Hua Khian Ceramics Tiles Supplies Pte Ltd v Torie Construction Pte Ltd

• Jurisdiction: Singapore
• Judge: G P Selvam JC
• Judgment Date: 30 November 1991
• Neutral Citation: [1991] SGHC 173
• Docket Number: Suit No 1336 of 1990
• Date: 30 November 1991
• Year: 1991
• Published date: 19 September 2003
• Plaintiff Counsel: Manjit Singh (Manjit Darshan & Partners)
• Citation: [1991] SGHC 173
• Defendant Counsel: Chandra Mohan (Tan Rajah & Cheah)
• Court: High Court (Singapore)
• Subject Matter: Summary judgment,Misleading the court,Set-off claim by defendant,Loss of reputation caused by other party's breach,Damages,Contract,O 18 r 17 Rules of the Supreme Court 1970,Civil Procedure,Remedies

In 1989 the government embarked on a project to improve the promenade in the vicinage of the Padang. The project was managed for the government by the Public Works Department (`PWD`). The PWD awarded the contract for the construction works to the defendants, Torie Construction Pte Ltd (`the defendants`). The value of the contract was $3,090,700. The defendants were required to deposit $154,535 being 5% of the contract value as security for due performance of the contract, which they did by an insurer`s guarantee. The project called for the walkways to be laid with granite tiles imported from Spain. The contract stipulated completion of the works by 19 April 1990 and imposed liquidated damages for late completion at $800 per day.

The plaintiffs by an agreement evidenced by two letters undertook to supply the granite tiles to the defendants. The particulars of the tiles and the pricing were agreed as follows:

Description Qty/M2 Price/M2 Total amount

595 [times ] 595 [times ] 25mm 5,060 $129 $652,740

295 [times ] 295 [times ] 25mm

514

$129

$ 66,306

300 [times ] 300 [times ] 75mm

226

$298

$ 67,348

720 [times ] 245 [times ] 20mm

381

$ 27

$ 10,287

$796,681

The effective delivery schedule extended from mid-December 1989 to mid-January 1990.

There was no term requiring the plaintiffs to pay liquidated damages for any delay in the supply of the granite tiles. There was also no express provision in the agreement requiring the plaintiffs to indemnify the defendants in respect of any claim from the PWD which the defendants might face.

The claims

The plaintiffs admittedly failed to adhere strictly to the delivery schedule. The defendants remonstrated against the delay. The plaintiffs blamed their supplier in Spain. In the event the defendants invoked a provision in the PWD contract and asked for an extension of the completion date. By a letter dated 19 May 1990 to the defendants the PWD extended the completion date of the project to 3 June 1990. In the letter the PWD stated that the extension of time was given for the supply and delivery of additional granite tiles.

On 4 June 1990 the defendants confirmed in writing to the PWD that the contract works had been completed on 3 June 1990. There is no question that the project was completed and handed over within the extended completion period.

The plaintiffs submitted invoices for the total amount of $657,290.97. The defendants paid $325,046.46 leaving a balance of $332,244.51 under six invoices. On 27 July 1990 the plaintiffs issued a writ claiming the balance amount and applied for summary judgment for that amount. The defendants did not deny that full deliveries were made as evidenced by the relevant delivery orders but resisted the application with cross-claims. On 12 November 1990 the registrar gave judgment for $126,234.99 and gave unconditional leave to defend for the balance amount of $206,009.52. The defendants thereafter filed a defence and counterclaim asserting various cross-claims. The plaintiffs appealed seeking judgment for the remaining $206,009.52. When the appeal came up for hearing before me on 12 March 1991, I allowed the appeal and gave judgment for the remaining amount with interest at 8%pa from 1 July 1990. I now give the grounds of my decision.

