Labroy Offshore v Master Marine: Injunction against Refund Guarantee Payment Dispute

Labroy Offshore Ltd ("Labroy") contracted with Master Marine AS ("MM") for the construction of a rig. Labroy provided refund guarantees from Oversea-Chinese Banking Corporation Ltd, United Overseas Bank Ltd, and DBS Bank Pte Ltd (collectively, "the Banks"). MM purported to rescind the contract and demanded payment under the guarantees. Labroy sought an injunction to restrain the Banks from paying MM. The High Court of Singapore granted Labroy's application for an injunction against MM, finding that MM was not entitled to make a New Demand under the Refund Guarantees when the Construction Contract had been rescinded. The court reserved the decision on costs.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Application for an injunction granted.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Labroy Offshore sought an injunction to prevent Master Marine from receiving payment under refund guarantees after contract rescission. The court granted the injunction.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
United Overseas Bank LtdDefendantCorporationNeutralNeutral
Oversea-Chinese Banking Corporation LtdDefendantCorporationNeutralNeutral
Master Marine ASDefendantCorporationApplication for Injunction Granted AgainstLost
Labroy Offshore LtdPlaintiffCorporationInjunction GrantedWon
DBS Bank Pte LtdDefendantCorporationNeutralNeutral

3. Judges

Judge NameTitleDelivered Judgment
Andrew AngJudgeYes

4. Counsels

Counsel NameOrganization
Lee Eng BengRajah & Tann LLP
Lynette KohRajah & Tann LLP
Chan Leng SunAng & Partners
Joanne ChiaAng & Partners
Prakash P MulaniM&A Law Corporation
Steven LimCLASIS LLC
Bhaskaran SivasamyM&A Law Corporation

4. Facts

  1. Labroy and MM entered into a construction contract for Labroy to construct a rig for MM.
  2. MM was to pay the contract price in six installments, with the first five deemed advances.
  3. Labroy provided Refund Guarantees from the Banks to guarantee the refund of MM’s advances upon certain contingencies.
  4. MM purported to rescind the Construction Contract and issued demands for payment under the Refund Guarantees to the Banks.
  5. Labroy applied for an injunction to restrain the Banks from paying MM and to enjoin MM from receiving payment.
  6. The Refund Guarantees were initially set to expire one month following the original delivery date, ie, 31 September 2010.
  7. Failure to extend the Refund Guarantees at least 14 working days before the expiry of the Refund Guarantees is itself an event of default under the Construction Contract.

5. Formal Citations

  1. Labroy Offshore Ltd v Master Marine AS and others, Originating Summons No 305 of 2011, [2011] SGHC 234

6. Timeline

DateEvent
Construction Contract signed
MM sent letters to Labroy stating that the validity period of the Refund Guarantees would have to be extended.
MM sent letters to Labroy stating that the validity period of the Refund Guarantees would have to be extended.
MM sent letters to Labroy stating that the validity period of the Refund Guarantees would have to be extended.
MM sent letters to Labroy stating that the validity period of the Refund Guarantees would have to be extended.
MM sent letters to Labroy stating that the validity period of the Refund Guarantees would have to be extended.
Labroy applied for extensions of the validity period of the Refund Guarantees from 30 April to 31 May 2011.
MM sent letters to Labroy stating that the validity period of the Refund Guarantees would have to be extended.
The Banks extended the Refund Guarantees to 31 May 2011.
MM wrote to Labroy enquiring why Labroy had not sent MM new replacement guarantees.
MM sent Labroy a Notice of Rescission, purporting to rescind the contract.
MM served letters of demand to the Banks, seeking payment under the Refund Guarantees.
Labroy responded to the Notice of Rescission by e-mail asserting that the Refund Guarantees had been validly extended.
MM acknowledged receipt of Labroy’s 12 April 2011 e-mail and stated that without prejudice to the service of the Notice of Rescission, the guarantee extensions furnished on 12 April 2011 did not comply with the Construction Contract.
Judgment issued

7. Legal Issues

  1. Validity of New Demand under Refund Guarantees
    • Outcome: The court held that Master Marine was not entitled to make a New Demand under the Refund Guarantees when the Construction Contract had been rescinded.
    • Category: Substantive
  2. Interpretation of Refund Guarantees
    • Outcome: The court interpreted the refund guarantees to determine the conditions under which a demand for payment could be made.
    • Category: Substantive

8. Remedies Sought

  1. Injunctive Relief

9. Cause of Actions

  • Breach of Contract
  • Injunction

10. Practice Areas

  • Commercial Litigation
  • Construction Disputes
  • Banking
  • Arbitration

11. Industries

  • Construction
  • Offshore Oil and Gas

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Dauphin Offshore Engineering & Trading Pte Ltd v The Private Office of HRH Sheikh Sultan bin Khalifa bin Zayed Al NahyanN/AYes[2000] 1 SLR(R) 117SingaporeCited regarding the principle that it would be unconscionable to deprive an innocent party of its contractual rights merely because the party in breach failed to exercise its own diligence in ensuring compliance.
Astrata (Singapore) Pte Ltd v Tridex Technologies Pte LtdN/AYes[2011] 1 SLR 449SingaporeCited regarding the principle of unconscionability.
Shanghai Electric Group Co Ltd v PT Merak Energi IndonesiaN/AYes[2010] 2 SLR 329SingaporeCited regarding the principle that it would be unconscionable to deprive an innocent party of its contractual rights merely because the party in breach failed to exercise its own diligence in ensuring compliance.
Eltraco International Pte Ltd v CGH Development Pte LtdN/AYes[2000] 3 SLR(R) 198SingaporeCited regarding the principle that it would be unconscionable to deprive an innocent party of its contractual rights merely because the party in breach failed to exercise its own diligence in ensuring compliance.
Union Eagle Ltd v Golden Achievement LtdN/AYes[1997] AC 514N/ACited to argue that Labroy’s late payment ought not be excused and the cause of Labroy’s lateness was irrelevant since deliberate non-performance or negligence is not a requirement for contractual default.
The LaconiaN/AYes[1977] 1 Lloyd’s Rep 315N/ACited to urge the court to prioritise “certainty ... in all commercial transactions” and not “[torture] the language of the charter in an effort to extract from it a meaning which it does not bear, but might, if it did, lead to a less harsh result”.
JBE Properties v Gammon Pte LtdN/AYes[2011] 2 SLR 47SingaporeCited regarding the principle of unconscionability.

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

  • Refund Guarantee
  • Construction Contract
  • New Demand
  • Initial Demand
  • Rescission
  • Replacement Guarantees
  • Extension of Guarantee
  • Milestones
  • Advances

15.2 Keywords

  • refund guarantee
  • construction contract
  • injunction
  • rescission
  • offshore rig
  • banking
  • arbitration

17. Areas of Law

Area NameRelevance Score
Construction Contract80
Breach of Contract75
Refund Guarantees75
Contract Law70
Injunctions65
New Demand60
Guarantee60
Guarantees and indemnities55
Initial Demand55
Deferred Demand50
Submission to Jurisdiction40

16. Subjects

  • Construction Dispute
  • Contract Law
  • Banking Law
  • Injunctions