1. ) Ahmad Zaki Resources Berhad v Kerajaan Malaysia (CA-24C-1-04/2026)

AHMAD ZAKI RESOURCES BERHAD [COMPANY NO.199701017271(432768-X)]

AHMAD ZAKI SDN BHD [COMPANY NO.198201001504(81250-W)] ...PLAINTIFFS AND GOVERNMENT OF MALAYSIA ...DEFENDANT GROUNDS OF JUDGMENT Introduction [1] Before this Court is the Plaintiffs' application for interlocutory injunctive relief pursuant to section 11 of the Arbitration Act 2005 and related provisions seeking, among others, orders restraining the Defendant from making and/or receiving payment under two Performance Bonds issued in favour of the Defendant. [2] The application arises from a construction contract and a supplemental agreement entered into between the 1st Plaintiff and the Defendant concerning the design, construction, equipping and maintenance of a bridge project together with certain additional works. [3] The Plaintiffs contend that the Defendant's calls on the Performance Bonds are invalid, wrongful and unconscionable. The Defendant disputes those allegations and maintains that the calls were made pursuant to rights conferred by the contractual arrangements following the Plaintiffs' alleged failure to furnish a Design Guarantee Bond. The Legal Issue [4] It is important at the outset to identify the limits of the inquiry presently before the Court. This application is not concerned with the final determination of the parties' substantive contractual rights and obligations. [5] The Court is not called upon at this stage to conclusively decide whether the Plaintiffs' interpretation of the Contract is correct, whether the Defendant's interpretation should prevail, whether either party has committed a breach of contract or whether the Defendant was contractually entitled to require the provision of a Design Guarantee Bond. [6] Those are substantive issues which fall to be determined in the arbitral proceedings contemplated by the parties. [7] The central issue before this Court is whether the Plaintiffs have satisfied the legal requirements necessary to justify restraining the Defendant from calling on the Performance Bonds pending arbitration. [8] It is trite that Performance Bonds are autonomous instruments. The obligation of the issuing bank is independent of disputes arising under the underlying contract. [9] Consequently, courts interfere with calls on Performance Bonds only in exceptional circumstances. [10] Malaysian law recognises fraud and unconscionability as grounds upon which a beneficiary may be restrained from calling upon a Performance Bond. Fraud is not alleged in the present case. [11] The application therefore turns entirely upon the doctrine of unconscionability. Finding And Analysis Issues for Determination [12] Having considered the parties' submissions, the issues arising for determination are: i. Whether the 2nd Plaintiff possesses the requisite locus standi; ii. Whether this Court has jurisdiction to entertain the application notwithstanding that the Defendant is a Government of Malaysia; iii. Whether there are serious issues to be tried; iv. Whether the Plaintiffs have established a strong prima facie case of unconscionability sufficient to justify restraining the calls on the Performance Bonds; v. Whether damages constitute an adequate remedy; and vi. Where the balance of convenience lies. Issue 1 Whether the 2nd Plaintiff Has Locus Standi [13] The Defendant submits that the Contract and Supplemental Agreement were entered into solely between the 1st Plaintiff and the Defendant. [14] It is not disputed that the 2nd Plaintiff was not a party to either agreement. [15] The rights asserted in the present proceedings arise entirely from those contractual arrangements. [16] The doctrine of privity of contract remains a settled principle of Malaysian law. As explained in Razshah Enterprise Sdn Bhd v Arab Malaysian Finance Bhd [2008] 3 MLRA 481 and reaffirmed in Boustead Naval Shipyard Sdn Bhd v Dynaforce Corp Sdn Bhd [2015] 2 MLRA 348, a person who is not a party to a contract generally has no right to sue upon it. [17] The mere fact that the 2nd Plaintiff may suffer commercial consequences arising from the Defendant's call on the Performance Bonds does not create contractual rights where none exist. [18] No independent legal right vested in the 2nd Plaintiff has been identified before this Court. [19] Accordingly, I agree with the Defendant that the 2nd Plaintiff lacks locus standi to maintain the present proceedings. Issue 2 [20] The application, insofar as it is brought by the 2nd Plaintiff, is therefore unsustainable. Whether This Court Has Jurisdiction To Entertain The Present Application Against The Defendant [21] The Defendant submits that the relief sought is barred by section 29 of the Government Proceedings Act 1956 ("GPA") and section 54 of the Specific Relief Act 1950 ("SRA"). [22] Reliance was placed on, amongst others, Government of Malaysia v Lim Kit Siang [1988] 2 MLJ 12, Superintendent of Lands & Surveys Kuching Division & Ors v Kuching Waterfront Development Sdn Bhd [2009] 6 CLJ 751, Tan Bun Teet & Ors v Menteri Sains, Teknologi dan Inovasi Malaysia & Ors [2013] 3 MLJ 676 and YKK (Malaysia) Sdn Bhd v Pengarah Tanah dan Galian