Four Seas Construction Co Pte Ltd v The Tai Ping Insurance Company Limited and Another

JurisdictionSingapore
JudgeTay Yong Kwang JC
Judgment Date30 December 1998
Neutral Citation[1998] SGHC 414
CourtHigh Court (Singapore)
Year1998
Published date27 March 2013
Plaintiff CounselJoseph Liow (Derrick Ravi & Pnrs)
Defendant CounselBrij Raj Rai with Edric Pan (Rajah & Tann),Ho Chien Mien (Allen & Gledhill)
Citation[1998] SGHC 414

Judgment :

GROUNDS OF DECISION

1 The application before me was taken out by the Second Defendants to set aside an interim injunction granted on 16 December 1997.

THE WRIT OF SUMMONS

2 On 16 December 1997, the Plaintiffs commenced this action against the Tai Ping Insurance Company Limited ("Tai Ping") as the sole Defendants, stating in the endorsement on the writ that their claim was for a declaration that the call made on 9 December 1997 by Yeo Hiap Seng Limited ("YHS") on the Performance Bond issued by Tai Ping was made fraudulently and for an order that Tai Ping be restrained from making payment to YHS under the said bond.

THE EX PARTE APPLICATION

3 On the same day, the Plaintiffs took out an ex parte application in Chambers for an interim injunction to restrain Tai Ping from paying out $3,206,093.00 or any sum whatsoever under the said Performance Bond until after the trial of this action or until further order. This was supported by an affidavit deposed to by Lim Ming Woei, the Plaintiffs’ Senior Manager.

4 It appeared from this affidavit that on 10 May 1996, the Plaintiffs entered into a contract with YHS to construct a eight-storey factory and a three-storey office building for YHS at Senoko Way for a sum of $32,060,930.00. The contract required the Plaintiffs to furnish a Performance Bond in favour of YHS for 10% of the contract sum. The Performance Bond issued by Tai Ping to YHS read as follows:

"WHEREAS by a Contract ("the Contract") in writing made on the 10th day of May 1996 between yourselves as Employer and MESSRS. FOUR SEAS CONSTRUCTION CO PTE LTD (hereinafter called the "Contractor") the Contractor has agreed to carry out, complete and maintain the 8-STOREY FACTORY AND 3-STOREY OFFICE BUILDING ON LOT 2353 MK 13 AT SENOKO WAY, SINGAPORE ("the Works") for the consideration therein mentioned.

AND WHEREAS

We THE TAI PING INSURANCE COMPANY LIMITED of 62 Cecil Street #B1-00, #03-04-00 TPI Building, Singapore 049710 have been requested by the Contractor and have agreed to guarantee due performance of the Contract in the terms hereinafter appearing

NOW THIS DEED WITNESSETH:-

1. In consideration of you not insisting on the Contractor paying SINGAPORE DOLLARS THREE MILLION TWO HUNDRED AND SIX THOUSAND AND NINETY THREE ONLY ($3,206,093.00) as a security deposit for the Contract, we hereby irrevocably and unconditionally undertake, covenant and firmly bind ourselves to pay to you on demand any sum or sums which from time to time may be demanded by you up to a maximum aggregate of SINGAPORE DOLLARS THREE MILLION TWO HUNDRED AND SIX THOUSAND AND NINETY THREE ONLY ($3,206,093.00) ("the said sum").

2. Should you notify us in writing, at any time prior to the expiry of this Bond, by notice purporting to be signed for and on your behalf that you require payment to be made of the whole or any part of the said sum, we irrevocably and unconditionally agree to pay the same to you immediately on demand without further reference to the Contractor and notwithstanding any dispute or difference which may have arisen under the Contract or any instruction which may be given to us by the Contractor not to pay the same.

3. We hereby confirm and agree that we shall be under no duty or responsibility to inquire into:

3.1 the reason or circumstances of any demand hereunder, or

3.2 the respective rights, obligations and/or liabilities of yourselves and the Contractor under the Contract, or

3.3 the authenticity of your notice or the authority or entitlement of persons signing such notice,

but that we shall be entitled to and shall rely upon any written demand by you hereunder.

4. Any payment to be made by us hereunder shall be made without any set-off, deduction or counterclaim whatsoever.

5. We agree that our liability hereunder shall not be discharged, affected or impaired in any way by reason of any modification, amendment or variation in or to any of the conditions or provisions of the Contract or the Works or by reason of any breach or breaches of the Contract by the Contractor, whether the same are made with or without our knowledge or consent. We further agree that no invalidity in the Contract nor its avoidance, suspension or termination shall discharge, affect or impair our liability hereunder and that no waiver, compromise, indulgence or forbearance, whether as to time, payment, performance or any other matter afforded by you to the Contractor under the Contract, shall discharge, affect or impair our liability hereunder.

6. We confirm that our liability hereunder shall be a continuing liability and that this Bond shall remain in full force and effect until the first to happen of the following events:

6.1 the original of this Bond is returned by you to us at our address aforesaid; or

6.2 expiry of this Bond as hereinafter provided.

