Bella Builders Sdn Bhd v 1. Kerajaan Malaysia; 2. Malayan Banking Berhad (WA-24C(ARB)-44-12/2016)

1.

MALAYAN BANKING BERHAD ... DEFENDANTS (COMPANY NO: 3813-K) THE JUDGMENT OF YA LEE SWEE SENG [1] The First Defendant ("D1") had employed the Plaintiff as the Design and Build Contractor for the project known as “Projek Pembinaan Infrastruktur Bagi Pesawat Helikopter Di Pangkalan Udara TUDM: Pakej 1 – Pangkalan Udara TUDM Kuantan (Reka Dan Bina)” ("the Works”) that was based at TUDM, Kuantan, Pahang for the original contract sum of RM108,888,999.00. [2] The terms binding on the Plaintiff and D1 are contained in the Letter of Award (Ref: (48) JKR: UB(S)123/PUB/159 Jld 2) and the contract agreement (Ref: JKR/IP/CKUB/149/2011) dated 11.10.2011 (“the Contract”). As part of the terms of the Contract the Plaintiff was required to procure a Performance Bond in favour of D1 which the 3 Plaintiff duly complied in furnishing the Performance Bond (Ref: 99010BGP 5851031) dated 02.12.2011 from the Second Defendant ("D2") which is Malayan Banking Berhad in favour of D1. [3] The Performance Bond was in the sum equivalent to 5% of the contract sum i.e. RM5,444,449.95. [4] The Works were divided into 2 sections:

section (i) which consisted of the following items “Hangar, Apron, Taxiways, Sekolah Sistem dan SAR Aircraft Shelter”. Section (i) had the sectional completion date of 11.03.2013; and

(ii) section (ii) which consisted of the remaining job scope under the Works. Section (ii) had the overall completion date of 14.08.2013. [5] Vacant possession of the site was given to the Plaintiff on 25.10.2011. [6] There were delays to the Works and the Plaintiff contended that these delays were caused and compounded by D1 through:

their refusal, failure or neglect to appropriately and timely consider the Plaintiff’s variation order(s) ("VO") applications; 4

(ii) their refusal, failure or neglect to appropriately and timely consider the Plaintiff’s extensions of time ("EOT") applications; and

(iii) following thereto, their unreasonable imposition of liquidated and ascertained damages ("LAD”) on the Plaintiff in the circumstances. [7] The Plaintiff contended that the termination of its employment under the Contract is unlawful and ultimately, D1’s call on the Performance Bond is similarly, unlawful. [8] The start of the problem, the Plaintiff argued, may be traced to D1’s refusal to recognise and approve the VO on the “expansion of the building spaces” for all buildings under the Works, which then led to the dismissal of the Plaintiff’s EOT applications. [9] For ease of reference, D2 shall be referred to as “Maybank” while the D1 shall be referred to as the Government of Malaysia where relevant. Prayers [10] The Plaintiff had filed this Originating Summons ("OS") under section 11(1)(h) of the Arbitration Act 2005 or under Order 69 rule 2 or 4 of the Rules of Court 2012. 5 [11] Section 11(1)(h) of the Arbitration Act 2005 provides that a party may, before or during arbitral proceedings, apply to a High Court for any interim measure and the High Court may make the following orders for an interim injunction or any other interim measure. [12] The Plaintiff filed the present OS seeking inter alia – a) an injunction to prevent D1 or their agents from calling or forfeiting the Performance Bond held with D2 till the disposal of the arbitration proceeding to determine the dispute regarding the termination of the project; b) an ad-interim injunction to prevent the D1 and their agents from calling or forfeiting the bond till the disposal of the present summon; and c) an ad-interim injunction to prevent D2 and their agents to make payment from Performance Bond. [13] The Plaintiff contended that D1 had wrongfully terminated the Plaintiff’s employment through a notice dated 08.12.2016, which the Plaintiff only received on 09.12.2016 at about 2:00pm. [14] In this notice, D1 also indicated that they will be calling on the Performance Bond. 6 Principles Whether the non-approval of the VO claim and the applications for EOT and the imposition of LAD by D1 made the conduct of D1 unconscionable in calling on the Performance Bond [15] The position of the law on restraining a call on a Performance Bond has been clarified and confirmed in the Federal Court case of Sumatec Engineering and Construction Sdn Bhd v Malaysian Refining Company Sdn Bhd [2012] 4 MLJ 1. It is now recognised that unconscionability is a ground for restraining a call on a Performance Bond. The Federal Court speaking through his Lordship Abdull Hamid Embong FCJ, endorsed the approach taken by the Court of Appeal as follows: “[17] The Court of Appeal used the following tests and principles in coming to its conclusion, in determining the issue at hand as found in the following passages from its judgment:

