Kayangan Kemas Sdn Bhd v Exyte Malaysia Sdn Bhd (WA-24NCC-57-01/2026)

EXYTE MALAYSIA SDN BHD [NO. SYARIKAT: 200301034750 (0637171-K)]

AMBANK (M) BERHAD [NO. SYARIKAT: 196901000166 (8515-D)] …DEFENDAN-DEFENDAN

The Plaintiff is a sub-contractor who was awarded a RM330 million lump sum sub-contract to complete a package of works at a Penang work site (“Contract”). By this Originating Summons, the Plaintiff sought an injunction to restrain the 1st Defendant main-contractor, from receiving the proceeds of two on-demand bank guarantees.

The Plaintiff invoked section 11(1) of the Arbitration Act 2005 to maintain the status quo pending arbitration between the parties in Singapore. It filed an ex parte Notice of Application to secure an urgent hearing (Enclosure 2) and was granted an ad interim injunction on 26-1-2026 until disposal of the Originating Summons on 27-4-2026. Background facts

The Contract works relate to the construction of a 13-storey car park building with office and M&E utility space for a project owned by Intel Electronics (Malaysia) Sdn Bhd (“Works”). The Contract period was initially 15 months from 5-7-2022 until 5-10-2023, with one agreed extension to 26-10-2023. There were some later variations to the scope of the Works.

The Contract terms required the Plaintiff to furnish a performance guarantee in the amount of 10% of Contract price or RM33 million, which the Plaintiff did with Performance Bond Ref. No. T80722IBG1055332 dated 29-8-2022 issued by the 2nd Defendant to the 1st Defendant (“Performance Bond”).

At the request of the Plaintiff, an advance payment of 10% of the Contract price or RM33 million was invoiced to and paid by the 1st Defendant. It was secured against a second bank guarantee, i.e. Advance Payment Bond Ref. No. T80722IBG1055331 dated 29-8- 2022 issued by the 2nd Defendant to the 1st Defendant (“AP Bond”).

Both the Performance Bond and AP Bond (collectively, “Bonds”) were immediately due and payable upon written demand by the 1st Defendant to the 2nd Defendant, advising that the Plaintiff has not fulfilled its obligations under the Contract. The Bonds were to remain valid until final acceptance of the Works and until the advance payment is fully amortised respectively.

The amortization of the AP Bond was at a fixed 15% of the interim Certificates of Payment (“COPs”) commencing when the total cumulative certified payment value (inclusive of payment for materials on site) reached a threshold of 30% of the Contract Price.

The parties fell into dispute, primarily over the issue of delay in the progress of the Works. There were fairly typical complaints of inadequate manpower and resources levelled by the 1st Defendant, and competing complaints by the Plaintiff of late handover, unanswered extension of time applications (“EOT”) and back charges for additional labour, machinery and resources allegedly deployed by the 1st Defendant.

The Plaintiff initiated an adjudication under the Construction Industry Payment and Adjudication Act (“CIPAA”) on 2-5-2024 to recover RM6,348,255.38 in back charges, deducted from 19 COPs by the 1st Defendant when the total gross certified work done amounted to RM182,066,212.89.

On 10-10-2024, the adjudicator dismissed the claim and ruled that: a) save for 10 days, the 1st Defendant was not in delay in the handover of such part of the site sufficient for the Plaintiff to execute the works and that it was the Plaintiff who was in delay in the execution of the works; and b) the 1st Defendant was entitled to deduct the RM6,348,255.38 from COP 2 to 11. (“Adjudication Decision”)

