Econ Corp Ltd v So Say Cheong Pte Ltd

• Jurisdiction: Singapore
• Judge: Belinda Ang Saw Ean J
• Judgment Date: 19 October 2004
• Neutral Citation: [2004] SGHC 234
• Court: High Court (Singapore)
• Year: 2004
• Published date: 20 October 2004
• Plaintiff Counsel: Tan Cheow Hin (CH Partners)
• Defendant Counsel: Timothy Ng (Lee and Lee)
• Subject Matter: Civil Procedure,Principles,Defendant contested plaintiff's computation of its claim,Whether plaintiff had made out its claim.,Contract,Formation,Defendant claimed there was an oral contract with plaintiff under which plaintiff was to pay defendant commission,Whether oral contract was concluded.
• Citation: [2004] SGHC 234

19 October 2004

Belinda Ang Saw Ean J:

1 The plaintiff, Econ Corporation Limited, is a wholly-owned subsidiary of Econ International Limited, a company listed on the Singapore Exchange. This action for breach of contract was filed on 24 April 2002 to recover the total sum of $925,738.30 being the unpaid balance for material supplied and work and services rendered by the plaintiff as subcontractor of two projects, namely the Amenity Centre and Multi-storey Carpark project at Jurong Island (“the JI project”) and the Woodlands Secondary School project (“the WSS project”). The plaintiff also carried out the mechanical and electrical (“M&E”) works at Sembawang Secondary School, but the claims here do not concern those works. The plaintiff was placed under judicial management on 15 March 2004. This action continues against the defendant, So Say Cheong Private Limited, with the approval of the judicial manager.

2 The defendant was the main contractor of both projects. The defendant is not pursing its counterclaim, but is raising a set-off as a defence to extinguish the plaintiff’s claims. The set-off is founded upon an alleged oral agreement reached in March 1997 whereby the plaintiff agreed to pay the defendant a 2% commission for appointing the former as its subcontractor of the two projects. The pleadings go on to allege fraudulent misrepresentation and estoppel, but neither plea was pursued at the trial and in the defendant’s Closing Submissions.

3 A plea of an alleged oral agreement, or the alternative plea formulated as an alleged oral collateral contract, is one for breach of such a contract, not for misrepresentation. I should mention that a claim founded on s 2(1) of the Misrepresentation Act (Cap 390, 1994 Rev Ed) is an action in contract: see Trans-World (Aluminium) Ltd v Cornelder China (Singapore) Pte Ltd [2003] 3 SLR 501 at [124]. The defendant has to establish the oral contract and the representation that induced it into contracting with the plaintiff. Otherwise, the claim under this Act will fail.

The pleadings

4 It is convenient to now set out in some detail the terms of the alleged oral contract. In its Amended Defence, the defendant averred that:

5. Sometime in March 1997 the Plaintiffs and the Defendants through their respective chairmen, entered into an oral agreement … The Plaintiffs had requested the Defendants and the Defendants had agreed to engage the Plaintiffs as their subcontractors for certain future building projects where the Defendants would be engaged as the main contractor.

6. The parties agreed inter alia that:

6.1 the Plaintiffs would contact the Defendants if they wished to tender for a project that was worth more than $10 million and would prepare the tender. The costs of preparing the tender would be borne by the Defendants, the Plaintiffs and/or the consultants or other parties engaged by the Plaintiffs;

6.2 the Defendants would thereafter submit the tender prepared by the Plaintiffs as its (sic) own. The tender was checked by the Defendants;

6.3 if the tender was successful, the Defendants had to subcontract the works to the Plaintiffs in return for a commission/fee amounting to 2% of the final contract value as certified by the employer or their consultants. The final contract value was to be determined and the 2% commission deducted once the final accounts for the respective project was finalised;

6.4 in addition to this 2% commission/fee, the Plaintiffs would also pay a management fee and any other disbursements incurred by the Defendants on behalf of the Plaintiffs. The rate and quantum of the said management fees and other disbursements as well as other details were to be negotiated and agreed on a case by case basis between the respective chairmen’s subordinates (on behalf of the Plaintiffs and the Defendants).

5 The plaintiff argues that there is no right of set-off. It flatly denies an agreement of the type described as having been made when Chew Tiong Kheng (“Chew”) of the plaintiff and So Say Cheong (“SSC”) of the defendant met in March 1997. The plaintiff’s version of the meeting in March 1997 is set out in its Reply as follows.

