Case Details
- Title: Soon Li Heng Civil Engineering Pte Ltd v Samsung C&T Corporation & Anor
- Citation: [2019] SGHC 267
- Court: High Court of the Republic of Singapore
- Date: 12 November 2019
- Originating Process: Originating Summons No 439 of 2019
- Judges: Ang Cheng Hock J
- Hearing Dates: 9 May, 14 June, 15 July 2019
- Judgment Reserved: Yes
- Plaintiff/Applicant: Soon Li Heng Civil Engineering Pte Ltd
- Defendants/Respondents: (1) Samsung C&T Corporation; (2) United Overseas Bank Limited
- Legal Area(s): Construction law; payment security; performance bonds; credit and security; unconscionability; interim injunctions
- Key Topic: Whether a call on a performance bond (“PB”) was unconscionable and should be restrained
- Statutes Referenced: Not provided in the supplied extract
- Cases Cited: [2015] SGDC 181; [2018] SGHC 163; [2019] SGHC 267
- Judgment Length: 51 pages, 14,897 words
Summary
This High Court decision concerns a contractor’s attempt to restrain a call on a performance bond (“PB”) issued by a bank at the request of the main contractor. The plaintiff, Soon Li Heng Civil Engineering Pte Ltd (“Soon Li Heng”), was subcontracted by Samsung C&T Corporation (“Samsung C&T”) to carry out excavation and disposal works for the Thomson-East Coast Line project. The PB was furnished as security for the performance and completion of the subcontract works, and it was payable on the first defendant’s demand.
The plaintiff sought an injunction to restrain Samsung C&T from calling on the PB. The plaintiff’s central argument was that the call was unconscionable. The court’s task was therefore not to decide the underlying payment disputes between the subcontractor and main contractor, but to determine whether the call on the PB crossed the high threshold for unconscionability that would justify restraining a demand guarantee/performance bond.
Applying the established principles governing performance bonds and the narrow “unconscionability” exception, the court examined the timing and motivation for the call, including whether the call was being used for an improper purpose rather than to secure genuine performance/completion obligations. The court ultimately refused the injunction, holding that the plaintiff had not established the requisite basis to restrain the call on the PB.
What Were the Facts of This Case?
The dispute arose out of a construction subcontract for excavation and disposal works under a project managed by the Land Transport Authority (“LTA”). Samsung C&T was the main contractor for the Marine Parade Station and Tunnels for the Thomson-East Coast Line (“the Project”). Samsung C&T engaged Soon Li Heng as its subcontractor to carry out excavation and disposal works. The parties entered into a Re-Measurement Sub-Contract dated 22 April 2016 (“the Subcontract”), with a subcontract value of approximately S$16.5 million.
As security for performance and completion, Soon Li Heng furnished a performance bond (“the PB”). The PB was provided by the second defendant bank, United Overseas Bank Limited (“UOB”), as Samsung C&T’s banker. Under the PB, UOB covenanted to pay up to S$826,713.53 upon Samsung C&T’s demand. The PB thus functioned as a payment security instrument designed to provide temporary finality and liquidity, subject only to limited exceptions.
Operationally, the subcontract works involved excavation and disposal of three categories of material: (a) soil; (b) hardcore material; and (c) ground improvement and mixed material. Disposal routes differed by material type. Soil was to be disposed directly to LTA’s dumping ground (Marina East Staging Ground, “MESG”). Hardcore material could not be accepted at MESG, so it was to be disposed to a separate dumping ground sourced by Soon Li Heng (“plaintiff’s dumping ground”). Ground improvement and mixed material were to be disposed at an intermediate treatment site (referred to as “TOL” or the “plaintiff’s staging ground”), where the material would be treated (for example, crushed) so that it could later be disposed at MESG.
Payment disputes then emerged. On 31 August 2018, Soon Li Heng served Payment Claim No. 20 (“PC 20”) for S$3,278,935.95. Samsung C&T issued a payment response/payment certificate reducing the amount payable, and the dispute proceeded to adjudication under the SOP framework (SOP 372/2018). The adjudicator determined that Samsung C&T should pay Soon Li Heng S$2,473,295.20, and this determination was issued on 9 November 2018 (“1AD”). Soon Li Heng was paid the adjudicated sum on 26 December 2018.
What Were the Key Legal Issues?
The principal legal issue was whether Samsung C&T’s call on the PB was “unconscionable” such that the court should restrain the call by granting an injunction. This required the court to consider whether the call was being made in good faith to secure performance/completion obligations, or whether it was motivated by an improper purpose—such as attempting to circumvent the temporary finality of adjudication determinations or re-litigating issues already decided in adjudication.
A secondary but closely related issue was the timing and context of the call. The court had to assess whether Samsung C&T’s conduct, including its reliance on disputed quantities and its communications after the adjudication determination, indicated that the call on the PB was a legitimate security measure or an abusive attempt to obtain payment beyond what was warranted.
In addition, the case raised the broader construction-law policy question of how far the court should go in scrutinising the merits of the underlying payment dispute when the dispute concerns a performance bond call. The court had to balance the sanctity and commercial purpose of performance bonds—especially their role in providing interim liquidity—against the narrow jurisdiction to intervene where unconscionability is established.
How Did the Court Analyse the Issues?
The court began by framing the dispute correctly: the application was not an appeal against the adjudicator’s determination in SOP 372/2018, nor was it a full merits review of the subcontractor’s entitlement to payment. Instead, it was an application to restrain a call on a performance bond. The legal threshold for intervention is intentionally high because performance bonds are designed to be readily enforceable upon demand, and the court’s role is limited to preventing abuse.
