AXA Insurance v Chiu Teng Construction: Performance Bond Dispute over Subcontract Breach at NTU Project
In AXA Insurance Pte Ltd v Chiu Teng Construction Co Pte Ltd, the Court of Appeal of Singapore dismissed AXA's appeal on June 24, 2021, affirming the High Court's decision that AXA was liable to pay Chiu Teng Construction Co Pte Ltd under a performance bond. The dispute arose from a subcontract breach by QBH Pte Ltd, engaged by Chiu Teng for a project at Nanyang Technological University. AXA, as the bond issuer, contested the call, arguing that Chiu Teng had not established QBH's breach and the resulting losses through a formal determination or admission. The court found that the bond's terms did not require such a determination and that Chiu Teng had adequately proven its losses. The court dismissed AXA's appeal.
1. Case Overview
1.1 Court
Court of Appeal of the Republic of Singapore1.2 Outcome
Appeal Dismissed
1.3 Case Type
Civil
1.4 Judgment Type
Grounds of Decision
1.5 Jurisdiction
Singapore
1.6 Description
AXA Insurance's appeal against a decision compelling payment under a performance bond was dismissed, affirming the bond's enforceability upon proof of subcontract breach.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| AXA Insurance Pte Ltd | Appellant, Defendant | Corporation | Appeal Dismissed | Lost | Ganesh Bharath Ratnam |
| Chiu Teng Construction Co Pte Ltd | Respondent, Plaintiff | Corporation | Judgment for Respondent | Won | Lee Peng Khoon Edwin, Jayaraman Sanjana |
| QBH Pte Ltd | Other | Corporation |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Sundaresh Menon | Chief Justice | No |
| Steven Chong | Justice of the Court of Appeal | Yes |
| Quentin Loh | Judge of the Appellate Division | No |
4. Counsels
| Counsel Name | Organization |
|---|---|
| Ganesh Bharath Ratnam | Gurbani & Co LLC |
| Lee Peng Khoon Edwin | Eldan Law LLC |
| Jayaraman Sanjana | Eldan Law LLC |
4. Facts
- Chiu Teng Construction Co Pte Ltd (CTC) was the main contractor for a project at Nanyang Technological University (NTU).
- CTC engaged QBH Pte Ltd (QBH) as a subcontractor for the project on 1 August 2016.
- AXA Insurance Pte Ltd (AXA) issued Performance Bond No LBP/P1821315 dated 25 July 2016 in favour of CTC for $397,687.50.
- A dispute arose over QBH’s Payment Claim No 23, which sought payment of $1,108,739.94.
- CTC asserted that QBH should pay $805,843.13 to CTC in Payment Response No 23.
- QBH submitted the dispute for adjudication, and the adjudicator determined that CTC owed QBH $386,856.21.
- CTC served a Notice of Termination of the Subcontract on QBH on 30 October 2018.
- CTC purported to call on the Bond on 14 September 2018 (the First Call).
- QBH commenced HC/OS 1239/2018 to restrain AXA from making payment under the Bond.
- QBH was put into liquidation on 23 April 2019.
- The judge granted the injunction sought in OS 1239/2018, holding that the Bond was an indemnity performance bond and that the First Call was defective.
- CTC wrote to QBH’s liquidators on 18 February 2020, claiming breach of the Subcontract and losses of $484,108.28.
- QBH’s liquidators did not reply to the 18 February Letter.
- CTC wrote to AXA on 13 March 2020, purporting to call on the Bond again (the Second Call).
- AXA replied on 31 March 2020 that the Second Call was defective and that it was not obliged to make payment.
- CTC applied to the High Court in HC/OS 603/2020 for an order that AXA make payment of $397,687.50.
5. Formal Citations
- AXA Insurance Pte Ltd v Chiu Teng Construction Co Pte Ltd, Civil Appeal No 151 of 2020, [2021] SGCA 62
6. Timeline
| Date | Event |
|---|---|
| Performance Bond No LBP/P1821315 issued by AXA Insurance Singapore Pte Ltd in favour of Chiu Teng Construction Co Pte Ltd | |
| Subcontract between Chiu Teng Construction Co Pte Ltd and QBH Pte Ltd signed | |
| QBH Pte Ltd served Payment Claim No 23 on Chiu Teng Construction Co Pte Ltd | |
| Chiu Teng Construction Co Pte Ltd issued Payment Response No 23 | |
| QBH Pte Ltd submitted dispute for adjudication and Chiu Teng Construction Co Pte Ltd purported to call on the Bond (First Call) | |
| Adjudication Determination that Chiu Teng Construction Co Pte Ltd owed QBH Pte Ltd a sum of $386,856.21 | |
| QBH Pte Ltd commenced HC/OS 1239/2018 to restrain AXA from making and CTC from receiving any payment under the Bond | |
| Chiu Teng Construction Co Pte Ltd served a Notice of Termination of the Subcontract on QBH Pte Ltd | |
| QBH Pte Ltd was put into liquidation | |
| Judge held that the Bond was an indemnity performance bond and granted the injunction sought in OS 1239/2018 | |
| Chiu Teng Construction Co Pte Ltd wrote to QBH’s liquidators, claiming breach of Subcontract | |
| Chiu Teng Construction Co Pte Ltd wrote to AXA, purporting to call on the Bond again (Second Call) | |
| AXA replied that the Second Call was defective and that it was not obliged to make payment | |
| Chiu Teng Construction Co Pte Ltd applied to the High Court in HC/OS 603/2020 for an order that AXA make payment of $397,687.50 | |
| Appeal dismissed with brief grounds | |
| Detailed grounds of decision delivered |
7. Legal Issues
- Enforceability of Performance Bond
- Outcome: The court held that the bond was enforceable upon proof of breach of the underlying contract and resulting losses, without requiring a prior determination or admission.
