Building and Construction Law

• Date: 01 December 2010
• Author: CHOW Kok Fong LLB (Hons), BSc(Bldg) (Hons), MBA; FRICS, FCIArb, FCIS, FSIArb; Chartered Arbitrator; Chartered Quantity Surveyor. Philip CHAN Chuen Fye Dip Bldg, LLB (Hons), LLM, PhD, Dip Ed; FSIArb; Barrister-at-Law (Middle Temple), Advocate and Solicitor (Singapore); Associate Professor, National University of Singapore. [NB: Part A was contributed by Chow Kok Fong; and Part B was contributed by Philip Chan.]
• Published date: 01 December 2010

PART A

Extensions of time: Time bar provisions

7.1 The operation of time bar provisions in relation to construction contracts has been the subject of some debate following some inconclusive determinations on this issue in other jurisdictions, most notably, the Australian decisions of Gaymark Investments Pty Ltd v Walter Construction Group Ltd (1999) 18 BCL 449 and Peninsula Balmain Pty Ltd v Abigroup Contractors Construction Group Ltd [2002] NSWCA 211. Although the position taken in these decisions were rejected in the Inner House decision of the Scottish Court of Session in City Inn Ltd v Shepherd Construction Ltd [2010] CSIH 68, the matter has never surfaced in Singapore.

7.2 In Ho Pak Kim Realty Co Pte Ltd v Revitech Pte Ltd [2010] SGHC 106 (‘Ho Pak Kim Realty Co Pte Ltd’), the High Court had to consider the operation of cl 23(2) of the Singapore Institute of Architects Conditions of Contract. This clause provided:

It shall be a condition precedent to an extension of time by the Architect under any provision of this Contract including the present clause (unless the Architect has already informed the Contractor of his willingness to grant an extension of time) that the Contractor shall within 28 days notify the Architect in writing of any event or direction or instruction which he considers entitles him to an extension of time, together with a short statement of the reasons why the delay to completion will result …

7.3 The case was described as the third tranche of an ongoing dispute between the parties - the first tranche having been heard before

another court in October 2006 and the second tranche was heard by the High Court in May 2007. The point was raised in connection with a letter written by the contractor which complained of persistent undercertification and payment defaults and which attributed delays in construction to late approval of drainage and sewage connections and late supply of marble and granite tiles. The letter invited the architect to ‘consider carefully’ in relation to the issue of the delay certificate. Before the High Court, the contractor contended that the letter constituted notice of a claim for extension of time. Although, the Australian and Scottish authorities on the subject were not cited before the court, Lai Siu Chiu J held that a contractor in making a request for extension of time has to serve a request which complies with the requirements of cl 23(2). This includes making the request within the time stipulated in the provision. While no form is prescribed under the contract, it must be clear that what was served was indeed a request for time extension. In deciding that the letter did not amount to a request for extension of time, the learned judge said (Ho Pak Kim Realty Co Pte Ltd at [97]-[98]):

[The] plaintiff “s letter did not even mention let alone make a request for EOT, it made no reference at all to cl 23(2) of the contract set out earlier at [54], which compliance is a condition precedent to a request for an EOT. Further, a request for EOT must be submitted to the architect within 28 days of an event or direction or instruction which the plaintiff considered entitled him to an EOT. Even if the 28 November letter can be said to amount to a request for EOT, it is noteworthy that it was sent to the architect twelve days after the issuance of the Delay Certificate, which fact (as the defendant contended) showed that the same was an afterthought.

While I agree no particular format for an EOT is required under the contract, it must be clear to the architect that the plaintiff was making a request for an EOT. I cannot see how the 28 November letter can be said to amount to a request for EOT especially when Ho“s concluding paragraph therein seemed to suggest that he was requesting the architect to reconsider the Delay Certificate.

Developer“s entitlement to claim for defects

7.4 It was also argued on behalf of the contractor in Ho Pak Kim Realty Co Pte Ltd v Revitech Pte Ltd that since the employer in that case had sold off all the units of the residential development, the employer no longer retained any interest in the project to make the counterclaim for defects. Lai Siu Chiu J dismissed this line of argument, holding that the position as settled in Prosperland Pte Ltd v Civic Construction Pte Ltd [2004] 4 SLR(R) 129 (affirmed on appeal in Chia Kok Leong v Prosperland Pte Ltd [2005] 2 SLR(R) 484) is that the developer retained an interest to sustain this action given that it remains liable to the

management corporation and in turn to the subsidiary proprietors for the contractor“s defective works: Ho Pak Kim Realty Co Pte at [116].

