L.K. Ang Construction Pte Ltd v Chubb Singapore Private Limited

• Court: High Court (Singapore)
• Judge: Kan Ting Chiu J
• Judgment Date: 18 December 2002
• Neutral Citation: [2002] SGHC 309
• Citation: [2002] SGHC 309
• Defendant Counsel: Wong Yoong Phin (Wong Yoong Phin & Co)
• Plaintiff Counsel: Raymond Chan (Chan Tan LLC)
• Published date: 19 September 2003
• Docket Number: Suit No 355 of 2002
• Date: 18 December 2002
• Subject Matter: Tort,Whether intention to enter into contract before or without signed agreement,Whether execution of agreement a mere formality,Formation,Defamation,Contract,Whether defendant reckless in publishing defamatory words,Whether recipients of letters interested in contents of letters,Whether malice inferred from late apology,Qualified privilege

Judgment Cur Adv Vult

GROUNDS OF DECISION

1 This action touches on two main issues, the formation of a building sub-contract and libel.

2. The plaintiff L.K. Ang Construction Pte Ltd was the main contractor for addition and alteration works to be carried out on a factory. The employer was Techplas Industries Pte Ltd. The contract between the plaintiff and the employer incorporated the SIA Conditions of Contract 6^th Edn.

3. The consultants to the project included –

Architect - K C Kan Architects Pte Ltd

Mechanical and Electrical Consultant - Chee Choon & Associates

Quantity Surveyor – LCH Quantity Surveying Consultant

4. The defendant Chubb Singapore Pte Ltd tendered successfully for the Fire Protection Installation Works ("the FPI works"). On 5 Dec 2001, it was informed by the M&E consultant that it would be appointed the nominated sub-contractor for the FPI works.

5. On 6 Dec 2001 the architect instructed the plaintiff to issue a letter of award to the defendant and to enter into a nominated sub-contract with it. The plaintiff, in compliance with the architect’s letter, wrote to the defendant on 18 Jan 2002 that

We refer to the enclosed Architect’s Instruction No. A 01 dated 6 December 2001 and are pleased to appoint you as the Nominated Sub-Contractor for the Fire Protection Installation Work for the above-mentioned project.

The Performance Bond in the form of Banker’s Guarantee as stated in the Main Contract should cover for the period from 5 December 2001 to 28 September 2003.

The formal contract will be issued to you in the near future.

You shall take this letter as instruction to proceed with the preparation of the works for the timely delivery according to our project schedule. Please note that the terms and conditions of your Sub-Contract shall be same as the Main Contract as far as your scope of works and shall be strictly followed.

Although it was not stated that a sub-contract was formed between them by the issuance of the letter, the plaintiff’s case is that such an agreement was formed.

6. The defendant commenced work as instructed (it had started some preparatory works even before 18 Jan), and submitted its progress claims for work done on 21 Jan and 28 Feb.

7. It also caused a financial credit search to be made on the plaintiff in compliance with its financial risk policy. A credit reference agency DP Information Networks Pte Ltd was engaged for the purpose. The defendant was disturbed by the agency’s report which concluded with

Unfavourable & favourable factors carry similar weight in credit consideration. Capability to overcome financial difficulties seems comparatively limited or considered not known. Capability to pay both interest and principal sums is doubtful.

8. It sought to alter the payment arrangements so that it could receive payment for the sub-contract works direct from the employer, rather than through the plaintiff as the main contractor. The request was made to the architect by letters dated 18 Feb and 20 Feb, the second of which enclosed a copy of the credit report. In the letters the defendant gave notice that it would not sign a sub-contract with the plaintiff if direct payment from the employer was not allowed.

9. On 26 Feb it sent the architect a third letter which is the subject of this action. The letter reads -

Reference is made to the above, our earlier request letter Ref. No. CON/15190/02/PC/L and CON/15192/02/PC/L dated 18 Feb 2002 and 20 Feb 2002 respectively.

Our request for direct payment comes about from the findings of the Company business overview/financial check.

As L K Ang Construction Pte Ltd have a poor credit rating, we cannot accept and sign the contract with the main contractor (L K Ang Construction Pte Ltd) if necessary commercial precautions are not put in place to avoid unnecessary consequences.

Based on your reply letter Ref. no. 0108/chubb/002/02 dated 22 February 2002, rejecting the direct payment request or any other precautionary option, we regret to confirm that we are unable to accept and formalize the Nominated Sub-Contract with L K Ang Construction Pte Ltd.

With the above confirmation and the site works provided for December 2001, January 2002 and February 2002, we trust that payment shall be made for the January and February 2002 payment certificates.

