Daya CMT Sdn Bhd v Yuk Tung Construction Sdn Bhd (22C-61-12/2015)

The dispute here between a main contractor and its principal subcontractor has a familiar story line. The subcontractor as Plaintiff here, had been engaged by the main contractor, the Defendant here, with respect to the construction of a mixed development of 3 blocks of 28-storey buildings ("the Project"). The Defendant itself is being employed by the landowner/developer as the Main Contractor for all the works under the Project for RM270 million ("Principal Subcontract Works"). The contract 2 documents for the Principal Subcontract Works ("Principal Subcontract") between the Plaintiff as Principal Subcontractor and the Defendant as Main Contractor, consisted of a Letter of Award dated 2 May 2012 and the PWD 203 (Rev 10/83) together with amendments in Attachment A to the Letter of Award ("the Conditions of Contract"). The appendix to the Conditions of Principal Subcontract is found in Attachment B.

It was a term of the Conditions of Contract that the Plaintiff do furnish a Bank Guarantee ("BG") in favour of the Defendant for RM13.5 million. It is common ground that the BG is an on-demand BG. By clause 37(c) of the Conditions of Contract, if the Plaintiff commits any breach of its obligations under the Conditions of Contract, the Defendant may utilize and make payments out of or deductions from the BG or any part thereof in accordance with the terms of the Conditions of Contract.

The completion date of the Project was 14 November 2014 ("Original Completion Date") under clause 39. This was extended by 43 days under clause 43 to 27 December 2014 ("Final Completion Date"). Problem [4] What happened was that there was substantial delay in the Project. As is not uncommon, each blamed the other for it! One thing was clear: by 3 October 2014 there was no way the Plaintiff could complete the Principal Subcontract Works by the Original Completion Date. Parties then entered into a Supplemental Agreement dated 28 October 2014 to allow for sectional completion. Originally the Project consisted of Block A of 526 units SOHO (22 storeys and 10 units shop offices); Block B of 365 units of service apartments (21 storeys); Block C (168 units of service apartments (21 storeys); including 7 1/2 storey podium car park and 2 storey basement car park. Under the sectional completion, completion of Block A was referred to as Section 1 and that of Block B and C as Section 2. The completion date of both Sections 1 and 2 remained as 14 November 2014. There was one exception though: the Liquidated and Ascertained Damages ("LAD") for Section 1 is RM30,000.00 per day and that of Section 2 is RM40,000.00 per day; down from RM70,000.00 per day under clause 40 of the Conditions of Contract.

A Certificate of Non-Completion ("CNC") was issued certifying that the Plaintiff had failed to complete the Principal Subcontract Works by the Final Completion Date. It was only on 22 November 2015 that the Plaintiff completed Section 1 which is Block A. 4

According to the Defendant there were slippages in the completion of the Principal Subcontract Works after the Revised Work Programme was given by the Plaintiff. There were work stoppages and strikes by the Plaintiff's subcontractors and workmen. The Defendant proceeded to give a Notice under clause 51 of the Conditions of Contract requiring the Plaintiff to remedy the defaults failing which the Defendant would terminate the Principal Subcontract. The work stoppages and strikes continued unabated and the site memo, dated 14 December 2015 exhibited by the Defendant in Exhibit D 25 in the Defendant's 1st Affidavit, set out the number of strikes and work stoppages. The Defendant terminated the Principal Subcontract by its Notice of Termination dated 22 December 2015 for the Plaintiff's failure to regularly and diligently proceed with the Principal Subcontract Works. The Notice of Termination is at Exhibit P 12 of the Plaintiff's 1st Affidavit. Prayer [7] Thereafter the Defendant proceeded to make a call on the BG by its letter dated 22 December 2015 issued to Alliance Bank Malaysia Bhd ("the Bank"). To bring the matter up-to-date, the Plaintiff filed a Writ and this application in Enclosure 3 on 23 December 2015. The Plaintiff moved the Court on a certificate of urgency filed and an ex-parte Injunction was given 5 the same day, to essentially restrain the Defendant from calling on the BG or from receiving the proceeds guaranteed under the BG of RM13.5 million or any part thereof pending the disposal of the suit or until further order of the Court.

The grounds are that the termination of the Principal Subcontract is unlawful and that the call on the BG was unconscionable in the circumstances of the case. The Plaintiff said the Defendant's unconscionable conduct consisted of the following:

The Defendant reneged on the parties agreement to allow the Plaintiff to complete the Principal Subcontract Works by end March 2016 and terminated the Principal Subcontract notwithstanding the Settlement;

The Defendant also failed, refused and/or neglected to properly assess the Plaintiff’s Variation Order Claims (“VO Claims”) as well as

In so doing, the Defendant also misled/enticed the Plaintiff to execute the Supplemental Agreement for the benefit of the Defendant and the Developer when it had no intention to honour its commitment thereunder to fairly re-assess the Plaintiff’s 3 EOT Applications; 6

To cap the atrocities, the Defendant by virtue of its superior position, also engineered the Plaintiff’s termination by interfering with the Plaintiff’s administration of the subcontracts between the Plaintiff and its subcontractors, resulting in various strikes that delayed the

The encashment and paying out of the BG proceeds will result in the Plaintiff receiving monies exceeding the alleged LAD. [9] The Plaintiff stressed that the aforesaid unconscionable conduct are not mere disputes over interpretation of the Conditions of Contract and/or the documents adduced and that far from it, the unconscionable conduct of the Defendant patently demonstrates the Defendant’s abuse of its dominant position against the Plaintiff culminating in a clear-cut oppression of the Plaintiff as its subcontractor. Principles [10] Lest we forget, this Court must state at the outset that the BG is an on-demand performance bond. This can be seen from the clear terms of the BG that the Bank is to pay: “...on the Beneficiary’s first demand in writing without proof or condition and notwithstanding any contestation or protest by the 7 Principal Subcontractor or by the Guarantor or by any other third party...” [11] Payment on the performance bond or BG is only dependent on the terms of the bond or guarantee and not on proof of default of the underlying contract. In Teknik Cekap Sdn Bhd v Public Bank Bhd [1995] 3 MLJ 449 at 454, the court stated as follows: “Having considered the submissions it is relevant to find out what therefore is a performance bond. As I see it there is nothing special or unique in a performance bond. It is in fact 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 the parties. A great deal, therefore, depends on the wording of the bond itself.” 8 [12] Be that as it may, the cases have stated that between the beneficiary and the party procuring the bond (the obligor) one is entitled to look at the underlying contract between them, to see if the beneficiary's conduct has been unconscionable in the circumstances surrounding the underlying contract between the parties. [13] That unconscionability has been regarded as a distinct ground to restrain a beneficiary from calling on a BG as separate from fraud, has been firmly established since the decision of the Apex Court in the case of Sumatec Engineering and Construction Sdn Bhd v Malaysian Refining Company Sdn Bhd [2012] 4 MLJ 1. The Federal Court speaking through his Lordship 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 9 cases where unfair advantage has been gained by an 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 than to give some very broad indications such as lack of bona fides. What kind of situation would constitute ‘unconscionability’ 10 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 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 11 establish a clear case of fraud or unconscionability in the interlocutory proceedings. It is clear that mere allegations are insufficient’.” (emphasis added) [14] In relation to restraining a beneficiary from calling the 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 BG 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) [15] With respect to the threshold test of a seriously arguable case, the Federal Court in Sumatec Engineering (supra) explained as follows: 12 “[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 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 13 (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.” (emphasis added) [16] 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) [17] Therefore the test to be applied may be summarised as follows: 14

