DJY v DJZ: Injunction to Restrain Performance Bond Call | Construction Dispute

In DJY v DJZ and DKA, the High Court of Singapore dismissed DJY's application for an injunction to restrain DJZ from demanding payment under an irrevocable standby letter of credit (SBLC) related to a contract for the construction of an offshore semi-submersible production platform. The court determined that the SBLC was a performance bond and that DJZ had strictly complied with the conditions for calling on it, and that DJY had not established unconscionability on the part of DJZ. The second defendant, the bank which issued the SBLC, was absent and unrepresented.

1. Case Overview

1.1 Court

General Division of the High Court

1.2 Outcome

Application for injunction dismissed.

1.3 Case Type

Civil

1.4 Judgment Type

Judgment

1.5 Jurisdiction

Singapore

1.6 Description

Singapore court denies DJY's injunction to restrain DJZ from demanding payment under a performance bond (SBLC) in a construction dispute.

1.7 Decision Date

25 November 2024

2. Parties and Outcomes

Party Name	Role	Type	Outcome	Outcome Type	Counsels
DJY	Claimant	Corporation	Application for injunction dismissed	Lost	Lin Weiqi Wendy, Jill Ann Koh Ying (Xu Ying), Leau Jun Li (Phoebe), Wee Jong Xuan, Foo Hsien Weng
DJZ	Defendant	Corporation	Application for injunction dismissed	Won	Hing Shan Shan Blossom, Lim Mingguan, Lu En Hui Sarah, Desiree Chong Ci En
DKA	Defendant	Corporation	Application for injunction dismissed	Neutral

3. Judges

Judge Name	Title	Delivered Judgment
Wong Li Kok, Alex JC	Judicial Commissioner	Yes

4. Counsels

Counsel Name	Organization
Lin Weiqi Wendy	WongPartnership LLP
Jill Ann Koh Ying (Xu Ying)	WongPartnership LLP
Leau Jun Li (Phoebe)	WongPartnership LLP
Wee Jong Xuan	WongPartnership LLP
Foo Hsien Weng	WongPartnership LLP
Hing Shan Shan Blossom	Drew & Napier LLC
Lim Mingguan	Drew & Napier LLC
Lu En Hui Sarah	Drew & Napier LLC
Desiree Chong Ci En	Drew & Napier LLC

4. Facts

DJY entered into a contract with DJZ on 19 December 2003 to construct an offshore platform.
The contract price was increased to US$ 882,877,414.79.
The Federal Audit Court of Country [X] initiated an audit process into the contract in 2007.
The FAC ordered the suspension of payments resulting from economic-financial rebalancing.
DJZ was permitted to continue payments if DJY provided a guarantee.
An irrevocable standby letter of credit (SBLC) was issued in favour of DJZ on 20 February 2008, revised on 28 March 2022.
The SBLC stipulated conditions for payment, including a final decision by the FAC declaring the payment null and void.

