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COURT OF APPEAL KUALA LUMPUR
SOUTH EAST ASIA INSURANCE BHD – Appellant
Versus
KERAJAAN MALAYSIA – Respondent
[Civil Appeal No: W-01-142-95]
[1] This appeal is from the decision of the High Court in allowing an application by the respondent for summary judgment under O 14 Rules of the High 1980. Earlier the application was dismissed with costs by the registrar. The learned judge reversed the registrar's decision and entered judgment against the appellant and also ordered assessment of damages.
[2] One Jasib Shipyard & Engineering (M) Sdn Bhd contracted with the respondent to construct and complete the partially completed beach restoration works between Kuala Sungai Terengganu and Kuala Ibai in Kuala Terengganu. The appellant gave the respondent a performance bond up to the amount of RM420,645 and an insurance guarantee against advance payment for the sum of RM1,069,035. It was alleged that Jasib Shipyard failed to perform the contract to the satisfaction of the respondent and the respondent accordingly terminated the contract. Thereafter the respondent made a demand on the appellant on the said two bonds which the appellant failed to respond. This appeal before us being essentially an appeal against the order of summary judgment, the core issue is whether there are triable issues. It is well settled that if a defendant in an O 14 application succeeds in raising even a single triable issue, it will not be a fit and proper case to order summary judgment. It is only in plain and obvious cases where there are no issues to be tried should recourse be had to O 14. In Bank Negara Malaysia v. Mohd Ismail & Ors, [1992] 1 MLJ 400 it was held by the Supreme Court that in an application under O 14 the Court has to be satisfied on affidavit evidence that the defence has not only raised an issue, but also that the issue is triable.
[3] The issue in this appeal and in the Court below is on the construction of the performance bond and the advance payment bond. It is the contention of counsel for the appellant that both the bonds are conditional bonds and therefore a demand simpliciter is insufficient to trigger the payment mechanism. On the other hand it is the contention of counsel for the respondent that both the bonds are on demand bonds and therefore a demand simpliciter is sufficient. Therefore, if they are conditional bonds, then the issue is whether the notice of demand issued by the respondent to the appellant is a valid notice and whether this is a triable issue. It is pointed out that the respondent themselves have pleaded that the bonds are subject to certain conditions in their amended statement of claim. Therefore, they are bound by their pleadings and cannot now say that the bonds were on demand bonds. In the amended statement of claim dated 7 June 1994, the respondent in para 5 averred as follows:
5. Melalui Syarat Gerenti Pelaksanaan tersebut defenden bersetuju membayar kepada plaintif sebanyak RM420,645 dalam tempoh tiga bulan selepas menerima satu notis bertulis menghendaki defenden membayar kepada plaintif jika Kontraktor melakukan apa-apa perlanggaran terhadap kewajipannya di bawah Kontrak.
[4] On our reading of para 5 of the amended statement of claim it seems clear that it was drafted pursuant to cls 1 and 2 of the performance bond itself. Paragraph 5 appears to indicate that the respondent themselves aver that what would trigger the payment mechanism is the breach of the contract by the contractor. If there was no breach of any of the terms of the contract, the question of the appellant's liability to pay would not arise. This seems to be abundantly clear from the wording of cls 1 & 2 of the performance bond, which provides:
1) Jika Kontraktor (melainkan... layak) mungkin melaksanakan kontrak mengenai apa-apa perkara atau melakukan apa-apa perlanggaran terhadap kewajipannya di bawah kontrak, maka Kerajaan akan, jika perlu, memberi Penggerenti peluang untuk berbincang sebelum sesuatu keputusan dibuat.
2) Penggerenti akan membayar gantirugi kepada Kerajaan sebanyak dan setakat RM420,645 dalam tempoh tiga bulan selepas menerima satu
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