Case Details
- Citation: [2025] SGHC(A) 3
- Court: SGHCA (Appellate Division of the High Court)
- Case Title: Ee Hup Construction Pte Ltd v China Jingye Engineering Corp Ltd (Singapore Branch) & Anor
- Appellate Division / Civil Appeal No: Civil Appeal No 61 of 2024
- Date of Decision: 3 February 2025
- Date of Delivery of Grounds: 11 February 2025
- Judges: Tay Yong Kwang JCA, See Kee Oon JAD and Mavis Chionh Sze Chyi J
- Appellant/Applicant: Ee Hup Construction Pte Ltd (“EH”)
- Respondents: (1) China Jingye Engineering Corporation Limited (Singapore Branch) (“CJY”); (2) India International Insurance Pte Ltd (“III”)
- Procedural History: Appeal against HC/OA 426/2024 (injunction application restraining call on on-demand performance bond); also involving a later revision of an order on stay of execution pending appeal
- Legal Areas: Building and Construction Law; Performance Bonds; Injunctions (including “Erinford injunction”); Unconscionability
- Statutes Referenced: Building and Construction Industry Security of Payment Act 2004 (2020 Rev Ed) (“SOPA”) (notably s 15(3))
- Cases Cited: BS Mount Sophia Pte Ltd v Join-Aim Pte Ltd [2012] 3 SLR 352
- Judgment Length: 20 pages; 5,879 words
Summary
This decision concerns EH’s attempt to restrain CJY from calling on an “irrevocable and unconditional on-demand” performance bond issued by III. The Appellate Division upheld the High Court’s approach and, in substance, confirmed that the high threshold for restraining an on-demand bond on the ground of unconscionability was not met. The court reiterated the policy rationale for performance bonds: they are intended to provide security and to preserve commercial certainty, so that beneficiaries can call on them without being drawn into the merits of underlying disputes.
EH sought an injunction to stop CJY’s bond call in relation to two categories of alleged losses: (a) “TOL fees” (temporary land occupation fees and related charges), for which the High Court granted an injunction; and (b) “back-charges” (costs allegedly incurred by CJY on EH’s behalf, including equipment, services, materials, manpower, and safety lapses), for which the High Court refused an injunction. EH appealed the refusal, while CJY did not appeal the grant in respect of the TOL fees. The Appellate Division dismissed EH’s appeal and did not disturb the costs order.
What Were the Facts of This Case?
CJY was the main contractor engaged by the Land Transport Authority of Singapore for the Bedok South Mass Rapid Transit station and tunnels for the Thomson–East Coast line (the “Project”). CJY subcontracted excavation and earthworks to EH under a subcontract dated 13 December 2016 (the “Sub-Contract”). The Sub-Contract was a fixed lump sum arrangement for $5,483,334, with EH’s scope set out in schedule B1.
Under cl 9 of the Sub-Contract, EH was required to procure an “irrevocable and unconditional on-demand” performance bond in the sum of $501,163.80 (10% of the lump sum). Accordingly, Performance Bond No AGPB-013715 was issued by III in favour of CJY for the “Bond Amount”. The bond was stated to be valid until 31 May 2024, with automatic extensions of 180-day periods unless III gave 90 days’ written notice of non-extension. III gave such notice on 6 October 2022, enabling CJY to call on the bond upon expiry unless further extension was directed.
Disputes arose between EH and CJY regarding alleged “back-charges” that CJY claimed to have incurred on EH’s behalf. EH issued payment claim (PC) No 69 on 25 March 2023 for $1,909,794.65 for works carried out up to that date. CJY responded with payment response (PR) No 65 on 15 April 2023, allowing payment of only $63,938.87 and referencing back-charges totalling $327,656.17. EH then commenced adjudication in SOP/AA 069/2023 (“AA 69/2023”) concerning PC 69. The adjudicator determined that $642,307.63 was payable to EH, but the determination did not take into account the back-charges because CJY withdrew its back-charges claim for the purposes of that adjudication. EH’s subsequent adjudication review application was dismissed.
