The bond battlefield: time to revisit the Cyanamid conundrum?

Authors: Christopher Chuah, Lee Hwai Bin and Valerie Koh

Christopher Chuah Law Chambers LLC

14 May 2026

This article was first published on Global Arbitration Review in May 2026; for further in-depth analysis, please visit the GAR - The Asia-Pacific Arbitration Review 2027.

In summary

This article^[1] examines the legal principles governing the grant of injunctions to restrain calls on conditional performance bonds in the building and construction industry, with a particular focus on whether the conventional interlocutory injunction framework in American Cyanamid Co Ltd v Ethicon Ltd [1975] AC 396 (American Cyanamid) should apply.

A comparative review of the relevant Commonwealth jurisprudence shows that the legal burden properly rests on the beneficiary to prove the account party’s breaches of contract and the actual losses sustained. Further, where the issues in dispute in these conditional bond injunction proceedings are unrelated to fraud or unconscionability, the court can and should apply the American Cyanamid framework, namely: (1) whether there is a serious question to be tried; and (2) whether the balance of convenience favours the grant of injunctive relief. The application of this legal framework promotes the ideals prescribed in the Rules of Court 2021. In particular, it ensures procedural fairness and avoids undermining judicial economy.

Discussion points

• Applicable legal principles governing injunction proceedings commenced by the account party against the beneficiary to restrain payment under unconditional bonds in Singapore.

• Applicable legal principles governing court proceedings commenced by the beneficiary against the issuer for payment under conditional bonds in Commonwealth jurisdictions.

• Applicable legal principles governing injunction proceedings commenced by the account party against the beneficiary to restrain payment under conditional bonds in Commonwealth jurisdictions.

Referenced in this article

• American Cyanamid Co Ltd v Ethicon Ltd [1975] AC 396

• Unistress Building Construction Ltd v Top Dollars Development Ltd [2017] HKCU 3128

• Hawkins Ltd v Elizabeth Properties Ltd [2024] NZHC 561

• Doosan Babcock Ltd v Comercializadora De Equipos Y Materiales Mabe Limitada [2013] EWHC 3010 (TCC)

• JBE Properties Pte Ltd v Gammon Pte Ltd [2011] 2 SLR 47 (CA)

• Bocotra Construction Pte Ltd and others v Attorney-General [1995] 2 SLR(R) 262 (CA)

• Bintai Kindenko Pte Ltd v Samsung C&T Corp and another [2018] SGHC 191

• Rules of Court 2021 (Cap. 322), Order 3 rule 1

Introduction

Much ink has been spilled in local jurisprudence about the legal principles governing the restraint of payments under unconditional on-demand performance bonds in the building and construction industry. The Singapore courts have affirmed that such bonds are autonomous in nature and that injunctions restraining payment will be granted only in exceptional cases of fraud or unconscionability. Little, however, has been said about the principles governing the restraint of payments under conditional bonds. This is unsurprising given that employers or principals will typically require the contractors to procure unconditional performance bonds instead of conditional ones and will generally include specimens of such unconditional bonds in their contracts with the contractors.

The legal and practical significance of the distinction between an unconditional bond and a conditional bond is clear. If the bond is an on-demand bond, the issuer must pay the beneficiary the bond amount when the demand is made in the manner provided for, and the beneficiary need not prove the account party’s breaches and/or the losses it has sustained. Conversely, if the bond is a conditional bond, the issuer is liable to pay only if the beneficiary proves such breaches and/or losses.^[2] Accordingly, from a practical standpoint, the nature of the bond will affect how effectively the beneficiary can obtain payment under the same.

What remains unclear, however, is whether the legal test applied in the context of unconditional bond injunction proceedings can apply equally to conditional bond injunction proceedings, particularly where the issues that arise for determination are not related to fraud and/or unconscionability and relate instead to whether the beneficiary has sufficiently proven breach and/or loss. The Singapore legal position is not settled.

Disputes over calls on conditional bonds, notwithstanding their diminishing prevalence, have arisen in recent times. Given the uncertainties in local jurisprudence, several issues merit further examination. This article therefore aims to draw on the principles developed in the relevant commonwealth jurisprudence and explore whether there is room for the application of the American Cyanamid test in the context of conditional bond injunction proceedings.

