Samwoh Asphalt Premix Pte Ltd v Sum Cheong Piling Private Limited and Another

• Jurisdiction: Singapore
• Judge: Chao Hick Tin JA
• Judgment Date: 05 December 2001
• Neutral Citation: [2001] SGCA 79
• Docket Number: Civil Appeal 600052190 of
• Date: 05 December 2001
• Published date: 19 September 2003
• Year: 2001
• Plaintiff Counsel: Sundaresh Menon and Choy Chee Yean (Rajah & Tann)
• Citation: [2001] SGCA 79
• Defendant Counsel: Suresh Damodara and K Sureshan (Colin Ng & Partners),Andre Maniam and Daniel Chia (Wong Partnership)
• Court: Court of Appeal (Singapore)
• Subject Matter: Whether court should intervene and grant injunctive relief,Performance guarantee,Whether beneficiary's conduct in calling for payment unconscionable,Unconscionability,Call on performance guarantee,Contract

Judgment

GROUNDS OF DECISION

The background facts (ii) CAAS taxiway fillets
(iii) MINDEF taxiway fillets up to 75 m from east of the runway centre line
(iv) Three reinforced concrete box culverts and U-drains including outfall structures
(v) All drainage works west of the runway
(vi) All drainage works across the runway
(vii) All drainage works east of the runway until western edge of taxiway
(viii) Turfing works until western edge of parallel taxiway

(the principal sub-contract).

(ii) CAAS taxiway fillets
(iii) MINDEF taxiway fillets up to 75m from east of the runway centre line

(the subsidiary sub-contract).

4 Under the terms of the subsidiary sub-contract, for the purpose of securing the performance of that sub-contract, Samwoh were required to furnish a performance guarantee in favour of SC Piling for the sum of S$500,000, being about 5% of the subsidiary sub-contract sum. In compliance with this requirement, Samwoh procured ECICS to issue a performance guarantee dated 30 September 1999 (the performance guarantee) in favour of SC Piling 5 Paragraph (2) of the recital of the performance guarantee stated that ECICS agreed to guarantee the due performance of the [subsidiary sub-contract] in the manner set out therein. The performance guarantee was therefore intended to guarantee the due performance by Samwoh of the subsidiary sub-contract, and not the performance of any other obligation of Samwoh to SC Piling. Nor was it a performance guarantee to secure the due performance by Gim Chuan of the principal sub-contract. For the purpose of this appeal, the key provision is Clause 1 which is as follows:

The Guarantor unconditionally and irrevocably undertakes and convenants to pay in full forthwith upon demand in writing any sum or sums that may from time to time be demanded by the Main Contractor up to a maximum aggregate sum of S$500,000-00 (Singapore Dollars Five Hundred Thousand Only) without requiring any proof that the Main Contractor is entitled to such sum or sums under the Contract or that the Nominated Subcontractor has failed to execute the Contract or is otherwise in breach of the Contract. Any sum or sums so demanded shall be paid forthwith by the Guarantor unconditionally, without any deductions whatsoever and notwithstanding the existence of any differences or disputes between the Main Contractor and the Nominated Subcontractor arising under or out of or in connection with the Contractor or the carrying out of work thereunder or as to any amount or amounts payable thereunder and notwithstanding that such differences or disputes have been referred to arbitration or are the subject of proceedings in Court or is in the midst of any other means of dispute resolution.

Wetness problem at site6. In October 2000, the runway was flooded and Samwoh was unable to carry out their works. The runway continued to have excessive water content in the sub-soil. Samwoh raised the problem with SC Piling and Gim Chuan in November, and informed them that their experts were of the opinion that the problem could have been due to two causes: a high water table and inadequate drainage systems at the site Neither SC Piling nor Gim Chuan really accepted that the excessive moisture or water in the subsoil was due to or occasioned by the inadequate drainage. At a site discussion between the representatives of SC Piling, Gim Chuan and Samwoh held on 20 December 2000, SC Pilings representative stated that owing to the wet weather there was apparently a problem of discharge of surface run-off at the site, resulting in stagnation and ponding of water, and suggested to Gim Chuan to provide sufficient temporary site drainage to facilitate discharge of the surface run-off so as to alleviate the wetness problem. Apparently, the problem excessive moisture or water in the sub-soil remained and Samwoh investigated further and raised the problem again with Gim Chuan and SC Piling. However, the problem was not addressed 7. It is Samwohs claim that Gim Chuan were obliged to rectify this problem, which Gim Chuan had failed to do, and that the excessive water content in the sub-soil had rendered it impossible for them to proceed with the pavement works, which they had contracted to carry out. On 7 February 2001, Samwoh by a written notice accepted what they considered was Gim Chuans repudiation of the subsidiary sub-contract and terminated that sub-contract. 8. After the termination of the subsidiary sub-contract, SC Piling and Samwoh entered into negotiations with a view to having a contract made directly between them. While the negotiations were in progress, Samwoh at the request of SC Piling carried out certain works at the site for a few days. However, the negotiations subsequently broke down, as the parties could not agree on certain terms on which Samwoh would take over the contract. On 28 February 2000, Samwoh stopped working at the site which they had started under the temporary arrangement made with SC Piling. Decision below The appeal11. The main issue in this appeal is whether SC Piling had acted unconscionably in calling on the performance guarantee. In Singapore, unconscionability on the part of the beneficiary in calling for payment on a performance guarantee is a separate and distinct ground from fraud for seeking injunctive relief: see Bocotra Construction Pte Ltd and Ors v A-G (No 2) [1995] 2 SLR 733; Raymond Construction Pte Ltd v Low Yang Tong & Anor (11 July 1996, unreported); Min Thai Holdings Pte Ltd v Sunlabel Pte Ltd & Anor [1999] 2 SLR 368; Sin Kian Contractor Pte Ltd v Lian Kok Hong (31 July 1999, unreported); GHL Pte Ltd v Unitrack Building Construction Pte Ltd & Anor [1999] 4 SLR 604; and Dauphin Offshore Engineering & Trading Pte Ltd v The Private Office of HRH Sheikh Sultan bin Khalifa bin Zayed Al Nahyan [2000] 1 SLR 657. In determining this issue it is necessary to examine all the relevant facts and circumstances of the case including the facts leading up to the demand for payment under the performance guarantee.

Relevant circumstances

12. From the documentary evidence adduced, Samwoh at the material time certainly had a serous concern about the excessive water content in the sub-soil, which impeded the pavement works to be carried out by them under the subsidiary sub-contract. They had raised this problem repeatedly with Gim Chuan and SC Piling. Samwohs own experts had also investigated the problem and they had written detailed reports on the causes of the excessive water content in the sub-soil, and copies of these reports were subsequently furnished by Samwoh to Gim Chuan and SC Piling respectively. SC Piling...