and the conduct of the
parties subsequent to it, and putting the Plaintiff’s case at its highest, what
we have is a contractual dispute over the validity of termination of the
Principal Subcontract, not uncommon in a termination of a construction
contract. Whilst one may believe in the rightness and even the
righteousness of one’s claim as is the Plaintiff’s stand and stance here, that
does not, in the absence of cogent evidence, convert the Defendant’s
conduct into something unconscionable altogether.
Whether the non-approval of the Variation Orders and the Rejection of

the Applications for EOT is unconscionable in the circumstances
49
[58] The Plaintiff accepts that fact that the veracity of the VO claims and
EOT claims as well as the parties’ respective contentions in relation thereto
are matters to be decided at trial. However the Plaintiff highlighted the
following in the hope of persuading the Court that the Defendant’s actions
or inactions, taken together, would make it unconscionable for the
Defendant to call on the BG:
(a) There are various outstanding VO and EOT Claims that remains as
disputed issues to date;
(b) The Project was fraught with legacy issues, which the Plaintiff
assisted the Defendant to resolve;
(c) Pertinently is the issue surrounding the Caisson Wall where the
Plaintiff, in good faith, agreed to accept the novation of the
Defendant’s existing subcontractors and to assist in the construction
of the Caisson Wall as a means to resolve the legacy issues in
demolishing the existing structure;
(d) Arising from the various disputes, including the outstanding EOT
Claims, parties executed a Supplemental Agreement;
50
(e) Notwithstanding the execution of the Supplemental Agreement,
parties specifically agreed under the Supplemental Agreement that
the parties in relation to the EOT Claims dispute are preserved:
“...For the avoidance of doubt, the Principal Subcontractor’s
entitlement to extension of time (if any) for the completion of the
Principal Subcontract works shall not be extinguished.”
[59] In all this debate about who would suffer more and who would be in a
more dire financial stress or distress, it must not be forgotten the plight of
the purchasers of the uncompleted units; they have every right to damages
for late delivery. They have to look to the landowner/developer to pay who
in turn would look to the Defendant, who would in turn look to the Plaintiff
under the LAD Clause. The Plaintiff’s applications for EOT has been
rejected and only 43 days granted. The Plaintiff wanted to appeal and they
would have every right to. The Consultants have replied to say that whilst
the Plaintiff may appeal, they were not inclined to change their minds
unless there are fresh grounds submitted for the appeal for EOT. See
Exhibit D-90 of the Defendant’s 1st Affidavit 2nd Volume p 409 and Exhibits
D-68, D-69, D-70, D-71 and D-72 of the Defendant’s 1 st Affidavit 2nd
Volume pages 284,308, 309, 310, 311, 312 and 316.
51
[60] The Consultants have given their reasons for rejecting the EOTs
Applications. Whether these are reasonable, would have to be decided at
trial. For the moment, this Court must ask if the evidence challenging their
refusal to grant any further EOTs shows a prima facie case of
unconscionable conduct on the part of the Defendant. Learned counsel for
the Defendant, Mr William Leong, summarised the reasons given by the
Consultants as follows:
1. No extension was given for EOT 1 because the Caisson Wall which
is to be built in 83 days is a replacement for the original designed
reinforced concrete wall which was to take 138 days. There should
thus have been a saving of 55 days. The delay in the Caisson Wall
was due to the Plaintiff’s poor coordination works, insufficient
manpower and machinery. Exhibit D-64 Defendant’s 1 st Affidavit
Volume 2 p 271.
2. Only 23 days was granted for EOT 2 and the others were rejected as
not being additional works or major changes. The Consulting
Engineer did not grant the extension due to delay caused by the
Plaintiff’s own lack of knowledge or experience on the scope of
works. Exhibit D-74 Defendant’s 1 st Affidavit Volume 2 p 320.
52
3. Only 20 days was granted for EOT 3 on the condition that the Plaintiff
can justify that the events fell on the critical path. The additional
works did not fall on the critical path and therefore no extension was
given for the rest. No extension was given for the claim of 118 days
because the delay was due to the Plaintiff’s own poor coordination
works, insufficient manpower and machinery which caused significant
delay. Exhibit D-81 Defendant’s 1st Affidavit Volume 2 p 349.
[61] The dates of the various submissions of the EOT 1, EOT 2 and EOT
3 were on 17 April 2013, 14 November 2014 and 27 November 2014
respectively. The EOT 1 was rejected on 13 May 2013. The extension 23
days was granted on EOT 2 on 15 December 2014 and the extension 20
days for EOT 3 was also granted on the same day. The many letters
written by the Defendant to the Plaintiff reminding them of the increasing
chronic and critical delays and the lamentable slow progress in the Works
with LAD increasing by the days, are summarised in a table at pages 25-27
of the Defendant’s Main Submission to oppose the Injunction. There were
14 letters all in and were written contemporaneously with key events such
as different milestones in the delay, LAD kicking in, strikes and work
stoppages and finally a Notice dated 30 September 2015 for the Plaintiff to
53
rectify the breaches and to catch up with the schedule provided by the
Plaintiff in the 4 th Revised Work Programme.
[62] One would have expected a vigorous objection from the Plaintiff if
factually, the various concerns addressed in the above letters were not
true. Indeed the Plaintiff by their letter to the Defendant dated 14 March
2014 responded by proposing a mitigation plan and a catch-up programme,
having secured a commitment from its subcontractors to work extended
hours to catch up with the delay. The Plaintiff also pledged its commitment
to increase manpower, improve site planning, appoint full time dedicated
staff to handle non-compliance report, complete the TNB sub-station by 18
October 2014 and also place orders for major equipment. Further the
Plaintiff also acknowledge the delay and replaced its main subcontractor
and produced 4 mitigation plans including a pledge to commit further
resources and to work additional hours to catch up with the schedule of
Works.
[63] The Plaintiff, of course, was entitled to appeal on the EOT
applications which they did, being dissatisfied with the decisions of the
Consultants. The Defendant and the Consultants informed the Plaintiff that
unless there were fresh grounds, they would not change their mind.
54
Exhibits D-68, D-69, D-70, D-71 and D-72 Defendant’s 1st Affidavit Volume
2 pages 284, 308, 309, 310, 311, 312 and 316.
[64] The Defendant explained that out of the sum of RM6,656,741.77 in
the VO claimed, RM 5,567,000.00 had been certified and paid. The
balance had not been certified because the Plaintiff had failed to provide
the necessary particulars. The reason had been communicated to the
Plaintiff. Even if there is a balance sum owing, that has been overtaken by
Clause 51(c)(iv)(a) where parties have agreed that all progress payments
after the notice of determination shall be suspended.
[65] At this stage this Court cannot conclude that a strong prima facie
case has been made out by the Plaintiff, such that it would be
unconscionable for the Defendant to call on the BG.
Whether the Supplemental Agreement had been procured by the
Defendant unconscionably for its benefit and that of the Developer
when it had no intention of re-assessing the Plaintiff’s 3 EOT
Applications
[66] Learned counsel for the Plaintiff, Mr Alan Wong, submitted that it
