JBE Properties v Gammon: Interim Injunction Against Performance Bond Call Due to Unconscionability

In JBE Properties Pte Ltd v Gammon Pte Ltd, the Court of Appeal of Singapore heard an appeal by JBE Properties against the High Court's decision to grant an interim injunction restraining JBE from receiving money under a performance bond. The court dismissed JBE's appeal against the interim injunction but set aside certain ancillary orders made by the Judge. The court found that JBE's call on the bond was unconscionable, given the circumstances surrounding the rectification of defects in the construction project. The court construed the bond as a true indemnity performance bond, requiring proof of actual loss before a call could be made. The court ordered costs to be costs in the cause.

1. Case Overview

1.1 Court

Court of Appeal of the Republic of Singapore

1.2 Outcome

Appeal dismissed in part

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

The Court of Appeal dismissed JBE's appeal, upholding an interim injunction against calling on a performance bond due to unconscionability. The court found JBE's call abusive and bordering on fraudulent.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
JBE Properties Pte LtdAppellantCorporationAppeal dismissed in partLost
Gammon Pte LtdRespondentCorporationInterim Injunction upheldWon

3. Judges

Judge NameTitleDelivered Judgment
Chan Sek KeongChief JusticeYes
Andrew Phang Boon LeongJustice of the Court of AppealNo
V K RajahJustice of the Court of AppealNo

4. Counsels

Counsel NameOrganization
Edwin LeeEldan Law LLP
Chelva R RajahTan Rajah & Cheah
Dawn Noeline TanEldan Law LLP
Lim Dao KaiAllen & Gledhill LLP
Ho Chien MienAllen & Gledhill LLP

4. Facts

  1. JBE awarded the construction of a building to Gammon on 19 January 2006.
  2. JBE and Gammon entered into a building contract on 3 August 2006 for $11,515,000.
  3. Gammon procured a performance bond for $1,151,500 from BNP Paribas Singapore.
  4. JBE made a call on the bond due to alleged defects in the construction.
  5. Gammon applied for an interim injunction to restrain JBE from receiving payment under the bond.
  6. JBE appointed Weng Thai Construction to rectify cladding defects for $2,200,800.
  7. The Superintending Officer issued a completion certificate stating the works were completed save for minor outstanding works including rectification of cladding defects.

5. Formal Citations

  1. JBE Properties Pte Ltd v Gammon Pte Ltd, Civil Appeal No 63 of 2010, [2010] SGCA 46
  2. Gammon Pte Ltd v JBE Properties Pte Ltd (SCDA Architects Pte Ltd, third party), , [2010] 3 SLR 799

6. Timeline

DateEvent
Construction of the Building awarded to Gammon Pte Limited
Building Contract entered into between JBE and Gammon
Superintending Officer issued a Completion Certificate
Superintending Officer instructed Gammon to rectify specific defects in the Building
JBE solicited quotations from other contractors for the Rectification Works
JBE awarded the Rectification Works to WTC
JBE called on the Bond for the entire sum of $1,151,500
Gammon applied for an interim injunction to prevent JBE from receiving payment under the Bond
Inspection of rectification works to be carried out in the month of October 2010
Court of Appeal dismissed JBE’s appeal against the grant of the Interim Injunction, but set aside certain Ancillary Orders made by the Judge

7. Legal Issues

  1. Unconscionability
    • Outcome: The court found that JBE's call on the performance bond was unconscionable, justifying the grant of an interim injunction.
    • Category: Substantive
    • Related Cases:
      • [1995] 2 SLR(R) 262
      • [1999] 3 SLR(R) 44
  2. Nature of Performance Bond
    • Outcome: The court construed the bond as a true indemnity performance bond, requiring proof of actual loss before a call could be made.
    • Category: Substantive

8. Remedies Sought

  1. Monetary Damages
  2. Interim Injunction

9. Cause of Actions

  • Breach of Contract

10. Practice Areas

  • Commercial Litigation
  • Construction Litigation

11. Industries

  • Construction

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Gammon Pte Ltd v JBE Properties Pte Ltd (SCDA Architects Pte Ltd, third party)High CourtYes[2010] 3 SLR 799SingaporeThe decision from which this appeal arose. The High Court granted an interim injunction restraining JBE from receiving any money under a performance bond on the ground that JBE’s call on the Bond was unconscionable.
Bocotra Construction Pte Ltd and others v Attorney-GeneralCourt of AppealYes[1995] 2 SLR(R) 262SingaporeCited as establishing unconscionability as a separate and independent ground for restraining a call on a performance bond.
GHL Pte Ltd v Unitrack Building Construction Pte Ltd and anotherCourt of AppealYes[1999] 3 SLR(R) 44SingaporeCited as establishing unconscionability as a separate and independent ground for restraining a call on a performance bond.
Edward Owen Engineering Ltd v Barclays Bank International Ltd and AnotherEnglish Court of AppealYes[1978] QB 159England and WalesDiscussed in relation to the English position on restraining calls on performance bonds, which requires clear proof of fraud.
Royal Design Studio Pte Ltd v Chang Development Pte LtdHigh CourtYes[1990] 2 SLR(R) 520SingaporeFirst case to cast doubt on whether the strict test of 'clear fraud' was the only test consistent with or permitted by existing law for the purposes of restraining calls on performance bonds.
Chartered Electronics Industries Pte Ltd v Development Bank of SingaporeHigh CourtYes[1992] 2 SLR(R) 20SingaporeSuggested that clear fraud need not be shown and that a strong prima facie case of fraud would be sufficient to restrain a call on a performance bond.
IE Contractors Ltd v Lloyds Bank Plc and Rafidain BankCourt of AppealYes[1990] 2 Lloyd’s Rep 496England and WalesCited for the dictum that where the wording of a performance bond is ambiguous, the court would be entitled to interpret the performance bond as being conditioned upon facts rather than upon documents or upon a mere demand.

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 Bond
  • Interim Injunction
  • Unconscionability
  • Indemnity Performance Bond
  • On-Demand Performance Bond
  • Rectification Works
  • Cladding Defects
  • Building Contract

15.2 Keywords

  • performance bond
  • interim injunction
  • unconscionability
  • construction law
  • contract law
  • Singapore

17. Areas of Law

Area NameRelevance Score
Performance Bond90
Unconscionability75
Contract Law60
Construction Law50
Breach of Contract40
Collections30
Civil Procedure25
Injunctions20

16. Subjects

  • Construction Dispute
  • Contract Law
  • Performance Bonds
  • Injunctions