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

• Jurisdiction: Singapore
• Judge: Aedit Abdullah J
• Judgment Date: 03 September 2018
• Neutral Citation: [2018] SGHC 191
• Court: High Court (Singapore)
• Docket Number: Suit No 800 of 2017 (Summons No 4313 of 2017)
• Year: 2018
• Published date: 04 June 2019
• Hearing Date: 20 November 2017,01 December 2017,19 January 2018
• Plaintiff Counsel: Josephine Choo Poh Hua, Lee Hui Min and Dynyse Loh Jia Wen (WongPartnership LLP)
• Defendant Counsel: Kelvin Aw Wei Keng, Lee Kok Wee, Eugene and Leonard Chew Wei Chong (Morgan Lewis Stamford LLC),second defendant not represented, not present.
• Citation: [2018] SGHC 191

Aedit Abdullah J:Introduction

This case concerns an interim injunction restraining the 2nd defendant from paying out on a banker’s guarantee issued in favour of the 1st defendant and to prevent the 1st defendant from receiving payment of the same. The banker’s guarantee was procured by the plaintiff pursuant to its obligation under the subcontract with the 1st defendant. Following alleged breaches of the subcontract between the plaintiff and the 1st defendant, the latter called on the guarantee on 28 August 2017. Subsequently, on 29 August 2017, the plaintiff sought and obtained an interim injunction against the demand and payment on an ex parte basis. The present application was brought by the 1st defendant to lift the injunction, among other things. I lifted the injunction following an inter partes hearing. The plaintiff has appealed against my decision. Leave to appeal has since been granted by the Court of Appeal. I now set out the grounds of my decision.

Background

As the matter is presently at the interim stage and given the existence of multiple contractual documents, I would refer to the general contractual arrangement between the plaintiff and 1st defendant as the “subcontract” and leave specific references to documents where necessary.

The genesis of the present application stems from a subcontract entered into by the 1st defendant and the plaintiff for the supply and installation of mechanical, electrical and plumbing works in December 2012; the plaintiff being the subcontractor. A banker’s guarantee of about $4.3m, issued by the 2nd defendant-bank, was granted in favour of the 1st defendant pursuant to the subcontract. After certain delays and alleged contractual breaches, the 1st defendant imposed liquidated damages and sought to call on the guarantee. The circumstances leading up to that demand are as follows.

The completion dates for the various phases of the works to be done spanned March 2013 to April 2014. The plaintiff, however, only achieved actual completion of the last phase in February 2015. Thereafter, various letters were exchanged from the period of May 2015 to January 2016, where the 1st defendant sought to pin responsibility for the delay on the plaintiff and notified the plaintiff of potential liquidated damages to be paid.

Payment claims filed by the plaintiff, and responses from the 1st defendant detailing reasons for withholding payments and indicating liquidated damages payable by the plaintiff were then exchanged between February 2017 and July 2017. Notably, the 1st defendant addressed the plaintiff’s request for the release of the first half of retention monies, variation order claims and back charges in the responses.

On 7 July 2017, the plaintiff lodged an adjudication application against the 1st defendant in relation to the first half of the retention monies. An adjudicator was appointed on 11 July 2017. Further payment claims and responses continued to be filed after the appointment of the adjudicator. The adjudication determination was granted on 15 August 2017 in favour of the plaintiff; no determination was made on the variation order claims and back charges. Shortly after, the plaintiff requested for payment of the amount due under the adjudication determination. The 1st defendant replied with a payment response on 24 August 2017 explaining why payments were withheld.

On 28 August 2017, the 1st defendant made a demand on the banker’s guarantee on the basis that the plaintiff owed it liquidated damages. Due to the urgency of the matter, the plaintiff applied for, and obtained, an interim injunction restraining the 1st defendant’s call on the guarantee on 29 August 2017. This interim injunction was then discharged following an inter partes hearing before me; that discharge is now the subject of the appeal.

At issue between the parties were the circumstances of the ex parte hearing and the basis for the call on the guarantee; whether full disclosure had been given then; whether the contract between the parties excluded unconscionability as a basis to bar the call on the guarantee; and whether fraud was made out.

For completeness, the 1st defendant eventually filed an application to set aside the adjudication determination. The matter was heard on 14 November 2017 by Foo Chee Hock JC. The judge found that the adjudication determination was made in breach of natural justice as it failed to take into account other essential issues of back charges for scaffolding and re-assessed variation works, and consequently set aside the adjudication determination. The matter was thereafter appealed by the plaintiff. The appeal was dismissed in Bintai Kindenko Pte Ltd v Samsung C&T Corp[2018] SGCA 39.