Unconditional bonds – the fraud and unconscionability exceptions

In Singapore, where applications for injunctions to restrain payment under unconditional on-demand bonds are concerned, the Singapore Court of Appeal has opined that the sole consideration is whether there is fraud or unconscionability (fraud and/or unconscionability exceptions), and once this can be established, it is not necessary to address the superfluous question of whether the “balance of convenience” test propounded in American Cyanamid Co Ltd v Ethicon Ltd [1975] AC 396 (American Cyanamid) is satisfied.^[3] It is trite that the two-stage test in American Cyanamid is as follows: (1) whether there is a serious question to be tried; and (2) whether the balance of convenience lies in favour of granting the injunction.^[4]

In terms of the applicable standard of proof, the account party bears the burden of proving a “strong prima facie case” of fraudulent and/or unconscionable conduct.^[5] There have also been considerable judicial developments in the law governing the restraint of payment under such unconditional bonds as well as increasing clarity on what constitutes fraudulent and unconscionable conduct, and what is insufficient.^[6]

Conditional bonds – the legal burden of proof and applicable test

However, uncertainty still lingers in the jurisprudence regarding the principles governing the restraint of payments under conditional bonds, particularly in relation to the legal burden of proof and applicable test.

It is not entirely clear from the Singapore authorities: (1) whether the legal burden still falls on the account party to prove a negative (ie, that the conditions specified in the bond are not satisfied) or whether the legal burden properly falls on the beneficiary to prove that the bond conditions are satisfied; and (2) what the applicable test or standard of proof is. Guidance may be drawn from the relevant Commonwealth jurisprudence in this regard.

Hong Kong

In the context of injunction proceedings commenced by the account party against the beneficiary to restrain payment under conditional bonds, the decision of Unistress Building Construction Ltd v Top Dollars Development Ltd [2017] HKCU 3128 (Unistress) is instructive.

In that case, the beneficiary property developer engaged the account party as a main contractor to undertake building and construction works for a residential development. Pursuant to the terms of the main contract, the account party procured a performance bond in favour of the beneficiary. Among others, Clause 2 of the bond provided as follows:

2 The Contractor shall duly perform and observe all the terms, provisions, conditions, obligations, stipulations and specification of the Contract according to the true purport intent and meaning thereof and to the reasonable satisfaction of the Architect appointed by the Employer in respect of the Works or if on default by the Contractor the Surety shall satisfy and discharge the damages sustained by the Employer thereby as certified by the said Architect, up to the amount of the above written Bond then his obligation shall be null and void but otherwise his obligation shall be and remain in full force and effect.

Disputes arose between the parties in relation to allegedly defective stone panels and the relevant rectification works. The beneficiary then made a call on the bond for the maximum guaranteed amount and the account party commenced injunction proceedings to restrain the beneficiary from pursuing payment. A number of issues arose for determination, the key aspects of which are summarised below.

In relation to the nature of the bond, the court held that the bond was a conditional bond. The words “as certified by the said Architect” meant that the beneficiary’s claim under the bond must be accompanied, or supported, by the architect’s certification of the damages sustained by the beneficiary. However, if the beneficiary’s claim was disputed, the “certification is not sufficient by itself” to entitle the beneficiary to be paid under the bond.^[7] In other words, the presentation of the architect’s certificate was a necessary, but not sufficient, condition for payment under the bond.

In relation to the burden of proof, the court affirmed the principle that “he who asserts breach has to prove breach”. Accordingly, the beneficiary, as the party seeking to recover under the bond, bore the burden of proving both the alleged breaches by the account party, and the damages allegedly sustained.^[8]

In terms of the account party’s locus standi to intervene, the court held that the account party had legal basis or locus standi to do so as the operation of a conditional bond was “not independent” of the underlying contract between the account party and the beneficiary and the account party would, in the ordinary course of events, come under an obligation to indemnify the issuer in respect of any payment made by the issuer to the beneficiary.^[9]

In determining whether the interlocutory injunction should be granted, the Court adopted the American Cyanamid test and its findings are summarised below.

