Diamond Glass Enterprise Pte Ltd v Zhong Kai Construction Co Pte Ltd and another appeal

• Jurisdiction: Singapore
• Judge: Woo Bih Li JAD
• Judgment Date: 23 December 2022
• Neutral Citation: [2022] SGHC(A) 44
• Citation: [2022] SGHC(A) 44
• Year: 2022
• Published date: 29 December 2022
• Docket Number: Civil Appeal Nos 125 and 129 of 2021
• Plaintiff Counsel: Chan Kah Keen Melvin and Yong Wei Jie Timothy (TSMP Law Corporation)
• Defendant Counsel: Kris Chew Yee Fong and Isabel Su Hongling (Zenith Law Corporation)
• Subject Matter: Building and Construction Law,Damages,Liquidated damages,Scope of works,Variations,Statutes and regulations,Building and Construction Industry Security of Payment Act,Termination,Repudiation of contract
• Hearing Date: 21 July 2022
• Court: High Court Appellate Division (Singapore)

Quentin Loh JAD (delivering the judgment of the court): Introduction

The present dispute concerns two cross-appeals in AD/CA 125/2021 (“CA 125”) and AD/CA 129/2021 (“CA 129”) arising out of the decision of the High Court judge (the “Judge”) in Zhong Kai Construction Co Pte Ltd v Diamond Glass Enterprise Pte Ltd [2021] SGHC 277 (the “Judgment”).

By a Letter of Award dated 7 November 2016 (the “Subcontract”), Zhong Kai Construction Co Pte Ltd (“ZK”) engaged Diamond Glass Enterprise Pte Ltd (“DG”) as a subcontractor for the supply of materials, equipment and tools to carry out and complete the aluminium cladding of an external facade, blast/ballistic doors and windows, aluminium doors, and window works. These works were for a project for the construction of equipment buildings and facilities at the Singapore Changi Airport (the “Project”). The works under the Subcontract were divided into Phase 1 and Phase 2A works.

In the proceedings below, ZK claimed against DG for liquidated damages (“LD”) arising from DG’s delays. The LD claimed amounted to a total of $501,800, comprising Phase 1 works amounting to $383,400 and Phase 2A works amounting to $118,400. ZK also claimed the sum of $340,233.10 against DG for replacement works arising from DG’s abandonment of the worksite around 6 June 2018 and for rectification works done. ZK further sought to overturn the adjudicated amount that was awarded to DG in an adjudication determination under the Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed) (“SOPA”) issued on 15 November 2019 (the “AD”).

In response, DG counterclaimed for the following: payments due under four variation orders (ie, DV0006 (“VO 6”), DV0008 (“VO 8”), DV00018 (“VO 18”), DV00019 (“VO 19”), collectively the “VOs”) in the amount of $65,849.45; the retention sum for the Subcontract (the “Retention Sum”) in the amount of $27,902.75, (we pause to note that references in the Judgment, at [29(b)] and [245], to the Retention Sum as the sum of $28,051 appears to be an inadvertent error; the Retention Sum of $27,902.75 is recorded as an agreed figure in para 151 of the AD,¹ (see [26] below), DG’s Appellant’s Case at paras 111 to 115 and DG’s Defence and Counterclaim dated 12 May 2021);² remainder of the Subcontract sum ($561,019.90, minus payments received of $339,136.60, the disputed VO sum of $65,849.45, and the Retention Sum); and legal costs associated with the AD.

The Judge allowed ZK’s claims for LD in part. He allowed ZK’s claims for LD for Phase 1 works in the amount of $356,400, which was less than the claimed sum of $383,400, and disallowed LD of $118,400 for Phase 2A works. He also allowed the costs of replacement and rectification works in part, in the amount of $197,501.49 out of the $340,233.10 claimed by ZK. We set out at [93], a table taken from the Judgment at [220], containing the itemised claims for such works. A reference to an item simpliciter is to an item from that table. The Judge also dismissed ZK’s claim for overturning the main works allowed by the adjudicator in the AD.

As for DG’s counterclaims, the Judge allowed DG’s counterclaim for payment due under VO 18 in the amount of $5,070 and disallowed DG’s counterclaims for payments in respect of VO 6, 8 and 19. The Judge also dismissed DG’s claims for [4(b)]–[4(d)] above.

