Jurong Engineering Ltd v Paccan Building Technology Pte Ltd

• Jurisdiction: Singapore
• Judge: Goh Joon Seng J
• Judgment Date: 09 July 1999
• Neutral Citation: [1999] SGCA 48
• Date: 09 July 1999
• Subject Matter: Breach,Discharge,Contract,Whether breach of obligation to proceed with reasonable diligence exists
• Docket Number: Civil Appeal No 318 of 1998
• Published date: 19 September 2003
• Defendant Counsel: George Tan and Tan Joo Seng (Chan Tan & Partners)
• Court: Court of Appeal (Singapore)
• Plaintiff Counsel: Alvin Yeo, Lawrence Tan and Elly Tham (Wong Partnership)

Judgment:

GOH JOON SENG J

(delivering the judgment of the court): This is an appeal against the decision of the High Court (`the trial judge`) which held that the appellants had wrongfully terminated a building subcontract (`the subcontract`). Consequently, the trial judge held that the respondents were entitled to loss and damages arising therefrom. He also dismissed the appellants` counterclaim for damages for the respondents` alleged breach of the subcontract.

2. The parties

The appellants were the main contractors for the construction of the main office and ancillary buildings for the Senoko Gasworks at Woodlands (`the building works`) complete with mechanical and electrical installations (`the M&E works`). The owners of the Senoko Gasworks were the Public Utilities Board (`the Board`). The respondents were the subcontractors of the appellants for the building works. They were then known as CKM Building Technology Pte Ltd. The engineer in charge of the project for the Board was Development Resources Pte Ltd. It was a subsidiary of the Board and now of Singapore Power Ltd since the Board`s privatisation.

3. The background

In September 1993, while preparing their tender to be submitted to the Board, the appellants invited the respondents to submit their quotation for the building works. After some negotiation, it was finally agreed on 25 November 1993 that the respondents would carry out the building works for $8,510,000 if the appellants` tender was accepted by the Board. The building works comprised the main office, the substation and the guard house.

4.Factoring in the respondents` quotation, their profit and their own costs for carrying out the M&E works, the appellants submitted their tender to the Board. In the event, they were successful and were awarded the main contract for the contract sum of $13,899,000 sometime in or about early February 1994.

5.On being awarded the main contract, the appellants pursuant to their earlier agreement with the respondents awarded the subcontract to the respondents on 15 February 1994. So far as relevant, the letter of award stated:

1 We are pleased to inform you that JEL has accepted your offer for the construction and completion of the Main Office Building and Ancillary Works of the Senoko Gasworks Development submitted on 25 November 1993 subject to the Conditions of Tendering, General Conditions and Special Conditions of Contract, the Specifications, Schedules, Form of Tender, Form of Contract Agreement and this letter and as clarified and modified in your subsequent series of correspondence at an estimated sum of S$8,510,000 (Singapore Dollars Eight Million Five Hundred and Ten Thousand Only) as per Appendix 1.

...

4 The dates of commencement/completion of work shall be in accordance with the Schedules of Timings as shown in the Tender Document.

...

6.The form of contract agreement consisted of three pages. Clause 4 read:

It is hereby agreed and understood that except as expressly varied herein the provisions of the main contract shall apply in full force and effect in every way as if the same are set out in this agreement and agreed to and confirmed by both parties.

The General Conditions (`Gencon`) of the main contract were thus incorporated as part of the subcontract.

7.Among the list of correspondence deemed part of the subcontract was the letter of 29 December 1993 from the appellants to the respondents. It read:

One of the conditions in the contract is to prepare a detailed programme upon letter of acceptance by the contractor.

I propose that this be immediately proceeded unless you think otherwise. My reason is that we on our part will need to incorporate our M&E works into your civil/building contract programme for which we are dependent on/before formal submission to PUB if the contract is awarded to us. Please consider the above and respond back to us.

Take note of the key dates when preparing the detailed programme. (The detailed programme activities should be broken down into piling, rc architectural on a floor by floor and grid line/room by room/or area by area basis.

...

8.The key dates based on which the respondents` construction programme was required were:

Key Dates	Description
29 April 1995	Completion of Substation 2
Guardhouse including M&E Works
30 September 1995	Completion of Superstructural Works, all Building Works.Internal Architectural Finishes including M&E Services of the Main Office Building
29 February 1996	Completion of Main Office Building
30 March 1996	Completion of contract

9.Pursuant to their obligation under the subcontract, the respondents furnished a number of construction programmes. The pertinent one is the construction programme of 23 March 1994 (`the subcontract programme`). As required by the letter of award, the respondents also furnished a performance bond for $425,500 issued by AXA Sime Assurance Pte Ltd in favour of the appellants securing the due performance of the subcontract by the respondents.

