The Singapore Island Country Club v China Taiping Insurance (Singapore) Pte. Ltd.

• Jurisdiction: Singapore
• Judge: Clement Seah Chi-Ling
• Judgment Date: 10 February 2023
• Neutral Citation: [2023] SGDC 23
• Court: District Court (Singapore)
• Docket Number: OSS 22 of 2022
• Hearing Date: 22 November 2022,16 August 2022,15 June 2022,21 June 2022,17 March 2022,11 January 2023
• Citation: [2023] SGDC 23
• Year: 2023
• Plaintiff Counsel: Reuben Gavin Peter, Lavan Vickneson and Faye Ng (Dentons Rodyk & Davidson LLP)
• Defendant Counsel: Chelliah Ravindran and Alison Jayaram (Chelliah & Kiang LLC)
• Subject Matter: Credit and Security,Performance bond,Notice of non-renewal,Whether beneficiary had actual notice of notice of non-renewal,Whether call on performance bond valid
• Published date: 11 March 2023

District Judge Clement Seah Chi-Ling: Introduction

DC/OSS 22/2022 (“OSS 22”) is the Plaintiff’s application for the following orders: An order that the Defendant pay the sum of S$165,508.70 to the Plaintiff forthwith pursuant to the Plaintiff’s demand on the Security Deposit Guarantee (Bond No. DBPBSNA00001501900) dated 7 May 2019 (the “Performance Guarantee”) for the sum of S$165,508.70 on 25 November 2021, or such further order as this Honourable Court deems fit; The Plaintiff be at liberty to apply for further orders; The costs of and incidental to OSS 22 to be paid forthwith by the Defendant to the Plaintiff; and Such further and/or other relief(s) be granted as this Honourable Court deems fit.

The crux of the present dispute centered on whether the Performance Guarantee was valid and subsisting at the time of the Plaintiff’s demand on the Performance Guarantee, or whether it had been earlier terminated by a non-renewal letter allegedly sent by the Defendant to the Plaintiff.

Background Facts The Parties

The Plaintiff (hereinafter, referred to as the “Plaintiff” or “SICC”), is a professionally managed club in the business of providing a recreational space and facilities for club members. The Plaintiff is incorporated in Singapore, and has its registered office at 180 Island Club Road, Singapore 578774.

The Defendant is a Singapore-incorporated insurance company, having its registered office at 3 Anson Road, #16-00, Springleaf Tower, Singapore 079909. The Defendant provided the Performance Guarantee in favour of the Plaintiff.

The Project

The Plaintiff is the employer for a project involving refurbishment works for a 50-metre pool, a 25-metre pool and a kids’ play pool located at the SICC’s premises (the “Project”).

The Plaintiff’s contractor for the Project is Tienrui Design & Construction Pte. Ltd. (“Tienrui”). Tienrui was awarded the Project under a letter of award dated 8 March 2019 issued by the Plaintiff. SICC and Tienrui subsequently entered into a formal agreement dated 28 August 2019 for the Project (the “Contract”).

The Contract provides, inter alia, that: Tienrui is contractually obliged to furnish the Plaintiff with a security deposit, by way of either a cash deposit or a guarantee provided by a bank or insurance company, as security for its due performance of its obligations under the Contract; The Plaintiff is entitled to utilize the security deposit to make good any loss or damage sustained, or likely to be sustained, as a result of any breach of contract by Tienrui, including any liquidated damages; and The amount of the security deposit to be furnished is 10% of the Contract Sum, i.e. S$165,608.65 (the “Guaranteed Sum”).

The Performance Guarantee

Pursuant to its obligations under the Contract, on or around 8 March 2019, Tienrui procured the Defendant to provide the Performance Guarantee for the Guaranteed Sum of S$165,508.70 in favour of the Plaintiff. The Performance Guarantee is an on-demand and unconditional security. Clause 1 of the Performance Guarantee¹, reads as follows:

“1. We shall unconditionally pay to the Employer any sum or sums up to a maximum aggregate of Singapore Dollars ONE HUNDRED SIXTY FIVE THOUSAND FIVE HUNDRED EIGHT AND CENTS SEVENTY ONLY (S$165,508.70) (the “Guaranteed Sum”) upon receiving your written notice of claim for payment made pursuant to Clause 4 of this Guarantee without any proof of actual default on the part of the Contractor and without need to satisfy any other condition.”

The Performance Guarantee has an automatic extension provision. Clause 3 of the Performance Guarantee provides that the Performance Guarantee is to remain in effect until 5 May 2021, after which, the expiry date is automatically extended for successive periods of one month, unless the Defendant gives SICC ninety days’ written notice prior to the (extended) expiry date of the Defendant’s intention not to extend the Performance Guarantee in respect of any future extension.

