[2009] 2 CLJ 1 (FC)
The Federal Court held that the bank guarantee was an unconditional and an “on demand” performance bond / bank guarantee. Payment should therefore be effected notwithstanding any contestation by the appellant or the respondent when a valid demand on the bank guarantee was made. All that was required was a demand simpliciter to trigger the obligation to make payment. In the instant case, both the High Court and the Court of Appeal had applied the principle in Teknik Cekap Sdn Bhd v. Public Bank Bhd where there was no requirement that a beneficiary must assert expressly and clearly that the contractor had failed to perform or had committed a breach of the underlying contract. A demand was sufficient to trigger payment. This court fully agreed with the ruling made by the High Court and the Court of Appeal in Teknik Cekap Sdn Bhd v. Public Bank Bhd (foll). The courts in an “on demand” type bond will not inquire into any breach in the underlying contract. However, the Federal Court recognised that the appellant’s grievances were matters that must be adjudicated elsewhere. The contractor’s remedy was to sue in damages.