3. The Plaintiffs aver that there were however prior oral negotiations between the respective Chairmen of the Plaintiffs and the Defendants with the object of mutual benefits whereby the general approach was as follows:

(i) As the Defendants have no track record in design and build projects in excess of $10 million, the Plaintiffs would prepare the tender documents and bear the expenses thereof, for submissions for such projects in the Defendants’ name;

(ii) if the tender was successful and the Defendants were appointed main contractor of such project, the Defendants shall award the sub-contract for the entire project to the Plaintiffs on such written terms to be agreed;

(iii) the Plaintiffs shall pay for and retain the Defendants’ architect/project manager during the contract period; and

(iv) the Plaintiffs shall bear the fees, costs, expenses and other charges arising from their engagement as sub-contractors.

4. In the premises, any sub-contract that were to be subsequently awarded by the Defendants to the Plaintiffs … shall be on written terms to be specifically agreed upon on an ad hoc basis.

6 The Amended Statement of Claim avers that the terms of the JI project were contained in or evidenced by a letter of award dated 27 July 1998 read with the plaintiff’s letter of 22 March 1998 (“the JI sub-contract”). The terms of the sub-contract for the construction of the Woodlands Secondary School were contained in or evidenced by a letter of award dated 5 January 1999 (“the WSS sub-contract”). So, by s 93 of the Evidence Act (Cap 97, 1997 Rev Ed), the court is to look at the four corners of the documents mentioned for the terms of the agreements. Mr Tan submits that none of the documents recorded a 2% commission to the defendant. In any event, the defendant cannot bring its case within the exceptions in s 94 of the Evidence Act.

7 On the Friday before the start of the trial on Monday, the defendant obtained leave to amend its pleadings. Counsel for the plaintiff, Mr Tan Cheow Hin, pointed out that the defendant, at the very last minute, abandoned its previously held position – that the sub-contracts were partly oral and partly in writing – to plead that both sub-contracts were made orally. Consequently, the omission of the 2% commission was, after all, not a mistake on the defendant’s part. Rectification of the sub-contracts was no longer sought by the defendant.

8 On any view, the existence of the sub-contracts is admitted. The claims relate to unpaid certificates and the debate is about the plaintiff’s computation of the claims, not liability. It is not the defendant’s case that work was not rendered or material was not supplied. Neither is the objection premised on a reduction of the claim amount because of delays or defects that had made the work less valuable or caused extra expenses to the defendant. In raising the defence of set‑off, there is tacit acceptance that the claims as presented are well founded, but the debts have been extinguished. As an alternative to the defence of set-off, a few items of the plaintiff’s claims are being contested. I shall come to them in due course.

9 Ultimately, a major issue in the action that I have to decide on is whether there was an oral agreement reached in March 1997 to pay 2% commission on the final contract value to be determined at the end of the project when accounts are finalised. The burden of proof is on the defendant to establish that the parties intended to make a binding agreement to the effect as pleaded. Whether the parties have reached a contract binding at law is a question to be determined objectively.

10 I said in Lemon Grass Pte Ltd v Peranakan Place Complex Pte Ltd [2002] 4 SLR 439 at [116] to [119] that for a collateral contract to be enforceable, the court must find all the usual legal requirements of a contract having been fulfilled. Any statement purporting to be the contractual promise must be promissory in nature or effect rather than representational. Similarly, the burden of proof is on the defendant, as the party seeking to rely upon the collateral contract, to establish that both parties intended to create a legally binding contract.

11 It is appropriate at this juncture to deal with the issue of illegality canvassed in the defendant’s Closing Submissions. It emerged at the trial that the main contractor is prohibited under the main contract from subcontracting the entire project to a sub-contractor, and the errant main contractor may be debarred, for a few years, from tendering for future public sector projects. During the trial, I asked counsel whether any illegality was being suggested. Tan said that in such a situation, the main contractor was simply in beach of contract. Counsel for the defendant, Mr Timothy Ng, agreed with that observation and added that the main contract might be terminated. As either side had not suggested illegality of any sort, I was surprised to see arguments on the illegality of the JI sub-contract and WSS sub-contract in the defendant’s Closing Submissions to which the plaintiff duly responded. The defendant had not pleaded illegality in the Amended Defence and O 18 r 8(1) of the Rules of Court (Cap 322, R 5, 2004 Rev Ed) clearly requires a party to specifically plead any matter showing illegality. At the conclusion of the trial, no leave to amend the pleadings was applied for. Be that as it may, where a transaction is manifestly illegal on its face, the court can intervene on its own motion and refuse to enforce it, even if illegality is not pleaded or alleged. However, I am unable to say that this was such a case. There is also no evidence of illegality adduced before me. Accordingly, I must reject the defendant’s arguments on illegality.

The evidence

12 The plaintiff called three witnesses. The principal witness for...