The Bonds were renewed multiple times after its initial 15-month period of validity. At the time of the demand on the Bonds by the 1st Defendant on 26-1-2026, both were on their 10th renewal and were due to expire on 31-1-2026. The following are events immediately preceding the demand on the Bonds: a) on 30-12-2025, the Plaintiff commenced arbitration against the 1st Defendant, alleging under-certification of payment claims for work done, prolongation and disruption costs, finance charges and wrongful deduction of back-charges amounting to RM200,997,041.49 as at COP 37; b) on 16-1-2026, the 1st Defendant issued COP 39 to the Plaintiff for cumulative work done as at 31-12-2025, valued at RM249,010,352.83. Notably, COP 39 highlighted a cumulative deduction for back charges amounting to RM48,041,203.87, maximum contractual liquidated damages (“LD”) in the amount RM2,285,000.00 and a 10% retention sum totaling RM33,259.617.41, leaving a net sum owed by the Plaintiff to the Defendant in the amount RM3,575,267.79; and c) on 20-1-2026, the Defendant filed its Answering Statement and Counterclaim in the arbitration and asserted a counterclaim for RM257,979,133.38, the components of which are dealt with further down in this judgment.

As noted, on 26-1-2026, the 1st Defendant demanded the full RM33 million of the Performance Bond and RM15,443,670.67 being the un-recouped advance payment. The 1st Defendant asserts that it did not know whether the Plaintiff would renew the Bonds for an 11th time. It turns out that the Plaintiff did, in fact, do so, albeit only for a short period. Analysis and findings

There was no argument that section 11 of the Arbitration Act 2005 is improperly invoked in this case. The parties also appeared to be on common ground that both Bonds are on-demand guarantees, in that there are no conditions other than a written demand by the 1st Defendant “advising [the 2nd Defendant] that [the Plaintiff] has not fulfilled its obligations under the Contract.” Accordingly, there was no requirement to prove the breach.

With limited exceptions, the courts have consistently emphasised that on-demand guarantees must be honoured once a compliant demand is presented, regardless of disputes in the underlying contract. As the 1st Defendant’s demand on the Bonds are compliant in form, and there is no allegation of fraud, the only question is whether the demand was unconscionable.

As set out by the Federal Court in Sumatec Construction & Engineering Sdn Bhd v Malaysian Refining Co Sdn Bhd [2014] 4 MLJ 1 (“Sumatec”), unconscionability is a separate and independent ground to allow for a restraining order on a beneficiary even if it has presented a compliant demand on an unconditional, on-demand guarantee.

The Federal Court in Sumatec also confirmed that to invoke the Court’s jurisdiction to restrain an otherwise compliant demand, there must be manifest or strong evidence (not just a bare assertion), of a strong prima facie case of unconscionability, noting that: “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.”

There are no pre-determined categories of what qualifies as unconscionable. It is fact-specific and must be decided on a case by case basis (Kejuruteraan Bintai Kindenko v Nam Fatt Construction Sdn Bhd & Anor [2011] 7 CLJ 442).

The AP Bond in this case served to secure the performance of a different obligation than the Performance Bond i.e. it is security for the repayment of the 1st Defendant’s RM33 million advance payment to the Plaintiff. Regardless of the underlying obligation secured, the validity of demands on all on-demand guarantees is evaluated on the same principles.

The Plaintiff argued that the demand on the AP Bond was “tainted” by the unconscionability of the 1st Defendant’s demand on the Performance Bond, and the same facts were asserted to argue that the demand on both Bonds were equally unconscionable without distinction, i.e.: a) that the Contract works were substantially completed when the demand was made on the Bonds; b) that the demand was in retaliation to the Plaintiff’s referral of the disputes to arbitration considering the temporal proximity of the 2 events; c) that the 1st Defendant has not properly and/or fairly assessed the Plaintiff’s EOT claims and made wrongful deductions on certified payments; and d) that the 1st Defendant has set up an unmeritorious inflated counterclaim in the arbitration.

This Court finds that the above complaints are unconnected to the obligations secured by the AP Bond, because the Plaintiff has not accounted for the un-recouped advance payment anywhere when it put forward its claims for payment in the arbitration. Thus, it cannot be said that the remaining RM15,443,670.67 from the advance payment has been off-set by performance.

As it stands, there is no real dispute that the un-recouped sum of RM15,443,670.67 is a debt which, according to the 1st Defendant, could no longer be recovered through the intended contractual mechanism as the Works were close to completion. In fact, it is the Plaintiff’s case that the Works were substantially completed when the demand was made.

