Axianergy (M) Sdn Bhd v Petronas Gas Berhad (BA-24C-42-07/2025)

(M) Sdn Bhd dan Petronas Gas Berhad Dan Dalam perkara Jaminan Bank bertarikh 19.4.2021 (No. Ruj. 349PG090391) yang diisukan oleh United Overseas Bank (Malaysia) Berhad memihak Petronas Gas Berhad berserta Addendum Pertama bertarikh 23.05.2023, Addendum Kedua bertarikh 03.10.2023 dan Addendum Ketiga bertarikh 29.04.2025 Dan Dalam perkara Seksyen 11(1)(a) dan 11(b) Akta Timbang Tara 2005 Dan Dalam perkara timbang tara antara

(M) Sdn Bhd dan Petronas Gas Berhad Dan Dalam perkara Aturan 7, 28, 29, 32, 69 dan 92 Kaedah 4 KaedahKaedah Mahkamah 2012 Dan Dalam Perkara Seksyen-Seksyen 50, 51, 52 dan 53 Akta Relief Spesifik 1950 ANTARA AXIANERGY (M) SDN BHD [No. Syarikat:201401041986 (1118150-U)] ... PLAINTIF DAN PETRONAS GAS BERHAD [No. Syarikat: 198301006447 (101671-H)] ... DEFENDAN GROUNDS OF JUDGMENT

This Originating Summons is filed by the Plaintiff pursuant to S.11 of the Arbitration Act 2005 for an injunction to restrain the Defendant from making a call on the Bank Guarantee dated 19.4.2021 (Ref No. 349PG090391) in the sum of RM9,140,982.25 issued by United Overseas Bank (Malaysia) Bhd in favour of the Defendant (“the Bank Guarantee”).

The Court granted an Ex-Parte Order on 4.7.2025.

The Defendant subsequently filed Enclosure 10 to set aside the said Ex Parte Order. On the return date of Enclosure 10 on

18.7.2025, this Court granted an ad interim injunction pending the disposal of the OS.

The relevant affidavits filed in support of and in opposition to the OS and Enclosure 10 are as follows :-

the Plaintiff’s supporting affidavit affirmed by Mohd Shafidz Bin Mohd Yasin on 4.7.2025 [Enclosures 6 & 7] (“the Plaintiff’s Affidavit 1”);

(ii) the Defendant’s affidavit affirmed by Abdul Aziz Bin Othman on 17.7.2025 [Enclosures 11 & 12] (“the Defendant’s Affidavit 1”);

(iii) the Plaintiff’s affidavit affirmed by Mohd Shafidz Bin Mohd Yasin on 25.7.2025 [Enclosures 20- 51] (“the Plaintiff’s Affidavit 2”);

(iv) the Defendant’s affidavit affirmed by Abdul Aziz Bin Othman on 29.7.2025 [Enclosure 53] (“the Defendant’s Affidavit 2”);

the Plaintiff’s affidavit affirmed by Mohd Shafidz Bin Mohd Yasin on 5.8.2025 [Enclosure 56] (“the Plaintiff’s Affidavit 3”); [the Plaintiff’s affidavit affirmed by Mohd Shafidz Bin Mohd Yasin on 6.10.2025 [Enclosure 69] was disregarded for purposes of the OS and Enclosure 10 and forms no part of my consideration]

On 12.11.2025, I allowed the OS with costs of RM7,500.00 (subject to allocator) and dismissed Enclosure 10. Dissatisfied with my decision in allowing the OS, the Defendant lodged an appeal on 26.11.2025.

I set below my grounds for allowing the OS.

By way of a letter of award bearing ref no: TULIP-EXE-PGB-AXN-LTR-001 dated 24.02.2021 9 (“LOA”), the Plaintiff was appointed by the Defendant as its contractor to carry out the substructure works for the project known as: “Engineering, Procurement, Construction And Commissioning (EPCC) Of NPS 36 Pulau Indah Lateral Pipeline (Tulip) Project For Petronas Gas Berhad” (‘”Project”) for an original contract sum of RM182,819,645.00.

