Case Details
- Citation: [2015] SGCA 24
- Title: CKR Contract Services Pte Ltd v Asplenium Land Pte Ltd and another and another appeal and another matter
- Court: Court of Appeal of the Republic of Singapore
- Date of Decision: 22 April 2015
- Judges: Sundaresh Menon CJ; Chao Hick Tin JA; Andrew Phang Boon Leong JA
- Case Numbers: Civil Appeals Nos 204 and 206 of 2014 and Summons No 197 of 2015
- Parties: CKR Contract Services Pte Ltd (appellant/applicant); Asplenium Land Pte Ltd and another (respondent)
- Second Respondent: DBS Bank Ltd (neutral position; did not make submissions)
- Legal Area: Credit and Security — Performance bonds
- Key Issue: Whether a contractual clause excluding the unconscionability exception for restraining calls on an on-demand performance bond is void for ouster of jurisdiction/public policy
- Statutes Referenced: Unfair Contract Terms Act
- Lower Court Decision: CKR Contract Services Pte Ltd v Asplenium Land Pte Ltd and another [2015] 1 SLR 987
- Procedural Posture: Appeals by both parties against the High Court judge; CKR also sought to adduce fresh evidence on appeal
- Judgment Length (reported): 10 pages, 5,910 words
- Counsel: N Sreenivasan SC, Shankar A S, Vithyashree and Lim Min (Straits Law Practice LLC) for the appellant in CA 204/2014 and the first respondent in CA 206/2014; Christopher Chuah, Kua Lay Theng, Candy Agnes Sutedja, Lydia Bte Yahaya and Amanda Lim Qian Wen (WongPartnership LLP) for the first respondent in CA 204/2014 and the appellant in CA 206/2014; Tham Hsu Hsien (Allen & Gledhill LLP) for the second respondent in CA 204/2014 and CA 206/2014
Summary
CKR Contract Services Pte Ltd v Asplenium Land Pte Ltd [2015] SGCA 24 concerned an application by a main contractor to restrain a call on an on-demand performance bond. The developer (Asplenium) called the bond after purported termination of the main contract. The contractor (CKR) sought injunctive relief on the ground that the call was “unconscionable”. The central question on appeal was whether the parties’ contract—specifically a clause barring CKR from restraining a bond call on any ground other than fraud—was enforceable or void for being contrary to public policy as an ouster of the court’s jurisdiction.
The Court of Appeal held that the clause was enforceable. It rejected the High Court’s view that the clause was unenforceable because it ousted the court’s jurisdiction. Applying established principles governing performance bonds and the narrow circumstances in which injunctions may be granted to restrain calls, the Court of Appeal affirmed that, absent fraud, the unconscionability exception could be excluded by contract. As there was no suggestion of fraud, the Court dismissed CKR’s appeal and allowed Asplenium’s cross-appeal.
What Were the Facts of This Case?
Asplenium employed CKR as the main contractor for the construction of a condominium along Seletar Road. The main contract was for a two-year period commencing 21 January 2013, with a completion date of 20 January 2015. The contract sum was $88,063,838.00. The parties’ contractual framework was based on the amended Singapore Institute of Architects Articles and Conditions of Building Contract (9th Ed, Reprint, August 2011).
A key credit/security feature of the contract was the requirement that CKR furnish an on-demand performance bond in Asplenium’s favour for 10% of the contract sum. The bond was intended to operate as security for the proper and due performance of CKR’s obligations. Clause 3.5.8 of the Preliminaries (incorporated into the main contract) provided that, except in the case of fraud, CKR was not entitled to enjoin or restrain Asplenium from making any call or demand on the performance bond (or receiving cash proceeds), nor could CKR prevent the obligor from paying cash proceeds, “on any ground including the ground of unconscionability”.
The performance bond was duly issued by DBS Bank Ltd for $8,806,383.80 and was due to expire on 18 October 2016. Disputes arose between the parties during the project. Asplenium complained of substandard work and slow progress. These disagreements culminated in Asplenium’s purported termination of the main contract on 24 October 2014, based on two termination certificates issued by the architect on 23 October 2014. The disputes under the main contract were submitted to arbitration pursuant to the arbitration clause in the main contract.
On 4 November 2014, Asplenium made a call on the performance bond for the full secured sum. CKR then applied for and obtained an injunction restraining Asplenium from receiving payment under the bond on an ex parte basis. At the inter partes hearing on 11 November 2014, Asplenium reduced the call amount to $7,697,687.51. The High Court dismissed CKR’s application on 18 December 2014. CKR appealed and also obtained an Erinford injunction pending the resolution of the appeal. Separately, CKR sought to adduce fresh evidence on appeal to support its unconscionability case.
What Were the Key Legal Issues?
The Court of Appeal identified the issue broadly as whether parties can agree to exclude the unconscionability exception as a ground for restraining a call on an on-demand performance bond. This required the Court to consider the enforceability of the contractual clause that barred CKR from restraining the bond call on unconscionability grounds (save for fraud).
The crucial legal question was whether the clause was void and unenforceable because it was contrary to public policy as an ouster of the court’s jurisdiction. In other words, the Court had to decide whether a contractual agreement limiting the grounds for injunctive relief effectively fettered the court’s ability to grant relief in an appropriate case, thereby undermining the constitutional/common law principle of access to the courts.