In relation to the issue of breach and/or damages, even though there was reason to believe that the account party’s breach was more extensive than a single stone panel, the “true nature, full extent and seriousness of [the account party]’s breach [could] not be determined in the present interlocutory application by reference to what is necessarily limited, and incomplete, evidence”.^[10] There were plainly serious issues to be tried at least in respect of the following matters:^[11]

• the full extent of the breach;

• whether such breach as may have been committed by the account party would justify a complete dismantling and/or replacement of all the stone panels installed by the account party;

• whether the works carried out or contracted to be carried out by the replacement contractor could all be attributed to the account party’s breach of contract in relation to the installation of stone panels, given that the works contracted to the replacement contractor also covered works for alleged defective aluminium wall cladding and water leakage in addition to stone panels; and

• whether the replacement contract sum was proper or a reasonable contract sum.

  
  

The balance of convenience lay in favour of continuing the injunction against the beneficiary given the following.^[12]

• If the bond call were successful, this would have significant adverse impacts on the account party’s business, including impacts on its reputation and its ability to secure new works from the private and public sector markets and “such adverse impacts cannot be readily compensated in damages”.^[13]

• On the other hand, if the injunction were wrongly granted, damages would be an adequate remedy for the beneficiary. The bond will still be available to satisfy the beneficiary’s claim and there was no suggestion that the account party would not be able to honour its undertaking as to damages.

In the context of proceedings commenced by the beneficiary against the issuer for payment under conditional bonds, the Hong Kong courts have also often taken into consideration pending arbitration proceedings between the account party and the beneficiary in granting a stay of the court proceedings, especially where the issuer has given an undertaking to be bound by the outcome of the arbitration.^[14]

The courts have made the following observations in this regard.

• It would serve the ends of justice between the parties and the administration of justice by the courts to avoid the risk of inconsistent findings on common facts and issues as to the account party’s breach of the contract and the respective rights and liabilities of the beneficiary and the account party thereunder.^[15]

• In relation to the doctrine of cause of action estoppel or issue estoppel, while there is an absence of mutuality in the parties in the arbitration proceedings (between the beneficiary and the account party) and the parties in the court proceedings (between the beneficiary and the issuer), it would be an abuse of process for the arbitration and court proceedings to continue in tandem because the underlying issues between the beneficiary and the issuer in court proceedings are the same as the underlying issues between the beneficiary and the account party in the arbitration.^[16] If findings on the issues relating to the account party’s liability are made against the beneficiary in the arbitration, there are no valid reasons for allowing the beneficiary to have a second bite of the cherry in court proceedings against the issuer.^[17]

• Further, the costs incurred in the court proceedings between the beneficiary and the issuer would be duplicated and wasted if the findings on the issues relating to the account party’s liability are made against the beneficiary in the arbitration.^[18]

United Kingdom

Where the conditional bond contains a clause requiring the beneficiary to prove the damages it sustained as “established and ascertained” in accordance with the building contract, the UK courts have held that an amount is “established and ascertained” only where it has been determined pursuant to an adjudicator’s decision made in favour of the beneficiary,^[19] or pursuant to the dispute resolution mechanisms prescribed under the building contract.^[20] It is observed that these bonds typically include clauses that are worded in a manner identical or similar to the following:^[21]

The Guarantor guarantees to the Contractor that in the event of a breach of the Contract by the Sub-Contractor, the Guarantor shall subject to the provisions of this Guarantee Bond satisfy and discharge the damages sustained by the Contractor as established and ascertained pursuant to and in accordance with the provisions of or by reference to the Contract and taking into account all sums due or to become due to the Sub-Contractor. (Emphasis added.)

On the other hand, where unconditional bonds are concerned and injunction proceedings are commenced to restrain the bank (as opposed to the beneficiary) from making payment under the same, the English courts will usually refuse to grant an injunction to restrain the bank from making payment pursuant to a compliant demand unless there is clear evidence of fraud.^[22]

However, where injunction proceedings are commenced to restrain the beneficiary (as opposed to the bank) from making a demand under an unconditional bond, the English courts have shown a willingness to intervene in limited situations where the bond call is premised on the beneficiary’s breaches of its contractual obligations or where the bond call is expressly precluded by the terms of the underlying contract. In determining whether an interlocutory injunction should be granted on account of such breaches, the courts have also applied the American Cyanamid principles. Some examples are summarised below.

