JUDGMENT

By way of a sub-contract dated 4.6.93 (the agreement) and varied by a supplemental agreement to the agreement dated 21.10.94 (the supplemental agreement) the defendant appointed the plaintiff to perform certain sub-contract works on the Kuala Lumpur Telecommunications Tower. Article 4 in the conditions of contract annexed to the agreement provides that the plaintiff shall place with the defendant a performance bond (the bond) equal to 30% of the sub-contract sum. In accordance with their obligations under Article 4 the plaintiff caused the Bank of Commerce (M) Bhd (the bank) to issue the bond no. 1408LG940735 dated 8.2.94 in the sum of RM1,530,000.00 to the defendant. The sub-contract works were due for completion on 31.10.95. The plaintiff alleged that whilst it had substantially completed all the sub-contract works, the portions of the sub-contract works remaining to be done are as a result of the defendant and/or their other sub-contractors failing to complete their works on time and as a result of numerous variations in the works requested for by the defendant. The plaintiff wrote to the defendant that certain works could not be performed because certain items had not been supplied by the defendant and also due to other defaults of the defendant. The plaintiff then sought an extension of time to complete the works because of delays caused by other parties and due to lack of facilities and access provided by the defendant. The plaintiff also wrote to the defendant providing a schedule of works to be completed and asked the defendant when access could be given to allow the plaintiff to perform certain works. By way of a letter dated 9.2.96 the plaintiff formally handed over the sub-contract works having been fully installed, tested, fully commissioned and witnessed by the technical supervisor. By letter dated 16.2.96 the defendant listed the works which in its opinion remained incomplete and which the plaintiff estimated by way of its reply letter dated 6.3.96, as amounting to a maximum of RM40,000.00. A dispute thus arose between the plaintiff and the defendant on the plaintiff's claim for variation works. The defendant then by its letter dated 5.4.96 made a demand on the bank for the payment of RM1,530,000.00. It is the plaintiff's contention that the defendant does not have the right under the said agreement to demand payment on the bond, and it further contends that the value of the bond represents a penalty under section 75 of the Contracts Act 1950 and therefore should not be allowed. Alternatively the plaintiff contends that the defendant is only entitled to the actual damage suffered by the defendant which the defendant had failed to quantify. The plaintiff thus sought by way of this originating summons (enclosure 2) the following orders:

"1. That an injunction be granted on the terms that the Defendant whether by itself or by its agents or servants be restrained from calling on and/or receiving payment of the sum of RM1,530,000.00 or any sum whatsoever under a Performance Bond dated 8th of February 1994 and numbered 1408LG940735 issued by the Bank of Commerce (M) Berhad;

2. Whether the Sub-Contract dated 4th June 1993 and/or the Supplemental Agreement to the Sub-Contract dated 21st October 1994 permit(s) the Defendant whether by itself or by its agents or servants to make a call on the Performance Bond mentioned in question 1 above;

3. If the answer to question 2 is yes, then a determination by the Honourable Court on the sum that can be called and which is payable under the Performance Bond mentioned in question 1;

4. Costs; and

5. Any other relief that this Honourable Court may think fit and proper."

The plaintiff then took out an ex parte summons and on 11.4.96 obtained an order in terms of prayer (1) of enclosure 2. The inter partes hearing was fixed for 22.4.96. On the said date the defendant filed an application (enclosure 8) for stay of all further proceedings (except the plaintiff's first prayer in