LQS Construction Pte Ltd v Mencast Marine Pte Ltd

JurisdictionSingapore
JudgeHoo Sheau Peng JC
Judgment Date29 June 2017
CourtHigh Court (Singapore)
Docket NumberOriginating Summons No 1340 of 2016 (Summons No 362 of 2017)
Date29 June 2017
LQS Construction Pte Ltd
and
Mencast Marine Pte Ltd and another

[2017] SGHC 148

Hoo Sheau Peng JC

Originating Summons No 1340 of 2016 (Summons No 362 of 2017)

High Court

Civil Procedure — Injunctions — Ex parte injunctions — Discharge — Party seeking to discharge ex parte injunction on basis of material non-disclosure — Whether ex parte injunction should be discharged on basis of intentional misrepresentation and suppression of material facts

Credit and Security — Performance bond — Obligor seeking to restrain beneficiary from calling on performance bond — Whether obligor had shown prima facie case of unconscionability

Held, discharging the injunction:

(1) An applicant for an ex parte injunction had the duty to make full and frank disclosure to the court of all material facts. These facts did not have to be decisive or conclusive: at [28].

(2) When faced with an inter partes application to discharge an existing ex parte injunction, the court would determine whether, on the full facts and arguments presented by both parties, the injunction should be continued or discharged, or if a fresh injunction should be issued. If it was shown that there was misrepresentation, suppression of material facts or material non-disclosure in relation to the initial application for the injunction, the court had the discretion to discharge the injunction without looking into the merits, and should ordinarily do so when there was intentional suppression of facts: at [29].

(3) The court could grant an injunction to restrain a beneficiary from calling on a performance bond on the ground of unconscionability. This depended on the facts of each case. Mere breaches of contract by the beneficiary, and the existence of genuine disputes between parties, were not sufficient per se to constitute unconscionability. The obligor had to establish a strong prima facie case of unconscionability before the court would grant or continue an injunction restraining the beneficiary from calling on the bond: at [31] to [33].

(4) The contractor had failed to make full and frank disclosure of all material facts in its initial application, and had instead blatantly suppressed and misrepresented certain crucial facts. It had averred in an affidavit that it had “faithfully completed all of the work of the Project” and handed over all the keys to the premises when contemporaneous documents and correspondence showed this was not the case. The contractor had also sought to create the erroneous impression that the building owner had unreasonably refused to make payment and issue the handing-over certificate. It was thus proper for the court to discharge the ex parte injunction on the basis of material non-disclosure: at [36], [37], [41], [42] and [44].

(5) Further, the building owner gave satisfactory explanations regarding its conduct complained of in the contractor's initial application for the ex parte injunction. Taking the contractor's case at its highest, there was nothing more than a genuine dispute between the parties, which did not suffice to show unconscionability. The building owner's right to call on an on-demand performance bond was not subject to any preconditions, and it had in any event provided the contractor with a comprehensive list of outstanding work and repairs and an opportunity to undertake the repairs. The building owner was also able to justify why it had drafted certain letters for the contractor to sign, and why it had issued negative or nil progress payment claim certifications to the contractor. In view of the building owner's losses under the contract, its call on the full amount of the performance bond was not unconscionable: at [45], [47], [48], [56], [57], [60] and [61].

Case(s) referred to

BS Mount Sophia Pte Ltd v Join-Aim Pte Ltd [2012] 3 SLR 352 (folld)

CKR Contract Services Pte Ltd v Asplenium Land Pte Ltd [2015] 3 SLR 1041 (folld)

Eltraco International Pte Ltd v CGH Development Pte Ltd [2000] 3 SLR(R) 198; [2000] 4 SLR 290 (folld)

Raymond Construction Pte Ltd v Low Yang Tong [1996] SGHC 136 (refd)

Tay Long Kee Impex Pte Ltd v Tan Beng Huwah [2000] 1 SLR(R) 786; [2000] 2 SLR 750 (folld)

Facts

The first defendant (“the building owner”) engaged the plaintiff (“the contractor”) as its main contractor for the construction of two buildings. Pursuant to the letter of award, the contractor submitted a performance bond for the sum of $6.16m, being 10% of the total contract sum for the project. The performance bond was issued by the second defendant (“the insurer”).

The building owner and the contractor subsequently entered into a formal contract for the project on 27 May 2014. According to the contract, the contractor was to complete construction by 24 January 2016. Despite an extension of time to 21 March 2016, the project was still not completed by then.

