Ranhill E&C Sdn Bhd v Thyssenkrupp Indusries (M) Sdn Bhd, 16-03-2016

• Judge: Y.A. TUAN LEE SWEE SENG
• Judgment Date: 16 March 2016
• Court: High Court (Malaysia)
• Record Number: NO: 22C-55-11/2015

IN THE HIGH COURT OF MALAYA AT KUALA LUMPUR

IN THE FEDERAL TERRITORY OF WILAYAH PERSEKUTUAN, MALAYSIA

(CIVIL DIVISION)

CIVIL SUIT NO: 22C-55-11/2015

BETWEEN

RANHILL E&C SDN BHD ... PLAINTIFF

(COMPANY NO: 742354-X)

AND

1. THYSSENKRUPP INDUSRIES (M) SDN BHD

(COMPANY NO: 1013967-A)

2. MALAYAN BANKING BERHAD

(COMPANY NO: 3813-K) ... DEFENDANTS

THE JUDGMENT OF

Y.A. TUAN LEE SWEE SENG

1. This is an inter-parte hearing in Enclosure 11 as to whether the ex-parte injunction restraining the first Defendant ("D1") from receiving the sum of RM2.45 million under a Bank Guarantee issued by the second Defendant Malayan Banking Berhad ("D2") and restraining D2 from paying out to D1 the said sum, should be confirmed, discharged or varied.

The Project

2. A company known as Tanjung Bin Energy Issuer Bhd. Malaysia (“TBEI”) was tasked to administer and manage the construction of a 1,000

megawatt power plant located at Tanjung Bin Johor (“the Project”) TBEI in turn appointed Alstom Services Sdn Bhd (“Alstom Services”) to provide services of erection, commissioning and testing of a coal handling plant (“the Works”).

3. Alstom Services thereafter entered into an agreement with the D1 wherein it was to carry out the Works. D1 is a wholly owned subsidiary of Thyssenkrupp Industries India Pty Ltd and was incorporated on or around 15 August 2012.

4. D1 then appointed the Plaintiff to undertake the Works for the Project for a total price of RM24.5 million ("the Contract Sum") by its Letter of Intent dated 12 April 2013. The Letter of Intent set out the initial scope of Works required to be carried out by the Plaintiff in respect of the Project. This was followed by a work order W.O. No. TK(M)/3M0037/PO-002 dated 15 May 2013 to the Plaintiff in respect of the scope of works to be carried out ("the Work Order")

5. The Letter of Intent, the Work Order together with the Commercial Terms and Conditions dated 9 April 2013 ("the Terms and Conditions") formed the salient parts of the Contract between the Plaintiff and D1. The initial scope of Works included unloading at site, handling storage till erection, erection, testing, commissioning and supervision ("the initial Scope of Works").

6. It was a term of the Contract that D1 was to provide an advance payment in the sum of RM2,450,000.00 to the Plaintiff being 10% of the Contract Sum for the commencement of the Initial Scope of Works by the Plaintiff (“the Advance Payment”). The Advance Payment was to be made against the submission of a bank guarantee in favour of D1 Under Annexure 1 of the Terms and Conditions, the Bank Guarantee which was to secure the Advance Payment, was to remain valid until the expiry of 90 days beyond the completion or performance of the Plaintiff’s scope of Works.

7. It should also be mentioned that the subsequent 80% of the order value shall be paid to the Plaintiff progressively against monthly progressive reports and bills as certified by D1 and after 30 days from the date of submission of documents by the Plaintiff to D1. In respect of the last 10% of the order value, the Plaintiff is entitled to payment upon (i) the completion of their works as signified by a performance guarantee test (as defined in the Contract) carried out by the Plaintiff and (ii) upon the provision of a bank guarantee for the value of the last 10% of the order value which was to be valid up to 30 April 2018. For the avoidance of doubt and confusion, this bank guarantee is separate and distinct from the Bank Guarantee for the Advance Payment. The Bank Guarantee ("BG") for the Advance Payment dated 3 June 2013 was duly furnished by the Plaintiff to D1; being issued by D2 to D1.

Problems

8. The Plaintiff experienced various difficulties which it said was beyond its control in completing its Initial Scope of Works. Seeing that the Plaintiff was falling behind its schedule of Works, the Plaintiff and D1 entered into an agreement wherein the balance of the Initial Scope of Works of the Plaintiff would be de-scoped and awarded directly to the Plaintiff's subcontractors. The Plaintiff's obligation would then be reduced accordingly ("the New Scope of Works") as captured in D1's letter to the Plaintiff dated 7 November 2014.

9. According to the Plaintiff, it had to the best of its ability performed the New Scope of Works up until February 2015 when for reasons best known to D1, D1 had wrongfully and/or in bad faith restricted and/or denied the Plaintiff access to the Project Site, thus preventing the Plaintiff from carrying out any further works.