The parties subsequently executed Contract No.: RFP- 000000000263/1004 which consists of amongst others, General Terms & Conditions (“the GTC”). The contract documents for this Project are listed in Clause 1 of the LOA.

9.

The validity and extensions of the Bank Guarantee are as follows:-

initial period 24.2.2021 – 21.6.2024;

(ii) extended till 24.12.2024;

(iii) extended till 30.4.2025;

(iv) extended till 30.4.2026.

Clause 11 of LOA and Article 29 of the GTC provide that any dispute between parties are to be resolved by arbitration.

Discussions took place between parties in April & May 2025 concerning payments allegedly due to the Plaintiff and the potential descoping of works.

As the Bank Guarantee was due to expire on 30.4.2025, the Defendant made an initial call on the Bank Guarantee on 28.4.2025 (“the First Call”).

Upon the Plaintiff procuring an extension of the Bank Guarantee till 30.4.2026, the Defendant withdrew the First Call.

On 5.5.2025, the Plaintiff issued a Payment Claim under S. 5 of the Construction Industry Payment & Adjudication Act 2012 (“CIPAA”) for RM73,966,926.93 (“the Payment Claim”).

On 19.5.2025, the Defendant issued a Payment Response under S. 6 of CIPAA disputing the amount claimed.

On 20.6.2025, the Defendant issued a letter of demand in the sum of RM81,721,539.85 purportedly for reimbursement of costs incurred for remedial works arising from the damage caused by the Plaintiff where from the Plaintiff has failed to obtain the requisite permits prior to the pipe jacking works done by the Plaintiff at KP0+200 (KM14.4) at the Elite Highway (“the Defendant’s Letter of Demand”).

By its reply dated 26.6.2025, the Plaintiff disputed the Defendant’s claim asserting, inter alia, that the alleged losses were never communicated earlier nor substantiated and that the demand was retaliatory in nature following the commencement of adjudication proceedings under CIPAA.

On 2.7.2025, the Defendant, through Petroliam Nasional Berhad, made a call on the Bank Guarantee.

The Plaintiff sought to restrain the call on the Bank Guarantee on the following grounds:-

that the Bank Guarantee was a conditional Bank

(ii) that the Defendant had unilaterally converted the beneficiary of the Bank Guarantee to a third party; and

(iii) that there was unconscionable conduct on the part of the Defendant in making the call on the Performance Bond.

The Defendant opposed the application contending that :-

the terms of the Bank Guarantee were unconditional in nature; and

(ii) the call on the Bank Guarantee was made as the Plaintiff has failed to pay the Defendant’s demand of RM81,721,539.85 being the additional/ remedial costs incurred as a result of the Plaintiff’s failure to obtain the necessary permits from the relevant authorities prior to carrying out the pipe jacking works at KM 14.4 of the Elite Highway (“Permit Breach”).

The issues for determination were therefore:-

whether the Bank Guarantee was unconditional and payable on demand;

(ii) whether the call on the Bank Guarantee by the Defendant was invalid by the nomination of a 3rd Party as beneficiary;

(iii) whether the Defendant’s conduct in making the call on the Bank Guarantee was unconscionable. THE LAW

In the case of Cobrain Holdings Sdn Bhd V Expertise International A&I (M) Sdn Bhd & Ors (2015) 11 MLJ 339 the High Court referred to the fundamental principles of bank guarantees and performance bonds. It was held : “[24] First, as expressed earlier in the decisions of Sato Kogyo (M) Sdn Bhd v Salini (M) Sdn Bhd (2014) 10 MLJ 614 and Bina Jaya Mantap Sdn Bhd v Institute of Technology Petronas Sdn Bhd (2014) 11 MLJ 352, bank guarantees are in substance and effect, performance bonds intended to secure the performance of the underlying contract between parties. These bank guarantees are intended to be honoured without fuss or question and upon presentation of documents as opposed to arguments or meeting some threshold which is merit based… [25] …Such guarantees further enjoy “a bias or (rebuttable) presumption in favour of construction which holds a performance bond to be conditioned upon documents rather than facts… A more restrained and strict exercise of discretion is therefore advocated where injunctive reliefs are sought to prevent the demands or calls on such guarantees…”