In Simon Carves Ltd v Ensus UK Ltd [2011] EWHC 657 (TCC) (Simon Carves), the court was satisfied that not only was there a “serious issue to be tried”, the account party had proven a “strong case” that pursuant to clauses 3.7 and 3.8 of the “Special Conditions” of the contract, the bond was to be treated as null and void upon the issue of the “Acceptance Certificate” by the beneficiary’s project manager and there was no claim before the “Acceptance Certificate” that could be described as “pending or previously notified”.^[23] Damages would not be an adequate remedy as the calling of the bond would give rise to “a very real risk of damage to the commercial reputation, standing and creditworthiness” of the account party that would be “difficult to quantify” and that there would be a “very real risk” that the account party would not pre-qualify for tenders.^[24] The balance of convenience therefore favoured the continuing of the injunction and the status quo would be preserved by the availability of the bond as a continuing security to the beneficiary.^[25]

In Doosan Babcock Ltd v Comercializadora De Equipos Y Materiales Mabe Limitada [2013] EWHC 3010 (TCC) (Doosan), the court was satisfied that the account party had shown a “strong case” that the beneficiary’s refusal to issue the “Taking-Over Certificates” was a breach of contract and the beneficiary should not be permitted to make a bond demand if it is only able to do so by virtue of its own contractual breaches.^[26] Damages would not be an adequate remedy as it would be “difficult to quantify in financial terms” the damage to the “commercial and financial reputation of [the] contractor”.^[27] On the other hand, if the injunction granted subsequently turns out to be unjustified, the beneficiary could be adequately compensated by the account party’s undertaking in damages.^[28] Accordingly, the balance of convenience lay strongly in favour of the account party and no prejudice would be caused by preserving the status quo for the time being.^[29]

Australia and New Zealand

New Zealand courts have similarly applied the American Cyanamid principles in determining whether injunctive relief should be granted in the context of performance bonds (even unconditional bonds).

For example, in the context of proceedings commenced by the account party to restrain the beneficiary from calling a bond, the New Zealand High Court in Hawkins Ltd v Elizabeth Properties Ltd [2024] NZHC 561 (Hawkins) has highlighted that the “pre-conditions for [the beneficiary’s] call are an important component of the risk allocation between the parties” and that the “pre-conditions are to be determined by reference to the terms of the contract”.^[30] Accordingly, the American Cyanamid principles apply and the “the dispute as to the meaning of the contract is to be assessed against the orthodox threshold of serious question to be tried” before the court moves on to consider whether the “balance of convenience” favour granting or refusing relief.^[31] The court also opined that questions relating to the proper interpretation of the underlying contract between the beneficiary and the account party may also amount to serious questions to be tried.^[32]

In that case, the High Court held that the following matters gave rise to serious questions to be tried: (1) whether the beneficiary was entitled to call on the bond given the pending adjudication dispute and the way the engineer’s certificate was sought and given; (2) whether LDs were payable at all as a question of the proper construction of the contract and the reset agreement; and (3) whether the engineer had formed a reasonable opinion and whether the beneficiary ensured that the engineer acted reasonably.^[33] The court also took into account evidence of reputational harm of the call on the account party in concluding that damages would not be an adequate remedy, and that the balance of convenience favoured the grant of interim relief.^[34]

The court in Hawkins had also considered inter alia the following decisions where interim injunctions were granted to restrain payment under performance bonds.

• Universal Publishers Pty Ltd v Australian Executor Trustees Ltd [2013] NSWSC 2021 (Universal), where the New South Wales Supreme Court opined that it is easier to conclude that the purpose of the performance bond is not just to provide security for the performance of the account party’s contractual obligations but also to allocate the financial risk as to who should be out-of-pocket pending resolution of the disputes arising out of the underlying contract, if the contract expressly provides that the bond may be called on the basis of the beneficiary’s mere subjective assertion of breach and loss.^[35] In that case, the Court held that the relevant contractual terms provided that the purpose of the unconditional bank guarantee was merely to secure the account party’s obligations under the lease as well as losses and damages suffered by the beneficiary as a result of the account party’s breaches, and that the beneficiary was not entitled to make a demand on the guarantee if there had not been a default or breach by the account party.^[36]

