Bintai Kindenko Pte Ltd v Samsung C&T Corp and another [2019] SGCA 39

Case Details

• Citation: [2019] SGCA 39
• Court: Court of Appeal of the Republic of Singapore
• Decision Date: 30 May 2019
• Coram: Tay Yong Kwang JA; Woo Bih Li J
• Case Number: Civil Appeal No 95 of 2018
• Appellants: Bintai Kindenko Pte Ltd
• Respondents: (1) Samsung C&T Corporation; (2) DBS Bank Ltd
• Counsel for Appellant: Tan Chee Meng SC, Josephine Choo Poh Hua, Dynyse Loh Jia Wen and Eugene Oh (WongPartnership LLP)
• Counsel for First Respondent: Kelvin Aw Wei Keng, Leonard Chew Wei Chong and Eugene Lee (Holborn Law LLC)
• Practice Areas: Credit and Security; Performance bond; Interim injunction restraining call on performance bond; Building and Construction Law

Summary

The decision in Bintai Kindenko Pte Ltd v Samsung C&T Corp and another [2019] SGCA 39 represents a significant affirmation of the autonomy of performance bonds in Singapore and the validity of contractual provisions that seek to limit the grounds upon which a call on such bonds may be restrained. The appeal arose from a dispute between a main contractor, Samsung C&T Corporation (the First Respondent), and its mechanical and engineering sub-contractor, Bintai Kindenko Pte Ltd (the Appellant), regarding a project involving the upgrading of the Suntec City Convention Centre. The central legal conflict concerned the Appellant’s attempt to restrain a call on a performance bond issued by DBS Bank Ltd (the Second Respondent) on the grounds of unconscionability.

The Court of Appeal was tasked with determining whether the parties had effectively excluded the "unconscionability" exception through the incorporation of specific exclusion clauses from the main contract into the sub-contract. This case builds upon the principles established in CKR Contract Services Pte Ltd v Asplenium Land Pte Ltd and another and another appeal and another matter [2015] 3 SLR 1041, where the court previously held that parties are generally free to contractually limit the grounds for enjoining a call on a performance bond, provided such clauses are clear and satisfy the requirements of the Unfair Contract Terms Act (Cap 396, 1994 Rev Ed) ("UCTA").

The Court of Appeal dismissed the appeal, upholding the High Court's decision to discharge an interim injunction that had previously restrained the call. The Court held that the exclusion clauses were successfully incorporated into the sub-contract by reference and that these clauses effectively precluded the Appellant from relying on unconscionability as a ground for relief. Furthermore, the Court clarified the application of the burden of proof under the Evidence Act (Cap 97, 1997 Rev Ed) in the context of interlocutory injunctions, emphasizing that while the party asserting a contractual right (the Respondent) bears the burden of proving the existence of the exclusion clause, the party seeking the injunction (the Appellant) bears the burden of establishing the grounds for such relief.

This judgment reinforces the commercial utility of performance bonds as "equivalent to cash in hand" and provides practitioners with clear guidance on the mechanics of "back-to-back" incorporation in construction contracts. It signals that the Singapore courts will respect the allocation of risk agreed upon by sophisticated commercial parties, even where that allocation significantly narrows the judicial "safety valve" of unconscionability.

Timeline of Events

1. 1 June 2012: The date from which the terms of the Second LOA were to have retroactive effect.
2. 3 December 2012: The Second Letter of Acceptance (Second LOA) is issued by the First Respondent and subsequently accepted and signed by the Appellant.
3. 18 December 2015: A date relevant to the underlying project timeline and disputes regarding mechanical and engineering works.
4. 27 January 2016: Further project milestones and communications between the parties regarding performance and delays.
5. 20 February 2017: The First Respondent issues a notice or communication regarding the potential call on the performance bond.
6. 13 March 2017: Continued disputes regarding the mechanical and engineering sub-contract works and payment claims.
7. 3 July 2017: The First Respondent makes a formal call on the performance bond issued by DBS Bank Ltd.
8. 7 July 2017: The Appellant commences legal proceedings and obtains an ex parte interim injunction to restrain the call on the bond.
9. 22 July 2017: Procedural developments regarding the maintenance of the interim injunction.
10. 15 August 2017: The First Respondent files an application to discharge the interim injunction.
11. 28 August 2017: The Appellant files Suit No 800 of 2017 against the First Respondent.
12. 29 August 2017: Formal commencement of Suit No 800 of 2017.
13. 30 November 2017: The High Court (the Judge) grants the First Respondent's application and discharges the interim injunction.
14. 1 April 2019: The substantive hearing of the appeal before the Court of Appeal.
15. 30 May 2019: The Court of Appeal delivers its judgment, dismissing the appeal.