Clause 3 of the Performance Guarantee reads as follows: “3. Our liability under this Guarantee shall continue and this Guarantee shall remain in full force and effect from 6th May 2019 until 5th May 2021 provided always that the expiry date of this Guarantee and our liability under this Guarantee shall be automatically extended for successive periods of 1 month unless we give you 90 days’ written notice prior to the expiry of our liability (the “Notice Period”) of our intention not to extend this Guarantee in respect of any future extension and provided further that you shall be entitled – (a) upon receiving such notice of our intention either to: (i) make a claim under this Guarantee; or (b) direct us (within the Notice Period) to extend the validity of this Guarantee for a further period not exceeding 1 month (and this Guarantee shall then expire at the end of such further period).” [Emphasis added]

The parties’ case

Over the course of the Project, the Plaintiff alleged that Tienrui had failed to perform its contractual obligations and/or committed numerous breaches of contract, which caused the Plaintiff to sustain (and/or likely sustain) loss or damage. The Plaintiff’s claim for loss or damage against Tienrui, arising from Tienrui’s breaches of the Contract, included: A claim for liquidated damages; A defects claim; and A clawback claim to recover monies wrongly awarded to Tienrui in SOP AA/242 of 2020.

In view of the loss and damage suffered, the Plaintiff, by way of a letter dated 25 November 2021, demanded that the Defendant pay the full Guaranteed Sum of S$165,508.70 to the Plaintiff within thirty (30) business days from the Defendant’s receipt of the said letter (the “Demand”)².

Plaintiff’s case

The Plaintiff’s case is that it has complied with all the requirements for calling on the Performance Guarantee. Under the terms of the Performance Guarantee, the Defendant was thus obliged to make payment on the Plaintiff’s demand without question. In relation to the Defendant’s contention that the Performance Guarantee had been terminated as a result of an earlier Non-Renewal Letter dated 5 February 2021 sent by the Defendant pursuant to clause 3 of the Performance Guarantee, the Plaintiff’s position is that the said Non-Renewal Letter: (a) was not sent out by the Defendant, (b) was not received by the Plaintiff, and/or (c) was not brought to the Plaintiff’s notice.

Specifically, the Plaintiff contends that the Defendant has failed to prove that the Non-Renewal Letter was actually mailed to the Plaintiff and/or that the Non-Renewal Letter was actually received by the Plaintiff. In this connection, it is undisputed that the postal acceptance rule does not apply to the case at hand following the High Court decision of 1L30G Pte Ltd v EQ Insurance Co Ltd [2017] 5 SLR 1106 (“1L30G”). Accordingly, mere proof that the Non-Renewal Letter was mailed to the Plaintiff is insufficient for the Defendant to avoid liability – it is necessary for the Defendant to prove that the Non-Renewal Letter was received by the Plaintiff. Plaintiff contends that there is insufficient proof that the Non-Renewal Letter was in fact received by the Plaintiff, or that the Plaintiff had actual notice of it. The Performance Guarantee was thus automatically extended at the end of each expiry period, and remained valid at the time of the Plaintiff’s Demand. The Plaintiff additionally claimed that the Defendant had failed to comply with the condition precedent for terminating the Performance Guarantee by failing to give the Plaintiff at least 90-days’ notice before terminating the Performance Guarantee.

Defendant’s case

The Defendant submits that the Plaintiff’s application ought to be dismissed as the Plaintiff’s demand on the Performance Guarantee was out of time and therefore invalid. The Defendant contends that pursuant to clause 3 of the Performance Guarantee, and by way of a letter dated 5 February 2021 sent by the Defendant to the Plaintiff by AR Registered post on 29 January 2021 (the “Non-Renewal Letter”)³, the Defendant has given the Plaintiff the requisite 90-days’ written notice of the Defendant’s intention not to extend the Performance Guarantee upon its expiry on 5 May 2021. Although the Defendant’s letter was dated 5 February 2021, the Defendant asserts that it was in fact issued on 29 January 2021 and post-dated to 5 February 2021. This was to factor in time for the letter to be delivered to the Plaintiff so that the Plaintiff would receive the 90-day notice as required by the terms of the Performance Guarantee. The Defendant tenders a Yellow Card⁴ endorsed by Singapore Post which purportedly shows that the Non-Renewal Letter was delivered to SICC on 2 February 2021.

The Defendant’s position is that since the Defendant has informed the Plaintiff of its intention not to extend the expiry date of the Performance Guarantee beyond 5 May 2021 via the Non-Renewal Letter, the Performance Guarantee expired on 5 May 2021. As the Plaintiff’s Demand was only made on 25 November 2021, the Defendant is not liable to the Plaintiff under the Performance Guarantee.

Procedural History

I should note that the Defendant had in the initial stages of the proceedings submitted that the Plaintiff’s application was wrongly commenced by way of an originating summons (“OS”) and ought to be dismissed outright. The Defendant submitted that the proceedings should instead have been commenced by way of a writ action given the number of factual disputes raised in the case.

Under Order 28 r 4(3) of the Rules of Court 2014, the court may, in the event it determines that there is a dispute as to fact, order that “the originating summons shall be heard on oral evidence or partly on oral evidence and partly on affidavit evidence, with or without cross examination of any of the deponents, as it may direct”.

Both counsel agreed that instead of...