- Category: Substantive
- Sub-Issues:
- Conditions for calling on the bond
- Proof of breach of underlying contract
- Proof of loss sustained
- Related Cases:
- [2020] SGHC 234
- [2011] 2 SLR 47
- [2013] 3 SLR 1142
- Interpretation of Contractual Terms
- Outcome: The court interpreted the terms of the performance bond to determine the conditions for payment and the allocation of risks between the parties.
- Category: Substantive
- Sub-Issues:
- Construction of indemnity clauses
- Allocation of risk
- Implication of terms
- Related Cases:
- [2012] 3 SLR 125
8. Remedies Sought
- Payment under Performance Bond
- Declaration of Bond Validity
9. Cause of Actions
- Breach of Subcontract
- Call on Performance Bond
10. Practice Areas
- Commercial Litigation
- Construction Disputes
11. Industries
- Construction
- Insurance
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Chiu Teng Construction Co Pte Ltd v AXA Insurance Pte Ltd | High Court | Yes | [2020] SGHC 234 | Singapore | The appeal was against the decision of the High Court judge in this case. |
| JBE Properties Pte Ltd v Gammon Pte Ltd | Court of Appeal | Yes | [2011] 2 SLR 47 | Singapore | Cited as a case where the court undertook an independent determination of whether the plaintiff had suffered actual losses under an indemnity performance bond. |
| York International Pte Ltd v Voltas Ltd | High Court | Yes | [2013] 3 SLR 1142 | Singapore | Cited as a case where the relief sought was only for a stay pending the completion of arbitral proceedings. |
| American Home Assurance Co v Hong Lam Marine Pte Ltd | Court of Appeal | Yes | [1999] 2 SLR(R) 992 | Singapore | Discussed the terminology used in the area of performance bonds and the proper characterisation of certain kinds of performance bonds. |
| Master Marine AS v Labroy Offshore Ltd and others | Court of Appeal | Yes | [2012] 3 SLR 125 | Singapore | Discussed the principles applicable to "first demand", or unconditional, performance bonds, and how those bonds differed from indemnity performance bonds. |
| Econ Piling Pte Ltd v Aviva General Insurance Pte Ltd and another | Court of Appeal | Yes | [2006] 4 SLR(R) 501 | Singapore | Cited as an example of a case where a "default bond" was construed as a guarantee. |
| Anglomar Shipping Co Ltd v Swan Hunter Shipbuilders Ltd and Swan Hunter Group Ltd (The “London Lion”) | N/A | Yes | [1980] 2 Lloyd’s Rep 456 | N/A | Cited in relation to indemnities being conditional on breach of the underlying contract. |
| Esal (Commodities) Ltd v Oriental Credit Ltd | N/A | Yes | [1985] 2 Lloyd’s Rep 546 | N/A | Discussed whether the bond should be interpreted such that payment was conditional on an actual failure to perform the underlying contract. |
| IE Contractors Ltd v Lloyds Bank plc and Rafidain Bank | N/A | Yes | [1990] 2 Lloyd’s Rep 496 | N/A | Discussed whether the bond should be interpreted such that payment was conditional on an actual failure to perform the underlying contract. |
| Samsung C&T Corp v Soon Li Heng Civil Engineering Pte Ltd | Court of Appeal | Yes | [2020] 2 SLR 955 | Singapore | Discussed the distinction between a security payable on default and one payable on demand. |
| Fletcher Construction Australia Ltd v Varnsdorf Pty Ltd | Court of Appeal of the Supreme Court of Victoria | Yes | [1998] 3 VR 812 | Australia | Cited in relation to the relationship between the beneficiary and account party. |
| Clough Engineering Ltd v Oil and Natural Gas Corp Ltd | Federal Court of Australia | Yes | [2008] FCAFC 136 | Australia | Cited in relation to the relationship between the beneficiary and account party. |
| Patterson Building Group Pty Ltd v Holroyd City Council | New South Wales Supreme Court | Yes | [2013] NSWSC 1484 | Australia | Cited in relation to the relationship between the beneficiary and account party. |
| Ex parte Young; In re Kitchin | N/A | Yes | (1881) 17 Ch D 668 | N/A | Cited for the general rule that a judgment or an award against a principal debtor is not binding on the guarantor. |
| PT Jaya Sumpiles Indonesia and another v Kristle Trading Ltd and another appeal | Court of Appeal | Yes | [2009] 3 SLR(R) 689 | Singapore | Confirmed that the rule in Re Kitchin remains the law in Singapore. |
| Maybank Kim Eng Securities Pte Ltd v Lim Keng Yong and another | High Court | Yes | [2016] 3 SLR 431 | Singapore | Cited in relation to when the court will grant a stay of proceedings brought by an indemnified party against an indemnifier in favour of arbitration proceedings. |
| SCT Technologies Pte Ltd v Western Copper Co Ltd | High Court | Yes | [2016] 1 SLR 1471 | Singapore | Cited for the distinction between the legal and evidential burden of proof. |
13. Applicable Rules
| Rule Name |
|---|
| Rules of Court (Cap 322, R 5, 2014 Rev Ed) |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| 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
- Indemnity Performance Bond
- Subcontract
- Beneficiary
- Account Party
- Issuer
- Breach of Contract
- Actual Loss
- Determination
- Admission
- Call on Bond
15.2 Keywords
- performance bond
- construction
- subcontract
- breach of contract
- indemnity
- AXA
- Chiu Teng
- QBH
- Singapore
- NTU
- call on bond
16. Subjects
- Construction Dispute
- Performance Bond
- Contract Law
- Civil Procedure
17. Areas of Law
- Contract Law
- Construction Law
- Credit and Security
- Performance Bond