Johor [2021] 1 MLJ 385. [23] The Plaintiffs, however, rely principally on the Court of Appeal decision in Sabil Mulia (M) Sdn Bhd v Pengarah Hospital Tengku Ampuan Rahimah & Ors [2005] 3 MLJ 325 and submit that the Court retains jurisdiction to grant interim relief against the Government in appropriate circumstances. [24] Having considered the authorities cited by both parties, I am persuaded that the present application is more appropriately analysed through the lens of Sabil Mulia. [25] In Sabil Mulia, the Court of Appeal recognised that although sections 29 GPA and 54 SRA restrict the grant of injunctions against the Government, the Court nevertheless retains jurisdiction to grant appropriate interim relief where justice so requires. [26] The Court of Appeal observed that the prohibition against injunctions should not be applied mechanistically so as to deprive the Court of its ability to preserve the subject matter of litigation or prevent proceedings from being rendered nugatory. [27] In the present case, the Plaintiffs do not seek final relief against the Government at this stage. Rather, the Plaintiffs seek interim protective relief pending the resolution of disputes which they intend to pursue through arbitration pursuant to the arbitration agreement between the parties. [28] More importantly, the present application is grounded upon section 11 of the Arbitration Act 2005. Section 11 expressly confers upon the Court jurisdiction to grant interim measures in aid of arbitration. [29] The purpose of that provision is to preserve the efficacy of arbitral proceedings and to prevent those proceedings from being rendered nugatory pending the constitution of the arbitral tribunal or the determination of the dispute. [30] In my judgment, section 11 constitutes a specific statutory conferral of jurisdiction upon the Court to grant interim measures in appropriate cases. [31] The existence of such jurisdiction is not displaced merely because one of the parties happens to be a Government. [32] I am therefore unable to accept the Defendant's submission that the Court lacks jurisdiction to entertain the present application altogether. [33] The authorities relied upon by the Defendant address the circumstances in which injunctive relief may ultimately be granted against the Government. [34] They do not, in my respectful view, negate the Court's jurisdiction to hear and determine an application for interim protective measures brought pursuant to section 11 of the Arbitration Act 2005. [35] Accordingly, I find that this Court possesses jurisdiction to entertain and determine the present application. Issue 3 Whether There Are Serious Issues To Be Tried [36] The Plaintiffs contend that the contractual preconditions for the provision of a Design Guarantee Bond have not arisen. The Defendant disputes that contention. [37] The parties have advanced competing interpretations of the relevant contractual provisions. [38] Having considered the material before me, I am satisfied that the disputes raised are genuine and substantial. They are neither frivolous nor vexatious. [39] Accordingly, I accept that the Plaintiffs have established the existence of serious issues to be tried. However, that finding merely satisfies the first stage of the inquiry. [40] In the context of Performance Bond litigation, the existence of a contractual dispute or a serious issue to be tried does not, without more, justify restraining a call on a Performance Bond. [41] The Plaintiffs must still satisfy the additional and more stringent requirements applicable to Performance Bond cases. Issue 4 Whether the Plaintiffs Have Established Unconscionability Applicable Principles [42] The principal issue in this application is whether the Defendant's call on the Performance Bonds is unconscionable. [43] In Sumatec Engineering & Construction Sdn Bhd v Malaysian Refining Company Sdn Bhd [2012] 2 MLRA 289, the Federal Court recognised unconscionability as an independent ground upon which a beneficiary may be restrained from calling upon a Performance Bond. [44] The doctrine is directed towards the prevention of oppression and unfair conduct. [45] However, the Federal Court simultaneously emphasised that not every contractual dispute amounts to unconscionability. Whether unconscionability exists depends entirely upon the facts of the particular case. [46] The Court is not concerned merely with whether one party may ultimately prove to be wrong in law or in fact. Rather, the Court is concerned with whether the conduct complained of displays bad faith, oppression, abuse of contractual power or unfair dealing of such degree as to justify interference with an otherwise autonomous commercial instrument. [47] The Plaintiffs relied upon authorities such as Bina Jaya Mantap Sdn Bhd v Institute of Technology Petronas Sdn Bhd [2014] 4 MLRH 390 and Dunggon Jaya Sdn Bhd v Aeropod Sdn Bhd [2019] 2 SSLR 339. [48] Those decisions demonstrate that unconscionability may arise where the evidence discloses a pattern of bad faith, oppression, abuse of contractual power or an attempt to improperly exploit the security mechanism provided by a Performance Bond. [49] In those cases, the