Soon Li Heng v Samsung C&T: Unconscionability in Performance Bond Call for Alleged Overpayment in Construction Subcontract Dispute

In Soon Li Heng Civil Engineering Pte Ltd v Samsung C&T Corporation and United Overseas Bank Limited, the Singapore High Court considered an application by Soon Li Heng Civil Engineering Pte Ltd to restrain Samsung C&T Corporation's call on a performance bond provided by United Overseas Bank Limited. The plaintiff sought to restrain the call on the performance bond on the ground that the call was unconscionable. The court granted the injunction, finding that Samsung C&T's call on the bond was unconscionable as it was an attempt to overturn a prior adjudication determination and was inconsistent with the terms of the subcontract.

1. Case Overview

1.1 Court

High Court of the Republic of Singapore

1.2 Outcome

Prayers (1) to (3) of Originating Summons 439 of 2019 granted; the call on the performance bond was unconscionable and ought to be restrained.

1.3 Case Type

Civil

1.4 Judgment Type

Judgment

1.5 Jurisdiction

Singapore

1.6 Description

Singapore High Court restrains Samsung C&T's call on performance bond due to unconscionability. The call was an attempt to overturn prior adjudication.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
United Overseas Bank LimitedDefendantCorporationNeutralNeutral
Samsung C&T CorporationDefendantCorporationInjunction Granted AgainstLost
Soon Li Heng Civil Engineering Pte LtdPlaintiffCorporationInjunction GrantedWon

3. Judges

Judge NameTitleDelivered Judgment
Ang Cheng HockJudgeYes

4. Counsels

Counsel NameOrganization
Lee Peng Khoon EdwinEldan Law LLP
Er Hwee Lee Danna DollyEldan Law LLP
Poon Guokun NicholasBreakpoint LLC

4. Facts

  1. Soon Li Heng was a subcontractor for Samsung C&T for excavation and disposal works.
  2. A performance bond was furnished by United Overseas Bank as security for Soon Li Heng's performance.
  3. Disputes arose over Payment Claim 20, leading to adjudication proceedings where Samsung C&T was ordered to pay Soon Li Heng S$2,473,295.20.
  4. Samsung C&T later issued a further notice of dispute, alleging overpayment and fraudulent claims by Soon Li Heng.
  5. Samsung C&T called on the performance bond for the full amount of S$826,713.53, claiming Soon Li Heng had over-claimed.
  6. Soon Li Heng sought an injunction to restrain Samsung C&T's call on the bond, arguing it was unconscionable.
  7. Samsung C&T claimed the overpayment was discovered after reviewing emails sent by Soon Li Heng to the Land Transport Authority.

5. Formal Citations

  1. Soon Li Heng Civil Engineering Pte Ltd v Samsung C&T Corp and another, Originating Summons No 439 of 2019, [2019] SGHC 267

6. Timeline

DateEvent
Re-Measurement Sub-Contract entered into between Soon Li Heng Civil Engineering Pte Ltd and Samsung C&T Corporation.
Soon Li Heng Civil Engineering Pte Ltd served Payment Claim No. 20 on Samsung C&T Corporation.
Adjudication determination 1AD issued.
Samsung C&T Corporation issued a “Notice of Dispute” to Soon Li Heng Civil Engineering Pte Ltd.
Samsung C&T Corporation informed Soon Li Heng Civil Engineering Pte Ltd that it was terminating the Subcontract.
The adjudicated sum under 1AD was paid by Samsung C&T Corporation to Soon Li Heng Civil Engineering Pte Ltd.
Soon Li Heng Civil Engineering Pte Ltd served on Samsung C&T Corporation its Payment Claim No 24.
Samsung C&T Corporation wrote to Soon Li Heng Civil Engineering Pte Ltd regarding discrepancies in disposal quantities.
Samsung C&T Corporation wrote to Soon Li Heng Civil Engineering Pte Ltd to request for clarification relating to “hardcore disposal”.
Soon Li Heng Civil Engineering Pte Ltd replied to Samsung C&T Corporation regarding the method of measurement.
Soon Li Heng Civil Engineering Pte Ltd served Payment Claim No 25 on Samsung C&T Corporation.
Samsung C&T Corporation replied to assert that it was entitled to “challenge in arbitration” the reasoning which the adjudicator in SOP 372/2018 had adopted.
Soon Li Heng Civil Engineering Pte Ltd stated that it had explained itself in the previous correspondence.
Soon Li Heng Civil Engineering Pte Ltd pointed out that Samsung C&T Corporation was not adhering to the methods of measuring quantities that were set out in the Subcontract.
Samsung C&T Corporation stated that it was relying on Soon Li Heng Civil Engineering Pte Ltd’s own data.
Samsung C&T Corporation sent Soon Li Heng Civil Engineering Pte Ltd the “further notice of dispute”.
The matter was referred to adjudication (“SOP 98/2019”).
Samsung C&T Corporation called on the PB for its full amount of S$826,713.53.
Soon Li Heng Civil Engineering Pte Ltd filed the present originating summons, seeking an injunction to restrain Samsung C&T Corporation’s call on the bond.
Hearing date.
Adjudicator’s determination in SOP 98/2019 issued.
Hearing date.
Hearing date.
Judgment reserved.

