Shanghai Chong Kee v Church of St Teresa: Unconscionability in Performance Bond Call
In Shanghai Chong Kee Furniture & Construction Pte Ltd v Church of St Teresa, the High Court of Singapore dismissed an application by Shanghai Chong Kee for a declaration that the Church of St Teresa acted unconscionably in calling on a performance bond for a restoration project. Shanghai Chong Kee sought an injunction to restrain the Church from receiving payment under the bond, or alternatively, for a reduction in the bond sum to account for retention sums already held by the Church. The court, presided over by Judicial Commissioner Wong Li Kok, found no strong prima facie case of unconscionability and dismissed the application. The claimant's application for an Erinford injunction was also dismissed.
1. Case Overview
1.1 Court
General Division of the High Court1.2 Outcome
Claimant's application dismissed
1.3 Case Type
Civil
1.4 Judgment Type
Grounds of Decision
1.5 Jurisdiction
Singapore
1.6 Description
The High Court dismissed Shanghai Chong Kee's application to restrain Church of St Teresa from receiving payment under a performance bond, finding no unconscionable conduct.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Shanghai Chong Kee Furniture & Construction Pte Ltd | Claimant | Corporation | Application dismissed | Lost | Lim Chong Guang Charles, Ryan Mark Lopez, Nilesh Khetan |
| Church of St Teresa | Defendant | Other | Judgment for Defendant | Won | Tan Spring, Farahna Alam |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Wong Li Kok, Alex | Judicial Commissioner | Yes |
4. Counsels
| Counsel Name | Organization |
|---|---|
| Lim Chong Guang Charles | Shook Lin & Bok LLP |
| Ryan Mark Lopez | Shook Lin & Bok LLP |
| Nilesh Khetan | Shook Lin & Bok LLP |
| Tan Spring | Withers KhattarWong LLP |
| Farahna Alam | Withers KhattarWong LLP |
4. Facts
- Claimant and defendant entered into a contract on 19 August 2019 for restoration works at the defendant's church.
- The contract incorporated the Articles and Conditions of Contract for Minor Works 2012.
- Clause 26 of the Conditions of Contract required the claimant to provide a performance bond of 10% of the contract sum.
- The claimant delivered a performance bond dated 9 October 2019 to the defendant for $629,998.70.
- The contract provided for Jiudong LLP to serve as the architect for the project.
- Restrictions related to the COVID-19 pandemic impacted the works and progress was delayed.
- On 20 July 2023, the defendant made a call on the Bond.
5. Formal Citations
- Shanghai Chong Kee Furniture & Construction Pte Ltd v Church of St Teresa, Originating Application No 876 of 2023, [2024] SGHC 5
6. Timeline
| Date | Event |
|---|---|
| Claimant and defendant entered into a contract for the Project. | |
| Contract commencement date. | |
| Claimant delivered the Bond to the defendant. | |
| Contract completion date. | |
| Claimant submitted a Notification for Relief under s 9 of the Covid-19 (Temporary Measures) Act 2020 to the defendant. | |
| Defendant expressed its wish to assert its entitlement to claim LDs in an email to the Architect. | |
| Completion Certificate issued. | |
| Claimant was placed under a moratorium pursuant to s 64 of the Insolvency, Restructuring and Dissolution Act 2018. | |
| Defendant made a call on the Bond. | |
| Claimant took out the present originating application seeking a declaration that the defendant’s call on the Bond was unconscionable. | |
| Interim injunction granted restraining the defendant from receiving payment from Lonpac under the Bond. | |
| Oral decision dismissing the claimant’s application for an injunction was delivered. | |
| Claimant filed a notice of appeal and sought an order for an Erinford injunction. | |
| Judgment date. | |
| Judgment date. |
7. Legal Issues
- Unconscionability
- Outcome: The court found no strong prima facie case of unconscionability on the part of the defendant.
- Category: Substantive
- Sub-Issues:
- Abuse
- Unfairness
- Dishonesty
- Related Cases:
- [2012] 3 SLR 352
- Entitlement to Liquidated Damages
- Outcome: The court did not rule on the merits of whether the liquidated damages claim was contractually and legally justified.
- Category: Substantive
- Erinford Injunction
- Outcome: The court dismissed the claimant's application for an Erinford injunction.
