Case Details
- Citation: [2020] SGCA 79
- Title: Samsung C&T Corporation v Soon Li Heng Civil Engineering Pte Ltd
- Court: Court of Appeal of the Republic of Singapore
- Date of Decision: 17 August 2020 (grounds of decision); appeal dismissed on 17 July 2020
- Civil Appeal No: 222 of 2019
- Originating Summons No: 439 of 2019
- Judges: Judith Prakash JA, Belinda Ang Saw Ean J and Woo Bih Li J
- Judgment Author: Woo Bih Li J (delivering the grounds of decision)
- Plaintiff/Applicant: Samsung C&T Corporation (appellant in the Court of Appeal)
- Defendant/Respondent: Soon Li Heng Civil Engineering Pte Ltd (respondent in the Court of Appeal)
- Other Parties in Originating Summons: United Overseas Bank Limited (defendant in the High Court proceedings)
- Legal Areas: Construction law; security of payment; performance bonds; injunctions; unconscionability
- Statutes Referenced: Building and Construction Industry Security of Payment Act (Cap 30B) (“SOPA”); reference also made to the NSW Act (New South Wales legislation) for comparative purposes
- Key Procedural Context: Injunction to restrain a beneficiary from receiving money under a performance bond after an adjudication determination (“AD”)
- Prior/Related Decision: Samsung C&T Corp v Soon Li Heng Civil Engineering Pte Ltd and another [2019] SGHC 267
- Judgment Length: 21 pages; 6,095 words
Summary
This Court of Appeal decision concerns the interaction between Singapore’s statutory adjudication regime under the Building and Construction Industry Security of Payment Act (Cap 30B) (“SOPA”) and the commercial function of performance bonds. The dispute arose from a construction subcontract where the subcontractor (SLH) procured a performance bond in favour of the main contractor (Samsung). After an adjudication determination (“AD”) was made in SLH’s favour, Samsung demanded payment under the performance bond, seeking to recover an alleged overpayment that it said was supported by “new evidence”. SLH obtained an injunction restraining Samsung from receiving the bond proceeds.
On appeal, the Court of Appeal dismissed Samsung’s appeal and upheld the injunction. The court’s central holding was that it is unconscionable to call on a performance bond in circumstances where doing so would negate the temporary finality of an AD before the parties’ dispute is finally determined. The court emphasised that SOPA’s legislative scheme is designed to ensure expeditious interim payment outcomes through adjudication, without allowing parties to undermine those outcomes by collateral means such as performance bond calls.
What Were the Facts of This Case?
Samsung C&T Corporation was engaged by the Land Transport Authority (“LTA”) as the main contractor for the Marine Parade Station and Tunnels for the Thomson-East Coast Line (the “Project”). Samsung in turn subcontracted excavation and disposal works to Soon Li Heng Civil Engineering Pte Ltd (“SLH”). The parties entered into a re-measurement subcontract dated 22 April 2016 (the “Subcontract”). Under the Subcontract, SLH procured a performance bond from United Overseas Bank Limited dated 27 June 2016 in favour of Samsung (the “PB”).
The Subcontract required SLH to excavate and dispose of three categories of material: (a) soil; (b) hardcore material; and (c) ground improvement and mixed material. Importantly, the disposal arrangements were structured such that there was a separate disposal site for each type of material. This mattered later because the measurement and quantification of disposal quantities depended on the contractual measurement principles applicable to each category of work and material.
On 31 August 2018, SLH served Payment Claim No 20 (“PC 20”) on Samsung for $3,278,935.95. Samsung responded with a payment response (Payment Certificate No 20, “PR 20”) stating that Samsung would pay only $167,848.99. The dispute proceeded to adjudication under SOPA (SOP 372/2018). The adjudicator determined that Samsung was to pay SLH a sum, and an amended AD issued on 19 November 2018 reduced the adjudicated sum to $2,473,295.20 (including GST) (referred to as “1AD”).
Samsung then issued a Notice of Dispute on 15 December 2018 and terminated the Subcontract on 17 December 2018. Samsung paid the adjudicated sum under 1AD on 26 December 2018. Subsequently, on 31 December 2018, SLH served Payment Claim No 24 (“PC 24”). Samsung later asserted that it had identified discrepancies in SLH’s claimed final disposal quantities as of 16 December 2018, based on an email from SLH to LTA dated 8 January 2019. Samsung’s position was that SLH had over-claimed and that the over-claim could be demonstrated using a formula based on lorry loads and weights.
What Were the Key Legal Issues?
The appeal primarily turned on whether Samsung’s call on the performance bond was unconscionable. While performance bonds are generally enforceable according to their terms, Singapore law recognises limited exceptions where an injunction may be granted to restrain a beneficiary from receiving bond proceeds. The key question was whether Samsung’s demand, made after an AD had been issued in SLH’s favour, was an attempt to undermine the statutory adjudication outcome.
A secondary issue concerned the contractual basis for Samsung’s demand under the PB. The High Court had considered whether Samsung was entitled under the Subcontract to demand payment under the PB to satisfy its alleged overpayment claim, focusing on the offset and set-off clause (cl 17.7). However, the Court of Appeal indicated that once unconscionability was established, it was unnecessary to decide the contractual entitlement issue.
How Did the Court Analyse the Issues?
The Court of Appeal began by framing the dispute within SOPA’s legislative purpose. SOPA was enacted to provide an expeditious mechanism for payment in the event of disputes in building and construction contracts. The adjudication process is intended to be temporary and interim: an adjudicator’s determination is binding for the purposes of payment pending final resolution by the courts or other dispute resolution processes. This temporary finality is critical to the statutory scheme, because it prevents the adjudication outcome from being rendered illusory.
