SINOPEC ENGINEERING CO LTD

On the court record

An engineering counterparty seeking to restrain a performance-bond call on grounds of unconscionability, invoking the interim-measures jurisdiction under the Arbitration Act 2005.

Sinopec Engineering Co Ltd appears in the corpus, together with a Malaysian group entity, in proceedings concerning a performance bond and the court's power to restrain a call on it.

The proceedings arose from an ex parte application under, among other provisions, section 11 of the Arbitration Act 2005, to injunct the counterparty from making a demand under a performance bond, and a cross-application by the counterparty to set aside the ex parte order under Order 29 rule 1, Order 32 rule 6, Order 42 rule 13 and Order 92 rule 4 of the Rules of Court 2012, with an application to assess damages if the injunction were set aside. The two enclosures were heard together at first instance.

On appeal the central issue was crystallised as whether the counterparty's demand on the performance bond was unconscionable. Unconscionability is the recognised exception on which a court may restrain a call on an on-demand bond, distinct from establishing fraud, and the appeal engaged the same procedural provisions together with section 11 of the Arbitration Act 2005 and questions of interim measures and security for costs.

As a party to a construction or engineering arrangement secured by a performance bond, the company sought the court's protection against a bond call pending arbitration, while the counterparty resisted that restraint and sought to enforce its security. The matter is a clear illustration of how the unconscionability exception and the court's interim-measures jurisdiction under the Arbitration Act 2005 operate where a performance bond is called during a dispute.

The narrative reports the statutory provisions and the issue the courts identified, and states outcomes only as recorded, without commenting on the underlying engineering dispute or the parties' commercial positions. The company's shift from applicant on the injunction to respondent on the set-aside appeal illustrates how the procedural initiative can move between the parties as a performance-bond dispute progresses through the courts.