Crescendas Bionics Pte Ltd v Jurong Primewide Pte Ltd

• Jurisdiction: Singapore
• Judge: Tan Siong Thye J
• Judgment Date: 11 January 2019
• Neutral Citation: [2019] SGHC 4
• Court: High Court (Singapore)
• Docket Number: Suit No 477 of 2015
• Published date: 15 November 2019
• Year: 2019
• Hearing Date: 24 October 2018,17 August 2018,23 August 2018,10 August 2018,08 August 2018,03 August 2018,22 October 2018,30 July 2018,21 August 2018,29 August 2018,15 August 2018,31 July 2018,31 August 2018,13 August 2018,16 August 2018,14 August 2018,23 October 2018,30 August 2018,07 August 2018,20 August 2018,06 September 2018,24 August 2018
• Plaintiff Counsel: Parmar Karam Singh, Kang Weisheng Geraint Edward, Muslim Albakri, Siaw Hui and Leong Lijie (Tan Kok Quan Partnership)
• Defendant Counsel: Philip Antony Jeyaretnam SC, Koh Kia Jeng, Lau Wen Jin, Reuben Gavin Peter and Tan Ting Wei (Dentons Rodyk & Davidson LLP)
• Subject Matter: Contract,Contractual terms,Rules of construction,Formation,Offer,Acceptance,Consideration,Waiver,Building and Construction Law,Guaranteed maximum price contract,Delay in completion
• Citation: [2019] SGHC 4

Tan Siong Thye J (delivering the oral judgment of the court): Introduction

The plaintiff is Crescendas Bionics Pte Ltd, a Singapore registered entity that was incorporated as a property developer.¹ The plaintiff is part of the Crescendas Group. Mr Lawrence Leow Chin Hin (“PW1”), a key witness for the plaintiff, is the Chief Executive Officer of the Crescendas Group and a director of the plaintiff.²

The defendant is Jurong Primewide Pte Ltd, a general building contractor, registered as a Grade A1 contractor with the Building and Construction Authority (“BCA”).³ The defendant is a wholly owned subsidiary of Jurong International Holdings Pte Ltd (“JIHPL”).⁴ On 30 June 2008, the plaintiff and the defendant signed the Letter of Intent dated 26 June 2008 (“the LOI”). This four-page document was the only written contract signed by the plaintiff and the defendant. The parties agree that the LOI is binding on them. In the LOI, the plaintiff engaged the defendant as the management contractor to build a seven-storey multi-user business park development with two levels of basement carpark at Biopolis Drive/Biomedical Groove (“the Project”).⁵ The LOI stated that the contract sum for the Project was $95,870,000 (the “Contract Sum”).⁶

The LOI was not the typical conventional construction contract. It was based on the model of a Guaranteed Maximum Price (“GMP”) contract that was proposed by the defendant. Under the GMP contract, the defendant guaranteed a maximum price that the plaintiff would be required to pay for the Project, subject to any legitimate adjustments to the GMP due to additional scope of works which were outside what the parties had contracted under the LOI. Based on the GMP contract, the “out-turn cost” is the cost actually incurred for the Project. Under the LOI, the out-turn cost is calculated by adding all the costs incurred for the work done by the trade contractors engaged by the defendant for the Project. Should the out-turn cost exceed the GMP, the plaintiff would only be liable up to the GMP and the defendant would have to bear the costs exceeding the GMP.⁷

However, if the GMP exceeds the out-turn cost, the parties agreed to share the difference or savings equally.⁸ I shall refer to the difference between the GMP and the out-turn cost (if it is a positive figure) as the “shared savings”. In other words, under the LOI, the plaintiff was required to pay 50% of the shared savings (if any) to the defendant.

The LOI further stipulated that the plaintiff would pay the defendant for the provision of preliminaries (“Preliminaries Sum”).⁹ “Preliminaries” refer to all the groundworks done by the defendant that do not typically form the permanent structure of the building and do not come within the scope of work of the various trade contractors and their trade preliminaries for the Project. The preliminaries works that the defendant were to provide typically included the provision of a site office, vehicle washing point, preparation of the progress reports, provision of plant and equipment (eg, tower cranes) and employment of site staff to manage the whole work site of the Project.¹⁰ In other words, the defendant, being a management contractor, provided the management contractor’s preliminaries for the Project.