The Federal Court in China Airlines Ltd v Maltran Air Corp Sdn Bhd (1996) 2 MLJ 517 held at page 534 held that “(A) bank guarantee is a performance bond. There are two types of performance bond. The first type is a conditional bond whereby the guarantor becomes liable upon proof of a breach of the terms of the principal contract by the principal and the beneficiary sustaining loss as a result of such breach. The guarantor’s liability will therefore arise as a result of the principal’s default. The second type is an unconditional or “on demand” performance bond which is so drafted that the guarantor will become liable merely when demand is made upon him by the beneficiary with no necessity for the beneficiary to prove any default by the principal in performance of the principal contract.”

Sumatec Engineering And Construction Sdn Bhd v Malayan Refining Company Sdn Bhd (2012) 3 CLJ 401, the Federal Court stated : “The fundamental principle behind a bank guarantee is that it is a separate and independent of the underlying contract between the disputing immediate parties and the contract between the account party and the bank. Thus in this case, MRC could, relying on this autonomy principle, call upon BIMB to make payment on the bank guarantee at any time without proof of any breaches arising from the underlying contract.”

On the grounds to restrain a beneficiary from calling in on a performance bond, the Federal Court in Sumatec held that other than the fraud exception, unconscionability is now a distinct ground for such a restraint. The applicant must show by manifest or strong cogent evidence of unconscionable conduct on the part of the beneficiary in making the call on the performance bond. At paragraph 39, the Federal Court adopted and agreed with the Court of Appeal’s proposition that the required burden now rested with Sumatec (the applicant) : “As in the case of fraud, to establish ‘unconscionability’ there must be placed before the court manifest or strong evidence of some degree in respect of the alleged unconscionable conduct complained of, not a bare assertion. Hence, the respondent has to satisfy the threshold of a seriously arguable case that the only realistic inference is the existence of ‘unconscionability’ which would basically mean establishing a strong prima facie case. In other words, the respondent has to place sufficient evidence before the court so as to enable the court to be satisfied, not necessarily beyond reasonable doubt, that a case of “unconscionability” being committed by the beneficiary (the appellant) has been established to an extent sufficient for the court to be minded to order injunction sought. This additional ground of ‘unconscionability’ should only be allowed with circumspect where events or conduct are of such degree such as to prick the conscience of a reasonable and sensible man.”

In Kejuruteraan Bintai Kindenko Sdn Bhd v Nam Fatt Construction Sdn Bhd & Anor (2011) 7 CLJ 442, the Court of Appeal held that the principle underlying the unconscionability doctrine was the prevention of oppression and unfair conduct, and because the determination of unconscionability was fact-specific and the courts must consider such claim on a case to case basis and must assess the totality of the circumstances.

In essence, to establish that the Defendant’s call on the Bank Guarantee was unconscionable, the Plaintiff must adduce clear, strong, and cogent evidence of the alleged unconscionable conduct. Accordingly, this Court must examine and analyse the facts and circumstances leading to the call on the Bank Guarantee.

S. 11 of the Arbitration Act 2005 allows a party to apply to the High Court for any interim measure, before or during arbitral proceedings. As the Defendant did not raise any serious objections to the width of the application of S.11 of the Arbitration Act 2005, I accept that Section 11(1) allows for an injunction to be granted even before arbitral proceedings and this application is properly made by the Plaintiff.

Nature of the Bank Guarantee

The Plaintiff argued that as Clause 6.1 of the LOA and Article 9.1(a) of the GTC required a bank guarantee of RM9,140,982.50 to be issued in the Defendant’s favour for the due performance of the Plaintiff under the LOA and the GTC respectively, the calling on the Bank Guarantee by the Defendant must necessarily be conditional upon the Plaintiff’s breach the Contract, or its failure to perform its obligation.