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. [18] As for the definition or meaning of “unconscionability”, the Court of Appeal 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: “[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). 15 [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 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) [19] The Singapore Court of Appeal in BS Mount Sophia Pte Ltd v Join-Aim Pte Ltd [2012] SGCA 28 at paragraph [36] and [37] said “unconscionability” is a label applied to describe unsatisfactory conduct tainted by bad faith. A precise definition of the concept would not be useful because the value of unconscionability is that it can capture a wide range of conduct demonstrating a lack of bona fides. The Singapore Court of Appeal went on to elaborate that although unconscionability itself may not carry a precise definition what constitutes unconscionable conduct should be reasonably apparent, it is probably very difficult to negligently act in bad faith, if the call on the bond is motivated by improper purposes or such a call cannot be justified with clear evidence or in other situations where the 16 beneficiary is less than certain about his entitlement to call on the bond and the amount and unfairness is also an element to be taken into account. In paragraph [21] it spoke of the test as follows: “When determining if a strong prima facie case has been made out, the entire context of the case must be thoroughly considered, and it is only if the entire context of the case is particularly malodorous that such an injunction should be granted. We must emphasise that the courts’ discretion to grant such injunctions must be sparingly exercised and it should not be an easy thing for an applicant to establish a strong prima facie case.” (emphasis added) [20] In Raymond Construction Pte Ltd v Low Yang Tong and AGF Insurance (Singapore) Pte Ltd [1996] SGHC 136 Lai Kew Chai J at paragraph [5] said: “The concept of ‘unconscionability’ to me involves unfairness, as distinct from dishonesty or fraud or conduct of a kind so reprehensible or lacking in good faith that a court of conscience would either restrain the party or refuse to assist the party. Mere breaches of contract by the party in question ... would not by themselves be unconscionable. 17 [21] In Sumatec Engineering and Construction Sdn Bhd v Malaysian Refining Co Sdn Bhd [2012] 4 MLJ 1 at paragraph [41] it was observed that: “A determination on whether unconscionability applies in a particular case would therefore depends largely on the material facts....” [22] It goes without saying that whether or not unconscionability has been made out would depend on the particular and peculiar facts of each case taken as a whole and that its determination is very much fact-centric. The Court in Kejuruteraan Bintai Kindenko Sdn Bhd v Nam Fatt Construction Sdn Bhd [2011] 7 CLJ 442 at p 449 speaking through her Ladyship Zainun Ali JCA (now FCJ) expressed thus: “[4] ... unconscionability is a doctrine which allows the courts to deny enforceability of a contract because of abuses arising out of contract. [5] In my view the principle underlying the unconscionability doctrine is the prevention of oppression and unfair conduct and because the determination of unconscionability is fact specific, courts must consider such a claim on a case by case basis and assess the totality of the circumstances” 18 [23] This Court agrees with learned counsel for the Defendant, Mr William Leong, that mere breaches of the contract, without more, would not by themselves amount to unconscionability. He referred to the following cases: a. Mere breaches of contract is not unconscionability: Raymond Construction Pte Ltd v Low Yang Tong and AGF Insurance (Singapore) Pted Ltd [1996] SGHC 136, Sumatec’s case (supra); b. Alleged breaches of the underlying contract that the technical reports required to call on the performance guarantee was insufficient because it was made in a cursory manner and without using instruments is not unconscionability: Yorker Sdn Bhd v PY Mayora Indah [2014] 9 MLJ 591; c. Alleged breaches of the underlying contract to challenge the decisions of an arbitration tribunal disputed by the obligor is not unconscionability: Sato Kogyo (M) Sdn Bhd v Salini (M) Sdn Bhd [2014] 10 MLJ 614; d. Alleged breaches of contract between the contractor and subcontractor not involving the employer/obligor is not unconscionability: Cobrain Holdings Sdn Bhd v Expertise International A&I (M) Sdn Bhd [2015] 11 MLJ 339; 19 e. A beneficiary calling on the performance bond for breaches of the contract although disputed by the obligor is not unconscionability: El Traco International Pte Ltd v CGH Development Pte Ltd [2000] 4 SLR 290. [24] Mr William Leong stated as a proposition of law that it is unconscionable to call on the performance bond where the obligor was not in default of the contract but the beneficiary commenced a course of conduct which caused the obligor to default or the beneficiary participated or caused to forge or manipulate documents to call on the performance bond. He cited examples culled from the cases below as illustrating the said proposition of law: a. The beneficiary and or its consultants failed to work with the obligor unless they pay a bribe, upon the obligor refusing to pay the bribe and issuing a notice to terminate the contract, the beneficiary commenced a course of conduct which afforded the beneficiary an excuse to call on the performance bond: Bina Jaya Mantap Sdn Bhd v Institute of Technology Petronas Sdn Bhd [2014] 11 MLJ 352; 20 b. The obligor and the architect manipulated and certified certain documents to expose the obligor to LAD when he obligor was not so liable: BS Mount Sophia Pte Ltd v Join-Aim Pte Ltd [2012] SGCA 28; c. Where the obligor’s non-performance of the contract was induced by the beneficiary’s very own actions, where the non-performance was due to the beneficiary’s refusal to pay the interim payments: Royal Design Studio Pte v Chang Development [1992] 2 MLJ 229; d. Where the beneficiary had repeatedly obstructed the obligor from carrying on the works: Raymond Construction Pte Ltd v Low Yang Tong and AGF Insurance (Singapore) Pte Ltd [1996] SGHC 136; e. Where the beneficiary fails to fulfill his major obligation as stated in the contract such as to open a letter of credit: Kvaerner Singapore Pte Ltd v UDL Shipbuilding (Singapore) Pte Ltd [1993] 3 SLR 350; f. Where the beneficiary owes a substantial sum of money to the obligor and had issued bounced cheques yet called on the performance bond: Royal Design (supra) and Raymond Construction (supra); g. Where the beneficiary was aware that the obligor was entitled to the benefit of a force majeure clause for not-fulfilling its contractual 21 obligations due to severe floods but proceeded to call on the performance bond: Min Thai Holdings Pte Ltd v Sunlabel Pte Ltd [1999] 2 SLR 368; h. Where the beneficiary threatened to make a call on the performance bond unless the obligor paid the lower tier subcontractor which had a financial connection to the beneficiary but for which there is no contractual provision allowing the beneficiary to make such a direction: Bains Harding (Malaysia) Sdn Bhd v Arab-Malaysian Merchant Bank Bhd [1996] 1 MLJ 425. [25] Mr William Leong also distilled the following principle from his analysis of the cases: that where the amount of the performance bond called is excessive to the amount due to the beneficiary, the conduct of the beneficiary in calling on the bond may be unconscionable: a. The beneficiary called for the full amount when part of the works was not due, such part that was premature was unconscionable: El Traco’s case; b. The beneficiary called for the full amount of the performance bond when the contractual amount had been reduced by 65%: GHL Pte Ltd v Unitrak Building Construction Pte Ltd [1999] 3 SLR 604; 22 c. The obligor had completed 95% of the works and the amount called was more than the value of the remaining works and value for repairs: Nafas Abadi Holdings Sdn Bhd v Putrajaya Holdings Sdn Bhd [2004] 1 LNS 127; d. The beneficiary had called on the full amount of the performance bond a greater part of which had already been repaid: Olex Focas Pty v Skodaexport Co Ltd [1998] 3 VR 380 Supreme Court of Victoria. [26] Bearing in mind then the above test, this Court shall proceed to consider the various grounds raised by the Plaintiff/Applicant to ascertain if they meet the threshold test of a strong prima facie case of unconscionability. Whether the Defendant's termination of the Principal Subcontract before the revised completion of end March 2016 is unconscionable [27] It is apposite at this juncture to appraise ourselves of some of the key terms of the Conditions of Contract. By clause 39 the Completion Date is 14 November 2014 unless extended in accordance with clause 43. If the Plaintiff fails to complete the Principal Subcontract Works and the SO certifies by way of the Certificate of Non-Completion the Plaintiff shall pay 23 the defendant LAD at RM70,000.00 a day as stated in Clause 40. Clause 43 Deals with Extension of Time ("EOT"). It provides that upon it becoming reasonably apparent to the Plaintiff that progress of the Works is delayed the Plaintiff is to give notice of the causes of delay and if in the opinion of the SO that the delay is caused by any of the causes listed in sub-paragraphs (a) – (k) therein the SO shall grant a fair and reasonable extension of time for completion of the Principal Subcontract Works. [28] By clause 45 the Plaintiff is required to make good the defects within the Defects Liability Period at its cost and if the Plaintiff fails to do so the Defendant shall be entitled make good the defects and deduct the cost from the retention sum or from the Bank Guarantee. The Defendant is entitled under clause 50 to deduct any money owing by the Plaintiff from any sums payable to the Plaintiff. [29] There is also an amended Clause 51 on "Special Conditions" where by a new Clause 51(c)(iv)(a) has been added to provide that all progress payments payable after the notice of determination shall be suspended until receipt of the Final Contract Sum from the Employer or expiration of the Defects Liability Period (whichever is the later) under the Contract and thereafter until the costs of construction of completion of the Principal 24 Subcontract Works and making good defects thereto, damages for delay [including but not limited to liquidated damage incurred by the Contractor under the Contract] and all other costs, loss or expense incurred by the Contractor shall have been ascertained. [30] The Plaintiff took possession of the Site on 15 May 2012. The Original Completion was 14 November 2014 and the Final Completion Date is 27 December 2014. The Plaintiff pursuant to paragraph 7.1 of the Letter of Award submitted a Revised Master Construction Schedule on 27 September 2012 to complete the entire Project incorporating Blocks A, B and C within 900 days by 14 November 2014. The Architect by a letter dated 15 October 2012 accepted the Works Programme and agreed that pursuant to paragraph 7.1 of the Letter of Award, all parties shall follow the Works Programme. The Revised Master Construction Programme is Exhibit D-4 in the Defendant's 1st Affidavit page 33-76 and the Architect’s letter dated 15 October 2012 is Exhibit D-5 in the Defendant's 1st Affidavit page 77. [31] There is evidence that the Plaintiff was unable to carry out the works in accordance with the Works Programme. The Defendant submitted that delay occurred almost from the beginning and continued to deteriorate over 25 time. The Plaintiff failed to meet its Works Programme and had to revise it 4 times. The Defendant has produced a series of letters written by the Defendant, the consultants and the Plaintiff itself contemporaneously documenting the ever increasing accumulative delay. When it became apparent that the Project could not be completed by the Original Completion Date, the Defendant had to take stock of the situation and confront the consequences of what may follow. A delay in handing over vacant possession to the purchasers would result in the claims from purchasers against the landowner/developer with the cascading consequence of the landowner/developer claiming the same from the defendant as main contractor. [32] Parties entered into negotiations and executed a Supplemental Agreement on 28 October 2014 to address the problem of delay in completion. The salient terms of the Supplemental Agreement are reproduced below: SUPPLEMENTAL AGREEMENT THIS SUPPLEMENTAL AGREEMENT is made this 28th day of October 2014 ... 26 NOW IT IS HEREBY AGREED as follows:-

The Contractor has at the request of the Principal Subcontractor agreed to include within the Principal Subcontract completion of the Works in sections (“Sections”) within the meaning in Clause 41 of the Conditions of the Principal Subcontract with Block A and related works necessary for handover of units in Block A to purchasers being Section 1 and balance of the Principal Subcontract Works being Section 2. The sections are as set out as in Appendix A to this Supplemental Agreement.

The Dates for Completion of both Section 1 and Section 2 are as per the Date for Completion of the Principal Subcontract Works set out in the Letter of Award, i.e. 14 November 2014.

The Liquidated and Ascertained Damages for Section 1 shall be RM30,000.00 and for Section 2 shall be RM40,000.00 for each day the same remain incomplete.

The provisions of Clause 41 of the Condition of the Principal Subcontract and all other provisions express or implied relating to Sectional Completion shall apply to the completion of Section 1 and the completion of the Balance of the Works. 27

Save and except where expressly amended the Principal Subcontract shall continue to be in full force and effect. For the avoidance of doubt, the Principal Subcontractor’s entitlement to extension of time (if any) for the completion of the Principal Subcontract Works shall not be extinguished.

In no event shall any delay failure or omission on the part of either party in enforcing or pursuing any right, power, privilege, claim or remedy, which is conferred by this Contract or this Supplemental Agreement or any of the obligations, be deemed to be or construed as:-

a waiver thereof, or of any other such right power, privilege, claim or remedy in respect of the particular circumstances in question; or

operates so as to bar the enforcement or exercise thereof, or of any other such right, power, privilege, claim or remedy, in any other instance or at any time thereafter;

