Graham Taylor Designs (S) Pte Ltd v Grande Studio East Pte Ltd (fka Grande Star East Pte Ltd)

• Jurisdiction: Singapore
• Judge: Lim Teong Qwee JC
• Judgment Date: 27 October 1999
• Neutral Citation: [1999] SGHC 282
• Docket Number: Suit No 1764 of 1998
• Date: 27 October 1999
• Year: 1999
• Published date: 19 September 2003
• Plaintiff Counsel: Felicia Ng and Yeo Piah Chuan (Piah Tan & Partners)
• Citation: [1999] SGHC 282
• Defendant Counsel: Chia Ho Choon and Rowena Chew (Bih Li & Lee)
• Court: High Court (Singapore)
• Subject Matter: Building and Construction Law,Disclosure of profits,Scope of agreement,Building and construction contracts,Director of main contractor also director of sub-contractor,Whether main contractor owed duty to disclose profits arising from share in sub-contractor,Contractor's duties,Whether "design and build" Contract

: This is a claim for balance of fees payable for consultancy services under a contract evidenced by a memorandum of understanding dated 16 March 1998 and for balance of price of construction works executed under an oral agreement made on or about 4 May 1998 and several letters of award issued pursuant to the oral agreement and orders for additions and variations. On 26 August 1999 I gave judgment for the plaintiff as claimed less deductions for defects and dismissed the counterclaim. On 4 September 1999 I assessed the defects and gave judgment accordingly. Having regard to all the circumstances including the issue of defects I awarded the plaintiff only part of the costs. The defendant has given notice of appeal and these are my written grounds. [The appeal was withdrawn - Ed.]

The plaintiff (`Graham Taylor`) is a company incorporated in Singapore and as its company profile says it `offers a professional consultancy service in space planning, environment and interior design`. In January 1998 the defendant (`Grande Studio`) was minded to operate a theme entertainment centre at the 9th storey of the building at Grange Rd known as Cineleisure Orchard and for that purpose to take a lease of the premises and fit it out accordingly. Graham Taylor was approached and following several discussions a memorandum of understanding (`memorandum`) contained in a letter dated 16 March 1998 was signed for Graham Taylor by Mr Linwood its managing director and for Grande Studio (then known as Grande Star East Pte Ltd) by its executive director Mr Law.

The memorandum provides:

1.1 [Grande Studio] agrees to appoint [Graham Taylor] as Full Service Consultants and Project Managers for the above project.

1.2 The design and completion of the project is to be carried out in accordance with the attached Budget Estimate and Fee Proposal (Appendix A), and Programme of Works (Appendix B).

1.3 No changes to the Budget or Programme of Works will be allowed without written approval of [Grande Studio].

1.4 [Grande Studio] agrees to pay [Graham Taylor] a lump sum fee of $333,000.00 for the Consultancy services stated therein and further specified on the attached Scope of Services (Appendix C) and itemised hereafter:

Interior Design; Project Management; M&E Design; Graphic Design; Architectural Submissions; Structural Engineer; Clerk of Works; Acoustic Engineer.

I have added the numbering. Payment terms are then set out in para 2 and it appears that the services are divided into five phases described as planning, design development, specification, tender, and site supervision. Paragraph 3 provides that a full service agreement will be prepared by Graham Taylor for signature by Grande Studio before the commencement of phase 2. Paragraph 4 of the memorandum provides:

Following completion of [tender phase] of the above services the successful Contractor will be appointed by [Graham Taylor] under a separate agreement.`

The annexed budget estimate provides for interior and M&E works, catering equipment, professional fees and a 2.25% contingency sum. The interior and M&E works were estimated over 14 locations of the entertainment centre on a cost per square metre basis giving a total of $2,049,250. The estimate for catering equipment was $125,000 and that for professional fees was $370,000. The programme of works allowed 12 weeks from the appointment of Graham Taylor as consultant to handover of the works to Grande Studio. More significantly it allowed five and a half weeks for construction on site.

In accordance with para 3 of the memorandum Graham Taylor sent two copies of its full service agreement to Grande Studio with its letter of 25 March 1998. These have not been signed and it is not disputed that the parties were bound by the agreement evidenced by the memorandum and that nothing in the full service agreement has been incorporated in the agreement. The letter of 25 March 1998 also said:

The Scope of Works excludes Graphic Design and the total fee is therefore reduced to $333,000.00 (excluding GST) as agreed. Phase 4 of our services has been renamed `Cost Control` since, as directed, tenders will not be issued but a pricing exercise will be held instead.

Paragraph 1.4 of the memorandum already mentions the reduced fee as reflected in the budget estimate.

