Alacran Design Pte Ltd v Broadley Construction Pte Ltd

• Jurisdiction: Singapore
• Judge: Audrey Lim JC
• Judgment Date: 10 July 2017
• Neutral Citation: [2017] SGHC 162
• Plaintiff Counsel: Ng Hwee Lon and Ipsen Low (Veritas Law Corporation)
• Date: 10 July 2017
• Docket Number: Suit No 520 of 2016
• Hearing Date: 18 April 2017,29 May 2017
• Subject Matter: Fraudulent,Mistake,Misrepresentation,Contract
• Published date: 19 May 2018
• Defendant Counsel: Eugene Thuraisingam and Syazana Yahya (Eugene Thuraisingam LLP)
• Court: High Court (Singapore)
• Citation: [2017] SGHC 162
• Year: 2017

Audrey Lim JC:

The plaintiff, Alacran Design Pte Ltd (“Alacran”), claimed against the defendant, Broadley Construction Pte Ltd (“Broadley”), a sum of $423,407.34 for equipment supplied to Broadley in the construction of a residential development project (“the Project”), of which Broadley was a sub-contractor. The main contractor of the Project was Singbuild Pte Ltd (“Singbuild”). It is undisputed that Broadley owed that sum to Alacran. The dispute centres on whether a letter of undertaking discharged Broadley from liability for payment of the sum on the basis that Singbuild was authorised to pay the sum to Alacran on Broadley’s behalf.

Background

The parties entered into a contract on 8 July 2013 for Alacran to supply equipment to Broadley which Broadley in turn installed for Singbuild for the Project. From time to time, Broadley would issue delivery orders (“DOs”) to Alacran for it to supply the equipment. Around 2015, Broadley became unable to pay Alacran on some of the DOs as it was unable to obtain payment from Singbuild. Several meetings ensued to resolve the issue of payment to Alacran, which eventually led to the signing of a letter of undertaking.

The plaintiff’s case

Alacran’s case is narrated by Jacky, its former business development manager. Jacky had chased Broadley on several occasions in 2015 for payment of the outstanding DOs. In August 2015, he informed Broadley’s managing director, Roy, that Alacran would cease to supply further equipment to Broadley if it did not pay on the outstanding DOs. Roy then requested a meeting with Jacky to resolve the payment issue. The meeting took place in August 2015 (“the First Meeting”) and was attended by Roy, Chatterly (Broadley’s senior quantity surveyor), Ramesh (Broadley’s site manager for the Project) and Jacky.

At the First Meeting, Roy explained that Broadley could not pay Alacran as it had not received payment from Singbuild. Roy requested Alacran to continue supplying the equipment so that Temporary Occupation Permit could be obtained in time for the Project. Roy also stated that Broadley was expecting monies from Singbuild soon and it would then be able to pay Alacran. Jacky informed Roy that he could not accede to the request unless the then outstanding amount of around $215,588.31 was first paid up. Roy suggested issuing Alacran post-dated cheques for that outstanding amount. However, as Broadley did not have sufficient money in its account, Roy requested Jacky to refrain from presenting the cheques until Broadley had been paid by Singbuild. On that basis Alacran continued to supply Broadley the necessary equipment. Broadley subsequently issued to Alacran two cheques post-dated to September 2015 (“the Cheques”).

On 28 September 2015, Jacky informed Roy that Alacran intended to encash the Cheques. Roy stated that Broadley still did not have sufficient money to honour the Cheques and that he would update Jacky once Singbuild had paid Broadley. After Temporary Occupation Permit was obtained for the Project, Roy arranged another meeting (“the Second Meeting”) with Jacky to discuss the outstanding payments, which was by then $423,407.34 (“the Outstanding Sum”).

The Second Meeting, which took place on 4 November 2015, was attended by Jacky, Roy, Ramesh and Chatterly. At the meeting, Jacky suggested that Broadley pay the Outstanding Sum by instalments. Roy replied that Broadley was not able to pay Alacran so long as Singbuild did not pay Broadley. Roy proposed instead that an undertaking be issued to authorise Singbuild to pay the Outstanding Sum directly to Alacran from moneys that Singbuild owed Broadley under the Project. Jacky informed Roy that it made no difference to Alacran who paid the Outstanding Sum so long as Alacran was paid in full, and that if Singbuild defaulted on the payment Broadley would remain liable for any amount that was outstanding. Roy remained silent when Jacky informed him as such, and Jacky took it that Roy had agreed to what he had said.¹ The parties agreed that what transpired at the meeting would form the basis of their agreement, and Roy stated that he would prepare an undertaking authorising Singbuild to pay the Outstanding Sum to Alacran on Broadley’s behalf. At this meeting, Broadley did not mention that it would be absolved from its liability to pay Alacran should Singbuild fail to do so, and Roy also did not request for the Cheques to be returned.