As this Supplemental Agreement is executed at the request of the Principal Subcontractor, the principle of contra proferentem shall not apply to the construction of this Supplemental Agreement. 28 [33] Instead of a single completion of all the 3 Blocks A, B and C, there is now substituted a sectional completion of Block A under Section 1 and Blocks B and C and the remainder works under Section 2. There was also the reduction of LAD of RM70,000.00 per day to RM 30,000.00 per day for Block A and RM40,000.00 per day for Blocks B and C. What is obvious is that the more onerous operation of the LAD of RM70,000.00 per day is now buffeted with a reduced LAD of RM30,000.00 for Block A with the hope that Block A might be completed soon. Once Block A is completed LAD would stop to run and the Plaintiff may then concentrate on Section 2 of the works and any delay would only attract the reduced LAD of RM40,000.00. It was a workable way forward considering the worrying state of affairs. [34] In the meanwhile the rights of both parties are reserved and preserved under the original Principal Subcontract and that was clearly spelt out in Clause 6 of the Supplemental Agreement. The Plaintiff would have to submit a fresh Works Programme. New target dates of completion were incorporated in the Plaintiff's 3rd and 4th Works Programmes. Block A was supposed to be completed by May 2015 but when the progress was agonizingly slow, the Defendant wrote to the Plaintiff on 6 May 2015, expressing its anxious concerns that Block A would not meet the target date of May 2015 or even June 2015 and likewise too Blocks B and C 29 targeted for completion by January 2016. The Defendant also reminded the Plaintiff that LAD to purchasers is mounting by each month's delay. See Exhibit D-17 at p 110 of Defendant's 1st Affidavit. [35] The Plaintiff again fell behind schedule and submitted a 4th Revised Works Programme to complete the Project by 31 March 2016 which the Defendant used for monitoring purposes. The Defendant also impressed upon the Plaintiff of serious concerns on the increasingly frequent occurrences of strikes and work stoppages. A list of the number of strikes was provided with instruction to catch up on the delay. See letter dated 14 September 2015 in Exhibit D - 18 at p 115 of Defendant's 1st Affidavit. [36] There were further delays on the 4th Revised Works Programme and the lamentable lack of progress such that realistically it would be nigh impossible to complete the Project even by end March 2016. Learned counsel for the Defendant submitted that the Defendant and the consultants had given numerous warnings that the Plaintiff will be liable to pay LAD for the delay and the Principal Subcontract will be terminated unless the Plaintiff put in additional working hours, personnel and equipment to catch up with the 4th Revised Works Programme but to no 30 avail. See one such letter from the Defendant to the Plaintiff dated 30 September 2015 in Exhibit D-9 at p 134 in the Defendant's 1st Affidavit. [37] By that letter, the Defendant informed the Plaintiff, it was under pressure to deliver the units to the purchasers and the Defendant cannot accept delay beyond 31 March 2016 as indicated in Plaintiff’s 4th Revised Works Programme. However, delay, strikes and stoppages continued. Therefore the Defendant issued a notice under Clause 51 on 3 December 2015 and terminated the Principal Subcontract on 22 December 2015 when the default was not remedied. A summary of the documentary evidence produced in Defendant’s 1st Affidavit Volume 1 is set out at paragraph 40 pages 25-27 of the Defendant's Main Submission. [38] A copy of the said Notice to Rectify Breach dated 3 December 2015 is reproduced in full below for an appreciation of the context of the termination: Yuk Tung Construction Sdn Bhd Our ref : YC/CR/DAYA/L/261 Date : 3 December 2015 Plot 81, Lebuhraya Kampung Jawa, 11900 Bayan Lepas, Penang. 31 Attn : Mr. Nathan Tham Jooi Loon / / Mr. William Tham Wooi Loon / Datuk T.S Lim Dear Sir, CADANGAN MENDIRIKAN PEMBANGUNAN BERCAMPUR 3 BLOK 28 TINGKAT YANG MENGANDUNGI: 1) BLOK A: 526 UNIT SOHO (22 TINGKAT) DAN 10 UNIT KEDAI PEJABAT, 2) BLOK B: 365 UNIT APARTMENT SERVIS 21 TINGKAT, 3) BLOK C: 168 UNIT APARTMENT SERVIS 21 TINGKAT TERMASUK 7 ½ TINGKAT PODIUM TEMPAT LETAK KERETA DAN 2 TINGKAT BASEMEN TEMPAT LETAK KERETA DI ATAS LOT 30844, BATU 6, JALAN SUNGAI BESI, DALAM BANDARAYA KUALA LUMPUR UNTUK TETUAN YUK TUNG LAND SDN BHD - Failure by Principal Sub-Contractor (“PSCor”) to act and allowing further delay at Towers B & C despite Contractor’s “Notice to take action to catch up with further accumulating delays” We refer to and write further to our letter ref. YC/CR/DAYA/245 of 30- 9-15 wherein we had stated in the closing paragraph of the letter that “it is absolutely crucial that you take all measures to catch up with the progress to ensure completion at both Blocks by 31-3-16 and we will be monitoring the situation anxiously ...” (emphases in the original). We have indeed been monitoring the progress since late September 2015 and are in fact alarmed by the continuing further slippage in progress to the critical structural works base on your Progress Report for Period Ending 15-11-15: i. Whilst the Rev 4 programme indicated your completing 3 floors plus the roof structure (about L25 to L27 plus roof structure) at Block B from 28-9-15 to 15-11-15 you managed to complete only about 1.2 floors; and ii. At Block C Rev 4 programme shows your completing 5 floors from 28-9-15 to 15-11-15 (commence L22 to complete L26) but you managed to complete only about 3 floors. 32 Accordingly, we are left with absolutely no alternative but to demand that you act to substantially achieve completion of structural works at Block B up to Roof level and all brickwalls L24 & L25, and Block C up to L26 and all brickwalls up to L21 & L22 within the 14 days period following your receipt of this letter of this letter by recorded delivery. Rev 4 programme indicates completing these as a minimum by mid-December 2015. Failure by you shall entitle us without prejudice to any of our rights and/or remedies under the Principal Sub-Contract and/or at law to determine your employment under the Principal Sub-Contract on the basis that you: are failing to proceed regularly and diligently with the Works in accordance with the requirement of Clause 51(a) paragraph (ii) of the Conditions of Principal Sub-Contract; and/or failing to execute the Works in accordance with the Principal Sub-Contract or persistently neglecting to carry out your obligations under the Principal Sub-Contract in that you are seriously failing to take such measures as to ensure that the completion of Section 2 of the Works are not further delayed beyond that we which we had previously agreed, i.e. end-March 2016. We trust that the above is clear and that you will act accordingly failing which we shall act in accordance with Clause 51(a) paragraph

(ii) and/or Clause 51(a) paragraph (iii) of the Conditions of Principal Sub-Contract to determine your employment under the Principal Sub-Contract. Thank you. Yours faithfully, - sgd – LIM KIM CHAI, JP 33 S.O. & Chairman c.c. Zone Architect - Mr. Gan B.P /Ms.Noor Fadzilaniza Dr Y G Tan Jurutera Perunding - Dr Y.G. Tan / Mr. K.P Lee Global Alliance - Ir. Vincent Tan Quanticonsult Sdn Bhd - Sr. Toh Siew Hock /Sr. Chuan S.S Yuk Tung Construction - Mr. Leow Chee Wah [39] As of the date of termination of the Principal Subcontract on 22 December 2015, there was an accumulative delay of 404 days and after deduction of the 43 days extension, the delay was 361 days. [40] The Plaintiff, on the other hand, contended that the Defendant’s own contemporaneous correspondence reveals an agreement between parties that the Plaintiff will be allowed to complete the Works by “end-March 2016” as extracted from the above Notice to Rectify Breach: “...failing to execute the Works in accordance with the Principal Sub-Contract or persistently neglecting to carry out your obligations under the Principal Sub-Contract in that you are seriously failing to take measures as to ensure that the completion of Section 2 or the Works are not further delayed beyond that we which we had previously agreed, i.e. end-March 2016.” (Emphasis added) 34 [41] The Plaintiff further argued that the facts also disclosed that the Defendant reneged on the “End-March” agreement and terminated the Subcontract vide its Notice of Termination on 22 December 2015. Learned counsel for the Plaintiff submitted that apart from substantially affecting the Plaintiff’s financial as well as reputational well being, the Defendant’s wrongful termination is also maliciously used as a premise for the Defendant to unconscionably call on the BG. [42] Learned counsel for the Plaintiff, Mr Alan Wong, drew the Court's attention to the following unfolding of events which revealed the reasonableness of the Plaintiff's actions and correspondingly, what he castigated as the unconscionability of the Defendant's conduct in the following proposals from the Defendant to resolve the various disputes between the parties:

The Defendant will grant an extension of the Principal Subcontract for the Completion of Section 1 by 23 October 2015 and Section 2 by 30

In consideration thereof, the Plaintiff will pay the Defendant LAD of RM20,000,000.00; 35

The Defendant is entitled to deduct the said RM20,000,000.00 from the Final Certificate;

In the event the Plaintiff fails to complete Section 2 by 30 June 2016, the Plaintiff is entitled to immediate payment of the RM20,000,000.00; and

The Plaintiff has to guarantee payment of said RM20,000,000.00 by way of a bank guarantee as well as the 5% retention sum and that the bank guarantee shall be maintained until the revised completion date for Sections 1 and 2, substituting the original contractual completion date. [43] Learned counsel for the Plaintiff was candid enough to admit that the parties did not reach an agreement on the proposed settlement. Nevertheless he argued that it was undeniable that there was no urgency to have the Principal Subcontract terminated considering that:

The Defendant agreed to allow the Plaintiff to complete the Works by end-March 2016 at the earliest; or

The Defendant was also prepared to have the Works completed by 30 June 2016 as per the settlement. 36 [44] Towards the last quarter of 2015, there was evidence of a chronic cash flow problem on the part of the Plaintiff, with the Defendant having a justifiable doubt as to the ability of the Defendant to catch up with time lag in the Revised Works Programme. The Plaintiff's Director, Mr Nathan Tham wrote in his email of 20 October 2015 to the Defendant acknowledging that the Plaintiff was responsible for the delay. He claimed that the Bank had withdrawn the finance facility because the Plaintiff was unable to obtain the EOT. The Plaintiff had requested the Defendant to allow the EOT in return for the Plaintiff waiving any increase in preliminaries and undertaking to pay the LAD for Blocks A, B and C purchasers directly and also to purchase unsold units. He admitted that without financing, the Plaintiff would not be able to settle the subcontractors and catch up on progress. See email dated 20 October 2016 in Exhibit D-93 of the Defendant's 1st Affidavit Volume 1 page 415. [45] The Defendant responded by its email dated 5 November 2015 stating that it had already rejected the terms that Mr Nathan had proposed at a meeting on 16 October 2015. However, the Defendant had instead, proposed a settlement for the reduction of the LAD payable by the Plaintiff from RM 32 million to RM 20 million provided it is secured by a Bank Guarantee. See Exhibit P-8 of the Plaintiff's 1st Affidavit. 37 [46] Mr Nathan replied in his letter dated 11 November 2015 by referring to what he had understood to be an agreement said to have been made in June 2015 that the Plaintiff would only pay the LAD at the rate payable by the developer/land owner, Yuk Tung Land Sdn Bhd to the purchasers and not the LAD rate payable by the Plaintiff under the Principal Subcontract. See Exhibit P-9 of the Plaintiff's 1st Affidavit. [47] The Defendant denied this and took the Plaintiff's reply in Exhibit P-9 as a rejection of the Defendant's proposal in Exhibit P-8 and informed the Plaintiff that the Defendant would charge the full LAD rate. The Defendant also gave notice to the Plaintiff to comply with the 4th Revised Work Programme. See Exhibit P-10 of the Plaintiff's 1st Affidavit. The Defendant then gave Notice to the Plaintiff to comply with the 4th Revised Work Programme. See Exhibit P-10 of the Plaintiff's 1st Affidavit which is reproduced below to show the lack of a consensus ad idem as late as 12 November 2015: Yuk Tung Construction Sdn Bhd Our ref : YC/CR/DAYA/L/255 Date : 12th November 2015 Plot 81, Lebuhraya Kampung Jawa, 11900 Bayan Lepas, 38 Penang. Attn : Mr. Nathan Tham / Datuk T.S Lim / Mr. Joe Tan Dear Sir, CADANGAN MENDIRIKAN PEMBANGUNAN BERCAMPUR 3 BLOK 28 TINGKAT YANG MENGANDUNGI: 1) BLOK A: 526 UNIT SOHO (22 TINGKAT) DAN 10 UNIT KEDAI PEJABAT, 2) BLOK B: 365 UNIT APARTMENT SERVIS 21 TINGKAT, 3) BLOK C: 168 UNIT APARTMENT SERVIS 21 TINGKAT TERMASUK 7 ½ TINGKAT PODIUM TEMPAT LETAK KERETA DAN 2 TINGKAT BASEMEN TEMPAT LETAK KERETA DI ATAS LOT 30844, BATU 6, JALAN SUNGAI BESI, DALAM BANDARAYA KUALA LUMPUR UNTUK TETUAN YUK TUNG LAND SDN BHD - Re: Proposed Amicable Settlement and Completion of the Project We refer to your letter dated 11 November 2015. We deny in the strongest terms your allegation that we had agreed to only charge you the LAD based on the amount payable to the end purchasers upon completion of Block A and to consider EOT for Blocks B and C to enable you to obtain financing. We did not at any time agree to such a proposal. We have maintained at all times that your company is liable to the full LAD payable under Clause 40 of the Contract. This is shown in each certificate of payment and our correspondence to you. Following your proposal in your email dated 20 October 2015, we informed you in our letter of 5 November 2015 that we are only prepared to accept an amount of RM20 million provided this is secured by the Bank Guarantee and the 5% Retention Sum. Based upon your letter of 11 November 2015, we take it that you are not agreeable to our proposal. In the circumstances we shall claim the full amount of the LAD under Clause 40 and all rights and remedies available to us under the Contract. 39 Please take note we hold you strictly to the works programme Revision 4. We shall exercise our rights to terminate the Contract if your progress does not meet the works programme. Thank you. Yours faithfully, - sgd – LAY KOK KEONG Contracts Manager c.c. Zone Architect - Mr. Gan B.P /Ms.Noor Fadzilaniza Dr Y G Tan Jurutera Perunding - Dr Y.G. Tan / Mr. K.P Lee Global Alliance - Ir. Vincent Tan Quanticonsult Sdn Bhd - Sr. Toh Siew Hock /Sr. Chuan S.S Yuk Tung Construction - Mr. Leow Chee Wah [48] Learned counsel for the Plaintiff was also careful to state that, as a matter of fact, there was no concluded settlement. Be that as it may, learned counsel for the Plaintiff proceeded to argue that as the parties were still negotiating, the Defendant should not have, in the midst of the negotiation, issued a Notice to Rectify Breach and thereafter to terminate the Principal Subcontract. Going back to basics, when parties are negotiating, there would of course be offers and counter-offers and when the Defendant takes the view that the negotiations have come to an end as in a stalemate, it would mean that there has been no successful negotiated 40 settlement. Such a conduct cannot by any stretch of the imagination, be said to be unconscionable on the part of the Defendant. Otherwise one would have to contend with a new proposition of law that unless both parties agree that the negotiations have ended, parties must continue to negotiate ad infinitum until a settlement is reached!! That would be a subtle but sustained pressure applied to the parties until a settlement is concluded. No one would dare to begin to negotiate even on a without prejudice basis, for once embarked upon it would be a case of no return! Nothing can be further from the truth. A counter-offer, as has been understood for as long as contract law has been around, cancels the original offer and is a fresh offer altogether. A non-acceptance of that means that there is no negotiated settlement. [49] He censured the so-called termination as nothing but a charade to “justify” the Defendant to call upon the BG, thus unjustifiably denying the Plaintiff’s opportunity to complete the Works as agreed. [50] It must be appreciated that the peculiar and potentially problematic properties of a construction contract is such that upon failure of a contractor to proceed regularly and diligently with the works, the employer may give a notice to rectify breach and thereafter to terminate the contract. In other 41 words, the employer does not have to wait until after the completion date is over before his right to terminate arises. Otherwise the employer would have to endure what may be a painfully slow progress in the works, unrealistically hopeful against hope that the contract would be completed on time when every bit of evidence points to the contrary. Clause 51(a) paragraph (ii) of the Conditions of Contract allows the Defendant to so terminate the Principal Subcontract for the Plaintiff's failure to proceed regularly and diligently with the Works and Clause 51(a) paragraph (iii) for the Plaintiff's failure to execute the Works in accordance with the Principal Subcontract or persistently neglecting to carry out its obligations under the Principal Subcontract, respectively. [51] The clause is reproduced below: "51 Determination of Contractor's Employment Government may possess, if the Contractor shall make default in any one or more of the following respects, that is to say: …

