Announcement

Zul Rafique & Partners successfully enforced an on-demand Guarantee by way of a Summary Judgment Application and successfully resisted a Striking Out Application in the High Court

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19 April 2023

Our Partner, Susan Tan Shu Shuen and Associates, Koh Shien Lin and Noor Sumaeya Sofea Shamsudin from Zul Rafique & Partners’ Construction Dispute Resolution Practice Group acting for the Employer of a construction project worth about RM48.3 million (“Project”), have successfully obtained a summary judgment in the Construction High Court of Shah Alam.

As a matter of background, the Plaintiff as the Employer of the Project appointed a Main Contractor to carry out the works under the Project (“Contract”). The Defendant (as the sole shareholder and director of the Main Contractor) issued a Guarantee in favour of the Plaintiff in the sum of RM2,415,000.00 to secure the due performance of the works by the Main Contractor.

The Main Contractor subsequently committed various breaches of its obligation under the Contract with the Plaintiff. In view of the Main Contractor’s breaches, the Plaintiff vide its solicitors issued a Written Demand for the Guaranteed Sum of RM2,415,000 against the Defendant. The Defendant however denied liability under the Guarantee and failed, neglected and/or refused to comply with the Written Demand and pay the Guaranteed Sum or any part thereof to the Plaintiff.

In light of the above, the Plaintiff filed an action in the Construction High Court of Shah Alam to enforce the Guarantee and to claim for the Guaranteed Sum against the Defendant. Subsequently, the Plaintiff applied pursuant to Order 14 of the Rules of Court 2012 for a summary judgment to be entered against the Defendant for the sum of RM2,415,000.00, being the Guaranteed Sum payable by the Defendant to the Plaintiff (“Summary Judgment Application”).

In resisting the Plaintiff’s Summary Judgment Application, the Defendant contended that there is a triable issue in that the Guarantee is conditional upon the Plaintiff proving the Main Contractor’s breach or default in the underlying Contract by way of an arbitration proceeding, and since the Plaintiff has yet to obtain an arbitral award in this regard, this results in the Plaintiff’s action to be premature. It is also based on this very same ground that the Defendant applied to strike out the Plaintiff’s claim pursuant to Order 18 Rule 19 of the Rules of Court 2012 (“Striking Out Application”).

The Plaintiff argued amongst others the following:

1) That the Guarantee is an on-demand and unconditional guarantee, and the issuance of the Written Demand by the Plaintiff is sufficient to regulate the call on the Guarantee without the Plaintiff having to prove any default or breach by the Main Contractor in the performance of the underlying Contract;

2) There is no triable issue or meritorious defence raised by the Defendant; and

3) The Defendant has failed to show that the Plaintiff’s action for the Guaranteed Sum is in any manner unreasonable, frivolous, vexatious and/or amounts to an abuse of the court process.

Upon reading the submissions from both parties, the High Court allowed the Plaintiff’s Summary Judgment Application for a final judgment be entered against the Defendant for the Guaranteed Sum of RM2,415,000.00 and dismissed the Defendant’s Striking Out Application 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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