is clear from the Supplemental Agreement that the disputes on the EOT
Claims/Applications are to be deferred and to be decided at a later stage
55
for it make no sense to preserve and keep it as a “live” issue. In other
words, the actual time for completion is still very much a “live” issue when
the Defendant wrongfully terminated the Plaintiff and called upon the BG.
He then distilled the essence of the Defendant’s conduct in defiantly
reneging on the aforesaid position as well as the “End-March
Agreement”/Settlement as a clear abuse of its superior position, especially
by virtue of having the BG in hand. He sought to persuade the Court that
such unconscionable conduct/abuse culminating with the calling of the BG
must be restrained, especially considering the Defendant had already
benefited from the completion of Section 1 of the Project following the
Supplemental Agreement.
[67] To support his proposition, he referred to the following passage of
Ramly Ali JCA (now FCJ) in the earlier cited Kejuruteraan Bintai
Kindenko case (supra) as follows:
“[43] It was also held in that case (Commercial Bank v. Amadio) that
‘a transaction will be unconscientious within the meaning of the
relevant equitable principles only if the party seeking to enforce the
transaction has taken unfair advantage of his own superior bargaining
power, or of the position of disadvantage in which the other party was
56
placed. The principle of equity applies whenever one party to a
transaction is at a special disadvantage in dealing with the other party
because illness, ignorance, inexperience, impaired faculties, financial
need or other circumstances affect his ability to conserve his own
interests, and the other party unconscientiously takes advantage of
the opportunity thus placed in his hands.’
[44] Mason J in the same case above ruled as follows:
Historically courts have exercised jurisdiction to set aside contracts
and other dealings on a variety of equitable grounds. They include
fraud, misrepresentation, breach of fiduciary duty, undue influence
and unconscionable conduct. In one sense they all constitute species
of unconscionable conduct on the part of a party who stands to
receive a benefit under a transaction which, in the eye of equity,
cannot be enforced because to do so would be inconsistent with
equity and good conscience. But relief on the ground of
“unconscionable conduct” is usually taken to refer to the class
of case in which a party makes unconscientious use of his
superior position or bargaining power to the detriment of a party
who suffers from some special situation of disadvantage.”
(emphasis added)
57
[68] It is true that there was a clause 5 in the Supplemental Agreement
that reads as follows:
“5. Save and except where expressly amended the Principal
Subcontract shall continue to be in full force and effect. For the
avoidance of doubt, the Principal Subcontractor’s entitlement to
extension of time (if any) for the completion of the Principal
Subcontract Works shall not be extinguished.” (emphasis added)
[69] As can be seen, the Plaintiff’s entitlement to extension of time is
something for the Plaintiff to prove and not a given as is clear from the
qualification in the words “(if any)”. In as much as the Plaintiff may put in
fresh application for EOT, the Consultants are not required to re-assess it
especially if no fresh grounds are canvassed. All that the Consultants have
said is that if the application is based on the same reason, then what they
have decided stands. There is nothing unconscionable about that.
[70] The Defendant and its Consultants have written letters to the Plaintiff
stating that the delay on the Plaintiff’s part was due to 6 factors referred to
in the Defendant’s 1st Affidavit: the Plaintiff’s non-performance,
incompetence, lackadaisical attitude, lack of co-ordination with
subcontractors, frequent change of staff and lack of finance.
58
[71] The Plaintiff’s tacit admission and acceptance of responsibility for the
delay is reflected in its letter dated 14 March 2013 where the Plaintiff had
directed the blame to the festive season and the shortage of sand in the
market. The Plaintiff proposed in its letter a mitigation plan and a catch-up
programme. The Plaintiff also impliedly admitted to its shortcomings and
promised to increase the manpower, site accessibility, site planning,
machinery and equipment planning and to appoint full time dedicated staff
to address the non-compliance reports. See Exhibit D-11 Defendant’s
Affidavit Volume 1 pages 87-89.
[72] The Plaintiff by its letter of 8 April 2013 admitted the delay was due to
the non-performance of its subcontractor, Million Aim Sdn Bhd and agreed
to replace the subcontractor with another. Such disputes on extension of
time and the number of days of entitlement are a fertile area of conflict in a
construction contract and in the absence of cogent evidence of
unconscionability in rejecting the EOT application or in giving less than
what is reasonably applied for, this Court would not at this stage conclude
that a strong prima facie case of unconscionability has been made out.
Whether or not an EOT application should have been granted and if so for
how long, would be a matter for trial. At this stage even if an EOT
59
application has not been considered reasonably or has been rejected
unreasonably, that does not, in the absence of some egregious element,
amount to an unconscionable conduct.
[73] It was also clearly declared in Clause 7 of the Supplemental
Agreement that the Agreement had been executed at the request of the
Plaintiff.
[74] It has often been stated that if a party acts within his contractual
rights, then his motive is immaterial. Here there was no complaint of the
Defendant’s superior bargaining position when the Principal Subcontract
was entered into. It was a substantial contract of no small size, of RM270
million. It was part of a public listed company and would stand to gain a
handsome profit if it could complete the Principal Subcontract Works on
time. The terms of the Supplemental Agreement have been reproduced
above and there is nothing unfairly oppressive to the Plaintiff; if at all it has
a humanizing element after examining the reality of the Plaintiff’s failure to
complete by the Completion Date, it sought to mitigate the contractual LAD
of RM70,000.00 per day by sectionalising it to RM30,000.00 and
RM40,000.00 per day for Section 1 and Section 2 Works respectively. All
the other rights and obligations of the parties are reserved and preserved
60
under the Principal Subcontract. As such it could hardly be said to be a
case where a party with a superior bargaining power has sought to bully
into submission a party with little or no negotiating power.
Whether the Defendant by virtue of its superior position, also
engineered the Plaintiff’s termination by interfering with the Plaintiff’s
administration of the subcontracts between the Plaintiff and its
subcontactors, resulting in various strikes that delayed the Project
[75] According to the Plaintiff, from the exchange of affidavits, it is
also patently clear that the Defendant had interfered with the Plaintiff’s
administration of the contracts between the Defendant and its
subcontractors. The Defendant’s interference in turn led to escalation of
strikes and work stoppages as:
(a) The Defendant communicated directly with the Plaintiff
subcontractors, spreading rumors and alleging that the Plaintiff is in
financial difficulties, insinuating that the Plaintiff will be unable to pay
its subcontractors; and
(b) Besides creating confusion and affecting the Plaintiff’s
subcontractors’ morale, this led to the said subcontractors demanding
61
for advance payment from the Plaintiff (and its collaborative partner),
