Anwar Siraj & Another v Teo Hee Lai Building Construction Pte Ltd

• Jurisdiction: Singapore
• Judge: Chao Hick Tin JA
• Judgment Date: 25 November 2002
• Neutral Citation: [2002] SGCA 51
• Docket Number: Civil Appeal No 53 of 2002
• Date: 25 November 2002
• Year: 2002
• Published date: 19 September 2003
• Plaintiff Counsel: G Raman and V Suriamurthi (G Raman & Partners)
• Citation: [2002] SGCA 51
• Defendant Counsel: S Thulasidas (Ling Das & Partners)
• Court: Court of Appeal (Singapore)
• Subject Matter: Building contract,Setting aside interim injunction restraining call on performance bond,Whether call on performance bond unconscionable,Banking,Performance bonds

Judgment

GROUNDS OF DECISION

1 The appellants, Mr Anwar Siraj and Madam Norma Khoo Cheng Neo, engaged the respondent building contractors, Teo Hee Lai Building Construction Pte Ltd ("THL"), to construct a house for them. They lodged this appeal in order to set aside an injunction restraining them from making a demand under a performance bond issued by Tai Ping Insurance in their favour pursuant to the terms of the building contract. We allowed the appeal and now give the reasons for our decision.

Background

2. The appellants, the owners of No 2 Siglap Valley, entered into a contract with THL on 30 December 1999 for the demolition of the house then standing on the property and the construction of a new house. The cost of the construction work was $1,200,000 and the agreed date for the completion of the new house was 9 January 2001.

3. THL was required by the building contract to procure a performance bond in the appellants’ favour for 10% of the cost of construction. As such, they arranged for Tai Ping Insurance Co ("Tai Ping") to furnish a performance bond for the sum of $120,000 on 12 January 2001. The bond provided that the insurance company would pay the appellants the sum of $120,000 "unconditionally and immediately on demand and without any reference to the contractor and notwithstanding any dispute or difference which may have arisen under or in connection with the contract".

4. The construction of the house was not completed by 9 January 2001 and the house was handed over to the appellants on 5 April 2001. As such, liquidated damages at the rate of $1,000 per day was payable by THL to the appellants. At the date of handing over of the house, a number of defects listed by the appellants’ architect, Mr Tan Hock Beng of Maps Design Studio, had not been rectified. The architect then wrote to THL to request for an undertaking that the latter would rectify all the stated defects.

5. THL complained that that they were denied access to the appellants’ premises to carry out the rectification work. In August 2001, they gave the appellants notice of arbitration. THL said that they would bear the cost of rectification work pending the arbitrator’s finding as to who should be responsible for the cost.

6. On 20 September 2001, the appellants, who contended that THL breached their contractual obligation to rectify the defects noted by the architect, made a demand under the performance bond for $120,000. When Tai Ping did not pay the amount claimed, the appellants issued a writ against them. THL then sought an interim injunction to restrain the appellants from obtaining any payment from Tai Ping under the performance bond. An ex-parte interim injunction was granted by the District Court but it was set aside on 14 January 2002. THL appealed to the High Court and persuaded the judicial commissioner who heard the appeal to restore the interim injunction. The appellants sought and obtained leave to appeal to the Court of Appeal against the decision of the judicial commissioner.

The decision of the judicial commisisoner

7. The judicial commissioner noted that THL had alleged that the first appellant had been an extremely difficult client and that he had interfered with the architect’s duties. He also noted that THL had alleged that some of the problems in relation to the construction of the house were caused by design error and he thought that they had put up a reasonable case.

8. The judicial commissioner pointed out that THL had alleged that they had been denied the opportunity to carry out remedial work during the maintenance period. There was a dispute as to whether THL’s expert, one Mr Donald Payne ("Payne"), should have been allowed to attend meetings with the architect. The judicial commissioner, who pointed out that a contractor is entitled to be assisted by any person in his attempt to keep a proper record of the works to be completed before and after rectification work has been carried out, was satisfied that the architect and the first appellant had acted oppressively by denying THL the assistance which Payne could have rendered them. After taking all the circumstances into account, he ruled that there was sufficient evidence of unconscionability on the part of the appellants. As such, he agreed that the appellants should be restrained from making a demand or receiving any payment under the performance bond until their dispute with THL has been resolved through arbitration.

The appeal

9. This...