In addition, the Court had to address the performance bond framework under Singapore law, including the established circumstances in which injunctions may be granted to restrain calls: fraud and, in appropriate cases, unconscionability. Since fraud was not in issue, the case turned on whether unconscionability could be contractually excluded without offending public policy.
How Did the Court Analyse the Issues?
The Court of Appeal began by reaffirming the established approach to on-demand performance bonds in Singapore. It is “well established” that injunctive relief to restrain a call on an on-demand performance bond may be granted in two situations: where the call is made fraudulently, and where the call is made unconscionably. The Court emphasised that fraud was not raised in the appeals, leaving unconscionability as the only potential basis for restraint.
Against that background, the Court framed the central question as one of contractual freedom versus public policy. Freedom of contract is the norm, but courts may override contractual rights where doing so serves a greater public good. However, because “public policy” is inherently nebulous, such intervention is treated as an exceptional step. The Court also noted that one category of contracts held contrary to public policy concerns agreements that oust the jurisdiction of the courts. The Court therefore analysed whether the clause in question fell within that category.
On the enforceability analysis, the Court disagreed with the High Court’s reasoning that clause 3.5.8 was unenforceable because it ousted the court’s jurisdiction. The High Court had treated the clause as a “severe incursion” into the court’s freedom to grant injunctive relief on unconscionability, and had reasoned that equitable jurisdiction cannot be curtailed by contract. The Court of Appeal, however, treated the clause as a limitation on the grounds for relief rather than a removal of access to the courts altogether. This distinction mattered: a clause that prevents a party from invoking a particular substantive ground (unconscionability) does not necessarily prevent the court from exercising its jurisdiction in all circumstances.
The Court of Appeal also addressed the conceptual basis of the unconscionability exception. The unconscionability exception is a judicially recognised safeguard against abusive conduct in the context of performance bonds. Yet the Court accepted that the parties’ bargain can allocate risk and define the circumstances in which the bond may be restrained. In this case, the clause expressly preserved the fraud exception, which is the traditional and absolute basis for restraint. By contrast, it excluded unconscionability as a ground. The Court treated this as consistent with the commercial function of on-demand bonds: they are designed to provide prompt and reliable security, and the law generally resists expanding the circumstances in which calls may be restrained.
In reaching its conclusion, the Court of Appeal applied the public policy framework for ouster clauses. It considered that the clause did not “oust” the jurisdiction of the court because the court remained available to determine whether fraud was present, and because the clause did not prevent the court from being seized of disputes. Put differently, the clause did not bar the court from granting relief where the recognised legal threshold (fraud) was met; it only prevented CKR from seeking restraint on a different, contractually excluded basis. The Court therefore held that clause 3.5.8 was enforceable.
Finally, the Court of Appeal applied the enforceability finding to the facts. Since there was no suggestion of fraud in the call, CKR could not rely on unconscionability to restrain the bond call. Accordingly, CKR’s appeal was dismissed. The Court also allowed Asplenium’s cross-appeal against the High Court’s ruling that the clause was unenforceable.
What Was the Outcome?
The Court of Appeal held that clause 3.5.8 of the Preliminaries was enforceable and not void for being contrary to public policy as an ouster of the court’s jurisdiction. It therefore allowed Asplenium’s appeal (cross-appeal) and overturned the High Court’s finding that the clause was unenforceable.
Because there was no suggestion of fraud, the Court dismissed CKR’s appeal. The practical effect was that the contractor’s attempts to restrain the on-demand performance bond call on unconscionability grounds failed, and Asplenium was entitled to receive the called bond proceeds subject to the contractual and legal framework governing the bond.
Why Does This Case Matter?
CKR Contract Services is significant for practitioners dealing with performance bonds and other on-demand security instruments. It clarifies that, in Singapore, parties may contractually exclude the unconscionability exception as a ground for restraining a call on an on-demand performance bond, provided the clause does not amount to an impermissible ouster of jurisdiction. This reinforces the commercial expectation that on-demand bonds will be honoured promptly, with judicial intervention kept within narrow and predictable boundaries.
The decision also provides a useful analytical framework for assessing public policy challenges to contractual clauses. The Court’s reasoning underscores that not every restriction on remedies or grounds for relief is an ouster clause. The key inquiry is whether the clause removes access to the courts or fetters the court’s jurisdiction in a manner that offends public policy. Where the court’s jurisdiction remains available—particularly for the fraud exception—the clause is more likely to be upheld.
For contractors and developers, the case has direct drafting and risk allocation implications. Contractors seeking to preserve the ability to restrain bond calls on unconscionability grounds must negotiate clauses that do not exclude that exception. Conversely, employers/developers who want the certainty of on-demand payment should ensure that the contract contains clear language excluding unconscionability as a restraint ground, while retaining the fraud carve-out consistent with the law’s baseline safeguards.
Legislation Referenced
- Unfair Contract Terms Act
Cases Cited
- CKR Contract Services Pte Ltd v Asplenium Land Pte Ltd and another [2015] 1 SLR 987
Source Documents
This article analyses [2015] SGCA 24 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the full judgment for the Court's complete reasoning.