E-Tech Building Services Pte Ltd v Foreign Domestic Worker Association for Social Support and Training (FAST)

JudgeKow Keng Siong
Judgment Date13 September 2021
Neutral Citation[2021] SGDC 195
Citation[2021] SGDC 195
CourtDistrict Court (Singapore)
Published date21 September 2021
Docket NumberDC/OSS 95/2021, HC/RAS 19/2021
Plaintiff CounselDaniel Tay (Chan Neo LLP)
Defendant CounselLim Bee Li / Wong Zhen Yang (Optimus Chambers LLC)
Subject MatterContract,Formation,Certainty of terms,Whether contract terms certain and complete,Credit and Security,Performance bonds,Unconditional on-demand bond,Whether bond is valid if it was made pursuant to a non-existent Letter of Award,Whether unconscionable to call on bond if it was purchased in anticipation of an agreement which eventually did not materialise
Hearing Date13 August 2021
District Judge Kow Keng Siong: Introduction

DC/OSS 95/2021 (“the Application”) is the Plaintiff’s application to restrain the Defendant from receiving $200,000.00 from an on-demand bond (“the Bond”).

The Plaintiff contended that the Bond was invalid because it was issued pursuant to a non-existent “Letter of Award” (dated 9 October 2019) for retrofitting works. The Defendant accepted that there was no such “Letter of Award” but contended that the Bond was nonetheless valid because the parties had a binding agreement on the FAST Hub Project. The Plaintiff denied the agreement and contended that the Defendant’s claim on the Bond was unconscionable.

After hearing parties, I allowed the Application.

The Defendant is dissatisfied with my decision and has appealed. I now set out the reasons for my decision.

Background to the dispute

The parties. The Plaintiff is a company in the building and real estate management business. The Defendant is a non-profit charity whose objectives are to provide skills training and social support for foreign domestic workers (“FDWs”).

The FAST Hub Project. Sometime in or before 2019, the Defendant sought to lease from the Singapore Land Authority (“SLA”) 3 Chin Cheng Avenue Singapore 429401 (“the Property”). The Defendant intended to use the Property to provide enhanced services for FDWs (“FAST Hub Project”).

The July RFP. In July 2019, the Defendant issued a request for proposal (“RFP”) from parties who were interested to participate in the FAST Hub Project (“July RFP”). According to the RFP, the successful party would have to retrofit the Property and thereafter take up a sub-tenancy at the Property to operate (a) a transit centre, (b) a medical and dental centre, and (c) a cook house for FDWs. In return, the successful party would be allowed to keep the revenue from operating these facilities.

The Plaintiff’s Proposal and Exchange of Letters. Sometime on or before 16 August 2019, the Plaintiff submitted its proposal for the FAST Hub Project (“the Plaintiff’s Proposal”). Based on the Plaintiff’s Proposal, the Defendant issued a letter of offer to award the project to the Plaintiff on 16 August 2019 (“16 August Letter of Offer”). The Plaintiff accepted the letter of offer on 27 August 2019 via a letter (“27 August Letter of Acceptance”). On 9 October 2019, the Defendant issued a letter of intent to appoint the Plaintiff as its partner for the FAST Hub Project (“9 October Letter of Intent”). According to the exchange of letters, the terms of the intended “partnership” were subject to further discussions between the parties, and that these terms were to be eventually incorporated into a memorandum of understanding and a tenancy agreement (“TA”). (The Defendant submitted a draft TA to the Plaintiff for its comments in March 2020.)1

The October RFP. In the same month that the 9 October Letter of Intent was issued, the Defendant published another RFP to invite proposals for the FAST Hub Project2 (“October RFP”). Suffice to note, there are material differences between the July RFP and the October RFP. These differences are set out in Annex A.

The Plaintiff’s conduct. Between November 2019 to February 2020, the Plaintiff (a) had various discussions with the Defendant on the works to be carried out at the Property, (b) drew up a list of defects at the Property for SLA to rectify before SLA handed over the Property to the Defendant, (c) worked with the Defendant’s qualified persons on the design and building compliance of the FAST Hub Project, and (d) procured a letter from the Defendant for the purpose of applying for water and electricity metering for the Property.3 The Defendant required the Plaintiff to take over the Property pending the preparation of the agreement(s).4 The Plaintiff obliged. The SLA handed over possession of the Property in early March 2020.