(ii) if he fails to proceed regularly and diligently with the Works, or 42

(iii) if he fails to execute the Works in accordance with this Contract or persistently neglect to carry out his obligations under this Contract, or … then the SO may give him a notice by registered post or by recorded delivery specifying the default, and if the Contractor shall either continue such default for fourteen (14) days after receipt of such notice or shall at any time thereafter repeat such default (whether previously repeated or not), then the Government may thereupon by a notice sent by registered post or by recorded delivery determine the employment of the Contractor under this Contract."(Emphasis added.) [52] The meaning of the expression "to proceed regularly and diligently" has been dealt with in Kerajaan Malaysia v Ven-Coal Resources Sdn Bhd [2014] 11 MLJ 218. It was explained in West Faulkner Associates v London Borough of Newham (1994) 42 ConLR 144 as follows: "In the JCT contracts the phrase requiring the contractor 'to proceed regularly and diligently with the works' means that the contractor must proceed continuously, industriously and efficiently with appropriate 43 physical resources so as to progress the works steadily towards completion substantially in accordance with the contractual requirements as to time, sequence and quality of work. The clause requires the contractor to proceed both regularly and diligently. Failure in either respect entitles the employer to terminate the contract." [53] That right was available to the Defendant before the Original Completion Date and by extension the Revised Completion Date. That right could not have vaporized and vanished after the expiry of the Completion Dates when in fact the Supplemental Agreement entered into when there was no hope of the Plaintiff completing the Works by the Original Completion Date specifically preserved and reserved the rights of the parties under the Conditions of Contract. The Defendant has the option whether or not to terminate the Principal Subcontract after the Certificate of Non Completion was issued. It is certainly not an easy decision to make. On the one hand there are the repeated overtures from the Plaintiff that things would improve at its end and with the change in their main subcontractor, it should be able to speed up the Works and catch up with lost time. With that in place the Plaintiff submitted their 3rd Revised Works Programme and after falling behind, a 4th Revised Works Programme. On 44 the other hand the Defendant has to weigh the further delay in the Works once the Principal Subcontract is terminated as there is a need to retender the balance Works and the corresponding increase in costs and the LAD claims from purchasers with every day of delay. [54] Surely it cannot be a case that when the Plaintiff submitted the target date for Sectional Completion with its Revised Works Programme and the Defendant having accepted it, the Plaintiff now has the advantage that the Principal Subcontract cannot be terminated, come what may save if it has stopped work or abandoned the Works completely. Surely the Defendant cannot be in a far worse position unless it has expressly agreed. Otherwise the Defendant would have suffered a double whammy: agreeing to a reduced LAD and a Sectional Completion and yet being required to endure however agonizingly slow the progress in the balance Works even when realistically, the balance Works cannot be completed by those target dates. [55] The Plaintiff's submission that by extending the completion date to end March 2015 or June 2015 or for that matter January 2016, the Defendant has affirmed the breach and can only claim damages for delayed completion is misplaced. It was of course only reasonable for the Defendant, after the CNC had been issued, for the Defendant to request 45 the Plaintiff to submit the Revised Works Programme with a target date for completion. The various dates proposed by the Plaintiff in its Revised Works Programme are target dates for completion and they do not take away the right of the Defendant to terminate the Principal Subcontract for the grounds contained in the Conditions of Contract, which remained valid and subsisting, unless varied to the limited extent provided under the Supplemental Agreement. These are dates given by the Plaintiff pursuant to paragraph 7.1 of the Letter of Award. It is not an extension of time under Clause 43 of the Conditions of Contract. [56] The learned author I.N. Duncan Wallace Q.C. in Hudson's Building and Engineering Contracts, Eleventh Edition Volume 1, London, Sweet & Maxwell, 1995 observed at paragraph 4.128 as follows: "....In addition to express provisions for completion by a stated date, virtually all construction contracts, for very good practical reasons, also contain provisions requiring due diligence or expedition by the contractor at all times prior to completion. Thus, the English standard forms provide that the contractor "shall ....regularly and diligently proceed with the [works] .......but in fact, even in the absence of such provisions, it is submitted that there must be an implied term that the 46 contractor will proceed with reasonable diligence, although no doubt, in cases where a completion date is stipulated in the contract, the degree of required progress will be measured against the prospects of completion by that date. The reason for this latter implied term, it is submitted, is that, otherwise, an owner will be forced to stand by helpless until the perhaps distant completion date, notwithstanding a rate of progress clearly inadequate to achieve the promised date and certain to cause irremedial future loss to the owner."(emphasis added) [57] Looking at the dispute that has arisen over the different interpretations on the Supplemental Agreement and the conduct of the parties subsequent to it, and putting the Plaintiff's case at its highest, what we have is a contractual dispute over the validity of termination of the Principal Subcontract, not uncommon in a termination of a construction contract. Whilst one may believe in the rightness and even the righteousness of one's claim as is the Plaintiff's stand and stance here, that does not, in the absence of cogent evidence, convert the Defendant's conduct into something unconscionable altogether. Whether the non-approval of the Variation Orders and the Rejection of the Applications for EOT is unconscionable in the circumstances 47 [58] The Plaintiff accepts that fact that the veracity of the VO claims and EOT claims as well as the parties’ respective contentions in relation thereto are matters to be decided at trial. However the Plaintiff highlighted the following in the hope of persuading the Court that the Defendant's actions or inactions, taken together, would make it unconscionable for the Defendant to call on the BG:

There are various outstanding VO and EOT Claims that remains as disputed issues to date;

The Project was fraught with legacy issues, which the Plaintiff assisted the Defendant to resolve;

Pertinently is the issue surrounding the Caisson Wall where the Plaintiff, in good faith, agreed to accept the novation of the Defendant’s existing subcontractors and to assist in the construction of the Caisson Wall as a means to resolve the legacy issues in demolishing the existing structure;

Arising from the various disputes, including the outstanding EOT Claims, parties executed a Supplemental Agreement; 48

Notwithstanding the execution of the Supplemental Agreement, parties specifically agreed under the Supplemental Agreement that the parties in relation to the EOT Claims dispute are preserved: “...For the avoidance of doubt, the Principal Subcontractor’s entitlement to extension of time (if any) for the completion of the Principal Subcontract works shall not be extinguished.” [59] In all this debate about who would suffer more and who would be in a more dire financial stress or distress, it must not be forgotten the plight of the purchasers of the uncompleted units; they have every right to damages for late delivery. They have to look to the landowner/developer to pay who in turn would look to the Defendant, who would in turn look to the Plaintiff under the LAD Clause. The Plaintiff's applications for EOT has been rejected and only 43 days granted. The Plaintiff wanted to appeal and they would have every right to. The Consultants have replied to say that whilst the Plaintiff may appeal, they were not inclined to change their minds unless there are fresh grounds submitted for the appeal for EOT. See Exhibit D-90 of the Defendant's 1st Affidavit 2nd Volume p 409 and Exhibits D-68, D-69, D-70, D-71 and D-72 of the Defendant's 1st Affidavit 2nd Volume pages 284,308, 309, 310, 311, 312 and 316. 49 [60] The Consultants have given their reasons for rejecting the EOTs Applications. Whether these are reasonable, would have to be decided at trial. For the moment, this Court must ask if the evidence challenging their refusal to grant any further EOTs shows a prima facie case of unconscionable conduct on the part of the Defendant. Learned counsel for the Defendant, Mr William Leong, summarised the reasons given by the Consultants as follows:

No extension was given for EOT 1 because the Caisson Wall which is to be built in 83 days is a replacement for the original designed reinforced concrete wall which was to take 138 days. There should thus have been a saving of 55 days. The delay in the Caisson Wall was due to the Plaintiff's poor coordination works, insufficient manpower and machinery. Exhibit D-64 Defendant's 1st Affidavit Volume 2 p 271.