The defence of set-off

Order 18 r 17 of the Rules of the Supreme Court 1970 provides:

Defence of set-off

Where a claim by a defendant to a sum of money (whether of an ascertained amount or not) is relied on as a defence to the whole or part of a claim made by the plaintiff, it may be included in the defence and set-off against the plaintiff`s claim, whether or not it is also added as a counterclaim.

The rule does not afford any guidance on the circumstances in which a defendant may set up a cross-claim as a defence. The law recognizes the following forms of set-off: (i) legal set-off, (ii) abatement, and (iii) equitable set-off. Each of these expressions is a term of art. Morris LJ in Hanak v Green [1958] 2 QB 9[1958] 2 All ER 141 at p 23 summed up the categories of set-off as follows:

(a) a set-off of mutual debts;

(b) in certain cases a setting-up of matters of complaint which, if established, reduce or even extinguish the claim; and

(c) reliance upon equitable set-off and reliance as a matter of defence upon matters of equity which formerly might have called for injunction or prohibition.

Legal set-off

Before 1728 a defendant who had a cross-claim or was entitled to any relief or remedy against his adversary had to bring a separate action to enforce his right. He could not match it against the adversary`s claim. The practice was changed by statute in 1728 with the creation of the legal set-off. Though called a legal set-off, it was truly a statutory relief beginning with the English Set-Off Statutes of 1728-1734. Under these and subsequent statutes, a defendant became entitled to set off a debt against a debt. It was in substance a merger or combining of the two debts to obtain the net result. Under various set-off statutes a cross-claim for a liquidated monetary claim could be used to diminish an adversary`s claim. It did not matter that the cross-claim was completely unrelated to the plaintiff`s claim provided it was a liquidated claim. If a cross-claim for liquidated amount is properly asserted as a legal set-off, the resulting benefit to the cross-claimant can be immense especially where the main claimant is in solvent situation: Hongkong & Shanghai Banking Corp v Kloeckner & Co AG [1990] 2 QB 514 In this case Hirst J gave the benefit of a legal set-off to a bank with a liquidated claim against an insolvent beneficiary of a letter of credit establishing by it against an amount the bank admittedly owed to the beneficiary. Hirst J citing Agra and Masterman`s Bank Ltd v Leighton [1866] 2 LR Exch 56 stated that it is a well-settled rule that a legal set-off in the nature of a liquidated claim is permissible even against a claim under a bill of exchange.

Abatement

In times before Basten v Butte r [1806] 103 ER 185 a defendant who had a cross-claim against the plaintiff for breach of warranty was not permitted to use it to abate his opponent`s claim. He had to satisfy the claim against him and bring a separate action to seek redress for the breach of warranty. In Mondel v Steele [1841] 151 ER 1288 at p 1293 Parke B stated the old rule in these words:

... where an action was brought for an agreed price of a specific chattel, sold with a warranty, or of work which was to be performed according to contract, to allow the plaintiff to recover the stipulated sum, leaving the defendant to a cross-action for breach of the warranty or contract; in which action, as well the difference between the price contracted for and the real value of the articles or of the work done, as any consequential damage, might have been recovered.

In Templer v M`Lachlan [1806] 127 ER 576 Chambre J stated the argument in support of the rule against abatement:

If such defence were let in, `it would be a constant source of surprise to parties, and the extent of the inquiry, into which courts would be led by it, would be endless. ... The only reason which could induce the courts to let in such a defence, would be the hope of preventing a multiplicity of actions. But in that view, if we entertained it, I think we should be deceived.

Parke B after citing Basten v Butter [1806] 103 ER 185 and King v Boston [1789] 103 ER 186 said that a departure from the old rule had been made in sale of goods or work done cases and added:

... in all cases of goods sold and delivered with a warranty, and work and labour, as well as the case of goods agreed to be supplied according to a contract, the rule which has been found so convenient is established; and that it is competent for the defendant, not to set-off, by a proceeding in the nature of a cross-action, the amount of damages which he has sustained by breach of the contract, but simply to defend himself by

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