Geocon Piling & Engineering Pte Ltd (in compulsory liquidation) v Multistar Holdings Ltd (formerly known as Multi-Con Systems Ltd) and another suit

• Jurisdiction: Singapore
• Judge: Vinodh Coomaraswamy J
• Judgment Date: 31 October 2016
• Neutral Citation: [2016] SGHC 240
• Court: High Court (Singapore)
• Docket Number: Suit No 65 of 2011 consolidated with Suit No 500 of 2011
• Published date: 08 November 2016
• Year: 2016
• Hearing Date: 26 February 2014,28 February 2014,01 September 2014,25 February 2014,24 February 2014,09 May 2016,16 January 2016,30 May 2016,29 August 2014,27 February 2014
• Plaintiff Counsel: Leo Cheng Suan and Teh Ee-Von (Infinitus Law Corporation)
• Defendant Counsel: Govindarajalu Asokan (instructed) (Govind Law Corporation) and Shehzhadee binte Abdul Rahman (Gabriel Law Corporation)
• Subject Matter: Building and Construction Law,Building and construction contracts,Lump sum contract,Scope of works,Variations,Subcontracts,Contract,Limitation Act
• Citation: [2016] SGHC 240

Vinodh Coomaraswamy J: Introduction

This dispute arises out of construction works carried out at a particular section of the Kallang-Paya Lebar Expressway (“the KPE”) in 2004 and 2005. The defendant was the subcontractor for the bored piling works at that section of the KPE. The plaintiff was the sub-subcontractor for those works.

The plaintiff commenced this action against the defendant in 2011 to recover outstanding sums said to be due under their subcontract. I have granted the plaintiff’s claims in part, finding that the sum of $4,343,569.35 remains due from the defendant to the plaintiff. The defendant has appealed against my decision. I now set out the grounds for my decision.

Factual background The parties and their contractual relationship

The defendant in this suit is Multistar Holdings Limited (“Multistar”). Multistar is the parent company of a group of companies in the engineering and construction business.¹ Multistar was known as Multi-Con Systems Limited when it was incorporated. For that reason, it is referred to in some of the contemporaneous documentation in this matter as “Multicon”. It changed its name to Multistar Holdings Limited in 2008.²

The plaintiff in this suit is Geocon Piling & Engineering Pte Ltd (“Geocon”). Geocon has been in compulsory liquidation since 2006.³ At all material times, Geocon was a wholly-owned subsidiary of Multistar and was the specialist piling subcontractor in the Multistar group of companies.

Because of their parent/subsidiary relationship, both parties were controlled by common officers, at least until Geocon went into liquidation in 2006. These officers include one Tan Hang Meng (“Mr Tan”) (the Managing Director of both companies) and one Chan Siew Hoong (“Mr Chan”) (the Executive Director of both companies and Multistar’s Executive Chairman). In addition, one Yip Mun Choon (“Mr Yip”) and one Oh Chee Boon Benny (“Mr Benny Oh”) managed Geocon and were employees of Multistar.⁴

In 2001, the Land Transport Authority awarded a contract known as C421 to Sembcorp Engineers and Constructors Pte Ltd (“Sembcorp”). Sembcorp’s scope of work under C421 was to construct a part of the KPE from the East Coast Parkway (“ECP”) to Nicoll Highway. Its scope of work included, but was not limited to, the bored piling at all locations along this section of the KPE.⁵ These bored piling works included the processes of piling, pile-hacking, and debris removal.

In 2002,⁶ Sembcorp subcontracted the entire scope of its bored piling works under C421 to Multistar (“the Sembcorp/Multistar subcontract”). The Sembcorp/Multistar subcontract was for a fixed lump sum of $27,479,313.00,⁷ subject to variations.⁸

Later in 2002,⁹ Multistar subcontracted its entire scope of work under the Sembcorp/Multistar subcontract to Geocon (“the Multistar/Geocon subcontract”). The Multistar/Geocon subcontract sum was agreed at a fixed lump sum of $26m but was made on the same terms as the Sembcorp/Multistar subcontract.¹⁰ Therefore, it was also a lump sum contract subject to variations.

Geocon then subcontracted its entire scope of work under the Multistar/Geocon subcontract to Resource Piling Pte Ltd (“Resource Piling”) (“the Geocon/Resource Piling subcontract”). The nominal value of the Geocon/Resource Piling subcontract was $18,710,510.84.¹¹ The difference of $7,289,489.16 between the value of the Multistar/Geocon subcontract and the Geocon/Resource Piling subcontract represents Geocon’s project management fees under the Multistar/Geocon subcontract.¹²

The flow of progress claims and payments

Given this chain of subcontracts, the flow of progress claims and payments under the last two subcontracts ought to have been between Multistar and Geocon on their subcontract, and between Geocon and Resource Piling on their subcontract. But Multistar and Resource Piling treated each other as direct contractual counterparties from the outset. They bypassed Geocon entirely. Resource Piling presented progress claims directly to Multistar, and Multistar made progress payments directly to Resource Piling.¹³ As Multistar made each of these payments, Multistar would back charge that payment to Geocon and invoice Geocon for the work done by Resource Piling. Geocon would then recognise an indebtedness to Multistar in the amount of each such payment.¹⁴