which effectively held the Project to ransom.
[76] The Plaintiff argued that, needless to say, the Defendant’s
interference caused further detriment to the Plaintiff in that the Plaintiff is
put to greater financial hardship, apart from the hardship already suffered
arising from:
(a) The Defendant’s wrongful assessment/rejection of the 3 EOT
Applications; and
(b) The Defendant rejecting/holding up of the Plaintiff’s VO Claims.
[77] Learned counsel for the Plaintiff contended that the Defendant
terminated the Contract on allegation that the Plaintiff failed to proceed
regularly/diligently with the Principal Subcontract Works or failed to take
measures to ensure completion of the same. According to him, it was clear
that the alleged breach was as a result of the Defendant’s own doing in:
(a) Wrongfully rejecting the 3 EOT Applications as well as VO Claims;
and
(b) Pertinently, fostering disharmony and encouraging discord amongst
the Plaintiff’s subcontractors by maliciously spreading rumor of the
62
Plaintiff’s financial position, which in turn lead to various strikes by the
Plaintiff’s subcontractors.
[78] Learned counsel for the Plaintiff concluded that the alleged breach
(which is denied), forming the basis of the termination, is clearly induced by
the Defendant’s unconscionable conduct. He further pointed out that it is
pertinent to note that the performance bond is to be utilized only in the
event that the Plaintiff breaches the Contract:
“If the Contractor fails to execute the Contract or commits any breach
of his obligation under the Contract, the Government or the S.O. on
its behalf may utilize and make payments out of or deductions from
the said Performance Bond or any part thereof in accordance with the
terms of this Contract.”
[79] He excoriated the Defendant’s conduct as prima facie
unconscionable where having first engineered the breach, the Defendant
thereafter rely on the same to terminate the Contract as well as to call upon
the Bond. He railed that this must be restrained.
[80] In support thereof, the Plaintiff referred to the following passage in
the earlier cited Kejuruteraan Bintai Kindenko case (supra):
63
“[59] In Singapore, instances where “unconscionability” was held to
be applicable are:
a) where the beneficiary made a call based on a breach induced
by their own default (Kvaerner Singapore Ltd v. UDL Ship Building
(Singapore) Ltd. [1993] 3 SLR 350)...”
[81] The Defendant’s counsel cautioned against accepting
unquestioningly the allegation that the Defendant had instigated the strikes
by the Plaintiff’s subcontractors by spreading rumors about the Plaintiff’s
financial difficulties. He invited the Court to look at what is incontrovertible
and undeniable: the list of some 7 subcontractors and suppliers who have
not been paid by the Plaintiff to the tune of RM 5.2 million at paragraph
15.1 of the Defendant’s 2nd Affidavit and in Exhibit D-10. The Plaintiff had
claimed that the strikes and stoppages were due to the subcontractors’ and
workmen’s poor management of their own cash flow as the Plaintiff
asserted that they had been paying their subcontractors and workers
adequately and promptly. However, upon termination of the Contract, the
truth emerged that the subcontractors, suppliers and workers have not been
paid. Some were owed more than RM 2 million like the air-conditioner
subcontractor. Others like the plumber has not been paid since April 2015.
It cannot be overemphasized that prompt payment is the life blood of
64
subcontractors and suppliers in the construction industry. The Defendant
said that they had at their end, being mindful of this, paid the Plaintiff
promptly and even in advance. However, this did not cascade down such
that the subcontractors, suppliers and workers were not paid. Without
payments, they have to dump their tools for that is the natural response of
hungry stomachs. They went on strike and stopped work.
[82] Seeing that there are 2 versions on the strikes and stoppage of
works, one of the Defendant spreading rumors of the Plaintiff’s dire
financial strains and the other, the subcontractors, suppliers and workers
not being paid, this Court will have to ask which is more probable at this
stage. The Plaintiff has not refuted the allegation of non-payment to the
subcontractors, suppliers and workers. One can suppose that downliners in
the construction ladder are practical people; if they have been paid, why
should they succumb to rumors? If they have not been paid than it is like a
car without fuel. The engine just would not start to run. Work is stalled;
delay sets in. It has a contagion effect.
[83] The Defendant is candid in admitting that they did meet up with the
subcontractors, but this was at their expressed request, as they had failed
to obtain payment from the Plaintiff. The Defendant agreed to meet with the
65
subcontractors and suppliers out of humanitarian reasons and to resolve a
potentially crippling problem.
[84] The Defendant could not conceal their disappointment with the
Plaintiff here, describing their conduct of blaming the Defendant for the
strikes and stoppages of work as particularly galling as the Defendant had
assisted the Plaintiff on various occasions with their cash flow. The
Defendant reminded the Plaintiff that they did not deduct the LAD from the
Plaintiff’s interim payments although they were entitled to do so, to assist
the Plaintiff’s cash flow so that the Plaintiff may be able to pay its
subcontractors and perhaps the strikes would be averted. Reference is
made to the Defendant’s 1st Affidavit Volume 1 pages 142 to 143.
[85] Lest the Plaintiff might have forgotten, the Defendant sought to
refresh its memory by referring to the Plaintiff’s request for early release of
certificate for payment No. 37 of RM 6,962,234.69 with the expressed
direction to the Plaintiff to use the money to pay the subcontractors,
carpenters, bar benders and plasterers who had all stopped work. See the
Defendant’s letter dated 9 September 2015 Exhibit D-24 of the Defendant’s
1st Affidavit Volume 1 page 144.
66
[86] It is said that the faintest ink is better than the most retentive memory,
a saying attributed to Confucius. The Defendant recalled and retrieved a
letter from the Plaintiff dated 29 May 2015 requesting for an interest-free
RM 5 million advance. The Defendant was willing to consider this provided
the Plaintiff could give its consent for the payment to be made directly to
the subcontractors and suppliers. However, for reasons best known to the
Plaintiff, it was not keen to give this consent. References are made to the
Plaintiff’s letter dated 29 May 2015 in Exhibit D-61(d) of the Defendant’s 1st
Affidavit Volume 1 page 263 and the Defendant’s letter dated 8 July 2015
in Exhibit D-60(a) of the Defendant’s 1 st Affidavit Volume 1 page 242.
[87] Based on the above documentary evidence, I am not in a position to
hold that a strong prima facie case of unconscionable conduct on the part
of the Defendant has been established by the Plaintiff. The truth as to
whether the Defendant had engineered the default and termination or was
it a case of the Plaintiff trying to engineer itself out of paying its contractual
liabilities, is something that can only be established at trial.
Whether the encashment of the BG would unjustly enrich the
Defendant as the amount exceeds the Defendant’s LAD claim and
thus unconscionable
67
[88] Perhaps the most persuasive argument of the Plaintiff is that the
encashment of the BG will also result in the Defendant being unjustly
enriched. That if true would be unconscionable indeed. Learned counsel for
the Plaintiff, Mr Alan Wong, laid the planks for this attack on the call on the
BG as follows:
(a) The LAD as at 13 November 2015 (the imposition of which is

