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2022 MarsdenLR 2927
HIGH COURT (SHAH ALAM)
WONG KIAN KHEONG, J
Panzana Enterprise Sdn Bhd – Plaintiff
Versus
Turnpike Synergy Sdn Bhd – Defendant
ORIGINATING SUMMONS NO BA-24C-9-03 OF 2021
The court ruled that calls on performance bonds were valid following contractor defaults, emphasizing the need for clear disclosures in legal applications.
Headnote:(A) Arbitration Act 2005 - Section 11 - Specific Relief Act 1950 - Sections 41 and 52 - Construction contract - Dispute arose over the validity of termination and subsequent call on performance bonds - The defendant validly terminated the contract after the plaintiff's defaults and delay in completing works, hence, the calls on the performance bonds were lawful - The plaintiff failed to prove unconscionability of the defendant's demands for payment - Application for injunction to restrain the defendant's calls on performance bonds dismissed - Plaintiff's application for further relief refused. (Paras 66 to 96)
(B) Judicial management - Applicability of judicial management to pending arbitration matters - No injunction can be granted if damages are adequate, and the balance of convenience favors the defendant. (Paras 66, 96)
(C) Court process - Requirement for applicants to disclose material facts in support of applications - Failure to disclose such facts can lead to setting aside orders granted ex parte. (Paras 91, 93)
JUDGMENT (Court enclosure nos. 1 and 19)A. Background
[1]The defendant company (Defendant) is a subsidiary of Projek Lintasan Kota Holdings Sdn. Bhd. (Prolintas) which is wholly owned by Permodalan Nasional Bhd. (PNB).
[2]The Defendant is in charge of overseeing the construction of, among others, the Damansara-Shah Alam Elevated Expressway (DASH).
[3]By way of a “Letter of Acceptance” dated 4.8.2016, the Defendant had appointed the plaintiff company (Plaintiff) as the main contractor of one package of DASH, ie., “Projek Penswastaan Lebuhraya Bertingkat Damansara-Shah Alam Package DASH - C4 - Construction and Completion of Mainline and Other Associated Works from CH.4983 to CH.9307” (Project). The contract for the Project between the Plaintiff and Defendant (Contract) consists of, among others, the following documents:
(1)“Conditions of Contract” dated 27.2.2017 (COC); and
(2)“Special Provisions to the Conditions of Contract” (SPCOC).
[4]Clause 7 COC provides that the value of the Contract is RM670,000,000.31 (Contract Sum).
[5]The Plaintiff has furnished the following two bank guarantees in favour of the Defendant (2 BG’s):
(1)pursuant to clause 13.1(a) SPCOC, BG no. T807161BG1027454 dated 22.8.2016 for a sum of RM33,500,000.02 had been issued by Ambank (M) Bhd. (Ambank) as the Plaintiff’s Performance Bond (PB) for the Project (1st BG); and
(2)BG no. T807211BG1049093 dated 4.2.2021 had been issued by Ambank for an amount of RM10,000,000.00 (2nd BG). The 2nd BG had been furnished due to the Defendant’s partial release of the “Retention Sum” to the Plaintiff [Defendant’s Partial Release (Retention Sum)].
[6]On 10.2.2021, the Superintending Officer of the Project (SO), Dato’ Mohammad Azlan Abdullah (Dato’ Azlan), signed a letter on behalf of the Defendant to the Plaintiff (Default Notice). The Default Notice stated as follows, among others -
(1)the Defendant had granted a fifth extension of time (5th EOT) until 30.12.2020 (Extended Completion Date) but the Plaintiff had failed to complete the works in the Project (Works) on the Extended Completion Date;
(2)the Defendant had been advised by the Project’s consultant engineers, Khairi Consult Sdn. Bhd. (KC), that the Plaintiff was not entitled to a further EOT to complete the Works;
(3)the Defendant was entitled to -
(a)claim for “Liquidated and Ascertained Damages” (LAD) at a rate of RM162,452.00 per day from the Plaintiff due to the Plaintiff’s delay in the Works [Delay (Works)];
(b)recover the LAD from the 1st BG; and/or
(c)recover the LAD could from the Plaintiff as a debt;
(4)the Defendant had previously assisted the Plaintiff by -
(a)the Defendant’s Partial Release (Retention Sum); and
(b)making bi-weekly direct payments to the Plaintiff’s sub- contractors and suppliers [Defendant’s Direct Payments (Plaintiff’s Sub-Contractors/Suppliers)];
(5)despite the Defendant’s Partial Release (Retention Sum) and Defendant’s Direct Payments (Plaintiff’s Sub-Contractors/Suppliers), the Defendant was concerned regarding the Plaintiff’s financial capability to complete the Works;
(6)the Delay (Works) had jeopardized the overall completion of DASH as a whole; and
(7)the Plaintiff had committed “serious defaults” under clauses 51.1(a)(iii) and 51.1(a)(v) COC. Consequently, the Defendant served this Notice of Default which required the Plaintiff to rectify such defaults within 14 days from the Plaintiff’s receipt of the Default Notice (Remedial Period) and if the Plaintiff failed to do so, the SO “shall have the right to forthwith terminate the Contract” by giving a written notice pursuant to clause 51.1(b) COC.
[7]The contents of the Default Notice were denied by the Plaintiff’s letter dated 19.2.2021 [Plaintiff’s Letter (19.2.2021)]. According to the Plaintiff’s Letter (19.2.2021), among others -
(1)the Delay (Works) was caused by the following two reasons -
(a)there was a delay in providing information regarding the Project (Project Information) to the Plaintiff [Alleged Delay (Project Information)]; and
(b)there was
