MCC OVERSEAS (M) SDN BHD MALAYAN BANKING BERHAD & DUA LAGI

MCC OVERSEAS (M) SDN BHD MALAYAN BANKING BERHAD & DUA LAGI

Although the Bond is prima facie an on‑demand guarantee enforceable on a conforming demand, the court identified unresolved, material and complex issues from successive assignments and incomplete financing documentation that could render encashment unconscionable and unjust at this interlocutory stage; accordingly the balance of convenience favoured restraining the beneficiary/assignee from receiving or utilising Bond proceeds pending resolution of those issues in arbitration or further declaratory proceedings, while not restraining the issuer bank from payment per se.

Citation
WA-24C(ARB)-28-08/2020 (Mahkamah Tinggi)
Parties
Plaintiff: MCC OVERSEAS (M) SDN BHD; First Defendant (issuer): MALAYAN BANKING BERHAD; Second Defendant (assignee/agent): MAYBANK INVESTMENT BANK BERHAD; Third Defendant (employer/beneficiary): DAMAI CITY SDN BHD
Court
ARB
Jurisdiction
Malaysia
Judgment Date
17 May 2021
Case Number
WA-24C(ARB)-28-08/2020 (Mahkamah Tinggi)
Procedural Posture
Section 11 Arbitration Act 2005 Application for Interim Measures (interlocutory Injunction) / Interlocutory Application and Setting Aside Application; Decision Delivered
Outcome
Interlocutory relief granted in part: injunction restraining Second and Third Defendants from receiving/using Bond proceeds; costs awarded to Plaintiff; Setting Aside Application dismissed
Legal Topics
Performance Bond, On Demand Guarantee, Interim Injunction, Assignment of Chose in Action, Unconscionability, Over Securitisation, Authority to Determine Contract
Source Language
Malay/English
Arbitration Contract Law Banking Law Construction Law Civil Procedure Performance Bond On Demand Guarantee Interim Injunction +4 more

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Parties

MCC OVERSEAS (M) SDN BHD

Plaintiff

MALAYAN BANKING BERHAD

First Defendant (issuer)

MAYBANK INVESTMENT BANK BERHAD

Second Defendant (assignee/agent)

DAMAI CITY SDN BHD

Third Defendant (employer/beneficiary)

Procedural Posture

Section 11 Arbitration Act 2005 Application for Interim Measures (interlocutory Injunction) / Interlocutory Application and Setting Aside Application; Decision Delivered

Legal Issues

  1. 1 Whether court should grant interlocutory injunction restraining payment/receipt under performance bond pending arbitration
  2. 2 Whether the performance bond remained a valid enforceable guarantee after successive assignments
  3. 3 Whether the bond is on-demand or conditional and what constitutes a conforming demand

Ratio Decidendi

Although the Bond is prima facie an on‑demand guarantee enforceable on a conforming demand, the court identified unresolved, material and complex issues from successive assignments and incomplete financing documentation that could render encashment unconscionable and unjust at this interlocutory stage; accordingly the balance of convenience favoured restraining the beneficiary/assignee from receiving or utilising Bond proceeds pending resolution of those issues in arbitration or further declaratory proceedings, while not restraining the issuer bank from payment per se.

Court Disposition

Interlocutory relief granted in part: injunction restraining Second and Third Defendants from receiving/using Bond proceeds; costs awarded to Plaintiff; Setting Aside Application dismissed

Orders

  • Interim injunction restraining the Second and Third Defendants and any other third parties from receiving and/or utilising any monies received under the Performance Bond dated 29.12.2017 pending disposal of the arbitral proceedings
  • Interlocutory Application and originating summons prayers (2) to (4) allowed and prayer (2) of the Interlocutory Application allowed