From time to time, Geocon rendered its own progress claims to Multistar under the Multistar/Geocon subcontract. These progress claims included what were said to be Geocon’s costs in performing the Multistar/Geocon subcontract. Geocon, of course, did not actually incur any actual direct costs in performing the Multistar/Geocon subcontract: it had subcontracted the entire works under the Multistar/Geocon subcontract to Resource Piling, and Multistar was paying these costs directly to Resource Piling on Geocon’s behalf. The “costs” which Geocon claimed were therefore incurred only in a notional sense. Geocon included these notional costs in its progress claims to Multistar purely to be in a position to set them off against its back charged indebtedness to Multistar, leaving Geocon in a position to claim its project management fees from Multistar.

The 2004 Litigation

Resource Piling’s work did not proceed smoothly. It encountered difficulties at a location known as the “ECP South Location”.¹⁵ By October 2002, Resource Piling had stopped all work at the ECP South Location. Despite this, Resource Piling continued its work at other locations covered by the Geocon/Resource Piling subcontract during 2003 and into 2004. But by April 2004,¹⁶ Resource Piling had ceased work at all locations under its subcontract.¹⁷ Geocon ended up completing the works at the ECP South Location and at all the other locations under the Geocon/Resource Piling subcontract. I shall refer to the latter (ie, the works at all the other locations) as “the Balance Works”.

Multistar commenced proceedings against Resource Piling in 2004.¹⁸ Multistar’s position at that time was that it was Multistar (and not Geocon) which was Resource Piling’s contractual counterparty. Multistar alleged that Resource Piling had abandoned the bored piling works in repudiatory breach of this contract said to be between Multistar and Resource Piling.

Resource Piling responded by commencing a separate suit against Geocon and Multistar as co-defendants.¹⁹ Resource Piling rejected Multistar’s position, arguing that Resource Piling’s contract was with Geocon and not Multistar. It sued Geocon for non-payment of progress claims and other breaches of contract.²⁰ Its case was that Geocon had failed to pay progress claims due to Resource Piling under the Geocon/Resource Piling subcontract and that this amounted to a repudiation of that contract.²¹ Resource Piling asserted a contractual right to stop work at all locations and further asserted that Geocon was liable to it in damages. Resource Piling named Multistar as a co-defendant to this action, alleging that Multistar had undertaken to pay Geocon’s debt to Resource Piling.²²

All of this litigation was eventually consolidated and tried together before Tay Yong Kwang J (as he then was). I shall refer to this consolidated litigation as “the 2004 Litigation”.

Resource Piling won the 2004 Litigation. Tay J held that Resource Piling’s subcontract was with Geocon and not with Multistar. He found Geocon liable to Resource Piling to pay damages for breach of contract. He quantified those damages at $3.3m. In order to arrive at this figure, he quantified the value of work done by Resource Piling under the Geocon/Resource Piling subcontract as $13,744,417.03.²³

A liquidator takes control of Geocon

Geocon was unable to pay Resource Piling the judgment debt arising out of the 2004 Litigation.²⁴ As a result, Resource Piling secured an order winding up Geocon on 30 June 2006.²⁵ One Tam Chee Chong (“the liquidator”) was then appointed – and remains today – as Geocon’s liquidator.²⁶

The liquidator, as is his duty, has taken control of Geocon’s accounting books and records. He reviewed these books and records with the assistance, where necessary, of one John Dudley Baker (“Mr Baker”). Mr Baker is the plaintiff’s expert witness in this action and is a professional construction consultant and Chartered Quantity Surveyor with BK Burns Pte Ltd.²⁷

The review showed that Geocon captured all costs which were ultimately referable to the Multistar/Geocon subcontract in two cost ledgers maintained in its computerised accounting books and records.²⁸ These two cost ledgers are known as GC 1063 and GC 1077. Broadly speaking, GC 1063 captures Geocon’s costs incurred from the very outset of the Multistar/Geocon subcontract in January 2002 until the end of April 2004, when Resource Piling ceased work completely.²⁹ This includes the additional costs incurred by Multistar to complete the works abandoned by Resource Piling at the ECP South Location.³⁰ GC 1077 captures costs incurred from the beginning of May 2004, when Geocon took over the Balance Works, until the end of 2005.³¹

The liquidator’s review showed that Geocon had not billed Multistar for all the work captured in GC 1063 and GC 1077.³² It showed also that Multistar may have overcharged Geocon for the work done by Resource Piling.³³

As a result of this review, the liquidator took the view that Multistar still owed Geocon money under their subcontract. Multistar took the opposite view. It claimed that it was Geocon who still owed money to Multistar under their subcontract and filed proofs of debt with the liquidator. The liquidator sought an explanation from Multistar on various occasions as to the state of the accounts between the two companies. However, he was still not satisfied that Geocon’s claims against Multistar had been discharged.³⁴

The liquidator therefore rejected Multistar’s proofs of debt. The content of those proofs of debt forms the subject-matter of Multistar’s...