Sulzer Pumps Spain v Hyflux: Unconscionability & Performance Bond Call Injunction

Sulzer Pumps Spain, S.A. applied to the High Court of Singapore to discharge an ex parte injunction obtained against Hyflux Membrane Manufacturing (S) Pte Ltd, preventing Hyflux from calling on a performance bond issued by Deutsche Bank AG. The bond guaranteed Sulzer's contractual obligations to Hyflux for supplying and installing pumps for a desalination plant project in Oman. Hyflux called on the bond due to alleged design flaws in the pumps. Justice Aedit Abdullah discharged the injunction, finding that Sulzer failed to demonstrate a strong prima facie case of unconscionability and had failed to make full and frank disclosure at the ex parte hearing.

1. Case Overview

1.1 Court

High Court of the Republic of Singapore

1.2 Outcome

Injunction discharged

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Sulzer Pumps sought to discharge an injunction preventing Hyflux from calling on a performance bond. The court discharged the injunction due to a failure to prove unconscionability.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Sulzer Pumps Spain, SAApplicantCorporationInjunction dischargedLost
Hyflux Membrane Manufacturing (S) Pte LtdRespondentCorporationInjunction dischargedWon
Deutsche Bank AGRespondentCorporationNeutralNeutral

3. Judges

Judge NameTitleDelivered Judgment
Aedit AbdullahJudgeYes

4. Counsels

Counsel NameOrganization
Anparasan s/o KamachiWhiteFern LLC
Sumyutha SivamaniWhiteFern LLC
Sandosham Paul RabindranathCavenagh Law LLP
Joan Peiyun Lim-CasanovaCavenagh Law LLP

4. Facts

  1. Sulzer Pumps Spain, S.A. was contracted to supply and install pumps.
  2. The pumps repeatedly failed between November 2017 and May 2019.
  3. Hyflux called on the bond in October 2019.
  4. Sulzer sought an injunction to prevent Hyflux from calling on the bond.
  5. The bond was an unconditional first demand bank guarantee.
  6. Hyflux is undergoing restructuring proceedings.
  7. The contract contained an arbitration agreement.

5. Formal Citations

  1. Sulzer Pumps Spain, SA v Hyflux Membrane Manufacturing (S) Pte Ltd and another, Originating Summons No 1323 of 2019, [2020] SGHC 122

6. Timeline

DateEvent
Two purchase orders issued to Sulzer Pumps Spain, S.A.
Guarantee obtained from Deutsche Bank AG in favour of Hyflux Membrane Manufacturing (S) Pte Ltd
Difficulties encountered with the pumps
Design flaws rectified by Sulzer Pumps Spain, S.A.
Hyflux Membrane Manufacturing (S) Pte Ltd called on the bond
Ex parte application for an injunction heard and granted
Inter partes hearing held
Judgment reserved

7. Legal Issues

  1. Unconscionability
    • Outcome: The court found that the applicant failed to prove a strong prima facie case of unconscionability.
    • Category: Substantive
    • Related Cases:
      • [2012] 3 SLR 352
      • [2000] 3 SLR(R) 198
  2. Full and Frank Disclosure
    • Outcome: The court found that the applicant failed to make full and frank disclosure at the ex parte hearing.
    • Category: Procedural
    • Related Cases:
      • [2000] 1 SLR(R) 786
  3. Jurisdiction to Award Injunction
    • Outcome: The court held that it had the power to grant a freestanding injunction to prevent injustice, even if there were no underlying substantive proceedings.
    • Category: Jurisdictional