• Walton Construction Pty Ltd v Pines Living Pty Ltd [2013] ACTSC 237 (Walton), where the Australian Capital Territory Supreme Court held that the relevant contractual terms did not permit recourse to the bank guarantee in circumstances where, although the beneficiary’s claim was bona fide, that claim was subject to a genuine dispute.^[37]

• Lucas Stuart Pty v Hemmes Hermitage Pty Ltd [2010] NSWCA 283 (Lucas Stuart), where the New South Wales Court of Appeal held inter alia that the relevant contractual terms only entitle the beneficiary to call on the bond if the account party had not materially complied with its obligations as a matter of “objective fact”,^[38] and the issue of whether the beneficiary’s notice issued to the account party requiring defects to be remedied within a specified time was invalid gave rise to a serious question to be tried.^[39]

Even where the relevant contractual terms governing the provision of a performance bond in favour of the beneficiary are properly construed as risk allocation devices that shift the financial risk to the account party, the Australian courts have held in recent authorities that the court is still required to weigh the competing risks of injustice and the risk allocation function of the bond does not “dictate the outcome” of the court’s consideration of “balance of convenience” or “conclusive determine” the status quo in some limiting way.^[40] Further, where the beneficiary failed to submit any other evidence as to the prejudice it might suffer from being restrained from calling the security, the courts have also concluded that the balance of convenience lay in favour of injunctive relief, even if maximum weight were given to the existence of contractual terms that operate as a risk allocation device.^[41]

Singapore

In the context of proceedings commenced by the beneficiary against the issuer for payment under conditional bonds, based on the case of AXA Insurance Pte Ltd v Chiu Teng Construction Co Pte Ltd [2021] 2 SLR 549 (CA) (AXA Insurance), it is settled law that the legal burden in such proceedings falls on the beneficiary to prove that the account party had breached the contract and caused it loss.^[42]

In terms of the “means” or types of proof, the Court of Appeal in AXA Insurance had also opined that it was not necessary, based on the terms of the bond, for the beneficiary to present “proof as against the [account party]” (such as an independent determination against the account party or the account party’s admission) before a valid call on the bond could be made.^[43] However, it had left open the question of what other “means” or types of proof were sufficient for the beneficiary to discharge its legal burden, especially in the event that the issuer were to adduce evidence to contest the beneficiary’s claim that it had allegedly sustained losses as a result of the account party’s breaches.

In terms of the applicable standard of proof, while not expressly noted in the AXA Insurance case, it is uncontroversial that the beneficiary is required to prove the account party’s breaches and the actual losses it had sustained on a balance of probabilities.^[44]

In the context of proceedings commenced by the account party against the beneficiary, the seminal case is JBE Properties Pte Ltd v Gammon Pte Ltd [2011] 2 SLR 47 (CA) (JBE). In that case, the Court of Appeal did not expressly highlight whether the legal burden fell on the beneficiary to prove the relevant breaches and damages sustained, the court had determined that “JBE” (the beneficiary) had “failed to show that, at the date of its call on the [b]ond, it had suffered actual loss arising from Gammon’s [the account party] breach of the Building Contract”. Proof of actual loss was essential given the court’s conclusion that the bond in that case “should be construed as a true indemnity performance bond”.^[45] This is also consistent with the Hong Kong court’s pronouncement in the Unistress case that “he who asserts breach has to prove breach”.^[46]

The Court of Appeal further highlighted that a performance bond was “merely security for the secondary obligation of the obligor [ie, the issuer] to pay damages if it breaches its primary contractual obligations to the beneficiary”.^[47] As a performance bond was “not the lifeblood of commerce, whether generally or in the context of the construction industry specifically”, a “less stringent standard” can justifiably be adopted for determining whether a call on a performance bond should be restrained.^[48]

It remains unclear, however, what the applicable standard of proof in such conditional bond injunction proceedings is. This was not expressly elucidated in the JBEcase. It appears that parties had not canvassed submissions on the appropriate standard of proof that the beneficiary was required to satisfy to establish its entitlement to call on the bond and had instead relied on the traditional grounds for restraining a call on a performance bond (namely, the grounds of fraud and unconscionability) espoused in Bocotra Construction Pte Ltd and others v Attorney-General [1995] 2 SLR(R) 262 (CA) (Bocotra).