disputed) stands at RM2,770,000.00;
(b) Whereas the maximum LAD imposable as at termination stands at

RM23,330,000.00;
(c) The Defendant had already failed to remit payment of

RM2,628,304.78 under Interim Payment Certificate No. 40. This
amount is on top of the Retention Sum of RM13,500,000.00 currently
held by the Defendant;
(d) In the event that the Defendant is permitted to receive a further

RM13,500,000.00 under the Bond, the Defendant will be holding
monies belonging to the Plaintiff amounting to RM29,628,304.80;
(e) The aforesaid RM29,628,304.80 is clearly far in excess of the LAD as

at termination or the RM20,000,000.00 as per what the Plaintiff said
to be the Settlement.
68
[89] He pointed out that, notwithstanding the LAD provisions under the
Contract, the Defendant now claims that its estimated losses is in the
region of RM54 million, including Purchasers’ LAD of RM6,991,942.80 and
RM11,058,009.42. However, not an iota of evidence was presented to
remotely support the RM54 million contended in the affidavit. He concluded
by imploring this Court that, considering the various other unconscionable
conduct of the Defendant mentioned aforesaid as well as the fact that the
Defendant itself is not sure of the amount that it is allegedly entitled to, the
Defendant ought to be restrained from calling and/or receiving payment
under the BG.
[90] Mr William Leong for the Defendant objected vehemently to this
simplistic approach of assessing the damage suffered by the Defendant.
He submitted most vigorously that the Plaintiff had approached the LAD
claim unrealistically, with no attention being given to the number of days of
delay. He argued from that which was not disputed i.e. that there had
already been 361 days of delay. The LAD payable by the Plaintiff at RM
70,000.00 per day from 27 December 2014 (Final Completion Date) to 20
November 2015 (Completion of Block A) and RM40,000.00 per day from 20
November 2015 to 22 December 2015 (Date of Termination) is RM
24,310,000.00. Had the LAD continued until 30 June 2016 which is what
69
the Plaintiff said should be the extended completion date before which the
Plaintiff cannot terminate, then the LAD would have amounted to
RM33,230,000.00. He further submitted that the retention sum of RM13.5
million cannot be taken into account because it is held for a different
purpose and cannot be used to pay the LAD and the new contractor. There
is merits in the Defendant’s submission as to allow the Plaintiff to “swap the
security” as it were by substituting the Retention Sum of RM 13.5 million
would be rewriting the contract for the parties having in mind the purpose of
the BG procured before the commencement of the Principal Subcontract
Works.
[91] The Defendant in paragraph 7(c) of its 1st Affidavit has set out in
detail the breakdown of the damage suffered or to be suffered estimated to
be RM 54,786,986.38. At this stage of the interlocutory proceedings, this
Court needs to be satisfied that there is some basis for the Defendant’s
assertion as to their exposure to the loss and damage delineating from
various heads of claim arising out of the termination of the Principal
Subcontract. It is only too true that there would be the purchasers’ LAD
claim against the Developer for late delivery under the standard form sale
and purchase agreement entered into with the Developer under the
Housing Development (Control and Licensing) Act 1966 and they in turn
70
would look to the Defendant as Main Contractor to pay them what they
have to pay out. That claim by the purchasers for LAD is a continuing claim
until practical completion and vacant possession is given to the purchasers.
Even taking generously that Block B and C should have been completed by
30 June 2016 which is nigh soon, the purchasers’ claim for LAD alone was
estimated to be RM11,056,009.42.
[92] The Defendant has also given notice to the Plaintiff that it would have
to be responsible for all GST payments because no GST would have been
payable if the project had been completed by the Final Completion Date. It
was submitted that this Court may take judicial notice of the fact that GST
was implemented on 1 April 2015. The GST payable is estimated to be RM
6,963,638.61. See letter dated 20 August 2015 in Exhibit D-91 of the
Defendant’s 1st Affidavit 2nd Volume page 410.
[93] Then there are the usual loss and expense damages heads of claim
incurred to complete the Project as set out in paragraph 7(c) of the
Defendant’s 1st Affidavit. These will be confirmed upon the taking of final
measurements and appointment of the new contractor to complete the
Project in accordance with Clause 51(c) of the Conditions of Contract. The
Defendant submitted that these are fair estimates of the cost, expenses
71
incurred and damage suffered by them and therefore there is no basis for
lambasting the Defendant for what the Plaintiff has perceived as unjustly
enriching the Defendant at the expense of the Plaintiff if the full amount of
the BG were to be released.
[94] At any rate under Clause 37 (d) of the Conditions of Contract, if there
is any credit standing in favour of the Contractor on completion of making
good of all defects, shrinkages or other faults which may appear during the
Defects Liability Period and upon giving of the Certificate of Completion of
Making Good Defects for the whole of the Works, the surplus shall be
refunded to the Plaintiff.
[95] Learned counsel for the Defendant concluded that the Defendant is
not guilty of unconscionable conduct in terminating the Principal
Subcontract and calling on the BG. The Plaintiff failed to carry out the
Principal Subcontract Works regularly and diligently. There was substantial
delay and increasingly frequent strikes and work stoppages. The Defendant
had lawfully terminated the Principal Subcontract in accordance with the
terms thereof. As at the termination date on 22 December 2015 there was
a delay of 361 days and the total amount of losses and damages payable
by the Plaintiff inclusive of LAD exceeds RM54,786,986.38. There is thus a
72
basis for the Defendant to call on the BG. With that this Court is inclined to
agree. This Court is satisfied that there is no danger or evidence of the
Defendant unjustly enriching itself.
Whether the balance of convenience tilts in favour of the Plaintiff or
the Defendant
[96] As the Plaintiff has not discharged the burden of showing a strong
prima facie proof of unconscionable conduct on the part of the Defendant,
the injunction application to restrain the call on the BG, would
correspondingly be discharged. However parties had proceeded to submit
on the balance of convenience test and out of deference to counsel, this
Court shall nevertheless weigh and consider where the balance should tilt.
[97] The Plaintiff sought to persuade the Court that the balance of
convenience in this matter tipped heavily in favour of granting the injunction
sought. Learned counsel was positioning this argument at an inviting angle
by seeking the agreement of this Court that it is more equitable to
temporarily restrain on the calling of the BG and/or receipt of payment
thereunder for such restrain merely postpones the realization of the
Defendant’s security until the alleged breaches and losses are proved.
73
[98] In support thereof, the Plaintiff referred to the following passage from
the earlier cited case of Kejuruteraan Bintai Kindenko (supra) as follows:
“[93]...Parties should not be allowed to take advantage of one another
in making a demand or call on the performance bond particularly
when they are not entitled to do so. It must be stressed that a
performance bond can operate as an oppressive instrument and a
demand or call by a beneficiary can sometimes be abusive. In the
event that a beneficiary calls on the bond in circumstances where
there is prima facie evidence of fraud or unconscionable conduct, the
court should step in to intervene at the interlocutory stage to avoid
further injustice to the other party. As has been expressed by the
Court of Appeal in GHL Pte Ltd v. Unitrack Building Construction Pte
Ltd & Anor (supra), “we agree that a beneficiary under a performance
bond should be protected as to the integrity of the security he has in
case on non-performance by the party on whose account the
performance bond was issued, but a temporary restraining order
does not prejudice or adversely affect the security, it merely
postpones the realisation of the security until the party
concerned is given an opportunity to prove his case.” (emphasis
added)
74
[99] Learned counsel for the Plaintiff summoned the following factors to
support his stand as summarised below:
(a) The BG is currently still valid and as long as the BG is kept valid, the
temporary restrain does not prejudice or adversely affect the security
but merely postpones the realization of the same.
(b) The Defendant company is clearly used as a shield protecting the
ultimate employer, i.e. the Developer Yuk Tung Land Sdn Bhd (“Yuk
Tung Land”);
(c) It is instructive that both the Defendant and Yuk Tung Land shares
the same directors, although YT Land’s supposed rosy state of
financial health is no indication of the Defendant’s financial affair;
(d) In any event, out of the Defendant’s supposed current assets of
RM82,862,565.00, RM73,231,232.00 is locked down in trade
receivables owing from certain directors of the Defendant;
(e) In other words and especially considering that the amount under the
BG together with existing security is in excess of the LAD claimed,
there is high likelihood that the Plaintiff will be unable to recover any
amount paid out if the Plaintiff ultimately succeed in its Suit;
75
(f) Last but not least, the Plaintiff’s reputation as well as that of its parent
company, Daya Materials Berhad, a public listed company listed on
Bursa Malaysia, is also at stake considering that the termination and
the calling of the Bond thereafter, were premised on the alleged
breach of the Plaintiff.
[100] Considering the above and especially the fact that the BG is still valid,
the Plaintiff implored upon this Court to restrain the Defendant from calling
and/or receiving payments under the BG in light of what the Plaintiff has
painted as the unconscionable conduct on the part of the Defendant.
[101] In further support thereof, the Defendant relied heavily on the
following passage of Ramly Ali JCA (now FCJ) in the earlier cited
Kejuruteraan Bintai Kindenko case (supra):
“[107] In this case, both of the performance bonds have been
extended by the appellant, at the request of the beneficiary and the
employer (GPSB). The right and interest of the beneficiary pursuant
to the performance bonds is secured. Its right to call on the same is
secured. On the other hand if the sums guaranteed under the
performance bonds were to be released to the beneficiary, the
appellant would suffer great losses and damage which cannot
76
be adequately compensated; and the reputation of the appellant
would be at stake. The balance of convenience thus tipped
heavily in favour of the appellant.” (emphasis added)
[102] The Defendant, on the other hand, submitted that it is critical to the
completion of the Project for the Defendant to obtain the proceeds of the
BG to pay for the cost and expenditure that the Defendant had paid or are
immediately payable. The cost and expenditure for the completion of the
Project was estimated at RM54,786,986.38 at the time the Defendant’s 1st
Affidavit was filed. This is set out in paragraph 7(c) of the Defendant’s 1st
Affidavit.
[103] The Plaintiff’s delay is evidenced by contemporaneous documents
issued by the Defendant, its consultants and even the Plaintiff himself. The
Plaintiff’s delay is set out in paragraphs 34 to 37 (a)-(n) of the Defendant’s
1st Affidavit. Where the Plaintiff has a prima facie reasonable basis to
terminate the Principal Subcontract for failure of the Plaintiff to regularly
and diligently proceed with the Works, the Defendant would have every
contractual right to call on the BG. Both parties have at the outset of the
contract agreed that the Plaintiff as Contractor should furnish the
Defendant this on-demand BG which the Defendant may call upon if there
77
is a breach of the Principal Subcontract. As the Defendant has, prima facie,
a reasonable ground for terminating the contract, there is then no basis for
restraining the call on the BG. Those in the construction industry
understand a BG to be as good as cash, to be released upon a call on the
Bank in the event of an event of default and termination of the contract.
[104] To allow a restrain each time the default is being challenged together
with the termination, the efficacy of a BG would be diluted and more dire
than that, denuded altogether such that what has been bargained for is not
what one is getting. The law realizing that this is not what a BG is supposed
to be in practice, has declared that there must be a strong prima facie case
of an unconscionable conduct on the beneficiary of the BG and only then
may a restraining order be issued to prevent a call on the BG.
[105] If contractually, the Defendant is entitled to call on the BG, then it
is not open to the Plaintiff as obligor of the BG to tell the Defendant that they
should use their own funds to finance the balance of the Project and not the
funds from the release of the BG.
[106] There is also the public element in the interest of the purchasers to
have their purchased units delivered to them as soon as possible. It is
common knowledge that besides from LAD claims, there is the increased
78
costs in the tender for a new contractor to finish completing the balance
Works. The purpose of the BG is to provide for this buffer and cushion the
consequences arising out of the termination and any surplus, upon the
finalization of the accounts on completion, will have to be refunded to the