The Bond and insurance policies. In or around early March 2020, the Defendant also requested the Plaintiff to purchase (a) the Bond and (b) contractor’s all risk and work injury compensation insurance policies (“insurance policies”) to cover the works in the Property. The Plaintiff again obliged. The Bond and the insurance policies were issued sometime on or after 16 March 2020.5

Property designated as a Migrant Workers Housing Facility. On 4 April 2020, due to the COVID-19 pandemic, SLA informed the Defendant that the Property would be required to be used as a migrant workers housing facility (“MWHF”).6 (This meant that the Property could not be used for the FAST Hub Project.) Additionally, SLA wanted the Defendant to carry out various works at the Property7 and to manage the MWHF.8 On 24 April 2020, the parties discussed the “change of events”.9 It was subsequently agreed that the Plaintiff would be the on-site “contractor” to carry out the SLA works at the Property.10

The draft TA. Shortly thereafter, in May 2020, the Defendant forwarded a draft TA for the FAST Hub Project to the Plaintiff for comments.11 The Plaintiff was reluctant to agree to the draft TA given that there was uncertainty as to when the Property could be used for the FAST Hub Project. The Defendant dismissed these concerns and there was an impasse on how to move the project forward.12

The draft Service Contract and Term Sheet. On 21 August 2020, the Defendant’s solicitors sent two documents to the Plaintiff for the latter’s comments and agreement. The first is a draft “Service Contract”.13 This document sets out the terms relating to the Plaintiff’s appointment as the service provider for the MWHF. The appointment is stated to be for 12 months, from 1 June 2020 to 31 May 2021. The draft Service Contract did not relate to the FAST Hub Project. The second document is a draft “Term sheet for the collaboration agreement between [the Defendant] and [the Plaintiff] for (i) tenancy and (ii) provision of fitting out works in respect of [the Property]” (“draft Term Sheet”). This document related to the FAST Hub Project. More will be said of it later. The key provisions in the Term Sheet relating to the tenancy and provision of fitting out works can be found in Annex B and Annex C respectively.

The breakdown. On 4 September 2020, the Plaintiff informed the Defendant’s solicitors (a) that it would not be signing either the draft Service Contract or the draft Term Sheet, and (b) that it would cease to be the operator for the MWHF.14 Less than two weeks later, the Plaintiff left the Property after completing the SLA retrofitting works.

Claim on the Bond. In May 2021 (i.e. some eight months thereafter), the Defendant made a claim on the Bond. This prompted the Plaintiff to take out the Application.

The Plaintiff’s case

The Plaintiff relied on the following grounds to submit why the Defendant should be restrained from receiving monies under the Bond: First, the Bond was “invalid” as it was issued pursuant to a non-existent Letter of Award dated 9 October 2019.15 Further, the Bond could not have been referring to the 9 October Letter of Intent. The purported Letter of Award was said to contain provisions which the Plaintiff had to comply with, including an obligation to provide a cash deposit of $200,000.00.16 The 9 October Letter of Intent contained no such provisions. Finally, the Bond was not supported by an underlying agreement between the parties – as they did not conclude a binding agreement on the FAST Hub Project.17 While they were desirous of collaborating on the project, the terms of the agreement were not finalised.18

The Defendant’s case

The Defendant submitted that the Application should be dismissed. First, the Bond was an on-demand bond. In deciding on the Application, the court should not be concerned with the merits of the parties’ dispute regarding the underlying contract.19 A claim on the Bond was not unconscionable as there was already a finalised agreement on the FAST Hub Project. While no formal instrument had been executed, this agreement was evidenced by the Plaintiff’s conduct, namely, by him20 – (i) taking possession of the Property for the purpose of carrying out retrofitting works, (ii) purchasing the Bond and the insurance policies, (iii) giving notice to the Defendant that it would “cease to be the operator for the [MWHF] with effect from 16 September 2020”, and (iv) seeking reimbursements from the Defendant for various payments [it] had incurred in managing the FAST Hub.

Issues to be determined

To decide whether the Defendant was legally entitled to receive monies under the Bond, it would be necessary to resolve the following issues: Was the Bond invalid given that it was issued pursuant to a non-existent Letter of Award? If the answer is yes, then obviously the Application ought to be allowed. If the Bond was valid, then was it supported by a binding agreement regarding the FAST Hub Project. On this issue, it is relevant to note that the Defendant had accepted that a claim on the Bond would be unconscionable if there was no such agreement.

My decision

At the end of the hearing, I found that the Bond was invalid.

I also found that even if the Bond was valid, it would have been unconscionable for a claim to be made on it. The parties had an in-principle agreement on the FAST Hub Project. This agreement had numerous details to be fleshed out and was subject to contract. The Bond was purchased in anticipation of the parties eventually entering into a binding agreement on the FAST Hub Project. Such an agreement unfortunately failed to materialise.

The Bond is invalid

The purpose of the Bond. The purpose of the Bond is set out in both its preamble and clause 1: ...

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