The principle concerning ‘unconscionability’ was initially propounded by Lord Denning in the case of Lloyds Bank v Bundy [1975] QB 326 where it was held that unconscionable transaction between parties may be set aside by the court of equity. This ‘unconscionable’ category is said to extend to all cases where unfair advantage has been gained by an 7 unconscientious use of power by a stronger party against a weaker (see also Halsbury’s Law of England, (3rd Ed), Vol 17 [1956] at p 682).

(ii) On an application for relief against unconscionable conduct, the court looks to the conduct of the party attempting to enforce, or retain benefit of, a dealing with a person under a special disability in circumstances where it is not consistent with equity or good conscience that he should do so (see Commercial Bank of Australia Ltd v Amadio and Another [1983] 46 ALR 402).

(iii) In the Singapore High Court, Lai Kew Chai J in the case of Min Thai Holdings Pte Ltd v Suniable Pte Ltd & Anor [1999] 2 SLR 368 opined that ‘the concept of unconscionability involves unfairness, as distinct from dishonesty or fraud, or conduct so reprehensible or lacking in good faith that a court of conscience would either restrain the party or refuse to assist the party’.

(iv) It is not possible to define ‘unconscionability’ other that to give some very broad indications such as lack of bona fides. What kind of situation would constitute ‘unconscionability’ would have to depend on the facts of each case. This is a question which the court has to 8 consider on each occasion where its jurisdiction is invoked. There is no pre-determined categorization (see Dauphin Offshore Engineering and Trading Pte Ltd v The Private Office of HRH Sheikh Sultan bin Khadifa bin Zayed Al-Nahyan [2000] 1 SLR (R) 117; and Shanghai Electric Group Co Ltd v PT Merak Energi Indonesia [2010] 2 SLR 329)

Based on the above considerations, we are of the view that there is no simple formula that would enable the court to ascertain whether a party had acted unconscionably in making a call on an on-demand performance bond or bank guarantee. In the final analysis, whether or not ‘unconscionability’ has been made out is largely dependent on the facts or each case. In every case where ‘unconscionability’ is made out, there would always be an element of unfairness or some form of conduct which appears to be performed in bad faith.

(vi) In Bocotra Construction Pte Ltd v AG [1995] 2 SLR (R) 262, the Singapore Court of Appeal, stated that ‘a higher degree of strictness applies, as the applicant will be required to establish a clear case of fraud or unconscionability in the interlocutory proceedings. It is clear that mere allegations are insufficient’.” (emphasis added) 9 [16] In restraining a beneficiary from calling on a bond, the Court of Appeal in Kejuruteraan Bintai Kindenko Sdn Bhd v Nam Fatt Construction Sdn Bhd [2011] 7 CLJ 442 held that the provisions of the underlying contract between the beneficiary and the applicant would be relevant to justifying a restrain on the call on the bond by the Defendant beneficiary: “[70] In dealing with an application for injunctive relief (as in the present case) the court must, first of all, differentiate or distinguish whether it is to restrain the beneficiary from making a call or demand on the performance bond; or to restrain the bank/issuer from making payment out of the performance bond to the beneficiary. If it is for the earlier one, the provisions of the underlying contract between the parties must be considered and cannot be disregarded...” (emphasis added) [17] With respect to the threshold test of a seriously arguable case, the Federal Court in Sumatec Engineering (supra) explained as follows: “[39] We are of the considered view that the 'seriously arguable and realistic inference' test as used by the learned judicial commissioner in Focal Asia is equally applicable to the extended exception of unconscionability. That test therefore needs to be applied to the relevant material facts before the court. The same 10 test which results in a ‘strong prima facie case’ was utilized by the Court of Appeal at the intermediate appeal stage. And the Court of Appeal said this of the required burden now rested on the shoulder of Sumatec: 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 11 conscience of a reasonable and sensible man.” (emphasis added) [18] What is the test to be applied with respect to showing an unconscionable conduct on the part of the beneficiary of the bond? The Court of Appeal case in Kejuruteraan Bintai Kindenko Sdn Bhd v Nam Fatt Construction Sdn Bhd [2011] 7 CLJ 442 explained the test as follows as summarised in the headnotes: “(6) In order to rely on the ground of ‘unconscionable conduct’ to restrain an abusive call on a performance bond the plaintiff must show manifest or strong evidence of some degree of the conduct complained of; not a bare statement. The evidence need not necessarily be beyond reasonable doubt. The circumstances or conduct must be of such degree as to prick the conscience of a reasonable and sensible man.” (emphasis added) [19] Therefore the test to be applied may be summarised as follows:

The applicant must be able to satisfy the court that he has a “seriously arguable case that the only realistic inference is that unconscionability has been made out";

The applicant has to place manifest or strong prima facie case of the alleged unconscionable conduct and not a bare assertion. [20] As for the meaning of “unconscionability”, the Court of Appeal in Kejuruteraan Bintai Kindenko Sdn Bhd (supra) broadly indicated that unconscionability is tantamount to actions that lack bona fides where there are an element of unfairness or some form of conduct which appears to be performed in bad faith as follows: “[47] It is not possible to define “unconscionability” other than to give some very broad indications such as lack of bona fides. What kind of situation would constitute “unconscionable conduct” would have to depend on the facts of each case. This is a question which the court has to consider on each occasion where its jurisdiction is invoked. There is no pre-determined categorization (see: Dauphin Offshore Engineering and Trading Pte. Ltd. v. The Private Office of HRH Sheikh Sultan bin Khalifa bin Zayed Al-Nahyan [2000] 1 SLR (R) 117; and Shanghai Electric Group Co Ltd v. PT Merak Energi Indonesia & Anor [2010] 2 SLR 329). [48] Based on the above considerations, we are of the view that there is no simple formula that would enable a court to ascertain whether a party had acted unconscionably in making a call or demand on an “on demand” performance bond. In the final 13 analysis, whether or not “unconscionability” has been made out is largely dependent on the facts of each case. In every case where “unconscionability” is made out, there would always be an element of unfairness or some form of conduct which appears to be performed in bad faith.” (emphasis added) [21] Having set out the position of the law, I shall now consider if the conduct of D1 in the circumstances of the case may be said to be unconscionable to justify the injunction prayed for. [22] The Plaintiff argued that D1 themselves had stated in Exhibit MZ-8 inter alia that: “1.2 Beliau (Tuan Pengerusi – En. Mat Rosly Mat Daud [Ketua Pen. Pengarah Kanan, CPUM]) juga memaklumkan bahawa jika terdapat sebarang penambahan ‘floor area’ lanjutan daripada SOA yang telah ditetapkan maka pihak Kontraktor adalah layak untuk menuntut ‘variation order’ (VO). Jika rekabentuk yang dikeluarkan oleh pihak Kontraktor kurang daripada yang telah disyorkan di dalam dokumen brief project, maka ‘v.o omittion diisu bagi pengurangan kerja berkenaan.” (emphasis added) 14 [23] On 02.11.2012, the Plaintiff issued the notice that they will be submitting a claim on the expansion of building office space and that the notice there was based on an estimation only. The Plaintiff further argued that it was unconscionable for D1 to reject the VO only on 10.01.2014. [24] That is not quite correct. As pointed out by D1, they had issued a letter dated 03.01.2013 requesting the Plaintiff to submit further supporting documents for the said VO claim. The Plaintiff replied on 26.02.2013. Thereafter D1 had their meetings with respect to the VO claims on 06.06.2013 and 11.06.2013. On 16.12.2013 the Plaintiff resubmitted their VO claims and D1 asked for additional documents on 23.12.2013. D1 stated that it was after a few requests for supporting documents to no avail that they rejected the Plaintiff's VO on 16.01.2014. [25] Briefly, D1 had given the following reasons for rejecting the VO as stated: “2. Merujuk sesi mesyuarat tersebut, ahli mesyuarat bersetuju menolak permohonan tuan bagi perkara di atas untuk kerja tambahan pembesaran ruang-ruang bangunan seperti berikut: 15 a. Sekolah Sistem b. Stor Matra c. Komplek Bomba d. Markas Pangkalan Udara e. Wisma Bintara f. Wisma Perwira g. Wisma Ahli Udara 3. Pejabat ini menolak permohonan tuan bagi perkara di atas, kerana tiada bukti yang jelas dan nyata yang menyatakan terdapat arahan perubahan kerja diberikan.” (emphasis added) [26] I do not see the above reasons given for rejecting the VO as being contradictory to D1's earlier assurance or statement that the Plaintiff would be entitled to claim for additional floor space. Surely it must be additional floor space as instructed in writing by D1 or at least there must be some minutes of meetings referring to such an instruction. [27] In D1's letter of 03.01.2013 in Exhibit LSF 2, D1 had asked for letter of instruction/ minutes of meetings from TUDM stating the need for the additional floor/room space. They had also asked for breakdown cost/BQ for the each additional item as well as the submission of pre-bid 16 drawings and construction drawings that had been approved to show clearly the locations for the additional floor space. [28] D1's stand was that there was no instruction for VO for the expansion of the building office space and the only expansion of office space was for the hangar which was approved on 31.03.2014 (APK 6). [29] At any rate this is a contractual dispute that would have to proceed to arbitration. Such a dispute is not uncommon in the construction industry with respect to whether a VO was approved especially when there were no supporting documents that instructions had come in writing from D1. It cannot be elevated to an unconscionable conduct. [30] I therefore can see the logic of D1's reply on the application for the corresponding EOT which the Plaintiff took umbrage with as follows: “2. Lanjutan daripada keputusan Mesyuarat Membincangkan Pertambahan Kerja dan Lanjutan Masa No. 2 (Bahagian ii) & No. 3 (Bahagian ii) bertarikh 01 April 2014 yang telah diadakan di bilik mesyuarat utama CPUM, permohonan tuan bagi lanjutan masa No. 2 (Bahagian ii) dan No. 3 (Bahagian ii) masih belum dapat dipertimbangkan kerana asas permohonan berkaitan “isu pertambahan ruang 17 bangunan masih belum diluluskan sebagai pertambahan kerja”. (emphasis added) [31] The Plaintiff said that D1 was still undecided on the application of EOT arising out of the VO claim when in reality what D1 was saying was that the EOT application could not be considered as the "issue of additional building space has not been approved as additional works”. There is thus no basis for stating that D1’s rejection of the Plaintiff’s VO claim through their letter dated 16.01.2014 had been premature. [32] D1 took the stand that since no VO was approved for the expansion of the building office space other than the hangar office, there was no need for any EOT to be given except for the expansion of the hangar office for which an EOT of 71 days for EOT Number 1 was given for section (i). [33] As for EOT Number 3 even though the Plaintiff only applied for 90 days, D1 had more than fairly and justly given 173 days to the Plaintiff for EOT Number 3 section (i). [34] As for section (ii) of the Project, D1 approved 170 days for EOT