Factually, it appears that full amortisation of the advance payment had been deferred at the Plaintiff’s request in the light of the other contractual deductions being made by the 1st Defendant. Thus, the failure or inability to amortise the advance payment in time before the substantial completion of the project is also the consequence of a voluntary waiver of rights by the 1st Defendant.

Regardless why the RM33 million advance payment is not yet fully amortised, this Court agrees that there is no dispute about the Plaintiff’s liability to repay the un-recouped balance. As an on-demand guarantee, the AP Bond is designed to secure against the very risk that the advance payment is not properly amortised.

In principle therefore, the 1st Defendant is entitled to make a demand on the AP Bond to recover the outstanding balance of the advance payment. On the prevailing facts, this Court finds nothing unconscionable about the 1st Defendant’s demand on the AP Bond to make good the debt.

Before the 1st Defendant made the demand on the Bonds, the Plaintiff had commenced arbitration on 30-12-2025, and the 1st Defendant answered the claim on 20-1-2026 with a counterclaim. The 1st Defendant argued that one had nothing to do with the other, and that there is nothing unconscionable about the call on the Performance Bond either.

The 1st Defendant listed a host of contractual defaults by the Plaintiff in its demand on the Performance Bond. Logically, the 1st Defendant must also have accrued real losses arising from the defaults to justify the demand. Although proving the losses is unnecessary, the legitimacy of the claims must be considered when assessing the risk of loss and whether the demand on the Performance Bond is unconscionable.

Based on the Contract terms, the 1st Defendant had been in a position to exercise self-help to deduct and set off sums from the Plaintiff’s certified claims to redress what it says are the Plaintiff’s contractual defaults. The 1st Defendant has deducted maximum contractual LD and substantial amounts in back charges.

The validity of the deductions made by the 1st Defendant on account of LD and back charges, and the Plaintiff’s competing entitlement to EOT and related delay losses, are all matters in dispute in the arbitration. It is clearly not the function of this Court to form any conclusive view on the relative merits of matters pending in arbitration.

Until a final determination in the arbitration, this Court also does not consider itself bound by findings made in the Adjudication Decision. The recognition of an adjudication decision for enforcement under CIPAA serves only the limited policy function of securing cash flow in construction projects and is not intended to finally determine any rights and liabilities.

A dismissed adjudication claim under CIPAA produces no enforceable order, and therefore no binding determination of rights or liabilities. Although the adjudicator agreed with the 1st Defendant that it had a contractual right to deduct back charges, the finding is only provisional now that the issue is pending arbitration.

In any case, the rejected claim in the adjudication was for the refund of deductions to the Plaintiff’s certified claims at the stage of progress in the works at that time. The more important fact is that the sum claimed by the Plaintiff had already been set off and deducted by the 1st Defendant.

For present purposes, this Court is not concerned with the Plaintiff’s claims. It is only concerned with the 1st Defendant’s claims, for it is only the risk of loss arising from these claims that can fairly justify a call on the Performance Bond as at 26-1-2026.

According to the 1st Defendant, fresh claims accrued after 31-12- 2025 (COP 39) and for a period of 20 days such that its arbitration counterclaim amounted to RM235,346,256.28 comprising the following components: a) RM3,575,267.79 in un-deducted back charges as at COP 39; b) RM22,485,950.71 in back charges after COP 39 (and continuing) to expedite the progress of the works and to remedy both the remedy both the delays and correct defective works attributable to the Plaintiff; c) RM3,690,000.00 interest accrued on the RM33 million AP Bond; d) RM80,510,000 in project management costs, additional insurance coverage, extended equipment warranties and additional manpower expenses due to delay in obtaining CCC; e) RM124,814,938.18 disruption and loss of efficiency/ productivity, including but not limited to engaging additional contractors to accelerate progress of works, disruption to other subcontractor works, claims from such contractors, repeated mobilisation, inefficient handling of materials, additional storage requirements, working out of sequence, and increased use of plant and equipment. Interest on advance

This Court first considered the RM3,690,000.00 interest claim, said to have accrued on the RM33 million advance payment. The sum was derived by imposing 6% interest per annum on RM33 million over 2 years. On the face of it, this cannot be correct. Admittedly, there was no contractual basis for the rate and the calculations did not account for the RM17,556,329.33 recouped through amortisation.

