Jia Min Building Construction Pte Ltd v Ann Lee Pte Ltd

• Court: High Court (Singapore)
• Judge: V K Rajah JC
• Judgment Date: 25 May 2004
• Neutral Citation: [2004] SGHC 107
• Citation: [2004] SGHC 107
• Defendant Counsel: Yang Yung Chong and Joan Sim Su Mei (Lee and Lee)
• Plaintiff Counsel: Tan Liam Beng and Yow Su Joan (Drew and Napier LLC)
• Published date: 01 June 2004
• Docket Number: Suit No 1490 of 2002
• Date: 25 May 2004
• Subject Matter: Whether waiver of strict requirements of contract,Contract affirmed by subcontractor,Whether right to exercise set-off removed by clear and unequivocal words,Whether main contractor precluded by own breach from terminating contract,Remedies,Subsequent repudiation by subcontractor,Whether term of contract varied by parties,Equitable remedies,Repudiation of contract,Main contractor in breach of obligation to make progress payments,Suspension of performance,Mitigation of damage,Set-off and abatement,Whether innocent party acted reasonably,Building and Construction Law,Whether non-payment of claims entitled subcontractor to suspend performance,Termination,Contract,Whether varied term waived in entirety,Estoppel

25 May 2004 Judgment reserved.

V K Rajah JC:

1 Sometime in 1999, the defendant was appointed as the main contractor to build Hilltop Grove Condominium Development (“the project”) on Lot 3143V Mukim 10, Hillview Avenue, Singapore (“the site”). Pursuant to a written agreement dated 4 October 1999 (“the sub-contract”) between the plaintiff and the defendant, the defendant engaged the plaintiff as its sub-contractor for the structural works of the project. The work embraced the substructure and the superstructure for three residential blocks of flats inclusive of external works (“the works”) for the lump sum price of $5,860,000 (“the sub-contract sum”). The Letter of Award (“LOA”) enclosing the sub-contract included a term:

Should you fail to cope with the work and/or fail to carry out the true intent of this contract, we shall reserves [sic] the right to terminate the sub-contract at our discretion.

The plaintiff signified its acceptance of the sub-contract and its terms by signing the LOA, as well as the sub-contract. The sub-contract itself is unremarkable save for its relative brevity. It did, however, include an express term that the plaintiff would “employ sufficient workmen to execute [the] contract”.

2 Sub-clause 5.1 of the sub-contract stated:

Monthly interim payment shall be made to you based on the actual work done as per our agreed breakdown details with deduction for materials supplied by Main Contractor and subjected [sic] to approval by the Consultants/Owners/Main Contract, and upon receiving of Progress Payment from the Owner.

3 Pursuant to the sub-contract, the plaintiff was obliged to supply labour and materials for the works. This term was varied by agreement, resulting in the defendant purchasing the requisite building materials on the plaintiff’s behalf. It is common ground that this arrangement was arrived at between the parties because the suppliers preferred to deal with the defendant and the defendant was able to procure better pricing arrangements. The purchases included steel reinforcement bars (“rebars”) and ready-mix concrete. Metal scaffolding and formwork for the structural works were also rented. After effecting the purchases, the defendant issued invoices for them and made corresponding deductions of the amount payable from the interim payments due to the plaintiff. It became a pattern for the defendant to deduct from the progress payments the amounts payable for the building materials supplied during the previous month.

4 The plaintiff contends that during the negotiations in September 1999, the parties had orally agreed that the interim payments to the plaintiff for works done would be made on a half-monthly basis, and not on a monthly basis as contractually provided for. This oral agreement is alleged to have been also confirmed just prior to the formal execution of the sub-contract. The plaintiff further asserts that the existence of this variation is corroborated by the fact that all its submissions for progress payments until October 2000 were submitted, accepted and settled by the defendant on a half-monthly basis. There were two occasions when this was delayed but nothing really turns on this. In the circumstances, the plaintiff avers that, notwithstanding sub-cl 5.1 (at [2] above), there was a contractual variation recognising that progress payments be made “on a half monthly basis with deduction for materials supplied by the defendant and subject to the approval of the defendant” [emphasis added]. This half-monthly payment regime proceeded uneventfully until the second half of October 2000.

5 In the meantime, a tempest was slowly but surely brewing and taking shape on a separate front. From the commencement of the contract the plaintiff did not have sufficient workmen to carry out the works. The defendant made arrangements for several foreign workers (“seconded workers”) to assist the plaintiffs. Under this arrangement, while the defendant was responsible for procuring the seconded workers, the plaintiff remained responsible for their monthly wages. The defendant also rendered financial assistance to the plaintiff by way of early progress payments – without receiving corresponding payments under the main contract for variation works. Indeed on an occasion in April 2000, it advanced a loan of $25,000 to the plaintiff. The plaintiff, in its evidence, denied that it had any financial problems when the contract commenced. It claimed that the secondment of workers was a temporary arrangement initiated at the commencement of the contract to help tide it over, pending the arrival of workers it intended to directly employ. Despite this claim, no credible explanation was offered by the plaintiff as to why this “temporary arrangement” carried on for a year until the termination of the contract.

