Eltraco v CGH: Interlocutory Injunction on Performance Bond Call over Construction Defects
In Eltraco International Pte Ltd v CGH Development Pte Ltd, the Singapore High Court addressed an application by Eltraco for an interlocutory injunction to restrain CGH from receiving S$2,438,800 under a performance bond related to a construction project. Eltraco, the main contractor, sought to prevent CGH from calling on the bond, arguing that CGH had to first prove a breach of contract and that it was unconscionable for CGH to receive the funds. CGH contended that the terms of the bond allowed them to call on it without proving a breach. The court granted an order restraining CGH from receiving more than S$1.6 million under the bond until further order, finding that while genuine disputes existed, the full amount claimed was potentially unconscionable given the retention moneys and undisputed variation works.
1. Case Overview
1.1 Court
High Court1.2 Outcome
Interlocutory injunction granted in part, restraining the defendant from receiving more than $1.6 million under the performance bond until further order.
1.3 Case Type
Civil
1.4 Judgment Type
Grounds of Decision
1.5 Jurisdiction
Singapore
1.6 Description
Eltraco sought to restrain CGH from calling on a performance bond due to alleged construction defects. The court allowed CGH to claim up to $1.6m.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| QBE Insurance (International) Limited | Other | Corporation | Neutral | Neutral | |
| Eltraco International Pte Ltd | Plaintiff | Corporation | Interlocutory injunction granted in part | Partial | |
| CGH Development Pte Ltd | Defendant | Corporation | Injunction granted in part | Partial |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Woo Bih Li | Judicial Commissioner | Yes |
4. Counsels
4. Facts
- Eltraco was engaged by CGH as the main contractor for a construction project.
- The contract incorporated the SIA Conditions with amendments.
- Eltraco submitted progress claim No 32 for S$1,605,574.43.
- The project was completed on 29 August 1998, and the maintenance period commenced on 30 August 1998.
- Eltraco was placed under judicial management on 21 January 2000.
- CGH retained S$609,700 as the second half of retention moneys.
- CGH made a demand on the performance bond for S$2,438,800.
5. Formal Citations
- Eltraco International Pte Ltd v CGH Development Pte Ltd, Suit 214/2000, [2000] SGHC 114
6. Timeline
| Date | Event |
|---|---|
| Letter of award issued to the plaintiffs as main contractors for the project. | |
| Performance Bond No 01-6501802 issued by QBE Insurance in favour of the defendants. | |
| Project completed according to the completion certificate issued by the architect. | |
| Maintenance period commenced. | |
| Maintenance period for defects expired. | |
| Plaintiffs submitted progress claim No 32. | |
| Plaintiffs requested the quantity surveyor to recommend a payment certificate for the balance of variation works. | |
| Plaintiffs placed under judicial management. | |
| Defendants made a demand on the bond for S$2,438,800. | |
| Quantity surveyor stated that the plaintiffs’ claim No 32 could not be recommended. | |
| Defendants commenced an action against QBE for the sum of S$2,438,800 under the bond. | |
| Plaintiffs commenced action against the defendants. | |
| Court granted an order restraining the defendants from receiving more than $1.6m under the bond until further order. | |
| Decision Date |
7. Legal Issues
- Call on Performance Bond
- Outcome: The court held that the terms of the bond did not require the defendants to establish a breach by the plaintiffs before being entitled to call on the bond, but granted an injunction in part based on unconscionability.
- Category: Substantive
- Sub-Issues:
- Entitlement to make call on performance bond
- Requirement to establish breach of contract first
- Contractual terms precluding call on performance bond
- Unconscionability in receiving payment under performance bond
- Related Cases:
- [1990] SLR 1116
- [1999] 4 SLR 604
- Unconscionability
- Outcome: The court considered whether it was unconscionable for the defendants to receive moneys under the bond, ultimately restraining the defendants from receiving more than $1.6m.
- Category: Substantive
- Related Cases:
- [1999] 4 SLR 604
- [1999] 3 SLR 732
- [1999] 2 SLR 368
8. Remedies Sought
- Permanent injunction to restrain the defendants from receiving the S$2,438,800 under the bond
- Stay of the action against QBE
9. Cause of Actions
- Breach of Contract
10. Practice Areas
- Commercial Litigation
- Construction Disputes
- Performance Bonds
11. Industries
- Construction
- Insurance
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Royal Design Studio Pte Ltd v Chang Pte Ltd | N/A | Yes | [1990] SLR 1116 | Singapore | Cited regarding whether a beneficiary must establish a breach of contract before calling on a performance bond. |
| GHL Pte Ltd v Unitrack Building Construction Pte Ltd | Court of Appeal | Yes | [1999] 4 SLR 604 | Singapore | Cited for the principle that a court can intervene at the interlocutory stage if there is prima facie evidence of fraud or unconscionability in calling on a performance bond. |
| Sin Kian Contractor Pte Ltd v Lian Kok Hong & Anor | N/A | Yes | [1999] 3 SLR 732 | Singapore | Cited for the definition of unconscionability as involving unfairness or conduct so reprehensible that a court of conscience would intervene. |
| Min Thai Holdings Pte Ltd v Sunlabel Pte Ltd & Anor | N/A | Yes | [1999] 2 SLR 368 | Singapore | Cited for the definition of unconscionability as involving unfairness or conduct so reprehensible that a court of conscience would intervene. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| No applicable statutes | |
15. Key Terms and Keywords
15.1 Key Terms
- Performance bond
- Interlocutory injunction
- Judicial management
- Retention moneys
- Schedule of defects
- Unconscionability
- Liquidated damages
- Maintenance period
- Progress claim
- Variation works
15.2 Keywords
- Performance bond
- injunction
- construction
- Eltraco
- CGH
- Singapore
17. Areas of Law
16. Subjects
- Construction Dispute
- Performance Bonds
- Injunctions