What Were the Facts of This Case?

The dispute arose within the context of a large-scale construction project for the upgrading of the Suntec City Convention Centre and its retail podium (the "Project"). The First Respondent, Samsung C&T Corporation, was the main contractor for the Project. In 2012, the First Respondent appointed the Appellant, Bintai Kindenko Pte Ltd, as the mechanical and engineering ("M&E") sub-contractor. The contractual relationship was initially governed by a First Letter of Acceptance (First LOA) in June 2012, but this was superseded by a Second Letter of Acceptance (Second LOA) dated 3 December 2012. The Second LOA was signed by the Appellant and expressly provided that its terms would have retroactive effect from 1 June 2012.

The Second LOA was a sophisticated document that sought to incorporate various other sets of conditions. Clause 3 of the Second LOA stated that the form of the sub-contract would be the Singapore Institute of Architects (SIA) Lump Sum Contract (9th Edition) and that the sub-contract would be on the SIA Conditions of Sub-Contract (4th Edition, 2010), including "Particular Conditions as set out in the Main Contract." The Main Contract was the agreement between the Project employer (HSBC Institutional Trust Services (S) Limited) and the First Respondent. The Main Contract itself contained "Main Contract Particular Conditions" (MC Particular Conditions).

Crucially, the MC Particular Conditions contained Clause 5A(5), which stipulated that the contractor (Samsung) shall not be entitled to enjoin or restrain the employer from making any call on the performance bond on any ground, including unconscionability, except in the case of fraud. There was also a document titled "Particular Conditions of Sub-Contract" (SC Particular Conditions), which contained a mirror provision in Clause 14A(5), stating that the sub-contractor (Bintai) shall not be entitled to restrain the main contractor (Samsung) from calling on the sub-contract performance bond on any ground other than fraud.

The performance bond in question was an on-demand guarantee for the sum of $13,479,366.43, issued by DBS Bank Ltd. As the Project progressed, disputes emerged regarding delays and the quality of the M&E works. The First Respondent alleged that the Appellant had failed to perform its obligations, leading to significant delays and costs. The Appellant, conversely, raised various payment claims and sought an Adjudication Determination under the Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed). While the Appellant initially obtained a determination for approximately $4.3 million, this was later set aside by the High Court in separate proceedings (see: Bintai Kindenko Pte Ltd v Samsung C&T Corp [2018] 2 SLR 532).

On 3 July 2017, the First Respondent made a call on the performance bond for the full amount of $13,479,366.43. The Appellant immediately sought an ex parte interim injunction to restrain the call, alleging that the call was unconscionable. The Appellant argued that the First Respondent’s call was motivated by a desire to gain leverage in the ongoing payment disputes and that the amount claimed was excessive given the status of the works. The First Respondent applied to discharge the injunction, relying on the exclusion clauses (Clause 5A(5) of the MC Particular Conditions and Clause 14A(5) of the SC Particular Conditions) which it argued were incorporated into the sub-contract by Clause 3 of the Second LOA.

The High Court Judge in [2018] SGHC 191 agreed with the First Respondent. The Judge found that the exclusion clauses were incorporated and were not "standard terms" within the meaning of Section 3 of the Unfair Contract Terms Act. Even if they were standard terms, the Judge held they satisfied the requirement of reasonableness. Consequently, the Appellant was contractually barred from relying on unconscionability. The Judge also found that, on the merits, the Appellant had failed to establish a strong prima facie case of unconscionability. The interim injunction was discharged on 30 November 2017, leading to this appeal.