Plaintiff.
[107] This Court is not persuaded that the Defendant would not be in a
position to pay back the Plaintiff should the Plaintiff succeed at the trial.
The Defendant’s financial resources can be seen in the audited accounts
exhibited as Exhibits D-95 and D-96 of the Defendant’s 1 st Affidavit
Volume 2 pages 433 -458. Yuk Tung Land has current assets of RM
137,084,569 and net assets of RM35,961,962.00 as at 31 December
2014. The Defendant has current assets of RM59,331,248.00 and net
assets of RM23,531,327.00 as at 31 December 2014. Granted the

Defendant and the Owner/Developer are owned by the same shareholders
and managed by the same Directors, the financial position would in all
likelihood improve upon the completion of Blocks B and C as the end
financiers would be releasing the full purchase price of the completed units
upon practical completion and handing over of vacant possession to the
purchasers.
79
[108] There is no evidence to suggest that the Defendant would not be in a
position to pay back the Plaintiff should they succeed at the trial or for that
matter, the damages arising out of a so-called wrongful termination. Whilst
the Defendant must continue to manage cash flow for the balance Works to
be completed and the payment of purchasers’ LAD, the Plaintiff has no
further obligation to complete the Works. It only has to suffer what Banks
would ordinarily do if the amount secured by the BG is released, which is to
realize their security for the BG. This is a risk which the Plaintiff would have
appraised itself at the outset when the BG was procured as part of the
condition of the Principal Subcontract.
[109] The so-called dent and damage to the reputation of the Plaintiff must
also be viewed dispassionately from the other perspective, which is that
Yuk Tung Land together with its Main Contractor Yuk Tung Construction
Sdn Bhd (the Defendant here) would suffer in its reputation in not being
able to deliver within the contractually agreed period the certificate of
practical completion and with it the need to pay promptly the purchasers’
LAD claims.
[110] The Defendant also drew the Court’s attention to the fact that the
Plaintiff is no longer part of a public listed parent company as the shares of
80
the parent company had been disposed of to a RM10.00 company and the
public listed parent company had refused to provide an extension of its
corporate guarantee to guarantee that the Plaintiff would complete the
Project according to the terms of the Principal Subcontract.
[111] I am not satisfied that the balance of convenience would tilt or tip in
favour of the Plaintiff such that the injunction to restrain the call on the BG
should be granted.
Pronouncement
[112] Taking into considerations all the arguments for and against the
injunction, this Court is satisfied that the Plaintiff has not shown a strong
prima case of unconscionable conduct on the part of the Defendant to
justify a restrain on the Defendant from making a call on the BG or to
receive the proceeds from the BG. The Plaintiff’s case taken at its highest
would show a bona fide dispute on the termination of the Principal
Subcontract that would have to go for trial. Nothing had come near to
shocking the conscience or pricking it to the point of a reflex reaction of
revulsion at the so-called reprehensible conduct of the Defendant.
[113] In the upshot, I had dismissed the Plaintiff’s application in Enclosure

