Milan International v Cluny Development: Performance Bond & Building Contract Dispute

In Milan International Pte Ltd v Cluny Development Pte Ltd and Etiqa Insurance Pte Ltd, the High Court of Singapore addressed Milan's application to restrain Cluny from receiving funds from Etiqa under a performance guarantee. The dispute arose from a building contract where Cluny engaged Milan to construct strata detached houses. Cluny terminated Milan's employment due to delays in obtaining permits and Milan's failure to renew its General Builder Class 1 Licence. Milan sought an injunction, alleging fraud and unconscionability in Cluny's call on the performance guarantee. The High Court dismissed Milan's applications, finding no strong prima facie case of fraud or unconscionability on Cluny's part.

1. Case Overview

1.1 Court

High Court of the Republic of Singapore

1.2 Outcome

Applications dismissed

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Milan sought to restrain Cluny from calling on a performance bond. The court dismissed the application, finding no fraud or unconscionability.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Etiqa Insurance Pte LtdRespondentCorporationNeutralNeutral
Milan International Pte LtdApplicantCorporationApplications dismissedLost
Cluny Development Pte LtdRespondentCorporationApplications dismissedWon

3. Judges

Judge NameTitleDelivered Judgment
Hoo Sheau PengJudgeYes

4. Counsels

Counsel NameOrganization
Poonaam Bai d/o Ramakrishnan GnanasekaranEldan Law LLP
Lawrence Tan Shien LoonEldan Law LLP
Ho Shao HsienEldan Law LLP
Raymond ChanChan Neo LLP
Soh Wan Cheng DeniseChan Neo LLP

4. Facts

  1. Cluny engaged Milan to build six units of strata detached houses.
  2. The project was to be completed by 19 May 2018.
  3. Milan's General Builder Class 1 Licence expired on 8 October 2016.
  4. Cluny terminated Milan’s employment on 22 February 2017.
  5. Cluny made a demand on a performance guarantee furnished by Etiqa Insurance.
  6. Milan applied for an injunction to restrain Cluny from receiving the sum of $991,883.60 from Etiqa.

5. Formal Citations

  1. Milan International Pte Ltd v Cluny Development Pte Ltd and another, Originating Summons No 631 of 2017 and Summons No 2625 of 2017, [2018] SGHC 33

6. Timeline

DateEvent
Cluny obtained written permission from the Urban Redevelopment Authority for the proposed development.
The Building and Construction Authority approved Cluny’s building plans.
Cluny engaged Milan as its main contractor for the Project.
Liu & Wo Architects Pte Ltd ceased employment as Cluny’s architect.
Milan’s General Builder Class 1 Licence expired.
AGA Architects Pte Ltd replaced Liu & Wo Architects Pte Ltd as the Architect.
Milan submitted the performance guarantee to Cluny.
The Architect issued a Termination Certificate to Milan.
Cluny gave Milan a Notice of Termination.
Cluny engaged BHD Construction Pte Ltd to complete Milan’s outstanding work.
Cluny issued a written call on the performance guarantee to Etiqa.
Milan commenced applications to dispute Cluny’s right to make a demand on the performance guarantee.
The court dismissed Milan's applications.
Judgment was delivered.

7. Legal Issues

  1. Unconscionability
    • Outcome: The court found that Milan failed to establish a strong prima facie case of unconscionability on Cluny’s part.
    • Category: Substantive
    • Related Cases:
      • [2012] 3 SLR 352
      • [1996] SGHC 136
      • [2011] 2 SLR 47
  2. Fraud
    • Outcome: The court found that Milan failed to establish a strong prima facie case of fraud on Cluny’s part.
    • Category: Substantive
    • Related Cases:
      • [2012] 3 SLR 352
  3. Breach of Contract
    • Outcome: The court considered whether Cluny had grounds to terminate the contract with Milan due to alleged breaches.
    • Category: Substantive

8. Remedies Sought

  1. Injunction to restrain Cluny from receiving funds from Etiqa under the performance guarantee

9. Cause of Actions

  • Breach of Contract
  • Injunction to restrain call on performance bond

10. Practice Areas

  • Construction Law
  • Commercial Litigation
  • Arbitration

11. Industries

  • Construction
  • Insurance

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
BS Mount Sophia Pte Ltd v Join-Aim Pte LtdHigh CourtYes[2012] 3 SLR 352SingaporeCited for the legal principles regarding injunctions to restrain calls on performance bonds, specifically the requirement to establish a strong prima facie case of fraud or unconscionability.
Raymond Construction Pte Ltd v Low Yang TongHigh CourtYes[1996] SGHC 136SingaporeCited for the definition of unconscionability as conduct that is reprehensible or lacking in good faith, such that a court of conscience would restrain the party or refuse to assist the party.
JBE Properties Pte Ltd v Gammon Pte LtdHigh CourtYes[2011] 2 SLR 47SingaporeCited for the principle that a performance bond is merely security for the secondary obligation of the obligor to pay damages if the obligor breaches its primary contractual obligations to the beneficiary.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
Building Control Act (Cap 29, 1999 Rev Ed)Singapore
Building Control Regulations 2003 (GN No S666/2003)Singapore
Rapid Transit Systems (Railway Protection, Restricted Activities) Regulations (Cap 263A, Reg 3, 1997 Rev Ed)Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Performance bond
  • Building contract
  • Termination
  • Injunction
  • Unconscionability
  • Fraud
  • General Builder Class 1 Licence
  • Permit to Commence Work
  • Earth Retaining or Stabilising Structures
  • Mobilisation period

15.2 Keywords

  • performance bond
  • building contract
  • injunction
  • construction law
  • singapore

17. Areas of Law

Area NameRelevance Score
Performance Bond90
Credit and Security80
Building and Construction Contracts80
Construction Law75
Guarantee70
Contract Law60
Banking and Finance50
Civil Procedure40
Arbitration30

16. Subjects

  • Building and Construction Law
  • Contract Law
  • Performance Bonds
  • Civil Procedure
  • Injunctions