Eversendai Constructions (M) Sdn. Bhd. v Samsung C&T Corporation Uem Construction Jv Sdn. Bhd. (WA-24C-156-08/2022)

This judgment deals with the Defendant’s application for the Order made on 20.4.2023, where I had allowed the Plaintiff’s application (encl. 1) to restrain the Defendant from receiving the full sum or any part of the Bank Guarantee (‘BG’) issued by HSBC Amanah Malaysia Berhad (‘HSBC’) dated 31.5.2016 until final disposal of all disputes between the parties pursuant to Clauses 20.4 and 20.5 of the Subcontract Agreement dated 1.5.2016 or until further order, with costs 2 of RM15,000.00 to be paid by the Defendant to the Plaintiff and liberty to apply (‘Injunction Order’; encl. 84), to be discharged.

The Defendant’s application was premised mainly on the ground that there is a material change of circumstances.

After having considered the cause papers and submissions by the parties, I had on 7.9.2023, dismissed the Defendant’s application with no order as to cost. The reasons for the decision are elaborated below.

The cause papers are as follows:

the Notice of Application and Certificate of Urgency both dated 25.7.2023 (encls. 91 and 96);

the Defendant’s Affidavit in Support (‘AIS’) affirmed by its Deputy Project Director, Wan Nor Azman Bin Wan Salleh on 25.7.2023 (encls. 92 - 95);

the Defendant’s Notice of Intention to use Affidavit in encls. 3 - 5, 8, 12, 16 - 28, 30, 31, 35 - 36, 42 - 43 and 52 in this suit dated 2.8.2023 (encl. 97);

the Plaintiff’s Notice of Intention to use Affidavit in encls. 3 - 5, 8, 12, 16 - 28, 30, 31, 35 - 36, 42 - 43 and 52 in this suit dated 2.8.2023 (encl. 99);

the Plaintiff’s Affidavit in Reply (‘AIR’) affirmed by its Director, Nathan a/l Elumalay on 2.8.2023 (encl. 100); and

the Defendant’s AIR affirmed by the same deponent on 9.8.2023 (encl. 101). [5] The Defendant has appealed against my decision in granting the Injunction Order. My full Grounds of Judgment in respect of encl. 1, which includes the background facts of this case, and shall not be repeated here, can be found in Eversendai Constructions (M) Sdn Bhd v Samsung C&T Corporation UEM Construction JV Sdn Bhd [2023] MLJU 2025. The Legal Principles [6] In the Notice of Application, the Defendant cited that the application was made pursuant to the liberty to apply provision in the Injunction Order, O. 92, r. 4 of the Rules of Court 2012 and/ or the inherent jurisdiction of the Court. [7] The Defendant submitted that, based on the decision in WRP Asia Pacific Sdn Bhd & Anor v Tael Tijari Partners Ltd & Ors [2019] 1 LNS 1645 (HC), the court has the power to vary or set aside an injunction order in the event there is a change of circumstances justifying the making of such an order (see paras 89 - 95 of the judgment; see too, The Store (Terengganu) Sdn. Bhd. v Abi Construction Sdn. Bhd. & Anor [2013] MLJU 1650 (HC) at paras 9 and 10; Empire Holding Ltd v Suruhanjaya Sekuriti Malaysia & Ors [2023] MLJU 1034 (HC) at para 48; and Law and Practice of Injunctions in Malaysia, Sweet & Maxwell, 2020, General Editor Robert Lazar and a team of expert contributors at para 5.068, p 199). [8] The Plaintiff accepted the general principle of law as aforesaid but contended that WRP Asia Pacific (supra) involved the issue of suppression of material facts by the plaintiff at the time the injunction orders were made. However, here, the Defendant did not raise any such issue. Whilst this is true, it is observed that in WRP Asia Pacific, the defendants did argue that there has been a material change of circumstances and the court also justified the decision to set aside the injunction orders on the ground that recent developments have given rise to “… a completely new circumstance that must weigh in the Court’s consideration whether to continue with the Injunction Orders.” (see paras 28, 94 and 118 of the judgment). The Issue: Has the Defendant established a material change of circumstances to warrant a discharge of the Injunction Order? [9] The original BG remained valid and enforceable until 31.12.2020. By an amendment dated 23.12.2020, the expiry date of the BG was extended to 31.7.2023 HSBC agreed to pay all written demands against the BG provided that the aggregate amount of all such demands shall not exceed the guaranteed sum of RM32,849,223.61 and are received by HSBC no later than 56 days after the extended end date i.e. by 25.9.2023. [10] Mr. T. Kuhendran vehemently submitted for the Defendant that there is a material change of circumstances after the Injunction Order was made which warrants a discharge of the same as the Plaintiff has failed to extend or maintain the Performance Security (‘PS’), which expired or lapsed on 31.7.2023, in accordance with the following contractual provisions:

Clause 4.2 of the Particular Conditions of Subcontract which stipulates, among others, that "… The Subcontractor is required to maintain the Subcontract Performance Security as valid and enforceable until the time specified in the Appendix to

the Appendix to the General Conditions and Particular Conditions which specifies the validity period of the PS as “From the commencement date of the Subcontract Works and shall remain valid and enforceable until issuance of the

Clause 11.3 of the Particular Conditions of Subcontract which provides, among others, that "… The Contractor shall issue the Subcontractor’s Performance Certificate within 28 days of the expiry of the Subcontract Defects Notification Period, or as soon thereafter as the Subcontractor has supplied all the Subcontractor’s Documents and completed and tested all the Subcontract Works, including remedying any defects.”;

Clause 11.2 of the General Conditions of Subcontract which states, among others, that the Subcontractor’s Defects Notification Period “… shall be from the date on which the whole of the Subcontract Works have been taken-over under Clause 10 [Completion of and Taking-Over the Subcontract Works] to the date of expiry of the Defects Notification Period applicable to the Main Works or Section of part of the Main Works of which the whole Subcontract Works are part”; and

Clause 11.2 of the Particular Conditions of Subcontract which provides, among others, that “… the Subcontractor’s responsibilities and obligations for the remedy of defects in the Subcontract Works under Clauses 11.1 and 11.2 shall cease …

days after the date of the Subcontract Taking-Over Certificate. …”. [11] The above-mentioned contractual provisions were highlighted by the Defendant’s solicitors in the letter dated 5.7.2023 to the Plaintiff’s solicitors wherein the Defendant required the Plaintiff to show proof by

15.7.2023 that the extension of the PS has been approved by HSBC and will be effected before the expiry date of 31.7.2023. [12] It was further submitted that the Plaintiff has failed to extend or maintain the PS which expired on 31.7.2023 even though –

in paragraph 5 of the Plaintiff’s letter dated 1.6.2023 to HSBC, the Plaintiff said that"…we seek your kind cooperation in extending the Bond until 31-July-2025. The extension would ensure that we are not in breach of the Subcontract Agreement, …”. This shows that the Plaintiff at all material times understood that the PS must remain in effect with any failure to maintain or extend the same amounting to a breach; and

the Plaintiff had given an undertaking that it would extend the PS beyond its current expiry date of 31.7.2023 (see para 24 in AIR

which was affirmed by the Plaintiff on 2.6.2023 and filed on 5.6.2023 for the Defendant’s application in O.S. No. WA-24C-15- 02/2023 under para 16(1)(b) of the Construction Industry Payment and Adjudication Act 2012 [Act 746] (‘CIPAA’) for an order that the Adjudication Decision (‘AD’) made on 18.8.2022 and all execution proceedings arising from the AD be stayed while the subject matter of the AD is pending final determination by way of arbitration). [13] The Defendant maintained that it was compelled to file the instant application since there is no other way to secure the Plaintiff’s proper performance and the PS until the issuance of the Subcontractor’s Performance Certificate. The Subcontract Defects Notification Period of 730 days has not even commenced. It was contended that if the Injunction Order remains, it will be harsh, unworkable and detrimental to the Defendant and expose it to severe risk as there is nothing to secure the Plaintiff’s performance of its obligations under the Subcontract Agreement. [14] I have considered the submissions of the parties and I find that there is no material change in circumstances for the following reasons:

The correspondence between the Plaintiff and HSBC after the Injunction Order shows that the status quo is maintained as the monies under the BG would be preserved post-31.7.2023 pending final disposal of all disputes between the parties in the arbitration proceedings, irrespective of whether the BG has expired or not. The relevant correspondence (exhibits “NT-1” and “NT-2” in encl. 100) is summarised as follows:

On 1.6.2023, the Plaintiff had, on its own and before any demand to extend the BG was made by the Defendant, wrote to HSBC to inform regarding the Injunction Order and the decision of this Court in respect of the applications under ss 15 and 28 of the CIPAA. The Plaintiff additionally stated its position that it has substantially completed the subcontract works but the Defendant has not issued the Subcontractor’s Performance Certificate due to continuing delays in the project. As the arbitration proceedings is likely to take another two years to complete and the BG will expire on 31.7.2023, the Plaintiff requested HSBC to extend the BG until 31.7.2025 to ensure that the Plaintiff is not in breach of the Subcontract Agreement, which would in turn inhibit any further unconscionable actions by the Defendant.