What Were the Key Legal Issues?

The appeal centered on several critical issues regarding the intersection of contract law and the law governing performance bonds:

• Incorporation of Exclusion Clauses: Whether the Judge erred in finding that the exclusion clauses (specifically Clause 14A(5) of the SC Particular Conditions) were contractually incorporated into the sub-contract between the Appellant and the First Respondent via Clause 3 of the Second LOA. This involved a detailed analysis of the "back-to-back" drafting technique.
• Validity and Enforceability of the Exclusion: Whether a party can legally exclude the right to rely on the unconscionability exception to restrain a call on a performance bond. This required the Court to revisit its holding in CKR Contract Services and address the Appellant's arguments regarding public policy and the inherent jurisdiction of the court.
• Application of the Unfair Contract Terms Act (UCTA): Whether the exclusion clauses constituted "standard terms of business" under Section 3 of the UCTA and, if so, whether they met the "reasonableness" test under Section 11.
• Burden of Proof: Whether the First Respondent bore the burden of proving the incorporation of the exclusion clauses and whether the Appellant bore the burden of establishing the grounds for the injunction. This involved interpreting Sections 103 and 105 of the Evidence Act.
• Merits of Unconscionability: Even if the exclusion clauses were not incorporated, whether the Appellant had established a strong prima facie case of unconscionability to justify the continuation of the injunction.

How Did the Court Analyse the Issues?

The Court of Appeal began its analysis by reaffirming the fundamental principle that a performance bond is an independent contract between the issuer (the bank) and the beneficiary. The court’s intervention to restrain a call is exceptional and historically limited to cases of fraud. However, Singapore law recognizes a second exception: unconscionability. As stated in BS Mount Sophia Pte Ltd v Join-Aim Pte Ltd [2012] 3 SLR 352 at [18]:

"The court will only intervene to prevent a beneficiary from calling on a performance guarantee if it can be shown that the call was either fraudulent or unconscionable."

Issue 1: Incorporation of the Exclusion Clauses
The Appellant argued that Clause 14A(5) of the SC Particular Conditions was not incorporated because the SC Particular Conditions document was not signed by the parties and was not specifically identified in the Second LOA. The Court rejected this, focusing on the language of Clause 3 of the Second LOA, which referred to "Particular Conditions as set out in the Main Contract." The Court found that the Main Contract expressly referred to the SC Particular Conditions as the document intended to govern the sub-contract relationship. The Court applied a purposive approach to contractual interpretation, noting that in the construction industry, "back-to-back" arrangements are common and intended to ensure that the main contractor's risks are mirrored in its sub-contracts.

The Court relied on International Research Corp PLC v Lufthansa Systems Asia Pacific Pte Ltd and another [2014] 1 SLR 130 to emphasize that where a contract refers to another document, that document is incorporated unless the reference is too vague or the terms are inconsistent with the main agreement. Here, the reference to "Particular Conditions as set out in the Main Contract" was sufficiently clear to include the SC Particular Conditions which were physically part of the Main Contract bundle.

Issue 2: The Validity of Excluding Unconscionability
The Appellant contended that the unconscionability exception is a matter of public policy and cannot be excluded by contract. The Court of Appeal disagreed, following its previous decision in CKR Contract Services. The Court held that the unconscionability exception is a "safety valve" created by the courts to prevent abuse, but it does not override the freedom of contract. If sophisticated parties choose to limit their remedies to fraud only, the court will generally respect that choice. The Court noted at [2] that parties could exclude the unconscionability exception "subject to the ordinary legal constraints on exclusion clauses."

Issue 3: The Unfair Contract Terms Act (UCTA)
The Court then addressed whether the exclusion clause was caught by Section 3 of the UCTA. The Appellant argued that the First Respondent’s sub-contract terms were "written standard terms of business." The Court found that even if Section 3 applied, the clause was reasonable. The Court observed that the parties were commercial entities of equal bargaining power and that the exclusion of unconscionability was a known and accepted risk-allocation mechanism in the construction industry. The Court cited Press Automation Technology Pte Ltd v Trans-Link Exhibition Forwarding Pte Ltd [2003] 1 SLR(R) 712 to support the view that reasonableness is assessed at the time the contract is made, not when the dispute arises.

