Building and Construction Law

• Published date: 01 December 2018
• 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 (Singapore). Mohan PILLAY LLB (Hons), LLM; FCIArb; FSIArb; Senior Accredited Specialist (Building and Construction Law); Chartered Arbitrator; Senior Adjudicator; Advocate and Solicitor (Singapore).
• Citation: (2018) 19 SAL Ann Rev 105
• Date: 01 December 2018
• Publication year: 2018

Entire agreement clause

7.1 The negotiations between parties leading to a contract typically entail an exchange of draft documents and statements. An “entire agreement” clause is frequently inserted in a contract to ensure that the terms of the contract are confined to those stated expressly set out in the agreement.

7.2 During the year under review, the High Court was invited to consider the operation of an entire agreement clause in determining whether a particular tender document should be construed as part of the contract between the parties. In Sunray Woodcraft Construction Pte Ltd v Like Building Materials (S) Pte Ltd1 (“Sunray Woodcraft”), a main contractor and subcontractor had, in the course of negotiating the terms of a draft letter of award dated 22 June 2015 (“LOA”), recorded certain matters in a document referred to as the “Tender Bid Evaluation” (“TBE”). The TBE set out a long list of items for which the subcontractor's answers were sought, including the percentage of the retention. It was returned by the subcontractor to the main contractor on 7 July 2015, following which the main contractor told the subcontractor that the main contractor was preparing the LOA. The LOA did not mention the TBE, but it contained an entire agreement clause, cl 2.4 of the LOA, and this stated:

Except as provided above in the list of correspondences and documents forming the Sub-Contract, all other correspondences with the Employer and/or Consultants and/or us shall be excluded from this Sub-Contract. Similarly, all representations, statements and/or prior negotiations are specifically excluded.

7.3 Ang Cheng Hock JC ruled that an entire agreement clause does not prevent a court from adopting a contextual approach in contract interpretation.2 The question to be determined is whether the agreement in its final form constituted the entire agreement, thereby superseding and replacing all representations that might have transpired in the course of reaching the agreement in the first place, but which were never actually incorporated in the written agreement.3 The court held that, in this case, the TBE could not be characterised as “representation, statements and/or prior negotiations” for the purpose of cl 2.4 of the LOA but was a document that recorded parties' agreement on certain terms arising from the negotiations.4 The court further considered that this finding was fortified by another clause in the LOA which incorporated the subcontractor's responses to “various questionnaires, clarifications and addenda” and held that the TBE was precisely such a document.5 In the course of his judgment, Ang JC distinguished the case from Encus International Pte Ltd v Tenacious Investment Pte Ltd,6 emphasising that, here, the TBE was discussed and agreed after cl 2.4 had already been drafted in the LOA.7

Validity of architect's certificates

7.4 The court had an opportunity during the year under review to consider the basis for challenging an architect's certificate following two recent decisions of the Court of Appeal on this subject, Chin Ivan v H P Construction & Engineering Pte Ltd8 and Ser Kim Koi v GTMS Construction Pte Ltd.9

7.5 In Yau Lee Construction (Singapore) Pte Ltd v Far East Square Pte Ltd10 (“Yau Lee (HCR)”) – the first of the two cases between the same parties which came before the courts during the year11 – the

subject contract in that case incorporated the Singapore Institute of Architects Standard Form of Building Contract (“SIA Conditions”). Clause 31(3) of the SIA Conditions provided for certificates issued by the architect to be given full effect by way of summary judgment or interim award or otherwise in the absence of fraud, improper pressure or interference by either party. The completion of the works was delayed. The developer commenced proceedings in court to claim liquidated damages in reliance on the architect's delay certificate and further delay certificate. The central issue before the court was whether there existed a dispute which could properly be referred to arbitration12 and this is discussed below. However, in the course of reaching its decision the court had to inquire, albeit in a limited way, into the validity of the architect's certificates.

