Kvaerner Singapore Pte Ltd v UDL Shipbuilding (Singapore) Pte Ltd

JurisdictionSingapore
JudgeG P Selvam JC
Judgment Date30 June 1993
Neutral Citation[1993] SGHC 146
Docket NumberSuit No 2254 of 1992
Date30 June 1993
Published date19 September 2003
Year1993
Plaintiff CounselHerman Jeremiah (Haridass Ho & Partners)
Citation[1993] SGHC 146
Defendant CounselAlvin Yeo and Sim Mei Ling (Wong Meng Meng & Partners)
CourtHigh Court (Singapore)
Subject MatterFailure by buyers to open letter of credit as required,Buyers demanding payment under performance guarantee,Performance guarantees,Application for injunction to restrain a beneficiary from calling on performance bond issued pursuant to an underlying contract for the sale of goods,Buyers cannot take advantage of their own wrong,Contractual terms,Interlocutory injunctions,Opening of letter of credit as condition precedent to call on performance guarantee,Failure by beneficiary to open letter of credit as required,Civil Procedure,Credit and Security,Guarantees and indemnities,Failure by buyers to open letter of credit as required under contract of sale,Principles applicable,Whether buyers entitled to call on the performance guarantee when they had failed to fulfil condition precedent,Contract,Injunctions,Opening of letter of credit a condition precedent to a call on the performance guarantee,Interlocutory injunction sought by sellers to restrain bank from making payment,Interlocutory injunction sought by sellers to restrain bank from making payment to buyers

Cur Adv Vult

This matter involves an application to forestall payment under a performance guarantee and it is founded on the defendants` failure to open a letter of credit in favour of the plaintiffs.

The plaintiffs, the applicants, a company incorporated in Singapore, contracted to sell to the defendants a pumping system and a cargo valve control system (`the equipment`) for a total price of $1,000,000.
The equipment was to be installed in an ocean tanker the defendants were constructing for a Taiwanese company called Energy Shipping Co Ltd (`Energy Shipping`).

Delivery of the equipment was to be in instalments beginning with the 25th week of 1992 (20 June 1992) and ending with the 32nd week (8 August 1992).
Under the agreement the defendants were required to make part payment equivalent to 30% of the purchase price and the plaintiffs were required to deliver to the defendants a banker`s performance guarantee (`the performance guarantee`) for an equivalent amount. The performance guarantee was to be valid until the delivery of the equipment by the plaintiffs to the defendants on 2 August 1992. After delivery of the equipment the amount of the performance guarantee was to be reduced to 10% of the total purchase price and continue to be valid up to the commissioning of the system or until 30 October 1992 whichever was earlier. The defendants were further required to make payment of the balance of the purchase price amounting to $700,000 being 70% of the total purchase price by way of an irrevocable letter of credit issued by a Singapore bank. The letter of credit was to be issued 30 days prior to shipment which the plaintiffs computed as 1 June 1992.

The plaintiffs caused to be issued in favour of the defendants a performance guarantee dated 2 April 1992 and issued by Den Norske Bank AS (`the bank`).
By the performance guarantee the bank undertook `unconditionally and irrevocably to pay to you on your first written demand to us in case that the seller has failed or refused to fulfil his obligations under the contract notwithstanding any objection by the seller the amount of the letter of guarantee or any part thereof up to a maximum amount of Singapore dollars Three Hundred Thousand only (S$300,000) equal to 30% of the total contract price of S$1,000,000`.

The defendants made the deposit of $300,000 but failed to establish the letter of credit for the sum of $700,000 as they had undertaken.
Notwithstanding the defendants` failure, the plaintiffs said that they delivered on 5 June 1992 equipment to the defendants $14,200 in value without receiving any payment. In June the defendants were informed that the goods were ready for shipment. Yet there was no letter of credit established. In view of the defendants` failure, the plaintiffs by letters dated 13 October 1992 and...

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35 cases
7 books & journal articles
  • RESTRAINING A CALL ON A PERFORMANCE BOND: SHOULD ‘FRAUD OR UNCONSCIONABILITY’ BE THE NEW ORTHODOXY?
    • Singapore
    • Singapore Academy of Law Journal No. 2000, December 2000
    • 1 December 2000
    ...I E Contractors Ltd v Lloyds Bank plc [1990] 2 Lloyd’s Rep 205, at 207; Kvaerner Singapore Pte Ltd v UDL Shipbuilding (Singapore) Pte Ltd[1993] 3 SLR 350, at 353—54; Nik Sharifuddin Bin Nik Kadir v Mohaiyani Securities Sdn Bhd[1994] 4 CLJ 402, at 409; Development Bank of Singapore Ltd v Eng......
  • Security for performance
    • United Kingdom
    • Construction Law. Volume II - Third Edition
    • 13 April 2020
    ...253 Royal Design Studio Pte Ltd v Chang Development Pte Ltd [1991] 2 MLJ 229; Kvaerner Singapore Ltd v UDL Ship Building (Singapore) Ltd [1993] 3 SLR 350. It is for the party alleging unconscionability to adduce suicient evidence of the alleged unconscionable behaviour: see CCM Industrial P......
  • AN ANALYSIS OF RECENT JUDICIAL DEVELOPMENTS IN SELECTED AREAS OF CIVIL PROCEDURE
    • Singapore
    • Singapore Academy of Law Journal No. 1996, December 1996
    • 1 December 1996
    ...principles discussed, see Discount Records Ltd v Barclays Bank[1975] 1 WLR 315; Kvaerner Singapore Pte Ltd v UDL Shipbuilding (S) Pte Ltd[1993] 3 SLR 350. 125 [1995] 1 SLR 159. 126 Ibid, at p 165. 127 [1995] 2 SLR 733, at p 747. 128 [1995] 1 MLJ 149. 129 Ibid, at p 158. 130 [1995] 2 SLR 148......
  • A REVIEW OF DEVELOPMENTS IN SELECTED AREAS OF CIVIL PROCEDURE1
    • Singapore
    • Singapore Academy of Law Journal No. 1996, December 1996
    • 1 December 1996
    ...3 SLR 631. 65 For a case in which exceptional circumstances arose, see Kvaerner Singapore Pte Ltd v UDL Shipbuilding (Singapore) Pte Ltd[1993] 3 SLR 350 (applicants induced breach and relied on it to call on performance bond). See Star-Trans Far East Ltd v Norske-Tech Ltd[1995] 3 SLR 631, a......
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