Pengerang Refining Company Sdn Bhd v Sinopec Engineering (Group) Co Ltd (W-02(C)(A)-565-04/2025)

1.

SINOPEC ENGINEERING GROUP MALAYSIA SDN BHD. - RESPONDENTS [In the Matter of the High Court of Malaya at Kuala Lumpur In the State of Federal Territory, Malaysia Civil Appeal No: WA-24C(ARB)-38-06/2024 & WA-24C(ARB)-38-06/2024 Between Pengerang Refining Company Sdn Bhd - Appellants

Sinopec Engineering (Group) Co Ltd 2. Sinopec Engineering Group Malaysia Sdn Bhd. - Respondent CORAM: AZMI BIN ARIFFIN, HMR MOHD FIRUZ BIN JAFFRIL, HMR ONG CHEE KWAN, HMR

R6 and R7 are two related appeals. R6 : CIVIL APPEAL NO: W-02(IM)(C)558- 04/2025 (COA) (ENCLOSURE 107 DATED 4.4. 2025) IN HC : ORIGINATING SUMMONS NO: WA-

Enclosure 31 dated 3/7/2024 is the Appellant/ Defendant's application to set aside under Order 29 rule 1 and Order 32 rule 6 and/or Order 42 rule 13 and/ or Order 92 rule 4 of the Rules of Court 2012, the Ex-Parte Order dated 10.6.2024 ("Ex-Parte Order") granted to the Respondents/ Plaintiffs (“the Setting aside Application”).

The Appellant/ Defendant (Pengerang) appealed against the High Court’s decision dated 24.3.2025, dismissing the Appellant/Defendant’s application to set aside the Ex-Parte Order (“Enclosure 107”).

The brief facts leading to the setting aside Application arose in the following manner: a) On 10.6.2024, the Respondents/ Plaintiffs applied for an injunction to restrain the Appellant/ Defendant and/ or its agents from:

making a demand on the Performance Bond dated 26.8.2014 in the sum of USD132,902,900.00 (“Performance Bond”); or

(ii) calling and/ or receiving monies or payment pursuant to the demand under the Performance Bond, if already made (“Respondent’s Application”). b) Subsequently, the Respondents/ Plaintiffs obtained the Ex-Parte Order, restraining the Appellant/ Defendant from calling and/ or receiving monies or payment pursuant to the Performance Bond pending a final award in the arbitration. c) On 14.6.2024, an Ad Interim Injunction Order was granted. d) On 3.7.2024, the Appellant filed the Setting Aside Application. e) The Learned High Court Judge dismissed the Setting Aside Application on 24.3.2025.

Hence, this led to the Appellant/ Defendant’s appeal to the Court of Appeal on 4.4.2025 via Enclosure 107. R7 : CIVIL APPEAL NO: W-02(IM)(C)565-04/2025 (COA) (ENCLOSURE 105 DATED 4.4.2025) IN HC: EX-PARTE ORIGINATING SUMMONS NO:

Enclosure 1 dated 10.6.2024 is the Plaintiff's Ex-Parte application pursuant to, amongst others, under section 11 of the Arbitration Act 2005 to injunct the Defendant or its servants or agents from making a demand under the Performance Bond No. 99140BGJ6951453 dated 26.8.2014

The Learned High Court Judge on 24.3.2025 allowed the Plaintiff's application to injunct the Defendant or its servants or agents from making a demand under the Performance Bond No. 99140BGJ6951453 dated 26.8.2014.

On 4.4.2025 via Enclosure 105 the Defendant appealed to the Court of Appeal. Facts of the case

The Appellant is a company incorporated under the laws of Malaysia with its registered address at Kuala Lumpur.

The 1st Respondent (SINOPEC ENGINEERING (GROUP) CO LTD) is a company incorporated under the laws of the People’s Republic of China.

The 2nd Respondent (SINOPEC ENGINEERING GROUP MALAYSIA SDN BHD) is a company incorporated under the laws of Malaysia with its registered address at No 3-27, Jalan Puteri 4/8, Bandar Puteri, 47100 Puchong.

The 1st Respondent is the world's largest oil refining, gas and petrochemical conglomerate.

The Respondents are involved, among others, in the business of oil refinery and construction works on large scale infrastructure projects.

By an agreement in writing and dated in August 2014 (the EPCC Contract), the Respondents agreed to perform certain works, more particularly described as the engineering, procurement, construction and commissioning of Refinery Package 2 (CDU, ARDS and HCDU Units) for the Refinery and Petrochemical Integrated Development (RAPID) Project at Pengerang, Johor Darul Ta’zim, for the Appellant.

