Bintai Kindenko Pte Ltd v Samsung C&T Corp and another

• Jurisdiction: Singapore
• Judge: Tay Yong Kwang JA
• Judgment Date: 30 May 2019
• Neutral Citation: [2019] SGCA 39
• Court: Court of Appeal (Singapore)
• Docket Number: Civil Appeal No 95 of 2018
• Published date: 04 June 2019
• Year: 2019
• Hearing Date: 01 April 2019
• Plaintiff Counsel: Tan Chee Meng SC, Josephine Choo Poh Hua, Dynyse Loh Jia Wen and Eugene Oh (WongPartnership LLP)
• Defendant Counsel: Kelvin Aw Wei Keng, Leonard Chew Wei Chong and Eugene Lee (Holborn Law LLC),The second respondent absent and unrepresented.
• Subject Matter: Credit and Security,Performance bond,Interim injunction restraining call on performance bond,Civil Procedure,Injunctions,Burden of proof,Building and Construction Law,Sub-contracts,Incorporation of main contract terms,Contract,Contractual terms,Incorporation by reference
• Citation: [2019] SGCA 39

Tay Yong Kwang JA (delivering the grounds of decision of the Court): Introduction

The court will only intervene to prevent a beneficiary from calling on a performance guarantee if it can be shown that the call was either fraudulent or unconscionable (BS Mount Sophia Pte Ltd v Join-Aim Pte Ltd [2012] 3 SLR 352 (“BS Mount Sophia”) at [18]; CKR Contract Services Pte Ltd v Asplenium Land Pte Ltd and another and another appeal and another matter [2015] 3 SLR 1041 (“CKR Contract Services”) at [15]). These two grounds for intervention have been termed the fraud and unconscionability exceptions respectively.

In recent years, it is becoming more common for parties to agree to exclude the right of the provider of the performance guarantee to rely on the unconscionability exception to prevent the beneficiary’s call on the performance guarantee. In CKR Contract Services, this Court held that the parties could do so, subject to the ordinary legal constraints on exclusion clauses (at [23]). The Court also observed that it would be open to parties to argue that such an exclusion clause was not incorporated into the contract in the first place (CKR Contract Services at [22]).

This appeal was brought against the decision of a High Court Judge (“the Judge”) to discharge an ex parte interim injunction which restrained a call on a banker’s guarantee. The Judge’s grounds of decision can be found at Bintai Kindenko Pte Ltd v Samsung C&T Corp and another [2018] SGHC 191 (“the GD”). We dismissed the appeal after hearing the appellant and the first respondent on 1 April 2019. The Second Respondent, DBS Bank Ltd, which issued the banker's guarantee, did not participate in these proceedings as it needed only to comply with the Court’s directions. These are the grounds of our decision for dismissing the appeal.

Background facts

The first respondent, Samsung C&T Corporation (“the First Respondent”), was appointed by HSBC Institutional Trust Services (S) Limited (“the Employer”) as the main contractor for a project to upgrade the Suntec City Convention Centre and its retail podium (“the Project”).

Having been appointed the Project’s main contractor, the First Respondent then appointed the appellant, Bintai Kindenko Pte Ltd (“the Appellant”), as the Project’s mechanical and engineering sub-contractor through a tender process. In June 2012, the First Respondent sent a Letter of Acceptance (“the First LOA”) to the Appellant which contained various contractual terms. However, the Appellant did not sign or accept the terms of the First LOA. Instead, it proposed various amendments to the terms stated therein. Eventually, the First Respondent issued another Letter of Acceptance dated 3 December 2012 (“the Second LOA”) to the Appellant which contained various amendments to the terms of the First LOA. The Second LOA also provided that all of its terms were to have retroactive effect from 1 June 2012.

The Appellant accepted the terms and conditions stated in the Second LOA. Its representative, who was the Appellant’s President, Chief Executive Officer and Managing Director, signed below a paragraph in the Second LOA which stated as follows:

On behalf of BINTAI KINDENKO Pte Ltd, we the undersigned hereby acknowledge receipt of this Letter of Acceptance, the documents and confirm acceptance of all the terms and conditions stated herein.

The relevant clauses of the Sub-Contract

It was undisputed that the Appellant and the First Respondent were contractually bound by the terms of the Second LOA. The following clauses of the Second LOA were most relevant to this appeal.

The first, cl 3 (“Clause 3”), provided as follows: 3. Form of Sub-Contract

The Form of our Main Contract with the Employer is the Singapore Institute of Architects (“SIA”) Lump Sum Contract (9th Edition) and the Sub-Contract shall be SIA Conditions of Sub-Contract 4th Edition, 2010, including all Particular Conditions as set out in the Main Contract.

This Sub-Contract shall be executed on a “back-to-back” basis in accordance with the relevant clauses within the Main Contract.

A provision similar to Clause 3 was also contained in the First LOA.

