Econ Piling Pte Ltd v Aviva General Insurance Pte Ltd and Another

• Jurisdiction: Singapore
• Judge: Chan Sek Keong CJ
• Judgment Date: 12 September 2006
• Neutral Citation: [2006] SGCA 32
• Docket Number: Civil Appeal No 44 of 2006
• Date: 12 September 2006
• Published date: 15 September 2006
• Year: 2006
• Plaintiff Counsel: Chia Chor Leong and V Rajasekharan (Citilegal)
• Citation: [2006] SGCA 32
• Defendant Counsel: Andre Maniam and Melvin See (Wong Partnership),Michael Eu (United Legal Alliance LLC)
• Court: Court of Appeal (Singapore)
• Subject Matter: Performance bond,Claims on underlying contract time-barred,Whether performance bond default or on-demand bond,Whether insurer may be restrained from paying under bond,Construction of terms of bond,Credit and Security,Calls on default bond

12 September 2006 Judgment reserved.

Lai Siu Chiu J (delivering the judgment of the court):

Introduction

1 This was an appeal against the decision of the judge in Originating Summons No 326 of 2005 (“the OS”) in setting aside an injunction which the District Court had granted to the appellant, Econ Piling Pte Ltd (“Econ”), to restrain the first respondent, Aviva General Insurance Pte Ltd (“Aviva”), from making payment to the second respondent, Jurong Town Corporation (“JTC”), under a performance bond.

2 On JTC’s appeal against the granting of the injunction, the High Court set aside the injunction. Econ appealed against the decision of the High Court ([2006] SGHC 76).

3 Aviva, although named as the defendant in the OS and the first respondent here, was not a key party to either of the proceedings. Neither did it file a case in this appeal. Aviva’s counsel informed the court that his client would abide by the court’s decision.

The facts

4 JTC engaged Econ, a piling contractor, to install bored piles at the International Business Park located in Jurong (“the Project”) under a contract dated 6 July 1992 (“the Contract”). The Insurance Corporation of Singapore Ltd (“ICS”) and Econ jointly furnished a performance bond numbered DJIS 9290018 dated 25 May 1992 (“the Bond”) to JTC as security for the due performance of the Contract. The Bond was for a maximum sum of $173,400.

5 Econ started work on the Project on 20 June 1992. The last working pile was installed by Econ on 25 November 1992. Tests were conducted on the installed piles and all the tested piles passed the load test. The pile eccentricities were also tested and found to be within the permissible tolerance levels. The final progress claim was submitted by Econ to JTC on 31 December 1992.

6 JTC had engaged Teow Aik Realty (S) Pte Ltd (“TAR”) to carry out excavation works for the Project. After the installation of the last working pile, TAR commenced excavations as part of the superstructure works.

7 Econ wrote to JTC on 6 April 1993 to warn the latter that TAR’s excavation works might cause pile movements and damage. This was followed by Econ’s second letter dated 23 June 1993 to JTC, giving notice of pile and earth movements as well as damage to the piles. On 28 June 1993, Econ submitted a report to JTC on the piles that had been damaged and pushed out of position.

8 JTC terminated its contract with TAR and commenced arbitration proceedings (“the arbitration”) against TAR. Econ was not a party to the arbitration.

9 On 31 March 2003, the arbitrator decided that it was Econ and not TAR which was responsible for the damaged piles. JTC was ordered to pay TAR a sum in excess of $850,000. Econ was not given a copy of the arbitration award.

10 On 29 April 2003, Econ wrote to JTC Consultants Pte Ltd, who was the consultant appointed for the Project, requesting the release of the retention sum of $136,782.77 held by JTC. On 6 May 2003, JTC wrote to inform Econ of the outcome of the arbitration and indicated it would not release the retention sum. Econ did not pursue its claim for the retention sum.

11 On 1 December 2003, JTC called on the Bond. In correspondence between their solicitors, Econ argued there was no proof that it was in breach of the Contract and even if it was in breach, JTC’s claim was time-barred. JTC contended that the Bond was payable on demand, without proof or conditions.

12 On 15 December 2003, ICS informed JTC’s solicitors that it would not be making payment under the Bond. A second demand for payment on the Bond was made by JTC’s solicitors on 29 December 2003.

13 On 1 March 2005, ICS changed its name to Aviva Ltd, which subsequently transferred its general insurance business to Aviva.

14 On 6 May 2005, JTC wrote to the superintending officer (“the SO”) of the Project for a determination as to whether Econ had breached the Contract.

15 On 20 June 2005, the SO determined that Econ was in breach of the Contract. Econ did not appeal against the SO’s decision by taking it before an arbitrator, as provided for under cl 43 of the Contract.

16 On 20 July 2005, JTC again demanded payment on the Bond from Aviva.

17 On 5 August 2005, Econ applied ex parte in the OS for an interim injunction to restrain Aviva from paying under the Bond. JTC was initially not a party to the OS but was joined later on its application. The District Court granted the injunction and JTC appealed to a judge in chambers in the High Court.

The High Court’s findings

18 The judge, inter alia, found that:

(a) The SO’s determination established Econ’s default. The SO had based her determination primarily, if not entirely, on the outcome of the...