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2010 MarsdenLR 3086
HIGH COURT MALAYA KUALA LUMPUR
MMN BINA SDN BHD – Appellant
Versus
FELDA PROPERTIES SDN BHD – Respondent
[Originating Summons No: D-24Ncc-301-2010]
Unconscionability, while a possible ground for intervention in performance guarantees, requires strong evidence, and disputes related to contract performance should typically proceed to arbitration.
Headnote:(A) Contracts - Performance Guarantees - On-demand Contracts - The court discussed the nature of on-demand and unconditional guarantees, affirming that the only recognized exception to the obligation to pay on demand is in cases of fraud (para. 7).
(B) Unconscionability - The court acknowledged 'unconscionability' as a distinct ground for judicial intervention separate from fraud, citing prior case law (para. 8).
(C) Jurisdiction - The court emphasized that disputes arising from contracts should be resolved through arbitration as per contractual provisions (para. 16).
Facts of the case:
The plaintiff sought a restraining order against a demand made by the defendant on a bank guarantee for an incomplete construction project (paras. 1-3).
Findings of Court:
The court found that the defendant was entitled to demand payment on the guarantee without being restrained due to the absence of unconscionable conduct (para. 18).
Issues: The key issues were whether the plaintiff’s completion of works under the contract justified a restraining order on the bank guarantee and whether unconscionability served as a valid ground for intervention (paras. 12-15).
Ratio Decidendi: The court ruled that no unconscionable conduct was sufficiently demonstrated to warrant intervention, as all disputes were strictly contractual and should be determined by an engineer or through arbitration (para. 18).
Result: Application dismissed, with costs awarded to the defendant.
| Table of Content |
|---|
| 1. application for restraining order against bg (Para 1 , 2 , 3 , 4 , 5) |
| 2. nature of bg and required legal exceptions (Para 6 , 7 , 8) |
| 3. court's perspective on unconscionability principle (Para 9 , 10 , 11) |
| 4. arguments for and against unconscionability (Para 12 , 13 , 14) |
| 5. court's reasoning against restraining order (Para 15 , 16 , 17 , 18) |
Varghese George JC:
Grounds Of Decision
[1] Enclosure 1 was an ex parte application by the plaintiff (by way of summons-in-chambers) filed on 26 August 2010 which essentially sought for a restraining order against the defendant from making a demand on a Bank Guarantee with the reference No. TF 001 G 8-247 given by CIMB Bank Berhad (hereinafter referred as 'the BG') until further order of the court, or till after the lapse of 84 days from the date of the decision of the 'engineer' or in the event of an arbitration between the parties, until an award is published thereunder, whichever was the later.
Enclosure 1 was supported by affidavit sokongan affirmed by one Nazrin b. Basri for the plaintiff (encl. 2).
[2] The originating process, namely, the saman pemula (encl. 4) was filed on 27 August 2010 seeking in effect the same restraining order.
[3] The material factual background upon which the application was made were as follows:
(a) The plaintiff had been engaged by the defendant, and by an agreement entered into on 20 October 2005 was the contractor for the construction and completion of a project known as "Cadangan Membina dan Menyiapkan Rumah Kos Rendah Setingkat, Rumah Kos Sederhana Setingkat, Kedai Setingkat, Pencawang Elektrik dan Kerja-Kerja Infrastruktur yang Berkaitan Di Felda Keratong 3, Mukim Keratong, Daerah Rompin, Pahang Darul Makmur" for a contract value of RM19,750,000 (hereinafter referred as 'the contract').
(b) It was a term of the contract that the plaintiff provides a guarantee for the due performance of the contract in the sum of 5% of the consideration of the contract. Accordingly there was in place the BG to the value of RM987,750. The BG which was dated 29 July 2008 named the defendant as the beneficiary to the guaranteed sum.
(c) The plaintiff claims that the works under the contract had been completed and in support of the same made reference to various letters from the defendant's engineer in June 2008 and July 2008. (paras. 9 of the affidavit sokongan).
(d) The BG, it must be noted however, was issued on 29 July 2008. It was also admitted by the plaintiff that the defendant's engineer had on 8 November 2008 maintained that certain remaining works and rectification to defects to have been undertaken by the plaintiff had not been completed by the plaintiff as of that date. It also appeared from the material before the court, that a joint inspection and survey had even been held by the parties on 12 January 2009 but the disputes and differences between the parties continued to remain unresolved.
(e) Neither the plaintiff nor the defendant had invoked cl. 55 of the contract to refer the differences and disputes as between them towards resolution by arbitration, in any event.
[4] On 12 August 2010, the defendant proceeded to issue a demand on CIMB for payment of the sum guaranteed under the BG. On 19 August 2010, the bank informed the plaintiff in writing that a demand had been received in respect of the BG from the defendant and that the bank would proceed to pay the sum in question within seven (7) days to the defendant.
Enclosure 1 was filed only on 26 August 2010 the last day before expiry of that seven day period.
[5] When the matter first came up before me on 27 August 2010, I directed that encl. 1 be served on the defendant and the plaintiff's application be disposed of inter parte .
On 30 August 2010 in the presence of both counsel for the plaintiff and the defendant, I granted an ad interim order and adjourned encl. 1 for hearing and disposal to 17 September 2010 to enable the counsel for the defendant to take further instructions and file any affida