3 for an injunction to restrain the Defendant from making a call on the BG
81
or to receive the proceeds from the BG. At any rate, damages would be
more than an adequate remedy being a monetary sum that the parties are
disputing over and that overall, the balance of convenience would tilt in
favour of the Defendant. The ad-interim injunction granted was discharged.
[114] Damages shall be assessed for the time when the injunction was in
place pursuant to the usual undertaking on damages that the Plaintiff had
given. By consent the parties agreed that any assessment of damages
shall be had at the end of the trial.
[115] I had also awarded costs of RM15,000.00 to be paid by the Plaintiff
to the Defendant. Allocator shall be paid before the extraction of the order
of costs.
[116] Upon the order being given discharging the injunction, learned
counsel for the Plaintiff informed the Court that he had his client’s
instruction to appeal and that he would file in the Notice of Appeal the next
day. He asked for an interim stay of the order pending the filing of an
Erinford injunction.
[117] Learned counsel for the Defendant asked the Court to hear the
Erinford injunction there and then.
82
[118] The Court was of the opinion that a formal application for an Erinford
injunction should be filed and the reasons carefully considered before
disposing of the Erinford injunction application. The Court therefore granted
a temporary stay of the order discharging the injunction until the disposal of
the Erinford injunction application duly filed in Enclosure 25.
Whether there are special circumstances justifying an Erinford
Injunction pending the Plaintiff’s appeal
[119] The power of the Court in granting an Erinford injunction has been
clearly spelled out in the case that bears its name in Erinford Properties
Ltd v. Cheshire County Council [1974] 2 All ER 448 at p. 454 where
Megarry J states the principle with much perspicuity as follows:
“I can see no real inconsistency in any of these cases. The questions
that have to be decided on the two occasions are quite different.
Putting it shortly, on a motion the question is whether the applicant
has made out a sufficient case to have the respondent restrained
pending the trial. On the trial, the question is whether the plaintiff has
sufficiently proved his case. On the other hand, where the application
is for an injunction pending an appeal, the question is whether the
judgment that has been given is one on which the successful party
83
ought to be free to act despite the pendency of an appeal. One of the
important factors in making such a decision, of course, is the
possibility that the judgment may be reversed or varied. Judges must
decide cases even if they are hesitant in their conclusions; and at the
other extreme a judge may be very clear in his conclusions and yet
on appeal be held to be wrong. No human being is infallible, and for
none are there more public and authoritative explanations of their
errors than for judges. A judge who feels no doubt in dismissing a
claim to an interlocutory injunction may, perfectly consistently
with his decision, recognise that his decision might be reversed,
and that the comparative effects of granting or refusing and
injunction pending an appeal are such that it would be right to
preserve the status quo pending the appeal. I cannot see that a
decision that no injunction should be granted pending the trial is
inconsistent, either logically or otherwise, with holding that an
injunction should be granted pending an appeal against the decision
not to grant the injunction, or that by refusing an injunction pending
the trial the judge becomes functus officio quoad granting any
injunction at all.” (emphasis added)
84
[120] The above passage and the principle that it enunciated have been
cited with approval by our Federal Court in Subashini a/p Rajasingam v.
Saravanan a/l Thangathoray and other appeals [2008] 2 MLJ 147.
[121] In Cocoa Processors Sdn Bhd v. United Malayan Banking Corp.
Bhd. & Ors. [1989] 1 CLJ (Rep) p 436 the plaintiff owed the 1 st and 2 nd
defendants quite a substantial sum of money secured by a debenture.
Upon default receivers and managers were appointed over the properties
and assets of the plaintiff. The plaintiff claimed for damages for wrongful
appointment of the receivers and managers. The plaintiff’s application for
an injunction to restrain the defendants from disposing, selling and dealing
with its assets pending trial of the action was dismissed. The Court held
that there was no serious issue to be tried. Pending appeal to the Supreme
Court then, the plaintiff applied for an Erinford injunction to preserve the
status quo. In refusing the Erinford application, his Lordship Mohamed
Dzaiddin J (as the former CJ then was) opined as follows at p 439:
“ ... I am of the view that whether or not the plaintiff succeeds in the
appeal and in the main action will not be affected by its failure to
obtain this further interim injunction. It must be remembered that the
plaintiff’s claim against the defendants is for damages for wrongful
appointment of receivers and managers. The 1 st and 2 nd defendants
85
being a commercial and merchant bank respectively will no doubt
satisfy any money judgment ordered by the Court. Therefore,
responding to Mr. Bala’s fear and anxiety on behalf of the plaintiff, I
must say quite confidently that there is no likelihood of a
successful appeal against my decision being rendered nugatory.
Secondly, a more serious issue to be considered here is the
balance of convenience. Based on the facts and circumstances of
the present case, I find the balance of convenience lay in favour of
the injunction pending appeal being refused. I accept the submission
of Miss Solomon that the assets of the plaintiff company had
depreciated and the longer it remains in its present position, the
greater the hardship being inflicted on the defendants. Further, in the
event the plaintiff’s claim being dismissed, the assets having been
depreciated quite considerably, the defendants may not be able to
reap the fruits of their success under the debentures. On the other
hand, should the plaintiff succeed in its claim ultimately, for damages,
the defendants will have no difficulty in settling the judgment.
Lastly, I agree with Tunku Alina that in the present case damages
seem to be a suitable and adequate remedy. The plaintiff would be
adequately compensated in damages for the temporary damage
86
between now and the date when its appeal is heard if my decision is
reversed by the Supreme Court.” (emphasis added)
[122] As is evident above, in the case of recovery of a monetary judgment,
the issue of nugatoriness was considered from the perspective of whether
the banks as defendants could satisfy any judgment that may be granted in
the plaintiff’s favour and not so much that the plaintiff’s assets having been
sold, cannot be reverted back to the plaintiff.
[123] A similar approach was taken in Kilang Kosfarm Sdn Bhd v. Kosma
Nusantara Bhd (No. 2) [2002] 5 MLJ 662. There the plaintiff had failed in
its application for an injunction compelling the defendant to surrender
vacant possession of the defendant’s land to the plaintiff and to restrain the
defendant from interfering and obstructing the plaintiff in carrying out its
obligations under the “Oil Palm Operation and Maintenance Contract”. The
main reliefs in the writ action was a declaration that the defendant had
wrongfully repudiated the said contract for no reasonable cause and
damages to be assessed and for accounts inquiry into the fruits harvested. In
dismissing the plaintiff’s application for an Erinford injunction application,
his Lordship Ramly Ali J (now FCJ) set out his reasoning as follows at p
174:
87
“In order to assist me in exercising my discretion on this matter, it is
pertinent to see that there would be no impediment to the plaintiff
enforcing any judgment in its favour should the plaintiff succeed in
its intended appeal as well as the main writ. Whether a successful
appeal by the plaintiff against my earlier decision being
rendered nugatory or not, we have to go back to the plaintiff’s
claim against the defendant in its writ and statement of claim. I
have scrutinised all the prayers in the plaintiff’s statement of claim (as
listed above) and satisfied that whether or not the plaintiff succeeds in
the appeal and in the main action will not be effected (sic) by its
failure to obtain the present Erinford injunction. There would be no
impediment to the plaintiff enforcing any judgment in its favour
should it succeed in its appeal and ultimately in its writ. There is
no evidence to show that the defendant, would be in no position
financially, to honour the judgment obtained by the plaintiff.
Therefore, I must say quite confidently that there is no likelihood
of a successful appeal against my decision being rendered
nugatory.” (emphasis added)
[124] It is trite law that the Plaintiff as Applicant must show that should its
appeal be successful, it would prove to be nugatory. However, what we
88
have here is the release of a sum of RM13.5 million which has to go
towards the balance of the Principal Subcontract Works to be done for the
completion of the Project. If the Plaintiff is successful on appeal, it would
have every right to claim for the money back from the Defendant.
Generally, a payment of money cannot render a successful Appellant’s
appeal nugatory because there is nothing sacrosanct, sacred or special of
the money. As the balance of the Project for all practical purposes is
unlikely to be completed until the end of the first quarter of 2017, the
Plaintiff if successful, can always proceed with a garnishee order against
the Owner/Developer who would have received the payment of the balance
purchase price for the units from the end financiers and who would in turn
also have to pay the Defendant for the balance Principal Subcontract
Works done. Both the trial in this Court, realistically rescheduled to 22 till 26
August 2016, as well as the appeal to the Court of Appeal, would in all
probability have been disposed of.
[125] I agree with Mr Wiliam Leong for the Defendant that the subject
matter of the appeal is not something that is irreversible if the injunction is
not granted such as in cases restraining the approval of a planning
application as in the Erinford Properties Ltd case (supra) or prohibiting
89
the hold of an annual general meeting as in Wong Heng Meng v. Prince
Guneratnam & Ors [2010] 9 MLJ 457.
[126] In Mitsubishi Corp & Ors v. Sepangar Bay Power Corp Sdn Bhd &
Ors [2009] 9 MLJ 121 at p 140 it was held that the no Erinford injunction
would be granted if the Defendant would be able to return any monies
collected from the financial institutions in the event the applicant succeeds
in the Court of Appeal. On the argument that the financial statement does
not show the beneficiary of the bond to have a good financial health, the
High Court held that that is not the sole criterion for determining its
solvency.
[127] This Court finds it difficult to appreciate the anxious concerns
expressed by the Plaintiff that the Defendant does not have the financial
capabilities to repay back the RM13.5 million BG. Here, Yuk Tung Land as
Developer of the Project has given its direct undertaking to the Court that it
would repay the Plaintiff the sum of RM13.5 million in the event the
Plaintiff’s appeal is allowed. See Exhibit D-117 of the Defendant’s Affidavit
affirmed on 24 May 2016 (Enclosure 32). That is on top of the Defendant’s
direct undertaking to this Court given through its counsel, Mr William
Leong, should the Plaintiff be successful in its appeal. The usual penal
90
clause shall be included in the order of the Court with the directors name
being mentioned such that upon a failure to comply, a contempt action may
be proceeded with against the directors.
[128] Mr Alan Wong for the Plaintiff conceded that the direct undertaking of
a Defendant to refund monies released to it in a BG coupled with a further
undertaking of another company owned by the same shareholders of the
Defendant which company is the Developer/Owner of the land on which the
Project is developed to also make a refund of the said sum released under the
BG, is not common and not usually procured or offered. Here the
Defendant and its related company Yuk Tung Land as Developer have
voluntarily offered their respective undertakings to the Court. An
undertaking to the Court is a most serious matter and a breach of it would
expose the directors of both the companies to contempt of court. Generally
the Plaintiff has to be satisfied with the Defendant showing sufficient means
or resources to pay the Plaintiff should the Plaintiff be successful upon
appeal or that it is not in a dire financial straits or that it is financially solvent
for all practical purposes.
[129] Quite apart from the undertakings of the Defendant and the
Developer, both of them have disclosed their financial soundness in their
91
audited accounts as at 31 December 2014. The Developer has the financial
capacity and capability to meet their undertaking to repay the sum so
released as the gross development value of the Project is RM
633,821,960.00. See paragraph 70(d) of the Defendant’s 1st Affidavit
affirmed on 29 December 2015. The Developer too has current assets of
RM137,084,569.00 and net assets value of RM35,241,643.00 according to
its 2014 audited financial statements. See Exhibit P-9 of the Plaintiff’s
Affidavit affirmed on 6 May 2016.
[130] As for the Defendant, it has a net asset value of RM23,531,317.00
according to its 2014 audited financial statements in Exhibit P-10 of the
same Plaintiff’s Affidavit. The Plaintiff’s allegation that the Defendant’s trade
receivables of RM73,231,232.00 is “locked up” is without merits as there is
a Note 4 to the Defendant’s audited accounts expressing providing that the
trade receivables are collectable under normal credit terms granted to trade
clients ranging from 30 days to 120 days. Note 4 further states that the said
sum is due from a company in which certain directors have an interest ie,
the Developer. Learned counsel Mr Alan Wong then expressed concerns
that the audited accounts were that of 31 December 2014. As the audited
accounts of 31 December 2015 were not ready yet, the Defendant
subsequently filed a management account for year ended 31 December
92
2015 to show that the trade receivables have not vanished or written off but
very much intact. See Exhibit D-115 in Enclosure 31.
[131] Subsequent to the date of the Defendant’s 1st Affidavit, the Defendant
affirmed an Affidavit to oppose the Erinford injunction in Enclosure 29. It
detailed that the actual cost and expenses incurred or to be incurred by the
Defendant is RM68,418,598.95 at paragraph 10.2. A sum of
RM41,760,612.24 is paid or payable as at at 31 March 2016. Particulars of
these cost and expenses are set out in the table below:
Item Descriptions Amount Paid/ Estimated Total (RM)