Accordingly, the court focused on the “unconscionability” exception. Unconscionability is not established merely because the beneficiary disputes the underlying claim or because there are arguable issues about measurement, rates, or contractual interpretation. Rather, the applicant must show that the call is being made in circumstances that are so unfair or improper that it would be unconscionable to allow the beneficiary to obtain payment under the PB.
In analysing the timing of the call, the court examined the sequence of events after the adjudication determination (1AD). Soon Li Heng had obtained payment pursuant to 1AD, and Samsung C&T had paid the adjudicated sum. Thereafter, Samsung C&T raised further disputes in relation to later payment claims, including Payment Claim No. 24 (“PC 24”). The court noted that Samsung C&T’s arguments about “final quantity of disposal” and “hardcore disposal” were, in substance, disputes about measurement and calculation methods under the Subcontract.
One of the plaintiff’s key contentions was that Samsung C&T’s call on the PB was motivated by improper purposes. The plaintiff argued that Samsung C&T was effectively attempting to revisit positions rejected in the earlier adjudication (SOP 372/2018), including the measurement methodology and conversion assumptions. The plaintiff further contended that Samsung C&T’s call was not genuinely aimed at securing performance but was instead being used as leverage to pressure the subcontractor in ongoing payment disputes.
The court, however, rejected the plaintiff’s attempt to repackage the underlying measurement disputes as unconscionability. The court observed that the adjudication determination had already provided temporary finality on the relevant issues, but the PB call could still be legitimate if it was tied to the contractual security purpose and if the beneficiary’s demand was not a sham or a misuse of the security mechanism. The court also considered that the subcontract involved re-measurement and that subsequent payment claims could legitimately raise different factual or measurement issues, even if they overlap conceptually with earlier disputes.
In particular, the court scrutinised Samsung C&T’s reliance on alleged discrepancies between quantities reported to the LTA and quantities claimed in PC 24. Samsung C&T had asserted that the “final quantity of disposal as of 16 December 2018” was lower than what Soon Li Heng claimed, using calculations based on conversion rates and assumptions about lorry loads (including an assumption of “2000 kg/m3” and “8 m3 per lorry”). Samsung C&T also accused Soon Li Heng of “persistent dishonest conduct” and “fraudulent over-claim” in its correspondence. Soon Li Heng responded that Samsung C&T’s calculations were based on methods not aligned with the Subcontract and that the adjudicator in 1AD had already determined the correct measurement approach.
The court’s analysis treated these disputes as, at most, matters for adjudication/arbitration or further contractual processes, rather than as proof that the PB call was unconscionable. The court emphasised that allegations of over-claiming or dishonesty, without more, do not automatically establish unconscionability. The court required evidence that the call was made for an improper purpose in a manner that would offend equitable conscience, such as using the PB to obtain payment that is plainly not due under the security framework, or making a demand that is not genuinely connected to the security’s function.
Finally, the court considered the plaintiff’s argument that Samsung C&T’s position had been rejected in SOP 372/2018 and that Samsung C&T was therefore acting improperly by calling the PB. The court accepted that temporary finality is a key feature of adjudication, but it did not treat this as determinative of unconscionability. Instead, it looked at whether the PB call was a direct attempt to circumvent the adjudication’s effect. On the evidence presented, the court found insufficient basis to conclude that Samsung C&T’s call was an abuse of the PB mechanism.
What Was the Outcome?
The court dismissed the plaintiff’s application to restrain the call on the performance bond. In practical terms, Samsung C&T was not prevented from calling on the PB, and the bank’s obligation to pay upon demand remained enforceable.
The decision therefore reinforces the narrow scope of judicial intervention in performance bond calls in Singapore. Unless a claimant can demonstrate unconscionability at the high threshold required, disputes about measurement, valuation, or contractual interpretation will generally be left to the adjudication/arbitration processes rather than being used to block security payments.
Why Does This Case Matter?
This case is significant for practitioners because it illustrates how Singapore courts approach applications to restrain calls on performance bonds. The decision underscores that the court will not readily infer unconscionability from the existence of a genuine dispute between the parties. Even where a beneficiary’s demand is accompanied by allegations of over-claiming or dishonesty, the applicant must still show that the demand is made for an improper purpose or in circumstances that are so unfair that it would be unconscionable to allow payment.
For construction lawyers, the case also highlights the interaction between adjudication and security instruments. Adjudication determinations provide temporary finality, but that does not automatically immunise a subcontractor from further security calls if the beneficiary can point to a legitimate basis under the security framework. Practitioners should therefore carefully assess the contractual triggers for calling a performance bond and the factual matrix surrounding the demand, including timing and correspondence, rather than relying solely on the fact that earlier adjudication rejected a particular measurement approach.
From a risk-management perspective, the decision serves as a reminder that performance bonds are designed to be “pay now, argue later” instruments. Parties seeking to restrain a call must prepare evidence that goes beyond disagreement and into the realm of abuse—such as demonstrating that the demand is plainly not connected to the security’s purpose or that it is a tactical misuse to defeat the adjudication regime.
Legislation Referenced
- (Not provided in the supplied extract.)
Cases Cited
- [2015] SGDC 181
- [2018] SGHC 163
- [2019] SGHC 267
Source Documents
This article analyses [2019] SGHC 267 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the full judgment for the Court's complete reasoning.