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

• Jurisdiction: Singapore
• Judge: G P Selvam JC
• Judgment Date: 30 June 1993
• Neutral Citation: [1993] SGHC 146
• Docket Number: Suit No 2254 of 1992
• Date: 30 June 1993
• Published date: 19 September 2003
• Year: 1993
• Plaintiff Counsel: Herman Jeremiah (Haridass Ho & Partners)
• Citation: [1993] SGHC 146
• Defendant Counsel: Alvin Yeo and Sim Mei Ling (Wong Meng Meng & Partners)
• Court: High Court (Singapore)
• Subject Matter: Failure 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...