Issue 4: Burden of Proof
A significant portion of the judgment was dedicated to the burden of proof. The Court clarified that under Sections 103 and 105 of the Evidence Act, the burden of proof lies on the party who asserts the affirmative of an issue. In this case:

• The First Respondent bore the burden of proving that the exclusion clause was part of the contract (incorporation).
• The Appellant bore the burden of proving that the call on the bond was unconscionable (the ground for the injunction).

The Court held that the First Respondent had met its burden regarding incorporation through the documentary evidence of the Second LOA and the Main Contract structure. The Appellant, however, had not met its burden of showing a strong prima facie case of unconscionability.

Issue 5: Merits of Unconscionability
Even if the exclusion clause had not applied, the Court found that the Appellant’s case on unconscionability was weak. The Court noted that unconscionability requires more than a mere dispute over the amount due or the quality of work. It requires "unfairness, as distinct from a lack of good faith" (BS Mount Sophia at [20]). The fact that there were ongoing disputes and that the First Respondent had called for the full amount of the bond did not, in itself, constitute unconscionability, especially where the First Respondent had provided evidence of potential losses and delays exceeding the bond amount.

What Was the Outcome?

The Court of Appeal dismissed the appeal in its entirety. The Court affirmed the High Court's decision to discharge the interim injunction, thereby allowing the First Respondent to proceed with the call on the performance bond. The Court's final order was summarized at [85]:

"For the above reasons, we dismissed the appeal and ordered the Appellant to pay the First Respondent’s costs."

Regarding costs, the Court ordered the Appellant to pay the First Respondent’s costs for the appeal, which were fixed at $30,000, plus reasonable disbursements. The Court found no reason to depart from the usual rule that costs follow the event. The Second Respondent, DBS Bank Ltd, did not participate in the appeal and no costs were awarded for or against it.

The practical effect of the judgment was that the $13,479,366.43 performance bond could be encashed by the First Respondent. The Appellant was left to pursue its claims for payment and damages through the underlying Suit No 800 of 2017, but without the security of the bond proceeds. This outcome underscores the "pay now, argue later" philosophy that underpins on-demand performance bonds in Singapore's construction sector.

Why Does This Case Matter?

This case is a landmark for several reasons, particularly for practitioners in the construction and banking sectors. First, it provides the highest level of judicial confirmation that the unconscionability exception—a unique feature of Singapore law compared to English law—can be contractually excluded. This allows main contractors and employers to achieve greater certainty by limiting the grounds for judicial interference to the very narrow window of fraud.

Second, the judgment offers a masterclass in the law of incorporation. It demonstrates that the courts will not take a pedantic approach to "back-to-back" clauses. If the intent to incorporate terms from a main contract into a sub-contract is clear from the overall contractual matrix, the court will give effect to that intent even if every document is not individually signed or explicitly named in the primary letter of acceptance. This is a pragmatic recognition of how construction contracts are often bundled and executed in practice.

Third, the Court’s analysis of the Unfair Contract Terms Act in this context is vital. By finding that such exclusion clauses are generally "reasonable" between commercial parties, the Court has effectively insulated these clauses from most UCTA-based challenges. This reinforces the principle of party autonomy and risk allocation in high-value commercial transactions.

Fourth, the clarification on the burden of proof under the Evidence Act is of general application to all interlocutory injunctions. It reminds practitioners that the "strong prima facie case" standard for restraining a bond call is a high bar, and the burden remains firmly on the applicant to provide clear evidence of unconscionability or fraud.

Finally, the case reaffirms Singapore's position as a pro-contract and pro-commerce jurisdiction. By upholding the autonomy of performance bonds and the validity of exclusion clauses, the Court of Appeal has ensured that these financial instruments remain reliable "cash equivalents," which is essential for the liquidity and stability of the construction industry.