5. Formal Citations

DJY v DJZ and another, Originating Application No 530 of 2022, [2024] SGHC 301

6. Timeline

Date	Event
2003-12-19	DJY entered into a contract with DJZ to construct an offshore platform.
2007-01-01	The Federal Audit Court of Country [X] initiated an audit process into the Contract.
2007-10-17	The FAC ordered to suspend payments resulting from economic-financial rebalancing.
2007-11-21	The FAC determined that DJZ could continue to make payments to DJY under certain conditions.
2008-02-20	An irrevocable standby letter of credit was issued in favour of DJZ.
2011-12-07	The FAC issued its decision directing DJZ to retain existing balances and liquidate bank letters of guarantee.
2022-03-28	Standby letter of credit revised.
2022-07-27	Appeal against FAC decision dismissed.
2022-08-10	DJY's Motion for Clarification against the FAC Appeal Decision was dismissed.
2022-08-22	DJZ sought the execution of the SBLC.
2022-09-08	DJY commenced a lawsuit in Country [X] to seek an injunction ordering DJZ to withdraw its call on the SBLC.
2022-09-09	DJY commenced proceedings in Singapore (HC/OA 530/2022) to seek an injunction against DJZ and the Bank.
2022-09-14	Interim injunction granted by See Kee Oon J.
2022-09-15	Preliminary injunction granted in Country [X].
2022-10-24	DJY filed a second MFC against the FAC Appeal Decision.
2022-11-22	Second MFC was dismissed by the FAC.
2023-02-07	The Supreme Court dismissed DJY’s Writ of Mandamus.
2023-05-05	DJY withdrew the Writ of Mandamus.
2023-12-14	Final injunction dismissed in Country [X]. DJY commenced a suit against DJZ and the Federal Government of Country [X] to seek an annulment of the various decisions by the FAC.
2023-12-21	DJY commenced arbitration against DJZ.
2024-01-17	Preliminary injunction request denied in Country [X].
2024-01-18	DJY commenced HC/OA 60/2024 to seek injunctions in aid of the arbitration.
2024-02-07	DJY filed an appeal against the dismissal of the final injunction in Country [X].
2024-07-08	The third Federal Court dismissed the New Lawsuit.
2024-07-31	Arbitral tribunal found that it did not have jurisdiction to order injunctive relief to prevent a demand from being made on the SBLC.
2024-08-13	DJY’s MFC against this dismissal was similarly dismissed.
2024-09-13	DJY appealed against the dismissal of the New Lawsuit.
2024-10-08	Hearing date.
2024-11-26	Judgment reserved.

7. Legal Issues

Whether the SBLC should be regarded as a performance bond or a letter of credit
- Outcome: The court held that the SBLC was a performance bond.
- Category: Substantive
- Related Cases:
  - [2011] 2 SLR 47
  - [1992] 3 SLR(R) 12
  - [1997] 1 SLR(R) 277
  - [1992] 2 SLR(R) 20
Whether the requirements to warrant granting an injunction restraining payment under the SBLC are made out
- Outcome: The court held that the requirements were not met, as there was strict compliance and no unconscionability.
- Category: Substantive
- Sub-Issues:
  - Strict compliance with the terms of the SBLC
  - Unconscionability
- Related Cases:
  - [1995] 2 SLR(R) 262
  - [2021] 3 SLR 571
  - [2012] 3 SLR 125
  - [1997] 2 SLR(R) 1020