7. This Bond shall expire as to any undrawn portion of the said sum at the close of banking business on the day which one hundred and eighty (180) days after the expiry of the Maintenance Period or one hundred and eighty (180) days after the date of issue of the Maintenance Certificate under the Contract whichever is the later. Notification of demand for payment may be presented to us at any time prior to expiry. "Undrawn portion" shall mean the said sum less the aggregate amount which shall have been the subject of notification by you of your demand for payment as hereinbefore provided.

8. This Bond shall be governed by and construed in accordance with the laws of Singapore and we hereby agree to submit to the non-exclusive jurisdiction of the Courts of Singapore."

5 Work at the site commenced with the architect issuing interim progress certificates from time to time. The Plaintiffs complained that the amounts reflected in the certificates were insufficient and, in particular, failed to take into account the proper value of variation works instructed by the architect and carried out by the Plaintiffs. By the time the tenth certificate was issued in early February 1997, the Plaintiffs’ cash flow was seriously affected.

6 The Plaintiffs then had discussions with YHS. YHS agreed to assist the Plaintiffs by lending them money to pay their domestic subcontractors timeously to make up for the shortfall in the architect’s certificates. This agreement was evidenced by a letter dated 10 March 1997 and a Deed of Guarantee by Tan Guan Seng, a director of the Plaintiffs, given on the same date. The letter dated 10 March 1997 from YHS to the Plaintiffs was in the following terms:

"REQUEST FOR ADVANCE PAYMENT

YEO HIAP SENG FACTORY AT SENOKO WAY ("the Project")

We refer to your request for an advance payment of S$1.5 million (Singapore Dollars One Million Five Hundred Only) in respect of the final 25% of your works in the Project.

We are agreeable to advancing the sum requested provided that you agree to the following terms:

1 That the sum advanced of S$1.5 million shall be applied progressively in payment of all sums due to you after 75% of the Project is completed until the said sum is exhausted.

2 That if before 75% of the Project is completed:

a. you shall become insolvent or unable to pay your debts as they fall due or make a composition with your creditors; or

b. any petition or application to wind you up or to appoint a judicial manager or receiver and/or manager over you; or

c. any resolution to wind you up is passed; or

d. any execution is levied on you or your properties;

the said advance payment of S$1.5 million may be set-off against all payments due to you in the period prior to the achievement of a 75% completion of the Project.

If for any reason the works on the Project or the Contract between you and ourselves relating thereto is terminated or suspended, the sum advanced or any part thereof not applied towards payment due to you in the Project in accordance with the terms of this letter shall be repaid immediately upon written demand and our written demand and the sum stipulated therein shall be conclusive evidence against you of the sum due and payable to us.

If you are agreeable to the above terms, please signify your agreement by appending the signature of a duly authorised officer in the space denoted below and returning the original signed copy of the letter to us."

The terms were agreed to by the Plaintiffs. Further loans/advances were made by YHS to the Plaintiffs for the same purpose.

7 The total amount of loans from YHS to the Plaintiffs was $5,977,925.26 while the direct payments made by YHS to the subcontractors totalled $9,744,831.66.

8 The architect continued to issue interim certificates in favour of the Plaintiffs, deducting the amounts that the Plaintiffs were obliged to credit to YHS as at the time of the certificates in respect of the loans/advances. From certificates number 16A dated 9 September 1997 to number 19A dated 28 November 1997, a total of $4,597,025.85 should have been paid to the Plaintiffs.

9 In early December 1997, Jenssen Lee, Vice-President of Property Development in YHS, "were going to demand payment of $3,206,093.00 from the Defendant to cover the amount of the loans/advances which Yeo Hiap Seng Limited had made to the Plaintiffs". On 9 December 1997, YHS wrote to Tai Ping to demand payment of the said amount by the next day.

10 According to the Plaintiffs, the demand made on the Performance Bond was dishonest because YHS knew that it was not made in respect of a matter concerning the terms of the underlying contract but was made in respect of the loans/advances agreement which was supported by the guarantee by Tan Guan Seng. YHS deliberately misled Tai Ping by not stating this in their letter of demand.

11 The demand was also dishonest because YHS knew that as at 9 December 1997, the Plaintiffs were not indebted to them in the sum of $3,206,093.00 in respect of the loans/advances agreement. In certificate number 19A, the architect certified the...

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1 books & journal articles
  • Security for performance
    • United Kingdom
    • Construction Law. Volume II - Third Edition
    • 13 Abril 2020
    ...Ltd [2012] SGCA 28 at [26]–[31]. 314 See paragraph 26.152. 315 See, eg, Four Seas Construction Co Pte Ltd v Tai Ping Insurance Co Ltd [1998] SGHC 414 at [64], per Tay Yong Kwang JC. 316 Any such injunction will usually enjoin the beneiciary from making a demand until such time as the irst i......

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