courts identified conduct which went beyond an ordinary contractual disagreement and disclosed circumstances capable of supporting an inference of unfairness sufficient to warrant judicial intervention. [50] Having carefully considered the evidence before me, I am unable to conclude that the present case bears the hallmarks found in Bina Jaya Mantap or Dunggon Jaya. [51] The Plaintiffs' complaint is essentially that the Defendant was not entitled to insist upon the provision of a Design Guarantee Bond and was correspondingly not entitled to call upon the Performance Bonds. The Defendant maintains the opposite position. [52] In substance, the parties disagree on the proper construction and operation of the contractual provisions. That disagreement may ultimately be resolved in favour of either party in arbitration. [53] However, a genuine disagreement concerning contractual interpretation, even if substantial and bona fide, does not without more amount to unconscionability. [54] The Plaintiffs rely upon matters such as the absence of a Certificate of Practical Completion, the issuance of partial completion certificates, the alleged expiry of certain defect liability periods, the Defendant's refusal to reduce the quantum of security and the Defendant's refusal to accept alternative arrangements proposed by the Plaintiffs. [55] Those matters undoubtedly raise arguable contractual questions. However, they do not establish bad faith, oppression, abuse or unfair dealing. [56] The evidence demonstrates that the parties had been engaged in correspondence over an extended period concerning the Design Guarantee Bond. [57] The Defendant's position was repeatedly communicated to the Plaintiffs. The Plaintiffs were fully aware of that position and sought to persuade the Defendant to adopt alternative arrangements. [58] The Defendant's refusal to accept those alternatives does not, without more, amount to unconscionability. A beneficiary does not act unconscionably merely because it insists upon what it genuinely believes to be its contractual entitlement. [59] It is also relevant to observe that the 1st Plaintiff is a sophisticated commercial entity operating within the construction industry and had voluntarily entered into the Contract and Supplemental Agreement containing the security arrangements now under challenge. [60] The Performance Bonds and the Design Guarantee Bond provisions formed part of the contractual risk allocation agreed between the parties. Whether those provisions ultimately operate in the manner contended for by the Defendant is a matter for determination in arbitration. [61] However, the fact remains that the present dispute concerns obligations arising from contractual arrangements knowingly entered into by commercial parties dealing at arm's length. [62] In such circumstances, the Court must be slow to characterise the enforcement of rights asserted under those contractual arrangements as unconscionable absent clear evidence of bad faith, oppression or abuse. Nor does the Court's equitable jurisdiction permit it to rewrite the parties agreed security arrangements at the interlocutory stage. [63] Most importantly, I am unable to identify any evidence demonstrating dishonesty, ulterior motive, bad faith, oppression or abuse of process on the part of the Defendant. [64] Viewed as a whole, the evidence before the Court does not disclose any prima facie conduct on the part of the Defendant that can fairly be characterised as mala fide, oppressive, abusive or of such a degree as to prick the conscience of a reasonable and sensible person. [65] Rather, what emerges from the evidence is a bona fide dispute concerning the parties' respective contractual rights and obligations, including the proper construction of the Contract and the circumstances under which the Defendant was entitled to call upon the Performance Bonds. [66] Such disputes are precisely the type of disputes which the parties agreed would be resolved through arbitration. They do not, without more, justify the extraordinary remedy of restraining a beneficiary from exercising rights under a Performance Bond. [67] Put differently, the Plaintiffs' complaint is directed principally at whether the Defendant was contractually entitled to insist upon the provision of a Design Guarantee Bond and thereafter call upon the Performance Bonds. Those are questions of contractual entitlement. [68] Even if the Plaintiffs ultimately succeed on those questions in arbitration, it does not necessarily follow that the Defendant's conduct in asserting its position was unconscionable at the time the calls were made. [69] Accordingly, I find that the Plaintiffs have failed to establish a strong prima facie case of unconscionability. Issue 5 Whether Damages Are An Adequate Remedy [70] The Plaintiffs contend that payment under the Performance Bonds would adversely affect liquidity, banking facilities, ongoing projects and commercial reputation. [71] I accept that the calls may have significant commercial consequences. However, the losses complained of remain fundamentally financial in nature. [72] If the Plaintiffs ultimately succeed in arbitration and establish