It bears highlighting, however, that Bocotra was a case involving unconditional on-demand bonds instead of conditional bonds. Further, the Court of Appeal in that case did not hold that the American Cyanamid test was wholly inapplicable to performance bond injunction applications. Rather, it held that the balance of convenience test (ie, the second inquiry) would be rendered “superfluous” in cases involving irrevocable letters of credit (which are similar in nature to unconditional on-demand performance bonds) where fraud or unconscionability is established.^[49] Importantly, the court left open the question of whether the American Cyanamid test could be applied in cases involving conditional bonds and to issues unrelated to fraud and/or unconscionability, such as issues relating to whether the conditions for the bond call are satisfied and whether the beneficiary had proven the account party’s breaches and/or losses sustained.

In this regard, the High Court in Bintai Kindenko Pte Ltd v Samsung C&T Corp and another [2018] SGHC 191 had opined that the Bocotra case did not lay down a “definitive ruling” on the “applicable threshold in deciding issues unrelated to fraud and unconscionability” and “did not exclude the use of the normal interlocutory standard where the issue in contention is one not of fraud or unconscionability”.^[50] In approaching the issue of whether an exclusion clause was incorporated into the contract between the account party and the beneficiary, the court’s view was that it was at least plausible that the appropriate test was “whether there is a serious issue to be tried”.^[51] These observations were not disturbed on appeal.^[52]

In a similar vein, under English law, while the English courts will generally refuse to grant an injunction to restrain the bank and/or the beneficiary from making payment under performance bonds unless there is clear evidence of fraud, they have not outrightly rejected the application of the American Cyanamid test and have simply opined that performance bonds are special cases “within the American Cyanamid guidelines”.^[53]

Having regard to the local and foreign jurisprudence, it is the authors’ opinion that there is no compelling reason why the American Cyanamid principles cannot be applied in this context, particularly since this is the conventional test applied in other interlocutory injunction proceedings involving other types of disputes or areas of law.^[54]

While the application of this legal test means that an interim injunction would, in practice, be granted to restrain payment under conditional bonds in many instances, it is the authors’ view that this outcome is consistent with the ideals prescribed in Order 3 rule 1 of the Rules of Court 2021, which include ensuring fair access to justice, expeditious proceedings, efficient use of court resources as well as fair and practical results suited to the needs of the parties.

The first inquiry into whether there are serious issues to be tried will promote expeditious injunction proceedings and efficient use of court resources, particularly where arbitration proceedings have already been commenced.

Where the beneficiary’s allegations of breach and loss are disputed, serious questions to be tried will ordinarily arise. The true nature and extent of the account party’s alleged breaches and that of the beneficiary’s alleged losses cannot be determined in interlocutory proceedings where it is not the court’s function to engage in a protracted examination and determination of the merits of the parties’ respective cases.^[55] In these interlocutory proceedings, without the full document production exercise and cross-examination of the relevant witnesses and experts, the court is neither in a position to determine the reliability and probative value of the evidence, nor does it have the benefit of full argument that would place the evidence in its proper context.^[56]

For example, where the beneficiary makes a claim for liquidated damages allegedly suffered as a result of the account party’s alleged delays, the specific discovery or document production exercise typically plays a crucial role in the fact-finding process. The court or tribunal can order production of additional documents that have not been voluntarily disclosed by the parties hitherto such as internal correspondence (where they are relevant and material), meeting minutes, progress reports and other contemporaneous project records that shed light on the parties’ conduct and matters relating to the beneficiary’s complaints of delays, the scope of works undertaken for each phase of the project (where applicable), the account party’s applications for extensions of time, the beneficiary’s assessments of the same, the partial occupation or actual completion of the works and the issuance of the relevant completion certificates. The cross-examination process is also essential because it enables the court to properly assess the independence of parties’ respective delay experts as well as fully ascertain the credibility, reliability, logic, consistency and accuracy of their respective expert evidence on highly technical and complex matters relating to the delay analysis methodologies, the critical path analyses, the causes of delay and periods of culpable delay.