Further, it was noted that the 1st Defendant had acquiesced to the deferment of recoupment through amortisation and in the absence of any agreement as to the terms of this deferment, the claim for interest is questionable on both principle and quantum. Back charges

Based on COP 39, the 1st Defendant had already assessed and deducted a cumulative sum of RM48,041,203.87 in back charges, allegedly for work done by others in respect of the Plaintiff’s scope of Works, to remedy both the delays and defective works attributed to the Plaintiff.

In submissions, the 1st Defendant alleged that a further RM22,485,950.71 in back charges were raised after COP 39 (and continuing). However, in the arbitration counterclaim, the 1st Defendant claims that it has deducted RM39,561,630.38 as at COP 38 and has “incurred and will continue to incur substantial costs, losses, and/or damages amounting to RM8,479,573.49 that have yet to be backcharged as at 20.1.2026.”

The purpose of the back charges was, presumably, to neutralise the alleged failure by the Plaintiff to carry out the Works regularly and diligently with sufficient manpower, materials and equipment. This was effected, and deductions were taken from time to time from the value of certified work done.

At the time of COP 39, the Works were at least 97% complete, though the Plaintiff pitches it at a higher percentage. Even if 97% is accepted, the 1st Defendant cannot approbate and reprobate by relying on this fact to justify its call on the AP Bond—namely, by contending that the outstanding advance cannot be fully amortised against the remaining payment claims—while failing to recognise that, on that very premise, any back charges it asserts should logically be correspondingly limited.

For the above reason alone, the back charges of RM22,485,950.71 in the 20 days after COP 39 did not sit well with the Court and the prevarication in the figures stated in the arbitration counterclaim raises questions about the RM48,041,203.87 already deducted.

This Court also notes that back charges were also incurred to correct defective works attributable to P, even though the 1st Defendant is withholding a total Retention Sum of RM33,259,617.41 for this purpose. Other costs/expenses

Finally, the 1st Defendant has advanced a further counterclaim in excess of RM200 million comprising the two components of loss (RM80,510,000.00 and RM124,814,938.18) respectively described above as project management costs etc. and disruption and loss of efficiency/productivity etc. The latter amount is quantified at a still higher sum in the arbitration counterclaim.

According to the Plaintiff, the eye-watering quantum of claims were articulated for the first time in the arbitration counterclaim, while the 1st Defendant took the position that it had reserved the right to claim this from the Plaintiff. Be that as it may, this Court was unable to overlook the glaring issue of their recoverability as a matter of proof (the claims are supported only by a self-generated spreadsheet with no accompanying primary evidence) and the law on damages.

The parties are on common ground that contractual LD clauses under Malaysian law caps the sum that can be claimed as delay losses (Golden Bay Realty Pte Ltd v Orchard Twelve Investments Pte Ltd [1989] 2 MLJ 70, Cubic Electronics Sdn Bhd (in liquidation) v Mars Telecommunications Sdn Bhd [2019] 6 MLJ 15 (“Cubic Electronics”)).

In Cubic Electronics, the Federal Court held: “[69] Notwithstanding the foregoing, it must not be overlooked that s 75 of the Act provides that reasonable compensation must not exceed the amount so named in the contract. Consequently, the impugned clause that the innocent party seeks to uphold would function as a cap on the maximum recoverable amount.”

In this case, the capped LD sum of RM2,285,000.00 has already been deducted as at COP 39 and, presumably, represents a genuine pre-estimate of the contemplated heads of loss that accrues when there is a delay in completion of the Contract works. To overcome this point, the 1st Defendant argued that its other heads of loss are separate from and in addition to LD.

The description of many of the alleged costs and expenses listed by the 1st Defendant are however, clearly delay related. As pleaded in the arbitration counterclaim: …

There also seems to be some overlap in the description of losses under this head, with the additional labour costs to expedite works being incurred by the 1st Defendant and back charged to the Plaintiff with 8% administrative charges.

