Ryobi Tactics v UES Holdings: Unconscionable Call on Performance Bonds in Construction Subcontracts
In Ryobi Tactics Pte Ltd v UES Holdings Pte Ltd and AXA Insurance Pte Ltd, and Ryobi Tactics Pte Ltd v UES Holdings Pte Ltd and Tokio Marine Insurance Singapore Ltd, the High Court of Singapore heard applications by Ryobi Tactics for injunctions to restrain UES Holdings from calling on performance bonds issued by AXA Insurance and Tokio Marine Insurance. The court, presided over by Kannan Ramesh J, allowed the applications in part, restraining the calls on performance bonds related to the Changi and Jurong projects but not the Chestnut project, finding the calls to be unconscionable and based on a misinterpretation of contract terms. UES Holdings' appeals were filed against this outcome.
1. Case Overview
1.1 Court
High Court of Singapore1.2 Outcome
Plaintiff's applications for injunctions allowed in part.
1.3 Case Type
Civil
1.4 Judgment Type
Grounds of Decision
1.5 Jurisdiction
Singapore
1.6 Description
Singapore court restrains UES Holdings from calling on performance bonds for Changi and Jurong projects due to unconscionability and misinterpretation of contract terms.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| AXA Insurance Pte Ltd | Defendant | Corporation | Neutral | Neutral | |
| Ryobi Tactics Pte Ltd | Plaintiff | Corporation | Injunction granted in part | Partial | |
| UES Holdings Pte Ltd | Defendant | Corporation | Applications for injunctions allowed in part | Partial | |
| Tokio Marine Insurance Singapore Ltd | Defendant | Corporation | Neutral | Neutral |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Kannan Ramesh | Judge | Yes |
4. Counsels
4. Facts
- Ryobi Tactics was engaged by UES Holdings as a subcontractor for three construction projects.
- Four subcontracts were entered into between Ryobi Tactics and UES Holdings.
- Ryobi Tactics was required to furnish UES Holdings with performance bonds in lieu of a cash deposit.
- UES Holdings called on the four performance bonds for the full value of the bonds.
- The calls on the performance bonds were in relation to losses that UES Holdings had suffered on the Chestnut project.
- The performance bonds were each issued in respect of a particular project and a particular subcontract entered into for that project.
5. Formal Citations
- Ryobi Tactics Pte Ltd v UES Holdings Pte Ltd and another and another matter, Originating Summons No 726 and 727 of 2018, [2019] SGHC 11
6. Timeline
| Date | Event |
|---|---|
| First defendant called on the four performance bonds. | |
| Plaintiff's works in relation to the Jurong project completed. | |
| Hearing date. | |
| Judgment date. |
7. Legal Issues
- Unconscionability
- Outcome: The court found that the calls on the performance bonds for the Changi and Jurong projects were unconscionable.
- Category: Substantive
- Related Cases:
- [2012] 3 SLR 352
- [1999] 3 SLR(R) 144
- Interpretation of Performance Bonds
- Outcome: The court held that the performance bonds related to specific subcontracts and did not extend to losses under other subcontracts.
- Category: Substantive
- Related Cases:
- [1998] 1 SLR(R) 544
- [2009] 3 SLR(R) 1063
- [2012] 3 SLR 125
- Right of Set-off
- Outcome: The court held that the right of set-off in the subcontracts did not allow the first defendant to call on all four performance bonds to set off its perceived losses under the Chestnut project.
- Category: Substantive
8. Remedies Sought
- Injunctive Relief
9. Cause of Actions
- Breach of Contract
- Unconscionable Conduct
10. Practice Areas
- Construction Law
- Commercial Litigation
- Performance Bonds
11. Industries
- Construction
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Chip Hua Poly-Construction Pte Ltd v Housing and Development Board | Court of Appeal | Yes | [1998] 1 SLR(R) 544 | Singapore | Cited to support the argument that performance bonds must be construed within their four corners and cannot extend to other subcontracts. |
| BS Mount Sophia Pte Ltd v Join-Am Pte Ltd | Court of Appeal | Yes | [2012] 3 SLR 352 | Singapore | Established guiding principles on what might justify a finding of unconscionability in calling on a performance bond. |
| Eltraco International Pte Ltd v CGH Development Pte Ltd | N/A | Yes | [2000] 3 SLR(R) 198 | Singapore | Cited for the principle that the existence of genuine disputes between the parties is not sufficient to constitute unconscionability. |
| LQS Construction Pte Ltd v Mencast Marine Pte Ltd and another | N/A | Yes | [2018] 3 SLR 404 | Singapore | Cited for the principle that the existence of genuine disputes between the parties is not sufficient to constitute unconscionability. |
| Pender Development Pte Ltd v Chesney Real Estate Group LLP and another and another suit | N/A | Yes | [2009] 3 SLR(R) 1063 | Singapore | Cited to support the principle that strict compliance with the conditions stipulated in a performance bond is necessary to trigger the financial institution’s obligation to pay. |
| Master Marine AS v Labroy Offshore Ltd and others | N/A | Yes | [2012] 3 SLR 125 | Singapore | Cited to support the principle that the court should be restrained in its examination of the external context and extrinsic evidence when construing a first demand performance bond. |
| China Resources (S) Pte Ltd v Magenta Resources (S) Pte Ltd | N/A | Yes | [1997] 1 SLR(R) 103 | Singapore | Cited to support the principle that strict compliance with the conditions stipulated in a performance bond is necessary to trigger the financial institution’s obligation to pay. |
| Edward Owen Engineering v Barclays Bank International | N/A | Yes | [1978] QB 159 | N/A | Cited to support the principle that an issuer of a performance bond must honor the bond according to its terms and is not concerned with the parties’ underlying contract. |
| Kvaerner Singapore Ltd v UDL Shipbuilding (Singapore) Pte Ltd | N/A | Yes | [1993] 2 SLR(R) 341 | Singapore | Cited for the proposition that a party could be restrained from calling on a performance bond where he had avoided the underlying contract. |
| Dauphin Offshore Engineering & Trading Pte Ltd v The Private Office of HRH Sheikh Sultan bin Khalifa bin Zayed Al Nahyan | N/A | Yes | [2000] 1 SLR(R) 117 | Singapore | Cited as standing for the proposition that it would be unconscionable to allow a beneficiary to make a call based on a breach of an underlying contract induced by their own default. |
| Tactic Engineering Pte Ltd (in liquidation) v Sato Kogyo (S) Pte Ltd | High Court | Yes | [2017] SGHC 103 | Singapore | Distinguished from the present case because the performance bond in that case was issued specifically in consideration for the beneficiary releasing retention sums back to the contractor. |
| GHL Pte Ltd v Unitrack Building Construction Pte Ltd and another | Court of Appeal | Yes | [1999] 3 SLR(R) 144 | Singapore | Cited to support the argument that a performance bond can operate as an oppressive instrument, and in the event that a beneficiary calls on the bond in circumstances where there is prima facie evidence of fraud or unconscionability, the court should step in to intervene. |
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
- Subcontract
- Unconscionability
- On-demand bond
- Set-off
- Construction project
- Injunction
15.2 Keywords
- performance bond
- construction
- unconscionability
- injunction
- Singapore
17. Areas of Law
| Area Name | Relevance Score |
|---|---|
| Performance Bond | 90 |
| Building and Construction Contracts | 80 |
| Construction Law | 75 |
| Contract Law | 65 |
| Credit and Security | 50 |
| Injunctions | 40 |
| Banking and Finance | 30 |
16. Subjects
- Building and Construction
- Contract Law
- Performance Bonds
- Injunctions