Sunrise Industries v PT OKI Pulp: Performance Bond Dispute & Fraud Exception
In Sunrise Industries (India) Ltd v PT OKI Pulp & Paper Mills and Dena Bank Limited, the High Court of Singapore addressed a dispute over a performance bond. Sunrise sought injunctions to prevent PT OKI from calling on the bond issued by Dena Bank. PT OKI applied to set aside the injunctions, claiming Sunrise breached the supply contract. The court set aside the injunctions, finding Sunrise did not prove fraud or unconscionability on PT OKI's part. The court ruled in favour of PT OKI, allowing them to call on the performance bond.
1. Case Overview
1.1 Court
High Court of the Republic of Singapore1.2 Outcome
Injunctions set aside; application for fresh injunctions dismissed.
1.3 Case Type
Civil
1.4 Judgment Type
Judgment
1.5 Jurisdiction
Singapore
1.6 Description
Singapore court case involving a performance bond call. The court addressed fraud and unconscionability exceptions, ultimately ruling in favor of PT OKI.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Sunrise Industries (India) Ltd | Plaintiff | Corporation | Application for fresh injunctions dismissed | Lost | Christopher Anand Daniel, Ganga Avadiar, Eileen Yeo Yi Ling |
| PT OKI Pulp & Paper Mills | Defendant | Corporation | Injunctions set aside | Won | Sushil Nair, Darius Bragassam, Teo Wei Ling |
| Dena Bank Limited | Defendant | Corporation | Neutral | Neutral |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Tan Lee Meng | Senior Judge | Yes |
4. Counsels
| Counsel Name | Organization |
|---|---|
| Christopher Anand Daniel | Advocatus Law LLP |
| Ganga Avadiar | Advocatus Law LLP |
| Eileen Yeo Yi Ling | Advocatus Law LLP |
| Sushil Nair | Drew & Napier LLC |
| Darius Bragassam | Drew & Napier LLC |
| Teo Wei Ling | Drew & Napier LLC |
4. Facts
- Sunrise was to supply FRP-Piping to PT OKI for a pulp mill project.
- The Supply Contract required Sunrise to furnish a Bank Guarantee to PT OKI.
- PT OKI called on the Bank Guarantee on 10 October 2016.
- Sunrise sought injunctions to prevent PT OKI from calling on the Bank Guarantee.
- PT OKI claimed Sunrise breached the Supply Contract by failing to meet delivery deadlines.
- PT OKI alleged Sunrise supplied non-compliant goods and failed to deliver Special Tools.
- Sunrise argued PT OKI extended delivery deadlines and acknowledged fulfillment of obligations.
5. Formal Citations
- Sunrise Industries (India) Ltd v PT OKI Pulp & Paper Mills and another, Suit No 8 of 2017(Summons Nos 1510 of 2017 and 1940 of 2017), [2018] SGHC 145
6. Timeline
| Date | Event |
|---|---|
| Sunrise and PT OKI entered into two separate contracts. | |
| The Supply Contract was signed. | |
| The Supply Contract was amended. | |
| The Bank Guarantee was issued by the Bank. | |
| The parties amended the Supply Contract to include some further items. | |
| Original delivery deadline for the goods. | |
| Original delivery deadline for the additional goods. | |
| The L/Cs for these goods were amended. | |
| The security under the Bank Guarantee was increased to US$832,413.20. | |
| PT OKI emailed Sunrise stating they have no interest to continue business. | |
| PT OKI called on the Bank Guarantee. | |
| The Bank acknowledged PT OKI’s written demand. | |
| PT OKI’s solicitors informed Sunrise that PT OKI intended to take all necessary steps to protect its interests. | |
| Sunrise commenced proceedings in the Indian Commercial Court of Vadodora. | |
| Sunrise commenced Suit No 8 of 2017 in Singapore against PT OKI. | |
| Injunctions against PT OKI and the Bank were ordered. | |
| PT OKI entered an appearance in Sunrise’s action against it. | |
| PT OKI formally terminated both the Supply Contract and the Installation Contract. | |
| PT OKI filed its Defence and Counterclaim. | |
| PT OKI filed its written submissions. | |
| First hearing date. | |
| Second hearing date. | |
| Judgment reserved. |
7. Legal Issues
- Fraud Exception
- Outcome: The court found that Sunrise did not prove a strong prima facie case of fraud on PT OKI's part.
