Attribution and the Illegality Defence

AuthorErnest Lim
Publication Date01 May 2016
Injunctive Relief: But Let’s Agree Not To Have It?
Lau Kwan Ho
The ability of parties contractually to limit their right to seek injunctive relief has not often been
judicially discussed. An interesting case from Singapore nowappear s to suggest that this is much
more than a theoretical possibility. Some arguments can, however, be made to demonstrate
that this is perhaps not the vista of opportunity over which some contract draughtsmen might
rejoice, and care should be taken to ascertain the boundaries of the law, as explained in this
The recent decision in CKR Contract Services Pte Ltd vAsplenium Land Pte Ltd1
(Asplenium) saw a rather uncommon issue being raised before the Court of
Appeal of Singapore. Can a party contractually limit its right to seek injunctive
relief, in this case to restrain the counterparty from calling on a performance
bond on the basis that the call was made unconscionably? The court’s reply
was yes, but deeper questions remain unanswered. In particular, the result raises
a number of general issues which have important conceptual and practical
It should be noted at the outset that the law of Singapore on performance
bonds differs from English law in one significant respect. Both would allow a
party to restrain another from calling on a performance bond on the ground that
the call was made fraudulently, but only Singapore law additionally permits a
restraining order to be made in cases where the call wasmade unconscionably.The
‘unconscionability exception’ (as it became known) was judicially introduced
in Singapore to counter the increasing prevalence of abusive calls by bond
beneficiaries, as described in an early case:
We are concerned with abusive calls on the bonds. It should not be forgotten that a
performance bond can operate as an oppressive instrument, and in the event that a
beneficiary calls on the bond in circumstances, where there is prima facie evidence of
fraud or unconscionability, the court should step in to intervene at the interlocutory
stage until the whole of the circumstances of the case has been investigated.It should
also not be forgotten that a performance bond is basically a security for the performance of the
main contract, and as such we see no reason, in principle, why it should be so sacrosanct and
inviolate as not to be subject to the court’s intervention except on the ground of fraud.2
Advocate and Solicitor, Singapore.
1CKR Contract Services Pte Ltd vAsplenium Land Pte Ltd [2015] SGCA 24; [2015] 3 SLR 1041.
2GHL Pte Ltd vUnitrack Building Construction Pte Ltd [1999] SGCA 60; [1999] 3 SLR(R) 44 at
[24] (emphasis added).
C2016 The Author.The Moder n Law Review C2016 The Modern Law Review Limited. (2016) 79(3) MLR 468–503
Published by John Wiley& Sons Ltd, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA
Lau Kwan Ho
The Singapore Court of Appeal has since confirmed on multiple occasions that
the unconscionability exception is a separate ground from fraud, and includes
conduct such as unfairness and abuse which are broader than conduct that
would constitute fraud. A finding of unconscionability is therefore a conclu-
sion applied to conduct which is found to be so lacking in bona fides that an
injunction restraining the beneficiary’s substantive r ights is warranted.3
Returning to the facts of the Asplenium case, the building contractor there
had, pursuant to a contract with a property developer, requested its bank
to furnish an on-demand performance bond in favour of the developer as
security for the performance and obser vance of the contractor’s obligations
under the contract. Crucially, however, clause 3.5.8 of the contract provided
that the contractor was not, except in the case of fraud, entitled to restrain the
developer from calling on the bond ‘on any ground including the ground of
unconscionability’. Disagreements arose during the construction project and
the developer called on the bond for the full secured amount. The contractor
pursuant to an ex parte application promptly obtained an interim injunction
restraining payment under the bond. At the subsequent inter partes hearing,
however, the first instance judge, Edmund Leow JC, dismissed the contractor’s
application for an injunction (in reliance on the unconscionability exception)
to restrain the developer from calling on the bond.4
In his ruling the first instance judge held that clause 3.5.8 was unenforceable,
for three reasons: first, it was an attempt to oust the court’s jur isdiction on the
significant ground of unconscionability and represented a severe incur sion into
the court’s freedom to grant injunctive relief;5secondly, the power to g rant
injunctions emanated from the court’s equitable jur isdiction and this could not
be circumscribed or curtailed by contract;6and thirdly, the unconscionabil-
ity exception was based on policy considerations which could not be lightly
brushed aside by agreement.7However, the judge went on to find that the
threshold had not been met for the unconscionability exception to apply, and
he therefore declined to grant the injunction sought.8
The important question on appeal was whether the judge had been right to
hold that clause 3.5.8 was unenforceable. The Court of Appeal reversed the
judge on this point, reasoning as follows: first, clause 3.5.8, by restricting the
right (except in a fraud situation) to restrain the beneficiary from calling on the
bond, was only seeking to limit the right to an equitable remedy in a particular
situation; this was more in the nature of an exclusion or exception clause
than an ouster of jurisdiction clause. The parties had moreover voluntarily
agreed to the provision. Looked at in this light, neither party had been denied
access to the court. That was not to say that there were no safeguards; such a
clause could at least potentially be subject to judicial scrutiny pursuant to the
3BS Mount Sophia Pte Ltd vJoin-Aim Pte Ltd [2012] SGCA 28; [2012] 3 SLR 352 at [23] and [45].
