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

• Jurisdiction: Singapore
• Judge: Woo Bih Li J
• Judgment Date: 08 May 2006
• Neutral Citation: [2006] SGHC 76
• Docket Number: District Court Originating Summons
• Date: 08 May 2006
• Published date: 08 May 2006
• Year: 2006
• Plaintiff Counsel: Sharmilee Shanmugam (CitiLegal LLC)
• Citation: [2006] SGHC 76
• Defendant Counsel: Michael Eu (ComLaw LLC),Melvin See (Wong Partnership)
• Court: High Court (Singapore)
• Subject Matter: Plaintiff issuing performance bond in favour of defendant to secure plaintiff's performance of obligations under contract with defendant,Limitation of Actions,Effect of time having run,Whether defendant precluded from calling on performance bond after expiry of limitation period for bringing action in contract or tort against plaintiff for breach,Plaintiff determined to have breached contract with defendant

8 May 2006

Woo Bih Li J:

1 On or about 5 May 1992, the plaintiff, Econ Piling Pte Ltd (“Econ”), was engaged by the second defendant, Jurong Town Corporation (“JTC”), to supply and install bored piles at Plot 3, International Business Park at Boon Lay Way/Jurong East Street 11, Jurong. A performance bond dated 25 May 1992 (“the PB”) was issued by The Insurance Corporation of Singapore Limited (“ICS”) and Econ in favour of JTC to secure the due performance by Econ of its obligations under its contract with JTC. The PB was for a maximum sum of $173,400.

2 According to Econ, it commenced work on 20 June 1992 and the last bored pile was installed on 25 November 1992. Its sixth and final progress claim was submitted to JTC on 31 December 1992. Subsequent to the completion of the piling works, excavation works were commenced by the building contractor Teow Aik Realty (S) Pte Ltd (“TAR”). Defects and serious damage were discovered on the installed piles after TAR commenced excavation works. Econ and TAR blamed each other for the defects and damage. JTC terminated its contract with TAR and commenced arbitration proceedings against TAR for, inter alia, the defective and damaged piles. Econ was not a party to the arbitration.

3 On 31 March 2003, the arbitrator decided in his award on liability that the defects and damage were caused by Econ and not TAR and ordered JTC to pay TAR a sum in excess of $850,000 for works carried out by TAR to investigate and rectify the damaged piles.

4 On 29 April 2003, Econ wrote to JTC to release $136,782.77 said to be due and owing by JTC to Econ. I will refer to this sum as “the retention sum” for convenience.

5 JTC refused to release the retention sum. On 6 May 2003, JTC wrote to inform Econ of the outcome of the arbitration and that it would look to Econ for any sum which JTC was found liable to TAR for.

6 Econ did not pursue its claim for the retention sum. However, on 1 December 2003, JTC made a call on the PB. According to Econ, the name of ICS had been changed to Aviva Ltd. Aviva Ltd then transferred some businesses in March 2005 to the first defendant, Aviva General Insurance Pte Ltd (“AGIPL”). There was an exchange of correspondence during which Econ asked JTC to hold its hands for its interim judicial manager to review the claim. However, JTC did not hear from Econ again.

7 On 6 May 2005, JTC wrote to the Superintending Officer (“SO”) pursuant to cl 43 of its contract with Econ (“Clause 43”) to seek her determination on whether Econ had breached its contract with JTC.

8 On 20 June 2005, the SO determined that Econ was in breach of contract.

9 On 20 July 2005, JTC wrote to Aviva Ltd (by then some businesses had been transferred to AGIPL) to again demand payment under the PB. Consequently, Econ filed an originating summons in the District Court for an injunction, inter alia, to restrain AGIPL from making payment under the PB. AGIPL was initially the only defendant but subsequently JTC was added, on its own application, as a party to the originating summons. On 2 December 2005, a district judge granted the plaintiff an injunction to restrain AGIPL from making payment under the PB. JTC then appealed. On 22 February 2006, I allowed the appeal and set aside the injunction order.

10 I have granted Econ’s application for leave to appeal to the Court of Appeal. I set out below the arguments and my reasons for my decision to allow JTC’s appeal.

The PB

11 The material parts of the PB stated:

NOW THE CONDITION of the above-written Bond is such that it shall be void only in either of the following cases, namely :

(1) if the CONTRACTOR or his successors or assigns shall well and truly perform, fulfil and keep all and every of the terms, covenants, conditions, clauses, provisos and stipulations of the Contract on the part of the CONTRACTOR or his successors or assigns to be observed, performed, fulfilled and kept according to the true purport, intent and meaning thereof; or

(2) if, on failure or default by the CONTRACTOR or his successors or assigns so to do, the SURETY shall, without proof or conditions, pay to the CORPORATION the full amount of the above-written Bond.

….

The Certificate of the Superintending Officer of the CORPORATION certifying the amount of losses damages costs and expenses sustained by the CORPORATION shall also be deemed to be final and conclusive of the same PROVIDED ALWAYS THAT where the total of these amounts less any payments or credit in sums or money certain due and payable to the CONTRACTOR do not exceed the abovewritten Bond the balance of the bond money shall after meeting the claims of other parties be released to the SURETY.

12 The district judge was of the view that the crux of the issue was whether Econ had indeed well and truly performed the contract. In her view, the absence of any legal action by JTC against Econ during the period allowed by the Limitation Act (Cap 163, 1996 Rev Ed) (“the Act”) was sufficient proof that Econ had performed the contract to the extent that the PB was rendered void. As for JTC’s reliance on the decision of the SO, the district judge noted that JTC’s request to the SO for her determination was made long after the limitation period had ended and she was concerned that if JTC was allowed to make a call on the PB it would open companies like Econ to potential claims for an indefinite period of time, thus circumventing the Act. The district judge was also of the view that the SO had based her determination entirely on the arbitrator’s decision which was inherently unfair as Econ had not participated in the arbitration.

13 The district judge also observed that JTC’s conduct in the circumstances might fall into the category of unconscionable behaviour for which interlocutory injunctions have been granted in the past in respect of “on demand” bonds, pending the outcome of the substantive dispute under the underlying contract for which a performance bond had been procured. Nevertheless, the district judge made no finding on this issue as the parties had not addressed her thereon.

14 Econ’s counsel, Ms Shanmugam, submitted that because JTC was precluded under the Act from bringing any action (under contract or tort) against Econ, JTC was also precluded from making a demand under the PB.

15 However, JTC’s counsel, Mr See, submitted that the effect of the expiry of a limitation period merely precluded JTC from commencing action but did not extinguish the right to claim damages against Econ. The textbook, David W Oughton, John P Lowry & Robert M Merkin, Limitation of Action (LLP, 1998) states at pp 48 to 49:

Generally, it is said that when time expires against the plaintiff, his remedy is barred, but his right is not extinguished. …

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