- Category: Substantive
- Unconscionability Exception
- Outcome: The court found that Sunrise did not prove a strong prima facie case of unconscionability on PT OKI's part.
- Category: Substantive
- Breach of Contract
- Outcome: The court found that there were genuine disputes between the parties regarding Sunrise's alleged breaches of the Supply Contract.
- Category: Substantive
8. Remedies Sought
- Injunction to restrain PT OKI from calling on the Bank Guarantee
- Declaration that the Bank Guarantee stands discharged
- Damages from PT OKI
9. Cause of Actions
- Breach of Contract
- Injunction to restrain call on bank guarantee
10. Practice Areas
- Commercial Litigation
- Banking Law
11. Industries
- Manufacturing
- Pulp and Paper
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Arab Banking Corp (BSC) v Boustead Singapore Ltd | Court of Appeal | Yes | [2016] 3 SLR 557 | Singapore | Cited for the purpose and effect of performance bonds and the grounds for setting aside a call on a performance bond. |
| JBE Properties Pte Ltd v Gammon Pte Ltd | High Court | Yes | [2011] 2 SLR 47 | Singapore | Cited for the principle that fraud should not be the sole ground for restraining the beneficiary from receiving payment under a performance bond. |
| BS Mount Sophia Pte Ltd v Join-Aim Pte Ltd | Court of Appeal | Yes | [2012] 3 SLR 352 | Singapore | Cited for the elements of unconscionability and the standard of proof required to restrain a call on a performance bond. |
| Raymond Construction Pte Ltd v Low Yang Tong and another | High Court | Yes | [1996] SGHC 136 | Singapore | Cited for the definition of unconscionability. |
| Dauphin Offshore Engineering & Trading Pte Ltd v The Private Office of HRH Sheikh Sultan bin Khalifa bin Zayed Al Nahyan | Court of Appeal | Yes | [2000] 1 SLR(R) 117 | Singapore | Cited for the broad indications of unconscionability. |
| Chartered Electronics Industries Pte Ltd v Development Bank of Singapore | High Court | Yes | [1992] 2 SLR(R) 20 | Singapore | Cited for the standard of proof required to restrain a call on a performance bond on grounds of fraud. |
| Edward Owen Engineering Ltd v Barclays Bank International Ltd | Queen's Bench | Yes | [1978] QB 159 | England and Wales | Cited to highlight the nature of contractual terms agreed upon between the parties in relation to performance guarantees. |
| Bocotra Construction Pte Ltd and others v Attorney-General | Court of Appeal | Yes | [1995] 2 SLR(R) 262 | Singapore | Cited to explain that damage to reputation is not a relevant factor in determining whether a call on a bank guarantee was made fraudulently and/or unconscionably. |
| Eltraco International Pte Ltd v CGH Development Pte Ltd | Court of Appeal | Yes | [2000] 3 SLR(R) 198 | Singapore | Cited for the principle that a call on a performance bond should not be made for an excessive amount. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| No applicable statutes | |
15. Key Terms and Keywords
15.1 Key Terms
- Performance Bond
- Bank Guarantee
- Supply Contract
- Installation Contract
- Fraud Exception
- Unconscionability Exception
- Liquidated Damages
- Special Tools
- Delivery Deadlines
- CPTA (Certificate of Performance Test Acceptance)
15.2 Keywords
- performance bond
- bank guarantee
- fraud
- unconscionability
- injunction
- contract
- singapore
- commercial dispute
16. Subjects
- Credit and Security
- Performance Bonds
- Contract Law
- Commercial Litigation
17. Areas of Law
- Credit and Security
- Performance Bond
- Contract Law
- Injunctions