The court affirmed that a bank's obligation under an unconditional bank guarantee is absolute, requiring payment upon demand without further investigation into the underlying contract.

Azmi Ariffin JCA:

Introduction

[1] Enclosure 53 dated 1 April 2024 is the Appellant / Plaintiff Notice of Appeal to this Honourable Court against the Shah Alam High Court decision delivered on 26 March 2024 in dismissing the Appellant's injunction application (Enclosure 3) to restrain the Respondent / Defendant from enforcing the loan and security documents against the Appellant following its default, with costs of RM5,000.00 subject to allocator.

[2] For convenience, we will refer the Appellant as the Plaintiff and the Respondent as the Defendant.

Backgrounds Facts

[3] The Plaintiff is the developer of a housing and commercial development project known as Cadangan Membina 5 Blok 38 Tingkat 1,099 Unit Rumah Pangsa Kos Tinggi dan 23 Unit Kedai 4 Tingkat yang Mengandungi Kemudahan Tadika, Dewan Serbaguna, Surau Serta 4 Tingkat Podium Tempat Letak Kereta dan Rekreasi Dengan 1 Tingkat Basemen di atas Lot 3901 HS(D) 61423, Jalan Aman Fasa III (KG Berembang), Mukim Ulu Klang, Daerah Gombak, Selangor Darul Ehsan) ("the Project").

[4] The Defendant provided credit facilities for the Plaintiff's development projects including the Project, Kemensah Townhouse Project and the Pangsapuri Berembang Indah Project.

[5] By way of a Letter of Award dated 31 December 2013, the Plaintiff appointed China Railway Engineering Corporation (M) Sdn Bhd and Bismark Construction & Engineering Sdn Bhd as the main contractor for the Project for a sum of RM1,062,500,000.00 (Ringgit Malaysia One Billion Sixty-Two Million Five Hundred Thousand Only).

[6] The Defendant provided the following credit facilities to the Plaintiff's development projects:

(a) RM30,000,000.00 (Ringgit Malaysia Thirty Million Only) Credit Facilities dated 16 January 2007 to part finance the preliminary expenses, earth works and show houses pertaining to Kemensah Mixed Development project comprising of 72 unit of 2-storey townhouses and 91 units of 3 and a half-storey Superlink Terraced Houses on land identified as Lots PT 2499 - PT 2631, Mukim Hulu Kelang, Daerah Gombak.

(b) RM125,000,000.00 (Ringgit Malaysia One Hundred and Twenty- Five Million Only) Credit Facilities dated 15 June 2007 to finance the payment to Permodalan Negeri Selangor Berhad comprising of land compensation in respect of the joint development on the land known as Perumahan Jalan Aman Fasa III (Kg. Berembang) Mukim Hulu Klang, District of Gombak, to part finance the preliminary expenses, pre-development cost, earth works and the low-cost housing construction pertaining to the Project and to part finance the Plaintiff's development and construction of the Festa Condominium and balance RM35,000,000.00 for the payment of interest in arrears of the RM125,000,000.00 Credit Facilities;

(c) RM104,100,000.00 (Ringgit Malaysia One Hundred and Four Million One Hundred Thousand Only) Term Loan Facility dated 10 December 2018 to be utilised to settle interest, fees, penalties and other charges (including legal fees, costs and charges) outstanding or due and payable for credit facilities ie, RM30,000,000.00 Credit Facilities, RM125,000,000.00 Credit Facilities, RM476,000,000.00 Bank Guarantee Facilities, RM476,000,000.00 Term Loan Facility and RM235,000,000.00 Term Loan Facility; and

(d) RM235,000,000.00 (Ringgit Malaysia Two Hundred and Thirty- Five Term Loan Facility dated 6 August 2020 to fully settle