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IN THE COURT OF APPEAL AT PUTRAJAYA APPEAL NO W-01(NCVC)(W)-14-01/2015 BETWEEN GLOBAL UPLINE SDN. BHD. ... APPELLANT AND KERAJAAN MALAYSIA ... RESPONDENT Heard together with IN THE COURT OF APPEAL AT PUTRAJAYA APPEAL NO W-01(NCVC)(W)-22-01/2015 BETWEEN KERAJAAN MALAYSIA ... APPELLANT AND GLOBAL UPLINE SDN. BHD. ... RESPONDENT [In the matter of High Court Malaya at Kuala Lumpur Civil Trial No. No.21NCVC-257-12/2012 Between Global Upline Sdn Bhd ... Plaintiff And Kerajaan Malaysia ... Defendant CORAM: LIM YEE LAN, JCA DAVID WONG DAK WAH, JCA ABANG ISKANDAR BIN ABANG HASHIM, JCA JUDGMENT OF THE COURT Brief facts of case [1] The Plaintiff in this appeal before us is Global Upline Sdn Bhd ("the Plaintiff") a company incorporated in Malaysia and the Government of Malaysia is the Defendant ("the Defendant"). [2] By way of a letter of intent dated 17 February 2005 from the Defendant and a subsequent letter of acceptance dated 9 November 2005, the Plaintiff agreed to carry out works in connection with the upgrading of Labuan Airport for a total sum of RM365 million ("the contract price"). However, the contract price was later on reduced to RM342,313,912.46. [3] As required under the Letter of Acceptance, the Plaintiff furnished the Defendant with a performance bond from Bank Muamalat ("the Bank") in the sum of RM18,250,000.00 being 5% of the contract price. The sum was later reduced to RM 9,125,000.00 on 28 February 2011. [4] A contract agreement was duly executed by the parties on 22 March 2006 ("the contract") with its terms and conditions therein, including the Liquidated Ascertained Damages ("LAD") clause. [5] The Plaintiff was granted the $ 1^{\mathrm{st}} $ extension of time of 173 days by the Defendant through Extension of Time Certificate No.1 ("the $ 1^{\mathrm{st}} $ EOT") dated 8 January 2009 with the new date for completion being 30 April 2009. [6] The Plaintiff then made a $ 2^{\mathrm{nd}} $ application of time vide its notice dated 14 April 2009 ("the $ 2^{\mathrm{nd}} $ EOT"). [7] By way of letter dated 29 April 2009, the Defendant informed the Plaintiff that it was imposing provisional LAD of RM 32,131.05 per day for all interim payments made after 30 April 2009. [8] The Plaintiff was further informed that as construction was to extend beyond 31 July 2009, the Defendant would then issue the Certificate of Non-Completion and LAD would be permanently imposed. [9] In the meantime, the Plaintiff managed to complete a few buildings before the original date for completion on 8 November 2008 and the Defendant issued Taking-Over Certificates ("TOCs"). [10] As at 31 July 2009, the Plaintiff had completed 99% of the Works, but the Defendant issued a Certificate of Non-Completion dated 8 October 2009 certifying that the Plaintiff failed to complete the works by 30 April 2009 and imposing LAD commencing 1 May 2009. [11] The Certificate of Practical Completion ("CPC") was issued on 19 October 2010 certifying that the Works were completed on 12 April 2010. [12] To date, the Defendant retained a total sum of RM11,149,474.35 as LAD from 1 May 2009 to 12 April 2010. [13] Apart from the LAD, the Defendant also retained a further sum of RM650,000.00 paid by the Plaintiff to the PWD for repair of certain public roads and also RM399,795.23 due to the Plaintiff under the contract. [14] On 20 September 2012, the Defendant prepared a notice to the Bank claiming the sum of RM9,125,000.00 under the performance bond for the Plaintiff's failure to perform under the Contract. [15] Although there was negotiation on the performance bond, the same was called and the Bank released the monies on 1 November 2012. [16] As a result, the Plaintiff now claimed for the LAD, and the 2 other sums retained by the Defendant as well as for the performance bond to be refunded to them as they have completed the contract. [17] After full trial, the learned Judicial Commissioner ("JC") allowed the Plaintiff's claim for the LAD, and the 2 sums retained by the Defendant, but dismissed the Plaintiff's claim for performance bond. [18] Dissatisfied with the decision, the Plaintiff appealed against it against PART of the decision on the performance bond only vide Appeal W-01(NCVC)(W)-14-01/2015, while the Defendant had also filed an appeal against the decision on the issue of LAD and the 2 sums retained by the Defendant vide appeal W-01(NCVC)(W)-22-01/2015. The Appeals [19] We heard the two appeals together as early as 27 October 2015 but after a series of postponements the hearing of these appeals was completed on 3 October 2017. Among other reasons of the delay was the Defendant's intention to file Supplementary Record of Appeal out of time and to include minutes of meeting held on 21 January 2010 and 19 March 2010 in the record vide Notice of Motion Enclosure 10a. In the course of exchanging affidavits, the Plaintiff on the other hand filed