DJY v DJZ & Anor

Facts

DJY contracted with DJZ on 19 December 2003 to build an oil and gas production platform, and the contract price was later increased to adjust for currency movements. An audit court in Country [X] began reviewing the contract in 2007 and allowed DJZ to keep making the increased payments (the Balancing Payment) only if DJY provided security. A standby letter of credit was therefore issued in DJZ's favour, later replaced by one dated 28 March 2022 for US$126,569,231.12. A condition of payment was that DJZ present the audit court's final decision declaring the Balancing Payment null and void. After the audit court dismissed appeals on 27 July 2022, DJZ called on the letter of credit on 22 August 2022, presenting a notification receipt containing a link to the decision on the court's portal.

DJY applied in Originating Application No 530 of 2022 to restrain DJZ from receiving and the bank from paying under the letter of credit. The judge held that the instrument was in substance a performance bond but that DJZ's call complied with its terms, and dismissed the application in DJY v DJZ and another [2024] SGHC 301. DJY appealed and applied by Summons No 3752 of 2024 for an injunction pending the appeal, known as an Erinford injunction. At the parties' invitation, the court set out fuller grounds on the law.

Issues

1. What test governs the grant of an Erinford injunction, and whether it includes a balancing of prejudice between the parties.
2. Whether DJY's appeal had a sufficient prospect of success.
3. Whether the balance of prejudice favoured preserving the status quo until the appeal was heard.

Holding

The High Court allowed the application and granted the Erinford injunction sought by DJY, restraining payment under the standby letter of credit pending the determination of DJY's appeal.

Reasoning

The court treated an injunction pending appeal and a stay of execution pending appeal as two sides of the same coin, governed by the same principles. Reviewing Erinford itself, Singapore decisions and the English Court of Appeal's approach in Novartis AG v Hospira UK Ltd, it held that the two factors in earlier cases, likelihood of success and whether the appeal would be rendered nugatory, are primary but not exclusive. The test has two parts: whether the appeal has a real prospect of success, and a balancing of the effects of granting or refusing the injunction. An appeal being rendered nugatory is the extreme end of that balance, and where it is clear the injunction should be granted. The court clarified that its earlier remarks in Shanghai Chong Kee were not meant to exclude prejudice as a factor, and only factors within the case itself are relevant.

The first part does not require a high likelihood of success, only detailed and fair reasons rather than bare disagreement. DJY met it by explaining why an order to repay might not equal a declaration that the payment was null and void, and why the link might not incorporate the decision.

On balance, the court was not persuaded the appeal would be rendered nugatory: DJZ had acted lawfully for 15 years and had net assets far exceeding the sum, and the cost of pursuing recovery abroad was not enough by itself. Each side's arguments about DJY's finances were internally contradictory. The decisive point was that the status quo had stood for over 15 years, and disturbing it would likely harm DJY, whereas the wait until the appeal was only a few months and any prejudice to DJZ was covered by DJY's undertaking as to damages.

From the judgment