In Teknik Cekap Sdn Bhd v Public Bank Bhd (1995) 3 MLJ 449, it was held at page 454 that a performance bond is “a written contract of guarantee by a bank, other financial institutions or in some cases an insurance company, whereby they guarantee the due performance of a contract and in the event of a breach or non-performance of the contract, they guarantee to pay, on a written demand being made, the sum stipulated in the guarantee. Therefore a performance bond is nothing more than a written guarantee, and in order to interpret the obligations of the bank, one need only to look at the written bond itself to determine what are the terms and conditions agreed upon between parties. A great deal, therefore depends on the wording of the bond itself.” Further at page 456, the Court of Appeal went on to hold that : “The line of authorities seem to indicate that the courts adopted a strict interpretation of performance bonds and that in making demands on them the beneficiary must adhere strictly to their terms.”

Upon examination of the terms in the Bank Guarantee, particularly Clause 3(b), the Bank Guarantee is autonomous and did not incorporate the terms of the LOA and/or the GTC. There is no requirement for proof of breach or default prior to payment.

I am satisfied that, as between the Defendant and United Overseas Bank (Malaysia) Bhd, the Bank Guarantee was unconditional and payable on demand.

It follows, and I accordingly hold, that upon receipt of a demand from the Defendant, United Overseas Bank (Malaysia) Bhd shall have to make payment to the Defendant, as the beneficiary of the Bank Guarantee, notwithstanding any contest or protest from the Plaintiff.

(ii) Unilateral Change of Beneficiary Without Consent

Evidence relating to the beneficiary of the Bank Guarantee is uncontroverted. The Bank Guarantee named the Defendant, Petronas Gas Berhad, as the sole beneficiary.

In making the call on 2.7.2025, the Defendant, through Petroliam Nasional Berhad, instructed payment to be made to Petroliam Nasional Berhad, a 3rd party who is a stranger to the Bank Guarantee and the underlying contract. It is beyond dispute that Petroliam Nasional Berhad is a distinct legal entity from the Defendant.

No explanation or evidence was adduced to justify this issuance by, and direction of payment to, a 3rd party. The Defendant did not exhibit any deed of assignment, corporate resolution or written notice evidencing a lawful transfer of rights under S. 4(3) of the Civil Law Act, 1956 S.4(3) provides that : “Any absolute assignment, by writing, under the hand of the assignor, not purporting to be by way of charge only, of any debt or other legal chose in action, of which express notice in writing has been given to the debtor, trustee or other person from whom the assignor would have been entitled to receive or claim the debt or chose in action, shall be, and be deemed to have been, effectual in law, subject to all equities which would have been entitled to priority over the right of the assignee under the law as it existed in the State before the date of the coming into force this Act, to pass and transfer the legal right to the debt or chose in action, from the date of the notice, and all legal or other remedies for the same, and the power to give a good discharge for the same, without the concurrence of the assignor.”

This evidential omission is significant. In the absence of any express term permitting the transfer of the Bank Guarantee to a 3rd party and/or payment to a 3rd party, or evidence of lawful assignment, I find that the Defendant failed to strictly comply with the terms of the Bank Guarantee.

I am therefore constrained to question the validity and enforceability of the call on the Bank Guarantee. Thus, the call in my view is legally unenforceable.

(iii) Unconscionability

The Plaintiff relied on the following to assert unconscionable conduct on the part of the Defendant :-

the absence of supporting evidence for the alleged reimbursement costs;

(ii) the timing of the demand;

(iii) there were negotiations between parties in April and May 2025 in relation to the final stage of the Contract

I shall deal with each issue in turn.

the absence of supporting evidence for the alleged reimbursement costs

The First Call was made on the Bank Guarantee on 28.4.2025 on account that the Bank Guarantee was expiring on 30.4.2025.

