High Court rejects bid to stop bond payout over $1.46m home

Insurer AXA came under fire in the High Court for holding back payment of a performance bond that had been called by aggrieved home owner Ms Jaclyn Reutens.
Insurer AXA came under fire in the High Court for holding back payment of a performance bond that had been called by aggrieved home owner Ms Jaclyn Reutens.PHOTO: ST FILE

Judge says insurer AXA had no reason to wait for outcome of contractor's court application

Insurer AXA came under fire in the High Court for holding back payment of a performance bond that had been called by an aggrieved home owner, with the judge making clear the insurer could not await the outcome of a court application seeking to stop the payment.

Terraced house owner Jaclyn Reutens had called in the $146,300 bond in July from AXA Insurance over alleged building defects by Hup Seng Lee (HSL), the contractor for her property.

AXA said HSL had told it not to pay while it applied for a court injunction to restrain Ms Reutens from receiving the bond payout.

Justice Chan Seng Onn said AXA's action was "puzzling" when it knew the performance bond was "an unconditional, on-demand bond and that it would be obligated to pay once a written demand was made".

He said in judgment grounds last week AXA had "no reason" to heed HSL's instruction as it was not a party to the performance bond between Ms Reutens and AXA.

In doing so and failing to pay within a reasonable time, AXA had "clearly breached the terms of the performance bond", said the judge.

Ms Reutens had hired HSL to build a terraced house in the Upper Thomson area in 2016.

Justice Chan Seng Onn said AXA's action was "puzzling" when it knew the performance bond was "an unconditional, on-demand bond and that it would be obligated to pay once a written demand was made".

As part of the deal, HSL agreed to a performance bond or guarantee equal to 10 per cent of the $1.46 million contract, issued by AXA in favour of Ms Reutens.

But the parties got into a dispute over alleged defects and Ms Reutens claimed she incurred additional costs for an inspection report after the building was completed, which detailed the defects that other contractors were hired to rectify.

In July, her lawyer, Ms Gan Kam Yuin, sought payment for the bond but was told by AXA it was awaiting instructions on the matter.

Justice Chan found Ms Reutens was not "simply inventing defects" and there was no evidence of abuse, dishonesty or unfairness in her call on the bond.

He rejected HSL lawyer Zaminder Singh Gill's call for the sum to be remitted to her lawyers' firm's solicitors' account pending the resolution of the dispute instead of paying it directly to her.

The judge said this would offend the terms of the bond, and dismissed HSL's application for the injunction restraining Ms Reutens as the beneficiary of the bond.

Justice Chan said the two accepted grounds to restrain payment on a bond were fraud or unconscionability - terms overwhelmingly and unjustly in favour of one party - both of which were absent here.

The judge noted that AXA had not paid Ms Reutens for more than two months up to the time of the hearing. He held AXA, although present at the hearing as a non-party only, as also liable for costs with Hup Seng Lee.

"Given the substantial delay of two months in paying out the monies under the performance bond, coupled with the fact that it had inexplicably aligned itself with the interests of (Hup Seng Lee), it would be just to order costs against AXA," said Justice Chan.

A version of this article appeared in the print edition of The Straits Times on November 21, 2018, with the headline 'High Court rejects bid to stop bond payout over $1.46m home'. Print Edition | Subscribe