Only 23 days was granted for EOT 2 and the others were rejected as not being additional works or major changes. The Consulting Engineer did not grant the extension due to delay caused by the Plaintiff's own lack of knowledge or experience on the scope of works. Exhibit D-74 Defendant's 1st Affidavit Volume 2 p 320. 50

Only 20 days was granted for EOT 3 on the condition that the Plaintiff can justify that the events fell on the critical path. The additional works did not fall on the critical path and therefore no extension was given for the rest. No extension was given for the claim of 118 days because the delay was due to the Plaintiff's own poor coordination works, insufficient manpower and machinery which caused significant delay. Exhibit D-81 Defendant's 1st Affidavit Volume 2 p 349. [61] The dates of the various submissions of the EOT 1, EOT 2 and EOT 3 were on 17 April 2013, 14 November 2014 and 27 November 2014 respectively. The EOT 1 was rejected on 13 May 2013. The extension 23 days was granted on EOT 2 on 15 December 2014 and the extension 20 days for EOT 3 was also granted on the same day. The many letters written by the Defendant to the Plaintiff reminding them of the increasing chronic and critical delays and the lamentable slow progress in the Works with LAD increasing by the days, are summarised in a table at pages 25-27 of the Defendant's Main Submission to oppose the Injunction. There were 14 letters all in and were written contemporaneously with key events such as different milestones in the delay, LAD kicking in, strikes and work stoppages and finally a Notice dated 30 September 2015 for the Plaintiff to 51 rectify the breaches and to catch up with the schedule provided by the Plaintiff in the 4th Revised Work Programme. [62] One would have expected a vigorous objection from the Plaintiff if factually, the various concerns addressed in the above letters were not true. Indeed the Plaintiff by their letter to the Defendant dated 14 March 2014 responded by proposing a mitigation plan and a catch-up programme, having secured a commitment from its subcontractors to work extended hours to catch up with the delay. The Plaintiff also pledged its commitment to increase manpower, improve site planning, appoint full time dedicated staff to handle non-compliance report, complete the TNB sub-station by 18 October 2014 and also place orders for major equipment. Further the Plaintiff also acknowledge the delay and replaced its main subcontractor and produced 4 mitigation plans including a pledge to commit further resources and to work additional hours to catch up with the schedule of Works. [63] The Plaintiff, of course, was entitled to appeal on the EOT applications which they did, being dissatisfied with the decisions of the Consultants. The Defendant and the Consultants informed the Plaintiff that unless there were fresh grounds, they would not change their mind. 52 Exhibits D-68, D-69, D-70, D-71 and D-72 Defendant's 1st Affidavit Volume 2 pages 284, 308, 309, 310, 311, 312 and 316. [64] The Defendant explained that out of the sum of RM 6,656,741.77 in the VO claimed, RM 5,567,000.00 had been certified and paid. The balance had not been certified because the Plaintiff had failed to provide the necessary particulars. The reason had been communicated to the Plaintiff. Even if there is a balance sum owing, that has been overtaken by Clause 51(c)(iv)(a) where parties have agreed that all progress payments after the notice of determination shall be suspended. [65] At this stage this Court cannot conclude that a strong prima facie case has been made out by the Plaintiff, such that it would be unconscionable for the Defendant to call on the BG. Whether the Supplemental Agreement had been procured by the Defendant unconscionably for its benefit and that of the Developer when it had no intention of re-assessing the Plaintiff's 3 EOT Applications [66] Learned counsel for the Plaintiff, Mr Alan Wong, submitted that it is clear from the Supplemental Agreement that the disputes on the EOT Claims/Applications are to be deferred and to be decided at a later stage 53 for it make no sense to preserve and keep it as a “live” issue. In other words, the actual time for completion is still very much a “live” issue when the Defendant wrongfully terminated the Plaintiff and called upon the BG. He then distilled the essence of the Defendant's conduct in defiantly reneging on the aforesaid position as well as the “End-March Agreement”/Settlement as a clear abuse of its superior position, especially by virtue of having the BG in hand. He sought to persuade the Court that such unconscionable conduct/abuse culminating with the calling of the BG must be restrained, especially considering the Defendant had already benefited from the completion of Section 1 of the Project following the Supplemental Agreement. [67] To support his proposition, he referred to the following passage of Ramly Ali JCA (now FCJ) in the earlier cited Kejuruteraan Bintai Kindenko case (supra) as follows: “[43] It was also held in that case (Commercial Bank v. Amadio) that ‘a transaction will be unconscientious within the meaning of the relevant equitable principles only if the party seeking to enforce the transaction has taken unfair advantage of his own superior bargaining power, or of the position of disadvantage in which the other party was 54 placed. The principle of equity applies whenever one party to a transaction is at a special disadvantage in dealing with the other party because illness, ignorance, inexperience, impaired faculties, financial need or other circumstances affect his ability to conserve his own interests, and the other party unconscientiously takes advantage of the opportunity thus placed in his hands.’ [44] Mason J in the same case above ruled as follows: Historically courts have exercised jurisdiction to set aside contracts and other dealings on a variety of equitable grounds. They include fraud, misrepresentation, breach of fiduciary duty, undue influence and unconscionable conduct. In one sense they all constitute species of unconscionable conduct on the part of a party who stands to receive a benefit under a transaction which, in the eye of equity, cannot be enforced because to do so would be inconsistent with equity and good conscience. But relief on the ground of “unconscionable conduct” is usually taken to refer to the class of case in which a party makes unconscientious use of his superior position or bargaining power to the detriment of a party who suffers from some special situation of disadvantage.” (emphasis added) 55 [68] It is true that there was a clause 5 in the Supplemental Agreement that reads as follows: "5. Save and except where expressly amended the Principal Subcontract shall continue to be in full force and effect. For the avoidance of doubt, the Principal Subcontractor’s entitlement to extension of time (if any) for the completion of the Principal Subcontract Works shall not be extinguished." (emphasis added) [69] As can be seen, the Plaintiff's entitlement to extension of time is something for the Plaintiff to prove and not a given as is clear from the qualification in the words "(if any)". In as much as the Plaintiff may put in fresh application for EOT, the Consultants are not required to re-assess it especially if no fresh grounds are canvassed. All that the Consultants have said is that if the application is based on the same reason, then what they have decided stands. There is nothing unconscionable about that. [70] The Defendant and its Consultants have written letters to the Plaintiff stating that the delay on the Plaintiff's part was due to 6 factors referred to in the Defendant's 1st Affidavit: the Plaintiff's non-performance, incompetence, lackadaisical attitude, lack of co-ordination with subcontractors, frequent change of staff and lack of finance. 56 [71] The Plaintiff's tacit admission and acceptance of responsibility for the delay is reflected in its letter dated 14 March 2013 where the Plaintiff had directed the blame to the festive season and the shortage of sand in the market. The Plaintiff proposed in its letter a mitigation plan and a catch-up programme. The Plaintiff also impliedly admitted to its shortcomings and promised to increase the manpower, site accessibility, site planning, machinery and equipment planning and to appoint full time dedicated staff to address the non-compliance reports. See Exhibit D-11 Defendant's Affidavit Volume 1 pages 87-89. [72] The Plaintiff by its letter of 8 April 2013 admitted the delay was due to the non-performance of its subcontractor, Million Aim Sdn Bhd and agreed to replace the subcontractor with another. Such disputes on extension of time and the number of days of entitlement are a fertile area of conflict in a construction contract and in the absence of cogent evidence of unconscionability in rejecting the EOT application or in giving less than what is reasonably applied for, this Court would not at this stage conclude that a strong prima facie case of unconscionability has been made out. Whether or not an EOT application should have been granted and if so for how long, would be a matter for trial. At this stage even if an EOT 57 application has not been considered reasonably or has been rejected unreasonably, that does not, in the absence of some egregious element, amount to an unconscionable conduct. [73] It was also clearly declared in Clause 7 of the Supplemental Agreement that the Agreement had been executed at the request of the Plaintiff. [74] It has often been stated that if a party acts within his contractual rights, then his motive is immaterial. Here there was no complaint of the Defendant's superior bargaining position when the Principal Subcontract was entered into. It was a substantial contract of no small size, of RM270 million. It was part of a public listed company and would stand to gain a handsome profit if it could complete the Principal Subcontract Works on time. The terms of the Supplemental Agreement have been reproduced above and there is nothing unfairly oppressive to the Plaintiff; if at all it has a humanizing element after examining the reality of the Plaintiff's failure to complete by the Completion Date, it sought to mitigate the contractual LAD of RM70,000.00 per day by sectionalising it to RM30,000.00 and RM40,000.00 per day for Section 1 and Section 2 Works respectively. All the other rights and obligations of the parties are reserved and preserved 58 under the Principal Subcontract. As such it could hardly be said to be a case where a party with a superior bargaining power has sought to bully into submission a party with little or no negotiating power. Whether the Defendant by virtue of its superior position, also engineered the Plaintiff’s termination by interfering with the Plaintiff’s administration of the subcontracts between the Plaintiff and its subcontactors, resulting in various strikes that delayed the Project [75] According to the Plaintiff, from the exchange of affidavits, it is also patently clear that the Defendant had interfered with the Plaintiff’s administration of the contracts between the Defendant and its subcontractors. The Defendant’s interference in turn led to escalation of strikes and work stoppages as:

The Defendant communicated directly with the Plaintiff subcontractors, spreading rumors and alleging that the Plaintiff is in financial difficulties, insinuating that the Plaintiff will be unable to pay its subcontractors; and

Besides creating confusion and affecting the Plaintiff’s subcontractors’ morale, this led to the said subcontractors demanding 59 for advance payment from the Plaintiff (and its collaborative partner), which effectively held the Project to ransom. [76] The Plaintiff argued that, needless to say, the Defendant’s interference caused further detriment to the Plaintiff in that the Plaintiff is put to greater financial hardship, apart from the hardship already suffered arising from:

The Defendant’s wrongful assessment/rejection of the 3 EOT

The Defendant rejecting/holding up of the Plaintiff’s VO Claims. [77] Learned counsel for the Plaintiff contended that the Defendant terminated the Contract on allegation that the Plaintiff failed to proceed regularly/diligently with the Principal Subcontract Works or failed to take measures to ensure completion of the same. According to him, it was clear that the alleged breach was as a result of the Defendant’s own doing in:

