Dauphin Offshore Engineering & Trading Pte Ltd v The Private Office of HRH Sheikh Sultan bin Khalifa bin Zayed Al Nahyan

• Jurisdiction: Singapore
• Judgment Date: 17 January 2000
• Date: 17 January 2000
• Docket Number: Civil Appeal No 62 of 1999
• Court: Court of Appeal (Singapore)

Dauphin Offshore Engineering & Trading Pte Ltd

Plaintiff

and

The Private Office of HRH Sheikh Sultan bin Khalifa bin Zayed Al Nahyan

Defendant

[2000] SGCA 4

L P Thean JA

and

Chao Hick Tin JA

Civil Appeal No 62 of 1999

Court of Appeal

Banking–Performance bonds–Guarantee payable on demand–Ex parte interim injunction restraining call on guarantee–Whether injunction should be discharged–Whether call on guarantee unconscionable–Whether unconscionability a ground for granting injunctive relief–Standard of proof of unconscionability–Civil Procedure–Injunctions–Ex parte interim injunction restraining call on guarantee–Failure by ex parte applicant to make material full and frank disclosures–Discretion of court to discharge or continue injunction

By a contract, the defendant (“HRH”) engaged the plaintiff (“Dauphin”) to build a luxury motor yacht. HRH was required under the contract to make payment for the construction by instalments. The first instalment was to be paid within five days of the contract date while the second instalment was to be paid upon the keel being laid. In accordance with the terms of the contract, HRH duly paid the first instalment and also opened an irrevocable letter of credit for the full amount of the contract price in favour of Dauphin. In turn, Dauphin procured the issue by the Bank of America of a performance guarantee in favour of HRH.

When the keel of the yacht was laid and fax notice of the same was given to HRH two days later. HRH did not make any payment in respect of the second instalment subsequently which was due. HRH gave Dauphin notice of termination of the contract. Dauphin was later informed by the Bank of America that HRH had made a demand on the guarantee. In response, Dauphin took out a writ and made an ex parte application for an injunction to restrain HRH from calling on the bank guarantee. The High Court granted theex parte interim injunction. HRH applied to have the ex parte injunction discharged. At the hearing, the High Court discharged the interim injunction on the ground that there was a lack of full and frank disclosure by Dauphin when it made its ex parte application. Although the judge did not think there was a separate concept of “unconscionability” as a ground to restrain a call on a performance guarantee, he held that, in any event, it was not unconscionable for HRH to call on the guarantee. Dauphin appealed against the decision and pending the hearing of the appeal, the discharge order was stayed.

Held, dismissing the appeal:

(1) On the evidence, there was a misrepresentation or lack of full disclosure by Dauphin of the relevant facts. The statements made by Dauphin did not portray a true picture or fair view of the actual position and amounted to material misstatements: at [22].

(2) In Singapore, “unconscionability” had been accepted as a separate ground in itself for granting injunctive relief against calls on performance guarantees: at [41].

(3) Other than giving some broad indications, such as lack ofbona fides, it was not possible to define the concept of “unconscionability”. There was no predetermined categorisation and what constituted unconscionability depended on the facts of each case: at [42].

(4) Although the failure to make material full and frank disclosures might warrant the discharge of an ex parteinjunction, the court nonetheless had the discretion to continue it or to grant a fresh injunction in its place, if so required by the justice of the case: at [48].

(5) A high degree of strictness applied to the standard of proof required of the alleged unconscionability. Mere allegations were insufficient. A strongprima facie case of unconscionability had to be shown. After carefully weighing all the circumstances, it was held, though not without some hesitation, that the call on the guarantee was not unconscionable: at [57].

Bocotra Construction Pte Ltd v AG [1995] 2 SLR (R) 262; [1995] 2 SLR 733 (folld)

Brink's-Mat Ltd v Elcombe [1988] 1 WLR 1350; [1988] 3 All ER 188 (folld)

Chartered Electronics Industries Pte Ltd v Development Bank of Singapore [1992] 2 SLR (R) 20; [1999] 4 SLR 655 (folld)

Dormeuil Freres SA v Nicolian International (Textiles) Ltd [1988] 1 WLR 1362; [1988] 3 All ER 197 (folld)

GHL Pte Ltd v Unitrack Building Construction Pte Ltd [1999] 3 SLR (R) 44; [1999] 4 SLR 604 (folld)

Kvaerner Singapore Ltd v UDL Shipbuilding (Singapore) Pte Ltd [1993] 2 SLR (R) 341; [1993] 3 SLR 350 (refd)

Min Thai Holdings Pte Ltd v Sunlabel Pte Ltd [1998] 3 SLR (R) 961; [1999] 2 SLR 368 (refd)

New Civilbuild Pte Ltd v Guobena Sdn Bhd [1998] 2 SLR (R) 732; [1999] 1 SLR 374 (refd)

