Kurihara Kogyo Co Ltd v W Y Steel Construction Pte Ltd (Eastpac Construction Pte Ltd, Third Party)

• Jurisdiction: Singapore
• Judge: Foo Tuat Yien
• Judgment Date: 29 December 2004
• Neutral Citation: [2004] SGDC 307
• Court: District Court (Singapore)
• Year: 2004
• Published date: 06 January 2005
• Plaintiff Counsel: David Ong Lian Min (David Ong and Company)
• Defendant Counsel: Michael Por Hock Sing and Sherain Tan (Tan Lee and Partners)
• Citation: [2004] SGDC 307

29 December 2004

District Judge Foo Tuat Yien

Introduction

1.1 W Y Steel Construction Pte Ltd (‘WYS’), the defendants, are a construction company, which specialises in steel and roofing works. They have a Building and Construction Authority grading, which qualifies them to be appointed main contractor for certain construction projects. In early 2001, they entered into an agreement with Eastpac Construction Private Limited (‘Eastpac’), the third party, for Eastpac to tender for and carry out projects in WYS’s name. WYS would receive an ‘administrative fee’ of 3% of the project contract value for lending their name and other resources to Eastpac. WYS would deduct their 3% entitlement from progress payments made by the project owner and pay the balance to Eastpac. This same arrangement was adopted when the Singapore Sports Council, (‘SSC’) appointed WYS as main contractor for additions and alterations to an existing 2-storey sports hall at Hougang Ave 4/Avenue 10 (‘Hougang project’).

1.2 Kurihara Kogyo Co. Ltd (Kurihara), the plaintiffs, carried out the electrical sub-contract works for the Hougang project, They say that under a letter of intent dated 23 November 2001 and a letter of award dated 3 June 2002 issued by WYS and signed by Roger Oh, as WYS’s project director, WYS had subcontracted with them for the supply of electrical works and services. They allege that this is further evidenced by Kurihara’s progress payment claims, tax invoices and letters all addressed to WYS, albeit that they had accepted project payments from Eastpac. They are suing WYS for payment of the balance amounts due for their work under a lump sum contract for $350,000 and for variation works valued at $100,683.50.

1.3 WYS say that they are not liable as Kurihara was engaged by and were the subcontractors of Eastpac. WYS filed a third party claim against Eastpac, claiming an indemnity. After the amended third party statement of claim was filed and served in late October 2003, an order was made in early 2004 for the winding up of Eastpac. This trial was only between Kurihara and WYS.

Background

General Arrangments between WYS and Eastpac

2.1 On 1 March 2001, WYS and Eastpac signed a Memorandum of Understanding (MOU) and a construction subcontract for a sports recreation centre for Nanyang Technological University (‘NTU’). The documents were signed by one John Sidney Killick, WYS’s then Business Development Manager and one Koji Oh, Eastpac’s Executive Director.

2.2 Under the subcontract, WYS subcontracted their works in the NTU project to Eastpac. WYS would pay Eastpac for their work based on the consultant’s certifications. Upon receiving progress payments from the project owner, WYS would deduct both their 3% ‘administrative fee’ and the agreed costs of any materials and services supplied by WYS to Eastpac, before paying Eastpac the balance within 3 days. On their part, Eastpac agreed to meet all the requirements of the project construction programme and indemnify WYS against any claims for liquidated damages arising from Eastpac’s delay as well as all loss and damages, expenses and costs whatsoever should WYS became subject or exposed to prosecution, proceedings, summonses, notices, claims and demands arising out of illegal employment of foreign workers. Eastpac agreed to extend a copy of all correspondence sent to any party using WYS letterhead to WYS for record. If Eastpac failed to rectify any non-compliance with the consultant’s instructions, contract specifications and statutory and by law regulations within 7 days of a notice issued by WYS, the latter could terminate the contract without compensation save for work already done.

2.3 In the affidavit of evidence in chief of one Lim Joo Suan (‘Lim’), WYS’s managing director, he added that as Eastpac was a relatively small and new company, without financial means to undertake construction projects as main contractor, WYS had also agreed, pending payment of progress claims by the project owner, to provide financial advances to Eastpac for the project works, when so required at an interest rate of 1% per month up to date of full repayment by Eastpac. WYS would setoff these advances against any certified payments due to Eastpac.

2.4 Under the MOU, WYS allowed Eastpac to use its office space, manpower support services, print name cards (for Roger Oh, Koji Oh, Beh Gaik Chin only), letterheads, request for information, clarification issues, among others to be restricted to tendering purposes and project execution. In his affidavit of evidence in chief, Lim said that this extended to Eastpac’s use of the WYS’s site office to manage the project. Other than the day to day matters of a minor financial nature pertaining to projects execution, Eastpac was not to commit WYS to any financial cost implications without the prior consent of WYS’s managing director, Lim. The works or projects were to be fully carried out by Eastpac, who would be responsible for engaging other specialists, supplier or sub-contractors on their own. Subject to the approval of WYS, WYS might supply materials and services to Eastpac and deduct the cost from Eastpac’s accounts.

