Newtech Engineering Construction Pte Ltd v BKB Engineering Constructions Pte Ltd and Others

• Jurisdiction: Singapore
• Judgment Date: 26 June 2003
• Date: 26 June 2003
• Docket Number: Suit No 42 of 2003
• Court: High Court (Singapore)

Newtech Engineering Construction Pte Ltd

Plaintiff

and

BKB Engineering Constructions Pte Ltd and others

Defendant

[2003] SGHC 141

Tay Yong Kwang J

Suit No 42 of 2003

High Court

Building and Construction Law–Building and construction related contracts–Performance bonds–Nature of performance bonds–Injunctions–Purposes for grant–Grounds for restraining receipt of payment under performance bonds

The plaintiffs (“Newtech”) and the first defendants (“BKB”) entered into two building sub-contracts, for which performance bonds were issued. Newtech sought an injunction to restrain BKB from receiving payment under the respective performance bonds on the ground that the call on the bonds was made in bad faith and was unconscionable. Newtech submitted that BKB encountered delay in their own works which had to be completed before Newtech could carry out their works and further, that there was no complaint until the first performance bond was called upon, about 26 months later. In the case of the second performance bond, the call was made 11 months into the defects liability period.

Further, BKB's statement of account showed discrepancies when compared with that of Newtech's, including an alleged overpayment to Newtech which Newtech alleged was “simply conjured up in an attempt to establish over-payment of a sum suspiciously close to the total bond sum that was called”.

It was BKB's case that the performance bonds were unconditional and irrevocable in nature. BKB further contended that Newtech had not only failed to produce sufficient evidence to show any alleged fraud or unconscionable conduct but Newtech were also in breach of the two sub-contracts. Newtech admitted the works were completed late and that they were therefore liable for liquidated damages.

Held, allowing the plaintiffs' application for injunction:

(1) Newtech's arguments showed a strong prima facie case of unconscionability on the part of BKB in calling on the two performance bonds in issue: at [25].

(2) BKB failed to explain the discrepancies in their final statements of account, were unable to produce any documents to support its contention and in particular, it failed to show how the costs of removal of surplus earth, to which they attributed the discrepancies in their statement of account, ballooned. The changes to the final accounts appeared to have been arbitrarily made and buttressed Newtech's contention that they were done to show overpayment of an amount suspiciously close to the total amount payable under the bonds: at [26].

(3) Newtech had produced cogent evidence to support their contention that they were not in default of their contractual obligations and that there was therefore no reason to call on the bonds. The entire circumstances of the case suggested strongly that BKB had an ulterior motive in calling on the bonds. It did not appear to be based on any bona fide claim they had against Newtech. The calls on the bonds appeared to have been made to ameliorate their cash flow problems: at [27].

American Cyanamid Co v Ethicon [1975] AC 396 (distd)

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

Dauphin Offshore Engineering & Trading Pte Ltd v The Private Office of HRH Sheikh Sultan bin Khalifa bin Zayed Al Nahyan [2000] 1 SLR (R) 117; [2000] 1 SLR 657 (folld)

Four Seas Construction Pte Ltd v The Tai Ping Insurance Co Ltd [1998] SGHC 414 (distd)

GHL Pte Ltd v Unitrack Building Construction Pte Ltd [1999] 3 SLR (R) 44; [1999] 4 SLR 604 (folld)

Lawrence Lim and Chong Kuan Keong (Chong Chia & Lim LLC) for the plaintiffs

Lai Swee Fung (UniLegal LLC) for the first defendants.

Tay Yong Kwang J

1 The plaintiffs were the first defendants' sub-contractors in respect of a building construction project at Sembawang Camp. Two sub-contracts were entered into on 31 January 2000 and on 18 April 2000. The plaintiffs claimed to have performed and completed their scope of works but have not been paid by the first defendants an outstanding sum of $376,944.99 (inclusive of 3% goods and services tax). The second defendants issued a performance bond pursuant to the first sub-contract and the third defendants issued a performance bond for the second sub-contract.

2 In these two summonses-in-chambers, the plaintiffs sought to restrain the first defendants from receiving payment of $43,150 from the second defendants and from receiving payment of $200,000 from the third defendants under the respective performance bonds. The basis of the applications was that the call on the two bonds was made in bad faith and unconscionably...