Bocotra Construction Pte Ltd and Others v Attorney General

• Jurisdiction: Singapore
• Judge: Goh Joon Seng J
• Judgment Date: 28 October 1994
• Neutral Citation: [1994] SGHC 219
• Date: 28 October 1994
• Subject Matter: Construction,Arbitration,Performance bonds,Whether a performance bond or cash payable under the bond came within the rule,Arbitral tribunal,Whether a demand bond,Rules of arbitration for power to order preservation of property,Whether beneficiary should be restrained from calling on the bond prior to a final determination that a default in the underlying contract had occurred,Powers,Banking
• Docket Number: Originating Summons No 266 of 1994
• Published date: 19 September 2003
• Defendant Counsel: Lee Sieu Kin and Lionel Yee (Attorney General's Chambers)
• Court: High Court (Singapore)
• Plaintiff Counsel: Michael Khoo, Christopher Lau, Josephine Low and Ho Chien Mien (Allen & Gledhill)

Cur Adv Vult

The plaintiffs are building and civil engineering contractors.

On 27 November 1987, the plaintiffs entered into an agreement with the Director-General of Public Works (`PWD`) for and on behalf of the government of the Republic of Singapore (`the government`), for the engineering survey and investigation, design, construction and maintenance, of the then proposed Central Expressway Phase II from Bukit Timah Road to Chin Swee Road (`the contract`). The contract sum was $312,888,888.

By cl 9 of the conditions of contract, the plaintiffs were required to provide a guarantee in the prescribed form to be issued by an approved bank to be jointly and severally bound with the plaintiffs in a sum equal to 10% of the contract sum.

Pursuant to cl 9 aforesaid, the plaintiffs procured the issue of a performance bond (`the bond`) by the Standard Chartered Bank (`the bank`) for the sum of $31,288,888.80. The bond reads:

Whereas by a contract (hereinafter called the contract) dated 27 November 1987 and made between Messrs Bocotra Construction Pte Ltd, whose registered office is situated at Level 19, UIC Building, No 5 Shenton Way, Singapore 0106, Lee Kim Tah (Pte) Ltd, whose registered office is situated at 20 Jalan Afifi, #07-00, CISCO Centre, Singapore 1440, Metrobilt Construction Pte Ltd, whose registered office is situated at 36 Robinson Road #05-01 City House, Singapore 0106 and L Prestressing Pte Ltd, whose registered office is situated at 4 Second Chin Bee Road, Jurong, Singapore 2261 (hereinafter called `the contractor`) of the one part and the government of the Republic of Singapore (hereinafter called `the government`) of the other part whereby the contractor upon and subject to the conditions annexed to the contract agreed to design, construct and maintain the Central Expressway Phase II from Bukit Timah Road to Chin Swee Road and all other related works as specified therein in consideration of the payment of a sum (referred to in the contract and hereinafter called `the contract sum`).

And whereas by cl 9 of the conditions of contract, the contractor must provide a bank guarantee for a sum equal to ten per cent (10%) of the contract sum, for the due performance of the contract.

1 Now we, Standard Chartered Bank, hereby agree to pay to the government forthwith on demand any sum or sums not exceeding in the aggregate Singapore Dollars Thirty One Million Two Hundred and Eighty Eight Thousand Eight Hundred and Eighty Eight and Cents Eighty Only (S$31,288,888.80) (hereinafter referred to as the `guaranteed sum`) upon receipt of any written notice from you.

2 On receipt of the guaranteed sum from us, you shall be entitled to utilised [sic] it to satisfy such liability of the contractor as you may determine, arising from or due to the default of the contractor. The balance of the guaranteed sum, if any shall be refunded to us.

(3) We shall not be discharged or released from this guarantee by any arrangement made between you and the contractor with or without our consent or by the contractor or by any forbearance whether as to amount time performance or in any other way.

(4) This guarantee is valid from the date hereof up to the date the engineer issues the maintenance certificate in accordance with cl 55 of the conditions of the contract.

(5) This guarantee is conditional upon a claim being made by the government by notice in writing to us and a claim hereunder must be made within six (6) months from the expiry of this guarantee.

(6) The government may make more than one claim on this guarantee so long as the claims are made within six (6) months from the expiry of this guarantee and the total claims under this guarantee do not exceed the guaranteed sum.

Dated this 13th day of August 1988.

The bond thus expires on the issue of the maintenance certificate under cl 55 of the conditions of contract and any claim thereunder must be made within six months therefrom. The issue of the maintenance certificate itself depends on the issue of the certificate of completion under cl 47(1) of the conditions of contract.