Wrongfully rejecting the 3 EOT Applications as well as VO Claims; and

Pertinently, fostering disharmony and encouraging discord amongst the Plaintiff’s subcontractors by maliciously spreading rumor of the 60 Plaintiff’s financial position, which in turn lead to various strikes by the Plaintiff’s subcontractors. [78] Learned counsel for the Plaintiff concluded that the alleged breach (which is denied), forming the basis of the termination, is clearly induced by the Defendant’s unconscionable conduct. He further pointed out that it is pertinent to note that the performance bond is to be utilized only in the event that the Plaintiff breaches the Contract: “If the Contractor fails to execute the Contract or commits any breach of his obligation under the Contract, the Government or the S.O. on its behalf may utilize and make payments out of or deductions from the said Performance Bond or any part thereof in accordance with the terms of this Contract.” [79] He excoriated the Defendant’s conduct as prima facie unconscionable where having first engineered the breach, the Defendant thereafter rely on the same to terminate the Contract as well as to call upon the Bond. He railed that this must be restrained. [80] In support thereof, the Plaintiff referred to the following passage in the earlier cited Kejuruteraan Bintai Kindenko case (supra): 61 “[59] In Singapore, instances where “unconscionability” was held to be applicable are: a) where the beneficiary made a call based on a breach induced by their own default (Kvaerner Singapore Ltd v. UDL Ship Building (Singapore) Ltd. [1993] 3 SLR 350)...” [81] The Defendant's counsel cautioned against accepting unquestioningly the allegation that the Defendant had instigated the strikes by the Plaintiff's subcontractors by spreading rumors about the Plaintiff's financial difficulties. He invited the Court to look at what is incontrovertible and undeniable: the list of some 7 subcontractors and suppliers who have not been paid by the Plaintiff to the tune of RM 5.2 million at paragraph 15.1 of the Defendant's 2nd Affidavit and in Exhibit D-10. The Plaintiff had claimed that the strikes and stoppages were due to the subcontractors' and workmen's poor management of their own cash flow as the Plaintiff asserted that they had been paying their subcontractors and workers adequately and promptly. However, upon termination of the Contract, the truth emerged that the subcontractors, suppliers and workers have not been paid. Some were owed more than RM 2 million like the air-conditioner subcontractor. Others like the plumber has not been paid since April 2015. It cannot be overemphasized that prompt payment is the life blood of 62 subcontractors and suppliers in the construction industry. The Defendant said that they had at their end, being mindful of this, paid the Plaintiff promptly and even in advance. However, this did not cascade down such that the subcontractors, suppliers and workers were not paid. Without payments, they have to dump their tools for that is the natural response of hungry stomachs. They went on strike and stopped work. [82] Seeing that there are 2 versions on the strikes and stoppage of works, one of the Defendant spreading rumors of the Plaintiff's dire financial strains and the other, the subcontractors, suppliers and workers not being paid, this Court will have to ask which is more probable at this stage. The Plaintiff has not refuted the allegation of non-payment to the subcontractors, suppliers and workers. One can suppose that downliners in the construction ladder are practical people; if they have been paid, why should they succumb to rumors? If they have not been paid than it is like a car without fuel. The engine just would not start to run. Work is stalled; delay sets in. It has a contagion effect. [83] The Defendant is candid in admitting that they did meet up with the subcontractors, but this was at their expressed request, as they had failed to obtain payment from the Plaintiff. The Defendant agreed to meet with the 63 subcontractors and suppliers out of humanitarian reasons and to resolve a potentially crippling problem. [84] The Defendant could not conceal their disappointment with the Plaintiff here, describing their conduct of blaming the Defendant for the strikes and stoppages of work as particularly galling as the Defendant had assisted the Plaintiff on various occasions with their cash flow. The Defendant reminded the Plaintiff that they did not deduct the LAD from the Plaintiff's interim payments although they were entitled to do so, to assist the Plaintiff's cash flow so that the Plaintiff may be able to pay its subcontractors and perhaps the strikes would be averted. Reference is made to the Defendant's 1st Affidavit Volume 1 pages 142 to 143. [85] Lest the Plaintiff might have forgotten, the Defendant sought to refresh its memory by referring to the Plaintiff's request for early release of certificate for payment No. 37 of RM 6,962,234.69 with the expressed direction to the Plaintiff to use the money to pay the subcontractors, carpenters, bar benders and plasterers who had all stopped work. See the Defendant's letter dated 9 September 2015 Exhibit D-24 of the Defendant's 1st Affidavit Volume 1 page 144. 64 [86] It is said that the faintest ink is better than the most retentive memory, a saying attributed to Confucius. The Defendant recalled and retrieved a letter from the Plaintiff dated 29 May 2015 requesting for an interest-free RM 5 million advance. The Defendant was willing to consider this provided the Plaintiff could give its consent for the payment to be made directly to the subcontractors and suppliers. However, for reasons best known to the Plaintiff, it was not keen to give this consent. References are made to the Plaintiff's letter dated 29 May 2015 in Exhibit D-61(d) of the Defendant's 1st Affidavit Volume 1 page 263 and the Defendant's letter dated 8 July 2015 in Exhibit D-60(a) of the Defendant's 1st Affidavit Volume 1 page 242. [87] Based on the above documentary evidence, I am not in a position to hold that a strong prima facie case of unconscionable conduct on the part of the Defendant has been established by the Plaintiff. The truth as to whether the Defendant had engineered the default and termination or was it a case of the Plaintiff trying to engineer itself out of paying its contractual liabilities, is something that can only be established at trial. Whether the encashment of the BG would unjustly enrich the Defendant as the amount exceeds the Defendant's LAD claim and thus unconscionable 65 [88] Perhaps the most persuasive argument of the Plaintiff is that the encashment of the BG will also result in the Defendant being unjustly enriched. That if true would be unconscionable indeed. Learned counsel for the Plaintiff, Mr Alan Wong, laid the planks for this attack on the call on the BG as follows:

The LAD as at 13 November 2015 (the imposition of which is disputed) stands at RM2,770,000.00;

(b)

The Defendant had already failed to remit payment of RM2,628,304.78 under Interim Payment Certificate No. 40. This amount is on top of the Retention Sum of RM13,500,000.00 currently held by the Defendant;

In the event that the Defendant is permitted to receive a further RM13,500,000.00 under the Bond, the Defendant will be holding monies belonging to the Plaintiff amounting to RM29,628,304.80;

The aforesaid RM29,628,304.80 is clearly far in excess of the LAD as at termination or the RM20,000,000.00 as per what the Plaintiff said to be the Settlement. 66 [89] He pointed out that, notwithstanding the LAD provisions under the Contract, the Defendant now claims that its estimated losses is in the region of RM54 million, including Purchasers’ LAD of RM6,991,942.80 and RM11,058,009.42. However, not an iota of evidence was presented to remotely support the RM54 million contended in the affidavit. He concluded by imploring this Court that, considering the various other unconscionable conduct of the Defendant mentioned aforesaid as well as the fact that the Defendant itself is not sure of the amount that it is allegedly entitled to, the Defendant ought to be restrained from calling and/or receiving payment under the BG. [90] Mr William Leong for the Defendant objected vehemently to this simplistic approach of assessing the damage suffered by the Defendant. He submitted most vigorously that the Plaintiff had approached the LAD claim unrealistically, with no attention being given to the number of days of delay. He argued from that which was not disputed i.e. that there had already been 361 days of delay. The LAD payable by the Plaintiff at RM 70,000.00 per day from 27 December 2014 (Final Completion Date) to 20 November 2015 (Completion of Block A) and RM40,000.00 per day from 20 November 2015 to 22 December 2015 (Date of Termination) is RM 24,310,000.00. Had the LAD continued until 30 June 2016 which is what 67 the Plaintiff said should be the extended completion date before which the Plaintiff cannot terminate, then the LAD would have amounted to RM33,230,000.00. He further submitted that the retention sum of RM13.5 million cannot be taken into account because it is held for a different purpose and cannot be used to pay the LAD and the new contractor. There is merits in the Defendant's submission as to allow the Plaintiff to "swap the security" as it were by substituting the Retention Sum of RM 13.5 million would be rewriting the contract for the parties having in mind the purpose of the BG procured before the commencement of the Principal Subcontract Works. [91] The Defendant in paragraph 7(c) of its 1st Affidavit has set out in detail the breakdown of the damage suffered or to be suffered estimated to be RM 54,786,986.38. At this stage of the interlocutory proceedings, this Court needs to be satisfied that there is some basis for the Defendant's assertion as to their exposure to the loss and damage delineating from various heads of claim arising out of the termination of the Principal Subcontract. It is only too true that there would be the purchasers' LAD claim against the Developer for late delivery under the standard form sale and purchase agreement entered into with the Developer under the Housing Development (Control and Licensing) Act 1966 and they in turn 68 would look to the Defendant as Main Contractor to pay them what they have to pay out. That claim by the purchasers for LAD is a continuing claim until practical completion and vacant possession is given to the purchasers. Even taking generously that Block B and C should have been completed by 30 June 2016 which is nigh soon, the purchasers' claim for LAD alone was estimated to be RM11,056,009.42. [92] The Defendant has also given notice to the Plaintiff that it would have to be responsible for all GST payments because no GST would have been payable if the project had been completed by the Final Completion Date. It was submitted that this Court may take judicial notice of the fact that GST was implemented on 1 April 2015. The GST payable is estimated to be RM 6,963,638.61. See letter dated 20 August 2015 in Exhibit D-91 of the Defendant's 1st Affidavit 2nd Volume page 410. [93] Then there are the usual loss and expense damages heads of claim incurred to complete the Project as set out in paragraph 7(c) of the Defendant's 1st Affidavit. These will be confirmed upon the taking of final measurements and appointment of the new contractor to complete the Project in accordance with Clause 51(c) of the Conditions of Contract. The Defendant submitted that these are fair estimates of the cost, expenses 69 incurred and damage suffered by them and therefore there is no basis for lambasting the Defendant for what the Plaintiff has perceived as unjustly enriching the Defendant at the expense of the Plaintiff if the full amount of the BG were to be released. [94] At any rate under Clause 37 (d) of the Conditions of Contract, if there is any credit standing in favour of the Contractor on completion of making good of all defects, shrinkages or other faults which may appear during the Defects Liability Period and upon giving of the Certificate of Completion of Making Good Defects for the whole of the Works, the surplus shall be refunded to the Plaintiff. [95] Learned counsel for the Defendant concluded that the Defendant is not guilty of unconscionable conduct in terminating the Principal Subcontract and calling on the BG. The Plaintiff failed to carry out the Principal Subcontract Works regularly and diligently. There was substantial delay and increasingly frequent strikes and work stoppages. The Defendant had lawfully terminated the Principal Subcontract in accordance with the terms thereof. As at the termination date on 22 December 2015 there was a delay of 361 days and the total amount of losses and damages payable by the Plaintiff inclusive of LAD exceeds RM54,786,986.38. There is thus a 70 basis for the Defendant to call on the BG. With that this Court is inclined to agree. This Court is satisfied that there is no danger or evidence of the Defendant unjustly enriching itself. Whether the balance of convenience tilts in favour of the Plaintiff or the Defendant [96] As the Plaintiff has not discharged the burden of showing a strong prima facie proof of unconscionable conduct on the part of the Defendant, the injunction application to restrain the call on the BG, would correspondingly be discharged. However parties had proceeded to submit on the balance of convenience test and out of deference to counsel, this Court shall nevertheless weigh and consider where the balance should tilt. [97] The Plaintiff sought to persuade the Court that the balance of convenience in this matter tipped heavily in favour of granting the injunction sought. Learned counsel was positioning this argument at an inviting angle by seeking the agreement of this Court that it is more equitable to temporarily restrain on the calling of the BG and/or receipt of payment thereunder for such restrain merely postpones the realization of the Defendant’s security until the alleged breaches and losses are proved. 71 [98] In support thereof, the Plaintiff referred to the following passage from the earlier cited case of Kejuruteraan Bintai Kindenko (supra) as follows: “[93]...Parties should not be allowed to take advantage of one another in making a demand or call on the performance bond particularly when they are not entitled to do so. It must be stressed that a performance bond can operate as an oppressive instrument and a demand or call by a beneficiary can sometimes be abusive. In the event that a beneficiary calls on the bond in circumstances where there is prima facie evidence of fraud or unconscionable conduct, the court should step in to intervene at the interlocutory stage to avoid further injustice to the other party. As has been expressed by the Court of Appeal in GHL Pte Ltd v. Unitrack Building Construction Pte Ltd & Anor (supra), “we agree that a beneficiary under a performance bond should be protected as to the integrity of the security he has in case on non-performance by the party on whose account the performance bond was issued, but a temporary restraining order does not prejudice or adversely affect the security, it merely postpones the realisation of the security until the party concerned is given an opportunity to prove his case.” (emphasis added) 72 [99] Learned counsel for the Plaintiff summoned the following factors to support his stand as summarised below:

The BG is currently still valid and as long as the BG is kept valid, the temporary restrain does not prejudice or adversely affect the security but merely postpones the realization of the same.

