Ho Seng Lee Construction Pte Ltd v Nian Chuan Construction Pte Ltd

• Jurisdiction: Singapore
• Judgment Date: 21 September 2001
• Date: 21 September 2001
• Docket Number: Suit No 151 of 2000
• Court: High Court (Singapore)

Ho Seng Lee Construction Pte Ltd

Plaintiff

and

Nian Chuan Construction Pte Ltd

Defendant

[2001] SGHC 274

Judith Prakash J

Suit No 151 of 2000

High Court

Contract–Mistake–Common mistake–Lease of metal-forms for use in construction projects–Quantity of metal-forms less than agreed quantity–Whether subject matter of agreement radically or essentially different from subject matter which contracting parties believed to exist at time agreement executed–Contract–Mistake–Unilateral mistake–Lease of metal-forms for use in construction projects–Quantity of metal-forms less than agreed quantity–Whether one contracting party knew other party to be mistaken as to quantity of metal-forms on-site

The plaintiff (“HSL”) agreed to lease metal-forms to the defendant (“NC”) for the latter's use at certain construction projects. However, the quantities of metal-forms actually leased did not tally with the quantities stated in the agreements.

When NC failed to pay the rental moneys, HSL commenced proceedings. NC argued that the agreements were vitiated by common or unilateral mistake as to the subject matter of the agreements, and as to the quantities of metal-forms actually leased respectively.

Held, granting the plaintiff's claim:

(1) Although the actual quantities of metal-forms leased did not tally with that in the agreements, it did not mean that NC was absolved of its contractual liability to pay the rental moneys in respect of the contractually stated quantities. Whether it could do so depended on whether the agreements were vitiated by mistake: at [68].

(2) There was no common mistake by the parties. The subject matter of the agreements was the lease of metal-forms, and the mistake pleaded related only to the quantities actually leased. Although the quantities actually leased were less than that agreed on, they were more than sufficient for NC to perform its work. Notwithstanding the shortfall, the subject matter of the agreements was not essentially and radically different from that which both believed to exist at the time the contract was executed: at [80].

(3) There was no unilateral mistake on NC's part as it failed to show that HSL knew that it was mistaken as to the quantities actually leased. HSL itself believed that the quantities contracted for were already on-site, and it was not unreasonable for it to assume that NC had checked that the quantities tallied with that in the agreements: at [85].

(4) NC was bound by the agreements as it failed to establish that the defence of mistake was open to it: at [86].

[Observations: A contract would be void ab initio for common mistake if a mistake by both contracting parties rendered the subject matter of the contract essentially and radically different from that which both believed to exist at the time the contract was executed: at [69].

Unilateral mistake occurred when only one of the contracting parties was mistaken and the other knew, or must be taken to have known, of his mistake. The two possible legal consequences were (a) the mistaken party could elect to have the contract declared void, or (b) he could elect to enforce it on his own terms. The test as to the non-mistaken party's knowledge was an objective one based on what a reasonable person would have known in similar circumstances: at [84].]

Associated Japanese Bank (International) Ltd v Crédit du Nord SA [1988] 3 All ER 902 (folld)

Barrow, Lane and Ballard, Limited v Phillip Phillips and Company, Limited [1929] 1 KB 574 (distd)

Bell v Lever Brothers, Limited [1932] AC 161; [1931] All ER Rep 1 (folld)

Sale of Goods Act 1893 (c 71) (UK) s 6

Irving Choh and Twang Kern Zern (Chong Yeo & Partners) for the plaintiff

Wong Kah Chiew and Teh E-Von (Wong & M Seow) for the defendant.

Judgment reserved.

Judith Prakash J

1 The plaintiff company carries on the business of leasing metal-forms to builders for use in constructing buildings. These metal-forms are used as moulds for liquid concrete or cement.

2 The defendant company is in the construction business. In 1999, it entered into three agreements with the plaintiffs under which it rented metal-forms from them. The plaintiffs now claim that there is outstanding rental due to them from the defendants arising under the three agreements.

Pleadings

3 The statement of claim was straightforward. The plaintiffs alleged that by a written agreement dated 1 May 1999 and two further agreements both made on 1 June 1999, the plaintiffs agreed to lease and the defendants agreed to hire metal-forms for use at three Housing and Development Board (“HDB”) projects then underway. These projects were known as Sengkang N3C3 (“Sengkang”), Woodlands N5C14 (“Woodlands”) and Ang Mo Kio RC12 (“Ang Mo Kio”). Under the agreements, payment of hire was to be made within 30 days of invoicing by the plaintiffs. The defendants failed to pay the plaintiffs rental amounting to $268,802.49 and the plaintiffs therefore claimed that sum and interest thereon at 1.5% per month in accordance with the terms of the agreements.

