Rasma Corporation Sdn Bhd v Kamalbina Sdn Bhd (AA - 24NCVC - 469 - 10/2019)

1.5 Akibatnya, Bank tersebut tanpa pengetahuan mereka bahawa Defendan telah gagal/ingkar/cuai untuk memenuhi terma-terma di dalam “NSC Contract” tersebut telah membuat bayaran berjumlah RM 105,453.70 kepada Defendan tanpa merujuk kepada Plaintif terlebih dahulu 1.6 Oleh itu, Plaintif memfailkan tindakan ini untuk mendapatkan perintah mahkamah supaya Defendan memenuhi tanggungjawab dan mematuhi terma-terma di dalam “NSC Contract” yang mengikat kedua-dua pihak. …” [7] As a result of claim by defendant, the plaintiff had requested for time to settle issue on payment due. Proof of this is contained in a series of WhatsApp messages between them. (See exhibit “A” numbered A1 – A5 to affidavit in reply by Dato’ Kamarulbahrain bin Zainuddin dated 21.11.2019). Much time had passed, and the plaintiff did not fulfil its promise to pay. Hence the defendant made a call on the performance bond directly from Maybank. [8] Maybank paid defendant an amount of RM105,453.70 from the performance bond. This turned out to be the bane in the contractual relationship between plaintiff and defendant. 5 Narrative [9] Resulting from that, plaintiff filed this OS to seek specific performance of the NSC contract originally entered into between plaintiff and defendant. The primary contention by the plaintiff is that when payment was made by Maybank, it had in fact side stepped the NSC contract which binds the defendant. This OS was filed after payment out by Maybank to defendant of the said amount from the performance bond. [10] In the contractual relationship, there are two separate contracts, namely:

NSC contract.

(ii) Terms and conditions of the Performance Bond (PB). [11] The PB which is supposed to be related to the NSC contract makes no reference to it. It serves as bank guarantee for works done. It is issued in consideration of the principal allowing the contractor to undertake construction works at the site for a sum of RM55,502,574.00. At the request of contractor, Maybank undertakes to guarantee the principal for due performance of contract against failure of the other party to meet obligations pursuant to the contract. Under the PB, the Bank is required to pay 6 on demand regardless of the underlying contract. The words of the present PB did not make it conditional upon proof or inquiry of a breach of contract by the plaintiff. The Bank was not required to inquire or make any evaluation on the merits of the demand. In the absence of a prevalence clause in either of the contract, the PB operates independently of the NSC contract. The prevalence clause would have the effect of stipulating which agreement would prevail in the event of any conflict or inconsistency between the NSC contract and PB. [12] To the contrary, the PB contains an entire agreement clause which provides certainty that it constitutes the entire agreement between parties. By having this clause, the plaintiff and defendant agree that the PB supersedes any previous contractual arrangements between them, including the NSC contract. It simply avoids the risk of misunderstanding like in the present case, on which is applicable when a call of PB is made. With an entire agreement clause included, once the PB, being a definitive agreement executed between plaintiff and defendant, it will supersede the NSC contract. [13] To that extent, reliance on clauses 28.2 and 40 of NSC contract by the plaintiff is misplaced, as it not applicable to the PB, as no reference is made to the said clauses or provisions of the NSC 7 contract in the PB. In terms of clause 28.2 of NSC Contract, the defendant had made full and frank disclosure to the Supervising Officer (see exhibit B96 to affidavit in reply by Dato’ Kamarulbahrain bin Zainuddin dated 21.11.2019) on conduct of plaintiff. As there was no reply from the said officer, defendant went ahead to make a call on the PB from Maybank. Maybank, whom is not privy to the NSC Contract, acceded to the request by defendant. If the NSC contract is binding on Maybank, it would not have made payment to defendant at its request as then it would be faulted for being in breach of the NSC contract. There is also no injunctive relief sought by plaintiff against Maybank to restrain it from paying defendant, albeit having knowledge of defendant's demand at all times, as had happened in the case of SN Almida Holdings Sdn Bhd v MTD Construction Sdn Bhd (2020) MLJU 2038. Maybank is also not made a party to this OS. But, in fact the plaintiff vide letter dated 22.10.2019 (see exhibit “KBY 5” to the affidavit in support of Kalthum bt Yahya dated 29.10.2019) had informed Maybank to stop payment to defendant, failing which it may institute a claim against Maybank, but no action was taken nor was the said letter copied to the defendant. 8 [14] Likewise, clause 40 of NSC Contract which favours arbitration in case of dispute, does not apply to the present case, as the trigger is only possible if there is any dispute or difference in connection with NSC Contract and not PB. [15] Clause 1 of PB stipulates the following: “…