(ii) HSBC, vide its letter dated 14.6.2023 to the Plaintiff, informed that HSBC is not agreeable to extend the expiry date of the BG and is of the view that it is required to maintain the BG pending final disposal of all disputes between the Plaintiff and the Defendant in arbitration as pronounced in the Injunction Order. HSBC made it clear that it has not processed the Defendant’s claim on the BG which was received on 10.8.2022 and that, pursuant to the terms of the facilities offer letter to the Plaintiff, the Plaintiff shall continue to pay commission fees on the BG for the full liability period, notwithstanding that it is beyond the expiry date.

(iii) On 15.6.2023, the Plaintiff sought written confirmation from HSBC as to whether it will process the Defendant’s demand on the BG in the event the injunction is lifted after the expiry date of the BG on 31.7.2023 plus 56 days. HSBC confirmed in the affirmative in its reply vide the letter dated 20.6.2023 as follows: “Kindly be informed that the Bank will, subject to the terms of the Bank Guarantee, process the claim made on the Bank Guarantee by the Beneficiary which the Bank has received on 10 August 2022 (“August 2022 Claim”) in the event that the relevant injunction or court orders prohibiting payment and/or receipt of payment under the Bank Guarantee has been uplifted/expired post (and notwithstanding) the Expiry Date of the Bank Guarantee, unless there is a final court order instructing otherwise and/or declaring that the August 2022 Claim to be invalid.”.

(iv) The Plaintiff wrote to HSBC again on 28.7.2023 (after the case management before me for the present application on 26.7.2023) to seek confirmation as to whether it is HSBC’s position that the entire BG has been accounted for pursuant to the Defendant’s call on the BG on 10.8.2023 and consequently, there is no BG to extend and that the expiry of the BG on 31.7.2023 will have no bearing on HSBC’s obligation to pay the Defendant the sum of the BG is so ordered by the arbitral tribunal at a later date. HSBC responded on 1.8.2023 that –

(A) it will maintain the status quo of the BG until final disposal of the dispute between the Plaintiff and the Defendant with regards to the call on the BG, regardless of the expiry date of the BG;

(B) there is no extension of the BG as there is a pending claim made by the Defendant on 10.8.2022 that has yet to be processed due to the Injunction Order; and

(C) notwithstanding the expiry of the BG, HSBC will process the Defendant’s call on the BG if the relevant injunctions or court orders prohibiting payment and/ or receipt of payment under the BG has been uplifted/ expired; the Defendant’s claim on 10.8.2022 fulfils the terms and conditions of the BG; and there is no final court/ arbitral order instructing otherwise and/ or declaring that the Defendant’s call on the BG to be invalid or that the Defendant is not entitled to payment under the BG.

In the light of HSBC’s views on the status of the BG, it is not possible for the Plaintiff to renew the BG even if it wants to do so. As such, the allegation that the Plaintiff has refused to extend the PS is misconceived.

The Subcontract Agreement only requires the Plaintiff to provide a PS to the value of 10% of the subcontract price. The Defendant has made a call on the BG in full, however the Injunction Order prevents HSBC from making any payment to the Defendant under the BG. In other words, the entire security is accounted for and there is no express provision in the Subcontract Agreement which imposes an obligation on the Plaintiff to provide further security in the circumstances of this case. [15] For completeness, the Court is of the following view with regards to the following cases which were cited by the Plaintiff:

In Gumusut-Kakap Semi-Floating Production System (L) Ltd v Sabah Shell Petroleum Co Ltd [2017] MLJU 877 (HC), Lee Swee Seng J (now JCA) had on 20.10.2016, granted an ex parte injunction order to restrain the defendant from receiving monies under the performance bond subject to the usual undertaking as to damages. On 3.11.2016, the court granted an ad interim injunction order with a provision for the bond to be renewed “out of an abundance of caution”. However, on 4.11.2016, the bank confirmed that the bond does not need to be extended or renewed as the demand on the bond had been made, and that the sum under the bond would remain available until the court disposes of the suit. The court then, on 10.11.2016, varied its earlier order to remove the obligation to renew or extend the bond. The similarity between Gumusut-Kakap and the present application before this Court lies in the confirmation by the guarantor bank that there is no necessity to extend the bond once a call has been made on the same.

