A Bank Guarantee expires if the demand is made post the defined validity period, which is independent of the underlying contract disputes.

Headnote:(A) Arbitration Act 2005 - Section 10 - Bank Guarantees - The Court held that the dispute regarding the validity of the Bank Guarantee is not subject to arbitration due to the lack of an explicit arbitration clause in the guarantee. The Bank Guarantee expired before the demand was made by the Second Defendant. The Plaintiff sought declarations that the Bank Guarantee has expired and that the Second Defendant is not entitled to call on it. The First Defendant acknowledged that the guarantee was no longer valid. (Paras 1-4, 68-110)

(B) Jurisdiction - The Plaintiff was found to have standing to seek declaratory relief regarding the validity of the guarantee, despite not being a party to it, as its interests were directly affected. Key facts included the timeline of the guarantee's terms and the correspondence regarding extensions and demands. (Paras 25-26, 75-76, 90-92)

Findings of Court:
The Court ruled that the guarantee had indeed expired, and consequently, the Second Defendant could not demand payment under it.

Issues: Whether the demand on the Bank Guarantee was valid and whether the dispute concerning it was subject to arbitration.

Ratio Decidendi: The validity of the Bank Guarantee must be determined without reference to the underlying contract and arbitration clause because they are separate documents.

Result: Declaration that the guarantee has expired and that the Second Defendant is not entitled to its proceeds.

Table of Content
1. jurisdiction and arbitration applicability (Para 1 , 1 , 2 , 3 , 4 , 5)
2. charterparty agreement and bank guarantee terms (Para 6 , 7 , 12 , 14 , 22)
3. extension of hire period and correspondence (Para 8 , 10 , 11 , 13 , 19)
4. chronology of charterparty agreement and bg requirements. (Para 9)
5. claims related to vessel damage and reinstatement. (Para 15)
6. d2's demand on bg and plaintiff's position on expiry. (Para 23 , 24)
7. dispute on validity of bank guarantee (Para 25 , 26 , 28 , 31)
8. plaintiff's contention regarding bg expiration. (Para 27)
9. dispute over the interpretation of bg expiration. (Para 29 , 30)
10. d2’s argument for arbitration relevance. (Para 33 , 34)
11. court's decision on arbitration clause incorporation. (Para 35 , 36 , 40 , 41)
12. interpretation of bank guarantee expiry (Para 73 , 77 , 79 , 82 , 90)
13. court's determination of bg validity. (Para 74 , 76)
14. plaintiff's standing and declaratory relief (Para 75 , 81 , 91)

[1] The Plaintiff in this originating summons, Sigur Ros Sdn. Bhd. ('Plaintiff') seeks declarationsinter alia, that:-

(a) The Plaintiff's Bank Guarantee No. 99060BGF5921220 dated 30 October 2013 ('BG') issued by the First Defendant, Malayan Banking Berhad ('the Bank') to the Second Defendant, Master Mulia Sdn. Bhd. ('D2') has expired; and

(b) D2 is not entitled to call on the said BG issued by the Bank.

[2] D2 however opposes this originating summons on the grounds that the issues that arise above in (a) and (b) in relation to the BG are more properly dealt with by an arbitrator in view of the terms of a Charterparty agreement between the Plaintiff and itself, which contains a mandatory arbitration clause. D2 maintains that the agreement to arbitrate in the Charterparty agreement has been effectively incorporated into the terms of the BG by way of specific reference, and that accordingly, the reliefs sought by the Plaintiff are more properly dealt with by way of arbitration.

[3] D2 effectively maintains that this Court has no jurisdiction to deal with the issues set out in (a) and (b) above in light of the said arbitration clause which, it is contended, is effectively incorporated into the BG and therefore binding on D1 as well as the Plaintiff and D2.

[4] To this end therefore D2 has filed an application in Enclosure 6 for a stay of proceedings pending arbitration under s 10 of the Arbitration Act 2005 ..

[5] Given the foregoing, it is necessary to determine Enclosure 6 relating to the stay of proceedings pending arbitration first, as this will effectively determine whether the Plaintiff is entitled to have these declarations made by this Court or by an arbitrator. If D2 succeeds in its application for a stay, there will be no further need to consider the questions posed and declarations sought by the Plaintiff as these matters will be dealt with by the arbitrator in the course of the resolution of the dispute under the Charterparty agreement. If however, D2 fails in its application for a stay of proceedings, it will then be necessary to go on to consider whether the Plaintiff is in fact entitled to the reliefs sought herein. The matters here are purely questions of law and therefore efficaciously determined by way of an originating summons.

Salient Facts

[6] The salient facts have been comprehensively set out in the affidavits relating to this matter as well as the written submissions of learned counsel for the Plaintiff, Mr. Chang Chew Min, and D2, Mr. Gan Khong Aik. I adopt the chronology below from the affidavits and their submissions.

[7] On 23 October 2012 the Plaintiff and D2 entered into a charterparty agreement for the charter of a vessel owned by D2, namely the 'PLB Mas Mulia' ('the Vessel'). The agreement was in the form and style known as the BIMCO Time Charter Party For Offshore Service Vessels code Name: Supplytime 2005 ('the Contract').

[8] The salient terms of the Contract include the following matters:-

(a) The Hire Period

(i) Box 9 of the Contract provides that th

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2013 MarsdenLR 2316

HIGH COURT MALAYA KUALA LUMPURSIGUR ROS SDN BHD – AppellantVersusMALAYAN BANKING BERHAD & ANOR – Respondent[Originating Summons No: 24NCC-89-03/2013]

A Bank Guarantee expires if the demand is made post the defined validity period, which is independent of the underlying contract disputes.

Cases Referred (1)

HIGH COURT MALAYA KUALA LUMPUR
SIGUR ROS SDN BHD – Appellant
Versus
MALAYAN BANKING BERHAD & ANOR – Respondent
[Originating Summons No: 24NCC-89-03/2013]