Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2023 MarsdenLR 2952

HIGH COURT MALAYA KUALA LUMPUR
KHARISMA WIRA SDN BHD – Appellant
Versus
KETUA SETIAUSAHA KEMENTERIAN PERTAHANAN MALAYSIA & ORS – Respondent
[Orginating Summons No: WA-21NCC-5-11-2022]

Petitioner Advocates:Alan Wong,Kavyaasrini ,Respondent Advocate: Zulyana Zollkapli

Injunctions against the Government are not permissible under statutory provisions, and the Plaintiff failed to establish a prima facie case of unconscionability regarding the call on Performance Bonds.

Headnote:(A) Arbitration Act 2005 - Section 11 - Government Proceedings Act 1956 - Section 29 - Specific Relief Act 1950 - Section 54 - Application for interim injunction against the Government for restraining the calling of Performance Bonds pending arbitration - Court held that injunctions against the Government are not permissible under Section 29 of the GPA and Section 54 of the SRA, reaffirming the principle that the courts cannot interfere with public duties. (Paras 18-20, 26-30)

(B) Unconscionability - The Plaintiff failed to establish a prima facie case of unconscionability regarding the Government's call on Performance Bonds, as the disputes are contractual matters to be resolved by arbitration. (Paras 33-39)

(C) Balance of Convenience - The court found that the public interest favored the Government, and an injunction would impede its ability to fulfill public duties. (Paras 40-44)

Facts of the case:
The Plaintiff sought an injunction to prevent the Government from claiming Performance Bonds following a contract termination, alleging wrongful termination and non-payment. The Government argued against the injunction based on statutory provisions.

Findings of Court:
The court dismissed the Plaintiff's application for an injunction, citing statutory prohibitions and the lack of a prima facie case of unconscionability.

Issues: Whether the court has jurisdiction to grant an injunction against the Government; whether the Plaintiff established unconscionability; whether the balance of convenience favored granting the injunction.

Ratio Decidendi: The court ruled that injunctions against the Government are barred by statute, and the Plaintiff did not meet the high threshold for establishing unconscionability.

Result: Application for interim injunction dismissed with costs.

Judgement Key Points

Key Points: - (!) (!) (!) - (!) (!) - (!) (!) - (!) (!) - (!) (!) - (!) (!) - (!) (!) - (!) (!) - (!) (!)

Question 1?

How to determine whether a court can grant interim injunctions against the Government under the Government Proceedings Act 1956 (GPA) and the Specific Relief Act 1950 (SRA) in relation to performance bonds?

Question 2?

What is the test for unconscionability in restraining the calling of on-demand performance bonds pending arbitration?

Question 3?

What are the standards for balance of convenience and public interest when issuing interim relief against government entities in contractual/arbitration contexts?

Table of Content
1. injunctions sought under arbitration act. (Para 1 , 2)
2. background of the contract and related disputes. (Para 3 , 4 , 5 , 6 , 7)
3. plaintiff argues bad faith in bond call. (Para 8)
4. defendants contest injunction application. (Para 9 , 10)
5. legal foundation for interim measures under arbitration act. (Para 11 , 12 , 13 , 14 , 15)
6. court's jurisdiction to grant injunction against government. (Para 16 , 17 , 18)
7. legal provisions against granting injunctions to government. (Para 19 , 20 , 21 , 22 , 23)
8. court's interpretation of binding authority. (Para 24 , 25 , 26)
9. court adheres to precedent despite evolving law. (Para 27 , 28 , 29)
10. court dismisses os due to lack of jurisdiction. (Para 30 , 31)
11. unconscionability not established; contractual disputes remain. (Para 32 , 33 , 34 , 35 , 36 , 37 , 38 , 39)
12. public interest favors government's duty performance. (Para 40 , 41 , 42 , 43 , 44 , 45 , 46)
13. judgment concludes with dismissal of plaintiff's claims. (Para 47)

Liza Chan Sow Keng J:

Introduction

[1] This Amended Originating Summons ("OS") was filed on 17 November 2022 by the Plaintiff against the Defendants for interim measures as follows pursuant to s 11 Arbitration Act 2005 as the contract between the parties contains an Arbitration Agreement:

1.1 An injunction to restrain Defendants from claiming the full or partial amount of the Performance Bonds below until disposal of the Arbitration proceeding:

a. Bank Guarantee No 08136160262 for Bon Pelaksanaan (Kontrak/ Bekalan/ Perkhidmaan) amounting RM398,500.00 dated 29 November 2016 through Bank Islam Malaysia Berhad ("Contract Performance Bond"); and

b. Bank Guarantee No 08136160266 for Bon Pelaksanaan (Kontrak/ Bekalan/ Perkhidmatan) amounting to RM3,000,000.00 dated 5 December 2016 through Bank Islam Malaysia Berhad ("Performance Bond for Advance Payment") issued.

(collectively "the Performance Bonds")

1.2 An injunction to restrain Defendants from receiving the proceeds of the Performance Bonds from Bank Islam Malaysia Berhad until the disposal of the Arbitration proceeding together with costs.

[2] I had on 17 April 2023 dismissed the OS with costs to the 4th Defendant and given broad reasons for my decision. This judgment contains the full reasons for my decision.

Background

[3] The background facts are culled from the affidavits and submissions of the parties.

[4] The Plaintiff and the Government of Malaysia, the 4th Defendant herein had entered into a Contract dated 27 March 2017 ("the Contract") for the supply, delivery, testing and commissioning of 2 units of Air Droppable Rescue and Survival System (ADRSS) ("the Articles") for the benefit of the 3rd Defendant "berdasarkan kepada kadar harga dan deskripsi yang dinyatakan di dalam Jadual No 1 syarat-syarat kontrak dengan mengikut spesifikasi kerajaan seperti di Jadual 2A kepada Kontrak ini berdasarkan Pesanan Rasmi yang dikeluarkan oleh Kerajaan mengikut Klausa 8 dan menyediakan latihan dan dokumentasi berkenaan tatacara pengoperasian dan selenggaraan bagi Artikel mengikut terma dan syarat Kontrak ini".

[5] The agreed contract period was for two (2) years starting on 24 November 2018 ending 23 November 2020. Clause 32 of the Contract provides that all disputes between the parties not resolved amicably shall be referred to arbitration.

[6] Two (2) Final Acceptance Tests ("FAT") were conducted for the Articles. It was alleged by the Government that both Tests failed. The Contract was terminated on 7 March 2022 under cl 28 of the conditions of contract. Following the termination of the Contract on 7 March 2022, the 3rd Defendant issued a Notice of Liquidated & Ascertained Damages ("Notice of LAD Claim") on 22 August 2022, and by letter dated 14 November 2022, called on the Performance Bonds.

[7] The Plaintiff swiftly responded by filing this OS.

Plaintiff's Case

[8] The Plaintiff argued that the call on the Performance Bonds is made in bad faith, unfair and unconscionable due to:

8.1 Wrongful Termination

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