The LOI also required the plaintiff to pay the defendant a management fee (“Management Contractor’s Fees) and the “Profit and Attendance” for the Provisional Items provided by the defendant. “Provisional Items” are works which are not included in the calculation of the GMP. However, the LOI stipulated that the defendant was nonetheless entitled to make a profit from the appointment of sub-contractors for the Provisional Items and for the costs associated with the provision of attendance (ie, the provision of water, power and other main contractor’s preliminaries to enable the sub-contractor for Provisional Items to carry out its work). Finally, the LOI stipulated the start date of the Project, and that it had to be completed within 18 months. There was also a provision on liquidated damages.¹¹

After the LOI was executed, the relationship between the parties began to deteriorate as the parties disagreed on their respective obligations and the scope of their responsibilities under the LOI. This was partly because the parties did not execute a detailed contract. Their effort to agree on a detailed contract was hampered by their disagreement on the scope, duties, responsibilities and the cost breakdown of the defendant’s preliminaries works. In fact, the parties had commenced the piling works on the Project even before the LOI was signed. As a result, there were numerous disagreements between the parties. Particularly, the plaintiff disagreed on the quantum of the Preliminaries Sum and whether the defendant was required to provide an on-demand performance bond under the LOI. The plaintiff also alleged that during the discussions between the parties after the LOI was signed, the defendant had agreed to forgo its share in the first $5 million of shared savings. The plaintiff also felt that the defendant was overcharging and double-charging the plaintiff for work done. The defendant disagreed with all the plaintiff’s allegations. A deep distrust between the parties soon plagued their relationship after the LOI was signed.

Despite these disagreements, and in the interest of completing the Project, the plaintiff made all the payments under the LOI to the defendant, less $155,000 which is the sum counter-claimed by the defendant as the cost incurred by the defendant for the procurement of the conditional bond obtained from Oversea-Chinese Banking Corporation Limited (“OCBC Bond”).¹² In total, the plaintiff paid the costs of all the trade packages, including the preliminaries of the trade contractors, the Preliminaries Sum of $12.3 million less $155,000, the defendant’s Management Contractor’s Fees and the defendant’s share of the shared savings which the plaintiff alleged was agreed to be calculated as follows: 0.5 x (total shared savings - $5 million). The plaintiff, nonetheless, reserved its rights to resolve the dispute over the quantum of the Preliminaries Sum under the LOI in court.¹³

The Project was eventually certified as completed on 12 January 2011 by the Superintending Officer (“SO”), Jurong Consultants Pte Ltd (“JCPL”), which was appointed by the plaintiff.¹⁴ The parties agreed that this exceeded the stipulated time period required of the defendant to complete the Project under the LOI.

Prior to the start of the trial, the parties had successfully resolved some of the claims raised in their pleadings leaving the following outstanding disputes for this court to consider: Was the Preliminaries Sum for the defendant, the management contractor, agreed by the parties under the LOI to be $12.3 million? Did the defendant agree to waive its first $5 million of the shared savings? Was the defendant entitled to its counterclaim of $155,000 which was the cost incurred to secure the performance bond? Were the delays in the completion of the Project due solely to the defendant or were both the plaintiff and the defendant responsible for the delays?¹⁵ Is the plaintiff entitled to liquidated damages for the delay? Is the plaintiff entitled to a refund of the additional preliminaries it paid to the defendant for the delay in the Project’s completion?

As this trial was bifurcated, I shall only determine the liabilities of the parties. The assessment of damages will be determined at a later stage.

Background Events leading up to the signing of the LOI

Sometime in 2007, Mr Tang Tat Kwong (“DW1”), the Chief Executive Officer of JIHPL, which is the parent company of the defendant, and PW1 representing the Crescendas Group, agreed to make a joint bid for the development of the Project. The plaintiff was used as the vehicle to make the joint bid for the development of the Project.¹⁶

This culminated in the execution of a Heads of Agreement dated 29 October 2007 (“HOA”) signed by Accrington Pte Ltd, the plaintiff’s parent company, and JIHPL. Under the HOA, the plaintiff was required to engage the defendant as the management contractor for the Project.¹⁷

In or around December 2007, the plaintiff was awarded the contract to develop the Project. Pursuant to the HOA, it entered into discussions with the defendant to negotiate the contract sum and the scope of work that the defendant would provide as the management contractor for the Project.¹⁸

In accordance with the HOA, the plaintiff appointed JCPL as the design consultant and the SO of the Project.¹⁹ JCPL developed the design intent of the Project with input from the defendant. JCPL also developed and issued the architectural design drawings, which were used by the defendant (as management contractor) to engage the trade contractors. In turn, the defendant developed the relevant detailed drawings for the construction of the various works in the Project.²⁰

In early May 2008, JCPL’s scope of work was reduced as the defendant took over the design, development and supervision of the temporary and permanent structural works which included the piling works. The defendant informed the plaintiff and JCPL that it would be able to reduce the cost of the reinforced concrete works (“RC works”) by doing so and hence enjoy substantially higher shared savings. To achieve this, the defendant appointed Parsons Brinckerhoff Pte Ltd (“Parsons”) as its consultant engineers for the temporary and permanent structural works.²¹

On the recommendation of the defendant, the plaintiff engaged WT Partnership to prepare a cost estimate for the Project.²² WT Partnership was the Quantity Surveyor involved in a recent development of a biological science building in the vicinity known as Biopolis II.²³ As Biopolis II was of a similar nature to the Project, the parties believed that WT Partnership would be familiar with the scope...