Comfort Management Pte Ltd v OGSP Engineering Pte Ltd and another

• Jurisdiction: Singapore
• Judge: Vinodh Coomaraswamy J
• Judgment Date: 06 August 2020
• Neutral Citation: [2020] SGHC 165
• Court: High Court (Singapore)
• Docket Number: Suit No 509 of 2017
• Published date: 14 August 2020
• Year: 2020
• Hearing Date: 15 April 2019,23 April 2019,17 April 2019,12 April 2019,09 April 2019,24 April 2019,11 April 2019,29 July 2019,16 April 2019,10 April 2019
• Plaintiff Counsel: Paul Wong, Zhulkarnain Abdul Rahim, Andrea Gan and Francis Wu (Dentons Rodyk & Davidson LLP)
• Defendant Counsel: Nicholas Lazarus (Justicius Law Corporation),Anil Lalwani and Adrian Teo (DL Law Corporation)
• Subject Matter: Building and Construction Law,Building and construction contracts,Lump sum contract,Sub-contracts,Claims by sub-contractor,Scope of works,Variations,Contract,Breach,Causation,Tort,Negligence,Breach of duty
• Citation: [2020] SGHC 165

Vinodh Coomaraswamy J: Introduction

This action arises out of a lump sum construction contract which the plaintiff entered into with the first defendant in October 2013 for a project in Jurong (“the Project”). The first defendant carried out the works for the air conditioning ducting system and mechanical ventilation system (“the Works”) for the Project. The main contractor for the Project subcontracted the Works to Lead Management Engineering & Construction Pte Ltd (“Lead”). Lead in turn sub-subcontracted the Works to the plaintiff under a lump sum contract (“the Lead Contract”).¹ The plaintiff then sub-sub-subcontracted the Works to the first defendant under a back-to-back lump sum contract (“the Comfort Contract”).²

The first defendant duly commenced work under the Comfort Contract in October 2013. However, it demobilised its team and withdrew from the site on 9 October 2014.³ It is common ground that the first defendant carried out no works of any kind for the Project after that date.⁴ The plaintiff’s case in this action is that the first defendant had completed only 65% of the Works before it withdrew from the site.⁵ The first defendant’s case is that it had completed or substantially completed the Works before it withdrew.

In this action, the plaintiff claims the following sums against the first defendant: approximately $410,000, being the plaintiff’s overpayment to the first defendant for the Works; $81,000 in liquidated damages for 162 days of delay;⁶ $86,606.41, being back charges imposed by Lead on the plaintiff for the first defendant’s defective work;⁷ and $918,306.09, being the sum which the plaintiff paid to the first defendant pursuant to an Adjudication Determination (“AD”) in 2017.⁸ In the alternative, the plaintiff claims damages against the first defendant to be assessed.⁹

To supervise the Works on site, the plaintiff engaged the second defendant as its project manager.¹⁰ In this action, the plaintiff claims against the second defendant the sum by which the plaintiff alleges it overpaid the first defendant (see [3(a)] above).¹¹ The plaintiff’s case against the second defendant is that he is liable to the plaintiff for this sum because he breached his duties to the plaintiff in contract and in tort by over-certifying the sum due from the plaintiff to the first defendant under the Comfort Contract.¹²

The first defendant in turn brings a counterclaim in this action against the plaintiff seeking the following relief:¹³ if the AD is set aside: $180,013.27 as outstanding payment under the Comfort Contract price for completion of the Works; $14,300 as outstanding payment for completed works under the first variation order dated 21 August 2014 (“VO1”); $621,828.73 as outstanding payment for completed works under the alleged second variation order (“VO2”); and $30,178.78 arising from materials which the first defendant alleges it purchased at the request of the plaintiff;¹⁴ if the AD is not set aside, a declaration that the first defendant is entitled to the moneys awarded under the AD; or alternatively, a quantum meruit for the work the first defendant actually did.¹⁵

The claim and counterclaim raise the following issues: How much of the Works did the first defendant complete before it left the site on 9 October 2014 and is the first defendant liable to pay liquidated damages for delay (“the Works Issue”)? Were there any defects in the Works and is the plaintiff entitled to impose back charges on the first defendant (“the Defects Issue”)? Did the first defendant order materials on the plaintiff’s instructions, thereby entitling the first defendant to claim the cost of those materials from the plaintiff (“the Materials Issue”)? Is the first defendant entitled to recover on two variation orders and, if so, in what amount (“the Variation Orders Issue”)? Did the second defendant breach his duties in contract or tort by over-certifying the amount of work completed by the first defendant or by acting in a position of conflict of interest, thereby causing the plaintiff to suffer loss (“the Personal Duty Issue”)?