Potton Homes v Coleman Contractors (1984) 28 Build LR 19 (refd)

Raymond Construction Pte Ltd v Low Yang Tong [1996] SGHC 136 (refd)

Royal Design Studio Pte Ltd v Chang Development Pte Ltd [1990] 2 SLR (R) 520; [1990] SLR 1116 (refd)

Sin Kian Contractor Pte Ltd v Lian Kok Hong [1999] 2 SLR (R) 1085; [1999] 3 SLR 732 (refd)

Asokan Govindarajalu and Henry Heng (Rodyk & Davidson) for the appellant

P Jeya Putra and Derek Tan (Joseph Tan Jude Benny) for the respondent.

Judgment reserved.

Chao Hick Tin JA

(delivering the judgment of the court):

1 This is an appeal against the decision of the High Court discharging an ex parte interim injunction which was granted to the plaintiff (the appellant herein and whom we shall refer to as “Dauphin”), and under which the defendant (the respondent herein and whom we shall refer to as “HRH”) is restrained from demanding payment under a bank guarantee issued in favour of the defendant.

The facts

2 Dauphin is a private limited company incorporated in Singapore and is in the business of, inter alia,shipbuilding. HRH is a corporation organised and established under the laws of the United Arab Emirates (“UAE”).

3 By a contract dated 2 August 1998 (“the contract”) HRH engaged Dauphin to build a 55-metre twin-screw luxury motor yacht at the price of US$5,850,000. The contract provides that HRH shall make payment for the construction of the yacht by instalments. For the purpose of this action, only the terms governing the first and second instalment payments are relevant and they are as follows:

First instalment

The sum of US$877,500, equivalent to 15% of the contract sum, shall be paid within five days of the effective date of the contract by telegraphic transfer of the amount into Dauphin's bank account.

Second instalment

The sum of US$1,462,500, equivalent to 25% of the contract sum shall be paid upon the keel being laid. This instalment shall be paid by telegraphic transfer as aforesaid within ten working days after the receipt of fax notice from Dauphin of the keel of the yacht having been laid and confirmed by the Classification Society.

4 To secure payment, HRH was required under the contract to furnish Dauphin with an irrevocable letter of credit for the full amount of the contract price.

5 On the part of Dauphin, the contract required it to provide, upon receiving payment of the first instalment, an irrevocable confirmed bank guarantee for US$877,500 and this guarantee shall be a guarantee “for the repayment to (HRH) over the period until the 3rd instalment payment date”. The guarantee “shall be payable/encashable on first demand by (HRH) if (Dauphin) does not fulfil”. The contract also set out in an exhibit the precise terms of the bank guarantee to be furnished by Dauphin, the pertinent part of which reads as follows:

In consideration of your making advance payment of the first instalment to (Dauphin) … we … hereby absolutely and irrevocably and unconditionally guarantee that we will pay to you or your assignee immediately on demand the full amount of all sums paid by you to the builder as the said instalments in United States dollars together with interest thereon at the rate of … upon our receipt of a written demand from you, accompanied by a statement to the effect that such sum become refundable to you from the builder (accompanied by a copy of a demand made by you to the builder not less than 14 days before …)

6 HRH duly paid the first instalment and also opened the letter of credit in favour of Dauphin. In turn, Dauphin procured the issue by the Bank of America of a performance guarantee in favour of HRH.

7 On 25 October 1998 the keel of the yacht was laid and on 27 October 1998, Dauphin gave a fax notice of the same to HRH, together with a stage certificate confirmation from Lloyd's Register of Shipping. On 10 November 1998 HRH acknowledged receipt of the notice (with enclosures) but did not make any payment in respect of the second instalment, which was due on 22 November 1998 (ten working days from 10 November 1994).

8 On 12 April 1999, HRH, through its solicitors in Singapore, gave Dauphin notice of termination of the contract, citing without limiting themselves to these only, 19 instances of breach of contract on the part of Dauphin, and the more pertinent breaches alleged are the following:

(a) failing to design and provide for fire-fighting equipment in compliance with SOLAS requirements;

(b) failing to provide stability calculations despite undertaking to do so;

(c) failing to design a yacht and/or engine room capable of accommodating the contractually specific Caterpillar 3516B engines;

(d) failing to provide for a sufficiently large freezer and/or cold room as required for such a luxury yacht;

(e) failing to design and provide for suitable mechanisms dealing with exhaust fumes and sewerage odour as required for such a luxury yacht;

(f) failing to consult HRH on modifications and to keep HRH, or its Singapore representatives, informed of the modifications;

(g) unilaterally changing the keel thickness from 12mm to 10mm;

(h) failing to keep HRH (or its Singapore representatives) informed of the progress of the construction;

(i) failing to furnish information requested by HRH and to...