8. Remedies Sought

  1. Injunction to restrain call on performance bond

9. Cause of Actions

  • Breach of Warranty

10. Practice Areas

  • Commercial Litigation
  • Injunctions
  • Arbitration

11. Industries

  • Construction

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Tay Long Kee Impex Pte Ltd v Tan Beng Huwah (trading as Sin Kwang Wah)High CourtYes[2000] 1 SLR(R) 786SingaporeCited for the principle that suppression of material information should lead to discharge of an injunction and the duty to make full and frank disclosure of all material facts to the court at the ex parte hearing.
Eltraco International Pte Ltd v CGH Development Pte LtdHigh CourtYes[2000] 3 SLR(R) 198SingaporeCited for the principle that courts should be slow to interfere with contractual arrangements freely entered into by the parties and that calling on the bond where there is a genuine dispute between the parties does not meet the unconscionability threshold.
BS Mount Sophia Pte Ltd v Join-Aim Pte LtdHigh CourtYes[2012] 3 SLR 352SingaporeCited for the principle that the applicant must show a strong prima facie case of unconscionability and the entire context of the case must be particularly malodorous to prevent the calling on an unconditional first demand bond.
Bintai Kindenko Pte Ltd v Samsung C&T Corp and anotherHigh CourtYes[2019] 2 SLR 295SingaporeCited for the principle that courts would only intervene to prevent a beneficiary from calling on a performance guarantee if it could be shown that the call was either fraudulent or unconscionable.
JBE Properties Pte Ltd v Gammon Pte LtdHigh CourtYes[2011] 2 SLR 47SingaporeCited to argue that a less stringent standard should be adopted for determining when a call on a performance bond can be restrained, as compared to a letter of credit.
Arab Banking Corp (B.S.C.) v Boustead Singapore LtdHigh CourtYes[2016] 3 SLR 557SingaporeCited for the principle that under the unconscionability exception, an injunction should be granted if it would be unfair for the beneficiary to realise his security pending the resolution of the substantive dispute.
CEX v CEY and anotherHigh CourtYes[2020] SGHC 100SingaporeCited for examples of when unconscionability has manifested in the context of performance bond calls.
Raymond Construction Pte Ltd v Low Yang Tong and AnotherHigh CourtYes[1996] SGHC 136SingaporeCited for the principle that unconscionability involves conduct of a kind so reprehensible or lacking in good faith that a court of conscience would restrain the party.
Soon Li Heng Civil Engineering Pte Ltd v Samsung C&T Corp and anotherHigh CourtYes[2019] SGHC 267SingaporeCited as an example where the court found that the beneficiary’s call on the bond was for the purposes of fulfilling claims which had already been rejected by an adjudicator, which would have the effect of undermining the temporary finality of the adjudication determination.
Ryobi Tactics Pte Ltd v UES Holdings Pte Ltd and another and another matterHigh CourtYes[2019] 4 SLR 1324SingaporeCited as an example where the beneficiary sought to call on the bond to cover losses under other contracts, even though he did not have reason to believe that the corresponding underlying contract of the bond had been breached.
GHL Pte Ltd v Unitrack Building Construction Pte LtdHigh CourtYes[1999] 3 SLR(R) 44SingaporeCited as an example where the contract required a performance bond of 10% of the contract price, but the contract price was subsequently revised downwards by about 65%, and the court found that the call on the old bond was unconscionable.
Min Thai Holdings Pte Ltd v Sunlabel Pte Ltd and anotherHigh CourtYes[1998] 3 SLR(R) 961SingaporeCited to argue that an injunction should be granted where there was a genuine dispute.
Dauphin Offshore Engineering & Trading Pte Ltd v The Private Office of HRH Sheikh Sultan bin Khalifa bin Zayed Al NahyanHigh CourtYes[2000] 1 SLR(R) 117SingaporeCited as an example of unconscionability.
PT Pukuafu Indah v Newmont Indonesia LtdHigh CourtYes[2012] 4 SLR 1157SingaporeCited for the definition of an interlocutory order.
Maldives Airport Co Ltd and another v GMR Malé International Airport Pte LtdCourt of AppealYes[2013] 2 SLR 449SingaporeCited for the nature and purpose of the present injunction.
Bi Xiaoqiong (in her personal capacity and as trustee of the Xiao Qiong Bi Trust and the Alisa Wu Irrevocable Trust) v China Medical Technologies, Inc (in liquidation) and anotherCourt of AppealYes[2019] 2 SLR 595SingaporeCited for the definition of an interlocutory injunction.
Fourie v Le Roux and othersHouse of LordsYes[2007] 1 WLR 320United KingdomCited for the argument that an injunction cannot be free standing but must be based on an underlying cause of action.
Siskina (owners of cargo lately laden on board) and others v Distos Compania Naviera S.A.House of LordsYes[1979] 1 A.C. 210United KingdomCited for the argument that an injunction cannot be free standing but must be based on an underlying cause of action.
Marty Ltd v Hualon Corp (Malaysia) Sdn Bhd (receiver and manager appointed)Court of AppealYes[2018] 2 SLR 1207SingaporeCited for the argument that the applicant should be disentitled from maintaining the injunction as it had not come to the court with clean hands, having committed repudiatory breach of the arbitration agreement.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
International Arbitration Act (Cap 143A, 2002 Rev Ed)Singapore
s 12A of the International Arbitration Act (Cap 143A, 2002 Rev Ed)Singapore
Rules of Court (Cap 322, R 5, 2014 Rev Ed), O 92 r 4(1)Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Performance bond
  • Unconscionability
  • Injunction
  • Full and frank disclosure
  • Warranty obligations
  • First demand bond
  • Design flaws
  • Restructuring proceedings
  • Arbitration agreement

15.2 Keywords

  • Performance bond
  • Injunction
  • Unconscionability
  • Hyflux
  • Sulzer
  • Singapore High Court
  • Arbitration
  • Warranty

17. Areas of Law

Area NameRelevance Score
Performance Bond95
Credit and Security90
Unconscionability90
Injunctions85
Contract Law70
Duty of Candour60
Banking and Finance50
Arbitration40
Bankruptcy Chapter 1130
Bankruptcy30

16. Subjects

  • Contract Law
  • Injunctions
  • Arbitration
  • Performance Bonds