When the Plaintiff obtained an extension of the Bank Guarantee till 30.4.2026, the Defendant withdrew the First Call on 5.5.2025.

On 20.6.2025 the Defendant issued its demand for RM81,721,539.85 purportedly for the reimbursement of costs. At paragraphs 2 and 3 of the Demand, the Defendant based their demand in the following manner (verbatim): “COMPANY hereby expressed our serious concern regarding the CONTRACTOR’s failure to obtain the required permit(s) from PLUS prior to executing pipe jacking works at KM14.4 ELITE Highway Crossing which has caused significant non-compliance with the contractual obligations, reputational impact and substantial unplanned costs to the COMPANY. In line with the CONTRACT and as clearly outlined in the above correspondences, all costs arising due to this breach are to be borne solely by the CONTRACTOR. Accordingly, the COMPANY has consolidated the following current costs incurred for reimbursement.”

The Defendant justified the Demand by invoking Article 30.4 of the GTC in claiming their right to recover costs arising from such breaches. Article 30.4 of the GTC provides : “If the CONTRACTOR or its SUBCONTRACTOR/ VENDOR perform any part of the WORKS hereunder in breach of the law, then the CONTRACTOR shall bear any additional costs resulting from the said violation and correction thereof. The CONTRACTOR shall not enter into negotiations with any relevant authority or agency to develop acceptance to exemption, composition, variation, or revision to LAW in connection with this CONTRACT without the COMPANY’s prior written approval.”

Reimbursement, as defined in the Oxford Advanced Learner’s Dictionary, refers to the act of paying back money to a person for expenses incurred or losses sustained, or the amount so repaid. Accordingly, for a claim of reimbursement to be sustainable, it is incumbent upon the party seeking reimbursement to adduce evidence demonstrating that such expenses were in fact incurred.

The breakdown of the Demand for the reimbursement costs of RM81,721,539.85, according to the Defendant, are as follows :-

Associated Cost for Gas-In : RM4,230,000.57

(ii) Temporary Rectification Cost by PLUS : RM5,016,295.12

(iii) Permanent Bypass line : RM42,420,923.00

(iv) Associated cost for ELITE Permanent Repair : RM30,054,321.16 RM81,721,539.85

As regards the alleged losses of RM81,721,539.85, the Defendant merely asserted that such costs were incurred. No invoices, receipts, proof of payment, correspondence from PLUS, or confirmations from contractors were provided. In short no documentary evidence was produced to substantiate the quantum claimed as reimbursement cost.

In the present case, the Defendant has wholly failed to discharge this burden.

I hasten to add that, while this is not the appropriate forum for the Defendant to prove its substantive entitlement to reimbursement, the Defendant cannot, without more, merely assert an entitlement to the substantial sum of RM81,721,539.86 as reimbursement in an arbitrary manner. At the very least, some evidential basis must be disclosed to support such a claim; a bare assertion, without supporting material, is plainly insufficient.

This is particularly so where the Defendant purported to ground its right to call on the Bank Guarantee, through Petroliam Nasional Berhad, on 2.7.2025 on the Plaintiff’s alleged failure to comply with the Demand.

the timing of the demand

It was emphasised by the Plaintiff that the First Call was made on 28.4.2025 and was withdrawn by the Defendant on 5.5.2025 without asserting any quantified reimbursement claim (which according to the Defendant was accumulated progressively).

Bearing in mind that at paragraph 43 of the Defendant’s Affidavit 1 the Defendant has averred : “In this regard, the sum of RM81,721,539.85 incurred by the Defendant as a result of the damage caused by the Permit Breach was accumulated progressively and only crystallised in June 2025. Pursuant to the Contract, the Plaintiff is responsible to pay the said sum.”

The Defendant’s demand dated 20.6.2025 was the first occasion on which the substantial sum of RM81,721,539.85 was articulated. This temporal gap was not explained by the Defendant.

