CKR Contract Services v Asplenium Land: Enforceability of Clause Restricting Performance Bond Calls Based on Unconscionability
In CKR Contract Services Pte Ltd v Asplenium Land Pte Ltd, the Singapore Court of Appeal addressed the enforceability of a clause in a construction contract that restricted the main contractor, CKR, from restraining a call on a performance bond by the developer, Asplenium, except in cases of fraud. The High Court initially found the clause unenforceable as an ouster of the court's jurisdiction but dismissed CKR's application to restrain the call on the grounds of unconscionability. The Court of Appeal allowed Asplenium's appeal, holding that the clause was enforceable and did not oust the court's jurisdiction, dismissing CKR's appeal as there was no fraud.
1. Case Overview
1.1 Court
Court of Appeal1.2 Outcome
Appeal allowed in part. Asplenium's appeal was allowed, and CKR's appeal was dismissed.
1.3 Case Type
Civil
1.4 Judgment Type
Grounds of Decision
1.5 Jurisdiction
Singapore
1.6 Description
The Singapore Court of Appeal held that a clause restricting calls on performance bonds, except in cases of fraud, was enforceable, upholding party autonomy.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| DBS Bank Ltd | Respondent | Corporation | Neutral | Neutral | |
| CKR Contract Services Pte Ltd | Appellant, Respondent | Corporation | Appeal Dismissed | Lost | |
| Asplenium Land Pte Ltd | Respondent, Appellant | Corporation | Appeal Allowed | Won |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Sundaresh Menon | Chief Justice | No |
| Chao Hick Tin | Justice of the Court of Appeal | No |
| Andrew Phang Boon Leong | Justice of the Court of Appeal | Yes |
4. Counsels
4. Facts
- CKR was the main contractor for a condominium project for Asplenium.
- The main contract contained a clause stating CKR could not restrain a call on the performance bond, except in the case of fraud.
- Asplenium purported to terminate the main contract due to disagreements over work quality and progress.
- Asplenium made a call on the performance bond for $8,806,383.80, later reduced to $7,697,687.51.
- CKR sought an injunction to restrain Asplenium from receiving payment under the performance bond.
- The main contract was based on the amended Singapore Institute of Architects Articles and Conditions of Building Contract (9th Ed, Reprint, August 2011).
5. Formal Citations
- CKR Contract Services Pte Ltd v Asplenium Land Pte Ltd and another and another appeal and another matter, Civil Appeals Nos 204 and 206 of 2014 and Summons No 197 of 2015, [2015] SGCA 24
6. Timeline
| Date | Event |
|---|---|
| Main contract commenced | |
| Architect issued termination certificates | |
| Asplenium purported to terminate the main contract | |
| Asplenium made a call on the performance bond | |
| CKR obtained an ex parte injunction | |
| Inter partes hearing before the Judge | |
| Judge dismissed CKR’s application to restrain Asplenium’s call on the performance bond | |
| CKR filed Civil Appeal No 204 of 2014 and applied for an Erinford injunction | |
| Asplenium filed its cross-appeal in Civil Appeal No 206 of 2014 | |
| Court of Appeal held that the clause was enforceable and allowed Asplenium’s appeal |
7. Legal Issues
- Enforceability of Clause Restricting Restraint of Performance Bond Call
- Outcome: The Court of Appeal held that the clause was enforceable and did not oust the jurisdiction of the court.
- Category: Substantive
- Sub-Issues:
- Ouster of court jurisdiction
- Restriction of equitable remedies
- Freedom of contract vs. public policy
- Related Cases:
- [2015] 1 SLR 987
- Unconscionability
- Outcome: The court found that the argument from unconscionability was immaterial in light of the clause restricting restraint of performance bond calls.