8. Remedies Sought

Injunction to restrain payment under the SBLC

9. Cause of Actions

Injunction to restrain payment under a standby letter of credit

10. Practice Areas

Commercial Litigation
Construction Law
Performance Bonds

11. Industries

Construction
Oil and Gas

12. Cited Cases

Case Name	Court	Affirmed	Citation	Jurisdiction	Significance
JBE Properties Pte Ltd v Gammon Pte Ltd	Court of Appeal	Yes	[2011] 2 SLR 47	Singapore	Cited to distinguish between a letter of credit and a performance bond, and the applicable standard for restraining a call on each.
Indian Overseas Bank v United Coconut Oil Mills Inc	High Court	Yes	[1992] 3 SLR(R) 12	Singapore	Cited to analogize the SBLC to letters of credit and to distinguish the SBLC from the performance bond in JBE Properties.
Kumagai-Zenecon Construction Pte Ltd (in liquidation) and another v Arab Bank plc (Low Hua Kin, third party)	High Court	Yes	[1997] 1 SLR(R) 277	Singapore	Cited for the principle that the label 'letter of credit' is not dispositive and the court must look to the terms and underlying purpose of the instrument.
Chartered Electronics Industries Pte Ltd v Development Bank of Singapore	High Court	Yes	[1992] 2 SLR(R) 20	Singapore	Cited for the key question of whether a credit document is merely a security or a mode of payment in exchange for goods.
Bocotra Construction Pte Ltd and others v Attorney-General	Court of Appeal	Yes	[1995] 2 SLR(R) 262	Singapore	Cited for the principle that fraud or unconscionability is the sole consideration in applications for injunctions restraining payment or calls on bonds.
CEX v CEY and another	High Court	Yes	[2021] 3 SLR 571	Singapore	Cited for the framework for evaluating whether an injunction restraining a performance bond should be granted on the ground of unconscionability.
Master Marine AS v Labroy Offshore Ltd and others	Court of Appeal	Yes	[2012] 3 SLR 125	Singapore	Cited for the principle that the doctrine of strict compliance applies where condition precedents are set for the beneficiary to a performance bond.
Kumagai-Zenecon Construction Pte Ltd (in liquidation) and another v Arab Bank plc (Low Hua Kin, third party)	Court of Appeal	Yes	[1997] 2 SLR(R) 1020	Singapore	Cited for the necessity of strict compliance with the terms and conditions of a standby letter of credit.
Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction Pte Ltd	High Court	Yes	[2008] 3 SLR(R) 1029	Singapore	Cited for the principle that ambiguity is no longer a prerequisite for the admissibility of extrinsic evidence in aid of contractual interpretation.
Kookmin Bank v Rainy Sky SA and others	England and Wales Court of Appeal	Yes	[2010] EWCA Civ 582	England and Wales	Cited for the proposition that where there are two possible constructions, the Court is entitled to reject the one which is unreasonable and, in a commercial context, the one which flouts business commonsense.
Rainy Sky SA v Kookmin Bank	UK Supreme Court	Yes	[2011] 1 WLR 2900	United Kingdom	Cited for upholding the proposition that where there are two possible constructions, the Court is entitled to reject the one which is unreasonable and, in a commercial context, the one which flouts business commonsense.
Bintai Kindenko Pte Ltd v Samsung C&T Corp and another	Court of Appeal	Yes	[2019] 2 SLR 295	Singapore	Cited for the principle that parties to a signed contract could be bound by the additional terms of a separate document if the signed contract incorporated some or all the terms of a separate document by making reference to those terms.
Borissik Svetlana v Urban Redevelopment Authority	High Court	Yes	[2009] 4 SLR(R) 92	Singapore	Cited for the principle that a person seeking judicial review of a decision by a public body must exhaust all alternative remedies before invoking the jurisdiction of the court for judicial review.
Ollech David v Horizon Capital Fund	Court of Appeal	Yes	[2024] 1 SLR 287	Singapore	Cited for the principle that in the absence of proof of the content of foreign law, a court may regard foreign law as the same as local law.
Ryobi Tactics Pte Ltd v UES Holdings Pte Ltd and another and another matter	High Court	Yes	[2019] 4 SLR 1324	Singapore	Cited for the proposition that although genuine disputes as to whether the underlying subcontracts were breached would not render a call unconscionable, genuine disputes as to whether the beneficiary was legally entitled to call on the bond would.
BS Mount Sophia Pte Ltd v Join-Aim Pte Ltd	High Court	Yes	[2012] 3 SLR 352	Singapore	Cited for stressing that there is a high threshold for proving unconscionability.
Arab Banking Corp (B.S.C.) v Boustead Singapore Ltd	Court of Appeal	Yes	[2016] 3 SLR 557	Singapore	Cited for the obiter that it would be unfair for the beneficiary to realise his security pending resolution of the substantive dispute.
GHL Pte Ltd v Unitrack Building Construction Pte Ltd	Court of Appeal	Yes	[1999] 3 SLR(R) 44	Singapore	Cited for stressing that since a performance bond is basically a security for the performance of the main contract, a temporary restraining order does not prejudice or adversely affect the security.
Winson Oil Trading Pte Ltd v Oversea-Chinese Banking Corp Ltd and another appeal	Court of Appeal	Yes	[2024] 1 SLR 1054	Singapore	Cited for the principle that in the context of letters of credit, the fraud exception is the only exception to the autonomy principle.
Energy Shipping Co Ltd v UDL Shipbuilding (Singapore)	High Court	Yes	[1994] SGHC 225	Singapore	Cited in support of the argument that standby letters of credit have been considered within the same category as performance bonds in case law.

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

Standby Letter of Credit
Performance Bond
Strict Compliance
Unconscionability
Federal Audit Court
Injunction
Contract
Offshore Platform
Final Decision
Null and Void
Economic-Financial Rebalancing

15.2 Keywords

Standby Letter of Credit
Performance Bond
Construction
Injunction
Singapore
SBLC
DJY
DJZ

16. Subjects

Credit and Security
Construction Dispute
Injunctions

17. Areas of Law

Credit and Security
Construction Law
Civil Procedure
Injunctions
Contract Law