Having considered and analysed the parties’ evidence and submissions, I have come to the following conclusions: On the Works Issue, I find that the first defendant had completed 95.29% of the Works as at 9 October 2014. I accordingly dismiss the plaintiff’s claim that the first defendant has been overpaid. The plaintiff is in fact obliged to pay the first defendant a further sum of $121,138.27. The plaintiff, however, is entitled to recover $81,000 from the first defendant as liquidated damages for 162 days of delay. On the Defects Issue, I dismiss the plaintiff’s claim against the first defendant. On the Variation Orders Issue, I find that the first defendant is entitled to recover its entire counterclaim of $14,300 on VO1. I find that the first defendant is not entitled to recover its counterclaim on VO2 in contract but is entitled to a quantum meruit for the work done on VO2. I assess the value of the quantum meruit at two-thirds of its claim of $621,828.73 on VO2. On the Materials Issue, I dismiss the first defendant’s counterclaim against the plaintiff. On the Personal Duty Issue, I dismiss the plaintiff’s claim against the second defendant.

I now set out the reasons for my decision.

The Works Issue

By the time the first defendant withdrew from the site on 9 October 2014, the plaintiff had paid the first defendant just over $1.18m under the Comfort Contract.¹⁶ After adjusting for variations and back charges, the plaintiff’s case is that it had overpaid the first defendant by about $410,000.¹⁷

The contemporaneous evidence on the Works Issue is an email which the second defendant, as the plaintiff’s project manager, sent on 9 October 2014 at 6.44am (“9 October Email”) to Mr Natarajan Chidambaram (“Mr Ram”), the first defendant’s project manager. The second defendant attached to this email a list of items which the first defendant had failed to complete. The second defendant derived this list from a list of outstanding items which Lead had compiled and attached to an email to the plaintiff dated 3 October 2014 (described in more detail at [24] below).¹⁸ Lead followed this with three further emails to the plaintiff after the first defendant withdrew from the site attaching virtually the same list of outstanding items.¹⁹

The plaintiff’s case is that the bulk of the items which it listed in the 9 October Email relate to the Works, ie, works within the scope of the Comfort Contract, and not to variations, ie, works which the parties agreed outside the scope of the Comfort Contract. To support its case, the plaintiff says it had to spend the substantial sum of over $397,000²⁰ after 9 October 2014 to complete the Works.²¹

The first defendant’s case is that the Works were complete or substantially complete by 9 October 2014.²² It says that the 9 October Email relates entirely to variations and not to any of the Works. In support of its argument, the first defendant relies on Certificate of Payment No 13 (“COP 13”) which Lead issued to the plaintiff on 28 September 2014. In COP 13, Lead certified that 95.29% of the Works had been completed as at 15 September 2014.²³ The value of the Comfort Contract was $1.25m. This necessarily implies that, as at 15 September 2014, the value of the outstanding Works was only 4.71% of $1.25m, or $58,875. Further, the first defendant remained on site and continued work from 15 September 2014 until 9 October 2014. The percentage of the Works actually completed by 9 October 2014 is therefore likely to be even more than the 95.29% which Lead certified complete as at 15 September 2014.

The first defendant points out that the second defendant, in the 9 October Email, makes no allegation at all that the first defendant had in fact failed to complete the Works.²⁴ The first defendant also relies on another email dated 10 October 2014 which the first defendant sent to the second defendant as the plaintiff’s project manager. In that email, the first defendant asserts that the Works were complete. The plaintiff did not reply to this email or challenge this assertion.²⁵

The first defendant computes its counterclaim of $180,013.27 as follows:²⁶

Comfort Contract price	$1,250,000.00
Less amount paid up to 9 October 2014	($1,185,686.73)
Outstanding due for the Works	$64,313.27
Add amount due for variations	$115,700.00
Total due for the Works and variations	$180,013.27

Lump sum contract does not bar the plaintiff’s claim

I deal at the outset with a preliminary point raised by the first defendant. It argues that it is fundamentally wrong for the plaintiff to reassess the true proportion of the Works completed as at 9 October 2014 because the Comfort Contract is a lump sum contract.²⁷ It is back-to-back with the Lead Contract. Lead certified the Works to be 95.29% complete and paid the plaintiff accordingly. A reassessment is both legally and factually unsustainable. The plaintiff should not be entitled to recover any alleged overpayment to the first defendant.

I reject this argument. It is undoubtedly the case that the parties to a lump sum contract cannot reopen the lump sum after entering into the contract because of issues such as an under or over estimation of the price of materials or the costs of manpower. However, where a contractor alleges that a subcontractor failed to complete works contracted under a lump sum contract and has therefore been paid more than its contractual entitlement to be paid, the court must undertake an objective assessment of the proportion of the works which the subcontractor did in fact complete in order to ascertain the actual extent of the subcontractor’s contractual entitlement to be paid.

Indeed, cl 6.1(c) of the General Conditions of the Lead Contract, read with cl 3 of the...