Practice Pointers

• Drafting Incorporation Clauses: When drafting sub-contracts, ensure that the incorporation of "Particular Conditions" from the main contract is explicit. Use clear language in the Letter of Acceptance to refer to the specific documents intended to be part of the sub-contract.
• Reviewing Main Contract Terms: Sub-contractors must carefully review the Main Contract Particular Conditions, as these may contain exclusion clauses that significantly limit their rights to restrain bond calls. The "back-to-back" nature of these contracts means silence on a point in the sub-contract may result in the main contract's harsher terms applying.
• UCTA Compliance: While the court found the clause reasonable here, practitioners should still ensure that exclusion clauses are brought to the attention of the other party to satisfy the "requirement of reasonableness" under the Unfair Contract Terms Act.
• Evidence of Unconscionability: If seeking an injunction, move beyond mere allegations of "unfairness." Provide concrete evidence of the beneficiary’s lack of a bona fide belief in its claim. General disputes over delay or defects are rarely sufficient to meet the "strong prima facie case" threshold.
• Autonomy Principle: Advise clients that a performance bond is independent of the underlying contract. A breach of the underlying contract by the beneficiary does not, by itself, make a call on the bond unconscionable or fraudulent.
• Signature and Execution: While the court was pragmatic here, the best practice remains to have all incorporated documents (like SC Particular Conditions) signed or initialed by both parties to avoid disputes over incorporation.

Subsequent Treatment

This decision has been consistently cited as the authoritative statement on the contractual exclusion of the unconscionability exception in Singapore. It settled the debate that began with CKR Contract Services, confirming that such exclusions are not contrary to public policy. Subsequent High Court decisions have applied the "back-to-back" incorporation logic found in this case to various other types of construction disputes, reinforcing the court's pragmatic approach to complex contractual matrices.

Legislation Referenced

• Unfair Contract Terms Act (Cap 396, 1994 Rev Ed) — Sections 3, 11
• Evidence Act (Cap 97, 1997 Rev Ed) — Sections 103, 105
• Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed) — Section 27(1)

Cases Cited

• BS Mount Sophia Pte Ltd v Join-Aim Pte Ltd [2012] 3 SLR 352
• CKR Contract Services Pte Ltd v Asplenium Land Pte Ltd and another and another appeal and another matter [2015] 3 SLR 1041
• Bintai Kindenko Pte Ltd v Samsung C&T Corp and another [2018] SGHC 191
• Bintai Kindenko Pte Ltd v Samsung C&T Corp [2018] 2 SLR 532
• Bocotra Construction Pte Ltd and others v Attorney-General [1995] 2 SLR(R) 262
• Press Automation Technology Pte Ltd v Trans-Link Exhibition Forwarding Pte Ltd [2003] 1 SLR(R) 712
• Wartsila Singapore Pte Ltd v Lau Yew Choong and another suit [2017] 5 SLR 268
• Huationg (Asia) Pte Ltd v Lonpac Insurance Bhd [2016] 1 SLR 1431
• Abani Trading Pte Ltd v BNP Paribas and another appeal [2014] 3 SLR 909
• International Research Corp PLC v Lufthansa Systems Asia Pacific Pte Ltd and another [2014] 1 SLR 130
• Grace Electrical Engineering Pte Ltd v Te Deum Engineering Pte Ltd [2018] 1 SLR 76
• Koh Lin Yee v Terrestrial Pte Ltd and another appeal [2015] 2 SLR 497
• JBE Properties Pte Ltd v Gammon Pte Ltd [2011] 2 SLR 47
• Arab Banking Corp (B.S.C.) v Boustead Singapore Ltd [2016] 3 SLR 557
• Tay Long Kee Impex Pte Ltd v Tan Beng Huwah (trading as Sin Kwang Wah) [2000] 1 SLR(R) 786
• The “Vasiliy Golovnin” [2008] 4 SLR(R) 994
• Northrop Grumman Mission Systems Europe Ltd v BAE Systems (AL Diriyah C4I) Ltd (2015) 161 ConLR 1

Source Documents

• Original judgment PDF: Download (PDF, hosted on Legal Wires CDN)
• Official eLitigation record: View on elitigation.sg