China Taiping Insurance v Teoh Cheng Leong: Indemnities, On-Demand Guarantees & Security Bonds

China Taiping Insurance (Singapore) Pte Ltd sued Mr. Teoh Cheng Leong in the High Court of Singapore on January 3, 2012, seeking $449,896.98 based on 47 guarantees provided to the Controller of Immigration and 47 indemnities executed by the Defendant. The claims related to expenses incurred for foreign workers employed by companies of which the Defendant was a director. The court, presided over by Chan Seng Onn J, found in favor of China Taiping Insurance, granting interlocutory judgment with damages to be assessed by the Registrar. The court held that the Defendant was liable under the indemnities for the amounts paid out by the Plaintiff under the guarantees.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Interlocutory judgment for the Plaintiff with damages to be assessed by the Registrar.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

China Taiping Insurance sought indemnity from Teoh Cheng Leong based on guarantees and indemnities related to foreign worker security bonds. The court found for the Plaintiff, holding the Defendant liable under the indemnities.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
China Taiping Insurance (Singapore) Pte Ltd (formerly known as China Insurance Co (Singapore) Pte Ltd)PlaintiffCorporationInterlocutory judgment for PlaintiffWon
Teoh Cheng LeongDefendantIndividualInterlocutory judgment against DefendantLost

3. Judges

Judge NameTitleDelivered Judgment
Chan Seng OnnJudgeYes

4. Counsels

Counsel NameOrganization
Ravi ChelliahM/s Chelliah & Kiang
Sally KiangM/s Chelliah & Kiang
Arivanantham s/o KrishnanAri, Goh & Partners

4. Facts

  1. The Plaintiff provided 47 guarantees to the Controller of Immigration at the request of the Companies and the Defendant.
  2. The Defendant executed 47 indemnities concurrently with the guarantees.
  3. The Plaintiff's claim totaled $449,896.98, comprising token wages, bond, air tickets, meals, lodging, mattress, transport, and administrative fees.
  4. The Defendant was the director of six companies in the SME group of companies.
  5. The Companies employed 182 foreign workers as work permit holders.
  6. The Companies were required to provide security bonds for these foreign workers.
  7. Instead of placing a cash security deposit, the Defendant requested the Plaintiff to provide Guarantees to the Controller.
  8. The Companies breached the conditions of the Security Bonds by failing in the upkeep and maintenance of the 182 foreign workers and by failing to repatriate them.
  9. The Plaintiff agreed to cooperate with MOM to avoid the forfeiture of the entire $910,000 in security deposits.
  10. The Plaintiff incurred a total cost of $449,896.98 through the eight heads of claims.

5. Formal Citations

  1. China Taiping Insurance (Singapore) Pte Ltd (formerly known as China Insurance Co (Singapore) Pte Ltd) v Teoh Cheng Leong, Suit No. 877 of 2009/K, [2012] SGHC 2

6. Timeline

DateEvent
Issues of liability and damages were bifurcated by an order of court.
Guarantees and Indemnities were dated between this date and 19 December 2008.
Guarantees and Indemnities were dated between 28 November 2007 and this date.
Period between February 2009 and June 2009, the Companies requested the Plaintiff’s assistance to repatriate the 182 workers.
Period between February 2009 and June 2009, the Companies requested the Plaintiff’s assistance to repatriate the 182 workers.
Email from Jeanette Har of MOM to the Plaintiff regarding agreement to pay up to a maximum of $3,000 per worker.
Defendant’s Affidavit of Evidence-in-Chief (AEIC) dated.
Trial began.
Decision Date