The Defendant company is clearly used as a shield protecting the ultimate employer, i.e. the Developer Yuk Tung Land Sdn Bhd (“Yuk

It is instructive that both the Defendant and Yuk Tung Land shares the same directors, although YT Land’s supposed rosy state of financial health is no indication of the Defendant’s financial affair;

In any event, out of the Defendant’s supposed current assets of RM82,862,565.00, RM73,231,232.00 is locked down in trade receivables owing from certain directors of the Defendant;

In other words and especially considering that the amount under the BG together with existing security is in excess of the LAD claimed, there is high likelihood that the Plaintiff will be unable to recover any amount paid out if the Plaintiff ultimately succeed in its Suit; 73

Last but not least, the Plaintiff’s reputation as well as that of its parent company, Daya Materials Berhad, a public listed company listed on Bursa Malaysia, is also at stake considering that the termination and the calling of the Bond thereafter, were premised on the alleged breach of the Plaintiff. [100] Considering the above and especially the fact that the BG is still valid, the Plaintiff implored upon this Court to restrain the Defendant from calling and/or receiving payments under the BG in light of what the Plaintiff has painted as the unconscionable conduct on the part of the Defendant. [101] In further support thereof, the Defendant relied heavily on the following passage of Ramly Ali JCA (now FCJ) in the earlier cited Kejuruteraan Bintai Kindenko case (supra): “[107] In this case, both of the performance bonds have been extended by the appellant, at the request of the beneficiary and the employer (GPSB). The right and interest of the beneficiary pursuant to the performance bonds is secured. Its right to call on the same is secured. On the other hand if the sums guaranteed under the performance bonds were to be released to the beneficiary, the appellant would suffer great losses and damage which cannot 74 be adequately compensated; and the reputation of the appellant would be at stake. The balance of convenience thus tipped heavily in favour of the appellant.” (emphasis added) [102] The Defendant, on the other hand, submitted that it is critical to the completion of the Project for the Defendant to obtain the proceeds of the BG to pay for the cost and expenditure that the Defendant had paid or are immediately payable. The cost and expenditure for the completion of the Project was estimated at RM54,786,986.38 at the time the Defendant’s 1st Affidavit was filed. This is set out in paragraph 7(c) of the Defendant’s 1st Affidavit. [103] The Plaintiff’s delay is evidenced by contemporaneous documents issued by the Defendant, its consultants and even the Plaintiff himself. The Plaintiff’s delay is set out in paragraphs 34 to 37 (a)-(n) of the Defendant’s 1st Affidavit. Where the Plaintiff has a prima facie reasonable basis to terminate the Principal Subcontract for failure of the Plaintiff to regularly and diligently proceed with the Works, the Defendant would have every contractual right to call on the BG. Both parties have at the outset of the contract agreed that the Plaintiff as Contractor should furnish the Defendant this on-demand BG which the Defendant may call upon if there 75 is a breach of the Principal Subcontract. As the Defendant has, prima facie, a reasonable ground for terminating the contract, there is then no basis for restraining the call on the BG. Those in the construction industry understand a BG to be as good as cash, to be released upon a call on the Bank in the event of an event of default and termination of the contract. [104] To allow a restrain each time the default is being challenged together with the termination, the efficacy of a BG would be diluted and more dire than that, denuded altogether such that what has been bargained for is not what one is getting. The law realizing that this is not what a BG is supposed to be in practice, has declared that there must be a strong prima facie case of an unconscionable conduct on the beneficiary of the BG and only then may a restraining order be issued to prevent a call on the BG. [105] If contractually, the Defendant is entitled to call on the BG, then it is not open to the Plaintiff as obligor of the BG to tell the Defendant that they should use their own funds to finance the balance of the Project and not the funds from the release of the BG. [106] There is also the public element in the interest of the purchasers to have their purchased units delivered to them as soon as possible. It is common knowledge that besides from LAD claims, there is the increased 76 costs in the tender for a new contractor to finish completing the balance Works. The purpose of the BG is to provide for this buffer and cushion the consequences arising out of the termination and any surplus, upon the finalization of the accounts on completion, will have to be refunded to the Plaintiff. [107] This Court is not persuaded that the Defendant would not be in a position to pay back the Plaintiff should the Plaintiff succeed at the trial. The Defendant's financial resources can be seen in the audited accounts exhibited as Exhibits D-95 and D-96 of the Defendant's 1st Affidavit Volume 2 pages 433 -458. Yuk Tung Land has current assets of RM 137,084,569 and net assets of RM 35,961,962.00 as at 31 December

The Defendant has current assets of RM 59,331,248.00 and net assets of RM 23,531, 327.00 as at 31 December 2014. Granted the Defendant and the Owner/Developer are owned by the same shareholders and managed by the same Directors, the financial position would in all likelihood improve upon the completion of Blocks B and C as the end financiers would be releasing the full purchase price of the completed units upon practical completion and handing over of vacant possession to the purchasers. 77 [108] There is no evidence to suggest that the Defendant would not be in a position to pay back the Plaintiff should they succeed at the trial or for that matter, the damages arising out of a so-called wrongful termination. Whilst the Defendant must continue to manage cash flow for the balance Works to be completed and the payment of purchasers' LAD, the Plaintiff has no further obligation to complete the Works. It only has to suffer what Banks would ordinarily do if the amount secured by the BG is released, which is to realize their security for the BG. This is a risk which the Plaintiff would have appraised itself at the outset when the BG was procured as part of the condition of the Principal Subcontract. [109] The so-called dent and damage to the reputation of the Plaintiff must also be viewed dispassionately from the other perspective, which is that Yuk Tung Land together with its Main Contractor Yuk Tung Construction Sdn Bhd (the Defendant here) would suffer in its reputation in not being able to deliver within the contractually agreed period the certificate of practical completion and with it the need to pay promptly the purchasers' LAD claims. [110] The Defendant also drew the Court's attention to the fact that the Plaintiff is no longer part of a public listed parent company as the shares of 78 the parent company had been disposed of to a RM10.00 company and the public listed parent company had refused to provide an extension of its corporate guarantee to guarantee that the Plaintiff would complete the Project according to the terms of the Principal Subcontract. [111] I am not satisfied that the balance of convenience would tilt or tip in favour of the Plaintiff such that the injunction to restrain the call on the BG should be granted. Pronouncement [112] Taking into considerations all the arguments for and against the injunction, this Court is satisfied that the Plaintiff has not shown a strong prima case of unconscionable conduct on the part of the Defendant to justify a restrain on the Defendant from making a call on the BG or to receive the proceeds from the BG. The Plaintiff's case taken at its highest would show a bona fide dispute on the termination of the Principal Subcontract that would have to go for trial. Nothing had come near to shocking the conscience or pricking it to the point of a reflex reaction of revulsion at the so-called reprehensible conduct of the Defendant. [113] In the upshot, I had dismissed the Plaintiff's application in Enclosure 3 for an injunction to restrain the Defendant from making a call on the BG 79 or to receive the proceeds from the BG. At any rate, damages would be more than an adequate remedy being a monetary sum that the parties are disputing over and that overall, the balance of convenience would tilt in favour of the Defendant. The ad-interim injunction granted was discharged. [114] Damages shall be assessed for the time when the injunction was in place pursuant to the usual undertaking on damages that the Plaintiff had given. By consent the parties agreed that any assessment of damages shall be had at the end of the trial. [115] I had also awarded costs of RM 15,000.00 to be paid by the Plaintiff to the Defendant. Allocator shall be paid before the extraction of the order of costs. [116] Upon the order being given discharging the injunction, learned counsel for the Plaintiff informed the Court that he had his client's instruction to appeal and that he would file in the Notice of Appeal the next day. He asked for an interim stay of the order pending the filing of an Erinford injunction. [117] Learned counsel for the Defendant asked the Court to hear the Erinford injunction there and then. 80 [118] The Court was of the opinion that a formal application for an Erinford injunction should be filed and the reasons carefully considered before disposing of the Erinford injunction application. The Court therefore granted a temporary stay of the order discharging the injunction until the disposal of the Erinford injunction application duly filed in Enclosure 25. Whether there are special circumstances justifying an Erinford Injunction pending the Plaintiff's appeal [119] The power of the Court in granting an Erinford injunction has been clearly spelled out in the case that bears its name in Erinford Properties Ltd v Cheshire County Council [1974] 2 All ER 448 at p. 454 where Megarry J states the principle with much perspicuity as follows: “I can see no real inconsistency in any of these cases. The questions that have to be decided on the two occasions are quite different. Putting it shortly, on a motion the question is whether the applicant has made out a sufficient case to have the respondent restrained pending the trial. On the trial, the question is whether the plaintiff has sufficiently proved his case. On the other hand, where the application is for an injunction pending an appeal, the question is whether the judgment that has been given is one on which the successful party 81 ought to be free to act despite the pendency of an appeal. One of the important factors in making such a decision, of course, is the possibility that the judgment may be reversed or varied. Judges must decide cases even if they are hesitant in their conclusions; and at the other extreme a judge may be very clear in his conclusions and yet on appeal be held to be wrong. No human being is infallible, and for none are there more public and authoritative explanations of their errors than for judges. A judge who feels no doubt in dismissing a claim to an interlocutory injunction may, perfectly consistently with his decision, recognise that his decision might be reversed, and that the comparative effects of granting or refusing and injunction pending an appeal are such that it would be right to preserve the status quo pending the appeal. I cannot see that a decision that no injunction should be granted pending the trial is inconsistent, either logically or otherwise, with holding that an injunction should be granted pending an appeal against the decision not to grant the injunction, or that by refusing an injunction pending the trial the judge becomes functus officio quoad granting any injunction at all." (emphasis added) 82 [120] The above passage and the principle that it enunciated have been cited with approval by our Federal Court in Subashini a/p Rajasingam v Saravanan a/l Thangathoray and other appeals [2008] 2 MLJ 147. [121] In Cocoa Processors Sdn Bhd v United Malayan Banking Corp. Bhd. & Ors. [1989] 1 CLJ (Rep) p 436 the plaintiff owed the 1st and 2nd defendants quite a substantial sum of money secured by a debenture. Upon default receivers and managers were appointed over the properties and assets of the plaintiff. The plaintiff claimed for damages for wrongful appointment of the receivers and managers. The plaintiff's application for an injunction to restrain the defendants from disposing, selling and dealing with its assets pending trial of the action was dismissed. The Court held that there was no serious issue to be tried. Pending appeal to the Supreme Court then, the plaintiff applied for an Erinford injunction to preserve the status quo. In refusing the Erinford application, his Lordship Mohamed Dzaiddin J (as the former CJ then was) opined as follows at p 439: “ ... I am of the view that whether or not the plaintiff succeeds in the appeal and in the main action will not be affected by its failure to obtain this further interim injunction. It must be remembered that the plaintiff’s claim against the defendants is for damages for wrongful appointment of receivers and managers. The 1st and 2nd defendants 83 being a commercial and merchant bank respectively will no doubt satisfy any money judgment ordered by the Court. Therefore, responding to Mr. Bala’s fear and anxiety on behalf of the plaintiff, I must say quite confidently that there is no likelihood of a successful appeal against my decision being rendered nugatory. Secondly, a more serious issue to be considered here is the balance of convenience. Based on the facts and circumstances of the present case, I find the balance of convenience lay in favour of the injunction pending appeal being refused. I accept the submission of Miss Solomon that the assets of the plaintiff company had depreciated and the longer it remains in its present position, the greater the hardship being inflicted on the defendants. Further, in the event the plaintiff’s claim being dismissed, the assets having been depreciated quite considerably, the defendants may not be able to reap the fruits of their success under the debentures. On the other hand, should the plaintiff succeed in its claim ultimately, for damages, the defendants will have no difficulty in settling the judgment. Lastly, I agree with Tunku Alina that in the present case damages seem to be a suitable and adequate remedy. The plaintiff would be adequately compensated in damages for the temporary damage 84 between now and the date when its appeal is heard if my decision is reversed by the Supreme Court." (emphasis added) [122] As is evident above, in the case of recovery of a monetary judgment, the issue of nugatoriness was considered from the perspective of whether the banks as defendants could satisfy any judgment that may be granted in the plaintiff's favour and not so much that the plaintiff's assets having been sold, cannot be reverted back to the plaintiff. [123] A similar approach was taken in Kilang Kosfarm Sdn Bhd v Kosma Nusantara Bhd (No. 2) [2002] 5 MLJ 662. There the plaintiff had failed in its application for an injunction compelling the defendant to surrender vacant possession of the defendant's land to the plaintiff and to restrain the defendant from interfering and obstructing the plaintiff in carrying out its obligations under the "Oil Palm Operation and Maintenance Contract". The main reliefs in the writ action was a declaration that the defendant had wrongfully repudiated the said contract for no reasonable cause and damages to be assessed and for accounts inquiry into the fruits harvested. In dismissing the plaintiff's application for an Erinford injunction application, his Lordship Ramly Ali J (now FCJ) set out his reasoning as follows at p 174: 85 "In order to assist me in exercising my discretion on this matter, it is pertinent to see that there would be no impediment to the plaintiff enforcing any judgment in its favour should the plaintiff succeed in its intended appeal as well as the main writ. Whether a successful appeal by the plaintiff against my earlier decision being rendered nugatory or not, we have to go back to the plaintiff’s claim against the defendant in its writ and statement of claim. I have scrutinised all the prayers in the plaintiff’s statement of claim (as listed above) and satisfied that whether or not the plaintiff succeeds in the appeal and in the main action will not be effected (sic) by its failure to obtain the present Erinford injunction. There would be no impediment to the plaintiff enforcing any judgment in its favour should it succeed in its appeal and ultimately in its writ. There is no evidence to show that the defendant, would be in no position financially, to honour the judgment obtained by the plaintiff. Therefore, I must say quite confidently that there is no likelihood of a successful appeal against my decision being rendered nugatory." (emphasis added) [124] It is trite law that the Plaintiff as Applicant must show that should its appeal be successful, it would prove to be nugatory. However, what we 86 have here is the release of a sum of RM13.5 million which has to go towards the balance of the Principal Subcontract Works to be done for the completion of the Project. If the Plaintiff is successful on appeal, it would have every right to claim for the money back from the Defendant. Generally, a payment of money cannot render a successful Appellant's appeal nugatory because there is nothing sacrosanct, sacred or special of the money. As the balance of the Project for all practical purposes is unlikely to be completed until the end of the first quarter of 2017, the Plaintiff if successful, can always proceed with a garnishee order against the Owner/Developer who would have received the payment of the balance purchase price for the units from the end financiers and who would in turn also have to pay the Defendant for the balance Principal Subcontract Works done. Both the trial in this Court, realistically rescheduled to 22 till 26 August 2016, as well as the appeal to the Court of Appeal, would in all probability have been disposed of. [125] I agree with Mr Wiliam Leong for the Defendant that the subject matter of the appeal is not something that is irreversible if the injunction is not granted such as in cases restraining the approval of a planning application as in the Erinford Properties Ltd case (supra) or prohibiting 87 the hold of an annual general meeting as in Wong Heng Meng v Prince Guneratnam & Ors [2010] 9 MLJ 457. [126] In Mitsubishi Corp & Ors v Sepangar Bay Power Corp Sdn Bhd & Ors [2009] 9 MLJ 121 at p 140 it was held that the no Erinford injunction would be granted if the Defendant would be able to return any monies collected from the financial institutions in the event the applicant succeeds in the Court of Appeal. On the argument that the financial statement does not show the beneficiary of the bond to have a good financial health, the High Court held that that is not the sole criterion for determining its solvency. [127] This Court finds it difficult to appreciate the anxious concerns expressed by the Plaintiff that the Defendant does not have the financial capabilities to repay back the RM 13.5 million BG. Here, Yuk Tung Land as Developer of the Project has given its direct undertaking to the Court that it would repay the Plaintiff the sum of RM 13.5 million in the event the Plaintiff's appeal is allowed. See Exhibit D-117 of the Defendant's Affidavit affirmed on 24 May 2016 (Enclosure 32). That is on top of the Defendant's direct undertaking to this Court given through its counsel, Mr William Leong, should the Plaintiff be successful in its appeal. The usual penal 88 clause shall be included in the order of the Court with the directors name being mentioned such that upon a failure to comply, a contempt action may be proceeded with against the directors. [128] Mr Alan Wong for the Plaintiff conceded that the direct undertaking of a Defendant to refund monies released to it in a BG coupled with a further undertaking of another company owned by the same shareholders of the Defendant which company is the Developer/Owner of the land on which the Project is developed to also make a refund of the said sum released under the BG, is not common and not usually procured or offered. Here the Defendant and its related company Yuk Tung Land as Developer have voluntarily offered their respective undertakings to the Court. An undertaking to the Court is a most serious matter and a breach of it would expose the directors of both the companies to contempt of court. Generally the Plaintiff has to be satisfied with the Defendant showing sufficient means or resources to pay the Plaintiff should the Plaintiff be successful upon appeal or that it is not in a dire financial straits or that it is financially solvent for all practical purposes. [129] Quite apart from the undertakings of the Defendant and the Developer, both of them have disclosed their financial soundness in their 89 audited accounts as at 31 December 2014. The Developer has the financial capacity and capability to meet their undertaking to repay the sum so released as the gross development value of the Project is RM 633,821,960.00. See paragraph 70(d) of the Defendant's 1st Affidavit affirmed on 29 December 2015. The Developer too has current assets of RM 137,084,569.00 and net assets value of RM35,241,643.00 according to its 2014 audited financial statements. See Exhibit P-9 of the Plaintiff's Affidavit affirmed on 6 May 2016. [130] As for the Defendant, it has a net asset value of RM 23,531,317.00 according to its 2014 audited financial statements in Exhibit P-10 of the same Plaintiff's Affidavit. The Plaintiff's allegation that the Defendant's trade receivables of RM 73,231,232.00 is "locked up" is without merits as there is a Note 4 to the Defendant's audited accounts expressing providing that the trade receivables are collectable under normal credit terms granted to trade clients ranging from 30 days to 120 days. Note 4 further states that the said sum is due from a company in which certain directors have an interest i.e. the Developer. Learned counsel Mr Alan Wong then expressed concerns that the audited accounts were that of 31 December 2014. As the audited accounts of 31 December 2015 were not ready yet, the Defendant subsequently filed a management account for year ended 31 December 90 2015 to show that the trade receivables have not vanished or written off but very much intact. See Exhibit D-115 in Enclosure 31. [131] Subsequent to the date of the Defendant’s 1st Affidavit, the Defendant affirmed an Affidavit to oppose the Erinford injunction in Enclosure 29. It detailed that the actual cost and expenses incurred or to be incurred by the Defendant is RM68,418,598.95 at paragraph 10.2. A sum of RM41,760,612.24 is paid or payable as at at 31 March 2016. Particulars of these cost and expenses are set out in the table below: Item Descriptions Amount Paid/ Payable as at 31.03.2016 (RM) Estimated costs from 1.4.2016 until 31.3.2017 (RM)