Supplemental agreements and construction claims

7.5 In the midst of a construction project, various events on site may lead to an elaborate myriad of disputes between parties to a construction contract. Typically, the works have been disrupted by delay events such as changes to the works but these are frequently juxtaposed with the contractor“s own difficulties with the works. In many of these situations, it is extremely unwieldy to resolve these complications and parties may prefer to negotiate and settle these matters as the project proceeds. This ensures that the problems and uncertainties do not fester to an intolerable extent and minimise the distraction they would otherwise cause to the continued construction of the works. In a large and complex project, it is not uncommon therefore for parties to record these settlements in one or more supplemental agreements.

7.6 In Shanghai Tunnel Engineering Co Ltd v Econ-NCC Joint Venture [2011] 1 SLR 217 (‘Shanghai Tunnel Engineering Co Ltd’), the High Court considered the operation of a supplemental agreement in relation to the underlying contract between the parties. In this case, the defendants, ENJV, were main contractors for the construction of two MRT stations and the tunnels for a section of the Circle line. ENJV employed STEC, the plaintiffs, as the subcontractor for the bored tunnelling works in one of the phases of the main contract. Under the subcontract, STEC“s works were to commence on 15 December 2002 and to complete on 31 December 2004 in accordance with ENJV“s programme. However, before STEC could commence work, ENJV had to complete certain preparatory works, including the design and construction of the launch shaft and base slab for the crane so that the tunnel boring machine (‘TBM’) could be lowered into the launch shaft. For various reasons, ENJV did not complete these preparatory works on the dates as scheduled. The launch shaft and the shaft for the north bound tunnels were only handed over to STEC on 27 June 2003 and 11 August 2003 respectively. On 26 July 2003, the parties entered into what was referred to as a second supplemental agreement (‘2nd SA’), under which ENJV would pay STEC a sum of $1.008m for the out-ofsequence working as well as other expenses borne by STEC. The 2nd SA also provides for STEC to withdraw and waive all claims relating to the subcontract works, including claims for loss of profit.

7.7 Nevertheless, the subcontract works were further delayed and, as a consequence, further disputes between the parties arose. In May 2005, STEC commenced arbitration proceedings against ENJV. Before the arbitrator, STEC claimed a sum of $7.10m for variations, sought an

extension of time of between 112 days and 156 days and claimed a further sum of $1.35m as delay-related expenses. On their part, ENJV attributed the delays to STEC and their counterclaim includes $1m as liquidated damages, a sum of $10.68m in respect of their prolongation costs and $1.19m in contra charges. (All figures were rounded up to the nearest $10,000.00.) In January 2009, the arbitrator issued a partial award which determined, inter alia, that STEC was entitled to a sum of $6.11m for their claim for variations and allowed ENJV a large portion of the contra charges claimed. He also held that STEC was entitled to 44 days extension of time and $183,000 for delay-related expenses.

However, he made no order with respect to certain issues, most significantly ENJV“s counterclaim of $10.68m on account of their liability to LTA arising from the subcontract delays.

7.8 Although the result of this case turns eventually on the court“s finding under the ‘Complete Decision Question’ that the arbitrator should have, in this case, rendered a complete decision in respect of all issues referred to him, Judith Prakash J also considered at length (see Shanghai Tunnel Engineering Co Ltd at [41]) the construction of the 2nd SA, in particular, whether it should be construed as a compromise agreement or as a variation to the subcontract. This was referred to in the judgment of the court as the ‘Commercial Purpose - Reciprocity Question’.

7.9 In the partial award, the arbitrator found that on the terms of the 2nd SA, STEC had effectively waived its claims against ENJV for extension of time arising from ENJV“s late handover of the launch shafts. In disputing this finding, STEC contended that the 2nd SA was in effect a compromise agreement and that, accordingly, if it had resulted in STEC waiving its claim for 84 days“ extension of time against ENJV, then the agreement should also have the reciprocal result that ENJV waived its claims against STEC for damages in respect of 84 days“ delay to the subcontract works. In their submission, STEC relied on two important Court of Appeal decisions. First, they relied on the contextual approach in the interpretation of contracts as affirmed by the majority of the Court of Appeal in Yamashita Tetsuo v See Hup Seng Ltd [2009] 2 SLR(R) 265 (‘Yamashita’) and that such an approach involves, in appropriate cases, a consideration of the commercial purpose of the contract in question: Yamashita at [64]. Extrinsic evidence is admissible under proviso (f) of s 94 of the Evidence Act (Cap 97, 1997 Rev Ed) to aid in the interpretation of written words but...