Multazam Development Sdn Bhd v Felda Global Ventures Plantations (M) Sdn Bhd (WA-24C(ARB)-44-11/2018)

An injunction to restrain the Defendant from awarding a contract to any party for the Works for the Project known as “Design and Build and Development of Estate Workers Housing Comprising of Workers Hostel and 6 Door Single Storey Terrace and Other Ancillary Work in Peninsular Malaysia and 4 Sarawak” pending the disposal of the arbitration proceedings (“Plaintiff’s injunction against awarding new Contract”); and 2. An order compelling the Defendant to pay to the Plaintiff’s solicitors as stakeholder the performance guarantee sum of RM3,750,000.00 (“Performance Guarantee Sum”) pending the disposal of the arbitration proceedings (“Plaintiff’s injunction against Performance Guarantee Sum”). [10] The Defendant opposed the injunction to compel the payment of the Performance Bond sum of RM3.75 million to the Plaintiff’s solicitors as stakeholders and also the injunction to restrain them from engaging a new Contractor to complete the Works. The Defendant argued that any delay in the Plaintiff obtaining the relevant regulatory approvals before proceeding with the Works was a risk that the Plaintiff had undertaken under the Contract and that the delay cannot be blamed on the Defendant. [11] The Defendant further argued that the Plaintiff’s application for an EOT was without any reasonable basis and had been rightly rejected by the Project Director. [12] The Defendant further argued that there was nothing unconscionable in the conduct of the Defendant to terminate the contract as the percentage of completion of the Works was hardly 10.71% at point of termination which was a month before the Completion Date and that the Plaintiff had been guilty of a failure to carry out the Works regularly and diligently. [13] The Defendant further argued that there were no serious issues to be tried with respect to the termination and that in any event damages was more than an adequate remedy. Conversely, the grant of an injunction to restrain the Defendant from engaging a new contractor to continue with and complete the Works would cause irreparable damage to the Defendant 5 which the Plaintiff would not be in a position to pay damages, considering their weak financial position. It was submitted by the Defendant that the balance of convenience lies in favour of not granting the injunction. Principles [14] Section 11 of the Arbitration Act 2005 as amended by the Arbitration (Amendment) (No.2) 2018 which came into force on the 8.5.2018 reads as follows: “Section 11. Arbitration agreement and interim measures by

A party may, before or during arbitral proceedings, apply to a High Court for any interim measure and the High Court may make the following orders for the party to-

maintain or restore the status quo pending the determination of the dispute;

take action that would prevent or refrain from taking action that is likely to cause current or imminent harm or prejudice to the arbitral process;

provide a means of preserving assets out of which a subsequent award may be satisfied, whether by way of arrest of property or bail or other security pursuant to the admiralty jurisdiction of the High

preserve evidence that may be relevant and material to the resolution of the dispute; or

provide security for the costs of the dispute. 6

Where a party applies to the High Court for any interim measure and an arbitral tribunal has already ruled on any matter which is relevant to the application, the High Court shall treat any findings of fact made in the course of such ruling by the arbitral tribunal as conclusive for the purposes of the application.

