The performance guarantee is independent of the subcontract, and demands for payment do not require proof of breach, establishing unconscionability as a high bar to prevent such calls.

[1] The proceedings before the Court are related to a contract awarded to Tindakan Mewah Sdn Bhd and Salini Costruttori SpA who formed a consortium (Consortium) that successfully tendered for the Ulu Jelai Hydroelectric Project Contract TNB No 361/2008: Lot CW-1-Preliminary Works [Ulu Jelai Project] in Cameron Highland, Pahang from Tenaga Nasional Berhad.

[2] The defendant in turn entered into a subcontract dated 24 September 2010 with the defendant where the defendant was appointed to undertake the preliminary works for the Ulu Jelai Project (Sub-Contract). The scope of the Sub-Contract Works involved the building of internal access roads, designing and constructing the Engineer's Site Office and other facilities in Pos Telanok, constructing a working platform area and associated works.

[3] The plaintiff's sub-contract works also involved earthworks for which an earthworks permit under s 6(1) of the Land Conservation Act of 1960 (Act 385) was required. Prior to commencement of the earthworks, various preparatory works were also required. This included the establishment of the temporary site office, and the mobilising of sufficient equipment and machineries for setting out and for survey works. The preparatory works were to be conducted stage by stage as the access road was 10,700 m long, that is from chainage (CH) 0 to CH10,700.

[4] As part of the conditions of contract between the parties, the plaintiff was required to execute a performance security in favour of the defendant. It accordingly procured one with Alliance Bank Malaysia Berhad - see p 2725 vol 8.

[5] A dispute arose between the parties essentially as to whether the plaintiff could carry on with the works without this permit; who was responsible for procuring this permit; and over the plaintiff's notification of its intention to claim for an extension of time. The plaintiff claimed that it was advised by its then external legal counsel under retainer that any earthworks conducted beyond the conditions were illegal and that the plaintiff had to stop proceeding with the sub-contract immediately. Alternatively, the plaintiff was to obtain the requisite indemnities from the defendant.

[6] This dispute was referred to arbitration under cl 18(5)(a),(c) and (d) of the sub-contract. These provisions required any dispute between the parties to be settled under the Rules of Arbitration of the ICC International Chamber of Commerce. This meant that three arbitrators would hear the dispute, the seat of arbitration is Singapore, and the governing law would be the laws of Malaysia.

[7] Before the arbitral tribunal, apart from a ruling on a preliminary issue, the parties agreed to a bifurcate hearing, where the issues of liability would be determined first followed by a hearing on the issues of quantum, if necessary. The parties also agreed on the formulation of the issues of liability. A total of 10 questions were posed for determination. The arbitration then proceeded on these questions.

[8] Meanwhile, the defendant through its solicitors wrote to the plaintiff's solicitors on 4 March 2013 for an extension of the performance guarantee. The plaintiff refused taking the position that since the second Partial Award had yet to be rendered, there was no basis for the demand.

[9] This led the plaintiff to filing an application before this Court seeking declaratory orders on the performan