4CKR Contract Services Pte Ltd vAsplenium Land Pte Ltd [2014] SGHC 266; [2015] 1 SLR 987
(Asplenium (HC)).
5ibid at [19] and [20].
6ibid at [21].
7ibid at [22]-[25].
8ibid at [27]-[34].
C2016 The Author. The Modern Law Review C2016 The Modern Law Review Limited.
(2016) 79(3) MLR 468–503 469
Injunctive Relief
Singapore equivalent of the Unfair Contract Terms Act 1977 (UCTA).9The
second strand of the court’s reasoning was that on the f acts the developer could
have asked for a cash deposit instead of a performance bond as security, and
there was therefore no pressing reason in pr inciple or policy why clause 3.5.8
should be considered as being contrary to public policy for purporting to oust
the court’s jurisdiction.10 The court did not elaborate further, but the thinking
could perhaps have been that since the parties could have eschewed the courts
altogether, had cash security been transacted, there was in commerciallyrealistic
terms no compelling justification to read clause 3.5.8 as an ouster of jurisdiction
provision. Finally, in concluding that the policy considerations underlying the
unconscionability exception could not be displaced summarily by agreement,
the first instance judge had incorrectly conflated the policy motivations for
developing the unconscionability exception with the general public policy of
invalidating contracts seeking to oust a court’s jur isdiction.11
It is not intended here to debate the theoretical correctness of the uncon-
scionability exception or whether that is a legitimate response to changing
circumstances in a mature but nimble-footed jurisdiction. The remaining dis-
cussion thus proceeds on the footing that the unconscionability exception is a
warranted addition; and, as will be seen, this does not materially detract from
the generality of the discussion that follows. The first issue is whether a provi-
sion like clause 3.5.8, in disentitling a person from specified equitable remedies
on a recognised ground of relief, can properly be analogised to an exclusion
or exception clause (hereafter referred to simply as an exemption clause, for
brevity). The second is to ascertain the limits to contractual autonomy in navi-
gating around a ground of equitable relief that was created precisely to regulate
the conduct of commercial parties.
The resolution of the first issue evidently relies in part on a preliminary
ques tion of frami ng. In t he con text o f perform ance bonds, t akin g away a
party’s right to apply for an injunction on the ground of unconscionability may
appear (as it did to the appeal court in Asplenium) to be no different in concept
from a disclaimer sometimes found in commercial contracts that a party will
not be liable for loss caused through its negligence. Both, it could be argued,
belong to the category of provisions depriving a party of a particular remedy
that might otherwise be available on the facts. It is thought however that there
exists a perceptible difference depending on whether it is a legal or equitable
remedy that is being excluded. The difference is not that an equitable remedy
(unlike a legal one) involves an exercise of judicial discretion which can never
be denied to the court; such a rationalisation is flawed because it is in truth
no more than a mere by-product of the traditional primacy of common law
remedies over the equitable remedies, and in any case it is tolerably clear that
the common law remedies involve a significant degree of facultative decision-
making as well (for example, in respect of questions of causation, the measure
of damages awarded) etc. Rather, the nature of the relief sought to be denied
9Asplenium n 1 above at [21], [22], [24] and [36].
10 ibid at [31].
11 ibid at [40] and [41].
470 C2016 The Author. The Modern Law Review C2016 The Modern Law Review Limited.
(2016) 79(3) MLR 468–503

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