The 1st defendant’s case

The plaintiff’s interim injunction application was on the basis that it would be unconscionable, in the circumstances, for the 1st defendant to have called on the guarantee. The 1st defendant argued that the plaintiff’s application was fundamentally flawed as the ground of unconscionability was not available to the plaintiff in the first place. The subcontract incorporates a clause which expressly stipulates that except in the case of fraud, the plaintiff shall not for any reason whatsoever be entitled to enjoin or restrain the 1st defendant on making any call or demand on the guarantee (“Exclusion Clause”). Such a clause was upheld in CKR Contract Services Pte Ltd v Asplenium Land Pte Ltd and another and another appeal and another matter[2015] 3 SLR 1041 (“CKR”); parties are entitled to contract out of the ground of unconscionability. The burden lay on the plaintiff to make out non-incorporation of such a clause on a clear case.

In any event, the subcontract contained an arbitration clause. The parties expressly agreed to refer disputes relating to a demand on the guarantee to arbitration.

There were also material facts not disclosed to the court. An applicant in an ex parte application is under a duty to make full and frank disclosure of all material facts even if these facts are prejudicial to him. Apart from the non-disclosure of the existence of the Exclusion Clause and arbitration clause, the plaintiff also did not disclose material facts such as the adjudicator’s decision that the Exclusion Clause was applicable and the plaintiff’s own submissions in the adjudication application referencing the provision in the subcontract which incorporated the Exclusion Clause. Instead, the plaintiff’s conduct was particularly egregious as it made certain active misrepresentations as to the validity of its application for an injunction on the ground of unconscionability.

Additionally, the ex parte application was brought without notice to the 1st defendant’s solicitors. This was contrary to para 41(2) of the Supreme Court Practice Directions which provides that even in cases of extreme urgency, notice must be given to the other party. Further, it would have been clear to the plaintiff’s solicitors that any notification ought to have been sent to the 1st defendant’s solicitors since the latter were already on the record for the adjudication application. Yet when the plaintiff’s solicitors sought the interim injunction, they did not inform the 1st defendant’s solicitors of the application and simply sent a letter to the 1st defendant itself.

If there was to be any challenge to the call on the guarantee, the only ground available was fraud. There was not even a shred of an allegation of fraud in the supporting affidavits, nor was this raised to the court in argument. In any event, fraud cannot be made out:Aside from liquidated damages of $26m, there were other outstanding claims by the 1st defendant. There were claims for re-evaluation, further back charges, omissions on the plaintiff’s part and liability for water ingress, among others. The plaintiff remained generally liable for these sums even after the adjudication determination. The total sum claimed by the 1st defendant, excluding liquidated charges, exceeded the sum guaranteed and this justified the call on the banker’s guarantee for $4.3m.The plaintiff has no basis to say that the call on the guarantee was made with reckless indifference to the truth. As opposed to the sort of conduct considered by the court in BS Mount Sophia Pte Ltd v Join-Aim Pte Ltd[2012] 3 SLR 352 (“BS Mount Sophia”), where there was call on the guarantee despite there being a complete absence of allegations of delay, the liquidated damages claim which formed the basis of the 1st defendant’s call arose out of the plaintiff’s actual delay. The call was not a retaliation against the plaintiff’s adjudication application. Further, at the point the call was made, there were already damages and back charges as well. There was no fraudulent behaviour. Any allegation of fraud was not even made out on a prima facie level.The 1st defendant’s call on the bond contained sums which were not dealt with in the adjudication. This was the very reason for the 1st defendant’s position that the adjudication determination was a breach of natural justice. Since these sums were not part of the adjudication, it can hardly be said that the claims forming the basis of the call on the guarantee were contrived.All the categories of claims invoked by the 1st defendant were in existence at the time of the call, and not fabricated.It was acknowledged that there were discrepancies in some of the figures relating to certain claims. However, the 1st defendant’s call on the guarantee was nonetheless justified. These discrepancies were corrected upon revision and a reduction of the amounts claimed had been made. Even taking the plaintiff’s case at its highest, the reduction on the amount claimed should not affect the call on the guarantee.

In the present application, the plaintiff has sought to change their position from unconscionability to fraud. The 1st defendant is surprised by the fraud...