Application of agreement to Hougang Project

3.1 There is no dispute that the arrangements in paragraphs 2.1 to 2.4 for the NTU project also applied to the Hougang project. On 17 October 2001, Lim as managing director for WYS, signed a letter of acceptance with the SSC for the Hougang project. The documents referred to in this letter of acceptance included several letters signed by one Roger Oh as project director of WYS. On that same day, one Chng Che Hwa, a project director with WYS and Koji Oh, director of Eastpac signed the construction subcontract for the Hougang project.

3.2 On 23 November 2001, Roger Oh in his capacity as project director of WYS, issued a letter of acceptance (under the WYS letterhead) to Kurihara accepting Kurihara’s quotation in their letters of 19 October and 19 November 2001. The letter referred to various submissions and ‘meetings at the office of Bescon Consulting Engineers Pte Ltd (‘Bescon’). The subcontract terms and conditions were to be back to back, as per the main contract between WYS and the SSC. On 3 June 2002, Roger Oh, again in his capacity as project director of WYS issued a letter of award (under the WYS letterhead) to confirm the earlier letter of intent. Roger Oh’s reference to meetings held in Bescon’s office is significant because Bescon was the M&E Consultant and, as will be evident later, both WYS and Eastpac were concerned to ensure that Bescon, like the other consultants, architect and the project owner would at all times, remain under the impression that WYS was the defacto main contractor and that Roger Oh, the project director was representing WYS.

4 To all intents and purposes, insofar as the project owner, consultants and other parties were concerned, WYS was to be seen as the formal and defacto main contractor carrying out the works, whether of co-ordination or otherwise. In effect, however, Eastpac would be running the project, for which they would receive the entire project contract sum less 3% for WYS. To facilitate this arrangement, WYS allowed Eastpac to deal with these persons in the name of WYS using WYS letterheads, namecards, office space, office staff etc.

5 The issues in this case are:

i) Was Kurihara a subcontractor engaged by Eastpac or was Kurihara a subcontractor engaged by WYS? This would require the court to find if WYS had authorised Roger Oh, the project director of WYS to enter into the contract for WYS or whether Roger Oh had apparent or ostensible authority to enter into the contract for WYS ;

ii) Whether if the contract was made between Kurihara and WYS, would Kurihara, (as alleged by WYS) be estopped from maintaining the existence of such a contract by virtue of their having accepted their progress payments from Eastpac; and

iii) Quantifying the amounts due to Kurihara for their contract and variation works.

6 The main persons, whose names are mentioned in connection with the Hougang project are:

i) Ng Eng Thye (‘Ng’), Kurihara’s manger and main witness, who had been involved in the Hougang project throughout;

ii) Gong Wooi Lian, a Consulting Engineer from Bescon. the M&E consultants for the project, who was subpoenaed to give evidence for Kurihara at the trial;

iii) Roger Oh, WYS’s project director for the Hougang project, who was also a director of Eastpac;

iv) Koji Oh, WYS’s project/site manager for the Hougang project, who was also a director of Eastpac;

v) Lim, the managing director of WYS and their only witness;

vi) Teo Teck Heong ( WYS’s engineer in charge of site operations), Ms Tan Yumin (scaffolding department), Yusof Mohd (M&E Coordinator), Donald Chiang and one Chng Che Hwa from WYS; and

vii) Sam Tay, a representative from the firm of Winscad Engineering; and

7 Documents produced and accepted as authentic by both parties show that Roger Oh and Koji Oh had signed a number of letters under the WYS letterhead as project director and project manager respectively. It is not disputed that both Roger Oh and Koji Oh had been appointed and authorised by WYS to act for WYS in the Hougang project and that they were also directors of Eastpac. Gong Wooi Lian, Bescon’s engineer, confirmed that he dealt with them as representatives of WYS. Lim also confirmed this in his evidence but sought to confine the authority of Roger Oh and Koji Oh to areas allegedly authorised by WYS in the MOU and the construction subcontract.

General Nature of Evidence

8 The 2 witnesses who gave evidence for Kurihara were Ng, Kurihara’s manager and Gong Wooi Lian. Ng said that he had been involved in the project from the beginning in 2001 (after the letter of intent dated 29 November 2001 had been signed) to the last stages, when Kurihara and WYS’s representatives met with Bescon to quantify the Variation works in 2003. Gong Wooi Lian had worked in this project right up to...