This section shall also apply in respect of an international arbitration, where the seat of arbitration is not in Malaysia.” (emphasis added) [15] The application was made under Section 11(1)(a),(b) and or (d) of the Arbitration Act 2005. In the case of an injunction to restrain the call on a Performance Bond issued generally by a bank, the party applying for the injunction must show that the call would be unconscionable in the circumstances of the case and so the parties would be referring to and relying on the underlying Contract to show that the call is unconscionable or otherwise, as the case may be. [16] See the Federal Court’s decision in Sumatec Engineering and Construction Sdn Bhd v Malaysian Refining Company Sdn Bhd [2012] 3 CLJ 401, [2012] 4 MLJ 1. [17] However in the instant case there is no Performance Bond issued in the true sense of the word but a Bank Draft being deposited with the Defendant for the same amount of RM3.75 million. [18] It is no different from the Defendant retaining a 5% from the value of the Works certified for the first Progress Claim as a way of allocating risks. There is thus no prohibition for the Defendant to encash the Bank Draft for how else would the Defendant know that the Bank Draft is good for payment and that it has not been revoked or cancelled unless it is banked 7 into the Defendant’s account. Granted generally such a Bank Draft can only be cancelled if it is lost or misplaced or otherwise the original copy has to be returned for cancellation. The Bank Draft was made out in the name of the Defendant as payee and if it is not banked it, it would in any event expire at the end of 6 months after its issuance. [19] The parties and in particular the Defendant would not, in the absence of clear language, have accepted a less favourable mode of security for the Plaintiff’s performance of the Works when they accepted the Bank Draft for the same amount. [20] If it is intended that the Bank Draft be not encashed but that the Defendant should merely hold it, then it is no comfort and security at all to them; with a limited validity of 6 months it has a limited shelf life and when a dispute has arisen the Plaintiff may revoke or cancel the Bank Draft. In a case where the same amount had been deducted from the first Progress Claim Certificate the Defendant would have the certainty and comfort of the monies in the Performance Bond Sum in their possession to be applied to cover all losses arising from the breach of the Contract in the failure of the Plaintiff to complete the Works and the ensuing termination of the Contract. [21] The Plaintiff by resorting to the instrument of a Bank Draft cannot be in a worse position as they must have their own good reason for not being able to procure a Performance Bond from a bank. Apparently the Plaintiff was not able to get a Bank who would be prepared to issue a Performance Bond on their behalf. The Plaintiff would thus have to part with RM3.75 million to have the bank issued a Bank Draft for the same amount. [22] The test then with respect to whether the sum of RM3.75 million already cashed by the Defendant should be mandatorily paid back to the Plaintiff’s solicitors as stakeholders pending the handing down of an Arbitral 8 Award in the arbitration that has been commenced would be a matter to be determined by the common principles applicable to an injunction application. Positions of the Parties [23] The date for possession or commencement and the date for completion stipulated in the LAA and the Conditions of Contract are 13.2.2018 (“Date for Possession”) and 12.8.2018 (“Date for Completion”) respectively; completion period being 6 months. [24] The Plaintiff contended that they are entitled to an EOT from the Defendant and the Defendant having wrongly rejected the application for EOT in bad faith, time for completion became at large such that there was no valid ground to terminate the Contract when the Defendant sought to do so before the Completion Date. [25] The Plaintiff argued that the delay in completion was caused by the Defendant in that they had insisted on the Plaintiff obtaining the necessary insurance coverage from one of their related companies. The Contract made it a condition precedent to commencement of Works that the Plaintiff provide all necessary insurance as required under Clause 12 and Clause 39 of the Contract. Clause 12.1 provides as follows: “No work on this Contract shall commence unless and until the Performance Bond stipulated under Clause 10.1 and such insurance policies specified under Clause 39 shall have been deposited with the government.” [26] The All Risks Insurance and the Workmen Compensation Insurance were both obtained on 12.4.2018. The Plaintiff argued that they had in fact obtained the insurance on 13.2.2018 but this was rejected by the 9 Defendant as the Defendant wanted the Plaintiff to obtain insurance through Felda Trading Sdn Bhd. [27] As the Plaintiff themselves contended that there is no contractual requirement to obtain the relevant insurances through the Defendant’s related company, one would have expected that the Plaintiff could proceed with the Works while awaiting the fresh insurance coverages to be issued. [28] The Plaintiff submitted that the evidence showed the Tax Invoice for the insurance was only issued on 20.4.2018 by Zurich Takaful. [29] The Plaintiff further submitted that the period between 13.2.2018 to 20.4.2018 [or payment on 12.4.2018] was delay occasioned by the Defendant and that such a delay cannot be visited on the Plaintiff. The Plaintiff maintained that being a condition precedent before the Works could be commenced, the delay was until 12.4.2018 when the premium was paid for the insurances. Therefore the 6 months to complete should rightly start from 12.4.2018 and with that the last date to complete would be 11.10.2018. Hence, it was argued for the Plaintiff, that any termination prior to 12.10.2018 is therefore unlawful. [30] The Plaintiff emphasized that even though the possession of the site as given in Clause 12.2 of the Contract is taken into account, the obligation to commence works is expressly made subject to Clause 12.1. [31] Learned counsel for the Plaintiff referred to section 33 of the Contracts Act 1950 and the case of National Land Finance Co-operative Society Ltd v Sharidal Sdn Bhd [1983] 2 MLJ 211 in support of that proposition. [32] However it is not the position of the law that an Employer must wait until the stipulated Completion Date before they can terminate the contract on ground that the Contractor has failed to proceed with the Works 10 regularly and diligently. Otherwise when a Contractor has fallen way behind the schedule of progress of the works and is progressing so agonizingly slowly with no hope or reasonable certainty of completing within the Completion Date, the Employer must nevertheless endure the slow progress and be powerless to terminate until the Completion Period is over! That would be to add insult to injury and to visit the Employer with a far greater loss than if they have terminated earlier and engaged a new Contractor to complete the works. [33] In Kerajaan Malaysia v Ven-Coal Resources Sdn Bhd [2014] 5 CLJ 186; [2014] 11 MLJ 218 it was held that a gross and glaring delay on the part of a Contractor may safely be said to be a failure to proceed "regularly and diligently with the Works" as follows: "[40] There is the subjective element in determining whether one has proceeded 'regularly and diligently with the works'. Where there has been a gross and glaring delay that a contractor is guilty of, it may safely be said that the contractor has failed to regularly and diligently carry out the works and the employer need not have to wait until completion date to terminate the contract. In other words an employer should not have to endure the agonizingly slow pace of the contractor's progress in the works." (emphasis added) [34] Granted the Employer takes the risk when so doing and the burden of proof is on the Employer to show that they have a reasonable ground based on the relevant factual matrix to buttress their termination of the contract on such a ground. [35] Even if the Employer was responsible for 2 months of delay in insisting on the insurances to be taken through one of their related 11 companies, was the delay so grave even after factoring in a 2 month EOT as to justify termination of the Contract? [36] According to the Defendant, the progress of the Works was extremely slow and had fallen far behind the schedule. Based on the progress report, the Plaintiff had only completed 