Clause 47 reads:

(1) When the contractor shall consider that the whole of the works has been substantially completed and has satisfactorily passed any final test that may be prescribed by the contract he may give a notice to that effect to the engineer or to the engineer`s representative accompanied by an undertaking to finish any outstanding work during the period of maintenance. Such notice and undertaking shall be in writing and shall be deemed to be a request by the contractor for the engineer to issue a certificate of completion in respect of the works and the engineer shall within 21 days of the date of delivery of such notice either issue to the contractor (with a copy to the employer) a certificate of completion stating the date on which in his opinion the works were substantially completed in accordance with the contract or else give instructions in writing to the contractor specifying all the work which in the engineer`s opinion requires to be done by the contractor, before the issue of such certificate. If the engineer shall give such instructions the contractor shall be entitled to receive such certificate of completion within 21 days of completion to the satisfaction of the engineer of the work specified by the said instructions.

(2) ...

(3) If the engineer shall be of the opinion that any part of the works shall have been substantially completed and shall have satisfactorily passed any final test that may be prescribed by the contract he may issue a certificate of completion in respect of that part of the works before completion of the whole of the works and upon the issue of such certificate the contractor shall be deemed to have undertaken to complete any outstanding work in that part of the works during the period of maintenance.

...

Clause 55 of the conditions of contract reads:

(1) Upon the expiration of the period of maintenance or where there is more than one such period upon the expiration of the latest period and when all outstanding work referred to under cl 47 and all work of repair, amendment, reconstruction, rectification and making good of defects, imperfections, shrinkages and other faults referred to under cll 48 and 49 shall have been completed the engineer shall issue to the contractor a maintenance certificate stating the date on which the contractor shall have completed his obligations to design, construct, complete and maintain the works to the engineer`s satisfaction.

(2) The issue of the maintenance certificate shall not be taken as relieving either the contractor or the eEmployer from any liability the one towards the other arising out of or in any way connected with the performance of their respective obligations under the contract.

The period of maintenance stipulated in the contract is one year from the date of issue of the certificate of completion.

The completion date stipulated in the contract was 25 January 1991 subject to provisions for extension of time.

Work commenced on 25 January 1988. Substantially the whole of the works, including the tunnels, were opened for public use in a formal ceremony on 21 September 1991.

On 24 September 1991 the engineer issued a partial completion certificate, under cl 47(3), certifying completion of the bulk of the works including the tunnels with effect from 5 September 1991. He has not to date issued his certificate of completion for the whole of the works because of outstanding works which were left uncompleted by the plaintiffs being removal of the cofferdam in the Singapore River, construction of the river wall, completion of certain ramps, staircases and underpasses and other miscellaneous items. Consequently the maintenance certificate has also not been issued.

In the meantime disputes having arisen between the plaintiffs and PWD, the plaintiffs by letter of 14 August 1991 required the said disputes to be referred to arbitration under cl 60 of the conditions of contract. Clause 60 reads:

If any dispute or difference of any kind whatsoever shall arise between the employer or the engineer and the contractor in connection with or arising out of the contract or the carrying out of the works (whether during the progress of the works or after their completion and whether before or after the termination, abandonment or breach of the contract) it shall in the first place be referred to and settled by the engineer who within a period of 45 days after being requested by either party to do so shall give written notice of his decision to the contractor. ... If the engineer shall fail to give notice of his decision as aforesaid within a period of 45 days after being requested as aforesaid or if either the employer or the contractor be dissatisfied with any such decision then and in any such case either the employer or the contractor may within 45 days after receiving notice of such decision ... require that the matter or matters in dispute be referred to arbitration as hereinafter provided.

Pursuant to the said reference, the plaintiffs and PWD on behalf of the government on 19 January 1993 appointed Tun Mohamed Suffian to be the sole arbitrator (`the arbitrator`).

A set of rules for the arbitration based on the Arbitration Rules of the Singapore International Arbitration Centre was agreed upon (`the agreed rules`), r 18(g) of which reads:

18 Unless the parties at any time agree otherwise, and subject to any mandatory limitations of any applicable law, the tribunal shall have the power, on the application of any party or of its own motion, but in either case only after giving the parties a proper opportunity to state their views, to:

...

(g) order the preservation, storage, sale or other disposal of any property or thing under the control of any party;

By their points of claim filed and served on or about 16 February 1993, the plaintiffs are alleging that...