7. Legal Issues

  1. Unconscionability
    • Outcome: The court found that the call on the performance bond was unconscionable.
    • Category: Substantive
    • Sub-Issues:
      • Improper purpose
      • Undermining temporary finality of adjudication determination
      • Inconsistent with contract terms
  2. Temporary Finality of Adjudication Determinations
    • Outcome: The court held that the call on the performance bond undermined the temporary finality of the adjudication determination.
    • Category: Substantive
  3. Interpretation of Contractual Terms
    • Outcome: The court interpreted the term 'amount due under the Subcontract' narrowly, finding that it did not include alleged overpayments.
    • Category: Substantive

8. Remedies Sought

  1. Injunctive Relief

9. Cause of Actions

  • Breach of Contract
  • Restitution

10. Practice Areas

  • Commercial Litigation
  • Construction Disputes
  • Performance Bonds
  • Arbitration

11. Industries

  • Construction

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
BS Mount Sophia Pte Ltd v Join-Aim Pte LtdSingapore Court of AppealYes[2012] 3 SLR 352SingaporeCited for the principle that unconscionability is a ground to restrain a beneficiary of a performance bond from calling on it.
JBE Properties Pte Ltd v Gammon Pte LtdSingapore Court of AppealYes[2011] 2 SLR 47SingaporeCited for the principle that unconscionability is a ground to restrain a beneficiary of a performance bond from calling on it.
Eltraco International Pte Ltd v CGH Development Pte LtdSingapore Court of AppealYes[2000] 3 SLR(R) 198SingaporeCited for the principle that in determining whether a call on a bond is unconscionable, the entire picture must be viewed, taking into account all the relevant factors.
W Y Steel Construction Pte Ltd v Osko Pte LtdSingapore Court of AppealYes[2013] 3 SLR 380SingaporeCited for the principle that under s 21 of the SOPA, an adjudication determination binds the parties until leave to enforce the determination is refused, the dispute is settled, or until a final resolution of the parties’ dispute.
AM Construction Technology Pte Ltd v South Island LG Pte Ltd and Liberty Insurance Pte LtdSingapore District CourtYes[2015] SGDC 181SingaporeDiscussed in relation to whether a call on a bond is unconscionable when made shortly after an adjudication determination.
AES Façade Pte Ltd v Wyse Pte Ltd and anotherSingapore High CourtYes[2018] SGHC 163SingaporeDiscussed in relation to whether a call on a bond is an unfair attempt to claw back monies paid out following an adjudication determination.
Patterson Building Group Pty Ltd v Holroyd City CouncilNew South Wales Supreme CourtYes[2013] NSWSC 1484AustraliaDiscussed in relation to whether an employer is entitled to have recourse to security to recover amounts paid pursuant to an adjudicator’s determination.
John Holland Pty Ltd v Roads and Traffic Authority of New South WalesNew South Wales Court of AppealYes[2007] NSWCA 140AustraliaCited for the principle that an adjudication determination in New South Wales is a simple means of obtaining prompt interim progress payment.
Min Thai Holdings Pte Ltd v Sunlabel Pte LtdSingapore High CourtYes[1998] 3 SLR(R) 961SingaporeCited as an example of when it would be unconscionable to call on a performance bond or guarantee.
Dauphin Offshore Engineering & Trading Pte Ltd v The Private Office of HRH Sheikh Sultan bin Khalifa bin Zayed Al NahyanSingapore Court of AppealYes[2000] 1 SLR(R) 117SingaporeRecognized the decision in Min Thai Holdings Pte Ltd v Sunlabel Pte Ltd as an example when it would be unconscionable to call on a performance bond or guarantee.
Ryobi Tactics Pte Ltd v UES Holdings Pte Ltd and another and another matterSingapore High CourtYes[2019] 4 SLR 1324SingaporeCited for the principle that calls on performance bonds ought to be restrained if they go beyond the terms of the underlying subcontracts.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed)Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Performance Bond
  • Unconscionability
  • Adjudication Determination
  • Overpayment
  • Subcontract
  • Payment Claim
  • Payment Response
  • Temporary Finality
  • Fraudulent Over-Claim
  • Hardcore Disposal
  • Final Quantity Disposal

15.2 Keywords

  • performance bond
  • unconscionability
  • construction
  • Singapore
  • adjudication
  • SOPA
  • injunction

17. Areas of Law

Area NameRelevance Score
Unconscionability95
Performance Bond90
Contract Law70
Civil Procedure40
Banking and Finance30

16. Subjects

  • Construction Dispute
  • Contract Law
  • Performance Bonds
  • Injunctions
  • Arbitration