M.E.B Technology Sdn Bhd v 1. ) Petrotechnic Engineering and Construction Sdn Bhd (WA-24C(ARB)-42-10/2022)

PETROTECHNIC ENGINEERING AND CONSTRUCTION SDN BHD [Company No.: 199701034734 (450233-H)]

PUBLIC BANK BERHAD [Company No.: 196501000672 (6463-H)] …DEFENDANTS GROUNDS OF JUDGMENT (Enclosure 42)

1.

maintain the status quo between the parties while pending the disposal for the appeal at the Court of Appeal

restrain the 2nd Defendant (D2), their employee and/or their agents from making any payments or making any calls under the Bank Guarantee identified as Public Bank Berhad’s Bank Guarantee No TFCG342917 (“BG”) to the 1st Defendant (“D1”) until disposal of the Appeal

The grounds for Enclosure 42 are briefly as follows:-

the Plaintiff filed a Notice of Appeal on 16.2.2023 in the Court of Appeal against the decision of the learned High Court Judge;

(ii) the Plaintiff’s appeal to the Court of Appeal is meritorious in that D1 had acted unconscionably in calling the said Bank Guarantee;

(iii) in the event a call is allowed on the said Bank Guarantee, there is a strong likelihood that the Plaintiff’s reputation with D2 would be adversely affected; and

(iv) D1 would suffer no prejudice that cannot be compensated by costs in the event the interim injunction of Erinford injunction above is granted.

This Court had heard the learned counsels for the respective parties with regards Enclosure 42 on 7.3.2022 and thereafter dismissed the same with costs of RM3,000 to be paid to D1.

By way of a Letter of Acceptance dated 2/7.2021, (which incorporated the JKR 203A (Rev.1/2010) Conditions of Contract)(the “Sub-Contract”), D1 as Main Contractor appointed the Plaintiff as the subcontractor for works more particularly known as “Proposed Construction & Completion for Rejuvenation of Seremban RSA (Southbound) at Section C5, North-South Expressway (“NSE”): (the “Works”). As a matter of backgrounds:-

4.1 The Employer of the Works is Macfeam Sdn Bhd (“Macfeam”);

4.2 By a letter of acceptance dated 2.7.2021 (“Original LOA”), D1 appointed one Amona Sdn Bhd (“Amona” and/or “Original Subcontractor”) as the subcontractor for the Works;

4.3 By a Novation Agreement dated 27.4.2022 between D1, the Original Subcontractor and the plaintiff, the Original LOA was novated by the Original Subcontractor to the Plaintiff as the new subcontractor, which takes effect from 19.8.2021.

As per the terms of the Sub-Contract, the Plaintiff was required to furnish with D1 a valid, unconditional and irrevocable bank guarantee in the sum equivalent to 5% of the Sub-Contract Sum. The Plaintiff then procured the BG rom D2 for the sum of RM1,051,567.40 (the “Guaranteed Sum”) in favour of D1.

5.1 Under Clause 3 of the BG, the BG is effective from 13.10.2021 to 12.10.2022.

5.2 Under Clause 4 of the BG, it provides that “the [Guaranteed Sum] shall become payable by [D2] in the event of failure of the [Plaintiff] to perform the [Sub-Contract] or commit any breach of his/their obligations thereunder and upon receipt of the demand by [D1] in writing”.

5.3 Under Clause 3 of the BG, the last day to issue a demand pursuant to the BG was on 24.10.2022.

It was amongst others alleged that the Plaintiff had a meritorious appeal and the same will be rendered nugatory if the status quo is not maintained. I find no basis for this as the Plaintiff can still argue the merits of its appeal at the Court of Appeal even if Enclosure 42 was disallowed and that if the Court of Appeal finds in favour of the Plaintiff at the appeal, the Plaintiff is entitled to recover back the guaranteed sum under the said BG.