D1 contended that they had more than acted fairly, justly and in good faith and it is the Plaintiff who had failed to complete the Works even after 3 EOTs had been given. 18 [35] A Certificate of Non-Completion was issued in January 2014 and it was only after its issuance that LAD was imposed. The amount of LAD was:

for section (i); RM11,388.00 per day; and

(ii) for section (ii); RM8,648.00 per day. [36] This makes it approximately RM601,080.00 per month. [37] According to the Plaintiff the net effect of the above was severely detrimental on them because then for the Plaintiff to obtain any net positive amount from D1 (through the progress claims), the value of the Plaintiff’s progressive claims per month had to exceed RM601,080.00. [38] According to D1, they continued to make payment to the Plaintiff for work done and the Plaintiff only ceased to receive payment for work done after December 2014 after the value of work done was less than the LAD as can be seen in the contract ledger exhibited as Exhibit LSF

[39] The Plaintiff argued that D1 had started to impose LAD since January 2014 and that it is unconscionable for D1 to do so and to now call upon the Performance Bond as on 12.10.2016 (some 2 years and 9 months later since rejecting the VO for expansion of office space on 19 10.04.2014), they had approved the VO albeit with a significantly lesser sum. [40] However D1's approval of the VO claim on 12.10.2016 was not under additional works but under a streamlining of contract price or in its original language "satu Pelarasan Harga Kontrak (PHK)" and not under a VO. As it was not a VO there was no justification for an EOT by D1. [41] The Plaintiff's unhappiness with the amount allowed of RM3,409,778.16 is a contractual dispute that has to be sorted out at arbitration. There is nothing unconscionable on a dispute of this nature. However the Plaintiff said that D1 has contradicted themselves because in the other “pelarasan harga kontrak”, they had granted the appropriate EOT. For example, when the change from the “intermediate column” in the hangar design to the “free column” (ie. PHK 2), an EOT of 173 days was granted. A closer look at the reasons given for the EOT was that there was a change of design of the hangar from "intermediate column" to "column free" design as can be seen in Exhibit LSF

