LEBAS TECHNOLOGIES SDN. BHD. v MALAYSIAN BIO-XCELL SDN. BHD. (IN LIQUIDATION)

Case Significance

Holds that a performance bond sum wrongfully withheld may be declared trust property held on a constructive trust and recovered from a company in liquidation, which cannot use its liquidation as a shield against complying with an adjudication award recognised by the courts.

This High Court decision concerns a claim that a performance bond sum held by a company now in liquidation is trust property that must be returned to the depositor, and whether liquidation shields the company from repaying it. Under an engineering, procurement, construction and commissioning contract entered into in 2011, the plaintiff had been appointed sub-contractor to build a facility to produce propanediol at the defendant's biotechnology park in Johor Bahru for a sum exceeding RM106 million, and had deposited a performance bond sum of RM5,346,550.00 with the defendant. After the defendant terminated the plaintiff in 2013, the plaintiff pursued adjudication and obtained an award in its favour, which had been recognised by both the High Court and the Federal Court. The defendant, having gone into liquidation, continued to withhold the performance bond sum. The plaintiff brought an originating summons under section 41 of the Specific Relief Act 1950 and the court's inherent jurisdiction, seeking declarations that the performance bond sum is trust property and that the defendant holds it as a constructive trustee, together with an order that the defendant or its liquidator return the sum with interest. The court held that it had a discretion to grant declaratory relief and that the plaintiff had a real and genuine interest in having the matter resolved. It found that the defendant had continuously ignored the adjudication award and the court orders and had side-stepped payment, and held that the defendant could not hide behind the shield of liquidation to avoid complying with the award, since it could not retain what lawfully belonged to the plaintiff. The court granted an order in terms of the declaratory and return prayers, while dismissing two prayers for costs in other proceedings as not being properly before it. The judgment is significant for holding that a performance bond sum wrongfully withheld may be recovered as trust property from a company in liquidation.