On the issue of the Plaintiff’s reputation being allegedly tarnished or affected especially with the bankers, I hold that this argument is misconceived and I adopt the statement of the High Court in Envipure Sdn Bhd v Esstar Vision Sdn Bhd [2018] MLJU 534 where it was said “It was further argued that there would be deleterious financial consequences to the respondent as a result of the bank releasing the money under the guarantee. Ms Toh explained that the release of the amount of the guarantee would affect the reputation of the respondent, which in turn may affect its other banking facilities. As a consequence, damages—it was contended—would not be an adequate remedy for the respondent. While I am prepared to accept at face value that the payment by the bank may have reputational consequences (even though a call on a guarantee does not amount to an event of default, and hence would be unlikely to trigger cross default in any other facilities that the respondent may have), the fact remains that the call on the guarantee has already been made. The respondent has already been embroiled in litigation, both before me and in the construction court. In my considered view, any further reputational decline to the respondent as a result of the bank paying on the guarantee would be marginal. It is for this reason also that I reject the contention that damages are not an adequate remedy. The further point is that the respondent can easily avoid whatever adverse reputational consequences by paying simply the amount of the guarantee directly to the appellant, thereby discharging the guarantee.”

I further find that D1 is in a position to repay the Guaranteed Sum under the BG as the Companies Commission Search dated 3.10.2022, as found in exhibit LKS 15 in enclosure 43, on D1 shows that it has a share capital of RM10 million and assets of more than RM29 million.

As to the Plaintiff’s allegation that it will suffer damages which cannot be quantified and that damages would not be an adequate remedy; I have not been shown any reasons by the Plaintiff as to this allegation and therefore cannot accede to this contention.

With regards the prejudice effect submitted by the Plaintiff, I find no merit in this. I had already given my reasons for dismissing the Injunction in enclosure 1 and I do agree with D1 that based on the facts of the matter, it is critical that the Guaranteed Sum should go towards inter alia the alleged loss and expenses suffered by D1. I further hold that the balance of convenience thus lies with D1 in not allowing the Erinford Injunction.

After having perused the grounds to support Enclosure 42, I find that the Plaintiff had, on a balance of probabilities, failed to satisfy the requirements for an Erinford Injunction and I adopt what Suriyadi Halim JCA (as His Lordship then was) stated in Suibashini Rajasingam v Saravanan Thangathory (No 2) [2007] 3 CLJ 209: “[26] An Erinford injunction application is as good as a second bite at the cherry after a failed attempt at an interlocutory injunction application. Invariably it is supposed to satisfy the prayers of the failed interlocutory injunction application but within the scope of the prayers of say, in this case, the motion. The rationale, amongst others, is the premise that no judge is infallible, and unless the order was given, a successful appeal might be rendered nugatory. This principle of ensuring that a successful appeal is not rendered nugatory may be traced to the later part of Megarry J's statement in Erinford Properties Ltd v. Cheshire (supra), where he said: ... the principle is to be found in the leading judgment of Cotton LJ in Wilson v. Church (No 2) 1, where, speaking of an appeal from the Court of Appeal to the House of Lords, he said, "when a party is appealing, exercising his undoubted right of appeal, this Court ought to see that the appeal, if successful, is not nugatory". That was the principle...., and not because I felt any real doubts about my judgment on the motion, that I granted counsel for the plaintiffs the limited injunction pending appeal that he sought (emphasis mine). [27] No rules ought to be relaxed in an Erinford injunction application, bearing in mind that it is a backdoor action, attempting to resuscitate a failed interlocutory application. The interest of the other party must never be discarded on the mere pretext of possible weaknesses of a judge and "that it is right to preserve the status quo". As Megarry J said at p. 454 (Erinford Properties Ltd (supra)): There may, of course, be many cases where it would be wrong to grant an injunction pending appeal, as where any appeal would be frivolous, or to grant the injunction would inflict greater hardship than it would avoid, and so on (emphasis mine).”

All in, I must say that the grounds relied on to justify Enclosure 42 is similar to that raised in support of enclosure 1 i.e the main injunction application for which this Originating Summons was filed and I had dismissed the said enclosure 1.

Accordingly, based on my reasonings above, Enclosure 42 is dismissed with costs. Dated: 7th day of March 2023 sgd. NADZARIN WOK NORDIN HIGH COURT JUDGE CONSTRUCTION COURT 1 COUNSEL FOR THE PLAINTIFF: Ling Yee Siew and Natasha Adilla Mahazir [Messrs Y S Ling & Co.] COUNSEL FOR THE 1st DEFENDANT: T Kuhendran and Delvin Singh Mangat and Esther Tan (Messrs Zul Rafique & Partners] COUNSEL FOR THE 2nd DEFENDANT: Deborah Lui Shien Mae (Messrs Shook Lin & Bok]