Samwoh Asphalt v Sum Cheong Piling: Unconscionability in Performance Guarantee Call

Samwoh Asphalt Premix Pte Ltd (Samwoh) appealed a High Court decision allowing Sum Cheong Piling Private Ltd (SC Piling) to discharge an interim injunction that restrained SC Piling from calling on a performance guarantee issued by ECICS-COFACE Guarantee Company (Singapore) Ltd (ECICS). The Court of Appeal found that SC Piling acted unconscionably in calling on the performance guarantee, as the call was not based on a bona fide claim but rather used as a bargaining chip. The court allowed the appeal, ordering SC Piling to repay the amount received under the guarantee and restoring the injunction.

1. Case Overview

1.1 Court

Court of Appeal

1.2 Outcome

Appeal allowed.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Appeal regarding an interim injunction restraining Sum Cheong Piling from calling on a performance guarantee. The court found Sum Cheong Piling's conduct unconscionable.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Samwoh Asphalt Premix Pte LtdAppellantCorporationAppeal AllowedWon
Sum Cheong Piling Private LimitedRespondentCorporationAppeal DismissedLost
ECICS-COFACE Guarantee Company (Singapore) LtdRespondentCorporationNeutralNeutral

3. Judges

Judge NameTitleDelivered Judgment
Chao Hick TinJudge of AppealYes
L P TheanJudge of AppealNo

4. Counsels

Counsel NameOrganization
Choy Chee YeanRajah & Tann
Sundaresh MenonRajah & Tann
Suresh DamodaraColin Ng & Partners
K SureshanColin Ng & Partners
Daniel ChiaWong Partnership
Andre ManiamWong Partnership

4. Facts

  1. SC Piling were the main contractors for the construction of a runway at Changi East.
  2. Samwoh was the nominated sub-contractor for runway pavement works.
  3. Samwoh furnished a performance guarantee for S$500,000 in favor of SC Piling.
  4. The runway experienced excessive water content in the sub-soil, impeding Samwoh's work.
  5. Samwoh terminated the subsidiary sub-contract due to Gim Chuan's failure to rectify the water problem.
  6. SC Piling and Samwoh negotiated a new contract, but negotiations failed.
  7. SC Piling called on the performance guarantee after negotiations failed and without making a claim for damages.

5. Formal Citations

  1. Samwoh Asphalt Premix Pte Ltd v Sum Cheong Piling Private Limited and Another, CA 600052/2001, [2001] SGCA 79

6. Timeline

DateEvent
Performance guarantee issued by ECICS in favor of SC Piling for Samwoh's account.
Runway flooded, impeding Samwoh's work.
Samwoh raised concerns about excessive water content with SC Piling and Gim Chuan.
Site discussion held regarding the wetness problem.
Samwoh terminated the subsidiary sub-contract with Gim Chuan.
SC Piling wrote to PWD Consultants regarding the water content problem.
PWD Consultants responded to SC Piling's letter.
Representatives from Samwoh and SC Piling met at SC Piling's office.
Samwoh wrote to SC Piling regarding site drainage problems.
SC Piling wrote to Samwoh requesting mobilization of a paving team.
Further meeting between Samwoh and SC Piling representatives.
Samwoh wrote to SC Piling outlining conditions for mobilization.
Samwoh mobilized a paving team to the site.
Samwoh wrote to SC Piling clarifying conditions for continued presence at the site and discontinued their work.
SC Piling made a demand on ECICS for payment under the performance guarantee.
Samwoh obtained an interim injunction restraining ECICS from paying SC Piling.
The judge allowed SC Piling's application and set aside the interim injunction.
Court of Appeal allowed the appeal.

7. Legal Issues

  1. Unconscionability
    • Outcome: The court found that SC Piling acted unconscionably in calling on the performance guarantee.
    • Category: Substantive
    • Sub-Issues:
      • Abusive call on performance guarantee
      • Bargaining chip
    • Related Cases:
      • [1995] 2 SLR 733
      • [1999] 2 SLR 368
      • [1999] 4 SLR 604
      • [2000] 1 SLR 657

8. Remedies Sought

  1. Injunctive Relief

9. Cause of Actions

  • Breach of Contract

10. Practice Areas

  • Commercial Litigation
  • Construction Law
  • Performance Bonds

11. Industries

  • Construction

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Bocotra Construction Pte Ltd and Ors v A-G (No 2)N/AYes[1995] 2 SLR 733SingaporeCited as precedent for unconscionability being a separate ground from fraud for seeking injunctive relief in performance guarantee cases.
Min Thai Holdings Pte Ltd v Sunlabel Pte Ltd & AnorN/AYes[1999] 2 SLR 368SingaporeCited as precedent for unconscionability being a separate ground from fraud for seeking injunctive relief in performance guarantee cases.
GHL Pte Ltd v Unitrack Building Construction Pte Ltd & AnorN/AYes[1999] 4 SLR 604SingaporeCited as precedent for unconscionability being a separate ground from fraud for seeking injunctive relief in performance guarantee cases.
Dauphin Offshore Engineering & Trading Pte Ltd v The Private Office of HRH Sheikh Sultan bin Khalifa bin Zayed Al NahyanN/AYes[2000] 1 SLR 657SingaporeCited as precedent for unconscionability being a separate ground from fraud for seeking injunctive relief in performance guarantee cases.
Kvaerner Singapore Pte Ltd v UDL Shipbuilding (Singapore) Pte LtdN/AYes[1993] 3 SLR 350SingaporeCited for the principle that a demand under a performance guarantee can only be made when the seller has failed or refused to fulfill his obligations under the contract.
Credit Agricole Indosuez v Banque Nationale de Paris (No 2)N/AYes[2001] 2 SLR 301SingaporeCited as authority for awarding interest.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
No applicable statutes

15. Key Terms and Keywords

15.1 Key Terms

  • Performance guarantee
  • Unconscionability
  • Interim injunction
  • Subsidiary sub-contract
  • Excessive water content
  • Bona fide claim
  • Bargaining chip

15.2 Keywords

  • performance guarantee
  • unconscionability
  • injunction
  • construction
  • contract

17. Areas of Law

Area NameRelevance Score
Unconscionability98
Performance Bond95
Contract Law90
Injunctions80
Erinford Injunction60
Construction50
Commercial Disputes40

16. Subjects

  • Contract Law
  • Construction Law
  • Performance Bonds
  • Injunctions