10 September 2021

Please click HERE for the Mandarin version of the case update.

T Kuhendran, Daniel Lau and Jasmeet Kaur from Zul Rafique & Partners’ Construction Dispute Resolution Practice Group, representing the MTD Construction Sdn Bhd (“Respondent”), successfully resisted two appeals against a judgment of the High Court dismissing two applications for interim injunction in respect of the Respondent’s calls on bank guarantees securing a performance bond (“PB”) and advance payment guarantee (“APG”).

The Respondent is a works package contractor in respect of a package of the Putrajaya MRT Line whilst the Appellant was a nominated sub-contractor appointed to carry out works in respect of two elevated stations along the Putrajaya Line. The Respondent had terminated the sub-contract with the Appellant on the grounds, amongst others, that the Appellant had persistently neglected to perform its obligations and failed to proceed regularly and diligently with its obligations under the sub-contract. Thereafter, the Respondent made two calls on bank guarantees in respect of the PB and the APG.

Prior to the Respondent’s calls, the Respondent had complied with and fulfilled the contractual requirements for the calls by obtaining a certificate from the contract administrator, viz. the Project Delivery Partner certifying that the Appellant had been in default of its obligations under the sub-contract.

The Appellant contended unconscionability in the conduct of the Respondent, amongst others, in the Respondent’s alleged unlawful termination of the sub-contract, in allegations of non-payment on certified amounts and delays to the works caused by the Respondent, force majeure and the impact of the Covid-19 pandemic.

These allegations of unconscionability were rejected and the Respondent presented the following counter-arguments, amongst others: that the termination of the sub-contract was valid and lawful, that payments were rightfully deducted as financial assistance and payments on behalf had been made by the Respondent, that delays even if attributable to the Respondent were minimal and had not critically impacted the Appellant’s works, and the fact that the defaults of the Appellant had arisen prior to the Covid-19 pandemic. In any event, these counter-allegations are merely contractual disputes which ought to be ventilated in arbitration and do not of themselves give rise to unconscionability on the part of the Respondent.

The High Court dismissed the Appellant’s applications for interim injunctive relief, the decision of which was upheld by the Court of Appeal and the appeals were dismissed with costs.

For more insight into this area of law, please contact our Partners in the Construction Dispute Resolution Practice Group:
Kuhendran Thanapalasingam
Susan Tan Shu Shuen

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