In early August 2016, the contractor requested to partially hand over the premises, but the building owner rejected this request. The building owner set out a list of incomplete and defective aspects of the construction works as recorded during a joint site inspection. The building owner further reminded the contractor that it had not submitted the complete set of as-built drawings, manuals and warranties, as required under the contract.

In November 2016, upon a written request by the contractor for a handing-over certificate to be issued, the building owner issued a written notice for the contractor to proceed with diligence and expedition pursuant to the contract's terms. The contractor replied, acknowledging that at least some of the works highlighted by the building owner were outstanding or defective. However, the contractor took no steps to compete the outstanding works.

In December 2016, the building owner issued a notice of termination on the basis of the contractor's failure to comply with the notice, as well as the fact that a winding-up application had been filed against the contractor by one of its creditors. The building owner sent a letter to the insurer calling on the performance bond.

A day before the performance bond was due to be paid, the contractor applied for an ex parte injunction on an urgent basis to restrain the building owner from calling on the bond. It served the relevant documents on the other parties between 9.00pm and 10.00pm that evening.

At the hearing, only the contractor was present. It argued that the building owner had acted unconscionably by, among other things, failing to inform the contractor of the necessary repairs, failing to make payment and calling on the performance bond. The ex parte injunction was granted.

The building owner subsequently applied to discharge the injunction on the basis that the contractor had failed to make full and frank disclosure of material facts such as the fact that the contract had already been terminated due to the contractor's failure to complete the outstanding works. The building owner also provided explanations regarding its actions to show that its conduct had not been unconscionable as the contractor had claimed.

Legislation referred to

Rules of Court (Cap 322, R 5, 2014 Rev Ed) O 32 r 5(1), O 32 r 5(3)

Lau See-Jin Jeffrey (Lau & Co) for the plaintiff;

Ong Kok Seng, Chermaine Tan Si NingandMichael Nathanael Chee Guang Hui (Xu Guanghui) (Patrick Ong Law LLC) for the first defendant;

Anparasan s/o Kamachi and Wong Jing Ying Audrey (KhattarWong LLP) for the second defendant.

29 June 2017

Hoo Sheau Peng JC:

Introduction

1 Summons No 362 of 2017 was an application by the first defendant, Mencast Marine Pte Ltd (“Mencast”), to discharge an ex parte injunction obtained by the plaintiff, LQS Construction Pte Ltd (“LQS”), against Mencast's call on an on-demand performance bond on the ground of unconscionability (“the discharge application”). I discharged the ex parte injunction and made consequential orders. LQS has appealed against my decision. I now set out my reasons.

Background

2 LQS is a construction company incorporated in Singapore. By way of a letter of award dated 10 January 2014 (“the Letter of Award”) which was duly accepted by LQS, Mencast engaged LQS as its main contractor for the construction of a four-storey factory and an 11-storey office building at 42A Penjuru Road (“the Project”). The Letter of Award stated that the contract sum for the entire Project was $61.6m (“the Contract Sum”).

3 Pursuant to cl 6 of the Letter of Award, LQS was to submit a performance bond amounting to 10% of the Contract Sum to secure the performance of its obligations under the Contract. Accordingly, a performance bond dated 11 February 2014 was issued by the second defendant, First Capital Insurance Ltd (“FCI”), in favour of Mencast for the sum of $6.16m (“the Performance Bond”). LQS provided FCI $500,000 as cash collateral to secure the Performance Bond. Clauses 1 and 2 of the Performance Bond provided that this was an unconditional, on-demand bond, ie, that FCI agreed to immediately and unconditionally pay any sum demanded by Mencast in writing up to $6.16m without requiring any proof of breach or Mencast's entitlement to such a sum. Clause 4 stated that the Performance Bond was to remain in force until 24 January 2017 unless cancelled, renewed or extended.

4 LQS and Mencast subsequently entered into a formal contract for the Project on 27 May 2014 (“the Contract”). The Contract incorporated the Real Estate Developers' Association of Singapore Design and Build Conditions of Contract (3rd Ed, 2010) in full.

5 Thereafter, LQS commenced construction work and submitted monthly progress payment claims to Mencast. These claims were certified by Mencast's quantity surveyor, stating the certified amounts due from Mencast to LQS for work done for the Project.

6 According to the Contract, LQS was to complete construction on the Project by 24 January 2016. There was a delay to the...

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