6 From about April 2000 until the contract was terminated by the defendant in December 2000, the defendant sent several written complaints to the plaintiff about the shortage of labour executing the works. The defendant also asserts that apart from these written communications, the same issues were raised during the worksite meetings held during this period. The shortage of workers extended to several different facets of the works.

7 On 29 August 2000, Han Yuh Kwang (“Han”), the project manager of the defendant, sent a facsimile message to Phua Choon Seng (“Phua”), a director of the plaintiff. It should be noted here that Phua was, for all intents and purposes, the controlling mind of the plaintiff. The note was captioned “SLOW STRUCTURAL WORK PROGRESS”. The message referred to an agreement by the plaintiff to meet a promised schedule and included a reference to the potential imposition of liquidated damages for delay. It also ought to be pointed out, at this juncture, that the plaintiff had unilaterally stopped paying the wages of the seconded workers from August 2000. The plaintiff did not respond to this message. On 4 September 2000, the defendant sent a further facsimile message strenuously complaining about the delay. The plaintiff was warned to increase its workforce immediately, failing which the defendant would seek to employ other sub-contractors.

8 The plaintiff’s responses did not satisfy the defendant and the steady flow of complaints from the defendant continued unabated. On 21 October 2000, Han sent to Phua another facsimile message expressing deep dissatisfaction and distress over the lackadaisical execution of the works. The message made a reference to Phua’s assurance given earlier in the morning that he would engage a team of workers to address outstanding work by 24 October 2000. It stated emphatically that this would be the last warning before the defendant took alternative measures to complete the work

9 Thereafter, the defendant made no further progress payments. According to the plaintiff, various progress claims as outlined below continued to be sent to the defendant, but to no avail:

Date of Progress Claim Amount Claimed

No 21 31 October 2000 $583,579.26

No 22 15 November 2000 $ 79,937.35

No 23 30 November 2000 $ 20,787.07

No 24 12 December 2000 $ 1,258.16

Total $685,561.84

10 The defendant denies having received the progress claims for the periods ending 31 October 2000, 30 November 2000 and 12 December 2000. It asserts that it could not timeously effect the deduction of $270,065.23 for materials purchased in September 2000 at the end of October 2000; this could only be effected from the certification of progress claim No 22, made 15 days later on 15 November 2000. The amount of $109,934.77 that Han subsequently certified as a progress payment was in respect of work for a full month from 16 October 2000 to 15 November 2000.

11 On 20 November 2000, Han had a discussion with Low Wee Geok (“Low”), the defendant’s accounts manager. She expressed concern about the plaintiff’s parlous financial condition and its inability and apparent lack of interest in fulfilling its contractual obligations to the defendant. They both agreed it would be in the defendant’s interests to protect itself from the plaintiff’s potential default of its obligations by deducting from the pending progress payment a further sum of $225,183.77; this being the total cost of materials incurred for October 2000. With the implementation of this further deduction, no moneys were payable to the plaintiff pursuant to the claim made.

12 Han asserts that he verbally informed Phua of the defendant’s decision and the reasons for this on at least two occasions including a site meeting on 12 December 2000. It was never communicated to the plaintiff that the defendant intended to halt all further payments to it. Phua, on the other hand, states that Han informed him that the defendant would not be making any further progress payments.

13 On 12 December 2000, the defendant sent yet another note to the plaintiff complaining, once again emphatically, about the progress of the plaintiff’s work. It warned that the plaintiff should “increase [its] workforce IMMEDIATELY to accelerate [its] progress and complete … outstanding items”. If this was not adhered to by 14 December 2000 “we shall exercise our rights and shall employ other sub-contractors to complete all your remaining works and all costs incurred will be borne by your company”.

14 The plaintiff’s very first written response was sent on 15 December 2000. The plaintiff complained that progress payments had stopped since October 2000 even though “additional steel reinforcement work” had been carried out on the site. The plaintiff added that without payment it could not pay its workers and sub-contractors and that it could no longer ensure “a regular progress or work”. A stoppage of work could ensue at “any moment”.

15 On 18 December 2000 the defendant wrote again to the plaintiff stating that from 16 December 2000, the plaintiff’s workers “had ceased all work on the site” and that this stoppage was “affecting the progress of work...