Fongsoon Engineering (S) Pte Ltd v Kensteel Engineering Pte Ltd

• Judge: Belinda Ang Saw Ean J
• Judgment Date: 06 April 2011
• Neutral Citation: [2011] SGHC 82
• Citation: [2011] SGHC 82
• Court: High Court (Singapore)
• Published date: 06 May 2011
• Docket Number: Suit No. 67 of 2008
• Plaintiff Counsel: Joseph Ignatius (Ignatius J & Associates)
• Defendant Counsel: Wong Yoong Phin (Wong Yoong Phin & Co)
• Subject Matter: Building and Construction Law
• Hearing Date: 19 March 2010,08 July 2009,07 September 2010,12 January 2009,16 February 2011,18 March 2010,10 July 2009

Belinda Ang Saw Ean J: Introduction

In the present action, the plaintiff, Fongsoon Engineering (S) Pte Ltd, claims moneys due to the plaintiff under a lump sum contract for the fabrication and erection of the main structure of the Su Tu Vang switchgear (hereafter referred to as “the Sub-Contract Works”). The other claim relates to variation or additional works requested by the defendant, Kensteel Engineering Pte Ltd. The defendant’s counterclaim against the plaintiff is for expenses incurred by the defendant in rendering assistance to the plaintiff to complete the Sub-Contract Works. Mohd Puad bin Md Isa (“Mohd Puad”), the plaintiff’s business manager, and Ng Chin Hong, commonly known as Francis Ng (“Francis Ng”), the defendant’s chief executive officer, were the only witnesses called to testify for the respective parties.

The parties’ pleaded cases

The plaintiff’s pleaded case is based on a lump sum contract for the Sub-Contract Works. Whilst the defendant rejects in entirety the plaintiff’s claim in the sum of $403,072.74 for variation works, the defendant’s refusal to pay the outstanding progress claims in the sum of $121,621.16 was on account of its counterclaim against the plaintiff.

In its Defence and Counterclaim, the defendant pleaded that the plaintiff was contractually obliged to complete the Sub-Contract Works by 6 May 2007. However, the plaintiff failed to meet the contractual deadline, and was therefore in breach of contract. The defendant, in adherence to its duty to mitigate following the plaintiff’s breach, proceeded to and did render assistance to the plaintiff to facilitate completion of the Sub-Contract Works as well as rectification of defective works. As a result, the defendant expended the sum of $201,649.53 and is, therefore, seeking payment in its counterclaim against the plaintiff. In addition, the defendant denies issuing any variation orders to the plaintiff. In any event, the defendant’s pleaded case is that the plaintiff was obliged to finish the Sub-Contract Works by a stipulated time, and changes to the work-plan, if any, were due entirely to plaintiff’s obligation to speed up its work after its initial delay. Accordingly, the defendant has denied any responsibility whatsoever.

In its Reply and Defence to Counterclaim, the plaintiff denied that it was in breach. It contended that it had a period of ten weeks to complete the Sub-Contract Works, and that the period of ten weeks would not commence until the plaintiff had received all the steel required for the Sub-Contract Works. The defendant only completed its supply of steel sometime in mid April 2007.

What were the terms of the lump sum contract?

The debate is over the deadline by which the plaintiff was supposed to complete and hand over the Sub-Contract Works. Ordinarily, the applicable deadline can be easily ascertained from the terms of the contract. Unfortunately, the parties were unable to agree on the documents that evidenced the contract between them, or even the date on which a binding contract was formed. As such, the dispute became rather protracted.

The defendant maintains that the contract gave the plaintiff a total of ten weeks to complete the Sub-Contract Works, and time would start to run from the commencement of the work. The plaintiff commenced work on 22 February 2007, and the Sub-Contract Works should have been completed by the end of April 2007. In contrast, the plaintiff’s case is premised on a different start date: the ten weeks to complete the Sub-Contract Works was to start from the total receipt of the steel. The defendant’s delivery of the steel material was completed on 20 April 2007. As such the period of ten weeks should start from that April date. In support of its contention, the plaintiff relied on a 3-page document dated 7 March 2007 which was signed and initialled by the parties. According to the plaintiff, this 3-page document is the contractual documentation governing the rights and obligations of the parties.

This dispute came about because of the inclusion of an additional term shortly after the defendant had signed the 3-page document and then passed it on for the plaintiff’s execution. A good starting point is to examine the course of the correspondence between the parties to determine the date on which the contract between them was concluded, as well as the terms contained within that contract.