10.71% of the Works as at 15.7.2018 which was a month before the Completion Date. [37] Even if there were still 2 more months to go assuming the EOT had been given, it was still a question of whether the Employer should take the risk of the Contractor completing the balance 89.29% of the Works in 3 months. The past performance record of 5 months to complete only 10.71% did not engender confidence in the Employer that the balance Works could be completed on time. [38] The Plaintiff would not have forgotten that they only procured a Bank Draft for RM3.75 million on 12.4.2018 which is a condition precedent to commencement of the Works. If the Plaintiff had procured the Bank Draft some 2 months earlier perhaps there is some basis for arguing that the delay was wholly caused by the Defendant. In fact according to the Defendant, the Plaintiff had difficulty getting a Bank to issue a Performance Bond and so finally settled for a Bank Draft. [39] The Defendant highlighted that it was upon being served with a Notice of Default dated 31.7.2018 (“First Notice of Default”) that the Plaintiff belatedly submitted its application for an EOT dated 6.8.2018 (“EOT Application”). The Project Director had determined the EOT Application and rejected the Plaintiff’s EOT Application via letters dated 13.8.2018 and 29.8.2018 premised on grounds of non-compliance with the terms of the Contract and lack of merits. 12 [40] Since no EOT was granted, the Plaintiff remained liable to complete the Works by the Date for Completion, which the Plaintiff had failed to achieve. Therefore, the Certificate of Non-Completion dated 13.8.2018 was issued by the Project Director. [41] The Defendant explained that as a result of the defaults and breaches by the Plaintiff, the Defendant then issued a notice of default dated 30.8.2018 (“Second Notice of Default”) pursuant to clause 60.1(a) of the Conditions of Contract. Despite having been given a fresh 14 days to the Plaintiff, the Plaintiff failed to remedy the defaults and the Defendant therefore issued a notice of termination dated 14.9.2018 (“Notice of Termination”) to terminate the Contract. [42] There is also the counter argument of the Defendant that all other preliminary works with respect to applying for and obtaining the relevant approval of the authorities for the building plans and for other regulatory compliance could still proceed and that before an EOT is granted for a corresponding period of delay, the delay must be shown to fall within the critical path. [43] The Plaintiff raised the fact there was a need to comply with the statutory requirement of obtaining approval for the Building Works from the Jabatan Tenaga Kerja (“JTK”) (Department of Labour) as the Works contracted to the Plaintiff were works to construct housing and hostels for the Defendant’s work force. [44] It appears to be a statutory requirement under the Workers’ Minimum Standard of Housing and Amenities Act 1990 which states expressly in section 7 that construction can only commence upon the Employer obtaining approval of the building plans and site plans from the JTK. Out of the 158 sites, only 57 are shown and none have unconditional approval. 13 Some have conditional approval and others have the status as “in the process”. The earliest dates for conditional approval for particulars sites is 22.3.2018. [45] Learned counsel for the Plaintiff submitted that taking both the mandatory statutory requirement and the express contractual conditions, the Plaintiff could not start building work at the few sites even with conditional approval on 12.4.2018 as the relevant statute does not allow for this and is not able by law to start work on any site without such approval. [46] It was further submitted that even if they could, time could only start to run on 12.4.2018 and not 13.2.2018 as the approval from JTK being a statutory requirement is not a matter within the control of the Plaintiff. Learned counsel submitted not without some confidence that to impose this obligation on the Plaintiff to obtain the approvals and complete the construction of 159 locations is to enforce an obligation not contracted and to impose an impossible condition upon the Plaintiff designed to cause the contract to fail. [47] The Defendant’s stand is simple - the obligations to obtain the approvals of the authorities within the period of completion specified fell squarely on the shoulders of the Plaintiff as the Contract is a Design and Build Contract. Indeed Clause 5 requires the Plaintiff as Contractor to comply with all laws and by-laws etc. Clause 3.2 states that “the Contractor shall design, construct and complete the Works in accordance with the Contract”. [48] The Plaintiff asked what they thought was a rhetorical question: “Can the Defendant take the position that the obligation is on the Plaintiff to obtain the relevant JTK approvals and complete the project within the 6 month completion date?” 14 [49] To the Defendant, the Plaintiff, having the gumption to tender for such a massive contract of RM75 million must have the relevant experience, whether first hand or vicariously, with respect to the reality on the ground as to when approvals of this nature may be obtained from the JTK. [50] It is for the Plaintiff to negotiate for the relevant EOT if the matter was something beyond their control for otherwise it can be argued that they would have the necessary expertise and experience to work within the time frame of 6 months provided for completion without breaking or for that matter bending the law. It is not unusual for Contractors to have built into the Contract that time runs from the date the relevant approvals of the authorities have been obtained. [51] If indeed the Plaintiff had proceeded on the basis that it was the Defendant that ought to have applied for the relevant approvals, then surely acting consistent with that belief, the Plaintiff would have inquired as to when the approval had been obtained and if it had not been obtained yet, to then factor in the delay that might be occasioned by waiting for the JTK’s approval. [52] If it is an impossible burden imposed on the Plaintiff to discharge then the Plaintiff should have objected to it and should not have accepted the Design and Build Contract as it is. [53] No one is asking the Plaintiff to break the law here but that the Defendant is expecting that the Plaintiff would be able to get the necessary approvals from the JTK such that they are cautiously confident of completing the Works within the Completion Period or be subject to Liquidated and Ascertained Damages (“LAD”). [54] Neither is anyone trying to condone any unlawful acts in commencing the Works without the prior approval of the JTK and the Defendant is not 15 for a moment thinking of using this Court as a tool to legalize unlawful actions of any party. [55] The proposition of law enunciated by the case of Chase Perdana Bhd v Md Afendi bin Hamdan [2009] 6 MLJ 783 that a statutory condition could not be waived by contract as this would in effect be against public policy is not quite relevant here as the obligation is on the Plaintiff to comply with it. [56] The Plaintiff submitted that all that could do is to make the necessary applications and undertake necessary follow-up. As if to say the obvious, the Plaintiff said they have no control over the speed at which the applications for approvals of the State’s JTK are processed. [57] The Plaintiff argued rather audaciously that until such time when the approvals are granted, the time between the intervening period, from the time of site possession to making the applications and to obtaining the approvals, is necessarily suspended as this contingent condition only makes the Plaintiff obligation unconditional when the approvals are granted. [58] Painting a picture of the Plaintiff above reproach their learned counsel drew the Court’s attention to the fact that notwithstanding the fact that the Plaintiff could not in law commence construction works, in its weekly report No: 25 on the detailed progress of the Works for the period of 30.7.2018 and 5.8.2018 the following can be observed:  Survey Work is 100% complete;  Site Clearing Work is 100% complete except for 5 sites out of 62; 16  Earthworks to Platform is 100% complete except for 12 sites out which 3 sites are more than 90%; 4 sites are 50% or more and 5 sites 30% or more.  There were 13 sites with foundations at 100% with 20 in construction [59] The Defendant however pointed out that it was the Plaintiff that had delayed in seeking approvals from the authorities in the following:

The Plaintiff substantially delayed the site survey procedure and preparing the necessary drawings, site surveys, and documents required for JTK approvals, despite having been informed and given examples for the same;

The information, surveys and drawings prepared by the Plaintiff contained numerous errors, were inaccurate, and did not comply with JTK’s requirements; and 3. The Plaintiff failed to follow up in respect of obtaining the required JTK approvals. See: Exhibit D-5, D-6 and D-12 of the Defendant’s 1st Affidavit.

Further, the Plaintiff had also delayed in appointing its consultants for the Works. Based on the Defendant’s record, the Plaintiff only appointed the architectural, structural and civil, and mechanical and electrical consultants on 23.3.2018, which was a month after the Date for Possession. The letters of appointment were only forwarded to the Defendant on 3.4.2018 which consequently delayed the submission of the required documents, site surveys and drawings for JTK approval. [60] So far the complaints of the Plaintiff of the conduct, actions and inaction of the Defendant in not granting the EOT applied for by the Plaintiff 17 do not point to a prima facile case of unconscionability in the part of the Defendant even if one were to apply the test used for restraining a call on a Performance Bond by way of analogy; conscious always of the fact that here we are dealing with a Bank Draft that has been encashed. [61] The Plaintiff also highlighted that the Defendant was prepared to give the new contractor 7 months to complete the Project and that underscored the fact that it was practically impossible for one to complete it in 6 months. That I must say is a matter for the parties to negotiate with each other and surely if 6 months was not enough then the Plaintiff should have negotiated for more months to complete or to reject the LAA. There is clearly no basis for arguing that the Contract was awarded in bad faith. [62] The Plaintiff also mounted the argument that the rejection of the EOT was done in bad faith without taking into consideration relevant matters beyond the control of the Plaintiff. The Plaintiff said that they applied for EOT pursuant to the terms of the Contract by their letter dated 6.8.2018. It was pointed out that the Project Director outright rejection by stating that the Plaintiff was not allowed to apply, relying solely on the LAA without regard to Clause 49 was erroneous. The Plaintiff had requested for 6 months to complete upon obtaining all the relevant statutory approvals. [63] The Project Director did subsequently assessed the application for EOT under Clause 49 of the Contract and issued a letter dated 29.8.2018 to the Plaintiff rejecting their application. [64] After the summary dismissal of the EOT Application by the Project Director by his letter of 13.8.2018 the Project Director on the same date issued a letter imposing Liquidated Damages for Non-Completion. Learned counsel for the Plaintiff took the stand that time had become at large upon 18 the initial wrongful rejection of the application for EOT and as such the letter imposing Liquidated Damages was bad in law. [65] The Defendant had earlier by their letter of 31.7.2019 issued a Notice of Default to the Plaintiff pursuant to Clause 60.1(a)(iii) and (v) and gave the Plaintiff 14 days to remedy the defaults and stating that it would forthwith terminate without any further notice. [66] The Defendant then issued another Notice of Default dated 30.8.2018 without withdrawing its earlier notice of default and purported to give the Plaintiff 14 days to remedy the defaults failing which it may exercise its rights pursuant to Clause 60.1(b) to terminate the Contract. See page 565 Ex R-11 Jilid 2. This was refuted by the Plaintiff by their letter dated 12- p.9.2018 (page 568 R-11 Jilid 2). [67] The Defendant then issued a Notice of Termination dated 14.9.2018. See Exhibit D 15 Defendant’s Affidavit. [68] The Plaintiff submitted that the Notice of Termination of 14.9.2018 and the Notices of Default dated 30.7.2018 and 30.8.2018 are all bad in law. [69] The Plaintiff’s argument that the First Notice of Default dated 30.7.2018 was bad in law was premised on the fact that there was subsequently an application for EOT made on 6.8.2018 which was not assessed at all under Clause 49 of the Contract and instead LAD was imposed. Arising out of that time for completion had become at large and the Notice of Default therefore was automatically set aside on 13.8.2018 when the EOT was summarily rejected for the wrong reasons. [70] The Plaintiff also submitted that the Second Notice of Default was also bad in law as if it is assumed that the First Notice was valid, then the contract was automatically terminated on 13.8.2018 as stated in the First 19 Notice of Default of 30.7.2018. Therefore, the issuance of the Second Notice of Default was a redundant exercise and a non-starter seeing that the First Notice of Default was not withdrawn before or at the time the Second Notice of a Default was issued. The First Notice of Default had automatically terminated the Contract on 13.8.2018, albeit unlawfully. [71] Building on the arguments that learned counsel for the Plaintiff had developed, he then moved in with his killer point, which is this: the Notice of Termination of 14.9.2018 is unlawful as it was premised on the Second Notice of Default which was bad in law! [72] On the other hand the Defendant submitted that the First Notice of Default was not followed through with a Notice of Termination and hence there was no termination under the First Notice of Default. There was furthermore an application for EOT that had been applied for after the First Notice of Default had been issued. Though the application for EOT was rejected, the Defendant, as a matter of prudence, felt that the Plaintiff should be given a fresh 14 days notice and the Defendant issued the Second Notice of Default dated 30.8.2018 and gave the Plaintiff a fresh 14 days to rectify the defaults stipulated therein. As a result of the Plaintiff’s failure to rectify the Defendant issued the Notice of Termination dated 14.9.2018 to terminate the Contract. [73] The Defendant submitted that at all material times, the Plaintiff had never treated the Contract as being terminated 14 days after the issuance of the First Notice of Default for:

The Plaintiff remained on Site;

The Plaintiff continued to proceed with work on Site; and 3. The Plaintiff submitted its EOT Application on 7.8.2018, stating, among others, that it continued to pursue the completion of 20 their work as rapidly as is reasonably possible under the circumstances.