In summary, we allow DG’s appeal in CA 125 in part and ZK’s appeal in CA 129 in part, as follows: DG’s appeal in respect of LD awarded to ZK is allowed in part and the $356,400 LD awarded to ZK for Phase 1 works is reduced by $165,600 to $190,800; DG’s appeal against the award of $5,906.40 to ZK in respect of ZK’s claim for replacement and rectification works, is allowed, (see item 1(e) at [93]), and this award is accordingly set aside; ZK’s appeal against the dismissal of its claim for $27,735.47 in respect of its claim for replacement and rectification works (see item 4(a) at [93]), is allowed and ZK is awarded this sum; DG’s appeal against the dismissal of its counterclaim for payments in respect of VO 6 (ie, the sum of $32,602.50) is allowed, and DG is awarded this sum; DG’s appeal against the dismissal of its counterclaim for payments in respect of VO 8 (ie, the sum of $13,185) is allowed, and DG is awarded this sum; DG’s appeal against the dismissal of its counterclaim for the Retention Sum (ie, the sum of $27,902.75) is allowed, and DG is awarded this sum; and The question of DG’s entitlement to its legal costs for the adjudication as well as the quantum is remitted back to the Judge for his determination (see [280] below). If for any reason the Judge is not available, the parties may write to this court to make this determination. As there are or will be various sums owing by DG to ZK and vice versa under these cross-appeals, (pursuant to (a) to (f) above), as well as under the Judgment, (which fall outside (a) to (f) above), the parties will have to set-off these various sums against each other to arrive at a final balance. We therefore make the necessary consequential orders below at [282] in relation to Companies Winding Up No 95 of 2020 (“CWU 95”, see [32]–[33] below) and the sum of $211,044 paid into court by ZK by way of security for a stay of CWU 95 pending the outcome of these cross appeals (the “Security Sum”).

Facts

We gratefully adopt the Judge’s summary of the facts in so far as they are relevant to the issues in the present appeals (Judgment at [1]–[3] and [6]–[27]).

The parties

ZK is a Singapore-incorporated company in the building and construction industry. Its principal business is in building and construction.³ DG is also a Singapore-incorporated company in the building and construction industry. It is engaged in the design, manufacture, supply, installation and maintenance of architectural glass.⁴

ZK was a subcontractor involved in the Project, which was for the construction of equipment buildings and facilities at the Singapore Changi Airport.⁵ The owner of the Project was the Civil Aviation Authority of Singapore (“CAAS”). Surbana Jurong Infrastructure Pte Ltd (“SJ”) was CAAS’ consultant for the Project.⁶ SCB Building Construction Pte Ltd (“SCB”) was the main contractor for the Project.⁷ ZK was a subcontractor of SCB for the Project.

Through the Subcontract dated 7 November 2016,⁸ ZK engaged DG as a subcontractor for the supply of materials, equipment and tools to carry out and complete the aluminium cladding of the external facade, blast/ballistic doors and windows, aluminium doors, and window works for the Project.⁹ The “Subcontract Sum” was a provisional sum of $558,055 excluding goods and services tax (“GST”).¹⁰

Background to the dispute

The Subcontract was divided into two phases: Phase 1 and Phase 2A. Phase 1 related to works for an eight-storey Equipment Building (“Phase 1 Works”) while Phase 2A related to works for a two-storey Annex Building (“Phase 2A Works” and “Annex Building” respectively).¹¹

According to ZK, DG began to show signs of delay in meeting the schedule for the Subcontract works sometime in February 2017.¹² SCB and ZK gave many written notices and reminders to DG from February 2017 to February 2018.

According to DG, these delays were not caused by them but by ZK and/or those further up the contractual chain.¹³ The delay was caused by, among other things, ZK’s delay in obtaining the requisite approval from the Building and Construction Authority (“BCA”) to carry out the structural works for Phase 1, the change in glass specifications, and ZK’s refusal to agree to payment of claims or to make payment on time and in full.¹⁴

The disagreement between the parties continued in April 2018 as evidenced by email correspondence between them concerning the purchase of cabin glass that DG was obliged to install on the eight-storey Equipment Building under Phase 1 Works.

In an email by SCB dated 17 April 2018, addressed to both ZK and DG, it was stated that “[t]ill date, despite our repeated reminders, you have not placed order for the cabin glass and there has been no progress update”.¹⁵

On 25 April 2018, DG sent a letter via email to ZK, with the header “Cancellation of Purchase Order for Cabin Glass”.¹⁶ In that letter, DG stated that “[d]espite our very lucid explanation of the facts and the various issues raised regarding payment of monies due and owing to us plus our requirement that the relevant parties accept responsibility for the costs of airfreight, we have not received any substantive reply from [ZK]”.¹⁷ As such, DG had “no choice but to cancel the Purchase Order for Cabin Glass with immediate effect”.¹⁸ DG also sought written confirmation from ZK to bear the liability to pay $48,380 to settle DG’s claims, without which they would not be able to proceed further.

In response, ZK sent an email to DG on the same day stating that “to cancel the purchase order for cabin glass is a serious impact to achieve overall completion of work [sic]”.¹⁹ ZK also stated that they would purchase the cabin glass and the cost incurred would be deducted from DG’s progress payment claim.²⁰

On 30 May 2018, DG replied to ZK’s email stating:²¹

Repudiatory Breach of Contract

…

For the reasons set out in our correspondence on 19 April 2018 we have explained and established that there was no delay by [DG] in their project from the moment the glass specifications were changed …

Further, it is painfully obvious that despite our progress claims, no payment has been made on the sum outstanding of $261,006.74. [ZK]’s refusal to approve the variation work quotes and total failure to obtain payment for all the variation work requested puts us in jeopardy of making a loss in this project.

…

[emphasis in original]

DG also demanded payment of $149,436.99 by 12.00pm on 5 June 2018. Should ZK fail to meet the deadline, DG would treat the Subcontract as terminated.²² ZK did not make the demanded payment by the...