[42] The Plaintiff also stated in their affidavit that there were various VOs that had not been approved under the Contract. Again this is issue under the Contract which ought to be determined in the arbitration. As a matter of fact D1 had approved and paid 6 VOs under the said Project. 20 [43] D1 had granted 3 EOTs for section (i) of the Project and an extension for time for section (ii) of the Project. The new completion date for section (i) was 22.05.2014 and section (ii) on 31.01.2014. Since the Plaintiff had failed to complete the Project on the completion date, D1 had imposed LAD of RM11,388.00 a day for section (i) and section (ii) a sum of RM8,648.00 a day in accordance with the terms of the Contract. There is no evidence adduced to show a prima facie case of unconscionable conduct on the part of D1. [44] The calculation of the LAD as at 11.10.2016 appearing at Exhibit LSF 7 is as follows: LAD section (i) @ RM11,388.00 X 873 days = RM 9,941,724.00 LAD section (ii) @ RM 8,648.00 X 984 days = RM 8,509,632.00 RM18,451,356.00 [45] Even assuming that the Plaintiff is entitled to the 365 days asked for in the EOT application, the Plaintiff could only deduct RM3,156,520.00 calculated as follows: (RM8,648.00 X 365 days) and leaving still a balance sum due of RM15,294,836.00 to D1 for the rest of the LAD. [46] D1 had highlighted that they cannot be blamed for the Plaintiff's failure to complete the Works. Indeed the Plaintiff had received as at

12.2014 the sum of RM103,454,900.00 for works done throughout the contract period out of the original contract sum of RM108,888,999.00. See a summary of the claims and payments in Exhibit LSF 7. [47] It cannot be seriously denied that the Plaintiff's works on the Project had come to a standstill since May 2015. See the report at Exhibit LSF 8. At that time the Plaintiff had completed up to 97% for section (i) and 93.09% for section (ii) of the Project. There was thus no further progress on the Works till the date of termination on 08.12.2016. [48] D1 had issued the Notice for the Purpose of termination on 17.11.2016 directing the Plaintiff to complete work within 14 days. However the Plaintiff failed to complete the work within that duration. As a consequence, D1 had issued the termination notice on 08.12.2016. The ground for the termination is the Plaintiff had failed to carry out work regularly and diligently. [49] Whether or not such a termination is lawful or unlawful is to be thrashed out in the arbitration. Surely D1 cannot be expected to wait forever for the completion of the balance 3% for section (i) and the balance 6.91% for section (ii) of the Works. I cannot see how the termination of the Contract for failure to proceed regularly and diligently 22 with the Works can be said to be unconscionable after the complete standstill in the Works from May 2015 till termination on 08.12.2016. [50] I am satisfied that Clause 10.4 of the Contract clearly provides that D1 is entitled to call the Bond when the Plaintiff fails to carry out their obligation under the Contract. Clause 10.7 of the Contract also allows D1 to forfeit the Bond in the event the Contract is terminated due to failure of the Plaintiff to carry out works regularly and diligently as specified under the Contract. [51] Like most terminations of construction contracts, there will be the ensuing arbitration or litigation. Invariably in a construction dispute arising out of termination of the contract, a claim is often met with a counterclaim. There is the all too familiar tune being played of one party contending the termination is lawful and the other claiming that it is not. [52] However, in the absence of unconscionable conduct on the part of the beneficiary of the Bond, this Court would not restrain such a call for to do so would denude a Performance Bond of its efficaciousness and the raison d'être of insisting on the Performance Bond as part of the terms of the Contract to begin with and more so when, as here, D1 had to make an advance of RM10 million for the commencement of the Works. 23 [53] It would be apposite to refer to a summary of the law with respect to restraining a call on a bond as distilled by Judge Thornton QC in the UK TCC in TTI Team Telecom International Ltd and Another v Hutchinson 3G UK Ltd [2003] 1 All ER (Comm) 914, at p. 930-931 as follows: "[46] In the light of these authorities, the law may be summarised in this way.

A third party seeking to restrain a beneficiary from calling a bond must initially show that such an application is supporting an underlying entitlement or claim based on a breach by the beneficiary of the underlying contract or on some other cause of action or basis for injunctive relief such as fraud, restitution or a breach of faith.

When a third party seeks to restrain a beneficiary from calling a bond, or from receiving the product of a call, the court's starting point is that a call will ordinarily only be restrained where there has been fraud in setting up or calling the bond or where there is a lack of a breach of faith by the beneficiary in threatening a call.

