Building and Construction Law
| Citation | (2017) 18 SAL Ann Rev 131 |
| Date | 01 December 2017 |
| Published date | 01 December 2017 |
| Publication year | 2017 |
| Author | CHOW Kok Fong LLB (Hons), BSc (Bldg) (Hons), MBA; FRICS; FCIArb; FCIS; FSIArb; FSProjM; Chartered Arbitrator; Chartered Quantity Surveyor; Senior Adjudicator. Christopher CHUAH LLB (Hons), DipSurv; FCIArb; FSIArb; FCIOB; Senior Accredited Specialist (Building and Construction Law); Senior Adjudicator; Advocate and Solicitor, Supreme Court of Singapore. Mohan PILLAY LLB (Hons), LLM; FCIArb; FSIArb; Senior Accredited Specialist (Building and Construction Law); Chartered Arbitrator; Senior Adjudicator; Advocate and Solicitor, Supreme Court of Singapore. |
7.1 During the year under review, the High Court was invited to reconsider the principle relating to the effect of an earlier interim certificate on the certifier's valuation in a subsequent interim certificate.
7.2 In Mansource Interior Pte Ltd v CSG Group Pte Ltd,1 this issue was framed on a submission that the certifier had waived any objection to the correctness of the approach taken in an earlier valuation and is therefore bound to take that approach in a subsequent valuation. The respondent in this case was a lead subcontractor for interior fitting out works while the claimant was the respondent's sub-subcontractor. The respondent awarded the claimant a subcontract for wall finishes and a subcontract for joinery work. Both subcontracts were expressed to be re-measurement contracts. One of the issues in the action concerned the payment under the wall finishes subcontract. The respondent's case was that under the terms of the subcontract, all openings in the walls must be excluded in calculating the amount due to the claimant. The claimant's case was that at the time when parties entered into the subcontract, the respondent had agreed that it would measure all openings and pay of them at the contract rate. The claimant relied, inter alia, on the fact that the respondent was bound by its previous interim certificates which showed that the openings were included. It argued that in certifying the claimant's interim claims on the basis that the
7.3 The High Court rejected the claimant's submission. Vinodh Coomaraswamy J affirmed the principles relating to estoppel by convention as laid down in MAE Engineering Ltd v Fire-Stop Marketing Services Pte Ltd,2 which laid down three requirements for finding the existence of an estoppel by convention: (a) there must be a course of dealing between the parties; (b) the course of dealing must be such that parties proceeded on the basis of an agreed interpretation of the contract; and (c) it must be unjust to allow a party to go back on the agreed interpretation.3 The court decided that the parties' course of dealing did not suggest the understanding that the interim certificates would be final measurements. The judge cited with approval the statement on the subject in a textbook on the subject that these “certifications are never intended to be a precise determination of the value of the works”.4
7.4 All the major standard forms of construction contract contain provisions which require the contractor to proceed with due diligence and expedition. Due diligence has been described as an obligation on the part of a contractor to carry out construction work “industriously, assiduously, efficiently and expeditiously”.5 An issue posed before the courts during the year under review was whether, in the absence of an express obligation to proceed regularly and diligently, such a term may be implied.
7.5 In CAA Technologies Pte Ltd v Newcon Builders Pte Ltd6 (“CAA Technologies”), the facts concerned a subcontract for the design and production of precast concrete elements for a medical facility awarded on the basis of a three-page letter of intent (“LOI”). The terms contained in the LOI were supposed to be elaborated upon in a subsequent letter of acceptance (“LOA”) but the LOA was never signed
7.6 The Court of Appeal had accepted the trial judge's finding of fact and his decision that the main contractor was entitled to terminate the subcontract because the subcontractor's breaches had substantially deprived the main contractor of the whole benefit of the subcontract. The views expressed by the Court of Appeal on the subject of due diligence are thus strictly obiter but they are instructive on a subject which, as the court noted, is not without controversy.7 In essence, the Court of Appeal decided that there was no clear authority for the implication of a term of due diligence and expedition8 and the court was reluctant to imply such a term. Steven Chong JA, in delivering the judgment of the court, cited two reasons for the court's reluctance to imply such a term. First, due diligence clauses are commonly found in standard form construction contracts in Singapore. Given that parties to construction contracts have recourse to standard form contracts, the fact that they ultimately agreed on a contract without an express term for due diligence may well mean that they elected not to include such clauses.9 Terms cannot be implied in fact in order to give a party a specific remedy which parties did not expressly provide for.10 Second, Chong JA considered that it would usually be unnecessary to imply a term of due diligence in construction contracts that stipulate a completion date of the main contractual obligation.11 This appears to be consistent with the ruling in Leander Construction Ltd v Mulalley and Co Ltd.12
7.7 Although the focus of the court in CAA Technologies regarding implied terms was on the term relating to due diligence and expedition in construction contracts, the court also briefly commented on the implication of a term as to time being of the essence. The court cited, with approval, the view expressed in the tenth edition of Keating on
7.8 An interesting case during the year under review provided the courts with an opportunity to consider the basis on which practical completion may be determined. The decision validates the principle that in the absence of any other definition of completion in a contract, substantial or practical completion is normally considered to have been achieved when the works are in a state which is reasonably ready to be used by the employer. In Smile Inc Dental Surgeons Pte Ltd v OP3 International Pte Ltd,16 the dispute arose from a contract for the interior design and fitting out of a dental clinic. One of the issues before the court was whether there was delay to the works and this turned on the date of completion. On this issue, Chan Seng Onn J considered that the respondent had commenced operations at the clinic on 1 November 2013 and found, on this basis, that the clinic would have been handed over to the respondent by 31 October 2013. The court therefore held that the date of practical completion was 31 October 201317 notwithstanding that, on that date, there was still a list of some 36 incomplete and outstanding items of works.18
7.9 The Court of Appeal in CAA Technologies disagreed with the finding of the court below that the subcontractor was liable for liquidated damages paid by the main contractor to the employer, JTC, on account that the project had been delayed by the subcontractor. The Court of Appeal held that in order to sustain its claim, the main contractor had to prove that the liquidated damages incurred under the main contract arose solely from the breaches by the subcontractor. The evidence before the court showed that the main contractor did pay the employer a sum in liquidated damages but there was no evidence to
In essence, Newcon [that is, the main contractor] is inviting the court to infer that the 22 days of delay must have been caused by CAA's [that is, the subcontractor's] breaches of cl 2 of the LOI … In this regard, we should add that CAA has no burden to prove that the delay was caused by some other sub-contractors, and therefore the mere fact that CAA was not able to establish that the delay was caused by other subcontractors did not per se prove that CAA was solely responsible for Newcon's payment of the liquidated damages to JTC. That burden rests with Newcon.
7.10 Standard forms of contract frequently contain provisions entitling a party to terminate a contract without proof of default. These provisions are useful where for some reason, it is not possible for the owner to continue with the project, typically because of adverse changes in the business environment or unexpected change in the owner's financial resources to enable the completion of the project. During the year under review, a case involving the exercise of such a termination provision in one of the major standard forms – the Public Sector Standard Conditions of Contract for Construction Works (“PSSCOC”)21 – came before the High Court. The court's approach in determining the basis for compensating the contractor in this situation is instructive.
7.11 In TT International Ltd v Ho Lee Construction Pte Ltd22 (“TT International”), the dispute arose from a construction contract for the construction of an eight-storey warehouse and retail complex which incorporated the PSSCOC 2006.23 A few months after the Contractor commenced the building works, the Employer began to experience financial difficulties arising from the 2008 global financial crisis. The superintending office issued...
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