Initial quotation by the plaintiff

On 24 January 2007, the defendant sent an e-mail to the plaintiff attaching the terms and conditions and the schedule of work. The plaintiff was specifically asked to review the terms and conditions and to revert with its comments, if any. The plaintiff’s witness, Mohd Puad, confirmed that the terms and conditions referred to in the e-mail of 24 January 2007 were attached to the e-mail and received by the plaintiff. He identified the documents exhibited in his affidavit of evidence-in-chief at pages 36 to 54 as the terms and conditions received by the plaintiff.¹ The documents in question comprised “Exhibit A - Form of Agreement, Part II - Sub-contract terms and conditions (hereafter referred to as “the STC”). In reply, the plaintiff on 30 January 2007 quoted a total price of $480,000 excluding GST and wrote:

Dear Sir,

We thank you for your enquiry and are pleased to quote as follows:

...

Delivery Time: 14 Weeks

Terms of offer: 20% deposit upon confirmation of order. Balance by progress claim upon invoice.

It is common ground that up to this point, there was no binding contract. Letter of intent

On 9 February 2007, the defendant e-mailed its Letter of Intent to the plaintiff. The Letter of Intent read as follows:

Re: Letter of Intent for (Structural fabrication and erection of the Su Tu Vang Switchgear/CCR Building Award)

...

In reference to your quotation on the above subject matter, we have reviewed and perused your quotation and we are please[d] to award your Company the contract for the structural fabrication & erection of the Su Tu Vang Switchgear CCR Building. Please treat this letter of intention as an authorization to proceed with the work, while the Sub Contract is being prepared.

The Sub-Contract shall consist of: 1. Scope of Work for structural fabrication and erection of the Su Tu Vang SwitchGear/CCR Building 2. Engineering Deliverable starting with Reference No. R2837-006013-ST-0WG001 to R2837-006013-ST-0WG0023

Please confirm acceptance of this letter of intent by signing and duly returning the signed copy by end of business day 9 February 2007.

The e-mail of 9 February 2007 read as follows:

Dear Edmund,

As spoken, Attached is the Letter of intent for your company to proceed with the work. As discussed in the meeting, it was agreed the following: 1) The final subcontract price is S$400,000.00 (exclude GST) 2) The Fabrication and erection schedule to be completed by 10 weeks 3) The milestone payment shall be 10% upon contract sign and the rest will be progressively payment upon work completion.

We are preparing the subcontract agreement (Draft will be email to you for review by early next week) and we can sign once all are agreed.

...

I should mention that the usage of letters of intent that give rise to some limited rights and liabilities is common in the construction business. Typically, the employer states that it intends to enter into a contract with the contractor and requires the contractor to start work while the formal contractual documentation is being prepared. Ultimately, the full effect of any letter of intent depends entirely on the objective meaning of the language used as well as the context in which it was given.

In my judgment, the Letter of Intent coupled with the defendant’s e-mail of 9 February 2007 make up the defendant’s offer for the Sub-Contract Works. The terms of the offer were those set out in the e-mail, Letter of Intent and the STC. I should add that the document entitled “Scope of Work” and dated 23 January 2007 was exhibited by Mohd Puad in his affidavit of evidence-in-chief at p58. The witness confirmed that it was provided to the plaintiff by the defendant via e-mail of 24 January 2007.² Mohd Puad also confirmed that the Scope of Work mentioned in item 1 of the Letter of Intent was referable to the document at p58 of his written evidence.³ For present purposes, under the Scope of Work dated 23 January 2007, the defendant was to supply primary and secondary steel to the plaintiff.

Did the plaintiff accept the defendant’s offer

The plaintiff’s reply of 10 February 2007 indicated that it was accepting the contract but with additional terms:

Dear Tjek Poa;

We refer to your - and the Letter of Intent, dated 9/2/2007.

We hereby agreed and confirmed in principle for the above job but with the following conditions:

1) All payment and progressive payment shall be quantified as follows: • 10% of the Total Sub-Contract upon contract sign • 20% fortnightly progressive payment of the remaining Contract Sum 2) Progressive payment shall be fortnightly and payment shall be made to us 1 week after submission of claim. 3) We also reserved the right to exercise “Stop of Work”, should your company fail to make progressive payment after submission of our claim.

For your review and retention. Thank you.

On 12 February 2007, the defendant replied to the plaintiff in the same e-mail thread with its comments. The defendant wrote:

Dear Edmund/Violet,

Pls note my response below in Blue. Hope all clear and agreeable. Pls concur.

[LawNet Admin Note: For display purposes, the text that was coloured in blue in the source document has been emphasised in bold and underlined below.]

The text in blue was as follows: · 20% fortnightly progressive payment of the remaining Contract Sum – Progressive payment shall depend on the progress achieved 2 Progressive payment...