10.Work was to commence on 1 April 1994. But right from the start, there was delay with insufficient manpower. Piling work was to have commenced on 1 April 1994, but it only began on 10 May 1994.

Original completion date	Status to date	Remarks
i	Pile cap	Mid July 1994	Approximately 11% completed	Critical
ii	Ground beam	Mid July 1994	Nil	Yet to commence
iii	Backfilling	Mid September 1994	Nil	Yet to commence
iv	Tanapiling	1st week Aug 1994	Nil	Yet to commence

Original completion date	Status to date	Remarks
i	Pile cap	Mid June 1994	Approximately 65% completed	Delayed
ii	Ground beam/ ground slab	End June 1994	Grd beam physical construction not started	Critical

11.On 27 June 1994, the respondents` rate of progress was listed as follows:

Main Office

Substation

12.On 2 September 1994, the appellants highlighted the delay in the subcontract works and noted that the reasons were inadequate resources. The appellants also invited the respondents` directors to attend the site meeting to assist in expediting and `catching` up on the schedule.

13.Following further complaints of delay and the continued lack of satisfactory progress in the subcontract works, the appellants called for Head Office Review Meetings in late December 1994 and early January 1995 at which the respondents were requested to come up with a recovery schedule. The meeting on 28 December 1994 recorded as follows:

The purpose of this meeting is to understand [respondents`] course of action in rectifying the present situation of slow progress due to reduced resources (in particular the carpenters) and material requirements (in particular the plywood materials, bricks) at site.

The explanations given by the respondents were problems with their own subcontractors resulting in `labour/resources/material problems at site`.

14.Due to the continued slow progress, the appellants, on 13 January 1995, served on the respondents a notice under cl 35(1)(ii) of Gencon for failing to proceed with reasonable diligence. The letter gave a litany of failure to proceed with reasonable diligence and recorded notices of delay not attended to. It ended as follows:

[4] To date, based on the programmed progress of works, your works are in delay for a period of at least four months and if this persists, there is absolutely no chance of you completing the works on time.

[5] Despite various meetings called to discuss the issue of your delay of works, you had taken no action to remedy your defaults.

We hereby give you notice under cl 35[1][ii] of the main contract to rectify the default within seven days from the date of this letter, failing which, we shall exercise our rights under the aforesaid clause to terminate your contract and we reserve our right to claim against you all loss and damages suffered by us as a result of your aforesaid breach and repudiation of contract.

Clause 35(1) read:

Default - If the contractor shall make default in any of the following namely:

(i) without reasonable cause wholly suspends the works before completion;

(ii) fails to proceed with the works with reasonable diligence;

(iii) refuses or to a substantial degree persistently neglects after notice in writing from the engineer to remove defective work or improper materials;

then, if any such default shall continue for seven days after a notice sent by registered post or recorded delivery to the contractor from the Board specifying the same, the Board may without prejudice to any other rights herein contained thereupon by notice sent by registered post or recorded delivery determine this contract.

15.The appellants did not proceed to terminate the subcontract pursuant to cl 35(1)(ii) because the respondents came up with the recovery schedule and promised, inter alia, to increase their manpower.

16.The delay and defaults however persisted. Consequently, in March, April and May 1995, the appellants acted under cl 34 of Gencon to take over large sections of the subcontract works. Clause 34 read:

If the contractor, after receipt of a written notice take[sic] from the engineer requiring compliance within seven days, fails to comply with such further drawing and/or engineer`s Instructions the Board may employ and pay other persons to execute any work whatsoever which may be necessary to give effect thereto and all costs incurred in connection therewith shall be recoverable from the contractor by the Board as a debt or may be deducted by the Board from any moneys due or to become due to the contractor.

17.Although the volume of the respondents` subcontract works had been reduced thereby, their pace of work did not improve. On the contrary, the respondents decreased their manpower further at the site. They also refused to carry out instructions for variation works and their project manager was instructed not to attend consultants` meetings. Their attitude was recorded in the minutes of the consultants` meeting of 18 May 1995 as follows:

[Respondents] failed to complete the first storey bricklaying/plastering and skim coating by 17 May

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