Join-Aim Pte Ltd v BS Mount Sophia Pte Ltd and another

• Jurisdiction: Singapore
• Judge: Tay Yong Kwang J
• Judgment Date: 09 January 2012
• Neutral Citation: [2012] SGHC 3
• Court: High Court (Singapore)
• Docket Number: OS 643 of 2011
• Published date: 17 May 2012
• Year: 2012
• Hearing Date: 11 October 2011
• Plaintiff Counsel: Tan Chee Meng, SC and Quek Kian Teck (WongPartnership LLP)
• Defendant Counsel: Teh Kee Wee Lawrence and Melvin See Hsien Huei (Rodyk & Davidson LLP),The second defendant unrepresented.
• Subject Matter: Banking,Performance Bonds,Unconscionability
• Citation: [2012] SGHC 3

Tay Yong Kwang J: Introduction

The plaintiff (the main contractor in a building project) sought an injunction to restrain the 1st defendant (the employer in the building project) from calling on a Performance Bond for the amount of S$360,084.62.¹ This Performance Bond was issued by the 2nd defendant.²

Having heard arguments by both parties, I decided that the interim injunction granted earlier by Andrew Ang J should stand, pending arbitration between the plaintiff and the 1st defendant. I now set out my reasons.

Facts Parties to the dispute

The plaintiff is a Singapore incorporated company, having its address at Block 201E Tampines Street 23 #04-94, Singapore 527201.³ It is the main contractor under the Contract (see [6]).⁴

The 1st defendant is also a Singapore incorporated company. Its address is at 2 Mistri Road #01-03, Singapore 079624.⁵ It is the employer under the Contract.⁶

The 2nd defendant issued the Performance Bond in favour of the 1st defendant.⁷

Background to the dispute The call on the Performance Bond

The plaintiff, as main contractor, entered into a contract with the 1st defendant, as developer, on 28 February 2008 (“the Contract”) for the erection of a 5-storey residential development comprising 50 units with swimming pool and basement carparks at 95 Sophia Road, Singapore 228163 (“the Project”).⁸ The contract was valued at over S$9 million.⁹ Its terms were in accordance with the SIA Articles and Conditions of Contract.¹⁰ Pursuant to Clause 41 of the Conditions of Contract (as amended by the Additions to Conditions of Contract), the plaintiff submitted Performance Bond No. SD08B04687 (“the Performance Bond”) to the 1st defendant for the amount of S$484,440.00.¹¹

The architect under the Contract was M/s Ronny Chin & Associates of 147B Selegie Road, Singapore 188313 (“the Architect”).¹² The quantity surveyor was M/s 1MH & Associates of 10 Lorong 19 Geylang #02-02, Singapore 388492 (“the QS”).¹³ Other consultants included Portwood & Associates (“the Structural Engineer”) and Elead Associates (“the Services Engineer”).¹⁴

On 4 March 2011, the Architect issued the Completion Certificate which certified that works under the Contract were completed on 27 August 2010.¹⁵ Goh Tong Chuan (“Goh”), the Managing Director of the plaintiff, stated in his affidavit that the plaintiff completed the works on 19 May 2010 even though the plaintiff was entitled to an extension of time till 27 October 2010 to complete the works.¹⁶

The director of the Architect, Chin Hong Onn, also known as Ronny Chin (“Chin”), stated in his affidavit that the original date for completion under the Contract was 1 January 2010. The extended Completion date was 4 April 2010 after the Architect certified that the plaintiff was entitled to 93 days extension of time by way of the Delay Certificate. As stated earlier (see [8]), the works under the Contract were certified completed as at 27 August 2010.¹⁷

On 30 March 2011, the Architect sent the Completion Certificate to the parties by fax. The following day, the Architect informed the parties by letter of the Completion Date of 27 August 2010.¹⁸

On 24 May 2011, the plaintiff submitted its request for an extension of time of 298 days. The granting of this extension would bring the plaintiff’s work in line with the Completion Date of 27 August 2010.¹⁹

On 22 June 2011, the Architect recommended that an extension of time of 24 days be granted to the plaintiff and this brought the total extension of time to 93 days.²⁰

In an email dated 24 June 2011, the Architect sent the plaintiff a Delay Certificate dated 4 March 2011 which confirmed that: the plaintiff was granted 93 days extension of time, the revised completion date was to be 4 April 2010 based on the 93 days extension granted, the plaintiff was in delay.²¹

Goh, in his affidavit, stressed the point that the Delay Certificate was issued only on 4 March 2011, some 6 months after the certified completion of 27 August 2010.²²

On 15 July 2011, and pursuant to Clause 37(1) of the Conditions of Contract, the plaintiff commenced arbitration proceedings against the 1st defendant under the Singapore Institute of Architects (“SIA”) Arbitration Rules by way of a Request for Arbitration served on the 1st defendant.²³ The reliefs sought in the arbitration were²⁴: A determination from the Arbitrator to award or otherwise declare an extension of time for the total of 298 days Prolongation costs and related losses and expense amounting to S$253,339.37 to be paid by 1st defendant to the plaintiff A determination from the Arbitrator to declare that the plaintiff completed the works under the Contract on 19 May 2010 A determination by the Arbitrator that the plaintiff is entitled to the amount of S$1,197,669.68 claimed under Progress Claim No. 30 (Revision 4) and the said sum of S$1,197,669.68 is rightfully due and payable to the Plaintiff under the Contract Interest Costs Such further or other direction as the Arbitrator deems fit.