1.1

1.2

1.3

1.4 Purchasers’ LAD Purchasers’ LAD for Block A Purchasers’ LAD for shop Purchasers’ LAD for Block B Purchasers’ LAD for Block C 5,502,618.08 234,117.12 16,124,270.46 274,212.18 762,161.59 - - - 6,264,779.67 234,117.12 16,124,270.46 274,212.18 2

from 1.4.2015 to 22.12.2015 2,496,736.23 - 2,496,736.23 91

Balance work award x 6% - 6,300,541.64 6,300,541.64 3 Interest on Loans 686,538.24 - 686,538.24 4 Staff costs 1,755,690.54 1,323,870.60 3,079,561.14 5 Project Management Fees 5,366,250.00 3,577,500.00 8,943,750.00 6 Additional costs to complete the balance work 5,000,000.00 13,705,874.16 18,705,874.16 7 Rubbish clearing costs 300,000.00 - 300,000.00 8 Payment on behalf of Daya CMT to Kone Lift 210,000.00 - 210,000.00 9 Lands rental for fabrication yard (30,000 + 35,000) x (12 months + 6 months demobilization & defects liability store) + 6% GST 1,240,200.00 - 1,240,200.00 10 To settle the outstanding wages of Plaintiff’s workers to remove them from site kongsi 446,300.00 - 446,300.00 11 Security guard charges 277,371.39 988,038.72 1,265,410.11 12 Purchase of the air-cond units 1,846,308.00 - 1,846,308.00 Total 41,760,612.24 26,657,986.71 68,418,598.95 92 [132] In the Defendant's Affidavit in Enclosure 29, the Defendant also set out the cost incurred to rectify defects as at 31 March 2016 is RM2,794,633.83, the estimated costs to rectify defects from 1 April 2016 until the estimated completion date of 31 March 2017 for Blocks A, B & C is RM4,928,557.51. The supporting documents for the cost are marked collectively as Exhibit “D-112”. Particulars of these costs are as follows in paragraph 11 of Enclosure 29: Item Descriptions Actual amount as at 31.03.2016 (RM) Estimated cost from 1.4.2016 until 31.3.2017 (RM) Total (RM) 1 Defect rectification costs for Block A and podium 2,794,633.83 1,975,057.51 4,769,691.34 2 Defect rectification costs for Block B & C - 2,953,500.00 2,953,500.00 Total 2,794,633.83 4,928,557.51 7,723,191.34 [133] As such, the cost and expenditure exceeds the RM29,628,304.80 comprising of RM13,500,000.00 to be received under the BG, RM13,500,000.00 held as Retention Sum and RM2,628,304.80 withheld under Interim Certificate No. 40. There is no basis for saying that the 93 Defendant would be receiving a surplus sum and thus unjustly enriched and hence conduct unconscionable, if the sum of RM 13.5 million under the BG is released. [134] In addition, the new contractor, R & C Cergas Teguh Sdn Bhd had requested for an advance sum of RM5,000,000.00 for the advance payment and rental deposit required by the various suppliers. The Defendant stated that they needed to release the money requested in order for the new contractor to continue with the Project and for catching-up on the delay caused by the Plaintiff. See Exhibit D-113 (Enclosure 29) a copy of a letter dated 31 March 2016 from R & C Cergas Teguh Sdn Bhd. Pronouncement [135] Taking all the above factors into consideration, the Plaintiff has not shown that if it is successful, the appeal would be nugatory or that there are special circumstances justifying an Erinford injunction pending appeal. The Erinford application was thus dismissed with costs of RM5,000.00 to be paid by the Plaintiff to the Defendant. [136] As only the Writ has been filed so far by the Plaintiff without a Statement of Claim being filed, the Court directed the Plaintiff to file the Statement of Claim and serve the same within 2 weeks. The Defendant is 94 to file its Defence and Counterclaim if any, 2 weeks thereafter. Trial dates were fixed from 22-26 August 2016. On 26 May 2016 when the Court delivered this decision, Mr Alan Wong applied for a stay of the Court's order dismissing the Erinford application pending his client's application on an urgent basis to the Court of Appeal. The Court granted a temporary stay of the order until Tuesday 5pm of 31 May 2016. Dated: 27 June 2016. Sgd Y.A. TUAN LEE SWEE SENG Judge Construction Court High Court Malaya For the Plaintiff/Applicant: Alan Wong and Andrew Heng (Messrs Zain Megat & Murad) For the Defendant/Respondent : William Leong Jee Keen (Messrs William Leong & Co) Date of decision: 4 May 2016 for Enclosure 3 26 May 2016 for Enclosure 25