The basis for a contention of a breach of faith must be established by clear evidence even for the purposes of 24 interim relief. A breach of faith can arise in such situations as: a failure by the beneficiary to provide an essential element of the underlying contract on which the bond depends; a misuse by the beneficiary of the guarantee by failing to act in accordance with the purpose for which it was given; a total failure of consideration in the underlying contract; a threatened call by the beneficiary for an unconscionable ulterior motive; or a lack of an honest or bona fide belief by the beneficiary that the circumstances, such as poor performance, against which a performance bond had been provided, actually exist.

In addition, where it appears that the call would be a nullity, a court will intervene to restrain that invalid call. Examples are where a condition precedent to a call has not yet been fulfilled; where the bond is a 'see to it' bond necessitating prior proof of loss by the beneficiary or poor performance by the third party which has not yet been established; or where the demand or the supporting documents show that the demand does not conform to the requirements imposed by the bond for a valid demand.

Otherwise, a threatened call will not be restrained. In particular an allegedly incorrect calling of a performance bond will not be restrained merely because the factual basis of the call 25 arising out of the underlying contract is disputed. Thus disputes as to whether a breach of contract, a determination of a contract for cause, a repudiation of a contract or the incurring of loss have occurred, where these are events covered by the performance guarantee, will not be allowed to found an application to restrain a call unless these disputes reveal a breach of faith by the beneficiary. Any consequent payment under the bond to the beneficiary which over-compensates the beneficiary may be recouped in the 'accounting' exercise that the third party may claim in subsequent litigation against the beneficiary under the underlying contract.

If interim relief is being sought, a court will not intervene unless a third party has a real prospect of succeeding in both the entitlement to restrain the call and in its underlying claim which ought to be tried out before a call is made. This conforms to the overriding objective of proportionality required by the CPR.

Where these principles point to the grant of interim injunctive relief, it will also be necessary to consider and apply the balance of convenience." (emphasis added) 26 [54] The Performance Bond will be expiring on 31.08.2017 and D1 had called for the Bond on 13.12.2016. The call on the on-demand Performance Bond on account of the failure of the Plaintiff to complete the Works cannot be unconscionable in the circumstances of the case. Whether the Balance of Convenience lies in favour of the Government in the circumstances of the case [55] This is a case where the balance of convenience would lie in favour of D1. In the event that the Plaintiff should be proved right at the arbitration, there is no issue of the Government of Malaysia as D1 to pay damages to the Plaintiff. Conversely in the event that the Plaintiff is proved wrong, the Project which may be presumed to be a Project in the interest of the nation, would have been delayed further as the Government would have to seek further allocation to complete the Project if the Performance Bond could not be forfeited. [56] Indeed the Project is for the construction for a military helicopter infrastructure in TUDM, Kuantan. Learned SFC submitted that this project has the national interest of enhancing the country’s security. This is a case where the Government had paid almost RM100 million for the Project. The balance work that needs to be done is estimated about RM13.1 million. Therefore the sum of RM5,444,449.95 from the Performance Bond will go towards the completion of the Project. 27 [57] As the Plaintiff did not proceed with any further works from May 2015 to date of termination of the Contract in December 2016, one can surmise, as it is admitted by the Plaintiff itself, that they had cash flow problem arising by what they said is the unjustifiable dismissal of their VO claim and an imposition of a LAD claim on them. If the Government of Malaysia should succeed at the end of the day in the arbitration, there is no certainty that they would be able to recover from the Plaintiff the damages arising out of the LAD and the additional costs incurred in completing the unfinished Works. The LAD already amounted to RM 18,451,356.00 not counting the amount advanced of RM10,000.000.00. [58] In Transfield Projects (M) Sdn Bhd & Anor v Malaysian Airlines Systems Bhd [2000] 7 MLJ 583, it was summarized in the headnotes at p. 583 as follows: “(3) The court do not think an injunction should be granted to restrain the defendant, who now has the proceeds of the performance bond, to set it aside in an account on trust pending arbitration. There is no existence of any obligation on the part of the defendant to do so. To grant such an injunction as prayed for would allow a departure from the contract to which the parties have committed themselves. There is clearly no subsisting obligation on the defendant who has already received the monies 28 as the result of the call made on the performance bond to set it aside and not to appropriate it. Clause 37(c) provides the defendant or the superintending officer on its behalf may utilize and make payments out of or deductions from the said performance bond, i.e. they may have recourse thereto for payments. The court is now asked to grant an injunction when there is clearly no obligation imposed on the defendant anywhere in the contract to set the proceeds as a separate trust fund to be kept until the outcome of the arbitration (see pp 596H-I, 597A-B)” [59] I agree with the learned SFC that D1's officer in demanding for the Performance Bond under the contract is only performing their public duty as provided under the terms of the Contract. Furthermore the money for the Project is from the public coffer. Such money should be returned to the Government to enable the Government to complete the Project and to perform other duties. [60] I would follow the approach taken by learned brother George Varghese JC (later JCA) in Tidalmarine Engineering Sdn Bhd v Kerajaan Malaysia (Jabatan Kerja Raya Malaysia Cawangan Terengganu) [2011] 2 MLJ 400 at 401 where it is summarized in the headnotes as follows: 29 “[2] On the totality of evidence, a case on ‘unconscionability’ in respect of the demand issued by the defendant or of the conduct of the defendant had not been made out for the court to make any restraining order as applied for by the plaintiff. Whether the termination by the defendant was proper or wrongful was for another forum to determine. There was nothing to indicate ‘unconscionability’ on the part of the defendant in taking the contractual action they were entitled to as was done here (see paras 27 & 29(b).

