Unconscionability can serve as an independent ground for granting an injunction against bank guarantees, particularly in the presence of evidence suggesting improper demands related to contract execution.

[1] There are two applications before the court: encls (1) and (6). Enclosure (1) is the plaintiff's application for an injunction to restrain the defendant from demanding and/or realising the bank guarantee that the plaintiff provided under the contractual arrangements between itself and the defendant. Enclosure (6) is the defendant's application for a stay of the present proceedings pending arbitration.

[2] As a result of the unfolding, development and intervening events in respect of these proceedings which are well recorded, and more particularly with the consent of the parties to treat encl (1) as an application under s 11 of the Arbitration Act 2005 (Act 646); and encl (6) for stay under s 10 of the same Act; accordingly encl (1) will be treated as an application for an interim injunction pending arbitration under s 11 of Act 646. Further, it is recorded that the parties are in agreement that the substantive merits of the dispute between them should be referred to arbitration. In fact, arbitration has already been initiated by the plaintiff through its letter sent just today to the defendant for this purpose.

[3] The parties have filed affidavits and affidavits-in-reply in respect of both applications.

Factual Background

[4] On 27 December 2012, the plaintiff and the defendant entered into a contract wherein the defendant appointed the plaintiff as a contractor to execute works for a project known as "The Proposed Construction and Completion of Two (2) Nos of Research and Development (R&D) Buildings at Universiti Teknologi Petronas, Bandar Seri Iskandar, Perak Darul Ridzuan (Package 3C) (Contract No: ITPSB/RD/12/02)" for RM74 million (the Project). As required under the terms of this contract, the plaintiff provided a bank guarantee for the sum of RM3.7 million issued by United Overseas Bank (Malaysia) Berhad.

[5] The defendant appointed one Encik Hilme Hassan from KLCC Projeks Services Sdn Bhd as the "Employer's Representative". He, together with other consultants of the defendant was the defendant's representatives in the Project.

[6] The plaintiff alleged that from the early days of execution of the contract, the defendant breached the contract through its representatives' "misconduct and antagonising treatment" of the plaintiff. Such "misconduct and antagonising treatment" were alleged to be "unprofessional, impulsive, arbitrary, wrongful, unlawful and/or without proper or reasonable cause", for the purpose of harassing and threatening the plaintiff; and to frustrate the plaintiff's efforts in relation to the execution of the contract.

[7] Zainol bin Abdullah (Zainol), the plaintiff's Managing Director gave details of these allegations in his affidavit filed in support of the plaintiff's application (encl 2). They included allegations of the defendant's interference with its subcontractors; matters relating to site clearance and removal of trees at the work site; changes in the platform level and the location of a borrow pit; construction of additional or temporary drains; as well as threats made during meetings between the parties; and "requests for bribe" by one of the defendant's consultants.

[8] For instance, Zainol explained how the defendant's representatives are said to have unnecessarily interviewed the plaintiff's subcontractors; and unreasonably rejected the workers of the plaintiff's subcontractors. According to Zainol, such actions jeopardised the execution of the works by the subcontractors who then had to take time to replace these "rejected" workers.

[9] Zainol further explained how the defendant's requirement for additional works had also delayed