The timing of the demand is material. The Plaintiff issued and served on 5.5.2025 a Payment Claim under S. 5 of CIPAA to the Defendant for the outstanding payment of RM73,966,926.93 which the Plaintiff claimed was owing by the Defendant to the Plaintiff and the Defendant’s Payment Response under S.6 of CIPAA was issued on 19.5.2025.

Barely 4 weeks thereafter, the Defendant issued the reimbursement demand and shortly thereafter, through Petroliam Nasional Berhad, made a call on the Bank Guarantee.

I pause here to note that the Defendant has full knowledge that the Plaintiff had executed the works at KM14.4 of the ELITE Highway without the requisite permits since 2023. This is borne from the following letters issued between parties:-

the Defendant’s letter dated 22.6.2023 - the Defendant notified the Plaintiff that they were informed on 30.5.2023 that the Plaintiff performed works at KP0+ 200 and KP 6 without approval from Lembaga Lebuhraya Malaysia (LLM), Elite and SKVE; - the Defendant reminded the Plaintiff to forward copies of the approvals

(ii) the Defendant’s letter dated 4.8.2023 - the Defendant notified the Plaintiff that Projek Lebuhraya Usahasama Berhad (PLUS) has issued them a letter dated 3.8.2023 where PLUS discovered that the Plaintiff had done pipe jacking works at KP0+200 (KM 14.4) at ELITE Highway without acquiring the relevant permits from PLUS

(iii) the Plaintiff’s letter dated 8.8.2023 - the Plaintiff confirmed that they had undertaken the pipe jacking works at KM 14.4 at the ELITE Highway without obtaining the relevant permits from, inter alia, PLUS; - the Plaintiff agreed to undertake the necessary remedial action to resolve the issue

(iv) the Defendant’s letter dated 10.11.2023 - the Defendant informed the Plaintiff that they have received a notification from PLUS that the installation of gas pipeline work at KM 14.4 of ELITE Highway was done without authorisation from LLM and PLUS and the said works has caused damage to the pile embankment which provided structure support on the highway; - the Defendant put the Plaintiff on notice that the Plaintiff was to repair any damages to the highway - the Defendant exercised its rights to withhold payments due to the Plaintiff until all corrective action and rectification works are completed

the Plaintiff’s letter dated 15.1.2024 - other than requesting the Defendant to release the payments due to them, the Plaintiff has also acknowledged the severity of the ELITE Highway issue and proposed to have a discussion with the Defendant regarding the magnitude of cost, arrangement, and method of payment for any back charges associated with the rectification works

I find as a fact that the Defendant was aware, from at least June 2023, that pipe jacking works at KM14.4 of the ELITE Highway had been undertaken without the requisite permits, and nevertheless continued with the Project while addressing the issue contractually.

Yet, the demand for RM81,721,539.85 was issued on 20.6.2025 only after the Plaintiff commenced adjudication proceedings under CIPAA.

It must also be pointed out that the costs incurred amounting to RM81,721,539.85 is not the final amount yet. This is can be gleaned from :-

the Demand where the Defendant has unequivocally stated that “the COMPANY has consolidated the following current costs incurred for reimbursement”

(ii) in their Written Submission dated 11.8.2025, at paragraph 60 it was the Defendant’s submission that “the sum of RM81,721,539.85 claimed by the Defendant in the Letter of Demand reflects the actual costs incurred due to the Plaintiff’s breaches which was progressively incurred and continuing to be incurred.”

(iii) when asked by the Court during the hearing of Enclosure 1, the Defendant’s Counsel was very candid when he confirmed that “the Defendant still do not know how much it will eventually cost, the minimum now the Defendant is saying is RM81 million”

When, by the Defendant’s own admission, the costs allegedly incurred as a result of the damage arising from the Permit Breach were accumulated progressively and continue to be incurred, the haste with which the Defendant issued the Demand against the Plaintiff remains unexplained. This is particularly so given that the Bank Guarantee had been extended until 30.4.2026.