In accordance with Article 5.2 of the Conditions of Contract the Respondents have procured the following Performance

a Maybank Performance Bond No 99140BGJ6051453 dated 26.8.2014 for the sum USD132,902,900.00, being 10% of the Contract Price, in favour of the Appellant.

a corporate guarantee from SINOPEC Group, the 1st Respondent’s parent company, Parent Company Guarantee dated 28.11.2014 (the 1st Parent Company Guarantee), and delivered to the Appellant, which guarantees all the 1st Respondent’s obligations and liability under the EPCC Contract.

By a letter dated 10.6.2024 (Notice of Dispute), the Respondents gave notice to the Appellant in accordance with Article 53.1 of the Conditions of Contract, that identifies the dispute between the parties.

By a Notice of Arbitration dated 10.7.2024, the Respondents commenced arbitral proceedings against the Appellant.

On 9.8.2024, the Appellant served a Response to Notice of Arbitration.

By a letter dated 10.6.2024, the Appellant made a demand under the Performance Bond.

20.

By an Order (Ex-Parte) made on 10.6.2024 the High Court granted an injunction that the Appellant be restrained from calling and/ or receiving monies or payment pursuant to the demand under the Performance Bond pending a final award in the arbitration and that an inter-partes hearing be fixed on 14.6.2024.

On 14.6.2024, the High Court granted an ad interim order that the Appellant be restrained from calling and/ or receiving monies pursuant to the demand under the Performance Bond until the inter-partes hearing and disposal of the Respondents’ application.

The Respondents’ application for an interim measure was heard on 11.11.2024 and 6.2.2025.

By an Order made on 24.3.2025, the High Court granted an interim injunction, restraining the Appellant from calling and/ or receiving monies pursuant to the demand on the Performance Bond pending a final award in arbitral proceedings.

Simultaneously, the High Court also dismissed the Appellant’s application to set aside the Order (Ex-Parte). The Appellant’s Appeals to this Honourable Court

By a Notice of Appeal dated 4.4.2025, the Appellant appealed to this Honourable Court against the Order made by the High Court allowing the Respondents’ application for an interim measure (Appeal 565).

By a separate Notice of Appeal dated 4.4.2025 (Appeal 558), the Appellant appealed to this Honourable Court against the Order made by the High Court dismissing the Appellant’s application the ad interim injunction to set aside (Appeal 558). The Respondents’ Applications for Security for Costs in this

By a Notice of Motion dated 17.4.2025 (Enclosure 6), the Respondents filed an application to this Court for security for costs in Appeal 565.

By an Order made on 25.6.2025 (Enclosure 94), this Court granted an order for the Appellant to pay security for costs in the sum of RM10,000.00 to the solicitors for the Appellant.

On 14.7.2025, the Appellant deposited the RM10,000.00 into their solicitors account as security for costs.

By a Notice of Motion dated 17.4.2025 (Enclosure 6), the Respondents filed an application to this Court for security for costs in Appeal 558.

By an Order made on 25.6.2025 (Enclosure 35), this Court granted an order for the Appellant to pay security for costs in the sum of RM10,000.00 to the solicitors for the Appellant.

On 14.7.2025, the Appellant has deposited RM10,000.00 into their solicitors account as security for costs.

By an application dated 14.6.2024, the 1st Respondent applied to the Beijing Financial Court to rule that the Industrial and Commercial Bank of China Limited (ICBC) suspend payment of USD132,903,000.00 under the Counter-Guarantee Bond No

By a Civil Ruling made on 14.6.2024, the Beijing Financial Court ruled that Industrial and Commercial Bank of China Limited (ICBC) suspend payment of USD132,903,000.00 under the aforesaid Counter-Guarantee to Maybank. Main issue for determination

Whether the Appellant’s demand on the Performance Bond is unconscionable? The Appellant’s contention

The Appellant argument amongst others are as follows:

the Respondents' application was filed prior to the Appellant making a demand on the Performance Bond;

in obtaining the Ex Parte Order, the Respondents failed to disclose the relevant law concerning the application of

the Appellant's call on the Performance Bond was not unconscionable;

pursuant to Article 30.1 of the Conditions of Contract, the Appellant is entitled to Delay Damages considering that the Respondents failed to achieve

the learned High Court Judge erred in finding that the Respondents could pursue injunctive relief despite the agreement in Article 5.9 of the Conditions of Contract;

the learned High Court Judge had interfered with the arbitral tribunal's jurisdiction by making a finding that the demand on the Performance Bond is invalid and of no effect;

the learned High Court Judge was wrong in his conclusions that the Appellant was potentially at fault for the explosion and the consequent delays; and

there is no act of bad faith on the part of the Appellant. The Appellant is the party which has clearly suffered as a result of the delays caused to the completion of the works by the Respondents. The Respondents’ contention

The Respondents contention amongst others are as follows:

there is a prima facie case that the demand on the performance bond is unconscionable based on the following reasons:

the Facility has been completed and handed over to the Appellant, who has earned revenue from operating the facility;

(ii) the demand was made after the completion of the Facility, which is contrary to the purpose of the Performance Bond; and

(iii) the Appellant had deliberately not disclosed a Performance Test Report, and the fact that the Facility is operating.

the convenience test does not apply in an application for an injunction to restrain a call on a performance bond.

the demand on the performance bond tainted by unclean hand, selective and incomplete disclosures.

the Appellant is not entitled to Delay Damages, as the Appellant caused the delay.

that Article 5.9 of the Conditions of Contract is void under section 29 of the Contracts Act 1950.

that Article 5.9 of the Conditions of Contract cannot be enforced, as it is contrary to section 11 of the Arbitration Act 2005.

