Royal Design Studio v. Chang Development

The assumption that there is autonomy between a performance bond and its underlying contract appears to have been weakened, at least under Singapore law, by the decision of the High Court of Singapore in Royal Design Studio Pte. Ltd. v. Chang Development Pte. Ltd.1 The plaintiff agreed to construct a number of terraced houses on the defendant’s land. The defendant agreed to convey, upon completion of the houses and issue of the temporary occupation licences, some units thereof to the plaintiff. The plaintiff was to deliver to the defendant a performance bond and a personal guarantee by one of the plaintiff’s directors to secure completion of the construction;2 the plaintiff duly delivered both. A dispute arose in which the plaintiff complained that interim payments from the defendant were late, delaying the works. The defendant, on the other hand, argued that the plaintiff had failed to complete construction in time. Finally, the defendant by notice terminated the agreement and requested vacation of the premises by the plaintiff. The plaintiff applied for two interim injunctions. The relevant one is that sought to restrain the defendant from calling on and/or receiving payment under the performance bond.