4 The defence recited first the background to the agreements. It stated that before the defendants commenced work on the relevant HDB projects, another contractor, namely, Kong Siong Construction Pte Ltd (“Kong Siong”) had been constructing the buildings. Kong Siong required metal-forms for its work on these projects and leased the same from the plaintiffs. While construction was underway, the defendants took over the projects and agreed with the plaintiffs to lease the metal-forms previously leased to Kong Siong.

5 Paragraph 4 of the defence stated that the quantities of metal-forms leased to the defendants were, in the lease agreements, stated to be 80,003 pieces for Sengkang, 47,630 pieces for Woodlands and 12,235 pieces for Ang Mo Kio (in fact there was a mistake in the defence in that there the quantities for Woodlands and Ang Mo Kio were mixed up and the correct numbers were 47,630 pieces for Ang Mo Kio and 12,235 pieces for Woodlands). In actual fact, as the defendants discovered subsequently, the quantities of metal-forms leased were much smaller. The defendants averred that the quantities actually leased were not in accordance with the quantities stated as leased in the three agreements. By para 5 the defendants went on to allege that at the time the agreements were executed by the parties both, alternatively the defendants alone, mistakenly but honestly believed that the quantities of metal-forms leased were as in the agreements. This was because when the defendants took over the projects from Kong Siong, the metal-forms had already been set up at the sites or were lying on the ground and it was virtually impossible to count how many pieces were indeed handed over to the defendants.

6 In para 6 of the defence, it was stated that the plaintiffs had been unwilling to rectify the agreements so as to reflect the correct quantities of metal-forms leased. The defendants were only willing to pay rental in respect of the actual quantities leased. The defendants went on to assert that the three agreements were not binding on or enforceable against them. They denied that the sum outstanding due to the plaintiffs was $268,802.49 and asserted that the correct rental over the period from May 1999 to March 2000 should have been $235,634.01. The defendants had paid $225,818.71 leaving a balance of only $9,815.30 outstanding.

7 In para 10 the defendants put in a counterclaim to have the lease agreements rectified so as to embody the contracts actually made. Alternatively, they claimed for rescission of the agreements.

8 The issues that arose from the above pleadings were:

(a) in respect of each site, how many metal-forms were on that site as of the date that the plaintiffs and the defendants signed the rental agreement for those metal-forms;

(b) whether there was a common mistake at the time the agreements were executed as to the subject matter of the agreements;

(c) alternatively, whether there was a unilateral mistake on the part of the defendants as to the number of metal-forms on each of the sites and whether the plaintiffs were aware of such mistake; and

(d) if (b) or (c) is answered in the affirmative, whether the defendants are entitled to rectification of the contracts.

The evidence

The plaintiffs' witnesses

9 The first witness for the plaintiffs was Mr Yeo Kiong Yong, their marketing manager. He confirmed that in 1995 the plaintiffs had leased metal-forms to Kong Siong for the latter's use at the HDB sites at Sengkang, Woodlands and Ang Mo Kio. In early 1999, Kong Siong faced financial difficulties and handed these projects to the defendants. The defendants then approached the plaintiffs to allow them to continue leasing the metal-forms.

10 Mr Yeo asserted that prior to taking over the projects the defendants had wanted to take over Kong Siong itself and that they knew the outstanding debts of Kong Siong. He then said that it could be inferred that at all times the defendants knew of the quantities of metal-forms on the three sites. He said he had shown the last quantity of metal-forms leased to Kong Siong, including all previous invoices, to one Ms Kelly Low and one Mr Atan, both of the defendant company. They went through all the plaintiffs' delivery orders and invoices and found them to be correct.

11 On 1 May 1999, the plaintiffs and defendants had entered into the metal-form rental agreement in respect of Ang Mo Kio and on 1 June 1999, they entered into similar agreements in respect of the metal-forms at Woodlands and Sengkang. Mr Yeo said that before signing the three agreements, the plaintiffs had allowed the defendants to inspect and count all the metal-forms at the various sites. In fact he personally had told the defendants to return the metal-forms that were on-site and then re-lease them from the plaintiffs in order that they would know the exact quantity taken. The defendants...