that the calls were wrongful, such losses are capable of assessment and compensation through an award of damages. [73] The availability of damages as an adequate remedy remains a relevant consideration even in Performance Bond cases. [74] The fact that the Plaintiffs may suffer cash-flow difficulties, commercial inconvenience or adverse financial consequences does not, without more, render damages inadequate. Such consequences are common incidents of commercial disputes and are capable of monetary assessment should the Plaintiffs ultimately succeed. [75] In this regard, the observations of the Supreme Court in Esso Petroleum Malaysia Inc v Kago Petroleum Sdn Bhd [1994] 1 MLRA 446 remain instructive. [76] I am therefore unable to conclude that damages would be an inadequate remedy. Issue 6 Balance of Convenience [77] The Performance Bonds are due to expire on 8 May 2026. The Defendant submits that unless it is permitted to proceed with the calls, it risks losing the benefit of the contractual security. [78] The Plaintiffs dispute that contention and maintain that valid demands had already been made before expiry. [79] At this interlocutory stage, I do not consider it necessary to determine conclusively the legal effect of those competing positions. [80] Nevertheless, the approaching expiry of the Performance Bonds remains a practical consideration which forms part of the overall balancing exercise. [81] I also consider the timing of the present application to be relevant. [82] The evidence demonstrates that the dispute concerning the Design Guarantee Bond did not arise suddenly. [83] The parties had been corresponding on this issue for a considerable period of time before the Defendant eventually made the impugned demands. [84] The Plaintiffs were aware, long before these proceedings were commenced, that the Defendant maintained the position that a Design Guarantee Bond was required. [85] Notwithstanding that knowledge, the present application was only commenced shortly before the expiry of the Performance Bonds. [86] The chronology suggests that the application was triggered primarily by the Defendant's actual exercise of its contractual rights rather than by any newly discovered conduct said to constitute unconscionability. [87] While delay alone is not fatal, it remains a relevant equitable consideration. In the present case, that delay further strengthens my conclusion that the balance of convenience does not favour the grant of injunctive relief. [88] I also take into account the nature of the parties before the Court. [89] The 1st Plaintiff is a commercial entity engaged in the business of undertaking large-scale construction projects and entered into the contractual arrangements in question with full knowledge of the security mechanisms provided therein. [90] The Defendant, on the other hand, is a public authority entrusted with the administration of public infrastructure projects and the stewardship of public resources. [91] While the Defendant enjoys no special advantage merely by virtue of its status as a public authority, the Court cannot ignore that the Performance Bonds were procured as part of a contractual framework designed to protect public funds and public interests in the execution of a major public project. [92] In assessing the balance of convenience, that public dimension is a relevant consideration which weighs in favour of preserving the Defendant's ability to exercise rights which it genuinely believes are available under the contractual arrangements. [93] While public interest is not determinative, it remains a relevant consideration in assessing the competing prejudice likely to be suffered by the parties. [94] Viewed cumulatively, the balance of convenience favours the Defendant. Conclusion And Decision [95] Ultimately, this Court is concerned not with whether the Defendant's contractual position is correct, but whether the Plaintiffs have demonstrated circumstances sufficiently exceptional to justify restraining the operation of an autonomous commercial instrument furnished in connection with a public infrastructure project. In my judgment, they have not. [96] For the reasons set out above, I find that:

the 2nd Plaintiff lacks locus standi;

(ii) this Court possesses jurisdiction to entertain the present application;

(iii) there are serious issues to be tried;

(iv) the Plaintiffs have failed to establish a strong prima facie case of unconscionability;

damages constitute an adequate remedy; and

(vi) the balance of convenience favours the Defendant. [97] The Plaintiffs have therefore failed to satisfy the stringent threshold required for restraining a call on Performance Bonds. [98] Accordingly, the application is dismissed with costs of RM15,000.00 subject to allocatur. Dated: 8 June 2026 (SAMRY BIN MASRI) Judicial Commisioner High Court Kuantan Counsel for the Plaintiffs : Tetuan Lee & Poh Partnership Peguam Bela & Peguam Cara A-10-3, Tower A Vertical Business Suite Avenue 3 Bangsar South, No. 8, Jalan Kerinchi 59200 Kuala Lumpur Counsel for the : Jabatan Peguam Negara Defendant Bahagian Guaman No. 45, Persiaran Perdana Presint 4 62100 Putrajaya (Ruj:PN/PG/HQ/SF/26/02/2026)