Against this backdrop, the court stressed that SLH did not rely merely on the existence of an AD. Rather, Samsung’s reasons for calling on the PB had already been considered and rejected by the adjudicator in the SOP 372/2018 adjudication that resulted in 1AD. The Court of Appeal held that it is unconscionable for a party to call on a performance bond where the effect is to negate an AD prior to any final determination of the dispute between the parties. The court’s reasoning was anchored in the legislative scheme embodied in SOPA: allowing performance bond calls to defeat adjudication outcomes would undermine the statutory objective of maintaining interim payment certainty.
The court agreed with the High Court’s assessment of Samsung’s “New Evidence” argument. Samsung claimed that it had obtained new evidence after 1AD, which allegedly showed that SLH had over-claimed in PC 24. The High Court had found that Samsung’s approach did not account for the contractual measurement principles and that the alleged new evidence did not genuinely establish an overpayment when the Subcontract’s measurement methodology was properly applied. The Court of Appeal indicated it was unnecessary to revisit the High Court’s detailed reasoning on this point because Samsung had not shown error in the High Court’s reasoning and conclusions.
In particular, the High Court had observed that the Subcontract provided different methods of measurement for different kinds of work and different types of material disposed of. Samsung’s method, which relied on a simplified approach based on lorry loads and weights, did not reflect the contractual structure. For hardcore material, the contractual bills of quantities used lorry loads for some measurements and “as built drawings” for others, meaning Samsung’s exclusive reliance on lorry loads was not correct. The High Court also found that Samsung’s annex or table did not correlate to the “new evidence” it claimed to have discovered; instead, it was essentially a reference back to figures already considered in PR 20. The Court of Appeal accepted that Samsung’s overpayment case was, in substance, a facade to justify calling on the PB.
On the unconscionability analysis, the Court of Appeal also addressed Samsung’s attempt to draw support from New South Wales law. The High Court had distinguished the statutory provisions in Singapore from those in New South Wales, noting that New South Wales does not have an equivalent to s 21 of SOPA, which provides for the temporary finality of an AD. The Court of Appeal endorsed the core point: the presence of SOPA’s temporary finality mechanism means that collateral enforcement mechanisms should not be used to circumvent the adjudication outcome. In other words, unconscionability in this context is not merely about bad faith in the abstract; it is about the effect of the bond call in undermining the statutory interim payment structure.
Finally, although the Court of Appeal did not need to decide the contractual entitlement issue, it noted that the High Court had interpreted cl 17.7 of the Subcontract as requiring that any recovery through the Subcontract Performance Security or set-off must be “under the Subcontract” in the sense of being referable to a specific contractual provision. The High Court had found that Samsung’s demand was not made pursuant to any such provision, and therefore was not consistent with the Subcontract. The Court of Appeal, however, treated this as secondary once unconscionability was established.
What Was the Outcome?
The Court of Appeal dismissed Samsung’s appeal and upheld the injunction granted by the Judge below. Practically, this meant that Samsung was restrained from receiving money under the performance bond after the adjudication determination in SLH’s favour (1AD). The injunction preserved the interim payment outcome mandated by SOPA pending final resolution of the parties’ dispute.
The decision reinforces that performance bond calls cannot be used as a tactical substitute for the adjudication process. Where the call would effectively negate an AD before the dispute is finally determined, the court may intervene on the basis of unconscionability.
Why Does This Case Matter?
Samsung C&T Corporation v Soon Li Heng Civil Engineering Pte Ltd is significant for practitioners because it clarifies the boundary between (i) the enforceability of performance bonds and (ii) the statutory policy of SOPA adjudication. Performance bonds are often used to manage risk and ensure performance or payment security. However, this case confirms that courts will not allow bond mechanisms to be deployed in a manner that defeats the temporary finality of an adjudication determination.
For main contractors and subcontractors, the decision highlights that the unconscionability inquiry will focus on the effect of the bond call on the SOPA adjudication outcome. If the beneficiary’s reasons for calling the bond have already been considered in an adjudication, or if the call is functionally an attempt to re-litigate the same dispute in a collateral forum, the court is likely to view the call as unconscionable. This is especially so where the beneficiary’s “new evidence” does not genuinely engage with the contractual measurement or valuation principles that govern the underlying claim.
For law students and litigators, the case is also useful as an illustration of how SOPA’s legislative scheme informs equitable relief. The court’s reasoning demonstrates that unconscionability is not limited to traditional categories such as fraud or clear breach of bond terms; it can arise where the bond call undermines the statutory interim payment architecture. Practitioners advising on performance bond strategy in construction disputes should therefore assess not only the bond’s terms and the factual basis for the call, but also the adjudication history and the likely impact on the temporary finality principle.
Legislation Referenced
- Building and Construction Industry Security of Payment Act (Cap 30B) (“SOPA”), including s 21 (temporary finality of adjudication determinations)
- Reference to the NSW Act (New South Wales legislation) for comparative purposes regarding the absence of an equivalent temporary finality provision
Cases Cited
- Samsung C&T Corp v Soon Li Heng Civil Engineering Pte Ltd and another [2019] SGHC 267
- Samsung C&T Corporation v Soon Li Heng Civil Engineering Pte Ltd [2020] SGCA 79
Source Documents
This article analyses [2020] SGCA 79 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the full judgment for the Court's complete reasoning.