While there may be a case to allow interlocutory injunctions against the government in appropriate cases, it should be restricted to only where it is obvious and clear that the government’s discharge of public duties are not interfered with in any way. A restraining order as applied for here, if issued, will interfere with the ‘public duty’ or ‘public element’ of the defendant’s role and obligations on the road project (see paras 36-37). [61] I would further endorse the sentiments expressed at p. 412, that balance of convenience is to be interpreted more widely in cases where "public duty" of the Government and "public element" of the project is concerned as observed by Justice George Varghese as follows: 30 "[32] The decisions of the Supreme Court in Lim Kit Siang v United Engineers (M) Bhd & Ors [1987] 2 CLJ 195 and the recent judgment of the Court of Appeal in Superintendent of Lands and Surveys, Kuching Division & Ors v Kuching Waterfront Development Sdn Bhd [2009] 5 MLJ 607; [2009] 6 CLJ 751 are cited as authority for the position in law that the courts discretion to grant injunctions are limited statutorily and do not extend to granting injunctions against the government, regardless of whether the injunction sought is interim/interlocutory or permanent. [33] On the other hand, the decision of our Court of Appeal in Sabil Mulia (M) Sdn Bhd v Pengarah Hospital Tengku Ampuan Rahimah & Ors [2005] 3 MLJ 325; [2005] 2 CLJ 122 and the dicta found in the judgments of the Court of Appeal in Kekatong Sdn Bhd v Danaharta Urus Sdn Bhd [2003] 3 MLJ 1; [2003] 3 CLJ 378 and of the High Court in Tengku Haji Jaafar & Anor v Government of the State of Pahang [1978] 2 MLJ 105 are relied on to argue that s 29 of the Government Proceedings Act 1956 does not prohibit the grant of a temporary or interlocutory injunction against the government. [34] The plaintiff's arguments in this instant case was to the effect that a temporary injunction or interlocutory injunction should lie 31 against the government and in any case, that the subject matter in question in this case was not to interfere with the public duties of any department or of the government. Counsel for the plaintiff's argued that the contract in this case was akin to a 'private contract' and was not caught by the limitation in s 54 of the Specific Relief Act 1950 as it did not involve a 'public duty'. [35] The learned SFC’s submission, on the other hand, was that the road works project was for the benefit of the rakyat. The money secured by the bonds were to go towards the costs of completing the project now necessitated by the appointment of another contractor. In any case, the monies guaranteed by the advance payment bond was the refund of the balance of monies already advanced by the defendant to the plaintiff at the commencement of the contract. The element of ‘pubic duty’ was therefore, it was argued – clearly discernable here as the beneficiaries of the road project was the general public. The learned SFC for the defendant also laid stress on the decision of the English Court of Appeal in Smith and others v Inner London Education Authority [1978] 1 All ER 411 that in any event where the defendant is a public authority performing duties to the public, one must look at the balance of convenience more widely and take into account 32 the interest of the public in general to whom the duties are owed. [36] While there may be a case to allow interlocutory injunctions against the government in appropriate cases on the rationale forcefully stated in Sabil Mulia, Kekatong and Tengku Haji Jaafar's cases, I am inclined to restrict it to only where it is obvious and clear that the government's discharge of public duties are not interfered with in any way. [37] After giving due consideration to the arguments of the respective counsel whether or not a ‘public duty’ would be interfered with or not in this case I take the position and accordingly hold that a restraining order as applied for here, if issued, will interfere with the ‘public duty’ or ‘public element’ of the defendant’s role and obligations on the road project. [38] My conclusion therefore is that on all counts, the plaintiff failed in this application. I therefore dismissed encl 3 with costs and dissolved the ad interim order issued by me on 31 May 2010.” (emphasis added) [62] I