an application to expunge from the Record of Appeal the affidavit affirmed by one Burhan Irwan Cheong on 9 June 2016 (the disputed affidavit) filed by the Defendant in support of application at Enclosure 10a. [20] Having heard submissions on the said application, we had dismissed the said Notice of Motion Enclosure 10a and allowed Enclosure 30a and proceeded with the hearing of the main appeals. [21] Having heard parties on the main appeal, we had dismissed the appeal by the Defendant Government of Malaysia and also we had dismissed the Plaintiff's appeal on the issue of the performance bond. We had since been informed that the Plaintiff was aggrieved by our decision and had since filed application for leave to appeal to the apex Court. No such action was taken by the Government of Malaysia. As such, this Ground of Judgement shall only be dealing with the appeal lodged by the Plaintiff for the Performance bond issue. The parties will be referred to by us as they appeared in the High Court, in this ground of appeal. [22] The Plaintiff's case on the performance bond was one of the complaints it had against the Defendant and was one of the heads of claim that it had filed in the writ against the Defendant. [23] As a brief background, the issue that surrounded this performance bond had been this. As would be usual in most contracts for works of sizeable magnitude, the project owner would insist on the inclusion of a performance bond provisions in the contract documents between the contracting parties. In this case, the contract value was nearly half a billion ringgit involving the construction of the Labuan Airport. The fact that the project was not completed within the stipulated time was not in issue. This would be easily discernible from a short chronology pertaining to the same, which had invariably led to the calling on the performance bond by the Defendant. The Plaintiff was not happy with this event and had cried foul, alleging that the Defendant had breached the contract when it called on the performance bond. [24] The learned JC had considered the evidence before her and she had concluded that the Defendant had been correct when it called on the performance bond. Her rationale was contained in her Grounds of Judgement at paragraphs 38, 39 and 40. Our findings [25] We had considered her findings as contained in those paragraphs referred to by us. We noted that she had addressed the grievances of the Plaintiff pertaining to the alleged wrongful calling for the full amount of the performance bond by the Defendant. [26] What is a performance bond? Essentially, a performance bond is issued to one party of a contract as a guarantee against the failure of the other party to meet obligations specified in the contract. It is also referred to as a contract bond. A performance bond is usually provided by a bank or an insurance company to make sure a contractor completes designated projects. All these features were present in the performance bond we were dealing with in this appeal. Not unlike such other documents of that nature, it was put in place to ensure that the contractor performed its part of the bargain as stipulated in the contract and deliver the completed construction project as agreed between the contracting parties. Failure to deliver on the promise will invariably clothe the employer with the necessary trigger to invoke its right under the bond instrument to call on the performance bond usually for the purpose of engaging third party contractor to complete the works left uncompleted by the original contractor. Of course how a performance bond clause is worded may differ but its essence does not depart from the fundamental purpose of providing a form of guarantee given by the contractor which is liable to be called upon by the employer on the occurrence of a breach that results in the failure by the contractor to deliver on its promise to deliver up the completed project within the agreed time frame as per the contract. [27] Now, in this appeal, Clause 10 of the Agreement was referred to by the Plaintiff. This Clause 10 had related to matters pertaining to the performance bond. According to the Plaintiff, the right to call on the performance bond must be dependent upon the Defendant's estimated costs of repairing the outstanding works. The learned JC had rejected this interpretation to Clause 10. She described such interpretation as being a 'flawed' one. [28] We had sighted Clause 10 of the Agreement and we must, with respect, express our view that the learned JC was correct in taking the position that she had taken on the matter. Indeed, there was nothing in Clause 10 that would be capable of suggesting the view that was taken by the Plaintiff. Rather, we were in unison in our view that Clause 10 ought to be interpreted in the manner as was done by the learned JC in the High Court. We now reproduce Clause 10 as follows: "PERFORMANCE SECURITY