After AA 69/2023, EH issued further payment claims for the period from 1 November 2016 to the dates of each PC, and CJY issued PRs incorporating back-charges. Ultimately, CJY called on the performance bond on 16 April 2024. In its call letter to III, CJY stated it had sustained costs and/or expenses totalling $598,015.19 arising from EH’s default and/or matters pertaining to the Sub-Contract. CJY’s breakdown showed $499,864.67 as back-charges and $98,150.52 as “Temporary Land Occupation (TOL) fees and charges”, including damages imposed by the Singapore Land Authority for TOL handover after expiry. EH’s injunction application sought to restrain the bond call in its entirety. The High Court granted an injunction only for $98,150.52 (TOL fees) and refused for $499,864.67 (back-charges).
EH also pursued further adjudication activity. On 29 April 2024, EH brought a claim in PC 76 for $1,289,590.33 to adjudication in SOP/AA 103/2024 (“AA 103/2024”). CJY issued PR 73 certifying a negative amount payable to EH of $345,903.27 and, importantly, CJY withdrew its back-charges claim for the purposes of AA 103/2024, so the adjudicator did not consider the back-charges and instead determined that EH was entitled to $150,865.61.
What Were the Key Legal Issues?
The central legal issue was whether CJY’s call on an on-demand performance bond was unconscionable, such that the court should restrain the call. The Appellate Division emphasised that unconscionability is a high-threshold ground, reflecting the need to preserve the raison d’être of performance bonds. The question was not whether the beneficiary might ultimately be wrong on the merits of its underlying claim, but whether the call itself crossed the exceptional line of unconscionability.
A second issue concerned EH’s reliance on SOPA’s adjudication regime, particularly the alleged “duty to speak” under s 15(3) of SOPA. EH argued that CJY breached this duty by withdrawing back-charges from adjudication in AA 69/2023 and AA 103/2024 (the “two ADs”), and that the bond call effectively negated the temporary finality of those adjudications. The court had to decide whether these arguments, even if accepted in part, could amount to unconscionability sufficient to restrain an on-demand bond call.
Third, EH advanced an alternative theory that the bond call was fraudulent. This required the court to consider whether the evidence supported a finding that CJY knew it had no basis to call on the bond (for example, because the back-charges were “falsely inflated”), and whether that knowledge was sufficiently established at the interlocutory stage.
How Did the Court Analyse the Issues?
The Appellate Division began by restating the governing principles for restraining calls on performance bonds. It relied on the Court of Appeal’s decision in BS Mount Sophia Pte Ltd v Join-Aim Pte Ltd [2012] 3 SLR 352, where the court held that the threshold for unconscionability is high and the burden lies on the party seeking an injunction to show a strong prima facie case. The policy rationale is twofold: first, to respect the parties’ allocation of risk in construction contracts; and second, to preserve the commercial function of performance bonds as security that can be called upon without being undermined by disputes about underlying performance.
Against that framework, the court examined EH’s submission that the High Court applied an incorrect (subjective) test of unconscionability. The Appellate Division accepted that the High Court’s formulation was not wrong. It treated unconscionability as an objective legal threshold informed by the circumstances, rather than a purely subjective inquiry into the beneficiary’s state of mind. The court’s analysis therefore focused on whether the evidence, viewed at the interlocutory stage, showed conduct that was sufficiently egregious to justify an exceptional restraint on an on-demand bond.
EH’s “duty to speak” argument under s 15(3) of SOPA formed a major plank of its case. EH contended that CJY’s withdrawal of back-charges from AA 69/2023 and AA 103/2024 meant CJY had failed to put forward its case in those adjudications, and that calling on the bond afterwards was inconsistent with the temporary finality of adjudication outcomes. The Appellate Division rejected the proposition that CJY’s conduct in withdrawing back-charges from adjudication necessarily amounted to unconscionability in the bond context. In particular, the court held that CJY did not breach any relevant “duty to speak” by withdrawing the back-charges from adjudication proceedings. The court also did not accept that the bond call negated the two adjudication determinations in a manner that automatically rendered the call unconscionable.