agree with the learned SFC that public interest is always a relevant consideration in the granting of specific relief. If the Government 33 is prevented from calling of the Performance Bond and have to wait till the completion of the arbitration proceedings, the Bond would have expired. When the bond has expired, D1 would be prevented from demanding the sum secured by the said Bond. [63] The public interest element here would lean heavily in favour of the Government. [64] Besides this is a matter where damages would be more than an adequate remedy considering that it is the Government of Malaysia in D1 that has to make the payment out to the Plaintiff in the event that the call is held to have been unlawfully made. [65] In Ganad Media Sdn Bhd v Dato’ Bandar Kuala Lumpur (No 2) [2002] 6 CLJ 6, Abdul Malik Ishak J (later JCA) decided at p. 31 as follows: “Once damages are the proper remedy, an injunction will not be issued. In this connection, the following germane passages appearing in Saw Seng Kee’s case (supra – particularly at p. 81 to p. 82) are certainly useful to remember: This brings me to the next ground on which I dismissed their applications. ‘The very first principle of law,’ said Lindley L.J. 34 in London Blackwall Railway Co. Cross [1886] 31 Ch. D. 354, 369: ... is that prima facie you do not obtain an injunction to restrain actionable rights in which damages are the proper remedy. In the Cyanamid case, Lord Diplock made the same point at p. 408 B & C in the following terms: [T]he court should first consider whether, if the plaintiff were to succeed at the trial in establishing its right to a permanent injunction, he would be adequately compensated by an award of damages for the loss he would have sustained as a result of the defendants continuing to do what was sought to be enjoined between the time of the application and the time of the trial. If damages ... would be adequate remedy and the defendant would be in a financial position to pay them, no interlocutory injunction should normally be granted, however strong the plaintiff’s claim appeared to be at that stage. 35 In these circumstances, as I had no doubt as to adequacy of the plaintiffs’ remedy lying in damages should they succeed in their claims at the final hearing, there was no need for me to consider the further question of the balance of convenience (see the Cyanamid case at p. 408). But, had it been necessary to do so, then I was satisfied that the balance of convenience favoured the Urban Development Authority rather than the plaintiffs. [66] Further at p. 32 of the Ganad Media's case (supra): "Lord Diplock in the American Cyanamid case (supra) said at p. 511 that: ... where there is doubt as to the adequacy of the respective remedies in damages available to either party or to both, that the question of balance of convenience arises. To determine the balance of convenience or the “balance of justice” as was said by Sir John Donaldson MR in Francome v Mirror Group Newspapers Ltd [1984] 2 All ER 408 at p. 413g, one must examine all the relevant facts and give appropriate weight to it accordingly. The facts would certainly vary from case to case. 36 In the present case, the balance of convenience weighed heavily in favour of the defendant who was merely performing a duty under the statute. It was indeed a statutory duty ...” (emphasis added) Pronouncement [67] For all the reasons given above I had dismissed the application against both D1 and D2 with costs of RM5,000.00 for D1 as suggested by the SFC and as for D2 the costs of RM2,000.00. [68] The Plaintiff learned counsel had asked for a temporary stay pending their application for an Erinford injunction. D1 objected to the said application for a temporary stay. [69] I had granted a temporary stay until the disposal of the Erinford injunction provided that the notice of appeal and the application is filed within 1 week from date of the decision i.e. until 14.02.2017. Dated: 19 May 2017. LEE SWEE SENG Judge Construction Court High Court Kuala Lumpur 37 For the Plaintiff : James Ding (Messrs SS Ng & Lim) For the 1st Defendant : Ahmad Hanir (Senior Federal Counsel– AG’s Chambers) For the 2nd Defendant : Dazz Narayanan and Al Muazzim (Messrs Azam Lim & Pang) Date of Decision : 7 February 2017 [subject to minor editorial corrections and amendments]