10. D1's version is that the Plaintiff had abandoned the works in late September 2014. See paragraph 21(c) Enclosure 23 and Exhibit P8. At the time the Plaintiff abandoned the works, the progress for the works by the Plaintiff was only 32.26% as evidenced by Exhibit P 11 in Enclosure 23. This is the Plaintiff's own document annexed to its Statement of Claim. As can be seen up to Claim No. 16 dated 29 December 2015 the total progress of the works stood at 32.36%.

11. The Advance Payment had been deducted from every Progress Claim by deduction of 10% of the amount payable. The work, having stopped, there was the problem that the balance Advance Payment would be not recoverable if not by a demand made on the Bank Guarantee. The Plaintiff had at the request of D1 extended the Bank Guarantee on 2 previous occasions to 12 August 2015 and then further to 12 November 2015.

12. The Plaintiff proceeded from their understanding that since the Plaintiff's project works have been performed, there is no longer any obligation to maintain the Bank Guarantee which was expiring on 12 November 2015 nor any entitlement by D1 to call on the same. The Plaintiff wrote as such to D1 by its letter of 4 November 2015 seeking also a resolution in respect of the Plaintiff's outstanding claims for additional works and/or variations.

13. D1 had written to the Plaintiff by their letter dated 3 November 2015 (Exhibit P 18 Enclosure 28) stating categorically that the Plaintiff had failed to perform the Work Order as evidenced by various communications between the parties in the past. D1 reiterated that the delay in the erection works was on account of the Plaintiff's inability to mobilize the agreed resources in time and this was inspite of the additional financial support from D1 in making payments in advance of the work to be done at the request of the Plaintiff to ease their financial burden. D1 impressed upon the Plaintiff that they had paid them a sum of RM9.2 million inspite of the Plaintiff not completing their scope of works. In summary D1 informed the Plaintiff that they have incurred RM32.95 million till date to complete the scope of work in the Work Order of RM24.5 million, the difference being RM8.45 million, which is their financial loss purely attributable to the Plaintiff inability to perform the Work Order. The letter ended with the cryptic note that they were thus constrained to invoke the BG.

Prayers

14. The Plaintiff rushed to Court with a Certificate of Urgency and obtained on 11 November 2015 an ex-parte injunction in Enclosure 11 on the following terms:

(i) that parties are to appear on 16 December 2015 at 9.00 a.m. for the hearing of the Application;

(ii) that an ad-interim order is granted that the 1^st Defendant and/or their servants and/or their agents or otherwise are restrained and an ad-interim injunction is granted restraining them and each of them from receiving and/or dealing with any money from the call on the Malayan Banking Berhad’s Bank Guarantee for Advance Payment No. 99140BGF5966287 until the disposal of the hearing on 16 December 2015; and

(iii) that an ad-interim order is granted that the 2^nd Defendant and/or their servants and/or their agents or otherwise are restrained and an ad-interim injunction is granted restraining them and each of them from making any payment whatsoever under the Bank Guarantee to the 1^st Defendant or otherwise until the disposal of the hearing on 16 December 2015.

15. The ad-interim injunction was extended by consent of the parties and finally fixed for disposal on an inter-parte hearing before me on 24 February 2016.

Whether the BG is an unconditional on demand BG

16. The operative words of the BG issued by the Bank D2 in favour of D1 read as follows:

BANK GUARANTEE FOR ADVANCE PAYMENT

WHEREAS THYSSENKRUPP INDUSTRIES (M) SDN. BHD., a company existing under the laws of Malaysia, having its registered office at No. 656, 2^nd Floor, 4^th Mile, Jalan Ipoh 51200, Kuala Lumpur, Malaysia (hereinafter called the ‘Company’) which expression shall unless repugnant to the context include its successors and permitted assigns have received order from ALSTOM SERVICES SDN BHD for on-shore activities including but not limited to THE ERECTION AND COMMISSIONING OF THE COAL HANDLING PLANT FOR 1X100 MW POWER PLANT FOR TANJUNG BIN PROJECT AT MALAYSIA.

WHREAS M/S RANHILL E & C SDN BHD having its office at Level 14, Wisma Perkeso, No. 155, Jalan Tun Razak, 50400 Kuala Lumpur (hereinafter referred to as the ‘Contractor’) which expression shall unless repugnant to the context includes its successors, administrators, representatives and permitted assigns have approached the Company and offered to undertake THE ERECTION, COMMISSIONING, COLD TRIALS, HOT TRIALS, PG TEST SUBSTANTIAL COMPLETION & HANDING OVER TO CLIENT OF COAL HANDLING PLANT FOR 1+1X1000MW COAL FIRED POWER PLANT,...