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2022 MarsdenLR 2041
HIGH COURT MALAYA SHAH ALAM
PANZANA ENTERPRISE SDN BHD – Appellant
Versus
TURNPIKE SYNERGY SDN BHD – Respondent
[Originating Summons No: BA-24C-9-03/2021]
The court held that existing arbitration agreements limit judicial intervention in construction disputes, prioritizing arbitration outcomes over preemptive judicial remedies.
Headnote:(A) Construction Industry Payment and Adjudication Act 2012 – Sections 7 and 9 – Arbitration Act 2005 – Section 11(1) – Dispute between contractor and employer regarding bank guarantees and termination of contract – Court cannot issue declarations or permanent injunctions during arbitration – Claims of unconscionability linked to the employer's delays and alleged breaches rejected – Validity of termination notice and demands for payment upheld. (Paras 1-6, 10-17, 21-22, 61-74)
Facts of the case: Dispute arose between contractor and employer concerning claims for extension of time and financial obligations related to a construction project. The employer issued a termination notice citing contractor defaults.
Findings of Court: The termination notice was valid, and the contractor's claims for further extensions were insufficiently supported.
Issues: The court examined whether terms under the Arbitration Act precluded it from granting the contractor relief against demands made under bank guarantees.
Ratio Decidendi: The court emphasized that disputes governed by arbitration agreements cannot be preemptively resolved by the courts without written consensus from both parties, reaffirming the need to respect established procedural frameworks in arbitration.
Result: Application by contractor dismissed, costs awarded to employer.
(Court Enclosure Nos 1 And 19)
A. Background
[1] The defendant company (Defendant) is a subsidiary of Projek Lintasan Kota Holdings Sdn. Bhd. (Prolintas) which is wholly owned by Permodalan Nasional Bhd. (PNB).
[2] The Defendant is in charge of overseeing the construction of, among others, the Damansara-Shah Alam Elevated Expressway (DASH).
[3] By way of a "Letter of Acceptance" dated 4 August 2016, the Defendant had appointed the plaintiff company (Plaintiff) as the main contractor of one package of DASH, ie, "Projek Penswastaan Lebuhraya Bertingkat Damansara-Shah Alam Package DASH - C4 - Construction and Completion of Mainline and Other Associated Works from CH.4983 to CH.9307" (Project). The contract for the Project between the Plaintiff and Defendant (Contract) consists of, among others, the following documents:
(1) "Conditions of Contract" dated 27 February 2017 (COC); and
(2) "Special Provisions to the Conditions of Contract" (SPCOC).
[4] Clause 7 COC provides that the value of the Contract is RM670,000,000.31 (Contract Sum).
[5] The Plaintiff has furnished the following two bank guarantees in favour of the Defendant (2 BG's):
(1) pursuant to clause 13.1(a) SPCOC, BG no. T807161BG1027454 dated 22 August 2016 for a sum of RM33,500,000.02 had been issued by Ambank (M) Bhd. (Ambank) as the Plaintiff's Performance Bond (PB) for the Project (1st BG); and
(2) BG no. T807211BG1049093 dated 4 February 2021 had been issued by Ambank for an amount of RM10,000,000.00 (2nd BG). The 2nd BG had been furnished due to the Defendant's partial release of the "Retention Sum" to the Plaintiff [Defendant's Partial Release (Retention Sum)].
[6] On 10 February 2021, the Superintending Officer of the Project (SO), Dato' Mohammad Azlan Abdullah (Dato' Azlan), signed a letter on behalf of the Defendant to the Plaintiff (Default Notice). The Default Notice stated as follows, among others:-
(1) the Defendant had granted a fifth extension of time (5th EOT) until 30 December 2020 (Extended Completion Date) but the Plaintiff had failed to complete the works in the Project (Works) on the Extended Completion Date;
(2) the Defendant had been advised by the Project's consultant engineer, Khairi Consult Sdn. Bhd. (KC), that the Plaintiff was not entitled to a further EOT to complete the Works;
(3) the Defendant was entitled to:-
(a) claim for "Liquidated and Ascertained Damages" (LAD) at a rate of RM162,452.00 per day from the Plaintiff due to the Plaintiff's delay in the Works [Delay (Works)];
(b) recover the LAD from the 1st BG; and/or
(c) recover the LAD from the Plaintiff as a debt;
(4) the Defendant had previously assisted the Plaintiff by:-
(a) the Defendant's Partial Release (Retention Sum); and
(b) making bi-weekly direct payments to the Plaintiff's sub-contractors and suppliers [Defendant's Direct Payments (Plaintiff's Sub-Contractors/Suppliers)];
(5) despite the Defendant's Partial Release (Retention Sum) and Defendant's Direct Payments (Plaintiff's Sub-Contractors/Suppliers), the Defendant was concerned regarding the Plaintiff's financial capability to complete the Works;
(6) the Delay (Works) had jeopardized the overall completion of DASH as a whole; and
(7) the Plaintiff had committed "serious defaults" under clauses 51.1(a)(iii) and 51.1(a)(v) COC. Consequently, the Defendant served this Notice of Default which required the Plaintiff to rectify such defaults within 14 days from the Plaintiff's receipt of the Default Notice (Remedial Period) and if the Plaintiff failed to do so, the SO "shall have the right to forthwith terminate the Contract" by giving a written notice pursuant to clause 51.1(b) COC.
[7] The contents of the Default Notice were denied by the Plaintiff's letter dated 19 February 2021 [Plaintiff's Letter (19 February 2021)]. According to the Plaintiff's Letter (19 February 2021), among others:-
(1) the Delay (Works) was caused by the following two reasons:-
(a) there was a delay in providing information regarding the Project (P
