Sun Fook Kong v HDB: Novation, Bonds, and Limitation in Construction Contracts
Sun Fook Kong Construction Ltd (formerly Sung Foo Kee, Ltd) sued the Housing and Development Board (HDB) in the High Court of Singapore, disputing HDB's call on security bonds related to construction contracts. The contracts had been novated to Winhouse Construction Pte Ltd. Lai Siu Chiu J dismissed Sun Fook Kong's claim, finding that the novation was valid and that Sun Fook Kong lacked locus standi to sue on the bonds. The court also rejected Sun Fook Kong's application to add new plaintiffs and amend its pleadings.
1. Case Overview
1.1 Court
High Court1.2 Outcome
Plaintiff's claims struck out and action dismissed.
1.3 Case Type
Civil
1.4 Judgment Type
Grounds of Decision
1.5 Jurisdiction
Singapore
1.6 Description
Sun Fook Kong Construction sues HDB over bond calls after novation. The court dismisses the claim, finding no locus standi due to valid novation.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Housing and Development Board | Defendant | Statutory Board | Claims Struck Out | Won | |
| Sun Fook Kong Construction Ltd (formerly known as Sung Foo Kee, Ltd) | Plaintiff | Corporation | Claim Dismissed | Lost |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Lai Siu Chiu | Judge | Yes |
4. Counsels
| Counsel Name | Organization |
|---|---|
| Andre Maniam | Wong Partnership |
| Elly Tham | Wong Partnership |
| Oommen Mathew | Haq and Selvam |
4. Facts
- Plaintiff entered into three construction contracts with the defendant in 1991-1992.
- Plaintiff provided security bonds issued by AHA for the contracts.
- Plaintiff requested the defendant's agreement for Winhouse to take over the contracts.
- Defendant approved the assignment of rights and liabilities to Winhouse.
- SFK bonds were amended to substitute Winhouse as the contractor.
- A deed of novation was executed, making Winhouse the contracting party.
- Winhouse faced financial difficulties and was wound up.
5. Formal Citations
- Sun Fook Kong Construction Ltd (formerly known as Sung Foo Kee, Ltd) v Housing and Development Board, Suit 485/2003/Z, SIC 5356/2003, 5998/2003, [2004] SGHC 69
6. Timeline
| Date | Event |
|---|---|
| Sung Foo Kee Construction (Singapore) Pte Ltd incorporated as a wholly-owned subsidiary of the plaintiff. | |
| American Home Assurance Company issued security bond for SFK contract. | |
| American Home Assurance Company issued security bond for SFK contract. | |
| American Home Assurance Company issued security bond for SFK contract. | |
| Plaintiff requested defendant’s agreement for Winhouse to take over the SFK contracts. | |
| Winhouse furnished a security bond of $1,680,000. | |
| Winhouse substituted as the name of the “Contractor” in place of the plaintiff. | |
| Defendant gave its approval for the assignment of all rights and liabilities under the SFK contracts to Winhouse. | |
| SFK bonds were amended by AHA. | |
| Winhouse forwarded AHA’s endorsements on the SFK bonds to the defendant. | |
| Plaintiff returned the novation deed which had been duly executed by itself and Winhouse, under their respective common seals. | |
| Defendant executed the deed of novation. | |
| Winhouse was placed under judicial management. | |
| Winhouse was subsequently wound up. | |
| Hong Kong & Shanghai Bank’s appointment of a receiver and manager over the company’s assets. | |
| Defendant filed its Proof of Provisional Debt in the CWU. | |
| Defendant wrote to AHA giving notice of the termination of the SFK and the Winhouse contracts. | |
| Parent company wrote to the defendant contending that neither the parent company, nor the plaintiff nor Winhouse, could be liable on the SFK bonds. | |
| Defendant formally demanded payment of $5,214,550 from AHA on the SFK and the Winhouse bonds. | |
| AHA forwarded four cheques to the defendant totalling $5,214,550 in compliance with the defendant’s call on the four security bonds. | |
| Plaintiff commenced proceedings in Originating Summons No 6000768 of 2001 for pre-action discovery. | |
| Defendant filed a revised Proof of Debt in the CWU in the sum of $20,659,791.29. | |
| Plaintiff commenced this suit, disputing the defendant’s call on the SFK bonds for the SFK contracts and on the Winhouse bond for the Winhouse contract. | |
| Plaintiff filed its Reply. | |
| Defendant applied to court for claims to be struck out. | |
| Plaintiff applied to court to add new plaintiffs to action. | |
| Plaintiff’s application first came up for hearing before Senior Assistant Registrar Toh Han Li. | |
| Judgment delivered. |
7. Legal Issues
- Validity of Novation
- Outcome: The court held that a valid novation had occurred, transferring all rights and liabilities from the plaintiff to Winhouse.
