The court established that unconscionable conduct by a beneficiary can preclude the calling of a Bank Guarantee even if it is unconditional.

[1] These two appeals arose from the decision of the High Court at Kota Kinabalu which:

(a) disallowed the appellant's application by way of Originating Summons to restrain the 1st respondent from calling on the Bank Guarantee of RM4,031,979.34 issued by the 2nd respondent until the appellant's claim is heard and disposed of by arbitration;

(b) disallowed the appellant's preliminary objection against the use of the 1st respondent's affidavit in reply as an opposing affidavit in the said application; and

(c) allowing the 1st respondent's Notice of Application to set aside the ex parte Originating Order dated 20 January 2017 granted to the appellant.

[2] Having heard arguments by both sides, we allowed the appellant's appeals and these are our grounds.

[3] The following facts are not in dispute. The 1st respondent was appointed by the appellant to carry out construction works for the Main Building Works for Package 1: Basement Level, Level 1, 2, Block C and D pursuant to a Letter of Acceptance dated 29 November 2013 under Contract Reference No. ASAB-BLDG-C029/13.

[4] On or about 4 February 2014, the appellant and the 1st respondent entered into a formal contract adopting the PAM Form of Contract 2006 (Without Quantities) with modifications.

[5] On 19 November 2014, the parties entered into a Bank Guarantee No BGINM001592 for the sum of RM4,031,979.34. The Bank Guarantee is couched in the following language:

"If the Contractor shall in any respect fail to execute the Contract or commit any breach of his obligations there under then the Guarantor shall within Seven (7) banking days upon receipt of written demand pay to the Principal up to and not exceeding the sum of Ringgit Malaysia Four Million Thirty One Thousand Nine Hundred Seventy Nine and Sen Thirty Four only (RM4,031,979.34) representing 5% of the Contract Value notwithstanding any contestation or protest by the Contractor or by the Guarantor or by any other third party."

[6] On 12 October 2015, the 1st respondent unilaterally terminated the contract on the ground that the appellant failed to proceed regularly and diligently with the construction works even though the appellant was given until February 2016 to complete the works. The Bank Guarantee was called on by the 1st respondent on the same day.

[7] On 21 October 2015, the appellant filed a writ of summons for an order that the 1st respondent be restrained from calling on the Bank Guarantee, and on even date applied for an ex parte injunction. The 1st respondent countered by filing an application to stay all proceedings under s 10 of the Arbitration Act 2005 ("the Arbitration Act") pending arbitration.

[8] On 22 October 2015, the ex parte injunction applied for by the appellant was granted by the High Court.

[9] On 22 February 2016, the Court granted a stay of proceedings under s 10 of the Arbitration Act of the remaining proceedings under the first suit but not the injunction application.

[10] On 25 May 2016, the inter partes injunction application was heard and granted by Ravinthran N Paramaguru J. The 1st respondent appealed against the decision.

[11] On 19 January 2017, this Court allowed the 1st respondent's appeal and set aside the injunction on the principal ground that the appellant in its injunction application failed to cite s 11 of the Arbitration Act in its intitulement and also failed to go by the Ori