The next clause of the Second LOA which is relevant here is cl 6 (“Clause 6”), which concerned the performance bond. This clause provided: 6. Performance Bond

[The Appellant] is to submit the Performance Bond (issued by an approved Bank) equivalent to Five (5%) percent of the Sub-Contract Sum within 14 days from the date hereof as required under the terms of the Sub-Contract.

The relevant clauses of the Main Contract

As stated in Clause 3, the Main Contract was based on the 9th edition of the Singapore Institute of Architects’ Lump Sum Contract (the “SIA Lump Sum Contract”).

Additionally, Clause 3 also made reference to the “Particular Conditions as set out in the Main Contract”. There were two documents before us that fell within this description. The first was a document that was entitled the “Particular Conditions of Main Contract” (the “MC Particular Conditions”) which contained various amendments and additions to the SIA Lump Sum Contract and as agreed upon between the Employer and the First Respondent. The MC Particular Conditions document was signed by both the Employer and the First Respondent. The second document was entitled the “Particular Conditions of Sub-Contract” (the “SC Particular Conditions”). This document purported to incorporate various additional terms or amendments to the SIA Conditions of Sub-Contract, 4th edition (September 2010). It was not signed by the Appellant or by the First Respondent. However, express reference was made to the SC Particular Conditions in the preliminaries of the Main Contract.

Both the MC Particular Conditions and the SC Particular Conditions purported to add similarly-worded exclusion clauses into the Main Contract and the Sub-Contract respectively. Clause 13 of the MC Particular conditions provided that a new cl 5A was to be added to the Main Contract’s conditions. Sub-clause (5) of this new cl 5A (“Clause 5A(5)”) stated as follows: (5) Pursuant to the intent set out in Sub-Clause (1) above that the performance bond is to stand in lieu of a cash deposit, the Contractor agrees that except in the case of fraud, the Contractor shall not for any reason whatsoever be entitled to enjoin or restrain: (a) the Employer from making any call or demand on the performance bond or receiving any cash proceeds under the performance bond; and/or (b) the obligor under the performance bond from paying any cash proceeds under the performance bond,

on any other ground including the ground of unconscionability. …

Likewise, cl 8 of the SC Particular Conditions purported to add a new cl 14A(5) to the SIA Conditions of Sub-Contract (“Clause 14A(5)”), which provided that: (5) Pursuant to the intent set out in Sub-Clause (1) above that the performance bond is to stand in lieu of a cash deposit, the Contractor agrees that except in the case of fraud, the Sub-Contractor shall not for any reason whatsoever be entitled to enjoin or restrain: (a) the Contractor from making any call or demand on the performance bond or receiving any cash proceeds under the performance bond; and/or (b) the obligor under the performance bond from paying any cash proceeds under the performance bond,

on any other ground including the ground of unconscionability. …

We shall refer to Clauses 5A(5) and 14A(5) collectively as the “Exclusion Clauses”.

The banker’s guarantee

In accordance with Clause 6 of the Second LOA (see above at [10]), the Appellant furnished the First Respondent with a banker’s guarantee (“BG”) for a sum of about $4.3 million (the “guaranteed sum”) which was issued by the Second Respondent.

The BG, an on-demand guarantee, provided in Clauses 2 and 3 that: 2 Upon your demand of the whole or any part of the Guaranteed Sum made in writing addressed to us and sent by hand or by AR registered post to our Banker’s Guarantee Section … and made at any time on or before the expiry of 90 days after the Termination Date of this Bond, we shall immediately pay the sum demanded to you notwithstanding the existence of any dispute or differences which may have arisen in relation to the Sub-Contract or any amount payable under the Sub-Contract or any defences which the Sub-Contractor may have, or any request or instruction which may have been given to us by [the Appellant] not to pay the same. 3 We shall not be obliged to inquire into the reasons, grounds or circumstances or any demand made by you nor into the respective rights, obligations and/or liabilities between you and [the Appellant] under the Sub-Contract, or into the authenticity of your notice or the authority of the persons signing such notice but shall immediately pay to you the Guaranteed Sum (or any part as stated in your demand) on your written demand made in the manner as set out in Clause 2 herein.

The Appellant did not dispute that the BG was valid when the First Respondent called on it on 28 August 2017.

The dispute between the parties

We now set out the relevant background facts for the purposes of this appeal.

It turned out that various phases of the Sub-Contract works were not completed on time and disputes arose between the parties as to whether the Appellant was liable for these delays. Between March 2014 and December 2015, the Appellant wrote various letters to the First Respondent seeking extensions of time to the contractual deadlines for the respective phases of the Sub-Contract works. These requests were all rejected by the First Respondent in a letter to the Appellant dated 18 December 2015. In that letter, the First Respondent also stated that it would hold the Appellant responsible for the delays allegedly caused by it, which included liability for liquidated damages and claims for any additional costs incurred by the First...