- Category: Substantive
- Sub-Issues:
- Consent of parties
- Extinguishment of original contract
- Substitution of new contract
- Locus Standi
- Outcome: The court held that the plaintiff lacked locus standi to sue on the bonds because it was no longer a party to the underlying contracts after the novation.
- Category: Procedural
- Sub-Issues:
- Privity of contract
- Right to sue on bonds
- Interpretation of Security Bond Clauses
- Outcome: The court interpreted clause 3 of the security bonds to allow the defendant to call on the bonds for monies due under any contract with the contractor, not just contracts related to the same project.
- Category: Substantive
- Sub-Issues:
- Scope of clause 3
- Entitlement to call on bonds
- Limitation Period
- Outcome: The court held that the claims of the parent company were time-barred under the Limitation Act and that the proposed amendments to add the parent company as a plaintiff would be prejudicial to the defendant.
- Category: Procedural
- Sub-Issues:
- Accrual of cause of action
- Time bar for claims
- Amendment of pleadings
8. Remedies Sought
- Declaration that the defendant was not entitled to call for payment on the security bonds
- Refund of the sum paid under the Winhouse bond
9. Cause of Actions
- Breach of Contract
- Unjust Enrichment
10. Practice Areas
- Construction Contracts
- Commercial Litigation
11. Industries
- Construction
- Housing Development
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Chip Hua Poly-Construction Pte Ltd v Housing and Development Board | High Court | Yes | [1997] 2 SLR 797 | Singapore | Cited for the interpretation of clause 3 in security bonds, regarding the defendant's right to demand payment for monies due under any other contract. |
| Chip Hua Poly-Construction Pte Ltd v Housing and Development Board | Court of Appeal | Yes | [1998] 2 SLR 35 | Singapore | Cited for the Court of Appeal's interpretation of clause 3 in security bonds, regarding the defendant's right to demand payment to satisfy monies due from the plaintiff under the Jurong West contract or any other contract made between the plaintiff and the defendant. |
| Bocotra Construction Pte Ltd v Attorney-General (No 2) | Court of Appeal | Yes | [1995] 2 SLR 733 | Singapore | Cited to support the view that the security bond should be interpreted within its four corners without looking at the underlying contract. |
| Chan Mui Eng v Chua Chu Huwe | High Court | Yes | [1994] 1 SLR 375 | Singapore | Cited for the principle that leave to amend pleadings should not be granted if the statutory period of limitation has expired and the amendments would deprive the defendant of a defence at law. |
| Investors Compensation Scheme Ltd v West Bromwich Building Society | Unknown | Yes | [1998] 1 WLR 896 | Unknown | Cited on the interpretation of clauses in contracts, but deemed not on point. |
| The Fina Samco | Unknown | Yes | [1995] 2 Lloyd’s Rep 344 | Unknown | Cited on the interpretation of clauses in contracts, but deemed not on point. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Housing and Development Act (Cap 129, 1997 Rev Ed) | Singapore |
| s 6(1)(a) of the Limitation Act (Cap 163, 1996 Rev Ed) | Singapore |
| s 6(7) of the Limitation Act (Cap 163, 1996 Rev Ed) | Singapore |
| s 262(3) of the Companies Act (Cap 50, 1994 Rev Ed) | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Novation
- Security Bond
- Locus Standi
- Limitation Period
- Deed of Novation
- SFK Contracts
- Winhouse Contract
- Contractor
- Indemnity
- Assignment
15.2 Keywords
- novation
- security bonds
- construction contracts
- limitation act
- locus standi
- HDB
- Sun Fook Kong
- Winhouse
17. Areas of Law
| Area Name | Relevance Score |
|---|---|
| Construction Law | 90 |
| Building and Construction Contracts | 80 |
| Contract Law | 70 |
| Bonds | 70 |
| Novation | 60 |
| Civil Practice | 50 |
| Joinder | 40 |
| Amendment | 40 |
16. Subjects
- Construction Law
- Contract Law
- Civil Procedure