- Category: Procedural
- Related Cases:
- [1974] 2 WLR 749
8. Remedies Sought
- Declaration that the defendant’s call on the Bond was unconscionable
- Injunction to restrain the defendant from receiving payment from Lonpac on the Bond
- Reduction in the Bond sum that the defendant is allowed to call on and receive in order to account for the retention sum
9. Cause of Actions
- Breach of Contract
10. Practice Areas
- Construction Law
- Commercial Litigation
11. Industries
- Construction
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| BS Mount Sophia Pte Ltd v Join-Aim Pte Ltd | Court of Appeal | Yes | [2012] 3 SLR 352 | Singapore | Cited as the leading case summarizing the law on unconscionability in the context of calls on performance bonds in construction contracts. |
| JK Integrated (Pte Ltd) v 50 Robinson Pte Ltd and another | High Court | Yes | [2015] SGHC 57 | Singapore | Cited for the principle that a mistaken but bona fide call on a performance bond would not fall foul of the doctrine of unconscionability. |
| Dauphin Offshore Engineering & Trading Pte Ltd v The Private Office of HRH Sheikh Sultan bin Khalifa bin Zayed Al Nahyan | High Court | Yes | [2000] 1 SLR(R) 117 | Singapore | Cited for the principle that a high degree of strictness must be applied to the claimant’s case, with the claimant required to establish a clear case of fraud or unconscionability, and mere allegations are insufficient. |
| Bocotra Construction Pte Ltd and others v Attorney-General | Court of Appeal | Yes | [1995] 2 SLR(R) 262 | Singapore | Cited for the principle that a high degree of strictness must be applied to the claimant’s case, with the claimant required to establish a clear case of fraud or unconscionability, and mere allegations are insufficient. |
| Anwar Siraj and another v Teo Hee Lai Building Construction Pte Ltd | Court of Appeal | Yes | [2003] 1 SLR(R) 394 | Singapore | Cited for the principle that the court does not engage in a detailed merits review when hearing an application to injunct the call on a performance bond. |
| CEX v CEY and another | High Court | Yes | [2021] 3 SLR 571 | Singapore | Cited for the principle that when the architect is called on to exercise his independent judgment and issue certificates, he cannot be the agent of the employer. |
| Hiap Hong & Co Pte Ltd v Hong Huat Development Co (Pte) Ltd | High Court | Yes | [2001] 1 SLR(R) 458 | Singapore | Cited for the principle that when executing duties, the Architect was not acting as the defendant’s agent. |
| Eltraco International Pte Ltd v CGH Development Pte Ltd | Court of Appeal | Yes | [2000] 3 SLR(R) 198 | Singapore | Cited for the principle that the court should take a broad approach and decide whether the present call on the Bond gave the defendant ample security, without being that inordinate as to be unconscionable. |
| SH Design & Build Pte Ltd v BD Cranetech Pte Ltd | High Court | Yes | [2018] SGHC 133 | Singapore | Cited regarding the form of application for the Erinford injunction. |
| Sin Herh Construction Pte Ltd v Hyundai Engineering & Construction Co Ltd and another | High Court | Yes | [2017] SGHC 3 | Singapore | Cited regarding the form of application for the Erinford injunction. |
| Erinford Properties Ltd and Another v Cheshire County Council | Unknown | Yes | [1974] 2 WLR 749 | England and Wales | Cited for the grounds on which an Erinford injunction should be granted. |
13. Applicable Rules
| Rule Name |
|---|
| Rules of Court 2021 |
| Architects Rules, The Schedule (Code of Professional Conduct and Ethics), Part I, Rule 3.-(1) |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Covid-19 (Temporary Measures) Act 2020 | Singapore |
| Insolvency, Restructuring and Dissolution Act 2018 | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Performance Bond
- Unconscionability
- Liquidated Damages
- COVID-19 (Temporary Measures) Act 2020
- COTMA
- Architect's Certificate
- Retention Sum
- Erinford Injunction
15.2 Keywords
- Performance bond
- Unconscionability
- Construction contract
- Injunction
- Singapore
- COVID-19
- Building and Construction Law
16. Subjects
- Construction Law
- Contract Law
- Injunctions
- Performance Bonds
17. Areas of Law
- Building and Construction Law
- Injunctions
- Contract Law