Raymond Construction Pte Ltd v Low Yang Tong and Another

• Jurisdiction: Singapore
• Judge: Lai Kew Chai J
• Judgment Date: 11 July 1996
• Neutral Citation: [1996] SGHC 136
• Court: High Court (Singapore)
• Published date: 20 December 2012
• Year: 1996
• Plaintiff Counsel: Hee Theng Fong with Doris Lee [Hee Theng Fong & Co]
• Defendant Counsel: Raymond Chan with Tan Joo Seng [Chan Tan & Partners],Tan Lee Cheng [Lee Bon Leong & Co]
• Citation: [1996] SGHC 136

Judgment:

GROUNDS OF JUDGMENT

1. The plaintiffs ("the contractor") are building contractors. The first defendant ("the owner") was at all material times the co-owner with his wife of the property known as 10B Yarwood Avenue, Singapore ("the property"). The plaintiffs and the first defendant in Aug 93 entered into a building contract to erect a 2 storey detached dwelling house ("the house") on the property.

The second defendants are an insurance company and their only role in these proceedings is limited to the performance guarantee dated 12 Oct 93 which they, at the request of the plaintiffs, issued to the owner in the sum of $40,419.05 which was payable unconditionally on demand. The first defendant and his family moved into the house on 30 May 95. The Temporary Occupation Permit was issued by the authorities on 3 Jul 95. It would be fair to note that the first defendant's case was that there were several defects in the construction of the house. In the circumstances, his solicitors made a demand in writing dated 26 Sep 95 on the second defendants to pay the sum of $40,419.05 under the guarantee by 29 Sep 95.

2. By an ex-parte application to the High Court, which was heard on 28 Sep 95, the plaintiffs obtained an injunction to restrain the second defendants from paying the said sum and to restrain the first defendant from receiving it. In a nutshell, the plaintiffs averred that the first defendant had wrongfully called for payment and that the demand was fraudulent, lacking in bona fides and wrongful as the plaintiffs were not in breach of agreement. It should be noted that no evidence of fraud as such was led by the plaintiffs. The attack against the first defendant was directed at his bad conduct and his bad faith. They said that they had substantially completed the works, as contracted and as subsequently varied by the parties, and that their claim No. 9 for interim payment was not dealt with by the architect at all because the first defendant, as the architect had confirmed, had unlawfully and oppressively prevented the architect from issuing the certificate of payment. In the result, the plaintiffs averred that the first defendant was owing them the substantial sum of $229,417.00, after conceding that they had, despite obstacles put up by the first defendant, repaired some defects and that certain minor repairs were still outstanding. These minor repairs could have been dealt with during the defects liability period but, owing to the obduracy of the first defendant, even these minor items were not put right. The assertions of the plaintiffs will have to be set out in some detail later in these grounds of judgment.

3. I should interpose at this stage with some references to a particular prayer of the plaintiffs in their ex parte application. The plaintiffs also sought an injunction restraining the first defendant from "demanding" the said sum from the second defendants, which, as was observed by the court during the hearing, was otiose, seeing that the first defendant through his solicitors had in fact made the demand on 26 Sep 95. The court also observed that ordinarily parties such as the plaintiffs, having caused the issue of an instrument such as a guarantee, should not apply to restrain the beneficiary of the instrument from making a demand under it. That would on the face of it be an unacceptable interference with contractual rights and could, if the injunction be issued, cause a time bar to set in against the beneficiary. The purpose was clearly to prevent payment by the issuer or receipt of payment by the beneficiary and injunctions limited to and specifically directed against those acts would have been appropriate. The arguments proceeded on the basis, as was clear from the plaintiffs' affidavit, that the plaintiffs' solicitors had in mind restraining the first defendant from making "further" demands; the matter was left at that.

4. Not unexpectedly, the first defendant filed a summons- in-chambers on 20 Oct 95 for an order that the injunction granted ex parte by Lai Siu Chiu J be discharged, that the second defendants be ordered to pay the sum of $40,419.05 to the first defendant and that there be an inquiry as to whether the first defendant had sustained any and if any what damages which the plaintiffs ought to pay under the undertaking given to the court and for interest thereon. The first defendant also asked that he be at liberty to enter judgment against the plaintiffs for the amount of such damages, interest thereon and costs. The background and averments of the first defendant would also have to be elaborated. Very briefly, the first defendant's case was that it was his undoubted legal right to demand payment under the guarantee, that the plaintiffs had breached his contract and it was even admitted by the plaintiffs that the defects, on their figures which the first defendant did not accept, would cost $26,000 to make good and the omissions were worth $17,000, making a total of $43,000. Learned counsel for the first defendant strenuously pressed the point that there was no justification at all to look into the other circumstances, e.g. as to the reason why the 9th interim certificate was not issued by the architect of the project.

