Read the full judgment text of HCCT000005/1999 on BabelCite. This 高等法院原訟法庭 judgment was delivered on 21 April 1999 before The Hon Mr Justice Findlay, in Chambers.
Performance Bond — Demand Payment — Validity Period of Bond — Construction of Bond Terms — Whether Demand Valid if Contract Fully Performed — Legality of Contesting Payment Demand during Bond Validity — Authority of Signatories for Demand. This case concerns a demand bond issued by the defendant to secure the plaintiff’s subcontractor’s obligations under an agreement to remove excavated material. The bond required payment upon written demand by two authorised signatories "from time to time or at any time during the validity of this Bond without proof or contestation of further condition." The defendant contended the bond had expired by the time of the demand, asserting full contractual performance. The court held that the bond's validity period is conditional upon the subcontract being "in every respect duly and properly discharged performed and completed" and that clause 2’s phrase "without proof or contestation of further condition" does not negate the requirement that demands must be made during the bond's validity. The defendant is therefore entitled to contest the bond’s validity at the time of the demand. The defendant’s denial that the demand was made by authorised signatories was held not to be arguable and was struck out. Costs of the striking-out application were ordered to be costs in the cause. The judgment underscores that such bonds, while payable on demand, may nevertheless be conditional on performance, and the bondsman is not required to pay if the bond is no longer valid at the time of demand. The plaintiff’s right to payment will depend on resolution of factual disputes at trial.
Legal issues: Validity of demand under performance bond · Authority of signatories making demand
Outcome: The defendant is entitled to contest the validity of the demand based on the bond's expiry; the authorised signatories defence is struck out; costs of this application are to be costs in the cause.