For the above reasons, this Court is of the view that there is merit in the argument that the 1st Defendant’s alleged counterclaim appears to be inflated. Based on COP 39, the 1st Defendant acknowledges that it has deducted LD and back charges. The net result of COP 39 is that the Plaintiff allegedly owes the 1st Defendant only RM3,575,267.79, and the maximum LD of RM2,850,000.00 for contemplated delay losses has already been deducted.

Technically, the 1st Defendant could have made a demand on the Bonds immediately after COP 39 as according to the 1st Defendant, the Plaintiff had by then already defaulted on the Contract and there is a sum of money due. However, the amount owed is only RM3,575,267.79 according to COP 39.

The massive RM235,346,256.28 claim (or RM257,979,133.38 in the arbitration counterclaim) a short time later as at 20-1-2026, gives rise to a realistic inference that it was formulated in response to the Plaintiff’s arbitration claim of a similar order of magnitude. The counterclaim figure stands in stark contrast to COP 39.

In any case, the 1st Defendant has already deducted substantial amounts from the Plaintiff’s certified claims and/or allegedly under-certified the Plaintiff’s claims to the tune of over RM200 million. This arbitration counterclaim is not only in excess of the RM33 million available on the Performance Bond, but also of the Plaintiff’s arbitration claim. This conveniently removes any argument that, if the 1st Defendant relies solely on COP 39, the Plaintiff’s claim far exceeds the 1st Defendant’s.

In China Construction Pearl River (M) Sdn Bhd v. Industrial And Commercial [2022] 7 CLJ 211, the High Court restrained the pay-out and receipt of a performance bond monies pending arbitration because the party demanding it was over-securitised and its losses were a projected estimate and wholly speculative.

On the facts of this case, the 1st Defendant already enjoys a high level of securitisation in the form of the contractual retention sum, disputed back charges and under-certifications, all of which are being claimed in the arbitration. Together with the contemporaneous COP 39, the figures advanced in the arbitration counterclaim and the timing of the demand, this level of securitisation represents strong evidence and not just a bare assertion that the demand was probably retaliatory, opportunistic and thus unfair because of the minimal risk of loss to the 1st Defendant. This makes the demand unconscionable. Balance of convenience

As a secondary consideration, this Court notes that the grant of interim injunctions is ultimately a discretionary remedy. On finding that there is unconscionability in this case, the attention of this Court was also brought to the 1st Defendant’s latest available reported financial results (FYE 31-12-2024):

The 1st Defendant, a wholly owned by a Singaporean holding company, has negative retained earnings and a recorded pre-tax loss of RM465,345,000.00 despite revenues of over RM2.3 billion in the financial year ending 31-12-2024. With these financial results, the balance of convenience also militates in favour of maintaining the status quo with an injunction pending the outcome of the arbitration.

For the above reasons, this Court allows Enclosure 1 in part as follows:

An injunction against the 1st Defendant, to restrain the 1st Defendant, its servants and/or its agents until the determination of the arbitral tribunal in the arbitration between the parties instituted in Singapore under the AAA Rules, from receiving any monies from the 2nd Defendant pursuant to any call or demand on Performance Bond T80722IBG1055332 dated 29.8.2022 with its full value of RM33,000,000.00 (or sum equivalent to it) and/or any sums in any manner;

An injunction against the 2nd Defendant, to restrain the 2nd Defendant, its servants and/or its agents from making payment on the Performance Bond with its full value of RM33,000,000.00 and/or any sums in any manner to the 1st Defendant;

A penal notice pursuant to Order 45, rule 7 of the Rules of Court 2012 be endorsed in the Order; and

No order as to costs.

Enclosure 2 is struck out with no order as to costs. Bertarikh: 04 Mei 2026 ELAINE YAP CHIN GAIK PESURUHJAYA KEHAKIMAN MAHKAMAH TINGGI MALAYA KUALA LUMPUR Peguam Untuk Plaintif: Chong Yee Leong (Lilian Saw Soh Zhen Ning bersamanya) Tetuan Rahmat Lim & Partners Untuk Defendan Pertama: Rodney Gomez (Esther Khor Hui Hui dan Prem Sanghvi bersamanya)