Further, when the Defendant issued the Second Notice of Default and thereafter the Notice of Termination, the Plaintiff did not allege that the Contract had already been terminated earlier. [74] Taking the stand that the Contract cannot be terminated without prior notice, the threat to terminate without notice as contained in the First Notice of Default would, at best, amount to merely a repudiatory breach of the contract. See: AL Stainless Industries Pte Ltd v Wei Sin Construction Pte Ltd [2001] SGHC 243 and page 900 of the Cheshire, Fifoot and Furmston’s Law of Contract, Second Singapore and Malaysian Edition. [75] The Defendant submitted that in this circumstance, the Plaintiff is then given a choice to either accept the repudiation or to reject the repudiation. This well-established principle in LSSC Development Sdn Bhd v Thomas a/l Iruthayam and Anor [2007] 4 MLJ 1 at page 5, would apply, where the Court held as follows: “... Where a promisor wrongfully repudiates a contract in its entirety, the promisee has a choice. He or she may elect to accept the repudiation, treat the contract as at an end and sue for damages. The rationale is that the primary obligation to perform the promise made is substituted with a secondary obligation to compensate the promisee for the breach. See, Moschi v Lep Air Services Ltd [1973] AC 331. Alternatively, he or she may elect to reject the repudiation and treat the contract as subsisting.” 21 [76] There was nothing to show that the Plaintiff had accepted repudiation and in fact, the facts point to the fact that the Plaintiff had “rejected the repudiation and treated the contract as subsisting”. [77] Learned counsel for the Defendant further submitted that it is evidently clear from the conduct of the Plaintiff that the Plaintiff had at all material times acknowledged that the termination of the Contract was made pursuant to the Notice of Termination dated 14.9.2018. The letter from the Plaintiff dated 20.9.2018 clearly indicated that the Plaintiff had referred to the termination of the Contract by reference to the Notice of Termination and not to the 14 days after the issuance of the First Notice of Default. See: Exhibit R-13 of the Plaintiff’s 1st Affidavit. [78] As the Plaintiff had elected to reject the repudiation under the First Notice of Default, such an election is final. Support of this proposition can be found in the case of Sim Chio Huat v Wong Ted Fui [1983] 1 MLJ 151 at page 153, where it was held as follows: “In this case obviously he did not choose to treat the agreement as having been repudiated. By allowing the delivery dates to pass and by acquiescing in the work continuing under the agreement and indeed by ordering extra work to be done for each of these houses, for which the agreement made no provision, the appellant must be held to have waived his right to rescind the agreement on account of repudiation and also the right to treat himself as discharged therefrom. He must be deemed to have elected the agreement as still continuing.” (emphasis added) [79] Likewise in LSSC Development Sdn Bhd v Thomas a/l Iruthayam and Anor [2007] 4 MLJ 1 at page 5, where the Court held as follows: 22 “... Whether the one or the other course was adopted by the promisee – the innocent party — is a fact that is to be inferred by the court from the objective facts, including the words and conduct of the parties. An election once made is irreversible.”(emphasis added) Whether there is a serious issue to be tried with respect to the validity of termination of the Contract by the Defendant [80] It is not a matter for this Court to decide at this stage whether or not the delay caused by the authorities in granting the relevant approvals is a matter that would justify an EOT but rather a matter for the arbitrator to decide. [81] Whether or not the termination is lawful would be for the arbitrator to decide and suffice to say that at the moment there appears to be a serious issue to be tried. Whether or not this is a case of the Plaintiff failing to proceed regularly and diligently with the Works and that they had done all that they could do while awaiting the JTK’s approval is a matter of contractual dispute to be decided by the arbitrator. Whether the Defendant was justified to terminate the Contract before the completion date would be for the arbitrator to decide. [82] At this stage, I can only say that all these are engaging and interesting questions of law to be thrashed out in the arbitration but for the moment they are just contractual disputes not uncommon in construction contracts and certainly not a ground for restraining a call on a Performance Bond if one were to use by way of analogy the cashing of the Bank Draft being likened to a call on the Bond. 23 [83] At any rate the money in the Bond has been released to the Defendant under such an analogy for the sum of RM3.75 million had been encashed. [84] In reality the horse had bolted and it is too late to bring the horse back into the stable! [85] However if one were to consider the relief prayed for from the point of view of an ordinary injunction, then whilst there are serious issues to be tried, this is a case where damages would be an adequate remedy if at the end of the arbitration it is found that the termination of the Contract is unlawful and that the Defendant should not have terminated the Contract and engaged a new contractor to take over the completion of the balance Works. The damages can be easily calculated and generally it would encompass the profit the Plaintiff would have made had they been allowed to complete the Contract. [86] Likewise where the Bank Draft is concerned that sum is known to be RM3.75 million and so if it had been wrongly encashed the Arbitrator can make an order for this sum plus interest to be paid back including all damage suffered as a result subject to proof as always. [87] The fact that damages would be an adequate remedy will be demonstrated below. Whether damages would be an adequate remedy and that the balance of convenience lies in favor of the Defendant with respect to the Plaintiff’s injunction against awarding new Contract [88] There is no intrinsic worth of an irreparable nature where the performance of a contract is concerned in the event that it is held in the arbitration that the termination of the Contract by the Defendant had been 24 unlawful. Damages can always be assessed for all the losses and damage suffered. [89] The Plaintiff had taken the stand that the Contract had been terminated unlawfully by virtue of the First Notice of Default and that the Second Notice of Default was redundant and thus ineffective in terminating for a second time what had been unlawfully terminated via the First Notice of Default. [90] A natural consequence of termination is that the party contending the termination is unlawful is released from performing its remaining obligations under the terminated Contract and more than that, the innocent party may proceed to sue for all losses and damage arising from the breach by the defaulting party and this would include the loss of profits which they would have made had the have the opportunity to conclude the Contract, subject always to proof. The Court of course must have regard to the project accounts of the Plaintiff as supported by relevant documents and also the delay if any that the Plaintiff was already liable for. It is not rocket science as the party affected would at times engage a quantum expert to verify their loss. [91] The Plaintiff said that this is no ordinary contract but one for a contract sum of RM75 million for simultaneous construction of housing accommodations over 158 locations. Hence this is a very important contract to the Plaintiff as the successful completion of this project would greatly enhance the reputation and professionalism and integrity of the Plaintiff. Correspondingly a termination of such a contract would dent the credibility and reputation of the Plaintiff. Generally there is no award of damages for loss of reputation in a pure contractual claim. 25 [92] In Scomi Transit Projects Sdn Bhd v Prasarana Malaysia Berhad [2016] MLJU 622 it was observed as follows: “[129] Likewise here the Defendant submitted that in the event it is shown that the Defendant is not entitled to terminate the Contracts, any losses suffered by the Plaintiff (directly foreseeable and other related losses) is confined and limited to an assessment of damages that it would be contractually entitled had it been allowed to perform the remaining unperformed portion of the Works. There is in short, nothing novel or extraordinarily difficult to assess damage arising out of a wrongful termination of a construction contract.” … [145] … The Plaintiff’s claim under the Contract is only monetary in the sense that if it is demonstrated that the Defendant was not entitled to terminate the Contract under clause 15.2 of the Principal Contract (in respect of which the Defendant unequivocally says it can lawfully terminate), the Plaintiff is entitled to an assessment of damages relating to the losses (directly foreseeable and other related losses) that it would be contractually entitled had it been allowed to perform the remaining unperformed portion of the Works. With that the Court agrees.” [93] For the Plaintiff to claim that the Contract had been terminated, albeit unlawfully, and at the same time to prevent the Defendant from engaging a new contractor to finish the remaining Works, would be to hold the Defendant to ransom. [94] There was also unexplained delay in the Plaintiff applying for the current relief. The Contract was terminated on 14.9.2018. Upon termination of the Contract, the Defendant embarked upon the re-tendering exercise so 26 that the Defendant could continue and complete the Works. Even though the Plaintiff knew that the Contract was terminated on 14.9.2018, the Plaintiff did not file this application until almost 2 months later. The Plaintiff’s own letter dated 20.9.2018 issued right after the termination of the Contract revealed that the focus of the Plaintiff was a claim for damages. In this letter it can be said that:

While the Plaintiff disputed the termination, it did not seek the withdrawal of the termination or reinstatement of the Contract;

Instead, the Plaintiff clearly demonstrated its intention to seek monetary compensation – as shown in paragraphs 2 and 3 where:

the Plaintiff said they needed to “compute all losses that we have suffered”; and

the Plaintiff needed time to “compute our total losses and expenditures in order for us to mount a proper claim”.