Payable as at costs from
31.03.2016 1.4.2016 until
(RM) 31.3.2017
(RM)
1 Purchasers’ LAD
Purchasers’ LAD for Block A 5,502,618.08 762,161.59 6,264,779.67
1.1.
Purchasers’ LAD for shop 234,117.12 - 234,117.12
1.2.
Purchasers’ LAD for Block B 16,124,270.46 - 16,124,270.46
1.3.
Purchasers’ LAD for Block C 274,212.18 - 274,212.18
1.4.
-
GST Charges:
2.
(a) from 1.4.2015 to 2,496,736.23 - 2,496,736.23
22.12.2015
93
(b) Balance work award - 6,300,541.64 6,300,541.64

x 6%
3 Interest on Loans 686,538.24 - 686,538.24
4 Staff costs 1,755,690.54 1,323,870.60 3,079,561.14
5 Project Management 5,366,250.00 3,577,500.00 8,943,750.00

Fees
6 Additional costs to 5,000,000.00 13,705,874.16 18,705,874.16

complete the balance
work
7 Rubbish clearing costs 300,000.00 - 300,000.00
8 Payment on behalf of 210,000.00 - 210,000.00

Daya CMT to Kone Lift
9 Lands rental for 1,240,200.00 - 1,240,200.00

fabrication yard (30,000
+ 35,000) x (12 months
+ 6 months
demobilization &
defects liability store) +
6% GST
10 To settle the outstanding 446,300.00 - 446,300.00

wages of Plaintiff’s
workers to remove them
from site kongsi
11 Security guard charges 277,371.39 988,038.72 1,265,410.11
12 Purchase of the air-cond 1,846,308.00 - 1,846,308.00

units
Total 41,760,612.24 26,657,986.71 68,418,598.95
94
[132] In the Defendant’s Affidavit in Enclosure 29, the Defendant also set
out the cost incurred to rectify defects as at 31 March 2016 is
RM2,794,633.83, the estimated costs to rectify defects from 1 April 2016
until the estimated completion date of 31 March 2017 for Blocks A, B & C is
RM4,928,557.51. The supporting documents for the cost are marked
collectively as Exhibit “D-112”. Particulars of these costs are as follows in
paragraph 11 of Enclosure 29:
Item Descriptions Actual Estimated Total (RM)

amount as at cost from
31.03.2016 1.4.2016 until
(RM) 31.3.2017
(RM)
Defect rectification costs