Moreover, where arbitration proceedings are already underway, a detailed merits determination by the court creates a significant risk of inconsistency between the findings made in the interlocutory proceedings on the basis of incomplete evidence and limited submissions and the eventual decision made by the arbitral tribunal with the benefit of complete evidence and full submissions. Such inconsistency would not only waste costs but undermine judicial economy.

The second inquiry into whether damages would be an adequate remedy for the account party and where the balance of convenience likewise ensures fair and practical results suited to the needs of the parties.

Bearing in mind that the purpose of conditional bonds is only to provide security for the account party’s performance of its obligations under the underlying contract, and not to shift to the account party the financial risk of being out-of-pocket pending resolution of the disputes arising out of the underlying contract, the account party’s position would be severely prejudiced if it were not afforded a fair opportunity to present all the relevant factual and expert evidence and to canvass its full legal submissions on the credibility, reliability and veracity of such evidence.

In such a situation, damages would typically be an inadequate remedy for the account party because allowing a bond call that subsequently turns out to be unjustified would cause significant damage to the account party’s commercial reputation, standing and creditworthiness as well as ability to secure new projects in the public and private sectors, harm that is difficult to quantify. It may also cause the account party to suffer significant financial hardship pending the final determination of the disputes with the beneficiary.

On the other hand, the grant of an injunction that subsequently turns out to be unjustified would not cause prejudice to the beneficiary especially where the account party gives an undertaking as to damages, unless there is cogent evidence demonstrating otherwise. Given that the function of conditional bonds is merely to “provide security for amounts that might be found due to a beneficiary”, the beneficiary is “not entitled to demand payment under the security pending resolution of any dispute”.^[57]

Conclusion

The American Cyanamid test has not lost its place in injunction proceedings commenced to restrain payments under conditional bonds. Where the disputed issues that arise for determination are unrelated to fraud and/or unconscionability, it is the authors’ view that the Singapore courts can still apply the two-stage test (serious question to be tried and balance of convenience) to determine whether an interim injunction should be granted to the account party, especially since it is the beneficiary who bears the legal burden of proving its entitlement to make the bond call on the basis that the relevant conditions are satisfied. While the practical significance of applying such a test is that an interim injunction will be granted in many instances, the commercial reality is that conditional bonds will become increasingly rare in the building and construction industry, as employers or principals who are legally advised will usually require the procurement of unconditional bonds that are payable on demand without proof of default.

Endnotes

^[1] In this article, for consistency, the party who applies for the bond to be issued is referred to as the “account party”, the financial institution (whether a bank or insurance company) that issues the bond is referred to as the “issuer”, and the party in favour of whom the bond is issued is referred to as the “beneficiary”.

^[2] The requirement for the beneficiary to prove the account party’s breaches and/or the beneficiary’s losses will depend on the terms of the performance bond.

^[3] Bocotra Construction Pte Ltd and others v Attorney-General [1995] 2 SLR(R) 262 (CA) at [46]. See also Bintai Kindenko Pte Ltd v Samsung C&T Corp and another [2019] 2 SLR 295 (CA) at [1].

^[4] See the reiteration of these principles in the recent case of Gonzalo Gil White v Oro Negro Drilling Pte Ltd and others [2024] SGCA 9, albeit in the context of interim injunction applications involving other types of disputes.

^[5] Bintai Kindenko Pte Ltd v Samsung C&T Corp and another [2019] 2 SLR 295 (CA) at [72] to [73]. See also the more recent cases of Shanghai Chong Kee Furniture & Construction Pte Ltd v Church of St Teresa [2024] SGHC 5 at [36] and [38] to [39] and Star Engineering Pte Ltd v Pollisum Engineering Pte Ltd [2024] 1 SLR 1099 (CA) at [34] and [36].

^[6] See the recent 2025 cases concerning performance bonds e.g., Tradesmen Pte Ltd v Ten-League Corporations Pte Ltd [2025] SGHC 114, where the court held that the bond in question was an indemnity performance bond but also proceeded to opine in obiter on the instances where the beneficiary’s conduct would be regarded as unconscionable and where it would not; Ee Hup Construction Pte Ltd v China Jingye Engineering Corp Ltd (Singapore Branch) [2025] SGHC(A) 3, where the Appellate Division held that the beneficiary’s conduct of withdrawing certain back-charges from adjudication proceedings (because it took the position that the back-charges fell within the “damage, loss or expense” preclusion in Section 17(3) of the Building and Construction Industry Security of Payment Act 2004), and subsequently relying on these back-charges in support of a bond call post-adjudication, was not unconscionable.