Having examined and scrutinised the cause papers, the oral and written submissions made by both parties, we now come to our unanimous decision. We will first deal with R7.

The test that the Respondents are required to satisfy is as follow:

There is a seriously arguable case that the demand on the performance bond is unconscionable; and

(ii) there is prima facie case that the demand on the performance bond is unconscionable.

The law is settled that, where the works are completed, any demand on the Performance Bond will be unconscionable.

In Nafas Abadi Holdings Sdn Bhd v. Putrajaya Holdings Sdn Bhd & Anor [2004] MLJU 148 the court held as follows: “Melihat kepada fakta kes, Defendan 1 sendiri telah mengakui bahawa Plaintif telah menyiapkan hampir 95% dari kerja-kerja di bawah Building Contract (Ekshibit A, Encl. 3). Malahan, perkara ini telah disokong oleh laporan perunding bebas, Barisan Jurutera Perunding Sdn Bhd, yang mengesahkan Plaintif telah pun menyiapkan 100% kerja-kerja fizikal di bawah kontrak berkenaan. Pada bila-bila masa fakta ini tidak disangkal oleh Defendan 1. Malahan, fakta juga menunjukkan bahawa Perbadanan Putrajaya, yang merupakan pihak ketiga, telah menghantar surat kepada Plaintif dan Defendan 1 memaklumkan bahawa projek itu telah dibuka kepada awam dan fakta ini pun tidak disangkal oleh Defendan 1. Memandangkan keadaan fakta kes ini sendiri, maka mahkamah berpendapat tuntutan ini adalah telah dibuat secara tidak ikhlas (unconscionable). Malahan dengan menuntut kesemua jumlah wang di bawah Bank Guarantee tersebut, Plaintif telah melakukan fraud kerana tuntutan tersebut telah dilakukan dengan pengetahuan bahawa ianya adalah melebihi dari nilai untuk kerja-kerja pembaikan yang patut dilakukan.”

In Global Upline Sdn Bhd v. Kerajaan Malaysia and another appeal [2018] MLJU 175, the Court of Appeal inter alia, held: “…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.”

Here, we find that the Appellant deliberately withheld the issuing of the approved Performance Test Report for ARDS Unit 1210 to the Respondents (despite the project being completed after inspection and testing) in order to avoid having to issue the Certificate of Provisional Acceptance.

Via a letter dated 8.12.2023, the Appellant informed the Respondent that they are not entitled to the certificate of Provisional Acceptance because the Respondent has not paid the Appellant the delay damages in the amount of USD132,902,900.00 which to us the Appellant is not entitled to after the said facility has been completed and handed over to the Appellant. More so the Appellant has also earned revenue from operating the facility. Accordingly, we find that the Appellant demands on the Performance Bond is unconscionable.

In addition, the Appellant’s here is not without remedy after completion when the Performance Bond should have been handed back, as the Appellant can still make a demand on the Parent Company’s Guarantees.

In summary, we can safely conclude that the calling on the Performance Bond by the Appellant is against the purpose of the said Bond.

In respect of appeal in R6, we find that the Respondents have made full and frank disclosure at the High Court.

The learned High Court Judge at paragraph [26] of his judgment held as follows:

the Respondents have disclosed the performance bond and Parent Company Guarantees;

(ii) the Respondents have disclosed the grounds for the Respondent’s ex-parte originating summons;

(iii) the Respondents have disclosed all material facts in relation to the incident;

(iv) the Respondents have disclosed all the relevant materials including points that may be unfavourable to the respondents; and

the Respondents have disclosed that there is no previous similar ex-parte application made by the Plaintiffs.

In the upshot, we fully agree with the learned judge decision.

For the reasons given, we find no real substance in both appeals to merit our interference.

The appeal in R6 and R7 is dismissed with costs of RM25,000.00 for each case subject to allocatur fees. Dated: 9th December 2025 - SGD - AZMI BIN ARIFFIN JUDGE COURT OF APPEAL MALAYSIA Counsel For the Appellant :

Sanjay Mohan

Muhd Naazraj

Siew Suet Mey [Sanjay Mohan (Kuala Lumpur)] For the Respondent :

Thayananthan A/L Baskaran

Ng Faye Xiang

Leezzie John [Baskaran (Kuala Lumpur)]