1 2,794,633.83 1,975,057.51 4,769,691.34
for Block A and podium
Defect rectification costs

2 - 2,953,500.00 2,953,500.00
for Block B & C
Total 2,794,633.83 4,928,557.51 7,723,191.34
[133] As such, the cost and expenditure exceeds the RM29,628,304.80

comprising of RM13,500,000.00 to be received under the BG,
RM13,500,000.00 held as Retention Sum and RM2,628,304.80 withheld
under Interim Certificate No. 40. There is no basis for saying that the
95
Defendant would be receiving a surplus sum and thus unjustly enriched
and hence conduct unconscionable, if the sum of RM13.5 million under the
BG is released.
[134] In addition, the new contractor, R & C Cergas Teguh Sdn Bhd had
requested for an advance sum of RM5,000,000.00 for the advance
payment and rental deposit required by the various suppliers. The
Defendant stated that they needed to release the money requested in order
for the new contractor to continue with the Project and for catching-up on
the delay caused by the Plaintiff. See Exhibit D-113 (Enclosure 29) a copy
of a letter dated 31 March 2016 from R & C Cergas Teguh Sdn Bhd.
Pronouncement
[135] Taking all the above factors into consideration, the Plaintiff has not
shown that if it is successful, the appeal would be nugatory or that there are
special circumstances justifying an Erinford injunction pending appeal. The
Erinford application was thus dismissed with costs of RM5,000.00 to be
paid by the Plaintiff to the Defendant.
[136] As only the Writ has been filed so far by the Plaintiff without a
Statement of Claim being filed, the Court directed the Plaintiff to file the
Statement of Claim and serve the same within 2 weeks. The Defendant is
96
to file its Defence and Counterclaim if any, 2 weeks thereafter. Trial dates
were fixed from 22-26 August 2016. On 26 May 2016 when the Court
delivered this decision, Mr Alan Wong applied for a stay of the Court’s
order dismissing the Erinford application pending his client’s application on
an urgent basis to the Court of Appeal. The Court granted a temporary stay
of the order until Tuesday 5pm of 31 May 2016.
Dated: 27 JUNE 2016
(LEE SWEE SENG)

Judge
Construction Court
High Court Malaya
Counsel:
For the plaintiff/applicant - Alan Wong & Andrew Heng; M/s Zain
Megat & Murad
For the defendant/respondent - William Leong Jee Keen; M/s

William Leong & Co
Date of decision: 4 MAY 2016 for Enclosure 3
26 May 2016 for Enclosure 25
97

Daya CMT SDN BHD V Yuk Tung Construction SDN BHD

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Daya CMT SDN BHD V Yuk Tung Construction SDN BHD

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[2016] 1 LNS 649 Legal Network Series

IN THE HIGH COURT OF MALAYA AT KUALA LUMPUR

[SUIT NO: 22C-61-12/2015]

DAYA CMT SDN BHD ... PLAINTIFF

YUK TUNG CONSTRUCTION SDN BHD ... DEFENDANT

CONTRACT: Building contract - Performance bond - On demand

CONTRACT: Building contract - Sub-contract - Termination -

Whether main contractor was guilty of unconscionable conduct by

CIVIL PROCEDURE: Injunction - Injunction to restrain calling of

CIVIL PROCEDURE: Injunction - Erinford injunction - Injunction

[Plaintiff’s application vide Court Encl No. 3 and Encl No. 25

Case(s) referred to:

Bina Jaya Mantap Sdn Bhd v. Institute of Technology Petronas Sdn

Cobrain Holdings Sdn Bhd v. Expertise International A&I (M) Sdn

Erinford Properties Ltd v. Cheshire County Council [1974] 2 All ER

Kejuruteraan Bintai Kindenko Sdn Bhd v. Nam Fatt Construction Sdn

Kerajaan Malaysia v. Ven-Coal Resources Sdn Bhd [2014] 5 CLJ 186

Kilang Kosfarm Sdn Bhd v. Kosma Nusantara Bhd (No. 2) [2002] 3

Olex Focas Pty v. Skodaexport Co Ltd [1998] 3 VR 380 (refd)

Teknik Cekap Sendirian Berhad v. Public Bank Berhad [1995] 4 CLJ

West Faulkner Associates v. London Borough of Newham [1994] 42

Yoker Sdn Bhd v. PY Mayora Indah [2014] 9 MLJ 591 (refd)

Other source(s) referred to:

subcontractor has a familiar story line. The subcontractor as Plaintiff here,

respect to the construction of a mixed development of 3 blocks of 28-storey

buildings (“the Project”). The Defendant itself is being employed by the

Project for RM270 million (“Principal Subcontract Works”). The contract

documents for the Principal Subcontract Works (“Principal Subcontract”)

between the Plaintiff as Principal Subcontractor and the Defendant as Main

203 (Rev 10/83) together with amendments in Attachment A to the Letter of

Award (“the Conditions of Contract”). The appendix to the Conditions of

Principal Subcontract is found in Attachment B.

a Bank Guarantee (“BG”) in favour of the Defendant for RM13.5 million. It

is common ground that the BG is an on-demand BG. By clause 37(c) of the

Conditions of Contract, if the Plaintiff commits any breach of its obligations

payments out of or deductions from the BG or any part thereof in

accordance with the terms of the Conditions of Contract.

clause 43 to 27 December 2014 (“Final Completion Date”).

Subcontract Works by the Original Completion Date. Parties then entered

into a Supplemental Agreement dated 28 October 2014 to allow for

sectional completion. Originally the Project consisted of Block A of 526

service apartments (21 storeys); Block C (168 units of service apartments

car park. Under the sectional completion, completion of Block A was

referred to as Section 1 and that of Block B and C as Section 2. The

completion date of both Sections 1 and 2 remained as 14 November 2014.

(“LAD”) for Section 1 is RM30,000.00 per day and that of Section 2 is

the Conditions of Contract.

[5] A Certificate of Non-Completion (“CNC”) was issued certifying that

completed Section 1 which is Block A.

[6] According to the Defendant there were slippages in the completion of

Plaintiff’s subcontractors and workmen. The Defendant proceeded to give a

Notice under clause 51 of the Conditions of Contract requiring the Plaintiff

Principal Subcontract. The work stoppages and strikes continued unabated

Exhibit D 25 in the Defendant’s 1 st Affidavit, set out the number of strikes

and work stoppages. The Defendant terminated the Principal Subcontract

by its Notice of Termination dated 22 December 2015 for the Plaintiff’s

failure to regularly and diligently proceed with the Principal Subcontract

Works. The Notice of Termination is at Exhibit P 12 of the Plaintiff’s 1 st

[7] Thereafter the Defendant proceeded to make a call on the BG by its

application in Enclosure 3 on 23 December 2015. The Plaintiff moved the

Court on a certificate of urgency filed and an ex-parte Injunction was given

or from receiving the proceeds guaranteed under the BG of RM13.5 million