5. At the conclusion of the adjourned hearing on 26 Jan 96, this court observed as follows:-

"Bocotra Construction Pte Ltd v AG (No.2) < 1995 > lays down the rule of law that there must be compelling evidence capable of proving fraud or unconscionability before an injunction may be granted restraining payment under instruments which contain unconditional and irrevocable obligations to pay on demand. The concept of "unconscionability" to me involves unfairness, as distinct from dishonesty or fraud, or conduct of a kind so reprehensible or lacking in good faith that a court of conscience would either restrain the party or refuse to assist the party. Mere breaches of contract by the party in question (in this case, the first defendant) would not by themselves be unconscionable. Where breaches are alleged, there would generally be (counter- allegations and) disputes when the case is before the court. Therefore the first defendant's breaches alone would not have sufficed. In my view, Royal Design Studio (Thean J as he then was) and Kvaerner Singapore (Selvam J) are illustrations of the circumstances where payments would have been unconscionable." (Words within brackets are added)

6. So as to place the context in which these remarks were made, there were really two matters which the court was addressing. First, on the authorities considered, the court was elaborating on what would amount to unconscionability sufficiently grave and serious for equity to intervene. That proceeded on the basis that equity would step in to prevent the enforcement of any legal right if such enforcement would have been unjust. Any allegation of fraud was put aside. Secondly, learned counsel for the first defendant contended that mere allegations of breaches of contract by the first defendant did not amount to unconscionability. I agreed with him.

7. Contrary to the contention advanced on behalf of the first defendant, I came to the conclusion after reading all the affidavits and the exhibits that I had to look at all the circumstances, which I did. I was very conscious of the fact that all I had before me were affidavits and exhibits and that I could not in an interlocutory matter make any finding of fact or draw any inferential fact without the benefit of viva voce evidence, unless any fact was not in or beyond controversy or was agreed as common ground. But there were considerable compelling evidence adduced by the plaintiffs which drove me to the conclusion that I had to restrain the first defendant from insisting on and obtaining his strict legal rights. In my judgment, he had to be stopped from acting in an unfair, harsh and unconscionable manner. In my minute, I described the first defendant's conduct as "most unfair" and stated that "he should be restrained". I accordingly dismissed his application with costs fixed at $5,000.

The background
8. On 10 Aug 93 the plaintiffs entered into a construction contract with the first defendant to erect the house on a piece of land at Denham Close and Yarwood Avenue for the sum of $808,381.00. Under the contract the plaintiffs agreed to provide a security deposit, which was 5% of the contract sum, to ensure their due performance of the contract. The plaintiffs requested the second defendants to and they did issue in favour of the first defendant a performance guarantee under which the second defendants agreed to pay to the first defendant on demand and unconditionally the sum of $40,419.05. The guarantee provided that it took effect from 5 Oct 93 to 4 Oct 95 inclusive of the 12 months maintenance period and shall continue to be in effect unless and until the works have been certified by the architect, Mr Loo Kek Chew, to have been completely executed in accordance with the conditions of the contract. The construction works commenced in or about Oct 93.

9. There was a site meeting on 8 Aug 94. Those who attended were the first defendant, his wife, the architect and a director of the plaintiffs, Wong Chun Weng. At the end of the meeting, several variations were agreed to be made to the contract ("the variation agreement"). The variation agreement is evidenced in a letter dated 11 Aug 94 and written on the stationery of the plaintiffs by Wong Chung Weng. This letter was signed by the first defendant, apparently on 29 Aug 94, and the architect. The letter recorded that certain "circumstances and several events" had developed along the course of the project. As a result, it was further agreed in the following words:-

1. The contract completion date shall be 31 Dec 94.

2. Practical completion is defined as when the followings are achieved:

(a) Electricity turn-on
(b) Water supply turn-on

It has been agreed that the front...