Min Thai Holdings Pte Ltd v Sunlabel Pte Ltd and Another

• Judgment Date: 30 November 1998
• Date: 30 November 1998
• Docket Number: Suit No 1631 of 1998
• Court: High Court (Singapore)

Min Thai Holdings Pte Ltd

Plaintiff

and

Sunlabel Pte Ltd and another

Defendant

[1998] SGHC 395

Lai Kew Chai J

Suit No 1631 of 1998

High Court

Civil Procedure—Injunctions—Seller obtaining injunction to restrain payment under performance guarantee—Disputes between parties to contract yet to be resolved—Whether unconscionable for buyer to call on performance guarantee

The plaintiff and defendants entered into an agreement under which the first defendant would buy rice from the second defendant who in turn would buy the rice from the plaintiff, Min Thai. Min Thai alleged that in addition to its contract with the second defendant Finorgan, there existed a separate collateral contract with the first defendant, Sunlabel. Among other things, the terms of the contract between the parties: (a) required Min Thai to issue a performance guarantee in favour of Sunlabel, payable upon default of delivery; and (b) incorporated the force majeure conditions under the ICC rules and regulations. After the performance guarantee was issued, Min Thai was unable to deliver the rice due to exceptional rainfall in China. Sunlabel then demanded in writing that they be paid under the performance guarantee. Min Thai then obtained an interim injunction restraining the defendant Sunlabel from receiving money under a performance guarantee until trial or further order, arguing that it would be unconscionable for Sunlabel to enforce the performance guarantee. Sunlabel applied to set aside the injunction.

Held, dismissing the application:

There were serious issues to be tried between the parties, such as whether Min Thai’s performance of the collateral contract with Sunlabel was affected by theforce majeure. There was also a question whether the ICCForce Majeure Conditions applied to the defendants. It would be unconscionable in the circumstances for Sunlabel to attempt to receive payment under the performance guarantee, without resolving the disputes between itself and Min Thai: at [33] and [35].

Bocotra Construction Pte Ltd v AG [1995] 2 SLR (R) 262; [1995] 2 SLR 733 (refd)

Kvaerner Singapore Pte Ltd v UDL Shipbuilding (Singapore) Pte Ltd [1993] 2 SLR (R) 341; [1993] 3 SLR 350 (refd)

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

Royal Design Studio Pte Ltd v Chang Development Pte Ltd [1990] 2 SLR (R) 520; [1990] SLR 1116 (refd)

Simon Yuen and Gerald Khor (Chong Yeo & Partners) for the plaintiff

Lum Pak Meng (Leong & Lum) for the first defendant.

Lai Kew Chai J

1 This appeal arises out of my refusal to set aside an injunction order. On 16 September 1998 the plaintiff (“Min Thai?) obtained an interim injunction from S Rajendran J restraining the first defendant (“Sunlabel?) from calling on and/or receiving any sum whatsoever under a performance guarantee dated 26 June 1998 issued by the Allied Irish Banks plc until trial or further order. Broadly speaking, the injunction was obtained on the ground that it would have been unconscionable for Sunlabel to have enforced the performance guarantee.

2 On 12 October 1998, I heard Sunlabel’s application to set aside the injunction orders. At the conclusion of the hearing, I dismissed the application and ordered that the costs of the application be reserved.

The background

3 The plaintiff (“Min Thai?), the first defendant (“Sunlabel?) and the second defendant (“Finorgan?) are all traders in, amongst other commodities, China origin white rice. The quantity with which we are concerned is 50,000 metric tons. Min Thai has its own sources in the Peoples’ Republic of China who would sell and deliver to it or to its order the white rice. Sunlabel has his own importers of the white rice to Indonesia to whom it intended to sell the white rice. Finorgan may be described in the two interfacing transactions, in one sense, as the intermediate party.

4 According to Min Thai, the transactions relevant to these proceedings are not the usual sales of goods contracts involving three parties but basically giving rise to two contracts for the sale of goods. The typical case is where A sells goods to B and B in turn under a separate contract sells those goods to C; in such cases there is no privity of contract between A and C. However, Min Thai, the plaintiff, alleges in this case a collateral contract with Sunlabel, the first defendant, in addition to the one it has with Finorgan, the second defendant; and more of the details later.

The contract between Sunlabel and Finorgan

5 The managing director of Min Thai, Mr Chew Ching Khim (“Mr Chew?), affirmed and filed an affidavit in support of its application for the injunction. He affirmed that Min Thai “was involved? in the contract dated 9 June 1998 which was entered into between Finorgan and Sunlabel. Under the contract written on Sunlabel’s stationery, Sunlabel agreed to buy and Finorgan agreed to sell the white rice. The contractual specification to note is that broken rice shall be “25% max.? Half of the quantity shall be shipped...