^[7] Unistress at [39].

^[8] ibid at [36] and [40].

^[9] ibid at [43] to [44].

^[10] ibid at [44].

^[11] ibid.

^[12] ibid at [49] to [52].

^[13] These pronouncements were also affirmed by the Hong Kong court in the more recent case of JML-Craft Pty Ltd v China Ping An Insurance (Hong Kong) Co Ltd and Another [2021] HKCU 2422 at [ 56], albeit expressed in obiter in the context of an on-demand performance bond.

^[14] L v M and Another [2021] HKCU 4648 (L v M); Fortune Pharmacal Co, Ltd v Falcon Insurance Company (Hong Kong) Limited and Another [2023] HKCU 181 (Fortune Pharmacal).

^[15] L v M at [36].

^[16] Fortune Pharmacal at [24] to [26].

^[17] ibid at [28].

^[18] ibid at [34].

^[19] Yuanda (UK) Company Ltd v Brookfield Multiplex Construction Europe Ltd and another company [2020] EWHC 468 (TCC) (Yuanda) at [83] and [103]. This case involves proceedings commenced by the account party to restrain the beneficiary from receiving payment (as opposed to the bank).

^[20] Clarington Developments Limited v HCC International Insurance Company plc [2019] IEHC 630 (Clarington) at [76] to [77].

^[21] Clarington at [13]; Yuanda at [15].

^[22] Alternative Power Solution Ltd v Central Electricity Board and another (Mauritius) [2014] UKPC 31; CR Construction (UK) Company Ltd v Barclays Bank Plc [2026] EWHC 202 (TCC). The English courts have held that the bank is allowed to rely on the autonomy principle, which highlights that the unconditional bond issued in favour of the beneficiary is separate and independent from the underlying contract between the beneficiary and the account party, and the bank should make payment upon a valid demand notwithstanding disputes arising out of the underlying contract.

^[23] Simon Carves at [37].

^[24] ibid at [41].

^[25] ibid at [42].

^[26] Doosan at [43] to [44].

^[27] ibid at [47].

^[28] ibid at [48].

^[29] ibid at [49].

^[30] Hawkins at [46].

^[31] ibid at [47] read with [24].

^[32] ibid at [49].

^[33] ibid at [61] to [65].

^[34] ibid at [71] to [76].

^[35] Universal at [14] to [17].

^[36] Universal at [18] to [19].

^[37] Walton at [62] to [63].

^[38] Lucas Stuart at [36] to [41].

^[39] Lucas Stuart at [47].

^[40] Synergy Construct Australia Pty Ltd v GSA North Terrace Pty Ltd (atf GSA North Terrace Unit Trust) [2025] SASCA 72 at [100] to [103].

^[41] Cobolt Constructions Pty Ltd v Duke Ventures Wellington Street Pty Ltd [2025] VSC 609 at [50] to [51].

^[42] AXA Insurance at [76].

^[43] ibid at [39] and [43].

^[44] SCT Technologies Pte Ltd v Western Copper Co Ltd [2016] 1 SLR 147 (CA), which was referred to at [76] of AXA Insurance.

^[45] JBE at [30].

^[46] Unistress at [36] and [40].

^[47] JBE at [10].

^[48] ibid.

^[49] Bocotra at [44] to [48].

^[50] Bintai (HC) at [23].

^[51] ibid.

^[52] Bintai Kindenko Pte Ltd v Samsung C&T Corp and another [2019] SGCA 39.

^[53] Doosan at [41].

^[54] Gonzalo Gil White v Oro Negro Drilling Pte Ltd and others [2024] SGCA 9 at [61] to [62].

^[55] CEX at [20].

^[56] CEX at [20].

^[57] Samsung C&T Corp v Soon Li Heng Civil Engineering Pte Ltd [2020] 2 SLR 955 (CA) at [41].