Based on the above chronology of events and the unexplained rush by the Defendant in issuing the Demand, the irresistible conclusion that the Court has drawn is that the Demand, and by extension the Bank Guarantee, was a retaliation against the Plaintiff for commencing adjudication proceedings against the Defendant under CIPAA.

there were negotiations between parties in April and May 2025 in relation to the final stage of the Contract

It is the Plaintiff’s contention that in the months leading to the calling of the Bank Guarantee, the Plaintiff and the Defendant were in active discussion in April, May and June 2025 to achieve a way to move forward with the Project with the Final Documentation stage, in the following manner :-

potential descoping of certain works; and

(ii) certain works to be completed by the Plaintiff. This is evidenced vide the Plaintiff’s letter dated 3.7.2025 which despite the Plaintiff’s request for confirmation remained unanswered by the Defendant.

The Defendant did not deny that such discussions took place, but contended that it demonstrated the Plaintiff’s alleged lack of commitment to complete the Works.

From the Plaintiff’s perspective, the fact that the parties were engaged in discussions in the months preceding the Demand dated 20.6.2025 regarding the possible descoping of certain works in order to achieve Final Documentation—coupled with the Defendant’s withdrawal of the First Call on 5.5.2025—gave rise to the belief that there had been, and would continue to be, an ongoing commercial relationship between the parties, and that there had been no breakdown in that relationship.

The facts of the present case bear a degree of similarity to those in BGMC Corporation Sdn Bhd v MRCB Builders Sdn Bhd & Ors [2022] MLJU 2458, where the High Court held that the call on the Performance Bond was unconscionable when the employer gave the impression that “everything was well” and/or “business as usual” as the parties there were constantly in negotiations and discussions regarding the WWF Plan (which objective was (i) the continuing of the current arrangement between the Plaintiff and D1 and to complete the construction of the Project; (ii) avoiding the drawdown on the performance bonds there and (iii) reducing the exposure of the liquidated and ascertained damages) and were at the stage of finalising the same when D1 there issued the Notices of Termination. To the Plaintiff, D1 had been unconscionable in inducing the Plaintiff to believe that there has been, and will be, a continuing relationship between them, which the Plaintiff had acted in reliance upon.

On the evidence, the discussions were consistent with an ongoing contractual relationship rather than an impending enforcement action.

As such, I find and hold that the call on the Bank Guarantee by the Defendant, through Petroliam Nasional Berhad, when parties were in discussions in April and May 2025 regarding the completion of the Project and the potential descoping of works was oppressive and/or lacking good faith.

According to the Defendant, the call on the Bank Guarantee on 2.7.2025 was purportedly premised on the Plaintiff’s failure to satisfy the Demand.

While Article 30.4 of the GTC provides for the Defendant’s right to recover costs arising from the Plaintiff’s failure to obtain the requisite permits prior to the commencement of works, the said Article does not confer upon the Defendant any corresponding right to call on the Bank Guarantee.

I note that Article 18 of the GTC deals with the rights of the Defendant in the event of default by the Plaintiff. “ARTICLE 18 – DEFAULT OF CONTRACTOR

18.1 The occurrence of any of the following events (“EVENT OF DEFAULT”) shall be deemed a default by the CONTRACTOR under this CONTRACT:

The CONTRACTOR commits a material or repeated breach of the CONTRACT, of a PERMIT;

The CONTRACTOR fails to pay the COMPANY any amount owing under the CONTRACT within fourteen (14) calendar days of receiving the notice or demand to pay

18.2 Upon the occurrence of any of the above, save and except in the EVENTS OF INSOLVENCY, which amounts to immediate termination by the COMPANY, the COMPANY shall notify the CONTRACTOR in writing of such occurrence of any of the EVENTS OF DEFAULT and the CONTRACTOR shall within a period of thirty (30) days (date of notice included), or any other period deemed appropriate by the COMPANY, commence and complete the appropriate corrective actions.