7. Legal Issues

  1. Obligations under Guarantees and Indemnities
    • Outcome: The court held that the Plaintiff's and Defendant's obligations under the Guarantees and Indemnities were not circumscribed by the Security Bonds.
    • Category: Substantive
    • Sub-Issues:
      • Construction of guarantee agreements
      • Nature of on-demand guarantees
      • Scope of indemnity obligations
    • Related Cases:
      • [1973] AC 331
      • [1999] 2 SLR(R) 992
      • [1978] QB 159
      • [2005] 1 WLR 2497
      • [1995] 2 SLR(R) 262
      • [1961] 1 WLR 828
      • [2007] 2 SLR(R) 756
      • [1976] 2 Lloyd’s Rep 289
  2. Breach of Security Bond Conditions
    • Outcome: The court found that the Defendant breached the conditions of the Security Bonds related to the upkeep, maintenance, and repatriation of foreign workers.
    • Category: Substantive
    • Sub-Issues:
      • Failure to maintain foreign workers
      • Failure to repatriate foreign workers
      • Non-payment of wages

8. Remedies Sought

  1. Monetary Damages

9. Cause of Actions

  • Breach of Indemnity
  • Breach of Guarantee

10. Practice Areas

  • Commercial Litigation
  • Insurance Litigation

11. Industries

  • Insurance

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Moschi v Lep Air Services LtdHouse of LordsYes[1973] AC 331United KingdomCited for the importance of contractual construction to determine the true nature of obligations within a document.
American Home Assurance Co v Hong Lam Marine Pte LtdCourt of AppealYes[1999] 2 SLR(R) 992SingaporeCited to emphasize that performance bonds are not guarantees in the true sense, but a stringent form of contract of indemnity.
Edward Owen Engineering Ltd v Barclays Bank International LtdCourt of AppealYes[1978] QB 159United KingdomCited as an archetype of a performance bond or performance guarantee.
Marubeni Hong Kong and South China Ltd v Mongolian GovernmentCourt of AppealNo[2005] 1 WLR 2497United KingdomCited for the principle that the absence of language appropriate to a performance bond creates a strong presumption against the parties’ intention to create a performance bond.
Bocotra Construction Pte Ltd and others v Attorney-generalCourt of AppealYes[1995] 2 SLR(R) 262SingaporeCited for the principle that a recital in a performance bond making reference to a separate contract does not incorporate the terms of the entire contract into the guarantee.
Yeoman Credit Ltd v LatterCourt of AppealYes[1961] 1 WLR 828United KingdomCited for the definition of a contract of indemnity as a contract by one party to keep the other harmless against loss.
S Y Technology Inc v Pacific Recreation Pte LtdHigh CourtYes[2007] 2 SLR(R) 756SingaporeCited for the distinction between a guarantee and an indemnity, particularly regarding the parties involved.
Argo Caribbean Group Ltd v LewisCourt of AppealYes[1976] 2 Lloyd’s Rep 289United KingdomCited for the distinction between a guarantee and an indemnity, particularly regarding the parties involved.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
Immigration Regulations (Cap 133, Regulation 1, 1998 Rev Ed), Regulation 21Singapore
Statute of Frauds 1677 (c 3) (UK), s 4United Kingdom
Civil Law Act (Cap 43, 1999 Rev Ed), s 6Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Guarantees
  • Indemnities
  • Security Bonds
  • Controller of Immigration
  • Ministry of Manpower
  • Foreign Workers
  • Token Wages
  • Repatriation
  • On-Demand Guarantee
  • Performance Bond

15.2 Keywords

  • guarantee
  • indemnity
  • security bond
  • foreign worker
  • immigration
  • contract
  • insurance

17. Areas of Law

Area NameRelevance Score
Guarantees and indemnities95
Guarantee90
Personal Guarantee85
Guarantor80
Insurance Bad Faith75
Bank Guarantee65
Credit and Security60
Construction of Contract40
Agency Law30
Restructuring and Insolvency20
Procedural Law15
Affidavits10
Best Efforts Clause5
General Principles5
Rules of Court 20215

16. Subjects

  • Contract Law
  • Insurance Law
  • Immigration Law
  • Guarantees
  • Indemnities