7.6 After reviewing the procedure by which the delay certificate is to be issued under the SIA Conditions,13 the learned assistant registrar distilled the disagreement between the parties in relation to cl 24(1) to essentially the “relevant date” on which to determine whether there are matters which entitle the contractor to an extension of time.14 The developer's position was that the relevant date was the latest extended date while the contractor argued that this was the date on which the delay certificate was issued.15 Elton Tan AR observed that, from the language and structure of cl 24(1), there is a clear distinction between the determination of the “latest Date for Completion” and the determination of whether “at the said date there are no other matters entitling the Contractor to an extension of time”.16 He concluded that the latest date for completion determined in accordance with cl 22(1) should be the reference point for the architect's consideration of whether there are matters entitling the contractor to extensions of time.17

7.7 In respect of the termination of delay certificate, the debate was reduced to whether the architect can consider any instructions (that is, the delay events) that occurred before the date of the delay certificate in granting an extension of time through a termination of delay certificate.

It was held that on the language of cl 24(3), the architect can only consider instructions or matters entitling the defendant to an extension of time that occur “while the Contractor is continuing work subsequent to the issue of a Delay Certificate”.18

7.8 On the contention that the architect should wait out the expiry of the 28-day notice period before issuing a delay certificate, Tan AR considered that there was nothing in the language of cl 24(1) to support this construction. The purpose of the notification, as stated in cl 23(2), is that it served as a condition precedent to an extension of time by the architect.19 It is clear that not every architect's instruction causes a delay and there should not be any presumption to such effect.20

7.9 The learned assistant registrar concluded that given the 94 instructions were given after the latest date for completion of 30 September 2013 (as certified by the architect), in issuing the delay certificate as he did, the architect had plainly failed to consider these instructions before finding the contractor culpable for delay. The developer's claim could not be considered to be undisputed or indisputable or “so unanswerable that there is nothing to arbitrate”. The contractor had therefore established a “prima facie case of disputes”.21 Tan AR also considered that, on the terms of cl 24(3)(c), the validity of the further delay certificate is premised on the validity of the termination of delay certificate. If the termination of delay certificate is invalid, there is no proper grant of extension of time under it and accordingly no grounds to issue a further delay certificate.22

Performance bond

7.10 The doctrine of unconscionability featured in an instructive decision of the High Court during the year under review. In Milan International Pte Ltd v Cluny Development Pte Ltd,23 a developer terminated the employment of a contractor on account of several incidents of breach of contract. Three months following the termination, the developer called on the contractor's on-demand

performance bond. In applying for an injunction to restrain the developer's call on the bond, the contractor contended that it had been prevented from commencing work because the employer's consultants had not provided the necessary documents to enable the contractor to secure the necessary statutory permits for this purpose. It also argued that the developer had shown through its actions that it did not want to be bound by the contract and was in repudiatory breach. The contractor further alleged that the termination was unlawful in that the developer had not issued the notice as required by cl 32(3)(d) of the SIA Conditions. Finally, the contractor claimed that the developer had not suffered any damages arising from the alleged breaches.

7.11 The High Court dismissed the contractor's application. The court held that the contractor failed to establish a strong prima facie case of fraud or unconscionability on the part of the developer in making the call on the bond. Hoo Sheau Peng J stated in her decision that since unconscionability and fraud were separate and independent grounds for restraining a call on a performance bond, the contractor's case turned on showing strong prima facie proof of unconscionability.24 The learned judge noted that unconscionability has been described as involving abuse, unfairness or dishonesty or “conduct of a kind so reprehensible or lacking in good faith that a court of conscience would either restrain the party or refuse to assist the party”.25 The existence of genuine disputes and mere breaches of contract do not amount to unconscionable conduct,26 but:27

… where it can be said that the beneficiary under the performance bond did not honestly believe that the obligor whose performance is guaranteed by the bond has failed or refused to perform his obligations, the court may find that a demand was made dishonestly and in bad faith.

Crucially, the learned judge made the point that the court was not required to decide on the substantive entitlements of the parties or to engage in a protracted consideration of the merits of the substantive disputes between the parties.28

7.12 A similar finding was reached by the High Court in AES Façade Pte Ltd v Wyse Pte Ltd.29 In that case, a façade subcontractor was successful in its adjudication application lodged...