At paragraph 5, the Plaintiff has also clearly accepted that the Plaintiff needed to vacate the site, although the Plaintiff asked for more time. See: Exhibit R-13 of the Plaintiff’s 1st Affidavit. [95] The Plaintiff was not seeking to remain on site, reinstate the Contract, or to continue with the Works. To restrain the Defendant from engaging a rescue contractor to complete the Works expeditiously would be to throw a spanner in the Defendant’s Project knowing that it would take at least a year if not longer for an award to be given via an arbitration that has just been commenced. It would be to jam up the Defendant and to jettison the whole Project. This would not be to preserve the status quo but to prolong 27 unnecessary suffering on the part of the Defendant, knowing that creating a stalemate would hurt the Defendant the most. [96] It would in effect be rewriting the Contract to make it impossible to terminate such that the Employer must continue with the Contract to completion no matter how egregious the delay may be. That is not the law. [97] The position of the law is that where damages would be an adequate remedy the Court would not allow an injunction, which is essentially a equitable relief. [98] The authoritative text in Keating on Construction Contracts (9th Edition), Sweet & Maxwell at 12-022 has this to say: “It is thought that the decision in American Cyanamid does not affect the principle that in the ordinary case the contractor cannot obtain an injunction restraining forfeiture by the employer, since this would equate to the ordering of specific performance of the contract. The contractor can be adequately compensated in damages for any wrongful forfeiture.” (emphasis added) [99] In Hudson’s Building and Engineering Contracts (12th Edition), Sweet & Maxwell, at 7-077 the following principle was observed which soundness had not been questioned as follows: “In many of the cases the issue of whether there should be specific performance arises where one party wishes to terminate, and the other wishes to continue. In such circumstances an injunction to stop termination has the practical effect of compelling specific performance on the unwilling party, and the court has to weigh that consideration in its discretion. It should normally be decisive, and the court will not give an order compelling the Employer to allow the Contractor back on to the site: 28 ‘...an ordinary building contract enables the building contractor to go upon the land for the purpose of conducting building operations so that he can perform his contract and earn his expected profit. His right continues to exist even if the building owner wrongfully repudiates the contract. But the only remedy of the building contractor for infringement of the right is in damages. If he goes on the land against the will of the owner he may be treated as the trespasser.’” (emphasis added) [100] In the case of Scomi Transit Projects Sdn Bhd v Prasarana Malaysia Bhd [2016] MLJU 622 this Court had held that at paragraph 147 as follows: “Further, an injunction in terms of Enclosures 4 and 5 would in effect be indirectly the interim equivalent of a decree of specific performance of the Principal Contract and SSC, whereby the Defendant would be compelled to continue the relationship with the Plaintiff under a highly technical and sophisticated contract. This is a situation not countenanced in law.” (emphasis added) [101] The law as stated in section 54(f) of the Specific Relief Act 1950 (“SRA”) provides that an injunction cannot be granted to prevent the breach of a contract the performance of which would not be specifically enforced. In this regard, section 20(1) of the SRA 1950 sets out certain types of contracts that cannot be specifically enforced, which includes:

Contract for the non-performance of which compensation in money is an adequate relief (Section 20(1)(a)); and 2. Contract which runs into such minute or numerous details, or which is so dependent on the personal qualifications or volition of the parties, or otherwise from its nature is such, that the court 29 cannot enforce specific performance of its material terms (Section 20(1)(b)). [102] In the case of Vethanayagam v Karuppiah & Ors [1968] 1 MLJ 283, where the question was whether it was proper to grant an interim injunction (which was sought by motion) at the suit of a member of an unlawful society to restrain other members of that society from violating its rules. The question fell to be decided in relation to paragraph (f) of Section 54 of the Specific Relief (Malay States) Ordinance 1950, of which the present Act is a revised version. The motion was dismissed. Raja Azlan Shah J (as His Royal Highness then was) at page 284C-F held that: “An order for a temporary injunction can be sought only in aid of a prospective order for a perpetual injunction. If, therefore, in the event of the plaintiff's success, he cannot obtain a decree for perpetual injunction, it is not competent for him to ask for a temporary injunction (see Bishun Prashad Sashi Bhusan AIR 1923 Pat 133). In other words, a temporary injunction will not be granted in cases where a permanent injunction is not available under sections 52 to 54 of the Specific Relief (Malay States) Ordinance, 1950. Section 54(f) enacts that an injunction cannot be granted to prevent the breach of a contract the performance of which would not be specifically enforced. This means that a court will not grant an injunction to prevent the breach of a contract if the contract be such as cannot be specifically enforced under the provisions of Chapter II of the Ordinance, for example section 20(b). The grant of injunction therefore is always guided by the same principles as the grant of specific performance of a contract, and if the contract is such as not to be capable of being specifically 30 enforced, no injunction can be granted to prevent its breach.” (emphasis added) [103] Learned counsel for the Plaintiff cited the cases of Mayor, Aldermen, and Burgesses of Wolverhampton v Emmons [1901] 1 QB 515 and Price v Strange [1977] 3 WLR 943 at page 958 but these cases have to be read with caution and be confined to the extremely egregious facts of the case. Their utility in the Malaysian context is doubted in the light of section 54(f) read with section 20(1) of the SRA 1950. [104] Having decided that damages would be an adequate remedy the matter ends there and there is no need to consider where the balance of convenience lies. [105] In American Cyanamid Co v Ethicon Ltd [1975] 1 All ER 504, [1975] AC396, [1975] UHKL 1 (05 February 1975), Lord Diplock held at paragraph 98 that: "... the governing principle is that the court should first consider whether, if the plaintiff were to succeed at trial in establishing his right to a permanent injunction, he would be adequately compensated by an award of damages for the loss he would have sustained as a result of the defendant's continuing to do what was sought to be enjoined between the time of the application and the time of the trial. If damages in the measure recoverable would be [an] adequate remedy and the defendant would be in a financial position to pay them, no interim injunction should normally be granted, however strong the plaintiff's claim appeared to be at that stage. ...It is where there is doubt as to the adequacy of the respective remedies in damages available to either party or 31 to both, that the question of balance of convenience arises." (emphasis added) [106] For the sake of argument this Court is even prepared to venture into considering where the balance of convenience lies. Assuming that the injunction is given to restrain the Defendant from proceeding to complete the balance Works through a new Contractor, the Defendant would be delayed for the period until the arbitration is concluded and the further time for the Award to be delivered. [107] In the event that the Award is in favour of the Defendant the loss would not only be arising from the delay occasioned but also the additional costs in completing the Works. Whilst there is an undertaking to pay damages this undertaking is illusory considering that the Plaintiff is a loss-making business with very little assets. See Exhibit D-19 of the Defendant’s 1st Affidavit. [108] The Court must also consider the following factors of national importance to the growth and competitiveness of the oil palm industry in Malaysia. The Defendant had stated that the completion of the Project was necessary for the Defendant to fulfill the requirements as stipulated in the international Roundtable on Sustainable Palm Oil’s (“RSPO”) certifications and the Malaysia Sustainable Palm Oil (“MSPO”) Certification Scheme. See Exhibit D-20 of the Defendant’s 1st Affidavit. [109] One of the requirements for the certification under the RSPO Certification System is that the Defendant is required to provide, among others, the following:

Adequate housing, water supplies and welfare amenities to national standards or above, in accordance with Workers’ 32 Minimum Standard of Housing and Amenities Act 1990 or above;

Evidence of compliance with relevant legal requirements, which includes the Workers’ Minimum Standard of Housing and Amenities Act 1990; and 3. Criteria no. 4.4.5.11 of the MSPO standards also requires housing to be in compliance with the Workers’ Minimum Standard of Housing and Amenities Act 1990. See: Exhibit D-20 of the Defendant’s 1st Affidavit. [110] The MSPO deadline imposed on palm oil producers nationwide, including the Defendant is 31.12.2019. See: Exhibit D-22 of the Defendant’s 1st Affidavit. [111] I can accept the submission of the Defendant that being a global player and the Felda group (which the Defendant is part of) is the world largest producer of palm oil, obtaining the certifications is essential to the Defendant’s business. This housing Project was part of the Defendant’s effort to ensure that the Defendant complies with the requirements in order to obtain the certifications. [112] The Defendant explained that failure to obtain the certifications will have tremendous, catastrophic and unimaginable loss to the Defendant, the Felda group and the country. It would significantly and adversely affect, inter-alia:

the marketability of the Defendant’s produce;

the financial performance of the Felda group and its share prices;

the reputation of the Defendant and Felda group;