On 6 November 2015, Broadley emailed to Jacky a scanned copy of a letter of undertaking (“the Undertaking”), which had been pre-signed by Broadley and Singbuild. The Undertaking stated as follows:

RE: UNDERTAKING LETTER FOR SWITCHES & ELV SYSTEMS OUTSTANDING BALANCE

We, [Broadley] has appointed [Alacran] to supply [the equipment] for the [Project]. … to date, we have outstanding balance amounting to $423,407.35 …This amount is final and has been agreed with Alacran and no further claims shall be submitted in relation to this contract.

We, [Broadley] hereby authorises [Singbuild] to pay on our behalf, the total outstanding balance due to Alacran, which sums to $423,407.35 ..., details as attached and agreed by the supplier. We agree that this amount be deducted from our Remaining Contract Amount with [Singbuild].

This agreement has been agreed by [Singbuild], [Broadley] and [Alacran]. This letter indemnifies [Broadley] and is free of any responsibility and is no longer liable with regards to the outstanding balance with [Alacran].

Jacky signed the Undertaking on Alacran’s behalf and sent it back to Broadley. To Jacky’s understanding, the Undertaking authorised Singbuild to pay Alacran on Broadley’s behalf but did not absolve Broadley from paying Alacran if Singbuild failed to do so. He did not realise that the Undertaking, through its last paragraph, waived Alacran’s right to claim the Outstanding Sum from Broadley, as he had signed the Undertaking on the basis that it was consistent with what was agreed by the parties at the Second Meeting and in reliance on the title of the document as an “undertaking”.² Broadley had thus surreptitiously inserted a clause (the last paragraph in the Undertaking) to exclude itself from liability to pay the Outstanding Sum owed to Alacran.

A few days after returning the Undertaking to Broadley, Roy phoned Jacky for the return of the Cheques. Jacky informed Roy that Alacran was retaining the Cheques as security, as Singbuild had not paid Alacran and there was no guarantee that it would do so pursuant to the Undertaking. Roy did not call Jacky again to ask him to return the Cheques.

As it transpired, Singbuild never paid Alacran the Outstanding Sum despite being chased to do so by Alacran. Alacran therefore proceeded to encash the Cheques in February 2016 but discovered that Broadley had stopped payment on them. Hence, Alacran now claims the Outstanding Sum from Broadley on the following basis: (a) the Undertaking was not valid and binding; (b) there has been a total failure of consideration; (c) Alacran entered into the Undertaking based on a fraudulent misrepresentation or under a unilateral mistake; (d) non est factum; and (e) the Undertaking did not contain the entire agreement between the parties.

The defendant’s case

Roy, Broadley’s director and sole shareholder, stated that it was Jacky and not him who had suggested, at the First Meeting, that Broadley issue post-dated cheques to pay the outstanding amount owed to Alacran.³ Roy agreed to issue the Cheques on condition that Alacran would only present them for payment after being notified by Broadley that it had been paid by Singbuild. As Broadley was unable to pay Alacran even in October 2015, the Second Meeting was held. At that meeting, Roy informed Jacky that Broadley had not received payment from Singbuild and was thus unable to pay the Outstanding Sum to Alacran. The parties thus agreed that Alacran would absolve Broadley of “any and all liability for [Alacran’s] outstanding invoices if Singbuild were to assume full responsibility and accept all liability for the said outstanding invoices”.⁴

In cross-examination, Roy related the following conversation that transpired at the Second Meeting.⁵ Roy told Jacky that when Singbuild pays Broadley, he would notify Jacky to encash the Cheques. Jacky then made a phone call to check with Alacran’s management. After that call, Jacky asked Roy to issue an undertaking as Alacran wished to collect the Outstanding Sum directly from Singbuild. Roy asked Jacky what would happen to the Cheques if Broadley issued an undertaking. Jacky replied that he would return the Cheques to Broadley once the undertaking was signed by Alacran, Broadley and Singbuild. Roy agreed to prepare an undertaking and informed Jacky that the undertaking would absolve Broadley from all further liability to Alacran.

After the Second Meeting, Chatterly drafted the Undertaking on Broadley’s behalf. Before it was signed, Roy met Singbuild’s representative, who asked him whether, based on the Undertaking, Singbuild could pay Alacran directly from the amounts that it owed to Broadley. Roy informed Singbuild that it could do so. The Undertaking signed by Broadley and Singbuild was then sent to Alacran on 6 November 2015. Alacran did not seek any clarification on or raise any objections to the Undertaking and returned a signed copy to Broadley. At all material times, Roy was under the impression that Alacran was aware of the terms of the Undertaking, as the Undertaking encapsulated what was agreed at the Second Meeting.

As for the Cheques, Jacky did not return them to Roy despite Roy’s repeated requests. Around 11 November 2015, Roy informed Jacky that he would cancel the Cheques, which Roy subsequently did on 13 November 2015. In the circumstances, the plain words of the Undertaking clearly supports Broadley’s defence that it has been indemnified and is no longer liable to Alacran for the Outstanding Sum.

My decision ...