In addressing EH’s broader argument that the call was unconscionable because the back-charges were excessive, without merit, and known to be contested, the Appellate Division drew a clear line between disputes about quantum and the exceptional standard required to restrain a bond call. Even if the back-charges were ultimately found to be overstated, that would not necessarily establish unconscionability. The court noted that the back-charges appeared to be supported by evidence, which undermined EH’s attempt to characterise the call as inherently abusive or dishonest.
The court also dealt with EH’s “status quo” argument. EH argued that it was just and equitable to maintain the status quo pending final determination of the back-charge disputes. The Appellate Division held there was no merit to this argument in the circumstances. The status quo rationale cannot displace the high threshold for unconscionability in performance bond cases, because doing so would erode the security function of on-demand bonds and effectively convert them into instruments whose calls are routinely litigated on the merits.
On the fraud theory, the Appellate Division again applied the interlocutory evidential standard. EH’s fraud case overlapped with its unconscionability case: it alleged that CJY had no basis to call because the back-charges were “falsely inflated” and CJY knew it. The court found no basis to conclude that the call was fraudulent. The evidence did not establish the requisite knowledge and dishonest intention at the threshold level required for fraud-based restraint.
Finally, the court considered EH’s attempt to obtain an “Erinford injunction”. The High Court had declined to grant an Erinford injunction on the basis that EH had not placed material before the court that merited it. The Appellate Division agreed there was no basis to grant such an injunction. It also declined to disturb the High Court’s costs order, finding no reason to interfere with the costs outcome given EH’s partial success at first instance.
What Was the Outcome?
The Appellate Division dismissed EH’s appeal against the High Court’s refusal to restrain CJY’s call on the performance bond in respect of the $499,864.67 representing back-charges. The practical effect is that CJY remained entitled to call on the bond for the back-charge component, while the High Court’s injunction in respect of the $98,150.52 TOL fees remained undisturbed (since CJY did not appeal that portion).
The court also did not disturb the High Court’s costs order. EH was therefore left with the outcome that it succeeded only partially at first instance and failed to expand the injunction to cover the back-charges component on appeal.
Why Does This Case Matter?
This decision is significant for practitioners because it reinforces Singapore’s strict approach to restraining calls on on-demand performance bonds. The Appellate Division’s reasoning underscores that unconscionability is not a vehicle for re-litigating the merits of construction disputes, including disputes about back-charges and quantum. Even where adjudication has produced outcomes that do not consider certain claims (because of withdrawal), that does not automatically translate into unconscionability in the bond-call context.
For construction lawyers, the case also clarifies the limits of using SOPA’s adjudication framework as a basis to restrain bond calls. While SOPA adjudication outcomes have temporary finality and the statutory scheme aims to reduce delay, the court will not readily infer that a beneficiary’s conduct in adjudication equates to unconscionable conduct in calling a performance bond. This is particularly relevant where parties strategically withdraw claims in adjudication for procedural or evidential reasons.
More broadly, the decision provides guidance on the evidential burden at the interlocutory stage. The court’s emphasis on the presence of supporting evidence for the back-charges illustrates that a party seeking an injunction must do more than assert that the underlying claim is excessive or contested. It must show a strong prima facie case of unconscionability or fraud—an exceptional standard that protects the commercial integrity of performance bonds.
Legislation Referenced
- Building and Construction Industry Security of Payment Act 2004 (2020 Rev Ed) (“SOPA”), s 15(3) [CDN] [SSO]
Cases Cited
Source Documents
This article analyses [2025] SGHCA 3 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the full judgment for the Court's complete reasoning.