- Category: Substantive
8. Remedies Sought
- Injunctive Relief
9. Cause of Actions
- Breach of Contract
10. Practice Areas
- Commercial Litigation
- Arbitration
- Construction Law
- Performance Bonds
11. Industries
- Construction
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| CKR Contract Services Pte Ltd v Asplenium Land Pte Ltd and another | High Court | Yes | [2015] 1 SLR 987 | Singapore | The judgment under appeal. The Court of Appeal overturned the High Court's decision that the clause was unenforceable. |
| Scott v Avery | N/A | Yes | (1856) 5 HLC 811 | England | Cited as an example of a case where parties have agreed to exclude recourse to the court in favour of a dispute being adjudicated by a private tribunal or expert. |
| Lee v The Showmen’s Guild of Great Britain | Court of Appeal | Yes | [1952] 2 QB 329 | England | Cited as an example of a case where parties have agreed to exclude recourse to the court in favour of a dispute being adjudicated by a private tribunal or expert. |
| Leigh v National Union of Railwaymen and another | Chancery Division | Yes | [1970] Ch 326 | England | Cited as an example of a case where parties have agreed to exclude recourse to the court in favour of a dispute being adjudicated by a private tribunal or expert. |
| Hyman v Hyman | House of Lords | Yes | [1929] AC 601 | England | Cited as an example of a case where a wife covenants not to apply to court for maintenance for herself, her child, or both. |
| Bennett v Bennett | N/A | Yes | [1952] 1 KB 249 | England | Cited as an example of a case where a wife covenants not to apply to court for maintenance for herself, her child, or both. |
| AV Asia Sdn Bhd v Measat Broadcast Network Systems Sdn Bhd | Federal Court | Yes | [2014] 3 MLJ 61 | Malaysia | Discussed and distinguished. The court found material distinctions between this case and the present case. |
| Jet Print Inc v Cohen | Ontario Superior Court of Justice | Yes | [1999] OJ No 2864 | Canada | Cited in AV Asia. Parties to a contract cannot obviate or waive the usual requirements on which a court would need to be satisfied before exercising its equitable jurisdiction. |
| First Health Group Corp v National Prescription Administrators, Inc and David W Norton | Pennsylvania District Court | Yes | 155 F Supp 2d 194 (2001) | United States | Cited in AV Asia. It would represent an extraordinary variance from this basic principle for a court to recognize that the parties to a suit at equity have contracted around one of these fundamental elements. |
| Warner Brothers Pictures, Incorporated v Nelson | English High Court | Yes | [1936] 1 KB 209 | England | Cited for the principle that parties cannot contract themselves out of the law. |
| Koh Lin Yee v Terrestrial Pte Ltd and another appeal | Court of Appeal | Yes | [2015] 2 SLR 497 | Singapore | Cited for the principle that the reasonableness of a clause under the UCTA is dependent on a number of factors as well as facts. |
| Bateman Project Engineering Pty Ltd and others v Resolute Ltd and others | Western Australia Supreme Court | Yes | [2000] WASC 284 | Australia | Discussed and distinguished. The court found that in this case, Asplenium’s right to call on the performance bond is not contingent on the satisfaction of any preconditions. |
| Dobbs v National Bank of Australasia Ltd | High Court | Yes | (1935) 53 CLR 643 | Australia | Cited in Bateman. Clause 6.2(b)(iii) did was to “take from a party to whom a right actually accrues ... his power of invoking the jurisdiction of the courts to enforce it” |
| GHL Pte Ltd v Unitrack Building Construction Pte Ltd and another | Court of Appeal | Yes | [1999] 3 SLR(R) 44 | Singapore | Cited for the recognition that a performance bond could be used as an “oppressive instrument”. |
| JBE Properties Pte Ltd v Gammon Pte Ltd | Court of Appeal | Yes | [2011] 2 SLR 47 | Singapore | Cited for the recognition that a performance bond may cause “undue hardship” or “unwarranted economic harm to the obligor”. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Unfair Contract Terms Act | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Performance bond
- Unconscionability
- Ouster clause
- Injunction
- Main contract
- Termination
- Fraud
- Party autonomy
- Equitable remedy
15.2 Keywords
- Performance bond
- Unconscionability
- Construction contract
- Injunction
- Singapore
- Contract law
17. Areas of Law
| Area Name | Relevance Score |
|---|---|
| Performance Bond | 95 |
| Unconscionability | 70 |
| Contract Law | 60 |
| Civil Litigation | 30 |
16. Subjects
- Contract Law
- Construction Law
- Performance Bonds
- Civil Procedure