On of the Principal first written demand, the Guarantor shall forthwith pay to the Principal the amount specified in such demands notwithstanding any contestation or protest by the Contractor or Guarantor or by any other third party and, without proof or conditions provided always that the total of all payments so made shall not exceed the sum of RM2,775,128.70 (RINGGIT “MALAYSIA” TWO MILLION SEVEN HUNDRED SEVENTY FIVE THOUSAND ONE HUNDRED TWENTY EIGHT AND CENTS SEVENTY ONLY) and the total amount recoverable against the guarantor under this Agreement shall not exceed the said sum…” (emphasis is mine) Incidentally, the phrases used in the PB was also a subject matter for determination in the case of Konajaya Sdn Bhd v Perbadanan Urus Air Selangor Bhd (2009) 5 MLJ 263 at page 277, where it was decided: “… “WITHOUT PROOF OR CONDITIONS” [31] The words ‘without proof or conditions’ in the bank guarantee do not mean ‘without having to assign any reason whatsoever’ as was the case in Kirames Sdn Bhd v Federal Land Development Authority [1991] 2 MLJ 198; 9 [1991] 3 CLJ (Rep) 27 (HC). The words ‘without proof or conditions’ simply mean the defendant is not required to prove an actual default by the plaintiff in the performance of the contract. This was the first possible construction of performance bonds as explained in Esal Commodities. Even if the proof of an actual default is not required, the court maintains that the defendant must state in its written demand the basis upon which the demand is made (which is the second possible construction of performance bonds as explained in Esal Commodities). [32] The court further maintains the words ‘without proof or conditions’ mean that upon receipt of a valid demand, the bank ought to pay the defendant the sum of the bank guarantee without imposing any conditions. The demand must be valid in the first place. In this case, however, the defendant’s written demand was invalid for failing to state the basis for its demand. ‘NOTWITHSTANDING ANY CONTESTATION OR PROTEST’ [33] The words ‘notwithstanding any contestation or protest by the contractor’ are consistent with the above interpretation of the bank guarantee. Similar words ‘notwithstanding any contestation or protest’ were used in the performance bond in Teknik Cekap Sdn Bhd v Public Bank Bhd [1995] 3 MLJ 449; [1995] 4 CLJ 697 at p 459 (MLJ); p 701 (CLJ) and the Court of Appeal in that case nevertheless held that the bond required the beneficiary to inform the bank of the basis of the demand. This interpretation was affirmed by the Federal Court on Appeal in [1998] 3 MLJ xxv. [34] The words ‘notwithstanding any contestation or protest by the contractor’ were also used in the performance bond in Cygal Bhd v Bandar Subang Sdn 10 Bhd [2004] 3 CLJ 67 (CA); [1998] 1 LNS 414 (unreported) (HC). In these cases, the High Court held and the Court of Appeal affirmed that the ‘defendant in making a claim on the bond merely has to state in the notice to the bank that the plaintiff has breached the contract and the claim has to be made good or honoured’. …” (emphasis is mine) Ensuing from the above decided case and decision of the apex Court in the case of Teknik Cekap Sdn Bhd v Public Bank Bhd, referred to, the primary consideration is the basis of the written demand made to the Guarantor Bank. In the present case, the defendant in its letter of demand dated 18.10.2019 (see page B101 of Exhibit B to affidavit in reply by Dato’ Kamarulbahrain b. Zainuddin dated 21.11.2019) had stated clearly the nature of the defendant’s claim and its basis, which was within knowledge of the plaintiff as intimated by the various letters sent. The said demand reads as the following: “… Untuk makluman pihak tuan, pihak Rasma Corporation Sdn Bhd yang disebut sebagai Sub-Kontraktor Dinamakan untuk kerja pemasangan sistem mekanikal bagi projek di atas telah gagal membayar sejumlah tuntutan kepada pihak kami (Kontraktor Utama) bagi