Newtech v BKB Engineering: Injunction against Performance Bond Call for Sembawang Camp Project

Newtech Engineering Construction Pte Ltd, the Plaintiff, sought an injunction against BKB Engineering Constructions Pte Ltd, the First Defendant, from receiving payment under two performance bonds issued by The Asia Insurance Company Ltd and Cosmic Insurance Corporation Limited, the Second and Third Defendants respectively. The dispute arose from sub-contracts related to a building construction project at Sembawang Camp. The High Court of Singapore, presided over by Justice Tay Yong Kwang, granted the injunctions, finding a strong prima facie case of unconscionability on the part of the First Defendants in calling on the performance bonds.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Plaintiffs’ applications for injunctions granted.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Injunction granted against BKB Engineering's call on performance bonds due to unconscionability. Dispute arose from Sembawang Camp construction project.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Newtech Engineering Construction Pte LtdPlaintiffCorporationInjunctions grantedWon
The Asia Insurance Company LtdDefendantCorporationNeutralNeutral
Cosmic Insurance Corporation LimitedDefendantCorporationNeutralNeutral
BKB Engineering Constructions Pte LtdDefendantCorporationInjunctions granted againstLost

3. Judges

Judge NameTitleDelivered Judgment
Tay Yong KwangJudgeYes

4. Counsels

Counsel NameOrganization
Chong Kuan KeongChong Chia & Lim LLC
Lawrence LimChong Chia & Lim LLC
Lai Swee FungUniLegal LLC

4. Facts

  1. The Plaintiffs were the First Defendants’ sub-contractors for a building construction project at Sembawang Camp.
  2. Two sub-contracts were entered into on 31 January 2000 and on 18 April 2000.
  3. The Plaintiffs claimed an outstanding sum of $376,944.99 from the First Defendants.
  4. The Second and Third Defendants issued performance bonds for the first and second sub-contracts, respectively.
  5. The First Defendants called on the performance bonds, leading the Plaintiffs to seek injunctions.
  6. The Plaintiffs argued the calls on the bonds were made in bad faith and unconscionably.
  7. The First Defendants failed to explain discrepancies in their final statements of account.

5. Formal Citations

  1. Newtech Engineering Construction Pte Ltd v BKB Engineering Constructions Pte Ltd and Others, Suit 42/2003, SIC 379/2003, 380/2003, [2003] SGHC 141

6. Timeline

DateEvent
First sub-contract entered into
Plaintiffs were to take possession of the site under the first sub-contract
Plaintiffs informed the First Defendants they had completed the excavation works
Second sub-contract entered into
Original completion date for the first sub-contract
Plaintiffs stopped their culvert works
Project’s architect granted the Plaintiffs an extension of 6 weeks after the completion of piling works
Plaintiffs wrote to the First Defendants to state that they had stopped their culvert works
Piling works were completed
Revised Master Programme showed the revised completion date for the box culvert works as 10 November 2000
Box culvert works were completed satisfactorily
Plaintiffs completed substantially all of the road works
Changes were still being made to the external electrical works which disrupted the Plaintiffs’ completed road works
External works were handed over by the First Defendants to MINDEF
The other works were completed in December 2001 and the Plaintiffs laid the last layer of premix accordingly
External works were handed over by the First Defendants to MINDEF
First Defendants’ account showed an alleged overpayment of $3,371.08 to the Plaintiffs
First Defendants called on the first performance bond
Call on the second bond was made
Project’s architect, in a reply dated 7 February 2003 to the Plaintiffs’ solicitors, stated that ‘the employer has taken out other works from BKB such as the drainage works and M & E works owing to BKB’s delay in commencing works in accordance with the contract’
Plaintiffs were informed by the Third Defendants about the call on the second bond
Nylect obtained an injunction against the First Defendants in Suit 124 of 2003
Decision Date
Trial of this action has been scheduled to commence

7. Legal Issues

  1. Unconscionability
    • Outcome: The court found a strong prima facie case of unconscionability on the part of the First Defendants in calling on the two performance bonds.
    • Category: Substantive
    • Related Cases:
      • [1995] 2 SLR 733
      • [2000] 1 SLR 657
  2. Injunction against call on performance bond
    • Outcome: The court granted the injunctions sought by the Plaintiffs.
    • Category: Procedural
    • Related Cases:
      • [1995] 2 SLR 733

8. Remedies Sought

  1. Injunction to restrain the First Defendants from receiving payment under the performance bonds

9. Cause of Actions

  • Injunction to restrain call on performance bond

10. Practice Areas

  • Construction Law
  • Commercial Litigation
  • Performance Bonds

11. Industries

  • Construction

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Bocotra Construction Pte Ltd v Attorney General (No. 2)Court of AppealYes[1995] 2 SLR 733SingaporeCited for the principle that the sole consideration in applications for injunctions restraining payment or calls on bonds was whether there was fraud or unconscionability.
American Cyanamid Co v EthiconN/AYes[1975] AC 396N/ACited to note that the balance of convenience test is not applicable in cases involving performance bonds.
Dauphin Offshore Engineering & Trading Pte LtdCourt of AppealYes[2000] 1 SLR 657SingaporeCited for the principle that a strong prima facie case of unconscionability must be shown.
GHL Pte Ltd v Unitrack Building Construction Pte LtdN/AYes[1999] 4 SLR 604SingaporeCited for the principle that fraud and unconscionability are separate grounds for restraining a beneficiary of a performance bond from enforcing it.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
No applicable statutes

15. Key Terms and Keywords

15.1 Key Terms

  • Performance bond
  • Injunction
  • Unconscionability
  • Sub-contract
  • Sembawang Camp
  • Liquidated damages
  • Defects liability period

15.2 Keywords

  • Performance bond
  • Injunction
  • Construction
  • Singapore
  • Unconscionability

17. Areas of Law

Area NameRelevance Score
Performance Bond90
Injunctions85
Construction Law75
Unconscionability70
Contract Law60
Breach of Contract50
Summary Judgement30

16. Subjects

  • Construction Dispute
  • Injunctions
  • Performance Bonds