The Brief Grounds by Nadzarin Wok Nordin J in Kuala Lumpur Originating Summons No. WA-24C-13-02/2023 (‘Suit 13’) between Global Wall (Malaysia) Sdn Bhd and the Defendant (exhibit “NT-3”, encl. 100) where, in para 19, His Lordship found that the demand on the BG was motivated by the Defendant being in financial distress. The Plaintiff relied on this finding in affirming that “… there is no surprise that the Defendant would want the Plaintiff to provide a new bank guarantee so as to allow the defendant to call on said new bank guarantee to aid its financial situation or simply to put strain on the Plaintiff with the hope that the Plaintiff will back down from pursuing its lawful entitlements.” (see para 23, encl. 100). However, in my opinion, the facts in Suit 13 are distinct and irrelevant to the instant application. There is simply insufficient evidence to link the outcome of Suit 13 as the impetus for the Defendant to file the instant application in this Court. Conclusion [16] Premised on the aforesaid considerations, the Court is not convinced that there is a material change in circumstances after the date of the Injunction Order to warrant a discharge of the same. Accordingly, the Defendant’s application in encl. 91 was dismissed with no order as to costs. [17] Following the request made by the Defendant’s counsel, which was accepted by the Plaintiff’s counsel with full reservation of the Plaintiff’s rights, the Defendant is allowed to make a demand on the BG (25.9.2023 being the last day that such demand can be made) but the Defendant is still restrained from receiving the sums thereunder in accordance with the terms of the Injunction Order and the Plaintiff’s rights are reserved. Dated: 27 October 2023 (ALIZA SULAIMAN) Judge Construction Court 2 High Court Kuala Lumpur Counsels/ Solicitors: For the Plaintiff: James Monteiro (Vishal V Kumar and Ban Qiao Hui with him) Messrs. James Monteiro Advocates & Solicitors D4-6-1, Solaris Dutamas No. 1, Jalan Dutamas 1 50480 Kuala Lumpur For the Defendant: Kuhendran Thanapalasingam (Daniel Lau Hsien Yuong and Agesh Krishendra Jeyaratnam with him) Messrs. Zul Rafique & Partners Advocates & Solicitors D3-3-8, Solaris Dutamas No. 1, Jalan Dutamas 1 50480 Kuala Lumpur Cases, legislation and other sources referred to in the submissions by learned counsels and in the Grounds of Judgment: Cases: AAR and another v. AAS (liquidator and trustee of B and others) and others [2009] 4 SLR(R) 33 Blue Valley Plantation Bhd v. Periasamy a/l Kuppannan & Ors [2011] 5 MLJ 521 Bumi Armada Navigation Sdn Bhd v. Mirza Marine Sdn Bhd [2015] 5 CLJ 652 Empire Holding Ltd v Suruhanjaya Sekuriti Malaysia & Ors [2023] MLJU 1034 Eversendai Constructions (M) Sdn Bhd v Samsung C&T Corporation UEM Construction JV Sdn Bhd [2023] MLJU 2025 Gumusut-Kakap Semi-Floating Production System (L) Ltd v Sabah Shell Petroleum Co Ltd [2017] MLJU 877 Henderson v Henderson [1843-60] All E.R. Rep. Liberty Mercian Ltd v Cuddy Civil Engineering Ltd and another [2013] EWHC 4110 (TCC) Liberty Mercian Ltd v Cuddy Civil Engineering Ltd and another [2014] EWHC 3584 (TCC) Liberty Sky Investment Ltd v. Goh Seng Heng and another [2017] SGHC 182 Livesey (formerly Jenkins) v. Jenkins [1985] 1 All ER 106 London Underground Ltd v. National Union of Railwaymen (No. 2) [1989] IRLR 343 Metalform Asia Pte Ltd v. Holland Leedon Pte Ltd [2009] 4 SLR(R) 83 N v N [2014] EWCA Civ 314, 2014 WL 1097062 The Store (Terengganu) Sdn. Bhd. v Abi Construction Sdn. Bhd. & Anor [2013] MLJU 1650 WRP Asia Pacific Sdn Bhd & Anor v Tael Tijari Partners Ltd & Ors [2019] 1 LNS 1645; [2019] MLJU 1244 Legislation: Construction Industry Payment and Adjudication Act 2012, ss 15, 16(1)(b) & 28 Rules of Court 2012, O. 92, r. Other sources referred to: Chow Kok Fong, Law and Practice of Construction Contracts, Fifth Edition, Volume 1, Sweet & Maxwell Asia, 2018 Iain S. Goldrein QC, Professor Sir Robin Jacob, Michael Kershaw QC, His Honour Judge K. Wilkinson & other authors, Commercial Litigation: Pre-Emptive Remedies, Sweet & Maxwell, 1991 Robert Lazar (General Editor) and a team of expert contributors, Law and Practice of Injunctions in Malaysia, Sweet & Maxwell, 2020