Please take note that we shall cease work for the above project on the 28 February 2002 and all contractual duties, responsibilities and liabilities shall expires accordingly.

(Emphasis added)

10. Copies of the letter were sent to the employer, the M&E consultant, the quantity surveyor and the plaintiff.

11. The request was turned down and the defendant stopped work on 28 Feb. The plaintiff regarded the stoppage of work as a repudiation of the sub-contract. It accepted the repudiation and treated the sub-contract as terminated. It appointed another sub-contractor, Sprinkler Engineering Pte Ltd to undertake the work for $223,388 and sued for damages for breach of the sub-contract.

12. The plaintiff also claimed that the italicised portions of the letter of 26 Feb were defamatory in that in its natural and ordinary meaning it meant that

5.1. the Plaintiffs were financially unstable;

5.2. the Plaintiffs were not creditworthy;

5.3. the Plaintiffs as Main Contractors could not be relied upon to pay to the Defendants and other sub contractors any monies received from the Employer;

5.4. the Plaintiffs’ financial standing rendered them unreliable and untrustworthy as Main Contractors;

5.5. the Plaintiffs were unfit to be appointed as Main Contractors in view of their financial instability;

5.6. the Plaintiffs could not be relied upon financially to complete their works;

5.7. the Plaintiffs were not creditworthy and unfit to enter into Nominated Sub Contracts with the Defendants and other Nominated Sub contractors.

13. The defendant initially denied that the letter was defamatory, but conceded in the closing submissions that the letter was defamatory in that it meant that

(1) the Plaintiffs were financially unstable;

(2) the Plaintiffs were not creditworthy;

(3) the Plaintiffs as Main Contractors could not be relied upon to pay to the Defendants monies received from the Employer; or

(4) the Plaintiffs were not creditworthy and unfit to enter into a Nominated Sub Contract with the Defendants.

14. I find the plaintiff’s reading of the letter overly broad, especially on the plaintiff’s unreliability and untrustworthiness. The defendant’s construction was more reasonable.

15. The defence then was that although the letter was defamatory, it was published on an occasion of qualified privilege in that

(a) the Defendants and the Architect, the M & E Consultant, the QS and/or the Employer had a common and/or corresponding interest in the subject matter of the letter and/or the words complained of; and/or

(b) the Defendants wrote and published the said letter and/or the words in the reasonable protection of their own legitimate interests(s) to the Architect, the Employer, the M & E Consultant and the QS who each had a like interest in receiving the same.

16. A privileged occasion is classically defined as

(A)n occasion where the person who makes a communication has an interest, or a duty, legal, social or moral, to make it to the person to whom it is made, and the person to whom it is so made has a corresponding interest or duty to receive it.

per Lord Atkinson, Adam v Ward [1917] AC 309 @ 334

17. There was no dispute that the defendant had an interest in the financial standing of the plaintiff, as its receipt of payments under the sub-contract would be affected if the plaintiff ran into financial difficulties in the course of the project.

18. The architect had an interest in the progress of the project. He was the proper party for the request to be addressed, and he needed to know of the reason for the request to advise the employer on it. The M&E consultant also had an interest. The FPI works came within the purview of the mechanical and electrical works. It negotiated with and recommended the appointment of the defendant for these works, issued the letter of 5 Dec, and would monitor the works when they were carried out. It was reasonable for the defendant to inform the M&E consultant of the request and the reason for it, as its views may be sought by the employer.

19. However the plaintiff denied that the quantity surveyor had any interest in the FPI works to justify sending the letter to him. Counsel for the defendant submitted at length that the quantity surveyor was a proper recipient of the letter, but length was not matched by content. There was nothing to show that that quantity surveyor had any role in the appointment of the defendant or any interest to be informed of the defendant’s apprehensions over the plaintiff’s financial position and the request to change the payment procedure.

20. The plaintiff contended that the qualified privilege defence was not available because the defendant acted with actual malice. The plaintiff argued that there was malice because (i) the words were published recklessly, (ii) the defendant was late to apologise or withdraw the words, and (iii) the defendant’s true intention was to withdraw from the sub-contract because its price was too low.

21. The defendant was acting properly in obtaining a credit report on the plaintiff from D P Information Networks. When it received the report, it regarded it as a negative report. However it forwarded a copy of the report to the architect with its request.

22. In the letter of 26 Feb it stated that the plaintiff had a poor credit rating. Those words were not used in the report, but was the defendant’s reading of it. The credit report had placed the plaintiff in the fifth of seven categories of descending creditworthiness. The defendant conceded that the letter was defamatory. The plaintiff contended that it was made with malice...