18.3 In the event the CONTRACTOR fails to complete rectification of the default within the notice period as per ARTICLE 18.2 hereinabove, the COMPANY shall, without prejudice to any other rights it may have, withhold any payments due to the CONTRACTOR as per ARTICLE 7 – INVOICING AND PAYMENTS, enforce the PERFORMANCE SECURITY as per ARTICLE 9 – PERFORMANCE SECURITY, if applicable under this CONTRACT, suspend the WORKS (full or partial) as per ARTICLE 21 – SUSPENSION OF WORKS and/or terminate the CONTRACT and such termination shall take effect on the date as specified in the COMPANY’s notice.”

Accordingly, by the operation of Article 18.3 of the GTC, the earliest date on which the Defendant would be entitled to call on the Bank Guarantee is 3.8.2025. The calculation is as follows:

(i)

(ii) under Article 18.2, the Defendant is required to notify the Plaintiff in writing of the default, upon which the Plaintiff is afforded 30 days to commence and complete the necessary corrective action, expiring on 3.8.2025.

However, the Defendant, through Petroliam Nasional Berhad, proceeded to call on the Bank Guarantee on 2.7.2025. Once again, the haste in making the call remains unexplained and stands in stark contrast to the cautionary language employed by the Defendant in its own correspondence to the Plaintiff, wherein it expressly stated that it “COMPANY hereby reserves all its rights and remedies under the Contract and/or at law.”

I find that the Defendant failed to issue a notice of default and afford the Plaintiff an opportunity to rectify pursuant to Article 18.2 of the GTC before calling on the Bank Guarantee.

As the parties did not canvass or fully ventilate the issue of a premature call on the Bank Guarantee, I decline to make a definitive finding as to whether the call was, in fact and in law, premature. Nevertheless, I am prepared to hold that the Defendant’s decision to proceed with the call, through Petroliam Nasional Berhad, without first complying with Article 18.2 constitutes evidence of oppressive and unconscionable conduct on the part of the Defendant.

As a matter of law, although the Bank Guarantee is unconditional and payable on demand as between the issuing bank and the named beneficiary, strict compliance with its express terms is required for a valid and enforceable call.

The Defendant’s unilateral transfer of the Bank Guarantee to a 3rd party and/or direction for payment to a 3rd party not named as beneficiary renders the call legally questionable and undermines its enforceability.

Additionally, in accordance with the principles in Sumatec (supra.) and Bintai Kindenko (supra.), unconscionability constitutes an independent and recognised ground upon which the Court may restrain a call on the Bank Guarantee, provided there is manifest and strong cogent evidence of conduct that is oppressive or lacking in good faith, there must be sufficient evidence to show that the circumstances or conduct are of such a degree that pricks the conscience of a reasonable and sensible man.

On the facts as found, I hold that the Defendant’s conduct in issuing an unsubstantiated and evolving demand, in close temporal proximity to the Plaintiff’s CIPAA proceedings, in failing to adhere to the contractual default mechanism, and the making of a call on the Bank Guarantee by a 3rd party and/or in directing payment to a 3rd party not entitled under the Bank Guarantee, cumulatively or individually amounts to unconscionable conduct.

Taken individually or cumulatively, the Defendant’s acts and omissions are of such a degree as to prick the conscience of a reasonable and sensible person.

Accordingly, prayer 1 of Enclosure 1 was allowed. The Plaintiff is to ensure that the Bank Guarantee remains valid pending the disposal and final determination of the arbitration proceedings between parties. Costs of RM7,500.00 was awarded to the Plaintiff (subject to allocator). Dated : 19th January 2026 t.t ………………………………………… Shahriza Zalina Binti Abdul Shukor Judicial Commissioner Mahkamah Tinggi Malaya Shah Alam For the Plaintiff : Naveen a/l Sri Kantha Leong Chee Weng & Lim Suat Yee (Messrs. Lee & Poh Partnership) For the Defendant : Faisal Moideen Razeena Rahumat & Shaagita Rajenthiran (Messrs. Moideen & Max)