Chip Hua Poly-Construction Pte Ltd v Housing And Development Board

• Jurisdiction: Singapore
• Judge: Karthigesu JA
• Judgment Date: 24 February 1998
• Neutral Citation: [1998] SGCA 14
• Date: 24 February 1998
• Subject Matter: Whether demand could only be made pursuant to contracts between one party and other party acting alone,Contractual terms,Whether terms of bond entitled beneficiary of bond to call on bond in satisfaction of claims arising under any contract in respect of other projects,Performance bond,Validity of demand under bond,Contract
• Docket Number: Civil Appeal No 183 of 1996
• Published date: 19 September 2003
• Defendant Counsel: Andre Francis Maniam and Lawrence Tan (Wong Partnership)
• Court: Court of Appeal (Singapore)
• Plaintiff Counsel: Peter Chow and Lim Yong Khern (Wee Swee Teow & Co)

Judgment:

LP THEAN JA

(delivering the grounds of judgment of the court): The facts

1.On 30 July 1992, the respondents (`HDB`) awarded the appellants (`Chip Hua`) a contract for a project known as the Jurong West Neighbourhood 3 contract 21 (`the Jurong West contract`). Pursuant to the terms of this contract, Chip Hua provided HDB with a security bond in the sum of $818,500 from UMBC Insurance Sdn Bhd (`UMBC`) on 4 August 1992 (`the bond`).

2.Around November 1993, Chip Hua together with another company, Hock Heng Trading and Construction Pte Ltd (`Hock Heng`), submitted joint tenders to carry out building works for two of HDB`s projects located in Choa Chu Kang. The joint tenders were accepted by HDB on 6 December 1993. Further, in November 1994 or thereabouts, Chip Hua and Hock Heng again submitted joint tenders to carry out works for three HDB`s projects at Bukit Panjang, Serangoon Central and Hougang respectively. The joint tenders for the first two projects were accepted on 31 December 1994 and the tender for the third project on 17 January 1995. We shall refer to the contracts for these five projects as the `joint contracts`. Pursuant to each of the five joint contracts, Chip Hua and Hock Heng provided HDB with security bonds amounting in aggregate to a sum of $4,798,340.

3.Unfortunately, the works under the joint contracts did not progress smoothly. As a result of the delays, HDB claimed against Chip Hua and Hock Heng damages for breaches of contract. By letters dated 16 April 1996, HDB called on the performance bonds provided as security for the joint contracts, and the amounts thereunder amounting in aggregate to $4,798,340 were paid to HDB.

4.Following that, HDB indicated to Chip Hua that they would call on the bond (for the Jurong West contract) in satisfaction of their claims against Chip Hua and Hock Heng under the joint contracts. On 4 April 1996, Chip Hua wrote to HDB urging HDB not to call on the Jurong West bond, and HDB replied on 17 April 1996 informing Chip Hua that they were seeking legal advice on the position. Subsequently, by a letter dated 6 May 1996, HDB informed Chip Hua that they would proceed to call on the bond. This was followed by a formal letter from HDB to UMBC dated 29 May 1996 demanding payment under the bond.

5. Proceedings below

On 10 June 1996 Chip Hua obtained ex parte an interim injunction restraining HDB from calling on the bond until the hearing of an inter partes summons-in-chambers in which Chip Hua applied for a continuation of the injunction until trial. Subsequently, the summons was heard before a judge in chambers on 24 October 1997, and was dismissed. [See [1997] 2 SLR 797.] Against the decision of the learned judge, Chip Hua appealed. We allowed the appeal and now give our reasons.

6. Appeal

The main issue before us was whether HDB was entitled to call on the bond to satisfy their claim under the joint contracts. This turned on the construction of the provisions of the bond. It is convenient at this juncture to refer to the relevant provisions of the bond. We turn first to the recital which, so far as relevant, states as follows:

(1) The Board [ie HDB] has accepted the tender of the Contractor [ie Chip Hua] for Building including Sanitary, Water and Gas Installation at Jurong West Neighbourhood 3 Contract 21 (Neighbourhood Centre), Singapore (Contract No A/296/92) (hereinafter called the `said Works`) resulting in a contract for the said Works (hereinafter called the `said Contract`).

(2) The Contractor is obliged under the said Contract to submit an approved bond from the Contractor and an approved party as security for the purposes stated in the said Contract.

The bond was therefore intended to secure the due performance by Chip Hua of their obligations under the Jurong West contract.

7.The main provisions of the bond are cll 1, 3, 8 and 9. We set out first cll 1 and 3, which are as follows:

1 The Contractor and the Surety shall immediately without question and unconditionally pay on demand any sum or sums which may, from time to time, be demanded by the Board up to a maximum aggregate sum of $818,500.

3 The Board may demand payment of a sum or sums under this Bond in satisfaction of moneys due from the Contractor to the Board under the provisions of any other contract made between the Contractor and the Board. The Board shall not in connection with a demand whether made under the said Contract or under any other contract be required to prove either a breach of contract or duty or damages arising from such breach.

8.Counsel for Chip Hua contended that, on the true construction of these clauses, the bond covers (i) liabilities of Chip Hua to HDB under the Jurong West contract, and (ii) liabilities under any other contract made between HDB and Chip Hua in respect of other project. However, it does not cover liabilities arising under a contract made between HDB and Chip Hua jointly with another party in respect of projects jointly undertaken by them.

9.Counsel for HDB, on the other hand, contended that the terms of the bond put beyond doubt that it is not limited to claims by HDB under the Jurong West contract alone. He submitted that first, by reason of cl 1, the bond is an unconditional bond payable on demand and there is no restriction as to what payment can be demanded and no requirement to state why a demand was made. Secondly, cl 3 gives to HDB the right to demand payment in satisfaction of sums due from Chip Hua under the Jurong West contract or under any other contract made between Chip Hua and HDB and this includes sums due under the joint contracts. Clause 3 does not limit the scope of the bond; on the contrary it extends...