the shareholders and investors of Felda group; and

the reputation of Malaysia as a major palm oil producer, particularly in view of the adverse market condition and prejudicial perception against palm oil that the country is fighting against worldwide. [113] Suffice to say that much of these losses cannot be quantified in monetary terms and are irreversible in nature. Learned counsel for the Defendant submitted that even if any of these losses can be quantified in monetary terms, the amount would be astronomical. I am prepared to give some weight to that argument. [114] Conversely if the injunction is not granted the losses would be that arising from the unlawful termination of the Contract. Even giving the Plaintiff a generous profit margin of 20% of the contract sum, that would put the damages at RM15 million which the Defendant is in a more resilient to absorb and cushion. [115] Based on the Defendant’s audited financial statements for years 2015 to 2017 and the Defendant’s statement of actual income between January to September 2018 the Defendant can be said to be in a far more financially viable position than the Plaintiff. [116] In the Defendant’s audited financial statements for year 2017, it shows that the Defendant possesses assets in excess of RM6.6 billion, revenue of RM9.4 billion and profit before tax of RM391 million. See: Paragraph 8 and Exhibit “D-23” of the Defendant’s Supplementary Affidavit in Reply affirmed by Suhaidi bin Hamzah on 4.12.2018. [117] In the Defendant’s statement of actual income for 3 quarters up to September 2018, the Defendant’s actual revenue is in the sum of RM1,751,340,558.00 (RM1.7 billion) and profit before zakat and taxation is in the sum of RM44,187,198.00 (RM44 million). See: Paragraphs 11 and 34 12 and Exhibits “D-23” and “D-24” of the Defendant’s Supplementary Affidavit in Reply affirmed by their CEO Encik Suhaidi bin Hamzah on 4.12.2018. [118] For all the above reasons the injunction applied for by the Plaintiff to restrain the Defendant from engaging a new contractor to complete the Works is wholly devoid of merits and I had no hesitation in dismissing it. Whether damages would be an adequate remedy and that the balance of convenience lies in favor of the Defendant with respect to the Plaintiff’s injunction against the Performance Guarantee Sum of RM3.75 million [119] The Plaintiff had procured a Bank Draft, valid for 6 month from its issuance date of 12.4.2018 and so it would have been valid up to 12.10.2018. There is no agreement shown anywhere in writing that it is a condition of the issuance and delivery of the Bank Draft that it is not to be banked into the Defendant’s account. [120] The Bank Draft had to be banked in anyway before its expiry on 12.10.2018 for thereafter it would have become invalid. If it is not to be banked in at all, then it is ineffective as a security. If it is a case where the Defendant had to inform the Plaintiff before banking in, then it serves the Plaintiff no advantage as the Plaintiff ought not to cancel it unless it is on the permissible ground of having misplaced it or lost it. If it is to get the consent of the Plaintiff before banking it is then the Plaintiff only have to object and the Defendant would be in breach to encash the Bank Draft. [121] All the above permutations are proffered to point out the fact that the only reasonable inference when the Plaintiff delivered the Bank Draft to the Defendant of the amount equaled to the Performance Bond sum instead of 35 the Performance Bond, was such that it must be no less favourable to a Performance Bond. [122] In the absence of an injunction to restrain the call on the Bond or the Bank paying out, the Bank would have to release the sum secured by the Bond to the beneficiary. Likewise when the payee of the Bank Draft should decide to bank in the Bank Draft. [123] Once the sum secured has been released to the beneficiary it would be too late to restrain by injunction the release of the sum secured or the encashment of the same. [124] What the Plaintiff is asking for by the Injunction is to improve on the Plaintiff’s position before the cashing of the Bank Draft by the Defendant in that the sum of RM3.75 million should now be transferred by the Defendant to the Plaintiff’s solicitors as stakeholders pending the disposal of the arbitration. [125] I would not allow the Plaintiff to improve their position to that prior to the issuance of the Bank Draft. That would be to rewrite the Contract for the parties. After all the Plaintiff is not put in a worse off position as the Plaintiff had already expended the money for the Bank to issue the Bank Draft. [126] This is a case where damages would be an adequate remedy in the event that the Arbitrator should hold that the amount secured in the Bank Draft should not have been banked in. [127] In fact and in truth the Plaintiff appears to be asking for a Mareva Injunction in that this sum of RM3.75 million should be parked with and preserved by its solicitors as stakeholders pending the disposal of the arbitration. However there is no evidence that the Defendant is dissipating its assets to make itself judgment-proof. 36 [128] In Transfield Projects (M) Sdn Bhd v Malaysian Airline Systems Bhd [2000] 7 MLJ 583 at page 596 where on similar circumstances and considerations, the injunction sought to set aside the performance bond in an account pending arbitration was dismissed, with the High Court observing as follows: “The plaintiffs are asking the court to grant an injunction to restrain the defendant from utilising the monies. From my reading of cl 37(c) I do not think an injunction should be granted to restrain the defendant, who now has the proceeds of the performance bond, to set it aside in an account on trust pending arbitration. There is no existence of any obligation on the part of the defendant to do so. To grant such an injunction as prayed for would allow a departure from the contract to which the parties have committed themselves. There is clearly no subsisting obligation on the defendant who has already received the monies as the result of the call made on the performance bond to set it aside and not to appropriate it. Clause 37(c) provides the defendant or the SO on its behalf may utilize and make payments out of or deductions from the said performance bond, ie they may have recourse thereto for payments. The court is now asked to grant an injunction when there is clearly no obligation imposed on the defendant anywhere in the contract to set the proceeds as a separate trust fund to be kept until the outcome of the arbitration. The granting of interlocutory injunctions of this type is a discretionary remedy. To me, there is nothing in the contract to obligate the defendant to set up a separate trust account to keep the proceeds of the performance bond. What is clear from the facts of this case is 37 the plaintiffs failed to complete the works. That being the situation, I cannot see any basis for me to grant the injunction prayed for.” (emphasis added) [129] See also the case of Kheng Bee Construction Sdn Bhd v Standard Warehousing Sdn Bhd [2000] 1 LNS 187. [130] This Court can take cognizance of the fact that the Defendant is part of a conglomerate forming the largest oil palm estate in Malaysia, if not globally. Lately the Plaintiff has been beset with various issues of financial mismanagement and a lack of corporate governance coupled with the current poor price of palm oil in the global market, its reserves is in the negative in the sum of RM3 billion as reflected in its latest audited accounts for year ending 2017. [131] The “negative reserve” had been explained by the CEO of the Defendant in Enclosure 18 as a “reorganization reserve” which represents the difference between the fair value of the purchase consideration and carrying value of the net assets acquired arising from the acquisition of plantation estates. He further explained that the “negative reserve” is captured for accounting purposes to recognize the plantation estates acquired and the Defendant’s obligations under the land lease agreement with the Federal Land Development Authority (FELDA), a statutory body set up under the Land Development Act 1956. He further affirmed that the “negative reserve” does not impact the Defendant’s financial capability to pay the Performance Guarantee as it is not a debt or sum due and owing to anyone. [132] To assure the Plaintiff that the Defendant is more than capable to pay back the Performance Bond sum of RM3.75 million, the Defendant’s CEO alluded to the fact that the Defendant has substantial deposits, cash and 38 bank balances which far exceed the sum of RM3.75 million as shown in the audited financial statements. He gave s summary of the deposits, cash and bank balances for the years 2014-2017 as follows: 2014 - RM256,081,000.00; 2015 - RM288,022,000.00; 2016 - RM140,653,000.00; 2017 - RM236,100,000.00 [133] As pointed out, between 2016 and 2017 alone, the Defendant increased its deposits, cash and bank balances by RM95,447,000.00. [134] Seeing that this is not a Mareva Injunction applied for in the strict sense and that it is also not a case of an injunction to restrain call on a Performance Bond or payment under it but that it has more to do with restraining the amount encashed from being used by the Defendant such that they may not be in a position to pay the Plaintiff back should the Arbitral award be in the Plaintiff’s favour, this Court in the exercise of its discretion, would have to fashion a relief that would meet the demands of justice and address the needs and concerns of both the parties. [135] Bearing this in mind and looking at the financial position of the Defendant where their “negative reserves” is concerned but that they are not commercially insolvent, I ordered as follows:

Pending the disposal of the arbitration already commenced by the Plaintiff, the Defendant shall at all times maintain a sum of RM3.75 million as “deposits, cash and bank balances” in their accounts;

Parties shall proceed expeditiously with the arbitration;

The Plaintiff in the light of the above order shall withdraw the claim on the Performance Bond from the Adjudication 39 Proceedings under the Construction Industry Payment and

Liberty to apply. [136] Costs shall be costs in the cause in the arbitration and parties by agreement confer such jurisdiction to award costs on the arbitrator. [137] Enclosure 4 which was more a subset of reliefs prayed for in Enclosure 1 in the Originating Summons, was in the light of the above orders, withdrawn and so struck out with no order as to costs. Dated: 14 March 2019. - signed - LEE SWEE SENG Judge Construction Court High Court of Malaya Kuala Lumpur For the Plaintiff : Avinder Singh Gill and Mansoor Saat (Messrs Mansoor Saat & Co.) For the Defendant : Choon Hon Leng and Kevin Wong (Messrs Raja, Darryl & Loh) Date of Decision: 13 December 2018.