Grande Studio admits the agreement evidenced by the memorandum as amended by the letter of 25 March 1998. It alleges in para 2 of its defence that the memorandum did not constitute the entire contract and that:

[Graham Taylor`s] obligation was to design and build an exclusive and up-market night entertainment club comprising, inter alia, a discotheque (also known as the Main Hall), a wine bar (also known as the Cafe Bar) and karaoke rooms (also known as KTV Rooms/Section) which were to operate in close proximity on the same floor of the premises at level 9 Cineleisure Orchard.

It further alleges in para 9 that:

It was an express or implied term of the [memorandum] that [Graham Taylor] would undertake the project on a design and build basis.

Mr Law said in his affidavit:

In the minutes of meeting held on 9 March 1998 ... para 1 stated `[Graham Taylor] was appointed by Mr Paul Law to be the Interior Designer/Project Management & Builder for Star East`.

Accordingly, when the [memorandum] was signed, it was understood, and [Grande Studio] is advised it was an express or implied term that [Graham Taylor] would be responsible and liable to [Grande Studio] for all aspects of the Project, including the construction aspect.

A copy of the minutes was annexed to the affidavit. It appears on the face of it to contain minutes recorded by a Mr Wee of a meeting on 9 March 1998 between Mr Law and Mr Wee representing Grande Studio and Mr Linwood representing Graham Taylor. Mr Wee did not give any evidence. Mr Linwood did not give any evidence about the alleged meeting on 9 March 1998 and he was not cross-examined on what the minutes recorded.

On 10 March 1998 Graham Taylor wrote to Grande Studio and para 1 (appointment of Graham Taylor as full service consultants and project managers) was in material respects identical with para 1.1 of the memorandum. The letter that was produced had these words written in the margin against this paragraph: `No mention of builder`. Under cross-examination Mr Law admitted that Mr Wee faxed this letter to him with these words which Mr Wee had written. On 16 March 1998 another meeting took place and following that the letter containing the memorandum was sent.

Item 1 of the minutes of the meeting on 9 March 1998 states that Graham Taylor was appointed to be the `Interior Designer/Project Management & Builder`. It goes on to state that the agreed lump sum fee was $250,000 for design and project management and $120,000 for all other related professional services. Nothing was recorded in the minutes as regards the construction cost but item 4 states:

[Graham Taylor] will also be preparing a Design Build Contract for [Grande Studio] to review as soon as [Graham Taylor] has finalised the contract sum for the project.

It is not disputed that no `design build` or `design and build` contract was ever prepared whether by Graham Taylor or by Grande Studio.

On 22 April 1998 Graham Taylor wrote to Grande Studio to advise that it had awarded a contract for preliminary works to DH Decor Pte Ltd and forwarded a letter of award expressed to be from Graham Taylor on behalf of Grande Studio and addressed to DH Decor with a request that it be signed by Grande Studio as confirmation. The letter of award when signed would show that it was Grande Studio contracting as owner with DH Decor as contractor. This letter was returned to Graham Taylor with a note written on it to the effect that Grande Studio would not sign it. The note continues:

As you are aware that this is a turn key project we will only sign with your company.

On 27 April 1998 there was a meeting of consultants and following that Mr Linwood had a discussion with Mr Law and Mr Wee. On 29 April 1998 Graham Taylor wrote to Grande Studio. The relevant part of the letter states:

As already explained a `turn key` approach to this project is not possible as an itemised budget has not been agreed and we are providing comparative quotations, which of course is the best way for you to control costs. We must reiterate that if we follow standard consultancy procedure (as outlined in our Design Agreement and the Project Organisation sheet), [Graham Taylor] will still act as the conduit through which all communication flows; yet [Grande Studio] retains ultimate direct financial control.

If you wish us to act as a main contractor then we will do so and apply a profit and attendance sum to each sub-contractor and supplier.

You proposed a meeting with Paul Law to resolve this issue however he is not available until 4 May 1998. This will hinder commencement of works. Please arrange the meeting at your convenience.

There was a meeting on 4 May 1998 and following that meeting all the letters of award and variation orders were signed. These documents show that Grande Studio contracted with Graham Taylor for the construction works. Graham Taylor did not execute the works itself but sub-contracted out the works to DH Decor and others. As Mr Linwood explained the letters of award between Graham Taylor and the sub-contractors and suppliers were sent out upon Grande Studio signing the letters of award between Grande Studio and Graham Taylor.

Grande Studio`s case is that at the meeting on 9 March 1998 a `design and build` contract was made. I find that no such contract was made at all. The minutes of the meeting are inconsistent with any such contract having been made notwithstanding the inclusion of `builder` in item 1. A design had not been developed yet. It would have been impossible to determine a price for it. A design and build...