kerja-kerja pembaikian dan pemulihan ke atas kerosakan-kerosakan yang dilakukan oleh pihak Rasma Corporation Sdn Bhd di tapak bina. 11 Tuntutan tersebut adalah bagi kerja-kerja seperti berikut: a) Kerja penutupan siling buat kali kedua bagi aras 6, 7, 8 dan 10 b) Kerja penutupan siling aras 9 c) Kerja kemasan Cat Dinding aras 1, 4, 5, 6, 7, 8, 9 dan 10 Jumlah keseluruhan tuntutan (a), (b) dan (c) seperti di atas kepada pihak Rasma Corporation Sdn Bhd berjumlah RM 105,453.70. Jumlah yang dinyatakan tersebut adalah dikenakan atau dilaksanakan oleh pihak kami setakat ini sahaja dan kerja pembaikian dan pemulihan lain akan dituntut dari masa ke semasa. Oleh yang demikian, pihak kami sebagai Kontraktor Utama bagi projek di atas, menghendaki pihak tuan sebagai penjamin bagi pihak Rasma Corporation Sdn Bhd di mana perjanjian yang telah dibuat pada 25/8/2015 dengan jaminan bernombor 99010BGP6113911 untuk membayar keseluruhan tuntutan pihak kami yang berjumlah RM 105,453.70 terhadap kerja-kerja tersebut melalui nilai Bon Perlaksanaan pihak Rasma Corporation Sdn Bhd yang keseluruhan berjumlah RM 2,775,128.70. Permohonan pihak kami ini adalah bersandarkan kepada syarat-syarat dan peraturan di dalam Jaminan Bank asal bernombor 99010BGP6113911 untuk Bon Perlaksanaan (Kontrak Kerja) yang bertarikh 25/8/2015 dan jaminan-jaminan lanjutan seperti yang dilampirkan. …” 12 Findings and Conclusion [16] It is so apparent from the record that the plaintiff has slept on their rights and it cannot now seek equitable relief in the form of specific performance from this court, when it does not come with clean hands, to wit, not to pay the defendant on completion of works. It is not conscionable on the part of plaintiff to do so after having given an impression to the defendant that it would prefer a settlement of the issue, which was not forthcoming till the end. This too speaks of conduct of the plaintiff which is relevant to the fact in issue, leading to a call by the defendant for the PB. Such conduct is relevant pursuant to section 8(2) of the Evidence Act 1950 (Act 56) for this court to consider, which had influenced the fact in issue in the present case, as to whether the call on PB is justified and legitimate. [17] Commercial agreements, including construction contracts demand certainty as otherwise there would not be any logical sense to the stipulations made in a contract, like the PB in the present case. [18] In view of the foregoing, this court is left with no alternative but to give effect to the wording of the PB per se. In that context, the express terms in the bond which specifies, notwithstanding any contestation or protest by the contractor and without proof or conditions, the guarantor shall forthwith pay to the principal the 13 amount specified in the demand made prevails. It is these express terms, clearly worded in the PB that both plaintiff and defendant intend to have contractual force and not clause 28.2 and 40 of the NSC contract. [19] In terms of time, PB prevails over the NSC contract as it was made ten months after the NSC. Moreover, to reiterate, the stipulations in the form of clause 28.2 and 40 in the NSC, relied on by plaintiff is not referred to in the PB. [20] In the premise, call on performance bond by the defendant is justified and legitimate, and in turn the plaintiff has no reasonable cause of action against the defendant, pursuant to the terms and conditions of the PB, which explicitly declares intention of parties, which this court must give effect to. (See again Konajaya Sdn Bhd v Perbadanan Urus Air Selangor Bhd (2009) 5 MLJ 263). The terms and conditions of PB are clear and unambiguous and this court should not go behind it by introducing or adding new terms to it but to confine itself to the construction of it premise solely on the said terms and conditions. (See Koh Siak Poo v Perkayuan OKS Sdn Bhd & Ors (1989) 3 MLJ 164). Moreover, both plaintiff and defendant who are parties to the PB must perform their respective 14 promises as contracted for from the date of its inception. (See section 38(1) of the Contracts Act 1950 (Act 136). [21] In the upshot, the claim by plaintiff in this Originating Summons is dismissed with costs of RM5000, subject to an allocatur fee, to be paid to the defendant. Judgment for the defendant. Dated 29 April 2021 Sgd. Muniandy Kannyappan Judicial Commissioner High Court, Taiping. Miss Norroziyana Rahim of EZRILAW FIRM, counsel for the plaintiff. Mr Manjit Singh of Manjit Subra & Associates, counsel for defendant.