On 20 July 2011, the plaintiff sent the 1st defendant’s solicitors a list of proposed arbitrators. Goh’s affidavit stated that the 1st defendant completely disregarded the Request for Arbitration and the system for dispute resolution and instead made an unconscionable demand on the Performance Bond without any prior notice to the plaintiff.²⁵ The 1st defendant replied in its written submissions that this assertion was mischievous and misleading, that the SIA Rules provided that a response was optional and that the 1st defendant did not need to file any response.²⁶

On 27 July 2011, the 1st defendant made a demand for the amount of S$360,084.62 under the Performance Bond shortly after being served with the Request for Arbitration.²⁷

On 2 August 2011, the plaintiff obtained an interim injunction restraining the 1st defendant from calling on the Performance Bond.²⁸

In the light of Clause 2 of the Performance Bond and the 1st defendant’s demand, the 2nd defendant informed the plaintiff that unless an injunction was obtained, payment would be made as demanded by 29 July 2011.²⁹

Plaintiff’s progress claims

On 16 May 2011, the plaintiff submitted Progress Claim No. 30 (Revision 4) pursuant to clause 31(2) (a) of the Conditions of Contract for the amount of S$1,197,669.68, in respect of (i) variation works carried out by the plaintiff after completion of the Contract works under Architect’s Instructions No. 38-56, and (ii) variation works carried out by the Plaintiff under several Variation Orders issued by the Architect. In Goh’s affidavit, it stated that the 1st defendant and the Architect did not dispute Progress Claim No. 30 (Revision 4) but they also did not provide any payment response. On 14 June 2011, Progress Claim No. 30 (Revision 4) was resubmitted by the plaintiff to the Architect and the 1st defendant. According to Goh, this amount remains due and outstanding from the 1st defendant to the plaintiff.

Summary of Pleadings

The plaintiff submitted that the injunction ought to be continued on the ground on unconscionability.³⁰

The 1st defendant, unsurprisingly, opposed the plaintiff’s application for the injunction restraining the 1st defendant from calling on the Performance Bond to be continued.

Plaintiff’s Case

The plaintiff, in support of its case, essentially stated that³¹: The amount called for by the 1st defendant under the performance bond was incorrect, The 1st defendant was not entitled to any liquidated damages, as: Any delays were caused by the 1st defendant and/or the 1st defendant’s consultants The Delay Certificate was not issued in accordance with clause 24(1) of the Conditions of Contract. The call on the Performance Bond was made for a collateral purpose, in retaliation to the Request for Arbitration and was a call made in bad faith.

In Goh’s affidavit, he stated that it would be “patently unfair” for the 1st defendant to receive payment under the Performance Bond when prolongation costs of S$253,339.37 and the amount of S$1,197,669.68 under Progress Claim No. 30 (Revision 4) remained due and outstanding from 1st defendant to the plaintiff. He also stated that there was no conceivable loss on the part of the 1st defendant that entitled it to make a demand on S$360,084.62.³²

Respondent’s Case

The 1st defendant painted the background to the case as such³³: By a Delay Certificate dated 4 March 2011, the Architect certified that the plaintiff was granted a total of 93 days extension of time under the Contract. The Completion Date was then extended to 4 April 2010. By a Completion Certificate dated 4 March 2011, the Architect certified that the works under the Contract were completed on 27 August 2010. The plaintiff was therefore 145 days in delay.³⁴ Pursuant to the provision on liquidated damages for delay under the Contract, the 1st defendant was entitled to damages of (145 days * $6,000/day³⁵) = S$870,000.00. On 22 July 2011, the quantity surveyor for the Contract advised the 1st defendant that based on the draft final accounts as of 8 July 2011, the value of works carried out by the plaintiff that remained uncertified was S$29,782.90.³⁶ The 1st defendant also withheld S$480,132.48 as retention money. Accordingly, the balance sum due to the 1st defendant was (S$870,000.00- S$29,782.90 - S$480,132.48) = S$360,048.62 Accordingly, the 1st defendant’s case was that it was entitled to call on the Performance Bond on 27 July 2011 for the sum of S$360,084.62, being a partial call on the Bond’s full value of S$484,400.00.

The 1st defendant argued that: It was entitled to be paid liquidated damages as compensation for its loss; The Architect’s replies to the extension of time requests were based on the considered views of the consultants; Allegations of conspiracy or interference regarding the Architect’s certifications on the extensions of time were baseless; The extended...